Report for the third quarter2011
2 AkzoNobel I Report for the third quarter of 2011
•Revenueup5percentdrivenbypricingactionstooffsetrawmaterialcostinflation
•Weakereconomicconditionsandcontinuedrawmaterialpriceinflationimpactresults,particularlyinDecorativePaints
•EBITDAdecreasedto€507million(2010:€574million)•Netincomefromcontinuingoperations€148million(2010:€217million)
•AdjustedEPS€0.91(2010:€1.19)•Interimdividendof€0.33persharedeclared,up3percent•Majorperformanceimprovementprogramlaunchedtodeliver€500millionEBITDAin2014
Our results ataglance
(39 percent in high growth markets)
A North America
B Emerging Europe
Mature Europe
Asia Pacific
C
D
E
F
Latin America Other regions
%
20
6
39
21
104
100
C
D
EF
A
B
(Based on the full year 2010)
AkzoNobel around the worldRevenue by destination
In € millions
Q3 11Q3 10 Q4 10 Q1 11 Q2 110
1000
2000
3000
4000
5000
3,8674,097 4,051
3,6203,762
0
100
200
300
400
500In € millions
Q2 11 Q3 11Q3 10 Q4 10 Q1 11
437
377
551
507
574
Revenue EBITDA
AkzoNobel I Report for the third quarter of 20113
Operating ROI %Moving average ROI %
Q4 09 - Q3 10 Q4 10 - Q3 11Q4 08 - Q3 09
8.9%
11.0%9.7%
28.2%
22.2%
24.4%
Returns on invested capital
Continuing operations before incidentals3rdquarter January-September
2010 2011 ∆% in€ millions 2010 2011 ∆%
3,867 4,051 5 Revenue 11,020 11,910 8
574 507 (12) EBITDA 1,587 1,495 (6)
14.8 12.5 EBITDAmargin(in%) 14.4 12.6
428 352 (18) EBIT 1,152 1,042 (10)
11.1 8.7 EBITmargin(in%) 10.5 8.7
MovingaverageROI(in%) 11.0 9.7
OperatingROI(in%) 28.2 24.4
1.19 0.91 Adjustedearningspershare(in€) 2.89 2.73
After incidentals3rdquarter January-September
2010 2011 ∆% in€ millions 2010 2011 ∆%
381 301 (21) Operatingincome 1,060 1,006 (5)
217 148 Netincomefromcontinuingoperations 534 531
21 1 Netincomefromdiscontinuedoperations 58 14
238 149 Netincometotaloperations 592 545
0.93 0.63 Earningspersharefromcontinuingoperations(in€) 2.29 2.27
1.02 0.63 Earningspersharefromtotaloperations(in€) 2.54 2.33
109 158 Capitalexpenditures 336 452
378 409 Netcashfromoperatingactivities 244 55
Interestcoverage 7.0 7.9
Investedcapital 12,677 13,194
Netdebt 2,030 1,595
Numberofemployees 55,530 56,350
Financialhighlights
4 AkzoNobel I Report for the third quarter of 2011
Revenuewasup5percent,duetovolumegrowthof1percentandpricingof9percent(beforea3percentadversemixeffect).Weakereconomicconditionsandcontinuedrawmaterialpriceinflationadverselyimpactedourresults,particularlyinDecorativePaints.Wehavelaunchedamajorperformanceimprovementprogramtodeliver€500millionEBITDAin2014.
EBITDA has been impacted by further rawmaterialprice inflation,demandvolatilityandsoftdemand.
We are implementing a major performanceimprovement program which includesfunctionalandoperationalexcellenceinitiativestosustainablyunderpinourperformance.Thisprogramwillensurethatourgrowthambitionsaredeliveredatorabovethemid-pointofour13-15percentEBITDAmarginguidance.
Revenue• TheDecorativePaintsbusinessshoweda
revenueincreaseof5percent(7percentonaconstantcurrencybasis)inthethirdquarter.RevenueincreasedacrossallregionsexceptforNorthAmerica,whererevenuewas4percentdowncomparedtothepreviousyear.SalesvolumeinAsiaandLatinAmericagrew6and10percentrespectively.However,demandinourmaturemarketsremainedweakandthepaceofgrowthinAsiaslowed.
• RevenueinPerformanceCoatingswasup5percent,whichwaspositivelyaffectedbya1percentvolumeincrease,a7percentpriceincrease,andoffsetby3percentnegativecurrencyeffect.IndustrialCoatingsshowedthestrongestgrowth.Atsegmentlevel,MarineremainsaffectedbytheshortfallinNewConstructionandWoodAsiacontinuestobeweakbecauseofitsexposuretotheUShousingmarket.Wecontinuetomanageoursellingpricesinresponsetothehighrawmaterialcosts.
• InSpecialtyChemicals,revenuedevelopmentremainedpositiveinthethirdquarter,withallofourbusinessunitscontributingtothe6percentincreaseinrevenue.Volumesinthequarterwereslightlydown,butyear-to-dateisstill2percentaheadoflastyear.Thestrengthinmanufacturingandindustrialproduction,particularlyinAsiaandNorthAmerica,resultedinstabledemandacrossmostofourbusinesslines,withsomeexceptionswhereweseedecreaseddemandanduncertaintyinorderingpatterns.Thedemandintheresidentialconstructionrelatedbusinessesremainedweak.
Financial highlights
+1%
+6% 0% -2%
+5%8
10
0246
Revenue development Q3 2011Increase Decrease
Acquisitions In Performance Coatings, the acquisition ofcoatingsmanufacturerSchrammHoldingAGhasclosedearlyOctober,2011.Thisacquisitionwill enable us to strengthen our globalleadershippositioninspecialtyplasticcoatings.In Specialty Chemicals, we announced theacquisition of Boxing Oleochemicals, the
leadingsupplierofnitrileaminesandderivativesinChinaandthroughoutAsia.
Revenue
3rdquarter January-September
2010 2011 ∆% in€ millions 2010 2011 ∆%
1,372 1,435 5 DecorativePaints 3,829 4,092 7
1,239 1,295 5 PerformanceCoatings 3,548 3,844 8
1,272 1,349 6 SpecialtyChemicals 3,684 4,050 10
(16) (28) Otheractivities/eliminations (41) (76)
3,867 4,051 5 Total 11,020 11,910 8
Volume development per quarter (year-on-year; in %)
Q310 Q410 Q111 Q211 Q3 11
DecorativePaints – 1 9 6 4
PerformanceCoatings 5 5 7 2 1
SpecialtyChemicals 10 3 6 1 (1)
Total 4 3 7 3 1
Price/mix development per quarter (year-on-year; in %)
Q310 Q410 Q111 Q211 Q3 11
DecorativePaints 1 2 1 2 3
PerformanceCoatings – 3 2 3 7
SpecialtyChemicals 2 8 6 8 8
Total 1 4 3 4 6
in % versus Q3 2010Volume Price/mix Acquisitions Exchange
ratesTotal
DecorativePaints 4 3 – (2) 5
PerformanceCoatings 1 7 – (3) 5
SpecialtyChemicals (1) 8 – (1) 6
Total 1 6 – (2) 5
AkzoNobel I Report for the third quarter of 20115
Raw materialsRawmaterials have continued to impact ourmarginsinthethirdquarter,particularlyvisiblein Decorative Paints. Sequentially comparedtothesecondquarter,rawmaterialcostshaverisenaround2percent,andcomparedtothethirdquarter lastyeararound15percent.Forthe quarters to come we anticipatemost ofthe rawmaterials to rise, albeit with amoremoderate pace, except for titanium dioxidewhichcontinuestobefacedwithtightsupplycircumstances, causing further upwardprice pressure. We continue to mitigate thepressures by using ourmarginmanagementprograms.
