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Ups and Downs Open Akzo's 2015

Wednesday, April 22, 2015

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AMSTERDAM—Favorable currency effects and cost cutting offset volume declines, yielding increases in revenues and operating income for AkzoNobel's opening quarter of 2015, the company reported Tuesday (April 21).

Sales volumes dipped, "reflecting a slow start to the year," the Dutch paint and coatings maker announced, but the first quarter was "solid," with "positive developments in all three Business Areas despite a challenging market environment."

Infographic
Images: Akzo Nobel unless noted

AkzoNobel reaffirmed its 2015 ROS and ROI targets as it released its Q1 earnings on Tuesday.

For the first quarter ended March 31, AkzoNobel reported:

  • Revenue increased by 6 percent, due to 8 percent favorable currency effects;
  • Volumes declined by 2 percent;
  • Operating income grew by 42 percent, due to reduced restructuring expenses, lower costs and currency effects; and
  • Return on Investment improved to 10.6 percent over the year-ago period of 9.7 percent.

The company said its 2015 targets remained on track, although "overall market conditions remain challenging in many regions."

AkzoMarkets

The following segment results were reported.

Performance Coatings

Revenue was up in all businesses, benefiting from the simplification of the segment's business structure and from favorable currency effects, the company reported.

Sales volume was mixed, increasing in North America and declining elsewhere. Operating income increased 35 percent across the business due to cost reductions.

Marine and Protective Coatings reported a 9 percent increase in revenue, despite volume declines in both businesses. Protective Coatings sales were hit by market challenges in both oil and gas and heavy industry, the company said.

Overall, Protective Coatings volumes grew in North America and China, offset by other regions, while Marine volumes declined.

AkzoMarineCoatings

Revenues in Marine and Protective Coatings increased 9 percent, despite volume declines.

Sales volume grew in Automotive and Specialty Coatings, fueling a 13 percent increase in revenue. Vehicle Refinishes and Aerospace volumes improved.

Industrial and Powder Coatings registered mixed performance, with favorable currencies producing a 5 percent increase in revenue, despite struggling sales.

Metal Coatings volumes were flat overall, with the Packaging Coatings segment growing across all regions but Coil Coatings declining in Asia and Europe.

Powder Coating volumes dipped in China but grew in North America and Europe. Wood Coatings also grew in Europe, but declined elsewhere.

Decorative Paints

Lower volumes hurt revenues, but cost reductions and favorable currency effects helped, yielding a 3 percent increase in revenue for the first quarter.

RioPainting RioPainting
Let's Colour

AkzoNobel's global  “Tudo de Cor” (Let's Colour) project has included 1,250-plus events in Brazil, including one March 25 in Santa Marta, Rio de Janeiro. Teams unveiled a 15-meter mural by artists Paulo Consentino and Swell.

Lower volumes in Europe, Middle East and Africa (EMEA) drove down revenues in the region by 4 percent; "markets in continental and Eastern Europe were challenging," the company noted.

Latin America struggled with high costs for imported raw materials in local currencies. Still, revenue increased by 19 percent on volumes, currency effects, cost management and price/mix.

Volumes declined in Asia, with a notably "soft start" to China's year, but currency effects delivered a 10 percent increase in revenues.

Specialty Chemicals

Volumes were flat over the previous year, amid a "mixed and volatile picture across segments and regions," but currency effects gave the segment a 6 percent increase in revenues. Cost containment and lower restructuring costs improved operating income by 21 percent.

SaltSilo

Volumes in Specialty Chemicals were flat in the first quarter of 2015.

Revenue in Industrial Chemicals decreased by 4 percent, while Functional Chemicals' revenue increased by 5 percent. Volumes were flat in Surface Chemistry,  partly reflecting challenging conditions in China and in the oil drilling segment, but revenue increased 11 percent.

Strong growth in silica and other products boosted Pulp and Performance Chemicals.

Outlook: 'On Track'

The dynamics of 2015 will be built largely on "exchange rate movements and lower growth rates in high-growth economies," AkzoNobel said. The restructuring and cost-cutting initiatives of recent years "form a sound basis for improved performance," the company said.

The company's previously announced targets for full-year 2015 include a 9 percent return on sales and 14 percent return on investment.

MaëlysCastella

"AkzoNobel is continuing to deliver an improved performance in a challenging economic environment," said Chief Financial Officer Maëlys Castella.

"Our results for the first quarter demonstrate that AkzoNobel is continuing to deliver an improved performance in a challenging economic environment," said Chief Financial Officer Maëlys Castella.

"Our strategy is working, and its positive effects are becoming increasingly visible in our results.

"We continue to build on this strong foundation to further increase our profitability, and we remain on track to deliver our 2015 targets."

   

Tagged categories: AkzoNobel; Architectural coatings; Business conditions; Business management; Earnings reports; Economy; Marine Coatings; Paint and Coating Sales; Raw materials; Specialty Coatings

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