Latest / The SME Stream / Why Resene Paint is under pressure (but won't sell)

Transcript

Why Resene Paint is under pressure (but won't sell) · The SME Stream

• 0:00
  Speaker 1: The information provided in this program is of a general
• 0:02
  Speaker 1: nature and is not intended to be personalized financial advice.
• 0:05
  Speaker 1: We encourage you to seek appropriate advice from a qualified
• 0:07
  Speaker 1: professional to suit your individual circumstances. Razine Paints has been
• 0:11
  Speaker 1: a company of color for seventy eight years, but now
• 0:14
  Speaker 1: the third generation family owned business is facing margin pressure.
• 0:19
  Speaker 1: At CFO explains.
• 0:20
  Speaker 2: Why the main business, which is the Razine business you'd
• 0:23
  Speaker 2: be familiar with, is you know, like everybody else for.
• 0:26
  Speaker 1: Strugman, has it ever taken on external investment or debt?
• 0:30
  Speaker 1: Or has it been entirely bootstrapped?
• 0:32
  Speaker 2: Tili bootstrap the family run business that's incredibles, staunchly kiwi
• 0:36
  Speaker 2: and we're proud of it.
• 0:51
  Speaker 1: Razine Paints chief financial Officer Mike Durkin is taking us
• 0:54
  Speaker 1: inside its factory.
• 0:57
  Speaker 3: It's the entrance point for the raw materih I just
• 1:00
  Speaker 3: got a whiff of paint. Ye in the simplest form,
• 1:04
  Speaker 3: we've got pikes coming through under the floor, but being
• 1:07
  Speaker 3: something more we call risin thin lights, cheap seat and
• 1:10
  Speaker 3: then and they add in there we pump it into
• 1:12
  Speaker 3: the end of the fashion, comed up through the floors
• 1:15
  Speaker 3: into these big bags.
• 1:16
  Speaker 1: So why keep manufacturing and well into it's obviously more
• 1:20
  Speaker 1: expensive here to manufacture.
• 1:21
  Speaker 4: The other places in the world, but it's an earthquake.
• 1:23
  Speaker 2: Joan's w we keep a field.
• 1:26
  Speaker 4: Drink again, I know.
• 1:28
  Speaker 3: So yeah, it's that's a honything come for you and
• 1:31
  Speaker 3: we want to keep it in want.
• 1:32
  Speaker 1: Therese very few good things made a La Lah very good,
• 1:35
  Speaker 1: you know, raisine, paint and me.
• 1:37
  Speaker 4: But you're the haft of the moment. I don't tell
• 1:39
  Speaker 4: many people about.
• 1:40
  Speaker 2: Like right up with the set, we're safe the news.
• 1:43
  Speaker 4: Thank you.
• 1:45
  Speaker 1: Mike showed us the vats where it's been mixing all
• 1:47
  Speaker 1: the materials to make paint here for decades.
• 1:52
  Speaker 4: You can see the colors in it.
• 1:54
  Speaker 1: Yellow, green, red, black, gray.
• 1:56
  Speaker 5: Here there's a green one underways, and then from here
• 1:58
  Speaker 5: it's pretty sufflquent.
• 1:59
  Speaker 3: They are platform so gravity that leep it that'll go
• 2:03
  Speaker 3: into one we call the canning line, and it goes
• 2:05
  Speaker 3: into the packaging from here.
• 2:06
  Speaker 2: Oh, it's just sober. While this is happening. They're taking
• 2:10
  Speaker 2: examples and they're testing it.
• 2:11
  Speaker 1: This is a warehouse where it all ends up. It's
• 2:14
  Speaker 1: a di Wire's dream. So is this all color coded?
• 2:17
  Speaker 1: Mic just WoT to do it?
• 2:19
  Speaker 5: That was very good definitely all color coded, product coded,
• 2:23
  Speaker 5: color coded.
• 2:24
  Speaker 1: The company is proudly in New Zealand, owned by the
• 2:27
  Speaker 1: founder's family. It's with many cycles and it's near eighty
• 2:31
  Speaker 1: year lifetime.
• 2:32
  Speaker 2: Good example. So the first year of COVID to the lockdown,
• 2:37
  Speaker 2: the first sort of three weeks of lockdown, obviously nothing happened,
• 2:41
  Speaker 2: it was dead. And then then the next sort of
• 2:43
  Speaker 2: nine months we did like two and a half years
• 2:45
  Speaker 2: and six months. So it was huge, huge increase from
• 2:48
  Speaker 2: when I said increase, So the financials were was basically
• 2:53
  Speaker 2: a process of cost control and then unlimited demand and
• 2:58
  Speaker 2: went completely opposite rate that we expected it to.
• 3:01
  Speaker 4: And you were making more margin off more volume. Wow.
• 3:05
  Speaker 2: And then but you know, the recessions started kicking in
• 3:09
  Speaker 2: a year later and then we've started to buy. But
• 3:12
  Speaker 2: so that we've been questioned by that particular year, which
• 3:15
  Speaker 2: was the twenty twenty one year. You know, that's filled
• 3:18
  Speaker 2: up the loft and the coffers if you like it,
• 3:20
  Speaker 2: and we've sort of relied on that since. But the
• 3:22
  Speaker 2: last two years has been tight, really tight. Yeah. I mean,
• 3:26
  Speaker 2: if you've watched the building industry, we feed off the
• 3:29
  Speaker 2: building industry. So ten percent of our revenue comes from
• 3:31
  Speaker 2: new builds, so residential and the big footprint retirement homes for.
