• Akzo Nobel to buy Chinese coatings company

While more and more Western businesses are complaining about China’s investment environment and are considering transferring their factories elsewhere, Swedish-Dutch paint and chemicals company AkzoNobel is not only staying put but expanding. Rapidly.

Hans Wijers, chief executive of AkzoNobel, told The Swedish Wire in Shanghai that business opportunities are still very attractive in China, especially compared to the slow progress in Europe.

“We have aggressive growth plans”, he said in an interview. “We have grown double-digit the last couple of years and intend to continue doing so. We are actively looking to gain market shares in China”.

The company, with roots going back all the way to Swedish chemist and innovator Alfred Nobel, plans to double revenue in the Middle Kingdome – from 1.5 billion dollar last year to 3 billion in 2015 – by organic growth and acquisitions.

Last week Hans Wijers opened a 375 million dollar production facility in Ningbo, south of Shanghai. It’s the company’s single biggest greenfield investment ever and marks a “new phase of accelerated sustainable growth”.

Unlike many other Western companies Akzo Nobel do not intend to use China for production of low-cost export goods. The Ningbo site, with world scale production, will only serve local and regional demand. The products will not be sent back to Europe.

The opening comes as China’s government aims to shift from an export-led economy to domestic consumption led-growth. However, Hans Wijers believes complaints from Western company leaders and European trade organizations about rising labour costs in China and government protectionism are overdone.

China is likely to overtake the US as Akso Nobel’s biggest market within five years. Demand for paint is booming in China as the housing market swells. In Europe the construction market shows no noteworthy signs of improvement. Today Akzo Nobel has 3,000 – 4,000 paint stores in China and opens some 2.5 new stores – every day. Besides decorative paints, the company’s growth plans in performance coating and specialty chemicals is also go-getting, boosted by demand from sectors such as energy infrastructure, shipping, automotive and electronic goods.

Business opportunities also arises from China’s new Five Year Plan (2011-2015) that clearly wants to drive the development of green technologies and products to meet the growing demand for ecological solutions.

“Sustainability drives business in China. It gives fantastic business opportunities", Hans Wijers told the Swedish Wire, adding that many smaller players that don't meet new environment regulations will go under. "When we build this new factory, we used the latest and best technology. It’s shortsighted to cut corners".

The new Ningbo site is an improved copy of the company’s factory in Stenungsund, southwest Sweden. But the Chinese site has considerably lower carbon footprint and runs more cost efficiently; it is 20 percent more energy efficient and generates 10 percent less waste.

The competitive landscape in China is highly fragmented. Hans Wijers said Akzo Nobel intend to be a active consolidator and is looking for "selective acquisitions", mainly to get access to unique distribution networks that are difficult to build.

“We will be a consolidator. We are looking at opportunities to accelerate growth by selective acquisitions. I see a lot of opportunities in the mid-range market”, Hans Wijers said.

Akzo Nobel recently bought China's Changzhou Prime Automotive Paint, without disclosing the financial details. Prime is one of China's largest vehicle refinish suppliers and a leader in the fast-growing mid-market segment.

However, the biggest part of its acceleration plans will come from organic growth.

AkzoNobel said its third quarter profits rose 21 percent due to cost-cutting and growth in emerging markets, adding its cautious over housing and construction in mature markets. Growth in emerging market is therefore significantly more important. High-growth markets will move from 37 percent of revenue today to 50 percent in this decade, the company said.