Annual Review 2015
Contents
Oras Invest in brief . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
MISSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Oras Invest year 2015 . . . . . . . . . . . . . . . . . . . . . . . . 3
Message from the CEO . . . . . . . . . . . . . . . . . . . . . . 4
Oras Invest 70 years . . . . . . . . . . . . . . . . . . . . . . . . . 6
VISION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Oras Invest strategy . . . . . . . . . . . . . . . . . . . . . . . . . 14
Portfolio companies . . . . . . . . . . . . . . . . . . . . . . . . . 16
Oras Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Uponor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Tikkurila . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Kemira . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
LONG-TERM OBJECTIVES . . . . . . . . . . . . . . . . . . . . . 24
Summary of Financial Statements . . . . . . . . . . . . 26
Parent company income statement . . . . . . . . 26
Parent company balance sheet . . . . . . . . . . . . 27
Parent company cash flow statement . . . . . 28
Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . 30
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Oras Invest Ltd’s
Annual Review and
full Financial Report
2015 are available in
PDF-format in English and
Finnish on the company
website orasinvest.fi
Personnel photos Mika Malo Art work in the photos
Erkki Paasikivi, from the book Metalli ja vesi (1988), original photos
by Pentti M. Valmunen A.R.P.S History photos from the book
Family business, faucet company, industrial owner (2015)
Graphic design and layout Kreab Print Libris, Helsinki 2016
1
Oras Invest in brief
Oras Invest is a family-owned company with 70 years of industrial
entrepreneurship tradition. Its current industrial holdings are
Oras Group, Uponor, Kemira and Tikkurila. At the end of 2015
the net asset value of Oras Invest totaled EUR 795 million.
Oras Invest holdings
Aggregate key figures 2015
Net sales
Oras Group
Uponor
100%
23%
Since 1945
Since 1999
EUR
4.3 billion
Employees
12,988
average number
Operating in
Tikkurila
Kemira
18%
18%
Since 2010
Since 2007
40 countries
Annual Review 2015
2
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.
mission
3
Oras Invest year 2015 2015 Highlights
We celebrated 70 years as a family business.
Our portfolio remained unchanged with strong
focus on the building and water industries.
The net asset value was 795 million euro and TSR 9%.
Equity-to-assets ratio improved to 85% and
gearing reduced to 18%.
Oras Invest key figures 2015
2015
2014
26.3
27.7
Shareholders’ equity, EUR million
535.4
511.1
Balance sheet total, EUR million
630.4
630.6
Equity-to-assets ratio
85%
81%
Gearing
18%
23%
Net asset value (NAV), EUR million
795
732
Total shareholder return (TSR)
9%
–6%
11%
14%
Net profit, EUR million
Debts-to-investments at market value ratio
Annual Review 2015
4
Message from the CEO
Long-term ownership
Oras Group 70 years
Uponor 16 years
Kemira and Tikkurila 8 years
T
hroughout the difficult economic conditions which
started back in 2008, our long-term ownership has
been a valuable backbone for the entire personnel
of our companies. It is a well-known fact that Oras
Invest supports their long-term strategic development. Another
important feature of our ownership model is the seamless
and transparent cooperation between the Boards of Directors
and the Management Teams, and their alignment regarding
long-term targets and the means of achieving them. All this
work is of course continuously analyzed in a rapidly changing
environment.
In value creation, we always put the benefits to the
company before the owners’ interests, as we strongly believe
that an effectively performing company will benefit all of its
owners equally. 2015 was a year of reflection for us as we
celebrated 70 years as a family business – one which has
thrived for three generations and has been able to grow
sustainably and create welfare for its stakeholders. Our
family’s story as entrepreneurs and industrial owners was
published in a book in May, and we are grateful for the
positive feedback, especially that provided by our current
and retired personnel.
Business as usual
We saw no changes to our portfolio in 2015. We
continued as the largest owner of the listed companies
Uponor, Kemira and Tikkurila, and as the 100% owner of
Oras Group.
Oras Invest net asset value grew by 9% to EUR 795
million (EUR 732 million in 2014) and the total shareholder return was 9% (–6%). We expect an income
stream from our companies of approximately EUR
33 million (32 million) from 2015. Our balance sheet
remains strong, with an equity ratio of 85% (81%) and
gearing of 18% (23%).
5
Oras Group experienced some challenges after a very
successful first year as a company with two strong brands,
Oras and Hansa. Despite a total net sales decline of 5% to EUR
245 million (258 million), the company managed to maintain
its strong market position in its two most important home
markets – Finland and Germany. Oras Group’s operative EBIT
declined to EUR 24.9 million, 10.2% of net sales (30.4 million,
11.8%). The EBIT excludes non-recurring items and depreciation
on assets generated in the Hansa acquisition. Leadership at
Oras Group will play a decisive role in the coming years, as
the company strives for full cultural integration based on
the strong company values. Throughout 2015, Oras Group
explicitly communicated its strategic choice as a strong partner
in the professional three-tier distribution channel. This has
been an important commitment in an industry undergoing
transformation.
Uponor reported a small growth in net sales at EUR 1,050.8
million (EUR 1,023.9 million), with organic growth at 5.2%.
Despite the seasonal volatility on both fronts
– raw material availability and pricing and
sales – Uponor’s operative EBIT improved
by 12.6% to EUR 71.4 million (63.4 million).
