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Akzo Nobel N.V.
Earnings Release • Jul 23, 2024
3806_iss_2024-07-23_2da0e8a5-e616-4ebe-ba5c-4e9a3f9b1b33.pdf
Earnings Release
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Our results at a glance
Highlights Q2 2024 (compared with Q2 2023)
- Organic sales up 2%, with volumes up 1%; revenue up 2%
- Operating income €270 million (2023: €279 million)
- Adjusted EBITDA €400 million (2023: €397 million); Adjusted EBITDA margin 14.4% (2023: 14.5%)
- Net cash from operating activities positive €151 million (2023: positive €305 million)
Highlights half-year 2024 (compared with half-year 2023)
- Organic sales up 2%, driven by higher volumes and positive price/mix; revenue flat
- Operating income €531 million (2023: €461 million)
- Adjusted EBITDA €763 million (2023: €702 million); Adjusted EBITDA margin 14.1% (2023: 13.0%)
- Net cash from operating activities negative €19 million (2023: positive €255 million)
Outlook*
Based on current market conditions and constant currencies, AkzoNobel expects to deliver 2024 adjusted EBITDA towards the lower end of its full-year guidance range of €1.5 to €1.65 billion.
For the mid-term, AkzoNobel aims to expand profitability to deliver an adjusted EBITDA margin of above 16% and a return on investment between 16% and 19%, underpinned by organic growth and industrial excellence.
The company aims to lower its leverage to around 2.3 times net debt/EBITDA by the end of 2024 and around 2 times in the mid-term, while remaining committed to retaining a strong investment grade credit rating.
* Outlook is based on organic volumes and constant currencies, and assumes no significant market disruptions.
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 Notes to the condensed consolidated financial statements, paragraph "Alternative performance measures."
| Second quarter | January-June | ||||
|---|---|---|---|---|---|
| 2023 | 2024 | ∆% in € millions/% | 2023 | 2024 | ∆% |
| 2,741 | 2,784 | 2% Revenue | 5,398 | 5,424 | —% |
| 279 | 270 | (3%) Operating income | 461 | 531 | 15% |
| (32) | (39) | Identified items* | (68) | (52) | |
| 311 | 309 | (1%) Adjusted operating income* | 529 | 583 | 10% |
| 397 | 400 | 1% Adjusted EBITDA* | 702 | 763 | 9% |
| 14.5 | 14.4 | Adjusted EBITDA margin (%)* | 13.0 | 14.1 | |
| Average invested capital* | 8,358 | 8,239 | (1%) | ||
| ROI (%)* | 10.0 | 13.7 | |||
| 56 | 74 | Capital expenditures* | 118 | 115 | |
| Net debt* | 4,353 | 4,253 | |||
| Leverage ratio (net debt/EBITDA)* | 4.0 | 2.9 | |||
| 305 | 151 | Net cash from operating activities | 255 | (19) | |
| 249 | 77 | Free cash flow* | 137 | (134) | |
| 118 | 177 | Net income attributable to shareholders | 212 | 358 | |
| 170.6 170.7 | Weighted average number of shares (in millions) | 170.6 170.7 | |||
| 0.69 | 1.04 | Earnings per share from total operations (in €) | 1.24 | 2.10 | |
| 0.93 | 1.07 | Adjusted earnings per share from continuing operations (in €)* | 1.65 | 2.19 |
* Alternative performance measure: For more details on these measures, including reconciliation to the most directly comparable IFRS measures and explanation of their use, refer to the Notes to the condensed consolidated financial statements, APM paragraph
Summary of financial results
Financial highlights
Q2 2024
Revenue
Organic sales up 2% due to volume growth and higher price/mix, revenue up 2%. Volume growth in Coatings was partly offset by slightly lower volumes in Paints. Deco EMEA was flat on unfavorable weather. Volume growth in Coatings was driven by double digit growth in China and solid growth in the rest of Asia and North America, with a flat market in Europe.
Price/mix was up 1%, driven by pricing in hyperinflationary economies Türkiye and Argentina. Underlying price/mix was flattish.
Acquisitions added 1% due to the acquisition of Huarun (completed in August 2023), while adverse currencies negatively impacted revenue by 1%.
Half-year 2024
Revenue
Organic sales up 2% due to volume growth and higher price/mix, revenue flat. Volumes were up 2% in Coatings, while Paints was flat. Volume growth in Coatings was driven by higher volumes in most businesses, including mid-single digit growth in Powder Coatings and double digit growth for most Coatings businesses in China. Volumes in Paints were flat, with higher volumes in SESA offset by weaker demand in China and LATAM. Deco EMEA was flat.
Adverse currencies impacted revenue by 2%.
Revenue
| Second quarter | January-June | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2024 | ∆% | ∆% Orga |
nic* in € millions | 2023 | 2024 | ∆% | ∆% Orga nic* |
|
| 1,147 1,139 (1%) | (1%) Decorative Paints |
2,193 2,195 —% | 1% | ||||||
| 1,594 1,645 3% | 4% Performance Coatings |
3,205 3,229 1% | 3% | ||||||
| — | — | Other activities | — | — | |||||
| 2,741 2,784 2% | 2% Total | 5,398 5,424 —% | 2% |
* Alternative performance measure: For more details on these measures, including explanation of their use, refer to the Notes to the condensed consolidated financial statements, APM paragraph
Revenue development Q2 2024
Revenue development half-year 2024
| in % versus Q2 2023 |
Volume | Price /mix |
Organic | sales Acq./div | FX | Other | Revenue |
|---|---|---|---|---|---|---|---|
| Decorative Paints |
(1) | — | (1) | 1 | (1) | — | (1) |
| Performance Coatings |
2 | 2 | 4 | — | (1) | — | 3 |
| Total | 1 | 1 | 2 | 1 | (1) | — | 2 |
| in % versus half-year 2023 |
Volume | Price /mix |
Organic | sales Acq./div | FX | Other | Revenue |
|---|---|---|---|---|---|---|---|
| Decorative Paints |
— | 1 | 1 | 1 | (2) | — | — |
| Performance Coatings |
2 | 1 | 3 | — | (2) | — | 1 |
| Total | 1 | 1 | 2 | — | (2) | — | — |
| Volume development per quarter (year-on-year) in % |
Q2 23 | Q3 23 | Q4 23 | Q1 24 | Q2 24 |
|---|---|---|---|---|---|
| Decorative Paints | (1) | — | 3 | 1 | (1) |
| Performance Coatings | (1) | — | 3 | 2 | 2 |
| Total | (1) | — | 3 | 2 | 1 |
| Price/mix development per quarter (year-on-year) in % |
Q2 23 | Q3 23 | Q4 23 | Q1 24 | Q2 24 |
|---|---|---|---|---|---|
| Decorative Paints | 5 | 3 | 2 | 2 | — |
| Performance Coatings | 4 | 3 | 2 | — | 2 |
| Total | 5 | 3 | 2 | — | 1 |
| Organic sales development per quarter (year-on-year) in % |
Q2 23 | Q3 23 | Q4 23 | Q1 24 | Q2 24 |
|---|---|---|---|---|---|
| Decorative Paints | 4 | 3 | 5 | 3 | (1) |
| Performance Coatings | 3 | 3 | 5 | 2 | 4 |
| Total | 4 | 3 | 5 | 2 | 2 |
| Revenue development per quarter (year-on-year) in % |
Q2 23 | Q3 23 | Q4 23 | Q1 24 | Q2 24 |
|---|---|---|---|---|---|
| Decorative Paints | (3) | (3) | (2) | 1 | (1) |
| Performance Coatings | (5) | (5) | (3) | (2) | 3 |
| Total | (4) | (4) | (3) | (1) | 2 |
Financial highlights
Q2 2024
Operating income
Operating income at €270 million (2023: €279 million) with operating cost inflation, particularly in wages, partly offset by raw material cost benefits and volume growth.
Identified items of negative €39 million (2023: negative €32 million) were mainly due to restructuring related costs.
Adjusted EBITDA
Adjusted EBITDA at €400 million (2023: €397 million). Adjusted EBITDA margin at 14.4% (2023: 14.5%).
Adjusted EBITDA includes €11 million negative impact from hyperinflation accounting.
Half-year 2024
Operating income
Operating income increased to €531 million (2023: €461 million), mainly due to gross margin expansion and higher volumes, more than compensating for operating cost inflation.
Identified items of negative €52 million (2023: negative €68 million) were mainly due to restructuring related costs.
Adjusted EBITDA
Adjusted EBITDA at €763 million (2023: €702 million). Adjusted EBITDA margin at 14.1% (2023: 13.0%).
