Statement of Chair of Supervisory Board
Over the last two years, COVID-19 has impacted the world, people, habits and businesses in a massive way. It has created unpredictability, volatility, challenges and opportunities to varying degrees across industries.
For AkzoNobel, the lockdowns resulted in a surge in demand for decorative paints, initially in the do-it-yourself sector. More recently, demand also increased in professional channels, with people deciding to invest in upgrading their homes as they were spending more time in them. The market for performance coatings – AkzoNobel’s largest business area – suffered during 2020, but is now showing signs of rebounding as investment in construction and other industries starts to return.
Having navigated supply chain issues and various other challenges in 2020 to successfully deliver on its 15 by 20 ambition, 2021 was the first year that AkzoNobel could fully focus on its new Grow & Deliver strategy. Building on the progress made during the last five years, the attention is now on returning the company to growth rates that are at least at industry levels, and growing margins with an ambition of delivering significant progress in earnings and strengthened market positions over the coming years.
From an operations perspective, 2021 proved to be just as challenging as 2020. The many headwinds resulting from COVID-19 persisted, with the stress on the global supply chain having a particular impact. The company responded well, however, and was able to limit most of the effects that the restricted supplies of raw materials could have had on service levels to our customers.
The biggest challenge in 2021 came from the almost unprecedented increases in costs and transportation, which put our margins and profitability under severe pressure. Management identified these challenges very early on and implemented significant price increases, which were needed to protect profitability and the health of the company in a timely and highly professional manner. As a result of this, and the strong implementation of strategic and operational initiatives, the company was able to deliver a significant increase in turnover, driven by both higher prices and increasing volumes. The company’s absolute results from operations were in line with last year’s strong performance, although the operating margin was, as expected, lower than 2020. The Supervisory Board is very satisfied with the result and the fact that AkzoNobel’s ability to compete and win in its global markets has been further strengthened.
Much of the management focus during the year had to be on operating margin and ensuring that customer demand was met. However, securing long-term progress on the company’s Grow & Deliver strategy was also a priority and we were gradually able to shift our attention back to this as we spent more time discussing growth opportunities and progress on strategic initiatives in Supervisory Board meetings. It’s important that the company continues to move forward and we were impressed with the progress made in a number of important areas, where we saw the organization stepping up despite various distractions.
Participation in the company’s organizational health survey hit an all-time high, as did engagement levels. With many colleagues having to work from home and opportunities for “normal” working heavily restricted, this was an excellent achievement. A lack of face-to-face contact was something the Supervisory Board also had to contend with, which resulted in most of our meetings having to take place virtually. Nevertheless, we stayed in regular contact to ensure that we remained closely involved with all company developments.
Although the company didn’t make as much progress on its safety agenda as we would have liked – partly due to operational issues caused by COVID-19 – the Supervisory Board was particularly encouraged by the strong progress that continues to be made in the area of sustainability. The award of the highly prestigious Terra Carta Seal was a significant honor and underlines AkzoNobel’s unwavering commitment to having a positive impact in all areas of its activities.
This commitment was further demonstrated by the evolution of People. Planet. Paint., which has now taken on far greater prominence. Initially introduced as a way of explaining AkzoNobel’s approach to sustainable business, it has come to truly represent everything AkzoNobel stands for. Coupled with the Paint the Future collaborative innovation ecosystem – which goes from strength to strength – the company is well positioned to continue being a frontrunner in both innovation and sustainability.
After another difficult year, the management team and all employees should be proud of their efforts in 2021. AkzoNobel has shown itself to be an agile and competitive company and the senior leadership continues to demonstrate a capacity for tackling ongoing challenges while striving for future success. It’s important that progress continues to be made, and improvements are ongoing in various areas, such as commercial excellence, supply chain optimization and strengthening processes and systems. The Supervisory Board is looking forward to the next phase of the company’s ongoing journey.
I would like to thank my Supervisory Board colleagues, the Board of Management and Executive Committee for all their efforts during another extraordinary year. Most importantly, I want to thank AkzoNobel’s employees around the world for their continued passion and commitment, which helped to deliver a solid performance during tough times.
Amsterdam, February 28, 2022
Nils Smedegaard Andersen
Chair of the Supervisory Board