AkzoNobel

Report for the fourth quarter and full-year 2021

2

Highlights

Q4 2021 (compared with Q4 2020)

  • Pricing up 12.5%; December pricing up 14%
  • Revenue up 9% and 7% higher in constant currencies. Compared with Q4 2019, revenue was up 12% in constant currencies
  • Volumes 6% lower, flat compared with Q4 2019
  • Operating income at €205 million (2020: €243 million)
  • Adjusted operating income at €209 million (2020: €294 million) despite raw material and other variable costs increases of €325 million
  • €1 billion share buyback completed in January 2022
  • €500 million share buyback announced, to be completed by Q1 2023

Full-year 2021 (compared with full-year 2020)

  • Pricing up 7%
  • Revenue up 12% and 14% higher in constant currencies. Compared with 2019, revenue up 9% in constant currencies
  • Operating income up 16% at €1,118 million (2020: €963 million)
  • Adjusted operating income at €1,092 million (2020: €1,099 million) despite raw material and other variable costs increases of
    €769 million

Outlook

AkzoNobel targets to grow at or above its relevant markets, in line with its Grow & Deliver strategy. Trends differ per region and segment, while raw material cost inflation and supply constraints are expected to gradually ease by mid-2022. Plans are in place to deliver the €2 billion adjusted EBITDA target for 2023, and an average annual 50 basis points increase in return on sales over the period 2021-2023. AkzoNobel targets a leverage ratio of 1-2 times net debt/EBITDA and commits to retain a strong investment grade credit rating.

Alternative performance measures (APM)

AkzoNobel uses APM adjustments to IFRS measures to provide supplementary information on the reporting of the underlying developments of the business. A reconciliation of the alternative performance measures to the most directly comparable IFRS measures can be found in the tables on pages 16 and 17.

Leading the way in sustainability

In 2021, we became the first paints and coatings company to receive official validation for setting science-based sustainability targets. The commitment we've made - a 50% carbon reduction by 2030 (2018 baseline) - covers the full value chain and is aligned with the 1.5˚C pathway in the Paris agreement. The validation was confirmed just a few weeks before we became one of the first recipients of the Terra Carta Seal, a major new sustainability award launched at COP26. We were the only paints and coatings company to receive the honor.

AkzoNobel

Report for the fourth quarter and full-year 2021

3

Our results at a glance

Highlights Q4 2021 (compared with Q4 2020)

  • Pricing up 12.5%; December pricing up 14%
  • Revenue up 9% and 7% higher in constant currencies (compared with Q4 2019: up 12% in constant currencies), driven by pricing initiatives and despite supply constraints
  • Volumes 6% lower, flat compared with Q4 2019
  • Raw material and other variable costs increased €325 million
  • Operating income at €205 million (2020: €243 million), includes €4 million net negative impact from identified items. OPI margin 8.5% (2020: 11.0%)
  • Adjusted operating income at €209 million (2020: €294 million),
    ROS2 at 8.7% (2020: 13.3%)
  • Net cash from operating activities lower at €178 million (2020: €615 million), mainly due to the impact from the increase in raw material cost on working capital
  • Net income attributable to shareholders at €187 million (2020: €167 million)
  • EPS from total operations at €1.04 (2020: €0.87); adjusted EPS
    from continuing operations at €0.74 (2020: €1.08)
  • The 2019 comparatives are included in this report to allow for proper comparison in light of the COVID-19

impact in 2020.

  • ROS is adjusted operating income as percentage of revenue; ROS excluding unallocated cost was reported in relation to the Winning together: 15 by 20 strategy and is no longer reported.

Membership of Responsible Mica Initiative formalized

We formalized our membership of the Responsible Mica Initiative (RMI), having been one of the founding members when it was launched in 2017. Used in a wide range of industries, mica minerals are mined extensively in India, where a variety of factors contribute to poor working conditions, including the use of child labor. The RMI's mission is to establish responsible and sustainable mica supply chains that are free of child labor. Following the RMI's pilot year, we continued to focus on the issue and a commitment was made to conduct serious due diligence and look for creative ways to contribute to the initiative - which has now resulted in full membership.

Full-year 2021

(compared with full-year 2020)

  • Pricing up 7%
  • Revenue up 12% and 14% higher in constant currencies (compared with full-year 2019: up 9% in constant currencies), driven by pricing initiatives and volume growth
  • Volumes 7% higher, while acquisitions added 1%
  • Raw material and other variable costs increased €769 million
  • Operating income up at €1,118 million (2020: €963 million), includes €26 million net positive impact from identified items. OPI margin 11.7% (2020: 11.3%)
  • Adjusted operating income at €1,092 million
    (2020: €1,099 million), ROS2 at 11.4% (2020: 12.9%)
  • Net cash from operating activities lower at €605 million (2020: €1,220 million), mainly due to the impact from the increase in raw material cost on working capital
  • Net income attributable to shareholders at €829 million (2020: €630 million)
  • EPS from total operations at €4.48 (2020: €3.29); adjusted EPS
    from continuing operations at €4.07 (2020: €3.88)
  • Final dividend proposed of €1.54 per share (2020: €1.52 per share)
  • The 2019 comparatives are included in this report to allow for proper comparison in light of the COVID-19 impact in 2020.
  • ROS is adjusted operating income as percentage of revenue; ROS excluding unallocated cost was reported in relation to the Winning together: 15 by 20 strategy and is no longer reported.

