Terry Knowles, European Correspondent04.18.23
For April I wrote on how Europe’s top paint company performed in 2022. This time I thought I would consider the performance of some of the other major European paintmakers, although M&A activity continues to reduce the count left since the PPG-Tikkurila and Nippon Paint-Cromology deals. The general backdrop for (the paint) industry is still painted with considerable uncertainty, which is reducing both acquisitions and investments at the global level, making good performance harder to achieve. War in Ukraine, supply chain problems and high transportation each continue to exert drags on industry, and that says nothing of the challenges of escalating raw material and energy prices, which have been especially keenly felt in Europe.
The report also provides an interesting insight into the scale of how much costs are rising for the industry. Costs of goods sold rose from NOK 12,480 million to NOK 15,941 million – an increase of 27%. Jotun notes that the five most voluminous raw materials in use, namely TiO2, emulsions, epoxies, additives and metals constitute more than 50% of such costs.
Western Europe and Scandinavia is the second-largest regional piece in Jotun’s global sales jigsaw, with turnover in the region rising from NOK 6,083 million in 2021 to NOK 6,746 million last year. Eastern Europe and Central Asia is the second smallest piece – the Americas is the smallest contributor – and turnover there rose from NOK 2,440 million to NOK 2,682 million across 2021-2. Also in Eastern Europe, Jotun sold off it Russian operations for NOK 54 million last summer.
Despite its very long-established strengths in the Middle East, South East Asia and the Pacific region forms the leading sales territory, with turnover there increasing from NOK 5,371 million to NOK 7,177 million.
Indonesia and Egypt were the scenes of Jotun’s production facility investments last year, a year when it also commissioned new factories in Qatar, Bangladesh and Pakistan. A new regional headquarters and R&D centre in Dubai and some Norwegian facility upgrades also comprised part of its investment expenditure.
• In the decorative segment where Hempel’s recent acquisitions were effected, there was overall growth of 18.3%; yet also organic sales loss of 2.9%, this reflecting the completion of the pandemic DIY boom. In the UK, Crown Paints business enjoyed some retail invigoration while Farrow & Ball added 11 new colours to its range. Meanwhile in the Middle East, Hempel’s decorative operations opened 38 new third-party outlets.
• Of particular note and satisfaction at Hempel was a record year for its marine coatings operations; they saw sales rise by 33% to €626 million. A key strength in this segment has been its silicone-based hull coatings that are emerging as an industry winner on the bases of fuel efficiency and environmental performance.
• In the energy segment, commoditisation of the wind energy started to impact the company’s profitability in this area, although its new Hempablade Edge offering is seen as delivering a competitive advantage in this field. Organic growth in this segment was by 5.7% but overall growth reached higher from €266 million to €313 million; much closer to 10%.
• Finally Hempel’s infrastructure segment flourished with 19.6% organic growth, turnover in this part of the company rising from €359 million to €445 million (up 24% in toto). Greater globalisation boosted a wide range of operations here. The overall distribution of Hempel’s sales is best appreciated from the chart.
That last point also reflects the fact that in early 2022 Hempel adopted a more global approach within its own organisation that included a globalised supply chain and global support functions, which have helped to cohere operations further while simultaneously reducing costs. It also assisted Hempel in opening out more products and services for its customers. As part of its Double Impact strategy, Hempel is now pursuing scalability in its operations which will ultimately deliver more efficiencies and pave the way for more sustainable choices in the future.
Jotun enjoys strong performance
In its annual report for 2022, Jotun revealed that sales for the year rose to NOK 27,858 million from NOK 22,809 million in 2021 – an increase of 22%, while operating profits increased from NOK 3138 million in 2021 to NOK 3737 million in 2022 – a leap of 19%. Early price increases from Jotun accounted for this strong performance.The report also provides an interesting insight into the scale of how much costs are rising for the industry. Costs of goods sold rose from NOK 12,480 million to NOK 15,941 million – an increase of 27%. Jotun notes that the five most voluminous raw materials in use, namely TiO2, emulsions, epoxies, additives and metals constitute more than 50% of such costs.
Western Europe and Scandinavia is the second-largest regional piece in Jotun’s global sales jigsaw, with turnover in the region rising from NOK 6,083 million in 2021 to NOK 6,746 million last year. Eastern Europe and Central Asia is the second smallest piece – the Americas is the smallest contributor – and turnover there rose from NOK 2,440 million to NOK 2,682 million across 2021-2. Also in Eastern Europe, Jotun sold off it Russian operations for NOK 54 million last summer.
Despite its very long-established strengths in the Middle East, South East Asia and the Pacific region forms the leading sales territory, with turnover there increasing from NOK 5,371 million to NOK 7,177 million.
Indonesia and Egypt were the scenes of Jotun’s production facility investments last year, a year when it also commissioned new factories in Qatar, Bangladesh and Pakistan. A new regional headquarters and R&D centre in Dubai and some Norwegian facility upgrades also comprised part of its investment expenditure.
Hempel’s turnover exceeds €2 billion
Hempel is in the midst of its ambitious sales-doubling strategy, Double Impact, that in recent years has seen it acquire Australia’s Wattyl from Sherwin-Williams and the high-end Farrow & Ball paintmaker in the UK. Last year it progressed matters further by acquiring Khimji Paints in Oman, the Paint World retailer in Australia (six stores) and five stores from France’s Cap Couleur. The aim is to reach sales of €3 billion in 2025, from a total of €1.5 billion in 2020, making 2022 the second year in this strategy. Referencing identical collective effects as Jotun in what it described as a year of ‘unusual instability’, Hempel announced 12.7% organic growth in its top line sales. But revenue growth as a whole reached nearly 24% as the fuller sales picture detailed, rising from €1,744 million to €2,159 million. During the year it sought to cut costs and optimise cash to manage effectively the undesirable pairing of spiralling raw material prices and declining demand. Hempel has therefore nearly accomplished 50% of the turnover progress required to satisfy its ongoing strategy successfully. It closed its Russian operations in April 2022.• In the decorative segment where Hempel’s recent acquisitions were effected, there was overall growth of 18.3%; yet also organic sales loss of 2.9%, this reflecting the completion of the pandemic DIY boom. In the UK, Crown Paints business enjoyed some retail invigoration while Farrow & Ball added 11 new colours to its range. Meanwhile in the Middle East, Hempel’s decorative operations opened 38 new third-party outlets.
• Of particular note and satisfaction at Hempel was a record year for its marine coatings operations; they saw sales rise by 33% to €626 million. A key strength in this segment has been its silicone-based hull coatings that are emerging as an industry winner on the bases of fuel efficiency and environmental performance.
• In the energy segment, commoditisation of the wind energy started to impact the company’s profitability in this area, although its new Hempablade Edge offering is seen as delivering a competitive advantage in this field. Organic growth in this segment was by 5.7% but overall growth reached higher from €266 million to €313 million; much closer to 10%.
• Finally Hempel’s infrastructure segment flourished with 19.6% organic growth, turnover in this part of the company rising from €359 million to €445 million (up 24% in toto). Greater globalisation boosted a wide range of operations here. The overall distribution of Hempel’s sales is best appreciated from the chart.
That last point also reflects the fact that in early 2022 Hempel adopted a more global approach within its own organisation that included a globalised supply chain and global support functions, which have helped to cohere operations further while simultaneously reducing costs. It also assisted Hempel in opening out more products and services for its customers. As part of its Double Impact strategy, Hempel is now pursuing scalability in its operations which will ultimately deliver more efficiencies and pave the way for more sustainable choices in the future.