simo laitala, managing director, russia and central asia · 2020. 3. 5. · long term financial...
TRANSCRIPT
Tikkurila in Russia Danske Bank's Russia Seminar
March 12, 2013
Simo Laitala, Managing Director, Russia and
Central Asia
Disclaimer
In this presentation, all forward-looking statements in relation
to the company or its business are based on the
management judgment, and macroeconomic or general
industry data are based on third-party sources, and actual
results may differ from the expectations and beliefs such
statements contain.
March 12, 2013 2
Contents
• Tikkurila in brief
• Tikkurila in Russia
• Conclusions
March 12, 2013 3
Tikkurila in brief
March 12, 2013 5
Bringing protection, comfort and sustainable beauty to various environments
Customers:
Consumers and professionals
Market position:
Leading market position in decorative paints in
Finland, Sweden, Russia and the Baltic countries,
one of the leading in Poland
Market area:
Northern Europe, Central Eastern Europe, Russia
and other CIS countries, Ukraine
Products and services:
Decorative paints, industrial wood and metal
coatings, customer training, comprehensive
advisory service (e.g. Customer hotline), Designer
and Contractor Pool etc.
Tikkurila's locations
Tikkurila in brief
Tikkurila in a nutshell
Ukraine
China
Kazakhstan
Finland Sweden
Poland
Russia
Germany
Estonia
Production, logistics center, sales
Logistics center, sales
Distribution center, sales
March 12, 2013 6
Serbia
Revenue EBIT* Personnel
Tikkurila key facts 2012
• Revenue EUR 671.8 million
• EBIT (excl. non-recurring items) EUR 73.9 million
• Personnel at year-end 3,227
March 12, 2013 7
*Excl. non-recurring and Group items
36%
29%
16%
19%
East Scandinavia Finland CEE
42%
32%
17%
9%
East Scandinavia Finland CEE
45%
13%
17%
25%
East Scandinavia Finland CEE
RUSSIA SWEDEN FINLAND POLAND
Tikkurila market shares and positions in
decorative paints in key markets* in 2011
#1
March 12, 2013 8
19%
81%
Tikkurila Others
40%
60%
Tikkurila Others
>50% 50%
Tikkurila Others
16%
84%
Tikkurila Others
#1 #1 #4 *Russia accounts for 30%
of Group revenue
*Sweden accounts for 24%
of Group revenue
*Finland accounts for 17%
of Group revenue
*Poland accounts for 9%
of Group revenue
Sources: Chem-Courier (Russia), SVEFF (Sweden), Association of Finnish Paint Industry (Finland), IRP Research (Poland)
0
2
4
6
8
10
12
14
16
0
100
200
300
400
500
600
700
800
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Revenue Revenue from acquisitions Divestments EBIT margin (excl. non-recurring)
Long term financial development
Development of sales and profitability 1996–2012
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
648 625
563
457 441 439
450 445
345 358 361 349
255
589
March 12, 2013 9
644 672
10%
8%
8%
7%
7%
6% 4% 3% 3%
44%
Value of the global paints and coatings market
EUR ~76 billion
Decorative paints 44% Industrial coatings 56%
Source: IPPIC 2012
Decorative paints
Metal Industrial
Coatings
Transportation
Industrial Maintenance
and Protective
Automotive
Refinish
Powder Coatings
Wood Coatings
Marine Coatings
Coil Coatings
Packaging Coatings
March 12, 2013 10
Drivers for paint demand
March 12, 2013 11
MATURE MARKETS EMERGING MARKETS
Demand factors in long-term • Construction styles
• Trends in interior decoration
•Economic development and
improving standard of living
•Potential for trading-up
• Local habits, e.g. frequency of
repainting
Demand factors in medium
and short-term
• GDP growth
• Consumer confidence
• Employment situation
•Activity level in new construction
and renovation
• GDP growth
• Consumer confidence
• Employment situation
•Activity level in new construction
and renovation
Supply factors • Raw material prices and availability
• Changes in regulation
• Raw material prices and availability
• Changes in regulation
Tikkurila in Russia
2010 New production line in
St. Petersburg for
water-borne products
Tikkurila's key milestones in Russia
March 12, 2013 13
1862 1970 1980 1990 2000 2010
1862 Tikkurila
established
in Finland
1980’s Export to the Soviet
Union started with
industrial coatings for
automotive industry
1990’s Tikkurila is the first
western paint
company to start
promoting tinting
technology in
Russia
1995 Opening of the first
western paint factory in
St. Petersburg
2006 Acquisition of Kraski
Teks in Russia
2007 Acquisition of Gamma
and Ohtek in Russia
2009 Logistic center in
Mytischi, Moscow
2011 Divestment of Powder
Coatings business
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.