Adjusted EBITDA includes €19 million negative impact from hyperinflation accounting.
Financing income and expenses
Financing income and expenses amounted to negative €47 million (2023: negative €83 million). The €36 million decrease in expenses is mainly due to the interest impact related to the release of a provision for an uncertain tax position and hyperinflation accounting.
Income tax
The effective tax rate was 22.2% (2023: 38.7%). The low effective tax rate is mostly due to the tax impact related to the release of a provision for an uncertain tax position and adjustments on the tax positions for the UK ACT case, which together decreased the effective tax rate by 12%, while hyperinflation accounting increased the effective tax rate by 4%.
Net income
Net income attributable to shareholders was €358 million (2023: €212 million). Earnings per share from total operations was €2.10 (2023: €1.24).
Adjusted EBITDA*
| Second quarter | January-June | ||||
|---|---|---|---|---|---|
| 2023 | 2024 | ∆% in € millions | 2023 | 2024 | ∆% |
| 191 | 178 | (7%) Decorative Paints | 328 | 334 | 2% |
| 214 | 237 | 11% Performance Coatings | 401 | 458 | 14% |
| (8) | (15) | Other activities | (27) | (29) | |
| 397 | 400 | 1% Total | 702 | 763 | 9% |
* Alternative performance measure: For more details on these measures, including reconciliation to the most directly comparable IFRS measures and explanation of their use, refer to the Notes to the condensed consolidated financial statements, APM paragraph
| Operating income | |||||||
|---|---|---|---|---|---|---|---|
| Second quarter | January-June | ||||||
| 2023 | 2024 | ∆% in € millions | 2023 | 2024 | ∆% | ||
| 151 | 121 | 28% Decorative Paints | 245 | 237 | (3%) | ||
| 168 | 182 | 42% Performance Coatings | 298 | 358 | 20% | ||
| (40) | (33) | Other activities | (82) | (64) | |||
| 279 | 270 | 35% Total | 461 | 531 | 15% |
Operating income to net income
| Second quarter | January-June | |||
|---|---|---|---|---|
| 2023 | 2024 in € millions | 2023 | 2024 | |
| 279 | 270 Operating income | 461 | 531 | |
| (45) | (31) Financing income and expenses | (83) | (47) | |
| 5 | 5 Results from associates | 12 | 12 | |
| 239 | 244 Profit before tax | 390 | 496 | |
| (106) | (53) Income tax | (151) | (110) | |
| 133 | 191 Profit from continuing operations | 239 | 386 | |
| — | 1 Profit from discontinued operations | (1) | — | |
| 133 | 192 Profit for the period | 238 | 386 | |
| (15) | (15) Non-controlling interests | (26) | (28) | |
| 118 | 177 Net income | 212 | 358 |
Decorative Paints
Highlights Q2 2024
- Organic sales down 1% due to lower volumes; revenue -1%
- Adjusted EBITDA margin at 15.6% (2023: 16.7%)
Q2 2024
Organic sales down 1% and revenue down 1%. Mid-single digit volume growth in SESA was more than offset by lower volumes in China and LATAM. Deco EMEA was flat.
Acquisitions added 1% due to the acquisition of Huarun in China (completed in August 2023), while adverse currencies negatively impacted revenue by 1%.
Operating income at €121 million (2023: €151 million), mainly due to operating cost inflation and identified items. Operating income includes identified items of negative €20 million (2023: negative €6 million), mainly due to restructuring related costs.
Adjusted EBITDA at €178 million (2023: €191 million). Adjusted EBITDA margin at 15.6% (2023: 16.7%).
Half-year 2024
Organic sales up 1% and revenue flat. High single digit volume growth in SESA was offset by lower volumes in China and LATAM. Deco EMEA was flat.
Acquisitions added 1% due to the acquisition of Huarun in China (completed in August 2023), while adverse currencies negatively impacted revenue by 2%, resulting in revenue being flat.
Operating income at €237 million (2023: €245 million), mainly due to operating cost inflation offsetting an increase in gross margins. Operating income includes identified items of negative €24 million (2023: negative €14 million), mainly due to restructuring related costs.
Adjusted EBITDA at €334 million (2023: €328 million). Adjusted EBITDA margin at 15.2% (2023: 15.0%).
| Revenue | ||||||||
|---|---|---|---|---|---|---|---|---|
| Second quarter | January-June | |||||||
| 2023 | 2024 | ∆% | ∆% Orga |
nic* in € millions | 2023 | 2024 | ∆% | ∆% Orga nic* |
| 668 | 688 | 3% | 2% Decorative Paints EMEA |
1,266 1,300 | 3% | 3% | ||
| 196 | 184 (6%) | 1% Decorative Paints Latin America |
373 | 367 (2%) | 4% | |||
| 283 | 267 (6%) | (9%) Decorative Paints Asia |
554 | 528 (5%) | (6%) | |||
| 1,147 1,139 (1%) | (1%) Total | 2,193 2,195 —% | 1% |
* Alternative performance measure: For more details on these measures, including explanation of their use, refer to the Notes to the condensed consolidated financial statements, APM paragraph
Revenue development half-year 2024
Key financial figures
| Second quarter | January-June | ||||
|---|---|---|---|---|---|
| 2023 | 2024 | ∆% in € millions/% | 2023 | 2024 | ∆% |
| 151 | 121 (20%) Operating income | 245 | 237 (3%) | ||
| (6) | (20) | Identified items1 | (24) | ||
| (34) | (37) | Depreciation and amortization,2 | (69) | (73) | |
| 191 | 178 | (7%) Adjusted EBITDA1 | 328 | 334 | 2% |
| 16.7 | 15.6 | Adjusted EBITDA margin (%)1 | 15.0 | 15.2 | |
Average invested capital1 3,857 3,813 (1%) ROI (%)1 10.8 13.2 Alternative performance measure: For more details on these measures, including
1 reconciliation to the most directly comparable IFRS measures and explanation of their use, refer to the Notes to the condensed consolidated financial statements, APM paragraph 2 Excluding identified items
Europe, Middle East and Africa
Q2 organic sales up 2% and revenue up 3%. Organic sales growth was driven by positive price/mix with flat volumes. Volumes were impacted by unfavorable weather. Higher volumes in Benelux, offset by lower volumes in the UK and France. Price/mix excluding Türkiye was stable.
Half-year organic sales up 3% and revenue up 3%. Organic sales growth was due to higher price/mix, with flat volumes. Volume growth in Benelux, Southern Europe and Eastern Europe.
Latin America
Q2 organic sales up 1% and revenue down 6%. Higher price/mix was partly offset by lower volumes. Volume growth in Brazil, despite a slow start to the quarter due to the Rio Grande do Sul floods, was more than offset by volume decline from a challenging economic environment in Colombia. Higher price/mix includes inflationary pricing in Argentina.
Half-year organic sales up 4% and revenue down 2%. Organic sales growth was driven by positive price/mix. Volume growth in Brazil was more than offset by volume decline from a challenging economic environment in Colombia and Argentina.
Pintuco brand helps town in Colombia to flourish
The Pintuco brand has rolled out our "Flourish" identity in Colombia and Ecuador. It marks the latest stage in the integration of Grupo Orbis, which we acquired in 2022. Pintuco's products have recently been helping attract tourists to Usiacurí in Colombia. More than 18,000m² of the town's rooftops have been painted with a macro-mural featuring eye-catching images of birds. The facades of a large number of homes have also been repainted. Over the course of the three-year project, visitor numbers have soared from 400 a month to 24,000 a month.
Asia
Q2 organic sales down 9% and revenue down 6%, driven by competitive pricing in China and parts of SESA. Mid-single digit volume growth in SESA was driven by strength in India and several other countries, while China volumes were down due to challenging market conditions.
Half-year organic sales down 6% and revenue down 5%, driven by competitive pricing in China and parts of SESA. Volumes were down in China as per Q2. High single digit volume growth in SESA was driven by strength in India and Indonesia.
Performance Coatings
Highlights Q2 2024
- Organic sales up 4%, mainly driven by higher volumes; revenue up 3%
- Adjusted EBITDA margin at 14.4% (2023: 13.4%)
Q2 2024
Organic sales up 4%, revenue up 3%, driven by double digit volume growth in China and solid growth in the rest of Asia and North America, with a flat market in Europe.
Adverse currencies negatively impacted revenue by 1%, resulting in 3% revenue growth.
Operating income increased to €182 million (2023: €168 million), mainly due to higher volumes and gross margin expansion, partly offset by operating cost inflation. Operating income includes identified items of negative €11 million (2023: negative €5 million), mainly due to restructuring related costs.
