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Akzo profit doubles, plans pharma IPO
Shares add nearly 7% on IPO, though margins disappoint
By Simon Kennedy, MarketWatchLast Update: 10:15 AM ET Feb. 7, 2006
LONDON (MarketWatch) -- Chemicals giant Akzo Nobel said Tuesday its quarterly income more than doubled and detailed plans to spin off its pharmaceuticals division in an initial public offering.
Fourth-quarter net income rose to 317 million euros from 153 million euros a year earlier. Revenue in the quarter climbed 7% to 3.31 billion euros, topping analyst forecasts.
But the results aren't as good as they first appear, said Jan de Cauter, an analyst at Delta Lloyd Securities.
"In spite of what might look as positive news, a major part of the result comes from one-off items," he noted. "Margins in all divisions decreased, mainly due to higher raw-material prices."
BRL68.96, +1.46, +2.2%) and the release of 283 million euros from ending a post-retirement health-care scheme.
AKZOY51.10, +3.64, +7.7%) (NL:00913: news, chart, profile) climbed 6.5% in Amsterdam, which de Cauter attributed to the IPO announcement. The Dutch firm is the world's largest maker of chemical coatings.
The company said it will start with a minority IPO of its pharmaceuticals arm, to be called Organon Biosciences, on the Euronext exchange in Amsterdam. The timing of the issue will depend on developments in Organon's pipeline of new products. Full separation of the business will take a further two to three years, Akzo said.
A final decision on the timing and details of the listing will be taken in the second half of the year.
"Over recent years, we have made significant progress related to our strategy of fixing pharma, refocusing our chemicals portfolio and continuing to grow and invest in our coatings business," said CEO Hans Wijers.
"As a logical next step, and after a thorough strategic review, we believe that creating two independent companies...will enhance shareholder value through both increased management and strategic focus, and greater transparency."
"What we have done in the last couple of years is basically preparing for this move," Wijers told a press conference.
Wijers said the new company, which will also include Akzo's animal healthcare business, will be headed by Toon Wilderbeek, the board member responsible for pharmaceuticals.
Wijers declined to speculate on the size of the IPO. An analyst at a sell-side firm said, based on annual sales of 3.5 billion euros at the divisions to be spun off, he would expect the new company to be valued at roughly 5.5 billion euros. He noted, since it will be a minority IPO, the issued shares will be worth possibly about 30% of this figure.
Going back to the quarterly figures, Akzo said operating income fell across all divisions.
In its pharmaceuticals division, operating income dipped 3% to 84 million euros.
"The decline is due to the fact that we have a very full pipeline, which of course drives a lot of costs to research and development and marketing and sales," said Wijers.
In the coatings division, operating income dropped 19% to 42 million euros.
"We had a very, very tough year in coatings. There were unprecedented hikes in raw-material costs," said Wijers. But he noted the market has improved since the first half of the year.
Akzo said it will continue with its policy of disciplined balance-sheet management.
"Options for shareholder value creation, such as a share buyback program, are evaluated against investments and acquisitions for growth," the company noted.
Wijers said the company's balance sheet is getting stronger, but noted many companies in the pharmaceutical sector maintain a strong balance sheet.
"Don't forget we still have a net debt of 1.5 billion euros," he added.
Akzo profit doubles, plans pharma IPO
Shares add nearly 7% on IPO, though margins disappoint
By Simon Kennedy, MarketWatchLast Update: 10:15 AM ET Feb. 7, 2006
LONDON (MarketWatch) -- Chemicals giant Akzo Nobel said Tuesday its quarterly income more than doubled and detailed plans to spin off its pharmaceuticals division in an initial public offering.
Fourth-quarter net income rose to 317 million euros from 153 million euros a year earlier. Revenue in the quarter climbed 7% to 3.31 billion euros, topping analyst forecasts.
But the results aren't as good as they first appear, said Jan de Cauter, an analyst at Delta Lloyd Securities.
"In spite of what might look as positive news, a major part of the result comes from one-off items," he noted. "Margins in all divisions decreased, mainly due to higher raw-material prices."
BRL68.96, +1.46, +2.2%) and the release of 283 million euros from ending a post-retirement health-care scheme.
AKZOY51.10, +3.64, +7.7%) (NL:00913: news, chart, profile) climbed 6.5% in Amsterdam, which de Cauter attributed to the IPO announcement. The Dutch firm is the world's largest maker of chemical coatings.
The company said it will start with a minority IPO of its pharmaceuticals arm, to be called Organon Biosciences, on the Euronext exchange in Amsterdam. The timing of the issue will depend on developments in Organon's pipeline of new products. Full separation of the business will take a further two to three years, Akzo said.
A final decision on the timing and details of the listing will be taken in the second half of the year.
"Over recent years, we have made significant progress related to our strategy of fixing pharma, refocusing our chemicals portfolio and continuing to grow and invest in our coatings business," said CEO Hans Wijers.
"As a logical next step, and after a thorough strategic review, we believe that creating two independent companies...will enhance shareholder value through both increased management and strategic focus, and greater transparency."
"What we have done in the last couple of years is basically preparing for this move," Wijers told a press conference.
Wijers said the new company, which will also include Akzo's animal healthcare business, will be headed by Toon Wilderbeek, the board member responsible for pharmaceuticals.
Wijers declined to speculate on the size of the IPO. An analyst at a sell-side firm said, based on annual sales of 3.5 billion euros at the divisions to be spun off, he would expect the new company to be valued at roughly 5.5 billion euros. He noted, since it will be a minority IPO, the issued shares will be worth possibly about 30% of this figure.
Going back to the quarterly figures, Akzo said operating income fell across all divisions.
In its pharmaceuticals division, operating income dipped 3% to 84 million euros.
"The decline is due to the fact that we have a very full pipeline, which of course drives a lot of costs to research and development and marketing and sales," said Wijers.
In the coatings division, operating income dropped 19% to 42 million euros.
"We had a very, very tough year in coatings. There were unprecedented hikes in raw-material costs," said Wijers. But he noted the market has improved since the first half of the year.
Akzo said it will continue with its policy of disciplined balance-sheet management.
"Options for shareholder value creation, such as a share buyback program, are evaluated against investments and acquisitions for growth," the company noted.
Wijers said the company's balance sheet is getting stronger, but noted many companies in the pharmaceutical sector maintain a strong balance sheet.
"Don't forget we still have a net debt of 1.5 billion euros," he added.
posted by Jones Lang LaSalle NJ News Blog at 10:23 AM
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