PPG Industries surprised the coatings industry when it unexpectedly announced it will look at strategic options for its North American decorative-paint business. That typically means a sale, something even the M&A investment bankers didn’t see coming.
The decision to explore an exit from iconic brands like Glidden to focus on higher-margin performance coatings has left some wondering if other companies could follow suit.
At 109-year-old Hempel, there’s no such discussion.
Under the leadership of Michael Hansen, the transformation of what was largely a marine paint player into a global coatings group continues.
By acquiring Crown, Renaulac, Farrow & Ball and Wattyl Hempel create a new decorative-paint platform, and growing it further is a core part of Hansen’s strategy, the CEO said in an interview with chemicalESG.
Hempel reported record results in 2023, surpassing even its own expectations. While Marine and Energy were the stars, with 26% and 19% growth, respectively, household paint still posted 4% organic revenue growth in a period of low consumer confidence, such that it’s now an EU800m business and Hempel’s largest segment.
Ironically, when Hansen took over as CEO 1 1/2 years’ ago, some questioned whether the former Maersk executive and head of Hempel’s Energy & Infrastructure division would gravitate to marine and other performance coatings given his background in Danish shipping and bridge maintenance. After all, margins are higher and there’s not the same brutal price war that you see on the shelves at DIY stores.
“This is not about me, it’s about the company. Of course, historically, the business was performance coatings but look at the acquisitions we’ve done.
It’s a commitment that we made to really being a decorative paint player. It is a more challenging market.
When you look at a brand like Farrow & Ball and the opportunity taking it into the US and other geographies, we’re quite excited.”
PPG, which acquired Tikkurila of Finland, will still be a competitor on Hempel’s doorstep. It’s only considering options like a sale, or JV, or partnership for architectural paint in the US and Canada. EMEA, Asia and Latin America are off limits because the US company has a stronger market position there.
Hansen is undertaking some refurbishment projects of his own.
Rather than large mergers, the coatings industry is in a phase of asset swapping and portfolio trimming as companies focus on their strongest markets. Alongside the start-up of new factories in Yantai and Zhangjiagang, Hempel is evaluating its portfolio to see whether divestments or structural changes are needed, he added.
“That’s an ongoing assessment,” Hansen said. “We’re readying ourselves over time to once again participate in acquisitions,” in an “optimal way,” he added.
There’s a renewed drive to expand F&B outside of its home UK market. In an approach tailored to the US, this time Hempel is engaging with influencers, Instagram and embracing e-commerce, which already accounts for 16-17% of the brand’s sales.
He’s also accelerating a program to harmonise operations and sharpen up the supply chain globally with a view to generating more cash and paying down debt, all in preparation for more acquisition-led growth. The so-called Scalable Operation initiative is introducing more digital- and AI-based solutions to help standardise procedures. The company already started to globalise production, R&D, finance and Human Resources to drive scale.
“We’ve done all the structural changes,” Hansen said.
“Only a couple of years ago, we were a group of regions put together in a global setting. There’s so much more we can do.”