Report 2013
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How we
create
value
Input
Our organization
Energy
We continue to improve our energy efficiency
and increase our share of renewable energy,
which is currently at 31 percent.
Capital expenditures
€666 million
Value of all assets
€16.1billion
E
D
A
C
B
Total energy input
A 31% Renewable energy
B 37% Natural gas
C 15% Coal
D 15% Nuclear
E 2% Other fossil fuels
Raw materials
and packaging
We value our supplier relationships. Around
96 percent have signed our Vendor Policy,
which helps to ensure a sustainable supply
chain. Renewable raw materials are now
13 percent of the organic (fossil-based)
materials that we buy. An increase will lower
our dependence on fossil-based resources.
A
Origin of raw materials
A 5% Renewable raw materials
(bio-based)
B
B 35% Fossil-derived materials
(petrochemicals)
C 60% Inorganic materials
(salt, minerals, clays)
C
Own operations
CO2(e) emissions
3.9 million tons
Total waste
161 kilotons
85%
of sites with sustainable
fresh water management
D ecorative
P aints
P erfor m ance
C oatings
S pecialty
C he micals
B uildin gs an d
Infrastructure
Transp ortation
C o nsu m er G o o ds
Industrial
As the leading global paints and coatings company and a major producer of specialty chemicals, we know only too well that our future hinges on our ability to create value by doing more with less.More innovation, less traditional solutions; more renewable energy and materials, less fossil-based; more value chain focus while improving our financial performance; more investment in talent and career planning.By bringing more value to our customers, investors, employees and society in general, we can better position ourselves for growth and achieve our strategic vision of leading market positions delivering leading per - formance. So as well as actively working to reduce our carbon footprint across the value chain, we’re also creating social value by developing our employees and generating intellectual value by continuing to innovate in order to supply more sustainable products and solutions for our customers. This will ultimately lead to more financial value for our investors.Total energy use 99,000 TJ or 5.6 GJ per ton of productionFresh water consumption 265 million m3 or 14.9 m3 per ton of productionTotal energy bill €0.6 billionUpstream CO2(e)emissions including VOCs 11 million tonsRD&I investments €373 millionEmployee engagement score (1-5 scale) 3.88Employee benefits €3.0 billionEmployees 49,600Total reportable rate of injuries 2.3Cost of raw materials and packaging €5.4 billion
Our organization
Output
Customer value
In 2013 we sold products to many thousands
of customers. We continue to improve our
customer focus and develop products and
solutions that help them to be successful in
their markets.
Financial value
With a ROS% of 6.6 percent, we are making
progress towards achieving our 9 percent
target for 2015, and with our ROI% of
9.6 percent, we are progressing towards our
14 percent target for 2015.
Revenue per end-user segment
A 44% Buildings and
Infrastructure
A
B 16% Transportation
C 16% Consumer Goods
D 24% Industrial
D
C
B
Human value
Employee safety is a key priority and we are
actively driving towards a reduction in the
number of incidents. We highly value, and
actively work on, improving employee
engagement. We’re investing in training and
development and continue to work on a more
diverse workforce.
Environmental value
We continue to improve the environmental
footprint of our operations by focusing on
operational eco-efficiency.
D ecorative
P aints
P erfor m ance
C oatings
Innovation value
Innovation is vital for our current and future
success. Currently, 18 percent of our revenue
is derived from eco-premium solutions with
customer benefits. We continue to work
towards sustainable solutions that our
customers expect from us.
S pecialty
C he micals
Community value
We contributed €1.0 million to community
programs, 2,000 employees volunteered, and
six million lives improved via our “Let’s Colour”
program. We also paid €230 million in taxes.
B uildin gs an d
Infrastructure
Transp ortation
C o nsu m er G o o ds
Industrial
Asset valueThe value of our assets is €16.1 billion. We invested €666 million in 2013 to keep our facilities in good shape, as well as expanding our manufacturing capability. We continue to improve process and product safety.Revenue €14.6 billion Operating income €958 million Earnings per share €3.00 Buildings and Infrastructure is our largest end-user segment, with €6.4 billion of revenue.The Industrial end-user segment is generating €3.5 billion of revenue.The Consumer Goods end- user segment is generating €2.3 billion of revenue.The Transportation end-user segment is generating €2.4 billion of revenue.Downstream CO2(e) emissions including VOCs12 million tons AkzoNobel
at a glance in 2013
Our geo-mix (revenue) and employees (by region)
Geo-mix revenue
by destination
Employees
by region
Revenue (in € billions)
€14.6
Revenue by Business Area
A Decorative Paints
28%
B Performance Coatings 38%
C
C Specialty Chemicals
34%
A
B
Employees
49,600
Employees by Business Area
A Decorative Paints
33%
B Performance Coatings 43%
C Specialty Chemicals
21%
D Other
3%
D
C
A
B
North America
Mature Europe
Asia Pacific
15%
5,100
38%
20,600
25%
15,100
Latin America
Emerging Europe
Other countries
11%
8%
3%
4,500
2,600
1,700
In 2013, we took further steps to adjust our company
to the new business reality. It was a challenging
year, but we continued to make progress, drive value
creation and strengthen our financial position.
More details can be found in this Report 2013, which
offers an in-depth look at our performance and activities
during the year.
In an effort to make our reporting as transparent and comprehensive as possible,
AkzoNobel’s Report 2013 is also available online (www.akzonobel.com/report)
and as an iPad app (http://bit.ly/ANApp). The digital versions offer additional
information, such as videos and downloadable graphs and tables.
RAL 6004
Case studies
-75%
Throughout our Report 2013 you will find various
case studies highlighting just part of our contribution
to the world around us.
100
million liters/
year
20
Doing more with less
37
Putting more wind in our sails
-75%
47
Setting world class standards
58
No job too big
70
Making roads safer
77
Learning to be the best
177
Greening the supply chain
100%
fully
biodegradable
Prevents the development
of frost damage to
road surfaces
206
Driving improvements
for customers
80
A different class of product
22
Contents
Strategy
Chairman’s statement
Our businesses
End-user segments
Strategy and targets
Risk management
Business performance
Decorative Paints
Performance Coatings
Specialty Chemicals
Our leadership
Our Board of Management and Executive Committee
Statement of the Board of Management
Supervisory Board Chairman’s statement
Our Supervisory Board
Report of the Supervisory Board
Governance and compliance
Corporate governance statement
Compliance and integrity management
Remuneration report
AkzoNobel on the capital markets
Financial statements
Consolidated statement of income
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of cash flows
Consolidated statement of changes in equity
Segment information
Notes to the Consolidated financial statements
Company financial statements
Other information
Sustainability statements
Consolidated sustainability statements
Value chain
Safety
Employees
Environment
Independent assurance report
Summaries
Financial summary
Sustainability performance summary
111
112
112
113
114
115
116
117
155
160
163
164
171
180
186
191
195
199
200
204
5
6
8
9
14
22
31
38
48
60
73
74
76
78
79
81
87
88
97
101
107
Index
Glossary
Financial calendar
History
207
208
210
211
3
Strategy
This section provides an overview of our strategic priorities
and gives details of the targets to which we aspire. You will
also find the Chairman’s statement and learn about how we
manage operational risks.
Chairman’s statement
Our businesses
End-user segments
Strategy and targets
Risk management
6
8
9
14
22
Strategy Leading market positions
delivering leading performance
“We continued to make progress on our strategy and 2015 targets”
6
Dear stakeholder
2013 was a year of initiating a process of change. We launched
a new organic growth and ope rational excellence strategy with
a new vision, new financial targets and clearly defined targets
for sustainability.
Our new executive team also established itself, and we
adapted the short and long-term incentives for an extended
group of executives in order to align them with our new strat-
egy. The original targets for our performance improvement
program were delivered a year early, and we moved into a
more continuous improvement mode going forward. It was
also a year when we launched new values to drive a perfor-
mance culture, while a commercial excellence program has
been established to drive growth.
Coming into 2013, there was little indication that economic
conditions were going to rebound, and while some indicators
slowly began to suggest that the tide was turning, we saw
little evidence in our businesses. Against this uncertain back-
drop, we continued to make progress on our strategy and
2015 targets. Our commitment to improving our profitability,
even in a testing economic environment, was exemplified by
the fact that our performance improvement program delivered
more than the targeted €500 million EBITDA a year early. We
have now transitioned into a period of continuous improve-
ment, with cost savings coming through and increased trac-
tion in several important programs at corporate and Business
Area levels.
Despite the market headwinds, we improved our return on
sales in the third and fourth quarters and remain on track to
deliver our 2015 targets. Key profitability ratios and cash flow
also improved, while the receipt of funds from the divestments
of our Decorative Paints North America and Building Adhe-
sives businesses meant that we did not need to refinance
borrowings, which helped us to improve our net debt position
at year-end. Capital expenditures were reduced, reflecting the
completion of many of our longer term strategic investment
programs, while operating working capital further declined.
Chairman’s statement | Strategy | AkzoNobel Report 2013 Having sold our North American Decorative Paints activities,
we continued to take decisive action to reorganize the busi-
ness and make it more competitive. This included the stra-
tegic divestments of Building Adhesives and our German
decorative paints stores, as well as continuing our efforts to
streamline the product range and further reduce complexity.
We also continued to invest, opening a new plant in India and
announcing the construction of two new facilities in China,
while our new decorative paints site in the UK will commence
full operations in 2015.
Growing demand
Performance Coatings made steady progress, with Marine
and Protective Coatings and Aerospace Coatings securing
several major contracts, while Specialty Finishes had a strong
year on the back of growing demand for coatings for mobile
devices. Our Specialty Chemicals businesses, on the other
hand, were negatively affected by a fairly weak year for the
industry as a whole. A major restructuring program is currently
underway which will not only adjust our manufacturing foot-
print and drive efficiency, but will also enable us to capital-
ize on the investments that we have made in the world’s
high growth regions. A strategic portfolio review resulted in
the divestment of our Primary Amides and Purate activities,
while on the investment side, our Industrial Chemicals plant in
Frankfurt is due to become operational in 2014.
Despite the difficult economic environment, we continued to
introduce a wide range of new products and technologies to
the market. This included a number of eco-premium prod-
ucts, such as a heat-reflective range of powder coatings and
a highly efficient biocidal antifouling for ships which offers a
controlled release over time. Our continued focus on innova-
tion underlines the fact that even though the business environ-
ment remains challenging, we are committed to investing in
both product and process innovation and remain fully focused
on increasing our share of revenue from products that offer a
sustainability advantage for customers. In order to accelerate
our efforts in this area, in 2013, we also launched our Planet
Possible concept. Essentially a commitment to doing more
with less, it will help to build on our long-standing reputation
as a leader in the field of sustainability, evidenced by being
ranked first in the broad Materials industry group on the Dow
Jones Sustainability Index, which includes the chemicals,
mining and materials sectors.
Another key development was the launch of our new values
and behaviors, which are fully aligned with our new strate-
gy. I’m a firm believer that people make an organization and
by energizing the company around a new set of values we
will ensure everyone is playing a role in helping us to meet
our strategic goals and deliver leading performance. We
have established three core principles - Safety, Integrity and
Sustainability – and four values – Customer focused, Deliver
on commitments, Passion for excellence, Winning together.
To help all our employees become familiar with them and
understand their importance, an extensive global roll-out
has been taking place which has included more than 200
town hall sessions hosted by various senior leaders, includ-
ing members of the Executive Committee. I participated in
many of these myself and was very encouraged by the enthu-
siasm our people showed and their eagerness to define which
behavioral changes will make the greatest impact on their
business results.
energized leadership team in place made up of people who
really understand their business, who are hands-on and not
only have a strategic mindset, but also know what it takes to
lead an organization. One of our immediate tasks will be to
find a successor for CFO Keith Nichols, who announced that
he will be leaving the company at the end of June 2014. Keith
has played a vital role in helping to transform the company
over the last eight years and I would like to personally thank
him for his outstanding contribution.
It is difficult to look ahead with any certainty, but what is clear
is that we are in a strong financial position, have a focused
strategy in place and have already made progress in start-
ing to deliver on our strategic targets. There is also clarity in
where we want to go and what we want to do. We have set
realistic targets and have mapped out a journey to drive value
creation which has already begun. There are still many issues
to address, including safety, a more rigorous approach to
talent development and transitioning our culture and behav-
iors based on a continuous improvement mindset. I’m confi-
dent, however, that we are driving forward in the right direction
and that our focus on organic growth and operational excel-
lence will result in the leading performance that we have set
out to achieve.
Energized leadership
Fostering this winning culture is one of the key responsibilities
of Marten Booisma, the most recent addition to our Execu-
tive Committee. Marten is our Chief Human Resource Officer
and his significant international experience will be invaluable
as we look to deliver the change in culture that’s needed. He
is part of an Executive Committee which has seen a number
of changes in the last 18 months, including the appointments
of Conrad Keijzer (responsible for Performance Coatings)
and Ruud Joosten (Decorative Paints). They joined Werner
Fuhrmann (Specialty Chemicals) and Sven Dumoulin (General
Counsel), to complete an Executive Committee with extensive
experience and expertise. Another key appointment in 2013
was that of David Allen as our new Head of Supply Chain,
Research and Development. We now have a very strong and
On behalf of the Executive Committee, I would like to thank
our shareholders and all our colleagues around the world for
their hard work and valued contribution during 2013.
Ton Büchner
CEO and Chairman of the Board of Management and
Executive Committee
7
AkzoNobel Report 2013 | Chairman’s statement | Strategy
Our businesses
Decorative Paints
Whether our customers are professional decorators or keen
DIY-ers, they want great paint that gives a great finish. We
supply a huge variety of quality products for every situation
and surface, including paints, lacquers and varnishes. We
also offer a range of mixing machines, color concepts and
training courses for the building and renovation industry, while
our specialty coatings for metal, wood and other critical build-
ing materials lead the market.
The business operates three units:
• Decorative Paints Europe
• Decorative Paints Asia
• Decorative Paints Latin America
Brands include Dulux, Sikkens, Flexa, Coral, Sadolin
and Hammerite.
Some of our customers: Thousands of paint distributors
around the world and large retail outlets such as B&Q, Leroy
Merlin and OBI.
Performance Coatings
We’re a leading supplier of performance coatings with strong
product technologies and brands. Our high quality products
are used by customers across the world to protect and
enhance everything from vessels, cars, aircraft, yachts and
architectural components (structural steel, building products,
flooring) to consumer goods (mobile devices, appliances,
beverage cans, furniture) and oil and gas platforms. Due
to our strong product portfolio, leading technologies and
extensive distribution network, we hold leading positions in
the markets we serve.
The business operates four units:
• Automotive and Aerospace Coatings
• Industrial Coatings (e.g. coil, wood and packaging)
• Marine and Protective Coatings
• Powder Coatings
Specialty Chemicals
As a major producer of specialty chemicals with leadership
positions in many markets, we make sure that industries
worldwide are supplied with high quality ingredients and
process aids for the manufacture of life’s essentials. These
include products used in paints, detergents, foods, plastics,
cosmetics, construction, pulp and paper, pharmaceuticals,
electronics, agro and oilfield applications.
The business operates four units:
• Functional Chemicals (e.g. chelates, ethylene amines)
• Industrial Chemicals (e.g. chlor-alkali, caustic soda, salt)
• Pulp and Performance Chemicals (e.g. bleaching, colloidal
silicas)
• Surface Chemistry (e.g. surfactants, synthetic polymers
and bio-polymers)
Brands include International, Sikkens, Interpon and Awlgrip.
Brands include AkzoNobel, Dissolvine, Eka, Expancel, Jozo,
Kromasil, Ecosel, Bindzil and Biostyle.
Some of our customers: Airbus, Boeing, Bosch, Dell, IKEA,
Philips, Samsung, Shell, Toyota, Volkswagen, Whirlpool.
Some of our customers: BASF, Bayer, Dow, GE, Huntsman,
Monsanto, P&G, Shin-Etsu, Stora Enso, Momentive, Unilever.
Decorative Paints 2013 revenue split per-end user segment
in %
Performance Coatings 2013 revenue split per end-user segment
in %
Specialty Chemicals 2013 revenue split per end-user segment
in %
A Buildings and Infrastructure 100
A Buildings and Infrastructure 24
A Buildings and Infrastructure 18
B Transportation
C Consumer Goods
D Industrial
37
25
14
B Transportation
C Consumer Goods
D Industrial
6
19
57
8
Strategy | AkzoNobel Report 2013ABCDABCDA
End-user segments
Buildings and Infrastructure
We supply a wide variety of products to
build, decorate, protect, maintain and reno-
vate building interiors and exteriors. Various
products are also used for the construction
and maintenance of infrastructure, such as
airports, bridges and roads. We divide our
global Buildings and Infrastructure activities
into three specific sub-segments:
Transportation
We supply products that are widely used in the
maintenance of cars, trucks, ships, airplanes
and trains, as well as for parts manufacture and
assembly. They play important functional roles,
such as protection and aesthetics. Our specialty
chemicals are also key parts of the process
that makes components. We are active in three
sub-segments:
Consumer Goods
We supply a large range of products used
in con sumer electronics, furniture, domes-
tic appliances, food and beverage, personal
care and cleaning. Our specialty chemicals
are either vital to the process that makes
components, or they are key functional ingre-
dients. Our coatings also play an aesthetic or
design role. We have two sub-segments:
Industrial
We supply products for oil and gas, metals and
mining, electricity/utilities, agriculture, che mi-
cal manufacturing and pulp and paper. They
are used during production, or play a func-
tional role in the end product. We also sell
liquid protective and powder coatings, which
provide functionality such as fire and corro-
sion protection. We have two sub-segments:
New build projects
• Residential
• Commercial
• Infrastructure
Maintenance, renovation and repair
• Residential
• Commercial
• Infrastructure
Building products and components
• Windows
• Doors
• Joinery
• Flooring
• Roofing and siding
• Structural components
Automotive repair
• Aftermarket refurbishment and
modification of cars and trucks
• Repair of damage to cars and trucks
Automotive OEM, parts and assembly
• Interior and exterior components and
systems for cars and trucks, including:
• Bumpers and wheels
• Instrument panels
• Assembly of cars, light vehicles and
commercial vehicles
Marine and air transport
• Ship new build, maintenance, repair and
refurbishment
• Airplane new build, maintenance, repair
and refurbishment
Consumer durables
• Consumer electronics
• Domestic appliances
• Wood furniture and cabinetry
• Metal furniture
• Toys, recreational and sports equipment
Natural resource and energy industries
• Oil and gas extraction
• Metals and mining
• Energy and electricity generation
• Water and wastewater treatment
• Agriculture
Consumer packaged goods
• Packaged (particularly canned) food
and beverage
• Personal care products such as hair and
body care
• Industrial cleaning
• Household cleaning
• Micronutrients
• Pharmaceuticals
Process industries
• Bulk chemicals
• Specialty chemicals
• Pulp production
• Paper manufacturing
99
AkzoNobel Report 2013 | Strategy Buildings and Infrastructure
This end-user segment includes a variety
of products used to build, decorate, pro-
tect, maintain and renovate buildings
and infrastructure interiors and exteriors.
It is our largest segment (44 percent of
revenue), with the Maintenance, renovation
and repair sub-segment particularly impor-
tant for our Decorative Paints business.
Trends
There was significant contraction during the
recession, with limited recovery in mature
economies. In Europe, most analysts believe
the decline has halted and in some markets,
such as the UK, housing transactions and
house prices are rising. Moderate growth
levels have returned in North America. Govern-
ment stimulus activity remains a factor in many
markets, notably infrastructure, although this
is reducing somewhat. The outlook for high
growth regions remains positive due to popu-
lation and wealth growth, but growth rates
going forward are lower, particularly in China,
where growth has moderated considerably.
Future sustainability developments
Given the contribution of the built environment
to scarce resource use, demand for products
that contribute to a reduction in non-renew-
able energy use and energy cost reduction is a
major factor, and this will continue. According
to the World Business Council for Sustainable
Development (WBCSD), by 2050, 70 percent
of the world’s population will live in urban
areas and 95 percent of new building stock
will use zero net energy. The proportion of
buildings heated by fossil fuels will also fall
below 6 percent. Sustainability issues beyond
energy use and carbon emissions, such as air
quality, will continue to have an impact.
Implications for strategy and actions
We will need to manage product lines and re-
structure operations to respond to structurally
reduced demand levels in mature markets. In
high growth regions, we must have strong market
positions and brands where relevant. Globally,
we need business models based on a value-cost
trade-off and must innovate to respond to sustain-
ability and other end-user needs to create trig-
gers for purchasing our products. We also need
to con tinue restructuring in mature geographies,
while in high growth areas we must ensure strong
positions and appropriate business models.
Where some of our products are used:
Internal and external masonry
Roofing
Refurbishment
Furniture
Total construction 1
$ billion, output 2013
US
BRI 2
EUR
China
30
20
10
-10
0
10
20
30
Total market new build construction 1
hundreds units
US
BRI 2
EUR
China
35
30
25
20
15
10
5
Structural steel
Restoration
Asphalt additives
Cladding
1010
Architectural
detailing
2013
2014
2015
2016
2017
Total market maintenance and repair 1
$ billion, output
US
BRI 2
EUR
China
12
10
8
6
4
2
0
Curtain
wall
Window
frames
Flooring
2013
2014
2015
2016
2017
1 Source: IHS/Construction IC, January 2014.
2 BRI: Brazil, Russia, India.
Strategy | AkzoNobel Report 2013 Transportation
Light vehicle production
million units
1
China
N-AM
EUR
30
25
20
15
10
5
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
Vehicle car park
vehicles) million units
1 (passenger cars and light
BRIC
N-AM
EUR
35
30
25
20
15
10
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
New build ship deliveries
million deadweight tons
2
Delivered
On order
+18.4%
-5.7%
-28.2%
+10.6%
200
150
100
50
0
'07
'08
'09
'10
'11
'12
'13
'14
1 Source: IHS, January 2014.
2 Source: Clarkson Research Services Limited, December 2013.
This end-user segment covers parts, assembly and
maintenance of all forms of transport. At 16 percent of
our revenue, this is one of the two smaller segments for
AkzoNobel. Our coatings are vital for both protection
and aesthetics in vehicles and our chemicals are used
in processes that make components.
Trends
New build markets in this segment are quite cyclical, with substan-
tial drops in demand during an economic downturn. The timing
of the downturn can differ, however. Car production was already
recovering from the recent economic crisis in 2010 and has been
on a reasonable growth path since then. We expect this pattern
to continue going forward, with growth roughly tracking GDP in
all geographies. In terms of shipbuilding it is not clear whether the
bottom of the cycle has been reached. Based on the order book,
a robust recovery is expected to begin in 2014, but the timing of
this is still uncertain as previous forecasts had shown recovery
beginning in 2013. The maintenance market in all parts of the
Transportation segment is much more stable, but slower growing,
as evidenced by the vehicle car park, an important contributor to
vehicle repair market dynamics.
Future sustainability developments
Reduced energy use in the manufacture and running of vehicles
is clearly a major issue. Therefore, expected changes in the
segment due to reduced energy use are considerable. Accord-
ing to the WBCSD’s Vision 2050 report, by 2050, an 80 percent
reduction in energy use by light duty vehicles is expected, along
with a 50 percent drop in energy use in freight transportation.
Implications for strategy and actions
As production continues to shift, we need to continue to
ensure that we are well-positioned geographically both in
terms of supply and the decision-making process, which
often takes place in other physical locations. We also need
to have products with the right functionality, aesthetics and
price level to consistently meet the requirements in this
very demanding segment. This includes providing prod-
ucts that contribute to reduced energy use throughout the
value chain.
Where you can find some of our products:
Wing coatings
Cabin coatings
Basecoat/clearcoat systems
Special effects
Primers
Antifoulings
Cargo hold coatings
Varnishes
Fouling control
Fillers
Finishes
Ballast tank coatings
Paint repairs
Instrument panels
Wheels
Bumpers
Vehicle components
1111
AkzoNobel Report 2013 | Strategy Consumer Goods
This end-user segment covers durables
such as consumer electronics, furniture
and domestic appliances, as well as food
and beverage, personal care and cleaning
products. At 16 percent of revenue, it is one
of our two smaller segments, to which we
sell both coatings and chemicals.
care), while growth in production and demand
is higher in high growth areas, the main global
production base remains in Europe and North
America. Reasonable growth rates are expect-
ed in all sectors, but for some, such as consum-
er electronics, domestic appliance and personal
care, growth rates are expected to be higher.
Trends
There is a shift from mature to high growth
regions. In some sectors (consumer electron-
ics and domestic appliances), this has been so
dramatic that production in high growth regions
now outstrips the mature economies. In other
sectors (furniture, food and beverage, personal
The geographic shift has changed demand
patterns, with an emphasis in high growth
markets on more affordable goods. But shifts
in consumption are not restricted to high
growth markets. Globally, there is evidence of
the “vanishing middle”, with consumers buying
either premium products or basic alternatives.
Future sustainability developments
The WBCSD expects consumer durables to last
longer, with package recycling being integrated
into business models. By 2050, it is forecast
people will only use five tons of non-renewable
materials each, down from today’s 85 tons (US).
Implications for strategy and actions
We need to optimize our design, sales, tech-
nical service and production to address the
geographic shift, including building more capa-
bilities in high growth areas and continuing to
restructure in mature regions. We also need
differentiated business models with appropri-
ate value and cost trade-offs.
Domestic appliance production
$ billion, value added
1
Mature
BRIC
50
40
30
20
10
2013
2014
2015
2016
2017
2018
Food and beverage production
$ billion, value added
1
Mature
BRIC
Where some of our products are used:
Sports equipment
Microwave ovens
Tablet devices
Consumer
electronics
Salt
Mobile
phones
Beverage
cans
Wood
furniture
1212
Wood
cabinetry
Washing
machines
Metal
furniture
Detergents
60
50
40
30
20
10
2013
2014
2015
2016
2017
2018
Personal care
$ billion, retail value
2
Mature
BRIC
25
20
15
10
2013
2014
2015
2016
2017
1 Source: Oxford Economics, January 2014.
2 Source: Euromonitor International, December 2013.
Strategy | AkzoNobel Report 2013 Industrial
Chemical production
$ billion, value added
1
BRI 2
China
N-AM
W-EUR
200
150
100
50
0
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
Bleached chemical pulp production
$ billion, output
1
Lat-AM
Asia
N-AM
EUR
40
35
30
25
20
15
This end-user segment covers production
activities such as oil and gas, mining,
agriculture and chemical and pulp manu-
facturing. It is our second largest segment,
being 24 percent of revenue. We supply
key chemicals for industrial processes and
coatings.
Trends
Many industrial markets are fairly cyclical, with
some exceptions, such as pulp production.
Most have recovered since the recession, partly
because the downturn was muted by high
growth market demand. For example the chemi-
cals industry in Western Europe returned to peak
levels in 2010 and has since grown at modest
rates, a trend we expect to continue. We also
expect higher growth levels in North America,
due partly to the impact of shale gas. China
remains important, due to both production and
demand growth, but these rates are moderat-
ing somewhat. Production growth in other high
growth regions is forecast to be much lower,
except in select markets such as bleached pulp
production, where South America is key and
growing rapidly. Growth in oil and gas should
remain high due to high oil prices.
Future sustainability developments
Sustainability continues to be a key driver. A
major increase is expected in the eco-efficiency
of resources and materials (four to ten times
improvement by 2050 according to the WBCSD).
Increasingly, “closed loop” processes will lead to
reductions in waste that goes to landfill.
Implications for strategy and actions
Globally, we need to continue improving produc-
tivity and innovation rates to remain competitive.
We must also continue to optimize our manu-
facturing footprint in Europe (where growth is
limited), capitalize on opportunities created by
shale gas in North America and continue devel-
oping marketing and selling capabilities in China
and other high growth markets to take advan-
tage of higher growth rates.
Where some of our products are used:
Production efficiencies
Processing aids
Energy saving
Sustainable
technologies
Quality
improvements
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
Brent crude oil price
$ barrel
3
120
100
80
60
40
20
'01
'03
'05
'07
'09
'11
'13
'15
'17
1 Source: Oxford Economics, January 2014.
2 BRI: Brazil, Russia, India.
3 Source: RISI, January 2014.
Corrosion protection
Drilling additives
Well stimulation
Cementing additives
De-icing salt
1313
AkzoNobel Report 2013 | Strategy Strategy and targets
Our strategic targets
Return on sales
Achieve return on sales (operating income/revenue) of
9 percent by 2015
Resource efficiency
Improve resource efficiency across the full value chain
Return on investment
Achieve return on investment (operating income/average
invested capital) of 14 percent by 2015
Net debt/EBITDA
Maintain net debt/EBITDA lower than 2.0 by 2015
Carbon emissions
Reduce our carbon emissions across the value chain by
25 to 30 percent per ton by 2020 (2012 base)
Eco-premium solutions
Increase revenue from down stream eco-premium solutions
to 20 percent of our revenues by 2020
Planet Possible
We are fully aware that our future hinges on our ability to do
radically more while using less. So in order to secure our own
business success – and that of our customers – we have to
create more value from fewer resources.
We are looking to proactively engage with partners who
fully support our Planet Possible strategy and want to better
understand the changes that will be required in our market
segments in order to open up infinite possibilities in a finite
world.
Some people think the planet won’t be able to support
nine billion people by 2050. But we do. Which is why we’ve
adopted a sustainability approach geared towards accelerat-
ing the pace of our commitment.
Because at AkzoNobel, we firmly believe that the planet being
limited by resources doesn’t mean our ambition and imagina-
tion have to be restricted as well. So we are committed to
finding opportunities where there don’t appear to be any.
Welcome to Planet Possible
1414
Strategy | AkzoNobel Report 2013
Vision:
Leading
market positions
delivering
leading
performance
In 2013, we announced a new vision,
targets and strategy. Since then, it has
been fine-tuned and cascaded throughout
the company. Key enablers such as
aligned core principles and values have
now been developed.
End-user
segments
Buildings
and Infrastructure
Transportation
Consumer Goods
Industrial
Actions
Deliver dependably
Grow organically
Innovate
Simplify
Standardize
Continuously improve
Processes
and capabilities
People, product and
process safety
Operational control cycle
Continuous improvement
Innovation
Procurement
Talent management
Strategic
focus areas
Care for the customer
Reduction of product
and process complexity
Cash and return on
investment
Embedded safety
and sustainability
Diverse and inclusive
talent development
Values
1515
AkzoNobel Report 2013 | Strategy Strategic focus areas
We have identified five areas that we will focus on in terms
of strategy development across the company. The following
provides a brief description of what we have been doing and
what we plan to do in each of them.
Care for the customer
The starting point for market success has to be care for our
customers. This incorporates understanding both the trends in
the end-user segments that we serve and those in the needs-
based customer segments, as well as developing appropri-
ate product and service value propositions to serve these
segments. All of this will help to ensure that we are able to
develop and/or maintain our leading market positions.
However, if we are to achieve our vision of delivering leading
performance from our leading market positions, we must go
beyond value proposition development and create and utilize
commercially excellent processes. For example, we have to
manage our products and margins in a disciplined manner
based on a deep understanding of the cost-to-serve our
customers. We also need to develop and train our sales force
to sell effectively and efficiently.
To ensure that our commercial excellence initiatives are fully
attuned to our market sectors, we have decided to pursue
these initiatives within each of our three Business Areas, based
on an overarching company-wide framework. More informa-
tion on specific implementation plans per Business Area can be
found on the relevant pages within the Business performance
section.
1616
Cash and return on investment
In the past few years, we have not generated sufficient cash to
fully fund our requirements and our return on investment has
been too low given our cost of capital. Addressing this situa-
tion is fundamental to achieving our targets. In 2013, we signifi-
cantly reduced our net debt by reducing our capital expen-
ditures, lowering our operating working capital and through
divestments. We also took a major step by successfully
completing our performance improvement program a year
ahead of schedule, but recognize that this is still not enough.
We are in the process of creating a continuous improvement
process for all parts of our company which will generate year-
on-year cost savings to offset inflation and other increases.
A key contributor to a simultaneous improvement in costs,
cash and return on investment will be taking a more differen-
tiated and selective approach to investments. To facilitate this,
we have thoroughly reviewed all our portfolios and carefully
defined which market sectors we will be investing in, with a
focus on organic growth, as well as defining where we need to
focus more in terms of structural cost reductions.
We will also remain acutely aware of both the sustainability and
financial consequences of our decisions. We are convinced that
choosing sustainable solutions makes good business sense
and that we can generate more value from fewer resources,
whether these resources are monetary, people-based or raw
material-based. Therefore, we will be even more rigorous in
bringing sustainability into our investment decisions.
Reduction of product and process complexity
Achieving leading performance means that we will need to
have an appropriate cost position in all aspects of our business.
To deliver this, we need to simplify and standardize our product
portfolio and our business processes. We will deliver the
former by implementing the product and margin management
approach that has already been described. We will achieve the
latter by implementing company-wide processes and Business
Area level capabilities.
A key area of focus in process complexity reduction at the
AkzoNobel level is in global business services. For functional
support activities such as human resources, finance and infor-
mation management, we are in the process of putting a three-
pronged approach in place, with centers of excellence, busi-
ness partners and regional shared service centers. This has
already been carried out with some functions in certain parts
of the world, leading to meaningful improvements in terms of
effectiveness and efficiency.
Reducing product and process complexity will yield required
benefits in terms of costs. But it should also yield additional
benefits in terms of carbon footprint reduction and the manage-
ment of priority substances. Because taking a more proactive
approach to product and process management will involve
evaluating and selecting the best formulations and approaches
in terms of performance, as well as robustness from a sustain-
ability perspective.
Examples of this include: (a) the introduction of raw mate-
rial slates to reduce and rationalize the procurement of exist-
ing – and the introduction of new – raw materials used in the
production of performance coatings and (b) the development
of continuous reactive distillation processes for the production
of specialty chemicals and coatings intermediates at lower cost
and with significantly reduced production of waste.
Strategy | AkzoNobel Report 2013 Embedded safety and sustainability
In 2013, for the second year in a row, we were ranked top of
the Dow Jones Sustainability Indices for the Materials industry
group. We have now been in the top three in our sector for eight
consecutive years. This is a record we are very proud of, and
which we have achieved by being committed to the concept
that we shouldn’t make separate business and sustainability
decisions. We also recognize that we cannot rest on our laurels,
because we need to constantly look for the next level of devel-
opment in our safety and sustainability agenda.
Building on our solid sustainability foundations, in 2013 we
developed a new approach to sustainability based on input
from all parts of the company, as well as from external stake-
holders. We fundamentally believe that financial and sustain-
ability performance are aligned and are therefore firmly commit-
ted to what we call Planet Possible. In the next generation
of sustainability development, we believe that leadership will
require a much stronger external focus. By tailoring solutions
to customer and end-user needs, we will make sustainability
profitable, both now and in the future.
There are four main components to this new sustainability
strategy, which we refer to as our Planet Possible approach.
They are:
• Sustainable business
We will create business value through products and
solutions that provide both functionality and other sustain-
able benefits, as well as cost savings from operational
efficiency. Overall, we will track our progress against
this aspect of our strategy using a measure of eco-
premium solutions with downstream benefits. These are
solutions that generate direct resource, environmental and
energy benefits for our customers, consumers and users
• Resource efficiency
We will accelerate resource efficiency improvements
across the value chain. This includes yield improve -
ments from manufacturing excellence and lowest
imaginable cost formulations, as well as increased use
of renewable materials and energy by our suppliers and
in our own operations
• Capable, engaged people
We will continue to train and develop our people to
their maximum potential and work hard to ensure that they
remain highly motivated and committed to our
future success
• Maintaining strong existing foundations
Based on a company-wide process, we will continue to
improve in people, process and product safety. We will
also maintain our integrity management processes
(see Compliance and integrity management chapter) and
our community involvement, facilitated by our AkzoNobel
Community Program
Diverse and inclusive talent development
If we are to deliver on our vision and ambitions, we need to
ensure the active participation of a strong and motivated work-
force, which reflects the diversity of the end-user segments we
serve.
Therefore, we have to continue building our programs and pro-
cesses in order to achieve substantially higher levels of employ-
ee engagement and diversity at various levels in the company.
We will do this through focusing our resources on company-
wide talent management that:
• Actively redresses the gender balance in our management
layers and ensures that our management reflects our
geographical presence
• Provides continuous learning and development
opportunities at all levels of our organization
• Increases employee engagement
The new integrated Talent Management process, which was
introduced in 2013, will bring increased objectivity to the identi-
fication of talent, a more targeted approach to the development
of leadership potential and increased process transparency.
This, when combined with the new skills-based curriculum
offered to all employees via the AkzoNobel Academy, and the
further alignment of learning and development with our strate-
gy, will put us in a strong position to deliver leading performance
over the coming years.
1717
AkzoNobel Report 2013 | Strategy Processes and capabilities
We believe that in order to make the required progress on our
strategic focus areas, we must have a select set of company-
wide core processes. Our intention is to develop, implement
and embed processes that truly distinguish AkzoNobel. Our
AkzoNobel Academy will be fundamental to ensuring that we
deliver this. Each of these core processes is described briefly
below.
People, product and process safety
Safety comes first at AkzoNobel, both figuratively and literally.
Our safety process includes:
• Assessing the safety culture, management systems and
progress
• Identifying “at risk” behaviors, hazards and priority harmful
substances
• Observing behaviors, developing hazard scenarios,
scoring and notifying priority substances
• Analyzing behavior observations and assessing process
safety and priority substance risks
• Removing barriers to safe behavior, managing process
safety risks, restricting or prohibiting certain substances
• Driving continuous improvement
Operational Control Cycle
The Operational Control Cycle is a connected cycle based on
a continuous improvement approach. The objective is to drive
operational performance and continuous improvement, align
views on the outlook going forward and make and follow up
on relevant operational decisions quickly. It starts with a CEO/
CFO/BA cycle, but also includes BA/BU and CEO/Functional
cycles and continues throughout the organization. This process
has now been in place for more than a year and is already
having a significant impact in terms of strategy implementation.
Continuous improvement
Process standardization is fundamental to making improve-
ments in our strategic focus areas. But this isn’t enough for
us to deliver on our vision of leading performance. We need
to make step changes in some parts of our business, using
expert-led projects to generate major improvements. Once
these step changes have been achieved, we need to make
incremental, ongoing improvements based on a continuous
plan-do-review-act approach in all areas of the organization.
Innovation
Given the nature of our business, which involves specialty prod-
ucts, innovation is very important to our success and we must
have best practice innovation processes. We are developing
processes that start with customer insight and incorporate
structured ideation, selection and prioritization, and disciplined
execution through and beyond launch, utilizing a robust project
management approach.
Procurement
Raw material spend is a significant component of our cost
base. There are also situations whereby the same company
can be a supplier, competitor and customer of our businesses.
Careful management of procurement process is therefore very
important. These processes will be based on defining require-
ments guided by business strategy, a robust strategic sourcing
process, disciplined key supplier management and an efficient
purchase-to-pay operational process.
Talent management
In order to deliver diverse and inclusive talent development, we
must have one talent management process company-wide,
which engages and motivates a high quality, diverse workforce.
This talent management process includes:
• Planning for talent needs
• Developing and retaining talent
• Assessing performance and potential
• Identifying leaders through creation of a common
leadership potential profile
• Deploying personnel based on solid succession planning
and rich internal talent pools
• Strategic workforce planning
• Attracting, acquiring and on-boarding based on a clear
employee value proposition
1818
Strategy | AkzoNobel Report 2013 Actions
End-user segments
Core principles
and values
To address our strategic focus areas and deliver on our vision
and targets, we have identified a set of high level actions that
we are pursuing throughout the company. We will:
• Deliver dependably
• Grow organically
• Innovate
• Simplify
• Standardize
• Continuously improve
Since we announced these high level actions in early 2013, all
functions and businesses within the company have been devel-
oping appropriate action plans, as evidenced in the Business
performance section of this Report 2013.
We are convinced that by prioritizing activities in our strate-
gic focus areas, implementing our core processes and taking
defined operational effectiveness actions based on our new
values and behaviors, our internal approach will support
de livery on our vision and targets. However, we will only achieve
our vision if our internal approach is delivered successfully to
the markets via our end-user segments.
To ensure that our action plans are appropriate for our end-user
segments, we have initiated a disciplined ongoing approach to
evaluating the outlook for our end-user segments and sub-
segments based on external research and analysis. Profiles of
the trends for these four end-user segments – Buildings and
Infrastructure, Transportation, Consumer Goods and Industrial
– are included earlier in this Strategy section.
Core principles
Customer focused
We build successful partnerships
with our customers
(cid:127) Safety
(cid:127) Integrity
(cid:127) Sustainability
Deliver on commitments
We do what we say we will do
Passion for excellence
Winning together
We strive to be the best
in everything we do, every day
We develop, share and use our
personal strengths to win as a team
Everyone at AkzoNobel is central to our strategy and its imple-
mentation. To enable the successful roll-out of our strategic
agenda and, in turn, the achievement of our vision, we must be
clear not only about what we will do, but also how we will do
it. Through a process that involved individuals from across the
company, we defined the following:
Core principles
There are certain behaviors that we expect from all our employ-
ees under all circumstances. We call these non-negotiable
behaviors, or core principles. We have defined three – Safety,
Integrity and Sustainability.
Values
• Customer focused – we build successful partnerships
with our customers
• Deliver on commitments – we do what we say we will do
• Passion for excellence – we strive to be the best in
everything we do, every day
• Winning together – we develop, share and use our
personal strengths to win as a team
These principles and values have now been translated into
26 languages and we have defined a set of behavioral dos and
don’ts so that all our employees around the world will under-
stand what we expect from them. We are in the process of
embedding these core principles and values into all of our
processes, beginning with talent management.
1919
AkzoNobel Report 2013 | Strategy RAL 6004
Material that can’t be sold as products to
customers includes off-spec batches, QC
samples, powder fines and outdated stocks
Doing more with less
Manufacturing, by its very nature, can result in the loss of
some raw materials during the various processes involved.
Paints and coatings are no exception, with materials being
generated that can’t be sold as products to customers. This
includes off-spec batches, quality control samples, powder
fines and outdated stocks, as well as damaged goods that
are returned to us.
In the past, these were often disposed of as waste, for
example by incineration or landfill. But as part of our
continuing efforts to radically reduce our waste streams,
we’ve now found customers for these previously obsolete
materials.
Representatives from our various paints and coatings
businesses joined forces with specialists from supply chain,
legal and our corporate departments to form a dedicated
task force. Together, they developed contracts which made
it possible for the company to sell what used to be regarded
as waste for further use as low tier paints. This included
making all the required documents available, such as safety
data sheets and product codes.
Customers now use what we sell them as raw materials in
their own processes and market products under their own
brand names. Typical low tier products are water-borne and
solvent-borne paints, as well as powder coatings. Audits are
also carried out to ensure that our products are being
legitimately applied for further use.
In 2013, 11,000 tons of paints and coatings were sold
as a result of this initiative, saving AkzoNobel an estimated
€4.5 million.
RAL 6004
11,000 tons
of paints and coatings containing our
obsolete materials was sold in 2013
Estimated cost savings for AkzoNobel
€4.5 million
Risk management
Doing business inherently involves taking risks.
By taking balanced risks, we strive to be a
sustainable company. Risk management is an
essential element of our corporate governance
and strategy development.
Enterprise
Risk Management
process
Enterprise
Risk Management
reporting
2222
Strategy | AkzoNobel Report 2013 We foster a high awareness of business risks and internal
control, geared to preserving our risk appetite and providing
transparency in our operations. The Executive Committee is
responsible for managing the risks associated with our activi-
ties and, in turn, for the establishment and adequate functio-
ning of appropriate risk management and control systems
(see Statement of the Board of Management in the Our lead-
ership section).
Risk appetite
Clarity on risk appetite and boundaries that determine the
freedom of action or choice in terms of risk taking and risk
acceptance is provided to all managers. Risk boundaries
are set by our strategy, our Company Statement, Code of
Conduct, company values, authority schedules, policies and
corporate directives. Our risk appetite differs by objective area
and type of risk:
AkzoNobel risk management framework
Through our risk management framework, we seek to provide
reasonable assurance that our business objectives can be
achieved and our obligations to customers, shareholders,
employees and society can be met. Our risk management
framework is in line with the Enterprise Risk Management –
Integrated Framework of COSO and the Dutch Corporate
Governance Code. The Executive Committee reviews our
risk management and control systems and our major busi-
ness risks, which are subsequently reviewed by the Super-
visory Board.
• Strategic: In pursuing our strategic ambitions, we are
prepared to take considerable risk related to achieving
our performance, innovation and sustainability objec-
tives. Returns on investment in the development of
innovative products and sustainable solutions are never
certain. Yet considerable funds and efforts are spent on
research, development and innovation, even in less certain
economic circumstances
• Operational: With respect to operational risks, we seek
to minimize the downside risk from the impact of unfore-
seen operational failures within our businesses
• Financial: With respect to financial risks, we have a
prudent financing strategy and a strict cash management
policy and are committed to maintaining strong investment
grade credit ratings. Our financial risk management and
risk appetite are explained in more detail in Note 23 of the
Financial statements
• Compliance: We do not permit our employees to take
any compliance risk and have a zero tolerance policy in
relation to breaches of our Code of Conduct. See the
Governance and compliance section for more details
Risk management in 2013
Enterprise Risk Management is a bottom-up process which
provides full coverage of the organization and ensures that
we focus on what we consider to be the areas of major risk
exposure. The scoping of our 2013 risk management activi-
ties was performed by the Executive Committee, business
unit Managing Directors and Corporate Directors, in associa-
tion with the risk management function. Besides the focus on
coverage of our organization, emphasis is put on organiza-
tional changes, key strategic projects and high growth regions.
In 2013, we facilitated 93 Enterprise Risk Management
workshops. In these workshops, more than 2,000 unique
risk scenarios were identified and prioritized by responsible
management teams and functional experts. In addition, in
selected areas with low risk tolerance, dedicated risk assess-
ments were performed to preserve our risk appetite. All major
risks were responded to by the unit that identified them. The
outcome of all risk assessments was reported to the next
higher management level. Risk profiles and trends were shared
by managers across the company. In the bottom-up consoli-
dation process, the risks were taken to the next management
level, where they were re-assessed, either because of the
materiality of the risk exposure and/or because of the accu-
mulated effect.
Risks we have seen materializing to a full or lesser extent in
2013 were in the area of extreme weather events impacting
our operations (e.g. floods, storms, fires), soft trading condi-
tions in general, adverse energy costs primarily in Europe,
several HSE incidents, product claims and significant nega-
tive exchange rate fluctuations with a harmful impact on our
financial results.
