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AkzoNobel Sales Hold, But Profits Drop

Thursday, July 24, 2014

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With improving sales but declining revenue, Akzo Nobel’s Decorative Paints business provided a good microcosm Wednesday (July 23) of the company’s mixed fortunes in the second quarter of 2014.

Overall, profits at the Dutch coating and chemical multinational plunged in the second quarter, despite improved sales volume across all three businesses, the company reported Wednesday (July 23).

Second-quarter profit from continuing operations declined to €230 million ($309.6 million USD) in 2014 from €333 million ($448.2 million USD) from the same quarter in 2013, AkzoNobel said.

Akzo Decorative Paints
Images: AkzoNobel

Decorative Paints revenues declined in Latin America and elsewhere.

Revenues dropped by four percent, to €3.710 billion ($4.9 billion USD) from the prior-year period—primarily due to adverse currency effects, reported.AkzoNobel, the world's second-largest paint and coatings company.

Bright Spots

Volumes increased in each of the business units, however, and Return on Sales (ROS) improved to 9.5 percent from 8.3 percent. The 2014 ROS figure includes €45 million ($60.5 million USD) in restructuring costs. Excluding those costs (which increased €5 million over 2013), ROS was 10.7 percent in the second quarter.

Operating income also climbed by 10 percent in the second quarter and by six percent for the first half of the year, compared to the prior-year periods.

Overall, the company said it remained on track to deliver its 2015 targets.

AkzoNobelQ2H1

Revenues declined and income increased at AkzoNobel in the second quarter and first half of 2014.

“With the publication of the Q2 figures, the results of our ongoing commitment to organic growth and operational efficiency continue to be visible," said CEO Ton Büchner.

He noted the company's gains in volume, ROS and net income, despite "operating in a volatile market."

'Commitment to Innovation'

Büchner also said the second quarter saw "some great examples of AkzoNobel’s commitment to innovation and sustainability," including:

  • The opening of a new membrane electrolysis plant in Germany;
  • A new €6.5 million investment to expand the research center at the Performance Coatings site in China;
  • The start-up of a €80 million Imperatriz Chemical Island in Brazil; and
  • The launch of the company's Human Cities initiative.
Ton Buchner AkzoQ2

CEO Ton Büchner cited "some great examples of AkzoNobel’s commitment to innovation and sustainability" that would "boost our market-leading positions." He also praised the company's operating efficiencies.

"These developments will not only help to further enhance our operational efficiency and stimulate organic growth, but will also boost our market-leading positions," he said.

Decorative Paints

In Decorative Paints, volumes rose by three percent overall, mostly from increases in Asia and "most European countries," the company said.

Revenue declined nine percent compared with 2013, due to the divestment of the Building Adhesives business and adverse currency effects. Operating income was the same as last year, increasing when the effect of divestments and adverse currency developments are excluded.

"The ongoing operational excellence measures in Europe continue to support the improvements in margin," the company said.

Volumes in Europe, the Middle East and Africa were up year-over-year, although revenues declined because of diverstments and currency effects. Revenues declined in continental Europe, while the UK and Eastern Europe saw positive developments.

Revenue declined in Latin America, partially offset by higher selling prices. Volumes grew in Asia, although revenue declined.

Performance Coatings

Volumes in Performance Coatings inched up 1 percent compared with 2013. Revenue declined 2 percent overall, as adverse currencies wiped out improvements in volume and price/mix.

AkzoNobel PMC

Marine volumes increased in both deep-sea maintenance and new construction.

Operating income improved by nine percent, "due to operating effectiveness measures," AkzoNobel said. Return on sales was 12.4 percent (2013: 11 percent).

Revenue in Marine and Protective Coatings was down 2 percent on last year, mostly due to adverse currency effects. The struggling marine sector enjoyed increased volumes in deep-sea maintenance and new construction over prior year. Protective coatings volumes ended flat.

Revenue in Automotive and Aerospace Coatings was down 1 percent. Volumes in Automotive varied by region, while Aerospace volumes rose.

Powder Coatings revenue was up four percent, with all regions showing positive volumes.

Industrial Coatings reveue declined five percent as volumes dropped and adverse currency effects took a toll. The Asia Pacific region saw growth in all businesses.

Specialty Chemicals

Volumes in Specialty Chemicals increased by four percent due to better market conditions in most businesses, with Pulp and Performance Chemicals and Functional Chemicals showing strong growth. Revenue declined, mainly due to adverse currency developments and continued caustic price pressure.

Operating income increased 2 percent compared with 2013 due to cost control and operational efficiencies.

Read the full second-quarter and half-year report here.

 

   

Tagged categories: AkzoNobel; Architectural coatings; Decorative coatings; Earnings reports; Marine Coatings; Paint and Coating Sales

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