Paint supplier DuluxGroup may consider pulling out of its joint-venture business in China as its paints brand struggles but has flagged higher hopes for Indonesia, with plans to start selling some its Selleys products into the growing market there.
DuluxGroup lifted profit by 9.6 per cent to $142.9 million for the year to September 30, and said on Wednesday it expects to deliver an even better result in the year ahead.
Strong growth in the group's Dulux Australia-New Zealand business contributed the bulk of earnings, driven by positive markets and good margin management, and Selleys Australia and New Zealand also lifted.
But earnings from DuluxGroup's "other businesses" segment, which includes the Yates garden care range, PNG, south-east Asia, and China's DGL Camel paints business fell because of a weaker Camel result.
DuluxGroup managing director Patrick Houlihan says DuluxGroup's China business generates about $50 million in revenue, or about three per cent of group revenue.
The China business comprises Camel paints, which is the largest part, and the Selleys range.
Camel and Selleys are profitable in Hong Kong, and Selley's has prospects for success on mainland China, but the Camel paints business has struggled from lack of scale and lack of brand awareness and delivered a poor result in fiscal 2017.
The Camel paints joint-venture started in 2012.
"We just don't have the competitive ratio (with Camel)," Mr Houlihan told reporters on Wednesday
"We doing a strategic review of that business at the moment, particularly the coatings (Camel) portion of it.
"As to what that concludes, I won't pre-empt."
Mr Houlihan said Indonesia has good prospects.
DuluxGroup is partnering with Avian Paints, one of the largest paint companies in Indonesia, to sell some of the Selleys adhesives and sealants range starting in mid-2018.
Mr Houlihan said the joint-venture with Avian has the potential to ultimately access about 40,000 retail hardware outlets in a large and growing market.
"It's going to take a few years to build - this won't be transformative overnight," Mr Houlihan said.
"Over the short term, it will really be about launching in quite a considered matter, portions of the range, one at a time."
DuluxGroup expects its Australia-New Zealand business to remain resilient in the year ahead with its core markets - home renovation, housing construction and commercial markets - forecast to provide solid growth in 2018.
DuluxGroup also said its new paint factory in Merrifield in Melbourne is schedule to begin commercial production in the first half of the 218 financial year and will support the company for decades to come.
Shares in DuluxGroup were 20 cents, or 2.6 per cent, higher at $7.74 at 1117 AEDT.
DULUX LIFTS ANNUAL PROFIT, DIVIDEND
* Full-year profit up 9.6pct to $142.9m
* Revenue up 4pct to $1.8b
* Fully-franked final dividend of 13.5cps, up from 12.5 cents
