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Note 3: Operating income


Costs per category

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2011

 

2012

In € millions

 

Employee benefits

 

Amor-
tization

 

Depre-
ciation

 

Inci-
dentals

 

Employee benefits

 

Amor-
tization

 

Depre-
ciation

 

Inci-
dentals

Cost of sales

 

(935)

 

(9)

 

(314)

 

(50)

 

(996)

 

(6)

 

(339)

 

(118)

Impairment

 

 

 

 

 

 

 

 

(2,106)

Selling expenses

 

(989)

 

(98)

 

(58)

 

(64)

 

(1,097)

 

(118)

 

(78)

 

(135)

General and administrative expenses

 

(611)

 

(30)

 

(35)

 

(24)

 

(724)

 

(30)

 

(38)

 

(93)

Research and development expenses

 

(230)

 

(7)

 

(14)

 

(9)

 

(247)

 

(8)

 

(18)

 

(12)

Other operating income/(expenses)

 

 

 

 

21

 

 

 

 

(56)

Subtotal

 

(2,765)

 

(144)

 

(421)

 

(126)

 

(3,064)

 

(162)

 

(473)

 

(2,520)

Discontinued operations

 

 

(26)

 

(30)

 

 

 

(26)

 

(30)

 

Total

 

(2,765)

 

(170)

 

(451)

 

(126)

 

(3,064)

 

(188)

 

(503)

 

(2,520)

Note 3: Operating income and cost by nature

 

 

 

 

 

In € millions

 

2011

 

2012

Revenue

 

14,604

 

15,390

Variable selling cost

 

(712)

 

(709)

Materials and energy

 

(7,193)

 

(7,552)

Amortization & Depreciation

 

(565)

 

(635)

Employee benefits

 

(2,765)

 

(3,064)

Impairment

 

 

(2,106)

Other

 

(2,224)

 

(2,568)

Operating income

 

1,145

 

(1,244)

Incidental items

In 2012, we incurred higher restructuring costs mainly in mature markets, as we implement the performance improvement program. Restructuring activities are ongoing across the businesses, but in particular, we stepped up restructuring in the European businesses in Decorative Paints.

In 2011, the incidental gains and losses related, besides restructuring charges of €129 million, mainly to results from acquisitions and divestments (Schramm, Boxing) and a release from an antitrust provision.

Employee benefits income

Salaries, wages and other employee benefits in operating income

 

 

 

 

 

In € millions

 

2011

 

2012

Salaries and wages

 

(2,106)

 

(2,354)

Pension and other post-retirement cost

 

(247)

 

(294)

Other social charges

 

(412)

 

(416)

Total

 

(2,765)

 

(3,064)

Employees

 

 

 

 

 

Average number during the year

 

2011

 

2012

Decorative Paints

 

17,100

 

17,200

Performance Coatings

 

21,300

 

21,700

Specialty Chemicals

 

11,300

 

11,800

Corporate and other

 

1,400

 

1,500

Total

 

51,100

 

52,200

At year-end 2012, we employed 50,610 staff for ongoing activities (year-end 2011: 52,020 employees). The net increase was due to:

  • A net decrease of 540 due to acquisitions and divestments, mainly from the Boxing acquisition (620 employees) and the divestment of Chemicals Pakistan (1,100 employees).
  • A decrease of 1,450 employees due to ongoing restructuring.
  • An increase of 580 employees, mainly due to new hires in high growth markets.

The average number of employees working outside the Netherlands was 47,100 (2011: 46,100).

Share-based compensation

Share-based compensation relates to the performance-related share plan. Charges recognized in the 2012 statement of income for share-based compensation amounted to €43 million and are included in salaries and wages (2011: €32 million). Under the performance-related share plan, a number of conditional shares are granted to the members of the Board of Management, members of the Executive Committee and executives each year. The number of participants of the performance-related share plan at year-end 2012 was 656 (2011: 636).

