Interim Report January September 2013...,0 2,0 4,0 6,0 8,0 10,0 12,0 14,0 16,0 0 100 200 300 400 500...

Interim Report

January–September 2013 Investor presentation

Disclaimer

New or revised or amended standards and interpretations

have been applied from the beginning of 2013 and therefore

comparison information is changed accordingly.

In this presentation, all forward-looking statements in relation

to the company or its business are based on the

management judgment, and macroeconomic or general

industry data are based on third-party sources, and actual

results may differ from the expectations and beliefs such

statements contain.

November 2013 2

Contents

• Tikkurila overview

• Development during the review period

• Key financials of the Strategic Business Units

• Conclusions and outlook for 2013

• Appendix

November 2013 3

Tikkurila overview

Customers:

Consumers and professionals

Market position:

Leading market position in decorative paints in

Finland, Sweden, Russia and the Baltic countries,

one of the leading in Poland

Market area:

Northern Europe, Central Eastern Europe, Russia

and other CIS countries, Ukraine

Products and services:

Decorative paints, industrial wood and metal

coatings, customer training, comprehensive

advisory service (e.g. Customer hotline), Designer

and Contractor Pool etc.

Tikkurila's locations

Tikkurila in brief

Tikkurila in a nutshell

Ukraine

China

Kazakhstan

Finland Sweden

Poland

Russia

Germany

Estonia

Production, logistics center, sales

Logistics center, sales

Distribution center, sales

November 2013 5

Serbia

RUSSIA SWEDEN FINLAND POLAND

Tikkurila market shares and positions in

decorative paints in key markets in 2012

#1

November 2013 6

38%

62%

Tikkurila Others

>50% 50%

Tikkurila Others

15%

85%

Tikkurila Others

#1 #1 #4 Russia accounts for 32%

of Group revenue

Sweden accounts for 23%

of Group revenue

Finland accounts for 16%

of Group revenue

Poland accounts for 9% of

Group revenue

Source: Chem-Courier (Russia, volume), SVEFF (Sweden, value), Association of Finnish Paint Industry (Finland, value), IRP Research (Poland, volume)

17%

83%

Tikkurila Others

10%

8%

8%

7%

7%

6% 4% 3% 3%

44%

Value of the global paints and coatings market

EUR ~76 billion

Decorative paints 44% Industrial coatings 56%

Source: IPPIC 2012

Decorative paints

Metal Industrial

Coatings

Transportation

Industrial Maintenance

and Protective

Automotive

Refinish

Powder Coatings

Wood Coatings

Marine Coatings

Coil Coatings

Packaging Coatings

November 2013 7

Paint consumption and demand structure

Factors impacting paint demand Estimated paint consumption per capita*

• Living standards

• Local habits and painting methods

• Construction styles and available materials

• Trends in interior decoration, colors etc.

• Level of activity in new construction,

renovation and industry

• Functional paints

Markets in Western Europe mature, growth opportunities in areas with increasing income per household

Tikkurila has an established presence in areas

with expected growth in consumption per

capita and increasing demand for premium

products

= High

= Medium

= Low

* Paint consumption source: Management estimates, IPPIC

November 2013 8

,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

16,0

0

100

200

300

400

500

600

700

800

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Revenue Revenue from acquisitions Divestments EBIT margin (excl. non-recurring)

Long term financial development

Development of sales and profitability 1996–2012

Acquisition of Alcro-

Beckers in 2001

(Revenue ~MEUR 190)

Sale of tinting business in

2000

(Revenue ~MEUR 130)

Acquisition of Kraski Teks

in 2006

(Revenue ~MEUR 80)

Acquisition of Zorka Color

in 2011

(Revenue ~MEUR 16)

Major acquisitions and divestments

Reve

nu

e, E

UR

mill

ion

EB

IT %

(e

xcl. n

on

-re

cu

rrin

g)

530

648 625

563

457 441 439

450 445

345 358 361 349

255

589

November 2013 9

644 670

The leading provider

of paint-related

architectural solutions

for consumers and

professionals in the

Nordic area as well as

in Russia and other

selected Eastern

European countries.

