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Resilient Mix of Businesses Protects Akzo Nobel Earnings

PRESSRELEASE: Akzo Nobel's 2001 annual results were just 1 per cent short of the record year 2000 figure thanks to a resilient mix of businesses.

Akzo Nobel's 2001 annual results were just 1 per cent short of the record year 2000 figure thanks to a resilient mix of businesses.

Net result1 EUR 938 million almost level with record year 2000

Arnhem, the Netherlands, February 22, 2002 – AkzoNobel, the international pharmaceuticals, coatings and chemicals company, reports net earnings1 of EUR938 million, 1% short of the year 2000 record of EUR 946 million. In presenting the report on the 4th quarter and the year 2001, AkzoNobel chairman and CEO Cees van Lede said: “AkzoNobel held steadyin a difficult global environment thanks to a resilient mix of businesses, as well as restructuring measures. Our Pharma group was able to once again close the year with double-digit growth figures. Coatings, as the world’s leading paint manufacturer, produced solid results despite a weak business climate. Chemicals has the highest sensitivity to the economic situation but, given the circumstances, turned in a good performance.”

The net result1 for the fourth quarter exceeded the previous year’s figure by 3%. Pharma’s and Coatings’ ongoing operations closed higher. Pharma especially benefited from higher sales, while for Coatings cost containment made a notable contribution. For Chemicals, quarterly sales and earnings continued to be depressed by the weak economy.

Pharma – another year of double-digit growth

For the full year, Akzo Nobel’s Pharma group showed continued double-digit growth. In Van Lede’s words: “In human healthcare, Organon’s promising pipeline is delivering a variety of innovative products, such as Remeron® SoltabTM, the new contraceptive NuvaRing®, and the next generation antithrombotic Arixtra®. In addition, our existing product lines are yielding a good performance; sales of Remeron®, for example, were more than 50% higher. We are defending Remeron’s position against anticipated generic competition by actively protecting our patent rights. This summer we’ll be relocating Organon’s International Headquarters to the United States, underscoring our successes to date and future ambitions in the world’s largest pharmaceuticals market. Intervet, the world’s number three animal healthcare player, closed the year on a record performance. Indeed, Intervet is now reaping the benefits from the successful integration of earlier acquisitions and is earning margins in line with our human healthcare business. Diosynth, producer of complex pharmaceutical ingredients, drew further strength from the acquisition of the CBSI biotechnology bridgehead in the United States. Next to certain strategic divestments, the overall level of investments to sustain the growth of the Pharma group was raised to more than twice the amount of depreciation.”

1 Excluding extraordinary and nonrecurring items and before change in accounting principles.

Coatings – solid performance despite weak economic climate

“In 2001, Coatings was confronted with a weakening of the economic climate,” Cees van Lede said. “Even so we managed to achieve a solid performance. The stepped-up restructuring programs announced in July have again been intensified in order to improve the cost structure and by the same token create a platform for more growth. In Europe and the United States these efforts will impact some 2,000 jobs. Elsewhere in the world there are opportunities for growth in promising markets, particularly in Asia. New investments made in the past year can be cited as evidence that we are making full use of such chances for expansion.”

Chemicals – under pressure

In 2001, the chemical industry was drawn into a recession spreading from the United States into Europe and Asia. Van Lede commented: “Under tough circumstances, Chemicals achieved a good performance. Margins were being squeezed by high feedstock and energy prices. We have identified further potential to strengthen the cost position of Chemicals and have moved to intensify previously announced restructuring efforts. All in all they involve some 1,500 jobs. These actions are preparing Chemicals to benefit immediately when economic growth resumes.”

Sound financials

In 2001, Akzo Nobel achieved a positive cash flow from operations of EUR 1,453 million (2000: EUR 1,367 million). Net interest-bearing borrowings were down EUR 233 million at year-end and gearing improved to 1.47 (was 1.65). “Akzo Nobel has a sound financial position, but we are not there yet.” Cees van Lede said. “As a result of our restructuring plans, we will structurally reduce our cost level over the next few years by some EUR 200 million annually.”

Outlook for 2002: results1 to exceed year 2000 record level

“Pharma’s strong earnings almost compensated the decline in Coatings’ and Chemicals’ results. However, the conditions in the world market for these two groups continue to call for determined efforts to improve cost structure and strengthen those businesses in order to position the Company to benefit from any economic revival. Against that background we expect a net income1 which exceeds the record year 2000.”

1 Excluding extraordinary and nonrecurring items.

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