EBITDA• InDecorativePaints,EBITDAwasdown25
percentforthequarterduetoweakerdemand,increasedrawmaterialpricesandunfavorableproductmixeffects(customerdowntrading)whichhasimpactedprofitmargins.EBITDAmarginwas10.3percent(2010:14.4percent).
• InPerformanceCoatings,marginshavebeenaffectedbyhigherrawmaterialcostsaswellasnegativemixeffects,particularlyinhighgrowtheconomies.Costcontrolandrestructuringeffortsinmaturemarketsareongoingandcontinuetosupportperformanceasdorecentacquisitions.EBITDAmarginwas12.1percent(2010:13.4percent).
• InSpecialtyChemicals,theinputcostsarelargelydrivenbypetrochemicalderivativesandenergy.Escalationofthesecosts,combinedwithnegativecurrencyeffectsandalessfavorablesupplyanddemandbalanceloweredouraveragemargins.Weregainedpartofthelostmarginsinthesecondpartofthequarterduetopriceincreases.EBITDAmarginwas17.6percent(2010:20.0percent).
Incidental itemsRestructuring is mainly related to Europeanbusinesses in Decorative Paints andPerformanceCoatings.
EBIT in "other"Corporatecostsinthequarterwerebelowtheprevious year. Additional costs for functionalexcellence activities were offset by costsavings. The result of our captive insurancecompanieswas in linewiththepreviousyear.The year-to-date result is better than theprevious year due to the lower number ofclaims. Other costs were lower due to costsavingsandfavorablenon-recurringitems.
Net financing expensesNet financing charges remained unchangedcompared to Q3 2010, amounting to€70million.Significantitemsincludedare:• Financingexpensesonpensionswhich
decreasedby€11millionto€15million(2010:€26million)mainlyduetolowerdiscountrates
• Netinterestondebtdecreasedby€2millionto€35million(2010:€37million)duetothecloseoutofinterestrateswaps
• Interestonprovisionswhichincreasedby€7millionto€13million(2010:€6million)duetolowerdiscountrates
• Otheritemswhichincludedanincreaseincostsof€5millionto€9million(2010:€4million)onforeigncurrencyresultsofhedgedfutureinterestcashflows.
TaxTheQ3taxrateis31percent(2010:25percent),impacted by changes in tax rates on themeasurement of deferred tax andnon-deductible cost. Excluding these andotheroneofffactors,thetaxratewouldhavebeen29percent.In2010,theQ3taxratewaslowbecauseofseveraladjustmentstopreviousyears and a tax-exempt gain related to theacquiredpowdercoatingsactivities.Theyear-to-date tax rate is 29 percent (2010:26percent).
EBITDA3rdquarter January-September
2010 2011 ∆% in€ millions 2010 2011 ∆%
198 148 (25) DecorativePaints 485 429 (12)
166 157 (5) PerformanceCoatings 500 470 (6)
254 238 (6) SpecialtyChemicals 718 699 (3)
(44) (36) Otheractivities/eliminations (116) (103)
574 507 (12) Total 1,587 1,495 (6)
Incidentals included in operating income
3rdquarter January-September
2010 2011 in€ millions 2010 2011
(53) (47) Restructuringcosts (91) (76)
– 2 Resultsrelatedtomajorlegal,antitrustandenvironmentalcases
(1) 24
15 (5) Resultsonacquisitionsanddivestments 17 21
(9) (1) Otherincidentalresults (17) (5)
(47) (51) Incidentals included in operating income
(92) (36)
EBIT in other3rdquarter January-September
2010 2011 in€ millions 2010 2011
(25) (19) Corporatecosts (68) (69)
3 (4) Pensions 5 (11)
2 2 Insurances (2) 10
(28) (20) Other (63) (43)
(48) (41) EBIT in “other” (128) (113)
6 AkzoNobel I Report for the third quarter of 2011
Revenue development Q3 2011
-2%
+4%
+3% 0%+5%
Volume AcquisitionsPrice/mix Exchange rates
Total
Increase Decrease
810
246
0
The Decorative Paints business showed arevenueincreaseof5percent(7percentonaconstant currency basis) in the third quarter.Revenue increasedacrossall regionsexceptfor North America, where revenue was4percentdowncomparedtothepreviousyear.Our growth strategy of investing in brands,distributionandpeople,aswellasexpandingintomid-tiermarketsinhighgrowthregions,isprogressing. Sales volume in Asia and LatinAmericagrewby6and10percentrespectively.However, demand in our mature marketsremainedweakandthepaceofgrowthinAsiaslowed.EBITDAwasdown25percentforthequarterduetoweakerdemand,increasedrawmaterial prices and unfavorable productmixeffects (customer downtrading) which hasimpactedprofitmargins.EBITDAmarginwas10.3 percent (2010: 14.4 percent). Furtherprice increases are being implemented. InEuropeandNorthAmerica, therehavebeenchanges inmanagementstructuresandcostreductionactionsareunderway.
EuropeIn Europe, revenue was up 3 percent (up4 percent in constant currencies). Revenuewasdrivenbyhighervolumedevelopmentbutadversely impacted by product and countrymix.Performanceacrossthebusinessvaried,withcontinuedstrongperformance inTurkey,Russia andBuildingAdhesives, aswell as apartialrecoveryintheUKonthebackofstrongpromotional activities. However, in theSouthern European markets, margins wereweakerduetoincreasedvariablecostinflationand adverse product mix. Additional priceincreaseshavebeenandwill continue tobeimplementedinthefourthquarter.
AmericasRevenue in the US was down 3 percent(4percentupinconstantcurrencies).VolumesintheUSwereinlinewithpreviousyear.ThenewWalmartbusinessdeliveredthemajorityoftheQ3revenueimprovement.Performanceinthe US declined due to raw material costincreases outpacing pricing actions, acontinuedweakerproductmixandinvestmentin Walmart. In Canada, Q3 revenue was6percentbelow2010(5percent inconstantcurrencies)drivenbylowerdemand,particularlyinRetail.Thedecreaseindemandwasduetoweakconsumerconfidence.InLatinAmerica,Q3 revenue was 22 percent above 2010(25percent inconstantcurrencies)drivenbyprice, mix and share gain. Successfulmarketingcampaign (TudoDeCor)andnewproduct launch contributed to the favorablesharedevelopment.
