Arnhem, the Netherlands, May 11, 2001 – Akzo Nobel confirms its main strategic approach during the Spring Analyst Meeting today in Amsterdam: being a focussed hybrid with muscle and visibility in worldwide Pharma, Coatings and Chemicals businesses. Cees van Lede, CEO of Akzo Nobel, in his summary: “Pharma will be keeping up double digit growth, based on 3 strong pillars Organon, Intervet and Diosynth. The ambition is to become a global top 20 player in healthcare. Coatings will expand the No.1 worldwide leadership position, by growing sales and further improving margins. We will continue to play an active role in the overall coatings industry restructuring. Akzo Nobel’s Chemicals business will further prune its portfolio and focus on margin improvement.”
Penta fast track; Xyvion® delayed
Chief Financial Officer, Fritz Fröhlich, focuses on the overall financial performance of Akzo Nobel, giving a progress report. ”Our strategy is based on value creation. Pharma is now approaching some 50% of EBIT. Our ROS target in this area is raised to be above 20%, based on our impressive pipeline of new pharmaceutical products.” Fröhlich adds: “I am very happy that Organon received notification that there will be a fast-track procedure for the new antithrombotic pentasaccharide drug.” Fast-track approval is usually granted to new drugs that show clear potential for the treatment of a serious or life-threatening condition that cannot be provided by existing therapies.
“On the other hand, the introduction of Xyvion in the USA will be delayed around two years because additional clinical studies are needed. This superior product deserves an explanatory leaflet that fully values its eminent qualities. We prefer to take our time for further research instead of giving in for a description that is not satisfying.”
About the animal healthcare business, Fröhlich added: “Intervet is the global No. 3 now and will be increasingly contributing to our Pharma success. Recent diseases will raise more and more attention for animal healthcare all over the world.”
After the acquisition of Covance Biotechnology Services Inc., a leading company in the development and manufacturing of innovative biopharmaceutical substances, Diosynth now has an important bridgehead in the United States of America.
Coatings building on No.1 position
The Spring Analyst Meeting in Amsterdam is mainly concentrating on Coatings topics. Rudy van der Meer, responsible Board Member for Coatings: “Compared to our European peers we are doing all right, but we know we can do better. We have to improve our margins. Our objective remains a ROI of 30% (2000: 21%), to be reached step by step over the next 3 to 5 years. The accumulated experience and know-how of our organization is a vital resource and the best competitive tool we have. The overall ambition is not only to hold on to our leading position, but to play an active role in the further consolidation of the industry, as we have shown with our recent acquisitions and strategic investments. We are continuously upgrading our performance also by selective divestments and at the same time growing our business. Emerging markets in Asia/Pacific and Eastern Europe have our special attention with their increasing part of our geo-mix.” Coatings sales by destination in Asia/Pacific has increased from 4% in 1995 to 11% last year.
Decorative Coatings Europe has reorganized to a real pan European structure to reap the benefit of Akzo Nobel's outstanding leading position in Western Europe within Deco. General manager Leif Abildgaard: “We are in pole position to serve customers in all corners of Europe and we have the advantage of a rapid transfer of successes between regions too.” About cost reductions he added: “A lot of our energy will be used to reduce our structural costbase within production and logistic such as the closure of sites in Berlin (Germany), Copenhagen (Denmark), Rugby warehouse (UK) and the selling of the Sneek site in Holland. Invested capital as well as operating working capital has to come down also via reduction of raw materials, recipes, number of stock keeping units as well as a further focus on fewer and stronger brands. Our strong brands as Sikkens® will be developed and supported by the innovative power of the Coatings group and we want to stay a strong leader in care for the environment and colors. This will also assist our aim for improved margins. Our new Sikkens® Rubbol BL waterborne topcoat as an example is judged by professional painters as the best in the world.”
Car Refinishes has extended its profitable business activities by entering new segments next to the highest quality and services segment. After the introduction of a new segment approach since 1995 now some 30% of worldwide sales comes from these new segments. Doubling the R&D effort with new labs in Bangalore (India) and Pontiac (USA) will further boost innovation. “Car Refinishes evolves from a paint supplier to a solution provider”, explains General Manager Cor de Grauw.
Marine & Protective Coatings General Manager Leif Darner shows the anti-cyclical character of his business. The strong increase in the first quarter results, mainly due to the shipbuilding boom in Asia, is expected to continue at this level for the next two years.
Chemicals: improving margins
The Chemicals businesses of Akzo Nobel are rigorously improving their margins with ongoing cost savings programs. Pruning of the portfolio, selective acquisitions and ring-fenced capital expenditures are the key words. Critical mass and leading positions in chosen segments are really making the difference in this still quite fragmented industry.
Outlook: net income1 around record year 2000
The strategic update of CEO Cees van Lede confirmed earlier statements about the expected year result of the Akzo Nobel Company. “We are facing a tougher economic climate. Akzo Nobel is emphasizing internal programs and strengthening our balance sheet. We are determined to deliver net income1 in the same order of last year with some EUR 950 million, which was the record year in the history of our company.”
1 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 more than 75 countries. Financial results for the second quarter of 2001 will be published on July 25, 2001.