paint industry analysis

Paint Industry Analysis - January 12th, 2009 This an in-depth overview of paint sector in India :Industrial AnalysisThe size of the paints market in India is estimated at Rs 110 bn, with the contribution of the organised and unorganised segments in the ratio of 65:35. Reduction of excise duties over the last few years, from 40% to the present level of 14%, has helped create a level playing field between the unorganised and the organised segments, as the former is not subject to excise duty. As the unorganised sector loses its competitive edge, it is also losing market share to the organised sector players.In view of the low per capita annual consumption of paints in India (0.5 kg, compared to 4 kg in South East Asian countries, 22 kg in developed countries and a global average of 15 kg), the domestic paints industry has tremendous potential. The paints industry is working-capital intensive, rather than fixed-asset intensive. As in consumer non-durables, distribution strengths and brand building are of paramount importance.The Indian paint industry witnessed robust growth in turnover on the back of increased volumes during the festival season. Both decorative and industrial segments performed well during the quarter. Moreover, the margins received a boost with the domestic currency continuing to rise against the greenback, causing a substantial reduction in cost of imported inputs. This in turn induced some of the players in the industry to reduce the prices of select products to pass on the benefit to the customers. Further, players are going in for capacity expansions to reap the benefits of the rising demand for paintsSegments:On product lines, paints can be differentiated into decorative or architectural paints and industrial paints. While the former caters to the housing sector, the automotive segment is a major consumer of the latter. Decorative paints can further be classified into premium, medium and distemper segments. Premium decorative paints are acrylic emulsions used mostly in the metros. The medium range consists of enamels, popular in smaller cities and towns. Distempers are economy products demanded in the suburban and rural markets. Nearly 20 per cent of all decorative paints sold in India are distempers and it is here that the unorganised sector has dominance. Industrial paints include powder coatings, high performance coating and automotive and marine paints. But two-thirds of the industrial paints produced in the country are automotive paints. Decorative and industrial paints are the segments within the sector, in a 70:30 proportion. Brand equity, a wide range of shades, distribution strength and efficient working capital management are key success factors in the decorative paints segment. A strong distribution network acts as an entry barrier. Within the decorative segment, enamel is the largest sub-segment, accounting for over 50%, followed by wall finishes, primers and wood finishes. The season for decorative paints is from October to March, a period characterised by festivals like Diwali, and the summer, when painting is normally carried out.The industrial segment pertains mainly to automobiles. In this segment, technological competence, product range and customised solutions are of utmost importance. Technological strength is another entry barrier. The slowdown in the automobile sector has affected the overall growth of the industrial segment, as the former contributes around 50% of the latter's revenues.Other sub-segments are marine paints, powder coatings for white goods like refrigerators and washing machines, and industrial coatings. Within the paints sector, the proportion of the industrial paints segment is likely to increase in the next few years and the ratio is likely to become 50:50.The demand for decorative paints is highly price-sensitive and also cyclical. Monsoon is a

slack season while the peak business period is Diwali festival time, when most people repaint their houses. The industrial paints segment, on the other hand, is a high volume-low margin business. In the decorative segment, it is the distribution network that counts while in the industrial segment the deciding factor are technological superiority and tie-up with automobile manufacturers for assured business.The share of industrial paints in the total paint consumption of the nation is very low compared to global standards. It accounts for 30 per cent of the paint market with 70 per cent of paints sold in India for decorative purposes. In most developed countries, the ratio of decorative paints vis-Ã -vis industrial paints is around 50:50. But, with the decorative segment bottoming out, companies are increasingly focussing on industrial paints. The future for industrial paints is bright. In the next few years, its share would go up to 50 per cent, in line with the global trend.Decorative Sector Composition ( to be check for accuracy of figures)Enamels 50% Distemper 19% Emulsions 17% Exterior Coatings 12% Wood Finishes 2% Decorative Sector Features Enamels Steady growth. These are oil based paints which are widely used for painting on all surfaces including walls, wood and metals. They also find application in painting of hoardings and signboards and repainting of commercial vehicles.Emulsions Shift from distemper and enamels to emulsions. High growth area. These are premium qualtity oil based wall paints.Distempers High growth in low priced low quality distempers as consumers are upgrading from limewash. These are water based wall paints priced at a much lower range than the above two. Exteriors Exterior emulsion fastest growing segment in the Indin Paint market. Industrial Sector Composition ( to be check for accuracy of figures)Automotive Paints - 50% High Performance Coating - 30% Powder Coating - 10% Coil Coating - 5% Marine Paints - 5% Automotive Sector High growth sector with a number of new entrants like Mercedes Benz, Mitsubishi, Daewoo, Hyundai, Honda, Fiat, General Motors, Ford. However, recently there is some slackness in Auto demands. Two wheeler market booming due to demand from large Indian middle class. Goodlass and Asian Paints are the leading OEM players and ICI is the leading player in the replacement marketPowder Coatings Increase growth due to increased sales of white goods and auto ancillaries. Berger and Goodlass lead in this solid powder coating segment used for decoration and protection of white goods, electronic equipment and auto components.High Performance Coatings Steady growth due to increase investments in refinery segment and power sectors, particularly Thermal and Nuclear. Coil Coatings:Solvent based paints for sheets and coils. ICI and Asian Paints lead this segment. Marine: Shalimar and Bombay Paints are the major players in these anti-corrosive,