AsiaRevenue increased 7 percent (10 percent inconstant currencies). All countries in Asiacontributedtothisgrowth.Howeverthepaceof growth in Asia decelerated in the thirdquarter.
RevenueinChinagrewby2percent(3percentin constant currencies) in the third quarter.Comparedtothesecondquarter,thegrowthratedeclinedduetoaslowingintheChineseproperty market. The volume of propertytransactionsdeclinedsharplyasaresultofa
• Revenueincreased5percent;EBITDAdecreased25percent•Weakerdemand,unfavorableproductmixandhigherrawmaterialcosts,particularlyinEuropeandNorthAmerica
•High-growthmarketsdeliveredhighersales• Furtherpriceincreasesarebeingimplementedandthecostbaseisbeingadjustedforlowervolumes
Decorative Paints
AkzoNobel I Report for the third quarter of 20117
In € millions
90
191
148
198
63
Q1 11 Q2 11 Q3 11Q3 10 Q4 10
In € millions
Q2 11 Q3 11Q3 10 Q4 10 Q1 110
300
600
900
1200
15001,461 1,435
1,372
1,1391,196
Revenue
EBITDA
series of Chinese government tighteningmeasurestocurbpropertyprices.Inthethirdquarter, we opened or upgraded about200 Dulux stores and launched integratedcampaignsforseveralnewproductsincludingForestBreathandVOCFree.Let’sColourwasalsoakeycampaigntobuildthebrandimageand inspire customers to redecorate theirhousesandoffices.
In South East Asia and Pacific, revenueincreased by 8 percent versus 2010(11 percent in constant currencies). Strongrevenue growth was achieved in most keymarkets except for Vietnam, which wasnegativelyaffectedbyitsweakeningeconomicsituation. Margin management offset mostincreases inrawmaterialpricesandadversemixeffects.Theregioncontinuesto invest inbrands, people and tinting machines togeneratetop-linegrowth.
Growth in India continued to be strong at19percent in thethirdquarter (24percent inconstantcurrencies)duetohighdemandandstrongpricing.
Keybrands
Revenue3rdquarter January-September
2010 2011 ∆% in€ millions 2010 2011 ∆%
720 739 3 DecorativePaintsEurope 2,042 2,123 4
423 447 6 DecorativePaintsAmericas 1,181 1,269 7
231 248 7 DecorativePaintsAsia 610 702 15
(2) 1 Other/intragroupeliminations (4) (2)
1,372 1,435 5 Total 3,829 4,092 7
Before incidentals
198 148 (25) EBITDA 485 429 (12)
14.4 10.3 EBITDAmargin(in%) 12.7 10.5
148 95 (36) EBIT 335 275 (18)
10.8 6.6 EBITmargin(in%) 8.7 6.7
MovingaverageROI(in%) 5.6 4.3
After incidentals
136 57 Operatingincome 301 231
28 44 Capitalexpenditures 91 128
Investedcapital 6,392 6,605
Numberofemployees 21,840 22,520
8 AkzoNobel I Report for the third quarter of 2011
Revenue development Q3 2011
Volume AcquisitionsPrice/mix Exchange rates
Total
+1%
+7% 0% -3%+5%
Increase Decrease10
2468
0
Performance Coatings• Revenueincreased5percent;EBITDAdecreased5percent• Rawmaterialcostscontinuetopressuremargins• EBITDAmarginat12.1percent(2010:13.4percent)• StronggrowthinIndustrialCoatings,whileweakeningmarketsimpactMarineandWoodFinishessegments
•Continuedfocusoncostcontrolandmarginmanagementinitiatives
Revenuewas up 5 percent (8 percent on aconstantcurrencybasis)drivenbya7percentpriceincrease.IndustrialCoatingsshowedthestrongest growth. At segment level, Marineremains affected by the shortfall in NewConstructionandWoodAsiacontinuestobeweak because of its exposure to the UShousingmarket.Wecontinuetomanageourselling prices in response to the high rawmaterialcosts.Ourmarginshavebeenaffectedbyhighrawmaterialcostsaswellasnegativemix effects, particularly in high growtheconomies. Cost control and restructuringefforts in mature markets are ongoing andcontinuetosupportperformanceasdorecentacquisitions. In thebeginningofOctoberwealso finalized the acquisition of SchrammHoldingAG.
Marine and Protective CoatingsRevenue forMarineandProtectiveCoatingswas up 3 percent from last year, with flatvolumesandnegativecurrency.Marinevolumelevels fellasNewConstructionoutputat themajoryardscontinuestodecline,alongwithaslow quarter for Coastal and Navy, partiallyoffsetby increase inDeepSeaMaintenanceactivity. Protective Coatings’ strong growthcontinueswithHeavyIndustryandOilandGas
markets experiencing good rates of growthacross all geographic regions, with theAmericas proving particularly strong. Yachtperformance has been affected bymacroeconomic factors, with low marketactivity across all regions. Increasing rawmaterial prices continue to pressure themargins despite our margin managementactivities.InProtectiveCoatings,launchactivityisunderway for Interchar2060—a thin-filmintumescentfireprotectionproduct.
Wood Finishes and AdhesivesWood Finishes and Adhesives’ revenuedecreased by 2 percent from last year,negatively affected by lower volumes andcurrencyandpartiallyoffsetbyprices.Volumesremainweakinmanyofthemarketsegments,mainlydrivenbytheprolongedhousingcrisisin theUSandslowingeconomies inEurope.However,demandremainedstableinNorthernEuropeandgrew inSouthAmerica,EasternEurope and Turkey. Operating costs remainbelow last year’s level, reflecting ongoingrestructuring efforts and cost-optimizationactivities. The impact of rawmaterial pricescontinuestoaffectourmarginsinallsegments.New manufacturing capacity in Vietnam isscheduled tobecommissioned in the fourth
quarterandwearebeginningconstructionofanewboardresinfacilityinPeru.
Automotive and Aerospace CoatingsAutomotiveandAerospaceCoatings’revenuedecreased by 1 percent over previous year,negativelyaffectedbycurrencies,acquisitionanddivestment activities. Volumes remainedflatinthequarter—withgrowthattributedtoAsia’stradesegmentsandAerospaceoffsetbylowerVehicleRefinishesvolumesinmatureEurope.CV-OEMvolumesremainedconstantsupported by continuing demand in the USand Western Europe. Aerospace Coatingsexperiencedastrongquarter,benefittingfromincreased production rates at Boeing andAirbus and high demand from Russia. Rawmaterialpricepressurecontinuestoaffectallthesegmentsofourbusiness.AutomotiveandAerospaceCoatingswasselectedbyToyotaMotorsEurope(TME)asthepreferredsupplierfor its European dealers and official bodyshops.
