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AkzoNobel Q3 2013


Overview


Our quarterly results at a glance

  • Revenue down 5 percent, mainly due to adverse currency effects and divestments
  • Operating income at €303 million (2012: €248 million excluding impairment), mainly driven by lower restructuring costs and higher volumes
  • Net income attributable to shareholders €155 million (2012: €110 million excluding impairment)
  • Adjusted EPS stable at €0.74
  • Interim dividend of €0.33 declared
  • AkzoNobel ranked first in the Dow Jones Sustainability Index in the Materials industry group
  • Divestment of Building Adhesives completed on October 1
  • Performance improvement program on track with estimated €160 million restructuring charges in Q4
  • Expected higher restructuring charges, and continued weak markets, mean that full-year operating income before incidental items is unlikely to exceed €908 million

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 was down 5 percent, mainly due to adverse currency effects and divestments. Operating income was significantly higher than the previous year at €303 million, mainly driven by lower restructuring charges and higher volumes. The performance improvement program is on track with estimated €160 million restructuring charges in Q4. Cash from operating activities was €552 million (2012: €460 million), mainly due to higher operating income and lower payments from provisions.

Summary of financial outcomes

3rd quarter

 

 

 

 

 

January - September

2012

 

2013

 

Δ%

 

in € millions

 

2012

 

2013

 

Δ%

3,966

 

3,778

 

(5)

 

Revenue

 

11,717

 

11,108

 

(5)

248

 

303

 

22

 

Operating income (excluding impairment)

 

872

 

842

 

(3)

6.3

 

8.0

 

 

 

ROS% (excluding impairment)

 

7.4

 

7.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Invested capital

 

10,414

 

9,842

 

 

 

 

 

 

 

 

Moving average ROI (in %)

 

8.0

 

8.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

428

 

456

 

7

 

EBITDA

 

1,392

 

1,305

 

(6)

195

 

133

 

 

 

Capital expenditures

 

496

 

432

 

 

460

 

552

 

 

 

Net cash from operating activities

 

107

 

407

 

 

 

 

 

 

 

 

Net debt

 

2,597

 

1,817

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

130

 

154

 

18

 

Net income from continuing operations (excluding impairment)

 

455

 

558

 

23

(20)

 

1

 

 

 

Net income from discontinued operations (excluding impairment)

 

(42)

 

115

 

 

110

 

155

 

41

 

Net income attributable to shareholders (excluding impairment)

 

413

 

673

 

63

(2,368)

 

155

 

 

 

Net income attributable to shareholders (including impairment)

 

(2,065)

 

673

 

 

(9.94)

 

0.64

 

 

 

Earnings per share from total operations (in €)

 

(8.66)

 

2.79

 

 

0.74

 

0.74

 

 

 

Adjusted earnings per share (in €)

 

2.45

 

2.63

 

 

 

 

 

 

 

 

Number of employees

 

52,310

 

50,420

 

 


Revenue

3rd quarter

 

 

 

 

 

January - September

2012

 

2013

 

Δ%

 

in € millions

 

2012

 

2013

 

Δ%

1,141

 

1,136

 

 

Decorative Paints

 

3,302

 

3,240

 

(2)

1,467

 

1,415

 

(4)

 

Performance Coatings

 

4,308

 

4,204

 

(2)

1,393

 

1,252

 

(10)

 

Specialty Chemicals

 

4,223

 

3,749

 

(11)

(35)

 

(25)

 

 

 

Other activities/eliminations

 

(116)

 

(85)

 

 

3,966

 

3,778

 

(5)

 

Total

 

11,717

 

11,108

 

(5)

Revenue development Q3 2013

AkzoNobel – Revenue development Q3 2013 (bar chart)

in % versus Q3 2012

 

Volume

 

Price/mix

 

Divestments

 

Exchange
rates

 

Total

Decorative Paints

 

5

 

2

 

 

(7)

 

Performance Coatings

 

2

 

 

 

(6)

 

(4)

Specialty Chemicals

 

 

 

(6)

 

(4)

 

(10)

Total

 

2

 

1

 

(2)

 

(6)

 

(5)

Volume development per quarter
(year-on-year)

 

Q3 12

 

Q4 12

 

Q1 13

 

Q2 13

 

Q3 13

Decorative Paints

 

(6)

 

2

 

(1)

 

4

 

5

Performance Coatings

 

 

(2)

 

(3)

 

 

2

Specialty Chemicals

 

(2)

 

(1)

 

(4)

 

(5)

 

Total

 

(3)

 

(1)

 

(3)

 

 

2

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

 

Q3 12

 

Q4 12

 

Q1 13

 

Q2 13

 

Q3 13

Decorative Paints

 

1

 

 

(1)

 

(2)

 

2

Performance Coatings

 

3

 

3

 

1

 

 

Specialty Chemicals

 

(1)

 

1

 

(2)

 

(2)

 

Total

 

1

 

2

 

(1)

 

(1)

 

1


Investments and divestments


Operating income

In Q3 2012, the ongoing businesses of Decorative Paints recorded a goodwill impairment of €2,106 million. An amount of €372 million was recorded for the Decorative Paints business in North America in results from discontinued operations. In this report, impairments from the 2012 numbers are excluded from operating income to present comparable financial outcomes.

