AkzoNobel earnings drop on weak demand, lower volumes
Grows revenue on increased pricing, despite macro-economic headwinds impacting volumes and results.
Akzo Nobel N.V. published its results for Q4 and full-year 2022. In terms of sales, fourth quarter sales were €2,606 million, with full year sales of €10,846 million.
Highlights Q4 2022 (compared with Q4 2021)
• Revenue up 8% and 9% higher in constant currencies; pricing up 11%, volumes 9% lower
• Operating income at €103 million (2021: €205 million), resulting from lower volumes, higher raw material and freight costs, and inflation on operating expenses; OPI margin 4.0% (2021: 8.5%)
• Adjusted operating income at €126 million (2021: €209 million), excludes €23 million negative impact from Identified items (2021: €4 million negative impact); ROS3 at 4.8% (2021: 8.7%)
• Acquisition of wheel liquid coatings business of Lankwitzer Lackfabrik completed in December
• Share buyback of €500 million finalized in December
Highlights full-year 2022 (compared with full-year 2021)
• Revenue up 13% and 11% higher in constant currencies, pricing up 14%, volumes 7% lower
• Operating income at €708 million (2021: €1,118 million), resulting from lower volumes, higher raw material and freight costs, inflation on operating expenses and €46 million negative impact from hyperinflation accounting. OPI margin 6.5% (2021: 11.7%)
• Adjusted operating income at €789 million (2021: €1,092 million), excludes €81 million negative impact from Identified items (2021: €26 million positive impact); ROS at 7.3% (2021: 11.4%)
• Adjusted EBITDA at €1,157 million (2021: €1,436 million)
• Final dividend proposed of €1.54 per share (2021: €1.54 per share)
“Looking back on 2022, it was a year of persistent worldwide uncertainty as global events caused significant cost inflation, disrupted supply chains and prompted declining consumer confidence,” AkzoNobel CEO Greg Poux-Guillaume said. “Our Q4 results continued to be impacted by softer demand, as well as the lingering effects of COVID-19 in some of our most important markets.
“Moving forward, with our margin management and cost reduction programs firmly in place, we plan to mitigate the ongoing pressure from cost inflation and aim to deliver €1.2 to €1.5 billion adjusted EBITDA for 2023, based on current market conditions. Since I joined, I’ve personally witnessed the dedication of our teams around the world, and I’m confident that together we’ll continue to improve the performance of AkzoNobel.”
• AkzoNobel completed a repainting project in Vietnam as part of our Lighthouse Protection Campaign. Cu Lao Xanh – built in 1890 – was coated with more than 11,000 liters of Dulux Weathershield to help protect it against the elements, an example of how the company’s People. Planet. Paint. approach helps to preserve local history and heritage.
• Value chain partners have teamed up with AkzoNobel in the fields of circular solutions, process efficiency and solvent reduction in a determined effort to collectively reduce carbon emissions in the paints and coatings value chain, including Scope 3 emissions. Five teams have been established as part of AkzoNobel’s first-ever Paint the Future Collaborative Sustainability Challenge. They will now work together in their respective groups to develop possible solutions for limiting climate change.
• AkzoNobel has become the global refinish partner for BYD Auto Sales Company Ltd. – currently the world’s leading seller of electric vehicles. AkzoNobel has been a recommended supplier of vehicle refinish products and services to BYD in China since 2017. The new deal means that agreement will continue, while extending the partnership to serve BYD’s bodyshops and approved repairer networks worldwide.
AkzoNobel expects the ongoing macro-economic uncertainties to continue and weigh on organic volume growth. The company will focus on margin management, cost reduction, working capital normalization and de-leveraging. Cost reduction programs are expected to mitigate the ongoing pressure from inflation in operating expenses for 2023. AkzoNobel expects declining raw material costs to have a favorable impact on profitability.
Based on current market conditions, AkzoNobel targets to deliver €1.2 to €1.5 billion adjusted EBITDA. The company aims to lower its leverage ratio to less than 3.4 times net debt/EBITDA, including the impact of the Kansai Paint Africa acquisition, by the end of 2023 and return to around 2 times post-2023.
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