underwater paints used for ships and containers.Chemicals: These high performance paints are used in fertilisers, petrochemicals etc. for prevention of corrosion.APIL dominates the decorative segment with a 38 per cent market share. The company has more than 15,000 retail outlets and its brands Tractor, Apcolite, Utsav, Apex and Ace are entrenched in the market. GNPL, the number-two in the decorative segment, with a 14 per cent market share too, has now increased its distribution network to 10,700 outlets to compete with APIL effectively. Berger and ICI have 9 per cent and 8 per cent shares respectively in this segment followed by J&N and Shalimar with 1 and 6 per cent shares.GNPL dominates the industrial paints segment with 41 per cent market share. It has a lion's share of 70 per cent in the OEM passenger car segment, 40 per cent share of two wheeler OEM market and 20 per cent of commercial vehicle OEM market. It supplies 70 per cent of the paint requirement of Maruti, India's largest passenger car manufacturer, besides supplying to other customers like Telco, Toyota, Hindustan Motors, Hero Honda, TVS-Suzuki, Mahindra & Mahindra, Ashok Leyland, Ford India, PAL Peugeot and Bajaj Auto. GNPL also controls 20 per cent of the consumer durables segment with clients like Whirlpool and Godrej GE. The company is also venturing into new areas like painting of plastic, coil coatings and cans. APIL, the leader in decorative paints, ranks a poor second after Goodlass Nerolac in the industrial segment with a 15 per cent market share. But with its joint venture Asian-PPG Industries, the company is aggressively targeting the automobile sector. It has now emerged as a 100 per cent OEM supplier to Daewoo, Hyundai, Ford and General Motors and is all set to ride on the automobile boom. Berger and ICI are the other players in the sector with 10 per cent and 9 per cent shares respectively. Shalimar too, has an 8 per cent share.

Raw Material scenario:The paint industry is raw material-intensive, in terms of value and quantity of raw materials used. Raw material costs account for around 70% of total production costs. Imports constitute around 30% of the raw material requirements. The most critical raw materials used are titanium dioxide (TD) (rutile and anatase grades), phthalic anhydride (PAN) and pentaerithrithol (PENTA). Some other raw materials like castor oil, soyabean oil, linseed oil and mineral turpentine are also used. Increasing prices of raw materials, on the one hand, and the inability to pass on the price increases from recession and competitive pressure, on the other, are major areas of concern. Of the 300 raw materials (30% petro-based derivatives), nearly half of them are imported petroleum products. Thus, any deficit in global oil reserves affects the bottomline of the players.

The paint industry volume in India has been growing at 15% per annum for quite some years now. As far as the future growth prospects are concerned, the industry is expected to grow at 12-13% annually over the next five years. FY11 was a challenging year for the industry as a whole due to subdued demand across key sectors and rising inflation.

The unorganised sector controls around 35% of the paint market, with the organised sector accounting for the balance. In the unorganised segment, there are about 2,000 units having small and medium sized paints manufacturing plants. Top organised players include Asian Paints, Kansai Nerolac, Berger Paints and ICI.

