AkzoNobel half-year and Q2 2017 results

| Source: AkzoNobel AkzoNobel

July 25, 2017

Half-year revenue up 4%; strong progress on strategy to accelerate growth and value creation

       
  Progressing strategy to accelerate growth and value creation Capacity expansions in Brazil, Mexico, Sweden and Thailand Two acquisitions announced to strengthen Performance Coatings business Decorative Paint product launches including Levis in China and EasyCare in Brazil Specialty Chemicals separation process on track for completion by April 2018 Shareholder engagement plans announced including EGM on September 8, 2017 New set-up for Executive Committee
    Half-year: Volumes up 2%, driven by Decorative Paints and Specialty Chemicals Revenue up in all Business Areas and 4% overall, mainly due to volume growth and acquisitions EBIT up 1% at €837 million (2016: €825 million), mainly due to volume growth and continuous improvement, partly offset by higher raw material costs and continued weak demand in Marine and Protective Coatings Q2: Volumes increased for Decorative Paints and Specialty Chemicals, and flat overall Revenue up 2% driven by Performance Coatings and Specialty Chemicals EBIT at €461 million (2016: €491 million), impacted by higher raw material costs, continued weak demand in Marine and Protective Coatings and a planned maintenance turnaround in Industrial Chemicals
 

Outlook We continue to anticipate positive developments for EMEA (excluding the UK), North America and Asia, improving during the year, while Latin America is expected to stabilize. Market trends will remain challenging for the marine and oil and gas industries. We have improved our ability to respond to developments in our markets and continue taking appropriate measures, including structure to drive operational excellence and additional cost control, to deal with higher raw material prices in an inflationary environment. We continue to expect EBIT for 2017 to be around €100 million higher than 2016, as a result of growth momentum and continuous improvement, assuming no further material changes in market and economic dynamics, including foreign currencies.

Highlights half-year and Q2 2017

Decorative Paints Half-year: Volumes up 6%, driven by Asia and Latin America. Revenue was impacted by adverse price/mix effects. Favorable impact from Brazilian real was offset by the weakening of pound sterling. EBIT and operating income improved 8%, driven by volumes and cost control, adversely impacted by unfavorable price/mix effects and higher than anticipated raw material costs. ROS increased to 10.1% (2016: 9.6%); ROI increased to 13.5% (2016: 12.3%). Q2: Volumes up 3%, driven by Asia and Latin America. Revenue was impacted by adverse price/mix and currency effects. EBIT and operating income were adversely impacted by unfavorable price/mix effects and higher than anticipated raw material costs, partly offset by cost measures. Performance Coatings Half-year: Volumes down 2% due to weak demand for Marine and Protective Coatings. Volumes up excluding Marine and Protective Coatings. Revenue up 4%, mainly due to the acquired Industrial Coatings business. EBIT and operating income adversely impacted by ongoing weakness in the marine and oil and gas industries. ROS at 13.1% (2016: 14.3%) and ROI at 27.2% (2016: 31.0%), affected by Marine and Protective Coatings and the integration of the acquired Industrial Coatings business. Q2: Volumes up for Industrial and Powder Coatings more than offset by lower volumes in Marine and Protective Coatings. Revenue up 2%, mainly due to the acquired Industrial Coatings business. EBIT and operating income adversely impacted by ongoing weakness in the marine and oil and gas industries, as well as increased costs of raw materials. Specialty Chemicals Half-year: Volumes up 4% with growth in most business units and all regions. Revenue up 6% due to higher volumes and positive currency and price/mix effects. EBIT and operating income up 3% mainly due to the higher volumes. ROS at 13.9% (2016: 14.2%); ROI at 18.0% (2016: 17.1%). Q2: Volumes up 2% with growth in all business units, except for Industrial Chemicals, and all regions. Revenue up 4% due to higher volumes and positive price/mix effects. EBIT and operating income flat as favorable volume and price/mix developments were offset by the impact of a planned maintenance turnaround in Industrial Chemicals.

