Coatings World - June 2016

Charles W. Thurston, Latin America Correspondent

The regional demand for paint and coatings in Latin America (including Mexico) is likely to exceed gross domestic product growth (GDP) in the region, forecast at only 0.2 percent this year. In the recent past, paint and coatings growth has moved one to two percent faster than the GDP, but it seems far less likely that this year will follow suit on a regional basis.

2015 was a tough year from which to recover, and the process is not over. “The Latin American and Caribbean region’s GDP contracted by 0.4 percent in 2015, which translated into a 1.5 percent downturn in per capita GDP, the poorest performance since 2009,” opined Daniel Titelman, chief of the economic development division of Economic Development Division of the Economic Commission for Latin America and the Caribbean (Eclac), in Santiago.

More optimistically, “We believe that we will see growth this year at moderate levels in Latin America varying by country, ( although) economic indicators predict further contraction. Even though the economic conditions in Brazil remain challenging, PPG has seen growth within portions of our portfolio due, for example, to some of our competitors in the automotive refinish sector exiting the market,” said Tim Knavish, PPG senior vice president, automotive coatings, who also oversees PPG’s Latin America operations.

Matthew N. Winokur, the vice president of corporate affairs at Axalta Coating Systems, in Philadelphia, said “Reflecting our confidence in the long term prospects in the region, we continued to invest there. We hope to capitalize on opportunities in all the end-use markets we serve across the region.”

Major Players Report Varied Results

AkzoNobel’s CFO Maelys Castella said in an April earnings call that their “decorative paints business saw revenues decline 27 percent in Latin America to €101 million (about $114 million), during the first quarter of 2016.” The company reported in its 2015 annual report that “Performance Coatings revenue was up seven percent, driven by favorable price/mix and currencies. Volumes were down two percent across the segments, impacted by market developments in Brazil and ongoing spending declines in the global oil and gas industry.” Akzo-Nobel claims to lead the Latin American market for decorative paints, and suggests that the combined segments in the region represents about 10 percent of its global sales, which were € 14. 9 billion (about

$16.8 billion) last year.

BASF reported in its third-quarter 2015 report that regional
coatings sales were affected by “the depreciation of the Brazilian
real, together with weaker demand (and) considerably reduced
sales in the decorative paints business in Brazil. Earnings de-
clined slightly, as South America observed lower volumes and
negative currency effects in all business areas.”
BASF began the implementation of its 2025 Strategy - South
America two years ago, with a sales target of € 9 billion (about
$10.2 billion) in South America. Since 2011, BASF will have
invested €1.2 billion (about $1.4 billion) in infrastructure on
the continent by 2017, including €500 million (about $565 mil-
lion) for the construction of the Acrylic Complex in Camaçari,
Bahia State.

PPG reported that during 2015, “Latin America sales volumes grew 3. 5 percent year-over- year. In addition to the organic growth, acquisitions, led by Comex, added about 6.0 percent to net sales.”