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Akzo Nobel's results beat predictions

Published: 29 July 2009
Price increases and cost cutting helps offset fall in sales volume and has positive effect on Dutch coating company's Q2 trading statement.
Akzo Nobel reported earnings before interest and tax (EBIT) of €370m, which was above the average forecast of E 267m, predicted in a poll by Reuters. However, this was still 12% down on the 2008 figure of €422m.

Sales volumes were down 16% compared with last year, mitigated by price increases of 5%, which were secured in the second half of 2008. Akzo Nobel's decorative paint sector was hit fairly hard with sales volume down 10% and a 5% drop in revenue as a result.

Its UK decorative paint business, which includes brands such as Hammerite, Dulux and Cuprinol, saw one of the best performances in Europe, with the retail market driven by third party promotional activity, helping to limit its market decline.

Akzo reduced its net workforce in its decorative coatings business by more than 2,100 employees and revealed that it plans disciplined control on its capital expenditure.

The statement also revealed that the trade segment experienced continued weakness in the decorative paints sector, while the retail business has been far more resilient.

In a presentation on the results, Akzo Nobel chief executive Hans Wijers said of the company's plans: "Forward visibility remains limited, due to continuing uncertain economic development. We continue to expect that 2009 will be a challenging year Nevertheless, we remain focused on working towards our medium-term target of an EBITDA margin of 14% by the end of 2011, delivering at least €540 million of ICI synergies and cost restructuring."

He added that Akzo plans to drive margin management programs across the company. The Dutch business announced its intentions to cut its full-time workforce at its headquarters by 20%, while a salary freeze has been implemented in 2009 for more than 500 executives, including board members and most other employees.

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