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AkzoNobel Q1 2013


Overview


Our results at a glance

  • Revenue down 7 percent due to weak demand in Europe and divestments
  • Operating income at €217 million (2012: €236 million) as weaker end markets and production issues in the Specialty Chemicals value chain impacted results
  • Cash from operating activities improved €298 million, mainly due to lower pension payments
  • Net income attributable to shareholders €89 million (2012: €84 million)
  • Adjusted EPS €0.51 (2012: €0.65)
  • Divestment of Decorative Paints North America completed on April 1, 2013
  • Strategic focus announced in February addresses the need for performance improvement in challenging market conditions

AkzoNobel around the world
Revenue by destination

(44 percent in high growth markets)

AkzoNobel around the world – Revenue by destination (pie chart)

Financial highlights

Revenue was down 7 percent, mainly due to lower volumes and divestments. Weaker European end markets and production issues in the Specialty Chemicals value chain adversely impacted our results, with operating income 8 percent lower at €217 million. Cash from operating activities improved €298 million, mainly due to lower pension payments.

Summary of financial outcomes

1st quarter

 

 

 

 

in € millions

 

2012

 

2013

 

Δ%

Revenue

 

3,707

 

3,465

 

(7)

Operating income

 

236

 

217

 

(8)

ROS%

 

6.4

 

6.3

 

 

 

 

 

 

 

 

 

Invested capital

 

12,519

 

10,484

 

 

Moving average ROI (in %)

 

9.4

 

7.8

 

 

 

 

 

 

 

 

 

EBITDA

 

410

 

375

 

(9)

Capital expenditures

 

135

 

131

 

 

Net cash from operating activities

 

(704)

 

(406)

 

 

Net debt

 

2,860

 

2,888

 

 

 

 

 

 

 

 

 

Net income from continuing operations

 

110

 

96

 

(13)

Net income from discontinued operations

 

(26)

 

(7)

 

 

Net income attributable to shareholders

 

84

 

89

 

6

Earnings per share from continuing operations (in €)

 

0.47

 

0.40

 

 

Earnings per share from total operations (in €)

 

0.36

 

0.37

 

 

Adjusted earnings per share (in €)

 

0.65

 

0.51

 

 

Number of employees

 

52,550

 

50,320

 

 


Revenue

1st quarter

 

 

 

 

in € millions

 

2012

 

2013

 

Δ%

Decorative Paints

 

974

 

925

 

(5)

Performance Coatings

 

1,369

 

1,331

 

(3)

Specialty Chemicals

 

1,399

 

1,244

 

(11)

Other activities/eliminations

 

(35)

 

(35)

 

 

Total

 

3,707

 

3,465

 

(7)

Revenue development Q1 2013

AkzoNobel – Revenue development Q1 2013 (bar chart)

in % versus Q1 2012

 

Volume

 

Price/mix

 

Divestments

 

Exchange
rates

 

Total

Decorative Paints

 

(1)

 

(1)

 

 

(3)

 

(5)

Performance Coatings

 

(3)

 

1

 

 

(1)

 

(3)

Specialty Chemicals

 

(4)

 

(2)

 

(5)

 

 

(11)

Total

 

(3)

 

(1)

 

(2)

 

(1)

 

(7)

Volume development per quarter
(year-on-year)

 

Q1 12

 

Q2 12

 

Q3 12

 

Q4 12

 

Q1 13

Decorative Paints

 

 

(3)

 

(6)

 

2

 

(1)

Performance Coatings

 

(1)

 

(2)

 

 

(2)

 

(3)

Specialty Chemicals

 

(1)

 

(2)

 

(2)

 

(1)

 

(4)

Total

 

(2)

 

(3)

 

(3)

 

(1)

 

(3)

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

 

Q1 12

 

Q2 12

 

Q3 12

 

Q4 12

 

Q1 13

Decorative Paints

 

5

 

3

 

1

 

 

(1)

Performance Coatings

 

8

 

6

 

3

 

3

 

1

Specialty Chemicals

 

1

 

2

 

(1)

 

1

 

(2)

Total

 

5

 

3

 

1

 

2

 

(1)


Acquisitions and divestments


Operating income

1st quarter

 

 

 

 

in € millions

 

2012

 

2013

 

Δ%

Decorative Paints

 

25

 

43

 

72

Performance Coatings

 

127

 

129

 

2

Specialty Chemicals

 

140

 

99

 

(29)

Other activities/eliminations

 

(56)

 

(54)

 

 

Total

 

236

 

217

 

(8)


Restatements in 2013

Comparative numbers for 2012 have been restated accordingly. Please refer to our website for the details as issued at the time of our Strategy update on February 20, 2013.


