Werner pictured with senior management from the Specialty Chemicals businesses.
We achieved record results in 2017 and grew the business, despite currency headwinds and challenging conditions in some markets. Our solid track record of improving profitability, combined with a commitment to operational excellence and capturing long-term growth, mean we are in a strong position and ready to stand on our own feet as we separate from AkzoNobel in 2018.
In addition to our record financial performance, we also achieved the lowest safety incident rate in the history of AkzoNobel’s chemicals business. Over the last two years, we have reduced our incident rate by 58%.
With the foundations in place, we are now focusing on the next stage of value creation – organic growth. This gained traction in 2017, driven by increasing demand from our customers. To satisfy this growing demand, we approved a series of debottlenecking investments and expanded several sites in all our key regions.
For example, in China, we completed an expansion at our Boxing plant – significantly increasing Surface Chemistry’s regional product portfolio – and boosted production capacity for dicumyl peroxide (DCP) at our Ningbo multi-site by 40%. We then announced plans to further increase DCP capacity in Ningbo by another 50% by Q3 in 2018. In North America, capacity for sodium hydrosulfide was increased in LeMoyne (US) to meet growing customer demand, while in Los Reyes (Mexico), we inaugurated a capacity expansion for the production of organic peroxides. Over in Brazil, we completed the expansion of the Chemical Island at the Fibria Três Lagoas site, which is now the largest single pulp mill in the world.
Meanwhile, construction of a new membrane technology plant in Germany was completed for the production of potassium hydroxide, chlorine and hydrogen – in a joint arrangement with Evonik – while in Spain, our Sal Vesta joint arrangement opened up new markets in the Mediterranean following the opening of a new packaging facility in Súria. We also broke ground at several locations, including a world-scale plant for monochloroacetic acid (MCA) in Gujarat, India (as part of a joint arrangement with chemical company Atul), and at our Kvantorp plant in Sweden (as part of a project to expand production capacity for chelated micronutrients). This activity throughout the year shows that we are investing all over the world and are continuing to satisfy the requirements of our customers.
Organic growth is also being stimulated through the introduction of new products and technologies. I’m particularly excited by the work being done in our Ethylene and Sulfur Derivatives business to develop a novel technology platform for the production of ethylene amines and their derivatives from ethylene oxide. In addition, a partnership with Itaconix was announced to develop innovative, bio-based chelates for use in cleaning markets. I was also very pleased to see our first Imagine Chemistry innovation challenge prove to be such a big success. We received more than 200 entries and selected ten worthy winners for a variety of collaboration agreements. We have high hopes for the second edition, which is being staged in Sweden in mid-2018.
Looking briefly at how each business performed, Industrial Chemicals had a strong year, with high capacity utilization and good margins, while Pulp and Performance Chemicals also had an excellent 2017 and captured healthy growth opportunities. Ethylene and Sulfur Derivatives and Polymer Chemistry benefited from robust demand, and Surface Chemistry had a satisfactory year, after being held back by lower activity with regard to shale gas-driven drilling and oil and gas exploration. Fortunately, our sites suffered no significant damage due to Hurriance Harvey in the US, although in Q3 there were disruptions to the manufacturing and supply chain. Our employees deserve credit for dealing with the challenges it posed in a positive way. In terms of continuous improvement, the efficiencies resulting from the AkzoNobel Leading Performance System (ALPS) ensured we delivered more from constrained assets.
From a sustainability perspective, we were pleased to make an important contribution to the company being ranked number one in the Chemicals industry on the Dow Jones Sustainability Index. We also received the European Chemical Industry Council (CEFIC) Responsible Care® Award in the Environment Responsibility category.
Our work in this area continued to gather pace in 2017 as we led an initiative with DSM, Google and Philips in the Netherlands to enable and source green power from the Bouwdokken wind park. We also teamed up with a bio-steam facility in Delfzijl to reduce annual CO2 emissions by around 100,000 tons. Our safety performance – which remains top of our agenda – continued to improve as well, as we move closer to our ambition of zero incidents.
Having announced the separation of the company into two focused businesses, along with new financial guidance, I am confident that Specialty Chemicals is well positioned to grow and prosper. We have a highly engaged workforce and we’re looking forward to a new future.
“We are in a strong position and ready to stand on our own feet”
CEO of Specialty Chemicals and member of the Executive Committee
We have defined three levels of safety incidents. The highest category – Level 3 – involves any loss of life; more than five severe injuries; environmental, asset or business damage totaling more than €25 million; inability to maintain business; or serious reputational damage to AkzoNobel stakeholders.
AkzoNobel Leading Performance System, a company-wide continuous improvement program.