AKZO NOBEL N.V. Q2REPORT
23
AkzoNobel | Report for the second quarter and half-year 2023 2
Our results at a glance
Highlights Q2 2023 (compared with Q2 2022)
- Revenue 4% down on unfavorable exchange rates, 3% up in constant currencies
- Pricing up 5%, volumes 1% lower
-
Operating income 36% higher at €279 million (2022: €205 million), adjusted operating income
25% higher at €311 million (2022: €249 million); ROS improved to 11.3% (2022: 8.7%) - Net cash from operating activities positive €305 million (2022: negative €52 million)
Highlights half-year 2023 (compared with half-year 2022)
- Revenue flat on unfavorable exchange rates, 5% up in constant currencies
- Pricing up 6%, volumes 2% lower
-
Operating income 5% higher at €461 million (2022: €437 million), adjusted operating income 10%
higher at €529 million (2022: €479 million); ROS improved to 9.8% (2022: 8.9%) - Net cash from operating activities positive €255 million (2022: negative €154 million)
2023 Outlook*
AkzoNobel expects the ongoing macro-economic uncertainties to continue and weigh on organic volume growth. The company will focus on margin management, cost reduction, working capital normalization and de-leveraging.
Cost reduction programs are expected to partly mitigate higher than expected inflationary pressure on operating expenses for 2023. AkzoNobel expects declining raw material costs to have a favorable impact on profitability.
Based on current market conditions, AkzoNobel targets to deliver €1.40 to €1.55 billion adjusted EBITDA.
The company aims to lower its leverage ratio to less than 3.4 times net debt/EBITDA, including the impact of the Kansai Paint Africa acquisition, by the end of 2023 and return to around 2 times post-2023.
* Outlook is based on organic volumes and constant currencies, and assumes no significant market disruptions.
Alternative performance measures (APM)
AkzoNobel uses APM adjustments to IFRS measures to provide supplementary information on the reporting of the underlying developments of the business. A reconciliation of the alternative performance measures to the most directly comparable IFRS measures can be found in the tables on pages 13 (free cash flow), 16 and 17 (all other alternative performance measures).
Summary of financial results
Second quarter | January-June | |||||||||||
2022 | 2023 | ∆% | in € millions / % | 2022 | 2023 | ∆% | ||||||
2,853 | 2,741 | (4%) | Revenue | 5,378 | 5,398 | -% | ||||||
292 | 367 | 26% | EBITDA* | 613 | 636 | 4% | ||||||
337 | 397 | 18% | Adjusted EBITDA* | 654 | 702 | 7% | ||||||
205 | 279 | 36% | Operating income | 437 | 461 | 5% | ||||||
(44) | (32) | Identified items* | (42) | (68) | ||||||||
249 | 311 | 25% | Adjusted operating income* | 479 | 529 | 10% | ||||||
7.2 | 10.2 | OPI margin (%)* | 8.1 | 8.5 | ||||||||
8.7 | 11.3 | ROS (%)* | 8.9 | 9.8 | ||||||||
Average invested capital* | 7,332 | 8,358 | 14% | |||||||||
ROI (%)* | 12.7 | 10.0 | ||||||||||
67 | 56 | Capital expenditures | 124 | 118 | ||||||||
Net debt | 3,865 | 4,353 | ||||||||||
Leverage ratio (net debt/EBITDA)* | 3.2 | 4.0 | ||||||||||
Number of employees | 36,100 | 34,700 | ||||||||||
(52) | 305 | Net cash from operating activities | (154) | 255 | ||||||||
(119) | 249 | Free cash flow* | (278) | 137 | ||||||||
106 | 118 | Net income attributable to shareholders | 260 | 212 | ||||||||
175.9 | 170.6 | Weighted average number of shares (in millions) | 176.8 | 170.6 | ||||||||
0.60 | 0.69 | Earnings per share from total operations (in €) | 1.47 | 1.24 | ||||||||
0.84 | 0.93 | Adjusted earnings per share from continuing operations (in €)* | 1.70 | 1.65 |
- Alternative performance measures; please refer to reconciliation to the most directly comparable IFRS measures on pages 13 (free cash flow), 16 and 17 (all other alternative performance measures).
