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View Annual Report Delivering Tomorrow’s Answers Today Today Answers Tomorrow’s Delivering Delivering Tomorrow’s Answers Today AkzoNobel 2008 Report AkzoNobel 2008 Report 2008 AkzoNobel www.akzonobel.com/report We’re the largest global paints and coatings company and a major producer of specialty chemicals. We supply industries worldwide with quality ingredients for life’s essentials. We think about the future, but act in the present. We’re passionate about developing sustainable answers for our customers. Based in Amsterdam, the Netherlands, we have 60,000 employees working in more than 80 countries – all committed to excellence and delivering Tomorrow’s Answers Today™. © 2009 Akzo Nobel N.V. All rights reserved. “Tomorrow’s Answers Today” is a trademark of Akzo Nobel N.V. 01452_040309 What’s inside The contents of the AkzoNobel 2008 Report 1 Overview 2 and strategy Operations Overview 2 AkzoNobel at a glance and business 4 Key figures 6 Key developments 8 AkzoNobel on the capital market performance 12 Year of integration Strategy and business review Segment performance 14 Chairman’s statement 36 Decorative Paints 18 Our Board of Management 52 Performance Coatings 20 Strategy 76 Specialty Chemicals 24 Report of the Board of Management 32 Report of the Supervisory Board 102 Sustainability framework 34 Our Supervisory Board 107 Art Foundation Realizing Tomorrow’s Answers Today 108 Research, Development & Innovation What’s inside I AkzoNobel 2008 Report 1 Financial statements 134 Consolidated statement of income 135 Consolidated balance sheet 136 Consolidated statement of cash flows 137 Consolidated statement of changes in equity 138 Segment information 139 Notes to the consolidated financial statements 116 Risk management 176 Company financial statements 122 Corporate governance 180 Other information 128 Remuneration report Summary 182 Financial summary 186 Financial calendar Sustainability facts and figures 188 2008 highlights 189 Managing our values 190 Key focus areas 2008 191 Integration through the value chain 192 Stakeholder engagement 193 Our social and environmental values 200 Reporting principles 201 2008 Performance summary 202 Assurance report Additional information 203 Index 204 Overview business cases 206 Glossary 207 Contact details 2 • Revenue up 1 percent to €15.4 billion • EBITDA before incidentals totaled €1,878 million • Net income from continuing operations before incidentals down 14 percent to €742 million • Dividend maintained at €1.80 per share • Severity of the deteriorating economy became apparent in Q4 AkzoNobel is proud to be one of the world’s leading industrial companies. Based in Amsterdam, the Netherlands, we make and supply a wide range of paints, coatings and specialty chemicals – 2008 revenue totaled €15.4 billion. In fact, we are the largest global paints and coatings company. As a major producer of specialty chemicals we supply industries worldwide with quality ingredients for life’s essentials. We think about the future, but act in the present. We’re passionate about introducing new ideas and developing sustainable answers for our customers. That’s why our 60,000 employees – who are based in more than 80 countries – are committed to excellence and delivering Tomorrow’s Answers Today. Geo-mix revenue by destination 24% 22% 23% Other European North countries America Sweden, Germany, UK, The Netherlands 19% Asia Pacific 8% 4% Latin America Other countries Overview and strategy I AkzoNobel at a glance I AkzoNobel 2008 Report 3 AkzoNobel Total revenue €15.4 billion 34% 37% 29% Decorative Performance Specialty Paints Coatings Chemicals • Revenue €5.1 billion • Revenue €4.5 billion • Revenue €5.7 billion E B IT D A• EBITDA• 1 €593 million EBITDA• 1 €546 million EBITDA• 1 €891 million • 24,000 employees • 21,000 employees • 13,300 employees D C G A F C A E 34%A 29% 37% B B D B C Decorative Paints Performance Coatings Specialty Chemicals IN % IN % IN % A Europe 54 A Industrial Activities 42 A Functional Chemicals 20 B Americas 32 B Marine and Protective Coatings 30 B Pulp and Paper Chemicals 17 C Asia 14 C Car Refinishes 20 C Industrial Chemicals 17 100 D Packaging Coatings 8 D National Starch 15 100 E Surface Chemistry 14 F Polymer Chemicals 9 G Chemicals Pakistan 8 100 1 Before incidentals. 