Paint giant's earnings up 42%

Akzo Nobel NV, the world's largest maker of paints, said fourth-quarter earnings increased 42 percent on sales of house paints and chemicals used in the paper and pulp industry.

Earnings before interest and tax increased to 174 million euros from 122 million euros, the Amsterdam-based company said yesterday.

Akzo Nobel improved sales and profit margins at its chemicals and coatings units after reorganizing the divisions in 2006 to lower costs. The $15.9 billion purchase of UK paint maker Imperial Chemical Industries in January will help the company raise prices, negotiate better deals with suppliers and counter an expected North American and European slowdown by adding units in South America and Asia.

"The results are positive and are better than expected," Jan Hein de Vroe, an analyst at ABN Amro Holding NV said. "And Akzo is already starting its share buyback." De Vroe recommends investors buy Akzo stock.

The company plans to start buying back about 1 billion euros of shares from March and seek investor approval at its next annual meeting to repurchase double that amount.

Akzo climbed as much as 3.20 euros to 51.05 euros in Amsterdam and was trading at 50.58 euros as of 10:51 am local time. The stock has fallen 7.6 percent this year, giving the company a market value of 14.2 billion euros.

The company has been able to pass on rising costs to its customers and its added scale will provide Akzo Nobel with "buying power to resist some increases in raw materials", CEO Wijers said yesterday.

Fourth-quarter revenue rose 2 percent to 2.4 billion euros led by the chemicals division, which gained 12 percent and increased selling prices by 4 percent. Coatings sales rose 3 percent. Currency effects cut revenue growth by 3 percent, the company said.

Revenue from chemicals rose 7 percent on higher prices and volumes, led by papermaking and surfacing.

At the coatings division, pretax profit improved to 9.4 percent of sales on changes in branding and reduced production expenses.

Akzo will increase its dividend by 50 percent to 1.80 euros, it said yesterday.

"The fourth quarter was a transitional quarter," said Tom Muller, an analyst at Theodoor Gilissen Bankiers in Amsterdam.

Agencies

(China Daily 03/07/2008 page17)