24 April 2013 11:00 [Source: ICIS news]
LONDON (ICIS)--Tikkurila has swung to a net profit of €6.6m ($8.6m) in the first quarter of the year, compared to a €0.5m loss over the same period in 2012, the Finnish paint and lacquer producer said on Wednesday.
The swing came on the back of streamlining measures and a stabilisation in the price of raw materials.
However, the company’s CEO painted a bleak picture of the European decorative paints market, saying cold weather and low consumer confidence has resulted in strong headwinds for the sector.
"The economic situation in Europe continued to be extremely challenging at the beginning of the year. The level of consumer confidence was low, and construction declined. These, combined with the exceptionally cold spring in all of Tikkurila's key markets, resulted in a decline in our sales volumes,” said CEO Erkki Jarvinen.
“The weak development of sales at the beginning of the current year has burdened the entire industry,” he said.
Despite sluggish demand and weakened sales, earnings before interest and taxes (EBIT) rose on the back of lower costs. EBIT was €10.2m in the first quarter of 2013, compared to €5.8m in the first quarter of 2012, despite a 7% year-on-year drop in revenues to €138.4m.
Tikkurila noted that it had increased its marketing expenditure in Sweden during the quarter on the back of a shrinking market share attributed to “aggressive sales” campaigns by competitors.
The company’s market share also shrank in Russia as a result of consumers shifting to lower price paints, due to economic uncertainty.
With Europe finally emerging from a bitter winter, Tikkurila and the rest of the decorative paints industry is waiting on the crucial spring quarter, but is not expecting demand to be much stronger than last year, according to Jarvinen.
He said: “The significance of the first quarter is fairly minor to us. Traditionally, the approaching exterior painting season is decisive in terms of sales and results for the entire year. Economic growth in both developed and emerging markets may be modest in the current year.”
The company maintained its prognosis that economic development would remain weak in Europe over the course of the year, and that its operating profit would remain at 2012 levels.
The company posted a total net profit for the year of €40.7m in 2012, a 15% improvement on the €35.5m profit generated in the full-year 2011.
($1 = €0.77)
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