Interim Report January–June 2013 Investor presentation

Interim Report January–June 2013Investor presentation

2

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.

July 2013

3

Contents• Tikkurila overview• Development during the review period• Key financials of the Strategic Business Units• Conclusions and outlook for 2013• Appendix

July 2013

Tikkurila overview

5

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

FinlandSweden

Poland

Russia

Germany

Estonia

Production, logistics center, salesLogistics center, salesDistribution center, sales

July 2013

Serbia

6

RUSSIA SWEDEN FINLAND POLAND

Tikkurila market shares and positions in decorative paints in key markets in 2012

#1July 2013

38%

62%

Tikkurila Others

>50%50%

Tikkurila Others

15%

85%

Tikkurila Others

#1 #1 #4Russia 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

7

10%

8%

8%

7%

7%

6%4%3%3%

44%

Value of the global paints and coatings marketEUR ~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 CoatingsCoil Coatings

Packaging Coatings

July 2013

8

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

July 2013

9

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120

100

200

300

400

500

600

700

800

0

2

4

6

8

10

12

14

16

Revenue Revenue from acquisitionsDivestments 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

Rev

enue

, EU

R m

illio

n

EB

IT %

(ex

cl. n

on-r

ecur

ring)

530

648625

563

457441 439450445

345 358 361 349

255

589

July 2013

644670

10

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

FocusingCustomersGeographic areaBrands

ProfitabilityResilienceRealignmentAgility

GrowthOrganicWell-targeted acquisitions

July 2013

Tikkurila offers user-friendly and sustainable solutions for surface

protection and decoration.

11

Financial targets for 2018

• Revenue EUR 1 billionGrowth

• Operative EBIT margin over 12 percentProfitability

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

Return on capital

• Gearing less than 70 percent Balance Sheet structure

July 2013

Strong and well-established brands

Large majority of sales from strategic brands

Strategic brands Local brands

July 2013 12

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

"Medium" "Economy"

13

• Creating added value to consumers• The strongest brands• Marketing support• Active product and service development• Training for retailers' personnel• Developing the category together with the retailers

Deep partnerships with retailers are of crucial importance

July 2013

14

Profe professional services InternetDesigner Pool

Contractor Pool Helpline Training

Inspiration Ideas Colors Stores

Service concepts and tinting technology

July 2013

15

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

July 2013

16

Tikkurila's ownership structure

• Number of shareholders ~22,000

• Largest shareholders Oras Invest Oy (18%), Ilmarinen (10%) and Varma (6%)

• 50 largest shareholders holding ~55%

• ~95% of shareholders holding max 1,000 shares

July 2013

Ownership structure on June 30, 2013

22%

10%

22%12%

3%

30%Private companiesFinancial and in-surance institutionsPublic sector organiza-tions HouseholdsNon-profit organiza-tions Foreigners and Nom-inee registered

Development during the review period

18

• Revenue was at comparison period level• Sales volumes continued to decline but the decline was clearly less

steep compared to the beginning of the year • Increases in sales prices and changes in the sales mix had a positive

impact on the revenue

• Profitability remained at the comparison period's good level • Increased fixed cost level and decline in revenue decreased profitability • Streamlining measures and decline in raw material prices supported

profitability

• Net debt was down by 19% year-on-year

• Economic situation continued to be weak in all key markets

July 2013

Second quarter highlights

19

Review period key figures EUR million 4−6/2013 4−6/2012 Change % 1–6/2013 1–6/2012 Change % 2012

