(Cefic), representing chemicals producers.
Speciality chemicals production, which
also comprises coatings and its raw materials, went up by 0.7 percent last year after slumping by almost 4 percent in 2012.
“Europe is (now) expected to return to the growth zone,” said Matthias
Wolfgruber, chief executive of Altana
AG, a German-based vertically integrated coatings, sealants, pigments and additives company.
With approxmately 42 percent of
last year’s sales of €1.8 billion ($ 2.45
billion) in Europe, the company is hoping to double its revenue by 2020 while
maintaining earnings before interest, tax,
depreciation and amortisation (EBITDA)
at a sales ratio of 18-20 percent.
After suffering sometimes sharp
declines in European sales and profits following the post-2008 economic
downturn, most European coatings
companies have been restructuring their
domestic businesses to raise efficiencies
and reduce costs.
They are now hoping that they can
use their leaner European operations as a
platform for achieving steadily rising and
much more profitable sales in Europe,
especially in the economically more dynamic Western European countries.
Tikkurila of Finland, a decorative and
industrial coatings producer supplying
the markets in Scandinavia, Central and
Eastern Europe and Russia and its neighbours on the eastern European periphery, recorded a revenue decrease of 2.6
percent last year. Yet its operating profit
went up 7. 7 percent to €71.5 million with
a margin on sales of close to 11 percent.
In its home market of Finland sales
dropped by 3. 6 percent to € 108 million
but its operating profit jumped by 38 percent with a margin of 14 percent. In its
Central and Eastern European business
operating profit soared by 93 percent on
flat sales of €125 million.
“We have been modifying and simpli-
fying our structures in recent years,” said
Erkki Jaervinen, Tikkurila’s president and
chief executive. “These measures have sup-
ported good profitability in our operations
in the challenging economic situation.”
BASF Coatings, which has approxi-
mately 40 percent of its sales in Europe,
European decorative paints operation.
“Our coatings business has been
developing very nicely last year, especially in emerging markets,” Kurt Bock,
BASF’s chairman told the company’s recent annual results press conference in
Ludwigshafen, Germany.
AkzoNobel’s European sales of
decorative paints, in which it is market leader in the region, fell 5 percent
in 2013 to €2.5 billion, still around 60
percent of its global decorative sales.
Yet its operating income in European
decorative paints was higher than in
2012 due to a lower cost base created
by efficiency improvements, according
to the company which does not give a
breakdown of profits figures by region
or segment.
Among the restructuring initiatives in
its European decorative business was the
divestment of its European building adhesives activity to Sika AG of Switzerland.
It also sold a network of stores for professional painters in Germany, while it
has also been improving the effectiveness
of its stores network in France.
“We are taking decisive action
to streamline our product range, re-
duce complexity and become more
competitive,” said Roud Joosten, member
of AkzoNobel’s executive committee re-
sponsible for decorative paints.
The company is implementing a new
business model for European decorative
products which exploits the benefits of
a simplified management structure with
a greater emphasis on sustainability and
eco-premium paints with a high environmental profile.
Next year it is due to commission
a £100 million green-field decorative
paints plant in northeast England with
an annual capacity of 100 million litres,
which will replace two other UK plants
and supply both the UK and continental
European markets. It will use r harvested rain water and consume 60 percent
less energy per litre of paint output.
The company’s ‘Fix Europe’ agenda which embraces both its decorative
and performance coatings businesses
not only covers manufacturing and
distribution but also marketing, sales
and administration. The objective is
to have a slimmer and more cost competitive structure to take full advantage of the expected renewed growth
in Europe.
However the reorganisations being
undertaken by AkzoNobel and many
other European coating companies
may first have to cope with the economic reverberations of the confrontation between the West and Russia
over Ukraine.
The Russian economy was already
showing signs of softening before the
Ukrainian uprising. “In Russia consum-
er confidence weakened during the last
months of the year,” said Jaervinen,
Otherwise not only themselves but
most other European coating compa-
nies will have to be much more cautious
about the prospects for sales and profits
not only this year but probably in 2015
as well. CW
“Many Western
European countries
have been relying
on exports to those
emerging markets
on their doorsteps to
offset static or even
declining domestic
sales. “
