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Annual Review 2013
family
company &
INDUSTRIAL
OWNER
“A year of mergers
and acquisitions”
Contents
Oras Invest in brief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Oras Invest year 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Message from the CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Oras Invest story . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Megatrends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Oras Invest strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Oras & Hansa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Portfolio companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Oras Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Uponor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Tikkurila . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Kemira . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Long-term objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Summary of Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 25
Parent company income statement . . . . . . . . . . . . . . . . . . . 26
Parent company balance sheet . . . . . . . . . . . . . . . . . . . . . . . 27
Parent company cash flow statement . . . . . . . . . . . . . . . . . 28
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Graphic design and layout Kreab Gavin Anderson Photos Mika Malo Art work in the pictures Erkki Paasikivi, from the book Metalli ja vesi (1988),
original photos by Pentti M. Valmunen A.R.P.S Print work Erweko, Helsinki 2014
Oras Invest Ltd’s Annual Review and full Financial Report 2013 are available in
PDF-format in English and Finnish on the company website orasinvest.fi
Oras Invest in brief
Oras Invest
in brief
Oras Invest is a family-owned company with almost 70 years of
industrial entrepreneurship tradition. Its current industrial holdings
are Oras Group, Uponor, Kemira and Tikkurila. At the end of 2013
the net asset value of Oras Invest totaled EUR 776 million.
Oras Invest holdings
Oras Group
100%
Uponor
23%
Tikkurila
Kemira
18%
18%
Since 1945
Since 1999
Since 2010
Since 2007
Aggregate key figures 2013
NET SALES
EUR
3.9
billion
EMPLOYEES
13,443
average number
OPERATING IN
40
countries
Annual Review 2013 1
Oras Invest year 2013
Year 2013 in a
nutshell
The 100% family-owned faucet company Oras Group
doubled its size by acquiring Hansa.
The net asset value of Oras Invest grew by
20% to 776 million euro, while our debt compared to the
market value of investments was 16%.
The aggregate revenue of our companies was 3.9 billion, and
they employed 13,443 people in 40 countries.
2
Creating wealth to the society
The aggregate contributions of our holdings in 2013
Revenue from customers
EUR 3,984 million
SU
IER
PPL
S OF R
AW MATERIALS, GOODS &
SE R
VIC
ES
EUR 2,904 million
EMPLOYEES
EUR 581 million
EUR 147 million
EUR 44 million
SOCIETY
BANKS
Dividends
EUR 148 million
to 66,874 shareholders
Oras Invest key figures 2013
2013
Net profit, EUR
Shareholders’ equity, EUR
Balance sheet total, EUR
Equity-to-assets ratio
Gearing
Net asset value (NAV)*, EUR
Total shareholder return (TSR)
Debts-to-investments at market value -ratio
27.4 million
485.0 million
635.6 million
76%
30%
776 million
26%
16%
2012
28.1 million
459.1 million
639.8 million
72%
37%
617 million
49%
22%
*NAV= Market value of Uponor, Tikkurila and Kemira on December 31, 2013
(Oras Group + Hansa proforma) EBITDA × 8 – net debt
Annual Review 2013 3
Message from the CEO
A year of mergers &
acquisitions
I
n 2013, the markets remained volatile, experiencing major
fluctuations even at monthly level. Whereas the markets
were buoyant in the summer months, there was a return
to reality as Christmas approached. As in the previous
year, Q4 was disappointing. Planning for the future was
hampered by zero visibility and low or zero predictability in
the markets. While the markets provided little excitement, a
hands-on approach was required within our companies. Years
of streamlining finally paid off, in the form of growth-oriented
activity.
Our portfolio of owned companies has grown into an
optimal balance between our two core industries, water and
building, even if the roots of our family company lie in the
faucet business. Oras Group had an exciting year, doubling in
size with the acquisition of Hansa. Uponor – the plumbing and
indoor climate solutions provider – grew through a merger
as the joint venture with KWH Pipe began operations in July.
Kemira – the global water chemicals company – has been busy
with both, strategic acquisitions and divestments. For Tikkurila
– the decorative paints company – last year was more or less
business as usual.
Solid performance
As our family company approaches 70 years of age, it is worth
looking back on what we have achieved as an industrial owner.
We are currently preparing a book on our history, which we
will publish next year. Our focus has always been on building
companies with healthy balance sheets, a steady positive
cash flow and sustainable profitability. Shifting the focus to
growth can only succeed once a solid foundation has been
laid. Last year showed that our companies are capable of stable
growth without risking their profitability. The effort invested
by our management teams in recent years, in streamlining
4
and trimming our organizations, is now paying off. Lately, our
companies have made a clear switch to investment mode.
In general, all of our companies endured the economic
uncertainty of 2013 fairly well. However, the fight for market
share is only intensifying in markets that have continued to
suffer from low or zero growth. The European building market
remains weak and demand is being hampered by caution
among consumers. On a more positive note, expansion in the
US markets is driving growth; Uponor and Kemira were able to
benefit from the lively US market in 2013.
Oras Group has renewed itself last year due to the
acquisition of Hansa (more on p. 15). The key figures include
Hansa’s Q4 financial results. The Group’s revenue totaled
156.7 million euro in comparison with the previous year’s 131.1
million euro. The EBIT margin declined to 5.6% (13.1%), due to
one-time costs and asset amortizations related to the Hansa
acquisition. Gearing rose to 53.4% (15.2%) due to acquisition
loans. Coordinated and decisive steps are being taken towards
full integration of the new Oras Group, with the goal of creating
one unified company with two strong and highly recognized
brands: Oras and Hansa. The Oras Group is on its way to
becoming a major European player in the sanitary fittings
industry.
Uponor had a busy year integrating the merged infrastructure business. Revenue grew to 906.0 (811.5) million euro
(including the H2 financial results of KWH Pipe). Uponor’s EBIT
margin came to 5.5% (7.1%) while gearing fell to 33.7% (45.4%). A
new company, Uponor Infra, was created from the joint venture,
with ownership divided between Uponor at 55.3% and KWH
Group at 44.7%.
