TheChek News Flow

Tension is high at LVMH, with heads rolling among the higher echelons of the group. If we talk just about CEOs, this year alone the leaderships of many brands and divisions have changed.

Starting with watches, there has been a new division head and new bosses for Tag Heuer and Hublot, then in fashion, new chiefs for Fendi and Givenchy. Then there was the kerfuffle around who is CEO of the Fashion Group, the umbrella division for fashion houses other than Louis Vuitton and Dior. The Fashion Group’s CEO left in April after three months. He was replaced by the division’s former boss, but his return was never officially confirmed, probably because it was evidence of how erratic the group’s management decisions can be. More on this below.

In beauty, the CEO of Make Up For Ever, was brutally ousted at the end of June. Earlier in June, the group’s CFO and a key member of the executive committee was told he was going to be replaced by a woman from Danone. The two men who were pushed out have something in common: they expressed discontent about what was going on at the group and were shown the door, sources close to the group said. However, other sources close to the group said the CFO wanted to leave and was encouraged to do so.

Bernard Arnault, LVMH boss and one of the world’s richest and most powerful men, does not like to hear his managers point out strategic mistakes or complain openly about their superior’s abusive behaviour. Public humiliation is a national sport at LVMH and Arnault is a champion.

The recent wave of people leaving confirms that at LVMH, although officially you are encouraged to disagree with your manager or complain if something is not right, the reality is that if you do, you risk losing your job. This pattern creates a climate of fear inside the group which is bad for performance and creativity -- pillars of LVMH’s success.

The group’s culture of suppressing whistleblowing appears now in broad daylight. In June, several people were sacked from the Moët Hennessy wine and spirits division because they complained about cases of emotional blackmail and sexual harassment. One of the women involved was told by the group to take lessons in becoming “less seductive”, as La Lettre reported. LVMH’s internal auditing procedures might need beefing up.

Bernard Arnault appears to have lost touch with reality. He believes he can get away with autocratic behaviour and suppressing any form of opposition or accountability. That spirit does not send a very positive or reassuring signal to shareholders in terms of corporate culture.

Arnault’s opposition to freedom of the press, and freedom of speech more generally-- pillars of democracy -- became clear last week when a memo he sent to staff was published by La Lettre. In it, he forbade his staff from talking to journalists from seven media organizations including Miss Tweed. Since they do not rely on advertising by his brands to pay their journalists’ salaries, he cannot control them. Therefore, he regards them as a threat.

Richemont does the same. The group has not only blacklisted Miss Tweed for more than three years, it has also banned staff from posting on social media for more than a year. That edict goes against individuals’ freedom of speech: the right to express opinions and ideas without interference, retaliation or punishment by a government or any other organization or institution.

This week, more than 46 French media outlets signed an open letter in protest against the very idea of blacklisting journalists, something many luxury groups do, not only LVMH and Richemont as Miss Tweed has reported. Several news organizations owned by Arnault signed the open letter, including Les Échos and Le Parisien as well as Challenges magazine in which LVMH has a 40-percent stake.

On Wednesday, another senior LVMH executive left: Chris de Lapuente, a member of the executive committee since 2011 in charge of selective distribution. De Lapuente oversaw the duty-free business DFS, based in Hong Kong, the Paris department store Le Bon Marche and beauty retailer Sephora.

“Chris has led Sephora to become the undisputed leader of Prestige Beauty worldwide,” Arnault, LVMH’s controlling shareholder, said in an internal memo announcing his departure. “Sephora has become five times bigger since Chris took the helm.”

It is not clear why de Lapuente left. LVMH said he was retiring. However, who retires at the age of 61 at LVMH? Some execs who are still in place are well into their late 60s. Some are even older, such as the Fashion Group’s returning CEO Sidney Toledano who is 73. Arnault himself is 75 and plans to stay at the helm at least until he is 80, if not beyond. The same applies to the group’s CFO Jean-Jacques Guiony, who is 62. The dynamic finance director may have resigned but he is certainly not in a retirement mode. It is not clear what he will do next and whether he will stay with the group or not.

Industry observers will notice that many of the executives resigning from their positions are over 60. LVMH HR supremo Chantal Gaemperle is good at finding ways to make them want to retire, either thanks to big cheques or various forms of pressure from Bernard Arnault. “Gaemperle is obsessed with replacing people who are over 60 with younger managers,” one person close to the group said. “But the problem with this drive is that the group is losing a lot of experienced managers and the younger ones are not always of the same caliber.”

