AkzoNobel hit by €2.5 billion impairment
Slowdown in consumer-facing paints, chemicals more resilient
Akzo Nobel has taken a €2.5 billion non-cash impairment on its Decorative Paints business area, turning a small net income in Q3 into a massive loss, despite respectable results overall. This was essentially because of difficult market conditions for paint in Europe and Latin America, partly offset by strong revenue and volume growth in China and Northern Asia.
“Despite the unavoidable impact of the economic slowdown, the business portfolio of AkzoNobel remains resilient,” said CFO Keith Nichols. “Many of our business units are performing well, maintaining high margins and market share. The impact of the slowdown is primarily being felt in the more consumer-facing businesses.”
Overall, the company’s revenues were 5.7% up on Q3 to €4,280 million, while EBITDA was 6.5% up to €540 million, due to favourable currency effects and pricing actions. For the first nine months, revenues and EBITDA were up by 6.3% up to €12,658 million and by 4.1% to €1,556 million respectively. The EBITDA margin fell slightly to 12.5%.
In Q3, the Specialty Chemicals business area saw its revenue increase by 3% on Q3 2011 to €1.39 billion. However, its EBITDA fell 5% to €227 million because of lower volumes and margin weakness in Functional Chemicals. The Surface Chemistry and Pulp & Performance Chemicals businesses were the strongest performers.
Revenues for the Performance Coatings business area were 13% up to €1.47 billion, driven mainly by acquisitions in Industrial Coatings and strong demand in Protective Coatings, though volumes were flat. Decorative Paints had flat sales by comparison with Q3 2011, with a volume decline offset by price increases. However, the poor outlook for the business in Europe led AkzoNobel to decide on taking the impairment.
AkzoNobel further revealed in its results that restructuring activities are being initiated to reduce costs further in the businesses most affected by the economic slowdown. This is in addition to an ongoing performance improvement programme that, the company said, is on track to achieve the previously announced €200 million EBITDA by the end of 2012.
Supervisory board and board member Leif Darner, who has responsibility for the Performance Coatings business area, will step down from the board of management at the 2013 AGM in April. He will be succeeded by Conrad Keijzer, currently managing director of AkzoNobel Industrial Coatings. Meanwhile, Werner Fuhrmann is to retain his interim responsibility for Specialty Chemicals on the executive committee, in addition to Supply Chain and Sourcing.
The supervisory board subsequently announced that CEO Ton Büchner is expected to return to work at some time around the end of the year. Büchner took a leave of absence on medical advice in September after being diagnosed with temporary fatigue. Nichols is standing in for him as the first point of contact and coordinator for the executive committee.