AkzoNobel: Upturn in the third quarter of 2023 and earnings growth

Highlights from AkzoNobel's reported Q3 2023 include (compared to Q3 2022) sales that increased 5 percent at constant exchange rates despite flat volumes due to pricing, a 4 percent decrease in reported sales due to unfavorable exchange rates, an improvement in operating profit to €354 million (2022: €168 million), adjusted operating profit of €324 million (2022: €184 million) and return on sales of 11.8% (2022: 6.4%). Net cash flow from operating activities was positive at €297 million (2022: €126 million) and the net debt to EBITDA ratio improved sequentially to 3.2x. Greg Poux-Guillaume, CEO of AkzoNobel, commented, "Our third quarter results show a solid recovery in profit and a continued improvement in our margins, despite negative currency impacts. While volumes were flat, we are increasingly benefiting from the easing of raw material costs. Higher profits and improved working capital management contributed to a gearing ratio of 3.2, which keeps us on track to meet our year-end guidance."

AkzoNobel expects ongoing macroeconomic uncertainties to persist and weigh on organic volume growth. The company will focus on margin management, cost reduction, working capital normalization and deleveraging. Cost reduction programs are expected to partially mitigate higher than expected inflationary pressures on operating costs in 2023. AkzoNobel expects falling raw material costs to have a positive impact on profitability. Based on current market conditions, AkzoNobel is targeting adjusted EBITDA of approximately €1.45 billion. The leverage ratio guidance remains unchanged at less than three times net debt/EBITDA by the end of 2023, excluding the acquisition of Kansai Paint Africa, which is not expected to be completed before the end of the year.