AkzoNobel Reports Third-Quarter Results
October 28, 2009
AMSTERDAM, The Netherlands - Akzo Nobel N.V (AkzoNobel) has announced its results for the third quarter of 2009, reporting a revenue decline of 10 percent to EUR 3,639 million.
“We have seen some signs of an improvement in emerging markets, but overall we don’t foresee a quick recovery,” said AkzoNobel CEO Hans Wijers. “The business environment continues to be tough, so it’s pleasing to see that our focus on customers, costs and cash is proving to be effective. We remain committed to implementing our restructuring and integration programs, and we are on track to deliver on our previously stated EBITDA margin target of 14 percent by the end of 2011.”
EBITDA from continuing operations before incidentals was four percent higher at EUR 549 million, due to continued margin management and cost-reduction programs. Decorative Paints is undertaking a major restructuring of the European supply chain, while all businesses in Performance Coatings benefited from margin management and cost reduction programs, leading to an EBITDA of EUR 166 million, 12 percent higher than 2008. Focus on cost and cash reduced the Specialty Chemicals cost base and partially offset the volume shortfall.
Major restructuring projects in Decorative Paints were related to further supply chain and integration projects in Continental Europe and to rightsizing capacity and store closures in the United States. In Performance Coatings, the company incurred costs for headcount-reduction programs in Industrial Activities and Car Refinishes. In Specialty Chemicals, the closure of the Skoghall site in Sweden was announced, and EUR 49 million was recognized as restructuring costs. The process for an intended 20 percent reduction of staff working at the Amsterdam head office and Arnhem shared service center in the Netherlands is on track.
In Decorative Paints, revenue was down six percent with volume decline of nine percent. The EBITDA margin was 15.2 percent, compared to 15.0 percent in 2008. In Europe, volumes were down compared with last year, but price increases mitigated the revenue decline. EBITDA margin improved on 2008 despite the weakness of the pound sterling. The U.S. market was still depressed, and U.S. stores had a challenging quarter, as the commercial market remained soft. Restructuring activities are continuing with the closure of 48 stores in the quarter. China experienced growth fueled by advertising and new product launches.
Revenue in Performance Coatings declined 12 percent as a result of lower demand across all businesses. Volume decreased 11 percent, compared to a 19 percent decrease in the second quarter of 2009. Volumes are still below prior-year level. With the exception of the late cycle Marine and Protective Coatings business, some recovery in volume is visible.
The emerging markets showed the most visible signs of recovery. All businesses clearly benefited from margin management and cost reduction programs, leading to an EBITDA of EUR 166 million, 12 percent higher than in 2008. The EBITDA margin was 16.1 percent, 3.4 percent ahead of the previous year.
Specialty Chemicals experienced lower demand across most businesses. Market conditions remained challenging as overall demand has leveled off below 2008, and the pressure on margins has intensified accordingly.