|
|||
2010-10-29 08:00:00 CEST 2010-10-29 08:00:57 CEST REGULATED INFORMATION Tikkurila Oyj - Interim report (Q1 and Q3)Tikkurila's Interim Report for January−September 2010 - Revenue growth continued, full year outlook unchangedStock Exchange Release, October 29, 2010 at 9.00 am (CET +1) July−September 2010 highlights * Revenue for the third quarter increased by 9.8 percent in comparison to the previous year and totaled EUR 173.5 million (7-9/2009: EUR 158.1 million). * Operating profit (EBIT) was EUR 25.2 (26.2) million, i.e. 14.5 (16.6) percent of revenue. * EPS was EUR 0.38 (0.38). January-September 2010 highlights * Revenue increased by 10.1 percent in comparison to the previous year and was EUR 475.4 million (1-9/2009: EUR 431.7 million). * Operating profit (EBIT) excluding non-recurring items was EUR 61.1 (54.8) million, i.e. 12.9 (12.7) percent of revenue. * Non-recurring items totaled EUR 0.7 (-2.4) million. * EPS was EUR 0.93 (0.68). * Group's capital structure developed favorably and the amount of net debt decreased. Key Figures (EUR million) 7- 7-9/2009 Change 1- 1-9/2009 Change 1- 9/2010 % 9/2010 % 12/2009 -------------------------------------------------------------------------------- Income statement Revenue 173.5 158.1 9.8% 475.4 431.7 10.1% 530.2 Operating profit (EBIT), excluding non-recurring items 25.2 26.2 -3.8% 61.1 54.8 11.5% 50.2 Operating profit (EBIT) margin, excluding non- recurring items, % 14.5% 16.6% 12.9% 12.7% 9.5% Operating profit (EBIT) 25.2 26.2 -3.8% 61.8 52.4 18.1% 47.7 Operating profit (EBIT) margin, % 14.5% 16.6% 13.0% 12.1% 9.0% Profit before tax 22.0 23.1 -4.9% 55.8 42.2 32.4% 35.7 Net profit 16.8 16.6 1.6% 41.0 30.0 36.7% 27.8 Other key indicators EPS*, EUR 0.38 0.38 0.0% 0.93 0.68 36.8% 0.63 ROCE, % p.a. 18.0% 13.0% 18.0% 13.0% 17.7% Cash flow after capital expenditure, EUR million 62.5 61.0 2.4% 37.4 38.4 -2.6% 45.3 Net interest-bearing debt at period-end, EUR million 92.0 166.7 -44.8% 129.5 Gearing, % 47.9% 146.3% 90.0% Equity ratio, % 40.0% 25.4% 35.7% Personnel at period-end 3,677 3,658 0.5% 3,538 * As calculated by using the amount of shares outstanding of 44,108,252. Comments by President and CEO Erkki Järvinen"The favorable development of our revenue continued in the third quarter. Our sales volumes improved in all of our market areas except for Finland, where the exceptionally long period of hot weather in the summer hampered the sales of exterior paints. Of our strategic business units SBU Scandinavia, in particular, performed strongly. The general recovery of the economies in our operating area had a positive impact on the demand. Furthermore, we expect the pick-up in the residential building market to have an effect also on the paint demand during 2011. Due to cost increases and changes in sales mix, our relative profitability declined in the third quarter in comparison to the corresponding period last year. Our sales mix developed unfavorably in Finland, Scandinavia and Central Eastern Europe. The cost level was further raised by additional investments in marketing and human resources in Russia, where we consider investments in future competitiveness especially important. In addition, challenges related to the availability and prices of raw materials started to realize especially towards the review period end, and our raw material costs increased in the third quarter. The uncertainty related to raw material prices and availability seems to continue during the coming months. Our focus will be on securing sufficient raw material supply by extending our sourcing alternatives, where possible, and also by adapting our raw material base to the appropriate extent. We will continue adjusting our own sales prices during the year-end. Historically, we have had a strong pricing power to pass on cost increases to our sales prices. Due to the uncertainties related to the general economic situation, we will pay special attention to managing our cost level. Cash flow from operations has remained very strong despite the fact that the Group has invested in higher raw material and end-product inventories. Based on our strategy, we strive continuously to make our operations more efficient. We are also exploring actively alternatives to grow both organically and through possible acquisitions." Tikkurila Oyj Erkki Järvinen, President and CEO For further information, please contact: Erkki Järvinen, President and CEO Mobile +358 400 455 913,erkki.jarvinen@tikkurila.com Jukka Havia, CFO Mobile +358 50 355 3757,jukka.havia@tikkurila.com Susanna Aaltonen, Group Vice President, Communications & IR Mobile +358 40 593 4221,susanna.aaltonen@tikkurila.com Press conference today at 12.00 pm Tikkurila will hold a press conference about its Interim Report for January- September 2010 for the media and analysts today on October 29, 2010 starting at 12.00 noon Finnish time at restaurant Palace Gourmet's Union cabinet on the 10th floor; address Eteläranta 10, Helsinki. The conference will be held in Finnish. Attendees will be served lunch in connection with the conference, starting at 11.30 am Finnish time. The Interim Report will be presented by Erkki Järvinen, President and CEO, and Jukka Havia, CFO. In addition, Tikkurila will organize conference calls in English. If you are interested in having a conference call with the Tikkurila management, please contact Susanna Aaltonen, Vice President, Communications and IR, for setting exact schedules. Presentation material will be available before the press conference at www.tikkurilagroup.com/investors Tikkurila will publish its Financial Statement Release 2010 on Friday, February 11, 2010 at around 9.00 am Finnish time. Tikkurila provides consumers, professionals and the industry with user-friendly and environmentally sustainable solutions for protection and decoration. Tikkurila is a strong regional player that aims to be the leading paint company in the Nordic area and Eastern Europe including Russia. - Tikkurila inspires you to color your life. Tikkurila Oyj, Interim Report, January 1-September 30, 2010 This Interim Report has been prepared in accordance with IAS 34. The disclosed information is unaudited except for the 2009 full year data. The figures in the Interim Report are independently rounded. All forward-looking statements in this review are based on the management's current expectations and beliefs about future events, and actual results may differ from the expectations and beliefs such statements contain. In case there