Christine Esposito08.10.05
When the production line slows at the manufacturing plant, industrial coatings makers know they'll be applying the brakes at their own facilities. Regardless of size, companies that make coatings for original equipment manufacturers (OEM) are praying for the economy to show signs of recovery soon. But the smarter ones are doing-or have done-something to help them weather the storm.
"Last year was a challenging but rewarding year for our industrial coatings business," said Jean-Pierre Monteny, president of BASF Group's coatings division and CEO of BASF Coatings AG. "We faced a very weak business environment, as most of our relevant markets showed a significant decline. Nevertheless we were able to considerably improve our business performance. Reshaping and innovation have been the top two priorities for this year, along with efforts to improve our market position."
Streamlining product lines, refocusing core businesses and investing in R&D are some of the activities coatings companies have dabbled in during this downturn. While not a cure-all for the ills of the market, coatings companies contend their efforts will help them in the long run.
"We have done our homework. We have used 2002 to further optimize our processes," said Mr. Monteny. "We have been quick to implement the necessary structural measures and will continue to address this issue next year. Our extensive measures to increase efficiency, cut costs and restructure processes have all paid off. We were able to more than make up for the impact of the current economic situation, and this has also provided us with the basis for sustainable profitable growth."
According to Mr. Monteny, in Europe, BASF underwent measures to align its business structure for continued growth. Efforts included customer and product portfolio management and adaptation and restructuring of its sales force, as well as raw material consolidation. Mr. Monteny remarked that the number of raw materials processed in BASF's production facilities has been reduced by six percent in 10 months. In addition, BASF has improved manufacturing efficiencies by shuffling and consolidating production locations of certain resins and select powder and liquid coatings products.
At PPG Industries, the latest effort to realign and refocus its position in the OEM market was headlined by the renaming of its light industrial coatings operations as PPG TrueFinish industrial coatings.
"The name was changed to reflect PPG's heritage and brand as an authentic, leading global manufacturer of industrial coatings," commented Greg De Camp, general manager, PPG TrueFinish industrial coatings. "The name TrueFinish reaches back over decades of experience, performance and leadership, and conveys our strong industry reputation."
PPG's TrueFinish line replaces its former light industrial coatings, One Source and Icron brands. The new product line encompasses Spectracron solvent-based, lead- and chrome-free liquid coatings, Aquacron water-based, lead- and chrome-free liquid coatings and Envirocron powder coatings.
According to Mr. De Camp, in terms of service, the new name reflects PPG's "sharper focus and renewed commitment" to its customers. "Being responsive to our customers and providing them with superior liquid and powder coatings technologies is our primary emphasis," he said.
Through the TrueFinish structure, PPG contends its expertise and sales staff will be a better match for the U.S. light industrial coatings industry-a market which is comprised of a growing number of small OEM and contract paint businesses that require small, custom batches in two or three days-about twice as fast as traditional paint-manufacturing processes can provide. Those customers include metal fabricators, cabinet, office furniture business machine and medical equipment makers, consumer electronics producers and assorted machinery and equipment companies.
In general, TrueFinish customers operate as outsource businesses that serve larger companies and, as has been the trend in other segments of the coatings industry, offering these clients value-added services is key to helping them save money.
PPG has recognized this opportunity within the light industrial coatings marketplace. "These services could include line design, problem-solving support, training and paint line management support," said Mr. De Camp. "We feel this support could be invaluable to coatings users who do not have sophisticated paint line engineering or application resources. We are selling our experience gained from years of technical service support to the automotive, industrial and automotive refinish industries. We strongly believe this could generate significant cost savings and increased efficiencies for our customers."
BASF has also recognized the need to offer support. In the important coil coatings market, BASF has worked to improve its on-site technical assistance at major customers. BASF's Pevicoat technical service centers are now in Europe, Asia and Africa, with the newest center in place at Alumasa, a Spanish maker of venetian blinds and window shutters.
While BASF and PPG are global giants, smaller companies in the OEM and industrial coatings market are also finding themselves operating under difficult market conditions.