Outlook and 2015 targets

The economic environment remains challenging and we do not expect an early improvement in the trends that we see in our businesses. The acceleration of our performance improvement program and the strategic priorities announced in February are the right focus to have in these markets:

Please refer to our website for more information on our ambitions and the strategic focus areas.

Amsterdam, April 18, 2013
The Board of Management


Financial calendar

April 26, 2013
Annual General Meeting

April 30, 2013
Ex-dividend date of 2012 final dividend

May 3, 2013
Record date of 2012 final dividend

May 6, 2013 – May 23, 2013
Election period cash or stock final dividend

May 24, 2013
Determination of exchange ratio

May 29, 2013
Payment date cash dividend and delivery of new shares

July 18, 2013
Report for the 2nd quarter 2013

October 21, 2013
Report for the 3rd quarter 2013

February 6, 2014
Report for the year 2013 and the 4th quarter


Decorative Paints – Overview

  • Revenue 5 percent down impacted by currencies, lower volumes and price/mix
  • Challenging market conditions in Europe negatively impacting price/mix and volumes
  • Operating income above the previous year, benefiting from lower cost and lower restructuring charges, but impacted by weak volume development in Europe

Revenue declined 5 percent, mainly due to lower volumes in Europe, price/mix and currencies. Volumes were lower in Europe and South East Asia, but higher in Latin America and China. Costs were lower mainly in Europe, while operating income for the quarter, at €43 million, was higher than in 2012, reflecting lower costs in Europe and lower restructuring charges during the quarter.

Revenue development Q1 2013

Decorative Paints – Revenue development Q1 2013 (bar chart)

Decorative Paints – Key figures

Revenue

1st quarter

 

 

 

 

in € millions

 

2012

 

2013

 

Δ%

Decorative Paints Europe

 

618

 

578

 

(6)

Decorative Paints Latin America

 

134

 

134

 

-

Decorative Paints Asia

 

222

 

213

 

(4)

Other/intragroup eliminations

 

 

 

 

Total

 

974

 

925

 

(5)

 

 

 

 

 

 

 

Operating income

 

25

 

43

 

72

ROS%

 

2.6

 

4.6

 

 

 

 

 

 

 

 

 

Invested capital

 

5,476

 

3,175

 

 

Moving average ROI (in %)

 

4.4

 

2.7

 

 

 

 

 

 

 

 

 

EBITDA

 

68

 

88

 

29

Capital expenditures

 

29

 

27

 

 

Number of employees

 

17,320

 

16,960

 

 


Europe

Revenue was down 6 percent. All regions experienced substantial volume declines, with the Southern region (France, Greece, Spain and Italy) being most impacted. However, growth was achieved in some emerging countries. The implemented restructuring measures and various operational efficiency improvement programs led to lower costs than the previous year.


Latin America

Revenue was flat due to an unfavorable currency impact, while volumes and prices improved, but at lower margins. Additional manpower to support growth increased our costs.


Asia

Revenue was down 4 percent due to lower volumes in South East Asia and an unfavorable currency effect in India. In China, we continued to grow volume and revenues in double digit percentages.


Performance Coatings – Overview

  • Revenue down 3 percent, primarily due to volume decline in certain markets
  • Operating income up 2 percent, return on sales at 9.7 percent (2012: 9.3 percent)
  • Ongoing focus on cost control and operational efficiencies

Revenue declined 3 percent compared with the previous year. The slowdown in Europe impacted all businesses. ROS% improved due to a combination of margin management activities, ongoing cost control and restructuring.

Revenue development Q1 2013

Performance Coatings – Revenue development Q1 2013 (bar chart)

Performance Coatings – Key figures

Revenue

1st quarter

 

 

 

 

in € millions

 

2012

 

2013

 

Δ%

Marine and Protective Coatings

 

369

 

351

 

(5)

Automotive and Aerospace Coatings

 

310

 

318

 

3

Powder Coatings

 

244

 

230

 

(6)

Industrial Coatings

 

452

 

440

 

(3)

Other/intragroup eliminations

 

(6)

 

(8)

 

 

Total

 

1,369

 

1,331

 

(3)

 

 

 

 

 

 

 

Operating income

 

127

 

129

 

2

ROS%

 

9.3

 

