Investor Presentation UPDATED 27 JULY 2020 Content Tikkurila in - - PowerPoint PPT Presentation
Tikkurila Investor Presentation UPDATED 27 JULY 2020 Content Tikkurila in brief Tikkurilas strong market position and chosen market segments Key trends in the industry and competitors Tikkurila strategy Financial
UPDATED 27 JULY 2020
▪ 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
Content
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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. REVENUE BY MARKET SEGMENT REVENUE BY REGION (2019) EXAMPLES OF CUSTOMER CHAINS CORE PREMIUM BRANDS
OTHER (121M, +0%) 40+ countries RUSSIA (EUR 144M, +7%) POLAND (89M, +6%) FINLAND (EUR 91M, -3%) SWEDEN (EUR 119M, -7%) DECORATIVE (83%) INDUSTRIAL (17%)
KEY FIGURES (2019) TOP10 customers equal 1/3 of revenue
Gearing 45.6%
Revenue EUR 564 M +0.4% yoy ROCE 15.4% +6.1%-p yoy
EUR 46 M +19.5% yoy
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TIKKURILA PRODUCTION UNITS (7 sites in 6 countries) COUNTRIES WITH TIKKURILA’S OWN OPERATIONS
In total Tikkurila’s products are sold to 40+ 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 2006 Sales company established in Kazakhstan 2007 Sales company established in China Operations divested or closed since 2010 2012 Hungary, Czech, Slovakia, Romania 2016 Ukraine, Belarus 2017 Serbia, Macedonia 2018 Germany
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Adjusted EBIT (MEUR)
Failed ERP implementation Global raw material inflation
Ti02
Increasing currency fluctuation in key markets
Challenges faced in 2017-2018
“Holding company” style management culture 59 54 29 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 10 20 30 40 50 60 2018 2016 2015 2017 2019 39 46 EUR million % of revenue
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Revenue (EUR million) Adjusted operating profit (EUR million)
584 572 582 562 564 50 100 150 200 250 300 350 400 450 500 550 600 2016 2015 2019 2017 2018 0,4% 59 54 29 39 46 5 10 15 20 25 30 35 40 45 50 55 60 2015 2017 2016 2018 2019 +19,5%
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Key indicators continued to develop positively
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2018 R12M 2016 2017 2019
201.3 215.8 185.9 180.4 175.6
Fixed costs
EUR million Rolling 12m
H1/19 151.8 H1/20 H1/17 H1/18 157.2 157.3 96.9 2016 R12M 2017 2019 2018 18.5% 6.3% 9.3% 15.4% 20.5%
ROCE
% Rolling 12m
2019 R12M 2016 2017 2018 22.7 4.4 36.3 52.7 76.9
Cash flow after capital expenditure
EUR million, Rolling 12m
Net interest-bearing liabilities
EUR million
2016-2018 excluding IFRS 16, 2019-2020 including IFRS 16
Elisa Markula CEO Since 2018 Fredrik Linde SVP, Operations Since 2019 In Tikkurila since 2010 Markus Melkko CFO Since 2019 Meri Vainikka SVP, Offering Since 2017 Oskari Vidman SVP, Sales, West Since 2019 Anders Rotkirch SVP, Transformation & ICT Since 2018 Melisa Bärholm SVP, Human Resources Since 2017
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Roman Ivashko SVP, Sales, East Since 2020
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Finland Sweden Russia Poland Baltics 16% of revenue EUR 91M 21% of revenue EUR 119M 25% of revenue EUR 144M 16% of revenue EUR 89M
Sources: VTY, SVEFF, Chem Courier, GFK, company financials Data: Market shares in value for 2019 (comparison 2018)
In industrial paints our market share is ~15-17 %
(63%) (37%) (19%) (20%) (24%)
1. 1. 1. 4. 1.
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Tikkurila AkzoNobel PPG Local significant competitors Other
Share of value increasing We focus on our key brands
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
2016 2015 2017 2018 2019
Share of total
Premium Medium Economy
Economy Premium Medium
1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000 9 000 10 000 2019 2017 2016 2020 TARGET 2018
Number of SKUs cut in half
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Consumers Professional painters Wood industry OEM Protective coatings 83% of revenue* 17% of revenue*
Decorative paints Industrial paints
Core brands in decorative Core brand in industry
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*2019
Consumers Professionals Industrial Renovators Decorators Gardeners Home and garden builders Professional Contractors & subcontractors Man & Van entrepreneurs Designers Developers & property owners Industry Wood industry OEM Protective coatings
17% of revenue* 83% of revenue*
* 2019
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We operate in a large global market driven by stable structural growth
23 €B
~4-5% CAGR Europe
31 €B
~3% CAGR APAC
72 €B
~6-7% CAGR Africa & Middle East
11 €B
~5% CAGR World wide paintings & coatings market, 2018
44M Liters
World wide market growth
(~4.5% in volume)
10 €B
~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.
