AkzoNobel misses estimates on price-mix effects, restructuring costs, weakness in performance coatings

February 15, 2017 | Ian Young

AkzoNobel reports fourth-quarter net profit of €133 million, down 34% from the year-earlier period, on sales down 3%, to €3.5 billion. EBIT dropped 12% year-on-year (YOY), to €235 million, missing analysts’ consensus estimate, provided by Vara Reasearch (Frankfurt, Germany), by 4%.

Unfavorable currency and price-mix effects drove revenue down, AkzoNobel says. Adverse price-mix effects and higher restructuring expenses, partly offset by 2% volume growth and continuous improvement measures, put pressure on EBIT, AkzoNobel says. The company’s improvement program boosted full-year return on sales (ROS) to 10.6% from 9.8% in 2015, and return on investment (ROI) to 15.0% from 14.0% in 2015.

Weaker-than-expected results in AkzoNobel’s performance coatings business also contributed to the fourth-quarter EBIT decline, say analysts at Bernstein (London). The performance coatings business reports a 21% YOY fall in fourth-quarter EBIT, to €152 million on a 6% decline in revenue, to €1.4 billion, with volumes slipping 1%, on weak demand in the marine and oil and gas industries, as well as currency- and price-mix effects. AkzoNobel completed the acquisition of BASF’s industrial coatings business in December 2016. The acquired business is expected to generate revenue of about €280 million in 2017, AkzoNobel says.

EBIT in AkzoNobel’s decorative paints business increased 11% YOY in the fourth quarter, to €51 million—partly on lower costs—on a 4% revenue decrease, to €898 million, on currency- and price-mix effects. Volumes rose 2%.

EBIT in the specialty chemicals business jumped 31% YOY in the fourth quarter, to €118 million, on flat sales of €1.2 billion. Volumes increased 4%, mainly driven by Asia and Europe. Price deflation in several markets offset the higher volumes, and operational efficiencies boosted EBIT, AkzoNobel says.

AkzoNobel anticipates “positive developments for EMEA, North America, and Asia” during 2017, despite some economic and political uncertainty. The tough conditions in the marine, and oil and gas, industries are expected to continue in the first half of 2017, the company says. AkzoNobel maintains its guidance for a ROS of 9-11% and a ROI of 13.0-16.5% in 2016-18.

The company, meanwhile, says it has structurally improved its ability to respond to developments in its markets and is taking appropriate measures to deal with higher raw material prices in an inflationary environment.