Tikkurila in Poland Tikkurila Analyst Day on August 15, Ilari Hyyrynen, Managing Director, Tikkurila Polska S.A.

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1 Tikkurila in Poland Tikkurila Analyst Day on August 15, 2013 Ilari Hyyrynen, Managing Director, Tikkurila Polska S.A.

2 Tikkurila in Poland Key facts 2012 revenue EUR 60.5 million 9% of Group revenue 48% of SBU CEE revenue Personnel 409 employees at year end (2012) Production sites Debica Production capacity 55 million liters per year (~20% of Group total) Szczecin Lodz Warsaw Debica Brands History 1982 Paint export to Poland started 1998 Joint venture established with a local partner 1998 Tikkurila acquires Baltcolor in Szczecin 1999 Alcro-Beckers increases ownership to 95% in Debica 2001 Tikkurila Oy acquires Alcro-Beckers Szczecin factory closed Debica production site and Jedynka brand obtained through the Alcro-Beckers acquisition 2012 Industrial coatings operations were merged into Tikkurila Polska S.A. August 15,

Group total) Szczecin Lodz Warsaw Debica Brands History 1982 Paint export to Poland started 1998 Joint venture established with a local partner 1998 Tikkurila acquires Baltcolor

3 Debica site Production capacity 55 million liters Water-borne and solvent-borne products for consumers, professionals and the industry Resin production for both internal and external use Modern RD&I center August 15,

professionals and the industry Resin production for

4 Country facts on Poland Population 38.4 million Urbanization Urban population :61% of total population Major urban areas: Warsaw (capital) 1.7 million people, Krakow 0.8 million people Age structure Economy Unemployment rate 65 years and over years years years 0-14 years 0% 10% 20% 30% 40% 50% GDP growth in 2012: 2% GDP per capita: $ 20,900 (country comparison: 69) GDP composition by sector: agriculture 4%, industry 34%, services 62% 12.6% Poland's economy was the only one in the EU to avoid recession through the economic downturn GDP per capita significantly below the EU average Source: CIA World Factbook Unemployment exceed the EU average August 15,

per capita: $ 20,900 (country comparison: 69) GDP composition by sector: agriculture 4%, industry 34%, services 62% 12.

5 Polish macro indicators Annual GDP growth rate (%) in Poland and EU area Consumer confidence in Poland F 2014 F GDP growth, Poland GDP growth, EU Construction output in Poland F US$ billion F 2014F 2015F 2016F New construction Renovation CAGR (PLN) 10% CAGR F (PLN) 2% Source: Eurostat, Trading economics, Profound August 15,

in Poland 2007 2016F US$ billion 140 120 100 80 60 40 20 0 2007 2008 2009 2010 2011 2012 2013F 2014F 2015F 2016F New

6 Polish paint market is median in terms of consumption and quality Paint market in Poland Population 38.4 million Decorative paint market Paint consumption Paint market growth EUR 560 million 10 liters per capita (deco + industry) 6% per year in Price level Average liter price 2.3 /l (2012) Current demand structure Economy and medium segments dominating, premium segment expected to grow fastest Private labels are growing in Big Boxes, current market share >5% Competition Almost all major players from east and west present Four biggest paint producers account for almost 80% of the total decorative paint market August 15,

7 Few players dominate the Polish paint market Market shares in decorative paints in Poland in 2012 Current market brand segmentation map 23% 23% 15% 22% PPG Akzo Nobel Sniezka Tikkurila Others 17% Although four biggest paint providers account for almost 80% of the market, there are hundreds of players on the market Source: IBP Research 2012, volume August 15,

Tikkurila Others 17% Although four biggest paint providers account for almost 80% of the

8 Industrial coatings sector is relatively strong in Poland Deco vs. industry split in Poland In 2012, industrial coatings accounted for 26 percent of Tikkurila's revenue in Poland, exceeding clearly the Group average of approximately 15 percent 26% The higher relative share of industrial coatings is explained by Poland's large wood and metal finishing industry 74% The biggest suppliers of industrial coatings in Poland include PPG, Helios, Akzo Nobel, Tikkurila and Teknos-Oliwa Decorative paints Industrial coatings August 15,

the Group average of approximately 15 percent 26% The higher relative share of industrial coatings is explained by Poland's large

