Terry Knowles, Europe Correspondent02.21.24
Recently the paint and coatings sector has experienced a much quieter period where acquisitions – the lifeblood of much of its growth over the last three decades – have been much fewer, thereby spotlighting true organic growth instead.
Where there have been acquisitions, these have been especially targeted in nature but the fact remains that they are not taking place on anywhere near the same scale as they have done historically. The high-volume decorative markets are currently generally flat as a result of unfavourable spending conditions for consumers, and this is compounded by the artificially induced decorative peak and waveform that was started by the lockdown period of 2020/1.
Packaging and general industrial coatings appeared to be the worst-performing sectors in 2023, whereas the marine and protective areas championed growth. In fiscal terms, the results for 2023 have been characterised by minimal growth figures once all the different mainstream sectors had been consolidated in the final reckoning, with many regional gains being wiped out by currency effects. Similarly the same can be said for the ups and downs of industrial coatings across their entire panoply. Yet, softening raw material prices delivered increasing net profits; a welcome relief for industry and a trend that should continue in 2024.
In this industry performance summary of 2023, which telescopes together some of the key data and trends from those companies whose data has been released by mid-February (Sherwin-Williams, PPG Industries, AkzoNobel and Axalta Coating Systems), these are the trends that have emerged.
Sherwin-Williams remains the world's largest paint company, when measured in terms of sales and that is attributable to the fact that about 80% of its sales revenues are in The Americas. The remaining 20% of turnover is split roughly between the EMEA region and Asia.
The bedrock of the company's business is its Paint Stores Group, which with sales of US$12.8 billion accounted for 55% of its total annual sales of US$23 billion. Turnover in the Paint Stores Group grew by 7% over the year. Sherwin-Williams' Performance Coatings operations were fairly flat across the year (growth below 1%) while sales in the Consumer Brands Group fell slightly (less than 1%) as a result of divestitures.
Looking deeper into the Paint Stores Group, by the end of the year the protective, marine, commercial and residential repaint areas all flourished. However, in the domestic home improvements arena where homeowners budgets are under fire and where there is strong competition for the DIY dollar, this area is somewhat in the doldrums as the industry moves towards spring, traditionally the time when many DIY projects get started.
AkzoNobel is the largest paint company in Europe and the largest decorative paintmaker in the continent. One of it's most recent acquisitions was that of Sherwin-Williams' decorative paint operations in China; effectively the Huarun business that had been bought by Valspar. This added another bow to the company's Chinese quiver of Dulux operations. A very valuable bow it was – worth around €100 million in annual sales and a leading native brand in China too.
Marine and protective coatings together was the best-performing sector for AkzoNobel in 2023; it recorded a 7% increase in turnover in this area, reflecting a combination of rising volumes and rising prices. Most of the performance coatings segments delivered almost flat sales when recorded in euro terms – that is to say powder coatings, automotive and specialty coatings. The company's industrial coatings proper operations fared even less well with reported turnover down by 10%, reflecting weaker sales in the packaging coatings market in the first half of 2023 and a weaker time for wood coatings that appeared to last the whole year. The general industrial and packaging decline reflects the same results of Sherwin-Williams.
AkzoNobel's huge Decorative Paints business turned in a flat performance over 2023, with sales flat in the EMEA region. The company's much-vaunted Grupo Orbis acquisition in Colombia continued to reap rewards in Latin America, while in Asia the decorative operations performed well in China and India, helping to compensate for lower sales in Vietnam.
One of the key performance highlights at AkzoNobel was a 45% increase in operating income across the whole of 2023, to reach more than one billion euros. In the last quarter alone, it more than doubled its operating income relative to Q4 of 2022.
The last major planned acquisition by AkzoNobel was that of Kansai Paint's African paints operations, but in November 2023 this was called off when both parties agreed not to proceed further with the deal.
PPG Industries is the biggest challenger to both Sherwin-Williams on the US decorative markets and to AkzoNobel in the European decorative markets, and like both has a product portfolio that is diversified across most major sectors. It achieved a 3% turnover increase across the whole year at US$18.2 billion, but more significantly, a 24% leap in net income to US$1.27 billion. Currently it is evaluating future options for its silicas business.
One of the biggest acquisitions that PPG had made in recent years was that of the Ennis Flint roadmarking (traffic) paints company, which it used promptly to form a new worldwide Traffic Solutions business. But in October 2023, PPG divested its Australian/New Zealand operations to Geveko Markings of Sweden. The European operations were also sold off, the company stated in its end-of-financial-year release.
When announcing the Geveko deal, PPG stated that it was “laser-focused on driving growth” and is clearly targeting its acquisitions strategy in growth markets only. Sales of US$18 billion mean that its turnover is about three-quarters of Sherwin-Williams, its domestic rival and the world leader (in turnover terms). Could it be that the laser focus on overseas growth markets will provide an express route to catch up with its old US rival? Although Sherwin-Williams has been flourishing in Latin America, recent years have seen it dispose of sizeable overseas operations (Huarun, Wattyl) to its European competitors.
Axalta Coating Systems is the only major diversified and globalized paint and coatings company that does not have a decorative paints business. Like PPG, one of its biggest foundations is its participation in the automotive OEM markets. Mirroring how some of its competitors have enjoyed high-spots in certain parts of the industrial coatings sector, Axalta had quite a strong year last year with a 6% increase in its turnover. It also experienced a softening in raw materials prices, which helped increase net profits from US$ 192 million to US$ 269 million.
In autumn 2023, Axalta concluded the acquisition of Andre Koch AG, a Switzerland-based provider of car maintenance and repair services and the results from that operation have already been included in the company's Performance Coatings operations. A shrewd acquisition of its own!
