Akzo results better than expected

- Last updated on GMT

Related tags: Akzo nobel, Revenue

Akzo Nobel's second-quarter results reveal increasing pressure on
its drugs business and lead to speculation that it may consider a
pharma spin-out.

Akzo Nobel's second-quarter results have revealed increasing pressure on its pharmaceuticals business and led to renewed speculation that it may consider splitting drugs from its chemicals and coating operations.

Generic competition bit Remeron (mirtazepine), Akzo's antidepressant, in the USA, leading to a 2 per cent decline in pharma sales at the group's Organon unit. This marks something of a reversal in fortunes, as Organon has been the best performer of Akzo's businesses in recent years, often supporting the group as its more cyclical businesses suffered downturns. Remeron made up 28 per cent of the division's sales in 2002.

Fritz Fröhlich, Akzo's chief financial officer, told the Financial Times Deutscheland that the €500 million disposals program for chemicals, started in May, would leave the group with a leaner operation that would sit well alongside its number one position in coatings. The big question now is Organon, he told the newspaper.

The reduction in headcount at the division has led to significant cost savings, according to Fröhlich, who pointed to new products such as the once-monthly contraceptive NuvaRing (etonogestrel/ethinylestradiol) and antithrombotic Arixtra (fondaparinux sodium) as being central to a restoration of pharma fortunes.

Analysts have suggested, however, that Akzo's late-stage pipeline does not have the revenue-generating power to offset the decline in Remeron sales.

The group's net earnings were €201 million, a 20 per cent reduction on the same period of 2002. The group reported revenues of €365 million, down from €464 million a year ago but much better than expected, as sales slid from €7.13 billion to €6.67 billion.

Fröhlich said: "For the remainder of the year we assume no real improvement of the business conditions. As a consequence of accelerating competition against Remeron in the US and the negative impact of currencies and pensions, our net income will be significantly below last year."

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