• 3:38
  Speaker 5: Instance, But some of those aren't being building, exilting a
• 3:41
  Speaker 5: lot of a lot of land bank and going on.
• 3:43
  Speaker 2: Developers are just not building because the cost isreme.
• 3:46
  Speaker 4: And interest rate is so high. That kind of important
• 3:48
  Speaker 4: to continue to develop.
• 3:49
  Speaker 5: I can't name companies I can, but some of the
• 3:53
  Speaker 5: big group housing companies who are our customer, their consents
• 3:57
  Speaker 5: year on year forty percent down to us.
• 3:59
  Speaker 2: That all main of those issues and I just consent issued.
• 4:04
  Speaker 2: That means in twelve to fifteen months time, they won't
• 4:06
  Speaker 2: want to paint on them.
• 4:07
  Speaker 4: That is future product that is not.
• 4:10
  Speaker 2: So we've gone a ride up to now and we're
• 4:11
  Speaker 2: sort of hanging in there. Our smaller companies have actually
• 4:14
  Speaker 2: kept us in the game because they are in different markets,
• 4:16
  Speaker 2: not the residential market. There's like aircraft, and there's mode
• 4:19
  Speaker 2: of vehicles, and there's steel and flame protection, fire protection,
• 4:23
  Speaker 2: all that sort of stuff is on a smaller scale.
• 4:25
  Speaker 2: But we're doing all right in nose spaces. But the
• 4:28
  Speaker 2: main business, which is the razine business you'd be familiar with,
• 4:31
  Speaker 2: as you know, like everybody else was straighting.
• 4:35
  Speaker 1: This is what many will think of when they hear
• 4:37
  Speaker 1: the name Razine.
• 4:38
  Speaker 4: This is a keen face that IP this is iconic Razine.
• 4:41
  Speaker 4: The chart forty two a Razine color shop. My mum
• 4:46
  Speaker 4: is in interiors.
• 4:48
  Speaker 1: This was my childhood, so these were all over my
• 4:51
  Speaker 1: kitchen table all the time, especially this one.
• 4:54
  Speaker 4: Half black white black white. What really is the difference?
• 4:59
  Speaker 2: Well, ferent light. That's why you should wander around the
• 5:02
  Speaker 2: house with the different colors in different light at different
• 5:05
  Speaker 2: times of the day. They all all look quite different.
• 5:08
  Speaker 1: It mixes every color in its catalogs from just thirteen
• 5:12
  Speaker 1: at base colors the intents on top of.
• 5:14
  Speaker 2: That, so they are the base and you can do it.
• 5:18
  Speaker 2: You can do a vtn Z orange where you could
• 5:22
  Speaker 2: do a BP green, or you could know. All of
• 5:24
  Speaker 2: those are corporate colors that are specific to those.
• 5:27
  Speaker 1: Companies and Razine has made there and they're all trademarch
• 5:30
  Speaker 1: for that brand.
• 5:31
  Speaker 2: Yeah. Absolutely, b people will say, we want BP green
• 5:34
  Speaker 2: and BP green is different to other green. Can we
• 5:38
  Speaker 2: make our markets as we could make a market with medicine,
• 5:42
  Speaker 2: What color do we go for or option you actually
• 5:44
  Speaker 2: come up with a Well.
• 5:45
  Speaker 1: When I first made the show, I went with an
• 5:47
  Speaker 1: indigo purple and you know why, because apparently that exudes
• 5:50
  Speaker 1: luxury and wealth.
• 5:52
  Speaker 2: Well you should if you, I should stick with that.
• 5:55
  Speaker 2: You can act with the color. We'll make it for you.
• 5:56
  Speaker 1: They've made hundreds of thousands of colors over the years,
• 6:00
  Speaker 1: can make any paint from history for any customer today.
• 6:03
  Speaker 1: I have a serious question, my Mike, how do you
• 6:06
  Speaker 1: come up with all of the names?
• 6:08
  Speaker 4: Because there's what called a moonbean.
• 6:10
  Speaker 2: A lot of red wine and a lot of red
• 6:14
  Speaker 2: it's red. It's red wine in the boardroom, I tell
• 6:17
  Speaker 2: you not. There's there's a there's a obviously a suggestions
• 6:20
  Speaker 2: box for the staff. It is incredible about the big
• 6:22
  Speaker 2: The big ones are all done after a couple of wines,
• 6:25
  Speaker 2: like there's one called I don't know if you're familiar
• 6:27
  Speaker 2: with Monty Python, no Norwegian Blue. Have you read in
• 6:31
  Speaker 2: Norwegian Blue remark or bird the Norwegian blue in it?
• 6:33
  Speaker 2: Beautiful plumage the parrot and the parrot and the color
• 6:37
  Speaker 2: of the parrot is one of our colors. That's amazing.
• 6:41
  Speaker 2: If you're Wondy Python fan, you'll know.
• 6:43
  Speaker 1: That it made the decision to create its own retowl
• 6:50
  Speaker 1: network decades ago and it's paid off.
• 6:53
  Speaker 4: When did that become part of the strategy.
• 6:55
  Speaker 2: You want, oh that would have been That was okay,
• 6:58
  Speaker 2: that was kind of a chant ants. So it was
• 7:01
  Speaker 2: way back. We were in the in cview, so there
• 7:06
  Speaker 2: was in disparate buildings and it was principally a trade
• 7:10
  Speaker 2: business at that stage and we were locked out of
• 7:13
  Speaker 2: a lot of the urban centers by the competition.