Revenue 208.3 209.1 -0.4% 346.7 357.7 -3.1% 670.4

EBIT excluding non-recurring items 33.4 34.7 -3.9% 43.5 44.8 -2.9% 73.7

EBIT excluding non-recurring items, % 16.0% 16.6% 12.6% 12.5% 11.0%

EBIT 33.3 33.2 0.5% 43.6 39.0 11.8% 66.3

EBIT, % 16.0% 15.9% 12.6% 10.9% 9.9%

EPS, EUR 0.54 0.52 3.7% 0.69 0.51 35.0% 0.92

ROCE, %, rolling 22.9% 20.6% 22.9% 20.6% 21.0%

Cash flow after capital expenditure 4.4 -0.8 -9.4 -23.6 60.4% 50.3

Net interest-bearing debt at period-end 125.6 155.4 -19.2% 80.8

Gearing, % 66.0% 87.4% 40.6%

Equity ratio, % 36.9% 33.6% 45.9%

Personnel at period-end 3,400 3,552 -4.3% 3,223

July 2013

20

Market conditions remained challenging

July 2013

EUR million 4–6/2013 4−6/2012 Change %

Revenue 208.3 209.1 -0.4%

Group's revenue development Q2/2013 vs. Q2/2012

Increase/decrease, %

Volume Sales mix/Price Exchange rates Acquisitions/ divestments Total

-6

-4

-2

0

-4%(EUR -8.8

million)

+4%(EUR +8.5

million)

0%(EUR -0.4

million) 0%

0%(EUR -0.8

million)

21

-20

-15

-10

-5

0

5

10

-4-2

-4

-8

Decline in sales volumes was less steep in the second quarter

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

SBU East SBU Scandinavia SBU Finland SBU CEE

2012 2013

July 2013

22

Price development of raw materials

• Raw material prices were on a slightly lower level than in the comparison period, mainly due to the decline in TiO2 price

• TiO2 price is expected to remain at the current level during the remainder of the year

• FY 2013 raw material costs are expected to be slightly lower than in 2012

July 2013

Titanium dioxide price developmentIndex (2009=100)

Q1 201

0

Q2 201

0

Q3 201

0

Q4 201

0

Q1 201

1

Q2 201

1

Q3 201

1

Q4 201

1

Q1 201

2

Q2 201

2

Q3 201

2

Q4 201

2

Q1 201

3

Q2 201

380

100

120

140

160

Key financials of the SBUs

24

SBU East Q2/2013

July 2013

Revenue development Q2/2013 vs. Q2/2012

EUR million 4−6/2013 4−6/2012 Change % 1−12/2012

Revenue 80.3 82.4 -2.6% 242.8EBIT* 13.0 15.3 -14.7% 32.5EBIT*, % 16.3% 18.6% 13.4%

Q2/2013 highlights

• Weak economic situation kept consumers cautious

• Sales were also reduced by delivery disturbances

• Profitability was reduced by the increase in fixed costs, by the decline in revenue and by the weakening of ruble


* Excluding non-recurring items

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

Volume Sales mix/Price Exchange rates Acquisitions/ divestments

Total

-6

-4

-2

0

2

-4%

+5% 0%

-3%-3%

25

SBU Scandinavia Q2/2013

July 2013

Revenue development Q2/2013 vs. Q2/2012 Q2/2013 highlights

• Decline in sales volumes experienced at the beginning of the year became considerably less steep

• Marketing efforts were clearly boosted

• Streamlining measures and lower raw material prices improved profitability


Revenue 57.9 55.5 4.5% 194.2EBIT* 10.3 8.7 18.3% 24.3EBIT*, % 17.8% 15.7% 12.5%




Total

-4

-2

0

2

4

6

-2%+3%

0% +5%+4%

26

SBU Finland Q2/2013

July 2013


• Sales volumes decreased due to the decline in construction, home sales and the weakened purchasing power of consumers

• Profitability was mainly decreased by the decline in revenue and higher cost level


Revenue 33.4 34.3 -2.9% 107.9EBIT* 5.9 6.9 -14.4% 12.6EBIT*, % 17.8% 20.2% 11.7%




Total

-6

-4

-2

0

-4%

0% 0% -3%

+1%

27

SBU Central Eastern Europe Q2/2013

July 2013


• Revenue remained at the comparison period level

• Development of retail was weak • Profitability was improved by the

restructuring and streamlining measures carried out in the area

• Business operations in Poland developed well in the tight competitive situation


Revenue 36.7 36.9 -0.4% 125.5EBIT* 4.9 4.5 7.3EBIT*, % 13.5% 12.3% 5.8%



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


Total

-10

-8

-6

-4

-2

0

-8%

+1% 0%

0%

+6%

Conclusions and outlook for 2013

29

Conclusions

July 2013

• Performance during the second quarter was reasonably good considering the current market conditions

• In 2013, the market conditions remain challenging and the economic growth may be modest in all Tikkurila's markets