Several sources close to LVMH believe it’s possible that Guiony also left because he expressed his opinion too forcefully and contradicted Arnault – which is the job of a CFO. Guiony’s departure reminds us of the brutal exit of Yves Carcelle, the beloved former CEO of Louis Vuitton who died of cancer in 2014 at the age of 66. Carcelle also paid dearly for doing things his own way and ignoring Arnault’s demands, as described in the book How Luxury Conquered the World. Like Guiony, Carcelle’s replacement came from Danone.

Guiony was gently humiliated by Arnault in front of more than 300 of the group’s executives at the leaving party for Toni Belloni, the group’s former managing director, several people close to the group said. In March, Belloni was replaced by Stéphane Bianchi as LVMH’s managing director. Bianchi is also chairman of the executive committee. He will oversee the group’s selective distribution arm, previously run by de Lapuente. The fact that a replacement has not been named immediately could mean de Lapuente left because he wanted to or was encouraged to resign.

Belloni was protecting de Lapuente, sources close to the group said. They both worked for Procter & Gamble before joining LVMH. With Belloni gone, de Lapuente probably realized it was a good time to go.

The current downturn in discretionary spending is a factor in the tension at luxury groups, with people casting blame at each other for the underperformance of the brands or divisions under their responsibility. As a result, heads are likely to continue to roll in the luxury industry. Egos in the industry tend to be large, not only at LVMH. This makes it difficult to build a genuine esprit de corps and a fluid workflow which are essential for success.

Michael Burke, Louis Vuitton’s former boss who was named CEO of LVMH Fashion Group in January, left after a few weeks. He was replaced by the division’s former boss Sidney Toledano, previously CEO of Dior. On LVMH’s website, Burke, 67, is still CEO of Fashion Group and a member of the executive committee.

People close to the group said Burke left because he badly managed the hiring of Alessandro Michele for Fendi. Michele is the designer credited with driving Gucci’s revival from 2015 until the pandemic. Michele’s demands in terms of remuneration and power were too high, sources close to LVMH said. For example, he wanted the brand to sever ties with Fendi family members, including Silvia Venturini Fendi and her daughter.

The Fendi matriarch is in charge of Fendi’s menswear and accessories and worked alongside the brand’s former star designer Karl Lagerfeld for five decades. Her daughter, Delfina Delettrez Fendi, has looked after the brand’s jewelry since 2020 and presented her first high jewelry collection in July last year. The two women are respectively the third and fourth generation of the Fendi family to be involved in the brand.

Michele joined Mayhoola’s Valentino in March and showed his first collection on Sunday during Paris Fashion Week (more on his show next week). On Tuesday, Miss Tweed reported that the former Valentino designer Pierpaolo Piccioli was expected to be appointed Fendi’s new creative director. Piccioli is credited with having strengthened Valentino’s fashion authority, particularly in couture and evening wear, and growing the Italian brand into a €1.3 billion business during his 16-year tenure.

It is not yet known when Piccioli’s appointment will be announced. “I understand it’s going to be official soon,” one senior industry source said.” “Talks are very advanced,” another industry source said. LVMH declined to comment. Contracts with designers often take a long time to be negotiated and there are often last-minute changes. It’s possible that the departure of Hedi Slimane at Celine, which Miss Tweed was first to report, will be announced before, possibly as early as this week, some industry sources predict.

Fendi has been struggling to regain momentum and find its footing after its longstanding German creative director Karl Lagerfeld died in 2019. Lagerfeld, known as “the Kaiser”, had been Fendi’s creative director since 1965. He created the brand’s double FF logo and kept it vibrant and relevant for decades with provocative shows.

The Kaiser was replaced by Kim Jones in 2020, but the British designer did not succeed in giving Fendi a new credible and pertinent identity that seduced shoppers. The brand’s sales have been sagging, even before the current luxury spending downturn of the past 18 months.

Fashion critics argue that Jones simply did not understand Fendi. What he does is elegant, luxurious and timeless, but it does not have much emotion. His latest collection, shown in Milan last week, paid homage to the 1920s (Fendi was founded 1925) with some Art Deco embroideries on transparent tulle dresses. The show failed to generate much excitement among fashion followers.

