Financial highlights

Revenue

Q3 2019:

Revenue was up 3%, and up 2% in constant currencies. Price/mix was up 4% overall, mainly driven by pricing initiatives. Volumes were 4% lower due to our value over volume strategy.

  • Decorative Paints revenue was up 3%, and up 2% in constant currencies, with positive price/mix up 5%. Pricing initiatives and acquisitions more than offset lower volumes due to our value over volume strategy
  • Performance Coatings revenue was up 2% and flat in constant currencies. Price/mix was 3% positive, driven by pricing initiatives, while volumes were 3% lower
  • Other revenue includes royalty and service revenue related to continued services to the former Specialty Chemicals business

Revenue development Q3 2019

AkzoNobel – Revenue development Q3 2019 (bar chart)

Revenue development year-to-date 2019

AkzoNobel – Revenue development year-to-date 2019 (bar chart)

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Revenue

Third quarter

 

January-September

2018

2019

∆%

∆% CC *

in € millions

2018

2019

∆%

∆% CC *

*

Change excluding currency impact

951

977

3%

2%

Decorative Paints

2,803

2,826

1%

2%

1,388

1,418

2%

–%

Performance Coatings

4,184

4,202

–%

(1%)

(13)

3

 

 

Other activities/eliminations

(39)

6

 

 

2,326

2,398

3%

2%

Total

6,948

7,034

1%

1%

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in % versus Q3 2018

Volume

Price/mix

Acq./div.

Other

Exchange rates

Total

Decorative Paints

(5)

5

2

–

1

3

Performance Coatings

(3)

3

–

–

2

2

Total

(4)

4

1

1

1

3

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in % versus year-to-date 2018

Volume

Price/mix

Acq./div.

Other

Exchange rates

Total

Decorative Paints

(5)

5

2

–

(1)

1

Performance Coatings

(6)

5

–

–

1

–

Total

(6)

5

1

1

–

1

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Volume development per quarter (year-on-year) in %

Q3 18

Q4 18

Q1 19

Q2 19

Q3 19

Decorative Paints

(5)

(6)

(6)

(4)

(5)

Performance Coatings

(7)

(7)

(8)

(7)

(3)

Total

(6)

(7)

(7)

(6)

(4)

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Price/mix development per quarter (year-on-year) in %

Q3 18

Q4 18

Q1 19

Q2 19

Q3 19

Decorative Paints

5

8

6

4

5

Performance Coatings

7

11

7

7

3

Total

6

9

6

5

4

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Currency development per quarter (year-on-year) in %

Q3 18

Q4 18

Q1 19

Q2 19

Q3 19

Decorative Paints

(6)

(6)

(2)

(2)

1

Performance Coatings

(3)

(2)

1

(1)

2

Total

(4)

(3)

(1)

(1)

1

Raw material

Raw material costs in Q3 2019 were roughly flat compared to Q3 2018. Pricing initiatives and cost-saving programs continued to offset raw material inflation.

Acquisitions

The impact of acquisitions on revenue was 2% for Decorative Paints and 1% for AkzoNobel overall.

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

Adjusted operating income

Q3 2019:

Adjusted operating income was up at €300 million (2018: €243 million), driven by pricing initiatives and cost-saving programs. Several one-off items, including asset network optimization, effect the year-on-year cost comparison with Q3 2018. Continuous improvement initiatives successfully offset inflation, while cost savings resulting from the ongoing transformation delivered €19 million in the quarter. We are on track to deliver €200 million of savings planned by 2020. ROS was up 2.1% at 12.5% (2018: 10.4%).

  • Decorative Paints continued to improve. Price/mix effects and cost savings more than compensated for lower volumes. ROS was up at 13.8% (2018: 12.1%)
  • Performance Coatings improved as a result of pricing initiatives and cost savings more than offsetting lower volumes. ROS was up at 13.7% (2018: 12.2%)
  • Other activities/eliminations improved €13 million to €29 million, mainly due to lower costs and a one-off gain on a disposal (2018: €42 million)

Year-to-date 2019:

Adjusted operating income was up at €768 million (2018: €617 million), driven by pricing initiatives and cost-saving programs. ROS was up 2.0% at 10.9% (2018: 8.9%).

