AMSTERDAM, The Netherlands - Akzo Nobel N.V., Amsterdam, The Netherlands, announced its fourth-quarter and full-year 2012 results. Revenue for the year was up five percent driven by favorable currencies and pricing, while offset by a decline in volumes. EBITDA for the year was four percent higher at EUR 1,901 million (2011: EUR 1,834 million), helped by the company’s performance improvement program, which contributed EUR 276 million to EBITDA. As a consequence of the impairment charge of EUR 2,106 million in the third quarter related to the company’s Decorative Paints division, AkzoNobel recorded a full-year operating loss of EUR 1,244 million. Excluding this impairment charge, operating income was EUR 862 million positive (2011: EUR 1,145 million).
Decorative Paints was impacted by weaker demand in the European markets. Specialty Chemicals delivered a robust performance, despite weaker demand in the second half of the year. Performance Coatings recorded a strong performance, driven by margin management and operational efficiency actions, despite weaker volumes overall.
On December 14, 2012, AkzoNobel announced the sale of Decorative Paints North America to PPG. On December 28, 2012, the company completed the sale of Chemicals Pakistan, which was subsequently deconsolidated. In early 2012, AkzoNobel acquired Boxing Oleochemicals in Specialty Chemicals - a supplier of nitrile amines and derivatives in China and throughout Asia. The Schramm/SSCP acquisition accounted for the positive acquisition effect in Performance Coatings as these activities were consolidated from the fourth quarter of 2011.
The company announced a new strategy and financial targets. The strategy will build on the company’s leading market positions in mature and high-growth markets to achieve new financial targets. It 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 the new strategy, 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."
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 the company more responsive to market developments. The company's focus on end-user segments will also allow for further growth in both mature and high-growth markets. High-growth markets already account for 44 percent of revenue - a percentage that is expected to grow further in the years ahead.
AkzoNobel's drive for operational excellence and performance improvement is supported by its sustainability and innovation strategy, which focuses on creating value with fewer resources. The company has defined the following sustainability ambitions: in 2020, AkzoNobel's downstream eco-premium products will account for 20 percent of revenue and carbon emissions will be reduced by 25 to 30 percent per ton of product by 2020 (base 2012).
Since the announcement of its performance improvement program in October 2011, AkzoNobel has delivered structural EBITDA gains of EUR 250 million, while one-off costs amounted to EUR 292 million. (Gains and costs are excluding North America Decorative Paints.) The company will accelerate the program and expects to achieve the full EBITDA benefit of EUR 500 million in 2013, with associated costs estimated at EUR 205 million.
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. Targets include: return on sales, defined as operating income divided by revenue, is targeted at 9 percent by the end of 2015; return on investment target of 14 percent by the end of 2015; and net debt/EBITDA of less than 2.0 times by the end of 2015.
Based on the market environment and the leading indicators in its end-user segments, the company is assuming sales growth (CAGR) of around four percent per annum between 2012 and 2015.
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.
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.