Barloworld brushes off sale rumours
Carli Lourens
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Trade and Industry Editor
BARLOWORLD has denied rumours that it plans to sell its troubled Australian paint business, but some analysts believe this may be on the cards.
The Sydney Morning Herald reported yesterday there was speculation that Barloworld could sell unprofitable Australian operation Taubmans, which is one of BarloworldÆs two major paint brands in that market.
BarloworldÆs Australian MD, Garth Smart, was quoted as saying conditions were difficult, but that there were ôno immediate plansö to sell the business.
The newspaper quoted an unnamed paint supplier as saying that Barloworld was already running down much of its stock, and had informed its distributors that a major announcement would be made this week.
Smart denied this.
An analyst in SA, who declined to be named, said the Australian paint market was weak, and retailers had all the power. In addition, Australia had served its purpose as a launch pad for BarloworldÆs paint production activities into China, he said. These factors alone made a good case for the business to be sold. ôI wouldnÆt be surprised if they do,ö said the analyst.
Another analyst said it was not in BarloworldÆs nature to sell a business after one bad set of results ù unless the group received a ôridiculousö offer.
He said, however that paint producers were always at ransom to retailers in Australia. Retailers such as Bunnings enjoyed a skewed balance of power as paint had to be sold under the retailerÆs name, preventing paint suppliers from building brands.
Barloworld attributed the loss reported by the Australian business earlier this year to weak industry conditions, which led to a 12% decline in sales, and a de-stocking exercise by the largest customer, Bunnings. Lower building activity fuelled competition, it said.
BarloworldÆs paint division had revenue of R2,4bn in the year to September last year.
The Southern African and the Australia and Asian divisions had contributed almost equally to revenue.
But the Australian and Asian operationsÆ contribution to operating profit was only R23m, while the southern African division delivered R215m.
Barloworld said in May this year that despite the pressures in the Australian market, the business had improved its market share ôslightlyö.
The group expected an improved performance from the business in Australia in the second half of the financial year.
Barloworld rival Wattyl in Australia launched a $50m takeover for Taubmans 10 years ago, but the deal was blocked by competition authorities.
The Herald said that with the growing market power of retailers such as Bunnings it was argued the competition authorities would now approve such a deal.
BarloworldÆs global coatings head office in SA could not be reached for comment yesterday.
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