2323
AkzoNobel Report 2013 | Strategy Under the explicit understanding that this is not an exhaustive
list, the major risk factors that may prevent full achievement
of our strategic ambitions are listed in detail in this section.
There may be current risks that the company has not fully
assessed, or that are currently identified as not having
a significant impact on the business, but which could at
a later stage develop a material impact. The company’s
risk management systems endeavor to ensure the timely
discovery of such incidents. An overview of our major risk
factors follows. The five risks that we currently assess as the
most significant for the forthcoming five years are indicated.
Internal
Strategic
External
Strategic
• Identification of major transforming technologies
• Worsening of economic conditions
Operational
• International operations
•
Operational
• Attraction and retention of talent
• Sourcing of raw materials
• Management of change
• Production process risks
Financial
• Energy pricing and emission trading rights
• Product liability
• Environmental liabilities
Financial
• Cash flow
• Retirement and healthcare benefits
• Decline of asset values
• Fluctuations in exchange rates
Compliance
Compliance
• Complying with laws and regulations
2424
Strategy | AkzoNobel Report 2013
Internal Strategic
Internal Operational – Top five risk
Internal Operational
Identification of major
transforming technologies
Attraction and retention
of talent
Production process risks
Our success depends on the sustainable growth of our
business through research, development and innovation.
If we are not able to identify and adopt major transform-
ing technologies in a timely manner, this may lead to the
loss of our leadership positions and adversely affect our
business.
Risk corrective actions
The risk of missing relevant technology developments
is mitigated in four ways. Firstly, we adequately support
research and development with a spend of 2.6 percent
of revenue (€373 million). Secondly, as defined in our
core innovation process, our key projects have detailed
technology roadmaps which assess relevant technology
horizons and pathways to acquire and deploy new tech-
nologies. Thirdly, we have an established and managed
global open innovation capability to identify, assess (as
opportunities or threats) and acquire the most recent and
promising emerging sciences and technologies. These
technology platforms are used as an integral part of our
ideation process, where we define technology and market
opportunities. Finally, we have a Chief Scientist to advise
and guide the Head of Supply Chain, Research and
Development and the RD&I Leadership Team on diverse
aspects of external research and to benchmark our own
R&D capabilities.
Successfully executing our strategy is, to a large extent,
dependent on having the right people.
Risk corrective actions
Diverse and inclusive talent development was identified
as a Strategic focus area in the 2013 Strategy review.
Consequently, we have developed a new global process
for integrated talent management. This focuses on the
further professionalization of recruitment, a more rigor-
ous approach to the identification and development of
leadership potential and a more transparent approach to
career development opportunities. In addition, as part of
the overall performance improvement program, we have
further developed the AkzoNobel Academy. This is focused
on building functional capability across the company and
developing a higher level of project and change manage-
ment skills, as well as providing a platform for the sharing
of best practices. We have also continued with the harmo-
nization of key HR administration processes to provide
efficient service and free up time for the business partner-
ing that is crucial to helping us attract, develop and retain
talented people.
Risks in production processes can adversely affect our
results. These risks arise from areas such as personal
health and safety, process safety and product safety.
Unlikely scenarios can involve major incidents with a high
impact for our organization, causing business continuity
risks and reputational damage.
Risk corrective actions
We continuously strive to improve our safety performance.
Each year, we organize a company-wide Safety Day focus-
ing on enforcing our TakeCare program. TakeCare is the
umbrella for all existing and future safety initiatives at busi-
ness and central level. Among other initiatives, this encom-
passes our Life-Saving Rules program, which includes a
“golden principle” and eight basic safety rules that have
been mandatory for all AkzoNobel employees and all our
contractors since April 2013. We continue with our busi-
ness continuity planning and have appropriate risk trans-
fer arrangements in place. To help realize our 2015 safety
target for total reportable injuries (TRR) of <2.0 incidents
per million hours worked, we have increased manage-
ment attention on people safety, as well as implementing
enhanced process safety (such as asset integrity) and
occupational health standards, and improving the HSE
audit process. See Note 7-10 of the Sustainability state-
ments for more information about our safety improvements.
2525
AkzoNobel Report 2013 | Strategy
Internal Operational – Top five risk
External Strategic – Top five risk
External Strategic – Top five risk
Management of change
Worsening of economic
conditions
International operations
In order to implement our strategic agenda we are chang-
ing our operating model, which includes the setting up
of a Global business services function. We are also under -
taking various restructuring projects which require signifi-
cant change, as well as stakeholder management and
project management expertise. Failure to successfully
execute these initiatives could lead to industrial action and,
ultimately, to not achieving our strategic ambitions.
Risk corrective actions
In 2013, we introduced new Core Principles and Values
which will set in motion the behavioral changes that will
help to accelerate the implementation of our strategy. Senior
management is involved in all critical projects that have been
prioritized and are supervised by the Executive Committee
to ensure an aligned and integrated vision and thrust
from the top for the company’s change agenda. Project
management and change management are both included
in the curriculum of the AkzoNobel Academy.
One of the principal uncertainties continues to be the
development of the global economy, which remains
fragile, and it is difficult to predict customer demand and
raw material costs. Chronic fiscal imbalances may further
adversely impact the global, regional or national econo-
mies in markets where we operate. AkzoNobel is suscep-
tible to decreased growth rates within high growth markets
and/or continued economic and market downturn in
mature markets. The effects lead to a decline of demand
and deteriorating financial results, thereby not realizing our
financial targets.
Risk corrective actions
As a key element of our strategy, we are committed to
bringing down our operational cost base and reducing
complexity. This will be done through introducing and
implementing standardized core functional processes in
each region across the organization, helping to reduce
operational costs, as well as making the company more
agile and competitive. We are also continuing with our
performance improvement programs in the three Business
Areas and began a structured program of commercial
excellence to offset the effects of decreasing economic
growth rates.
We are a global business with operations in more than
80 countries. We are therefore exposed to a variety of
risks, many of them beyond our control. Unfavorable
political, social or economic developments and develop-
ments in laws, regulations and standards could adversely
affect our business and results of operations. Our aspi-
rations to fuel growth in high growth markets will further
expose us to these risks.
Risk corrective actions
We spread our activities geographically and serve many
sectors to benefit from opportunities and reduce the risk
of instability. Political, economic and legislative conditions
are carefully monitored by responsible functions at corpo-
rate, Business Area and business unit level. The Execu-
tive Committee decides on all significant investments and
the countries and industry segments in which AkzoNobel
conducts its business. Country organizations are in
place in order to mitigate country specific, but business
generic risks.
2626
Strategy | AkzoNobel Report 2013
External Operational
External Operational
External Operational
Energy pricing and emission
trading rights
Our Specialty Chemicals business operates two energy-
intensive businesses, Pulp and Performance Chemicals
and Industrial Chemicals. The latter conducts its business
primarily in Europe. A non-level playing field for energy on
a global level (e.g. shale gas, national policies, subsidies)
and emission trading rights can affect the competitive
position of these businesses and the competitive position
of our customers.
Risk corrective actions
We will continue to analyze and review our competi-
tive positions and we are proactively managing energy
usage and costs. We operate several cogeneration units
which enable us to make efficient use of combined heat
and power. We are implementing our Carbon Policy and
are working on energy efficiency programs. In addition,
we are driving to diversify our energy source portfolio to
reduce the amount of gas-based heat, for example by
investing in energy from waste and biomass. Carbon
management plans are closely monitored and strategi-
cally managed. We have policies for energy contracts
and have
in place
long-term purchase contracts
(see Note 23 of the Financial statements).
Product liability
Environmental liabilities
Product liability claims could adversely affect our compa-
ny’s business and results of operations. Unlikely long-term
implications with a high impact for our organization could
follow from the use of new technologies and compounds.
Risk corrective actions
Quality improvement programs are in place in our different
Business Areas. Improving our management of change
procedures in this area is a joint responsibility for the RD&I,
Supply Chain, Marketing and Procurement functions. In
addition, product stewardship has been incorporated into
the company’s HSE and operational eco-efficiency agenda.
Product stewardship is also integrated into product
slate decisions in the Operational Excellence program. We
also have a central policy to optimize insurance coverage
which relates to specific insurance programs covering
product liability.
We use, and have used in the past, hazardous materials
and biological compounds in several product development
programs and manufacturing processes, including waste
thereof. We have been, and can be, exposed to risks of
accidental contamination or past practices that give rise to
current liabilities. We could be exposed to events of non-
compliance with environmental laws, regulatory enforce-
ment, property damage, possible personal injury and any
resulting claims for damage. Regulations and standards
are becoming increasingly stringent.
Risk corrective actions
We are committed to conducting all our activities in the
safest and most responsible manner. We have a special-
ist group managing these issues. Contingency plans and
assignment arrangements are in place to mitigate known
risks and regular reviews are conducted to monitor prog-
ress and assess financial and reputational exposure. Our
policy is to accrue and charge against earnings environ-
mental clean-up costs, damages or indemnifications
when it is probable that a liability has materialized and an
amount can be estimated (see Note 20 of the Financial
statements).
2727
AkzoNobel Report 2013 | Strategy External Operational
External Financial
The graph below shows the percentages of our €5.4 billion
total spend in raw materials, excluding energy.
Breakdown of total raw material spend in %
(excluding Decorative Paints North America, divested in April 2013)
A Chemicals & intermediates
B Resins
C Additives
D Solvents
E Packaging
F Titanium dioxide
G Coatings specialties
H Pigments
I Other raw materials
23
21
14
9
9
8
8
4
4
Retirement and healthcare
benefits
Our policy is to sponsor defined contribution pensions
and other post-retirement benefits wherever possible, but
we have a number of defined benefit pension and health-
care schemes from the past. Generally, these schemes
have been funded through external trusts or foundations.
AkzoNobel is at risk from potential funding shortfalls in
these defined benefit schemes.
Risk corrective actions
We practice proactive pension risk management. Our policy
is to offer defined contribution schemes to new employees
and, where appropriate, to existing employees. The most
significant defined benefit schemes are the ICI Pension
Fund and the AkzoNobel (CPS) Pension Scheme in the
UK. Both are closed to new entrants. They are managed
and controlled by independent trustees. Changes in the
value of the assets or liabilities of these defined benefit
schemes, and therefore their funded status, and invest-
ment and other decisions by their in dependent trustees,
may require additional funding from the employing entities
and may adversely impact our business and results. Addi-
tional funding may, in the case of the UK schemes, also
result from decisions by the UK Pension Regulator or, in
certain cases, by the scheme actuary and trustee, subject
to the powers of the UK Pensions Regulator. In each case,
additional funding may adversely affect our business and
results. We are committed to further de-risking over time.
For more information about our post-retirement benefit
provisions, see Note 15 of the Financial statements.
Sourcing of raw materials
Prices for key raw materials can be volatile and are affected
by economic conditions. The table on the right shows our
relative spend on these key raw materials, excluding energy.
We may also be impacted by inability to access sufficient
raw materials, business interruption or product discontinu-
ation at key suppliers. These potential circumstances may
increase cost and expenses for raw materials and energy.
Changes in product mix may adversely affect future results
and growth. We are, to some extent, able to pass on higher
input prices to our customers, but this largely depends on
market conditions.
Risk corrective actions
In 2013, Procurement was selected as a company-wide
core process. As part of this process, our strategic sourc-
ing methodology includes the structural periodic review of
all critical raw materials, aiming to bundle the purchasing
power in both product related and non-product related
requirements. We use our purchasing power and long-term
supplier relationships to acquire raw materials and safe-
guard their constant delivery in a sustainable manner, to
secure volumes and cooperate on innovation and sustain-
ability. We have an inventory of single sourced raw materials
and are actively pursuing plans to mitigate dependencies.
We monitor markets in which we operate for opportunities
and adapt our purchasing accordingly. We also monitor our
critical value chains to understand the critical suppliers and
markets of our suppliers. This enables us to signal risks and
opportunities at an earlier stage.
28
Strategy | AkzoNobel Report 2013ABCDEFGHI
External Financial
External Financial – Top five risk
External Compliance
Fluctuations in exchange rates
Cash flow
Exchange rate fluctuations can have a harmful impact on our
financial results, as experienced in 2013. We have operations
in more than 80 countries and report in euros. We are particu-
larly sensitive to the relation between the euro and US dollar,
pound sterling, Swedish krona and Latin American and
Asian currencies.
The potential for further deterioration of economic condi-
tions may have an impact on the free cash flow generation
of our businesses. Furthermore, we are potentially exposed
to funding of pension schemes. This may lead to insufficient
free cash flow generation which limits our strategic degrees
of freedom.
Risk corrective actions
We have centralized treasury and a hedging policy is in
place for certain currency exchange rate risks (see Note
23 of the Financial statements). At a more operational
level, risks are reduced by the prevalence of local-for-local
production, which is the norm in many of our businesses.
External Financial
Decline of asset values
Risk corrective actions
Our balance sheet and debt profile are strong. We have a
long-term senior unsecured debt rating of BBB+ by Standard
& Poor’s and Baa1 by Moody’s. We are committed to main-
taining a strong investment grade rating. Regular review
meetings are held between rating agencies and AkzoNo-
bel senior management. We will engage in restructuring of
under performing parts of our portfolio if deemed strategically
appropriate. We have a prudent financing strategy and a
strict cash management policy, which are governed by our
centralized treasury function (see Note 23 of the Financial
statements). Focus on cash management is stressed in our
monthly Operational Control Cycle meetings and relevant
metrics are included in our updated remuneration policies.
Complying with laws
and regulations
We may be held responsible for any liabilities arising out of
non-compliance with laws and regulations.
Risk corrective actions
We are monitoring and adapting to significant and rapid
changes in the legal systems, regulatory controls, customs
and practices in the countries in which we operate. These
affect a wide range of areas including competition law,
anti-bribery and export control and sanctions. We are
dedicated to minimizing our compliance risk with special
emphasis on the application of our Code of Conduct. We
advertise the use of our company-wide complaints proce-
dure called SpeakUp!, which enables all our employees
to report irregularities in relation to our Code of Conduct.
We provide mandatory training regarding the code to all
employees and additional mandatory training regard-
ing specific relevant subjects to selected employees. We
monitor compliance through our comprehensive annual
non-financial letter of representation process, as well as
our annual competition law compliance declaration (see
the Governance and compliance section).
Impairments and book losses could adversely affect our
financial results.
Risk corrective actions
The Executive Committee continuously monitors acquisi-
tion and divestment opportunities and the management
of assets held for sale. We do impairment tests for intan-
gibles with indefinite lives (goodwill, some brands) every
year and whenever an impairment trigger exists. For
tangibles and other fixed assets, we do impairment tests
whenever an impairment trigger exists (see Notes 7 and 8
of the Financial statements).
29
AkzoNobel Report 2013 | Strategy
Business
performance
The following chapter gives a detailed summary of progress
on our main strategic targets and other key performance indi-
cators, as well as looking at how each of our Business Areas
performed during 2013. Information on market characteristics
is also provided.
Overall strategic progress
Decorative Paints
Performance Coatings
Specialty Chemicals
32
38
48
60
Business performance 2013 performance
Strategic targets
Return on sales
We use return on sales (ROS) as a performance indicator to
reflect profitability relative to revenue. ROS as a target will
focus management on delivery and quality of profits. ROS%
is defined as operating income as percentage of revenue. For
operating income 2012, the goodwill impairment is excluded.
Return on investment
We use return on investment (ROI) as a performance indicator
to reflect profitability relative to invested capital. ROI as a target
will focus management on delivering value through returns
in excess of our cost of capital. ROI% is defined as operat-
ing income divided by average invested capital. For operating
income 2012, the goodwill impairment is excluded.
• The ROS target is 9.0 percent by 2015
• ROS for 2013 was 6.6 percent (2012: 5.9 percent)
• Operating income includes net incidental gains of
€61 million and €348 million restructuring costs
(2012: €292 million)
• The ROI target is 14.0 percent by 2015
• ROI for 2013 was 9.6 percent (2012: 7.7 percent or
8.9 percent if the impairment in Decorative Paints was
excluded from invested capital for the full year)
• ROS pre-restructuring costs and incidentals increased
• ROI pre-restructuring costs and incidentals increased from
from 8.2 percent to 8.5 percent
10.7 percent in 2012 to 12.4 percent in 2013
• Both revenue and operating income were affected by
• Invested capital was €0.8 billion lower than in 2012 due
adverse currency effects and divestments
to working capital management, foreign currency translation
and a transfer of some businesses and assets to assets
held for sale
Net debt/EBITDA
Net debt/EBITDA reflects our strategy to maintain a solid
investment grade.
• The net debt/EBITDA target is <2.0 times
• At year-end 2013, this ratio was 1.0 (2012: 1.4)
• Net debt was down €769 million due to the net effect
of cash from operating activities, divestments, capital
expenditures and dividend payments
• EBITDA was €1,513 million (2012: €1,597 million) due to
higher restructuring costs and adverse currency effects.
EBITDA does not include any incidental results
Return on sales (ROS) development
Operating income in % of revenue
Return on investment (ROI) development
Operating income/average invested capital in %
Net debt/EBITDA
Ratio
Decorative Paints
Performance Coatings
Specialty Chemicals
AkzoNobel
Decorative Paints
Performance Coatings
Specialty Chemicals
AkzoNobel
12
9
8
6
10 9
10 9
6
7
6
12 12
9
8
20
18
8
22
21
25
12
14
14
15
14
12
9
10
8
1.4
1.0
1.0
2
3
2011
2012
2013
2015
2011
2012
2013
2015
2011
2012
2013
<2.0
2015
target
32
Business performance | AkzoNobel Report 2013 Eco-premium solutions with customer benefits
Our 2020 target is to achieve 20 percent of revenue from prod-
ucts and services which provide customers and consumers
in our downstream value chain with a significant sustainability
advantage compared with the most commonly available equi-
valent commercial products or industrial processes.
• Eco-premium solutions stimulate top line and bottom line
growth opportunities
• In 2013, revenue from eco-premium products and services
with downstream benefits totaled €2.7 billion, or 18 percent
of total revenue
• It may appear that we are already close to realizing our
2020 target of 20 percent of revenue. However since this
eco-premium solution metric compares our products and
solutions with the mainstream in the market, our progress
will be impacted by improvements in competitor offerings
and changes in legislation
Cradle-to-grave carbon footprint
Our ambition is to reduce our cradle-to-grave carbon footprint
by 25-30 percent per ton of sales between 2012 and 2020.
• This year indicates a total footprint of around 27 million
tons of CO2(e) and a reduction of CO2(e) per ton of sold
product of 2 percent
Resource Efficiency Index (REI)
In the chemicals industry, sustained business success will
require product and process innovations that generate much
more added value from each unit of raw materials and energy
used across the value chain – be it with our suppliers, in our
own operations or with the users of our products.
• The reduction derives mainly from reformulations and higher
sales of lower impact paints, and from power consumption
with lower carbon footprint impact in some facilities
• Other changes in product mix and higher production
The Resource Efficiency Index is defined as gross profit (or gross
margin) divided by cradle-to-grave carbon footprint – reported
as an index. Our aim is to use this metric to drive further improve-
ments in resource efficiency across the value chain.
volumes in facilities with a less favorable energy mix have
limited the impact of these improvements
We are reporting for the first time in 2013. A review of our perfor-
mance over the past five years reveals a gradually increasing
trend. Contributory factors include:
• Improvements in energy efficiency
• Increased renewable and low carbon energy supply
• The ongoing switch towards waterborne coatings
• Margin improvements as a result of higher value
added products
Eco-premium solutions with customer benefits
in % of revenue
Cradle-to-grave carbon footprint
% reduction CO2(e) per ton of sales from 2012
Resource Efficiency Index
gross profit/CO2(e) indexed
17
18
2012
2013
For more details see Sustainability statements Note 4.
20
2020
target
0
2
2012
2013
25 - 30
2020
target
100
106
105
111
109
2009
2010
2011
2012
2013
For more details see Sustainability statements Note 5.
For more details see Sustainability statements Value chain section.
33
AkzoNobel Report 2013 | Business performance 2013 performance
Other indicators
Financial overview
2013 revenue was down 5 percent, mainly due to adverse curren-
cy effects and divestments. Operating income was €958 million
and included €61 million incidental results. Excluding these,
operating income was €897 million (2012: €908 million excluding
impairment). Net debt was €769 million lower at €1,529 million
(2012: €2,298 million). The performance improvement program
exceeded targets and has now successfully been completed,
one year ahead of schedule.
Summary of financial outcomes
∆%
(5)
6
(5)
(3)
In € millions
Revenue
Operating income
ROS%
Invested capital
ROI%
EBITDA
Capital expenditures
Net cash from operating activities
Net debt
Net income attributable to share-
holders
Earnings per share from total
operations (in €)
2012
2013
15,390
14,590
908 1
5.9
10,062
7.7 2
958
6.6
9,281
9.6
1,597
1,513
826
737
666
716
2,298
1,529
(2,092)
724
(8.82)
3.00
Adjusted earnings per share (in €)
2.55
2.62
Number of employees
50,610
49,560
1 The goodwill impairment in 2012 numbers is excluded from operating income to present
comparable financial outcomes.
2 With impairment of Decorative Paints excluded from invested capital for the full year:
8.9 percent.
Revenue
• Revenue in Decorative Paints declined 3 percent
compared with 2012 due to adverse currency effects and
divestments. Volumes were up 3 percent for the year with
increases in all regions except Europe, which was flat
overall, reflecting the difficult trading conditions
• Revenue in Performance Coatings declined 2 percent
compared with the previous year, due to adverse
currencies and overall flat volumes, but with continued
variability between individual segments. Volumes were
down at the start of the year compared with 2012 –
reflecting the difficult trading conditions – but gradually
improved
• It was a year of continued soft demand for Specialty
Chemicals, with low activity being particularly evident in
construction-related products, pulp bleaching and the
plastics industries. In addition to the general slowdown
in demand, we had new plant start-ups and extended
maintenance stops earlier in the year, which impacted
production temporarily
Revenue in € millions
Decorative Paints
Performance Coatings
Specialty Chemicals
4,201
5,170
5,335
2011
4,297
5,702
5,543
2012
4,174
5,571
4,949
2013
Revenue development in % versus 2012
Increase
Decrease
+1%
0%
-2%
-5%
-4%
2
0
-2
-4
-6
Volume
Price/mix
Divestments
Exchange
rates
Total
Divestments
During 2013, several divestments were concluded:
• The divestment of Decorative Paints North America. This
business was reported as a discontinued operation. The
divestment resulted in a gain of €141 million and cash
inflows of €779 million
• The divestment of Building Adhesives was completed on
October 1, 2013, resulting in a gain of €198 million and
cash inflows of €247 million
In addition, we concluded smaller divestments, such as the
Primary Amides and Purate businesses, and agreed to sell
the German stores in Decorative Paints in 2014. In 2012,
Chemicals Pakistan was divested.
34
Business performance | AkzoNobel Report 2013
Net debt and cash flows
Operating activities in 2013 resulted in cash inflows of
€716 million (2012: €737 million). The change is the net impact
of higher operating income (excluding impairment) and lower
cash outflow from provisions, partly offset by lower inflow from
working capital, as 2012 had an exceptional impact.
Net debt decreased from €2,298 million at year-end 2012 to
€1,529 million at year-end 2013 as a consequence of the net
impact of:
• Cash inflows from divestments (€313 million) and
discontinued operations (€675 million)
• Cash inflows from operating activities of €716 million
• Capital expenditures of €666 million
• Dividend payments of €286 million (€210 million to
shareholders and €76 million to non-controlling interests)
We have set a cap on the ratio of net debt/EBITDA of 2.0.
Currently that ratio is 1.0. Our strategy is to maintain a solid
investment grade.
Operating income
• Decorative Paints’ results include the gain of
€198 million on the divestment of Building Adhesives.
Margins improved due to margin management and lower
raw material prices. Performance improvement programs
and restructuring measures have lowered the cost base.
Restructuring charges were below 2012
• In Performance Coatings, margins were stable despite
higher restructuring costs
Invested capital
Invested capital at year-end 2013 totaled €9.3 billion,
€0.8 billion lower than at year-end 2012. Invested capital was
mainly impacted by the net effect of:
• A decrease of operating working capital of €0.2 billion
due to working capital management. Expressed as a
percentage of revenue, operating working capital was
9.9 percent (year-end 2012: 10.7 percent)
• A decrease of €0.4 billion due to foreign currency
• Specialty Chemicals’ results include a non-cash
translation, caused by the stronger euro
• Qualifying certain businesses and assets as assets
held for sale
We are prioritizing our investments given the weak recovery
of the markets and our focus on cash and return on investment.
We therefore expect our 2014 capital expenditures to be in line
with 2013, of which 40-50 percent is related to growth.
Capital expenditure 2013
100% = €666 million (4.6% of revenue)
A Decorative Paints
B Performance Coatings
C Specialty Chemicals
26
22
52
C
A
B
impairment charge of €139 million on a business held
for sale. Focus on cost control and margin management
was maintained in all businesses, with a comprehensive
performance improvement program being implemented at
Functional Chemicals
Full-year average raw material costs were down, having sta-
bilized during the year.
The performance improvement program announced in October
2011 has exceeded targets and achieved €545 million in EBITDA
for the period 2011 through 2013. This successfully completes
the performance improvement program a year ahead of sche-
dule. Further efficiency and cost reduction measures have
been identified as part of continuous improvement initiatives
which are integrated in the regular business activities. Full-year
restructuring costs were €348 million (2012: €292 million).
Operating income in € millions
Decorative Paints
Performance Coatings
Specialty Chemicals
235
458
622
941
542
500
2011
2012
1 Excluding goodwill impairment.
398
525
297
2013
35
AkzoNobel Report 2013 | Business performance Safety
A company-wide HSE platform established common improve-
ment programs in people, process and product safety. We aim
to differentiate ourselves by our thoroughness in embedding
best practice safety processes in all our operations, using
common approaches and systems.
Workforce
At year-end 2013, our workforce totaled 49,560 employees
(year-end 2012: 50,610 employees). The net decrease was
due to:
• Divestments, affecting 440 employees
• A decrease of 1,740 employees due to ongoing
• We achieved significant progress in total reportable injury
• An increase of 1,130 employees due to new hires, mainly
rate towards our target of <2.0 by 2015
in high growth markets
restructuring
Outlook
Although we saw early signs of stabilization in the second half
of 2013 in some of our businesses, the economic environ-
ment remains fragile and foreign currencies volatile. We will
continue to significantly restructure our businesses in 2014 to
reduce our cost base further to offset the expected continued
weak recovery. The company is on track to achieve its stra-
tegic targets for 2015.
• We implemented our new Life-Saving Rules as part of a
global TakeCare behavioral safety program
• We enhanced the stringency of our behavior-based safety
program – more than 96 percent of our manufacturing
sites are already consistent with the higher standards
• We refocused the process safety aspect of our HSE self-
assessment program in order to make improvements at
high hazard sites
We accelerated restructuring activities during 2013 and will
continue to significantly restructure our businesses in 2014 to
reduce our cost base. These programs will run globally, with a
focus on mature markets.
Dividend
Our dividend policy is to pay a stable to rising dividend. We
will propose a 2013 final dividend of €1.12 per share, which
would make a total 2013 dividend of €1.45 (2012: €1.45)
per share. There will be a stock dividend option with cash
dividend as default.
Employee and supervised contractors total
reportable injuries injury rate
Earnings per share (EPS) total operations in €
Dividend in €
3.6
3.1
2.4
2.3
2010
2011
2012
2013
2015
<2.0
2015
target
2.04
2011
(8.82)
2012
3.00
1.45
1.45
1.45
2013
2011
2012
2013
36
Business performance | AkzoNobel Report 2013 Putting more wind in our sails
One of the key aims of our Planet Possible approach to
sustainability (doing more with less) is to reduce our reliance
on fossil fuels. Not only will this have environmental benefits,
but it will also reduce our dependency on fossil fuel markets
and carbon pricing.
A renewable energy supply strategy is now in place,
which includes participating in large-scale energy ventures
and exploring on-site renewable energy generation.
One business that has been particularly active is Pulp and
Performance Chemicals – which has the largest share of
renewable energy in our existing portfolio. Around 60 percent
of the business’ operations already run on renewable
power, which could rise to 80 percent by 2020. However,
as is the case throughout the company, this will need to be
achieved in a cost-effective manner, supporting our other
business goals.
One of many ongoing projects is based in the Nordics, where
the company is part-owner of the VindIn consortium, which
has been set up to produce renewable energy competitively.
VindIn already has 35 wind turbines in operation, with more
to come over the next few years. The target is to generate
1,000 GWh annually.
So far, VindIn has made substantial progress in Sweden,
where two wind farms are in operation and seven more are
under development. A further seven projects are also being
worked on in Finland.
Input
Our organization
How Decorative Paints
creates value
Total energy use
2,000 TJ
Energy
We continue to improve efficiency by
reducing our energy use per ton of
production, and are working towards
improving our share of renewable energy.
Fresh water consumption
283 million m3
B uildin gs an d
Infrastructure
Employees
16,200
Employee engage-
ment score (1-5 scale)
3.93
Total reportable rate
of injuries
1.9
Own operations
CO2(e) emissions
0.1 million tons
Total waste
39 kilotons
Raw materials
and packaging
We continue to work towards raw material
efficiency and the use of renewable
raw materials.
Cradle-to-grave
CO2(e) emissions including VOCs
4.2 million tons
Decorative Paints
Europe
Decorative Paints
A m ericas
Decorative Paints
Asia
38
TransportationConsumer GoodsIndustrialAs a leading global supplier of decorative paints, our brands are crucial to our success. Our activities are fully focused on the Buildings and Infrastructure end-user segment, serving the do-it-yourself market and professional painters. Our innovation is geared towards low energy processes, with a strong emphasis on reducing our upstream supply chain impact by changing formula-tions to water-borne technology. Many of our brands are household names and we work closely with local communi-ties via a series of national and international initiatives, some of which involve volunteer support from our employees. Business performance | AkzoNobel Report 2013
Our organization
Output
A
Revenue per end-user segment:
A 100% Buildings and Infrastructure
B uildin gs an d
Infrastructure
Human value
Employee safety is a key priority and we
are actively driving towards a reduction in
the number of incidents. We highly value,
and actively work on improving, employee
engagement. We’re investing in training
and development and continue to work
on a more diverse workforce.
Decorative Paints
Europe
Decorative Paints
A m ericas
Customer value
In 2013 we sold to many thousands of
customers. We continue to improve our
customer focus and develop products and
solutions that help them to be successful
in their markets.
Financial value
ROS% at 9.5 percent includes the divest-
ment gain on Building Adhesives of
€198 million. Excluding this gain, ROS%
is 4.8 percent. ROI% excluding this gain
is 6.9 percent.
Revenue
€4,174 million
Operating income
€398 million
including €198 million gain
on Building Adhesives
Innovation value
RD&I investments have resulted in
27 percent of revenue derived
from eco-premium solutions with
customer benefits.
Community value
We participate in community programs,
education programs and local sponsorships.
Via our “Let’s Colour” program, we improved
around six million lives in 2013.
Decorative Paints
Asia
39
TransportationConsumer GoodsIndustrialEnvironmental value We continue to improve the environ- mental footprint of our operations by focusing on operational eco-efficiency.Asset valueThe value of our assets is €4.3 billion. We invested €171 million in 2013 to keep our facilities in good shape, as well as expanding our manufacturing capability. AkzoNobel Report 2013 | Business performance Decorative
Paints
From left to right: Peter van Campen, Jeremy Rowe, Jan-Piet van Kesteren, Liang Qi Lin, Ruud Joosten, Amit Jain, Jaap Kuiper, Kees Ekelmans, Guy Williams.
“We are taking decisive action
to streamline our product range,
reduce complexity and become
more competitive”
Ruud Joosten
Member of the Executive Committee responsible for Decorative Paints
Our Decorative Paints activities had a positive year, outper-
forming 2012 by some distance, despite continued market
weakness, unfavorable exchange rates and the impact of
further restructuring costs.
China in particular had a very strong year, while South East
Asia and Pacific showed signs of recovery and Latin America
started to pick up again. Europe, however, remained chal-
lenging, with no real recovery being evident during the course
of the year. Most of the gains in the region were generated
through cost-cutting, working capital management and
margin improvement initiatives, although the UK and notably
Russia performed very well.
Given the strategic importance of Europe to our Deco activi-
ties, we are taking decisive action to streamline our product
range and operations, reduce complexity and become more
competitive. This was highlighted by the sale in December
of our German professional paint stores, which will enable
us to sharpen our distribution focus and concentrate on
strengthening our efficiency and profitability in Germany.
We have also been taking steps to optimize our activities
in France by improving the stores network that we have
there, further contributing to the company’s performance
improvement ambitions.
Another key divestment completed in 2013 involved our
Building Adhesives business, which was sold following
a strategic review of its fit within our portfolio. The sale
was announced a few months after we finalized the
€0.8 billion divestment of our North American Decorative
Paints business. Our focus now is on continuing to improve the
performance of our European activities and accelerating
profitable growth in high growth markets such as Asia and
Latin America. We have already made good progress in
simplifying the organization – including the introduction of
an enhanced leadership structure – and plan to implement
a new business model for Europe which will make us more
agile and better positioned to increase market penetration.
We also continued to invest throughout 2013, which proves
that we’re taking a long-term view – in Europe as well as the
high growth markets. A new €20 million plant was inaugurated
in Gwalior, India, and we announced plans to build a produc-
tion facility in Chengdu, China, which will start-up in 2015. In
addition, a new research center was opened in the Nether-
lands, while construction work is continuing at Ashington
in the UK, where we are developing a world class decora-
tive paints site. Scheduled to open in 2015, it will feature our
award-winning system for harvesting rainwater, which will
significantly reduce annual fresh water usage. In addition,
the global brand identity roll-out continued to make strong
progress and our “Let’s Colour” campaign gathered further
momentum across the world.
Our focus on innovation was also stepped up, particularly with
regards to the development of eco-premium solutions that
benefit the customer. In 2013, these generated 27 percent of
revenue, supported by several new product launches across
the globe. Another notable achievement in the area of sustain-
ability saw us reduce cradle-to-grave carbon emissions per
ton of product sold for the third consecutive year – this year
by 3 percent. Safety performance was noteworthy as well.
The TRR was below the company’s 2015 target of 2.0 (down
from 3.5 in 2011) something we should be particularly proud
of, although we’ll look to improve even further.
With an improved 2013 performance to build on, we will
continue to address our cost base and target profitable
growth. At the same time, we’ll be working even harder
to develop bigger and better sustainable innovations for
our customers in order to create a leading Deco organiza-
tion which is fully focused on achieving the company’s
strategic targets.
40
Business performance | AkzoNobel Report 2013 Actions
Fix Europe
Grow profitably in high
growth markets
Leverage investments
in marketing, sales,
innovation
Improve supply chain
performance
Generate more value with
fewer resources
Strategic
focus areas
These are aligned with the
company’s strategic focus
areas (see the Strategy
section for details)
Processes
and capabilities
The processes are aligned
with the company’s
processes (see the
Strategy section for details)
The capabilities are:
Branding
Distributor, wholesaler,
retail management
Understanding and serving
professional painters
Consumer inspiration
Quality management
Values
Vision:
The leading global
Decorative Paints
company in size
and performance
End-user
segments
Buildings and
Infrastructure
Transportation
Consumer Goods
Industrial
Decorative Paints expected 2015
financial outcomes:
Return on sales: 7.5%
Return on investment: 12%
41
AkzoNobel Report 2013 | Business performance
Decorative paints market overview
End-user segment strategy context
Decorative paints makes up just under half of the world
market for paints and coatings. All revenue generated by the
decorative paints industry stems from the Buildings and Infra-
structure end-user segment. This segment was hit hard by
the recent recession and still hasn’t fully recovered globally.
Market leadership positions
Decorative Paints Europe
1st
Continental Europe
Northern and Eastern Europe
UK, Ireland and South Africa
Decorative Paints Latin America
2nd
Latin America
Decorative Paints Asia
1st
2nd
3rd
South East Asia and Pacific
China and North Asia
India and South Asia
Buildings and Infrastructure
Decorative paints are primarily used in two sub-segments
within Buildings and Infrastructure – Maintenance, renova-
tion and repair and New build projects. We estimate that a
substantial part of our revenue (around 75 percent) is derived
from the former, rather than the latter. Maintenance, renova-
tion and repair is less cyclical than New build projects, but also
has generally lower growth over the full cycle. More context on
each of these two sub-segments follows.
New build projects
Badly affected by the recent economic downturn, this segment
is beginning to regain momentum in many countries. There has
already been a return to growth in the high growth geo graphies.
Given our strength in many of these regions, this is a very posi-
tive development from an AkzoNobel perspective. However,
we expect that growth going forward will be at lower, or even
much lower, levels than we have seen previously, particularly
in China. In mature markets relevant for AkzoNobel, some slight
recovery is visible in Europe, but the picture remains uncertain.
Maintenance, renovation and repair
Looking ahead, predictions are for double digit growth in Main-
tenance, renovation and repair in high growth markets, but with
reduced growth rates in some other key markets, such as China
and Brazil. In mature regions, we already see a limited return to
growth, evidenced by increased housing transactions and house
prices, notably in the UK, one of our key European markets.
Strategic direction
Already the global leader in terms of size, our vision is to
become the leading global decorative paints company in size
and performance. We are strongly focused on improving our
performance to achieve return on sales of 7.5 percent and
return on investment of more than 12 percent by 2015.
Key to our success in achieving this vision of leading size and
performance is the implementation of a new operating model.
This will be based on a simplified organization with standardized
and simplified processes, functional excellence and optimized
ways of working. It will be underpinned by clear accountability
and a harmonized set of key performance indicators.
We are nearing completion of our work to carefully map out
our new model and the processes that support it, as well as
identifying responsibilities and developing a set of indices to
allow us to measure and monitor improvement versus expec-
tations. We have established a program management office
to maximize the likelihood of successful delivery on all of the
key components of our strategy, as outlined below.
Beyond the implementation of our new organizational model,
the actions we are taking to deliver on these targets are to
fix Europe; grow profitably in high growth markets; leverage
investments in marketing, sales and innovation; and improve
supply chain performance. Here is a brief look at what we
accomplished in 2013 and what we are planning for 2014.
42
Business performance | AkzoNobel Report 2013 Fix Europe
implemented considerable restructuring-
We successfully
based cost improvements from 2008 to 2012. However, given
the substantial market downturn, these measures are no longer
sufficient, so we are taking more stringent and comprehensive
measures to reduce costs and prepare ourselves for the future.
Grow profitably in high growth markets
We are proud of our strong positions in many high growth
markets, such as China, Brazil, Indonesia, Turkey, Vietnam,
Poland and South Africa. We continued to invest in 2013 and
plan to grow further in 2014, and are seeing the benefits of
this in terms of top line growth.
We continue to consolidate our manufacturing and distribu-
tion footprint, but our supply chain is only the starting point.
We are also undertaking significant organizational changes
in marketing and sales in Europe and reducing the cost base,
while ensuring that our customer-facing teams are better
equipped to focus on addressing the needs of local custom-
ers by using efficient platforms and solutions. In addition,
we are carrying out a major program of process redesign
in back office functions to drive back office consolidation
and restructuring.
While we align our cost base to the new market reality, we
are also maintaining a strong focus on our customers and
markets. This includes further building on one of our tradi-
tional strengths – understanding and serving professional
painters – as well as consolidating our strong position in
large-scale retail operations and continuing to build a robust
approach to digital marketing. Once growth returns, we
believe that the combination of rigorous efficiency improve-
ment and these market-facing initiatives will mean that we
are uniquely positioned for profitable growth.
However, with lower growth rates predicted in high growth
geographies, we must also ensure that all of our growth
is profitable growth. Central to this will be the success we
achieve in the mid-market. Our high growth market positions
are generally based on the premium sector, so mid-market
growth is a key component of our strategy. In order to deliver
this growth profitably, we must ensure that we have appro-
priate value propositions, based on appropriate cost-value
trade-offs.
Beyond the mid-market, most of our market-facing initia tives
are based on learning from a more global approach. So in
high growth markets, we will benefit from repeatable models
in terms of understanding and serving professional painters
and digital marketing. Eventually, we will also utilize the same
approach to back office efficiency currently being imple-
mented in Europe, as well as continuing to take a consistent
approach to supply chain efficiency and effectiveness across
the globe.
To grow profitably in high growth markets, we will need to
continue attracting, developing and retaining people in what
is a highly competitive labor market. To address this, we are
focusing on university recruitment and offering challenging
opportunities for graduates to gain experience and develop in
a highly professional environment.
Leverage investments in marketing,
sales and innovation
Branding and consumer inspiration are core capabilities for
our Decorative Paints business. To ensure that we benefit
from our scale and make our size an asset, we will continue
to develop models regionally or globally and roll these models
out in relevant countries. During 2013, good examples of this
principle were the global launches of Dulux Ambiance, Dulux
Colours of the World and Dulux Weathershield.
Furthermore, we are continuing to invest heavily in our
global “Let’s Colour” brand, both commercially and through
our community programs. In the UK, our “Let’s Colour”
programs have led to improved share and profit, while we are
experiencing the same impact in China. Together, with
our professional trade partners, we have rolled out success-
ful store, specification and
loyalty programs and this
will continue. In addition, we are rolling out our global web
platform across successive markets.
43
AkzoNobel Report 2013 | Business performance Improve supply chain performance
Since the ICI acquisition in 2008, we have extensively restruc-
tured our operations footprint in Europe in order to leverage
our scale and address the considerable market contraction
from the recession. Specifically, we have closed 13 manu-
facturing units and nearly 50 warehouses. At the same
time, we are also investing for the future. For example, we
recently completed a new factory in India, have significantly
expanded our plant in Southern China and are planning
a new facility in Western China. In the UK, we are consolidat-
ing our manufacturing activities from Slough and Prudhoe into
a new, state-of-the-art greenfield plant in Ashington. All of this
construction is based on new, more efficient paint manufac-
turing technology.
We will continue to review our supply chain footprint to ensure
we adapt our facilities to best fit the market we serve. Once
current restructuring plans are complete, we plan to move
away from a project mindset and pursue a continuous improve-
ment approach, aiming for ongoing year-on-year cost savings.
With this in mind, in 2013 we embarked on a large-scale roll-
out of a training and development plan across our European
factories to drive the “lean” (i.e. waste reduction) approach to
manufacturing excellence. The lead sites are already showing
good improvement from harvesting low hanging fruit.
Generate more value with fewer resources
Embedded sustainability is a core component of our Decorative
Paints strategy. As is the case with all three AkzoNobel Busi-
ness Areas, our focus is on generating more value from fewer
resources as part of our Planet Possible sustainability strategy.
To implement this, we are working internally across functions
and externally with suppliers and customers. Specific areas
of focus are volatile organic compound (VOC) reduction, eco-
premium solutions, packaging/end-of-life and own operations.
VOC reduction
Traditional solvent borne products have high levels of VOCs.
The introduction of new technologies such as “water in oil”
and improvements in water-borne products have already led
to a reduction in average VOC per liter of 20 percent from
2009 to 2012. We continue to push for further reductions in
this area from both new technological innovation and market
education – a real challenge in some markets.
Eco-premium solutions
Eco-premium products with downstream benefits account for
27 percent of our Decorative Paints sales. Examples of such
products are Dulux Trade Light & Space (which makes rooms
feel brighter); Dulux Forest Breath (which has been specially
developed to enhance air quality); and Cetol HLS Plus, which
uses our “water in oil” technology to help reduce solvent use
and lower emissions during application. For more information
about our eco-premium solutions, see Note 4 of the Sustain-
ability statements.
Packaging and end-of-life
We continue to look for ways to optimize our packaging
to ensure that it protects the product, while minimizing
packaging material. We have a program of work to lightweight
cans and increase the amount of recycled content in cans.
These two aspects are interrelated as, for instance, recycled
content in cans often results in less robust cans. So the chal-
lenge is to optimize the balance between weight and recycled
content. We also have a number of trials underway looking at
how waste paint can be used. Potential solutions range from
diverting materials to community projects to reincorporating
leftover paint into new paints.
Own operations
The environmental impact of our own operations is a rela-
tively small amount compared with the whole value chain,
but we continue to look for ways to minimize our resource
use. This means building footprint reduction activities (which
generally also result in cost savings) into our supply chain
continuous improvement program.
It also means ensuring that we optimize resource use in new
build facilities. For example, our new UK site will be our most
sustainable, as it will use half the energy and generate half the
waste of the plants that it will replace.
44
Business performance | AkzoNobel Report 2013 Key developments 2013
Geo-mix revenue by destination
Key figures in € millions
Employees by region at year-end
48%
8%
Emerging Europe
Mature Europe
26%
Asia Pacific
Revenue
Operating income
ROS%
Invested capital
Capital expenditures
ROI%
20121
4,297
94
2.2
2013
4,174
398 2
9.5
Latin America
Mature Europe
Emerging Europe
2,981
2,589
Asia Pacific
206
2.0
171
13.7
Other countries
Total
2012
2013
1,800
8,400
1,400
4,500
900
1,800
7,500
1,300
4,700
900
17,000
16,200
1 Excluding goodwill impairment.
2 Including the divestment gain on Building Adhesives of €198 million.
4%
Rest of the world
Revenue breakdown by business unit
in %
Cradle-to-grave carbon footprint
in million tons of CO2(e)
14%
Latin America
Revenue development in % versus 2012
Increase
Decrease
4
2
0
-2
-4
+3%
0%
-1%
-5%
-3%
Volume
Price/mix
Divestments
Exchange
rates
Total
C
B
A
A Decorative Paints Europe
B Decorative Paints Latin America
C Decorative Paints Asia
60
14
26
Scope 3 upstream
Scope 1 & 2
Scope 3 downstream
% reduction CO2(e) per ton of
sales
0
5.0
3
4.2
2012
2013
5
4
3
2
1
0
Eco-premium solutions with
customer benefits
% of revenue
Total reportable rate of injuries
per million hours
22
27
4.0
3.5
2.7
1.9
2012
2013
2010
2011
2012
2013
0
5
10
15
20
25
30
45
AkzoNobel Report 2013 | Business performance
Key developments 2013
Decorative Paints
Some of our customers
Top raw materials
• Binders/resins
• Titanium dioxide
• Packaging materials
Key cost drivers
• Oil prices
• Energy prices
• Steel prices
Decorative Paints Europe
• Solid year under difficult market conditions
• Markets in Western and Southern Europe were
mostly stable or in decline, while weakening
currencies impacted our business in Eastern
Europe and Africa
• Despite the difficult climate, we grew our overall
paints volume, with the UK, Russia, South Africa
and the Netherlands contributing in particular
• As we continue to align to the new
market reality across Europe, the ongoing
organizational restructuring delivered significant
cost reductions and, along with stronger
marketing and distribution, contributed to the
overall improvement
• We divested Building Adhesives and sold 69 of
our 72 professional paint stores in Germany to
focus on our core business
• The Flourish brands were successfully rolled out
across all premium consumer brands in Europe
and Africa, while Dulux increased its share in
the UK retail and trade markets
• New Dutch R&D center opened
Decorative Paints Latin America
• Financial performance improved considerably
compared with 2012, while operational
excellence was bolstered by successful
implementation of SAP in Brazil
• Revenue growth in local currency was driven by
successful product launches, especially under
the Coral brand, and a distinctive customer
loyalty approach whereby trade partners
actively participated in the hugely successful
Tudo de Cor (Let’s Colour) program in their
own neighborhoods.