"Like all companies serving the OEM market, our overall sales have been negatively affected during this economy," said Hank Godshalk, president, Finishes Unlimited, a Sugar Grove, IL industrial coatings company. Mr. Godshalk said his company is faring quite well, thanks in part to its size. "While many of our customers are buying less paint from us now, we have not really lost any important business and, as a matter of fact, we have added several important customers in the past few months. We are a small company so we can be fairly agile in responding to both market downturn and opportunities," he commented.
Product Development
Of course, the R&D department doesn't sit idle during slow economic times. While there may be a deceleration in the speed at which new products come to market, companies continue to launch coatings and improve existing technologies to meet demands for better performing products at lower price points.
"There is continual demand for improved performance at lower costs and our product development experts in our industrial, refinish and automotive OEM coatings businesses are responding," said Mr. De Camp. Among efforts made at PPG's industrial coatings business has been the development of improved scratch-resistant powder topcoats. "Certain end-use segments, such as agricultural and construction equipment, have upgraded performance requirements for durability and are moving from alkyds to powder or liquid urethane technologies. Lower-temperature cured coatings, especially powders, which perform equal to their high-temperature-cured counterparts, are being introduced at lower costs," Mr. De Camp added.
About a year ago, Finishes Unlimited successfully introduced a quick drying, air-dry coating that is HAPs-free. "We focused on creating a fast drying product for customers running high volume manufacturing lines that wanted to use an air-dry paint line and to have their finished products ready for shipment in the shortest time possible. The fact that it is also HAPs-free is another attraction," said Mr. Godshalk, who added that the product has demonstrated excellent moisture resistance in the field.
More recently, Finishes Unlimited has been awarded a Phase I Small Business Innovation Research (SBIR) grant to continue research on the application techniques for its near-zero-VOC bake enamel waterborne coating.
The grant is quite a coup for the company-more than 300 companies applied for Phase I funds and only 31 were successful. Through the SBIR program, 12 federal agencies make funds available to small companies for R&D efforts on products or processes that may have strong commercial potential and which also meet the funding agency's own research needs.
The SBIR grant will enable Finishes Unlimited to continue work on Ultra Aqualite, a bake enamel coating with VOC levels of between 0.1 and 0.5 lbs./gallon without water. According to the company, field tests on Ultra Aqualite revealed several application issues not encountered in the laboratory. While Finishes Unlimited was able to correct most of the field problems by the time it submitted its proposal for the SBIR grant, one problem remained: unacceptable surface roughness. This will be the focus of the company's efforts going forward.
"We are optimistic we can solve the problem," said Mr. Godshalk.
Hempel has introduced two new industrial coatings products. The first-Hempaxane 55000-is a new topcoat for steel structures that are exposed to severely corrosive environments. Based on epoxy and polysiloxane binder chemistry, the product provides corrosion protection and long color and gloss retention. Hempel contends Hempaxane 55000 outperforms polyurethane topcoats in many respects, and due to the combination of color/gloss retention and corrosion protection, it can be used in place of an epoxy coat and polyurethane coat, reducing the number of coatings used on a structure.
The second new product to come out of the Hempel R&D lab is Hempadur Multi-Strength GF 35870, a high build epoxy coating reinforced with lamellar glass flakes. By using impermeable glass flake, Hempel has been able to increase the distance water has to take to get through the paint film. The product has a volume solids as high as 87%, according to Hempel, which allows it to be applied in dry-film thicknesses as high as 350-500 micron, even on vertical surfaces. Hempadur Multi-Strength GF 35870 is also self-priming and fast drying.
For metal coating applications, BASF has launched a new e-coat technology, Cathoguard 500, which delivers limited foaming, reduced dropping and run-outs, improved mechanical properties and a reduction of VOC emissions.
New Contracts Continue
Despite the sputtering economy, industrial coatings companies are still inking major contracts with customers seeking innovative products that will enable them to win a larger share in their respective markets.
AK Coatings has signed a new accord with Carrier, Corp., the Farmington, CT-based maker of air conditioning and heating units. AK Coatings, Inc., a wholly owned subsidiary of AK Steel Corporation, specializes in supplying antimicrobial coatings and antimicrobial-coated steel to customers in heat ventilating and air conditioning (HVAC), construction, food equipment, food processing, appliance and medical equipment industries.
