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Revenue Down for AkzoNobel in Q2

Thursday, July 19, 2018

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Global coatings manufacturer AkzoNobel published the financial report for its second quarter yesterday, reporting revenue 3 percent lower than originally forecast, which can be attributed to difficulties in the Marine and Protective Coatings segment.

In March, AkzoNobel announced the 10.1 billion-euro ($12.5 billion) sale of its Specialty Chemicals business to The Carlyle Group and Singapore’s sovereign wealth fund GIC. Specialty Chemicals was marked as discontinued operations in the Q2 report, and the company noted the implementation of the first phase of a fit-for-purpose organization for a focused paints and coatings company.

Financial Overview

In addition to the dip in revenues on the quarter, volumes also decreased by 3 percent, primarily due to the Marine and Protective Coatings segment, though selling prices were up 4 percent. The Performance Coatings segment as a whole, which includes Marine and Protective, Powder Coatings, Automotive and Specialty, and Industrial Coatings, experienced a downturn at 11.8 percent return-on-sales, compared to 2017’s Q2 ROS standing at 13.4 percent.

Images: AkzoNobel

In March, AkzoNobel announced the 10.1 billion-euro ($12.5 billion) sale of its Specialty Chemicals business to The Carlyle Group and Singapore’s sovereign wealth fund GIC. Specialty Chemicals was marked as discontinued operations in the Q2 report.

The second quarter saw an adjusted operating income of 225 million euros, which includes the adverse impact of items related to the company transformation. Net income from total operations rang in at 271 million euros (in comparison with 2017's 301 million euros), including discontinued operations at 164 million euros (2017, 164 million euros).

As for the half-year mark, revenue is 6 percent lower, although it's up 1 percent in constant currencies with the positive price and mix offset by lower volumes. Adjusted operating income is down from 2017’s 502 million euros to 374 million euros.

Decorative Paints

ROS for Decorative Paints was up for the quarter at 12.2 percent, indicating that pricing initiatives and cost savings are compensating for the higher cost of raw materials. This year, AkzoNobel also acquired Romania-based decorative paint and plaster manufacturer Fabryo, as well as two companies—Whites Trade Paints and Cambrian Decorators Supplies Limited—to further enhance the network of Dulux Decorator Centres in the U.K.

Selling prices were 5 percent higher overall, and up in all regions. Revenue was 4 percent lower than prior-year numbers, but up 2 percent in constant currencies. Adjusted operating income for the segment increased to 123 million euros, up from 2017’s 121 million, thanks to higher selling prices and cost savings offsetting foreign currencies, among other factors.

Performance Coatings

Revenue in constant currencies for the Performance Coatings segment was up 5 percent, excluding Marine and Protective Coatings. The upward trend continues into a 3 percent increase in selling prices, but revenue for the segment is down 3 percent.

Global coatings firm AkzoNobel released its second-quarter financial report yesterday, with revenue 3 percent lower than originally forecasted, return-on-sales for Decorative Paints up at 12.2 percent and the implementation of the first phase of a fit-for-purpose organization for a focused paints and coatings company.

Adjusted operating income also took a hit, falling from 2017’s 202 million euros to today’s 172 million euros; this was impacted by foreign currencies, higher raw material costs and lower volumes.

Discontinued Operations

Revenue for Specialty Chemicals, reported as Discontinued Operations, was up 1 percent, and up 7 percent inconstant currencies thanks to positive price/mix. Adjusted operating income increased 5 percent from 2017’s 166 million euros to 175 million euros. Improvements made to both pricing and productivity were partially offset by adverse currencies and one-off environmental and restructuring costs.

Moving Forward

To restructure the company, AkzoNobel has kicked off the first phase of the “Winning together: 15 by 20” strategy, which brought in 25 million euros in Q2.

AkzoNobel’s outlook for the future remains positive, as the forecast indicates positive developments for Decorative Paints and Performance Coatings. This excludes Marine and Protective Coatings, for which market conditions remain difficult.

Raw material inflation is expected to continue throughout the course of this year, but moving more slowly than it did at the beginning of 2018. Both pricing initiatives and cost-saving tactics are being used to mitigate current difficulties.


Tagged categories: AkzoNobel; Earnings reports; Finance

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