How we created value in 2021

By delivering more value to our customers, shareholders, employees and society in general, we can better accelerate profitability while positioning ourselves for growth.

  • Financials
  • People
  • Planet
  • Paint

Financial overview

Pricing up 7%. Revenue was 12% higher, and 14% higher in . Volumes were 7% higher, mainly due to the impact of the recovery from COVID-19 on end market demand.

was up 16% at €1,118 million (2020: €963 million). Significant price increases and volume increases contributed to offset raw material cost inflation and supply constraints. Operating income further includes net positive of €26 million, mainly related to gains from the Brazil ICMS case and UK pensions past service credit (see Note 4 in the Consolidated financial statements for more details). improved to 11.7% (2020: 11.3%). Adjusted operating income was 1% lower at €1,092 million (2020: €1,099 million). at 11.4% (2020: 12.9%).

Summary of financial outcomes*

in € millions

2020

2021

∆%

Revenue

8,530

9,587

12%

EBITDA*

1,324

1,469

11%

Adjusted EBITDA*

1,442

1,436

Operating income

963

1,118

16%

Identified items*

(136)

26

 

Adjusted operating income*

1,099

1,092

(1%)

OPI margin*

11.3

11.7

 

ROS*

12.9

11.4

 

 

 

 

 

Average invested capital*

6,834

6,829

 

ROI (%)*

16.1

16.0

 

 

 

 

 

Capital expenditures

258

288

 

Net debt

1,034

2,340

 

Leverage ratio (net debt/EBITDA)*

0.8

1.6

 

Number of employees

32,200

32,800

 

 

 

 

 

Net cash from operating activities

1,220

605

 

 

 

 

 

Net income attributable to shareholders

630

829

 

Weighted average number of shares (in millions)

191.4

185.0

 

Earnings per share from total operations (in €)

3.29

4.48

 

Adjusted earnings per share from continuing operations (in €)*

3.88

4.07

 

*

Alternative performance measures: Please refer to reconciliation to the most directly comparable IFRS measure in Note 4 of the Consolidated financial statements.

Business revenue

  • Decorative Paints pricing up 6%. Revenue up 12% and 13% higher in constant currencies. Volumes up 6%, mainly due to higher end market demand
  • Performance Coatings pricing up 8%. Revenue was 13% higher and 15% higher in constant currencies. Volumes were 8% higher, mainly due to end market demand recovery in all markets

Acquisitions

In March 2021, the acquisition of Titan Paints in Spain was completed, strenghtening our paints business and footprint in Spain. In June 2021, the intended acquisition of Colombia-based paints and coatings company Grupo Orbis was announced. The deal is expected to be completed in the first quarter of 2022.

Cost of sales

Raw material and other variable costs increased €769 million, adjusted for the impact of volume changes, compared with 2020. The increase was mainly driven by raw material inflation, which is expected to gradually ease by mid-2022.

Operating income and adjusted operating income

Operating income was up 16% at €1,118 million (2020: €963 million). Significant price increases and volume increases contributed to offset raw material cost inflation and supply constraints. further includes net positive identified items of €26 million, mainly related to gains from the Brazil ICMS case and UK pensions past service credit (refer to Note 4 in the Consolidated financial statements for further details), partly offset by transformation initiatives (2020: €136 million negative identified items, mainly relating to transformation initiatives). OPI margin improved to 11.7% (2020: 11.3%). Adjusted operating income was 1% lower at €1,092 million (2020: €1,099 million). ROS at 11.4% (2020: 12.9%).

  • Decorative Paints performance improved, mainly due to strong demand across all regions and one-off gains, with volumes up 6% compared with full-year 2020. OPI margin was up at 16.1% (2020: 15.5%). Adjusted operating income higher at €598 million (2020: €573 million) and ROS at 15.0% (2020: 16.1%)
  • Performance Coatings operating income decreased, mainly due to higher raw material prices. OPI margin at 11.6% (2020: 13.4%). Adjusted operating income at €648 million (2020: €700 million). ROS at 11.6% (2020: 14.1%)
  • Other activities improved €81 million to €172 million negative (2020: €253 million negative), mainly resulting from lower negative identified items

Net financing income and expenses

Net financing expenses decreased by €30 million, mainly due to one-off interest income from the Brazil ICMS case (see Note 4 in the Conslidated financial statements).

