Tikkurila's Financial Statement Release for January-December 2017 - Declining profitability, restructuring continues
Tikkurila Oyj
Stock Exchange Release
February 13, 2018 at 9:00 a.m. (CET+1)
Tikkurila's Financial Statement Release for January-December 2017
- Declining profitability, restructuring continues
Full-year 2017 highlights
- Revenue increased by 1.8 percent to EUR 582.4 million (2016: EUR 572.0 million).
- Adjusted operating profit was EUR 28.8 (54.0) million, i.e. 4.9 (9.4) percent of revenue.
- Operating profit (EBIT) was EUR 19.3 (53.1) million, i.e. 3.3 (9.3) percent of revenue.
- EPS was EUR 0.24 (1.01).
- Cash flow after capital expenditure was EUR 4.4 (22.7) million.
October-December 2017 highlights
- Revenue decreased by 1.9 percent to EUR 102.2 million (10-12/2016: EUR 104.2 million).
- Adjusted operating result was EUR -18.3 (-10.6) million, i.e. -17.9 (-10.1) percent of revenue.
- Operating result (EBIT) was EUR -26.5 (-10.7) million, i.e. -25.9 (-10.3) percent of revenue.
- EPS was EUR -0.53 (-0.18).
Dividend proposal
- The Board proposes a dividend of EUR 0.80 (0.80) per share, which corresponds to about 331 (79) percent of the Group's 2017 earnings per share. It is proposed that the dividend will be paid in two equal tranches.
Guidance for 2018
- Tikkurila's revenue is expected to remain at last year's level and adjusted operating profit to improve.
| Key figures | ||||||
| (EUR million) | 10-12/2017 | 10-12/2016 | Change % | 1-12/2017 | 1-12/2016 | Change % |
| Income statement | ||||||
| Revenue | 102.2 | 104.2 | -1.9% | 582.4 | 572.0 | 1.8% |
| Adjusted operating result | -18.3 | -10.6 | -72.9% | 28.8 | 54.0 | -46.7% |
| Adjusted operating result margin, % | -17.9% | -10.1% | 4.9% | 9.4% | ||
| Operating result (EBIT) | -26.5 | -10.7 | -147.7% | 19.3 | 53.1 | -63.6% |
| Operating result (EBIT) margin, % | -25.9% | -10.3% | 3.3% | 9.3% | ||
| Result before taxes | -27.2 | -8.8 | -207.6% | 16.6 | 57.4 | -71.0% |
| Net result for the period | -23.4 | -8.2 | -187.3% | 10.7 | 44.5 | -76.0% |
| Other key indicators | ||||||
| EPS, EUR | -0.53 | -0.18 | -187.3% | 0.24 | 1.01 | -76.0% |
| ROCE, %, rolling | 6.3% | 18.5% | 6.3% | 18.5% | ||
| Cash flow after capital expenditure | 11.0 | 9.3 | 19.0% | 4.4 | 22.7 | -80.5% |
| Net interest-bearing debt at period-end | 90.1 | 58.7 | 53.5% | |||
| Gearing, % | 50.2% | 28.1% | ||||
| Equity ratio, % | 42.0% | 50.9% | ||||
| Personnel at period-end | 3,037 | 3,033 | 0.1% |
Comments by Jukka Havia, Interim President and CEO:
"Last year Tikkurila's profitability was particularly weak due to high cost level, which was caused on the one hand by the cost of the deployment of the new ERP system, and on the other hand, by the significant increase in the raw material and packaging material prices. Our operations were also affected by one of our key raw material provider's factory being destroyed in a fire in January, and some other problems with availability. The deployment of the ERP system caused problems that had a negative impact on our operations especially in Sweden. Last year, we increased our sales prices in several market areas, but this only partially offset the increased costs.
Our revenue was at the comparison period's level. Due to the problems with the deployment of the ERP system and the availability of raw materials, we were not able to fully meet market demand. Hence, we estimate to have lost some market share in Sweden and Finland. In Poland, we continued on our steady development path. Our business operations also developed favorably in Russia, where the stronger exchange rate of the ruble had a positive impact.
In the autumn of 2017, we launched an extensive program to boost profitability with the aim of achieving savings of at least EUR 30 million and improving our cost competitiveness. As part of the program, we announced the divestment of our unprofitable business operations in the Balkan area. We are preparing further actions to optimize our future production and logistics network in all our operating countries. Based on this we have, for instance, decided to close down the production facilities in southwestern Russia and in Germany by the end of 2018. In addition, we have changed our organization model. As a result, decision-making and business development are now handled more at the group level.