Uponor responded to the continuing
challenges in the Building Solutions Europe and Infra segments by initiating
a major transformation program to
accelerate profitable growth and
reduce costs. On the other hand, the
Building Solutions – North America
segment continued to grow and
improve its profitability for the fifth
consecutive year.
Kemira reported net sales
growth of 11% at EUR 2,373.1 million (2,136.7 million). The growth
is mainly an impact of the acquisition of the AkzoNobel paper
chemicals business. Kemira’s operative EBIT increased to EUR
163.1 million with a margin of 6.9% (158.3 million, 7.4%). The
AkzoNobel paper chemicals business is accounted for since
May 4, 2015. The integration has worked according to plan and
the Pulp & Paper segment already reported improvement in
relative profitability.
Tikkurila faced a decline in net sales to EUR 584.1 million
(618.4), mainly as a consequence of the weakened Russian ruble.
Relative profitability remained at a good level, with operative
EBIT of EUR 58.9 million (64.2 million) and a margin of 10.1%
(10.4%). Weakening consumer confidence in Russia had a direct
effect on Tikkurila’s Strategic Business Unit East performance.
In contrast, SBU West improved with growing markets, such as
Poland and Sweden.
Aiming for sustainable and profitable growth
Tackling the future challenges facing our companies requires
an increasing amount of competence. Our most important
operative task, together with our fellow owners, is to make
sure that we can attract the right people to our companies’
boards. The work done by the Nomination Committees is
becoming increasingly demanding. Both of our focus industries,
building and water, are experiencing global transformation. The
composition of a Board of Directors must be compatible with
the challenges ahead in order for the board to be able to truly
create value through strategic guidance.
Our companies are continuously striving to bring innovative
products and quality solutions to their existing and potential
customers. All of our companies are technological trendsetters
in industrial applications and product features. We encourage
them to channel funds into research and development and
innovation functions, so that they can always be one step
ahead of the competition and improve their performance
through increased competence.
2015 was overcast with bad news on a global
scale, from the refugee crisis to the
auto industry emissions fraud
and numerous acts of terrorism.
All these unfortunate events will
have long-term consequences
on our companies’ main markets.
These consequences are not yet
known, and the volatile economic
conditions are expected to
continue. It is our job to monitor
President and CEO,
the likely directions our industries
Jari Paasikivi
and markets take, and to make
sure that our companies are
appropriately equipped when the current challenges turn into
new opportunities.
I would like to express my warmest thanks to each and
every one of the 12,988 people working with our companies
worldwide for your courage in these challenging conditions. In
addition, I would like to thank all of our Board and Nomination
Committee Members and our trusted partners for their
meaningful support and for joining in the celebrations to mark
the 70 years of a family in business.
All of our companies
are technological
trendsetters in
industrial applications
and product features.
April, 2016
Jari Paasikivi
Annual Review 2015
6
Oras Invest 70 years
The pioneer entrepreneur
Our story
70 years
Our family business was founded 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 father’s 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. Because Kosti Oras had operated
cars and buses in Rauma since 1920s, the workshop began
repairing and making spare parts for buses. However, thanks
to Erkki Paasikivi’s engineering ambitions, the company started
to create a variety of pieces of equipment from supplies that
7
became available, and the focus shifted from buses to other
products.
The first step in the production of water fittings was taken
in 1947 when Erkki managed to acquire a batch of anti-aircraft
grenade shells. They were processed into radiator pipe
connectors which were sold to plumbing businesses. In 1951
Oras began to produce faucets. There was great demand in
Finland for fittings and faucets, and sales were so good that
the company could concentrate on them. At first Oras ordered
the tap bodies from a subcontractor, but because the quality
was not always up to requirements, it was decided that Oras
would establish its own foundry. The best available technology
was developed by West German company Piel & Adey, so
Erkki contacted them. The licensing agreement was signed
in March 1955. In the same year, Oras received its first export
order.
At the start of the 1960s, Oras was developing faster than
ever. Two-handle faucets had become Oras’ most important
product and were selling very well. At first, exports were
modest and primarily aimed at the Nordic countries. In 1967
the company took part in its first international HVAC fair, the
ISH in Frankfurt.
Annual Review 2015
8
Oras Invest 70 years
Erkki Paasikivi and the Oras executive team believed that the
company should increase its exports so that larger series could
be produced at lower unit costs. The new factory, Isometsä, was
inaugurated in May 1970.
The 1970s was a challenging decade for many Finnish
companies. Oras made its first ever loss in 1975, but recovered
from the recession faster than its competitors, largely as a result
of the single-lever Safira faucet, which was popular in Finland.
The Safira also accounted for half of all Oras exports. In 1979,
Erkki Paasikivi decided that it was time for his sons Pekka, Jukka
and Jari to take over the family business.
Growth, internationalization and acquisitions
Oras saw that there were no prospects for a significant rise
in demand in the domestic market; therefore, the company
needed to expand abroad. Together with management, the
owners developed a clear strategy for the company. Innovative
products, steady revenue growth, and expansion into new
markets ensured profitability and provided a solid platform for
strategic acquisitions.