Carrier's 39M Aero air handling units will be available with AK Coating's AgION antimicrobial-coated steel as an integral material for the pre-painted steel inner liner. AgION, a silver ion-based compound that suppresses the growth of bacteria, molds, mildew, fungi and other microbes, is made by AgION Technologies, Inc. The compound has been registered by EPA for use in HVAC applications.
Carrier recognized the opportunity to deliver a product that addressed customer concerns with a special coatings technology. "Recently, public awareness about mold, mildew and other microbes has increased, particularly in the education and healthcare sectors, as the general public has learned that heat and humidity allow these elements to infiltrate their buildings," said Todd Bluedorn, Carrier's North America commercial president. "We're proud to offer the AgION antimicrobial compound on our air handling units to our customers."
Like AK Coatings, Akzo Nobel has also signed a new deal to supply industrial coatings to a major project. Akzo Nobel's International unit will supply products for four developments located on the world's largest deposit of heavy crude oil. The company will supply more than 1.3 million liters of coatings for four facilities involved in heavy oil development on the Orinoco Belt of Venezuela, which has an estimated recoverable reserve of more than 270 billion barrels.
International Paint is the sole supplier for three (Petrozuata, Sincor and Hamaca) of the four construction projects which are all located near the coastal town of Jose. It will split supply at Cerro Negro, but has the largest percentage of that business. International's products will be used to coat refineries, chemical plants, tank farms and the marine terminal, which will transfer the crude oil to vessels ready for transportation.
This latest deal with Akzo Nobel follows its recent divestiture of its Nordic industrial coatings business to Tikkurila, which was finalized on Jan. 1, 2003. Through the acquisition, Tikkurila Coatings has been able to significantly strengthen its market position in the Nordic countries and the Baltic Sea area. Sales of the business in Finland, Sweden, Norway, Denmark and Poland were E17 million in 2001.
H.B. Fuller has also signed a major accord that affects its OEM coatings business. The company has signed a deal with Darex, the division of W.R. Grace that sells can and closure sealants, coatings for the food and beverage industry and specialty polymers. The joint marketing and distribution alliance will allow H.B. Fuller to sell Darex's Daran PVdC latex for flexible packaging in conjunction with its own Hydroflex family of waterborne adhesives for drybond and wetbond lamination. Darex's PVdC latex coatings act as a barrier to transmission of oxygen, moisture, grease and even aroma in packaging used to protect food, consumer and industrial products.
Recovery Insight
As contracts continue to be signed and companies continue to improve their products, all eyes remain on the economy. Just when will conditions improve is the big question, and few are willing to place bets on when that will be.
"We don't feel comfortable predicting a timetable for recovery," said Mr. Godshalk of Finishes Unlimited. "We believe we will notice the recovery in increased sales to current and new customers that want to take full advantage of waterborne coatings' potential to improve the environment within their production areas. This will include companies that want to lower VOCs in their plants and also adopt more aggressive agile or lean manufacturing practices while continuing to enjoy the application and performance advantages of liquid coatings."
According to Mr. De Camp of PPG TrueFinish industrial coatings, the market may be nearing the turning point. "While it's very difficult to pinpoint when a recovery will occur, we do expect the manufacturing segments in North America and Europe to be on the front end of the recovery. We feel there is pent-up demand for manufactured goods," he said.
As a global company, PPG has been able to take advantage of growing markets in other regions, and will do so with TrueFinish. "We have seen very robust opportunities for growth in China over the last two years and are moving to position ourselves in that important region," Mr. De Camp added.
BASF's Mr. Monteny's forecast was a bit gloomy. "There are signs that the year 2003 will be another difficult year," he said. "Considerable uncertainties and risks overshadow the economic climate throughout Europe. We do not anticipate a fundamental economic improvement in the short term. At the same time, we are concerned that the developments in political, fiscal and statutory framework conditions may have a negative impact on our competitiveness." Mr. Monteny mentioned the eco-tax in Germany and the policy on chemicals adopted by the European Union as areas of concern. "Although in our industry we are only indirectly affected by the policy on chemicals proposed by the EU, we are worried that it will weaken Europe's competitiveness and innovative strength. In principle we favor a reorganization of the European chemicals policy, but such a reorganization must not have a negative impact when it comes to the choice of operating base."
