Tikkurila Capital Markets Day · 6/13/2012 · 1862 1950 1960 1970 1980 1990 2010 1862 An oil...
Transcript of Tikkurila Capital Markets Day · 6/13/2012 · 1862 1950 1960 1970 1980 1990 2010 1862 An oil...
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
Global megatrends and corporate actions
• Focus on growth regions
• Adapt to the 60+ age group
• Use trend labs; smart solutions are needed
Changes in demographics
• Exploit the market potential of the middle class
• Apply scenario techniques Globalization
• Reduce consumption
• Reduce dependency
• Appeal to consumers Scarcity of resources
• Establish cooperative partnerships and networking
• Watch the latest technology trends
• Think divergently and convergently
Technological changes & Innovations
• Seize new business opportunities
• Reduce CO2 emissions
• Manage climate risk
Competition for scarcer resources
June 13, 2012 3
Source: Roland Berger Strategy Consultants
Current macro environment is challenging
It seems that we are entering a world of low economic growth with
high volatility for the next years to come.
June 13, 2012 4
GDP growth, %
-10
-8
-6
-4
-2
0
2
4
6
8
10
2006 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F
Russia
Sweden
Finland
Poland
Source: IMF
Value of the global paints and coatings market
EUR ~73 billion
Decorative paints 44% Industrial coatings 56%
Source: IPPIC 2010, Valspar 2012
10%
6%
6%
3%3% 4%
7%
8%
8%44%Decorative paints
Metal Industrial
Coatings
Transportation
Industrial Maintenance
and Protective
Automotive
Refinish
Powder Coatings
Wood Coatings
Marine Coatings
Coil Coatings
Packaging Coatings
June 13, 2012 5
Historical and forecast sales of decorative
paints
• Global decorative paint sales is
estimated to total approximately
EUR 33 billion in 2012
• Europe represents approximately 30%
of the total value
• Demand growth is closely correlated
with GDP development
June 13, 2012 6
0
5
10
15
20
25
30
35
40
2004 2009 2014F
Europe RoW
EUR billion
Source: Orr & Boss, IPPIC
24
27
37
Paint consumption per capita
• Russia 5 liters
• Sweden 13 liters
• Finland 12 liters
• Poland 11 liters
= High (>10 liters)
= Medium (5–10 liters)
= Low (<5 liters)
Paint consumption source: Management estimates, IPPIC
Standard of living and painting habits drive
paint consumption
June 13, 2012
= Premium products
= Medium products
= Economy products
Russia
and CIS
Nordic
CEE
Drivers for paint demand
June 13, 2012 8
MATURE MARKETS EMERGING MARKETS
Demand factors in long-term • Construction styles
• Trends in interior decoration
• Economic development and
improving standard of living
• Potential for trading-up
• Local habits, e.g. frequency of
repainting
Demand factors in medium
and short-term
• GDP growth
• Consumer confidence
• Employment situation
• Activity level in new construction
and renovation
• GDP growth
• Consumer confidence
• Employment situation
• Activity level in new construction
and renovation
Supply factors • Raw material prices and availability
• Changes in regulation
• Raw material prices and availability
• Changes in regulation
Paint demand and GDP development are
clearly correlated
• In mature markets, the GDP growth has slightly exceeded Tikkurila revenue growth
• In emerging markets, Tikkurila revenue growth has clearly outpaced the GDP growth
June 13, 2012 9
-30
-20
-10
0
10
20
2008 2009 2010 2011
Finnish GDP SBU Finland revenue
-30
-20
-10
0
10
20
2008 2009 2010 2011
Russian GDP SBU East revenue*
Mature market example Emerging market example
Growth % Growth %
*Euro-denominated revenue
Key business environment trends in
European decorative paint sector
Further structural changes are (slowly)
taking place in distribution channels for
decorative paints
June 13, 2012 10
Distribution Customers
0 %
20 %
40 %
60 %
80 %
100 %
Big boxes
Independent dealers
Company-owned stores
0 %
20 %
40 %
60 %
80 %
100 %
Professionals
DIY
Source: Orr & Boss, IPPIC
From do-it-yourself (DIY) to buy-it-yourself
(BIY) and do-it-for-me (DIFM)
Peer group profitability comparison
June 13, 2012 11
EBIT % in 2011 EBIT % 2007–2011
Source: Data published by the companies
Note: Companies may apply different reporting standards, financial periods and currencies
0
5
10
15
20
25
2007 2008 2009 2010 2011
Asian Paints
Tikkurila
Jotun
Flügger
Teknos
Akzo Nobel (decorative paints)
Helios
0
2
4
6
8
10
12
14
16
18
Asian Paints
Tikkurila Jotun Teknos Flügger Akzo Nobel
(decorative paints)
Helios
Revenue EBIT* Personnel
Tikkurila key facts 2011
• Revenue EUR 643.7 million
• EBIT (excl. non-recurring items) EUR 62.7 million
• Personnel at year-end 3,551
June 13, 2012 12
34%
30%
17%
19%
East Scandinavia Finland CEE
43%
12%
20%
25%
East Scandinavia Finland CEE
39%
37%
17%
7%
East Scandinavia Finland CEE
*Excl. non-recurring and Group items
Tikkurila key facts 2011
• Focus on decorative paint business
• Total production capacity ~300 million liters
• Water-borne paints account for two thirds of total production
June 13, 2012 13
Operations Production Water vs. solvent-borne
51%49%
Outside EU In EU
84%
16%
Decorative paints Industrial coatings
70%
30%
Water-borne Solvent-borne
RUSSIA SWEDEN FINLAND POLAND
Tikkurila market shares and positions in
decorative paints in key markets* in 2011
#1
June 13, 2012 14
19%
81%
Tikkurila Others
40%
60%
Tikkurila Others
>50%50%
Tikkurila Others
16%
84%
Tikkurila Others
#1 #1 #4*Russia accounts for 30%
of Group revenue
*Sweden accounts for 24%
of Group revenue
*Finland accounts for 17%
of Group revenue
*Poland accounts for 9%
of Group revenue
Sources: Chem-Courier (Russia, volume), SVEFF (Sweden, value), Association of Finnish Paint Industry (Finland, value), IRP Research (Poland, volume)
150 years of decoration and protection
June 13, 2012 15
1862 1950 1960 1970 1980 1990 2010
1862
An oil press was
founded on the
banks of the
Keravanjoki River
in Tikkurila.
