European Paint & Resin News - Executive Briefings 2004
Executive Briefing - June 2004
‘In ancient Greece there were 12 gods. In modern Greece there are 11' was the improbable boast painted on the side of Greece's Euro 2004 team bus prior to the UEFA Euro 2004 football tournament.
In spite of the eighty to one odds, Greece heroically defeated the host nation Portugal 1-0 in the final, thus writing a new legend through their spirit and national pride - and laying new foundations for the future of Greek sport, just a few weeks prior to the Athens 2004 Olympic Games.
Another last Herculanean effort will still be required by the country of just 11 million people. It may now rank number one in European football with a consequent rush on blue and white colours but Greece was the 10th ranked European domestic paint market in 2002 by volume and 12th by value. Greece is a net importer of paints.
Imports are dominated by Italy, with Germany and the UK in second and third place. The top four countries - Italy, Germany, UK and France - supplied 72% of Greek paint imports in 2002.
After the Euro 2004 success and with the Olympics returning to its spiritual home after more than 100 years away the Gods are also looking down benevolently on other concerns that honour them - if only in name.
Helios is acquiring a majority share in its rival in the Slovenia paints market Color of Medvode for (see page 5) while Apollo Management, a private investment firm, is taking the laurels in the resins field; it has signed a definitive agreement to acquire Borden Chemical.
Borden Chemical produces binding and bonding resins, performance adhesives, UV-curable coatings and the building-block chemical formaldehyde for various wood and industrial markets. Based in Columbus, Ohio, the company has 2,400 employees worldwide.
Apollo Management is acquiring Borden Holdings, the parent of Borden Chemical, from BW Holdings, an affiliate of Kohlberg Kravis Roberts & Co. Apollo Management recently announced it is buying parts of Eastman's coatings, adhesives, speciality polymers and inks, more details on page 6.Arvanakos, C. Market Brief : Greece - Paints (BFAI), 2003, 12-6.
http://www.contracostatimes.com Jun. 20, 2004. Toronto Star Wed. 7 July 2004. CEPE, Nov 2003. Inside Paint, 7 July 2004
Executive Briefing - May 2004
The 2004 Financial Times global ranking of the world’s top 500 companies by market capitalisation highlights the effects of the rally in stock market prices.
This year’s list is headed by General Electric, having pushed last year’s leader Microsoft into second place. Altogether the USA leads the list with 227 companies with a total market value of $9023BN.
The capitalisation ranking also confirms the relative low standing of the world’s chemical companies. A notable departure this year was PPG Industries, which last year had joined the Index in 470th place. The ranking of the remaining chemical companies (as of 25 March) is headed by DuPont.
Are chemical companies becoming too small? - asked an editorial in the wake of such announcements as Akzo Nobel’s sale of its catalyst business to Albemarle, the Dynamit Nobel takeover by KKR/CSFB and Rhodia’s divestment of its European phosphate unit to Thermphos.
Scale can be important. Not only does diminishing size have an adverse impact on stock market valuations, but also on the visibility of chemical companies within the financial community and the ease of raising funds.
Even many large multinational chemical companies fall below the $5BN capitalisation threshold: ICI, DSM, Eastman and Clariant. Celanese has now been delisted following its takeover by private equity group Blackstone.
Maybe, as chemical companies continue to strip to their essential core, there is actually, in the words of the ECN editorial, ‘a problem waiting at the core’. FT Global 500, Financial Times, 27 May 2004,16p, ECN, 27 April - 2 May 2004
EPRN EXECUTIVE BRIEFING - April 2004
May 1 marked the largest single expansion of the EU in its half-century history - and for eastern European countries changed Soviet rule to just a bad memory.
The ten new countries are the Baltic Sates of Estonia, Latvia and Lithuania plus the Czech Republic, Hungary, Poland, Slovakia, and Slovenia. Also joining are the Mediterranean islands of Cyprus and Malta.
