Akzo Nobel (AKZA) Q3 2024 earnings summary

Executive summary

• Achieved fourth consecutive quarter of volume growth, with Q3 2024 organic sales and volumes up 1% year-over-year, but revenue declined 3% due to adverse currency effects and flat price/mix.

• Adjusted gross margin expanded by 60 bps in Q3 and 180 bps YTD; adjusted EBITDA was €400 million (15% margin), or €394 million post hyperinflation accounting, in line with guidance.

• Operating income fell 27% to €259 million, impacted by €44 million in restructuring-related items and higher operating costs; operating expenses were higher year-over-year but declined sequentially.

• Transformation initiatives include closure of three Deco EMEA sites, SG&A reductions targeting 2,000 positions, and a strategic portfolio review in South Asia, aiming for over €250 million in industrial efficiency benefits by 2027.

• Net income attributable to shareholders rose to €521 million year-to-date, with EPS from total operations at €3.05.

Financial highlights

• Q3 2024 revenue was €2,668 million (down 3% year-over-year); organic sales grew 1%.

• Adjusted EBITDA margin was 14.8% in Q3 (down from 15.1% in Q3 2023); year-to-date margin at 14.3% (up from 13.7%).

• Free cash flow in Q3 was €83 million, down from €380 million in Q3 2023, due to temporarily higher working capital.

• Net income for Q3 was €521 million, up from €401 million in Q3 2023; adjusted EPS from continuing operations was €1.14, up from €0.99.

• Net debt at €4,069 million, leverage ratio at 3.0x net debt/EBITDA.

Outlook and guidance

• Full-year 2024 adjusted EBITDA expected around €1.5 billion; net debt/EBITDA ratio targeted at 2.7x by year-end, higher than previous guidance due to working capital and restructuring impacts.

• Q4 volumes expected to be flat overall, with continued softness in China Decorative and industrial coatings, but mid-single-digit growth in Latin America and Southeast Asia Deco.

• Cost inflation expected to normalize in 2025, with OpEx anticipated to be below 2024 levels due to ongoing cost actions.

• Pricing discipline to continue, with early 2025 price increases planned to offset inflation and tariffs.

• Stable dividend policy maintained; CAPEX at €320 million for 2024.