Powder CoatingsPowderCoatingsexperiencedagoodquarterwith revenue up 6 percent over last year,supported by pricing actions and negativelyaffectedbycurrencyandvolume.Salesgrowthwasmostevident intheUSandhighgrowthmarkets such as Turkey and Russia. Rawmaterial developments remained challengingdespite price and margin managementactivities. Powder Coatings’ cost basebenefited from the further consolidation ofRohmandHaasactivities,bothinEuropeandNorthAmerica.PowderCoatingsannouncedapartnership with BioCote and launchedInterponAM—apowdercoatingproductthatincorporatesBioCoteantimicrobialtechnology,
AkzoNobel I Report for the third quarter of 20119
Revenue
EBITDA
Revenue3rdquarter January-September
2010 2011 ∆% in€ millions 2010 2011 ∆%
334 344 3 MarineandProtectiveCoatings 996 1,025 3
201 197 (2) WoodFinishesandAdhesives 591 586 (1)
251 248 (1) AutomotiveandAerospaceCoatings 738 772 5
222 236 6 PowderCoatings 574 705 23
235 275 17 IndustrialCoatings 660 776 18
(4) (5) Other/intragroupeliminations (11) (20)
1,239 1,295 5 Total 3,548 3,844 8
Before incidentals
166 157 (5) EBITDA 500 470 (6)
13.4 12.1 EBITDAmargin(in%) 14.1 12.2
140 129 (8) EBIT 421 386 (8)
11.3 10.0 EBITmargin(in%) 11.9 10.0
MovingaverageROI(in%) 28.1 23.0
After incidentals
129 114 Operatingincome 383 375
21 27 Capitalexpenditures 51 73
Investedcapital 2,024 2,327
Numberofemployees 21,030 21,000
In € millions
147
166
143
Q1 11
170
157
Q2 11 Q2 11Q3 10 Q4 10
In € millions
Q1 11 Q2 11 Q3 11Q3 10 Q4 100
300
600
900
1200
1500
1,2371,312 1,295
1,239 1,238
which provides benefits in areas with highlevelsofhumancontact,especiallyinhygienesensitive areas such as the medical andcatering industries. Inaddition,anewprimerthat can be cured at low temperatureswaslaunched in the automotive wheel market,enabling customers to reduce curingtemperaturesbyatleast68degreesFahrenheit(20 degrees Celsius), thus increasingproductivitybyupto10percent.
Industrial CoatingsIndustrial Coatings experienced a strongquarterwithrevenueup17percentover lastyear. The growth was mainly attributable tohigher volumes, pricing actions, and impactfrom an acquisition — offset by negativecurrency. Themain driver of the growth hasbeen Coil Coatings, which continues to bestronginallregions,especiallyintheAmericas.Packaging Coatings’ food and beveragebusiness also experienced another strongquarter, supported by European and Asianmarkets and the impact of the Lindgens’acquisition. Specialty Plastics’ revenuedecreasedinthequarter,mainlyduetolowerrevenue inwireless and IT segments inAsiaandpartiallyoffsetbyastrongrevenueincreasein the automotive segment. The pressure ofthe raw material prices continues to be feltthroughout the business. The acquisition ofSchramm Holding AG was finalized in earlyOctober.
Keybrands
10 AkzoNobel I Report for the third quarter of 2011
Revenue development Q3 2011
Volume AcquisitionsPrice/mix Exchangerates
Total
-1%
-1%+8%+6%
Increase Decrease
1012
02
-2
4680%
All of our business units contributed to the6percentincreaseinrevenue.Volumesinthequarterwere slightly down, but year-to-dateare still 2 percent ahead of last year. Thestrength in manufacturing and industrialproduction, particularly in Asia and NorthAmerica, resulted in stable demand acrossmost of our business lines, with someexceptionswhereweseedecreaseddemandand uncertainty in ordering patterns. Thedemandintheresidentialconstructionrelatedbusinessesremainedweak.Theescalationofinput costs (largely driven by petrochemicalderivatives and energy), combined withnegativecurrencyeffectsandalessfavorablesupplyanddemandbalance,haveloweredouraverage margins. However, in most of ourbusinesses these input costs stabilizedthroughoutthecourseofthethirdquarter.Weregainedpartofthelostmarginsinthesecondpartofthequarterduetopriceincreases.Ourfocusremainsonmarginmanagement,marketshare and cost optimization. Cost controlmeasuresareinplaceandadditionalEBITDAimprovements havebeendeveloped. In July,
we announced the intention to furtherstrengthenourleadershippositioninspecialtysurfactantsbyacquiringBoxingOleochemicals.BoxingistheleadingsupplierofnitrileaminesandderivativesinChinaandthroughoutAsia.
Functional ChemicalsOurearningsdevelopmentinthethirdquarterdid not materially change compared to Q2,andwecontinuetoseeamixedpicture.Weseesignsthatdemandisweakeninginsomeof our businesses. The building andconstruction markets remain down andplastics’applicationsforluxurysegments(likeboats) are down as well. In general, ourcustomers are more cautious andunpredictable in their ordering pattern.Alongside this, the supply/demand balancehasimprovedformostproductlinesduetoourown and competitor expansions as well asbetter availability of worldwide productioncapacitiesduetofewerinterruptionsthisyear.The deterioration in results compared to lastyear is most noticeable in Ethylene Amines,Performance Additives, Cross-linking
Peroxides,ThermosetChemicalsandPolymerAdditives and Chelates, and clear marginmanagementactionsareongoinginall thesesegments.We see increased results inHighPolymers,mainlyduetofurthergrowthintheHigh Purity Metalorganics business. Marginmanagementactionsareongoinginall thesesegments. Both Salt Specialties and SulfurDerivatives are performing similarly to thepreviousyear.Industrial Chemicals Industrial Chemicals delivered a solidperformance in the quarter although resultswereslightlybelowthelastyear’slevel,asQ32010 includedmorerevenuefromsecondaryuseofsaltcaverns.SalesvolumesforchlorineinQ3wereslightlybelow lastyear,drivenbythemaintenancestopofakeyaccountintheRotterdam-Botlek cluster along with lowercapacityduetomaintenanceintheRotterdamelectrolyses plant. Demand for salt,chloromethanesanddimethylether improvedcompared to previous year. The Energybusiness remains under pressure as thespreads are low due to overcapacity in theNetherlandsenergymarket.
Specialty Chemicals• Revenueincreased6percent,basedonstablevolumes;EBITDAdecreased6percent
• Priceincreasesarebeingimplementedtooffsetincreasedinputcostsandunfavorablecurrencyeffects
• Stabledemandoverallthisquarter,butwithsomeexceptions• EBITDAmarginwas17.6percent(2010:20.0percent)•Additionalcostandcashsavingsprogramsinitiated
AkzoNobel I Report for the third quarter of 201111
In € millions
220241
254
221
Q1 11 Q2 11
238
Q3 11Q3 10 Q4 10
In € millions
Q2 11 Q3 11Q3 10 Q4 10 Q1 110
300
600
900
1200
15001,351 1,350 1,349
1,272 1,259
Revenue
EBITDA
Surface ChemistryRevenue in Surface Chemistry increased by11percentcomparedtolastyear.Theincreaseis primarily from higher pricing driven byincreasingrawmaterialcostsforfatsandoils.Demand improved slightly compared to agoodQ3lastyear.Allgeographicregionsarecontributingand the improvement is inmostmarket sectors. Compared to last year, wehave good growth in the agriculture,miningand the petroleum segments with somecontinuedweakness intheconsumer-relatedapplications.