Kemira recorded revenue of 2,229 million euro (2,241) in
2013. Its operative EBIT margin increased to 7.4% (6.9%), driven
by higher sales volumes and fixed cost savings related to
Lately, our
companies have
made a clear switch
to investment mode.
President and CEO,
Jari Paasikivi
the “Fit for Growth” restructuring program. Despite its decline
in revenue, Kemira reported an increase in organic growth.
Kemira’s gearing is steadily reducing, falling to 40.6% (42.2%)
at the year-end. Wolfgang Büchele announced his departure
as CEO, effective from the beginning of May 2014. Importantly
from our perspective, continuity has been ensured by
Wolfgang’s commitment to continue developing Kemira, as a
member of the Board of Directors. Kemira’s Board of Directors
appointed Jari Rosendal, 48, M. Sc. (Eng.) as Kemira Oyj’s
President and Chief Executive Officer as of May 1, 2014.
Tikkurila recorded a solid result after the previous year’s
record-breaking figures. Despite a decline in revenue, the
company managed to maintain its healthy profitability.
Tikkurila’s revenue totaled 653.0 million euro (670.4) and its
EBIT margin was 11.1% (11.0%). Due to strong cash flow, gearing
almost halved to 23.4% (40.6%).
Oras Invest recorded a solid performance in 2013. Profit for
the reporting period was 27.4 (28.1) million euro. Our net asset
value grew by 20% to 776 million euro (617) and the total shareholder return was 26% (49%). Our incoming divided stream
from 2013 will be approximately 32 (32) million euro, which is in
line with our expectations. We have further strengthened the
balance sheet in accordance with our strategy. Oras Invest’s
equity-to-assets ratio improved to 76% (72%) and gearing
reduced to 30% (37%).
Continuous development of our business model
We expect demand to remain flat in most of our main markets
in 2014. In addition, the political tensions between Russia
and Ukraine will make the markets more nervous. However,
revenue growth remains the number one focus in all of our
companies. In mature markets, top line growth can only be
achieved by gaining market share. As an industrial owner, one
of our key responsibilities is to ensure that our companies’
personnel is sufficiently competent in the face of intensifying
global competition. The talent and expertise found within our
companies must be continuously improved. Growth opportunities are created by people working towards common goals.
Such goals should consist of an improved offering and better
value propositions for existing and new customers. Strategic
acquisitions, technological innovation, world-class R&D and
investment in new production technologies are some of the
key performance indicators of future success. We continue
our persistent work in support of the healthy and sustainable
growth of our companies.
I would like to express my warm thanks to each and every one
of the 13,443 people working with our companies worldwide
for making 2013 a success. In addition, I would like to thank all
of our board members for their support and foresight, and all of
our partners for their trust.
March, 2014
Jari Paasikivi
Annual Review 2013 5
Oras Invest story
Our story
– the makings of an
Industrial Owner
The pioneer entrepreneur
Our family business originated in 1945 in the small town of
Rauma, on the West coast of Finland. The founders – Erkki and
Irja Paasikivi and Kosti Oras – set up a small metal workshop in
Irja’s fathers’ basement, right after the end of the Second World
War. The company was named after Irja’s father, who helped out
by financing the initial stages.
By the 1950’s, serial production was well under way – Erkki
had managed to acquire a batch of surplus grenade shells
from Ammus Oy. These were processed into radiator pipe
connectors, establishing the combination of metal and water
that became a hallmark of the company. The era between the
1950’s and 1970’s marked not only the growth of Oras, but also
Finland’s growth as it rose from the ruins of the war.
By the end of the 1970’s, Oras was already well known as
the manufacturer of the single-lever faucet. As a respected
employer, it had brought a new industry to its local area and
showed true entrepreneurial spirit. The first steps towards
internationalization had been taken, not only in the form of
exports, but more significantly by importing know-how and
competence. With the help of a German partner, Erkki Paasikivi
built Oras’ s first foundry from scratch.
The growth, internationalization and acquisitions
The 1980’s saw Oras expand and grow into the Nordic market
leader and one of the largest faucet manufacturers in Europe.
Together with the management, the owners developed a
clear business idea for the company. Alongside innovative
6
products, steady revenue growth and expansion into new
markets ensured profitability and provided a solid platform for
strategic acquisitions. Oras first acquired a faucet manufacturer
in Germany, then its largest national competitor, followed by a
Norwegian rival.
In 1995, Oras announced an ambitious growth-strategy,
“Vision 2005”. The company intended to conquer the European
markets and triple its revenue. Steps in this direction were taken
based on advances in R&D, as Oras became the first European
faucet manufacturer to introduce an electronic faucet. The
company’s name and trademark had developed into a widely
recognized and valued brand, associated with durability,
innovation and attractive design. A further acquisition was
made in Poland. The Vision, however, proved too complex to
implement and the owners stepped back and took a broader
look at the industry. At the same time, Fortum Oyj, the newly
established energy giant, was seeking a new Finnish owner for
its plastic pipe business.
Industrial Owner
Oras became the largest owner of Uponor in 1999, heralding
the beginning of its era of industrial ownership. Pekka Paasikivi
became Chairman of the Board of Uponor, introducing
business-idea based thinking and a single-brand strategy.
The owner’s approach was active and its commitment visible.
Uponor’s shares had been purchased at a favorable time and
the share price had consistently gained value, with the steadily
growing dividend stream peaking in 2006. At the same time,
Close to 70 years of industrial experience
Oras Invest era
Family business &
Industrial owner
Oras Ltd era
Kemira Tikkurila
Uponor
Net asset value
Family business
B U S I N E S S
New
Oras Group
I D E A S
Acquisitions
Entrepreneur
Management
group
Generation 1
1945
1960
Generation 2
1970
1980
1990
Generation 3
2000
2010
2012
2013
2014
Today, Oras
Invest continues
to be an active and
committed
long‑term owner.
the owners of Oras decided to organize the
two industrial companies under a single
holding unit.
