* Akzo Nobel Q2 results
* Wednesday, July 29, 0500 GMT
* Operating profit seen at 267 million euros
By Aaron Gray-Block
AMSTERDAM, July 27 (Reuters) - Dutch paints and chemical group Akzo Nobel NV is expected on Wednesday to show second-quarter earnings were hit by lower demand for its products and lower prices, although cost savings could give a positive surprise, analysts said.
Akzo Nobel, the world's biggest paint company, is seen reporting a 37 percent fall in earnings before interest and taxes (EBIT), excluding incidentals, to 267 million euros, according to the average forecast in a Reuters poll.
The global economic slowdown has seen Akzo Nobel's customers cut spending and Chief Executive Hans Wijers warned in April the company may need an extra year to achieve its margin target of 14 percent for underlying earnings by end-2011 if the economic downturn persists.
Akzo Nobel had in 2008 an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 12.2 percent.
The company is targeting 540 million euros in cost savings by the end of 2011 via job cuts and factory closures and cost savings could soon start paying off, which could improve the margin.
"Akzo's cost savings initiatives were said to be bearing fruit during the first quarter, especially towards the end of the period, and hence might offer some additional support in the second quarter," KBC analyst Wim Hoste said.
Prices for caustic soda fell in the second quarter which could adversely impact earnings at the company's Specialty Chemicals unit, and concerns continue over volumes after a 17 percent decline in group volumes in the first quarter and a 10 percent fall in the fourth quarter.
U.S. rival PPG Industries, however, which posted forecast-beating second-quarter profit earlier this month, said there were signs markets have stabilised and demand would improve in the third quarter.
ING analyst Jan Hein de Vroe said PPG's results confirmed the value of cost cutting, stressing the higher gross margins and restructuring offset underlying revenue declines.
He added Akzo Nobel might also benefit from lower energy prices and only minimal rises in the price of its raw materials, such as resins, providing further support to its margins.
Akzo Nobel shares trade at 18 times earnings compared with 21 times for PPG. (Editing by Simon Jessop)