Pulp and Paper Chemicals The performance of our Pulp and PaperChemicals’business in the thirdquarterwasslightlyaheadofthethirdquarterof2010.Allregions have been affected by plannedseasonal maintenance stops, but the orderinflowpickedupafterthemaintenanceperiod.Demand for pulp and paper chemicalscontinues to be strong, especially in SouthAmerica. During Q3, the increase in rawmaterialcostsleveledout.However,therearedifferencesperregion:AsiaandSouthAmericashowdecreasingrawmaterialpriceswhereasNorthAmericaiscopingwithincreasedenergyandfreightcosts.
Chemicals PakistanTradingconditions in theChemicalsPakistanbusiness remain difficult. Domesticdownstream market conditions remainedsubduedthroughoutthequarterandpolyestermarkets were depressed by rising polyesterstaple fiber prices and volatility in feedstockandcottonmarkets.TherisingseverityofgasshortagesandtheongoingeconomiccrisisinPakistanhascreateduncertaintyregardingthedirection of the market. Gas outages haveforcedanincreaseintheuseofmoreexpensivefurnace oil in our Soda plant. Downstreamindustries continued to face natural gasshortages throughout the quarter, whichimpacted demand. Despite these difficultcircumstances,profitabilitywasclosetoprioryear.
Keybrands
Revenue
3rdquarter January-September
2010 2011 ∆% in€ millions 2010 2011 ∆%
464 481 4 FunctionalChemicals 1,352 1,460 8
276 291 5 IndustrialChemicals 788 880 12
219 243 11 SurfaceChemistry 647 725 12
272 290 7 PulpandPaperChemicals 774 840 9
73 81 11 ChemicalsPakistan 223 249 12
(32) (37) Other/intragroupeliminations (100) (104)
1,272 1,349 6 Total 3,684 4,050 10
Before incidentals
254 238 (6) EBITDA 718 699 (3)
20.0 17.6 EBITDAmargin(in%) 19.5 17.3
188 169 (10) EBIT 524 494 (6)
14.8 12.5 EBITmargin(in%) 14.2 12.2
MovingaverageROI(in%) 19.6 18.6
After incidentals
164 169 Operatingincome 485 489
54 79 Capitalexpenditures 182 233
Investedcapital 3,364 3,594
Numberofemployees 11,100 11,430
12 AkzoNobel I Report for the third quarter of 2011
Condensed financial statements
Consolidated statement of comprehensive income3rdquarter January-September
2010 2011 in€ millions 2010 2011
260 167 Profit for the period 658 601
Other comprehensive income
(449) 108 Exchangedifferencesarisingontranslationofforeignoperations 629 (261)
65 6 Cashflowhedges 66 (33)
(18) (4) Taxrelatingtocomponentsofothercomprehensiveincome (19) 16
(402) 110 Other comprehensive income for the period (net of tax) 676 (278)
(142) 277 Comprehensive income for the period 1,334 323
Comprehensive income attributable to
(145) 239 Shareholdersofthecompany 1,244 284
3 38 Non-controllinginterests 90 39
(142) 277 Comprehensive income for the period 1,334 323
Consolidated statement of income3rdquarter January-September
2010 2011 in€ millions 2010 2011
Continuing operations
3,867 4,051 Revenue 11,020 11,910
(2,277) (2,511) Costofsales (6,442) (7,247)
1,590 1,540 Gross profit 4,578 4,663
(853) (857) Sellingexpenses (2,484) (2,539)
(275) (293) Generalandadministrativeexpenses (789) (887)
(89) (87) Researchanddevelopmentexpenses (251) (258)
8 (2) Otheroperatingincome/(expenses) 6 27
381 301 Operating income 1,060 1,006
(70) (70) Netfinancingexpenses (271) (197)
9 9 Resultsfromassociatesandjointventures 21 24
320 240 Profit before tax 810 833
(81) (74) Incometax (210) (246)
239 166 Profit for the period from continuing operations 600 587
Discontinued operations
21 1 Profitfortheperiodfromdiscontinuedoperations 58 14
260 167 Profit for the period 658 601
Attributable to
238 149 Shareholdersofthecompany 592 545
22 18 Non-controllinginterests 66 56
260 167 Profit for the period 658 601
AkzoNobel I Report for the third quarter of 201113
Shareholders'equityShareholders'equityasattheendofQ32011increased to €9.1 billion, due to the neteffectof:• Netincomeof€545million.• Decreasedcumulativetranslationreservesby
€239millionduetothestrengtheningeuro.• Dividendpaymentsof€253million.
Dividend policy Weareaimingtopayastabletorisingdividend.Followingrequests inourAGMinApril,wewillintroduce a stock dividend option with cashdividendasdefault.Detailsofthepaymentdatesarefoundonthelastpageofthisreport.Givenourstrongfundamentalsandasasignalofconfidence in our ability to deliver theperformance improvement program inchallengingmarkets,the2011interimdividendwillbeincreasedby3percentto€0.33pershare.Ourintentionistogrowthe2011totaldividendbyaround€0.05pershare(asimilarincreaseaswas made for the 2010 dividend), aimingtowardsatotal2011dividendof€1.45pershare.
Condensed consolidated balance sheetin€ millions December31,
2010September 30, 2011
Assets
Non-currentassets
Intangibleassets 7,308 7,099
Property,plantandequipment 3,384 3,430
Otherfinancialnon-currentassets 1,977 2,118
Total non-current assets 12,669 12,647
Currentassets
Inventories 1,678 1,889
Tradeandotherreceivables 2,788 3,105
Cashandcashequivalents 2,851 1,704
Othercurrentassets 108 86
Total current assets 7,425 6,784
Total assets 20,094 19,431
Equity and liabilities
Total equity 9,509 9,589
Non-currentliabilities
Provisionsanddeferredtaxliabilities 2,444 2,291
Long-termborrowings 2,880 2,771
Total non-current liabilities 5,324 5,062
Currentliabilities
Short-termborrowings 907 528
Tradeandotherpayables 3,305 3,342
Othershort-termliabilities 1,049 910
Total current liabilities 5,261 4,780
Total equity and liabilities 20,094 19,431
Changes in equity
in€ millions Subscribed share capital
Additional paid-in capital
Cashflow hedge
reserve
Revaluation reserves
Cumulative translation
reserves
Other reserves
Shareholders’ equity
Non-controlling interests
Total equity
Balance at January 1, 2010 465 2 (6) 7 (777) 8,084 7,775 470 8,245
Profitfortheperiod – – – – – 592 592 66 658
Othercomprehensiveincome – – 47 – 605 – 652 24 676
Comprehensive income for the period – – 47 – 605 592 1,244 90 1,334
Dividendpaid – – – – – (245) (245) (61) (306)
Equity-settledtransactions – – – – – 23 23 – 23
Issueofcommonshares 2 4 – – – – 6 – 6
Acquisitionsanddivestments – – – – – (7) (7) (4) (11)
Balance at September 30, 2010 467 6 41 7 (172) 8,447 8,796 495 9,291
Balance at January 1, 2011 467 9 29 7 (43) 8,515 8,984 525 9,509
Profitfortheperiod – – – – – 545 545 56 601
Othercomprehensiveincome – – (22) – (239) – (261) (17) (278)
Comprehensive income for the period – – (22) – (239) 545 284 39 323
Dividendpaid – – – – – (253) (253) (29) (282)
Equity-settledtransactions – – – – – 26 26 – 26
Issueofcommonshares 1 14 – – – – 15 – 15
Acquisitionsanddivestments – – – – – – – (2) (2)
Balance at September 30, 2011 468 23 7 7 (282) 8,833 9,056 533 9,589
14 AkzoNobel I Report for the third quarter of 2011
15.314.1 13.9
Operating working capitalIn % of revenue
Q1 11
14.5
Q2 11
14.9
Q3 11Q3 10 Q4 10
Invested capital InvestedcapitalattheendofQ32011totaled€13.2 billion, €0.5 billion higher than atyear-end2010.Investedcapitalwasimpactedbytheneteffectof:
• Foreigncurrencyeffectsonintangiblesand property,plantandequipment,duetothestrengtheningeuro.Intotal,investedcapitaldecreasedby€0.3billionduetothecurrencytranslationimpact.
