Tikkurila company presentation 2014

Tikkurila inspires you

to color your life!

Contents

• Tikkurila in brief

• Business environment

• Key figures and financial targets

• Business Units

2 4/14/2014 Tikkurila company presentation

Tikkurila in brief

Durable protection and sustainable beauty

for built environments since 1862


150 years of decoration and protection

5

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

marketing and

customer training

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.

Entering the Balkan

area through the

acquisition of

Serbian Zorka Color.

Tikkurila turned

150 yrs.

4/14/2014 Tikkurila company presentation

Revenue EBIT* Personnel

Tikkurila 2013

Revenue EUR 653 million

4/14/2014 6

*Excl. non-recurring and Group items

36%

29%

16%

19%

East Scandinavia Finland CEE

For 150 years already, Tikkurila has provided consumers and professionals with user-friendly and

sustainable solutions for surface protection and decoration. Tikkurila wants to be the leading paint

company in the Nordic area as well as in Russia and other selected Eastern European countries.

– Tikkurila inspires you to color your life.

EBIT* EUR 73 million Personnel 3,133

Tikkurila company presentation

32%

34%

19%

15%


44%

13%

18%

25%


Tikkurila in brief

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 in a nutshell Tikkurila's market positions*

7

1

1 1

1

4

* Decorative paints


RUSSIA SWEDEN FINLAND POLAND

Tikkurila market shares and positions in

decorative paints in key markets in 2012

#1

4/14/2014 8

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), IBP Research (Poland, volume)

17%

83%

Tikkurila Others


4/14/2014 9

Ukraine

China

Kazakhstan

Finland Sweden

Poland

Russia

Germany

Estonia

Production, logistics center, sales

Logistics center, sales

Distribution center, sales

Serbia

Production units in 8 countries

Sales units in 16 countries

Tikkurila locations


Tikkurila Group structure

4/14/2014 10

Support Functions

Supply Chain Management

& HSEQ

RDI

Business Portfolio & Brand

Management

SBU EAST Russia

Central Asia

Ukraine

Belarus

Balkan

China

Exports

SBU WEST Sweden

Norway

Denmark

Finland

Poland

Germany

Baltic countries

Tikkurila's reporting units: West and East.


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

Focusing Customers

Geographic area

Brands

Profitability Resilience

Realignment

Agility

Growth Organic

Well-targeted acquisitions

4/14/2014 11

Tikkurila offers user-friendly and

sustainable solutions for surface

protection and decoration.

2011–2012 Restructuring and improving profitability │2013– Growth


12

Tikkurila values

We are innovative

We drive change in the market and offer novel

solutions for our customers' needs.

We are trustworthy

We create and offer quality brands, services,

and products that people can trust are safe,

reliable, and environmentally sustainable.

We are professionals

We add value to our customers, owners, and the

community – every day.


Tikkurila aims at profitable growth

Profitable growth

The focus is on organic growth generated by

strong brands.

Continuous improvement

A profitable volume growth raises the

utilization rate of our capacity and reduces the

manufacturing costs per unit, since fixed costs

can be spread over a larger manufacturing

volume. Efficiency is also sought through

intra-Group activities

Marketing and innovations

Improved effectiveness of operations frees

resources for developing our business

operations. In our operations, new and

improved products and more convenient

purchasing and use of products are achieved

through investments in product development

and marketing.

4/14/2014 Tikkurila company presentation 13

Strong and well-established brands

Large majority of sales from strategic brands.

Annual sales and marketing expenses account for approximately 15% of revenue.

Strategic brands Local brands

14

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

"Medium" "Economy"


Distribution channels

Tikkurila's own paint shops

Temaspeed distribution network

Direct sales

Retail** Wholesale*

TIKKURILA

Consumers Professionals * Only in some markets

** Big boxes, specialized paint shops

Retail**


Deep partnerships with retailers are of

crucial importance

• 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


Enhancing the user experience

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• Making buying and selling of paints, as well as

painting, easier.

• Inspiring people to paint.

• Guiding end-users to choose and use paint.

• Comprehensive training and raising awareness

about products and painting.

• Enhancing the quality of painting, environmentally

sustainable use of products, product and user

safety, as well as the knowledge of surface

treatment.

Tikkurila company presentation 17

Own paint shop and retail concepts

• Tikkurila invests in developing solutions

that make selling and buying of paint

easier.

• Tikkurila utilizes its own paint shops, as

well as retail and shop-in-shop concepts

in many of its operating countries.

• The idea is to help paint retailers

succeed, to make buying paint a pleasant

experience, and to increase the

attractiveness of painting.


We help our customers to succeed in surface

protection and decoration

4/14/2014 19 Tikkurila company presentation

Inspiration Ideas Colors Stores

Helpline Training Internet Designer Pool Contractor Pool

Professional services

The many advantages of tinting


Ecological

and cost-efficient

way of operating

Practically

unlimited

amount of

shades

Economical way

to produce small

batches of

different colors

Enables

lower

inventory

levels Enhances

the service level

of retailers

Emphasizes

the quality

of paint

Deepens

the cooperation of

retailers and

paint producer

Colors

• Tikkurila is one of the forerunners

in the production of paints for

tinting and in the development and

marketing of colors.

