International Coatings Scene
LATIN AMERICA
BY CHARLES W. THURSTON
LATIN AMERICAN CORRESPONDENT
THURSTONCW@RODPUB.COM
Chilean paint market tightens
with competition
Chile’s paint
and coatings
industry
is one of
the most
developed in
Latin America
and expects
positive
growth.
Chile’s estimated $200 million paint
and coatings market is coming under
increasing pricing pressure as manufacturers compete more aggressively for sales,
while raw materials costs escalate and paint
overproduction continues, according to Fitch
analysts Andrea Jiminez and Rina Jarufe, in
Santiago.
Despite greater competition in the architectural paint market, the outlook for consumption
in Chile is strong and expected to rise with the
four to five percent gross domestic product
(GDP) growth projected for this year. Last year
Chile’s economy grew at 5.1%, according to the
Chilean Central Bank.
One reason for the strong expectations for the
Chilean economy is record prices for copper
exports, which have largely insulated the country from the fallout of the U.S. economic slowdown. Indeed, Chilean GDP per capita is well
over $11,000, one of the highest levels in Latin
America, and inspired a 7.7% increase in household spending during 2007. Per capita consumption of paint in the country is only 1.3 gallons.
In a recent review of the credit risk for
Tricolor S.A., of Santiago, one of Chile’s leading
domestic paint producers, the Fitch analysts
indicated that the architectural segment represents approximately 60% of overall sales for all
manufacturers in Chile, while the industrial
segment represents the other 40%. In contrast,
Tricolor derives 70% of its sales from the architectural segment, and 30% from the industrial
segment. Some two-thirds of Tricolor architectural sales are made through hardware or box
stores, while one-third are through large distributors like Sodimac, Easy and MTS, Fitch
reported.
Tricolor reported roughly flat sales of approximately $94 million in 2007 compared with
2006, but still maintains a stable outlook, the
Fitch analysts reported. The company had little
success in raising prices during 2007 despite rising oil and petrochemical costs, which account
for 80% of Tricolor’s materials costs. As a result,
Tricolor margins eroded by 5.8% last year, the
analysts reported. The market preference for
oil-based paints in Chile is growing faster than
water-based paints, the Fitch analysts noted.
“One reason for the strong
expectations for the Chilean
economy is record prices for
copper exports...”
Tricolor has sales offices throughout the country, including the cities of Antofagasta,
Concepción, Temuco, Puerto Montt and Punta
Arenas. The company manufactures latex
paints, enamels, varnishes, anti-corrosives,
industrial paints and other products at factories
in Vina del Mar, and in Lima, Peru. Tricolor controls the Pinturas Iris brand in Chile and the
Pinturas Vencedor brand in Peru.
The Fitch analysts noted that the Peruvian
paint and coatings market is far less developed
than in Chile, with per capita paint consumption only 0.3 gallons per year in Peru and a per
capita GDP of only approximately $6,500. Still,
Peru’s economy expanded by nine percent during 2007, and early International Monetary
Fund indicators suggest that this year seven
percent GDP growth will take place. Fitch
recently upgraded Peru’s sovereign credit risk to
investment grade, indicative of expectations of
strong economic performance there. Chile was
previously the only country in Latin America
with an investment grade for sovereign risk. CW
