media release

Q3 net income up 25%; upward trend continued

Akzo Nobel’s Pharma fuels growth , the Netherlands, October 25, 2000 – Akzo Nobel, (EURONEXT: AKZ; NASDAQ: AKZOY) the multinational pharmaceuticals, coatings and chemicals company, continued the upward trend with third-quarter net income up 25% to EUR 242 million (1999: EUR 193 million). Growth driver Pharma continued its strong contribution to Akzo Nobel’s best Q3 results ever. The full-year earnings growth of Akzo Nobel is expected to slightly exceed 20%.

Akzo Nobel’s Pharma fuels growth

Arnhem, the Netherlands, October 25, 2000 – Akzo Nobel, (EURONEXT: AKZ; NASDAQ: AKZOY) the multinational pharmaceuticals, coatings and chemicals company, continued the upward trend with third-quarter net income up 25% to EUR 242 million (1999: EUR 193 million). Growth driver Pharma continued its strong contribution to Akzo Nobel’s best Q3 results ever. The full-year earnings growth of Akzo Nobel is expected to slightly exceed 20%.

Financial Highlights Third Quarter

  • Net income up 25% to EUR 242 million – trend continued
  • Net income per share EUR 0.85 (1999: EUR 0.68)
  • Sales increase 16% to EUR 3,540 million
  • Operating income1 14% higher at EUR 417 million
  • Return on sales up to 11.8% from 9.6%
  • Interest coverage 6.2 (Q3 1999: 5.3)
  • Interim dividend EUR 0.30
  • Outlook: full-year net income growth expected to slightly exceed 20%

Business Highlights Third Quarter

  • Pharma – unbroken growth momentum
    • Sales up 36% to EUR951 million; operating income EUR187 million, surging 41%.
    • Pentasaccharides, a newly developed antithrombotic:
      – joint venture with Sanofi-Synthélabo for marketing and future development
      – EUR 45 million investment for U.S. manufacturing facilities
    • Acquisition of Bayer’s North American Animal Biologicals further strengthened Intervet’s worldwide leading position
  • Coatings – earnings maintained amid raw material price pressure and economic slowdown
    • Sales of ongoing business up 9% to EUR1,446 million; operating income up 3% to
      million
    • Acquisition of Dexter Coatings globalized Aerospace Coatings activities
  • Chemicals – sound performance
    • Sales increased 13% to EUR1,187 million, operating income up 10% to EUR107 million

1 Excluding Acordis

CFO Fritz Fröhlich: "Improved portfolio boosts growth and margin"

"We are clearly reaping the benefits of our improved portfolio mix which is boosting our growth and improving our margin. Pharma is fueling Akzo Nobel’s growth by contributing almost half of our operating profits. Our strategy is clearly working," said Fritz Fröhlich, Akzo Nobel’s Chief Financial Officer. "Coatings maintained last year’s earnings level amid pressure from increasing raw material prices and some economic slowdown. Chemicals continued its sound performance. For the full year we continue to expect double digit growth with net income expected to slightly exceed 20%."

Net income – upward trend continued

Third-quarter net income surged 25% to EUR242 million. Pharma and Chemicals particularly contributed to the improvement. Coatings maintained its earnings level amid pressure from increasing raw material prices and some economic slowdown. Net income per share was EUR0.85, against EUR0.68 in 1999.

Net income in the first nine months rose by 26% to EUR726 million. The per share amount of EUR2.54 compares with EUR2.02 in 1999.

Sales and earnings – spurred by Pharma

Spurred by the continuous growth of Pharma, sales2 in the third quarter rose 16% to EUR3.5 billion. Volumes were up 5%, with 1% higher average selling prices. Currency translations had a positive effect of 7%, while acquisitions and divestments, on balance, added 3%. Sales2 in the first nine months of 2000 aggregated EUR10.4 billion, up 16%.

Third-quarter operating income2 increased 14% to EUR417 million. The major contribution came from Pharma. Chemicals achieved a sound performance, while Coatings maintained its earnings level amid pressure from increasing raw material prices and some economic slowdown. Year-to-date operating income2 rose 21% to EUR1,269 million.

Return on sales in the third quarter improved from 9.6% to 11.8%. For January-September, this ratio went up from 9.7% to 12.2%.

