Excellence and endurance Backed by centuries of expertise, our extensive coatings and chemicals know-how and innovative technologies are in demand all over the world. For example, we supply the aerospace and marine industries with advanced, high quality products that offer unrivalled performance and appearance. Business performance The following section gives a detailed summary of how each of our Business Areas performed during 2014. Information on market characteristics is also provided. Decorative Paints 62 Performance Coatings 74 performanceBusiness Specialty Chemicals 86 AkzoNobel Report 2014 | Business performance 61 Decorative Paints “The work we have done to streamline our business is clearly paying off as we continued to grow in challenging circumstances” Ruud Joosten Member of the Executive Committee responsible for Decorative Paints 2015 expected outcomes ROS 7.5% ROI 12% 62 Business performance | AkzoNobel Report 2014 It was a positive year for the Decorative Paints business. to introduce sustainable innovations to the market. This was We operationally outperformed 2013 by some distance, highlighted by the proportion of revenue we achieve from despite continued market weaknesses, and remain on track eco-premium solutions with customer benefits. Notable to achieve our operational objectives for 2015. product launches included Coral Acrílico Total in Brazil, a wall paint for internal and external use, with great resistance, A lot of work has gone into streamlining our global activities coverage and washability, which reinforced the brand’s over the last few years in order to make the business more position in the premium segment. We also launched Nordsjö efficient and profitable, as well as providing further growth One Supertech in the Nordics, a self-cleaning paint which momentum. This is clearly paying off, as we continued to has already proved to be very successful. Another highlight grow in very challenging economic circumstances. was the introduction of our award-winning Visualizer app. This is available as a free download and we’re particularly Markets remained weak, especially in Europe, where many proud of it because it represents a world’s first in augmented economies are still trying to recover from the ongoing reality technology. It enables users to see in real time what economic recession. The professional market in the UK was a room would look like if it was painted in different colors – something of an exception, while consumer confidence all before any paint has been applied to the wall. The app has over continental Europe was fairly low. We continued to been hugely successful and it underlines how we’re working perform well in China, despite evidence of the economy to embrace digital innovations alongside our slowing down. Our performance was also good in Latin product innovations. America, even though circumstances were less than favorable in countries such as Argentina and Brazil. South Color is also one of the main pillars of the Human Cities East and South Asia also contributed strongly, with India, initiative which the company launched in 2014. Designed Indonesia and Vietnam in particular posting good results. to make cities more enjoyable and inspiring, it will give extra momentum to the global “Let’s Colour” initiatives that A specific area of attention this year was Europe, where we Decorative Paints has been running for a number of years. successfully implemented a new operating model in October. In particular, “Let’s Colour” will play a key role in supporting It is designed to take advantage of our scale in back the commitment AkzoNobel made to the Clinton Global office functions such as Finance, Human Resources and Initiative in September, which established a partnership Information Management, which have been combined on a with 100 Resilient Cities – pioneered by The Rockefeller global and European level. This model enables us to operate Foundation. As part of that commitment, over the next a more focused Sales and Marketing organization within two years, we will contribute to special projects in four cities the countries themselves. The introduction of this model named on the 100 Resilient Cities list. builds on changes we introduced to our global management structure and set-up at the start of 2014. As a result of these Another notable development this year was the improvements, we now have a more agile and competitive groundbreaking at our new site in Chengdu, China. Decorative Paints business which is better positioned to The plant will be our fourth in China producing decorative achieve profitable growth. paints and is due to open in 2016, with full operations expected by 2017. There is strong demand for our products Even though it was a busy year in terms of reshaping the in the region and this will enable us to meet the increasing organization, we remained highly focused on maintaining needs of the market. our good safety performance. Our total reportable rate of injuries (TRR) improved from 1.9 to 1.6, and we continued AkzoNobel Report 2014 | Business performance 63 Decorative Paints strategy Our vision is to