Average raw material costs are expected to be stable in the remainder of the year.

Operating income (excluding impairment)

3rd quarter

 

 

 

 

 

January - September

2012

 

2013

 

Δ%

 

in € millions

 

2012

 

2013

 

Δ%

48

 

107

 

123

 

Decorative Paints

 

185

 

252

 

36

130

 

160

 

23

 

Performance Coatings

 

428

 

452

 

6

133

 

107

 

(20)

 

Specialty Chemicals

 

427

 

327

 

(23)

(63)

 

(71)

 

 

 

Other activities/eliminations

 

(168)

 

(189)

 

 

248

 

303

 

22

 

Total

 

872

 

842

 

(3)


Performance improvement program

The performance improvement program announced in October 2011 is on track to deliver the full €500 million in EBITDA at the end of the year. Further efficiency and cost reduction measures have also been identified as restructuring activities are stepped up, the benefits of which will be realized in 2014 and beyond. As previously indicated, the majority of the restructuring charges for the second half of 2013 will be taken in the fourth quarter. Year-to-date restructuring costs are €144 million of an expected full-year total of around €300 million (2012: €292 million). In Q3, restructuring costs amounted to €75 million (2012: €101 million).

The return on sales in the quarter, before restructuring charges, has improved in all three business areas.


Outlook and 2015 targets

The economic environment remains challenging and we do not expect an early improvement in the trends faced in our end-user market segments. Restructuring charges in the fourth quarter are estimated at around €160 million. This means that full-year operating income before incidental items is unlikely to exceed €908 million. The acceleration of the performance improvement program and the strategic priorities announced in February are the right focus to have in these markets:

Amsterdam, October 21, 2013
The Board of Management


Financial calendar

October 23, 2013
Ex-dividend date of 2013 interim dividend

October 25, 2013
Record date of 2013 interim dividend

October 28, 2013 - November 19, 2013
Election period cash or stock interim dividend

November 26
Payment date of cash dividend and delivery of new shares

February 6, 2014
Report for the year 2013 and the 4th quarter

April 17, 2014
Report for the 1st quarter 2014

April 29, 2014
Annual General Meeting of shareholders

July 23, 2014
Report for the 2nd quarter 2014

October 21, 2014
Report for the 3rd quarter 2014


Decorative Paints – Overview

  • Revenues stable, with adverse currency effects (7 percent) compensated by higher volume
  • Positive volume development in Asia and Latin America, offsetting the adverse currency effects
  • Operating income above the previous year, due to lower costs and lower restructuring charges
  • Streamlining management structure to increase competitiveness

Q3 revenue in Decorative Paints was flat. Volumes in Q3 were higher in all our markets, with no significant mix effect, however offset by 7 percent adverse currency effects. Costs and restructuring charges were below the previous year, resulting in operating income of €107 million, more than double Q3 2012.

Revenue development Q3 2013

Decorative Paints – Revenue development Q3 2013 (bar chart)

Key figures

Revenue

3rd quarter

 

 

 

 

 

January - September

2012

 

2013

 

Δ%

 

in € millions

 

2012

 

2013

 

Δ%

698

 

705

 

1

 

Decorative Paints Europe

 

2,096

 

2,019

 

(4)

160

 

155

 

(3)

 

Decorative Paints Latin America

 

429

 

429

 

271

 

276

 

2

 

Decorative Paints Asia

 

769

 

792

 

3

12

 

 

 

 

Other/intragroup eliminations

 

8

 

 

 

1,141

 

1,136

 

 

Total

 

3,302

 

3,240

 

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

48

 

107

 

123

 

Operating income (excluding impairment)

 

185

 

252

 

36

4.2

 

9.4

 

 

 

ROS% (excluding impairment)

 

5.6

 

7.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Invested capital

 

3,270

 

2,799

 

 

 

 

 

 

 

 

Moving average ROI (in %)

 

3.0

 

5.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

97

 

146

 

51

 

EBITDA

 

320

 

375

 

17

44

 

39

 

 

 

Capital expenditures

 

114

 

106

 

 

 

 

 

 

 

 

Number of employees

 

17,220

 

16,860

 

 


Europe

Revenue in Europe was up 1 percent. Volumes were stronger in the southern region (Greece, Spain and Italy), but most countries continued to be affected by weak European demand. We continued to grow in countries such as the UK, Russia and Turkey. Restructuring measures and various operational efficiency improvement programs led to a lower cost base. As a result, operating income was higher than the previous year.


Latin America

Revenue decreased 3 percent, with strong volume development offset by an adverse currency impact in Brazil. Margins improved due to lower material costs and improved formulations. Costs increased due to additional manpower to support growth.


Asia

Revenue was up 2 percent, with strong volumes offset by an adverse currency impact in the region. China saw healthy growth in all segments. Profitability increased in the region due to lower costs.


Performance Coatings – Overview

  • Revenue down 4 percent, due to adverse currency effects (6 percent)
  • Volume increased 2 percent compared with the previous year
  • Operating income up 23 percent due to lower restructuring costs
  • Continued focus on cost control and operational efficiencies

Revenue declined 4 percent compared with the previous year, due to adverse currency effects which more than offset positive volume development. Weak demand in Europe continued to impact all businesses. Operating income improved due to lower restructuring costs in 2013 compared with the previous year.

