03.13.20
Coatings World’s 2020 CEO Forum features executives from seven coatings companies offering their insights on the industry. This year’s forum includes CEOs from leading coatings companies from the U.S., Europe and Asia Pacific. The participants are Robert Bryant, CEO, Axalta; John Falder, CEO, HMG Paints; Boris Gorella, CEO, Beckers Group; Michael H. McGarry, chairman and CEO, PPG Industries; Lars Petersson, president and CEO, Hempel Group; Abhijit Roy, CEO, Berger Paints; Masaaki Tanaka was appointed as chairman, president & CEO, Nippon Paint and Thierry Vanlancker, CEO, AkzoNobel.
Coatings World: How did the market for paints and coatings fare overall in 2019?
Axalta CEO Robert Bryant
Bryant: While coatings continue to be a strong sector, markets were mixed in 2019. Refinish demand was stable globally, which plays to Axalta’s strength, with demand coming from a strong global car parc that grew last year by more than three percent, or 89 million new cars. The Industrial end-market, which is driven by broader industrial production gauges, saw some pressure in 2019, and the Transportation market also experienced some headwinds with global light vehicle demand down for the year.
Falder: The UK Market was an interesting place in 2019 with the political uncertainty of Brexit and the numerous delays leading to companies restricting or delaying spending until we had a clear political path. Supply and import issues, as well as legislative confusion, are all unhelpful.
HMG Paints CEO John Falder
Gorella: 2019 was an exciting year for the Beckers Group, with the highest sales ever in our 154-year history. Our innovative research work and the unrivaled customer-focused technical support have resulted in the “pole position” for our coil coatings segment; we further strengthen our No. 1 position as the global leader!
McGarry: The global paints and coatings market remained resilient in 2019, and we anticipate that the market will experience a modest improvement in 2020. PPG achieved strong results in our aerospace and protective and marine coatings (PMC) businesses in 2019, reflecting customer demand for our specific technologies. Our aerospace coatings business delivered strong volume growth, outpacing industry performance in both the U.S. and Asia regions. Led by continued strong growth in the Asia region, our protective and marine coating business delivered above-industry sales volume growth of a mid-single-digit percentage during the fourth quarter of 2019.
Petersson: We saw that the market for protective picked up in 2019, although the general industrial market shrunk a little. The marine market also picked up globally in 2019. The marine newbuilding market is still at a very low level, but is showing signs of recovery despite uncertainty about future regulations and how to reach future emissions reductions. The repair and maintenance market was reasonably strong due to an increase in dry dockings and a growing market for sea stock due to an increase in fleet age and net fleet.
As expected, the decorative market in EMEA was challenging with flat or even declining demand.
Berger Paints CEO Abhijit Roy
Roy: The Indian economy faced some strong headwinds in 2019 and overall growth has been much slower than in the past decade. Some of these were due to systemic and infrastructural issues, while others were linked to the overall slowdown in the world economy. The automotive OEM and realty sectors were extremely sluggish and it hurt companies that depend on them.
As far as Berger is concerned, we were able to achieve double-digit volume and value growth in most segments with the exception of our automotive business. Raw material prices were largely constant this year and our strong R&D pipeline was able to derive cost efficiencies that ensured that our bottom-line growth was very healthy. Many of our new initiatives in distribution, paint services and retailing have been doing extremely well and have helped to shore up the sales. Our investments in bolstering the supply chain have also started yielding results and we are poised to take full advantage of the expected upturn in demand.
Tanaka: In our mainstay Asian market, demand for paints and coatings increased slightly in 2018 compared with 2019. In particular, the number of housing construction demand in China increased by 9.2 percent compared with 2018. China’s automobile production fell six percent to 26.09 million units.
In the Japanese market, the number of housing construction projects decreased by four percent from 2018. The number of units produced in construction machinery fell 3.7 percent to 390,000, but the number of units produced in the automobile industry was 9.22 million, almost the same as that in 2018.
The total volume of paints produced in Japan was 1.64 million tons, almost of the same level as that in 2018.
Vanlancker: Our 2019 results show we are on track with our transformation. We made good progress, despite higher raw material costs and softer end-market demand. Our performance improvement accelerated during the second half of 2019, resulting in a business return on sales up by almost 200 basis points to 12.5 percent.
AkzoNobel CEO Thierry Vanlancker
We delivered on our commitment and returned €6.5 billion to shareholders, following the sale of Specialty Chemicals.
At the same time, we continued to invest in our future. We kickstarted a €50 million investment in our U.S. wood coatings business, completed the acquisition of Mapaero to strengthen our global position in aerospace coatings and expanded our Paint the Future innovation ecosystem.
The real driving force behind AkzoNobel’s achievements has been our dedicated and diverse colleagues around the world. Together, we remain fully focused on delivering our “Winning together: 15 by 20” strategy during the year ahead.
CW: Did your company see an increase in revenue in 2019?
Bryant: Axalta generated net sales of $4.5 billion in 2019, down only 0.5 percent before foreign exchange currency headwinds and the impact of a divestiture (down 4.6 percent on a reported basis). Last year, we saw a fairly difficult economic and market backdrop, with volume headwinds globally across many of our end-markets. Axalta, however, benefited from stable refinish coating demand and we grew our global Refinish net sales by 3.3 percent, before foreign exchange translation impacts.
For the full year 2019, we also reported a five percent increase in Adjusted EBIT to $706 million, saw a six percent rise in Adjusted EPS to $1.80, and recorded a 31 percent increase from 2018 in free cash flow to $475 million.
Falder: 2019 was a year of considerable growth for our small company in which we achieved a record turnover. One the back of the increased revenue, we were honored to receive recognition including the Manchester Evening News Business of the Year Award, as well as the British Coatings Federation, Corporate Social Responsibility Campaign of the Year award, for our ongoing work in our community and with stakeholders.
Beckers Group CEO Boris Gorella
Gorella: We enjoyed double-digit growth in our coil coating segments globally, while we saw some flat developments in our ACE segment.
McGarry: Full-year 2019 reported net sales from continuing operations were up approximately one percent to about $15.1 billion, excluding unfavorable foreign currency translation.
PPG CEO Michael H. McGarry
We were able to grow sales despite recession-like conditions in many of our OEM end-use markets. We are very proud of the success we had completing four acquisitions in 2019 that have strengthened our business portfolio:
Hempel CEO Lars Petersson
The strong results are based on organic growth, especially in the second half of the year as well as in Asia. We did see challenging conditions in multiple markets, many of which had an impact on our 2019 result. The ongoing uncertainty around Brexit affected our decorative business in the UK and Ireland; geopolitical uncertainty and the economic slowdown in the Middle East affected our Europe, Middle East and Africa (EMEA) region; while the potential state bankruptcy of Argentina and the trade war between the U.S. and China increased uncertainty in our Americas and Asia-Pacific regions. However, despite these challenges, all our regions performed well in 2019 and we are very satisfied.
Roy: We posted a healthy volume and value growth this year in spite of challenging market conditions though we would have been happier with a higher rate of growth. Our philosophy of making investments in research, manpower and in new market segments even in tough market conditions has allowed us to maintain the growth engine.
