Tikkurila publishes half year financial report

April-June 2017 highlights

• Revenue for the second quarter totaled EUR183.2 million (4-6/2016: EUR 179.3 million).
• Adjusted operating profit was EUR20.0 (28.4) million, i.e. 10.9 (15.8) percent of revenue.
• Operating profit (EBIT) was EUR20.0 (27.6) million, i.e. 10.9 (15.4) percent of revenue. 

January-June 2017 highlights

• Revenue totaled EUR320.2 million (1-6/2016: EUR 309.8 million).
• Adjusted operating profit was EUR25.2 (40.9) million, i.e. 7.9 (13.2) percent of revenue.
• Operating profit (EBIT) was EUR25.2 (40.1) million, i.e. 7.9 (13.0) percent of revenue. 

Comments by Erkki Järvinen, President and CEO:

“The operating profit for the second quarter came well short of our expectations. Our sales volumes were lower than anticipated due to poor weather conditions, as well as the problems with the availability of raw materials and the new ERP system in Sweden and Finland. Higher raw material prices, the introduction of the new ERP system, and investments in sales promotion also significantly increased costs.

Raising revenue is still high on our list of priorities. Our focus is on bringing operations to the normal level and restoring our excellent supply chain reliability. We will also be strengthening our competitiveness regarding new construction and services offered to professionals and industrial customers, which will also balance the seasonal nature of our operations. Due to raw material cost pressure, we will continue selective sales price increases.

We have initiated an extensive program to boost profitability. The program is aimed at generating at least EUR30 million in savings. As part of this program, a study on our future production network has been started. We will also continue the previously launched organisational and structural transformation, which is aimed at clarifying decision-making and responsibilities and eliminating overlaps. Improved cost competitiveness will support Tikkurila in seeking new growth opportunities.”

Outlook for 2017

Among Tikkurila's key markets in Sweden and Poland, the fairly strong economic growth is expected to continue in 2017. The economies of Finland and Russia are also anticipated to grow slightly. Demand for paint is predicted to moderately increase in Tikkurila's operational area during the current year. The importance of the professional segment is growing, which affects the sales structure of the Tikkurila Group.

The problems related to the introduction of the new ERP system and the availability of raw materials meant that Tikkurila could not fully meet market demand during the first half of 2017. The problems related to the ERP system has been solved to a large extent but they will still affect our operations in the second half.

Raw material prices are expected to rise, but Tikkurila will aim to compensate for this impact by intensifying its raw material procurement, increasing local purchasing in Russia, and by increasing its sales prices. Furthermore, there are risks related to the availability of titanium dioxide.

Guidance for 2017

Tikkurila expects its revenue to remain at last year's level and adjusted operating profit for the financial year 2017 to remain below the 2016 level.