9 Share of water-borne products of Tikkurila sales in Poland % % 72% 72% 71% 70% Water-borne paints' relative share of Tikkurila sales has decreased because the relative share of industrial coatings of Tikkurila sales has increased Traditionally, industrial coatings have mainly been solvent-borne due to their purpose of use EU regulations imposed on coatings manufacturers in Poland shift the market towards water-borne coatings August 15,

Traditionally, industrial coatings have mainly been solvent-borne due to their purpose of use 20 0 2008 2009 2010 2011

price varies between 25 and 150 Pln/10 liters 5-10% of the paint is tinted;

10 Ready-made shades are popular in Poland Ready-shades account for 60-65% of the market; transparent pricing White color accounts for 30% of the market; price varies between 25 and 150 Pln/10 liters 5-10% of the paint is tinted; limited personnel resources in customer service (big boxes) August 15,

11 Tikkurila Optiva is allergy classified and ecolabeled in Poland In 2012, the products of Tikkurila's Optiva product range were granted the EU Ecolabel in Poland Approximately ten paints sold in Poland, for instance the Optiva product selection, have been awarded the allergy label Although price is still the decisive factor in the paint purchase decision, sustainability awareness is increasing also in Poland August 15,

the Optiva product selection, have been awarded the allergy label Although price is still the decisive

12 Polish decorative paint market characteristics Water vs. solvent-borne Interior vs. exterior DIY vs. professional 20% 30% 30% 80% 70% 70% Water-borne Solvent-borne Interior paints Exterior paints Do-it-yourself Professional EU regulation of CLP (Classification & Labeling of Packaging) came into force in January CLP regulations have replaced the requirements for classification and labeling of substances, forcing paint producers develop more environmentally sustainable solutions Source: IRL 2013 August 15,

regulation of CLP (Classification & Labeling of Packaging) came into force in January 2009.

13 Big boxes and retail shops are gaining market share Sales structure in volume 5% Distributor 20% 40% Wholesaler Big box Retail shop 27% 8% Directly from producer Source: IBP Research 2012, decorative paints August 15,

Wholesaler Big box Retail shop 27% 8% Directly from

14 Distribution channels of decorative paints 2/3 of Tikkurila deco paint sales Tikkurila, Poland 1/3 of Tikkurila deco paint sales Distributors & Wholesalers is the most important distribution channel in terms of volume Distributors & Wholesalers Big Boxes Consolidation among distributors continues Distributors invest in own shops Contractors Paint shops DIY and professional Big boxes concentrate to big cities and they are gaining market share from the wholesalers August 15,

Wholesalers Big Boxes Consolidation among distributors continues Distributors invest in own shops Contractors Paint shops

15 Tikkurila brand positioning in Poland Premium ~20% of market Medium ~50% of market Economy ~30% of market Traditional distribution Big boxes August 15,

16 Tikkurila brand is valued by architects Spontaneous brand awareness, architects Brands recommended to customers 35% 30% 25% 20% 15% 10% 5% 0% 35% 30% 25% 20% 15% 10% 5% 0% Source: BCMM 2012 August 15,

17 Succesful launch of the new shop concept for the Beckers brand August 15,

18 More effort on training and other services Approx. 800 professionals and shop assistants are trained annually in our Paletti training center in Debica dedicated set of programs for different target groups During high season, approx. 50 outsourced promoters demonstrate Tikkurila brands mainly in big boxes Customer Helpline established in 2004 August 15,

in Debica dedicated set of programs for different target groups During high season, approx.

19 Key market trends Due to low growth, the economy-segment is growing its relative market share in Poland Growth in premium-segment will continue when the GDP growth takes an upward turn Competition is getting tougher Consolidation in distribution continues August 15,

continue when the GDP growth takes an upward turn Competition is

20 Key success factors Strong brands and Scandinavian image Local production New shop concepts Committed personnel August 15,

21 Our near-term focus in Poland Strong presence in the growing Professional segment Marketing investments in our premium brands; new shop concepts and exclusive distribution for selected distributors More emphasis on sustainability, eco-labeling and CSR August 15,

22 Q&A

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