I joined AkzoNobel as CEO in 2022, so it will always be a significant year for me on a personal level. It’s a privilege to be leading this great company, one with such a strong heritage, talented people and a fantastic portfolio of globally respected brands.
On a more general level, 2022 proved to be a year of persistent worldwide uncertainty as global events caused significant cost inflation, challenged supply chains, dented consumer confidence and weakened market demand. The war in Ukraine had a severe impact on the wider economy, especially in Europe (which accounts for around half our revenue), while China’s zero COVID-19 policy put pressure on one of our most important markets.
Like many other companies, we felt the impact of this turbulence and disruption. Degrading market conditions from the second quarter onwards resulted in us missing our targets and abandoning our €2 billion adjusted EBITDA ambition for 2023. However, I’m convinced that our ongoing transformation will set us up for profitable growth for years to come.
I’m convinced that our ongoing transformation will set us up for profitable growth for years to come.
It’s been a question of finding the right balance between adapting to the external challenges we’re facing – which require decisive measures – and the agility we need to run our businesses. One of our key successes in weathering the storm has been our ability to offset the impact of raw material and freight cost inflation with strong pricing initiatives, with cumulative price increases of 23% over the last two years.
Despite the complex market conditions, we achieved volume growth in Latin America and South Asia, as well as in our Marine and Protective, Vehicle Refinishes and Aerospace businesses. Meanwhile, we continued to work on our operational efficiency and effectiveness. We introduced cost and working capital reduction measures in mid-2022, which will remain a priority throughout 2023.
We also seized opportunities to grow through acquisitions. In April, we welcomed Colombia-based paints and coatings company Grupo Orbis, a strong business which will help to cement our market position in Latin America. Another deal we finalized (in December) was for the liquid wheel coatings business of Lankwitzer Lackfabrik GmbH, which perfectly complements our powder coatings portfolio. Finally, we announced our intention to acquire all the African paints and coatings activities of Kansai Paint (due to be completed in 2023, pending the relevant approvals).
Since joining the company, I’ve been particularly impressed with the passion and commitment of our people when it comes to sustainability and innovation. So it was good to see the two come together in the Paint the Future Collaborative Sustainability Challenge, a great combination of two fundamental elements of our People. Planet. Paint. company purpose. Other highlights in 2022 included a major “Let’s Colour” project to repaint Jodhpur in India (see the Out of the blue case study), exciting product launches such as our mosquito-repellent coating in Brazil (see the Biting back to combat disease case study) and our investment in a new production line for water-based texture paints at our Songjiang site in Shanghai (see the Increased capacity for sustainable solutions highlight on the Carbon emissions in own operations page). Overall, we made strong progress in reducing our own carbon emissions, although we still have work to do to reduce our full value chain emissions, which we’ll continue working on collectively with our suppliers and customers. Moving forward, we’ll also remain keenly focused on all four of our key sustainability ambitions.
Looking at 2023, it will be a challenging year, with market headwinds likely to be felt for months to come. We’ll continue to balance growth opportunities and profitability through cost actions and expected margin expansion as we defend our pricing and raw material cost pressure abates. Our focus on supply chain improvements – as well as getting a stronger grip on our working capital to rebuild cash generation and strengthen our balance sheet – will serve us well.
On behalf of the entire Executive Committee, I want to thank you, our shareholders, customers, partners and other stakeholders, for your support throughout 2022. And a huge thank you to AkzoNobel’s teams around the world for all their efforts. I’ve had time to visit a number of our sites – in the US, the UK, France, Spain and the Netherlands – and I’ve been impressed by the enthusiasm and dedication of the colleagues I’ve met. There’s both an energy and a determination to succeed which makes me excited about leading AkzoNobel on the next phase of its journey.
Grégoire (Greg) Poux-Guillaume
CEO and Chair of the Board of Management and Executive Committee
Adjusted EBITDA is operating income excluding depreciation, amortization and identified items.