Dulux owner Akzo sees core earnings towards low end of forecasts
By Stephanie Hamel
(Reuters) -Dutch paints and coatings maker Akzo Nobel set out a plan to save costs and improve supply chain efficiency on Wednesday, after forecasting yearly core earnings towards the lower end of previous guidance due to lower than expected volumes.
Shares in the maker of Dulux and Flexa paints were down 4.9% at 61.02 euros by 1132 GMT, after touching their lowest in 11 months.
The company said it would make a 150 million euros ($159 million) investment through 2024-2026 for its cost saving "industrial transformation" plan, aiming for a 250 millions euros benefit by 2027.
Asked about cost-cutting plans, CEO Greg Poux-Guillaume said the company did not have site closures or job cut numbers to disclose yet.
"We're adding people. We're not reducing people. But we have some sites that will have to shrink. It's decorative paints in Europe, and it's coatings in Europe and in the U.S.," Poux-Guillaume said in a interview with Reuters.
Akzo has been recovering from a post-COVID slowdown last year, marked by rising raw material costs and destocking activity in its decorative do-it-yourself segment in Europe.
The Amsterdam-based company said it now targeted around 1.45 billion euros in adjusted core earnings (EBITDA) for 2023, at the lower end of its previous guidance between 1.4 and 1.55 billion.
The company has been passing on steep raw material costs to customers through price rises, hiking them 3% in the third quarter, but Poux-Guillaume signalled the increases ending except in hyperinflation-ridden countries, as costs have started to ease.
"I think price increases sequentially have mostly come to an end. Or we're back to normal market conditions," he said.
CFO Maarten de Vries said raw material deflation trends were foreseeable for the next quarter and the first half of 2024, saying Akzo was "still on a trajectory to restore our margins".
Poux-Guillaume told a press call that the company had seen flat volumes, but had achieved a better performance than its peers. "It's a reflection of what we see in our competitors," he said about the updated guidance, which is slightly below the 1.47 billion euros expected by analysts in a company-provided consensus.
"Overall, in line adj EBIT print/adj EPS miss and somewhat weaker 4Q guide than consensus will likely limit the enthusiasm on the stock," J.P. Morgan analysts said in a note.
Akzo Nobel reported a 46% rise in adjusted EBITDA to 414 million euros ($439 million) in the quarter, above the 412 million seen in a consensus.
($1 = 0.9430 euros)
(Reporting by Stéphanie Hamel; Editing by Jacqueline Wong, David Holmes)
