Key Takeaways:
AkzoNobel NV (AKZA.AS) reported first-quarter adjusted core profit that beat analyst estimates by nearly 7 percent, as higher pricing and cost-saving measures helped offset rising raw material costs and a slight dip in revenue.
"While the conflict in the Middle East is impacting our cost of supply, we’re maintaining our guidance for the year," Chief Executive Greg Poux-Guillaume said in a statement. "Our already announced price increases are expected to fully compensate anticipated cost impacts based on current assumptions."
The Dutch paints and coatings maker posted adjusted earnings before interest, taxes, depreciation and amortization of €345 million ($405 million). Revenue was €2.39 billion ($2.81 billion), matching consensus, for an operating margin of 14.5 percent.
Shares in the company rose around 4 percent in Amsterdam trading as investors welcomed the confirmation of the full-year outlook. Analysts from J.P. Morgan noted that while the guidance was positive, "there will likely still be some skepticism around... any demand destruction from higher inflation."
The company, which owns brands like Dulux and Interpon, is facing a high-teens percentage increase in its raw material basket due to shipping disruptions in the Strait of Hormuz, with the full effect expected in the next two quarters. AkzoNobel's ability to pass on price increases is a key advantage over commodity chemical producers.
AkzoNobel has been actively managing its portfolio, having recently sold its units in India and Pakistan for a combined $1.65 billion. The company is also in the process of a planned merger with U.S. peer Axalta Coating Systems to create a combined entity valued at around $25 billion.
The strong quarterly result demonstrates AkzoNobel's ability to use its brand power to protect margins from inflation. Investors will now watch for evidence in the second quarter that the implemented price hikes do not significantly impact sales volumes.
This article is for informational purposes only and does not constitute investment advice.
