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AkzoNobel Releases Third-Quarter Numbers

Thursday, October 19, 2017

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Global coatings giant AkzoNobel (Amsterdam) released its third-quarter earnings report on Wednesday (Oct. 18), along with a notice of changes to its supervisory board and the announcement for an Extraordinary General Meeting set for the end of November.

Volumes were up by 2 percent in the quarter over last year, led by the company’s Performance Coatings segment, while revenue was also marginally up by 1 percent (3.62 billion euros—or $4.27 billion—versus 3.6 billion in 2016).

Images: AkzoNobel

“EBIT for 2017 is now expected to be in line with 2016, due to adverse foreign exchange, ongoing industry specific headwinds and supply chain disruptions, including the adverse impact of Hurricane Harvey in the U.S.,” CEO Thierry Vanlancker said of AkzoNobel's third-quarter earnings report.

Earnings before interest and tax were down from 442 million euros to 383 million euros. AkzoNobel attributed the drop to unfavorable currencies, temporary disruption to the manufacturing and supply chain, continued headwinds for Marine and Protective Coatings and margin pressure from raw material cost inflation. The company added that it suffered a direct EBIT impact of 25 million euros related to Hurricane Harvey and other events.

“EBIT for 2017 is now expected to be in line with 2016, due to adverse foreign exchange, ongoing industry specific headwinds and supply chain disruptions, including the adverse impact of Hurricane Harvey in the U.S.,” said CEO Thierry Vanlancker.

“We have also initiated phase one of our transformation plan to create a fit for purpose Paints and Coatings organization which will deliver 110 million euros of annual savings in 2018 contributing towards our 2020 financial guidance.”

The Q3 release also noted that the separation of the company’s Specialty Chemicals business is still on track to be completed by April 2018.

Performance by Segment

Volumes in the Decorative Paints segment increased 5 percent from positive developments in Asia. However, revenue in the segment was down 1 percent (1.02 billion euros to 1 billion euros) as volume growth was offset by currency effects, the company noted.

Volumes in the Decorative Paints segment increased 5 percent from positive developments in Asia. However, revenue in the segment was down 1 percent (1.02 billion euros to 1 billion euros) as volume growth was offset by currency effects, the company notes.

Performance Coatings led the small upswing with 1 percent volume growth in Industrial and Powder Coatings and a 2 percent growth in revenue (1.4 billion euros to 1.4 billion euros). The company noted that much of the growth in this segment was offset by weak demand from Marine and Protective Coatings, which on its own was down 10 percent in revenue.

Both the Decorative Paints and Performance Coatings segments were impacted by raw material cost inflation, which the company says it's working to mitigate.

The Specialty Chemicals segment was mostly stagnant in Q3: volumes were flat and revenue was up just 1 percent (from 4.24 billion euros to 4.37 billion euros). The company notes that this segment was impacted the most by Hurricane Harvey.

Additional Announcements

AkzoNobel also announced on Wednesday that it has proposed changes to its Supervisory Board, which will be up for a vote during the EGM on Nov. 30.

Among the changes, the company put forth the nomination of Michiel Jaski for Supervisory Board member. Jaski’s nomination comes after the announcement of Sue Clark and Patrick Thomas in August. Shareholder Universities Superannuation Scheme Limited also requested a nomination of Eric Meurice to the board.

There are three seats vacant on the board. At the EGM, Clark and Thomas will be up for shareholder approval while either Jaski or Meurice will be approved. AkzoNobel notes that the board does not support the proposal of Meurice, therefore he needs a two-thirds majority to be voted in.

The Specialty Chemicals segment was mostly stagnant in Q3: volumes were flat and revenue was up just 1 percent (from 4.24 billion euros to 4.37 billion euros). The company notes that this segment was impact the most by Hurricane Harvey.

"I am very pleased we have nominated Michiel Jaski, who brings with him a wealth of knowledge and insights which will benefit the composition of our Board moving forward,” said Supervisory Board Chairman Antony Burgmans.

The EGM agenda also includes:

  • The proposal to appoint Mr. Maarten de Vries as member of the Board of Management, in effect from January 1, 2018 (voting point); and
  • The approval of the separation of the Specialty Chemicals business from AkzoNobel through a private sale or a legal demerger (voting point).

The vote on de Vries follows the announcement that he will begin duties as CFO in January 2018, and the approval for the separation of the Specialty Chemicals business will allow the company to stay on track with its April target.

“The requested approval for the separation of the Specialty Chemicals business will allow us to take the next step in value creation,” Burgmams said. “It will enable AkzoNobel to unlock the full potential of the Paints and Coatings business and the Specialty Chemicals business, to the benefit of our shareholders and other stakeholders.

"Following approval of the separation, our shareholders will receive a 1 billion euros special dividend which reflects our confidence in the proposed separation."

   

Tagged categories: AkzoNobel; Business management; Business matters; Business operations; Earnings reports; Finance

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