EBITDA was up 16 percent. During the second half of the year we were impacted by higher raw material costs, which we partly offset by pricing.
In Decorative Paints, we continued to invest in the future of the business, with absolute A&P spending increasing by 30 percent and A&P spending as percentage of revenue increasing to 6 percent (2009: 5 percent). During the year, we maintained our focus on costs, margin improvement and operating working capital efficiency. We continued the restructuring programs in our European business to counter soft market demand, while our margin management programs enabled us to maintain overall margins, despite higher raw material prices. EBITDA increased 13 percent and the EBITDA margin improved from 10.6 percent in 2009 to 11.0 percent in 2010.
Full-year EBITDA increased 9 percent, where the positive currency impact was 7 percent, and ended at €647 million. The EBITDA margin was 13.5 percent (2009: 14.4 percent). Costs were kept under control, however, margins were impacted by higher raw material prices.
Improved volume, firm margins and limited cost growth in Specialty Chemicals resulted in an EBITDA growth of 27 percent to €939 million for 2010, surpassing all previous performance levels for the portfolio. With the National Starch divestment having been completed and our Ningbo site in China operational, the Business Area was even better positioned at the close of the year.
Raw material prices increased in 2010, particularly in the second half of the year. We expect 2011 prices to increase further. Pricing and cost reduction actions are ongoing and AkzoNobel is confident that it will be able to compensate for these increases during 2011.
Incidental items included in operating income
During 2010, we continued to restructure:
Apart from restructuring costs, we took a €32 million provision for environmental clean-up costs at a site in Sweden. In addition, we reported gains in connection with the acquisition of the acquired powder coatings activities and the divestment of a capitve insurance company.
EBIT in “other”
Corporate costs ended below the previous year. The pension cost impact compared with the previous year is completely due to IAS 19 corridor accounting. We saw fewer insurance claims in 2010, leading to a better result this year in insurance. Other costs are higher than the previous year, mainly due to increased project activity in line with our strategy to drive functional excellence.
The year-to-date tax rate is 19 percent (2009: 30 percent). The tax rate is low because of several adjustments to previous years, partly related to settlements with tax authorities. Furthermore, there were tax-exempt gains related to acquisitions and divestments. Excluding these and other incidental items, the year-to-date tax rate would have been 28 percent (2009: 30 percent).
Net financing expenses
Net financing charges for the year decreased by €78 million from €405 million to €327 million, due to decreased financing expenses on pensions (€71 million mainly due to higher returns on plan assets). In addition:
On October 1, we completed the divestment of National Starch with a gain of €53 million. The operating results for 2010 were €74 million. In 2010, we also incurred €37 million related to further settlements and tax-related costs from the divestments of the businesses sold to Henkel in 2008. In total, we reported a gain from discontinued operations of €90 million for 2010.
At year-end 2010, we employed 55,590 staff for ongoing activities (year-end 2009: 54,740 employees). The net increase was due to:
Our growth ambitions will entail hiring new employees, in particular in high growth regions.
EBITDA AkzoNobel 2008 – 2010