The conditional grant of shares is linked for 50 percent to the ranking of the company in the Dow Jones Sustainability Indexes and the remaining 50 percent to the relative TSR performance of the company compared with a peer group. As from the series 2011-2013, the grant is linked for 50 percent to the Sustainable Asset Management (SAM) benchmark.

The shares of the series 2009-2011 have vested and were delivered to the participants in 2012.

The conditional shares vested in 2012 as follows:

  • our TSR performance over 2010-2012 series resulted in an 11th position within the ranking of the peer group companies. This did not result in vesting of conditional shares
  • the average position in the DJSI benchmark resulted in a 1.67th position within the ranking

As a result, the conditional shares of the 2010-2012 series vested for 66.67 percent (series 2009-2011: 62.5 percent), including dividend shares of 10.42 percent, the final vesting percentage amounted to 73.61 percent (series 2009-2011: 69.80 percent).

The fair value of the performance-related share plan at grant date is amortized as a charge against income over the three-year vesting period. The fair value was €38.79 per performance-related share (without a holding restriction) conditionally granted in 2012 (2011: €46.91).

The share price of a common AkzoNobel share at year-end 2012 amounted to €49.75 (2011: €37.36).

For further details on our performance-related share plan, refer to the Remuneration report.

Performance-related shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series

 

Balance per January 1, 2012

 

Granted in 2012

 

Vested in 2012

 

Forfeited in 2012

 

Dividend in 20121

 

Balance at December 31, 2012

 

Vested on January 1, 2013

1

Equivalent in shares related to accumulated dividend, which is included in the balances on balance sheet date.

2009 – 2011

 

755,484

 

 

(755,484)

 

 

 

 

2010 – 2012

 

780,400

 

2,234

 

 

(274,637)

 

29,003

 

537,000

 

537,000

2011 – 2013

 

866,104

 

1,214

 

 

(8,100)

 

32,121

 

891,339

 

2012 – 2014

 

 

1,043,250

 

 

(7,895)

 

38,929

 

1,074,284

 

Total

 

2,401,988

 

1,046,698

 

(755,484)

 

(290,632)

 

100,053

 

2,502,623

 

537,000

Stock option plans

Prior to 2008, performance-related stock options were granted to members of the Board of Management and executives. We have not purchased own shares in connection with the stock option plan. the stock options are equity-settled and all exercisable.

For stock options exercised during 2012, the weighted average of the actual share price at date of exercise amounted to €43.21 (2011: €49.71). A number of 0.5 million of outstanding stock options are non-dilutive but could potentially dilute basic earnings per share in the future.

Stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year of issue

 

Exercise price in €

 

Outstanding per January 1, 2012

 

Exercised in 2012

 

Expired in 2012

 

Forfeited in 2012

 

Outstanding at December 31, 2012

 

Expiry date

2002

 

46.53

 

107,250

 

 

(107,250)

 

 

 

April 25, 2012

2005

 

31.98

 

202,760

 

(202,135)

 

(625)

 

 

 

April 24, 2012

2006

 

46.46

 

397,478

 

(39,842)

 

 

 

357,636

 

April 26, 2013

2007

 

58.89

 

496,489

 

 

 

 

496,489

 

April 26, 2014

Total

 

 

 

1,203,977

 

(241,977)

 

(107,875)

 

 

854,125

 

 

Number and weighted average exercise price stock options

 

 

 

 

 

 

 

Number of options

 

Weighted average exercise price in €

Balance at January 1, 2011

 

1,611,181

 

45.80

Forfeited during the period

 

(12,205)

 

47.69

Exercised during the period

 

(394,999)

 

35.53

Balance at December 31, 2011

 

1,203,977

 

49.15

Expired during the period

 

(107,875)

 

46.45

Exercised during the period

 

(241,977)

 

34.36

Balance at December 31, 2012

 

854,125

 

53.69

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