• The 1,000th Tudo de Cor project was staged
and involved Brazilian soccer coach Felipe
Scolari, who helped paint a hospital in his
home town
• Coral – named brand of the year in Brazil –
launched a blockbuster, water-based trim paint,
Coralit Zero, which promotes the switch from
solvent-based to water-based enamels
Decorative Paints Asia
• The China business significantly out per formed
the market, mainly due to premium segment
growth and cost control
• Operating income increased substantially in
South East Asia and Pacific, with 2013 being a
particularly strong year for Indonesia, while the
market in Vietnam began to recover
• In India, the business adapted to a change
in market dynamics to take advantage of
major growth in the mid-tier paints sector and
combined this with accelerated distribution in
smaller towns
• The Ambiance range was launched in China,
where efforts to drive our zero VOC range of
products is continuing
• New mass market offerings were introduced in
Malaysia and Indonesia, while Dulux EasyClean
was relaunched in South East Asia with a new
campaign based around KidProof technology
• A new paint factory was opened in Gwalior,
India, and we added 56 small towns to our
distribution network
Revenue in € millions
Revenue in € millions
Revenue in € millions
2,658
2,640
2,508
590
603
591
951
1.048
1,075
2011
2012
2013
2011
2012
2013
2011
2012
2013
Key brands
Key brands
Key brands
46
Business performance | AkzoNobel Report 2013 100
million liters/
year
The amount of paint Ashington
will be capable of producing for sale
in the UK and Europe
-75%
-50%
Setting world class standards
As the top ranked company in the Materials industry group
on the Dow Jones Sustainability Index, we ensure that
sustainability runs right through the company. So when we
announced the construction of a £100 million world class
decorative paint facility in the UK, its environmental footprint
was always going to be a major factor.
A clear sign of our strategic commitment to focus our deco
activities on key markets in Europe and high growth regions,
the new plant is being built in Ashington in the north-east of
England. Housing nine fully automated paint filling lines, it will
be capable of producing up to 100 million liters of paint a
year for sale in the UK and Europe – double what is possible
from existing UK operations in Slough and Prudhoe.
Featuring cutting-edge manufacturing technology, the new
facility will not only reduce energy consumption per liter of
paint produced by 60 percent, but will also deliver a minimum
of 10 percent of site energy from on-site, low carbon sources
such as biomass, photovoltaic panels and solar thermal
water heating.
Designed to be one of the most sustainable plants in the
world, Ashington also aims to achieve 100 percent re-use of
water and 90 percent re-use of solvents, as well as reducing
VOC emissions by 75 percent and waste by 50 percent.
Due to become the heart of our UK deco operations, the site
has targeted an “excellent” BREEAM accreditation and is
scheduled to be fully operational in 2015.
Input
Our organization
How Performance
Coatings creates value
Total energy use
5,000 TJ
Energy
We continue to improve efficiency by
reducing our energy use per ton of
production, and are working towards
improving our share of renewable energy.
Fresh water consumption
283 million m3
Employees
21,400
Total reportable rate
of injuries
2.8
Employee engage-
ment score (1-5 scale)
3.85
Own operations
CO2 (e) emissions
0.3 million tons
Total waste
54 kilotons
Raw materials
and packaging
We continue to work towards raw material
efficiency and the use of renewable
raw materials
Cradle-to-grave CO2 (e)
emissions including VOCs
12.9 million tons
M arine and
Protective Coatings
Auto m otive and
Aerospace Coatings
Industrial Coatings
Po w der Coatings
B uildin gs an d
Infrastructure
Transp ortation
C o nsu m er G o o ds
Industrial
48
Our Performance Coatings businesses are focused on all four of our end-user segments. Supplying high performance products and cutting-edge technologies primarily to business to business customers, we are increasingly incorporating low energy processes and working to reduce our carbon impact across the value chain. Innovation is also key to our cutting-edge product development, which is often highly technical in order to meet strict customer specifications. Particular emphasis is placed on supplying products that offer environ-mental benefits for our customers. Business performance | AkzoNobel Report 2013
Our organization
Output
Customer value
In 2013 we sold to many thousands of
customers. We continue to improve our
customer focus and develop products and
solutions that help them to be successful in
their markets.
D
A
C
B
Human value
Employee safety is a key priority and we
are actively driving towards a reduction in
the number of incidents. We highly value,
and actively work on, improving employee
engagement. We’re investing in training and
development and continue to work on a
more diverse workforce.
Protective Coatings
M arine and
Financial value
ROS% and ROI% are in line with 2012
and on track to achieve the strategic
targets for 2015 of 12 percent and
25 percent respectively.
Revenue per end-user segment
A 24% Buildings and Infrastructure
B 37% Transportation
C 25% Consumer Goods
D 14% Industrial
B uildin gs an d
Infrastructure
Aerospace Coatings
Auto m otive and
Innovation value
RD&I investments have resulted in
13 percent of revenue derived from eco-
premium solutions with customer benefits.
Industrial Coatings
Community value
We participate in a number of community
programs, education programs and local
sponsorships, including a partnership with
the Cruyff Foundation.
Po w der Coatings
Transp ortation
C o nsu m er G o o ds
Industrial
49
Operating income €525 millionRevenue €5,571 millionEnvironmental value We continue to improve the environmental footprint of our operations by focusing on operational eco-efficiency.Asset valueThe value of our assets is €4.1 billion. We invested €143 million in 2013 to keep our facilities in good shape, as well as expanding our manufacturing capability. We continue to improve process and product safety.AkzoNobel Report 2013 | Business performance Performance
Coatings
From left to right: Rob Molenaar, AB Ghosh, Conrad Keijzer, John Wolff, Jim Rees.
Meanwhile, Specialty Finishes benefited from continued
strength in the consumer electronics market and sales of
coatings for mobile devices. In terms of safety, the overall
TRR increased from 2.6 to 2.8 incidents per million hours
worked. To address this, all of our sites have implemented
BehaviorBased Safety and LifeSaving Rules programs and
we con tinue to work towards our 2015 TRR target of less
than 2.0.
To improve our cost base and drive competitiveness, we have
looked hard at our production footprint – particularly in Europe
– and have announced the intended closure of our production
sites in Elbeuf (France), Guarulhos (Brazil), Birmingham (US),
Nuremberg (Germany), Gamleby (Sweden), Suzhou (China)
and Romano (Italy).
“It was a year of solid progress
in terms of becoming more cost
effective and better positioned for
organic growth”
Conrad Keijzer
Member of the Executive Committee responsible for
Performance Coatings
Things got off to a weak start, with difficult market conditions
in most regions (except North America) which resulted in a
drop in volumes in the first half of the year. Conditions recov
ered somewhat as the year progressed and by the third and
fourth quarters our volumes improved.
In the second half of 2013, many of our high growth markets
experienced weakening currencies, which impacted our
reported results and the cost base in some regions where
raw materials are still predominantly imported. Several oneoff
costs related to restructuring also had an additional negative
effect on our results.
Despite these market challenges, we continued to make
steady progress with our growth strategy. In China, for
example, we started construction of a new powder coatings
manufacturing facility in Chengdu, scheduled to open in 2014.
We also broke ground for a new powder coatings facility in
Dubai. In addition, we opened a new design center for the
specialty finishes market in Offenbach, Germany, and more
than doubled capacity at our resin factory in Songjiang, China.
Marine and Protective Coatings launched new paint technolo
gies, including Intersleek 1100SR and Intercept next genera
tion fouling control products. Intersleek provides better slime
resistance, while Intercept is a highly efficient biocidal anti
fouling with a controlled release over time. The Protective
business was involved in a number of high profile projects
during the course of the year. This included the ongoing
supply of coatings and fire protection products for Shell’s
Prelude, the world’s largest ever floating vessel. We are also
supplying a large quantity of protective coatings for Ichthys,
the world’s largest LNG project, off the coast of Australia.
Our Automotive and Aerospace Coatings business had a
good year. Refinish volumes began to recover and the activity
in Aerospace was particularly encouraging, with many airlines
placing major orders. Successes included the repainting and
rebranding of the American Airlines fleet, along with important
customer wins among the fastgrowing airlines in China and
the Middle East. Strategic partnerships were also secured by
Vehicle Refinishes with several major customers, including
Volkswagen, Toyota and Fiat.
50
Business performance | AkzoNobel Report 2013 Vision:
To be the leading
coatings company
from a performance
perspective
End-user
segments
Performance Coatings expected
2015 financial outcomes:
Actions
Buildings and Infrastructure
Transportation
Consumer Goods
Industrial
Return on sales: 12%
Return on investment: 25%
Strategic
focus areas
These are aligned with the
company’s strategic focus
areas (see the Strategy
section for details)
Drive overarching
performance improvement
initiatives
Pursue differentiated
growth strategies
– Outgrow the market
organically
– Improve performance
by driving operational
excellence
Deliver business-specific
plans
Processes
and capabilities
The processes are aligned
with the company’s
processes (see the
Strategy section for details)
The capabilities are:
Key account management
Coatings technology and
product innovation
Footprint in growth
markets
Values
51
AkzoNobel Report 2013 | Business performance
Buildings and Infrastructure
The largest sub-segment for our Performance Coatings
Business Area within Buildings and Infrastructure is Building
products and components, accounting for nearly 90 percent
of total revenues in the segment. We sell powder coatings, coil
coatings, wood finishes and wood adhesives to this particular
sub-segment. Protective coatings are supplied to both of the
other sub-segments, New build projects and Maintenance,
renovation and repair. Our customer base, and consequently
our products and revenues, are oriented towards new build
and larger construction projects.
Analysts expect reasonable growth in most geographies
in all parts of Buildings and Infrastructure. Our view on the
market outlook is largely consistent with this. However, we
remain concerned about the outlook for our businesses
selling into sectors of the Building products and components
sub-segment that are oriented towards the residential market
in Europe (such as Wood Finishes and Wood Adhesives),
where evidence of market recovery is still limited. We will
therefore continue to take a conservative view on growth for
these businesses and have developed business plans on the
basis of these more cautious growth estimates.
Transportation
Transportation is the largest end-user segment for our
Performance Coatings Business Area. The vast majority of
our Transportation revenues come from the Automotive repair
and Marine and air transport sub-segments, with our reve-
nues being roughly evenly split between the two. Although
these sub-segments are approximately equal in size, they are
very different in terms of their growth patterns and outlooks.
We expect stable but below GDP growth in the Automo-
tive repair sub-segment. Growth will largely come from
high growth markets, as the expected growth in mature
geographies is low. In high growth regions, vehicle sector
growth is somewhat above GDP growth, but this does not
necessarily directly transfer to growth in coatings demand, as
insurance and repair rates are not yet at mature market levels.
As mentioned earlier, the outlook for the Marine business is
a key issue in terms of our Performance Coatings outlook.
The recent late cycle drop in marine new building, combined
with low freight rates, has restricted any growth in demand for
marine coatings. The consensus view of analysts is that we
are reaching the bottom of the cycle and the sub-segment will
now return to growth, but evidence of this is not yet available.
The aerospace business has already returned to above GDP
growth, but the aerospace coatings market is small compared
with marine coatings, so this has limited impact.
In addition to the above, we have revenues in the Trans-
portation segment coming from the Automotive OEM, parts
and assembly end-user sub-segment. Our position here is
limited to powder coatings (used for wheels, for example) and
specialty finishes (used for exterior and interior plastic compo-
nents, such as fascias). Looking ahead, we expect moderate
growth as the market has now recovered from the substantial
downturn experienced in 2008 to 2009.
End-user segment strategy context
Performance coatings make up slightly more than half of
the world market for paints and coatings. They are used in
all four of our end-user segments, Buildings and Infrastruc-
ture, Transportation, Consumer Goods and Industrial. Most
end-user segments have shown some recovery from the reces-
sion of 2008 to 2009, and their overall outlook is cautiously
positive. However, there are two main areas of uncertainty.
Firstly, although there is growing consensus that we are now
reaching the bottom of the cycle in marine new building, the
upturn has not yet occurred. Secondly, concerns remain about
Buildings and Infrastructure and related markets (such as
furniture and appliances) in Europe.
Additional information follows on the outlook for each of
our end-user segments, along with the implications for our
Performance Coatings Business Area.
Market leadership positions
Marine and Protective Coatings
1st
Protective coatings
Yacht coatings
2nd
Marine coatings
Automotive and Aerospace Coatings
1st
2nd
3rd
Specialty finishes
Aerospace coatings
Vehicle refinish
Industrial Coatings
1st
Coil coatings
Wood finishes and adhesives
2nd
Packaging coatings
Powder Coatings
1st
Powder coatings
52
Business performance | AkzoNobel Report 2013 Industrial
This is the smallest end-user segment for our Performance
Coatings Business Area, where we sell protective and func-
tional powder coatings. As both are oriented towards the oil
and gas market, the outlook is for above GDP growth as high
oil prices and strong high growth market demand continue to
make a wide variety of projects economic.
Consumer Goods
The majority of our Performance Coatings revenue in the Con-
sumer Goods end-user segment comes from the Consumer
durables sub-segment, into which we sell powder coatings,
wood finishes, wood adhesives and specialty finishes. Nearly
all parts of this sub-segment have fully recovered from the
recession and are now on a reasonably normal growth trajec-
tory at or slightly above GDP, with production continuing to
increase more rapidly in high growth geographies to serve
both domestic and export markets. The exception is in furni-
ture which, as indicated earlier, is strongly linked to housing
markets. Analysts expect growth going forward in furniture to
be below GDP growth levels until we see full recovery in Build-
ings and Infrastructure.
We sell our packaging coatings into the Consumer packaged
goods sub-segment. This is much more stable, because while
consumers may down trade to some extent during a reces-
sion, they don’t stop buying basic necessities such as food,
beverages and personal care products. The downturn there-
fore was very limited. Going forward, growth should continue
to be stable at GDP growth levels.
53
AkzoNobel Report 2013 | Business performance operators to plan and budget effectively throughout
the docking cycle
• In Powder Coatings, our global scale and deep under-
standing of the end-user segments are key to our
success. As the largest powder coatings supplier in
the world, Interpon offers the widest product line in the
industry. Our leading technologies and innovations
include highly durable and stylish coatings for architects;
clear coats to protect aluminum wheels from corrosion
for automakers; and Resicoat, a tailored product specified
for use by pipeline operators. We will continue leveraging
our global presence and our strong innovation pipeline
to offer our customers the best choice and technologies
• In Industrial Coatings, high durability coatings, superior
color and styling capabilities, as well as the introduction
of eco-friendly solutions, are key to our success. We
work with customers who are large industrial OEM
manufacturers where we are a key part of their supply
chain – providing them with products and solutions to
make their production processes more efficient and their
customers’ products better. We continue to invest in
innovation to provide improved coatings solutions, such as
chromate-free coil coatings, BPA-free packaging coatings
and low-formaldehyde wood finishes and adhesives
Strategic direction
The vision for our Performance Coatings business is to be the
leading coatings company from a performance perspective.
By 2015, our expected outcomes are to achieve a return
on sales level of 12 percent and a return on investment of
25 percent. The actions that we are taking to deliver on these
targets are:
• Drive overarching performance improvement initiatives
• Pursue differentiated growth strategies
• Deliver business-specific plans
Drive overarching performance improvement initiatives
We have defined improvement actions that apply to all parts
of our business. These initiatives are instrumental to both
revenue and cost improvement. The actions include:
• Continuously reducing external spend. Procured raw
materials make up a significant percentage of our
Performance Coatings cost base, so it is fundamental to
our success that we appropriately manage our external
spend. We will take measures to ensure continuous year-
on-year savings by leveraging our scale and simplifying
our product designs across the full Business Area to
maximize and capture opportunities created by similarities
in terms of raw materials and suppliers
• Continuously improving our operations. We will continue
to adapt our operational footprint to the geographic shifts
in demand and drive benefits through concentrating
production from several business units on to larger
sites. We will further improve our performance through
productivity improvement techniques and reduction of
inventory and logistics costs
• Drive commercial excellence to increase sales
effectiveness. We are focusing on improving sales force
effectiveness based on best-in-class processes in key
account management, specification selling and customer
relationship management, as well as a harmonized
approach to training
Pursue differentiated growth strategies
To continue growing our business while improving perfor-
mance levels, we will focus and prioritize our activities on
market sectors and geographies where we have the best
opportunities.
We have defined two strategic priorities for our businesses:
• Outgrow the market organically. For parts of our business
that are in attractive markets and where our competitive
position is strong, we will be focusing on profitable growth
• Improve performance by driving operational excellence.
In parts of our business where the growth opportunities
are less favorable, our focus will be on improving
profitability by driving operational excellence
Deliver business-specific plans
Each individual business will continue to develop key capabil-
ity areas that will support the delivery of leading performance
and eco-premium solutions in the market.
• In Automotive and Aerospace Coatings, our color and
design expertise is fundamental to our success. We are
a global leader in this area based on digitized color
matching tools which allow us to effectively and
efficiently work with customers to provide the perfect
color. Our state-of-the-art digitized color system was
instrumental in the rapid and cost-effective roll-out of
Autowave upgrades. Autowave is a technology upgrade
for vehicle refinishes coatings improving our customers’
environmental footprint through less waste and the
increased use of water-borne technology
• In Marine and Protective Coatings, our leading anti-
corrosion, fouling control and fire protection
technologies drive our success. We will continue to
lead innovation in these areas, building on recent
product introductions such as Intersleek 1100SR foul
release, which provides industry-leading anti-slime
performance, while at the same time delivering the same
level of environmental benefits as our existing Intersleek
range. Another good example of this is the introduction
of our Intercept antifouling range, which offers
predictable linear polishing performance, enabling
54
Business performance | AkzoNobel Report 2013 Key developments 2013
Geo-mix revenue by destination
Key figures in € millions
Employees by region at year-end
19%
North America
27%
Mature Europe
11%
Emerging Europe
31%
Asia Pacific
3%
Rest of the world
9%
Latin America
Revenue
Operating income
ROS%
Invested capital
Capital expenditures
ROI%
2012
5,702
542
9.5
2013
5,571
North America
525
9.4
Latin America
Mature Europe
2,439
2,251
Emerging Europe
123
21.7
143
21.3
Asia Pacific
Other countries
2012
2013
3,100
1,700
6,700
1,100
8,100
600
3,100
1,600
6,400
1,200
8,200
900
Total
21,300
21,400
Revenue breakdown by business unit
in %
Cradle-to-grave carbon footprint
in million tons of CO2(e)
Revenue development in % versus 2012
Increase
Decrease
D
C
A
B
0%
1%
0%
-3%
-2%
A Marine and Protective Coatings
B Automotive and Aerospace Coatings
C Powder Coatings
D Industrial Coatings
27
24
17
32
Scope 3 upstream
Scope 1 & 2
Scope 3 downstream
% reduction CO2(e) per ton of
sales
0
13.0
0
12.9
15
12
9
6
3
0
Volume
Price/mix
Divestments
Exchange
rates
Total
2012
2013
Eco-premium solutions with
customer benefits
% of revenue
Total reportable rate of injuries
per million hours
13
13
3.3
2.8
2.6
2.8
2012
2013
2010
2011
2012
2013
2
0
-2
-4
-6
0
5
10
15
20
25
30
55
AkzoNobel Report 2013 | Business performance
Key developments 2013
Marine and Protective Coatings
• Revenue was 5 percent lower as a result of exchange rates and mix
• We benefited significantly from our reorganization into global units and functional lines.
Automotive and Aerospace Coatings
• Revenue was up 2 percent on 2012, driven by price/mix and volumes, partially offset by
adverse currencies
Operating expenses were reduced compared to 2012, with the benefit of exchange rates
and the higher level of efficiencies offsetting inflation
• A strong portfolio of projects led to continued growth in Protective Coatings in the oil and
• Volumes in the vehicle refinishes market showed recovery in the US and Canada. Latin
America and China continued to grow, while demand in Western Europe remained weak
• Strong customer demand was experienced in the consumer electronics and aerospace
gas industry
markets, driven by continued innovation and technology leadership
• In North America, a new distribution model for Protective Coatings was successfully
implemented following the divestment of the company’s Decorative Paints North America
business. We also capitalized on market growth in the Middle East and Korea
• Marine Coatings increased its business in the deep sea maintenance and repair market,
• We merged our Automotive Plastics and Specialty Finishes businesses to bring synergies
and better customer focus to the transportation segment. This completed the integration
of the former Schramm business and resulted in the closure of four production sites
• Sikkens Autowave 2.0 was launched in the vehicle refinish segment, a low VOC water-
offsetting the global decline in new build
borne basecoat with best-in-class color and application performance
• New product technologies were introduced in Marine Coatings (including Intersleek
• We are on track to complete the construction of a new production facility for vehicle
1100SR and Intercept 7000/8000), helping AkzoNobel to regain its leadership position in
fouling control innovation
• Yacht Coatings successfully introduced Nautical, a value brand addressing the private label
market, while additional new products were launched supporting the retail yacht market
refinishes, automotive plastics and aerospace coatings in Changzhou, China. Due to start
up in the second half of 2014, the new site near Shanghai will serve the growing market in
China with locally manufactured products
Key brands
Revenue in € millions
Key brands
Revenue in € millions
1,398
1,577
1,495
2011
2012
2013
Geo-mix revenue by destination in %
1,165
1,299
1,321
2011
2012
2013
Geo-mix revenue by destination in %
C
B
A
Some of our customers
• Boeing
• Etihad Airways
• Hyundai
• General Motors
• Toyota
• Volkswagen
• Airbus
• Geely
• HP
• Amazon
• Samsung
• Dell
Top raw materials
• Pigments
• Acrylic resins
• Acrylic dispersions
Key cost drivers
• Metals, base chemicals prices
• Oil, energy prices
27
25
48
A EMEA
B Americas
C Asia Pacific
41
30
29
A
B
Some of our customers
• Qatar Gas
• Hapag Lloyd
• Carnival Cruise
• ExxonMobil
• Shell
• Hyundai Heavy
Industries
• West Marine
• Brunswick
Top raw materials
• Epoxy resins and
organic solvents
• Copper/zinc
• Curing agents
Key cost drivers
• Oil feedstock chain
• Metals, base chemicals prices
C
A EMEA
B Americas
C Asia Pacific
56
Business performance | AkzoNobel Report 2013
Industrial Coatings
• Revenue declined 3 percent, due to adverse currencies, while overall volumes also
declined, with growth in Coil more than offset by declines in Packaging and Wood
• Performance improvements in Wood Finishes and Adhesives and Coil and Extrusion
Powder Coatings
• Revenue declined 2 percent compared with 2012, impacted by adverse currencies and
partially offset by positive volume and price/mix
• Europe, the Americas and most high growth markets showed positive results with growth
Coatings were offset by increased restructuring costs
in volumes
• Streamlining of our coil coatings manufacturing footprint in Europe was announced
• In the automotive and architectural markets, we improved our leading positions, resulting
involving the transfer of production to sites in Russia, Sweden and Germany
in improved volumes and revenues
• We continued to achieve growth in our high growth markets, with Coil Coatings and
• We announced an investment to build a new powder coatings manufacturing facility in
Packaging Coatings benefiting in Asia in particular
Chengdu to capture growing demand in Western China
• We added capacity for Packaging Coatings in India and a new resin reactor in Songjiang,
• The closure of sites in Ningbo and Suzhou, China, was announced, with production being
China, where we are also establishing a new Industrial Coatings RD&I center
consolidated at the existing Automotive and Aerospace Coatings site in Changzhou
• In Packaging Coatings, we are well positioned in leading the industry to move away from
bisphenol A-based epoxy coatings
• We launched a new heat-reflective range of powder coatings for buildings, Interpon D2525
Eternity, as well as new Interpon Align dry-on-dry coatings technology, which is designed
to improve productivity and lower energy consumption
Key brands
Revenue in € millions
Key brands
Revenue in € millions
1,718
1,856
1,799
940
997
982
Some of our customers
• IKEA
• Blue Scope Steel
• Arcelor Mittal
• TATA
• Crown
• Rexam
• Ball
Top raw materials
• Polyester and epoxy resins
• Glycol, ether and aromatic solvents
• Titanium dioxide
Key cost drivers
• Basic feedstock prices
• Oil/gasoline/naphtha/natural gas prices
2011
2012
2013
Geo-mix revenue by destination in %
Some of our customers
• Philips
• Whirlpool
• Bosch
• TATA
• Mercedes-Benz
2011
2012
2013
Geo-mix revenue by destination in %
C
B
A
Top raw materials
• Polyester and epoxy resins
• Titanium dioxide
C
B
A
A EMEA
B Americas
C Asia Pacific
Key cost drivers
• Gasoline/naphtha prices
45
35
20
A EMEA
B Americas
C Asia Pacific
46
22
32
57
AkzoNobel Report 2013 | Business performance
40,000 liters
Approximately 40,000 liters of Intersleek 900 was used
on the 488-meter long underwater hull of the Prelude,
representing the product’s biggest ever single application.
No job too big
The saying goes that no job is too big, and that’s certainly
the case for our Marine and Protective Coatings business
and its Intersleek 900 fluoropolymer foul release coating.
The product was specified for the construction of the Shell
Prelude floating liquefied natural gas (FLNG) facility which,
once complete, will be the world’s largest floating structure.
Approximately 40,000 liters of Intersleek 900 was used
on the 488-meter long underwater hull of the Prelude,
representing the product’s biggest ever single application.
Intersleek 900 was specifically designed for use in slow
moving or static conditions, with its ultra-low drag making
it the most effective foul release coating on the market.
With its exceptionally smooth, slippery, low friction surface,
Intersleek 900 stops organisms from attaching themselves
to vessels, saving operators time and money at sea by
cutting fuel costs and improving operational efficiency. It
also prevents transfer of invasive species from one environ-
ment to another.
A report produced by one of the shipping industry’s leading
research bodies, Professor James Corbett’s Energy and
Environmental Research Associates, recently proved that
Intersleek 900 can reduce greenhouse gas and other
emissions by an average of 9 percent.
Weighing in at 600,000 tons, the Prelude will operate in a
remote basin around 475 kilometers north-east of Broome,
Western Australia, for around 25 years. It will allow Shell
to produce natural gas at sea, turn it into liquefied natural
gas and transfer it directly to the ships that will transport it
to customers.
Low friction surface prevents organisms
from attaching themselves to vessels.
Input
Our organization
How Specialty Chemicals
creates value
Energy
We continue to improve efficiency by redu-
cing our energy use per ton of production,
and are working towards improving our
share of renewable energy.
Employees
10,400
Total reportable
rate of injuries
2.2
Employee engagement
score (1-5 scale)
3.87
Total waste
64 kilotons
Own operations
CO2(e) emissions
3.5 million tons
Raw materials
and packaging
We continue to work towards raw material
efficiency and the use of renewable raw
materials.
Cradle-to-grave CO2(e) emissions
including VOCs
9.4 million tons
Functional Che micals
Industrial Che micals
Pulp and Performance
Chemicals
Surface Chemistry
B uildin gs an d
Infrastructure
Transp ortation
C o nsu m er G o o ds
Industrial
60
We are a major producer of specialty chemicals, supplying key products to business to business customers in all four of our end-user segments.We utilize inherently high energy processes and focus strongly on reducing carbon footprint and energy use, while saving costs in our own operations. Developing close relationships with our customers – and helping them to create value – is key to our ongoing success, along with efficient processes, an increased focus on eco-premium solutions and renewable energy and a high level of innovation.Total energy use92,000 TJBusiness performance | AkzoNobel Report 2013
Our organization
Output
Customer value
In 2013 we sold to many thousands of
customers. We continue to improve our
customer focus and develop products and
solutions that help them to be successful in
their markets.
A
B
C
D
Functional Che micals
Financial value
Excluding the impairment of €139 million,
ROS% is 8.8 percent and ROI% is
12.1 percent. We are on track to achieve
our 2015 targets.
Revenue per end-user segment
A 18% Buildings and Infrastructure
B 6% Transportation
C 19% Consumer Goods
D 57% Industrial
B uildin gs an d
Infrastructure
Human value
Employee safety is a key priority and we
are actively driving towards a reduction in
the number of incidents. We highly value,
and actively work on, improving employee
engagement. We’re investing in training
and development and continue to work on
a more diverse workforce.
Industrial Che micals
Innovation value
RD&I investments have resulted in
16 percent of revenue derived from eco-
premium solutions with customer benefits.
Pulp and Performance
Chemicals
Community value
We participate in community programs,
education programs and local sponsorships.
Surface Chemistry
Transp ortation
C o nsu m er G o o ds
Industrial
61
Operating income€297 millionincluding €139 million impairment on a business held for saleRevenue €4,949 millionEnvironmental value We continue to improve the environmental footprint of our operations by focusing on operational eco-efficiency.Asset valueThe value of our assets is €4.4 billion. We invested €346 million in 2013 to keep our facilities in good shape, as well as expanding our manufacturing capability. We continue to improve process and product safety.AkzoNobel Report 2013 | Business performance Specialty
Chemicals
From left to right: Knut Schwalenberg, Niek Stapel, Werner Fuhrmann, Jan Svärd, Graeme Armstrong.
“We are swiftly responding to
changing trends in the chemicals
industry”
Werner Fuhrmann
Member of the Executive Committee responsible for Specialty Chemicals
turing program is being implemented which is designed to
cut costs, drive efficiency and adjust our manufacturing foot-
print. By taking this action, we are not only making ourselves
functionally excellent, but are also preparing ourselves for the
future. Because once opportunities for growth do arise, we will
be well positioned to take full advantage of the initiatives we
already have in place, many of which were launched in 2013.
It was a weak year for the chemical industry as a whole,
notably in Europe – where demand was down across the
board – with volatility in supply and demand also evident in
China. This inevitably had a negative effect on our financial
performance. Despite the strain on operating income caused
by the difficult market conditions, we maintained our focus on
several key growth initiatives and continued to optimize our
global capabilities.
For example, as well as starting up our Jupiá Chemical Island in
Brazil and a new facility for Bermocoll cellulose derivatives in
Ningbo, China, we also announced expansion plans for our
Surface Chemistry business in both Ningbo and Boxing. In
addition, a newly expanded Expancel site was inaugurated
in Sweden. Our Middle East organization also grew stronger
as the company continued to invest in regions where future
growth is expected.
From a financial perspective, in addition to volume declines, un-
favorable exchange rates in particular worked against us, with
the euro turning out to be stronger than expected and curren-
cies in South East Asia and Brazil being somewhat weaker.
A higher number of one-off items, including an impairment of
€139 million, also adversely affected our final results, along with
the revenue effect of the divestment of Chemicals Pakistan.
Trading conditions were therefore very challenging and we
had to take swifter action than originally planned in order to
ensure that we achieve our 2015 ambitions. A major restruc-
As we continue to strive for operational excellence, a number
of improvement programs were introduced, with several of
them being centered on our Pulp and Performance Chemicals
and Functional Chemicals businesses. Functional Chemicals
in particular has endured difficult conditions in recent years,
mainly due to the temporary over-supply in the market of
ethylene amines. Various other products also encountered
difficult conditions in 2013, which forced us to introduce a
number of initiatives designed to significantly increase the
business’ profitability. In Pulp and Performance Chemicals,
a number of closures and divestments have been concluded
in order to adjust our manufacturing footprint. Results were
reasonable though, impacted mainly by softer demand and
margin pressure.
Industrial Chemicals also encountered a challenging business
environment and had the additional burden of an extended
planned maintenance stop in the Rotterdam value chain.
Expensive gas prices, especially in the Netherlands, had a
further adverse impact. Surface Chemistry also saw weaker
demand, but delivered results very close to the excellent
2012 performance. The business continued to build on the
acquisition of Boxing Oleochemicals, which was accompa-
nied by a reduction in FTEs, and benefited somewhat from
the upbeat mood in the US chemical industry.
We continue to consolidate progress in safety performance,
particularly in the area of people safety, where we are
close to achieving the company’s 2015 TRR target of less
than 2.0. Several positive developments in terms of further
improving the sustainable nature of our operations should
also be mentioned. These include securing additional steam
supply from Twence for salt production in Hengelo, the
Netherlands, helping to lower our CO2 emissions. In addi-
tion, we have entered into partnerships with Zeachem and
Solvay for the increased purchasing of renewable raw
materials, while our StimWell and EcoFill products are now
being marketed commercially, helping to increase our share
of eco-premium solutions that offer customer benefits.
62
Business performance | AkzoNobel Report 2013 Strategic
focus areas
These are aligned with the
company’s strategic focus
areas (see the Strategy
section for details)
Actions
Build on our strong
chemical platforms to
deliver profitable growth
in selected markets
Drive functional excellence
– Productivity of supply
chain and operations
– Commercial excellence
– Talent management
leveraging the AkzoNobel
process
Reduce organizational
complexity and cost
Commercialize product
innovation and deliver
process innovation
Capitalize on industry
changes
Processes
and capabilities
The processes are aligned
with the company’s
processes (see the
Strategy section for details)
The capabilities are:
Understanding custom-
er needs and delivering
customer value proposi-
tions
Management of integrated
value chains
Continuous technological
advancement, including
automation
Engineering and project
management
Values
End-user
segments
Buildings and Infrastructure
Transportation
Consumer Goods
Industrial
Vision:
Delivering leading
performance based
on sustainable
chemical platforms
driving profitable
growth in selected
markets
Specialty Chemicals expected
2015 financial outcomes:
Return on sales: 12%
Return on investment: 15%
63
AkzoNobel Report 2013 | Business performance
Buildings and Infrastructure
Our specialty chemicals are used throughout the supply chain
that serves the construction industry. Primarily through the salt/
chlorine platform and organic peroxides platform, we supply
salt, chlorine, initiators and various other products used in the
manufacture of plastics that are, in turn, used to make doors,
windows and other construction material plastics. Together,
all these products generate approximately 20 percent of our
Specialty Chemicals Business Area revenues. In this segment,
we are expecting a return to growth in Europe, although the
recovery is not yet secure. Growth will continue in high growth
regions, but at a lower level than we have seen historically.
End-user segment strategy context
We supply specialty chemicals to all four of our end-user
segments, based largely (80 percent of our revenues) on five
main value chain platforms. These platforms are: salt/chlorine,
surfactants, ethylene oxide, bleaching chemicals and organic
peroxides. The outlook for the end-user segment relevant for
our value chain platforms is described as follows.
Market leadership positions
Functional Chemicals
1st
Chelates and micronutrients
Organic peroxides
Industrial Chemicals
1st
Chlorine merchant (Europe)
Monochloroacetic acid (MCA)
Pulp and Performance Chemicals
1st
Bleaching chemicals
Colloidal silica dispersions
Surface Chemistry
1st
Industrial applications
Agricultural applications
Industrial
Accounting for nearly 60 percent of revenues, the Industrial
end-user segment is by far the largest for our Specialty
Chemicals Business Area. All five of our platforms supply
this end-user segment, with our main revenue streams
coming from:
• Sales from our surfactant and ethylene oxide platforms
into the oil, gas, mining and agricultural industries. The
outlook for these industries is quite positive, as continued
increases in wealth in high growth areas is driving
demand. With high oil prices, many oil and gas projects
are economic. There is also considerable demand for
products that facilitate oil production, such as our chelates
and surfactants. Similar trends are evident in most mining
and agricultural industries
• Sales from our bleaching chemicals platform into the
parts of the pulp and paper industry that use chemical
bleaching. Pulp and paper is rather stable in terms of
demand and is growing well today in South America
and Asia and we expect this trend to continue
• Sales from our salt/chlorine platform and organic
peroxides platform into a wide variety of chemical
processes. A particular area of focus is the plastics
industry, into which we supply salt, chlorine, initiators
and various other products
64
Business performance | AkzoNobel Report 2013 Consumer Goods
Most of the 19 percent of Specialty Chemicals revenues
generated by the Consumer Goods end-user segment comes
from our surfactants and ethylene oxide platforms. These
products are used in a wide variety of consumer packaged
goods applications, including personal care products, clean-
ing, dishwashing and fabric softeners. The expected growth
in demand for these end-uses is at, or slightly above, GDP
growth in mature markets, but above GDP growth levels in
high growth geographies. Products such as hair condition-
ers, fabric softeners and dishwasher detergent are clearly not
necessities and may even require the purchase of domestic
appliances before they can be used, so the penetration of
these end-uses continues to increase.
Transportation
At just over 5 percent of our Specialty Chemicals revenues,
Transportation is the smallest end-user segment. As is the case
in Buildings and Infrastructure, we sell a wide variety of prod-
ucts, generally used in the manufacture of automotive plastics,
primarily via our salt/chlorine and organic peroxides platforms.
Over recent years, these businesses have benefited from
market recovery following the economic downturn, but these
markets are now growing steadily at roughly GDP growth rates.
Strategic direction
The vision for our Specialty Chemicals business is to deliver
leading performance based on sustainable chemical plat-
forms driving profitable growth in select markets. Our
expected outcomes for 2015 are to achieve a return on sales
level of 12 percent and a return on investment of 15 percent.
To achieve these ambitions we will:
• Build on our strong chemical platforms to deliver profitable
growth in selected markets
• Drive functional excellence
– Productivity of supply chain and operations
– Commercial excellence
– Talent management leveraging the AkzoNobel process
• Reduce organizational complexity and cost
• Commercialize product innovation and deliver process
innovation
• Capitalize on industry changes
More details on what we achieved in 2013, and our plans for
2014 in terms of each of these actions, follow.
Build on our strong chemical platforms
The Specialty Chemicals business is inherently more capital
intensive than our other two Business Areas, so if we are to
achieve the expected improvements in return on investment,
we must carefully allocate our capital to the opportunities that
have the greatest potential for profitable growth.
Although we are positive about the robust outlook for the
markets that we serve and are confident about our competi-
tive position in these markets, we must evaluate which of the
platforms provide us with the most promising opportunities
and then differentially direct our capital into the best opportu-
nities for profitable growth.
We have defined two main approaches:
• In parts of our business where there are attractive market
growth opportunities and we have a strong competitive
position, we aim to outgrow the market. We will do this
based on organic growth. We will also ensure that
while we grow we will leverage our scale so that we not
only grow in terms of revenue, but we also simultaneously
improve our margins through better leverage of scale.
For example, in bleaching chemicals, we are investing
for growth in sodium chlorate chemical islands in Brazil,
while in surfactants, we are investing for growth in more
attractive end-user markets
• In other chemical platforms (for example the salt/chlorine
chain), where the markets are more mature or offer us
less growth potential, we also intend to improve our
profitability, but we will do so on the basis of driving
operational excellence. We will still invest in these
businesses, particularly in terms of process technology.
Growth investments will be selectively reviewed, such as
our current investment in Frankfurt, or for performance
improvement (for example in automation)
65
AkzoNobel Report 2013 | Business performance
Capitalize on industry changes
Over the last decade, we have aggressively invested in build-
ing production facilities in high growth countries such as
China and Brazil, with the objective of aligning our capabili-
ties with changes in the market. Clearly, we must continue
to ensure that we adapt to emerging industry developments.
This includes additional geographic shifts, as well as shifts in
the supply base, such as increasing availability of shale gas
and greater availability of renewable raw materials, including
energy, as well as feedstocks. By taking a comprehensive
view at the Business Area level, we will be able to ensure that
we continue to stay ahead of the market, as we have done
with our capacity additions in China.
Drive functional excellence
To reach our return on sales expectations, we need to
develop best-in-class capabilities in vital functional areas.
To leverage our scale and create these capabilities effectively
and efficiently, we will do this in a consistent manner across
the Business Area.
Key areas of functional focus are:
• Improvement in productivity of the supply chain and
operations. As part of the company’s overall performance
improvement program, we have conducted over 70 site
improvement projects, with savings up to €5 million
per site. In addition to cost reductions, we achieved
significant improvements in operational eco-efficiency,
thereby lowering our carbon footprint. We have also
established a Lean Six Sigma platform within the Business
Area as part of a company-wide chemicals production
system designed to further optimize certain processes in
operations. We will also launch programs for increased
focus on yield, waste and quality to cut costs and optimize
resource use. We will do this by creating a center of
excellence for training and implementation of best practice
processes for supply chain activities as the next step in
the roll-out of our production system
• Commercial excellence. We have already introduced
a margin management program in all our Specialty
Chemicals businesses. This program includes stan-
dardized customer needs segmentation and pricing tools,
as well as a product and service portfolio management
process based on a rigorous assessment of cost-to-
serve. Our next steps are to create a common customer
feedback process and develop and implement a sales
force productivity improvement program. Sales force
improvements will be based on implementation of
standardized sales processes, aligned incentive systems
and training programs
• Talent management leveraging the AkzoNobel process.
At AkzoNobel level, we are implementing a disciplined
approach to diverse and inclusive talent development
based on a consistent talent management process. At
Specialty Chemicals Business Area level, we will address
specific areas of concern, including the need to continue
to migrate our employee base to high growth geographies
Reduce organizational complexity and cost
We have carried out substantial restructuring to date as our
industry environment has changed, closing or divesting more
than ten factories, including those considered non-core busi-
nesses, as well as realigning our sites in mature markets.
Going forward, we will continue restructuring in line with the
company’s functional excellence approach, as well as review-
ing the structure in multi-site organizations and reducing non-
product related spend.
Commercialize product innovation and deliver
process innovation
We have already delivered significant process improvements
in all of our platforms, including in electrolysis and the salt
manufacturing process in the salt/chlorine platform, and
offered our customers continuous initiator dosing in the
organic peroxides platform. In addition, we regularly intro duce
new products that provide a variety of benefits, including
energy reduction and functional process improvement. One
example is Ecosel AsphaltProtection, an additive to de-icing
brine which reduces winter damage to road surfaces by up
to 50 percent. One of our newest products, it has also been
classified as an eco-premium solution with downstream
benefits. Going forward, we will continue to standardize
and improve processes and introduce new products in new
applications to help generate more value from fewer resources
across all of the value chains that we serve.
66
Business performance | AkzoNobel Report 2013 Key developments 2013
Geo-mix revenue by destination
Key figures in € millions
Employees by region at year-end
22%
North America
44%
Mature Europe
5%
Emerging Europe
17%
Asia Pacific
2%
Rest of the world
10%
Latin America
Revenue development in % versus 2012
Increase
Decrease
0
-2
-4
-6
-8
-10
-12
-2%
-11%
-1%
-6%
-2%
Volume
Price/mix
Divestments
Exchange
rates
Total
Revenue
Operating income
ROS%
Invested capital
Capital expenditures
ROI%
2012
5,543
500
9.0
3,528
484
13.6
2013
4,949
297 1
6.0
3,355
346
8.2
North America
Latin America
Mature Europe
Emerging Europe
Asia Pacific
Total
2012
2013
1,800
1,000
5,500
100
2,300
1,800
1,000
5,500
100
2,000
10,700
10,400
1 Including €139 million impairment on a business held for sale.
Revenue breakdown by business unit
in %
Cradle-to-grave carbon footprint
in million tons of CO2(e)
D
C
A
B
A Functional Chemicals
B Industrial Chemicals
C Pulp and Performance Chemicals
D Surface Chemistry
Eco-premium solutions with
customer benefits
% of revenue
Scope 3 upstream
Scope 1 & 2
Scope 3 downstream
% reduction CO2(e) per ton of
sales
0
9.5
2
9.4
10
8
6
4
2
0
37
23
20
20
2012
2013
Total reportable rate of injuries
per million hours
16
16
3.5
2.8
1.8
2.2
2012
2013
2010
2011
2012
2013
0
5
10
15
20
25
30
67
AkzoNobel Report 2013 | Business performance
Key developments 2013
Functional Chemicals
• It was a challenging year financially, mainly due to weak demand in Europe, although
Industrial Chemicals
• Revenue was on a par with 2012, reflecting the ongoing difficult economic conditions in
markets in North America and Asia strengthened towards the end of the year
Europe, our primary market
• Business performance was boosted by internal cost-cutting programs and restructuring
• Chlor-Alkali was impacted by technical issues at major customers, along with an extended
activities at various production sites
• Plans were announced to phase out production of organic peroxides at our Deventer
site in the Netherlands by the end of 2016
• Dissolvine StimWell stimulation technology was firmly established in the oil and gas
industry due to its environmental and performance benefits, while our Dissolvine
GL chelate was recognized by the US EPA with a Design for the Environment label,
recognizing the product as being a safer ingredient
• A new production facility for Bermocoll cellulose derivatives was started up in
Ningbo, China
• The sale of the Primary Amides business and related manufacturing assets in Korea
was completed
maintenance shut-down at its largest plant, while MCA was in line with expectations,
despite a more competitive environment in China
• Salt performed well in core markets, but suffered from the loss of gas storage proceeds
from previous years and higher steam costs
• Two expansion projects were concluded, at Taixing, China, for MCA, and Rotterdam, the
Netherlands, for DME
• We introduced Ecosel BioCare, an anti-caking agent for road salt, and secured the supply
of 25 MWh base load electricity from a biomass incinerator in Delfzijl, the Netherlands, for
a seven-year period, which will result in a CO2 reduction of 130,000 tons per year
Key brands
Revenue in € millions
Key brands
Revenue in € millions
Rexolin®
1,917
1,963
1,872
1,165
1,188
1,173
Some of our customers
• Dow
• BASF
• Yara
• Procter & Gamble
• FMC
• Warwick
• Lyondell-Basell
• Henkel
Top raw materials
• Ammonia, ethylene,
methane and propylene
• Chloroformates
• Sulfur, salt, cellulose
Key cost drivers
• Ethylene
• Sulfur
• Salt
• Energy
68
2011
2012
2013
Geo-mix revenue by destination in %
A
C
B
Some of our customers
• Bayer
• Huntsman
• Shin-Etsu
Top raw materials
• Fuels (for cogeneration)
• Power
• Acetic acid
2011
2012
2013
Geo-mix revenue by destination in %
B C
A
A EMEA
B Americas
C Asia Pacific
Key cost drivers
• Oil, gas and coal prices
• Methanol prices
42
30
28
A EMEA
B Americas
C Asia Pacific
91
5
4
Business performance | AkzoNobel Report 2013
Pulp and Performance Chemicals
• Volumes for most product lines started slowly, but recovered substantially in all areas in
the second half of the year
• The Bleaching Chemicals business saw somewhat lower volumes in North America, but
this was offset by growing volumes in South America, while Europe was slightly higher
than 2012 and Asia was stable
• Colloidal Silica continued its growth in high added value and differentiated segments,
while Expancel, our expandable microspheres business, grew its revenue according to
plan versus 2012. Paper Chemicals saw some volume pressure, but was able to increase
its margins
Surface Chemistry
• Operating income held up well compared with 2012
• Unexpected supply chain and production issues at some US and Chinese sites impacted
volumes and revenues, but significant effort has been put into strengthening output and
the reliability of our supply chain
• Several performance improvement actions were launched as part of a renewed strategy for
the business
• Signed long-term development agreements with key customers in the agro segment
• Began debottlenecking projects at our sites in the US and Europe which will increase
capacity by 20 to 30 percent
• The Jupiá Chemical Island in Três Lagoas, Brazil, was inaugurated and a new Expancel
• Announced a significant investment in China to boost capacity and improved operational
plant in Sundsvall, Sweden, also started production
excellence at manufacturing sites in Boxing and Ningbo
• A number of smaller, non-core businesses were divested during 2013
• Powered by electricity generated from renewable biomass, our Chemical Islands in Brazil
continue to provide customers with an innovative and sustainable solution to meet their
operational needs
• Launched Berol LS, which delivers superior degreasing performance in an organic,
solvent-free solution
• Completed the OneSAP project without impacting customers, a major accomplishment in
a challenging setting
Key brands
Revenue in € millions
Key brands
Revenue in € millions
1,116
1,153
1,036
945
1,085
1,012
Some of our customers
• APP
• BillerudKorsnäs
• Domtar
• Fibria
• Georgia Pacific
• Stora Enso
• SCA
• Smurfit Kappa
• Suzano
Top raw materials
• Energy
• Salt
• Rosin
• Sodium silicate
Key cost drivers
• Energy prices and logistic costs
2011
2012
2013
Geo-mix revenue by destination in %
A
C
B
Some of our customers
• Elementis
• GE
• Monsanto
• Procter & Gamble
• Potash Corporation
of Saskatchewan
• Southern Clay
• Unilever
Top raw materials
• Animal fats and
vegetable oils
• Starch (corn, potato,
tapioca)
2011
2012
2013
Geo-mix revenue by destination in %
A
C
B
A EMEA
B Americas
C Asia Pacific
Key cost drivers
• Biofuels, food prices
• Ethylene prices
39
46
15
• Propylene prices
• Oil and gas prices
A EMEA
B Americas
C Asia Pacific
31
55
14
69
AkzoNobel Report 2013 | Business performance
Making roads safer
Winter can play havoc with road pavements, resulting in
dangerous driving conditions and hefty repair bills for road
authorities. So anything that can help prevent cracks
and what’s known as raveling (loss of material from the
surface) is likely to make roads considerably safer while
also saving money.
