Sean Milmo10.13.05
New EU environmental legislation, as well as changing priorities among paint companies, has put additive producers in a stronger position to initiate technological advances in coatings. Coating companies are concentrating on giving themselves greater clout in the market place through more effective marketing and more efficient logistics and distribution.
Meanwhile some of the manufacturers of additives are developing the technologies to help the paint makers comply with EU regulations in areas such as emissions of VOCs.
As a result, additives producers with R&D operations have bargaining power to push up their prices and enjoy some of the biggest margins in the coatings value chain. But their leverage stems from a willingness to invest in research to generate innovative products as well as tech support and customer service.
"The coatings industry is constantly looking for innovative technologies," said Matthias Wolfgruber, president and chief executive of Altana Chemie.
"Paint companies not only need to differentiate their products. They also need technological innovation to ensure that their paints maintain their level of performance when they are reformulated to comply with new environmental legislation," Wolfgruber said. "These trends are opening up opportunities for specialist additives producers whose businesses are both R&D and service intensive. Some additives sectors are growing at annual rates of 15-20% in value terms, far quicker than the coatings market itself."
Altana Chemie's paint additives activity, operated by BYK-Chemie, increased its sales last year by 13% to approximately $276 million, equivalent to approximately three quarters of all the company's additives sales. Altana Chemie's total sales last year were €854 million and its EBITDA was 19%.
Following a strategy to focus on additives for paint, Altana Chemie has been selling off its coil and industrial coatings businesses. It now concentrates on a range of some 400 additive products. And it has recently expanded into metallic and special effects pigments with the takeover of Eckart, which last year had sales of €302 million and an EBITDA margin of 21%.
To maintain its technological leadership in certain niches, Altana Chemie spends five percent of its sales on R&D, which it plans to boost shortly to six percent. The company also has a development partnership with Nanophase Technologies, Romeoville, IL, in which it has bought a seven percent stake for $10 million.
Among the new nanotechnology products generated by the alliance are nanoparticle dispersions which improve the scratch and abrasion resistance of coating surfaces.
"A successful additives company has to be willing to spend money on research and development in order to provide innovative products," said Wolfgruber.
Altana Chemie backs up its research activities with strong technical support services. Approximately 20% of its 2,500 employees work in R&D or technical services. It has a worldwide network of tech service laboratories. BYK-Chemie last year opened new technical service laboratories in China and Brazil.
"Only a few years ago, additives producers were considered by most paint manufacturers to be merely suppliers," explained Vinayak Rao, an analyst at Frost & Sullivan, who wrote a recent report on the European market for rheology modifiers in paint.
"But now the additives producers are seen to be providers of total solutions, which includes the availability of a good backup service," said Rao. "If something goes wrong with a formulation paint companies expect additives makers to be quickly available to help sort out the problem. Small additive manufacturers are struggling to provide this level of comprehensive service."
Paint companies in Europe tend to take a conservative approach to additive suppliers, preferring to buy the products of those they know. But this is only as long as they have a level of service which deals effectively with their technical problems, Frost & Sullivan reports.
"The provision of quality services, together with the offer of innovative products, is one way for additive suppliers to take market share away from their competitors," said Rao.
The need for good technical backup and innovation is particularly strong as paint firms reformulate to comply with new environmental legislation.
"Some additives producers are able to enjoy high margins because they can put a premium price on their products at a time of tougher EU environmental regulations," said Rao. "Their additives assist regulatory compliance so there is a demand for them irrespective of the relatively slow level of growth in the European paints market."
In the European rheology modifiers sector, "consolidation will continue as smaller players come under pressure to provide more services and innovation," said Rao.
Among coatings resins producers, the value of innovative technologies was apparent earlier this year when DSM bought NeoResins for €515 million, equivalent to almost double the activity's annual sales. The attraction was NeoResins' leading position in high-growth resins for waterborne paints, helping DSM to become less dependent on the shrinking solvent-borne areas of polyester, alkyd, acrylate and amino resins.
Since the takeover the need for innovation has become even greater for resin manufacturers because of their vulnerability to steep rises in raw material costs.
"The margins of many resin producers have been squeezed by the higher price of their petrochemical-based raw materials in the wake of high oil prices," said Irfab's Hans Courtier. "On the other hand resin makers with new clean technologies like those for waterborne paint are able to achieve better margins because they have fewer competitors and are better placed to put up their prices."
