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Tuesday, 26 March 2019

Emerging markets slowing down: thunder in paradise?

Thursday, 8 October 2015 | Posted by: Damir Gagro, European Coatings Journal

Growth rates in emerging economies are not as miraculous as they used to be. Nothing new, it’s all over town. Almost all BRIC countries are struggling. Lately, even China made it on that list. This week two stories came as blow, which more or less are linked to these developments. Henkel cuts 1,200 jobs in its adhesives business and DuPont’s CEO Ellen Kullman retires.

Weak and slowing business activities have been raising concerns in the industry about a cooling of China’s economy. The local government has aimed for a growth of 7 % this year, which is according to "Handelsblatt”, the lowest increase in the last 25 years. As the adhesives business is very cyclical – Henkel derives about half of its revenue from its adhesives business – the job cuts should be completed by the end of the first quarter in 2016. The business employs 27,000 people worldwide. Approximately 250 employees will be affected in Europe. The Chinese slowdown and the development in the business fell behind the expectations, chief executive officer Kasper Rorsted said.

Forecast become more and more short-lived

Simultaneously DuPont announced that CEO Ellen Kullman will retire and that the company will lower their earnings outlook for 2015. DuPont is citing the impact on the stronger U.S. dollar and continued weakening of markets, mainly Brazil, as a reason. According to speculations she was removed because of the company's failure to realize its full-year projection. Many believe that DuPont CEO Ellen Kullman was "pushed out” of the company for fighting activist investor Nelson Peltz. Along with cost-saving programmes he had sought more changes, including the possibility of splitting the company further. Saying that Kullman stepped down or did not achieve all goals in terms of cost-savings just because of slowing emerging markets is not the truth, but it surely contributed.

It shows that forecasts – if at all – are only valid for a shorter period nowadays. The market is in a changing mode. At this year’s CEPE Conference in Krakow/Poland many speakers shared dismal prospects for the future. Nevertheless, in general the opinion among the attending coatings producers quite optimistic.

How do you rate the developments for your business?

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