AkzoNobel | Report for the second quarter and half-year 2023 3
Financial highlights
Q2 2023
Revenue
Revenue was 4% lower, and 3% higher in constant currencies, with pricing up 5%. Volumes were 1% lower, with trends improving after a weak start to the quarter. Acquisitions added 1%, mainly related to Grupo Orbis (acquired April 21, 2022). Other mainly relates to the impact of hyperinflation accounting, which reduced revenue by 2%, mostly due to the devaluation of the Turkish Lira.
Cost of sales
Raw material and other variable costs (including freight), adjusted for the impact of lower volumes, decreased €5 million compared with the second quarter of 2022.
Half-year 2023
Revenue
Revenue was flat and 5% higher in constant currencies, with pricing up 6%. Volumes were 2% lower, despite growth in Asia and Marine and Protective. Acquisitions added 2%, mainly related to Grupo Orbis.
Cost of sales
Raw material and other variable costs (including freight), adjusted for the impact of lower volumes, increased €118 million compared with the first half-year of 2022.
Revenue development Q2 2023 | in % versus | Volume | Price/ | Acq./ | Other | Exch. | Total | ||||||||||||||||||||||||||||||||||||||||
■ Increase | ■ Decrease | Q2 2022 | mix | div | rates | ||||||||||||||||||||||||||||||||||||||||||
Decorative | |||||||||||||||||||||||||||||||||||||||||||||||
Paints | (1) | 5 | 2 | (1) | (8) | (3) | |||||||||||||||||||||||||||||||||||||||||
10 | 5% | 1% | 3% | Performance | |||||||||||||||||||||||||||||||||||||||||||
Coatings | (1) | 4 | 1 | (2) | (7) | (5) | |||||||||||||||||||||||||||||||||||||||||
5 | |||||||||||||||||||||||||||||||||||||||||||||||
-2% | Total | (1) | 5 | 1 | (2) | (7) | (4) | ||||||||||||||||||||||||||||||||||||||||
0 | |||||||||||||||||||||||||||||||||||||||||||||||
-1% | |||||||||||||||||||||||||||||||||||||||||||||||
-5 | |||||||||||||||||||||||||||||||||||||||||||||||
-7% | -4% | in % versus | Price/ | Acq./ | Exch. | ||||||||||||||||||||||||||||||||||||||||||
-10 | half-year 2022 | Volume | mix | div | Other | rates | Total | ||||||||||||||||||||||||||||||||||||||||
Volume | Price/ | Acq./ | Other | Total | Exch. | Total | Decorative | ||||||||||||||||||||||||||||||||||||||||
mix | div. | in CC | rates | Paints | (1) | 5 | 3 | - | (6) | 1 | |||||||||||||||||||||||||||||||||||||
Performance | |||||||||||||||||||||||||||||||||||||||||||||||
Coatings | (3) | 6 | 2 | (1) | (4) | - | |||||||||||||||||||||||||||||||||||||||||
Revenue development half-year 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
Total | (2) | 6 | 2 | (1) | (5) | - | |||||||||||||||||||||||||||||||||||||||||
■ Increase | ■ Decrease | ||||||||||||||||||||||||||||||||||||||||||||||
10 | 2% | 5% | Volume development per | ||||||||||||||||||||||||||||||||||||||||||||
6% | quarter (year-on-year) in % | Q2 22 | Q3 22 | Q4 22 | Q1 23 | Q2 23 | |||||||||||||||||||||||||||||||||||||||||
5 | |||||||||||||||||||||||||||||||||||||||||||||||
-1% | Decorative Paints | (8) | (6) | (9) | (1) | (1) | |||||||||||||||||||||||||||||||||||||||||
0 | |||||||||||||||||||||||||||||||||||||||||||||||