• In Russia, the service level will be upgraded in order to secure the revenue growth

• Streamlining of operations will support our profitability

30

Outlook for 2013

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 %

July 2013

2008 2009 2010 2011 20120

100

200

300

400

500

600

700

800

0

2

4

6

8

10

12

648

530589

644 6709.1 9.510.1 9.7

11.0

RevenueEBIT, % (excluding non-recurring items)

Appendix

32

Tikkurila SBUs

July 2013

Russia and other CIS countries

East

1 In Sweden2 Industrial coatings

FinlandScandinavia CEE

FinlandSweden, Norway, Denmark

CEE countries and other countries incl. GermanyOperational area

Production sites

Current demandstructure

Expected demand structure

Competitors

Distribution channels

St. Petersburg, RussiaStary Oskol, RussiaKiev, Ukraine

Tikkurila, VantaaNykvarn, Sweden Tallinn, EstoniaAnsbach, GermanyDebica, Poland Sabac, Serbia

Economy price and quality segment products

Premium and medium price and quality segment products


Medium and economy price and quality segment products

Premium price and quality segment products expected to rise



Medium and premium price and quality segment 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, wholesalersIndustry: direct sales, Temaspeed

Deco: DIY retailers, independent paint retailersIndustry: direct sales, Temaspeed

Deco: DIY retailers, Alcro-Beckers professional stores1, Happy Homes chain1, Colorama retail chain1 Industry: direct sales, Temaspeed

Deco: DIY retailers, independent retailersIndustry: direct sales, Temaspeed

33

SBU East in briefKey facts

1970s Export to Russia and the former Soviet Union started1994 Sales company in Russia1995 First western paint factory opened in St. Petersburg1998 Sales company OOO Tikkurila Coatings established2004 Acquisition of Kolorit in Ukraine2006 Acquisition of Kraski Teks2006 Sales company established in Almaty, Kazakhstan2007 Acquisition 2 St. Petersburg-based paint companies

(Gamma, Powder Coatings)2008 Sales company established in Minsk, Belarus2009 Completion of logistic centre in Mytishchi, Moscow region2011 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 items2 Excluding group items

St. Petersburg

Mytishchi

Stary OskolKiev

AlmatyChelyabinsk

NovosibirskMinsk

Irkutsk

Khabarovsk

Ekaterinburg

Krasnodar

July 2013

34

• 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)

July 2013

17%

6%

5%

72%

Tikkurila EmpilsLakraOthers

35

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

July 2013

51%49%

Outside EU In EU

36

SBU Scandinavia in brief

1865 Beckers founded1906 Alcro founded1967 First Tikkurila subsidiary established in Sweden2001 Acquisition of Alcro-Beckers2002 Acquisition of Akzo Nobel’s general industrial finishes

business2007 New production plant in Nykvarn2008 New headquarters in Hammarby Sjöstad2008 Acquisition of Måleributiken in Alvik, Sweden2011 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

NykvarnOslo

Copenhagen


Stockholm

July 2013

37

SBU Finland in briefKey facts Locations

Operational area Finland




Production sites Vantaa, Finland

Sales offices Several in Finland

Vantaa


July 2013

38

+ China (Beijing and Shanghai)

Ansbach

Riga

Vilnius

WarsawLodz

Debica

Šabac

Skopje

SBU CEE in brief

1989 JV established in Tallinn, Estonia1992 Paint production started in Tallinn, Estonia1993 Sales company in Riga, Latvia1995 Sales company established in Vilnius, Lithuania1997 Sales company in Budapest, Hungary2001 Production plants in Ansbach, Germany and Debica, Poland 2006 Acquisition of sales company in Prague, Czech Republic2007 Sales company established in Beijing, China2008 Sales companies in Shanghai, China, Bucharest, Romania and

Martin, Slovakia2011 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


July 2013

39

Investor and media contacts

Erkki JärvinenPresident and CEO

Minna AvellanManager, Investor [email protected]. +358 40 533 7932

Jukka HaviaCFO

July 2013

mailto:[email protected]

Thank you

Interim Report January–June 2013 Investor presentation

Documents

group revenue source

group revenue finland

group revenue sweden

group revenue poland

paint consumption source

russia accounts

global paints

leading market position