In late 2017, our strategy was updated for the new five-year term 2018-2022. We are committed to improving the overall user experience of our customers and our internal efficiency. We are creating value through our customer promise: 'Nordic quality from start to finish'.
The market outlook for 2018 is relatively good, although uncertainty has increased in the Swedish housing market in recent months. Economic growth is anticipated for our key markets and consumer confidence is strong. The identified problems with the deployment of the ERP system have been mostly resolved. The main challenge is that raw material and packaging material prices are estimated to continue rising during 2018. In order to compensate for increased costs, we will continue to increase our sales prices and take further actions to boost profitability. In 2018, our focus will be on improving profitability and enhancing the reliability of deliveries."
Outlook for 2018
The market outlook for the current year is relatively good, although uncertainty has increased in the Swedish housing market in recent months. Economic growth is anticipated to continue in Tikkurila's key markets and consumer confidence is high. The identified problems with the deployment of the ERP system have mostly been resolved, and inventory levels have been significantly raised in order to ensure deliveries.
The prices of raw materials and packaging materials are anticipated to continue rising throughout the year. Some challenges with availability may also still occur. In order to compensate for increased costs, Tikkurila will continue to raise its sales prices and to take action to boost profitability.
The ongoing organizational and structural change may cause indirect costs or otherwise negatively affect the company's operations.
Guidance for 2018
Tikkurila's revenue is expected to remain at last year's level and adjusted operating profit to improve.
Board of Directors' proposal for the distribution of profit
Tikkurila Oyj's distributable equity totaled 161.3 million on December 31, 2017: reserve for invested unrestricted equity totaled EUR 40.0 million and retained earnings totaled EUR 86.2 million. The Board proposes to the Annual General Meeting that a dividend of EUR 0.80 per share will be distributed for the year ended on December 31, 2017, and that the rest be retained in the unrestricted equity. The proposed dividend totals about EUR 35.3 million, which corresponds to approximately 331 percent of the Group's net profit for 2017.
Due to the seasonality of the business, Tikkurila will, from now on, pay the dividend in two tranches. The payment of the dividend for the financial year 2017 will take place as follows: the first tranche of EUR 0.40 per share will be paid to a shareholder which is recorded at the record date for the payment of dividend on April 16, 2018 at the Company's shareholder register maintained by Euroclear Finland Oy. The proposed date of payment is April 23, 2018. The second tranche EUR 0.40 per share will be paid in November 2018. The second tranche will be paid to a shareholder who is recorded at the record date for the payment of dividend at the Company's shareholder register maintained by Euroclear Finland Oy. The Board of Directors will decide at the meeting scheduled for October 25, 2018 the record date and the payment date for the second tranche. According to the current rules of the Finnish book-entry system the record date would then be October 29, 2018 and the dividend payment date earliest November 5, 2018.
Press Conference and webcast
Tikkurila will hold a press conference regarding the Financial Statement Release for 2017 for the media and analysts today on February 13, 2018, at 12:00 p.m. (CET+1) in the Akseli Gallen Kallela Cabinet at the Hotel Kämp (address Pohjoisesplanadi 29, 00100 Helsinki). The conference will be held in Finnish language. Attendees will be served lunch at the conference premises starting at 11:30 a.m. (CET+1). The Financial Statement Release will be presented by Jukka Havia, Interim President and CEO, CFO.
A live webcast, conducted in English, will be organized on February 13, 2018, at 3:00 p.m. (CET+1). The live webcast will be available at www.tikkurilagroup.com. The participants can also join a telephone conference that will be arranged in conjunction with the live webcast. The telephone conference details are set out below:
+358 9 7479 0361 (Finnish callers)
+44 330 336 9105 (UK callers)
+1 646 828 8156 (US callers)
Participant code: 7399588
An on-demand version of the webcast will be available at www.tikkurilagroup.com/investors later during the same day.
The Financial Statement Release and presentation materials will be available before the event at www.tikkurilagroup.com/investors.
Tikkurila Oyj
Jukka Havia, Interim President and CEO, CFO
For further information, please contact:
Jukka Havia, Interim President and CEO, 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.