Where there have been acquisitions, these have been especially targeted in nature but the fact remains that they are not taking place on anywhere near the same scale as they have done historically. The high-volume decorative markets are currently generally flat as a result of unfavourable spending conditions for consumers, and this is compounded by the artificially induced decorative peak and waveform that was started by the lockdown period of 2020/1.
Packaging and general industrial coatings appeared to be the worst-performing sectors in 2023, whereas the marine and protective areas championed growth. In fiscal terms, the results for 2023 have been characterised by minimal growth figures once all the different mainstream sectors had been consolidated in the final reckoning, with many regional gains being wiped out by currency effects. Similarly the same can be said for the ups and downs of industrial coatings across their entire panoply. Yet, softening raw material prices delivered increasing net profits; a welcome relief for industry and a trend that should continue in 2024.
In this industry performance summary of 2023, which telescopes together some of the key data and trends from those companies whose data has been released by mid-February (Sherwin-Williams, PPG Industries, AkzoNobel and Axalta Coating Systems), these are the trends that have emerged.
Sherwin-Williams
Sherwin-Williams remains the world's largest paint company, when measured in terms of sales and that is attributable to the fact that about 80% of its sales revenues are in The Americas. The remaining 20% of turnover is split roughly between the EMEA region and Asia.
The bedrock of the company's business is its Paint Stores Group, which with sales of US$12.8 billion accounted for 55% of its total annual sales of US$23 billion. Turnover in the Paint Stores Group grew by 7% over the year. Sherwin-Williams' Performance Coatings operations were fairly flat across the year (growth below 1%) while sales in the Consumer Brands Group fell slightly (less than 1%) as a result of divestitures.
Looking deeper into the Paint Stores Group, by the end of the year the protective, marine, commercial and residential repaint areas all flourished. However, in the domestic home improvements arena where homeowners budgets are under fire and where there is strong competition for the DIY dollar, this area is somewhat in the doldrums as the industry moves towards spring, traditionally the time when many DIY projects get started.
AkzoNobel
AkzoNobel is the largest paint company in Europe and the largest decorative paintmaker in the continent. One of it's most recent acquisitions was that of Sherwin-Williams' decorative paint operations in China; effectively the Huarun business that had been bought by Valspar. This added another bow to the company's Chinese quiver of Dulux operations. A very valuable bow it was – worth around €100 million in annual sales and a leading native brand in China too.
Marine and protective coatings together was the best-performing sector for AkzoNobel in 2023; it recorded a 7% increase in turnover in this area, reflecting a combination of rising volumes and rising prices. Most of the performance coatings segments delivered almost flat sales when recorded in euro terms – that is to say powder coatings, automotive and specialty coatings. The company's industrial coatings proper operations fared even less well with reported turnover down by 10%, reflecting weaker sales in the packaging coatings market in the first half of 2023 and a weaker time for wood coatings that appeared to last the whole year. The general industrial and packaging decline reflects the same results of Sherwin-Williams.
AkzoNobel's huge Decorative Paints business turned in a flat performance over 2023, with sales flat in the EMEA region. The company's much-vaunted Grupo Orbis acquisition in Colombia continued to reap rewards in Latin America, while in Asia the decorative operations performed well in China and India, helping to compensate for lower sales in Vietnam.
One of the key performance highlights at AkzoNobel was a 45% increase in operating income across the whole of 2023, to reach more than one billion euros. In the last quarter alone, it more than doubled its operating income relative to Q4 of 2022.
The last major planned acquisition by AkzoNobel was that of Kansai Paint's African paints operations, but in November 2023 this was called off when both parties agreed not to proceed further with the deal.
PPG Industries
PPG Industries is the biggest challenger to both Sherwin-Williams on the US decorative markets and to AkzoNobel in the European decorative markets, and like both has a product portfolio that is diversified across most major sectors. It achieved a 3% turnover increase across the whole year at US$18.2 billion, but more significantly, a 24% leap in net income to US$1.27 billion. Currently it is evaluating future options for its silicas business.
One of the biggest acquisitions that PPG had made in recent years was that of the Ennis Flint roadmarking (traffic) paints company, which it used promptly to form a new worldwide Traffic Solutions business. But in October 2023, PPG divested its Australian/New Zealand operations to Geveko Markings of Sweden. The European operations were also sold off, the company stated in its end-of-financial-year release.
When announcing the Geveko deal, PPG stated that it was “laser-focused on driving growth” and is clearly targeting its acquisitions strategy in growth markets only. Sales of US$18 billion mean that its turnover is about three-quarters of Sherwin-Williams, its domestic rival and the world leader (in turnover terms). Could it be that the laser focus on overseas growth markets will provide an express route to catch up with its old US rival? Although Sherwin-Williams has been flourishing in Latin America, recent years have seen it dispose of sizeable overseas operations (Huarun, Wattyl) to its European competitors.
Axalta Coating Systems
Axalta Coating Systems is the only major diversified and globalized paint and coatings company that does not have a decorative paints business. Like PPG, one of its biggest foundations is its participation in the automotive OEM markets. Mirroring how some of its competitors have enjoyed high-spots in certain parts of the industrial coatings sector, Axalta had quite a strong year last year with a 6% increase in its turnover. It also experienced a softening in raw materials prices, which helped increase net profits from US$ 192 million to US$ 269 million.
In autumn 2023, Axalta concluded the acquisition of Andre Koch AG, a Switzerland-based provider of car maintenance and repair services and the results from that operation have already been included in the company's Performance Coatings operations. A shrewd acquisition of its own!
