Dulux parent, Akzo Nobel has reported a 3% uplift in sales within its Decorative Paints business for H1, despite the weak pound and poor consumer confidence in the UK, and adds that it is making “strong progress” on its strategy to grow and add value to the business. 

During the half year, volumes were up 2% across the Dutch company, driven by decorative paints and speciality chemicals. In Decorative Paints, alone, volumes were up 6%, with growth in Asia and Latin America.

Earnings before interest and taxes (EBIT) increased 8% in Decorative Paints, which was mainly as a result of improved volumes and cost control by the company.

The company has made a series of product launches in key markets, including the Levis premium coating brand in the professional market segment in China and its EasyCare brand in Brazil.

However, the report added that the favourable impact from the growth in Brazil was offset by the weakening of the pound sterling. In the second quarter, revenue was down in the UK Decorative Coatings business, hit by “adverse currency effects, notably the pound sterling, price/mix and lower volumes”, said Akzo. The firm added that, while positive developments were visible in a number of international markets following successful product campaigns, the UK was affected by lower consumer confidence.

Across the business as a whole, revenue was up 4% in H1, mainly due to volume growth and acquisitions, according to the report. EBIT was up 1% at €837 million (2016: €825 million), although this increase was partly offset by higher raw material costs and continued weak demand in Marine and Protective Coatings, said the company.

In Q2 in particular, volumes increased in decorative paints and speciality chemicals but were flat overall. During the period, Akzo completed a €160 million share repurchase scheme and also restructured its executive committee.

As part of its plans to accelerate growth within the business, it is separating out its Speciality Chemicals business – a process Akzo says remains on track. It has made two acquisitions - Flexcrete Technologies Ltd., a UK manufacturer of products used for the protection and repair of concrete substrates; and Disa Technology, a French supplier of adhesive films used in the aerospace, transportation and industrial equipment sector – which strengthen its Performance Coatings business. Expansion has also been made in international markets, including Mexico, Sweden, Thailand and also Brazil, where it made its decorative paint product launches.

The new strategy was announced earlier this year when rival PPG Industries was attempting a takeover of Akzo and suggested its shareholders would benefit from a merger of the two global giants. Although Akzo did eventually enter into talks with PPG, more than one offer from the US paint firm was turned down and the Akzo board reaffirmed its commitment to the strategy, which it believes is in the best interests of the company and its shareholders.

When reporting the H1 results, Akzo also announced that, as part of an ongoing program to engage with and strengthen the relationship with its shareholders, it would be unveiling a range of new activities and called for an Extraordinary General Meeting (EGM) on to be held on September 8, 2017. 

Akzo said that it “continues to anticipate positive developments” for international markets, including The Middle East and Europe (excluding the UK), North America and Asia, improving during the year, while Latin America “is expected to stabilise.”

The firm has introduced new cost-control measures and put new structures in place to improve operational efficiency in order to help deal with the rising prices of raw material in what Akzo describes as “an inflationary environment”.

Newly-appointed CEO Thierry Vanlancker, commented on the results: “It is a privilege to lead Akzo Nobel, a company full of great people focused on delivering for our customers every day.

“I was involved in developing our strategy to accelerate sustainable growth and value creation for all our stakeholders. We will continue to deliver on the plans for the creation of two focused, high-performing businesses - Paints and Coatings and Specialty Chemicals. The separation process remains on track.

“During the first half of the year, we invested to significantly increase our production capacity around the world and launched two of our premium Decorative Paints brands in key markets.”

He continued: “Following a record performance for Akzo Nobel in the first quarter, we continued to see growth across all our business areas with the exception of challenging market conditions in the marine and oil and gas industries, and inflationary pressures which impact part of our business. Mitigation plans are in place and we will see the benefit of these later in the year.

“We remain focused on executing our new strategy and continue to expect EBIT for 2017 to be around €100 million higher than 2016, as a result of growth momentum and continuous improvement. This assumes no further material changes in market and economic dynamics, including foreign currencies.”