THE FORMER ICI businesses being retained by the Netherlands' Akzo Nobel are an excellent strategic fit with the other parts of the specialty chemical division, Leif Darner, head of the division, said last week.
Following the acquisition of ICI in January this year, Akzo Nobel's chemical business plans to divest the UK coatings and specialty chemical group's starch business, leaving Akzo Nobel with ICI's specialty polymers business, which has ?00m ($613m) in annual sales.
The specialty polymer unit's components have strong synergies with the existing specialty chemical portfolio, says Darner, adding that powdered polymers - used as thickeners for paint, adhesives and insulation - fit well within the company's cellulosic specialties group, part of the functional chemical business.
"This will remain a separate business as we don't want to break up what is running nicely," he said.
The Alco Chemical business, strong in chemicals for water treatment and detergents, fits into functional chemicals and surfactants, while polymers going into personal care "have similarities with our surfactants business, so we're quite excited about that."
ICI's regional and industrial group contained ICI Pakistan, the country's top producer of chemicals and coatings, so Akzo Nobel will also become the dominant chemical producer in that country. "This gives us a nice footbridge to a region where we're not so strong, enabling us to develop other chemical platforms," Darner said.
To fuel growth in China, the company is still considering construction of additional organic peroxide capacity and production of cellulosic specialties at its Ningbo complex. Further options include paper chemicals, surfactants and solvent-based coatings.
Darner said Akzo Nobel is still in an acquisitive mood, with a strong balance sheet, though "of course we've got a bit of digestion to do with the integration of ICI."
He added: "We are looking at a whole range across all sectors following the same criteria: a good strategic fit and financial return. That is the priority of the board when making these decisions."
In the fourth-quarter results, Darner's specialty chemical division posted a record return on investment of 21.7%, up from 17.5% last year and 12-13% four years ago, despite maintaining investment levels well above depreciation.
Darner attributed the achievement mostly to a special margin management program where software and training have been rolled out to the sales organizations to manage product mix and pricing with customers.
"We have been able to successfully mitigate the raw material price increases and have improved gross margins and contributions," Darner said. The tools allow managers to analyze the product portfolio, margins and market positions.
"Then you can prepare each discussion in the marketplace and also tell the customer how you can add value by moving to higher value-added products. We are also managing our long-term contracts in a more sophisticated way," he said.
Darner sees few signs of a recession, despite weaknesses in some markets, particularly North American decorative coatings.
"Sometimes you wonder when you read the newspapers and see all the Doomsday scenarios. Then you look at the results and you talk to the managers and we don't recognize it. For the full year, the feeling is good and it has started well."
Following the acquisition of ICI in January this year, Akzo Nobel's chemical business plans to divest the UK coatings and specialty chemical group's starch business, leaving Akzo Nobel with ICI's specialty polymers business, which has ?00m ($613m) in annual sales.
The specialty polymer unit's components have strong synergies with the existing specialty chemical portfolio, says Darner, adding that powdered polymers - used as thickeners for paint, adhesives and insulation - fit well within the company's cellulosic specialties group, part of the functional chemical business.
"This will remain a separate business as we don't want to break up what is running nicely," he said.
The Alco Chemical business, strong in chemicals for water treatment and detergents, fits into functional chemicals and surfactants, while polymers going into personal care "have similarities with our surfactants business, so we're quite excited about that."
ICI's regional and industrial group contained ICI Pakistan, the country's top producer of chemicals and coatings, so Akzo Nobel will also become the dominant chemical producer in that country. "This gives us a nice footbridge to a region where we're not so strong, enabling us to develop other chemical platforms," Darner said.
To fuel growth in China, the company is still considering construction of additional organic peroxide capacity and production of cellulosic specialties at its Ningbo complex. Further options include paper chemicals, surfactants and solvent-based coatings.
Darner said Akzo Nobel is still in an acquisitive mood, with a strong balance sheet, though "of course we've got a bit of digestion to do with the integration of ICI."
He added: "We are looking at a whole range across all sectors following the same criteria: a good strategic fit and financial return. That is the priority of the board when making these decisions."
In the fourth-quarter results, Darner's specialty chemical division posted a record return on investment of 21.7%, up from 17.5% last year and 12-13% four years ago, despite maintaining investment levels well above depreciation.
Darner attributed the achievement mostly to a special margin management program where software and training have been rolled out to the sales organizations to manage product mix and pricing with customers.
"We have been able to successfully mitigate the raw material price increases and have improved gross margins and contributions," Darner said. The tools allow managers to analyze the product portfolio, margins and market positions.
"Then you can prepare each discussion in the marketplace and also tell the customer how you can add value by moving to higher value-added products. We are also managing our long-term contracts in a more sophisticated way," he said.
Darner sees few signs of a recession, despite weaknesses in some markets, particularly North American decorative coatings.
"Sometimes you wonder when you read the newspapers and see all the Doomsday scenarios. Then you look at the results and you talk to the managers and we don't recognize it. For the full year, the feeling is good and it has started well."
