AkzoNobel’s Q1 results show 31% profitability improvement, despite headwinds from COVID-19

Highlights 2020

• Adjusted operating income¹ up 31% at €214 million (2019: €163 million), despite impact from COVID-19
• Return on Sales, excluding unallocated costs,² increased to 12.4% (2019: 9.1%) with price/mix up 2%
• Operating income up 65% at €187 million (2019: €113 million); OPI margin improved to 9.1% (2019: 5.2%)
• Transformation and other savings delivered €44 million lower costs (compared with the first quarter of 2019)
• €408 million of €500 million share buyback program executed during Q1 2020

Q1 2020 (compared to Q1 2019)

• Revenue 6% lower and 5% lower in constant currencies3, with positive price/mix of 2% more than offset by 7% lower volumes, mainly due to the impact of COVID-19
• Operating income at €187 million includes €27 million negative impact from identified items, related to transformation costs (2019: €113 million, including €50 million negative identified items related to transformation costs and non-cash impairments); OPI margin improved to 9.1% (2019: 5.2%)
• Net income from total operations at €114 million (2019: €65 million)
• Adjusted EPS from continuing operations up 54% at €0.71 (2019: €0.46), EPS from total operations at €0.59 (2019: €0.28)

^?AkzoNobel CEO, Thierry Vanlancker, commented: “Just like many around the world, we’re dealing with challenges from COVID-19. Our top priority at AkzoNobel is the health and safety of our colleagues. As a business, we’re also taking all reasonable steps to continue serving our customers and make sure AkzoNobel remains in a strong position to weather the storm.

“Our results for the first quarter demonstrate our transformation was fully on track, even though COVID-19 already had a significant impact, especially in China and later in the quarter other regions of the world. Our performance improvement accelerated, resulting in business return on sales 330 basis points higher at 12.4%. These results were possible due to the passion and commitment of everyone at AkzoNobel who have been working – and winning – together during unprecedented circumstances. 

“While things are gradually returning to normal in China, COVID-19 headwinds are increasing for most of the world and will have a significant impact during Q2. Although we’ve been forced to pause key parts of our transformation and suspend our 2020 financial ambition, we’re eager to quickly resume our positive momentum once markets normalize.”

First wave of sustainability ambitions for 2030 announced

The first in a series of challenging sustainability ambitions has been announced by AkzoNobel, designed to accelerate the newly focused paints and coatings company towards zero waste and cut carbon emissions in half by 2030. These two key ambitions – and their related targets – are the first in a wave of measures and focus on the “Planet” element of the company’s new “People. Planet. Paint.” approach to sustainability. The associated targets for 2030 include a 30% reduction in energy use, 100% renewable electricity, 100% water reuse at the company’s most water intensive sites and zero non-reusable waste.

Outlook

AkzoNobel has paused key parts of the company’s transformation and suspended its 2020 financial ambition in response to the significant market disruption resulting from the COVID-19 pandemic. Headwinds related to COVID-19 are increasing for most parts of the world and will have a significant impact during Q2. Demand trends differ per region and segment in an uncertain macro-economic environment. Raw material costs are expected to have a moderately favorable impact for the first half of 2020. Continued margin management and cost-saving programs are in place to address the current challenges. Once markets normalize, AkzoNobel intends to resume its positive momentum and drive performance in line with industry frontrunners. The company targets a leverage ratio of 1-2 times net debt/EBITDA by the end of 2020 and commit to retain a strong investment grade credit rating.

The report for the first quarter 2020 can be viewed and downloaded at https://akzo.no/Q12020