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John Pagni, in Helsinki, and Monika Hanley, in Riga, report on how the Nordic paint industry is maintaining a sustainability push, despite inflation and supply chain challenges
As the Nordic paint and coatings sector moves towards increasing sustainability, reducing its carbon and other emissions, including volatile organic compounds (VOCs), the region’s market is facing significant challenges. Inflation of prices for finished products is dampening demand – annual inflation in Sweden in December was 12.3%; Norway 5.9%; Denmark 7.7%; and Finland 9.1%. These price rises have especially hit the cost of coatings raw materials – a key issue for a region with two global paint manufacturing giants: Norway’s Jotun and Denmark’s Hempel. This has come on top of disruption to the global supply chain caused by COVID-19, shifting restrictions in chemical manufacturing hub China and neighbouring Russia’s bloody and destructive invasion of Ukraine. These have all left Nordic paint and coatings companies with higher costs.
“High raw material prices will continue to put pressure on our margins. Therefore, we must continue with price increases and cost control”Morten For, Jotun’s CEO and President, speaking May 2022
The Russian invasion has impacted more than the supply chain – Nordic coatings companies have been selling off shares and transferring ownership of facilities in Russia. Hempel ceased Russian operations in April 2022, closing its factory in Ulyanovsk, although some administrative staff remain while the company attempts to sell the facility, which has been tough due to interpretations of European Union (EU) sanctions. “However, with the sanctions package issued by the EU just before the end of 2022, it is now possible for companies to apply for a special permit to divest Russian assets without breaking the sanctions,” Hempel’s spokesperson, Joanna Ashmead, told PPCJ.
She said the company planned to divest its Russian activities as soon as possible but could not say exactly when the process will be concluded – probably during the first quarter of 2023.
In October, Hempel appointed a new CEO Michael Hansen, who has said a considerable part of the company’s future growth will rely on mergers and acquisitions (M&A), such as its purchase of Omani’s Khimji Ramdas’ coating division in October 2022, along with their Double Impact strategy, doubling revenue through both organic growth and M&As by 2025, when the company aims to become carbon neutral. (1)
Future purchases reflect long-standing Hempel policy, with 2021 acquisitions costing it €500M. With these purchases, Hempel expects to double its revenue to €3bn by 2025, while increasing its sustainability: “Our targets are to halve greenhouse gas emissions in our entire value chain by 2030 and reduce carbon emissions from our own operations by 90% in 2026,” said Hempel’s Ashmead.
As for Norway’s Jotun, it also left Russia (in August 2022) due to sanctions challenging its Russian operations. While outside the EU, Norway has been implementing EU-backed sanctions as the invasion by January 23 (2023) had killed 7,068 civilians, say UN figures. Russian building materials company Atomstroykomplex has taken over Jotun’s St Petersburg facility, while retaining the former Jotun employees.
While Jotun CEO Morten Fon accepted the war and COVID has inflated raw material costs, he stressed there had been a recovery in the marine new-build market, as well as increasing sales for ship maintenance products, including protective coatings and decorative paints.
Despite the global problems, Jotun’s operating revenue increased 22% to Norwegian Krone NOK18.2bn over the first eight months of 2022, (2), with operating income in Q2 increasing by 19%. Jotun’s largest sales segment is decorative paints (39%) followed by protective paints (28%) and marine coatings (24%).
The maritime segment has helped Jotun to boost its sustainability, notably by tapping a global antifouling paint and coatings market estimated by market researcher the IMARC Group to reach €11.6bn by 2027 (3). Jotun has developed antifoulants reducing ship drag and, hence, fuel consumption along with CO2 emissions. Overall, the company plans to reduce its carbon footprint 50% by 2030.
Sweden also has key coatings manufacturers, with its bio-tech major I-Tech AB pushing advances in marine paint and anti-fouling technology utilising a medetomidine molecule and its use in anti-fouling to make the coating Selektope, which can reduce biocide use.
There is potential for boosting Nordic sustainable coating sales in the decorative market too, said New York-based Persistence Market Research, specifically floor paints, largely due to an increase in demand and urbanisation in Norway and Sweden. (4)
Norway’s regulations for low-carbon buildings and encouraging environment-friendly paints are expected to toughen at the same time, said Persistence. Also demand for concrete floor coverings is increasing through new industrial projects and increasing renovations, notably in Sweden, said the report. The Nordic floor paints market is predicted to reach a value of €95.6M by 2031 (5).
In Finland, paint and coating major Teknos, with a 2021 turnover of €480M, exited Russia in March 2022, and final shares were sold in July. Its production facility in St. Petersburg, producing water- and solvent-based coatings for woodworking and metal industries, is under new ownership, with Teknos not disclosing the new owner. “Due to the evolution of the situation and circumstances, we do not see any possibility to conduct our business in this environment,” remarked CEO and owner Paula Salastie. In the meantime, Teknos has also been boosting its sustainability profile, rolling out its Biora Air and Biora Air Ceiling lines, which are water-based acrylates for interior spaces that transform aldehydes into harmless compounds, purifying ambient air.
Finland’s exposure to the Ukraine war is particularly high, given its 1,340km border with invader Russia and past prominent levels of trade with its eastern neighbour. As a result, Finnish paint major Tikkurila has not cut links with Russia altogether – minimal production continues at Russia-based plants to pay local staff, selling consumer brands Teks and Finncolor, with any net profits donated to refugee charities.
Whether it quits Russia altogether will be a decision for USA-based PPG, which bought the Tikkurila Group for €1.1bn in June 2021. The reasoning behind the move was simple: both companies complement each other geographically and in the decorative sector: “Tikkurila has very strong decorative brands and product offerings in northern and eastern European countries where the PPG [presence] was minimal,” said Meri Vainikka, Tikkurila’s CEO. She said PPG plans to expand Tikkurila’s range of products.
In keeping with demand for environmentally friendly products, Tikkurila launched its first partly bio-based products Optiva Nature in mid-2022, with its waterborne decorative paints output rising to 90% of total output.
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1 – https://www.hempel.com/-/media/Files/Global/PDF/News/12-01-2021-New-strategy-sets-Hempel.pd
2 – https://mb.cision.com/Public/19690/3644358/b04f0176a69d5987.pdf
3 – https://www.researchandmarkets.com/reports/5642460/antifouling-paints-and-coatings-market-global?utm_source=GNOM&utm_medium=PressRelease&utm_code=7bld47&utm_campaign=1745514+-+%2412.6+Billion+Worldwide+Antifouling+Paints+and+Coatings+Industry+to+2027+-+Featuring+Akzo+Nobel%2c+BASF%2c+Boero+Yacht+Coatings+and+Hempel+Among+Others&utm_exec=jamu273prd
4 – https://www.persistencemarketresearch.com/market-research/nordic-floor-paints-market.asp
5 – https://www.bloomberg.com/press-releases/2021-08-26/sales-of-nordic-floor-paints-to-reach-us-104-mn-by-2031-pmr