Coatings World - December 2012

been undergoing the most restructuring with production being centralized in large plants to cut costs.

BASF Coatings’ recent sale of its Relius decorative operations in Germany and France to Prosol Lacke + Farben GmbH of Germany highlighted a swing to vertical integration in the sector. Prosol is a leading coatings wholesaler.

“The renovation part of the decorative market in Europe is pretty stable,” said Alexander Keller, a partner at Roland Berger strategy consultants, Dusseldorf, Germany. “But in Europe there will not be much growth in the second, more volatile decorative segment of new building.” “Overall, the European decorative market is not going to be a source of big profits, but it will still be providing profits on a stable basis,” he added. “On the other hand, there is good potential for industrial coatings in Europe. There is a large installed industrial base in Europe where customers expect quality and

technological performance and are will-
ing to pay for it.”
AkzoNobel surprised analysts in
November when it announced a €2.5 bil-
lion write-down of its decorative paints
operation, plunging the company into a
net loss of €2.4 billion in the third quar-
ter. Decorative paints account for ap-
proximately a third of AkzoNobel’s total
sales with its other two businesses of per-
formance coatings and specialty chemi-
cals both also making up a third each.

The move reflected the extent to which the decorative paints operation has been declining in value in recent years, mostly in Europe and the other mature market of North America. Approximately three quarters of the impairment charge was for the European decorative activities and most of the rest in North America.

AkzoNobel’s profit margins in deco-
rative paints in Europe, which accounts
for 47 percent of its decorative sales, and
in North America have been slipping in
recent years while it is thought the com-
pany has not been making much mon-
ey yet out its decorative paint sales in
China, India and other emerging Asian
economies.

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