International Coatings Scene
EUROPE
In China coatings volumes have been
going up 20-30% a year—double to
triple GDP growth—and in India the
increase in volumes has been 12-14%
which has also been well above GDP
increases.”
The response of Jotun Group of
Norway to reduced growth in the
global economy is to step up its
investment in growth markets outside Europe.
“It is important for us to be able to
position ourselves in the countries
and sectors where there is reason to
believe that growth will remain relatively strong over time,” said Morten
Fon, Jotun’s CEO. His company is
planning to open a new plant in
South Korea next year and is building a new factory in Libya.
Also both coatings producers and
suppliers of their raw materials and
intermediates appear at the moment
reluctant to cut back on R&D expenditure because of the importance of
innovation in exploiting rising
demand in a revived economy.
“Everyone is thinking about innovation during a downturn,” said
Martin. “Innovation helps companies
become more efficient, save money
and certainly enables them to
become more competitive.”
“At Rohm and Haas, we are using
this crisis as an opportunity to
expand our reach in the market,” she
continues. “It is the right time to do
it. We are helping customers create
new and better formulations so that
they can get the right product to the
right marketplace in preparation for
the economic recovery. You cannot let
up in a downturn. Otherwise, you’ll
lose out when the upturn comes.”
With some coatings companies,
however, the priority will be to avoid
being in financial difficulties in a
recession at whatever cost. For others it will be a matter of survival.
Both raw material suppliers and
coatings manufacturers are now paying much closer attention to the
financial health of customers when
providing credit to them.
“We are seeing more credit problems with some of our customers,”
said Steven Welch, chief operating
officer, international businesses, at
BP which is a leading producer in
Europe of acetic acid, a major raw
material for coatings production.
“We haven’t been significantly
reducing the amount of credit we
give to customers,” he added. “But
we are watching things very carefully. In a commodity business with low
margins you cannot afford any
write-offs.”
Even large companies are being
attentive to their debt financing.
With €1.8 billion of its net debt due
to mature in the next seven months,
Akzo Nobel has decided to defer the
remaining €1.6 billion of a share buy-back program.
Analysts are expecting a certain
amount of restructuring along the
coatings supply chain over the next
year, mainly through takeovers.
“There will definitely be more consolidation,” said McCulloch. “Times
like these when companies will be
getting into difficulties are an opportunity for expansion through acquisition for cash-rich players.” CW