Adjusted EBITDA increased to €237 million (2023: €214 million), with an Adjusted EBITDA margin at 14.4% (2023: 13.4%).
Half-year 2024
Organic sales up 3%, revenue up 1%. Organic sales growth was driven by higher volumes in most businesses, including mid-single digit growth in Powder Coatings and double digit growth for most businesses in China.
Adverse currencies negatively impacted revenue by 2%, resulting in 1% revenue growth.
Operating income increased to €358 million (2023: €298 million), mainly due to higher volumes and gross margin expansion, partly offset by operating cost inflation. Operating income includes identified items of negative €12 million (2023: negative €20 million), mainly due to restructuring related costs.
Adjusted EBITDA increased to €458 million (2023: €401 million), with an Adjusted EBITDA margin at 14.2% (2023:12.5 %).
Revenue development Q2 2024
| Revenue | ||||||||
|---|---|---|---|---|---|---|---|---|
| Second quarter January-June |
||||||||
| 2023 | 2024 | ∆% | ∆% Orga |
nic* in € millions | 2023 | 2024 | ∆% | ∆% Orga nic* |
| 345 | 350 1% | 2% Powder Coatings | 689 | 691 —% | 3% | |||
| 375 | 412 10% | 10% Marine and Protective Coatings |
741 | 771 4% | 6% | |||
| 354 | 364 3% | 3% Automotive and Specialty Coatings |
717 | 736 3% | 4% | |||
| 520 | 519 —% | —% Industrial Coatings | 1,058 1,031 (3%) | —% | ||||
| 1,594 1,645 3% | 4% Total | 3,205 3,229 1% | 3% |
* Alternative performance measure: For more details on these measures, including explanation of their use, refer to the Notes to the condensed consolidated financial statements, APM paragraph
Key financial figures
| Second quarter | January-June | ||||
|---|---|---|---|---|---|
| 2023 | 2024 | ∆% in € millions / % | 2023 | 2024 | ∆% |
| 168 | 182 | 8% Operating income | 298 | 358 20% | |
| (5) | (11) | Identified items1 | (20) | (12) | |
| (41) | (44) | Depreciation and amortization2 | (83) | (88) | |
| 214 | 237 11% Adjusted EBITDA1 | 401 | 458 14% | ||
| 13.4 | 14.4 | Adjusted EBITDA margin (%)1 | 12.5 | 14.2 | |
| Average invested capital1 | 3,896 3,742 (4%) | ||||
| ROI (%)1 | 13.4 | 19.7 |
1 Alternative performance measure: For more details on these measures, including reconciliation to the most directly comparable IFRS measures and explanation of their use, refer to the Notes to the condensed consolidated financial statements, APM paragraph 2 Excluding identified items
Powder Coatings
Q2 organic sales up 2% and revenue up 1%. Organic sales growth was driven by continued volume growth, especially in the architectural and industrial & consumer segments. Asia and North America contributed to mid-single digit growth.
Half-year organic sales up 3% and revenue flat. Organic sales growth was driven by volume growth across all segments.
Marine and Protective Coatings
Q2 organic sales up 10% and revenue up 10%. Organic sales growth was mainly driven by strong demand in South Asia and the Middle East, and continued strong volume growth in marine newbuild, which accelerated in the second quarter.
Half-year organic sales up 6% and revenue up 4%. Organic sales growth was mainly driven by volume growth in marine new-build.
Automotive and Specialty Coatings
Q2 organic sales up 3% and revenue up 3%. Organic sales growth continued to be driven by higher price/mix. Volumes were down, mainly in vehicle refinishes, which was impacted by a material weakening of demand in Türkiye post-election. Volumes in aerospace were flat due to OEM production delays, while consumer electronics started to rebound.
Half-year organic sales up 4% and revenue up 3%. Organic sales growth was mainly driven by higher price/mix. Volumes were down, mainly due to vehicle refinishes, with automotive and aerospace stable.
Industrial Coatings
Both organic sales and revenue in Q2 were flat. Volume growth driven by growth in packaging and coil, particularly in North America, was offset by continued lower price/mix due to indexed contracts and weak volumes in wood finishes.
Half-year organic sales flat and revenue down 3%. Higher volumes in packaging and coil were offset by lower price/mix, driven by indexed contracts.
AkzoNobel goes full throttle with new powder coating for two-wheelers Motorcycle manufacturers can now kickstart improved cost and energy savings following the launch of Interpon A3000 from AkzoNobel's Powder Coatings business.The company's first single layer powder coating for two-wheelers, the newly introduced product can help customers accelerate their efficiency gains, without compromising on performance or aesthetics. Interpon A3000 is focused in particular on the key Indian market, home to well over 200 million two-wheeled vehicles. Last year alone, it's estimated that more than 18 million two-wheelers were sold in India. The product will also be available globally.
Principal risks and uncertainties
In our 2023 annual report, we consider risk assessment and mitigation a continuous process, which is carried out against the background of an evolving risk landscape that includes short, medium and longer term challenges. We consider the major risk factors as communicated in the annual report of 2023 to be still valid. The information below reflects the updated risk assessment since the publication of the 2023 annual report. Mitigation of the risks is defined and progressing as planned.
Risks assessed to increase
| Risk | Risk description | Mitigating actions | ||||
|---|---|---|---|---|---|---|
| Geopolitical instability |
The risk that increasing geo-political turbulence results in declining customer and industry confidence and a decline in key markets and significant losses to our sales and profitability. |
• Balanced geographic presence with revenue generated from all regions and continued investment focus on higher growth markets to optimize geographic spread • Geo-political assessment as part of investment decisions and medium-term operational planning • Drive business unit strategic mandates underpinning the company strategy • Drive demand planning through Integrated Business Planning • Diversifying our supply chain and managing redundancy |
||||
| Supply shortages | The risk of supply shortages of key raw materials, packaging and/or spare parts, resulting in production interruptions, additional cost and muted organic growth. |
• Maintain and further improve strong industry and market intelligence analysis of suppliers and raw material markets • Drive supply chain network design, end-to-end, from supplier to end customer • Assess climate change impact and develop mitigation plans for own operations, key suppliers' locations and logistics |
||||
| Pricing and margin management |
The risk of lower margins resulting from higher raw material prices, inflation and increased competitive pressure, combined with insufficient margin management. |
• More data-driven approach, based on value pricing • Investment in sales capability and focus on commercial excellence • Closely monitor raw material prices and availability |
Risks assessed to remain fairly stable
| Risk | Risk description | Mitigating actions |
|---|---|---|
| Macro-economic crisis |
The risk of a prolonged macro-economic downturn, leading to local currency devaluation, high inflation, customer destocking and a reduction in volume and margin. |
• Balanced geographic presence with revenue generated from all regions and continued investment focus on higher growth markets to optimize geographic spread • Focus on operational cost, complexity reduction, margin management and commercial and procurement excellence • Drive business unit strategic mandates underpinning the company strategy |
Risks assessed to remain fairly stable
| Risk | Risk description | Mitigating actions | ||
|---|---|---|---|---|
| Cybersecurity | The risk of significant business disruption and/or inadequate recovery following a cybersecurity attack, leading to potential loss of sensitive information, intellectual property, cash, or reputational damage. |
• Reinforcing a cybersecurity awareness and culture within the entire organization • Strengthening protection, detection and response capabilities on both IT and OT (operational technology) domains by leveraging new technologies. In addition, accelerate the integration of the IT and OT infrastructure from M&A entities where not fully completed • Improving our capacity for reducing the impact from sophisticated cyber attacks and quickly recovering from them • Improving our capacity for assessing cyber risks in critical domains and monitoring their remediation • Increasing the level and quality of partnerships with public and private institutions for improving the level of security of our business ecosystem |
||
| Ability to execute | The risk of misalignment between the business and functions and short-term versus long-term, leading to inability to support and drive the business agenda and growth plans, resulting in not delivering the set targets. |
