Review of the year by COO Ruud Joosten
Our ongoing transformation into a focused paints and coatings company gathered considerable momentum during 2019. We achieved significant profit improvement, based on our clear value over volume strategy, and are making progress towards delivering on our Winning together: 15 by 20 ambition.
Most of our business units realized a significant increase in return on sales during 2019. Results of our pricing discipline have been very strong, while our efficiency programs also made a major contribution.
Despite the various macro-economic headwinds we faced, some business units performed extremely well. For example, our Powder Coatings business continued to strengthen its position as market leader, driven by a number of innovative new products, including Interpon Redox – a one-stop-shop offering the simplest route to maximum corrosion protection – and Interpon D X-Pro, a scratch-resistant powder coating for the architectural market which is available in both matt and satin finishes.
It was also a strong year for the beverage can coatings activities of our Industrial Coatings business. Customers love our innovative products and they’re seeing increasing demand because consumers are turning away from single use plastic. So the drinks can manufacturers are working flat out to try and meet that demand, which in turn means there’s a huge demand for our coatings.
Our Decorative Paints Europe, Middle East and Africa (EMEA) business also delivered a very good 2019. After many years of investment and finding the right balance of central management and local freedom – as well as setting up a single supply chain – the business is now performing really well.
We also faced a few challenges as the year unfolded. Negative developments in the automotive sector impacted our Automotive and Specialty Coatings business, mainly due to the fact that around five million fewer cars were produced globally. It meant there was less demand for the products we supply for vehicle interiors, for example, despite us being less exposed to the automotive OEM (original equipment manufacturer) sector.
The number of new ships being built also continued to hover around all-time low levels, which inevitably had an effect on our Marine and Protective Coatings business. In the marine sector, we’re continuing to develop our dry docking business, which is helping us to compensate somewhat for the lack of new-build demand. We did see more positive opportunities for our protective coatings activities during the year – in oil and gas projects, for example – where we are continuing to grow. We also remain very strong in the yacht coatings market.
Other major developments included the acquisition of French aerospace coatings manufacturer Mapaero in November. The deal will strengthen our global position in aerospace coatings – notably in the structural and cabin coating sub-segments – and demonstrates our commitment to continue investing in strategic growth opportunities.
We achieved significant profit improvement, based on our clear value over volume strategy
Another highlight was the official opening of a €13 million R&D innovation campus at our Felling site in the UK. The trailblazing lab complex can test new products in conditions that mimic the world’s most extreme environments. These investments show just how committed we are to innovation and making our products even more sustainable. They will help us to continue making life better for our customers, just as we did during 2019 with new introductions such as Awlfair SF, a high-performance filler for super-yachts, which can be applied by pressurized airless spray, rather than by hand.
We were also very proud to become the first major manufacturer to launch recycled paint, thanks to a ground-breaking partnership in the UK with resource management experts Veolia. Developed by our Dulux Trade brand, the revolutionary Evolve matt emulsion is made from other people’s paint waste, with the final product containing 35% recycled paint (see New life for old paint).
And it was a special year for our Paint the Future innovation ecosystem, which launched with a collaborative startup challenge in May and has since expanded to include suppliers and academia.
We’re making progress towards delivering our 15 by 20 ambition and we’re already working on longer term projects. It means we asked a lot from our people in 2019 – and they all rose to the challenge. They displayed an infectious passion for paint to help us remain on track and realize our goals.
This is a key profitability measure and is calculated as adjusted operating income as a percentage of revenue.
Europe, Middle East and Africa.
Research & Development.