� Annual Report 1980 i " I I I I [ I' I I I Z " Contents The annual meeting of stockholders will be held at the RAI Congress Center, Europaplein, Amsterdam, on Page Tuesday, May 12,1981, at 10 a.m. 2 Report of the supervisory council Agenda 3 Financial highlights Opening 4 Report of the board of management 2 Report of the board of management for the financial 4 General review year 1980 7 Financial review 13 Human resources 3 Approval of the financial statements and 13 Social developments consideration of the proposal, contained therein, to 15 Research and technology omit the dividend 17 Membranes 20 Man-made fibers 4 Appointment of members of the supervisory council 22 Chemical products 25 Coatings 5 Appointment of a member of the board of 26 Pharmaceuticals management 28 Consumer products 29 Miscellaneous products 6 Annual decision concerning issues as required by the London Stock Exchange* 30 Organization of the Akzo Group 7 Any other business 31 Management * annually recurring agenda item in re compliance with the requirements of the 33 Financial statements London Stock Exchange concerning the listing of Akzo shares on that stock 34 Consolidated financial statements of the exchange Akzo Group 44 Current-value information 46 Financial statements of Akzo NY 49 Auditors' report 50 Ten-year financial summary 55 Principal companies of the Akzo Group Translation Akzo Akzo N.V., 82 IJssellaan 6800 LS Arnhem, the Netherlands The svrnbol'" indicates trademarks registered in one or Phone (085) 65 19 11 Telex 45438 more countries. Supervisory council and board of management Supervisory council Akzo G. Kraijenhoff, chairman Akzo is an international group of companies with J.R.M. van den Brink, deputy chairman operations in 50 countries. Employing 83,000 people, the Y. Scholten, deputy chairman Group achieved sales of Hf112.5 billion in 1980. S.C. Bakkenist Akzo's product range includes man-made fibers, salt, P.M.H. van Boven commodity and specialty chemicals, coatings, ~. Herrhausen pharmaceuticals, consumer products, electronic H.L. Merkle products, and miscellaneous industrial products. H.J. Schlanqe-Schoninqen Business activities are organized in seven entities: six Mrs. K. Schudel-van lwanenberg divisions - Enka, Akzo lout Chemie, Akzo Chemie, Akzo J. de Vries Coatings, Akzo Pharma, and Akzo Consumenten O. Wolff von Amerongen Produkten - which operate on a worldwide scale, and Akzona which incorporates practically all our interests in Board of management North America. AG. van den Bos, president Akzo recognizes the importance of good communica- AA Loudon, deputy president tions regarding its policies and activities with those who J.A. Wolhoff, deputy president are directly or indirectly involved with the Group. It H. van Doodewaerd accepts the codes of conduct established by the A van Oriel Organisation for Economic Co-operation and M.W. Geerlings Development (OECD) and the International Labour H.J. Kruisinga Organisation OLO). J. Veldman H.J.J. van der Werf M.D. Westermann H.G. lempelin Adviser: W.K.N. Schmelzer Secretary J.P. Huges Report of the supervisory council 2 Changes in supervisory council and board of implemented to deal with the unprofitable situation in management the synthetic textile and carpet fiber sector because, apart from a significant non-recurring loss, they involve At the annual meeting of stockholders held May 13, a substantial decrease in the number of jobs. 1980, J.R.M. van den Brink, P.M.H. van Boven and Nevertheless, we feel that the measures proposed by the Y. Scholten, whose terms of office had expired, were board are necessary to end structural losses which can reappointed. no longer be borne by the Group. Only so will we At the meeting, Mr. van den Brink retired as chairman improve the development opportunities of the other and was succeeded by G. Kraijenhoff, deputy chairman. product groups and safeguard the continued existence of Mr. van den Brink joined the supervisory council of AKU the Group. We are confident that after implementation of in 1953 and took the chair in 1961. His competence as the measures conditions for a balanced development will chairman of the council and his sense of purpose, which be more favorable. was of great support to us in difficult times, have been invaluable to the Company. We are gratified that We herewith submit to you for approval at the annual Mr. van den Brink has accepted reappointment and will meeting of stockholders of May 12, 1981, the financial continue to serve on the council as a deputy chairman. statements for the financial year 1980, as prepared by the board of management. The statements are made up At the annual meeting of stockholders of May 12, 1981, of the balance sheet and statement of income, with Mrs. K. Schudel-van Zwanenberg, S.C. Bakkenist, notes, inclusive of the consolidated statements