9.7

 

 

 

 

 

 

 

 

 

Invested capital

 

2,438

 

2,607

 

 

Moving average ROI (in %)

 

20.4

 

21.3

 

 

 

 

 

 

 

 

 

EBITDA

 

159

 

163

 

3

Capital expenditures

 

18

 

26

 

 

Number of employees

 

21,910

 

21,220

 

 


Marine and Protective Coatings

Revenue declined 5 percent due to volumes and currency. In Marine Coatings, the global decline in new build activity accounts for the year-on-year volume reduction. In Protective Coatings, high activity levels continued in oil and gas, while volumes at Yacht were lower than last year. The closure of a site in Australia as part of the announced performance improvement program, was initiated during the quarter.


Automotive and Aerospace Coatings

Revenue was up 3 percent supported by price/mix and volumes, while currency had an adverse impact. In Vehicle Refinish, volumes in Europe remained weak. There were mixed results in Asia, while in North America developments were positive. Customer demand picked up in specialty finishes and aerospace. Cost reduction initiatives are ongoing throughout the business.


Powder Coatings

Revenue declined 6 percent due to volumes and currency. Markets in Europe continued to be weak, resulting in lower volumes. However, growth in Asian markets partially offset the decline in Europe. On a segment level, volumes declined across the board. In particular, domestic appliance continued to suffer from the weaker economic situation. Margin management, coupled with effective cost control, offset the revenue decline.


Industrial Coatings

Revenue was 3 percent below 2012 due to volumes, although this was partly offset by price/mix. Growth in Asia partially offset the decline in Europe. The Wood Finishes and Packaging Coatings businesses declined in Europe. At Coil Coatings, the results from construction related activities were flat on the previous year. Costs remained under control.


Specialty Chemicals – Overview

  • Revenue down 11 percent, due to lower volumes and the Chemicals Pakistan divestment
  • Operating income down 29 percent to €99 million, due to unfavorable market conditions and production issues in the value chain
  • Surface Chemistry exited the merchant fatty acids business in China
  • Performance improvement programs accelerated in all businesses

Revenue in Specialty Chemicals was 11 percent lower due to divestments and lower volumes, mainly in construction related products and the pulp bleaching and plastics industries. The slow start to the year for the seasonal segments such as agriculture, due to the cold weather, and the exit from the merchant fatty acids business in Boxing, China, also contributed to the volume decline. Profitability was impacted by production stops and reductions in volume.

Revenue development Q1 2013

Specialty Chemicals – Revenue development Q1 2013 (bar chart)

Specialty Chemicals – Key figures

Revenue

1st quarter

 

 

 

 

in € millions

 

2012

 

2013

 

Δ%

Functional Chemicals

 

499

 

467

 

(6)

Industrial Chemicals

 

301

 

291

 

(3)

Surface Chemistry

 

284

 

258

 

(9)

Pulp and Performance Chemicals

 

282

 

262

 

(7)

Chemicals Pakistan

 

69

 

 

 

Other/intragroup eliminations

 

(36)

 

(34)

 

 

Total

 

1,399

 

1,244

 

(11)

 

 

 

 

 

 

 

Operating income

 

140

 

99

 

(29)

ROS%

 

10.0

 

8.0

 

 

 

 

 

 

 

 

 

Invested capital

 

3,658

 

3,751

 

 

Moving average ROI (in %)

 

16.9

 

12.4

 

 

 

 

 

 

 

 

 

EBITDA

 

235

 

174

 

(26)

Capital expenditures

 

87

 

78

 

 

Number of employees

 

11,860

 

10,680

 

 


Functional Chemicals

Market conditions remained difficult, with volumes under pressure in construction related products (performance additives, polysulfides) and polymer initiators. Ethylene Amines margins remained under pressure due to the continued imbalance in supply/demand. A fire at our Battleground site in the US interrupted production. Our focus remains on performance improvement projects.


Industrial Chemicals

Volumes and margins were impacted by low caustic inventories due to an on-going large planned maintenance stop in Rotterdam.


Surface Chemistry

Volumes were down, mainly due to the announced exit from the merchant fatty acids business in China. Agriculture and asphalt applications were affected by cooler weather in North America.


Pulp and Performance Chemicals

It was a weak quarter with lower volumes than last year, mainly due to divestments. The business was impacted by the devaluation of the Venezuelan currency. During Q1, our Chemical Island in Jupia, Brazil, started production, as previously announced.


