24 February 2009 11:41 [Source: ICIS news]
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LONDON (ICIS news)--AkzoNobel has recorded a net loss of €1.49bn ($1.9bn) in the fourth quarter of 2008, down from a gain of €56m in the same period in 2007, the Dutch specialty chemicals company said on Tuesday.
Sales dropped by 3% year on year to €3.56bn as price increases were offset by a decline in volumes and a negative currency impact.
AkzoNobel said it had incurred significant additional incidental costs in 2008 due to the integration of ICI and restructuring measures in response to the economic slowdown.
The company also recorded an impairment of intangibles acquired from ICI of €1.2bn after tax relating to the decorative paints and national starch businesses, resulting in a net loss of €1.1bn for 2008.
The company fell to a full-year net loss of €1.08bn from a gain of €595m in 2007.
“Our fourth-quarter results reflect the impact of the economic climate in many of our businesses,” CEO Hans Wijers said.
“The harsh trading conditions experienced towards the end of the fourth quarter have continued into 2009 and, as a result, we expect this year to be very challenging,” he said.
In its outlook, the company said it aimed to achieve an EBITDA (earnings before interest, tax, depreciation and amortisation) margin of 14% by the end of 2011 by continuing to drive synergies from ICI and by rigorous cost management.
The company has announced several cost-cutting measures to protect margins, with particular focus on decorative paints in ?xml:namespace>
It has cut 1,660 jobs over the last year, reduced third-party spending and initiated a 2009 salary freeze for the management board, over 500 executives and most other employees where possible.
AkzoNobel said it would not complete its planned share buyback programme due to uncertainties in the global economy.
Wijers said it was most likely that further restructuring would involve job cuts, but would not specify how many or in what areas.
“We’re in a pretty intense process. The company has some concrete plans to meet its target of saving an additional €100m this year,” said Wijers.
AkzoNobel has reduced manufacturing capacity and the overlap of a wide range of activities following the ICI acquisition in the decorative paints segment.
The company said it aimed to reduce costs by aiming to move from a multi-local to a regional organisation in
AkzoNobel currently employs about 60,000 people worldwide.
Investment bank Cazenove said AkzoNobel’s balance sheet remained strong for the current economic climate, allowing scope for the company to withstand a severe downturn.
“Akzo remains the largest paint company in the world and should be able to pick up market share from, and benefit from lower input cost than its smaller competitors,” said analyst Martin Evans, adding that cost-cutting measures in the ICI integration should help.
AkzoNobel reduced its capital expenditure (capex) allocation for 2009 to €475m, down from a planned €600m, and lower than 2008’s level of €534m.
By business unit, decorative paints reported a 6% drop in fourth-quarter revenue as higher prices and synergy benefits were offset by decreasing volumes and negative currency effects.
In performance coatings, sales fell 4%. AkzoNobel said a 6% drop in volumes was partly counterbalanced by product mix and margin management.
Specialty chemicals revenues increased 3% in the fourth quarter despite weakening demand and volatile feedstock costs, the company said.
($1 = €0.79)
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