Demand for paints comes from two broad categories:

Decoratives: Major segments in decoratives include exterior wall paints, interior wall paints, wood finishes and enamel and ancillary products such as primers, putties etc. Decorative paints account for over 72% of the overall paint market in India. Asian Paints is the market leader in this segment. Demand for decorative paints arises from household painting, architectural and other display purposes. Demand in the festive season (September-December) is significant, as compared to other periods. This segment is price sensitive and is a higher margin business as compared to industrial segment.

Industrial: Three main segments of the industrial sector include automotive coatings, powder coatings and protective coatings. Kansai Nerolac is the market leader in this segment. User industries for industrial paints include automobiles engineering and consumer durables. The industrial paints segment is far more technology intensive than the decorative segment.

The paints sector is raw material intensive, with over 300 raw materials (30% petro-based derivatives) involved in the manufacturing process. Since most of the raw materials are petroleum based, the industry benefits from softening crude prices.

Key Points

Supply Supply exceeds demand in both the decorative as well as the industrial paints segments. Industry is fragmented.

Demand Demand for decorative paints depends on the housing sector and good monsoons. Industrial paint demand is linked to user industries like auto, engineering and consumer durables.

Barriers to entry Brand, distribution network, working capital efficiency and technology play a crucial role.

Bargaining power of suppliers

Price increase constrained with the presence of the unorganised sector for the decorative segment. Sophisticated buyers of industrial paints also limit the bargaining power of suppliers. It is therefore that margins are better in the decorative segment.

Bargaining power of customers

High due to availability of wide choice.

Competition In both categories, companies in the organised sector focus on brand building. Higher pricing through product differentiation is also followed as a competitive strategy.

Financial Year '11

FY11 was a mixed bag for the paint companies. While all the 3 players viz. Asian Paints, Kansai Nerolac and Berger Paints reported strong growth in sales, operating margins came under severe pressure due to raw material price inflation. Top-line growth was boosted by strong demand from the decorative paints segment. Nonetheless, the demand environment in the industrial segment continues to remain challenging due to rising interest rates.

Performance on the margins front was a big disappointment. Rising prices of crude oil and titanium dioxide increased the overall expenditure thereby impacting profitability growth. However, companies are undertaking a gradual and calibrated price increase to shield margins. Nonetheless, as a complete pass on of raw material price increase is not possible in the industrial segment, the blended margins continue to suffer.

All the key players are in an expansion phase. Asian Paints' plant in Khandala, Maharashtra is under construction and is expected to be commissioned by 4QFY13. Kansai Nerolac's capacity expansion plans at Jainpur and Hosur culminated during the year. Berger Paints has also undertaken capacity expansion for its plants located in Andhra Pradesh and Goa. Further, it is also contemplating to set up a manufacturing facility in Pune, Maharashtra.

Prospects The market for paints in India is expected to grow at 1.5 times to 2 times GDP in the next

five years. With GDP growth expected to be over 7% levels, the top three players are likely to clock above industry growth rates, especially given the fact that protection that was available to unorganised players has come down significantly.

Decorative paints segment is expected to witness higher growth going forward. The fiscal incentives given by the government to the housing sector have benefited the housing sector immensely. This will benefit key players in the long term.

Although the demand for industrial paints is lukewarm it is expected to increase going forward. This is on account of increasing investments in infrastructure. Domestic and global auto majors have long term plans for the Indian market, which augur well for automotive paint manufacturers like Kansai Nerolac and Asian-PPG. Increased industrial paint demand, especially powder coatings and high performance coatings will also propel topline growth of paint majors in the medium term.

Sector analysis: Berger Paints most favoured stock among paint companies

Jwalit Vyas, ET Bureau Feb 20, 2012, 12.59AM IST

Tags:

Paint industry | paint companies | investor's guide | Berger Paints (India) Ltd.

The last two quarters were not so good for paint companies. An extended monsoon and a relatively early Diwali resulted in lower painting activity thus reducing the offtake of paint. Besides, there was a slight erosion in margins due to higher input prices. This led to a correction in the stock prices of paint companies providing an opportunity for long-term investors to enter.

But this drop in the sales and earnings seems to be temporary. And the delay in painting activities will lead to a spillover in the coming quarters and will reflect in the numbers. The Indian paint industry is growing at a double digit rate for several years now, unlike in the western countries and Japan where the growth has stagnated. And it is expected to continue growing at around 15% as historically it has grown at an average of 1.8 times the GDP rate.

