Shem Oirere, Africa Correspondent05.09.22
Africa’s paint and coatings market continued to report mixed performance in the period prior to the outbreak of COVID-19, a trend that has continued even as leading global companies announce divestitures and acquisitions that are likely to directly or indirectly impact the overall market performance in the long-term.
Although some of the divestitures are a culmination of re-alignments and tweaking by the companies of their business strategy in the Middle East and Africa, the impact of COVID-19 may have accelerated the decisions to sell their interest in the region.
American Fortune 500 company PPG Industries, which is active in 75 countries globally, where it supplies the construction, consumer products and industrial markets, is the latest major international company to announce divestiture from some of the African markets.
PPG said on April 1, 2022, it has approved the sale of its business interest in Senegal, Ivory Coast, Cameroon, Gabon and Algeria to French industrial group Océinde.
However, Océinde, which is also active in Europe, the Indian Ocean and Africa in telecommunications and the media sector, construction, painting and food sector, will continue to offer the existing PPG range of products, including SEIGNEUIRE paint, through a licensing and distribution agreement, according to PPG’s statement.
“This partnership will strengthen a longstanding relationship between the companies, which includes the supply of specialty materials from Océinde to PPG,” the company said.
PPG had committed in December 2020 to implement a plan targeting disposal of selected entities “in smaller, non-strategic countries.”
However, all employees in the four African entities that PPG is selling will join Océinde with the company. Olivier Bouin, currently PPG general manager, Architectural Coatings Africa French Overseas and Suriname, will become the new general manager for the trade architectural coatings market in Africa at Océinde once the deal is completed.
“We are convinced that this change of business model will benefit our customers in Africa,” said Pascal Tisseyre, PPG vice president, Architectural Coatings, Europe, Middle East and Africa.
“Both companies are looking forward to working together to better serve the African market,” he added.
Océinde’s CEO Nassir Goulamaly said that PPG’s divestiture from the four markets and the decision to allow current employees to remain at their work stations demonstrates “the trust shown by PPG as well as all the employees who are joining us today.”
“We have been investing for decades in the innovation of architectural coatings dedicated to the growing African market and this agreement will help us support that,” said Goulamaly.
PPG had previously said the revenue from the four entities it will divest from in early 2022 was equivalent to less than 1% of its annual net sales.
“As a result, the assets and liabilities of these entities were reclassified as held for sale, and impairment charges of $21 million and $52 million were recorded in the consolidated statement of income for the years ended December 31, 2021 and 2020, respectively,” PPG had said in its 2021 Annual Report.
The divesture comes at a time when PPG says it has achieved all-time record sales of $16.8 billion for 2021, which is 21% more than the previous year.
“This was led by strong organic growth of 10% and several strategic acquisitions,” the company said.
Apart from divesting from the four African markets, PPG said it has been strengthening its position as a leader in global paints market by completing and approving more acquisitions, including the integration of Ennis-Flint in December 2020.
After 2020, PPG said it began “integrating the companies acquired in 2021, including VersaFlex, Cetelon, Wörwag and Tikkurila.”
These five acquisitions added $1.7 billion of annualized revenue, expanded PPG’s sustainable product offerings and moved PPG into new markets.
PPG’s reduction of its Africa market share comes months after Japanese paint industry giant Kansai announced disposal of shares in two business entities in Nigeria and Middle East as part of its plan to realign low-profit assets so as to improve the company’s business competitiveness.
The second phase of Kansai’s realignment affected Kansai Paint Middle East FZCO, (KPME) Kansai Plascon Africa Ltd (KPAL) and Nigeria.
In the case of KPME and Nigeria, Kansai said it had reached an agreement “to sell all shares owned by us to the partner.”
However, the Plascon brand licensing will continue for the Nigerian case with transaction resulting in a profit boost effect of 100 million yen ($ 807,000).
Kansai made entry into the Nigerian market in 2016 av few months before it announced partnership with Paints and Coatings Manufacturers Nigeria (PCMN).
In the United Arab Emirates, Kansai was divesting from KPME and selling its stake to its joint venture partner, G6 International, although the existing technology license will continue. Kansai said divesting from the UAE will lead to an annual profit boost effect of 1.5 billion yen ($12 million).
In South Africa, Kansai said it amortized the remaining goodwill KPAL all at once with annual profit boost effect of 1.1 billion yen ($ 8.8 million).
In hindsight, divesting from some of these African markets by companies such as PPG and Kansai at the time they did may have been a perfect coincidence taking into consideration the devastating impact of COVID-19 in the first quarter of 2020.
Although growth of the paint industry is expected to make a rebound in the long term, Kansai’s president Kunishi Mouri said in the short term the outlook “remains uncertain due to a number of risk factors, such as global trade issues, future prospects for the Chinese economy, trends in emerging economies, uncertainty surrounding policy, and fluctuations in the financial and capital markets.”
Africa’s economic stagnation has also impacted the global construction machinery market with China, the continent’s leading supplier, reporting a decrease
in demand.
In Africa, Kansai said, the company’s sales for 2020 through to 2021 were “sluggish.”