are any discrepancies between the language versions of the Interim Report, the Finnish version shall prevail. Tikkurila's business operations are organized in four reportable segments, of which Tikkurila uses the name Strategic Business Unit. Tikkurila's reporting segments are SBU East, SBU Finland, SBU Scandinavia, and SBU Central Eastern Europe. SBU East consists of Russia, Ukraine, Central Asian countries and Belarus. SBU Finland covers Tikkurila's business in Finland. SBU Scandinavia consists of Sweden, Denmark and Norway. SBU Central Eastern Europe consists of the following countries: the Baltic countries, Poland, Czech Republic, Slovakia, China, Germany, Hungary and Romania. Furthermore, this SBU is responsible for export sales in approximately 20 additional countries that are not included in the SBUs' operational areas. Financial Performance in July-September 2010 The revenue and profitability by reporting segments for the third quarter is presented below. July-September (EUR million) Revenue Operating profit (EBIT) excluding non-recurring items 7-9/2010 7-9/2009 7-9/2010 7-9/2009 SBU East 65.7 55.7 9.6 9.5 SBU Finland 26.5 28.3 3.4 5.9 SBU Scandinavia 49.8 44.6 9.1 8.0 SBU Central Eastern Europe 31.6 29.5 3.7 3.4 Group common and eliminations 0.0 0.0 -0.6 -0.6 Consolidated Group 173.5 158.1 25.2 26.2 Tikkurila Group's revenue for July-September 2010 totaled EUR 173.5 (158.1) million, i.e. 9.8 percent (EUR 15.5 million) more than in the third quarter of 2009. Exchange rate changes contributed to the growth, as well as sales volume growth. Of the total growth, about EUR 12.0 million was based on the foreign exchange rate translation effect, and EUR 6.4 million on sales volume increases. Changes in product mix decreased the revenue by EUR 3.0 million. Decorative paints generated about 85 percent and industrial coatings about 15 percent of the total revenue for the third quarter of 2010. Operating profit (EBIT) for July-September 2010 was EUR 25.2 (26.2) million, which equals 14.5 (16.6) percent of revenue. The profitability of Tikkurila's third quarter was hampered by changes in product mix, as well as by increased cost level. In the Group's operations there is intra-year seasonality, and hence the second and third quarters typically generate most of Tikkurila's annual profits. There were no non-recurring items in the third quarters of 2010 or 2009. Net finance expenses for July-September totaled EUR 3.2 (3.1) million. Profit before tax was EUR 22.0 (23.1) million. Taxes totaled EUR 5.1 (6.5) million, representing an effective tax rate of 23.4 (28.3) percent. Earnings per share were EUR 0.38 (0.38). Financial Performance in January-September 2010 The revenue and profitability by reporting segments for the first nine months is presented below. January-September (EUR million) Revenue Operating profit (EBIT) excluding non-recurring items 1-9/2010 1-9/2009 1-9/2010 1-9/2009 SBU East 158.4 135.3 20.8 17.5 SBU Finland 90.2 90.8 16.1 16.2 SBU Scandinavia 143.3 126.9 20.3 16.7 SBU Central Eastern Europe 83.5 78.7 6.3 6.2 Group common and eliminations 0.0 0.0 -2.4 -1.8 Consolidated Group 475.4 431.7 61.1 54.8 Tikkurila Group's revenue for January-September 2010 totaled EUR 475.4 (431.7) million, i.e. 10.1 percent (EUR 43.7 million) more than in the corresponding period last year. Of the total growth, about EUR 32.6 million was based on the foreign exchange rate translation effect, sales volume increases boosting the revenue by EUR 13.3 million. The effect of changes in product mix was EUR 2.3 million negative. Decorative paints accounted for about 85 percent, and industrial coatings for about 15 percent, of the total revenue of the first nine months of 2010. Operating profit (EBIT) excluding non-recurring items for January-September 2010 was EUR 61.1 (54.8) million, which equals 12.9 (12.7) percent of revenue. The non-recurring items were related to the second quarter of 2010 and 2009. The non-recurring items recognized in the second quarter of 2010 were related to an insurance compensation in Russia, and a fine set by Polish competition authorities, having altogether a positive effect of EUR 0.7 million on the operating profit. The non-recurring expense of EUR 2.4 million in the comparison period in 2009 was caused by personnel reductions in the Group's Finnish and Swedish operations. Operating profit (EBIT) for January-September 2010 was EUR 61.8 (52.4) million. The lower level of variable costs in the first nine months of 2010, in comparison to last year, as well as higher sales volumes and exchange rate changes contributed to the improved operating profit. The exchange rate changes had a EUR 3.5 million positive impact on the operating profit. Net finance expenses for January-September totaled EUR 6.0 (10.3) million. Profit before tax was EUR 55.8 (42.2) million. Taxes totaled EUR 14.8 (12.2) million, representing an effective tax rate of 26.6 (28.9) percent. Earnings per share were EUR 0.93 (0.68). Financial Performance by Reporting Segments SBU East SBU East, Income Statement (EUR million) 7-9/ 7-9/ Change 1-9/ 1-9/ Change 1-12/ 2010 2009 % 2010 2009 % 2009 -------------------------------------------------------------------- Revenue 65.7 55.7 17.9% 158.4 135.3 17.0% 167.1 Operating profit (EBIT), excluding non-recurring items 9.6 9.5 1.3% 20.8 17.5 18.8% 17.7 Operating profit (EBIT) margin, excluding non- recurring items, % 14.6% 17.0% 13.1% 12.9% 10.6% Operating profit (EBIT) 9.6 9.5 1.3% 22.2 17.5 27.3% 17.7 Operating profit (EBIT) margin, % 14.6% 17.0% 14.0% 12.9% 10.6% Capital expenditure excluding acquisitions 1.3 1.5 -16.3% 3.1 6.0 -48.8% 7.2 SBU East's revenue for July-September 2010 grew by 17.9 percent from the comparison period and totaled EUR 65.7 (55.7) million. The increased revenue was mainly due to exchange rate changes, the impact of which was EUR 5.4 million. In addition, the revenue was improved by increased sales volumes, with an impact of EUR 2.5 million. Changes in product mix increased the revenue by EUR 2.1 million. The positive development of the economies contributed to the improved demand. The development of sales in SBU East's fringe areas, such as Ukraine, Kazakhstan and Belarus, was very satisfactory. On the other hand, the Russian consumer confidence fell somewhat in the third quarter. The relative profitability of SBU East declined in the third quarter in comparison to the corresponding period last year due to increased cost level, related to e.g. increased variable