Tikkurila's strategy for 2012–2014

Focusing Customers

Geographic area

Brands

Profitability Resilience

Realignment

Agility

Growth Organic

Well-targeted acquisitions

November 2013 10

Tikkurila offers user-friendly and

sustainable solutions for surface

protection and decoration.

Financial targets for 2018

• Revenue EUR 1 billion Growth

• Operative EBIT margin over 12 percent Profitability

• Operative return on capital employed (ROCE) over 20 percent

Return on capital

• Gearing less than 70 percent Balance Sheet

structure

November 2013 11

Strong and well-established brands

Large majority of sales from strategic brands

Strategic brands Local brands

November 2013 12

"High end" (premium) "High end" (premium)

"Medium" "Economy"

Profe professional services

Internet Designer Pool

Contractor Pool Helpline Training

Inspiration Ideas Colors Stores

Service concepts and tinting technology

November 2013 13

Distribution channels

Tikkurila

Consumers Professionals

BIG Boxes Specialised

paint shops

Wholesale (some countries)

Temaspeed

Direct sales to:

• construction

industry

• wood industry

• metal industry

Advertising and trade marketing

RETAIL

November 2013 14

Tikkurila's ownership structure

• Number of shareholders

~21,000

• Largest shareholders Oras

Invest Oy (18%), Ilmarinen

(10%) and Varma (6%)

• 50 largest shareholders

holding ~50%

• ~95% of shareholders holding

max 1,000 shares

November 2013 15

Ownership structure on September 30, 2013

21 %

8 %

21 % 11 %

3 %

35 %

Private companies

Financial andinsurance institutions

Public sectororganizations

Households

Non-profitorganizations

Foreigners andNominee registered

Development

during the review

period

• Revenue was at comparison period level

• Sales volumes declining, the situation in Russia stabilizing

• Weakening of key exchange rates decreased revenue

• Increases in sales prices and sales mix had a positive impact

• Profitability was at record-high level

• Sales mix, streamlining measures and lower raw material prices had a

positive impact

• Profitability improved in Central Eastern Europe and Finland

• In Russia, higher marketing investments and the weakening of the ruble

had a negative impact on profitability

• Situation in retail and construction continued to be difficult

November 2013

Third quarter highlights

17

Review period key figures EUR million 7−9/2013 7−9/2012 Change % 1–9/2013 1–9/2012 Change % 2012

Revenue 189.6 191.3 -0.9% 536.3 549.0 -2.3% 670.4

EBIT excluding non-

recurring items 33.3 32.1 3.8% 76.8 76.9 -0.1% 73.7

EBIT excluding non-

recurring items, % 17.6% 16.8% 14.3% 14.0% 11.0%

EBIT 33.1 31.4 5.4% 76.7 70.4 8.9% 66.3

EBIT, % 17.4% 16.4% 14.3% 12.8% 9.9%

EPS, EUR 0.55 0.51 8.0% 1.25 1.02 21.5% 0.92

ROCE, %, rolling 23.7% 20.9% 23.7% 20.9% 21.0%

Cash flow after capital

expenditure 64.9 64.1 55.5 40.5 37.2% 50.3

Net interest-bearing debt

at period-end 60.1 89.2 -32.7% 80.8

Gearing, % 28.0% 43.6% 40.6%

Equity ratio, % 46.4% 42.0% 45.9%

Personnel at period-end 3,253 3,355 -3.0% 3,223

November 2013 18

Demand continued to be weak

November 2013 19

EUR million 7–9/2013 7−9/2012 Change %

Revenue 189.6 191.3 -0.9%

Group's revenue development Q3/2013 vs. Q3/2012

Increase/decrease, %

-4% (EUR -6.7 million)

