Terry Knowles, European Correspondent04.11.23
If anything reflects the multi-faceted aspects of the paint and coatings industry in the 2020s, it must surely be AkzoNobel’s annual report for 2022 that runs to a comprehensive 167 pages of ‘text-bites’ and graphics. Acquisitions, formulations, raw materials, inflation, war, training, sustainability, packaging, e-commerce operations, in-store retailing and innovation are all in this literary collage of the challenges and fronts that major paint companies have to be active on these days.
AkzoNobel, Europe’s largest paint company, reflects in its report on all of its efforts within the global paint and coatings scene, its supply chains and sustainability and clean industry targets as well as its financial outcomes from yet another testing year for industry. However, not too many of the five- and ten-year charts and graphics so beloved of annual report designers this time – instead more of an outward-looking, focusing on the future approach. This is almost certainly a reflection of the turbulent time all paint industry players have experienced in the lockdown and post-lockdown years.
Pricing initiatives overall culminated in a 14% increase in prices for customers in 2022 and the global turnover result mirrors this very closely: a 13% increase in sales, which rose from €9,587 million to €10,846 million. The Grupo Orbis takeover effected in Colombia had the greatest impact on sales, increasing them by the best part of the total 4%.
Meanwhile, the takeover of Kansai Paint’s African operations will have additional positive impact in 2023 and is due to be completed by the end of this year. That deal will add both the large-volume decorative operations and industrial coatings in the automotive, protective, coil and wood coatings sectors.
Three other unusual highlights from the financials list also struck me: the company’s net debt rose from €2,340 million in 2021 to €4,089 million in 2022 (an increase of 75%); net cash from operating activities fell from €605 million in 2021 to €263 million last year (a decrease of 56%); and the company’s return on investment (ROI) fell from 16% to 9.8%.
• Sustainability trends in Europe were reflected in the raw materials sector through the greater incorporation of bio-based binders in large-volume wall paints.
• Packaging sustainability was improved by substituting much of the plastic packaging used in Europe for packaging materials of partially recycled content.
• Business simplification in terms of reducing the complex variations in formulations, raw materials and packaging types assisted in offsetting the huge rise in raw material costs.
• Changes in store retailing in Europe were effected; moves towards a self-operating franchise in the Netherlands were accompanied by a broader portfolio of partners for AkzoNobel’s French Sikkens stores.
• Online retailing and delivery was seen building from the post-COVID period with growing capabilities for e-commerce and B2C (business-to-consumer) deliveries manifesting in several different European countries.
• In the UK, AkzoNobel increased its Dulux Academy presence with courses at 13 venues. It has trained more than 13,000 painters and decorators so far.
• Another UK highlight (in the industrial sector) was the application of the company’s Interzone protective coatings for the offshore wind farm Hornsea 2; all 165 turbines in this, the world’s largest offshore energy project, were finished with an Interzone epoxy, which has already been used on more than 4,000 offshore wind assets around the world.
In toto, EMEA decorative paint sales fell slightly in 2022, from €2,429 million in the previous year to €2,405 million last year. The background of rising inflation was seen as refocusing consumer spending on life’s essentials. One might add also that many consumers had been busy painting and decorating during COVID lockdowns, when the decorative sector enjoyed an unexpected boost.
The Automotive sector was impacted by the ongoing shortage of semiconductors but demonstrated recovery in the second half of the year. A notable and clean energy achievement in China was the striking of an agreement for the global supply of refinishes with major electric vehicle producer BYD. Automotive and Specialty Coatings count 43% of their sales in EMEA.
At AkzoNobel Industrial Coatings, gains were hard-won. The company reports that the first half of the year saw strong trading conditions, while the second half was impacted by the collective impact of energy costs, inflation and the effects of the Ukraine war. In China the zero-COVID policy also negatively affected business.
Yet, achievements here continued with the gradual introduction of water-based and UV-curable wood finishes with at least 5% bio-based raw materials through collaboration with key industry partners, and the launch of the Acquaduro 2K PU system for wood finishing in North America. Coil coaters were availed of the new color palette CERAM-A-STAR 1050 Select and alternatives to PVDF coatings, which have experienced supply chain challenges. The AkzoNobel alternatives are also greener than PVDF coatings. Industrial Coatings operations find 43% of their sales in EMEA.
In the Marine sphere, AkzoNobel launched two new products: B-Free Explore, which is a biocide-free formulation aimed at recreational sailors wanting to reduce their environmental impact, and Micron Extra SPC for the yacht market for easy-use hull solutions.
Protective coatings, which are an especial mainstay in AkzoNobel’s portfolio, reported continued growth and recorded their own milestones. With much of the marine segment now in Asia and starting into recovery after the COVID period, some 41% of AkzoNobel’s marine and protective sales are in the Asia Pacific region, with Europe comprising 35%.
Powder coatings were uniquely positioned for benefiting to some extent from rising energy costs in the architectural sector as AkzoNobel witnessed rising demand for its lower temperature curing powder coatings, yet even that was universally limited by energy price and inflationary trends. Automotive powder coatings showed some recovery during the second half of 2022 and the company has been investing in new innovations for applications for wheels, underbodies and electric vehicle batteries. Nearly half – 47% – of AkzoNobel’s powder coatings sales are achieved in the EMEA region.
