UpdateAkzoNobel Q3 net profit down 37% on higher costs, expenses

20 October 2011 11:51  [Source: ICIS news]

(Adds quotes, segment detail in paragraphs 10-16)

SINGAPORE (ICIS)--Dutch chemicals producer AkzoNobel reported on Thursday a third-quarter net profit of €149m ($204m), down 37% year on year, as higher cost of sales and other expenses offset its growth in sales.

Sales were up by 4.7% year on year to €4.05bn in the three months to September 2011, the company said in a statement.

"Although our top-line revenue growth throughout the quarter was relatively strong, we have seen the macroeconomic situation worsen which has impacted our third-quarter results,” said AkzoNobel CEO Hans Wijers in a statement.

Operating income from continuing operations for the quarter, meanwhile, fell by 21% year on year to €301m, it said.

“We have also not yet fully offset the unprecedented raw material cost increases, but this quarter illustrates that we are making good progress as evidenced by the 6% overall price increase, led by specialty chemicals,” Wijers said.

In the first nine months of the year, the company said its net profit fell by 8% year on year to €545m despite an 8% increase in sales to €11.9bn.

Operating income for January-September 2011 slipped by 5% to €1.01bn, with earnings before interest, tax, depreciation and amortisation (EBITDA) for the period falling by 6% year on year to €1.50bn, AkzoNobel said.

"We do not expect the macroeconomic situation to improve quickly. So, as in 2008, we are taking action and have launched a major performance improvement programme to deliver €500 million EBITDA in 2014,” Wijers said.

“This programme will ensure that our growth ambitions are delivered at or above the mid-point of our 13-15% EBITDA margin guidance,” he added.

Revenue in the company’s decorative paints division rose 5% year on year in the third quarter to €1.44m from €1.37m.

However, EBITDA fell by 25% year on year to €148m from €198m following weaker demand and higher raw material costs.

The performance coatings division also recorded a 5% rise in revenue in the third quarter year on year to €1.30m from €1.24m.  

The division's EBITDA declined by 5% to €157m from €166m with raw material costs continuing to affect margins.

Akzonobel’s specialty chemicals business recorded a 6% rise in revenue for the third quarter to €1.35m from €1.27m. The division's EBITDA was down by 6% to €238m from €254m.

The company said it will look to increase revenue in high growth markets in India, Brazil, and China, and to expand in the middle east.  

“Our medium-term ambitions are to grow to €20bn revenue, increase EBITDA each year while maintaining a 13-15% margin,” the company said.

AkzoNobel's share price was trading at €35.72 at 10:45 GMT on the London Stock Exchange, up 2.39% from the previous close.

($1 = €0.73)

Additional reporting by Leigh Stringer

For more on AkzoNobel, visit ICIS company intelligence

By: Pearl Bantillo
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