Akzo Nobel fourth-quarter earnings beat expectations; sees lower input costs
Dutch paint maker Akzo Nobel on Wednesday posted flat fourth-quarter core earnings of 240 million euros ($272 million), but marginally beat expectations, and said it expected pressure from rising raw material costs to ease in 2019.
Analysts polled by Reuters had expected earnings before interest, taxes, depreciation and amortisation (EBITDA) for the three months ended Dec. 31 to be at 235 million euros, compared with 240 million euros in the year-ago period.
Sales volume declines in China, which fell 7 percent in the fourth quarter of 2018, are expected to ease, Akzo Bobel said in a statement.
The company maintained current financial goals of a 15 percent return on sales and investment by 2020, Chief Executive Officer Thierry Vanlancker said.
“Demand trends differ per region and segment in an uncertain macro-economic environment,” the company said. “Raw material inflation is expected to continue during the first half of 2019, although at a lower rate than 2018.”
It said it would continue to pass higher prices on to customers, and cut input costs by 200 million euros by 2020.
Akzo Nobel was affected by all macro-economic factors that have captivated investors in 2018, and would continue to be, in 2019, including the U.S.-China trade war, Britain’s plan to leave the European union, and high inflation rates in several developing markets, Vanlancker said.
“We really didn’t get any help from anybody,” Vanlancker said on a call with reporters.
“We belive that for the first 3-4 months of this year, it’s going to be business as usual,” he said, with a focus on cost-cutting.
Akzo warded off an acquisition by U.S. peer PPG in 2017 and sold its chemicals arm, representing a third of its business, for 10.1 billion euros in March 2018 to a group of buyers led by Carlyle Group.
It outlined plans for proceeds to shareholders in October by mix of sharebacks and a capital return.
Speaking to Imagala.com’s “Squawk Box Europe” on Wednesday, Vanlancker said the sales volume shift in China was a normalization following a surge in demand in the fourth quarter of 2017.
“Our volume in those markets is exactly the same as what we had in the fourth quarter of 2016, so it is actually a normalizing with some extraordinary effect,” he said. “We of course are very vigilant on that, (and) if you look at the rest of our business we see about 1 or 2 percent volume stabilizing and starting to gradually come back.”
He added that the company expected the numbers in China to “really get much more normalized in the coming year.”