Our Industrial Chemicals business has already commer-
cialized Ecosel BioCare, a 100 percent biodegradable
anticaking agent for de-icing salt which avoids the use of
ferrocyanide, so addressing environmental concerns.
Now, our scientists have developed another new product
in the Ecosel range of innovative additives for salt, which
is known as Ecosel AsphaltProtection.
Due to be commercialized in 2014 after being tested with
partners in various European countries, the new product
– which is also fully biodegradable – is an additive for de-icing
brine which prevents the development of frost damage to
road surfaces. It works by slowing the freezing process,
resulting in soft, slushy ice rather than hard, abrasive ice.
Test results obtained from Austria, Sweden, Denmark
and the Netherlands have shown that use of Ecosel
Asphalt Protection prevents up to 50 percent of raveling
develop ment caused by frost – leading to substantial savings
in mainte nance and repair budgets, less disturbance to
traffic and lifetime extension of asphalt, not to mention safer
and better conditions for drivers.
Ecosel AsphaltProtection slows the freezing process,
resulting in soft, slushy ice rather than hard, abrasive ice.
100%
fully
biodegradable
Prevents the development
of frost damage to
road surfaces
100%
fully
biodegradable
Prevents the development
of frost damage to
road surfaces
Our leadership
In this section we introduce our Board of Management and
Executive Committee, as well as our Supervisory Board. We
also present the Report of the Supervisory Board and provide
detailed overviews of their activities during 2013.
Our Board of Management and Executive Committee
Statement of the Board of Management
Supervisory Board Chairman’s statement
Our Supervisory Board
Report of the Supervisory Board
74
76
78
79
81
Our leadership Our Board of Management
and Executive Committee
3
5
4
1
2
7
6
Ton Büchner (4)
CEO and Chairman of the Board of Management
and the Executive Committee (1965, Dutch)
of ICI plc. He was appointed CFO in 2008 to lead and
integrate the finance function and oversee the delivery of
the ICI acquisition synergies.
Secretary four years later. From 2003 to 2007, he held
professorships in company law at the Universities of
Groningen and Tilburg in the Netherlands.
Prior to joining AkzoNobel in 2012, Ton Büchner was
President and CEO of Sulzer Corporation, a position he
took up in 2007.
He has lived and worked in the UK, the Netherlands,
France and the US and is a Fellow of the Association
of Corporate Treasurers, as well as holding the MCT in
treasury, risk and corporate finance.
Marten Booisma (1)
Member of the Executive Committee responsible
for Human Resources (1966, Dutch)
Marten Booisma joined AkzoNobel in October 2013
from Royal Ahold, where he was Chief Human Resource
Officer, a position he took up in 2007. He has extensive
experience in corporate HR and is highly skilled at
improving HR processes and developing an effective
organization.
He joined Ahold Europe in 1999 and held a number of
important management positions, which included being
responsible for overall HR strategy in Europe. Earlier in
his career he worked for both Unilever and Shell.
Educated in the Netherlands, the UK and the US, he is
a Supervisory Board member at Raet.
Sven Dumoulin (2)
General Counsel and Member of the Executive
Committee (1970, Dutch)
Outside AkzoNobel, Dumoulin is a member of various
Legal Professional Associations in both the Netherlands
and abroad. He is a member of the Board of Directors
of the CPR International Institute for Conflict Prevention
& Resolution, and a Board member of both the
Dutch Association for Securities Law and the Dutch
Association for Listed Companies (VEUO). He was also
a member of the Dutch Corporate Governance Code
Monitoring Committee from 2007 to 2009.
Werner Fuhrmann (7)
Member of the Executive Committee responsible
for Specialty Chemicals (1953, German)
Before joining the Executive Committee, Werner
Fuhrmann held various positions in the field of
finance, including Controller of AkzoNobel’s Specialty
Chemicals business. He was appointed General
Manager of Chelates and Sulphur Products in 2000,
before becoming Managing Director of Industrial
Chemicals in 2005, a position he held until he took on
his current role in 2011.
Outside of AkzoNobel, he is Chairman of the Dutch
Association of the Chemicals Industry (VNCI), and
a Board member of both the European Chemicals
Association (Cefic) and American Chemisty Council.
Sven Dumoulin joined AkzoNobel as General Counsel
in 2010 and is responsible for legal, compliance,
intellectual property and legacy mana gement.
Ruud Joosten (5)
Member of the Executive Committee responsible
for Decorative Paints (1964, Dutch)
He holds a PhD in law from the University of Groningen
and worked as a lawyer with a large Dutch firm prior to
joining Unilever in 2003, where he was appointed Group
Ruud Joosten joined AkzoNobel in 1996 as International
Marketing Manager for the Decorative Paints business.
Since then, he has held various management positions
within both Decorative Paints and Specialty Chemicals.
In 2008, he was appointed Managing Director of Deco
rative Paints North and Eastern Europe, located in
Warsaw, Poland. Three years later he became Managing
Director for Pulp and Performance Chemicals, located
in Gothenburg.
A graduate of the Amsterdam Free University, where
he gained a Masters in economics, he has lived and
worked in the Netherlands, Poland and Sweden.
Conrad Keijzer (3)
Member of the Executive Committee responsible
for Performance Coatings (1968, Dutch)
Conrad Keijzer joined AkzoNobel in 1994 as Market
Development Manager in the company’s Industrial
Chemi cals business, after graduating from Twente
University of Technology with a Masters degree in
industrial engineering.
Since then, he has held various management positions
within the Performance Coatings and Specialty Chemi
cals Business Areas. In 2004, he was appointed Global
Director for Automotive Plastic Coatings. Then in
2008 he served as Managing Director for AkzoNobel
Packaging Coatings and two years later as Managing
Director for AkzoNobel Industrial Coatings.
Outside of AkzoNobel, he is a Board member of CEPE
(the European Council of Paint and Printing Ink
producers).
He has lived and worked in the Netherlands, Mexico,
the US, Spain and Germany.
An engineer by training, he earned his Master of Science
in Civil Engineering at Delft University of Technology, the
Netherlands. He also has a Master of Business Admi
nistration from IMD in Lausanne and attended the
Stanford Executive Program in Palo Alto, California, US.
His early career was spent in the oil and gas construction
industry involving roles at Allseas Engineering in Europe
and AkerKvaerner in South East Asia. He then joined
Sulzer in 1994, working in a range of operations before
his appointment to the executive committee as a
divisional president in 2001.
He has lived and worked in the Netherlands, Singapore,
Malaysia, China, Switzerland and the US.
Keith Nichols (6)
CFO and Member of the Board of Management
and the Executive Committee (1960, British)
Keith Nichols joined AkzoNobel in December 2005
from Corus Group plc, where he held the position of
Group Treasurer. Prior to joining Corus in 2004, he held
a number of senior finance positions within the TNT
Post Group, including that of CFO, and before that with
WPP plc, BET plc and Storehouse plc.
Having brought extensive international finance expe
rience to AkzoNobel, he played a key role in the
divestment of the company’s pharmaceutical operations
in 2007, and in financing and completing the acquisition
74
Our leadership | AkzoNobel Report 2013 Statement of the
Board of Management
The Board of Management’s
statement on the financial
statements, the management
report and internal controls.
We have prepared the AkzoNobel Report 2013, and the
undertakings included in the consolidation taken as a whole,
in accordance with International Financial Reporting Standards
(IFRS), as adopted by the EU and additional Dutch disclosure
requirements for annual reports.
To the best of our knowledge:
• The financial statements in this AkzoNobel Report 2013
give a true and fair view of our assets and liabilities,
our financial position at December 31, 2013, and of the
result of our consolidated operations for the financial
year 2013
• The management report in this AkzoNobel Report 2013
includes a fair review of the development and performance
of the businesses and the position of AkzoNobel, and
the undertakings included in the consolidation taken as a
whole, and describes the principal risks and uncertainties
that we face
The Board of Management is responsible for the establishment
and adequate functioning of internal controls in our company.
Consequently, the Board of Management has implemented a
broad range of processes and procedures designed to provide
control by the Board of Management over the company’s oper
ations. These processes and procedures include measures
regarding the general control environment, such as a Code
of Conduct including business principles and a corporate
complaints procedure (SpeakUp!), corporate directives and
authority schedules, as well as specific measures, such as a
risk management system, a system of controls and a system of
letters of representation by responsible management at various
levels within our company.
All these processes and procedures are aimed at a reason
able level of assurance that we have identified and managed
the significant risks of our company and that we meet our
operational and financial objectives in compliance with appli
cable laws and regulations. The individual components of the
above set of internal controls are in line with the COSO Enter
prise Risk Management Framework. With respect to support
to, and monitoring of, compliance with laws and regulations,
including our Code of Conduct, a Compliance Committee
has been established. Internal Audit provides assurance to
the Board of Management whether our internal risk manage
ment and control systems, as designed and represented by
management, are adequate and effective.
While we routinely work towards continuous improvement of
our processes and procedures regarding financial reporting,
the Board of Management is of the opinion that, as regards
financial reporting risks, the internal risk management and
control systems:
• Provide a reasonable level of assurance that the financial
reporting in this Report 2013 does not contain any errors
of material importance
• Have worked properly during the year 2013
For a detailed description of the risk management system
with regard to the strategic, operational and compliance risks
and the principal risks identified, reference is made to the Risk
management chapter in the Strategy section, as well as the
Compliance and integrity management chapter of the Gover
nance and compliance section. We have discussed the above
76
opinion and conclusions with the Audit Committee, the Super
visory Board and the external auditor.
Outlook
Although we saw early signs of stabilization in the second half
of 2013 in some of our businesses, the economic environment
remains fragile and foreign currencies volatile. We will continue
to significantly restructure our businesses in 2014 to reduce
our cost base further to offset the expected continued weak
recovery. The company is on track to achieve its strategic priori
ties for 2015.
Amsterdam, February 19, 2014
The Board of Management
Ton Büchner
Keith Nichols
Our leadership | AkzoNobel Report 2013 Learning to be the best
Every company wants to establish a competitive edge, even
more so when the economy makes life difficult and doing
business becomes extra challenging. But how do you meet
this challenge and get that allimportant advantage over your
competitors?
At our Automotive and Aerospace Coatings business, one
answer has been to train salespeople to clearly communicate
how a product can meet a customer’s needs and beat the
competition more in terms of value than price. Introduced this
year in Asia, the new sales training program – which employs
an approach known as blended learning – has been highly
successful.
Blended learning is different from traditional oneoff training
events because it combines workshops, roleplaying,
elearning and takehome assignments in a single course
which takes two months to complete. This approach was
used recently in China and India for a Value Proposition
Selling program, which involved participants putting their
knowledge into practice for four weeks immediately after the
course had been completed.
Not only does this approach prompt employees to start
applying their newly acquired knowledge straight away, but it
also encourages them to take a more active role in their
career development. In turn, it leads them to commit more
fully to their role and take more responsibility for their
performance. The programs also offer a very tangible
demonstration of AkzoNobel’s commitment to developing the
talents of its people.
And initial evidence suggests that it is paying off. In the four
weeks following the completion of one course in India, the
sales staff added several new customers and increased sales
at existing customers.
Supervisory Board
Chairman’s statement
2013 was an inspiring year for
AkzoNobel. Although we experien
ced constant headwinds due to the
economic environment, the year
was notable for the rollout of our
new company strategy. It was also
the year in which AkzoNobel was
once again ranked number one in
the Materials industry group on
the Dow Jones Sustainability Index.
The challenging economic conditions persisted through
out 2013 and I do not expect an early improvement in the
trends facing our enduser market segments. I am convinced,
however, that our CEO Ton Büchner, together with his dedicat
ed team, will be able to drive AkzoNobel through these difficult
economic circumstances. The acceleration of the performance
improvement program and the strategy announced in February
2013 are clearly the right focus for the company to have.
With the additions of Conrad Keijzer, Ruud Joosten and Marten
Booisma to the Executive Committee, we have a committed
and enthusiastic team with excellent strategic knowledge and
operational skills which will be of great benefit to the company
as we look to make swift progress on our strategic agenda.
The new strategy of building on leading market positions and
focusing on four enduser segments, as well as concentrat
ing on organic growth, operational excellence and sustainabil
ity, has been in place for a year now. Our enduser approach
in particular has helped us to further develop key customer
driven actions. Remuneration has also been aligned with
announced targets in order to drive performance towards
achieving the strategy. In addition, the performance improve
ment program we announced in 2011 continued to do well
during the course of 2013, with more than the €500 million in
EBITDA that we originally targeted being delivered a year early.
As a result of this acceleration, I am confident that AkzoNobel
will continue to embed a culture of continuous improvement
and operational excellence.
I am particularly proud that AkzoNobel was again ranked in
first place on the Dow Jones Sustainability Index (in the newly
named Materials industry group), the eighth consecutive year
we have been ranked in the top three. The ranking underlines
the fact that sustainability is at the heart of our strategy and
emphasizes our shared belief that sustainability is business
and business is sustainability. With this strategy, we have been
creating more value for all our stakeholders.
The following pages provide a detailed overview of the Super
visory Board’s activities during the reporting year. Relevant
information concerning myself and my fellow Supervisory
Board members is also provided. Our corporate governance,
remuneration policy, compliance and integrity management
and shareholder relations are covered in the Governance and
compliance section. I hope it will give you a good understand
ing of the framework under which the company operates. At
AkzoNobel, we believe that good corporate governance is
integral to the structures and processes that the Supervisory
Board, Board of Management and Executive Committee have
put in place in order to achieve our strategic objectives.
On behalf of my fellow members of the Supervisory Board, I
would like to thank the CEO, the CFO, the other members of
78
the Executive Committee and all employees for their dedica
tion and hard work for the company in 2013. The Supervisory
Board experienced this during a combined visit with the Execu
tive Committee to Turkey. Country visits are important for our
understanding of the local businesses and people and they
support us in performing our governance tasks.
Finally, I would like to thank my fellow Supervisory Board
members for their commitment and support during the year. I
believe that the Supervisory Board is a strong and united team
with a wide range of experience and expertise that will continue
to serve the company well. In April 2014, I will reach the end of
my third and final term as a member of the Supervisory Board.
As per the 2014 AGM, I will therefore hand over the Chairman
ship. A thorough process has been followed to prepare my
successor and I am confident that the new Chairman will lead
the company into an exciting new era.
Karel Vuursteen
Chairman of the Supervisory Board
Our leadership | AkzoNobel Report 2013 Our Supervisory Board
Karel Vuursteen
(1941, Dutch) Chairman
Initial appointment 2002
Current term of office 2010–2014
Former CEO of Heineken; Deputy
Chairman and member of the Board
of Directors of Heineken Holding N.V.;
Chairman of the Supervisory Board of
TOMTOM N.V.
• Chairman of the Nomination Committee
• Member of the Remuneration Committee
Uwe-Ernst Bufe
(1944, German) Deputy Chairman
Initial appointment 2003
Current term of office 2011–2015
Sari Baldauf
(1955, Finnish)
Initial appointment 2012
Current term of office 2012–2016
Dolf van den Brink
(1948, Dutch)
Initial appointment 2004
Current term of office 2012–2016
Peggy Bruzelius
(1949, Swedish)
Initial appointment 2007
Current term of office 2011–2015
Former CEO of Degussa AG; member of
the Supervisory Board of Umicore SA.
Former member of the Group Executive
Board of Nokia Oyj; nonexecutive director
of FSecure Oyj; Chairman of the Board of
Fortum Oyj; Supervisory Board member at
Daimler AG and Deutsche Telekom.
• Member of the Remuneration Committee
• Member of the Nomination Committee
Former member of the Managing Board
of ABN AMRO Bank; Chairman of the
Supervisory Boards of Elsevier Reed Finance
B.V., Nederlandse Waterschapsbank N.V.
and Center Parcs Europe N.V.; Supervisory
Director of Legal & General Nederland N.V.,
KBC Bank and De Heus Nederland B.V.
• Chairman of the Audit Committee
Former CEO of ABB Financial Services;
former Executive VicePresident of SEB;
nonexecutive director of Axfood AB,
Lundin Petroleum AB, Skandia Mutual Life
Insurance and Diageo plc; Chairman of
Lancelot Asset Management AB.
• Member of the Audit Committee
Antony Burgmans
(1947, Dutch)
Initial appointment 2006
Current term of office 2010–2014
Sir Peter Ellwood
(1943, British)
Initial appointment 2008
Current term of office 2012–2016
Louis Hughes
(1949, American)
Initial appointment 2006
Current term of office 2010–2014
Ben Verwaayen
(1952, Dutch)
Initial appointment 2012
Current term of office 2012–2016
Former Chairman and CEO of Unilever
N.V. and plc; nonexecutive director of BP
plc; member of the Supervisory Boards of
SHV Holdings N.V., Jumbo Group Holding
B.V. and AEGON N.V.; Chairman of the
Supervisory Boards of TNT Express N.V.
and Intergamma B.V.
• Member of the Nomination Committee
• Chairman of the Remuneration Committee
Former Chairman of ICI plc; former Group
Chief Executive of Lloyds TSB Group.
• Member of the Audit Committee
Former President and COO of Lockheed
Martin; former Executive VicePresident of
General Motors; Chairman of InZeroSystems
LLC; member of the Board of Directors of
ABB Group and AlcatelLucent SA; executive
advisor of Wind Point Partners.
• Member of the Audit Committee
Former CEO of AlcatelLucent; former
Chief Executive/Chairman of the Board’s
Operating Committee BT group; non
executive director of Akamai Technologies,
Inc and Bharti Airtel Ltd.
• Member of the Remuneration Committee
• Member of the Nomination Committee
79
AkzoNobel Report 2013 | Our leadership A different class of product
As part of our ongoing efforts to supply more sustainable
products to customers, we are increasingly steering our
innovation towards the development of what we call eco
premium solutions (EPS). We define these as products that
offer a significant sustainability advantage compared with the
most commonly available equivalent commercial products.
One such example is our crystal metallic UV topcoats –
sup plied by our Wood Finishes and Adhesives business –
which are used to coat panels for a variety of commercial
applications, including schools, airports and restaurants. Not
only does the product meet our criteria for qualifying as an
EPS (see Note 4 of the Sustainability statements), but it’s also
an example of an EPS with direct downstream benefits.
The advantages of the product can be highlighted by
customer James Hardie, who used the 100 percent UV
system to replace a competitor’s 2K isocyanate coating
which had a VOC content of more than 60 percent.
Not only does the coatings system we provided contain zero
VOCs, but it is also nonflammable and significantly more
durable for chemical and abrasion resistance. In addition, our
customer was also able to cut their solvent emissions by
more than 50 percent, reduce their handling of isocyanate,
slash their reject rates from 12 percent to 0.2 percent and
achieve an increase in their productivity with an instant cure
UV process, more than offsetting the energy increase of UV
curing in comparison to air drying.
Looking ahead, we have a clear 2020 target to achieve
20 percent of revenue from products and services that
provide customers and consumers with a significant
sustainability advantage.
Report of the
Supervisory Board
Main 2013 activities
Succession planning resulting
in one new Supervisory Board
member candidate, to be
proposed for election at the
2014 AGM, in order to broaden
the financial knowledge base of
the Supervisory Board
The annual internal evaluation
concluded that the Supervisory
Board and its committees
continue to operate effectively
Chairman selection and
preparation for succession as
of the 2014 AGM
The Supervisory Board visited
Istanbul and Gebze in Turkey,
providing members with a
greater understanding of our
local business and their
customers
Senior executive succession in
the Executive Committee,
resulting in Marten Booisma
becoming the new ExCo
member responsible for
Human Resources, effective
October 1, 2013
Finalization of monitoring of
the performance improvement
program following its success-
ful acceleration in 2013
Meetings
The Supervisory Board held seven meetings during 2013. Six
meetings were plenary sessions with the full Executive Commit
tee present for all or part of the meetings. One meeting was
held without the full Executive Committee present, only the
Board of Management attended that meeting. All Supervisory
Board meetings were preceded or succeeded by an execu
tive session of the Supervisory Board, with the Chief Executive
Officer (CEO) being invited to four of these meetings. An atten
dance overview of the Supervisory Board and its committees
can be seen on this page. The Chairman of the Supervisory
Board prepared the meetings with the Corporate Secretary and
discussed matters such as the agendas with the CEO.
Supervisory Board attendance record
The Supervisory Board is confident that the following table
shows all members made adequate time available to give suffi
cient attention to the company. If Supervisory Board members
are unable to attend a Supervisory Board or committee meeting,
they inform the Chairman stating the reason. They also have
the opportunity to discuss any agenda items with the Chairman
and chairmen of the committees. Attendance is expressed as
the number of meetings attended out of the number eligible
to attend.
Supervisory Board attendance record
Karel Vuursteen
Sari Baldauf
Dolf van den Brink
Peggy Bruzelius
UweErnst Bufe
Antony Burgmans
Sir Peter Ellwood
Louis Hughes
Ben Verwaayen
SB
7/7
7/7
7/7
6/7
7/7
6/7
7/7
7/7
7/7
AC
–
–
8/8
7/8
–
–
8/8
7/8
–
RC
3/3
3/3
–
–
–
3/3
–
–
3/3
NC
2/2
2/2
–
–
–
2/2
–
–
2/2
The table indicates the meeting attendance for the Supervisory Board (SB), the Audit
Committee (AC), the Remuneration Committee (RC) and the Nomination Committee (NC).
81
AkzoNobel Report 2013 | Our leadership
The outcome of the enterprise risk management session held
by the Executive Committee was presented to the Supervisory
Board and risk corrective actions were identified to address the
top ten risks. Further details are included in the Risk management
chapter and the Strategy section.
All Supervisory Board members participated in the annual
compliance training session in which the General Counsel
and an external law firm provided an overview of AkzoNobel’s
compliance framework and gave competition law compliance
training. Supervisory Board members are also given the possibility
to enroll in AkzoNobel’s online compliance training modules on an
ongoing basis.
A thorough operational planning process followed, resulting in
a 2014 budget and operational plan, which was reviewed and
approved by the Supervisory Board.
The three members with Business Area responsibilities provi
ded regular updates to inform the Supervisory Board on safety,
competitive behavior, projects and yeartodate financials.
In 2013, the Supervisory Board moved to a digital meeting
platform. This will help improve governance by facilitating
communi ca tions and enabling a timely view of current and historic
company information.
Supervisory Board activities
One of the main activities of the Supervisory Board in 2013
was Supervisory Board member succession planning. Sir
Peter Ellwood has decided to step down at the 2014 AGM.
The Nomination Committee engaged the services of an execu
tive search agency to assist with the succession. In order to
identify a potential candidate, the agency employed a rigorous
search process after first gaining a thorough understanding of
AkzoNobel’s strategic ambitions, the specific leadership roles and
competencies needed to meet those ambitions and the culture
of our organization. As a result, it is the Supervisory Board’s inten
tion to nominate Mr. Byron Grote for election to the Supervisory
Board at the 2014 AGM. The new member will bring additional
financial knowledge and as such be an appropriate successor
for Sir Peter Elwood. The new Supervisory Board member will
partici pate in a tailored induction program covering AkzoNobel’s
governance and businesses and will also join the ongoing train
ing program in which all Supervisory Board members participate.
Mr. Vuursteen will reach the end of his 12year maximum tenure,
of which the last five years were as Chairman of the Supervisory
Board. A diligent and careful approach was adopted in order to
identify, select and prepare the new Chairman for his role and
responsibilities as of the 2014 AGM.
Considerable time was devoted to discussing the company’s
strategy and reviewing strategic options with the CEO. Business
Area, business unit and functional strategies were presented to
the Supervisory Board following the strategic review sessions
at company level with the Executive Committee. In 2013, these
included the presentation of the Powder Coatings business’
strategy, while both the Legal function and Integrated Supply
Chain gave strategy updates. The Board of Management kept the
Supervisory Board regularly informed of intended organizational
changes, appointments of senior managers and major contracts.
The Supervisory Board reviewed the 2013 sustainability perfor
mance data through the sustainability dashboard, providing
performance indicators for safety performance, ecoefficiency
improvement and employee engagement, including diversity and
inclusion and talent management. The Supervisory Board recog
nized that AkzoNobel has, over the past decade, built a strong
foundation for sustainability and is recognized as a leader in its
industry, demonstrated by the number one position in the Materi
als industry group on the 2013 Dow Jones Sustainability Index.
The Supervisory Board considers it of key importance that the
company maintains and strengthens this leadership position. The
Supervisory Board therefore supports and is fully behind the 2020
sustainability strategy and the Planet Possible concept, a next
level approach to sustainability which is fully focused on creating
more value from fewer resources.
In September 2013, the Supervisory Board, Board of Manage
ment and Executive Committee visited some of the company’s
businesses in Turkey. This included meetings with local manage
ment, customers and other stakeholders, as well as a visit to the
Decorative Paints site in Gebze. The visit provided a clear over
view of the country from a market segmentation perspective,
which helped the Supervisory Board to place the Turkish busi
ness in a structured way in the company’s new strategy. It was
also an excellent opportunity for the Supervisory Board to liaise
and engage with local management and to learn more about the
politicoeconomic view of Turkey.
Another key area of attention during the year was the company’s
performance improvement program, which is focused on achiev
ing operational and functional excellence and is fundamental to
the delivery of our 2015 targets in a challenging market environ
ment. The program was closely monitored by three Supervisory
Board members, who held five meetings with the CEO or Chief
Financial Officer (CFO), the program director and the Corporate
Director of Control. During these meetings, the progress of the
program was reviewed and discussed in detail, while representa
tives from the various work streams were also invited to attend
on several occasions to provide detailed overviews of their areas
of responsibility. In addition to providing reports on the prog
ress made, discussions were held about embedding the results
achieved and the quality of implementation. The results of these
meetings were reported back to, and discussed with, the full
Supervisory Board. As a result of the successful acceleration of
the program in 2013, monitoring by Supervisory Board members
of the program ended as of January 1, 2014.
82
Our leadership | AkzoNobel Report 2013
Financial statements and profit allocation
The financial statements of Akzo Nobel N.V. for the financial
year 2013 were audited by KPMG Accountants N.V. The
Board of Management submitted the financial statements,
together with the report of the Board of Management, the
report and management letter of the external auditor to the
Supervisory Board.
The financial statements, the report and management letter of
the external auditor were discussed extensively with the audi
tors by the Audit Committee, in the presence of the CEO and
CFO, and by the full Supervisory Board with the full Board of
Management. Based on these discussions, the Supervisory
Board is of the opinion that the 2013 financial statements of
Akzo Nobel N.V. meet all requirements for correctness and
transparency, and that they form a good basis to account for
the supervision provided (see the Financial statements section).
The Audit Committee monitors the followup by management
of the recommendations reported by the external auditor.
The Supervisory Board recommends that the Annual General
Meeting of shareholders (AGM) adopts the financial statements
as presented in this Report 2013 and, as proposed by the Board
of Management, approve the allocation of €352 million for the
payment of dividend. This is consistent with the company’s
aim to provide a stable to rising dividend. The proposed total
dividend for 2013 on each of the common shares outstanding
is €1.45 and it is proposed that this amount, less the interim
dividend of €0.33 – which was paid in November 2013 – be
made payable on May 28, 2014. The dividend will, at the share
holder’s discretion, be paid either in cash or in shares. In addi
tion, we request that the AGM discharge the members of the
Board of Management of their responsibility for the conduct of
business in 2013 and the members of the Supervisory Board
for their supervision in 2013.
Board evaluation
To assess its effectiveness, the Supervisory Board carried
out an internal performance evaluation of itself, its individual
members, its Remuneration Committee and Nomination
Committee, the Chairman and the chairmen of these commit
tees. The process consisted of Supervisory Board members
completing a confidential questionnaire. The Audit Committee
also carried out an internal performance evaluation of itself and
invited the other meeting participants to complete the confiden
tial questionnaire.
In a separate meeting without the Board of Management, the
full Supervisory Board discussed the results of the evaluation
questionnaires. The Supervisory Board also discussed the
functioning of the Board of Management and the performance
of its individual members. The evaluation of the Chairman
was discussed by the Supervisory Board in the Chairman’s
absence. The Audit Committee invited the Board of Manage
ment and other meeting participants to join part of the evalua
tion discussion. These discussions were recorded and conclu
sions and actions were discussed and confirmed at the next
meeting of the Supervisory Board and the Audit Committee.
Items addressed were overall performance and composition
of the Supervisory Board, the Audit Committee and the other
committees, strategic issues and key areas for 2014. Other
points discussed were the nature and impact of the discus
sions, strategy oversight, risk management and internal control
and succession planning. We are pleased to confirm that our
internal evaluation concluded that the Supervisory Board and
its committees continued to operate proficiently. The Supervi
sory Board was positive about the progress made in a number
of important areas, such as succession planning and coaching
of the new Executive Committee members. Improvement areas
are diversity and training.
The Supervisory Board intends to use an external facilitator in
the evaluation process every third year. The last external evalu
ation took place in 2011. We will once again use an external
consultancy firm for the 2014 Board evaluation.
Audit Committee
The Audit Committee held eight meetings during 2013.
The roles and responsibilities and composition of the Audit
Committee are set out in the Corporate governance statement.
Issues discussed in Audit Committee meetings were reported
back to the full Supervisory Board in subsequent meetings of
this Board.
Main 2013 activities
Review of the effectiveness of internal controls over
financial reporting including internal audit findings
Review of the 2013 annual report and financial
statements
Review of AkzoNobel’s dividend direction
Assessment of the economic crisis and the company’s
contingency planning
External auditor independence
Appointment of new lead auditor
External auditor tender process
Results/financial statements
Before each announcement of the quarterly results and annual
financial statements, the Audit Committee reviewed the finan
cial results and consulted on the reports and press releases to
be published and issues reviewed by the Disclosure Commit
tee. Supervisory Board members in general participated in this
part of the Audit Committee meeting.
83
AkzoNobel Report 2013 | Our leadership Risk management and internal control arrangements
The Audit Committee reviewed AkzoNobel’s overall approach
to risk management and control, its processes, outcomes and
disclosure. It also reflected on the deteriorating market condi
tions in Europe and the US and discussed contingency plan
ning. During 2013, the Audit Committee discussed:
• Internal control procedures and report
• InControl assurance statement
• Operating working capital management. In several
meetings, the Audit Committee discussed OWC to identify
improvement actions
• HSE and sustainability audits and summary of findings
• Risk management
• Internal audit reports and planning
• Post investment reviews
• Treasury strategy
• Tax strategy
• Litigation and claims
• Compliance with primary and secondary legislation
(internal framework, monitoring and processes and
compliance reports)
• Information management strategy
In addition, the Audit Committee reviewed the annual opera
tional plan (including budget), AkzoNobel’s dividend directions
and proposals. On fulfilling its oversight responsibilities in rela
tion to risk management and internal control arrangements, the
Audit Committee met regularly with senior executives and is
fully satisfied with the key decisions taken.
Internal audit function
The Audit Committee reviewed the internal audit plan and
strategy and agreed its budget and resource requirements.
An evaluation of the performance and quality of the internal
audit function was also carried out, with members being satis
fied with the effectiveness of the function. The Audit Commit
tee also met independently with the Corporate Director of
Internal Audit during the year and discussed the results of the
audits performed.
84
External auditor
KPMG Accountants N.V., AkzoNobel’s external auditor,
re ported in depth to the Audit Committee on the scope and
outcome of the annual audit of the financial statements, includ
ing the consolidated financial statements and the company
financial statements.
Evaluation
The Supervisory Board evaluated the performance of the
Audit Committee and the Audit Committee carried out a self
assessment of its performance. Both concluded that the Audit
Committee is performing effectively. Reference is made to the
paragraph on the Board evaluation in this chapter.
The Audit Committee held independent meetings with the
external auditor during the year and reviewed and challenged
the external auditor’s approach to auditing the company,
engagement letter, fees, risk assessment and audit plan. Other
topics discussed included:
• Hard close (as part of making the yearend process more
efficient, and in order to highlight important issues for
the annual financial statements, as well as giving timely
attention to important issues, AkzoNobel performed a
hard close as of October 31, 2013. Aligned with this, the
external auditor also performed certain procedures in
respect of the financial outcomes as of the same date)
• The quality of external audit
• Impact of new IFRS rules
The Audit Committee performed the annual review of the
adequacy of the Audit Committee charter, as well as evaluating
the services of the external auditor, and continues to closely
monitor international discussions on auditor independence.
Both processes were concluded and, as a result, the Audit
Committee has recommended to the Supervisory Board not
to propose a change in the external auditor’s appointment until
2016. In that year, based on Dutch regulations, the company
is required to change its audit firm. The tender process and
selection of a new firm was concluded in 2013, and the chosen
auditors will be proposed by the Supervisory Board to the AGM
in April 2014. Based on auditor independence requirements,
the lead auditor in charge of the AkzoNobel account is changed
every seven years. KPMG’s current lead partner, Mr. Weusten,
has held this position since July 2007. He will be succeeded
by Mr. Van Leeuwen, who will take over in April 2014. Further
details on the external auditor can be found in the Corporate
governance statement.
Our leadership | AkzoNobel Report 2013 Gratitude
All members of the Supervisory Board would like to express
their gratitude to the Board of Management and the other
members of the Executive Committee, as well as all employ
ees around the world, for their dedication and hard work for
the company in 2013.
Amsterdam, February 19, 2014
The Supervisory Board
Remuneration Committee
The Remuneration Committee held three meetings in 2013. The
roles and responsibilities and composition of the Remuneration
Committee are set out in the Corporate governance statement.
The Remuneration Committee reviewed the performance of
the members of the Board of Management and the Executive
Committee. Recommendations were made on the remunera
tion and personal targets for members of the Board of Manage
ment and the other members of the Executive Committee.
Proposals for the remuneration of Mr. Booisma were reviewed
and discussed with the CEO. The committee also reviewed the
remuneration of the members of the Supervisory Board and the
pension plan of the Executive Committee. Based on the recom
mendation of the Remuneration Committee, the Supervisory
Board intends to propose a change in the annual fixed remu
neration at the 2014 AGM.
Further details on the remuneration policy and its imple
mentation for 2013 are outlined in the Remuneration report
chapter in the Governance and compliance section. Infor
mation on the remuneration of the Board of Management and
Supervisory Board can be found in Note 22 of the Consolidated
financial statements.
Nomination Committee
The Nomination Committee held two meetings in 2013. The
roles and responsibilities and composition of the Nomination
Committee are set out in the Corporate governance statement.
The Nomination Committee made several recommendations
to the Supervisory Board during 2013. These included the
appointment of Messrs. Joosten and Keijzer as members of
the Executive Committee as of the 2013 AGM. The Supervisory
Board supported and approved these recommendations.
Together with the CEO, the Committee also devoted consid
erable time to senior executive succession planning. After a
thorough selection process, with the assistance of an execu
tive search agency, a recommendation was made by the
Nomination Committee – following proposals by the CEO – for
the succession of Mrs. Oudeman. Important selection criteria
included a proven track record, global business experience
and team spirit. The appointment was subsequently approved
by the Supervisory Board. Mr. Booisma was appointed as
the Executive Committee member responsible for Human
Resources as of October 1, 2013.
For CFO succession, a thorough selection process has been
initiated, reviewing external and internal candidates.
In addition, the Nomination Committee successfully identified
Mr. Byron Grote to succeed Sir Peter Ellwood as a member of
the Supervisory Board and devoted considerable time to dis
cussing the Chairman succession and short and longterm
Supervisory Board member succession. Based on the advice
of the Nomination Committee, the Supervisory Board recom
mends the appointment of Mr. Grote as a member of the
Supervisory Board at the AGM in 2014. As the Chairman
will retire as per the 2014 AGM, the Nomination Committee
recommended the Supervisory Board to limit the number of
Supervisory Board positions from nine to eight members.
The Supervisory Board also recommends the reappointment
of Messrs. Burgmans and Hughes at the 2014 AGM. It is the
intention of the Supervisory Board to appoint Mr. Burgmans
as Chairman of the Supervisory Board after the 2014 AGM.
85
AkzoNobel Report 2013 | Our leadership Governance
and compliance
In this section, we outline our corporate governance
structure and explain the remuneration of our
Board of Management. Information about compliance
and integrity management and AkzoNobel on the capital
markets is also included.
Corporate governance statement
Compliance and integrity management
Remuneration report
AkzoNobel on the capital markets
88
97
101
107
Governance and compliance Corporate governance statement
Shareholders
Supervisory Board
Board of Management
Executive Committee
Functions
Business Area
Decorative Paints
Business Area
Performance Coatings
Business Area
Specialty Chemicals
Countries
Business units
Business units
Business units
Our corporate governance framework is
governed by the following regulations:
Major external regulations
• Dutch Civil Code
• Dutch Act on financial supervision and
other applicable securities laws
• NYSE Euronext Amsterdam listing rules
• Dutch Corporate Governance Code
Major internal regulations
• Articles of Association
• Business Code of Conduct
• Share Dealing Rules
• Rules of Procedure for the Supervisory
Board
• Rules of Procedure for the Board
of Management and the Executive
Committee
• Directives and rules
• Authority rules
88
Governance and compliance | AkzoNobel Report 2013 AkzoNobel aspires to high
standards of corporate
governance. We consistently
enhance and improve our
corporate governance
standards and framework,
emphasizing transparency,
in accordance with applicable
laws and regulations.
The company’s management and supervision structure is
organized in a so-called two-tier system, comprising a Board
of Management, solely composed of executive directors, and
a Supervisory Board, solely composed of non-executive direc-
tors. The Supervisory Board supervises the Board of Manage-
ment and ensures that external experience and knowledge
are embedded in the company’s conduct. The two Boards are
independent of each other and are accountable to the Annual
General Meeting of shareholders (AGM) for the performance
of their functions.
Akzo Nobel N.V. is a public limited liability company (Naamloze
Vennootschap) established under the laws of the Netherlands.
Its common shares are listed on NYSE Euronext Amsterdam.
AkzoNobel has a sponsored level 1 ADR program and ADRs
can be traded on the international OTCQX platform in the US.
Our corporate governance framework is based on the
requirements of the Dutch Civil Code, the Dutch Corpo-
rate Governance Code adopted in 2003 and amended in
2008 (the Code), applicable securities laws, the company’s
Articles of Association and the rules and regulations appli-
cable to companies listed on the NYSE Euronext Amster-
dam stock exchange. These are complemented by several
internal procedures, such as the Business Code of Conduct
and the Share Dealing Rules. These procedures include a
risk management and control system, as well as a system of
assurance of compliance with laws and regulations, including
a complaints procedure.
To safeguard consistency and coherence for the whole orga-
nization, the Executive Committee has established directives,
including rules which provide a set of mandatory internal rules
and regulations that must be adhered to. The Business Code
of Conduct, Business Principles, directives, rules, manuals
and guidelines are part of the company’s directives frame-
work, which set out internal rules for employees.
The company’s Articles of Association were most recently
amended and adopted at the 2012 AGM, inter alia to comply
with changes in Dutch legislation such as the Securities Giro
Act (Wet giraal effectenverkeer) and the Act on Management
and Supervision (Wet bestuur en toezicht).
The Supervisory Board confirms that, throughout the year,
the company complied with the Code. The Code contains
principles and best practices for Dutch companies with listed
shares. Deviations from the Code – currently the company
deviates from the Code’s provisions III.3.5 and IV.1.1 – are
explained in accordance with the Code’s “apply or explain”
principle. With the exception of those aspects of our gover-
nance structure which can only be amended with the approval
of the AGM, the Board of Management and the Supervisory
Board may make adjustments to the way the Code is applied
as described below, if this is considered to be in the interests of
the company. If adjustments are made, they will be published
and reported in the annual report for the relevant year.
Board of Management and Executive Committee
General
The Board of Management is entrusted with the management
of the company and, as of January 1, 2011, operates in the
context of an Executive Committee. The Executive Commit-
tee comprises the members of the Board of Management,
currently the Chief Executive Officer (CEO) and Chief Financial
Officer (CFO), business leaders and leaders with functional
expertise, allowing both the functions and the Business Areas
to be represented at the highest level in the company. The
functions currently represented in the Executive Committee
are HR and Legal.
89
AkzoNobel Report 2013 | Governance and compliance In performing its duties, the Executive Committee is guided
by the interests of the company and its affiliated enterprises,
taking into consideration the relevant interests of the compa-
ny’s stakeholders. Among other responsibilities, the members
of the Executive Committee define the strategic direction,
establish the policies and manage the company’s day-to-day
operations.
The members of the Board of Management remain jointly and
individually accountable for all decisions made by the Execu-
tive Committee. All Executive Committee decisions require
a majority of the members of the Board of Management.
The Board of Management can decide to reserve decisions
for the Board of Management. The Board of Management
is accountable for its performance to a separate and inde-
pendent Supervisory Board. The Board of Management is
also answerable to the shareholders of the company at the
AGM. The Executive Committee members who are not also
a member of the Board of Management report to the CEO.
The CEO leads the Executive Committee in its overall manage-
ment of the company to achieve its performance goals and
objectives. He is the main point of liaison with the Supervi-
sory Board. The CFO is specifically responsible for overseeing
AkzoNobel’s finances.
The company has organized its activities into three Business
Areas: Decorative Paints, Performance Coatings and Special-
ty Chemicals. Each Business Area is represented by a respon-
sible member of the Executive Committee. To manage our
business in a more operational way, an Operational Control
Cycle is conducted once per month. For each Business Area,
there are Operational Review Meetings which provide a forum
for a more in-depth operational discussion on subjects rele-
vant to the Business Area. In addition, Functional and Country
Review Meetings are held to review upcoming proposals and
progress on the respective functional agendas. Twice per year
in each Operational Review Meeting, the functional agendas
of Sustainability, Human Resources, Commercial Excellence,
Integrated Supply Chain and Research, Development and
Innovation are discussed.
The Managing Directors of our business units, the Country
Directors and the Corporate Functional Directors in charge of
the different functions, report to individual Executive Commit-
tee members with specific responsibility for their activities and
performance.
The Board Committee Pensions, chaired by the CFO, over-
sees the general pension policies (to be) implemented in the
various pension plans of the company.
The company has a Sustainability Council, which advises
the Executive Committee on strategy developments. It also
monitors the integration of sustainability into management
processes and oversees the company’s sustainability targets
and overall sustainability performance. The council is chaired
by the CEO and includes representatives from the Executive
Committee, Managing Directors from our businesses and
Corporate Directors of Strategy, Human Resources, Sustain-
ability and HSE, Supply Chain/Research and Development,
Sourcing, and Communications. Progress regarding sustain-
ability objectives, development, target setting and imple-
mentation is reviewed quarterly by the Executive Committee
and semi-annually by the Supervisory Board, and is verified
annually by KPMG Sustainability (part of KPMG Advisory
N.V.). Our sustainability framework is further explained in
Note 1 of the Sustainability statements.
The company has a Compliance Committee to support the
Executive Committee with its responsibility in assuring and
managing compliance, and with its reporting to the Supervi-
sory Board. The Compliance Committee systematically identi-
fies material compliance risks, assists in assurance of compli-
ance with laws, regulations and ethical standards, monitors
compliance and reports findings and recommendations to the
Executive Committee. The Compliance Committee consists
of the General Counsel (chair), Corporate Secretary, Senior
Legal Counsel and Corporate Directors of Internal Audit,
Control, Compliance, Human Resources and Sustainability
and HSE. Our compliance and integrity management system
is explained in more detail in the Compliance and integrity
management chapter.
