Akzo Loss Widens on Write-Downs Article
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By ROBERTA B. COWAN
AMSTERDAM -- Coatings and chemicals company AkzoNobel NV reported a sharply wider fourth-quarter net loss, hammered by write-downs related to the acquisition of a U.K. company.
"Our fourth quarter results reflect the impact of the economic climate in many of our businesses," Chief Executive Hans Wijers said. "The fact that we have implemented a significant level of restructuring is a clear indicator that action is being taken across the company to mitigate the effects of the current global crisis.
For the quarter ended Dec. 31, the world's biggest paint maker by sales Tuesday posted a net loss of €1.52 billion ($1.93 billion), compared with a net loss of €56 million a year earlier. AkzoNobel, which markets brands such as Dulux, Devoe, and Glidden, booked a €1.2 billion impairment charge on the acquisition of Imperial Chemical Industries PLC, a deal that closed in 2008.
"This non-cash adjustment relates to the Decorative Paints businesses and the re-classification of National Starch, which was originally recorded in our books as an asset held for sale," Finance Chief Keith Nichols said.
A €205 million charge related to restructuring announced in September also hurt the bottom line, as revenue dropped 2.7%, to €3.56 billion from €3.66 billion.
At AkzoNobel's decorative-paints unit, volumes fell by 10% in the quarter. The specialty-chemicals business reported an 11% drop in volumes, hit by a sharp decline in sulfur prices
Downgrade anche per Akzo Nobel da parte di S&P. Pesa l'indebolimento della capacità di generare flussi di cassa a salvaguardia dei creditori da imputare alla riduzione delle vendite, che si attende si protragga anche in futuro.
Dutch Chemicals Producer Akzo Nobel N.V. Downgraded to 'BBB+' on Weak Demand; Outlook Negative
LONDON (Standard & Poor's) Feb. 25, 2009--Standard & Poor's Ratings Services said today that it lowered its long-term corporate credit, senior unsecured debt, and bank loan ratings on Netherlands-based coatings and chemicals producer Akzo Nobel N.V. (Akzo) to 'BBB+' from 'A-'. At the same time, the 'A-2' short-term rating on Akzo was affirmed. The outlook is negative.
"The one-notch downgrade reflects our view of the impact of weak demand on volumes in Akzo's markets and on its operating results, specifically cash flow generation, as well as uncertain future economic conditions," said Standard & Poor's credit analyst Sophia Dedemadis. "We previously anticipated that funds from operations (FFO) to debt, according to our adjusted calculation, would be in the range of 35%-40%. However, given the difficult market conditions at present, we believe credit ratios are unlikely to improve to this range in the short term.
"The group's announcement, in its fourth quarter report for 2008, of the uncertain timing with regard to the disposal of National Starch (part of the Specialty Chemicals division) is also viewed as a negative rating factor. This is because the proceeds could have been used to reduce debt, improve the group's balance sheet, and bolster its credit protection ratios."
Akzo's fourth quarter results showed a material decline in volumes of
10%, which was higher than our expectations. Nevertheless, in our view this is less severe than the volume declines experienced by many commodity chemicals companies. Even so, we believe that volumes will likely continue to decline into the first quarter of 2009.
"We believe operating performance and FFO generation will continue to be under pressure due to weak demand," said Ms. Dedemadis.
"Furthermore, in our opinion, sales volume declines will be combined with raw material cost volatility. We observe that demand in the paints and coatings industry has historically grown generally in line with GDP; and based on our global economic assumptions, 2009 is expected to remain challenging."