• 7:16
  Speaker 1: It since cut a deal to sell through a major
• 7:18
  Speaker 1: retail chain.
• 7:19
  Speaker 2: We're in with Mighty ten and that fits with us
• 7:22
  Speaker 2: because it's a New Zealand company, New Zealand branding, and
• 7:25
  Speaker 2: we sort of go to the market together. So we're
• 7:27
  Speaker 2: in seventy two Mighty teen stores, wow, sixty seven around
• 7:30
  Speaker 2: of our own stores, which which we lease off Mum
• 7:34
  Speaker 2: and Pop investors. So that's that's kind of how the market.
• 7:38
  Speaker 2: Our network is probably the biggest by far, I think
• 7:41
  Speaker 2: of all the paint stores, and.
• 7:43
  Speaker 1: They're of a margin difference through direct sale FROMS and
• 7:47
  Speaker 1: globs shop and partners.
• 7:49
  Speaker 2: Of course, we're not playing different well, we're not paying
• 7:51
  Speaker 2: rent in our in Mighty ten of course, so that
• 7:55
  Speaker 2: kind of evens out hit.
• 7:56
  Speaker 4: Don't they clip the ticket?
• 7:58
  Speaker 2: Yeah, they clipped the ticket and they come into too
• 8:01
  Speaker 2: much of it. Well, imagine that different.
• 8:04
  Speaker 1: And the price has to be the same, right, because
• 8:06
  Speaker 1: the customer has to be able to.
• 8:07
  Speaker 4: Get the same price. Where is the fellow shop. It's
• 8:09
  Speaker 4: as smart at ten.
• 8:10
  Speaker 2: Yeah, you can't sell it lower than us or higher
• 8:12
  Speaker 2: than us. So we regulate whether it might atteen exam
• 8:16
  Speaker 2: for example. That so you know, when we have a
• 8:18
  Speaker 2: promotion they get they get a promotion, they can sell
• 8:21
  Speaker 2: it at that price. We can sell it at that price.
• 8:23
  Speaker 2: We give them a promotional price when they buy it
• 8:25
  Speaker 2: office and the market's happy because they don't get confused
• 8:28
  Speaker 2: with different pricing. So that's kind of our words.
• 8:30
  Speaker 4: So what's the strategy on that going forward?
• 8:32
  Speaker 1: Would you rather grow direct sales or would you rather
• 8:35
  Speaker 1: grow distribution?
• 8:36
  Speaker 2: It's kind of as different because you don't you don't
• 8:39
  Speaker 2: get the same level of advice so that.
• 8:42
  Speaker 4: You can control direct sales better.
• 8:44
  Speaker 2: Yeah, and all our training goes into our own staff,
• 8:47
  Speaker 2: of course, so we give them that and they get
• 8:49
  Speaker 2: incentivized for being more knowledgeable. So they go through intents
• 8:53
  Speaker 2: and training programs and it's and it's ongoing. Whereas the
• 8:56
  Speaker 2: staff and might attends. It's more like a supermarket, right,
• 8:58
  Speaker 2: so you're going there and you buy some hammer and nails,
• 9:00
  Speaker 2: and you buy some bit of that. I might buy
• 9:02
  Speaker 2: some paint and they might sell on you now you
• 9:05
  Speaker 2: tell you or whatever paint you know you need that.
• 9:08
  Speaker 2: They don't have the same little school, so you can't
• 9:12
  Speaker 2: survive with either. I think without without the others.
• 9:15
  Speaker 1: The company has survived through plenty. After the tour, Mike
• 9:19
  Speaker 1: and I sat down to discuss the company's current state
• 9:22
  Speaker 1: in more detail and why it wants to remain in
• 9:25
  Speaker 1: New Zealand hands no matter what. Mike, thank you so
• 9:29
  Speaker 1: much for doing That's good to see you, Pleaser pleasure.
• 9:31
  Speaker 4: Should we share the story of how this opportunity came
• 9:34
  Speaker 4: to be?
• 9:34
  Speaker 2: We should?
• 9:35
  Speaker 1: I met you at a CFO summit and you were
• 9:38
  Speaker 1: writing down notes furiously. You're probably the only CFO of
• 9:41
  Speaker 1: the room actually paying attention.
• 9:42
  Speaker 4: It wasn't just a day off work.
• 9:43
  Speaker 2: I was the only guy with no mates, so there's
• 9:45
  Speaker 2: no one else at the table, right, And I was
• 9:47
  Speaker 2: so interested.
• 9:47
  Speaker 4: I was like, well, who do you work for? What
• 9:49
  Speaker 4: are you doing? And you said razime yep and.
• 9:52
  Speaker 2: Offered to have a look around the site and hear
• 9:55
  Speaker 2: the story. It's a good story. It's an iconic New
• 9:57
  Speaker 2: Zealand company. I'm always happy to tell the story. We
• 10:01
  Speaker 2: always we're always calling about getting the right people on
• 10:03
  Speaker 2: the bus. We don't really care where the bus is going.
• 10:06
  Speaker 2: Figure that out later to get the right people on
• 10:07
  Speaker 2: the bus and off you go.
• 10:08
  Speaker 1: Well, thank you so much for having us on the bus.
• 10:10
  Speaker 1: This has been good fun. But look, I want this
• 10:12
  Speaker 1: to go into more of the economics of the business.
