Coatings – excellent growth, sharply higher EBIT
Coatings – excellent growth, sharply higher EBIT
Akzo Nobel Coatings delivered revenues growth of 16 percent to 1,434 million. Volumes rose by a robust 7 percent led by solid growth in Asia. Price increases of 2 percent were achieved. Last year's acquisitions, predominantly Swiss Lack and Zweihorn, added 2 percent to revenues. Operating income excluding incidentals rose 68 percent to 104 million, with EBIT margin improving sharply to 7.3 percent compared with 5.0 percent in Q1 2005. Marine &Protective Coatings continued its good performance in almost every region and market sector. Other industrial segments, notably Coil and Wood Coatings, also achieved substantial earnings growth in virtually all regions. Car Refinishes is clearly turning the corner as the new strategy, including cost reduction, is driving percent improved margins. The business conditions for the decorative coatings activities in Western Europe continued to be challenging and restructuring measures to adjust the cost base in this region are being actively pursued. During the quarter, plans were announced to build a new decorative coatings facility in the greater Barcelona area.
Chemicals – strong start to the year, new growth strategy paying off
Akzo Nobel Chemicals also had a strong start to the year. Revenues rose 8 percent to 1,037 million on 3 percent volume growth and 4 percent higher selling prices. Chemicals' focus on five core growth platforms is clearly paying off, with most Chemicals activities benefiting from strong autonomous growth and cost control. Operating income excluding incidentals grew 15 percent and EBIT margin improved to 11.0 percent compared with 10.3 percent in Q1 2005. Pulp and Paper Chemicals and Surfactants showed positive developments, while Polymer Chemicals achieved a strong improvement due to both volume and higher sales prices. Functional Chemicals achieved solid volume growth, with chelates and ethylene amines achieving notable improvement compared with 2005. Market conditions for Base Chemicals' chlor-alkali business were slightly less favorable compared with last year; therefore the excellent first quarter of 2005 could not be matched.
The Chemicals divestment program is on track, with agreements for the remaining businesses expected by the middle of 2006.
Strong financial position
Invested capital at March 31, 2006, amounted to 8.2 billion, 0.2 billion higher than at December 31, 2005, mainly due to the seasonal increase of working capital and currency translation effects. Equity rose 0.2 billion,mainly as a result of first quarter income. Net interest-bearing borrowings decreased 0.1 billion to 1.5 billion, principally due to the positive cash flow. As a result, gearing improved to 0.39 (December 31, 2005:0.44). During the first quarter of 2006, the rating agencies confirmed the company's credit ratings.
Trading conditions 2006
In the current environment, the company expects to be well positioned for significant further growth of revenues across its portfolio.
With respect to earnings, the company expects to achieve increases in its ongoing activities in Chemicals, robust improvements in our Coatings business,and a continuation of the positive trends at Intervet. At Organon, the company plans to find the right balance between the required expenditures in R&D and marketing and sales for new products, with the ambition to protect our margin.
The report for the 1st quarter is available at: www.akzonobel/news/reports
