Interim Report January June 2013...China Kazakhstan Finland Sweden Poland Russia Germany Estonia...
Transcript of Interim Report January June 2013...China Kazakhstan Finland Sweden Poland Russia Germany Estonia...
Interim Report
January–June 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.
July 2013 2
Contents
• Tikkurila overview
• Development during the review period
• Key financials of the Strategic Business Units
• Conclusions and outlook for 2013
• Appendix
July 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
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Serbia
RUSSIA SWEDEN FINLAND POLAND
Tikkurila market shares and positions in
decorative paints in key markets in 2012
#1
July 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
July 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
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0
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100
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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
July 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
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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
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Strong and well-established brands
Large majority of sales from strategic brands
Strategic brands Local brands
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"High end" (premium) "High end" (premium)
"Medium" "Economy"
• 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 13
Profe professional services
Internet Designer Pool
Contractor Pool Helpline Training
Inspiration Ideas Colors Stores
Service concepts and tinting technology
July 2013 14
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
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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 16
Ownership structure on June 30, 2013
22%
10%
22% 12%
3%
30%
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 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
18
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
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Market conditions remained challenging
July 2013 20
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, %
-4% (EUR -8.8 million)
+4% (EUR +8.5 million)
0% (EUR -0.4 million)
0% 0% (EUR -0.8 million)
-6
-4
-2
0
Volume Sales mix/Price Exchange rates Acquisitions/ divestments Total
-4
-2
-4
-8
-20
-15
-10
-5
0
5
10
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
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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 22
Titanium dioxide price development
Index (2009=100)
80
100
120
140
160
Key financials of
the SBUs
SBU East Q2/2013
July 2013 24
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% 242.8
EBIT* 13.0 15.3 -14.7% 32.5
EBIT*, % 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
Increase/decrease, %
* 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.
-4%
+5%
0%
-3% -3%
-6
-4
-2
0
2
Volume Sales mix/Price Exchange rates Acquisitions/divestments
Total
SBU Scandinavia Q2/2013
July 2013 25
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
EUR million 4−6/2013 4−6/2012 Change % 1−12/2012
Revenue 57.9 55.5 4.5% 194.2
EBIT* 10.3 8.7 18.3% 24.3
EBIT*, % 17.8% 15.7% 12.5%
Increase/decrease, %
* Excluding non-recurring items
-2%
+3%
0% +5% +4%
-4
-2
0
2
4
6
Volume Sales mix/Price Exchange rates Acquisitions/divestments
Total
SBU Finland Q2/2013
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Revenue development Q2/2013 vs. Q2/2012 Q2/2013 highlights
• 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
EUR million 4−6/2013 4−6/2012 Change % 1−12/2012
Revenue 33.4 34.3 -2.9% 107.9
EBIT* 5.9 6.9 -14.4% 12.6
EBIT*, % 17.8% 20.2% 11.7%
Increase/decrease, %
* Excluding non-recurring items
-4%
0% 0% -3%
+1%
-6
-4
-2
0
Volume Sales mix/Price Exchange rates Acquisitions/divestments
Total
SBU Central Eastern Europe Q2/2013
July 2013 27
Revenue development Q2/2013 vs. Q2/2012 Q2/2013 highlights
• 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
EUR million 4−6/2013 4−6/2012 Change % 1−12/2012
Revenue 36.7 36.9 -0.4% 125.5
EBIT* 4.9 4.5 7.3
EBIT*, % 13.5% 12.3% 5.8%
Increase/decrease, %
* 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.
-8%
+1% 0% 0%
+6%
-10
-8
-6
-4
-2
0
Volume Sales mix/Price Exchange rates Acquisitions/divestments
Total
Conclusions and
outlook for 2013
Conclusions
July 2013 29
• 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
Outlook for 2013
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 %
July 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
July 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
price and quality segment
products
Medium and economy
price and quality segment
products
Premium price and quality
segment products
expected to rise
Premium and medium
price and quality segment
products
Premium and medium
price and quality segment
products
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,
wholesalers
Industry: direct sales,
Temaspeed
Deco: DIY retailers,
independent paint retailers
Industry: direct sales,
Temaspeed
Deco: DIY retailers, Alcro-
Beckers professional
stores1, Happy Homes
chain1, Colorama retail
chain1
Industry: direct sales,
Temaspeed
Deco: DIY retailers,
independent retailers
Industry: direct sales,
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
July 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)
July 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
July 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
2012 revenue EUR 194.2 million, 29% of Group
2012 EBIT1 EUR 24.3 million, 32% of Group2
Employees 421 (average)
Production sites Nykvarn, Sweden
Sales offices Sweden, Norway, Denmark
Development in Scandinavia
Locations
Nykvarn
Oslo
Copenhagen
1 Excluding non-recurring items
2 Excluding group items
Stockholm
July 2013 36
SBU Finland in brief
Key facts Locations
Operational area Finland
2012 revenue EUR 107.9 million, 16% of Group
2012 EBIT1 EUR 12.6 million, 17% of Group2
Employees 641 (average)
Production sites Vantaa, Finland
Sales offices Several in Finland
Vantaa
1 Excluding non-recurring items
2 Excluding group items
July 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.
2012 revenue EUR 125.5 million, 19% of Group
2012 EBIT1 EUR 7.3 million, 9% of Group2
Employees 843 (average)
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
1 Excluding non-recurring items
2 Excluding group items
38 July 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
July 2013 39
Thank you