18 July 2013 12:15 [Source: ICIS news]
(updates with detail throughout)
LONDON (ICIS)--AkzoNobel said on Thursday that the sale of its North American decorative paints business helped to drive a strong rise in net income for the second quarter of 2013, but that sales and operating income were down, and the outlook for 2013 remains muted.
The Amsterdam-headquartered paints and coatings specialist posted a 96% year-on-year increase in net income for the second quarter of 2013 to €429m ($564m), driven by the $1.05bn sale of the North American unit to US-based PPG.
However, CEO Ton Buchner noted that market conditions remained challenging, and the company’s total operating income for 2013 is unlikely to exceed the €908m generated in 2012.
“Conditions remain tough and, as we have previously indicated, we do not expect an early improvement in the external trends our businesses are facing,” he said.
Group sales for the quarter were €3.87bn, down 4% from the €4.04bn generated during the same period in 2012, and second-quarter operating income was down 17% year on year to €322m.
The anticipated cost of restructuring measures for the year is likely to be €325m, a €120m increase on earlier estimates, Akzo added, with €69m of that total invested so far in the first half of the year. The company is targeting €500m in efficiency savings by the end of the year
Decorative paints revenues for the quarter were down 1% year on year to €1.18bn, weighed down by unfavourable pricing and currency conditions. European revenues fell by 6%, with the extent of the decline mitigated by a strong performance in the UK and Russia, while China helped to drive a 10% increase in sales to Asia.
Akzo’s performance coatings division also reported a 1% year on year fall in revenues during the quarter to €1.46bn as a result of the European slowdown, with sales down across the marine and protective, powder and industrial coatings divisions.
Automotive and aerospace coatings was the only division to expand, with revenues increasing by 3% to €339m.
Hardest hit was the specialty chemicals division, which noted a 12% decline in revenues during the period to €1.25bn. The decline was attributed to lower volumes and the sale of its stake in its Pakistan chemicals business in 2012.
The company also noted a “general softening in demand”, particularly in Europe, but extending to other regions. Revenues were down across all specialty chemicals divisions.
“Manufacturing also slowed down in China and other high-growth markets, impacting global supply chains and adding to the volatility in ordering patterns,” the company added.
US financial services business JP Morgan Cazenove called the results “disappointing”, and noted that the weak showing by the company’s specialty chemicals unit in particular may be a bellwether for the current state of the industry.
“With margins in the specialty chemicals division down 110bp [basis points] in Q2 [the second quarter] year on year, this sets a cautious tone for the rest of the chemicals sector,” the company said in an investor note.
US-based Bernstein Research stated that the company’s adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of €474m was 5% below its expectations and 8% below consensus estimates.
For the first six months of this year, the company’s net income rose by 71% year on year to €518m, while its revenue was down by 5% at €7.33bn.
Its operating income for January-June this year fell by 14% year on year to €539m.
($1 = €0.76)
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