Strategic targets

Return on sales

We use return on sales (ROS) as a performance indicator to reflect profitability relative to revenue. ROS as a target will focus management on delivery and quality of profits. ROS% is defined as operating income as percentage of revenue. For operating income 2012, the goodwill impairment is excluded.

  • The ROS target is 9.0 percent by 2015
  • ROS for 2013 was 6.6 percent (2012: 5.9)
  • Operating income includes net incidental gains of €61 million and €348 million restructuring costs (2012: €292 million)
  • ROS pre-restructuring costs and incidentals increased from 8.2 percent to 8.5 percent
  • Both revenue and operating income were affected by adverse currency effects and divestments

Return on sales (ROS) development
Operating income in % of revenue

Return on sales (ROS) development, Operating income after incidentals/revenue (bar chart)

Return on investment

We use return on investment (ROI) as a performance indicator to reflect profitability relative to invested capital. ROI% as a target will focus management on delivering value through returns in excess of our cost of capital. ROI is defined as operating income divided by average invested capital. For operating income 2012, the goodwill impairment is excluded.

  • The ROI target is 14.0 percent by 2015
  • ROI for 2013 was 9.6 percent (2012: 7.7 percent or 8.9 percent if the impairment in Decorative Paints was excluded from invested capital for the full year)
  • ROI pre-restructuring costs and incidentals increased from 10.7 percent in 2012 to 12.4 percent in 2013
  • Invested capital was €0.8 billion lower than in 2012 due to working capital management, foreign currency translation and a transfer of some businesses and assets to assets held for sale

Return on investment (ROI) development
Operating income/average invested capital in %

Return on investment (ROI) development, Operating income/average 12-month invested capital in % (bar chart)

Net debt/EBITDA

Net debt/EBITDA reflects our strategy to maintain a solid investment grade.

  • The net debt/EBITDA target is <2.0 times
  • At year-end 2013, this ratio was 1.0 (2012: 1.4)
  • Net debt was down €769 million due to the net effect of cash from operating activities, divestments, capital expenditures and dividend payments
  • EBITDA was €1,513 million (2012: €1,597 million) due to higher restructuring costs and adverse currency effects. EBITDA does not include any incidental results

Net debt/EBITDA
Ratio

Net debt/EBITDA Ratio (bar chart)

Eco-premium solutions with customer benefits

Our 2020 target is to achieve 20 percent of revenue from products and services which provide customers and consumers in our downstream value chain with a significant sustainability advantage compared with the most commonly available equivalent commercial products or industrial processes.

  • Eco-premium solutions stimulate top line and bottom line growth opportunities
  • In 2013, revenue from eco-premium products and services with downstream benefits totaled €2.7 billion, or 18 percent of total revenue
  • It may appear that we are already close to realizing our 2020 target of 20 percent of revenue. However since this eco-premium solution metric compares our products and solutions with the mainstream in the market, our progress will be impacted by improvements in competitor offerings and changes in legislation

Eco-premium solutions with customer benefits
in % of revenue

Eco-premium solutions with customer benefits in % of revenue (bar chart)

For more details see Sustainability statements Note 4.

Cradle-to-grave carbon footprint

Our ambition is to reduce our cradle-to-grave carbon footprint by 25-30 percent per ton of sales between 2012 and 2020.

  • This year indicates a total footprint of around 27 million tons of CO2(e) and a reduction of CO2(e) per ton of sold product of 2 percent
  • The reduction derives mainly from reformulations and higher sales of lower impact paints, and from power consumption with lower carbon footprint impact in some facilities
  • Other changes in product mix and higher production volumes in facilities with a less favorable energy mix have limited the impact of these improvements

Cradle-to-grave carbon footprint
% reduction CO2(e) per ton of sales from 2012

Cradle-to-grave carbon footprint in million tons of CO2€ (bar chart)

For more details see Sustainability statements Note 5.

Resource Efficiency Index (REI)

In the chemicals industry, sustained business success will require product and process innovations that generate much more added value from each unit of raw materials and energy used across the value chain – be it with our suppliers, in our own operations or with the users of our products.

The Resource Efficiency Index is defined as gross profit (or gross margin) divided by cradle-to-grave carbon footprint – reported as an index. Our aim is to use this metric to drive further improvements in resource efficiency across the value chain.

We are reporting for the first time in 2013. A review of our performance over the past five years reveals a gradually increasing trend. Contributory factors include:

  • Improvements in energy efficiency
  • Increased renewable and low carbon energy supply
  • The ongoing switch towards waterborne coatings
  • Margin improvements as a result of higher value added products

Resource Efficiency Index
(gross profit/CO22(e) indexed

Resource efficiency index (gross profit/CO2) (indexed) (bar chart)

For more details see Sustainability statements Value chain section.