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Safe harbor statement*
This report contains statements which address such key issues as Akzo Nobel’s growth
strategy, future financial results, market positions, product development,
pharmaceutical products in the pipeline, and product approvals. Such statements,
including but not limited to the “Outlook for 2005”, should be carefully considered, and
it should be understood that many factors could cause forecasted and actual results to
differ from these statements. These factors include, but are not limited to price
fluctuations, currency fluctuations, developments in raw material and personnel costs,
pensions, physical and environmental risks, legal issues, and legislative, fiscal, and
other regulatory measures. Stated competitive positions are based on management
estimates supported by information provided by specialized external agencies. For a
more complete discussion of the risk factors affecting our business please see our
Annual Report on Form 20-F filed with the United States Securities and Exchange
Commission, a copy of which can be found on the Company’s website
www.akzonobel.com.
* Pursuant to the U.S. Private Securities Litigation Reform Act 1995.
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Hans Wijers, CEO
Creating a platform for growth
February 4, 2005
2004 Results Press Conference
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2004 – actions to strengthen the Company
paid off
Akzo Nobel tackled challenges with accelerated pace of change
Robust performance 2004 – actions paying off
2005 – facing the future from a position of strength
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Robust performance in the face of
headwind
• Pharma: sales down 9%, but margins held steady thanks
to restructuring and benefits of new alliances
• Coatings: autonomous growth 5%, steady ROS and
higher ROI despite steep rise in raw material costs
• Chemicals: quantum leap in ROI, strong operating profit
growth from continuing operations
• Divestment program achieved EUR 1 billion proceeds
• Operating leverage due to aggressive restructuring –
cost lowered by EUR 150 million compared to 2003
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Creating the platforms for growth
Pharma – ready for renewed top-line growth
Coatings – expanding #1 position
Chemicals – further focused platform
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2004 financial results
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Net income substantially up
Δ%
2004
2003
Sales
12,688
13,051
(3)
EBIT*
1,210
1,347
(10)
Net income excl. nonrec.
770
811
(5)
Net income
856
602
42
ROS*
9.5
10.3
EPS
3.00
2.11
EUR mln or %
Ratio or EUR
* Excluding nonrecurring items
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Outperformance against 2004 outlook
EUR mln or %
2004
2003**
Δ%
Sales
12,688
13,051
(3)
EBIT*
1,210
1,259
(4)
Net income excl. nonrec.
770
741
4
Net income
856
542
58
ROS*
9.5
9.6
* Excluding nonrecurring items
** Excluding initial asenapine payment
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Autonomous growth 2%
EUR bln
Sales Δ%
12.7
Pharma
Coatings
Chemicals
3.2
5.2
4.3
Growth
+ 2%
Currencies
– 3%
Divestments/
acquisitions
– 2%
Total
– 3%
(3)
(9)
2
1*
2004
* Ongoing operations
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Operating income down
EUR mln
Pharma
Coatings
Chemicals
EBIT
Δ%
1,210
(10)
522
(14)*
421
354
2
21**
2004
Pensions
+ 4%
Currencies
– 4%
Divestments/
acquisitions
– 2%
Performance
– 2%
Total
– 4%
Pfizer
– 6%
Total
– 10%
* Excluding asenapine.
** Ongoing operations.
Excluding nonrecurring items.
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Pharma – margin aggressively defended;
benefiting from strategic realignments
• Organon – turning point for top-line growth
• Diosynth – overcapacity
• Intervet – good results
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Pharma – margin protection program
mitigating effect top-line decline
Sales
EBIT
900
350
300
250
600
200
150
300
100
50
0
0
Q-1
EUR mln
Q-2
Sales
Q-3
EBIT
Q-4
2003
2004
Excluding nonrecurring items; Q-4 dark top part concerns asenapine special benefit.
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Coatings – volume growth and improved
efficiency offset rising raw materials costs
• Steep increase in raw material costs in second half
• Autonomous growth 5%, mainly Asia Pacific and U.S.,
32% of sales now from emerging markets
• ROS held steady at 8%, ROI improved to 20.5%
• Marine & Protective and Powder Coatings led growth
• Decorative Coatings – improved performance from cost
savings
• Car Refinishes – major worldwide restructuring set to pay
off in 2005
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Coatings – raw materials impact 2H, priority
to obtain higher selling prices in 2005
Sales
EBIT
1.500
200
1.000
100
500
0
0
Q-1
EUR mln
Q-2
Sales
Q-3
EBIT
Q-4
2003
2004
Excluding nonrecurring items
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Chemicals – best performance in years
• Benefits of cost savings programs combine with
improved business conditions to lift performance
• Continued operations – autonomous growth 5%;
operating income up 21%
• Steeply rising raw material and energy prices – increasing
pressure on margins
• EUR 1 bln divestment program – completed
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Chemicals – superior performance from
continuing operations
Sales
EBIT
1.250
125
1.000
100
750
75
500
50
250
25
0
0
Q-1
EUR mln
Q-2
Sales
Q-3
EBIT
Q-4
2003
2004
Excluding nonrecurring items.