Following the company’s strategy, Oras acquired German
company Goswin & Co. GmbH in 1982, Finnish competitor Osy
in 1983, and Norwegian Lyng Armatur in 1984. During the 1980s,
9
Oras expanded to become an international faucet manufacturer operating in six countries. It also exported products to
other countries in Europe and beyond. By the turn of the 1990s,
foreign operations already accounted for more than half of net
sales. With its strong finances, Oras had good prospects for the
coming decade.
The recession hit Finland hard in the first half of the 1990s.
Oras was dependent on the building industry, which was the
biggest loser in the recession. Domestic net sales declined but
sales in Germany and Norway made up for the shortfall. After
a couple of fairly subdued years, a new period of growth got
underway in the beginning of the 1990s. In 1993 both sales
and profitability improved more than expected. Buoyed by its
strong finances, the company was able to plan further growth
through acquisitions. The prospects were good because it had
the cash reserves as well as its own new technology product,
the electronic faucet.
In 1995, Oras announced an ambitious growth strategy,
“Vision 2005”. The company intended to conquer the European
markets and triple its revenue. Steps in that direction were
taken based on advances in R&D, as Oras became the first
European faucet manufacturer to introduce an electronic
Annual Review 2015
10
Oras Invest 70 years
faucet. The company’s name and trademark had developed
into a widely recognized and valued brand, associated with
durability, innovation and attractive design. In 1996 Oras
acquired a faucet factory in Olesno, Poland.
However, Vision 2005 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 Uponor.
Industrial owner
Oras became the largest owner of Uponor in 1999, heralding
the start of a new era of industrial ownership. Pekka Paasikivi
became Chairman of the Board of Uponor, introducing business
idea-based thinking and a single-brand strategy. Theowner’s
approach was active and its commitment clearly visible.
Uponor’s shares had been purchased at a favorable time and
the share price consistently gained value, with the steadily
growing dividend stream peaking in 2006. At this time,
the owners of Oras decided to organize the two industrial
companies under a single holding unit.
Oras Invest Ltd 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 of its privately owned companies,
based on long-term commitment. At this point, the third
generation of the family became active through board
memberships.
By 2007, Oras Invest had become a household name
in the HVAC and building material industries. The owners
11
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,
allowing 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 when Oras
acquired Hansa. This 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 in our 70-year history has contributed to our know-how
and expertise, 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
entire history, Oras Invest has remained under 100% family
ownership. Read more:
Herranen, Timo (2015)
Family business, faucet company, industrial owner
Annual Review 2015
12
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.
vision
13
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 cannot be claimed without an open and
honest approach, respect for work and fair play.
The responsibilities of ownership are greater than its priviledges.
By
VITALITY
we demonstrate our
aim to develop the
business by seeking
re-generation and
innovative ownership
ideas.
By
ENDURANCE
By
COMMITMENT
we simply express our
long-term commitment
to our companies and
stakeholders; and to
driven by sustainable
our family.
we state that there
is continuity and
competence in our
work and we are
value creation.
Annual Review 2015
14
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
In the case of listed
is long-term development of the
companies we own. This also means
companies, it is our
continuous dialogue with the other
goal to be the largest
owners of our companies and our
closest stakeholders. We direct our
shareholder, while in
earned dividends either on further
other cases we aim
investments in our current and new
companies, or on strengthening our
for a majority holding.
balance sheet.
We strive towards value growth,
which requires active work by the Boards,
and constructive cooperation with the management of our
15
Basic business principles and
continuous renewal
Sustainable growth
Business
competence
Profitability
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
Foundation
of a company’s business idea, strategies,
management, and risks.
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. Annual Review 2015
16
Portfolio companies
Oras Group – high-quality
sanitary fittings for
70 years already
Net sales
EUR 244.8 million
O
ras Group is a significant European provider of
sanitary fittings: the market leader in the Nordics
and a leading company in Continental Europe.
The company’s mission is to make the use of water
easy and sustainable and its vision is to become the European
leader of advanced sanitary fittings.
Overview of 2015
Oras Invest’s
ownership
100%
Since 1945
Net sales of Oras Group totalled EUR 244.8 million (EUR 258.1
million). The operating profit excluding non-recurring items
was EUR 24.9 million, or 10.2% of net sales (EUR 30.4 million and
11.8%).
A decline in sales outside Europe, the collapse in the Russian
economy, unfavourable development of currency exchange
rates and strategy-driven brand consolidation in certain
markets of Oras Group resulted in a slight decline in net sales.
In the most important markets of the Group the company
maintained its market position.
Having completed a structural integration, Oras Group has
efficient sales organizations in place. The aim is to leverage
the Group’s effectiveness to establish and strengthen the
company’s position in the current markets. Harmonization of
tools and systems will be finalized during 2016 and the focus
of the integration will shift to the building of one common
company culture. This is expected to last for a few years. The
implementation of common company values was started
17
during the 70th anniversary of the company. A significant
effort will be made to enable the entire personnel of the
Group to understand and live the company values.
Oras Group operates with two strong brands, Oras
and Hansa, and with a single brand strategy per market.
In product management the Group resources serve both
brands. The assortment of advanced products of both brands
was expanded during the year and the initial response from
the market was encouraging. The results of first Oras Group
product development efforts were presented in the spring.
