Profitability continued to improve Adjusted operating profit - - PowerPoint PPT Presentation

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Profitability continued to improve Adjusted operating profit - - PowerPoint PPT Presentation

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HALF YEAR FINANCIAL REPORT AUGUST 8, 2019 Profitability continued to improve Adjusted operating profit increased by 25% in H1 Key takeaways from H1/2019 Adjusted operating profit increased by 25% compared to previous year, driven by:

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SLIDE 1

Profitability continued to improve

Adjusted operating profit increased by 25% in H1

HALF YEAR FINANCIAL REPORT AUGUST 8, 2019

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SLIDE 2
  • Adjusted operating profit increased by 25% compared to previous year, driven by:
  • successful implementation of price increases
  • improved sales mix
  • cost savings
  • Revenue increased by 1.1% excl. currency effects, divestments and closures
  • Euro-nominated revenue decreased slightly
  • Headwind from currency fluctuations, mainly Ruble and Krona
  • Raw material prices remain at a historically high level
  • Fixed costs continued to decrease
  • Improved ROCE and cash flow

Key takeaways from H1/2019

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SLIDE 3

EUR, million 4-6/2019 4-6/2018 Change % H1/2019 H1/2018 Change, % Revenue 169.7 173.7

  • 2.3%

298.8 303.8

  • 1.7%
  • Excl. impact from currency

effects, divestment & closures

  • 1.5%

1.1% Adjusted operating profit 23.2 21.5 7.8% 31.4 25.1 24.9% Adjusted operating margin, % 13.7% 12.4% 10.5% 8.3% Operating profit (EBIT) 21.2 21.2 0.2% 29.1 21.1 37.6% Operating profit (EBIT) margin, % 12.5% 12.2% 9.7% 7.0% Earnings per share (EPS), EUR 0.37 0.35 4.9% 0.53 0.30 77.4% ROCE, % rolling 12.2% 5.0% 12.2% 5.0% Cash flow after capital expenditure

  • 12.0
  • 6.5
  • 85.8%
  • 30.1
  • 52.1

42.3% Net interest-bearing debt at period-end 151.8 157.3

  • 3.5%

Gearing, % 94.2% 104.6% Equity ratio, % 30.4% 28.1% Personnel at the end of period 2,846 3,030

  • 6.1%

Currency effect Volume Price/mix Divestments and closures Total The effects of various factors on revenue (H1/19 vs. H1/18) Increase/decrease, %

  • 3.1%

4.3%

  • 0.7%
  • 2.0%
  • 1.7%

Key figures

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SBU East

H1/2019 highlights

  • In Russia, revenue was in good growth and the share of premium

products of sales continued to increase.

  • The profitability of SBU East improved in January–June especially due to

higher revenue driven by a favorable sales mix with an increasing share

  • f premium products and tight cost control.
  • An adjustment of EUR -1.8 million related to the cancelled Russian

greenfield project (announced on April 25, 2019) was excluded from the adjusted operating profit.

The figures on the graph above have been independently rounded, which should be taken into account when calculating total figures.

SBU East consists of Russia, Central Asian countries, and

  • China. Furthermore, SBU East is responsible for the exports

to more than 20 countries.

EUR million 4–6/2019 4–6/2018 Change % 1–6/2019 1–6/2018 Change % 1–12/2018

Revenue 62.2 58.7 5.9% 94.1 88.3 6.6% 180.3

  • Excl. currency effects &

divestments 9.0% Adjusted operating profit 9.8 6.8 42.9% 9.1 4.1 119.6% 9.9 Adjusted operating profit, % 15.7% 11.7% 9.7% 4.7% 5.5%

Revenue development H1/2019 vs. H1/2018

Increase/decrease, %

Total Price/mix Volume Currency effect Divestments 6.6%

  • 0.2%

8.5% 0.7%

  • 2.3%

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SLIDE 5

SBU West

EUR million 4–6/2019 4–6/2018 Change % 1–6/2019 1–6/2018 Change % 1–12/2018

Revenue 107.5 115.1

  • 6.5%

204.7 215.5

  • 5.0%

381.2

  • Excl. currency effects &

divestments and closures

  • 2.2%

Adjusted operating profit 14.8 16.2

  • 9.0%

25.4 23.5 8.0% 34.5 Adjusted operating profit, % 13.7% 14.1% 12.4% 10.9% 9.1% Increase/decrease, %

Revenue development H1/2019 vs. H1/2018

Highlights from January–June

  • Revenue in Finland and Sweden decreased in part due to lower than

expected market demand especially in exterior paints.

  • In Sweden, revenue decline was additionally driven by currency fluctuation,

tightening competition and changes in sales management. The shift from traditional paint retailers to DIY stores (“big boxes”) continued.

  • In Finland, revenue decline has been additionally impacted by the

continued consolidation among industry customers, and general offshoring

  • f industrial production.
  • In Poland, good revenue growth continued and the positive development in

sales mix continued as the share of premium products increased.

  • The profitability of SBU West was improved in January–June due to price

increases, changes in product mix, and tight cost control of fixed expenses.

SBU West consists of Sweden, Denmark, Norway, Finland, Poland, Germany, Estonia, Latvia, and Lithuania.

The figures on the graph above have been independently rounded, which should be taken into account when calculating total figures.