+7% (EUR +13.4 million)

-4% (EUR -8.4 million)

0% -1% (EUR -1.7 million)

-6

-4

-2

0

2

4

Volume Sales mix/Price Exchange rates Acquisitions/ divestments Total

Sales volumes declining, the situation in

Russia stabilizing

Quarterly sales volume development, change in %, year-on-year

SBU East SBU Scandinavia SBU Finland SBU CEE

2012 2013

November 2013 20

+1

-5 -5

-9

-20

-15

-10

-5

0

5

10

Headwinds from foreign exchange rates,

tailwinds from raw material prices

• Ruble exchange rate has clearly

weakened during the past few months

80

100

120

140

160

Euro ruble exchange rate

RUB

• Price development of TiO2 and other

raw materials has been stable in the

fall

November 2013 21

Titanium dioxide price development

Index (2009=100)

New segment reporting structure

SBU West

Sweden

Norway

Denmark

Finland

Poland

Germany

Baltic countries

SBU East

Russia

Central Asia

Ukraine

Belarus

Balkan

China

Exports

November 2013 22

• Two reporting segments based

on geographical split

• Better supports the

development of our business

operations

• New SBU West less than 60%

and the new SBU East more

than 40% of the full-year 2012

revenue

• Structure will be applied from

the beginning of 2014

(Q1/2014 interim report)

Key financials of

the SBUs

SBU East Q3/2013

November 2013 24

Revenue development Q3/2013 vs. Q3/2012

EUR million 7−9/2013 7−9/2012 Change % 1−12/2012

Revenue 74.3 75.6 -1.7% 242.8

EBIT* 11.1 14.4 -23.2% 32.5

EBIT*, % 14.9% 19.1% 13.4%

Q3/2013 highlights

• Weakening of the ruble

decreased revenue

• Sales mix developed favorably

• Marketing efforts were boosted

• Increased cost level and the

weakening of the ruble

reduced profitability


* Excluding non-recurring items

+1%

0% -2%

+5%

-8%

-4

-2

0

2

4

6

8

Volume Sales mix/Price Exchange rates Acquisitions/divestments

Total

SBU Scandinavia Q3/2013

November 2013 25

Revenue development Q3/2013 vs. Q3/2012 Q3/2013 highlights

• Lower sales volumes and the

weakening of the krona

decreased revenue

• Streamlining measures and

lower raw material prices

improved profitability


Revenue 51.0 52.2 -2.3% 194.2

EBIT* 11.7 11.1 4.7% 24.3

EBIT*, % 22.9% 21.3% 12.5%



-5%

-3%

0%

-2%

+6%

-6

-4

-2

0

2


Total

SBU Finland Q3/2013

November 2013 26


• Sales volumes decreased due

to the decline in construction,

home sales and consumers'

caution on spending

• Lower cost level improved

profitability


Revenue 26.5 26.4 0.1% 107.9

EBIT* 5.5 3.5 57.1% 12.6

EBIT*, % 20.6% 13.2% 11.7%



-5%

0% 0% 0% +6%

-6

-4

-2

0

2


Total

The figures on the graph above have been independently rounded, which should be taken into account when calculating total figures.

