AkzoNobel Wood Finishes and Adhesives

Overview

It was a challenging year of stark contrasts. On the one hand we identified new opportunities in the world’s high growth regions, while on the other we faced uncertainly stemming from the ongoing economic decline in the more mature markets. Lack of consumer confidence and weak housing markets adversely affected our business and rapidly increasing raw material prices caused an additional strain. Through a combination of stringent price increases and cost control methodologies, we were able to optimize revenue and profit outcomes for the year.

Analysis

Our activities are closely linked to the world’s housing markets and historically a significant segment of our business has been dependent upon the mature, developed parts of the world, such as Western Europe and North America. Those economies were essentially flat during 2011, and with raw material prices increasing dramatically, we faced extremely challenging business conditions. This situation prompted decisive action to cut costs through headcount reduction and rationalization projects. Margin management was attained through price increases in a very difficult commercial environment on a global basis. However, we did achieve growth in the high growth regions of Eastern Europe, Latin America and parts of Asia in both our Finishes and Adhesives businesses.

Highlights

Despite unfavorable market conditions, we continue to align ourselves for accelerated growth. In Asia, for example, we are investing in strengthening and expanding our local teams focused on driving growth in the domestic industrial wood segments. They have made rapid progress in launching into new domestic markets in Asia and are starting to supply a core range of products. We also teamed up with our Decorative Paints business in India to take advantage of their extensive distribution network to break into the country’s industrial wood market. Another significant development was the start-up of our new plant in Vietnam, which supports our growth strategy in the Asian export and domestic markets. We’ve identified a number of new business opportunities and have already developed a new range of products for this region. In Eastern Europe, we continue to expand our business with large OEM customers while increasing our distribution channels for the custom workshop sector. Despite the difficult economic environment, we’re very confident that these additional activities will provide us with a platform for accelerated growth moving forward.

Developments

The key focus of our business is to successfully grow with large OEM customer groups and drive further market penetration into the custom workshop market by providing value-added products, services and solutions delivered locally to our chosen customer base. This focused approach led to a number of exciting developments during 2011, including new sustainable waterborne and UV cure products. Among a series of product launches, we introduced VOC compliant coatings into our European and North American distribution lines, while our Adhesives business launched several new product ranges, including the GripLine system for wood construction and the LignuLine system for interior components. These developments are focused on improving and enhancing the sustainability and competitiveness of our customers, which in turn will contribute to a more sustainable AkzoNobel.