AkzoNobel net income jumps on lower costs; forex issues remain
Tom Brown
17-Apr-2014
(adds sector detail, updates throughout)
LONDON
(ICIS)–AkzoNobel’s net income rose by 45% year on year to
€129m in the first quarter of 2014, boosted by lower
financing costs, but currency issues dampened revenues and
earnings, the Netherlands-based producer said on Thursday.
The company’s revenue fell by 2% year on year to €3.38bn in
January-March this year, while earnings before interest, tax,
depreciation and amortisation (EBITDA) was down by 3% at
€375m, which the company attributed to the impact of currency
exchange issues, which have dogged the results of many
European companies in recent months.
According to AkzoNobel, currency headwinds reduced revenues
by 5%, while currencies and restructuring cut operating
income by €15m, leaving it flat year on year at €216m.
Financing costs fell on the back of recent debt repayments,
but AkzoNobel noted that the economic environment remains
fragile, and currency volatility continues to be a factor.
“AkzoNobel is on track to deliver its 2015 targets despite the expected continued fragile economic environment and continued volatile currencies in 2014,” the company said.
Revenues were down across the company’s three key divisions of decorative paints, performance coatings and specialty chemicals, despite an across-the-board increase in volumes.
Decorative paints division revenues fell 6% year on year in the first quarter to €865m, which the company attributed to the impact of currency effects, mainly in Latin America and Asia, as well as the impact of the sale of its building adhesives division. Operating income declined 60% year on year to €17m.
Performance coatings revenues fell 1% year on year during the quarter to €1.32bn, as improved pricing and volumes were more than offset by currency impacts, which also led to a 2% drop in operating income to €126m. Higher restructuring costs also weighed on income, the company added.
Improved market conditions for functional chemicals and fewer production issues compared to the first three months of 2013 for industrial chemicals helped to increase volumes for AkzoNobel’s specialty chemicals division, but currency effects and divestments led to a 2% decline in revenues to €1.22bn
Operational efficiencies and cost controls helped to drive a 36% year on year increase in operating income for the division to €135m, the company added.
“Despite higher restructuring charges, continued adverse currency effects and ongoing weakness in Europe, our year-on-year return on sales, both before and after higher restructuring charges, improved for the third consecutive quarter,” said AkzoNobel CFO Keith Nichols.
“AkzoNobel remains on track to deliver its 2015 targets of 9
percent return on sales, 14 percent return on invested
capital and a net debt/EBITDA ratio lower than 2.0,” he
added.
Additional reporting by Nurluqman Suratman
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