Building on our strong premium brands to maximize efficiency and organic growth CAPITAL MARKETS DAY 5 JUNE 2019
Tikkurila Capital Markets Day 8:30 Registration and coffee 9:00 Opening and welcome Tapio Pesola, Director, IR & Communications 9:05 We maximize e ef efficie iciency cy and d accele elerat ate e organ anic ic growth th Elisa Markula, CEO 9:35 We fo focus s on our stron ong g bran ands ds Meri Vainikka, SVP Offering 10.15 Q&A 10.30 Break 10:40 We are impr provi ving g our perfor orman ance ce in sales es, operation tions s and sourcin cing Oskari Vidman, SVP Sales Fredrik Linde, SVP Operations Mika Uusitalo, VP Sourcing 11:10 We We have a clear ar strateg tegy to to reach ach our finan ancia cial targe gets ts – and progr gress ss is is under derway Markus Melkko, CFO 11:30 Q&A 11:45 Lunch 12:30 Tikku kkurila ila factor tory y Tour Host: Petri Karhu, Operations ~ 13:15 End of the program Tikkurila Capital Markets Day 2019 2
New Tikkurila Management Team as of May 2019 Elisa Markula Chief Executive Officer Markus Melkko Tapio Pesola Finance Communications and IR Sanna Lehti Melisa Bärholm Human Resources Legal Mika Uusitalo Anders Rotkirch Transformation and ICT Sourcing Meri Vainikka Fredrik Linde Oskari Vidman Marketing, portfolio and R&D Operations Sales Tikkurila Capital Markets Day 2019 Company confidential 3 6/5/2019
Building on our strong premium brands to maximize efficiency and accelerate organic growth Elisa Markula, CEO Tikkurila Capital Markets Day 2019 4
Tikkurila is committed to creating value by improving efficiency and accelerating organic growth This is Tikkurila This is our strategy This is our target Market leader in INCREASING Revenue Growth Profitability North-Eastern Europe. EFFICIENCY Among TOP20 globally. EBIT > 12% Faster than home market growth ACCELERATING Well-known and preferred premium brands PROFITABLE GROWTH Gearing ROCE > 20% Skillful employees with CREATING A STRONG < 70% “ONE TIKKURILA” close to 160 years CULTURE knowledge in surfaces Tikkurila Capital Markets Day 2019 5
We operate in a large global market driven by stable structural growth Europe 1 17 €B World wide paintings & N. America 1-2% coatings market, 2016 16 €B CAGR APAC 2 >120 €B 66 €B ~3% CAGR ~3-6% 54M mT CAGR RoW 3 World wide market growth 22 €B ~3.5% ~2-3% CAGR Note: Market size for 2016 and based on consumption; Compounded annual growth rate forecast 2017-2022 period. Revenue growth expected to be higher than volume growth due to shift to higher value-add coating products 1. Includes Western and Eastern Europe countries. 2. APAC, includes China, Oceania 3. Rest of World, including Saudi Arabia, Turkey, Mexico, Russia, Brazil and other smaller consumption countries. Source: IHS P&C market study, Axalta, investor presentations, Technavio Tikkurila Capital Markets Day 2019 6
Changing operating environment: Urbanization, consolidation and customer needs drive the industry Digitalization and Urbanization e-commerce Changes in distribution, Raw material "Professionalization" shift availability from DIY to "do-it-for-me" Regulation will Fragmented Sustainability, continue to tighten needs, preference health & safety for premium Impact on painting industry: Increasing need for Increasing need for Increasing need for understanding the efficiency and premium products and functional solutions customer sustainability Tikkurila Capital Markets Day 2019 7
Tikkurila focuses on segments with low global consolidation - There is a clear demand for strong local premium brands Share of total market (%) ~ 40 % ~ 40 % ~ 20 % in value Decorative Industry Industry - Low global consolidation - Low global consolidation - High global consolidation 100 Market 30% 35% 80 40% 40% share of 42% global 60% 60% players (% of total 60 80% 80% 80% segment) 65% 40 Market 70% share of 60% 60% 58% local stars Tikkurila’s focus markets 20 (% of total 40% 40% segment) 20% 20% 20% 0 0 20 40 60 80 100 Wood Decorative OEM Other Auto OEM Marine Protective Powder Aerospace Auto refinish Tikkurila Capital Markets Day 2019 8 Source: IHS P&C market study
Our regional focus is on North-Eastern Europe where we strengthened our position further in 2018 Deco and industry Tikkurila revenue Region market growth growth in local in 2018 currency in 2018 84% Russia +2.4% +5.3% Poland +2.2% +10.4% of revenue from Finland, Sweden +0.6% +2.2% Sweden, Russia, Poland and Baltics Finland +0.7% +1.7% Baltics +0.5% +5.7% Rest of revenue comes from 30+ other countries where Tikkurila’s products are also sold Source: The Association of the Finnish Paint Industry, SVEFF, Global Research and Data Services 9 Tikkurila Capital Markets Day 2019 from UN; Chem Courier; CEPE; Markets and Markets; IPPIC; Tikkurila materials, BCG analysis