• Tikkurila's color cards are based

on the tinting system and made

with color card paints. Thus the

color card sample will be as close

to the color of the final painted

surface as is technically possible.

• Color cards are provided for both

indoor and outdoor painting.


Tikkurila makes painting easier

• Tikkurila’s customer hotline offers

assistance, advice and ideas for

painting.

• Our experts provide technical

consultation, advice on selecting colors

and paints as well as tips and work

instructions that helps our customers to

achieve high-quality and sustainable

results in their painting projects.

• The Maalilinja customer hotline,

established in 2000 in Finland, receives

more than 75,000 contacts per year by

phone and e-mail.


Tikkurila organizes paint-related trainings

• Tikkurila trains its customers, retailers, and

other professionals and students in its training

centers and in stores.

• Tikkurila organizes seminars, lectures, and

training regarding paints, painting, and tinting.

• Training centers in seven countries.


Responsibility increasingly important

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• Increasing stakeholder expectations and environmental awareness

• Global and business environment trends

• Changes in legislation


Tikkurila provides its customers

with sustainable beauty

• High-quality, user-friendly and

environmentally sustainable solutions for

surface protection and decoration.

• Added value for customers throughout the

entire product life-cycle.

• Long-term preferred partner for

stakeholders.

• Safe and reliable employer that promotes

innovativeness and openness in all of its

operations.


Environmentally sound solutions

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• Quality

• Long service life and long

maintenance painting intervals

• Easy and safe to use

• Water-borne products

• Eco-labels


Minimizing the environmental impact

of operations

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• Material efficiency

• Waste

• Solvent emissions in production

• Eco-efficiency


Business environment

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


Paint consumption and demand structure

Factors impacting paint demand Estimated paint consumption per capita*

• Living standards

• GDP development

• Consumers' and companies' confidence

• Level of activity in new construction,

renovation and industry

• Local habits and painting methods

• Construction styles and available materials

• Trends in interior decoration, colors etc.

• 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


Key figures and

financial targets

0

2

4

6

8

10

12

14

16

0

100

200

300

400

500

600

700

800

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Revenue Revenue from acquisitions Divestments EBIT margin (excl. non-recurring)

Long term financial development

Development of sales and profitability 2000–2013

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

589

4/14/2014 32

644 670

653


Financial targets for 2018

• Revenue of EUR 1 billion

• Operating EBIT >12%

• Operative return on capital

employed (ROCE) >20%

• Gearing <70%

• Dividend policy: Target is

to pay at least 40 % of

annual operative net

income as dividends

Historical performance

1) Excluding non-recurring items

2) Board of Directors' proposal

2007 2008 2009 2010 2011 2012 2013

Revenue 625 648 530 589 644 670 653

EBIT, %1 10.3% 9.1% 9.5% 10.1% 9.7% 11.0% 11.1%

ROCE 24.5% 18.7% 15.7% 19.2% 19.4% 21.0% 23.5%

Gearing 135.3% 208.5% 90.0% 41.4% 51.9% 40.6% 23.4%

Dividend payout;

share of operative

net income, %

86%

(EUR

0.70 per

share)

88%

(EUR

0.73 per

share)

72%

(EUR

0.76 per

share)

69%2

(EUR

0.80 per

share)


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


Key figures 2013

35

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

Revenue 653.0 670.4 -2.6%

EBIT excluding non-recurring items 72.6 73.7 -1.5%

EBIT excluding non-recurring items, % 11.1% 11.0%

EBIT 71.5 66.3 7.7%

EBIT, % 10.9% 9.9%

EPS*, EUR 1.14 0.92 23.1%

ROCE, % rolling 23.5% 21.0%

Cash flow after capital expenditure 66.9 50.3 33.2%

Net interest-bearing debt at period-end 48.6 80.8 -39.8%

Gearing, % 23.4% 40.6%

Equity ratio, % 50.1% 45.9%

Personnel at period-end 3,133 3,223 -2.8%


Tikkurila's ownership structure on

December 31, 2013

4/14/2014 36

Tikkurila's ownership structure

on Dec 31, 2013

21%

8%

22% 11%

3%

36%

Private companies

Financial andinsurance institutions

Public sectororganizations

Households

Non-profitorganizations

Foreigners andNominee registered

• Number of shareholders ~21,000

• Foreign ownership in Tikkurila has

increased strongly

• Largest shareholders:

Oras Invest Oy (18.1%),

Ilmarinen (9.1%) and

Varma (5.7%)

• 50 largest shareholders holding ~45%

• ~95% of shareholders holding max

1,000 shares


Business Units

Tikkurila Strategic Business Units (SBU)

Russia, Central Asian countries, Ukraine, Belarus,

Serbia, Macedonia, and China. Furthermore, this

SBU is responsible for the exports to approximately

20 countries.

