UPDATE 2-AkzoNobel says passing on cost rises after Q4 hit

Thu Feb 16, 2012 4:57am EST

* Q4 EBITDA of 301 mln euros, down 20 pct from yr ago

* Q4 revenue of 3.787 bln euros, down 5 pct from yr ago

* Turns to Q4 net loss of 62 mln euros

* Proposes div of 1.45 euro, medium-term ambitions unchanged

* Shares reverse losses, up 4.3 pct

By Sara Webb

AMSTERDAM, Feb 16 (Reuters) - AkzoNobel NV, the world's largest paintmaker and owner of the Dulux brand, said on Thursday it was now passing on to customers most of the rise in raw material prices that pulled down its fourth-quarter core profit.

The escalating cost of materials such as titanium dioxide, a paint pigment, and oil-related resins and solvents was particularly painful last year for paintmakers such as AkzoNobel and rival U.S. maker Sherwin-Williams Co.

Having now priced in most of the increases, AkzoNobel said it was seeing greater price stability in most raw materials except for titanium dioxide, which it expects to rise further.

Its decorative paints division, which accounted for 1.204 billion euros ($1.57 billion) or about a third of quarterly sales, reported earnings before interest, tax, depreciation and amortisation (EBITDA) of just 11 million euros, down from 63 million euros a year ago, and 148 million in the third quarter.

"2011 was a challenging year against the background of weaker global economic conditions and unprecedented raw material price inflation," said Hans Wijers, chief executive, who will be succeeded in April by Ton Buechner, CEO of Swiss machinery maker Sulzer.

"The absolute impact of increased raw material prices for the year was approximately 1 billion euros. Despite this significant headwind, our reported pricing actions have now offset most of this, and for the year ahead we expect to see the full-year benefit of these increases," he added.

Wijers highlighted the "very, very weak" construction market in Europe and moves by Chinese authorities to calm a frothy property market as trends likely to curb demand for paints.

The company, which also makes chemicals for the pulp and paper industry, said the outlook remained uncertain because of the shaky global economic environment, with the risk of recession in Europe, delayed recovery in the United States property market, and a potential slowdown in China.

AkzoNobel said group fourth-quarter EBITDA fell 20 percent to 301 million euros, slightly below analysts' forecasts, making a net loss of 62 million euros from continuing operations, on revenue down 5 percent at 3.787 billion euros.

Analysts in a poll commissioned by Reuters had forecast EBITDA before incidentals of 319 million euros and a net loss of 68 million euros, on revenue of 3.75 billion euros.

The stock, down more than 4 percent in early trade, reversed to trade up 4.3 percent by 0900 GMT, while the Amsterdam market was down 0.7 percent.

AkzoNobel reported full-year revenue of 15.7 billion euros and reiterated its medium-term target for annual revenue of 20 billion euros, as well as its ambition to increase EBITDA each year while maintaining a 13 to 15 percent margin.

Wijers said that could come from acquisitions as well as organic growth, but declined to comment on potential targets. AkzoNobel is seen as a potential buyer for chemical maker DuPont's automotive finishes and industrial coatings unit.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.