Summary
• The acquisition of Crown Paints in an MBO has set the company on a path to growth.
• The environment will continue to influence the next generation of products with the changing environment, emissions and performance at the top of the list.
• Coatings are central to the development of best practice guidelines for the use of modified wood.

Another year in the coatings and finishings sector, another takeover. After last year’s acquisition of ICI by Akzo Nobel, a management team has taken over Crown Paints.

Crown, whose products include Sandtex exterior paints and the Sadolin wood protection range, has been taken out of the hands of Akzo Nobel in a multi-million pound deal funded by private equity house Endless LLP.

Graham Hallworth, chairman of the Crown management team, described the company’s return to independence as “very exciting”, with growth on the menu.

“It’s good news for Sandtex and Sadolin. We can focus on the marketing and promotion of our own brands and not have to worry about other timber brands,” he said. “Brand confusion has now gone and it’s easier to manage with the sole focus on Crown’s products.”

When asked if the new management team would safeguard Crown’s future in the current uncertain financial climate, he said “absolutely”.

“The buyout is well funded and the funding structure was designed with these market conditions in mind.”

However, ICI Paints marketing director Dr Steve Snaith said it “could be a big challenge” for some brands to maintain high standards in the face of the credit crunch.

“It is going to be interesting to see over the next couple of years, given the credit crunch, whether with the pressure on budgets, we will be able to maintain the quality ethos; or whether we will see people slip back into a lower price, lower quality scenario,” he said.

The economic downturn has been felt across the coatings sector, with two of Europe’s largest manufacturers’ depressed results symptomatic of the situation.

Denmark’s Dyrup Group has seen a decline in most of its key markets. Home-grown business is the hardest hit, down 12% in the first three quarters, with trade in France and Germany also down 7% and 3% respectively.

However, the developing Polish market was a shining light for the group, with year-to-date performance up 21% to DKr104m. This, it said, was down to the growing DIY market and European firms relocating their production facilities to eastern Europe.

German chemicals giant BASF, which has business interests in the wood coatings market, recorded operating profits of €1.5bn from sales of €15.7bn during the third quarter.

Operating profits were down 10% on a year ago, while sales were up 13%. Net profits were €758m, a 37.5% decrease on 2007.

BASF said although sales rose substantially in polymers for construction, architectural coatings and fibre bonding, price increases were not sufficient to make up for the increases in raw material costs.

Dr Snaith said these economic conditions will lead companies involved in the production of coatings and finishes on to new paths to find a competitive edge.

This will be predominantly driven by the environment, with specifiers and contractors moving away from solvent-based products, looking for the best life-cycle performance, altering the formulation of their products to match the UK’s changing weather and the increased role played by the Code for Sustainable Homes.

Moreover, Dr Snaith said the implementation of phase II of the Volatile Organic Compounds (VOCs) in Paints, Varnishes & Vehicle Refinishing Products Regulations 2005 will bring sustainability into sharp focus.

The regulations will see more stringent controls on the level of VOCs emitted by paints and finishes, with the British Coatings Federation (BCF) expecting trim and cladding paints and varnishes and woodstains to be hardest hit, due to the need to change the composition of solvent-borne products. This will lead to different application processes, drying times and conditions for use, BCF said, with some manufacturers already working towards products that achieve comparable qualities to existing products within the new VOC limits..

“There will need to be some significant reformulation work, but it is definitely going to be good for the environment,” said Dr Snaith. “This will inevitably have some effect on the product characteristics.”

Another area working to achieve best practice with coatings is the field of modified wood, with the Wood Protection Association (WPA) incorporating coatings manufacturers into its efforts to establish a set of guidelines for the use of the material.

WPA has set up a working group to develop these principles for the use of modified wood types, such as Accoya and Kurawood, with coatings specialists taking a key role in discussions. The WPA modified wood group plans to publish its guidelines shortly.