CEO statement

Thierry Vanlancker, CEO and Chairman of the Board of Management and Executive Committee (photo)

2021 was another challenging year. While 2020 was marked by sudden shifts in demand across our paints and coatings market segments, 2021 was affected in a very different way.

This time, the ongoing impact of COVID-19 – combined with several extreme weather events early in the year – caused significant disruption across our supply chains. The overall availability and movement of raw materials was a real challenge for the whole paints and coatings industry. This resulted in significant shortages of key raw materials, which is still ongoing, and an unprecedented cost increase compared with 2020.

So 2021 was a real stress test for the operational resilience and can-do attitude we’ve been fostering over the last few years. We found ourselves climbing an unexpectedly high mountain as the business environment became increasingly difficult. However, our teams had the summit in sight, and while they were somewhat tired, I’m happy to report they’re also in good spirits, as we’re in an excellent position to accelerate along the other side of the slope.

Although we were dealing with incoming supply chain disruption and inflation, demand for our paints and coatings remained strong. The vast majority of our markets continued to rebound well and we were able to expand our position in significant target markets. I’m very proud of how our teams demonstrated their new-found resilience. Our commercial teams responded quickly with pricing initiatives to compensate for the huge raw material cost inflation. Meanwhile, our procurement, and supply chain colleagues worked hard to continue serving customers in the face of the severe supply chain disruption.

As a result, despite these massive headwinds, we were able to safeguard our profitability and stay on track for defending or strengthening our market positions – our Grow & Deliver strategy has remained on course.

The reinvention of AkzoNobel as a focused paints and coatings company, which started in 2017, is clearly on track to make us the reference in our industry.

A notable example of our “Grow” mindset was our Powder Coatings business, which delivered another strong year of double-digit revenue growth. There were some exciting developments around electric vehicles, low temperature and UV-curing for powder on wood and the increasing trend of moving from liquid to powder, for example in the US architectural market.

We also achieved multiple proof points of growth across our Decorative Paints businesses. For example, in , we added the availability of Dulux to another 11,200 stores, delivered double-digit growth in the premium market segment and improved our profitability. In addition, we announced the acquisition of Colombia-based paints and coatings company Grupo Orbis, which will further expand our long-term leadership position in South and Central America.

From a “Deliver” perspective, we continued to improve our operational efficiency and effectiveness. Much of this work has involved streamlining end-to-end processes, reducing unproductive product portfolio complexity and simplifying how we run the company in general. For example, almost 95% of the company now operates on just four major ERP systems.

The reinvention of AkzoNobel as a focused paints and coatings company, which started in 2017, is clearly on track to make us the reference in our industry. We’ve kept a sharp focus on the business fundamentals, including cost discipline and cash generation.

Another key focus area is sustainability, which has been a core value for many years. So it was with a great sense of pride that we were one of the first recipients of the inaugural Terra Carta Seal – the only paints and coatings company to receive the honor. It’s recognition of the positive action we’re taking, driven largely by the fact that sustainability is embedded in our culture and fundamental to the way we operate. In 2021, we also committed to science-based sustainability targets, signaling our intention to take stronger action to tackle climate change. We’re excited that this commitment will be an enormous innovation driver for what we do throughout our entire value chain with our customers and suppliers over the next few years.

Given our passion for making a genuine difference to customers, communities and the environment, we took a logical step in elevating People. Plant. Paint. to give it a much wider and deeper meaning for the company. So rather than only focusing on how we talk about sustainability, People. Planet. Paint. is now at the heart of everything we do. We’ve put solving globally relevant challenges at our very core, but recognize that we can’t do it alone. So it’s great to see how our teams are leading the way in collaborative innovation. Our Paint the Future innovation ecosystem is going from strength to strength, with a highly successful regional event staged in China in the first half of 2021, while our second global startup challenge bootcamp and finals event is set for 2022.

That collaborative spirit also featured prominently in several other highlights during the year. This included the results of the research phase of Operation Night Watch being announced (a partnership with the Rijksmuseum in Amsterdam, the Netherlands). Meanwhile, our work with the Advanced Research Center Chemical Building Blocks Consortium (ARC CBBC) in the Netherlands – which strives to bridge bio-based sciences to competitively create paints and coatings building blocks – continues to excite and delight as we strive to remain a frontrunner in innovation. The work we’re doing with Nobel Prize winner Ben Feringa is particularly promising.

Of course, none of this would have happened without the 32,800 AkzoNobel employees around the world, who responded magnificently to the extreme challenges we faced in 2021. They held everything together inside our company and made sure that we stayed close to our customers, to help them get through their own tough times. And it was great to achieve more progress in organizational health, with our score improving once again (the participation rate reached an all-time high), suggesting that engagement is strong within the company and that we’re in great shape for 2022.

So a heartfelt thank you to the whole organization. For myself and the whole Executive Committee, it’s a real privilege – and fun – to be part of this journey as we advance further towards becoming the frontrunner in our industry.

Thierry Vanlancker CEO and Chair of the Board of Management and Executive Committee

R&D

Research and development.

North Asia

Includes, among others, China, Japan and South Korea.