Arnhem, the Netherlands, April 25, 2001. – Akzo Nobel (EURONEXT: AKZ, NASDAQ: AKZOY), the international pharmaceuticals, coatings and chemicals company, achieved first-quarter net income of EUR 216 million (USD 200 million; GBP 136 million), almost equal to last year’s level of EUR 219 million. The strong performance of Pharma’s human and animal healthcare activities was offset by earnings pressure at Coatings and Chemicals, mainly due to slowing demand. Fritz Fröhlich, Akzo Nobel’s CFO, said: “Pharma continues to deliver healthy growth, based on its strong product program and successful expansion in the United States. Coatings and Chemicals are facing rapidly weakening market conditions and respond by accelerating their cost reduction programs. Akzo Nobel earlier expressed the ambition of achieving a net income of EUR 1 billion. Now we anticipate to fall somewhat short and expect a net income* of the same order of magnitude as the record year 2000.” Total sales were up 4% to EUR 3.5 billion, mainly driven by an 11% increase for the ongoing Pharma businesses. "The almost 50% increase in sales at Organon in the United States was led by the growing success in this key market for our antidepressant and female healthcare products. Well over 30% of total Organon revenues are now generated in the United States. Intervet and Diosynth also turned in a very robust performance," Fröhlich said.
"Coatings experienced a disappointing sales level, leading to lower margins. The slowdown of the U.S. economy and weakness of the automotive industry are the main causes. The financial crisis in Turkey, an important Coatings market, influenced the European results. Cost reduction programs are being accelerated, and these efforts coincide with the Company-wide introduction of new performance-based incentives at business unit level."
Chemicals’ activities are particularly under pressure as a result of the slowing U.S. economy. "One-third of our Chemicals revenues are realized in the United States. In addition, some units have been impacted by higher raw material and energy prices. But there is also good news from the sectors Pulp & Paper Chemicals and Salt, where the results were higher due to Bleaching Chemicals in the United States and favorable winter conditions in Northwestern Europe, respectively."
Given this operating environment, Akzo Nobel believes that its previously stated aim of EUR 1 billion net income* for 2001 will be hard to achieve. In view of the tougher economic circumstances, Fröhlich commented: "The economic situation in the United States has weakened much faster than we expected, impacting demand levels in Europe and Asia as well.
We are taking appropriate measures and have rolled out EVA targets to sharpen the business units’ focus on shareholder value. Nevertheless, the Company expects a net income* of the same order of magnitude as last year. Akzo Nobel has a very sound portfolio with fast growing Pharma businesses and is a considerably less cyclical company than a couple of years ago. Our businesses and market positions are in very solid shape."
* Excluding extraordinary and nonrecurring items.
Akzo Nobel, based in the Netherlands, serves customers throughout the world with healthcare products, coatings and chemicals. Consolidated sales for 2000 totaled EUR 14 billion (USD 13 billion, GBP 8.5 billion). The Company currently employs 68,800 people in 75 countries. Financial results for the second quarter of 2001 will be published on July 25, 2001.
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