akzonobel report for the year 2011

8/2/2019 AkzoNobel Report for the Year 2011

http://slidepdf.com/reader/full/akzonobel-report-for-the-year-2011 1/24

Report or the year 2011and the ourth quarter



2 AkzoNobel I Report for the year 2011 and fourth quarter

•2011revenueup7percentdrivenbypricingactionstooffsetrawmaterialcostinflation

•Weakerendmarketsandcostinflationimpactedresults

•2011EBITDA9percentlowerat€1,796million(2010:€1,964million)

•Netincomefromcontinuingoperations€469million(2010:€664million)

•AdjustedEPS€2.91(2010:€3.71)•Totaldividendfor2011increaseto€1.45proposed

(2010:€1.40)•Performanceimprovementprogramontrack•Theeconomicenvironmentandcertainrawmaterialsremainour

principalsensitivitiesin2012

Our resultsataglance

(40 percent in high growth markets)

A North America

B Emerging Europe

Mature Europe

Asia Pacific

C D E

F Latin America

Other regions

%

20

7

38

21

10

4

100

C

D

EF

A

B

(Based on the full year 2011)

AkzoNobel around the world

Revenue by destination

In € millions

Q3 11 Q4 11Q4 10 Q1 11 Q2 11

4,097 4,051

3,7873,620

3,762

In € millions

437

377

551

507

301

Q3 11 Q4 11Q4 10 Q1 11 Q2 11

Revenue EBITDA



AkzoNobel I Report for the year 2011 and fourth quarter3

Operating ROI %Moving average ROI %

2010 20112009

9.2%

10.8%

8.9%

27.7%

23.2%

22.3%

Returns on invested capital

Continuing operations beore incidentals

4thquarter January-December

2010 2011 ∆% in€ millions 2010 2011 ∆%

3,620 3,787 5 Revenue 14,640 15,697 7

377 301 (20) EBITDA 1,964 1,796 (9)

10.4 7.9 EBITDAmargin(in%) 13.4 11.4

222 133 (40) EBIT 1,374 1,175 (14)

6.1 3.5 EBITmargin(in%) 9.4 7.5

MovingaverageROI(in%) 10.8 8.9

OperatingROI(in%) 27.7 22.3

0.82 0 .17 A dj us ted e ar nin gs pe r sha re (i n€ ) 3.71 2.91

Ater incidentals


2010 2011∆%

in€ millions 2010 2011 ∆%

159 36 (77) Operatingincome 1,219 1,042 (15)

130 (62) Netincome/(loss)fromcontinuingoperations 664 469 (29)

32 (6) Netincome/(loss)fromdiscontinuedoperations 90 8

162 (68) Netincome/(loss)totaloperations 754 477 (37)

0.55 (0.26) Earningspersharefromcontinuingoperations(in€) 2.85 2.01

0.69 (0.29) Earningspersharefromtotaloperations(in€) 3.23 2.04

198 256 Capitalexpenditures 534 708

275 270 Netcashfromoperatingactivities 519 325

Interestcoverage 6.4 4.3

Investedcapital 12,718 13,708

Netdebt 936 1,895

Numberofemployees 55,590 57,240

Financialhighlights




Revenuefortheyear2011wasup7percent,mainlyduetopricingactionstooffsetrawmaterialcostinflation.However,weakerendmarketsandcostinflationadverselyimpactedourresultsin2011.Theperformanceimprovementprogramtodeliver€500millionEBITDAin2014isontrackandweareconfidentthatthiswillbringusinlinewithourmedium-termambitions.

Perormance improvement program

Wehavelaunchedaperformanceimprovement

program to strengthen our competitiveness,

enhance our ability to grow, simplify our

supportstructuresandreduceourcostbase. Thissimplification andstandardizationof our

supportstructuresimpliesasignificantchange

inouroperatingmodelandbusinessculture.

Theprogram,whichweannouncedinOctober

2011,isacomprehensivethree-yearplanto

i mprov e o ur p erformance and d eli ver

€500 million EBITDA by 2014.The program

includesbusinessrestructuringandistodeliver

€200 million EBITDA in 2012. This implies

higherrestructuringcostforthecomingyear.

Theprogramisontrackandthefirstupdateon

progress and financial impact is due in our

2012half-yearlyreport.

Revenue

• InDecorativePaints,full-yearrevenue

growthwas7percentwithvolumesup

5percent;priceincreases3percentand

adverseimpactofcurrenciesof1percent.

RevenueinAsiaandtheAmericasshowed

double-digitgrowthin2011,mainlydriven

bypriceincreasesandthenewWalmart

contractintheUS.Demanddeclinedin

Europe,whilstgrowthratesachievedin

ChinaandSouthEastAsiaoutpaced

marketgrowth;however,thepaceof

marketgrowthsloweddowninthese

marketsinthesecondhalfoftheyear.

Q4revenuedevelopmentfollowedasimilar

regionalpatterntotherestof2011.

Revenueincreased6percent(7percentin

constantcurrencies),primarilydrivenbythe

US,LatinAmerica,ChinaandIndia,while

SouthEastAsiawasnegativelyimpacted

bythefloodinginThailandandslower

marketdevelopmentsinVietnamand

Malaysia.

• PerformanceCoatings2011revenuewas

up8percent,supportedbyvolumes

(2percent),acquisitions(2percent),andprice(5percent),andadverselyimpactedby

currencies(1percent).IndustrialCoatings

showedthelargestvolumeincrease,driven

bygoodperformancesinPackagingand

CoilCoatings,whileWoodFinishesand

Adhesiveshadlowervolumesduetoweaker

demandinthehousingmarket.

Financial highlights

+2%

+5% +1% -1% +7%8

10

0

2

4

6

Revenue development 2011

Increase Decrease

-2%

+6%

+1% 0% +5%8

10

0

2

-2

4

6

Revenue development Q4 2011

Increase Decrease

InQ4,revenueendedup7percentoverlast

year,supportedbyprice(7percent)andacquisitions(2percent);volumeswere

lowercomparedtothepreviousyear

(2percent).Signsofareductionintherate

ofrawmaterialpriceincreaseswereevident

inQ4,althoughmarginswerestillimpacted

bytheincreasedprices.

• SpecialtyChemicalshadasolid

performanceduring2011.Revenuegrewoverlastyearonpriceincreases,with

limitedoverallvolumegrowthduetothe

economicslowdownandgrowthbeing

hamperedinsomebusinessunitsdueto

capacityconstraints.Volumegrowthwas

evidentinmarketsectorsforSurface

Revenue


2010 2011 ∆% in€ millions 2010 2011 ∆%

1,139 1,204 6 DecorativePaints 4,968 5,296 71,238 1,326 7 PerformanceCoatings 4,786 5,170 8

1,259 1,285 2 SpecialtyChemicals 4,943 5,335 8

(16) (28) Otheractivities/eliminations (57) (104)

3,620 3,787 5 14,640 15,697 7

in % versus 2010Vol um e Pr ic e/mi x A cqu isi ti on s E xc ha ng e

ratesTotal

DecorativePaints 5 3 – (1) 7

PerformanceCoatings 2 5 2 (1) 8

SpecialtyChemicals 1 7 – – 8

Total 2 5 1 (1) 7

in % versus Q4 2010Vol um e Pr ice /mi x A cq ui si ti on s E xc ha ng e

ratesTotal

DecorativePaints 2 4 1 (1) 6

PerformanceCoatings (2) 7 2 – 7

SpecialtyChemicals (4) 5 – 1 2

Total (2) 6 1 – 5




ChemistryandPulpandPaperChemicals,

wherethedemandremainedstrong.

DespitelowervolumesinQ4insomeofthe

businesses,revenueincreasedby2percentonthebackofpriceincreases,

althoughtheywereoffsetbyareduction

inEthyleneAminessalespricesduringthe

quarter.Salesvolumesdippedbelow

previousyearastheeconomyslowed

downandcustomerspostponedordersto

reduceinventorylevelstowardstheendof

theyear.

Acquisitions and investments

In 2011, we made several acquisitions and

significantinvestments:

• InDecorativePaintswehaveenteredintoa

partnershipinChinawithQuangxiCAVA TitaniumIndustryCo.Ltd.tohelpensure

supplyoftitaniumdioxide(TiO2 ).Inaddition,

weareinvesting€110millionina

replacementmanufacturingfacilityinthe

NorthEastofEngland.

• InPerformanceCoatings,theacquisitionof

coatingsmanufacturerSchrammHolding

AGclosedearlyOctober,2011.This

acquisitionwillenableustostrengthenour

globalleadershippositioninspecialty

plasticcoatings.Wearealsoinvesting

€60milliontoincreasetheproduction

capacityofourAutomotiveandAerospace

CoatingsbusinessinChinatomeetrisingdemand.

• InSpecialtyChemicals,wehaveacquired

BoxingOleochemicalsinJanuary2012.

Boxingistheleadingsupplierofnitrile

aminesandderivativesinChinaand

throughoutAsia.Weareinvesting

€170millionintwonewfacilitiesbeingbuilt

inBraziltosupplypulpmills,oneofthem

beingtheworld’slargest.