costs, increased sales and marketing efforts, as well as additional personnel expenses at the production facilities. Operating profit (EBIT) for July-September 2010 totaled EUR 9.6 (9.5) million. The operating profit was mainly improved by changes in product mix, as shifting from economy products to premium products, which started in the beginning of the year, continued. Exchange rates improved the operating profit by EUR 0.6 million. SBU East's revenue for January-September 2010 grew by 17.0 percent from the comparison period and totaled EUR 158.4 (135.3) million. The increased revenue was mainly due to exchange rate changes and increased sales volumes. The exchange rate changes improved the revenue by EUR 13.4 million and the increased sales volumes by EUR 7.0 million. The impact of changes in product mix was EUR 2.8 million. The operating profit (EBIT) excluding non-recurring items for January-September 2010 grew by 18.8 percent from the comparison period and totaled EUR 20.8 (17.5) million. The operating profit was mainly improved by higher sales volumes, changes in product mix, as well as variable costs remaining at lower levels. SBU Finland SBU Finland, Income Statement (EUR million) 7-9/ 7-9/ Change 1-9/ 1-9/ Change 1-12/ 2010 2009 % 2010 2009 % 2009 -------------------------------------------------------------------- Revenue 26.5 28.3 -6.2% 90.2 90.8 -0.7% 106.8 Operating profit (EBIT), excluding non-recurring items 3.4 5.9 -42.6% 16.1 16.2 -0.8% 14.2 Operating profit (EBIT) margin, excluding non- recurring items, % 12.9% 21.0% 17.9% 17.9% 13.3% Operating profit (EBIT) 3.4 5.9 -42.6% 16.1 14.3 12.9% 12.2 Operating profit (EBIT) margin, % 12.9% 21.0% 17.9% 15.7% 11.4% Capital expenditure excluding acquisitions 0.5 0.4 27.8% 1.7 1.8 -5.3% 2.1 SBU Finland's revenue for July-September 2010 declined by 6.2 percent from the comparison period and totaled EUR 26.5 (28.3) million. The demand was hampered by an exceptionally long period of hot weather. Due to relatively high pre-order volumes and challenging weather conditions during the summer, additional orders for exterior paints were at modest levels. The revenue was mainly decreased by changes in product mix, the impact of which was EUR 1.3 million negative. Lower sales volumes decreased the revenue by EUR 0.5 million. SBU Finland's operating profit (EBIT) for July-September 2010 declined by 42.6 percent from the comparison period and totaled EUR 3.4 (5.9) million. The decrease was mainly due to changes in product mix, higher cost level, and lower sales volumes. SBU Finland's revenue for January-September 2010 declined slightly and totaled EUR 90.2 (90.8) million. The revenue declined mainly due to changes in product mix. SBU Finland's operating profit (EBIT) excluding non-recurring items for January-September 2010 remained at last year's level and totaled EUR 16.1 (16.2) million. The operating profit was hampered by changes in product mix. SBU Scandinavia SBU Scandinavia, Income Statement (EUR million) 7-9/ 7-9/ Change 1-9/ 1-9/ Change 1-12/ 2010 2009 % 2010 2009 % 2009 -------------------------------------------------------------------- Revenue 49.8 44.6 11.5% 143.3 126.9 12.9% 157.8 Operating profit (EBIT), excluding non-recurring items 9.1 8.0 13.6% 20.3 16.7 21.7% 16.1 Operating profit (EBIT) margin, excluding non- recurring items, % 18.3% 17.9% 14.2% 13.2% 10.2% Operating profit (EBIT) 9.1 8.0 13.6% 20.3 16.4 24.3% 15.7 Operating profit (EBIT) margin, % 18.3% 17.9% 14.2% 12.9% 10.0% Capital expenditure excluding acquisitions 0.5 0.4 37.6% 1.5 1.3 11.5% 2.1 SBU Scandinavia's revenue for July-September 2010 grew by 11.5 percent from the comparison period and totaled EUR 49.8 (44.6) million. The increase was mainly due to changes in exchange rates and improved sales volumes. The impact of exchange rates was EUR 4.8 million, and that of sales volumes EUR 2.7 million. Changes in product mix decreased the revenue by EUR 2.4 million. The Swedish economy is growing rather strongly, and the prospects for the rest of the year are bright. Sales to professional customers, in particular, picked up notably during the review period. SBU Scandinavia's operating profit (EBIT) for July-September 2010 grew by 13.6 percent and totaled EUR 9.1 (8.0) million. The improvement was mainly due to higher sales volumes. On the other hand, the operating profit was hampered by changes in product mix. The exchange rate changes improved the operating profit by EUR 0.8 million. SBU Scandinavia suffered from raw material shortages in the end of the review period, which impacted negatively revenue and operating profit levels. SBU Scandinavia's revenue for January-September 2010 grew by 12.9 percent from the comparison period and totaled EUR 143.3 (126.9) million. The increase was mainly due to changes in exchange rates, the impact of which was EUR 14.2 million. The impact of improved sales volumes was EUR 4.1 million. On the other hand, changes in product mix hampered the operating profit by EUR 1.9 million. SBU Scandinavia's operating profit (EBIT) excluding non-recurring items in January-September 2010 grew by 21.7 percent and totaled EUR 20.3 (16.7) million. The improvement was mainly due to lower variable costs. SBU Central Eastern Europe (CEE) SBU CEE, Income Statement (EUR million) 7-9/ 7-9/ Change 1-9/ 1-9/ Change 1-12/ 2010 2009 % 2010 2009 % 2009 -------------------------------------------------------------------------- Revenue 31.6 29.5 7.1% 83.5 78.7 6.1% 98.5 Operating profit (EBIT), excluding non-recurring items 3.7 3.4 9.9% 6.3 6.2 0.4% 5.0 Operating profit (EBIT) margin, excluding non-recurring items, % 11.8% 11.5% 7.5% 7.9% 5.1% Operating profit (EBIT) 3.7 3.4 9.9% 5.5 6.2 -12.2% 5.0 Operating profit (EBIT) margin, % 11.8% 11.5 % 6.6% 7.9% 5.1% Capital expenditure excluding acquisitions 0.6 0.5 22.8% 1.4 1.8 -18.0% 2.1 SBU Central Eastern Europe's revenue for July-September 2010 grew by 7.1 percent from the comparison period and totaled EUR 31.6 (29.5) million. The revenue improvement was due to exchange rate changes and higher sales volumes. The impact of exchange rate changes was EUR 1.8 million, and that of higher sales volumes EUR 1.8 million. On the other hand, changes in product mix deteriorated the revenue by EUR 1.4 million. SBU Central Eastern Europe's operating profit (EBIT) for July-September 2010 grew by 9.9 percent from the comparison period and totaled EUR 3.7 (3.4) million. The operating profit improvement was mainly due to higher sales