The acquisition of Shalimar Tar Products (STP), a well-known, established and respected name in the water-proofing category, on Nov. 1, 2019, brings a host of benefits to us in the form of business from new surfaces, a range of unique products, a strong product portfolio of waterproofing, road marking and road repair products and most importantly a wealth of experience in these fields in the form of a strong well-aligned team who will integrate into the Berger family. In the months and years to come, this acquisition will help us reach for a leadership position in the fast-growing water-proofing segment.
Nippon Paint CEO Masaaki Tanaka
Tanaka: In fiscal 2019, net sales were up to three percent YoY, excluding M&A and other temporary factors. Operating profit amounted to 4.8 percent YoY, and our business is doing well.
In addition to the strong performance of Chinese decorative paints, which have a high market share and the strong performance of decorative paints in Japan and the Americas contribute to our operating profit. Revenue rose by 10.3 percent with the acquisition of DuluxGroup in Australia and Betek Boya, a Turkish decorative manufacturer, last year.
Vanlancker: Revenue was flat, with a positive price/mix of four percent and acquisitions contributing one percent, offset by five percent lower volumes due to our value-over-volume strategy.
CW: What areas of the paint and coatings market represent the most growth opportunities for your company?
Bryant: Axalta sees multiple areas for growth in both our Performance and Transportation Coatings segments globally. We expect to continue building our global presence via innovation-led new product introductions, broadening our geographic reach, and gaining share with existing and underpenetrated customers in each of our businesses. We also see a meaningful opportunity for growth through M&A given continued consolidation within the coatings industry.
In Refinish, we are the market leader and have shown the ability to gain market share globally, and notably including the multi-site operators, or MSOs, in North America. We will continue to focus on innovation-led growth, including the launch in 2019 of new “value-focused” clearcoat and primer products and the extended launch of our new waterborne sealer technology to use with our premium basecoat systems. We see car parc growth globally of around three percent, which will drive the overall refinish market and growth for Axalta.
In Industrial, we see terrific opportunity for growth in our Wood coatings business and will continue to drive new coatings innovations and products into the market, with a focus on waterborne solutions. There is also a significant global growth opportunity in Energy Solutions for electrical motor coatings, and emerging opportunities in both the general industrial liquid and powder coatings markets as well as the Agricultural, Construction, and Earthmoving (ACE) markets. Our M&A opportunity is also largely focused in Industrial, with many targets available within current areas served as well as coatings market adjacencies.
In Transportation, we will continue to introduce new products that support our customers’ growth globally. Specifically, in China, we see long-term growth opportunities in Light Vehicle as the middle class continues to expand and the demand for new automobiles per person increases. Also in China, Commercial Vehicle growth is expected with more than 1 million vehicles per year being produced to modernize fleets, as well as growth in the train and bus markets with many new players entering the region. Globally, we see developing opportunities in rail and trailers, and emerging opportunities in the specialty OEM and other commercial vehicle categories.
Falder: The HMG Business model covers a wide range of markets and we see significant growth potential across them all. In particular, advances in water-based and decorative coatings alongside the commercial vehicle markets following the launch of our innovative Acrythane 4G Topcoat and our Graphene containing Acrythane Ultra Commercial Vehicle Topcoat present exciting potential opportunities for HMG.
Gorella: To cater to the demand for even greater local access to Beckers’ expertise and production capacity, we have further expanded our Asian network, establishing a second site in Vietnam and constructing a brand-new plant in Bangladesh. Operations in North America are well established, with sites in the U.S. (Chicago, IL and Fontana, CA) and Mexico (Monterrey). Close cross-border cooperation is ensuring the fast, reliable and prompt delivery of better and more innovative products and services to our customers.
McGarry: PPG will continue to work diligently to remain a leading paint, coatings and specialty materials manufacturer by expanding our diverse portfolio of global brands, developing leading-edge customer-focused products, delivering shareholder value, and advancing our sustainability progress.
Now more than ever, customers are searching for new technology processes and innovative products to streamline their business operations. PPG is continuing to deliver multi-faceted technological solutions in the automotive, architectural and other industries that we serve. The automotive and industrial markets that support the advancement of electric vehicles will be a key driver. Electric vehicles typically require two to three times more paint compared to a traditional vehicle, as electric vehicle batteries and boxes require layers of coatings, adhesives and sealants, and protective coatings in order to meet all of their functional requirements.
As the state of the industry evolves and technology continues to be a critical component of the customer experience both inside and outside the can, PPG recognizes the imperativeness for our industry to adapt and offer future-forward digital tools that improve the customer experience. An example of this is our PPG Services platform, a digitally-enabled service platform that makes it easy for businesses with multiple commercial facilities across the U.S. to identify and connect with established professional painters then manage and schedule general painting maintenance projects.
Petersson: We have high expectations for our three core segments – marine, protective and decorative. These are also the segments where we want to become a market-leading solution provider. We also expect to see growth within specific sub-segments – passive fire protection coatings, for example. These coatings are increasingly demanded in building specifications and our investment in a new R&D center in Spain focusing on PFP coatings has seen us launch a number of products that not only provide proven fire protection, but also optimize application efficiency and so contribute to improved productivity and reduced project costs for applicators and project owners.
Roy: Berger has a strong presence in most segments of the paint and coatings market in India. The decorative segment is more than 70 percent of our business and that is where our growth opportunities lie. Within this segment, premium interior and exterior wall coatings are of particular interest to us. Protective coatings, in which we are the market leader, is another high growth opportunity for us. Our research capabilities backed by the best consultant team in the industry offer us an edge with our industrial clients.
Tanaka: We consider Asia, specifically centered on China, as one of our most important areas which accounts for approximately 40 percent of the Group’s net sales and is growing sustainably.
Our local brands are widespread in Asia, especially in China, wherein it has an overwhelming presence and position. As before, the company will focus on expanding its market share in China’s major metropolitan areas while expanding its share of the “One-Stop Service” housing interior products business, which has been developed mainly in major metropolitan areas, to regional cities.
In China, the growth rate of the paint market is 6.9 percent in 2015–2020, and it is expected that the demand for paint for decorative will continue to grow in the medium to long terms. The company also aims to expand its market share and profit by increasing sales. In Singapore and Malaysia, where we already have a high market share, the company will continue to maintain and strengthen brand recognition and further strengthen and expand its core business.
The business will focus mainly on construction paints, which account for approximately 40 percent of global paint demand and have high growth and profitability.
Vanlancker: Demand trends differ per region and segment in an uncertain macro-economic environment. Overall market growth has remained subdued during recent years, although specific dynamics differ per market and even sub-segment.
The decorative paint market remains very fragmented in many regions and countries. Industry consolidation continues to be a theme, and we’re participating in this with several bolt-on acquisitions during recent years. In terms of demand, Asia continues to outgrow more developed markets.
While demand for marine coatings seems to have stabilized at a lower level (after several years of decline), investment in the oil and gas industry – including for LNG – provides a slightly more positive outlook for marine and protective coatings going forward.
Powder coatings are by far the fastest-growing segment with many drivers, including strong demand for more sustainable solutions, plus, more and more applications are possible due to innovation. These factors have more than offset the impact of slower demand from the automotive industry. AkzoNobel is very well-positioned to capitalize on the growth of this segment.
There are very different dynamics between the sub-segments of our industrial coatings business. Slow demand for metal (coil) coatings and geographic shifts for wood coatings contrast starkly with a very strong demand for packaging coatings.
