Financial highlights

Revenue

Q4 2018:

Revenue was 1% up, and 4% up in constant currencies. Price/mix was up 9% overall, mainly driven by higher selling prices. Volumes were 7% lower versus an exceptionally strong quarter last year in China and driven by our value over volume strategy.

  • Decorative Paints revenue was up 3% in constant currencies. Price/mix was 8% positive. Pricing initiatives and acquistions offset lower volumes
  • Performance Coatings revenue was up 4% in constant currencies. Price/mix was 11% positive, driven by pricing initiatives, while volumes were lower
  • Other revenue includes service revenue related to services for the Specialty Chemicals business

Full-year 2018:

Revenue was 4% lower, although up 1% in constant currencies. Volumes were 5% lower versus an exceptionally strong last year in China, and driven by our value over volume strategy.

  • Decorative Paints revenue was up 1% in constant currencies. Price/mix was 4% positive. Pricing initiatives offset lower volumes
  • Performance Coatings revenue was up 1% in constant currencies. Price/mix effect was 7% positive, whilst volumes were lower

Revenue development Q4 2018

AkzoNobel – Revenue development Q4 2018 (bar chart)AkzoNobel – Revenue development Q4 2018 (bar chart)

Revenue development 2018

AkzoNobel – Revenue development 2018 (bar chart)AkzoNobel – Revenue development 2018 (bar chart)

* Other includes service revenues

Revenue

Fourth quarter

 

January-December

2017

2018

∆%

∆% CC *

in € millions

2017

2018

∆%

∆% CC *

*

Change in constant currencies

923

896

(3%)

3%

Decorative Paints

3,898

3,699

(5%)

1%

1,372

1,403

2%

4%

Performance Coatings

5,775

5,587

(3%)

1%

(12)

9

 

 

Other activities/ eliminations

(61)

(30)

 

 

2,283

2,308

1%

4%

Total

9,612

9,256

(4%)

1%

in % versus Q4 2017

Volume

Price/mix

Acq/div.

Other

Exchange rates

Total

Decorative Paints

(6)

8

1

(6)

(3)

Performance Coatings

(7)

11

(2)

2

Total

(7)

9

1

1

(3)

1

in % versus 2017

Volume

Price/mix

Acq/div.

Other

Exchange rates

Total

Decorative Paints

(3)

4

(6)

(5)

Performance Coatings

(6)

7

(4)

(3)

Total

(5)

6

(5)

(4)

Volume development per quarter (year-on-year in %)

Q4 17

Q1 18

Q2 18

Q3 18

Q4 18

Decorative Paints

12

(1)

(2)

(4)

(6)

Performance Coatings

(2)

(5)

(3)

(7)

(7)

Total

3

(3)

(3)

(5)

(7)

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

Q4 17

Q1 18

Q2 18

Q3 18

Q4 18

Decorative Paints

(5)

4

5

8

Performance Coatings

3

5

7

11

Total

(1)

2

5

6

9

Currency development per quarter (year-on-year in %)

Q4 17

Q1 18

Q2 18

Q3 18

Q4 18

Decorative Paints

(4)

(7)

(6)

(6)

(6)

Performance Coatings

(5)

(8)

(5)

(3)

(2)

Total

(5)

(7)

(5)

(4)

(3)

Raw material price development

Raw material prices in 2018 were higher compared with the previous year. Robust pricing initiatives continue being implemented to deal with these higher raw material costs. Raw material inflation continued in Q4 2018, although at a slower rate than during the start of the year.

Acquisitions

The acquisition of Xylazel in Spain and Doves Decorating Supplies in the UK were completed in September 2018. The acquisition of Fabryo in Romania was completed on October 1, 2018. The acquisition of Colourland Paints in Malaysia was completed in November 2018. The acquisition of the minority interest share to obtain full ownership of the AkzoNobel Swire Paints joint venture in China was completed in December 2018.

Q4 2018

Adjusted operating income

Adjusted operating income at €181 million (2017: €178 million) was up, driven by pricing initiatives and cost-saving programs. ROS was 7.8%, at the same level as 2017.

