A sickly eurozone economy has weakened demand for chemicals since we said buy shares in Dutch paints and coatings giant Akzo Nobel. Of course, that makes things harder, but Akzo is largely a self-help story and all the drivers we identified three months ago remain firmly in place. Investors, however, will need to be patient.
Crucially, Ton Büchner took up his post as chief executive at the annual meeting in April, just a few days after Akzo reported a 3 per cent fall in cash profits to €423m (£339m) – the benefit of better pricing was offset by weak demand and high raw material costs. Mr Büchner must now live up to his reputation for fixing broken businesses. Akzo’s underperforming US decorative paints division, where falling volumes sliced cash profits by 16 per cent, will be high up the list. Expect more details on his plans later this year.
Akzo’s global performance-improvement programme remains on track. It promises to deliver €200m of costs savings this year and, if all goes well, €500m by 2014. A falling oil price should help, too, given petrochemicals-based raw materials account for well over half total costs.
