Note 3: Operating income
EBIT (operating income excluding Incidentals)
In 2016, EBIT increased 3 percent to €1,502 million (2015: €1,462 million), reflecting the positive effects of volume growth, continuous improvement and lower costs.
- In Decorative Paints, EBIT increased 3 percent as a result of volume growth, continuous improvement and cost discipline, partly offset by currency impacts
- In Performance Coatings, EBIT decreased 4 percent driven by adverse currencies and price/mix effects and weakness in the marine and oil and gas industries, partly offset by continuous improvement
- In Specialty Chemicals, EBIT increased by 9 percent due to improved volumes and operational efficiencies
- EBIT in Corporate and other improved due to lower costs, driven by improvement programs and the implementation of the Global Business Services (GBS) model, and favorable one-time adjustments on legacy provisions, partly offset by higher restructuring expenses
Raw material prices were lower at the beginning of the year compared to the same period in 2015. In Q4, raw material costs were roughly flat versus the previous year, due to increases throughout the year. In most regions foreign currency effects adversely impacted raw material costs in local currencies.
Operating income
In 2016, operating income was positively impacted by Incidentals of €17 million, including adjustments to post-retirement benefit provisions, asset impairments and acquisition-related costs. The Incidentals impacted operating income of Decorative Paints by positive €9 million, Performance Coatings by negative €24 million and operating income in Corporate and other by positive €32 million.
In 2015, operating income was positively impacted by €111 million Incidentals. In Specialty Chemicals the book profit, net of related costs, of €31 million with respect to the divestment of the Paper Chemicals business was reported as Incidentals. Operating income in Corporate and other was impacted by Incidentals, including a recovery related to the 2014 fraud case (€42 million) and several adjustments to provisions, mainly for post-retirement benefits and legacy items.
in € millions |
Employee benefits |
Amor- |
Depre- |
Purchases |
Total |
Cost of sales |
(1,004) |
(7) |
(361) |
(7,412) |
(8,784) |
Selling expenses |
(1,022) |
(97) |
(74) |
(1,828) |
(3,021) |
General and administrative expenses |
(564) |
(28) |
(35) |
(618) |
(1,245) |
Research and development expenses |
(230) |
(7) |
(17) |
(93) |
(347) |
Other results |
92 |
– |
– |
19 |
111 |
Total |
(2,728) |
(139) |
(487) |
(9,932) |
(13,286) |
in € millions |
Employee benefits |
Amor- |
Depre- |
Purchases |
Total |
Cost of sales |
(1,014) |
(6) |
(365) |
(6,804) |
(8,189) |
Selling expenses |
(998) |
(88) |
(66) |
(1,795) |
(2,947) |
General and administrative expenses |
(532) |
(23) |
(33) |
(608) |
(1,196) |
Research and development expenses |
(241) |
(7) |
(18) |
(97) |
(363) |
Other results |
103 |
– |
– |
(86) |
17 |
Total |
(2,682) |
(124) |
(482) |
(9,390) |
(12,678) |
EBIT is operating income excluding incidentals.
EBIT is operating income excluding incidentals.
Global Business Services, which covers functional support activities such as Human Resources, Finance and Information Management, as well as non-product related Procurement.
Operating income is defined in accordance with IFRS and includes the relevant incidentals.
Incidentals are special charges and benefits, results on acquisitions and divestments, major impairment charges and charges related to major legal, anti-trust and environmental cases.