As companies look ahead to the market's recovery, many are tweaking select areas of their businesses by focusing on customer service, enhancing marketing initiatives or seeking new contracts. Yet there remains a common denominator: finding the right raw materials at the right price. Said Mr. Godshalk, "One of the major obstacles is the ability to find higher volumes of more reasonably priced resins to use in our environmentally oriented product lines."
"Last year was a challenging but rewarding year for our industrial coatings business," said Jean-Pierre Monteny, president of BASF Group's coatings division and CEO of BASF Coatings AG. "We faced a very weak business environment, as most of our relevant markets showed a significant decline. Nevertheless we were able to considerably improve our business performance. Reshaping and innovation have been the top two priorities for this year, along with efforts to improve our market position."
Streamlining product lines, refocusing core businesses and investing in R&D are some of the activities coatings companies have dabbled in during this downturn. While not a cure-all for the ills of the market, coatings companies contend their efforts will help them in the long run.
"We have done our homework. We have used 2002 to further optimize our processes," said Mr. Monteny. "We have been quick to implement the necessary structural measures and will continue to address this issue next year. Our extensive measures to increase efficiency, cut costs and restructure processes have all paid off. We were able to more than make up for the impact of the current economic situation, and this has also provided us with the basis for sustainable profitable growth."
According to Mr. Monteny, in Europe, BASF underwent measures to align its business structure for continued growth. Efforts included customer and product portfolio management and adaptation and restructuring of its sales force, as well as raw material consolidation. Mr. Monteny remarked that the number of raw materials processed in BASF's production facilities has been reduced by six percent in 10 months. In addition, BASF has improved manufacturing efficiencies by shuffling and consolidating production locations of certain resins and select powder and liquid coatings products.
At PPG Industries, the latest effort to realign and refocus its position in the OEM market was headlined by the renaming of its light industrial coatings operations as PPG TrueFinish industrial coatings.
"The name was changed to reflect PPG's heritage and brand as an authentic, leading global manufacturer of industrial coatings," commented Greg De Camp, general manager, PPG TrueFinish industrial coatings. "The name TrueFinish reaches back over decades of experience, performance and leadership, and conveys our strong industry reputation."
| PPG's TrueFinish Coatings are used on a variety of products, including toolboxes and violin bows. |
According to Mr. De Camp, in terms of service, the new name reflects PPG's "sharper focus and renewed commitment" to its customers. "Being responsive to our customers and providing them with superior liquid and powder coatings technologies is our primary emphasis," he said.
Through the TrueFinish structure, PPG contends its expertise and sales staff will be a better match for the U.S. light industrial coatings industry-a market which is comprised of a growing number of small OEM and contract paint businesses that require small, custom batches in two or three days-about twice as fast as traditional paint-manufacturing processes can provide. Those customers include metal fabricators, cabinet, office furniture business machine and medical equipment makers, consumer electronics producers and assorted machinery and equipment companies.
In general, TrueFinish customers operate as outsource businesses that serve larger companies and, as has been the trend in other segments of the coatings industry, offering these clients value-added services is key to helping them save money.
PPG has recognized this opportunity within the light industrial coatings marketplace. "These services could include line design, problem-solving support, training and paint line management support," said Mr. De Camp. "We feel this support could be invaluable to coatings users who do not have sophisticated paint line engineering or application resources. We are selling our experience gained from years of technical service support to the automotive, industrial and automotive refinish industries. We strongly believe this could generate significant cost savings and increased efficiencies for our customers."
BASF has also recognized the need to offer support. In the important coil coatings market, BASF has worked to improve its on-site technical assistance at major customers. BASF's Pevicoat technical service centers are now in Europe, Asia and Africa, with the newest center in place at Alumasa, a Spanish maker of venetian blinds and window shutters.
While BASF and PPG are global giants, smaller companies in the OEM and industrial coatings market are also finding themselves operating under difficult market conditions.
