From the CEO
CEO Q2/2018Our euro-denominated revenue decreased in the second quarter, but by excluding currency effects and divestments the comparable growth was 3 percent. Sales volumes grew in all key markets, thanks to our sales efforts, positive economic trends, and the improved reliability of deliveries.
Profitability improved due to higher sales volumes and reduced fixed expenses, but profitability did not reach the targeted level. We increased our sales prices, but not sufficiently to compensate for the increased raw material costs.
A year ago, we launched an extensive efficiency program to boost profitability and cost competitiveness. The minimum savings target for the program was set at EUR 30 million. Within the framework of the efficiency program, we have so far moved to a more centralized organizational model, discontinued and divested unprofitable business operations, decided to close down certain small production units, and begun streamlining and simplifying the product portfolio. At an annual level, the savings impact of the measures taken thus far is roughly EUR 10 million. Furthermore, we are aiming to achieve savings of approximately EUR 20 million by streamlining sourcing, optimizing the production network, and reducing fixed expenses. Headcount reductions are planned for areas in which overlaps and opportunities to streamline operations have been identified. The reductions will take place during the current year. The effects of the EUR 30 million saved through the program will be visible during 2019.
As for this year, we will continue to boost sales and raise sales prices in all markets. Raw material prices are estimated to continue to increase throughout 2018. We estimate that our revenue will remain at the previous year’s level, and our adjusted operating profit will improve. Our long-term goal is to ensure the realization of Tikkurila’s vision, ’Surfaces that make a difference’, and define the related strategic choices, particularly with regard to building outstanding customer experiences and making sustainability the center of all our operations and concrete added value to our customers. Our short-term goal is to focus on strengthening the position of our brands and improving operational efficiency through several transformation projects.