Revenue development Q3 2013

Performance Coatings – Revenue development Q3 2013 (bar chart)

Performance Coatings – Key figures

Revenue

3rd quarter

 

 

 

 

 

January - September

2012

 

2013

 

Δ%

 

in € millions

 

2012

 

2013

 

Δ%

405

 

373

 

(8)

 

Marine and Protective Coatings

 

1,185

 

1,124

 

(5)

330

 

332

 

1

 

Automotive and Aerospace Coatings

 

969

 

989

 

2

253

 

254

 

 

Powder Coatings

 

752

 

736

 

(2)

485

 

461

 

(5)

 

Industrial Coatings

 

1,420

 

1,375

 

(3)

(6)

 

(5)

 

 

 

Other/intragroup eliminations

 

(18)

 

(20)

 

 

1,467

 

1,415

 

(4)

 

Total

 

4,308

 

4,204

 

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

130

 

160

 

23

 

Operating income

 

428

 

452

 

6

8.9

 

11.3

 

 

 

ROS%

 

9.9

 

10.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Invested capital

 

2,559

 

2,439

 

 

 

 

 

 

 

 

Moving average ROI (in %)

 

20.6

 

22.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

163

 

193

 

18

 

EBITDA

 

526

 

553

 

5

23

 

26

 

 

 

Capital expenditures

 

66

 

78

 

 

 

 

 

 

 

 

Number of employees

 

21,650

 

21,440

 

 


Marine and Protective Coatings

Revenue dropped 8 percent due to currency and price/mix. In Marine, the new construction segment continued to decline, but growth was sustained in the Protective Coatings oil and gas sector.


Automotive and Aerospace Coatings

Revenue was up 1 percent, supported by price/mix and volumes, although currencies had an adverse impact. In Vehicle Refinish, volumes in Europe showed mixed results. Growth was achieved in Eastern Europe, but conditions were challenging in Northern and Southern Europe. It was a similarly varied picture elsewhere, with growth in the US and Latin America, while Asia produced mixed results. Our Aerospace and Specialty Finishes activities both achieved volume growth. Initiatives to control costs continued during the quarter.


Powder Coatings

Revenue was in line with the previous year, with the adverse currency impact being offset by favorable volume. Volumes were up in Europe, Asia and the Americas, with growth in the automotive and architectural segments. The appliance sector was more challenging, with volumes declining. Initiatives launched in 2012 helped to control costs during the quarter. We also announced the expansion of manufacturing facilities in western China.


Industrial Coatings

Revenue declined 5 percent due to currencies, partially offset by favorable price/mix. Europe continued to face challenging economic conditions, while the Asia Pacific region continued to grow. Conditions remained challenging in the packaging segment, however Coil posted improved results, particularly in Asia Pacific. Wood Finishes remained at 2012 levels.


Specialty Chemicals – Overview

  • Revenue down 10 percent, due to Chemicals Pakistan divestment (6 percent) and adverse currency effects (4 percent)
  • Total volumes during the quarter were flat with the previous year
  • Operating income down 20 percent to €107 million, mainly due to restructuring costs
  • Performance improvement measures continue to be carried out in all businesses

Revenue declined compared with the previous year due to divestments and adverse currency developments. Volumes were stable overall but lower in the construction and agriculture segments. Operating income was lower than in 2012, mainly due to restructuring costs in Functional Chemicals.

Revenue development Q3 2013

Specialty Chemicals – Revenue development Q3 2013 (bar chart)

Specialty Chemicals – Key figures

Revenue

3rd quarter

 

 

 

 

 

January - September

2012

 

2013

 

Δ%

 

in € millions

 

2012

 

2013

 

Δ%

489

 

470

 

(4)

 

Functional Chemicals

 

1,506

 

1,425

 

(5)

298

 

303

 

(2)

 

Industrial Chemicals

 

892

 

873

 

(2)

279

 

256

 

(8)

 

Surface Chemistry

 

856

 

778

 

(9)

287

 

257

 

(10)

 

Pulp and Performance Chemicals

 

858

 

777

 

(9)

74

 

 

(100)

 

Chemicals Pakistan

 

215

 

 

(100)

(34)

 

(34)

 

 

 

Other/intragroup eliminations

 

(104)

 

(104)

 

 

1,393

 

1,252

 

(10)

 

Total

 

4,223

 

3,749

 

(11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

133

 

107

 

(20)

 

Operating income

 

427

 

327

 

(23)

9.5

 

8.5

 

 

 

ROS%

 

10.1

 

8.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Invested capital

 

3,702

 

3,617

 

 

 

 

 

 

 

 

Moving average ROI (in %)

 

15.5

 

11.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

208

 

185

 

(11)

 

EBITDA

 

678

 

557

 

(18)

125

 

66

 

 

 

Capital expenditures

 

307

 

244

 

 

 

 

 

 

 

 

Number of employees

 

11,950

 

10,580

 

 


Functional Chemicals

Revenues were down, mainly due to an adverse currency impact. Some recovery in volumes is visible together with initial signs of stabilization in ethylene amines. Overall market conditions remained challenging in Europe for the construction market and general manufacturing.

