AkzoNobel N.V., the Dutch decorative paints, performance coatings and specialty chemicals multinational, met targets in the third quarter of 2014, but warned on Tuesday that global growth will slow. Even so, it has left its 2015 targets unchanged.
The Amsterdam-based company sees growth slowing in all major markets globally except the US. The United States, at €3 billion, is the company’s largest market. Lower energy prices in North America boosted business activity.
AkzoNobel laid off over 2,000 workers in the third quarter as part of a restructuring plan. Its EBITDA (earnings before interest, tax, depreciation and amortization) came in at €487 million, while sales fell 2% to €3.69 billion. Results were marginally below analysts’ expectations.
CEO Ton Büchner described the company’s Q3 performance as a solid one, in spite of continued global economic uncertainty.
Return on sales improved during the quarter to 9.1%, the fifth successive quarter with a positive posting.
The business environment will get tougher everywhere except in the US, Ton Büchner said.
Mr. Büchner said:
“Conditions continue to be challenging, but we have a resilient strategy focused on stimulating organic and sustainable growth. Coupled with the benefits from our ongoing operational efficiency programs, we are on track to deliver on our 2015 targets.”
“Q3 was also notable for several achievements, including being ranked first in our industry on the Dow Jones Sustainability Index for the third year running. In addition, our Human Cities initiative gathered momentum when we made a commitment to the Clinton Global Initiative and partnered with The Rockefeller Foundation through its 100 Resilient Cities program.”
The company developed coatings technology for the first ever fully recyclable and compostable paper cup.
Decorative Paints: sales were the same as in the third quarter of 2013. While the business environment remained challenging, the company said volumes increased in Asia. Revenue fell compared to 2013, partly because of the divestment of Building Adhesives and price discounts in Germany. Lower restructuring expenses helped raise operating income to a higher level than in 2013.
Performance Coatings: although sales increased compared to last year, revenue remained unchanged “as price/mix and adverse currencies offset higher volumes.” The new organizational structure now means there are fewer global management layers, which led to higher restructuring costs and a lower operating income compared to 2013. (Organizational structure is a system an organization uses to define its hierarchy. Each employee’s job description is defined, as well as departments, divisions, geographical locations, etc.)
Specialty Chemicals: sales were about the same as last year, with growth being undermined by some planned stoppages in the chain, as well as a strike in Rotterdam. Profitability increased despite the economic slowdown, which was helped by the cost savings and restructuring activities, as well as lower-than-expected restructuring costs.
Regarding 2015’s outlook, AkzoNobel wrote “AkzoNobel is on track to deliver on its 2015 targets despite the continued fragile economic environment.”
Mr. Büchner said the restructuring will carry on for the rest of this year, but the rate of job-cutting will slow down.