Wearealsoinvesting€45millioninNingbo,

Chinaand€140milliontoconvertour

chlorineplantinFrankfurt,Germany,to

membraneelectrolysistechnology.

Raw materials

Rawmaterialpriceincreaseswereasignificant

concern during 2011. Overall, the weighted

averageincreaseinourrawmaterialpricesfor

theyear was 16 percent. The increase year-

on-yearforQ4wasjustover10percent,which

isatalowerlevelthaninQ3,primarilydueto

astabilizationinallrawmaterialgroupsexcept

TiO2,wherewecontinuetoseesignificantprice

increases. The absolute impact of increased

rawmaterialpricesfortheyearisapproximately

€1billion(including2percentvolumeincrease),accounting for almost the entire increase in

costofsales.

EBITDA

• InDecorativePaints,EBITDAwas

20percentbehindlastyear(19percentin

constantcurrencies),mainlydrivenbythe

increasesinrawmaterialprices(specifically

TiO2 )andunfavorableproductmixeffects

includingdowntrading.EBITDAmargin

endedat8.3percentin2011(2010:

11.0percent).Westartedtorestructure

operationsinEuropeandannounced

restructuringactivitiesintheUSin2012.

MarginsinQ4werenegativelyimpactedby

theincreasedcostsofrawmaterialsand

stockwrite-offs(€17million)intheUS

resultinginanEBITDAof0.9percent(2010:

5.5percent).

• InPerformanceCoatings,rawmaterialprice

increaseshadanegativeimpactonthefull-

yearresultsinallbusinesses.Margin

managementprograms–includingselling

priceincreasesandrestructuringeffortsin

maturemarkets–areongoingandcontinuetosupportperformance.Full-yearEBITDA

endedat€611million(2010:647million),

withanEBITDAmarginof11.8percent

(2010:13.5percent).

Signsofareductionintherateofraw

materialpriceincreaseswereevidentinQ4,

althoughmarginswerestillimpactedbythe

increasedprices.Asaresult,EBITDAinthe

quarterwas€141million(€147millionin

2010).

• WhilemostbusinessesinSpecialty

Chemicalsrecordedtheirbest-everprofitability,FunctionalChemicalssawits

earningsdecreaseafteraverystrong2010

performance,dueprimarilytotheEthylene

Aminesproductline.Witheffectivemargin

managementandcostcontrol,unitmargins

remainedatthe2010leveloffsetting

significantrawmaterialpriceincreasesand

Volume development per

quarter (year-on-year)

Q410 Q111 Q211 Q311 Q4 11

DecorativePaints 1 9 6 4 2

PerformanceCoatings 5 7 2 1 (2)

SpecialtyChemicals 3 6 1 (1) (4)

Total 3 7 3 1 (2)

Price/mix development per

quarter (year-on-year)

Q410 Q111 Q211 Q311 Q4 11

DecorativePaints 2 1 2 3 4

PerformanceCoatings 3 2 3 7 7

SpecialtyChemicals 8 6 8 8 5

Total 4 3 4 6 6

EBITDA

4thquarter January-December2010 2011 ∆% in€ millions 2010 2011 ∆%

63 11 (83) DecorativePaints 548 440 (20)

147 141 (4) PerformanceCoatings 647 611 (6)

221 207 (6) SpecialtyChemicals 939 906 (4)

(54) (58) Otheractivities/eliminations (170) (161)

377 301 (20) Total 1,964 1,796 (9)




Incidentals included in operating income


2010 2011 in€ millions 2010 2011

(29) (55) Restructuringcosts (120) (131)

(48) (33) Resultsrelatedtomajorlegal,antitrustandenvironmentalcases

(49) (9)

16 (11) Resultsonacquisitionsanddivestments 33 10

(2) 2 Otherincidentalresults (19) (3)

(63) (97) Incidentals included in operatingincome

(155) (133)

EBIT in other


2010 2011 in€ millions 2010 2011

(29) (29) Corporatecosts (96) (98)

(12) (3) Pensions (7) (14)

4 (9) Insurances 2 1

(23) (21) Other (87) (64)

(60) (62) EBIT in “other” (188) (175)

adversecurrencyimpacts.Theenergy

marketintheNetherlandsremained

unattractiveforenergyproducersas"spark

spreads"(thedifferencebetweengasinput

costsversuselectricitysalesprices)adverselyimpactedourresults.Theoverall

portfolioshowsstrongprofitabilityinthese

difficulteconomiccircumstances,with

EBITDAat€906million(2010:

€939million)andEBITDAmarginat

17.0percent(2010:19.0percent).

Q4showedlowervolumesinmost

segments,duetolowerdemandand

customerstockcontrol.EBITDAwas

€207million(2010:€221million)and

EBITDAmarginat16.1percent(2010:

17.6percent).

Incidental items

Restructuring is mainly related to European

bus ines ses i n Deco rati ve Pai nts and

PerformanceCoatings.

EBIT in "other"

Corporatecostsendedinlinewithprevious

year.Additionalcostsforfunctionalexcellence

activities were offset by cost savings. The

resultofourcaptiveinsurancecompanieswas

inlinewiththepreviousyear,althoughwehad

ahighernumberofclaimsinthefourthquarter.

Othercostswerelowerduetocostsavings

andfavorablenon-recurringitems.

Net inancing expenses

Netfinancingchargesfortheyearincreased

by€11millionfrom€327millionto

€338million.Significantitemsincluded:

• Netinterestondebtwhichincreasedby

€56millionto€245million(2010:

€189million)duetotheloss(€67million)on

thebuybackofcompanybondsin

Decemberpartlyoffsetbyhigherfinancing

income.

• Financingexpensesonpensionswhich

decreasedby€41millionto€59million(2010:€100million)mainlyduetolower

discountrates.

• Adecreaseincostsof€16millionon

foreigncurrencyresultsofhedgedfuture

interestcashflows.

InQ4,we incurreda gain of€8 million asa

result of hedged future interest cash flows.

Other main changes were related to lower

financing expenses on pensions (€8 million)

and lower discount rates for provisions

(€20million).Mid-December,weboughtback

atotalnominalamountof€528millionofour

2014and2015bondsandreplacedthemwithbondswithlowerinterestrates.Thistransaction

resultedina loss of€67millioninthefourth

quarter,whichwillbesetoffinlateryearsby

si gni fi can tl y lo wer int eres t co st s. T he

transactionhasimprovedourmaturityprofile.

Tax

Theyear-to-datetaxrateis27percent(2010:

19percent).Thetaxratebenefitsfromseveral

adjustmentstopreviousyearsandtax-exempt

gains,themainonebeingareleaseofananti-

trustprovision.Thetaxratein2010waslow

because of several adjustments to previous

years, partly related to settlements with tax

authorities.

The Q4 tax is impacted positively by the

inf luence of changes in tax rates on themeasurement ofdeferredtax andby several

adjustmentstopreviousyears.





-1%

+2%

+4%

+1%

+6%

Volume AcquisitionsPrice/mix Exchange

rates

Total

Increase Decrease

8

10

2

4

6

0


-1%

+5%

+3% 0% +7%


rates

Total

Increase Decrease

8

10

2

4

6

0

Full-yearrevenuegrowthwas7percentwith

volume s up 5 perce nt, price inc rea ses

3percentandadverseimpactofcurrenciesof

1percent.RevenueinAsiaandtheAmericas

showed double-digit growth in 2011 in

constant currencies, mainly driven by price

increases,volumegrowthinAsiaandthenew

Walmart contract in the US. Growth rates

achieved in China and South East Asia

outpacedmarketgrowth;however,thepaceof

marketgrowthsloweddowninthesecondhalf

oftheyear.VolumesinEuropewerepositivefor

the year, however demand declined in the

secondhalfoftheyear.Continuousinvestment

inbrands,distributionandpeople,aswellas

expansion into mid-tier segments in high

growthmarkets,isprogressing.Achangein

the management structure in Europe and

NorthAmericawillallowforbetterleveragingof

economiesofscaleandwillleadtofurthercost

reductions. EBITDA was 20 percent behind

lastyear(19 percentin constantcurrencies),

mainly driven by increases in raw material

prices (specifically TiO2 ) and unfavorable

product mix effects including down trading.

TheEBITDAmarginwas8.3percentin2011.

Q4 revenue development followed a similar

regionalpatterntotherestof2011.Revenue

increased 6 percent (7 percent in constant

currencies),primarilydrivenbytheUS,Latin

America, Chinaand India, while South East

Asiawasnegativelyimpactedbytheflooding

inThailandand slowermarketdevelopments

in Vietnam and Malaysia. Margins were

negativelyimpactedbytheincreasedcostsof

rawmaterials andstock write-offs in theUS

(€17million),resultinginanEBITDAmarginin

Q4of0.9percent.

