Tikkurila Nordic quality from start to finish

Tikkurila Nordic quality from start to finish

Contents Tikkurila as a company Business environment Business Units 2

Tikkurila as a company 3

Tikkurila Sustainable Nordicness Tikkurila is a leading Nordic paint company with expertise that spans decades. We develop premium products and services that provide our customers with quality that will stand the test of time and weather. Revenue by segment 35% 65% Operating profit* by segment 46% 54% 45% Personnel by segment 55% We operate in around ten countries and our 3,000 dedicated professionals share the joy of building a vivid future through surfaces that make a difference. In 2017, our revenue totaled EUR 582 million. The company is listed on Nasdaq Helsinki. Nordic quality from start to finish since 1862. SBU West SBU East Revenue EUR 582 million Adjusted operating profit EUR 29 million (4.9% of revenue) More than 3,000 employees * Adjusted, excl. Group items SBU West SBU East SBU West Production in eight countries Products available in over 40 countries Leading market position in main markets SBU East 4

Our locations Production units in 8 countries Sales units in 12 countries Training centers in 9 countries Production, distribution center, sales Distribution center, sales Training center Denmark Finland Sweden Germany Poland Estonia Kazakhstan Russia China 5

Our end-customers CONSUMERS 50%* PROFESSIONALS 35%* INDUSTRY 15% 6 *Tikkurila estimate

Our products and services OUR SERVICES Ideas, work instructions and methods online CONSUMERS 50%* PROFESSIONALS 35%* INDUSTRY 15% Personal painting advice and technical support over the phone, online, on site and on production lines Comprehensive home interior and exterior surface treatment products Comprehensive surface treatment products for masonry surfaces, wood facades and concrete floors, effect and decorative paints Functional coatings Floor coatings for demanding environments Durable solutions to protect steel structures, machinery and equipment Paints and lacquers for wood industry Functional coatings for line application Color cards, color design and tinting service Training events On-site visits, inspections and analysis services Contacts with other professionals in the industry 7 *Tikkurila estimate

Over 150 years of decoration and protection 1920s The manufacture of paints and lacquers began in Tikkurila in 1919. Extensive marketing and customer training began in the 1920s. 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. 2010s Tikkurila listed on the stock exchange. Entering the Balkan area through the acquisition of Serbian Zorka Color. Tikkurila turned 150 yrs. 1862 1950 1960 1970 1980 1990 2010 1862 An oil press was founded on the banks of the Keravanjoki River in Tikkurila. 8 1950s Tikkurila introduced its first water-borne product, the Joker paint. Tikkurila's coloring service was led by designer Yki Nummi. 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.

Tikkurila is the market leader in decorative paints SWEDEN RUSSIA FINLAND POLAND 63% 37% (37%) 14% (15%) 50% >50% (>50%) 15% (16%) 85% 84% Tikkurila Others Tikkurila Others Tikkurila Others Tikkurila Others #1 #1 #1 #4 Sweden accounts for 23% of Group revenue Russia accounts for 25% of Group revenue Finland accounts for 16% of Group revenue Poland accounts for 13% of Group revenue Source: SVEFF (Sweden, value), Chem-Courier (Russia, volume), Association of Finnish Paint Industry (Finland, value), IBP Research (Poland, volume), 2016 9

Tikkurila Group structure TIKKURILA OFFERING RDI Marketing & Brand Management Business & Portfolio Development: Consumers, Professionals and Industry OPERATIONS Procurement Manufacturing Product care Logistics HSEQ SALES Consumers Professionals Industry Group KAM Sales support 10

MEGATRENDS Urbanization Climate change Growing middle class Digitalization Tikkurila strategy 2022 MISSION STRATEGY FOCUS AREAS VISION Nordic quality from start to finish. We offer competitive surface treatment solutions, and are committed to improving the overall user experience and efficiency of our customers. Pleasant and professional customer journeys. Unified customer segment specific portfolio. Surfaces that make a difference. More efficient use of resources. SUSTAINABILITY PROMISES We drive our portfolio towards maximized performance with minimum environmental impact. We improve and protect air quality. We drive at better resource efficiency. We are an active partner in our communities. VALUES We are trustworthy. We are innovative. We are professionals.

