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AkzoNobel Plans $67M China Expansion

Thursday, September 26, 2013

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In a move it says will solidify its position as a leading coating supplier in China, AkzoNobel will invest €50 million (about $67.5 million) to build two new manufacturing facilities in Chengdu.

Meanwhile, the global coatings maker made an announcement adjusting the timeline of planned restructuring charges of €256 million ($345.7 million USD).

Both announcements were made Wednesday (Sept. 25).

New Hubs for Decorative, Powder

The Netherlands-based company says it will invest more than €50 million (about $67.5 million USD) to build facilities for its Decorative Paints and Powder Coatings businesses in western China.

Chengdu street
Gong Chen, Mlogic / Wikimedia Commons

As an emerging industrial hub, Chengdu has seen an increase in demand for both powder coatings and decorative paint, the company says. New facilities for each are planned.

Both facilities will be located in Chengdu, one of the fastest-growing cities in southwestern China, AkzoNobel said. The powder coatings plant is scheduled to open in 2014, and the decorative paints site will begin production in 2015, the company said.

‘Strengthening Our Position’

"China is playing an increasingly important role in our growth strategy, and by expanding production capacity, we will further strengthen our position as a leading supplier to the Chinese market," said AkzoNobel CEO Ton Büchner.

"We already have a strong manufacturing footprint in eastern, central and southern China," he added. "As demand and volumes continue to rise, we will extend our production and distribution westwards, and the new sites will enable us to better serve our customers whenever and wherever they need our products."

Chengdu has “consistently delivered double-digit growth over the last two decades,” according to the company.

Ton Buchner CEO AkzoNobel

AkzoNobel CEO Ton Büchner says the new China production facilities will "better serve customers whenever and wherever they need our products."

As an industrial hub, the area has seen an increase in demand for both powder coatings and decorative paint, which is expected to remain strong as the area continues to develop, AkzoNobel explains.

Additional Start-Up

News of the new production sites follows the recent start-up of commercial production of Bermocoll cellulose derivatives at AkzoNobel's facility in Ningbo. That investment, topping more than €60 million ($81 million USD), was first announced in March 2011.

Cellulose derivatives are used in water-based paints and building additives applications.

AkzoNobel currently employs more than 7,700 people in China, including 500 in research and development. Revenue for 2012 was €1.7 billion, the majority being generated from local demand.

Restructuring Costs

The restructuring announcement follows release of the company's Q2 results in July. At that time, AkzoNobel said that it had identified further efficiency and cost-saving measures that would require €120 million (about $162.1 million USD) of restructuring charges in the second half of 2013.

These charges were in addition to previously announced Performance Improvement Program costs, making a total of €256 million ($345.7 million USD) in restructuring charges expected in the second half of 2013, the company said.

Now, the company anticipates that the majority of those costs will be booked in the fourth quarter, with more than 20 percent logged in the third quarter.

The full year 2013 operating income is unlikely to exceed the €908 million ($1.2 billion USD) seen in 2012, the coatings maker noted.

“The economic environment continues to be challenging, but the restructuring program remains on track and the additional initiatives are progressing well,” Keith Nichols, AkzoNobel's CFO, said in a statement.


Tagged categories: AkzoNobel; Asia Pacific; Business matters; Business operations; Coatings manufacturers; Coatings Technology; Decorative painting; Expansion; Powder Coatings

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