Refocused Akzo Nobel reports strong first quarter results

Following the March 12 announcement regarding the intended sale of Organon BioSciences (OBS), the results for the company's Pharma activities will, in line with IFRS, be shown under Discontinued Operations until the closing of the transaction, foreseen in the second half of 2007.

 

 

 

 

 

 

At EUR 2.5 billion, revenues for Coatings and Chemicals were 1% above the Q1 figure for 2006, with autonomous growth of 6% being largely offset by a negative currency impact. The refocused company posted EBITDA of EUR 307 million, an increase of 10% compared with last year. The operating result was up 18%. Incidentals only had a minor impact during the quarter, in contrast to Q1 2006, when the company booked significant positive incidentals. Excluding incidentals - but including the Pharma activities - total net income rose 13%, from EUR 215 million to EUR 244 million. Including incidentals, net income was virtually unchanged.

 

Commenting on the company's first quarter results, CFO Rob Frohn said: "The operational performance during the first quarter was very positive. I'm pleased that strong autonomous growth and the effects of our margin improvement programs, both in Coatings and Chemicals, resulted in an operating income increase of 18 percent. In addition Intervet reported a record quarter."

 

Coatings turned in a strong quarter, with revenues up 8% on 2006. The European businesses improved, and emerging markets continued to drive growth. Before incidentals, EBITDA rose 11% to EUR 153 million. Autonomous growth was 8%, with 5% due to higher volumes and 3% higher prices. Acquisitions added 4%, while currencies had a negative impact of 4%. Decorative Coatings delivered a promising start to the year, with both volume growth and improved margins, while the company's Marine & Protective activities enjoyed double digit revenues growth, led by Aerospace and Protective Coatings. The Industrial activities delivered a healthy performance, although the slowdown in the U.S. housing industry affected some parts of the businesses. Car Refinishes continued to report improved EBIT margins on both cost control and growth in emerging markets.

 

Chemicals revenues increased by 1% to EUR 917 million, with volume growth of 1% and price increases of 3% being partially offset by a negative currency impact of 2%. Before incidentals, EBITDA amounted to EUR 164 million, in line with last year. The EBIT margin improvement was a result of the margin management programs in all units. Pulp & Paper Chemicals benefited from higher margins for bleaching products in Europe and the Americas. Base Chemicals delivered a strong operational performance, driven by strong demand for chlor-alkali products. Functional Chemicals achieved increased margins in Chelates, Sulfur Products and Cellulosic Specialties, and the production issues in Ethylene Amines at our Swedish plant were resolved. Despite headwinds from currencies and higher raw material prices, the EBIT of Surfactants improved due to price increases and improved operational efficiency. EBIT of Polymer Chemicals was well ahead of 2006 due to cost savings and benefits from the margin improvement program.

 

First quarter revenues for Pharma amounted to EUR 920 million, equal to the same period in 2006. The EBIT of OBS before incidentals was up 4% to EUR 147 million. Organon's autonomous growth of 4% was more than offset by currency effects and the loss of Avinza® sales. NuvaRing® is continuing to do well. The EBIT was unchanged at EUR 84 million. Intervet reported a record quarter, driven by autonomous growth of 12%. The European region and products for companion animals were particularly strong contributors. The Intervet EBIT margin improved to 21.7%. The preparations of the transfer of Organon BioSciences are on track.

 

Akzo Nobel's workforce in Coatings and Chemicals was 42,880 employees, up from 42,690 at year-end 2006. The number of employees at Organon BioSciences was 19,140.

 

The company's strong financial position improved further due to a decrease of
EUR 0.1 billion net interest-bearing borrowings to EUR 1.0 billion.

 

Akzo Nobel is well positioned for profitable growth. Assuming no important change in the major economies of the world, the company believes that it is well placed to outgrow its markets and improve the financial returns in Coatings and Chemicals.

 

The Report for the 1st quarter is attached and can be read on the company's corporate website: http://www.akzonobel.com/com/News/Reports.htm

 

Akzo Nobel is a Fortune Global 500 company and is listed on both the Euronext Amsterdam and NASDAQ stock exchanges. It is also included on the Dow Jones Sustainability Indexes and FTSE4Good Index. Based in the Netherlands, we are a multicultural organization serving customers throughout the world with coatings, chemicals and human and animal healthcare products. We employ around 62,000 people and conduct our activities in these four segments, with operating subsidiaries in more than 80 countries. Consolidated revenues for 2006 totaled EUR 13.7 billion. The financial results for the second quarter will be published on July 24, 2007.

 

Internet: www.akzonobel.com

 

Akzo Nobel nv

Corporate Media Relations, tel. +31 26 366 43 43

Contact: Tim van der Zanden