Tikkurila Group

Tikkurila Group is a paint producer from finland. The Group focuses on higher price and quality grade paints, which are manufactured in 13 production units in ten countries. Major competitors are companies like AkzoNobel and PPG. The highest production capacity is located in Russia, where the company has been operating since the 1970s. The stock yields around 5.1% today.

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About them:

OUR BUSINESS
operations are organized into two reporting segments, or Strategic Business Units (SBU). The business units, based on a geographical division, are SBU West and SBU East.
The SBU West’s markets are Sweden, Denmark, Norway, Finland, Poland, Germany, Estonia, Latvia and Lithuania.
Main brands in the area include Tikkurila, Beckers, Alcro and Vivacolor. Our products are distributed through building supply stores, independent paint retailers,  wholesalers, Tikkurila’s professional stores and directly to customers.
The SBU East’s markets are Russia, Central Asian countries, Ukraine, Belarus, Serbia, Macedonia and China; SBU East is also in charge of imports to more than 20 countries. Main brands in the area include Tikkurila and Teks. Our products are distributed through building supply stores, independent paint retailers, wholesalers and directly
to customers.

operating_profit_by_segment

A List of some helpful Material:

 

Tikkurila is a strong regional player which focuses on the Nordic countries and Eastern Europe. The most important markets are Sweden, Finland, Russia and Poland, which account for approximately 80 percent of the Group’s revenue.

 

Tikkurila’s new financial targets for 2018 are the following:

Revenue: Revenue EUR 1 billion
Relative profitability: Operative EBIT margin over 12 percent
Return on capital: Operative return on capital employed (ROCE) over 20 percent
Balance Sheet structure: Gearing less than 70 percent (source)

 

The revenue has shrunk in the past view years. This is what the CEO says in the annual report about it:

THE TURBULENT market situation of recent years has changed our
geographic footprint. Russia’s contribution to our group’s revenue
has dropped from the more than 30% it was a few years ago to
just over 20%.

 

Tikkurila AR2015_page.PNG

I love how they display the revenue from acquisitions. This is very helpful.

What we can see here is the profile of a well-run mature company.They grow their revenue slowly but irregular – sometimes with acquisitions. Paint is a chemical-commodity business.We see a decline in Revenue in 2009, then a recovering till 2012 – then pain again. (Note: No big  acquisition in 2009). They managed to operate more efficient over the time – their EBIT margin grew and is now in the low double-digit area (10-11%).

I would say there is no astronomically high growth to be expected – maybe from acquisitions? Maybe they get bought – who knows? This is what they say how they see the Market trends:

Market trends provide opportunities

The growth in paint consumption has historically correlated with an increase in the standard of living. The market in Western Europe is relatively mature and there the paint consumption per capita is 8–15 liters. In Central Eastern Europe as well as in the CIS countries, the current decorative paint consumption per capita is significantly lower than in Western Europe.

In Russia, for instance, the per capita paint consumption is some 6 liters. The consumption is expected to pick up in Central Eastern Europe and the CIS area as the standard of living increases. Moreover, the improving standard of living in the emerging economies is expected to increase the relative share on higher quality and price category paints.

It seems like there is room for growth in some of their markets. But im not to euphoric about it. Maybe the per capita amount of Paint used in russia will double or tripple (maybe not) but how long will this take?

I liked the long-term anticyclical approach of the management. They intend to increase local manufacturing and raw material sourcing in Russia – in times the market there is down.

Remember: They plan to have Revenue of EUR 1 billion and a operative EBIT margin over 12 percent in 2018. I think the only way they can reach this goal is by acquisitions, maybe backed with a recovery from their Eastern Markets – but maybe I’m wrong.

 

Tikkurila’s Dividend history

  • 2010 EUR 0.70 per share
  • 2011 EUR 0.73 per share
  • 2012 EUR 0.76 per share
  • 2013 EUR 0.80 per share
  • 2014 EUR 0.80 per share

Historical dividends have corresponded to 69–88% of the operative net income. The price today is 15,435 EUR (in Berlin) this would translate into a dividend yield of around 5.1% – not bad. On the other hand they pay out almost all of their income – so the earnings yield would be almost the same. Note. finnish tax.

dividend

 

Historical Performance

Tikkurila_Performance

Yahoo just give me this. Tikkurila is blue, Sherwin-Williams from US is red.

Conclusion

I am not to excited about Tikkurila Group. Maybe they are well-managed – but I don’t wand to invest in the company now. The Price today is not very high, but also not very interesting – at least for me. I just don’t see the big growth opportunities the management sees – maybe I am wrong.

 

Disclaimer: The content contained on this site represents only the opinions of its author(s). I may hold a position in securities mentioned on this site. In no way should anything on this website be considered investment advice and should never be relied on in making an investment decision. As always please do your own research!
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