Akzo Nobel reports drop in earnings due to strong headwinds
Akzo Nobel has reported lower than expected third-quarter operating earnings of EUR383 million and pointed to headwinds at its marine coatings business and margin pressures from rising raw material costs.
The Q3 2017 results at a glance:
- Volumes 2% higher driven by Decorative Paints and Performance Coatings
- Revenue up 1%, mainly due to volume growth and acquisitions, partly offset by unfavorable currencies
- EBIT at EUR383 million (2016: EUR442 million), impacted by continued headwinds for Marine and Protective Coatings and margin pressure from raw material cost inflation
- Direct impact of around EUR25 million on EBIT related to Hurricane Harvey and other events
- Initiating phase one of transformation plan to create a Paints and Coatings organisation to deliver EUR110 million savings in 2018 contributing towards the 2020 financial guidance
- Creating two focused high-performing businesses
Decorative Paints
Third quarter volumes increased by 5% due to positive developments in Asia. Revenue was down 1%, with positive volume development more than offset by adverse currency and price/mix effects. EBIT was adversely impacted by continued higher raw material costs in the paints and coatings industry, not yet fully compensated, and geographical/product mix effects.
Performance Coatings
Volumes were up by 1% in the third quarter, with growth for Industrial and Powder Coatings, partly offset by adverse conditions in the marine and oil and gas industries. Revenue was up 2%, due to volume growth and the acquired Industrial Coatings business, partly offset by currency effects. EBIT was adversely impacted by ongoing weakness in the marine and oil and gas industries, as well as increased costs of raw materials in the paints and coatings industry and adverse currency effects.
Specialty Chemicals
Third quarter volumes were flat, despite significant global supply chain disruptions including Hurricane Harvey in the Houston area of the US. Revenue was up 1% due to positive price/mix effects, mostly offset by adverse currencies. EBIT was up 1% with favorable price/mix developments and cost savings partly offset by unfavorable currencies and global supply chain disruptions.
CEO Thierry Vanlancker said: “We have continued to grow our business with higher volumes and increased revenues despite challenging market conditions in selected areas of our business, especially in Marine and Protective Coatings. We have initiated phase one of our transformation plan to create a fit for purpose Paints and Coatings organisation which will deliver EUR110 million annual savings in 2018 contributing towards our 2020 financial guidance.” He also staided that Akzo is anticipating positive developments for EMEA (excluding the UK), North America and Asia, while Latin America is expected to stabilise. EBIT for 2017 is now expected to be in line with 2016, due to ongoing industry specific headwinds and supply chain disruptions.
Related Articles
Akzo Nobel develops novel technology platform to manufacture ethylene amines
