Strategic targets: 2014 performance

  • Financial performance
  • Sustainability performance

Return on sales (ROS)

We use return on sales (ROS) as a performance indicator to reflect profitability relative to revenue. ROS as a target will focus management on delivery and quality of profits. ROS is defined as operating income as percentage of revenue.

Progress towards our 2015 target

  • Modest volume growth
  • Robust operating expenditure cost control
  • Restructuring costs significantly down compared with 2013
  • Excluding incidental items, ROS was 7.5 percent (2013: 6.1 percent)

Return on investment (ROI)

We use return on investment (ROI) as a performance indicator to reflect profit relative to invested capital. ROI as a target will focus management on delivering value through returns in excess of our cost of capital. ROI is defined as operating income divided by average invested capital.

Progress towards our 2015 target

  • Capital expenditures lower than 2013
  • Operating working capital slightly higher than 2013

Net debt/EBITDA

Net debt/EBITDA reflects our strategy to maintain a strong investment grade rating (or credit rating).

Continued overachievement of our 2015 target

  • EBITDA increased significantly due to lower costs and restructuring charges
  • Very slight increase in net debt compared with the previous year

Eco-premium solutions with customer benefits

Our 2020 target is to achieve 20 percent of revenue from products and services which provide customers and consumers in our downstream value chain with a significant sustainability advantage compared with the most commonly available equivalent commercial products or industrial processes.

Continued steady progress towards our 2020 target

  • Percentage of revenue from eco-premium products and services with downstream benefits slightly higher than 2013
  • Increase came from a combination of new products and growth in revenue from existing products in Specialty Chemicals and Performance Coatings

Cradle-to-grave carbon footprint

Our ambition is to reduce our cradle-to-grave carbon footprint by 25-30 percent per ton of sales between 2012 and 2020.

Significant improvement required to reach the 2020 target

  • Carbon footprint per ton of sold product has increased, although absolute footprint is down 2 percent since 2012
  • Solid improvement in some areas due to lower footprint energy contracts and facility efficiency improvements
  • However, unfavorable energy source changes in Europe and a significant product mix effect limited the impact of these improvements

Resource Efficiency Index (REI)

The Resource Efficiency Index is defined as gross margin divided by cradle-to-grave carbon footprint – reported as an index. We are initially monitoring this index, and our aim is to use it to drive further improvements in resource efficiency across the value chain.

Significant improvement required

  • Improvements in energy efficiency based on renewable and low carbon energy supply
  • Ongoing switch towards waterborne coatings and margin improvements as a result of higher value added products
  • However, squeezed margins, demand for higher footprint products and changes in regional energy sourcing have had a negative impact