It’s a similar story for the sub-segments of automotive and specialty coatings. A widespread downturn in the automotive industry has impacted this segment in recent years. On the flip side, a large backlog for aircraft drives strong demand for aerospace coatings.
CW: What is your business strategy for growth in 2020 and beyond?
Bryant: Looking forward, Axalta is well-positioned to drive profitable growth in both the Performance and Transportation Coating segments.
In 2020, we have plans to drive growth globally across all business lines. We continue to introduce new and innovative products that are durable, sustainable, and beautiful. We are also broadening services to our customers and expanding our footprint in emerging markets.
For the long term, we will grow by deepening our partnerships with existing customers, expanding share with underserved customers and markets, and continuing to diversify our business within the industrial coating space. Our growth is supported by a careful strategy based on innovation and new product introductions.
Falder: Growth for HMG we consider a byproduct of doing a good job, and the growth during 2019 has shown how HMG’s flexibility and willingness to work with customers on product developments can generate value for all parties.
As ever we will continue to invest very heavily in the development and training of our people, there is an imperative in home growing our own staff into the most senior roles in the business. The core purpose of HMG is centered on the success of the company (i.e. the people) of the business.
Gorella: We are seeing an increase in functional coatings. Colour and gloss will always be primary features, but coatings must satisfy many other requirements. The durability of robust, well-proven coatings – able to withstand the impact of weather and particularly sunlight over many years ‒ must be considered as added functionality. End-users also want the color to remain unspoiled by atmospheric dirt, making self-cleaning coatings a highly popular functional coating, which Beckers has developed and sees great potential in.
McGarry: PPG is a global leader in paints, coatings and specialty materials through the strength of our acquisitions, innovative products, manufacturing capabilities, sustainability, community engagement and a world-class workforce. While maintaining our long-standing tradition of developing leading-edge technologies, we aim to continue achieving the highest quality standards and exceeding customers’ requirements.
As the autonomous and electric vehicles (EVs) emerging market continues to expand and garner global momentum, PPG is utilizing its deep industry expertise and broad spectrum of capabilities to develop innovative coatings that enhance the functionality and identity of smart vehicles. The automotive industry is in need of specialized coatings that will increase safety for next-generation vehicles, which is why PPG is leading the industry in creating functional coating solutions that can be detected by light detection and ranging (LiDAR) and radar systems. PPG is developing easy-to-clean, revolutionary coatings that help keep everyday obstructions – such as snow, dirt and ice – off of autonomous vehicle sensors, creating a safer driving environment for all. Additionally, PPG has manufactured environmentally-sensitive cathode and anode coatings used to store and transfer energy within modern lithium-ion batteries.
In addition, we will continue to strategically pursue organic and inorganic growth opportunities. We have a strong track record of creating shareholder value with acquisitions, and we intend to remain active but methodical.
Petersson: Our goal of doubling Hempel’s revenue and leading the markets in which we choose to compete remains in place. We already lead the industry in a number of areas and have laid a solid foundation for growth in others. We will dedicate significant investments in 2020 to strengthen our Chinese supply chain. With that, we will establish a solid platform for further profitable growth in our Asia- Pacific region.
We are also strengthening our focus on service management in which take over responsibility for maintaining the surfaces of our customers’ assets in order to reduce maintenance costs and extend asset lifetimes. We will continue to pilot new integrated service concepts for our customers and will develop digital systems that increase our field service employees’ access to information to improve quality and efficiency.
At Hempel, we see sustainability as a major part of our future. It is an opportunity for us to change the future and to make a positive impact on the environment. We want to be a part of the solution. We can make the biggest impact through our customers, as we help them to reach their sustainability targets. In 2019, for example, we launched Hempaguard MaX, a new hull coating solution that improves the hydrodynamics of ocean-going vessels to significantly reduce fuel consumption and associated emissions. Hempaguard MaX builds on the success of our market-leading Hempaguard X7, which was applied to over 1,500 vessels between its launch in 2013 and October 2019. In that time, it helped the collective vessel owners save $500 million in fuel bills and reduced CO2 emissions by 10 million tons. Hempaguard MaX offers even greater fuel savings and emission reductions than Hempaguard X7 and, as a three-coat system, it also reduces application time in dry dock. We expect coatings like these to play a key role in helping customers improve profitability and environmental performance in the coming years.
Roy: We believe that 2020 will be a much better year than the year gone by and that there will be recovery from the slowing down that the economy witnessed. A recovery is expected in the automotive and realty segments that should result in higher growth in the paints and coatings industry. Even while the economy was struggling, Berger continued to make investments in product development, marketing and acquisitions. Our business strategy is, therefore, to make the most of these investments and grow profitably.
Tanaka: In addition to solidifying its base with a high market share in China decorative coating business, the company aims to increase its market share in the Japanese business. In addition, we believe that sales of the DuluxGroup and Betek Boya, which we acquired last year, will contribute to profits in 2020.
As for the paint market, the world’s population continues to grow, and the paint market, which is associated with population growth, is considered to be an industry with large growth opportunities from a global perspective. To capture such growth, it is necessary to promote further globalization of domestic operations. One of our unique strengths is that we work closely with overseas group companies such as the NIPSEA Group in Asia, the DuluxGroup in Australia, Betek Boya in Turkey, and Dunn-Edwards in the U.S. For example, the company plans to formulate a growth strategy on the basis of the many lessons learned from the “The business models that change according to the market environment” undertaken by overseas groups. By investing in Japan and developing the infrastructure, we hope to lead to sustainable growth in the future. The year 2020 will be an important year in formulating the new medium-term management plan for the period from 2021 onward.
Vanlancker: Ambitions for 2021-2023 include:
Since 2017, we’ve kept a laser-sharp focus on our “Winning together: 15 by 20” strategy and on the promises set at the time. The progress we’ve made has been reflected in AkzoNobel’s total shareholder return of 82 percent during the same time period.
We’ve reignited our passion for paint and our transformation is on track. We’re now well on our way and gaining momentum, with the ambition to deliver ROS, excluding unallocated costs, of 14.5-15.5 percent for 2020. This relies on a significant amount of self-help, and we expect no support from our end markets. It’s all within our own hands.
Beyond 2020, we will balance growth and profitability improvement. Our ambitions for 2021-2023 are to grow at least in line with our relevant markets and deliver further profitability improvement. Ultimately, our goal is to take our rightful place among the frontrunners in paints and coatings, when it comes to both size and performance.
CW: In what areas are you focusing your R&D efforts?
Bryant: Innovation is at the core of everything we do at Axalta. Our R&D efforts are focused on providing solutions for key customer needs, including improved productivity, superior performance and environmental adherence. In 2019, we once again invested about four percent of sales in R&D and technology services, which continues to be among the highest levels of investment in our industry peer group.
Our customers use our coatings in a wide variety of applications and are constantly searching for productivity enhancements, such as reduced application times, lower energy requirements, decreased electric motor temperatures and eliminating steps in manufacturing processes. For example, our new Voltatex® 4224 impregnating resin allows electric motors to operate at lower temperatures, enabling smaller motors that last longer. Our Cromax® Ultra Performance Energy System for refinish collision repair allows body shops to reduce cure temperatures from 60 degrees Celsius to 40 degrees Celsius, thereby reducing energy usage.
