European Paint & Resin News - Executive Briefings 2005
Executive briefing - August 2005
Coatings World's corporate rankings for sales in 2004 notes only one change in position in the top ten from the same ranking in the previous year - a reshuffling between PPG and ICI.
The ranking includes adhesives companies - although not comprehensively. Such a broad coatings definition also opens the door to 3M at No 12 and Forbo in No 27, although omitting other global adhesives giants, such as Bostik.
There has been more action outside the top ten, with the debut of rising star COMEX and the exit of Ferro.
Other upwardly mobile companies include 3M and Masco, while Benjamin Moore slipped from 16th to 21st place and Jotun from 18th to 22nd.
Contenders outside the top 50 include Red Spot, Tnemec and True Value - plus Israel's Tambour and Malaysia's Mulpha International.
Today, to join the exclusive top 10 club requires annual sales of at least $2.1BN; five years ago, the lower limit was $1.7BN.
The total sales of the top 50 have risen.
However, it should be noted that the entire industry is much bigger than the top 50, and that there are well over 10,000 additional companies who provide the world with paint.
Executive briefing - July 2005
Flint Ink Corp., the world's second-largest ink maker, is to merge with German-based XSYS Print Solutions, ending 85 years of family ownership of the company in Michigan.
The deal, expected to close on 30 September, will combine two of the world's leading print companies to form a new entity. CVC Capital Partners, a London-based private equity firm that owns more than 50 companies worldwide, will own the combined company.
According to Cynthia Challener of C&M Consulting, M&A activity in the North American chemical industry was largely motivated by strategic considerations in 2004 - in contrast to Europe where private equity buys predominated. The Apollo purchases of Borden, Resolution Specialty Materials and Resolution Performance, together with Bakelite in April and the creation of Hexion being the exception.
However, with interest rates remaining at historic lows and global growth not faltering for a protracted time, it has been a fertile period for private equity, and 2005 has been an unprecedented year for leveraged buyouts.
Nigel McConnell, managing partner of Electra Partners Europe LLP, told Bloomberg ‘There's a huge amount of capital available.' Maurice Tchenio, of London-based Apax Partners Worldwide LLP boasts ‘You're in the era of the mega-buyout.'
The trend continues, as on 25 July, New York based Apollo was reported to be close to buying Kerr-McGee Corp.'s chemical business, which is the world's No. 3 producer and marketer of titanium dioxide.
Apollo's bid is the firm's latest push into the chemical business after forming Hexion, with Apollo and other private equity firms attracted to the segment's steady cash flows.
However, Matthew Lynn, for Bloomberg News, warns that private-equity may be receiving vast sums now but it faces challenges. ‘Higher interest rates, or weaker growth, will make the returns tougher to earn. Buyout firms that poured money into UK retailers, for example, may be getting cold feet now that consumers are buying less in stores.'
Funds may already be stretched for good managers. ‘The private nature of private equity has allowed too much poor performance to be hidden by smoke and mirrors,' said Jeremy Coller, founder of Coller Capital Ltd. in London, in April.
‘Soon, too much money will be chasing too few deals' Lynn suggests. ‘Remember nobody will realize the industry has too much cash until the returns have started to sour - something that may well happen in the near future.'
AltAssets. 1 Aug 2005. Bloomberg News, 15 May 2005. money.cnn.com/2005/07/25. Bloomberg.com 11 Jul 2005. Orlando Sentinel, 26 Jul 2005. candover.com, 1 Aug 2005
Executive briefing - June 2005
German paintmakers had a satisfactory 2004, registering turnover increases. The top ten list, however, underwent two major changes - with the promotion of Meffert from 11th to 8th - ousting the former 8th placed PPG to 14th - as well as the move of Sika from 9th to 11th, to be replaced by Ostendorf, last year ranked 13th.
The ranking, by Farbe Lack, includes German and multi-national groups, but there is no strict consistency in the counting of global or German sales. Thus BASF's employment refers to Germany, while the sales are global.
The bottom half of the top 20 German paintmakers contains one newcomer in 2004: ICI Packaging Coatings in 19th place.
One company which has disappeared from the Top 20 is Votteler, a specialist in wood finishes - no doubt an indication of the state of the German wood finishes market.
Although it only derives 21% of its sales directly from paint, Sto AG is notable for the fact that it remains a family owned company and is celebrating its golden anniversary.
According to its website, in 50 years the company has developed from three pioneers working from a ‘South Baden goat-stall', to having 3,894 members of staff in 19 countries and 96 locations alone in Germany.
The company was developed under the long-serving Managing Director, Fritz Stotmeister; under the name Stotmeister & Co. Farben und Baustoff (shortened from 1963 as Sto AG). It has now become an international group of companies that produces high quality paints and plasters and has, thanks in particular to its core business of façade insulation systems, achieved a world ranking status.
