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GROWTH DRIVERS 2 BPB annual report 2003 DEMOGRAPHIC CHANGE

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Page 1: BPB Annual Report 2003 - Investis Digitalfiles.investis.com/bpb/annual2003/ar_2003/files/...market positions in most of the world’s largest economies Plasterboard, where BPB holds

GROWTH DRIVERS

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BPB annual report 2003

DEMOGRAPHICCHANGE

Page 2: BPB Annual Report 2003 - Investis Digitalfiles.investis.com/bpb/annual2003/ar_2003/files/...market positions in most of the world’s largest economies Plasterboard, where BPB holds

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BPB annual report 2003

GROWTH IN SALES VOLUMES:Global needs for the creation ofadditional living, working andrecreational space are increasinglymet by using plasterboardsystems, BPB's primary business

In North America, the world’s most developed market, annualplasterboard consumption is nearly 10 square metres per head, and still rising

Activity in the more developedmarkets of Europe is progressingabove 3 square metres per head,about half the current estimatedpotential, while elsewhere inexpanding markets demand hasyet to exceed 2 square metres per head

Consumption in key emergingmarkets, such as Asia, is movingforward from a much lower base,but with sales volumes growingfast

Page 3: BPB Annual Report 2003 - Investis Digitalfiles.investis.com/bpb/annual2003/ar_2003/files/...market positions in most of the world’s largest economies Plasterboard, where BPB holds

DIFFERING DEVELOPMENT STAGESWorld plasterboard demand is characterised by average annual growth in excess of 6%, but this masks a much more dynamic globalenvironment with many markets at differingstages of development opportunity: the Europeanplasterboard market (comprising national marketsranging from more-developed to emerging)currently achieves long-term annual volumegrowth of 5% to 6%; the more advanced NorthAmerican market continues to grow at a long-term average annual rate of nearly 3%; and theRest of the World, split broadly equally betweenemerging markets and more developed markets,is growing much faster.

EVOLVING MARKET DEMOGRAPHICSPlasterboard systems continue to record some of the best market penetration and productgrowth rates in the building interiors sector, associo-economic factors driving the development of communities around the world ultimatelycontribute to the scale and pace of constructionactivity and influence the degree of sophisticationadopted in local building practices.

INCREASING AFFLUENCE AND URBANISATIONAgeing populations, declining traditional buildingskills, and increasing individual capital affluence,which are apparent in the more advanced anddeveloping economies, signal a trend towards achange in market segmentation for plasterboardusage – with the new commercial sector generallyreducing in segmental importance to 30% or less, all-sector repair and renovation rising to 30% or more, and new residential increasing to at least 40% in more developed markets.

Sustained economic growth, rising educationalstandards, and higher lifestyle aspirations arereflected in continuing urbanisation in emergingmarkets, offering the prospect of substantialplasterboard penetration in the commercial sector – leading the way to greater penetration against traditional building products in theresidential sector.

FOCUSING OUR STRATEGY Globally there is, therefore, considerable potentialfor greater demand through faster penetration inemerging regions and broader applications ofeasy-to-install systems in developing and moredeveloped markets. Our business leadershipstrategy remains clear: we seek to position BPB asthe preferred choice for interior building systemsthat provide innovative design solutions.

PRAGUE, CZECH REPUBLIC – MULTI-SCREEN CINEMAAS ECONOMIES DEVELOP AND TRADITIONAL BUILDING METHODS ARE SUBSTITUTED BY FAST-TRACK PLASTERBOARDSYSTEMS, PUBLIC BUILDINGS, SUCH AS MULTI-SCREENCINEMAS, REPRESENT IMPORTANT MARKET ENTRY POINTS –DEMONSTRATING BPB’S ABILITY TO MEET HIGH-LEVELSPECIFICATIONS FOR STRUCTURAL INTEGRITY, DESIGNAESTHETICS, FIRE PROTECTION AND ACOUSTIC ABSORPTION

ONTARIO, CANADA – SECOND HOMESBPB CANADA SUPPLIED ALMOST 80% OF THE WALLBOARDPRODUCTS FOR THE BLUE MOUNTAIN RESORT, WHICHBOASTS A 137-HOME CONDOMINIUM/HOTEL AND ACONFERENCE CENTRE. CONTINUING STRONG DEMAND FOR SECOND HOMES IN CANADA AND THE US ASSISTS IN MAINTAINING HIGH PER CAPITA CONSUMPTION RATES IN THE NORTH AMERICAN MARKET

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BPB annual report 2003

ADVANCINGSTANDARDS

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GROWTH IN THE VALUE CHAIN:Working closely with specifiers,distributors and installers, we are committed to meeting thediverse needs of the residential,commercial and renovationmarkets for interior buildingsystems

We offer the widest range of high quality, innovative buildingsolutions for active spaces in retail,education, health care, work andhome environments

Operating from efficientmanufacturing platforms, our aim is to optimise the product andservice offering at every stage ofmarket development

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BPB annual report 2003

Page 6: BPB Annual Report 2003 - Investis Digitalfiles.investis.com/bpb/annual2003/ar_2003/files/...market positions in most of the world’s largest economies Plasterboard, where BPB holds

MEETING MARKET NEEDSDemand for interior lining solutions that deliver acombination of higher technical performance andcreative design continues to grow, particularly inthe renovation sector, and is met by BPB’sincreasingly sophisticated offering of plasterboardsystems which conform to national andinternationally approved quality standards.

