Economic headwinds stifle fourth-quarter results
12:32 PM MST | February 21, 2014 | CW Staff
Early-reporting European companies struggled to improve sales and earnings in the fourth quarter of 2013. Adverse currency effects and continued economic uncertainty in Europe hindered sales, although companies report signs of an upturn in several regional markets. The effects of restructuring boosted earnings at certain companies, but restructuring costs weighed on others.
AkzoNobel reports increases in profits in fourth-quarter and full-year 2013 on lower sales due to adverse currency effects and divestments. Fourth-quarter net income reached €51 million ($70 million) compared with a €27-million loss in the year-earlier period. Fourth-quarter revenues declined 5%, to €3.48 billion. Ebitda was flat, at €208 million, and return on sales (ROS) was 3.3% compared with 1.0% in the fourth quarter of 2012. Full-year net income rose 88%, to €724 million, on 5% lower revenue, of €14.6 billion. Full-year ROS was 6.6% compared with 5.9% in 2012. Ebitda was 5% lower, at €1.5 billion.
“We indicated at the start of 2013 that trading conditions would continue to be challenging, and that has proven to be the case. In response, we accelerated our company-wide improvement actions and have brought our performance-improvement program to a successful conclusion a year ahead of schedule and above target. While the first half of 2013 was impacted by weaker trading conditions and specific one-off events in specialty chemicals, the second half has shown early signs of stabilization in several end markets. In combination with our restructuring actions, this positive effect has been evident in our improving return on sales in the third and fourth quarters despite foreign currency headwinds. In 2014, we will continue to improve our ability to leverage our strong brands and leading market positions,” says Ton Büchner, AkzoNobel CEO. “I am confident that we are on track to deliver on our 2015 strategic goals.”
AkzoNobel says that it will continue to restructure its operations during 2014 to reduce costs further and that it anticipates restructuring charges of at least €250 million. The company’s performance improvement program, announced in 2011, exceeded the cumulative amount of €500 million in Ebitda for the period through 2013, delivering a total of €545 million in benefits one year earlier than originally planned, the company says.
AkzoNobel’s decorative paints business achieved an operating income of €146 million in the fourth quarter compared with a €91-million operating loss in the year-earlier period. Sales were 6% lower, at €934 million. Performance coatings’ fourth-quarter operating income was down 36%, at €73 million, on 2% lower sales, of €1.37 billion. Specialty chemicals’ operating loss is €30 million in the fourth quarter compared with an operating profit of €73 million in the fourth quarter of 2012. Revenues were 9% lower, at €1.2 billion.
Kemira, meanwhile, reports a fourth-quarter net loss of €48.7 million compared with a net loss of €40.4 million in the year-earlier period. Revenues were down 2%, to €545.2 million, because of unfavorable exchange rates. The full-year net loss was €25.9 million compared with a net profit of €22.4 million in 2012. Full-year revenue was flat, at €2.23 billion.
“Kemira’s organic revenue and operative Ebit increased slightly in the fourth quarter. Of the two growth-focused segments, paper, with more than 10% organic revenue growth, was able to improve its operative Ebit by more than 20%,” says Kemira president and CEO Wolfgang Büchele. “By showing only modest, 3% organic growth at a disappointing profitability, oil and mining has not met our expectations. Thus, we have taken steps to bring the oil and mining business back to its strategic path. In addition, we closed the acquisition of 3F, which will significantly strengthen our position in the polymer market. The profitability contribution of 3F in the fourth quarter was lower than expected due to a temporary shutdown in one of the production sites and higher costs mainly related to integration. The acquisition is expected to result in substantial synergies through raw material, logistics, and fixed-cost savings,” he says.
Kemira expects to close the divestment of its ChemSolutions formic acid business during the first quarter. “Divestments, combined with [restructuring] measures, have significantly reduced complexity and strengthened our balance sheet in 2013. These measures were required to be able to compete effectively in our core businesses as well as to support our long-term profitability. Once the divestments [are] completed, Kemira [will be] transformed into a pure-play company focusing on water quality and quantity management,” Büchele says.
Kemira says it will continue to focus on improving profitability, reinforcing cash flow, and investing to secure growth.
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