AkzoNobel Q1 2015 results

21 April 2015

• Revenue up 6 percent, due to 8 percent favorable currency effects, offset by adverse volume of 2 percent
• Operating income up 42 percent at €306 million (2014: €216 million), reflecting the positive effects of process optimization efforts, reduced restructuring expenses, lower costs and favorable currency developments
• ROS improved to 8.5 percent (2014: 6.4 percent); ROI improved to 10.6 percent (2014:9.7 percent)
• Net income attributable to shareholders up 24 percent at €160 million
• Adjusted EPS up 25 percent at €0.76 (2014: €0.61)
• Net cash outflow from operating activities was €622 million (2014: €552 million)
• Overall market conditions remain challenging in many regions
• On track to deliver 2015 targets

Q1 2015 highlights

• Restructuring charges for the quarter were 11 million.
   
• In Decorative Paints, revenue increased 3 percent compared with 2014, due to a 7 percent favorable currency effect, offset by an adverse volume and price/mix impact. Volumes for the first quarter were up in Latin America, but down in Europe and Asia due to a slow start to the season. Price/mix continued to be influenced by the sale of the German stores. Operating income improved due to benefits of the new operating model, lower restructuring costs, strict cost containment and favorable currency developments.
   
• In Performance Coatings, revenue was up 8 percent due to favorable currencies and price/mix offsetting lower volumes. Volume was up in Automotive and Specialty Coatings and increased in North America with declines in other regions. Operating income was up 35 percent due to cost reductions generated by improvement activities, including the simplification of the business structure, cost control measures and currencies.
• The segment reporting for Performance Coatings has been updated. For more details, see appendix to the Investor Update presentation on www.akzonobel.com.
   
• In Specialty Chemicals, revenue was up 6 percent, mainly due to favorable currency effects. Volumes in the first quarter remained flat on the previous year. Developments in the bleaching and chelates segments were positive while volumes in oil drilling were lower. The U.S. continued to show good developments, while China and regions such as Russia and the Middle East were challenging. Operating income improved 21 percent due to improvement actions, cost containment and lower restructuring costs.
• The closing of the Paper Chemicals divestment is expected in Q2. The business is currently part of Pulp and Performance Chemicals.
• In Industrial Chemicals, the disruption in the Rotterdam supply chain continued to affect revenue, although compensated by an insurance pay-out.
   
• Operating income in other activities was lower than the previous year, mainly due to higher insurance pay-out. Corporate costs were higher in the quarter due to implementation of functional process optimization initiatives and a one-time benefit in previous year.
• Raw material prices were lower, although in many markets foreign currency effects have adversely impacted raw material costs.
• Operating working capital as a percentage of revenue increased from 10.1 at year-end to 14.1 due to seasonality and planned inventory increases within Performance Coatings as part of our scheduled footprint optimization.
• Operating activities in Q1 resulted in a cash outflow of €622 million mostly due to currency effects on working capital and pension top-ups. As a consequence net debt increased from €1,606 million at year-end 2014 to €2,278.
• In Q1 a €622 million bond with a 7.25% coupon rate was repaid from existing resources.

Restructuring charges by quarter

Q1 revenue development in % versus Q1 2014