media release

Akzo Nobel: solid performance continued

Q3 Results: Double-digit growth Pharma -Coatings and Chemicals under pressure.

Double-digit growth Pharma – Coatings and Chemicals under pressure

Arnhem, the Netherlands, October 24, 2001 – Akzo Nobel (EURONEXT: AKZ; NASDAQ: AKZOY), the international pharmaceuticals, coatings and chemicals company, achieved third quarter net income of EUR 239 million (USD 213 million; GBP 148 million), 1% below last year’s record EUR 242 million. Total sales for the Company were on a par with previous year.
Fritz Fröhlich, Akzo Nobel’s CFO, commented: “I am pleased that the Company continued its solid performance, especially when you consider the generally depressed economic climate. Pharma led the Company with its continued strong double-digit earnings growth, but results of Coatings and Chemicals were under pressure. We are implementing our restructuring programs–announced in July–to structurally reduce costs in these areas.”

On Akzo Nobel’s outlook for the full year Fröhlich commented: “The slowdown of the economy has continued and is being further accelerated by the tragic events of September 11 and their aftermath. Nevertheless, we expect that net income1 will be only slightly below the level of our record year 2000.”

Pharma continued double-digit growth
The healthcare business of Akzo Nobel continued double-digit growth. “Pharma performed solidly once again,” Fröhlich said. “Organon, the human healthcare business, is developing impressively thanks to its strong focus. In the United States, the most important pharmaceutical market, sales were up 33% in the quarter. We are poised to launch several exciting products from our pipeline. NuvaRing®, an innovative new contraceptive in the form of a vaginal ring, was recently approved. Arixtra®, a new antithrombotic pentasaccharide, has received an approvable letter from the FDA. We also filed Ariza®, a new antidepressant drug, mid-May in the United States, which we expect to be available on the market from the second half of 2002. We started legal actions in the United States to safeguard the patent protection of Remeron®, our leading antidepressant drug. The introduction of Remeron® SolTabTM, the superior release formulation, is also on track.”

Fröhlich added: “Strong growth is also continuing at our animal healthcare business Intervet. Diosynth announced a further EUR 18 million capacity expansion at its main facility in Oss, the Netherlands, to meet the growing demand for complex biopharmaceutical ingredients in Europe and the United States.”

Coatings suffering from weak business climate
A weaker business climate affected the Coatings business during the third quarter, even though raw material prices have continued to come down. Fröhlich said: “We managed to keep sales on a par with last year despite the negative economic developments. Decorative Coatings is recovering in Europe, but still suffering from the impact of the economic situation in Turkey. The industrial activities were affected by the weaker economies in the United States and Europe.” Car Refinishes managed to maintain its attractive earnings level. Marine & Protective Coatings again achieved substantial growth in sales and earnings. Fröhlich: “We are continuing to expand in Asia as we see that region as the main long-term growth market for Coatings. A new production site was opened near Shanghai and construction of a new powder coatings plant in Beijing has started.”

Chemicals under pressure
The economic weakness affecting the United States and Europe impacted most Chemicals businesses. Regarding this, Fröhlich commented: “Sales for the third quarter were down 4% compared to last year. Pulp & Paper Chemicals as well as Salt registered a somewhat better performance. Catalysts started to benefit from earlier cost-reduction programs. Raw material prices are still at a high level, although the situation is improving in some areas.”

Restructuring on schedule
Fröhlich: “The restructuring programs we announced earlier this year are on schedule. We are confident of reducing cost levels over the next few years by well over EUR 100 million on an annual basis. The Company will reduce its workforce at some 30 sites worldwide by around 2,000 employees.”

Interim dividend unchanged – EUR 0.30
Akzo Nobel will declare an interim dividend for 2001 of EUR 0.30 per common share. Starting October 25, 2001, Akzo Nobel shares will trade ex-dividend. The interim dividend will be made payable on November 8, 2001.

Outlook
Commenting on Akzo Nobel’s full year outlook, Fritz Fröhlich said: “Akzo Nobel is delivering solid performance. The slowdown of the economy has continued and is being further accelerated by the tragic events of September 11 and their aftermath. Nevertheless, we expect that net income1 will be only slightly below the level of our record year 2000.”

1 Excluding extraordinary and nonrecurring items

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