Rules of Procedure for the Board of Management and
the Executive Committee
The tasks and responsibilities, as well as internal procedural
matters for the Executive Committee, are addressed in the
Rules of Procedure for the Board of Management and Executive
Committee. These rules have been reviewed and approved by the
Supervisory Board and are available on our corporate website.
Representative authority, including the signing of documents,
is vested in at least two members of the Board of Manage-
ment jointly. The Board of Management has appointed corpo-
rate agents, including members of the Executive Committee
who are not also members of the Board of Management. The
list of authorized signatories is publicly available.
Appointment
Board of Management members are appointed to, and
removed from, office by the AGM. The other members of the
Executive Committee are appointed by the CEO, subject to
the approval of the Supervisory Board.
Members of the Board of Management are appointed for four-
year terms (or less), with the possibility of reappointment at
the expiry of each term. This is in line with the Code.
The Meeting of Holders of Priority Shares has the right to
make binding nominations for the appointment of members
of the Board of Management and the Supervisory Board. The
priority shares are held by the Foundation Akzo Nobel. The
Board of the Foundation Akzo Nobel consists of members
of the Supervisory Board who are not members of the Audit
Committee. In deviation of the Code (provision IV.1.1), the
Articles of Association state that the AGM cannot cancel
the binding nature of a nomination by the holders of priority
shares for the appointment of members of the Supervisory
Board or the Board of Management.
As the company subscribes to the Code’s principles in
general, members of the Supervisory Board and the Board of
Management are, in normal circumstances, appointed on the
basis of a non-binding nomination by the Supervisory Board.
90
Governance and compliance | AkzoNobel Report 2013 The Board of the Foundation Akzo Nobel has confirmed its
intention to use its binding nomination rights only in cases
and circumstances it considers exceptional, such as in the
event of a (threatened) hostile takeover. (Reference is made
to the description of anti-takeover provisions and control). In
normal circumstances, resolutions to appoint a member of
the Supervisory Board or Board of Management will therefore
require a simple majority of the votes cast by shareholders.
Shareholders that meet the requirements laid down in the
Articles of Association are also entitled to nominate Super-
visory Board or Board of Management members for appoint-
ment. According to the Articles of Association, such appoint-
ments will require a two-thirds majority, representing at least
50 percent of the outstanding share capital.
Although a deviation from provision IV.1.1 of the Code, the
Supervisory Board and the Board of Management are of the
opinion that these provisions will enhance the continuity of the
company’s management and policies.
Members of the Executive Committee are not allowed to hold
more than one supervisory board membership or non-execu-
tive directorship in another listed company. This is more strin-
gent than the Code (provision II.1.8) and the Act on Manage-
ment and Supervision, which allows members of a board of
management two such supervisory board memberships or
non-executive directorships. The exception to this rule is that
in the 18 months prior to their retirement, Executive Commit-
tee members are allowed to hold more than one such supervi-
sory board membership or non-executive directorship in order
to allow them to prepare for retirement, provided that this does
not interfere with the performance of their tasks as members
of the Executive Committee. Furthermore, an exception can
be made for an executive joining the Executive Committee.
However, a maximum of two supervisory board member-
ships or non-executive directorships will apply. Acceptance
of external supervisory board memberships or non-executive
directorships in other listed companies by members of the
Executive Committee is subject to approval of the Supervisory
Board, for which authority has been delegated to the Chair-
man of the Supervisory Board.
Pursuant to the Act on Management and Supervision that
came into force on January 1, 2013, a board of management
of a large Dutch public company, or “Naamloze Vennoot-
schap”, such as Akzo Nobel N.V., has a balanced compo-
sition if it consists of at least 30 percent female and 30
percent male members. If a board of management does not
have such a balanced composition, it must explain why in
its annual report. It must also set out how the company has
tried to create a balanced composition, and explain how it
will try to get to such a balanced composition in the future.
The law does not describe how this rule should be applied in
a board consisting of two people and whether a board that
consists of two male or two female members is deemed not
to have a balanced composition. In the event that candidates
for new appointments to the Board of Management must be
selected, the Supervisory Board will duly consider the relevant
diversity standards and requirements for an international listed
company.
Conflict of interest
The handling of (potential) conflicts of interest between the
company and members of the Board of Management is
governed by the Articles of Association and the Rules of
Procedure for the Board of Management and Executive
Committee. A member of the Board of Management and
the other members of the Executive Committee shall not
participate in the discussions and decision-making on a
subject or transaction in relation to which he has a conflict
of interest with the company. Decisions to enter into trans-
actions under which members have conflicts of interest that
are of material significance to the company – and to the
relevant Board of Management or Executive Committee
member – require the approval of the Supervisory Board.
Any such decisions involving members of the Board of
Management will be recorded in the annual report for the
relevant year, with reference to the conflict of interest and
a declaration that the relevant best practice provisions of
the Code have been complied with. In 2013, no transac-
tions were reported under which a member of the Board of
Management had a conflict of interest that was of material
significance to the company.
Remuneration
In line with the remuneration policy adopted by the AGM,
the remuneration of the members of the Board of Manage-
ment is determined by the Supervisory Board on the advice
of its Remuneration Committee. The Supervisory Board
also decides on the remuneration of the other members of
the Executive Committee on the proposal of the CEO. The
composition of the remuneration of Board of Management
members, and the remuneration policy itself, are described
in the Remuneration report and the Financial statements (see
Note 22). The service contracts of the members of the Board
of Management do not contain change of control provisions
and are compliant with the Code. The main elements of the
service contracts of Board of Management members are
available on our corporate website.
Supervisory Board
General
The Supervisory Board’s overall responsibility is to supervise
the policies adopted by the Board of Management and the
Executive Committee and oversee the general conduct of the
business of the company. This specifically includes supervision
of the achievement of the company’s operational and financial
objectives, the corporate strategy designed to achieve the
objectives, the design and effectiveness of the internal risk
management and control systems, the main financial param-
eters, compliance with applicable laws and regulations and
risk factors. The Supervisory Board also provides the Board of
Management and Executive Committee with advice. In fulfill-
ing their duties, members of the Supervisory Board are guided
by the interests of the company and its affiliated enterprise,
taking into consideration the relevant interests of the compa-
ny’s stakeholders. Major investments, acquisitions and func-
tional initiatives are subject to Supervisory Board approval.
Composition
The Supervisory Board endorses the principle that the compo-
sition of the Supervisory Board is such that the Supervisory
Board members are able to act critically and independently of
one another and of the Board of Management and the Execu-
tive Committee. Each Supervisory Board member is capable
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AkzoNobel Report 2013 | Governance and compliance of assessing the broad outline of the overall strategy of the
company and its businesses and carrying out its duties prop-
erly. The Supervisory Board – which currently consists of nine
members – is constituted in a balanced manner to reflect the
nature and variety of the company’s businesses, their interna-
tional spread and the desirability to have available expertise
in fields such as finance, economic, societal, environmental
and legal aspects of international business, government and
public administration. Consequently, the current members
have a diverse and appropriate mix of knowledge and experi-
ence of the markets in which AkzoNobel operates, as well
as insights from different markets and non-operational areas.
A list of current Supervisory Board members, including their
biographies, is given in the Our leadership section.
With reference to the Act on Management and Supervision
mentioned earlier, a supervisory board of a large Dutch public
company (such as Akzo Nobel N.V.) has a balanced composi-
tion if it consists of at least 30 percent female and 30 percent
male members. The Supervisory Board understands that the
current gender balance does not meet this depiction of a
balanced composition because only two of its nine members
are female. However, a further aim of the Supervisory Board
– which its members believe is currently being met – is that
at least one-third of the members should meet the diversity
criteria of gender (female) and/or nationality (outside of the
European Union). This is in compliance with provision III.3.1 of
the Code, which ensures that its composition better reflects
both society at large and the markets in which the company
operates. When nominating and selecting new candidates for
the Supervisory Board in the future, these requirements will
be taken into account. AkzoNobel feels that gender is only
one part of diversity and that Supervisory Board members
will continue to be selected on the basis of their wide-ranging
experience, backgrounds, skills, knowledge and insight. Our
current Supervisory Board represents six nationalities, all of
whom bring with them experience from a diverse range of
international business, professional and non-profit organiza-
tion backgrounds.
Rules of Procedure of the Supervisory Board
The Supervisory Board is governed by its Rules of Procedure,
which are available on the company’s corporate website. The
Rules of Procedure include the profile and the Charters of the
Committees and sets out the tasks and responsibilities of the
Supervisory Board.
The Chairman of the Supervisory Board determines the
agenda, chairs the meetings of the Supervisory Board, moni-
tors the proper functioning of the Supervisory Board and its
committees, arranges for the adequate provision of informa-
tion to its members and acts on behalf of the Supervisory
Board as the main contact for the Board of Management and
Executive Committee. He also initiates the evaluation of the
functioning of the Supervisory Board and its committees,
its individual members and the functioning of the Board of
Management. He additionally chairs the AGM. The Chairman
of the Supervisory Board is Mr. Vuursteen.
The Supervisory Board is assisted by the Corporate Secre-
tary. All members have access to the advice and services of
the Corporate Secretary, who is responsible for ensuring that
procedures are followed and that the Supervisory Board acts
in accordance with its statutory obligations under the Articles
of Association.
Resolutions of the Supervisory Board must be adopted by
absolute majority of the votes cast. The Chairman, or in his
absence the Deputy Chairman, shall cast the deciding vote in
the event of a tie.
more often if, in specific circumstances, including but not
limited to reasons of succession planning, this is considered
to be in the company’s interest.
In 2013 no (re)appointments to the Supervisory Board were
proposed to the AGM. For 2014, one appointment and
two re-appointments to the Supervisory Board are currently
scheduled to be proposed to the AGM.
Induction and training
Following appointment to the Supervisory Board, members
receive a comprehensive induction tailored to their individ-
ual needs. This includes an information package contain-
ing relevant information on the company and its corporate
governance and compliance systems, as well as meetings
with senior management and functional leaders. This enables
them to build up an understanding of AkzoNobel’s businesses
and strategy, and the key risks and issues the company faces.
Throughout the year, the Chairman of the Supervisory Board
ensures that regular updates on AkzoNobel’s businesses,
legal matters, social and corporate governance, environmen-
tal, accounting, investor relations matters and compliance are
provided to the Supervisory Board.
Independence of the Supervisory Board
Each member of the Supervisory Board meets the indepen-
dence requirements as stated in the Code provisions III.2.1
and III.2.2 and has completed an annual independence ques-
tionnaire addressing the relevant requirements for indepen-
dence.
Appointment
Members of the Supervisory Board are nominated, appointed
and dismissed in accordance with procedures which are the
same as those previously outlined for the members of the
Board of Management. As a general rule, based on a rotation
schedule (available on our corporate website), a Supervisory
Board member’s tenure is four years. In principle, members
are eligible for re-election twice, each time for a period not
exceeding four years. However, in deviation from the Code
(provision III.3.5), a member can be nominated for re-election
Conflict of interest
The Articles of Association and the Rules of Procedure include
detailed provisions on how to deal with conflicts of interest and
potential conflicts of interest between members of the Super-
visory Board and the company. A member of the Supervisory
Board shall not participate in the discussions and decision-
making on a subject or transaction in relation to which he/she
has a conflict of interest with the company. Decisions to enter
into transactions under which Supervisory Board members
have conflicts of interest that are of material significance to
92
Governance and compliance | AkzoNobel Report 2013 the company, and to the relevant Supervisory Board member,
require the approval of the Supervisory Board. Any such deci-
sions will be recorded in the annual report for the relevant year,
with reference to the conflict of interests and a declaration that
the relevant best practice provisions of the Code have been
complied with. In 2013, no transactions were reported under
which a member had a conflict of interest which was of mate-
rial significance to the company.
Remuneration
Supervisory Board members receive a fixed annual remunera-
tion and attendance fee, which is determined by the AGM.
More information on the remuneration of the members of the
Supervisory Board can be found in Note 22 to the Financial
statements.
Committees
The Supervisory Board has established three committees: the
Audit Committee, the Nomination Committee and the Remu-
neration Committee. Each committee has a charter describ-
ing its role and responsibilities and the manner in which it
discharges its duties and reports to the full Supervisory Board.
These charters are included in the Supervisory Board Rules of
Procedure, published on the company’s corporate website.
The committees report on their deliberations and findings to
the full Supervisory Board. The committee members’ atten-
dances in 2013 are shown in the Report of the Supervisory
Board.
Audit Committee
The Audit Committee assists the Supervisory Board in over-
seeing the quality and integrity of the accounting, auditing,
reporting and risk management practices of the company,
as well as the company’s compliance with legal and regula-
tory requirements, the qualifications, performance and inde-
pendence of the external auditor and the performance of the
internal audit function. The chairman of the Audit Commit-
tee is Mr. Van den Brink. The Audit Committee consists of
three other members – Mr. Hughes, Mrs. Bruzelius and Sir
Peter Ellwood – all of whom have accounting and financial
management expertise. As a rule, the CEO, CFO, Corporate
Director Control, Corporate Director Internal Audit and the
lead partner of the external auditor, KPMG, attend all regular
meetings. After every Audit Committee meeting, members
hold a separate meeting with only the internal auditor present,
and a separate meeting with only the external auditor present.
Other members of management attend as and when request-
ed. The General Counsel reports to the Audit Committee on
compliance related matters at every regular meeting of the
committee. The chairman of the Audit Committee initiates the
evaluation of the functioning of the Audit Committee and its
individual members, without the Board of Management being
present.
performance of the members of the Board of Management
and the Executive Committee. The committee also reviews
the remuneration package of the members of the Supervisory
Board and prepares proposals for adjustments if necessary.
The Remuneration Committee consists of four members and
is chaired by Mr. Burgmans. Ms. Baldauf, Mr. Verwaayen and
Mr. Vuursteen are the other members of the committee.
Further information on the work of the committees is set out
in the Report of the Supervisory Board, while details of the
remuneration of all Supervisory Board members are set out in
Note 22 of the Financial statements.
Nomination Committee
The Nomination Committee focuses on drawing up selection
criteria and appointment procedures for Supervisory Board and
Board of Management members. The committee assesses the
size and composition of both Boards, evaluates the functioning
of the individual members, makes proposals for appointments
and reappointments and supervises the Board of Management
on the selection of senior management. The committee also
considers nominations of Executive Committee members who
are not also a member of the Board of Management. When
selecting candidates for appointment to the Supervisory Board,
account is taken of the need for a balanced representation of
knowledge of the markets in which the company operates and
the need for insight from different markets and non-opera-
tional areas. Higher female and other diversity representation
are also actively being pursued. The Nomination Committee
consists of four members and is chaired by Mr. Vuursteen.
Ms. Baldauf, Mr. Verwaayen and Mr. Burgmans are the other
members of the Nomination Committee.
Remuneration Committee
The Remuneration Committee is responsible for making
proposals to the Supervisory Board on the remuneration policy
for the Board of Management, for overseeing the remunera-
tion of its individual members and the remaining members of
the Executive Committee and for overseeing the remuneration
schemes for AkzoNobel executives involving the company’s
shares. The committee conducts the periodic review of the
Auditors
The external auditor is appointed by the AGM on proposal
of the Supervisory Board. The current appointment is for
an indefinite period of time and is reviewed every four years
by the Audit Committee. The same committee advises the
Supervisory Board, which communicates the results of this
assessment to the AGM. The Audit Committee and the Board
of Management annually report their dealings with the external
auditor to the Supervisory Board and discuss the auditor’s
independence. During 2013, in addition to the annual internal
quality review on services provided by the external auditor,
the Audit Committee kept a close eye on national and interna-
tional discussions on auditor independence. As a result, the
Audit Committee has recommended to the Supervisory Board
not to propose a change in the external auditor’s appointment
until 2016. In that year, pursuant to the Dutch Audit Profes-
sion Act (Wet op het accountantsberoep), the audit firm of a
so-called public interest entity (such as a listed company) will
have to be replaced if the audit firm performed the statutory
audits of the company for a period of eight consecutive years.
For AkzoNobel, this means that it has to change its auditor
starting no later than January 1, 2016, it being noted that the
company’s current audit firm can finalize its audit in respect of
the financial year 2015 after the January 1, 2016, date. The
tender process and selection of a new firm was concluded in
2013. The selected auditors will be proposed by the Supervi-
sory Board to the AGM in April 2014. This new appointment
will be for a defined period as required by law.
93
AkzoNobel Report 2013 | Governance and compliance Based on auditor independence requirements, the lead
auditor in charge of the AkzoNobel account is changed every
seven years. KPMG’s current lead partner, Mr. Weusten, has
held this position since July 2007. He will be succeeded by
Mr. Van Leeuwen, who will take over in April 2014. The current
lead auditor is present at the AGM and may be questioned
with regard to his statement on the fairness of the financial
statements. The external auditor attends all meetings of the
Audit Committee, as well as the meeting of the Supervisory
Board at which the financial statements are approved. He
receives the financial information and underlying reports of the
quarterly figures and is given the opportunity to comment and
respond to this information.
Non-audit services
One area of particular focus in corporate governance is the
independence of the auditors. The Audit Committee has
been delegated direct responsibility for the compensation
and monitoring of the auditors and the services they provide
to the company. Pursuant to the Audit Profession Act, the
auditors are prohibited from providing the company with
services in the Netherlands other than “audit services aimed
to provide reliability concerning the information supplied by
the audited client for the benefit of external users of this infor-
mation and also for the benefit of the Supervisory Board, as
referred to in the reports mentioned.” The company has taken
the position that no additional services may be provided by
the external auditor and its global network that do not meet
these requirements, unless local statutory requirements so
dictate. In order to anchor this in our procedures, the Supervi-
sory Board adopted the AkzoNobel Rules on External Auditor
Independence and Selection and the related AkzoNobel Audit
Committee Pre-approval Guidelines. All these documents
have been revised and are available on the company’s corpo-
rate website.
Risk management and internal control
Internal control and risk management systems are in place.
Our risk management system is explained in more detail in the
Strategy section.
We have strict procedures for internal and disclosure controls
and auditor independence. The Disclosure Committee moni-
tors the procedures established by the company and advises
the Executive Committee to ensure adequate and timely
disclosure of material financial and non-financial information.
An Internal Control committee is responsible for maintaining
the company’s internal control framework. The awareness
of the company-wide internal control framework and self-
assessment process was improved in 2013 by publishing and
distributing the AkzoNobel control framework in an infograph-
ic format (see the following page). An area of continued focus
in 2013 was the control standards for our key IT systems and
making more use of automated controls in these systems.
We also have a company-wide compliance monitoring tool in
place to discuss and monitor progress with respect to compli-
ance-related issues. More detail on the so-called non-financial
letter of representation process is available in the Compliance
and integrity management chapter.
Reference is made to the Statement of the Board of Manage-
ment in the Our leadership section for the statements in
respect of the internal risk management and control systems.
Code of Conduct and complaints procedure
AkzoNobel has established a comprehensive Code of Conduct
and complaints procedure, pursuant to which employees
have the possibility of reporting alleged irregularities within the
company. More information can be found in the Compliance
and integrity management chapter.
Share Dealing Code
Members of the Board of Management, the Executive
Committee and the Supervisory Board are subject to the
AkzoNobel Share Dealing Rules, which limit their opportu-
nities to trade in AkzoNobel securities. In accordance with
Dutch law and regulations, transactions in AkzoNobel shares
carried out by Board of Management, Executive Committee
and Supervisory Board members are, as and when required,
notified to the Dutch Authority for the Financial Markets.
The Board of Management, Executive Committee and Super-
visory Board members require authorization from the General
Counsel prior to carrying out any transactions in respect of
AkzoNobel securities, even in a so-called open period. In
relevant cases, the General Counsel can prohibit carrying out
transactions in respect of other companies’ securities.
Share classes and major shareholders
AkzoNobel has three classes of shares: common shares,
cumulative preferred shares and priority shares. Common
shares are traded on the Euronext Amsterdam stock
exchange. Common shares are also traded over-the-counter
on OTCQX (organized by Pink Sheets) in the US in the form
of American Depositary Receipts (each American Deposi-
tary Receipt representing one-third of a common share). On
December 31, 2013, a total of 242,625,535 common shares
and 48 priority shares had been issued. By December 31,
2013, MFS Investment Management held more than 5 percent
of the company’s share capital.
The priority shares are held by the Foundation Akzo Nobel.
The Foundation’s Board consists of members of AkzoNobel’s
Supervisory Board who are not members of the Audit
Commit tee. The Meeting of Holders of Priority Shares has
the nomination rights for the appointments of members of the
Board of Management and of the Supervisory Board, as well
as the right to approve amendments to the Articles of Asso-
ciation of the company.
No cumulative preferred shares have been issued to date. It
has been communicated that the cumulative preferred shares
merely have a financing function, which means that if neces-
sary, and possible, they will be issued at or near to the prevail-
ing quoted price for common shares.
The Annual General Meeting of shareholders held on April 26,
2013, authorized the Board of Management for a period of 18
months after that date – subject to approval from the Super-
visory Board – to issue shares in the capital of the company
up to a maximum of 10 percent of the issued share capital (or
20 percent in case of a merger or acquisition) and to restrict
94
Governance and compliance | AkzoNobel Report 2013 3. Responding to risk
2. Setting objectives
4. Control activities
1. Control environment
5. Monitoring activities
6. Information and communication
95
AkzoNobel Report 2013 | Governance and complianceThe AkzoNobel control framework provides reasonable assurance in achieving busi ness goals, including strategic, operational and reporting goals, as well as those covering compliance. Internal control is not only about policies and procedures, but also relates strongly to people.Clear targets are vital for internal control. These align our vision, strategy and day-to-day business activities.Nothing happens without information and communication between people.Monitoring activities give feedback on the quality of the business processes.The four lines of defense :• Business management • Corporate departments • Internal audit • External auditAchieving our targets can be threatened by all possible risks. What these risks are, where they come from and how to handle them is a dynamic and ongoing process.Controls are executed everywhere, at all levels of the company and in all stages of business processes.The control environment provides the foundation. On the one hand, it gives organizational structure and assigns responsibillities. On the other, it shows commitment to the company’s values and to all employees. bid will be made without any agreement having been reached
in relation to such a bid with the company.
The same shall apply if one shareholder, or more shareholders
acting in a concerted way, hold a substantial percentage of
the issued common shares of the company without making
an offer. Or if, in the opinion of the Board of the Foundation
Akzo Nobel, the exercise of the voting rights by one share-
holder or more shareholders, acting in a concerted way, is
materially in conflict with the interests of the company. In such
cases, the Supervisory Board and the Board of Management,
in accordance with their statutory responsibility, will evaluate
all available options with a view to serving the best interests
of the company, its shareholders and other stakeholders. The
Board of the Foundation Akzo Nobel has reserved the right to
make use of its binding nomination rights for the appointment
of members of the Supervisory Board and of the Board of
Management in such circumstances.
In the event of a hostile takeover bid or other action which
the Board of Management and Supervisory Board consider
to be adverse to the company’s interests, the two Boards
reserve the right to use all available powers (including the right
to invoke a response time in accordance with provisions IV.4.4
and II.1.9 of the Code), while taking into account the relevant
interests of the company and its affiliate enterprise and stake-
holders.
or exclude the pre-emption rights for existing shareholders for
those shares. At the same meeting, the Board of Manage-
ment was given a mandate to acquire up to a maximum of
10 percent of the issued share capital of the company.
Annual General Meeting of shareholders (AGM)
Currently, General Meetings of shareholders are held at least
once a year. The Annual General Meeting of shareholders
is convened by public notice. The agenda, the notes to the
agenda and the procedure for attendance – including the
record date and the procedure for granting a proxy to a third
party – are published in advance and posted on the compa-
ny’s website. In 2013, the Shareholders’ Communication
Channel was used for the final time to distribute the agenda
and to allow shareholders who hold their shares through an
associated bank to participate in proxy voting at the meeting.
The Shareholders’ Communication Channel was terminated
as of December 31, 2013. However, AkzoNobel will contin-
ue to provide “remote voting” possibilities for shareholders,
among others by means of e-voting.
Holding shares in the company on the record date determines
the right to exercise voting rights and other rights relating to
the Annual General Meeting of shareholders, notwithstanding
the subsequent sale of shares thereafter. The notes to the
agenda contain all relevant information with respect to the
proposed resolutions. All resolutions are made on the basis
of the “one share, one vote” principle (assuming an equal par
value for each class of shares). All resolutions are adopted by
absolute majority, unless the law or the company’s Articles of
Association stipulate otherwise.
The Annual General Meeting of shareholders reviews the
annual report and decides on adoption of the financial state-
ments and the dividend proposal, as well as on the discharge
of the members of the Supervisory Board and the Board of
Management. In deviation from the Act on Corporate Gover-
nance (Frijns) that came into force on July 1, 2013, holders of
common shares in aggregate representing at least 1 percent
of the total issued capital may submit proposals for the
agenda of the Annual General Meeting of shareholders. These
proposals must be adequately substantiated and must be
submitted in writing, or electronically, to the company’s head
office in Amsterdam at least 60 calendar days in advance of
the meeting. The draft minutes of the Annual General Meeting
of shareholders (in Dutch) are made available on the compa-
ny’s corporate website within three months of the meeting
date. The final and duly signed minutes are made available
online within six months of the meeting date.
The Annual General Meeting of shareholders approves or
adopts, as the case may be, among other matters:
• The financial statements
• Dividends (not interim dividends)
• The election of members of the Board of Management
and the Supervisory Board
• The remuneration of the members of the Supervisory
Board
• Changes to the remuneration policy for the Board of
Management
• Other important matters such as major acquisitions or the
sale of a substantial part of the company as required
by law
• The authorization of the Board of Management to issue
new shares
Anti-takeover provisions and control
According to provision IV.3.11 of the Code, the company is
required to provide an overview of its actual or potential anti-
takeover measures, and to indicate in what circumstances it
is expected that they may be used. The priority shares may be
considered to constitute a form of anti-takeover measure. In
relation to the right of the Meeting of Holders of Priority Shares
to make binding nominations for appointments to the Board
of Management and the Supervisory Board, the Foundation
Akzo Nobel has confirmed that it intends to make use of such
rights in exceptional circumstances only. These circumstanc-
es include situations where, in the opinion of the Board of
the Foundation, the continuity of the company’s management
and policies is at stake. This may be the case if a public bid for
the common shares of the company has been announced, or
has been made, or the justified expectation exists that such a
96
Governance and compliance | AkzoNobel Report 2013 Compliance and integrity management
A strong compliance framework is one of the essential
foundations of good corporate governance and social
responsibility. Based on a comprehensive Code of
Conduct, AkzoNobel’s framework is supported by
implementation processes, monitoring and control
procedures, and is assessed by the Supervisory Board.
In everything we do, we aim for the highest standards
of performance and behavior. Our conduct must be
exemplary wherever we operate.
Compliance framework
Competition law
Anti-bribery
Export control
HSE &
Sustainability
Treatment of
employees
Share dealing
Privacy
Information security
Human rights
Fraud
AkzoNobel Code of Conduct
The Code of Conduct serves as the common reference
document which reflects our strategic values and sets out
our fundamental principles and rules for doing business.
The code applies equally to our corporate actions and the
behavior of individual employees, regardless of the market
segment, function or country in which we operate. The Code
of Conduct, Business Principles, directives, rules, manuals
and guidelines are part of the company’s directives frame-
work, which set out internal rules for employees. Available in
27 languages, the code is regularly distributed in paper form
and widely available online.
AkzoNobel is subject to local, regional and international laws
and regulations, regulatory controls and customs and prac-
tices in the countries in which we do business. Our legal and
compliance experts are monitoring and adapting to significant
and rapid changes in a wide range of legal and compliance
areas, to ensure that the code and our internal regulations
remain suited for purpose and are properly applied.
Code of Conduct for joint ventures, acquisitions and
our supply chain
We make sure that all employees – including those at joint
ventures we operate and at newly acquired companies – are
aware of, and comply with, laws and regulations that are
relevant to their specific role, as well as the Code of Conduct
and related internal regulations. In those joint ventures we do
not control, we encourage our partners to consistently apply
the values and principles reflected in our code when doing
business.
AkzoNobel expects employees of newly acquired companies
to adhere to the Code of Conduct in their daily actions and
to live up to our strategic values, our fundamental principles
97
AkzoNobel Report 2013 | Governance and compliance and rules for doing business. They receive extensive train-
ing, which enables them to fully acquaint themselves with the
compliance framework and the code.
We want to do business with suppliers who share our values
and principles. Our Vendor Policy, designed to help ensure a
sustainable supply chain, specifically states our desire to do
business with partners who endorse our ethical and social
and environmental standards as formulated in the code.
Vendors confirm
in
accordance with core compliance principles through the
AkzoNobel Vendor Policy Declaration. In addition, in 2013
we joined Together for Sustainability, an initiative designed to
develop and implement a global audit program to assess and
improve sustainability practices within the supply chains of the
chemical industry. See Note 6 of the Sustainability statements
for more details.
their business
they conduct
that
Code of Conduct training, communication
and awareness
We appreciate that raising awareness through effective
communication and training is pivotal to strengthening our
compliance framework, and assists us in protecting the
company and our employees against economic and reputa-
tional harm. Communication on the Code of Conduct starts
for new employees from the moment they join AkzoNobel and
includes online and classroom training. Around 95 percent of
our employees have completed the Code of Conduct training
module. Each year, all employees must confirm their aware-
ness of the code as part of the annual performance appraisal
discussions. The compliance training curriculum also offers
specialized training to improve critical competencies and
skills to a designated group of employees on topics such as
competition law, anti-bribery, export control, privacy, fraud
awareness, anti-harassment and trade secrets.
Code of Conduct corporate complaints procedure
(SpeakUp!)
We value an open dialog with our employees worldwide on
our core principle of integrity. Our employees are encouraged
to report potential issues regarding the Code of Conduct
98
to their manager, the relevant business level compliance
committee, the compliance department, or the corporate
Compliance Committee. A global reporting helpline is avail-
able to our employees 24 hours a day to report confiden-
tially – and, if desired, anonymously – potential breaches
of the code. These reporting mechanisms are part of the
complaints procedure and are described in our SpeakUp!
policy and manual. All alleged breaches of the code that are
brought to the attention of the compliance department are
investigated.
In 2013, a total of 151 alleged breaches of the Code of
Conduct were reported, both through SpeakUp! and other
channels. The divestment of Decorative Paints North America
in April 2013 had a significant impact on the overall number
of Code of Conduct matters reported, compared with
previous years. Of the 151 matters reported, 57 were
sub stantiated, with 24 still under review. Nine were managed
by the Compliance Committee as they met certain criteria.
By subject, around 54 percent of the matters investigated
in 2013 related to business integrity; around 41 percent
treatment of employees and approximately
related
to
5 percent
to HSE concerns. Company-wide,
related
43 employees were dismissed on grounds related to breaches
of the Code of Conduct. Other sanctions and reme dial
actions in substantiated matters included: review of proce-
dures (eight); warnings (four); coaching (three); sus pen sion
(one); and probation (one). Although none of the issues
reported were material, we are aware of the need to continue
conducting root cause analyses and take appro priate actions.
Compliance governance
The compliance department, in close collaboration with the
Compliance Committee, provides an adequate compliance
framework and ensures its enforcement via various methods.
These methods include the application of monitoring and
reporting tools, developing the compliance training curricu-
lum and managing the corporate complaints procedure as
a whole, including root cause analyses. The Compliance
Committee assists the Executive Committee in its ultimate
responsibility to report to the Audit Committee of the Super-
visory Board. The Compliance Committee consists of the
General Counsel (chair), Corporate Secretary, Senior Legal
Counsel and Corporate Directors of Internal Audit, Control,
Compliance, Human Resources and HSE and Sustainability.
Business unit management and corporate staff departments
are responsible and accountable for raising awareness and
compliance within their respective businesses and depart-
ments. We have appointed business compliance officers and
set up compliance committees in each of the businesses.
The compliance officer assesses the main risks, improves
and monitors compliance and its effectiveness and ensures
training of the relevant employees. The compliance officers
also ensure that alleged breaches of the Code of Conduct
are investigated and findings and lessons learned are reported
to the relevant business management team, who then take
appropriate action.
Compliance and integrity reporting and monitoring
AkzoNobel has developed a set of corporate reporting and
monitoring tools to manage compliance and integrity at the
company. The compliance department manages these tools
and reports on outcome and effectiveness to the Compliance
Committee.
Complaints procedure (SpeakUp!)
As mentioned earlier, this is the internal system, available 24
hours a day, which encourages employees to report alleged
breaches of the Code of Conduct. The system is also available
for temporary employees, third parties with whom AkzoNobel
has a business relationship (such as customers, suppliers and
agents) and members of the general public.
Competition law compliance declaration
Employees who meet defined criteria, such as contact
with customers or suppliers, confirm their compliance with
competition law as articulated in our Competition Law
Compliance Manual through an annual declaration. Any
possible concerns are reported to the General Counsel and
appropriate actions are taken. In 2013, 12,700 employees
signed this declaration.
Governance and compliance | AkzoNobel Report 2013 Integrity management
Code of Conduct reporting
Code of Conduct number of alleged breaches reported
Code of Conduct breakdown of alleged breaches
Health & Safety
Business integrity
Treatment of employees
Other
Code of Conduct investigation
Code of Conduct alleged breaches investigated (in %)
Code of Conduct alleged breaches handled by the Compliance Committee
(in numbers)
Code of Conduct alleged breaches handled by the relevant businesses
(in numbers)
Substantiated Code of Conduct breaches (within year)
Substantiated Code of Conduct breaches (total, including breaches substantiated
in a later year)
Number of dismissals for Code of Conduct breaches within year
Dismissals for Code of Conduct breaches (total, including employees dismissed
in a later year)
Compliance monitoring
Competition Law Compliance Declaration
(number of confirmations)
Non-financial letter of representation
(% of operational managers)
Code of Conduct training
Code of Conduct trained (% online employees)
*By definition this number is not yet known.
2010
2011
2012
2013
260
22
122
113
3
100
23
237
170
170
118
120
245
18
112
112
3
100
24
221
149
149
99
108
295
42
152
101
0
100
24
271
163
178
131
139
151
8
82
61
0
100
9
142
57
-*
43
-*
13,000
14,400
15,900
12,700
100
100
100
100
95
95
96
95
Non-financial letter of representation (NFL)
At the end of the year, the Managing Director of each busi-
ness signs the NFL to confirm compliance with the Code of
Conduct and other corporate non-financial requirements.
The outcome is reviewed with the responsible member
of the Executive Committee and General Counsel and
the results are reported to the Board of Management and
the Audit Committee. Outstanding actions are followed
up in each business and progressed in quarterly reviews.
The outcome of the NFL process, in combination with the
internal control self-assessment process, forms the basis
for the Statement of the Board of Management in this
Report 2013.
Share Dealing Code Statement
Members of the Board of Management, Executive Commit-
tee and Supervisory Board, along with certain designated
employees, are made aware of their obligations under the
AkzoNobel Share Dealing Code.
2013 overview
Training
Our training program and curriculum is a cornerstone of
our compliance program. In 2013, we focused in particu-
lar on strengthening our anti-bribery compliance framework
by introducing a refreshed online anti-bribery training for
designated employees. More than 13,000 employees have
completed the course. This program provides guidance on
the ban on facilitation payments and sets out norms on gifts
and hospitality.
We continue to emphasize competition law compliance in
the training curriculum. The Executive Committee and Super-
visory Board received competition law training in 2013. In
addition, the Managing Director of each business met with
competition counsel to discuss recent trends and develop-
ments in competition law compliance.
Sensitive Country Program
The Sensitive Country Program was implemented in 2013.
Under this program, a small team – consisting of the General
99
AkzoNobel Report 2013 | Governance and compliance For more information on stakeholder engagement and our
safety, environmental and supplier processes, please turn to
the Sustainability statements.
Counsel, another member of the Executive Committee and
the Director of Compliance – meets on a quarterly basis. They
review the extent to which the company does business in
countries recognized by monitoring groups such as Trans-
parency International and Freedom House to have signifi-
cant issues with regards to sanctions and export controls,
corruption, human rights, political stability and safety and
security. Based on this analysis, we take appropriate action
regarding trade with customers in specific countries, includ-
ing enhanced internal review and the imposition of additional
restrictions such as bans.
The Sensitive Country Program supplements our export
control framework, which contains procedures and training
that provide up-to-date guidance for employees on regulatory
and enforcement activities, especially those coming from the
US and the EU and including rules with extra-territorial effect.
Our established global network of business-based export
control officers plays a key role in ensuring export control/
sanction compliance.
Business and human rights
The Code of Conduct also sets out our approach to human
and labor rights. Our approach is based on, and confirms,
our support for the United Nations Universal Declaration of
Human Rights, the key conventions of the International Labor
Organization and the OECD Guidelines for Multinational
Enterprises. We are a signatory of the United Nations Global
Compact and continue to integrate principles on human
rights, labor, environment and anti-corruption into our strat-
egy and operations.
As a critical element of being a socially responsible company,
our businesses and employees are required to respect the
human rights of other employees and the communities in
which we operate. This is reflected in our Code of Conduct,
our global HSE standards, and our Vendor Policy for suppli-
ers. We pay particular attention to the company’s presence
and operations in emerg ing markets, as compliance frame-
works risk being less advanced in these regions compared
with mature economies.
100
Governance and compliance | AkzoNobel Report 2013 Remuneration report
This report describes our
remuneration policy and the
remuneration paid to members
of the Board of Management
in 2013.
The remuneration and the individual contracts of the members
of the Board of Management are determined by the Supervi-
sory Board, within the framework of the remuneration policy.
The remuneration policy was first adopted by the Annual
General Meeting of shareholders (AGM) in 2005 and has
since been amended several times, most recently in 2013.
The performance share plan for the Board of Management
was approved by the AGM in 2004. It has been amended
several times since then, in accordance with article 2:135 of
the Dutch Civil Code, most recently in 2013. The share match-
ing plan for the Board of Management was approved by the
AGM in 2011. Our remuneration policy, including all structures
and policies related to the remuneration and employment
contracts of the members of the Board of Management, is in
line with the Dutch Corporate Governance Code (the Code).
The first part of this report describes the remuneration policy
as it has been adopted over time, while the second part
describes the implementation of the policy in 2013.
Remuneration policy
Our remuneration policy has the objective of providing remu-
neration in a form which will attract, retain and motivate
members of the Board of Management as top managers of a
major international company, while protecting and promoting
the company’s objectives. The aim is to provide remuneration
at the median level of the external market.
The total remuneration package of the members of the Board
of Management consists of:
• Base salary
• Performance-related short-term incentive (STI),
with shareholding requirement related share
matching opportunity
• Performance-related long-term incentive (LTI) in the
form of shares
• Post-employment benefits
• Other benefits
The various elements of the remuneration package are
set out in more detail below.
Base salary
The base salary is determined by the Supervisory Board.
Short-term incentive (annual bonus)
The target STI is 100 percent of the base salary for the CEO
and 65 percent of the base salary for any other member. The
STI is linked to financial targets (70 percent), as well as the
individual and qualitative targets of the members of the Board
of Management (30 percent). The specific targets are deter-
mined annually by the Supervisory Board. In respect of the
financial targets, the Supervisory Board can choose two to
three financial metrics and determine their relative weighting
from the following list:
• EBITDA
• Operating income (OPI)
• EBIT
• Net income (to share-
holders)
• Operating cash flow (OCF) • Return on investment (ROI)
101
AkzoNobel Report 2013 | Governance and compliance
These metrics are as used and/or defined in the company’s
annual report from time to time (subject to minor adjustments
if required in order to provide a better indicator of manage-
ment’s performance).
These performance metrics apply as of 2013. In respect of
grants made prior to 2013, half of the conditional share grant
is linked to AkzoNobel’s relative sustainability performance
and half to AkzoNobel’s relative TSR performance.
Other benefits
Other benefits – such as a company car and allowances – are
determined by the Supervisory Board.
The Supervisory Board sets the performance ranges each
year, i.e. the values below which no payout will be made (the
threshold), the “at target” value and the maximum at which
the payout will be capped, it being noted that the STI awards
will not exceed 150 percent of the base salary for the CEO
and 100 percent of the base salary for any other member of
the Board of Management.
Long-term incentive
The LTI consists of performance-related shares. Under the
performance share plan, shares are conditionally granted
to the members of the Board of Management. Vesting of
these shares is conditional on the achievement of perfor-
mance targets during a three-year period. Achievement of
the performance targets is determined by the Supervisory
Board in the first quarter of the year following the three-year
performance period. The number of vested shares is
adjusted for dividends paid over the three-year performance
period. The retention period for the shares expires five years
after the conditional grant.
Because sustainability is considered key to our long-term
future, 30 percent of the conditional share grant is linked to
AkzoNobel’s relative sustainability performance, which is
measured as the company’s average position in the Robe-
coSAM ranking during the three-year performance period.
The remaining 70 percent of the conditional grant of shares
is split equally between AkzoNobel’s relative total shareholder
return (TSR) performance compared with the companies in a
defined peer group, and the development in ROI during the
performance period. The TSR peer group and the vesting
schemes are determined by the Supervisory Board. In each
case, the maximum at vesting is 150 percent of the relevant
part of the conditional grant.
Shareholding requirements and share matching
The CEO and any other member of the Board of Management
are required to build up, over a five-year period from the date of
appointment, and then hold, at least three times respectively one
time their gross base salary in AkzoNobel shares for the duration
of their tenure as member of the Board of Management.
Board members are expected, for these purposes, to use
both their long-term incentive and short-term incentive in the
manner set out below.
Board members who have not yet achieved their minimum
shareholding are required to invest one-third of the short-term
incentive they receive (net after tax and other deductions) in
AkzoNobel shares. As further encouragement to build up the
minimum holding requirement, Board members who invest
up to a second third of their short-term incentive in shares
will have such shares matched by the company, one on one,
after three years from the date of purchase of the shares, on
the condition that the Board member still holds these shares
and showed a sustained performance during the three-year
period, as determined by the Supervisory Board.
Board members who continue to invest their short-term incen-
tives in whole, or in part, in shares after the minimum holding
requirement has been reached, will have the opportunity to
have such shares matched subject to the same conditions.
However, such shares will be matched with one share to every
two shares thus acquired and no shares will be matched to
the extent that shares were purchased with more than two-
thirds of the Board member’s net annual short-term incentive.
Post-employment benefits
Members of the Board of Management receive a contribu-
tion towards pension and similar retirement benefits, as deter-
mined by the Supervisory Board.
Claw back and value adjustment
The Supervisory Board may claw back variable pay compo-
nents paid to members of the Board of Management in the
event that such variable pay components were based on
financial information which is shown within a certain period of
time to be materially incorrect.
Pursuant to the rules of the performance share plan and provi-
sion II.2.10 of the Code, the Supervisory Board has the power
to adjust the outcomes of the STI or the LTI vesting schedules
if, given the circumstances, this would reflect a fairer measure
of performance, provided that targets, in the opinion of the
Supervisory Board, are not more easy or difficult to be satis-
fied.
Loans
The company does not grant personal loans to its Board
members.
Implementation of the remuneration policy in 2013
The Supervisory Board ensures that the remuneration policy,
and its implementation, are aligned with the company’s objec-
tives. Both the policy itself, and the checks and balances
applied in its execution, are designed to avoid incidents where
members of the Board of Management – and senior execu-
tives for whom similar incentive plans apply – act in their own
interest, take risks that are not in line with our strategy and risk
appetite, or where remuneration levels cannot be justified in
any given circumstance.
To ensure that remuneration is linked to performance, a signif-
icant proportion of the remuneration package is variable and
dependent on the short and long-term performance of the indi-
vidual Board member and the company. Performance targets
must be realistic and sufficiently stretching and – particularly
with regard to the variable remuneration components – the
Supervisory Board ensures that the relationship between
102
Governance and compliance | AkzoNobel Report 2013 the chosen performance criteria and the strategic objectives
applied, as well as the relationship between remuneration and
performance, are properly reviewed and accounted for, both
ex-ante and ex-post.
Base salary
The base salaries of members of the Board of Management
increased by 2.26 percent in 2013.
In accordance with the requirements of the Code, the
Remuneration Committee, before setting the targets to be
proposed for adoption by the Supervisory Board, has carried
out scenario analyses of the possible financial outcomes
of meeting target levels, as well as maximum performance
levels, and how they may affect the level and structure of the
remuneration of the members of the Board of Management.
We aim to maintain overall remuneration levels that are at
the median level of the external market. For benchmarking
purposes, a peer group has been defined by the Supervisory
Board. The peer group currently consists of the following
companies:
• Royal Ahold
• Arkema
• Clariant
• Royal DSM
• Heineken
• Henkel
• Royal KPN
• Lafarge
• Royal Philips
• Randstad
• Reckitt Benckiser
• Solvay
The Remuneration Committee consults professional indepen-
dent remuneration experts to ensure an appropriate compari-
son. It further reviews the impact on pay differentials within
the company, which is taken into account by the Supervisory
Board when the overall remuneration is determined. When
other benefits are granted, the Supervisory Board ensures
that these are in line with market norms.
For communication purposes, the table Compensation over-
view members of the Board of Management 2013 (see next
page) presents an overview of the remuneration of the members
of the Board of Management who were in office in 2013. Refer-
ence is made to Note 22 of the Financial statements for more
details. The implementation of the remuneration policy in 2013
will be a separate agenda item at the 2014 AGM.
Short-term incentive (annual bonus)
The objectives of the short-term incentive in 2013 were to
reward performance on ROI, OPI and OCF, to measure indi-
vidual and collective performance and to encourage prog-
ress in the achievement of long-term strategic objectives.
On the outcome of the short-term incentive elements (ROI,
OPI, OCF and personal targets), the Supervisory Board
applies a reasonableness test in which the actual ambition
level of the performance targets is assessed critically in light
of the assumptions made at the beginning of the year. It also
includes an assessment of the progress made with the strate-
gic objectives under prevailing market conditions.
The target ROI, OPI and OCF have been determined by the
Supervisory Board. Qualitative targets are set and assessed
by the Supervisory Board in the context of the medium-term
objectives of the company. AkzoNobel will not disclose all the
targets as they are considered commercially sensitive informa-
tion. However, the targets for 2013 included goals set in rela-
tion to delivering on the performance improvement program.
ROI, OPI and OCF are based on the company’s financial
results in constant currencies. ROI was calculated by deter-
mining the ratio of operating income over invested capital
using the numbers as reported. OPI was calculated as the
number reported for IFRS purposes, in constant currencies.
