International Coatings Scene EUROPE BYSEANMILMO EUROPEANCORRESPONDENT MILMOCW@RODPUB.COM
Is the end of the recession in sight?
Paint firms
are moving
forward with
caution
despite signs
of market
stabilization.
The consensus among European coatings companies and their suppliers is that the sharp drop
in demand for paint is levelling out.
But because of short-term economic
uncertainties they are still not confident about the future trends in sales in
the coming months.
Instead companies are continuing with
policies adopted early in the recession of
cost cutting and other initiatives to ensure
that at least they maintain their margins
during a period of falling revenues.
“We think that the downturn seems to
have bottomed out and that there seems to
be stabilization at a low level,” said Kurt
Bock, chief financial officer at BASF of
Germany, a leading coatings producer and
supplier of coatings raw materials. “But we
see no signs of a sustained upturn,” he told
a conference call on the company’s half-year
results.
BASF Coatings’ sales dropped 18% in the
second quarter and by 22% in the first half
of the year. The company described the
demand for automotive and industrial coatings as “dramatically lower” in the second
quarter.
Yet its coatings business was able to
achieve stable margins during the quarter as
a result of lower fixed costs due to restructuring measures. A loss in the first quarter
was turned into a profit in the second.
AkzoNobel was even more cautious, particularly since its sales levels were still well
below those in 2008. “With the exception of
some emerging markets, we see little significant recovery of growth,” said Hans Wijers,
the company’s CEO. “Due to the continuing
economic uncertainty, forward visibility still
remains limited. Therefore management
actions continue to focus on customers, costs
and cash.”
The company’s interim results confirmed
big falls in sales compared to a year ago but
improvements on first quarter figures.
Revenue from decorative paints was down
by five percent in the quarter against 11%
in the first quarter. A 13% margin for earnings before interest, tax, depreciations and
amortization (EBITDA) in decorative sales
compared well with a 14% margin in the
same period last year.
In AkzoNobel’s performance coatings
operation, the EBITDA margin actually
went up in the second quarter from that of a
year ago—from 13% to 15.8%. This was
despite a 14% drop in sales in the second
quarter, with a fall of 19% by volume being
offset by price rises averaging five percent.
Other coatings companies also reported
second quarter results which, although
showing sharp declines over figures of a year
ago, were better than the first quarter’s.
Tikkurila, the coatings division of Kemira of
Finland, recorded sales 46% higher than the
first quarter’s and an operating profit which
was more than five times higher.
These improvements reflected progress in
the performance of some key parts of the
European economy since the beginning of
the year.
“The European economy as a whole seems
to have turned the corner,” said Alan
Eastwood, economic advisor at the UK’s
Chemical Industries Association (CIA) and
head of an economic forecasting group at the
European Chemical Industry Council
(Cefic). “Some of the figures on GDP growth
within individual countries in the second
quarter have turned out to be much more
positive than expected.”
In the 27 member states of the European
Union, GDP declined by 0.3% in the second
quarter compared to the previous quarter
but in the first quarter the quarter-by-quar-ter fall was 2.4%.
Significantly the economies of France and
