Tikkurila company presentation 2016

Tikkurila inspires you

to color your life!

Contents

• Tikkurila as a company

• Business environment

• Key figures and financial targets

• Business Units

June 27, 2016 Tikkurila company presentation 2

Tikkurila as a company


TikkurilaTikkurila is the leading paints and coatings professional in the Nordic

region and Russia. With our roots in Finland, we now operate in 14

countries. Our high-quality products and extensive services ensure

the best possible user experience in the market.

Sustainable beauty since 1862.

4

Tikkurila in brief

June 27, 2016

3,100 employees

#1Market position in key

markets* in decorative

paints

50%Balanced geographical

presence between mature

and emerging markets

Our end-customers

Our goal is to provide the

best user experience

Consumers IndustryProfessionals

Production in 9 countries

Operations in 14 countries

Presence in 40 countries

*Russia, Sweden, Finland, the Baltic countries

Tikkurila is #4 in PolandTikkurila company presentation 5

Production units in 9 countries

Sales units in 14 countries

Our locations

June 27, 2016 Tikkurila company presentation

Production, distribution center, sales

Distribution center, sales

Training center

FinlandSweden

Estonia

Germany

Serbia

Poland

Kazakhstan

China

Russia

Denmark

6

Our end-customers

June 27, 2016

Consumers (DIY) IndustryProfessional painters

50%* 15%

*Tikkurila estimate

35%*

Tikkurila company presentation 7

Ideas, work instructions and

methods online

Personal painting advice and

technical support over the phone,

online, on site and on production

lines

Color cards, color design and

tinting service

Training events

On-site visits, inspections and

analysis services

Contacts with other professionals

in the industry

Comprehensive home interior

and exterior surface

treatment products

Wallpapers

Comprehensive surface

treatment products for

masonry surfaces, wood

facades and concrete floors,

effect and decorative paints

Functional coatings

Durable products and

solutions to protect steel

structures, machinery and

equipment

Paints and lacquers for

wood industry

Floor coatings for

demanding environments

Functional coatings for line

application

ServicesConsumers (DIY)

Professional painters

and designersIndustry

Our products and services

150 years of decoration and protection


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.

9

Revenue EUR 584 million EBIT* EUR 59 million Personnel 3,100

Tikkurila 2015


Our largest markets are Sweden, Russia, Finland, Poland and the Baltic countries. We have production in nine countries, and we are

the leading decorative paint company in all our main markets. On the whole, our products are available in 40 countries. In 2015,

Tikkurila’s revenue totaled EUR 584 million, and it had 3,100 employees.

68 %

32 %

West East

79 %

21 %

West East

*Excl. non-recurring items

53%46%

1%

West East Group

10

RUSSIA SWEDEN FINLAND POLAND

Tikkurila market shares in decorative paints

in key markets in 2014

#1

June 27, 2016

37%(37%)

63%

Tikkurila Others

>50%(>50%)

50%

Tikkurila Others

16%(15%)

85%

Tikkurila Others

#1 #1 #4Russia accounts for 28% of Group revenue Sweden accounts for 23% of Group revenue Finland accounts for 16% of Group revenue Poland accounts for 10% of Group revenue

Source: Chem-Courier (Russia, volume), SVEFF (Sweden, value), Association of Finnish Paint Industry (Finland, value), IBP Research (Poland, volume)

16%(17%)

84%

Tikkurila Others


Tikkurila Group structure

June 27, 2016

Support Functions

Supply Chain Management

& HSEQ

RDI

Business Portfolio & Brand

Management

SBU EASTRussia

Central Asia

Balkan

China

Exports

SBU WESTSweden

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

FocusingCustomers

Geographic area

Brands

ProfitabilityResilience

Realignment

Agility

GrowthOrganic

Well-targeted acquisitions

June 27, 2016

Tikkurila offers user-friendly and

sustainable solutions for surface

protection and decoration.

2011–2012 Restructuring and improving profitability │2013– Growth


Tikkurila values


We are trustworthy

We create and offer quality brands, services, and products that people can

trust are safe, reliable, and environmentally sustainable.

We are innovative

We drive change in the market and offer novel solutions for our customers'

needs.

We are professionals

We add value to our customers, owners, and the community – every day.

14

Strong and well-established brands

Strategic international

brands

June 27, 2016

Tactical regional or local

brands

Strategic regional or local

brands


Distribution channels

Tikkurila's own paint shops

Tikkurila Industrial Paint Service

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

• Strongest brands

• Marketing support

• Active product and service development

• Training for retailers' personnel

• Developing the category together with the retailers


We help our customers to succeed in surface protection

and decoration

June 27, 2016

Inspiration Ideas Colors Stores

Helpline TrainingInternetDesigner PoolContractor Pool

Professional services


June 27, 2016

• We develop environmentally sustainable and user-friendly solutions.