OCF was calculated as EBITDA minus the change in oper-
ating working capital, capital expenditure as approved and
remaining incidentals. In 2013, the performance against the
targets set for ROI, OPI and OCF was as follows:
2013 performance on financial measures
Measure
ROI
OPI
OCF
Payout as % of target
55%
81%
66%
Upon its ex-post review of the relationship between the
chosen performance criteria and the strategic objectives
applied, and of the relationship between remuneration and
performance, the Supervisory Board, given the importance of
the link between the variable remuneration and the company’s
performance improvement program and strategic ambitions,
decided not to make any adjustment to the financial metrics.
Long-term incentives
The objectives of our long-term incentive plan are to encour-
age long-term sustainable economic and shareholder value
creation – both absolute and relative to competitors – and to
align Board of Management interests with those of sharehold-
ers, as well as ensuring retention of the members of the Board
of Management. Performance-related shares are considered
to provide a strong alignment with shareholders’ interests.
Stock option plan
Stock options were conditionally granted for the last time in
2007 and vested for the last time in 2010. As the total option
term is seven years, the last stock options that vested under
the stock option plan can be exercised until the expiration
date in 2014.
The exercise price of the stock options is the NYSE Euronext
Amsterdam opening price on the first day after the Annual
General Meeting of shareholders that the AkzoNobel share
is quoted ex-dividend in the year in which the options were
conditionally granted.
Performance share plan
In line with the remuneration policy, as applicable in previous
grant years, vesting of 50 percent of the shares conditionally
granted in 2011 under the performance share plan (in respect
of which the performance period ended on December 31,
2013) was linked to AkzoNobel’s relative sustainability perfor-
mance by taking AkzoNobel’s average position in the Robe-
coSAM ranking.
103
AkzoNobel Report 2013 | Governance and compliance For all conditional grants made in 2011, the relevant vesting
scheme has been determined by the Supervisory Board as
follows:
Average position in RobecoSAM ranking during
performance period
Rank
1
2
3
4 – 6
7 – 10
11 – 15
Below 15
Vesting (as % of half of
conditional grant)
150%
125%
100%
75%
50%
25%
0%
AkzoNobel ranked first in 2013 and 2012 and second in 2011
in the relevant RobecoSAM ranking. As a result, AkzoNobel’s
sustainability performance over the period 2011 through 2013
resulted in a vesting of 141.7 percent for this part of the long-
term incentive.
For the 2011 award, the remaining 50 percent was linked to
AkzoNobel’s relative total shareholder return (TSR) perfor-
mance compared with the companies in a defined peer
group.
Independent external specialists conduct an analysis to
calculate the number of shares that will vest according to the
TSR ranking. In order to adjust for changes in exchange rates,
all local currencies are converted into euros. The relative TSR
performance is compared with a peer group as determined by
the Supervisory Board.
The peer group currently consists of the following companies:
• Arkema
• DuPont
• Kansai Paint
• Kemira OYJ
• Nippon Paint
104
• PPG Industries
• RPM Industrial
• Sherwin-Williams
• Solvay
• Valspar Corporation
This peer group is reviewed on a regular basis to ensure that the
companies in the group remain appropriate peers. Occasionally,
changes need to be made, particularly if one of the companies
in the peer group is taken over. The Supervisory Board will see
to it that, to the extent reasonably possible, a replacement has
no impact on the company’s relative TSR ranking.
The following vesting scheme has been applied in respect of
the conditional grants made in 2011:
TSR vesting scheme for the conditional grants
Rank
1
2
3
4
5
6
7
8 – 11
Vesting (as % of half of
conditional grant)
150%
135%
120%
100%
75%
50%
25%
0%
AkzoNobel’s TSR performance over the period 2011 to 2013
resulted in a tenth position within the ranking of the peer
group companies. This ranking did not result in any vesting of
shares for the TSR part of the share plan.
Based on AkzoNobel’s combined sustainability and TSR
performance, the final vesting percentage of the 2011 condi-
tional grant after including the dividend yield during the perfor-
mance period (determined to be 10.09 percent), equalled
77.98 percent.
This resulted in a total vesting of 77.98 percent of the shares
that were conditionally granted in 2011. Upon its ex-post
review of the relationship between the chosen performance
criteria and the strategic objectives applied, and of the relation-
ship between remuneration and performance, the Supervisory
Board, given the importance of the link between the variable
remuneration and the company’s strategic ambitions, decided
not to make any correction in respect of the definitive award.
The number of performance-related shares conditionally
granted under the 2013 plan amounted to 24,200 for the CEO
Compensation overview members of the Board of Management 2013
in €
Base salary
Short-term incentive
Share awards 2
Post-employment benefits
Other post-employment benefits 3
Other emoluments 4
Other compensation 5
Total remuneration
Ton Büchner
Chief Executive
Officer
Keith Nichols
Chief Financial
Officer
Leif Darner 1
Board member
Performance
Coatings
Tex Gunning 1
Board member
Decorative Paints
820,000
630,900
807,700
291,600
–
8,100
–
2,558,300
616,000
308,100
857,900
221,800
–
228,900
73,600
2,306,300
200,700
–
996,900
–
58,900
2,500
50,700
200,700
–
1,367,600
–
58,900
2,700
–
1,309,700
1,629,900
1 Until April 26, 2013.
2 Costs relating to share awards (Performance Share Plan and Share Matching Plan) are non-cash and relate to the expenses following IFRS2.
3 Other post-employment benefits refers to payments intended for building up retirement benefits other than those included in Post-employment benefits.
4 Other emoluments refers to social security cost. For Mr. Nichols this refers to the employer’s contribution in the UK.
5 Other compensation refers to compensation for living expenses and home leave allowances (Mr. Darner & Mr. Nichols).
Governance and compliance | AkzoNobel Report 2013
and 18,200 for the CFO. The former members of the Board
of Management who left the company during 2013 received
pro-rata conditional grants under the plan.
The above vesting schemes apply in respect of conditional
share grants made until 2013. As of 2013, the relative weight-
ing is ROI performance 35 percent, TSR ranking 35 percent
and SAM ranking 30 percent. No further amendments have
been made to the sustainability and TSR schemes. The
Supervisory Board has set the ROI metric applied in the LTI
for 2013 and to be achieved by the end of 2015 as follows:
ROI vesting scheme of conditional grant series 2013-2015
Performance
≥ 16.5%
14.0% to 16.5%
14.0%
12.5% to 14.0%
12.5%
< 12.5%
Vesting (as % of
35% of conditional grant)
150%
linear
100%
linear
50%
0%
A performance between the above points will be measured
on a linear scale.
In accordance with provision II.2.13d of the Code, the sched-
ule at the end of this remuneration report sets out for 2008
onwards (i) the number of at target shares conditionally
granted; (ii) the number of shares which have vested; (iii) the
number of shares held by members of the Board of Manage-
ment at the end of the lock up period; (iv) the face value at the
conditional share grant, at vesting and at the end of the lock
up period respectively.
In accordance with the company’s Articles of Association,
the Code and the rules of the performance share plan, the
number of shares to be conditionally granted to members
of the Board of Management is determined by the Supervi-
sory Board, within the limits of the remuneration policy and
the maximum number of shares as adopted and approved,
respectively, by the AGM. The Supervisory Board has
decided that where, in the event of a takeover, the payout
under the performance share plan is between 100 percent
and 150 percent, it will, at its discretion – taking into account
the performance of the company prior to the takeover bid
– decide whether the projected outcome is fair and may
decide to adjust the vesting upwards or downwards within
the bandwidth mentioned. This does not affect the discretion
the Supervisory Board has to correct the variable remunera-
tion of the Board of Management upwards or downwards in
exceptional circumstances. It is noted that a takeover would
not influence the RobecoSAM sustainability ranking of the
company nor the ROI performance and therefore the Super-
visory Board will in such event primarily take into account the
company’s TSR performance.
Pension contributions
The contributions for the members of the Board of Manage-
ment are defined as a percentage of income as determined
by the Supervisory Board. Currently, they are based on age.
In principle, the premiums are paid over the base salary in
the current year (which may include base salary payments to
Board members who step down or have agreed to step down
prior to their regular retirement age for effective succession
planning as described under Employment agreements) and
the short-term incentive of the previous year. The premiums
will therefore vary depending on the performance during the
previous year and the age of the Board member. External
reference data can be used in determining market competi-
tive levels of pension arrangements.
Claw back and value adjustment
In 2013 there was no cause for a claw back or value adjust-
ment by the Supervisory Board.
Shareholding requirements and share matching
Reference is made to the table under Note 22 of the Finan-
cial statements for the number of shares that were held at
year-end 2013 and 2012 by the members of the Board of
Management. In the table below, an overview is given of
the shares acquired by the relevant members of the Board
of Management in 2013 that would, subject to the condi-
tions of the share matching plan, qualify for matching by the
company.
Qualifying shares
Board members
Ton Büchner
Keith Nichols
Qualifying shares acquired
in 2013
1,429
–
Shares obtained by members of the Board of Management
under the performance share plan are taken into account for
share ownership purposes (but not for matching purposes)
as soon as they have become unconditional. This includes
vested shares that are to be retained during the blocking
period of two years after vesting.
The pension entitlements at pension age depend on the premi-
ums received and the investment results during the period.
Depending on whether the pension entitlements qualify as a
pension under the Dutch Pension Act, they are reported as
“post-employment benefits” (pension) or “other post-employ-
ment benefits” (similar post-employment benefits).
Leaving arrangements and other special remuneration
paid during 2013
In 2013, Mr. Darner stepped down from the Board of Manage-
ment. Details regarding his leaving arrangements were disclosed
in the previous annual report. Mr. Gunning retired from his posi-
tion with the company.
Employment agreements
Agreements for members of the Board of Management are
concluded for a period not exceeding four years in accordance
with the Code. After the initial term, re-appointments may take
place for consecutive periods of up to four years each. The notice
period by the Board member is subject to a term of three months;
notice by the company shall be subject to a six-month term.
Members of the Board of Management normally retire in the
year that they reach the age of 62. The employment agree-
ments allow the Supervisory Board to request a Board
member to resign between the age of 60 and the regular
105
AkzoNobel Report 2013 | Governance and compliance retirement age for effective succession planning within the
Board. In such an exceptional situation, the Board member
concerned will be entitled to the “fixed” remuneration compo-
nent until the date of retirement.
Reference is made to Note 22 of the Financial statements for
an overview of the payments made to former Board members
in 2013.
Remuneration policy planned by the Supervisory Board
for the next financial year and subsequent years
No changes in the remuneration policy are currently fore-
seen. The Supervisory Board will continue to closely monitor
whether the policy and its implementation are in line with the
objectives of the company. The metrics applied for the STI in
2013 (ROI, OPI, OCF) will continue to be applied in 2014. As
regards the ROI metric for the long-term incentive awards in
2014, the Supervisory Board will consider a more challenging
performance range as stated in the table below.
ROI performance range series 2014-2016
Threshold
Target
Maximum
Payout opportunity
Target
50%
13%
100%
15%
150%
17%
Valuation 1 shares Board of Management
Unconditional shares, vested
Board Member
Keith Nichols
Series 2008 - 2010
Series
Series 2009 - 2011
Series 2010 - 2012
Series 2011 - 2013
Conditional share grant
Value at grant
in €
Number
Number of vested shares
Value at vesting
in €
Number
End of lock up period
(5 years after grant)
Value in €
Number
8,733
27,400
18,300
18,600
478,481
806,656
849,120
864,714
–
19,125
13,471
14,504
–
714,510
670,115
817,171
–
9,563
6,738
–
–
538,779
NA
NA
Conditional shares, not vested
Board Member
Series
Ton Büchner
Series 2012 - 2014
Series 2013 - 2015
Matching shares 2012 (vesting 2016)
Matching shares 2013 (vesting 2016)
Keith Nichols
Series 2012 - 2014
Series 2013 - 2015
Number
31,900
24,200
10,810
1,429
23,900
18,200
1 Values based on the share price on January 1 of the relevant financial year (face value).
Conditional share
grant at target
Value at grant in €
Vesting at min
performance
Number
Vesting at max
performance
Number
1,191,784
1,203,829
403,862
71,086
892,904
905,359
–
–
–
–
–
–
47,850
36,300
10,810
1,429
35,850
27,300
106
Governance and compliance | AkzoNobel Report 2013 AkzoNobel on the capital markets
Proposed dividend of €1.45 per
share (on a par with 2012)
Settlement of $500 million bond
which matured at the end of 2013
Close dialog with the capital markets
We attach great value to maintaining an open dialog with
the financial community in order to promote transparency.
Management gave presentations at a number of industry
conferences during the year, as well as holding meetings with
investors and analysts. In February, a strategy update was
issued to reinforce the vision of leading market positions deliv-
ering leading performance.
Dividend policy
AkzoNobel’s dividend policy is to pay a stable to rising dividend
each year. Cash dividend is default, stock dividend is optional.
Total proposed dividend of €1.45 per share
The Board of Management proposes a dividend of €1.45 per
common share. AkzoNobel’s shares will be trading ex-divi-
dend as of May 2, 2014. In compliance with the listing require-
ments of Euronext Amsterdam, the record date will be May 6,
2014. The dividend as proposed to the 2014 Annual General
Meeting of shareholders will be payable as of May 28, 2014.
The dividend paid over the last five years is shown in the
graph on this page.
Dividend paid in € per share
Interim dividend
Final dividend
1.05
1.08
1.12
1.12
1.12
0.30
2009
0.32
0.33
0.33
0.33
2010
2011
2012
2013
Share price performance
Our share price increased 12 percent in 2013, underperform-
ing both the DJ Stoxx Chemicals and AEX indices. The share
price performance relative to these indices for a one-year
period is shown in the graph on the following page.
107
AkzoNobel Report 2013 | Governance and compliance
Share price performance 2013
AkzoNobel share price in €
AkzoNobel
AEX index
DJ Stoxx Chemicals index
60
55
50
45
40
2
1
c
e
D
1
3
3
1
n
a
J
3
1
b
e
F
3
1
r
a
M
3
1
r
p
A
3
1
y
a
M
3
1
n
u
J
3
1
l
u
J
3
1
g
u
A
3
1
t
p
e
S
3
1
t
c
O
3
1
v
o
N
3
1
c
e
D
1
3
Analyst recommendations
At year-end 2013, AkzoNobel was covered by 29 equity
brokers and the following analyst recommendations were
applicable (see diagram next column):
Analyst recommendations in %
Key share data
Year-end (share price in €)
Year-high (share price in €)
Year-low (share price in €)
Year-average (share price in €)
Average daily trade (in € millions)
Average daily trade
(in millions of shares)
Number of shares outstanding at
year-end (in millions)
Market capitalization at year-end (in
€ billions)
Net income per share (in €)
Dividend per share (in €)
Dividend yield (in %)
* As restated.
2011
2012
2013
37.36
53.74
29.25
42.2
47.5
1.1
49.75
49.75
35.16
42.23
39.6
0.9
55.71
56.08
42.65
49.32
39.8
0.8
234.7
239.0
242.6
8.8
11.9
13.5
2.04
1.45
3.4
(8.82)*
1.45
3.4
3.00
1.45
2.9
A Buy
B Hold
C Sell
DJ Stoxx
AEX
Akzo
41
31
28
A
C
B
Listings
AkzoNobel’s common shares are listed on the stock ex -
change of Euronext Amsterdam. AkzoNobel is included in
the AEX Index, which consists of the top 25 listed companies
in the Netherlands, ranked on the basis of their turnover in
the stock market and free float. The AkzoNobel weight in the
AEX index was 4.43 percent at year-end 2013. In 2013, 206
million AkzoNobel shares were traded on Euronext Amster-
dam (2012: 241 million). AkzoNobel has a sponsored level 1
ADR program and ADRs can be traded on the international
OTCQX platform in the US. The 3:1 ratio (ADR:ORD) became
effective from January 2, 2012 onwards.
See the table below for stock codes and ticker symbols:
Euronext ticker symbol
AKZA
ISIN common share
OTC ticker symbol
ISIN ADR
Sedol code
NL0000009132
AKZOY
US0101993055
5458314
108
Governance and compliance | AkzoNobel Report 2013
Distribution of shares 2013
A North America
B UK/Ireland
C The Netherlands
D Rest of Europe
E Rest of world
F Undisclosed
47
12
12
14
3
12
E
F
D
C
B
Distribution of shares 2012
A North America
B UK/Ireland
C The Netherlands
D Rest of Europe
E Rest of world
F Undisclosed
45
12
12
16
3
12
E
F
D
A
C
B
AkzoNobel in key sustainability indices
For the eighth year in a row, AkzoNobel was included in the
Dow Jones Sustainability World Index (DJSI World). In 2013,
we retained the number one ranking in the newly named
Materials industry group. We were also once again represent-
ed in the Carbon Disclosure Project, with an improved rating
for transparency of reporting and performance. The Carbon
Disclosure Project represents more than 500 institutional
investors, with over $60 trillion in assets under management.
A
In addition we qualified for the Climate Disclosure Leadership
Index (CDLI Benelux) during 2013, and became the leader in
the Sustainalytics chemicals industry ranking.
Broad base of international shareholders
AkzoNobel, which has a 100 percent free float, has a broad
base of international shareholders. Based on an independent
shareholder ID carried out in August 2013, the chart on the
left shows the geographical spread. Around 9 percent of the
company’s share capital is held by private investors, most of
whom are resident in the Netherlands.
Credit rating and outlook
AkzoNobel is committed to maintaining a strong investment
grade rating. Regular review meetings are held between rating
agencies and AkzoNobel senior management. See table for
present rating and outlook.
Rating agency
Long-term rating
Moody’s 1
Standard & Poor’s 2
BAA1
BBB+
Outlook
Negative
Stable
1 Rating affirmed on July 31, 2013.
2 Rating affirmed on Jan 22, 2014.
Bonds
The proceeds from the divestment of the North American
Decorative Paints business enabled the repayment of the
$500 million bond which matured at the end of 2013. For a full
overview of our bonds, please see the Bond & Credit Informa-
tion in the Investors section of our corporate website.
Debt maturity* in € millions (nominal amounts)
€ Bonds
£ Bonds
825
622
300
800
750
2014
2015
2016
2017
2018
2019
2020
2021
2022
* At the end of Q4 2013.
For more information, please refer to www.akzonobel.com/
investors
109
AkzoNobel Report 2013 | Governance and compliance
Financial statements
Consolidated statement of income
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of cash flows
Consolidated statement of changes in equity
Segment information
112
112
113
114
115
116
Company financial statements
Note A General information
155
155
Note B Financial non-current assets and provisions
157
for subsidiaries
Note C Trade and other receivables
Note D Cash and cash equivalents
Note E Shareholders’ equity
Notes to the Consolidated financial statements
Note F Long-term borrowings
Note 1 Summary of significant accounting policies
Note 2 Scope of consolidation
Note 3 Operating income
Note 4 Employee benefits
Note 5 Financing income and expenses
Note 6
Income tax
Note 7
Intangible assets
Note 8 Property, plant and equipment
117
124
126
126
128
129
131
133
Note G Short-term debt
Note H Financial instruments
Note I Contingent liabilities
Note J Auditor’s fees
Other information
Independent auditor’s report
Profit allocation and distributions
Note 9
Investments in associates and joint ventures 134
Note 10 Other financial non-current assets
Note 11 Inventories
Note 12 Trade and other receivables
Note 13 Cash and cash flows
Note 14 Group equity
Note 15 Post-retirement benefit provisions
Note 16 Other provisions
Note 17 Long-term borrowings
Note 18 Short-term borrowings
Note 19 Trade and other payables
Note 20 Contingent liabilities and commitments
Note 21 Related party transactions
Note 22 Remuneration of the Supervisory Board
and the Board of Management
Note 23 Financial risk management
134
135
135
136
136
138
144
144
145
145
146
147
147
150
157
157
157
158
158
159
159
159
160
161
Financial statements
Consolidated statement of income
Consolidated statement of
comprehensive income
In € millions
Note
2012 1
2013
In € millions
15,390
(9,591)
(2,106)
(3,192)
(1,275)
(384)
(40)
59
(3)
(261)
13
Continuing operations
Revenue
Cost of sales
Gross profit
Impairment
Selling expenses
General and administrative expenses
Research and development expenses
Other operating income/(expenses)
Operating income
Financing income
Financing expenses related to pensions
Other financing expenses
Results from associates and joint
ventures
Profit/(loss) before tax
Income tax
Profit/(loss) from continuing operations
Discontinued operations
Profit/(loss) for the period from
discontinued operations
Profit/(loss) for the period
Attributable to
Shareholders of the company
Non-controlling interests
Profit/(loss) for the period
Earnings per share, in €
Continuing operations
Basic
Diluted
Discontinued operations
Basic
Diluted
Total operations
Basic
Diluted
1 Restated for the revised IAS 19.
112
3
3
3
3
3
3
5
5
5
9
6
2
14
14
14
14
14
14
14,590
(8,951)
Profit/(loss) for the period
Other comprehensive income
Items that will not be reclassified to statement of income:
5,799
5,639
Post-retirement benefits
Income tax
Net effect
Items that may be reclassified subsequently to statement of
income:
Exchange differences arising on translation of foreign operations
Cash flow hedges
Income tax
Net effect
Other comprehensive income for the period
Comprehensive income for the period
Comprehensive income attributable to
Shareholders of the company
Non-controlling interests
Comprehensive income for the period
(139)
(3,023)
(1,345)
(373)
199
32
(21)
(211)
14
(4,681)
958
772
(111)
661
131
792
724
68
792
2.46
2.44
0.54
0.54
3.00
2.98
(6,997)
(1,198)
(1,390)
(203)
(1,593)
(436)
(2,029)
(2,092)
63
(2,029)
(6.98)
(6.98)
(1.84)
(1.84)
(8.82)
(8.82)
2012 1
(2,029)
2013
792
(1,298)
249
(1,049)
34
(7)
5
32
(1,017)
(3,046)
(3,093)
47
(3,046)
(200)
(64)
(264)
(510)
(2)
(7)
(519)
(783)
9
(20)
29
9
Financial statements | AkzoNobel Report 2013
Consolidated balance sheet
at year-end, before allocation of profit
In € millions
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax assets
Investment in associates and
joint ventures
Note
January 1, 2012 1
Year-end 2012 1
Year-end 2013
7
8
6
9
7,392
3,705
907
198
4,454
3,739
1,146
185
1,297
3,906
3,589
1,071
183
965
Other financial non-current assets
10
1,559
Total non-current assets
13,761
10,821
9,714
Current assets
Inventories
Current tax assets
Trade and other receivables
Cash and cash equivalents
Assets held for sale
Total current assets
Total assets
Equity and liabilities
Equity
Shareholders’ equity
Non-controlling interests
Group equity
Non-current liabilities
Post-retirement benefit provisions
Other provisions
Deferred tax liabilities
Long-term borrowings
Total non-current liabilities
Current liabilities
Short-term borrowings
Current tax liabilities
Trade and other payables
Current portion of provisions
Liabilities held for sale
Total current liabilities
Total equity and liabilities
1 Restated for the revised IAS 19.
11
6
12
13
2
14
15
16
6
17
18
6
19
16
2
1,924
98
2,937
1,635
–
9,031
529
1,728
664
541
3,035
494
413
3,369
551
–
6,594
20,355
1,545
91
2,698
1,752
921
5,764
464
7,007
17,828
1,426
86
2,536
2,098
203
5,594
427
6,349
16,063
9,560
6,228
6,021
1,942
735
434
3,388
1,237
701
389
2,666
5,968
6,499
4,993
662
390
3,242
455
352
961
220
3,218
601
49
4,827
20,355
5,101
17,828
5,049
16,063
113
AkzoNobel Report 2013 | Financial statements Consolidated statement of cash flows
In € millions
Profit/(loss) for the period
Income from discontinued operations
Adjustments to reconcile earnings to cash generated from operating activities
Amortization/depreciation
Impairment losses
Financing income and expenses
Results from associates and joint ventures
Pre-tax result on divestments
Income tax
Changes in working capital
Changes in provisions
Interest paid
Income tax paid
Other changes
Net cash from operating activities
Capital expenditures
Interest received
Dividends from associates and joint ventures
Acquisition of consolidated companies
Proceeds from divestments
Other changes
Net cash from investing activities
Proceeds from borrowings
Borrowings repaid
Acquisition of non-controlling interests
Issue of shares for stock option plan
Dividends
Net cash from financing activities
Net cash used for continuing operations
Cash flows from discontinued operations
Net change in cash and cash equivalents of continued and discontinued operations
Cash and cash equivalents at January 1
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents
1 Restated for the revised IAS19.
114
(2,029)
436
625
2,106
205
(13)
28
203
251
(703)
(231)
(209)
68
(826)
48
9
(94)
216
(79)
1,583
(1,013)
(51)
8
(256)
Note
2
7, 8
7, 8
5
9
6
13
13
6
8
9
2
2
17, 18
18
2
4
2
13
2012 1
2013
792
(131)
616
139
200
(14)
(246)
111
(13)
(395)
(228)
(230)
115
(666)
38
10
(34)
347
(24)
249
(502)
–
13
(286)
716
(329)
(526)
(139)
675
536
1,558
(74)
2,020
737
(726)
271
282
(53)
229
1,335
(6)
1,558
Financial statements | AkzoNobel Report 2013 Consolidated statement of changes in equity
In € millions
Balance at January 1, 2012
Profit/(loss) for the period
Transfer to goodwill
Reclassification into the statement of income
Other comprehensive income
Tax on other comprehensive income
Comprehensive income
Dividend paid
Equity-settled transactions
Issue of common shares
Acquisitions and divestments
Attributable to shareholders of the company
Subscribed
share capital
Additional
paid-in
capital
Cash flow
hedge
reserve
Cumulative
translation
reserve
469
47
–
–
–
–
–
–
7
–
2
–
–
–
–
–
–
–
121
–
6
–
(9)
–
(8)
19
(18)
(1)
(8)
–
–
–
–
4
–
–
39
12
6
57
–
–
–
–
Other
(statutory)
reserves and
undistributed
profit
8,520
(2,092)
–
–
(1,299)
249
(3,142)
(342)
43
–
(11)
9,031
(2,092)
(8)
58
(1,305)
254
(3,093)
(214)
43
8
(11)
Balance at December 31, 2012 1
478
174
(17)
61
5,068
5,764
Profit for the period
Transfer to goodwill
Reclassification into the statement of income
Other comprehensive income
Tax on other comprehensive income
Comprehensive income
Dividend paid
Equity-settled transactions
Issue of common shares
Acquisitions and divestments
–
–
–
–
–
–
6
–
1
–
Balance at December 31, 2013
485
1 Restated for the revised IAS 19.
–
–
–
–
–
–
133
–
12
–
319
–
(2)
19
(19)
–
(2)
–
–
–
–
–
–
(65)
(406)
(7)
(478)
–
–
–
–
724
–
–
(200)
(64)
460
(349)
46
–
1
724
(2)
(46)
(625)
(71)
(20)
(210)
46
13
1
(19)
(417)
5,226
5,594
Shareholders’
equity
Non-controlling
interests
Group equity
529
63
–
–
(16)
–
47
(42)
–
–
(70)
464
68
–
–
(39)
–
29
(76)
–
–
10
427
9,560
(2,029)
(8)
58
(1,321)
254
(3,046)
(256)
43
8
(81)
6,228
792
(2)
(46)
(664)
(71)
9
(286)
46
13
11
6,021
115
AkzoNobel Report 2013 | Financial statements Segment information
Our Decorative Paints businesses supply a full range of interior
and exterior decoration and protection products for both the
professional and do-it-yourself markets. Our Performance
Coatings businesses are represented in most markets of this
industry and we serve a large range of customers including
ship and yacht builders and architects, consumer electronics
and appliance companies, steel manufacturers, the
construction industry, furniture makers, aircraft, bus and truck
producers, can makers and vehicle bodyshops. Our Specialty
Chemicals products are used in a wide variety of everyday
products such as ice cream, soups, disinfectants, plastics,
soaps, detergents, cosmetics, paper and asphalt.
Information per Business Area
Revenue from third parties
Group revenue
2012
4,246
5,635
5,372
137
2013
4,131
5,532
4,787
140
2012
4,297
5,702
5,543
(152)
2013
4,174
5,571
4,949
(104)
15,390
14,590
15,390
14,590
Amortization and
depreciation
2012
(176)
(131)
(306)
(12)
(625)
2013
(162)
(138)
(308)
(8)
(616)
2012
(2,120)
–
(24)
(26)
(2,170)
2013
198
–
(121)
(16)
61
Incidentals
Operating income
2012 1
2.2
9.5
9.0
–
5.9
ROS%
2013
9.5
9.4
6.0
–
6.6
In € millions
Decorative Paints
Performance Coatings
Specialty Chemicals
Corporate and other
Total
In € millions
Decorative Paints
Performance Coatings
Specialty Chemicals
Corporate and other
Assets held for sale
Total
Regional information
In € millions
The Netherlands
Germany
Sweden
UK
Other European countries
US and Canada
Brazil
Other Latin American countries
China
India
Other Asian countries
Other regions
Total
1 Excluding goodwill impairment.
116
2012
(2,012)
542
500
(228)
(1,198)
2012 1
2.0
21.7
13.6
–
–
7.7
2013
398
525
297
(262)
958
ROI%
2013
13.7
21.3
8.2
–
–
9.6
Invested capital
Total assets
Total liabilities
Capital expenditures
2012
2,981
2,439
3,528
1,114
–
2013
2,589
2,251
3,355
1,086
–
2012
5,777
4,011
4,774
2,345
921
2013
4,315
4,062
4,388
3,095
203
2012
2,059
1,364
1,215
6,610
352
2013
1,987
1,593
983
5,430
49
10,062
9,281
17,828
16,063
11,600
10,042
2012
206
123
484
13
–
826
2013
171
143
346
6
–
666
Revenue by region of destination
Intangible assets and property,
plant and equipment
Invested capital
Capital expenditures
2012
745
1,258
486
901
3,647
2,294
987
636
1,621
371
1,716
728
2013
765
1,176
473
887
3,531
2,155
925
628
1,643
353
1,380
674
15,390
14,590
2012
880
507
433
1,006
1,269
1,081
524
84
1,610
152
570
77
8,193
2013
834
523
396
1,021
910
1,002
465
74
1,563
138
481
88
2012
1,175
747
518
1,342
1,588
1,748
558
170
1,364
122
525
205
7,495
10,062
2013
1,174
725
424
1,286
1,223
1,730
557
140
1,295
116
461
150
9,281
2012
110
69
70
68
85
70
123
16
135
16
55
9
826
2013
94
87
38
74
66
62
70
13
104
17
23
18
666
Financial statements | AkzoNobel Report 2013 Notes to the Consolidated
financial statements
1
Note 1: Summary of significant accounting policies
General information
Akzo Nobel N.V. is a company headquartered in the
Netherlands. The address of our registered office is
Strawinskylaan 2555, Amsterdam. We have filed a list of
subsidiaries, associated companies and joint ventures,
drawn up in conformity with sections 379 and 414 of Book
2 of the Netherlands Civil Code, with the Trade Registry of
Amsterdam.
We have prepared the Consolidated financial statements
of Akzo Nobel N.V. in accordance with International
Financial Reporting Standards (IFRS) as adopted by the
European Union. They also comply with the financial
reporting requirements included in Section 9 of Book 2 of
the Netherlands Civil Code, as far as applicable.
On February 19, 2014, the Board of Management
authorized the financial statements for issue. The financial
statements as presented in this report are subject to the
adoption by the Annual General Meeting of shareholders.
Consolidation
The Consolidated financial statements include the
accounts of Akzo Nobel N.V. and its subsidiaries.
Subsidiaries are companies over which Akzo Nobel N.V.
has directly and/or indirectly the power to control the
financial and operating policies so as to obtain benefits. In
assessing control, potential voting rights that are presently
exercisable or convertible are taken into account. The
financial statements of subsidiaries are included in the
Consolidated financial statements from the date that
control commences until the date that control ceases.
Non-controlling interests in equity and in results are
presented separately. Transactions between consolidated
companies and intercompany balances are eliminated.
Accounting policies, as set out below, have been applied
consistently for all periods presented in these Consolidated
financial statements and by all subsidiaries.
Change in accounting policies
Employee benefits
The amendments to IAS 19 “Employee Benefits”, effective
January 1, 2013, have been applied in our 2013 financial
statements. The amendments include:
• recognizing actuarial gains and losses in other
comprehensive income, thus removing the corridor
method that was applied so far
• calculating the expected return on plan assets in the
statement of income using the discount rate for the
defined benefit obligation, instead of applying an expected
rate of return on plan assets
• recognizing administration costs as expense as incurred,
with the exception that administration costs related to
management of plan assets, which are recorded in other
comprehensive income
• recognizing past service costs in the statement of income
in full as incurred
The effect of the implementation of the amendments to
IAS 19 is disclosed in Note 15.
Other changes
Other accounting pronouncements, including IFRS 13
“Fair Value Measurement” and amendments to IAS 1
“Presentation of Financial Statements”, which became
effective for 2013, had no material impact on our
Consolidated financial statements.
Discontinued operations (Note 2)
A discontinued operation is a component of our business
that represents a separate major line of business or
geographical area of operations that has been disposed of
or is held for sale, or is a subsidiary acquired exclusively with
a view to resale. Classification as a discontinued operation
occurs upon disposal or when the operation meets the
criteria to be classified as held for sale. When an operation
is classified as a discontinued operation, the comparative
statements of income and statement of cash flows are
reclassified as if the operation had been discontinued from
the start of the comparative period.
Assets and liabilities are classified as held for sale if it is
highly probable that the carrying value will be recovered
through a sale transaction within one year rather than
through continuing use. When reclassifying assets and
liabilities as held for sale, we recognize the assets and
liabilities at the lower of their carrying value or fair value
less selling costs. Assets held for sale are not depreciated
but tested for impairment. Impairment losses on assets
117
AkzoNobel Report 2013 | Financial statements and liabilities held for sale are recognized in the statement
of income.
The North American Decorative Paints business, divested
in 2013, was classified as a discontinued operation in 2012
and 2013.
Use of estimates
The preparation of the financial statements in compliance
with IFRS requires management to make judgments,
estimates and assumptions that affect amounts reported in
the financial statements. The estimates and assumptions
are based on experience and various other factors that
are believed to be reasonable under the circumstances
and are used to judge the carrying values of assets and
liabilities that are not readily apparent from other sources.
The estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates
are recognized in the period in which the estimate is
revised or in the revision period and future periods, if the
changed estimates affect both current and future periods.
The most critical accounting policies involving a higher
degree of judgment and complexity in applying principles
of valuation and for which changes in the assumptions
and estimates could result in significantly different results
than those recorded in the financial statements are the
following:
• Business combinations (Note 2)
• Accounting for income tax (Note 6)
• Impairment of intangible assets and property, plant and
equipment (Note 7, 8)
• Accounting for post-retirement benefits (Note 15)
• Provisions (Note 16)
Statement of cash flows
We have used the indirect method to prepare the statement
of cash flows. Cash flows in foreign currencies have been
translated at transaction rates. Exchange rate differences
affecting cash items are presented separately in the
statement of cash flows. Receipts and payments with
respect to income tax are included in cash from operating
activities. Interest payments are included in cash from
operating activities, while interest receipts are included
in cash from investing activities. The costs of acquisition
of subsidiaries, associates and joint ventures, and other
investments, as long as paid in cash, are included in cash
from investing activities. Acquisitions or divestments of
subsidiaries are presented net of cash and cash equivalents
acquired or disposed of, respectively. Acquisitions of
non-controlling interests are reported in cash from financing
activities. Cash flows from derivatives are recognized in the
statement of cash flows in the same category as those of
the hedged items.
Earnings per share
We present basic and diluted earnings per share (EPS) for
our common shares. Basic EPS is calculated by dividing
the profit or loss attributable to holders of our common
shares by the weighted average number of common shares
outstanding during the period. Diluted EPS is calculated by
dividing the profit or loss attributable to holders of common
shares by the weighted average number of common shares
outstanding, including the effects for potentially dilutive
common shares, which comprise of stock options and
performance-related shares granted to employees.
Operating segments
We determine and present operating segments (“Business
Areas”) on the information that internally is provided to
the Executive Committee, the body that was our chief
operating decision maker during 2013. Operating results
of a Business Area have been reviewed regularly by the
Executive Committee to make decisions about resources
to be allocated to the Business Area and assess its
performance, and for which discrete financial information is
available. Business Area results reported to the Executive
Committee include items directly attributable to a Business
Area as well as those items that can be allocated on a
reasonable basis. Unallocated items comprise mainly
corporate assets and corporate costs and are reported in
Business Area “Corporate and other”.
Translation of foreign currencies
Transactions in foreign currencies are translated into
the functional currency using the foreign exchange
rate at transaction date. Monetary assets and liabilities
denominated in foreign currencies are translated into
the functional currency using the exchange rates at the
118
balance sheet date. Resulting foreign currency differences
are included in the statement of income. Non-monetary
assets and liabilities denominated in foreign currencies are
translated into the functional currency at the exchange rate
at acquisition date.
The assets and liabilities of entities with other functional
currencies are translated into the functional currency
of the parent entity, using the exchange rates at the
balance sheet date. The income and expenses of
entities with other functional currencies are translated
into the functional currency, using the exchange rates at
transaction date. Foreign exchange differences resulting
from translation into the functional currency of investments
in subsidiaries and of intercompany loans of a permanent
nature with other functional currencies are recorded as
a separate component (cumulative translation reserves)
within other comprehensive income. These cumulative
translation adjustments are reclassified (either fully or
partly) to the statement of income upon disposal (either
fully or partly) or liquidation of the foreign subsidiary to
which the investment or the intercompany loan with a
permanent nature relates to. Before being consolidated,
the financial statements of subsidiaries established in
hyperinflationary countries are adjusted for the effects of
changing prices of the local currency.
Foreign currency differences arising on the re-translation
of a financial liability designated as a hedge of a net
investment in a foreign operation are recognized in the
cumulative translation reserves (in other comprehensive
income), to the extent that the hedge is effective. To the
extent that the hedge is ineffective, such differences are
recognized in the statement of income. When the hedged
part of a net investment is disposed of, the associated
cumulative amount in other comprehensive income is
reclassified to the statement of income as an adjustment
to the transaction result.
Financial statements | AkzoNobel Report 2013 Exchange rates of key currencies
The principal exchange rates against the euro used in
preparing the balance sheet and the statement of
income are:
US dollar
Pound sterling
Swedish krona
Chinese yuan
Balance sheet Statement of income
2012
1.319
0.816
8.593
8.217
2013
1.378
0.834
8.836
8.399
2012
1.285
0.811
8.705
8.109
2013
1.328
0.850
8.647
8.209
Revenue recognition
Revenue is defined as the revenue from the sale and
delivery of goods and services and royalty income, net of
rebates, discounts and similar allowances, and net of sales
tax. Revenue is recognized when the significant risks and
rewards have been transferred to a third party, recovery of
the consideration is probable, the associated costs and
possible return of goods can be estimated reliably and
there is no continuing management involvement with the
goods. For revenue from sales of goods these conditions
are generally met at the time the product is shipped and
delivered to the customer, depending on the delivery
conditions. Service revenue is generally recognized as
services are rendered.
Post-retirement benefits (Note 4, 15)
Contributions to defined contribution plans are recognized
in the statement of income as incurred.
Most of our defined benefit pension plans are funded
with plan assets that have been segregated in a trust
or foundation. Valuations of both funded and unfunded
plans are carried out by independent actuaries based on
the projected unit credit method. Pension costs primarily
represent the increase in the actuarial present value of
the obligation for projected pension benefits based on
employee service during the year and the interest on this
obligation with respect to employee service in previous
years, net of the expected return on plan assets. The
discount rate used in determining the present value of the
obligations and the return rate on plan assets is the yield
at reporting date of AA-rated corporate bonds that have
maturity dates approximating the terms of our obligations.
reported in operating income, in as far as they are not
recorded in other comprehensive income.
When the calculation results in a benefit to AkzoNobel,
the recognized asset is limited to the present value of
economic benefits available in the form of any future
refunds from the plan or reductions in future contributions
to the plan. In order to calculate the present value of
economic benefits, consideration is given to any minimum
funding requirements that apply to any plan. An economic
benefit is available if it is realizable during the life of the
plan, or on the settlement of the plan liabilities. The effect
of these so-called asset ceiling restrictions and any
changes therein, are recognized in other comprehensive
income.
Other employee benefits (Note 4, 16)
Other long-term employee benefits include long-service or
sabbatical leave, jubilee or other long-service benefits, and
other employee benefits payable more than 12 months
after the related service is rendered. These provisions are
measured at present value, using actuarial assumptions.
The discount rate is the yield at reporting date of AA-rated
corporate bonds that have maturity dates approximating
the terms of our obligations. The calculation is performed
using the projected unit credit method. Any actuarial gains
and losses are recognized in the statement of income in
the period in which they arise.
In certain countries we also provide post-retirement
benefits other than pensions to our employees. These
plans are generally not funded. Valuations of the obligations
under these plans are carried out by independent actuaries
based on the projected unit credit method. The costs
related to such plans primarily consist of the present value
of the benefits attributed on an equal basis to each year of
service and the interest on this obligation with reference to
employee service in previous years.
Actuarial gains and losses that arise in calculating our
obligation with reference to a plan, are recognized in
other comprehensive income. When the benefits of a plan
improve, the portion of the increased benefits related to
past service by employees is recognized as an expense in
the statement of income immediately.
We recognize gains and losses on the curtailment or
settlement of a defined benefit plan when the curtailment
or settlement occurs. The gain or loss on curtailment
comprises any resulting change in the fair value of plan
assets and change in the present value of defined benefit
obligation.
Interest on the defined benefit obligation for both pensions
and other post-retirement benefits net of the return on
plan assets is included in financing expenses related to
pensions. Other charges and benefits recognized are
An accrual is recognized for the amounts expected to
be paid under short-term bonus or profit sharing plans
if a present legal or constructive obligation as a result of
past services provided exists and the obligation can be
estimated reliably.
Share-based compensation (Note 4)
We have a performance-related share plan, under which
shares are conditionally granted to certain employees. The
fair value of the performance-related shares granted is
recognized as an expense with a corresponding increase
in shareholders’ equity. The fair value is measured at
grant date and amortized over the period during which
the employees become unconditionally entitled to the
performance-related shares. Amortization is accelerated
in the event that employment is terminated with retention
of share entitlements before the end of the vesting
period. The fair value of the performance-related shares
for which vesting is based on the company’s ranking for
sustainability and performance, is the value of the Akzo
Nobel N.V. common share on the date of the grant. The
fair value for the TSR-linked vesting condition is measured
using the Monte Carlo simulation model. This Monte Carlo
model takes into account expected dividends, as well
as the market conditions expected to impact our TSR
performance in relation to selected peers. The amount
recognized as an expense is adjusted to reflect the actual
number of performance-related shares that vest, except
119
AkzoNobel Report 2013 | Financial statements
when forfeiture or extra vesting of performance-related
shares is due to a TSR performance that differs from the
performance anticipated at the grant of the performance-
related shares, because this is a market performance
condition.
Income tax (Note 6)
Income tax expense comprises both current and deferred
tax, including effects of changes in tax rates. In determining
the amount of current and deferred tax we also take into
account the impact of uncertain tax positions and whether
additional taxes and interest may be due. Income tax is
recognized in the statement of income, unless it relates
to items recognized in other comprehensive income. The
income tax consequences of dividends are recognized
when a liability to pay the dividend is recognized.
In the balance sheet, current tax includes the expected
tax payable and receivable on the taxable income for the
year, using tax rates enacted or substantially enacted at
reporting date, as well as any adjustments to tax payable
and receivable with respect to previous years.
Deferred tax is recognized using the balance sheet
method, providing for temporary differences between
the carrying amounts of assets and liabilities for financial
reporting and the amount used for taxation purposes. We
do not recognize deferred tax for the following temporary
differences: the initial recognition of goodwill, the initial
recognition of assets or liabilities that affect neither
accounting nor taxable profit, and differences related to
investments in subsidiaries to the extent that they will
probably not reverse in the foreseeable future. Deferred tax
assets are recognized for unused tax losses, tax credits
and deductible temporary differences, to the extent that it is
probable that future taxable profits will be available against
which they can be utilized. The nature of the evidence
supporting the recognition of the deferred tax assets is
the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies. The
amount of deferred tax assets considered realizable, could
change in the near term if future estimates of projected
taxable income during the carry forward period are revised.
Current and deferred tax assets and liabilities have been
offset in cases where there is a legally enforceable right for
such set off and they relate to income taxes levied by the
same taxation authority on the same taxable entity, or on
different taxable entities which intend either to settle current
tax on a net basis or their tax assets and liabilities will be
realized simultaneously.
Measurement of deferred tax assets and liabilities is
based upon the enacted or substantially enacted tax
rates expected to apply to taxable income in the years in
which temporary differences are expected to be reversed.
Non-refundable dividend tax is taken into account in the
determination of deferred tax liabilities to the extent of
earnings expected to be distributed by subsidiaries in the
foreseeable future. If separate tax rates exist for distributed
and undistributed profit, the current and deferred taxes are
measured at the tax rate applicable to undistributed profit.
Deferred tax is not discounted.
Research cost and preparation and start-up expenses
Research cost and preparation and start-up expenses are
charged to the statement of income as incurred.
Government grants
Government grants related to costs are deducted from
the relevant cost to be compensated in the same period.
Emission rights granted by the government are recorded
at cost. A provision is recorded if the actual emission is
higher than the emission rights granted. Government
grants to compensate for the cost of an asset are
deducted from the cost of the related asset.
Intangible assets (Note 7)
Intangible assets are valued at cost less accumulated
amortization and impairment charges. All intangible assets
are tested for impairment whenever there is an indication
that the intangible asset may be impaired. In addition,
intangible assets with an indefinite useful life, such as
goodwill and certain brands, are not amortized, but tested
for impairment annually.
Goodwill in a business combination represents the excess
of the consideration paid over the net fair value of the
acquired identifiable assets, liabilities and contingent
liabilities. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued and
liabilities incurred or assumed at the date of exchange.
Acquisition related costs are expensed as incidental
items on the line other operating income/(expenses) in
the statement of income. Any contingent consideration
to be transferred will be recognized at fair value at the
acquisition date.
If the cost of an acquisition is less than the fair value of
the net assets of the subsidiary acquired, the difference is
recognized directly in the statement of income. The effects
of all transactions with non-controlling interests
are recorded in equity if there is no change in control;
these transactions will not result in goodwill. Goodwill
related to an investment in associates and joint ventures
is included in the carrying value of that investment.