• 10:14
  Speaker 1: So you told us when we were on the manufacturing
• 10:16
  Speaker 1: floor that margins are under pressure. Sure, talk to me
• 10:19
  Speaker 1: about how much pressure and where that pressure is coming from.
• 10:22
  Speaker 2: Well, you know, at the moment and within the recession,
• 10:25
  Speaker 2: we are treating water. But we are aware a well
• 10:28
  Speaker 2: diversified business, so we've got a number of businesses in
• 10:30
  Speaker 2: different areas. Our core business is what people will be
• 10:34
  Speaker 2: more familiar with, but we've got protective coatings which are
• 10:36
  Speaker 2: in commercial areas like commercial marine and steel and fire protection,
• 10:41
  Speaker 2: those sort of things, so those things are still ticking away.
• 10:44
  Speaker 2: Buying and selling residential homes is quiet, which is obviously
• 10:49
  Speaker 2: a keep out of their business. And new builds construction
• 10:53
  Speaker 2: industry under pressure, so there's demand pressure there. Consensor down.
• 10:58
  Speaker 2: You don't put paint on buildings until they're built to
• 11:00
  Speaker 2: this twelve to fifteen month leg. So we have a
• 11:02
  Speaker 2: leg after the bill and you've got the building contractors
• 11:06
  Speaker 2: are slow. We don't feel it for another twelve to
• 11:08
  Speaker 2: fifteen months. So we're okay now, But who's to know
• 11:12
  Speaker 2: what's going to happen in twelve to fifteen months when
• 11:14
  Speaker 2: those consents for the buildings that would have been built
• 11:16
  Speaker 2: and we will be painting them. Where are we going
• 11:18
  Speaker 2: to be then? So there is pressure, and we know
• 11:20
  Speaker 2: there's more pressure coming now. There's wage pressure. Wages are
• 11:25
  Speaker 2: going up now quicker than inflation. What else is going on?
• 11:29
  Speaker 2: The freight international freight we import most of the materials
• 11:32
  Speaker 2: we used to manufacture the paint. That's all going up,
• 11:35
  Speaker 2: and wars don't help us. Like Red Sea that's now
• 11:39
  Speaker 2: not an issue. We have to go around the Caper
• 11:42
  Speaker 2: good Horn, I think it is. What else is going on?
• 11:45
  Speaker 2: The Ukraine war has put up the cost of hydrocarbons
• 11:48
  Speaker 2: some of the material that goes into a paints. There's
• 11:51
  Speaker 2: hydrocarbon based currency. Currency is under pressure.
• 11:56
  Speaker 1: It doesn't help when you're playing goods offshore.
• 11:58
  Speaker 2: If you're an importer currency, you know you want it,
• 12:01
  Speaker 2: you want it to be up. So it's kind of
• 12:03
  Speaker 2: a perfect storm. We've always been on record to be
• 12:07
  Speaker 2: a people company and an innovative company. We rely on
• 12:09
  Speaker 2: people to manufacture the paint. But we are being forced
• 12:12
  Speaker 2: a little bit at the moment to capital invest and
• 12:14
  Speaker 2: buy some machinery and technology, which is not what we've
• 12:17
  Speaker 2: had to do before. But you know, economics is forcing
• 12:21
  Speaker 2: us down that track.
• 12:22
  Speaker 1: I find it so interesting and this is why I
• 12:25
  Speaker 1: wanted to do this interview as well. When you told
• 12:26
  Speaker 1: me how many products this company imports of lots, it's immense,
• 12:32
  Speaker 1: Like you would be one of the biggest importers of
• 12:34
  Speaker 1: raw goods into New Zealand.
• 12:36
  Speaker 2: And they come in from and a lot of different
• 12:38
  Speaker 2: places like this does Europe. There's Germany, there's Belgium, this's France,
• 12:42
  Speaker 2: there's We bring material in from Italy, were bringing in
• 12:46
  Speaker 2: from China, We're bringing in from the US, we bring
• 12:49
  Speaker 2: it in from Mexico, a number of different places. And
• 12:52
  Speaker 2: anytime there's any sort of blockage in those supply chain,
• 12:56
  Speaker 2: you know we're impacted. So you know, there's talk can
• 12:59
  Speaker 2: we build res resilience into our supply chain or we
• 13:02
  Speaker 2: can't really because the material doesn't actually originate from New Zealand.
• 13:06
  Speaker 2: So we can't pull it all back, you know, we
• 13:09
  Speaker 2: just have to go with the ebbs and flow of
• 13:10
  Speaker 2: the market.
• 13:11
  Speaker 1: So tell me about all the materials that are critical
• 13:13
  Speaker 1: to go into paint.
• 13:14
  Speaker 4: You've mentioned resin, water, there's.
• 13:16
  Speaker 1: Thinners, and then titanium is the.
• 13:18
  Speaker 2: Big one right, Well, Titanium is a material that we
• 13:21
  Speaker 2: choose to use because it creates high quality products. Titanium
• 13:24
  Speaker 2: dioxide is a white powdered material. Most people who know
• 13:28
  Speaker 2: about their titanium golf club, but it's made out of
• 13:30
  Speaker 2: the same material. When it dries, it's it's very hard
• 13:34
  Speaker 2: and very durable, so we put it in their paint.
• 13:39
  Speaker 2: There's resin, which is which is a glutenous material like PBA.