During the quarter, plans were announced to phase out the production of organic peroxides at the Deventer site, Netherlands, and consolidate this at other facilities. Meanwhile, our new Performance Additives plant in Ningbo, China, started commercial production, which will substantially enhance our regional position.


Industrial Chemicals

Revenues were up, partly based on increased exports to the US and higher volumes for MCA. Margins, however, remain under pressure in all segments.


Surface Chemistry

Revenues were down, due mainly to lower sales in the agriculture and water treatment segments and the previously announced exit from the merchant fatty acids business in China. This was partly offset by growth in the personal care segment.


Pulp and Performance Chemicals

Revenues were down, mainly due to adverse currency effects and lower volumes resulting from exited paper activities. Volumes from bleaching chemicals increased due to investments in our Chemical Islands in Brazil, which partly compensated for weaker demand in Europe and the US.


Condensed financial statements


Consolidated statement of income

3rd quarter

 

 

 

January - September

2012

 

2013

 

in € millions

 

2012

 

2013

 

 

 

 

 

 

 

 

 

Continuing operations

3,966

 

3,778

 

Revenue

 

11,717

 

11,108

(2,447)

 

(2,296)

 

Cost of sales

 

(7,233)

 

(6,753)

1,519

 

1,482

 

Gross profit

 

4,484

 

4,355

(2,106)

 

 

Impairment

 

(2,106)

 

(829)

 

(763)

 

Selling expenses

 

(2,373)

 

(2,256)

(313)

 

(311)

 

General and administrative expenses

 

(917)

 

(965)

(98)

 

(92)

 

Research and development expenses

 

(285)

 

(276)

(31)

 

(13)

 

Other operating income/(expenses)

 

(37)

 

(16)

(1,858)

 

303

 

Operating income

 

(1,234)

 

842

(50)

 

(56)

 

Net financing expenses

 

(167)

 

(152)

5

 

4

 

Results from associates and joint ventures

 

14

 

13

(1,903)

 

251

 

Profit before tax

 

(1,387)

 

703

(64)

 

(83)

 

Income tax

 

(219)

 

(90)

(1,967)

 

168

 

Profit for the period from continuing operations

 

(1,606)

 

613

 

 

 

 

 

 

 

 

 

Discontinued operations

(392)

 

1

 

Profit for the period from discontinued operations

 

(414)

 

115

(2,359)

 

169

 

Profit for the period

 

(2,020)

 

728

 

 

 

 

 

 

 

 

 

Attributable to

(2,368)

 

155

 

Shareholders of the company

 

(2,065)

 

673

9

 

14

 

Non-controlling interests

 

45

 

55

(2,359)

 

169

 

Profit for the period

 

(2,020)

 

728


Consolidated statement of comprehensive income

3rd quarter

 

 

 

January - September

2012

 

2013

 

in € millions

 

2012

 

2013

(2,359)

 

169

 

Profit for the period

 

(2,020)

 

728

 

 

 

 

 

 

 

 

 

Other comprehensive income

3

 

(164)

 

Exchange differences arising on translation of foreign operations

 

150

 

(368)

7

 

18

 

Cash flow hedges

 

(6)

 

2

(299)

 

(383)

 

Post-retirement benefits

 

(1,024)

 

(146)

74

 

(16)

 

Tax relating to components of other comprehensive income

 

250

 

(50)

(215)

 

(545)

 

Other comprehensive income for the period (net of tax)

 

(630)

 

(562)

(2,574)

 

(376)

 

Comprehensive income for the period

 

(2,650)

 

166

 

 

 

 

 

 

 

 

 

Comprehensive income for the period attributable to

(2,579)

 

(366)

 

Shareholders of the company

 

(2,693)

 

142

5

 

(10)

 

Non-controlling interests

 

43

 

24

(2,574)

 

(376)

 

Comprehensive income for the period

 

(2,650)

 

166


Condensed consolidated balance sheet*

in € millions

 

December 31, 2012

 

September 30, 2013

*

Restated for the revised IAS 19

Assets

 

 

 

 

Non-current assets

 

 

 

 

Intangible assets

 

4,454

 

4,237

Property, plant and equipment

 

3,739

 

3,636

Other financial non-current assets

 

2,628

 

2,499

Total non-current assets

 

10,821

 

10,372

 

 

 

 

 

Current assets

 

 

 

 

Inventories

 

1,545

 

1,483

Trade and other receivables

 

2,698

 

2,831

Cash and cash equivalents

 

1,752

 

2,236

Other current assets

 

91

 

86

Assets held for sale

 

921

 

112

Total current assets

 

7,007

 

6,748

Total assets

 

17,828

 

17,120

 

 

 

 

 

Equity and liabilities

 

 

 

 

Total equity

 

6,228

 

6,223

 

 

 

 

 

Non-current liabilities

 

 

 

 

Provisions and deferred tax liabilities

 

3,111

 

2,792

Long-term borrowings

 

3,388

 

2,684

Total non-current liabilities

 

6,499

 

5,476

 

 

 

 

 

Current liabilities

 

 

 

 

Short-term borrowings

 

662

 

1,369

Trade and other payables

 

3,242

 

3,233

Other short-term liabilities

 

845

 

772

Liabilities held for sale

 

352

 