Oras Invest was established to manage
the family’s assets. From the outset, Oras
Invest had a clear strategy: to become the
largest owner of its publicly listed companies
and a majority owner in its privately owned
companies, based on a long-term commitment. At this point,
the family’s third generation owners became active through
board memberships.
By 2007, Oras Invest had become a household name
in the HVAC and building material industries. The owners
were ready to expand into a new industry. Following a
comprehensive investigation, Kemira was identified as an
interesting investment opportunity. Its involvement in global
water chemistry and its subsidiary Tikkurila were among the
decisive factors. Kemira’s main owner at the time, the Finnish
State, was prepared to reduce its ownership sufficiently to
allow Oras Invest to become the largest owner. Oras Invest
saw a consolidation opportunity in Kemira and purchased the
shares offered by the State. Operating
in the water industry and making one
quarter of its revenue in the building
industry made Kemira a strategic fit
with Oras Invest’s industrial portfolio.
Soon after becoming Kemira’s largest
owner, Oras Invest in accordance with
the original plan added a fourth arm to
its portfolio, when Tikkurila was spun off by Kemira, to form an
independent publicly listed company. In 2013, the new Oras
Group was created by Oras acquiring Hansa. The acquisition
doubled the size of the company in terms of revenue and
personnel.
Today, Oras Invest continues to be an active and committed
long-term owner of Oras Group, Uponor, Kemira and Tikkurila.
Each step along our almost 70-year history has contributed to
our understanding and expertise, while allowing us to take on
new challenges. We have been able to take the long view and
grow steadily into a significant contributor of value to society.
Throughout its history, Oras Invest has remained under 100%
family ownership. Annual Review 2013 7
Oras Invest
mission
Oras Invest focuses its ownership in
industrial companies, in which it has
a substantial understanding of the
industry, business characteristics
and development potential.
We develop our companies through
active Board work and close
cooperation with the management. The
aim is to create long-term sustainable
value growth.
8
Megatrends
Megatrends
present an
opportunity
Industrial investments have a long-term impact. A committed
owner must be able to form an idea of where the world is
going in the midst of short-term, often opaque prospects.
I
dentifying megatrends is important. Long-term tendencies
impact our industries, opening up opportunities and
challenges. They provide the framework for long-term
value creation.
Oras Invest currently owns stakes in companies that
provide building and water treatment solutions. Oras Group,
Uponor, Kemira and Tikkurila – they all have the ability to offer
sustainable products and solutions to serve the needs of a
dynamic world.
Environmental regulations are becoming stricter, clean
water is becoming more scarce, the world’s population is
increasing in size, the populations of developed nations are
ageing, urbanization is picking up pace, and fast-developing
countries are building up their infrastructures. The translation of
the requirements related to these long-term trends into future
opportunities for our companies is a key theme of our active
ownership work. Annual Review 2013 9
Strategy
An active owner’s
strategy
Committed ownership, long-term development and value
growth are permanent factors of our strategy. We look beyond
economic trends and work in close cooperation with the
other owners, management and all interest groups.
O
ur family business background has had a strong
influence in defining the nature and objectives
of our company as an industrial owner. We have
built a long-term commitment to our companies
and want to develop them in a determined
manner. Our strategy is guided by constant value creation
throughout economic fluctuations, and when necessary, bold
moves and preparation for challenging times.
To us, active industrial ownership is long-term development
of the companies we own. This also means continuous
dialogue with the other owners of our companies and our
closest stakeholders. We direct our earned dividends either on
further investments in our current and new companies, or on
strengthening our balance sheet.
We strive towards value growth, which requires active
work by the Boards, and constructive cooperation with the
management of our companies. It is necessary – not to
mention beneficial to all shareholders and interest groups – for
our Boards to have the ability to create a clear image of a
company’s business idea, strategies, management, and risks.
10
Basic business principles and continuous renewal
SUSTAINABLE GROWTH
BUSINESS
COMPETENCE
PROFITABILITY
FOUNDATION
In the case of listed companies, it is our
goal to be the largest shareholder, while in
the case of unlisted companies we aim for
majority ownership.
We comply with good corporate
governance. As an industrial owner, we are
in a decision-making position and exert
influence in general meetings of shareholders, Boards of Directors and committees.
We participate in ensuring that the capital
structures of our companies remain healthy,
giving them strength for development and
renewal, and for building a sustainable
future.
In order to generate continuity in our industrial ownership,
we monitor the signals regarding the outlook of our industrial
sectors and fluctuations in the economy and the financial
markets. We assess the development opportunities and value
creation abilities of our companies, while also evaluating their
management’s competences. In the case of
listed companies,
it is our goal to
be the largest
shareholder, while
in other cases
we aim for a
majority holding.
Annual Review 2013 11
Oras Invest
vision
We aspire to be the most
sought-after owner for
industrial companies.
The companies under our
ownership are the best
long-term performers in
their industries. These
companies also attract the
most competent people and a
committed owner base.
12
Values
Taking the
long view, with
sustainable values
Good ownership is a value and
way of life understood by Oras
Invest. It requires an honest, open
and responsible approach, respect
for work, and fair play. As an active
industrial owner, we look beyond
economic fluctuations.
Vitality, commitment and
endurance form the basis for Oras
Invest’s continuous, long-term
value creation. We ensure that the
companies we own are proactive
and able to renew themselves. Our
commitment to their long-term
development is tangible. We put our
competence and experience at our
companies’ disposal.
We take responsibility for
ensuring that our companies have
solid ownership structures, as well as
great Boards of Directors and CEOs.
These are the basic prerequisites for
solid value creation and constant
improvement. A company will only
be able to fulfil its social responsibility if it operates profitably on a
solid base and creates value.
Oras Invest values
OWNERSHIP
“…is an intrinsic value and a way of life.
