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AkzoNobel Q4 2012


Overview


Our results at a glance

  • 2012 revenue up 5 percent driven by favorable currencies and pricing, offset by lower volumes
  • 2012 EBITDA 4 percent higher at €1,901 million (2011: €1,834 million)
  • Performance improvement program 2012 target has been exceeded
  • Net loss from continuing operations €1,733 million (2011: €536 million income), due to the Q3 impairment charge of €2,106 million
  • Net cash from operating activities up 86 percent to €737 million
  • Adjusted EPS €3.26 (2011: €3.10)
  • Total dividend for 2012 proposed at €1.45 (2011: €1.45)
  • Decorative Paints North America reported in discontinued operations; Chemicals Pakistan divestment completed in 2012
  • The economic environment remains challenging, especially in Europe

Revenue

In € millions

AkzoNobel – Revenue (bar chart)

EBITDA

In € millions

AkzoNobel – EBITDA (bar chart)

Returns on invested capital

Returns on invested capital (bar chart)
2010 restated to exclude Decorative Paints North America.

AkzoNobel around the world
Revenue by destination

(44 percent in high growth markets)

AkzoNobel around the world – Revenue by destination (pie chart)

Financial highlights

Revenue for the year was up 5 percent driven by favorable currencies and pricing offset by lower volumes. EBITDA for the year was 4 percent higher at €1,901 million (2011: €1,834 million). The performance improvement program exceeded intermediate targets. As a consequence of the impairment charge of €2,106 million in Q3, operating income was €1,244 million negative; excluding the impairment charge, this was €862 million positive (2011: €1,145 million).

Summary of financial outcomes

4th quarter

 

 

 

 

 

January - December

2011

 

2012

 

Δ%

 

in € millions

 

2011

 

2012

 

Δ%

1

Excluding incidentals.

3,549

 

3,673

 

3

 

Revenue

 

14,604

 

15,390

 

5

352

 

363

 

3

 

EBITDA1

 

1,834

 

1,901

 

4

9.9

 

9.9

 

 

 

EBITDA margin (in %)

 

12.6

 

12.4

 

 

198

 

202

 

2

 

EBIT1

 

1,271

 

1,276

 

5.6

 

5.5

 

 

 

EBIT margin (in %)

 

8.7

 

8.3

 

 

 

 

 

 

 

 

Moving average ROI1 (in %)

 

10.5

 

10.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

107

 

7

 

 

 

Operating income

 

1,145

 

(1,244)

 

 

107

 

7

 

 

 

Operating income before impairment

 

1,145

 

862

 

(25)

(16)

 

(37)

 

 

 

Net income from continuing operations

 

536

 

(1,733)

 

 

(52)

 

(22)

 

 

 

Net income from discontinued operations

 

(59)

 

(436)

 

 

(68)

 

(59)

 

 

 

Net income total operations

 

477

 

(2,169)

 

 

(0.07)

 

(0.16)

 

 

 

Earnings per share from continuing operations (in €)

 

2.29

 

(7.30)

 

 

(0.29)

 

(0.25)

 

 

 

Earnings per share from total operations (in €)

 

2.04

 

(9.14)

 

 

0.34

 

0.50

 

 

 

Adjusted earnings per share (in €)

 

3.10

 

3.26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

242

 

330

 

36

 

Capital expenditures

 

658

 

826

 

26

256

 

630

 

146

 

Net cash from operating activities

 

396

 

737

 

86

 

 

 

 

 

 

Invested capital

 

12,613

 

11,030

 

 

 

 

 

 

 

 

Net debt

 

1,895

 

2,298

 

 

 

 

 

 

 

 

Number of employees

 

52,020

 

50,610

 

 

Discontinued operations

 

 

January - December

in € millions

 

2011

 

2012

Revenue

 

1,094

 

1,190

EBITDA

 

(69)

 

19

Performance improvement program savings

 

 

26

Incidentals

 

(7)

 

(17)

Impairment charge

 

 

(372)

Workforce at year-end

 

5,220

 

4,670

Reduction workforce

 

 

360


Discontinued operations

In December 2012, we announced the divestment of Decorative Paints North America to PPG Industries Inc. As a consequence, the results of this business are reported in discontinued operations in the statements of income and cash flows and are no longer included in the other explanations and details in this report. Restated numbers for 2011 and Q1-Q3 2012 can be found in the quarterly statistics of this report.


Revenue

4th quarter

 

 

 

 

 

January - December

2011

 

2012

 

Δ%

 

in € millions

 

2011

 

2012

 

Δ%

965

 

995

 

3

 

Decorative Paints

 

4,201

 

4,297

 

2

1,326

 

1,394

 

5

 

Performance Coatings

 

5,170

 

5,702

 

10

1,285

 

1,320

 

3

 

Specialty Chemicals

 

5,335

 

5,543

 

4

(27)

 

(36)

 

 

 

Other activities/eliminations

 

(102)

 

(152)

 

 

3,549

 

3,673

 

3

 

Total

 

14,604

 

15,390

 

5

Revenue development 2012

AkzoNobel – Revenue development 2012 (bar chart)

in % versus 2011

 

Volume

 

Price/mix

 

Acquisitions

 

Exchange
rates

 

Total

Decorative Paints

 

(2)

 

2

 

 

2

 

2

Performance Coatings

 

(1)

 

5

 

2

 

4

 

10

Specialty Chemicals

 

(1)

 

1

 

1

 

3

 

4

Total

 

(2)

 

3

 

1

 

3

 

5

Revenue development Q4 2012

AkzoNobel – Revenue development Q4 2012 (bar chart)

in % versus Q4 2011

 

Volume

 

Price/mix

 

Acquisitions

 

Exchange
rates

 

Total

Decorative Paints

 

2

 

 

 

1

 

3

Performance Coatings

 

(2)

 

3

 

1

 

3

 

5

Specialty Chemicals

 

(1)

 

1

 

1

 

2

 

3

Total

 

(1)

 

2

 

 

2

 

3

Volume development per quarter
(year-on-year)

 

Q4 11

 

Q1 12

 

Q2 12

 

Q3 12

 

Q4 12

Decorative Paints

 

(1)

 

 

(3)

 

(6)

 

2

Performance Coatings

 

(2)

 

(1)

 

(2)

 

 

(2)

Specialty Chemicals

 

(4)

 

(1)

 

(2)

 

(2)

 

(1)

Total

 

(3)

 

(2)

 

(3)

 

(3)

 

(1)

Price/mix development per quarter
(year-on-year)

 

Q4 11

 

Q1 12

 

Q2 12

 

Q3 12

 

Q4 12

Decorative Paints

 

4

 

5

 

3

 

1

 

Performance Coatings

 

7

 

8

 

6

 

3

 

3

Specialty Chemicals

 

5

 

1

 

2

 

(1)

 

1

Total

 

6

 

5

 

3

 

1

 

2


Acquisitions and divestments

Early 2012, we acquired Boxing Oleochemicals in Specialty Chemicals – the leading supplier of nitrile amines and derivatives in China and throughout Asia. The Schramm/SSCP acquisition accounted for the acquisition effect in Performance Coatings as these activities were consolidated from Q4 2011. On December 28, 2012, we completed the divestment of Chemicals Pakistan, which was subsequently deconsolidated.