Significant synergies have been identified and realized
especially in purchasing, and at the same time the
development of the logistics network has been started
in order to fit the new constellation. Oras Group has four
production sites – in Germany, Finland, Poland and Czech
Republic. The strategic roles of each plant have been defined.
facts &
figures
Development of Oras Group’s
net sales 2011–2015
2011
EUR 129.0 million
2012
EUR 131.1 million
2013
EUR 156.7 million
2014
EUR 258.1 million
Future outlook
The European faucet market is expected to slightly recover
after numerous years of uncertainty. The markets are
fragmented in terms of distribution and price points. As price
erosion continues in the low and medium priced products
and simultaneously cost levels are increasing, productivity
must continuously be improved and streamlined processes be
built in all operations.
Oras Group is currently developing a product philosophy
to guide product portfolio development. The target is an
aligned and effective offering that reflects the core of Oras
Group and its two brands. The three elements of the product
philosophy are performance, design and programme.
The company’s offering will consist of products that have
advanced functionality and where form follows function
and market trends. Oras Group stands for professional and
appealing sanitary fittings that enrich the way people work
with them and use water.
The focus of Oras Group is in Europe and the company
operates in strong partnership with selected professional
customers. The company’s strategy to prioritize three-tier
distribution has been well received. 2015
EUR 244.8 million
Oras Group in brief
Net sales: EUR 244.8 million
Operating profit excl.
non-recurring items: EUR 24.9 million
Average number of personnel: 1,394
Chairman of the Board: Jari Paasikivi
CEO: Pekka Kuusniemi
www.orasgroup.com
www.oras.com
www.hansa.com
Annual Review 2015
18
Portfolio companies
Uponor – an international
provider of HVAC,
building services and
infrastructure technology
Net sales
EUR 1,050.8 million
U
ponor is a leading international systems and
solutions provider for safe drinking water delivery,
energy-efficient radiant heating and cooling and
reliable infrastructure. The company serves a variety
of building markets including residential, commercial, industrial
and civil engineering. Uponor employs about 3,700 employees
in 30 countries, mainly in Europe and North America. In 2015,
Uponor’s net sales totalled EUR 1,051 million. Uponor is based in
Finland and listed on Nasdaq Helsinki.
Overview of 2015
Oras Invest’s
ownership
23%
Since 1999
In general, construction activity in Uponor’s markets remained
subdued during 2015, with no significant growth from the
previous year. Although construction accelerated markedly in a
few key markets, such as the USA, the Netherlands and Sweden,
most markets showed few signs of noteworthy recovery from
their already constrained levels of economic activity.
Uponor’s 2015 consolidated net sales from continuing operations amounted to EUR 1,050.8 (2014: EUR 1,023.9) million, up
2.6% year-on-year. In organic terms, Uponor’s consolidated net
sales grew by 5.2%. Based on a constant currency comparison,
there was a EUR +35.0 million difference in full-year net sales.
Consolidated operating profit came to EUR 71.4 (63.4) million,
up 12.6% from the previous year. The operating profit margin
improved slightly, coming to 6.8% (6.2%) of net sales. Currency
exchange rates had a EUR 7.5 million positive translation impact
on the improvement in full-year operating profit.
19
Building Solutions – Europe’s net sales declined by –2.5%,
reflecting the weak performance in the first three quarters of
the year. Notwithstanding the short-term pick-up in demand
in the last two months of the year, European markets have
generally remained flat, with Sweden and the Netherlands
standing out as the few brighter spots. The strength of the
fourth quarter 2015 was supported by mild weather especially
in northern Europe, some pre-stocking among customers, as
well as the timing of commercial projects in Germany.
Through a series of manufacturing expansions over recent
few years, Building Solutions – North America has been able to
sustain sturdy net sales growth over a lengthy period of time,
and 2015 was no exception. Due to currency changes, reported
net sales in euro were particularly strong.
Uponor Infra’s net sales for 2015 saw a clear decline, a bit
over half of which originated in the divested Thai and Extron
business units, which had combined net sales in 2014 of EUR
28.6 million. The segment’s continuing net sales decline was
mainly driven by weak development in Poland and Canada.
Within the business groups, the share of Plumbing Solutions
represented 45% (39%), Indoor Climate Solutions 25% (27%),
while Infrastructure Solutions represented 30% (34%) of Group
net sales.
Uponor’s largest investment in fixed assets in 2015 was its
sixth expansion of manufacturing capacity in the Apple Valley
facility in Minnesota, completed during the fourth quarter of
2015. The investment will add an additional 8,175 m2 of manufacturing and office space and secure further capacity needs in the
near-term.
In Russia, Uponor’s new greenfield factory for the production
of local heat distribution systems was officially inaugurated on
1 October 2015. A new distribution centre in Hassfurt, southern
Germany, close to the main German manufacturing operations
was opened for business in March. In November, Uponor
further announced that the company is planning to begin its
own manufacture of building solutions in China in 2016 in order
to satisfy growing demand in this large market.
Effective from 4 January 2016, Uponor Holding GmbH,
Germany acquired the shares in two German companies, Delta
Systemtechnik GmbH and the KaMo Group. This acquisition
aims at broadening Uponor’s portfolio and competencies in
the increasingly important hygienic drinking water delivery
sector. In 2014, the 119 employees of both companies combined
generated a total turnover of EUR 32.8 million.
