Akzo Nobel posts lower revenues, higher operating incomes in Q3

Akzo Nobel has recently reported its third quarter revenues of EUR3,778 million, 5% lower compared with the same period last year. The decrease was a consequence of adverse currency effects and divestments, says the firm. However, lower restructuring costs and higher volumes helped push its Q3 operating income up 22% to EUR303 million.

The third quarter saw AkzoNobel divest its Building Adhesives business (completed October 1) and announced plans to drive further efficiency and performance improvements within Functional Chemicals and in Germany, as well as plans to streamline the management structure in Decorative Paints to improve competitiveness. The company also published details of investments totaling more than EUR50 million in two new manufacturing facilities to meet growing demand in western China. AkzoNobel furthermore maintained its number one ranking in the Dow Jones Sustainability Index, heading the Materials industry group.

Decorative Paints revenues of EUR1,136 million in the third quarter were stable versus the previous year, with higher volumes offset by adverse currency effects. Although conditions in Europe remained challenging in general, global volumes were up on the same quarter last year. Lower costs and lower restructuring charges contributed to increased operating income for Q3 2013 of EUR107 million, more than double the previous year's figure.

Quarterly revenue at Performance Coatings declined 4% to EUR1,415 million compared with last year, with the decline attributable to adverse currency effects. Whilst overall volumes were up 2%, weak demand in Europe continued to impact all businesses. Q3 restructuring costs were lower in 2013 than a year earlier, as a result of which operating income showed an improvement, up 23 percent at EUR160 million.

Revenue in Specialty Chemicals was 10% lower at EUR1,252 million, primarily as a result of the divestment of Chemicals Pakistan and negative currency effects. Overall volumes were flat compared with a year earlier. Operating income was down 20% at EUR107 million, mainly as a consequence of one-off restructuring costs incurred as part of the performance improvement program in the Functional Chemicals Business Unit.

According to CFO Keith Nichols, the trading environment behind these results remains unchanged in that demand remains soft compared to the same period lasr year, which was particularly weak. “ The actions we have taken to address the challenges our businesses are facing are starting to have a positive effect; the return on sales before restructuring charges has improved in all three Business Areas due largely to our performance improvement actions, " he says.

On the other hand, the firm has implemented a performance improvement programme, which was announced in October 2011, is on track to deliver the full EUR500 million in EBITDA at the end of this year, a year early. Efficiency and cost reduction measures have also been identified as restructuring activities are stepped up, the benefits of which will be realised in 2014 and beyond. The majority of these restructuring charges for the second half of 2013 will be taken in the fourth quarter.

Akzo Nobel says the economic environment remains challenging and does not expect an early improvement in the trends faced in its end-user market segments. The acceleration of the performance improvement programme and the strategic priorities announced in February are the right focus to have in these markets. Akzo Nobel expects restructuring charges in the fourth quarter of around EUR160 million.


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