Our customers also demand superior performance from our coatings. This ranges from durability improvements in UV resistance, scratch resistance, gloss, coverage and corrosion protection. For example, our Unrivaled Prefinish System is a waterborne coating for exterior home siding that is designed to provide excellent coverage uniformity and superior exterior durability with a single application. Additionally, our latest Lumeera® automotive clearcoats provide industry-leading appearance and durability.
In addition to productivity and performance improvements, Axalta also focuses on providing coatings that adhere to the most stringent environmental standards. Over the last couple of years, we’ve introduced numerous waterborne coating technologies, including Syrox® waterborne basecoat, Spies Hecker Permahyd® 2K waterborne sealer, and Cromax® EZ waterborne basecoats to drive sustainability.
Falder: The HMG R&D Efforts cover a myriad of areas from new water-based technology to using materials such as Graphene in our products. The R&D team is working on 30+ projects at anyone one time from specific customer developments to Blue Sky thinking.
Gorella: To address the industry-specific challenges of global climate change, we are focusing on innovative solutions that promote sustainability, by reducing the environmental footprint of our production processes and end products.
This commitment to sustainable solutions is central to Beckers’ vision, expressed in the many product innovations and development strategies.
McGarry: PPG will remain focused on pioneering advanced offerings that solve specific challenges for our customers across the globe. Through leadership in innovation and sustainability, we help our customers in industrial, transportation, consumer products, and construction markets and aftermarkets enhance more surfaces in more ways than any other company. We continue to invest about three percent of sales in research and development and progress the commercialization of new products and technologies, including:
Today, we have embedded innovation and customer-focus throughout the company – it is a key part of our company culture. We want to be our customers’ preferred innovation partner so we can continue to develop value-adding solutions to meet their changing needs.
With 15 R&D centers and 400 dedicated science employees around the world, our efforts within R&D have a broad focus. A new state-of-the-art R&D and test center will be inaugurated at our headquarters in Copenhagen, Denmark in 2020. This will enable us to further enhance our capabilities, expertise and offerings.
Roy: Our R&D efforts are going to be focused on the four areas of Cost reduction, Energy Savings, Green Technology and improving convenience for customers and painters.
Tanaka: We still have a lot of room to discover technological breakthroughs in paint, and we want to inspire our technical team to create new demand for the next generation by solving social issues with paint technologies.
We are to maximize the attractiveness of paint through collaboration with external networks by strengthening open innovation activities that provide color, comfort, and peace of mind in daily life. We believe that we will not significantly change our basic strategy for business deployment based on core technologies such as paint, coating, and surface treatment.
CW: What are your company’s long-term plans?
Bryant: Our focus remains on the needs of our global customers – it is our vision to be the preferred coatings partner for customers seeking the most innovative products and services, delivered by the most talented team in the industry.
This vision is deeply rooted in a solid strategy to drive organic and inorganic growth; introduce new products that are durable, sustainable and beautiful; expand our presence in emerging markets; capture price and drive margins; and strengthen our business through disciplined and strategic capital allocation, including internal productivity investments, incremental acquisitions and opportunistic share repurchases.
As we enter a new decade and look to the future, we are well-positioned to achieve long-term growth and continue to deliver value to our customers and shareholders.
Falder: The long term plans for HMG are to continue what we’ve been doing for the previous 90 years – by continuing to work closely with our customers and develop our long term partnerships that focus on providing leading customer service and technical support combined with innovative new products that we develop.
McGarry: PPG is continuing to identify opportunities that drive lasting value for our customers and stakeholders. Increased digitization is a leading trend that will continue to influence the coatings industry on a global scale, which is why we are continuing to invest in cutting-edge technology platforms, such as PPG Services. We will continue to listen to our valued customers, creating unparalleled products and providing services that move the needle for their business.
Sustainability remains a significant and essential part of PPG’s future. As our portfolio continues to evolve, we strive to achieve even more impactful, sustainable business practices. In addition to advancing our own sustainability, we are developing innovative products and processes that provide environmental and other sustainability benefits to our customers. For more information on PPG’s sustainability goals and progress, visit sustainability.ppg.com.
One of PPG’s greatest strengths is the diversity of our talented people, whose unique perspectives enable us to meet challenges quickly, creatively and effectively. This provides a significant competitive advantage in today’s global economy. A clear focus on people development is crucial to ensuring we keep our employees are engaged, productive and successful at every stage of their careers.
Petersson: Hempel will continue to look for new companies to welcome into the Hempel family, which will further support our growth ambitions. Although we did not engage in any new acquisitions in 2019, we are ready when we find the right fit. We have the financial capabilities to acquire, in the form of a credit facility agreement with our core banks of €1 billion, and we have a competent and streamlined organization, which has proven it can find synergies together with new family members. We demonstrated this by the successful integration of J.W. Ostendorf, and the corresponding financial and cultural synergies that we are now benefitting from.
2020 marks the end of our Journey to Excellence strategy period. While we will continue to execute on this strategy in 2020, we will also define our strategy for the coming period, which will focus heavily on our customers, combining commercial success with sustainability and reaching our target of doubling Hempel.
Our work with Journey to Excellence has built the foundation for Hempel’s future success and, by the end of 2020, we will be ready to take the next steps in turning our company into a sustainability leader in the industry.
Roy: Berger Paints India will turn 100 years old in India in 2023 and aspires to break into the list of Top 10 paint companies of the world by that time. We are focussed on building the capability to support the kind of growth necessary to reach that milestone. This includes a strong distribution platform, manufacturing and marketing capacity, a strong talent pool and a robust R&D pipeline.
Tanaka: We have significantly changed our management structure in 2020 to achieve continuous and dramatic growth on a global scale as well as to challenge to solve some of the social issues including environmental conservation.
The company plans to announce specific numerical targets and plans in its new medium-term management plan starting next year, but it has already begun to lay the groundwork for the plan. As a pure holding company, NPHD will strengthen its role as a holding company for all domestic and overseas companies, including all of its global operations, through the formulation of group strategy and overall management of each operating company. Tokyo Head office will be established in April 2020. The new management structure will play an important role as the head office that supports this global organization. In addition, the company with company auditors will be transferred to a company with Three Committees (Nomination, Audit and Remuneration) structure. We will separate the supervisory and execution functions that have been performed by the Board of Directors and accelerate the speed of management required for a global company.
For the purpose of agile management, the company will adopt and operate not the “radical” management style that the Japanese headquarters is entirely in charge of entirely, but the “spider-web” management style (this management style is what I invented) that, for example, finds opportunities for free and vigorous synergies between the DuluxGroup and NIPSEA or between the DuluxGroup and Dunn-Edward partners in the U.S.
In addition, we will focus on SDGs and ESGs as the core of our management; fulfill our duties to customers, employees, business partners, and society; and strive to maximize the “shareholder value.”
Vanlancker: We have continued investing in the company. We created a global technology team and launched a Paint the Future innovation ecosystem, which continues to expand. We refreshed our approach to sustainability, now known as “People. Planet. Paint.” We’re always looking to push the boundaries of what paint can be and what it can do. Innovation is in our DNA.
Our leading innovation and technology provide our customers with new products and sustainable solutions. This is all thanks to our 3,000 scientists and nearly as many patents. In fact, around half of our patent portfolio is new since 2015. During the past five years, we’ve spent around €1.25 billion on research and development, and it’s paying off with an increase in the number of new patent applications filed during recent years.