The British designer is also the creative director of Dior’s menswear, a big job for which he has been getting more praise than for his work at Fendi. In May, Fendi appointed as its new CEO Pierre-Emmanuel Angeloglou, who had been promoted in March to deputy head of LVMH’s Fashion Group.

Another designer joining LVMH is Sarah Burton who abruptly resigned from Kering’s Alexander McQueen a year ago. Burton was appointed creative director of Givenchy earlier this month, working alongside Alessandro Valenti who replaced Renaud de Lesquen as CEO of the brand in July.

Will Burton turn Givenchy into a new version of Alexander McQueen where she has spent all her working life? Will Michele turn Valentino into a new version of Gucci? That’s the risk when luxury groups keep hiring the same designers whose style is more recognizeable than that of the brand itself.

Climate graphic of the week: Energy demand for cooling in global cities to soar, says report

Warming of 1.5C to 3C will lead to droughts and heatwaves requiring greater use of air-conditioning systems

World cities will face longer heatwaves, greater disease risk and “skyrocketing” energy demand for cooling, according to a new report on post-industrial global warming of 1.5C to 3C, which the planet is on track to reach.

While low-income cities were likely to be the hardest hit, developed global centres including Tokyo, Rome, Madrid, Rio de Janeiro, Beijing, Sydney, London and New York were also likely to be severely affected.

For most cities the difference will be substantial, with increased rainfall, heat and droughts rising in severity and frequency, the report by the World Resources Institute found.

The report analysed climate hazards using downscaled global models for 996 of the largest cities — home to 2.1bn people, or more than a quarter of the world’s population.

The world has already warmed by at least 1.1C since pre-industrial times, a body of UN scientists has found, and exceeded 1.5C in the past 12 months. Scientists track the temperature rise over at least one or two decades, however.

“The difference between 1.5C and 3C has life or death consequences for billions of people worldwide,” said Rogier van den Berg, global director at the WRI Ross Center for Sustainable Cities.

The findings were a “wake-up call to every city and national government leader: now is the time to start preparing cities for a much hotter world, while doing everything we can to slash [greenhouse gas] emissions,” he said.

The World Meteorological Organization has forecast that 2024 will be the warmest year on record. UN scientists say that on the current trajectory the world is likely to breach 1.5C by the mid-2030s.

At 1.5C above pre-industrial levels, the longest heatwave each year would last on average 16.3 days. At 3C, however, this would jump to 24.5 days, with 16 per cent of the world’s largest cities experiencing at least one heatwave lasting over a month each year, according to the WRI data.

In the Middle East and north Africa, the longest heatwaves would extend by 13.6 days on average, lasting 36.3 days.

Heatwaves would also become more frequent. On average cities would see a 29 per cent increase in the number of heatwaves, while in low-income countries this could climb by 45 per cent.

The report highlights that the demand for energy-intensive air-conditioning will also surge as more people are exposed to long periods of hot weather.

At 3C warming about 194mn city dwellers will see a doubling of cooling demand, compared with 8.7mn people at 1.5C, it estimates.

The spike in demand would pose particular challenges to cities with previously temperate climates in northern parts of Europe, as well as in lower-income urban areas, where there is less air-conditioning installed.

Longer droughts combined with short, but more extreme rainfall events in some regions had the potential to devastate agriculture and infrastructure, the report said, putting strain on food chains.

“This research makes it clear that we can’t afford to delay action on climate change any longer, as dire consequences await cities in a 3 degrees C world,” said Antha Williams, who leads the Bloomberg Philanthropies’ environment programme.

Millennium’s obsession with not losing money has powered $56 billion in investor gains

The investment pros at one of the world’s largest hedge funds, Millennium Management, have a strict rule: Don’t lose money.

Millennium parcels out the roughly $69 billion it manages for clients across more than 2,600 traders, analysts and other investment staffers working on hundreds of teams. Each team operates independently, betting on things like bonds converging or which companies get added to stock-market indexes or the outlook for commodity prices. But all of them face unusually tight limits on risk-taking, according to people familiar with the firm’s inner workings.

For example, portfolio managers who are allocated $1 billion can lose only $50 million before that buying power will likely be cut in half. If they lose an additional $25 million, they will likely be fired.

