Tikkurila Capital Markets Day Commercial Operations Janno Paju, Chief Commercial Officer
Disclaimer In this presentation, all forward-looking statements in relation to the company or its business are based on the management estimates, and actual results may differ from the expectations and beliefs such statements contain. Macroeconomic or general industry data are based on third-party sources. Tikkurila related figures in this presentation are based on internal accounting data. The information disclosed is unaudited except for some whole year 2011 figures. In addition, the market information presented is based on Tikkurila management estimates unless an external source is mentioned. All management estimates are suggestive. June 13, 2012 2
Tikkurila key facts 2011 by SBU Revenue EBIT* Personnel 17% 19% 34% 17% 7% 39% 25% 43% 30% 37% 20% 12% East Scandinavia Finland CEE East Scandinavia Finland CEE East Scandinavia Finland CEE *Excl. non-recurring and Group items June 13, 2012 3
CONSUMER AND PROFESSIONAL PAINT BUSINESS IS LOCAL June 13, 2012 4
Market characteristics Water-borne vs. solvent-borne paints* EAST SCANDINAVIA FINLAND CEE 3% 42% 30% 30% 58% 97% 70% 70% Solvent-borne Water-borne Solvent-borne Water-borne Solvent-borne Water-borne Solvent-borne Water-borne Share of water-borne paints is growing but there are differences in the markets due to e.g. climate conditions and traditions Legislation has also supported the growth of the water-borne paint sector *Share of SBU decorative paint sales June 13, 2012 5
Market characteristics Decorative paints vs. industrial coatings* EAST SCANDINAVIA FINLAND CEE 10% 12% 19% 31% 90% 88% 81% 69% Decorative Industrial Decorative Industrial Decorative Industrial Decorative Industrial Decorative paints dominate the sales of all Tikkurila SBUs Competition is international in industrial coatings and local in decorative paints *Share of SBU revenue June 13, 2012 6
Market characteristics Interior vs. exterior paints EAST SCANDINAVIA FINLAND CEE 27% 26% 49% 51% 51% 49% 73% 74% Interior paints Exterior paints Interior paints Exterior paints Interior paints Exterior paints Interior paints Exterior paints Construction styles have an impact on exterior paint demand; e.g. wooden facades, which in general need to be more frequently repainted, are more popular in Scandinavia and Finland *Share of SBU decorative paint sales June 13, 2012 7
Market characteristics Own production vs. traded goods* EAST SCANDINAVIA FINLAND CEE 5% 30% 9% 8% 95% 70% 91% 92% Manufactured Traded Manufactured Traded Manufactured Traded Manufactured Traded In Scandinavia, Tikkurila's own professional paint stores offer a wider range of adjacent products, such as paint brushes and putties *Share of SBU revenue June 13, 2012 8
Paint markets are fairly consolidated with the exception of Russia RUSSIA SWEDEN FINLAND POLAND 29% 23% 20% 29% 71% 77% 80% 71% Top 3 Others total Top 3 Others total Top 3 Others total Top 3 Others total Sources: Russia: Chem-Courier, decorative paint market volume Sweden: SVEFF and mgmt estimate, decorative paint market value Finland: Association of Finnish Paint Industry, decorative paint market value Poland: IRP Research, decorative paint market volume June 13, 2012 9
Strong and well-established brands Strategic brands Local brands "High end" (premium) "High end" (premium) "Medium" "Economy" June 13, 2012 10
Strategic brands of Tikkurila Premium brand Premium brand Value-for-money brand Medium brand Sold in both big boxes and in traditional paint stores Water-borne and solventborne products for consumers and professionals Tikkurila drives sustainable beauty Selective distribution (no big boxes) Only water-borne products for consumers and professionals Extensive eco-labeling Alcro acts together with professional painters and designers Wide national distribution In all key categories The best ratio of "pricequality" Teks makes the world around you more comfortable and beautiful Wide distribution (retail and wholesalers) Water-borne and solvent-borne products for consumers and professionals Vivacolor believes that you can color your dreams and make them real. Easily. June 13, 2012 11
Large majority of business from strategic brands* 20% Multi-brand approach allows Tikkurila to successfully compete in different price and quality segments Tikkurila's multi-brand approach and local brands enable retailer differentiation 80% Strategic brands Other brands Source: Strategic brands' share of Group revenue June 13, 2012 12