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Raw material availability Sustainability, health & safety Urbanization Digitalization and e-commerce Changes in distribution, "Professionalization" shift from DIY to "do-it-for-me"
Increasing need for efficiency and sustainability Increasing need for premium products and functional solutions Increasing need for understanding the customer Impact on painting industry:
Regulation will continue to tighten Fragmented needs, preference for premium
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Global top 9
45% market share globally 20% in our markets
Locals
55% market share globally, 80% in our markets
10B€
average revenue
1.5B€
average EBITDA
~800M€
revenue
60M€
EBITDA
~15%
average EBITDA%
~8%
EBITDA%
Each with distinct competitive advantages – there is room for both local and global players. Tikkurila is among the TOP25 paint producers globally.
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Source: Capital IQ
80 40 20 60 60
100
40
100 80 20
65%
Aerospace Wood
60%
Powder
40% 35% 60%
Other
80% 60% 30% 40%
OEM Decorative
40% 40% 80%
Auto OEM
20% 20%
Auto refinish Protective
70% 60% 20%
Marine
58% 42%
Share of total market (%) in value
80%
Tikkurila’s focus markets
Market share of global players (% of total segment)
Decorative
Industry
~ 40 % ~ 40 % ~ 20 %
Industry
Market share of local stars (% of total segment)
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Source: IHS P&C market study, Redburn, BCG analysis
Mature markets
Flat total markets Tikkurila’s market share already strong Opportunities to grow especially in Industry
Growth markets
More room to improve Tikkurila’s market share Faster market growth Continued premiumization Opportunities to grow in both decorative and Industry
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1 094 1199 1 138 946 1 010 1 405
Growth slowing down in our key markets
– But growth expectations still from +2.0% to +3.5%
94 99 110 80 83 90 174 2024 2017 2019 182 201
Total market value (deco and industry), M€
Finland
234 246 284 289 301 338 2019 2017 2024 523 548 622 2 504 2 718 3 237 2 758 2 949 3 405 2017 2019 2024 5 261 5 667 6 641 +3.8% +3.2% 2024 2017 2019 2 040 2 542 2 209 +4.1% +2.9% 74 69 83 2017 92 78 88 2024 2019 133 142 169 +3.6%
Sweden Russia Poland Baltics
Source: Markets and Markets, Tikkurila Deco Industry +3.5% +2.2% +2.0% +2.3% +2.6%
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Note: Data for different countries not in the same scale
Examples of key competitors
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Based in USA Revenue 2019: EUR 15.9 billion Geography: Global Segments: Decorative with focus on Professionals, Industry (Protective & Marine, Coil, Automotive, General Industrial, Wood, Packaging) Acquisition of Valspar in 2017 accelerated the S-W global growth strategy and made the company the global leader in paints and coatings. The company has a strong position in North America and operates its own outlet network. It is building a new HQ and R&D center in the US. Based in USA Revenue 2019: 13.5 EUR billion Geography: Global Segments: Decorative, Industry (Automotive, Aerospace, Packaging, Protective & Marine, Specialty) PPG’s strategy is focused on aggressively managing the cost structure and also optimizing business portfolio. In 2019 it completed four acquisitions. PPG invests heavily in R&D with strong focus
Based in the Netherlands Revenue 2019: EUR 9.3 billion Geography: Global Segments: Decorative, Industry (performance coatings) AkzoNobel sold its Specialty Chemicals unit in 2017 to be a focused paints & coatings company. The strategy Winning together: 15 by 20 has focused on improved profitability and especially value over volume strategy. Now the focus is aimed more on growth. The company has a strong position in Europe. Based in Poland Revenue 2019: EUR 168 million Geography: Eastern Europe (Poland, Hungary, Ukraine and Belarus) Segments: Decorative, Industry Śnieżka's strategy is to focus on its key markets. It acquired Hungarian Poli-Farbe in 2019 and will investstrongly in successful integration and improving Poli-Farbe’s profitability. In Poland Śnieżka is investing in new warehouse andlogistics centers. Based in Norway Revenue 2019: EUR 1,992 billion Geography: Global Private company, 40% owned by Orkla ASA Jotun’s strategy is to grow organically in its four
and intumescent steel protection coatings. Jotun has strong partnerships in Asia. Largest part of the revenue in all its business segments comes from Middle East or South-East Asia. Based in Denmark Revenue 2019: EUR 1,534 billion Geography: Global Owned by the Hempel foundation Segments: Decorative, Wind, Marine, Protective, Yacht, Services Journey to Excellence strategy 2016-2019 to modernize the company; ready for the next phase with a new CEO as of July 2019: Hempel plans to double in size and is actively exploring M&A opportunities, after the European decorative acquisition, J.W Ostendorf, has now fully integrated. Based in Denmark Revenue 2019: EUR 243 million Geography: Scandinavia, Poland Segments: Decorative with focus on Professionals Flügger’s strategy, Securing the Legacy, launched in August 2017 aims to consolidate position in Scandinavia, assess potential acquisitions in the existing market and to improve efficiency. Flügger expects its paint production to be 100% water-based by 2021. It has removed all Swedish production of water-based paints to Denmark. Based in Finland Revenue 2019: EUR 398 million Family business Geography: Mainly Europe Segments: Decorative, Industry (Wood, Metal, Powder) Teknos’ new strategy for 2019-2025 aims to ensure fast and profitable growth and to reach EUR 1 billion revenue by 2025 both with
Europe and also outside Europe. Stronger focus on industrial coatings (especially functional coatings) than in decorative paintings. Acquired Powder coatings unit from Śnieżka in 2017. Market leader in European Wood Coatings.
