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Note 2: Scope of consolidation

Material subsidiaries

The Consolidated financial statements comprise the assets, liabilities, income and expenses of approximately 360 legal entities (including the entities reported as held for sale). We consider legal entities material when they represent, for at least two subsequent years, more than 5 percent of either revenue or (before ) or based on qualitative aspects. Material subsidiaries included in the table are 100 percent owned, except for Akzo Nobel Swire Paints (Shanghai) Ltd., and meet these criteria.

Material subsidiaries related to continuing operations

Legal entity

Principal place of business/country of corporation

Akzo Nobel Coatings Inc.

United States

Akzo Nobel Swire Paints (Shanghai) Ltd.

China

Imperial Chemical Industries Limited

United Kingdom

International Paint LLC

United States

Akzo Nobel Coatings SPA

Italy

Material subsidiaries related to discontinued operations (The Specialty Chemicals business)

Legal entity

Principal place of business/country of corporation

Akzo Nobel Industrial Chemicals B.V.

The Netherlands

Akzo Nobel Pulp and Performance Chemicals AB

Sweden

Akzo Nobel Surface Chemistry LLC

United States

Akzo Nobel Surface Chemistry AB

Sweden

Akzo Nobel Functional Chemicals LLC

United States

Akzo Nobel Functional Chemicals B.V.

The Netherlands

Acquisition of BASF’s Industrial Coatings business

On December 14, 2016, we acquired BASF’s Industrial Coatings business. The transaction included two manufacturing plants, technologies, patents and trademarks, as well as securing supply to customers worldwide. The business supplies products for a number of end uses, including coil, furniture foil and panel coatings, wind energy and general industry, and commercial transport. The acquisition strengthened our position in the important coil coatings market and fits well with our existing business, allowing us to offer essential solutions to our customers. In 2017, we finalized the purchase price allocation. The outcome thereof is reflected in the table below. The goodwill is fully allocated to the respective business unit in Performance Coatings.

Other acquisitions

Other acquisitions are deemed to be individually immaterial in respect to IFRS 3 disclosure requirements. In 2017, the other acquisitions include the acquisition of Disa Technology (Disatech), Flexcrete Technologies Ltd and the business of V.Powdertech Co., Ltd.

In 2016, Other acquisitions include the acquisition of the remaining 50 percent stake in EkO Peroxide LLC.

Recognized fair values at acquisition

In € millions

Provisional BASF’s Industrial Coatings business

Final BASF’s Industrial Coatings business

2017
Adjustments

Other acquisitions

Total
2017

Other intangibles

165

238

73

28

101

Property, plant and equipment

4

4

11

11

Inventories

18

24

6

4

10

Trade and other receivables

1

1

4

4

Cash and cash equivalents

3

3

Long-term debt

(3)

(3)

Provisions

(17)

(17)

(2)

(2)

Deferred tax assets/(liabilities)

(3)

6

9

(7)

2

Trade and other payables

(29)

(29)

(3)

(32)

Net identifiable assets and liabilities

168

227

59

35

94

Goodwill

221

167

(54)

51

(3)

Purchase consideration

389

394

5

86

91

Cash and cash equivalents acquired

(3)

(3)

To be received/(paid) in 2018 and later years

9

4

(5)

(3)

(8)

Net cash outflow

398

398

80

80

Divestments

In 2016 and 2017, no significant divestments occurred.

Discontinued operations and held for sale

The results and cash flows from discontinued operations in 2016 as well as 2017 and the assets and liabilities held for sale at December 31, 2017 almost completely relate to the Specialty Chemicals business.

Discontinued operations

In € millions

2016

2017

Revenue

4,763

4,963

Cost of sales

(3,126)

(3,287)

Gross profit

1,637

1,676

Other expenses

(1,039)

(1,115)

Profit before tax

598

561

Income tax

(160)

(168)

Profit for the period after tax

438

393

Results related to discontinued operations in previous years

(3)

1

Tax related to discontinued operations in previous years

1

(1)

Profit for the period

436

393

Cash flows from discontinued operations

In € millions

2016

2017

Net cash from operating activities

714

691

Net cash from investing activities

(343)

(354)

Net cash from financing activities

(9)

323

Cashflows from discontinued operations

362

660

In April 2017, AkzoNobel officially announced its decision to separate the Specialty Chemicals business, thereby creating two focused, high performing businesses - Paints and Coatings, and Specialty Chemicals. At the Extraordinary General Meeting of November 30, 2017, the shareholders approved the proposed separation of the Specialty Chemicals business from AkzoNobel through a private sale or a legal demerger. In the course of December non-binding offers were received in the private track.

