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Performance Coatings strategy

Our vision is to be the leading coatings company from a performance perspective. Our expected outcomes for 2015 are to achieve a return on sales level of 12 percent and a return on investment of 25 percent. We are on track to deliver on these expectations, as evidenced by our 2014 financial results. In 2014, we introduced a simplified and leaner organizational structure. This new structure has reduced the number of global management layers, which in turn will enhance decision-making efficiency and improve our customer focus, while at the same time reducing costs. We also continue to progress in our three main action areas:

Performance Coatings – Strategic performance – Actions (graphic)Performance Coatings – Strategic performance – Actions (graphic)

Drive overarching performance improvement initiatives

  • Continuously reduce external spend. Procured raw materials make up a significant percentage of our Performance Coatings cost base, so appropriate management is fundamental. We have introduced a cross-business, cross-functional approach to maximize and capture opportunities created by common raw materials and suppliers
  • Continuously improve our operations. Operations comprise a smaller percentage of our cost base, but there is still room for improvement. We continue to optimize our global manufacturing footprint to leverage our scale and respond to changes in geographic demand. During 2014, we closed eight sites, but at the same time commissioned a new vehicle refinishes plant in Changzhou, China, and a new powder coatings factory in Dubai. These state-of-the-art facilities will strengthen our ability to manufacture locally developed products, particularly for the fast-growing mid-markets. In the future, we are placing more emphasis on continuous operational improvement. In order to deliver this, we are in the process of implementing the standardized AkzoNobel Leading Performance System (ALPS). Safety, customer service, material efficiency and cost productivity are all key areas of focus for this program
  • Drive commercial excellence. Our focus is on embedding common commercial processes to deliver both organic growth and commercial efficiency. To support this, we have a dedicated center of expertise which is driving consistency and best practice

Pursue differentiated growth strategies

The outlook differs for each of our end-user segments. We also face different competitive situations. To achieve our vision, we must continue to grow our business while improving performance levels. Thus, we need to focus and prioritize our growth activities and we are doing this by pursuing differentiated growth strategies. In roughly half of our businesses, our strategy is to outgrow the market organically in attractive markets where we are best able to win. In other parts of our Performance Coatings portfolio – where our position is often strong but the headroom for growth more limited – we want to grow with the market while driving operational excellence and controlling costs.

Examples are:

  • In Protective Coatings, we have a leadership position based on strong technologies, brands and reputation. We will continue to invest in generating higher levels of growth. We will also expand our market presence in high growth regions based on appropriate value propositions, such as second tier ranges, to compete in the domestic marketplace
  • In the high growth information technology sector of our Specialty Finishes business, we are investing to support key original equipment manufacturers (OEMs) and original design manufacturers (ODMs) to grow our positions
  • In Coil Coatings, we have a strong position and a good reputation in high performance architectural applications, and in innovations in chrome-free technologies and heat-reflective coatings. We are optimizing our footprint in Europe, reducing complexity in our formulations and pursuing opportunities to improve resin costs
  • Our Yacht Coatings business is already well positioned. In this sector, we are leveraging the recently launched Nautical range aimed at the mid-tier, and reducing costs through manufacturing consolidation
  • Our Wood Finishes and Adhesives business serves some parts of the Buildings and Infrastructure and Consumer Goods end-user segments which have a lower growth profile. We are focusing on the most profitable areas and brands and improving our supply chain to drive operational efficiency

Deliver business-specific plans

Continued success in Performance Coatings is fundamentally based on our ability to innovate in products and services. There are, of course, some areas of overlap in terms of innovation requirements across our businesses, such as the constant need for lower solvent or more waterborne solutions. For the most part, though, the focus for innovation differs by business. Therefore, the third key strategic activity area is based on investing in appropriate, specific innovation requirements for each of our businesses.

Examples are:

  • Our Powder Coatings business offers a customer solution that is high yield and free of volatile organic compounds (VOCs), so sustainability is a major element of the value proposition. We also pursue improved finish effects, and in 2014, we took a significant step forward with the introduction of Interpon Cr, a bright metallic powder coating for furniture, lighting and other interior fixtures which provides a more sustainable and cost-effective alternative to chrome plating
  • In our Vehicle Refinish business, color matching is everything. We continued to demonstrate leadership in this area through the 2014 launch of Color Universe – a new color documentation system which organizes color the way humans see it chromatically. Color Universe is an important addition to the array of tools that we provide to vehicle repair professionals to get color right the first time, every time
  • In our Marine Coatings business, leadership in fouling control that supports our customers in reducing their fuel requirements is fundamental. We are very proud that in 2014, we received approval for carbon credits for our industry-leading Intersleek foul release coatings. In addition, we launched Intersmooth 7570 SPC, a high performance coastal fouling control solution for the severe fouling challenges of vessels trading in tropical coastal waters. This product contains patented copolymer technology, providing energy savings and an extended operating life
  • Finally, in our Packaging Coatings business, we continue to commercially introduce and further innovate in terms of high performance packaging coatings that move away from the use of bisphenol A-based epoxies, addressing a key consumer and customer demand