  • Decorative Paints continued to improve. Price/mix effects and cost savings more than offset raw material inflation and lower volumes. ROS was up at 11.7% (2018: 10.5%)
  • Performance Coatings improved as a result of pricing initiatives and cost savings more than offsetting higher raw material costs and lower volumes. ROS was up at 12.6% (2018: 11.4%)
  • Other activities/eliminations improved €61 million to €92 million, mainly due to lower costs and one-off gains on disposals (2018: €153 million)

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Adjusted operating income 1

Third quarter

 

January-September

2018

2019

∆%

in € millions

2018

2019

∆%

1

Adjusted operating income and Operating income in Q3 2019 include the impact from the adoption of IFRS 16 “Leases” (as per January 1, 2019). As a result, €2 million of 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.

115

135

17%

Decorative Paints

294

331

13%

170

194

14%

Performance Coatings

476

529

11%

(42)

(29)

 

Other activities/eliminations

(153)

(92)

 

243

300

23%

Total

617

768

24%

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ROS%

Third quarter

 

January-September

2018

2019

∆

in € millions

2018

2019

∆

1

ROS% for Other activitities/eliminations is not shown, as this is not meaningful

12.1%

13.8%

1.7%

Decorative Paints

10.5%

11.7%

1.2%

12.2%

13.7%

1.5%

Performance Coatings

11.4%

12.6%

1.2%

 

 

 

Other activities/eliminations 1

 

 

 

10.4%

12.5%

2.1%

Total

8.9%

10.9%

2.0%

 

 

 

 

 

 

 

12.3%

13.8%

1.5%

Excl. Unallocated costs

11.1%

12.3%

1.2%

Operating income

Q3 2019:

Operating income increased to €247 million (2018: €237 million) and included negative identified items of €53 million, mainly related to transformation costs and non-cash impairments in Performance Coatings, following the implementation of our strategic portfolio review (2018: €6 million negative, mainly related to transformation costs).

Year-to-date 2019:

Operating income was up 24% at €668 million and includes €100 million negative impact from identified items, mainly related to transformation costs and non-cash impairments, partly offset by a gain on disposal of €57 million following asset network optimization (2018: €537 million, including €80 million negative impact from identified items).

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Operating income1

Third quarter

 

January-September

2018

2019

∆%

in € millions

2018

2019

∆%

1

Adjusted operating income and Operating income in Q3 2019 include the impact from the adoption of IFRS 16 “Leases” (as per January 1, 2019). As a result, €2 million of 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.

112

130

16%

Decorative Paints

271

350

29%

164

156

(5%)

Performance Coatings

447

427

(4%)

(39)

(39)

 

Other activities/eliminations

(181)

(109)

 

237

247

4%

Total

537

668

24%

Net financing income/(expenses)

Net financing expenses increased by €29 million to €58 million, mainly due to an interest benefit on a tax settlement in 2018.

Income tax

The effective tax rate was 24% (2018: 21%). The 2018 income tax expenses were positively impacted by a re-recognition of deferred tax assets and a tax settlement.

Profit from discontinued operations

Profit from discontinued operations was €16 million. In 2018, the results of the Specialty Chemicals business (€460 million) were included as profit from discontinued operations.

Net income

Net income attributable to shareholders was €458 million (2018: €825 million), of which €16 million was attributable to discontinued operations. In 2018, €375 million was attributable to continuing operations and €450 million to discontinued operations related to the divested Specialty Chemicals business. Adjusted earnings per share from continuing operations increased to €2.35 (2018: €1.48).

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Operating income to net income

Third quarter

 

January-September

2018

2019

in € millions

2018

2019

1

Adjusted operating income and Operating income in Q3 2019 include the impact from the adoption of IFRS 16 “Leases” (as per January 1, 2019). As a result, €2 million of 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.

237

247

Operating income 1

537

668

(20)

(27)

Net financing expenses 1

(29)

(58)

4

6

Results from associates and joint ventures

14

16

221

226

Profit before tax

522

626

(66)

(51)

Income tax

(112)

(151)

155

175

Profit from continuing operations

410

475

153

–

Profit from discontinued operations

460

16

308

175

Profit for the period

870

491

(7)

(13)

Non-controlling interests

(45)

(33)

301

162

Net income

825

458

Adoption IFRS 16 “Leases”

IFRS 16 “Leases” was adopted per January 1, 2019, applying the modified retrospective method. The 2018 comparative figures have not been restated. As a result, right-of-use assets and lease liabilities have been recognized on the balance sheet. In the P&L, the operating lease expenses in operating income have been replaced by depreciation of the right-of-use assets (operating income) and interest on the lease liability (net financing expenses). In the cash flow statement, the payments for operating leases are now recognized in the net cash from financing activities instead of net cash from operating activities. Further details are provided in Notes to the condensed consolidated financial statements.