Raw materials

On average, raw material costs were stable compared with the previous year, with the upward pressure on oil prices offsetting softer TiO2 prices.


EBITDA

4th quarter

 

 

 

January - December

2011

 

2012

 

Δ%

 

in € millions

 

2011

 

2012

 

Δ%

61

 

47

 

(23)

 

Decorative Paints

 

479

 

425

 

(11)

141

 

190

 

35

 

Performance Coatings

 

611

 

769

 

26

207

 

172

 

(17)

 

Specialty Chemicals

 

906

 

889

 

(2)

(57)

 

(46)

 

 

 

Other activities/eliminations

 

(162)

 

(182)

 

 

352

 

363

 

3

 

Total

 

1,834

 

1,901

 

4


Performance improvement program

The performance improvement program announced in October 2011 is making good progress and has exceeded its intermediate goal for 2012. Since the announcement of the program, benefits amount to €250 million (excluding €26 million contributed by Decorative Paints North America). The program conceptually consists of three building blocks: operational professionalization, functional excellence and business unit specific adaptations. Operational professionalization addresses issues such as product complexity reduction, procurement, manufacturing and distribution excellence, and margin management. Business unit adaptations and operational professionalization have contributed around 95 percent of the 2012 benefits, while functional standardization is primarily an important enabler.

The cost of the program for 2012 equaled €292 million, booked under incidentals, including costs for the additional restructuring measures in Decorative Paints and excluding €17 million for Decorative Paints North America.

Since the announcement of the program, around 2,100 people have left the company, of which approximately 360 in Decorative Paints North America.


Incidental items

4th quarter

 

 

 

January - December

2011

 

2012

 

in € millions

 

2011

 

2012

(54)

 

(148)

 

Restructuring costs

 

(129)

 

(324)

 

 

Impairment

 

 

(2,106)

(33)

 

(12)

 

Results related to major legal and environmental cases

 

(9)

 

(36)

(11)

 

(34)

 

Results on acquisitions and divestments

 

10

 

(45)

7

 

(1)

 

Other incidental results

 

2

 

(9)

(91)

 

(195)

 

Incidentals included in operating income

 

(126)

 

(2,520)


Outlook and strategy update

We expect the economic environment will remain challenging and there to be no fundamental changes in the trends that we have seen recently in our businesses. We will continue to focus on performance improvements and operational efficiencies in order to benefit from our strong portfolio of businesses with many leading market positions and exposure to growth markets.

On February 20, 2013, we will present a strategy update. For more information, please consult our website.

Amsterdam, February 19, 2013
Board of Management


Financial calendar

April 18, 2013
Report for the 1st quarter 2013

April 26, 2013
Annual General Meeting

April 30, 2013
Ex-dividend date of 2012 final dividend

May 3, 2013
Record date of 2012 final dividend

May 6, 2013 - May 23, 2013
Election period cash or stock final dividend

May 24, 2013
Determination of exchange ratio

May 29, 2013
Payment date of cash dividend and delivery of new shares

July 18, 2013
Report for the 2nd quarter 2013


Decorative Paints – Overview

  • Full-year revenue up 2 percent driven by favorable currencies and price/mix
  • EBITDA 11 percent below the previous year
  • Asian revenue growing due to strong volume development in China
  • Challenging market conditions continue in Europe and Latin America
  • Restructuring activities in Europe continue

Revenue increased 2 percent, mainly due to positive price/mix and favorable currencies. The euro crisis and the general slowdown in global markets continued to affect our business. Volumes were down 2 percent, with Europe and South East Asia experiencing the most significant declines. Restructuring activities continued across Europe. EBITDA for the year was 11 percent lower than the prior year, reflecting weaker demand from our European markets.

Q4 saw similar developments to the full-year. Revenue grew 3 percent, driven by positive volumes and favorable currencies. Volumes were up 2 percent, mainly reflecting China’s performance.

Revenue development 2012

Decorative Paints – Revenue development 2012 (bar chart)

Revenue development Q4 2012

Decorative Paints – Revenue development Q4 2012 (bar chart)
Decorative Paints – Brands (logos)

Key figures

Revenue

4th quarter

 

 

 

 

 

January - December

2011

 

2012

 

Δ%

 

in € millions

 

2011

 

2012

 

Δ%

535

 

544

 

2

 

Decorative Paints Europe

 

2,658

 

2,640

 

(1)

180

 

174

 

(3)

 

Decorative Paints Latin America

 

590

 

603

 

2

250

 

279

 

12

 

Decorative Paints Asia

 

951

 

1,048

 

10

 

(2)

 

 

 

Other/intragroup eliminations

 

2

 

6

 

 

965

 

995

 

3

 

Total

 

4,201

 

4,297

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

Before incidentals

61

 

47

 

(23)

 

EBITDA

 

479

 

425

 

(11)

6.3

 

4.7

 

 

 

EBITDA margin (in %)

 

11.4

 

9.9

 

 

19

 

1

 

(95)

 

EBIT

 

327

 

249

 

(24)

2.0

 

0.1

 

 

 

EBIT margin (in %)

 

7.8

 

5.8

 

 

 

 

 

 

 

 

Moving average ROI (in %)

 

5.9

 

4.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

After incidentals

(30)

 

(91)

 

 

 

Operating income

 

235

 

(2,012)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

63

 

92

 

 

 

Capital expenditures

 

155

 

206

 

 

 

 

 

 

 

 

Invested capital

 

5,673

 

3,387

 

 

 

 

 

 

 

 

Number of employees

 

17,120

 

17,020

 

 

Revenue

In € millions

Decorative Paints – Revenue (bar chart)

EBITDA

In € millions

Decorative Paints – EBITDA (bar chart)

Europe

Revenue was down 1 percent. All our businesses were affected by the deepening economic crisis in Europe and have experienced substantial volume decline, with the Southern Europe (France, Spain, Italy and Greece) being the most affected. In response to the declining volumes and revenue, we carried out restructuring activities and various operational efficiency improvement programs throughout the year. However, their benefits were outpaced by the weaker demand in the relevant housing markets. As a result, more restructuring activities were undertaken towards the end of 2012.


Latin America

Revenue was up 2 percent on the back of price increases. Throughout the year, we experienced weakening volumes, mirroring the general slowdown in the region. Raw material cost inflation adversely affected our margins.

