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Volume Up, Revenue Dips in AkzoNobel’s Q1

Wednesday, April 20, 2016

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AkzoNobel opened 2016 with volume increases across the board and a warning that the market environment remains uncertain with challenging conditions.

“During the first quarter we grew volumes in all Business Areas and continued to improve profitability despite a challenging market environment and negative currency effects,” Maëlys Castella, chief financial officer of one of the world’s largest paint and coatings companies, said Tuesday (April 19) in releasing its first-quarter report.

Castella
Photos, images: AkzoNobel

Maëlys Castella, AkzoNobel's chief financial officer, says volumes grew in all business segments despite challenging conditions.

The company reported a 4 percent decline in overall revenue due to “adverse currency effects, price/mix and divestments.”

The Amsterdam-based manufacturer said its operating income was up 17 percent to €357 million (US$406 million) and earnings before interest, taxes, depreciation and amortization increased 9 percent to €334 million ($380 million).

Profitability improved, with return on sales at 9.7 percent compared with 8.5 percent last year.

“Net income improved by 50 percent and we continue to further strengthen our businesses by delivering on our strategy of continuous improvement, organic growth and innovation,” Castella said, noting that during the first quarter the company agreed to acquire BASF’s Industrial Coatings division.

akzonobel graph

  * ROS% is EBIT divided by revenue
Moving average ROI% is EBIT divided by 12 months average invested capital.

By segment, AkzoNobel reported:

  • A 3 percent revenue decline in Decorative Paints;
  • A 3 percent revenue decline in Performance Coatings, which includes protective and marine coatings, industrial coatings, and automotive and aerospace coatings; and
  • A 7 percent revenue decline in Specialty Chemicals.

Decorative Paints

Despite the decline in revenue due to unfavorable currency effects and adverse price/mix, the segment saw operating income reach €52 million ($59 million)—a 4 percent hike largely due to higher volumes and lower costs.

Volumes increased 6 percent due to positive developments in Asia and Europe, offset by Latin America, the company said.

Performance Coatings

Operating income for this segment increased 9 percent, to €186 million ($211 million), due to higher volumes, management delayering, continuous improvement initiatives and lower costs, the company reported.

Ship Painting

The company's Performance Coatings posted a 2 percent increase in volume for the quarter, driven mainly by its marine and protective coatings business.

Volumes were up 2 percent mainly driven by Marine and Protective Coatings.

The intended acquisition of BASF’s Industrial Coatings business, announced this quarter, is expected to strengthen this segment’s position.

Specialty Chemicals

The company’s divestment of its Paper Chemicals business, price deflation and adverse currency effects cut revenue by 7 percent in this segment.

However, the segment posted 1 percent increases in operating income and volume, attributed to operational efficiencies and positive developments in Industrial Chemicals.

Outlook

Forgoing an upbeat outlook, the company warns that the picture ahead remains uncertain as challenging conditions persist in several of the countries and segments served.

“Deflationary pressures and currency headwinds are expected to continue,” AkzoNobel said.

   

Tagged categories: AkzoNobel; Business matters; Coatings manufacturers; Earnings reports; Economy; Finance

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