Change

2012 was a testing year for AkzoNobel, highlighted by a further deterioration of the economic environment and our CEO’s leave of absence, but the company remained strong and reported solid operational results.

The impact of the economic slowdown was unavoidable, but despite the unfavorable conditions, our business portfolio remained resilient. Many of the company’s activities performed well, maintaining high margins and market share, with the negative effect of the slowdown primarily being felt in our more consumer-facing businesses. Following a significant improvement in the performance of our Decorative Paints business in North America, and with the full support of the Supervisory Board, the company made a strategic choice to focus its Decorative Paints business on key markets in Europe and its strong positions in high growth regions. Therefore, we agreed to sell our Decorative Paints North America activities to PPG Industries, Inc.

CEO Ton Büchner’s leave of absence in mid-September was, of course, unexpected. He made an excellent start before being confronted with fatigue. Although difficult, we took the right joint decision in agreeing to his temporary leave of absence. Fortunately, we have been able to welcome him back in good health and excellent spirit to lead the company forward and return to business. In Ton’s absence, the knowledge and experience of the Executive Committee, with the support of my fellow Supervisory Board member, Antony Burgmans, proved invaluable as they took care of the day-to-day running of the company.

Before September, Ton initiated several leadership changes, which have now been implemented in close cooperation with the Supervisory Board. The Supervisory Board is confident that the new Executive Committee members, Conrad Keijzer and Ruud Joosten, will bring valuable expertise along with their strong track records and extensive management experience.

In addition, the Supervisory Board is delighted that Werner Fuhrmann, already the Executive Committee member responsible for Integrated Supply Chain, was appointed Executive Committee member responsible for Specialty Chemicals. His knowledge and skills will be of great benefit to the company in years to come.

Several measures were taken by Ton and the Executive Committee to deliver sustainable performance improvements. Due to deteriorating market conditions, the company had to write-down the value of its Decorative Paints assets and an additional restructuring within Deco Europe was initiated. To ensure that the Board of Management, together with the other members of the Executive Committee, remains fully focused on the company’s overall priorities – carefully managing costs and cash and looking for ways to make AkzoNobel more operationally and functionally excellent – the Supervisory Board will propose at the 2013 AGM that more flexibility is introduced into the remuneration policy. This will allow a decision to be taken each year, within a set of defined indicators, on the financial metrics and their weighting in order to define short-term incentives, similar to what already applies to the company’s executives. Further details on this proposal are outlined in the Remuneration report. Finally, a new Operational Control Cycle, with particular emphasis on the forward outlook for our business, was introduced during 2012, which over the last couple of months has truly become the heartbeat of the company.

Our ongoing performance improvement program also continues to do well. Focused on three main building blocks – operational professionalization, functional standardization and business unit specific adaptations – the program delivered €250 million EBITDA by the end of the year, exceeding our original ambition of €200 million.

I am confident that by leveraging our scale via operational and functional excellence at lower costs, together with the above mentioned additional sustainable performance improvements, the delivery of our medium-term profitability ambitions in a challenging market environment will be enhanced.

I am also proud that AkzoNobel has cemented its position as a global sustainability leader after being ranked first in the Chemicals supersector on the prestigious Dow Jones Sustainability Index, the sixth consecutive year we have been ranked in the top three.

On the following pages, we will further introduce the Supervisory Board and present the Supervisory Board report for 2012, which provides a detailed overview of our activities during the reporting year. Our corporate governance, remuneration policy and compliance and integrity management are covered in the Governance and compliance section. I hope it will give you a good understanding of the framework under which the company operates.

On behalf of my fellow members of the Supervisory Board, I would like to thank the CEO, Board of Management, the other members of the Executive Committee and all employees for their dedication and hard work for the company in 2012. Finally, I would like to thank my fellow Supervisory Board members for their commitment and support during the year. I believe that the Supervisory Board is a strong and united team with a wide range of experience and expertise that will continue to serve the company well.

Signature Karel Vuursteen, Chairman of the Supervisory Board (signature)

Karel Vuursteen
Chairman of the Supervisory Board

Karel Vuursteen (1941, Dutch) (photo)
Karel Vuursteen
Chairman of the Supervisory Board
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