AkzoNobel Industrial Chemicals

Overview

We had a very strong start to 2011, and although there was some slowdown in the final quarter, we were able to clearly outperform our 2010 revenue and results. Thanks to our market leadership positions in our key sectors, three of our four businesses achieved record results.

Analysis

We achieved top and bottom line growth, driven by our robust Salt, Chlor-Alkali and MCA activities, which more than compensated for the difficult conditions experienced by our Energy business – brought about by high gas prices. In terms of volumes, we were sold out until August, with occupation rates falling slightly during the final quarter due to somewhat softer demand, caused by a weak construction sector and overall market nervousness. We clearly benefited from our leadership positions in Europe for Salt and Chlor-Alkali and globally for MCA. The chloromethane business gained significant market share in Europe, we strengthened our caustic position and Salt benefited from a continuous flow of revenue from the secondary use of caverns. Good cost and margin management also contributed to our results, while we began to reap the benefits of recently implemented efficiency measures, such as MCA debottlenecking at Delfzijl and Taixing and last year’s Skoghall plant closure. The strong performance of the Chlor-Alkali business in Frankfurt – which we acquired in 2009 – was also important, along with the fact that we are at the beginning of the value chain, so we tend to feel less impact from raw material price increases.

Highlights

In June we announced a landmark €140 million investment at our Frankfurt site in Germany – the largest ever investment by AkzoNobel in Europe at a single site. The project involves switching our chlorine production from mercury to the very latest membrane electrolysis technology, as well as modernizing and significantly expanding the facility. Annual production of chlorine at the location is expected to increase to 250 kilotons, up from today’s 165 kilotons. It means that by the end of 2013, around 90 percent of Industrial Chemicals’ chlorine production will be based on membrane technology, which is 30 percent less energy intensive than current mercury technology. So it represents a huge step in terms of improving our eco footprint. We also secured the first license for our sustainable degreasing technology for the protein processing industry (see case study Putting customers first), while our European market share for chemical transformation salt increased quite significantly thanks to the success of the mTA (meso-Tartrate) next generation anti-caking agent which we launched last year.

Developments

The Lean Six Sigma operational excellence methodology we introduced in 2010 became further embedded into the organization. The first phase has been completed and we now have around 50 Black Belts and Green Belts throughout the organization dedicated to ensuring a sustainable and successful efficiency drive. We are confident it will prove to be an extremely powerful tool. We also continued to develop new initiatives to improve our eco footprint and make our products more sustainable. CO₂ reduction is a crucial issue for us and we will continue to launch significant projects in the near future, such as increasing our share of heat consumption from waste incineration. Another important development was the process safety pilot in Delfzijl, which we will roll out to other risk relevant areas of our activities. We will also be working harder to improve our overall safety performance.