4 These pages give an overview of our financial performance during 2008. The data provided includes revenue by destination and origin, key economic figures and information related to health, safety and environmental data. Employees by region Revenue by destination Revenue by origin NUMBER OF EMPLOYEES YEAR-END IN € MILLIONS IN € MILLIONS 2008 2008 2008 US and Canada 12,000 US and Canada 3,330 US and Canada 3,463 Latin America 4,800 Latin America 1,306 Latin America 1,103 China 6,300 China 1,054 China 968 Other Asian countries 7,800 Other Asian countries 1,866 Other Asian countries 1,682 The Netherlands 5,000 The Netherlands 867 The Netherlands 1,423 Germany 3,600 Germany 1,141 Germany 1,179 Sweden 3,800 Sweden 478 Sweden 1,457 UK 4,200 UK 1,093 UK 1,206 Other European countries 10,100 Other European countries 3,666 Other European countries 2,582 Other regions 2,400 Other regions 614 Other regions 352 Total 60,000 Total 15,415 Total 15,415 Overview and strategy I Key fi gures I AkzoNobel 2008 Report 5 Economic data IN € MILLIONS 2008 2007 PF 1 % Information on the statement of income before incidentals Revenue 15,415 15,255 1 EBITDA 1,878 2,011 (7) EBIT before fair value adjustments 1,416 1,520 (7) EBIT after fair value adjustments 1,266 1,344 (6) Net income from continuing operations before fair value adjustments 842 985 (15) Net income from continuing operations 742 859 (14) Earnings per share from continuing operations (in €) 3.00 3.11 (4) After incidentals Operating income/(loss) (626) 979 Impairment ICI intangibles, before taxes 1,275 – Net income/(loss) attributable to shareholders (1,086) 595 Cash fl ows and research and development Net cash from operating activities 91 643 3 Capital expenditures 534 543 (2) Research and development expenses 353 359 (2) Ratios in percent EBITDA margin (before incidentals) 12.2 13.2 Research and development expenses as percentage of revenue 2.3 2.4 Interest coverage (after incidentals) – 2 11.1 People, health, safety and environment Average number of employees during the year 61,300 61,700 4 Average revenue per employee (in thousands of €) 251 247 Volatile organic compound (VOC) emission to air (in metric kilotons) 4.0 4.9 Number of serious incidents 3 3 Total reportable rate of injuries (per million hours) 4.6 5.3 Total illness absence rate (in %) 2.2 2.2 1 Pro forma and unaudited. 2 Not meaningful as EBIT is a loss. 3 Not a pro forma number. 4 At year-end. 6 Q1 Q2 April May On-sale Portfolio strengthened Following the ICI acquisition, the The company strengthened its on-sale of part of the National Specialty Chemicals portfolio Starch business to Henkel was with two acquisitions. Pulp and completed. The £2.7 billion deal Paper Chemicals business, Eka January involved the divestment of the Chemicals, acquired Levasil, the former ICI’s Adhesives and silica sol business of Ger many’s Acquisition Electronic Materials activities. H.C. Starck Group. AkzoNobel AkzoNobel officially completed the €11.6 billion acquisition Polymer Chemicals agreed to pur- of Imperial Chemical Industries (ICI) and became the world’s New brand chase two organic peroxides largest decorative paints company. We launched our new corporate product lines from China’s Jiangsu brand, which included a brand QiangSheng. new set of company values, a powerful new logo and a commit- ment to delivering Tomorrow’s June Answers Today. Divestments Synergies upgrade In line with the commitment The estimated annual synergies package agreed in connection target resulting from the ICI acqui- with the acquisition of ICI, we sition was upgraded to €340 million, announced the sale of our Para a 20 percent increase on the and Crown Diamond decorative previously announced figure of paints brands in Canada to €280 million. General Paint Corp. In August, the sale of our Crown Paints decora- tive paints business in the UK and Ireland to Endless LLP was also agreed, along with the divestment of two Belgian brands to Rieu Investissements S.A. Overview and strategy I Key developments I AkzoNobel 2008 Report 7 Q3 Q4 August October China expansion Portfolio strengthened We expanded our presence in China with the opening of a new We strengthened our world-leading Marine and Protective Coatings €23 million facility for the manufacture and sale of protective coatings portfolio with the acquisition of the Enviroline business from Florida- in Suzhou, close to Shanghai. based Industrial Environmental Coatings Corporation. Enviroline is a specialist supplier of high performance, corrosion-resistant linings, pre- dominantly for the oil and gas industries, specializing in both new con- September struction and maintenance projects. New targets The company announced new financial targets, which included an November EBITDA margin of at least 14 percent by the end of 2011 and delivering 100 percent of the ICI synergies by 2010. New Indian plant AkzoNobel Industrial Finishes broke ground on a new coatings manu- Coatings investments facturing plant in India, signaling the company’s ambition to become one We revealed an investment of almost €50 million in our Performance of the country’s leading industrial players. The new facility, being built Coatings activities after agreeing two acquisitions to boost the com- near Bangalore, will produce coil and specialty plastic coatings. pany’s Car Refinishes and Industrial Finishes businesses. The two deals involved the purchase of durable paint and bright films manufacturer Soliant LLC and the global floor coatings business of Lord Corporation, both of which are based in the United States.
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