Update on Tikkurila's

Russian operations Tikkurila Analyst Day on August 15, 2013

Simo Laitala, Managing Director, Russia and

Central Asia

Tikkurila in Russia

August 15, 2013 2

Current demand

structure

Economy and medium segments

dominating, premium segment expected

to grow fastest

Facts about SBU East

Paint

consumption

~5-7 liters per capita*

*Excl. non-recurring items

Source: Chem-Courier 2012 (paint consumption)

Russia, other CIS countries, Ukraine

Operational area

Production sites Russia (3) and Ukraine (1)

Personnel

EUR 242.8 million, 36% of Group

Russia ~90% of SBU East revenue

2012 revenue

EUR 32.5 million, 44% of Group

2012 EBIT*

Retail Tikkurila's products are sold in more than

5,000 retail outlets

1,517 (on average in 2012)

Good coverage of operations

Khabarovsk

Saint Petersburg

Moscow Kopeisk

Yekaterinburg

Novosibirsk Irkutsk

Stariy Oskol

Krasnodar

Samara

August 15, 2013

Production, logistic center, sales

Logististic center and sales

Sales office

3

• Tikkurila sales function has regional structure with more than 200 employees

• Tikkurila has established long term partnerships with local customers

• Tikkurila's office and warehouse network has been expanded in 2012

Russian paint market is fragmented and there

have been no major changes recently

August 15, 2013 4

*Source: Chem-Courier 2012 (volume)

Market share development in Russia in 2010–2012 Russian decorative paint market shares in 2012

17%

6%

5%

4%

3%

3% 3%

3% 3%

53%

Tikkurila

Empils

Lakra

VGT

Dekart

Akzo Nobel

Akva

Meffert

ABC Farben

Others

17%

6% 5% 4% 3% 2%

63%

0%

10%

20%

30%

40%

50%

60%

70%

Tikkurila Empils Lakra VGT AkzoNobel

Caparol Other

2010 2011 2012

Low price segment is still dominating the

Russian paint market

• TOP 10 paint producers account for

almost 50% of the market, the rest is

shared by more than 250 small local

companies

• In terms of volume, economy and low price

segments account for the biggest part of

the market

• Water-borne paints are gaining market

share in medium and premium segments

due to the arising ecological trends in

consumer behavior

• Share of alkyd paints is decreasing in both

monetary and volume terms

5 August 15, 2013

Macro environment deteriorates

• GDP grew by 1.6% in Q1 2013 and

1.2% in Q2/2013

• FY GDP growth is estimated to be

modest (1-2%)

• Winter Olympics in 2014 and FIFA

World Cup in 2018 are expected to

support the GDP growth and

consumption

6

Source: Rosstat, several sources

August 15, 2013

Russian construction output has reached the

pre-crisis level

August 15, 2013 7

0

20

40

60

80

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Residential Non-residential

Construction output in Russia Total floor space, million square meters

Source: Rosstat

Paint market development in Russia

• Chem-Courier expects reduction in paint market volume and slight growth in value

• Other researchers are more optimistic and forecast the market to increase by 4-9%

August 15, 2013 8

618 616 614 583

1,312

1,579

1,398 1,426

0

200

400

600

800

1000

1200

1400

1600

1800

0

100

200

300

400

500

600

700

2010 2011 2012 2013F

Volume

Value

-5%

+2%

Source: Chem Courier

Million liters EUR million

Tikkurila brand positioning in Russia

Low

Economy

Medium

Premium

August 15, 2013 9

Price segment #1:

Tikkurila

#2:

Empils

#3:

Lakra Sintez

#4:

Akzo Nobel

Others:

Caparol

Premium

Medium

Economy

Low

Brand positioning of the main producers:

August 15, 2013 10

Indirect customers

Direct disributors/customers

Customer segments

Tikkurila SBU East

Consumers

DIY big boxes

Consumers

Color studios

Regional wholesalers

- Traditional retail outlets

- Professional painters

- Construction industry

Professionals

Temaspeed dealers Industry

Distribution channels in SBU East

11 August 15, 2013

• High share and number of distributors

• Chains are increasing slowly

• Both international and local big boxes

• Located only in the central parts of Russia, i.e. in big cities

• Low coverage of regions

• Tikkurila is present in all channels and has a long history of cooperation with the

customers

Tikkurila aims at diversifying its distribution

in Russia

• Tikkurila's products are sold

through more than 5,000 retail

outlets

• Big boxes are increasing their

market share slowly

• Majority of Tikkurila sales go

through distributors but their

relative share is decreasing

• Tikkurila aims at balanced

development of different

distribution channels

August 15, 2013 12

Big boxes' share of Tikkurila sales in Russia

0%

5%

10%

15%

20%

25%

2010 2011 2012

International

Big Boxes

National chains

& Household

Regional chains

& Department

store chains

Examples of key accounts in Russia

August 15, 2013 13

More active role in distribution to support

growth

• For consumers and

designers

• Brand offering: Tikkurila

• First shop opened in St.