of the H.L. Merkle, and J. de Vries will resign from the Group. These financial statements have been examined supervisory council. by Klynveld Kraayenhof & Co., Reqlstereccountents. Mr. de Vries will retire because he has reached the Their report appears on page 49. mandatory retirement age. To fill the vacancy we We have approved these financial statements, with the recommend appointment of E.G.G. Werner. board of management's proposal contained therein to The other members' terms of office are expiring and omit the dividend. we recommend that they be reappointed. The net loss of Hfl 69.6 million has been charged against reserves. At the annual meeting of May 12, 1981, A. van Driel, We propose that you also approve the financial president of Akzo Coatings, will resign from the board of statements, thus discharging the responsibility of the management effective May 31,1981, because he has members of the board of management for their conduct reached the mandatory retirement age. Stockholders will of the business and of the members of the supervisory be asked to appoint to the board with effect from June 1, council for their supervision. 1981, C. Zaal, now deputy president of Akzo Coatings. With effect from the same date, Mr. Zaal will become president of Akzo Coatings. In 1982 A.G. van den Bos will reach the mandatory retirement age and will step down as president and as a member of the board effective May 31 of that year. We propose that AA Loudon, now a deputy president, be appointed to succeed him as president as of June 1, 1982. Supervision We regularly obtained oral and written reports on the business of the Company and thus were able to keep the Group's performance under constant review. Last year we expressed our agreement with the board of management that top priority should be assigned to efforts and measures aimed at consolidating the position Arnhem, March 27, 1981 of the Group. The worldwide economic recession aggravated the For the supervisory council, problems of the Western European man-made fiber industry, thereby interrupting the Group's recovery. We G. Kraijenhoff, regret that once again drastic measures will have to be chairman L Financial highlights on an historical-cost basis 1980 1979 3 in Hfl million sales 12,453 12,015 operating income 416 689 net income (loss) before extraordinary items 170 289 net income (loss) after extraordinary items (70) 230 funds from operations 631 976 property, plant and equipment capital expenditures 645 461 depreciation 504 506 stockholders' equity 2,266 2,325 per common share of Hfl 20 par value, in Hfl net income (loss) before extraordinary items 5.77 9.75 net income (loss) after extraordinary items (2.35) 7.74 dividend 2.40 stockholders' equity 76.56 78.55 on a current-value basis (see pages 44 and 45) in Hfl million operating income 161 363 net income (loss) before extraordinary items 53 141 net income (loss) after extraordinary items (187) 82 stockholders' equity 2,929 2,828 per common share of Hfl 2~ par value, in Hfl net income (loss) before extraordinary items 1.80 4.75 net income (loss) after extraordinary items (6.32) 2.76 stockholders' equity 98.93 95.54 number of employees 83,100 83,000 Report of the board of management General review 4 Recovery interrupted Restructuring of man-made fibers By mid-1980 the Group's recovery was halted by a Since 1975 the Western European man-made fiber strong recession, which spread rapidly to most countries industry has been cutting back its production capacity of the world. In the first half of the year net income was for synthetic textile and carpet fibers, yet the market has well over the amount recorded for the corresponding failed to recover sufficiently. In 1980, aggregate losses of period of 1979. The decline in the second half of 1980 the Western European man-made fiber industry totaled resulted in a net income before extraordinary items of Hf12.5 billion, more than doubling the 1979 loss. Hfl 170 million, compared with an amount of Hfl 289 Apart from cyclical causes, the present, intensified million in 1979. Although sales were up 4% to Hf112.5 crisis situation is mainly due to a number of structural billion, shipments were down 3%. factors: From income of Hfl 170 million an amount of Hfl 240 million had to be deducted for extraordinary items, - in recent years the consumption of textile products in mainly due to restructuring measures to be taken in the Western Europe has shown only moderate growth; in man-made fiber sector of Enka Europe. The total cost of addition, the Western European textile industry has these measures is approximately Hfl400 million, some further decreased in size as a result of its increasing Hfl 150 million of which is to come from provisions inability to successfully cope with competition by already made for this purpose in previous years.