Protecting itself against even modest losses has made Millennium one of the most stable performers in the hedge-fund industry and made Israel “Izzy” Englander, the firm’s chief executive, a billionaire. Millennium has generated $56 billion in gains for investors after fees since the firm’s inception in 1989, according to LCH Investments. Among hedge funds, that trails only Citadel.

Millennium has had a single down year, 2008. Over the past five years, it hasn’t lost more than 1% in any given month.

That kind of longevity and consistency is rare in the hedge-fund world. Many of the most successful traders historically were defined by their risk appetites and track records that featured home-run returns alongside strikeouts. Nowadays, among investors such as pension plans and charitable foundations, go-for-broke hedge funds are out of fashion while those that reliably generate decent gains are in demand.

It is that type of returns that multimanager firms such as Englander’s are designed to deliver. A group of 53 multimanager hedge funds produced annualized gains of 9.9% over the past five years ended in June, outperforming the overall hedge-fund industry, according to Goldman Sachs’s prime-brokerage unit. They did it with less than half as much volatility as other hedge funds and nearly no correlation to the broader stock market.

Englander avoids the spotlight that other famous investors relish and rarely speaks about his fund in public. At a closed-door industry conference last year, fellow hedge-fund manager Paul Tudor Jones introduced Englander as one of the best risk-mitigators ever. When Englander plays the board game Risk, where the whole point is world domination, Jones joked that the Millennium executive is instead focused on “world mitigation.”

Millennium and other multimanager funds follow a similar playbook to manage risk. They have several investment teams, sometimes called pods, that operate autonomously with different strategies and asset classes, breeding diversification. These firms tend to run market neutral, or have mostly balanced wagers on rising and falling asset prices. The firms monitor teams’ exposure to the underlying attributes, or factors, that may be present across different securities.

Firms target a level of volatility that they view as acceptable, often resulting in portfolio managers increasing their positions when markets are tranquil and cutting them in times of trouble. Behind the scenes, risk managers might scale back similar bets that a number of different teams take to ensure they aren’t overweight any single position firmwide, usually without the knowledge of those teams.

Where Millennium stands apart is its relatively rigid imposition of so-called stop-losses, or the maximum amount its people can lose before the firm gets involved. A reduction in capital can occur when a portfolio manager is down by 5%. When losses reach 7.5%, that usually means the portfolio manager is out of a job, though Millennium sometimes makes exceptions.

Hedge funds track how big their returns are relative to the risk they took to generate them. Since its inception, Millennium scores a 2.6 on this metric, known as the Sharpe ratio. That is more than double the 1.1 that a broad hedge-fund index achieved over the past five years, according to Barclays.

Millennium’s portfolio managers can operate under a fear of hitting those stop-losses. Many portfolio managers choose to deploy millions of dollars less than they are allotted so as to give themselves more breathing room for losses.

Millennium’s higher turnover also means it constantly needs to find new people to put its money to work. About 15% to 20% of its staff leave each year, and Millennium, like other multimanager firms, offers generous pay packages to new recruits that can reach tens of millions of dollars.

At the conference, Englander cited noncompete agreements at rival hedge funds for the escalating cost of hiring new traders.

As long as their portfolios don’t lose money, Millennium gives employees a long leash. The firm can be less prescriptive than rivals when it comes to telling teams which or how many companies they can cover and invest in. Team leaders often give distinct names to the pods they run, as if they managed a stand-alone hedge fund.

That autonomy extends to how often members of investment teams are required to come into the office. One Millennium portfolio manager, Yao King, owns a farm in Pennsylvania and documents on social media his adventures growing garlic, inspecting his barn for leaks and tapping maple trees for sap. A video posted to Millennium’s YouTube page splices clips of King splitting wood with others of him in front of a trading terminal.

“Whether it’s in farming or in finance, you’re constantly trying to consider what risks you’re not considering,” King said.

Shigeru Ishiba needs to show pragmatism to make his administration a success

In electing a new prime minister, Japan’s ruling Liberal Democratic party could have opted for generational change in the form of 43-year-old Shinjiro Koizumi. It could have chosen a return to the nationalistic conservatism of former leader Shinzo Abe — and with it a first female prime minister — in the shape of Sanae Takaichi. Instead it went through door number three, an unexpected one, and selected 67-year-old Shigeru Ishiba, something of an outsider within his own party, who triumphed and won the top job at the fifth time of asking.

