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Akzo issues profit warning as CFO stands down

Dulux close up

On Friday Akzo Nobel issued a profit warning whilst announcing a restructuring of the organisation that will include the chief financial officer stepping aside and a shake-up to its paints and industrial coatings businesses.

The Dutch company, citing cost inflation and currency headwinds, said it would not now be able to achieve the €100m in operating profit this year that it promised when rejecting the recent takeover by rival PPG..

In May 2017, the company rejected a €26.3 billion takeover by US competitor PPG Industries, an offer worth €95 per share. Akzo shares were down 2.9 per cent at €76.4 in early trade yesterday.

In July CEO Ton Buechner quit for health reasons and this week Akzo said CFO Maelys Castella would also be taking a leave of absence due to health reasons and would return "in a senior management position" when she is better. 

Read - Akzo CEO Tom Buechner resigns with immediate effect

Antony Burgmans, Chairman of Akzo told reporters on Friday "It is extraordinary that these cases follow each other so rapidly, but it is purely coincidental. They are for entirely different reasons, and are in no way related.

New CEO Thierry Vanlancker will meet shareholders to defend the company's strategy, following a court order to repair relations damaged under Mr Buechner and Mr Burgmans. Shareholders, led by Elliott Advisors, sued Akzo for the right to hold a shareholders meeting to vote on expelling Mr Burgmans for mismanagement.

In rejecting the PPG takeover, Akzo Nobel pledged to pursue its own sale of its specialty chemicals division, which represents a third of the company's sales and profit.

Under a reorganisation announced yesterday, the firm said it will realign management along four geographical lines for paints, and there will be four "integrated coatings business units" presumably by product line, although the company did not elaborate.

Mr Vanlancker said headwinds, such as higher raw material costs, were having "a wider and greater impact as the year continues" and the company was raising prices and cutting costs in response.

Akzo remains on course to meet 2020 financial targets announced in April, he said, including reaching a 15 per cent return on sales, though analysts have been sceptical about these targets.

Source: Insight DIY Team

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10 September 2017

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