New CEO at Akzo Nobel Spring Analyst Meeting
Arnhem, the Netherlands, May 15, 2003 – New CEO Hans Wijers talks about general Akzo Nobel issues, as well as presenting a Coatings update, during the company’s Spring Analyst Meeting in Amsterdam.
Wijers leaves no doubt about his priorities for the near future. “We have to fix Akzo Nobel’s pharmaceutical business first. This means a strict realignment of cost levels to lower sales volumes. The next step is to reassess the strategy of our human healthcare business Organon. “To create room to maneuver we have decided on a EUR 500 million divestment program. Don’t expect major moves today. We have further adjustments in preparation, and before the year-end I will give you an update. In the short-term we will improve the performance of all three groups Pharma, Coatings and Chemicals. In the long run we will keep all strategic options open.”
Like other companies, Akzo Nobel is facing a strong impact from the macro-economic situation, currencies and pensions. On top of that Organon has to deal with a lack of sales momentum. Wijers says: “This is a normal part of doing business in this high risk, high reward, environment. The flexibility we have shown in a period of stronger growth will now help us to reduce costs. We took some clear decisions about a roadmap to fix Pharma. A structural EUR 120 million cost-saving program has started and before year-end the number of Pharma employees will be reduced to under 21,000. We are continuously looking for alliances in R&D and marketing to share knowledge and costs and to exploit our sales force.”
Coatings “very attractive business”
calls Akzo Nobel’s world leading Coatings activities a very attractive business with a high upside. “We are committed to further growth, especially in the emerging markets. We have a number of strong brands and will use the benefits of scale especially in purchasing. Coatings is not a very capital intensive business, but we will certainly do everything to further improve capital productivity.”
Chemicals portfolio assessment in progress
“Chemicals has a broad portfolio where certain parts have a good potential for growth,” adds Wijers. “Operational results are fine if we compare them with our peers in the European chemical industry, but we can even improve further. A critical portfolio assessment is progressing well. We are concentrating on scope, performance and cash. We will divest selectively, creating more room to maneuver for the Company.”
Investing to protect vitality
“Uncertain times ask for conservative financing,” says Wijers. “We are very selective in making investment choices, in order to use funds for what is really necessary to protect the vitality of this company. There are always a lot of interesting acquisitions possible to invest in further growth, but Akzo Nobel’s credit rating has a high priority. A logical consequence is that we will divest first, before we invest in new growth opportunities. The priority now is an efficient and lean organization.”
Coatings determined to further improve No. 1 position
The Spring Analyst Meeting is mainly dedicated to Akzo Nobel's Coatings activities. Rudy van der Meer, Member of the Akzo Nobel Board of Management responsible for Coatings: “The aim of the Coatings Group remains undiminished, both to improve our performance and to continue to reinforce our worldwide number one position. In order to reach our target of 30% ROI, excluding pension costs, we must deliver on organic growth and selective acquisitions, continue to lower our cost base and improve our capital turnover.
“Our focus remains growing in emerging markets. In the last five years we have doubled our sales in emerging markets to EUR 1.5 billion and grown in Asia-Pacific from 4 to 12% of our total sales. Finally, in the field of innovation, we will continue to step up our R&D efforts in areas such as waterborne paints, high solids, powder coatings and UV cure.”
Decorative Coatings, aligning strategies with distributors
decorative coatings market is changing rapidly from a very local market to a regional market. “Akzo Nobel is in an outstandingly strong position to benefit from this development with a presence in virtually all corners of Western Europe and with leading positions in more and more of the potential new European Union countries,” says Stephanie Knowles, Head of Retail Europe for Decorative Coatings Europe. “We have a superior customer base with a strong network of distributors. We also have a very efficient logistical structure available to serve our customers, which is a major strength in a market where there is ongoing consolidation of large distributors moving over regions.”
the subject of branding, she comments: “Developing brand leadership positions via innovative and high-impact marketing to consumers, as well as aligning our strategies with distributors in strategic partnerships, is the essence of the Retail division of Decorative Coatings Europe. This formula has proven successful to date and we are going to take it to another level.”
Industrial Finishes, various stages of consolidation and cost reduction
Industrial Finishes continues to aggressively reduce costs in its mature market businesses, while boosting investments in growth technologies and geographic expansion. Industrial Finishes’ General Manager Bob Torba: “The largest plant consolidation and cost reduction program in our history is in various stages of completion. At the same time we are reaping the benefits of geographic growth investments at an all-time record pace. Our industry and the markets we serve continue to reshape and restructure. We have positioned ourselves to take full advantage of the resultant opportunities.”
Powder Coatings, successful transfer of production
For Powder Coatings, number one in the worldwide market, the economic conditions in Europe and the Americas are testing. General Manager of Powder Coatings Bill McPherson: “In our drive to improve performance in those markets, we will cease production at our Houston powder facility during May. Transfer of production to the sites acquired in 2002 in Monterrey, Mexico, and to the former Ferro sites in the United States, has been successful. We can now focus on improving our performance at these new sites through further productivity gains, and on building a stronger presence in the Americas. “We will also continue to increase our already strong presence in Asia. The Ferro acquisitions of 2002 in China and Korea are performing better than we had planned. Our new facility in Vietnam, officially opened in March, has been an outstanding success so far. We see many opportunities for further strengthening our positions throughout the region and will pursue those opportunities vigorously.”
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