Intangible assets with a finite useful life, such as licenses,
know-how, brands, customer relationships and intellectual
property rights, are capitalized at historical cost and
amortized on a straight-line basis over the estimated useful
life of the assets, which generally ranges from 10 to 40
years. Development and software costs are capitalized if
the costs can be measured reliably, the related product or
process is technically and commercially feasible, sufficient
future economic benefits will be generated and sufficient
resources are available to complete the development.
The expenditures capitalized include the cost of materials,
consultancy, licenses, direct labor and overhead costs
that are directly attributable to preparing the asset for its
intended use. Capitalized development and software costs
are amortized on a straight-line basis over the estimated
useful life of related assets, which generally is up to five
years. Amortization methods, useful lives and residual
values are reassessed annually.
Property, plant and equipment (Note 8)
Property, plant and equipment are valued at cost less
accumulated depreciation and impairment charges.
Costs include expenditures that are directly attributable
to the acquisition of the asset, including financing
expenses of capital investment projects under
120
Financial statements | AkzoNobel Report 2013 construction. Government grants to compensate
for the cost of an asset are deducted from the cost
of the related asset.
Depreciation is calculated using the straight-line method,
based on the estimated useful life. In the majority of cases
the useful life of plant equipment and machinery is ten
years, and for buildings ranges from 20 to 30 years. Land
is not depreciated. In the majority of cases residual value is
assumed to be insignificant. Depreciation methods, useful
lives and residual values are reassessed annually.
Parts of property, plant and equipment that have
different useful lives are accounted for as separate
items of property, plant and equipment. Costs of major
maintenance activities are capitalized as a separate
component of property, plant and equipment, and
depreciated over the estimated useful life. Maintenance
costs which cannot be separately defined as a component
of property, plant and equipment are expensed in the
period in which they occur. Gains and losses on the sale
of property, plant and equipment are included in the
statement of income.
We have identified conditional asset retirement obligations
at a number of our facilities that are mainly related to plant
decommissioning. We recognize these conditional asset
retirement obligations in the periods in which sufficient
information becomes available to reasonably estimate
the cash outflow.
Impairments (Note 7, 8)
We assess the carrying value of intangible assets and
property, plant and equipment whenever events or
changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. In addition,
for goodwill and other intangible assets with an indefinite
useful life, we review the carrying value annually in the
fourth quarter. The recoverable amount of an asset or its
cash-generating unit is the greater of its value in use and
its fair value less costs to sell, whereby estimated future
cash flows are discounted to their present value. The
discount rate used reflects current market assessments
of the time value of money and, if appropriate, the risks
specific to the assets. If the carrying value of an asset or
its cash-generating unit exceeds its estimated recoverable
amount, an impairment loss is recognized in the statement
of income. The assessment for impairment is performed at
the lowest level of assets generating largely independent
cash inflows. For goodwill and other intangible assets
with an indefinite life, we have determined this to be at
business unit level (one level below segment). We allocate
impairment losses in respect of cash-generating units first
to goodwill and then to the carrying amount of the other
assets on a pro rata basis.
Except for goodwill, we reverse impairment losses if and
to the extent we have identified a change in estimates
used to determine the recoverable amount. We only
reverse to the extent that the carrying value of the asset
does not exceed the carrying value that would have
been determined, net of amortization or depreciation, if
no impairment loss had been recognized. Reversals of
impairment are recognized in the statement of income.
Leases (Note 8, 20)
Lease contracts in which we have substantially all the risks
and rewards of ownership are classified as finance leases.
Upon initial recognition, the leased asset is measured at
the lower of its fair value and the present value of minimum
lease payments. Subsequent to initial recognition, the
asset is accounted for in accordance with the accounting
policy applicable to the asset. Minimum lease payments
made under finance leases are apportioned between the
interest expenses and the reduction of the outstanding
liability. The interest expenses are recognized as other
financing expenses over the lease term.
Payments made under operating leases are recognized
in the statement of income on a straight-line basis over
the term of the lease. Lease incentives received are
recognized over the term of the lease.
Associates and joint ventures (Note 9)
Associates are those entities in which we have significant
influence, but no control, over the financial and operational
policies. Joint ventures are those entities over whose
activities we have joint control, established by contractual
agreement and requiring unanimous consent for strategic,
financial and operating decisions.
Associates and joint ventures are accounted for using
the equity method and are initially recognized at cost.
The Consolidated financial statements include our share
of the income and expenses of the associates and joint
ventures for the period that we have significant influence
or joint control, whereby the result is determined using our
accounting principles. When the share of losses exceeds the
interest in the investee, the carrying amount is reduced to
nil and recognition of further losses is discontinued, unless
we have incurred legal or constructive obligations on behalf
of the investee. Loans to associates and joint ventures are
carried at amortized cost less impairment losses.
The results from associates and joint ventures consist of our
share in the results of these companies, interest on loans
granted to them and the transaction results on divestments
of associates and joint ventures. Unrealized gains and losses
arising from transactions with associates and joint ventures
are eliminated to the extent of our interest in the investee.
Inventories (Note 11)
Inventories are measured at the lower of cost and net
realizable value. Costs of inventories comprise all costs of
purchase, costs of conversion and other costs incurred
in bringing the inventories to the present location and
condition. The costs of conversion of inventories include
direct labor and fixed and variable production overheads,
and take into account the stage of completion. The costs
of inventories are determined using the weighted average
cost formula. Net realizable value is the estimated selling
price in the ordinary course of business, less the estimated
cost of completion and selling expenses.
Equity (Note 14)
When share capital recognized as equity is repurchased, the
amount of the consideration paid, which includes directly
attributable cost, is net of any tax effects, and is recognized
as a deduction from equity. Dividends are recognized as a
liability in the period in which they are declared.
121
AkzoNobel Report 2013 | Financial statements Provisions (Note 16)
We recognize provisions when a present legal or
constructive obligation as a result of a past event exists,
and it is probable that an outflow of economic benefits is
required to settle the obligation. Provisions are measured
at net present value and take into account legal fees.
The expected future cash outflows are discounted at
appropriate pre-tax interest rates, reflecting current market
assessments of the time value of money and, if applicable,
the risks specific to the liability. The increase of provisions
as a result of the passage of time is recognized in the
statement of income under other financing expenses.
Provisions for restructuring are recognized when a detailed
and formal restructuring plan has been approved, and
the restructuring has either commenced or has been
announced publicly. We do not provide for future operating
costs. Termination benefits for voluntary redundancy are
recognized if we have made an offer encouraging voluntary
redundancy, it is probable that the offer will be accepted
and the number of acceptances can be estimated reliably.
A provision for warranties is recognized when the
underlying products or services are sold. The provision is
based on historical warranty data and a weighting of all
possible outcomes against their associated probabilities.
In accordance with our environmental policy and
applicable legal requirements, we recognize a provision
for environmental clean-up cost when it is probable that a
liability has materialized and the amount of cash outflow
can be reasonably estimated.
Financial instruments
Regular purchases and sales of financial assets and liabilities
are recognized on trade date, which is the date we commit
to purchase or sell the asset. The initial measurement of all
financial instruments is fair value. Except for derivatives, the
initial measurement of financial instruments is adjusted for
directly attributable transaction costs. We have the following
categories of financial instruments:
• Derivative financial instruments
• Other financial non-current assets
• Trade and other receivables
122
• Cash and cash equivalents
• Long-term and short-term borrowings
• Trade and other payables.
Derivative financial instruments (Note 23)
Derivative financial instruments include forward exchange
contracts and commodity contracts, as well as non-closely
related embedded derivatives included in normal
business contracts. All derivative financial instruments
are recognized at fair value on the balance sheet. Fair
values are derived from market prices and quotes from
dealers and brokers, or are estimated using observable
market inputs. When determining fair values, credit risk for
our contract party as well as for AkzoNobel is taken into
account.
Changes in the fair value of forward exchange and
commodity contracts are recognized in the statement
of income, unless cash flow hedge accounting or net
investment hedge accounting is applied. In that case, the
effective part of the fair value changes is deferred in other
comprehensive income and released to the related specific
lines in the statement of income or balance sheet at the
same time as the hedged item.
Both at the hedge inception and at each reporting date,
we assess whether the derivatives used are highly effective
in offsetting changes in fair values or highly probable cash
flows of hedged items. When a derivative is not highly
effective, we discontinue hedge accounting prospectively.
In the event a fair value hedge relationship is terminated,
amortization of fair value hedge adjustments is included in
financing income and expense. When a cash flow hedge
relationship is terminated, the fair value changes deferred
in other comprehensive income (in equity) are released to
the statement of income only when the hedged transaction
is no longer expected to occur. Otherwise these will be
released to the statement of income at the same time as
the hedged item.
Other financial non-current assets (Note 10)
Loans and receivables are measured at amortized cost
using the effective interest method, less any
impairment losses.
Trade and other receivables (Note 12)
Trade and other receivables are measured at amortized
cost, using the effective interest method, less any
impairment losses. An allowance for impairment of trade
and other receivables is established if the collection of a
receivable becomes doubtful.
Such receivable becomes doubtful when there is objective
evidence that we will not be able to collect all amounts
due according to the original terms of the receivables.
The amount of the allowance is the difference between
the asset’s carrying amount and the present value of
estimated future cash flows, discounted at the original
effective interest rate. An impairment loss is recognized in
the statement of income, as are subsequent recoveries of
previous impairments.
Cash and cash equivalents (Note 13)
Cash and cash equivalents are measured at fair value and
include all cash balances and short-term investments that
are directly convertible into cash. Changes in fair values
are included in financing income.
Long-term and short-term borrowings
(Note 17, 18, 23)
Long-term borrowings are measured at amortized cost,
applying the effective interest rate method. Short-term
borrowings are measured at amortized cost, using
the effective interest method. The interest expense on
borrowings is included in other financing expenses. The
fair value of borrowings, used for disclosure purposes, is
determined on the basis of listed market price, if available.
If a listed market price is not available, the fair value is
calculated based on the present value of principal and
interest cash flows, discounted at the interest at the
reporting date, taking into account AkzoNobel’s credit risk.
Trade and other payables (Note 19)
Trade and other payables are measured at amortized cost,
using the effective interest method.
Financial statements | AkzoNobel Report 2013 New IFRS accounting standards
IFRS and interpretations thereof not yet in force which may
apply to our consolidate financial statements for 2014 and
beyond have been assessed for their potential impact.
The most important are the following:
Other new IFRS accounting standards
Standard
IFRS 9
Financial
Instruments
Published
Implementation date in the standard
November 12, 2009 and
subsequent amendments
on December 16, 2011 and
November 19, 2013
Tentative implementation date of January 1,
2017
Endorsed by the
European Union
Postponed
IFRS 10
Consolidated Financial
Statements
May 12, 2011
January 1, 2013; under EU endorsement
postponed to January 1, 2014, with earlier
adoption permitted
December 29, 2012
IFRS 11 Joint Arrangements
May 12, 2011
IFRS 12 Disclosure of Interests
in Other Entities
May 12, 2011
May 12, 2011
Amendments to IAS 28,
Investments in Associates
and Joint Ventures
Amendment to IAS 19
Employee benefits (Employee
contributions)
January 1, 2013; under EU endorsement
postponed to January 1, 2014, with earlier
adoption permitted
January 1, 2013; under EU endorsement
postponed to January 1, 2014, with earlier
adoption permitted
January 1, 2013; under EU endorsement
postponed to January 1, 2014, with earlier
adoption permitted
December 29, 2012
December 29, 2012
December 29, 2012
June 27, 2013
July 1, 2014, with earlier adoption permitted
Not yet endorsed
Anticipated impact
IFRS 9 introduces new requirements for classifying and measuring financial assets and
liabilities. This standard encompasses an overall change of accounting principles for
financial instruments and will eventually replace IAS 39 – the current standard on financial
instruments. As its scope will be further expanded during the next years, we will review the
effects of a comprehensive standard on financial instruments and consider adoption when
appropriate.
This standard introduces an amended concept of control to determine whether an investee
should be consolidated. An investor controls an investee when the investor is exposed, or
has rights, to variable returns from its involvement with the investee and has the ability to
affect those returns through its power over the investee. This standard will not materially
affect our Consolidated financial statements.
This standard addresses the accounting of joint arrangements and eliminates proportionate
consolidation. We will apply this standard as from 2014 and have assessed that there will
not be a material impact on our Consolidated financial statements.
This standard contains the disclosure requirements for interests in subsidiaries, joint
ventures, associates and other unconsolidated interests. It may affect some disclosures in
our Consolidated financial statements as from 2014.
The revised standard addresses the criteria and measurement for investments on which the
investor has joint control or significant influence. No material impact on our Consolidated
financial statements is expected.
This amendment gives further guidance on the accounting for employee contributions to
post-retirement benefit plans and will become effective for our 2015 Consolidated financial
statements. The effect of this standard will be assessed in 2014.
123
AkzoNobel Report 2013 | Financial statements 2
Note 2: Scope of consolidation
During 2013, the divestment of the Building Adhesives
business was completed. In addition, we concluded
smaller divestments, such as the Primary Amides and
Purate businesses, and agreed to sell the German stores
in Decorative Paints, with completion expected in 2014.
No acquisition in 2013, individually nor in total, was
deemed material in respect of IFRS 3 disclosure require-
ments.
In 2012, the acquisition of Boxing Oleochemicals in
Specialty Chemicals and the divestment of Chemicals
Pakistan were completed.
We have filed a list of subsidiaries, associated companies
and joint ventures, drawn up in conformity with sections
379 and 414 of Book 2 of the Netherlands Civil Code, with
the Trade Registry of Amsterdam.
Discontinued operations
During 2013, the divestment of the North American
Decorative Paints business was completed and resulted
in €779 million net cash inflows and a transaction gain
after tax of €141 million, both reported in discontinued
operations.
Changes in scope of consolidation
Number of subsidiaries
Consolidated companies as of
January 1
First-time consolidations
Deconsolidations
Consolidated as of December 31
2012
435
9
(48)
396
Europe
224
4
(23)
205
North
America
Latin
America
22
–
(3)
19
29
–
(2)
27
Asia Pacific
103
–
(9)
94
Other coun-
tries
18
2
–
20
2013
396
6
(37)
365
Balance sheet Decorative Paints North America at divestment date
In € millions
Intangible assets
Property, plant and equipment
Financial non-current assets
Inventories
Receivables
Non-current liabilities and provisions
Current liabilities
Net assets and liabilities
Cash received
Cash disposed of
Net cash inflow
Deal result divestment Decorative Paints North America
In € millions
Net cash inflow
Net assets and liabilities
Liabilities assumed and costs allocated to the deal
Realization cumulative translation reserves
Tax on the divestment
Deal result
April 1, 2013
375
188
5
189
217
(90)
(188)
696
791
(12)
779
2013
779
(696)
(10)
65
3
141
124
Financial statements | AkzoNobel Report 2013 Discontinued operations
Assets and liabilities held for sale
In € millions
Revenue
Expenses
Impairment
Results from operating activities
Income tax
Results from operating activities after tax
Gain on the divestment of Decorative Paints North America
Income tax on the divestment
Deal result
Results related to discontinued operations in previous years
Tax related to discontinued operations in previous years
Profit for the period
Cash flows from discontinued operations
In € millions
Net cash from operating activities
Net cash from investing activities
Net cash from discontinued operations
2012
1,190
(1,255)
(372)
(437)
20
(417)
–
–
–
(16)
(3)
(436)
2012
(27)
(26)
(53)
2013
281
(294)
–
(13)
7
(6)
138
3
141
(36)
32
131
2013
(87)
762
675
In € millions
2012
2013
Property, plant and equipment
Intangible assets
Other assets
Total assets
Total non-current liabilities
Total current liabilities
Total liabilities
187
377
357
921
159
193
352
50
111
42
203
25
24
49
At year-end 2013, we qualified certain businesses and
assets as held for sale. At year-end 2012, assets held for
sale related to Decorative Paints North America.
125
AkzoNobel Report 2013 | Financial statements 3
Note 3: Operating income
4
Note 4: Employee benefits
Operating income
• Decorative Paints’ results include the gain of
€198 million on the divestment of Building Adhesives.
Margins improved due to margin management and
lower raw material prices, both for the full year and the
fourth quarter. Performance improvement programs and
restructuring measures have lowered the cost base.
Restructuring charges were below the previous year
• In Performance Coatings, margins were stable despite
higher restructuring costs
• Specialty Chemicals’ results include a non-cash
impairment charge of €139 million on a business held
for sale. Focus on cost control and margin management
was maintained in all businesses, with a comprehensive
performance improvement program being implemented
at Functional Chemicals
Full-year average raw material costs were down, having
stabilized during the year.
Performance improvement program
The performance improvement program announced in
October 2011 has exceeded targets and achieved
€545 million in EBITDA for the period 2011 through 2013.
This successfully completes the performance improvement
program a year ahead of schedule. Further efficiency and
cost reduction measures have been identified as part of
continuous improvement initiatives which are integrated in
the regular business activities.
Full-year restructuring costs were €348 million (2012:
€292 million) with €204 million in Q4 (2012: €115 million).
Salaries, wages and other employee benefits in
operating income
In € millions
Salaries and wages
Pension and other post-retirement cost
Other social charges
Total
2012
(2,354)
(248)
(416)
2013
(2,268)
(268)
(414)
(3,018)
(2,950)
Revenue and cost by nature
In € millions
Revenue
Variable selling cost
Materials and energy
Amortization and depreciation
Employee benefits
Impairment
Other costs
Operating income
2012
15,390
(709)
(7,552)
(625)
(3,018)
(2,106)
(2,578)
(1,198)
2013
14,590
(714)
(6,959)
(616)
(2,950)
(139)
(2,254)
958
2013
Employee
2012
Employee
benefits Amortization Depreciation
Incidentals
benefits Amortization Depreciation Incidentals
(991)
–
(1,090)
(722)
(244)
29
(3,018)
–
(3,018)
(6)
–
(118)
(30)
(8)
–
(162)
(26)
(188)
(329)
(20)
(998)
–
(78)
(38)
(18)
–
(463)
(40)
(503)
(2,106)
–
–
–
–
(943)
(772)
(237)
(44)
–
(2,170)
(2,950)
–
–
(2,170)
(2,950)
(7)
–
(94)
(36)
(7)
–
(144)
–
(144)
(343)
–
(75)
(36)
(18)
–
(149)
–
(15)
–
–
225
(472)
–
(472)
61
–
61
Average number of employees
During the year
Decorative Paints
Performance Coatings
Specialty Chemicals
Corporate and other
Total
2012
17,200
21,700
11,800
1,500
52,200
2013
16,800
21,300
10,600
1,500
50,200
The average number of employees working outside
the Netherlands was 45,000 (2012: 47,100).
Number of employees
At year-end
Decorative Paints
Performance Coatings
Specialty Chemicals
Corporate and other
Total
2012
17,000
21,300
10,800
1,500
50,600
2013
16,200
21,400
10,400
1,600
49,600
At year-end 2013, we employed 49,560 staff for ongoing
activities (year-end 2012: 50,610 employees). The net
decrease was due to:
• Divestments, affecting 440 employees
• A decrease of 1,740 employees due to ongoing
restructuring
• An increase of 1,130 employees, due to new hires in
high growth markets.
Costs per category
In € millions
Cost of sales
Impairment
Selling expenses
General and administrative
expenses
Research and development
expenses
Other operating income/
(expenses)
Subtotal
Discontinued operations
Total
126
Financial statements | AkzoNobel Report 2013 Share-based compensation
Share-based compensation relates to the performance-
related share plan as well as the share matching plan.
Charges recognized in the 2013 statement of income for
share-based compensation amounted to €43 million and
are included in salaries and wages (2012: €43 million).
Performance-related share plan
Under the performance-related share plan, a number
of conditional shares are granted to the members of
the Board of Management, members of the Executive
Committee and executives each year. The number of
participants of the performance-related share plan at year-
end 2013 was 689 (2012: 656).
The conditional grant of shares up to the series
2012–2014 is linked for 50 percent to the ranking of the
company in the RobecoSAM benchmark (SAM) and the
remaining 50 percent to the relative TSR performance of
the company compared with a peer group. As from the
series 2013-2015, return on investment (ROI) was added
as an additional performance measure. Subsequently, the
Performance-related shares
weighting changed to 35 percent for both TSR and ROI
and 30 percent for SAM.
The shares of the series 2010-2012 have vested and were
delivered to the participants in 2013.
The conditional shares of the series 2011-2013 vested as
follows:
• our TSR performance over the period 2011-2013
resulted in a 10th position within the ranking of the peer
group companies. This did not result in vesting of
conditional shares
• the average position in the RobecoSAM benchmark
resulted in a 1.33rd position within the ranking. As a
result, the conditional shares of the 2011-2013 series
vested for 70.83 percent (series 2010-2012:
66.67 percent), including dividend shares of 10.09
percent, the final vesting percentage amounted to 77.98
percent (series 2010-2012: 73.61 percent)
The fair value of the performance-related share plan
at grant date is amortized as a charge against income
over the three-year vesting period. The fair value was
€50.89 per performance-related share (without a holding
restriction) conditionally granted in 2013 (2012: €40.38).
The share price of a common AkzoNobel share at year-
end amounted to €56.34 (2012: €49.75). For further
details on our performance-related share plan, see the
Remuneration report.
Share–matching plan
The members of the Board of Management and the
members of the Executive Committee are eligible to
participate in the share–matching plan. Under certain
conditions, members who invest part of their short-term
incentives in AkzoNobel shares may have such shares
matched by the company. The investment in AkzoNobel
shares in 2013 resulted in a total of 2,820 potential
matching shares at year-end (2012: 12,005).
The fair value of the potential matching shares at the date
of the share investment is amortized as a charge against
income over the three-year vesting period. The fair value
was €40.67 per potential matching share in 2013 (2012:
€39.72).
Series
2010 – 2012
2011 – 2013
2012 – 2014
2013 – 2015
Total
Balance per
January 1,
2013
537,000
891,339
1,074,284
Granted in
2013
Vested in
2013
Forfeited in
2013
Dividend in
2013 1
Balance at
December
31, 2013
Vested on
January 1,
2014
–
(537,000)
–
–
–
–
2,588
31,999
–
753,713
–
–
–
(277,846)
(24,901)
(12,400)
24,943
31,853
21,646
641,024
641,024
1,113,235
762,959
–
–
2,502,623
788,300
(537,000)
(315,147)
78,442
2,517,218
641,024
1 Equivalent in shares related to accumulated dividend, which is included in the balances on balance sheet date.
127
AkzoNobel Report 2013 | Financial statements 5
Note 5: Financing income and expenses
Financing income and expenses
In € millions
Financing income
Financing expenses
Net interest on net debt
Other interest movements
Financing expenses related to pensions
Interest on provisions
Other items
2012
59
(239)
(180)
(3)
(29)
7
(25)
(205)
2013
32
(221)
(189)
(21)
(8)
18
(11)
(200)
Net financing expenses for the year decreased by
€5 million, from €205 million to €200 million. Significant
variances are:
• Net interest on net debt increased by €9 million to
€189 million (2012: €180 million), mainly due to lower
return on investments held in an escrow account
• Financing expenses related to pensions increased
by €18 million to €21 million (2012: €3 million after
restatement) due to lower discount rates reducing the
interest income on plan assets
• Interest on provisions decreased by €21 million to
€8 million (2012: €29 million) due to higher discount
rates in 2013
• Other items increased by €11 million to €18 million
(2012: €7 million), mainly due to capitalized interest and
a 2012 goodwill adjustment
A reduction of €12 million (2012: €8 million) was included
in the interest expenses of capital investment projects
under construction. The average interest rate used for
capitalization of these borrowing costs was 5.6 percent
(2012: 6.1 percent).
Stock option plans
Prior to 2008, performance-related stock options were
granted to members of the Board of Management and
executives. We have not purchased own shares in
connection with the stock option plan. The stock options
are equity-settled and all exercisable.
For stock options exercised during 2013, the weighted
average of the actual share price at date of exercise
amounted to €50.43 (2012: €43.21). A number of
0.5 million outstanding stock options are non-dilutive but
could potentially dilute basic earnings per share in the
future.
Stock options
Year of issue
2006
2007
Total
Exercise
price in €
Outstanding
per January
1, 2013
Exercised in
2013
Expired in
2013
Forfeited in
2013
Outstanding
at December
31, 2013
Expiry date
Net other financing charges
Net financing expenses
46.46
58.89
357,636
(287,090)
(70,546)
–
–
April 26, 2013
496,489
–
–
(2,900)
493,589
April 26, 2014
854,125
(287,090)
(70,546)
(2,900)
493,589
Number and weighted average exercise price stock options
Balance at January 1, 2012
Forfeited during the period
Exercised during the period
Balance at December 31, 2012
Forfeited during the period
Exercised during the period
Balance at December 31, 2013
Number of options
Weighted average exercise
price in €
1,203,977
(107,875)
(241,977)
854,125
(73,446)
(287,090)
493,589
49.15
46.45
34.36
53.69
46.95
46.46
58.89
128
Financial statements | AkzoNobel Report 2013 6
Note 6: Income tax
Pre-tax income from continued operations amounted to a
profit of €772 million (2012: loss €1,390 million). The net
tax charges related to continuing operations are included
in the statement of income as follows:
Classification of current and deferred tax result
In € millions
2012
2013
Current tax expense for
The year
Adjustments for prior years
Deferred tax expense for
Origination and reversal of temporary
differences and tax losses
Re-recognition of deferred tax assets
Changes in tax rates
(257)
31
(226)
20
5
(2)
23
(147)
6
(141)
(74)
97
7
30
Total
(203)
(111)
The total tax charge, including discontinued operations
was €69 million (2012: €186 million).
Effective tax rate reconciliation
The effective income tax rate based on the consolidated
statement of income is 14 percent. The tax line includes a
non-cash gain as a result of the recognition of €123 million
of previously unrecognized deferred tax assets and several
non-taxable items. Excluding these effects, the tax rate is
30 percent. The effective tax rate in 2012 – excluding the
impairment loss on intangibles of €2,106 million – was affected
by several adjustments relating to prior years. In addition, the
geographical mix of taxable income affected the tax charge.
The impact of non-refundable withholding tax on the tax rate
is dependent on our relative share in the profit of subsidiaries
in countries that levy withholding tax on dividends and on
the timing of the remittance of such dividends. This impact
is expected to increase in the coming years. Based on
the Dutch tax system there is only a limited credit for such
taxes. The tax rate for 2012 was impacted by an anticipated
extraordinary dividend that was received in 2013.
Effective consolidated tax rate
Income tax recognized directly in equity
2012
2013
in %
Corporate tax rate in the Netherlands
Effect of tax rates in other countries
Tax exempt income/non-deductible
expenses
Non-taxable income from investment in
associates and joint ventures
Changes in enacted tax rates
Recognition of previously unrecognized
deferred tax assets
Current year losses for which no
deferred tax asset was recognized
Current year profits compensated with
losses for which no deferred tax assets
was recognized
Under/(over)-provided in prior years
Non-refundable withholding taxes
Effective consolidated tax rate
1 Excluding impairment.
2012 1
25.0
3.8
2.7
(0.6)
0.3
(0.7)
1.3
(0.1)
(4.4)
4.0
31.3
2013
25.0
5.7
(3.2)
(0.5)
(0.9)
(14.1)
1.7
0.0
(0.8)
1.5
14.4
In € millions
Current tax for
Currency exchange differences on
intercompany loans of a permanent
nature
Deferred tax for
Share-based compensation
Hedge accounting
Currency exchange differences on
intercompany loans of a permanent
nature
Post-retirements benefits
Total
Unrecognized deferred tax assets
In € millions
Capital losses
Tax losses
Deductible temporary differences
Total
Deferred tax assets and liabilities
In the deferred tax asset for other provisions (€263 million),
an amount of €141 million (2012: €189 million) is related
to interest expense carried forward. From the total amount
of recognized net deferred tax assets, €916 million (2012:
€827 million) is related to entities that have suffered a loss
in either 2013 or 2012 in the tax jurisdiction to which a
deferred tax asset relates, and where utilization is dependent
on future taxable profit in excess of the profit arising from the
reversal of existing taxable temporary differences.
The loss carryforward recognized in the balance sheet and
its usage will have a decreasing impact on the cash tax
rate in coming years.
4
4
–
(1)
2
249
250
254
2012
267
21
190
478
(7)
(7)
3
–
–
(64)
(61)
(68)
2013
–
41
135
176
Total
2,754
(167)
Expiration year of loss carryforwards recognized in the balance sheet
In € millions
Total loss carryforwards
Loss carryforwards not recognized in
deferred tax assets
Total recognized
2014
2015
2016
2017
2018
Later
Unlimited
18
(12)
6
27
(19)
8
44
(29)
15
86
(36)
50
59
(45)
14
202
(6)
2,318
(20)
196
2,298
2,587
129
AkzoNobel Report 2013 | Financial statements Movement in deferred tax in 2012
In € millions
Intangible assets
Property, plant and equipment
Inventories
Trade and other receivables
Share-based payments
Post-retirement benefit provisions
Restructuring provisions
Other provisions
Other items
Net operating loss carryforwards
Deferred tax assets not recognized
Tax assets/liabilities
Set-off of tax
Net deferred taxes
Movement in deferred tax in 2013
In € millions
Intangible assets
Property, plant and equipment
Inventories
Trade and other receivables
Share-based payments
Post-retirement benefit provisions
Restructuring provisions
Other provisions
Other items
Net operating loss carryforwards
Deferred tax assets not recognized
Tax assets/liabilities
Set-off of tax
Net deferred taxes
130
Net balance
January 1, 2012
Changes in
exchange rates
Acquisitions/
divestments
Recognized in
income
Recognized in
equity
Held for Sale
Net balance
December 31,
2012
Assets
Liabilities
(701)
(94)
29
14
12
176
15
313
178
839
(415)
366
–
366
12
–
–
–
–
(7)
–
(4)
(2)
(1)
9
7
–
7
(6)
10
–
–
–
–
–
–
–
(1)
1
4
–
4
65
28
–
9
3
(164)
14
(25)
9
105
(6)
38
–
38
–
–
–
–
–
316
–
–
–
1
(67)
250
–
250
83
9
(5)
(2)
–
(25)
(2)
(7)
(4)
–
–
47
–
47
(547)
(47)
24
21
15
296
27
277
181
943
(478)
712
–
712
71
84
27
26
15
606
28
320
214
943
(478)
1,856
(710)
1,146
618
131
3
5
–
310
1
43
33
–
–
1,144
(710)
434
Net balance
January 1, 2013
Changes in
exchange rates
Acquisitions/
divestments
Recognized in
income
Recognized in
equity
Held for Sale
Net balance
December 31,
2013
Assets
Liabilities
(547)
(47)
24
21
15
296
27
277
181
943
(478)
712
–
712
35
7
(1)
(2)
–
(1)
(1)
(11)
(4)
(20)
2
4
–
4
–
–
(3)
(1)
–
(8)
–
(7)
(4)
–
–
(23)
–
(23)
10
(13)
16
(5)
(1)
(109)
–
(12)
27
(242)
368
39
–
39
–
–
–
–
3
4
–
–
–
–
(68)
(61)
–
(61)
9
1
1
–
–
–
–
–
–
–
–
11
–
11
(493)
(52)
37
13
17
182
26
247
200
681
(176)
682
–
682
88
66
40
20
17
279
26
263
252
681
(176)
1,556
(485)
1,071
581
118
3
7
–
97
–
16
52
–
–
874
(485)
389
Financial statements | AkzoNobel Report 2013 7
Note 7: Intangible assets
Intangible assets
In € millions
Balance at January 1, 2012
Acquisition cost
Cost of internally developed intangibles
Accumulated amortization/impairment
Carrying value
Movements in 2012
Acquisitions through business combinations
Other investments – including internally developed intangibles
Transfer to assets held for sale
Divestments
Impairment
Amortization 1
Changes in exchange rates
Total movements
Balance at December 31, 2012
Acquisition cost
Cost of internally developed intangibles
Accumulated amortization/impairment
Carrying value at year-end 2012
Movements in 2013
Acquisitions through business combinations
Other investments – including internally developed intangibles
Transfer to assets held for sale
Divestments
Disposals
Impairment
Amortization
Changes in exchange rates
Total movements
Balance at December 31, 2013
Acquisition cost
Cost of internally developed intangibles
Accumulated amortization/impairment
Carrying value at year-end 2013
1 Including Decorative Paints North America.
Goodwill
Brands
Customer
lists
Other
intangibles
4,890
2,514
1,256
–
(1,025)
3,865
58
(6)
(96)
(40)
(2,450)
–
21
–
(160)
2,354
1
–
(180)
–
(27)
(19)
(11)
(2,513)
(236)
–
(463)
793
16
–
(76)
(2)
(6)
(112)
(18)
(198)
4,102
2,226
1,030
–
(2,750)
1,352
7
1
–
–
–
(139)
–
(42)
(173)
–
(108)
2,118
–
–
–
–
–
(5)
(13)
(105)
(123)
3,966
2,113
–
(2,787)
1,179
–
(118)
1,995
–
(435)
595
9
–
(76)
–
–
(3)
(75)
(21)
(166)
854
–
(425)
429
431
141
(192)
380
7
79
(25)
(1)
–
(57)
6
9
445
166
(221)
389
–
29
(35)
(2)
(5)
(8)
(56)
(9)
(86)
360
196
(253)
303
Total
9,091
141
(1,840)
7,392
82
73
(377)
(43)
(2,483)
(188)
(2)
(2,938)
7,803
166
(3,514)
4,454
16
30
(111)
(2)
(5)
(155)
(144)
(177)
(548)
7,293
196
(3,583)
3,906
131
AkzoNobel Report 2013 | Financial statements Goodwill and other intangibles per segment
In € millions
Decorative Paints
Performance Coatings
Specialty Chemicals
Total
Goodwill
Brands with indefinite
useful lives
Other intangibles with finite
useful lives
Total intangibles
2012
17
686
649
2013
22
663
494
2012
1,881
–
–
2013
1,785
–
–
2012
398
330
493
1,352
1,179
1,881
1,785
1,221
2013
319
302
321
942
2012
2,296
1,016
1,142
4,454
2013
2,126
965
815
3,906
Average revenue growth rates per forecast period
In % per year
Decorative Paints
Performance Coatings
Specialty Chemicals
2014-2018
2019-2023
6.2
4.8
3.5
4.2
3.2
2.3
Other intangibles include licenses, know-how, intellectual
property rights and development cost. Both at year-end
2012 and 2013, there were no purchase commitments
for individual intangible assets. No intangible assets were
registered as security for bank loans.
Impairment
Goodwill and other intangibles with indefinite useful lives
are tested for impairment per business unit (one level
below segment level) in the fourth quarter or whenever an
impairment trigger exists.
The impairment test is based on cash flow projections
of the five-year plan. The key assumptions used in the
projections are:
• Revenue growth: based on actual experience, analysis
of market growth and the expected market share
development
• Margin development: based on actual experience
and management’s long-term projections
Revenue growth and margin development projections are
extrapolated beyond this five-year explicit forecast period
for another five years with reduced growth rates.
For virtually all business units, a terminal value was calcu-
lated using a long-term average market growth rate that did
not exceed 2 percent. The estimated pre-tax cash flows are
discounted to their present value using a pre-tax weighted
average cost of capital. The discount rates are determined
for each business unit and range from 7.7 percent to 13.5
percent, with a weighted average of 9.2 percent.
A sensitivity test on growth assumptions as well as the
pre-tax weighted average cost of capital confirms comfor-
table headroom in all businesses. As a result, no
impairment charge was recognized in relation to the
annual impairment test this year. As a result of classifying
a business as held for sale in Specialty Chemicals, an
impairment charge of €139 million was recognized in
2013.
In 2012, a non-cash impairment charge against our
Decorative Paints assets was recognized. In Europe,
we recognized an impairment charge of €1,948 million
and in South America an amount of €158 million. The
total of €2,106 million is disclosed on a separate line in
the consolidated statement of income. The impairment
of Decorative Paints North America of €372 million is
included in results from discontinued operations.
132
Financial statements | AkzoNobel Report 2013
8
Note 8: Property, plant and equipment
Property, plant and equipment
In € millions
Balance at January 1, 2012
Cost of acquisition
Accumulated depreciation/impairment
Carrying value
Movements in 2012
Acquisitions through business combinations
Transfer to assets held for sale
Divestments
Capital expenditures 1
Transfer between categories
Depreciation 1
Impairment
Changes in exchange rates
Total movements
Balance at December 31, 2012
Cost of acquisition
Accumulated depreciation/impairment
Carrying value at year-end 2012
Movements in 2013
Acquisitions through business combinations
Transfer to assets held for sale
Divestments
Capital expenditures
Transfer between categories
Depreciation
Impairment
Changes in exchange rates
Total movements
Balance at December 31, 2013
Cost of acquisition
Accumulated depreciation/impairment
Carrying value at year-end 2013
1 Including Decorative Paints North America.
Plant
equipment
and
machinery
Buildings
and land
Other
equipment
Construction
in progress
and
prepayments
on projects
Assets not
used in the
production
process
2,330
(1,087)
1,243
5,906
(4,074)
1,832
7
(82)
5
62
31
(89)
(10)
(10)
(86)
19
(88)
(64)
327
64
(345)
(11)
(14)
(112)
2,295
(1,138)
1,157
5,943
(4,223)
1,720
2
(23)
(22)
47
66
(75)
(30)
(57)
(92)
1
(24)
(33)
178
267
(321)
(34)
(76)
(42)
2,214
(1,149)
1,065
5,963
(4,285)
1,678
750
(556)
194
1
–
(5)
91
2
(68)
(6)
5
20
818
(604)
214
–
(3)
(6)
53
17
(75)
(2)
(1)
(17)
797
(600)
197
428
–
428
4
(15)
(22)
371
(100)
–
(5)
(21)
212
648
(8)
640
–
(1)
3
387
(351)
–
(1)
(35)
2
646
(4)
642
Capital expenditures
• In Decorative Paints, we are investing in high growth
markets and in creating efficiency in Europe
• In Performance Coatings, we are investing in multiple
projects, with the largest being the increase in the
production capacity of the Automotive and Aerospace
Coatings business in China to meet rising demand
• In Specialty Chemicals, we are investing in facilities
being built in Brazil as part of the Chemicals Island
concept with Suzano and Eldorado. The plant in Jupiá,
supplying the world’s largest pulp mill Eldorado, became
operational earlier in the year. We are also investing in
our chlorine plant in Frankfurt, Germany, to convert to
membrane electrolysis technology
Impairments
In 2013, impairment charges have been recognized for an
amount of €67 million (2012: €34 million). The impairment
charges have been recognized in cost of sales and in
other operating income. The impairment charges are
related to restructuring activities, mainly in Europe.
Financial lease
The carrying value of the property, plant and equipment
financed by hire purchase and leasing and not legally
owned by the company was €51 million (2012: €52 million)
of which €46 million is related to buildings and land,
€1 million to plant equipment and machinery and €4
million to other equipment.
Total
9,442
(5,737)
3,705
31
(187)
(85)
852
–
(503)
(34)
(40)
34
9,734
(5,995)
3,739
3
(51)
(59)
666
–
(472)
(67)
(170)
(150)
28
(20)
8
–
(2)
1
1
3
(1)
(2)
–
–
30
(22)
8
–
–
(1)
1
1
(1)
–
(1)
(1)
60
(53)
7
9,680
(6,091)
3,589
133
AkzoNobel Report 2013 | Financial statements 9
Note 9: Investments in associates and joint ventures
10
Note 10: Other financial non-current assets
Other financial non-current assets
In € millions
Loans and receivables
Other than financial instruments
Total
2012
287
1,010
1,297
2013
256
709
965
The loans and receivables include the subordinated loan of
€88 million (2012: €75 million) granted to the Pension Fund
APF in the Netherlands and the non-current part of an
escrow account of the AkzoNobel (CPS) Pension Scheme
in the UK amounting to €100 million, invested in bonds
and cash. Under certain conditions, the minimum annual
funding of this pension fund from the escrow account is
£25 million (€29 million). The current portion of the escrow
account is reported as other receivable within trade and
other receivables.
Other financial non-current assets include an amount of
€483 million related to pension plans in an asset position
(2012: €841 million).
At year-end 2013, the carrying value of investments in
associates amounted to €90 million (2012: €83 million)
and in joint ventures to €93 million (2012: €102 million).
In 2013, the results from associates and joint ventures
amounted to a profit of €14 million (2012: €13 million).
No significant contingent liabilities existed related to
associates and joint ventures, see Note 20.
The most significant associates and joint ventures of
AkzoNobel are: Metlac Holdings Brl (49 percent), Metlac
Spa (44 percent), Delesto B.V. (50 percent), Eka Chile SA
(50 percent), Fort Amanda Specialties LLC (50 percent)
and I.C. Insurance Holdings Ltd (49 percent).
Summary of financial information on a 100 percent basis
In € millions
2012
2013
2012
2013
Associates
Joint ventures
Condensed statement of income
Revenue
Income before tax
Net income
Condensed balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Shareholders’ equity
Total liabilities and equity
126
18
12
116
77
193
41
28
124
193
143
21
14
123
78
201
47
21
133
201
545
14
9
183
158
341
89
49
203
341
543
11
8
193
119
312
86
38
188
312
134
Financial statements | AkzoNobel Report 2013 11
Note 11: Inventories
12
Note 12: Trade and other receivables
Of the total carrying value of inventories at year-end 2013,
€67 million is measured at net realizable value (2012:
€50 million). In 2013, €31 million was recognized in the
statement of income for the write-down of inventories
(2012: €39 million), while €26 million of write-downs were
reversed (2012: €28 million). There are no inventories
subject to retention of title clauses.
Inventories
In € millions
Raw materials and supplies
Work in progress
Finished products and goods for resale
2012
520
81
944
2013
430
75
921
Total
1,545
1,426
Trade and other receivables
Allowance for impairment of trade receivables
In € millions
Trade receivables
Prepaid expenses
Tax receivables other than income tax
Receivables from associates and
joint ventures
Forward exchange and commodity
contracts
Other receivables
Total
2012
2,174
72
172
31
16
233
2,698
2013
2,087
In € millions
Opening balance
54
166
27
15
187
2,536
Additions charged to income
Release of unused amounts
Acquisition
Utilization
Transfer to assets held for sale
Currency exchange differences
Closing balance
2012
108
46
(18)
(3)
(25)
(6)
(2)
100
2013
100
40
(22)
(1)
(19)
(1)
(6)
91
The addition to and release of the allowance for
impairment have been included in the statement of income
under selling expenses.
The maximum exposure to credit risk at the reporting
date is the carrying value of each class of receivables
mentioned above. We do not hold any collateral for
trade receivables. We do not have a significant customer
concentration.
Trade receivables are presented net of an allowance for
impairment of €91 million (2012: €100 million). In 2013,
€40 million of impairment losses were recognized in the
statement of income (2012: €46 million).
Ageing of trade receivables
In € millions
Performing accounts receivable
Past due accounts receivables
and not impaired
< 3 months
3 – 6 months
> 6 months
Impaired accounts receivables
Allowance for impairment
Total trade receivables
2012
1,903
2013
1,852
226
11
3
131
(100)
185
8
4
128
(91)
2,174
2,086
With respect to the trade and other receivables that are
neither impaired nor past due, there are no indications
as of reporting date that the debtors will not meet their
payment obligations.
135
AkzoNobel Report 2013 | Financial statements 13
Note 13: Cash and cash flows
14
Note 14: Group equity
Cash flow and net debt
Operating activities in 2013 resulted in cash inflows of
€716 million (2012: €737 million). The change is the net
impact of higher operating income (excluding impairment)
and lower cash outflow from provisions partly offset by
lower inflow from working capital, as 2012 had an
exceptional impact.
Net debt decreased from €2,298 million at year-end 2012 to
€1,529 million at year-end 2013 as a consequence of the
net impact of:
• Cash inflows from divestments (€313 million) and
Composition of share capital at year-end
In €
Priority shares (48 with nominal value
of €400)
Cumulative preferred shares (200
million with nominal value of €2)
Common shares (600 million with
nominal value of €2)
Authorized
share capital
Subscribed
share capital
19,200
19,200
400,000,000
–
1,200,000,000
485,251,070
Total
1,600,019,200
485,270,270
discontinued operations (€675 million)
Outstanding common shares
• Cash inflows from operating activities of €716 million
• Capital expenditures of €666 million
• Dividend payments of €286 million (€210 million to
shareholders and €76 million to non-controlling interests)
Number of shares
2012
2013
Outstanding at January 1
234,688,341
239,047,452
Issued in connection to stock
options exercised and performance-
related shares granted
4,359,111
3,578,083
Balance at year-end
239,047,452
242,625,535
Weighted average number of common shares
Number of shares
Issued at January 1
Issued common shares during
the year
Shares for basic earnings per
share for the year
Effect of dilutive shares 1
For stock options
2012
2013
234,688,341
239,047,452
2,551,704
2,180,576
237,240,045
241,228,028
12,233
5,647
For performance-related shares
2,113,705
2,060,997
For share-matching plan
12,005
14,825
Shares for diluted earnings
per share
239,377,988
243,309,497
1 For 2012, all potentially dilutive shares were non-dilutive due to the loss.
Cash and cash equivalents
In € millions
Short-term investments
Cash on hand and in banks
Included under cash and cash
equivalents in the balance sheet
Debt to credit institutions
Total per cash flow statement
2012
301
1,451
1,752
(194)
1,558
2013
765
1,333
2,098
(78)
2,020
Short-term investments almost entirely consist of cash
loans, time deposits, marketable private borrowings and
marketable securities immediately convertible into cash. For
more information on credit risk management, see Note 23.
At December 31, 2013, an amount of €115 million in cash
and cash equivalents was restricted (2012: €119 million).
Restricted cash is defined as cash that cannot be accessed
centrally due to regulatory or contractual restrictions.
Changes in working capital
In € millions
Trade and other receivables
Inventories
Trade and other payables
Total
Changes in provisions
In € millions
Post retirement provisions
Restructuring provisions
Other provisions
Total
2012
(18)
108
161
251
2012
(593)
9
(119)
(703)
2013
(181)
(7)
175
(13)
2013
(417)
55
(33)
(395)
136
Financial statements | AkzoNobel Report 2013 Subscribed share capital
For further details on subscribed share capital, see
Note E in the Company financial statements.
Other components of shareholders’ equity
Changes in fair value of derivatives comprise the effective
portion of the cumulative net change in the fair value
of cash flow hedging instruments related to hedged
transactions that have not yet occurred. Tax related
to cash flow hedges was €nil (2012: €1 million negative).