• 13:42
  Speaker 2: It's like a like a glue that hasn't dried. That's
• 13:46
  Speaker 2: hydrocarbon based generally, and it comes from large global manufacturers,
• 13:50
  Speaker 2: so that comes into large quantities. We work with the
• 13:55
  Speaker 2: R and D side of those global resin manufacturers to
• 13:58
  Speaker 2: tell them what we actually need and what it needs
• 14:00
  Speaker 2: the properties it needs because not all reason there's the
• 14:02
  Speaker 2: same reason, so we have there's not one type of reason,
• 14:05
  Speaker 2: that's one type of reason for this product, one type
• 14:08
  Speaker 2: of reason for this product. So there's lots of different
• 14:10
  Speaker 2: combinations and again that creates risk, lots of different shipments
• 14:14
  Speaker 2: and lots of different products, lots of different quality issues.
• 14:17
  Speaker 2: If it doesn't get here and it's not the right
• 14:19
  Speaker 2: product and it's not the right grade, there's a lot,
• 14:21
  Speaker 2: there's a lot of failure points.
• 14:23
  Speaker 1: If you're like so, that then begs the question, Mike,
• 14:26
  Speaker 1: why manufacture the paint and Wellington, New Zealand of all
• 14:29
  Speaker 1: places if it makes that supply chain so complex.
• 14:33
  Speaker 2: That's a fair question. But we're a Wellington based company.
• 14:36
  Speaker 2: We're a family company. We're private and you know we
• 14:39
  Speaker 2: support a thousand families and we're going to continue to
• 14:42
  Speaker 2: do so. We've got no intention of moving. We just
• 14:45
  Speaker 2: roll with the punchers as a Welling to New Zealand
• 14:48
  Speaker 2: based business. And we don't want to be manufacturing in China,
• 14:51
  Speaker 2: we don't want to be manufacturing in Australia, and well,
• 14:54
  Speaker 2: you know, we'll just deal with that's what we do.
• 14:56
  Speaker 2: So it's more pressure and it's financially hard, but that's
• 15:00
  Speaker 2: that's that's who we are. We're a keepy company.
• 15:03
  Speaker 1: Can you give me some figures on how hard?
• 15:05
  Speaker 4: And I respect that you're privately owned business.
• 15:07
  Speaker 1: So I only tell us how much you want to
• 15:08
  Speaker 1: but how much have margins reduced and how much have
• 15:13
  Speaker 1: costs increased? And as a result, how much of your
• 15:16
  Speaker 1: price has had to increase off the back of that.
• 15:18
  Speaker 2: Well, some of the costs have gone up twenty five percent,
• 15:21
  Speaker 2: and what a year or over over a couple of
• 15:23
  Speaker 2: years of some of the it's an elastic product. We
• 15:29
  Speaker 2: were already at a premium to the market in terms
• 15:31
  Speaker 2: of our pricing, so there's a ceiling on what we
• 15:33
  Speaker 2: can charge. We can't pass it on, so so ceilings
• 15:36
  Speaker 2: staying the same, costs going up, margin getting pressed pressure
• 15:40
  Speaker 2: in the middle. So input costs. It's not a piece
• 15:44
  Speaker 2: of oil or you know, a transistor and a piece
• 15:48
  Speaker 2: of digital equipment. It's actually people creating products, as you
• 15:51
  Speaker 2: can see in the fattery. So they have to be feed.
• 15:54
  Speaker 2: They have to go home and feed their families. We paid,
• 15:56
  Speaker 2: you know, we paid them accordingly, so you know, it's
• 16:00
  Speaker 2: it's a tough gigent.
• 16:02
  Speaker 1: You said that Razin can continue to roll with the
• 16:04
  Speaker 1: punctures and is committed to manufacturing on shore still, but
• 16:07
  Speaker 1: is that realistic? I mean, if you are under that
• 16:10
  Speaker 1: much financial pressure right now, can you actually hold.
• 16:12
  Speaker 2: On for absolutely. Absolutely, there's a run rate there. There's
• 16:16
  Speaker 2: a run rate now you can see it. And we
• 16:18
  Speaker 2: think the recession is going to continue for another nine
• 16:21
  Speaker 2: months or so and then the interest rates are going
• 16:23
  Speaker 2: to start to have a calming effect if you like.
• 16:26
  Speaker 2: But we won't see that change and probably do another
• 16:28
  Speaker 2: twelve months. So we lag the construction industry and which
• 16:32
  Speaker 2: is under pressure. We've got more than new builds that
• 16:37
  Speaker 2: we can lean on. Lots of people are buying and
• 16:39
  Speaker 2: selling houses that are already built. They want to paint
• 16:41
  Speaker 2: them when they sell them. They want to paint them
• 16:43
  Speaker 2: when they buy them, and they want to change the
• 16:46
  Speaker 2: color because they don't like your color.
• 16:48
  Speaker 1: So what's the split for this business in terms of
• 16:51
  Speaker 1: sales between commercial projects like the housing developments.
• 16:55
  Speaker 4: Or buildings or businesses versus.
• 16:57
  Speaker 2: The scene of our customers are commercial customers.
• 16:59
  Speaker 4: Wow, thirty is just as we.
