Terry Knowles, European Correspondent09.25.24
Although we’re not quite done with 2024 yet, we’re already at the stage where colors of the year for 2025 are being announced for the decorative and other coatings sectors. But what of the color of 2024 itself? It’s time for a health-check to see how the major companies and markets have been faring so far this year – a sort-of visualization of how it might all turn out in the end.
The evidence of investment in new plants across both the paint industry and the raw material supply chain is very low, and both this scene and the mergers and acquisitions scenes are at the quietest times I have ever seen in more than 25 years of reporting on the paint and coatings sector and its suppliers, and where there are investments or acquisitions like southeast Asia and Latin America, well away from potentially troublesome spots.
India is replacing China as the engine of global growth, but it’s not attracting anywhere near the same levels of foreign direct investment (FDI) that China managed routinely ca. 20 years ago. Reasons for this may be a shortage of suitable, sizeable paint companies to acquire because the organized paint sector in India is small, but the absence of investment in R&D and technology sectors by major paint makers in India in recent years is notable.
Despite the bane of market maturity, acquisition is still considered the most rapid route to growth. Kansai Paint has been very active in assembling a new hand of European-based coatings technology operations over the last two years; in the latest announcement it redoubled on this strategy, saying that nothing was off limits in its search for acquisitions.
Recently it completed its acquisition of the Weilburger railway coatings business, one of the two divisions at Weilburger; the other division – serving the graphic arts sector – is now being acquired by Stahl, which is building up its portfolio of coatings for flexible packaging. European manufacturing has been struggling with growth; Germany, as the largest economy, has been hampered by a combination of tight fiscal policy and low activity in high-technology areas.
The general lack of current attractiveness for the paint sector – as well as its struggle against a stack of adverse conditions and demands – has prompted a slump in some paint makers’ share prices; indeed, AkzoNobel has recently announced plans to eliminate 5% of its workforce in a bid to reduce costs.
The spring-into-summer Q2 proved disappointing for Europe’s major decorative paint makers, AkzoNobel and PPG. AkzoNobel posted Q2 results that showed organic sales growth of 2% across the entire EMEA region, with revenues up by 3%. But this is mainly driven by price increases and not volume sales increases.
Poor weather conditions were seen dampening the passion for decoration in the UK and France in the spring, while sales in the Benelux region mitigated those two lackluster markets. Across the first half of 2024, AkzoNobel reported generally similar outcomes, with volume growth in Southern and Eastern Europe, while other sales growth was achieved on flat sales (i.e price increases again).
Similarly, PPG said that its European sales volumes across April to June (usually a key period for DIY/decorating) were below expectations. Subsequently it detailed a single-digit percentage decline in architectural coatings sales across the EMEA region for the quarter, and while Western Europe may have struggled in this sector, PPG reported some growth in Central and Eastern Europe.
In the European industrial coatings sector as a whole, AkzoNobel reported a collectively flat market, which was in marked contrast to its industrial coatings growth in North America and Asia.
The company reported its greatest growth in the second quarter in the marine and protective coatings business, at 10% organic growth, stemming from rising demand in the Middle East and Southeast Asia. There has been an uptick in demand from newbuilds in the marine sector.
There was less value growth in the other segments of AkzoNobel’s Performance Coatings business, at about 2-3% for the automotive/specialty and powder coatings sectors, while the industrial coatings sector proper was almost perfectly flat in its year-on-year performance in the second quarter and slightly behind when measured across the first half of the year.
European coatings volumes in the automotive OEM and industrial coatings sector proper declined at PPG during the second quarter of 2024, mirroring the same pattern in the USA. Mexico and China were better performers. The general outlook posted by PPG is continued good growth in those two markets, with the growth outlook across European remaining uneven, but stabilizing.
One of those, the brand-new report from Fortune Business Insights offers a breakdown of the global paint and coatings market (see pie chart), summarizing that the global sector market size should grow from US$ 217.36 billion in 2024 to US$ 303.97 billion by 2032, exhibiting a CAGR of 4.5% during the forecast period.
A few key insights according to region are also given:
• In the EMEA region, Europe is considered good for growth in the automotive sector, a result of being home to one of the world’s largest automotive assembly industries, combined with rising disposable incomes. Saudi Arabia and Qatar are also expected to flourish through their growing construction sectors.
• Similarly, the USA is also expected to grow in both the architectural and automotive coatings sectors, fuelled by rising incomes and a greater push on high-tech products.
• In South America, Brazil, Peru and Colombia each have nationwide infrastructure plans that are driving coatings consumption in the infrastructure and maintenance areas. Greater industrialization in Brazil is also seen spurring on further building paints use.
General Position
The general background that many paint companies are referencing is understandably one of global uncertainty, mainly with rising geopolitical tensions, especially in Eastern Europe and the Middle East.The evidence of investment in new plants across both the paint industry and the raw material supply chain is very low, and both this scene and the mergers and acquisitions scenes are at the quietest times I have ever seen in more than 25 years of reporting on the paint and coatings sector and its suppliers, and where there are investments or acquisitions like southeast Asia and Latin America, well away from potentially troublesome spots.
