Coatings - AkzoNobel

COATINGS
Decorative Coatings South is responsible for operations
in the Netherlands, Germany, France, Belgium, Italy,
Spain, Portugal, Switzerland, Austria, Morocco, Tunisia,
and North and South America as well as for business
development in East Asia.
Decorative Coatings North is responsible for operations
in the United Kingdom, Ireland, the Nordic countries,
Russia, Rumania, Ukraine, the Baltic states, Hungary,
Poland, Turkey, Greece, and the total adhesives
business. The business unit made significant headway
in its strategic assignment to further develop the
Central and Eastern European markets.
DECORATIVE COATINGS NORTH
Further growth in sales and earnings
Decorative Coatings North achieved further earnings
gains in 1998, even before acquisitions. Volume growth
was strong for cement-based powder adhesives but
generally flat for paints.
We have increased our market shares both in volume
and value in a number of markets. However, business in
the Nordic countries showed some stagnancy, reflecting
a weak outdoor season due to poor weather conditions.
The crisis in Russia affected results in the last quarters,
but we will continue to pursue our objectives there via
the joint venture Akzo Nobel Dekor ZAO, as this
potential growth market is essential to our business in
the long term. Construction of a new paint factory near
Moscow is scheduled to start in spring 1999.
We acquired a majority share in the Turkish company
Marshall Boya, which currently holds 25 percent of the
decorative coatings market in Turkey. Via Marshall we
also gained additional activities in Russia and a joint
venture in Rumania. Marshall, which is listed on the
Istanbul stock exchange, is our bridgehead for
expansion into the Black Sea region.
In addition to our relatively strong position in adhesives
in the Nordic countries, Germany, and France, we have
laid the foundation for expansion in Central Europe,
where a new organization was set up with a clear
growth agenda.
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Our U.K. business has been successfully turned around
as a result of restructuring efforts in recent years.
Earnings also improved because of strong commercial
performance, particularly in the retail business.
During 1998 a technical center for color mixing systems
was introduced in Malmö, Sweden. This center will be
the technical focal point for the business unit’s tinting
expansion. The development of tinting is an important
prerequisite for our future success.
R&D efforts strongly focus on the development of low
emission floor adhesives and waterborne trim paints.
DECORATIVE COATINGS SOUTH
Improving cost structure
After a strong first quarter, sales and earnings leveled
off, failing to reach the 1997 level. Poor weather
conditions had a negative impact on paint consumption
for outdoor applications. Compared to 1997, prices of
the white pigment titanium dioxide increased
substantially, which had a negative effect on margins.
In spite of fierce competition, sales, profitability, and
market share developed positively in France. Replacing
three warehouses, the new distribution center in
Montataire has improved the cost structure.
The German market remained hesitant. Through the
acquisition of the European decorative activities of
BASF we established a leading position in Germany in
lacquers and translucents for professional end users,
strengthened our position in dispersion paints, and
achieved attractive complementary positions in other
European countries, including Switzerland and France.
The cost structure of our operations in Spain improved.
All production activities, including those of the newly
acquired Parrot company, were concentrated on the
San Adrian site in Barcelona, enabling us to shut down
the Badalona site. Our network of Procolor centers
continued to grow strongly, providing excellent market
coverage and commercial distribution capabilities.