Ishiba is widely respected as an expert in defence policy and an honest, conscientious leader who is close to his rural constituents in Tottori prefecture. He has served as minister of defence and minister of agriculture, among other posts. Yet he is a singular figure, more popular with the public than with his parliamentary colleagues, who has spent the past decade sitting outside the main currents of Japanese politics. On economics, on the US-Japan alliance and in the management of his own party, some of Ishiba’s past positions will make it harder to run a successful administration. The new prime minister has his work cut out for him.

Ishiba’s most immediate challenge will be to form a cabinet. Given his enmity with power brokers such as former prime minister Taro Aso, it will be tricky to get the balance right. Ishiba’s path to victory relied on support from regional party members, who catapulted him into a run-off among parliamentarians with Takaichi, the candidate of the right. Ishiba was the second choice of enough of his fellows to emerge as a narrow victor, by 215 votes to 194, but his base of support in the parliamentary party is small. Ishiba is likely to call a general election quickly. Victory will strengthen his position. But he will have to watch his back for internal rivals at least as carefully as he handles the official opposition.

On the economy, Ishiba has signalled he will stick for now to the policies of his predecessor, Fumio Kishida, which are still, in essence, the policies of Abe. That is sensible. Ishiba favours the continued normalisation of the Bank of Japan’s monetary policy, which is desirable, provided it is consistent with keeping inflation at the 2 per cent target.

In the past, however, he was a fierce opponent of Abe’s stimulus. He has talked about raising taxes on business. He is ardently in favour of economic revitalisation for regional Japan, although how he might achieve this is unclear. None of his rhetoric is obviously supportive of economic growth. The yen rose and stock futures fell on news of his victory.

During the leadership campaign, Ishiba talked about creating an Asian Nato, presumably to defend its members against China. Yet it is not clear who, other than Japan, would want to join. He is likely, at least, to maintain Japan’s improved relations with South Korea.

Ishiba has often objected to the inequality of the US-Japan alliance, under which Washington protects Tokyo, but Japan is obliged to host US troops on its soil. It is an uneasy thought to imagine Ishiba — an earnest, serious man — discussing his desire to reshape the alliance with a mercenary, isolationist Donald Trump, should the latter regain the US presidency in a few weeks’ time.

After defeats in 2008, 2012, 2018 and 2020, Ishiba’s achievement of the premiership is a testament to the power of perseverance. His genuine personality and obvious respect for the voters give him public appeal. To succeed as the leader of a divided party, however, he will need to show a strong streak of pragmatism, at least for an initial phase, rather than pursue his own, long-held political projects.

Union’s opposition to Kroger’s $25bn purchase of Albertsons sparks doubts in local affiliate

Authorities challenging the largest supermarket deal in US history have said it must be blocked to protect unionised workers.

Not every labour leader agrees.

Kroger’s $24.6bn purchase of Albertsons “is not necessarily evil,” said John Niccollai, president of the United Food and Commercial Workers union local 464A, which represents Albertsons’ workers in parts of New York and New Jersey.

“Wouldn’t it be in the best interest of working men and women to have a totally unionised large national employer? And that’s really what a merger of Albertsons and Kroger would bring to fruition.”

Legal cases challenging the deal are moving through the court system. Final briefs were filed on Friday after a trial in which the Federal Trade Commission, eight states and the District of Columbia asked a federal judge for an injunction.

A separate case brought by the state of Washington is at trial. A third trial will begin in Denver on Monday after Colorado sued to block the takeover.

All three lawsuits go beyond customary claims about protecting consumers to allege harms to workers from the deal. But the FTC’s labour argument is the most extensive.

The FTC says uniting Kroger and Albertsons would diminish the bargaining power of unions that represent hundreds of thousands of employees at the two companies’ stores, because the two companies compete for workers.

“The proposed acquisition would eliminate that competition, likely leading to lower wages and reduced benefits, opportunities, and quality of workplace conditions and protections for thousands of [the companies’] employees,” said the FTC’s lawsuit.

Colorado attorney-general Phil Weiser said in his case: “Kroger and [Albertsons] are direct, horizontal competitors for labour.”

Kroger and Albertsons together have more than 700,000 employees across almost 5,000 stores. They are the first and second biggest supermarket chains in the US.