Outlook
No major changes in outlook are in prospect in Uponor’s key
geographic areas. Economic trends are likely to continue
in a similar manner to the last two years, i.e. North America
continuing to experience lively economic growth, while Europe
struggles with stagnant economies and lack of growth drivers.
Assuming that economic development in Uponor’s key
geographies otherwise continues undisturbed, Uponor
issues the following guidance for 2016: the Group’s net sales
and operating profit (excluding any non-recurring items) are
expected to improve from 2015. facts &
figures
Largest shareholders
31 Dec 2015
Oras Invest Oy 22.6%
Varma Mutual Pension
Insurance Company 5.3%
Nordea Nordic Small Cap Fund 4.1%
Ilmarinen Mutual Pension Insurance
Company 2.7%
Investment Fund Nordea Suomi 1.0%
The State Pension Fund 1.0%
Nordea Pro Finland Fund 1.0%
Others 62.3%
Uponor in brief
Net sales: EUR 1,050.8 million
Operating profit: EUR 71.4 million
Average number of personnel: 3,842
Chairman of the Board: Jorma Eloranta
CEO: Jyri Luomakoski
Oras Invest’s holding in Uponor
Since 1999
Proportion of share capital: 22.6%
Proportion of voting rights: 22.6%
Market value of ownership: EUR 225 million
www.uponor.com
Annual Review 2015
20
Portfolio companies
Tikkurila has offered
sustainable beauty
since 1862
Net sales
EUR 584.1 million
Oras Invest’s
ownership
18%
Since 2010
T
ikkurila is a leading Northern European paint industry
professional known for its high-quality surface
treatment products and expert services. 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 offers an extensive range of products for protecting
and beautifying surfaces for consumers, construction professionals, as well as selected industrial customers. Tikkurila’s range
of services includes, among others, color and tinting services,
painting advice as well as expert and training services. Tikkurila
aims to offer the best user experience. The company develops
high-quality, user-friendly and environmentally sustainable
solutions, and trains its stakeholders in the durable use of the
products. Tikkurila invests in developing solutions that make
selecting, buying and selling of paints easier, and supports its
customers through every stage of their painting work to ensure
successful and durable end results.
Tikkurila’s main markets are Sweden, Russia, and Finland,
where the company is the market leader in decorative paints.
Tikkurila has production in ten countries, and the majority of
the sales consists of premium products in the high quality and
price grade.
Tikkurila was established in 1862, and its shares have been
listed on Nasdaq OMX Helsinki since 2010.
21
facts &
figures
Overview of 2015
The market conditions were two-fold in Tikkurila’s operating
area. The development of certain markets of Tikkurila, such as
Sweden, Poland, the Baltic countries and China, continued to
be strong. Growth in the national economies of Sweden and
Poland is among the strongest in the EU region, which also
reflected favorably in the paint market. The market situation
was difficult in Russia throughout the year. The price of crude
oil, already at a low level, continued to decline at the end of the
year, which weakened the Russian ruble further. The Group’s
euro-denominated net sales decreased by six percent to EUR
584 million. The comparable net sales grew.
Relative profitability remained at the previous year’s level at
10.1 percent. Cost management was strict. However, strong sales
and marketing investments were continued, and the relative
share of sales and marketing costs of net sales increased. Prices
of raw materials were slightly higher than in the comparison
period due to the unfavorable exchange rate development.
Future Outlook
Growth in the EU region is forecasted to be steady but fairly low.
The importance of the Western markets, particularly Sweden
and Poland, is expected to increase further. The weak economic
situation in Russia and the low level of ruble will make the
operating environment difficult in 2016. In Russia, paint demand
is expected to decrease and the relative market share of the
lower price and quality grade products is expected to grow.
Tikkurila is planning to increase its prices primarily in Russia,
as well as to increase local manufacturing and raw material
purchasing. Sales and marketing investments will continue in
the previous years’ manner in order to strengthen the market
position. At the same time, increased operational efficiency and
cost savings will be actively sought in all operations. Tikkurila
expects its net sales for the financial year 2016, with exchange
rates as of the publication date of the financial statement
release, to be at the same level as in 2015. EBIT excluding
non-recurring items is expected to stay at 2015 level. Largest shareholders
31 Dec 2015
Oras Invest Oy 18.1%
Varma Mutual Pension
Insurance Company 5.7%
Ilmarinen Mutual Pension
Insurance Company 5.6%
Mandatum Life Insurance
Company Ltd. 3.6%
Others 67%
Tikkurila in brief
Net sales: EUR 584.1 million
Operating profit excl.
non-recurring items: EUR 58.9 million
Average number of personnel: 3,193
Chairman of the Board: Jari Paasikivi
CEO: Erkki Järvinen
Oras Invest’s holding in Tikkurila
Since 2010
Proportion of share capital: 18.1%
Proportion of voting rights: 18.1%
Market value of ownership: EUR 128 million
www.tikkurilagroup.com
Annual Review 2015
22
Portfolio companies
Kemira – Focusing on
profitable growth
K
Net sales
EUR 2,373.1 million
Oras Invest’s
ownership
18%
Since 2007
emira is a global chemicals company serving
customers in water-intensive industries. We provide
expertise, application know-how 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 2015, Kemira had annual net
sales of EUR 2.4 billion and around 4,700 employees. Kemira
shares are listed on the Nasdaq Helsinki Ltd.
