Q3
21
Bright Skies unveiled as Color of the Year
An airy light blue has been revealed as our 2022 Color of the Year. The stunning collection of colors will inspire interior design and surfaces for the aerospace, automotive and consumer electronics markets. According to our trend research, what people need most is a breath of fresh air. That theme is reflected in Bright Skies - an incredibly versatile shade also showcased in our ColorSurfaces E17 coatings collection.
AkzoNobel I Report for the third quarter 2021 2
Our results at a glance
Highlights Q3 2021
• | Pricing up 9% compared with Q3 2020. Revenue 6% higher (up 5% from Q3 2019, in constant currencies1) |
• | Raw material and other variable costs increased €278 million compared with Q3 2020 |
• | Adjusted operating income lower at €241 million (2020: €353 million), ROS2 at 10.0% (2020: 15.5%) |
• | €1 billion share buyback started April 27, 2021; €557 million completed by end of Q3 2021 |
• | First paints and coatings company to commit to a carbon reduction target of 50% by 2030 (2018 baseline) for the full |
value chain, verified by the Science Based Targets initiative |
Q3 2021 (compared with Q3 2020)
• | Revenue up 6%, driven by pricing initiatives. Volumes 6% lower, while acquisitions added 1% |
• | Operating income lower at €226 million (2020: €326 million). OPI margin 9.4% (2020: 14.3%), includes €15 million net negative |
impact from identified items | |
• | Adjusted operating income lower at €241 million (2020: €353 million), ROS2 at 10.0% (2020: 15.5%) |
• | Net cash from operating activities lower at €290 million (2020: €457 million) |
• | Net income attributable to shareholders lower at €164 million (2020: €220 million) |
• | EPS from total operations lower at €0.89 (2020: €1.15); adjusted EPS from continuing operations at €0.93 (2020: €1.30) |
• | Interim dividend of €0.44 per share (2020: €0.43 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.
Outlook
AkzoNobel targets to grow at least in line with its relevant markets. Trends differ per region and segment, with significant raw material cost inflation and supply constraints expected to continue through mid-2022. Margin management and cost discipline are in place to deliver an average annual 50 basis points increase in return on sales over the period 2021-2023. The company is confident in the €2 billion EBITDA target for 2023, in line with its Grow & Deliver strategy. AkzoNobel targets a leverage ratio of 1-2 times net debt/EBITDA and commits to retain a strong investment grade credit rating.
Summary of financial | outcomes | |||||||||||||
Third quarter | January-September | |||||||||||||
2020 | 2021 | ∆% in € millions / % | 2020 | 2021 | ∆% | |||||||||
2,276 | 2,410 | 6% | Revenue | 6,321 | 7,184 | 14% | ||||||||
417 | 313 | (25%) | EBITDA1 | 991 | 1,170 | 18% | ||||||||
439 | 325 | (26%) Adjusted EBITDA1 | 1,062 | 1,135 | 7% | |||||||||
326 | 226 | (31%) | Operating income | 720 | 913 | 27% | ||||||||
(27) | (15) | Identified items1 | (85) | 30 | ||||||||||
353 | 241 | (32%) Adjusted operating income1 | 805 | 883 | 10% | |||||||||
14.3 | 9.4 | OPI margin (%)1 | 11.4 | 12.7 | ||||||||||
15.5 | 10.0 | ROS (%)1,2 | 12.7 | 12.3 | ||||||||||
Average invested capital1 | 6,974 | 6,706 | ||||||||||||
ROI (%)1 | 14.7 | 17.5 | ||||||||||||
64 | 70 | Capital expenditures | 156 | 189 | ||||||||||
Net debt | 1,315 | 1,983 | ||||||||||||
Leverage ratio (net debt/ | 1.0 | 1.3 | ||||||||||||
EBITDA)1 | ||||||||||||||
Number of employees | 32,400 | 32,700 | ||||||||||||
457 | 290 | Net cash from operating | 605 | 427 | ||||||||||
activities | ||||||||||||||
220 | 164 | Net income attributable to | 463 | 642 | ||||||||||
shareholders | ||||||||||||||
190.6 | 184.1 | Weighted average number of | 191.7 | 186.6 | ||||||||||
shares (in millions) | ||||||||||||||
1.15 | 0.89 | Earnings per share from total | 2.41 | 3.44 | ||||||||||
operations (in €) | ||||||||||||||
1.30 | 0.93 | Adjusted earnings per share from | 2.80 | 3.32 | ||||||||||
continuing operations (in €)1 | ||||||||||||||
- Alternative performance measures; please refer to reconciliation to the most directly comparable IFRS measures on pages 12 and 13.
