AkzoNobel has updated its Q2 outlook based on the impact of the evolving business environment, including the effect of China lockdowns and the slower start to the EMEA DIY season.
Overall demand signs for paints and coatings remain robust, with North America still constrained in raw material availability and logistics, but sequentially improving. In Europe in particular, macro-economic uncertainty related to consumer confidence has increased.
Consumer demand in the Deco DIY channels in Europe – which represent 40% of total Deco EMEA revenue – got off to a slow start in Q2, subsequently impacted by inventory reductions in the DIY channel. In June, Deco DIY channel demand improved back to 2019 levels. Despite share gains and our Deco Professional business performing as anticipated, the total Q2 operating income for our Decorative Paints segment is expected to be down by approximately €50 million versus expectations entering the second quarter.
COVID-19 lockdowns in China during Q2 impact both paints and coatings. This impact was mainly on our coatings business, while paints was able to almost offset by progressing with its geographical expansion initiatives. The re-opening in June is showing a positive rebound, but not enough to catch up on all the missed revenue in the quarter, resulting in a negative operating income impact of approximately €40 million for the quarter, versus expectations entering Q2.
“The current business environment is complex and constantly evolving,” explains AkzoNobel CEO, Thierry Vanlancker. “Given the macro-economic uncertainties, we’re accelerating adjustments in our cost base for H2, as well as our working capital optimization, while continuing to make progress on our Grow initiatives.
“Business trends in June are largely in line with earlier views, while pricing actions remain ahead of raw material and logistics inflation. We continue to focus on realizing our Grow & Deliver ambition.”
AkzoNobel continues to focus on achieving its €2 billion adjusted EBITDA target for 2023, despite the volatile market environment having a material impact on the company’s Q2 2022 financials.
Financial results for Q2 of 2022 will be announced on July 20.
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