Recession watch: Demand for paint

Here is a good example of how fluctuating demand in one industry has an effect on sales and profits in another.

Akzo Nobel, the world’s largest paint maker, which bought the Dulux paint manufacturer when it took over ICI last year in a deal worth £8 billion, has announced a sharp fall in profits to €367 million. They plan to make 3,500 workers redundant including many workers in the UK. Business is being affected by the international slump in residential and commercial property construction which has led to a fall in market demand for decorative paints. Paint is a product where much of the volume of sales is derived from demand for the uses for paint. So a slump in the building industry - with many housing projects being mothballed - will impact on sales.

And profits are being squeezed by a rise in the costs of raw materials used in manufacturing paint.

The Dutch business has a world-wide reputation for producing high quality protective paints and other coverings used in home and industrial applications. Just recently they won a sizeable contract from McDonalds which involves supplying a range of paint products for the re-imaging of hundreds of its Purely Simple style restaurants.