AkzoNobel net income jumps on lower costs; forex issues remain

Tom Brown

17-Apr-2014

(adds sector detail, updates throughout)

AkzoNobel headquartersLONDON (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

READ MORE

Global News + ICIS Chemical Business (ICB)

See the full picture, with unlimited access to ICIS chemicals news across all markets and regions, plus ICB, the industry-leading magazine for the chemicals industry.

Contact us

Now, more than ever, dynamic insights are key to navigating complex, volatile commodity markets. Access to expert insights on the latest industry developments and tracking market changes are vital in making sustainable business decisions.

Want to learn about how we can work together to bring you actionable insight and support your business decisions?

Need Help?

Need Help?