Arnhem, the Netherlands, April 25, 2002 – At today’s Spring Analysts Meeting, Akzo Nobel CEO Cees van Lede emphasized that the Company is focusing more strongly on all activities and ensuring that all aspects of the business deliver a positive contribution to overall performance. EVA, completely rolled out in 2001, is the performance measure and bonuses are linked to added value, thus aligning the interests of both shareholders and management.
Stronger balance sheet
“A strong balance sheet is a critical success factor in today’s uncertain business environment and Akzo Nobel has reinforced its balance sheet by reducing debt a further EUR 175 million in the course of the first quarter,” said Mr. Van Lede.
Smooth management transition
Van Lede: “Now that our future CEO and a successor for Pharmaceuticals have been appointed, on a timetable that ensures continuity, a smooth transition will be a key priority that I will focus on personally.”
Q1-2002 net income up 9%
Akzo Nobel’s CFO Fritz Fröhlich elaborated on the first quarter results: “We had robust performance in Pharma, Coatings showed slight improvement and in Chemicals the downward trend is bottoming out.”
“Despite EUR 20 million higher pension costs, EBIT of the continuing operations was up 4%. Financing charges were significantly down due to debt reductions and lower interest rates,” he added.
This week Akzo Nobel launched a EUR 1 billion seven-year public bond issue with a coupon of 5,625%. The money raised will be used to redeem short-term debt, thus contributing to strengthening the balance sheet. “Following a successful road show, demand for this issue was high, in fact it was more than three times oversubscribed,” said Mr. Fröhlich.
Mr. Fröhlich reconfirmed the outlook for the full year, with net income1 above that of the record results achieved in 2000.
1.Excluding extraordinary and nonrecurring items, assuming 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.
Chemicals going for value creation, profitable growth
Throughout 2001 the Chemicals group thoroughly reviewed all business segments (57 segments) in the portfolio against the strategy of moving towards higher added value specialty businesses. Recent years have seen the group shift heavily towards specialties, and the result of the review indicates that focus is needed to move further in this direction.
“While our general strategy remains valid, we need to grow and create value within our own cash flow and hence will focus on two broad areas, global businesses with high growth potential supported by businesses which generate cash,” said Dag Strömqvist, Member of the Board of Management responsible for the Chemicals Group. He emphasized that, “Both cash and growth businesses are essential to achieving our goal of a return on investment of better than 17% over the cycle in Chemicals.”
“Where we have a market and technological strength on a global basis, with a strong possibility of profitably outgrowing the market, we will put these businesses on a growth footing,” he said. Businesses earmarked for growth are: Polymer Chemicals, Pulp & Paper Chemicals, Surface Chemistry and Resins. “Our remaining businesses, without limiting their natural development, will generate the cash necessary to fund growth, however cost reduction measures throughout the Group will also play a role,” he added.
Strömqvist told analysts that consensus in the industry indicated that the cycle may well have bottomed out, with encouraging signs visible in the United States, while Europe and Asia remained sluggish.
In addition, four Chemicals business units provided an overview of their respective activities. Business unit managers from Pulp and Paper Chemicals, Surface Chemistry and Resins, all earmarked for growth, and Catalysts, designated a cash generator, reviewed their growth over the past five years and gave an insight into their businesses.
Resins, global player, broad technology base
“Today we are a global player with a broad technology base in Coating and Printing Ink Resins,” said Resins General Manager, Jo Lennartz. “In the Coatings market, we focus on Industrial segments and have leading positions especially in high value markets like Automotive OEM and Car Refinishes. In Printing Ink Resins, we are a large international player in the industry.” After five years of rapid growth averaging 12.5% a year, Resins is currently consolidating and restructuring its activities. “In 2002, our efforts will be primarily aimed at a series of efficiency improvements. These will significantly enhance our productivity. Our true strength, however, lies in our wealth of know how and innovative capabilities. These will help us to again outgrow the market in the years to come,” said Lennartz.
Pulp and Paper Chemicals, market leader
Jan Svärd, General Manager of Pulp and Paper Chemicals (which trades as Eka Chemicals) said: “Our market share continues to grow and we are a leader in our industry segment.” Adding that the challenge now is “Growing the business by being recognized through innovative use of our unique knowledge of chemistry to improve our customers’ products and processes.” To this end, Pulp and Paper Chemicals is moving closer to the customer in bleaching, to the extent of taking over the production of chlorine dioxide in the customer’s premises. “This allows us to concentrate on what we do best, and the customer to concentrate on its core business,” said Svärd.
“2001 was not an easy year for the industry but our sales grew against those of 2000. In addition, cost reduction programs in the last year will lead to more than EUR 20 million in savings and we expect to continue to reap the benefits of these actions,” he added.
Catalysts, technological breakthroughs give an edge
Jon Meijnen, Catalysts General Manager, gave an overview of the markets for both Fluid Cracking Catalysts (FCC) and Hydroprocessing Catalysts (HPC), both used in the oil refining process. “Sales growth has been between 4 and 5% a year for Catalysts, in a market where there is strong competition and where a technological advantage is clearly an edge,” he said. “In FCC we have developed major technological breakthroughs in recent years which improve efficiency and throughput in the refinery. These are well received by the customer, and we are seeing further improvement in our results as a consequence.”
In addition, he pointed out that new requirements for low sulfur diesel fuels had enhanced the HPC business, largely due to the STARS and NEBULA technologies developed by Catalysts, and that this was an encouraging development.
Surface Chemistry, profitably outgrowing the market
“Surface Chemistry sales have grown at a little over 9% a year for the last five years and we demonstrate clear leadership in our market segments, which tend to grow at around GDP levels,” said General Manager, Rob Frohn. “We are a technology-driven global business and we are close to the customer, virtually wherever they are,” said Frohn. “Our ambition is to profitably outgrow the markets we choose to compete in, and to this end, we place a heavy emphasis on developing new products and applications that anticipate the customers needs. Today we spend almost 4% of sales on R&D. Our target is to have 25% of sales from products introduced in the last five years, and I think we will soon be there. These products must come in ahead of and meet regulatory requirements,” he added.
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