The companies say they need to merge to survive intensifying competition from Walmart, Costco, Amazon and other rivals.

Walmart and its Sam’s Club warehouse chain now account for 25.7 per cent of US grocery sales, according to Numerator, a market research firm, while Kroger and Albertsons together have 14.4 per cent.

To address concerns the combination would eliminate competition in some places, the companies have pledged to sell 579 stores to a group called C&S Wholesale Grocers. Worker groups have questioned the ability of C&S to manage the stores, invoking bitter memories of stores Albertsons sold off when it bought supermarket chain Safeway in 2015 to a company that soon went bankrupt. 

Leaders of UFCW International, the overarching body for local union affiliates around the US and Canada, voted unanimously to oppose the Kroger-Albertsons deal.

“We know what this type of consolidation means,” said Kim Cordova, president of UFCW Local 7, which represents Kroger and Albertsons workers in Colorado and Wyoming. “It’s great for Wall Street, it’s great for executives, but it’s really bad for workers, retirees, farmers, ranchers.”

Cordova and Niccollai are also vice-presidents at UFCW International.

Niccollai, who has served as Local 464A president since 1982, said he also endorsed UFCW International’s opposition to the merger.

“We’re team players. You can’t have a union divided. So we’ve taken the position that we’re opposed to the merger,” he said.

Yet in the north-east, where Albertsons but not Kroger has supermarkets, Niccollai warned blocking the deal could have unintended consequences for his members who work at Albertsons-owned Acme and Kings stores. 

“I am concerned that if this merger doesn’t go through, it could put those stores in jeopardy,” Niccollai said.

Vivek Sankaran, chief executive of Albertsons, testified in the FTC trial that if the deal does not close, management would have to consider options including job cuts, store closures, exiting certain markets or a sale of the company.

“It would mean thinking about assets that are not performing and making tough decisions on them; about businesses that are not performing and making tough decisions on them,” Sankaran said in court.

One UFCW local union, number 555 in Oregon, originally backed the merger but withdrew its support last month after reviewing what it said was new information that surfaced during ongoing contract talks with Kroger. Local 555 members undertook a six-day strike at Kroger’s Fred Meyer stores in August and September.

No other UFCW has endorsed the merger. But some other local union leaders have privately expressed worries that “Kroger is the only viable union operator to buy Albertsons, and if this doesn’t go through, Albertsons is going to get bargained off in pieces and sold to non-union retail competition,” said Henry Mellet, a senior director at Strategic Resource Group, a consultancy that has union locals and retailers as clients.

Niccollai said: “There’s really a dichotomy of opinions, because we have local unions that have different issues.”

Under its chair Lina Khan, the FTC has taken up worker protections as part of its focus. Last month, the agency signed a memorandum of understanding with the National Labor Relations Board, the Department of Labor and the Department of Justice antitrust division to collaborate on labour matters in antitrust investigations of mergers.

However, the FTC on Friday said it will withdraw from the agreement, without explaining why.

The IPO market will take the slow road to recovery

September’s quarter-end is a good point to call time on the IPO class of 2024, but how is 2025 shaping up?

There are a few sages who predicted all along that 2025 — not 2024 — would be the year to watch for IPOs. More have joined them as deal flow remained depressingly soggy. Will 2025 really be any better? Companies going public like certainty. There is not much of that in prospect. 

The looming US election makes the September quarter-end a good point to call time on the IPO class of 2024. Few executives will be prepared to risk the choppier markets that usually surround November votes. So far this year companies have raised some $26bn by going public in New York including social media group Reddit and cruise operator Viking. That beats $20bn raised in all of last year and positively sparkles compared with $8bn in 2022. But it is still the sort of amount that was being raised every six months in the years before the 2020-21 boom.

The argument for 2025 is that companies have still spent this year dealing with the fallout from that period. Valuations needed to deflate. Executives had to flip from talking up top line growth and start discussing plans for net profitability. If 2022, when the S&P tumbled 19 per cent, was the stuff of start-up nightmares then 2023’s 24 per cent rally despite fears of a recession (still yet to materialise), plainly caught them off-guard.

That left 2024, curtailed by the November election, to prepare for a listing. There is probably a handful of companies that rue not being ready sooner: strong markets between March and June this year could probably have supported more deals than landed. 

