Performance Coatings

Building on the transformational changes completed in 2015 to structurally improve our profitability and operational performance, our focus became more customer and growth oriented in 2016, with good progress in driving innovation, sustainability and continuous improvement.

We launched several new technologies, stepped up the pace of our digital innovation and improved our safety record. We also completed the acquisition of BASF’s Industrial Coatings business, welcoming around 350 new colleagues who bring broad and valuable expertise to AkzoNobel.

Throughout 2016, we continued to invest in production facilities near our customers, especially in key emerging markets. In India, we inaugurated a first-of-its-kind specialty coatings facility in Uttar Pradesh to better serve customers in the consumer electronics, automotive and cosmetics industries. We also started construction in Thane, near Mumbai, on a new powder coatings plant, our second in India. Meanwhile, we are building a manufacturing facility in Thailand to support growth markets in South-East Asia across all of our businesses.

Towards the end of the year, we completed the acquisition of BASF’s Industrial Coatings business, which supplies a wide range of products to industries including construction, domestic appliances, wind energy and commercial transport. We are now able to offer new products and maintenance solutions for wind turbine blades and service a broader customer base. The acquisition also enables us to further expand our geographic reach in countries such as Japan, Russia and South Africa. Confirming our strategy of pursuing value generating acquisitions, it will add around €280 million of revenue for Performance Coatings in 2017 and help to strengthen our position as the leading global supplier of coil coatings.

Our innovation expertise and commitment to sustainability will play a key role in enabling us to achieve organic growth as we continue to help customers resolve their technical and environmental challenges. In 2016, examples included the launch of Aquasilk in China, a water-based wood coating for the furniture industry which reduces VOC emissions for our customers. China is also home to the company’s new technology center, which was inaugurated in Songjiang, Shanghai. This is the company’s largest research facility in the country, housing 150 scientists who support customers in all of our end-user segments.

Another key focus area for Performance Coatings is helping customers to become more profitable – as well as sustainable – through the introduction of products and services that reduce energy consumption. During 2016, our Vehicle Refinishes business developed new UV clear coat technology which enables car repair body shops to cut energy costs in the clear coat drying process by up to 80 percent. Another major launch saw our Marine Coatings business introduce Intersleek 1000, a new biocide-free fouling control coating which offers fuel and CO₂ savings of up to 6 percent – an important contribution to our vision of more sustainable shipping. In addition, Intertrac Vision, continued to be well received by customers. The digital tool predicts hull performance, enabling ship owners to control costs by choosing the right coatings technology. You can read more in Case studies.

Our carbon credits program also continued to do well during the year. The program rewards ship owners for converting to sustainable hull coatings, such as those available through our International brand. In October, a special ceremony was held when we presented the Grimaldi Group with the largest number of carbon credits (almost 110,000) awarded so far through the award-winning initiative. More than 50 vessels have enrolled in our program to date.

2016 marked the first full operational year after our extensive reorganizations, which we completed in 2015. The changes have now been fully embedded and have enabled us to run our businesses more effectively. Our new structure facilitates increased customer responsiveness, yielding improved levels of customer service and satisfaction, with on-time in-full delivery now at industry-leading levels. Our annual employee engagement survey showed an improvement to a record level from previous years, while we continued to further improve our safety performance, reducing our total reportable rate of injuries as we move towards our aim of zero injuries.

Our commitment to our customers and the delivery of our strategy enabled us to achieve a solid financial performance in 2016, effectively realizing a higher level of profitability and performance. We delivered at the higher end of our performance range, with ROS at 13.4 percent and ROI at 29.4 percent. This was achieved in a deteriorating market environment in some of the key sectors we serve. The oil and gas sector has been especially challenging, while a significant downturn in the global shipbuilding industry impacted our revenue. We have therefore taken decisive action to align our cost structures, demonstrating our new agility, which gives us resilience where we need it most in our Marine and Protective Coatings businesses.

Looking ahead, despite the expected headwinds in the market, we remain confident in our capability to deliver organic growth through our continued focus on commercial excellence and innovation to better serve our customers with essential color and protection.