Dow, DuPont Under the Gun, BASF Production Site in India
- Jul 31, 2012
Hello and welcome to your early week international coatings industry update, brought to you by SpecialChem. The USA's "big two" chemical companies released their financial results late last week and they were not great, blamed on the European Economy and slow Chinese economic growth. We have a lot to wade through, let's get going.
Dow Chemical reported larger-than-estimated declines in second-quarter earnings and sales and said the outlook for global demand for the rest of the year is "bleak." Net income fell to $734 million from $1.07 billion a year earlier, Midland, Michigan, USA-based Dow said Friday in a statement. Revenue fell 9.6 percent to $14.5 billion. "These are about the worst operating conditions we have seen since 2009," Chairman and CEO Andrew Liveris said in a telephone interview. "That gives you a fairly bleak outlook, and it's a weak one for the rest of 2012."
Dow is struggling to increase earnings as contracting economies in Europe and slower Chinese growth curb demand for products such as plastics used in packaging and autos. Sales fell around the world, led by a 15 percent decline in Europe, the Middle East and Africa, Dow said. Liveris plans to boost cost-reduction efforts by $500 million to counter weaker global economies.
DuPont's net income fell 3 percent in the second quarter as sales volumes fell in several business units, including performance chemicals, electronics, and safety and protection, and it absorbed charges for claims over a weed killer and a legal settlement.
The good news is that revenue rose 7 percent, the bad news -- it fell short of Wall Street's expectations. The Wilmington, Delaware, USA-based company said net income totaled $1.18 billion for the three months ending June 30, down from $1.22 billion for the same period last year. Revenue totaled $11 billion, up from $10.26 billion for the second quarter of 2011. Volume declines in certain business segments were offset by continued strong performance in agriculture, where sales increased 13 percent to $3.4 billion, reflecting 7 percent price and 6 percent volume gains.
Toyo Engineering India Limited has been awarded an engineering, procurement and construction contract to build a new multi-business chemical production site for BASF India Limited at the Dahej Petroleum, Chemicals and Petrochemicals Investment Region, located in Dahej, on the west coast of India in Gujarat Province. The new site will be an integrated hub for polyurethane manufacturing and will also house production facilities for care chemicals and polymer dispersions for coatings and paper. The plant is expected to commence operations in 2014.
The polyurethane facility will produce thermoplastic polyurethane, microcellular polyurethane elastomers for automotive NVH parts and polyurethane systems. The care chemicals facility will produce surfactants for home and personal care. The polymer dispersions facility will produce products for architectural coatings, construction materials and paper coating.
As the worst drought in decades hits two-thirds of the USA, residents and businesses in normally well-watered areas are catching on to the lawn-painting practice employed for years in the drier West and Southwest.
Missouri Turf Paint Inc. president Jon Graves said he's seen a slight increase this year in calls from people interested in either greening up residential lawns or wanting to get into the lawn-painting business.
In the frequently parched Phoenix area, Brian Howland said he started Arizona Lawn Painting after the nationwide foreclosure crisis left scores of homes empty and their lawns neglected.
Some customers have been residents fearful that their homeowners' associations will penalize them for letting their lawns fade.
A newer entrant into the lawn-painting business is Tim Birdwell, whose Imperial Painting normally paints homes and commercial properties. But this month, Birdwell painted his own dry lawn.
The water-based dye used for this process is sprayed on and provides color and gloss to the water-dormant grass, lasts a few months before burning off in arid climates and costs about $5.00 per square yard to accomplish.
By the way, I have to write this story every year and the areas affected keep getting larger - there may be something to this global warming stuff. I'm just saying...
In business expansion news, Kelly-Moore Paint announced that it has opened three new stores in: Bee Cave, Texas, San Jose, California and Castro Valley, California. Kelly-Moore now has 141 stores in seven states, with more stores scheduled to open in Northern California later this year.
"With positive sales results in all segments, we look forward to continued growth in 2012. We're opening more stores now to meet growing demand in the future," said Mark Zielinski, Kelly-Moore's Vice President of Sales. "During the recent tough economic times, we've been able to innovate new products and improve market share, and more stores means better service and convenience for our customers."
Among the product offerings available at the new stores is Kelly-Moore's recently introduced Enviro Coat Reflective 1545, a premium exterior architectural coating designed to reflect the sun's radiant heat -- another one of Kelly-Moore's "Earth First" product lines. This eco-functional, exterior 100-percent acrylic low-sheen paint effectively lowers external wall temperature, allowing for homeowners to possibly decrease air-conditioning usage and save money on utility bills.
Kelly-Moore is one of the largest employee-owned paint companies in the United States. Kelly-Moore was the first major paint company to offer recycled paints, along with one of the largest selection of stock colors. Kelly-Moore is one of the few companies to continue to offer stock colors.
The company's environmentally friendly paint factory in San Carlos, California is the recipient of four widely recognized and among the most stringent environmental awards.
In coatings research news, Syria's regime announced last week that it has chemical weapons, and stands ready to use them if attacked. A new type of paint could potentially guard against it, protecting tanks and armored vehicles with a special chemical-absorbing topcoat.
Scientists at the UK's Defense Science and Technology Laboratory worked with AkzoNobel to develop the paint. It contains super absorbent silica gel, the same stuff that comes in those little bead-packets inside new shoeboxes and handbags. The material can absorb chemicals, like nerve gas, before they could reach a vehicle's interior.
