AkzoNobel Specialty Chemicals

‘The biggest challenge we faced in Specialty Chemicals in 2009 was how to respond to the sudden change in the world economy and the impact it had on the chemicals industry. The shift from record pace in 2008 to almost a complete standstill during Q1 was dramatic and we showed remarkable resilience in adjusting to the new situation.

Great achievement

Our top line inevitably suffered due to the significant volume loss caused by the recession, but the bottom line was much less impacted. We were able to maintain margins at a very acceptable level across the board thanks to stringent margin management and cost control. It was a great achievement by all our employees and I am very proud and grateful for their efforts. We created significant cash flow despite the lower earnings because we reduced working capital and our capital expenditures, throttling back on new projects in particular.

Commercial success

As well as improving margins, we also concentrated on operational effectiveness and restructured in the mature markets, taking out cost and reducing headcount. Delivering profitable growth proved difficult given the depressed economic climate, but we did not divert from our efforts to expand in high growth markets and continued to spend on technology and R&D. The success of our GLDA green chelate is just one example of how maintaining this focus on innovation has paid off.

Throughout the year, we never lost our focus on the market or our customers. In fact, when customers started to consider their supply risk maps and saw that some suppliers weren’t financially strong, many of them came to us. So our global reputation helped us to attract more business and improve customer relationships. One positive side effect of the recession was the fact that some customers had more time and capacity

to run trials for new products. This had particular benefits for our Pulp and Paper Chemicals and Polymer Chemicals businesses.

High growth markets

Our sustainability agenda did not suffer as a result of the downturn. As well as continuing to work on talent development, our businesses made major progress with regard to safety. We had an excellent year in this respect and while we realize that further improvements can be made, our enhanced safety performance underlined our commitment to achieving the ambitious targets we have set. Another major highlight of 2009 was the start up of the first unit at our new Ningbo site in China. Operations there are being brought on stream gradually and all the plants should be fully operational by the end of 2010. Our growing presence in high growth markets was also boosted by the inauguration of two new Pulp and Paper Chemicals facilities in Brazil. In addition, Polymer Chemicals took a majority position in an existing joint venture in Japan, while Industrial Chemicals completed an acquisition in chlor-alkali in Europe.One organizational change we made was the merger of our Polymer Chemicals activities into our Functional Chemicals business. This will take out cost and complexity and in many ways the recession was a good catalyst for helping us to come to this decision. With the integration of a number of former ICI activities into AkzoNobel Specialty Chemicals now complete, we can give full attention to market opportunities.

In many ways, 2009 saw us reap the benefits of the strategic realignment of Specialty Chemicals which began several years ago. Over time, the portfolio has demonstrated resilience and is better placed to grow. On the one hand, we have to make sure we capture the growth in high growth markets and position ourselves properly, while in mature markets, it’s more about operational excellence and productivity gains to ensure we remain competitive. Our robust performance this year has certainly proved that the portfolio has the strength to carry us forward as we look to pursue further growth.‚

Rob Frohn: Board member responsible for Specialty Chemicals (photo)
Rob Frohn
Board member responsible for Specialty Chemicals

“Our robust performance this year has certainly proved that the portfolio has strength to carry us forward as we look to pursue further growth.”

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