Tikkurila’s Interim Report for January-June 2014

Good profitability despite weak demand in Russia

April-June 2014 highlights

    Revenue for the second quarter decreased by 7.4 percent to EUR 192.9 million (4-6/2013: EUR 208.3 million).
    Operating profit (EBIT) excluding non-recurring items was EUR 32.2 (33.4) million, i.e. 16.7 (16.0) percent of revenue.
    Operating profit (EBIT) was EUR 32.5 (33.3) million, i.e. 16.8 (16.0) percent of revenue.
    EPS was EUR 0.56 (0.54).

January-June 2014 highlights

    Revenue decreased by 3.6 percent to EUR 334.4 million (1-6/2013: EUR 346.7 million).
    Operating profit (EBIT) excluding non-recurring items was EUR 45.3 (43.5) million, i.e. 13.5 (12.6) percent of revenue.
    Operating profit (EBIT) was EUR 46.3 (43.6) million, i.e. 13.8 (12.6) percent of revenue.
    EPS was EUR 0.73 (0.69).

Revenue and EBIT estimates for 2014 intact

    Tikkurila expects its revenue and EBIT excluding non-recurring items for the financial year 2014 to remain at the 2013 level.

Comments by Erkki Järvinen, President and CEO:

“Our financial performance continued to be good in the second quarter of the year despite the market challenges, but the weak Russian ruble, in particular, decreased our euro-denominated revenue. The growing uncertainty related to economic development in Russia was increasingly reflected in consumer behavior regardless of the fact that consumer confidence indicators have shown some positive development recently. Based on our estimate, the volume growth in the Russian decorative paints market will be very low this year. It would also appear that the relative demand for paints in the lower quality and price grades has increased in the entire paint market in Russia, at least temporarily. For Tikkurila, the postponed purchasing decisions lead to lower sales volumes in Russia during the second quarter compared to the same period last year. However, the sales of our higher quality and price grades continued to be at a reasonably good level.

The economic situation in the EU region also continued to be fairly weak, and no significant improvement is in sight in the overall economic situation. Our sales volume grew slightly in SBU West where the development of the operations in Poland and the Baltic countries, in particular, continued to be good. The weakening Swedish krona reduced our euro-denominated revenue in SBU West. 

Despite the decline in revenue, we improved our relative profitability through the streamlining of operations, improved productivity, cost savings, and favorable development of the sales mix. The continuous improvement of our operations will generate desired results in the future as well. Growing revenue organically is challenging in the current market situation, but we will continue the measures to reach our growth objective. At the end of the period under review, we completed a small acquisition in Sweden, which will strengthen our surface treatment competence aimed at professionals, in particular. Our objective is to commercialize the acquired technology in all our geographical areas of operation.”

Outlook for 2014

Tikkurila reiterates its guidance for 2014.

The economic situation in Europe is expected to improve moderately in 2014. Considerable regional differences are forecasted between Tikkurila’s different markets in private consumption and construction volumes in 2014, but overall growth is estimated to remain low. No considerable change is expected in the demand for Tikkurila’s products compared to last year. Cost inflation is expected to continue, and investments in sales, marketing and innovation activities are forecasted to increase the fixed cost level. Raw material prices are forecasted to remain stable.

Tikkurila expects its revenue and EBIT excluding non-recurring items for the financial year 2014 to remain at the 2013 level.