Ownership cannot be claimed without an
honest, open and responsible approach;
respect for work and fair play. ”
VITALITY
ENDURANCE
COMMITMENT
Annual Review 2013 13
Oras & Hansa
www.oras.com
www.hansa.com
In September 2013,
Oras announced an
acquisition through
which Hansa Metallwerke
AG and its subsidiaries
would join Oras
Group. From 1 October
onwards, the new Oras
Group became a major
European player in the
sanitary fittings industry,
occupying a strategic
position in several
European markets.
14
Oras & Hansa:
one company,
two brands,
full integration!
O
The creation of the
new Oras Group
doubled the size
of the company.
ras had announced as long
ago as 2009 that it was
seeking growth through
acquisitions – it was only a
matter of finding the right
target. When Hansa Group was put on the
market by its owners in 2010, Oras gave the
idea serious consideration. Three years later and in much better
condition, Hansa fullfilled the prerequisites set by Oras. In a
deal serving the interests of both the seller’s and Oras, Hansa
Metallwerke AG found a home as a member of the new Oras
Group. The acquisition brought together two complementary
companies with a clear strategic fit.
The histories of Oras and Hansa are entwined – in retrospect,
it might be said that the two were meant to be together. Before
joining forces, both companies had a history of manufacturing
high-quality products, owning respected brands and remaining
competitive by maintaining strong market positions in
complementary markets. Oras had an established leadership
position in the Nordic markets and Hansa was a leading brand
in Continental Europe. The creation of the new Oras Group
doubled the size of the company.
Integration of Oras and Hansa began as soon as the
transaction was closed. Since October 2013, decisive steps have
been taken towards the ultimate goal of one company with
two strong brands. Investigating, analyzing and understanding
the stand-alone status quo at Oras and Hansa marked the
beginning of the integration process.
Ways of working, the potential synergy
benefits and future development areas
were revealed. Over 50 professionals in
the faucet business worked tirelessly
to identify the best practices in both
companies. Based on this, the operational teams proposed action plans for the integration. The
first 100 days of integration planning confirmed the potency
of the original acquisition rationale. This had been based on
combining two brands with the ability to achieve market
positions and to gain synergies in sales, operations and product
portfolios that would have been unthinkable alone.
Oras Group now has annual net sales amounting to a
quarter of a billion euro, organizations in twenty countries
and 1,400 employees. The new group has benefited from clear
synergies in distribution channel expansion, in the utilization
of complementary product portfolios and in operational
economies of scale. Although the speed of implementation
varies across functions, the key integration is occurring
within the company culture. For Oras Group to succeed, the
management must steer the company in a unified, consistent
manner and all personnel must work towards common goals in
line with shared values.
Oras Group’s two most valuable assets are its brands: the red
hot Oras and the cool blue Hansa – reflecting the color coding
for temperature control throughout the history of faucets! Annual Review 2013 15
Portfolio companies
www.oras.com
www.hansa.com
Oras Group – from a
Nordic leader to
a major European
faucet provider
Oras Invest’s
ownership
100%
Since 1945
O
ras Group is a significant European provider of
sanitary fittings: the market leader in the Nordics
and a leading company in Continental Europe.
On 30 September 2013 Oras acquired Hansa
Metallwerke AG, a German faucet manufacturer,
with its subsidiaries, and together the companies form the new
Oras Group. Through this acquisition Oras Group became
a true European player in the industry, with a strategic position
in several European markets and with the economies of scale
needed to succeed in the increasingly tough competition.
Overview of 2013
Net sales for Oras Group totalled EUR 156.7 million (EUR
131.1 million). The operating profit of the company was EUR
8.8 million, or 5.6% of net sales (EUR 17.2 million and 13.1%).
Despite a declining total market, Oras Group achieved
growth in electronics and smart faucets. This meant growth
in the strategically most important product groups, which
strengthened the strategic position of the company. The
development was especially positive in Norway and Sweden.
16
facts&figures
2013 marked a significant milestone in the history of the
company for two reasons. Firstly, during the year Oras made a
significant product development effort and launched a new
product family Oras Optima, which represents the first wave of
a new standard in sanitary fittings. The product family features
smart, user friendly, water and energy saving solutions that
build on the distinctive capabilities of Oras Group. The initial
response from the market is extremely positive.
Secondly, the company doubled its size through the
­acquisition of Hansa Metallwerke AG, a German faucet
manufacturer, and its subsidiaries. Together the companies now
form the new Oras Group, as of 30 September, 2013.
Net sales
EUR 156.7 million
During the last quarter of 2013 a significant effort was made
by some fifty managers in the Group who participated in the
work of Oras Group integration workflow teams. Over the
course of three months the ways of working at both companies
were analyzed and best practices were identified.
Future outlook
No growth is expected in the main markets. There are some
signs of improvement in the European economy, but the
positive impact is likely to be seen with a lengthy delay on the
market of sanitary fittings. During the prolonged economic
crisis the market has become increasingly fragmented and
new distribution channels, brands and operation models have
emerged in the European market.
Through the integration of Oras and Hansa, Oras Group
takes a leap from Nordic market leadership towards a position
as a major European faucet provider and considerably
strengthens its position in Continental Europe. Both Oras and
Hansa brands will be further strengthened through careful
implementation of market specific strategies. Development of Oras Group’s
turnover 2009–2013
EUR million
140
120
100
80
60
40
20
0
09
10
11
12
13
Oras Group in brief
Net sales: EUR 156.7 million
Operating profit excl. non-recurring items:
EUR 16.3 million
Personnel end of the period: 1,400
Chairman: Jari Paasikivi
CEO: Pekka Kuusniemi
Oras Group (pro forma 2013)
Net sales: EUR 252.7 million
Operating profit: EUR 22.1 million
Annual Review 2013 17
Portfolio companies
www.uponor.com
Uponor –
an international provider
of HVAC, building services
and infrastructure
technology
U
ponor is one of the leading providers of indoor
climate and plumbing systems for buildings and
the utility infrastructures, and its products are
sold in approximately 100 countries. The Group’s
business is divided into three segments: Building
Solutions – Europe, Building Solutions – North America, and
Uponor Infra.
