Coatings World - September 2013

Akzo Nobel N.V. reported a four percent decrease in revenues in the second quarter compared with the same period last year. The company reported that this was due to divestments and adverse currencies against a backdrop of continued challenging market conditions. Operating income for Q2 was 17 percent lower at €322 million. Net income attributable to shareholders for the quarter rose to €429 million, buoyed by recognition of a deferred tax asset and profit on the divestment of Decorative Paints North America. The acceleration of AkzoNobel’s performance improvement program is on track to achieve the full EBITDA benefit of €500 million by the end of this year, while additional charges are expected in the second half of the year as restructuring activities are stepped up.

Decorative Paints second quarter revenue declined 1 percent, mainly due to negative price/mix and unfavorable currency effects. The slowdown in global markets continues to affect the top line. In general volumes stabilized, with some markets, in particular China, making a positive contribution in the quarter. Operating income for the second quarter totaled € 102 million, 9 percent lower than the previous year, mainly as a result of restructuring costs in mature markets.

Revenue in Performance Coatings declined one percent on largely stable overall volumes compared with the previous year as a result of adverse currency effects. Operating income was down five percent at €163 million due to investments in growth and business excellence initiatives, partially mitigated by margin management and structural cost benefits.

Revenue in Specialty Chemicals was
12 percent lower as a result of the divest-
ment of Chemicals Pakistan and lower
overall volumes. Operating income was
down 21 percent at €121 million, mainly
due to the lower volumes and the con-
clusion of value chain issues from the
previous quarter. During the quarter, the
Functional Chemicals Business Unit ini-
tiated a large restructuring program as
part of the performance improvement
program, the implementation of which
will start as of Q3.

“While I am pleased to report that our Decorative Paints and Performance Coatings businesses have reported an improved or stable return on sales for the first half of the year, our end markets remain challenging and this was particularly visible at the end of this second quarter,”said CEO Ton Büchner. “Conditions remain tough and, as we have previously indicated, we do not expect an early improvement in the external trends our businesses are facing. With this pressure on our top line, we are stepping up our restructuring activities to secure the delivery of our 2015 targets which drive cash generation and quality of earnings. As a consequence, full year restructuring costs are expected to be higher, with the benefits of these additional restructuring costs visible in 2014. These expected higher restructuring charges and continued weak markets mean that our full year operating income is unlikely to exceed last year.”

PPG Delivers Record Second
Quarter Results

PPG Industries reported record second quarter net sales in 2013 of $4.1 billion, up 16 percent versus the prior year. Second quarter 2013 reported net income from continuing operations was $341 million, or $2.35 per diluted share. Adjusted net income for the quarter was $356 million, or a record $2.45 per diluted share, excluding nonrecurring acquisition-related charges of 10 cents per diluted share as detailed in a reconciliation below. Second quarter 2012 reported net income and earnings per diluted share from continuing operations were $297 million and $1.92 respectively. There were no nonrecurring charges in the prior-year quarter.

“We achieved new sales and adjusted earnings records due to the continued strong performance of our coatings businesses, which in aggregate delivered 25 percent earnings growth in comparison to last year’s record level,” said Charles E. Bunch, PPG chairman and CEO. “The record adjusted earnings results were driven by our strong operating focus, including ongoing aggressive cost management, and the earnings benefit from cash deployed on recent coatings acquisitions.

“Overall economic conditions remained divergent by region,” Bunch said. “North America continued to expand, aided by higher industrial and auto production combined with continued positive momentum in the construction markets. Asia also grew, led by higher local consumption in China, while the European region remained sluggish with economic activity generally declining. Our sales volume results were also mixed, similar to the respective regional trends, but we delivered higher earnings in each major region.

“An important factor to our excellent overall coatings results was higher sales in businesses such as automotive OEM (original equipment manufacturer) coatings, automotive refinish and aerospace,” Bunch added. “For our non-coatings segments, sales and earnings were up modestly in Optical and Specialty Materials versus record prior-year results, and Glass earnings declined as market conditions for both glass businesses remained challenging.

“Importantly, we finalized our acquisition of the AkzoNobel North American architectural coatings business on April 1, and we are very pleased with the results in the quarter,” Bunch said. “The acquired business had sales of about $475 million in the quarter and delivered a mid-single-digit percentage earnings return on sales, which was slightly ahead of our target. We are in the early stages of integration and still have a considerable amount of