AkzoNobel, the world's largest paintmaker and owner of the Dulux brand, said it was now passing on to customers most of the rise in raw material prices that pulled down its fourth-quarter core profit.

The escalating cost of materials such as titanium dioxide, a paint pigment, and oil-related resins and solvents was particularly painful last year for paintmakers such as AkzoNobel and rival U.S. maker Sherwin-Williams Co.

Having now priced in most of the increases, AkzoNobel said it was seeing greater price stability in most raw materials except for titanium dioxide, which it expects to rise further.

Its decorative paints division, which accounted for €1.204 billion ($1.57 billion) or about a third of quarterly sales, reported earnings before interest, tax, depreciation and amortisation (EBITDA) of just €11 million, down from €63 million a year ago, and €148 million in the third quarter.

"2011 was a challenging year against the background of weaker global economic conditions and unprecedented raw material price inflation," said Hans Wijers, chief executive, who will be succeeded in April by Ton Buechner, CEO of Swiss machinery maker Sulzer.

"The absolute impact of increased raw material prices for the year was approximately 1 billion euros. Despite this significant headwind, our reported pricing actions have now offset most of this, and for the year ahead we expect to see the full-year benefit of these increases," he added.

Wijers highlighted the "very, very weak" construction market in Europe and moves by Chinese authorities to calm a frothy property market as trends likely to curb demand for paints.

The company, which also makes chemicals for the pulp and paper industry, said the outlook remained uncertain because of the shaky global economic environment, with the risk of recession in Europe, delayed recovery in the United States property market, and a potential slowdown in China.

AkzoNobel said group fourth-quarter EBITDA fell 20% to €301 million, slightly below analysts' forecasts, making a net loss of 62 million euros from continuing operations, on revenue down 5% at €3.787 billion.

Analysts in a poll commissioned by Reuters had forecast EBITDA before incidentals of €319 million and a net loss of €68 million, on revenue of €3.75 billion.

AkzoNobel reported full-year revenue of €15.7 billion and reiterated its medium-term target for annual revenue of €20 billion, as well as its ambition to increase EBITDA each year while maintaining a 13 to 15% margin.

Wijers said that could come from acquisitions as well as organic growth, but declined to comment on potential targets. AkzoNobel is seen as a potential buyer for chemical maker DuPont's automotive finishes and industrial coatings unit.