Sales personnel and brand strength matter in the paint purchase process Factors behind the purchase decision Comments on different factors 28% 39% "I found the right shades with the help of the sales person." "The sales person recommended Tikkurila Harmony, that's why I bought it." "My paint contractor told me to buy Tikkurila." "I trust Tikkurila paints. I chose Helmi because it is water-borne." 33% Sales person Brand Other "I found the right shade of white with suitable price." "I bought Tikkurila because I couldn't get the other brand that I was looking for." Source: Fenix Consulting 2011 (a study conducted in the Finnish market) June 13, 2012 13
Brand awareness in Russia and the Baltics % % Tikkurila Yaroslavskie kraski Oreol Nevskie kraski Pinotex Akvateks Dulux Teks Vivacolor Pinotex Sadolin Tikkurila Villa Akva Caparol Interior Eskaro Bindo Akrit Alpina 0 10 20 30 40 50 *Source: TNS Gallup media (Russia, May-October 2011, aided awareness) 0 20 40 60 80 100 *Source: Saar Poll LLC (Estonia, March 2011, aided awareness) Aided brand awareness of Tikkurila in Finland and Alcro in Sweden are more than 90%. June 13, 2012 14
Teks brand renewal Painting is easy! June 13, 2012 15
New Teks packages are more easy to identify BEFORE AFTER A total brand renewal based on customer feedback Brand advantages: reliability, integrity, friendliness, good value for money Brand disadvantages: difficulties in identifying product on the shelf, outdated design June 13, 2012 16
Vivacolor brand renewal in the Baltics BEFORE AFTER June 13, 2012 17
Allocation of Tikkurila S&M spend EUR 1,000 100 000 90 000 80 000 70 000 60 000 50 000 40 000 30 000 20 000 10 000 East Scandinavia Finland CEE SBU East S&M spend has been increased the most in the past years SBU Scandinavia's relatively large proportion of S&M spend is explained by own professional paint retail shops In the future, an increasing share of S&M spend will be allocated to the growing markets 0 2009 2010 2011 June 13, 2012 18
Deep partnerships with retailers are of crucial importance Creating added value to consumers The strongest brands Marketing support Active product and service development Training for retailers' personnel Developing the category together with the retailers June 13, 2012 19
Big boxes vs. other distribution channels RUSSIA SWEDEN FINLAND POLAND 20% 15% 30% 35% 80% 85% 70% 65% Big box Traditional distribution Big box Traditional distribution Big box* Traditional distribution Big box Traditional distribution Share of big boxes is slowly increasing Source; Management estimates *Incl. traditional hardware stores June 13, 2012 20
Distribution channels Tikkurila Wholesale (some countries) RETAIL Direct sales to: construction industry wood industry metal industry BIG Boxes Specialised paint shops Temaspeed Consumers Professionals/ Industry Advertising and trade marketing June 13, 2012 21
Tikkurila already has a wide range of services to offer Inspiration Ideas Colors and tinting Stores Profe professional services Designer Pool Contractor Pool Internet Helpline Training June 13, 2012 22
Case example: Service business in Kazakhstan Designer-Decorator department was established in Kazakhstan in 2010 Current portfolio includes designer services, as well as execution of interior paint decorating projects and furniture restoration An important part of the promotion was the creation of different types of decorative textures that were placed in Tikkurila partner stores Projects have included both public and private premises Galereya Center Shop (dealer in Almaty) Decorative Puzzle Wall, Tunto June 13, 2012 23
Private house, Shymkent June 13, 2012 24
Case example: Alcro to cooperate with Skanska in Sweden Tikkurila's subsidiary Alcro-Beckers will provide Skanska with consulting services for the painting work on the New Karoliniska Solna University Hospital outside Stockholm, Sweden During the five-year project Alcro will provide technical support and draw up painting work and material specifications for the whole project Hospital construction projects place special demands on wall paints; e.g. surfaces must be easy to keep clean and highly durable June 13, 2012 25
Conclusions GROWTH Tikkurila has excellent growth opportunities due to strong market positions, well-known brands and balanced geographical presence EFFICIENCY Focus on certain markets and customer segments enable further efficiency improvement CHALLENGES Biggest challenges are related to changes in the retail trade sector and to the demand distribution of different customer segments June 13, 2012 26
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