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. 12

Strong and well-established brands Strategic international brands Strategic regional or local brands Tactical regional or local brands 13

Distribution channels Wholesale* Retail** CONSUMERS PROFESSIONALS TIKKURILA Retail** Tikkurila s own paint shops in Scandinavia CONSUMERS PROFESSIONALS PROFESSIONALS Tikkurila Industrial Paint Service, direct sales PROFESSIONALS INDUSTRY 14 * Only in some markets ** Big boxes, specialized paint shops

We help customers to succeed in surface protection INSPIRATION IDEAS COLORS STORES CONSUMER SERVICES DIGITAL CHANNELS TRAINING PROFESSIONAL SERVICES 15

Succesful end-results We enhance the quality of painting, environmentally sustainable use of products, product and user safety, as well as the knowledge of surface treatment. We train our customers, retailers, and other professionals and students in our training centers and in stores regarding paints, painting, and tinting. We invest in developing solutions that make selecting, buying and selling of paints easier. We offer our customer technical consultation, advice on selecting colors and paints as well as tips and work instructions in all channels. 16

Unique colors Tikkurila is one of the forerunners in the production of paints for tinting and in the development and marketing of colors. 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. Tikkurila provides color cards for both indoor and outdoor painting. 17

The many advantages of tinting Enhances the service level of retailers Deepens the cooperation of retailers and paint producer Ecological and costefficient way of operating Economical way to produce small batches of different colors Practically unlimited amount of shades Enables lower inventory levels Emphasizes the quality of paint 18

Sustainability promises for 2018 2022 WE DRIVE OUR PORTFOLIO TOWARDS MAXIMIZED PERFORMANCE WITH MINIMUM ENVIRONMENTAL IMPACT. WE IMPROVE AND PROTECT AIR QUALITY WITH OUR PRODUCTS AND PROFESSIONAL SERVICES. WE DRIVE AT BETTER RESOURCE EFFICIENCY WITH QUALITY, SAFETY AND DURABILITY ON TOP OF OUR MINDS. WE ARE A RESPONSIBLE AND ACTIVE PARTNER IN OUR COMMUNITIES. 19

Durable and user-friendly products that are safe for people and the environment High-quality raw materials High-quality raw materials Carefully selected raw materials that have as low health and environmental impacts as possible. We aim to ensure that our suppliers act responsibly and ethically. Quality and durability Product and user safety in focus in our operations. Long service life of painted surfaces and long maintenance painting intervals. Eco-labels indicate the environmental impacts of products and their proven quality and safety characteristics. Water-borne and low emission paints Almost odorless paint, which ensures better indoor air quality and lower allergy risks. Ease of use and fast drying times. 20

75% of paints produced are water-borne (2017) 300+ eco-labeled products* (2017) 21 *products awarded international or national eco-label, allergy or asthma label or M1 classification

High-quality raw materials When selecting raw materials, the health, safety and environmental aspects are carefully considered. More than 90% of the raw materials and packaging materials for Tikkurila units in the EU are bought from the EU region. In Russia, more than 60% 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. 22

Committed product development Key principles for product development are quality, durability and safety. R&D develops new products, creates new business opportunities, renews existing products, and studies use of alternative and renewable raw materials. R&D units located in Finland, Poland, Russia, Sweden, Estonia and Denmark. The desired properties of products are ensured in thorough field testing and extensive laboratory testing. 23

Certified supply chain Tikkurila has 11 production units in 8 countries. Approx. half of Tikkurila personnel work in the supply chain. Production manufactures and packages the products in an economical, safe, and eco-efficient manner. We constantly work to develop our production processes and the resource efficiency of our production sites. Majority of Tikkurila s production sites have independently audited and certified quality, environmental, and safety management systems. 24

10 sites ISO 9001 QUALITY 9 sites ISO 14001 ENVIRONMENT 6 sites OHSAS 18001 HEALTH & SAFETY 25

Paint-making process 26

Business environment 27

Value of the global paints and coatings market; USD ~130 billion Decorative paints 43% Industrial coatings 57% 12% Transportation 10% Metal Industrial Coatings Decorative paints 43% 9% Industrial Maintenance and Protective 6% 3% 3% 3% 6% 6% Wood Coatings Powder Coatings Packaging Coatings Automotive Refinish Coil Coatings Marine Coatings Industrial segments where Tikkurila is present Source: IPPIC 2015 28

