AkzoNobel full-year and Q4 2014 results

AkzoNobel has reported positive volume growth and an improvement in return on sales (ROS) for the full-year 2014. Excluding incidentals, ROS was 7.5% (yr-on-yr 6.1%).

Operating income excluding incidentals grew 20% to €1,072M (€897M), reflecting higher benefits from on-going operational efficiency programmess and lower restructuring charges, offset by higher adverse incidental items. Contrary to positive incidental items of €61M in 2013, mainly related to gain on divestments, the negative incidental items of €85M in 2014 relate to provisions for legacy items, an external fraud suffered by one of its subsidiaries in the USA and project costs related to a divestment. Net income attributable to shareholders was €546M (€724M, which includes exceptional items). Revenue for the full year declined 2%, with volume up 1% in all Business Areas, more than offset by negative currency effects and divestments.

CEO Ton Büchner commented: "For the full year we achieved further improvements in our operational performance, visible in our return on sales and return on investment levels. The introduction of several commercial excellence initiatives will help us drive organic growth going forward.

"2014 was challenging, evidenced by negative currency effects, a continued lack of growth in Europe and a slowdown in some of the Asian and Latin American economies. During the year, we continued to build a solid foundation and remain on track to deliver on our 2015 targets.

"The year was also notable for several key achievements. A major highlight for us in 2014 was the launch of our Human Cities initiative and our partnership with 100 Resilient Cities. We introduced the first carbon credit methodology for the international shipping industry, which allows ships to generate income in the form of carbon credits by reducing CO₂ emissions. We were also especially pleased to be ranked first on the Dow Jones Sustainability Index (in the Materials industry group) for the third year in a row.”

Decorative Paints successfully implemented a new operating model in Europe. Volumes for the full year were up 1% with a positive volume development in Asia. Revenue declined 6% yr-on-yr due to divestments, adverse currency effects and an adverse price/mix effect. Q4 revenue was down 1%, mainly driven by the sale of the German stores, which offset 3% revenue growth in Asia and 6% revenue growth in Latin America. Operational results clearly improved.

Performance Coatings continued to profit from operational improvements and successfully introduced a new organisational structure with fewer management layers. Volumes for the full year were up 1%, mainly from growth in Marine and Protective Coatings and Powder Coatings. Revenue was flat yr-on-yr due to adverse currencies. Q4 revenue was up 4% on 2013 due to favourable currencies and price/mix, with 4% revenue growth in Powder Coatings and 8% revenue growth in Marine and Protective Coatings.

Specialty Chemicals showed increased volumes and increased its profitability in 2014, the latter due to significant savings from restructuring programmes. Volumes for the full year were up 1%. Revenue was 1% lower due to headwinds, such as price pressure in caustic, unfavourable currency developments during the first half of the year and interruptions in supply chain and manufacturing. Q4 volume was 1% down, due to production interruptions in Rotterdam and market reactions following the large oil price reduction, leading to destocking. Q4 revenue was in line with the previous year, with the adverse impact of volumes and divestments being offset by a favourable currency effect.

The company anticipates that significant developments in raw material prices, combined with relevant exchange rate movements and lower growth rates in high growth economies, will principally determine the dynamics of 2015. The preparations made during 2013 and 2014 will form a sound basis for further improvements in 2015. The company says that it remains on track to achieve its targets for 2015.