And So It Begins, AkzoNobel Flags Weaker-Than-Expected Second Quarter

Narrow-moat AkzoNobel announced second-quarter EBIT is expected to be EUR 90 million less than “expectations,” with expectations referring to consensus numbers around the beginning of the quarter. Using current Vara consensus, this would imply EBIT of about EUR 250 million or a 25% decline versus 2021. As we said in our May 10 note, “European Chemicals Outlook Dims on Rising Input Costs and Interest Rates, but We See Opportunities,” we think company guidance in the sector is generally too high. Hence, we expect cuts so this does not surprise us. Our 2022 EBIT forecast for AkzoNobel is already 15% below consensus, so we don’t expect to make a material change to our EUR 107 fair value estimate. Despite the profit warning and our bearish outlook versus consensus, we think shares look undervalued.