Q4 revenue was down 3 percent, mainly due to adverse currencies.


Asia

Revenue was up 10 percent driven by positive volume and currency effects. In China, we continued to experience double digit volume and revenue growth, driven by the growth in the project and professional channel. The China Coating Society awarded Dulux the number one interior emulsion brand. Our South East Asian business continued to be affected by the weaker market conditions. Strong cost control has helped to protect our profitability.

Q4 revenue was up 12 percent, reflecting strong performance in China, where volume and revenue continued to grow in double digits.


Performance Coatings – Overview

  • Strong year for Performance Coatings; revenue up 10 percent; EBITDA up 26 percent to €769 million (2011: €611 million)
  • Full-year revenue up 10 percent supported by margin management, acquisitions and favorable currencies; volume declined by 1 percent
  • Full-year EBITDA margin at 13.5 percent (2011: 11.8 percent) driven by margin management and operational efficiency
  • Integration of acquired Schramm activities supporting results

Revenue increased 10 percent compared with the previous year. The strongest growth came from Industrial Coatings and Marine and Protective Coatings. Volume declined, with differences between individual businesses. Overall margins improved due to a combination of margin management activities and the ongoing cost control. The major restructuring activities were undertaken in mature markets, where we experience lower activity levels. Integration activities relating to the Schramm acquisition continued.

In Q4, revenue was up 5 percent over the previous year, supported by currencies and the acquisition of Schramm. Margin management and operational efficiency improvements resulted in an EBITDA margin of 13.6 percent (2011: 10.6 percent).

Revenue development 2012

Performance Coatings – Revenue development 2012 (bar chart)

Revenue development Q4 2012

Performance Coatings – Revenue development Q4 2012 (bar chart)
Performance Coatings – Brands (logos)

Performance Coatings – Key figures

Revenue

4th quarter

 

 

 

 

 

January - December

2011

 

2012

 

Δ%

 

in € millions

 

2011

 

2012

 

Δ%

373

 

392

 

5

 

Marine and Protective Coatings

 

1,398

 

1,577

 

13

195

 

197

 

1

 

Wood Finishes and Adhesives

 

781

 

825

 

6

258

 

265

 

3

 

Automotive and Aerospace Coatings

 

1,030

 

1,051

 

2

235

 

245

 

4

 

Powder Coatings

 

940

 

997

 

6

273

 

305

 

12

 

Industrial Coatings

 

1,049

 

1,283

 

22

(8)

 

(10)

 

 

 

Other/intragroup eliminations

 

(28)

 

(31)

 

 

1,326

 

1,394

 

5

 

Total

 

5,170

 

5,702

 

10

 

 

 

 

 

 

 

 

 

 

 

 

 

Before incidentals

141

 

190

 

35

 

EBITDA

 

611

 

769

 

26

10.6

 

13.6

 

 

 

EBITDA margin (in %)

 

11.8

 

13.5

 

 

109

 

157

 

44

 

EBIT

 

495

 

638

 

29

8.2

 

11.3

 

 

 

EBIT margin (in %)

 

9.6

 

11.2

 

 

 

 

 

 

 

 

Moving average ROI (in %)

 

22.0

 

25.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

After incidentals

83

 

114

 

 

 

Operating income

 

458

 

542

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

43

 

57

 

 

 

Capital expenditures

 

116

 

123

 

 

 

 

 

 

 

 

Invested capital

 

2,351

 

2,415

 

 

 

 

 

 

 

 

Number of employees

 

21,960

 

21,310

 

 

Revenue

In € millions

Performance Coatings – Revenue (bar chart)

EBITDA

In € millions

Performance Coatings – EBITDA (bar chart)

Marine and Protective Coatings

Revenue was up 13 percent, supported by price/mix and currencies. There was a small decline in volume. The Marine new construction slowdown was offset by strong growth in the protective segment. In Yacht, overall activity remained in line with 2011.

In Q4, revenue was 5 percent ahead of the previous year, supported by favorable currencies and price/mix initiatives. Activity levels in Marine remained low, partially compensated by the oil and gas segment in Protective Coatings.


Wood Finishes and Adhesives

Revenue grew 6 percent, supported by currencies and price/mix. Demand remained weak across most of the mature markets, although the US benefited from a modest recovery of the housing market. Europe suffered the most from the volume decline during 2012, with cost control mitigating the impact of reduced activity levels.

In Q4, revenue was 1 percent above 2011, supported by favorable currencies and price/mix. Cost control and margin management initiatives continued.


Automotive and Aerospace Coatings

Revenue for 2012 was 2 percent higher than the previous year, driven by currencies and price/mix. Volumes were impacted by weak demand in the vehicle refinishes market in Europe and North America. Restructuring activities in mature markets helped to control costs.

In Q4, revenue grew 3 percent, with activity slowing down in all segments apart from aerospace.


Powder Coatings

Revenue was 6 percent higher than in 2011, supported by favorable currencies and price/mix. Volumes were adversely impacted by the weakening of the economic environment. In Europe, volumes were lower than the previous year throughout the region. However, excellent growth rates were achieved in Russia, while the North American and Asian markets continued to develop well.

Revenue in Q4 was up 4 percent, mainly as a result of architectural activities. Furniture and domestic appliances continued to suffer from the weak economic situation.


Industrial Coatings

Revenue increased by 22 percent, mainly due to the successful integration of Schramm/SSCP and further supported by favorable currencies and price/mix. Coil and Packaging continue to grow, with growth in Packaging coming primarily from Asia and for Coil from emerging Europe.

In Q4, revenue grew by 12 percent, mainly due to a strong performance by the Specialty Finishes business. The market remained soft in Europe, in particular for Packaging, while the Asian markets were strong in all businesses.


Specialty Chemicals – Overview

  • Full-year revenue increased 4 percent, primarily due to favorable currencies
  • Demand weakened in some segments, with volumes down 1 percent for the year
  • Full-year EBITDA down 2 percent to €889 million, due to unfavorable market conditions in Functional Chemicals
  • Integration of Boxing Oleochemicals on track
  • Divestment of Chemicals Pakistan completed in Q4

Specialty Chemicals made a good start to 2012, but demand started to weaken in the second half of the year, particularly in Europe. Demand was also more volatile. Besides the direct effect on our revenue from construction-related products (performance additives, polysulfides), in polymer catalysts and bleaching chemicals, the weakening demand also resulted in more imbalance in supply/demand, particularly for ethylene amines in Functional Chemicals. Nevertheless, Specialty Chemicals delivered a robust performance in the year on the back of margin management, cost control measures and strong market and technology leadership positions. Surface Chemistry and Pulp and Performance Chemicals delivered strong results, while Industrial Chemicals repeated solid performance. Functional Chemicals was below previous years due to the lagging demand and reduced margins.

