media release

Solid upward trend continued, net income up 30% in first quarter

Pharma, Coatings, and Chemicals operating income up sharply , the Netherlands, April 25, 2000 – Akzo Nobel, (AEX: AKZ; NASDAQ: AKZOY) the multinational pharmaceuticals, coatings and chemicals company, delivered strong first-quarter results with net income at EUR219 million, up 30% on the corresponding period of the previous year.

Pharma, Coatings, and Chemicals operating income up sharply

Arnhem, the Netherlands, April 25, 2000 – Akzo Nobel, (AEX: AKZ; NASDAQ: AKZOY) the multinational pharmaceuticals, coatings and chemicals company, delivered strong first-quarter results with net income at EUR219 million, up 30% on the corresponding period of the previous year.

Highlights

  • Net income EUR219 million, up 30%
  • Net income per share EUR 0.77 (Q1 1999: EUR 0.59)
  • Net sales1 EUR3.3 billion, up 17%
  • Volumes up 6%
  • Operating income1 EUR392 million, up 28%
  • Margins clear increase to 11.8% (Q1 1999: 9.1%)
  • Pharma – boosted by growth and acquisitions
    EUR0.9 billion, up 43%
    income EUR171 million, up 37%
  • Coatings – good start to the year
    EUR1.3 billion, up 14%
    income2 EUR97 million, up 37%
  • Chemicals – best quarter ever
    EUR1.1 billion, up 15%
    income EUR126 million, up 33%
  • Interest coverage increased to 5.8

"At EUR3.3 billion, first-quarter sales, excluding Acordis, were up 17% on the first quarter of 1999. Net income, at EUR219 million, improved considerably–up 30%–with major earnings growth and margin improvements achieved in all three Groups. This confirms the upward trend we saw developing throughout last year. Margins from ongoing businesses improved from 10.8% to 11.8% and in consequence of our exit from fibers, our overall margin improved by a total of 2.7%, from the 1999 first quarter level." said Fritz Fröhlich, Akzo Nobel’s Chief Financial Officer.

Sales amounted to EUR3.3 billion, up 17% from the 1999 first quarter, excluding Acordis. Sales volumes were up 6%, with average selling prices up 2%. Acquisitions–principally Hoechst Roussel Vet (HR Vet)–and divestments on balance added 2%. Currency translations, mainly the US dollar, had a positive effect of 7% on all Groups.

First-quarter operating income surged 26% to EUR392 million. Return on sales was 11.8% against 9.1% in the first quarter of 1999, reflecting the Company’s less volatile and more growth-oriented business mix.

Pharma: continued internal growth, boosted by HR Vet acquisition
Net sales EUR0.9 billion (Q1 1999: EUR0.6 billion)
income EUR171 million (Q1 1999: EUR125 million)

  • Sales up 43%
  • Operating income up 37% (ROS a healthy 19.2%)
  • Organon: momentum continued

    - Pentasaccharides filing: aiming for second half 2000
    Xyvion™ : possible delay in launch

  • Intervet: integration HR Vet well advanced

Pharma’s operating income improved by 37%, to which all business units contributed. The human healthcare activities continued their excellent performance, actively pursuing the internal growth strategy by further expanding the sales force and R&D programs. Earnings growth of the animal healthcare activities was boosted by the acquisition of HR Vet.

"Organon continues its growth, led by the progress of Remeron® , Livial® and Puregon® . We continue to exploit our powerful R&Dpipeline, and are aiming to file our pentasaccharides dossier in Europe and the United States in the course of the second half of this year. Our discussions with the FDA on the labeling and introduction of Xyvion™ are ongoing, a launch delay is possible, and we will provide further information in due course. The integration of the HR Vet business with Intervet is well advanced and our leading position in animal healthcare continues to strengthen." said Mr.Fröhlich.

Coatings: good start to the year
Net sales EUR1.3 billion (Q1 1999: EUR1.2 billion)
income EUR97 million (Q1 1999: EUR84 million)

  • Sales2 up 14%
  • Operating income2 up 37% (ROS a promising 7.2%)
  • Strong take-off in Industrial activities
  • Excellent performance from Car Refinishes
  • Solid start in Decorative activities

Operating income from the continuing Coatings operations rose 37%. In particular, the industrial activities achieved major earnings growth, while Car Refinishes again turned in a record performance. Decorative Coatings had a strong start to the year.

"We continue to reap the benefits of being number one in coatings with margins moving further in the right direction. Virtually every aspect of the Coatings Group shows serious improvement in the first quarter, in line with our expectations" said Mr. Fröhlich.

Chemicals: best quarter ever
Net sales EUR1.1 billion (Q1 1999: EUR1.0 billion)
income EUR126 million (Q1 1999: EUR95 million)

  • Sales up 15%
  • Operating income up 33% (ROS a robust 11.1%)
  • Volumes up 4%, with selling prices up 3%
  • Strong performance from all businesses; Base Chemicals, Surface Chemistry, Functional Chemicals and Polymer Chemicals leading
  • Restructuring and ongoing portfolio management paying off
  • Improvement in bleaching chemicals North America

Chemicals’ operating income grew 33%, with return on sales improving to a solid 11.1%. Especially, Base Chemicals, Surface Chemistry, and Functional Chemicals achieved higher earnings. Polymer Chemicals continued its excellent performance, while bleaching chemicals did better in North America. Resins began to feel some pressure from increasing raw material prices.

"Strong growth in the Western economies and an apparent turnaround in the economic climate of most of Asia are enabling the Chemicals activities to reap the benefits of active portfolio realignment in pursuit of higher profit margins. This has resulted in a strong quarter--with volumes up 4% and selling prices up 3%--with all business units delivering near peak performance" said Mr. Fröhlich.

Interest coverage improved

Financing charges decreased to EUR68 million (1999: EUR70 million), due to the reduced debt level, partially offset by the effect of higher currency exchange rates. Interest coverage increased to 5.8.

Investment authorizations increased from EUR80 million in the first quarter of 19991 to EUR130 million in 2000, predominantly stemming from Pharma and Coatings. First-quarter expenditures for property, plant and equipment were EUR135 million, on a par with the 19991 level. Depreciation amounted to EUR155 million (19991: EUR140 million).

Outlook – double-digit growth

The Company expects to achieve double-digit growth for its full-year net income, albeit at a lower rate than in the first quarter. This forecast assumes that the present economic circumstances continue and excludes extraordinary and nonrecurring items.

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 EUR 12 billion (USD 13 billion, GBP 8 billion). In the beginning of 2000, the Company employed 68,000 people in 75 countries. Financial results for the second quarter of 2000 will be announced on July 26, 2000.

Excluding Acordis.
For the ongoing activities, excluding divestments (mainly Courtaulds Aerospace) and Resins, now part of Chemicals.

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