- 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.
Alternative performance measures (APM)
AkzoNobel uses APM adjustments to the 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 12 and 13.
AkzoNobel I Report for the third quarter 2021 3
Financial highlights
Revenue
Q3 2021
Pricing up 9%. Revenue increased by 6% (compared with Q3 2019: up 5% in constant currencies), mainly due to pricing initiatives. Mix was up 2% overall, while volumes were 6% lower.
-
Decorative Paints pricing up 7%. Revenue increased 1% overall, with mix 3% higher due to normalization in the DIY segment
in EMEA. Volumes were 11% lower than in Q3 2020, while acquisitions added 2% - Performance Coatings pricing up 11%. Revenue was up 10% overall and increased 9% in constant currencies. Mix was flat. Volumes were 2% below Q3 2020
- Other activities revenue mainly includes service revenue
Cost of sales
Raw material and other variable costs in the third quarter of 2021 increased €278 million, adjusted for the impact of lower volumes, compared with the third quarter of 2020. The increase was mainly driven by raw material inflation, which continued to intensify.
Revenue development Q3 2021
Increase Decrease
Price: 9% | ||||||||||||
15 | Mix: 2% | |||||||||||
10 | 11% | 1% | 6% | - | 6% | |||||||
5 | ||||||||||||
0 | -6% | |||||||||||
-5 | ||||||||||||
-10 | Volume | Price/ | Acq./ | Total | Exch. | Total | ||||||
mix | div. | in CC | rates | |||||||||
Revenue development year-to-date 2021
Increase | Decrease | |||||||||||||||
20 | 4% | 1% | 16% | -2% | ||||||||||||
15 | 11% | 14% | ||||||||||||||
10 | ||||||||||||||||
5 | Price: 5% | |||||||||||||||
Mix: -1% | ||||||||||||||||
0 | ||||||||||||||||
Volume | Price/ | Acq./ | Total | Exch. | Total | |||||||||||
mix | div. | in CC | rates | |||||||||||||
Revenue
Third quarter | January-September | |||||||||||||||
∆% | ∆% | |||||||||||||||
2020 | 2021 | ∆% | CC* in € millions | 2020 | 2021 | ∆% | CC* | |||||||||
1,004 | 1,013 | 1% | 1% | Decorative Paints | 2,657 | 3,029 | 14% | 16% | ||||||||
1,270 | 1,396 | 10% | 9% | Performance | 3,651 | 4,151 | 14% | 17% | ||||||||
Coatings | ||||||||||||||||
2 | 1 | Other activities | 13 | 4 | ||||||||||||
2,276 | 2,410 | 6% | 6% | Total | 6,321 | 7,184 | 14% | 16% |
* Change excluding currency impact.
Price/ | Exchange | ||||||||||||
in % versus Q3 2020 | Volume | mix | Acq./div. | rates | Total | ||||||||
Decorative Paints | (11) | 10 | 2 | - | 1 | ||||||||
Performance Coatings | (2) | 11 | - | 1 | 10 | ||||||||
Total | (6) | 11 | 1 | - | 6 | ||||||||
Price/ | Exchange | ||||||||||||
in % versus year-to-date 2020 | Volume | mix | Acq./div. | rates | Total | ||||||||
Decorative Paints | 11 | 3 | 2 | (2) | 14 | ||||||||
Performance Coatings | 12 | 5 | - | (3) | 14 |
SBTi approves carbon reduction target
Our commitment to setting science-based sustainability targets has been officially validated by the Science Based Targets initiative (SBTi) - confirming AkzoNobel as the first paints and coatings company to receive this endorsement. We've also restated our carbon reduction target across the whole value chain and increased it to 50% by 2030 (baseline 2018). This brings it in line with the company's carbon reduction ambition in its own operations.