Revenue in Q4 was 3 percent higher, mainly due to favorable currencies. However, performance in the last quarter was unfavorably impacted by the general slowdown in demand (especially in Functional Chemicals) and production-related issues at our customers.

Revenue development 2012

Specialty Chemicals – Revenue development 2012 (bar chart)

Revenue development Q4 2012

Specialty Chemicals – Revenue development Q4 2012 (bar chart)
Specialty Chemicals – Brands (logos)

Specialty Chemicals – Key figures

Revenue

4th quarter

 

 

 

 

 

January - December

2011

 

2012

 

Δ%

 

in € millions

 

2011

 

2012

 

Δ%

457

 

457

 

 

Functional Chemicals

 

1,917

 

1,963

 

2

285

 

296

 

4

 

Industrial Chemicals

 

1,165

 

1,188

 

2

220

 

229

 

4

 

Surface Chemistry

 

945

 

1,085

 

15

276

 

295

 

7

 

Pulp and Performance Chemicals

 

1,116

 

1,153

 

3

81

 

72

 

(11)

 

Chemicals Pakistan

 

330

 

287

 

(13)

(34)

 

(29)

 

 

 

Other/intragroup eliminations

 

(138)

 

(133)

 

 

1,285

 

1,320

 

3

 

Total

 

5,335

 

5,543

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

Before incidentals

207

 

172

 

(17)

 

EBITDA

 

906

 

889

 

(2)

16.1

 

13.0

 

 

 

EBITDA margin (in %)

 

17.0

 

16.0

 

 

131

 

93

 

(29)

 

EBIT

 

625

 

583

 

(7)

10.2

 

7.0

 

 

 

EBIT margin (in %)

 

11.7

 

10.5

 

 

 

 

 

 

 

 

Moving average ROI (in %)

 

17.8

 

15.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

After incidentals

133

 

73

 

 

 

Operating income

 

622

 

500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

133

 

177

 

 

 

Capital expenditures

 

365

 

484

 

 

 

 

 

 

 

 

Invested capital

 

3,620

 

3,573

 

 

 

 

 

 

 

 

Number of employees

 

11,510

 

10,750

 

 

Revenue

In € millions

Specialty Chemicals – Revenue (bar chart)

EBITDA

In € millions

Specialty Chemicals – EBITDA (bar chart)

Functional Chemicals

The business was faced with challenging economic and market conditions in 2012, which severely impacted profitability. Revenue was up 2 percent, mainly due to favorable currencies, with volumes at par. Margins were impacted by the continuing price erosion in markets for ethylene amines as a result of overcapacity. Demand was also impacted in most other segments, especially in the polymer industry and the construction-related segments, notably towards the second half of the year and specifically in Europe.

Q4 revenue was on a par with last year, with lower volumes due mainly to weak demand in Europe.


Industrial Chemicals

Full-year revenue was up 2 percent and volumes were stable. All businesses turned in a solid performance, although the Energy segment continued to be impacted by high gas prices, causing spark spreads to be unfavorable.

Q4 revenue was up 4 percent, mainly as a result of price/mix, with volumes on a par with last year. Volume was impacted during the quarter due to production-related issues at our customers.


Surface Chemistry

It was a year of solid profitability for Surface Chemistry, showing strong growth over last year. Revenue was up 15 percent, mainly due to the Boxing Oleochemicals acquisition in China. All segments contributed to the improvement, with solid margin management, high capacity utilization and continued cost control.

Q4 revenue was up 4 percent, mainly as a result of the Boxing Oleochemicals acquisition. Volumes were lower than the previous year, with customers being cautious.


Pulp and Performance Chemicals

Pulp and Performance Chemicals delivered strong growth over 2011. Revenue was up 3 percent, mainly due to favorable currencies, with volumes being lower than last year. The market in 2012 showed some weakening in demand, especially in bleaching chemicals, which was affected by the general economic climate and slower growth in China. Strong margin management and cost reduction measures contributed to the improved performance.

Q4 revenue was up by 7 percent, mainly as a result of favorable currencies, with flat volumes in the quarter. The Eldorado investment in Brazil came on stream, with the first chlorine dioxide volumes being shipped. We completed the divestment of Permascand, an equipment manufacturer, and a small Paper Chemicals activity in Germany.


Chemicals Pakistan

The business continued to be impacted by difficult market conditions throughout 2012. The ongoing energy crisis subdued overall demand in the downstream industry for the Soda Ash and Polyester activities. The divestment of Chemicals Pakistan was completed during Q4, with the business being acquired by Yunus Brothers Group.


Condensed financial statements


Consolidated statement of income

4th quarter

 

 

 

January - December

2011

 

2012

 

in € millions

 

2011

 

2012

 

 

 

 

 

 

 

 

 

Continuing operations

3,549

 

3,673

 

Revenue

 

14,604

 

15,390

(2,261)

 

(2,359)

 

Cost of sales

 

(9,035)

 

(9,596)

1,288

 

1,314

 

Gross profit

 

5,569

 

5,794

 

 

Impairment

 

 

(2,106)

(750)

 

(821)

 

Selling expenses

 

(2,943)

 

(3,199)

(315)

 

(359)

 

General and administrative expenses

 

(1,142)

 

(1,277)

(96)

 

(100)

 

Research and development expenses

 

(349)

 

(387)

(20)

 

(27)

 

Other operating income/(expenses)

 

10

 

(69)

107

 

7

 

Operating income

 

1,145

 

(1,244)

(141)

 

(54)

 

Net financing expenses

 

(336)

 

(267)

 

(1)

 

Results from associates and joint ventures

 

24

 

13

(34)

 

(48)

 

Profit/(loss) before tax

 

833

 

(1,498)

25

 

29

 

Income tax

 

(233)

 

(172)

(9)

 

(19)

 

Profit/(loss) for the period from continuing operations

 

600

 

(1,670)

 

 

 

 

 

 

 

 

 

Discontinued operations

(52)

 

(22)

 

Profit/(loss) for the period from discontinued operations

 

(59)

 

(436)

(61)

 

(41)

 

Profit/(loss) for the period

 

541

 

(2,106)

 

 

 

 

 

 

 

 

 

Attributable to

(68)

 

(59)

 

Shareholders of the company

 

477

 

(2,169)

7

 

18

 

Non-controlling interests

 

64

 

63

(61)

 

(41)

 

Profit/(loss) for the period

 

541

 

(2,106)


Consolidated statement of comprehensive income

4th quarter

 

 

 

January - December

2011

 

2012

 

in € millions

 

2011

 

2012

(61)

 

(41)

 

Profit/(loss) for the period

 

541

 

(2,106)

 

 

 

 

 

 

 

 

 

Other comprehensive income

316

 

(122)

 