Condensed financial statements


Consolidated statement of income

1st quarter

 

 

in € millions

 

2012

 

2013

 

 

 

 

 

Continuing operations

 

 

 

 

Revenue

 

3,707

 

3,465

Cost of sales

 

(2,316)

 

(2,125)

Gross profit

 

1,391

 

1,340

Selling expenses

 

(743)

 

(715)

General and administrative expenses

 

(312)

 

(318)

Research and development expenses

 

(91)

 

(90)

Other operating income/(expenses)

 

(9)

 

Operating income

 

236

 

217

Net financing expenses

 

(50)

 

(63)

Results from associates and joint ventures

 

4

 

3

Profit before tax

 

190

 

157

Income tax

 

(66)

 

(45)

Profit for the period from continuing operations

 

124

 

112

 

 

 

 

 

Discontinued operations

 

 

 

 

Profit for the period from discontinued operations

 

(26)

 

(7)

Profit for the period

 

98

 

105

 

 

 

 

 

Attributable to

 

 

 

 

Shareholders of the company

 

84

 

89

Non-controlling interests

 

14

 

16

Profit for the period

 

98

 

105


Consolidated statement of comprehensive income

1st quarter

 

 

in € millions

 

2012

 

2013

Profit for the period

 

98

 

105

 

 

 

 

 

Other comprehensive income

 

 

 

 

Exchange differences arising on translation of foreign operations

 

(69)

 

91

Cash flow hedges

 

(15)

 

3

Post-retirement benefits

 

(449)

 

(6)

Tax relating to components of other comprehensive income

 

113

 

(20)

Other comprehensive income for the period (net of tax)

 

(420)

 

68

Comprehensive income for the period

 

(322)

 

173

 

 

 

 

 

Comprehensive income for the period attributable to

 

 

 

 

Shareholders of the company

 

(325)

 

148

Non-controlling interests

 

3

 

25

Comprehensive income for the period

 

(322)

 

173


Condensed consolidated balance sheet*

in € millions

 

December 31, 2012

 

March 31, 2013

Assets

 

 

 

 

Non-current assets

 

 

 

 

Intangible assets

 

4,454

 

4,450

Property, plant and equipment

 

3,739

 

3,799

Other financial non-current assets

 

2,628

 

2,717

Total non-current assets

 

10,821

 

10,966

 

 

 

 

 

Current assets

 

 

 

 

Inventories

 

1,545

 

1,633

Trade and other receivables

 

2,698

 

3,014

Cash and cash equivalents

 

1,752

 

1,309

Other current assets

 

91

 

99

Assets held for sale

 

921

 

987

Total current assets

 

7,007

 

7,042

Total assets

 

17,828

 

18,008

 

 

 

 

 

Equity and liabilities

 

 

 

 

Total equity

 

6,228

 

6,416

 

 

 

 

 

Non-current liabilities

 

 

 

 

Provisions and deferred tax liabilities

 

3,111

 

3,040

Long-term borrowings

 

3,388

 

2,701

Total non-current liabilities

 

6,499

 

5,741

 

 

 

 

 

Current liabilities

 

 

 

 

Short-term borrowings

 

662

 

1,495

Trade and other payables

 

3,242

 

3,233

Other short-term liabilities

 

845

 

803

Liabilities held for sale

 

352

 

320

Total current liabilities

 

5,101

 

5,851

Total equity and liabilities

 

17,828

 

18,008

* Restated for the revised IAS 19

Changes in equity*

in € millions

 

Subscribed share capital

 

Additional paid-in capital

 

Cashflow hedge reserve

 

Cumulative translation reserves

 

Other reserves

 

Share-
holders’ equity

 

Non-
controlling interests

 

Total equity

Balance at January 1, 2012

 

469

 

47

 

(9)

 

4

 

8,520

 

9,031

 

529

 

9,560

Profit for the period

 

 

 

 

 

84

 

84

 

14

 

98

Other comprehensive income

 

 

 

(13)

 

(53)

 

(343)

 

(409)

 

(11)

 

(420)

Comprehensive income
for the period

 

 

 

(13)

 

(53)

 

(259)

 

(325)

 

3

 

(322)

Dividend paid

 

 

 

 

 

 

 

(3)

 

(3)

Equity-settled transactions

 

 

 

 

 

9

 

9

 

 

9

Issue of common shares

 

2

 

3

 

 

 

 

5

 

 

5

Acquisitions and divestments

 

 

 

 

 

(7)

 

(7)

 

(9)