AkzoNobel around the world
Revenue by destination
% | E | ||||
A North Asia | 18 | A | |||
D | |||||
B South Asia Pacific | 11 | ||||
C EMEA | 51 | B | |||
D North America | 13 | ||||
E South America | 7 | ||||
100 |
C (Based on the full-year 2020)
Total | 11 | 4 | 1 | (2) | 14 | |||||||
Volume development per quarter | ||||||||||||
(year-on-year) in % | Q3 20 | Q4 20 | Q1 21 | Q2 21 | Q3 21 | |||||||
Decorative Paints | 14 | 12 | 28 | 22 | (11) | |||||||
Performance Coatings | (5) | 1 | 10 | 30 | (2) | |||||||
Total | 3 | 6 | 16 | 26 | (6) | |||||||
Price/mix development per | ||||||||||||
quarter (year-on-year) in % | Q3 20 | Q4 20 | Q1 21 | Q2 21 | Q3 21 | |||||||
Decorative Paints | (4) | 2 | 1 | (2) | 10 | |||||||
Performance Coatings | 1 | - | (2) | 4 | 11 | |||||||
Total | (1) | 1 | (1) | 1 | 11 | |||||||
Currency development per quarter | ||||||||||||
(year-on-year) in % | Q3 20 | Q4 20 | Q1 21 | Q2 21 | Q3 21 | |||||||
Decorative Paints | (7) | (10) | (8) | (2) | - | |||||||
Performance Coatings | (5) | (5) | (5) | (4) | 1 | |||||||
Total | (6) | (7) | (6) | (3) | - |
AkzoNobel I Report for the third quarter 2021 4
Financial highlights
Q3 2021
Operating income
Operating income at €226 million (2020: €326 million) as pricing initiatives were more than offset by significant raw material cost impact and lower volumes. OPI margin at 9.4% (2020: 14.3%).
- Decorative Paints operating income decreased, mainly due to significant raw material cost increases and 11% lower volumes, partly offset by pricing initiatives. OPI margin at 14.5% (2020: 20.1%)
- Performance Coatings delivered 11% higher pricing, although heavily impacted by continued raw material cost inflation. OPI margin at 9.5% (2020: 14.1%)
- Other activities improved €1 million to €54 million negative (2020: €55 million negative)
Adjusted operating income
Adjusted operating income at €241 million (2020: €353 million) excludes negative identified items of €15 million, mainly related to transformation initiatives (2020: €27 million negative identified items relating to transformation initiatives). ROS1 at 10.0% (2020: 15.5%).
Year-to-date
Operating income
Operating income up 27% at €913 million (2020: €720 million), driven by significant volume increases and one-off gains. Operating income includes net positive identified items of €30 million, mainly related to gains from the Brazil ICMS case and UK pensions curtailments, partly offset by transformation initiatives (2020: €85 million negative identified items, mainly relating to transformation initiatives). OPI
Net financing income/(expenses)
Net financing expenses decreased by €22 million, mainly due to one-off interest income from the Brazil ICMS case (see below).
Income tax
The effective tax rate was 27.0% (2020: 27.6%). The decrease compared with previous year is mainly related to non-taxable interest income from the Brazil ICMS case (see below). Excluding identified items, the effective tax rate in 2021 was 24.8% (2020: 26.8%).
In July 2021, the UK Supreme Court issued a decision in a group litigation case the company participates in ("Franked Investment Income"; filed in 2003). The company is in the process of assessing the impact of this decision and has not yet accounted for such impact.
Net income
Net income attributable to shareholders was €642 million (2020: €463 million). Earnings per share from total operations increased to €3.44 (2020: €2.41), including the impact of share buyback programs.
Identified items: Brazil ICMS and UK pensions year-to-date
Brazil state tax on goods and services (ICMS)
In May 2021, the Brazilian Supreme Court (STF) recognized the right to deduct state tax on goods and services (ICMS) from the calculation basis of the Social Integration Program-PIS (Programa de Integração Social) and the Financing of Social Security-COFINS (Contribuição para Financiamento da Seguridade Social).