Exchange differences arising on translation of foreign operations

 

55

 

8

(22)

 

(1)

 

Cash flow hedges

 

(55)

 

(7)

(7)

 

4

 

Tax relating to components of other comprehensive income

 

9

 

5

287

 

(119)

 

Other comprehensive income for the period (net of tax)

 

9

 

6

226

 

(160)

 

Comprehensive income for the period

 

550

 

(2,100)

 

 

 

 

 

 

 

 

 

Comprehensive income attributable to

202

 

(163)

 

Shareholders of the company

 

486

 

(2,146)

24

 

3

 

Non-controlling interests

 

64

 

46

226

 

(160)

 

Comprehensive income for the period

 

550

 

(2,100)


Condensed consolidated balance sheet

in € millions

 

December 31, 2011

 

December 31, 2012

Assets

 

 

 

 

Non-current assets

 

 

 

 

Intangible assets

 

7,392

 

4,454

Property, plant and equipment

 

3,705

 

3,739

Other financial non-current assets

 

2,198

 

2,763

Total non-current assets

 

13,295

 

10,956

 

 

 

 

 

Current assets

 

 

 

 

Inventories

 

1,924

 

1,545

Trade and other receivables

 

2,937

 

2,698

Cash and cash equivalents

 

1,635

 

1,752

Other current assets

 

98

 

91

Assets held for sale

 

 

921

Total current assets

 

6,594

 

7,007

Total assets

 

19,889

 

17,963

 

 

 

 

 

Equity and liabilities

Group equity

 

9,743

 

7,357

 

 

 

 

 

Non-current liabilities

 

 

 

 

Provisions and deferred tax liabilities

 

2,284

 

2,159

Long-term borrowings

 

3,035

 

3,388

Total non-current liabilities

 

5,319

 

5,547

 

 

 

 

 

Current liabilities

 

 

 

 

Short-term borrowings

 

494

 

662

Trade and other payables

 

3,369

 

3,242

Other short-term liabilities

 

964

 

845

Liabilities held for sale

 

 

310

Total current liabilities

 

4,827

 

5,059

Total equity and liabilities

 

19,889

 

17,963


Changes in equity

in € millions

 

Subscribed share capital

 

Additional paid-in capital

 

Cashflow hedge reserve

 

Cumulative translation res.

 

Other reserves

 

Share
holders’ equity

 

Non-
controlling interests

 

Group equity

Balance at January 1, 2011

 

467

 

9

 

29

 

(43)

 

8,522

 

8,984

 

525

 

9,509

Profit/(loss) for the period

 

 

 

 

 

477

 

477

 

64

 

541

Other comprehensive income

 

 

 

(38)

 

47

 

 

9

 

 

9

Comprehensive income for the period

 

 

 

(38)

 

47

 

477

 

486

 

64

 

550

Dividend paid

 

1

 

24

 

 

 

(329)

 

(304)

 

(58)

 

(362)

Equity-settled transactions

 

 

 

 

 

32

 

32

 

 

32

Issue of common shares

 

1

 

14

 

 

 

 

15

 

 

15

Acquisitions and divestments

 

 

 

 

 

(1)

 

(1)

 

 

(1)

Balance at December 31, 2011

 

469

 

47

 

(9)

 

4

 

8,701

 

9,212

 

531

 

9,743

Profit/(loss) for the period

 

 

 

 

 

(2,169)

 

(2,169)

 

63

 

(2,106)

Other comprehensive income

 

 

 

(8)

 

31

 

 

23

 

(17)

 

6

Comprehensive income for the period

 

 

 

(8)

 

31

 

(2,169)

 

(2,146)

 

46

 

(2,100)

Dividend paid

 

7

 

121

 

 

 

(342)

 

(214)

 

(42)

 

(256)

Equity-settled transactions

 

 

 

 

 

43

 

43

 

 

43

Issue of common shares

 

2

 

6

 

 

 

 

8

 

 

8

Acquisitions and divestments

 

 

 

 

 

(11)

 

(11)

 

(70)

 

(81)

Balance at December 31, 2012

 

478

 

174

 

(17)

 

35

 

6,222

 

6,892

 

465

 

7,357


Condensed consolidated statement of cash flows

4th quarter

 

 

 

 

 

January - December

2011

 

2012

 

in € millions

 

2011

 

2012

1,453

 

1,307

 

Cash and cash equivalents at beginning of period

 

2,683

 

1,335

 

 

 

 

 

 

 

 

 

 

 

Adjustments to reconcile earnings to cash generated from operating activities

 

 

(9)

 

(19)

 

Profit/(loss) for the period from continuing operations

 

600

 

(1,670)

160

 

177

 

Amortization, depreciation and impairments

 

577

 

2,795

144

 

469

 

Changes in working capital

 

(331)

 

251

(49)

 

24

 

Changes in provisions

 

(484)

 

(688)

10

 

(21)

 

Other changes

 

34

 

49

256

 

630

 

Net cash from operating activities

 

396

 

737

(242)

 

(330)

 

Capital expenditures

 

(658)

 

(826)

(169)

 

132

 

Acquisitions and divestments net of cash acquired

 

(156)

 

122

(9)

 

(40)

 

Other changes

 

2

 

(22)

(420)

 

(238)

 

Net cash from investing activities

 

(812)

 

(726)

80

 

(12)

 

Changes from borrowings

 

(470)

 

570

(81)

 

(67)

 

Dividends

 

(362)

 

(256)

 

4

 

Other changes

 

7

 

(43)

(1)

 

(75)

 

Net cash from financing activities

 

(825)

 

271

(165)

 

317

 

Net cash used for continuing operations

 

(1,241)

 

282

9

 

(38)

 

Cash flows from discontinued operations

 

(96)

 

(53)

(156)

 

279

 

Net change in cash and cash equivalents of total operations

 

(1,337)

 

229

38

 

(28)

 

Effect of exchange rate changes on cash and cash equivalents

 

(11)

 

(6)

1,335

 

1,558

 

Cash and cash equivalents at December 31

 

1,335

 

1,558


Notes to the condensed financial statements


Quarterly statistics

2011

 

 

 

 

 

 

 

 

 

 

 

2012

Q1

 

Q2

 

Q3

 

Q4

 

year

 

in € millions

 

Q1

 

Q2

 

Q3

 

Q4

 

year-to-
date

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

918

 

1,165

 

1,153

 

965

 

4,201

 

Decorative Paints

 

974

 

1,187

 

1,141

 

995

 

4,297

1,237

 

1,312

 

1,295

 

1,326

 

5,170

 

Performance Coatings

 

1,369

 

1,472

 

1,467

 

1,394

 

5,702

1,351

 

1,350

 

1,349

 

1,285

 

5,335

 

Specialty Chemicals

 

1,399

 

