Note 3: Alternative performance measures

In presenting and discussing AkzoNobel’s operating results, management uses certain alternative performance measures not defined by IFRS, which exclude the so-called . These alternative performance measures should not be viewed in isolation as alternatives to the equivalent IFRS measures and should be used as supplementary information in conjunction with the most directly comparable IFRS measures. Alternative performance measures do not have a standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. Where a non-financial measure is used to calculate an operational or statistical ratio, this is also considered an alternative performance measure.

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Alternative performance measures

 

2018

2019

In € millions

Continuing oper­ations

Discon­tinued oper­ations

Total

Continuing oper­ations

Discon­tinued oper­ations

Total

1

Includes costs related to the strategy to create a focused high-performing Paints and Coatings business.

2

2019 includes the tax impact on APM adjustments and the net of re-recognition and derecognition of deferred tax assets. Further details are disclosed in Note 8.

Operating income

605

656

1,261

841

–

841

 

 

 

 

 

 

 

APM adjustments to operating income

 

 

 

 

 

 

- Transformation costs1

130

29

159

204

–

204

- UK guaranteed minimum pension equalization

57

–

57

 

–

–

- Gain on disposal

–

–

–

(54)

–

(54)

- Legal

6

–

6

–

–

–

Total APM adjustments (identified items)

193

29

222

150

–

150

Adjusted operating income

798

685

1,483

991

–

991

Profit for the period attributable to shareholders of the company

410

6,264

6,674

517

22

539

APM adjustments to operating income

193

29

222

150

_

150

APM adjustment Interest on tax settlement

(30)

–

(30)

–

–

–

APM adjustments to income tax2

(86)

(6)

(92)

(7)

–

(7)

APM adjustment deal result on sale Specialty Chemicals, net of tax

–

(5,811)

(5,811)

–

(22)

(22)

Total APM adjustments

77

(5,788)

(5,711)

143

(22)

121

Adjusted profit for the period attributable to shareholders of the company

487

476

963

660

–

660

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Alternative performance measures: Adjusted OPI, OPI margin and ROS%

In € millions

2018

2019

1

For reconciliation to IFRS measures please refer to the table on the previous page.

2

OPI margin is calculated as operating income as a percentage of group revenue.

3

ROS% is calculated as adjusted operating income (operating income excluding identified items) as a percentage of group revenue.

4

OPI margin and ROS% for Other activities/eliminations is not shown, as this is not meaningful.

Group revenue

 

 

Decorative Paints

3,699

3,703

Performance Coatings

5,587

5,563

Other

(30)

10

Total

9,256

9,276

 

 

 

Operating income

 

 

Decorative Paints

308

425

Performance Coatings

577

565

Other

(280)

(149)

Total

605

841

 

 

 

Total APM adjustments (identified items)

 

 

Decorative Paints

(38)

7

Performance Coatings

(52)

(123)

Other

(103)

(34)

Total

(193)

(150)

 

 

 

Adjusted operating income1

 

 

Decorative Paints

346

418

Performance Coatings

629

688

Other

(177)

(115)

Total

798

991

 

 

 

OPI margin%2

 

 

Decorative Paints

8.3

11.5

Performance Coatings

10.3

10.2

Other4

 

 

Total

6.5

9.1

 

 

 

ROS%3

 

 

Decorative Paints

9.4

11.3

Performance Coatings

11.3

12.4

Other4

 

 

Total

8.6

10.7

AkzoNobel uses alternative performance measure adjustments (APM adjustments) to the IFRS measures to provide supplemetary information on reporting on the underlying developments of the business. These APM adjustments may affect the IFRS measures , net profit and . A reconciliation of the alternative performance measures to the most directly comparable IFRS measures can be found in the tables for adjusted operating income and adjusted earnings from continuing operations in this note.

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Alternative performance measures: ROI%

In € millions

2018

2019

1

For reconciliation to IFRS measures please refer to the table on the previous page.

2

ROI% is calculated as adjusted operating income (operating income excluding identified items) of the last 12 months as a percentage of average invested capital of the last 12 months. Invested capital is calculated as total assets (excluding cash and cash equivalents, short-term investments, investments in associates, the receivable from pension funds in an asset position and assets held for sale) less current tax liabilities, deferred tax liabilities and trade and other payables.

3

ROI% for Other activities/eliminations is not shown, as this is not meaningful.

Average invested capital

 

 

Decorative Paints

2,798

3,106

Performance Coatings

3,066

3,325

Other

476

595

Total

6,340

7,026

 

 

 

Adjusted operating income1

 

 

Decorative Paints

346

418

Performance Coatings

629

688

Other

(177)

(115)

Total

798

991

 

 

 

ROI%2

 

 

Decorative Paints

12.4

13.4

Performance Coatings

20.5

20.7

Other3

 

 

Total

12.6

14.1

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Alternative performance measures: Adjusted earnings per share

In € millions

2018

2019

*

For the reconciliation to IFRS measures please refer to the table on the previous page.

Profit for the period attributable to shareholders of the company from continuing operations

410

517

APM adjustments to operating income

193

150

APM adjustment to interest

(30)

–

APM adjustment to income tax

(86)

(7)

Adjusted profit from continuing operations attributable to shareholders of the company*

487

660

Weighted average number of shares

254.9

213.1

Earnings per share from continuing operations (in €)

1.61

2.43

Adjusted earnings per share from continuing operations (in €)

1.91

3.10

The implementation of IFRS 16 as per January 1, 2019, has impacted the alternative performance measures as presented in this note. Details on the impact of the implementation of IFRS 16 on these alternative performance measures are disclosed in Note 1.

Identified items

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

Operating income

This is income excluding net financing expenses, results from associates and joint ventures, income tax and profit from discontinued operations. Operating income includes the share of non-controlling interests. Operating income includes identified items to the extent these relate to lines included in operating income.

Earnings per share

Net income attributable to shareholders divided by the weighted average number of common shares outstanding during the year.