47

Total current liabilities

 

5,101

 

5,421

Total equity and liabilities

 

17,828

 

17,120


Changes in equity*

in € millions

 

Subscribed share capital

 

Additional paid-in capital

 

Cashflow hedge reserve

 

Cumulative translation reserves

 

Other reserves

 

Share-
holders’ equity

 

Non-
controlling interests

 

Total equity

*

Restated for the revised IAS 19

Balance at January 1, 2012

 

469

 

47

 

(9)

 

4

 

8,520

 

9,031

 

529

 

9,560

Profit for the period

 

 

 

 

 

(2,065)

 

(2,065)

 

45

 

(2,020)

Other comprehensive income

 

 

 

(6)

 

153

 

(775)

 

(628)

 

(2)

 

(630)

Comprehensive income
for the period

 

 

 

(6)

 

153

 

(2,840)

 

(2,693)

 

43

 

(2,650)

Dividend paid

 

5

 

90

 

 

 

(263)

 

(168)

 

(28)

 

(196)

Equity-settled transactions

 

 

 

 

 

30

 

30

 

 

30

Issue of common shares

 

2

 

4

 

 

 

 

6

 

 

6

Acquisitions and divestments

 

 

 

 

 

(14)

 

(14)

 

(39)

 

(53)

Balance at September 30, 2012

 

476

 

141

 

(15)

 

157

 

5,433

 

6,192

 

505

 

6,697

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2013

 

478

 

174

 

(17)

 

59

 

5,070

 

5,764

 

464

 

6,228

Profit for the period

 

 

 

 

 

673

 

673

 

55

 

728

Other comprehensive income

 

 

 

1

 

(349)

 

(183)

 

(531)

 

(31)

 

(562)

Comprehensive income
for the period

 

 

 

1

 

(349)

 

490

 

142

 

24

 

166

Dividend paid

 

4

 

106

 

 

 

(268)

 

(158)

 

(59)

 

(217)

Equity-settled transactions

 

 

 

 

 

33

 

33

 

 

33

Issue of common shares

 

2

 

11

 

 

 

 

13

 

 

13

Acquisitions and divestments

 

 

 

 

 

1

 

1

 

(1)

 

Balance at September 30, 2013

 

484

 

291

 

(16)

 

(290)

 

5,326

 

5,795

 

428

 

6,223


Condensed consolidated statement of cash flows

3rd quarter

 

 

 

 

 

January - September

2012

 

2013

 

in € millions

 

2012

 

2013

993

 

1,727

 

Cash and cash equivalents at beginning of period

 

1,335

 

1,558

 

 

 

 

 

 

 

 

 

 

 

Adjustments to reconcile earnings to cash generated
from operating activities

 

 

(1,967)

 

168

 

Profit for the period from continuing operations

 

(1,606)

 

613

156

 

153

 

Amortization and depreciation

 

464

 

463

246

 

183

 

Changes in working capital

 

(218)

 

(290)

(134)

 

(37)

 

Changes in provisions

 

(711)

 

(354)

2,159

 

85

 

Other changes

 

2,178

 

(25)

460

 

552

 

Net cash from operating activities

 

107

 

407

(195)

 

(133)

 

Capital expenditures

 

(496)

 

(432)

3

 

10

 

Acquisitions and divestments net of cash acquired

 

(10)

 

4

5

 

7

 

Other changes

 

18

 

29

(187)

 

(116)

 

Net cash from investing activities

 

(488)

 

(399)

70

 

5

 

Changes from borrowings

 

582

 

109

(8)

 

(30)

 

Dividends

 

(189)

 

(216)

(38)

 

 

Other changes

 

(47)

 

12

24

 

(25)

 

Net cash from financing activities

 

346

 

(95)

297

 

411

 

Net cash used for continuing operations

 

(35)

 

(87)

12

 

 

Cash flows from discontinued operations

 

(15)

 

692

309

 

411

 

Net change in cash and cash equivalents of total operations

 

(50)

 

605

5

 

(31)

 

Effect of exchange rate changes on cash and cash equivalents

 

22

 

(56)

1,307

 

2,107

 

Cash and cash equivalents at September 30

 

1,307

 

2,107


Notes to the condensed financial statements


Quarterly statistics

2012

 

 

 

 

 

 

 

 

 

2013

Q1

 

Q2

 

Q3

 

Q4

 

year

 

in € millions

 

Q1

 

Q2

 

Q3

 

Year-to-date

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

974

 

1,187

 

1,141

 

995

 

4,297

 

Decorative Paints

 

925

 

1,179

 

1,136

 

3,240

1,369

 

1,472

 

1,467

 

1,394

 

5,702

 

Performance Coatings

 

1,331

 

1,458

 

1,415

 

4,204

1,399

 

1,431

 

1,393

 

1,320

 

5,543

 

Specialty Chemicals

 

1,244

 

1,253

 

1,252

 

3,749

(35)

 

(46)

 

(35)

 

(36)

 

(152)

 

Other activities/eliminations

 

(35)

 

(25)

 

(25)

 

(85)

3,707

 

4,044

 

3,966

 

3,673

 

15,390

 

Total

 

3,465

 

3,865

 

3,778

 

11,108

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

 

 

 

 

 

 

 

 

 

