Financial highlights *
|In € millions||Q1 2008||Q1 2007 **||% change|
|EBITDA margin (in %)||11.4||11.6|
|EBIT margin (in %)||7.3||7.3|
|Earnings per share (in €)||0.52||0.49||6|
* Continuing operations before incidentals
** Pro forma
Operational highlights for the quarter
- Ongoing trend of underlying growth, in local currencies, in most businesses
- Autonomous growth of 6 percent offset by currency headwind
- ICI integration and synergies on track
- Earnings per share of continuing operations up 6 percent
- Total net income €118 million, up €40 million
AkzoNobel today reported 6 percent autonomous growth for the first quarter of 2008, indicating a strong underlying trend. However, this was offset by a similar negative currency impact. Operational margins of continuing operations were flat.
Although net income from continuing operations of €136 million was down 4 percent, earnings per share increased 6 percent, due to the share buyback programs.
The company achieved underlying growth in local currencies in most of its businesses, reaching double digit levels in emerging markets. Autonomous top line growth of 6 percent was reduced to a positive benefit of just 1 percent due to the currency translation impact.
AkzoNobel CFO Keith Nichols commented: “I am pleased with the stable performance which demonstrates the strength of our transformed company. The testing environment continued in the first quarter, as expected. However, I remain confident for the remainder of the year that we will deliver on our promises of outgrowing our markets, and continuing with the successful integration of ICI.”
Looking at the results in more detail, Specialty Chemicals realized strong autonomous growth of 11 percent, supported by almost all businesses. Growth at Performance Coatings was offset by currency pressure, although Marine & Protective Coatings produced another strong quarter.
There was double digit revenue growth at Decorative Paints in the emerging markets, but due to negative currency effects, total revenue was down 4 percent. The first quarter is not traditionally strong within the decorative sector. This seasonality was compounded by the poor weather conditions and an early Easter holiday.
Total revenue developed as follows:
|In % versus Q1 2007|
The year began well, but adverse weather conditions in Europe and eastern Canada towards the end of the quarter resulted in a delay in market demand. Performance was strong in the emerging markets, with double digit growth in Asia and Latin America. Growth was also healthy in most Central and East European countries. In the US, the trading environment continued to be soft. In most mature markets, the trade business performed well, while the retail segment faced weaker market conditions. Despite the significant currency impact on the top line, EBITDA and EBIT margins improved compared with the first quarter of 2007, benefiting from changes in product mix and a continuing focus on cost control.
the achievement of 4 percent autonomous growth was encouraging, this was offset by the currency headwind of 6 percent, which was felt by all businesses. Acquisitions added 2 percent to revenue, resulting in flat total first quarter revenue. Despite the tough currency conditions, Marine & Protective Coatings delivered another strong quarter, with all activities contributing. Industrial Activities’ performance was impacted by currencies and the soft economic conditions in the US. EBITDA and EBIT margins were down compared with last year, mainly due to the impact of currencies.
was another good quarter, with revenue up 5 percent on last year. Autonomous growth was 11 percent, indicating that most businesses have continuing high asset utilization. Higher raw material and energy prices were compensated by price increases of 7 percent. Before incidentals, EBITDA increased to €205 million (up 1 percent), while the EBITDA margin amounted to 17.1 percent, slightly below the first quarter of 2007. The Surface Chemistry, Polymer Chemicals and Chemicals Pakistan businesses in particular are operating at a clearly improved level.
income from continuing operations before incidentals amounted to €136 million, down 4 percent compared with last year. During the quarter there were incidental charges of €151 million (2007: €90 million), largely related to ICI integration costs (€84 million), and an amortization of the step-up of acquired inventories totaling €42 million. Net income including incidentals from continuing operations was €36 million (2007: €78 million). Discontinued operations realized a net income of €82 million. Total net income for the first quarter of 2008 was €118 million, up €40 million compared with the previous year.
Cash position – strong financial position
January 2, 2008, ICI was acquired for a gross price of €11.5 billion, of which €5 billion related to assets and liabilities held for sale. Prior to the Henkel on sale at the beginning of April – for cash proceeds of €4 billion – AkzoNobel concluded a legal restructuring of National Starch. This explains a relatively high cash and short-term borrowing position at the end of the first quarter of 2008. Invested capital increased due to the ICI acquisition and the related goodwill and intangibles of €8.1 billion. In mid-March, AkzoNobel embarked on a new €1 billion share buyback program as a first tranche of a €3 billion program. It is expected that the full €3 billion program will be completed in approximately 12 months.
softer economic conditions in the mature markets and the negative impact of currencies, AkzoNobel remains confident of outgrowing its markets and at least maintaining results in line with 2007.
first quarter results are unaudited. Pro forma numbers are used as comparatives in the texts of this press release. The Report for the first quarter is attached and can be read on the company’s corporate website www.akzonobel.com/quarterlyresults