Raw materials Raw material prices were higher compared to the same period in 2016. We are taking appropriate measures to deal with higher raw material prices in an inflationary environment. These measures were already effective for Specialty Chemicals, while for Decorative Paints and Performance Coatings it can take several quarters before the necessary mitigating impact is fully realized. Other activities Half-year: In other activities, EBIT improved. Operating income was impacted by identified items. In 2016, operating income was positively impacted by an identified item of €23 million with respect to sale of assets. In 2017, operating income was negatively impacted by identified items totaling €20 million, mainly related to the implementation of the new strategy to create two focused high-performing businesses and legal and anti-trust related items. Q2: EBIT in other activities was in line as lower insurance related costs in Q2 2017 offset favorable one-time adjustments on legacy provisions in Q2 2016. Operating income was negatively impacted by identified items totaling €20 million.

Cash flows and net debt Operating activities in Q2 2017 resulted in a cash inflow of €312 million (2016: €453 million).
At June 30, 2017, net debt was €1.9 billion (2016: € 1.6 billion) versus € 1.3 billion at year-end. The increase is mainly due to pension top-ups which were paid in Q1 and the share
repur­chase program.

Financial summary

 

€ million   2016   2017
Unless stated otherwise Q1 Q2 Half-year Q1 Q2 Half-year
Revenue 3,430 3,711 7,141 3,661 3,785 7,446
Decorative Paints 861 1,055 1,916 922 1,046 1,968
Performance Coatings 1,388 1,473 2,861 1,471 1,504 2,975
Specialty Chemicals 1,206 1,206 2,412 1,289 1,259 2,548
Other (25) (23) (48) (21) (24) (45)
EBITDA 487 642 1,129 534 620 1,154
D&A (153) (151) (304) (158) (159) (317)
EBIT(operating income excluding identified items) 334 491 825 376 461 837
Decorative Paints 52 131 183 77 121 198
Performance Coatings 186 222 408 187 202 389
Specialty Chemicals 164 179 343 176 179 355
Other (68) (41) (109) (64) (41) (105)
Identified items 23 0 23 - (20) (20)
Operating income 357 491 848 376 441 817
Finance income/expenses (27) (22) (49) (22) (19) (41)
Results from associates and joint ventures 20 8 28 8 8 16
Profit before tax 350 477 827 362 430 792
Income tax (86) (138) (224) (101) (104) (205)
Non-controlling interests (23) (27) (50) (21) (24) (45)
Discontinued operations (1) - (1) - (1) (1)
Net income attributable to shareholders 240 312 552 240 301 541
Tax rate 25% 29% 27% 28% 24% 26%

 Revenue development

in % versus half-year 2016   Volume Price/mix Acquisitions/
Divestments 		Exchange rates Total
Decorative Paints   6 (3) - - 3
Performance Coatings   (2) - 5 1 4
Specialty Chemicals   4 1 - 1 6
Total   2 (1) 2 1 4
             
in % versus Q2 2016   Volume Price/mix Acquisitions/
Divestments 		Exchange rates Total
Decorative Paints   3 (3) - (1) (1)
Performance Coatings   (4) 1 5 - 2
Specialty Chemicals   2 2 - - 4
Total   - - 2 - 2

Safe Harbor Statement
This document does not constitute or form a part of any offer, or any invitation or other solicitation of any offer, to buy or subscribe for any securities in AkzoNobel N.V. in the United States or any other jurisdiction. Some statements in this document are 'forward-looking statements'. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. These forward-looking statements involve known and unknown risks, uncertainties and other factors that are outside of our control and impossible to predict and may cause actual results to differ materially from any future results expressed or implied. These forward-looking statements are based on current expectations, estimates, forecasts, analyses and projections about the industries in which we operate and management's beliefs and assumptions about possible future events. You are cautioned not to put undue reliance on these forward-looking statements, which only speak as of the date of this presentation and are neither predictions nor guarantees of possible future events or circumstances. We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws. This document also contains statements, which address such key issues as AkzoNobel's growth strategy, future financial results, market positions, product development, products in the pipeline, and product approvals. Such statements should be carefully considered, and it should be understood that many factors could cause forecasted and actual results to differ from these statements. These factors include, but are not limited to, price fluctuations, currency fluctuations, developments in raw material and personnel costs, pensions, physical and environmental risks, legal issues, and legislative, fiscal, and other regulatory measures. Stated competitive positions are based on management estimates supported by information provided by specialized external agencies. For a more comprehensive discussion of the risk factors affecting our business please see our latest Annual Report, a copy of which can be found on the company's corporate website www.akzonobel.com.

Attachments

Media Release H1 and Q2 2017 Results PDF Investor Update PDF Analyst Factsheet Q2 Report