media release

Akzo Nobel - 2000: Building coherence, creating value

Following a thirty-year involvement in the fibers industry, Akzo Nobel completed the sale of Acordis, its Fibers Group, to CVC Capital partners by year-end 1999 as planned. Akzo Nobel holds 21 percent of the shares in the new Acordis.

Following a thirty-year involvement in the fibers industry, Akzo Nobel completed the sale of Acordis, its Fibers Group, to CVC Capital partners by year-end 1999 as planned. Akzo Nobel holds 21 percent of the shares in the new Acordis. In the same year, Akzo Nobel acquired Hoechst Roussel Vet and doubled its sales in animal healthcare, where it now occupies the number four position worldwide. The ultimate effect of these two transactions is a transfer of resources of some EUR 1 billion from Fibers to Pharma, fully in line with the company’s strategy of prioritizing growth in its pharmaceutical businesses.

“In consequence of our achievements in 1999, Akzo Nobel starts the new millennium in a totally new form. We have a significant position in healthcare – a leading player particularly in female healthcare, a world player in animal healthcare – the world’s largest Coatings company with a sound platform for further growth, and a number of leading positions in specialty chemicals delivering robust margins. All of these activities contribute substantially to operating income: Pharma by some 40 percent and Chemicals and Coatings each in the order of 25 to 30 percent,” said Mr. Van Lede.

The challenge to which the refocused company is now committed is that of increasing coherence internally – and in doing so, creating further value. A number of specific measures will be taken in this respect, among them the establishment of one single Decorative Coatings Business Unit in Europe in order to extract full value from the leading position Akzo Nobel has acquired on this continent. At the same time, Coatings and Chemicals operations will be aligned further in view of their similarities. This is particularly applicable to the areas of Industrial Coatings and Specialty and Functional Chemicals. As the logical consequence of this approach, the Business Unit Resins, which produces raw materials for several coatings products, will be transferred from Coatings to Chemicals.

“The company will also be better geared for a more stable and higher growth path. The divestment of Fibers and of most cyclical chemical activities – the latest was the sale of our 50 percent participation in Rovin – results in more stability. The consistent priority for high growth sectors such as Pharma, and high growth regions such as Asia, where we now have the former Courtaulds network, should contribute to this ambition,” said Mr. Van Lede. “We want to further align shareholders’ and employees’ interests. To this end, a pilot project on Economic Value Added (EVA) – a means to measure value creation – is under way in three Business Units with the intention to roll out the system Company-wide in 2001. EVA is believed to be a better tool to assess real capital productivity, taking into account the full cost of capital,” Mr. Van Lede said. “A second significant change is the switch from writing off the goodwill paid in acquisitions against equity to the practice of capitalizing and depreciating it over a period of maximum 20 years. This change brings our accounting practices more in line with our international competitors,” he added. “Finally, to bring the interests of employees and shareholders into coherence in the fullest possible sense, analyses are now being made on how to introduce ownership of the company on a broader scale – through employee share ownership schemes -- among the people who are Akzo Nobel,” he concluded.

Akzo Nobel, based in the Netherlands, serves customers throughout the world with healthcare products, coatings and chemicals. The company currently employs approximately 68,000 people in 75 countries. Consolidated sales for 1999, excluding Acordis, will total about EUR 12 billion / USD 13 billion / GBP 8 billion. Acordis, the former fibers business of Akzo Nobel, has been divested to CVC Capital Partners as of the end of 1999. The financial results for the year 1999 will be announced on February 25, 2000

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