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AkzoNobel’s Q1 results show progress towards 15 by 20 strategy

NCR Thierry AkzoNobel

On sales of €2,185 million, adjusted operating income was 9 percent higher at €163 million, impacted by: raw material inflation costs €77 million higher, ongoing pricing initiatives resulted in price/mix up 6 percent, cost-saving programs delivering €38 million and volumes lower due to value over volume strategy.

ROS, excluding unallocated costs, increased to 9.1 percent, up from 8.7 percent in 2018. Contributing factors included: Decorative Paints continued good momentum in seasonally low quarter, although Automotive and Specialty Coatings were impacted by order pattern. The business made €639 million cash payments to main UK pension plans and is on track to return a total of €6.5 billion to shareholders.

CEO, Thierry Vanlancker, commented: “We’re encouraged by the underlying business performance during this seasonally low quarter. Our pricing initiatives and cost-saving programs resulted in 9 percent higher profit and return on sales up at 9.1 percent. Decorative Paints demonstrated good momentum and all Performance Coatings businesses increased profitability, apart from Automotive and Specialty Coatings which was impacted by order pattern.”

“Our transformation plans for creating a more fit-for-purpose organization are on track and delivered savings of €38 million during the quarter. We’re maintaining our focus as we continue to deliver towards our Winning together: 15 by 20 strategy.”

Recent highlights  included: the transformation of Tepe, Kusadasi a town on Turkey’s Aegean coast through a major “Let’s Colour” project; the latest colour technology is helping the McLaren Formula 1 team make an impact as the 2019 season gets into gear; a new Dulux concept store has opened in Shanghai, offering customers a fully interactive experience using digital technology and personalised services; and the opening of a trailblazing lab complex in the UK which can test new products in conditions that mimic the world’s most extreme environments.

Looking forward, AkzoNobel indicates they are delivering towards their “Winning together: 15 by 20 strategy” and continues creating a fit-for purpose organization for a focused paints and coatings company, contributing to the achievement of their 2020 guidance. Demand trends differ per region and segment in an uncertain macro-economic environment. Raw material inflation is expected to continue during the first half of 2019, although at a lower rate than 2018.

Robust pricing initiatives and cost-saving programs are in place to address the current challenges as they continue executing their transformation to deliver the next €200 million cost savings by 2020, incurring one-off costs in 2019 and 2020. The target is a leverage ratio of between 1.0 – 2.0 times Net Debt/EBITDA by the end of 2020 and a commitment to retain a strong investment grade credit rating.

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