 

(16)

Balance at March 31, 2012

 

471

 

50

 

(22)

 

(49)

 

8,263

 

8,713

 

520

 

9,233

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2013

 

478

 

174

 

(17)

 

59

 

5,070

 

5,764

 

464

 

6,228

Profit for the period

 

 

 

 

 

89

 

89

 

16

 

105

Other comprehensive income

 

 

 

2

 

79

 

(22)

 

59

 

9

 

68

Comprehensive income
for the period

 

 

 

2

 

79

 

67

 

148

 

25

 

173

Dividend paid

 

 

 

 

 

 

 

(8)

 

(8)

Equity-settled transactions

 

 

 

 

 

13

 

13

 

 

13

Issue of common shares

 

2

 

8

 

 

 

 

10

 

 

10

Acquisitions and divestments

 

 

 

 

 

1

 

1

 

(1)

 

Balance at March 31, 2013

 

480

 

182

 

(15)

 

138

 

5,151

 

5,936

 

480

 

6,416

* Restated for the revised IAS 19

Condensed consolidated statement of cash flows

1st quarter

 

 

in € millions

 

2012

 

2013

Cash and cash equivalents at beginning of period

 

1,335

 

1,558

 

 

 

 

 

Adjustments to reconcile earnings to cash generated
from operating activities

 

 

 

 

Profit for the period from continuing operations

 

124

 

112

Amortization and depreciation

 

153

 

158

Changes in working capital

 

(384)

 

(350)

Changes in provisions

 

(548)

 

(279)

Other changes

 

(49)

 

(47)

Net cash from operating activities

 

(704)

 

(406)

Capital expenditures

 

(135)

 

(131)

Acquisitions and divestments net of cash acquired

 

1

 

(13)

Other changes

 

11

 

13

Net cash from investing activities

 

(123)

 

(131)

Changes from borrowings

 

490

 

163

Dividends

 

(3)

 

(8)

Other changes

 

(10)

 

10

Net cash from financing activities

 

477

 

165

Net cash used for continuing operations

 

(350)

 

(372)

Cash flows from discontinued operations

 

(71)

 

(87)

Net change in cash and cash equivalents of total operations

 

(421)

 

(459)

Effect of exchange rate changes on cash and cash equivalents

 

(9)

 

13

Cash and cash equivalents at March 31

 

905

 

1,112


Notes to the condensed financial statements


Quarterly statistics

2012

 

 

 

2013

Q1

 

Q2

 

Q3

 

Q4

 

year

 

in € millions

 

Q1

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

974

 

1,187

 

1,141

 

995

 

4,297

 

Decorative Paints

 

925

1,369

 

1,472

 

1,467

 

1,394

 

5,702

 

Performance Coatings

 

1,331

1,399

 

1,431

 

1,393

 

1,320

 

5,543

 

Specialty Chemicals

 

1,244

(35)

 

(46)

 

(35)

 

(36)

 

(152)

 

Other activities/eliminations

 

(35)

3,707

 

4,044

 

3,966

 

3,673

 

15,390

 

Total

 

3,465

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

 

 

 

68

 

155

 

97

 

(36)

 

284

 

Decorative Paints

 

88

159

 

204

 

163

 

147

 

673

 

Performance Coatings

 

163

235

 

235

 

208

 

152

 

830

 

Specialty Chemicals

 

174

(52)

 

(40)

 

(40)

 

(58)

 

(190)

 

Other activities/eliminations

 

(50)

410

 

554

 

428

 

205

 

1,597

 

Total

 

375

 

 

 

 

 

 

 

 

 

 

 

 

 

11.1

 

13.7

 

10.8

 

5.6

 

10.4

 

EBITDA margin (in %)

 

10.8

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

 

 

 

(27)

 

(26)

 

(26)

 

(27)

 

(106)

 

Decorative Paints

 

(28)

(23)

 

(25)

 

(23)

 

(24)

 

(95)

 

Performance Coatings

 

(25)

(61)

 

(63)

 

(62)

 

(65)

 

(251)

 

Specialty Chemicals

 

(62)

(3)

 

(1)

 

(4)

 

(3)

 

(11)

 

Other activities/eliminations

 

(4)

(114)

 

(115)

 

(115)

 

(119)

 

(463)

 

Total

 

(119)

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization

 

 

 

 

(16)

 

(17)

 

(18)

 

(19)

 

(70)

 

Decorative Paints

 

(17)

(9)

 

(8)

 

(10)