Europe

InEurope,revenuewasup3percent(4percent

in constant currencies). It was a mixed

performance across the region with a solid

starttotheyearbutasignificantslow-downin

the second half of 2011 in those countries

mostimpactedbytheeurocrisis.Revenuein

the more mature markets showed modest

growth,mainlyonthebackofpriceincreases

under weakmarketconditions,while Turkey,

PloandandRussiadeliveredstrongerrevenue

growth.Thereweresharegainsinsomeofour

keymarketsandastrongperformancefrom

ourBuilding Adhesivesbusiness. Allregionsreportedrevenuegrowth,withtheexceptionof

theSouthernregion.Marginsintheyearwere

under pressure due to raw material price

increases and – in the non-euro markets –

currencyeffects.Tomitigatetheseeffects,the

b us ine ss i mp lem en ted ac ti ve ma rg in

management.Costsfortheyearwereslightly

• Full-yearrevenueincreased7percentwith5percentvolumeincreaseand3percentpriceincrease

• EBITDA20percentbehindthepreviousyear• StrongestrevenuegrowthinChina,IndiaandLatinAmerica• ChallengingyearinEuropeandtheUSwith

continuedrestructuring• Marginsnegativelyimpactedbyhigherrawmaterialcosts

andmixeffect• Activemarginmanagementcontinues

DecorativePaints




In € millions

90

191

148

1163

Q1 11 Q2 11 Q3 11 Q4 11Q4 10

In € millions

Q2 11 Q3 11 Q4 11Q4 10 Q1 11

1,461 1,435

1,2041,139

1,196

Revenue

EBITDA

up on the back of some store related

acquisitions,specificITERP-relatedcostsand

brandinvestmentssupportingsharegrowthin

somekeygrowthmarkets.

InQ4,revenuewasinlinewith2010.Revenue

was impactedby the worsening oftheeuro

crisis.Marginscontinuedtobeunderpressure

duetorawmaterialcostsincreases,butwere

partlyoffsetbymarginmanagement.

Americas

Revenue in the US was 12 percent above

2010(inconstantcurrencies:up 17percent),

whichwasprimarilydrivenbythenewbusiness

with Walmart. In2011,the USpaint market

was essentially flat versus the prior year,

primarily driven by weakness in the trade

market.In2011,wecontinuedourinvestmentintheGliddenbrandandintroducedGlidden

DuoandGliddenTrimandDoorproductsat

TheHomeDepot.ProfitperformanceintheUS

declined due to rawmaterial costincreases

outpacing pricing actions, a weaker product

mix, stock write-offs and investments in

Walmart.

InCanada,2011revenuewas5percentbelow

2010(inconstantcurrencies:down4percent),

mainlydrivenbyvolume.Demandforpaintin

2011 was not as strong as it was in2010,

whenastrongrealestatemarketandhome

renovationtaxcreditsactedaskeycontributors

to economic growth. In addition, Canada’sgrowthwasimpactedbyslowrecoveryinthe

USandrisinginflation,allofwhichundermined

theconfidenceofconsumers.

In Latin America, ful l-year revenue was

15percentabove2010(inconstantcurrencies:

17 percent).All countries contributed to the

accelerated growth in theregionby building

brand equity through the activation of our

mission:AddingColourtoPeople’sLives.This

brandequitywasconvertedintomarketshare

andprofitthroughpoint-of-salelocationsand

the innovativeexecutionof theTudode Cor

Minha Casa (I want colors for my house)

programinBrazil.

Q4 revenue in the Americas increased by

16percent(inconstantcurrencies:17percent),

mainly driven by Latin America and the US.

Volume development in the US increased

significantlyduetotheWalmartcontract.

Keybrands

Revenue


2010 2011 ∆% in€ millions 2010 2011 ∆%

543 535 (1) DecorativePaintsEurope 2,585 2,658 3

366 421 15 DecorativePaintsAmericas 1,547 1,690 9

231 250 8 DecorativePaintsAsia 841 952 13

(1) (2) Other/intragroupeliminations (5) (4)

1,139 1,204 6 Total 4,968 5,296 7

Beore incidentals

63 11 (83) EBITDA 548 440 (20)

5.5 0.9 EBITDAmargin(in%) 11.0 8.3

8 (45) – EBIT 343 230 (33)

0.7 (3.7) EBITmargin( in%) 6.9 4.3


Ater incidentals

(26) (9 4) O pe ra tin g inc om e 275 137







Asia

In2011,ourgrowth inAsiawas strong, but

slowed down somewhat during the year.

Revenueincreased13percentfrom2010(in

constantcurrencies:16percent),withallAsiancountriescontributingtothisgrowth.

Our full-yearrevenuegrowth (16 percent) in

Chinasignificantlyoutpacedmarketgrowthin

2011(2percent).Investmentinbrandbuilding

hasstartedtocometofruition,withincreased

brand awareness across China. We

succ essf ul ly launc he d the Let’s Colour

campaign to build brand image and inspire

customers to redecorate their houses. We

openedorupgradedover900thirdpartyDulux

customer stores in 2011 to accelerate the

expansion of our “controlled” distribution

footprint. Major new product launches likeForestBreathandVOC-freeseriesgenerated

significantrevenue.Wecontinuedto investin

people, while at the same time built

organizational and system capabilities for

future growth. The sales organization was

restructuredto aggressively grow theproject

business:we welcomedmore than300 new

colleaguestoourorganization,withthemajority

beingdeployedinfieldsales.Wecontinuedto

buildcapabilityinourDuluxEasyPaintservice

in order to build a leading position in the

redecoration market. The market outlook for

next year is still uncertain. Wewill,however,

continuetoaccelerateourbrandbuildingandchannel development to fully capture the

growthpotentialinthemedium-tolong-term.

TheSouthEastAsiabusinessgrewfasterthan

themarketandweimprovedourcompetitive

position, cementing our overall number one

position in the region. This was achieved

through continued investment in the Dulux

brandacrosstheregion:particularlythelaunch

oftheDuluxLet’sColourbrandidentity,aswell

askeyproductandinnovationlaunchessuch

as DuluxWeathershield2nd Generationand

ournewDuluxInspireofferinginVietnamand

Thailand (designed for the mid-market). Themarkets have also been impacted by the

economic slowdown, particularly Indonesia

andMalaysia,andourThailandbusinesshas

been affected by the recent flooding. We

continuedtoinvestinourbusinesspartners–

painters,architects,interiordesigners–andour

channelsandcustomers,alongwithcontinued

expansionofourtintingmachinefootprint.In

ordertostayaheadofourgrowth,wemadea

major transition in our distribution systemin

Indonesiaandcontinuedtobuildupoursupplychainfootprintandcapabilitiesaccordingly.

GrowthinIndiawasstrongin2011andahead

ofthemarket.Werevisedourproductportfolio

and re-established Duluxas a quality leader.

Velvet Touch Trends launch doubled our

“specialeffects”salesinlaunchmarkets.Dulux

GuardianandDuluxWeatherShieldMaxwere

launchedintheretailchannelinDecemberin

threeregions(North,SouthandEastIndia)with

encouraging feedback from the market.

Contractor engagement continued to rise,

peakinginDecember,supportinga40percent

volumegrowthinthetradebusiness.Thesteepincrease in raw material prices was almost

completelymitigatedwithpricingactionsand

the adverse effect of the high currency and

price inflation was mitigated by a tight cost

controlprogram.

TheoverallgrowthmomentuminAsiacontinued

inQ4.However,inChinameasuresintroduced

by the central government to curb rising

propertypriceshaveledtosomesofteningof

demand in Q4. Asia revenue increased by

8 percent in Q4 ( in constant currencies

9 percent) while maintaining healthy profit

levels. Continued strong revenue growth inChinaandIndiawasoffsetbyaslowdownin

SouthEastAsiaasaresultofthefloodingin

ThailandandweakerdemandinIndonesiaand

Malaysia.





0%

-2%

+7%

+2% +7%


rates

Total

Increase Decrease

8

10

2

-2

4

6

0


-1%

+2%

+5%

+2%

+8%


rates

Total

Increase Decrease

8

10

2

4

6

0

PerormanceCoatings• Full-yearrevenueup8percent,withvolumesup2percent• EBITDA6percentbehindprioryear• Marginsimpactedbyhigherrawmaterialcost

• Performanceimprovementprograminitiated• StronggrowthinIndustrialCoatingsbutweaknessin

WoodFinishesandAdhesives• Integrationofacquiredactivitiesdeliveringresults

PerformanceCoatings2011revenuewas up

8percent,supportedbyvolumes(2percent),

acquisitions(2percent),andprice(5percent),

a nd a dver se ly impac te d by c ur re nc ie s

(1 percent). Industrial Coatings showed the

largest volume increase, driven by goodperformancesinPackagingandCoilCoatings,

whileWoodFinishesandAdhesiveshadlower

volumesduetoweakerdemandinthehousing

market.PowderCoatingsvolumes,excluding

acquisitions,wereimpactedinthesecondhalf

oftheyearbytheweakeconomicenvironment.

Rawmaterialpriceincreaseshadanegative

impactonthefull-yearresultsinallbusinesses;

the rate of increase began to soften in Q4

2011. Ma rgin management progra ms –

i nclu di ng s el li ng p rice i ncreas es and

restructuringeffortsin mature markets – are

ongoingandcontinuetosupportperformance.

