Review of the year by COO Ruud Joosten
Our transformation into a focused paints and coatings company is what really defined 2018 for AkzoNobel. It was a landmark year which gave us more clarity and enabled us to direct all our attention towards our customers in the paints and coatings market.
2018 proved to be a tough year for the whole industry. However, we remained committed to growing the business and improving our performance. So we were quick and decisive in responding to raw material price pressure and made a series of bolt-on acquisitions that proved we’re serious about getting ourselves fighting fit for long-term success. Yes, we need to improve profitability – which is what our Winning together: 15 by 20 strategy is primarily about – but we also need to look beyond that.
The bolt-on acquisitions we made in 2018 sent a clear signal that we’re building, we’re growing and we’re making good progress. The Fabryo deal makes us a leader for decorative paints in Romania, while acquiring Xylazel increased our presence in Spain’s decorative paints market. We were also delighted to acquire the minority interest share and obtain full ownership of the AkzoNobel Swire Paints joint venture in China, as well as purchasing Colourland Paints in Malaysia. Both these deals help to increase our footprint in Asia.
“We’re building, we’re growing and making good progress”
While we had one eye on the future, we also needed to quickly respond to the challenging trading conditions. Raw material prices in particular hit us hard across the board. It’s something the entire industry had to deal with. Our response to these challenges was swift, with extensive pricing initiatives being introduced. It made an important difference. When combined with various cost-saving measures, we were able to offset a large part of the headwinds we encountered. We couldn’t compensate entirely, though, due to the turbulent nature of the global economy, including changing dynamics in China, where the building industry was hit by less government investment. South America also proved difficult, due to turbulent economic and political issues. Things were better in North America – where our Coatings activities had a successful year – while Europe was more of a mixed bag.
One of our best performing businesses was Powder Coatings, which continued to do very well and had another excellent year. Aerospace Coatings also put in a strong performance for 2018, due to a combination of the growing popularity of our market-leading two-coat system and the high levels of service we offer our customers. The results of our Marine business also started to improve in the second half of the year due to the pricing initiatives we introduced and various cost-saving measures. We’re starting to see the first signs of an upturn in the cycle – with faster recovery expected in oil and gas – although we won’t see the benefits for a while.
There were also several other important developments during the year. In the UK, we acquired four businesses to enhance our network of Dulux Decorator Centres and further improve the service and support we offer our trade customers. The deals involved the purchase of Whites Trade Paints, Cambrian Decorators Supplies, Doves Decorating Supplies, and Trade Paints. It took our total number of stores in the UK to 229, a 20% increase compared with 2017. In China, production started at our new powder coatings plant in Changzhou – one of the largest facilities of its kind in the world. We also opened a newly-constructed mega-warehouse in Texas in the US, which will serve as a central regional hub for our Marine and Protective Coatings business.
In 2018, we continued to set the standard in sustainability and are well positioned to benefit from current and future opportunities. Sustainability is a key value driver. As one of our core principles, it adds purpose and meaning to what we do and our customers appreciate it. Our marketing decisions also continue to be guided by insights into local needs. This has enabled us to position our solutions and the benefits they offer, such as accelerating green building, making shipping more sustainable and improving air quality. In China specifically, the rapid growth of low VOC products contributed to increased eco-premium revenue in the region. Meanwhile, total revenue of eco-premium solutions amounted to 22% of overall revenue, ahead of our target of 20%.
Our societal involvement is a key part of our sustainability agenda, so it was encouraging to see our global “Let’s Colour” program continue to gather momentum. A particular highlight was an exciting project in Kuşadası, Turkey, which involved repainting 400 homes and transforming the lives of 2,000 people (find out more in Case studies).
Towards the end of the year, we announced our Paint the Future startup challenge. This is an amazing opportunity for us to work with innovators and visionaries who dare to be different. As a global leader, we’re taking the initiative to co-create customer-focused innovation which has a clear eye on the future, while recognizing that we can’t do it all alone. We can’t wait to see what develops as a result (read more in Case studies).
Throughout the year, our employees have shown immense pride in what they do and displayed an infectious passion for paint. It’s this energy and commitment which will propel us forward as we continue to build a leading paints and coatings company which delivers for all our stakeholders.
Volatile organic compounds.
A measure of the sustainability performance of our products. An eco-premium solution is significantly better than the offer in the market in at least one mainstream criterion (toxicity, energy use, use of natural resources/raw materials, emissions and waste, land use, risks, health and well-being), and not significantly worse in any other criteria. Downstream benefits include a tangible sustainability benefit for our customers.