Summary
- Akzo Nobel maintains stable margins despite falling volumes, thanks to strong cost control and pricing discipline.
- Industrial segments like Marine & Protective Coatings outperform, offsetting weakness in Decorative Paints and automotive.
- The stock offers income and value, with a solid balance sheet, attractive dividend yield, and revaluation potential if margin targets are met.
Introduction
Akzo Nobel N.V., producer of paints and coatings and owner of brands such as Sikkens and Dulux, recently surprised investors with robust quarterly figures. The share price shot up more than 8% in April after the publication of the results for the first quarter of 2025. This is remarkable in a sector where volumes are under pressure. The increase was not due to market recovery but due to cost reduction, price increases and a strategic reorganization.
In this article I investigate whether Akzo Nobel is still worth buying after this price jump. I think so, but not because of the external market conditions. They remain challenging. The attractiveness of the shares lies in the strong discipline of the company. With a healthy balance sheet, strong margin control and solid dividend yield, Akzo Nobel is interesting for investors with patience.
Market view: “Okay but not great”
Demand remains fragile especially in the sectors that are relevant to Akzo Nobel such as construction, industry and automotive. Akzo’s volumes fell by 2% in the first quarter which was a result of weakness in Turkey, China and parts of Europe in particular. Nevertheless, the company managed to keep adjusted EBITDA stable at €357 million, partly thanks to a 2% increase in price/mix and rigorous cost savings.
According to CEO Greg Poux-Guillaume, the market is “okay, but not great.” The company is therefore not counting on broad volume growth in 2025. Recovery must come from within the organization itself, by working more efficiently, improving the product mix and maintaining margins. So far, this has been quite successful. Despite inflationary pressure, Akzo managed to improve its gross margin slightly and keep operating costs at the 2024 level. This is remarkable considering that there was an 8% increase in wage costs. More than 70% of the previously announced reorganization program (which will see 2,200 jobs disappear) has now been realized. The benefits of these interventions are now visible in profitability. In addition, new factory closures in France and other regions are underway. This process should lead to a structurally higher margin, even if volumes do not recover in the short term.
Strong and Weak Segments: Marine Shines, Deco Falters
Not all segments within Akzo performed equally well. The Decorative Paints division, which includes consumer paints was hit hard. Demand was particularly weak in Asia because volumes fell in China and Indonesia, despite a slight recovery. In Turkey, a commercial recalibration resulted in temporarily lower sales. Even in Latin America where prices were increased sharply, volumes fell. Only India held up well.
In contrast, the Performance Coatings division performed well. Sales remained stable, but margins increased thanks to strong growth in Marine & Protective Coatings. Here, Akzo is benefiting from investments in infrastructure, shipbuilding and industrial installations. The company also saw improvements in niches such as Aerospace and Wood Coatings. Automotive Coatings, on the other hand, remains a source of concern, with declining volumes due to low car sales in Europe and North America.
This shows that Akzo is able to spread risks with its broad portfolio. The weakness in consumer markets is compensated for by strength in industrial applications. Marine & Protective Coatings (accounting for approximately 25% of revenue) also offers structural growth, fueled by the energy transition and public investments.
Geographical Spread as its Strength
One of Akzo’s strengths is its geographic spread. While American competitors such as Sherwin-Williams and PPG rely heavily on North America, Akzo has a broader global base. In Latin America, it even achieved organic sales growth in Q1, and the company was also a positive exception in India. In Europe, volumes are slowly stabilizing. The real problems are China and Turkey markets but the low point seems to be behind them.
Moreover, Akzo is well positioned to absorb trade barriers and geopolitical risks. Thanks to its local-for-local strategy (in which products are produced and sold locally) the company is relatively immune to import tariffs. In the US, 98% of products are made locally and only 10% of raw materials come from outside. The total direct impact of American and Chinese tariffs is estimated by management at around €35 million per year which is a manageable amount.
According to the CEO, the greater risk lies in indirect effects such as weaker customer confidence, postponed investments and falling demand. On the other hand, many end markets (such as shipbuilding and infrastructure) involve projects with a duration of years. These offer a certain stability even when the economic wind is against you.
Comparison With Competitors: Undervalued But Stronger
Compared to its peers, Akzo is doing remarkably well. Sherwin-Williams saw only modest revenue growth in Q1 thanks to a stable US renovation market but lost ground in consumer paints. PPG reported good numbers in aerospace and marine but struggled with volume weakness in automotive and industrial coatings. Akzo is following the same pattern but without overplaying itself.
Where Akzo lags is in valuation. Sherwin-Williams trades at over 30x expected earnings, PPG around 20x, while Akzo is trading also at 20x. Akzo is also clearly cheaper on an EV/EBITDA basis: 9x versus 12x for PPG and 15x for Sherwin. The P/B ratio is 2.3x versus 3.5x or more for US peers.
This difference is partly justified because Sherwin’s margins are structurally higher but also offers opportunities. Akzo’s growth expectations are lower but the company offers more stability through dividend and geographical diversification. If the margin targets are met (EBITDA margin >16% in 2026-2027), a revaluation is obvious.
Financial Position Is Solid
Akzo’s financial situation is robust. The balance sheet is healthy with net debt of €4.1 billion and a leverage ratio of 2.8x EBITDA. This is slightly above the target of 2.5x but given the seasonal effect in Q1 (stock build-up in spring) not worrying. Furthermore, most of the debt is financed at fixed rates and there will be no major maturities until 2027. The company therefore does not have to refinance under pressure in the current interest rate market.
Free cash flow was slightly negative which is normal for the first quarter. What is striking is that the company is able to maintain its cash flow at a reasonable level despite investments in reorganization and digitalization. There is also a large liquidity buffer with more than €1.5 billion in cash and short term investments.
Outlook: No Growth But Improvement
For 2025, Akzo Nobel expects an adjusted EBITDA of more than EUR 1.55 billion. This is a slight increase compared to 2024, driven by internal improvements. Margins should increase towards 16% and return on invested capital should be between 16 and 19%.
The growth path will not be straight up. Much depends on the pace at which markets such as China and Europe recover and whether inflation declines further. But the most important thing is that Akzo Nobel does not need a market recovery to achieve its own targets. The strategy is based on cost control, innovation and customer focus, not on hoping that the world will boost demand.
Dividends and Shareholder Return
The dividend is an attractive part of the Akzo shares. With an annual dividend yield of around 3.2%, the stock clearly outperforms its peers. The distribution policy is aimed at stability and moderate growth. The payout ratio is around 50–60% of adjusted earnings which is considered healthy and sustainable.
What Akzo does not do is aggressively buy back its own shares, as PPG and Sherwin do. Instead, it opts for direct reward to the shareholder. For investors who value tangible cash returns, this is an attractive feature.
Conclusion
Akzo Nobel is not a growth gem but it is a strong stock with an attractive yield. The combination of cost discipline, global diversification, good dividend and a relatively low valuation makes it suitable for investors who are patient. The recovery will be slow and will have to come from within but the foundation is strong.
My view is therefore a buy rating. Not for those looking for quick profits but for those looking for value, stability and revaluation potential in the medium term. If the markets recover, this stock could easily be 20–30% higher. But even if that does not happen, you will receive an attractive dividend yield in the meantime while the company steadily improves its margin.