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AkzoNobel sees costs inflation peaking this quarter as it posts weaker earnings

October 21/2021

MOSCOW (MRC) -- AkzoNobel's net income fell by 25.5% year on year to EUR164m in the third quarter following drop in operating profit due to significant raw material cost hikes, said the Dutch paints and coatings firm.

 Dutch paints and coatings maker Akzo Nobel warned on Wednesday that raw material costs inflation could peak in the fourth quarter before stabilising next year as it reported weaker-than-expected quarterly core earnings. We expect the raw material situation in 2022 to be less hectic, Chief Executive Thierry Vanlancker said in a call with analysts, adding that inflation will still be at the forefront in the first half of the year.

Hopefully we will get a little bit more breathing room, but were not betting on that, and our whole pricing plan and our whole market plan is based on the current situation, Vanlancker said. The rebound in economic activity as coronavirus restrictions are eased has exposed shortages across supply chains, with companies scrambling to find workers, ships and even fuel to power factories, threatening the recovery and keeping central bankers on high alert over inflation and its impact on rate decisions.

Chemical makers such as Akzo Nobel, Axalta Coating Systems , PPG Industries and Tikkurila have all been hit by rising raw material costs due to strong demand and supply chain issues this year. In an earlier call with journalists, Vanlacker flagged that raw material costs have escalated quite significantly and are impacting its long-term supplier contracts.

Most raw material suppliers go for monthly and sometimes bi-weekly (contracts) because they are very uncertain about our own pricing, Vanlancker said. The Amsterdam-based firm, which sells decorative paints and industrial coatings worldwide, raised its prices by 9% in the July-September period compared to fight the costs.

It also said raw material and other variable costs in the quarter increased by 278 million euros (USD324 million) year-on-year. The shares in the company fell 1.65% at 0938 GMT, the analysts flagging pressure from earnings miss and inflation comments.

The Dulux paint maker said it was still confident of achieving its 2 billion euro earnings before interest, taxes, depreciation, and amortization (EBITDA) target for 2023, and the annual 50 basis points increase in return on sales over the 2021-2023 period.

Akzo Nobel posted third-quarter adjusted operating income of 241 million euros, with sales improving 6% to 2.41 billion euros, but both missing analysts forecasts.

As per MRC, AkzoNobel N.V. no longer intends to acquire Tikkurila following a higher competing offer from US paints and coatings producer PPG Industries.

Akzo Nobel submitted a binding proposal to acquire Tikkurila for EUR31.25 per share on January 28, 2021, having conducted customary due diligence to confirm potential synergies. The company no longer intends to pursue this acquisition, following a competing, higher, offer for Tikkurila. Despite a strong cultural fit - and more synergies than any other combination with Tikkurila - the intended transaction no longer meets AkzoNobels criteria for superior value creation.
Author:Anna Larionova
Tags:coatings, compounding, compounds, adhesives, construction, Akzo Nobel Functional Chemicals BV.
Category:General News
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