1,431

 

1,393

 

1,320

 

5,543

(22)

 

(25)

 

(28)

 

(27)

 

(102)

 

Other activities/eliminations

 

(35)

 

(46)

 

(35)

 

(36)

 

(152)

3,484

 

3,802

 

3,769

 

3,549

 

14,604

 

Total

 

3,707

 

4,044

 

3,966

 

3,673

 

15,390

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

79

 

184

 

155

 

61

 

479

 

Decorative Paints

 

90

 

158

 

130

 

47

 

425

143

 

170

 

157

 

141

 

611

 

Performance Coatings

 

164

 

213

 

202

 

190

 

769

241

 

220

 

238

 

207

 

906

 

Specialty Chemicals

 

235

 

255

 

227

 

172

 

889

(37)

 

(33)

 

(35)

 

(57)

 

(162)

 

Other activities/eliminations

 

(51)

 

(49)

 

(36)

 

(46)

 

(182)

426

 

541

 

515

 

352

 

1,834

 

Total

 

438

 

577

 

523

 

363

 

1,901

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12.2

 

14.2

 

13.7

 

9.9

 

12.6

 

EBITDA margin (in %)

 

11.8

 

14.3

 

13.2

 

9.9

 

12.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation

(22)

 

(23)

 

(22)

 

(24)

 

(91)

 

Decorative Paints

 

(27)

 

(26)

 

(26)

 

(27)

 

(106)

(21)

 

(21)

 

(21)

 

(23)

 

(86)

 

Performance Coatings

 

(23)

 

(25)

 

(23)

 

(24)

 

(95)

(55)

 

(57)

 

(56)

 

(60)

 

(228)

 

Specialty Chemicals

 

(61)

 

(63)

 

(62)

 

(65)

 

(251)

(3)

 

(1)

 

(5)

 

(5)

 

(14)

 

Other activities/eliminations

 

(3)

 

(1)

 

(4)

 

(3)

 

(11)

(101)

 

(102)

 

(104)

 

(112)

 

(419)

 

Total

 

(114)

 

(115)

 

(115)

 

(119)

 

(463)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization

(15)

 

(14)

 

(14)

 

(18)

 

(61)

 

Decorative Paints

 

(16)

 

(17)

 

(18)

 

(19)

 

(70)

(7)

 

(7)

 

(7)

 

(9)

 

(30)

 

Performance Coatings

 

(9)

 

(8)

 

(10)

 

(9)

 

(36)

(12)

 

(12)

 

(13)

 

(16)

 

(53)

 

Specialty Chemicals

 

(13)

 

(15)

 

(13)

 

(14)

 

(55)

 

 

(1)

 

1

 

 

Other activities/eliminations

 

(1)

 

 

 

 

(1)

(34)

 

(33)

 

(35)

 

(42)

 

(144)

 

Total

 

(39)

 

(40)

 

(41)

 

(42)

 

(162)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBIT

42

 

147

 

119

 

19

 

327

 

Decorative Paints

 

47

 

115

 

86

 

1

 

249

115

 

142

 

129

 

109

 

495

 

Performance Coatings

 

132

 

180

 

169

 

157

 

638

174

 

151

 

169

 

131

 

625

 

Specialty Chemicals

 

161

 

177

 

152

 

93

 

583

(40)

 

(34)

 

(41)

 

(61)

 

(176)

 

Other activities/eliminations

 

(55)

 

(50)

 

(40)

 

(49)

 

(194)

291

 

406

 

376

 

198

 

1,271

 

Total

 

285

 

422

 

367

 

202

 

1,276

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8.4

 

10.7

 

10.0

 

5.6

 

8.7

 

EBIT margin (in %)

 

7.7

 

10.4

 

9.3

 

5.5

 

8.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

41

 

142

 

82

 

(30)

 

235

 

Decorative Paints

 

25

 

112

 

(2,058)

 

(91)

 

(2,012)

106

 

155

 

114

 

83

 

458

 

Performance Coatings

 

127

 

171

 

130

 

114

 

542

173

 

147

 

169

 

133

 

622

 

Specialty Chemicals

 

140

 

154

 

133

 

73

 

500

(40)

 

(12)

 

(39)

 

(79)

 

(170)

 

Other activities/eliminations

 

(59)

 

(59)

 

(67)

 

(89)

 

(274)

280

 

432

 

326

 

107

 

1,145

 

Total

 

233

 

378

 

(1,862)

 

7

 

(1,244)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8.0

 

11.4

 

8.6

 

3.0

 

7.8

 

ROS% before impairment

 

6.3

 

9.3

 

6.2

 

0.2

 

5.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Incidentals per Business Area

(1)

 

(5)

 

(37)

 

(49)

 

(92)

 

Decorative Paints

 

(22)

 

(3)

 

(2,144)

 

(92)

 

(2,261)

(9)

 

13

 

(15)

 

(26)

 

(37)

 

Performance Coatings

 

(5)

 

(9)

 

(39)

 

(43)

 

(96)

(1)

 

(4)

 

 

2

 

(3)

 

Specialty Chemicals

 

(21)

 

(23)

 

(19)

 

(20)

 

(83)

 

22

 

2

 

(18)

 

6

 

Other activities/eliminations

 

(4)

 

(9)

 

(27)

 

(40)

 

(80)

(11)

 

26

 

(50)

 

(91)

 

(126)

 

Total

 

(52)

 

(44)

 

(2,229)

 

(195)

 

(2,520)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Incidentals included in operating income

(8)

 

(20)

 

(47)

 

(54)

 

(129)

 

Restructuring costs

 

(33)

 

(43)

 

(100)

 

(148)

 

(324)

 

 

 

 

 

Impairment

 

 

 

(2,106)

 

 

(2,106)

1

 

21

 

2

 

(33)

 

(9)

 

Results related to major legal and environmental cases

 

(22)

 

3

 

(5)

 

(12)

 

(36)

 

26

 

(5)

 

(11)

 

10

 

Results on acquisitions and divestments

 

 

(5)

 

(6)

 

(34)

 

(45)

(4)

 

(1)

 

 

7

 

2

 

Other incidental results

 

3

 

1

 

(12)

 

(1)

 

(9)

(11)

 

26

 

(50)

 

(91)

 

(126)

 

Total

 

(52)

 

(44)

 

(2,229)

 

(195)

 

(2,520)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Incidentals per line item

(4)

 

(5)

 

(23)

 

(18)

 

(50)

 

Cost of sales

 

(34)

 

(11)

 

(20)

 

(53)

 

(118)

 

 

 

 

 

Impairment

 

 

 

(2,106)

 

 

(2,106)

(3)

 

(9)

 

(20)

 

(32)

 

(64)

 

Selling expenses

 

(6)

 

(21)

 

(51)

 

(57)