Overview of 2013
Oras Invest’s
ownership
23%
Since 1999
18
The year 2013 was featured by the establishment of Uponor Infra
Ltd, a new subsidiary company to Uponor, owned jointly by
Uponor Corporation (55.3%) and KWH Group (44.7%). It began
operating on 1 July 2013, thus merging Uponor’s Infrastructure
Solutions and KWH Pipe’s infrastructure businesses into one
company.
A key investment in 2013 was the expansion of manufacturing capacity in the Apple Valley factory in the U.S., increasing
manufacturing capacity by some 15%. Major investment funds
were also allocated into the manufacturing of the new seamless
aluminium composite pipe and other new technologies within
Building Solutions – Europe.
The European building and construction markets remained
challenging throughout most of 2013, influencing both the
building solutions and infrastructure solutions businesses. In
North America, the business environment remained healthy
throughout the year, boosting new housing development in
the region.
Uponor’s 2013 net sales from continuing operations
amounted to EUR 906.0 million, up 11.6% year on year. In
comparable terms, net sales went down by –1.5%.
Building Solutions – Europe had unsatisfactory net sales
development, reflecting the challenging market conditions in
the continent. The reasonably strong development in the third
quarter of 2013 weakened in the final quarter, and the situation
was adversely affected by the product approval cancellation in
France in the fourth quarter.
Positive progress was recorded in Building Solutions – North
America throughout 2013, and record numbers were reached
both in terms of sales and production. Uponor Infra’s net sales
grew as a result of the establishment of the new joint-venture
business.
The largest countries, in terms of net sales, and their
respective share of consolidated net sales, were as follows:
Germany 15.9%, USA 15.8%, Finland 13.8%, Sweden 9.5%, and
Canada 6.1%.
Consolidated operating profit came to EUR 50.2 million,
down –13.0% from the previous year. The operating profit
margin came to 5.5% of net sales, down from 7.1%. Operating
Net sales
EUR 906.0 million
profit development was primarily driven by the Uponor Infra
integration and transaction-related costs and the impact of the
French product approval case.
Outlook
The economic outlook in Uponor’s key markets is twofold for
2014: North America – the U.S., in particular – is expected to
stay lively and offer room for reasonable construction industry
growth. The European markets, however, are expected to
develop in a rather steady manner, but offering no real growth
in the building solutions or in the infrastructure solutions
markets. The development will continue to be fragile, and there
is a risk that short-term variances to the general trend may take
place.
Uponor will continue to promote its value-adding
sustainable solutions, which have a tailwind of significant global
megatrends. Uponor has kept on renewing its offering portfolio
over the last few years and expects the new products and
systems solutions to offer possibilities for increased sales and
profitability.
The management continues to keep a sharp eye on the
company’s focus, cost-efficiency, and cash flow, in order to
secure a solid financial position in the longer term, while
simultaneously being alert for new business opportunities. If
the outlook remains weak, further action to cut overheads and
other costs may become necessary in selected markets.
The Group’s net sales and operating profit (excluding any
non-recurring items) are expected to improve from 2013. facts&figures
Largest shareholders 31 Dec 2013
22.6%
7.1%
62.3%
4.0%
1.7%
1.3%
1.1%
Oras Invest Oy 22.6%
Varma Mutual Pension Insurance Company 7.1%
■ Nordea Nordic Small Cap Fund 4.0%
■ Nordea Nordenfonden 1.7%
■ Ilmarinen Mutual Pension Insurance Company 1.3%
■ Sigrid Jusélius Foundation 1.1%
■Others 62.3%
■
■
Uponor in brief
Net sales: EUR 906.0 million
Operating profit: EUR 50.2 million
Average number of personnel: 3,649
Managing director: Jyri Luomakoski
Chairman of the Board: Jari Paasikivi
Oras Invest Ltd’s holding
in Uponor Ltd
Since 1999
Proportion of share capital: 22.6%
Proportion of voting rights: 22.6%
Market value of ownership: EUR 235.7 million
Annual Review 2013 19
Portfolio companies
www.tikkurilagroup.com
Tikkurila has offered
sustainable
beauty since 1862
T
Oras Invest’s
ownership
18%
Since 2010
ikkurila offers a broad range of paints for consumers
and professionals for surface protection and
decoration. The product offering includes, among
others, interior paints, lacquers, and effect products,
exterior products for wood, masonry, and metal
surfaces, as well as a broad range of paint-related services.
Tikkurila’s brands are among the best-known paint brands
within their operating areas.
Tikkurila is a strong regional player which focuses on the
Nordic countries and Eastern Europe. The most important
markets are Russia, Sweden, Finland, and Poland, which account
for approximately 80% of the Group’s revenue. Tikkurila is the
market leader in decorative paints in Russia, Sweden, Finland,
and the Baltic countries. Tikkurila relies on strong brands and
sustainable products which support the life cycle philosophy.
A strong quality image and market leadership are the company’s
key competitive advantages.
Tikkurila has production in eight countries. The highest
production capacity is located in Russia, which is the largest
single market of Tikkurila.
Overview of 2013
In 2013, demand for paint continued to be fairly weak, which
manifested as lower sales volumes in all Tikkurila’s main
markets. The decrease in sales was due to the uncertain
economic situation, decline in construction, slower home sales,
20
and cautious spending by consumers. Economic growth in
Tikkurila’s key markets was fairly weak, estimated at less than
one percent. Furthermore, weakened currencies reduced the
euro-denominated revenue. On the other hand, the favorable
development of the sales mix and price increases implemented
in certain markets had a positive impact on revenue which in
total was slightly lower than the level of the comparison period.