• We train our stakeholders in the durable painting and use of our

products.

• We invest in developing solutions that make selecting, buying and

selling of paints easier.

• We inspire people to paint.

• We enhance the quality of painting, environmentally sustainable use

of products, product and user safety, as well as the knowledge of

surface treatment.

Tikkurila company presentation

Successful end-results

19

Advice services close to the customer

• Technical consultation, advice on selecting colors and paints as well

as tips and work instructions.

• Providing customers with easy ways for communicating, giving

feedback and making enquiries.

• Tikkurila’s customer hotline offers assistance, advice and ideas for

painting.


Extensive training

• 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 located in 11 countries.

• Recently, training centers have been opened in Serbia, Macedonia

and Lithuania.



Ecological

and cost-efficient

way of operating

Economical way

to produce small

batches of

different colors

Enhances

the service level

of retailers

Emphasizes

the quality

of paint

Deepens

the cooperation of

retailers and

paint producer

The many advantages of tinting

Enables

lower

inventory

levels

Practically

unlimited

amount of

shades

22

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.


Product development

• Key principles for product development are quality, durability and safety.

• R&D develops products for various purposes and with various

functionalities, studies use of alternative and renewable raw materials,

and improve properties of existing paints and coatings.

• Largest R&D units located in Finland, Sweden, Russia and Poland.

• The desired properties of products are ensured

in thorough field testing and extensive laboratory testing.


Raw materials

• When selecting raw materials, we carefully consider the different health,

safety and environmental aspects.

• Paint typically consists of binders, pigments, fillers, thinner and additives.

• More than 90 percent of the raw materials and packaging materials for

Tikkurila’s units in the EU are bought from the EU region. In Russia, more

than 60 percent of all raw materials and packaging materials are bought

from local suppliers.

• Chemical legislation sets restrictions on paint import to the EU region from

the third countries.

• Raw material prices affected mainly by oil prices, supply capacity, and

currencies.


Sustainable solutions

• Quality

• Long service life and long maintenance painting intervals

• Easy to use

• User safety

• Environmentally sustainable: raw material choices,

water-borne, low emissions

• Eco-labels


Majority of products water-borne

• High-quality and safe products which burden the environment as little

as possible are a key element in our strategy.

• Water-borne paints are a better choice for both the health and the

environment.

• The environmental impact of water-borne paint is smaller than that of

solvent-borne paint, especially in the application stage, since mainly

water evaporates from water-borne paint.

• The benefits of water-borne paints include ease of use, odorlessness

and fast drying times.73.5%

Share of water-borne products

in production in 2015

June 27, 2016 27

Eco-labels guide customers' purchase

decision

• Eco-labels and various classifications awarded to paints indicate the

environmental impacts of products as well as their proven safety

characteristics.

• Eco-labels guide consumers in their purchasing decisions, as well as to make

consumption habits more environmentally sound.

• Tikkurila Group’s different paint brands have been awarded several official and

local eco-labels and product-specific classifications.

* products awarded international or national eco-label,

allergy or asthma label or M1 classification

June 27, 2016 28

~300Amount of eco-labeled products*

Business environment


12%

10%

9%

6%

6%

6%3%3%3%

43%

Value of the global paints and coatings market;

USD ~130 billion

June 27, 2016

Decorative paints 43% Industrial coatings 57%

Source: IPPIC 2015

Decorative paints

Metal Industrial

Coatings

Transportation

Industrial Maintenance

and Protective

Automotive Refinish

Powder Coatings

Wood Coatings

Marine CoatingsCoil Coatings

Packaging Coatings

Industrial segments where

Tikkurila is present


Trends affecting Tikkurila's business operations


URBANIZATION AGING OF THE POPULATION

CHANGES IN CONSUMPTION

BEHAVIOR

RISE OF THE MIDDLE CLASSEXHAUSTING NATURAL

RESOURCES

CLIMATE CHANGE

31

Paint consumption and demand structure

June 27, 2016

Factors impacting paint demand Estimated paint consumption per capita*

• Living standards

• Local habits and painting methods

• Construction styles and available materials

• Trends in interior decoration, colors etc.