volumes and lower cost level. At the same time, changes in product mix had a negative impact on the operating profit. Exchange rates increased the operating profit by EUR 0.1 million. SBU Central Eastern Europe's revenue for January-September 2010 grew by 6.1 percent from the comparison period and totaled EUR 83.5 (78.7) million. The revenue improvement during the first nine months of the year was mainly due to exchange rate changes, the impact of which was EUR 5.0 million. SBU Central Eastern Europe's operating profit (EBIT) excluding non-recurring items for January-September 2010 remained at last year's level and totaled EUR 6.3 (6.2) million. The economies in the SBU Central Eastern Europe's operating area seem to be recovering from the recession at different paces. The biggest market Poland is expecting a clear growth for 2010. However, Polish consumer confidence weakened at the end of the preview period. Group Operations Group functions support the SBUs in their operations as well as take care of the responsibilities of the listed parent company. No major changes took place in the Group common items during the review period. Cash flow, Financing Activities and Financial Risk Management Tikkurila's financial position and liquidity remained at a good level during the review period. Cash flow from operations totaled EUR 45.0 (53.4) million in January-September. Net cash flow from investing activities totaled EUR -7.6 (-15.0) million, of which corporate acquisitions accounted for EUR 0.0 (-3.6) million. Cash flow after capital expenditure was EUR 37.4 (38.4) million. Net working capital totaled EUR 92.0 (86.8) million at the end of the review period. The Group's interest-bearing debt was EUR 147.8 (210.7) million on September 30, 2010. The average interest rate of the interest-bearing debt was 4.1 (6.2) percent. Cash and cash equivalents totaled EUR 55.8 (44.1) million at the end of September. A total of EUR 8.7 million of the Tikkurila Group's short- and long- term loans will mature during the fourth quarter of 2010. The Group had a net debt of EUR 92.0 (166.7) million on September 30. The Group's equity ratio was 40.0 (25.4) percent at the end of September and gearing was 47.9 (146.3) percent. The Group's net financial expenses totaled EUR 6.0 (10.3) million, of which currency exchange rate changes accounted for EUR 0.0 (-0.3) million. During the third quarter, a total of EUR 40.2 million of the Group's external interest-bearing debt was paid back. At the end of September 2010 the Group had a total of EUR 86 million of unused committed credit facilities. At the end of the review period, the nominal value of Tikkurila's forward exchange agreements was EUR 99.8 million, and the market value was EUR 0.1 million. At the end of September 2010, Tikkurila had interest rate swaps for a total nominal value of EUR 20.0 million in place; the market value of these interest rate swaps was EUR 0.0 million. Capital Expenditure Gross capital expenditure in January-September 2010, excluding acquisitions, amounted to EUR 7.8 (11.0) million. No major single investment was carried out during the review period. Depreciation amounted to EUR 15.5 (14.2) million in January-September. The Group carries out impairment tests according to IAS 36. Research and Development During January-September 2010, the Tikkurila Group's research and product development expenses totaled EUR 7.5 (7.6) million, corresponding to 1.6 (1.8) percent of revenue. Human Resources On September 30, the Tikkurila Group employed 3,677 (3,658) people. The average number of employees during January-September 2010 was 3,762 (3,822). The number of Tikkurila Group's employees at quarter end by SBUs is presented below, starting from Q1/2009. Q1/2009 Q2/2009 Q3/2009 Q4/2009 Q1/2010 Q2/2010 Q3/2010 ------------------------------------------------------------------------ SBU East 1,657 1,768 1,599 1,563 1,702 1,794 1,657 SBU Finland 832 869 787 732 749 857 762 SBU Scandinavia 479 512 469 466 464 485 464 SBU CEE 781 788 771 743 746 774 757 Group operations 30 31 32 34 34 36 37 ------------------------------------------------------------------------ Total 3,779 3,968 3,658 3,538 3,695 3,946 3,677 Legal Proceedings The Group's Russian subsidiary OOO Tikkurila is currently engaged in a dispute against the Russian company OOO Decolor in relation to "Finncolor" trademark. In June 2010, the Arbitration Court of St. Petersburg confirmed Tikkurila's property right to the "Finncolor" trademark. OOO Decolor appealed against the decision, and the Court of Appeals reversed the lower court's decision. Tikkurila will appeal against the decision. In October 2009, the Polish competition authority set a fine of approximately EUR 0.6 million for Tikkurila. According to the Polish competition authority, certain distribution agreements of Tikkurila Polska S.A. contained an illegal clause. Tikkurila appealed against the decision, and the Court of appeals declined the fine to approximately EUR 0.2 million (PLN 0.7 million) on August 5, 2010. The competition authority has a right of appeal, and thus the decision has not become final yet. Nomination Committee Tikkurila assigned five members to the Nomination Committee, four of them being members outside the Board of Directors of Tikkurila and representing the four largest shareholders of the company on August 31, 2010. The fifth member of the Nomination Committee is the Chairman of the Board of Directors of Tikkurila, who acts as an expert member. The members of the Nomination Committee are Pekka Paasikivi, Chairman of the Board of Directors of Oras Invest Oy; Kari Järvinen, Managing Director of Solidium Oy; Harri Kerminen, President and CEO of Kemira Oyj; Risto Murto, Deputy CEO of Varma Mutual Pension Insurance Company; and Jari Paasikivi, Chairman of the Board of Directors of Tikkurila Oyj. The Nomination Committee will prepare the nomination and remuneration proposals of the members of the Board of Directors to the Annual General Meeting. Shares and Shareholders Trading of Tikkurila Oyj's shares began on NASDAQ OMX Helsinki Ltd on March 26, 2010. At the end of September, Tikkurila's share capital was EUR 35.0 million, from a total of 44,108,252 registered shares. At the end of September 2010, Tikkurila held no treasury shares. According to Euroclear Finland Oy's register, Tikkurila had a total of 27,410 shareholders on September 30, 2010. A list of the largest shareholders is updated regularly on Tikkurila's website at