Summary of financial outcomes

Fourth quarter

January-December

2020

2021

∆%

in € millions / %

2020

2021

∆%

2,209

2,403

9%

Revenue

8,530

9,587

12%

333

299

(10%)

EBITDA1

1,324

1,469

11%

380

301

(21%)

Adjusted EBITDA1

1,442

1,436

-%

243

205

(16%)

Operating income

963

1,118

16%

(51)

(4)

Identified items1

(136)

26

294

209

(29%)

Adjusted operating income1

1,099

1,092

(1%)

11.0

8.5

OPI margin (%)1

11.3

11.7

13.3

8.7

ROS (%)1,2

12.9

11.4

Average invested capital1

6,834

6,829

ROI (%)1

16.1

16.0

102

99

Capital expenditures

258

288

Net debt

1,034

2,340

Leverage ratio (net debt/

0.8

1.6

EBITDA)1

Number of employees

32,200

32,800

615

178

Net cash from operating

1,220

605

activities

167

187

Net income attributable to

630

829

shareholders

190.5

180.6

Weighted average number of

191.4

185.0

shares (in millions)

0.87

1.04

Earnings per share from total

3.29

4.48

operations (in €)

1.08

0.74

Adjusted earnings per share

3.88

4.07

from continuing operations

(in €)1

  • Alternative performance measures; please refer to reconciliation to the most directly comparable IFRS measures on pages 16 and 17.
  • ROS is adjusted operating income as percentage of revenue; ROS excluding unallocated cost was reported in relation to the Winning together: 15 by 20 strategy and is no longer reported.

AkzoNobel

Report for the fourth quarter and full-year 2021

4

Financial highlights

Revenue

Q4 2021

Pricing up 12.5%; December pricing up 14%. Revenue was 9% higher, and 7% higher in constant currencies.

  • Decorative Paints pricing up 10%. Revenue was 5% higher and 4% higher in constant currencies. Volumes were 8% lower, mainly due to normalization of seasonality in the DIY segment in EMEA. Volumes were up 4% compared with Q4 2019
  • Performance Coatings pricing up 14%. Revenue was 11% higher and 9% higher in constant currencies. Volumes were 5% lower, mainly due to continued supply constraints, especially in North America. Volumes were 4% lower compared with Q4 2019

Full-year 2021

Pricing up 7%. Revenue was 12% higher, and 14% higher in constant currencies. Volumes were 7% higher, mainly due to the impact of the recovery from COVID-19 on end market demand.

  • Decorative Paints pricing up 6%. Revenue up 12% and 13% higher in constant currencies. Volumes up 6%, mainly due to higher end market demand
  • Performance Coatings pricing up 8%. Revenue was 13% higher and 15% higher in constant currencies. Volumes were 8% higher, mainly due to end market demand recovery in all segments

Cost of sales

Raw material and other variable costs in the fourth quarter of 2021 increased €325 million, adjusted for the impact of lower volumes, compared with the fourth quarter of 2020. For the full-year 2021, this number amounts to €769 million. The increase was mainly driven by raw material inflation, which is expected to gradually ease by mid-2022.

Acquisitions

In March 2021, the acquisition of Titan Paints in Spain was completed, strengthening our paints business and footprint in Spain. In June 2021, the intended acquisition of Colombia-based paints and coatings company Grupo Orbis was announced. The acquisition is expected to be completed in the first quarter of 2022.

Revenue development Q4 2021

Increase

Decrease

15

12%

1%

7%

2%

9%

10

5

0

-5

-6%

-10

Volume

Price/

Acq./

Total

Exch.

Total

mix

div.

in CC

rates

Revenue development full-year 2021

Increase

Decrease

20

6%

1%

14%

15

12%

10

7%

-2%

5

0

Volume

Price/

Acq./

Total in

Exch.

Total

mix

div.

