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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
#1
July 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 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
Rev
en
ue,
EU
R m
illio
n
EB
IT %
(e
xcl.
no
n-re
curr
ing
)
530
648625
563
457441 439
450445
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
FocusingCustomers
Geographic area
Brands
ProfitabilityResilience
Realignment
Agility
GrowthOrganic
Well-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 BoxesSpecialised 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 companies
Financial and in-surance institutions
Public sector organiza-tions
Households
Non-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 development
Index (2009=100)
Q1 20
10
Q2 20
10
Q3 20
10
Q4 20
10
Q1 20
11
Q2 20
11
Q3 20
11
Q4 20
11
Q1 20
12
Q2 20
12
Q3 20
12
Q4 20
12
Q1 20
13
Q2 20
1380
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% 242.8
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.
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
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
Volume Sales mix/Price Exchange rates Acquisitions/ divestments
Total
-4
-2
0
2
4
6
-2%+3%
0% +5%+4%
26
SBU Finland Q2/2013
July 2013
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
Volume Sales mix/Price Exchange rates Acquisitions/ divestments
Total
-6
-4
-2
0
-4%
0% 0% -3%
+1%
27
SBU Central Eastern Europe Q2/2013
July 2013
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.
Volume Sales mix/Price Exchange rates Acquisitions/ divestments
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
6446709.1 9.5
10.1 9.7
11.0
Revenue
EBIT, % (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, Russia
Stary Oskol, Russia
Kiev, Ukraine
Tikkurila, VantaaNykvarn, 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
33
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 sites3 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
Almaty
Chelyabinsk
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
Empils
Lakra
Others
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 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 items2 Excluding group items
Stockholm
July 2013
37
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 items2 Excluding group items
July 2013
38
+ China (Beijing and Shanghai)
Ansbach
Riga
Vilnius
WarsawLodz
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 sitesTallinn, Estonia, Ansbach, Germany, Debica, Poland and Sabac, Serbia
Sales officesCzech Republic, Hungary, Latvia, Lithuania, Romania, Slovakia, China, Finland (export)
Expansion in CEE
Locations
Tallinn
1 Excluding non-recurring items2 Excluding group items
July 2013
39
Investor and media contacts
Erkki JärvinenPresident and CEO
Minna AvellanManager, Investor [email protected]. +358 40 533 7932
Jukka HaviaCFO
July 2013
Thank you