 

(135)

(1)

 

(4)

 

(1)

 

(18)

 

(24)

 

General and administrative expenses

 

(10)

 

(10)

 

(21)

 

(52)

 

(93)

 

 

(1)

 

(8)

 

(9)

 

Research and development expenses

 

(1)

 

(2)

 

(5)

 

(4)

 

(12)

(3)

 

44

 

(5)

 

(15)

 

21

 

Other operating income/(expenses)

 

(1)

 

 

(26)

 

(29)

 

(56)

(11)

 

26

 

(50)

 

(91)

 

(126)

 

Total

 

(52)

 

(44)

 

(2,229)

 

(195)

 

(2,520)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation net financing expense

14

 

17

 

14

 

12

 

57

 

Financing income

 

15

 

17

 

16

 

11

 

59

(61)

 

(59)

 

(57)

 

(125)

 

(302)

 

Financing expenses

 

(57)

 

(65)

 

(58)

 

(59)

 

(239)

(47)

 

(42)

 

(43)

 

(113)

 

(245)

 

Net interest on net debt

 

(42)

 

(48)

 

(42)

 

(48)

 

(180)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other interest movements

(15)

 

(13)

 

(14)

 

(15)

 

(57)

 

Financing expenses related to pensions

 

(16)

 

(16)

 

(16)

 

(17)

 

(65)

(5)

 

(12)

 

(13)

 

(16)

 

(46)

 

Interest on provisions

 

(3)

 

(18)

 

(9)

 

1

 

(29)

5

 

3

 

1

 

3

 

12

 

Other items

 

(4)

 

 

1

 

10

 

7

(15)

 

(22)

 

(26)

 

(28)

 

(91)

 

Net other financing charges

 

(23)

 

(34)

 

(24)

 

(6)

 

(87)

(62)

 

(64)

 

(69)

 

(141)

 

(336)

 

Net financing expenses

 

(65)

 

(82)

 

(66)

 

(54)

 

(267)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarterly net income analysis

7

 

8

 

9

 

 

24

 

Results from associates and joint ventures

 

4

 

5

 

5

 

(1)

 

13

(15)

 

(22)

 

(20)

 

(7)

 

(64)

 

Profit attributable to
non-controlling interests

 

(14)

 

(22)

 

(9)

 

(18)

 

(63)

225

 

376

 

266

 

(34)

 

833

 

Profit before tax

 

172

 

301

 

(1,923)

 

(48)

 

(1,498)

(75)

 

(102)

 

(81)

 

25

 

(233)

 

Income tax

 

(61)

 

(82)

 

(58)

 

29

 

(172)

150

 

274

 

185

 

(9)

 

600

 

Profit for the period from continuing operations

 

111

 

219

 

(1,981)

 

(19)

 

(1,670)

33

 

27

 

30

 

74

 

28

 

Effective tax rate (in %)

 

35

 

27

 

(3)

 

60

 

(11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share from continuing operations (in €)

0.58

 

1.08

 

0.71

 

(0.07)

 

2.29

 

Basic

 

0.41

 

0.83

 

(8.35)

 

(0.16)

 

(7.30)

0.57

 

1.07

 

0.70

 

(0.07)

 

2.27

 

Diluted

 

0.41

 

0.82

 

(8.35)

 

(0.16)

 

(7.30)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share from discontinued operations (in €)

(0.03)

 

0.07

 

(0.07)

 

(0.22)

 

(0.25)

 

Basic

 

(0.11)

 

0.02

 

(1.65)

 

(0.09)

 

(1.84)

(0.03)

 

0.07

 

(0.07)

 

(0.22)

 

(0.25)

 

Diluted

 

(0.11)

 

0.02

 

(1.65)

 

(0.09)

 

(1.84)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share from total operations (in €)

0.55

 

1.15

 

0.64

 

(0.29)

 

2.04

 

Basic

 

0.30

 

0.85

 

(10.00)

 

(0.25)

 

(9.14)

0.54

 

1.14

 

0.63

 

(0.29)

 

2.02

 

Diluted

 

0.30

 

0.84

 

(10.00)

 

(0.25)

 

(9.14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of shares (in millions)

233.6

 

233.9

 

234.0

 

234.3

 

233.9

 

Weighted average number of shares

 

235.1

 

236.9

 

238.2

 

238.6

 

237.2

233.7

 

234.0

 

234.0

 

234.7

 

234.7

 

Number of shares at end of quarter

 

235.6

 

238.2

 

238.2

 

239.0

 

239.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted earnings (in € millions)

225

 

376

 

266

 

(34)

 

833

 

Profit before tax from continuing operations

 

172

 

301

 

(1,923)

 

(48)

 

(1,498)

11

 

(26)

 

50

 

91

 

126

 

Incidentals reported in operating income

 

52

 

44

 

2,229

 

195

 

2,520

34

 

33

 

35

 

42

 

144

 

Amortization of intangible assets

 

39

 

40

 

41

 

42

 

162

(89)

 

(108)

 

(105)

 

(13)

 

(315)

 

Adjusted income tax

 

(87)

 

(104)

 

(104)

 

(52)

 

(347)

(15)

 

(22)

 

(20)

 

(7)

 

(64)

 

Non-controlling interests

 

(14)

 

(22)

 

(9)

 

(18)

 

(63)

166

 

253

 

226

 

79

 

724

 

Adjusted net income for continuing operations

 

162

 

259

 

234

 

119

 

774

0.71

 

1.08

 

0.97

 

0.34

 

3.10

 

Adjusted earnings per share (in €)

 

0.69

 

1.09

 

0.98

 

0.50

 

3.26


Notes to the statement of income

EBIT in “other”

Corporate costs in the quarter were in line with the previous year. For the full year, these costs were higher due to increased information management and integrated supply chain costs as a consequence of functional excellence initiatives and one-off costs.

