Seeing Beyond the Numbers
This issue of PCI features our annual ranking of the top 10 global and top 25 North American coatings manufacturers. The biggest news in the industry is the March announcement of an agreement wherein Sherwin-Williams will buy Valspar in a deal valued at more than $9 billion. The acquisition will give Sherwin-Williams broader access to the DIY market, expand its global scope, and add new capabilities in the packaging and coil segments. Last year, we watched as PPG moved from the second-largest coatings company in the world to the largest, due in large part to acquisitions. With this latest deal, Sherwin-Williams joins the battle for the top spot.
The strength of the dollar was a major theme found in financial reports of the top companies. While a strong U.S. dollar makes buying foreign goods more affordable, it has a negative impact on earnings for companies that have substantial foreign operations. These companies see lower net profits when translating earnings in foreign currencies back to U.S. dollars.
The impact of currency exchange is seen in the case of AkzoNobel’s numbers. The PCIlisting ranks companies in U.S. dollars. AkzoNobel’s coatings sales for 2015 were up half a billion euros from 2014 (?10 billion in 2015 vs. ?9.5 billion in 2014). When translated into U.S. dollars, the company’s earnings fall by half a billion ($11 billion in 2015 vs. $11.5 billion in 2014).
Many non-U.S. earnings are reinvested as non-U.S. currency, making the currency rate less of a consideration. It might be more productive to look at demand trends in the industry as an indicator of where we are heading. According to a newly released report by industry research firm The Freedonia Group, global demand for coatings is projected to rise 3.7% per year, reaching 57.7 million metric tons in 2020, with economic growth in the Asia-Pacific region as a main driver.
Coatings demand is impacted as personal incomes rise in emerging economies and major economies shift focus, such as the Chinese shift from infrastructure spending to consumer spending, and a shift in the West for more sustainable technologies. As we consider where the industry is headed, these are the trends we should look at.
Our Global Top 10 and PCI 25 ranking can be found on page 22 of this issue. Please contact me at parkerpcimag@gmail.com if your company has been inadvertently omitted.