Andersen: As expected, the coatings market remained very competitive in 2018. Raw material prices increased more than anticipated, which affected the entire industry and put immediate pressure on our profitability. In addition, the marine and oil & gas markets remained in a recessional state and the political and macro-economic situation in the Middle East made business tougher than anticipated.
Finally, we saw challenging market conditions in Asia-Pacific. We met those challenges with a positive mindset and managed to turn around the curve by installing new leadership teams in the region and by working hard on the ground to create a winning Hempel Culture, one with strong ties to our customers that ensures all employees are engaged in our customer-focused vision.
Falder: Raw material pricing and availability of key raw materials in a number of areas has created its own challenge throughout the year for all coatings manufacturers and HMG was no different. Global factors continue to create a fragility across a number of areas of our supply chain. Key legislation changes have influenced our customers, and in particular the use of chrome VI in primer systems is now history.
Gorella: Although the markets no longer let us dream about the high growth rates we experienced a few years ago, the situation in 2018 remained fairly stable compared to 2017 for the industrial coatings markets we are active in. On the downside, the cost of raw materials increased significantly last year and many companies have been forced to adjust their prices in order to compensate at least for part of that cost raise.
McGarry: Overall, the paints and coatings market grew at a slower pace compared to 2017. For the full year, we delivered adjusted earnings per diluted share growth despite significant and persistent raw material and logistics cost inflation, which impacted the entire coatings industry and rose sequentially throughout much of the year.
Roy: The GDP growth of the Indian economy has accelerated to a healthy 7.2% in fiscal 2019. We have enjoyed a buoyant paints and coatings market in India for the last many quarters. Demand expansion has been witnessed in industrial, auto OEM and decorative segments. A steady growth in infrastructure spending by the Government and rapid urbanisation has meant that Company such as ours are reaping the benefits.
Llinas-Salá: Overall, 2018 was not a good year. We estimate that liquid paint market, on aggregate, experienced just marginal growth, with do-it-yourself doing worse and professional doing better. Powder, on average, performed better.
Needles to say, raw material price increases had a significant, negative, impact in our P&L.
Tado: Global market demand for paint and coatings by 2020 is expected to grow mainly due to the steady growth potential of Asian market. Especially, as the world’s largest demand for paint, Chinese market is still quite attractive, especially in the area of decorative paint segment, which has the biggest growth potential in the entire paint segment.
Market growth of paint and coatings in Japan has been relatively slow since 2012, and it became almost flat YoY in 2018.
In 2018, the paint and coating market faces challenges with the increase of raw materials cost occurred globally which had been maintained since 2017. In addition, the restrictions on housing investment by the China Government led decrease of paint demand in China.
Vanlancker: 2018 was a year of strong headwinds for the industry specifically looking at raw material inflation, volatile foreign exchange rates and uncertain macroeconomic environments.
For AkzoNobel 2018 was a landmark year as we completed the sale of the Specialty Chemicals business and began returning the vast majority of proceeds to our shareholders. Despite strong headwinds we made good progress on delivering our Winning together: 15 by 20 strategy with an increased business return on sales at 10.6% in the second half of the year versus 9.2% in the same period in 2017.
We’re now a focused paints and coatings company and are channeling all our experience, energy and passion into being recognized as the reference in our industry. We continue to invest in growth and in 2018, we made multiple bolt-on acquisitions, including Fabryo in Romania, Xylazel in Spain, Colourland Paints in Malaysia and the AkzoNobel Swire Paints joint venture in China. These deals will help accelerate our momentum as we continue to build AkzoNobel into an industry leader.
Yannidis: The Greek paint market has shown significant signs of recovery with an estimated growth of five percent in 2018. However, having experienced a shrinking of the market by 43 perent between 2008 to 2012, and cumulative growth of 10 perent from 2013 to 2018, one can easily realize that there is excess capacity for paint production in the country and the sales level of the past decade are difficult to achieve again.
CW: Did your company see an increase in revenue in 2018?
Andersen: Yes. We consider our 2018 results satisfactory when considering the negative impact from the increase in raw material prices and challenges to our performance in Asia-Pacific and the Middle East.
Falder: Another year of good progress for HMG which included some significant new business wins and as such 2018 saw the company achieve record litreage and turnover. The new business wins are in a variety of sectors however have a commonality in that the flexibility and commitment of the HMG team to our customers was a key contributing factor.
