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A market demand scenario described as “volatile” contributed to a modest retreat in AkzoNobel’s second-quarter earnings, although total revenue continues to post solid gains.
The world’s biggest coatings maker reported total second-quarter revenue of €4.1 billion (approximately $5.9 billion), a 5% increase from the second quarter of 2010. Net income, however, slipped 1.8%, to €268 million ($385 million). The company cited rising raw-material costs—estimated at 20% higher from a year earlier—as a major factor in the earnings dip. Also figuring into the bottom-line situation were “several prolonged large-site maintenance stops” at manufacturing locations.
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| Hans Wijers, AkzoNobel CEO |
“While the overall top-line development has remained strong, the demand pattern has been volatile during the quarter, particularly in the mature markets,” the company said. “High growth markets have continued to perform strongly overall.”
Second-quarter revenue rose 4% for the company’s Performance Coatings segment, which includes Protective and Marine Coatings. The Decorative Paints segment also saw revenue rise 4%.
“I am not satisfied with our performance in the quarter, despite positive volume and pricing developments,” said CEO Hans Wijers. “The recent months have been challenging, and it does take time for price increases to work through. We remain on track to deliver our medium-term growth ambitions, and we continue to invest in our businesses as shown by our announcements in this quarter.”
Wijers said the company also is implementing “additional performance-improvement measures and functional and operational excellence initiatives.”
For the first half, revenue was €7.86 billion, up 10% from €7.15 billion in the first half of 2010. Net income rose 12%, to €396 million.
Marine Down but Protective Coatings Up
According to Akzo’s report, Protective and Marine revenues dropped 2% compared to last year. While volume increased 3%, currency had a negative effect on revenues. Of all the Performance Coatings, Marine was hit hardest. Its activity levels were flat, and new construction remained unchanged from previous years, according to the company. “The increases in raw material prices over the last few quarters have had an increasingly negative impact on Marine’s fixed priced new construction projects,” Akzo reported. And while volumes in Deep Sea Maintenance improved somewhat, a drop in the Coastal and Navy business countered the gain.
The news on Protective Coatings was different: “In Protective Coatings we continue to see strong growth in all regions, with both the heavy industry as well as oil and gas markets contributing towards this,” according to the report. Moreover, the company noted, its new fire protection laboratory, which opened in June at Felling, UK, is promising. Identifying it as “one of the key global RD&I centers of excellence,” the company said, “This site will significantly improve our ability to develop new products for the market.”
For the full report: www.akzonobel.com/quarterlyresults
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