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February 6, 2014 4:31 pm
Akzo Nobel will continue to focus on cutting costs after its chief executive warned over the “fragility” of Europe’s economic recovery.
Ton Büchner, chief executive of the Dutch chemicals company which owns the Dulux paint brand, said that while the company saw some early signs of stabilisation in the second half of last year, he was not “overly excited” by prospects for 2014.
Mr Büchner cited the fragility of Europe’s recovery and China’s move to become a consumption-driven economy as two of the company’s biggest areas of concern.
Shares in Akzo Nobel, one of the world’s two largest paint companies by revenues, rose almost 7 per cent in early afternoon trading on Thursday after fourth-quarter and full-year earnings came in ahead of analysts’ consensus expectations. Fourth-quarter earnings before interest, tax, depreciation and amortisation rose 1 per cent to €208m, ahead of consensus estimates of €202m.
Fourth-quarter and full-year revenues both fell 5 per cent, to €3.48bn and €14.59bn respectively, compared with the same period in 2012 – below consensus estimates, which Akzo Nobel blamed on adverse currency effects and divestments.
“Around 44 per cent of our business comes out of growth markets so our company is very exposed to currencies,” said Mr Büchner. “Currencies will continue to be a factor in 2014.”
Mr Büchner, who took over the reins of Akzo Nobel in 2012 to turn round the company, said he would continue to concentrate on making the group leaner and more profitable, after the company confirmed it had completed – and exceeded – its €500m cost-cutting programme by the end of 2013, a year ahead of schedule.
May 17 2013: Ton Büchner, chief executive of Akzo Nobel, on consumer confidence in the eurozone
This has seen the company go through major restructuring in recent years, resulting in job cuts, divestment of non-strategic or weak market positions and factory consolidation. In 2012, it sold its North American decorative paints division to rival PPG for $1.1bn and divested its speciality chemicals arm in Pakistan for $150m.
Akzo Nobel’s restructuring has seen the company’s return on sales rise from 5.9 per cent to 6.6 per cent in 2013. It said on Thursday it was on track to meet its 2015 target of 9 per cent.
Mr Büchner said the company had to now move from its project improvement culture to regularly cutting costs of between €150m and €200m every year. “We need to get into the habit of taking that inflation out with productivity improvements and cost takeouts,” he said.
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