Dutch chemical group Akzo Nobel NV on Wednesday reported a 12 percent fall in core second-quarter profit, beating estimates as cost savings started to pay off, partly offsetting lower volumes.

The world's biggest paint company reported earnings before interest and taxes (EBIT), excluding incidentals, of 370 million euros, above the average forecast of 267 million in a Reuters poll and compared with EBIT of 422 million euros in the same period last year.

Akzo Nobel said early the indications in March that markets might be stabilising continued into the second quarter.

However, this gradual stabilisation is at significantly lower levels than 2008. With the exception of some emerging markets, we see little significant recovery of growth, Chief Executive Hans Wijers said in a statement adding forward visibility still remains limited. Akzo Nobel, which is targeting 540 million euros in cost savings by end-2011, said actions continue to focus on cost savings and that these actions are beginning to bear fruit. Sales fell 10 percent to 3.668 billion euros from last year as volumes declined 16 percent, but beat the average estimate of 3.537 billion euros.

U.S. rival PPG Industries posted forecast-beating second-quarter profit earlier this month after aggressive cost-cutting.

PPG said that there were signs markets had stabilised and that demand would mildly improve in the third quarter.

(Reporting by Aaron Gray-Block)

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