AkzoNobel, the world’s largest paintmaker and owner of the Dulux brand, said today that its Q4 2011 results were hampered by rising materials costs which it now intends to pass on to customers.
Revenues rose 7% to €15.7bn but earnings before interest, tax, depreciation and amortisation fell by 9% to €1.8bn and margins dropped to 11.4% from 13.4%.
The escalating cost of materials such as titanium dioxide, a paint pigment, and oil-related resins and solvents was particularly painful last year for paintmakers such as AkzoNobel and rival U.S. maker Sherwin-Williams.
Having now priced in most of the increases, AkzoNobel said it was seeing greater price stability in most raw materials except for titanium dioxide, which it expects to rise further.
“2011 was a challenging year against the background of weaker global economic conditions and unprecedented raw material price inflation,” said AkzoNobel, Chief executive, Hans Wijers. “The absolute impact of increased raw material prices for the year was approximately €1bn.”
“Despite this significant headwind, our reported pricing actions have now offset most of this, and for the year ahead we expect to see the full-year benefit of these increases.” Wijers will be succeeded in April by Ton Buechner, CEO of Swiss machinery maker Sulzer
Its decorative paints division, which accounted for €1.204bn or about a third of quarterly sales, reported earnings before interest, tax, depreciation and amortisation (EBITDA) of just €11m, down from €63m a year ago, and €148m in the third quarter.
Wijers highlighted the “very, very weak” construction market in Europe and moves by Chinese authorities to calm a frothy property market as trends likely to curb demand for paints.
AkzoNobel reported full-year revenue of 15.7 billion euros and reiterated its medium-term target for annual revenue of 20 billion euros, as well as its ambition to increase EBITDA each year while maintaining a 13-15% margin.
Wijers said that could come from acquisitions as well as organic growth, but declined to comment on potential targets. According to Reuters, AkzoNobel is seen as a potential buyer for chemical maker DuPont’s automotive finishes and industrial coatings unit.