Tikkurila Capital Markets Day
Russian Operations
Simo Laitala, Head of Russia and Central Asia
DisclaimerIn this presentation, all forward-looking statements in relation to the company or its business are based on the
management estimates, and actual results may differ from the expectations and beliefs such statements contain.
Macroeconomic or general industry data are based on third-party sources. Tikkurila related figures in this presentation are
based on internal accounting data. The information disclosed is unaudited except for some whole year 2011 figures. In
addition, the market information presented is based on Tikkurila management estimates unless an external source is
mentioned. All management estimates are suggestive.
June 13, 2012 2
2010 New production line in
St. Petersburg for
water-borne products
Tikkurila's key milestones in Russia
June 13, 2012 3
1862 1970 1980 1990 2000 2010
1862 Tikkurila
established
in Finland
1980s Export to the Soviet
Union started with
industrial coatings for
automotive industry
1990s Tikkurila is the first
western paint
company to start
promoting tinting
technology in Russia
1995 Opening of the first
western paint factory in
St. Petersburg
2006 Acquisition of Kraski
Teks in Russia
2007 Acquisition of Gamma
and Ohtek in Russia
2009 Logistic center in
Mytischi, Moscow
2011 Divestment of Powder
Coatings business
1970s
Entering the Eastern trade.
Tikkurila was known as
"Firma Miranol" in Soviet
Union. The acquisition of
Kraski Teks in 2006 made
Tikkurila the leading
decorative paint company in
Russia.
Russia
~5 liters per capita
= high
= middle
= low
Paint consumption per capita
* Source: paint consumption, IPPIC
Paint consumption is still on a relatively low
level in Russia
Europe
8–15 liters per capita
Russian population
142.9 million people
June 13, 2012 4
But the paint market is growing
June 13, 2012 5
2.22.6
3.0 3.0
3.4
4.0
4.4 4.3
3.6
4.3 4.3
0
1
2
3
4
5
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Liters
Source: Rosstat, Chem-Courier (decorative paints)
283300
358
411
457
571
622 615
515
618 619
-20
-15
-10
-5
0
5
10
15
20
25
30
0
100
200
300
400
500
600
700
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Market size Growth
Decorative paint market in Russia
Market size (million liters)1
1) Chem-Courier, Management estimates
6
Liters (million) Growth %
June 13, 2012
Russian macro environment
• Euro crises has had a limited effect
on Russia
• Strong growth figures in e.g.
construction output and retails sales
in late 2011 and early 2012
• Consumer confidence has been
improving
• Inflation is at record low level
• Oil price is still relatively high
• Russian GDP growth is estimated
to be some 4% over the medium-
term
• Inauguration of the new President
and formation of the government
• WTO membership
June 13, 2012 7
5.2
-7.9
4.0 4.3 3.5
-10
-5
0
5
10
2008 2009 2010 2011E 2012F
Russian consumer confidence index
-40
-30
-20
-10
0
10
Russian GDP development, %
Opportunities exist in Russia…
June 13, 2012 8
RUSSIA IS THE WEALTHIEST BRIC COUNTRY (GDP/CAPITA)
ALL SOURCES INDICATE GROWTH ON MEDIUM AND LONG TERM
RUSSIANS REMAIN BRAND CONSCIOUS
GROWING MIDDLE CLASS MAKES RUSSIA AN ATTRACTIVE MARKET
RUSSIA IS ONE OF THE LARGEST RETAIL MARKETS
…but there are also risks
June 13, 2012 9
RUSSIAN ECONOMY IS DEPENDENT ON THE OIL PRICE DEVELOPMENT
LACK OF RUSSIAN INDUSTRY AND EXPORT PRODUCTS
CHANGES IN LEGISLATION REQUIRE CONSTANT MONITORING
FIGHT FOR TALENTS
Tikkurila in Russia
June 13, 2012 10
Current demand
structure
Economy and medium segments
dominating, premium segment expected
