KEMIRA.HE — mttssn research

HOLD

Conviction: MEDIUM

A resilient Finnish specialty-chemicals cyclical, but mid-cycle returns are thin: adjusted ROIC 9.6% vs 8% WACC, EP only +EUR 35m (+1.6pp spread), with margins troughing and FY26 guidance cut. At ~11x operative EBIT the equity is roughly fairly valued — limited margin of safety. HOLD, medium conviction.

Adj. ROIC

9.6%

WACC 8% → spread +1.6pp

Economic Profit

+€35M

Thin — EP +EUR 35m, ROIC 9.6% only +1.6pp over 8% WACC

FCF Yield

n/a

FCF not disclosed at LTM; op cash flow H1 EUR 150.9m

Price / Target

€17 → €17

+0% base; HOLD

Revenue (LTM)

€2.7B

LTM H1 2026 EUR 2,721.6m; organic -2%, held by acquisitions

EBIT Margin

8.4%

Reported EBIT 8.4%; operative 10.2% — troughing on cost inflation

EV / IC

n/a

Enterprise value / invested capital

Net Debt

n/a

Net debt EUR 622.0m, 1.3x operative EBITDA; gearing 39%

Thesis

Kemira is a scale player in water-treatment coagulants/polymers (Water Solutions, the highest and steadiest-margin leg at ~18% operative EBITDA), packaging & hygiene chemicals, and pulp/paper (Fiber Essentials). The Water franchise carries real cost-scale and regulatory-approval switching-cost advantages, but the group is cyclical and currently mid-to-late-downcycle.

Returns are thin through the cycle: adjusted ROIC 9.55% barely clears the 8% WACC for +EUR 35m economic profit (a +1.6pp spread), versus a >16% peak-cycle ROCE now at 13.5% and falling. FY2025 operative EBIT fell -19% and H1 2026 organic revenue -2% with Q2 operative EBIT -31% on ~EUR 100m of raw-material and logistics cost inflation, only ~half recoverable via price.

Management reporting is clean (APM divergence 0.0%) and the balance sheet is resilient (net debt/operative EBITDA 1.3x, equity ratio ~54%, net pension-asset), but a 5m-share buyback plus dividend lifted gearing 30%->39% into the trough. The FY2026 outlook was cut to operative EBITDA EUR 400-500m vs 524.6m in 2025.

Valuation · reverse-DCF & scenarios

At EUR 17.05 the market cap is 2,563.3m and EV 3,185.3m (net debt 622.0m), i.e. ~11.4x LTM operative EBIT of 278.6m and ~13.9x reported EBIT of 229.8m — on a trough margin, not a normalised one. With EP only +EUR 35m over the 8% capital charge and the FY26 guide cut, the discount to conservative intrinsic value is limited.

Base EUR 17 (roughly flat — fairly valued on mid-cycle returns); bull EUR 21 (cost inflation recovered via price, cyclical demand and ROCE recover toward the >16% target); bear EUR 13 (a deeper trough, further margin compression and a de-rate as gearing rises).

Market-implied growth

≥9.1%

model ceiling — EV implies more than constant-ROIC sustains

No-growth value / share

€15

88% of price; rest = priced-in growth

ROIC − WACC

+1.6 pp

ROIC 9.6% vs WACC 8.0% — positive = value creation

CAP (priced-in)

10.6 yrs

years of excess returns the price implies (fades to WACC)

At today’s enterprise value the constant-ROIC reverse-DCF maxes out: even at its sustainable-growth ceiling (~9.1%, limited by ROIC 10% ≈ WACC 8%) it cannot reach the current EV. No-growth value is €15/share (88% of price); the market prices in growth and/or a higher ROIC than booked — richly valued on this lens. Read the sensitivity grid.

