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Tikkurila Finds Russia Bright Spot as Paint Skirts Slowdown

May 8 (Bloomberg) -- Tikkurila Oyj said it will increase investment in sales and marketing of its paint brands in Russia after first-quarter sales volumes in the nation grew, shrugging off a wider slowdown ignited by the crisis in Ukraine.

The Finnish maker of Teks and Vivacolor paint pushed through price increases in Russia and benefited from the early arrival of spring in Europe, it said today. Shares of the Vantaa, Finland-based company climbed as much as 8.7 percent, the most in 2 1/2 years, after first-quarter sales rose 2.2 percent to 141.5 million euros ($197 million), beating analyst estimates of 133.3 million euros.

“Despite the crisis, our sales volumes grew,” Chief Executive Officer Erkki Jaervinen said. “Our year got off to a good start. We achieved a strong result in the challenging market situation.”

Jaervinen has streamlined Tikkurila’s operations to lower costs. Producing paint in bigger batches has helped, as have efforts to reduce raw-material expenses, he said in an interview today.

The shares traded 5.6 percent higher at 18.45 euros as of 4:24 p.m. in Helsinki.

Local Manufacturing

Manufacturing the bulk of its paint sold in Russia locally helped lessen the impact of the weakening ruble. Tikkurila also indicated there are signs of improvement in its other key markets spanning Sweden, Poland and the Baltic region.

One priority is to push growth in operations outside of Russia, where Tikkurila is the No. 1 paint supplier with about 18 percent of the market. Competition in the middle market, where the Teks brand belongs, has become fiercer, Jaervinen said. An example is a small, top-end paint operation in China that’s gaining traction and where margins are healthy, he said.

To further diversify, Tikkurila is also looking into products and materials that are adjacent to paint and share the same customer base of homeowners and professional painters, the CEO said, declining to give details. That would require new technology, though not necessarily acquiring a company, and announcements may follow in the short term, the CEO said.

To contact the reporter on this story: Andrew Noel in London at anoel@bloomberg.net

To contact the editors responsible for this story: Simon Thiel at sthiel1@bloomberg.net Kati Pohjanpalo, Robert Valpuesta

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