India is replacing China as the engine of global growth, but it’s not attracting anywhere near the same levels of foreign direct investment (FDI) that China managed routinely ca. 20 years ago. Reasons for this may be a shortage of suitable, sizeable paint companies to acquire because the organized paint sector in India is small, but the absence of investment in R&D and technology sectors by major paint makers in India in recent years is notable.
Despite the bane of market maturity, acquisition is still considered the most rapid route to growth. Kansai Paint has been very active in assembling a new hand of European-based coatings technology operations over the last two years; in the latest announcement it redoubled on this strategy, saying that nothing was off limits in its search for acquisitions.
Recently it completed its acquisition of the Weilburger railway coatings business, one of the two divisions at Weilburger; the other division – serving the graphic arts sector – is now being acquired by Stahl, which is building up its portfolio of coatings for flexible packaging. European manufacturing has been struggling with growth; Germany, as the largest economy, has been hampered by a combination of tight fiscal policy and low activity in high-technology areas.
The general lack of current attractiveness for the paint sector – as well as its struggle against a stack of adverse conditions and demands – has prompted a slump in some paint makers’ share prices; indeed, AkzoNobel has recently announced plans to eliminate 5% of its workforce in a bid to reduce costs.
Looking into Europe
The general picture for Europe is flat with a struggle for growth in the high-volume decorative markets of the west, but with a few growth highlights emerging in Central, Eastern and southern Europe (but where the individual national markets are all smaller).The spring-into-summer Q2 proved disappointing for Europe’s major decorative paint makers, AkzoNobel and PPG. AkzoNobel posted Q2 results that showed organic sales growth of 2% across the entire EMEA region, with revenues up by 3%. But this is mainly driven by price increases and not volume sales increases.
Poor weather conditions were seen dampening the passion for decoration in the UK and France in the spring, while sales in the Benelux region mitigated those two lackluster markets. Across the first half of 2024, AkzoNobel reported generally similar outcomes, with volume growth in Southern and Eastern Europe, while other sales growth was achieved on flat sales (i.e price increases again).
Similarly, PPG said that its European sales volumes across April to June (usually a key period for DIY/decorating) were below expectations. Subsequently it detailed a single-digit percentage decline in architectural coatings sales across the EMEA region for the quarter, and while Western Europe may have struggled in this sector, PPG reported some growth in Central and Eastern Europe.
In the European industrial coatings sector as a whole, AkzoNobel reported a collectively flat market, which was in marked contrast to its industrial coatings growth in North America and Asia.
The company reported its greatest growth in the second quarter in the marine and protective coatings business, at 10% organic growth, stemming from rising demand in the Middle East and Southeast Asia. There has been an uptick in demand from newbuilds in the marine sector.
There was less value growth in the other segments of AkzoNobel’s Performance Coatings business, at about 2-3% for the automotive/specialty and powder coatings sectors, while the industrial coatings sector proper was almost perfectly flat in its year-on-year performance in the second quarter and slightly behind when measured across the first half of the year.
European coatings volumes in the automotive OEM and industrial coatings sector proper declined at PPG during the second quarter of 2024, mirroring the same pattern in the USA. Mexico and China were better performers. The general outlook posted by PPG is continued good growth in those two markets, with the growth outlook across European remaining uneven, but stabilizing.
Shape of the Markets Beyond 2024
Various market reports on the future of the paint and coatings sector peg the global market at about $200 billion for 2023/4. Estimates vary: US$200.3 billion in 2023 (Grand View Research), US$217.3 billion in 2024 (Fortune Business Insights) and US$178.3 billion in 2023 (Precedence Research), doubtless the variation arises from scope and definition. Most point to growth of about 4-5% p.a. up until 2030 and beyond, heralding moderately attractive growth that is likely to be firmly established in Asia.One of those, the brand-new report from Fortune Business Insights offers a breakdown of the global paint and coatings market (see pie chart), summarizing that the global sector market size should grow from US$ 217.36 billion in 2024 to US$ 303.97 billion by 2032, exhibiting a CAGR of 4.5% during the forecast period.
A few key insights according to region are also given:
• In the EMEA region, Europe is considered good for growth in the automotive sector, a result of being home to one of the world’s largest automotive assembly industries, combined with rising disposable incomes. Saudi Arabia and Qatar are also expected to flourish through their growing construction sectors.
• Similarly, the USA is also expected to grow in both the architectural and automotive coatings sectors, fuelled by rising incomes and a greater push on high-tech products.
• In South America, Brazil, Peru and Colombia each have nationwide infrastructure plans that are driving coatings consumption in the infrastructure and maintenance areas. Greater industrialization in Brazil is also seen spurring on further building paints use.
