Akzo Nobel reports fall in 3Q profits

By Wai Lang Chu

- Last updated on GMT

Related tags Cent Investment Akzo nobel

Dutch pharmaceuticals and chemicals giant Akzo Nobel reported
third-quarter sales of €3,29 billion, a slight decrease from the
previous quarter but up 5.4 per cent from the comparable period in
2004, thanks to growth in all its units, particularly in emerging

Net income for the quarter was €175 million was down 66 per cent on the corresponding period of 2004 (€510 million), which included the one-off gain from the 2004 Chemicals divestments.

EBIT from present operations and excluding one-offs was also down 7 per cent at €315 million.

Higher raw material costs could have had a greater impact on EBIT. However the growth of Akzo Nobel​'s coatings' top-line and successful price increases continued to limit the impact of higher raw material costs

The company received some joy from its investments overseas. "Emerging markets continue to be a growth story, with China delivering above average performance. Chemicals, despite high-energy prices impacting virtually all businesses, delivered stable performance across all five-growth platforms. The divestment program is on track,"​ said chief financial officer Rob Frohn.

Frohn was referring to the company's plans to divest chemical businesses with around $840 million in annual sales is on track, scheduled to be completed by the first quarter of 2006

The company's Organon pharmaceuticals divison were affected by a net one-off charge of €60 million, mainly concerning the settlement of the remaining Remeron (mirtazepine) court cases.

The company posted sales of €590 million compared to 2004's figure of €579 million - up 1 per cent.

Organon said its performance was impacted by the weak business climate for pharmaceutical ingredients. The EBIT margin, excluding one-offs, was 11.5 per cent (2004: 14.2 per cent).

"Organon continued to show top-line growth across the board in the quarter with NuvaRing and the new Puregon Pen delivering strong contributions,"​ added Frohn

"Pharmaceutical ingredients suffer from weak market conditions and in addition, we intend to settle the Mircette patent infringement case with Barr, for which, subject to the granting of FTC approval, Organon will receive $142 million."

Pharmaceutical R&D spending for Organon reached 18.3 per cent of total sales in the quarter, Frohn said, as the company increased investments in its pipeline drug projects, including six products in Phase III development.

Meanwhile the company's chemical division was buoyed on by the growth of emerging markets are delivering strong growth and a number of investment opportunities in China are currently under consideration with two new projects - a polysulfides plant and a paper chemicals production facility.

Third quarter revenues of €966 million were up 4 per cent on last year. Excluding one-off items, EBIT was virtually unchanged at €83 million while the EBIT margin excluding one-offs was 8.6 per cent (2004: 9.1 per cent).

Proceeds from higher revenues were largely offset by higher energy and raw material prices

"The strategy to concentrate on five new chemicals platforms is in place and the underlying businesses are focused on their performance roadmaps. The divestments are on track and we currently expect to conclude the first deals in the first quarter of 2006,"​ said Frohn.

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