Decorative Paints

Highlights Q4 2018:

  • ROS at 5.8% (2017: 6.3%) with 8% positive price/mix driven by pricing initiatives
  • Acquisition of Colourland Paints in Malaysia; minority interest share to obtain full ownership of the Swire Paints joint venture in China
  • Volumes in China normalized to 2016 levels versus an exceptionally strong quarter last year

Q4 2018:

  • Revenue 3% lower, and 3% up in constant currencies; price/mix was 8% positive, driven by pricing initiatives, while acquisitions contributed 1%
  • Adjusted operating income decreased to €52 million (2017: €58 million) and was up in constant currencies, with higher prices and cost savings compensating for raw material costs and lower volumes
  • Volumes were 6% lower versus an exceptionally strong quarter last year in China and driven by our value over volume strategy (excluding China volumes were 1% lower)
  • Adverse currency effects were driven by various currencies including the Argentinian peso, Brazilian real and Turkish lira
  • ROS at 5.8% (2017: 6.3%)

Full-year 2018:

  • Revenue 5% lower, although up 1% in constant currencies, with price/mix effects more than compensating for lower volumes versus an exceptionally strong last year in China
  • Adjusted operating income of €346 million (2017: €351 million) was impacted by higher raw material costs and adverse currency effects, almost fully compensated by pricing initiatives and cost savings
  • ROS increased to 9.4% (2017: 9.0%); ROS in the second half-year of 2018 increased to 9.0% (2017: 7.9%)
  • ROI at 12.4% (2017: 12.5%)
Asian acquisitions underline commitment to key markets (photo)

Asian acquisitions underline commitment to key markets
Two transactions in the final months of 2018 highlighted our continued focus on further strengthening our positions in Asia. In December, we acquired the minority interest share to obtain full ownership of the AkzoNobel Swire Paints joint venture, giving us greater control over our future growth and direction. A month earlier, we acquired Colourland Paints in Malaysia, which will boost our growth ambitions in the country itself and throughout South East Asia.

Q4 2018:

Revenue was up 3% in constant currencies. Price realization continued to gain momentum and selling prices were up overall. Volumes were lower versus an exceptionally strong quarter last year in China, mainly due to continued focus on pricing initiatives.

Adjusted operating income decreased to €52 million (2017: €58 million), and was up in constant currencies. Improved pricing and cost savings offset higher raw material costs and lower volumes, resulting in ROS of 5.8% (2017: 6.3%).

Operating income was adversely impacted by €15 million identified items relating to the transformation of the organization.

Full-year 2018:

Revenue was 5% lower, although up 1% in constant currencies. Price/mix effects were up 4% overall. Volumes were 3% lower, driven by our value over volume strategy and versus an exceptionally strong last year.

Adjusted operating income was €5 million lower, and up in constant currencies. Higher selling prices and cost savings offset higher raw material costs.

Operating income was impacted by €38 million identified items relating to the transformation of the organization.

Revenue

Fourth quarter

 

January-December

2017

2018

∆%

∆%CC 1

in € millions

2017

2018

∆%

∆%CC 1

1

Change in constant currencies

2

Including positive impact of hyperinflation accounting as per IAS 29 for our Argentian operations

443

465

5%

6%

Decorative Paints Europe, Middle East and Africa

2,095

2,093

2%

154

138 2

(12%)

7%

Decorative Paints Latin America

520

468 2

(10%)

10%

328

295

(10%)

(7%)

Decorative Paints Asia

1,289

1,144

(11%)

(7%)

(2)

(2)

 

 

Other/intragroup eliminations

(6)

(6)

 

 

923

896

(3%)

3%

Total

3,898

3,699

(5%)

1%

Revenue development Q4 2018

Decorative Paints – Revenue development Q4 2018 (bar chart)Decorative Paints – Revenue development Q4 2018 (bar chart)

Revenue development 2018

Decorative Paints – Revenue development 2018 (bar chart)Decorative Paints – Revenue development 2018 (bar chart)
Key financial figures

Fourth quarter

 

January-December

2017

2018

∆%

in € millions

2017

2018

∆%

58

52

(10%)

Adjusted operating income

351

346

(1%)

41

37

(10%)

Operating income

334

308

(8%)

6.3

5.8

 

ROS%

9.0

9.4

 

 

 

 

 

 

 

 

 

 

 

Average invested capital

2,803

2,798

 

 

 

 

ROI%

12.5

12.4

 

Europe, Middle East and Africa

Revenue in Q4 was up 5%, and up 6% in constant currencies. Price increases are taking effect, while volumes were lower.

Adverse currency impacts were mainly driven by the Turkish lira.

The acquisition of Fabryo in Romania, Xylazel in Spain and Doves Decorating Supplies in the UK contributed 1% to Q4 revenues.

Full-year revenue was flat, although up 2% in constant currencies, driven by volume growth and positive price/mix effects.

Latin America

Revenue in Q4 was 12% lower, although up 7% in constant currencies, mainly driven by positive price/mix effects. Pricing initiatives and cost control offset increased raw material costs.

Full-year revenue was 10% lower, although up 10% in constant currencies. Adverse currency impact was driven by the Brazilian real and the Argentinian peso, which was partly offset by the application of IAS 29 for hyperinflation accounting.

Asia

Revenue in Q4 was 10% lower and 7% lower in constant currencies. Selling prices increased, as a result of continued focus on pricing initiatives. Volumes were lower in China versus an exceptionally strong quarter last year and grew in India, Malaysia and Vietnam.

Full-year revenue was 11% lower, and 7% lower in constant currencies. Adverse currency effects resulted from most Asian currencies. Volumes in China were lower, while growth continued in India, Malaysia and Vietnam.

The acquisition of Colourland Paints in Malaysia to strengthen the business in Asia was announced and closed in November 2018.

The acquisition of minority interest share to obtain full ownership of the AkzoNobel Swire Paints joint venture in China was announced and closed in December 2018.