Dulux paint producer Akzo Nobel has beaten expectations with record profits and unveiled plans to revamp the business as it continues to fend off a takeover attempt from a US rival.
The Dutch firm notched up a healthy 13 per cent rise in earnings to £314 million in the first quarter of this year, with revenues climbing 7 per cent to £3.1 billion over the period.
The announcement came as the Dutch firm said it will return £1.3 billion to shareholders this year through a new strategy. It will lead to the creation of two separate firms by separating its speciality chemicals business from its paints and coatings arm.
Akzo Nobel is stepping up efforts to fend off PPG takeover
Setting out its strategy to investors in London, Akzo said it would sell or list the business, which accounts for about a third of sales and profits, within 12 months.
Akzo chief executive Ton Buechner commented: ‘This strategy will create substantial value for shareholders with significantly less risks and uncertainties compared to alternatives,’
U.S based chemicals manufacturer PPG ramped up the pressure, this week via an open letter to Akzo Nobel, claiming its vision to stay independent is risky and will create less value than if the two companies combined.
It follows calls from activist investor Elliott Advisors, which holds more than 3 per cent of the group, for an extraordinary general meeting where investors can vote to remove AkzoNobel chairman Antony Burgmans.
Known for its tough tactics, Elliott has previously warned it will attempt to overthrow Akzo Nobel’s managers if the company refused to commence talks with PPG.
Confident: Akzo Nobel is committed to increasing returns to shareholders
They rejected the request for the EGM earlier this month in a response that saw it accuse Elliott Advisors of sharing ‘price sensitive information’.
Akzo Nobel, which employs 3,000 staff across the UK, is hoping the new plan will win the favour of investors left dissatisfied by the firm’s decision to rebuff talks with PPG Industries following its second takeover tilt worth £19.5 billion.
Other shareholders, including Columbia Threadneedle and Henderson, have urged the paint maker to engage with PPG, but AzkoNobel has said the offer undervalues the company.
Maelys Castella, Akzo Nobel’s chief financial officer, said the company was committed to increasing returns to shareholders and had launched a £125 million share repurchase plan during the first quarter.
She said: ‘Our record performance continued this quarter, showing the substantial growth momentum we have across the business.’
‘Significant progress continues across all our business areas, reflecting both our strong customer focus and great portfolio of brand.’
Akzo said it would sell or list the chemicals business, which accounts for about a third of sales and profits, within 12 months
The company ramped up its full-year outlook, with earnings now expected to be £84 million higher than last year.
Focusing on the new strategy, chief executive Ton Buchner commented: ‘Our commitment to substantial shareholder returns reinforces our belief that the plan we are outlining today will create a step-change in value creation, generating significant shareholder value in the short, medium and long term.
‘It will be delivered at pace, with a clear timeline and is in the best interest of all stakeholders.’
AkzoNobel announced plans earlier this year to build a £10.7 million ‘innovation hub’ near Gateshead, safeguarding 270 jobs.
The firm is also looking to launch a £93.7 million Dulux paint factory in Ashington, Northumberland.