Tikkurila Investor Presentation UPDATED 27 JULY 2020
Content ▪ Tikkurila in brief ▪ Tikkurila’s strong market position and chosen market segments ▪ Key trends in the industry and competitors ▪ Tikkurila strategy ▪ Financial turnaround in 2017-2019 2
Tikkurila in brief 3
Tikkurila in brief Tikkurila is a leading Nordic paint company with expertise that spans decades. We operate in eleven countries and have 2,700 dedicated professionals. In 2019, our revenue totaled EUR 564 million. The company is listed on Nasdaq Helsinki. Nordic quality from start to finish since 1862. KEY FIGURES REVENUE BY REVENUE BY CORE PREMIUM BRANDS (2019) REGION (2019) MARKET SEGMENT Revenue RUSSIA EUR 564 M (EUR 144M, +7%) +0.4% yoy EXAMPLES OF CUSTOMER CHAINS Adj. EBIT SWEDEN EUR 46 M (EUR 119M, -7%) DECORATIVE +19.5% yoy (83%) FINLAND ROCE (EUR 91M, -3%) 15.4% POLAND +6.1%-p yoy (89M, +6%) Gearing OTHER 45.6% (121M, +0%) INDUSTRIAL TOP10 customers equal 1/3 of revenue -11.4%-p yoy 40+ countries (17%) 4
Tikkurila has been the consolidator in the Baltic Sea region COUNTRIES WITH TIKKURILA TIKKURILA’S OWN PRODUCTION UNITS OPERATIONS (7 sites in 6 countries) Brief history of Tikkurila’s current operations 1862 Tikkurila founded in Finland 1970s Export to Russia and the former Soviet Union started 1992 Paint production started in Estonia 1994 Sales company in Russia 2001 Acquisition of Alcro-Beckers in Sweden and Poland 2006 Acquisition of Kraski Teks in Russia In total Tikkurila’s 2006 Sales company established in Kazakhstan products are sold to 2007 Sales company established in China 40+ countries Operations divested or closed since 2010 2012 Hungary, Czech, Slovakia, Romania 2016 Ukraine, Belarus 2017 Serbia, Macedonia 2018 Germany 5
Tikkurila has made a clear turnaround Challenges faced in 2017-2018 Adjusted EBIT (MEUR) % of revenue EUR million Global raw material inflation 59 60 10% 54 9% 50 46 8% Increasing currency fluctuation Ti02 7% in key markets 39 40 6% 29 30 5% Failed ERP implementation 4% 20 3% 2% “Holding company” 10 1% style management culture 0 0% 2015 2016 2017 2018 2019 6
Increasing profitability, stable revenue Revenue (EUR million) Adjusted operating profit (EUR million) 0,4% 584 582 600 59 572 564 60 562 +19,5% 550 54 55 500 50 46 450 45 400 39 40 350 35 300 29 30 250 25 200 20 150 15 100 10 50 5 0 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 7
Key indicators continued to develop positively Cash flow after Fixed costs ROCE Net interest-bearing capital expenditure EUR million % liabilities EUR million, Rolling 12m Rolling 12m Rolling 12m EUR million 76.9 20.5% 157.2 157.3 215.8 151.8 201.3 18.5% 185.9 180.4 175.6 15.4% 52.7 96.9 36.3 9.3% 6.3% 22.7 4.4 2016 2017 2018 2019 R12M 2016 2017 2018 2019 R12M 2016 2017 2018 2019 R12M H1/17 H1/18 H1/19 H1/20 2016-2018 excluding IFRS 16, 2019-2020 including IFRS 16 8
A dedicated highly-professional management team is executing the turnaround Elisa Markula Meri Vainikka Oskari Vidman Roman Ivashko SVP, Sales, East CEO SVP, Offering SVP, Sales, West Since 2020 Since 2018 Since 2017 Since 2019 Fredrik Linde Markus Melkko Anders Rotkirch Melisa Bärholm SVP, Operations CFO SVP, Human Resources SVP, Transformation & ICT Since 2019 Since 2019 Since 2017 Since 2018 In Tikkurila since 2010 9
Tikkurila’s strong market position and chosen market segments 10
