International Coatings Scene
EUROPE
BY SEAN MILMO
EUROPEAN CORRESPONDENT
MILMOCW@RODPUB.COM
Recession restructure
The coatings
industry has
undergone
massive
restructuring
plans to try
and help
maintain
profitability
until the
economy
thaws.
The European coatings sector and its rawmaterialssuppliershaveentereda period of restructuring characterized
by extensive cost cutting measures including
reductions in personnel and, in many cases,
investment.
The result could be leaner businesses,
which will be able to withstand the financial
pressures stemming from short-term low
growth in their home markets.
Already some of the multinational
European coatings companies are showing
that they could emerge even stronger after
the recession to take full advantage of a
revival in demand.
European companies with large coatings
operations have even managed to maintain
their profitability this year despite big falls
in paint sales.
“Their profits are down but not by much,
while a lot of them have retained their margins,” said David Thomas, chemicals consultant at Oxford Economics, Oxford,
England. “They have achieved this mainly
through cutting costs and by restricting
investment.”
While overall investment levels in the
coatings sectors, including suppliers of raw
materials, have been going down, some coatings operations have taken the opportunity
of the economic crisis to strengthen their
position in markets by opening new production capacity, putting more resources into
innovation, and making acquisitions.
“Acquiring new business, especially in
Asian and Eastern European growth
regions, puts us in an ideal position for the
future,” said Raimar Jahn, head of BASF
Coatings AG.
In the nine months from January to
September this year, BASF Coatings’ sales
fell by 18% to €1.6 billion ($2.3 billion),
mainly because their strong dependence on
automobile demand. But the decline has
been leveling out. Sales dropped by 12% in
the third quarter while earnings were higher than in the previous quarter.
“We did well in a market experiencing an
overall downturn,” said Jahn. “During the
crisis, we didn’t lose market share. On the
contrary, in some areas, we managed to gain
market share. While the bottom has been
reached, recovery is slow and unsteady. For
the most part, however, we are headed in
the right direction, even if the situation is
still difficult.”
BASF Coatings has expanded production
capacity this year at its German sites in
Munster and Wuerzburg, and launched a
new scratch-resistant clear coat for automobiles. It has reduced casual staff in
Germany but has retained all permanent
staff in the country, with the help of a gov-ernment-funded scheme for short-time
working without job cuts.
AkzoNobel has announced it is cutting
costs and reorganizing its activities in order
to be “in good shape to take advantage of
the recovery when it comes.”
In its decorative paints business, in which
it is restructuring its supply chain in
Europe, the margin on sales of its earnings
before interest, tax, depreciation and amortization (EBITDA) actually rose slightly to
15.2% in the third quarter of this year
despite a six percent drop in sales. In performance coatings, EBITDA went up by 12%
during the quarter with the help of margin
management and cost reductions.
In November the company was even able
to buy from Dow Chemical the former powder coatings activity of Rohm and Haas.
Leif Darner, AkzoNobel board member
responsible for performance coatings,
described it as “a strategic acquisition
which will enable us to further penetrate
