AkzoNobel Reports Rebound in Q3 Finances

THURSDAY, OCTOBER 26, 2023


On Wednesday (Oct. 25), global coatings company AkzoNobel released its 2023 third-quarter financial results, announcing “solid profit growth and robust cash generation” for the quarter.

According to AkzoNobel’s press release, the company reported that revenue in constant currencies was up 5% on pricing, despite flat volumes. However, the company also reported that revenue was 4% down on unfavorable exchange rates compared to Q3 of last year.

“Our third-quarter results show a solid rebound in profit and continued improvement of our margins, despite an adverse currency impact,” said AkzoNobel CEO Greg Poux-Guillaume.

“While volumes were flat, we are increasingly benefitting from the easing of raw material costs. Higher profits and improving working capital management both contributed to a leverage ratio of 3.2, which keeps us on track to meet our year-end guidance.”

Other highlights from AkzoNobel’s Q3 report include:

  • Operating income improved to €354 million (2022: €168 million);
  • Adjusted operating increased at €324 million (2022: €184 million);
  • ROS improved to 11.8% (2022: 6.4%);
  • Net cash from operating activities were positive, at €297 million (2022: €126 million); and
  • Net debt to EBITDA leverage ratio improved sequentially to 3.2x.

By Segment

In the Decorative Paints segment, AkzoNobel reported that revenue in constant currencies was 5% higher, while reported revenue was 3% lower. Revenue growth in constant currencies was mainly driven by pricing, the company says.

Volumes were flat, with lower volumes in Latin America offset by higher volumes in Asia. The acquisition of the Chinese Decorative Paints business of Sherwin-Williams added 1%, the company reports.

In the Other category, which mainly relates to the impact of hyperinflation accounting, revenue increased by 1%. Operating income increased to €156 million (2022: €102 million), mainly due to a rebound in gross margins. Operating income includes identified items of negative €3 million (2022: negative €3 million). Adjusted operating income increased to €159 million (2022: €105 million), while ROS improved to 14.2% (2022: 9.0%).

In the Performance Coatings segment, revenue was 5% higher in constant currencies, while reported revenue was 5% lower. The company again reported that revenue growth in constant currencies was driven mainly by pricing.

Volumes were reported to be flat, with growth in Powder Coatings and Marine and Protective Coatings offset by continued soft demand in Industrial Coatings. Other also increased revenue by 1%.

Operating income increased to €245 million (2022: €98 million), mainly due to a rebound in gross margins. Operating income includes identified items of positive €43 million, mainly resulting from a property divestment (2022: negative €7 million identified items). Finally, adjusted operating income increased to €202 million, the company reports.

Year-End, Q4 Outlook

In its report, AkzoNobel says that it expects the ongoing macroeconomic uncertainties to continue and weigh on organic volume growth. The company says that it will focus on margin management, cost reduction, working capital normalization and de-leveraging to account for this uncertainty.

AkzoNobel also reports that cost reduction programs are expected to partly mitigate higher than expected inflationary pressure on operating expenses for 2023. The company also says it expects declining raw material costs to have a favorable impact on profitability.

Based on current market conditions, AkzoNobel aims to deliver around €1.45 billion adjusted EBITDA. Leverage guidance remains unchanged at less than three times net debt/EBITDA by the end of 2023, excluding the Kansai Paint Africa acquisition, which the company says is not expected to close before year end.

   

Tagged categories: AkzoNobel; Asia Pacific; Business matters; Business operations; Coating Business; Coatings; Consumer Reports; Earnings reports; EMEA (Europe, Middle East and Africa); Finance; Latin America; North America; PaintSquare; PaintSquare App - Commercial; Program/Project Management; Z-Continents

Join the Conversation:

Sign in to our community to add your comments.