Scenario	24m target	Impl. g	Upside	Prob.	Driver
Bull	€21	≥9%	+23%	30%	Cost inflation price-recovered; cyclical turn lifts ROCE toward >16% target
Base	€17	≥9%	-0%	45%	Fairly valued on mid-cycle returns; thin EP spread, guide cut
Bear	€13	-8%	-24%	25%	Deeper trough, further margin compression + de-rate as gearing rises
Prob-weighted	€17	—	+1%	100%	Scenario-weighted expected value

Sensitivity — fair value / share at WACC × growth

WACC \ g	0%	3%	5%	8%	10%	15%
6.50%	22	23	24	26	27	30
7.25%	18	19	20	21	21	23
8.00% (base)	15	16	16	17	17	18
8.75%	13	13	13	14	14	14
9.50%	11	11	11	11	11	11

Green = fair value above the current price of €17.05. The reverse-DCF conclusion is dominated by WACC and growth — see the whole surface, not a single fair value.

Method & data. NOPAT €215, invested capital and ROIC 9.6% are observed (adjustments.json); WACC 8.0% and terminal g 2.5% are assumptions. EV→equity uses net debt €622. The model holds ROIC constant (no fade) over the explicit horizon; the CAP figure instead fades excess returns to WACC.

⤓ Download the full model (.xlsx) — formula-driven sheets; flex the blue input cells and the model cascades in Excel.

Key drivers

1. Water Solutions stability

Highest, steadiest-margin leg (~18% operative EBITDA) anchored in regulated water-treatment chemistry — the quality core.

2. Price/cost recovery

~50% of the ~EUR 100m FY26 cost-inflation headwind expected recovered through price increases.

3. Cyclical demand turn

A recovery in industrial and pulp/paper end-markets would lift volumes and operative EBIT off the trough.

4. Cost self-help

>130 positions cut in Q2 (EUR 15m annualised); performance-improvement programme supports margin recovery.

5. Balance-sheet resilience

1.3x leverage, ~54% equity ratio and net pension-asset position give room to fund the cycle.

Key risks

Thin economic spreadAdjusted ROIC 9.6% only +1.6pp over WACC; little value-creation buffer through the cycle.
Margin trough deepeningQ2 operative EBIT -31%; cost inflation only partly price-recoverable, FY26 EBITDA guide cut.
CyclicalityIndustrial-chemicals demand is cyclical; organic revenue -2% in H1 2026 with pricing under pressure.
Rising gearingBuyback + dividend lifted gearing 30%->39% into the downturn; further leverage-funded returns would strain it.
Goodwill weightGoodwill 535.3m is ~37% of equity — an impairment risk if acquired-segment returns stay depressed.

Conclusion

Kemira is a resilient, cleanly-reported specialty-chemicals cyclical whose mid-cycle returns are thin (ROIC 9.6% vs 8% WACC, EP +EUR 35m) and whose margins are troughing on cost inflation. At ~11x operative EBIT the equity is roughly fairly valued and the FY26 guide was cut — limited margin of safety. We rate it HOLD, medium conviction; base target EUR 17 (~flat).

A durable cost-inflation recovery via price and a cyclical turn lifting operative ROCE back toward the >16% target would widen the spread and improve the risk/reward; a deeper trough or leverage-funded returns into weakness would do the opposite.

Footnote evidence & sources

Every adjustment traces to the cited note/page in the source filing — click to open it there. Annual report / 10-K: 📄 open · Latest interim: 📄 open

