A year of delivering Tomorrow’s Answers Today Key performance indicators Statement of income Dividend and earnings per share Cash flows Ratios Revenue Adjusted earnings per share Net debt Moving average ROI in € millions in € in € millions in % 2009 13,028 2009 2.06 2009 1,744 2009 9.2 2010 14,640 +12% 2010 3.71 +80% 2010 936 -46% 2010 10.8 +1.6 EBITDA Dividend per share Operating working capital Operating ROI in € millions in € % of revenue % of revenue 2009 1,690 2009 1.35 2009 13.7 2009 23.2 2010 1,964 +16% 2010 1.40 +4% 2010 13.9 +0.2 2010 27.7 +4.5 EBITDA margin Net income attributable Net cash from operating activities Research and development expenses % of revenue to shareholders in € millions in € millions in € millions 2009 13.0 2009 285 2009 1,220 2009 327 2010 13.4 +0.4 2010 754 2010 519 -57% 2010 334 +2% EBIT Earnings per share from Capital expenditures Research and development major in € millions continuing operations in € in € millions projects % of R&D expenses 2009 1,131 2009 1.09 2009 513 2009 41 2010 1,374 +21% 2010 2.85 2010 534 4% 2010 46 +5 EBIT and EBITDA Shareholders’ equity and EBITDA Operating cash flows Net debt and group equity in € millions per common share in € in € millions in € millions EBIT Shareholders’ equity per common share Net capital expenditure Group equity EBITDA EBITDA per common share Operating cash flows Net debt Operating ROI 3500 30 60 27.7 10 8.41 2800 23.5 23.2 24 48 7.70 7.28 8 9,509 7,913 8,245 18 2100 36 6 1,220 38.47 1400 1,964 12 24 33.48 4 1,785 1,690 32.21 519 1,374 700 1,234 1,131 6 12 2 2,084 1,744 (513) (534) 936 0 0 0 0 2008 2009 2010 2008 2009 2010 2009 2010 2008 2009 2010 Sustainability Specialty Chemicals Performance Coatings Decorative Paints Total reportable rate of injuries Revenue Revenue Revenue per million hours in € millions in € millions in € millions 2009 3.7 2009 4,359 2009 4,112 2009 4,573 2010 3.6 -0.1 2010 4,943 +13% 2010 4,786 +16% 2010 4,968 +9% Eco-premium solutions EBITDA EBITDA EBITDA % of revenue in € millions in € millions in € millions 2009 20 2009 738 2009 594 2009 487 2010 25 +5 2010 939 +27% 2010 647 +9% 2010 548 +13% Key value chains carbon EBITDA margin EBITDA margin EBITDA margin footprint assessment % of revenue % of revenue % of revenue 2009 158 2009 16.9 2009 14.4 2009 10.6 2010 286 +81% 2010 19.0 +2.1 2010 13.5 -0.9 2010 11.0 +0.4 Total waste Total reportable rate of injuries Total reportable rate of injuries = Total reportable rate of injuries in kilotons per million hours per million hours per million hours 2009 249 2009 2.8 2009 3.3 2009 4.7 2010 258 +4% 2010 3.5 +0.7 2010 3.3 2010 4.0 -0.7 Revenue breakdown in % Revenue breakdown in % Revenue breakdown in % E E C D A Total reportable rate of injuries A per million hours D A C B 5.3 4.6 B 3.7 3.6 B C 2007 2008 2009 2010 A Functional Chemicals 36 A Marine and Protective Coatings 28 A Europe 52 B Industrial Chemicals 21 B Car Refinishes 21 B Americas 31 Eco-premium solutions C Pulp and Paper Chemicals 20 C Industrial Coatings 18 C Asia Pacific 17 % of revenue D Surface Chemistry 17 D Powder Coatings 17 E Chemicals Pakistan 6 E Wood Finishes and Adhesives 16 25 18 18 20 Total revenue high growth Total revenue high growth Total revenue high growth 2007 2008 2009 2010 markets vs mature markets vs mature markets vs mature > 30% 100% > 45% 100% > 35% 100% AkzoNobel at a glance in 2010 Our geo-mix and employees 39% 20% 6% Mature Europe Emerging Europe North America 22,300 2,600 10,400 21% Asia Pacific 14,500 Geo-mix revenue by destination Employees by region 10% 4% Other countries Latin America 4,300 1,500 3% Other Specialty Chemicals Decorative Specialty 20% Paints Chemicals € 14.6 34% 33% Revenue (in € billions) Decorative Total revenue Paints 39% Total employees €14.6 billion 55,590 38% 33% Performance Performance Coatings 55,590 Coatings Employees Revenue by Business Area Employees by Business Area A year of delivering Tomorrow’s Answers Today 2010 was a successful year for AkzoNobel, the world’s largest coatings and specialty chemicals company. Our financial performance was strong; we completed a number of significant acquisitions; introduced a wide range of innovative and more sustainable products; and launched a new accelerated growth strategy. More information on all these developments can be found in this 2010 Report, which takes a detailed look at how we are continuing to deliver Tomorrow’s Answers Today. AKZONOBEL AND... Throughout this Report you will find various case studies highlighting just part of our contribution to the world around us. 17 HIGH GROWTH REGIONS 25 THE MID-MARKET 30 PAPER TECHNOLOGY 34 BRIGHT IDEAS 40 FASTER INNOVATION 