The company chalked up consistent market success, for example with the production of synthetic resin plaster, the development of the first façade insulation system, high production capabilities and a high level of service. In the middle of 2002, Sto AG took over Ispo GmbH, the ‘dowry' being the Lotusan brand façade paint.
Current innovations include the self-cleaning façade paint StoPhotosan Color as well as the only photo-catalytic interior paint with air cleaning action activated by artificial light named StoClimasan Color.
Farbe Lack, Jun 2005, 111 (6), 59-66. http://www.sto.com/evo/web/sto/257_EN, http://www-1.ibm.com/solutions/cpe/download0/20445/sap_sto_1.pdf
Executive briefing - May 2005
Reflecting cooling consumer demand, the Kingfisher group suffered a decline in sales and profit for the three months to 30 April 2005, citing a slow housing market and poor spring weather.
B&Q-owner Kingfisher reported that like-for-like sales for Britain's largest home improvement chain fell.
Just a week after reporting the figures, Kingfisher replaced Rob Cissell, who had been B&Q's chief executive for only 18 months, with Ian Cheshire, previously chief executive for international and development. Mr Cissell will become the group chief executive for commercial and development..
Kingfisher reported that sales of garden products, were hit particularly hard, while the early Easter period was blamed for weak sales of kitchens, bedrooms and bathrooms.
Kingfisher claims its profits had been hit by the UK consumers' response to higher interest rates, higher taxes and pension contributions and rising fuel bills.
The Land Registry recently reported a sharp drop in the level of home sales, and other surveys from mortgage lenders have suggested that the market is cooling or even stagnant.
Consequently, the home improvement industry is struggling, in line with High Street businesses generally.
Kingfisher said it remained cautious about prospects for the rest of the year.
‘With the key summer season still to come, it is too early to judge the outlook for the full year,' said chief executive Gerry Murphy. ‘Trading in the first three weeks of our second quarter continues to be challenging in the UK and France.'
Kingfisher also owns Castorama and Brico Depot in France and has stores across Europe and Asia. In France, profits were lower. Castorama's sales fell, again hit by poor weather. However, discount builders' merchant Brico Depot fared much better with a rise in turnover. Sales in Poland, Italy and China fell on a like-for-like basis.
Following the results announcement, Kingfisher's Gerry Murphy said there was no substance to market speculation that he was mulling over either a possible break-up of the group or a demerger of B&Q. .
‘We have no plans to break up the business, and we're not talking to anyone about this', he said. news.bbc.co.uk/ 26 May 2005, news.ft.com/ 2 Jun 2005, www.telegraph.co.uk/ 3 Jun 2005
Executive briefing - April 2005
News of some significant new mergers, and the result of a demerger, arrived towards the end of April. From Houston, Texas, Resolution Performance Products announced it plans to merge with Borden Chemical to form the world's largest producer of thermosetting resins. Then Akzo Nobel announced a takeover of the market leader in the Swiss paints market (Swiss Lack) and large numbers of redundancies were hinted at by Lanxess. Later this year Borden Chemical, Resolution Performance Products, Resolution Specialty Materials and Bakelite are to be brought together in one company under the name Hexion Specialty Chemicals.
Borden, RPP and RSM are all affiliates of private investment firm Apollo Management. Borden agreed to buy Bakelite last year.
Akzo Nobel's Decorative Coatings business unleashed the latest phase of its competitive European expansion strategy by signing an agreement to acquire Swiss Lack, Switzerland's leading paint company. The deal - which will see Akzo Nobel become the biggest coatings company in Switzerland - includes taking over Swiss Lack's brand portfolio, as well as its large commercial distribution network.
Due to be completed by the end of 2005, the transaction comes several months after Akzo Nobel strengthened its European market presence with similar acquisitions in Germany (wholesalers Timpe & Mock), and France. The latest deal furthers Akzo Nobel's Coatings group's plan for growth and obtaining leadership positions in national markets.
Based in Reussbühl south of Zurich, Swiss Lack manufactures Switzerland's leading paint brand, Swiss Lack.
By taking over the business, Akzo Nobel will significantly increase its current share in the Swiss market. However, investment advisor company Petercam says Akzo Nobel's purchase of Swiss Lack is a small deal, in line with previous M&A in Germany and France.
Lanxess, which was spun off from Bayer AG in late January, may cut jobs after announcing plans for plant closures as soon as next month, according to Bloomberg.
Germany's fourth largest chemicals manufacturer plans to close a fine chemicals plant in its hometown of Leverkusen, Germany. It will also decide whether to shut a styrenic resins plant in Dormagen, Germany, or one in Tarragona, Spain, in the second quarter.
www.prw.com 28/04/2005 , Akzo Nobel Press Release, 26 Apr 2005, Bloomberg.net, 26 Apr 2005, Dow Jones Newswires, 26 Apr 2005
Executive Briefing - March 2005
For the vast region from the Oder-Neisse to the Urals, trade is by no means a one-way street. Trade routes cross each other, with exports going mainly from West to East, but increasingly also from the new EU countries - Poland, the Czech Republic and Slovenia - to their Eastern neighbours. Slovenia is particularly active in supplying the former Yugoslav states.