to grow fastest
Tikkurila paint brands in RussiaFacts about SBU East
Paint
consumption
~5–7 liters per capita
PREMIUM ECONOMY
Market leader in Russia in 2011*
19%
6%
5%
70%
Tikkurila
Empils
Lakra
Others
*Source: Chem-Courier 2011 (decorative paints, volume)
Russia, other CIS countries, UkraineOperational area
Production sites Russia (4) and Ukraine (1)
1,577 (average in 2011)Personnel
EUR 220.0 million, 34% of Group
Russia 88% of SBU East revenue2011 revenue
EUR 25.3 million, 39% of Group2011 EBIT
RetailTikkurila's products are sold in more than
5,000 retail outlets
Track record in SBU East
June 13, 2012 11
204
227
167
195
220
0
2
4
6
8
10
12
14
0
50
100
150
200
250
2007 2008 2009 2010 2011
Revenue East EBIT margin
-30
-20
-10
0
10
20
2008 2009 2010 2011
Russian GDP growth, % East revenue growth, %
Development of Russian GDP and SBU East revenue*SBU East revenue and EBIT margin 2007–2011
Source: Rosstat (GDP)
*Euro-denominated revenue growth
EUR million % %
June 13, 2012 12
Population split in Russia
Central FD
Northwestern FD
Southern FD
Volga FD
Urals FD
Siberian FD
Far Eastern FD
North Caucasian
6.3 million
19.3 million
13.6 million
29.9 million
12.1 million
38.4 million
13.9 million
9.4 million
31.5 million people
111.4 million people
June 13, 2012 13
Central FD
Northwestern FD
Southern FD
Volga FD
Urals FD
Siberian FD
Far Eastern FD
North Caucasian
Novosibirsk
Saint Petersburg
Moscow
Stariy Oskol
Kopeisk
Tikkurila has regional focus
KhabarovskIrkutsk
Krasnodar
SamaraEkaterinburg
• Sales function has regional structure with more than 200 employees
• Tikkurila has established long term partnerships with local customers
• Tikkurila's office and warehouse network has been expanded in 2012
Tikkurila's focus will be on the golden cities
• Tikkurila will focus on the 14 "golden
cities" of Russia (population exceeds
1 million) and greater-Moscow area
• In these areas the distribution network
will be further expanded
June 13, 2012 14
Source: Global insights, Rosstat, E&Y
Population of Russia's largest cities
10.6
4.6
1.4
1.3
1.3
1.1
1.1
1.1
1.1
1.1
1.1
1.1
1
1
0 2 4 6 8 10 12
Moscow
St. Petersburg
Novosibirsk
Yekaterinburg
Nozhny Novgorod
Kazan
Samara
Omsk
Chelyabinsk
Rostov-on-Don
Ufa
Perm
Krasnoyarsk
Volgograd
Distribution channels in SBU East
Indirect customers
Direct disributors/customers
Customer segments
Tikkurila SBU East
Consumers
DIY big boxes
Consumers
Color studios
Regionalwholesalers
- Traditional retail outlets- Professional painters- Construction industry
Professionals
Temaspeeddealers Industry
15June 13, 2012
Big boxes account for approximately 20% of Tikkurila sales in Russia
Tikkurila is represented in all segments
16
Medium
Premium
2-6 EUR
TikkurilaSegment
Trends
Value
Shelf Price
Low /
Economic
< 1,0 EUR
Akzo Nobel
+ ICI
Russkiye
kraski
Caparol Empils Lakra Predpriyatie
VGT
KhimikFarben –
Dekart
Holding
Prestizh
Eskaro Meffert
> 6 EUR
1-2 EUR
16June 13, 2012
Water-borne paints have clearly increased
market share in Russia
June 13, 2012 17
16%25%
31%36% 40% 42%
47% 47%54% 56% 54% 57%
84%75%
69%64% 60% 58%
53%
53%46%
44%46% 43%
0 %
10 %
20 %
30 %
40 %
50 %
60 %
70 %
80 %
90 %
100 %
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
SB
WB
Source: Rosstat, Chem-Courier
Tikkurila promotes water-borne paints systematically in Russia
Tikkurila is in a good position to grow further
in Russia
June 13, 2012 18
Success in Russia: Tikkurila's strengths in Russia
MARKET KNOWLEDGE
EXPERIENCE
LEADING POSITIONS
CLEAR MARKET LEADER POSITION IN
DECORATIVE PAINTS
TOP-CLASS BRAND AWARENESS
GOOD COVERAGE OF OPERATIONS
AND DISTRIBUTION
Q&A