In 2013, operative profitability was at the same, excellent
level than in the comparison period. Profitability was supported,
in particular, by the restructuring measures in recent years,
streamlining of operations and the expense level which was
lower than in the comparison period. Marketing investments
were slightly higher than in the comparison period, accounting
14% of revenue. The operating profit margin, which was
Net sales
EUR 653.0 million
11% at the Group level, improved clearly in all reporting
segments, with the exception of Russia driven SBU East where
the result was burdened by decreased revenue, a higher
expense level and weaker currencies.
Future Outlook
The economic situation in Europe is expected to improve
moderately in 2014. Considerable regional differences are
forecasted between Tikkurila’s different markets in private
consumption and construction volumes in 2014, but overall
growth is estimated to remain rather weak. The GDPs in
Tikkurila’s key markets, i.e. Russia, Sweden, Finland, and Poland,
are expected to grow approximately two percent, on average,
in 2014. Based on these estimates, no considerable change is
expected in the demand for Tikkurila’s products compared
to last year. Cost inflation is expected to continue, and
investments in sales, marketing and innovation activities are
forecasted to increase the fixed cost level. Raw material prices
are forecasted to remain stable. Tikkurila expects its revenue
and EBIT excluding non-recurring items for the financial year
2014 to remain at the 2013 level. facts&figures
Distribution of the largest shareholders in Tikkurila at year-end
2013
18.1%
9.1%
5.6%
63.6%
3.6%
Oras Invest Oy 18.1%
Ilmarinen Mutual Pension Insurance Company 9.1%
■ Varma Mutual Pension Insurance Company 5.6%
■ Mandatum Life Insurance Company Ltd. 3.6%
■Other 63.6%
■
■
Tikkurila in brief
Net sales: EUR 653.0 million
Operating profit excl. non-recurring items:
EUR 72.6 million
Average number of personnel: 3,262
Chairman: Jari Paasikivi
CEO: Erkki Järvinen
Oras Invest Ltd’s holding
in Tikkurila
Since 2010
Share of share capital: 18.1%
Share of voting rights: 18.1%
Market value of ownership: EUR 158.6 million
Annual Review 2013 21
Portfolio companies
www.kemira.com
www.waterfootprintkemira.com
Delivering a
profitable water
pure-play
K
emira is a global chemicals company serving
customers in water-intensive industries. We
provide expertise and chemicals that improve
our customers’ water, energy and raw material
efficiency. Our focus is on pulp & paper, oil &
gas, mining and water treatment. In 2012, Kemira had annual
revenue of EUR 2.2 billion and around 4,900 employees. Kemira
shares are listed on the NASDAQ OMX Helsinki Ltd.
Overview of 2013
Oras Invest’s
ownership
18%
Since 2007
22
Kemira accomplished significant changes to transform the
company to become a profitable water pure-play. Kemira
presented its sharpened strategy in April, making choices
regarding the role of its businesses, geographical reach,
growth and innovation. Kemira has a unique strategy offering
chemicals to its customers in businesses related to water
quality and quantity management.
Kemira divested several of its non-core businesses: the
shares in the Sachtleben joint venture, ChemSolutions formic
acid business and coagulant business in Brazil. On the other
hand, the acquisition of 3F strengthened our position in
the water quality and quantity markets. Towards the end of
2013, Kemira strengthened its asset footprint by finalizing the
Nanjing factory investment in China, and Dormagen factory in
Germany. These investments strengthen Kemira’s position in
the Chinese paper markets, and sustain the leadership position
in the municipal and industrial water treatment market in EMEA.
In 2012, Kemira set a target of achieving EUR 60 million cost
savings through the restructuring program “Fit for Growth”
by the end of 2014. The program is progressing as planned
and nearly reached the full cost savings run rate at the end
of 2013. “Fit for Growth” measures have significantly reduced
complexity and strengthened Kemira’s balance sheet. Kemira
also continued to implement Lean manufacturing that is
driving for continuous efficiency improvement and increased
competitiveness through leaner processes and reduced costs.
Furthermore, the optimization of Kemira’s manufacturing
network resulted in 18 site and 2 production plant closures or
divestments during the year.
Kemira’s organic revenue growth was 3%, driven by higher
sales volumes in the Paper segment. In the Oil & Mining,
revenue in local currencies remained flat as recovered sales
volumes, especially in North America were offset by continued
market softness especially related to chemicals used in the
mining industry. The revenue of Municipal & Industrial was
partly impacted by the implementation of a new business
model, expected to improve segment’s profitability. Kemira’s
Net sales
EUR 2,229.1 million
operative EBIT increased 6% driven by higher sales volumes and
fixed costs savings related to the “Fit for Growth” restructuring
program. Kemira’s operative ROCE improved significantly to
11.9% (10.0%) during the year. In addition, Kemira generated over
EUR 200 million of cash flow from the operative activities and
reduced the net debt by some 15% to EUR 456 million (532).
Future outlook
Kemira will continue to focus on improving its profitability
and reinforcing the positive cash flow. The company will also
continue to invest in order to secure future growth in the water
quality and quantity management.
In 2014, Kemira expects the revenue in local currencies and
excluding acquisitions and divestments to be slightly higher
than in 2013 and the operative EBIT to be higher than in 2013. KEMIRA GUIDANCE
DEFINITION
Slightly higher/lower
from 0% to 5% or from 0% to –5%
Higher/lower
from 5% to 15% or from –5% to –15%
Significantly higher/lower
more than 15% or less than –15%
facts&figures
Distribution of the largest shareholders in Kemira at year-end 2013
18.2%
16.7%
54.4%
2.1%
6.1%
2.5%
Oras Invest Ltd 18.2%
Solidium Oy 16.7%
■ Varma Mutual Pension Insurance Company 6.1%
■ Ilmarinen Mutual Pension Insurance Company 2.5%
■ Kemira Oyj 2.1%
■Others 54.4%
■
■
Kemira in brief
Net sales: 2,229.1
Operating profit: 164.2
Average number of personnel: 4,632
Chairman of the Board: Jukka Viinanen
President and CEO: Wolfgang Büchele
Oras Invest Ltd’s holding in Kemira
Since 2007
Share of share capital: 18.2%
Share of voting rights: 18.2%
Market value of ownership: EUR 343.9 million
Annual Review 2013 23
Long-term
objectives
The total shareholder return is
generated by the increase of net
asset value and dividend yields.