The economic offerings the eastern nations bring are mixed. Current growth outstripps that of the stagnating Eurozone. According to the European Bank of Reconstruction and Development, GDP growth in the eight East European accession countries is expected to moderate in 2004. The highest growth will be in the Baltic States, followed by Hungary, Slovakia, Poland and Czech Republic, trailed by Slovenia.
To the West European paint market, accession will bring extra capacity and an additional demand. For West European raw material suppliers this will spell opportunities, be it through trade, M&A opportunities or direct manufacture.
In time, however, there's likely to be a shift from imports to direct manufacture, as the economies of the new countries begin to converge with the original EU states. This will bring further opportunities for technology licencing and M&A.
German industry is reported to be confident that the enlargement, which has created a market encompassing one-quarter of the world's total economic output, will offer new prospects for trade.
Eastern Europe has become the preferred production site for German automotive suppliers.
Volkswagen makes its new sports-utility vehicle in Slovakia, not Germany. In Poland, the Czech Republic and Slovakia, the carmaker is one of the three biggest German direct investors. Audi is the second-largest German investor in Hungary.
But while enlargement provides German companies access to a further 74 million people and gives them new opportunities to produce goods and services more efficiently, labour in the new member countries costs a fraction of the former-EU average and all boast lower taxes.
Economists suggest that German companies will have to invest more in research and development if they are to keep pace with competitors to the east. Forced over the past three years to tighten their belts, many have skimped in this area.
The rewards of accession will be material and psychological: bringing opportunities in trade, investment and aid but also, after an interval of some 50 years, in reforming the greater European family of nations. There is bound to be much greater competition in the corporate scene, and an inevitable shake-out.
Chem Week. 7/14 Jan 2004. Frankfurter Allgemeine Zeitung May 7 2004
EPRN EXECUTIVE BRIEFING - March 2004
The approach of the end of the first quarter of the year has seen a sudden flurry of company announcements and acquisitions.
Among these were a dual announcement by Bayer AG, who timed the naming of its spin-off chemicals business with news of the largest loss in its 141 year history.
At its Spring financial news conference Bayer announced the new company, in which it intends to place a large part of its chemicals business and some activities of Bayer Material Science, provisionally called ‘NewCo’, is to be named Lanxess.
‘We believe that the name is goal-oriented and forward-looking’ said Dr. Axel C. Heitmann, CEO designate of Lanxess, following the vote on the name, which was also approved by the Bayer Management Board. ‘This name is a combination of the French word 'lancer', meaning to set in motion, and the English word 'success'. It conveys our credo: we are aiming for success, as quickly as possible.’
Bayer also announced it annual results for 2003 showing improved operating performance and increased EBIT - despite difficult economic conditions and negative currency effects. Group sales declined though. Sales in local currencies advanced. However, the company’s net loss was largely due to impairment losses and valuation adjustments at end of 2003.
Bayer said it will decide early in the second half whether to perform an IPO or simply hand shares in the company over to Bayer shareholders as Hoechst AG did in 1999 when it carved out Celanese AG. Bayer are reported as saying an IPO is favoured because it would bring in more money.
Incidentally, a Google search for ‘Lanxess’ produces the query ‘Did you mean: laxness’ - which sets up Bayer’s management as easy meat for headline writers if the IPO doesn’t work out, which if it doesn’t could result in liberal use of the Novartis AG brand ‘Ex-Lax’ in reports of the departing executives...
Two days before the end the quarter, Lyondell Chemical Co. announced it is to acquire Millennium Chemical Co. to create the No.3 North American chemical producer. The company will be called ‘Lyondell Chemical Co.’ based in Houston, where Lyondell is currently based. Millennium is based in Hunt Valley, Maryland. Lyondell expects the acquisition to add to its earnings in 2005.
In the new organization, Lyondell, Millennium and Equistar, their plastics and petrochemicals joint venture, will each remain separate entities and keep their separate debt structures.
Analysts found positives as it will diversify Lyondell’s and Millennium’s TiO2 business in an organic product category that doesn’t rely on petrochemical feedstocks. However, Millennium’s is highly leveraged and its businesses have been under-performing in line with much of the chemicals industry. Bayer, 18 March 2004, Reuters 29 March 2004, Dow Jones Newswires, 30 March
EPRN EXECUTIVE BRIEFING - February 2004
Having fallen foul of wishful forecasts, a flotilla of companies appear reluctant to veer towards making brighter predictions for economic conditions ahead.
