Change

Decorative Paints

In Decorative Paints, EBITDA was 20 percent behind 2010 (19 percent in constant currencies), mainly driven by the increases in raw material prices (specifically TiO2) and unfavorable product mix effects including down trading. EBITDA margin ended at 8.3 percent in 2011 (2010: 11.0 percent). We started to restructure operations in Europe and announced restructuring activities in the US in 2012.

Performance Coatings

In Performance Coatings, raw material price increases had a negative impact on the full-year results in all businesses. Margin management programs – including selling price increases and restructuring efforts in mature markets – are ongoing and continue to support performance. Full-year EBITDA ended at €611 million (2010: 647 million), with an EBITDA margin of 11.8 percent (2010: 13.5 percent).

Specialty Chemicals

While most businesses in Specialty Chemicals recorded their best-ever profitability, Functional Chemicals saw its earnings decrease after a very strong 2010 performance, due primarily to the ethylene amines product line. With effective margin management and cost control, unit margins remained at the 2010 level, offsetting significant raw material price increases and adverse currency impacts. The energy market in the Netherlands remained unattractive for energy producers as the difference between gas input costs versus electricity sales prices adversely impacted our results. The overall portfolio shows strong profitability in these difficult economic circumstances, with EBITDA at €906 million (2010: €939 million) and EBITDA margin at 17.0 percent (2010: 19.0 percent).

Costs for research and development in 2012 are expected to be in line with 2011, with 50 percent aimed at breakthrough innovations.

Raw materials

Raw material price increases were a significant concern during 2011. Overall, the weighted average increase in our raw material prices for the year was 16 percent. The increase year-on-year for Q4 was just over 10 percent, which is at a lower level than in Q3, primarily due to a stabilization in all raw material groups, except TiO2, where we continue to see significant price increases. The absolute impact of increased raw material prices for the year is approximately €1 billion (including 2 percent volume increase), accounting for almost the entire increase in cost of sales.

Incidental items included in operating income

Restructuring is mainly related to European businesses in Decorative Paints and Performance Coatings.

Incidental included in operating income

 

 

 

 

 

In € millions

 

2010

 

2011

Restructuring costs

 

(120)

 

(131)

Results related to major legal, antitrust and environmental cases

 

(49)

 

(9)

Results on acquisitions and divestments

 

33

 

10

Other incidental results

 

(19)

 

(3)

Incidentals included in operating income

 

(155)

 

(133)

EBIT in “other”

Corporate costs ended in line with the previous year. Additional costs for functional excellence activities were offset by cost savings. The result of our captive insurance companies was in line with the previous year, although we had a higher number of claims in the fourth quarter. Other costs were lower due to cost savings and favorable non-recurring items.

EBIT in “other”

 

 

 

 

 

In € millions

 

2010

 

2011

Corporate costs

 

(96)

 

(98)

Pensions

 

(7)

 

(14)

Insurances

 

2

 

1

Other

 

(87)

 

(64)

EBIT in “other”

 

(188)

 

(175)

Tax

The year-to-date tax rate is 27 percent (2010: 19 percent). The tax rate benefits from several adjustments to previous years and tax-exempt gains, the main one being a release of an antitrust provision. The tax rate in 2010 was low because of several adjustments to previous years, partly related to settlements with tax authorities.

Net financing expenses

Net financing charges for the year increased by €11 million from €327 million to €338 million. Significant items included:

  • Net interest on debt which increased by €56 million to €245 million (2010: €189 million) due to the loss (€67 million) on the buy back of company bonds in December, partly offset by higher financing income
  • Financing expenses on pensions which decreased by €41 million to €59 million (2010: €100 million) mainly due to lower discount rates
  • A decrease in costs of €16 million on foreign currency results of hedged future interest cash flows

In December, we bought back a total nominal amount of €528 million of our 2014 and 2015 bonds and replaced them with bonds with lower interest rates. This transaction resulted in a loss of €67 million in the fourth quarter, which will be set off in later years by significantly lower interest costs. The transaction has improved our maturity profile.

Net financing expenses

 

 

 

 

 

In € millions

 

2010

 

2011

Financing income

 

51

 

57

Financing expenses

 

(240)

 

(302)

Net interest on net debt

 

(189)

 

(245)

Financing expenses related to pensions

 

(100)

 

(59)

Interest on provisions

 

(39)

 

(46)

Other items

 

1

 

12

Net other financing expenses

 

(138)

 

(93)

Net financing expenses

 

(327)

 

(338)

Workforce

At year-end 2011, we employed 57,240 people (year-end 2010: 55,590). The net increase was due to:

  • An increase of 900 due to acquisitions and divestments, mainly from the Schramm acquisition (790 employees)
  • A decrease of 1,050 employees due to ongoing restructuring
  • An increase of 1,800 employees due to new hires in high growth markets

In 2012, we will see the impact of restructuring in mature markets. In the context of the performance improvement program, restructurings have started in Decorative Paints in Europe and the US.

EBITDA AkzoNobel 2009 – 2011
in € millions

EBITDA AkzoNobel 2009 – 2011 (bar chart)
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