Akzo Nobel, a Dutch paints and coatings manufacturer, has reported better-than-expected demand in Europe and China as its first-quarter operating profit exceeded forecasts.
The company attributed the positive results to higher prices and the reopening of China’s economy. While the company had raised prices to offset the steep raw material costs last year, it had warned of lower sales volumes this year. However, the decline in volumes seen during the first quarter was only 3%, which is considered better than anticipated. The company’s finance chief, Maarten de Vries, credits this to the strong demand in Europe and China.
First-Quarter Results
Akzo Nobel’s adjusted operating income fell by 5% to 218 million euros ($241 million) in the first quarter. Despite this decline, the results beat the 193 million euros that analysts had predicted in a company-provided consensus. These results are consistent with its US rival, PPG Industries, which exceeded profit expectations last week and forecasted better-than-expected earnings in 2023 due to higher prices and sales volumes.
Outlook
Akzo Nobel is optimistic about its full-year outlook and expects to benefit from falling raw material costs. The company had planned to increase prices until April but does not intend to significantly raise prices in the coming months. However, the CEO, Grégoire Poux-Guillaume, told Reuters that pricing may be adjusted in certain countries where there are specific issues. The company’s shares fell by 1.8% at 1050 GMT, after rising by 2.2% in early trading.
Growth in China
Akzo Nobel reported mid-single-digit growth in China during the first quarter and predicts double-digit growth in Chinese retail-related volumes for the entire year. The company hopes to strengthen its position in China through its recent acquisition of Sherwin-Williams’ architectural paints business, which is expected to be completed in the second half of 2023. In the first quarter, Asia accounted for a quarter of Akzo Nobel’s decorative paints division’s total sales.