Paint prices skyrocket as raw material costs and supply delays rise

Paint prices will skyrocket again due to raw material costs and supply chain disruptions, Europe’s largest producer of the product has warned.

Akzo Nobel, whose brands include Dulux, said prices had already risen 9% in 2021 and are expected to rise another 5-6% by the end of the year due to soaring costs and shortages. additives, petrochemicals and packaging materials.

It is the latest manufacturer to report rising material and supply chain costs as a drag on financial performance following warnings from US companies Procter & Gamble and Colgate-Palmolive.

The Dutch group said its forecast was based on inflationary cost pressures that would persist until mid-2022, with prices likely to rise even more by low to mid-range figures early next year.

“It’s probably easier to tell where we’re not feeling the pressure. It’s very general, ”Thierry Vanlancker, Managing Director of Akzo Nobel, told the Financial Times. “We believe this situation will be with us for most of the first half of 2022.”

Vanlancker said he didn’t expect prices to reduce demand, or lead consumers to buy cheaper products or delay renovation projects, adding that the cost pressures were most likely temporary because there were no structural changes in the market.

“This is the whiplash coming out of Covid and the supply chain issues,” he said. But in a note of caution, he added that “it’s still a very nervous system, so it could slide in the wrong direction” if there is further disruption to the supply chain.

Vanlancker said “suppliers to suppliers of suppliers” was proving problematic. In particular, the Texas and Louisiana petrochemicals industry has been at a critical point as producers recover from a deep frost earlier in the year and Hurricane Ida in late August.

His comments came as Akzo Nobel reported lower-than-expected adjusted operating income of 241 million euros in the third quarter, despite rising revenue 6% to 2.4 billion euros.

The results had little effect on the company’s stocks, which benefited from the DIY boom brought on by the pandemic. They slipped 1.5% to € 94.12 on Wednesday afternoon in continental Europe.

At the end of the quarter in September, the average price of its products was up 9% year-on-year, but the group expects raw material costs to rise more than 20% by the end of the year.

The company plans to use the price hikes to cover costs by year-end and expand profit margins later in 2022 if cost pressures ease.

Martin Evans, head of European chemical research at HSBC, said continued cost pressures next year “could derail the phase of an expected recovery in margins.”

The Dutch group also missed another opportunity to win over a competitor, after the American PPG Industries won the battle to acquire Finnish Tikkurila at the start of the year.

DuluxGroup, a competitor to Nippon Paint which sells Dulux in Australia and New Zealand, entered exclusive negotiations on Wednesday to buy French decorative paint supplier Cromology from investment firm Wendel for an enterprise value of 1.26 billion euros.

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