• 17:02
  Speaker 2: Call it retail. But it's people coming into our stores
• 17:04
  Speaker 2: wanting to buy some paint for the for their house
• 17:07
  Speaker 2: or their fence or their If you go into a
• 17:11
  Speaker 2: into an architect's office and you you know they're doing
• 17:14
  Speaker 2: the work for you and you buy the paint, that
• 17:16
  Speaker 2: that's really a retail sale. They don't buy it from
• 17:19
  Speaker 2: the architect, but they will specify what and what the
• 17:22
  Speaker 2: colors should be and what the products are, and then
• 17:24
  Speaker 2: you come into our stores and buy that. That's what
• 17:26
  Speaker 2: we would call a retail sale. A commercial sale is
• 17:29
  Speaker 2: you know you're too lazy to paint your house. You
• 17:31
  Speaker 2: call up the pain painting contractor. They come in. They're
• 17:34
  Speaker 2: our customer. So in that case, you're not our customer.
• 17:37
  Speaker 2: The communitial considered commercial.
• 17:39
  Speaker 4: They might be a retail on the other are.
• 17:41
  Speaker 2: So you're you're the end customer. You're the customer of
• 17:43
  Speaker 2: the painting contractor. But the painting contractor is our customer
• 17:46
  Speaker 2: and that in that situation. So, and they have different
• 17:49
  Speaker 2: needs to what we call it DII or a retail need.
• 17:52
  Speaker 2: We have to make the paint very easy to use
• 17:54
  Speaker 2: and pretty much fail proof for a retail So it's
• 17:57
  Speaker 2: different paint to what we're selling with the trade guys.
• 18:00
  Speaker 2: There are a lot more experience. They're using it every day.
• 18:04
  Speaker 2: They just made how to use it. I've got all
• 18:06
  Speaker 2: the tools. Okay, I couldn't do it. I've done it one.
• 18:12
  Speaker 5: I've done it one more than I'm try and do exactly.
• 18:15
  Speaker 1: So, so what are the fundamentals that you're seeing in
• 18:18
  Speaker 1: each of those different customer categories. How is the retail
• 18:22
  Speaker 1: customer rechallenge at the moment.
• 18:24
  Speaker 2: Retail don't have any disposable income at the moment. I
• 18:27
  Speaker 2: think they're spending all their money on mortgages, and that's
• 18:30
  Speaker 2: obviously not going to change for another few months. Yet
• 18:33
  Speaker 2: there is light at the end of that tunnel, and
• 18:35
  Speaker 2: I think there is pick up in the residential market,
• 18:37
  Speaker 2: so that will ease. That will see their ease, but
• 18:41
  Speaker 2: the commercial market is still going to take some time.
• 18:44
  Speaker 1: How much of that downturn and retail specifically is also
• 18:47
  Speaker 1: a bit of a hangover from the number of DIY
• 18:49
  Speaker 1: projects people did during COVID when that they aren't doing
• 18:53
  Speaker 1: them now.
• 18:54
  Speaker 2: Yeah, that's there was a lot of demand when the
• 18:58
  Speaker 2: lockdown occurred. People literally for the lockdown. There was forty
• 19:01
  Speaker 2: eight hours. We were given notice on a Monday that
• 19:04
  Speaker 2: midnight midnight Wednesday they were shutting down. I remember that,
• 19:08
  Speaker 2: so our stores generally closed at five o'clock. There were
• 19:12
  Speaker 2: shoes outside the stores nationwide, but anything.
• 19:16
  Speaker 4: To get out of the house.
• 19:17
  Speaker 2: At at five o'clock. They were literally queues down the
• 19:21
  Speaker 2: street of people wanting to buy paint so they could
• 19:24
  Speaker 2: do something during the six week lockdown, and that literally
• 19:28
  Speaker 2: happened round the clock until midnight on on the Wednesday.
• 19:33
  Speaker 2: So the trucks were still leaving here at that time
• 19:36
  Speaker 2: and they were stopped on the street by the police
• 19:38
  Speaker 2: at midnight. All the trucks were stopped, they got sent
• 19:42
  Speaker 2: back to the Marshaling warehouses not here, to the straight forwarders,
• 19:45
  Speaker 2: and all the paint just sort of sat there. So
• 19:48
  Speaker 2: when it came round to starting up again, all our
• 19:51
  Speaker 2: stores were actually empty because you know, we'd sold all them,
• 19:54
  Speaker 2: so there was you know, there was ebbs and flows,
• 19:56
  Speaker 2: the online e commace platform that we've got. We're crazy
• 20:00
  Speaker 2: that time. It's a pretty crazy time.
• 20:04
  Speaker 1: So how much did revenue increase by net during that
• 20:07
  Speaker 1: time and then how much does it come off?
• 20:10
  Speaker 2: Well that the year from the March twenty twenty lockdown
• 20:15
  Speaker 2: until now year runs until June during the following year
• 20:19
  Speaker 2: was two years. Effectively, we had a two years and
• 20:22
  Speaker 2: one bernanda if you like. But it's been tight ever since.
• 20:27
  Speaker 2: That's when the recession started late twenty twenty one. High
• 20:31
  Speaker 2: of the retail market that's ever since then, for March
• 20:38
  Speaker 2: twenty two until now has been recessionary.
• 20:41
  Speaker 1: Can you give us a figure on how much revenue
• 20:43
  Speaker 1: is decreased by in that period.
• 20:45
  Speaker 2: Revenue has has been maintained.
• 20:48
  Speaker 1: Right, but it's the costs that are just eating away
• 20:50
  Speaker 1: at that.