"Like all companies serving the OEM market, our overall sales have been negatively affected during this economy," said Hank Godshalk, president, Finishes Unlimited, a Sugar Grove, IL industrial coatings company. Mr. Godshalk said his company is faring quite well, thanks in part to its size. "While many of our customers are buying less paint from us now, we have not really lost any important business and, as a matter of fact, we have added several important customers in the past few months. We are a small company so we can be fairly agile in responding to both market downturn and opportunities," he commented.
Product Development
Of course, the R&D department doesn't sit idle during slow economic times. While there may be a deceleration in the speed at which new products come to market, companies continue to launch coatings and improve existing technologies to meet demands for better performing products at lower price points.
"There is continual demand for improved performance at lower costs and our product development experts in our industrial, refinish and automotive OEM coatings businesses are responding," said Mr. De Camp. Among efforts made at PPG's industrial coatings business has been the development of improved scratch-resistant powder topcoats. "Certain end-use segments, such as agricultural and construction equipment, have upgraded performance requirements for durability and are moving from alkyds to powder or liquid urethane technologies. Lower-temperature cured coatings, especially powders, which perform equal to their high-temperature-cured counterparts, are being introduced at lower costs," Mr. De Camp added.
About a year ago, Finishes Unlimited successfully introduced a quick drying, air-dry coating that is HAPs-free. "We focused on creating a fast drying product for customers running high volume manufacturing lines that wanted to use an air-dry paint line and to have their finished products ready for shipment in the shortest time possible. The fact that it is also HAPs-free is another attraction," said Mr. Godshalk, who added that the product has demonstrated excellent moisture resistance in the field.
More recently, Finishes Unlimited has been awarded a Phase I Small Business Innovation Research (SBIR) grant to continue research on the application techniques for its near-zero-VOC bake enamel waterborne coating.
The grant is quite a coup for the company-more than 300 companies applied for Phase I funds and only 31 were successful. Through the SBIR program, 12 federal agencies make funds available to small companies for R&D efforts on products or processes that may have strong commercial potential and which also meet the funding agency's own research needs.
The SBIR grant will enable Finishes Unlimited to continue work on Ultra Aqualite, a bake enamel coating with VOC levels of between 0.1 and 0.5 lbs./gallon without water. According to the company, field tests on Ultra Aqualite revealed several application issues not encountered in the laboratory. While Finishes Unlimited was able to correct most of the field problems by the time it submitted its proposal for the SBIR grant, one problem remained: unacceptable surface roughness. This will be the focus of the company's efforts going forward.
"We are optimistic we can solve the problem," said Mr. Godshalk.
Hempel has introduced two new industrial coatings products. The first-Hempaxane 55000-is a new topcoat for steel structures that are exposed to severely corrosive environments. Based on epoxy and polysiloxane binder chemistry, the product provides corrosion protection and long color and gloss retention. Hempel contends Hempaxane 55000 outperforms polyurethane topcoats in many respects, and due to the combination of color/gloss retention and corrosion protection, it can be used in place of an epoxy coat and polyurethane coat, reducing the number of coatings used on a structure.
The second new product to come out of the Hempel R&D lab is Hempadur Multi-Strength GF 35870, a high build epoxy coating reinforced with lamellar glass flakes. By using impermeable glass flake, Hempel has been able to increase the distance water has to take to get through the paint film. The product has a volume solids as high as 87%, according to Hempel, which allows it to be applied in dry-film thicknesses as high as 350-500 micron, even on vertical surfaces. Hempadur Multi-Strength GF 35870 is also self-priming and fast drying.
For metal coating applications, BASF has launched a new e-coat technology, Cathoguard 500, which delivers limited foaming, reduced dropping and run-outs, improved mechanical properties and a reduction of VOC emissions.
New Contracts Continue
Despite the sputtering economy, industrial coatings companies are still inking major contracts with customers seeking innovative products that will enable them to win a larger share in their respective markets.
AK Coatings has signed a new accord with Carrier, Corp., the Farmington, CT-based maker of air conditioning and heating units. AK Coatings, Inc., a wholly owned subsidiary of AK Steel Corporation, specializes in supplying antimicrobial coatings and antimicrobial-coated steel to customers in heat ventilating and air conditioning (HVAC), construction, food equipment, food processing, appliance and medical equipment industries.
