“The paint and coating market continued to decline last year, though slower than in the previous years. Most likely we’re talking 5% to 10% decline on 2011 here,” says Dragos Militaru, general manager of Fabryo-Atlas group.
“Some market segments went well or even saw significant growth as a result of apartment building weatherization programs. One of them was the decorative wall coating segment.”
Militaru expects the decline to stop in 2013 and the market to be flat but admits that the unpredictability of demand, influenced by many factors does not allow him to provide accurate estimates, not even short-term ones.
He says that after four years of decline in a row, all production facilities on the market are underused. They operate at less than 30% capacity on average across the industry.
New construction projects in total sales of paint significantly declined in 2009-2012, Militari added. He estimates residential sector is the main destination for his group’s deliveries.
Marius Vacaroiu, chief executive officer of Policolor Orgachim says new construction projects account for 5% to 10% of the total sales of the group and the rest come from renovation projects. Residential sector generates 15% to 20% of the total Policolor sales.
“We are still a sector that is consolidating and is extremely competitive, with many local players; as a result the market volume indicators are hard to estimate. Production of these companies fluctuates, companies appear and disappear overnight after serving certain parts of the country with products. Still, 2013 may be a year of restructuring for the companies that matter.”
Marga Calin, marketing manager of Duraziv says renovation projects, which are mostly public projects, such as the apartment building weatherization program, account for the bulk of the paint sales of her company.
“About 40% of the paint deliveries to go this segment.”
Calin says Duraziv also identified and signed partnerships with several residential developers mainly in Bucharest-Ilfov area, where “investment slightly picked up.”
In the absence of statistics, Duraziv’s marketing manager estimates the paint and coating market stood at EUR150 million to EUR160 million last year. The volume is hard to guess, because there are about 250 competitors on this market and 100 of them are importers. The overall market remained flat in 2011 and 2012 and 2013 should be the same, she said.
“An important sign in 2012 and early 2013 is the increase in paint consumption in rural areas. We expect significant growth on the segment this year,” Marga Calin added.
One of the main problems the paint and coating industry is facing is the delayed payment by authorities. In addition, the cost of raw material increased, which eroded profit margins in some cases, since many producers did not pass the cost on to the shelf prices, Marga Calin says.
She added Duraziv posted slight increase in revenue in lei last year.
“The revenue in euros amounted to a little more than EUR17 million. Paint sales accounted for over 20% of that last year.”
Fabryo-Atlas boss says the decorative paint and coating market has been faced with shrinking demand and significant cost increase in raw materials for several years now.
“Our daily challenge is to find solutions to keep costs under control and we try to include as little of the increase in the shelf prices to avoid affecting consumption as much as possible,” he added.
Fabryo Corporate-Atlas Paints revenue stood at more than EUR39 million in 2012 and this year should be 10% higher. The merger between Fabryo, held by Swedish private equity firm Oresa Ventures and Atlas Paints, the construction supplies unit of Atlas Corporation owned by Greek businessman John Sitinas, was announced in September 2012 and finalized in the first quarter of 2013.
Policolor-Orgachim’s chief executive, too, says the producers operate in an industry that is affected directly and fast by all factors influencing the predictability of a business.
“I mean the fluctuations of the euro, which have an impact on manufacturing prices, and the many insolvencies that short-circuit the cash flow. Most examples I’ve seen are companies working with local authorities (…) local budgets are frail, payments cannot be made on time and the operators directly connected to that may suffer losses we, too, feel. Looking at things this way, 2013 can be a year of restructuring for companies that matter and want to operate soundly on the national market,” Vacaroiu added.
Policolor, controlled by the Romanian Investment Fund, RC2 and Romanian Reconstruction, also operates in Bulgaria after takeover or Orgachim. The revenue of the group rose 11% to 138.1 million lei (EUR31 million) last year.
Other major companies in the paint and coating business are Daw Benta, Deutek and Koeber.
(English version by Loredana Fratila-Cristescu)