2020: Need I Say More?

Since Sherwin-Williams’ acquisition of Valspar in 2017, I have wondered if and when the company and its increasing sales numbers would move ahead of number-one PPG. With PCI’s estimate of Sherwin-Williams’ coatings sales at $14.69 billion in this issue's annual Global Top 10 ranking, 2020 was the year. Sherwin-Williams saw a 2.6% increase in sales for 2020 compared to 2019, while PPG reported a decline in net sales of 9%. Sherwin-Williams reported in its annual report that sales in its DIY segment recorded the largest increase, as consumers turned to home improvement projects during lockdowns.

The sales numbers for PPG also suggest that companies with a significant offering of architectural coatings serving the DIY market fared better than companies with more business in the protective and industrial segments. In 2020, PPG’s Performance Coatings segment, which includes its architectural coatings offering, fell by 6% compared to 2019, while its Industrial Coatings segment saw a drop of 12.5% in net sales. Other companies with a significant presence in the automotive coating segment, such as Axalta and BASF, also reported lower sales during 2020. In terms of the smaller North American companies listed in the PCI 25, results were mixed, with many companies holding steady despite challenges, a few posting declines in sales and a few posting sales increases.

Acquisition news kicked off 2021 with a bidding war between AkzoNobel and PPG for leading Nordic paint supplier Tikkurila, which reported approximately $680 million in revenue for 2020. PPG eventually outbid AkzoNobel and announced the finalized acquisition in June. The Tikkurila purchase, the purchase of Ennis-Flint at the end of 2020, and the purchase this year of Wörwag and VersaFlex have the potential to add upwards of $1.5 billion to PPG’s net sales.

While the change in position of the number-one company is interesting, 2020 was far from normal, and 2021 is promising its own challenges. COVID-19 continues to play a significant roll in the global economy, as some countries such as the United States are recovering, while the pandemic is ravaging other parts of the world including India and parts of South America. With the interconnected nature of modern business, the push to vaccinate the entire world plays a key role in the health of economies across the globe.

Another challenge facing businesses in 2021 is the apparent weaknesses in the global supply chain that the pandemic seems to have exposed. These supply chain issues and the shortages such problems either cause or exacerbate have had an impact on the coatings industry. For example, shortages in microchips impact the automotive industry, which in turn impacts automotive coatings suppliers. Another example is the steep rise in the price of lumber and the effect it has on downstream industries, including coatings.

Despite uncertainties, global demand for coatings appears to be on the upswing. According to research by CHEM Research GmbH of Mainz, Germany, global demand for coatings in the first quarter of 2021 increased by 14% compared to the first quarter of 2020, when the market contracted by 5%. Demand for decorative coatings was up 22% due to construction activities in China and the United States, and growth in the DIY business in both North America and Europe. The research also reports a gradual increase in demand for industrial coatings, with growth reported at 5%. The strongest growth was reported in China and India, with more moderate growth in Europe, and North America lagging a bit behind other regions. This data suggest that uncertainties aside, things are looking up for coatings manufacturers.

Since Sherwin-Williams’ acquisition of Valspar in 2017, I have wondered if and when the company and its increasing sales numbers would move ahead of number-one PPG. With PCI’s estimate of Sherwin-Williams’ coatings sales at $14.69 billion in this issue's annual Global Top 10 ranking, 2020 was the year. Sherwin-Williams saw a 2.6% increase in sales for 2020 compared to 2019, while PPG reported a decline in net sales of 9%. Sherwin-Williams reported in its annual report that sales in its DIY segment recorded the largest increase, as consumers turned to home improvement projects during lockdowns.

The sales numbers for PPG also suggest that companies with a significant offering of architectural coatings serving the DIY market fared better than companies with more business in the protective and industrial segments. In 2020, PPG’s Performance Coatings segment, which includes its architectural coatings offering, fell by 6% compared to 2019, while its Industrial Coatings segment saw a drop of 12.5% in net sales. Other companies with a significant presence in the automotive coating segment, such as Axalta and BASF, also reported lower sales during 2020. In terms of the smaller North American companies listed in the PCI 25, results were mixed, with many companies holding steady despite challenges, a few posting declines in sales and a few posting sales increases.

Acquisition news kicked off 2021 with a bidding war between AkzoNobel and PPG for leading Nordic paint supplier Tikkurila, which reported approximately $680 million in revenue for 2020. PPG eventually outbid AkzoNobel and announced the finalized acquisition in June. The Tikkurila purchase, the purchase of Ennis-Flint at the end of 2020, and the purchase this year of Wörwag and VersaFlex have the potential to add upwards of $1.5 billion to PPG’s net sales.

While the change in position of the number-one company is interesting, 2020 was far from normal, and 2021 is promising its own challenges. COVID-19 continues to play a significant roll in the global economy, as some countries such as the United States are recovering, while the pandemic is ravaging other parts of the world including India and parts of South America. With the interconnected nature of modern business, the push to vaccinate the entire world plays a key role in the health of economies across the globe.

Another challenge facing businesses in 2021 is the apparent weaknesses in the global supply chain that the pandemic seems to have exposed. These supply chain issues and the shortages such problems either cause or exacerbate have had an impact on the coatings industry. For example, shortages in microchips impact the automotive industry, which in turn impacts automotive coatings suppliers. Another example is the steep rise in the price of lumber and the effect it has on downstream industries, including coatings.

Despite uncertainties, global demand for coatings appears to be on the upswing. According to research by CHEM Research GmbH of Mainz, Germany, global demand for coatings in the first quarter of 2021 increased by 14% compared to the first quarter of 2020, when the market contracted by 5%. Demand for decorative coatings was up 22% due to construction activities in China and the United States, and growth in the DIY business in both North America and Europe. The research also reports a gradual increase in demand for industrial coatings, with growth reported at 5%. The strongest growth was reported in China and India, with more moderate growth in Europe, and North America lagging a bit behind other regions. This data suggest that uncertainties aside, things are looking up for coatings manufacturers.