• Global process organization in place to increase common competencies and align on key end-to-end process improvements, as well as increased collaboration between relevant functions in Integrated Business Planning • Leadership team changed, flattening the organization, increasing business representation in the Executive Committee and consolidating the Commercial and Strategic functions • Improving our industrial operations by focusing on reducing complexity, improving capacity utilization and investing in the modernization of our sites |
||
| Integrated Business Planning maturity |
The risk that we don't reach the required service levels due to inadequate end to-end planning processes and supply chain infrastructure, leading to loss of existing business and inability to win new business. |
• Focus on complexity reduction and improving efficiency of the product portfolio and supply chain • Increase agility and velocity in the end-to-end process through simplification, cross-company initiatives, digitalization and data-driven modelling • Stronger performance management via aligned sets of lagging and leading KPIs, and mature IBP governance |
Risks assessed to decrease
| Risk | Risk description | Mitigating actions | ||
|---|---|---|---|---|
| Business continuity risk |
The risk of being unable to respond adequately to a significant business interruption, leading to financial and reputational damage. |
• Enhance our business continuity processes and plans, supported by taking Integrated Business Planning to a next maturity level and increasing cross-functional and business collaboration |
||
| Product portfolio | The risk of lacking a fit-for-purpose product portfolio, leading to a cost base that's too high and an inability to compete in the market. |
• Reduce our product portfolio complexity • Reengineering our products • Enhancement of our product lifecycle and product change management |
||
| Attract and retain talent |
The risk that we're unable to attract and/or retain talent to ensure a fit-for-future workforce with the right capabilities, leading to a threat to the organization's competitive advantage and the ability to achieve our strategic objectives. |
• Strengthen AkzoNobel's value proposition, based on our commitment to employee growth and the company purpose • Focus on talent management (talent attraction, development and retention) in several ongoing programs to ensure adequate capabilities • Engagement surveys, employee well-being programs and culture and change programs to support engagement |
Condensed consolidated financial statements
| Condensed consolidated statement of income | ||||
|---|---|---|---|---|
| Second quarter | January-June | |||
| 2023 | 2024 in € millions | 2023 | 2024 | |
| Continuing operations | ||||
| 2,741 | 2,784 Revenue | 5,398 | 5,424 | |
| (1,635) (1,643) Cost of sales | (3,310) (3,196) | |||
| 1,106 | 1,141 Gross profit | 2,088 | 2,228 | |
| (823) | (872) SG&A costs | (1,619) (1,697) | ||
| (4) | 1 Other results | (8) | — | |
| 279 | 270 Operating income | 461 | 531 | |
| (45) | (31) Financing income and expenses | (83) | (47) | |
| 5 | 5 Results from associates | 12 | 12 | |
| 239 | 244 Profit before tax | 390 | 496 | |
| (106) | (53) Income tax | (151) | (110) | |
| 133 | 191 Profit for the period from continuing operations |
239 | 386 | |
| Discontinued operations | ||||
| — | 1 Profit/(loss) for the period from discontinued operations |
(1) | — | |
| 133 | 192 Profit for the period | 238 | 386 | |
| Attributable to | ||||
| 118 | 177 Shareholders of the company | 212 | 358 |
15 15 Non-controlling interests 26 28 133 192 Profit for the period 238 386
Condensed consolidated statement of comprehensive income
| Second quarter | January-June | |||
|---|---|---|---|---|
| 2023 | 2024 in € millions | 2023 | 2024 | |
| 133 | 192 Profit for the period | 238 | 386 |
Other comprehensive income
| 2 | (11) Exchange differences arising on translation of foreign operations |
(29) | 85 | |
|---|---|---|---|---|
| (1) | — Cash flow hedges | (9) | — | |
| (130) | (20) Post-retirement benefits | (91) | (53) | |
| 32 | 7 Tax relating to components of other comprehensive income |
22 | 15 | |
| (97) | (24) Other comprehensive income for the period (net of tax) |
(107) | 47 | |
| 36 | 168 Comprehensive income for the period | 131 | 433 | |
Comprehensive income for the period attributable to
| 33 | 151 Shareholders of the company | 115 | 399 |
|---|---|---|---|
| 3 | 17 Non-controlling interests | 16 | 34 |
| 36 | 168 Comprehensive income for the period | 131 | 433 |
Condensed consolidated balance sheet in € millions December 31, 2023 June 30, 2024 Assets Non-current assets Intangible assets 4,081 4,057 Property, plant and equipment 1,994 2,017 Right-of-use assets 302 316 Other non-current assets 2,137 2,036 Total non-current assets 8,514 8,426 Current assets Inventories 1,649 1,836 Trade and other receivables 2,483 2,915 Current tax assets 134 138 Short-term investments 265 3 Cash and cash equivalents 1,513 1,166 Total current assets 6,044 6,058 Total assets 14,558 14,484 Equity and liabilities Group equity 4,546 4,710 Non-current liabilities Provisions and deferred tax liabilities 1,141 1,086 Long-term borrowings 3,165 3,182 Total non-current liabilities 4,306 4,268 Current liabilities Short-term borrowings 2,398 2,240 Trade and other payables 2,933 2,962 Current tax liabilities 211 150
Current portion of provisions 164 154 Total current liabilities 5,706 5,506 Total equity and liabilities 14,558 14,484
Cash flows
Net cash from operating activities in Q2 was an inflow of €151 million (2023: inflow of €305 million). The Q2 inflow includes working capital outflow of €70 million, which reflects normal seasonal patterns.
Net cash from investing activities in Q2 was an outflow of €35 million (2023: inflow of €42 million). The outflow was mainly due to capital expenditures, partly offset by repayments of short-term investments.
Net cash from financing activities in Q2 was an inflow of €73 million (2023: outflow of €24 million). The increase in inflow is mainly related to a higher inflow from changes from borrowings.
Net debt
At June 30, 2024, net debt was €4,253 million versus €3,785 million at year-end 2023, mainly due to capital expenditures (€115 million) and dividends paid (€281 million). The net debt/EBITDA leverage ratio at June 30, 2024, was 2.9 (December 31, 2023: 2.7).
Net debt
| in € millions | June 30, 2023 | December 31, 2023 |
June 30, 2024 |
|---|---|---|---|
| Short-term investments | (235) | (265) | (3) |
| Cash and cash equivalents | (1,498) | (1,513) | (1,166) |
| Long-term borrowings | 3,682 | 3,165 | 3,182 |
| Short-term borrowings | 2,404 | 2,398 | 2,240 |
| Total | 4,353 | 3,785 | 4,253 |
| Consolidated statements of cash flows | |
|---|---|
| --------------------------------------- | -- |
| Second quarter | January-June | ||
|---|---|---|---|
| 2023 | 2024 in € millions | 2023 | 2024 |
| 1,145 | 915 Net cash and cash equivalents at beginning of period |
1,398 | 1,453 |
| 133 | 191 Profit for the period from continuing operations | 239 | 386 |
| 88 | 92 Amortization and depreciation | 175 | 181 |
| 2 | — Impairment losses | 2 | — |
| 45 | 31 Financing income and expenses | 83 | 47 |
| (5) | (5) Results from associates | (12) | (12) |
| — | (1) Pre-tax result on acquisitions and divestments | 3 | — |
| 106 | 53 Income tax | 151 | 110 |
| 48 | (70) Changes in working capital | (213) | (488) |
| (5) | — Changes in post-retirement benefit provisions | (12) | (4) |
| (5) | 1 Changes in other provisions | 4 | (11) |
| (49) | (65) Interest paid | (90) | (113) |
| (56) | (81) Income tax paid | (94) | (129) |
| 3 | 5 Other changes | 19 | 14 |
| 305 | 151 Net cash generated from/(used for) operating activities |
255 | (19) |
| (56) | (74) Capital expenditures | (118) | (115) |
| 1 | 4 Acquisitions and divestments net of cash acquired/divested |
(39) | 11 |
| (12) | — Investments in short-term investments | (24) | — |
| 100 | 25 Repayments of short-term investments | 129 | 263 |
| 9 | 10 Other changes | 25 | 25 |
| 42 | (35) Net cash generated from/(used for) investing activities |
(27) | 184 |
| 244 | 346 Changes from borrowings | 130 | (227) |
| (268) | (273) Dividends paid | (272) | (281) |
| (24) | 73 Net cash generated from/(used for) financing activities |
(142) | (508) |
| 323 | 189 Net cash generated from/(used for) continuing operations |
86 | (343) |
| (1) | (1) Cash flows from discontinued operations | (2) | (4) |
| 322 | 188 Net change in cash and cash equivalents of continuing and discontinued operations |
84 | (347) |
| (16) | (15) Effect of exchange rate changes on cash and cash equivalents |
(31) | (18) |
1,451 1,088 Net cash and cash equivalents at June 30 1,451 1,088
Free cash flow
The free cash flow in Q2 2024 was an inflow €77 million and includes a working capital outflow of 70 million, which reflects normal seasonal patterns.
