Key figures
AkzoNobel in 2017
Creating two focused, high performing businesses
- Separation of Specialty Chemicals on track for April 2018; Specialty Chemicals business now reported as discontinued operations
- Revenue, including discontinued operations, up 3% (up 4% excluding currency impact) at €14,575 million
- EBIT, including discontinued operations, up 2% to a record €1,525 million
- Operating income, including discontinued operations, at €1,396 million includes identified items of €129 million, mainly related to the transformation of AkzoNobel, including the separation of Specialty Chemicals
- 2020 financial guidance* reconfirmed: Paints and Coatings 15% ROS, ROI >25%; Specialty Chemicals 16% ROS, ROI >20%
- Net income attributable to shareholders at €832 million (2016: €970 million)
- Total dividend proposed for 2017 up 52% to €2.50 per share (2016: €1.65)
- Special cash dividend of €4.00 per share paid in December 2017 as advance proceeds related to the separation of Specialty Chemicals
- Net cash inflow from operating activities at €969 million (2016: €1,291 million)
* Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption.
Continuing operations Discontinued operations
Continuing operations Discontinued operations Total operations
As from December 22, 2017, the Specialty Chemicals business is classified as held for sale and discontinued operations, therefore the consolidated statement of income for 2017, and for 2016, have been represented to show the results of the Specialty Chemicals business as discontinued.
The Specialty Chemicals business consists of the Specialty Chemicals Business Area and certain other assets and liabilities and income and expenses, which are directly attributed to the Specialty Chemicals business from the Other activities.
In the rest of this Report 2017, all financial numbers refer to Paints and Coatings (unless otherwise stated).
Paints and Coatings
Revenue by destination
€9.6 billion revenue
€905 million EBIT
€1.76 earnings per share
150+ countries
35,700 employees
Decorative Paints
€3.9 billion
revenue
9.0%
ROS
€351 million
EBIT
12.5%
ROI
Performance Coatings
€5.8 billion
revenue
11.6%
ROS
€669 million
EBIT
23.4%
ROI
Specialty Chemicals
€5.0 billion
revenue
€689 million
EBIT
13.8%
ROS
19.1%
ROI
CEO statement
“As we forge ahead to build for the future and maximize the power of our brands, the company is sharpening its focus”
How AkzoNobel performed
Financial guidance
15%
Return on sales (ROS)1
Achieve return on sales (EBIT/revenue) of 15% by 2020
>25%
Return on investment (ROI)2
Achieve return on investment (EBIT/average invested capital) of more than 25% by 2020
The transformation of AkzoNobel into a focused Paints and Coatings company, including the separation of Specialty Chemicals, is progressing and the associated one-off costs are within expectations. Phase one of creating a fit-for-purpose Paints and Coatings organization (announced in October 2017) is on track to achieve €110 million savings in 2018, contributing directly towards delivering the 2020 financial guidance. Various measures to mitigate current market challenges, including increased selling prices and cost discipline, also continue to be implemented.
2017 progress
9.4%
13.9%
1 Excluding unallocated corporate center costs; assumes no significant market disruption.
2 Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption.
Sustainability targets (including discontinued operations)
20%
Eco-premium solutions
Maintain revenue from downstream eco-premium solutions of 20% of revenue by 2020
25-30%
Carbon emissions
Reduce our carbon emissions across the value chain by 25-30% per ton by 2020 (2012 base)
REI
Resource Efficiency Index
Monitor gross margin divided by carbon emissions across the value chain, as an indicator for resource efficiency
2017 progress
20%
7%
106
Q1
Opened new plant in China to strengthen our global position in powder coatings, led by our Interpon brand
Q1
Invested in a new £13 million innovation hub in the UK
Q1
Partnered with SOS Children’s Villages to fight youth unemployment with the power of paint
Q2
Held investor day in London to launch our new strategy
Q2
Opened a new coatings facility in Chonburi, Thailand
Q2
Partnered with The Ocean Cleanup together with our International brand for the largest clean-up in history
Q2
Double coatings acquisition of the UK’s Flexcrete Technologies and Disa Technology in France
Q3
Announced major expansion of organic peroxides capacity in China
Q3
Opened the world’s most advanced and sustainable paint factory in Ashington, the new center of production for Dulux in the UK
Q4
All our paints and coatings production in the Netherlands is now powered by green energy
Q4
Chemical Island in Brazil expanded to support growth of Fibria, the world’s leading producer of eucalyptus pulp
Q4
Agreed to acquire the business of V.Powdertech, the leading Thai manufacturer of powder coatings
How AkzoNobel created value
Input
€6.3 billion
group equity
€3.3 billion
borrowings
€270 million
research and development expenses
Organization
€9.6 billion
revenue
€905 million
EBIT
€250 million
capital expenditures
€6,045 million
invested capital at year-end
We invested in 2017 to keep our facilities in good shape and expand our manufacturing capability.
Revenue breakdown by Business Area
in %
Outcomes
€338 million
income tax paid
€1,187 million
dividend paid
9.4% ROS
13.9% ROI
20%
of revenue from eco-premium solutions with customer benefits, due to RD&I investments
* All economic data (excluding income tax paid, dividend paid and revenue from eco-premium solutions) relates to Paints and Coatings. All environmental and social data relates to the combined Paints and Coatings and Specialty Chemicals organization.
Input
45%
renewable energy
98,000 TJ
energy use
11%
renewable raw materials as % of organic materials
€0.6 billion
energy spend
9.7 million tons
upstream CO2(e) emissions
Organization
3.4 million tons
CO2(e) emissions own operations
31%
reduction in operational eco-efficiency footprint (since 2009)
137 kilotons
total waste own operations
Outcomes
11.5 million tons
downstream CO2(e) emissions
24.6 million tons
CO2(e) emissions cradle-to-grave
7%
improvement CO2(e) per ton of sales from 2012 cradle-to-grave carbon footprint
106 REI
in Resource Efficiency Index
Input
45,400
employees at year-end 2017
22,900
number of volunteers for Community Program projects (cumulative since 2005)
Organization
0.2
total reportable rate of injuries
(per 200,000 hours)
19%
female executives
5%
high potential turnover
Outcomes
2,636
Community Program projects (cumulative since 2005)
Our businesses
“We are creating a world-leading company which is well positioned to accelerate growth and enhance profitability”
Ruud Joosten
Chief Operating Officer and member of the Executive Committee
David Allen
Chief Supply Chain Officer and member of the Executive Committee
Strategy
Our focused strategy for Paints and Coatings is designed to accelerate growth and profitability. This means becoming the number one choice for customers.
9.0% ROS 12.5% ROI
How Decorative Paints created value
11.6% ROS 23.4% ROI
Inspiring our world with color
“We are in a strong position and ready to stand on our own feet”
Werner Fuhrmann
CEO of Specialty Chemicals and member of the Executive Committee
Strategy
Ready to unleash its full potential as a standalone company, the focus for Specialty Chemicals is on accelerating growth and creating value. Our strategy is focused on capturing profitable growth with our customers and continuing to deliver on targets and beyond with our continuous operational excellence drive. Post-separation, we will offer additional step-change growth opportunities to unlock further value.