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Like White Paint, Akzo Nobel CEO Is Sticking to ‘Boring’ Basics

Like White Paint, Akzo Nobel CEO Is Sticking to ‘Boring’ Basics2017.01.24

By his own account, the chief executive of Akzo Nobel NV has put the Dutch paint maker on a more humdrum route to growth.

Ton Buechner is eschewing the splashy mega-deals that are transforming U.S. competitors such as Sherwin-Williams Co. and Dow Chemical Co. in favor of discipline and smaller operational changes.

“I told people this is going to look boring from the outside, but if we don’t do it, it’s really not going to be good for the company,” he said in an interview at the new headquarters in Amsterdam. “We’re not focusing on the big ones, the focus is on bolt-on acquisitions and organic growth.”

Buechner’s detail-oriented methods include monitoring cost savings on a live computer feed and inspiring thousands of employee projects to improve efficiency. They are emblematic of the transformation that Akzo Nobel has enjoyed under his nearly 5-year reign, when profitability improved along with the company’s ability to reach financial targets and pay a higher dividend.

Investors have taken notice, sending shares in Europe’s largest paint company about 50 percent higher since April, 2012. They ended nearly unchanged at 60.38 euros on Tuesday, giving a market capitalization of 15 billion euros ($16 billion).

“One of the things that we really wanted to do, is that we wanted to be predictable,” Buechner said, moving “from a company that had some severe challenges to a company that is starting to acquire.”

Akzo is expected to report on Feb. 15 a third straight year of annual profit growth partly due to restructuring and greater efficiency, with analysts predicting a 3 percent increase on average to 2.14 billion euros, according to a survey by Bloomberg.

Bet on Basics

For investors looking further ahead, Buechner, 51, said Akzo’s 2017 capital markets day will mostly be about internal growth, efficiency measures, a raft of new products in areas such as water-based paint, and the odd bolt-on acquisition.

To achieve this, the CEO is betting on the basics: generating cash for dividends, achieving targets and outperforming wider markets without splurging big on M&A. Faced with downbeat oil-and-gas and marine-coatings markets and a slowdown in Latin America, he said his strategy is to continually generate efficiency and make sure it sticks. For that purpose, executives from General Electric Co. were hired to help push through the changes.

“We do all this quietly and that doesn’t necessarily bring admiration,” Buechner said. “Steadiness used to be highly appreciated.”

Source:bloomberg.com

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