Akzo Nobel (Euronext Amsterdam: AKZ; Nasdaq: AKZOY) reported substantially higher revenues and operational earnings, driven largely by the coatings division. 

Operating income excluding incidentals was up 9 percent from EUR 334 million to EUR 365 million. Revenues were up 7 percent to EUR 3.6 billion (2005: EUR 3.4 billion). Autonomous growth was 8 percent, with all segments contributing. Volume growth was 6 percent and selling prices increased by 2 percent.

Commenting on the company's performance, CFO Rob Frohn said: "Our businesses performed well in the second quarter, with both top and bottom line improving significantly, particularly at Organon and Coatings. Energy prices and raw materials remain a concern. Nevertheless, we look ahead with confidence to the second half of the year."

Coatings contribution

Akzo Nobel Coatings revenues in Q2 were up 9 percent to EUR 1.6 billion, in particular boosted by a robust performance from the industrial activities and Marine & Protective Coatings businesses. Volume growth was 6 percent, with all units contributing. Operating income, excluding incidentals, rose 21 percent to an all-time high of EUR 175 million, while the EBIT margin improved by 1 percent to 10.7 percent. However, the rise in raw material prices continues to impact margins. The acquisition of Sico was completed in June, and earnings from its first month are included in the quarterly results.

Excluding incidentals, operating income rose 9 percent from EUR 334 million to EUR 365 million. Including incidentals, operating income increased 3 percent to EUR 352 million. Incidentals in the second quarter of 2006 resulted in a net loss of EUR 13 million (2005: gain of EUR 7 million). Restructuring and impairment charges of EUR 20 million were taken, related to various restructuring activities at Coatings and Chemicals.

Net income nearly doubled from EUR 182 million to EUR 361 million as a result of improved operational earnings and one-time tax benefit. Excluding incidentals, net income was up 23 percent from EUR 199 million to EUR 245 million. Car Refinishes is back on track after several years of decline, while the focus on costs will continue.

"Our strong volume growth, especially in emerging markets, contributed to this record quarter in Coatings," added Frohn. "It is positive to see our strong start to the year continued, however, ongoing pressure from raw materials remains an issue."