Since becoming a focused paints and coatings company, we’ve split our R&D function to focus on more specific activities. The technology group, based in key hubs around the world, focuses on breakthrough innovation and major drivers, while the product development team commercializes our innovation, and other scientists are present at around 70 locations worldwide providing customer support.
We continue investing in our future. Less than a year ago, we opened a ground-breaking R&D innovation campus in the UK. The state-of-the-art facilities can test new products in conditions that mimic the world’s most extreme environments, designed to keep AkzoNobel at the forefront of the coatings industry.
Around one year ago, we launched “Paint the Future” with a startup challenge. At the end of last year, we brought together some key suppliers to explore how we can better co-create, and right now, we’re running our first local startup challenge in Brazil.
Our collaborative (open) innovation ecosystem – which is currently being expanded to include existing partnerships we have with academia – is transforming the world of paints and coatings. When it comes to innovation, AkzoNobel is now seen by many as the reference in our industry.
Coatings World: How did the market for paints and coatings fare overall in 2019?
Axalta CEO Robert Bryant
Falder: The UK Market was an interesting place in 2019 with the political uncertainty of Brexit and the numerous delays leading to companies restricting or delaying spending until we had a clear political path. Supply and import issues, as well as legislative confusion, are all unhelpful.
HMG Paints CEO John Falder
Gorella: 2019 was an exciting year for the Beckers Group, with the highest sales ever in our 154-year history. Our innovative research work and the unrivaled customer-focused technical support have resulted in the “pole position” for our coil coatings segment; we further strengthen our No. 1 position as the global leader!
McGarry: The global paints and coatings market remained resilient in 2019, and we anticipate that the market will experience a modest improvement in 2020. PPG achieved strong results in our aerospace and protective and marine coatings (PMC) businesses in 2019, reflecting customer demand for our specific technologies. Our aerospace coatings business delivered strong volume growth, outpacing industry performance in both the U.S. and Asia regions. Led by continued strong growth in the Asia region, our protective and marine coating business delivered above-industry sales volume growth of a mid-single-digit percentage during the fourth quarter of 2019.
Petersson: We saw that the market for protective picked up in 2019, although the general industrial market shrunk a little. The marine market also picked up globally in 2019. The marine newbuilding market is still at a very low level, but is showing signs of recovery despite uncertainty about future regulations and how to reach future emissions reductions. The repair and maintenance market was reasonably strong due to an increase in dry dockings and a growing market for sea stock due to an increase in fleet age and net fleet.
As expected, the decorative market in EMEA was challenging with flat or even declining demand.
Berger Paints CEO Abhijit Roy
As far as Berger is concerned, we were able to achieve double-digit volume and value growth in most segments with the exception of our automotive business. Raw material prices were largely constant this year and our strong R&D pipeline was able to derive cost efficiencies that ensured that our bottom-line growth was very healthy. Many of our new initiatives in distribution, paint services and retailing have been doing extremely well and have helped to shore up the sales. Our investments in bolstering the supply chain have also started yielding results and we are poised to take full advantage of the expected upturn in demand.
Tanaka: In our mainstay Asian market, demand for paints and coatings increased slightly in 2018 compared with 2019. In particular, the number of housing construction demand in China increased by 9.2 percent compared with 2018. China’s automobile production fell six percent to 26.09 million units.
In the Japanese market, the number of housing construction projects decreased by four percent from 2018. The number of units produced in construction machinery fell 3.7 percent to 390,000, but the number of units produced in the automobile industry was 9.22 million, almost the same as that in 2018.
The total volume of paints produced in Japan was 1.64 million tons, almost of the same level as that in 2018.
Vanlancker: Our 2019 results show we are on track with our transformation. We made good progress, despite higher raw material costs and softer end-market demand. Our performance improvement accelerated during the second half of 2019, resulting in a business return on sales up by almost 200 basis points to 12.5 percent.
AkzoNobel CEO Thierry Vanlancker
We delivered on our commitment and returned €6.5 billion to shareholders, following the sale of Specialty Chemicals.
At the same time, we continued to invest in our future. We kickstarted a €50 million investment in our U.S. wood coatings business, completed the acquisition of Mapaero to strengthen our global position in aerospace coatings and expanded our Paint the Future innovation ecosystem.
The real driving force behind AkzoNobel’s achievements has been our dedicated and diverse colleagues around the world. Together, we remain fully focused on delivering our “Winning together: 15 by 20” strategy during the year ahead.
CW: Did your company see an increase in revenue in 2019?
Bryant: Axalta generated net sales of $4.5 billion in 2019, down only 0.5 percent before foreign exchange currency headwinds and the impact of a divestiture (down 4.6 percent on a reported basis). Last year, we saw a fairly difficult economic and market backdrop, with volume headwinds globally across many of our end-markets. Axalta, however, benefited from stable refinish coating demand and we grew our global Refinish net sales by 3.3 percent, before foreign exchange translation impacts.
For the full year 2019, we also reported a five percent increase in Adjusted EBIT to $706 million, saw a six percent rise in Adjusted EPS to $1.80, and recorded a 31 percent increase from 2018 in free cash flow to $475 million.
Falder: 2019 was a year of considerable growth for our small company in which we achieved a record turnover. One the back of the increased revenue, we were honored to receive recognition including the Manchester Evening News Business of the Year Award, as well as the British Coatings Federation, Corporate Social Responsibility Campaign of the Year award, for our ongoing work in our community and with stakeholders.
Beckers Group CEO Boris Gorella
McGarry: Full-year 2019 reported net sales from continuing operations were up approximately one percent to about $15.1 billion, excluding unfavorable foreign currency translation.
PPG CEO Michael H. McGarry
We were able to grow sales despite recession-like conditions in many of our OEM end-use markets. We are very proud of the success we had completing four acquisitions in 2019 that have strengthened our business portfolio:
- Whitford Worldwide Company, a global manufacturer that specializes in low-friction and nonstick coatings for industrial applications and consumer products;
- Hemmelrath, a global manufacturer of coatings for automotive original equipment manufacturers (OEMs);
- Dexmet Corporation, a manufacturer of specialty materials for surfaces in aerospace, automotive and industrial applications;
- Texstars, LLC, a manufacturer of high-performance transparencies, wingtip lenses and plastic components for aerospace and defense vehicles and a leader in advanced transparent coatings.
Hempel CEO Lars Petersson
The strong results are based on organic growth, especially in the second half of the year as well as in Asia. We did see challenging conditions in multiple markets, many of which had an impact on our 2019 result. The ongoing uncertainty around Brexit affected our decorative business in the UK and Ireland; geopolitical uncertainty and the economic slowdown in the Middle East affected our Europe, Middle East and Africa (EMEA) region; while the potential state bankruptcy of Argentina and the trade war between the U.S. and China increased uncertainty in our Americas and Asia-Pacific regions. However, despite these challenges, all our regions performed well in 2019 and we are very satisfied.
Roy: We posted a healthy volume and value growth this year in spite of challenging market conditions though we would have been happier with a higher rate of growth. Our philosophy of making investments in research, manpower and in new market segments even in tough market conditions has allowed us to maintain the growth engine.