Operating income
Third quarter | January-September | ||||||||||||
2020 | 2021 | ∆% in € millions | 2020 | 2021 | ∆% | ||||||||
202 | 147 | (27%) | Decorative Paints | 429 | 532 | 24% | |||||||
179 | 133 | (26%) | Performance Coatings | 450 | 513 | 14% | |||||||
(55) | (54) | Other activities | (159) | (132) | |||||||||
326 | 226 | (31%) | Total | 720 | 913 | 27% |
Adjusted operating income
Third quarter | January-September | |||||||||||||
2020 | 2021 | ∆% in € millions | 2020 | 2021 | ∆% | |||||||||
208 | 151 | (27%) | Decorative Paints | 447 | 490 | 10% | ||||||||
195 | 136 | (30%) | Performance Coatings | 488 | 511 | 5% | ||||||||
(50) | (46) | Other activities | (130) | (118) | ||||||||||
353 | 241 | (32%) | Total | 805 | 883 | 10% |
ROS1
Third quarter | January-September | ||||||||||||
2020 | 2021 | in % | 2020 | 2021 | |||||||||
20.7 | 14.9 | Decorative Paints | 16.8 | 16.2 | |||||||||
15.4 | 9.7 | Performance Coatings | 13.4 | 12.3 | |||||||||
Other activities2 | |||||||||||||
15.5 | 10.0 | Total | 12.7 | 12.3 |
- 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.
margin improved to 12.7% (2020: 11.4%).
- Decorative Paints performance improved, mainly due to strong demand across all regions and one-off gains, with volumes up 11% compared with year-to-date Q3 2020. OPI margin was up at 17.6% (2020: 16.1%)
- Performance Coatings operating income increased, mainly due to 12% higher volumes. OPI margin improved to 12.4% (2020: 12.3%)
- Other activities improved €27 million to €132 million negative (2020: €159 million negative), mainly resulting from lower negative identified items
Adjusted operating income
Adjusted operating income was 10% higher at €883 million (2020: €805 million). ROS1 at 12.3% (2020: 12.7%).
This STF decision covers a multi-year period prior to 2018. As a result, | Operating income to net income | |||||||||||
a year-to-date net gain of €50 million was recognized in net income, | Third quarter | January-September | ||||||||||
of which €36 million in Other results, €21 million in interest income, €6 | 2020 | 2021 in € millions | 2020 | 2021 | ||||||||
million in discontinued operations and €13 million negative in income tax. | 326 | 226 | Operating income | 720 | 913 | |||||||
(15) | (19) | Net financing income/(expenses) | (53) | (31) | ||||||||
UK pensions curtailment | ||||||||||||
6 | 6 | Results from associates and joint ventures | 18 | 21 | ||||||||
Following a court decision in April 2021, which allows the amendment | 317 | 213 | Profit before tax | 685 | 903 | |||||||
of the scheme documentation of one of the company's UK pension | (82) | (48) | Income tax | (189) | (244) | |||||||
funds, a curtailment gain of €23 million was recognized in Other results | 235 | 165 | Profit from continuing operations | 496 | 659 | |||||||
in Q2 2021. | (5) | - | Profit from discontinued operations | (6) | 5 | |||||||
230 | 165 | Profit for the period | 490 | 664 | ||||||||
(10) | (1) | Non-controlling interests | (27) | (22) | ||||||||
220 | 164 | Net income | 463 | 642 |
AkzoNobel I Report for the third quarter 2021 5
Decorative Paints
Highlights Q3 2021
• Pricing up 7% compared with Q3 2020, driven by strong pricing initiatives in all regions • Revenue up 1% (compared with Q3 2019: up 11% in constant currencies)
• Normalization in the DIY segment in EMEA, while the professional segment returned to growth; mix up 3%
Q3 2021
• | Pricing up 7%. Revenue up 1% (compared with Q3 2019: up 11% in constant currencies). Pricing initiatives and positive mix of 3% were |
offset by 11% lower volumes, while acquisitions added 2% | |
• | Operating income lower at €147 million (2020: €202 million) as pricing initiatives of 7% were more than offset by raw material cost |
inflation and lower volumes |
Revenue
Third quarter | January-September | ||||||||||||||||
∆% | ∆% | ||||||||||||||||
2020 | 2021 | ∆% | CC* in € millions | 2020 | 2021 | ∆% | CC* | ||||||||||
620 | 615 | (1%) | (2%) | Decorative Paints | 1,749 | 1,931 | 10% | 11% | |||||||||
Europe, Middle East | |||||||||||||||||
and Africa | |||||||||||||||||
116 | 131 | 13% | 25% | Decorative Paints | 259 | 329 | 27% | 52% | |||||||||
South America | |||||||||||||||||
268 | 267 | -% | (2%) | Decorative Paints Asia | 649 | 769 | 18% | 20% | |||||||||
1,004 | 1,013 | 1% | 1% | Total | 2,657 | 3,029 | 14% | 16% |
* Change excluding currency impact.