Dark top part concerns Catalysts, Phosphorus Chemicals and Coating Resins.
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Restructuring in mature markets –
growth in Asia Pacific
December 31, 2003: 64,580
Restructuring 2,650
Divestments 1,610
Growth
1,130
December 31, 2004: 61,450
Number of employees
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Positive impact of nonrecurring items
• Net nonrecurring gain of EUR 86 million
– divestments
– restructuring and impairment charges
– antitrust cases
– settlement of Remeron® cases
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Strong financial position, dividend
maintained
2004
2003
Working capital
2.2
2.6
Equity
3.2
2.6
Net borrowings
1.1
2.4
1.20
1.20
45
42
December 31; EUR bln
EUR or %
Dividend
Payout ratio
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Q-4 operational performance
• Q-4 earnings lower
• Autonomous growth of 4%
• Operating income down 42%
• Good operational performance
• Pharmaceuticals performance in line with expectations
• Coatings impacted by raw material costs
• Chemicals good
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Actively Managing
the Businesses
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Strategic review Chemicals – conclusions
• Focus portfolio on selected market segments meeting the
following criteria:
– Leading position and significant size
– Competitive advantage and opportunity to grow
– Sustainable above average financial performance
– Good internal fit
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Commitment to 5 core businesses with
clear prospects for profitable leadership
• Pulp & Paper Chemicals
Pulp Bleaching and Paper Chemicals for global pulp & paper
industry
• Polymer Chemicals
Organic Peroxides and additives for polymer producers and
processors around the world
• Surfactants
Surfactants for cleaning, agro, mining and petroleum
applications
• Functional Chemicals
High value added specialties, intermediates and derivatives
• Base Chemicals
Integrated Energy, Salt and Chlorine chain
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Businesses to be divested
• Ink & Adhesive Resins
• Oleochemicals
• Salt Specialties
• PVC Additives
• Solar Salt Australia
• Methyl Amines / Choline Chloride
• Others
Total 2004 sales of about EUR 750 mln
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Clarity of direction
• Challenging restructuring necessary to secure a
solid foundation for Akzo Nobel Chemicals
• A clear commitment to support profitable growth
in strategic areas
• Manage divestments and rationalization
in an efficient and responsible manner
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2005
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We enter 2005 in excellent shape, facing
the future from a position of strength
• Demonstrate Pharma pipeline progress
• Active consideration of opportunities to expand
leadership positions
• Push volume growth and price increases to mitigate raw
materials cost pressures
• Execute new divestment program and reap benefits of
further restructuring
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2005 – cautiously optimistic
• Top-line growth across portfolio
• Continued external pressure on margins
– raw material and energy prices
– currencies
• Costs to support future launches from Pharma pipeline
– defending margins vs. R&D and pre-marketing costs
 Aspiring to achieve net income within range of 2004
excluding nonrecurring items
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Operational performance
4th quarter of 2004
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Q-4 operational performance
• Q-4 earnings lower
• Autonomous growth of 4%
• Operating income down 42%
• Good operational performance
• Pharmaceuticals performance in line with expectations
• Coatings impacted by raw material costs
• Chemicals good
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Q-4 earnings – at a first glance
Δ%
2004
2003
Sales
3,040
3,111
(2)
EBIT*
254
441
(42)
Net income excl. nonrec
165
268
(38)
90
105
(14)
Q-4; EUR mln or %
Net income
* Excluding nonrecurring items
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Q-4 earnings – excluding asenapine
payment
Δ%
2004
2003**
Sales
3,040
3,111
(2)
EBIT*
254
353
(28)
Net income excl. nonrec
165
198
(17)
90
35
157
Q-4; EUR mln or %
Net income
* Excluding nonrecurring items
** Excluding initial asenapine payment
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Autonomous growth 4%
Q-4, EUR bln
Sales Δ%
3.0
Pharma
Coatings
Chemicals
0.8
1.2
1.0
Growth
+ 4%
Currencies
– 3%
Divestments/
acquisitions
– 3%
Total
– 2%
(2)
(9)
7
6*
2004
* Ongoing operations
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Operating income down 42%
Q-4, EUR mln
Pharma
EBIT Δ%
254
(42)
119
(40)*
Coatings
56
(32)
Chemicals
88
24**
Pensions
+ 3%
Performance
– 20%
Pfizer
– 20%
Divestments/
acquisitions
– 3%
Currencies
– 2%
Total
– 42%
2004
* Excluding asenapine.
** Ongoing operations.
Excluding nonrecurring items.
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