Full-yearEBITDAendedat€611million,with

an EBITDA margin of 11.8 percent (2010:

13.5percent).

InQ4,revenueendedup7percentoverlast

year, supported by price (7 percent) andacquisitions(2 percent); volumes were lower

comparedtothepreviousyearsamequarter

(2percent).Signsofareductionintherateof

rawmaterialprice increaseswere evident in

Q4,althoughmarginswerestill impactedby

theincreasedprices.Asaresult,EBITDAinthe

quarterwas€141million(€147millionin2010).

Marine and Protective Coatings

Revenuefor Marine andProtective Coatings

wasup4percent.InMarine,volumefellshort

oflastyear.Afterrecordactivitylevelsinnew

construction in China and Korea last year,

demandsoftenedinthesecondhalfof2011.

Maintenanceand repair markets have been

mixed, with some slow recovery over the

courseoftheyearindeepseamaintenance.In

ProtectiveCoatings,theyearhasseenstrong

revenuegrowth,withpositivedevelopmentinbothheavy industry as wellas oil and gas

markets, with increasing infrastructure

requirementsinChina,India,SouthEastAsia,

SouthAmericaandtheMiddleEastregions.In

Yacht, it has been a tough year with weak

demand across all regions. Volume off-take

waslow withour keydistributors giventheir

low retail activity in core European and US

markets; likewise the number and scale of

super-yachtprojectswaslowerthanhadbeen

anticipated. Raw material increases put

pressureonmarginsinallsectors.Attheend

ofthefirstquarter,welaunchedInterline9001,

our next-generation chemical tank coatingtechnology. The coating offers fewer cargo

restrictions, reduced cleaning time and zero

absorptionformanycargos.Theproductwas

well-received in the market, with positive

feedback from major operators. A new

€7 million, state-of-the-art fire protection

laboratorywasopenedattheFellingsiteinthe

UK,creatinga globalcenterof excellencefor

f ire prote ct ion developme nt which wil l

significantlyimproveourabilitytodevelopand

bringnewproductstothemarket.

Thefinalquarterendedwithslowactivitylevels,

causingvolumestoendlowerthanQ42010.Marine Deep Sea and Protective Coatings

generatedvolumesabovethelevelseenduring

the last quarter of previous year and new

construction continuedto belower thanthe

sameperiodlastyear.




Revenue

EBITDA

Revenue


2010 2011 ∆% in€ millions 2010 2011 ∆%

349 373 7 MarineandProtectiveCoatings 1,345 1,398 4

185 195 5 WoodFinishesandAdhesives 776 781 1

256 258 1 AutomotiveandAerospaceCoatings 994 1,030 4

230 235 2 PowderCoatings 804 940 17

222 273 23 IndustrialCoatings 882 1,049 19


1,238 1,326 7 Total 4,786 5,170 8

Beore incidentals

147 141 (4) EBITDA 647 611 (6)

11.9 10.6 EBITDAmargin(in%) 13.5 11.8

119 109 (8) EBIT 540 495 (8)

9.6 8.2 EBITmargin(in%) 11.3 9.6


Ater incidentals

104 83 Operatingincome 487 458




In € millions

147 143

Q1 11

170

157

Q2 11 Q3 11

141

Q4 11Q4 10

In € millions

Q1 11 Q2 11 Q3 11Q4 100

0

0

0

01,237

1,312 1,295

Q4 11

1,326

1,238

Wood Finishes and Adhesives

2011revenuewas1percentabovetheprior

year, adversely impacted by lower volumes.

Demand remained sluggish in the mature

marketsofNorthAmericaandEuropeformostof the year. We continue to strengthen our

position in the high growth markets with a

focuson the Asiandomesticmarkets,Latin

America and Eastern Europe. In 2011, we

commissioned a new wood finishes

manufacturingfacilityinVietnam,andbegan

constructionof a new boardresin facility in

Peru.In2011,weintroducedVOC-compliant

c oat ings into our E uropea n a nd N orth

American distribution lines and we

commercializedanewgenerationof superior

scratch-resistant coatings for pre-finished

hardwoodflooring.

Revenueforthequarterwas5percentabove

prioryear, driven by pricing actions to offset

higherrawmaterialcostswithvolumesalmost

flat.Thedemanddriverswererelativelystable

inthefourthquarter.The UShousingmarket

wasslightlyimprovedduringthequarter,but

the macroeconomic environment in Europe

becamemorevolatile.Thestrongestregional

growthwasrealizedinLatinAmerica.

Automotive and Aerospace Coatings

Revenuein2011ended4percenthigherthan

thepreviousyear.Revenuegrowthwasdriven

byavolumeincreaseof4percentmainlyduetostronggrowthinAsia,recoveryofdemand

in North and South America, and robust

demandintheAerospaceCoatingsmarket.In

2011 we also successfully introduced the

WandawaterbornebasecoatinNorthAmerica

and Asia. Adverse currency translation

impacted revenue.Increases in rawmaterial

pricesweremitigatedbysellingpriceincreases.

Weexperiencedslowdownindemandmainly

comingfromcountriesmostimpactedbythe

eurozone crisis. The expansion of our US

automotiverepairdistributionnetworkthrough

thedivestmentofcompanyownedstoresto

LKQwaspartiallycompensatedbythePrimeacquisition.Weannouncedaninvestmentof

€60milliontoincreaseproductioncapacityof

ourbusinessesinChinawhichbuildsonlast

year'sacquisitionofPrimeAutomotive.

Keybrands




In Q4, revenues increased 1 percent. The

growth rate in Asia slowed down, but was

coveredbyincreasedvolumesinAmericasand

Aerospace coatings. Total volumes ended

similartoQ42010.

Powder Coatings

Revenuein2011ended17percenthigherthan

thepreviousyear,withacquisitionscontributing

10 percent of this growth. Excluding

acquisitions,volumesinthesecondhalfofthe

yearwereadverselyimpactedbytheweakening

oftheeconomicenvironment.Continuedraw

material price increases impacted margins

adversely,thoughwerepartiallyoffsetbysales

price increases. The Americas and Europe

contributed to strong volume growth. The

Rohm and Haas integration process was

completed as planned. A leading globala gricultur al a nd c onstruct ion c ustome r

selectedInterponACEHighTempBlackasthe

only high tempe ra ture powder coat ing

approvedfortheiruse.Ambitiousplansforthe

highgrowthmarketswerealsohighlightedby

ope ning exte nded new f aci li ties at the

manufacturingplantinIzmir,Turkey.

RevenueinQ4wasaheadofthepreviousyear

by2percentsupportedbygoodperformance

intheAutomotiveandAgriculturalconstruction

equipmentactivities.However,volumesbefore

acquisitions were impacted by the weak

economic environment. The Architecture,Furniture and Domestic Appliances activities

showe d f ur ther wea knesse s, mainly in

SouthernEuropeandpartsofAsia.

Industrial Coatings

Industrial Coatings had a good year with

revenueincreasing19 percent,mainlydue to

highervolumes,pricerealization,thesuccessful

integrationoftheLindgensPackagingbusiness

(acquiredin2010)andtheSchrammacquisition

(Q42011).Thedriversforgrowthin2011came

fromPackagingCoatings’beverageandfood-

re lated businesse s a nd C oi l C oatings’

c on st ru ct io n a nd a gr ic ul tu re- re la tedbusinesses.Packaging continuedto grow in

Europe and Asia, while Coil grew in the

Americas.SpecialtyPlasticshadlowerrevenue

in2011duetoreduceddemandinthewireless

and IT segments in Asia. We saw a slight

slowingdownofactivitiesduringQ4inEurope,

whileNorth America continued to be strong.

Weopened a new Coil factory inBangalore,

India,inthebeginningof2011,tosupportour

growingdemandforcoilproductsandweare

addingcapacityinSongjiang,China,tosupportthecontinuedgrowingdemandforpackaging

coatingsinChina.

Overall, Industrial Coatings showed strong

revenue growth of 23 percent in the fourth

quarter,supportedbytheSchrammandSSCP.