CC

rates

AkzoNobel around the world

Revenue by destination

E

A

D

%

A

North Asia

18

B

B

South Asia Pacific

12

C

EMEA

50

D

North America

12

C

South America

8

E

100

(Based on the full-year 2021)

Revenue

Fourth quarter

January-December

∆%

in € millions

∆%

2020

2021

∆%

CC*

2020

2021

∆%

CC*

901

950

5%

4%

Decorative

3,558

3,979

12%

13%

Paints

1,306

1,452

11%

9%

Performance

4,957

5,603

13%

15%

Coatings

2

1

Other actvities

15

5

2,209

2,403

9%

7%

Total

8,530

9,587

12%

14%

* Change excluding currency impact.

in % versus Q4 2020

Price/

Acq./

Exchange

Volume

mix

div

rates

Total

Decorative Paints

(8)

10

2

1

5

Performance Coatings

(5)

14

-

2

11

Total

(6)

12

1

2

9

in % versus full-year 2020

Price/

Acq./

Exchange

Volume

mix

div

rates

Total

Decorative Paints

6

5

2

(1)

12

Performance Coatings

8

7

-

(2)

13

Total

7

6

1

(2)

12

Volume development per quarter

(year-on-year) in %

Q4 20

Q1 21

Q2 21

Q3 21

Q4 21

Decorative Paints

12

28

22

(11)

(8)

Performance Coatings

1

10

30

(2)

(5)

Total

6

16

26

(6)

(6)

Price/mix development per

quarter (year-on-year) in %

Q4 20

Q1 21

Q2 21

Q3 21

Q4 21

Decorative Paints

2

1

(2)

10

10

Performance Coatings

-

(2)

4

11

14

Total

1

(1)

1

11

12

Currency development per quarter

(year-on-year) in %

Q4 20

Q1 21

Q2 21

Q3 21

Q4 21

Decorative Paints

(10)

(8)

(2)

-

1

Performance Coatings

(5)

(5)

(4)

1

2

Total

(7)

(6)

(3)

-

2

AkzoNobel

Report for the fourth quarter and full-year 2021

5

Financial highlights

Q4 2021

Operating income

Operating income at €205 million (2020: €243 million) as pricing initiatives were more than offset by significant raw material cost impact and lower volumes. Operating income includes negative identified items of €4 million, mainly related to transformation initiatives (2020: €51 million negative identified items relating to transformation initiatives). OPI margin at 8.5% (2020: 11.0%).

  • Decorative Paints operating income decreased, mainly due to significant raw material cost increases and 8% lower volumes due to normalization of seasonality in the DIY segment in EMEA, partly offset by pricing initiatives. OPI margin at 11.4% (2020: 13.5%)
  • Performance Coatings delivered significantly higher pricing, with prices up 14% compared with Q4 2020. Volumes 5% lower, as Performance Coatings continues to be heavily impacted by raw material cost inflation and supply constraints. OPI margin at 9.4% (2020: 16.5%)
  • Other activities improved €54 million to €40 million negative (2020: €94 million negative), mainly as a result of transformation costs in 2020

Adjusted operating income

Adjusted operating income at €209 million (2020: €294 million).

ROS1 at 8.7% (2020: 13.3%).

Full-year 2021

Operating income

Operating income was up 16% at €1,118 million (2020: €963 million). Significant price increases and volume increases contributed to offset raw material cost inflation and supply constraints. Operating income further includes net positive identified items of €26 million, mainly related to gains from the Brazil ICMS case and UK pensions past service credit (refer to page 6 for further details), partly offset by transformation initiatives (2020: €136 million negative identified items, mainly relating to transformation initiatives). OPI margin improved to 11.7% (2020: 11.3%).

  • Decorative Paints performance improved, mainly due to strong demand across all regions and one-off gains, with volumes up 6% compared with full-year 2020. OPI margin was up at 16.1% (2020: 15.5%)
  • Performance Coatings volumes up 8%. Operating income decreased, mainly due to higher raw material prices. OPI margin at 11.6% (2020: 13.4%)
  • Other activities improved €81 million to €172 million negative (2020: €253 million negative), mainly resulting from lower negative identified items

Adjusted operating income

Adjusted operating income was 1% lower at €1,092 million (2020: €1,099 million). ROS1 at 11.4% (2020: 12.9%).

Operating income

Fourth quarter

January-December

2020

2021

∆%

in € millions

2020

2021

∆%

122

108

(11%)

Decorative Paints

551

640

16%

215

137

(36%)

Performance Coatings

665

650

(2%)

(94)

(40)

Other activities

(253)

(172)

243

205

(16%)

Total

963

1,118

16%

Adjusted operating income

Fourth quarter

January-December

2020

2021

∆%

in € millions

2020

2021

∆%

126

108

(14%)

Decorative Paints

573

598

4%

212

137

(35%)

Performance Coatings

700

648

(7%)

(44)

(36)

Other activities

(174)

(154)

294

209

(29%)

Total

1,099

1,092

(1%)

ROS%1

Fourth quarter

January-December

2020

2021

in %

2020

2021

14.0

11.4

Decorative Paints

16.1

15.0

16.2

9.4

Performance Coatings

14.1

11.6

Other activities2

13.3

8.7

Total

12.9

11.4

1 ROS is adjusted operating income as percentage of revenue; ROS excluding unallocated cost was reported in relation to the Winning together: 15 by 20 strategy and is no longer reported.

2 ROS for Other activities is not shown, as this is not meaningful.

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Akzo Nobel NV published this content on 09 February 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 February 2022 10:38:05 UTC.