Akzo Nobel Q3 2024 Earnings Call

Overview

Akzo Nobel (OTC:AKZOY) (AKZA.AS) reported continued volume growth for the fourth consecutive quarter in its Q3 2024 earnings call on October 25, 2024. Despite mixed market conditions, the company saw a 1% increase in volumes and maintained a steady EBITDA margin of 15%. However, the net debt-to-EBITDA ratio rose to 3x, attributed to temporarily elevated working capital.

Key initiatives include the closure of three EMEA Deco sites and the reduction of 2,000 global positions aimed at achieving significant cost savings. The company anticipates flat volumes for Q4, with stronger growth expected in emerging markets.

Key Takeaways

Akzo Nobel posts 1% volume growth in Q3, with an adjusted EBITDA of €400 million.
The net debt-to-EBITDA ratio increased to 3x due to higher working capital.
Closure of three EMEA Deco sites and reduction of 2,000 jobs are part of cost-saving measures.
Strategic review in South Asia focuses on decorative paints, especially in India.
Anticipated flat volumes in Q4, with mid-single-digit growth in emerging markets.
Full-year adjusted EBITDA expected to be around €1.5 billion, with a revised net debt-to-EBITDA forecast of 2.7x.
Interim dividend ex-date set for October 28, with payment on November 7.

Company Outlook

Full-year adjusted EBITDA expected to reach €1.5 billion.
Net debt-to-EBITDA forecast revised to 2.7x for the full year of 2024.
Strategic focus on portfolio management, especially in Southeast Asia and India.
Company open to partnerships or exits in markets with low consolidation potential.
Q4 results to be announced on January 29, 2025.

Bearish Highlights

Weak demand in China, particularly in the decorative paints segment.
Vehicle refinish market expected to soften due to mergers and lower repair volumes.
No further investment planned in Latin American decorative paints.

Bullish Highlights

Mid-single-digit growth in Latin America and strong double-digit growth in Southeast Asia.
Strategic review initiated for decorative paints in South Asia.
Interest in BASF's coatings business if it becomes available.

Misses

The company reported a rise in the net debt-to-EBITDA ratio, primarily due to increased working capital.

Q&A Highlights

Inflation assumption for 2025 is between 3% to 4%.
Focus on coatings over decorative products, with a strategic shift towards greater emphasis on coatings.
Selective bidding strategy in the marine sector to focus on high-value technical ships.
Anticipation of slight inflation in raw materials into 2025.

Akzo Nobel continues to navigate a complex market landscape while achieving modest volume growth. The leadership is implementing strategic initiatives to enhance efficiency and reduce costs, including consolidating operations and reducing the global workforce. Despite challenges in certain markets, Akzo Nobel remains committed to disciplined pricing and cost management to create value for shareholders.

Full Transcript

Operator

Thank you and good morning, everyone. I would like to welcome you all to the Akzo Nobel Q3 Results 2024 Conference Call. My name is Brika, and I will be coordinating your call today. [Operator Instructions] Thank you. I would now like to hand you over to our host, Kenny Chae, Head of Investor Relations, to begin. So please go ahead, Kenny.

Kenny Chae

Thank you, Brika. Good morning and welcome to Akzo Nobel’s investor update for the third quarter of 2024. I’m Kenny Chae, Head of Investor Relations. Today, our CEO, Greg Poux-Guillaume, and CFO, Maarten de Vries, will take you through our results… [This section contains rich details regarding Q3 results, operational strategies, and market analyses, leading to insights on future projections and investor relations discussions.]

Key Details
– Companies Involved: Akzo Nobel, BASF
– Date of Call: October 25, 2024
– Next Earnings Call Date: January 29, 2025
– Focus: Volume Growth, Cost Management, Market Conditions
– Strategic Review: South Asia Decorative Paints, Potential Partnerships

Summary

Akzo Nobel maintained growth with 1% volume increase and €400 million adjusted EBITDA in Q3 2024, navigating mixed market conditions while focusing on cost-saving initiatives.