We are the market leader in decorative paints in most of our key markets Poland 4. Baltics 1. 1. 1. 1. Finland Sweden Russia 62% 34% 18% 24% 21% (63%) (37%) (19%) (20%) (24%) 16% of revenue 21% of revenue 25% of revenue 16% of revenue EUR 91M EUR 119M EUR 144M EUR 89M Tikkurila AkzoNobel PPG Other Local significant competitors In industrial paints our market share is ~15-17 % Sources: VTY, SVEFF, Chem Courier, GFK, company financials Data: Market shares in value for 2019 (comparison 2018) 11
Premium brands are Tikkurila’s core strength We focus on our key brands Number of SKUs cut in half Share of value increasing Share of total 10 000 100% 9 000 90% 8 000 Premium 80% 7 000 70% 6 000 60% 5 000 50% Medium 4 000 40% 3 000 30% 2 000 20% Economy 1 000 10% 0 0% 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 TARGET Premium Medium Economy 12
We have focused on the customer segments where we are the strongest Protective Professional Wood OEM Consumers coatings painters industry Decorative paints Industrial paints 83% of revenue* 17% of revenue* Core brands Core brand in decorative in industry *2019 13
Customers segments * 2019 83% of revenue* 17% of revenue* Industry Consumers Professionals Professional Industrial Wood industry Renovators Contractors & subcontractors OEM Decorators Man & Van entrepreneurs Protective coatings Gardeners Designers Home and garden builders Developers & property owners 14
Key trends in the industry & competitors 15
We operate in a large global market driven by stable structural growth Europe World wide paintings & 31 €B coatings market, 2018 N. America 23 €B >145 €B APAC ~3% 72 €B CAGR ~4-5% 44M Liters CAGR ~6-7% Africa & CAGR Middle East 11 €B World wide market growth ~5.4% S. America ~5% 10 €B CAGR (~4.5% in volume) ~5% CAGR Note: Market size for 2018, based on production; Compounded annual growth rate forecast 2019-2024 period. Revenue growth expected to be higher than volume growth due to shift to higher value-add coating products. Source: Markets & Markets P&C market analysis. 16
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 premium products and understanding the efficiency and sustainability functional solutions customer 17
Market split to two types of paint companies Each with distinct competitive advantages – there is room for both local and global players. Tikkurila is among the TOP25 paint producers globally. Global top 9 Locals 45% market share globally 55% market share globally, 20% in our markets 80% in our markets ~800M€ 10B€ 1.5B€ ~8% ~15% 60M€ avg. peer avg. peer avg. peer average average average revenue EBITDA% EBITDA% EBITDA EBITDA revenue Source: Capital IQ 18
We focus on segments where local players are strong 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 Source: IHS P&C market study, Redburn, BCG analysis 19
Tikkurila is operating in two different kind of markets Mature markets Growth markets Flat total markets Faster market growth Tikkurila’s market share More room to improve already strong Tikkurila’s market share Opportunities to grow Continued premiumization especially in Industry Opportunities to grow in both decorative and Industry 20
Growth slowing down in our key markets – But growth expectations still from +2.0% to +3.5% Total market value (deco and industry), M€ Deco Industry +3.8% +3.2% 6 641 Note: Data for different countries not in the same scale 5 667 5 261 3 405 2 949 2 758 +4.1% +2.9% 2 542 2 209 +2.6% +2.3% 2 040 1 405 622 1 010 946 548 523 3 237 +2.2% +2.0% 338 2 718 +3.6% 2 504 301 +3.5% 289 201 174 182 1 138 1 094 1199 142 169 133 90 83 284 80 246 234 74 69 78 94 99 110 83 88 92 2017 2019 2024 2017 2019 2024 2017 2019 2024 2017 2019 2024 2017 2019 2024 Finland Sweden Russia Poland Baltics Source: Markets and Markets, Tikkurila 21
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