Sean Milmo, European Correspondent08.15.12
In terms of mergers and acquisitions, restructuring, portfolio changes and investment projects, one of the most active sectors in the European coatings supply chain is dispersions.
Despite a slow growth in demand for coatings, dispersion producers have been able to achieve relatively strong increases in sales in recent years backed by double-digit profit margins.
Now they face the challenge of being able to exploit their technological know-how to maintain the rise in sales with continued high profitability.
The dispersions or preparations sector, which covers pigments and binders or a combination of both, is benefitting from the trend towards micronized and nano scale ingredients.
Pigments dispersion producers in particular are able to take advantage of a specialist knowledge in how to make the best use of particle size, shape, surface structure and distribution.
As dispersion makers extend the scope of their activities further down the value chain, they are leaving coatings companies with fewer process steps to be carried out before the manufacture of the paint is completed.
At a time when in the face of rises in raw material prices, coatings companies are wanting to reduce their production costs, dispersion suppliers are able to help to simplify the making of paints.
They have been helping coating producers comply with new environmental regulations, especially those imposing restrictions on emissions of volatile organic compounds (VOCs). This can require not only the application of waterborne binder dispersions but also pigment dispersions, which are compatible with them.
“(Our) pigment dispersions support the need of coatings companies for water-based and low-VOC formulations with solvent-free preparations,” said Thomas Sommermann, head of technical services and development colorants at Lanxess, a German-based speciality chemicals company. “Our dispersions enable formulators to meet today’s demanding ecological requirements with their final products.”
With pigment dispersions or preparations, in particular, there are plenty of opportunities for specialist suppliers to make life easier for coatings companies, especially those with small to medium-sized plants.
“Customers with large plants will tend to do their own dispersions because it would be uneconomical to do otherwise,” said Gerd Koenig, vice president, global market and sales for the coatings business of Clariant, one of Europe’s largest pigment producers, which has been expanding its dispersion operations.
“But for customers with small or medium-sized coatings plants it is much easier to buy dispersions, which is why we are currently seeing higher growth in demand for our dispersions than our coatings pigments,” he said. “For coatings producers, dispersing pigments has become more and more difficult, complex and time consuming.”
One of the most intricate parts of the dispersion process is the milling and grinding of agglomerates of pigments to separate them so that they can be reduced to microscopic- sized primary particles which must be stabilized to prevent them coming together again.
“Milling now requires a lot of know-how about how to use the equipment properly and what additives to apply for the right distribution of the particles,” said Koenig.
Particle size and distribution can now determine the color intensity and key resistance properties of the paint. As a result dispersion supply has become an increasingly customized business, which requires production to be located close to customers and the provision of technical support services.
Dispersion operations have also been moving steadily closer to the end-user. Clariant, for example, expanded its presence in the tinting segment with the acquisition last year of Italtinto of Italy, which produces tinting systems, including dispensing machines, color-matching software and paint mixers.
But unlike other dispersion producers like BASF of Germany, which is also backward integrated into pigments manufacture, Clariant is not moving into coatings production. “We’ve extended ourselves as far as possible downstream,” said Koenig. “We will not go any further to avoid competing with our customers. Our competitive advantage is in our technological knowledge in dispersions.”
Furthermore its specialist knowhow in dispersions is helping to raise the profitability of Clariant’s pigments business unit. Despite a drop in sales last year, its operating profit margin rose around 1.5 percentage points to just under 19 percent while its margin on earnings before interest, tax, depreciation and amortisation (EBITDA) rose from 20 percent to close to 22 percent.
Technological know-how is emerging as a key driving force behind current expansion initiatives among dispersion producers.
Chromaflo Technologies, Ashtabula, Ohio, a recently formed trans-Atlantic merger of Plasticolors Inc, an Ohio-based pigment and chemical dispersions operation, and the Colortrend global colorants dispersion business of Evonik Industries of Germany, has a portfolio of technologies, particularly in areas like nanotechnology, which it says gives it a competitive edge over rivals in the international dispersions market.
The merger was created by Arsenal Capital Partners, a New York-based private equity firm, which took over both Plasticolors and Colortrend earlier this year with the aim of using the two entities to build a strong global business under the leadership of Scott Becker, Plasticolors’ chief executive.
“We are probably able to provide to the marketplace more technologies, chemistry knowhow and services than any other dispersions company,” said Becker, now CEO of Chromaflo, which emphasizes that it is ‘independent’ since unlike other dispersion operations it is not part of a coatings manufacturing company.
“One of our big strengths is that we are 100 percent focused on pigment dispersions so we can spend a lot of time and energy developing technologies and products for our customers,” he said.
Chromaflo believes that dispersions demand in Europe, the domestic market of Colortrend, which had sales last year of €130 million ($157 million), is growing at the same rate as the region’s gross domestic product (GDP). But with Chromaflo’s technological advantages its sales growth is expected to be above this average growth rate, especially in Eastern Europe.
Meanwhile Evonik, a specialty chemicals producer with total sales last year of €14.5 billion—more than €1 billion was in products related to the coatings and printing markets—has been expanding its dispersions portfolio outside of colorants.
It has been developing coatings dispersions based on its Aerosil fumed silica material consisting of nano-sized particles with low-viscosity thickening properties. It has recently launched Aerodisp WR 8520, a hydrophobic dispersion system for pigmented, water-based coatings. The company has also introduced nanostructured indium tin oxide dispersions for transparent, infrared (IR) radiation absorbing coatings.
