September 28, 2010
Highlights
· Medium-term "Value" ambitions - accelerated growth
§ Grow revenue to €20 billion
§ Increase EBITDA each year, maintaining a 13 to 15 percent margin*
§ Reduce OWC year-on-year as % of revenue by 0.5 percent to 12 percent level
§ Stable to rising dividend
· Medium-term "Values" ambitions - sustainable growth
§ Top quartile safety levels in peer group
§ Remain in the top three on Dow Jones Sustainability Indexes
§ Top quartile peer group in diversity, employee engagement and talent development
§ Top quartile peer group eco-efficiency improvement rates
*Absolute earnings before interest, tax, depreciation and amortization, before incidentals
AkzoNobel is entering a new era of accelerated and sustainable growth. That is the message being delivered today at the company's "Tomorrow's Answers Today: Making it happen" Capital Markets Day held in London.
Outlining the company's new medium-term strategy to financial markets, CEO Hans Wijers explained that AkzoNobel will leverage global mega-trends, geographical spread and leading market positions to realize its new ambitions.
"Having successfully transformed our portfolio and completed the phase of integration and restructuring, we are now entering a new chapter of accelerated and sustainable growth," he said.
The new ambitions relate to accelerated growth: increasing revenue to €20 billion, growing EBITDA each year while maintaining a 13 to 15 percent margin level, reducing OWC percent of revenue year-on-year by 0.5 percent towards a 12 percent level, and paying a stable to rising dividend.
The sustainability ambitions are: remaining in the top three on the Dow Jones Sustainability Indexes, being in the top quartile of our peer group in terms of safety levels, diversity, employee engagement and talent development and eco-efficiency improvement rates.
"Recent economic developments have enabled us to develop a deeper 'understanding of the shifting global marketplace and how we can seize opportunities to capitalize on our diversified portfolio, leading market positions and worldwide scale," continued Wijers.
"AkzoNobel is well positioned to benefit from global mega-trends affecting our industry such as population growth, improvement in quality of life in high growth markets, climate change and scarcity of natural resources. We have a clear vision of the path ahead and are confident that we can achieve our medium-term strategic ambitions."
AkzoNobel is well positioned to achieve its medium-term strategic ambitions:
· Strong leadership positions across its businesses
· Excellent geographical spread, with high growth markets representing close to 40 percent of revenue
· Focus on organic growth, particularly in high growth markets
· Exciting innovation pipeline with current RD&I spend of around 2.5 percent of revenue, making AkzoNobel the clear sector leader in absolute spend
· Ability to consider attractive acquisitions
· New Executive Committee leadership team
Aspirations for high growth markets
With high growth markets currently representing close to 40 percent of revenue, AkzoNobel believes that these markets will become significantly more important and intends to grow revenue to 50 percent during the course of the decade. The company will focus most of its resources to also gain market share in the mid-segments of these markets. Specific country targets were also outlined:
· Double revenue in China from $1.5 billion to $3 billion
· Create a significant footprint in India by growing revenue from €0.25 billion to €1 billion
· Outgrow the competition in Brazil by increasing revenue from €0.75 billion to €1.5 billion
Exciting RD&I pipeline to drive growth with clear sustainability focus
AkzoNobel's innovation strategy currently delivers 9 percent of revenue from "breakthrough"* innovations and 22 percent of revenue from eco-premium solutions**. The company intends to increase big R&D spend to more than 60 percent of total R&D spend and focus on functional solutions. As a result, AkzoNobel's medium-term ambition is to achieve more than 15 percent of revenue from "breakthrough" innovations and more than 30 percent of revenue from eco-premium solutions. AkzoNobel's innovation strategy will be underpinned by a clear sustainability focus.
*Major innovations that result in a significant competitive advantage
**Higher eco-efficiency than main competitive product
Strong executive leadership team
AkzoNobel is to broaden its operational leadership team by establishing a new Executive Committee to better drive common agendas and build capabilities across AkzoNobel. Joining the five Board members on the Executive Committee will be Marjan Oudeman (Human Resources and Organizational Development);
Graeme Armstrong (Research, Development & Innovation); Sven Dumoulin General Counsel) and Werner Fuhrmann (Supply Chain/Sourcing).
Financial focus and discipline unchanged
AkzoNobel will continue to build on the benefits of its focus on customers, cost and cash. The management intends to maintain its current EVA and cash discipline; deliver further operating working capital improvement towards 12 percent of revenue; and maintain a disciplined approach to capital allocation.
Maintenance of strong balance sheet
In August, the company's credit ratings were confirmed at BBB+/Baa1 with outlook improved to stable. The proceeds from the disposal of National Starch will fund growth and will potentially partly be used to strengthen the company's capital structure by, for example, re-paying 2011 debt maturity or de-risking pensions where possible.
Stable to rising dividend
AkzoNobel has announced a simplified dividend policy and intends to pay a stable to rising dividend, whereby a cash interim and final dividend will be paid. The 2010 interim dividend will be increased 6.7 percent to €0.32 per share, which will be paid on November 3, 2010. The ex-dividend date is October 25, 2010, and the record date is October 27, 2010.
AkzoNobel's intention is to grow the 2010 total dividend by around €0.05 per share, therefore, the company is guiding towards a total 2010 dividend of €1.40.*
*The new dividend and payout will be discussed at the 2011 Annual General Meeting
2010 outlook - cautiously optimistic
The uncertain global economic outlook, consumer caution and construction and housing markets give reason for caution. However, AkzoNobel's leading positions, scale and presence in diversified markets, strong balance sheet to fund future growth and evidence of sustained industrial demand beyond re-stocking give reasons for cautious optimism.
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AkzoNobel is the largest global paints and coatings company and a major producer of specialty chemicals. We supply industries and consumers worldwide with innovative products and are passionate about developing sustainable answers for our customers. Our portfolio includes well known brands such as Dulux, Sikkens, International and Eka. Headquartered in Amsterdam, the Netherlands, we are a Global Fortune 500 company and are consistently ranked as one of the leaders on the Dow Jones Sustainability Indexes. With operations in more than 80 countries, our 55,000 people around the world are committed to excellence and delivering Tomorrow's Answers Today(TM).
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