become the Actions Grow profitably in high growth markets Growth in high growth countries is a key component of our leading global decorative paints Fix Europe plan and we continue to build our brands in these areas as company in size and performance. Given the structural issues in the Buildings and Infrastructure a result. For example, in 2014, we successfully launched end-user segment in Europe, optimizing our cost base is a new blockbuster exterior walls proposition (Coral Acrílico We are on track to achieve fundamental. The starting point for this is our new operating Total) in Brazil. The launch was supported by a fully-fledged our expected 2015 financial model, which refocuses our country organizations on our marketing campaign, including a TV commercial with core business. Implementation of this operating model has three-time Roland Garros winner and former world number outcomes of 7.5 percent return resulted in fewer management layers, reduced production one tennis player, Gustavo Kuerten. We also introduced on sales and 12 percent return on costs, standardized processes, restructuring in Marketing our Colors of the World concept – a significant part of our and Sales, and outsourcing of transactional Finance. “flourish” brand architecture – in Tunisia, South Africa and investment, as evidenced by our Indonesia. In addition, we continue to develop and market 2014 performance, which was a In parallel with this, we also continue to make progress in appropriate value propositions for the mid-market segment. the market. For example, in the UK consumer market, 2014 A good example is the recent successful launch of the Fit significant improvement over 2013 marked the launch of a major new marketing campaign for by Marshall brand in Turkey. This brand offers an economic levels. In addition, we have also our Dulux consumer range, called “Change Your Story”. In solution for frequently painted areas. trade, the heartland of our business, we began the roll-out of successfully “gone live” with our our Sikkens 5051 color collection. We are supporting our vital market-facing efforts with an new operating model in Europe, This collection, combined with related services, emphasizes even clearer focus on productivity. For example: our dedication to color, a fundamental part of our • In South East and South Asia, we are rolling out consistent which includes a comprehensive professional value proposition. We are also continuing to value propositions and supporting campaigns across and disciplined process-based innovate, particularly in products with sustainability benefits, the full region. We have taken this approach with the such as Herbol Protectro Aqua, a water-based product with launches of Dulux Weathershield Powerflexx – which offers approach designed to improve longer gloss retention. strong protection on exterior walls against wear and tear both efficiency and effectiveness. caused by harsh weather conditions with its crack-proof elastomeric features – and Dulux EasyClean – which We also continue to make effectively resists stains on interior walls and enables progress in our five main easier cleaning – and it has proven to be effective as well as efficient action areas: • In China, we are further optimizing our logistics service providers • In Latin America, we increased our operational leverage significantly by reducing the fixed cost base and improving the product mix 64 Business performance | AkzoNobel Report 2014 Leverage investments in marketing, As we move towards a steady state, our focus is shifting • Eco-premium solutions sales and innovation towards operational excellence based on the company- We continue to win business from products and services Branding and consumer inspiration are core capabilities wide AkzoNobel Leading Performance System (ALPS). Our that have sustainability benefits. An excellent example of in Decorative Paints. In 2014, we completed global efforts are based on engaging our people in continuous this is Nordjsö One Supertech. This product is based on implementation of our “flourish” identity, successfully uniting improvement activities that improve safety and customer a collaboration with our Specialty Chemicals Business our premium consumer brands. service, while reducing inventory and cost. These efforts Area – it uses our specialty silica to create a self-cleaning are, of course, a key part of our plan for the next level exterior wood care paint. The product is yet another With this consistent brand identity aligned to a new global of improvement in mature Europe, but they are also example of products that provide functional benefits in brand architecture, we are able to facilitate stronger fundamental to the future of our supply chains in high addition to great aesthetics consumer propositions and more powerful, rapid and growth regions. • Packaging and end-of-life efficient communication through the value chain. For We continue to look for ways to reduce packaging and example, we expanded the distribution of our annual trend Generate more value from fewer resources better utilize leftover paint through the value chain.