Gorella: We are very satisfied about our volume development and the increase in revenues and earnings this year at Beckers.
McGarry: PPG’s full-year 2018 net sales totaled approximately $15.4 billion, up approximately four percent compared to the prior year. PPG reported adjusted earnings per diluted share from continuing operations of $5.92, up slightly versus the prior year.
We continued to strengthen our business portfolio, which is now entirely focused on innovative paints, coatings and specialty materials. In 2018, we completed four acquisitions:
• Paintzen, an innovative, online provider of residential painting services;
• ProCoatings, a leading architectural paint and coatings wholesaler, located in The Netherlands;
• Hodij Coatings, a leading distributor of well-known professional paint brands, based in The Netherlands; and
• SEM, a U.S.-based manufacturer of specialized automotive refinish products.
In addition, we announced the acquisition of Whitford, a global manufacturer that specializes in low-friction and nonstick coatings for industrial applications and consumer products, and Hemmelrath, a global automotive coatings manufacturer based in Germany. These acquisitions are expected to be finalized in the first half of 2019, subject to customary closing conditions.
Roy: Berger Paints has been growing in the high teens all through this fiscal on the back of strong performances by all our divisions. We are seeing our investments in R&D and new production facilities paying off, allowing us to post better results than the industry. There has been bottom-line pressure on account of high raw material prices but the overall growth trajectory has remained intact.
Llinas-Salá: No, we did not. Some segments grew but others went down, having our overall sales turnover to go slightly down. It is also fair to say that some of our restructuring initiatives had a negative effect on our top line.
Tado: The sales of Nippon Paint HD Group grew with 3 % YoY in 2018 due to steady expansion of existing business in Asia and the contribution of newly acquired US Paint Manufacture, DUNN-EDWARDS CORPORATION in 2016.
We did not able to reach the target that we planned at the beginning of the period, but we increased market share in each segments and regions where we do business.
Vanlancker: Our revenue for the year was four percent lower, although up in constant currencies with positive price/mix partly offset by lower volumes. For the fourth quarter of 2018 we saw revenue up of one percent and four percent up in constant currencies again with positive price/mix offset by lower volumes.
Yannidis: Our company VITEX has seen an increase in sales of 12 percent. We are proud to report a 47 percent growth in sales of architectural paints in six years, since 2012, the year that the Greek market stopped contracting and started stabilizing.
CW: What areas of the paint and coatings market represent the most growth opportunities for your company?
Andersen: We anticipate that the coatings market will regain strength in 2019 and we expect to deliver underlying organic growth in line with or slightly better than the market.
When talking about acquisitions, we are not excluding any of the areas we’re currently operating in, i.e. marine, decorative, protective, industrial, container and yacht.
Falder: There are a number of markets which represent growth for HMG Paints going forward including defence, conductive and teletronic, decorative and industrial, however we’re not focusing on one particular area. HMG’s size and flexibility allow us to seek and gain growth opportunities from a wide range of markets.
Gorella: We expect that the solid growth in Agricultural, Construction and Earth moving equipment that we saw last year will continue also in 2019. The same we anticipate for some developing markets for coil coatings. For instance, we trust the opening of our second production site in Vietnam in the end of 2018 will allow us to accelerate our growth in this developing market. Technology-wise, we expect our new Beckqua® range of waterborne coatings to bring us a significant boost in the market as it stands as a great alternative in an environment increasingly focused on VOC reductions. Our hopes are high based on the first very positive feedback we received from our customers.
McGarry: As a leading paints, coatings and specialty materials manufacturer, PPG continues to grow our strong portfolio of brands, deliver shareholder value, innovate new products, and drive sustainable business practices globally.
The increased functionality that customers are demanding from paints and coatings has made technology critical to the manufacturing industry. The rise of autonomous and electric vehicles is driving PPG to create advanced coatings that are required for the development and deployment of such vehicles. The industry will look to PPG to innovate and manufacture coatings that will enhance vehicle visibility, improve overall reliability and enable safety. These types of functional coatings will be detected by light detection and ranging (LIDAR) and radar systems. In addition, PPG is developing easy-to-clean coatings that help prevent obstruction of autonomous vehicle sensors and deliver a cleaner experience for shared vehicles; and environmentally sensitive cathode and anode coatings used to store and transfer energy within modern lithium ion batteries.
