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Akzo’s Q3 figures were above our quite cautious expectations, but could not match with the street. The top line was +2.6% (consensus: -1.1%) and profitability +3.2% (consensus: -1.8%) above our estimates. The implemented higher sales pushed the top line, but raw material prices were higher than guided. Decorative Paints showed some price sensitivity.
Management flagged higher raw material prices as well as higher sales prices. We believe this will also have a negative volume impact, when it com
Companies: Akzo Nobel N.V.
Akzo reported the expected strong volume-driven recovery yoy with some positive contributions from one-offs to profitability. Our conservative estimate was beaten primarily due to a less pronounced impact from higher raw material prices and the positive one-off. Consensus was not fully matched (top line: +3.3%; adjusted EBITDA: -3.5%).
The company guides for ‘significant higher’ raw material prices, which leaves us on the cautious side.
Akzo had a very strong start to the year, clearly beating our expectations as well as consensus (top line by +6.6%; adjusted EBITDA: +8.0%) and predominately driven by the strong recovery of Paints, whereas Coatings reported a moderate performance. Despite the strong volume-driven start, Akzo’s long-term weakness came even clearer: the lack of pricing power. The price/mix effect was still negative and, against the background of recent developments on the raw material side, the negative sign will
The extraordinary profitability push in Q4 could have made us believe that FY20 was exceptional as we haven’t seen such an organic growth rate of +3% for a long time. Looking at the long-term opportunities, missed chances (e.g. Tikkurila) and the sustainability of its profitability, our thinking becomes not so optimistic. Lower raw material prices will be of some help in 2021 but, thereafter, growing in line with the markets will not be good enough, when a rival enters one’s backyard.
... in for a pound.
Having thrown its hat into the ring, Akzo submitted today a binding proposal to Tikkurila’s management with unchanged conditions. It looks to us that Akzo has gathered enough information to take the next step, which is – as usual – linked to certain conditions, still underpinning the aim to take over the Finnish paints company.
Rephrasing our headline, it could have been ‘Buying into something tiny’. We are still struggling with the financial offer (€1,378m) and potential bidding war (management had excluded this), with its long-term rival PPG. We understand the strategic rationale, but a 3-5 year period to full value creation is completely unacceptable in our view. Furthermore, Akzo’s balance sheet will suffer due to the financing of the potential acquisition, which might postpone our rating upgrade.
Akzo’s management seems to have successfully obtained the qualification as feel-good manager. An additional €300m in cash will be spent to buy back shares. Was there an alternative? How about bolt-on acquisitions? 9M organic growth is still negative, despite some vital signs in Q3. Where the company is really going and where a sustainable growth momentum will come from remain unclear.
The reported figures were a notch weaker than expected. Street expectations were slightly beaten.
Akzo’s management continues to manage expectations without providing any figures. It looks as if Decorative Paints might have seen a stronger development than Performance Coatings.
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Further to its 7 December update, the group has posted a positive trading report, highlighting a better-than-expected profit and cash performance, driven by strong H2 trading in December, with North America, Europe and Australia all performing robustly. We raise our FY21 EPS forecast by 6.9%, and lift our dividend forecast by 9.2%. The outlook remains positive with a slightly greater investment in NPD supporting longer-term growth resulting in FY22 EBITDA similar to that of FY21. We raise our Ta
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ACP Energy plc, a company formed for the purpose of undertaking an acquisition or acquisitions of a majority interest in a company, business or asset, seeking to join the Main Market (Standard) The Company intends to focus on opportunities in the natural resources sector, raising gross proceeds of £830k. Due 28 Jan.
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Further international potential for the deployment of Powerhouse’s waste to hydrogen technology is emerging in the form of a LoI between partner Hydrogen International and Mitsubishi Heavy Industries. Clearly this is a strong partner and we identified Japan is a strong area of opportunity in our view.
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The Group has issued an in-line trading update for the first half of the current financial year and confirmed period end net cash (pre-IFRS 16) of £22.5m. Avingtrans has also announced that it has increased its shareholding in Adaptix to 11.9% at a cost of £1.5m. Adaptix and Magnetica have product launch plans that are convergent and there is clear benefit in the companies working in close collaboration as they bring about a transformation in (small-scale) diagnostic imaging. The funds are to be
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Plant Health Care and Wilbur Ellis hosted a joint webinar to discuss the strategic partnership. We highlight our key takeaways below, all excellent in our view. We see 2022 as the inflection year for PHC. We expect upward pressure to current forecasts, good news flow from Brazil on the launch of Saori and US registration of PHC279 as well as increasing penetration in Europe. The scale of key distribution partners is a massive endorsement. Buy
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Capital Limited has released its Q4 and FY2021 trading statement this morning. Overall, it shows 2021 was an outstanding year for the company with revenue growing an impressive 68% to $226.8m (above the latest guidance of US$220 -US$225 million) and most other operating metrics growing with it. The company enters 2022 with an ongoing tailwind from the commodity markets, the highest rig count in its history, Sukari at full speed and the MSALABS business at an inflection point for growth. In other
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Trading through Q3 and into Q4 to date has proven to be strong and not blunted by any of the headwinds that management held caution against at the time of reporting its Interims (on 1 December). Taylor Maxwell, and within that its timber merchanting division, has outperformed expectations and consequently management is now guiding to FY22E EBITDA of at least £32m, 13% ahead of our previous estimate and a baseline for FY23E from which it can still feel confident of growing profits by 20% plus. Ma
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Today Staffline has released a positive FY21 trading update with underlying operating profit expected to double versus the prior year and net cash of £6.9m at the period end (vs. net debt of £8.8m in FY20). We see Staffline as a unique platform that has improving quality of earnings and a transformed balance sheet. The business has strong defensive qualities but with attractive growth opportunities in structural growth markets. We believe the shares are undervalued and see an intrinsic value per
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