As from December 22, 2017, the Specialty Chemicals business is classified as held for sale/held for distribution and discontinued operations, therefore the Consolidated Statement of Income shows the results of the Specialty Chemicals business as discontinued. The Specialty Chemicals business presented as held for sale and discontinued operations consists of the Business Area Specialty Chemicals and income and expenses which are directly attributed to the Specialty Chemicals business from Corporate and Other which will not be recognized on an ongoing basis by AkzoNobel.

Assets and liabilities held for sale

In € millions

2017

*

The Current payables include an amount of €21 million with respect to net current tax liability related to discontinued operations.

Intangible assets

787

Property, plant and equipment

2,266

Financial non-current assets

205

Inventories

503

Receivables

840

Assets held for sale

4,601

Non-current liabilities

765

Short-term borrowings

341

Current payables*

1,090

Liabilities held for sale

2,196

The income and expenses from Corporate and Other included in discontinued operations mainly consist of:

  • Employee benefit expenses related to employees who were identified to be employees of the Specialty Chemicals business starting in 2018 as part of the legal reorganization.
  • Information management costs such as application services or infrastructure costs that relate directly to the Specialty Chemicals business.
  • Other contract costs that relate directly to the Specialty chemicals business.

The assets and liabilities held for sale include the assets and liabilities previously reported as part of Specialty Chemicals combined with assets and liabilities of Corporate and Other that have directly been attributed to the Specialty Chemicals business and are expected to be part of the disposal, consisting mainly of:

  • Post-retirement provisions were allocated between the Specialty Chemicals business and the Paints and Coatings business based on headcount for obligations in relation to active employees and post-separation retention of liabilities and obligations to finance the post-retirement plans for inactive employees.
  • Environmental and sundry provisions if related to historical Specialty Chemicals sites and activities and intended to be included in the disposal.
  • Provisions for restructuring that relate to Specialty Chemicals employees.

Cash and cash equivalents as well as debt positions of Specialty Chemicals are excluded from held for sale classification unless such items have been specifically designated as held for sale, e.g. in the case of specific local financing and debt related to finance leases held in relation to the Specialty Chemicals assets.

The assets and liabilities of the Specialty Chemicals business are recognized at their carrying value.

Specialty Chemicals business

 

Revenue from third parties

Group revenue

Amortization and depreciation

Identified items

Operating income

ROS%

In € millions

2016

2017

2016

2017

2016

2017

2016

2017

2016

2017

2016

2017

*

Corporate and other includes elimination effects.

Specialty Chemicals

4,760

4,961

4,783

4,985

(324)

(326)

629

689

13.2

13.8

Corporate and other*

3

2

(20)

(22)

(5)

22

(49)

(33)

(118)

Total

4,763

4,963

4,763

4,963

(324)

(331)

22

(49)

596

571

12.1

12.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Invested capital

Total assets

Total liabilities

Capital expenditures

ROI%

 

 

In € millions

2016

2017

2016

2017

2016

2017

2016

2017

2016

2017

 

 

Specialty Chemicals

3,494

3,570

4,755

4,699

1,315

1,582

356

363

17.9

19.1

 

 

Corporate and other*

(41)

(98)

614

 

 

Total

3,494

3,529

4,755

4,601

1,315

2,196

356

363

17.9

17.1

 

 

Separation costs

The costs related to the separation of Specialty Chemicals were reported as identified items in Corporate and other of discontinued operations and amounted to €67 million.

Employees

The average number of employees of the Specialty Chemicals business during the year was 9,700 of which 9,100 employees in Business Area Specialty Chemicals (2016: 9,000). At year-end 2017, Specialty Chemicals business employed 9,700 people of which 9,000 employees in Business Area Specialty Chemicals (2016: 9,000).

Operating income

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

Identified items

Identified items are special charges and benefits, results on acquisitions and divestments, major impairment charges and charges related to major legal, anti-trust and environmental cases.