The paint industry can be divided into decorative (60%) and industrial( 40%). Decorative demand is mainly driven by fresh construction (40%) and repainting (60%). The industry demand is mainly from the auto (about 75%). In the listed space there are mainly three paint companies, Asian Paints, Berger Paints India and Kansai Nerolac. Out of these Berger Paints looks the most attractive, given the high growth potenital for earnings and low valuation.

ASIAN PAINTS

Asian Paints dominates the Indian paint industry with a market share of 53%. Also, its strong brand equity allows the company to have higher margins. The company has outpaced industry growth in last ten years. But the company may not be able to maintain its growth momentum due to its relatively recent foray into international markets which is likely to drag down growth.

International business contributes around 19% of its total sales which is significant. And the current high P/E valuation of 34 doesn't leave much room for an upside in the company's stock price which is currently trading at Rs 3,040.

KANSAI NEROLAC

The company has around 18% market share. Around 45% of its revenue comes from the industry segment, mainly auto industry and it is the leader in this segment. Domestic passenger vehicle sales weakened in December 2011 quarter on a y-o-y basis, leading to rise in inventory at Kansai. There will be slow down in demand for paint due to this in the coming quarters and the company's sales from this segment will taper in future.

This will be partially offset by the decorative segment in which the company has been increasing its focus given higher margins in this segment and steady demand. At the current market price of Rs 815, the company's stock is trading at a P/E multiple of 22. Considering slower growth due to exposure to non-decorative industrial segment, this valuation is not so cheap.

BERGER PAINTS INDIA

Berger is a mid and mass segment player with a 20% market share. Since a high proportion of its sales come from the decorative business in the mass segment, Berger's earnings were impacted the most in the December quarter because of the extended monsoon and earlier Diwali.

Its earnings grew only by 12% as compared to 19% in the first half of the year. The company should see demand improve for its products in the coming quarters due to the delayed painting activity. Its P/E of 24 is cheap when compared to its bigger peer Asian Paints which is trades at 34.

Logo

Parent Company Asian Paints

Category Paint Industry

Sector Industrial Products and Chemicals

Tagline/ Slogan Merawala blue; Har ghar kuch kehta hai ki ;Ask Aparna

USP India’s biggest brand with widest reach.

STP

SegmentCaters to all segments with brand Royale aimed at premium segment and rest at mass market.

Target Group

Home-owners, industries-hotels, education, healthcare, agro & manufacturing equipment and automobile etc. infrastructure, govt. buildings

Positioning A complete array of products to cater to everyone.

SWOT Analysis

Strength

1. The largest paint company in India and third largest company in Asia2. They have over 50% of market share and are clear leaders decorative paints and are strong competitors to Kansai Nerolac to be leaders in Industrial paints and coatings.3. They operate in 17 countries and have 24 manufacturing facilities providing service to 65 countries all over the world.4. Asian paints has strong international presence with its four 4 subsidiaries; Berger International Limited, Apco Coatings, SCIB Paints and Taubmans.5. Most renowned brand in Indian Paint Industry & its strong customer focus and innovative-spirit has made it market leader since 1968.6. Superior technologies deployed to achieve maintain the competitive edge for eg. Supply chain management system that integrates plants, regional distribution centers, outside processing centers etc. hence they have strongest system with7. They have maintained their brand name and increased awareness by unique ways of and roping in celebrities like Saif Ali Khan.8. The company has strong financials.

Weakness 1. Limited market share in industrial paints segment with Kansai Nerolac and Akzonobel giving stiff competition.2.In decorative paints Industry Customer tastes and perceptions change very fast and products may become obsolete with change

in trends, hence production planning and inventory problem.

Opportunity

1. Big an international standard paint company it should look for more opportunities abroad2. There is a good scope for growth especially in industrial paints category3. Needs to have more focus on Automobile industry in industrial paints segment4. Competitors are going for Hi-tech process and Asian paints with good financial and intellectual capital can go for hi-tech.

Threats

1. Growth prone to slowdown effects2.Stringent Government rules and regulations regarding the quality of products and manufacturing facilities as Environment policies are given more emphasis3.Raw material scarcity and volatlility in prices.

Competition

Competitors

1.Jenson & Nicolson India Limited.2. Kansai Nerolac3.Akzonobel4. Sherwin-Williams Co.5. Nippon Paints Co.6. PPG Industries Inc.

