Supervisory Board Chairman’s statement

In 2018, AkzoNobel moved on from the events of the previous year to build a new future as a focused paints and coatings company. It was a year of delivering on commitments and the implementation of the ongoing transformation.

Nils Smedegaard Andersen, Chairman of the Supervisory Board (photo)

Key to establishing this new future was the successful sale of the Specialty Chemicals business to The Carlyle Group and GIC, which was completed on October 1, 2018. The company also announced it would be returning an additional €5.5 billion to shareholders, following the payment of a special cash dividend of €1 billion as advance proceeds in December 2017. Together, this €6.5 billion represents the vast majority of the €7.5 billion net proceeds returned to shareholders, as promised.

AkzoNobel is now focused on becoming a true leader in the paints and coatings industry. The company’s Winning together: 15 by 20 strategy is gathering pace and progress is being made towards realizing 15% (excluding unallocated corporate center costs) by 2020. It’s an ambitious and challenging target, but improving profit margins is absolutely necessary to enable the company to invest in its markets and regain growth momentum. The Supervisory Board has been heavily involved in critically evaluating, advising and approving the ongoing transformation plans, underlined at both the 2018 Annual General Meeting and the Extraordinary General Meeting in November 2018.

The Executive Committee, led by Thierry Vanlancker, has had a very busy year completing the sale of Specialty Chemicals, while at the same time focusing on the transformation of the remaining paints and coatings company. The Supervisory Board has been impressed by the Executive Committee’s level of ambition and commitment to leading AkzoNobel to the forefront of the industry.

When reviewing the improvement initiatives that have already had an impact, it’s worth mentioning the pricing program. AkzoNobel showed industry leadership and demonstrated the required discipline and commitment to implement its value over volume strategy – which was necessary to compensate for the unprecedented increase in raw material costs that started back in 2017. Towards the end of 2018, the cost-saving programs also began to produce positive results. At the same time, the company continued to pay close attention to its core principles of safety, integrity and sustainability.

Doing business with integrity remains at the heart of AkzoNobel and the company will continue to focus on strengthening the robust compliance culture which runs throughout the organization. The Supervisory Board is actively involved, conducting regular performance and business reviews. The company’s strategy and targets for sustainability and safety have also been revised and we remain confident that by making this an explicit differentiator, AkzoNobel will continue to enhance its value proposition for employees and business partners.

During several meetings I had in Amsterdam and at various sites, it was evident that some employees are still digesting the events of 2017 and the divestment of the Specialty Chemicals business. It was therefore encouraging to see that the management team has identified increased engagement and collaboration as a key priority. To become a true leader in the industry, everyone needs to be motivated and feel empowered to play their role in the company’s development. It is a top priority for the Supervisory Board that during 2019, as we implement the changes necessary to re-establish our competitiveness and move closer towards our 2020 goals, we also engage the organization in defining and communicating our compelling vision for the long-term future of AkzoNobel.

Finally, I would like to thank the Supervisory Board, the Board of Management, the Executive Committee and all AkzoNobel employees around the world for their commitment and hard work during what was an historic year for the company.

Nils Smedegaard Andersen, Chairman of the Supervisory Board – signature (handwriting)

Amsterdam, February 12, 2019

Nils Smedegaard Andersen
Chairman of the Supervisory Board

ROS (return on sales)

This is a key profitability measure and is calculated as adjusted operating income as a percentage of revenue.