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AkzoNobel Reports 13% Revenue Gain for Q2

Friday, July 23, 2010

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Akzo Nobel N.V. (AkzoNobel) reported strong second-quarter gains in sales and earnings, and said the results reflect continued economic recovery and ongoing restructuring programs.

Performance Coatings, Specialty Chemicals and the new-construction marine market all showed increases.

Revenue for the quarter was 3.9 billion euros (approximately $5 billion), a 13% increase from 3.4 billion euros for the second quarter of 2009. Net income was 273 million euros (approximately $351 billion), compared to 151 million euros in 2009.

For the first half, revenue was €7.2 billion ($9.3 billion), up 10% from €6.5 billion for the first half of 2009. Net income was €354 million ($456 million), compared to €148 million in 2009.

"Strong revenue gains were achieved in the higher-growth markets in all business areas," the company said in announcing the results. "Revenue improved 8% at Decorative Paints due primarily to its strong footprint in these markets, where the business is growing faster than the market, offset by lower or negative revenue development in mature markets. Both Performance Coatings and Specialty Chemicals booked double-digit revenue growth (19% and 14% respectively), mainly driven by higher volumes."

The company said second-quarter EBITDA (earnings before interest, taxes, depreciation, and amortization) was €614 million, a 21% increase from 2009.

Also during the quarter, AkzoNobel announced the $1.3 billion sale of National Starch, completing the divestments of non-core former ICI businesses;, a $3 billion revenue target for China by 2015; and the completion of the acquisition of the powder-coatings activities of the Dow Chemical Company.

CEO Hans Wijers said the second-quarter results "show a further increase of revenue and profitability across each of AkzoNobel's business areas, evidencing that we are benefiting from the recovery and our ongoing restructuring." He said the company's focus on customers, cost reduction and cash generation, and expansion initiatives in higher-growth markets-which currently represent close to 40% of revenue-"has been highly beneficial. AkzoNobel is emerging from the global economic crisis in better shape, underlined by the early achievement of our 2011 EBITDA margin target of 14%," he said.

"With the ICI integration complete and a number of important targets having been achieved, we can concentrate fully on accelerating our growth agenda and building our presence in key strategic markets," Wijers added.

Wijers said the developed markets "remain challenging. Raw-material price pressure and shortages are expected to continue into the third quarter. We will keep a careful eye on the trading environment and costs will continue to be managed aggressively."

Business-segment results

For the company's Decorative Paints segment, second-quarter revenue was €1.4 billion, an increase of 8% from €1.3 billion for the second quarter of 2009. EBITDA was €205 million, a 20% increase from €171 million in 2009. For the first half, Decorative Paints revenue was €2.5 billion, a gain of 8% from €2.3 billion in 2009. EBITDA was €287 million, a 31% increase from €219 million.

The company said second-quarter Decorative Paints revenue was flat in Europe, excluding currency effects, with Russia and Turkey showing solid growth, while the UK contributed moderate improvement and other countries "stable to declining on weak demand." Revenue declined in the U.S., due to continued soft consumer spending and a slow housing market. The company said it continued to invest in the Glidden brand in the U.S., resulting in "a healthy sales increase and share expansion of the Glidden brand in the retail segment."

Decorative Paints revenue growth was strong throughout Latin America, and the company said it accelerated the "Tudo de Cor Minha Casa" ("I want colors for my house") program, which is designed to stimulate consumers to enter a contest to win free painting of the front of their house.

Decorative Paints revenue in Asia surged 38% compared to 2009, and the company said it continued to expand its Dulux stores operations with point-of-sale tinting and the launch of the Dulux Guardian Odorless Washability label. In Indonesia, the company said it launched an initiative aimed at preserving the splendor of iconic buildings, with the Balai Permuda in Surabaya being the first structure to be painted. Growth in India continued to accelerate, and there the company introduced Dulux Super Smooth and an improved Velvet touch.

For the Performance Coatings segment, second-quarter revenue was €1.3 billion euros, a 19% increase from the first half of 2009. EBITDA was €191 million, a 15% increase from €166 million for the same period a year earlier. For the first half, Performance Coatings revenue was €2.3 billion, a 13% increase from 2009. EBITDA was €334 million, up 23% from the prior-year period.

Stronger demand continued to drive Performance Coatings revenue growth, led by increased volumes in the Powder, Industrial, and Wood Finishes businesses and in high-growth markets, the company said. Revenue was down 2% excluding the effect of currency translations for Marine and Protective Coatings businesses, although activity levels were stronger in the quarter, the company said. Revenue actually rose 8%, boosted by a 10% favorable currency-translation impact. The new-construction marine market exceeded expectations, particularly in China, while the deep-sea maintenance business "continued to be slow," the company said. Activities also remained "sluggish" in the primarily construction-related protective-coatings market, excluding oil and gas.

U.S. market conditions for Marine and Protective Coatings "improved over the very poor Q2 of 2009," the company said.

Wood Finishes revenue rose 24% from the second quarter of 2009, with stronger demand seen across all market segments.

The company's Specialty Chemicals segment also reported strong increases in revenue (up 14% for the quarter and 10% for the half) and EBITDA (increases of 28% for the quarter and 32% for the half).


Tagged categories: AkzoNobel; Coatings manufacturers; Economy; Finance

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