Akzo Signals Europe Paint Demand Slowed, Marring Profit Run

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  • Profitability improved across all business areas, CEO says
  • Volumes increased, while sales held back by currency moves

Akzo Nobel: We're a `Naturally Hedged' Business in U.K.

Akzo Nobel NV said a slowdown in paint sales in the U.K. in the run up to the nation’s vote on exiting the European Union has yet to recover and a wider malaise has befallen parts of the region and spending on home improvements.

The Dutch maker of Dulux paint and Cuprinol decking and fence protection is better equipped to deal with any slowdown after years of pushing through an efficiency drive, Chief Executive Officer Ton Buechner said on a call Tuesday. Shares of Akzo traded 5.1 percent lower at 56.48 euros as of 10:08 a.m. in Amsterdam, where the company is based.

Buechner said customers are reporting increased volatility in order patterns, making it hard to extrapolate any market trends for certain. The market environment remains uncertain for 2016 with challenging conditions in several countries and segments, the CEO said. Akzo’s outlook overshadowed its fifth straight quarterly earnings beat as it benefits from cheaper raw materials and an ongoing strategy of squeezing more efficiency from the European paint and chemical maker.

Operating profit excluding one-time items rose 9 percent to 491 million euros ($543 million). Analysts surveyed by Bloomberg had estimated 470 million euros, on average. Revenue fell by 6 percent to 3.71 billion euros, short of predictions, held back by currency headwinds.

Akzo Nobel has been transformed from a serial disappointment to a company that over-delivers on results under Buechner, who is now in his fourth year at the helm. He took over a company still carrying excess baggage following its $17 billion acquisition of Imperial Chemical Industries in 2008.

Now the Dutch company faces heightened competition from the U.S. after Sherwin-Williams Co. agreed in March to buy rival Valspar Corp. for about $9.3 billion to create the world’s largest paint company. Both U.S. companies had already made inroads into Akzo’s key European market, with Valspar displacing the Dutch company’s paint-mixing stations in Britain’s B&Q do-it-yourself chain.

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