Currency effect Price/mix

  • 4.7%

Total

  • 1.8%

Volume Divestments and closures 2.5%

  • 5.0%
  • 1.0%

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SLIDE 6

Not much tailwind from external factors

Price increases continue in the paint industry Consumers increasingly

  • pting for premium products

Raw material prices remain at a high level Economic growth softening in our core markets From DIY to DIFM Continued offshoring and consolidation of industry production Currency fluctuation continues Positive drivers Challenges

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SLIDE 7

Raw material prices remain on a historically high level

300 100 200 600 400 500 93% Price development of oil (Brent), 2016- Price development of titanium dioxide, 2016- 500 1 000 1 500 2 000 2 500 3 000 32%

EUR/Tn EUR/Tn

2018 2019 2017 2018 2019 2017

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SLIDE 8

Strategy action plan announced at the CMD (June 5, 2019)

  • Tikkurila has considerable potential to improve profitability

2 4 6 8 10 12 14 2018 Target

Market and raw material volatility

Long-term financial target Adjusted Operating Profit >12%

Optimize portfolio Increase efficiency in raw materials Improve sales performance management Increase efficiency in

  • perations

Adjusted Operating Profit (%) Grow in Deco and selected industry segments Save in fixed cost, centralize indirect sourcing

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We have reduced complexity in our offering by 40% since 2016

1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000 9 000 10 000 2020 2016 2018 2017 2019

  • 40%

Number of sales articles (SKU)

FOCUS PREMIUM BRANDS

We focus on our key brands

Target

  • 50%

By end of 2019

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We are strengthening our premium brands further

Strengthening our market leadership through group- wide marketing campaigns

PIC MISSING

Continued focus on increasing the share of premium products in sales, especially in Russia and Poland

PIC MISSING

Introducing new functional paint products, e.g. industry-first fire-retardant system for wood with the highest protection class Increases efficiency in marketing Improves our sales mix and profitability New growth opportunities

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SLIDE 11

Our fixed costs continue to decrease as planned

50 100 150 200 250 300 2017 177.1 2016 2018 215.8 Rolling 12-m 201.3 185.9 Fixed costs

*

* H1/2019 according to IFRS16. Excluding the impact of IFRS16, the rolling 12-month fixed costs were 32.6 percent of revenue in the period ending on June 30, 2019. EUR, million

30 31 32 33 34 35 36 37 38 39 40 2016 35.2% Rolling 12-m 31.8% 2017 2018 Fixed costs % of sales

% of sales

*

H1/19 30.4%

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  • Capital Employed peaked end 2017 / early 2018
  • Decisive actions with NWC and limited

investments in fixed assets have helped reducing Capital Employed

  • NWC Improvement
  • Tight Capex
  • Profitability improvement has turned ROCE trend

again towards the long-term goal of 20%

%

ROCE = Operating result + share of profit or loss of equity-accounted investees (rolling 12 months) / Capital employed (avg 12 months) Capital employed = Net working capital + property, plant and equipment ready for use + intangible assets ready for use + right-of-use assets + investments in equity-accounted investees (averages 12 month)

5 10 15 20 2016 2017 Rolling 12-m 2018 12.2% 18.5% 6.3% 9.3% +5.9% p.p.

We are delivering improved Return on Capital Employed

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SLIDE 13

Efficiency program actions resulting in improved cash flow

EUR million

20 40 10 30 50 60 2017 36.3 2016 2018 Rolling 12-m 22.7 4.4 58.3 + 1,218%

  • Several actions improving Net Working

Capital

  • Capital Expenditure under tight scrutiny
  • Improved profitability

Cash flow after capital expenditure

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Our adjusted operating profit margin continued to improve

%

1 2 3 4 5 6 7 8 9 10 2017 2016 6.9% 2018 Rolling 12-m 9.4% 4.9% 8.1% +3.2% p.p.

  • Tikkurila is moving in the right direction
  • The successful implementation of price

increases, improved sales mix and cost savings continued to increase Tikkurila’s profitability

  • Adjusted operating profit increased

both in Q2 and during the whole first half of the year

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SLIDE 15

This is our strategy

Tikkurila is committed to creating value by improving efficiency and accelerating organic growth

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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Achieve Successful turn-around Fix the foundation and feed growth Maximize efficiency and growth Phase I (2018)

Our long-term target is to achieve maximum efficiency and grow faster than the market

Phase II Phase III

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Guidance for 2019 remains unchanged

  • Revenue is expected to remain at the same

level as in 2018

  • Adjusted operating profit will continue to

improve.

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Thank you !

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For more information, please contact:

Elisa Markula CEO +358 50 596 0978 elisa.markula@tikkurila.com Markus Melkko CFO +358 40 531 1135 markus.melkko@tikkurila.com Tapio Pesola Director, Communication & IR +358 44 373 4693 ir.tikkurila@tikkurila.com

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DISCLAIMER

In this presentation, all forward-looking statements in relation to the company or its business are based on the management judgement, while macroeconomic or general industry statements are based third-party sources, and actual results may differ from the expectations and beliefs such statements contain. Nothing in this presentation constitutes investment advice and this presentation shall not constitute an offer to sell or the solicitation of an offer to buy any securities or otherwise to engage in any investment activity.

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