+1%

-4%

+5% 0% +2%


rates

Total

Increase Decrease

8

10

2

-4

-2

4

6

0


0%

+1%

+7% 0% +8%


rates

Total

Increase Decrease

8

10

2

4

6

0

Aftera strong2010,theSpecialtyChemicals

portfoliodeliveredasolidperformanceduring

2011. Most businesses, such as IndustrialChemicals,SurfaceChemistry,andPulpand

PaperChemicals recordedgood growthand

the ir best-ever profi ta bi li ty. Funct iona l

Chemicalssawitsearningsdecrease aftera

strong 2010 performance, especially in the

EthyleneAminesproductline.Revenuegrew

overlastyear,mainlyonpriceincreaseswith

overallvolumesshowinglimitedgrowthdueto

theeconomicslowdown,whichbecamemore

visibleinsomesegmentsduringtheyear,as

well as growth being hampered in some

businessunitsduetocapacityconstraints,for

whichsolutionsareunderway.Somespecific

product lines captured substantial growth,especially in market sectors for Surface

Chemistry and Pulp and Paper Chemicals,

wherethedemandremainedstrong.Chemicals

Pakistancontinuedtobeplaguedbydifficult

businessconditions,amongthemapersistent

naturalgasshortageinthecountry,leadingto

higher costs for using alternative energy

sources aswell as6 percent lower off-take

from our customers. Raw material prices

increasedsignificantlyduringtheyear,despite

startingtoleveloffandstabilizebytheendof

2011. More headwind came from adverse

t ra ns ac ti on al c ur re nc y d ev el op me nt s

impactingmarginsandalsofromtheenergymarket in the Netherlands, where spark

spreads (the difference between gas input

costs versus electricity sales prices) are

unattractive for energy producers. With

effectivemarginmanagementtheseeffectsare

compensatedinourpricing,andoverallforour

portfolio ourunit margins remainedclose to

the same level. The overall strong portfolio

showeda decentprofitabilityinthesedifficult

economiccircumstances.

Q4showedlowervolumesinmostsegments,

due to lower demand and customer stock

control. Despite these factors, revenueincreasedby2percentonthebackofprice

increases.

Functional Chemicals

Followingastrongyearin2010andagood

start in Q1 2011, the performance of the

FunctionalChemicals’businesswasimpacted

by the economic downtur n. For mos t

businesses,salesvolumesended belowlast

year.ThenewEthyleneAmines’andChelates’

plantsinNingbo–whichstartedupduringthe

year–kepttheportfolio’soverallsalesvolumes

inlinewith2010.

However, as a result of effective marginmanagement–onthebackofpriceincreases

– revenue increased by 6 percent, seen at

somebusinesssegmentsinQ4.Performance

intheyearwasalsoimpactedbyyear-on-year

increasesinrawmaterialcostsandunfavorable

transactionalcurrencyimpacts.

SpecialtyChemicals• Full-yearrevenueincreased8percent,mainlydrivenby

priceincreases• Weakeningdemandinsomesegmentsvisibleduringtheyear

• Performanceimprovementprograminitiated• Full-yearEBITDAdecreased4percentto€906millionagainst

astrong2010• EBITDAmarginremainedsolidat17.0percent(2010:19.0percent)




In € millions

220

241

221

Q1 11 Q2 11

238

Q3 11

207

Q4 11Q4 10

In € millions

Q2 11 Q3 11Q4 10 Q1 11

1,351 1,350 1,349

Q4 11

1,2851,259

Revenue

EBITDA

In Q4, earnings declined compared to the

previousquarter.Salesvolumesdippedbelow

previousyearastheeconomysloweddown

and customers postponed orders to reduce

inventorylevels towards theend of theyear.Formanyproductlinesthisresultedinvolumes

beingbelow normal levels, however, market

shares were maintained in general. The

reductioninperformanceoverthelastquarter

was most visible in Functional Chemicals,

which experienced sales price pressure in

somesegmentstowardstheendoftheyear,

drivenbylowerdemandandimprovedproduct

availabilityin themarket.Raw material price

increasescontinuedtohaveanimpact,though

stabilized towards theend of theyear. The

main driverfor the increases was higheroil

prices, resulting in higher prices for oil

derivatives.

Industrial Chemicals

IndustrialChemicalsperformedstronglyduring

the year. Chlor-Alkali and Monochloroacetic

Acid(MCA)benefitedfromhighercausticlye

pricesthanlastyear,withtheMCAbusiness

realizinghighvolumesinhigh-marginmarkets,

especially in China. The Chlor-Alkali

performance was also characterized by a

strongchloro-methanesbusiness,aswellas

favorable results of electricity hedging and

changed electricity regulations in Germany.

TheenergymarketintheNetherlandsremained

unattractive for energy producers as "sparkspreads" (the difference between gas input

costsversuselectricitysalesprices)adversely

impactedourresults.Saltalsoperformedwell,

increasing its market share with its highest

recorded chemical transformation (CT) salt

volume. On t he back of t hese st rong

performances,revenueincreasedby9percent;

howevertotalsalesvolumestayedflatexcept

for MCA, Dimethyl ether (DME) and chloro-

methanes.Therewasalsoamajormaintenance

stop ea rl ier in the ye ar f or Elec trolysis

Rotterdam, which is done once every four

years.

The fourth quarter saw revenue increase by

1percent,butvolumesdeclinedby6percent

– dominated by lower customer demand –

except for MCA. Overall, salt volumes were

strong, except for the road salt business,

whichwasimpactedbymildwinterconditions.

Keybrands

Revenue


2010 2011 ∆% in€ millions 2010 2011 ∆%

461 457 (1) FunctionalChemicals 1,813 1,917 6282 285 1 IndustrialChemicals 1,070 1,165 9

200 220 10 SurfaceChemistry 847 945 12

270 276 2 PulpandPaperChemicals 1,044 1,116 7

82 81 (1) ChemicalsPakistan 305 330 8


1,259 1,285 2 Total 4,943 5,335 8

Beore incidentals

221 207 (6) EBITDA 939 906 (4)

17.6 16.1 EBITDAmargin(in%) 19.0 17.0

155 131 (15) EBIT 679 625 (8)

12.3 10.2 EBITmargin(in%) 13.7 11.7


Ater incidentals119 133 Operatingincome 604 622







Transportation of chloro-methanes volumes

washamperedbylowwaterlevelsontheRhine

River.

Surace ChemistrySurfaceChemistryperformed wellcompared

to2010withrevenuegrowingby12percent

duetohighersalesprices,mainlydrivenbyraw

materialpriceincreases.Allgeographicregions

contr ibuted to the improvement, which

occurred in most market sectors. Plant

utilization was high and ran at full capacity,

resultingintheproductsbeingsoldoutforthe

majority of the year. Our industrial markets

performedstrongly,especiallyinagrochemicals

andmining,whilehighoilpricescontributedto

stronger demand for oilfield chemicals. The

co ns ume r- rel ate d mar ket s, ho we ve r,

experiencedsomesofteningthisyear.Marginsweresqueezedasrawmaterialpricesescalated

during the year and exhibited significant

volatility during Q3, however, they stabilized

during the last quarter of the year. Currency

impactsweresignificantduetoaweakerUS

dollar,impactingourmarginsandthestronger

Swedish krona, impacting our cost base in

those countries. The Boxing Oleochemicals

acq uis it io n in Chin a recent ly receiv ed

governmentapproval,whichwillcontributeto

strengthening the company’s position in

specialty surfactants within the region and

provideamanufacturingbaseinChina.Margin

management and effective cost controldeliveredastrongperformancefortheyear.

Revenue in Q4 increased by 10 percent

comparedtolastyear,mainlydrivenbyprice

increasesinallregions.However,volumewas

slightly below last year. Traditionally the

business is seasonaland itexperiencedthe

normaltrendforthistimeofyear,withsomeof

thelargerPersonalCarecustomersreducing

stocksduringthequarter.

Pulp and Paper Chemicals

TheperformanceofPulpandPaperChemicals

endedtheyearstronglywithrevenueincreasingby 7 percent despite adverse transactional

currencyeffects.Demandstrengthwasdriven

by Bleaching Chemicals and the Specialty

Productsportfolio,whilevolumessoftenedin

thePaper Chemicals business. Theincrease

was supported by most businesses and

regions,especiallyAmericasand AsiaPacific.

The overall performance was significantly

affectedbytransactionalcurrencyimpactsas

wellasrawmaterialpriceincreases.However,

marginmanagementinitiativesremainedstrong

withpriceincreasestocountertheseimpacts,as well as a favorable regional/product mix,

contributing to an overall strengthening in

marginsacrossallbusinesses.Pricesonraw

materialsroseconsiderablyduringthefirsthalf

oftheyear,impactingPaperChemicalsmore

thantheBleachingproducts.However,thelast

quarter saw prices leveling out and even

decreasing in certain regions. Cost control

measures remained strong, despite the

unfavorablecurrencyimpactsduetocostbase

inSweden.

VolumesinQ4increasedby2percentoverlast

year. Project activitiesin Brazil andour mostrecent investment in China supported the

developme nt, c ontr ibut ing to a robust

conclusionoftheyear.Currencyimpactwas

also less adverse than in previous quarters,

with favorable prices and decreasing raw

materialcostsleadingtoastrongfinalquarter.

Chemicals Pakistan

Business c onditions re ma ined diff ic ult

throughout 2011 for Chemicals Pakistan,

resultinginaloweroutcomecomparedtolast

year.Domesticdownstreammarketconditions

remained subdued during the year as the

energy shortages persisted along with theongoing economic crisiscreating uncertainty

andsuppressingoveralldemand.Throughout

the year, the polyester market continued to

experiencedifficult market conditions due to

thevolatilityinfeedstockandcottonmarkets.

The continued shortage of gas and resultant

usageofexpensivefurnaceoilintheSodaAsh

business c ontinued to impac t margins.

However,despitetheoverallvolumedecreasing

in2011,pricesincreasedonthebackofhigher

raw material prices, resulting in revenue

increasingby8percent.

