Dutch AkzoNobel's net profit set to decline in 2011 – Bernstein

18 October 2011 10:04  [Source: ICIS news]

AkzoNobel headquartersSINGAPORE (ICIS)--Dutch chemicals major AkzoNobel’s net income is forecast to drop by 13.9% year on year to €649m ($889m) in 2011, as earnings from its core segments come under pressure from higher raw material costs and deteriorating global economic conditions, Bernstein Research said on Tuesday.

AkzoNobel is expected to lower its 2011 guidance for its earnings before interest, tax, depreciation and amortisation (EBITDA) by about 5-10% on a year-on-year basis when it announces its third quarter results on 20 October, the research firm said in a report.

The company posted an EBITDA of €1.96bn in 2010, according to the report.

AkzoNobel said earlier in July that its 2011 EBITDA is expected to be at least in line with the year before, assuming that economic conditions do not deteriorate further.

While Bernstein has maintained its “outperform” rating on AkzoNobel, it has lowered its earnings per share (EPS) to €3.26 in 2011, from €3.71 in 2010. The company’s EPS is forecast by Bernstein to rise to €3.76 in 2012.

Raw material costs increased by 20% in the second quarter of this year, which had a major impact on the company’s three business areas: decorative paints, performance coatings and specialty chemicals.

For the decorative paints segment, its EBITDA is expected to fall by 10-15% in 2011 because of strong cost inflation in the third quarter of this year, Bernstein said.

“Even though paint prices continue to climb, raw material cost inflation, primarily titanium dioxide, has pressured margins,” the research firm said.

“We now expect third quarter decorative paints EBITDA margins of 11%, down from 13%, since the increasing titanium dioxide costs add about €33m [of] extra raw material costs,” the firm added.

Bernstein has also lowered its EBITDA estimates for AkzoNobel’s performance coating business by 2% and 5% on a year-on-year basis for 2011 and 2012, on the back of an expected weakening in industrial production.

AkzoNobel is forecast by Bernstein to post a 25.2% year-on-year drop in its third quarter 2011 net income to €178m, despite a 4.13% increase in sales to €4.03bn.

For more on AkzoNobel, visit ICIS company intelligence


By: Nurluqman Suratman



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