17 February 2011 18:03 [Source: ICIS news]
By Nigel Davis
End-use product demand growth in the fourth quarter of last year, in some markets, was not as strong as many would like it to have been. Yes, the commodity markets powered ahead – with prices rising strongly – and demand from
But closer to the consumer in Europe, North America and
It is hardly surprising that AkzoNobel wants to expand its decorative coatings business in
This is a €5bn ($6.8bn) revenue business and will play a major role in helping the company target doubled revenues in
AkzoNobel is not alone in facing tough trading conditions in parts of
AkzoNobel said that its fourth-quarter and full-year decorative paints sales were down 1% in constant currency exchange rate terms in
Operating earnings before interest, taxation, depreciation and amortisation (EBITDA) for the segment were down in the latest quarter due to a weak performance in
The company managed to lift full-year Europe decorative paints EBITDA, but sales in the mature European markets, apart from in the
Not surprisingly, the focus had to be on “operational efficiency, complexity reduction, margin management and working capital improvement”.
The situation was worse in
But this was the third year in a row of declining paint demand in the
In the final quarter of the year, AkzoNobel began to ship branded paints to Wal-Mart after it was selected as the primary paint supplier to the retail giant’s US stores.
The business in these mature economies, hard hit by the financial crisis and recession, is difficult but in clear contrast to that in
The constant currency increase in sales for the paints maker in Latin America last year was 10% and in
The Dulux brand that AkzoNobel acquired when it bought ICI is particularly strong in these markets, but has had to be pushed into new niches and through new delivery systems.
The brand was re-established as a quality leader in the
The fourth-quarter regional paints performance was still buoyant but reflected the moves made by
AkzoNobel’s performance coatings businesses performance was underpinned by margin management programmes in the mature economies, which made up for slower growth.
Volumes were higher across the board but driven by eastern Europe, Latin America and
Demand in Europe and the
The regional paints and coatings segments picture makes it easier to understand why the focus at AkzoNobel will so very much be on emerging markets over the next few years.
CEO Hans Wijers said on Thursday that the company was on track to achieving annual revenues of €20bn within five years. Revenues were $14.64bn in 2010.
The sales target is likely to be reached by organic, as opposed to acquisition-led, growth, and by the focus on high-growth markets.
($1 = €0.74)
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