Europe’s Economies Brace For A Tough 2012
With a recession
looming on the
horizon, Europe’s
paint and coatings
industry is readying
itself for a rough
year.
by Sean Milmo
European Correspondent
milmocw@rodpub.com
The coatings industry in Europe has been bracing itself for an extremely difficult 2012 in which much of the region will
be suffering from the effects of a severe economic downturn mainly due to the impact of
the troubles with the euro on consumer and
business confidence.
Many coatings companies have stepped up
cost-cutting programs and taken restructuring
measures, including job cuts.
One major concern is that a double-dip recession in 2012 will be the start of a long period
of slow economic growth that will force coatings producers to reorganize themselves even
more radically.
In fact the 17 countries of the euro zone have
already been experiencing a decline in GDP in
the fourth quarter of 2011. If, as is being predicted by economic forecasters, this is followed
by a drop in output in the first quarter of 2012
the area will officially be in recession.
Most Western European countries are expected to go through decreases in GDP growth of
60-90 percent next year compared to 2011 which
itself was a year of slow growth. In the majority
GDP rises will shrink to well below one percent
with large economies like Italy, Spain, France and
the UK being in or close to a recession.
On the whole Eastern European states will
fare better but even many of them will by hit by
considerable decreases in growth rates. Poland’s
GDP will fall from 4.2 percent to 2.5 percent
while Russia’s will actually go up from four percent to 4.1 percent but Hungary will slip into
recession, according to figures from the Paris-based Organisation for Economic Cooperation
and Development (OECD).
“At the beginning of the 2011 there was a lot
of optimism about an acceleration in the recovery from the 2008 financial crisis,” said Alan
Eastwood, chairman of the economic forecasting panel of the European Chemical Industry
Council (CEFIC) and economic advisor to the
“Now we’ve ended the year amidst a lot of
gloom and doom,” Eastwood said. “With Euro-
pean governments cutting back public expendi-
ture and the banks reluctant to lend money, it is
difficult to see where any significant growth will
come from.”
Cefic was predicting in early December that
chemicals output, which is usually an indicator of
trends in paints production, would go up by 1.5
percent next year compared with two percent in
2011. But already that rise is looking optimistic.
“The outlook for GDP growth in the EU has
changed within a few weeks,” said Eastwood.
“It could now be as low as 0.5 percent or even
negative which will mean chemicals output will
be lower than we initially thought.
“Amongst downstream sectors, construction
in particular will remain even more depressed,
which will put demand for decorative paints
under pressure,” he said. “With a scarcity of
money for mortgages fewer people will be mov-
ing into new homes.”
Due to the impending tighter squeeze on the
construction sector, coatings companies with
large decorative paints portfolios have tended to
be the most active in refocusing their strategies
and taking restructuring initiatives in Europe.
AkzoNobel, which has by far the biggest decorative paints business in Europe accounting for
over half its global decorative sales, has revealed
it is introducing further cost reduction and
streamlining measures in Europe.
Over the last three years in its Europe, Middle
East and Africa (EMEA) decorative business, in
which Europe has accounted for the vast majority
of annual sales of over €2.5 billion ($3.3 billion),
the company has closed 11 production plants, 19
warehouses and discontinued 19 brands.
The product portfolio and distribution will
now continue to be simplified, Richard Stuckes,
EMEA managing director for decorative paints,
told a recent meeting of investors and analysts in
Amsterdam. The managerial structure of the
EMEA business will be streamlined with countries focusing on selling and marketing while the
business unit’s (BU) organization will concentrate on further integration of supply chains and
supporting local activities.
