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Tikkurila CEO Says Weakening Ruble Is Risk to Russia Paint Sales

Tikkurila Oyj (TIK1V), the Finnish paintmaker that gets more than a third of its revenue from former Soviet republics, fears a decline in the ruble may hurt sales in Russia, Chief Executive Officer Erkki Jaervinen said.

“Devaluation of the ruble is the first thing to show up in everyone’s life there,” Jaervinen said in a phone interview today. “Purchasing power has declined and the regular citizens’ opportunities to buy Western goods have weakened.”

The ruble has dropped about 10 percent against the euro this year as markets have reacted to the conflict between Russia and Ukraine. European Union leaders meet today to discuss possible economic sanctions on Russia. Vantaa-based Tikkurila, founded more than 150 years ago, has focused on becoming the top decorative-paint supplier in Finland, Sweden and Baltic countries as well as Russia, a strategy that has increased its operating profit each year since its 2009 spinoff from Kemira Oyj. (KRA1V)

“All operational disturbances would be among the worst scenarios, including paralyzed goods traffic or production halts,” Jaervinen said. “Our operations are heavily dependent on seasons. Summer is the most important one -- we’d hope the situation would be resolved before.”

Paint Consumption

Russia is still attractive for Tikkurila and Russian paint sales have so far continued “at a normal level,” the CEO said.

The company, which entered Russia in the 1970s, sees growth opportunities in the region where paint consumption per capita is about 60 percent lower than in the Nordic countries.

Tikkurila has local production facilities in Russia and that reduces the negative impact from a declining ruble, the CEO said. The capacity of the Russian plants is currently “sufficient” and there are no plans for major investments in the country, according to Jaervinen.

The company has a target of 1 billion euros ($1.4 billion) in revenue by 2018, which compares with 653 million euros last year. The goal “probably requires” acquisitions or joint ventures, the CEO said.

“Targets probably won’t be huge and our financing needs will be moderate,” Jaervinen said.

To contact the reporter on this story: Kasper Viita in Helsinki at kviita1@bloomberg.net

To contact the editors responsible for this story: Kati Pohjanpalo at kpohjanpalo@bloomberg.net; Christian Wienberg at cwienberg@bloomberg.net

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