Exports from Central Europe provide price-conscious consumers in Russia with cheaper products than those from Germany or Finland. This in turn has given rise to national sub-markets, distinguished by price, with Central European countries catering for the lower end of the market in Russia, and Russia in turn supplying the Caspian states further to the East. At the same time, considerable inroads have been made into the region from the South, especially by Turkey.
Russia remains a colossus. The source of her economic growth is in the high global oil and gas prices, considering that these two products account for 55% of her exports.
UN statistics confirm Germany as the top exporter to Russia, followed by Finland and Sweden. Right behind are Turkey and Poland. Other intra-regional sources include Slovenia, Estonia, Ukraine, Lithuania and Latvia, according to IRL Consultants.
Central Asia is the opportunity for Russian exports.
Most of the paint imports from Western Europe are used in North West Russia. Southern and Central Russia depends on local products plus Turkish shipments, while Russia's Far East draws on Russian supplies, augmented by Chinese imports.
There is also a distinct market segmentation based on price. Those produced by Western companies on Russian soil tend to be slightly cheaper.
There are, however, few Western paintmakers with Russian manufacturing facilities. Tikkurila and Akzo Nobel being the exceptions, joined in 2004 by Meffert of Germany. Most Western paintmakers regard exporting to Russia as a less risky option. One Russian paintmaker who has ventured abroad is Empils, by acquiring the Odessa-based paint company Elaks in Ukraine.
Empils, part of the Novoe Sodruzhestvo Group, has expanded its manufacturing, warehousing and marketing functions in Ukraine. The old structures have paled into history, to be replaced by a far more diverse and interactive nexus, governed by market economics and the structures of the EU. The region offers a veritable windfall to the static markets in the West while bringing modern coating technologies to the paint-hungry countries.
Executive Briefing - February 2005
Akzo Nobel, the world’s largest coatings company, experienced mixed fortunes in 2004.
Operating profit for both Coatings and Chemicals were up, but Pharma’s steeply declined.
As a result, group operating profit (EBIT) and net income (excluding
non-recurring items) fell. However, net income (including non-recurring
items) was up in 2004. Total group sales fell.
All business units achieved performance gains, except car refinishes . Coatings
recorded improved return on investment (ROI). In 2005 Akzo Nobel aspires to achieve a net income (excluding non-recurring items) within the range of 2004. It has decided to divest even more, including ink and adhesive
resins, oleochemicals, salt specialties, additives for polyvinyl chloride, methylamines and
derivative choline chloride, and Solar Salt Australia.
The company has already received expressions of interest from potential buyers, according to Chief Financial Officer Rob Frohn. What’s left will make up what he terms a ‘new-look’ chemical organization: pulp and paper chemicals, polymerchemicals, a refocused surfactants business, functionalchemicals, and a reconstituted base chemicals business that includes chlor-alkali, energy, and electrolysis salt. Akzo Nobel, Report for the
year 2004, 3 Feb 2005, 24. Chemical & Engineering News,14 Feb 2005, 83 (97), 9.
Executive Briefing - January 2005
‘Headquartered in Europe’ is the criterion for inclusion in the list of the top 20 paint companies in Europe as compiled by European Coatings Journal. The ranking, last featured in EPRN, Jan 2004, p1, excludes non-European companies with a notable presence here, such as DuPont and PPG. It therefore differs from the listing produced for Polymer Paint Colour Journal included in EPRN, Nov 2004, p1, which includes the American companies DuPont, PPG and Valspar among Europe’s top ten.
The ranking order below varies only slightly from that of a year earlier. DAW, however, has jumped from No. 8 to fifth place and STO, which was No. 7, has now been stripped of its non-paint related activities and reduced to No. 20.
A decline in the sales of most companies is notable, partly due to the shedding of activities and partly due to currency effects. Sales are derived from paints and allied products, but companies producing solely inks or adhesives are excluded.
In the top ten in Europe, Germany contributed three companies and Netherlands, the UK and each of the four Scandinavian countries one each. In the second ten, Germany is represented by five companies and France, Denmark, Finland, Portugal and Turkey with an additional firm each, while Italy and Spain are absent from the list.
Newcomers since 2002, include Materis (Lafarge), Teknos and Degussa, while German paintmakers Grebe and Worwag have fallen off the list.
Profits are a more meaningful criterion of ranking, although not available for many private or consolidated companies, especially in Germany. Flacke, B. Eur. Coatings J, The Insider Edition 2005, 14-26
Previous Years:
2004: 2003: 2002: 2001