Meanwhile some of the manufacturers of additives are developing the technologies to help the paint makers comply with EU regulations in areas such as emissions of VOCs.
As a result, additives producers with R&D operations have bargaining power to push up their prices and enjoy some of the biggest margins in the coatings value chain. But their leverage stems from a willingness to invest in research to generate innovative products as well as tech support and customer service.
"The coatings industry is constantly looking for innovative technologies," said Matthias Wolfgruber, president and chief executive of Altana Chemie.
"Paint companies not only need to differentiate their products. They also need technological innovation to ensure that their paints maintain their level of performance when they are reformulated to comply with new environmental legislation," Wolfgruber said. "These trends are opening up opportunities for specialist additives producers whose businesses are both R&D and service intensive. Some additives sectors are growing at annual rates of 15-20% in value terms, far quicker than the coatings market itself."
Altana Chemie's paint additives activity, operated by BYK-Chemie, increased its sales last year by 13% to approximately $276 million, equivalent to approximately three quarters of all the company's additives sales. Altana Chemie's total sales last year were €854 million and its EBITDA was 19%.
Following a strategy to focus on additives for paint, Altana Chemie has been selling off its coil and industrial coatings businesses. It now concentrates on a range of some 400 additive products. And it has recently expanded into metallic and special effects pigments with the takeover of Eckart, which last year had sales of €302 million and an EBITDA margin of 21%.
To maintain its technological leadership in certain niches, Altana Chemie spends five percent of its sales on R&D, which it plans to boost shortly to six percent. The company also has a development partnership with Nanophase Technologies, Romeoville, IL, in which it has bought a seven percent stake for $10 million.
Among the new nanotechnology products generated by the alliance are nanoparticle dispersions which improve the scratch and abrasion resistance of coating surfaces.
"A successful additives company has to be willing to spend money on research and development in order to provide innovative products," said Wolfgruber.
Altana Chemie backs up its research activities with strong technical support services. Approximately 20% of its 2,500 employees work in R&D or technical services. It has a worldwide network of tech service laboratories. BYK-Chemie last year opened new technical service laboratories in China and Brazil.
"Only a few years ago, additives producers were considered by most paint manufacturers to be merely suppliers," explained Vinayak Rao, an analyst at Frost & Sullivan, who wrote a recent report on the European market for rheology modifiers in paint.
"But now the additives producers are seen to be providers of total solutions, which includes the availability of a good backup service," said Rao. "If something goes wrong with a formulation paint companies expect additives makers to be quickly available to help sort out the problem. Small additive manufacturers are struggling to provide this level of comprehensive service."
Paint companies in Europe tend to take a conservative approach to additive suppliers, preferring to buy the products of those they know. But this is only as long as they have a level of service which deals effectively with their technical problems, Frost & Sullivan reports.
"The provision of quality services, together with the offer of innovative products, is one way for additive suppliers to take market share away from their competitors," said Rao.
The need for good technical backup and innovation is particularly strong as paint firms reformulate to comply with new environmental legislation.
"Some additives producers are able to enjoy high margins because they can put a premium price on their products at a time of tougher EU environmental regulations," said Rao. "Their additives assist regulatory compliance so there is a demand for them irrespective of the relatively slow level of growth in the European paints market."
In the European rheology modifiers sector, "consolidation will continue as smaller players come under pressure to provide more services and innovation," said Rao.
Among coatings resins producers, the value of innovative technologies was apparent earlier this year when DSM bought NeoResins for €515 million, equivalent to almost double the activity's annual sales. The attraction was NeoResins' leading position in high-growth resins for waterborne paints, helping DSM to become less dependent on the shrinking solvent-borne areas of polyester, alkyd, acrylate and amino resins.
Since the takeover the need for innovation has become even greater for resin manufacturers because of their vulnerability to steep rises in raw material costs.
"The margins of many resin producers have been squeezed by the higher price of their petrochemical-based raw materials in the wake of high oil prices," said Irfab's Hans Courtier. "On the other hand resin makers with new clean technologies like those for waterborne paint are able to achieve better margins because they have fewer competitors and are better placed to put up their prices."