Tikkurila in Russia
March 12, 2013 14
Current demand
structure
Economy and medium segments
dominating, premium segment expected
to grow fastest
Tikkurila paint brands in Russia Facts about SBU East
Paint
consumption
~5-7 liters per capita
PREMIUM ECONOMY
Market leader in Russia in 2011*
19%
6%
5%
70%
Tikkurila
Empils
Lakra
Others
*Source: Chem-Courier 2011 (decorative paints, volume)
Russia, other CIS countries, Ukraine
Operational area
Production sites Russia (4) and Ukraine (1)
Personnel
EUR 242.8 million, 36% of Group
Russia ~90% of SBU East revenue
2012 revenue
EUR 32.5 million, 42% of Group
2012 EBIT
Retail Tikkurila's products are sold in more than
5,000 retail outlets
1,517 (on average in 2012)
Russia as part of the total coatings market
Total global coatings value is some EUR 76 billion
Russia accounts for 4% of the total value Europe accounts for 30% of the total value
Source: IPPIC (2010)
15
Europe 30% Western
Europe 22%
Other Eastern
Europe 4%
Russia 4%
ROW 7%
Latin America 7%
Asia Pacific 35%
North America 21%
March 12, 2013
Russia
~6 liters per capita
= high
= middle
= low
Paint consumption per capita
* Source: paint consumption, IPPIC
Paint consumption is still on a relatively low
level in Russia
Europe
8–15 liters per capita
Russian population
142.5 million people
March 12, 2013 16
But the paint market is growing
March 12, 2013 17
2.2 2.6
3.0 3.0
3.4
4.0
4.4 4.3
3.6
4.3 4.3
0
1
2
3
4
5
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Liters
Source: Rosstat, Chem-Courier (decorative paints)
283 300
358
411
457
571
622 615
515
618 619 632 651
670
-20
-15
-10
-5
0
5
10
15
20
25
30
0
100
200
300
400
500
600
700
800
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013F 2014F
Market size Growth
Development of the decorative paint market
in Russia 2001–2014F
Source: Chem-Courier, Management estimates
18
Liters (million) Growth %
March 12, 2013
Track record in SBU East
March 12, 2013 19
Development of Russian GDP and SBU East revenue* SBU East revenue and EBIT margin 2007–2012
Source: Rosstat (GDP)
*Euro-denominated revenue growth
EUR million % %
204
227
167
195
220
243 11.9%
11.3% 10.6%
12.4%
11.5%
13.4%
0
2
4
6
8
10
12
14
16
0
50
100
150
200
250
300
2007 2008 2009 2010 2011 2012
Revenue East EBIT margin
-30
-20
-10
0
10
20
2008 2009 2010 2011 2012
Russian GDP growth, % East revenue growth, %
Tikkurila is one of the most well-known
brands in the St. Petersburg region
10.56
4.6
1.41
1.34
1.28
1.14
1.14
1.13
1.1
1.05
Moscow
St. Petersburg
Novosibirsk
Yekaterinburg
Nozhny Novgorod
Kazan
Samara
Omsk
Chelyabinsk
Rostov-on-Don
Good coverage of operations
Khabarovsk
Saint Petersburg
Moscow Kopeisk
Yekaterinburg
Novosibirsk Irkutsk
Stariy Oskol
Krasnodar
Samara
March 12, 2013
Production, logistic center, sales
Logististic center and sales
Distribution center and sales
Population of Russia's largest cities
Source: Global insights, Rosstat, E&Y
21
Indirect customers
Direct disributors/customers
Customer segments
Tikkurila SBU East
Consumers
DIY big boxes
Consumers
Color studios
Regional wholesalers
- Traditional retail outlets
- Professional painters
- Construction industry
Professionals
Temaspeed dealers Industry
Distribution channels in SBU East
22 March 12, 2013
