Overall, 2012 was another challenging year for the business in the EMEA region. The slowdown in markets we identified in the fourth quarter of the previous year materialized as expected. Volumes were under pressure across Europe, mainly due to low consumer confidence and austerity measures starting to impact. Costs in general were well controlled, supported by the company’s performance improvement program.
Despite declining volumes in most mature markets, our revenues in those sectors were mostly flat or slightly up on the back of pricing activities and targeted market share gains. We experienced substantial raw material and packaging inflation, offset by price initiatives during the year. Key growth markets such as Russia and South Africa showed accelerated growth, although sales in Turkey were impacted by a significant slowdown and de-stocking by wholesalers. The UK and Tunisia contributed positively to our results, but sales in southern Europe were hit particularly hard, due to very poor economic conditions and the euro crisis. There was also a trend of down-trading evident in the markets.
We were focused on building our brands throughout the region during the year. A notable highlight was the launch of the consumer flourish brand in various countries across Europe and Africa, which supported our efforts to build a global, powerful identity with brands such as Dulux, Levis, Bruguer, Flexa and Marshall. This included successful Let’s Colour projects in Belgium, the Netherlands, Poland and Ireland. Our professional brands also achieved a number of successes, such as the launch of the Sikkens Hotel and Leisure concept. This aims to develop and communicate a specific proposition for property owners and maintenance managers. We also launched Dulux Trade Pyroshield Durable Eggshell, which reduces the spread of flame along interior walls, allowing occupants more time to escape in case of fire.
In order to further improve our customer focus, we have set up four customer-facing units, as well as a European supply chain organization which will drive efficiency, operational excellence and increase our focus on health, safety and the environment. A lot of activity associated with the company’s performance improvement program also took place throughout the year and they brought about some significant benefits. A project targeting working capital reduction was particularly successful, leading to significant improvement in stock level management, as well as an eventual reduction in external warehousing costs. We also initiated several other projects, which included streamlining production and our marketing organization. Among many efficiency improvements, we introduced a reduction in batch cycle time at the Gebze plant in Turkey and increased productivity and waste reduction at Mégrine in Tunisia. In addition, we’ve been busy making our operations more sustainable and cost efficient. For example, in Italy, our Castelletto site needed a new roof so we took the opportunity to install 200 kilowatts of solar cells. It’s the first site within the whole company to be using solar cells on such a large scale and they now supply 15 percent of the plant’s total annual energy consumption. Meanwhile, in the Netherlands, we built a new 13,000 m2 logistics center which complies with strict environmental standards.
Jan Piet van Kesteren
Peter van Campen