Akzo Nobel cuts jobs and suspends share buyback

Dutch chemicals group Akzo Nobel has postponed the remaining 1.6 billion euros of a share buyback plan due to the credit crunch, it said on Monday, sending its share price to a three-year low.

The world's biggest paint company, which earlier this year bought Imperial Chemical Industries (ICI), also said it would cut 3,500 jobs, which is expected to yield at least 100 million euros in cost savings.

Akzo Nobel's shares were down 7 percent at 33.00 euros at 08.10 this morning, the lowest level since early September 2005. The shares were the biggest decliner in the DJStoxx European chemicals sector index which was down 2.8 percent.

"Our conclusion is that Akzo is taking the right corrective measures but that this will not offset the impact of a difficult trading environment", RBS analyst Mutlu Gundogan said in a note.

Akzo's chief financial officer, Keith Nichols, told reporters it had to refinance debt which involves an 800 million-euro bond due to mature in December and another 1 billion euros maturing in May 2009, including some debt which it had inherited fromICI. "They've got pretty standard terms and conditions, nothing onerous", Nichols said.

"If capital markets become normal again it is, if I may say so, a no brainer. It's a very normal regular refinancing", Chief Executive Hans Wijers added. "This is just because the financial markets are basically closed."

The producer of household paint brands such as Dulux, Sikkens and Flexa, reiterated its full-year target, expecting 2008 earnings before interest, taxes, depreciation and amortisation (EBITDA) close to 1.87 billion euros.

Akzo Nobel, like its rivals, is experiencing a slowdown in its North American and European markets, particularly in its decorative paints business due to the housing market slump. ButWijers said visibility remains "limited" due to the ongoing turbulence on financial markets.

He said apart from the slowdown in both the United States and the UK, there are clear signals of a slowdown in southern Europe, Germany and in some emerging markets.

Akzo Nobel has transformed its business in the past year, divesting its pharmaceuticals unit Organon to the U.S.-based Schering Plough Corp last November and using the proceeds to buy the UK's ICI in January for 8 billion pounds.

Wijers told reporters that most of the announced job cuts will be made across the Decorative Paints business and then mainly in North America and Europe and should be done by 2011.