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AkzoNobel Reports Revenue Dip for Q3

Thursday, October 18, 2018

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Global coatings manufacturer AkzoNobel (Amsterdam) published its financial report for the third quarter yesterday (Oct. 17) and reported a 4 percent drop in revenue despite return-on-sales increases for both the Decorative Paints and Performance Coatings segments.

Financial Overview

Earlier this month, AkzoNobel completed the sale of its $2.5 billion Specialty Chemicals business to The Carlyle Group and Singapore’s sovereign wealth fund GIC, returning 6.5 billion euros to shareholders.

Also this quarter, the company noted that volumes were lower and adjusted operating income was up 18 million euros over this quarter last year, from  225 million euros to 243 million euros. Meanwhile, operating income was up 22 million euros (from 215 million to 237 million) and net income from total operations was up from 216 million to 301 million.

Images: AkzoNobel

Global coatings manufacturer AkzoNobel (Amsterdam) published its financial report for the third quarter yesterday (Oct. 17) and reported a four percent drop in revenue despite return-on-sales increases for both the Decorative Paints and Performance Coatings segments.

The company also noted that it is delivering toward its “Winning Together 15 by 20” initiative, which kicked off in July, and aims for the company’s ROS to his 15 percent and its ROI to be greater than 25 percent.

Decorative Paints

ROS for the Decorative Paint segment was up at 12.1 percent (9.4 percent in 2017), with 5 percent positive price/mix driven by pricing initiatives, the company said. Adjusted operating income also increased to 115 million euros (up from 95 million in 2017). Revenue was 6 percent lower, however.

Akzo noted that the higher income was aided by higher prices and cost savings that more than compensated for the raw material costs, which the industry has been dealing with for some time.

Decreases in revenue were also seen in the regional subsegments including EMEA (3 percent drop), Latin America (9 percent) and Asia (9 percent).

Also in this segment’s quarter, AkzoNobel completed acquisitions of Xylazel in Spain, and Fabryo in Romania.

“Profitability increased for both Paints and Coatings as a result of our pricing initiatives and cost-saving programs,” said CEO Thierry VAnlancker.

“We also continued to build on our leading positions in the paints and coatings market with the acquisitions of Fabryo in Romania, Xylazel in Spain and expansion of our Dulux Decorator Centre network in the U.K.”

Performance Coatings

ROS for the Performance Coatings segment was also up at 12.2 percent (10.3 percent in 2017) with higher selling prices contributing to a price/mix of 7 percent. Adjusted operating income was up 23 million euros—from 147 million to 170 million. Volumes continued to be down across the board, with a 3 percent drop in this segment.

ROS for the Performance Coatings segment was also up at 12.2 percent (10.3 percent in 2017) with higher selling prices contributing to a price/mix of 7 percent.

Revenue was up in one subsect of the segment: Powder Coatings, which saw a 6 percent bump. All other sects, however, saw decreases including Marine and Protective Coatings (8 percent), Automotive and Specialty Coatings (1 percent) and Industrial Coatings (4 percent).

Discontinued Operations

The Discontinued Operations segment consists almost solely of the company’s Specialty Chemicals business, which was first classified as such on Dec. 22, 2017. In Q3, adjusted operating income was 221 million euros, up from 158 million euros in this quarter 2017. Operating income was up 67 percent at 206 million euros, from 123 million euros in 2017.

Vanlancker noted that completing the sale gets the company a step closer to its overall goals.

“Completing the sale of our Specialty Chemicals business was a key milestone in the long and proud history of AkzoNobel as we take the next step in our transformation, delivering towards our Winning Together: 15 by 20 strategy,” he said.

Looking Ahead

The company noted that while demands and trends differ between regions and segments, it expects to continue seeing raw material inflation through the remainder of 2018. However, the company added that it has taken significant steps via pricing initiatives and cost-saving programs to offset the raw materials challenge.

“We made further progress towards becoming a focused, high performing, paints and coatings company thanks to the continued efforts of our dedicated organization,” Vanlancker said.

“I’m encouraged by what we achieved, despite challenging market conditions, including higher raw material costs and adverse foreign currencies.”

   

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

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