Overview of 2015
Kemira updated its vision in 2015 to be “The first choice in
chemistry for water-intensive industries” which communicates
customer and innovation focus as well as sustainable,
long-term shareholder value generation.
In 2015, our net sales grew by 11% to EUR 2,373 million (2,137)
due to acquisitions and favorable currency exchange rates. The
operative EBITDA increased 14% to EUR 287 million (253), mainly
due to the lower variable costs and positive currency exchange
rate impact, as well as a contribution from the acquisitions. The
operative EBITDA margin improved to 12.1% (11.8%).
In the Pulp & Paper segment, net sales increased to EUR
1,417 million (1,170) and operative EBITDA increased to EUR 171
million (137). The operative EBITDA margin improved to 12.1%
(11.7%). The acquisition of AkzoNobel’s paper chemicals business
was completed in May 2015. Kemira is now the only bleaching,
process and functional chemicals provider with a truly global
reach, serving the pulp and paper industry. Hence the Paper
segment was renamed as Pulp & Paper segment. Good demand
for pulp chemicals is expected to continue resulting in capacity
increases, such as our new chlorate plant in Brazil, which is
expected to start in the first half of the year. We are planning to
23
add bleaching chemical capacity also in the Nordics. In addition,
we have signed several new Total Chemistry Management
deals, which will bring additional net sales in 2016.
In the Municipal & Industrial segment net sales growth
continued and increased to EUR 606 million (565). The operative
EBITDA improved substantially to EUR 83 million (68), leading
to a margin of 13.7% (12.1%). After the restructuring period in the
previous years, the segment is delivering well on its strategic
objectives of steady growth and cash flow generation.
The Oil & Mining segment continues to be twofold. The
activity in the U.S. shale operations remains slow negatively
impacting the segment’s financials. Net sales decreased to EUR
350 million (382) million, while the operative EBITDA decreased
to EUR 34 million (48). The operative EBITDA margin declined to
9.6% (12.7%). On the other hand, the mining business remains
steadier and the progress of new applications in the field of
Chemical Enhanced Oil Recovery (CEOR) is encouraging.
facts &
figures
Largest shareholders
31 Dec 2015
Oras Invest Oy 18.2%
Solidium Oy 16.7%
Varma Mutual Pension
Insurance Company 5.3%
Ilmarinen Mutual Pension
Insurance Company 3.1%
Kemira Oyj 2.1%
Future outlook
Kemira will continue to focus on improving its profitability and
cash flow. The company will also continue to invest in order
to secure future growth to serve selected water-intensive
industries.
The company’s financial targets for 2017 are:
Net sales EUR 2.7 billion
Operative EBITDA-% of net sales 15%
Gearing level <60%.
The basis for growth is the expanding market for chemicals
and Kemira’s expertise that helps customers in water-intensive
industries to increase their water, energy and raw material
efficiency. The need to increase operational efficiency in
our customer industries creates opportunities for Kemira to
develop new products and services for both current and new
customers. Research and Development is a critical enabler of
growth for Kemira, providing differentiation capabilities in its
relevant markets.
Others 54.6%
Kemira in brief
Net sales: EUR 2,373.1million
Operative EBITDA: EUR 287.3 million
Average number of personnel: 4,559
Chairman of the Board: Jari Paasikivi
CEO: Jari Rosendal
Oras Invest’s holding in Kemira
Since 2007
Proportion of share capital: 18.2%
Proportion of voting rights: 18.2%
Market value of ownership: EUR 308 million
Outlook for 2016
Kemira continues to focus on profitable growth. Kemira expects
its net sales and operative EBITDA to increase in 2016 compared
to 2015.
Kemira expects its capital expenditure, excluding acquisitions, to be around EUR 200 million in 2016. www.kemira.com
www.waterfootprintkemira.com
Annual Review 2015
24
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.
long-term
objectives
25
Creating wealth
to the society
The aggregate net sales of our companies was 4.3 billion, and
they employed 12,998 people in 40 countries.
