Change

AkzoNobel Functional Chemicals


“The start of production at our new facility in Ningbo, China, will add more capacity to serve our customers and will help us to optimize our supply chain.”

Overview

Conditions were tough. Our sales volumes were down across all of our business activities. But our pricing held up quite well and, combined with good use of margin management and on average lower raw material costs, we were able to keep our profitability at a higher level than in 2008.

Analysis

We initiated substantial cost saving initiatives, some of which had already been started in the latter part of 2008. Exchange rates were also favorable over the course of the year, thanks to a stronger US dollar and a weaker Swedish krona. In addition, we started selling some of our newer innovative products, which have relatively higher margins. So despite the tough conditions and volumes falling sharply compared with 2008, our EBIT was higher.

Downturn

We were most affected by the global downturn in construction, automotive and mining. Polysulfides was one of the most impacted in terms of volumes. It’s used as the insulating material around double and triple paned glass windows and production of those windows nose-dived worldwide. We even felt the pressure in China, certainly in Europe and also the US. There was a slight recovery, but we expect some stabilization before there’s any steady improvement. Elotex also experienced tough conditions in Eastern Europe, which is a key strategic region for them, while our Micronutrients business was impacted as well, partly due to the overall demand swing and partly because customers were de-stocking.

Action

Managing our margins was critical to our performance. We noticed the slowdown coming in some of our businesses towards the end of 2008 and we proactively started to restructure and reorganize, especially at Elotex, which we took over as part of the ICI acquisition. Aggressive restructuring took place in Germany, Switzerland and the US. Our Sulfur Derivatives business, especially in Argentina, was also very aggressive, having been impacted by a downturn in the mining industry. Cellulosic Specialties – which is a major supplier to the paint industry – was heavily impacted too and again major restructuring was needed.

Performance

Our Ethylene Amines, Salt Specialties and Chelates businesses performed very well. We are leaders in these markets and due to the diverse applications our products are used in, we perhaps didn’t feel the economic pressure as badly in these areas. The strategic growth in most of our product lines is coming from Asia – especially China – as well as India, but this is particularly applicable in the case of our Ethylene Amines and Chelates activities.

Developments

We announced that the company’s Polymer Chemicals business will be merged into Functional Chemicals as of January 2010. It’s a strong business, and we’ll be integrating their activities as two separate businesses alongside our current portfolio of six. We also made good progress with our global sustainability checks and have identified areas where we need to improve, while we are continuing to develop our green chemistry offering. The start of production at our new facility in Ningbo, China, towards the end of the year was another notable highlight, which will add more capacity to serve our customers and will help us to optimize our supply chain.

Revenue
in € millions
Functional Chemicals – Revenue in € millions (bar chart)
Bob Margevich: Managing Director – Functional Chemicals (photo)
Bob Margevich
Managing Director
Key brands
Functional Chemicals – Key brands (logos)

Main products

  • Cellulosic additives
  • Chelates
  • Additives for the mortar industry
  • Ethylene amines
  • Salt specialties
  • Sulfur derivatives

Key markets

  • Detergents
  • Personal care
  • Crop protection
  • Micronutrients
  • Building materials
  • Paint
  • Pharmaceutical
  • Food
Geo-mix revenue by destination
in %
Functional Chemicals – Geo-mix revenue by destination in % (pie chart)
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Copyright © 2010 Akzo Nobel N.V.