Decorative Paints

Highlights Q3 2019:

  • Revenue up 3% with strong performance in EMEA and South America; higher profitability in all businesses
  • ROS up at 13.8% (2018: 12.1%) driven by pricing initiatives and cost savings

Q3 2019:

  • Revenue was up 3% and up 2% in constant currencies; price/mix was 5% positive, driven by pricing initiatives, while acquisitions contributed 2%
  • Adjusted operating income increased to €135 million (2018: €115 million) with pricing initiatives and cost savings more than compensating for lower volumes
  • Volumes were 5% lower due to our value over volume strategy and lower volumes in Asia
  • ROS up at 13.8% (2018: 12.1%); ROI at 12.5% (2018: 12.6%)
Recycled paint launched in UK to help close loop on waste (Photo)

Recycled paint launched in UK to help close loop on waste
AkzoNobel has become the first major manufacturer to launch recycled paint, thanks to a ground-breaking partnership in the UK with resource management experts Veolia. The revolutionary Evolve matt white emulsion contains 35% recycled paint and has been re-engineered and tested to meet the same high standards expected from Dulux Trade.

Q3 2019:

Revenue was up 3% and up 2% in constant currencies. Continued focus on pricing initiatives contributed to positive price/mix of 5%, while volumes were 5% lower, mainly due to our value over volume strategy. Acquisitions contributed 2% to revenues.

Adjusted operating income increased to €135 million (2018: €115 million). Continued pricing initiatives and cost savings more than offset lower volumes, while raw material costs were roughly flat, resulting in ROS of 13.8% (2018: 12.1%).

Operating income increased to €130 million and was negatively impacted by €5 million identified items related to transformation costs. In 2018, operating income of €112 million was adversely impacted by €3 million identified items.

Revenue

Third quarter

 

January-September

2018

2019

∆%

∆% CC *

in € millions

2018

2019

∆%

∆% CC *

*

Change excluding currency impact

546

573

5%

5%

Decorative Paints Europe, Middle East and Africa

1,628

1,699

4%

5%

117

121

3%

12%

Decorative Paints South America

329

324

(2%)

10%

288

283

(2%)

(4%)

Decorative Paints Asia

849

807

(5%)

(6%)

 

 

Other/intragroup eliminations

(3)

(4)

 

 

951

977

3%

2%

 

2,803

2,826

1%

2%

Revenue development Q3 2019

Decorative Paints – Revenue development Q3 2019 (bar chart)

Revenue development year-to-date 2019

Decorative Paints – Revenue development year-to-date 2019 (bar chart)
Key financial figures

Third quarter

 

January-September

2018

2019

∆%

in € millions

2018

2019

∆%

1

Adjusted operating income and Operating income in 2019 include the impact from the adoption of IFRS 16 “Leases” (as per January 1, 2019). As a result interest expenses, which previously were included in Lease expenses within operating income, are now recorded in Net financing expenses. The 2018 comparative figures have not been restated. Further details are provided in Notes to the condensed consolidated financial statements.

2

Average invested capital includes the impact from adoption of IFRS 16 “Leases” (as per January 1, 2019). Right-of-use assets (€165 million as per January 1, 2019) have been added to Invested capital whereas Lease liabilities remain excluded from Invested capital. The 2018 comparative figures have not been restated.

115

135

17%

Adjusted operating income 1

294

331

13%

112

130

16%

Operating income 1

271

350

29%

12.1

13.8

 

ROS%

10.5

11.7

 

 

 

 

 

 

 

 

 

 

 

Average invested capital 2

2,790

3,076

 

 

 

 

ROI%

12.6

12.5

 

Europe, Middle East and Africa

Revenue in Q3 was up 5% and up 5% in constant currencies due to successful pricing initiatives, partly offset by lower volumes. The acquisitions of Fabryo in Romania, Xylazel in Spain and Doves Decorating Supplies in the UK contributed 4% to revenues. AkzoNobel has become the first major manufacturer to launch recycled paint. The revolutionary Dulux Trade Evolve contains 35% recycled paint and meets the same high standards expected from Dulux Trade.

South America

Revenue in Q3 was up 3% and up 12% in constant currencies, mainly driven by positive price/mix effects following our focus on value over volume and further market penetration. Pricing initiatives and cost control offset inflation.

Asia

Revenue in Q3 was down 2%, and was 4% lower in constant currencies. Profitability improved due to continued focus on pricing initiatives and cost savings. Volumes were lower in China, although the impact was less than previous quarters.

The acquisition of Colourland Paints in Malaysia contributed 1% to revenues.