ABRAFATI

Reports Favorable Outlook for the Brazilian Paint Market

Paint consumption per capita in Brazil is only 25% of that in developed countries, which is over 20 litres per person per year. The country will move in that direction as production barriers are reduced and purchasing power increases. "ABRAFATI (Brazilian Paint Manufacturer's Association) expects sales - which increased by 6% in 2004 - to continue growing during this year and the years to come," said Dilson Ferreira, head manager, during ABRAFATI 2005, the sector's main event in Latin America and one of the most important worldwide. "One of the things that will contribute towards fulfilling this goal is the manufacturer's increase in investment on ad campaigns and marketing, which will aid paint - especially house paints - to enter the list of the consumer's most wanted items," Ferreira added.

The favorable outlook for the second half of 2005 and the coming years is further strengthened by the positive performance of segments that are wide users of paint, and which have contributed to the increase in the sector's sales. An example of this is the Brazilian automotive industry, which had excellent results in 2004, and which, according to the association that encompasses car manufacturers, expects an increase in production of around 11% in 2005.

Other industry segments that use paint on their end products have been getting positive results on both their internal and external sales. This was the case with household appliances, and steel and wood furniture.

Furthermore, the huge potential of the civil construction sector increases the optimism with regards to the bright future of the paint industry. Over the past years, the government has increased incentives to this sector, encouraging the purchasing of real estate property through the facilitation of funding and the simplification of legislation.

"Nevertheless, we cannot afford to be overly optimistic, as there are risks that will have to be faced by the county as a whole, and especially by the paint industry. This year, we had a tough first half, which was hit by the continuous growth on interests rates and high tax levels. There is still a question mark hanging over the future price of oil on the international market, an important variable that directly reflects upon our costs. Having especially in mind the sales of the second half of the year when, traditionally, there is an increase in paint sales, we believe that this year our sales can increase around 2-3%. Our prediction for 2006 is that we will once again reach last year's growth levels," added Ferreira.

ABRAFATI's head manager highlights the fact that, from a technological development point of view, there are two significant factors that are already influencing and will continue to influence the paint industry. "The first is globalization, and the demand of international clients which, nowadays is higher for the automotive sector due to the arrival of new assembly lines to the country, which has an impact on related segments." The second has to do with environmental awareness. "This is not merely about complying with legislation, but about having a stance of increasing responsibility towards the environment. ABRAFATI has been highly involved in this area and has worked in conjunction with the Coatings Care Program in Brazil and with the main governmental agencies to improve legislation," Ferreira said.