68

 

155

 

97

 

(36)

 

284

 

Decorative Paints

 

88

 

141

 

146

 

375

159

 

204

 

163

 

147

 

673

 

Performance Coatings

 

163

 

197

 

193

 

553

235

 

235

 

208

 

152

 

830

 

Specialty Chemicals

 

174

 

198

 

185

 

557

(52)

 

(40)

 

(40)

 

(58)

 

(190)

 

Other activities/eliminations

 

(50)

 

(62)

 

(68)

 

(180)

410

 

554

 

428

 

205

 

1,597

 

Total

 

375

 

474

 

456

 

1,305

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11.1

 

13.7

 

10.8

 

5.6

 

10.4

 

EBITDA margin (in %)

 

10.8

 

12.3

 

12.1

 

11.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

 

 

 

 

 

 

 

 

 

(27)

 

(26)

 

(26)

 

(27)

 

(106)

 

Decorative Paints

 

(28)

 

(28)

 

(24)

 

(80)

(23)

 

(25)

 

(23)

 

(24)

 

(95)

 

Performance Coatings

 

(25)

 

(25)

 

(24)

 

(74)

(61)

 

(63)

 

(62)

 

(65)

 

(251)

 

Specialty Chemicals

 

(62)

 

(64)

 

(66)

 

(192)

(3)

 

(1)

 

(4)

 

(3)

 

(11)

 

Other activities/eliminations

 

(4)

 

(2)

 

(3)

 

(9)

(114)

 

(115)

 

(115)

 

(119)

 

(463)

 

Total

 

(119)

 

(119)

 

(117)

 

(355)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization

 

 

 

 

 

 

 

 

 

 

(16)

 

(17)

 

(18)

 

(19)

 

(70)

 

Decorative Paints

 

(17)

 

(11)

 

(15)

 

(43)

(9)

 

(8)

 

(10)

 

(9)

 

(36)

 

Performance Coatings

 

(9)

 

(9)

 

(9)

 

(27)

(13)

 

(15)

 

(13)

 

(14)

 

(55)

 

Specialty Chemicals

 

(13)

 

(13)

 

(12)

 

(38)

(1)

 

 

 

 

(1)

 

Other activities/eliminations

 

 

 

 

(39)

 

(40)

 

(41)

 

(42)

 

(162)

 

Total

 

(39)

 

(33)

 

(36)

 

(108)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBIT

 

 

 

 

 

 

 

 

 

 

25

 

112

 

53

 

(82)

 

108

 

Decorative Paints

 

43

 

102

 

107

 

252

127

 

171

 

130

 

114

 

542

 

Performance Coatings

 

129

 

163

 

160

 

452

161

 

157

 

133

 

73

 

524

 

Specialty Chemicals

 

99

 

121

 

107

 

327

(56)

 

(41)

 

(44)

 

(61)

 

(202)

 

Other activities/eliminations

 

(54)

 

(64)

 

(71)

 

(189)

257

 

399

 

272

 

44

 

972

 

Total

 

217

 

322

 

303

 

842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6.9

 

9.9

 

6.9

 

1.2

 

6.3

 

EBIT margin (in %)

 

6.3

 

8.3

 

8.0

 

7.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

 

 

 

 

 

 

 

 

25

 

112

 

(2,058)

 

(91)

 

(2,012)

 

Decorative Paints

 

43

 

102

 

107

 

252

127

 

171

 

130

 

114

 

542

 

Performance Coatings

 

129

 

163

 

160

 

452

140

 

154

 

133

 

73

 

500

 

Specialty Chemicals

 

99

 

121

 

107

 

327

(56)

 

(49)

 

(63)

 

(60)

 

(228)

 

Other activities/eliminations

 

(54)

 

(64)

 

(71)

 

(189)

236

 

388

 

(1,858)

 

36

 

(1,198)

 

Total

 

217

 

322

 

303

 

842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6.4

 

9.6

 

6.3

 

1.0

 

5.9

 

ROS% before impairment

 

6.3

 

8.3

 

8.0

 

7.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Incidentals per Business Area

 

 

(2,111)

 

(9)

 

(2,120)

 

Decorative Paints

 

 

 

 

 

 

 

 

 

Performance Coatings

 

 

 

 

(21)

 

(3)

 

 

 

(24)

 

Specialty Chemicals

 

 

 

 

 

(8)

 

(19)

 

1

 

(26)

 

Other activities/eliminations

 

 

 

 

(21)

 

(11)

 

(2,130)

 

(8)

 

(2,170)

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Incidentals included in operating income

 

 

 

 

 

Restructuring costs

 

 

 

 

 

 

(2,106)

 

 

(2,106)

 

Impairment

 

 

 

 

(21)

 

2

 

(1)

 

 

(20)

 

Results related to major legal and environmental cases

 

 

 

 

 

 

(5)

 

(25)

 

(30)

 

Results on acquisitions and divestments

 

 

 

 

 

(13)

 

(18)

 

17

 

(14)

 

Other incidental results

 

 

 

 

(21)

 

(11)

 

(2,130)

 

(8)

 

(2,170)

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation net financing expense

15

 

17

 

16

 

11

 

59

 

Financing income

 

9

 

8

 

6

 

23

(57)

 

(65)