The aggregate contributions of our holdings in 2015
Net sales from customers
EUR 4.253 billion
EUR 3.018 billion
P
SU
RS O
PLIE
F RAW MATERIALS, GOODS & SE
RVI
CE
S
EMPLOYEES
EUR 654 million
EUR 168 million
EUR 47 million
SOCIETY
BANKS
Dividends
EUR 155 million
to 67,618 shareholders
Annual Review 2015
26
Summary of Financial Statements
Parent company income statement FAS
1 Jan – 31 Dec
2015
1 Jan – 31 Dec
2014
249,996.00
11,858.74
649,596.00
6,800.55
835,898.44
104,504.67
1,753,809.08
1,084,096.88
98,291.10
946,809.08
Operating profit
–2,432,357.45
–1,472,800.51
Financial income and expenses
26,625,530.50
25,206,209.76
Profit before extraordinary items
24,193,173.05
23,733,409.25
Extraordinary items
3,350,000.00
4,000,000.00
Profit before taxes
27,543,173.05
27,733,409.25
Income taxes
–1,278,228.66
–70,169.39
Profit for the financial period
26,264,944.39
27,663,239.86
Oras Invest Ltd
(EUR)
Net sales
Other operating income
Personnel expenses
Depreciation
Other operating expenses
27
Summary of Financial Statements
Parent company balance sheet FAS
Oras Invest Ltd
(EUR)
31 Dec
2015
31 Dec
2014
5,540.26
1,190,083.88
21,942,155.51
605,460,504.44
628,598,284.09
17,208.38
1,028,620.42
21,942,155.51
605,460,504.44
628,448,488.75
1,703,243.42
59,626.73
1,762,870.15
2,138,537.75
49,840.75
2,188,378.50
630,361,154.24
630,636,867.25
6,520,500.00
502,593,859.40
26,264,944.39
535,379,303.79
6,520,500.00
476,930,239.54
27,663,239.86
511,113,979.40
45,000,000.00
49,981,850.45
94,981,850.45
60,000,000.00
59,522,887.85
119,522,887.85
630,361,154.24
630,636,867.25
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
Liabilities
Non-current liabilities
Current liabilities
Total equity and liabilities
Oras Invest Ltd’s Annual Review and full Financial Report 2015 are available in
PDF-format in English and Finnish on the company website orasinvest.fi
Annual Review 2015
28
Summary of Financial Statements
Parent company cash flow statement FAS
1 Jan – 31 Dec
2015
1 Jan – 31 Dec
2014
24,193
23,733
105
–26,626
–12
98
–25,206
–7
–2,340
–1,382
–11
–118
140
Cash flow from operations before financial items and taxes
–2,469
–1,242
Interests paid and other financial items
Interests received
Dividends received
Income taxes paid
–2,231
485
28,324
–9
–3,165
565
27,661
–107
Cash flow from operations
24,100
23,712
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
Other adjustments
Cash flow from operations before change in working capital
Change in trade and other non-interest bearing receivables (–/+)
Change in trade and other non-interest bearing liabilities (+/–)
29
Summary of Financial Statements
1 Jan – 31 Dec
2015
1 Jan – 31 Dec
2014
Investments in intangible and tangible assets
Proceeds from sale of intangible and tangible assets
–284
42
–622
7
Cash flow from investments
–242
–615
–15,000
75,000
–105,000
3,800
Oras Invest Ltd
(EUR 1,000)
CASH FLOW FROM INVESTMENTS
CASH FLOW FROM FINANCING
Increase of non-current loans
Repayment of non-current loans
Increase of current loans
Repayment of current loans
Group contribution
Dividends paid
–9,348
2,500
–2,000
4,600
–1,500
–23,848
–23,100
Net change in cash and cash equivalents
10
–3
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
50
60
53
50
Cash flow from financing
Annual Review 2015
30
Corporate Governance
Corporate Governance
O
ras Invest Ltd (the Company) is a private limited
company registered in Finland. The company
follows good corporate governance practices
based on the Finnish Companies Act and the
company’s Articles of Association.
The Company is the parent company of Oras Invest Group.
In such capacity, it is responsible for the development of the
management of the Group, prepares the Group’s financial
reporting and supports the Group in financial, legal and
management issues.
The Group consists of a number of independent subgroups
and separate companies. 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, associated companies and other investments.
General Meeting of Shareholders
The highest decision-making authority in the Company is
exercised by the shareholders at the General Meeting of
shareholders. According to the Finnish Companies Act and the
Articles of Association, the General Meeting of shareholders
decides on the following issues:
–
–
–
–
Amendments to the Articles of Association
Adoption of the annual accounts
Dividend distribution
Appointment and compensation of the Owners Board
members
– Appointment and compensation of the Board of Directors
– Appointment of the Company’s auditor and decision on
audit fees
The General Meeting also elects the Chairman of the Board of
Directors and the Vice Chairman of the Board of Directors.
Owners Board
The Owners Board prepares all matters that are brought to be
decided by the General Meeting and decides on all such owner
matters which are not brought to the General Meeting. The
Owners Board is responsible for the ownership steering of the
Company and determines the long-term will and vision of the
owners. The Owners Board works in close cooperation with the
Company’s Board of Directors.
The Owners Board consists of four (4) to seven (7) members,
who elect a chairperson among themselves. Members of the
Owners Board are appointed annually at the General Meeting.
The Owners Board works according to a charter, which
describes the role and functions of the Owners Board in detail.
The Owners Board decides on the proposal for the appointment
of members to the Company’s Board of Directors, which is
brought to the Annual General Meeting.
Nomination Committee
The task of the Nomination Committee is to find the best
possible members to the Board of Directors of the Company
and to prepare the proposal regarding their remuneration.
The Owners Board elects a chairman for the Nomination
Committee among its members; in addition to which the
chairman of the Board of Directors will act as adviser to the
Nomination Committee.
The Nomination Committee submits its proposal to the
Owners Board, and the Owners Board decides on the proposal
for appointment of members to the Board of Directors, to
be brought to the Annual General Meeting. The Nomination
Committee submits its proposal regarding matters related to
remuneration to the Annual General Meeting.
The Board of Directors
In accordance with the Finnish Companies Act, the Board of
Directors is responsible for the governing of the Company and
the appropriate organisation of its operations. The Board’s main
duty is to direct the Company’s strategy so as to advance the
benefit of all shareholders in the long term, while taking into
account the expectations of various stakeholders. The Board
further monitors and supervises the executive management of
the Company, and appoints and dismisses the Chief Executive
Officer. The Board also oversees that the Company acts in
accordance with its values.
