2017 performance
Paints and Coatings
Return on sales (ROS)
We use return on sales (ROS) as a performance indicator to reflect profitability relative to revenue. ROS as a financial guidance aims to focus management on delivery and quality of profits. ROS is defined as EBIT as percentage of revenue.
- Focus on growth is delivering, with volume up
- Positive impact of continuous improvement and cost control
- Various measures to mitigate current market challenges, including increased selling prices and cost discipline, continue to be implemented
2020 guidance*
15%
Return on sales (ROS) development
EBIT as % of revenue
2016 is represented to present the Specialty Chemicals business as discontinued operations.
* Excluding unallocated corporate center costs; assumes no significant market disruption.
Return on investment (ROI)
We use return on investment (ROI) as a performance indicator to reflect profit relative to invested capital. ROI as a financial guidance aims to focus management on delivering value through returns in excess of our cost of capital. ROI is defined as EBIT of the last 12 months as percentage of average invested capital.
- EBIT was impacted by higher raw material costs, partly offset by increased selling prices, continuous improvement and cost control
- Average invested capital of the Paints and Coatings organization increased slightly to €6.5 billion
2020 guidance** >25%
Return on investment (ROI) development
EBIT/average invested capital in %
2016 is represented to present the Specialty Chemicals business as discontinued operations.
** Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption.
Specialty Chemicals
Return on sales (ROS)
Profitability increased, with higher volume and cost savings more than compensating for raw material price inflation and adverse currencies.
2020 guidance*** 16%
Return on sales (ROS) development
EBIT/average invested capital in %
Return on investment (ROI)
2020 guidance*** >20%
Return on investment (ROI) development
EBIT/average invested capital in %
*** Based on reported figures, excluding unallocated corporate costs and other carve-out adjustments which are expected to lead to downward adjustments of ROS and ROI. Exchange rates from April 2017.
Eco-premium solutions
During 2017, sales of eco-premium solutions with customer benefits totaled 20% of our revenue. We aim to maintain eco-premium solutions at a sustainable 20% of revenue through 2020 by constantly innovating.
The eco-premium portfolio is dynamic, as some solutions have stopped being classified as eco-premium due to competitive offerings having caught up. At the same time, new solutions have been introduced to the portfolio.
Another 21% of our products met the eco-performer criteria in 2017, having clear sustainability features and being at least as good as mainstream alternatives.
Target 20%
Eco-premium solutions with customer benefits
in % of revenue
Cradle-to-grave carbon footprint
In 2017, cradle-to-grave carbon footprint per ton of sales further reduced to 7% below the 2012 baseline.
Climate change risks and opportunities are assessed via our risk management process, aligned with recommendations of the Financial Stability Board (FSB) Task Force on Climate-related Financial Disclosures (TCFD). We manage potential business risk of a regulated price on carbon, leading to higher raw material costs, by working with suppliers to manage their carbon footprint, embedding carbon information at raw material level in formulating systems and adopting an internal carbon price in investment proposals (see Notes 5 and 6 of the Sustainability statements).
We also set a value chain carbon reduction target and committed to carbon neutrality by 2050. We are capitalizing on increased demand for low carbon solutions and shifting our portfolio to low VOC water-based paint.
Target 25-30%
Cradle-to-grave carbon footprint
% reduction CO2(e) per ton of sales from 2012
Resource Efficiency Index (REI)
The Resource Efficiency Index measures gross margin over carbon footprint, charting our long-term drive for margin growth decoupled from resource constraints.
In 2017, our volume grew in all areas. We also integrated an industrial coatings business acquired from BASF. As a result, our carbon footprint increased slightly, even though our emissions per ton of product went down. Combined with a lower gross margin, the Resource Efficiency Index equaled 106, compared with the 2012 baseline of 100.
Resource Efficiency Index
gross margin/CO2(e) indexed
*Including discontinued operations.
For more details on our sustainability performance, please refer to the Sustainability statements.
This is a key profitability measure and is calculated as EBIT as a percentage of revenue.
EBIT is operating income excluding identified items.
Total assets (excluding cash and cash equivalents, investments in associates, the receivable from pension funds in an asset position, assets held for sale) less current income tax payable, deferred tax liabilities and trade and other payables.
This is a key profitability measure and is calculated as EBIT as a percentage of average invested capital.
EBIT is operating income excluding identified items.
The carbon footprint of a product is the total amount of greenhouse gas (GHG) emissions caused during a defined period, of the product lifecycle. It is expressed in terms of the amount of carbon dioxide equivalents CO2(e) emitted.
Volatile organic compounds.
Resource Efficiency Index is gross margin divided by cradle-to-grave carbon footprint. The index measures value created from use of raw materials and energy.