Akzo misses Q3 earnings due to "strong headwinds"
Published: 18 October 2017 - Kiran Grewal
Akzo Nobel released its Q3 2017 results today, reporting a second profit warning since the failed takeover approach from PPG industries earlier this year. The report showed volumes were 2% higher overall, driven by Decorative Paints and Performance Coatings, while flat for Specialty Chemicals, despite significant global supply chain disruptions. Revenue was up 1%, mainly due to volume growth and acquisitions, partly offset by adverse currency effects.
In Decorative Paints, EBIT was adversely impacted by higher raw material costs, not yet fully compensated, and geographical/ product mix effects. Akzo has stated that appropriate measures are being taken to address higher raw material costs, including increased selling prices and additional cost control.
In Specialty Chemicals, EBIT was up 1% with favorable price/mix developments and cost savings, partly offset by adverse currencies and global supply chain disruptions.
In Europe, Middle East and Africa (EMEA), revenue reduced 4%, due to "unfavorable" currencies, most notably the pound sterling, and price/mix effects. Demand trends differed per country in the region and uncertainty continued in some markets. Growth was visible across much of EMEA, while the UK was affected by lower consumer confidence. In Q3, Akzo has opened a "highly efficient" plant at Ashington that will be the production center for Dulux.
Akzo reported lower-than-expected third-quarter operating earnings of 383 million euros on Wednesday, citing "headwinds" at its marine coatings business and margin pressures from rising raw material costs.
Analysts polled by Reuters had expected earnings before interest and taxes (EBIT) at 432 million euros, down from 442 million euros in the same period a year ago.
Akzo has struggled after rejecting a 26 billion euros takeover offer from U.S. rival PPG Industries, seeing its CEO and CFO resign and issuing a profit warning in September.
The company also said today that it would hold an extraordinary general meeting on Nov. 30 to vote on the separation of its Specialty Chemicals unit and said a €1 billion special cash dividend as advance proceeds will be paid on Dec. 7, following shareholder approval for the separation.