Continued growth at Pharma; Coatings and Chemicals bottoming out
Arnhem, the Netherlands, April 23, 2002 – Akzo Nobel’s net income for the first quarter of 2002 was EUR 234 million, up 9% compared with the previous year’s results. “On balance all three groups achieved a better performance in their ongoing businesses. Operating income was up 4% and financing charges were significantly lower”, explained Fritz Fröhlich, CFO of the Dutch-based international pharmaceuticals, coatings, and chemicals company. “Again our Pharma business continued its growth, while at Coatings and Chemicals the downtrend is bottoming out. We are clearly benefiting from our balanced portfolio.”
Pharma: growth continued
Sales of the ongoing Pharma operations were up 13% to EUR 1 billion. Fröhlich commented: “Akzo Nobel’s human healthcare business Organon grew strongly again. Sales in the United States were up 17%; they now represent more than one third of Organon’s sales worldwide. Remeron®, Puregon®, and Livial® all contributed with over 20% higher sales when compared to last year’s first quarter. Arixtra® was launched in the United States and received marketing approval for Europe. We also started the market introduction of the new NuvaRing® contraceptive.”
“We are still awaiting the outcome of legal proceedings regarding possible generic competition for Remeron®. Pending the judge’s decision we do not comment.” As for the delayed introduction of the new antidepressant Ariza he added: “The FDA has addressed certain issues. Organon will hand over additional information to the FDA next month. It is expected that the product will not be introduced this year.” Intervet, the animal healthcare company of Akzo Nobel, continued its growth pattern (sales +7%), while the manufacturer of complex active pharmaceutical ingredients Diosynth (sales +9%) is continuing to invest for further growth.
Coatings earnings slightly up
The previously announced cost saving programs in Coatings are on schedule. Fröhlich: “We will start to reap the benefits of these programs later this year. In this quarter we have seen that sales, margins and operating results of the continued Coatings activities were slightly up, in spite of higher pension charges. Decorative Coatings improved, while Marine & Protective Coatings and Car Refinishes sustained their positive trend of last year. The industrial activities turned in a mixed performance. In April, we signed a contract to acquire the worldwide marine and aerospace coatings businesses of U.S. Paint, including the renowned AWLGRIP® brand for marine coatings systems. This acquisition extends our position in marine and aerospace coatings systems.”
Chemicals: downtrend bottoming out due to restructuring
cost saving programs in the Akzo Nobel Chemicals group are progressing well and are contributing to earnings, which were slightly up on last year. Fröhlich: “Higher pension costs and the impact of lower sales volumes were more than offset by the favorable effect of cost savings and lower raw material and energy prices. Catalysts and Functional Chemicals in particular showed a strong improvement. Other businesses continued to feel the impact of the soft U.S. economy and the weak PVC industry.”
quarter the new low sulfur diesel requirements in Europe enhanced sales of our higher added value hydro processing catalysts (HPC).
Improved financial position
Fröhlich added that Akzo Nobel’s financial charges are significantly down. “We strengthened our financial position and are benefiting from lower short-term interest rates and reduced net borrowings.”
restructuring programs announced last year are being forcefully implemented in Coatings and Chemicals. In the first quarter, the workforce in these groups was reduced by some 400 jobs. On balance, however, the Company increased its workforce by 300 jobs, mainly due to strong Pharma growth.
Outlook reconfirmed - net income1 above record year 2000
Akzo Nobel kept its outlook for the full year unchanged. Fröhlich: “We reconfirm our earlier expressed expectation that our ongoing internal programs to boost performance will lead to a net income1 for 2002 which exceeds the record year 2000, on the assumption that the economy will resume growth again in the second half of this year and that no major changes will occur in currency exchange rates.”
1 Excluding extraordinary and nonrecurring items
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