Akzo Nobel Keeps 2008 Outlook, Shares Surge

Dutch chemical group Akzo Nobel stuck to its 2008 outlook but said it was uncertain about prospects for 2009 and postponed the sale of its National Starch unit citing turmoil in financial markets.

The world's largest paint maker, whose household paint brands include Dulux, Sikkens and Flexa, also posted a 9 percent drop in third-quarter core profit on Wednesday, in line with forecasts.

Its shares were up 20.1 percent at 30.20 euros, as European equities followed a surge by U.S. stocks.

Akzo Nobel's shares have fallen more than a third in the past three months, matching the decline in the DJ Stoxx European chemicals sector index.

Akzo Nobel has been hit by the global economic slowdown, with its decorative paints business primarily under pressure from the housing crisis in the United States and slowing sales in the UK and other parts of Europe.

"I would categorize the third quarter as what we expected, not dramatically worse," Chief Financial Officer Keith Nichols said on a conference call.

"We're very cautious, it is difficult to read.We're confident we can deliver 2008 and we'll really just have to wait and see how things develop."

Earnings before interest and taxes (EBIT) from continuing operations, excluding exceptional items, fell to 367 million euros ($459 million), in line with an average forecast of 364 million euros in a Reuters survey of five analysts.

"The third quarter results (of Akzo Nobel) were quite solid and operationally ahead of expectations," ING analyst Paul Satchell said.

U.S.-based rivals Sherwin-Williams and PPG both reported better-than-expected quarterly earnings earlier this month, but have warned of tougher conditions ahead.

Akzo Nobel's Dutch peer and resins supplier DSM, lowered its 2008 outlook on Monday and warned of a rapidly changing market amid industry destocking and lower demand.

Delayed Sale

Akzo Nobel also said it did not expect to sell its National Starch business as planned this year due to the current financial market conditions.

"There has been consistent strong interest in the business.Our conclusion really is that given the current uncertainty in the wider economy, coupled with financing issues for certain players it's unlikely we'll be able to sell before the end of this year," CFO Nichols said.

He reiterated the company's intention to sell the business but gave no timeframe.

Akzo Nobel, whose household paint brands include Dulux, Sikkens and Flexa, reiterated its full-year target, expecting 2008 earnings before interest, taxes, depreciation and amortization (EBITDA) in constant currencies close to 1.87 billion euros.

Sales for the third quarter were up 3 percent to 3.82 billion euros and in line with average forecast of 3.681 billion euros.

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