Akzo Nobel second-quarter core profit surges 36% on higher prices

Reuters with CNBC.com
We've offset the increased price of raw materials, Akzo Nobel CEO says

Dutch paints and coatings maker Akzo Nobel reported a better-than-expected 36% jump in second-quarter core profit on Wednesday, as higher prices and cost savings offset raw material inflation.

Adjusted operating income came in at 305 million euros ($339.9 million), compared with 225 million euros a year earlier and topping the 287.4 million euros expected in a poll of analysts by the company.

Sales were flat at 2.45 billion euros, missing expectations for a slight increase, as higher sales prices barely weighed up against a 6% decline in sales volumes.

Akzo kept its target of increasing return on sales to 15% by 2020, as the margin improved to 13.7% in the second quarter, while overall cost savings were on track to reach 200 million euros next year.

The company in 2017 promised frustrated shareholders that it would improve profitability, as it refused to consider an unwanted takeover offer by U.S. rival PPG Industries.

As part of its defence strategy, Akzo last year sold its speciality chemicals unit for 10 billion euros to a group of buyers led by Carlyle Group, with the proceeds distributed largely to shareholders.

Speaking to CNBC's "Squawk Box Europe" on Wednesday, Akzo Nobel CEO Thierry Vanlancker said the company had now offset inflated raw material costs through its own pricing.

"Since the beginning of 2017 we have seen almost a 900 million euro run-up in raw material costs, that's pretty significant for effectively a 10 billion euro company," he said.

Jock Fistick | Bloomberg | Getty Images

"Part of what you see in the second quarter is not us chasing the raw material increases any more, but as it stabilizes we can for the first time show the work that the whole team has been doing on correcting our prices versus raw materials."

"The rest of the year we believe all in all is going to be relatively stable, there are some downward pressures which is good for us, but everything oil-related seems to be trending up again," he added.

Shares of Akzo Nobel were up 3.5% during early trade on Wednesday.