AkzoNobel Releases Lower First-Quarter Results
April 23, 2009
AMSTERDAM, the Netherlands - Akzo Nobel N.V. (AkzoNobel) has announced its results for the first quarter of 2009. The company reported a revenue decline of 13 percent to EUR 3,272 million, while EBITDA was 33 percent lower at EUR 296 million.
The severity of the global downturn, which AkzoNobel experienced towards the end of the fourth quarter of 2008, continued to have an impact during the first quarter of 2009. "Our first-quarter results across all areas of our business reflect the depth of the global economic slowdown," said AkzoNobel CEO Hans Wijers. "We still have limited forward visibility, but there were some early indications in March that conditions in a number of our markets may be stabilizing. We are constantly monitoring activity levels and are preparing the company for various economic scenarios. However, I believe that because of our strong fundamentals and the actions we have already taken, and continue to take, AkzoNobel is well placed to weather the current economic storm."
With maturing debt refinanced, the company has a robust balance sheet. Having issued a EUR 750 million bond in March and a £250 million bond in April, the company has completed its refinancing and lengthened the duration of its debt book. Initiatives are in place to conserve cash and improve working capital utilization. As a result, the company remains well positioned to continue to improve its market positions and to achieve its medium-term objectives.
AkzoNobel CFO Keith Nichols outlined some of the management initiatives implemented during the first quarter. "In addition to the capturing of the ICI synergies, our Decorative Paints business in Europe is engaged in a major restructuring of the supply chain, which involves the concentration of production sites and the closure of warehouses. They are focused on strict cost control without jeopardizing innovation and promotional activities. Meanwhile, the focus on operating costs in Performance Coatings delivered an EBITDA margin of 10.7 percent, and the integration of LII Europe in Specialty Chemicals contributed to the top and bottom line for the quarter," said Nichols.
The global economic downturn continued to impact the decorative paint market, as the negative trends the company experienced during the second half of the previous year continued. Volumes for Decorative Paints were down 16 percent, partly offset by margin management (7 percent) and the acquisition of a distributor in Germany (1 percent). All regions reported a reduction in operational costs as a result of the ICI synergies and saving initiatives.
Revenue for Performance Coatings declined by 14 percent, with price increases of 6 percent partly offsetting a 20 percent volume decline. EBITDA amounted to EUR 104 million, 21 percent lower than in 2008. EBITDA margin was 10.7 percent. There were some signs of stabilization in March over the earlier months of the quarter.
Revenue for Specialty Chemicals was 11 percent lower compared with 2008. A volume decline of 16 percent was partly compensated by a positive acquisition impact of 4 percent. EBITDA amounted to EUR 158 million, 35 percent below last year. Despite the continued challenges created by weakening demand and volatile feedstock costs, an EBITDA margin of 12.2 percent was realized.
The company stated that forward visibility remains limited, which makes it difficult to predict with any certainty. AkzoNobel continues to expect that 2009 will be a challenging year. Nevertheless, the company remains focused on achieving its medium-term target of an EBITDA margin of 14 percent by the end of 2011, on continuing to deliver the EUR 340 million ICI synergies, on driving margin management programs across the company and on rigorous cost management.