www.tikkurilagroup.com. At the end of September, the closing price for the Tikkurila share was EUR 15.89. The volume-weighted average share price for the review period (for the trading period Mar 26-Sep 30) was EUR 15.78, the highest price being EUR 16.95, and the lowest EUR 14.17. At the end of September, the market value of Tikkurila's shares, valued at the closing price, was EUR 700.9 million. During January-September 2010 (Mar 26-Sep 30), a total of close to 12.1 million Tikkurila shares, which is about 27.4 percent of the registered amount of shares, were traded on NASDAQ OMX Helsinki Ltd, and the value of the traded volume was EUR 191.0 million. Short-term Business Risks and Uncertainties In addition to the risk factors highlighted in the earlier interim reports published in 2010, the Company sees the following developments and uncertainties potentially affecting the Group and the markets in which it operates: The availability of some key raw materials used in paint production is still very poor, and there are pressures to increase the raw material prices further. Raw material related risks have already realized to some extent and they have had an unfavorable impact on Group's financial performance. The Group has not been able to meet the market demand in full, and additional resources have to be spent on finding alternative raw material sources. In addition, the average unit cost of raw materials has increased because of changes in the supply-demand equilibrium. It is possible that the Group will not be able to transfer the increased costs in full or without delay into its end product prices. Moreover, uncertainties related to raw materials may have an impact on the market share development, general competitive situation and product range. In the 2009 financial statements there is a more detailed description of risks relevant to the Group's operations. Outlook for 2010 A significant part of Tikkurila's revenue and operating profit is accrued during the second and third quarter of the year. A great majority of the revenue improvement for both the second and third quarter was due to exchange rate changes, as well as higher sales volumes. The operating profit increased in January-September from the previous year due to higher sales volumes and lower variable costs as a percentage of the revenue, as well as changes in foreign exchange rates. No significant changes took place in the operating environment during the third quarter. The gradual recovery of the economies of Tikkurila's operating area continued, although consumer confidence indicators fell somewhat at the end of the review period in some market areas, such as Poland and Russia. There are also some visible signs of picking up in the new construction market, and e.g. in Finland the levels of building permits and new housing start-ups were clearly higher in the first nine months of this year compared to last year. In general, construction affects the paint demand with less than a year's delay. Inflation is rising somewhat in focal market areas. However, there are still no visible signs of a particularly strong recovery, especially in the order levels of industrial customers in western markets. The continuation of raw material price increases and problems related to their availability may hamper Tikkurila's profitability towards the year-end. The Group has decided to actively prepare to the problems related to raw material availability, due to which the amount of inventories may still exceed last year's levels in the near future. Tikkurila keeps its guidance for the full year 2010 unchanged. Tikkurila's revenue and operating profit (EBIT) excluding non-recurring items are expected to exceed the corresponding 2009 level. The revenue and operating profit estimates do not take into consideration possible effects from exchange rate fluctuations, which may have a significant impact on the revenue development, in particular. Summary Financial Statements and Notes The financial information presented in this interim report is prepared in accordance with IAS 34 standard. Tikkurila applies the same accounting principles as applied in the 2009 financial statements. The figures presented in the tables have been rounded to one decimal, which shall be taken into account when analyzing the numbers. The interim report information is unaudited except for the full year 2009 data. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 7-9/ 7-9/ 1-9/ 1-9/ 1-12/ EUR '000 2010 2009 2010 2009 2009 Revenue 173,544 158,083 475,392 431,732 530,166 Other operating income 388 429 2,660 1,121 1,451 Expenses -143,348 -127,244 -400,785 -366,312 -465,122 Depreciation, amortization and impairment losses -5,349 -5,023 -15,466 -14,190 -18,780 -------------------------------------------------------------------------------- Operating profit 25,235 26,245 61,801 52,351 47,715 Total financing income and expenses -3,248 -3,142 -6,004 -10,274 -12,048 Share of profit or loss of associates -5 1 15 74 75 -------------------------------------------------------------------------------- Profit before tax 21,982 23,104 55,812 42,151 35,742 Income tax -5,149 -6,544 -14,841 -12,187 -7,952 -------------------------------------------------------------------------------- Net profit for the period 16,833 16,560 40,971 29,964 27,790 Other comprehensive income Available-for-sale financial assets 120 0 1,699 0 0 Foreign currency translation differences for foreign operations -3,372 837 5,909 -4,506 -1,774 Income tax related to components of other comprehensive income -31 0 -442 0 0 -------------------------------------------------------------------------------- Total comprehensive income for the period 13,550 17,397 48,137 25,458 26,016 Net profit attributable to: Owners of the parent 16,833 16,560 40,971 29,933 27,759 Non-controlling interest 0 0 0 31 31 -------------------------------------------------------------------------------- Net profit for the period 16,833 16,560 40,971 29,964 27,790 Total comprehensive income attributable to: Owners of the parent 13,550 17,397 48,137 25,522 26,080 Non-controlling interest 0 0 0 -64 -64 -------------------------------------------------------------------------------- Total comprehensive income for the period 13,550 17,397 48,137 25,458 26,016 Earnings per share of the net profit attributable to owners of the parent -------------------------------------------------------------------------------- Basic earnings per share (EUR) 0.38 0.38 0.93 0.68 0.63 -------------------------------------------------------------------------------- Diluted earnings per share (EUR) 0.38 0.38 0.93 0.68 0.63 CONSOLIDATED STATEMENT OF FINANCIAL POSITION EUR '000 ASSETS Sept 30, 2010 Sept 30, 2009 Dec 31, 2009 Non-current assets Goodwill 68,574 68,139 68,261 Other intangible assets 32,045 34,424 33,713 Property, plant and equipment 114,261 115,244 114,857 Investment in associates 763 770 774 Available-for-sale financial assets 2,816 922 929 Non-current receivables 6,147 4,054 5,860 Defined benefit pension assets 204 805 439 Deferred tax assets 4,550 2,091 2,368 -------------------------------------------------------------------------------- Total non-current assets 229,360 226,449 227,201 -------------------------------------------------------------------------------- Current assets Inventories 77,499 70,294 73,499 Interest-bearing receivables 163 1,039 288 Non-interest-bearing receivables 118,121 108,169 77,578 Cash and cash equivalents 55,755 44,059 24,543 -------------------------------------------------------------------------------- Total current assets 251,538 223,561 175,908 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Total assets 480,898 450,010 403,109 EQUITY AND LIABILITIES Sept 30, 2010 Sept 30, 2009 Dec 31, 2009 Share capital 35,000 35,000 35,000 Other reserves 1,616 359 359 Reserve for invested unrestricted equity 40,000 0 40,000 Translation differences -14,526 -23,163 -20,431 Retained earnings 129,906 101,726 88,935 -------------------------------------------------------------------------------- Equity attributable to owners of the parent 191,996 113,922 143,863 -------------------------------------------------------------------------------- Non-controlling interest 0 0 0 -------------------------------------------------------------------------------- Total equity 191,996 113,922 143,863 -------------------------------------------------------------------------------- Non-current liabilities Interest-bearing non-current liabilities 139,076 173,243 115,085 Pension obligations 16,315 14,407 14,567 Provisions 418 378 411 Deferred tax liabilities 10,029 9,364 9,607 -------------------------------------------------------------------------------- Total non-current liabilities 165,838 197,392 139,670 -------------------------------------------------------------------------------- Current liabilities Interest-bearing current liabilities 8,709 37,477 38,996 Non-interest-bearing current liabilities 114,171 100,347 80,181 Provisions 184 872 399 -------------------------------------------------------------------------------- Total current liabilities 123,064 138,696 119,576 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Total equity and liabilities 480,898 450,010 403,109 CONSOLIDATED FINANCIAL STATEMENT OF CASH FLOWS 7-9/ 7-9/ 1-9/ 1-9/ 1-12/ EUR '000 2010 2009 2010 2009 2009 CASH FLOW FROM OPERATING ACTIVITIES Net profit for the period 16,833 16,560 40,971 29,964 27,790 Adjustments for: Non-cash transactions 10,264 5,155 21,074 15,554 20,146 Interest and other financing expenses 2,716 2,858 7,191 10,620 12,925 Interest income -738 -216 -1,123 -612 -865 Income tax 5,149 6,544 14,841 12,187 7,952 -------------------------------------------------------------------------------- Funds from operations before change in net working capital 34,224 30,901 82,954 67,713 67,948 -------------------------------------------------------------------------------- Change in net working capital 40,769 37,326 -19,895 -181 11,590 Interest paid -4,037 -2,086 -8,793 -10,287 -14,603 Interest received 738 216 1,123 612 865 Income tax paid -6,106 -2,660 -10,386 -4,477 -3,346 -------------------------------------------------------------------------------- Total cash flow from operations 65,588 63,697 45,003 53,380 62,454 -------------------------------------------------------------------------------- CASH FLOW FROM INVESTING ACTIVITIES Acquisitions of subsidiaries, net of cash acquired 0 46 0 -3,618 -3,718 Other capital expenditure -2,847 -2,735 -7,783 -10,990 -13,473 Proceeds from sale of assets 105 73 414 146 418 Change in non-current loan receivables decrease (+), increase (-) -342 -60 -312 -590 -413 Dividends received 0 0 62 61 61 -------------------------------------------------------------------------------- Net cash used in investing activities -3,084 -2,676 -7,619 -14,991 -17,125 -------------------------------------------------------------------------------- Cash flow before financing 62,504 61,021 37,384 38,389 45,329 -------------------------------------------------------------------------------- CASH FLOW FROM FINANCING ACTIVITIES Change in non-current borrowings, increase (+), decrease (-) -145 505 24,333 60 -18,904 Current financing, increase (+), decrease (-) -39,961 -38,494 -30,202 -369 1,489 Profit distribution 0 -5,932 0 -24,289 -33,975 Other 796 -1,460 515 -1,765 -1,623 -------------------------------------------------------------------------------- Net cash used in financing activities -39,310 -45,381 -5,354 -26,363 -53,013 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Net change in cash and cash equivalents 23,194 15,640 32,030 12,026 -7,684 Cash and cash equivalents at the beginning of period 32,615 26,509 24,201 30,851 30,851 Effect of exchange rate fluctuations on cash held 54 -1,590 476 -862 -1,034 Cash and cash equivalents in the end of period 55,755 43,739 55,755 43,739 24,201 -------------------------------------------------------------------------------- Net change in cash and cash equivalents 23,194 15,640 32,030 12,026 -7,684 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY EUR '000 Non- Total control equity Equity attributable to the owners of the parent -ling in- terest Share Other Re Trans- Re- Total capital re- serve lation tained serves for differen- earnings in- ces vested un- restric- ted equity Equity at Jan 1, 2009 35,000 359 0 -18,752 69,986 86,593 144 86,737 Total compre- hensive income for the period 0 0 0 -4,411 29,933 25,522 -64 25,458 Changes arising from business arrange- ments 0 0 0 0 1,807 1,807 -80 1,727 Equity at Sept 30, 2009 35,000 359 0 -23,163 101,726 113,922 0 113,922 Equity at Jan 1, 2010 35,000 359 40,000 -20,431 88,935 143,863 0 143,863 Total compre- hensive income for the period 0 1,257 0 5,905 40,971 48,133 0 48,133 Acqui- sition / disposal of treasury shares 0 0 0 0 0 0 0 0 Equity at Sept 30, 2010 35,000 1,616 40,000 -14,526 129,906 191,996 0 191,996 Based on the decision of the Annual General Meeting of Tikkurila