AkzoNobel Industrial Coatings

Overview

It was a year of record earnings, achieved through a combination of strong revenue growth, acquisitions and margin management, which continued the momentum we picked up in the latter part of 2009. Both Coil and Packaging Coatings grew revenue at double digit levels and reached all-time sales records in all key regions. Unexpectedly steep raw material price increases posed a significant challenge towards the middle of 2011, but we successfully compensated for these through margin management and higher sales.

Analysis

We continued to recover well in Western Europe and North America and put in a strong performance in several high growth regions, particularly China. Most of the growth came through our Packaging and Coil Coatings businesses. Packaging in particular achieved solid results and gained market share in the beer and beverage segment, while Coil benefited from construction activity in Asia, Russia and Turkey and pockets of investment in North America. This highlighted the underlying strength of our core markets in metal packaging and steel coil coating. Specialty Plastics was essentially flat, due mainly to the impact of changes in end product mix in the wireless and IT segments, although the business had a good year in the automotive sector. We were able to pass on the bulk of the raw material price rises and we also offset their impact through higher revenue.

Highlights

Our acquisitions of Schramm Holding AG and the coatings activities operated by Schramm’s largest shareholder, Korean company SSCP, were important deals. They not only gave us a global market leadership position in specialty plastic coatings, but also added key technologies, an excellent customer mix and brought recognized talent into our business, particularly in Asia. We now have a direct position in the Korean supply chain for plastics for consumer electronics and automotive components, and have reinforced our position in the automotive interior sector in Germany and China. The Korean mobile phone market is particularly exciting and we now have excellent capabilities to supply what is a dynamic, high profile industry. During 2011, we also completed the integration of the Lindgens Metal Decorating Coatings and Inks business acquired in 2010. Safety remained a priority and more than half our factories had an injury-free year, but we remain fully committed to achieving zero injuries.

Developments

We are already a leading supplier of soft-feel liquid coating technology to the automotive and consumer electronics markets, but during 2011 we launched a solvent-free, soft-touch paint film for the consumer electronics sector. Good progress was also made on the use of our EvCote technology – based on R-PET and introduced into the paper packaging market in 2010 – where the prospects in quick serve restaurant packaging are encouraging. In a joint partnership with DSM, we are developing coatings using resins with significantly improved carbon footprint. Elsewhere, we inaugurated our new production facility in Bangalore, India, for coil coatings and specialty plastics, while in Russia we further invested in our Lipetsk plant to support our continued growth in the country’s coil coatings markets. We also expanded our Songjiang R&D campus in China to include development of coatings for the unique requirements posed by the local mid-tier coil and extrusion segments. In Damman, Saudi Arabia, we invested in local manufacturing for packaging coatings to support markets in the Middle East.