How we created value in 2020
By delivering more value to our customers, shareholders, employees and society in general, we can better accelerate profitability while positioning ourselves for growth.
Financial overview
Revenue was 8% lower, and 4% lower in constant currencies. Price/mix was up 1% overall. Volumes were 4% lower, mainly due to the impact of COVID-19 on end market demand. Adjusted operating income was up 11% at €1,099 million (2019: €991 million); driven by margin management and cost-saving programs. Continuous improvement initiatives successfully offset inflation. ROS increased to 12.9% (2019: 10.7%). Operating income was up 15% at €963 million (2019: €841 million) and included negative identified items of €136 million.
In € millions |
2019 |
2020* |
∆% |
||
|---|---|---|---|---|---|
Revenue |
9,276 |
8,530 |
(8%) |
||
Adjusted EBITDA* |
1,341 |
1,442 |
8% |
||
EBITDA* |
1,201 |
1,324 |
10% |
||
Adjusted operating income* |
991 |
1,099 |
11% |
||
Identified items* |
(150) |
(136) |
|
||
Operating income |
841 |
963 |
15% |
||
ROS* |
10.7 |
12.9 |
|
||
OPI margin* |
9.1 |
11.3 |
|
||
Average invested capital* |
7,026 |
6,834 |
|
||
ROI* |
14.1 |
16.1 |
|
||
ROS excl. unallocated cost* |
12.0 |
15.0 |
|
||
ROI excl. unallocated cost* |
17.2 |
20.6 |
|
||
Capital expenditures |
214 |
258 |
21% |
||
Net debt |
802 |
1,034 |
|
||
Leverage ratio (net debt/EBITDA)* |
0.7 |
0.8 |
|
||
Number of employees |
33,800 |
32,200 |
|
||
Net cash from operating activities |
33 |
1,220 |
|
||
Net income from continuing operations |
517 |
637 |
23% |
||
Net income from discontinued operations |
22 |
(7) |
|
||
Net income attributable to shareholders |
539 |
630 |
17% |
||
Weighted average number of shares |
213.1 |
191.4 |
|
||
Adjusted earnings per share from continuing operations (in €)* |
3.10 |
3.88 |
25% |
||
Earnings per share from total operations (in €) |
2.53 |
3.29 |
30% |
||
|
|||||
Business revenue
- Decorative Paints revenue was 3% lower and up 3% in constant currencies, with volumes up 2% and positive price/mix of 1%, more than offset by 6% adverse currency impact
- Performance Coatings revenue was 11% lower and 8% lower in constant currencies. Revenue was positively impacted by 1% price/mix, while volumes were 9% lower, mainly due to the impact of COVID-19 on end market demand, especially in the first half of the year
Revenue by destination
in %
Capital expenditures 2020:
total €258mln
Capital expenditures are expected to be around €250 million per year 2021-23.
Revenue from third parties
in € millions
Innovation investment
research and development expenses in € millions
Research and development expenses expected to remain similar as % of revenue 2021-23.
Eco-premium solutions
in %
Acquisitions
The acquisition of Mauvilac Industries, announced on December 12, 2019, was closed on April 1, 2020. On September 2, 2020, the acquisition of Stahl’s performance powder coatings activities was completed. On October 19, 2020, the acquisition of Titan Paints in Spain was announced, with completion expected in 2021. The acquisition of New Nautical Coatings in the US was completed in Q4 of 2020.
Raw material price development
Raw material and other variable costs were €135 million lower in 2020, compared with 2019.
Adjusted operating income
Adjusted operating income was up 11% at €1,099 million (2019: €991 million); driven by margin management and cost-saving programs. Continuous improvement initiatives successfully offset inflation. ROS increased to 12.9% (2019: 10.7%).
- Decorative Paints adjusted operating income increased 37% as a result of volume growth, supported by margin management and cost savings. ROS was up at 16.1% (2019: 11.4%)
- Performance Coatings adjusted operating income increased by 2%, with positive price/mix, margin management and cost savings more than compensating for lower volumes due to the COVID-19 impact on end user demand. ROS increased to 14.1% (2019: 12.4%)
- Other activities were negative €174 million (2019: negative €115 million); other activities in 2019 included higher royalty income and one-off gains on disposals
For more about our Paints and Coatings businesses in 2020, see the Business overview chapter. Additional details about the performance of AkzoNobel and each business segment in 2020 can be found in the quarterly publications on our website.
Operating income
Operating income was up at €963 million (2019: €841 million) and included negative identified items of €136 million (€22 million in Decorative Paints, €35 million in Performance Coatings and €79 million in Other activities), mainly related to transformation costs. In 2019, identified items were negative €150 million, mainly related to transformation costs and non-cash impairments, partly offset by a gain on disposal of €54 million following asset network optimization. OPI margin increased to 11.3% (2019: 9.1%).
Net financing income and expenses
Net financing expenses decreased by €7 million, mainly due to lower interest on loans.
Income tax
The effective tax rate was 26.2% (2019: 29.3%). The decrease is mainy related to impairments of deferred tax assets in 2019. Excluding identified items, the effective tax rate in 2020 was 25.6% (2019: 25.3%).
Cash flows and net debt
Operating activities in 2020 resulted in an inflow of €1,220 million (2019: €33 million). This was mainly due to higher profitability and changes in working capital, while 2019 was impacted by higher pension related payments.
