Paint maker AkzoNobel significantly increased wholesale prices in the first quarter to offset sharply rising raw material and transportation costs. The amount of paint sold was actually lower than a year earlier. During times of coronavirus lockdown, people were more likely to tackle paint jobs in and around the home with AkzoNobel brands such as Flexa, Dulux and Sikkens.
According to the company, prices have increased by 17% compared to last year. As a result, its turnover jumped 12% to 2.5 billion euros. Sales volume decreased by 7%. AkzoNobel estimates that the high rate of inflation will gradually decline in the second half of this year. The company will continue to increase prices to offset higher costs.
The company said raw material and transport costs increased by 334 million euros compared to last year. AkzoNobel spoke of “unprecedented cost inflation” for the paint industry. Recently, for example, oil has become very expensive due to the war in Ukraine.
AkzoNobel also said the majority of its coatings business in Russia had been shut down due to sanctions against the country. The company expects more Russian business to shut down in the coming months, mainly due to raw material supply issues.
The company had previously suspended all activities in Ukraine due to the Russian invasion of that country. Ukraine and Russia accounted for about 2% of AkzoNobel’s revenue before the war broke out. The company has approximately 650 employees in both countries.
AkzoNobel also said it has suffered from tight restrictions against the spread of the coronavirus in China, with residents in some cities not allowed to leave home and retailers struggling to deliver food, water and products. at customers’ homes.
In a statement, CEO Thierry Vanlancker said it had been difficult for the company to absorb the increased costs. He said the price increases were necessary to “keep our heads above water”. Vanlancker also said costs have risen 40% since the start of 2021.
He went on to say that sales in Russia are expected to drop 70% this year due to the suspension of operations. AkzoNobel has been active in Russia for over thirty years. According to Vanlancker, the phasing out of Russian operations was not widely publicized in the interests of local employees. “We didn’t want to make it a PR story.”
AkzoNobel’s announcement welcomed by investors
AkzoNobel was the big winner on the AEX index on Thursday. Investors saw the company’s quarterly update, which countered rising costs with its own price increases. A number of other companies have also opened their books, such as ASM International (ASMI), RELX, Sligro and Basic-Fit.
AkzoNobel increased sales by 6.2% as the company sold less paint. The company raised prices by 17% to counter “unprecedented inflationary costs”. Some products such as oil and chemicals have become significantly more expensive due to the war in Ukraine. Other raw materials have also become more expensive over time.
ASMI increased by 2.7%. The maker of machinery needed to produce chips closed the first quarter of this year with record sales and saw the order book fill to record levels thanks to global shortages of semiconductors. Data provider RELX fell 0.1%. This company expects growth in turnover and profit to be faster than the trend of recent years.
However, tech investor Prosus was last in line and lost 3.8% of its sales, which was linked to the hit Chinese tech firm Tencent received in Hong Kong. Prosus holds a significant stake in Tencent.
The AEX rose 0.5% to 729.19 points. The MidKap gained 1% and settled at 1096.60 points. The Frankfurt and Paris stock exchanges rose to 1.4%, and those in London remained almost stable.
Basic-Fit was set slightly higher among medium-sized companies. The gym chain saw many returning customers in the first quarter and expanded its number of fitness centers, particularly in France. PostNL quoted the ex-dividend and lost nearly seven percent.
Wholesaler Sligro reported that its results are almost back to pre-pandemic levels and are 4.1%. Ajax fell 1.2% in the home market after manager Erik ten Hag’s departure to Manchester United was confirmed.
In Zurich, Swiss food producer Nestlé raised prices by 1.4 percent. The maker of KitKat bars and Maggi bouillon cubes, among other things, thinks it needs to keep raising prices sharply. Due to previous price increases, turnover also increased.
US oil became 0.5% more expensive and cost $102.75 a barrel. The price of Brent oil rose 0.8% to $107.74 a barrel. The euro was worth $1.0916. A day earlier, it was below $1.0852.