Akzo Nobel Profit Stagnates on Revamp, Currency WoesElco van Groningen
Akzo Nobel NV, the world’s largest decorative paints maker, reported stagnant first-quarter operating profit as restructuring costs and adverse currency effects held back earnings.
Operating profit reached 216 million euros ($299 million) after 217 million euros a year earlier, the Amsterdam-based company said today in a statement. Sales dropped 2.4 percent to 3.4 billion euros. Akzo shares declined as much as 7.1 percent, the biggest slump since July.
The paintmaker is trying to bring profitability in line with peers such as PPG Industries Inc. by focusing on fewer and more profitable businesses. Akzo Nobel is seeking a buyer for assets in its paper-chemical operations, people familiar with the matter told Bloomberg in February and the company earlier this year reported an impairment charge of 139 million euros on a business held for sale within the specialty chemicals unit.
Currency effects will continue to hurt earnings in the first half and the impact will become less severe in the second half, Chief Financial Officer Keith Nichols told analysts in a conference call today.
The CFO, who will leave the company at the end of June after eight years of service, said the paintmaker should make “some progress” in its full-year earnings.
The shares were down 5.4 percent at 53.78 euros as of 12:25 a.m. in Amsterdam trading, valuing the company at 12.9 billion euros.
The company in January said it will spend an extra 50 million euros on its reorganization this year, bringing total revamp costs to 250 million euros. In the first quarter, the company had restructuring costs of 44 million euros.
Akzo said it will still reach its targets for next year.
“We are on track to deliver the 2015 targets despite the expected continued fragile economic environment and continued volatile currencies in 2014,” Akzo said in the statement.
Chief Executive Officer Ton Buechner has set targets for an operating margin of 9 percent and a 14 percent return on investment in 2015.
Excluding restructuring costs, the operating margin rose to 7.7 percent from 7.1 percent a year earlier.
“The company seems to recover slowly but surely,” said Tom Muller, an analyst at Theodoor Gilissen Bankiers. “The company now has to hope the economy improves, especially for the decorative paints operations in Europe.”