Performance Coatings

Highlights Q3 2019:

  • Revenue up in all business, except for Automotive and Specialty Coatings due to softer end market demand
  • ROS up at 13.7% (2018: 12.2%) driven by pricing initiatives and cost savings

Q3 2019:

  • Revenue was up 2% and was flat in constant currencies, with 3% positive price/mix offset by lower volumes due to our focus on value over volume
  • Adjusted operating income was up at €194 million (2018: €170 million) as pricing initiatives and cost savings more than offset lower volumes
  • ROS up at 13.7% (2018: 12.2%); ROI up at 20.8% (2018: 20.2%)
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Q3 2019:

Revenue was 2% up and flat in constant currencies. Price/mix was offset by lower volumes in all segments due to our value over volume strategy and softer market demand, including the automotive industry.

Adjusted operating income increased to €194 million (2018: €170 million, including the positive impact of asset network optimization), as pricing initiatives and cost control more than compensated for lower volumes, while raw material costs were roughly flat.

Operating income at €156 million was adversely impacted by €38 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 €164 million was adversely impacted by €6 million identified items.

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Revenue

Third quarter

 

January-September

2018

2019

∆%

∆% CC *

in € millions

2018

2019

∆%

∆% CC *

*

Change excluding currency impact

302

314

4%

2%

Powder Coatings

911

929

2%

1%

318

335

5%

3%

Marine and Protective Coatings

958

976

2%

–%

346

344

(1%)

(2%)

Automotive and Specialty Coatings

1,051

1,044

(1%)

(2%)

438

451

3%

1%

Industrial Coatings

1,317

1,320

–%

(1%)

(16)

(26)

 

 

Other/intragroup eliminations

(53)

(67)

 

 

1,388

1,418

2%

–%

 

4,184

4,202

–%

(1%)

Revenue development Q3 2019

Performance Coatings – Revenue development Q3 2019 (bar chart)

Revenue development year-to-date 2019

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

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Key financial figures

Third quarter

 

January-September

2018

2019

∆%

in € millions

2018

2019

∆%

1

Adjusted operating income and Operating income in 2019 include the impact from the 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.

170

194

14%

Adjusted operating income 1

476

529

11%

164

156

(5%)

Operating income 1

447

427

(4%)

12.2

13.7

 

ROS%

11.4

12.6

 

 

 

 

 

 

 

 

 

 

 

Average invested capital 2

3,021

3,272

 

 

 

 

ROI%

20.2

20.8

 

Powder Coatings

Revenue in Q3 was up 4% and up 2% in constant currencies. Positive price/mix was partly offset by lower volumes, including for the automotive industry. Powder Coatings continued to build on its strong positions with the introduction of Interpon D X-Pro, a scratch-resistant powder coating for the architectural market, meeting customer demand.

Marine and Protective Coatings

Revenue in Q3 was up 5% and in constant currencies up 3%. Profitability continued to improve due to measures focused on restructuring and right-sizing, in particular in Marine Coatings. Awlgrip HDT (High Definition Technology), a new single-stage repairable topcoat was launched, creating a new standard in topcoat appearance and durability.

Automotive and Specialty Coatings

Revenue in Q3 was down 1% and 2% lower in constant currencies, with positive price/mix more than offset by lower volumes.

Automotive and Specialty Coatings was impacted by reduced demand from the automotive industry. Demand for aerospace coatings remained strong. AkzoNobel’s sustainable chromate-free exterior primer has been newly qualified by Boeing, underlining our ongoing drive to make the aerospace industry more sustainable.

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.

Industrial Coatings

Revenue in Q3 was up 3% and up 1% in constant currencies. Continued focus on value over volume resulted in positive price/mix effects, partly offset by lower volumes. Strategic portfolio management was implemented. Demand for packaging coatings remained strong.