-5% | -% | Performance Coatings | (9) | (4) | (9) | (4) | (1) | ||||||||||||||||||||||||||||||||||||||||
-5 | |||||||||||||||||||||||||||||||||||||||||||||||
-2% | Total | (9) | (5) | (9) | (3) | (1) | |||||||||||||||||||||||||||||||||||||||||
-10 | Volume | Price/ | Acq./ | Other | Total | Exch. | Total | ||||||||||||||||||||||||||||||||||||||||
mix | div. | in CC | rates | Price/mix development per | |||||||||||||||||||||||||||||||||||||||||||
quarter (year-on-year) in % | Q2 22 | Q3 22 | Q4 22 | Q1 23 | Q2 23 | ||||||||||||||||||||||||||||||||||||||||||
Decorative Paints | 11 | 11 | 11 | 5 | 5 | ||||||||||||||||||||||||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||||||||||||||||||||||
Performance Coatings | 19 | 14 | 14 | 8 | 4 | ||||||||||||||||||||||||||||||||||||||||||
Second quarter | January-June | ||||||||||||||||||||||||||||||||||||||||||||||
Total | 16 | 13 | 13 | 7 | 5 | ||||||||||||||||||||||||||||||||||||||||||
∆% | ∆% | ||||||||||||||||||||||||||||||||||||||||||||||
20221 | 2023 | ∆% | CC2 | in € millions | 20221 | 2023 | ∆% | CC2 | |||||||||||||||||||||||||||||||||||||||
1,177 | 1,147 | (3%) | 5% | Decorative Paints | 2,175 | 2,193 | 1% | 7% | Currency development per | ||||||||||||||||||||||||||||||||||||||
1,675 | 1,594 | (5%) | 2% | Performance Coatings 3,201 | 3,205 | -% | 4% | quarter (year-on-year) in % | Q2 22 | Q3 22 | Q4 22 | Q1 23 | Q2 23 | ||||||||||||||||||||||||||||||||||
1 | - | Other activities | 2 | - | Decorative Paints | 3 | 2 | (2) | (4) | (8) | |||||||||||||||||||||||||||||||||||||
2,853 | 2,741 | (4%) | 3% | Total | 5,378 | 5,398 | -% | 5% | Performance Coatings | 4 | 6 | 1 | (1) | (7) | |||||||||||||||||||||||||||||||||
1 Revenues for 2022 have been updated to reflect changes in the financial reporting structure. | Total | 4 | 5 | (1) | (3) | (7) | |||||||||||||||||||||||||||||||||||||||||
More information is available on our website. |
- Change excluding currency impact.
AkzoNobel | Report for the second quarter and half-year 2023 4
Financial highlights
Q2 2023
Operating income
Operating income increased 36% to €279 million (2022: €205 million) mainly due to higher pricing.
Operating income includes identified items of negative €32 million, mainly related to restructuring and acquisition-related costs (2022: negative €44 million). OPI margin improved to 10.2% (2022: 7.2%).
Other activities at negative €40 million (2022: negative €35 million).
Adjusted operating income
Adjusted operating income increased 25% to €311 million (2022: €249 million). ROS improved to 11.3% (2022: 8.7%).
Half-year 2023
Operating income
Operating income increased 5% to €461 million (2022: €437 million), with pricing more than offsetting lower volumes and cost inflation.
Operating income includes identified items of negative €68 million, mainly related to restructuring and acquisition-related costs (2022: negative €42 million). OPI margin at 8.5% (2022: 8.1%). Other activities at negative €82 million (2022: negative €66 million), mainly due to higher restructuring costs.
Adjusted operating income
Adjusted operating income increased 10% to €529 million (2022: €479 million). ROS improved to 9.8% (2022: 8.9%).
