Greg Poux-Guillaume, CEO at AkzoNobel, has told shareholders that the “positive momentum” generated last year by the company is set to continue, with expectations of volume, margin and profit growth in 2024.
In AkzoNobel’s Annual Report 2023, Poux-Guillaume said the company delivered a “clear rebound in performance after a disappointing 2022”.
“Our volumes stabilised despite continuing volatility in some of our markets, our profits rebounded on resilient pricing and the first effects of raw material deflation, while our efforts to transform our company gathered pace. This allowed us to absorb persistent global inflation and unfavourable currency effects to beat the targets we’d set ourselves at the beginning of the year,” said Poux-Guillaume.
“Most of our end markets seemed to bottom out in the second half of 2023, and some areas actually showed robust growth trends.”
According to Poux-Guillaume, “stalwart” divisions such as Vehicle Refinishes, Aerospace Coatings, and Marine and Protective Coatings – which benefitted from strong macro trends – continued to perform well.
“Progress on margin management was a key contributor to our performance as we demonstrated discipline and stickiness with our pricing,” added Poux-Guillaume. “Raw materials were a headwind in the first half of the year as we traded out expensive inventory, but this trend reversed in the second half and we expect it to continue until at least the first half of 2024.
“With regard to operating expenses, driving down costs in response to inflation was a key priority on which we delivered, in line with our target set at the beginning of 2023. This helped us absorb persistent global inflation and finished goods write-offs as we cleaned up our inventories, while delivering almost €300 million (up 24 per cent) more adjusted EBITDA than in 2022, despite close to €100 million of adverse currency effect.”
Poux-Guillaume said AkzoNobel also demonstrated cash discipline, with “strong collection and a firmer grip” on inventories as the company continued to drive working capital down towards normative levels of around 13 per cent of revenue.
“The combination of higher profits, working capital management and the decision to not proceed with the Kansai Paints Africa transaction allowed AkzoNobel to be significantly ahead of its deleveraging targets by the end of 2023, at 2.7x net debt to EBITDA – well on our way to our normative level of around 2x which we intend to retain in the mid-term,” he said.
“We also took decisive action to unlock the significant value we can gain by improving our industrial operations. An industrial excellence plan is underway, focused on reducing complexity, improving capacity utilisation and investing in the modernisation of our sites.
“We believe there’s significant value to be gained, as indicated by our €250 million incremental profit ambition, and this plan is a key long-term strategic priority for us.”
While AkzoNobel’s position improved, Poux-Guillaume said some challenges will remain in 2024. “We’ll still be living in an inflationary world with some macro-economic uncertainty. However, we have good momentum and we expect to resume growing volumes while delivering further margin and profit expansion,” he said.