• Anincreaseof€0.2billionoflong-termreceivablesrelatedtopensionfundsinassetposition.
• Anincreaseofoperatingworkingcapitalduetoseasonality,moreexpensiverawmaterialsandactionstoensuresupplyoftitaniumdioxide.Expressedasapercentageofrevenue,operatingworkingcapitalwas14.9percent(Q32010:14.1percent;year-end2010:13.9percent).
• Paymentsofaccruedinterestof€148million.
PensionsThefundedstatusofthepensionplansattheendofQ32011wasestimatedtobeadeficitof €0.7billion(year-end2010:€1.0 billion;Q22011:€0.4billion).Themovementcomparedtoyear-end2010isdueto:• Top-uppaymentsof€346millioninto
certaindefinedbenefitpensionplans• Lowerdiscountratesincreasingthe
pensionobligation• LowerinflationinUKdecreasingthe
pensionobligation• Higherassetreturns.
WorkforceAtSeptember30,2011,weemployed56,350staff(year-end2010:55,590employees).Thenetincreasewasdueto:• Adecreaseof740employeesdueto
ongoingrestructuring• Anetdecreasefromacquisitionsand
divestmentsof160employees• Anincreaseof1,660employeesdueto
newhiresandseasonalactivity.
Cash flowsOperating activities in Q3 2011 resultedin a cash inflow of €409 million (2010:€378million).Thechangeisduetoaneteffectof:• Lowerprofitfromcontinuingoperations• Lowercashflowsfromoperatingworking
capital• Lowerpaymentsrelatedtoprovisions• Lowerpaymentsfortaxandinterest.
Compared to 2010, year-to-date changes inworkingcapitalaremainlydueto:• Ahigherautonomousincreaseinoperating
workingcapital• Fairvaluechangesandcashsettlementsfor
foreigncurrencyhedgingactivities.
Invested capital
in€ millions September30,2010
December31,2010 September 30, 2011
Tradereceivables 2,269 2,101 2,432
Inventories 1,621 1,678 1,889
Tradepayables (1,699) (1,763) (1,888)
Operating working capital in Business Areas 2,191 2,016 2,433
Otherworkingcapitalitems (1,055) (1,203) (1,128)
Non-currentassets 12,327 12,669 12,647
Lessinvestmentsinassociatesandjointventures (190) (175) (197)
Deferredtaxliabilities (596) (589) (561)
Invested capital 12,677 12,718 13,194
Operating working capital
in€ millions,%ofrevenue September30,2010 December31,2010 September 30, 2011
DecorativePaints 710 12.9 651 14.3 848 14.8
PerformanceCoatings 787 15.9 714 14.4 853 16.5
SpecialtyChemicals 694 13.6 651 12.9 732 13.6
Total 2,191 14.1 2,016 13.9 2,433 14.9
AkzoNobel I Report for the third quarter of 201115
Medium-term ambitionsWehavetheaspirationtobetheworld’sleadingCoatings and Specialty Chemicals company.Our medium-term ambitions are to grow to€20 billion revenue, increase EBITDA eachyear while maintaining a 13 to 15 percentmargin,reduceOWCpercentofrevenueyear-on-yearby0.5percenttowardsa12percentlevel,andpayastabletorisingdividend.
The sustainability ambitions are to remaina top three leader in our industry, to be topquartile in our peer group in terms of safetyperformance,diversity,employeeengagementand development, and eco-efficiencyimprovementrates.
Amsterdam, October 20, 2011The Board of management
Net debt Net debt increased from €936 million atyear-end2010to€1,595millionattheendofQ3,mainlydueto:• Operatingcashinflowof€55million• Capitalexpendituresof€452million• Paymentsofdividendof€282million
InSeptember2011,werenewedourfiveyearmulti-currency syndicated revolving creditfacilityfor€1.8billion(previously:€1.5billion).