Oras Invest aims to reach total
shareholder return in excess
of the cost of capital over a
business cycle.
24
Summary of Financial Statements
Oras Invest Ltd’s
Annual Review and
full Financial Report 2013
are available in
PDF-format in English
and Finnish on the
company website
orasinvest.fi
Summary of Financial Statements
Parent company income statement . . . . . . . . . . . . . . . . . . . 26
Parent company balance sheet . . . . . . . . . . . . . . . . . . . . . . . 27
Parent company cash flow statement . . . . . . . . . . . . . . . . . 28
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Annual Review 2013 25
Summary of Financial Statements
Parent company income statement fas
1 Jan – 31 Dec
2013
1 Jan – 31 Dec
2012
Net sales
949,998.00
1,650,000.00
Personnel expenses
Depreciation
Other operating expenses
745,639.07
90,134.86
802,165.14
772,752.56
93,958.34
909,721.55
–687,941.07
–126,432.45
Financial income and expenses
23,578,242.42
22,300,113.27
Profit before extraordinary items
22,890,301.35
22,173,680.82
Extraordinary items
4,600,000.00
6,000,000.00
Profit before taxes
27,490,301.35
28,173,680.82
1,888.20
–1,888.20
–121,851.63
–64,127.13
27,370,337.92
28,107,665.49
Oras Invest Ltd
(EUR)
Operating profit
Appropriations
Income taxes
Profit for the financial period
26
Summary of Financial Statements
Parent company balance sheet fas
Oras Invest Ltd
(EUR)
31 Dec
2013
31 Dec
2012
32,816.53
489,350.61
21,942,155.51
605,460,504.44
627,924,827.09
51,378.76
560,923.24
21,942,155.51
605,460,504.44
628,014,961.95
4,823,677.58
2,755,283.44
53,389.46
7,632,350.48
8,219,580.93
3,518,132.25
47,063.55
11,784,776.73
635,557,177.57
639,799,738.68
6,520,500.00
451,059,616.62
27,370,337.92
484,950,454.54
6,520,500.00
424,451,666.13
28,107,665.49
459,079,831.62
ASSETS
Non-current assets
Intangible assets
Tangible assets
Investments in Group companies
Other investments
Current assets
Long-term receivables
Current receivables
Cash and cash equivalents
Total assets
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity
Share capital
Retained earnings
Profit for the year
Accumulated appropriations
Liabilities
Non-current liabilities
Current liabilities
Total equity and liabilities
1,888.20
78,445,483.98
72,161,239.05
150,606,723.03
121,792,133.32
58,925,885.54
180,718,018.86
635,557,177.57
639,799,738.68
Oras Invest Ltd’s Annual Review and full Financial Report 2013 are available in
PDF-format in English and Finnish on the company website orasinvest.fi
Annual Review 2013 27
Summary of Financial Statements
Parent company cash flow statement fas
1 Jan – 31 Dec
2013
1 Jan – 31 Dec
2012
22,890
22,174
90
–23,578
94
–22,300
Cash flow from operations before change in working capital
–598
–32
Change in trade and other non-interest bearing receivables (+/–)
Change in trade and other non-interest bearing liabilities (–/+)
8
–150
–1
96
Cash flow from operations before financial items and taxes
–740
63
Interests paid and other financial items
Interests received
Dividends received
Income taxes paid
–4,041
3
27,350
–152
–7,526
16
29,217
–1,503
Cash flow from operations
22,420
20,267
Oras Invest Ltd
(EUR 1,000)
CASH FLOW FROM OPERATIONS
Profit before taxes and extraordinary items
Non-cash adjustments
Depreciation and impairment
Financial income and expense
28
Summary of Financial Statements
Oras Invest Ltd
(EUR 1,000)
1 Jan – 31 Dec
2013
1 Jan – 31 Dec
2012
CASH FLOW FROM INVESTMENTS
–3
Investments in intangible and tangible assets
Cash flow from investments
0
–3
Repayment of non-current loans
Increase of current loans
Repayment of current loans
Group contribution
Dividends paid
–29,400
3,000
–15
5,500
–1,499
–19,800
10,739
–16,000
6,200
–1,499
Cash flow from financing
–22,414
–20,360
Net change in cash and cash equivalents
6
–96
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
47
53
143
47
CASH FLOW FROM FINANCING
Annual Review 2013 29
Board of
Directors
The Chairman of the Board
Pekka Paasikivi
Eerik Paasikivi
b. 1944, Finnish citizen, B.Sc. (Eng)
Board memberships:
– Chairman of the Board, Oras Invest Ltd
since 2004
– Member of the Board, Foundation of
Economic Education since 2003
– Chairman of the Board, Kemira, 2007–2012
b. 1983, Finnish citizen, Student at the Turku
School of Economics
Board memberships:
– Member of the Board, Oras Invest Ltd
since 2010
– Member of the Board, Erkki Paasikiven säätiö
(foundation) since 2008, Vice Chairman of
the Board since 2010
– Chairman of the Board, Wate Oy since 2007
Risto Paasikivi
Vesa Puttonen,
Dr. Frank Stangenberg-Haverkamp
b. 1976, Finnish citizen, BA International
Business (RBS London)
Board memberships:
– Member of the Board, Oras Invest Ltd since
2012
– Member of the Board, Oras Ltd since 2010
– Member of the Board, Erkki Paasikiven säätiö
(foundation) since 2010
– Member of the Board, NextStone since 2007
b. 1966, Finnish citizen, D.Sc. (Econ.)
