Akzo Nobel NV : AkzoNobel announces new strategy and financial targets
Leading market positions delivering leading performance
oAkzoNobel's vision is to deliver the full potential of its leading market
positions in mature and high-growth markets
oStrategy centers around customer focus, operational excellence and
oNew financial targets to be achieved by the end of 2015
oAcceleration of performance improvement program: full €500m EBITDA benefit
to be delivered one year early, in 2013
oFocus on four end-user segments: Buildings and Infrastructure,
Transportation, Industrial and Consumer Goods - increasing insight into
leading indicators, making the company more responsive to market
oSmaller executive leadership team; remuneration aligned with targets
AkzoNobel today announced a new strategy that will build on its leading market
positions in mature and high-growth markets to achieve new financial targets.
The strategy focuses on end-user segments, operational excellence and
sustainability and is summarized by the company's new vision: Leading market
positions delivering leading performance.
Commenting on AkzoNobel's new strategy and financial targets ahead of a
presentation to the investment community in London today, CEO Ton Büchner
explained: "AkzoNobel has leading market positions and brands in paints,
coatings and specialty chemicals. With our global scale and sustainability
leadership, we will focus our strategy on customer service and operational
excellence, creating value for all our stakeholders."
Delivering its full potential
To deliver its full potential, AkzoNobel has identified the following
strategic focus areas: care for the customer, reduction of product and process
complexity, cash and return on investment, embedded safety and sustainability,
and diverse and inclusive talent development.
AkzoNobel has company-wide core processes, which will support and drive the
strategic focus areas. These processes include: a more rigorous operational
control cycle to drive and monitor delivery of its targets, behaviour based
and process safety, talent management, innovation and procurement.
AkzoNobel has four key end-user segments that it sells into: Buildings and
Infrastructure, Transportation, Industrial and Consumer Goods. Better analysis
and understanding of the leading indicators of these segments will make
AkzoNobel more responsive to market developments.
AkzoNobel's focus on end-user segments will also allow for further growth in
both mature and high-growth markets. The company will build on its leadership
in high-growth markets, which already account for 44 percent of revenue - a
percentage that is expected to grow further in the years ahead.
Sustainability is business; business is sustainability
AkzoNobel's drive for operational excellence and performance improvement is
supported by its sustainability and innovation strategy focussed at: 'Creating
more value from fewer resources'.
AkzoNobel has defined the following sustainability ambitions:
oIn 2020, AkzoNobel's downstream eco-premium products will account for 20
percent of revenue
oCarbon emissions will be reduced by 25 to 30 percent per ton of product by
2020 (base 2012)
Acceleration of the performance improvement program
Since the announcement of the performance improvement program in October 2011,
AkzoNobel has delivered structural EBITDA gains of €250 million, while one-off
costs amounted to €292 million*. AkzoNobel will accelerate the program and
expects to achieve the full EBITDA benefit of €500 million, a year early, in
2013, with associated costs estimated at €205 million.
* Gains and costs are excluding North America Decorative Paints.
New financial targets
AkzoNobel's new financial targets are designed to drive operational
excellence, cash generation and accountability and demonstrate a clear focus
on creating value for shareholders.
oReturn on sales, defined as operating income divided by revenue, targeted
at 9 percent by the end of 2015.
oReturn on investment target of 14 percent by the end of 2015. This
reflects AkzoNobel's focus on delivering value through achieving returns
in excess of its cost of capital.
oNet debt / EBITDA less than 2.0 times by the end of 2015. This will give a
fuller measure of cash generation and not just one component.
Based on the market environment and the leading indicators in its end-user
segments - Buildings and Infrastructure, Transportation, Industrial and
Consumer Goods - AkzoNobel is assuming sales growth (CAGR) of around 4 percent
per annum between 2012 and 2015.
Financial implications and pensions
In order to increase accountability, incidental items such as restructuring
charges will now be included in EBITDA unless genuinely one-off and not
related to normal or ongoing business. Pro-forma data will be made publicly
available on the company website reflecting these and other restatements.
AkzoNobel's pension top-ups relate mainly to pension liabilities in the UK.
The actuarial funding deficit of the two main UK plans (ICI and CPS) is
estimated at €1.5billion to €2 billion. The recent CPS triennial actuarial
funding review has resulted in a reduction of top-up payments of €40 million
per annum, representing cumulative savings of €240 million over the remaining
six years of the agreed funding recovery plan. Combined with the earlier ICI
funding review, this represents total savings of €485 million over the next 6
Executive leadership alignment
Going forward AkzoNobel will have a smaller Executive Committee. Remuneration
of the top executives will be aligned with the new targets, with the new
short-term incentive bonus targets to include operating income, return on
investment and operating cash flow.
- - -
AkzoNobel is a leading global paints and coatings company and a major producer
of specialty chemicals. We supply industries and consumers worldwide with
innovative products and are passionate about developing sustainable answers
for our customers. Our portfolio includes well-known brands such as Dulux,
Sikkens, International and Eka. Headquartered in Amsterdam, the Netherlands,
we are consistently ranked as one of the leaders in the area of
sustainability. With operations in more than 80 countries, our 55,000 people
around the world are committed to excellence and delivering Tomorrow's Answers
Not for publication - for more information
Corporate Media Relations, tel. +31 20 502 78 33
Contact: Marcel van de Hoef
Corporate Investor Relations, tel. +31 20 502 7854
Contacts: Jonathan Atack and Sheryl Stokes
Pdf file AkzoNobel press release
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Source: Akzo Nobel NV via Thomson Reuters ONE
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