Consolidated statement of free cash flows
| Second quarter | January-June | ||
|---|---|---|---|
| 2023 | 2024 in € millions | 2023 | 2024 |
| 367 | 362 EBITDA | 636 | 712 |
| 2 | — Impairment losses | 2 | — |
| — | (1) Pre-tax results on acquisitions and divestments |
3 | — |
| 48 | (70) Changes in working capital | (213) | (488) |
| — | — Pension top-up payments | (1) | — |
| (10) | 1 Other changes in provisions | (7) | (15) |
| (49) | (65) Interest paid | (90) | (113) |
| (56) | (81) Income tax paid | (94) | (129) |
| 3 | 5 Other | 19 | 14 |
| 305 | 151 Net cash generated from/(used for) operating activities |
255 | (19) |
| (56) | (74) Capital expenditures | (118) | (115) |
| 249 | 77 Free cash flow | 137 | (134) |
Shareholders' equity
Shareholders' equity amounted to €4.5 billion at June 30, 2024, compared with €4.3 billion at year-end 2023. Main movements relate to:
- Profit for the period of €358 million
- Dividend of €263 million
Dividend
The dividend policy remains unchanged and is to pay a stable to rising dividend. A final 2023 divided of €1.54 per common share (2022: €1.54) was approved at the AGM on April 25, 2024, which resulted in a total 2023 dividend of €1.98 per share (2022: €1.98).
Outstanding share capital
The outstanding share capital was 170.8 million common shares at the end of June 2024. The weighted average number of shares in Q2 2024 was 170.7 million shares.
Consolidated statement of changes in equity
| in € millions | Subscribed share capital |
Cash flow hedge reserve |
Cumulative translation reserves |
Other (legal) reserves and undistributed profit |
Share holders' equity |
Non controlling interests |
Group equity |
|---|---|---|---|---|---|---|---|
| Balance at December 31, 2022 | 87 | (34) | (656) | 4,936 | 4,333 | 215 | 4,548 |
| Profit for the period | — | — | — | 212 | 212 | 26 | 238 |
| Other comprehensive income | — | (9) | (20) | (68) | (97) | (10) | (107) |
| Comprehensive income for the period | — | (9) | (20) | 144 | 115 | 16 | 131 |
| Dividend | — | — | — | (263) | (263) | (6) | (269) |
| Share buyback | (2) | — | — | 2 | — | — | — |
| Equity-settled transactions | — | — | — | 9 | 9 | — | 9 |
| Acquisitions and divestments | — | — | — | (1) | (1) | — | (1) |
| Balance at June 30, 2023 | 85 | (43) | (676) | 4,827 | 4,193 | 225 | 4,418 |
| Balance at December 31, 2023 | 85 | — | (711) | 4,948 | 4,322 | 224 | 4,546 |
| Profit for the period | — | — | — | 358 | 358 | 28 | 386 |
| Other comprehensive income | — | — | 80 | (39) | 41 | 6 | 47 |
| Comprehensive income for the period | — | — | 80 | 319 | 399 | 34 | 433 |
| Dividend | — | — | — | (263) | (263) | (18) | (281) |
| Share buyback | — | — | — | — | — | — | — |
| Equity-settled transactions | — | — | — | 12 | 12 | — | 12 |
| Balance at June 30, 2024 | 85 | — | (631) | 5,016 | 4,470 | 240 | 4,710 |
Invested capital
Invested capital at June 30, 2024, totaled €8.5 billion, up €0.6 billion from year-end 2023. This increase was mainly caused by seasonal demand resulting in higher trade receivables and inventories.
Invested capital
| in € millions | June 30, 2023 | December 31, 2023 |
June 30, 2024 |
|---|---|---|---|
| Trade receivables | 2,443 | 2,187 | 2,517 |
| Inventories | 1,757 | 1,649 | 1,836 |
| Trade payables | (2,283) | (2,312) | (2,425) |
| Operating working capital (trade) |
1,917 | 1,524 | 1,928 |
| Other working capital items | (319) | (402) | (151) |
| Non-current assets | 8,429 | 8,514 | 8,426 |
| Less investments in associates | (198) | (216) | (234) |
| Less pension assets | (1,002) | (1,017) | (1,003) |
| Deferred tax liabilities | (526) | (557) | (514) |
| Invested capital | 8,301 | 7,846 | 8,452 |
Operating working capital (trade)
Operating working capital (trade) was €1.9 billion at June 30, 2024 (June 30, 2023: €1.9 billion).
Operating working capital (trade) as a percentage of revenue was 17.3% in Q2 2024, compared with 17.5% in Q2 2023. Higher trade receivables and inventories were offset by an increase in trade payables.
Notes to the condensed consolidated financial statements
General information
Akzo Nobel N.V. is a public limited liability company headquartered in Amsterdam, the Netherlands. The interim condensed consolidated financial statements include the condensed financial statements of Akzo Nobel N.V. and its consolidated subsidiaries (in this document referred to as "AkzoNobel", "the Group" or "the company"). The company was incorporated under the laws of the Netherlands and is listed on Euronext Amsterdam.
Basis of preparation
All figures in this report are unaudited. The interim condensed consolidated financial statements were discussed and approved by the Board of Management and the Supervisory Board. These interim condensed financial statements have been authorized for issue.
The interim condensed consolidated financial statements should be read in conjunction with AkzoNobel's consolidated financial statements in the 2023 annual report as published on February 28, 2024. The 2023 financial statements were adopted by the Annual General Meeting of shareholders on April 25, 2024. In accordance with Article 393 of Book 2 of the Dutch Civil Code, PricewaterhouseCoopers Accountants N.V. has issued an unqualified auditor's opinion on the 2023 financial statements.
Accounting policies
The material accounting policies applied in the interim condensed consolidated financial statements are consistent with those applied in AkzoNobel's consolidated financial statements for the year ended December 31, 2023, except for IFRS standards and interpretations becoming effective on January 1, 2024. This includes, among others, amendments to IAS 1 "Classification of Liabilities as Current or Noncurrent and Non-current Liabilities with Covenants", amendments to IFRS 16 "Lease Liability in a Sale and Leaseback" and amendments to IAS 7 and IFRS 7 "Disclosures: Supplier Finance Arrangements".
These changes have been assessed for their potential impact. It was concluded that these changes do not have a material effect on AkzoNobel's consolidated financial statements.
The interim condensed consolidated financial statements have been prepared in accordance with IAS 34 "Interim financial reporting".
Further, in 2024, Pillar Two regulation came into force. The implementation did not have a material impact on the effective tax rate in the first half-year.
Seasonality
Revenue and results in Decorative Paints are impacted by seasonal influences. Revenue and profitability tend to be higher in the second and third quarter of the year as weather conditions determine whether paints and coatings can be applied.
In Performance Coatings, revenue and profitability vary, among others, with building patterns from original equipment manufacturers.
Revenue disaggregation
| January-June 2024 | ||||
|---|---|---|---|---|
| in € millions | Decorative Paints | Performance Coatings | Other | Total |
| The Netherlands | 114 | 56 | — | 170 |
| Other EMEA countries | 1,186 | 1,273 | — | 2,459 |
| North Asia | 248 | 581 | — | 829 |
| South Asia Pacific | 280 | 369 | — | 649 |
| North America | — | 705 | — | 705 |
| Latin America | 367 | 245 | — | 612 |
| Total | 2,195 | 3,229 | — | 5,424 |
| Timing of revenue recognition | ||||
| Goods transferred at a point in time | 2,159 | 3,131 | — | 5,290 |
| Services transferred over time | 36 | 98 | — | 134 |
| Total | 2,195 | 3,229 | — | 5,424 |
Other activities
In Other activities, we report activities which are not allocated to a particular segment.
Revenue disaggregation
The table below reflects the disaggregation of revenue. Additional disaggregation of revenue is included on the respective pages of Decorative Paints and Performance Coatings.
Hyperinflation accounting (Türkiye and Argentina)
For Türkiye and Argentina, hyperinflation accounting is applied. The impact of the application of hyperinflation accounting, which includes the use of end of period rates to translate the statement of the income statement, is shown in the table below.
| Hyperinflation accounting | ||||
|---|---|---|---|---|
| Second quarter | January-June | |||
| 2023 | 2024 in € millions | 2023 | 2024 | |
| (46) | 14 Revenue | (50) | 16 | |
| (14) | (16) Operating income | (23) | (24) | |
| (7) | 3 | Hyperinflation: gain/loss on net monetary position |
(15) | 17 |
| 1 | (1) Other financing income/expenses | 1 | (1) | |
| (20) | (14) Profit before tax | (37) | (8) | |
| (3) | (2) Income tax | (7) | (14) | |
| (23) | (16) Profit for the period | (44) | (22) | |
| 2 | 2 Non-controlling interests | 4 | 5 | |
| (21) | (14) Net income | (40) | (17) |
Hyperinflation impact on adjusted operating income for the half-year was €19 million negative (2023: €23 million negative); the impact for Q2 was €11 million negative (2023: €14 million negative).