Oyj on February 8, 2010, and Extraordinary General Meeting on March 4, 2010, Tikkurila Oyj has repurchased 4,639 Tikkurila Oyj shares on May 10, 2010, and transferred 4,639 shares to the members of the Board of Directors as part of the remuneration of the Board. After the transfer on May 19, 2010, the Company holds no treasury shares. NEW IFRS STANDARDS The Group has adopted the following standards, interpretations and their amendments as of January 1, 2010. - Revised IFRS 3 Business Combinations (effective for financial years beginning on or after July 1, 2009). The amendments made to the standard are substantial. - Amended IAS 27 Consolidated and Separate Financial Statements (effective for financial years beginning on or after July 1, 2009). The amendments affect the accounting treatment of acquisitions and sales achieved in stages. - Amendments to IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items (effective for financial years beginning on or after July 1, 2009). - IFRIC 17 Distributions of Non-cash Assets to Owners (effective for financial years beginning on or after July 1, 2009). - IFRIC 18 Transfers of Assets from Customers (effective on financial years beginning on or after July 1, 2009). - Improvements to IFRSs (April 2009, effective mainly on financial years beginning on or after January 1, 2010). - Amendments to IFRS 2 Share-based Payment - Group Cash-settled Share-based Payment Transactions (effective on financial years beginning on or after January 1, 2010). The Group's view is that the adoption of the standards and interpretations above did not have any significant effect on the financial statements of the reporting period. The adoption of the amendments would cause changes to Tikkurila Group financial statements 2010 if new subsidiaries would be acquired (IFRS 3) or if share-based payments would be taken into use (IFRS 2). OPERATING SEGMENTS Tikkurila's business activities are organized in four reportable segments as per its strategy to be a long-standing operator in Europe and its neighboring areas. The differences in these operating environments and overall management of each area have been taken into account while establishing these reporting segments. Segments' revenue arises from the sales of various paints and related products that are sold to retailers, industrial customers and for professional use. Insignificant revenue is received from the sales of auxiliary services related to paints. Tikkurila common section includes the items related to the Group headquarters. The evaluation of profitability and decision making concerning resource allocation are based on segmental operating profit. Reportable segment assets are items of the statement of financial position that the segment employs in its business activities or which can reasonably be allocated to a segment. Segments' revenue is presented based on the location of the customers, whereas reportable segment assets are presented according to the location of the assets. Inter- segment pricing is based on market prices. External revenue accumulates from a large number of customers. Revenue by segment 7-9/2010 7-9/2009 1-9/2010 1-9/2009 1-12/2009 EUR '000 SBU East 65,664 55,691 158,397 135,325 167,109 SBU Finland 26,524 28,270 90,239 90,843 106,809 SBU Scandinavia 49,768 44,638 143,267 126,861 157,774 SBU Central Eastern Europe 31,589 29,484 83,488 78,702 98,474 --------------------------------------------------------------------------- Total 173,544 158,083 475,392 431,732 530,166 EBIT by segment 7-9/2010 7-9/2009 1-9/2010 1-9/2009 1-12/2009 EUR '000 SBU East 9,606 9,482 22,237 17,468 17,748 SBU Finland 3,409 5,940 16,108 14,265 12,205 SBU Scandinavia 9,102 8,009 20,325 16,355 15,722 SBU Central Eastern Europe 3,719 3,383 5,486 6,246 5,045 Tikkurila common -605 -528 -2,370 -1,676 -2,235 Eliminations 4 -41 15 -307 -770 --------------------------------------------------------------------------- Total 25,235 26,245 61,801 52,351 47,715 Non-allocated items: Total financing income and expenses -3,248 -3,142 -6,004 -10,274 -12,048 Share of profit or loss of associates -5 1 15 74 75 --------------------------------------------------------------------------- Profit before tax 21,982 23,104 55,812 42,151 35,742 Sept 30, Sept 30, Dec 31, Assets by segment 2010 2009 2009 EUR '000 SBU East 126,209 119,477 108,702 SBU Finland 112,605 95,898 79,212 SBU Scandinavia 166,173 150,060 139,900 SBU Central Eastern Europe 84,940 86,898 77,486 Assets, non-allocated to segments 36,005 0 0 Eliminations -45,034 -2,323 -2,191 --------------------------------------------------------------------------- Total reportable segments assets 480,898 450,010 403,109 CHANGES IN PROPERTY, PLANT 1-9/ 1-9/ 1-12/ AND EQUIPMENT 2010 2009 2009 EUR '000 Carrying amount at the beginning of period 114,857 118,249 118,249 Acquisition of subsidiaries 0 91 91 Other additions 6,518 9,552 12,006 Other reductions -220 -173 -461 Depreciation, amortization and impairment losses -11,506 -10,765 -14,368 Exchange rate differences and other changes 4,611 -1,710 -,660 -------------------------------------------------------------------------------- Carrying amount at the end of period 114,260 115,244 114,857 Tikkurila Group had contractual commitments for purchase of property, plant and equipment for an amount of EUR 1.0 million at the end of September 2010. 1-9/ 1-9/ 1-12/ CHANGES IN INTANGIBLE ASSETS 2010 2009 2009 EUR '000 Carrying amount at the beginning of period 101,974 103,378 103,378 Acquisition of subsidiaries 0 2,401 2,402 Other additions 1,201 1,485 1,569 Other reductions -129 0 -5 Depreciation, amortization and impairment losses -3,960 -3,425 -4,614 Exchange rate differences and other changes 1,533 -1,276 -756 -------------------------------------------------------------------------------- Carrying amount at the end of period 100,619 102,563 101,974 INVENTORIES Write-downs of EUR 1.8 (1.4) million were recognized in relation to the inventories on September 30, 2010. RELATED PARTY TRANSACTIONS Tikkurila Group has related party relationships amongst the parent company, the subsidiaries, the associates and the joint ventures. Related parties include members of Board of Directors and the Group's Board of Management, including the Group President and CEO. In additions, Tikkurila's former parent company Kemira Oyj and other Kemira Group companies were considered to be related parties until March 26, 2010. Related party transactions are presented below EUR '000 1-9/2010 