At December 31, 2020, net debt was €1,034 million versus €802 million at year-end 2019. The net debt/EBITDA leverage ratio at December 31, 2020, was 0.8x (December 31, 2019: 0.7x).
Invested capital
Invested capital at December 31, 2020, totaled €6.4 billion, €0.6 billion lower compared with year-end 2019, mainly due to a reduction in working capital and other non-current assets.
Dividend
Our dividend policy is to pay a stable to rising dividend. In 2020, an interim dividend of €0.43 per common share (2019: €0.41) was paid. We propose a 2020 final dividend of €1.52 (2019: €1.49) per common share, which would equal a total 2020 dividend of €1.95 (2019: €1.90). In 2020, a total share buyback of €545 million was completed.
2018 |
2019 |
2020 |
||
|---|---|---|---|---|
1.80 |
1.90 |
1.951 |
||
|
||||
2018 |
2019 |
2020 |
|---|---|---|
26.19 |
2.53 |
3.29 |
2018 |
2019 |
2020 |
|---|---|---|
1.91 |
3.10 |
3.88 |
Outlook 2021
AkzoNobel targets to grow at least in line with its relevant markets. Although trends differ per region and segment with raw material inflation expected, margin management and cost-saving programs are in place to deliver 50 basis points increase in return on sales. The company targets a leverage ratio of 1-2 times net debt/EBITDA and commits to retain a strong investment grade credit rating.
See Note 28 of the Consolidated financial statements with regard to subsequent events.
Total waste
in kilotons
VOC
in kilotons
Energy use
in GJ/ton
For more details about our social performance, see the Sustainability statements.
Employees
At December 31, 2020, the number of employees was 32,200 (December 31, 2019: 33,800). Acquisitions in 2020 added around 250 people. For details on our approach to developing our workforce, see the People section of the Sustainability statements.
COVID-19
The pandemic situation is being closely monitored and appropriate measures are being taken to continue serving customers and save costs, while keeping the organization intact and able to respond quickly to changes in end market demand. Although demand trends differ per region and segment, the overall impact on AkzoNobel for the full-year 2020 was limited. An overall positive impact was noted for the Decorative Paints segment, while there was an overall adverse impact in the Performance Coatings segment. The pandemic has not impacted our going concern assumption.
AkzoNobel has a strong balance sheet and solid cash position. At December 31, 2020, cash and cash equivalents were €1.6 billion and financial leverage (net debt/EBITDA) was 0.8x. AkzoNobel is committed to retain a strong investment grade credit rating.
In 2020, a detailed assessment was performed of potential valuation adjustments to the overall asset base, either due to the direct impact of COVID-19, or its impact on future profitability. Goodwill and intangible asset impairment tests have been performed based on most recently updated forecasts; this has not revealed impairments. Recoverability of deferred tax assets has also been reassessed based on these forecasts, leading to immaterial adjustments only. Furthermore, while the allowance for impairment of trade receivables initially increased as a direct result of the additional risk associated with COVID-19, impairment of trade receivables returned to normal levels at year-end.
In 2020, a compensation of €33 million related to government support measures for COVID-19 was recognized as a reduction of employee benefit costs, mainly in Q2 and Q3. No application was made for the “Noodmaatregel Overbrugging voor Werkgelegenheid (NOW)” in the Netherlands. In our 2020 figures, all COVID-19 related impacts have been treated as normal operations; none of these impacts have been included in identified items.
Total reportable injury rate (TRR)
Numbers include AkzoNobel employees and temporary workers.
Fatalities
Female executives
in %
Organizational health score (OHI)
For more details about our social performance, see the Sustainability statements.
Calculations exclude the impact of changes in foreign exchange rates.
Operating income is defined in accordance with IFRS and includes the relevant identified items. Adjusted operating income excludes identified items.
ROS is adjusted operating income as a percentage of revenue. ROS excluding unallocated cost is adjusted operating income as a percentage of revenue for Decorative Paints and Performance Coatings. It excludes unallocated corporate center cost.
January 2020 - December 2020 |
||
|---|---|---|
|
||
in €millions |
2019 |
2020 |
Total revenue |
9,276 |
8,530 |
Less: revenue unallocated |
(57) |
(15) |
Revenue excluding unallocated revenue |
9,219 |
8,515 |
|
|
|
Adjusted operating income excluding unallocated cost |
1,106 |
1,273 |
|
|
|
ROS% excluding unallocated cost |
12.0 |
15.0 |
Identified items are special charges and benefits, results on acquisitions and divestments, major restructuring and impairment charges and charges related to major legal, environmental and tax cases.
The total of investments in property, plant and equipment and investments in intangible assets.
Operating income is defined in accordance with IFRS and includes the relevant identified items. Adjusted operating income excludes identified items.
Operating income as a percentage of revenue.
Defined as long-term borrowings plus short-term borrowings less cash, cash equivalents and short-term investments.
Operating income excluding depreciation and amortization.
Calculated as net debt divided by EBITDA, which is calculated as the total of the last 12 months.
Total assets (excluding cash and cash equivalents, short-term investments, investments in associates, the receivable from pension funds in an asset position, assets held for sale) less current income tax payable, deferred tax liabilities and trade and other payables.
Segments and regions of the paints and coatings industry from which AkzoNobel generates revenue.
Defined as long-term borrowings plus short-term borrowings less cash, cash equivalents and short-term investments.
Operating income excluding depreciation and amortization.
Identified items are special charges and benefits, results on acquisitions and divestments, major restructuring and impairment charges and charges related to major legal, environmental and tax cases.