Tikkurila Oyj
Stock Exchange Release
April 25, 2018 at 9:00 a.m. (CET+1)
Tikkurila's Business Review for January-March 2018
Tikkurila's revenue for the first quarter decreased by 5.1 percent to EUR 130.1 million (1-3/2017: EUR 137.1 million). Adjusted operating profit totaled EUR 3.6 (5.2) million, i.e. 2.8 (3.8) percent of revenue.
"Our revenue fell in the first quarter due to poor development in SBU East. SBU East's revenue declined mainly due to lower Russian sales volumes, the weakening of the ruble and the divestment of the Balkan business. The lower demand in Russia was affected by the consolidation of retail chains and the cold spring, which has delayed, among other things, the launch of infrastructure projects.
SBU West's volumes increased, especially in Poland. In the Nordic countries, the later arrival of spring, differences in the timing of pre-season orders and fewer trading days because of Easter had a negative impact on sales volumes. The weakening of the Swedish krona also reduced euro-denominated revenue.
Our profitability and margins were lower due to significantly higher raw material costs. The situation continued to be challenging as raw material prices kept rising, albeit slightly more slowly than last year. We also had problems with the availability of raw materials. Last year's increases in sales prices were not enough to compensate for the price inflation of raw materials. Fixed expenses were lower than in the previous year due to cost savings, lower ERP implementation costs, the exchange rate effect and the divestment of the business in the Balkans.
We will boost our revenue during the coming summer peak season. Our supply chain reliability is at its normal level and the market situation is good. Sales price increases have been implemented during the first quarter in our key markets, and further actions are planned for the remaining of the year to offset the significant raw material inflation. The optimization of the product portfolio and the production and logistics network as well as significant measures to improve cost efficiency will be continued this year", says CEO Elisa Markula.
Key figures
| (EUR million) | 1-3/2018 | 1-3/2017 | Change % |
| Group data | |||
| Revenue | 130.1 | 137.1 | -5.1% |
| Adjusted operating profit | 3.6 | 5.2 | -31.0% |
| Adjusted operating profit margin, % | 2.8% | 3.8% | |
| EPS, EUR | -0.05 | 0.13 | -137.9% |
| Net Interest-bearing liabilities (at period-end) | 133.8 | 89.2 | 49.9% |
| Total equity (at period-end) | 173.5 | 217.4 | -20.2% |
| Total assets (at period-end) | 471.7 | 486.1 | -3.0% |
| Segment data | |||
| SBU West revenue | 100.5 | 99.0 | 1.5% |
| SBU West adjusted operating profit | 7.3 | 7.1 | 3.2% |
| SBU East revenue | 29.6 | 38.1 | -22.3% |
| SBU East adjusted operating loss | -2.7 | -1.0 | -166.0% |
| Revenue by country | |||
| Sweden | 35.7 | 36.6 | -2.5% |
| Russia | 21.0 | 26.2 | -19.8% |
| Finland | 26.9 | 28.4 | -5.2% |
| Poland | 21.2 | 16.5 | 28.5% |
Financial development in January-March 2018
Lower sales volumes decreased Tikkurila Group's revenue in the first quarter by 3 percent. Several foreign exchange rates, particularly the Russian ruble and the Swedish krona, weakened against the euro and thus had a negative translation impact. Increases in sales prices had a positive and divestments had a negative impact on revenue.
Profitability was weakened by the cost level, which was clearly higher than in the comparison period, due to the steep rise in raw material costs.
The lower profitability of the business and higher level of net working capital weakened the cash flow considerably during the period under review. Net working capital increased due to higher inventory levels and trade receivables. Due to these factors, gearing was also higher.
As a result of discontinuing the German business, a provision of EUR 3.6 million for liabilities has been recorded in the first quarter, reducing the review period's net result and EPS. The provision is not included in the adjusted operating profit.
Market share development in 2017
Tikkurila's market share in decorative paints strengthened in Russia and Poland. The market share in value in decorative paints decreased by less than one percentage point in Sweden to 36 percent and by 4 percentage points in Finland due to the delivery problems. In Finland, the market share of Tikkurila in decorative paints is more than 50 percent.
Guidance for 2018 intact
Tikkurila's revenue is expected to remain at last year's level and adjusted operating profit to improve.
Tikkurila Oyj
Elisa Markula, CEO
For further information, please contact:
Elisa Markula, CEO
Mobile +358 50 596 0978, elisa.markula@tikkurila.com
Jukka Havia, CFO
Mobile +358 50 355 3757, jukka.havia@tikkurila.com
Minna Avellan, Director, Communications and Investor Relations
Mobile +358 40 533 7932, minna.avellan@tikkurila.com
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 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.