Hours before new CEO Thierry Vanlancker is due to meet shareholders at today’s scheduled extraordinary general meeting, AkzoNobel has downgraded profit expectations for 2017 and announced a new management structure for its core coatings businesses.
In addition, the company said its CFO Maëlys Castella is on a leave of absence for health reasons, and will return “in a senior management position” when she recovers. She is the second top Akzo executive to step down for health reasons after former CEO Ton Büchner resigned in July. The company has announced current group controller Hans De Vriese as interim CFO, while initiating a full internal and external search for a permanent replacement.
Today’s EGM is part of AkzoNobel’s campaign to repair relations with shareholders after the company successfully warded off the €26 billion ($31.4 billion) takeover approach from PPG Industries earlier this year. In advance of today’s meeting, AkzoNobel warned that its profits in 2017 will below previous guidance. It still expects EBIT to be higher than last year but not by the €100 million it previously expected. Many analysts publicly cast doubt on both the company’s short- and long-term goals after it missed expectations in the second quarter. The market consensus, for instance, was for an €80 million increase in 2017, with Bernstein expecting only €47 million. Analysts say the latest management reorganization shows that AkzoNobel is continuing to respond to shareholder pressure to meet the ambitious goals it outlined as part of its defense against PPG. AkzoNobel shares opened down 2.54% but have since recovered slightly.
The company today announced a new management structure for its paints and coatings business in advance of creating two focused businesses; paints and coatings and specialty chemicals. The announcement follows the recent changes to the executive committee, including the appointment of Ruud Joosten as COO and David Allen as chief supply chain officer. The new structure will increase customer focus, drive further operational excellence, and build greater momentum and speed across the business, the company says. It will be based on four regional paints business units and four integrated coatings business units with full profit and loss responsibility.
In addition, the company is implementing a range of measures to mitigate current market challenges. These challenges include unfavorable foreign exchange rates, continued headwinds for the marine and protective coatings industry, temporary disruption to the manufacturing and supply chain during the third quarter and current margin pressure from greater than expected raw material cost inflation.
The new management structure and additional measures are being implemented to ensure ongoing delivery of the company’s 2020 financial guidance, as announced in April 2017, which included 15% return on sales and larger than 25% return on investment for paints and coatings. Steps already taken, including price increases and additional cost control measures, are expected to enable AkzoNobel to deliver a higher EBIT in 2017. The separation of specialty chemicals remains on track for April 2018, the company says.
“Current challenges in the paints and coatings markets are having a wider and greater impact as the year continues and we are dealing with these head-on. Our new management structure will increase customer focus, drive further operational excellence, and build greater momentum and speed, says Thierry Vanlancker, CEO. “AkzoNobel is delivering growth and the organization changes we are making will pave the way for the creation of two focused businesses. These changes will help us deliver a stronger 2017 than 2016, despite dealing with current market challenges, and help to ensure we achieve our 2020 financial guidance.”
By Natasha Alperowicz
Source: Chemical Week
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