 

(9)

 

(36)

 

Performance Coatings

 

(9)

(13)

 

(15)

 

(13)

 

(14)

 

(55)

 

Specialty Chemicals

 

(13)

(1)

 

 

 

 

(1)

 

Other activities/eliminations

 

(39)

 

(40)

 

(41)

 

(42)

 

(162)

 

Total

 

(39)

 

 

 

 

 

 

 

 

 

 

 

 

 

EBIT

 

 

 

 

25

 

112

 

53

 

(82)

 

108

 

Decorative Paints

 

43

127

 

171

 

130

 

114

 

542

 

Performance Coatings

 

129

161

 

157

 

133

 

73

 

524

 

Specialty Chemicals

 

99

(56)

 

(41)

 

(44)

 

(61)

 

(202)

 

Other activities/eliminations

 

(54)

257

 

399

 

272

 

44

 

972

 

Total

 

217

 

 

 

 

 

 

 

 

 

 

 

 

 

6.9

 

9.9

 

6.9

 

1.2

 

6.3

 

EBIT margin (in %)

 

6.3

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

 

 

25

 

112

 

(2,058)

 

(91)

 

(2,012)

 

Decorative Paints

 

43

127

 

171

 

130

 

114

 

542

 

Performance Coatings

 

129

140

 

154

 

133

 

73

 

500

 

Specialty Chemicals

 

99

(56)

 

(49)

 

(63)

 

(60)

 

(228)

 

Other activities/eliminations

 

(54)

236

 

388

 

(1,858)

 

36

 

(1,198)

 

Total

 

217

 

 

 

 

 

 

 

 

 

 

 

 

 

6.4

 

9.6

 

6.3

 

1.0

 

5.9

 

ROS% before impairment

 

6.3

 

 

 

 

 

 

 

 

 

 

 

 

 

Incidentals per Business Area

 

 

 

 

 

 

(2,111)

 

(9)

 

(2,120)

 

Decorative Paints

 

 

 

 

 

– 

 

Performance Coatings

 

(21)

 

(3)

 

 

 

(24)

 

Specialty Chemicals

 

 

(8)

 

(19)

 

1

 

(26)

 

Other activities/eliminations

 

(21)

 

(11)

 

(2,130)

 

(8)

 

(2,170)

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Incidentals included in operating income

 

 

 

 

 

 

 

 

– 

 

Restructuring costs

 

 

 

(2,106)

 

 

(2,106)

 

Impairment

 

(21)

 

2

 

(1)

 

 

(20)

 

Results related to major legal and environmental cases

 

 

 

(5)

 

(25)

 

(30)

 

Results on acquisitions and divestments

 

 

(13)

 

(18)

 

17

 

(14)

 

Other incidental results

 

(21)

 

(11)

 

(2,130)

 

(8)

 

(2,170)

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation net financing expense

 

 

 

 

15

 

17

 

16

 

11

 

59

 

Financing income

 

9

(57)

 

(65)

 

(58)

 

(59)

 

(239)

 

Financing expenses

 

(56)

(42)

 

(48)

 

(42)

 

(48)

 

(180)

 

Net interest on net debt

 

(47)

 

 

 

 

 

 

 

 

 

 

 

 

 

Other interest movements

 

 

 

 

(1)

 

(1)

 

 

(1)

 

(3)

 

Financing expenses related to pensions

 

(5)

(3)

 

(18)

 

(9)

 

1

 

(29)

 

Interest on provisions

 

(12)

(4)

 

 

1

 

10

 

7

 

Other items

 

1

(8)

 

(19)

 

(8)

 

10

 

(25)

 

Net other financing charges

 

(16)

(50)

 

(67)

 

(50)

 

(38)

 

(205)

 

Net financing expenses

 

(63)

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarterly net income analysis

 

 

 

 

4

 

5

 

5

 

(1)

 

13

 

Results from associates and joint ventures

 

3

(14)

 

(22)

 

(9)

 

(18)

 

(63)

 

Profit attributable to non-controlling interests

 

(16)

190

 

326

 

(1,903)

 

(3)

 

(1,390)

 

Profit before tax

 

157

(66)

 

(89)

 

(64)

 

16

 

(203)

 

Income tax

 

(45)

124

 

237

 

(1,967)

 

13

 

(1,593)

 

Profit for the period from continuing operations

 

112

35

 

27

 

(3)

 

533

 

(15)

 

Effective tax rate (in %)

 

29

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share from continuing operations (in €)

