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AkzoNobel Sees Progress Despite 4th-Quarter Loss

Thursday, February 18, 2010

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AkzoNobel reported a fourth-quarter 2009 net loss of 60 million euros (approximately $82.2 million), compared to a net loss of 1.5 billion euros (appr. $2.1 billion) in the fourth quarter of 2008. Revenue for the quarter was 3.3 billion euros (appr. $4.5 billion), a 7% decline from the prior-year period.

For 2009 as a whole, the company reported net income from all operations of 285 million euros (appr. $392.4 million), compared to a net loss of 1.09 billion euros (appr. $1.5 billion) in 2008. Revenue for the year fell 10%, to 13.9 billion euros (appr. $19.1 billion).

The company said the fourth-quarter loss was the result of ongoing restructuring costs and “other incidental items.” Restructuring costs were reported at 119 million euros for the fourth quarter and 353 million euros for the year.

For continuing operations before exceptional items, the company reported fourth-quarter EBIT (earnings before interest and taxes) of 248 million euros, a 7% increase from the fourth quarter of 2008. For the year, the company’s EBIT was 1.15 billion euros, a 12% decrease from 2008.

Despite the revenue decline for the year, the company said volumes were up slightly for the fourth quarter, representing the “first positive quarterly volume development over last year.”

Commenting on the results for the year, CEO Hans Wijers said that an EBITDA (earnings before interest, taxes, depreciation, and amortization) margin of “close to 13% in such challenging markets is a good indication of both the underlying strength of our company, and the successful implementation of the ongoing restructuring and cost-reduction programs. Our ability to adapt early and quickly to the new economic reality was crucial and we are now well placed to take advantage of the upturn when it comes.” The company said EBITDA for the year was nearly 1.8 billion euros, down 8% from 2008. EBITDA margin edged up, however, to 12.7% from 12.5% in 2008.

Wijers added that volume development per quarter “confirms that the stabilization we reported at the end of the third quarter has continued. However, we believe the recovery is fragile and will be slow.” He said the company “will continue to focus on customers, cost reduction and cash generation, but investments to capture growth will remain a priority—particularly in high-growth markets.”

Segment revenue and earnings

Fourth-quarter revenue for the company’s Decorative Paints segment was 1.04 billion euros, a 4% decline from the fourth quarter of 2008. For the year, the segment’s revenue declined 7%, to 4.67 billion euros. The segment’s fourth-quarter EBIDTA was 71 million euros, a 24% decline from 2008. For the year, EBITDA fell 18%, to 492 million euros.

For the Performance Coatings segment, fourth-quarter revenue was 999 million euros, down 8% from 2008. For the year, Performance Coatings revenue was 4.08 billion euros, a 12% decline from 2008. For the quarter, the segment’s EBITDA was 153 million euros, a gain of 30% from 2008. For the year, the segment’s EBITDA rose 4%, to 587 million euros.

Specialty Chemicals segment revenue for the fourth quarter was 1.3 billion euros, down 9% from 2008. For the year, Specialty Chemicals revenue declined 8%, to 5.2 billion euros. The segment’s fourth-quarter EBITDA was 217 million euros, up 16% from 2008. For the year, segment EBITDA fell 10%, to 814 million euros.

In comments on the segment results, the company said Decorative Paints volumes recovered in the fourth quarter, with volume declines in North America being offset by recovering volumes in Asia and gains in Latin America. Volumes in Europe “stabilized,” the company said.

For Performance Coatings, lower demand was seen for all businesses, although demand weakness was less evident in the fourth quarter. Late-cycle volumes were off 14% for the Marine and Protective Coatings businesses, but were partially offset by stronger volumes in Industrial coatings.

Specialty Chemicals demand was down across all businesses, but volumes increased in the fourth quarter, mainly due to improvement for Polymer Chemicals.

Restructuring activities

The company said major restructuring costs for the Decorative Paints segment involved supply-chain and integration activities in Europe, Canada, and Latin America, and the closing of stores in North America. In the Performance Coatings segment, workforce reductions were carried out in all businesses, particularly the Industrial Activities and Car Refinishes units.

Major actions involved the integration of the acquired ICI Paints business, with 29 Decorative Paints sites closed since the acquisition; reductions in packaging types; the relaunch of the Glidden brand; and a partnership with Martha Stewart and The Home Depot.

In the Performance Coatings segment, significant moves included the closing and downsizing of several sites; an agreement to acquire the powder coatings business of The Dow Chemical Company; and the acquisitions of Kronospan and SABA.

A workforce reduction of nearly 3,000 occurred during the year in the Decorative Paints and Performance Coatings segments, with a reduction of 3,400 in Decorative Paints since the ICI acquisition.

   

Tagged categories: AkzoNobel; Coatings manufacturers; Marine; Protective coatings

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