AkzoNobel hits three-year targets, braces for 2016

AMSTERDAM (ICIS)–AkzoNobel has hit the three-year targets the paints, coatings and chemicals producer set for itself in 2012 through streamlining operations, reorganising divisions and cutting costs, CEO Ton Buchner said on Wednesday.

The targets set out by Buchner three years ago to be achieved by the end of 2015 have all been achieved, Buchner said, with return on sales standing at 10.6 times compared to a target of nine, and return on investment standing at 15 times, above the target of 14.

AkzoNobel had planned to reduce net debt to earnings before interest, taxes, depreciation and amortisation (EBITDA) below 2.0, and at the end of last year the figure stood at 0.6, Buchner added.

“We have never changed those targets despite the fact that the market developments were very different from the assumptions we’d made at that time,” Buchner said, speaking at the company’s headquarters in Amsterdam.

Buchner had anticipated that the buildings and infrastructure division – making up 44% of 2014 revenues – would be buoyed by emerging markets, perceived at the time as high-growth. Many of the most attractive regions have either seen substantial falls in growth, such as China, or fallen into recession, such as Brazil and Russia, he said.

Eastern European growth is tepid, and mature markets are not helping to offset the shortfall, aside from the UK, the Netherlands and Scandinavia, he said.

The marine sector has been positive for the transportation division, which represented 17% of 2014 revenue, thanks to strong order backlogs at shipyards, according to Buchner.

There is a gap of 18-24 months between orders being logged and AkzoNobel seeing demand growth on the back of it, and demand is currently dwindling at the shipyards, meaning that the sector may not be such a strong source of growth for the division over the next year or two, he added.

Comprising 22% of full-year revenues, the industrial division has seen a decline in demand as national and international oil majors reduce spending on the back of the oil price rout, while AkzoNobel’s consumer goods division is strongly tied to GDP, Buchner said.

“[Consumer goods] generally doesn’t feel a crisis or an upswing,” Buchner said.

However, performance in 2016 may be steady at or weaker than the previous year, Buchner added.

“Don’t see significant growth than in 2016 – much less concerned than we were four years ago, because we’re a much stronger company,” he said.