Financial highlights

Revenue

Half-year:

Revenue up in all Business Areas and 4% overall. Volumes up 2%, driven by Decorative Paints and Specialty Chemicals.

• In Decorative Paints, revenue was up driven by strong volume growth. Positive volume developments were partly offset by adverse price/mix. Volumes were up 6%, mainly driven by volume growth in Asia and Latin America. The favorable currency effect of the Brazilian real was offset by the negative impact of the pound sterling
• In Performance Coatings, revenue was up 4%, driven by the acquired Industrial Coatings business. Positive volume developments for Industrial and Powder Coatings were more than offset by continued weak demand for Marine and Protective Coatings. Excluding Marine and Protective Coatings, volumes were higher
• In Specialty Chemicals, revenue was up 6%, with growth in all business units and regions. Several businesses benefited from improved market conditions in the oil drilling, agrochemicals and building and construction segments. Strong growth in China was driven by our new organic peroxides plant in Ningbo and plant closures at our competitors, driven by an increased focus on the implementation of health, safety and environmental standards by the Chinese government

Q2:

Revenue was up 2%, mainly due to acquisitions. Volumes were flat.

• In Decorative Paints, revenue was down 1%. Positive volume developments were offset by adverse price/mix and currency effects. In China, significant growth in the premium and mass segment was realized
• In Performance Coatings, revenue was up 2%, driven by the acquired Industrial Coatings business as well as higher volumes in Industrial and Powder Coatings. Adverse conditions persisted in the marine and oil and gas industries
• In Specialty Chemicals, revenue was up 4% due to higher volumes in most business units and all regions, as well as positive price/mix effects. Volumes were up 2% with growth in all business units (except for Industrial Chemicals), and all regions, particularly the Americas and Asia. In Europe, volume growth was limited due to a planned maintenance turnaround in Industrial Chemicals. Positive price/mix reflects the successful pass through of raw material price inflation

Acquisitions

• On July 3, 2017, the acquisition of UK-based Flexcrete Technologies Ltd and an agreement to acquire French manufacturer Disa Technology (Disatech) were announced
• For the half-year and Q2 2017, the impact of the below acquisitions on revenue was 2% for AkzoNobel and 5% for Performance Coatings
• In Q4 2016, the acquisition of BASF’s Industrial Coatings business was completed
• In Q1 2016, the outstanding shares in Eko Peroxide LLC, a hydrogen peroxide joint venture, were acquired

Specialty Chemicals separation

On April 19, 2017, we unveiled a new strategy to create two focused, high-performing businesses with sustainable growth plans within 12 months. Having two separate businesses will enable us to deliver growth and value, with enhanced cash returns to shareholders. Project teams are in place and are progressing according to schedule.

Raw material price development

Raw material prices were higher compared with the same period in 2016. We are taking appropriate measures to deal with higher raw material prices in an inflationary environment. These measures were already effective for Specialty Chemicals, while for Decorative Paints and Performance Coatings it can take several quarters before the necessary mitigating impact is fully realized.

EBIT and operating income

Half-year:

• In Decorative Paints, EBIT and operating income increased 8%, mainly as a result of improved volumes and cost control
• In Performance Coatings, EBIT and operating income were down due to ongoing weakness in the marine and oil and gas industries. Excluding Marine and Protective Coatings, EBIT was up
• In Specialty Chemicals, EBIT and operating income increased 3% as a result of higher volumes, which were partly offset by raw material price increases not being fully recaptured yet through increased selling prices, and the impact of a planned maintenance turnaround in Industrial Chemicals
• In other activities, EBIT improved. Operating income was impacted by identified items. In 2016, operating income was positively impacted by an identified item of €23 million with respect to sale of assets. In 2017, operating income was negatively impacted by identified items totaling €20 million, mainly related to the implementation of the new strategy to create two focused high-performing businesses and legal and anti-trust related items

Q2:

• In Decorative Paints, EBIT and operating income were adversely impacted by higher raw material costs and price/mix effects
• In Performance Coatings, EBIT and operating income were impacted by ongoing weakness in the marine and oil and gas industries as well as increased costs of raw materials
• In Specialty Chemicals, EBIT and operating income were flat as strong volume developments in several business units and positive price/mix effects were offset by the impact of a planned maintenance turnaround in Industrial Chemicals, which impacted EBIT and operating income by around €13 million
• EBIT in other activities was in line as lower insurance related costs in Q2 2017 offset favorable one-time adjustments on legacy provisions in Q2 2016. Operating income was negatively impacted by identified items totaling €20 million, mainly related to the implementation of the new strategy to create two focused high-performing businesses and legal and anti-trust related items

Net financing expenses

Net financing expenses decreased slightly.

Tax

The year-to-date effective tax rate was 26% (2016: 27%), impacted by adjustments to previous years.

Net income

Year-to-date net income attributable to shareholders was €541 million (2016: €552 million). Net income attributable to shareholders in Q2 was €301 million (2016: €312 million). Q2 2017 was adversely impacted by identified items totaling €20 million, mainly related to the implementation of the new strategy to create two focused high-performing businesses and legal and anti-trust related items.