UPDATE 3-AkzoNobel hits margin target as Q2 beats estimates

* Q2 sales 3.9 bln euros vs poll forecast 3.68 bln

* Cautiously optimistic in spite of economic uncertainty

* 2011 EBITDA margin target of 14 percent already achieved

* Shares up 3.5 pct, outperforming main index

(Adds shares, detail, background)

By Harro ten Wolde

AMSTERDAM, July 23 (BestGrowthStock) – Netherlands’ AkzoNobel
(AKZO.AS: ), the world’s largest paint maker, said it would
continue to keep a close eye on costs after hitting its 2011
margin target early and reporting better-than-expected quarterly
results.

The maker of coatings for laptops, mobile phones, houses,
airplanes and ships said on Friday it had achieved its 2011
margin target of 14 percent on earnings before interest, taxes,
depreciation and amortisation (EBITDA) in the second quarter
after cutting costs in a tepid economic recovery during which
input prices rose.

AkzoNobel said EBITDA excluding one-offs rose to 614 million
euros ($783 million) from 506 million euros a year earlier,
driven by rising demand and cost cuts.

It beat the average forecast of 563 million euros as well as
the highest forecast of 576 million euros in a Reuters poll of
nine analysts.

The company said the results were mainly driven by growth in
its Asian markets, lead by its Decorative Paints, which includes
brands such as Dulux, Sikkens and Glidden as well as Performance
Coatings, which accounts for about a third of groups sales and
EBITDA.

“The developed markets remain challenging. Raw material
price pressure and shortages are expected to continue into the
third quarter,” Chief Executive Hans Wijers said.

Chief Financial Officer Keith Nichols said while he expected
raw material prices to increase 4 to 5 percent this year,
especially in coatings, the situation would likely improve from
the end of the third quarter and pose little threat to margins.

AkzoNobel shares were up 3.5 percent in early trade at 45.82
euros at a four-week high. The shares were the biggest gainers
in Stoxx European Chemicals index (.SX4P: ), which was flat.

“On balance positive results, with EBITDA 10 percent above
consensus. Currency effects played an important role with strong
volumes in Performance Coatings and better-than-expected prices
at Special Chemicals,” said ABN AMRO analyst Mark van der Geest.

“To the downside, Decorative Paints America was 4 percent
below expectations,” he said, adding that margins at Performance
Coatings of 15.2 percent also disappointed.

Akzo said it expected demand to remain weak in its European
decorative paints markets, while U.S. consumer spending remained
soft in a slow housing market.

AkzoNobel said it would update investors about its future
ambitions in London on Sept. 28. These would focus more on
absolute growth rather than margin management, CEO Wijers told
reporters.

Quarterly sales rose 13 percent to 3.9 billion euros, ahead
of analysts forecasts, ranging from 3.58 billion to 3.8 billion.

Global chemicals companies cut costs throughout the
recession as demand slumped, but are now broadly benefitting
from volume and margin improvements.

Earlier, U.S. rivals PPG (PPG.N: ) and Sherwin-Williams
(SHW.N: ) beat estimates with second quarter earnings but kept a
cautious view on the rest of the year. [ID:nN14154610]
[ID:nSGE66L0M2]

AkzoNobel’s Benelux peers Solvay (SOLB.BR: ) and DSM (DSMN.AS: )
report quarterly results next Thursday and Aug. 3, respectively.

Investing Analysis

(Editing by Samia Nakhoul, Michael Shields and Karen Foster)
($1=.7838 Euro)

UPDATE 3-AkzoNobel hits margin target as Q2 beats estimates