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AkzoNobel Reports Flat Revenue in Q1

Thursday, April 25, 2019

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Global coatings manufacturer AkzoNobel (Amsterdam) recently published its first-quarter financial report Wednesday (April 24), noting that the company numbers are holding steady in the beginning of this fiscal year.

For the company’s first quarter, revenue was reported to be flat, changing slightly from 2.176 billion euros ($2.42 billion) to 2.185 billion euros ($2.43 billion), but up 1% in constant currencies, offsetting the positive price/mix which was 6% overall.

Financial Overview

“We’re encouraged by the underlying business performance during this seasonally low quarter. Our pricing initiatives and cost-saving programs resulted in 9% higher profit and return on sales up at 9.1%,” said CEO Thierry Vanlancker.

Volumes were also reportedly 7% lower due to the value over volume strategy and lowered volumes in China, in addition to order patterns and a lower demand for Automotive and Specialty Coatings.

Images: AkzoNobel

Global coatings manufacturer AkzoNobel (Amsterdam) recently published its first-quarter financial report Wednesday (April 24), noting that the company numbers are holding steady in the beginning of this fiscal year.

In addition, the first-quarter results indicated that adjusted operating income was up 14 million euros over this quarter last year, from 149 million euros to 163 million euros. Meanwhile, operating income was up 5 million euros and net income from total operations was down 253 million (including 134 million from discontinued operations) to 65 million.

However, the company believes the quarter shows progress toward its “Winning Together 15 by 20” initiative, which was kicked off in July 2018, and aims for the company’s ROS to hit 15% and its ROI to be greater than 25%.

Decorative Paints

ROS for the Decorative Paint segment was up at 7.1% (6.6% in 2018), with 6% positive price/mix driven by pricing initiatives, the company said. Adjusted operating income also increased to 60 million euros (up from 56 million euros in 2018). Revenue was reported to be flat, however.

Akzo noted that the report showed a continued good momentum within a seasonally low quarter. Increases in revenue were also seen in EMEA, which was up 3% and up 5% in constant currencies due to successful pricing initiatives.

However, decreases in revenue were reported in regional subsegments including Latin America (6% drop) and Asia (4%).

ROS for the Decorative Paint segment was up at 7.1% (6.6% in 2018), with 6% positive price/mix driven by pricing initiatives, the company said. Above shows new Dulux concept store that opened in the first quarter in Shanghai, China.

“Decorative Paints demonstrated good momentum and all Performance Coatings businesses increased profitability, apart from Automotive and Specialty Coatings which was impacted by order pattern,” stated Vanlancker.

Performance Coatings

ROS for the Performance Coatings segment was up 10.3% (10.0% in 2018) with pricing incentives contributing to a price/mix of 7%. Adjusted operating income was up 4 million euros—from 134 million to 138 million. Volumes continued to be down, with an 8% drop in this quarter.

Revenue was up in one subsect of the segment: Powder Coatings, which witnessed a 2% increase. All other sects, however, saw a flat revenue or decrease including Industrial, Marine and Protective Coatings, and Automotive and Specialty Coatings (3%).

Looking Ahead

Although at a lower rate than 2018, Akzo foresees raw material inflation to continue in 2019. The new robust pricing initiatives and cost-savings programs are working to address various current challenges.

“Our transformation plans for creating a more fit-for-purpose organization are on track and delivered savings of €38 million during the quarter. We’re maintaining our focus as we continue to deliver toward our Winning together: 15 by 20 strategy,” Vanlancker.

The company plans to continue executing its transformation to deliver 200 million euros in cost savings by 2020, incurring one-off costs in 2019 and 2020.

   

Tagged categories: AkzoNobel; Asia Pacific; Business management; Business matters; Business operations; Earnings reports; EMEA (Europe, Middle East and Africa); Finance; Good Technical Practice; Latin America; North America; PaintSquare App - Commercial; Project Management; Z-Continents

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