 

 

0.47

 

0.90

 

(8.29)

 

(0.02)

 

(6.98)

 

Basic

 

0.40

0.46

 

0.90

 

(8.29)

 

(0.02)

 

(6.98)

 

Diluted

 

0.40

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share from discontinued operations (in €)

 

 

(0.11)

 

0.02

 

(1.65)

 

(0.09)

 

(1.84)

 

Basic

 

(0.03)

(0.11)

 

0.02

 

(1.65)

 

(0.09)

 

(1.84)

 

Diluted

 

(0.03)

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share from total operations (in €)

 

 

0.36

 

0.92

 

(9.94)

 

(0.11)

 

(8.82)

 

Basic

 

0.37

0.35

 

0.92

 

(9.94)

 

(0.11)

 

(8.82)

 

Diluted

 

0.37

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of shares (in millions)

 

 

235.1

 

236.9

 

238.2

 

238.6

 

237.2

 

Weighted average number of shares

 

239.4

235.6

 

238.2

 

238.2

 

239.0

 

239.0

 

Number of shares at end of quarter

 

239.8

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted earnings (in € millions)

 

 

190

 

326

 

(1,903)

 

(3)

 

(1,390)

 

Profit before tax from continuing operations

 

157

21

 

11

 

2,130

 

8

 

2,170

 

Incidentals reported in operating income

 

39

 

40

 

41

 

42

 

162

 

Amortization of intangible assets

 

39

(84)

 

(103)

 

(82)

 

(5)

 

(274)

 

Adjusted income tax

 

(57)

(14)

 

(22)

 

(9)

 

(18)

 

(63)

 

Non-controlling interests

 

(16)

152

 

252

 

177

 

24

 

605

 

Adjusted net income for continuing operations

 

123

0.65

 

1.06

 

0.74

 

0.10

 

2.55

 

Adjusted earnings per share (in €)

 

0.51


Notes to the statement of income

Operating income in “Other activities”

Operating income in other activities was in line with previous year. The “Other” costs were higher due to legacy items and one-offs. The results for pensions for 2012 have been restated for the revised IAS 19.

1st quarter

 

 

in € millions

 

2012

 

2013

Corporate costs

 

(36)

 

(30)

Pensions

 

3

 

(3)

Insurances

 

(2)

 

6

Other

 

(21)

 

(27)

Operating income in “other”

 

(56)

 

(54)

Net financing expenses

Net financing expenses increased by €13 million to €63 million. This was driven by:

Operating income to net income

1st quarter

 

 

in € millions

 

2012

 

2013

Operating income

 

236

 

217

Net financing expenses

 

(50)

 

(63)

Results from associates and joint ventures

 

4

 

3

Profit before tax

 

190

 

157

Income tax

 

(66)

 

(45)

Profit from continuing operations

 

124

 

112

Profit/(loss) from discontinued operations

 

(26)

 

(7)

Profit for the period

 

98

 

105

Non-controlling interests

 

(14)

 

(16)

Net income attributable to shareholders

 

84

 

89

Tax

The effective Q1 tax rate is 29 percent (2012: 35 percent).


Shareholders’ equity

Shareholders’ equity increased from €5.8 million at year-end 2012 to €5.9 billion, mainly due to the net effect of:


Invested and operating working capital

Invested capital

in € millions

 

March 31, 2012

 

December 31, 2012

 

March 31, 2013

Trade receivables

 

2,462

 

2,174

 

2,468

Inventories

 

1,832

 

1,545

 

1,633

Trade payables

 

(2,097)

 

(2,147)

 

(2,169)

Operating working capital

 

2,197

 

1,572

 

1,932

Other working capital items

 

(813)

 

(870)

 

(809)

Non-current assets

 

12,988

 

10,821

 

10,966

Less investments in associates and joint ventures

 

(195)

 

(185)

 

(186)

Less pension assets

 

(1,158)

 

(842)

 

(1,006)

Deferred tax liabilities

 

(500)

 

(434)

 

(413)

Invested capital

 

12,519

 

10,062

 

10,484

Invested capital at the end of Q1 2013 totaled €10.5 billion, €0.4 billion higher than at year-end 2012. Invested capital was impacted by the net effect of:

Operating working capital

in € millions, % of revenue

 

March 31, 2012

 

December 31, 2012

 

March 31, 2013

Decorative Paints

 

654

 

16.8

 

353

 

8.9

 

537

 

14.5

Performance Coatings

 

852

 

15.6

 

742

 

13.3

 

879

 

16.5

Specialty Chemicals

 

754

 

13.5

 

564

 

10.7

 

647

 

13.0

Other activities

 

(63)

 

 

 

(87)

 

 

 

(131)

 

 

Total

 

2,197

 

14.8

 

1,572

 

10.7

 

1,932

 

13.9

In % of revenue

AkzoNobel – Operating working capital (bar chart)

Pensions

The funded status of the pension plans at the end of Q1 2013 was a deficit of €0.6 billion (year-end 2012: €1.1 billion as reported, €0.9 billion on restated basis).