Workforce
At June 30, 2024, the number of employees was 35,700 (December 31, 2023: 35,200).
Pensions
The net balance sheet position (according to IAS19) of the pension plans at the end of Q2 was a surplus of €0.6 billion (year-end 2023: surplus of €0.7 billion). The development during 2024 was mainly the result of the net effect in key countries of higher discount rates and lower plan asset returns.
Financial risk management
The consolidated financial statements for the year ended December 31, 2023, provide a description of the financial risks faced by the company in its regular operations, as well as the policies and procedures established to mitigate these risks.
The risks, policies, and procedures outlined in the consolidated financial statements are still applicable and relevant. For an update on the assessment of the "Principal risks and uncertainties" as included in our annual report, reference is made to the paragraph with the same title in this report.
The carrying amount of the financial assets and current liabilities is a reasonable approximation of their fair value. The fair value of total borrowings as at June 30, 2024, was €5,237 million (December 31, 2023: €5,405 million); the carrying amount measured at amortized cost was €5,422 million (December 31, 2023: €5,563 million).
During the first half-year ended June 30, 2024, there have been no material changes in the fair value hierarchy.
Related parties
AkzoNobel traded goods and services with various related parties in which we hold a 50% or less equity interest (associates). We consider the members of the Executive Committee and the Supervisory Board to be the key management personnel as defined in IAS 24 "Related parties".
In the ordinary course of business, we have transactions with various organizations with which certain of the members of the Supervisory Board and Executive Committee are associated.
Alternative performance measures
In presenting and discussing AkzoNobel's operating results, management uses certain alternative performance measures (APM) not defined by IFRS. Management considers these alternative performance measures to be relevant supplementary indicators of the company's performance. These or similar measures are widely used in the industry to assess operational performance, developments and positions. Management believes that reporting these measures supports readers' understanding of the company's sales performance, profitability, financial strength and funding requirements.
Alternative performance measures should not be viewed in isolation as alternatives to the equivalent IFRS measures. Rather, they should be used as supplementary information in conjunction with the most directly comparable IFRS measures. Alternative performance measures do not have a standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies.
Explanations and reconciliations of the alternative performance measures to the most directly comparable IFRS measures can be found in this paragraph.
Identified items
Identified items are special charges and benefits, (post) acquisition and divestment related items, major restructuring and impairment charges, charges and benefits related to major legal, environmental and tax cases, and hyperinflation accounting adjustments for inventory positions that exceed normal operational levels.
As per Q2 2024, "hyperinflation accounting adjustments for inventory positions that exceed normal operational levels" have been added to the definition of identified items. With this change, the most excessive shifts between financing income and operating income are taken out and the alternative performance measures provide a better view of the underlying business performance in hyperinflationary environments. Prior period figures have not been restated, as the impact is immaterial.
Identified items are excluded when calculating adjusted operating income, adjusted EBITDA, adjusted EBITDA margin, return on investments (ROI) and adjusted earnings per share (EPS).
Adjusted EBITDA
Adjusted EBITDA is operating income excluding depreciation, amortization and identified items.
Adjusted EBITDA is used to evaluate the performance of the company and its segments. By excluding identified items, the comparability of the operational results increases and financial performance can be evaluated more effectively. Management views adjusted EBITDA as an appropriate measure for (segment) performance.
Adjusted EBITDA margin
Adjusted EBITDA margin is an operational profit margin. Adjusted EBITDA margin is adjusted EBITDA as a percentage of revenue. The measure provides a clear picture of (the development of) profitability.
| Adjusted EBITDA margin | ||||
|---|---|---|---|---|
| Second quarter | January-June | |||
| 2023 | 2024 | in % | 2023 | 2024 |
| 16.7 | 15.6 Decorative Paints | 15.0 | 15.2 | |
| 13.4 | 14.4 Performance Coatings | 12.5 | 14.2 | |
| Other activities* | ||||
| 14.5 | 14.4 Total | 13.0 | 14.1 |
* Adjusted EBITDA margin for Other activities is not shown, as this is not meaningful
Free cash flow
AkzoNobel reports on free cash flow as management believes it to be a useful measure to provide additional insight into the cash generating capability of its operations. A reconciliation of free cash flow to the most directly comparable IFRS measure is available in the condensed consolidated financial statements.
Capital expenditures
Capital expenditures is the total of investments in property, plant and equipment and investments in intangible assets. Reporting on capital expenditures gives insight into the investment in long-term assets.
Capital expenditures
| Second quarter | January-June | ||
|---|---|---|---|
| 2023 | 2024 in € millions | 2023 | 2024 |
| 51 | 65 Purchase of property, plant and equipment | 108 | 100 |
| 5 | 9 Purchase of intangible assets | 10 | 15 |
| 56 | 74 Capital expenditures | 118 115 |
Organic sales
Organic sales exclude the impact of changes in consolidation, the impact of changes in foreign exchange rates and the impact of hyperinflation accounting.
The impact of changes in foreign exchange rates is calculated by retranslating the prior year local currency amounts into euros at the current year's foreign exchange rates.
Organic sales comparison provides a better understanding of underlying revenue growth factors. Reconciliation to the development of revenue is available in the financial highlights (for consolidated revenues), as well as in the Decorative Paints and Performance Coatings sections.
Operating income to adjusted EBITDA
| January -June 2023 | January -June 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| Decorative Paints |
Performance Coatings |
Other activities |
Total | in € millions | Decorative Paints |
Performance Coatings |
Other activities |
Total |
| 245 | 298 | (82) | 461 Operating income | 237 | 358 | (64) | 531 | |
| (12) | (18) | (18) | (48) Restructuring-related costs | (14) | (10) | (11) | (35) | |
| (2) | — | (17) | (19) Acquisition / divestment related | (6) | (1) | (5) | (12) | |
| — | (2) | 1 | (1) Other | (4) | (1) | — | (5) | |
| (14) | (20) | (34) | (68) Total identified items | (24) | (12) | (16) | (52) | |
| 259 | 318 | (48) | 529 Adjusted operating income | 261 | 370 | (48) | 583 | |
| (69) | (83) | (21) | (173) Depreciation and amortization* | (73) | (88) | (19) | (180) | |
| 328 | 401 | (27) | 702 Adjusted EBITDA | 334 | 458 | (29) | 763 |
* Excluding identified items
Operating income to adjusted EBITDA
| Second quarter 2023 | Second quarter 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| Decorative Paints |
Performance Coatings |
Other activities |
Total | in € millions | Decorative Paints |
Performance Coatings |
Other activities |
Total |
| 151 | 168 | (40) | 279 Operating income | 121 | 182 | (33) | 270 | |
| (4) | (4) | (10) | (18) Restructuring-related costs | (10) | (9) | (4) | (23) | |
| (2) | — | (11) | (13) Acquisition / divestment related | (6) | (1) | (3) | (10) | |
| — | (1) | — | (1) Other | (4) | (1) | (1) | (6) | |
| (6) | (5) | (21) | (32) Total identified items | (20) | (11) | (8) | (39) | |
| 157 | 173 | (19) | 311 Adjusted operating income | 141 | 193 | (25) | 309 | |
| (34) | (41) | (11) | (86) Depreciation and amortization* | (37) | (44) | (10) | (91) | |
| 191 | 214 | (8) | 397 Adjusted EBITDA | 178 | 237 | (15) | 400 |
* Excluding identified items
Adjusted earnings per share
Adjusted earnings per share is used to provide additional insight into the underlying profitability of the company. It helps comparing performance over time, as well as to industry benchmarks and peers.
Adjusted earnings per share from continuing operations
| Second quarter | January-June | |||
|---|---|---|---|---|
| 2023 | 2024 in € millions | 2023 | 2024 | |
| 133 | 191 Profit from continuing operations | 239 | 386 | |
| 32 | 39 Identified items reported in operating income | 68 | 52 | |
| 1 | (14) Identified items reported in interest | 1 | (15) | |
| 7 | (18) Identified items reported in income tax | — | (21) | |
| (15) | (15) Non-controlling interests | (26) | (28) | |
| 158 | 183 Adjusted net income from continuing operations |
282 | 374 | |
| 170.6 | 170.7 Weighted average number of shares (in millions) |
170.6 | 170.7 | |
| 0.93 | 1.07 Adjusted earnings per share from continuing operations |
1.65 | 2.19 |
Average invested capital
Average invested capital is the average of the quarter-end invested capital balances for the last four quarters. Invested capital is total assets (excluding cash and cash equivalents, short-term investments, investments in associates, pension assets, assets held for sale) less current tax liabilities, deferred tax liabilities and trade and other payables.