AkzoNobel, Europe’s largest paint company, reflects in its report on all of its efforts within the global paint and coatings scene, its supply chains and sustainability and clean industry targets as well as its financial outcomes from yet another testing year for industry. However, not too many of the five- and ten-year charts and graphics so beloved of annual report designers this time – instead more of an outward-looking, focusing on the future approach. This is almost certainly a reflection of the turbulent time all paint industry players have experienced in the lockdown and post-lockdown years.
Financial Ups and Downs
Increasing sales on the back of price increases were one of the very few financial positives as it battled the disruptive effects of war in Ukraine and China’s zero-COVID policy.Pricing initiatives overall culminated in a 14% increase in prices for customers in 2022 and the global turnover result mirrors this very closely: a 13% increase in sales, which rose from €9,587 million to €10,846 million. The Grupo Orbis takeover effected in Colombia had the greatest impact on sales, increasing them by the best part of the total 4%.
Meanwhile, the takeover of Kansai Paint’s African operations will have additional positive impact in 2023 and is due to be completed by the end of this year. That deal will add both the large-volume decorative operations and industrial coatings in the automotive, protective, coil and wood coatings sectors.
Three other unusual highlights from the financials list also struck me: the company’s net debt rose from €2,340 million in 2021 to €4,089 million in 2022 (an increase of 75%); net cash from operating activities fell from €605 million in 2021 to €263 million last year (a decrease of 56%); and the company’s return on investment (ROI) fell from 16% to 9.8%.
European Achievements
Some of the achievements and progress that AkzoNobel listed in Europe alone are summarized below:• Sustainability trends in Europe were reflected in the raw materials sector through the greater incorporation of bio-based binders in large-volume wall paints.
• Packaging sustainability was improved by substituting much of the plastic packaging used in Europe for packaging materials of partially recycled content.
• Business simplification in terms of reducing the complex variations in formulations, raw materials and packaging types assisted in offsetting the huge rise in raw material costs.
• Changes in store retailing in Europe were effected; moves towards a self-operating franchise in the Netherlands were accompanied by a broader portfolio of partners for AkzoNobel’s French Sikkens stores.
• Online retailing and delivery was seen building from the post-COVID period with growing capabilities for e-commerce and B2C (business-to-consumer) deliveries manifesting in several different European countries.
• In the UK, AkzoNobel increased its Dulux Academy presence with courses at 13 venues. It has trained more than 13,000 painters and decorators so far.
• Another UK highlight (in the industrial sector) was the application of the company’s Interzone protective coatings for the offshore wind farm Hornsea 2; all 165 turbines in this, the world’s largest offshore energy project, were finished with an Interzone epoxy, which has already been used on more than 4,000 offshore wind assets around the world.
In toto, EMEA decorative paint sales fell slightly in 2022, from €2,429 million in the previous year to €2,405 million last year. The background of rising inflation was seen as refocusing consumer spending on life’s essentials. One might add also that many consumers had been busy painting and decorating during COVID lockdowns, when the decorative sector enjoyed an unexpected boost.
Other Achievements In Industrial Coatings
In the Automotive and Specialty Coatings segment, the Aerospace Coatings business enjoyed many achievements. AkzoNobel announced a €15 million investment for its aerospace coatings facility in Parniers, France, which will increase capacity and safety and reduce environmental impact. The development of a chrome-free primer technology that further eliminates the use of chromium(VI) compounds, which was developed with an aerospace OEM also won an innovation award, and another innovation in this area was in the use of VR (virtual reality) headsets to create an immersive training experience in a virtual paint booth that simulates the finishing process and the wider workshop environment.The Automotive sector was impacted by the ongoing shortage of semiconductors but demonstrated recovery in the second half of the year. A notable and clean energy achievement in China was the striking of an agreement for the global supply of refinishes with major electric vehicle producer BYD. Automotive and Specialty Coatings count 43% of their sales in EMEA.
At AkzoNobel Industrial Coatings, gains were hard-won. The company reports that the first half of the year saw strong trading conditions, while the second half was impacted by the collective impact of energy costs, inflation and the effects of the Ukraine war. In China the zero-COVID policy also negatively affected business.
Yet, achievements here continued with the gradual introduction of water-based and UV-curable wood finishes with at least 5% bio-based raw materials through collaboration with key industry partners, and the launch of the Acquaduro 2K PU system for wood finishing in North America. Coil coaters were availed of the new color palette CERAM-A-STAR 1050 Select and alternatives to PVDF coatings, which have experienced supply chain challenges. The AkzoNobel alternatives are also greener than PVDF coatings. Industrial Coatings operations find 43% of their sales in EMEA.
In the Marine sphere, AkzoNobel launched two new products: B-Free Explore, which is a biocide-free formulation aimed at recreational sailors wanting to reduce their environmental impact, and Micron Extra SPC for the yacht market for easy-use hull solutions.
Protective coatings, which are an especial mainstay in AkzoNobel’s portfolio, reported continued growth and recorded their own milestones. With much of the marine segment now in Asia and starting into recovery after the COVID period, some 41% of AkzoNobel’s marine and protective sales are in the Asia Pacific region, with Europe comprising 35%.
Powder coatings were uniquely positioned for benefiting to some extent from rising energy costs in the architectural sector as AkzoNobel witnessed rising demand for its lower temperature curing powder coatings, yet even that was universally limited by energy price and inflationary trends. Automotive powder coatings showed some recovery during the second half of 2022 and the company has been investing in new innovations for applications for wheels, underbodies and electric vehicle batteries. Nearly half – 47% – of AkzoNobel’s powder coatings sales are achieved in the EMEA region.