InQ4,revenuedecreasedby1percent,ontheback of lower volumes in all businesses.

PolyesterandSodaAshremainedparticularly

effectedduetothelowerdownstreamdemand

drivenbythesevereenergyshortage,resulting

from thepersistinggap between supplyand

demandofnaturalgas.




Condensed inancial statements

Consolidated statement o comprehensive income

4thquarter January-December2010 2011 in€ millions 2010 2011

179 (60) Prot/(loss) or the period 837 541

Other comprehensive income

198 316 Exchangedifferencesarisingontranslationofforeignoperations 827 55

(16) (22) Cashowhedges 50 (55)

(16) (7) Incometaxrelatingtoothercomprehensiveincome (35) 9

166 287 Other comprehensive income or the period (net o tax) 842 9

345 227 Comprehensive income or the period 1,679 550

Comprehensive income attributable to

279 202 Shareholdersofthecompany 1,523 486

66 25 Non-controllinginterests 156 64

345 227 Comprehensive income or the period 1,679 550

Consolidated statement o income


2010 2011 in€ millions 2010 2011

Continuing operations

3,620 3,787 Revenue 14,640 15,697

(2,230) (2,423) Costofsales (8,672) (9,670)

1,390 1,364 Gross prot 5,968 6,027

(857) (868) Sellingexpenses (3,341) (3,407)

(314) (342) Generalandadministrativeexpenses (1,103) (1,229)

(83) (98) Researchanddevelopmentexpenses (334) (356)

23 (20) Otheroperatingincome/(expenses) 29 7

159 36 Operating income 1,219 1,042

(56) (141) Netnancingexpenses (327) (338)

4 (1) Resultsfromassociatesandjointventures 25 23

107 (106) Prot/(loss) beore tax 917 727

40 52 Incometax (170) (194)

147 (54) Prot/(loss) or the period rom continuing operations 747 533

Discontinued operations

32 (6) Prot/(loss)fortheperiodfromdiscontinuedoperations 90 8


Attributable to

162 (68) Shareholdersofthecompany 754 477

17 8 Non-controllinginterests 83 64





Shareholders' equity

Shareholders'equityatyear-endof2011increased

to€9.2billion,mainlyduetotheneteffectof:

• Netincomeof€477million.

• Dividendpaymentsof€304million.

Dividend policy and inal dividend

Weareaimingtopayastabletorisingdividend.

Wehaveintroducedastockdividendoptionwith

cash dividend as default. Given our strong

fundamentalsandasasignalofconfidenceinour

ability to deliver the performance improvement

programinchallengingmarkets,wewillproposea

2011 final dividend of €1.12 per share, which

wouldmakeatotal2011dividendof€1.45(2010:

€1.40)pershare.

Condensed consolidated balance sheet

in€ millions December31,2010

December 31,2011

Assets

Non-currentassets

Intangibleassets 7,308 7,392

Property,plantandequipment 3,384 3,705

Othernancialnon-currentassets 1,977 2,198

Total non-current assets 12,669 13,295

Currentassets

Inventories 1,678 1,924

Tradeandotherreceivables 2,788 2,917

Cashandcashequivalents 2,851 1,635

Othercurrentassets 108 98

Total current assets 7,425 6,574

Total assets 20,094 19,869

Equity and liabilities

Total equity 9,509 9,743Non-currentliabilities

Provisionsanddeferredtaxliabilities 2,444 2,284

Long-termborrowings 2,880 3,035

Total non-current liabilities 5,324 5,319

Currentliabilities

Short-termborrowings 907 494

Tradeandotherpayables 3,305 3,349

Othershort-termliabilities 1,049 964

Total current liabilities 5,261 4,807

Total equity and liabilities 20,094 19,869

Changes in equity

in€ millions Subscribedshare capital

Additionalpaid-in

capital

Cashfowhedge

reserve

Cumulativetranslation

reserves

Otherreserves

Shareholders’equity

Non-controllinginterests

Total equity

Balance at January 1, 2010 465 2 (6) (777) 8,091 7,775 470 8,245

Protfortheperiod – – – – 754 754 83 837

Othercomprehensiveincome – – 35 734 – 769 73 842

Comprehensive income or the period – – 35 734 754 1,523 156 1,679

Dividendpaid – – – – (320) (320) (83) (403)

Equity-settledtransactions – – – – 27 27 – 27

Issueofcommonshares 2 7 – – – 9 – 9

Acquisitionsanddivestments – – – – (30) (30) (18) (48)

Balance at December 31, 2010 467 9 29 (43) 8,522 8,984 525 9,509

Protfortheperiod – – – – 477 477 64 541

Othercomprehensiveincome – – (38) 47 – 9 – 9

Comprehensive income or the period – – (38) 47 477 486 64 550

Dividendpaid 1 24 – – (329) (304) (58) (362)

Equity-settledtransactions – – – – 32 32 – 32

Issueofcommonshares 1 14 – – – 15 – 15

Acquisitionsanddivestments – – – – (1) (1) – (1)

Balance at December 31, 2011 469 47 (9) 4 8,701 9,212 531 9,743




15.313.9

Operating working capital

In % of revenue

Q1 11

14.5

Q2 11

14.9

Q3 11

14.4

Q4 11Q4 10

Invested capital

Invested capital at year-end 2011 totaled

€13.7 bil lion, €1.0 bil lion higher than at

year-end2010.Investedcapitalwasimpacted

bytheneteffectof:• Anincreaseof€0.2billionbytheacquisition

ofcoatingsmanufacturerSchrammHolding

AGearlyOctober,2011

• Anincreaseof€0.3billionoflong-term

receivablesrelatedtopensionfundsin

assetposition

• Anincreaseofoperatingworkingcapitalof

€0.2billionduetomoreexpensiveraw

materialsandactionstoensuresupplyof

titaniumdioxide.Expressedasa

percentageofrevenue,operatingworking

capitalwas14.4percent(year-end2010:

13.9percent)

• Paymentsofaccruedinterestof€0.2billion,including€31millionaccrued

interestonbondswhichwerepaidbackin

December2011,withregularcoupondates

inthefirstquarter.

Pensions

Thefundedstatusofthepensionplansat

year-end2011wasestimatedtobeadeficit

of €0.5billion(year-end2010:€1.0 billion;

Q32011:€0.7billion).Themovement

comparedtoyear-end2010isdueto:

• Top-uppaymentsof€354millioninto

certaindefinedbenefitpensionplans

• Lowerdiscountratesincreasingthepensionobligation

• LowerinflationinUKdecreasingthe

pensionobligation

• Higherassetreturns.

In January2012, we concluded thetriennial

actuarial funding review of the ICI Pension

Fund. We expect to have top-up payments

overthe remainingsix years of the recovery

planthatare£198millionlowerintotalthanthe

sumofthecurrentschedule:

• In2012and2013,theywillbe£62million

perannumlower

• In2014,2015and2016,theywillbe£19millionperannumlower.

• In2017,theywillbe£16millionlower.

In addition, we have agreed to terminate a

contingentassetonourbalancesheetinorder

tofundfurtherde-riskingactivitiesandthereby

reducefuturedemandsonourcashflows.

Workorce

At year-end 2011, we employed 57,240 staff

(year-end 2010: 55,590 employees). The net

increasewasdueto:

• Anincreaseof900duetoacquisitionsand

divestments,mainlyfromtheSchramm

acquisition(790employees)

• Adecreaseof1,050employeesdueto

ongoingrestructuring

• Anincreaseof1,800employeesduetonew

hiresinhighgrowthmarkets.

Cash lowsOperating activities in 2011 resulted

in a cash inflow of €325 million (2010:

€519million).Thechangeismainlyduetoa

neteffectof:

• Lowerprofitfromcontinuingoperations

• Higheroperatingworkingcapital

• Fairvaluechangesandcashsettlementsfor

foreigncurrencyhedgingactivities

• Lowerpaymentsrelatedtoprovisions

• Lowerpaymentsfortaxandinterest.

Net debt

Net debt increased from €936 mil lion at

year-end2010 to €1,895million at year-end

2011,mainlydueto:

• Operatingcashinflowof€325million

• Capitalexpendituresof€708million

• Netcashoutflowforacquisitionsand

divestmentsof€138million• Paymentsofdividendsof€362million.

Mid-December,weboughtbackhighinterest

bonds for a total nominal amount of

€528 million and a total consideration of

€633million.Thistransactionresultedinaloss

Invested capital

in€ millions December31,2010 December 31, 2011

Tradereceivables 2,101 2,250

Inventories 1,678 1,924

Tradepayables (1,763) (1,978)

Operating working capital in Business Areas 2,016 2,196

Otherworkingcapitalitems (1,203) (1,018)

Non-currentassets 12,669 13,295

Lessinvestmentsinassociatesandjointventures (175) (198)

Deferredtaxliabilities (589) (567)

Invested capital 12,718 13,708

Operating working capital

in€ millions,%ofrevenue December31,2010 December 31, 2011

DecorativePaints 651 14.3 709 14.7

PerformanceCoatings 714 14.4 792 14.9

SpecialtyChemicals 651 12.9 695 13.5

Total 2,016 13.9 2,196 14.4




Fortheyearaheadweexpecttoseethefull

year benefit of the price rises that we havebeen able to achieve, and which now have

offsetmostoftherawmaterialpriceincreases.