Roy: Berger has a versatile portfolio of products that caters to nearly every industry and consumer segment and we are therefore well placed to capitalize on the opportunities being thrown up by India’s rapid industrialization and urbanization. Growth in the decorative and protective coatings sectors have been particularly rewarding in recent quarters.
Llinas-Salá: Well, we do believe that in the professional segment is where the best opportunities lay for us. As I said, DIFM is doing better than DIY and this is a trend and, on top, our presence there is smaller.
We are revamping our product line and bringing some exciting innovations. Said that, this does not mean we are not going to forget the DIY segment. On the contrary, we do believe that there are good opportunities there and we are also investing a significant amount of resources in new product introduction as well as advertising. We are fortunate to have a strong brand and we want to ensure that it is even stronger for the future.
Powder coatings, is an area where we expect to have sustainable growth, driven by the market fundamentals and also by our specialties, like “wood effect”.
Tado: The focused segments of NIPPON PAINT HD Group are decorative and automotive. The demand of decorative segment in global market accounts for 40%, and it has growth potential and profitability. Our focused area is Asia, where its sales accounts for 57% of our group’s sales.
Although market demand in China shrunk due to the environmental restrictions and economic restrictions for housing investment by the China government, we believe that Chinese market has still opportunities for growth.
NIPPON PAINT HD Group aims to increase sales and operating income by expanding its share of the market with our unique strategies and strengths.
In Automotive segment, we expand the business globally as the World’s 4th company.
Vanlancker: Powder Coatings remained a strong growth market, with revenue up 4% and up 6% in constant currencies in Q4. Growth was supported by new applications and pricing initiatives. The acquisition of the V. Powdertech business in Thailand in 2017 helped to fuel growth and strengthen our leading powder coatings business in South East Asia.
Aerospace Coatings revenue was driven by strong demand and customer wins.
For decorative paints Asia, volumes were lower in China versus an exceptionally strong fourth quarter in 2017 and grew in India, Malaysia and Vietnam. The acquisition of Colourland Paints in Malaysia strengthens our business in Asia. In addition, we acquired the minority interest share to obtain full ownership of the AkzoNobel Swire Paints joint venture in China, enabling strategic flexibility.
Yannidis: VITEX is primarily active in architectural paints and our top priority is to grow in this segment. However, we have invested in ETICS (external thermal insulation composite systems) through our VitexTHERM brand, aiming to help energy saving and reaching the EU targets. Moreover, we entered the yachting world, with a premium antifoulings brand named EUMARIA.
CW: What is your business strategy for growth in 2019 and beyond?
Andersen: The goal of our Journey to Excellence strategy remains to improve profitability and growth by striving for organisational excellence.
Further, it is no secret that Hempel is looking for acquisition opportunities. In 2018, we welcomed J.W. Ostendorf into the Hempel family, a decorative coatings company with approx. 650 employees and operations primarily in Germany and France. When adjusting for effect of this acquisition, Hempel’s net interest-bearing debt was eliminated in 2018. We will continue to strive for excellence in this area to free up working capital, as it will give us the freedom to pursue our ambitious growth targets through major acquisitions and strong organic growth.
We also want to lead the industry in ‘service management’, essentially taking over responsibility for keeping our customers’ assets in the agreed condition over the asset’s life cycle. This is a new way of thinking for the industry and we understand that it will take time. We took an important step on this road in 2018 when we created Hempel Services, a new globally aligned service organisation that will contribute to strengthening our customer relationships, ensure consistency and quality in our service across the globe and contribute to Hempel’s earnings.
Falder: I believe HMG’s approach of working and listening closely with suppliers and customers still continues to be the right strategic approach. …..This approach hasn’t changed since 1930 and we understand that we need to be successful so do our customers and suppliers! By working together, we can provide value across the supply chain. The recent business wins have allowed HMG to invest further in our plant and machinery creating more capacity.
Gorella: In 2019 and for the years to come, in addition to keeping a strong momentum on innovation, we want to be as close to our customers’ needs as ever, providing them with further tailor-made solutions combined with the high quality of service and products Beckers is known for. What we want is to understand what true value means to each of our customers and ensure they get the best experience possible each time they interact with Beckers. By doing so, and as stated in our brand tagline, we are aiming at continuously adding value beyond the surface.
Roy: We will continue to target a high growth trajectory with a continued emphasis on improving profitability. Much of our attention will be devoted to identifying and nurturing talent in key areas like R&D as well as in business as these will be the key drivers of the next level of our growth story. Our investment philosophy is focussed on acquisition of technology, building manufacturing capability and making strategic acquisitions.
