Akzo Nobel has reported a 24% improvement in EBITDA for the second quarter to EUR 367 million as the refocused company continues to realize the benefits of its global growth strategy.
|EUR mln||Q2 2007||Q2 2006||% change|
|EBITDA margin*, in %||13.7||11.3|
|EBIT margin*, in %||10.4||7.9|
|Net income* Coatings/Chemicals||166||124||34|
|Net income* Organon BioSciences||146||121||21|
|Total net income including incidentals||270||361||(25)|
- Improvement across the portfolio; EBITDA up 24%
- Active operational and margin management; EBITDA margin improved to 13.7%
- Excellent growth in Coatings and Chemicals:
Coatings – autonomous growth of 5%
Chemicals – autonomous growth of 4%
- Net income (of Coatings and Chemicals) before incidentals up 34% to EUR 166
- Newly combined Decorative Coatings business starts visible turnaround
- Akzo Nobel’s portfolio is well positioned for further profitable growth
Arnhem, the Netherlands, July 24, 2007 – Akzo Nobel (Euronext Amsterdam: AKZ; Nasdaq: AKZOY) has reported a 24% improvement in EBITDA for the second quarter to EUR 367 million as the refocused company continues to realize the benefits of its global growth strategy.
growth of 4% contributed to revenues totaling EUR 2.7 billion, with net income (of Coatings and Chemicals) before incidentals amounting to EUR 166 million, up 34%. Total net income including incidentals was down 25% to EUR 270 million (2006: 361 million), mainly attributable to the final impact of the Chemicals divestment program and a EUR 125 million tax gain in Q2 2006.
for the company’s Coatings activities showed an 8% improvement on the second quarter of 2006 (up to EUR 1,775 million from EUR 1,643 million)—driven by Europe, the emerging markets and acquisitions—while Chemicals posted solid autonomous growth of 4%.
on the company’s Q2 performance, CEO Hans Wijers said: “I am very pleased with the results for the second quarter. We are continuing to deliver operationally, especially in terms of margin enhancement, and we remain in excellent financial shape as we prepare to push ahead with our ambitious global growth plans, which will be carried out in a financially disciplined manner. Clearly, all the hard work we have put in over recent years to create a newly focused company is paying off.”
Coatings—10% higher EBITDA on 8% revenues growth
Akzo Nobel Coatings produced a strong quarter, posting revenues growth of 8%—driven by autonomous growth and acquisitions. EBITDA before incidentals amounted to EUR 232 million (up 10%), while the EBITDA margin rose further to 13.1%. Margin improvement programs combined with higher selling prices largely offset the pressure resulting from raw material prices. However, in certain activities there is ongoing pressure from further increases.
Decorative Coatings, the start of the turnaround is clearly visible, with the newly combined business again posting double digit revenues growth. The new organizational set-up has established a firmer grip on business, which is paying off. Industrial activities also performed well, although weakness in the U.S. housing market affected Wood Coatings, while Powder Coatings increased its global presence by opening new plants in emerging markets such as Russia and China. Marine & Protective Coatings again achieved double digit revenues growth, benefiting from the first deliveries of Intersleek® 900, the business’ silicone-based antifouling. Car Refinishes posted a performance on a par with the previous year’s second quarter.
Chemicals—22% higher EBITDA on 4% autonomous growth
Akzo Nobel Chemicals is clearly benefiting from its strategy to focus on five growth platforms with leading global positions, and the ongoing efforts for margin improvement and cost control. Revenues were up slightly to EUR 904 million, with organic growth of 4% being offset by negative currency impact (1%) and divestments (2%). EBITDA before incidentals jumped 22% to EUR 157 million, while the EBITDA margin increased substantially from 14.4% to 17.4%.
Pulp & Paper Chemicals, the proceeds from higher selling prices were partly off-set by the continued rise of raw material and energy costs. Base Chemicals turned in a good performance, driven largely by its Energy activities, although revenues were negatively affected by the outsourcing of technical services in the Netherlands. Polymer Chemicals was well ahead of the corresponding period last year, helped by autonomous growth and the positive impact of lower manufacturing costs. Revenues at Surfactants were slightly higher, but increased raw material costs impacted margins, resulting in an operating income slightly below Q2 2006. Overall, Functional Chemicals posted an operating income slightly above last year’s second quarter, despite the impact of currency and raw materials.
Discontinued operation—Organon BioSciences
At EUR 936 million, Organon BioSciences’ second quarter revenues were 1% below 2006. There was a negative currency translation effect of 2%, mainly attributable to the U.S. dollar and the Japanese yen. Net income was up 21%, partially due to the effect of the non-recognition of depreciation. At Organon, revenues were down 5%. The strongest performer remained the Contraception activities, thanks mainly to Implanon® and NuvaRing®, for which volume increases of EUR 6 million and EUR 13 million respectively were realized. Second quarter revenues at Intervet grew 9% to a record EUR 306 million. Recent product introductions—including the pig vaccine Circumvent® PCV—boosted growth in the North American market.
Strong financial position
The EUR 1.6 billion share buyback program is progressing well. At the end of the second quarter, 9.9 million common shares had been repurchased for a total consideration of EUR 596 million.
Akzo Nobel is continuing to actively monitor opportunities to make strategic investments in its businesses and will remain financially-disciplined while seeking value-enhancing acquisitions. The company has significant opportunities for both geographic and product expansion and is outpacing growth in the markets in which it operates.
Nobel’s portfolio is well positioned for profitable growth. Assuming no significant change in the major economies of the world, the company believes that it is well placed to deliver on the objectives to outgrow its markets and further improve the financial returns in Coatings and Chemicals compared with 2006.
mid-September, Akzo Nobel will present an update on its strategy to the financial markets at the autumn analyst days taking place in London and New York.
Report for the 2nd quarter can be read on the company’s corporate website.