Currently we are experiencing greater price

stabil ity in most raw materials, with the

exception of TiO2, which we anticipate will

continue to rise in price, and for which we

have plans in place to pass through further

price rises in the future. In addition, we are

movingaheadwiththeimplementationofour

Performance Improvement Program which

should bring significant benefits in 2012and

beyond,underpinningourmargins.

The major uncertainty remainsthe economicenvironment.Ourconcernsarefocusedonthe

riskof recessionin Europe,delayed recovery

ofthe US property market and the potential

for a slowdownin China. Each ofthese can

haveasignificantimpactonourcustomersin

theseregions, that wouldin turn impact our

sales volumes. These, together with certain

rawmaterials,remainourprincipalsensitivitiesin2012.

AkzoNobel has a strong portfolio of

complementary businesses, with many

leading market positions and exposure to

growth markets. This, combined with our

ongoingmanagementactions,meansthatwe

areconfidentthatwecandelivermedium-term

growthinlinewithourstrategicambitions.

Amsterdam, February 15, 2012

The Board o management

of€67million.However,goingforwardthisloss

will be off-set by the significantly reducedcoupon on a new €800 million seven year

bondlaunchedinthesamemonth.Asaresult,

ourmaturityprofilehasimproved.

Medium-term ambitions and outlook

Wehavetheaspirationtobetheworld’sleading

Coatings and Specialty Chemicals company.

Our medium-term ambitionsare to grow to

€20 billion revenue, increase EBITDA each

year while maintaining a 13 to 15 percent

margin,reduceOWCpercentofrevenueyear-

on-yearby0.5percenttowardsa12percent

level,andpayastabletorisingdividend.

The sustainability ambitions are to remain

atop threeleader inourindustry, tobe top

quartilein our peer group interms ofsafety

performance,diversity,employeeengagement

and development, and eco-efficiency

improvementrates.

Condensed consolidated statement o cash lows


2010 2011 in€ millions 2010 2011

1,630 1,453 Cash and cash equivalents at beginning o period 1,919 2,683

Adjustments to reconcile earnings to cash generated rom operating activities

147 (54) Prot/(loss)fortheperiodfromcontinuingoperations 747 533

166 173 Amortization,depreciationandimpairments 640 633

58 209 Changesinworkingcapital (124) (344)

(20) (43) Changesinprovisions (651) (498)

(76) (15) Otherchanges (93) 1

275 270 Net cash rom operating activities 519 325

(198) (256) Capitalexpenditures (534) (708)

6 (167) Acquisitionsanddivestmentsnetofcashacquired 2 (138)

(1) (8) Otherchanges 53 (2)

(193) (431) Net cash rom investing activities (479) (848)

(4) 80 Changesfromborrowings (33) (470)

(97) (80) Dividends (403) (362)

(51) – Otherchanges (45) 7

(152) – Net cash rom nancing activities (481) (825)

(70) (161) Net cash used or continuing operations (441) (1,348)

1,095 7 Cashowsfromdiscontinuedoperations 1,095 11

1,025 (154) Net change in cash and cash equivalents o total operations 654 (1,337)

28 36 Effectofexchangeratechangesoncashandcashequivalents 110 (11)

2,683 1,335 Cash and cash equivalents at December 31 2,683 1,335




Quarterly statistics

20102011

Q1 Q2 Q3 Q4 year in€ millions Q1 Q2 Q3 Q4 year

Revenue

1,056 1,401 1,372 1,139 4,968 DecorativePaints 1,196 1,461 1,435 1,204 5,296

1,049 1,260 1,239 1,238 4,786 PerformanceCoatings 1,237 1,312 1,295 1,326 5,170

1,154 1,258 1,272 1,259 4,943 SpecialtyChemicals 1,351 1,350 1,349 1,285 5,335

(13) (12) (16) (16) (57) Otheractivities/eliminations (22) (26) (28) (28) (104)

3,246 3,907 3,867 3,620 14,640 Total 3,762 4,097 4,051 3,787 15,697

EBITDA

82 205 198 63 548 DecorativePaints 90 191 148 11 440

143 191 166 147 647 PerformanceCoatings 143 170 157 141 611

207 257 254 221 939 SpecialtyChemicals 241 220 238 207 906


399 614 574 377 1,964 Total 437 551 507 301 1,796

12.3 15.7 14.8 10.4 13.4 EBITDA margin (in %) 11.6 13.4 12.5 7.9 11.4

Depreciation

(29) (32) (31) (32) (124) DecorativePaints (30) (30) (33) (33) (126)

(19) (21) (20) (21) (81) PerformanceCoatings (21) (21) (21) (24) (87)

(52) (53) (54) (55) (214) SpecialtyChemicals (55) (56) (56) (60) (227)


(105) (110) (107) (113) (435) Total (108) (110) (114) (119) (451)

Amortization


(6) (7) (6) (7) (26) PerformanceCoatings (7) (7) (7) (8) (29)

(11) (12) (12) (11) (46) SpecialtyChemicals (12) (13) (13) (16) (54)

– 1 (2) (1) (2) Otheractivities/eliminations – – (1) (2) (3)

(36) (38) (39) (42) (155) Total (40) (40) (41) (49) (170)

EBIT

34 153 148 8 343 DecorativePaints 39 141 95 (45) 230




258 466 428 222 1,374 Total 289 401 352 133 1,175

7.9 11.9 11.1 6.1 9.4 EBIT margin (in %) 7.7 9.8 8.7 3.5 7.5

Operating income

19 146 136 (26) 275 DecorativePaints 37 137 57 (94) 137




224 455 381 159 1,219 Total 277 428 301 36 1,042




20102011

Q1 Q2 Q3 Q4 year in€ millions Q1 Q2 Q3 Q4 year

Incidentals per Business Area


(17) (10) (11) (15) (53) PerformanceCoatings (9) 13 (15) (26) (37)

(18) 3 (24) (36) (75) SpecialtyChemicals (1) (4) – 2 (3)

16 3 – 22 41 Otheractivities/eliminations – 22 2 (24) –

(34) (11) (47) (63) (155) Total (12) 27 (51) (97) (133)

Incidentals included in operating income

(17) (21) (53) (29) (120) Restructuringcosts (9) (20) (47) (55) (131)

(9) 8 – (48) (49) Resultsrelatedtomajorlegal,antitrustandenvironmentalcases

1 21 2 (33) (9)

1 1 15 16 33 Resultsonacquisitionsanddivestments

– 26 (5) (11) 10

(9) 1 (9) (2) (19) Otherincidentalresults (4) – (1) 2 (3)

(34) (11) (47) (63) (155) Total (12) 27 (51) (97) (133)

Incidentals per cost category

(16) (20) (37) (53) (126) Costofsales (4) (5) (25) (18) (52)

(5) (3) (7) (28) (43) Sellingexpenses (3) (9) (20) (34) (66)

(7) 1 (3) (4) (13) Generalandadministrativeexpenses

(1) (4) (1) (18) (24)

– – (2) 1 (1) Researchanddevelopmentexpenses

– – (1) (8) (9)

(6) 11 2 21 28 Otheroperatingincome/(expenses) (4) 45 (4) (19) 18

(34) (11) (47) (63) (155) Total (12) 27 (51) (97) (133)

Reconciliation net nancing expense

12 12 16 11 51 Financingincome 14 17 14 12 57

(67) (72) (53) (48) (240) Financingexpenses (61) (63) (49) (129) (302)

(55) (60) (37) (37) (189) Net interest on net debt (47) (46) (35) (117) (245)

Other interest movements

(25) (26) (26) (23) (100) Financingexpensesrelatedtopensions

(16) (13) (15) (15) (59)

(8) (29) (6) 4 (39) Interestonprovisions (5) (12) (13) (16) (46)

– 2 (1) - 1 Otheritems 5 7 (7) 7 12

(33) (53) (33) (19) (138) Net other nancing charges (16) (18) (35) (24) (93)

(88) (113) (70) (56) (327) Net nancing expenses (63) (64) (70) (141) (338)

Quarterly net income analysis

5 7 9 4 25 Resultsfromassociatesandjointventures

7 8 9 (1) 23

(18) (26) (22) (17) (83) Protattributabletonon-controllinginterests

(16) (22) (18) (8) (64)

141 349 320 107 917 Prot/(loss)beforetax 221 372 240 (106) 727(53) (76) (81) 40 (170) Incometax (73) (99) (74) 52 (194)

88 273 239 147 747 Prot/(loss)fortheperiodfromcontinuingoperations

148 273 166 (54) 533

38 22 25 (37) 19 Effectivetaxrate(in%) 33 27 31 49 27




2010 2011

Q1 Q2 Q3 Q4 year Q1 Q2 Q3 Q4 year

Earnings per share rom continuing operations (in €)