Pharma – unbroken growth momentum

Pharma’s sales in the third quarter were up 36% to EUR951 million, with operating income surging 41% to EUR187 million.

Fritz Fröhlich said: "Akzo Nobel’s Pharma activities are booming. We are one of the fastest growing pharmaceutical companies. Both the human and animal healthcare operations are major growth engines. Synergies of the HR Vet acquisition are paying off faster than expected."

The human healthcare activities again achieved strong growth through the strength of the Company’s product portfolio. Sales were up 21% due to healthy growth for contraceptives, Remeron®, Puregon®, and Livial®. In the United States, sales grew a sound 36%.

2 Excluding Acordis

An agreement was reached with Sanofi-Synthélabo on a joint venture for the marketing and future development of pentasaccharides. Organon will invest EUR 45 million in U.S. manufacturing facilities for this antithrombotic.

Earnings of the animal healthcare activities more than doubled, due to strong volume growth and the integration of Hoechst Roussel Vet. The acquisition of Bayer’s Animal Biological business in North America further strengthened Intervet’s worldwide leading position.

Coatings – earnings maintained amid raw material price pressure and some economic slowdown

Coatings3 sales in the third quarter were up 9% to EUR1,446 million, operating income ongoing business up 3% to EUR135 million.

Fritz Fröhlich: "The coatings industry is experiencing some testing market conditions. Operating income was slightly above the previous year’s level, despite increasing pressure from higher raw material prices and some slowdown of the business climate. We are reaping the benefits of our worldwide No.1 coatings position."

Car Refinishes again delivered a strong performance. Marine & Protective Coatings, achieved higher earnings due to improved market conditions, especially in Asia. TheDecorative Coatings and Industrial Coatings activities experienced market pressure.

With the acquisition of Dexter’s coatings business Akzo Nobel is a global player in Aerospace Coatings.

Chemicals – sound performance

Chemicals achieved a solid sales increase of 13% to EUR1,187 million, with operating income up 10% to EUR107 million.

Fritz Fröhlich about Akzo Nobel’s chemicals business: "Akzo Nobel Chemicals continued its solid performance with earnings clearly up."

Catalysts’ results were up considerably, due to the improved capacity utilization in the petroleum refining industry. Base Chemicals achieved significantly higher earnings due to good market conditions for their key customers. The North American Bleaching Chemicals improved due to stronger volumes and prices. Several business units started to feel pressure from increasing raw material prices.

The acquisition of Hopton Technologies will strengthen our Paper Chemicals position in North America

3 For the ongoing business (excluding divestments, mainly PRC-DeSoto)

Interest coverage improved

Financing charges for the third quarter were slightly over the prior year level. The positive effect of the reduced debt level was more than offset by the impact of higher currency exchange and short-term interest rates. Interest coverage was 6.2 (1999: 5.3).

Higher earnings from nonconsolidated companies

Earnings from nonconsolidated companies strongly increased to EUR20 million from EUR11 million in the third quarter of 1999. Results of Flexsys and Methanor were up and Acordis also contributed.

Capital expenditures below depreciation

Capital expenditures for January-September 2000 aggregated EUR459 million, somewhat below depreciation. To facilitate future growth and further cost containment, investment authorizations rose to EUR595 million, predominantly for Pharma and Chemicals.

Interim dividend of EUR 0.30

Akzo Nobel will declare an interim dividend for 2000 of EUR0.30 per common share. Starting October 26, 2000, Akzo Nobel shares will be traded ex-dividend. The interim dividend will be made payable on November 13, 2000.

Full-year earnings growth expected to exceed 20%

Akzo Nobel expects that the growth of the full-year net income – excluding extraordinary and nonrecurring items – will slightly exceed 20%. This expectation assumes no major changes in economic growth and currencies.

Akzo Nobel, based in the Netherlands, serves customers throughout the world with healthcare products, coatings, and chemicals. Consolidated sales for 1999 (excluding Acordis) totaled some EUR12 billion (USD13 billion, GBP8 billion). Currently, the Company employes 68,000 people in 75countries. Financial results for the full year 2000 will be announced on February23, 2001.

A webcast of the press conference of Akzo Nobel’s third quarter results can be accessed via the homepage. Additional documentation on the third quarter results include our "Report for the 3rd Quarter", as well as the explanatory sheets used during the press conference. These can be obtained at: http://www.akzonobel.com/finance/index2.asp.

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