AkzoNobel stages new strategy to hit financial targets

AkzoNobel is building on its leading market positions in mature and high-growth markets, which already account for 44% of revenue and expected to surge, for its newly set financial targets. This strategy focuses on end-user segments, operational excellence and sustainability, embodying the company’s vision: Leading Market Positions, Delivering Leading Performance.

The four key end-user segments are buildings and infrastructure; transportation, industrial and consumer goods.

Based on the market environment and the leading indicators in its end-user segments, AkzoNobel is assuming sales growth (CAGR) of around 4% annually between 2012 and 2015.

Also, AkzoNobel has identified the following strategic focus areas as care for the customer; reduction of product and process complexity; cash and return on investment; embedded safety and sustainability; and diverse and inclusive talent development.

Its company-wide core processes, which will support and drive the strategic focus areas, include a more rigourous operational control cycle to drive and monitor delivery of its targets, behaviour-based and process safety, talent management, innovation and procurement.

Since October 2011, AkzoNobel has delivered structural EBITDA gains of EUR250 million, while one-off costs amounted to EUR292 million. AkzoNobel will accelerate the programme and expects to achieve the full EBITDA benefit of EUR500 million, a year early, in 2013, with associated costs estimated at EUR205 million.

In order to increase accountability, incidental items such as restructuring charges will now be included in EBITDA unless genuinely one-off and not related to normal or ongoing business. Pro-forma data will be made publicly available on the company website reflecting these and other restatements.

AkzoNobel's pension top-ups relate mainly to pension liabilities in the UK. The actuarial funding deficit of the two main UK plans (ICI and CPS) is estimated at EUR1.5 billion to EUR2 billion. The recent CPS triennial actuarial funding review has resulted in a reduction of top-up payments of EUR40 million yearly, representing cumulative savings of EUR240 million over the remaining six years of the agreed funding recovery plan. Combined with the earlier ICI funding review, this represents total savings of EUR485 million over the next six years.

Meanwhile, the company will have a smaller Executive Committee. Remuneration for the top executives, with the new short-term incentive bonus targets to include operating income, return on investment and operating cash flow.


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