Performance Coatings

Highlights Q4 2019:

  • ROS up at 11.7% (2018: 10.9%) driven by margin management and cost discipline; OPI margin up at 10.1% (2018: 9.3%)
  • Revenue down due to softer end market demand, including the automotive industry

Q4 2019:

  • Revenue was 3% lower and 4% lower in constant currencies, with 4% lower volumes mainly due to softer end market demand including the automotive industry
  • Adjusted operating income was up at €159 million (2018: €153 million) as margin management, lower raw material costs and cost savings more than offset lower volumes; ROS up at 11.7% (2018: 10.9%)
  • Operating income improved to €138 million (2018: €130 million); OPI margin up at 10.1% (2018: 9.3%)

Full-year 2019:

  • Revenue was flat, and decreased 1% in constant currencies, with 4% positive price/mix more than offset by 5% lower volumes
  • Adjusted operating income was up at €688 million (2018: €629 million) as pricing initiatives and cost savings more than offset higher raw material costs and lower volumes; ROS up at 12.4% (2018: 11.3%)
  • Operating income decreased to €565 million (2018: €577 million); OPI margin was 10.2% (2018: 10.3%)
  • ROI up at 20.7% (2018: 20.5%)
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Q4 2019:

Revenue was 3% lower and 4% lower in constant currencies. Price/mix was flat, while volumes were lower in all businesses mainly due to softer end market demand, including the automotive industry.

Adjusted operating income increased to €159 million (2018: €153 million) as margin management and cost control more than compensated for lower volumes, while raw material costs were lower.

Operating income at €138 million was adversely impacted by €21 million identified items, mainly related to the transformation of the organization and non-cash impairments, following the implementation of our portfolio management. In 2018, operating income of €130 million was adversely impacted by €23 million identified items.

Full-year 2019:

Revenue was flat, and 1% lower in constant currencies. Price/mix was more than offset by lower volumes due to our value over volume strategy.

Adjusted operating income increased to €688 million (2018: €629 million) as pricing initiatives and cost control more than compensated for higher raw material costs and lower volumes.

Operating income at €565 million was adversely impacted by €123 million identified items, mainly related to the transformation of the organization (€59 million) and non-cash impairments (€64 million), following the implementation of our portfolio management. In 2018, operating income of €577 million was adversely impacted by €52 million identified items.

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Revenue

Fourth quarter

 

January-December

2018

2019

∆%

∆%
CC 1

in € millions

2018

2019

∆%

∆%
CC 1

1

Change excluding currency impact

2

Q4 2018 revenues Automotive and Specialty Coatings and eliminations represented for improved comparability purposes

307

305

(1%)

(2%)

Powder Coatings

1,218

1,234

1%

–%

333

330

(1%)

(2%)

Marine and Protective Coatings

1,291

1,306

1%

–%

354

344

(3%)

(4%)

Automotive and Specialty Coatings 2

1,392

1,388

–%

(2%)

421

411

(2%)

(4%)

Industrial Coatings

1,738

1,731

–%

(2%)

(12)

(29)

 

 

Other/intragroup eliminations 2

(52)

(96)

 

 

1,403

1,361

(3%)

(4%)

Total

5,587

5,563

–%

(1%)

Revenue development Q4 2019

Performance Coatings – Revenue development Q4 2019 (bar chart)

Revenue development 2019

Performance Coatings – 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 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.

153

159

4%

Adjusted operating income 1

629

688

9%

(23)

(21)

(9%)

Identified items

(52)

(123)

137%

130

138

6%

Operating income 1

577

565

(2%)

10.9

11.7

 

ROS%

11.3

12.4

 

9.3

10.1

 

OPI margin%

10.3

10.2

 

 

 

 

 

 

 

 

 

 

 

Average invested capital 2

3,066

3,325

 

 

 

 

ROI%

20.5

20.7

 

Powder Coatings

Revenue in Q4 was 1% lower and 2% lower in constant currencies. Positive price/mix was more than offset by lower volumes, including for the automotive industry.

The new Interpon Redox range offers customers the simplest route to maximum corrosion protection. It covers a full array of substrates, surfaces and environments – from cable cars and chemical plants to window frames and wind turbines.

Full-year revenue was up 1%, but flat in constant currencies, due to positive price/mix effects, offset by lower volumes.

Marine and Protective Coatings

Revenue in Q4 was 1% lower and 2% lower in constant currencies. Profitability continued to improve due to measures focused on restructuring and right-sizing, in particular in Marine Coatings.

The recently introduced Awlfair SF is a high-performance filler which can be applied by pressurized airless spray, rather than by hand. The breakthrough innovation boosts productivity for our customers.

Full-year revenue was up 1%, and flat in constant currencies, due to positive price/mix offsetting lower volumes following our value over volume strategy.

Automotive and Specialty Coatings

Revenue in Q4 was 3% lower and 4% lower in constant currencies, with positive price/mix offset by lower volumes.

Automotive and Specialty Coatings was impacted by continued reduced demand from the automotive industry. Demand for aerospace coatings remained solid.

The 15th edition of ColorSurfaces, our trend color collection, was launched and reflects the design trends impacting the automotive and consumer electronics industries, to inspire our customers. The acquisition of Mapaero to further strengthen our global position in the steadily growing aerospace coatings industry was completed in the fourth quarter and added 1% to revenue.

Full-year revenue was flat and was 2% lower in constant currencies, due to lower volumes as a result of our focus on value over volume.

Industrial Coatings

Revenue in Q4 was down 2%, and down 4% in constant currencies, mainly due to lower volumes following our value over volume strategy. Strategic portfolio management was implemented. Demand for packaging coatings continued to remain strong in all regions. Demand for wood coatings remained slow, in particular in North America, as well as parts of Asia.

Full-year revenue was flat and 2% lower in constant currencies. Positive price/mix was more than offset by lower volumes. Demand differed per region and segment.