  • Decorative Paints was lower, although up in constant currencies. Higher prices and cost savings did compensate for raw material costs and lower volumes. ROS was 5.8% (2017: 6.3%)
  • Performance Coatings improved as a result of pricing initiatives and cost savings more than offsetting higher raw material costs, adverse currencies and lower volumes. ROS was up at 10.9% (2017: 9.7%)
  • Other activities/eliminations was €11 million lower, as Q4 2017 was favorably impacted by one-off items related to sale of assets
Adjusted operating income

Fourth quarter

 

January-December

2017

2018

∆%

in € millions

2017

2018

∆%

58

52

(10%)

Decorative Paints

351

346

(1%)

133

153

15%

Performance Coatings

669

629

(6%)

(13)

(24)

 

Other activities/eliminations

(115)

(177)

 

178

181

2%

Total

905

798

(12%)

ROS%

Fourth quarter

 

January-December

2017

2018

in € millions

2017

2018

6.3%

5.8%

(0.5%)

Decorative Paints

9.0%

9.4%

0.4%

9.7%

10.9%

1.2%

Performance Coatings

11.6%

11.3%

(0.3%)

7.8%

7.8%

Total

9.4%

8.6%

(0.8%)

 

 

 

 

 

 

 

8.4%

9.0%

0.6%

excl. unallocated costs

10.6%

10.6%

Operating income

Operating income decreased €71 million and included identified items of €113 million, relating to one-off non-cash pension costs (€ 57 million) based on a UK legal precedent set in October 2018 for the Guaranteed Minimum Pensions equalization regulations and cost for the second phase of the transformation (€56 million).

Full-year 2018

Adjusted operating income

Adjusted operating income at €798 million (2017: €905 million), was impacted by adverse currencies, higher raw material costs and lower volumes, partly compensated by pricing initiatives. Savings from continuous improvement more than offset fixed cost inflation. Creating a fit-for-purpose organization fully delivered on the €110 million planned savings for 2018.

  • Decorative Paints was impacted by higher raw material costs and adverse currency effects, partly compensated by higher selling prices and cost savings. ROS was 9.4% (2017: 9.0%)
  • Performance Coatings was also impacted by foreign currencies, higher raw material costs, as well as lower volumes. ROS was 11.3% (2017: 11.6%)
  • Other activities/eliminations decreased by €62 million. 2017 was impacted by one-off items, as well as lower pension and insurance related costs

Operating income

Operating income was negatively impacted by identified items totaling €193 million, mainly related to restructuring costs for the transformation (€130 million) and a one-off non-cash pension cost (€57 million) based on a UK legal precedent set in October 2018 for the Guaranteed Minimum Pensions equalization regulations.

Net financing income/(expenses)

Net financing expenses decreased by €26 million, mainly due to a one-off interest benefit on a tax settlement and lower interest on discounted provisions driven by discount rate developments.

Income tax

The 2018 effective tax rate was 20.6% (2017: 33.1%) mainly as a result of re-recognition of certain deferred tax assets and a tax settlement. Excluding these the 2018 effective tax rate was 28%.

Profit from discontinued operations

Included in the profit from discontinued operations is the deal result on the sale of the Specialty Chemicals business to The Carlyle Group and GIC for an enterprise value of €10.1 billion, which was completed on October 1, 2018. At year-end 2018, AkzoNobel made a best estimate of the expected deal proceeds for the sale of the Specialty Chemicals business, including the net debt/working capital settlement that is to be finalized in 2019. The profit on the sale after tax is €5.8 billion. Reference is made to Discontinued operations for further details.

Profit from discontinued operations also includes the operational results of the Specialty Chemicals business until October 1, 2018. During that period, revenue was impacted by currencies and positive price/mix. Adjusted operating income was negatively impacted by restructuring costs related to manufacturing network optimization projects, environmental and other one-off costs and adverse currencies, partly offset by strong price/mix and productivity improvements.

Net income

Net income attributable to shareholders was €6.7 billion, of which €410 million was attributable to continuing operations and €6.3 billion to discontinued operations.

Operating income

Fourth quarter

 

January-December

2017

2018

∆%

in € millions

2017

2018

∆%

41

37

(10%)

Decorative Paints

334

308

(8%)

132

130

(2%)

Performance Coatings

668

577

(14%)

(34)

(99)

 

Other activities/eliminations

(177)

(280)

 

139

68

(51%)

Total

825

605

(27%)

Operating income to net income

Fourth quarter

 

January-December

2017

2018

in € millions

2017

2018

139

68

Operating income

825

605

(15)

(23)

Net financing expenses

(78)

(52)

2

6

Results from associates and joint ventures

17

20

126

51

Profit before tax

764

573

(81)

(6)

Income tax

(253)

(118)

45

45

Profit from continuing operations

511

455

47

5,814

Profit from discontinued operations

393

6,274

92

5,859

Profit for the period

904

6,729

(17)

(10)

Non-controlling interests

(72)

(55)

75

5,849

Net income

832

6,674