We focus on providing locally-relevant constructionsolutions which are fast, reliable and cost-effectivefor all market stages (whether emerging,developing, or more developed), for all marketsegments (the renovation, residential andcommercial sectors) and for all product sectors(walls, partitions, columns, floors and ceilings).

PROMOTING BPB PRODUCTSWorking alongside architects and specifiers, our regional business teams promote and developBPB products which satisfy local buildingtechnology specifications for energy efficiency,comfort and safety, supplying customers with anextensive range of interior lining solutions forspace division, thermal insulation, acousticabsorption, fire and humidity resistance, utilitiesand circuitry distribution, structural integrity anddesign aesthetics.

DEVELOPING NEW SOLUTIONSOur marketing emphasis is on providing individualmarkets with the best products and customerservices, whether adapting existing BPB offeringsfrom other national markets or introducing newsolutions. Best-practice initiatives groupwide arechannelled locally through country managementstructures, with product development divided intostages incorporating formal marketing, technicaland manufacturing reviews by multi-disciplinaryteams, so as to ensure that improvements fit localmarket needs and are in conformance with changing standards.

Areas under continual evaluation in BPB’sintegrated product innovation process include:

• forecasting changes in building regulations and standards, both nationally and regionally

• identifying future directions in buildingtechniques and design, in collaboration with architects and other specifiers

• assessing the availability of recovered materials and their commercial potential

MILAN, ITALY – ARCIMBOLDI THEATREBPB ITALIA’S HIGHLY VERSATILE PLASTERBOARD ANDCEILING TILE SYSTEMS WERE USED EXTENSIVELY TO MEETDEMANDING SPECIFICATIONS FOR STRUCTURAL INTEGRITY,DESIGN APPEARANCE AND ACOUSTIC PERFORMANCE

SHANGHAI, CHINA – IBM CHIP PLANTTO MEET CUSTOMER NEEDS FOR A SUPERIOR COMBINATIONOF PRODUCTS AND SERVICE, BPB BRINGS TOGETHER MULTI-NATIONAL PROJECT TEAMS WHOSE EMPHASIS IS ONPROVIDING LOCAL MARKETS WITH OPTIMUM SOLUTIONS. IN CHINA, GYPCO SHANGHAI WORKED WITH BRITISHGYPSUM TO SUPPLY IBM’S PLANT WITH A TOTAL OF 7DIFFERENT SYSTEMS USING OVER 120,000 SQUARE METRESOF FIRELINE PLASTERBOARD TO MEET FIRE RESISTANCEREQUIREMENTS RANGING FROM 30 MINUTES TO 4 HOURS

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BPB annual report 2003

ECONOMICDEVELOPMENT

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BPB annual report 2003

GROWTH IN COMPETITIVE MARKETS:BPB invests in the growth of its coreproducts and has an excellentbusiness platform,with competitivemarket positions in most of theworld’s largest economies

Plasterboard, where BPB holds acirca 20% global market share,continues to attract increasingdemand

BPB's main complementaryproduct, building plaster, holdssignificant local sales profiles across a mix of highly developed,developing and emerging markets,giving BPB a global share of around30% of branded sales volume

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GROWING GLOBAL DEMAND Annual consumption of plasterboard worldwidenow exceeds 5 billion square metres, with theEuropean economy accounting for some 20% of global demand, North America approximately55%, and the rest of the world around 25%,almost half of which relates to Japan. The product’scontinuing penetration and growth owes much tothe combination of several significant economicfactors, common in varying degrees through allstages of market development:

• economic growth and anticipated prosperity,the main drivers of construction activity

• a trend towards increasing build costs for both materials and labour

• more rapid build cycles in both commercial andresidential sectors

• increasing prominence of the renovation sector

POSITIONING BPB FOR GROWTH Our acquisitions in the US during the past threeyears have enabled us to establish a majorpresence in the substantial North Americaninternal linings market. Building on our Canadiansector leadership, our wallboard market share is now around 16% and ranks BPB as the clearNo.3 supplier in the world’s largest market.

Our European sector leadership, recentlyconsolidated through the acquisition of GyprocBenelux, our significant North American presenceand our strong positions in South America,Southern Africa and Asia, generate group-wideplasterboard sales in excess of 1 billion squaremetres per annum, or close to 1 in 5 of all boardssold, making BPB the global market leader.