The IPO market is a lumpy way to make a living. Take 2014 where Alibaba’s bumper $25bn float skews the numbers. In 1999, when BlackRock and Goldman floated alongside dotcom stars, those names were dwarfed by UPS’s $5.5bn deal — then a record.

Still, the last couple of years have been quiet by any measure. This time, an IPO recovery is more reliant on some predictability, rather than a roaring market. As August’s rout showed, it doesn’t take more than a couple of economic releases to trigger wild moves. The Fed this month made clear that it, too, will react to future data. That leaves listings wannabes attempting to plan for IPOs to fall neatly between mood-altering monthly jobs reports.

Forget about 2024. But the IPO recovery is coming — just perhaps not as quickly as some hope.

Industry pushes for rethink on anti-dumping measures against China’s exports of titanium dioxide

Paint manufacturers are pushing for a rethink of EU anti-dumping measures against Chinese exports of a key raw material, saying they will lead to factory closures and further erosion of the region’s industrial base.

The bloc’s paint producers fear that tariffs of up to 39.7 per cent on Chinese exports of titanium dioxide (TiO2) would bankrupt smaller producers and push bigger manufacturers to shift production outside the bloc.

The provisional duties imposed in July have yet to be confirmed by member states.

“This is a question of survival of these industries,” said Nicolas Dujardin, chief operating officer of Océinde, a family-owned French paint producer. “If all those investigations result in such high taxes in Europe, then there are going to be some bankruptcies.”

As a result of an anti-dumping investigation launched last year, the EU introduced provisional measures, including retroactive duties, that could be adjusted or confirmed next January.

The debate puts a spotlight on the dilemma the EU faces in protecting its industries from Chinese competition without stoking inflation and generating higher costs for its own producers.

Paula Salastie, the fourth-generation family owner of Finland’s Teknos, said the paint sector would face a prolonged downturn if consumers were hit by even higher prices, and that if Chinese supply were diverted elsewhere, raw material shortages would cause production outages.

“If we’re unable to sell as much as we were expecting, then we need to cut jobs. We are looking with a very keen eye,” she said.

The duties meant its next investments were likely to go outside the bloc, she added.

The European Commission declined to comment but noted that paint producers had until October 21 to submit their views ahead of a vote by member states.

Big paint producers have also criticised the duties. Pedro Serret Salvat, president of Europe, Middle East and Africa at PPG, the world’s second-largest paint company, said they would “have a negative impact on the competitiveness” of its EU manufacturers.

The duty was “disproportionate” and the retroactive application was “unacceptable”, he added.

Paint producers have said the tariffs would be acceptable if introduced gradually along with increased subsidies for local titanium dioxide production.

However, western TiO2 producers have been badly hit by Chinese competition.

China’s production capacity has ballooned from 1.4mn tonnes in 2008 to an estimated 6.1mn tonnes this year, taking its share relative to global consumption from 29 per cent to 83 per cent, according to TZMI, an industry information provider.

Approximately 1.1mn tonnes of non-Chinese production has shut down since 2007, including five plants in the EU, according to estimates by the European TiO2 Coalition, which made the complaint that led to the anti-dumping probe.

Tronox, a titanium dioxide producer that led the European TiO2 Coalition, said its market was “a microcosm of the problem with Chinese overcapacity” that also affected sectors such as batteries, solar panels and steel.

The company said the maximum increase in paint prices resulting from the duties would be 5 per cent. Paint producers disputed this, saying the impact could be higher.

Protecting the TiO2 industry mattered for the European aerospace industry as it was vital to producing titanium metal used in aircraft, Tronox added.

“We can’t operate with capacity utilisation at 60 per cent,” said Jeffrey Neuman, general counsel of Tronox. Protecting the industry through tariffs was “a fundamental industrial resilience question”, he added.

Some paint makers said they expected the duties both to give the UK a Brexit windfall and to boost Turkish rivals, with both nations still able to access cheap Chinese pigments.

But Tom Bowtell, chief executive of the British Coatings Federation, said any competitive edge from lower input prices would probably be negated by the extra trade costs incurred by leaving the EU.

Tronox said it was concerned that the UK could be flooded with Chinese material as exporters sought alternative markets outside the EU, especially as Brazil and India had launched their own anti-dumping investigations against TiO2 shipments from Asia’s biggest economy.