 

(58)

 

(59)

 

(239)

 

Financing expenses

 

(56)

 

(57)

 

(54)

 

(167)

(42)

 

(48)

 

(42)

 

(48)

 

(180)

 

Net interest on net debt

 

(47)

 

(49)

 

(48)

 

(144)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other interest movements

(1)

 

(1)

 

 

(1)

 

(3)

 

Financing expenses related to pensions

 

(5)

 

(5)

 

(5)

 

(15)

(3)

 

(18)

 

(9)

 

1

 

(29)

 

Interest on provisions

 

(12)

 

15

 

(8)

 

(5)

(4)

 

 

1

 

10

 

7

 

Other items

 

1

 

6

 

5

 

12

(8)

 

(19)

 

(8)

 

10

 

(25)

 

Net other financing charges

 

(16)

 

16

 

(8)

 

(8)

(50)

 

(67)

 

(50)

 

(38)

 

(205)

 

Net financing expenses

 

(63)

 

(33)

 

(56)

 

(152)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarterly net income analysis

4

 

5

 

5

 

(1)

 

13

 

Results from associates and joint ventures

 

3

 

6

 

4

 

13

(14)

 

(22)

 

(9)

 

(18)

 

(63)

 

Profit attributable to non-controlling interests

 

(16)

 

(25)

 

(14)

 

(55)

190

 

326

 

(1,903)

 

(3)

 

(1,390)

 

Profit before tax

 

157

 

295

 

251

 

703

(66)

 

(89)

 

(64)

 

16

 

(203)

 

Income tax

 

(45)

 

38

 

(83)

 

(90)

124

 

237

 

(1,967)

 

13

 

(1,593)

 

Profit for the period from continuing operations

 

112

 

333

 

168

 

613

35

 

27

 

(3)

 

533

 

(15)

 

Effective tax rate (in %)

 

29

 

(13)

 

33

 

13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share from continuing operations (in €)

0.47

 

0.90

 

(8.29)

 

(0.02)

 

(6.98)

 

Basic

 

0.40

 

1.28

 

0.64

 

2.31

0.46

 

0.90

 

(8.29)

 

(0.02)

 

(6.98)

 

Diluted

 

0.40

 

1.27

 

0.64

 

2.30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share from discontinued operations (in €)

(0.11)

 

0.02

 

(1.65)

 

(0.09)

 

(1.84)

 

Basic

 

(0.03)

 

0.50

 

 

0.48

(0.11)

 

0.02

 

(1.65)

 

(0.09)

 

(1.84)

 

Diluted

 

(0.03)

 

0.50

 

 

0.47

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share from total operations (in €)

0.36

 

0.92

 

(9.94)

 

(0.11)

 

(8.82)

 

Basic

 

0.37

 

1.78

 

0.64

 

2.79

0.35

 

0.92

 

(9.94)

 

(0.11)

 

(8.82)

 

Diluted

 

0.37

 

1.77

 

0.64

 

2.77

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of shares (in millions)

235.1

 

236.9

 

238.2

 

238.6

 

237.2

 

Weighted average number of shares

 

239.4

 

241.0

 

242.1

 

240.8

235.6

 

238.2

 

238.2

 

239.0

 

239.0

 

Number of shares at end of quarter

 

239.8

 

242.1

 

242.1

 

242.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted earnings (in € millions)

190

 

326

 

(1,903)

 

(3)

 

(1,390)

 

Profit before tax from continuing operations

 

157

 

295

 

251

 

703

21

 

11

 

2,130

 

8

 

2,170

 

Incidentals reported in operating income

 

-

 

-

 

-

 

-

39

 

40

 

41

 

42

 

162

 

Amortization of intangible assets

 

39

 

33

 

36

 

108

(84)

 

(103)

 

(82)

 

(5)

 

(274)

 

Adjusted income tax

 

(57)

 

28

 

(93)

 

(122)

(14)

 

(22)

 

(9)

 

(18)

 

(63)

 

Non-controlling interests

 

(16)

 

(25)

 

(14)

 

(55)

152

 

252

 

177

 

24

 

605

 

Adjusted net income for continuing operations

 

123

 

331

 

180

 

634

0.65

 

1.06

 

0.74

 

0.10

 

2.55

 

Adjusted earnings per share (in €)

 

0.51

 

1.37

 

0.74

 

2.63


Notes to the statement of income

Operating income in Other activities

Operating income in Other activities in the quarter was lower than the previous year, mainly due to incremental project-related costs.

3rd quarter

 

 

 

January - September

2012

 

2013

 

in € millions

 

2012

 

2013

(28)

 

(40)

 

Corporate costs

 

(90)

 

(101)

2

 

(2)

 

Pensions

 

16

 

(7)

5

 

1

 

Insurances

 

(6)

 

4

(42)

 

(30)

 

Other

 

(88)

 

(85)

(63)

 

(71)

 

Operating income in Other activities

 

(168)

 

(189)

Net financing expenses

Net financing expenses increased by €6 million to €56 million, mainly due to lower discount rates for pensions.