The acquisition of Shalimar Tar Products (STP), a well-known, established and respected name in the water-proofing category, on Nov. 1, 2019, brings a host of benefits to us in the form of business from new surfaces, a range of unique products, a strong product portfolio of waterproofing, road marking and road repair products and most importantly a wealth of experience in these fields in the form of a strong well-aligned team who will integrate into the Berger family. In the months and years to come, this acquisition will help us reach for a leadership position in the fast-growing water-proofing segment.
Nippon Paint CEO Masaaki Tanaka
In addition to the strong performance of Chinese decorative paints, which have a high market share and the strong performance of decorative paints in Japan and the Americas contribute to our operating profit. Revenue rose by 10.3 percent with the acquisition of DuluxGroup in Australia and Betek Boya, a Turkish decorative manufacturer, last year.
Vanlancker: Revenue was flat, with a positive price/mix of four percent and acquisitions contributing one percent, offset by five percent lower volumes due to our value-over-volume strategy.
CW: What areas of the paint and coatings market represent the most growth opportunities for your company?
In Refinish, we are the market leader and have shown the ability to gain market share globally, and notably including the multi-site operators, or MSOs, in North America. We will continue to focus on innovation-led growth, including the launch in 2019 of new “value-focused” clearcoat and primer products and the extended launch of our new waterborne sealer technology to use with our premium basecoat systems. We see car parc growth globally of around three percent, which will drive the overall refinish market and growth for Axalta.
In Industrial, we see terrific opportunity for growth in our Wood coatings business and will continue to drive new coatings innovations and products into the market, with a focus on waterborne solutions. There is also a significant global growth opportunity in Energy Solutions for electrical motor coatings, and emerging opportunities in both the general industrial liquid and powder coatings markets as well as the Agricultural, Construction, and Earthmoving (ACE) markets. Our M&A opportunity is also largely focused in Industrial, with many targets available within current areas served as well as coatings market adjacencies.
In Transportation, we will continue to introduce new products that support our customers’ growth globally. Specifically, in China, we see long-term growth opportunities in Light Vehicle as the middle class continues to expand and the demand for new automobiles per person increases. Also in China, Commercial Vehicle growth is expected with more than 1 million vehicles per year being produced to modernize fleets, as well as growth in the train and bus markets with many new players entering the region. Globally, we see developing opportunities in rail and trailers, and emerging opportunities in the specialty OEM and other commercial vehicle categories.
Gorella: To cater to the demand for even greater local access to Beckers’ expertise and production capacity, we have further expanded our Asian network, establishing a second site in Vietnam and constructing a brand-new plant in Bangladesh. Operations in North America are well established, with sites in the U.S. (Chicago, IL and Fontana, CA) and Mexico (Monterrey). Close cross-border cooperation is ensuring the fast, reliable and prompt delivery of better and more innovative products and services to our customers.
Now more than ever, customers are searching for new technology processes and innovative products to streamline their business operations. PPG is continuing to deliver multi-faceted technological solutions in the automotive, architectural and other industries that we serve. The automotive and industrial markets that support the advancement of electric vehicles will be a key driver. Electric vehicles typically require two to three times more paint compared to a traditional vehicle, as electric vehicle batteries and boxes require layers of coatings, adhesives and sealants, and protective coatings in order to meet all of their functional requirements.
As the state of the industry evolves and technology continues to be a critical component of the customer experience both inside and outside the can, PPG recognizes the imperativeness for our industry to adapt and offer future-forward digital tools that improve the customer experience. An example of this is our PPG Services platform, a digitally-enabled service platform that makes it easy for businesses with multiple commercial facilities across the U.S. to identify and connect with established professional painters then manage and schedule general painting maintenance projects.
Tanaka: We consider Asia, specifically centered on China, as one of our most important areas which accounts for approximately 40 percent of the Group’s net sales and is growing sustainably.
Our local brands are widespread in Asia, especially in China, wherein it has an overwhelming presence and position. As before, the company will focus on expanding its market share in China’s major metropolitan areas while expanding its share of the “One-Stop Service” housing interior products business, which has been developed mainly in major metropolitan areas, to regional cities.
In China, the growth rate of the paint market is 6.9 percent in 2015–2020, and it is expected that the demand for paint for decorative will continue to grow in the medium to long terms. The company also aims to expand its market share and profit by increasing sales. In Singapore and Malaysia, where we already have a high market share, the company will continue to maintain and strengthen brand recognition and further strengthen and expand its core business.
The business will focus mainly on construction paints, which account for approximately 40 percent of global paint demand and have high growth and profitability.
Vanlancker: Demand trends differ per region and segment in an uncertain macro-economic environment. Overall market growth has remained subdued during recent years, although specific dynamics differ per market and even sub-segment.
While demand for marine coatings seems to have stabilized at a lower level (after several years of decline), investment in the oil and gas industry – including for LNG – provides a slightly more positive outlook for marine and protective coatings going forward.
Powder coatings are by far the fastest-growing segment with many drivers, including strong demand for more sustainable solutions, plus, more and more applications are possible due to innovation. These factors have more than offset the impact of slower demand from the automotive industry. AkzoNobel is very well-positioned to capitalize on the growth of this segment.
There are very different dynamics between the sub-segments of our industrial coatings business. Slow demand for metal (coil) coatings and geographic shifts for wood coatings contrast starkly with a very strong demand for packaging coatings.
It’s a similar story for the sub-segments of automotive and specialty coatings. A widespread downturn in the automotive industry has impacted this segment in recent years. On the flip side, a large backlog for aircraft drives strong demand for aerospace coatings.
CW: What is your business strategy for growth in 2020 and beyond?
Bryant: Looking forward, Axalta is well-positioned to drive profitable growth in both the Performance and Transportation Coating segments.
In 2020, we have plans to drive growth globally across all business lines. We continue to introduce new and innovative products that are durable, sustainable, and beautiful. We are also broadening services to our customers and expanding our footprint in emerging markets.
For the long term, we will grow by deepening our partnerships with existing customers, expanding share with underserved customers and markets, and continuing to diversify our business within the industrial coating space. Our growth is supported by a careful strategy based on innovation and new product introductions.
Falder: Growth for HMG we consider a byproduct of doing a good job, and the growth during 2019 has shown how HMG’s flexibility and willingness to work with customers on product developments can generate value for all parties.
As ever we will continue to invest very heavily in the development and training of our people, there is an imperative in home growing our own staff into the most senior roles in the business. The core purpose of HMG is centered on the success of the company (i.e. the people) of the business.
Gorella: We are seeing an increase in functional coatings. Colour and gloss will always be primary features, but coatings must satisfy many other requirements. The durability of robust, well-proven coatings – able to withstand the impact of weather and particularly sunlight over many years ‒ must be considered as added functionality. End-users also want the color to remain unspoiled by atmospheric dirt, making self-cleaning coatings a highly popular functional coating, which Beckers has developed and sees great potential in.
McGarry: PPG is a global leader in paints, coatings and specialty materials through the strength of our acquisitions, innovative products, manufacturing capabilities, sustainability, community engagement and a world-class workforce. While maintaining our long-standing tradition of developing leading-edge technologies, we aim to continue achieving the highest quality standards and exceeding customers’ requirements.
