Japanese coating maker Kansai Paint will withdraw from Nigeria before March 2021, a move that follows the divestment of a joint-venture holding in the Middle East, as the company shifts way from those regions and focuses on India and Europe.
The manufacturer made inroads into emerging markets ahead of its Western rivals, but the economic deceleration weighed on its earnings. The company is also withdrawing from construction-use paints in China and plans to shift to India, where demand for automobile-use products is firm.
The company has had a presence in Nigeria since 2016, but the brand only attained a market share of a few percentage points. For the interior-coating joint venture in the UAE, Kansai Paint sold its 49.9% stake to a local trading firm for about 1.7 billion yen (US$15M). The Osaka-based manufacturer has also decided to exit its construction paint business in China.
“We will unload low-performing assets acquired in past [acquisitions] and develop our company’s strength in business-to-business operations,” said Kansai Paint President Kunishi Mori.
The company pursued aggressive mergers and acquisitions in emerging markets. But depreciated currencies and lower crude oil prices, along with the coronavirus pandemic, have created an economic slowdown.
“Interior coating is sensitive to the economy, weighing on earnings,” said Atsushi Yoshida, senior analyst at Mizuho Securities.
The company will redirect resources to more profitable pursuits, such as products for the Indian auto industry and the European rail sector.
The global coating industry is experiencing a shake-up, marked by acquisitions by Sherwin-Williams of the U.S. and Japan’s Nippon Paint Holdings. In the paint market, it is difficult for companies to differentiate themselves, forcing them to establish economies of scale.
But Kansai Paint will distance itself from the expansion route and instead focus on improving earnings in overseas operations.
“We have sufficiently grown the number of operating locations through past acquisitions,” said Mori.
Source: Nikkei Asian Review