ICI's new owner aims to save a further 100 million euros by cutting costs
AkzoNobel is to cut at least 3500 jobs over the next three years, as it seeks streamline its operations following its 2007 takeover of ICI.
The Amsterdam, Netherlands-based firm says that by 2010 it will achieve the full 340 million euros (?270 million) in annual synergies following the ICI takeover. But the company is now targeting an additional cost savings of 100 million euros, which has added to the total number of job losses.
’The world economy has now clearly entered a phase of lower growth, particularly in the mature markets,’ said Akzo CEO Hans Wijers. ’In these challenging markets, only lean companies succeed. We have therefore started a rigorous drive to further reduce our cost base.’
Most of the job cuts will go in the decorative paints business in North America and Europe, the firm said. With many countries in these areas experiencing a housing market slump, Akzo is seeking to grow its business in emerging markets, from 25 per cent of the division’s revenues in 2007 to 35 per cent by 2012.
AkzoNobel also announced that it was suspending its share buyback programme, due to the current uncertainties in global financial markets, until it has successfully refinanced the 1.8 billion euros of debt due to mature in the next eight months. The company launched its 4.6 billion euro share buyback scheme in 2007, of which 3 billion euros has been completed.
In Amsterdam, following the announcements, the company’s shares fell almost 4 euros to just under 31 euros, before rallying to above 32 euros. In January the company’s shares were trading at around 55 euros.
Royal Bank of Scotland analyst Mutlu Gundogan says that, although the company has maintained its 2008 financial year outlook, the latest announcement by the firm shows the difficult economic conditions. ’Our conclusion is that Akzo is taking the right corrective measures, but that this will not offset the impact of the difficult trading environment,’ Gundogan adds in a research note. Gundogan rates the shares as ’buy’, noting that the company expects to grow its before tax earnings margin to 14 per cent by 2011, a figure largely in line with RBS predictions.
James Mitchell Crow