The movement compared with year-end 2012 is primarily due to:

Offset by:


Workforce

At March 31, 2013, we employed 50,320 staff (year-end 2012: 50,610 employees). The net decrease was due to:


Cash flows and net debt

Operating activities in Q1 2013 resulted in a cash outflow of €406 million (2012: €704 million). The change is mainly due to lower payments related to pension provisions.

As a consequence of this cash outflow from operating activities, capital expenditures of €131 million and a cash outflow from discontinued operations of €87 million, net debt increased from €2,298 million at year-end 2012 to €2,882 million at the end of Q1 2013.


General information

Accounting policies and restatements

This interim financial report is in compliance with IAS 34 Interim Financial Reporting. This report is unaudited. Except for the implementation of the revised IAS 19 "Employee Benefits", the accounting principles are as applied in the 2012 financial statements.

As of 2013, we apply stricter rules to qualify items as incidental items and have restated the relevant performance measures. In addition, invested capital was restated to exclude the receivable from pension funds in an asset position. Further, moving average ROI is now to be calculated with use of last twelve months operating income instead of, the so far used, EBIT. Operating working capital now comprises the total company and therefore includes, besides the inventories, trade receivables and trade payables in the Business Areas, the same items for the other activities.

Comparative numbers for 2012 have been restated accordingly. Please refer to our website for the details of these restatements, as issued at the time of our Strategy update on February 20, 2013.

Seasonality

Revenue and results in Decorative Paints are impacted by seasonal influences. Revenue and profitability tend to be higher in the second and third quarter of the year as weather conditions determine whether paints and coatings can be applied. In Performance Coatings, revenue and profitability vary with building patterns from original equipment manufacturers. In Specialty Chemicals, the Functional Chemicals and the Surface Chemistry businesses experience seasonal influences. Revenue and profitability are affected by developments in the agricultural season and tend to be higher in the first half of the year.

The “other” category

In the category “other” we report activities which are not allocated to a particular business area. Corporate costs are the unallocated costs of our head office and shared services center in the Netherlands. Pensions reflects pension costs after the elimination of interest cost (reported as financing expenses). Insurances are the results from our captive insurance companies. Other includes the cost of share-based compensation and company projects, the results of treasury and legacy operations as well as the unallocated cost of some country organizations.


Glossary

Adjusted earnings per share are the basic earnings per share from continuing operations excluding incidentals in operating income, amortization of intangible assets and tax on these adjustments.

Comprehensive income is the change in equity during a period resulting from transactions and other events other than those changes resulting from transactions with shareholders in their capacity as shareholders.

EBIT is operating income before incidentals.

EBIT margin is EBIT as percentage of revenue.

EBITDA is EBIT before depreciation and amortization and refers to EBITDA before incidentals.

EBITDA margin is EBITDA as percentage of revenue.

Emerging Europe: Central and Eastern Europe (excluding Austria), Baltic States and Turkey.

Incidentals are special charges and benefits, results on acquisitions and divestments, restructuring and impairment charges, and charges related to major legal, anti-trust, and environmental cases. As of 2013, we apply stricter rules to qualify items as incidental.

Invested capital is total assets (excluding cash and cash equivalents, investments in associates, the receivable from pension funds in an asset position, assets/liabilities held for sale) less current income tax payable, deferred tax liabilities and trade and other payables.

Mature markets comprise of Western Europe, the US, Canada, Japan and Oceania.

Moving average ROI is calculated as operating income of the last twelve months divided by average invested capital.

Net debt is defined as long-term borrowings plus short-term borrowings less cash and cash equivalents.

Operating income is defined in accordance with IFRS and includes the relevant incidental results.

Operating working capital is defined as the sum of inventories, trade receivables and trade payables of the total company. When expressed as a ratio, operating working capital is measured against four times last quarter revenue.

ROS% is operating income as percentage of revenue.