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AkzoNobel Releases Q4, 2018 Numbers

Thursday, February 14, 2019

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Global coatings manufacturer AkzoNobel (Amsterdam) released its fourth-quarter and end-of-year financial reports Wednesday (Feb. 13), indicating a 1 percent increase in revenue for Q4, and a 4 percent decrease in revenue for the full year, though there was a 1 percent increase in constant currencies.

Financial Overview

In early October, 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. Net profit on the sale was 5.8 billion euros.

For the company’s fourth quarter, revenue was up 1 percent and up 4 percent in constant currencies, with the positive price/mix slightly offset by lower volumes. In response to higher material cost, pricing initiatives helped create a positive price of 9 percent overall. Volumes were also reportedly 7 percent lower, though in China the number drops to 2 percent lower, which normalized at a 2016 level in comparison to a strong quarterly volume in Decorative Paints last year.

Images: AkzoNobel

Global coatings manufacturer AkzoNobel (Amsterdam) released its fourth-quarter and end-of-year financial reports Wednesday (Feb. 13), indicating a 1 percent increase in revenue for Q4, and a 4 percent decrease in revenue for the full year, though there was a 1 percent increase in constant currencies.

Adjusted operating income was up 3 million euros, totaling 181 million euros, up from 2017’s fourth quarter at 178 million euros. Operating income, down from 2017’s 139 million euros, totaled 68 million euros, was largely attributed to a 113-million-euro adverse impact from items related to one-off non-cash pension costs based on a U.K. legal precedent.

ROS, excluding unallocated costs, was 9 percent.

Decorative Paints

The ROS for the company’s Decorative Paints segment for the fourth quarter totaled 5.8 percent, down from 2017’s 6.3 percent. There was also an 8 percent positive price/mix driven by pricing initiatives. AkzoNobel also acquired Colourland Paints, a producer of decorative paints in Malaysia, during its fourth quarter.

For this segment, revenue was 3 percent lower, and 3 percent up in constant currencies. Pricing initiatives contributed to an 8 percent positive price/mix. Acquisitions contributed 1 percent. Adjusted operating income decreased to 52 million euros, down from 2017’s 58 million euros, though there was an increase in constant currencies, which was largely attributed to higher prices and cost savings offsetting raw material costs and lower volumes.

Volumes were 6 percent lower in comparison to last year’s especially strong fourth quarter, according to AkzoNobel; this was largely attributed to the company’s value over volume strategy.

Performance Coatings

The ROS for the Performance Coatings’ fourth quarter was up at 10.9 percent, with a price/mix of 11 percent driven by pricing initiatives. Marine and Protective Coatings Revenue was up 5 percent in constant currencies. Profitability has largely been attributed to due to cost savings and price conditions. Powder Coatings also saw a similar increase, clocking in at 6 percent increase in constant currencies.

The ROS for the Performance Coatings’ fourth quarter was up at 10.9 percent, with a price/mix of 11 percent driven by pricing initiatives. 

The segment’s revenue was up 2 percent and up 4 percent in constant currencies. Adjusted operating income saw a 20-million-euro increase at 153 million euros, over 2017’s 133 million euros, which was largely driven by pricing initiatives and cost control.

End-of-Year Numbers

For AkzoNobel’s 2018, revenue was 4 percent lower, though up a 1 percent increase in constant currencies. Adjusted operating income totaled 798 million euros, down from 2017’s 905 million euros, which was impacted by adverse currencies, higher raw material costs and lower volumes. Operating income was 605 million euros, which includes the adverse impact of 193 million euros, a loss that is connected to transformation costs and one-off non-cash pension costs.

End-of-year numbers for the Decorative Paints segment saw revenue take a 5 percent dip, with a 1 percent increase in constant currencies. Adjusted operating income, totaling 346 million euros, was impacted by higher raw material costs and adverse currency effects, though offset by pricing initiatives and cost savings.

As for Performance Coatings, revenue was 3 percent lower, though there was also a 1 percent increase in constant currencies. Adjusted operating income clocked in at 629 million euros, down from last year’s 669 million euros, which was largely attributed to adverse currencies, higher raw material costs and lower volumes.

Phase one of the company’s “transformation to create a fit-for-purpose organization” delivered on the planned 110-million-euro savings for 2018. Moving forward, AkzoNobel aims to deliver the next 200 million euros in cost savings by 2020.

"We're now a focused paints and coatings company and are channeling all our experience, energy and passion into being recognized as the reference in our industry,” said AkzoNobel CEO Thierry Vanlancker. “We continue to invest in growth and in 2018, we made multiple bolt-on acquisitions, including Fabryo in Romania, Xylazel in Spain, Colourland Paints in Malaysia and the AkzoNobel Swire Paints joint venture in China. These deals will help accelerate our momentum as we continue to build AkzoNobel into an industry leader.

"Another highlight was the introduction of our Paint the Future startup challenge. It's designed to combine our global scale, know-how and expertise with the ingenious solutions of startups and scale-ups in the dynamic world of paints and coatings, making sure AkzoNobel is the reference when it comes to open innovation."

   

Tagged categories: AF; AkzoNobel; AS; Asia Pacific; Business matters; Earnings reports; EMEA (Europe, Middle East and Africa); EU; Finance; Latin America; NA; North America; OC; Program/Project Management; SA

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