44 MEETING CUSTOMER NEEDS 50 HEALTHY LIVING 54 NATURAL RESOURCES 144 ECO-PREMIUM SOLUTIONS 146 INVENTIVE THINKING 158 COOL COATINGS 162 SUPPLYING IKEA 164 CUTTING OUT CARBON Contents Strategy 5 Financial statements 85 Additional information 170 Chairman’s statement 6 Consolidated statement of income 86 Financial summary 170 Our Board of Management 8 Consolidated statement of comprehensive income 87 Index 174 Report of the Board of Management 10 Consolidated balance sheet 87 Glossary 175 Statement of the Board of Management 16 Consolidated statement of cash flows 88 Financial calendar 177 Achieving our medium-term ambitions 18 Consolidated statement of changes in equity 89 Disclaimer inside back cover Improving our performance levels 20 Segment information 90 Executive Committee 27 Notes to the consolidated financial statements 91 Company financial statements 129 Business performance 29 Other information 134 AkzoNobel Specialty Chemicals 30 AkzoNobel Performance Coatings 40 Sustainability facts and figures 137 AkzoNobel Decorative Paints 50 2010 key figures 138 Managing our values 139 Governance and compliance 59 Stakeholder activity 141 Our Supervisory Board 60 Sustainability framework 142 Report of the Supervisory Board 61 Invent 145 Corporate governance statement 63 Manage 149 Remuneration report 69 Improve 152 Risk management 75 Reporting principles 166 AkzoNobel on the capital market 80 Independent assurance report 167 Sustainability performance summary 168 AkzoNobel Report 2010 | Contents 3 This section provides an overview of our strategic priorities, highlights key performance areas and gives details of the medium- term ambitions targets to which we aspire. You will also find the Chairman’s statement and the Report of the Board of Management. Chairman’s statement 6 Our Board of Management 8 Report of the Board of Management 10 Statement of the Board of Management 16 Achieving our medium-term ambitions 18 Improving our performance levels 20 Executive Committee 27 Delivering Tomorrow’s Answers Today For AkzoNobel, 2010 was something of a landmark year. We still faced many challenges due to the ongoing uncertainty surrounding the economic climate. But our financial vigilance and swift response to the global downturn enabled us to launch a new accelerated growth strategy soon after markets began to recover. Our aim all along had been to emerge from the crisis an even stronger company, and we succeeded. 6 Page title | Strategy | AkzoNobel Report 2010 I’ll come to our new growth ambitions in a moment, but the Board of Management and four new leaders. I’m confident to safety and are making a concerted effort to achieve a top milestone nature of the year – and the essence of our strategic that this new set-up will help to better drive common agendas, quartile performance. Similarly, our employee programs are vision – was in many ways typified by November’s inauguration build capabilities across the company and develop a leader- being stepped up to improve engagement and encourage of our new multi-site in Ningbo, China. The €275 million facility ship group, culture and structure that will bring AkzoNobel to talent development. Creating an engaged workforce is central is AkzoNobel’s largest ever investment outside of an acquisi- the next level of substantially higher performance and growth. to our new strategy and we are working hard to stimulate a tion and underlines the increasing importance of the world’s climate of confidence, cooperation and co-creation. high growth markets as we look to establish ourselves as the During 2010, we continued with our strategy of consolidating world’s leading coatings and specialty chemicals company. our industries with a number of bolt-on acquisitions. Among I must stress that while not as severe as the previous year, Regions such as Asia and Latin America are fundamental to the most significant was the finalization of the deal in which we 2010 did present its fair share of challenges. The fact that our future plans and Ningbo is representative of all our ambi- took over the powder coatings activities of the former Rohm & we made such solid progress and have entered a new era tions as we strive to push ahead and seize opportunities to Haas from the Dow Chemical Company. This saw us become of accelerated and sustainable growth says much about our accelerate profitable growth. market leader in the US and helped to significantly improve underlying strength and our firm financial footing. In line with volumes. Another deal involved the purchase of Changzhou our new strategy, we will therefore propose an increased Value and Values Prime Automotive Paint Co.