Coatings World - April 2012

Tikkurila is expecting that, for its business, 2012 will be a repeat of 2011, which it regarded as a relatively good year with sales up 9. 4 percent and operating profit up 9. 7 percent. “We are feeling quite optimistic about this year, especially about the prospects for returning as good a profit as last year, which at around 10 percent is not bad for a coatings business,” said Jaervinen.

Coatings companies, particularly in
the decorative paints sector, have been
anticipating an end to a destocking pe-
riod early this year, which began in the
third quarter of 2011 after a brief surge
in demand. AkzoNobel, the leader in the
European decorative market, reported
that in the European sector there was “a
solid start to the year but a significant
slow-down in the second half of 2011 in
those countries most impacted by the
euro crisis.”
However the destocking activities in
the decorative sector is linked to a new
tendency among the larger retail chains to
cut back their inventories permanently.

“They are ordering the quantities they
need in the light of existing demand,” said
Jaervinen. “They are not speculating any
more by buying more than they require at
any one time in order to take advantage
of existing prices.”
Instead retailers are investing in data
processing and modelling of demand pat-
terns to predict more efficiently short-term
sales. They are also reducing the number
of paint brands they buy while at the same
time buying direct from coatings manu-
facturers rather than through wholesalers
in order to reduce logistics costs.

These retailers are looking to paints producers and other suppliers to help make cost savings. Kingfisher plc, a UK-based leading pan-European home improvement chain, recorded a 20 percent rise in pre-tax profit in the 2011/12 year to the end of January on a 3. 6 percent increase in sales. Ian Cheshire, Kingfisher’s chief executive, said amid “challenging times for our customers” the rise in profits had stemmed from cost-cutting and efficiency initiatives.

Kingfisher even managed to lift retail profit by 11. 6 percent on flat sales in the UK, which is its main market with 572

stores but whose DIY sector has been in the doldrums since a sharp drop in house prices after the 2008 financial crisis.

“The outlook for the decorative paints market in the UK this year is quite pessimistic because it won’t recover until there is an upturn in construction which we can’t see any sign of at the moment,” said Tony Mash, chief executive of the British Coatings Federation (BCF).

However the picture is much brighter with industrial coatings both in the UK and elsewhere in Europe due to a pickup in exports of engineering products and the start of a revival in capital investment.

“We saw increases in sales in various industrial coatings segments last year and this upwards movement is continuing so far this year, mainly because of demand from UK exporters,” said Mash.

In Germany, which is the only EU
country in which business and consumer
confidence is currently above the long-
term average, companies appear to be
starting a new round of capital expendi-
ture. “We’ve seen fairly strong sales of
coatings for machinery and heavy equip-
ment after customers have now gone head
with investments postponed since 2008,”
said one German-based industrial coat-
ings manager.

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