Tikkurila’s Business Review for January-September 2019: Revenue increased and profitability improved in Q3/2019
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 year’s 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 21.8% to 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 brands. Also, 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 revenue, 12.6% in Q3/18). This is largely a result of the continued efforts to improve our sales mix and price increases. It’s important that we continue 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 decrease. Overall, 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 Russia. The 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)
In Russia (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 demand. The 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
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