Revenue development Q3 2021
Increase Decrease
Q3 2021
Revenue was up 1%, with pricing initiatives and positive mix partly offset by lower volumes. Acquisitions added 2%.
Operating income of €147 million (2020: €202 million) was adversely impacted by raw material cost inflation and lower volumes, partly offset by pricing initiatives and positive mix effects. Operating income includes €4 million net negative identified items, mainly related to transformation initiatives. In 2020, operating income included €6 million identified items related to transformation initiatives.
Adjusted operating income lower at €151 million (2020: €208 million)
and ROS at 14.9% (2020: 20.7%).
Europe, Middle East and Africa
Revenue in Q3 was 1% lower and 2% lower in constant currencies (compared with Q3 2019: up 10% in constant currencies), with pricing initiatives offset by lower volumes.
Positive mix effects and lower volumes were driven by normalization in the DIY segment. DIY normalizing above 2019 levels, while the professional segment returned to growth, although still impacted by supply constraints.
South America
Revenue in Q3 was 13% higher and up 25% in constant currencies (compared with Q3 2019: up 70% in constant currencies), driven by pricing initiatives and market share gains in Brazil and Argentina.
Asia
Revenue in Q3 was flat and 2% lower in constant currencies (compared with Q3 2019: 3% lower in constant currencies). China showed strong growth in the premium retail segment, contributing to a positive mix. Pricing initiatives were offset by lower volumes as Vietnam, Malaysia and Indonesia were still heavily impacted by lockdown measures in Q3 2021, while India showed signs of recovery.
15 | ||||||
10 | Price: 7% | |||||
5 | Mix: 3% | |||||
-11% | 10% | 2% | 1% | -% | 1% | |
0 | ||||||
-5 | ||||||
10 | Volume | Price/ | Acq./ | Total | Exch. | Total |
-15 | ||||||
mix | div. | in CC | rates |
Revenue development year-to-date 2021
Increase Decrease | ||||||
20 | 3% | 2% | 16% | -2% | 14% | |
15 | ||||||
11% | ||||||
10 | ||||||
5 | Price: 5% | |||||
Mix: -2% | ||||||
0 | ||||||
Volume | Price/ | Acq./ | Total | Exch. | Total | |
mix | div. | in CC | rates |
Key financial figures
Third quarter | January-September | ||||||||||||
2020 | 2021 | ∆% in € millions / % | 2020 | 2021 | ∆% | ||||||||
202 | 147 | (27%) | Operating income | 429 | 532 | 24% | |||||||
(6) | (4) | Identified items* | (18) | 42 | |||||||||
208 | 151 | (27%) | Adjusted operating income* | 447 | 490 | 10% | |||||||
20.1 | 14.5 | OPI margin (%)* | 16.1 | 17.6 | |||||||||
20.7 | 14.9 | ROS (%)* | 16.8 | 16.2 | |||||||||
Average invested capital* | 2,882 | 2,771 | |||||||||||
ROI (%)* | 18.5 | 22.2 |
*Alternative performance measures; please refer to reconciliation to the most directly comparable IFRS measures on pages 12 and 13.
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Akzo Nobel NV published this content on 03 March 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 March 2022 09:29:08 UTC.