Operating income to net income

3rd quarter

 

 

 

January - September

2012

 

2013

 

in € millions

 

2012

 

2013

248

 

303

 

Operating income (excluding impairment)

 

872

 

842

(2,106)

 

 

Impairment

 

(2,106)

 

(1,858)

 

303

 

Operating income (including impairment)

 

(1,234)

 

842

(50)

 

(56)

 

Net financing expenses

 

(167)

 

(152)

5

 

4

 

Results from associates and joint ventures

 

14

 

13

(1,903)

 

251

 

Profit/(loss) before tax

 

(1,387)

 

703

(64)

 

(83)

 

Income tax

 

(219)

 

(90)

(1,967)

 

168

 

Profit/(loss) from continuing operations

 

(1,606)

 

613

(392)

 

1

 

Profit/(loss) from discontinued operations

 

(414)

 

115

(2,359)

 

169

 

Profit/(loss) for the period

 

(2,020)

 

728

(9)

 

(14)

 

Non-controlling interests

 

(45)

 

(55)

(2,368)

 

155

 

Net income

 

(2,065)

 

673

Tax

The Q3 effective tax rate is 33 percent (2012: 34 percent excluding the impact of the impairment in the Decorative Paint business). Excluding one-off and non-deductible costs, the tax rate is 29 percent.


Shareholders’ equity

Shareholders’ equity was unchanged compared to year-end 2012 at €5.8 billion, mainly due to the effect of:

Offset by:


Dividend

An interim dividend of €0.33 per share (2012: €0.33) will be paid out, with the option to elect stock dividend. Please refer to the financial calendar for dividend payment dates.


Invested and operating working capital

Invested capital

in € millions

 

September 30, 2012

 

December 31, 2012

 

September 30, 2013

Trade receivables

 

2,432

 

2,174

 

2,374

Inventories

 

1,718

 

1,545

 

1,483

Trade payables

 

(2,048)

 

(2,147)

 

(2,074)

Operating working capital

 

2,102

 

1,572

 

1,783

Other working capital items

 

(914)

 

(870)

 

(982)

Non-current assets

 

10,867

 

10,821

 

10,372

Less investments in associates and joint ventures

 

(192)

 

(185)

 

(188)

Less pension assets

 

(967)

 

(842)

 

(723)

Deferred tax liabilities

 

(482)

 

(434)

 

(420)

Invested capital

 

10,414

 

10,062

 

9,842

Invested capital at the end of Q3 2013 totaled €9.8 billion, €0.2 billion lower than at year-end 2012. Invested capital was mainly impacted by the net effect of:

Operating working capital

in € millions, % of revenue

 

September 30, 2012

 

December 31, 2012

 

September 30, 2013

Decorative Paints

 

587

 

12.9

 

353

 

8.9

 

424

 

9.3

Performance Coatings

 

857

 

14.6

 

742

 

13.3

 

840

 

14.8

Specialty Chemicals

 

734

 

13.2

 

564

 

10.7

 

641

 

12.8

Other activities

 

(76)

 

 

 

(87)

 

 

 

(122)

 

 

Total

 

2,102

 

13.3

 

1,572

 

10.7

 

1,783

 

11.8

In % of revenue

AkzoNobel – Operating working capital (bar chart)

Pensions

The funded status of the pension plans at the end of Q3 2013 was a deficit of €0.7 billion (year-end 2012: €1.1 billion as reported, €0.9 billion on restated basis). The movement compared with year-end 2012 is primarily due to:

Offset by:


Workforce

At September 30, 2013, we employed 50,420 staff (year-end 2012: 50,610 employees). The net decrease was due to:


Cash flows and net debt

Operating activities in Q3 2013 resulted in a cash inflow of €552 million (Q3 2012: €460 million). The change is the net impact of higher operating income (excluding impairment) and lower cash outflow from provisions partly offset by lower inflow from working capital. The movement in other changes relates to the non-cash impairment, that was included in profit from continuing operations in 2012.

Net debt decreased from €2,197 million in Q2 2013 to €1,817 million in Q3 2013 as a consequence of the net impact of:


General information

Accounting policies and restatements

This interim financial report is in compliance with IAS 34 Interim Financial Reporting. This report is unaudited. Except for the implementation of the revised IAS 19 Employee Benefits, the accounting principles are as applied in the 2012 financial statements.

As of 2013, we apply stricter rules to qualify items as incidental items and have restated the relevant performance measures. In addition, invested capital was restated to exclude the receivable from pension funds in an asset position. Further, moving average ROI is now to be calculated with use of last twelve months operating income instead of, the so far used, EBIT. Operating working capital now comprises the total company and therefore includes, besides the inventories, trade receivables and trade payables in the Business Areas, the same items for the other activities.

Comparative numbers for 2012 have been restated accordingly. Please refer to our website for the details of these restatements, as issued at the time of our Strategy update on February 20, 2013.

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.


Glossary

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. As of 2013, we apply stricter rules to qualify items as incidental.

Invested capital is total assets (excluding cash and cash equivalents, investments in associates, the receivable from pension funds in an asset position, assets/liabilities 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 operating income of the last twelve months divided by average invested capital. For this calculation operating income has been adjusted for the Q3 2012 impairment of the Decorative Paints business of €2,106 million.

Net debt is defined as long-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 of the total company. When expressed as a ratio, operating working capital is measured against four times last quarter revenue.

ROS% is operating income as percentage of revenue.