Coatings World - April 2011

els and raw material prices are still volatile, so discipline remains key,” said Hans Wijers, AkzoNobel’s chief executive and chairman.

However in Europe, coatings companies are continuing to be intent on running a lean operation. Some of them are undergoing a lot of restructuring and reorganizing of activities in order to keep a tight grip on costs by improving infrastructure and distribution and curbing investments to increase cash flow and strengthen margins.

With many, the majority of investment is being made outside Western Europe, particularly in Asia. While Jotun is building a new paints plant in Norway after closing two in the country, its other major projects are the construction of a production facility and distribution center in Malaysia and Singapore, two plants in China and an expansion of a powder coatings unit in the United Arab Emirates (UAE) while it has plans for a new waterborne coatings plant in neighbouring Saudi Arabia.

In decorative paints markets outside Western Europe, European companies are channelling a lot of money into building up awareness of their brands. AkzoNobel last year increased promotional expenditure by 30 percent from five percent to six percent of revenue.

In Europe coatings producers tend to concentrate on reinforcing their long-es-tablished premium brands by introducing backup services related to them, such as help with color choices and interior design. But these high-margin premium products can be relatively profitable even during periods of sluggish growth, which is a major reason for European coatings multinationals wanting to ensure they retain a firm foothold in the region.

In the global decorative market, volume outstrips value so while decorative paints account for 51 percent of output they make up only 44 percent of the value, according to the latest figures from the International Paint and Printing Ink Council (IPPIC). In Europe the position is reversed with its share of the worldwide paints market being higher by value than volume.

At Finnish-based Tikkurila, a regional
player in decorative and industrial coat-
ings covering the Nordic countries, East-
ern Europe and Russia and the rest of the
former Soviet Union, operating margins of
approximately 11-13 percent were
recorded by its Scandinavian and Russian
operations. The exception was its Central
and Eastern European activity, dominated
by Poland, in which margins slumped to
four percent, partially due to intense com-
petition in the Polish market.