Financing income and expenses
Financing income and expenses amounted to negative €83 million (2022: negative €40 million). The higher net expenses largely result from:
- An increase of net interest on net debt of €17 million
- An increase of €22 million in Other items (negative impact), which includes the impact from FX rate differences and hyperinflation accounting
Income tax
The effective tax rate was 38.7% (2022: 31.5%). The relatively high effective tax rate in 2023 is mainly the result of derecognition of deferred tax asset positions in several countries due to re-
assessments of, amongst others, technical tax limitations to deduct interest and to offset losses against profits. These derecognitions increased the tax rate with 9.7%.
Net income
Net income attributable to shareholders was €212 million (2022: €260 million). Earnings per share from total operations was €1.24 (2022: €1.47).
Impact from hyperinflation accounting (Türkiye and Argentina) As from our Q2 2022 reporting, we have retrospectively applied IAS 29 hyperinflation accounting for Türkiye from January 1, 2022. For Argentina, hyperinflation accounting has been applied since January 1, 2018. In addition, and in line with IAS 21, foreign currency rates at the end of the reporting period are used to translate both the balance sheet and the statement of income into euros.
The impact from hyperinflation accounting and the use of end of period rates (together referred to as "the impact from hyperinflation accounting") is included in normal results; no identified item treatment is applied.
The net impact from hyperinflation accounting for Q2 2023 amounted to €46 million negative on revenues, €14 million negative on operating income and €21 million negative on net income.
The net impact from hyperinflation accounting for half-year 2023 was €50 million negative on revenues, €23 million negative on operating income and €40 million negative on net income.
Operating income
Second quarter | January-June | |||||||||||
2022* | 2023 | ∆% | in € millions | 2022* | 2023 | ∆% | ||||||
128 | 151 | 18% | Decorative Paints | 239 | 245 | 3% | ||||||
112 | 168 | 50% | Performance Coatings | 264 | 298 | 13% | ||||||
(35) | (40) | Other activities | (66) | (82) | ||||||||
205 | 279 | 36% | Total | 437 | 461 | 5% |
- Operating income per segment for 2022 has been updated to reflect changes in the financial reporting structure. More information is available on our website.
Adjusted operating income
Second quarter | January-June | |||||||||||
2022* | 2023 | ∆% | in € millions | 2022* | 2023 | ∆% | ||||||
133 | 157 | 18% | Decorative Paints | 236 | 259 | 10% | ||||||
143 | 173 | 21% | Performance Coatings | 294 | 318 | 8% | ||||||
(27) | (19) | Other activities | (51) | (48) | ||||||||
249 | 311 | 25% | Total | 479 | 529 | 10% |
- Adjusted operating income per segment for 2022 has been updated to reflect changes in the financial reporting structure. More information is available on our website.
Operating income to net income
Second quarter | January-June | |||||||
2022 | 2023 | in € millions | 2022 | 2023 | ||||
205 | 279 | Operating income | 437 | 461 | ||||
(28) | (45) | Financing income and expenses | (40) | (83) | ||||
5 | 5 | Results from associates and joint ventures | 13 | 12 | ||||
182 | 239 | Profit before tax | 410 | 390 | ||||
(67) | (106) | Income tax | (129) | (151) | ||||
115 | 133 | Profit from continuing operations | 281 | 239 | ||||
(6) | - | Profit from discontinued operations | (6) | (1) | ||||
109 | 133 | Profit for the period | 275 | 238 | ||||
(3) | (15) | Non-controlling interests | (15) | (26) | ||||
106 | 118 | Net income | 260 | 212 |
AkzoNobel | Report for the second quarter and half-year 2023 5
Decorative Paints
Highlights Q2 2023
- Revenue 3% lower and 5% higher in constant currencies
- ROS improved to 13.7% (2022: 11.3%)
Q2 2023
Revenue was 3% lower and 5% higher in constant currencies mainly due to higher pricing. Lower volumes in Europe and Latin America were partly offset by higher volumes in Asia. Acquisitions added 2%, mainly related to Grupo Orbis. Other, mainly related to the impact of hyperinflation accounting in Türkiye, reduced revenue by 1%.
