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Weak pricing power (cont’d)
19 Oct 16
Akzo reported 4% lower sales, down to €3,600m, facing a lower price/mix (-2%), whereas the gross profit margin improved 1pp to 42.7% in Q3. EBITDA came in pretty much unchanged at €594m (€590m) and net income attributable to shareholders stood unchanged at €285m. Operating CF moved slightly up to €600m (€583m), helped by a stronger NWC inflow and more positive other changes, but partly eaten up more negative changes in provisions. Investing CF (€-114m after €-143m) benefited from lower capex (-21% to €-128m). Despite higher dividend payments (€-22m after €-10m), financing CF moved from €-277m to €-106m lifted by lower net gross debt repayments (€-78m after €-267m). Management continued to give no detailed guidance but sees itself in a position to confirm the group’s financial guidance 2016-18 (ROS: 9-11%; ROI: 13-16.5%).
Covering Paints and Coatings
19 Jul 16
Akzo’s sales weakened by 6% (v: +1%; p: -2%; FX: -5%) to €3,711m in Q2, but the gross profit margin strongly improved from 41.4% to 43.6%. EBITDA was up +5% to €642m, whereas net profit attributable to shareholders declined 6% to €312m. Operating CF was up (+11% to €453m) primarily helped by lower changes in provisions. Investing CF strongly rose from €-37m to €-110m, suffering from higher capex and lower divestment results. Despite higher dividend payments (€-226m after €-184m), financing CF came in at €-192m after €-361m fuelled by a swing in borrowings from net repayments to net proceeds. Management continued to give guidance, but it expects some uncertainties in the company’s markets triggered by challenging conditions in several countries and segments.
Not a good start to 2016, but profitability is resilient
19 Apr 16
Continued operations’ sales declined by 4% (organic: 0%) to €3,430m, but gross profit margin improved from 40.2% to 41.5% in Q1. EBITDA increased +5% to €487m and net profit attributable to shareholders jumped +50% to €240m. Operating CF moved from €-622m to €-336m, strongly benefiting from a lower NWC outflow and lower provisions. Capex stood unchanged at €-124m and investing CF came in at €-120m (€-131m). Financing CF swung from €-35m to €256m, driven by a net gross debt inflow after an outflow. Management failed to give guidance, but expects some uncertainties in the company’s markets triggered by challenging conditions in several countries and segments.
Non-business measures propelled profitability
10 Feb 16
Akzo Nobel lifted FY sales by +4% to €14,859m, primarily driven by favourable FX tailwinds (+6%) and the gross profit margin improved from 39.3% to 40.9%. EBITDA strongly climbed 24% to €2,088m with respective margin seen at 14.1% (11.8%). Net income attributable to shareholders jumped +79% to €979m. Operating CF strongly rose +40% to €1,136m, reflecting the higher operating performance and the swing in other changes despite the higher outflow for provisions. Investing CF saw a small change (€-508m after €-529m) primarily due to lower capex. Financing CF (€-972m after €-635m) was hit by higher net gross debt repayments (€-689m after €-367m). 2015 targets (ROS: 9%; ROI: of 14%; net debt/EBITDA ratio: <2.0x) have been reached (ROS: 10.6%; ROI: 15.0%; net debt/EBITDA: 0.6x) based on the company’s calculation. Management proposes a 2015 final dividend of €1.20 bringing the total 2015 dividend up to €1.55 (€1.45). For 2016, management failed to give clear guidance, but expects a challenging year with difficult market conditions in Brazil, China and Russia. Europe is expected to stay at current levels. The anuual report will be published within the next few weeks.
Performance Coatings' strong profitability push
22 Oct 15
Sales were up +2% to €3,760m and the gross profit margin improved from 40.0% to 41.9% in Q3. EBITDA strongly rose +21% to €590m and net profit attributable to shareholders jumped +39% to €285m. Q3’s operating CF was up +19% to €583m, benefiting from the better operating performance and additionally helped by a higher NWC inflow. Due to higher capex (€163m after €-137m), investing CF came in at €-143m (€-129m). Helped by lower net gross debt repayments (-€267m after €-277m) and lower dividends, financing CF moved from €-296m to €-277m. Management again confirmed delivery of 2015 targets. As a reminder, AkzoNobel aims for a ROS of 9%, a ROI of 14% and a net debt/EBITDA ratio below 2.0x.
Humble organic performance, but increasing profitability
21 Jul 15
Q2 sales were clearly fuelled by favourable FX developments (+9%), bringing sales up +6% to €3,949m. The gross profit margin jumped from 40.0% to 46.5% and EBITDA strongly rose by +32% to €610m. Net profit attributable to shareholders soared up from €205m to €331m. Q2 operating CF moved up just tiny blip (+€14m to €407m,) dampened by higher NWC outflow, higher provisions (ICI pension funds) and lower other changes. Investing CF came in at €-37m (€-147m) clearly helped by €114m in net proceeds from the Paper Chemicals divestment. Financing CF saw higher net gross debt repayments (€-175m after €-22m) bringing outflow from €-197m to €-361m. Management confirmed delivering its 2015 targets. As a reminder, AkzoNobel aims for a ROS of 9%, ROI of 14% and a net debt/EBITDA ratio below 2.0x.
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Commercial progress and financial discipline
24 Oct 16
Carbios has reported H116 results showing solid progress on scaling up and industrialisation, with good cash management. As expected, losses continue to increase during this process. Although we expect this pattern to continue to the end of the Thanaplast project in mid-2017, we believe that, with €7m net cash at 30 June, Carbios is sufficiently funded until the project’s completion. We have updated our forecasts and our valuation range is unchanged at €23-37 per share.
VSA Agri Monthly
28 Jun 16
VSA Agri Thought for the Month It is hard to forecast the precise impact on UK farming from the recent Brexit vote but we would highlight a few areas: Subsidies: Annual subsides of c£3bn are currently paid to UK farmers. Farming Minister George Eustice has previously said that support would be maintained following a Brexit vote. Farmers will be anxious to see this happen. However, money may be saved through a cap on the maximum payout for the largest farms. Regulation: How will regulations change as we exit the EU Common Agricultural Policy? Farmers will look for regulations to be simplified and more tailored to the UK. Exports: A weaker currency should increase the attractiveness of UK farming exports, offset by any increased cost from raw material imports and any newly imposed trade tariffs. Labour: UK farming is heavily reliant on seasonal agricultural workers, many from other EU states. The UK government has previously looked to encourage the employment of more UK workers on-farm but how will things change for those bringing in workers from abroad?
VSA Agri Monthly
28 Jul 16
VSA Agri Thought for the Month Leading Brexiteer Andrea Leadsom was appointed Secretary of State for the Department of Environment, Food and Rural Affairs (DEFRA) this month. Perhaps one of the most unenviable jobs in the new UK government, given the importance of EU subsidies to the country’s farming sector. Agra Europe estimated last year that up to 90% of UK farms would not survive without them. Given that the EU Common Agricultural Policy has long been criticised by environmentalists and free-market proponents alike, leaving the scheme is likely to be viewed positively by many. But what comes next? We believe we are likely to see some sort of reduction of subsidies (particularly for the largest farms and most uneconomic activities) as well as greater exposure to foreign imports through additional free trade agreements. We feel a focus on technology and a push for “efficiency” will also be high on the agenda, which could provide a boost to AgTech companies developing products in this area.
18 Oct 16
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