For Evonik and other chemical companies with cutting-edge technologies dispersions still remains an area with growth opportunities able to withstand the impact of divestments of parts of their dispersion businesses.
Despite a slow growth in demand for coatings, dispersion producers have been able to achieve relatively strong increases in sales in recent years backed by double-digit profit margins.
Now they face the challenge of being able to exploit their technological know-how to maintain the rise in sales with continued high profitability.
The dispersions or preparations sector, which covers pigments and binders or a combination of both, is benefitting from the trend towards micronized and nano scale ingredients.
Pigments dispersion producers in particular are able to take advantage of a specialist knowledge in how to make the best use of particle size, shape, surface structure and distribution.
As dispersion makers extend the scope of their activities further down the value chain, they are leaving coatings companies with fewer process steps to be carried out before the manufacture of the paint is completed.
At a time when in the face of rises in raw material prices, coatings companies are wanting to reduce their production costs, dispersion suppliers are able to help to simplify the making of paints.
They have been helping coating producers comply with new environmental regulations, especially those imposing restrictions on emissions of volatile organic compounds (VOCs). This can require not only the application of waterborne binder dispersions but also pigment dispersions, which are compatible with them.
“(Our) pigment dispersions support the need of coatings companies for water-based and low-VOC formulations with solvent-free preparations,” said Thomas Sommermann, head of technical services and development colorants at Lanxess, a German-based speciality chemicals company. “Our dispersions enable formulators to meet today’s demanding ecological requirements with their final products.”
With pigment dispersions or preparations, in particular, there are plenty of opportunities for specialist suppliers to make life easier for coatings companies, especially those with small to medium-sized plants.
“Customers with large plants will tend to do their own dispersions because it would be uneconomical to do otherwise,” said Gerd Koenig, vice president, global market and sales for the coatings business of Clariant, one of Europe’s largest pigment producers, which has been expanding its dispersion operations.
“But for customers with small or medium-sized coatings plants it is much easier to buy dispersions, which is why we are currently seeing higher growth in demand for our dispersions than our coatings pigments,” he said. “For coatings producers, dispersing pigments has become more and more difficult, complex and time consuming.”
One of the most intricate parts of the dispersion process is the milling and grinding of agglomerates of pigments to separate them so that they can be reduced to microscopic- sized primary particles which must be stabilized to prevent them coming together again.
“Milling now requires a lot of know-how about how to use the equipment properly and what additives to apply for the right distribution of the particles,” said Koenig.
Particle size and distribution can now determine the color intensity and key resistance properties of the paint. As a result dispersion supply has become an increasingly customized business, which requires production to be located close to customers and the provision of technical support services.
Dispersion operations have also been moving steadily closer to the end-user. Clariant, for example, expanded its presence in the tinting segment with the acquisition last year of Italtinto of Italy, which produces tinting systems, including dispensing machines, color-matching software and paint mixers.
But unlike other dispersion producers like BASF of Germany, which is also backward integrated into pigments manufacture, Clariant is not moving into coatings production. “We’ve extended ourselves as far as possible downstream,” said Koenig. “We will not go any further to avoid competing with our customers. Our competitive advantage is in our technological knowledge in dispersions.”
Furthermore its specialist knowhow in dispersions is helping to raise the profitability of Clariant’s pigments business unit. Despite a drop in sales last year, its operating profit margin rose around 1.5 percentage points to just under 19 percent while its margin on earnings before interest, tax, depreciation and amortisation (EBITDA) rose from 20 percent to close to 22 percent.
Technological know-how is emerging as a key driving force behind current expansion initiatives among dispersion producers.
Chromaflo Technologies, Ashtabula, Ohio, a recently formed trans-Atlantic merger of Plasticolors Inc, an Ohio-based pigment and chemical dispersions operation, and the Colortrend global colorants dispersion business of Evonik Industries of Germany, has a portfolio of technologies, particularly in areas like nanotechnology, which it says gives it a competitive edge over rivals in the international dispersions market.
The merger was created by Arsenal Capital Partners, a New York-based private equity firm, which took over both Plasticolors and Colortrend earlier this year with the aim of using the two entities to build a strong global business under the leadership of Scott Becker, Plasticolors’ chief executive.
“We are probably able to provide to the marketplace more technologies, chemistry knowhow and services than any other dispersions company,” said Becker, now CEO of Chromaflo, which emphasizes that it is ‘independent’ since unlike other dispersion operations it is not part of a coatings manufacturing company.
“One of our big strengths is that we are 100 percent focused on pigment dispersions so we can spend a lot of time and energy developing technologies and products for our customers,” he said.
Chromaflo believes that dispersions demand in Europe, the domestic market of Colortrend, which had sales last year of €130 million ($157 million), is growing at the same rate as the region’s gross domestic product (GDP). But with Chromaflo’s technological advantages its sales growth is expected to be above this average growth rate, especially in Eastern Europe.
Meanwhile Evonik, a specialty chemicals producer with total sales last year of €14.5 billion—more than €1 billion was in products related to the coatings and printing markets—has been expanding its dispersions portfolio outside of colorants.
It has been developing coatings dispersions based on its Aerosil fumed silica material consisting of nano-sized particles with low-viscosity thickening properties. It has recently launched Aerodisp WR 8520, a hydrophobic dispersion system for pigmented, water-based coatings. The company has also introduced nanostructured indium tin oxide dispersions for transparent, infrared (IR) radiation absorbing coatings.
For Evonik and other chemical companies with cutting-edge technologies dispersions still remains an area with growth opportunities able to withstand the impact of divestments of parts of their dispersion businesses.