33% 31% 29% 7%
Big boxes (DIY)
▪ E.g. K-Rauta, Bauhaus, Leroy Merlin ▪ Big boxes are increasing their market share ▪ As a market leader, Tikkurila is preferred by customers and chains
Distributors
▪ Key partners to secure scale and availability, especially in Russia and Poland ▪ Vital for industry and export
Specialized paint stores
▪ Continue to be preferred by professionals, but are loosing market share with consumers ▪ Personal customer service critical competitive advantage
Own stores
▪ Only in Sweden, Norway and Denmark ▪ Retains a niche position in direct selling to professionals
Share of various distribution channels, % of Tikkurila revenue (2018)
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60 70 80 2017 78.1% 83.2% 2015 2019 2016 2018 76.0% 81.5% 82.6%
Share of water-borne paints in Tikkurila’s decorative business*
* % of Tikkurila’s total gross revenue
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3.3% 1.6% 2.5% 1.7% 1.4% 1.7% 2.4% 1.8%
Water-borne Solvent-borne
RUSSIA POLAND SWEDEN FINLAND
WB WB SB WB WB SB SB SB
CAGRs in 2019-2024 for decorative paints in Tikkurila’s core market areas
Source: Markets&Markets
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This is our strategy
Market leader in North-Eastern Europe. Among TOP20 globally. Skillful employees with close to 160 years knowledge in surfaces Well-known and preferred premium brands Revenue Growth Profitability ROCE Gearing
EBIT > 12% < 70% Faster than home market growth > 20%
INCREASING EFFICIENCY ACCELERATING PROFITABLE GROWTH CREATING A STRONG “ONE TIKKURILA” CULTURE
This is Tikkurila This is our target
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We continue to systematically execute our strategy action plan towards long-term financial target Adjusted operating profit >12%
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2 4 6 8 10 12
Uncertainty: Market and raw material volatility
Optimize portfolio
Increase efficiency in raw materials
Improve sales performance management Increase efficiency in
Adjusted operating profit, % of revenue
Grow in decorative paints and selected industry paints Save in fixed costs, centralize indirect sourcing
Portfolio ▪ Tikkurila continued to reduce complexity, targeting a 50% reduction in sales articles by the end of this year, compared to
achieved by the end of this year. Growth ▪ New product’s share
▪ Marketing campaigns refocused in all markets to support the recovery of demand. Sales ▪ Focus premium products and mix. ▪ Price increases continued as planned. ▪ Active margin management in each business. ▪ Sales split in two: West and East divisions. Operations ▪ As announced on 29 April 2020, a small solvent-borne industrial paint production unit to be closed in St. Petersburg, as Tikkurila continues to focus on water-borne paints Fixed costs ▪ From cost reduction to active cost management. ▪ Successful implementation of temporary savings related to the Covid- 19 pandemic. Raw materials ▪ Successful negotiations with raw material and packaging suppliers, as the company continued to seek for cost savings in sourcing.
customer loyalty
Drive organic growth Innovation based on sustainability, functionality and services. Improve further cost competitiveness Create High Performance Culture to execute the strategy
Tikkurila’s value creation is based to drive profitable growth and efficiency
A strong strategic target is set for Tikkurila
Description
brands to secure competitiveness in each market
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Expand partnerships with DIY chains, “Win with the winners” New products and services: especially for industry customers Expand distribution: strong focus on store presence and attraction Successful sales activities with key accounts eCommerce
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Achieve Successful turn-around Fix the foundation and feed growth Maximize efficiency and growth Phase I (2018) Phase II Phase III
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Dividend yield
Dividend policy Tikkurila aims to distribute a dividend of at least 40 percent of its annual
Operative net income means net profit for the period excluding non- recurring items and adjusted for tax effects.
Any dividends to be paid in future years, their amount and the time of payment will depend on the Company’s future earnings, financial condition, cash flows, investments, solvency, business cycle and other factors, which the Company’s Board of Directors considers relevant.
EUR
0.1 0.0 0.2 0.5 0.8 0.3 0.9 0.4 1.2 0.7 0.6 1.0 1.1 1.10 2017 0.92 0.73 0.80 0.80 2018 2010 2011 2012 0.50* 2013 2014 2015 2016 2019 0.75 0.83 0.70 0.33 0.76 1.14 0.80 0.80 0.33 0.80 1.01 0.24 0.80 0.94 84% 91% 83% 70% 73% 85% 333% 300 200 100 79% 100% 66% Dividend %
%
EPS Dividend
* The Board of Directors proposes to the Annual General Meeting 2020 that a dividend of a maximum of EUR 0.50 per share will be paid for the year ended on December 31, 2019. The first tranche (EUR 0.25) was paid in June 2020. The AGM authorized the Board of Directors to decide, in its discretion, on a dividend payment of a maximum of EUR 0.25 per share to be distributed at a later stage.
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