1920s
The manufacture of
paints and lacquers
began in Tikkurila in
1919. Extensive
enlightment and
course activites
began in the 1920s.
1950s
Tikkurila introduced its
first water-borne
product, the Joker
paint. Tikkurila's
coloring service was led
by designer Yki Nummi.
1960s
Entering the
Scandinavian market
through Sweden. A
clear leading position
was obtained through
the acquisition of
Alcro-Beckers in 2001.
Tinting technology was
introduced.
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.
1980s
To the Eastern
European market
and the Baltics
through Poland.
2010s
Tikkurila listed on the
stock exchange.
Tikkurila turns 150
years. The introduction
of the Social
Responsibility program
"Sustainable Beauty".
China
Kazakhstan
Russia
Production, logistic center, sales
Logististic center and sales
Distribution center and sales
Production units in 8 countries
Sales units in 16 countries
16
Germany
Serbia
Ukraine
Poland
Finland
Estonia
June 13, 2012
Tikkurila is focused on Northern and Eastern
Europe
17
Production
set-up
Logistics
set-up
Outsourcing
of non-core
operations
Complexity
reduction
in all
operations
Supply Chain Management key themes
June 13, 2012
Examples of efficiency improvement
measures
• Headcount reductions and improved resource planning
• Reorganizing of areas and sales organizations in Russia and the Baltics
• Sale of the subsidiaries in Hungary, Slovakia, the Czech Republic and
Romania
June 13, 2012 18
RESTRUCTURING
LEAN
MANAGEMENT
SKU
MANAGEMENT
• Lean is a systematic approach to identifying and eliminating waste through
continuous improvement
• Optimizing production planning and processes, improving product quality and
occupational safety, reducing production and transportation costs, reducing
the amount of material waste and paint waste
• Measures to optimize product and raw material portfolios and to create formula,
raw material and product portfolio management models for the future
• Measures to create transparency in formulas and raw materials on Group
level; implementation of new IT applications in order to support and increase
the efficiency of R&D and Product Safety work
Growth example: the Balkan area
June 13, 2012 19
Balkan Serbia, Macedonia,
Bosnia-Herzegovina,
Croatia, Slovenia,
Montenegro, Kosovo
Tikkurila production sites Serbia
Tikkurila personnel 150
Market position #3 in Serbia
#1 Macedonia
Tikkurila in the Balkan area
60
45
24
12 11 8
0
20
40
60
80
Balkan paint market
EUR million
Paint market size EUR 160 million
Paint consumption per
capita
~5 liters
Distribution 90% traditional shops
10% big boxes
Biggest paint companies JUB, Helios,
Tikkurila Zorka
CATEGORY BRAND
Premium–
Medium
Economy
Introduction (2012/2013) of Tikkurila brand to high-end/
premium category to complement the offering and
differentiate from competitorsPaint market information source: Management estimates
Difficult to find optimal M&A targets;
focus on organic growth
• Leading market position
• Strong brands
• Focus on decorative paints
• Wide and efficient distribution network
• Good quality customer base
• Opportunities for profitable growth
• Strong track record
• Competent management and personnel
• Good governance
June 13, 2012 20
Target characteristics
Valuation
Strategic fit
• Geographic area
• Product and service portfolio
• Competitive landscape
• Key valuation metrics within Tikkurila's target range
set internally
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 2012–2014
FocusingCustomers
Geographic area
Brands
ProfitabilityResilience
Realignment
Agility
Targets:
Operating EBIT* >10%
Continuous improvement of ROCE %
GrowthOrganic
Well-targeted acquisitions
Target:
An annual organic revenue growth of >5%
June 13, 2012 21
*Excluding non-recurring items
Tikkurila offers user-friendly and
sustainable solutions for surface
protection and decoration.
Tikkurila's key growth drivers
June 13, 2012 22
GDP
SERVICES
DISTRIBUTION
WINNING
MARKET SHARE
Constant development of product and service offering with
feasible distribution set-up for each market
Evaluation of new distribution methods is a key priority for the
management
Services business provides interesting growth opportunities in
all markets
Tikkurila's growth outpaces the average GDP growth of its key
markets
Trading-up in paint demand as standard of living improve
Tikkurila key strengths
June 13, 2012 23
LEADING MARKET POSITIONS IN KEY MARKETS
STRONG CASH FLOW GENERATION ABILITY
SOLID PERFORMANCE OVER BUSINESS CYCLE
INCREASING SHARE OF SALES IS DERIVED FROM EMERGING
MARKETS
PROFITABILITY EXCEEDS THE INDUSTRY AVERAGE
COMPETENT AND DIVERSIFIED MANAGEMENT TEAM