AkzoNobel publishes Q2 results

20-07-2012: Akzo Nobel N.V. reported an 8 percent increase in second quarter revenue compared with the same period in 2011, mainly driven by pricing actions to offset higher raw material costs and currency effects. The EBITDA for Q2 was 8 percent higher at €593 million. The company also announced that its global performance improvement program is making good progress.

Decorative Paints achieved a revenue increase of 6 percent in the second quarter, mainly due to favourable price/mix effects and positive currency effects. EBITDA was down 8 percent, reflecting weaker European market conditions. Restructuring continues in mature markets, particularly in Europe.

In Performance Coatings, revenue increased 12 percent, supported by margin management, acquisitions and currency effects. EBITDA was up 25 percent compared with the previous year, further supported by improvements in operational efficiency. Volume declined, although there was significant variability between individual activities.

Specialty Chemicals revenue was up 6 percent, supported by margin management, the Boxing Oleochemicals acquisition and currency effects. EBITDA was 16 percent higher, reflecting improved margins and continued cost restructuring. Volumes were 2 percent below the previous year, reflecting a slowdown in most businesses in the quarter.

Raw materials

AkzoNobel continued to see inflation in the overall raw materials portfolio, although less than last year. The main driver of input cost inflation is TiO₂. In the second quarter, the company has seen an increase in supply from China and a reduction in global demand. However, in total, the company continues to expect an increased average cost for the year.

Performance improvement program

The performance improvement program announced in October 2011 is making good progress. Conceptually, it consists of three main building blocks, operational professionalization, functional standardization and business unit specific adaptations. Operational professionalization addresses issues such as product complexity reduction, procurement, manufacturing and distribution excellence, and margin management. Business unit adaptations and operational professionalization are expected to contribute around 90 percent of the expected 2012 benefits of €200 million, while functional standardization will primarily be an important enabler. The combined cost of the program in the first half year equals €90 million, booked under incidentals. The benefits of the program included in the first half year results, both in contribution margin and in cost savings, equal €65 million. Since the announcement of the program, around 1,000 people have left the company, of which around 800 left in 2012. The program is on track, with the main benefits for 2012 occurring in the second half of the year.

Outlook

The economic environment remains our principal sensitivity. The concerns are focussed on the risk of recession in Europe, delayed recovery of the US property market and the potential of a slowdown in Asia. AkzoNobel will be providing a strategic update upon the publication of the Q3 results.