Global coatings company AkzoNobel revealed earlier this week that it plans to cut more than 5% of its workforce in an effort to reduce costs. According to reports, this will include about 2,000 jobs globally, targeting positions in its head offices.
“We will be simplifying our structure, our processes, reducing cost of administrative functions,” AkzoNobel's senior spokesperson told Reuters, with positions in finance or global business services at the head offices to be affected.
As of June 30, the company employed around 35,700 workers. The job cuts will reportedly be finalized by the end of next year.
The spokesperson said that there is no specific estimate on how much costs would be saved with the job cuts, adding that part-time positions could also be affected.
Reuters reports that AkzoNobel shares have dropped about 21% so far this year, mirroring an “industry-wide” slump. For example, PPG and Nippon Paint are also down 14.9% and 20.9%, respectively.
Back in 2023, AkzoNobel announced a “cost saving industrial transformation” plan, aiming for a 250 million euro ($278 million) benefit by 2027. The company cited a post-COVID slowdown, rising raw material costs and customer destocking in its decorative do-it-yourself segment in Europe.
Recent Price Increase Warning
Last month, Gregoire Poux-Guillaume, Chief Executive Officer of AkzoNobel, warned in an interview that European and United States tariffs on Chinese chemical imports could raise prices for the company.
Speaking to Bloomberg in a phone interview, Poux-Guillaume addressed the European Union’s imposition of anti-dumping duties on titanium dioxide imports from China and the possibility of U.S. measures on epoxy.
The European Commission recently announced tariffs on imports of titanium dioxide from China, with the measure reportedly imposing anti-dumping duties of up to 39.7%. And, in May, the U.S. International Trade Commission said “there is a reasonable indication” that the domestic industry is materially injured or threatened by imports of epoxy resins from China, India, South Korea, Taiwan and Thailand.
The tariffs “will impact the world from a raw material price perspective because China is a significant supplier of some of the upstream chemicals,” Poux-Guillaume said. “And if the raw material prices in Europe go up, that is going to be felt in the consumer prices at some point.”
AkzoNobel uses titanium dioxide as an ingredient in its paints and coatings as a key pigment for producing white color and resins to make the coatings. China is reportedly a crucial producer of the two chemicals.
Akzo Q2 Financial Report
At the end of July, AkzoNobel released its 2024 second-quarter financial report, revealing a 2% increase in both revenue and organic sales.
Operating income came in at 270 million euros ($292.9 million) compared to last year’s 279 million euros, which the company attributes to operating cost inflation, particularly in wages. This, however, was reportedly offset by raw material cost benefits and volume growth.
In the Decorative Paints segment, revenue was reported to be down 1% at 1.139 billion euros compared to last year’s 1.147 billion euros. For the half year, the segment’s revenue remained essentially flat at 2.19 billion euros.
In the Performance Coatings segment, revenue was 3% higher, mainly driven by double digit volume growth in China and solid growth in the rest of Asia and North America, with a flat market in Europe. Adverse currencies negatively impacted revenue by 1%, the company says, resulting in 3% revenue growth.
For the first half of 2024, AkzoNobel reported that organic sales up 2% due to volume growth and higher price/mix, revenue flat. Volumes were up 2% in Coatings, while Paints was flat.
Additionally, volume growth in Coatings was driven by higher volumes in most businesses, including mid-single digit growth in Powder Coatings and double digit growth for most Coatings businesses in China. Volumes in Paints were flat, with higher volumes in SESA offset by weaker demand in China and LATAM. Deco EMEA was flat. Adverse currencies impacted revenue by 2%.
The company noted that operating income increased to 531 million euros over last year’s 461 million euros, mainly due to gross margin expansion and higher volumes, more than compensating for operating cost inflation.
For the rest of the year, based on current market conditions and constant currencies, AkzoNobel expects to deliver 2024 adjusted EBITDA towards the lower end of its full-year guidance range of 1.5 to 1.65 billion euro.