Average invested capital
July 2022 - June 2023/July 2023 - June 2024
| in € millions | 2023 | 2024 | ∆% |
|---|---|---|---|
| Decorative Paints | 3,857 | 3,813 | (1%) |
| Performance Coatings | 3,896 | 3,742 | (4%) |
| Other activities | 605 | 684 | |
| Total | 8,358 | 8,239 | (1%) |
Management uses average invested capital to assess the total amount of capital invested over the last 12 months.
Return on investment (ROI)
ROI is adjusted operating income of the last 12 months as a percentage of average invested capital. Management uses ROI to assess the efficiency of investments and make informed decisions on how to allocate capital to maximize returns and drive long-term growth.
Return on investment (ROI)
July 2022 - June 2023/July 2023 - June 2024
| in % | 2023 | 2024 |
|---|---|---|
| Decorative Paints | 10.8 | 13.2 |
| Performance Coatings | 13.4 | 19.7 |
| Other activities* | ||
| Total | 10.0 | 13.7 |
* ROI for Other activities is not shown, as this is not meaningful
Leverage ratio
Consistent with other companies in the industry, management monitors capital headroom based on the leverage ratio net debt/ EBITDA.The leverage ratio is calculated based on the net debt per balance sheet position divided by EBITDA of the last 12 months.
EBITDA
| July 2022 - June 2023/July 2023 - June 2024 | ||||||
|---|---|---|---|---|---|---|
| in € millions | 2023 | 2024 | ||||
| Operating income | 732 | 1,099 | ||||
| Depreciation and amortization | 367 | 363 | ||||
| EBITDA | 1,099 | 1,462 |
Leverage ratio
July 2022 - June 2023/July 2023 - June 2024
| in € millions | 2023 | 2024 |
|---|---|---|
| Net debt* | 4,353 | 4,253 |
| EBITDA | 1,099 | 1,462 |
| Leverage ratio | 4.0 | 2.9 |
* Breakdown of net debt is available in the net debt paragraph in the condensed consolidated financial statements section
Board of Management's statement on the condensed consolidated half-year 2024 financial statements and interim management report
We have prepared this half-year 2024 financial report of AkzoNobel, and the undertakings included in the consolidation taken as a whole, in accordance with International Financial Reporting Standards as adopted by the EU (IFRS) and additional Dutch disclosure requirements for half-yearly financial reports.
To the best of our knowledge:
-
- The condensed consolidated financial statements in this half-year 2024 financial report give a true and fair view of our assets and liabilities, financial position at June 30, 2024, and of the result of our consolidated operations for the first half-year of 2024
-
- The interim management report in this half-year 2024 financial report includes a fair view of the information required pursuant to section 5:25d, subsections 8 and 9 of the Dutch Act on Financial Supervision
Outlook*
Based on current market conditions and constant currencies, AkzoNobel expects to deliver 2024 adjusted EBITDA towards the lower end of its full-year guidance range of €1.5 to €1.65 billion.
For the mid-term, AkzoNobel aims to expand profitability to deliver an adjusted EBITDA margin of above 16% and a return on investment between 16% and 19%, underpinned by organic growth and industrial excellence.
The company aims to lower its leverage to around 2.3 times net debt/EBITDA by the end of 2024 and around 2 times in the midterm, while remaining committed to retaining a strong investment grade credit rating.
*Outlook is based on organic volumes and constant currencies, and assumes no significant market disruptions
Amsterdam, July 22, 2024 The Board of Management
Greg Poux-Guillaume Maarten de Vries
Quarterly statistics
| 2023 | 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| Q1 | Q2 | Q3 | Q4 | Full-year in € millions | Q1 | Q2 | Year-to-date | |
| Revenue | ||||||||
| 1,046 | 1,147 | 1,121 | 986 | 4,300 Decorative Paints | 1,056 | 1,139 | 2,195 | |
| 1,611 | 1,594 | 1,620 | 1,543 | 6,368 Performance Coatings | 1,584 | 1,645 | 3,229 | |
| — | — | — | — | — Other activities | — | — | — | |
| 2,657 | 2,741 | 2,741 | 2,529 | 10,668 Total | 2,640 | 2,784 | 5,424 | |
| EBITDA* | ||||||||
| 129 | 185 | 193 | 138 | 645 Decorative Paints | 152 | 158 | 310 | |
| 172 | 210 | 288 | 198 | 868 Performance Coatings | 220 | 227 | 447 | |
| (32) | (28) | (38) | (29) | (127) Other activities | (22) | (23) | (45) | |
| 269 | 367 | 443 | 307 | 1,386 Total | 350 | 362 | 712 | |
| Adjusted EBITDA (excluding Identified items)* | ||||||||
| 137 | 191 | 196 | 121 | 645 Decorative Paints | 156 | 178 | 334 | |
| 187 | 214 | 245 | 208 | 854 Performance Coatings | 221 | 237 | 458 | |
| (19) | (8) | (27) | (16) | (70) Other activities | (14) | (15) | (29) | |
| 305 | 397 | 414 | 313 | 1,429 Total | 363 | 400 | 763 | |
| 11.5 | 14.5 | 15.1 | 12.4 | 13.4 Adjusted EBITDA margin (in %) | 13.8 | 14.4 | 14.1 | |
| Depreciation/Depreciation excluding Identified items | ||||||||
| (30)/(30) | (29)/(29) | (31)/(31) | (33)/(33) | (123)/(123) Decorative Paints | (30)/(30) | (31)/(31) | (61)/(61) | |
| (33)/(33) | (34)/(33) | (34)/(34) | (35)/(34) | (136)/(134) Performance Coatings | (35)/(35) | (37)/(36) | (72)/(71) | |
| (4)/(4) | (6)/(5) | (4)/(5) | (4)/(4) | (18)/(18) Other activities | (4)/(4) | (5)/(5) | (9)/(9) | |
| (67)/(67) | (69)/(67) | (69)/(70) | (72)/(71) | (277)/(275) Total | (69)/(69) | (73)/(72) | (142)/(141) | |
| Amortization/Amortization excluding Identified items | ||||||||
| (5)/(5) | (5)/(5) | (6)/(6) | (6)/(6) | (22)/(22) Decorative Paints | (6)/(6) | (6)/(6) | (12)/(12) | |
| (9)/(9) | (8)/(8) | (9)/(9) | (8)/(9) | (34)/(35) Performance Coatings | (9)/(9) | (8)/(8) | (17)/(17) | |
| (6)/(6) | (6)/(6) | (5)/(5) | (7)/(6) | (24)/(23) Other activities | (5)/(5) | (5)/(5) | (10)/(10) | |
| (20)/(20) | (19)/(19) | (20)/(20) | (21)/(21) | (80)/(80) Total | (20)/(20) | (19)/(19) | (39)/(39) | |
* Alternative performance measures: For more details on these measures, including reconciliations to the most directly comparable IFRS measures and explanation of their use, refer to the Notes to the condensed consolidated financial statements, APM paragraph
Quarterly statistics
| 2023 | 2024 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Q1 | Q2 | Q3 | Q4 | Full-year in € millions | Q1 | Q2 | Year-to-date | ||
| Operating income | |||||||||
| 94 | 151 | 156 | 99 | 500 Decorative Paints | 116 | 121 | 237 | ||
| 130 | 168 | 245 | 155 | 698 Performance Coatings | 176 | 182 | 358 | ||
| (42) | (40) | (47) | (40) | (169) Other activities | (31) | (33) | (64) | ||
| 182 | 279 | 354 | 214 | 1,029 Total | 261 | 270 | 531 | ||
| Identified items included in operating income | |||||||||
| (8) | (6) | (3) | 17 | — Decorative Paints | (4) | (20) | (24) | ||
| (15) | (5) | 43 | (10) | 13 Performance Coatings | (1) | (11) | (12) | ||
| (13) | (21) | (10) | (14) | (58) Other activities | (8) | (8) | (16) | ||
| (36) | (32) | 30 | (7) | (45) Total | (13) | (39) | (52) | ||
| Adjusted operating income (excluding Identified items)* | |||||||||
| 102 | 157 | 159 | 82 | 500 Decorative Paints | 120 | 141 | 261 | ||
| 145 | 173 | 202 | 165 | 685 Performance Coatings | 177 | 193 | 370 | ||
| (29) | (19) | (37) | (26) | (111) Other activities | (23) | (25) | (48) | ||
| 218 | 311 | 324 | 221 | 1,074 Total | 274 | 309 | 583 | ||
| Reconciliation financing income and expenses | |||||||||
| 11 | 15 | 18 | 25 | 69 Financing income | 15 | 9 | 24 | ||
| (38) | (45) | (51) | (58) | (192) Financing expenses | (45) | (47) | (92) | ||
| (27) | (30) | (33) | (33) | (123) Net interest on net debt | (30) | (38) | (68) | ||
| Other interest | |||||||||
| 8 | 9 | 8 | 8 | 33 Financing income related to post-retirement benefits | 7 | 7 | 14 | ||
| (1) | 2 | — | (2) | (1) Interest on provisions | (4) | — | (4) | ||
| (18) | (26) | (43) | (94) | (181) Other items | 11 | — | 11 | ||
| (11) | (15) | (35) | (88) | (149) Net other financing charges | 14 | 7 | 21 | ||
| (38) | (45) | (68) | (121) | (272) Financing income and expenses | (16) | (31) | (47) |
* Alternative performance measures: For more details on these measures, including reconciliations to the most directly comparable IFRS measures and explanation of their use, refer to the Notes to the condensed consolidated financial statements, APM paragraph
Quarterly statistics