Condensed consolidated statement of cash flows3rdquarter January-September2010 2011 in € millions 2010 2011
1,472 1,194 Cash and cash equivalents at beginning of period 1,919 2,683
Adjustments to reconcile earnings to cash generated from operating activities
239 166 Profitfortheperiodfromcontinuingoperations 600 587
176 157 Amortization,depreciationandimpairments 474 460
105 41 Changesinworkingcapital (182) (553)
(128) (27) Changesinprovisions (631) (455)
(14) 72 Otherchanges (17) 16
378 409 Net cash from operating activities 244 55
(109) (158) Capitalexpenditures (336) (452)
23 5 Acquisitionsanddivestmentsnetofcashacquired (4) 29
50 3 Otherchanges 54 6
(36) (150) Net cash from investing activities (286) (417)
(80) – Changesfromborrowings (29) (550)
(24) (10) Dividends (306) (282)
3 (3) Otherchanges 6 7
(101) (13) Net cash from financing activities (329) (825)
241 246 Net cash used for continuing operations (371) (1,187)
(1) (7) Cashflowsfromdiscontinuedoperations – 4
240 239 Net change in cash and cash equivalents of total operations (371) (1,183)
(82) 20 Effectofexchangeratechangesoncashandcashequivalents 82 (47)
1,630 1,453 Cash and cash equivalents at September 30 1,630 1,453
16 AkzoNobel I Report for the third quarter of 2011
Quarterly statistics
2010 2011
Q1 Q2 Q3 Q4 Fullyear in€ millions Q1 Q2 Q3 Year-to-date
Revenue
1,056 1,401 1,372 1,139 4,968 DecorativePaints 1,196 1,461 1,435 4,092
1,049 1,260 1,239 1,238 4,786 PerformanceCoatings 1,237 1,312 1,295 3,844
1,154 1,258 1,272 1,259 4,943 SpecialtyChemicals 1,351 1,350 1,349 4,050
(13) (12) (16) (16) (57) Otheractivities/eliminations (22) (26) (28) (76)
3,246 3,907 3,867 3,620 14,640 Total 3,762 4,097 4,051 11,910
EBITDA
82 205 198 63 548 DecorativePaints 90 191 148 429
143 191 166 147 647 PerformanceCoatings 143 170 157 470
207 257 254 221 939 SpecialtyChemicals 241 220 238 699
(33) (39) (44) (54) (170) Otheractivities/eliminations (37) (30) (36) (103)
399 614 574 377 1,964 Total 437 551 507 1,495
12.3 15.7 14.8 10.4 13.4 EBITDA margin (in %) 11.6 13.4 12.5 12.6
Depreciation
(29) (32) (31) (32) (124) DecorativePaints (30) (30) (33) (93)
(19) (21) (20) (21) (81) PerformanceCoatings (21) (21) (21) (63)
(52) (53) (54) (55) (214) SpecialtyChemicals (55) (56) (56) (167)
(5) (4) (2) (5) (16) Otheractivities/eliminations (2) (3) (4) (9)
(105) (110) (107) (113) (435) Total (108) (110) (114) (332)
Amortization
(19) (20) (19) (23) (81) DecorativePaints (21) (20) (20) (61)
(6) (7) (6) (7) (26) PerformanceCoatings (7) (7) (7) (21)
(11) (12) (12) (11) (46) SpecialtyChemicals (12) (13) (13) (38)
– 1 (2) (1) (2) Otheractivities/eliminations – – (1) (1)
(36) (38) (39) (42) (155) Total (40) (40) (41) (121)
EBIT
34 153 148 8 343 DecorativePaints 39 141 95 275
118 163 140 119 540 PerformanceCoatings 115 142 129 386
144 192 188 155 679 SpecialtyChemicals 174 151 169 494
(38) (42) (48) (60) (188) Otheractivities/eliminations (39) (33) (41) (113)
258 466 428 222 1,374 Total 289 401 352 1,042
7.9 11.9 11.1 6.1 9.4 EBIT margin (in %) 7.7 9.8 8.7 8.7
Operating income
19 146 136 (26) 275 DecorativePaints 37 137 57 231
101 153 129 104 487 PerformanceCoatings 106 155 114 375
126 195 164 119 604 SpecialtyChemicals 173 147 169 489
(22) (39) (48) (38) (147) Otheractivities/eliminations (39) (11) (39) (89)
224 455 381 159 1,219 Total 277 428 301 1,006
AkzoNobel I Report for the third quarter of 201117
20102011
Q1 Q2 Q3 Q4 Fullyear in€ millions Q1 Q2 Q3 Year-to-date
Incidentals per Business Area
(15) (7) (12) (34) (68) DecorativePaints (2) (4) (38) (44)
(17) (10) (11) (15) (53) PerformanceCoatings (9) 13 (15) (11)
(18) 3 (24) (36) (75) SpecialtyChemicals (1) (4) – (5)
16 3 – 22 41 Otheractivities/eliminations – 22 2 24
(34) (11) (47) (63) (155) Total (12) 27 (51) (36)
Incidentals included in operating income
(17) (21) (53) (29) (120) Restructuringcosts (9) (20) (47) (76)
(9) 8 – (48) (49) Resultsrelatedtomajorlegal,antitrustandenvironmentalcases
1 21 2 24
1 1 15 16 33 Resultsonacquisitionsanddivestments
– 26 (5) 21
(9) 1 (9) (2) (19) Otherincidentalresults (4) – (1) (5)
(34) (11) (47) (63) (155) Total (12) 27 (51) (36)
Incidentals per line item
(16) (20) (37) (53) (126) Costofsales (4) (5) (25) (34)
(5) (3) (7) (28) (43) Sellingexpenses (3) (9) (20) (32)
(7) 1 (3) (4) (13) Generalandadministrativeexpenses
(1) (4) (1) (6)
– – (2) 1 (1) Researchanddevelopmentexpenses
– – (1) (1)
(6) 11 2 21 28 Otheroperatingincome/(expenses) (4) 45 (4) 37
(34) (11) (47) (63) (155) Total (12) 27 (51) (36)
Reconciliation net financing expense
12 12 16 11 51 Financingincome 14 17 14 45
(67) (72) (53) (48) (240) Financingexpenses (61) (63) (49) (173)
(55) (60) (37) (37) (189) Net interest on net debt (47) (46) (35) (128)
Other interest movements
(25) (26) (26) (23) (100) Financingexpensesrelatedtopensions
(16) (13) (15) (44)
(8) (29) (6) 4 (39) Interestonprovisions (5) (12) (13) (30)
– 2 (1) – 1 Otheritems 5 7 (7) 5
(33) (53) (33) (19) (138) Net other financing charges (16) (18) (35) (69)
(88) (113) (70) (56) (327) Net financing expenses (63) (64) (70) (197)
Quarterly net income analysis
5 7 9 4 25 Resultsfromassociatesandjointventures
7 8 9 24
(18) (26) (22) (17) (83) Profitattributabletonon-controllinginterests
(16) (22) (18) (56)
141 349 320 107 917 Profitbeforetax 221 372 240 833
(53) (76) (81) 40 (170) Incometax (73) (99) (74) (246)
88 273 239 147 747 Profitfortheperiodfromcontinuingoperations
148 273 166 587
38 22 25 (37) 19 Effectivetaxrate(in%) 33 27 31 30
18 AkzoNobel I Report for the third quarter of 2011
2010 2011Q1 Q2 Q3 Q4 Fullyear Q1 Q2 Q3 Year-to-date
Earnings per share from continuing operations (in €)
0.30 1.06 0.93 0.55 2.85 Basic 0.57 1.07 0.63 2.27
0.30 1.05 0.92 0.55 2.83 Diluted 0.56 1.07 0.63 2.25
Earnings per share from discontinued operations (in €)
0.05 0.11 0.09 0.14 0.38 Basic (0.02) 0.07 – 0.06
0.05 0.11 0.09 0.14 0.38 Diluted (0.02) 0.07 – 0.06
Earnings per share from total operations (in €)
0.35 1.17 1.02 0.69 3.23 Basic 0.55 1.14 0.63 2.33
0.35 1.16 1.01 0.69 3.21 Diluted 0.54 1.14 0.63 2.31
Number of shares (in millions)
232.7 233.3 233.4 233.5 233.2 Weightedaveragenumberofshares
233.6 233.9 234.0 233.8
233.2 233.4 233.5 233.5 233.5 Numberofsharesatendofquarter 233.7 234.0 234.0 234.0
Adjusted earnings (in € millions)
141 349 320 107 917 Profitbeforetaxfromcontinuingoperations
221 372 240 833
34 11 47 63 155 Incidentalsreportedinoperatingincome
12 (27) 51 36
36 38 39 42 155 Amortizationofintangibleassets 40 40 41 121
(71) (97) (107) (4) (279) Adjustedincometax (88) (107) (100) (295)
(18) (26) (22) (17) (83) Non-controllinginterests (16) (22) (18) (56)
122 275 277 191 865 Adjusted net income for continuing operations
169 256 214 639
0.52 1.18 1.19 0.82 3.71 Adjusted earnings per share (in €)
0.72 1.09 0.91 2.73
AkzoNobel I Report for the third quarter of 201119
Net debt isdefinedas long-termborrowingsplus short-term borrowings less cash andcashequivalents.