Asian Paints Limited (500820) - Financial and Strategic SWOT Analysis Review

Summary

Asian Paints Limited (APL) is involved in the manufacture and sale of industrial and decorative paints. The company’s product portfolio includes ancillaries, automotive and decorative paints. APL owns and operates 23 paint manufacturing facilities. The company has two operating segments Paints and Other segment. APL, along with its subsidiaries, operates internationally in 17 countries across South Asia, South East Asia, South Pacific, Middle East and Caribbean region through its five corporate brands including Asian Paints, Berger International, SCIB Paints, Apco Coatings and Taubmans. The company has five direct subsidiaries, namely, Asian Paints (Nepal) Pvt. Limited, Asian Paints Industrial Coatings Limited, Asian Paints (International) Limited, Multifacet Infrastructure (India) Limited and Maxbhumi Developers Limited. The company is headquartered at Mumbai in Maharashtra, India.

This comprehensive SWOT profile of Asian Paints Limited provides you an in-depth strategic SWOT analysis of the company’s businesses and operations. The profile has been compiled by Global Data to bring to you a clear and an unbiased view of the company’s key strengths and weaknesses and the potential opportunities and threats. The profile helps you formulate strategies that augment your business by enabling you to understand your partners, customers and competitors better.

The profile contains critical company information including:Business description - A detailed description of the company’s operations and business divisions.Corporate strategy - Analyst’s summarization of the company’s business strategy.

SWOT Analysis - A detailed analysis of the company’s strengths, weakness, opportunities and threats.Company history - Progression of key events associated with the company.Major products and services - A list of major products, services and brands of the company.Key competitors - A list of key competitors to the company.Key employees - A list of the key executives of the company.Executive biographies - A brief summary of the executives’ employment history.Key operational heads - A list of personnel heading key departments/functions.Important locations and subsidiaries - A list and contact details of key locations and subsidiaries of the company.Detailed financial ratios for the past five years - The latest financial ratios derived from the annual financial statements published by the company with 5 years history.Interim ratios for the last five interim periods - The latest financial ratios derived from the quarterly/semi-annual financial statements published by the company for 5 interims history.Note: Some sections may be missing if data is unavailable for the company

Synopsis

World Market Intelligence's 'Asian Paints Limited: Company Profile and SWOT Analysis' contains in depth information and data about the company and its operations. The profile contains a company overview, business description, financial ratios, competitor benchmarking data, SWOT analysis, key facts, key employees, as well as information on products and services.

Summary

This SWOT analysis and company profile is a crucial resource for industry executives and anyone looking to gain a better understanding of the company's business.

WMI's 'Asian Paints Limited: Company Profile and SWOT Analysis' report utilizes a wide range of primary and secondary sources, which are analyzed and presented in a consistent and easily accessible format.

WMI strictly follows a standardized research methodology to ensure high levels of data quality and these characteristics guarantee a unique report.

Scope

Examines and identifies key information and issues about 'Asian Paints Limited' for business intelligence requirements

Studies and presents the company's strengths, weaknesses, opportunities (growth potential) and threats (competition). Strategic and operational business information is objectively reported

Provides analysis on financial ratios along with a competitor benchmarking section The profile also contains information on business operations, company history, major

products and services, prospects, key employees

Reasons To Buy

Quickly enhance your understanding of the company Gain insight into the marketplace and a better understanding of internal and external

factors which could impact the industry Recognize potential partnerships and suppliers Obtain yearly profitability figures

Key HighlightsAsian Paints along with its subsidiaries manufactures and sells industrial and decorative coatings. The company's product portfolio includes ancillaries, automotive and decorative paints. The Company, along with its subsidiaries, operates in 17 countries; and servicing consumers in 65 countries through Berger International, SCIB Paints, Apco Coatings and Taubmans. The company manages 23 paint manufacturing facilities across key locations in India that include: Maharashtra, Gujarat, Andhra Pradesh, Uttar Pradesh, Tamil Nadu and Haryana. The company offers a wide range of ancillary products such as primers, fillers stainers, etc. The product range for ancillaries includes Asian Paints Decoprime Wall Primer WT, Asian Paints Decoprime Wall Primer ST, Asian Paints Acrylic Wall Putty, Asian Paints

Exterior Wall Putty, Asian Paints Wood Primer, Asian Paints Exterior Wall Primer etc. The company is headquartered in Mumbai, in India.

