AkzoNobel Q2 2016 Results: Continued volume growth

AkzoNobel today, July 19, reported a second quarter with positive developments in profitability in all three Business Areas, despite currency pressures and a challenging market environment. EBIT increased nine percent to €491M. Overall volumes improved by one percent, although this increase was not reflected in Q2 revenue, which was down six percent at €3.7bn, strongly affected by currencies. Return on sales improved to 13.2% and return on investment was up at 15.1%.

CEO Ton Büchner:
"During the quarter we increased volumes while improving profitability across all Business Areas, showing the ongoing resilience of our business. The market environment in 2016 remains uncertain, with challenging conditions in several countries and segments. Deflationary pressures and currency headwinds are expected to continue. Our ongoing focus will remain on driving continuous improvement and organic growth across our Business Areas.

We were delighted to open our largest technology centre in China, which will support product innovation and the development of next-generation paints, coatings and speciality chemicals. We were also ranked number one in our industry on the influential FTSE4GOOD index of sustainable companies, reinforcing our commitment to embedding sustainability at the heart of our business strategy."

Decorative Paints: Positive developments in Asia contributed to an increase in volumes and also drove an improvement in EBIT, which was up two percent. These gains were more than offset by unfavourable currency effects. Volumes continued to be down in Latin America and slightly lower in Europe, with overall revenue down seven percent. We launched our Unexpected Courts project in Rio de Janeiro, Brazil. It involves using paint in an imaginative way to create areas where children are inspired to try out different sports, such as basketball, hockey and volleyball in surprising places.

Performance Coatings: Demand trends differed per region, with higher volumes being more than offset by adverse currencies. This resulted in a revenue decrease of five percent. Higher volumes, continuous improvement initiatives and lower costs contributed to an increase in EBIT, although this was limited to one percent due to unfavorable currencies. We completed phase one of the expansion of our protective coatings facility in Cikarang, Indonesia. The expansion will increase capacity at the facility by 40% and will help us to meet growing domestic demand.

Speciality Chemicals: Volumes were flat overall, with positive developments in some segments balanced out by lower demand in oil-related segments. Revenue was down seven percent, mainly due to the divestments of Paper Chemicals in 2015, adverse currency effects and price deflation in several segments. EBIT rose 10% due to operational efficiencies and lower costs. Our Expancel Microspheres gained approval from the US Food and Drug Administration as a constituent in wine corks. The product helps to ensure wines are kept as perfect as possible and can be enjoyed as intended.