media release

AkzoNobel publishes Q3 2017 results

Revenue and volumes up despite strong headwinds;
Transformation plan to deliver €110 million savings in 2018

Akzo Nobel N.V. (AKZA.AS; AKZOY)

  • Volumes 2% higher driven by Decorative Paints and Performance Coatings
  • Revenue up 1%, mainly due to volume growth and acquisitions, partly offset by unfavorable currencies
  • EBIT1 at €383 million (2016: €442 million), impacted by unfavorable currencies, temporary disruption to the manufacturing and supply chain, continued headwinds for Marine and Protective Coatings and margin pressure from raw material cost inflation
  • Direct impact of around €25 million on EBIT related to Hurricane Harvey and other events
  • Adjusted EPS at €1.07 (2016: €1.20)
  • Initiating phase one of transformation plan to create a fit for purpose Paints and Coatings organization to deliver €110 million savings in 2018 contributing towards the 2020 financial guidance
  • Extraordinary General Meeting (EGM) to be held on November 30, 2017
  • Creating two focused high-performing businesses:
    • Separation of Specialty Chemicals is on track to be completed by April 2018
    • €1 billion special cash dividend as advance proceeds to be paid on December 7, 2017, following shareholder approval for the separation
  • Capacity expansions in the UK (Decorative Paints), China (Performance Coatings) and Sweden (Specialty Chemicals)
  • Number one in the Chemicals Industry Group on the Dow Jones Sustainability Index, for the fifth time in six years
CEO Thierry Vanlancker commented:

“We have continued to grow our business with higher volumes and increased revenues despite challenging market conditions in selected areas of our business, especially in Marine and Protective Coatings.

“We have also initiated phase one of our transformation plan to create a fit for purpose Paints and Coatings organization which will deliver €110 million annual savings in 2018 contributing towards our 2020 financial guidance.

“EBIT for 2017 is now expected to be in line with 2016, due to adverse foreign exchange, ongoing industry specific headwinds and supply chain disruptions, including the adverse impact of Hurricane Harvey in the US.

“There continues to be significant interest in our Specialty Chemicals business and we look forward to the separation process officially kicking off in the coming weeks. We have announced several capacity expansions to accelerate growth for the business, including a €20 million investment to increase production at Sundsvall, Sweden for our Expancel expandable microspheres.

Outlook:

We anticipate positive developments for EMEA (excluding the UK), North America and Asia, while Latin America is expected to stabilize.

Industry specific headwinds continue, including higher raw material prices and challenges for marine and protective coatings.

We are implementing various measures to mitigate current market challenges, including increased selling prices and additional cost control.

EBIT for 2017 is now expected to be in line with 2016, due to ongoing industry specific headwinds and supply chain disruptions.

Q3 2017 in € million      
  Q3 2016 Q3 2017 Δ %
Revenue 3,600 3,624 1
EBIT1 442 383 (13)
Return on sales (ROS)2 % 12.3 10.6  
Net income attributable to shareholders 285 216 (24)
       
Year-to-date January - September 2017 in € million      
  YTD 2016 YTD 2017 Δ %
Revenue 10,741 11,070 3
EBIT1 1,267 1,220 (4)
Return on sales (ROS)2 % 11.8 11.0  
Return on investment (ROI)3 % 15.2 14.2  
Net income attributable to shareholders 837 757 (10)

 

Decorative Paints:

Third quarter volumes increased by 5% due to positive developments in Asia. Revenue was down 1%, with positive volume development more than offset by adverse currency and price/mix effects.

EBIT was adversely impacted by continued higher raw material costs in the paints and coatings industry, not yet fully compensated, and geographical/product mix effects. Appropriate measures are being taken to address higher raw material costs, including increased selling prices and additional cost control.

AkzoNobel opened a new facility in Ashington, UK, which is the world’s most advanced and sustainable paint factory. This hi-tech plant is the new center of production for Dulux, the world’s leading decorative paint brand.

Performance Coatings:

Volumes were up by 1% in the third quarter, with growth for Industrial and Powder Coatings, partly offset by adverse conditions in the marine and oil and gas industries. Revenue was up 2%, due to volume growth and the acquired Industrial Coatings business, partly offset by currency effects.

EBIT was adversely impacted by ongoing weakness in the marine and oil and gas industries, as well as increased costs of raw materials in the paints and coatings industry and adverse currency effects. Measures being implemented to mitigate current industry specific headwinds include increased selling prices and additional cost control.

The company opened a facility in Dongguan, China, dedicated to producing aerospace coatings for the North and South Asian aviation market. This new facility will offer improved and faster service to existing, as well as new, customers in this rapidly-growing market.

Specialty Chemicals:

Third quarter volumes were flat, despite significant global supply chain disruptions including Hurricane Harvey in the Houston area of the US. Revenue was up 1% due to positive price/mix effects, mostly offset by adverse currencies.

EBIT was up 1% with favorable price/mix developments and cost savings partly offset by unfavorable currencies and global supply chain disruptions. Positive price/mix reflects the successful pass through of raw material price inflation.

During Q3, AkzoNobel announced a novel technology platform for producing a wide range of ethylene amines and their derivatives from ethylene oxide. The process involves lower raw material consumption and has an improved cost and sustainability profile when compared with existing processes. Construction of a demonstration unit will start next year.

Business Area highlights in € million    

 

     
Decorative Paints            
Q3 2016 Q3 2017 Δ %   YTD 2016 YTD 2017 Δ %
1,021 1,007 (1) Revenue 2,937 2.975 1
123 95 (23) EBIT1 306 293 (4)
12.0 9.4   ROS %2 10.4 9.8  
             
Performance Coatings            
Q3 2016 Q3 2017 Δ %   YTD 2016 YTD 2017 Δ %
1,406 1,428 2 Revenue 4,267 4,403 3
199 147 (26) EBIT1 607 536 (12)
14.2 10.3   ROS %2 14.2 12.2  
             
Specialty Chemicals            
Q3 2016 Q3 2017 Δ %   YTD 2016 YTD 2017 Δ %
1,202 1,209 1 Revenue 3,614 3,757 4
168 169 1 EBIT1 511 524 3
14.0 14.0   ROS %2 14.1 13.9  

 

  1. Operating income excluding identified items.
  2. ROS% is EBIT divided by revenue. 
  3. Moving average ROI% is 12 months EBIT divided by 12 months average invested capital

The Q3 2017 report can be viewed and downloaded here

 

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