05 November 2018Reading time: 3 minutes

Early July we wrote about the new strategy of AkzoNobel, in which the focus has shifted entirely to the paint and coating divisions. The recent completion of the sale of Specialty Chemicals, was an important step in this process. The American investment company Carlyle has paid 10,1 billion euro for the chemical division and has changed its name to Nouryon.

The recently presented third quarter results show that AkzoNobel has earned more from its paint and coating products, although the revenue decreased with 4 percent to 2,3 billion euro due to negative exchange rate effects. The net profit over the past quarter resulted in 301 million euro, which is an increase of more than 39 percent compared to the same period last year. The profit margin improved from 10 percent to 12,3 percent on an annual basis. This shows that the new strategy seems to pay off already.

It is remarkable that AkzoNobel seems to outperform their competitors at this moment. For example, the American PPG recently issued a profit warning. The American company tried take-over AkzoNobel in 2017. Recently it was also known that Trian Fund Management has built up an interest of 2,9 percent in PPG over the past months. At this moment it is unclear what the intensions are of this activist investor with their PPG interest. Also competitor Axalta has problems but in this case with their new CEO. Because of inappropriate behaviour he resigned already after one month. It remains to be seen how will be the new CEO of Axalta. Last year, AkzoNobel had Axalta in sight as a potential takeover candidate. Despite the positive results, there are several possible risks for AkzoNobel. Especially the increasing prices for raw materials could become a problem for the profit margins. The paint manufacturer has already indicated that prices for raw materials are likely to rise further this year. AkzoNobel recently increased the prices for their products in order to absorb this cost increase. It remains to be seen what influence this will have on sales volumes.

Also AkzoNobel will cut back on their costs in the coming years. Their goal is to achieve a cost reduction with a total of 200 million euro by the end of 2020. In order to achieve this goal the company will make an one-time investment of 350 million euro. AkzoNobel claimed that job losses seems unavoidable during this process. In the past period the paint manufacturer was already confronted with staff actions and the announced reorganization may cause even more unrest.

After the announcement of the third quarter results by AkzoNobel, the stock price rose strongly and it remains to be seen if this trend will continue. The stock price is now (05.11.2018) at 75 euro, which is still 5 percent lower compared to a year earlier.

The future price of the stock is subject to several political, industrial and sector specific as well as economic factors. Investors should consider such risk when making their investment decisions. Developments can be different at any time than investors expect, which can result in capital losses.

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27/11/2022 17:26:08