Akzo Profit Beats Goal as Wijers’ Savings Program Leaves Mark
Akzo Nobel NV (AKZA), the world biggest paintmaker, reported first-quarter earnings that beat analysts’ estimates as a savings program instigated by departing Chief Executive Officer Hans Wijers took effect.
Earnings before interest, taxes, depreciation and amortization before one-time items declined to 423 million euros ($554 million) from 437 million euros a year earlier, the Amsterdam based company said today. Analysts predicted 413 million euros.
Incoming CEO Ton Buechner, the former Sulzer AG (SUN) chief, inherits a broad revamp that spans coatings, paint and specialty chemicals. Analysts including Laurent Favre of Bank of America Merrill Lynch have highlighted the looming decision over what to do with Akzo’s under-performing U.S. decorative paint business as among the challenges Buechner faces.
“These are fine results, with better than expected price increases, particularly in Decorative Paints,” ING analyst Fabian Smeets said by phone. “With the impact from restructuring measures going forward and Buechner taking the helm next week I think we can have a nice ride with the share price in the rest of the year.”
The earnings beat mean Wijers exits his nine-year stint at the helm on a high, with shares of the company trading 3.5 percent higher at 44.64 euros as of 9:05 a.m. local time. Prior to today, Akzo had climed 16 percent this year, raising the market value to 10.2 billion euros.
Wijers’ plan for Akzo outlined annual savings of 450 million euros to help mitigate the effects of higher raw- material costs like titanium dioxide, used as a whitener in paint. The maker of Dulux-paints has set a target to boost Ebitda by 500 million euros for 2014 as it improves manufacturing as well as adding plants in India and Brazil.
Sales in the quarter increased 6 percent to 3.97 billion euros as cost cutting helped counter weaker volumes in markets like Europe and North America. Asia and Latin America have become key drivers of household paint sales. Volumes were down slightly, reflecting the volatile nature of the economic conditions, Wijers said.
“I have not given up on the ambition to get U.S. paint to a break even level in 2012, but this will remain a significant challenge,” Chief Financial Officer Keith Nichols said on a conference call.
Volumes in Decorative Paints in North America were down in the first quarter primarily due to a prior year customer load- in, and operating costs were higher as a consequence of investments in distribution channels and restructuring measures, Akzo said today.
Sherwin-Williams Co. (SHW), the largest U.S. paint retailer, reported preliminary first-quarter earnings that exceeded its guidance and analysts’ estimates amid rising demand and prices. A mild spring and improved pricing helped bolster demand.
Earnings fell 2 percent at Akzo’s specialty chemical division because of “difficult trading conditions in certain businesses,” the company said. Rob Frohn, who ran the specialty-chemicals division following a four-year stint as Akzo’s chief financial officer, is leaving in the wake of Buechner’s appointment. A replacement is still being sought.
Buechner will also have to decide if Akzo will take part in an auction for DuPont Co. (DD)’s auto-paint division. The Delaware, U.S.-based company is exploring the sale of the performance coatings division, which could fetch as much as $4 billion, people familiar with the process have said. DuPont will report earnings later today.
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