AkzoNobel Announces Further Cost Savings Given Macroeconomic Uncertainties; Shares Undervalued

Narrow-moat AkzoNobel reported second-quarter EBIT of EUR 249 million, down 26% versus 2021 and slightly below Vara consensus despite the profit warning announced in June (see our note "And So It Begins, AkzoNobel Flags Weaker-Than-Expected Second Quarter"). Shares were down 1% intraday, below most of the group. AkzoNobel announced further cost savings of EUR 200 million in support of its 2023 EBITDA target of EUR 2 billion given increasing macroeconomic uncertainties. As we have asserted previously, we have doubts about it achieving 2023 targets given the increasingly gloomy macroeconomic picture. Our 2023 EBITDA estimate is well below guidance and consensus, which is already a skeptical EUR 1.7 billion. Nevertheless, we are bullish versus the market as shares are now trading in 5-star territory. We don’t expect to make a material change to our EUR 107 fair value estimate.