Volume growth key to AkzoNobel specialty chemicals spin off plan

19 April 2017 13:24 Source:ICIS News

Test tube picLONDON (ICIS)--AkzoNobel can drive growth in its specialty chemicals businesses by increasing production capacities across the diversified portfolio, company executives said on Wednesday.

The company has identified additional capital spending of about €100m/year that can, it said, deliver €500m in additional revenue and €200m in earnings before interest, tax, depreciation and amortisation (EBITDA) within four years,

“These are very concrete market pull [investments],” said the executive board member responsible for specialty chemicals, Thierry Vanlancker.

They could include additional colloidal silica capacity, further polymer chemicals investment in Asia and, over the next three years, investment in chlorate and chlorine expansions in Europe.

“The market demand is there,” said Vanlancker, responding to questions from financial investors at a critical investor day meeting for AkzoNobel, which is an acquisition target for US paints maker PPG.

AkzoNobel said on Wednesday it intended to separate its specialty chemicals businesses from the core of the company within 12 months and would return the “vast majority” of net proceeds to shareholders.

And driving volume growth in the specialty chemicals business is central to AkzoNobel’s strategy to create greater shareholder value from the spin off as opposed to being acquired by PPG as some major shareholders prefer. AkzoNobel’s senior management has so far refused to engage in talks with PPG over its proposed offers.

“Growth is an integral part of the [specialty chemicals separation] plan,” said CEO Ton Buchner. “We have true confidence in delivering [on that growth],” he added.

In many cases customers are enquiring about new volumes, AkzoNobel said. The plan is to grow not just volumes but to tackle costs and drive margins higher, its executives added.

Buchner said there had been positive signs from various markets in recent months about volume growth in contrast to earlier, largely oil-price driven uncertainty.

Many of these markets were anticipating a downturn or lacklustre in the way they were moving but AkzoNobel is now seeing a “clear set of positive signs”, he added.

Focus article by Nigel Davis

By Nigel Davis