Petersburg in May 2013

August 15, 2013 14

Color Studio Profe Shop Inspiration Gallery

• In cooperation with a parquet

producer (Karelia Upofloor) in

Russia

• Idea: Total interior design

service, including follow-up

services and installation work

• First showroom opened in

Krasnodar in March 2013

• For small-scale construction

professionals

• Brand offering: Tikkurila,

Finncolor, Teks and

Tikkurila Coatings

• First shop opened in St.

Petersburg in May 2013

Tikkurila's new paint shop concepts

Russian paint market

Sustainability Water-borne paints gaining market share

Ecological production

Competition Additional production capacity to the market

Services Need for sales consultancy

Price sensitivity Tendency to buy low-cost products

Several no-name producers

High brand awareness At the same time: low awareness of brands

and how to apply paints

Characteristics Trends

Substitutes Wall papers are still very popular

Production optimization Investigating new applications and enhancing

product performance and quality

Growing demand from the construction industry

August 15, 2013 15

Water-borne paints have clearly increased

market share in Russia

August 15, 2013 16

Source: Rosstat, Chem-Courier, Tikkurila

Market Tikkurila

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Water-borne Solvent-borne

70%

30%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012

Water-borne Solvent-borne

Findings of a consumer survey in Russia

81%

18% 1%

Makes the finaldecision at thestore

Makes thedecision inadvance

Not able toanswer

Quality

Color palette

Price

Decision is made at the store Factors impacting choice

53% 11% 10% 10% 9% 5%

Big boxes Big retail (Starik Hotabych, etc.)Construction market Special painting shopShopping center of construction materials Household shop

Most popular place of purchase: Big boxes (e.g. Leroy Merlin, OBI, Castorama)

Source: GFK, 2012

August 15, 2013 17

Russian consumers' main sources for paint

information

Advice from relatives or friends

Advice from professionals

Google

Advice from the shop keeper

Own experience

August 15, 2013 18

Source: GFK, 2012

Adjacent markets offer interesting

opportunities

Kazakhstan Population: 17.7 million

Urban population: 59%

GDP per capita: $13,900 (country comparison: 96)

GDP growth rate: 5% in 2012

Paint market size: 60.0 million liters

Paint consumption per capita: 4 liters

Tikkurila presence: Representative office, warehouse

August 15, 2013 19

Ukraine Population: 44.6 million

Urban population: 69%

GDP per capita: $7,600 (country comparison: 136)

GDP growth rate: 0.2% in 2012

Paint market size: 165.0 million liters

Paint consumption per capita: 3.7 liters

Tikkurila presence: Production unit in Kiev, raw

material sourcing, representative office, warehouse

Belarus Population: 9.6 million

Urban population: 75%

GDP per capita: $16,000 (country comparison: 82)

GDP growth rate: 4.3% in 2012

Paint market size: 43.2 million liters

Paint consumption per capita: 4.5 liters

Tikkurila presence: Representative office,

warehouse

Source: CIA The World Factbook, Tikkurila estimates

Growth potential on the Kazakhstan paint

market

August 15, 2013 20

• Market size some 60 million liters

• Two main producers (local companies) hold 40-45% of the market

• Upcoming events include EXPO2017, Winter Universiade 2017, new G4 city

Market

• Tikkurila brand mainly sold through special paint shops

• TEKS brand sold through retail network and directly to construction and industrial companies

Distribution

• Tikkurila operates with Tikkurila and Teks brands

• Our market share is around 10% Our presence

Source: Management estimate

Key growth drivers, Russia

August 15, 2013 21

Changes in sales organization

New approach in marketing

New shop concepts

Broad service offering

GDP growth

Trading up Market forces

Own operations

Near-term focus in Russia to support growth

• Upgrading product mix towards

higher quality and environmentally

sound paints

• Boosting particularly point of sale

marketing efforts

• Increasing the sales of paint-

related services (design services,

painting work etc.)

• Increasing the amount and

geographical scope of our Color

studios and Profe shops

August 15, 2013 22

Q&A