ENHANCING COMPETITIVE ADVANTAGEOur national operating teams provide partnership-style support to third party distribution networks,BPB’s primary route to market, delivering industry-leading products and technical services whichenable merchants to optimise product mix andprofitability. Local business teams work withcustomers and leading contractors to develop new and more efficient building methodologiesrelevant to the market environment, with anemphasis on quality, sustainability and wastereduction.

Successful building solutions are valued by the way they perform on-site, both during and after construction. Accordingly, our nationalbusinesses provide full training and technicalsupport to contractors and applicators,demonstrating the versatility and ease of use of BPB interior lining systems and ensuring optimum installation efficiencies.

HYDERABAD, INDIA – NATIONAL VILLAGE GAMES STADIADEMAND FOR PLASTERBOARD SYSTEMS CONTINUES TOGROW STRONGLY IN ASIA AS CUSTOMERS INCREASINGLYPREFER THE BENEFITS OF MODERN BUILDING PRACTICESAND PRODUCTS. 14,000 SQUARE METRES OF GYPBOARDFULTONE TILES WERE USED TO MEET A TIGHT CONSTRUCTIONSCHEDULE AND FULFIL HIGH SPECIFICATIONS FOR ACOUSTICAND REVERBERATION INSULATION IN THE 4 STADIUMS BUILTFOR THE 2002 NATIONAL GAMES

LAS VEGAS, USA – BPB WALLBOARD PLANTBUILDING ON BPB’S EXISTING INVESTMENTS IN WESTROCAND CELOTEX, THE ACQUISITION OF THE JAMES HARDIE US WALLBOARD BUSINESS ALMOST DOUBLED BPB’S NORTH AMERICAN MARKET SHARE AND ESTABLISHED IT AS THE CLEAR NUMBER 3 SUPPLIER IN THE WORLD’SLARGEST MARKET

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BPB annual report 2003

BRANDPENETRATION

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BPB annual report 2003

GROWTH IN OPPORTUNITY:Developing demand for interiorbuilding systems lies at the heart of customer sales and marketingstrategies aimed at enhancingBPB’s growing reputation andattractiveness as the preferredsupplier

Sustaining or creating nationalbrand leadership positions forplasterboard and complementaryproducts is central to our drive forprofitable sales growth

Our development strategy seeks to optimise the group’s operationalsynergies across national andregional markets having similarcustomer bases and channels of distribution

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BUILDING BRAND AWARENESSOur business reputation and sector leadership in Europe benefits from the positive customerawareness generated by the key regional brandsPlaco, Rigips and Gyproc, with the prefix BPBgaining increasing recognition as a quality familybrand. Similarly, in the group’s emerging Asianmarkets, the rapid penetration of individual brandssuch as Gypboard and Gyproc is being achievedunder a visible BPB umbrella. In late 2002, all thebusiness operations in North America were re-launched under the identity of BPB, with allwallboard products being re-branded ProRoc.

LEVERAGING NATURAL SYNERGIESOur marketing of an integrated portfolio of BPB systems is aimed at encouraging profitablevolume growth and both individual and familybrand penetration, by accelerating innovation in product and service, increasing the customeroffering, and promoting sales of higher value-added products.

Logistical support represents a significantcompetitive differentiator for BPB, our goal beingto supply customers with the best choice ofinterior building solutions, the fastest deliverytimes, the highest product quality, and the mostefficient stock control. Complementary productscontribute to BPB’s growth and brand leadership,as businesses leverage the natural synergiesbetween core and complementary products toprovide customers with more convenient and cost-effective routes for meeting all their needs.

DEVELOPING COMPLEMENTARY PRODUCTSSales of our main complementary product,building plaster, are now well in excess of 4 million tonnes each year, making BPB theworld’s leading supplier of branded plasterproducts. We hold leadership positions in many of those key markets where finishing surfaces with easy-to-apply high-quality plasters continueto attract a loyal customer base. Other productssupporting BPB’s systems marketing approach are mineral wool and expanded polystyreneinsulation, textures, gypsum blocks and coving,and metal-grid ceiling tile systems.

BELGRADE, SERBIA – TELEVISION CENTREUNDER THE RIGIPS BRAND, BPB SUPPLIES EASTERNEUROPEAN MARKETS WITH A WIDE RANGE OF HIGHQUALITY INTERIOR BUILDING PRODUCTS TO MEET CUSTOMER END-USE REQUIREMENTS FOR DESIGN, SAFETY AND COMFORT. PLASTERBOARD AND CEILING TILE SYSTEMS WERE USED TO PROVIDE AN INNOVATIVEINTERNAL LINING SOLUTION AT THE BIG PINK MEDIA AND COMMUNICATION CENTRE IN BELGRADE

ANTALYA, TURKEY – CORNELIA HOTELAWARD WINNING ARCHITECTS FOR THE FIVE STAR HOTELSPECIFIED BOTH SATEN AND REFINO PLASTERS FROM BPBTO PROVIDE THE SCULPTURAL SHAPES AND HIGH QUALITYFINISH NEEDED TO ACHIEVE THEIR DESIGN ANDCONSTRUCTION REQUIREMENTS