11.11.22
The recent publication of Kansai Paint's integrated report for 2022 yields some interesting insights into its position in Europe and what its plans are for the future, particularly with regard to Europe. One of the surprising statistics that emerges from the report is that Europe accounted for 20% of Kansai Paint's turnover in 2021, which reflects the company's strategies of internationalisation and of reducing its dependency upon its native market, Japan.
The report's timing coincides with Kansai Paint embarking upon its 17th Medium-term Management Plan and to this end it outlines its plans up until 2024. One of the key strategies that the company is keen to pursue is a strengthening of its international business operations in both India and Europe and in Europe it plans to focus on acquiring more industrial coatings businesses from within the SME level. The company's announcement in June 2022 that it will sell its African decorative paint operations to AkzoNobel could therefore be envisaged as generating the so-called 'war chest' that companies covet in order to pursue acquisitions activity. Once the disposal of the African operations has been completed, the relative significance of the companies European operations will increase again. Among the objectives that Kansai has in its 17th MTM plan is achieving a turnover level of ¥500 billion and in its fiscal year 2021 turnover stood at ¥421 billion. Shrewd acquisitions in Europe or India might go a long way to fulfilling this aim. The company's stated aims are for a 23% increase in sales in its International Business Unit operations (effectively everything outside Japan).
Industrial coatings per se now account for nearly half of Kansai's European turnover alone, as seen from the chart. The chart accommodates several business realignments which makes any comparison quite difficult. However, a more detailed examination of the annual sales figures from Europe highlights record European turnover for Kansai in 2021, exceeding the previous high of 2018 before taking a dip in 2019-20. (Similar patterns were also witnessed in India and Asia, but not in Japan, where Kansai's sales have fallen every year since 2018.)
Finally, reflecting a difficult time for European industry, I wanted to mention the repercussions that are beginning to be felt by the European chemicals sector as a result of the impending energy crisis. This is something that will impact all segments of industry as the chemical industry is the fourth-largest manufacturing industry in the EU and supplies to all of Europe's value chains.
The crisis, which has been precipitated by the war in Ukraine, has been characterised by soaring gas and electricity prices, which in turn have led to gas supply shortages and mandates for lower electricity consumption, thereby putting hundreds of chemical plants at risk across Europe. It has led to the value of chemical imports exceeding that of exports, giving rise to a trade deficit of €5.6 billion for the first half of 2022. In direct opposition to the EU's self-sufficiency in chemicals ambitions, this is viewed as creating an import dependency.
According to Marco Mensink, Director General at the European chemical industry association, CEFIC, the sector is almost 'at breaking point'. In a statement released in late October he said, “We are approaching the point of no return; if no emergency solution to the energy prices is provided to our sector, we are not far off breaking point. Hundreds of businesses in the chemical sector are already in survival mode and we have started seeing the first closures. We need action now.”
Consequently, CEFIC has called upon the European Commission and its member states to take action on two fronts. In the short-term, measures are needed to stabilise energy supplies through the winter and in the long-term there is the need to safeguard the European chemical industry.
A number of emergency measures are being introduced for the winter and these include (but are not limited to): the shoring up of competitively-priced supplies from sources outside the EU (Norway and the USA); taking steps to engage the use of idled and back-up power plants across the EU; deployment of floating re-gasification units. The EU is very keen to see that regardless of the energy crisis outcomes, there is no reversal in the trend towards reducing energy consumption and this places stronger emphasis where possible on the expansion of renewable materials and low-carbon solutions.