Operating income increased 18% to €151 million (2022: €128 million). Pricing more than offset the combined impact from lower volumes and cost inflation. Operating income includes identified items of negative €6 million, mainly related to restructuring costs (2022: negative €5 million).
Adjusted operating income increased 18% to €157 million (2022: €133 million). ROS improved to 13.7% (2022: 11.3%).
Half-year 2023
Revenue was 1% higher and 7% higher in constant currencies, driven by pricing. Lower volumes in Europe and Latin America were partly offset by higher volumes in Asia. Acquisitions added 3%.
Operating income increased 3% to €245 million (2022: €239 million). Pricing more than offset the combined impact from lower volumes and cost inflation. Operating income includes identified items of negative €14 million, mainly related to restructuring costs (2022: positive €3 million).
Adjusted operating income increased 10% to €259 million (2022: €236 million). ROS improved to 11.8% (2022: 10.9%).
Revenue
Second quarter | January-June | |||||||||||||||
∆% | ∆% | |||||||||||||||
20221 | 2023 | ∆% | CC2 | in € millions | 20221 | 2023 | ∆% | CC2 | ||||||||
673 | 668 | (1%) | 4% | Decorative Paints | 1,273 | 1,266 | (1%) | 3% | ||||||||
EMEA | ||||||||||||||||
196 | 196 | -% | 20% | Decorative Paints | 307 | 373 | 21% | 43% | ||||||||
Latin America | ||||||||||||||||
308 | 283 | (8%) | (2%) | Decorative Paints | 595 | 554 | (7%) | (2%) | ||||||||
Asia | ||||||||||||||||
1,177 | 1,147 | (3%) | 5% | Total | 2,175 | 2,193 | 1% | 7% |
- Revenues for 2022 have been updated to reflect changes in the financial reporting structure.
More information is available on our website.
- Change excluding currency impact.
Key financial figures
Second quarter | First quarter | January-June | ||||||||||
2022 | 2023 | ∆% in € millions / % | 2022 | 2023 | ∆% | |||||||
128 | 151 | 18% | Operating income1 | 239 | 245 | 3% | ||||||
(5) | (6) | Identified items2 | 3 | (14) | ||||||||
133 | 157 | 18% | Adjusted operating | 236 | 259 | 10% | ||||||
income1,2 | ||||||||||||
10.9 | 13.2 | OPI margin (%)1,2 | 11.0 | 11.2 | ||||||||
11.3 | 13.7 | ROS (%)1,2 | 10.9 | 11.8 | ||||||||
Average invested capital2 | 3,220 | 3,857 | 20% | |||||||||
ROI (%)1,2 | 15.1 | 10.8 |
- Operating income and adjusted operating income (and related measures) for 2022 have been
updated to reflect changes in the financial reporting structure. More information is available on our website.
- Alternative performance measures; please refer to reconciliation to the most directly comparable IFRS measures on pages 16 and 17.
Revenue development Q2 2023
■ Increase | ■ Decrease | |||||||
10 | 5% | 2% | 5% | |||||
5 | ||||||||
-1% | ||||||||
0 | ||||||||
-1% | ||||||||
-5 | -8% | -3% | ||||||
-10 | Volume | Price/ | Acq./ | Other | Total | Exch. | Total | |
mix | div. | in CC | rates | |||||
Revenue development half-year 2023 | ||||||||
■ Increase | ■ Decrease | |||||||
10 | 5% | 3% | 7% | |||||
5 | 1% | |||||||
-% | ||||||||
0 | ||||||||
-1% | -6% | |||||||
-5 | ||||||||
-10 | Volume | Price/ | Acq./ | Other | Total | Exch. | Total | |
mix | div. | in CC | rates |
| Attention: This is an excerpt of the original content. To continue reading it, access the original document here. |
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
Akzo Nobel NV published this content on 26 July 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 July 2023 19:08:24 UTC.
