Akzo Nobel has reported net income for 2003 of EUR 811 million, 9% down on 2002. Net debt was also reduced by EUR 800 million. 1 of EUR 811 million (-9%). An unchanged dividend of EUR 1.20 will be proposed to shareholders.
Commenting on the fourth quarter and full year 2003 results, CEO Hans Wijers said: “This was a challenging year, but we have more than delivered on our promises. Earnings were slightly better than expected. We defended profit margins and slashed debt levels, reaping the rewards of our focus on costs and cash. In the face of considerable headwinds, including currency translation effects and pension charges, forceful cost-cutting contributed strongly to bottom line performance.
“As expected, Pharma sales were under pressure from generic competition to our key drug Remeron in the United States. The first major initiative of our new Pharma strategy – the new partnership on asenapine – delivered a boost to our results in the final quarter. Coatings and Chemicals continued their solid performance, benefiting from restructuring. Apart from growth in emerging markets, where we added some 1,000 employees, the Company reduced headcount in mature markets by more than 4,000.”
Pharma – new strategy starting to deliver
Organon, Akzo Nobel’s human healthcare business, tackled major challenges in 2003 as earnings levels withstood pressure from currencies, pension costs and stiff generic competition for Remeron® in the United States. Wijers: “We refocused Organon and achieved important results with our new strategy and cost reduction program. Organon is continuing to build on its strong R&D and on its core markets, while aggressively pursuing other means to increase value. In December we filed our new antidepressant Variza in the United States. The partnership on asenapine with Pfizer resulted in a receipt of USD 100 million in December. Our new strategic approach was again evidenced last month with the decision to transfer Arixtra to Sanofi. This year we will face additional generic competition to Remeron. I hope we will have seen the worst by the end of this year. We hope to see the turning point in 2005.”
Intervet felt the impact of weaker market conditions in the Americas, while performance in Europe improved. Diosynth earnings are being impacted by lower demand for chemical and biotech products. To address this situation, we are preparing to intensify our restructuring measures.
Coatings – solid performance, strongly benefiting from restructurings
Coatings achieved autonomous growth of 3%, which was more than offset by the negative impact from currencies and pensions. Cost reduction at operations located in mature markets was again stepped up last year. “Restructuring resulted in solid overall performance despite difficult economic circumstances,” Wijers said. “On the other hand, we are actively investing in growth opportunities in emerging markets in Asia-Pacific, which now generates 14% of our worldwide Coatings sales. Balancing the mature and new markets will be our main challenge in the coming years.”
Marine & Protective Coatings was again a star performer, while Powder Coatings and Industrial Finishes were strong. Decorative Coatings and Car Refinishes experienced tough business conditions.
Chemicals – robust performance in difficult market, forceful cost-cutting
In a very difficult business environment, Chemicals turned in a robust performance thanks to cost-cutting. Sales were down 4% to EUR 4,4 billion, and operating income declined 6% to EUR 324 million. The currencies impact on sales was 7%.
Wijers: “In Chemicals we successfully secured volumes and prices in a no-growth environment. I am proud to say that all Akzo Nobel business units, even those operating in the most testing circumstances, reported figures in the black.”
Base Chemicals and Catalysts posted strong performances, while Pulp & Paper Chemicals reaped the benefits of cost savings. Restructuring in Polymer Chemicals and Surface Chemistry was intensified. We continued to invest in profitable and leadership positions in the Netherlands, Sweden, Singapore and Brazil. In September, Akzo Nobel announced its intention to sell the Catalysts, Phosphorus Chemicals and Coating Resins businesses in order to create financial room to maneuver for the Company. “In the course of this year, we expect divestment proceeds that reflect their value,” added Wijers.
Financial position significantly improved
As a result of the Company’s focus on cash, capital and acquisition expenditures were strictly controlled. Selective investments were made in growth markets with lower operating costs such as China and Central and Eastern Europe, in line with our business group priorities. The debt reduction program brought net interest-bearing borrowings down by EUR 800 million to EUR 2.4 billion.
Outlook for 2004: net income2 below 2003
“We are well prepared for 2004, which will be another challenging year,” said Wijers. “On balance we expect net income, excluding nonrecurring items, to be below 2003. This outlook is based on our present portfolio of activities, and therefore excludes effects of the planned Chemicals divestments. In addition, it is based on 2003 earnings excluding the special benefit from the asenapine cooperation.”
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1 Excluding nonrecurring items.
2 Excluding nonrecurring items and special benefits.