Performance Coatings

  • ROS up at 13.6% driven by price/mix of 7% following pricing initiatives
  • Volumes impacted by our focus on value over volume and softer market demand, including the automotive industry

Q2 2019:

  • Revenue decreased 1% and was flat in constant currencies, with 7% positive price/mix offset by lower volumes due to a focus on value over volume
  • Adjusted operating income was up at €197 million (2018: €172 million) as pricing initiatives and cost savings more than offset higher raw material costs and lower volumes
  • ROS up at 13.6% (2018: 11.8%); ROI at 20.6% (2018: 19.9%)

Half-year 2019:

  • Revenue was flat, and decreased 1% in constant currencies, with 6% positive price/mix more than offset by lower volumes
  • Adjusted operating income was up at €335 million (2018: €306 million) as pricing initiatives and cost savings more than offset higher raw material costs and lower volumes
  • ROS up at 12.0% (2018: 10.9%)
AkzoNobel rises to challenge of historic Hudson Yards project in New York (Photo)

AkzoNobel rises to challenge of historic Hudson Yards project in New York

New York’s historic Hudson Yards development – which is changing the city’s iconic skyline – has reached its latest milestone, and AkzoNobel has made a major contribution. The largest private real estate development in US history, the ongoing project recently saw the completion of the two towers at 10 and 30 Hudson Yards. Taller than the Empire State Building, the impressive glass and steel structure of 30 Hudson Yards uses the company’s high performance architectural powder coatings, while 10 Hudson Yards features AkzoNobel’s industrial coatings.

Q2 2019:

Revenue was 1% lower and flat in constant currencies. Price/mix was offset by lower volumes in all segments due to our focus on value over volume and softer market demand, including the automotive industry.

Adjusted operating income increased to €197 million (2018: €172 million) as pricing initiatives and cost control more than compensated for higher raw material costs and lower volumes.

Operating income at €174 million was adversely impacted by €23 million identified items, mainly related to the transformation of the organization. In 2018, operating income of €162 million was adversely impacted by €10 million identified items.

Revenue development Q2 2019

Performance Coatings – Revenue development Q2 2019 (bar chart)

Half-year 2019:

Revenue was flat, and 1% lower in constant currencies. Price/mix was more than offset by lower volumes.

Adjusted operating income increased to €335 million (2018: €306 million) as pricing initiatives and cost control more than compensated for higher raw material costs and lower volumes.

Operating income at €271 million was adversely impacted by €64 million identified items, mainly related to the transformation of the organization and non-cash impairments in Industrial Coatings, following the implementation of our portfolio management. In 2018, operating income of €283 million was adversely impacted by €23 million identified items.

Revenue development half-year 2019

Performance Coatings – Revenue development half-year 2019 (bar chart)
Revenue

Second quarter

 

January-June

2018

2019

∆%

∆% CC *

in € millions

2018

2019

∆%

∆% CC *

*

Change excluding currency impact

317

317

–%

–%

Powder Coatings

609

615

1%

1%

340

341

–%

–%

Marine and Protective Coatings

640

641

–%

(1%)

359

364

1%

1%

Automotive and Specialty Coatings

705

700

(1%)

(2%)

456

445

(2%)

(3%)

Industrial Coatings

879

869

(1%)

(1%)

(18)

(22)

 

 

Other/intragroup eliminations

(37)

(41)

 

 

1,454

1,445

(1%)

–%

Total

2,796

2,784

–%

(1%)

Key financial figures

Second quarter

 

January-June

2018

2019

∆%

in € millions

2018

2019

∆%

1

Adjusted operating income and Operating income in 2019 include the impact from adoption of IFRS 16 “Leases” (as per January 1, 2019). As a result interest expenses, which previously were included in lease expenses within operating income, are now recorded in Net financing expenses. The 2018 comparative figures have not been restated. Further details are provided in Notes to the condensed consolidated financial statements.

2

Average invested capital includes the impact from adoption of IFRS 16 “Leases” (as per January 1, 2019). Right-of-use assets (€126 million as per January 1, 2019) have been added to Invested capital whereas Lease liabilities remain excluded from Invested capital. The 2018 comparative figures have not been restated.

172

197

15%

Adjusted operating income

306

335

9%

162

174

7%

Operating income 1

283

271

(4%)

11.8

13.6

 

ROS%

10.9

12.0

 

 

 

 

 

 

 

 

 

 

 

Average invested capital 2

2,949

3,200

 

 

 

 

ROI%

19.9

20.6

 

Powder Coatings

Revenue in Q2 was flat. Continued focus on value over volume resulted in positive price/mix offset by lower volumes, including to the automotive industry. The recently launched Interpon 610 range is specifically engineered to lower curing temperatures to save energy and help our customers to improve efficiency.

Revenue in the first half-year was up 1%, and also up 1% in constant currencies, due to positive price/mix effects more than compensating for lower volumes.

Marine and Protective Coatings

Revenue in Q2 was flat. Profitability continued to improve due to our value over volume strategy and measures focused on restructuring and right sizing in particular in Marine Coatings. Our new innovation lab in the UK started to develop product innovations for the marine and the oil and gas industries.

Revenue in the first half-year was flat, and 1% lower in constant currencies, due to lower volumes following our value over volume strategy.

Automotive and Specialty Coatings

Revenue in Q2 was up 1% with positive price/mix more than compensating for lower volumes due to our focus on value over volume.

Automotive and Specialty Coatings was impacted by reduced demand from the automotive industry. Demand for aerospace coatings remained strong and the order pattern for vehicle refinishes normalized. To best meet the evolving needs of our refinish customers in the US, Dynacoat was introduced with a full product assortment including color tools.

Revenue in the first half-year decreased 1% and was 2% lower in constant currencies, due to lower volumes as a result of our focus on value over volume.

The acquisition of Mapaero to further strengthen our global position in the steadily growing aerospace coatings industry was announced on July 18, 2019.

Industrial Coatings

Revenue in Q2 was 2% lower and 3% lower in constant currencies. Positive price/mix effects partly offset lower volumes, while strategic portfolio management was implemented. Investments were announced to strengthen the wood coatings business in the US.

Revenue in the first half-year was 1% lower. Positive price/mix partly offset lower volumes. Demand differed per region and segment. Packaging demand is increasing, due to more conversion from single-use plastic bottles and customer wins, while wood demand was slow.