• 20:50
  Speaker 2: Yeah, so we're just we're sort of flat lining on
• 20:52
  Speaker 2: revenue that staying there, but costs are zoomed up and
• 20:57
  Speaker 2: particularly getting material into the country. That did correct, but
• 21:01
  Speaker 2: then when the Israeli war started, that really picked it
• 21:05
  Speaker 2: up again, and again when Ukraine started and we saw
• 21:09
  Speaker 2: the same problem.
• 21:10
  Speaker 1: So Razim is a third generation family owned business. Tell
• 21:15
  Speaker 1: me about the history of this company and also how
• 21:17
  Speaker 1: has been financed over that time. Has it ever taken
• 21:20
  Speaker 1: on external investment or debt or has it been entirely bootstrapped?
• 21:23
  Speaker 2: Tiler bootstrapped, family run business, that's incredible. Started nineteen forty
• 21:29
  Speaker 2: six in Esport. He was a builder and back in
• 21:33
  Speaker 2: the day there was all a concrete foundation, concrete buildings,
• 21:37
  Speaker 2: no color. So he started playing around with resin or
• 21:41
  Speaker 2: concrete coatings and he started selling that product to his
• 21:45
  Speaker 2: mates who are also builders, and not long after that
• 21:47
  Speaker 2: he gave up the building and continuing down the civic
• 21:50
  Speaker 2: coatings par So that was ten night ago. He started it.
• 21:53
  Speaker 2: It's always been a Wellington based business. His son took
• 21:56
  Speaker 2: over probably fifteen years or so late. He took it
• 22:01
  Speaker 2: from twenty five staff up to seven hundred staff, and
• 22:05
  Speaker 2: that would have happened over a fifteen year period, so
• 22:07
  Speaker 2: he made some big changes. Test Pots is a clessic example.
• 22:13
  Speaker 4: This isn't, This isn't. Can you tell us about the
• 22:14
  Speaker 4: story because this is wild to me. You told me
• 22:17
  Speaker 4: about this earlier.
• 22:17
  Speaker 2: So test pots came about because he was trying to
• 22:20
  Speaker 2: figure out a way to get the paint on the
• 22:22
  Speaker 2: wall so people could actually see what it looked like
• 22:24
  Speaker 2: because prior to that, you bought a can of paint
• 22:27
  Speaker 2: and you didn't really know what it was until you
• 22:28
  Speaker 2: literally put it on the wall. If it was the
• 22:30
  Speaker 2: wrong color, you were like, oh, what do I do now?
• 22:33
  Speaker 2: So it was his idea to have a little sample
• 22:36
  Speaker 2: and put it in an all pot and then you
• 22:39
  Speaker 2: wander around your house and try it out and see
• 22:41
  Speaker 2: if it was actually the color that you wanted. That
• 22:44
  Speaker 2: was Razzem was the first company that actually came up
• 22:47
  Speaker 2: with it globally, so it'd never been done before. People
• 22:50
  Speaker 2: pooh pooed the idea. They thought it was madness, and
• 22:52
  Speaker 2: now it's a global phenomenal. Everyone uses it. I mean,
• 22:55
  Speaker 2: it's such a common thing to do, right, why wouldn't
• 22:57
  Speaker 2: you try that out? Why were you try it before
• 22:59
  Speaker 2: you buy it? Right? You try before you started here
• 23:01
  Speaker 2: and started busing try before you buy. It's just a
• 23:04
  Speaker 2: standard concept, right, So he yeah, he was very innovative.
• 23:09
  Speaker 2: The company grew because he was a very good salesman.
• 23:11
  Speaker 1: He was a.
• 23:11
  Speaker 2: Visionary and he also had a very strong partner who
• 23:14
  Speaker 2: was the chemist, and the two of them worked together,
• 23:18
  Speaker 2: the salesman telling the chemists what the products needed to
• 23:20
  Speaker 2: do based on what the customers were asking for, and
• 23:23
  Speaker 2: the chemists running around the background designing the new products
• 23:25
  Speaker 2: to meet that demand. So it was always innovative, always
• 23:29
  Speaker 2: coming up with new ideas. And we talked about the
• 23:32
  Speaker 2: sand and the paint right there. I think it is
• 23:33
  Speaker 2: a good example. Right. He's driving home one nightgown to Eastbourne.
• 23:37
  Speaker 2: There's a howling northwester coming across the harbor and there's
• 23:40
  Speaker 2: sand blowing up onto the road, and instead of getting
• 23:43
  Speaker 2: annoyed about the weather, he thought, hmm, I can use this.
• 23:46
  Speaker 2: So he scooped a piece of the very lightest sand
• 23:49
  Speaker 2: that actually had blown across the road. Took about the
• 23:51
  Speaker 2: next day, and then that product became part of the
• 23:54
  Speaker 2: non slip product range. But there's a number of products
• 23:57
  Speaker 2: in that area now, so there's literally sand in the paint,
• 24:00
  Speaker 2: so if you walk on a wet foot path, you
• 24:02
  Speaker 2: are going to fall over if it's been painting.
• 24:04
  Speaker 4: And then he just came up with it.
• 24:05
  Speaker 2: He came up with the idea on his way home
• 24:07
  Speaker 2: and they sort of talk together about what it would do.
• 24:10
  Speaker 2: And now it's reason we stand in the industry now.
• 24:13
  Speaker 2: But it just takes that little bit of you know, out
• 24:16
  Speaker 2: of the box thinking to come up with something like that.
• 24:19
  Speaker 1: And it's still being run by a third generation family
• 24:21
  Speaker 1: member zinc.
