Yahoo Finance Crown Paints expects profits to bounce back after ‘dismal performance’
Crown Paints has said it expects its profits to bounce back after a “dismal performance’ which saw the brand slump into the red and make redundancies.
The company, which is headquartered in Darwen, Lancashire, and is owned by Danish paints manufacturer, Hempel Group, has just published its delayed accounts for 2022 which reveal it fell to a £8m pre-tax loss, having reported a £13.9m profit in 2021.
Its accounts for 2023, which are due to be published on Companies House by the end of September, are expected to show an improved set of results, Crown Paints said.
The 2022 accounts also show its turnover dipped from £205.3m to £202.8m while its headcount reduced from 1,126 to 1,090.
‘Tough decision’
A statement signed off by the board said: “Crown Paints continued to focus on growth in line with our strategy with particular attention to scalable operations across the business.
“This was brought into sharp focus during 2022 when we saw raw material prices escalating together with supply chain challenges which were heavily impacted by geopolitical unrest.
“The tough decision to re-organise the business in line with the challenging economic climate meant we made redundancies across various functions to ensure the business could maintain its competitiveness in the market.
“We continue to service our customers with our well-established brands through our network of owned stores, independent distributors and retail outlets, supported by excellent customer service both from head office and in the field, to drive value for our customers.”
‘Lack of demand’
Crown Paints added: “Both the retail and trade paint markets in the UK remain highly challenging trading environments.
“In 2022, the decorative paint market dropped by 9.2 per cent, the second consecutive year of drop after the peak of 2020 Covid lockdowns which boosted paint sales.
“The retail business performance was severely hit by lack of demand from DIY customers due to high inflation, cost-of-living crisis and low consumer confidence.
“Crown benefited from launches of its products to new customers and gained some market share with these growth initiatives. New-home building remained robust with high demand for new homes.”
During the year Crown Paints ‘consolidated’ its manufacturing of water-based paint products in its Hull plant and closed its water-based manufacturing plant in Darwen, Lancashire, ice was converted into a distribution centre.
‘Dismal performance’
Crown Paints also said: “With raw material prices remaining at record highs further putting pressure on gross margin, partly mitigated through increases in sales prices and robust cost control, there was reduction in gross margin compared to prior year.
“Furthermore, there was significant increase of utility costs, rates and rents of owned stores, increases in brand investment to support growth initiatives, and one-off costs related to the close down of Darwen…and changes in the organisational structure.
“The company expects the reduced profitability to be a temporary situation and profitability to bounce back in 2023 from this dismal performance.
“In line with market forecasts, the company expects a volume reduction of market growth in 2023, returning to pre-pandemic levels.
“The directors believe that with record highs around raw material costs in both the trade and retail market together, and increased inflationary costs with increased market competition, this will lead to another challenging year.
“The company will continue to offer value, innovation, service and choice to existing customers across the brand portfolio to maximise growth opportunities, whilst working with new customers to explore further opportunities for growth.”
