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Tikkurila’s Business Review for January-September 2019: Revenue increased and profitability improved in Q3/2019

29.10.2019

Tikkurila Oyj, Business Review Q3
October 29, 2019 at 9.00 a.m. (CET+1)
  

Tikkurila’s Business Review for January-September 2019: Revenue increased and profitability improved in Q3/2019

July−September highlights (Q3) 

  • Revenue increased by 3.2% from the previous year, amounting to EUR 157.1 million (7-9/2018: 152.2). Excluding currency fluctuations and divestments, revenue increased by 2.2% 
  • Adjusted operating profit increased by 17.8% to EUR 22.6 (19.2) million and amounted to 14.4% (12.6%) of revenue. 
  • Earnings per share (EPS) increased by 75.9% to EUR 0.39 (0.22) 

January−September highlights 

  • Revenue was at previous years level, amounting to EUR 455.9 million (1-9/2018: 456.0). Excluding currency fluctuations and divestments, revenue increased by 1.5 % 
  • Adjusted operating profit increased by 21.8to EUR 54.0 (44.3) million and amounted to 11.8% (9.7%) of revenue. 
  • Earnings per share (EPS) increased by 76.8% to EUR 0.92 (0.52) 

Elisa Markula, CEO 

In the third quarter, Tikkurila’s revenue grew by 3 percent, and our profitability increased by 18 percent compared to previous year. Our cash flow also improved further, driven by favorable development in profitability, as well as a lower level of net working capital.  

Regionally, we saw improved sales performance in our growth markets – in Poland and especially in Russia – driven by the increasing sales of premium brandsAlso, in Finland our revenue grew, driven by good interior and industry sales.  

In Sweden, our business continued to be impacted by the weakening Krona as well as soft general demand. We continued efforts to improve our performance by focusing on commercial excellence and actions to improve go-to-market. 

Profitability continued to develop in the right direction (14.4% of revenue12.6% in Q3/18)This is largely a result of the continued efforts to improve our sales mix and price increases. It’s important that wcontinue efforts to offset the significant raw material cost inflation which has affected the whole industry in the past few years. Also, we are now starting to see the full impact of the fixed costs savings executed last year. While we will maintain strict cost discipline, going forward we expect gains in profitability to arise from improvements in operational and commercial excellence, as outlined at our Capital Markets Day in June. 

Key figures 

IFRS 16 standard has been applied as of January 1, 2019. Historical figures have not been adjusted. 

EUR million  7-9/2019  7-9/2018  Change %  1-9/2019  1-9/2018  Change %  1-12/2018 
Group data        
Revenue   157.1  152.2  3.2%  455.9  456.0  -0.0%  561.5 
Excl. FX and divestments  2.2%  1.5% 
Adjusted operating profit  22.6  19.2  17.8%  54.0  44.3  21.8%  38.8 
Adjusted operating profit margin, %   14.4%  12.6%  11.8%  9.7%  6.9% 
Operating profit   22.5  14.0  60.7%  51.6  35.2  46.8%  26.5 
Operating profit margin, %  14.3%  9.2%  11.3%  7.7%  4.7% 
Net profit for the period   17.1  9.7  75.9%  40.6  23.0  76.8%  14.6 
Earnings per share (EPS), EUR   0.39  0.22  75.9%  0.92  0.52  76.8%  0.33 
Net interest-bearing liabilities (at period-end)   77.7  94.6  -17.9%  85.5 
Total equity (at period-end)   176.8  159.6  10.8%  150.1 
Total assets (at period-end)  472.3  451.4  4.6%  400.0 
Gearing  43.9%  59.3%  57.0% 
ROCE, %, rolling  15.2%  3.0%  9.3% 
Cash flow after capital expenditure  74.0  62.2  19.1%  44.0  10.1  335.6%  36.3 

Segment data 

EUR million  7-9/2019  7-9/2018  Change %  1-9/2019  1-9/2018  Change %  1-12/2018 
SBU West revenue    97.3  97.7  -0.4%  302.0  313.3  -3.6%  381.2 
    Excl. FX and 
    divestments 
0.7%  -1.3% 
SBU West operating profit   12.7  9.6  32.2%  38.0  29.0  31.1%  22.7 
SBU West adjusted operating profit   12.8  14.2  -10.2%  38.2  37.8  1.1%  34.5 
SBU East revenue   59.7  54.4  9.8%  153.9  142.7  7.8%  180.3 
    Excl. FX and     
    divestments 
4.9%  7.8% 
SBU East operating profit  11.1  5.2  112.5%  18.2  9.5  91.6%  9.4 
SBU East adjusted operating profit  11.2  5.7  95.0%  20.3  9.9  105.3%  9.9 

