Coatings World - May 2012

Centralizing Deco Paint Operations
To Maximize Efficiencies
by Sean Milmo
Europe Correspondent
milmocw@rodpub.com
Recently
announced
plant projects

for Jotun and AkzoNobel highlight trend among paint makers to centralize production.

Jotun opened in March at Sandefjord, Nor- way, a decorative paints plant costing NOK 500 million ($87 million), which the company claims is one of the most modern in the world. It replaces two other decorative paints units in the country.

Meanwhile AkzoNobel received a planning permit in February to build a £100 million ($161 million) high-tech decorative paints plant across the North Sea at Prudhoe in northeast England, which will also replace two other facilities.

The projects are part of a general trend in the decorative paints sector in Europe—and to a lesser extent in its industrial coatings segment— to centralize production of paints to raise efficiencies, increase sustainability and cut costs.

Shareholders view these projects as favorable because at a time of low demand for decorative paints in slow-growth Europe, they will help to maintain or even raise margins.

The plants also being welcomed by the growing number of home improvement retail chains in the region who are aiming to centralize as much as possible their own supply sources. The concentration of manufacturing by paint companies is helping these retailers increase the amounts of decorative paints purchased directly from producers with the aim also of reducing costs.

However ironically at the same time the retailers are also seeking to expand into areas in which they will be competing with their suppliers, especially by pushing up sales of their own brands. The reorganization of paints production is freeing up capacity for the making of own-brand products.

Jotun’s plant at Sandefjord, which has been built as an addition to its existing plants at its Vindal site in the city, will supply the whole of Scandinavia, which is the company’s main decorative paints market in Europe. A facility for the production of fillers has also been added while a unit for making tinters has been expanded.

Kingfisher of the UK, one of the biggest home improvement retail groups in Europe, which runs the B&Q stores in its home market, is aiming to increase direct sourcing to 35 percent in the medium-term.

As part of the reorganization, all production of marine and industrial coatings has been moved to Jotun’s site at Flixborough, England.

The company says that its production facilities in Norway were “old and inefficient”, production and logistics costs were too high and “significant structural improvements “ were needed to make the company’s operations cost effective.

“Constructing this plant in Sandefjord made the most sense for financial and market proximity reasons,” said Jan Helge Eriksen, production and logistics director in Jotun’s decorative business. “We believe we will gain a stronger market position by producing in the very market we sell in.

“With increased use of new systems and au-
tomation we can be more responsive to the mar-
ket and produce according to demand,” Eriksen
said. “This again will lead to a lower build-up of
stock and allows us to supply the market more
quickly and efficiently.”
The plant, with an annual capacity of 80
million liters, will enable a reduction in the use
of solvents and the use of less hazardous chem-
icals. CO2 emissions from internal trans-
portation are projected to be cut by 80
percent. Energy consumption will be decreased
by half.