Adjustment / figure	Value	Source	Why mttssn treats it this way
Revenue (LTM)	2,722	Consolidated income statement, H1 2026 report p.24 + FY2025 p.106 📄 p.24	LTM = FY2025 revenue 2,753.5 - H1 2025 1,402.2 + H1 2026 1,370.3.
Reported EBIT (LTM)	230	Consolidated income statement (Operating profit), H1 2026 p.24 + FY2025 p.106 📄 p.24	LTM = 274.1 - 165.5 + 121.2.
Operative/comparable EBIT (LTM)	279	Segment note / Reconciliation to IFRS, FY2025 p.116 📄 p.116	LTM = FY 324.4 - H1'25 169.1 + H1'26 123.3; equals reported EBIT + items affecting comparability.
Items affecting comparability in EBIT (LTM add-back)	48.9	FY2025 IAC bridge p.115 (EBIT -50.3) + H1 2026 p.10 📄 p.115	Restructuring, acquisition integration, divestment and the one-time Teesport impairment; added back to reach comparable EBIT.
PPA amortization (LTM, kept in opex)	11.4	H1 2026 p.12 (EUR 5.9m) + FY2025 p.108 (EUR 9.2m) 📄 p.12	Amortization of acquisition PPA intangibles; real cost of acquired revenue, not added back — matches company operative EBIT which also excludes an add-back.
Total equity	1,591	Consolidated balance sheet 6/30/2026, H1 2026 p.25 📄 p.25	Interim equity snapshot for IC.
Accumulated OCI (stripped)	13.9	Statement of changes in equity, H1 2026 p.27 📄 p.27	Fair value & other reserves 96.2 + translation differences -82.3; removed from equity for IC.
Interest-bearing liabilities (incl. leases)	794	Consolidated balance sheet 6/30/2026, H1 2026 p.25 (642.7 + 151.2) 📄 p.25	Debt component of IC; IFRS-16 lease liabilities embedded in this line.
Cash and cash equivalents	172	Consolidated balance sheet 6/30/2026, H1 2026 p.25 📄 p.25	Excess cash (171.9 - 2%×revenue) removed from IC.
Invested Capital	2,254	Derived: equity_ex_oci 1577.1 + IB debt 793.9 - excess cash 117.5 📄 p.25	Interim IC base for ROIC / EP.
Adjusted NOPAT (LTM)	215	Operative EBIT 278.6 × (1 - 0.2273) 📄 p.116	Comparable EBIT after LTM effective tax.
Effective tax rate (LTM)	0.227	Income taxes / PBT, LTM 📄 p.24	LTM tax 46.3 / LTM PBT 203.7.

Quality · Buffett tenets9 / 15

Understandable business●●○

Water-treatment, packaging/hygiene and pulp chemicals — three simple segments, LTM revenue EUR 2,721.6m, Oil & Gas divested 2024; a legible industrial chemicals model with a multi-year operating history.

Durable moat●●○

[kostnads-skalfordel + byteskostnader (reglering) · stabil] Water Solutions holds the highest, steadiest segment margin (operative EBITDA 17.9% Q2 vs group 16.1%) — coagulants/polymers embedded in regulator-approved water processes carry re-approval switching costs; but commodity cost pass-through is partial (~50% of the ~EUR 100m FY26 inflation) and mid-cycle ROIC-WACC spread is only ~1.6pp, so narrow/compressing, not wide. frame: mid-cycle spread +1.6pp, past-peak; falsifier: sustained sub-WACC operative ROIC or a segment-margin step-down below 15%.

Able & honest management●●○

APM divergence 0.0% (our operative EBIT 278.6 = company's) — clean, no aggressive add-backs; PPA amort kept in opex. Returned cash via 5m-share buyback + EUR 0.76/sh dividend, lifting gearing 30%->39% into a downturn — sound but not counter-cyclically opportunistic. Red flag: further leverage-funded returns if the trough deepens.

Financial strength●●○

Through-cycle returns modest: adjusted ROIC 9.55% vs 8% WACC, EP +EUR 35m (thin +1.6pp spread); peak-cycle ROCE was >16%, now 13.5% group and falling. Balance sheet resilient — net debt/operative EBITDA 1.3x, equity ratio ~54%, net pension-asset position — survives a bad year comfortably.

Margin of safety●○○

EV/operative-EBIT ~11.4x on a troughing margin, EV/reported-EBIT ~13.9x; base target ~flat vs EUR 17.05 — the thin EP spread and cut FY26 guide leave little discount to conservative value.