Llinas-Salá: Innovation will be a key ingredient in our business strategy, with a special focus on premium products. We do believe it is important that the liters sold, even if not much more, are sold at a better margin. We also want to put a strong emphasis on sustainability as well as digital.
Tado: In 2018, NIPPONPAINT HD group started its medium-term management plan for2018 to 2020, which we call “N-20”.
“N-20” is designed to ensure that we attain the leading position in the segments and regions where we do business.
There are four main strategies. We will (1) strengthen the business in existing segments, (2) accelerate expansion of the portfolio, (3) improve earnings capacity, and (4) enhance the structure of ”Global One Team”, as the four key initiatives in accordance with the conditions of each business domain /region.
Although the market condition is quite severe, we will keep focusing on our strategies set in the “N-20” to archive the goal in 2020.
We recognize that we should demonstrate our group’s strength and now are asked by our various stakeholders about the real value of “what we should do now” in this difficult situations. Rather, we consider the situation as a chance for our group to further grow.”
Vanlancker: We are delivering towards our Winning together: 15 by 20 strategy and continue creating a fit-for-purpose organization for a focused paints and coatings company, contributing to the achievement of our 2020 guidance.
Demand trends differ per region and segment in an uncertain macro-economic environment. Raw material inflation is expected to continue during the first half of 2019, although at a lower rate than 2018.
Robust pricing initiatives and cost saving programs are in place to address the current challenges.
We continue executing our transformation to deliver the next €200 million cost savings by 2020, incurring one-off costs in 2019 and 2020.
Yannidis: We have declared 2019 as the year of Excellence for VITEX. Through various initiatives we will promote our commitment to offer our customers the most competitive total offering including top price/quality ratio, payment terms, products availability, order processing time, customer care, abundance of colorcards and fandecks, brand awareness, modern looks and many other things.
CW: What is your company’s long-term plans?
Andersen: Hempel is now almost halfway through its major transformational journey that we started back in 2016. We are strengthening our organisation and culture significantly, building a company that will become one of the leaders in the consolidation of the global coatings industry. Our goal is clear: to become a true industry leader in our core business areas.
Like any major change, our transformation will take time. However, 2018 has confirmed that we are making very strong progress in all of the most important areas and now have the necessary foundation to start making the desired acquisitions. We will of course continue full speed ahead in 2019 to pursue our opportunities to strengthen Hempel even further globally.
We will continue to look for new companies to bring into the Hempel family, as we continue our journey towards our goal of becoming a €3 billion revenue company.
Falder: HMG’s long-term plans remain the same we see growth as a by-product of doing a good job for our customers, i.e. great paint, great service and the best possible relationships across the supply chain. We do not set out to grow, only to do the best possible job we can. It’s been the same since 1930!
Gorella: Aiming at remaining an industry leader in our strategically chosen market segments and regions, the Beckers teams across the world will keep on giving their very best in order to maintain the close partnerships we have with our customers, and create new successful ones. Our long-term commitment to developing sustainable products is also what has been and still drives each and every employee at Beckers, and what participates in making us a high-performance organization backed by strong shared values.
Roy: Berger has been steadily climbing the rankings at Coatings World and in the last year has moved up another place to No. 14. We continue to aspire to break into the list of Top-10 paint companies. To that end, we have been building advanced production capabilities, enhancing our distribution and retail footprint and launching innovative products and services.
Llinas-Salá: In the mid term our focus will still be our home markets, building a stronger market franchise based essentially upon innovation and communication. We are not planning any major expansion until we complete our homework.
Tado: Our group’s long-term vision is to become “the leading company committed to continuously create new values” in 2030. In order to achieve the Vision in 2030, we set out a 3 year medium-term management plan, called “N-20,” for 2018 to 2020 to achieve our long term vision based on the “Future Pull,” back casting approach. In “N-20”, our group aims to promote the global growth of the Group and solidify its outstanding presence in Asia. And we will also maximize the values provided to all stakeholders in all business domains and regions.
Vanlancker: We want to close the gap with our competitors, hence we are focusing on our 15 by 20 strategy and creating a fit-for-purpose organization for a focused paints and coatings company, contributing to the achievement of our 2020 guidance and to be the reference in paints and coatings.
Yannidis: Handing over to the next generation.