UpdateDutch AkzoNobel swings to Q3 net loss of €2.38bn

18 October 2012 10:43  [Source: ICIS news]

(adds CFO comment and segment financials)

AkzoNobel headquartersLONDON (ICIS)--AkzoNobel said on Thursday it swung to a net loss of €2.38bn ($3.09bn) in the third quarter from a €149m net profit reported in the same period last year, weighed by a €2.5bn impairment charge on the firm’s decorative paints business.

The non-cash impairment charge came after AkzoNobel undertook what it called a prudent review, excluding restructuring effects, of its balance sheet, taking into account lower expected growth rates. In Europe, the company recognised an impairment charge of €1.9bn, in North America €400m and in South America €200m.

The company’s revenue rose by 6% year on year to €4.28bn in the third quarter, mainly because of favourable currency effects, although total volumes were down 3% year on year, primarily due to the economic slowdown in Europe.

Third-quarter earnings before interest, tax and depreciation (EBITDA) rose by 7% year on year to €540m, the Netherlands-headquartered coatings and specialty chemicals group said.

CFO Keith Nichols said: “Despite the unavoidable impact of the economic slowdown, the business portfolio of AkzoNobel remains resilient, and we have reported solid operational results for the quarter.”

“The impact of the slowdown is primarily being felt in the more consumer facing businesses,” he added.

The group’s Decorative Paints business generated revenue of €1.46bn in the third quarter, up 1% year on year. AkzoNobel said difficult market conditions in Europe and Latin America were largely offset by strong revenue and volume growth in China and Northern Asia. The segment’s EBITDA fell 1% year on year to €147m on the back of volume decline.

In its Performance Coatings business, revenue grew 13% to €1.47bn in the third quarter from the same period in 2011, driven by acquisitions in Industrial Coatings and strong demand in Protective Coatings, AkzoNobel said.

“Volumes were flat with continued variability between markets. EBITDA increased 29% to €202m as a result of margin growth from all business areas,” the company added.

Third-quarter revenue for AkzoNobel’s Specialty Chemicals segment increased 3% year on year to €1.39bn, although EBITDA fell 5% to €227m “impacted by lower volumes and margin weakness in Functional Chemicals”.

AkzoNobel said that the cost of its raw materials in the third quarter was slightly higher than the same period of last year, but has levelled off versus the second quarter of 2012.

“The price of TiO2 [titanium dioxide] has [been] reduced, but is still higher than the previous year and there has been some volatility from oil-related feedstock,” the company said.

“The company expects average raw material costs for the year [to be] slightly up due to the oil price increase in the second quarter,” it added.

For the first nine months of this year, the company swung to a net loss of €2.11bn, from a net profit of €545m in the same period in 2011. AkzoNobel’s revenue in the January-September period was up by 6% year on year at €12.7bn, while EBITDA was up by 4% at €1.56bn.

“During the year, the economic slowdown, particularly in Europe, is having an adverse impact on AkzoNobel’s volumes. Additional restructuring activities are therefore being initiated to further reduce costs in the businesses that are most affected,” the company said in its outlook.

The company added it was confident with regard to the long-term growth of its business, but remains cautious over the shorter-term development of its markets.

“Looking forward, the principal concern remains the decorative paint markets in Europe. The impairment taken in this quarter is a reflection of these concerns and our realistic assessment of the markets going forward. As we cannot expect quick recovery of the economy, we also will continue to implement our ongoing improvement agenda in order to increase our profitability,” Nichols said.

($1 = €0.76)

Additional reporting by Nurluqman Suratman


By: Franco Capaldo
+44 (0)20 8652 3214



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