Difficult economic conditions can be a time for committed companies to expand market share and establish themselves for the long term. Mikael Ruben, Managing Director of paint manufacturer AkzoNobel tells Business Advantage PNG his company sees the need to remain aggressive in Papua New Guinea.

AkzoNobel staff. Source: AkzoNobel

‘We have just celebrated our 50^th anniversary in PNG,’ Ruben tells Business Advantage PNG. ‘So that means we are rather resilient. The cycles have been up and down, and right now we are in a down cycle. In the aftermath of the PNG LNG project, business has been a bit slower for us. There are not a lot of funds coming into the country such as royalties and the like.

‘We are dependent on infrastructure projects and on an expanding construction sector—and the demand right now is slightly less.’

‘The market is much more open and competitive. Other players came in and some of them are quite aggressive.’

Ruben says AkzoNobel, which manufactures paint under the Taubmans brand in PNG, enjoyed a leading market position prior to Exxon Mobil’s PNG LNG project. But, as the PNG economy surged and the market expanded, more competitors emerged.

Open market

‘The market is much more open and competitive,’ he says. ‘Other players came in and some of them are quite aggressive.’

Ruben says the overall market right now is not ‘growing much,’ and ‘it has more players’. He says low cost, low quality imports from China and other Asian countries are also increasing, estimating that this now accounts for roughly 25 per cent of the market.

‘We have to follow the kina downward trend and it affects the margins—but so far not dramatically.’

‘The thing with low cost and low quality paint is that many of the labels are not in English, which actually is a health and safety issue. Do note that AkzoNobel is very much in favor of a fair and open competition but this is not always the case in today’s environment.’

AkzoNobel’s Mikael Ruben

Currency issues

Ruben says one of the bigger challenges for the company is the weakening of the kina and the lack of availability of foreign exchange. The company imports about 95 per cent of its products, intermediates and packaging—mainly in US dollars.

‘We have to follow the kina downward trend and it affects the margins—but so far not dramatically. But if it continues it will be difficult. We are monitoring our competitors, of course; if they start to increase prices then you have inflation.’

Ruben nominates infrastructure problems as one of the operational challenges the company faces. But he is optimistic for the future, saying internet speed has improved over the years.

‘The company has global systems for managing its personnel, which are adapted to PNG conditions.’

‘There is still room for improvement in other infrastructure matters such as: power cuts, water shortages, and high logistics costs. We ship our products around the country to reach our customers and that all impacts on the operational challenges for the company.’

Human Capital

AkzoNobel Group is a leading global paint manufacturer based in Holland. It has operations in more than 80 countries and employs over 50,000 people.

Ruben says the company’s PNG operations are part of its East Asia operation (SESAME), headquartered in Singapore.

The company has global systems for managing its personnel, which are adapted to PNG conditions. Ruben says all the compliance is run from the company’s headquarters, including health and safety, sustainability and product stewardship. But, otherwise, there is a local emphasis. ‘When it comes to dealing with our customers, the local managers develop the relationships,’ he says.

‘We are trying to be aggressive in the market: activate the re-sellers to create demand and to improve demand for our products’

Ruben says there is a heavy focus on fostering the staff’s capacity. ‘Human capital management is very important. It is one of the reasons why we are trying to develop local capability.’

Ruben says AkzoNobel has its own ‘AN Academy’, which uses e-learning techniques to train employees in areas ranging from compliance to health, safety and the environment. ‘We have that because it is expensive to send people abroad, although we do it from time to time.’

Retaining people has been a challenge. Ruben acknowledges that staff turnover is high.

‘Lately, though, there has been much higher retention. The cycle has turned there.

‘For several years now, the Group has conducted a survey among all its employees—called Viewpoint—which measures our staff’s engagement and inclusion. From there, we come up with local actions to improve and to get higher engagement, because this is the way to move the company forward. We are pleased to see the scores improving over the years. If we have engaged and dedicated teams then, of course, productivity and also the retention rates will go up.’

Challenging times

Ruben, who is Swedish, says he has been working in PNG for 11 years. He considers the present market conditions to be the most challenging he has faced so far. ‘The combination of a flat market, increased competition, no improvement in law and order—it is actually a very tough situation.’

He says the company has a ‘significant part of the market’ but still believes there is a good opportunity for the company to get its ‘house in order’ and be well prepared for the next upswing in the market. The aim is to increase market share.

‘We are trying to be aggressive in the market: activate the re-sellers to create demand and to improve demand for our products. After 12-to-18 months then you will probably see some light at the end of the tunnel and then we will be there ready to meet the new demand and serve our customers.’