UpdateAkzoNobel's share price up 10% on encouraging Q2 results

29 July 2009 12:18  [Source: ICIS news]

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By Lucy Craymer and Bohan Loh

LONDON (ICIS news)--AkzoNobel’s share price rose 10% on Wednesday after the Netherlands-based company reported better-than-expected second-quarter results, which saw net profits of €155m ($220m).

“Akzo has reported a more comforting result, with some stabilisation in end markets, volume declines slowing slightly, and some margin stability,” said a Cazenove analyst.

Clearly things are no worse, while margin stability may suggest that Akzo Nobel will prove more defensive than expected, he added.

Cazenove has upgraded its earnings per share by 5% to €2.04 for 2009.

But while markets were pleased with the results, AkzoNobel’s second-quarter profits were still down 13% year-on-year due to tough trading conditions throughout its business portfolio, the paint and chemicals major said.

Revenue for the quarter came in 10% lower year on year at €3.67bn, while earnings before interest, tax, depreciation and amortisation (EBITDA) dropped 9% compared to the previous corresponding period to €527m.

Sales similarly dropped for all of AkzoNobel’s business segments with the performance coatings division suffering the largest revenue decline of 14%.

Revenue for AkzoNobel’s Decorative Paints business dropped 5% year on year while turnover for its Specialty Chemicals division declined 8% as compared to the previous corresponding period.

However, the company’s margins were better than expected as a result of increased prices, lower raw materials and cost savings particularly those related to synergies between AkzoNobel and ICI.

“With the exception of some emerging markets, we see little significant recovery of growth,” said CEO Hans Wijers.

“Due to the continuing economic uncertainty, forward visibility still remains limited,” he added.

The company has not provided an earnings guidance for the rest of 2009 but said that it remained committed to achieving its medium-term target of an EBITDA margin of 14% by the end of 2011, and to realise a combined €540m in synergies from its ICI acquisition.

AkzoNobel's management declined to be drawn into discussions on whether third-quarter net profits would continue to fall when they spoke at a press conference.

“We hope for the best but we prepare for the worst,” said Wijers. “The world seems to have stabilised. But having said that do we have clear visibility about the future? No we don’t,” he added.

The company was modest about its ability to predict what lay ahead and so had made the decision not to forecast third-quarter results, he explained.

AkzoNobel’s shares were at €38.49 in early afternoon trading on the Amsterdam Stock Exchange, up around 10% from the closing price of €35.04.

($1 = €0.71)

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By: Lucy Craymer
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