Summary:
- Q3 revenue, at constant currencies, ahead 8 percent (reported up 3 percent)
- All business areas delivered resilient EBITDA performance
- Higher one-off charges impacted EBITDA
- Net income down 23 percent, impacted by one-off items
- Incidental charges of €79 million before tax
- ICI integration continues to be ahead of schedule
- Programs in place to further improve operational performance
- Interim dividend maintained at €0.40 per share
- 2008 outlook reconfirmed
Financial highlights *
| € million | Q3 2008 | Q3 2007 ** | % change |
Revenue in constand currencies
- reported | 4,007
3,820 | 3,715
3,715 | 8
3 |
EBITDA* in constant currencies
- reported | 492
477 | 517
517 | (5)
(8) |
| EBITDA margin (in %) | 12.5 | 13.9 | |
EBIT* (before fair value
adjustments) |
367 |
402 |
(9) |
Net income (before fair value
adjustments) | 219 | 258 | (15) |
| Total net income | 157 | 203 | (23) |
* Continuing operations before incidentals
** Pro forma
AkzoNobel today announced its results for the third quarter of 2008, emphasizing the fundamental strength of AkzoNobel’s operating businesses and balance sheet. The company also reconfirmed the outlook for 2008.
Fundamental strength
Keith Nichols, AkzoNobel CFO said: “All three business areas achieved underlying growth. This is solid proof of the strong positions AkzoNobel holds in diverse, highly attractive predominantly low-cyclical, sectors with good growth potential. It is also evidence of management actions taken to date to improve operational performance and to deliver the synergies from the ICI acquisition.”
"Other" costs of €72 million (2007: €37 million) and incidental charges of €79 million (2007: €36 million) reduced total net income in the third quarter to €157 million.
“Other” includes lower results at the captive insurance companies (€30 million). Incidental charges include €19 million for the post-retirement healthcare benefits and the final results of the requested divestments by the European Commission (€16 million).
Strong revenue growth in constant currencies
| Revenue change in % versus Q3, 2007 pro forma | Volume | Price | Acquisitions/
divestments | Currency | Total |
| Decorative Paints | (1) | 5 | 1 | (5) | - |
| Performance Coatings | - | 5 | - | (5) | - |
| Specialty Chemicals | (3) | 12 | 1 | (5) | 5 |
| AkzoNobel | (1) | 8 | 1 | (5) | 3 |
Decorative Paints – Good results
- Revenue up 5 percent in constant currencies (reported: stable)
- EBITDA in constant currencies up 8 percent
- Double-digit growth in Asia and Latin America
- Revenue growth of 3 percent achieved in Europe, despite a difficult UK market
- Challenging market conditions in the US prevail
- Price increases successfully implemented and compensate for higher raw material costs
Decorative Paints reported 4 percent autonomous growth and 1 percent growth from the acquisition in South Africa. Asia and Latin America continued to demonstrate strong double digit growth. Revenue from our European business increased, despite the volume drop in the UK market. The performance in the US was impacted by the continued soft trading environment with weak construction markets, underpinned by recessionary conditions. Price increases together with tight cost control contributed to an increase of EBITDA in constant currencies of 8 percent to €218 million, with an EBITDA margin of 14.7 percent.
Performance Coatings – A solid quarter
Autonomous growth of 5 percent was strong, but was counterbalanced by currencies (5 percent). Growth was achieved mainly by price increases, while volumes were fairly stable. EBITDA in constant currencies slightly increased by 1 percent to €146 million. The EBITDA margin was 12.6 percent, in line with the previous year.
Specialty Chemicals – Revenue growth supports healthy margins
Specialty Chemicals achieved third quarter performance in line with the previous year’s result, despite a currency headwind and pockets of weak demand. Revenue rose 5 percent compared with 2007. The EBITDA margin continued to be strong at more than 16 percent.
Specialty Starches update
In view of the current financial market conditions, the intended sale of National Starch (the former ICI Specialty Starch business) is not expected to take place in 2008. In accordance with IFRS, the financial results of the business will be reclassified as "continuing operations". The 2007 pro forma figures will also be adjusted accordingly as part of our 2008 year-end reporting process. The full year 2007 revenue for National Starch amounted to €813 million ($1.1 billion), while the 2008 Q3 year-to-date revenue totals €658 million ($1.00 billion). National Starch is a global leading supplier of specialty starches, mainly to the food industry.
Strong balance sheet
At the Q3 results, Nichols also confirmed the company’s strong cash position. “Our balance sheet and liquidity positions are solid.”
Interim dividend maintained
An interim dividend of €0.40 per common share will be paid on November 10, 2008. AkzoNobel shares will trade ex-dividend from October 30, 2008.
Outlook 2008 reconfirmed
AkzoNobel has today repeated that it expects 2008 EBITDA before incidentals, in constant currencies, to be close to the 2007 pro forma level of €1,870 million.
Management actions to improve operational performance
Nichols also outlined management actions being taken to improve operational performance. “It is clear that global economic conditions are deteriorating and that forward visibility is therefore limited. At this stage, the potential severity of the economic cycle is unclear. Recognizing this, we will remain focused on working towards our medium-term target of an EBITDA margin of 14 percent by the end of 2011, on delivering the €340 million ICI synergies faster; on driving margin management programs across the company; and on rigorous cost management to deliver at least an additional €100 million in net cost savings.”
The third quarter results are unaudited. The Report for the third quarter can be read on the company’s corporate website www.akzonobel.com/quarterlyresults