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Main challenges


Raw material costs for the whole of Functional Chemicals were €100 million higher than in 2007. We were hit with the biggest year-on-year increase than any other business in the company. The largest impact was felt by our Sulfur Products colleagues, who saw the price of sulfur increase by 1,000 percent within the space of 12 months. They had no choice but to raise the selling price of their products quite dramatically and the business did a very good job in a dynamic market. They used our margin management tools quickly and effectively and were able to offset the increase. At the end of the year, sharply declining sulfur prices led to a significant negative inventory result.

Elotex experienced a difficult year. This business exclusively serves the construction industry and had to cope with lower demand and some loss of market share. There are some synergies with Cellulosic Specialties, however, so we will be able to benefit from sharing distributors and technology platforms and we’re looking into optimizing the sales force.

Geographic overview

The economy slowed down across the globe. Our business was down in the US and we saw a downturn in China following the Olympic Games due to the fact that the rate of construction fell dramatically. There was also less building activity in Europe, notably the UK, Turkey and Spain. Yet China, and Asia in general, remain key regions for us.

We lead the market in Asia in Ethylene Amines and Chelates and are currently building facilities in China for both of those businesses at AkzoNobel’s major new €250 million multi-site in Ningbo. Functional Chemicals will be the primary user of that site and the need for these facilities is underlined by the fact that worldwide market demand is growing at a rate whereby every 18 months the market needs extra capacity equal to the size we are investing in at Ningbo. We also opened our newest Elotex plant near Shanghai towards the end of the year.

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