SBU Central Eastern Europe Q3/2013

November 2013 27


• Revenue increased slightly

• Profitability was improved by the

streamlining measures and lower

cost level

• Business operations developed

well in Poland and the Baltic

countries, in particular


Revenue 37.9 37.1 2.1% 125.5

EBIT* 5.8 3.7 56.7% 7.3

EBIT*, % 15.3% 10.0% 5.8%



-9%

0% +2% +12% -1%

-10

-8

-6

-4

-2

0

2

4


Total

Conclusions and

outlook for 2013

Conclusions

November 2013 29

• Unfavorable exchange rate changes had a

significant negative impact on the Q3 performance

• Profitability was on a record-high level due to

streamlining measures, lower cost level and sales

mix

• Measures conducted in Central Eastern Europe

bring desired results

• Market development is estimated to be weak also

during the remainder of the year

Outlook for 2013 reiterated

30

Revenue and profitability of Tikkurila 2008−2012 Outlook for 2013

Economic development in Europe is expected to be weak

in 2013. The overall uncertainty and increasing

unemployment are expected to have a negative impact on

consumers’ willingness to purchase and on the demand

for Tikkurila’s products. The outlook of the economic

development of Russia, which is one of the key markets of

Tikkurila, has weakened in comparison to the publishing

date of Tikkurila’s Financial Statement Release. The

average GDP growth of Russia, Sweden, Finland, and

Poland, is estimated to be slightly over one percent in

2013. Raw material prices are estimated to remain stable

or to decrease slightly.

Tikkurila expects its revenue and EBIT in euro

excluding non-recurring items for the financial

year 2013 to remain on 2012 level.

EUR million %

November 2013

648

530

589

644 670

9.1 9.5

10.1 9.7

11.0

0

2

4

6

8

10

12

0

100

200

300

400

500

600

700

800

2008 2009 2010 2011 2012

Revenue EBIT, % (excluding non-recurring items)

Appendix

Tikkurila SBUs

November 2013 32

Russia and other CIS

countries

East

1 In Sweden

2 Industrial coatings

Finland Scandinavia CEE

Finland

Sweden, Norway,

Denmark

CEE countries and other

countries incl. Germany Operational area

Production sites

Current demand

structure

Expected demand

structure

Competitors

Distribution

channels

St. Petersburg, Russia

Stary Oskol, Russia

Kiev, Ukraine

Tikkurila, Vantaa

Nykvarn, Sweden Tallinn, Estonia

Ansbach, Germany

Debica, Poland

Sabac, Serbia

Economy price and quality

segment products

Premium and medium

price and quality segment

products

Premium and medium


products

Medium and economy


products

Premium price and quality

segment products

expected to rise

Premium and medium


products

Premium and medium


products

Medium and premium


products

Akzo Nobel, Lakra-Sintez,

Empils, ABC-Farben,

Meffert, Caparol

Akzo Nobel, Teknos, Nor-

Maali, Sherwin-Williams

Akzo Nobel, Flügger,

Jotun, Sherwin-Williams,

Teknos

Akzo Nobel, PPG, a large

number of local and

regional suppliers

Deco: DIY retailers,

independent retailers,

wholesalers

Industry: direct sales,

Temaspeed


independent paint retailers


Temaspeed

Deco: DIY retailers, Alcro-

Beckers professional

stores1, Happy Homes

chain1, Colorama retail

chain1


Temaspeed


independent retailers


Temaspeed

SBU East in brief

Key facts

1970s Export to Russia and the former Soviet Union started

1994 Sales company in Russia

1995 First western paint factory opened in St. Petersburg

1998 Sales company OOO Tikkurila Coatings established

2004 Acquisition of Kolorit in Ukraine

2006 Acquisition of Kraski Teks

2006 Sales company established in Almaty, Kazakhstan

2007 Acquisition 2 St. Petersburg-based paint companies

(Gamma, Powder Coatings)

2008 Sales company established in Minsk, Belarus

2009 Completion of logistic centre in Mytishchi, Moscow region

2011 Divestment of the powder coatings business

2012 Expansion of sales and ware house network in Russia

Operational area Russia, other CIS countries, Ukraine

2012 revenue EUR 242.8 million, 36% of Group

2012 EBIT1 EUR 32.5 million, 42% of Group2

Employees 1,517 (average)

Production sites 3 in St. Petersburg, Russia, Stary Oskol,

Russia and Kiev, Ukraine

Sales offices Russia, Ukraine, Belarus, Kazakhstan

Expansion in East

Locations

1 Excluding non-recurring items

2 Excluding group items

33

St. Petersburg

Mytishchi

Stary Oskol

Kiev Almaty

Chelyabinsk

Novosibirsk Minsk

Irkutsk

Khabarovsk

Ekaterinburg

Krasnodar

November 2013

• Tikkurila is the leading decorative paints

supplier in Russia

• Tikkurila products are sold in over 5,000

retail outlets

• The product range consists of

decorative paints and coatings for the

wood and metal industries

• Products are sold under the well known

brands: Teks, Finncolor and Tikkurila

• Tikkurila has three paint factories in St.

