Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Akzo Nobel takes hit from weak demand in Europe, China

Published 07/20/2022, 01:26 AM
Updated 07/20/2022, 04:56 AM
© Reuters. FILE PHOTO: AkzoNobel's logo is seen in Amsterdam, Netherlands, February 16, 2012.    REUTERS/Robin van Lonkhuijsen/United Photos

© Reuters. FILE PHOTO: AkzoNobel's logo is seen in Amsterdam, Netherlands, February 16, 2012. REUTERS/Robin van Lonkhuijsen/United Photos

By Valentine Baldassari and Elitsa Gadeva

(Reuters) -Post-lockdown travelling in Europe and COVID-19 resurgence in China weighed on Akzo Nobel (OTC:AKZOY)'s second-quarter earnings, the Dulux paint maker said on Wednesday, dismissing higher prices as the reason for slowing demand.

Demand in China took a hit from coronavirus restrictions, while sales in Europe were weaker due to a combination of an "enthusiastic" inventory at the start of the quarter and a general reversal of do-it-yourself trends, Chief Executive Office Thierry Vanlancker said in a call with reporters.

"One of the leading ideas is that people were travelling or had other stuff to do than hanging around the house for once after the COVID period," Vanlancker said. "It was a pretty brutal reset of the inventory that was triggered by a very slow April and beginning of May and had nothing to do with pricing, people were just not showing up."

Akzo Nobel increased prices by 16% year-on-year in order to offset raw material and other variable costs - such as freight - which increased by 321 million euros ($328.29 million).

Over the last six quarters, the Dulux paint maker has had to absorb cumulative inflation adding up to 1.4 billion euros, Vanlancker said.

Raw material costs are expected to peak in the third quarter, he added, as availability improves.

Akzo Nobel has targeted 100 million euros in margin management, 100 million euros in cost reduction and 300 million euros in working capital reduction by 2023.

The company missed expectations with an adjusted operating income of 249 million euros ($254.65 million) versus an analysts' forecast of 261 million euros for the second quarter, while its revenues improved by 14% to 2.85 billion euros from a year earlier.

Shares in the company fell 1.9% at 0757 GMT.

© Reuters. FILE PHOTO: AkzoNobel's logo is seen in Amsterdam, Netherlands, February 16, 2012.    REUTERS/Robin van Lonkhuijsen/United Photos

Analysts' expectations were already lowered due to a profit warning last month.

($1 = 0.9778 euros)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.