Coatings World: How did the market for paints and coatings fare overall in 2013?
Ton Büchner: All in all, 2013 was a year of two halves for AkzoNobel’s businesses. At the early start of 2013 we indicated that trading conditions would continue to be challenging for the year and that proved to be the case, particularly in the first six months. In the second half volumes picked up as we started to see signs of stabilization, but currencies became a challenge. In Decorative Paints, full-year volumes were up three percent while our Performance Coatings business saw flat volumes.
Charles Shaver: The overall market continues to rebound from the economic downturn, albeit at different rates of improvement in different segments and regions. One of the strengths of our customer base is its diversity, both in terms of products and geographies. We touch so many industrial segments, from automotive OEM and refinish and virtually every type of commercial transportation vehicle to oil and gas and architectural applications, for example. Also, we do business in more than 130 countries. That sort of diversity helped to offset weaknesses in any one customer segment or country, and will put us in a good position looking ahead as well.
CW: Did your company see its revenue develop in 2013?
Büchner: For AkzoNobel as a whole, 2013 annual revenue totaled €14.6 billion ($20 billion), down five percent in Euro on 2012 as a consequence of adverse currency effects and divestments. In our Decorative Paints business these effects led to a three percent decline in revenues; the two percent impact at Performance Coatings was solely down to currencies. In response to the uncertain and turbulent economic environment we accelerated our company-wide improvement actions and brought our performance improvement program to a successful conclusion a year ahead of schedule and above target, which delivered total savings of around $750 million.
Shaver: Last year was a strong year for Axalta. As a privately held company we don’t report financial data. But I can tell you both our revenues and earnings grew last year. We were pleased with our ability to gain new business in our automotive OEM and refinish businesses where we made key inroads into the MSO segment in the U.S., for example, winning business with major players like Service King. Our refinish successes leveraged the strength of our flagship refinish brands: Spies Hecker, Standox and Cromax. But we listen to local customers and, for example, rolled out new economy lines with Imlar and CorMax in Mexico and Brazil, respectively. We saw other wins in Brazil, Russia, Spain and China to name a few. Plus, we grew while rebranding our entire company as Axalta Coating Systems and establishing our credentials as an independent company. As we like to say, Axalta is a new company with more than 145 years in the coatings industry. All of us at Axalta are truly proud that we were able to increase our business momentum while transforming our organization and identity at the same time.
CW: What areas of the paint and coatings market represent the most growth opportunities for your company?
Büchner: Our Decorative Paints activities are firmly focused on serving the Buildings and Infrastructure segment. The outlook for the markets for both maintenance and repair and new build is more positive than it has been for some time. The growth markets of, for example, China and Brazil showed healthy growth, whereas the mature regions started to show signs of stabilization and in some cases, even initial signs of growth. With our strong brands, many market-leading positions and presence in high-growth markets, we are well-positioned to improve our paints performance in all regions and grow profitably in high-growth markets, where all segments performed strongly last year. For Performance Coatings, we clearly see our width in industrial presences in the Protective coatings activities benefitting from our leading positions. We see further growth opportunities especially in the Marine, which seems to become more active again. Specialty Finishes, which had a strong 2013 on the back of growing demand for coatings for mobile devices also has opportunities going forward.
Shaver: One of the greatest strengths of Axalta is focus. Other companies make coatings but we’re the largest global coatings company that is 100 percent focused on industrial coatings. We’ve brought in new senior people to lead our global OEM and Industrial businesses. They’ll ensure that every customer everywhere gets access to the full array – and the very best – Axalta products and services. When I consider opportunities, I would say that almost every segment represents a chance for Axalta to increase its market share.
CW: What is your business strategy for growth in 2014?
Büchner: In 2014, we will continue to improve our ability to leverage our strong brands and leading market positions as we further adapt our business, reduce our costs and drive organic growth. We are embedding continuous improvement in our businesses and drive commercial excellence and customer focus even further I would like to think that our partners and customers will really notice that we are getting closer to them. I am confident that we are on track to deliver on our 2015 strategic goals – delivering leading performance for our customers.
Shaver: Building on my last answer, we’ll be looking at all the segments for organic growth. Our recent investment projects reflect one important direction which is to provide more waterborne coatings which a number of customers are calling for. In January, we broke ground to expand production of waterborne coatings to meet growing demand in China where the OEM market continues to flourish. Just this February we announced the last leg of a three year investment program in Brazil to expand waterborne capacity not only for Brazil and but other customers in South America. In 2014 we will continue to follow our customer.
CW: In what areas are you focusing your R&D efforts?
Büchner: Our research and development is firmly focused on exploring ways to develop more sustainable products, be that in their manufacture, their application, their capabilities, always thinking in lifecycle terms. Even though times are uncertain and market conditions tough, we continue to invest in innovations to improve our products and service to customers. In 2013 we invested $515 million in RD&I. Around 60 percent of our innovation spend goes on sustainable innovation, on innovations that help create value throughout the value chain. An example of this in transportation is Intersleek 1100SR, our new anti-fouling coating, repels the sludge and slime that sticks to ships’ hulls thereby reducing drag and fuel consumption.
Shaver: Our R&D is always looking for ways to create new formulations: products that dry faster, have reduced environmental impact, such as low VOC and waterborne coatings, and that improve the productivity of our customer. We do this by focusing in two directions. New product development is, of course, vital and we’re stepping that up. Last year we finished installation of a new pilot reactor at our global R&D center that will reduce development time and help us get new formulations to the market more quickly. In our powder business, for example, we’re excited about the new Nap-Gard 7-2555 product rolled out last year that meets new high temperature tolerances for oil and gas well pipes that allow for deeper - instead of more - wells. Assessment is the other big R&D function. We’re continually evaluating existing brands, always learning from customer feedback that comes into our seven R&D locations around the globe.
CW: What are your company’s long-term plans?
Büchner: In February 2013 we unfolded a clear longer term vision: to deliver leading performance from our many leading market positions. And we are talking performance in all aspects, for example in terms of customer delivery, factory efficiency, logistics excellence, supplier cooperation, innovation and financial performance. We have put the strategy in place to achieve this and our employees have put their shoulders underneath it. We have integrated our business strategy and our sustainability strategy in one, with clear targets set here as well. With our belief that “business is sustainability, sustainability is business” we drive the conviction that we all need to create more value from fewer resources throughout the organization.
Shaver: We’ll continue to stay focused on industrial coatings. What’s interesting is that in some sense our business has long been ahead of the sustainability curve. We’re all about providing products that preserve and protect – and do that beautifully – our customers’ products. Whether it’s a new car or one in the body shop, a new building, a piece of rebar, an electric motor or a deep oil and gas well pipe, our coatings make those products last longer and work more productively. Plus, our products themselves, the more low-VOC and water-based liquid coatings as well as all of our powder products, offer a reduced environmental footprint. With this kind of customer benefit, as we say in our advertising, we truly believe we are Built for Performance.