Akzo Nobel N.V. (AkzoNobel) reported strong first-quarter sales and earnings results, fueled by “continued strength in high-growth markets and demand recovery in mature economies.”
The company—the world’s biggest coatings manufacturer—said revenue gains for its Decorative Paints (architectural) segment were paced by growth in the U.S., where a new distribution deal with Wal-Mart is starting to make an impact on volumes, and in Asia.
Total revenue for the quarter was €3.762 billion ($5.479 billion), a 16% increase from the first quarter of 2010, while net income rose 58%, to €128 million ($186 million). Decorative Paints sales were €1.196 billion ($1.742 billion), a 13% increase from the first quarter of 2010, while Performance Coatings revenue rose 18%, to €1.237 billion ($1.802 billion).
“These results demonstrate further progress in working towards our medium-term strategic goals and in managing the current inflationary headwinds,” said CEO Hans Wijers. “I am particularly pleased with the strong volume and pricing behind our 16% revenue growth, which gives me confidence that we have been able to maintain or improve market share across the portfolio.
“The successful roll-out of our Decorative Paints products to 3,500 Walmart stores in the U.S., together with continued strong growth in Asia and Latin America, underpinned the Decorative Paints performance,” Wijers said.
Americas, Asia Set Revenue Pace
The company said results for the Decorative Paints segment benefited from a combination of higher selling prices and expansion into “mid-tier markets in high-growth regions.” Decorative Paints revenue in the Americas rose 18%, to €399 million from €339 million for the first quarter of 2010. A revenue gain of 21% was reported for Decorative Paints Asia, while the segment recorded an 8% sales increase in Europe.
Decorative Paints revenue in the U.S. was up sharply—by31%—with most of the increase generated by the company’s new distribution agreement with Wal-Mart. Shipments to Wal-Mart began in the final quarter of 2010, and involved the company’s Better Homes & Gardens and Glidden brands.
Decorative Paints sales revenue declined 2% in Canada, while revenue rose 16% in Latin America, due to “improved market conditions and investments in brands and distribution.”
In Europe, the company said Decorative Paints revenue posted strong gains in developing markets such as Turkey, Russia and South Africa, while revenue also rose in the UK. But the company said the outlook for Western Europe “remains challenging.”
Solid sales increases in Asia were paced by a 25% revenue gain in China, where the company opened nearly 200 new Dulux stores in the first quarter. Volume growth fueled a revenue increase of 14% for Southeast Asia and Asia Pacific, while revenue rose 24% in India.
Acquisition Boosts Powder-Coatings Sales
For the company’s Performance Coatings segment, the 18% revenue increase was the result of volume gains, acquisitions, currency translations, and selling-price moves. Revenue increases were 9% for marine and protective coatings, 6% for wood finishes and adhesives, 14% for automotive and aerospace coatings, 48% for powder coatings, and 26% for industrial coatings.
Contributing to Performance Coatings volume gains was the acquisition of the former Rohm and Haas powder-coatings business, with the effect of the acquisition seen most significantly in Europe and North America.
Wijers said “considerable differences” continue to be reported in demand strength in various geographic areas and end markets, while raw-material prices have continued to rise. “Pricing and cost reduction actions are ongoing,” he said.
Complete details on the company’s first-quarter results are available at AkzoNobel’s First Quarter 2011.
AkzoNobel First Quarter 2011 At a Glance
(EBITDA: Earnings before interest, taxes, depreciation, and amortization)