Carrier recognized the opportunity to deliver a product that addressed customer concerns with a special coatings technology. "Recently, public awareness about mold, mildew and other microbes has increased, particularly in the education and healthcare sectors, as the general public has learned that heat and humidity allow these elements to infiltrate their buildings," said Todd Bluedorn, Carrier's North America commercial president. "We're proud to offer the AgION antimicrobial compound on our air handling units to our customers."
Like AK Coatings, Akzo Nobel has also signed a new deal to supply industrial coatings to a major project. Akzo Nobel's International unit will supply products for four developments located on the world's largest deposit of heavy crude oil. The company will supply more than 1.3 million liters of coatings for four facilities involved in heavy oil development on the Orinoco Belt of Venezuela, which has an estimated recoverable reserve of more than 270 billion barrels.
International Paint is the sole supplier for three (Petrozuata, Sincor and Hamaca) of the four construction projects which are all located near the coastal town of Jose. It will split supply at Cerro Negro, but has the largest percentage of that business. International's products will be used to coat refineries, chemical plants, tank farms and the marine terminal, which will transfer the crude oil to vessels ready for transportation.
This latest deal with Akzo Nobel follows its recent divestiture of its Nordic industrial coatings business to Tikkurila, which was finalized on Jan. 1, 2003. Through the acquisition, Tikkurila Coatings has been able to significantly strengthen its market position in the Nordic countries and the Baltic Sea area. Sales of the business in Finland, Sweden, Norway, Denmark and Poland were E17 million in 2001.
H.B. Fuller has also signed a major accord that affects its OEM coatings business. The company has signed a deal with Darex, the division of W.R. Grace that sells can and closure sealants, coatings for the food and beverage industry and specialty polymers. The joint marketing and distribution alliance will allow H.B. Fuller to sell Darex's Daran PVdC latex for flexible packaging in conjunction with its own Hydroflex family of waterborne adhesives for drybond and wetbond lamination. Darex's PVdC latex coatings act as a barrier to transmission of oxygen, moisture, grease and even aroma in packaging used to protect food, consumer and industrial products.
Recovery Insight
As contracts continue to be signed and companies continue to improve their products, all eyes remain on the economy. Just when will conditions improve is the big question, and few are willing to place bets on when that will be.
"We don't feel comfortable predicting a timetable for recovery," said Mr. Godshalk of Finishes Unlimited. "We believe we will notice the recovery in increased sales to current and new customers that want to take full advantage of waterborne coatings' potential to improve the environment within their production areas. This will include companies that want to lower VOCs in their plants and also adopt more aggressive agile or lean manufacturing practices while continuing to enjoy the application and performance advantages of liquid coatings."
According to Mr. De Camp of PPG TrueFinish industrial coatings, the market may be nearing the turning point. "While it's very difficult to pinpoint when a recovery will occur, we do expect the manufacturing segments in North America and Europe to be on the front end of the recovery. We feel there is pent-up demand for manufactured goods," he said.
As a global company, PPG has been able to take advantage of growing markets in other regions, and will do so with TrueFinish. "We have seen very robust opportunities for growth in China over the last two years and are moving to position ourselves in that important region," Mr. De Camp added.
BASF's Mr. Monteny's forecast was a bit gloomy. "There are signs that the year 2003 will be another difficult year," he said. "Considerable uncertainties and risks overshadow the economic climate throughout Europe. We do not anticipate a fundamental economic improvement in the short term. At the same time, we are concerned that the developments in political, fiscal and statutory framework conditions may have a negative impact on our competitiveness." Mr. Monteny mentioned the eco-tax in Germany and the policy on chemicals adopted by the European Union as areas of concern. "Although in our industry we are only indirectly affected by the policy on chemicals proposed by the EU, we are worried that it will weaken Europe's competitiveness and innovative strength. In principle we favor a reorganization of the European chemicals policy, but such a reorganization must not have a negative impact when it comes to the choice of operating base."
As companies look ahead to the market's recovery, many are tweaking select areas of their businesses by focusing on customer service, enhancing marketing initiatives or seeking new contracts. Yet there remains a common denominator: finding the right raw materials at the right price. Said Mr. Godshalk, "One of the major obstacles is the ability to find higher volumes of more reasonably priced resins to use in our environmentally oriented product lines."
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