Revenue by destination

in %

Value creation – Revenue by destination (pie chart)

Based on full-year 2021.

Capital expenditures 2021:

total €288 million

Value creation – Capital expenditures (pie chart)

are expected to be around €300 million per year for the period 2022-23.

Revenue from third parties

in € millions

Value creation – Revenue from third parties (bar chart)

Innovation investment

research and development expenses in € millions

Value creation – Innovation investment (bar chart)

Research and development expenses expected to remain similar as % of revenue for the period 2022-23.

Income tax

The effective tax rate was 22.3% (2020: 26.2%). The decrease compared with the previous year is mainly related to the impact from the Brazil ICMS and UK ACT cases (refer to Note 4 in the Consolidated financial statements), in combination with a net re-recognition of deferred tax assets. All of these were booked as an . Excluding identified items, the effective tax rate in 2021 was 24.9% (2020: 25.6%).

Dividend

The dividend policy remains unchanged and is to pay a stable to rising dividend.

In 2021, an interim 2021 dividend of €0.44 per common share (2020: €0.43) was paid. A final 2021 dividend of €1.54 (2020: €1.52) per share is proposed, which would equal a total 2021 dividend of €1.98 (2020: €1.95).

Share buyback

On October 21, 2020, a €300 million share buyback program was announced, which was completed in 2021. On February 16, 2021, a €1 billion share buyback program was announced, which was completed in January 2022. This program started in April 2021. As at December 31, 2021, a total of 8.6 million shares had been acquired under this program, of which 5.9 million were cancelled.

Dividend in €

2019

2020

2021

1.90

1.95

1.981

1

Proposed

Earnings per share total operations in €

2019

2020

2021

2.53

3.29

4.48

Adjusted earnings per share from continuing operations in €

2019

2020

2021

3.10

3.88

4.07

Cash flows and net debt

Net cash from operating activities in 2021 resulted in an inflow of €605 million (2020: inflow of €1,220 million). This decrease in inflow was mainly driven by an outflow in relation to changes in working capital, changes in other provisions and income tax paid, partially offset by higher profit for the year.

At December 31, 2021, was €2,340 million versus €1,034 million at year-end 2020. The increase in net debt was mainly due to share buybacks (€1,135 million), dividend paid (€391 million) and capital expenditures (€288 million), offset by net cash generated from operating activities (€605 million). The net debt/ at December 31, 2021, was 1.6 (December 31, 2020: 0.8).

Invested capital

at December 31, 2021, totaled €7.1 billion, up €0.7 billion from year-end 2020. This increase was mainly caused by higher operating working capital (trade) and investments in non-current assets.

Sustainability progress

We’ve now set all our sustainability ambitions for 2025 and 2030 and are already making strong progress towards achieving them. This progress is highlighted in the People. Planet. Paint. charts in this section.

Employees

In 2021, the number of employees increased by 2% to 32,800 people (year-end 2020: 32,200 people). Acquisitions in 2021 added around 400 people.

COVID-19

The ongoing pandemic situation was closely monitored in 2021 and appropriate measures were taken to continue serving customers and control spend, while at the same time keeping the organization intact and able to respond quickly to changes in end market demand.

AkzoNobel has a strong balance sheet and solid cash position. At December 31, 2021, cash and cash equivalents were €1.2 billion and financial leverage (net debt/EBITDA) was 1.6. AkzoNobel is committed to retain a strong investment grade credit rating.

The ongoing pandemic situation was closely monitored in 2021 and appropriate measures were taken to continue serving our customers and control spend.

