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Financial overview

2013 revenue was down 5 percent, mainly due to adverse currency effects and divestments. Operating income was €958 million and included €61 million incidental results. Excluding these, operating income was €897 million (2012: €908 million excluding impairment). Net debt was €769 million lower at €1,529 million (2012: €2,298 million). The performance improvement program exceeded targets and has now successfully been completed, one year ahead of schedule.

Summary of financial outcomes

 

 

 

 

 

 

 

In € millions

 

2012

 

2013

 

∆%

1

The goodwill impairment in 2012 numbers is excluded from operating income to present comparable financial outcomes.

2

With impairment of Decorative Paints excluded from invested capital for the full year: 8.9 percent.

Revenue

 

15,390

 

14,590

 

(5)

Operating income

 

9081

 

958

 

6

ROS%

 

5.9

 

6.6

 

 

Invested capital

 

10,062

 

9,281

 

 

ROI%

 

7.72

 

9.6

 

 

 

 

 

 

 

 

 

EBITDA

 

1,597

 

1,513

 

(5)

Capital expenditures

 

826

 

666

 

 

Net cash from operating activities

 

737

 

716

 

(3)

Net debt

 

2,298

 

1,529

 

 

 

 

 

 

 

 

 

Net income attributable to shareholders

 

(2,092)

 

724

 

 

Earnings per share from total operations (in €)

 

(8.82)

 

3.00

 

 

Adjusted earnings per share (in €)

 

2.55

 

2.62

 

 

Number of employees

 

50,610

 

49,560

 

 

Revenue

  • Revenue in Decorative Paints declined 3 percent compared with 2012 due to adverse currency effects and divestments. Volumes were up 3 percent for the year with increases in all regions except Europe, which was flat overall, reflecting the difficult trading conditions
  • Revenue in Performance Coatings declined 2 percent compared with the previous year, due to adverse currencies and overall flat volumes, but with continued variability between individual segments. Volumes were down at the start of the year compared with 2012 – reflecting the difficult trading conditions – but gradually improved
  • It was a year of continued soft demand for Specialty Chemicals, with low activity being particularly evident in construction-related products, pulp bleaching and the plastics industries. In addition to the general slowdown in demand, we had new plant start-ups and extended maintenance stops earlier in the year, which impacted production temporarily

Revenue in € millions

Revenue in € millions (bar chart)

Revenue development in % versus 2012

Revenue development in % versus 2012 (bar chart)

Divestments

During 2013, several divestments were concluded:

  • The divestment of Decorative Paints North America. This business was reported as a discontinued operation. The divestment resulted in a gain of €141 million and cash inflows of €779 million
  • The divestment of Building Adhesives was completed on October 1, 2013, resulting in a gain of €198 million and cash inflows of €247 million

In addition, we concluded smaller divestments, such as the Primary Amides and Purate businesses, and agreed to sell the German stores in Decorative Paints in 2014. In 2012, Chemicals Pakistan was divested.

Operating income

  • Decorative Paints’ results include the gain of €198 million on the divestment of Building Adhesives. Margins improved due to margin management and lower raw material prices. Performance improvement programs and restructuring measures have lowered the cost base. Restructuring charges were below 2012
  • In Performance Coatings, margins were stable despite higher restructuring costs
  • Specialty Chemicals’ results include a non-cash impairment charge of €139 million on a business held for sale. Focus on cost control and margin management was maintained in all businesses, with a comprehensive performance improvement program being implemented at Functional Chemicals

Full-year average raw material costs were down, having stabilized during the year.

The performance improvement program announced in October 2011 has exceeded targets and achieved €545 million in EBITDA for the period 2011 through 2013. This successfully completes the performance improvement program a year ahead of schedule. Further efficiency and cost reduction measures have been identified as part of continuous improvement initiatives which are integrated in the regular business activities. Full-year restructuring costs were €348 million (2012: €292 million).

Operating income in € millions

Operating income development in € millions (bar chart)

1 Excluding goodwill impairment.

Invested capital

Invested capital at year-end 2013 totaled €9.3 billion, €0.8 billion lower than at year-end 2012. Invested capital was mainly impacted by the net effect of:

  • A decrease of operating working capital of €0.2 billion due to working capital management. Expressed as a percentage of revenue, operating working capital was 9.9 percent (year-end 2012: 10.7 percent)
  • A decrease of €0.4 billion due to foreign currency translation, caused by the stronger euro
  • Qualifying certain businesses and assets as assets held for sale

We are prioritizing our investments given the weak recovery of the markets and our focus on cash and return on investment. We therefore expect our 2014 capital expenditures to be in line with 2013, of which 40-50 percent is related to growth.

Capital expenditure 2013
100% = € 666 million (4.6% of revenue)

Capital expenditure 2013, 100% = € 666 million (4.6% of revenue) (pie chart)

Capital expenditure will be around 4 percent of revenues going forward

40 - 50 percent growth related

Net debt and cash flows

Operating activities in 2013 resulted in cash inflows of €716 million (2012: €737 million). The change is the net impact of higher operating income (excluding impairment) and lower cash outflow from provisions, partly offset by lower inflow from working capital, as 2012 had an exceptional impact. The movement in other changes relates to the non-cash impairment that was included in profit from continuing operations in 2012.

Net debt decreased from €2,298 million at year-end 2012 to €1,529 million at year-end 2013 as a consequence of the net impact of:

  • Cash inflows from divestments (€313 million) and discontinued operations (€675 million)
  • Cash inflows from operating activities of €716 million
  • Capital expenditures of €666 million
  • Dividend payments of €286 million (€210 million to shareholders and €76 million to non-controlling interests)

We have set a cap on the ratio of net debt/EBITDA of 2.0. Currently that ratio is 1.0. Our strategy is to maintain a strong investment grade.

Safety

A company-wide HSE platform established common improvement programs in people, process and product safety. We aim to differentiate ourselves by our thoroughness in embedding best practice safety processes in all our operations, using common approaches and systems.

  • We achieved significant progress in total reportable injury rate towards our target of <2.0 by 2015
  • We implemented our new Life-Saving Rules as part of a global TakeCare behavioral safety program
  • We enhanced the stringency of our behavior-based safety program – more than 96 percent of our manufacturing sites are already consistent with the higher standards
  • We refocused the process safety aspect of our HSE self-assessment program in order to make improvements at high hazard sites

Employee and supervised contractors total reportable injuries injury rate

Employee and supervised contractors total reportable injuries injury rate (bar chart)

Workforce

At year-end 2013, our workforce totaled to 49,560 employees (year-end 2012: 50,610 employees). The net decrease was due to:

  • Divestments, affecting 440 employees
  • A decrease of 1,740 employees due to ongoing restructuring
  • An increase of 1,130 employees due to new hires, mainly in high growth markets

We accelerated restructuring activities during 2013 and will continue to significantly restructure our businesses in 2014 to reduce our cost base. These programs will run globally, with a focus on mature markets.

Earnings per share (EPS) total operations in €

Earnings per share (EPS) total operations in € (bar chart)

Dividend

Our dividend policy is to pay a stable to rising dividend. We will propose a 2013 final dividend of €1.12 per share, which would make a total 2013 dividend of €1.45 (2012: €1.45) per share. There will be a stock dividend option with cash dividend as default.

Dividend in €

Dividend in € (bar chart)

Outlook

Although we saw early signs of stabilization in the second half of 2013 in some of our businesses, the economic environment remains fragile and foreign currencies volatile. We will continue to significantly restructure our businesses in 2014 to reduce our cost base further to offset the expected continued weak recovery. The company is on track to achieve its strategic targets for 2015.