Decorative Paints

Highlights Q4 2019:

  • ROS up 4.1% at 9.9% driven by margin management and continued strong performance in EMEA; OPI margin up at 8.6% (2018: 4.1%)
  • Price/mix was up 2% and volumes were 4% lower as a result of softer end market demand

Q4 2019:

  • Revenue was 2% lower; price/mix of 2% positive was more than offset by 4% lower volumes mainly due to softer end market demand
  • Adjusted operating income increased to €87 million (2018: €52 million) driven by margin management, cost savings and lower raw material costs more than offsetting lower volumes; ROS up at 9.9% (2018: 5.8%)
  • Operating income improved to €75 million (2018: €37 million); OPI margin up at 8.6% (2018: 4.1%)

Full-year 2019:

  • Revenue was flat and up 1% in constant currencies; price/mix (4% positive, driven by pricing initiatives) and acquisitions (2% positive) together more than offset 5% lower volumes
  • Adjusted operating income increased to €418 million (2018: €346 million) with pricing initiatives, margin management and cost savings more than compensating for higher raw material costs and lower volumes due to our value over volume strategy; ROS up at 11.3% (2018: 9.4%)
  • Operating income improved to €425 million (2018: €308 million); OPI margin up at 11.5% (2018: 8.3%)
  • ROI up at 13.4% (2018: 12.4%)
Launch of Global Brand Dulux Ambiance in Super Premium Interior paints in India (Photo)

Launch of Global Brand Dulux Ambiance in Super Premium Interior paints in India
Dulux has introduced six special effects paints, viz. Dulux Ambiance Marble, Metallic, Linen, Silk, Dulux ColourMotion and Desert in India. These special effects paints create entirely new designs and patterns which are inspired by artisans. For consumers, the collection of designs provides the perfect balance of craftsmanship and personalization by bringing lively never-seen-before design on their walls.

As part of the Ambiance range, Dulux has also launched Dulux Ambiance Velvet Touch Elastoglo that is powered with cutting edge elastomeric property that increases the elasticity of the paint film by three times in comparison to other premium interior paints. This paint film covers hairline cracks and protects the wall, providing an unmatched finish to the beautiful walls.

Q4 2019:

Revenue was 2% lower as price/mix of 2% positive was more than offset by 4% lower volumes mainly due to softer end market demand.

Adjusted operating income increased to €87 million (2018: €52 million). Margin management, cost savings and lower raw material costs more than offset lower volumes, resulting in ROS of 9.9% (2018: 5.8%).

Operating income increased to €75 million and was negatively impacted by €12 million identified items related to transformation costs. In 2018, operating income of €37 million was adversely impacted by €15 million identified items.

Full-year 2019:

Revenue was flat and up 1% in constant currencies. Continued focus on pricing initiatives contributed to positive price/mix of 4%, while volumes were 5% lower, mainly due to our value over volume strategy. Acquisitions contributed 2% to revenues.

Adjusted operating income increased to €418 million (2018: €346 million). Continued pricing initiatives and cost savings offset higher raw material costs and lower volumes, resulting in ROS of 11.3% (2018: 9.4%).

Operating income increased to €425 million and was positively impacted by €7 million identified items related to a gain on a disposal following asset network optimization (€54 million), partly offset by transformation costs (€47 million). In 2018, operating income of €308 million was adversely impacted by €38 million identified items.

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Revenue

Fourth quarter

 

January-December

2018

2019

∆%

∆%
CC *

in € millions

2018

2019

∆%

∆%
CC *

*

Change excluding currency impact

465

462

(1%)

(2%)

Decorative Paints Europe, Middle East and Africa

2,093

2,161

3%

4%

138

139

1%

10%

Decorative Paints South America

468

463

(1%)

10%

295

277

(6%)

(9%)

Decorative Paints Asia

1,144

1,084

(5%)

(7%)

(2)

(1)

 

 

Other/intragroup eliminations

(6)

(5)

 

 

896

877

(2%)

(2%)

Total

3,699

3,703

–%

1%

Revenue development Q4 2019

Decorative Paints – Revenue development Q4 2019 (bar chart)

Revenue development 2019

Decorative Paints – Revenue development 2019 (bar chart)

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Key financial figures

Fourth quarter

 

January-December

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 (€165 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.

52

87

67%

Adjusted operating income 1

346

418

21%

(15)

(12)

(20%)

Identified items

(38)

7

(118%)

37

75

103%

Operating income 1

308

425

38%

5.8

9.9

 

ROS%

9.4

11.3

 

4.1

8.6

 

OPI margin%

8.3

11.5

 

 

 

 

 

 

 

 

 

 

 

Average invested capital 2

2,798

3,106

 

 

 

 

ROI%

12.4

13.4

 

Europe, Middle East and Africa

Revenue in Q4 was 1% lower and 2% lower in constant currencies, due to successful margin management being more than offset by lower volumes. Performance improved, including the UK and France.

Full-year revenue was 3% higher and up 4% in constant currencies, driven by positive price/mix effects, partly offset by lower volumes. The acquisitions of Fabryo in Romania, Xylazel in Spain and Doves Decorating Supplies in the UK contributed 3% to revenues.

The intended acquisition of Mauvilac Industries to support our position in the African decorative paints market was announced on December 12, 2019.

South America

Revenue in Q4 was up 1% and up 10% in constant currencies, mainly driven by positive price/mix effects following our focus on value over volume and further market penetration. Pricing initiatives and cost control offset inflation.

Full-year revenue was 1% lower, although up 10% in constant currencies, mainly driven by positive price/mix effects. Currency impact was driven by the Brazilian real and the Argentinian peso, which was partly offset by the application of IAS 29 for hyperinflation accounting for Argentina.

Asia

Revenue in Q4 was 6% lower, and 9% lower in constant currencies. Profitability continued to improve due to margin management and cost savings. Overall revenues were impacted by a slowdown in some of our Asian end markets. In China profitability improved due to margin management and growth in the premium segment, partly offset by slowdown in the wood care segment.

Full-year revenue was 5% lower, and 7% lower in constant currencies. Positive price/mix was more than offset by lower volumes. The acquisition of Colourland Paints in Malaysia contributed 1% to revenues.