In 2021 and 2020, a detailed assessment was performed of potential valuation adjustments to the overall asset base, either due to the direct impact of COVID-19 or due to its impact on future profitability, which did not lead to significant valuation adjustments. Goodwill and intangible asset impairment tests in both years have been performed based on adjusted forecasts. Recoverability of deferred tax assets has also been reassessed based on these adjusted forecasts. Furthermore, an assessment was performed with regard to the allowance for impairment of trade receivables, also taking into account potential additional risk associated with COVID-19.

The impact of the pandemic on the Consolidated financial statements has been considered for each of the relevant notes, and additional disclosures have been provided in case COVID-19 had a material impact on a specific section. Refer to the Consolidated financial statements for further details.

In our 2021 and 2020 figures, all COVID-19 related impacts have been treated as normal operations; none of these impacts has been included in identified items.

Employee benefit costs in 2020 included €33 million compensation related to government support measures for COVID-19. For 2021, this number is not material.

Outlook

AkzoNobel targets to grow at or above its , in line with its Grow & Deliver strategy. Trends differ per region and segment, while raw material cost inflation and supply constraints are expected to gradually ease by mid-2022. Plans are in place to deliver the €2 billion target for 2023, and an average annual 50 basis points increase in over the period 2021-2023. AkzoNobel targets a leverage ratio of 1-2 times /EBITDA and commits to retain a strong investment grade credit rating.

Organizational health score

(OHI)

Value creation – People – Organizational health score (bar chart)

Total reportable injury rate

()

Value creation – People – Total reportable injury rate (bar chart)

Numbers include AkzoNobel employees and temporary workers.

Female executives

in %

Value creation – People – Female executives (bar chart)

For more details about our “People” performance, see the Sustainability statements.

Carbon reduction own operations

in %

Value creation – Planet – Carbon reduction own operations (bar chart)

Renewable electricity

(own operations) in %

Value creation – Planet – Renewable electricity (bar chart)

Circular waste

in %

Value creation – Planet – Circular waste in (bar chart)

For more details about our “Planet” performance, see the Sustainability statements.

Sustainable solutions

in % of revenue

Value creation – Paint – Sustainable solutions solutions (bar chart)

For more details about our “Paint” performance, see the Sustainability statements.

Constant currencies

Calculations exclude the impact of changes in foreign exchange rates.

Operating income

Operating income is defined in accordance with IFRS and includes the relevant identified items. Adjusted operating income excludes identified items.

Identified items

Identified items are special charges and benefits, results on acquisitions and divestments, major restructuring and impairment charges and charges related to major legal, environmental and tax cases.

OPI margin

Operating income as a percentage of revenue.

ROS (return on sales)

ROS is adjusted operating income as a percentage of revenue.

Operating income

Operating income is defined in accordance with IFRS and includes the relevant identified items. Adjusted operating income excludes identified items.

Capital expenditures

The total of investments in property, plant and equipment and investments in intangible assets.

Identified items

Identified items are special charges and benefits, results on acquisitions and divestments, major restructuring and impairment charges and charges related to major legal, environmental and tax cases.

Net debt

Defined as long-term borrowings plus short-term borrowings less cash, cash equivalents and short-term investments.

EBITDA

Operating income excluding depreciation and amortization.

Leverage ratio

Calculated as net debt divided by EBITDA, which is calculated as the total of the last 12 months.

Invested capital

Total assets (excluding cash and cash equivalents, short-term investments, 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.

Relevant markets

Segments and regions of the paints and coatings industry from which AkzoNobel generates revenue.

Adjusted EBITDA

Adjusted EBITDA is operating income excluding depreciation, amortization and identified items.

ROS (return on sales)

ROS is adjusted operating income as a percentage of revenue.

Net debt

Defined as long-term borrowings plus short-term borrowings less cash, cash equivalents and short-term investments.

Total reportable rate of injuries (TRR)

The number of injuries per 200,000 hours worked. Full definitions are in the Sustainability statements.