Key benefits of buying this profile include:You get detailed information about the company and its operations to identify potential customers and suppliers.The profile analyzes the company’s business structure, operations, major products and services, prospects, locations and subsidiaries, key executives and their biographies and key competitors.

Understand and respond to your competitors’ business structure and strategies, and capitalize on their weaknesses. Stay up to date on the major developments affecting the company.The company’s core strengths and weaknesses and areas of development or decline are analyzed and presented in the profile objectively. Recent developments in the company covered in the profile help you track important events.

Equip yourself with information that enables you to sharpen your strategies and transform your operations profitably.Opportunities that the company can explore and exploit are sized up and its growth potential assessed in the profile. Competitive and/or technological threats are highlighted.

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Gain key insights into the company for academic or business research.Key elements such as SWOT analysis, corporate strategy and financial ratios and charts are incorporated in the profile to assist your academic or business research needs.

Asian Paints contributors

Asian Paints is the leader in the Indian paint industry. It has an overall market share of around 30% and a 54% market share in the decorative paint segment. The company, through a 50:50 joint venture with PPG Industries, US, also has presence in the automotive paints segment. The company has significant global presence through acquisitions, which are being restructured. The management of the company is acclaimed for consistently outperforming industry and its peers in the last decade. Being well focused on its core business of paints it has posted a CAGR of 19% and 22% over the last five years in topline and the bottomline respectively.

For FY09, revenues on a consolidated basis grew by 24% YoY. While the company reported a robust performance in 1HFY09, things took a turn for the worse in 3QFY09, wherein revenues and profits fell sharply. However, demand conditions looked up in 4QFY09, enabling the company to post a strong growth in topline for the full year. The international business grew by 29% led by the Middle East and South Asia operations. The operating margins shrunk from 15% in FY08 to 12% in FY09, thereby leading to a decline in net profits by 3% YoY.

The company’s capex plans are on track with the first phase of Rohtak plant expected to be commissioned by April 2010. Further, the company is also looking to acquire land for its seventh plant in Western Maharashtra. The decorative business is expected to do well and Asian Paints would continue to lay emphasis on driving topline growth going forward. As far as the international business is concerned, focus would be on increasing the market share through initiatives such as new product launches, dealer tinting systems and increasing operating efficiency. However, in the medium term atleast, the management has opined that the slowdown in the economy is likely to take its toll on demand conditions.

Consolidated results

(Rs m) 4QFY07 4QFY08 Change FY07 FY08 Change

Net sales 9,590 11,330 18.20% 36,700 44,043 20.00%

Expenditure 8,420 9,773 16.10% 31,919 37,461 17.40%

Operating profit (EBIDTA) 1,170 1,557 33.10% 4,781 6,582 37.70%

Operating profit margin (%) 12.20% 13.70% 13.00% 14.90%

Other income 136 134 (1.80%) 373 620 66.30%

Interest 43 39 (8.20%) 189 212 11.90%

Depreciation & amortisation 173 154 (10.90%) 611 592 (3.20%)

Profits from associate company () () (4) ()

Profit before tax 1,090 1,497 37.40% 4,349 6,399 47.10%

Tax 399 477 19.60% 1,467 2,034 38.70%

Extraordinary items (78) 2 (78) (68)

Profit after tax 613 1,022 66.70% 2,804 4,296 53.20%

Minority interest 27 (54) () 21 189 816.00%

Net income 640 968 51.30% 2,784 4,108 47.60%

Net profit margin (%) 6.70% 8.50% 7.60% 9.30%

No. of shares (m) 95.9 95.9 95.9 95.9

Diluted earnings per share (Rs)* 42.8

Price to earnings ratio (x)* 28.5

(*trailing 12-month earnings)

The APAC paint and coatings market is growing in line with the robust economic growth seen in the region. This makes up roughly 30-35% of the global paint industry. In the last 5

International business: Slowly recovering…

Sales (Rs m) CY06 CY07 Change

Caribbean 1,520 1,500 (1.30%)

EBIT margins 2.60% 4.70%

Middle East 2,610 3,190 22.20%


South Asia 620 830 33.90%


South East Asia 840 890 6.00%

EBIT margins (16.70%) (4.50%)

South Pacific 730 620 (15.10%)


Total sales 6,320 7,030 11.20%


years, the APAC paint market enjoyed good growth. However, effects of the economic slump begin to hit the market in the second half of 2008 continuing into the first half of 2009. The paint and coatings market can be further split into 10 key segments which are Decorative, Automotive OEM, Automotive Refinish, Powder, Coil, Can, Industrial Wood, Marine, Protective, and Other Industrial coatings. The 6 focus segments are decorative, other industrial, industrial wood, protective, powder and automotive OEM coatings ranked in order of market size.

