This issue of PCI features our article outlining the top 10 global and top 25 North American coatings manufacturers, ranked according to 2018 coatings sales. The global top 10 list remains the same, with just a few companies moving spots in the ranking, and PPG and Sherwin-Williams retaining their positions in the top two places. Most of the global companies included in the list reported increased sales in 2018, with the exception of AkzoNobel, which was able to successfully separate its Specialty Chemicals business in 2018, the first step in the company’s plan to focus on its coatings business, with the goal of delivering 15% return on sales by 2020.
A recurring theme in 2018 annual reports of the top 25 North American manufacturers was the challenge presented by increasing raw material costs. In PPG’s annual report, Michael H. McGarry, Chairman and Chief Executive Officer, noted that PPG was able to deliver growth “despite significant and persistent raw material and logistics cost inflation.” Axalta CEO and President Robert Bryant mentioned headwinds faced by the company in 2018 were higher raw material costs, a slowdown in coatings markets – including China, and increased global competition. In his letter to shareholders, Sherwin-Williams Chairman, President and Chief Executive Officer John G. Morikis listed persistent raw material inflation, tariffs, global trade uncertainty and interest rate hikes as challenges the company faced in 2018. Despite rising raw material costs and other factors, these three companies all reported relatively healthy organic growth in 2018.
Consistent growth in sales for the top coatings manufacturers lines up with the latest market studies. A report recently released by P&S Intelligence, Future in Paints and Coatings Market, projects coatings industry sales will reach $262.5 billion by 2023, with the automotive, electronics and construction industries driving demand. The report expects the APAC region to experience the strongest growth, with a projected compound annual growth rate in terms of value of 8.3%. In what has become the trend in recent years, expansion in China and India is expected to drive growth. The study predicts continued industry focus in environment-friendly innovations, with the highest growth predicted in the UV coatings sector.
In terms of mergers and acquisitions, 2018 was a relatively calm year for our industry. PPG bought four companies in 2018: an online provider of residential painting services, an architectural coatings wholesaler in the Netherlands, a distributor of professional paint brands, also in the Netherlands, and a manufacturer of specialized automotive refinish products in the United States. Sherwin-Williams, still working on the integration of Valspar, the largest acquisition in the company’s history, announced no acquisitions in 2018. AkzoNobel had acquisitions in Spain, the U.K., Romania and Malaysia in 2018, as well as obtaining full ownership of a joint venture in China. Industry acquisitions in the first half of 2019 appear to be on the same pace as 2018, with PPG buying Whitford Worldwide Co., a manufacturer of low-friction and nonstick coatings for industrial applications and consumer products, in March of this year, and Nippon announcing two planned acquisitions, one in Turkey, and one in Australia and New Zealand. While there is activity in the sector, most of the M&A activity in the industry occurred outside of the United States and has not impacted the top-25 list.
This year, I would like to welcome a few U.S. companies to the PCI 25. I am always happy to include additional companies to the list, as it shows that while the industry has experienced significant consolidation in the past 20 years, we still have vibrant, independent and privately owned coatings manufacturers in North America. New companies in the PCI 25 include: APV Engineered Coatings, an industrial coatings manufacturer headquartered in Akron, Ohio; NAPCO Ltd., a supplier of refinishing products for the kitchen and bath located in Skokie, Illinois; and Induron Coatings Inc., a protective coatings provider in Birmingham, Alabama.