However, with Africa’s current recession, the worst in 50 years, predicted to have started ebbing away from last year, the continent’s economic growth is likely to surge by 3.4%, spurring revival of key paint consuming sectors such as construction and manufacturing.
PPG and Kansai Divest from Some African Markets
Although some of the divestitures are a culmination of re-alignments and tweaking by the companies of their business strategy in the Middle East and Africa, the impact of COVID-19 may have accelerated the decisions to sell their interest in the region.
American Fortune 500 company PPG Industries, which is active in 75 countries globally, where it supplies the construction, consumer products and industrial markets, is the latest major international company to announce divestiture from some of the African markets.
PPG said on April 1, 2022, it has approved the sale of its business interest in Senegal, Ivory Coast, Cameroon, Gabon and Algeria to French industrial group Océinde.
However, Océinde, which is also active in Europe, the Indian Ocean and Africa in telecommunications and the media sector, construction, painting and food sector, will continue to offer the existing PPG range of products, including SEIGNEUIRE paint, through a licensing and distribution agreement, according to PPG’s statement.
“This partnership will strengthen a longstanding relationship between the companies, which includes the supply of specialty materials from Océinde to PPG,” the company said.
PPG had committed in December 2020 to implement a plan targeting disposal of selected entities “in smaller, non-strategic countries.”
However, all employees in the four African entities that PPG is selling will join Océinde with the company. Olivier Bouin, currently PPG general manager, Architectural Coatings Africa French Overseas and Suriname, will become the new general manager for the trade architectural coatings market in Africa at Océinde once the deal is completed.
“We are convinced that this change of business model will benefit our customers in Africa,” said Pascal Tisseyre, PPG vice president, Architectural Coatings, Europe, Middle East and Africa.
“Both companies are looking forward to working together to better serve the African market,” he added.
Océinde’s CEO Nassir Goulamaly said that PPG’s divestiture from the four markets and the decision to allow current employees to remain at their work stations demonstrates “the trust shown by PPG as well as all the employees who are joining us today.”
“We have been investing for decades in the innovation of architectural coatings dedicated to the growing African market and this agreement will help us support that,” said Goulamaly.
PPG had previously said the revenue from the four entities it will divest from in early 2022 was equivalent to less than 1% of its annual net sales.
“As a result, the assets and liabilities of these entities were reclassified as held for sale, and impairment charges of $21 million and $52 million were recorded in the consolidated statement of income for the years ended December 31, 2021 and 2020, respectively,” PPG had said in its 2021 Annual Report.
The divesture comes at a time when PPG says it has achieved all-time record sales of $16.8 billion for 2021, which is 21% more than the previous year.
“This was led by strong organic growth of 10% and several strategic acquisitions,” the company said.
Apart from divesting from the four African markets, PPG said it has been strengthening its position as a leader in global paints market by completing and approving more acquisitions, including the integration of Ennis-Flint in December 2020.
After 2020, PPG said it began “integrating the companies acquired in 2021, including VersaFlex, Cetelon, Wörwag and Tikkurila.”
These five acquisitions added $1.7 billion of annualized revenue, expanded PPG’s sustainable product offerings and moved PPG into new markets.
PPG’s reduction of its Africa market share comes months after Japanese paint industry giant Kansai announced disposal of shares in two business entities in Nigeria and Middle East as part of its plan to realign low-profit assets so as to improve the company’s business competitiveness.
The second phase of Kansai’s realignment affected Kansai Paint Middle East FZCO, (KPME) Kansai Plascon Africa Ltd (KPAL) and Nigeria.
In the case of KPME and Nigeria, Kansai said it had reached an agreement “to sell all shares owned by us to the partner.”
However, the Plascon brand licensing will continue for the Nigerian case with transaction resulting in a profit boost effect of 100 million yen ($ 807,000).
Kansai made entry into the Nigerian market in 2016 av few months before it announced partnership with Paints and Coatings Manufacturers Nigeria (PCMN).
In the United Arab Emirates, Kansai was divesting from KPME and selling its stake to its joint venture partner, G6 International, although the existing technology license will continue. Kansai said divesting from the UAE will lead to an annual profit boost effect of 1.5 billion yen ($12 million).
In South Africa, Kansai said it amortized the remaining goodwill KPAL all at once with annual profit boost effect of 1.1 billion yen ($ 8.8 million).
In hindsight, divesting from some of these African markets by companies such as PPG and Kansai at the time they did may have been a perfect coincidence taking into consideration the devastating impact of COVID-19 in the first quarter of 2020.
Although growth of the paint industry is expected to make a rebound in the long term, Kansai’s president Kunishi Mouri said in the short term the outlook “remains uncertain due to a number of risk factors, such as global trade issues, future prospects for the Chinese economy, trends in emerging economies, uncertainty surrounding policy, and fluctuations in the financial and capital markets.”
Africa’s economic stagnation has also impacted the global construction machinery market with China, the continent’s leading supplier, reporting a decrease
in demand.
In Africa, Kansai said, the company’s sales for 2020 through to 2021 were “sluggish.”
However, with Africa’s current recession, the worst in 50 years, predicted to have started ebbing away from last year, the continent’s economic growth is likely to surge by 3.4%, spurring revival of key paint consuming sectors such as construction and manufacturing.