Pursuant to the Articles of Association, the Board of
Directors of the Company comprises a minimum of three (3)
and a maximum of seven (7) members, appointed for a term
starting at the close of the General Meeting at which they were
appointed, and expiring at the close of the following Annual
31
General Meeting. Members of the Board of Directors can also
be appointed mid-term, at Extraordinary General Meetings.
The Board of Directors shall comprise of competent
members with diverse expertise from various fields. At least
two (2) independent members and at least one (1) owner must
be appointed as members of the Board.
The Board evaluates its work on an annual basis and reports
on this to the Nomination Committee.
Chief Executive Officer
The Chief Executive Officer (CEO) is appointed by the Board
of Directors. The CEO plans and manages the Company’s
operations and is responsible for its executive management in
accordance with the instructions and orders given by the Board
of Directors. It is the CEO’s duty to ensure that the Company’s
accounts are in compliance with the law and its financial affairs
have been arranged in a reliable manner.
Compensation
The Nomination Committee proposes the salaries and
remuneration of members of the Board of Directors. The
General Meeting of shareholders shall annually decide on the
remuneration of members of the Board of Directors and the
Owners Board. The Board of Directors decides on the CEO’s
salary and benefits and confirms the salaries and benefits of the
executive management.
Supervision
Pursuant to the Articles of Association, the Company has
two auditors and a deputy auditor. The Board of Directors
proposes auditors for election to the General Meeting which
appoints them annually. The auditors provide the Company’s
shareholders with the statutory auditor’s report. Auditors’ duties
are regulated by statutory law and other sources.
Together with the Chief Executive Officer, the Board of
Directors of the Company is responsible for arranging appropriate internal supervision. Annual Review 2015
32
Board of Directors
The Chairman of the Board
Pekka Paasikivi
b. 1944, Finnish citizen, B.Sc. (Eng.)
Board Memberships:
– Chairman of the Board, Oras Invest Ltd
since 2004
– Chairman of the Board, Kemira, 2007–2012
– Chairman of the Board, Uponor, 1999–2008
Kaj Paasikivi
b. 1968, Finnish citizen, B.Sc. (Business
Administration, Woodbury University), MBA
(Helsinki School of Economics)
Board Memberships:
– Member of the Board, Oras Invest Ltd since
2010
– Chairman of the Board, NextStone since 2007
– Vice Chairman of the Board, Oras Ltd,
2013–2014
– Member of the Board, Oras Ltd, 2006–2014
Ulf Mattsson
b. 1964, Swedish citizen, BSc in BA and Econ,
PMD Harvard Business School.
Board Memberships:
– Chairman of the Board, Musti ja Mirri Oy
since 2015
– Chairman of the Board, Granngården AB
since 2014
– Chairman of the Board, Evidensia
Djursjukvård Holding AB since 2014
– Chairman of the Board, ItsLearning AS since
2013
– Chairman of the Board, Crem International
AB since 2012
– Chairman of the Board, AcadeMedia since
2010
– Member of the Board, Oras Invest Ltd since
2014
– Member of the Board, StormGeo AS since
2014
– Member of the Board, AddTech AB (publ)
since 2012
Pekka Paasikivi, Kaj Paasikivi, Ulf Mattsson,
Vesa Puttonen, Dr. Frank Stangenberg-Haverkamp and Christoph Vitzthum
Vesa Puttonen
b. 1966, Finnish citizen, D.Sc. (Econ.), Professor
of Finance, Aalto University since 2001
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
Dr. Frank
Stangenberg-Haverkamp
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
– Chairman of the Board of Travel Asset Group Ltd.,
London/UK since 2007
– Chairman of the Supervisory Board, Fortas AG,
Roesrath/Germany since 2000
Christoph Vitzthum
b. 1969, Finnish citizen, M.Sc. (Econ.)
President and CEO, Oy Karl Fazer Ab since 2013
Board Memberships:
– Member of the Board, Konecranes since 2015
– Member of the Board, Oras Invest Ltd since 2013
– Member of the Board, NCC since 2010
Personnel
Jari Paasikivi, Annika Paasikivi, Tuula Ylhäinen and Anniina Myllyperkiö
President and CEO
Jari Paasikivi
COO
Annika Paasikivi
CFO
Tuula Ylhäinen
b. 1954, Finnish citizen, M.Sc. (Econ.)
Board Memberships:
– Chairman of the Board, Kemira since 2014
– Vice Chairman of the Board, Varma Mutual
Pension Insurance Company since 2014
– Chairman of the Board, Oras Ltd since 2013
– Chairman of the Board, Tikkurila since 2010
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
– Vice Chairman of the Board, Oras Ltd since
2014
– Member of the Board, Finow Ltd since 2007
– Member of the Board, Oras Invest Ltd,
2004–2011
b. 1955, Finnish citizen, M.Sc. (Econ.)
Executive Assistant
Anniina Myllyperkiö
b. 1978, Finnish citizen, BBA
Annual Review 2015
family
company &
industrial
owner
ORAS INVEST LTD
Fabianinkatu 14 A, 4th floor
FI-00100 Helsinki
Finland
Tel. +358 10 2868 100
www.orasinvest.fi