Operating income isdefined inaccordancewith IFRS and includes the relevantincidentalresults.
Operating ROI iscalculatedasEBITbeforeamortizationofthelasttwelvemonthsdividedby average invested capital excludingintangibleassets.
Operating working capital is defined asthesumof inventories,tradereceivablesandtradepayables in theBusinessAreas.Whenexpressedasaratio,operatingworkingcapitalis measured against four times lastquarterrevenue.
Revenueconsistsofsalesofgoods,services,androyaltyincome.
Safe Harbor StatementThisreportcontainsstatementswhichaddresssuch key issues as AkzoNobel’s growthstrategy, future financial results, marketpositions, product development, products inthe pipeline and product approvals. Suchstatements should be carefully considered,anditshouldbeunderstoodthatmanyfactorscouldcauseforecastandactualresultstodifferfromthesestatements.Thesefactorsinclude,but are not limited to, price fluctuations,currency fluctuations, developments in rawmaterial and personnel costs, pensions,physicalandenvironmentalrisks,legalissues,and legislative, fiscal, and other regulatorymeasures. Stated competitive positions arebasedonmanagementestimatessupportedbyinformationprovidedbyspecializedexternalagencies. For a more comprehensivediscussion of the risk factors affecting ourbusiness,pleaseseeourlatestAnnualReport.
Brands and trademarksInthisreport,referenceismadetobrandsandtrademarks owned by, or licensed to,AkzoNobel. Unauthorized use of these isstrictlyprohibited.
Accounting policies This interim financial report is in compliancewithIAS34"InterimFinancialReporting".Thisreportisunaudited.
Theaccountingprinciplesareasapplied inthe2010financialstatements.
SeasonalityRevenueandresults inDecorativePaintsareimpacted by seasonal influences. Revenueandprofitabilitytendtobehigherinthesecondand third quarter of the year as weatherconditions determine whether paints andcoatings can be applied. In PerformanceCoatings, revenue and profitability vary withbuilding patterns from original equipmentmanufacturers. In Specialty Chemicals, theFunctional Chemicals and the SurfaceChemistry businesses experience seasonalinfluences. Revenue and profitabilityare affectedbydevelopmentsintheagriculturalseasonandtendtobehigherinthefirsthalfoftheyear.
The "other" categoryIn the category "other" we report activitieswhicharenotallocatedtoaparticularbusinessarea. Corporate costs are the unallocatedcostsofourheadofficeandsharedservicescenter in the Netherlands. Pensions reflectspensioncostsafter theeliminationof interestcost (reported as financing expenses).Insurances are the results from our captiveinsurancecompanies.Otherincludesthecostof share-based compensation and companyprojects, the results of treasury and legacyoperationsaswellastheunallocatedcostofsomecountryorganizations.
GlossaryAdjusted earnings per share are the basicearningspersharefromcontinuingoperationsexcluding incidentals in operating income,amortization of intangible assets and tax ontheseadjustments.
Comprehensive income is the change inequity during a period resulting fromtransactionsandothereventsotherthanthosechanges resulting from transactions withshareholdersintheircapacityasshareholders.
Constant currencies information excludesforeigncurrency translationeffectsassumingforeign currency exchange rates have notchanged between the prior year period andthecurrentperiod.
EBIT isoperatingincomebeforeincidentals.
EBIT marginisEBITas percentageofrevenue.
EBITDA is EBIT before depreciation andamortization and refers to EBITDA beforeincidentals.
EBITDA margin isEBITDAas percentageofrevenue.
Emerging Europe: CzechRepublic,Estonia,Hungary, Poland, Romania, RussianFederation,Slovenia,TurkeyandUkraine.
Incidentalsarespecialchargesandbenefits,results on acquisitions and divestments,restructuring and impairment charges, andchargesrelatedtomajorlegal,anti-trust,andenvironmentalcases.EBITDAandEBITbeforeincidentalsarekey figuresweuse toassessourperformance,asthesefiguresbetterreflectthe underlying trends in the results of theactivities.
Interest coverage is operating incomedividedbynetinterestonnetdebt.In2010,weused thedefinitionoperating incomedividedby net financing expenses and includednon-cash itemssuchas interestonpensionsandprovisions.Wehavechangedthedefinitionstarting 2011. The 2010 figure has beenadjustedtoalignwiththe2011definition.
Invested capital is total assets (excludingcash and cash equivalents, investments inassociates, assetsheld for sale) lesscurrentincometaxpayable,deferredtaxliabilitiesandtradeandotherpayables.
Mature markets compriseofWesternEurope,theUS,Canada,JapanandOceania.
Moving average ROI iscalculatedasEBITofthe last twelve months divided by averageinvestedcapital.
Notes to the condensed financial statements
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www.akzonobel.com
AkzoNobelisthelargestglobalpaintsandcoatingscompanyandamajorproducerofspecialtychemicals.Wesupplyindustriesandconsumersworldwidewithinnovativeproductsandarepassionateaboutdevelopingsustainableanswersforourcustomers.OurportfolioincludeswellknownbrandssuchasDulux,Sikkens,InternationalandEka.HeadquarteredinAmsterdam,theNetherlands,weareaGlobalFortune500companyandareconsistentlyrankedasoneoftheleadersintheareaofsustainability.Withoperationsinmorethan80countries,our55,000peoplearoundtheworldarecommittedtoexcellenceanddeliveringTomorrow’sAnswersToday™.©2011AkzoNobelN.V.Allrightsreserved.“Tomorrow’sAnswersToday”isatrademarkofAkzoNobelN.V.
Akzo Nobel N.V.Strawinskylaan2555P.O.Box757301070ASAmsterdam,theNetherlandsTel:+31205027555Fax:+31205027666Internet:www.akzonobel.com
Formoreinformation:TheexplanatorysheetsusedduringthepressconferencecanbeviewedonAkzoNobel’scorporatewebsitewww.akzonobel.com
AkzoNobelCorporateCommunicationsTel:+31205027833Fax:+31205027604E-mail:[email protected]
AkzoNobelInvestorRelationsTel:+31205027854Fax:+31205027605E-mail:[email protected]
Financial calendarEx-dividenddateof2011interimdividendOctober24,2011Recorddateof2011interimdividendOctober26,2011Electionperiodcashorstockinterimdividend October27,2011- November18,2011Paymentdateofcashdividendanddeliveryofnewshares November24,2011Reportfor2011andthe4thquarter February16,2012Reportforthe1stquarter2012 April19,2012AnnualGeneralMeeting April23,2012Reportforthe2ndquarter2012 July19,2012Reportforthe3rdquarter2012 October18,2012