Leverage control and debt reduction have been the goals of coating companies in recent years. However, under the influence of the New
Crown epidemic, the importance of financial security has become more prominent, especially cash flow. To this end, the paint boss is
more determined to carry out a self-salvation journey: control costs, divestiture bad business, eliminate losses and no quality
growth, ensure cash flow, but at the same time ensure market competitiveness.
It can be said that in the face of the uncertainty brought about by the new crown epidemic, the paint tycoons have placed their profit
quality on a strategic position, and the company’s immunity is reflected in the king of cash, so "pursuing profitable income and cash
"Stream profit" is particularly important.
Buffett's most famous comment on cash flow is: "Cash is oxygen. You will not pay attention to it 99% of the time until it is gone." It
can be said that catching cash flow is the eternal theme of paint companies. When the situation is good, there is income and there is
profit, but in the "cold winter" period caused by the new crown epidemic, changes in market competition and changes in environmental
resources have caused many companies to face tight funds and cash flows.
At the moment, all paint companies are facing a bloody reality, that is, how to carry this history has not changed. The resources
output by the terminal demand cannot meet the survival and development of the enterprise, then the internal austerity measures will
follow. Recently, the global coatings giant PPG has announced a 15%-30% reduction in the salary of the Chairman and the CEO and all
executives. The adjustment has been effective since April 1. In addition, the salaries of paid professionals will also be temporarily
reduced. It is expected From May 1st lasted 6 months.
Regarding the temporary salary reduction action taken by PPG, Li Mingyue, an observer of Tu Jie, believes that because of the highest
proportion of PPG's fixed costs, salary of executives and employees accounts for layoffs. Therefore, PPG takes temporary pay cuts to
reduce costs and increase cash flow, which is also a short-term self-help option.
Not only PPG, other coating giants are also actively taking action to ensure cash flow through various measures. On April 8, AkzoNobel
announced the issuance of 750 million euros of bonds on attractive terms, with a maturity of ten years and a coupon rate of 1.625%.
The company stated that the issuance of the bond took advantage of favorable market conditions and extended the duration of the
company's overall bond portfolio. The bond will be issued by Akzo Nobel and will be listed on the Luxembourg Stock Exchange. Settled
on April 14, 2020, the bonds will expire on April 14, 2030.
Akzo Nobel stated that the company has a strong balance sheet and strong cash position. As of December 31, 2019, net cash and cash
equivalents were 1.2 billion euros, and financial leverage was 0.7 times net debt/EBITDA. The company has 1.3 billion euros of unused
revolving credit lines with a maturity date of 2025. The next bond maturity date is 750 million euros in July 2022. Akzo Nobel is
committed to maintaining a strong investment-grade credit rating.
Tu Tu reporter noted that Akzo Nobel announced on March 31 this year that it suspended the key part of the company’s transformation
and suspended its financial goals for 2020 in response to the severe market chaos caused by the pandemic of the new coronavirus
(COVID-19) . "There is currently little reliable visibility in the second quarter, but we expect the end market demand to be much
lower than any of our previous expectations." AkzoNobel CEO Thierry Vanlancker said.
As Asia's largest paint manufacturer, Nippon Paint Holdings is also taking action to secure cash flow. On April 10, Nippon Paint
Holdings Co., Ltd. issued an announcement that in order to ensure the liquidity of the cash on hand, the company signed agreements
with two Japanese banks on the commitment amount and the borrowing of funds. The company stated that the financing is not expected to
have a significant impact on our business performance and financial condition.
Tu Jie reporter noticed that Nippon Paint signed a commitment quota agreement with Sumitomo Mitsui Banking Corporation and Mitsubishi
UFJ Banking Corporation, and obtained the largest loan of 180 billion yen (about 11.7 billion yuan) unsecured/guaranteed The contract
period is 1 year. At the same time, Nippon Paint also signed a loan agreement with the two, and obtained a total of 20 billion yen
(about 1.3 billion yuan) from the two banks. The loan period is 1 year.
Domestic paint tycoons are also actively taking action. On April 13, Sankeshu (603737), a leading domestic paint company, announced
that the company plans to issue no more than 5,793,742 shares (including the principal) at a price of 69.04 yuan per share, and the
total amount of funds raised will not exceed 40,000 Ten thousand yuan (including issuance expenses), used to supplement working
capital after deducting issuance expenses.
In response to the purpose of this non-public offering, Sankeshu stated that one is to provide sufficient financial guarantee for
business development; the other is to reduce the company's asset-liability ratio and enhance its ability to resist risks. "After the
completion of this issuance, the company's total assets and net assets will increase, and the company's financial strength will be
further strengthened, which can effectively reduce the company's asset-liability ratio and financial costs, and improve the company's
financial ability to resist risks."
Tu Tu reporter noted that there have been many paint tycoons taking various measures to deal with the impact of the epidemic,
especially in terms of safeguarding cash flow. For example, Axalta, who ended the strategic alternative assessment due to the
epidemic, said its chairman and CEO Robert Bryant: "Since the announcement of the strategic assessment last June, we have achieved a
strong three consecutive quarters. Financial performance, including strong operating profit and free cash flow for the full year of
2019. After this strong result, the global market experienced an unprecedented decline this quarter."
Based on the impact of the epidemic, Axalta took rapid and decisive action, planning to respond to the impact of customer demand
reduction on some of its business areas, including cost structure adjustments throughout the organization. "We believe that the
actions we are taking, coupled with a strong balance sheet and sufficient liquidity, will enable us to get out of this crisis with a
strong stance." Robert Bryant said.
In addition to issuing bonds to raise funds, AkzoNobel is also taking other measures to ensure cash flow. "We are closely monitoring
the new crown epidemic and taking all necessary measures, including measures to quickly reduce costs and carefully manage cash flow in
the short term," said Akerry Nobel CEO Thierry Vanlancker.
Although operating income and profits achieved growth in the first quarter of 2020, Lipa Mail (RPM) took active measures in February
of this year to increase its financial flexibility and improve its revolving credit by obtaining a $400 million term loan Available
liquidity under the tool. In addition, in view of the macroeconomic uncertainties caused by the recent pandemic pneumonia epidemic,
Lipamax also suspended its stock repurchase program.
"Like most companies, we expect that our financial performance will be affected by the damage and uncertainty caused by the new
coronary pneumonia outbreak to the global economy. Since we cannot predict the duration or scope of the pandemic, we cannot reasonably
estimate The financial impact of our results may be significant," said Frank C. Sullivan, chairman and CEO of Lipamai.
"We will continue to assess the situation and long-term impact of the new coronary pneumonia epidemic. In this environment, we will
take proactive measures to manage cash flow by reducing working capital, capital expenditure and disposable expenditure. In this
regard, the MAP growth plan’s The timing is lucky for us because we have increased our profit margins and are beginning to see the
benefits of a reduced working capital plan, which has improved cash flow this year." Sullivan said.
Tu Ming observer Li Mingyue believes that in the face of this extremely special epidemic situation, paint companies will face more
serious challenges. Companies with insufficient cash flow and low operating efficiency will be the first to face the severe market
situation. Even for paint bosses with good cash flow, they still have to rebuild their cost capabilities, because dealing with
uncertainty is a normal ability.
Li Mingyue said that with the deteriorating situation of the global coatings industry, the worries of coating tycoons are increasing
day by day. For paint companies, if there is no sufficient cash flow, it will be greatly tested in this epidemic. It is not only small
and medium-sized enterprises that are affected by the epidemic's cash flow pressures, but also the paint giants. Next, how to win this
cash flow "defense battle" is crucial!