Financial highlights

Volumes were 2% higher overall, driven by Decorative Paints and Performance Coatings while flat for Specialty Chemicals despite significant global supply chain disruptions. Revenue was up 1%, mainly due to volume growth and acquisitions, partly offset by adverse currency effects. EBIT at €383 million (2016: €442 million) was impacted by unfavorable currencies, temporary disruption to the manufacturing and supply chain, continued headwinds for Marine and Protective Coatings and margin pressure from raw material cost inflation. ROS at 10.6% (2016: 12.3%) and ROI at 14.2% (2016: 15.2%). Net cash inflow from operating activities at €416 million (2016: €600 million).

Employee inspecting the working process (Photo)

Investing in UK production
We opened the world’s most sustainable paint factory, capable of producing over 200 million liters of paint per year. Ashington will be the production centre for Dulux, the world’s leading paint brand.

Revenue

Volumes were 2% higher, driven by Decorative Paints and Performance Coatings. Revenue increased 1%, mainly due to volume growth and acquisitions, partly offset by adverse currency effects.

  • In Decorative Paints, volumes were up 5% due to positive development in Asia. Revenue was down 1%, with positive volume development more than offset by adverse currency and price/mix effects, mostly due to strong growth in Asia
  • In Performance Coatings, volumes were up 1%. Revenue was up 2%, driven by the acquired Industrial Coatings business, as well as positive volume development in Industrial and Powder Coatings, partly offset by adverse currency effects. Adverse conditions persisted in the marine and oil and gas industries
  • In Specialty Chemicals, volumes were flat despite significant global supply chain disruptions, including Hurricane Harvey. Revenue was up 1%, due to positive price/mix effects, partly offset by adverse currencies. Positive price/mix reflects the successful pass through of raw material price inflation
Revenue

Third quarter

 

January-September

2016

2017

∆%

in € millions

2016

2017

∆%

1,021

1,007

(1)

Decorative Paints

2,937

2,975

1

1,406

1,428

2

Performance Coatings

4,267

4,403

3

1,202

1,209

1

Specialty Chemicals

3,614

3,757

4

(29)

(20)

 

Other activities/eliminations

(77)

(65)

 

3,600

3,624

1

Total

10,741

11,070

3

in % versus Q3 2016

Volume

Price/mix

Acquisitions/divestments

Exchange rates

Total

Decorative Paints

5

(3)

(3)

(1)

Performance Coatings

1

5

(4)

2

Specialty Chemicals

4

(3)

1

Total

2

1

2

(4)

1

Volume development per quarter (year-on-year)

Q3 16

Q4 16

Q1 17

Q2 17

Q3 17

Decorative Paints

3

2

9

3

5

Performance Coatings

(2)

(1)

(4)

1

Specialty Chemicals

1

4

5

2

Total

2

4

2

Price/mix development per quarter (year-on-year)

Q3 16

Q4 16

Q1 17

Q2 17

Q3 17

Decorative Paints

(1)

(2)

(3)

(3)

(3)

Performance Coatings

(2)

(3)

(1)

1

Specialty Chemicals

(3)

(4)

2

4

Total

(2)

(3)

(1)

1

Revenue development Q3 2017

AkzoNobel – Revenue development Q3 2017 (bar chart)

Raw material price development

Raw material prices were higher compared with the same period in 2016. We are taking appropriate measures to deal with higher raw material prices in an inflationary environment. These measures were already effective for Specialty Chemicals, while for Decorative Paints and Performance Coatings it is expected to take several quarters before the necessary mitigating impact is fully realized.

Acquisitions

  • For Q3 2017, the impact of acquisitions on revenue was 2% for AkzoNobel and 5% for Performance Coatings
  • In Q3 2017, the acquisitions of Flexcrete Technologies Ltd and Disa Technology (Disatech) were completed
  • In Q4 2016, the acquisition of BASF’s Industrial Coatings business was completed

Creating two focused high-performing businesses

On April 19, 2017, we unveiled a new strategy to create two focused, high-performing businesses with sustainable growth plans within 12 months. Having two separate businesses will enable us to deliver growth and value, with enhanced cash returns to shareholders. The separation of Specialty Chemicals remains on track for April 2018.

EBIT

  • In Decorative Paints, EBIT was adversely impacted by higher raw material costs, not yet fully compensated, and geographical/product mix effects
  • In Performance Coatings, EBIT was adversely impacted by ongoing weakness in the marine and oil and gas industries, as well as increased costs of raw materials and adverse currency effects
  • In Specialty Chemicals, EBIT was up 1% with favorable price/mix developments and cost savings, partly offset by adverse currencies and global supply chain disruptions
  • EBIT in other activities improved, due to lower corporate costs including one-off items, as well as lower pension and insurance related costs

The direct impact of disruptions to the manufacturing and supply chain was around €25 million on EBIT in Q3 2017, related to Hurricane Harvey and other events, with the majority of the impact in Specialty Chemicals.

EBIT (operating income excluding incidental items)

Third quarter

 

January-September

2016

2017

∆%

in € millions

2016

2017

∆%

123

95

(23)

Decorative Paints

306

293

(4)

199

147

(26)

Performance Coatings

607

536

(12)

168

169

1

Specialty Chemicals

511

524

3

(48)

(28)

 

Other activities/eliminations

(157)

(133)

 

442

383

(13)

Total

1.267

1.220

(4)

Operating income

Operating income was negatively impacted by identified items totaling €45 million, mainly related to the implementation of the new strategy to create two focused high-performing businesses. The identified items impacted operating income in other activities.

In Q3, 2016, operating income was positively impacted by identified items with a net effect of €12 million, including adjustments to provisions, among others for post-retirement benefits, and asset impairments. The identified items impacted operating income of Decorative Paints, Performance Coatings and the operating income in Other activities.

Operating income

Third quarter

 

January-September

2016

2017

∆%

in € millions

2016

2017

∆%

132

95

(28)

Decorative Paints

315

293

(7)

192

147

(23)

Performance Coatings

600

536

(11)

168

169

1

Specialty Chemicals

511

524

3

(38)

(73)

 

Other activities/eliminations

(124)

(198)

 

454

338

(26)

Total

1,302

1,155

(11)

Net financing expenses

Net financing expenses increased, mainly as a result of lower interest income.

Tax

The year-to-date effective tax rate was 26% (2016: 28%), impacted by adjustments to previous year and geographical mix.

Net income

Year-to-date net income attributable to shareholders was €757 million (2016: €837 million). Net income attributable to shareholders in Q3 2017 was €216 million (Q3 2016: €285 million). Q3 2017 was adversely impacted by identified items totalling €34 million, mainly related to the implementation of the new strategy to create two focused high-performing businesses.

Operating income to net income

Third quarter

 

January-September

2016

2017

in € millions

2016

2017

454

338

Operating income

1,302

1,155

(33)

(36)

Net financing expenses

(82)

(77)

10

5

Results from associates and joint ventures

38

21

431

307

Profit before tax

1,258

1,099

(131)

(82)

Income tax

(355)

(287)

300

225

Profit from continuing operations

903

812

1

Profit from discontinued operations

(1)

300

226

Profit for the period

902

812

(15)

(10)

Non-controlling interests

(65)

(55)

285

216

Net income

837

757