Effects of various factors on revenue 

Group  SBU West  SBU East 
EUR million  7-9/2019  1-9/2019  7-9/2019  1-9/2019  7-9/2019  1-9/2019 
Volume  -1.5%  -2.6%  0.3%  -3.2%  -4.7%  -1.5% 
Price/mix   3.7%  4.2%  0.4%  1.9%  9.6%  9.3% 
Currencies  1.0%  -1.1%  -1.1%  -1.6%  4.9%  0.1% 
Divestments  0.0%  -0.5%  0.0%  -0.7%  0.0%  -0.1% 

  
Main drivers (Q3) 

Volumes decrease was mainly driven by Russia, where the sales of private label products continued to decreaseOverall, in the decorative business the decrease was is mainly a result of our deliberate strategy to focus on value and our core premium brands in all markets. In industry coatings there was also generally weaker demand, especially in metal. 

The positive effect from price/mix changes was driven by price increases in all countries, as well as the increasing share of premium products especially in RussiaThe strengthening of the Russian Ruble had a clear positive effect on revenue growth in SBU East, whereas the weakened Swedish Krona had a slight negative impact on revenue in SBU West. 

Revenue in key countries 

EUR million  7-9/2019  7-9/2018  Change %  1-9/2019  1-9/2018  Change %  1-12/2018 
Russia   45.5  41.2  10.6%  114.6  107.4  6.6%  134.4 
Sweden   29.4  31.1  -5.7%  95.9  104.3  -8.1%  127.6 
Finland   23.4  22.7  2.9%  78.4  80.4  -2.5%  94.4 
Poland   24.9  24.2  2.8%  72.2  69.7  3.5%  84.6 

  
Main drivers (Q3) 

IRussia (SBU East), revenue growth was equally driven by positive changes in our product mix and price increases as well as positive tailwind from development of the Russian Ruble. Especially our core Tikkurila brand expanded its share of sales in all channels. The share of private label products decreased. 

In Sweden (SBU West)revenue continued to decrease, including headwind from the negative development of the Swedish Krona. There was positive development with mix/price, but this did not fully compensate the declining volumes, as demand for exterior paints remained at a low level. During the quarter, sales ramp up in DIY stores progressed as planned. 

In Finland (SBU West), revenue growth was driven by increased sales of interior paints, improved industry sales and price increases. With exterior paints, demand remained at a relatively low level throughout the season compared to previous year.  

In Poland (SBU West)revenue grew driven by increasing volumes especially in interior paints, despite softening market demandThe share of premium products continued to increase. 

Events after the reporting period   

No material changes regarding the company’s business or financial position have materialized after the end of the quarter.   

Guidance for 2019 unchanged 

Tikkurila’s revenue is expected to remain at the same level as in 2018 and the adjusted operating profit will improve. 

Press conference 

CEO Elisa Markula and CFO Markus Melkko will present Tikkurila’s Business Review for January−September 2019 in Finnish for the media and analysts at Tapahtumatalo Bank’s cabinet 24-25 (Unioninkatu 20, Helsinki) today at 13:00 (CET +1).    

Contact information: 

Elisa Markula, CEO 
+358 50 596 0978 
elisa.markula@tikkurila.com   

Markus Melkko, CFO 
+358 40 531 1135 
markus.melkko@tikkurila.com 

Tapio Pesola, Director, Communication and Investor Relations 
+358 44 373 4693 
ir.tikkurila@tikkurila.com 

  

DISTRIBUTION 
Nasdaq Helsinki Ltd 
Main news media 
www.tikkurilagroup.com 

About us

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. We operate in seven countries and our 2,700 dedicated professionals share the joy of building a vivid future through surfaces that make a difference. In 2018, our revenue totaled EUR 562 million. The company is listed on Nasdaq Helsinki. Nordic quality from start to finish since 1862.

www.tikkurilagroup.com

Contact

Tikkurila Oyj
P.O. Box 53, Heidehofintie 2 FI-01300 Vantaa Finland
+358 20 191 2000
www.tikkurilagroup.com