Opportunities are Plentiful for Akzo Nobel Inks
By Sean Milmo, European Editor
AkzoNobel Inks (ANI) recently celebrated the 100th anniversary of its site in the southern Swedish town of Trelleborg, where it still has its main plant and head office.
ANI has gone through several name changes and owners since it started making inks at its current location in 1901. Shortly it will yet again have to find a new identity.
The company was bought by the management through an MBO supported by NeSBIC, a Dutch-based equity fund, when it was divested in 2001 by Akzo Nobel, the Dutch/Swedish coatings, pharmaceuticals and chemicals group.
Akzo, which acquired the company in 1994 when it was part of Nobel Industries, agreed to allow its former subsidiary to use the Akzo Nobel brand name for three years.
Prior to its takeover by Nobel, it was called AB G-man, derived from its original name of E.T. Gleitsmann, a German group which before World War I had a network of ink production plants across Europe. Since then, its various owners have included the Swedish state for a short period and Stora, the Swedish paper maker now enlarged into Stora Enso.
Heading Out On Its Own
ANI will soon not only need to find a new brand name but alsonew financial arrangements, since NeSBIC, specializes in supporting management buyouts and normally stays as investors for three to five years.
However, the change will give ANI the opportunity to become better placed in the ink market, which is still undergoing consolidation particularly among medium-sized ink makers like itself.
Its main target for expansion is the packaging inks sector, which last year accounted for two-thirds of its E194 million ($204 million) turnover, with the majority of its packaging sales coming from narrow web inks in which it is the global leader. It also produces coldset web and sheetfed offset inks, mainly for the Scandinavian, German and U.K. markets.
“Although we are number one worldwide in narrow web, we believe we should be even stronger and further grow by acquisitions,” said Peter Koivula, Akzo Nobel Inks’ president and chief executive.
“In wide web, our other packaging inks business, we need to be stronger in areas of Europe, especially in corrugated board and pre-print in which we are number one in Scandinavia,” he added.
The necessity of a name change would be simplified by adopting its acronym ANI as a brand. It is already thinking about the design of an ANI logo.
“We probably need to have something ready by the end of the year to give us time to be well prepared for the moment when we can’t use ‘Akzo Nobel’ any more,” said Bertil Ahlberg, Akzo Nobel Inks’ marketing director.
Meanwhile the company is considering candidates with sales of E10 million to E50 million ($11 million to $58 million) for a possible bolt-on acquisition.
"We have quite a strong financial position and can act rather freely without further involving NeSBIC," says Mr Koivula.
The big opening could come, however, when NeSBIC decides to exit the business with one option being to merge the company with another ink maker.
The appeal of this move is that it would solve the difficulty of establishing a new brand name.
“We could combine with a company with a name which is well known in the printing inks market,” said Mr. Koiluva. “We are already looking ahead and talking to people. A good brand name is important in this business.”
Akzo Nobel Inks wants to grow in selected areas of the ink industry, in which it is currently 11th worldwide and seventh in Europe. A merger, possibly with another middle-order player, would help to push it up the league table, particularly the global one.
Outside of the narrow web sector, Akzo Nobel Inks is mainly a regional ink manufacturer with a firm base in the Scandinavian market, where it has half its 860 employees. It is the largest among three Nordic producers, with the others being Torda of Norway and a Finnish-based subsidiary of SICPA.
The company believes that it needs to take advantage of the persistent trend to greater concentration in the inks market, both geographically and within product sectors.
“The world is continuing to shrink and there seems no reason why consolidation in the industry should stop,” said Mr. Koivula, who joined ANI three years ago after nearly 10 years as an executive in Sun Chemical.
“Customers are consolidating as well,” he explained. “They want single-source suppliers who are able to serve all their local needs throughout the world. That is why you need to build up a good local technical service by cutting down on production costs through using bigger plants and taking advantage of cheaper logistics.”
ANI has been restructuring by streamlining its supply chain from production through to its sales and technical services units and distributors where ink concentrates are mixed to meet specific customer requirements.