Research Overview

This research service titled Strategic Analysis of the Paint and Coatings Market provides the size of the paint and coatings market for 14 major countries in the Asia Pacific. The trend analysis on the market sizing for each of the countries in Asia Pacific depends on the macroeconomic growth and the growth of the end-user industries. The study also discusses the key market drivers and restraints, technologies, relevant regulations and strategic recommendations. For the purpose of this study, the forecast period is from 2010 to 2011. In this research expert analysts thoroughly examine the following markets: automotive original equipment manufacturer (OEM), automotive refinish, can coatings, coil coatings, decorative coatings, marine coatings, powder coatings, protective coatings, wood coatings and other industrial coatings.Market Overview

The $43.52 billion Paints and Coatings Market in the Asia Pacific to Grow at a Steady CAGR of 11 per cent to Reach $53.55 billion in 2011

Value Additions to Paints and Coatings Find Many Takers in the Asia Pacific

The paints and coatings market in the Asia Pacific has struck a purple patch due to the impressive growth in the end-user segments of construction, commercial, public buildings and residential real estate. The buoyant economic conditions in most Asia Pacific countries, especially in China and India, have had a bearing on the fortunes of these sectors and thereby on the paints and coatings market. The high inflow of foreign investments in these two countries and their reduced operating costs are greatly helping to increase the profit margins of operators in those countries. However, in countries such as Vietnam, Indonesia and the Philippines that have lower purchasing power, there is insubstantial demand for premium-grade and high-performance paints. Paint manufacturers' margins will also feel the pinch of the rising prices of raw materials.

Stringent environmental regulations have a role to play in limiting global paint trade, as the restriction on the use of hazardous materials in the paint composition limits product innovation. Foreign investors will also be deterred by the unstable social, economic and political situation in a country. Domestic participants will have to find a way around investors' hesitation, as they will be eager for higher spending on brand development and management of products as Asians prefer well-recognised brands. “One way to engage

foreign companies is through merger and acquisitions with the local companies,” says the analyst of this research. “Such alliances will reduce foreign investors' cost of setting up a distribution hub in the country and enhance their product penetration in the local market.” Companies could collaborate with national research centres to reduce the cost of R&D and ensure that product quality meets international standards.

Manufacturers in the more affluent countries have a more optimistic outlook, as consumers are highly appreciative of product innovations. Rising environmental awareness and the demand from the middle class population have popularised eco-friendly paints and coatings. Most of the decorative products available in the market are water-based and have low or almost zero levels of volatile organic compound (VOC) emissions. Dirt-resistant paints that are more durable are proving to be significant revenue generators, as are innovative heat-reflective paints in the tropical countries. “Manufacturers will be looking to create a type of OEM coating product that can withstand various temperature and humidity conditions,” notes the analyst. “This will save manufacturers time and costs on the production of customized industrial products.”

Market Sectors

Expert analysts thoroughly examine the following market sectors in this research:

By Products:- Automotive OEM- Automotive refinish- Can coatings- Coil coatings- Decorative coatings- Marine coatings- Powder coatings- Protective coatings- Wood coatings- Other industrial coatings

East Asian Paint and Coatings Markets

Concentrating on Domestic Needs Key to SuccessThe current economic downturn in the U.S. has dampened investor confidence,decreasing demand for end user products from East Asia, such aspaints and coatings. However, opportunities exist for manufacturers that focuson domestic markets. For example, as South Korea prepares to host the 2002World Cup tournament, refurbishing hotels, gymnasiums, and other non-residentialbuildings will be a priority. Architectural coating manufacturers shouldexperience a significant increase in sales over the short term. This Frost & Sullivan study examines the major product segments in the paintand coating markets, including protective, marine, automotive, architectural,and manufacturing coatings. It evaluates drivers and restraints, and presentsexpert forecasts for each segment in three East Asian markets: South Korea,Taiwan, and Hong Kong. With such a comprehensive view of the field, yourcompany will be poised to realize its full potential. Rise of Manufacturing in China Poses Challenges, Creates OpportunitiesChina has emerged as a preferred location for manufacturing due to itsinexpensive land, labor, and raw materials, says the author of this study. AsChina enters the World Trade Organization, the manufacturing costs there areexpected to drop even further. The lure of low overhead and a large domesticmarket will interest investors from around the globe.