Megatrends that drive our business Climate change affecting the whole globe: Changing weather conditions and temperatures, increasing air pollution and indoor air problems, different health risks. Share of middle class is growing: Increases in economic income and consumption, changing consumption patterns, increasing demand for premium brands, health and wellbeing related products and services. By 2050, more than 65% of world's population lives in urban areas: Improved economic well-being, social development, increasing building construction, increased energy consumption and emissions. Digitalization: Comprehensive way to connect with customers and understand their needs in detail through data, optimize operations and develop new growth opportunities. 29

Paint consumption and demand structure Estimated paint consumption per capita* Factors impacting paint demand 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 = High = Medium = Low * Paint consumption source: Management estimates, IPPIC Tikkurila has an established presence in areas with expected growth in consumption per capita and increasing demand for premium products 30

Revenue, EUR million Adjusted operating profit % Long-term financial development Development of sales and profitability 2000 2017 Major acquisitions and divestments Sale of tinting business in 2000 (Revenue ~MEUR 130) Acquisition of Alcro- Beckers in 2001 (Revenue ~MEUR 190) Acquisition of Kraski Teks in 2006 (Revenue ~MEUR 80) Acquisition of Zorka Color in 2011 (Revenue ~MEUR 16) 800 700 600 500 400 345 445 450 439 441 457 563 625 648 530 589 644 670 653 618 584 572 582 12 10 8 6 300 200 100 4 2 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Revenue Revenue from acquisitions Divestments Adjusted operating profit margin 0 31

Business units 32

Tikkurila Strategic Business Units (SBU) Operational area SBU West Sweden, Denmark, Norway, Finland, Poland, Germany, Estonia, Latvia, and Lithuania SBU East Russia, Central Asian countries, and China. Furthermore, this SBU is responsible for the exports to approximately 20 countries. Production sites Nykvarn, Sweden Vantaa, Finland Debica, Poland Ansbach, Germany Tallinn, Estonia Lunderskov, Denmark St. Petersburg, Russia Stary Oskol, Russia Almaty, Kazakhstan Current demand structure Premium and medium price and quality segment products Economy price and quality segment products Expected demand structure Competitors Premium and medium price and quality segment products Akzo Nobel, PPG, Flügger, Jotun, Sherwin-Williams, Teknos, Nor-Maali, Sniezka Premium price and quality segment products expected to rise Akzo Nobel, Lakra-Sintez, Empils, ABC-Farben, Meffert, Caparol Distribution channels Deco: DIY retailers, independent retailers, Alcro professional stores, wholesalers Industry: direct sales, Tikkurila Industrial Paint Service Deco: DIY retailers, independent retailers, wholesalers Industry: direct sales, Tikkurila Industrial Paint Service

SBU West key facts SBU West locations Operational area Sweden, Denmark, Norway, Finland, Poland, Germany, Estonia, Latvia, and Lithuania Revenue 2017 Adjusted operating profit 2017 Employees Production sites Development in West EUR 379.8 (395.2) million, 65% of Group EUR 18.1 (45.3) million, 54% of Group * 1,605 (at year-end) Nykvarn, Sweden; Vantaa, Finland; Debica, Poland; Ansbach, Germany; Tallinn, Estonia; Lunderskov, Denmark 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 Nykvarn Vantaa Oslo Tallinn Copenhagen Stockholm Riga Vilnius Lunderskov Szczecin Warsaw Ansbach Debica * Excluding Group items

Operational area Revenue 2017 Adjusted operating profit 2017 Employees Production sites SBU East key facts Russia, Central Asian countries, and China. Furthermore, this SBU is responsible for the exports to approximately 20 countries. EUR 202.6 (176.8) million, 35% of Group EUR 15.2 (13.4) million, 46% of Group * 1,409 (at year-end) St. Petersburg, Russia (3) Stary Oskol, Russia Šabac, Serbia Almaty, Kazakhstan Development in SBU East 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 2017 Divestment of Serbia and Macedonia Mytishchi St. Petersburg Ekaterinburg Novosibirsk Samara Chelyabinsk Stary Oskol Almaty Khabarovsk * Excluding Group items Krasnodar Beijing Shanghai