• High share and number of distributors
• Chains are increasing slowly
• Both international and local, i.e. Russian, big boxes
• Located only in the central parts of Russia, i.e. in big cities
• Low coverage of regions
• Big boxes account for approximately 20% of Tikkurila sales in Russia
• Tikkurila is present in all channels and has a long history of cooperation with the
customers
Russian paint market
Sustainability Water-borne paints gaining market share
Ecological production
Competition Additional production capacity to the market
Services Need for sales consultancy
Price sensitivity Tendency to buy low-cost products
Several no-name producers
High brand awareness At the same time: low awareness of brands
and how to apply paints
Characteristics Trends
Substitutes Wall papers are still very popular
Production optimization Investigating new applications and enhancing
product performance and quality
Growing demand from the construction industry
March 12, 2013 23
Water-borne paints have clearly increased
market share in Russia
March 12, 2013 24
16%
25% 31%
36% 40% 42%
47% 47% 54% 56% 54% 57%
84%
75% 69%
64% 60% 58%
53%
53% 46%
44% 46% 43%
0 %
10 %
20 %
30 %
40 %
50 %
60 %
70 %
80 %
90 %
100 %
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
SB
WB
Source: Rosstat, Chem-Courier
Findings of a consumer survey in Russia
81%
18% 1%
Makes the finaldecision at thestore
Makes thedecision inadvance
Not able toanswer
Quality
Color palette
Price
Decision is made at the store Factors impacting the choice
53% 11% 10% 10% 9% 5%
Big boxes Big retail (Starik Hotabych, etc.)Construction market Special painting shopShopping center of construction materials Household shop
Most popular place of purchase: Big boxes (e.g. Leroy Merlin, OBI, Castorama)
Source: GFK, 2012
March 12, 2013 25
Customer service improvements
• Training centers
• Order Desk
• Customer Hotline
• Consumer Hotline
• Technical support
• for 'deco customers'
• for industrial customers
• for professionals
26 March 12, 2013
New training center in St. Petersburg
27 March 12, 2013
Showroom in Krasnodar
• In cooperation with a parquet producer (Karelia Upofloor) in Russia
• Idea: Total interior design service, including follow-up services
• Target groups: HORECA, designers, homeowners
March 12, 2013 28
New concept for Color Studios
29
• New design for the Color Studios
• New channel for working with constructors, architects and designers
• Providing service and consultancy
March 12, 2013
Conclusions
30
Opportunities exist in Russia…
March 12, 2013 31
RUSSIA IS THE WEALTHIEST BRIC COUNTRY (GDP/CAPITA)
ALL SOURCES INDICATE GROWTH ON MEDIUM AND LONG TERM
RUSSIANS REMAIN BRAND CONSCIOUS
GROWING MIDDLE CLASS MAKES RUSSIA AN ATTRACTIVE MARKET
RUSSIA IS ONE OF THE LARGEST RETAIL MARKETS
…but there are also risks
March 12, 2013 32
RUSSIAN ECONOMY IS DEPENDENT ON THE OIL PRICE DEVELOPMENT
LACK OF RUSSIAN INDUSTRY AND EXPORT PRODUCTS
CHANGES IN LEGISLATION REQUIRE CONSTANT MONITORING
FIGHT FOR TALENTS
Revenue development by segment
2009–2012
March 12, 2013 33
19% 18% 19% 19%
20% 18% 17% 16%
30% 31%
30% 29%
32%
33% 34% 36%
0
100
200
300
400
500
600
700
800
2009 2010 2011 2012
CEE Finland Scandinavia East
CAGR
13.3%
0.3%
7.4%
8.4%
EUR million
530
589
644 672
8.2%
Thank you