More acquisitions planned
In fact, one of the key things that has been revealed in the report is that in August 2022 Kansai Paint acquired Westdeutsche Farben GmbH (wefa), a German coatings manufacturer with its own technological expertise in water-based coatings that suits the modern regulatory compliance agenda. The deal, which has been secured through its Kansai Helios operations, has brought Kansai Paint new plants and new expertise within Europe that complements its Rembrandtin railway and other industrial coatings operations.By Region | |
---|---|
Japan | 33 |
India | 23 |
Europe | 20 |
Asia | 14 |
Africa | 9 |
Other | 1 |
Source: Kansai Paint Integrated Report 2022 |
European Sales | In Yen Million |
---|---|
Industrial | 40867 |
Others | 22631 |
Refinish, marine and protective | 9769 |
Architectural | 5692 |
Automotive | 5360 |
Source: Kansai Paint Integrated Report 2022 |
The report's timing coincides with Kansai Paint embarking upon its 17th Medium-term Management Plan and to this end it outlines its plans up until 2024. One of the key strategies that the company is keen to pursue is a strengthening of its international business operations in both India and Europe and in Europe it plans to focus on acquiring more industrial coatings businesses from within the SME level. The company's announcement in June 2022 that it will sell its African decorative paint operations to AkzoNobel could therefore be envisaged as generating the so-called 'war chest' that companies covet in order to pursue acquisitions activity. Once the disposal of the African operations has been completed, the relative significance of the companies European operations will increase again. Among the objectives that Kansai has in its 17th MTM plan is achieving a turnover level of ¥500 billion and in its fiscal year 2021 turnover stood at ¥421 billion. Shrewd acquisitions in Europe or India might go a long way to fulfilling this aim. The company's stated aims are for a 23% increase in sales in its International Business Unit operations (effectively everything outside Japan).
Industrial coatings per se now account for nearly half of Kansai's European turnover alone, as seen from the chart. The chart accommodates several business realignments which makes any comparison quite difficult. However, a more detailed examination of the annual sales figures from Europe highlights record European turnover for Kansai in 2021, exceeding the previous high of 2018 before taking a dip in 2019-20. (Similar patterns were also witnessed in India and Asia, but not in Japan, where Kansai's sales have fallen every year since 2018.)
Growth through a difficult time for industry
One of the challenges that arises in carving out a strategy now is pursuing growth at a time when industry headwinds continue to be extremely unfavourable. Kansai Paint acknowledges that the surge in raw materials and logistical costs is not likely to be temporary; potentially damaging for profits for all companies. Furthermore although rising demand is anticipated by the industry, the nature of the demand is likely to swing further in towards sustainable chemistries. The company's presence in Europe at a time when greenness and renewables etc. is given a high priority is something that it plans to leverage and potentially transfer elsewhere, in what it sees as the maximisation of resources.European energy crisis bites chemical sector hard
Finally, reflecting a difficult time for European industry, I wanted to mention the repercussions that are beginning to be felt by the European chemicals sector as a result of the impending energy crisis. This is something that will impact all segments of industry as the chemical industry is the fourth-largest manufacturing industry in the EU and supplies to all of Europe's value chains.
The crisis, which has been precipitated by the war in Ukraine, has been characterised by soaring gas and electricity prices, which in turn have led to gas supply shortages and mandates for lower electricity consumption, thereby putting hundreds of chemical plants at risk across Europe. It has led to the value of chemical imports exceeding that of exports, giving rise to a trade deficit of €5.6 billion for the first half of 2022. In direct opposition to the EU's self-sufficiency in chemicals ambitions, this is viewed as creating an import dependency.
According to Marco Mensink, Director General at the European chemical industry association, CEFIC, the sector is almost 'at breaking point'. In a statement released in late October he said, “We are approaching the point of no return; if no emergency solution to the energy prices is provided to our sector, we are not far off breaking point. Hundreds of businesses in the chemical sector are already in survival mode and we have started seeing the first closures. We need action now.”
Consequently, CEFIC has called upon the European Commission and its member states to take action on two fronts. In the short-term, measures are needed to stabilise energy supplies through the winter and in the long-term there is the need to safeguard the European chemical industry.
A number of emergency measures are being introduced for the winter and these include (but are not limited to): the shoring up of competitively-priced supplies from sources outside the EU (Norway and the USA); taking steps to engage the use of idled and back-up power plants across the EU; deployment of floating re-gasification units. The EU is very keen to see that regardless of the energy crisis outcomes, there is no reversal in the trend towards reducing energy consumption and this places stronger emphasis where possible on the expansion of renewable materials and low-carbon solutions.