Petersburg and one in Stary Oskol

• Personnel 1,400 at year-end 2012

PREMIUM ECONOMY

Overview Tikkurila paint brands in Russia

Tikkurila in Russia

Market leader in decorative paints in 2012*

* Source: Chem-Courier, 2013 (volume)

November 2013 34

17%

6%

5%

72%

Tikkurila

Empils

Lakra

Others

In good position to grow further in Russia,

other CIS Countries and CEE countries

• 11 production facilities in 8 countries

• Local production increases flexibility,

clear advantage specially during

unstable market conditions

• Production of water-borne products

increasing; ~60% of total, ~70% of

decorative paints

• Raw material prices affected mainly by

oil prices, supply capacity and

currencies

• ~75% of raw materials from western

suppliers, in Russia ~50% of raw

materials from local suppliers

Tikkurila's production capacity Production and raw materials

November 2013 35

51% 49%

Outside EU In EU

SBU Scandinavia in brief

1865 Beckers founded

1906 Alcro founded

1967 First Tikkurila subsidiary established in Sweden

2001 Acquisition of Alcro-Beckers

2002 Acquisition of Akzo Nobel’s general industrial finishes

business

2007 New production plant in Nykvarn

2008 New headquarters in Hammarby Sjöstad

2008 Acquisition of Måleributiken in Alvik, Sweden

2011 Divestment of two retail stores in Sweden

Key facts

Operational area Sweden, Norway, Denmark



Employees 421 (average)

Production sites Nykvarn, Sweden

Sales offices Sweden, Norway, Denmark

Development in Scandinavia

Locations

Nykvarn

Oslo

Copenhagen



Stockholm

November 2013 36

SBU Finland in brief

Key facts Locations

Operational area Finland




Production sites Vantaa, Finland

Sales offices Several in Finland

Vantaa



November 2013 37

+ China (Beijing and Shanghai)

Ansbach

Riga

Vilnius

Warsaw Lodz

Debica

Šabac

Skopje

SBU CEE in brief

1989 JV established in Tallinn, Estonia

1992 Paint production started in Tallinn, Estonia

1993 Sales company in Riga, Latvia

1995 Sales company established in Vilnius, Lithuania

1997 Sales company in Budapest, Hungary

2001 Production plants in Ansbach, Germany and Debica, Poland

2006 Acquisition of sales company in Prague, Czech Republic

2007 Sales company established in Beijing, China

2008 Sales companies in Shanghai, China, Bucharest, Romania and

Martin, Slovakia

2011 Acquisition of the business of Serbian Zorka Color

2012 Divestment of subsidiaries in Hungary, Czech Republic, Slovakia

and Romania

Key facts

Operational area

Estonia, Latvia, Lithuania, Poland, China,

Germany, Serbia, Slovakia and Macedonia.

Furthermore, exports to approximately 25

countries that are not included in the

operating areas of the other SBUs.




Production sites Tallinn, Estonia, Ansbach, Germany, Debica,

Poland and Sabac, Serbia

Sales offices Czech Republic, Hungary, Latvia, Lithuania,

Romania, Slovakia, China, Finland (export)

Expansion in CEE

Locations

Tallinn



38 November 2013

Investor and media contacts

Erkki Järvinen

President and CEO

Minna Avellan

Manager, Investor Relations [email protected]

Tel. +358 40 533 7932

Jukka Havia

CFO

November 2013 39

mailto:[email protected]

Thank you

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