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AkzoNobel Reports Revenue Dip for 2018 Q1

Wednesday, April 25, 2018

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Global coatings giant AkzoNobel (Amsterdam) released its 2018 first-quarter earnings report Tuesday (April 24) noting an increase in net income year over year. However, the company also reported a single-digit drop in revenue in all areas, citing adverse conditions in foreign currencies and high raw materials costs.

Images: AkzoNobel

Global coatings giant AkzoNobel (Amsterdam) released its 2018 first-quarter earnings report Tuesday (April 24) noting an increase in net income year over year. However, the company also reported a single-digit drop in revenue in all areas, citing adverse conditions in foreign currencies and high raw materials costs.

“Headwinds continue for Marine and Protective Coatings, as well as currencies and higher raw material costs. Results were lower compared to an exceptionally strong quarter last year,” said CEO Thierry Vanlancker.

AkzoNobel reported that in total, revenue year over year was down 8 percent form 2.38 billion euros ($2.91 billion) to 2.18 billion euros. Volumes reportedly dipped 3 percent overall, and adjusted earnings before interest, taxes, depreciation and amortization dipped from 281 million euros to 209 million euros.

Performance by Segment

Both paints and coatings segments, Decorative Paints and Performance Coatings, saw drops in revenue at 8 percent (from 922 million euros to 846 million euros) and 9 percent (from 1.47 billion euros to 1.34 billion euros), respectively.

“Higher raw material costs and adverse effects from foreign currencies are projected to continue in 2018, especially during the start of the year,” the company said. “We anticipate ongoing positive developments for Decorative Paints in all regions, particularly Asia.

“Trends for Performance Coatings are expected to be positive for most segments and regions, while still challenging for Marine and Protective Coatings. We continue to implement various measures to mitigate current market challenges, including increased selling prices and cost discipline.”

In Decorative Paints, while revenue was down in all regions, volumes were up in EMEA, the company noted, and price increases are taking effect everywhere. Akzo also notes that consumers in Pakistan now have access to Dulux Promise, the first launch in the country’s mass market.

In Decorative Paints, while revenue was down in all regions, volumes were up in EMEA, the company noted, and price increases are taking effect everywhere. Akzo also notes that consumers in Pakistan now have access to Dulux Promise, the first launch in the country’s mass market.

While revenue was down overall in the Performance Coatings segment, the Powder Coatings division saw an increase, from 288 million euros to 292 million euros. That was the only upswing, however, as Marine and Protective Coatings, Automotive and Specialty Coatings and Industrial Coatings all dipped. Of note was the opening of a new powder coatings plan in India, a 9-million-euro facility in Mumbai.

Specialty Chemicals & Closing

Numbers for Akzo’s Specialty Chemicals segment was reported as Discontinued Operations and also dipped in revenue, from 1.29 billion euros to 1.25 billion euros.

The company successfully spun off its Specialty Chemicals segment into a separate business over the past year and subsequently sold it last month to global alternative asset manager The Carlyle Group (Washington, D.C.) for 10.1 billion euros.

Vanlancker referenced the sale in the Q1 report, calling it a “key milestone.” He also noted that even with the slight revenue drop, the company’s pricing initiatives are on track to deliver 15 percent return on sales by 2020 (referred to as “Winning together: 15 by 20” initiative).

“We are ramping up our pricing initiatives and have implemented various cost discipline measures to deal with higher raw material prices. Initial savings from creating a fit-for-purpose organization are also being realized,” Vanlancker said.

   

Tagged categories: AkzoNobel; Earnings reports; Finance

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