1-9/2009 1-12/2009 Joint ventures Sales 1,560 1,434 1,870 Receivables 222 234 143 Liabilities 24 30 16 Associates Sales 17,929 410 555 Purchases 886 1,052 1,070 Receivables 6,454 140 227 Liabilities 45 1 3 Due the changes in invoicing procedures during the year 2010, the sales to associated companies increased compared to the previous year. Related party transactions with former parent company Kemira Oyj and with other Kemira Group companies were presented in the Q1 interim report. COMMITMENTS AND CONTINGENT LIABILITIES EUR '000 Sept 30, 2010 Sept 30, 2009 Dec 31, 2009 Mortgages given as collateral for liabilities in the statement of financial position Loans from pension institutions 40,000 0 0 Mortgages given 53,000 0 0 Other loans 0 100 100 Mortgages given 102 102 102 ----------------------------------------------------------------------------- Total loans 40,000 100 100 ----------------------------------------------------------------------------- Total mortgages given 53,102 102 102 Contingent liabilities Assets pledged On behalf of own commitments 0 42 32 Guarantees On behalf of own commitments 1,998 1,763 2,123 On behalf of others 2,974 3,470 2,485 Lease obligations 39,932 44,561 42,910 ----------------------------------------------------------------------------- Total contingent liabilities 44,904 49,836 47,550 DERIVATIVE INSTRUMENTS Sept 30, 2010 Sept 30, 2009 Dec 31, 2009 EUR '000 Currency Nominal Fair Nominal Fair Nominal Fair derivatives value value value value value value Currency forwards 99,798 96 - - - - Interest rate derivatives Interest rate swaps 20,000 31 - - - - KEY PERFORMANCE INDICATORS 7-9/2010/ 7-9/2009/ 1-9/2010/ 1-9/2009/ 1-12/2009/ Sept 30, Sept 30, Sept 30, Sept 30, Dec 31, 2010 2009 2010 2009 2009 Earnings per share / basic and diluted, EUR 0.38 0.38 0.93 0.68 0.63 Cash flow from operations, EUR '000 65,588 63,697 45,003 53,380 62,454 Cash flow from operations / per share, EUR 1.49 1.44 1.02 1.21 1.42 Capital expenditure, EUR '000 2,847 2,689 7,783 14,608 17,191 of revenue % 1.6 % 1.7 % 1.6 % 3.4 % 3.2 % Shares (1,000), average 44,108 44,108 44,108 44,108 44,108 Shares (1,000), at the end of the reporting period 44,108 44,108 44,108 44,108 44,108 Equity attributable to the owners of the parent / per share, EUR 4.35 2.58 4.35 2.58 3.26 Equity ratio, % 40.0 % 25.4 % 40.0 % 25.4 % 35.7 % Gearing, % 47.9 % 146.3 % 47.9 % 146.3 % 90.0 % Interest-bearing financial liabilities (net), EUR '000 92,030 166,661 92,030 166,661 129,538 Return on capital employed (ROCE), % p.a. 18.0 % 13.0 % 18.0 % 13.0 % 17.7 % Personnel (average) 3,839 3,803 3,762 3,822 3,757 DEFINITIONS OF KEY FIGURES Earnings per share (EPS) Net profit of the period attributable to the owners of the parent ---------------------------------------------------------------------- Shares on average Equity per share Equity attributable to the owners of the parent at the end of the reporting period ---------------------------------------------------------------------- Number of shares at the end of the reporting period Cash flow from operations / per share Cash flow from operations ---------------------------------------------------------------------- Shares on average Equity ratio, % Total equity x 100 ---------------------------------------------------------------------- Total assets - advances received Gearing, % Net interest-bearing financial liabilities x 100 ---------------------------------------------------------------------- Total equity Interest-bearing financial liabilities (net) Interest-bearing net liabilities - money market investments - cash and cash equivalents Net working capital Inventories + interest-free receivables, excluding current tax assets, accrued interest income and other prepaid financial items - interest-free liabilities, excluding current tax liabilities, accrued interest expenses and other accrued financial items Return on capital employed (ROCE), % p.a. ** Operating profit + share of profit or loss of associates x 100 ---------------------------------------------------------------------- (Net working capital + intangible assets ready for use + property, plant and equipment ready for use + investments in associates)* * average during the period ** actual operating profit and share of profit or loss of associates taken into account for a rolling twelve month period ending at the end of the review period SEGMENT INFORMATION BY QUARTER Revenue by 1-3/ 4-6/ 7-9/ 10-12/ 1-3/ 4-6/ 7-9/ segment 2009 2009 2009 2009 2010 2010 2010 EUR '000 SBU East 25,675 53,960 55,691 31,784 28,412 64,322 65,664 SBU Finland 29,181 33,392 28,270 15,966 29,228 34,488 26,524 SBU Scandinavia 36,258 45,966 44,638 30,912 39,870 53,629 49,768 SBU Central Eastern Europe 20,116 29,101 29,484 19,772 21,887 30,012 31,589 ---------------------------------------------------------------------- Total 111,230 162,419 158,083 98,434 119,397 182,451 173,544 EBIT by 1-3/ 4-6/ 7-9/ 10-12/ 1-3/ 4-6/ 7-9/ segment 2009 2009 2009 2009 2010 2010 2010 EUR '000 SBU East -266 8,252 9,482 280 -51 12,681 9,606 SBU Finland 3,143 5,182 5,940 -2,060 4,830 7,870 3,409 SBU Scandinavia 2,013 6,333 8,009 -633 2,944 8,279 9,102 SBU Central Eastern Europe -312 3,175 3,383 -1,201 294 1,472 3,719 Tikkurila common -536 -612 -528 -559 -516 -1,248 -605 Eliminations -19 -247 -41 -463 0 11 4 ---------------------------------------------------------------------- Total 4,023 22,083 26,245 -4,636 7,501 29,064 25,235 Non-allocated items: Total financing income and expenses -3,792 -3,340 -3,142 -1,774 -1,606 -1,149 -3,248 Share of profit or loss of associates 48 25 1 1 15 5 -5 ---------------------------------------------------------------------- Profit before tax 279 18,768 23,104 -6,409 5,909 27,921 21,982 Sept Assets by Mar 31, Jun 30, Sept 30, Dec 31, Mar 31, Jun 30, 30, segment 2009 2009 2009 2009 2010 2010 2010 EUR '000 SBU East 106,168 125,084 119,477 108,702 123,350 143,886 126,209 SBU Finland 101,043 108,403 95,898 79,212 102,898 124,962 112,605 SBU Scandinavia 159,168 162,890 150,060 139,900 155,784 175,048 166,173 SBU Central Eastern Europe 78,786 84,299 86,898 77,486 86,045 84,120 84,940 Assets, non- allocated to segments 0 0 0 0 57,845 64,566 36,005 Eliminations -1,182 -1,559 -2,323 -2,191 -69,870 -70,604 -45,034 ---------------------------------------------------------------------- Total reportable segments assets 443,983 479,117 450,010 403,109 456,052 521,979 480,898 Vantaa, October 29, 2010 TIKKURILA OYJ BOARD OF DIRECTORS [HUG#1456942] |
|||
|