It’s safe to say that 2009 was a year few of us will easily forget. We experienced the most severe global financial and economic crisis since the crippling Great Depression of the late 1920s and 1930s. Companies all over the world faced enormous challenges due to the inevitable impact on markets and many struggled to remain competitive as the recession began to bite. Our aim was to emerge an even stronger company.
It was a unique and extremely tough situation which demanded a swift and effective response. I’m proud to say that across the world displayed tremendous commitment and spirit to ensure that AkzoNobel remained strong during such testing economic times. Our ability to quickly adapt to the new reality was crucial. We overcame the virtual standstill at the beginning of the year, negotiated the gradual stabilization mid-year and then experienced some rebounding of growth in selected markets as 2009 came to an end. This carefully planned and disciplined response to the downturn means we have maneuvered ourselves into a robust position where we can take full advantage of any opportunities that may present themselves.
Our rigorous efforts to maintain our competitiveness were underpinned by a strict focus on , specifically concentrated on “Customers, Costs and Cash”. In fact, many of our businesses forged even stronger links with customers to help them weather the storm caused by the ongoing crisis. Close collaboration of this nature is integral to the way we do business and it resulted in even deeper relationships being formed, which subsequently led to higher market shares. The emphasis we have placed on margin management in recent years also paid off, illustrated by our gross profit margin improving from 36.4 percent in 2008 to 39.3 percent in 2009.
Another key achievement was the realization of €508 million cumulative annualized savings in 2009. This was the result of accelerated synergies from the ICI acquisition and a fundamental cost-reduction program introduced throughout the portfolio. The success of our company-wide operational focus also led to improvements in operating working capital (OWC). We significantly exceeded our medium-term ambition of a 0.5 percent OWC reduction per year by ending 2009 with a percentage of 13.7, compared with 16.5 percent in 2008. Due to the severity of the financial crisis, our 2009 revenue fell 10 percent, but thanks to the disciplined approach to customers, costs and cash, our EBITDA margin improved to 12.7 percent.
But 2009 wasn’t just about focusing on our operational performance. Although the economic situation demanded most of our attention, we never allowed it to distract us from making progress in other vital areas of our operations. Investing in the future of AkzoNobel remained a priority, even though we were in the grip of financial turmoil. A number of acquisitions were made across the business, while our commitment to was highlighted by our continued funding for R&D and capital expenditures such as plants, sites, equipment and information technology. A particular highlight was the start-up of our new site in Ningbo, China, which includes facilities for multiple businesses and is a shining example of our commitment to investing in profitable growth in high growth markets. We also continued to invest in our people, successfully rolling out new training programs and introducing a Diversity and Inclusion initiative designed to increase the number of roles for women and non-Westerners at all levels within the company. Product development was another area where we never lost focus, with all of our businesses introducing new technologies or eco-premium innovations to the market.
Our sustainability agenda also gathered momentum. I took great pride in the fact that AkzoNobel was again listed among the world leaders in the Chemicals sector on the Dow Jones Sustainability Index, with a second place rating. Our clear objective is to remain in the top three. Safety – just one part of our broader sustainability agenda – also remained paramount and continuous step-by-step improvements have been made in our performance. In fact, the total reportable rate of injuries for our employees and contractors improved by around 20 percent during 2009, while we are still striving to achieve our ambitious 2010 target of two or less injuries per one million hours worked. I feel confident that we will get there.
Despite the challenges we faced during 2009, there can be no doubt that it was a year in which we demonstrated the fundamental strength of our company. We have the utmost confidence in that strength, and in the ability of our management to successfully guide AkzoNobel into the future. We will therefore propose a dividend at the upper end of the dividend policy range to our shareholders at the forthcoming Annual General Meeting.
Focus on improvement
Of course, while most of our markets now seem to have stabilized and are even showing some signs of growth – particularly in – we still lack clear visibility about developments in 2010. We are, however, optimistic about our ability to embrace any growth opportunities in high growth markets and will allocate our resources accordingly. The situation in most mature economies is somewhat different. There has been almost no robust volume growth and as a consequence we will maintain our focus in these regions on ‘‘Customers, Costs and Cash’’. In terms of overall strategy, we will continue to focus on growing market share, improving our EBITDA margin towards 14 percent by the end of 2011, further reducing OWC and becoming a true leader in sustainability, safety and talent development. This commitment to constant improvement will ensure that we remain inspired and continue to deliver Tomorrow’s Answers Today.
My colleagues on the Board of Management and I take great pride in leading this great company. We would like to express our sincere gratitude and admiration to all the great teams and individuals who are leading AkzoNobel with such commitment through this difficult and challenging period.
CEO and Chairman of the Board of Management
“Although the economic situation demanded most of our attention, we never allowed it to distract us from making progress in other vital areas of our operations. Investing in the future of AkzoNobel remained a priority.”
CEO and Chairman of the Board of Management