AkzoNobel Reports Revenue Increase in 2022 Q1
Global coatings company AkzoNobel released its 2022 first quarter earnings report Thursday (April 21), showing a 12% increase in revenue year-over-year (10% in constant currencies), along with a 9.1% ROS.
The company attributes the increases to strong pricing (up 17%), while the affected ROS is a result of raw material and freight cost inflation and supply constraints. However, the company also reports operating income is down 23% from 303 million euros (about $328.3 million) to 232 million euros. Adjusted operating income is down 25% from 307 million euros to 230 million euros, and net income is down from 217 million euros to 154 million euros.
“We continued to make good progress, with strong revenue growth in both paints and coatings in the first quarter. Through our vigorous pricing initiatives, we are in line with the unprecedented variable cost inflation that impacted our industry during the quarter,” commented AkzoNobel CEO, Thierry Vanlancker.
“I’m very proud of our organization, and our first quarter results are proof of the ongoing hard work and commitment of all our employees.
“Although uncertainties remain with regard to amongst others the sanctions on Russia, the COVID-19 resurgence in China and continued supply constraints – especially in North America – we remain confident in realizing our Grow & Deliver strategy.”
Report by Segment
In the Decorative Paints segment, the company reported that revenue was up 8% (6% in constant currencies) at 1.01 billion euros from 930 million euros, taking in all regions including South America, Asia and the EMEA. Adjusted operating income decreased from 144 million euros to 105 million euros, and ROS was also down, reporting 10.4%. Lower volumes in the Decorative Paints segment were reportedly due to DIY normalization in Decorative Paints EMEA, in addition to continued raw material cost inflation and supply constraints.
In the Performance Coatings segment, revenue was up 14% (12% in constant currencies) overall to 1.52 billion euros from 1.33 billion euros. The company attributes this to strong pricing initiatives, despite lower volumes, due to supply constraints in all Performance Coatings businesses, especially in North America.
All numbers were up in the Performance Coatings subsegments, with powder coatings up 8% (7% in constant currencies); marine and protective coatings up 11% (8% in constant currencies); automotive and specialty coatings showing a 12% increase (10% in constant currencies); and industrial coatings up 21% (20% in constant currencies).
Highlights from the quarter include the company’s Cetol products being used on the futuristic Atchugarry Museum of Contemporary Art; the company’s sustainability ratings reflecting its People. Planet. Paint. Commitment; its Paint the Future winners signing letters of intent; the company’s in-house resin production being scaled-up; and a team-up with Microsoft to explore how quantum computing could help fast track the development of more sustainable paints and coatings.
AkzoNobel also noted the impact from the conflict in Ukraine and sanctions on Russia, with about 2% of its revenue being represented in Ukraine and Russia combined, the vast majority concerning Russia. The company reports that it has approximately 650 colleagues in the countries.
“In Q1, activities in Ukraine came to a halt,” wrote the company. “In Russia, our Aerospace Coatings activities and new investments and marketing activities have already been suspended. As a result of EU sanctions which came into force after Q1, the majority of our Coatings business in Russia is being suspended and the residual Russian business will be locally operated.
“We are evaluating the situation daily; more of the remaining business in Russia might come to a halt in the next months, especially due to the practical difficulties around the supply of raw materials in Russia.”
The impact on operating income was approximately 5 million euros, of which 1 million euros relates to impairment of accounts receivable and inventories in the region. AkzoNobel reports it is impacted globally by increased energy and commodity prices, as well as increased supply chain disruptions.
Looking forward, the company said that it targets to grow at or above its relevant markets, in line with its Grow & Deliver strategy, with raw material and other cost inflation expected to gradually ease during the second half of 2022. AkzoNobel plans to continue to offset these costs through pricing initiatives.