Its objective is to have mother plants at Trelleborg making its coldset, sheetfed and narrow web inks. There would be another mother unit for liquid packaging inks at Broendy, near Copenhagen, Denmark, which used to be part of the Sadolin printing inks business before it was merged with G-man to form Casco Nobel Inks in 1989.
Within Europe, ANI currently makes coldset inks for the newspaper sector at the Swedish and Danish sites, in Norway and at Cologne, Germany, where at the moment it has no plans to stop production.
With 75 percent of its sales now coming from outside Scandinavia, the company has 37 production, sales and distribution sites in 22 countries worldwide. It has representatives in another 40 countries.
In North America, which accounts for about 20 percent of its sales, it produces and markets mainly narrow-web inks. The U.S. operation is in principle based on water-based inks from the former Louis Werneke Ink Group, Plymouth, MN, which it took over in 1998, and the UV curing range of products from Akzo Nobel Ink’s U.S. company.
ANI also distributes sheetfed inks in the region through Atlas Graphics of Toronto.
“We want to grow faster in North America and are looking at acquisition options,” said Mr. Koivula.
Outside of Scandinavia, its main markets in Western Europe are the U.K., Ireland and Germany, which last year between them had a share of group sales of more than 20 percent.
In addition to the Asia Pacific region, its big growth market is Eastern Europe, in particular Russia, which now provides 6 percent of sales and where ANI now has its own sales office in Moscow.
The company has been active in Eastern Europe since the the days of the Communist Bloc, when it was able to take advantage of Sweden’s neutrality.
“We were there in times of tough market conditions and that worked in our favor in the good times after the fall of the Communist regimes,” said Mr. Ahlberg. “We also have the geographical advantage of being able to deliver inks relatively easily to countries like Poland, Czech Republic and Hungary.”
ANI has been streamlining its portfolio to enable it to concentrate resources on its four core businesses of narrow web, liquid, coldset and sheetfed inks. Last year, it sold its can coatings activities to Altana of Germany, and it has just found a buyer for its metal deco ink business for metallic packaging and metal cans.
The company’s fastest expanding activity is narrow web inks, in which sales are growing at more than 5 percent annually worldwide with rates of 10 percent to 15 percent being achieved in Eastern Europe and Asia.
It is the leading company worldwide in this business segment, with SICPA as its main international rival. Its other competitors are mostly local ink producers serving typical narrow-web printers in segments like self-adhesive labels, small-size packaging, sleeves and rigid plastic containers.
“There are a lot of consumer products, like in pharmaceuticals, cosmetics and wines, whose manufacturers believe that the design of the label is the way to be seen on the shop shelves,” said Mr. Koivula.
“Narrow web also gives them the opportunity for shorter runs for packaging designs which they want to be on the market for only a short period,” he added.
It is also a sector which requires a high level of technical service. As a result, ANI has sales and distribution centres for narrow web inks in six European countries, as well as in South Africa, China, Malaysia, U.S. and Brazil.
“It’s a kilogram-batch business in which you need to be close to the customers so the local offices are more like sales and warehousing companies,” explained Mr. Koivula.
“The customers need a lot of support because of the complexity of having different printing processes, such as flexo, gravure, letterpress, offset and screen, in one line with all the inks being compatible,” he continued.
In the wide web liquid inks market, ANI also has a leading position in another niche segment – envelope inks, in which it claims to be the biggest European producer with a 30 percent market share.
It was one of the first to move into the market 40 years ago when the Danish press equipment manufacturer Nilpeter introduced a new envelope label printing machine and chose ANI – then G-man – as its recommended ink supplier.
“No one was interested in this new market because it meant producing small batches,” said Mr. Ahlberg.
Since then, ANI has been working with press manufacturers and envelope makers to keep itself in the forefront of the sector. It has created similar close ties with equipment and label suppliers in the narrow web market as well.
A combination of these alliances and the priority it gives to customer service is providing a platform for improved profitability. It aims to raise its operating profit (EBIT) margin from 5 percent to 10 percent in recent years to more than 10 percent, or more than twice the current average for ink manufacturers.
“We think the whole industry needs to raise it EBIT margin above 10 percent if it is to be able to invest in the future,” said Mr. Koivula. ANI is determined to set an example to other medium-sized ink producers as it searches for its new identity over the next few years.