Paint Firms Look to Emerging Economies
for Growth Opportunities
Slow, stable
domestic markets
are the backbone
of operations, but
growth lies in Asia,
Eastern Europe and
Latin America.
by Sean Milmo
European Correspondent
milmocw@rodpub.com
Many of Europe’s large and medium- sized coatings companies, predomi- nantly based in Western Europe, are
having to grapple with the problem of operating businesses in markets with different characteristics and growth rates around the world.
Also private equity funds are now taking the
opportunity to offload investments in the sector,
which they made before the recession.
They have a slow-growing domestic market
so that much of their increases in sales have to
come from expansions in the fast-growing markets of the emerging economies of Asia, Latin
America and Eastern Europe.
The contrasts between the mature and developing segments of the global coatings sector
has been evident in the latest annual results of
Europe’s paint producers.
AkzoNobel, the world’s biggest coatings producer, recorded 33 percent and 25 percent rises
in Asia and Latin America respectively last year
in decorative paints. In Europe its decorative
sales increased by two percent.
Overall AkzoNobel’s sales of decorative
paints went up by nine percent to € 5 billion
($7.1 billion) and those of performance coatings
by 16 percent to € 4. 8 billion. With revenue from
its specialty chemicals operation, approximately
40 percent of its sales now come from fast-growing markets.
With such big differences in geographical
growth rates, many European coatings companies, even SMEs, have been extending their activities outside their Western Europe base into
Eastern Europe and countries on the periphery
of Europe. The multinational players are now
investing heavily further afield in Asia and
Latin America.
European coatings companies with a global
reach tended last year to be the leading performers in terms of sales increases as well as
profitability. BASF Coatings, a large proportion
of whose sales come from the global OEM markets, benefited from a revival in the automobile
market worldwide with an 19 percent rise in
sales to €2.6 billion.
Norwegian-based Jotun, which is probably
the most internationalized of the top-ranking
pure-play European coatings companies with
non-European sales of approximately 60 percent,
pushed up revenue by seven percent to 12 billion
Norwegian kroner ($2.1 billion) with operating
profit up 16 percent to 1.2 billion kroner.
Its combined investments in capacity, personnel, new markets and R&D were the highest
last year in the company’s 80-year-old history.
A large proportion of the investments were in
the Middle East and Asia, which account for the
vast majority of its sales outside Europe.
In the running of their increasingly internationalized businesses, European coatings companies are adopting different strategies in
different regional markets. Most companies
have been intent on reducing costs and raising
cash flows across the world. “Our markets
have not yet fully returned to pre-recession lev-