We are #1 in nearly all our main markets in decorative paints (value share) Russia Sweden Finland Poland Baltics Deco 2018 Deco 2018 Deco 2018 Deco 2018 Deco 2017 Tikkurila Tikkurila Tikkurila Tikkurila Tikkurila 37 % 63% 19% 19% 25% Others 37% Others Others Others Others 75% 81% 63 % 81% In the industry segments our market shares are ~15-17 % of industry per market Source: Sources: BCG, VTY, SVEFF, Chem Courier, GFK, Tikkurila management estimate. 10 Tikkurila Capital Markets Day 2019
We offer premium solutions to all key customer segments - Fastest growth expected in professionals and industry CONSUMERS PROFESSIONALS INDUSTRY (47% of total sales) (35%) (18%) • • • Renovators Contractors Wood industry • • • Decorators Designers and Architects OEM • • • Gardeners Investors Protective coatings • • • Home and garden builders Other influencers Other pre-treated surfaces Retail distribution shift Seeking for efficiency KEY TREND COMPETITIVENESS Differentiate through premium brands, functionality and sustainability FACTORS “Grow through “Growth driven by GROWTH DRIVERS “Growth in selected segments” differentiated portfolio premiumization” including services” 11 Tikkurila Capital Markets Day 2019
Tikkurila’s products are used in the most demanding projects Olympic stadium Indoor Ski hall Helsinki, Finland Lørenskog, Norway Bogoroditce- Irkutskaya Church Irkutsk, Russia 12 Tikkurila Capital Markets Day 2019
Turn-around strategy execution is progressing as planned Revenue Adjusted operating profit Key drivers for 2018 performance +3,1 % in Sales volumes increased MEUR MEUR local 70 12% currencies 600 584 582 Sales prices were raised 572 580 561 60 561 10% 10% 560 9% Fixed expenses savings of 30 MEUR 50 540 8% 8% Cash flow and profitability 520 40 7% 6% 500 30 5% 480 4% 460 20 Raw material price inflation 440 2% 10 420 Divestments effects to revenue -11.3 MEUR 0 0% 400 Currency effects – 27.5 MEUR to revenue 13 Tikkurila Capital Markets Day 2019
Our long-term target is to achieve maximum efficiency and grow faster than the market Maximize efficiency and growth Fix the foundation and feed growth Achieve Successful turn-around Phase I Phase II Phase III (2018) 14 6/5/2019
We have a concrete action plan to improve our performance in all key areas - Tikkurila has considerable potential to improve profitability Adjusted Operating Market and raw Profit (%) material volatility 14 Long-term financial target Adjusted Operating Profit >12% 12 10 Increase Save in efficiency in 8 fixed cost, Increase raw materials centralize Improve sales efficiency in 6 Grow in indirect performance operations Deco and Optimize sourcing management selected portfolio 4 industry segments 2 0 2018 Target Tikkurila Capital Markets Day 2019 15
We made significant progress in 2018, and have a proactive agenda for 2019 Achievements in 2018 2019- Savings fully visible in 2019. Actions to improve profitability and growth Save in fixed Fixed expenses savings of EUR 30 million achieved in 2018. Further activities on cost, centralize Numerous initiatives to manage net working capital more efficiently. working capital. indirect sourcing Optimization of manufacturing formulas, raw materials and SKUs is Optimization Optimize portfolio underway at Tikkurila, the goal is to reduce the number of product will continue. titles by half by 2020. Most potential Streamlining of both direct and indirect purchases. The targeted Key focus area. Sales price Increase efficiency variable cost savings have to a large extent been offset by the increases to offset raw material in raw materials continued increase of raw material costs in 2018. hike 2018 and Q1/19. Improve sales Revenue growth in local currencies 3.1% Several price increases. performance Key focus area. Deco market share grew in Poland, Sweden and Baltics. management Operations were divested in Balkan and Germany. Small production Supply chain efficiency to be Increase efficiency further improved. in operations sites in Denmark and Russia were closed Revenue increased in all main markets (Finland, Sweden, Russia, Grow in Deco Faster than Poland, Baltics) in local currencies. Market share in decorative paints and selected market growth. remained strong in all market areas, increasing in Poland and Sweden. industry segments 16 Tikkurila Capital Markets Day 2019
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