• Level of activity in new construction, renovation and

industry

• 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

0

100

200

300

400

500

600

700

800

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

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

Long term financial development Development of sales and profitability 2000–2014

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

648625

563

457441 439450445

345

589

June 27, 2016

644670

653618

584


Financial targets for 2018

2007 2008 2009 2010 2011 2012 2013 2014 2015

Revenue 625 648 530 589 644 670 653 618 584

EBIT, %1 10.3% 9.1% 9.5% 10.1% 9.7% 11.0% 11.1% 10.4% 10.1%

ROCE 24.5% 18.7% 15.7% 19.2% 19.4% 21.0% 23.5% 22.9% 22.2%

Gearing 135.3% 208.5% 90.0% 41.4% 51.9% 40.6% 23.4% 24.6% 23.7%

Dividend paid;

share of operative

net income, %

84%

(EUR

0.70 per

share)

88%

(EUR

0.73 per

share)

72%

(EUR

0.76 per

share)

69%

(EUR

0.80 per

share)

73%

(EUR

0.80 per

share)

90%2

(EUR

0.80 per

share)

June 27, 2016

Historical performance

• 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

1) Excluding non-recurring items

2) Board of Directors' proposal


Key figures 2015


EUR million 1−12/2015 1−12/2014 Change %

Revenue 584.1 618.4 -5.5%

EBIT excluding non-recurring items 58.9 64.2 -8.2%

EBIT excluding non-recurring items, % 10.1% 10.4%

EBIT 61.7 63.7 -3.2%

EBIT, % 10.6% 10.3%

EPS, EUR 0.94 1.10 -14.1%

ROCE, %, rolling 22.2% 22.9%

Cash flow after capital expenditure 32.6 49.9 -34.5%

Net interest-bearing debt at period-end 46.2 47.4 -2.4%

Gearing, % 23.7% 24.6%

Equity ratio, % 51.1% 49.5%

Personnel at period-end 3,100 3,142 -1.3%

36

Tikkurila's ownership at the end of December 2015

June 27, 2016

Tikkurila's ownership structure on December 31,

2015

• Number of shareholders ~20,500

• Foreign ownership in Tikkurila has

increased strongly

• Largest shareholders:

Oras Invest Oy (18.1%), Varma

(5.7%), and Ilmarinen (5.6%) and

20%

7%

13%

12%2%

47%

Private companies

Financial and insuranceinstitutions

Public sector organizations

Households

Non-profit organizations

Foreigners and Nomineeregistered


Business Units


Tikkurila Strategic Business Units (SBU)

Russia, Central Asian countries, Serbia, Macedonia, and

China. Furthermore, this SBU is responsible for the exports to

approximately 20 countries.

SBU EastSBU West

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

Estonia, Latvia, and LithuaniaOperational area

Production sites

Current demand

structure

Expected demand structure

Competitors

Distribution channels

St. Petersburg, Russia

Stary Oskol, Russia

Almaty, Kazakhstan

Sabac, Serbia

Nykvarn, Sweden Lunderskov, Denmark

Vantaa, Finland

Debica, Poland

Ansbach, Germany

Tallinn, Estonia

Economy price and quality segment productsPremium and medium price and quality segment products

Premium price and quality segment products expected to

risePremium and medium price and quality segment products

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

CaparolAkzo Nobel, PPG, Flügger, Jotun, Sherwin-Williams,

Teknos, Nor-Maali, Sniezka

Deco: DIY retailers, independent retailers, wholesalers

Industry: direct sales, Tikkurila Industrial Paint Service

Deco: DIY retailers, independent retailers, Alcro professional

stores, wholesalers

Industry: direct sales, Tikkurila Industrial Paint Service


SBU West key facts

Operational area Sweden, Denmark, Norway, Finland, Poland, Germany, Estonia, Latvia, and Lithuania

2015 revenue EUR 395.3 million, 68% of Group

EBIT 20151) EUR 50.5 million, 79% of Group2)

Employees 1,630 (at year-end)

Production sitesNykvarn, Sweden; Vantaa, Finland; Debica, Poland; Ansbach, Germany; Tallinn, Estonia;

Lunderskov, Denmark

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

2014 Acquisitions of ISO Paint Nordic and KEFA Drytech

SBU West locations

VantaaNykvarnOslo

CopenhagenStockholm

Tallinn

Riga

Vilnius

AnsbachDebica

WarsawLodz

1 Excluding non-recurring items

2 Excluding group items

June 27, 2016

Lunderskov


SBU East key facts

Operational areaRussia, Central Asian countries, Serbia, Macedonia, and China. Furthermore,

this SBU is responsible for the exports to approximately 20 countries.

2015 revenue EUR 188.9 million, 32% of Group

EBIT 20151) EUR 13.4 million, 21% of Group2)

Employees 1,441 (at year-end)

Production sites

St. Petersburg, Russia (3)

Stary Oskol, Russia

Šabac, Serbia

Almaty, Kazakhstan

Development in SBU East

Šabac

Khabarovsk

Novosibirsk

Almaty

Ekaterinburg

Chelyabinsk

St. Petersburg

Mytishchi

Stary Oskol

Krasnodar

SkopjeBeijing

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

2015 New factory opened in Almaty, Kazakhstan focusing on water-borne

products

2016 Divestment of subsidiaries in Ukraine and Belarus

June 27, 2016

1 Excluding non-recurring items

2 Excluding group items

Tikkurila company presentation

Samara

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Documents

Tikkurila company presentation 2016