AMSTERDAM, the Netherlands - Akzo Nobel N.V. (AkzoNobel) reported a six percent increase in third-quarter revenue compared with the same period last year, a result of favorable currency effects and pricing actions.
The company has taken an impairment charge against its Decorative Paints business, because of tougher than expected market conditions in Europe, which it expects to persist this quarter.
Decorative Paints generated revenue of EUR 1.46 billion, broadly unchanged on the comparative period. The difficult market conditions in Europe and Latin America were largely offset by strong revenue and volume growth in China and Northern Asia. Despite the volume decline, AkzoNobel has been able to maintain or increase its relative market share in most of its markets.
In Performance Coatings, revenue increased 13 percent to EUR 1.47 billion, driven by acquisitions in Industrial Coatings and strong demand in Protective Coatings. Volumes were flat with continued variability between markets. EBITDA increased 29 percent to EUR 202 million as a result of margin growth from all business areas.
Specialty Chemicals revenue increased 3 percent to EUR 1.39 billion. EBITDA fell 5 percent to EUR 227 million impacted by lower volumes and margin weakness in Functional Chemicals. Surface Chemistry and Pulp and Performance Chemicals delivered the strongest EBITDA growth during the quarter.
The cost of AkzoNobel's raw materials in the third quarter was slightly above last year, but has leveled off versus the second quarter. The company expects average raw material costs for the year, slightly up due to the oil price increase in the second quarter.
CFO Keith Nichols said, "Despite the unavoidable impact of the economic slowdown, the business portfolio of AkzoNobel remains resilient, and we have reported solid operational results for the quarter. Many of our business units are performing well, maintaining high margins and market share. The impact of the slowdown is primarily being felt in the more consumer-facing businesses. Looking forward, the principal concern remains the decorative paint markets in Europe. The impairment taken in this quarter is a reflection of these concerns and our realistic assessment of the markets going forward. As we cannot expect quick recovery of the economy, we also will continue to implement our ongoing improvement agenda in order to increase our profitability."
Because the slowdown in Europe is affecting the company’s volumes, it is planning more restructuring activities to reduce costs in the businesses that are most affected.
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