How we performed in 2018

Return on sales (ROS)1

We use as a performance indicator to reflect profitability relative to revenue. ROS as a financial guidance aims to focus management on delivery and quality of profits. ROS is defined as as percentage of revenue.

  • Revenue 4% lower, although up 1% in , with price/mix partly offset by lower volumes
  • Adjusted impacted by adverse currencies, higher raw material costs and lower volumes, not yet fully offset by positive price/mix and cost savings
  • Savings from continuous improvement of €165 million
  • Creating a fit-for-purpose organization fully delivered on the €110 million planned for 2018
  • Next step taken in our transformation to deliver a further €200 million cost savings by 2020

Target 15% by 2020

2018 progress 10.6%

Return on sales development

Adjusted operating income as % of revenue

Return on sales development (bar chart)

1 Excluding unallocated corporate center costs; assumes no significant market disruption.

Return on investment (ROI)2

We use as a performance indicator to reflect profit relative to . ROI as a financial guidance aims to focus management on delivering value through returns in excess of our cost of capital. ROI is defined as adjusted operating income of the last 12 months as percentage of average invested capital.

  • impacted by adverse currencies, higher raw material costs and lower volumes, not yet fully offset by positive price/mix and cost savings
  • Average invested capital decreased 2% to €6.3 billion

Target >25% by 2020

2018 progress 16.6%

Return on investment development

Adjusted operating income/average invested capital in %

Return on investment development (bar chart)

2 Excluding unallocated corporate center costs and ; assumes no significant market disruption.

Eco-premium solutions

We use to track our performance in creating shared value for our business, our customers and society. We aim to maintain at least 20% of revenue from eco-premium solutions by constantly innovating, based on insights into evolving environmental concerns and societal needs. Eco-premium solutions need to exceed the reference in each market in terms of sustainability performance. It is therefore a moving target, as the reference is constantly improving.

  • In 2018, total share of revenue from eco-premium solutions was 22%
  • Fast growth of low products in China and North Asia contributed to the improved performance
  • Around another 20% of revenue was from , which have clear sustainability benefits and are at least as good as mainstream alternatives, putting the total revenue of solutions with sustainable benefits at approximately 42%

Target 20%

2018 progress 22%

Eco-premium solutions with customer benefits

in % of revenue

Eco-premium solutions with customer benefits (bar chart)
ROS (return on sales)

This is a key profitability measure and is calculated as adjusted operating income as a percentage of revenue.

Adjusted operating income

Operating income excluding identified items.

Constant currencies

Calculations excluding the impact of changes in foreign exchange rates.

Operating income

Operating income is defined in accordance with IFRS and includes the identified items to the extent these relate to lines included in operating income.

ROI (return on investment)

This is a key profitability measure and is calculated as adjusted operating income as a percentage of 12 months average invested capital.

Invested capital

Total assets (excluding cash and cash equivalents, short-term investments, investments in associates, the receivable from pension funds in an asset position, assets held for sale) less current income tax payable, deferred tax liabilities and trade and other payables.

Adjusted operating income

Operating income excluding identified items.

Invested capital

Total assets (excluding cash and cash equivalents, short-term investments, investments in associates, the receivable from pension funds in an asset position, assets held for sale) less current income tax payable, deferred tax liabilities and trade and other payables.

Eco-premium solutions with customer benefits

A measure of the sustainability performance of our products. An eco-premium solution is significantly better than the offer in the market in at least one mainstream criterion (toxicity, energy use, use of natural resources/raw materials, emissions and waste, land use, risks, health and well-being), and not significantly worse in any other criteria. Downstream benefits include a tangible sustainability benefit for our customers.

VOC

Volatile organic compounds.

Eco-performer

An eco-performer is a solution offering clear sustainability benefits, but that is overall on a par with the mainstream offer in the market.