The objective was to make the topcoat peelable upon contamination. This would make it easier to clean - when the nerve gas is soaked up, and the tank is back in a safe area, soldiers could just peel off the paint and throw it away. The paint is sticky like a Post-It Note - adhesive enough to hold it in place, but a coherent polymer film and therefore easy to remove.
AkzoNobel will produce the absorbent paint in standard military camouflage colors, and it's likely to be used on the UK's Warrior tanks. Eventually the company wants to produce color-changing paint that would alert a tank's occupants they are under chemical attack.
AkzoNobel also wants to produce a paint that not only absorbs noxious chemicals, but neutralizes them. Apparently one research team at Vermont University added vanadium to a silica mix, which reacts with mustard gas to render it harmless. Presumably other catalysts could be added to oxidize other chemicals.
Syria is believed to have mustard gas, along with nerve gases including tabun, sarin and VX, according to the Washington Post. Paint like this could potentially help if Bashar Assad's regime does decide to deploy its weapons. But complete efficacy testing and the complex military procurement process could mean it will be some time before this paint sees the surface of a tank.
In other news, the green movement is having an impact on car colors, according to a new report by BASF Automotive Coatings. Their new auto coatings survey is out, and things are looking up for more colorful cars. As I said in our last issue, I've seen this trend recently, but even I didn't expect confirmation so soon.
"The increasing inclination of society to celebrate beauty in earth tones and more traditional green and blue hues is the basis for this trend," the BASF report said.
Silver, white and gray are on the way out, according to the forecast.
"Although popular staple colors such as silver, black and white make up approximately 50 to 80 percent of current production, there is a rich diversity of potential shades that is returning to the market," said Paul Czornij, Technical Manager for the BASF Color Excellence group.
In recent years, the color green has not played much a role on the roads, yet in four to five years, the color is predicted to become more popular. Similarly, white, silver, and gray will gradually wane in popularity at the expense of more saturated colors like blues and browns.
"There are signs from automakers and consumers that the desire for more color on the roads is continuing. We will be tapping into further color spaces, such as bronzes and emeralds," says Mark Gutjahr, Head of Design for BASF in Europe. "The continued high value assigned to the notion of ecology may now again be signified by the color green."
The report predicts "future colors will be 'naturally cultivated' with nuanced berry and copper tones."
If silver has always been your safe choice, especially when it comes reselling your car, you may want to rethink that approach.
Finally, from the rumor mill, DuPont has supposedly received three final bids for its car paint unit, two people "familiar with the matter" said last Tuesday, as the chemical company's auction of the roughly $3.5 billion business enters what the sources identify as its final phase.
Carlyle Group LP, Apollo Global Management LLC and a consortium of KKR & Co LP and Onex Corp submitted final bids last Friday, the sources said. The pairing of Blackstone Group LP and Bain Capital LLC, which was previously identified as taking part in the process, has dropped out, they added.
Of course, representatives of DuPont, KKR, Onex, Apollo, Carlyle, Blackstone and Bain declined to comment. No surprise there.
DuPont's board was expected to meet later this week to consider the bids, one person familiar with the deal said. According to industry sources that remain unnamed, DuPont last year hired Credit Suisse to explore the sale of the unit.
Last Tuesday, Ellen Kullman, DuPont CEO, dismissed queries about the deal on the division. The company has never publicly acknowledged that it is in discussions with possible buyers.
Asked by a financial analyst on a conference call about the progress of the discussions, Kullman refused to be drawn into an admission of fact on the deal. "I'm not sure where that question is coming from," the chief executive said. "If we have anything to announce about any of our businesses or product lines, we will make sure we include you."
Sales at the performance coatings division - which primarily sells products to large refinishers like Maaco and to the big US car manufacturers such as Ford and General Motors - declined by 1.5 percent in the quarter from last year.
I've been writing this newsletter for way over ten years now, and I can tell you that it is not unusual for large corporations to "shop around" underperforming divisions in advance of making a decision as to the viability of the separation for the corporation. You would be surprised at the number of these speculative offerings that never happen. There are a lot of moving parts in a deal of this magnitude, and not all of them have to do with the bottom line. I must say that getting a bank involved in the shopping is a new twist to me, since I assume that a large corporation has a veritable phalanx of internal economists to advise on such things.
So just remember, this one is interesting, unusual and makes a certain amount of sense for DuPont, but it's a rumor until the principal says it is real.
In other news on the site, INX International Ink Co. has experienced tremendous success due in part to having a world class Research & Development team engineer and create new breakthrough products. This year is no exception. Visitors to Labelexpo Americas 2012 will be the first to see the next generation of AquaTech ION™ Label ink systems when INX introduces it at the show, from September 11-13 in Rosemont, Illinois...
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Huntsman Corporation announced that its Polyurethanes division has opened a systems house focusing on specialties and differentiated products at its Gandaria site, near Jakarta, Indonesia. The plant has been purpose-built to produce pre-polymer and polyol blends for Indonesia's fast-growing MDI systems market...
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Mimicking the way mother of pearl is created in nature, scientists have for the first time synthesized the strong, iridescent coating found on the inside of some mollusks. By recreating the biological steps that form nacre in mollusks, the scientists were able to manufacture a material which has a similar structure, mechanical behavior, and optical appearance of that found in nature...
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And finally, Evonik Industries' Catalysts Business Line has recently agreed with US based BioAmber Inc. on a long term cooperation for the development and manufacturing of catalysts for making BDO, THF and GBL from bio-based succinic acid. BDO, THF and GBL are large volume industrial chemicals used in a wide range of applications including polymers, paints, adhesives and solvents...
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