Akzo Nobel aims paints prices higher as costs bite

29 July 2008 11:13  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS news)--Akzo Nobel will raise decorative paints prices across the board in the second half of 2008 to cover raw material cost increases of around 12%, the coatings and chemicals group said on Tuesday.

The company is facing significant raw material cost rises alongside some weakening of chemicals demand and strongly adverse currency movements.

Raw material cost pressure will continue across the board in the second half of 2008 and into 2009, it said.

“We are in a strong position with our suppliers, but [we] are facing cost increases across business areas and don’t see that decreasing,” chief financial officer Keith Nichols said.

“We anticipate weaker economic conditions and continued [high] raw material and energy prices,” Nichols told financial analysts in a conference call.

Akzo Nobel said earlier that it did not expect 2008 earnings before interest, tax, depreciation and amortisation (EBITDA) before incidental charges to match the 2007 pro forma level of €1.87bn ($2.97bn), although it expected the result to be close in constant currencies.

Akzo Nobel reported a second-quarter EBITDA down 3% at €526m and an EBITDA margin of 13.6% from 14.3%. Sales were up 2% as reported, at €3.87bn or 9% higher in constant currencies at €4.14bn.

The firm’s second-quarter net profit before a fair value adjustment was down 6% at €258m. It reported a net profit for the period down 18% at €184m.

Akzo Nobel completed its acquisition of decorative paints maker ICI at the start of 2008 and sold on the ICI starch-based ahesives and electronic material businesses to Henkel at the start of the second quarter for €3.6bn.

EBITDA in the decorative paints business before incidental charges dropped 4% to €195m on 4% lower sales at €1.41bn. Performance coatings EBITDA before incidentals were up 7% at €161m on 1% higher sales at €1.18bn.

Akzo Nobel pushed through price increases in speciality chemicals in the quarter and raised segment sales 6% to €1.22bn. Specialty chemicals EBITDA before incidentals were down 2% at €195m.

($1 = €0.63)

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By: Nigel Davis
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