AkzoNobel Decorative Paints

Europe

Overview

It was a challenging year, particularly during the second half, when the economic environment was heavily impacted by the uncertainty around the euro, government austerity measures and associated weakening in consumer confidence around Europe, in particular in the south European countries. Despite this, overall revenue and volume were still up, but with a slowdown in momentum in the fourth quarter. In addition, margins were impacted by significant variable cost inflation with a lag in terms of the impact of implemented price increases.

Analysis

In a difficult market environment, the business overall performed well, with share gains in particular coming in key markets including Turkey, Russia and the Benelux. Gains were even achieved in areas impacted by the economic crisis, such as Greece. However, some parts of the business were impacted by weaker exterior paint sales due to weather conditions. We also saw adverse product and channel mix due to the weak economy in the more mature markets. Combined with higher variable cost inflation – in particular on the back of TiO₂ – the business experienced pressure on contribution margins. In markets outside the eurozone, we experienced additional cost pressures due to weakening local currencies. As a result, despite continued restructuring benefits, profits for the year were down.

Highlights

At the end of 2010 we announced the merger of three Decorative Paints businesses in Europe into one Decorative Paints EMEA business and we made good progress during the year in creating strategic clarity and establishing the new organization. It was a busy year in terms of securing and implementing contracts. For example, we announced that Dulux paint is being used to help transform the Russian headquarters of the World Wildlife Fund, which will be a showcase for green construction. Our own sustainability efforts included an important breakthrough at our Prudhoe plant in the UK. An eco-efficient way of making paint – based on harvesting rain water – has been developed which could slash the site’s use of industrial water by 50 percent. Meanwhile, our Nordsjö and Sadolin brands became the first in the Nordic region to offer a filler accredited with the coveted Nordic Ecolabel. There were also positive improvements in safety performance and operational eco-efficiency metrics.

Developments

There was a lot of brand activity throughout the region, including the rollout of the Herbol brand in Italy and the Vivechrom Express one coat concept in Greece, while Savdel Blue and Flasch were introduced in Morocco and Tunisia and the Dulux Let’s Colour campaign was launched in South Africa. Another important development was the launch of the Sikkens EcoSure range of interior and exterior wall paints, which offers the optimal balance between quality, low environmental impact and total lifecycle footprint. In addition, we relaunched our woodcare ranges in Poland (Sadolin) and Belgium (Xyladecor) with new livery, and in Germany we introduced Einflach Glatt, a ready mix filler with two unique tools to smooth walls quickly and easily. During 2011 we also sponsored the inaugural European Painting Skills Legacy workshop, in association with UNIEP. The prestigious event brought together experienced professionals with trainees from across the continent and was designed to allow trainee painting contractors to experience and learn from the latest developments in painting.