Protective and industrial coatings brightened AkzoNobel’s otherwise-struggling second quarter, with the Dutch coating giant turning in single-digit revenue growth built largely on price increases, according to company financials released Thursday (July 19).
In its first quarter under new CEO Ton Büchner, Akzo Nobel N.V. reported an 8 percent increase in revenue from the year-ago period, mainly driven by pricing actions.
Second-quarter earnings (EBITDA) for Q2 were also 8 percent higher, at €593 million (about $727.8 million US). Adjusted earnings per share (EPS) were €1.12 ($1.37 US), up from €1.09 ($1.33 US) in the same period in 2011.
Sales volumes declined 2 percent overall, due primarily to the economic slowdown in Europe. “The economic environment remains the principal sensitivity in 2012,” AkzoNobel said in a release.
Nevertheless, the company said that its global performance improvement program, launched in mid-2011, was “making good progress” and would reap greater results in the second half of 2012. AkzoNobel has laid off about 1,000 employees since the program began, including 800 in 2012.
Performance Coatings Improve
AkzoNobel drew strength from its Performance Coatings business, although individual units varied widely.
Overall revenues increased by 12 percent over the same period in 2011, driven by strong growth in Industrial Coatings (from acquisitions) and Marine and Protective Coatings (due to strong demand in protective coatings).
Marine and Protective Coatings revenue was up 15 percent over 2011, although marine volumes declined with the slowdown in the new shipbuilding market. Protective Coatings volumes increased across most regions, with especially good growth coming from the oil and gas businesses.
The company reported “notable success” in the quarter with coatings supplied to “mega” projects commissioned by the oil majors Chevron, Total and Shell.
Industrial Coatings revenue climbed 28 percent, mainly due to acquisition activity. Coil Coatings’ construction-related business achieved strong growth in the high-growth markets of Turkey and Russia. Packaging Coatings’ beverage and food-related business continued to increase its top line, especially in Asia, while Specialty Finishes gained in the automotive and consumer electronics markets.
Automotive and Aerospace revenues remained flat, while Powder Coatings revenues climbed 7 percent.
Other Segments, Challenges
The Decorative Paints business achieved a 6 percent revenue increase in the second quarter, as gains in the Americas and Asia offset flat demand in Europe. EBITDA was down 8 percent, reflecting weaker European market conditions. Restructuring continued in Europe and other mature markets.
Specialty Chemicals revenue was up 6 percent, thanks to margin management, the Boxing Oleochemicals acquisition and currency effects. EBITDA rose 16 percent higher, the company said, reflecting improved margins and continued cost restructuring. Volumes dipped 2 percent below the previous year.
AkzoNobel continued to battle raw materials costs but said that the quarter had benefited from increasing supply from China and reduction in global demand.
However, the company also expressed concern about the European economy, delayed recovery of the U.S. real-estate market, and the potential for a slowdown in Asia.
Büchner: Solid Businesses, Strong Markets
“The overall performance in our Q2 results is solid, given the increasingly difficult economic environment,” said CEO Ton Büchner, who assumed his position at the end of April.
“In my first few months as CEO, I have spent a great deal of time with our customers, employees and shareholders, and have also visited many of our factories around the world,” he said.
“My initial observations are that we have solid businesses and many strong market positions. The opportunity remains to increase return on capital, cash generation and margins, which is why the immediate priority for me and the leadership team is performance improvement.”