| 2023 | 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| Q1 | Q2 | Q3 | Q4 | Full-year | Q1 | Q2 | Year-to-date | |
| Quarterly net income analysis (in € millions) | ||||||||
| 7 | 5 | 8 | 7 | 27 Results from associates | 7 | 5 | 12 | |
| 151 | 239 | 294 | 100 | 784 Profit before tax | 252 | 244 | 496 | |
| (45) | (106) | (96) | (49) | (296) Income tax | (57) | (53) | (110) | |
| 106 | 133 | 198 | 51 | 488 Profit for the period from continuing operations | 195 | 191 | 386 | |
| 30 | 44 | 33 | 49 | 38 Effective tax rate (in %) | 23 | 22 | 22 | |
| Earnings per share from continuing operations (in €) | ||||||||
| 0.56 | 0.69 | 1.11 | 0.26 | 2.62 Basic | 1.07 | 1.03 | 2.10 | |
| 0.56 | 0.69 | 1.11 | 0.26 | 2.61 Diluted | 1.06 | 1.03 | 2.09 | |
| Earnings per share from discontinued operations (in €) | ||||||||
| (0.01) | — | (0.01) | (0.02) | (0.03) Basic | (0.01) | 0.01 | — | |
| (0.01) | — | (0.01) | (0.02) | (0.03) Diluted | (0.01) | 0.01 | — | |
| Earnings per share from total operations (in €) | ||||||||
| 0.55 | 0.69 | 1.11 | 0.24 | 2.59 Basic | 1.06 | 1.04 | 2.10 | |
| 0.55 | 0.69 | 1.10 | 0.24 | 2.58 Diluted | 1.06 | 1.03 | 2.09 | |
| Number of shares (in millions) | ||||||||
| 170.5 | 170.6 | 170.6 | 170.6 | 170.6 Weighted average number of shares1 | 170.6 | 170.7 | 170.7 | |
| 170.6 | 170.6 | 170.6 | 170.6 | 170.6 Number of shares at end of quarter1 | 170.6 | 170.8 | 170.8 | |
| Adjusted earnings from continuing operations (in € millions)* | ||||||||
| 106 | 133 | 198 | 51 | 488 Profit from continuing operations | 195 | 191 | 386 | |
| 36 | 32 | (30) | 7 | 45 Identified items reported in operating income | 13 | 39 | 52 | |
| — | 1 | (1) | 44 | 44 Identified items reported in interest | (1) | (14) | (15) | |
| (7) | 7 | 10 | (23) | (13) Identified items reported in income tax | (3) | (18) | (21) | |
| (11) | (15) | (8) | (7) | (41) Non-controlling interests | (13) | (15) | (28) | |
| 124 | 158 | 169 | 72 | 523 Adjusted net income from continuing operations | 191 | 183 | 374 | |
| 0.73 | 0.93 | 0.99 | 0.42 | 3.07 Adjusted earnings per share from continuing operations (in €) |
1.12 | 1.07 | 2.19 |
* Alternative performance measure: For more details on this measure, including reconciliations explanation of its use, refer to the Notes to the consolidated financial statements, APM paragraph
Glossary
Adjusted earnings per share are the basic earnings per share from continuing operations, excluding Identified items and taxes thereon.
Adjusted EBITDA is operating income excluding depreciation, amortization and Identified items.
Adjusted EBITDA margin is adjusted EBITDA as percentage of revenue.
Adjusted operating income is operating income excluding Identified items.
Capital expenditures is the total of investments in property, plant and equipment and investments in intangible assets.
Comprehensive income is the change in equity during a period resulting from transactions and other events other than those changes resulting from transactions with shareholders in their capacity as shareholders.
Constant currencies calculations exclude the impact of changes in foreign exchange rates by retranslating the prior year local currency amounts into euros at the current year's foreign exchange rates.
EBITDA is operating income excluding depreciation and amortization.
EBITDA margin is EBITDA as a percentage of revenue.
EMEA is Europe, Middle East and Africa.
Free cash flow is net cash generated from/(used for) operating activities minus capital expenditures.
Huarun is the acquired Chinese decorative paints business of Sherwin-Williams.
Identified items are special charges and benefits, (post) acquisition and divestment related items, major restructuring and impairment charges, charges and benefits related to major legal, environmental
and tax cases, and hyperinflation accounting adjustments for inventory positions that exceed normal operational levels.
Invested capital is total assets (excluding cash and cash equivalents, short-term investments, investments in associates, pension assets, assets held for sale) less current tax liabilities, deferred tax liabilities and trade and other payables.
Average invested capital is the average of the quarter-end invested capital balances for the last four quarters.
Latin America excludes Mexico.
Leverage ratio is calculated as net debt divided by EBITDA, which is calculated as the total of the last 12 months.
Net debt is defined as long-term borrowings plus short-term borrowings less cash and cash equivalents and short-term investments.
North America includes Mexico.
North Asia includes, among others, China, Japan and South Korea.
Operating income is defined as income excluding net financing expenses, results from associates, income tax and profit/loss from discontinued operations. Operating income includes the share of non-controlling interests. Operating income includes Identified items to the extent these relate to lines included in operating income.
Operating working capital (trade) is defined as the sum of inventories, trade receivables and trade payables. When expressed as a ratio, operating working capital is measured against four times last quarter revenue.
Organic sales compares sales between periods, excluding the impact of changes in consolidation, the impact of changes in foreign exchange rates and the impact of hyperinflation accounting. Refer to "Constant currencies" for details on the calculation of the foreign exchange rate impact.
Other working capital is defined as other receivables, plus current tax assets, less other payables and current tax liabilities.
ROI is adjusted operating income of the last 12 months as percentage of average invested capital.
SG&A costs include selling and distribution expenses, general and administrative expenses and research, development and innovation expenses.
South Asia Pacific includes South East Asia and Asia Pacific.
Safe harbor statement
This report contains statements which address such key issues as AkzoNobel's growth strategy, future financial results, market positions, product development, products in the pipeline and product approvals. Such statements should be carefully considered, and it should be understood that many factors could cause forecast and actual results to differ from these statements. These factors include, but are not limited to, price fluctuations, currency fluctuations, developments in raw material and personnel costs, pensions, physical and environmental risks, legal issues, and legislative, fiscal, and other regulatory measures, as well as significant market disruptions such as the impact of pandemics. Stated competitive positions are based on management estimates supported by information provided by specialized external agencies. For a more comprehensive discussion of the risk factors affecting our business, please see our latest annual report.
Brand and trademarks
In this report, reference is made to brands and trademarks owned by, or licensed to, AkzoNobel. Unauthorized use of these is strictly prohibited.
Akzo Nobel N.V.
Christian Neefestraat 2 P.O. Box 75730 1070 AS Amsterdam, the Netherlands T +31 88 969 7555 www.akzonobel.com
For more information: The explanatory sheets used during the press conference can be viewed on AkzoNobel's corporate website: www.akzonobel.com
AkzoNobel Global Communications T +31 88 969 7833 E [email protected]
AkzoNobel Investor Relations T +31 88 969 0139 E [email protected]
Financial calendar
Report for the third quarter 2024 October 23, 2024
Since 1792, we've been supplying the innovative paints and coatings that help to color people's lives and protect what matters most. Our world class portfolio of brands – including Dulux, International, Sikkens and Interpon – is trusted by customers around the globe. We're active in more than 150 countries and use our expertise to sustain and enhance everyday life. Because we believe every surface is an opportunity. It's what you'd expect from a pioneering and longestablished paints company that's dedicated to providing sustainable solutions and preserving the best of what we have today – while creating an even better tomorrow. Let's paint the future together.
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