AkzoNobel Cautions Tariffs Could Increase Prices
WEDNESDAY, AUGUST 7, 2024
Gregoire Poux-Guillaume, Chief Executive Officer of global coatings company AkzoNobel, warned in a recent 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.
“If our source of supply is more expensive, then we have two possibilities and you have to pursue both,” Poux-Guillaume said. “One is a new source of supply and two, you reflect that cost increase into your pricing. There’s a way to mitigate, but there’s no free lunch.”
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.”
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| United Soybean Board, CC-BY-2.0, via Wikimedia Commons |
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Gregoire Poux-Guillaume, Chief Executive Officer of global coatings company AkzoNobel, warned in a recent interview that European and United States tariffs on Chinese chemical imports could raise prices for the company. |
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.
“If there are abnormally low prices that can’t be justified, then this is the ground for tariffs,” Poux-Guillaume continued. “Where it becomes dangerous is when tariffs are used as a form of economic warfare or protectionism, because that has other knock-on effects.”
Akzo Q2 Financial Report
At the end of last month, 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 notes 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.
Tagged categories: AkzoNobel; Business conditions; Business management; Business matters; Business operations; Coating Business; Coating Materials; Economy; Epoxy; Government; Industry News; Raw materials; Titanium dioxide
