Performance Coatings strategy
In 2015, we delivered return on sales of 13.3 percent and return on investment of 29.4 percent, surpassing our expected 2015 outcomes of 12 percent and 25 percent, respectively. We are continuing to progress towards our vision of leading market positions delivering leading performance.
Our simplified organization model has been a significant enabler for performance improvement. We have now streamlined the organization into seven strategic market units (SMUs) operating in six defined regions. Management layers have also been reduced from an average of nine to six. This new set-up has already had a substantial impact in terms of cost reduction. Going forward, we expect the benefits to be much more comprehensive, resulting from higher levels of customer proximity and collaboration, more rapid decision-making and clearer lines of accountability.
Our three overarching performance initiatives have also contributed to profitability improvement, as explained elsewhere on this page. Given the scope of the change we are undergoing, we have established a dedicated transformation office to lead our change process.
Pursue differentiated growth strategies
Having completed our major restructuring activities, the next step in delivering our leading performance vision is to deliver profitable organic growth and continuous improvement. We are focusing and prioritizing our growth activities by pursuing differentiated growth strategies. In roughly half of our businesses, our strategy is to outgrow the market. These sectors, with examples of growth priorities, are listed below:
- Marine Coatings: Continuing to invest in fouling control, sustainable innovation and enhanced services
- Protective Coatings: Continuing to build our business beyond upstream oil and gas
- Powder Coatings: Continuing to take a segmented approach and look for opportunities to provide an integrated liquid and powder offering
In other parts of our Performance Coatings portfolio – where our position is often strong, but the headroom for growth more limited – we want to grow with our markets while driving operational excellence and controlling costs.
Drive overarching performance improvement initiatives
Reduce external spend
Procured raw materials make up a significant percentage of our Performance Coatings cost base, so appropriate management is a fundamental component of performance improvement in this Business Area.
Improve our operations
Although operations comprise a smaller percentage of our cost base, there is still room for improvement. Over the last few years, our focus has been on footprint optimization. Between 2012 and the end of 2015, we reduced the number of manufacturing plants from 102 to 87. During the same period, we have also commissioned new, state-of-the-art plants to respond to changes in geographic demand. Throughout this time of major changes, we have maintained our commitment to safety and have stabilized our performance.
We are now focusing on achieving operational excellence through continuous improvement, based on the AkzoNobel Leading Performance System (ALPS). A top priority is to further improve customer service and we are already seeing the benefits of this program.
Drive commercial excellence
The focus has been on salesforce efficiency and margin management to support our improvement in bottom line performance. Going forward, our common processes and tools are increasingly oriented towards salesforce effectiveness.
Deliver business-specific innovation plans
Continued success in Performance Coatings is fundamentally based on our ability to innovate. Our innovation program is aimed at developing products, services, processes and tools that address four strategic drivers:
- Customer operational efficiency (a higher production rate through product design or application process)
- Customer benefits in terms of sensory perception, substrate protection and coating functionality
- Global future trends such as sustainability, carbon footprint and scarcity of natural resources
- Internal AkzoNobel efficiency
These strategic drivers provide a framework for innovation across the whole Business Area, while we also work across AkzoNobel to optimize efficiency and effectiveness. There is an opportunity to leverage our scale by working across sectors.
Examples of innovations we have already introduced include:
- Intertrac Vision: A tool which accurately predicts the potential fuel and CO2 savings that fouling control can offer to the marine industry
- Interplan: A mobile-enabled survey tool which delivers corrosion information directly to customers of our protective coatings to help them predict their maintenance requirements
- Automatchic Vision: A lightweight device (the smallest of its kind) which provides a fast and reliable color match to bodyshops, saving time and paint consumption in the vehicle repair process
- We are well positioned for the continued global market conversion to high performance packaging coatings that avoid the use of bisphenol A-based epoxies, addressing a key consumer and customer demand
- We continue to deliver lower temperature curing for our powder coatings, which help to improve energy efficiency and reduce customer production costs, as well as improving finish effects
- In our Aerospace business, we continue to introduce products that provide our customers with increased productivity and resource efficiency. For example, we have recently introduced a basecoat/clear coat system. In addition to reducing drying time, this system also provides protection against weathering and fading
- Sikkens Autoclear UV: A new eco-premium solution within Vehicle Refinishes. Sikkens Autoclear UV is a UV curable high gloss clearcoat which meets the needs of the fast track/stationary repair trend and reduces energy consumption and material usage
- Interpon ReFlex: A reflective powder coating which increases the effective output of commercial lighting. Because the product is solvent-free (like all powder coatings), it has a lower environmental impact than competing materials used in the lighting market
- Chartek 8E: A new Chartek® passive fire protection product aimed at the offshore oil and gas industry. Chartek 8E provides a significant reduction in applied weight, addressing a key customer need
This is a key profitability measure and is calculated as operating income as a percentage of revenue.
This is a key profitability measure and is calculated as operating income as a percentage of average invested capital.
AkzoNobel Leading Performance System.
The carbon footprint of a product or organization is the total amount of greenhouse gas (GHG) emissions caused during a defined period, or across the total or part of a product lifecycle. It is expressed in terms of the amount of carbon dioxide equivalents CO2(e) emitted.
A measure of the eco-efficiency of our products. An eco-premium solution is significantly better than competing offers in the market in at least one eco-efficiency 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.