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Akzo Nobel misses profit forecast, says it rolled back some prices in Q4
Global Banking and Finance Review
Company
By Stephanie Hamel
(Reuters) -Akzo Nobel reported a smaller-than-expected rise in fourth-quarter core profit on Wednesday, as the Dutch paints and coatings maker started rolling back price hikes in some of its markets.
The maker of Dulux and Flexa paints has been recovering from a post-COVID slowdown marked by rising raw material costs and destocking by resellers of its decorative do-it-yourself paints.
It posted a 42% rise in fourth-quarter adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) to 313 million euros ($337 million). That missed an analysts’ forecast of 319 million euros in a company-provided consensus.
Hyperinflation in Argentina and Turkey had a negative 23 million-euro impact on operating income during the fourth quarter, Akzo said.
Prices were 4% higher in the period compared to a year earlier prices soared in Argentina and Turkey, even as the company started rolling back some price increases in its more mature markets, CEO Greg Poux-Guillaume said.
“In some cases, there’s price drops. In some cases, there’s still competitive power that allows us to absorb in pricing the general inflation that we’re still subjected to,” Poux-Guillaume told reporters.
Akzo had signalled in October that price rises had come to an end in most of its markets as costs started to ease.
While volumes in the decorative segment in Europe were not back to 2019 levels yet, Poux-Guillaume said the market had bottomed out in mid-2023, leading to a rebound in the fourth quarter.
“I’d say so far so good, with an improvement in the larger part of the business, the European business, that will carry into next year,” Poux-Guillaume said.
For 2024, the company expects an adjusted EBITDA of between 1.50 billion and 1.65 billion euros, while analysts had forecast a core profit of 1.59 billion euros for the year.
The shares were flat in early trading.
($1 = 0.9287 euros)
(Reporting by Stéphanie Hamel in Gdansk; Editing by Milla Nissi and Sharon Singleton)
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a financial metric used to evaluate a company's operating performance by measuring its profitability before accounting for non-operating expenses.
Hyperinflation is an extremely high and typically accelerating inflation rate, often exceeding 50% per month. It erodes the real value of the local currency, leading to a loss of confidence in the currency's ability to function as a stable store of value.
Operating income is the profit a company makes from its core business operations, excluding any income derived from non-operating activities such as investments or sales of assets. It is a key indicator of operational efficiency.
Price inflation refers to the rate at which the general level of prices for goods and services rises, leading to a decrease in purchasing power. It is typically measured by the Consumer Price Index (CPI).
Destocking is the process of reducing inventory levels, often in response to decreased demand or to improve cash flow. It can indicate a slowdown in sales or a strategic move to optimize inventory management.
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