SBU East SBU West

Sweden, Denmark, Norway, Finland, Poland,

Germany, Estonia, Latvia, and Lithuania Operational area

Production sites

Current demand

structure

Expected demand

structure

Competitors

Distribution

channels

St. Petersburg, Russia

Stary Oskol, Russia

Kiev, Ukraine

Sabac, Serbia

Nykvarn, Sweden

Vantaa, Finland

Debica, Poland

Ansbach, Germany

Tallinn, Estonia

Economy price and quality segment products

Premium and medium price and quality segment

products

Premium price and quality segment products

expected to rise Premium and medium price and quality segment

products

Akzo Nobel, Lakra-Sintez, Empils, ABC-Farben,

Meffert, Caparol Akzo Nobel, PPG, Flügger, Jotun, Sherwin-

Williams, Teknos, Nor-Maali, Sniezka

Deco: DIY retailers, independent retailers,

wholesalers

Industry: direct sales, Temaspeed

Deco: DIY retailers, independent retailers, Alcro

professional stores, wholesalers

Industry: direct sales, Temaspeed


SBU West

Key facts

Operational

area

Sweden, Denmark, Norway, Finland, Poland, Germany, Estonia,

Latvia, and Lithuania

2013 revenue EUR 388.6 million, 59.5% of Group

EBIT 20131) EUR 50.9 million, 67% of Group2)

Employees 1,537 (at year-end)

Production

sites

Nykvarn, Sweden; Vantaa, Finland; Debica, Poland; Ansbach,

Germany; Tallinn, Estonia

Development

in West

1862 Tikkurila founded in Finland

1865 Beckers founded in Sweden

1906 Alcro founded in Sweden

1930 Customer training started in Finland

1958 Color card development and color advisory service

started in Finland

1970 Monicolor tinting system launched in Finland

1992 Paint production started in Estonia

1995 Sales company established in Lithuania

2000 Maalilinja customer helpline launched in Finland

2001 Acquisition of Alcro-Beckers in Sweden

2001 Production plants in Germany and Poland

2003 Customer training center Paletti opened in Finland

2007 New production plant in Nykvarn Sweden

2009 Avatint tinting system launched

2012 Divestment of subsidiaries in Hungary, Czech

Republic, Slovakia, and Romania

Locations

Vantaa Nykvarn Oslo

Copenhagen Stockholm

Tallinn

Riga

Vilnius

Ansbach Debica

Warsaw Lodz

1 Excluding non-recurring items

2 Excluding group items


SBU East Key facts

Operational area

Russia, Central Asian countries, Ukraine, Belarus, Serbia,

Macedonia, and China. Furthermore, this SBU is responsible

for the exports to approximately 20 countries.

2013 revenue EUR 264.4 million, 40.5% of Group

EBIT 20131) EUR 24.7 million, 33% of Group2)

Employees 1,565 (at year-end)

Production sites

St. Petersburg, Russia (3)

Stary Oskol, Russia

Kiev, Ukraine

Šabac, Serbia

Development in East

Minsk

Šabac

Khabarovsk Irkutsk

Novosibirsk

Almaty

Ekaterinburg

Chelyabinsk

St. Petersburg

Mytishchi

Kiev

Stary Oskol

Krasnodar

Skopje Beijing

Shanghai

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 Kazakhstan

2007 Sales company established in China

2008 Sales company established in Belarus

2009 Completion of logistic centre in Mytishchi, Moscow

region and new water-borne production lines to

Obukhovo site in St. Petersburg

2011 Divestment of the powder coatings business

2011 Acquisition of the business of Serbian Zorka Color

2012 Expansion of sales and ware house network in

Russia

4/14/2014 40

1 Excluding non-recurring items

2 Excluding group items


Tikkurila in Russia

4/14/2014 41

Brands

Production

Production sites in St. Petersburg (3) and Stary Oskol

Majority of the products sold in the area are produced

locally, Tikkurila brand is also exported from Finland

EUR 204 million, 31% of Group

2013 revenue

Retail Tikkurila's products are sold in more than 5,000 retail

outlets

Raw materials Approximately half of the raw materials used in the

production in Russia is sourced from local suppliers

PREMIUM ECONOMY

Market position in

decorative paints

Source: Chem-Courier, 2013 (volume)

17%

6% 5%

72%

Tikkurila

Empils

Lakra

Others


In the long run, many factors support the good

development of business operations in Russia

• Approximately half of Tikkurila's

production capacity is located in

Russia.

• Tikkurila's operations cover the entire

nation. Products are sold in more than

5,000 retail outlets in different parts of

the country.

• Rise of the middle class increases

paint consumption and boosts quality

consciousness.

• Brand awareness is high and growing.

Tikkurila is by far the most well-known

paint brand in Russia.

4/14/2014 42

Paint consumption on Tikkurila's markets, liters per capita

Source: Tikkurila, market data


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 especially during

unstable market conditions

• Production of water-borne products

increasing; ~70% of production

• 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

• Chemical legislation sets restrictions

on paint import to the EU region from

the third countries

Tikkurila's production capacity Production and raw materials

4/14/2014 43

51% 49%

Outside EU In EU


Tikkurila company presentation 2014

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