0.30 1.06 0.93 0.55 2.85 Basic 0.57 1.07 0.63 (0.26) 2.01

0.30 1.05 0.92 0.55 2.83 Diluted 0.56 1.07 0.63 (0.26) 1.99

Earnings per share rom discontinued operations (in €)

0.05 0.11 0.09 0.14 0.38 Basic (0.02) 0.07 – (0.03) 0.03

0.05 0.11 0.09 0.14 0.38 Diluted (0.02) 0.07 – (0.03) 0.03

Earnings per share rom total operations (in €)

0.35 1.17 1.02 0.69 3.23 Basic 0.55 1.14 0.63 (0.29) 2.04

0.35 1.16 1.01 0.69 3.21 Diluted 0.54 1.14 0.63 (0.29) 2.02

Number o shares (in millions)

232.7 233.3 233.4 233.5 233.2 Weightedaveragenumberofshares

233.6 233.9 234.0 234.3 233.9

233.2 233.4 233.5 233.5 233.5 Numberofsharesatendofquarter 233.7 234.0 234.0 234.7 234.7

Adjusted earnings (in € millions)

141 349 320 107 917 Prot/(loss)beforetaxfromcontinuingoperations

221 372 240 (106) 727

34 11 47 63 155 Incidentalsreportedinoperatingincome

12 (27) 51 97 133

36 38 39 42 155 Amortizationofintangibleassets 40 40 41 49 170

(71) (97) (107) (4) (279) Adjustedincometax (88) (107) (100) 9 (286)

(18) (26) (22) (17) (83) Non-controllinginterests (16) (22) (18) (8) (64)

122 275 277 191 865 Adjusted net income orcontinuing operations

169 256 214 41 680

0.52 1.18 1.19 0.82 3.71 Adjusted earnings per share(in €)

0.72 1.09 0.91 0.17 2.91




Moving average ROI iscalculatedasEBITof

the last twelve months divided by average

investedcapital.

Net debtisdefinedas long-termborrowingsplus short-term borrowings less cash and

cashequivalents.

Operating income isdefinedinaccordance

with IFRS and includes the relevant

incidentalresults.

Operating ROI iscalculatedasEBITbefore

amortizationofthelasttwelvemonthsdivided

by a ve rage investe d ca pita l e xc luding

intangibleassets.

Operating working capital is defined as

thesumofinventories,tradereceivablesandtradepayablesintheBusinessAreas.When

expressedasaratio,operatingworkingcapital

is measured against four times last

quarterrevenue.

Revenueconsistsofsalesofgoods,services,

androyaltyincome.

Sae Harbor Statement

Thisreportcontainsstatementswhichaddress

such key issues as AkzoNobel’s growth

strategy, future f inancial results, market

positions, productdevelopment, products in

the pipeline and product approvals. Suchstatements should be carefully considered,

anditshouldbeunderstoodthatmanyfactors

couldcauseforecastandactualresultstodiffer

fromthesestatements.Thesefactorsinclude,

but are not limited to, price fluctuations,

currency fluctuations, developments in raw

material and personnel costs, pensions,

physicalandenvironmentalrisks,legalissues,

and legislative, fiscal, and other regulatory

measures. Stated competitive positions are

basedonmanagementestimatessupported

byinformationprovidedbyspecializedexternal

ag encies. Fo r a more comp rehens iv e

discussion of the risk factors affecting ourbusiness,pleaseseeourlatestAnnualReport.

Brands and trademarks

Inthisreport,referenceismadetobrandsand

trademarks owned by, or licensed to,

AkzoNobel. Unauthorized use of these is

strictlyprohibited.

Accounting policies

Thefullyear2011financialfiguresofAkzoNobel

included in the primary statements in this

reportarederivedfromthefinancialstatements

2011.Thesefinancialstatements havebeenauthorizedforissue.Thefinancialstatements

havenotyetbeenpublishedbylawandstill

havetobeadoptedbythegeneralmeetingof

shareholders. In accordance with section

2:393BW,KPMGAccountantsN.V.hasissued

an unqualified auditor's opinion on these

financialstatements, whichwill bepublished

on February 23, 2012. All quarterly figures

areunaudited.

Comparedtothe2010financialstatementsthe

majoraccountingprinciplesareunchanged.

Seasonality

Revenue andresultsin Decorative Paintsareimpactedbyseasonalinfluences.Revenueand

profitabilitytendtobehigherinthesecondand

thirdquarteroftheyearasweatherconditions

determinewhetherpaintsandcoatingscanbe

applied.InPerformanceCoatings,revenueand

profitability vary with building patterns from

originalequipmentmanufacturers.In Specialty

Chemicals,theFunctionalChemicalsandthe

Surface Chemistry businesses experience

seasonalinfluences.Revenue and profitability

are affectedbydevelopmentsintheagricultural

seasonandtendtobehigherinthefirsthalfof

theyear.

The "other" category

In the category "other" we report activities

whicharenotallocatedtoaparticularbusiness

area. Corporate costs are the unallocated

costsofourheadofficeandsharedservices

center in the Netherlands. Pensions reflects

pensioncostsaftertheeliminationofinterest

cost ( re ported a s f inancing e xpense s) .

Insurances are the results from our captive

insurancecompanies.Otherincludesthecost

of share-based compensation andcompany

projects, the results of treasury and legacy

operationsaswellastheunallocatedcostof

somecountryorganizations.

Glossary

Adjusted earnings per share arethe basic

earningspersharefromcontinuingoperations

excluding incidentals in operating income,

amortization of intangibleassets andtax on

theseadjustments.

Comprehensive income is the change in

equity during a period resulting from

transactionsandothereventsotherthanthose

changes resulting from transactions with

shareholdersintheircapacityasshareholders.

Constant currencies information excludes

foreigncurrency translation effectsassuming

foreign currency exchange rates have not

changed between the prioryear period and

thecurrentperiod.

EBIT isoperatingincomebeforeincidentals.

EBIT marginisEBITas percentageofrevenue.

EBITDA is EBIT before depreciation and

amortization and refers to EBITDA before

incidentals.

EBITDA margin is EBITDA as percentageof

revenue.

Emerging Europe: CzechRepublic,Estonia,

Hungary, Poland, Romania, Rus sian

Federation,Slovenia,TurkeyandUkraine.

Incidentalsarespecialchargesandbenefits,

results on acquisitions and divestments,

restructuring and impairment charges, and

chargesrelatedtomajorlegal,anti-trust,and

environmentalcases.EBITDAandEBITbefore

incidentalsarekeyfiguresweusetoassessourperformance,asthesefiguresbetterreflect

the underlying trends in the results of the

activities.

Interest coverage is oper at ing income

dividedbynetinterestonnetdebt.In2010,we

usedthedefinitionoperatingincomedivided

by net financing expenses and included

non-cashitemssuchas interestonpensions

andprovisions.Wehavechangedthedefinition

starting 2011. The 2010 figure has been

adjustedtoalignwiththe2011definition.

Invested capital is total assets (excludingcash and cash equivalents, investments in

associates,assetsheld forsale) lesscurrent

incometaxpayable,deferredtaxliabilitiesand

tradeandotherpayables.

Mature markets compriseofWesternEurope,

theUS,Canada,JapanandOceania.

Notes to the condensed inancial statements



1 2

www.akzonobel.com

AkzoNobelisthelargestglobalpaintsand

coatingscompanyandamajorproducerof

specialtychemicals.Wesupplyindustriesand

consumersworldwidewithinnovativeproducts

andarepassionateaboutdevelopingsustainable

answersforourcustomers.Ourportfolioincludes

wellknownbrandssuchasDulux,Sikkens,

InternationalandEka.Headquarteredin

Amsterdam,theNetherlands,weareaGlobal

Fortune500companyandareconsistentlyranked

asoneoftheleadersintheareaofsustainability.Withoperationsinmorethan80countries,our

57,000peoplearoundtheworldarecommittedto

excellenceanddeliveringTomorrow’s

Answers Today™

Akzo Nobel N.V.

Strawinskylaan2555

P.O.Box75730

1070ASAmsterdam,theNetherlands

Tel:+31205027555

Fax:+31205027666

Internet:www.akzonobel.com

Formoreinformation: Theexplanatorysheetsusedduringthe

pressconferencecanbeviewedonAkzoNobel’s

corporatewebsitewww.akzonobel.com

AkzoNobelCorporateCommunications

Tel:+31205027833

Fax:+31205027604

E-mail:[email protected]

AkzoNobelInvestorRelations

Tel:+31205027854

Fax:+31205027605

E-mail:[email protected]

Financial calendar

Reportforthe1stquarter2012 April19,2012

AnnualGeneralMeeting April23,2012

Ex-dividenddateof2011naldividend April25,2012

Recorddateof2011naldiv idend Apr il27,2012

ElectionperiodcashorstocknaldividendApril30,2012–

May18,2012

Paymentdateofcashdividendanddelivery

ofnewshares May24,2012Reportforthe2ndquarter2012 July19,2012

Reportforthe3rdquarter2012 October18,2012

akzonobel report for the year 2011

Documents