As the autonomous and electric vehicles (EVs) emerging market continues to expand and garner global momentum, PPG is utilizing its deep industry expertise and broad spectrum of capabilities to develop innovative coatings that enhance the functionality and identity of smart vehicles. The automotive industry is in need of specialized coatings that will increase safety for next-generation vehicles, which is why PPG is leading the industry in creating functional coating solutions that can be detected by light detection and ranging (LiDAR) and radar systems. PPG is developing easy-to-clean, revolutionary coatings that help keep everyday obstructions – such as snow, dirt and ice – off of autonomous vehicle sensors, creating a safer driving environment for all. Additionally, PPG has manufactured environmentally-sensitive cathode and anode coatings used to store and transfer energy within modern lithium-ion batteries.
In addition, we will continue to strategically pursue organic and inorganic growth opportunities. We have a strong track record of creating shareholder value with acquisitions, and we intend to remain active but methodical.
Petersson: Our goal of doubling Hempel’s revenue and leading the markets in which we choose to compete remains in place. We already lead the industry in a number of areas and have laid a solid foundation for growth in others. We will dedicate significant investments in 2020 to strengthen our Chinese supply chain. With that, we will establish a solid platform for further profitable growth in our Asia- Pacific region.
We are also strengthening our focus on service management in which take over responsibility for maintaining the surfaces of our customers’ assets in order to reduce maintenance costs and extend asset lifetimes. We will continue to pilot new integrated service concepts for our customers and will develop digital systems that increase our field service employees’ access to information to improve quality and efficiency.
At Hempel, we see sustainability as a major part of our future. It is an opportunity for us to change the future and to make a positive impact on the environment. We want to be a part of the solution. We can make the biggest impact through our customers, as we help them to reach their sustainability targets. In 2019, for example, we launched Hempaguard MaX, a new hull coating solution that improves the hydrodynamics of ocean-going vessels to significantly reduce fuel consumption and associated emissions. Hempaguard MaX builds on the success of our market-leading Hempaguard X7, which was applied to over 1,500 vessels between its launch in 2013 and October 2019. In that time, it helped the collective vessel owners save $500 million in fuel bills and reduced CO2 emissions by 10 million tons. Hempaguard MaX offers even greater fuel savings and emission reductions than Hempaguard X7 and, as a three-coat system, it also reduces application time in dry dock. We expect coatings like these to play a key role in helping customers improve profitability and environmental performance in the coming years.
Roy: We believe that 2020 will be a much better year than the year gone by and that there will be recovery from the slowing down that the economy witnessed. A recovery is expected in the automotive and realty segments that should result in higher growth in the paints and coatings industry. Even while the economy was struggling, Berger continued to make investments in product development, marketing and acquisitions. Our business strategy is, therefore, to make the most of these investments and grow profitably.
Tanaka: In addition to solidifying its base with a high market share in China decorative coating business, the company aims to increase its market share in the Japanese business. In addition, we believe that sales of the DuluxGroup and Betek Boya, which we acquired last year, will contribute to profits in 2020.
As for the paint market, the world’s population continues to grow, and the paint market, which is associated with population growth, is considered to be an industry with large growth opportunities from a global perspective. To capture such growth, it is necessary to promote further globalization of domestic operations. One of our unique strengths is that we work closely with overseas group companies such as the NIPSEA Group in Asia, the DuluxGroup in Australia, Betek Boya in Turkey, and Dunn-Edwards in the U.S. For example, the company plans to formulate a growth strategy on the basis of the many lessons learned from the “The business models that change according to the market environment” undertaken by overseas groups. By investing in Japan and developing the infrastructure, we hope to lead to sustainable growth in the future. The year 2020 will be an important year in formulating the new medium-term management plan for the period from 2021 onward.
Vanlancker: Ambitions for 2021-2023 include:
- Revenue growth ≥ market CAGR (compound annual growth rate);
- Return on sales (ROS) +50 basis points CAGR
Since 2017, we’ve kept a laser-sharp focus on our “Winning together: 15 by 20” strategy and on the promises set at the time. The progress we’ve made has been reflected in AkzoNobel’s total shareholder return of 82 percent during the same time period.
We’ve reignited our passion for paint and our transformation is on track. We’re now well on our way and gaining momentum, with the ambition to deliver ROS, excluding unallocated costs, of 14.5-15.5 percent for 2020. This relies on a significant amount of self-help, and we expect no support from our end markets. It’s all within our own hands.
Beyond 2020, we will balance growth and profitability improvement. Our ambitions for 2021-2023 are to grow at least in line with our relevant markets and deliver further profitability improvement. Ultimately, our goal is to take our rightful place among the frontrunners in paints and coatings, when it comes to both size and performance.
CW: In what areas are you focusing your R&D efforts?
Bryant: Innovation is at the core of everything we do at Axalta. Our R&D efforts are focused on providing solutions for key customer needs, including improved productivity, superior performance and environmental adherence. In 2019, we once again invested about four percent of sales in R&D and technology services, which continues to be among the highest levels of investment in our industry peer group.
Our customers use our coatings in a wide variety of applications and are constantly searching for productivity enhancements, such as reduced application times, lower energy requirements, decreased electric motor temperatures and eliminating steps in manufacturing processes. For example, our new Voltatex® 4224 impregnating resin allows electric motors to operate at lower temperatures, enabling smaller motors that last longer. Our Cromax® Ultra Performance Energy System for refinish collision repair allows body shops to reduce cure temperatures from 60 degrees Celsius to 40 degrees Celsius, thereby reducing energy usage.
Our customers also demand superior performance from our coatings. This ranges from durability improvements in UV resistance, scratch resistance, gloss, coverage and corrosion protection. For example, our Unrivaled Prefinish System is a waterborne coating for exterior home siding that is designed to provide excellent coverage uniformity and superior exterior durability with a single application. Additionally, our latest Lumeera® automotive clearcoats provide industry-leading appearance and durability.
In addition to productivity and performance improvements, Axalta also focuses on providing coatings that adhere to the most stringent environmental standards. Over the last couple of years, we’ve introduced numerous waterborne coating technologies, including Syrox® waterborne basecoat, Spies Hecker Permahyd® 2K waterborne sealer, and Cromax® EZ waterborne basecoats to drive sustainability.
Falder: The HMG R&D Efforts cover a myriad of areas from new water-based technology to using materials such as Graphene in our products. The R&D team is working on 30+ projects at anyone one time from specific customer developments to Blue Sky thinking.
Gorella: To address the industry-specific challenges of global climate change, we are focusing on innovative solutions that promote sustainability, by reducing the environmental footprint of our production processes and end products.
This commitment to sustainable solutions is central to Beckers’ vision, expressed in the many product innovations and development strategies.