Akzo Nobel, in its annual report for 2003, says it sees no signs of sustainable improvement in global business conditions and, after a stormy year, ICI’s CEO John McAdam said, ‘to say that ICI has turned the corner is premature. It is simply not performing’. The company is shedding 2 000 jobs, though it has since sold its global food ingredients unit. Forecasts tend to reflect the curren conditions and often have other interests at stake. However, a number of economic forecasts suggest gradual improvement. The UK lobbying group Confederation of British Industry (CBI) on 26 February raised its forecast for economic growth this year, saying the recovery in the UK will be driven by rising exports, resilient consumer spending and a revival in business investment.
Most East and Central European countries face good growth prospects in 2004, according to the European Bank for Reconstruction and Development. The Baltic States will spearhead growth among the EU accession candidates for May 2004, but others - such as Bulgaria, Romania and Russia - are keeping pace. CBI Press Release, 26 Feb 2004. Financial Times, 30 Jan 2004, 11. Russia Express, Dec 2003, (12), 31. Chem Week, 7/14 Jan 2004, 166 (1), 25
EPRN EXECUTIVE BRIEFING - January 2004
At a time when many of Europe’s traditional industries are suffering from both technical maturity and economic downturn, nanotechnology holds out the tantalising promise of revolutionising their materials, properties and applications.
Although the word nano (from the Greek for dwarf) could be seen as a ‘buzz’ word to attract funding and is not totally new, the technology holds the potential to indeed be very significant. In the US nanotechnology in the coatings industry is responsible for as many as 19 000 US patents, a special Nanotech session at the 2003 ICE show was told. Some patents for silica from Cabot and DuPont date back to the 1950s, but new applications continue to proliferate.
PRA hosted a ‘Nanotechnology for the Surface Coatings Industry Workshop’ on 11 December at which delegates also made the point that nanotechnology in the coatings industry is not new. Emulsions and colloids in the nano particle size range (up to 100nm) have been available for many years, as have nano-scale pigments.
Their novelty derives from the use of nanotechnology in new applications, through tailoring structures to deliver specific functions.
Potential applications include ultra violet screen (skin care, wood protection), air pollution neutralisation, hygienic/anti-fungal/ anti-bacterial coatings, fire retardancy, anti-graffiti coatings, self-healing coatings, ‘smart’ coatings (responding to stimuli), improved mechanical properties (scratch resistance, toughness) and improved barrier properties (eg oxygen and water permeability, for packaging and metal protection).
The event also highlighted a concern in using the term ‘nano’ in the context of the general public, where there may be a negative, emotional response - perhaps due to alarmist science fictional press reports.
In Japan, photocatalytic self-cleaning technology, based on nano-titanium dioxide particles and activated by light, has already resulted in commercial applications with a market value of $400M. These include glazed acoustic barrier walls, tiled road tunnels and hospital operating theatres. There is even a photocatalytic spray on the market which will keep cars dirt-free for up to half a year.
To bring the benefits of this technology to Europe, the German Institute for New Materials (INM) based at Saarbrücken has entered into a strategic partnership with the R-Cast Institute at the University of Tokyo and the Toto Company. Pilkington has already produced the first self-cleaning window glass in the autumn of 2003. Work on the next generation of more effective and more economical solutions with the help of nano particles is now in progress in Europe based at the Saarbrücken Institute for New Materials.
The Paint Research Association has produced a ‘Nanotechnology Brief’ - a selection from the literature over the last two years with an introdution that asks the question ‘Nanotechnology for the Coatings Industry - Holy Grail or Hype?’. To order a copy at a price of £25 and to see a report on the PRA Workshop, go to /research/nanotechnology.htm ICE Show Daily, 13 Nov 2003, 4. Frisch, F. JOT, Aug 2003, 43 (8), 44-5
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