September 29, 2008
Management announces new operational targets and additional cost savings.
Summary:
EBITDA margin target of at least 14 percent by the end of 2011
Continue to outgrow markets
ICI synergies delivered faster
Additional net cost savings of €100 million
At least 3,500 jobs cut
Prudent financial policy – share buy back program deferred due to uncertainty in financial markets
Outlook for 2008 unchanged
Speaking at a company analyst conference in London, CEO Hans Wijers and his fellow Board members explained how the new AkzoNobel is taking aggressive action to accelerate the synergies of the new combination and to further improve operational effectiveness.
Said Wijers: “After a major transformation process which streamlined and refocused the company, it’s now time for us to deliver on what we promised and, in today’s very different economic landscape, significantly improve our performance. The initiatives we are announcing today mark the start of a far-reaching operational excellence process designed to make us even stronger by building on what we have created – a solid foundation for sustainable, profitable growth.”
He added: “We operate from strong positions in diverse, highly attractive sectors with good growth potential. This is particularly evident in emerging markets, which now represent 35 percent of total revenue and 40 percent of total EBIT. Our positions of strength are underpinned by our widespread market-leadership and the fact that up to 75 percent of the new AkzoNobel operates in markets with low to very low cyclicality.
”The world economy has now clearly entered a phase of lower growth, particularly in the mature markets,” continued Wijers. “In these challenging markets, only lean companies succeed. We have therefore started a rigorous drive to further reduce our cost base.”
Improving operational performance
AkzoNobel has today announced an EBITDA margin target of at least 14 percent by the end of 2011. This will be achieved by:
organic growth and selective acquisitions
delivering the ICI synergies faster, with 100 percent to be realized by 2010
driving margin management programs across the company, improving pricing and procurement
rigorous cost management at both corporate and business level, leading to at least an additional €100 million in net cost savings
ICI synergies, combined with these additional net cost savings, will result in a total reduction of 3,500 jobs by 2011.
Added Wijers: “AkzoNobel has a strong restructuring track record and, as always, we will work closely with our social partners in this process.“
To reach the company’s ambitious targets, the even stronger focus on operational effectiveness will be supported by organic growth, which differs per business area.
Decorative Paints – raising targets in emerging markets
AkzoNobel has an excellent geographic spread, holding leading positions with strong brands such as Dulux®, Sikkens® and Glidden®. Dulux® represents more than 25 percent of our total Decorative Paints revenue. In 2007, emerging markets accounted for 25 percent of total Decorative Paints revenue. By 2012, that number will have increased to 35 percent. The company has adopted a new brand strategy – driving towards fewer, stronger brands in the medium term – with an even stronger focus on our global approach to innovation.
Performance Coatings – strong position in a broad range of segments
Growth potential is high – notably in the emerging markets – with further opportunities being targeted through organic growth and active participation in industry consolidation. Close to 50 percent of the business is conducted in emerging markets, which provides a strong platform for organic growth.
Specialty Chemicals – investing in emerging markets
Investing in emerging markets such as Brazil and China will help to drive further growth – current projects account for more than €300 million. Moving forward, the main focus will be on margin management through procurement, value pricing and further energy efficiency.
Share buy back program & dividends
Since 2007, AkzoNobel has embarked on share buy back programs totaling €4.6 billion. By the end of September 2008, €3.0 billion had been completed. With €1.8 billion of our net debt due to mature in the next eight months – and given the current volatile situation in the global financial markets – the company has decided to defer the remaining €1.6 billion of the current program until the refinancing of the bonds has been completed. The company remains committed to maintaining its dividend and its A-minus credit rating.
Outlook 2008 reconfirmed
AkzoNobel has today repeated that it expects 2008 EBITDA before incidentals, in constant currencies, to be close to the 2007 pro forma level of €1,870 million.
AkzoNobel fact file – Looking closer, seeing further
Published today, the AkzoNobel fact file gives a comprehensive overview of the company’s business and will provide the investment community with details of AkzoNobel’s leadership positions; market and business characteristics; operational excellence; key raw materials and innovations.
A full video webcast of the Analyst & Investor Day can be viewed on the company’s corporate website.