McGarry: PPG will remain focused on pioneering advanced offerings that solve specific challenges for our customers across the globe. Through leadership in innovation and sustainability, we help our customers in industrial, transportation, consumer products, and construction markets and aftermarkets enhance more surfaces in more ways than any other company. We continue to invest about three percent of sales in research and development and progress the commercialization of new products and technologies, including:
- PPG POWERCRON® 160 anionic epoxy electrocoat (e-coat) technology, which has lower volatile organic compound (VOC) content and cures at lower temperatures than conventional anionic e-coats, further reducing energy use and emissions;
- PPG SIGMAGLIDE™ Foil: an eco-friendly, 100 percent biocide-free fouling release foil that helps to reduce drag by up to 10 percent in comparison to other technologies. Less drag improves a vessel’s fuel efficiency and reduces greenhouse gas emissions;
- The PPG MOONWALK™ automated paint mixing system that brings a new level of speed, precision, quality and color consistency to the body shop mixing process. The unique system replaces manual mixing processes with a splash-free, self-contained system that eliminates spills, transforming the refinish mixing room into a clean and safe environment. The PPG MoonWalk system also reduces paint waste through extreme mixing accuracy;
- SEIGNEURIE™ Phylopur interior wall paint, which uses a 97 percent bio-based resin produced from plants and industrial by-products. The renewable raw materials, which are cultivated according to a sustainable management method, reduce the use of fossil fuels and contribute to the paint’s very low VOC emissions.
Today, we have embedded innovation and customer-focus throughout the company – it is a key part of our company culture. We want to be our customers’ preferred innovation partner so we can continue to develop value-adding solutions to meet their changing needs.
With 15 R&D centers and 400 dedicated science employees around the world, our efforts within R&D have a broad focus. A new state-of-the-art R&D and test center will be inaugurated at our headquarters in Copenhagen, Denmark in 2020. This will enable us to further enhance our capabilities, expertise and offerings.
Roy: Our R&D efforts are going to be focused on the four areas of Cost reduction, Energy Savings, Green Technology and improving convenience for customers and painters.
Tanaka: We still have a lot of room to discover technological breakthroughs in paint, and we want to inspire our technical team to create new demand for the next generation by solving social issues with paint technologies.
We are to maximize the attractiveness of paint through collaboration with external networks by strengthening open innovation activities that provide color, comfort, and peace of mind in daily life. We believe that we will not significantly change our basic strategy for business deployment based on core technologies such as paint, coating, and surface treatment.
CW: What are your company’s long-term plans?
Bryant: Our focus remains on the needs of our global customers – it is our vision to be the preferred coatings partner for customers seeking the most innovative products and services, delivered by the most talented team in the industry.
This vision is deeply rooted in a solid strategy to drive organic and inorganic growth; introduce new products that are durable, sustainable and beautiful; expand our presence in emerging markets; capture price and drive margins; and strengthen our business through disciplined and strategic capital allocation, including internal productivity investments, incremental acquisitions and opportunistic share repurchases.
As we enter a new decade and look to the future, we are well-positioned to achieve long-term growth and continue to deliver value to our customers and shareholders.
Falder: The long term plans for HMG are to continue what we’ve been doing for the previous 90 years – by continuing to work closely with our customers and develop our long term partnerships that focus on providing leading customer service and technical support combined with innovative new products that we develop.
McGarry: PPG is continuing to identify opportunities that drive lasting value for our customers and stakeholders. Increased digitization is a leading trend that will continue to influence the coatings industry on a global scale, which is why we are continuing to invest in cutting-edge technology platforms, such as PPG Services. We will continue to listen to our valued customers, creating unparalleled products and providing services that move the needle for their business.
Sustainability remains a significant and essential part of PPG’s future. As our portfolio continues to evolve, we strive to achieve even more impactful, sustainable business practices. In addition to advancing our own sustainability, we are developing innovative products and processes that provide environmental and other sustainability benefits to our customers. For more information on PPG’s sustainability goals and progress, visit sustainability.ppg.com.
One of PPG’s greatest strengths is the diversity of our talented people, whose unique perspectives enable us to meet challenges quickly, creatively and effectively. This provides a significant competitive advantage in today’s global economy. A clear focus on people development is crucial to ensuring we keep our employees are engaged, productive and successful at every stage of their careers.
Petersson: Hempel will continue to look for new companies to welcome into the Hempel family, which will further support our growth ambitions. Although we did not engage in any new acquisitions in 2019, we are ready when we find the right fit. We have the financial capabilities to acquire, in the form of a credit facility agreement with our core banks of €1 billion, and we have a competent and streamlined organization, which has proven it can find synergies together with new family members. We demonstrated this by the successful integration of J.W. Ostendorf, and the corresponding financial and cultural synergies that we are now benefitting from.
2020 marks the end of our Journey to Excellence strategy period. While we will continue to execute on this strategy in 2020, we will also define our strategy for the coming period, which will focus heavily on our customers, combining commercial success with sustainability and reaching our target of doubling Hempel.
Our work with Journey to Excellence has built the foundation for Hempel’s future success and, by the end of 2020, we will be ready to take the next steps in turning our company into a sustainability leader in the industry.
Tanaka: We have significantly changed our management structure in 2020 to achieve continuous and dramatic growth on a global scale as well as to challenge to solve some of the social issues including environmental conservation.
The company plans to announce specific numerical targets and plans in its new medium-term management plan starting next year, but it has already begun to lay the groundwork for the plan. As a pure holding company, NPHD will strengthen its role as a holding company for all domestic and overseas companies, including all of its global operations, through the formulation of group strategy and overall management of each operating company. Tokyo Head office will be established in April 2020. The new management structure will play an important role as the head office that supports this global organization. In addition, the company with company auditors will be transferred to a company with Three Committees (Nomination, Audit and Remuneration) structure. We will separate the supervisory and execution functions that have been performed by the Board of Directors and accelerate the speed of management required for a global company.
For the purpose of agile management, the company will adopt and operate not the “radical” management style that the Japanese headquarters is entirely in charge of entirely, but the “spider-web” management style (this management style is what I invented) that, for example, finds opportunities for free and vigorous synergies between the DuluxGroup and NIPSEA or between the DuluxGroup and Dunn-Edward partners in the U.S.
In addition, we will focus on SDGs and ESGs as the core of our management; fulfill our duties to customers, employees, business partners, and society; and strive to maximize the “shareholder value.”
Vanlancker: We have continued investing in the company. We created a global technology team and launched a Paint the Future innovation ecosystem, which continues to expand. We refreshed our approach to sustainability, now known as “People. Planet. Paint.” We’re always looking to push the boundaries of what paint can be and what it can do. Innovation is in our DNA.
Our leading innovation and technology provide our customers with new products and sustainable solutions. This is all thanks to our 3,000 scientists and nearly as many patents. In fact, around half of our patent portfolio is new since 2015. During the past five years, we’ve spent around €1.25 billion on research and development, and it’s paying off with an increase in the number of new patent applications filed during recent years.
Since becoming a focused paints and coatings company, we’ve split our R&D function to focus on more specific activities. The technology group, based in key hubs around the world, focuses on breakthrough innovation and major drivers, while the product development team commercializes our innovation, and other scientists are present at around 70 locations worldwide providing customer support.
We continue investing in our future. Less than a year ago, we opened a ground-breaking R&D innovation campus in the UK. The state-of-the-art facilities can test new products in conditions that mimic the world’s most extreme environments, designed to keep AkzoNobel at the forefront of the coatings industry.
Around one year ago, we launched “Paint the Future” with a startup challenge. At the end of last year, we brought together some key suppliers to explore how we can better co-create, and right now, we’re running our first local startup challenge in Brazil.
Our collaborative (open) innovation ecosystem – which is currently being expanded to include existing partnerships we have with academia – is transforming the world of paints and coatings. When it comes to innovation, AkzoNobel is now seen by many as the reference in our industry.
