Jotun Paints sales increase 40%

Jotun Paints says its sales has increased by 40 per cent during the first four months of 2009 compared to the same period last year but warned that 2010 could be a difficult year for paint companies world over. A senior industry official said the boom in Abu Dhabi is compensating for the slowdown in Dubai. In an interview, Eric Aaberg, Executive Group Vice-President at Jotun Paints, said the company has submitted prequalification tenders for a major development in Abu Dhabi and is hopeful of winning the contract. Compared to the rest of the world, the markets in the GCC and the Middle East would grow at a faster pace and 2011 could be the revival year for the paint industry. The company, according to him, is going ahead with expansion plans in Saudi Arabia and Libya and hopes to tighten spending in Thailand. How has the paint industry as a whole been performing? Profits are tumbling across the board. Several large US-based companies – large because of the size of the US market – have been struggling. It also depends on the industry you are serving. A lot of them are into supplying products for the automobile industry and the automobile industry has been struggling. If you look at the Far East, they too are affected but not to the extent of those in the United States. Many of the paint manufacturers in Japan and Korea cater to the automobile industry and they too are affected a bit. The Far East paint manufactures also cater to industrial coatings for appliances for air conditioners and refrigerators, which has also been affected. The segment that seems to be holding up best across the board seems to be Performance Coatings, and both Akzo and PPG reported that this was a segment that saw double-digit growth for them in 2008. How has Jotun's performance been? Jotun is not too much into serving the automobile sector. We are mainly focused on marine paints, protective coatings , serving oil and gas sector and decorative paints. We are mainly focused on Scandinavia, where the economy is pretty good; in the Middle East where the construction industry was booming until last year; in South East Asia and the Far East. The most risky exposure we have in the Far East is the ship building industry. There is an over capacity of ships in the world today. But we have several existing contracts mostly in China and Korea. So our business is still good as far as marine industry is concerned. If you look at the Middle East, construction industry was really doing well until last year. However, the existing contracts is still keeping us busy. For us, last year was one of the best years in the Jotun's history worldwide. In the Middle East and South East Asia, we have had about 20 per cent growth compared to 2007. How has 2009 been so far for the company and what has the second half in store for the sector? Within the Middle East, the first four months of 2009 has been better than last year. We have grown by more than 40 per cent compared to last year. However, we are concerned about the coming months. There are a lot of cancelled projects. Most probably we will witness a drop in revenues during the second half. So by the end of 2009, our turnover could be similar to that of last year. The economic situation in the Middle East has been more stable. In the beginning of the year, we saw some countries spending less and more carefully. But that situation has improved. There will be a drop in Dubai but that will be made up by contracts in Abu Dhabi. However, we are concerned about 2010 which will be more difficult compared to 2009. In South East Asia, we have been struggling in Thailand. The political situation in Thailand has been unstable, the foreign investments have reduced and unemployment has increased and that's where our problems lie. In other markets such as Vietnam and Indonesia, where we recently entered with decorative paints, the market looks promising. We had our presence there although it was limited to marine paints. We need to put in more manpower and investment to give an impetus to these markets. Cost of construction materials have dropped significantly during the last six to eight months. What's the situation as far as the paint industry is concerned? Paint prices have not dropped much. It has just gone down by about five to six per cent after the peak in the third quarter of 2008. Everyone is expecting prices to go down drastically because of the slowdown. The raw material prices are slightly lower compared to November and December last year [about 10 per cent] but the prices are still 30 per cent higher compared to April last year. We are still struggling to deal with the growth in the cost. There has been a small reduction in the prices here. The raw material cost is not the basis for reduction. But given the circumstances you need to operate with reduced margins. What is the current status of your order book in the UAE? The orders are healthy at the moment but we have conservative expectations for the next qu