4th quarter

 

 

 

January - December

2011

 

2012

 

in € millions

 

2011

 

2012

(29)

 

(31)

 

Corporate costs

 

(98)

 

(113)

(3)

 

(1)

 

Pensions

 

(14)

 

(4)

(9)

 

(1)

 

Insurances

 

1

 

(6)

(20)

 

(16)

 

Other

 

(65)

 

(71)

(61)

 

(49)

 

EBIT in “other”

 

(176)

 

(194)

Net financing expenses

Net financing charges for the year decreased by €69 million from €336 million to €267 million. Significant variances were:

Operating income to net income

4th quarter

 

 

 

January - December

2011

 

2012

 

in € millions

 

2011

 

2012

107

 

7

 

Operating income

 

1,145

 

(1,244)

(141)

 

(54)

 

Net financing expenses

 

(336)

 

(267)

 

(1)

 

Results from associates and joint ventures

 

24

 

13

(34)

 

(48)

 

Profit/(loss) before tax

 

833

 

(1,498)

25

 

29

 

Income tax

 

(233)

 

(172)

(9)

 

(19)

 

Profit/(loss) for the period from continuing operations

 

600

 

(1,670)

(52)

 

(22)

 

Profit/(loss) for the period from discontinued operations

 

(59)

 

(436)

(61)

 

(41)

 

Profit/(loss) for the period

 

541

 

(2,106)

(7)

 

(18)

 

Non-controlling interests

 

(64)

 

(63)

(68)

 

(59)

 

Net income

 

477

 

(2,169)

Tax

Excluding the non-tax-deductible goodwill impairment charge of €2,106 million, the year-to-date tax rate was 30 percent (2011: 27 percent). The tax rate was negatively impacted by several adjustments to previous years and by other non-taxable items. The Q4 tax charge is impacted positively by several adjustments to previous years. The loss carry-forward recognized in the balance sheet and its usage in the coming years has a decreasing impact on the cash tax rate in coming years.


Shareholders' equity

Shareholders’ equity as at year-end 2012 decreased to €6.9 billion, mainly due to the net effect of:


Final dividend

Our dividend policy is to pay a stable to rising dividend. We will propose a 2012 final dividend of €1.12 per share, which would make a total 2012 dividend of €1.45 (2011: €1.45) per share. There will be a stock dividend option with cash dividend as default.


Pensions

The funded status of the pension plans at year-end 2012 was estimated to be a deficit of €1.1 billion (year-end 2011: €0.5 billion; Q3 2012: €0.9 billion).

The movement compared with year-end 2011 is primarily due to:

Offset by:

The amended IAS 19 on pensions has become effective as of January 1, 2013. Implementation of this amendment will result in including the pension deficit in other comprehensive income in shareholders’ equity as of 2013. The impact is disclosed in our 2012 financial statements, from which the pension note is issued together with this report.


Workforce

At year-end 2012, we employed 50,610 staff in continuing operations (year-end 2011: 52,020 employees). The net decrease was due to:


Invested and operating working capital

Invested capital

in € millions

 

December 31, 2011

 

December 31, 2012

Trade receivables

 

2,213

 

2,172

Inventories

 

1,716

 

1,545

Trade payables

 

(2,038)

 

(2,058)

Operating working capital in Business Areas

 

1,891

 

1,659

Other working capital items

 

(905)

 

(958)

Non-current assets

 

13,295

 

10,956

Less investments in associates and joint ventures

 

(198)

 

(185)

Deferred tax liabilities

 

(567)

 

(442)

Discontinued operations

 

(903)

 

Invested capital

 

12,613

 

11,030

Invested capital at year-end 2012 totaled €11.0 billion, €1.6 billion lower than at year-end 2011. Invested capital was impacted by the net effect of:

Operating working capital

in € millions, % of revenue

 

December 31, 2011

 

December 31, 2012

Decorative Paints

 

434

 

11.2

 

353

 

8.9

Performance Coatings

 

772

 

14.6

 

742

 

13.3

Specialty Chemicals

 

685

 

13.3

 

564

 

10.7

Total

 

1,891

 

13.2

 

1,659

 

11.2

In % of revenue

AkzoNobel – Operating working capital (bar chart)

Cash flows and net debt

Operating activities in 2012 resulted in a cash inflow of €737 million (2011: €396 million). The change is mainly due to a net effect of:

Partly offset by:

Net debt increased in 2012 to €2,298 million (2011: €1,895 million) as higher cash flows from operating activities were more than offset by higher capital expenditures.


General information

Accounting policies

The full-year 2012 financial figures of AkzoNobel included in the primary statements in this report are derived from the Financial statements 2012. These Financial statements have been authorized for issue. The Financial statements have not yet been published by law and still have to be adopted by the general meeting of shareholders. In accordance with section 2:393 BW, KPMG Accountants N.V. has issued an unqualified auditors opinion on these Financial statements, which will be published on February 27, 2013. All quarterly figures are unaudited. Compared with the 2011 Financial statements the major accounting principles are unchanged.

As from 2013, the amended IAS 19 on pensions will become effective and the impact will be disclosed in our 2012 Financial statements. Implementation of this amendment will result in recognizing the full pension liability and the pension deficit, as disclosed in the Pensions chapter, will be recognized in other comprehensive income in shareholders’ equity.

Seasonality

Revenue and results in Decorative Paints are impacted by seasonal influences. Revenue and profitability tend to be higher in the second and third quarter of the year as weather conditions determine whether paints and coatings can be applied. In Performance Coatings, revenue and profitability vary with building patterns from original equipment manufacturers. In Specialty Chemicals, the Functional Chemicals and the Surface Chemistry businesses experience seasonal influences. Revenue and profitability are affected by developments in the agricultural season and tend to be higher in the first half of the year.

The ‘‘other” category

In the category “other” we report activities which are not allocated to a particular business area. Corporate costs are the unallocated costs of our head office and shared services center in the Netherlands. Pensions reflects pension costs after the elimination of interest cost (reported as financing expenses).

Insurances are the results from our captive insurance companies. Other includes the cost of share-based compensation and company projects, the results of treasury and legacy operations as well as the unallocated cost of some country organizations.


Adjusted earnings per share are the basic earnings per share from continuing operations excluding incidentals in operating income, amortization of intangible assets and tax on these adjustments.

Comprehensive income is the change in equity during a period resulting from transactions and other events other than those changes resulting from transactions with shareholders in their capacity as shareholders.

EBIT is operating income before incidentals.

EBIT margin is EBIT as percentage of revenue.

EBITDA is EBIT before depreciation and amortization and refers to EBITDA before incidentals.

EBITDA margin is EBITDA as percentage of revenue.

Emerging Europe: Central and Eastern Europe (excluding Austria), Baltic States and Turkey.

Incidentals are special charges and benefits, results on acquisitions and divestments, restructuring and impairment charges, and charges related to major legal, anti-trust, and environmental cases. EBITDA and EBIT before incidentals are key figures we use to assess our performance, as these figures better reflect the underlying trends in the results of the activities.

Invested capital is total assets (excluding cash and cash equivalents, investments in associates, assets held for sale) less current income tax payable, deferred tax liabilities and trade and other payables.

Mature markets comprise of Western Europe, the US, Canada, Japan and Oceania.

Moving average ROI is calculated as EBIT of the last twelve months divided by average invested capital.

Net debt is defined aslong-term borrowings plus short-term borrowings less cash and cash equivalents.

Operating income is defined in accordance with IFRS and includes the relevant incidental results.

Operating working capital is defined as the sum of inventories, trade receivables and trade payables in the Business Areas. When expressed as a ratio, operating working capital is measured against four times last quarter revenue.

ROS% is operating income as percentage of revenue.