PACHIN: Leading the paints market in Egypt, no. 81 in the world

Interview with Eng. Mohey Abdel Rezek, Managing Director of PACHIN

Let us start with the assessment of the painting industry, which is directly related to the construction industry. How do you view the paints industry in Egypt and what are the current trends?

The painting industry is a part of the chemical industry in Egypt. But paint itself is available in the market as one of the consumer goods. So, this industry is dependent on the prices, the availability in the market, on the quality and on the margins and so on. This industry is therefore sensitive to these parameters, which are affecting the supply and demand ratio. On the last 3 years the market in Egypt has been very volatile due to the security, political and social situation in the country t. But among all the other companies PACHIN has been able to maintain its growth throughout the market. The market itself was in a stagnant position, but PACHIN was able to improve its market share and increase the revenue. This has been possible mainly because the management has principally focused on the HR (Human Resources), the people. This has been one of the top priorities of the company. By putting some HR related rules and regulations in place, we were able to maintain an acceptable stability level for the company. Based on this stability, we could achieve our goals of developing our position in the market.

PACHIN was started 50 years ago. Your last report states that your revenue surpassed the one-billion Egyptian Pounds thresholds. What types of paints do you bring into the market? Where do you see the most demand right now?

PACHIN is one of the oldest companies manufacturing paints in Egypt & started its operations in 1958. We are now manufacturing all types of paints from decorative to industrial paints, in addition to printing ink. We have an old printing Inks manufacturing plant for which started operations in 1964, and we also manufacture alkyd resins. This is one of the intermediate raw materials for paints & inks. So, we are really the market leaders in our field. There is no other company with all these 4 business lines – decorative paints, industrial paints, printing ink and alkyd resins.

These are your own paints. Do you also represent some international brands or do you only manufacture your own brands?

Sure, we have relationships with international companies. We have some agreements in the form of licensing and/or distribution. We have licensing and distribution partnership with AKZO Nobel. This is the number one company in the manufacture of coating. Also, PACHIN ranks number 81 among the top 100 companies in the world.

We collaborate with other international companies in addition to AkzoNobel.  We have an agreement with NovaColor. This is an Italian company specializing in decorative products for premium markets. We also have an agreement with Chugoku Marine Paints, which manufactures marine paints in Japan. This Company ranks 20 among the top 100. AKZO Nobel is number one, Chugoku is number 20, and PACHIN is number 81. So, we have very strong and lasting relationships with international companies.

Are you planning on expanding your presence in Egypt in terms of adding new factories?

We won’t be adding new factories, but we are expanding geographically with new branches all over Egypt. We now have branches in about 5 cities from the Delta up to Upper Egypt. We have more than 250 outlets, part of them is owned by PACHIN and most of them are franchises. We have a plant in Libya. We have exclusive distribution rights for NovaColor in Egypt, Libya and Tunisia.

We have a 5-year strategy (from 2013 to 2018). The greater vision of this strategy is to develop PACHIN from just a local player in Egypt to being an important regional player in our region, which includes the Middle East and North Africa. The COMESA countries are among our scope of interest.

What are some of your immediate targets in terms of your regional expansion? You mentioned Libya, Tunisia and some other countries.

We are expanding in Libya. We only had one small plant there. We plan to expand further there.

What is the portfolio of your clients? Of course, you have many individual customers, but can you mention some larger industrial companies?

Our distribution channels are mainly classified into wholesalers, retailers, outlets and contractors. Wholesalers take up the biggest part of our products. We then have retailers. They belong to our company; they are our staff, our team. Then there are outlets. We own a small part of them, but most of them are franchises. Then of course we have the team of contractors and big projects. All these deal with decorative paints. But everything related to industrial paints and printing ink mainly entails business to business relations. This means that our staff directly deals with business institutions. This even includes newspaper or manufacturing companies working on the highways, roads, gas and water pipelines, industrial floorings, storage tanks, and bridges and all other industrial applications. So these are the different kinds of interactions that we have with different clients.

What type of paints are you trying to promote at the moment? Are there specific paints for example premium etc.?

In general, the market is divided into 3 categories – economic, medium and premium. The economic category is very small. The medium category comprises the bulk of the market and a very small part of it belongs to the premium category. PACHIN is the market leader in the medium category, which owns about 70% to 75% of the market. But due to our targets to enhance our profitability, right now we are focusing on the most profitable products. We are focusing on the premium market, which really comprises not more than 10%, but this is a very profitable segment.

Please tell us about your vision for the company. Where would you like to see it in the future?

The vision of our company is very obvious in our strategy. As I mentioned, our big vision is to change PACHIN from a local Egyptian player to a regional layer. But speaking about values or volumes, last year our revenues surpassed 1 billion Egyptian pounds. Our target is to reach 1.5 billion Egyptian Pounds as revenues at the end of next 5 years. Based on the prices in 2013, this target is a lot more. Our revenue at the end of 5 years will be more than 1.6 to 1.7 billion Egyptian Pounds. Volume-wise our target is to increase our revenues by more than 60%. This is our big vision. In the next 5 years, we would like to develop our market share in printing ink. We are the sole local manufacturer of some kinds of printing ink like offset ink and ink jets. We would like to enhance our market share in these segments. Also, in the industrial area, relying on our relation with Chugoku, we would like to develop our market share in marine paints and heavy duty paints.

What makes your company different from other companies? What sets you apart?

PACHIN is different in some aspects like our modern facilities. We have the latest and most modern manufacturing facilities in the Middle East area with big capacity. We have a very huge resource of R&D (Research and Development), with 4 different laboratories exclusively dedicated to decorative paints, industrial paints, printing ink and alkyd resins. We have a large Sales and Marketing team. We have a very good reputation in the market. Our customers are extremely loyal to our products. Last but not least is our team. Our team is extremely loyal. They have been working in the business of paints and inks since 40 years. PACHIN is considered THE institute of paints in Egypt. If you go to any other company working in this field, you will find at least 5% to 10% of the employees will be ex-PACHINers. Even some owners of our competing companies were ex-PACHINers. This is what differentiates us from other competitors.

So you are pioneers in this field.

Yes, I believe we are.

What are some of the challenges you face in this industry?

There is of course competition in the industry. There are lots of manufacturers in Egypt. The second challenge is, after 3 years of instability, about 20% of the market is taken by the unofficial manufacturers. They do not follow any standards or quality, no legal permissions, no tax registration but they offer low-priced products. They entail 20% of the market. The third and last challenge for PACHIN in particular is the situation in Libya. We have a plant in Libya and we used to export a lot of our products to Libya. Our business in Libya forms 10% of our revenues. The instability in Libya is a big risk to PACHIN.

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