Dulux Paint Maker Akzo Nobel Expects Costs Inflation to Weigh Through Mid-2022

“Where doesn’t it impact our business?”, Chief Executive Thierry Vanlancker asked on a call with journalists, adding that raw material cost have escalated quite significantly and are impacting its long-term supplier contracts.

Chemical makers such as AkzoNobel, Axalta Coating Systems, PPG Industries and Tikkurila have been hit by rising raw material costs due to strong demand and supply chain issues this year, as global economies try to scramble their way out of the coronavirus pandemic.

“Most raw material suppliers go for monthly and sometimes bi-weekly (contracts) because they are very uncertain about our own pricing,” Vanlancker said, adding that the availability of essential raw materials is also affecting packaging activities in certain places around the globe.

The Amsterdam-based firm, which sells decorative paints and industrial coatings worldwide, has raised its prices 9% over July-September period compared to last year to fight the inflation.

It also said raw material and other variable costs in the quarter increased by 278 million euros ($324 million) year-on-year.

Analysts expect Akzo Nobel’s share price to come under pressure, given the consensus-missing results and comments on costs inflation, with JP Morgan saying in a note to clients that Akzo Nobel’s near-term narrative is unlikely to change.

However, the Dulux paint maker said it was still confident of achieving its 2 billion euro earnings before interest, taxes, depreciation, and amortization (EBITDA) target for 2023, and the annual 50 basis points increase in return on sales over the 2021-2023 period.

Akzo Nobel reported third-quarter adjusted operating income of 241 million euros, missing analysts’ forecast of 243.8 million euros, while sales improved 6% to 2.41 billion euros, also slightly below the company-provided consensus of 2.44 billion euros.

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($1 = 0.8584 euros)

(Reporting by Anait Miridzhanian and Valentine Baldassari; Editing by Clarence Fernandez, Subhranshu Sahu and Louise Heavens)