China could attract companies away from Hong Kong and Taiwan, restrictingdomestic sales for paints and coatings. But at the same time, coating

manufacturers prepared to capitalize on growing demand in China should seeimpressive gains. This study identifies emerging challenges and recommendsstrategies to help you anticipate and overcome hurdles that might lay ahead.

Regulations Require Environmentally Friendly Coatings

Environmental regulations on volatile organic compounds will limit

production of traditional solvent-based products and push manufacturerstoward water- and powder-based coatings, says the author. Fortunately, manyEast Asian manufacturers are well prepared for this change. For example,

Taiwan is the second largest regional producer of powder coatingsafter China.

Increased environmental awareness among end users will further drivedemand for solvent-free products. This study tracks legislative changes andtechnology trends and assesses their impact on the marketplace, giving yourfirm an essential guide to the future of the field.

Market Overview

Growth in End-user Markets Likely to Fuel Asian Paints and Coatings Market

Since China’s inception into the WTO in 2001, the Asian paints and coatings market has reported tremendous growth. Due to the lack of environmental regulations in Asia, traditional solvent-based coatings seem to dominate the coatings market in the region. However, buoyant economic growth, globalization of end-user industries, and increasing foreign investments have brought quality products to the market. 'Local manufacturers have established tie-ups with leading multinational coating companies to serve their customers better,' notes the analyst of this study. 'In order to sustain profitability in a market where rising raw material costs and competitive pricing command profit margins, manufacturers should start investing in cost-effective coatings technologies, for which the margins are higher.'

The rapid growth in the end-user markets is expected to act as the key driver for the growth of the paint market. Paint manufacturers cater to a variety of end-user industries; the increasing influx of foreign investments into emerging markets has benefited most of the industries. The construction industry has witnessed robust growth over the past few years. The growth of the automotive industry in Asia, which is primarily driven by China, has been bolstered by India and Thailand. China is expected to emerge as the global production hub for electronic goods. Asia accounts for 60 percent of the global ship building market, and rapid growth in China, aided by moderate growth in South Korea and Japan, is expected to drive the demand for marine coatings.

Mergers Combined with Stringent Regulations Likely to Boost Market Growth

There have been a number of mergers, acquisitions and technical co-operations between MNCs and local suppliers in the Asian paints and coatings market. Mergers and acquisitions have been beneficial for international manufacturers trying to penetrate the Asian market in order to tap its potential. The local suppliers, in turn, benefit as they get access to superior technologies and foreign markets. This enables them to support their customers who are penetrating the overseas markets. Consolidation has resulted in the rapid advancement of coating technologies, and is expected to drive the growth of the paints market in the next five years. Numerous unqualified coating suppliers are finding it difficult to compete, as the focus is shifting from lowering prices to consistent supply of quality products.

In addition, mature markets such as Australia, Japan, and South Korea have strict regulations in place. Coating manufacturers in these countries invest consistently in R&D in order to remain competitive in the market. In emerging markets such as China, India, and Southeast Asia, the regulations are lax and the market is price sensitive. With growing consumer awareness and consolidation in the market, manufacturers are investing in high-end technologies. Regulatory bodies in these countries are expected to impose regulations in these markets, slowly and gradually. 'With strict regulations in place, the paint manufacturers are expected to move away from low-cost pricing strategy and focus more on quality products,' explains the analyst. 'Regulatory standards are expected to drive product innovations in the Asian coatings industry in the coming years.'

Market Sectors Expert Frost & Sullivan analysts thoroughly examine the following market sector in this research:

By Application:- Automotive- Construction- Electronics- Furniture- Ship building

By Geographic Region:- Australia- China- Hong Kong- India- Indonesia- Japan- Malaysia- The Philippines- Singapore- South Korea- Taiwan- Thailand- Vietnam

paint industry analysis

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