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Nov 07, 2007

Newly listed Chemspec seeks greater participation in global paint market

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© Reuse this Newly listed paint and coatings manufacturer ChemSpec will be investigating opportunities to expand its stake in the international paint market, which is currently valued at some $150-billion, CE Strath Wood said on Wednesday.

The group has an aggressive export strategy, which it said was enabled by the fact that it did not manufacture under a licence.

Chemspec was looking to increase its foreign sales from 13% in 2006/7 to 24% in 2007/8.

Its South African sales accounted for 87% for 2006/7 and are forecast to contribute 76% for 2007/8.

FD Bruce Mackinnon explained that the company had established itself predominantly in the automotive paint market in the US, Australia and New Zealand, supplying paint for vehicle refurbishment rather than original equipment manufacturers.

ChemSpec acquired a well-established paint business in the US with its own infrastructure and an existing footprint to facilitate its entry into the market. It also runs a distribution operation in Australia to cater for the region, including New Zealand.

Mackinnon commented that the company's success in the foreign market's could be attributed to the fact that it was 30% to 40% less expensive than other products, because its manufacturing base in South Africa was cheaper and its margins were lower than other foreign companies.

ChemSpec products are also sold in Canada, the Caribbean, Mexico, Poland, China, Russia and India.

He said that the only potential problem going forward would be to fulfil this demand.

To deal with capacity constraints ChemSpec acquired some 200 000 m2 of land, valued at about R70-million, in the Canelands, KwaZulu-Natal, on which a new facility will be developed.

Mackinnon noted that the facility was expected to be completed in March next year and to be fully operation by mid-2008. The new facility, which is focused on "efficiency savings", will absorb the four factories that are currently operational.

Mackinnon commented that the facility provided more than enough capacity with significant room for future growth.

ChemSpec is also looking to increase its House of Paint franchise stores nationwide and has identified 160 sites, including previously disadvantaged areas, to be developed over the next five years.

On the research and development front, Wood pointed out that ChemSpec is currently linked with a US university for the development a nanotechnology- enhanced paint that is dirt-repellent. He added that Chemspec has the licence for the product and it is expected to be released early next year.



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