• 24:22
  Speaker 4: Correct, And how.
• 24:24
  Speaker 1: Is innovation still flourishing in this business? Have they kept
• 24:26
  Speaker 1: that ethos today?
• 24:27
  Speaker 2: Yeah, they look at all sorts of different products, you know, others.
• 24:30
  Speaker 2: Now they talk about stains and what the does permeate
• 24:34
  Speaker 2: the wood? Does it protect the wood? Now that it's
• 24:37
  Speaker 2: it's always about, you know, this is not just the cooding.
• 24:39
  Speaker 2: How can we because it's generally the biggest and most expensive,
• 24:43
  Speaker 2: most valuable asset that people own, So if we can
• 24:45
  Speaker 2: preserve it and actually make it easier for them to
• 24:48
  Speaker 2: preserve it and give it and give it some decorative spark.
• 24:53
  Speaker 2: You know, we're actually helping a lot of people. So
• 24:56
  Speaker 2: that's the ethos behind the company. It's about it's about
• 24:58
  Speaker 2: the culture of the company. It's an innovation. We always
• 25:01
  Speaker 2: talk about the bust. The staff have to be of
• 25:05
  Speaker 2: a type. We don't really know what the type is,
• 25:08
  Speaker 2: but you do know what the type is not. So
• 25:10
  Speaker 2: we have Razine people, get them on the bus, figure
• 25:13
  Speaker 2: out where the bus goes later. So we we talk
• 25:15
  Speaker 2: about the bus a lot our culture as it's along
• 25:20
  Speaker 2: those sort of loans.
• 25:20
  Speaker 4: So where does the Razine bus go next?
• 25:26
  Speaker 2: I think we continue down the same path. We look
• 25:29
  Speaker 2: for growth. We're looking for growth where it's trying to
• 25:31
  Speaker 2: steal market share off the opposition. I think we've got
• 25:34
  Speaker 2: a better story than the opposition. People people like us,
• 25:37
  Speaker 2: and as long as they like us, they're going to
• 25:39
  Speaker 2: keep buying office. I think it's.
• 25:42
  Speaker 1: Tell me about competition in this market because Razine isn't
• 25:45
  Speaker 1: almost has been around for us.
• 25:47
  Speaker 2: We have to be nimble because we're up against multinationals
• 25:50
  Speaker 2: with deep pockets and we're a private company and they're
• 25:53
  Speaker 2: a original scize company. But we were very small compared
• 25:56
  Speaker 2: to the globals. So we have to have innovative products
• 25:59
  Speaker 2: and we have to provide good service and good advice,
• 26:01
  Speaker 2: and that's that's our kicker over the opposition. They don't
• 26:05
  Speaker 2: have the same network in terms of distribution network, access
• 26:11
  Speaker 2: to market, they don't have the full range of products
• 26:13
  Speaker 2: that we do, and they certainly don't have the people
• 26:15
  Speaker 2: that we do. So that that's how we can compete.
• 26:18
  Speaker 2: We've put extra expensive and more durable and more quality
• 26:24
  Speaker 2: products together, so we sell out a higher price point,
• 26:30
  Speaker 2: but we do pay for that. But if you've painted
• 26:34
  Speaker 2: with the Razine, you're going to probably repaint in seven
• 26:37
  Speaker 2: or eight years. If you paint with the opposition, you're
• 26:39
  Speaker 2: going to paint three to four years. So you pay
• 26:42
  Speaker 2: a bit more, but you don't have to do it again.
• 26:44
  Speaker 1: So the prices that you're having to pay now, the
• 26:47
  Speaker 1: cost of manufacturing on shore, the cost of it was
• 26:50
  Speaker 1: input goods, is actually your competitive edge.
• 26:52
  Speaker 2: Yes, yes, yes, so you know, like I said, we're
• 26:55
  Speaker 2: not we don't intend to change in terms of where
• 26:58
  Speaker 2: we manufacture the product. We're staunchly Kiwi and were and
• 27:02
  Speaker 2: we're proud of that.
• 27:04
  Speaker 1: A lot of historic iconic Kiwi companies have been purchased
• 27:09
  Speaker 1: by offshore opposition, a trade citis. I was going to
• 27:14
  Speaker 1: ask if you had to do some private equity due
• 27:16
  Speaker 1: diligence at any stage.
• 27:18
  Speaker 2: More people have approached us to purchase other companies. And
• 27:22
  Speaker 2: you know, Net gets a tap on the shoulder Quae
• 27:24
  Speaker 2: regularly to sell his business. But there's there's no intention
• 27:27
  Speaker 2: of doing that. The business will never be sold in
• 27:30
  Speaker 2: his lifetime. It's not going to be I p O.
• 27:32
  Speaker 2: There won't be a trade sale. It's it's just and
• 27:37
  Speaker 2: he and he tells it to the staff, says the
• 27:39
  Speaker 2: staff know that they secure. That's who we are.
• 27:43
  Speaker 1: It's amazing. Congratulations and all the success. Can't wait to
• 27:46
  Speaker 1: see what colors do you come up with next?
• 27:48
  Speaker 2: Maybe you're having your own color.
• 27:50
  Speaker 4: I look forward to that. I'll be back for that.
• 27:52
  Speaker 4: Thank you so much, Mike.
• 27:52
  Speaker 2: This has been so pleasing. I'm pleas good to have
• 27:54
  Speaker 2: you here.