Board memberships:
– Chairman of the Board, Finnish Hockey
League since 2013
– Member of the Board, Taaleritehdas
since 2013
– Member of the Board, Suomi Mutual
since 2013
– Member of the Board, Finnish Foundation for
Share Promotion since 2011
– Member of the Board, Rocla since 2007
– Member of the Board, Oras Invest Ltd
since 2006
b. 1948, German citizen, University of Freiburg/Germany,
M.Sc. (Econ.), Ph.D.
Board memberships:
– Chairman of the Executive Board, E. Merck KG,
Darmstadt, Germany since 2014
– Member of the Board Oras Invest Ltd since 2012
– Member of the Supervisory Board, M.A.X. Automation
AG, Duesseldorf/Germany until Nov 5, 2013
– Chairman of the Board of Travel Asset Group Ltd.,
London/UK since 2007
– Chairman of the Supervisory Board, Fortas AG,
Roesrath/Germany since 2000
30
Personnel
President and CEO
Jari Paasikivi
Kaj Paasikivi
b. 1954, Finnish citizen, M.Sc. (Econ)
Board Memberships:
– Chairman of the Board, Kemira since 2014
– Member of the Board, Varma Mutual Pension
Insurance Company since 2014
– Chairman of the Board, Oras Ltd since 2013
– Chairman of the Board, Technology
Industries of Finland since 2013
– Member of the Board, Confederation of
Finnish Industries since 2013
– Chairman of the Board, Tikkurila since 2010
b. 1968, Finnish citizen, B.Sc. (Business
Administration, Woodbury University), MBA
(Helsinki School of Economics)
Board memberships:
– Vice Chairman of the Board, Oras Ltd since 2013
– Member of the Board, Oras Invest Ltd since 2010
– Chairman of the Board, NextStone since 2007
– Member of the Board, Oras Ltd since 2006
COO
Annika Paasikivi
b. 1975, Finnish citizen, BA International Business
(EBS London)
M.Sc. Global Politics (University of Southampton)
Board Memberships:
– Deputy Chair of the Board, Uponor since 2014
– Member of the Board, Oras Ltd since 2012
– Member of the Board, Finow Ltd since 2007
– Member of the Board, Oras Invest Ltd, 2004–2011
Christoph Vitzthum
b. 1969, Finnish citizen, M.Sc. (Econ)
President and CEO, Oy Karl Fazer Ab since 2013
Board memberships:
– Member of the Board, Oras Invest Ltd
since 2013
– Member of the Board, NCC since 2010
CFO
Executive Assistant
Tuula Ylhäinen
Susanne Cronstedt
b. 1955, Finnish citizen, M.Sc. (Econ.)
b. 1965, Finnish citizen, QBA
Annual Review 2013 31
Corporate Governance
O
ras Invest Ltd is a private limited company
registered in Finland. The company follows good
corporate governance practices based on the
Finnish Limited Liability Companies Act and the
company’s Articles of Association.
Oras Invest Ltd is the parent company of Oras Invest Group.
In that capacity, it is responsible for the development of the
Group, prepares the Group’s financial reporting and supports
the Group in financial, legal and management matters.
The Group consists of a number of independent subgroups
and companies. The decisions regarding their operations are
taken by each company’s own decision-making bodies. Oras
Invest exercises its ownership through representatives elected
by its Board of Directors in the decision-making bodies of its
subsidiaries and associated companies.
General Meeting of Shareholders
The highest authority in Oras Invest is exercised by the
shareholders at general meetings of shareholders. Under the
Finnish Limited Liability Companies Act, decisions made by
general meetings of shareholders include:
–– Amendments to the Articles of Association
–– Adoption of the annual accounts
–– Dividend distribution
–– Election of members of the Board of Directors and
decision on their emoluments
–– Election of the Corporation’s auditor and decision on
audit fees
The Board of Directors
In accordance with the Finnish Limited Liability Companies Act,
the Board of Directors is responsible for the management of
the company and the proper organization of its activities. The
Board’s main duty is to direct the company’s operations in such
a way that, in the long run, the yield to shareholders is secured,
while simultaneously taking the expectations of various
stakeholders into account.
Pursuant to the Articles of Association, the Board of Directors
comprises a minimum of three and maximum of seven
members, elected for a one-year term starting at closing of
32
the annual general meeting at which they were elected and
expiring at closing of the following annual general meeting.
The annual general meeting held in April 2013 elected the
following six members to the Board of Directors:
Pekka Paasikivi, Eerik Paasikivi, Kaj Paasikivi, Risto Paasikivi, Vesa
Puttonen and Frank Stangenberg-Haverkamp. In an Extra­
ordinary General Meeting held on 21. 11. 2013 Christoph Vitzthum
was elected to the Board.
Chief Executive Officer
The Chief Executive Officer is appointed by the Board of
Directors. The CEO plans and manages the company’s
business operations and bears responsibility for the company’s
day-to-day management in accordance with the decisions
and instructions issued by the Board of Directors. It is the CEO’s
duty to ensure that the company’s accounting procedures
comply with the applicable legislation and that the financial
management is conducted in a reliable manner.
Salaries and Remuneration
The annual general meeting of shareholders confirms the
remuneration of the members of the Board of Directors for one
year at time. The Board of Directors decides on the CEO’s salary
and benefits and it also confirms the salaries and benefits for
the other management.
Supervision
Oras Invest’s auditors are Ernst & Young Oy, with Minna
Toivonen Authorized Public Accountant, and Heikki Ilkka
Authorized Public Accountant. The auditors supply the
company’s shareholders with the statutory auditor’s report on
the annual financial statements. The auditors also report on
their observations to the company’s management and Board of
Directors. ORAS INVEST LTD
Fabianinkatu 14 A, 4th floor
FI-00100 Helsinki
Finland
Tel. +358 10 2868 100
Executive Assistant
Susanne Cronstedt
Tel. +358 40 350 5402
www.orasinvest.fi