Cumulative translation reserves comprise all foreign
exchange differences arising from the translation of
the financial statements of foreign operations, as well
as from the translation of intercompany loans with
a permanent nature and liabilities and derivatives that
hedge the net investments in a foreign subsidiary.
Tax related to exchange differences arising on translation
of foreign operations were €7 million negative
(2012: €6 million positive).
Equity-settled transactions include the stock option
program and the performance-related share plan
whereby options or shares are granted to the Board
of Management, Executive Committee and other
executives. For details of the share-based compensation,
see Note 4. Tax related to equity settled transactions was
€3 million positive in 2013 (2012: €nil).
Non-controlling interests
Group equity
Partner
AkzoNobel Swire Paints (Shanghai)
Limited,Shanghai, China
Akzo Nobel India Ltd, Kolkata, India
Swire Pacific Limited, China
Privately held, India
PT ICI Paints Indonesia, Jakarta, Indonesia
PT DWI Satrya Utama, Indonesia
ICI Paints (Malaysia) Sdn Bhd, Kuala Lumpur,
Malaysia
AkzoNobel Swire Paints (Guanzhou) Limited,
China
Privately held, Malaysia
Swire Pacific Limited, Industrial
Development Co. Ltd of Guanzhou,
China
%
30.00
27.04
45.00
40.05
46.00
International Paint (Korea) Ltd, Busan, South-
Korea
Noroo Holdings, South Korea
40.00
Kayaku Akzo Corp, Tokyo Japan
Nippon Kayaku Co., Ltd., Japan
Akzo Nobel Kemipol AS, Izmir, Turkey
Privately held, Turkey
Marshall Boya, Dilovasi-Kocaeli, Turkey
Marshal Employees' Foundation,
Privately held, Turkey
25.00
49.00
11.75
AkzoNobel Boya Sanayi ve Ticaret A.S. (PC),
Izmir, Turkey
Privately held, Turkey
25.00
Akzo Nobel Pakistan Limited
AkzoNobel OmanSAOC
Privately held, Pakistan
24.19
Omar Zawawi establishment LLC
Others
Total
2012
2013
Equity stake
Equity stake
€ mln
170
73
38
33
36
24
10
14
6
6
16
–
38
%
30.00
27.04
45.00
40.05
46.00
40.00
25.00
49.00
11.75
25.00
24.19
50.00
€ mln
167
53
27
29
41
19
8
15
5
4
9
10
40
464
427
137
AkzoNobel Report 2013 | Financial statements 15
Note 15: Post-retirement benefit provisions
Post-retirement benefit provisions relate to defined benefit
pension and other post-retirement benefits, including
healthcare or welfare plans. We have a number of defined
benefit pension plans. The largest pension plans are the ICI
Pension Fund (ICIPF) and the AkzoNobel (CPS) Pension
Scheme (CPS) in the UK which together account for
83 percent of defined benefit obligations (DBO) and
91 percent of plan assets. Other pension plans include the
largely unfunded plans in Germany, the plans in the US and
certain other smaller plans in the UK. The benefits of these
pension plans are based primarily on years of service and
employees’ compensation. The funding policy for the plans
is consistent with local requirements in the countries of
establishment. We also provide certain healthcare and life
insurance benefits to retired employees, mainly in the US
and the Netherlands.
Valuations of the obligations under the plans are carried
out regularly by independent qualified actuaries. We accrue
for the expected costs of providing such post-retirement
benefits during the service years of the employees.
Governance of the benefit plans is the responsibility of the
Board Committee Pensions, a technical committee to the
Board of Management. This committee provides oversight
of the costs and risks of the plans including oversight of
the impact of the plans on the company in terms of cash
flow, pension expenses and the balance sheet, by the
development and maintenance of policies on benefit design,
funding, asset allocation and assumption setting.
Pension plans
Almost all of the defined benefit plans have been closed
to new members since the early to mid-2000s, although
in many plans long-serving employees continue to accrue
benefits. For plans in the US, benefit accrual is frozen
and employees participate in defined contribution plans
for future service. In countries where plans are closed,
new employees are eligible to join a defined contribution
arrangement. In countries in high growth markets, pension
schemes currently are not material. Unless mandated by
law, it is our policy that any new plans are established as
defined contribution plans.
138
The most significant risks that we run in relation to
defined benefit plans are that investment returns fall short
of expectations, decline in discount rates, that inflation
exceeds expectations, and that retirees live longer than
expected. The assets and liabilities of the funded plans
are held outside of the company in a trust or a foundation,
which is governed by a board of fiduciaries or trustees,
depending on the legal arrangements in the country
concerned. The primary objective with regard to the
investment of pension plan assets is to ensure that each
individual plan has sufficient funds available to satisfy future
benefit obligations in accordance with local legal and
legislative requirements. For this purpose, we work closely
with plan fiduciaries to develop strategic asset allocation
strategies. Asset liability modelling (ALM) studies are carried
out periodically to analyse and understand the trade-off
between expected investment returns, volatility of outcomes
and the impact on cash contributions. We aim to strike a
cautious balance between these factors in order to agree
affordable contribution schedules with plan fiduciaries.
Plan assets principally consist of long-term interest-
earning investments and (investment funds with holdings
primarily in) quoted equity securities. Our largest plans
use derivatives (such as index futures, currency forward
contracts and swaps) to reduce volatility of underlying
variables, for efficient portfolio management and to improve
the liability matching characteristics of the assets. However,
derivatives are not used to gear our funds. Limits have been
set on the use of derivatives which are periodically subject
to review for compliance with the pension fund’s investment
strategy. CPS has entered into an insurance contract with
SwissRe to hedge longevity risk in respect of a portion of its
pensioners (see the table at the end of this note).
In line with our pension/investment strategy, we seek to
reduce risk in our pension plans over time. In 2013, our
North American pension liabilities were significantly reduced
by the following actions:
• As a result of the Decorative Paints North America
divestment in 2013, at the end of 2012 post-retirement
balance sheet provisions of €107 million were classified
as held for sale. The sale on April 1, 2013, resulted in
the remeasurement and curtailment of US pension and
other post-retirement liabilities (at a loss of €18 million)
and the transfer to PPG of the Canadian pension and
other post-retirement plans of Decorative Paints and
former ICI
• In September 2013, former employees with vested
benefits in the US were offered the opportunity to take
their benefits as a single lump sum immediately. Some
4,200 participants elected to take the cash sum
reducing our liabilities by $113 million (€85 million) at a
settlement loss of €4 million. This followed a similar
exercise in December 2012
• In December 2013, AkzoNobel settled pension
entitlements of approximately 9,400 retirees and
beneficiaries in the US by purchasing annuities from
insurance company MetLife for an amount of $675 million
(€490 million) thereby reducing the liabilities by
$655 million (€475 million) with a €15 million settlement
loss. To enable this transaction, AkzoNobel made a
top-up contribution of $168 million (€127 million)
In addition, during 2012 and 2013 certain pension plans
have been curtailed, which were not material. All of these
actions generally will reduce expenses and employer
contribution requirements into those plans in future years.
The remaining pension plans primarily represent defined
contribution plans. This includes, among others, the
Pension Fund APF in the Netherlands and the 401k
Plan in the US. The ITP2 plan in Sweden is financed
through insurance with the Alecta insurance company
and is classified as a multi-employer defined benefit plan.
AkzoNobel does not have access to sufficient information
from Alecta to enable a defined benefit accounting
treatment and hence it is accounted for as a defined
contribution plan. Contributions in 2013 were €10 million
(2012: €10 million). Alecta’s target funding ratio in 2013
was 140 percent although the actual ratio at September
2013 stood at 153 percent. There are also a small number
of multi-employer plans in the US in which AkzoNobel
participates with annual contributions totaling less than
€1 million. These are also accounted for as defined
contribution plans. The expenses of plans classified as
defined contribution plans in AkzoNobel totaled €172 million
in 2013 (2012: €180 million).
Financial statements | AkzoNobel Report 2013 Other post-retirement benefit plans
AkzoNobel provides certain healthcare and life insurance
benefits to retired employees, mainly in the US and the
Netherlands. The risks to which the US healthcare plans
expose AkzoNobel include the risk of future increases in
the cost of healthcare which would increase the cost of
maintaining the plans. The benefit payments to retirees
under the Dutch plan are frozen. Both plans expose
AkzoNobel to the risk of a further decline in long-term
corporate bond rates, which increases the plan obligations,
and longevity risk as the plans generally pay lifetime
benefits.
Reconciliation balance sheet
In € millions
DBO
Plan
assets
2012
Funded
status
DBO
Plan
assets
2013
Funded
status
Balance at the beginning of the period
(15,345)
14,605
(740)
(16,674)
15,378
(1,296)
Statement of income
Current service cost
Past service cost/curtailments
Settlements
Net (interest)/income on net defined benefit (liability)/asset
Cost recognized in statement of income
Remeasurements
Actuarial gain/(loss) due to liability experience
Actuarial gain/(loss) due to liability financial assumption changes
Actuarial gain/(loss) due to liability demographic assumption changes
Return on plan assets greater/(less) than discount rate
(61)
(8)
66
(707)
(710)
22
(1,418)
(2)
–
Remeasurement effects recognized in other comprehensive income
(1,398)
Cash flow
Employer contributions
Employee contributions
Benefits and administration costs paid from plan assets
Net cash flow
Other
Acquisitions/divestments/transfers
Changes in exchange rates
Total other
–
(6)
1,055
1,049
37
(307)
(270)
–
–
(58)
704
646
–
–
–
104
104
767
6
(1,055)
(282)
(25)
330
305
(61)
(8)
8
(3)
(64)
22
(1,418)
(2)
104
(1,294)
767
–
–
767
12
23
35
(68)
13
584
(602)
(73)
(92)
9
17
–
(66)
–
(5)
962
957
319
349
668
–
–
(602)
581
(21)
–
–
–
(128)
(128)
568
5
(962)
(389)
(266)
(326)
(592)
(68)
13
(18)
(21)
(94)
(92)
9
17
(128)
(194)
568
–
–
568
53
23
76
Balance at the end of the period
(16,674)
15,378
(1,296)
(15,188)
14,248
(940)
Asset restriction
Medicare receivable
–
–
–
–
(2)
(3)
–
–
–
–
(2)
(2)
Net balance sheet provision
(16,674)
15,378
(1,301)
(15,188)
14,248
(944)
In the balance sheet under
Other financial non-current assets
Post-retirement benefit provisions
Current portion of provisions
Liabilities
Net balance sheet provision
841
(1,942)
(93)
(107)
(1,301)
483
(1,237)
(184)
(6)
(944)
139
AkzoNobel Report 2013 | Financial statements In addition to the expenses, administrative expenses are
incurred, especially for the UK pension funds, of €12
million (2012: €11 million), which are included in operating
income. In addition, we directly incurred asset management
expenses of €6 million (2012: €5 million), which have been
included in other comprehensive income, as was the
€1 million reduction of the restriction of asset recognition
in 2012.
Interest costs on DBO for both pensions and other
post-retirement benefits together with the interest income
on plan assets comprise the net financing expenses on
post-retirement benefits of €21 million (2012: €3 million),
see Note 4.
Plan assets
In € millions
Equities
Debt - fixed interest government bonds
Debt - index-linked government bonds
Debt - corporate and other bonds
Cash and cash equivalents
Other
Total
DBO at funded and unfunded pension plans
In € millions
Wholly or partly funded plans
Unfunded plans
Total
2012
15,934
347
2013
14,591
295
16,281
14,886
Cash flows
In 2014, we expect to contribute €394 million to our
defined benefit pension plans. This includes €96 million of
regular pension contributions and €298 million for top-ups,
of which £25 million (€30 million) will be paid out of the
CPS escrow account (see explanation at the end of this
note). We expect to pay a further €23 million for other
post-retirement benefit plans. No allowance is made for
any special one-off contributions that may arise in relation
to new de-risking opportunities, like for example the
pensioner settlement with MetLife in the US in 2013.
The figures in the table below are the estimated future
benefit payments to be paid from the plans to beneficiaries
over the next ten years.
Total
2,328
2,795
2,760
5,001
924
1,570
2012
% of total
15
18
18
33
6
10
2013
In € millions
Total
1,824
2,635
2,816
4,339
1,117
1,517
% of total
13
18
20
30
8
11
2014
2015
2016
2017
2018
15,378
100
14,248
100
Other post-
retirement
benefits
Pensions
892
890
898
904
911
23
23
23
23
22
2019-2023
4,650
104
The equities and debt assets in the table above have
quoted prices in active markets, although most are held
through funds comprised of such instruments which are
not actively traded themselves. Other plan assets include
certain assets that are not quoted in active markets, such
as real estate, insurance policies and private equity. Other
assets included unquoted securities totalling €531 million
(December 31, 2012: €557 million, of which €229 million is
invested in real estate (December 31, 2012: €249 million).
Plan assets did not directly include any of AkzoNobel’s
own transferable financial instruments, nor any property
occupied by or assets used by the company.
In the US, the Medicare Prescription Drug Improvement
and Modernization Act of 2003 introduced prescription
drug benefits for retirees, as well as a federal subsidy
to sponsors of post-retirement healthcare plans, which
both began on January 1, 2006. We have recognized
this reimbursement right as an asset under other financial
non-current assets, measured at fair value amounting
to €2 million at year-end 2013 (year-end 2012:
€3 million).
Pension balances recorded under other financial
non-current assets (December 31, 2013: €483 million;
December 31, 2012: €841 million) could be recognized
under IFRIC14 because economic benefits are available
in the form of future refunds from the plan or reductions in
future contributions to the plan, either during the life of the
plan or on the (final) settlement of the plan liabilities.
140
Financial statements | AkzoNobel Report 2013 CPS
UK
19%
(3,147)
2,804
(343)
–
–
Other
pension
plans
20%
(3,396)
2,051
(1,345)
(2)
–
Other post-
retirement
benefits
2%
(393)
–
(393)
–
(3)
2012
Total
(16,674)
15,378
(1,296)
(2)
(3)
ICIPF
UK
63%
(9,576)
10,007
431
–
–
CPS
UK
20%
(3,051)
2,941
(110)
–
–
(343)
(1,347)
(396)
(1,301)
431
(110)
13%
8
29
3.5%
–
–
–
5.9%
3.8%
61
767
3.9%
3.4%
2.4%
2.3%
5.9%
3.8%
13%
9
170
4.3%
4.3%
3.3%
3.1%
22%
15
91
4.4%
4.4%
3.4%
2.4%
Other
pension
plans
15%
(2,259)
1,300
(959)
(2)
–
(961)
56%
38
281
3.9%
2.9%
2.1%
1.9%
Other post-
retirement
benefits
2%
(302)
–
(302)
–
(2)
(304)
9%
6
26
4.2%
–
–
–
5.5%
3.8%
2013
Total
(15,188)
14,248
(940)
(2)
(2)
(944)
68
568
4.2%
4.1%
3.2%
2.7%
5.5%
3.8%
Key figures and assumptions by plan
In € millions or %
Percentage of total DBO
Defined benefit obligation at year-end
Fair value of plan assets at year-end
Plan funded status
Restriction on asset recognition
Medicare receivable
Amounts recognized on the balance sheet
Percentage of total current service cost
Current service cost
Employer contributions
Discount rate
Rate of compensation increase
Inflation
Pension increases
Healthcare cost trend rate for next year
Rate to which cost trend rate is assumed to decline
Year that rate reaches the ultimate trend rate
Life expectancy (in years)
Currently aged 60
Males
Females
Currently aged 45, from age 60
Males
Females
ICIPF
UK
59%
(9,738)
10,523
785
–
–
785
15%
9
433
4.1%
3.6%
2.6%
2.6%
26.7
29.3
27.8
30.6
21%
13
146
4.1%
3.8%
2.8%
2.3%
26.5
28.4
27.7
29.7
51%
31
159
3.4%
2.3%
1.5%
1.5%
24.2
27.1
25.3
28.2
2019-2032
2019-2032
2019-2032
2019-2032
24.1
26.3
24.4
26.3
26.1
28.6
27.2
29.8
26.8
29.3
28.0
30.5
26.7
28.4
27.9
29.6
25.0
28.1
26.6
29.6
24.9
26.7
26.0
27.3
26.5
28.9
27.7
30.1
141
AkzoNobel Report 2013 | Financial statements Total
1,081
628
581
7
13.9
The effect on DBO shown allows for an alternative value
for each assumption while the other actuarial assumptions
remain unchanged. Whilst this table illustrates the overall
impact on DBO of the changes shown, the significance of
the impact and the range of reasonably possible alternative
assumptions may differ between the different plans that
comprise the total DBO; in particular the plans differ in
benefit design, currency and average term, meaning that
different assumptions have different levels of significance
for different plans. The sensitivity analysis is intended to
illustrate the inherent uncertainty in the evaluation of the
DBO under market conditions at the measurement date.
Its results cannot be extrapolated due to non-linear effects
that changes in the key actuarial assumptions may have
on the overall total DBO. Furthermore, the analysis does
not indicate a probability of such changes occurring and it
does not necessarily represent our view of expected future
changes in DBO. Any management actions that may be
taken to mitigate the inherent risks in the post-retirement
defined benefit plans or changes in asset values are not
reflected in this analysis.
The sensitivities in the table only apply to the DBO and
not to the net amounts recognized in the balance sheet.
Movements in the fair value of plan assets would, to some
extent, be expected to offset movements in the DBO
resulting from changes in the given assumptions.
Sensitivity of DBO to change in assumptions
In € millions
Discount rate: 0.5% decrease
Price inflation: 0.5% increase 1
Life expectancy: 1 year increase from age 60
Healthcare cost trend rate: 0.5% increase
Maturity information
ICIPF
UK
632
368
412
–
CPS
UK
266
168
105
–
Other
pension
plans
Other post-
retirement
benefits
167
92
59
–
16
–
5
7
9.5
Weighted average duration of DBO (years)
13.0
17.1
14.4
1 The sensitivity to price inflation assumption includes corresponding changes to all inflation-related assumption compensation
increases, pensions in payment and pensions in determent.
142
Financial statements | AkzoNobel Report 2013 In € millions
Type of plan
Benefits
ICIPF
CPS
Defined benefit, based upon years of service and final salary
Retirement pension for employee
Dependants pensions on death of employee/ pensioner
Options for ill health early retirement
Pension increases (main benefit section)
Annually linked to UK RPI with a maximum of 5
percent
Annually linked to UK CPI with a maximum of
5 percent
Plan structure
Governance
Regulatory framework
Funding basis
Plans are set up under a trust and are tax approved
Trustee directors:
5 member nominated
1 independent (Law Debenture)
5 appointed with the agreement of Law
Debenture
5 member nominated
5 company nominated
1 independent (Law Debenture)
The plans are tax approved and assets are held in trust for the benefit of participants. The trustees
have a legal duty to manage the trust in the best interests of participants. Investment strategy is
controlled by the trustees in consultation with the company.
A plan specific basis must be agreed with each trustee board in accordance with UK Regulations.
The basis is not the same as the IFRS calculation as it uses more prudent assumptions about life
expectancy and the discount rates reflect prudent estimates of the expected return on assets actu-
ally held, thus the trustees’ investment strategies will impact the discounted value of liabilities.
Frequency of funding reviews
Latest valuation
Every three years
March 31, 2011
Deficit at previous valuation
£1.0 billion (€1.2 billion)
Recovery plan
£178.5 million (€214 million) per annum to 2017
inclusive paid in January each year
March 31, 2012
£220 million (€264 million) allowing for the
escrow account
£42 million (€50 million) per annum to 2018
inclusive, plus £25 million (€30 million) per annum
to 2017 from the escrow account paid in March
each year
Next funding review
March 31, 2014
Estimated funding deficit at December 31, 2013
£1.1 billion (€1.3 billion)
March 31, 2015
£0.25 million (€0.3 million)
Strategic asset allocation
Matching
Return seeking
Other
Escrow account
Membership
Active
Deferred
Pensioner
Total
80%
20%
Not applicable
Not applicable
459
10,713
49,765
60,937
58%
42%
Longevity hedge contract with SwissRe to cover
40% of pensioner liabilities
Pre-funded account established in 2007 to fund
existing deficit. It pays a minimum of £25 million
per annum to CPS until it is exhausted (no later
than 2017). Value at year-end 2013 is £108
million (€130 million)
753
19,992
20,659
41,404
Effect of the implementation of the revised IAS 19
In € millions
Original Restated
Balance sheet January 1, 2012
Deferred tax assets
Other financial non-current assets
Post-retirement benefit provisions
Deferred tax liabilities
Shareholders’ equity
Non-controlling interests
Statement of income 2012
Operating income
Financing expenses related to pensions
Income tax
Profit/(loss) for the period
Attributable to
Shareholders of the company
Non-controlling interests
Earnings per share from total operations
(in €)
Basic
Diluted
Statement of comprehensive income 2012
Actuarial gains and losses, and other items relat-
ing to pensions and other post-retirement benefits
Exchange differences arising on translations of
foreign operations
Income tax relating to other comprehensive
income
813
907
1,187
1,559
1,156
1,831
567
541
9,212
9,031
531
529
(1,244)
(1,198)
(65)
(172)
(3)
(203)
(2,106)
(2,029)
(2,169)
(2,092)
63
63
(9.14)
(9.14)
(8.82)
(8.82)
–
8
(1,298)
34
–
249
Other comprehensive income for the period
6
(1,017)
Comprehensive income for the period
(2,100)
(3,046)
Attributable to
Shareholders of the company
Non-controlling interests
Balance sheet December 31, 2012
Deferred tax assets
Other financial non-current assets
Post-retirement benefit provisions
Deferred tax liabilities
Shareholders’ equity
Non-controlling interests
(2,146)
(3,093)
46
47
830
1,748
1,126
442
1,146
1,297
2,142
420
6,892
5,764
465
464
143
AkzoNobel Report 2013 | Financial statements 16
Note 16: Other provisions
17
Note 17: Long-term borrowings
Movements in other provisions
In € millions
Balance at January 1, 2013
Additions made during the year
Utilization
Amounts reversed during the year
Unwind of discount
Acquisitions/divestments
Transfer to Liabilities held for sale
Changes in exchange rates
Balance at December 31, 2013
Non-current portion of provisions
Current portion of provisions
Balance at December 31, 2013
Restructuring
of activities
Environmental
costs
184
191
(111)
(26)
1
–
–
(3)
236
75
161
236
424
7
(48)
(24)
(4)
(1)
(8)
(17)
329
283
46
329
Other
489
158
(65)
(17)
8
(4)
(1)
(15)
553
343
210
553
Total
1,097
356
(224)
(67)
5
(5)
(9)
(35)
1,118
701
417
1,118
Provisions for restructuring of activities
Provisions for restructuring of activities comprise accruals
for certain employee benefits and for costs which are
directly associated with plans to exit or cease specific
activities and closing down of facilities. For all restructuring
provisions a detailed formal plan exists and the imple-
men tation of the plan has started or the plan has
been announced before the balance sheet date. Most
restructuring plans are expected to be completed within
two years from the balance sheet date.
Provisions for environmental costs
For details on environmental exposures, see Note 20.
Other provisions
Other provisions relate to a great variety of risks and
commitments, including provisions for claims, antitrust
cases and other long-term employee benefits, such as
long-service leave and jubilee payments.
The majority of the cash outflows related to other
provisions are expected to be within one to five years. In
calculating the other provisions, a pre-tax discount rate
of on average 3.5 percent has been used.
Current portion of provisions
Current portion of post-retirement benefit provisions
(€184 million) and other provisions (€417 million) adds up
to €601 million (2012: €455 million).
Long-term borrowings
In € millions
Debt issued
Debt to credit institutions
Other borrowings
Total
2012
3,289
10
89
3,388
2013
2,458
48
160
2,666
The amounts due within one year are presented under
short-term borrowings. For details on the exposure to
interest rate and foreign currency risk, see Note 23. During
2013, the average effective interest rate on debt issued
was 5.3 percent (2012: 5.6 percent).
Debt issued
In € millions
7 3/4 % 2008/14 (€825 million )
7 1/4 % 2009/15 (€621 million)
8 % 2009/16 (£250 million)
4 % 2011/18 (€800 million)
2 5/8 % 2012/22 (€750 million)
Other
Total
2012
823
630
305
792
739
–
2013
–
626
299
793
740
–
3,289
2,458
Aggregated maturities of long-term borrowings
In € millions
Debt issued
Debt to credit institutions
Other borrowings
Total
2015 – 2018
After 2018
1,718
22
119
1,859
740
26
41
807
144
Financial statements | AkzoNobel Report 2013 18
Note 18: Short-term borrowings
19
Note 19: Trade and other payables
We have a €1.8 billion multi-currency revolving credit,
which has been extended in 2013 with an additional year
to 2018. At year-end 2013 and 2012, this facility had not
been drawn. At year-end 2013 and 2012, none of the
borrowings was secured by collateral.
Financial lease liabilities are included in other borrowings
and aggregated €51 million (2012: €52 million). An amount
of €6 million will mature within one year and €18 million will
mature in the period 2015 through 2018 and €27 million
after 2018.
Short-term borrowings
Trade and other payables
In € millions
Debt to credit institutions
Current portion of long-term borrow-
ings
Total
2012
194
468
662
2013
78
883
961
In € millions
Suppliers
Amounts payable to employees
Derivatives
Taxes and social security contributions
In 2013, a bond of $500 million matured. In January 2014,
a bond totaling €825 million will mature and is classified as
a short-term borrowing.
We have US dollar and euro commercial paper programs
in place, which can be used to the extent that the
equivalent portion of the €1.8 billion multi-currency
revolving credit facility is not used. We had no commercial
paper outstanding at year-end 2013 and 2012.
Prepayments by customers
Dividends
Payable to related parties
Other liabilities
Total
2012
1,990
258
38
230
156
19
32
519
3,242
2013
1,944
361
42
216
184
14
32
425
3,218
145
AkzoNobel Report 2013 | Financial statements outcome will not materially affect our consolidated financial
position but could be material to our results of operations
or cash flows in any one accounting period.
Commitments
Purchase commitments for property, plant and
equipment aggregated €93 million (2012: €89 million).
Maturity operational lease contracts
In € millions
Due within one year
Due between one and five years
Due after more than five years
Total
2012
127
266
170
563
2013
106
215
126
447
The 2012 numbers have been restated to exclude the
operational lease commitments of the North American
Decorative Paints business.
Lease payments during 2013 amounted to €127 million.
Guarantees related to associates and joint ventures at
year-end 2013 totaled €9 million (2012: €10 million).
20
Note 20: Contingent liabilities and commitments
Environmental matters
We are confronted with substantial costs arising out
of environmental laws and regulations, which include
obligations to eliminate or limit the effects on the
environment of the disposal or release of certain wastes
or substances at various sites. Proceedings involving
environmental matters, such as the alleged discharge of
chemicals or waste materials into the air, water, or soil, are
pending against us in various countries. In some cases
this concerns sites divested in prior years or derelict sites
belonging to companies acquired in the past.
It is our policy to accrue and charge against earnings
environmental clean-up costs when it is probable that
a liability has materialized and an amount is reasonably
estimable. These accruals are reviewed periodically and
adjusted, if necessary, as assessments and clean-ups
proceed and additional information becomes available.
Environmental liabilities can change substantially due to
the emergence of additional information on the nature or
extent of the contamination, the geological circumstances,
the necessity of employing particular methods of
remediation, actions by governmental agencies or private
parties, or other factors. Cash expenditures often lag
behind the period in which an accrual is recorded by a
number of years.
The provisions for environmental costs accounted for in
aggregated €329 million at year-end 2013 (2012:
€424 million). The provision has been discounted using an
average pre-tax discount rate of 3.9 percent (2012:
2.9 percent). While it is not feasible to predict the outcome
of all pending environmental exposures, it is reasonably
possible that there will be a need for future provisions for
environmental costs which, in management’s opinion,
based on information currently available, would
not have a material effect on the company’s financial
position but could be material to the company’s results
of operations in any one accounting period.
Claims and litigations
AkzoNobel is – together with others – involved in civil
proceedings initiated by Cartel Damages Claims HP
SA/NV before the Dortmund Court in Germany in relation
146
to the Hydrogen Peroxide infringement in the 1990’s.
CDC Project 13 SA has initiated civil proceedings against
AkzoNobel and other companies before the Amsterdam
District Court in relation to the Sodium Chlorate
infringements in the 1990’s. These claims are disputed.
An appeal by the company is pending with the General
Court against the decision by the European Commission
to impose fines on the company for violations of EU
competition laws regarding Heat Stabilizers.
AkzoNobel has provided various indemnities and
guarantees in respect of past divestments to the relevant
purchasers and their permitted assigns (if applicable),
which in general are capped in time and/or amount (in
proportion to the value received). In connection with the
Organon BioSciences divestment to Schering-Plough,
AkzoNobel has limited its maximum exposure to claims
to €850 million. The provided guarantees and indemnities
have varying maturity periods. AkzoNobel has received
various claims under such indemnities and guarantees. In
some instances, AkzoNobel has been named as a direct
defendant despite the divestments.
A number of other claims are pending, all of which are
contested. We are also involved in disputes with tax
authorities in several jurisdictions.
Provisions are recognized when an outflow of economic
benefits for settlement is probable and the amount is
reliably estimable. It should be understood that, in light
of possible future developments, such as (a) potential
additional lawsuits, (b) possible future settlements, and (c)
rulings or judgments in pending lawsuits, certain cases
may result in additional liabilities and related costs. At this
point in time, we cannot estimate any additional amount
of loss or range of loss in excess of the recorded amounts
with sufficient certainty to allow such amount or range of
amounts to be meaningful. Moreover, if and to the extent
that the contingent liabilities materialize, they are typically
paid over a number of years and the timing of such
payments cannot be predicted with confidence.
While the outcome of said cases, claims and disputes
cannot be predicted with certainty, we believe, based
upon legal advice and information received, that the final
Financial statements | AkzoNobel Report 2013 21
Note 21: Related party transactions
22
Note 22: Remuneration of the Supervisory Board
and the Board of Management
We purchased and sold goods and services to various
related parties in which we hold a 50 percent or less
equity interest (associates and joint ventures). Such
transactions were conducted at arm’s length with terms
comparable with transactions with third parties. In 2013,
a significant related party transaction was a €99 million
gas supply (2012: €115 million) to Delesto, a joint venture
of AkzoNobel and Essent. Delesto transforms gas into
steam and electricity. The steam is used in our production
processes and the electricity is sold to the market.
During 2013, we considered the members of the Executive
Committee and the Supervisory Board to be the key
management personnel as defined in IAS 24 “Related
parties”. For details on their remuneration, as well as on
shares and options held by members of the Supervisory
Board or Board of Management, see Note 22. In the
ordinary course of business, we have transactions with
various organizations with which certain of the members
of the Supervisory Board or Executive Committee are
associated, but no related party transactions were effected
in 2013. Likewise, there have not been any transactions
with members of the Supervisory Board or Executive
Committee, any other senior management personnel or
any family member of such persons. Also no loans have
been extended to members of the Supervisory Board
or Executive Committee, any other senior management
personnel or any family member of such persons.
For related party transactions with pension funds, see
Note 10 and 15.
The members of the Supervisory Board and the Executive
Committee are considered key management personnel.
Total compensation to key management personnel
amounted to €15.4 million (2012: €24.1 million), which
includes €1.3 million related to the Dutch crisis tax
(of which €0.9 million related to members of Board of
Management). An amount of €7.0 million related to short-
term employee benefits (2012: €10.4 million), €1.2 million
to post-employment benefits and other post-employment
compensation (2012: €1.5 million) and €5.8 million to
share-based compensation (2012: €8.1 million).
Supervisory Board
Members of the Supervisory Board receive a fixed
remune ration: €100,000 for the Chairman, €60,000 for the
Deputy Chairman and €50,000 for the other members.
Members of committees receive an extra compensation.
Members living outside the Netherlands receive an
attendance fee dependent on the country of residence.
Members who are resident in the Netherlands do not
receive an attendance fee except for meetings held
outside the Netherlands.
In accordance with the Articles of Association and good
corporate governance practice, the remuneration of
Supervisory Board
Supervisory Board members is not dependent on the
results of the company.
We do not grant share-based compensation to our Super-
visory Board members, neither do we provide loans. Travel
expenses and facilities for members of the Supervisory
Board are borne by the company and reviewed by the
Audit Committee. The shares in the company owned by
Supervisory Board members serve as a long-term
investment in the company.
Shares held by the members of the Supervisory
Board
Number of shares at year-end
Karel Vuursteen
Sari Baldauf
Uwe-Ernst Bufe
Dolf van den Brink
Peggy Bruzelius
Antony Burgmans
Peter Ellwood
Louis Hughes
Ben Verwaayen
2012
400
–
500
500
500
500
500
500
–
2013
400
–
500
500
500
500
500
538
–
Total
remuneration Remuneration Attendance fee
Committee
allowance fees
Employer’s
charges
Total
remuneration
In €
2012
Karel Vuursteen, Chairman
121,100
100,000
Sari Baldauf 1
Uwe-Ernst Bufe, Deputy Chairman
Dolf van den Brink
Peggy Bruzelius
Antony Burgmans
Peter Ellwood
Louis Hughes
Ben Verwaayen 1
Total
1 As of May, 2012.
52,400
78,600
72,500
94,500
67,500
84,900
93,600
52,400
50,000
60,000
50,000
50,000
50,000
50,000
50,000
50,000
5,000
17,500
17,500
5,000
15,000
5,000
17,500
30,000
17,500
15,000
10,000
–
20,000
15,000
15,000
15,000
15,000
10,000
2013
3,900
123,900
–
–
–
17,300
–
3,900
3,900
3,000
77,500
77,500
75,000
97,300
70,000
86,400
98,900
80,500
717,500
510,000
130,000
115,000
32,000
787,000
147
AkzoNobel Report 2013 | Financial statements Post-employment benefits and other post-
employment compensation
Other post-employment compensation are payments to
a person intended for building up retirement benefits other
than those included in Post-employment benefits. Pension
contributions were calculated over the 2013 remuneration.
These amounts together with the contributions over
the 2013 short-term incentives are included in the
post-employment benefits and other post-employment
compensation.
Share-based compensation
The costs for share-based compensation are non-cash
and related to the performance-related share plan and
the share matching plan following IFRS 2. The fair value
of the performance-related share plan at grant date is
amortized as a charge against income over the three-year
vesting period. The fair value amounted to €41.28 per
performance-related share conditionally granted in 2013
for those members of the Board of Management facing a
two year holding restriction (2012: €32.43) and €50.89 for
those members whose holding restriction will lapse after
the end of their Board member’s term (2012: €38.79). The
fair value for the shares related to the share-matching plan
amounted to €40.67 (2012: €39.72).
Former members of the Board of Management
In 2013, charges for former members of the Board of
Management amounted to €4.8 million (2012: €18,000)
mainly due to taxation on excessive pay (‘Belastingheffing
excessieve beloningsbestanddelen’) and Dutch crisis tax.
Board of Management
The individual contracts of the members of the Board of
Management are determined by the Supervisory Board
within the framework of the remuneration policy adopted
by the Annual General Meeting of shareholders. We do not
provide loans to members of the Board of Management.
For more detailed information on the decisions of the
Supervisory Board with respect to the individual contracts
of the members of the Board of Management, see the
Remuneration report.
Short-term incentive
The short-term incentives for 2013 are linked to return on
investment (20 percent), operating income (20 percent),
operating cash flows (30 percent) and the individual
and qualitative targets of the members of the Board of
Management (30 percent). For more information, see the
Remuneration report.
Other short-term benefits
Other short-term benefits include employer’s charges and
other compensations. Employer’s charges refer to social
contributions and healthcare contributions. The social
charges of Mr. Nichols (€228,900) related to employer’s
contribution in the UK. The other costs for Mr. Nichols
(€73,600) and Mr. Darner (€50,700) related to living
expenses and home leave allowances.
Board remuneration 2012
In €
Ton Büchner
Keith Nichols
Leif Darner
Tex Gunning
Total
Salary
Short-term
incentives
Other short-
term benefits
Post-
employment
benefits
Other post-
employment
compensa-
tion
Share-based
compensa-
tion
534,700
170,900
5,700
–
128,900
399,500
602,000
224,500
182,400
109,100
78,000
880,400
Termination
benefits
Total remu-
neration
–
–
1,239,700
2,076,400
602,000
200,100
689,500
229,500
602,000
200,100
584,600
236,700
–
–
1,248,600
796,300
3,766,000
951,300
–
2,574,700
2,340,700
795,600
1,462,200
575,300
206,900
3,479,800
796,300
9,656,800
Board remuneration 2013
Short-term
incentives
Other short-
term benefits
Post-employ-
ment benefits
Other post-
employment
compensation
Share-based
compensation
Total
remuneration
630,900
308,100
–
–
8,100
302,500
53,200
2,700
–
–
58,900
58,900
291,600
221,800
–
–
807,700
857,900
996,900
2,558,300
2,306,300
1,309,700
1,367,600
1,629,900
Salary
820,000
616,000
200,700
200,700
1,837,400
939,000
366,500
117,800
513,400
4,030,100
7,804,200
In €
Ton Büchner
Keith Nichols
Leif Darner 1
Tex Gunning 1
Total
1 Until April 26, 2013.
148
Financial statements | AkzoNobel Report 2013 Performance-related shares
With regard to the performance related shares granted
to the members of the Board of Management in 2011,
the final vesting percentage of the series 2011-2013
equaled 70.83 percent (series 2010-2012: 66.67 percent),
including dividend shares 77.98 percent (series 2010-
2012: 73.61 percent). The members of the Board of
Management will retain the shares for a minimum period
of two years after vesting or (if shorter) for the duration of
their tenure as member of the Board of Management.
Share-matching plan
The members of the Board of Management are required
to buy AkzoNobel shares. Under certain conditions,
such shares may be matched by the company. See
the Remuneration report for further details on individual
arrangements.
Number of performance-related shares
Balance at
January 1,
2013
Series
Granted
in 2013
Vested
in 2013
Forfeited
in 2013
Dividend
in 2013
Balance at
December
31, 2013
Vested on
January 1,
2014
Ton Büchner
2012 – 2014
33,099
–
2013 – 2015
–
24,200
Keith Nichols
Leif Darner
Tex Gunning
2010 – 2012
2011 – 2013
2012 – 2014
2013 – 2015
2010 – 2012
2011 – 2013
2012 – 2014
2013 – 2015
2010 – 2012
2011 – 2013
2012 – 2014
2013 – 2015
13,471
19,895
24,799
–
–
–
–
18,200
13,471
19,895
24,799
–
–
–
–
6,067
13,471
19,895
24,799
–
–
–
–
6,067
–
–
(13,471)
–
–
–
(13,471)
–
–
–
(13,471)
–
–
–
(5,973)
–
–
–
(5,973)
–
–
–
–
–
–
(5,973)
–
–
967
707
–
582
724
531
–
582
724
177
–
582
724
177
34,066
24,907
–
14,504
25,523
18,731
–
14,504
25,523
6,244
–
14,504
25,523
6,244
–
–
–
14,504
–
–
–
14,504
–
–
–
14,504
–
–
Shares held by the Board of Management
Number of potential matching shares
Number of shares at year-end
Ton Büchner
Keith Nichols
2012
10,810
16,632
2013
16,243
21,870
Ton Büchner
Tex Gunning
Year of share
investment
2012
2013
2012
2013
Potential match
Matched in 2013
Forfeited in 2013
10,810
1,429
1,002
702
–
–
(1,002)
(702)
–
–
–
–
Balance at
year-end 2013
10,810
1,429
–
–
Stock options
Keith Nichols
Leif Darner
Year of issue
2006
2007
2006
2007
Exercise
price in €
Outstanding at
January 1,
2013
46.46
58.89
46.46
58.89
3,000
3,750
13,000
13,000
Forfeited
in 2013
Exercised in
2013
Outstanding at
year-end 2013
Expiry date
–
–
–
–
3,000
–
13,000
–
April 26, 2013
3,750
April 26, 2014
–
April 26, 2013
–
13,000
April 26, 2014
149
AkzoNobel Report 2013 | Financial statements 23
Note 23: Financial risk management
Financial risk management framework
Our activities expose us to a variety of financial risks: market
risk (including: currency risk, fair value interest rate risk
and price risk), credit risk and liquidity risk. These risks are
inherent to the way we operate as a multinational with a
large number of locally operating subsidiaries. Our overall
risk management program seeks to identify, assess, and – if
necessary – mitigate these financial risks in order to minimize
potential adverse effects on our financial performance. Our
risk mitigating activities include the use of derivative financial
instruments to hedge certain risk exposures. The Board of
Management is ultimately responsible for risk management.
We centrally identify, evaluate and hedge financial risks , and
monitor compliance with the corporate policies approved
by the Board of Management, except for commodity risks,
which are subject to identification, evaluation and hedging in
the businesses. We have treasury hubs located in Brazil, Asia
and the US that are primarily responsible for regional cash
management and short-term financing. We do not allow for
extensive treasury operations at subsidiary level directly with
external parties.
Liquidity risk management
The primary objective of liquidity management is to provide
for sufficient cash and cash equivalents at all times and
any place in the world to enable us to meet our payment
obligations. We aim for a well-spread maturity schedule of
our long-term borrowings and a strong liquidity position.
At year-end 2013, we had €2.1 billion available as cash
and cash equivalents (2012: €1.8 billion), see Note 13. In
addition, we have a €1.8 billion multi-currency revolving
credit facility, which has been extended in 2013 with an
additional year to 2018. At year-end 2013 and 2012,
this facility had not been drawn. We have US dollar and
euro commercial paper programs in place, which can be
used to the extent that the equivalent portion of the €1.8
billion multi-currency revolving credit facility is not used.
We had no commercial paper outstanding at year-end
2013 and 2012. The table shows our cash outflows per
maturity group. The amounts disclosed in the table are the
contractual undiscounted cash flows.
150
Maturity of liabilities and cash outflows
Less than
1 year
Between
one
and 5 years
Over 5
years
Trade and other payables
3,242
In € millions
At year-end 2012
Borrowings
Interest on borrowings
Finance lease liabilities
FX contracts (hedges)
Outflow
Inflow
Other derivatives
Outflow
Inflow
Total
At year-end 2013
Borrowings
Interest on borrowings
Finance lease liabilities
FX contracts (hedges)
Outflow
Inflow
Other derivatives
Outflow
Inflow
Total
4,090
2,157
1,698
656
211
6
2,380
(2,417)
12
–
955
134
6
2,433
(2,431)
15
–
1,794
1,548
332
17
–
–
–
14
–
121
29
–
–
–
–
–
1,841
269
18
–
–
–
11
–
780
70
27
–
–
–
–
–
4,330
2,139
877
Trade and other payables
3,218
Credit risk management
Credit risk arises from financial assets such as cash
and cash equivalents, derivative financial instruments
with a positive fair value, deposits with financial
institutions, and trade receivables. We have a credit
risk management policy in place to limit credit losses
due to non-performance of financial counterparties and
customers. We monitor our exposure to credit risk on
an ongoing basis at various levels. We only deal with
financial counterparties that have a sufficiently high credit
rating. Generally, we do not require collateral in respect of
financial assets. Investments in cash and cash equivalents
and transactions involving derivative financial instruments
are entered into with counterparties that have sound
credit ratings and good reputation. Derivative transactions
are concluded mostly with parties with whom we have
contractual netting agreements and ISDA agreements in
place. We set limits per counterparty for the different types
of financial instruments we use. We closely monitor the
acceptable financial counterparty credit ratings and credit
limits and revise where required in line with the market
circumstances. We do not expect non-performance by the
counterparties for these financial instruments. Due to our
geographical spread and the diversity of our customers,
we were not subject to any significant concentration of
credit risks at balance sheet date. The credit risk from
trade receivables is measured and analyzed at a local
operating entity level, mainly by means of ageing analysis,
see Note 12.
Generally, the maximum exposure to credit risk is
represented by the carrying value of financial assets in the
balance sheet.
At year-end 2013, the credit risk was €4.9 billion
(2012: €4.7 billion) for cash, loans and trade and other
receivables. Our credit risk is well spread amongst both
global and local counterparties. Our largest counterparty
risk amounted to €270 million at year-end 2013.
Foreign exchange risk management
Trade and financing transactions
We operate in a large number of countries, where we have
clients and suppliers, many of whom are outside of the
local functional currency environment. This creates currency
exposure which is partly netted out on consolidation.
The purpose of our foreign currency hedging activities is
to protect us from the risk that the functional currency net
cash flows resulting from trade or financing transactions
are adversely affected by changes in exchange rates. Our
policy is to hedge our transactional foreign exchange rate
exposures above predefined thresholds from recognized
assets and liabilities. Cash flow hedge accounting is applied
Financial statements | AkzoNobel Report 2013
by exception. Derivative transactions with external parties are
bound by overnight limits per currency.
In general, forward exchange contracts that we enter into
have a maturity of less than one year. When necessary,
forward exchange contracts are rolled over at maturity.
Currency derivatives are not used for speculative purposes.
Hedged notional amounts at year-end
In € millions
US dollar
Pound sterling
Swedish krona
Other
Total
Buy
2012
273
68
275
273
889
Sell
2012
616
541
58
517
1,732
Buy
2013
267
67
302
270
906
Sell
2013
684
665
30
379
1,758
Investments in foreign subsidiaries, associates
and joint ventures
Net investment hedge accounting is applied on hedges of
pound sterling net investments in foreign operations which
were hedged by a £250 million bond. During 2013, the
hedge was fully effective.
In 2011, 2012 and 2013 we applied cash flow hedge
accounting of CNY793 million for an acquisition of which
CNY90 million was still outstanding at the end of 2013.
There was no material gain/loss in 2012 and 2013 on the
effective hedges.
The foreign exchange and interest rate risks related to
divestments completed in 2013 amounting to $56 million
and CAD190 million were hedged in 2012 using forward
contracts and cash flow hedge accounting was applied.
The loss on the effective hedges amounted to €3 million
(2012: €5 million gain). There was no cash flow hedge
reserve related to divestments outstanding at the end of
2013 (2012: €3 million gain).
Price risk management
Commodity price risk management
We use commodities, gas and electricity in our production
processes and we are particularly sensitive to energy price
movements.
Our Chlor Alkali activity in the Netherlands mitigates price
risks related to electricity by concluding electricity futures
to gradually cover the expected use over future periods.
We apply cash flow hedge accounting to these futures.
All contracts qualified as effective for hedge accounting.
The fair value of the contracts outstanding at year-end
2013 amounted to a loss of €4 million, net of tax (year-end
2012: a loss of €10 million, net of tax), which are expected
to affect profit within the next three years. In order to
hedge the oil price risk, we have entered into oil/gas
swap contracts. At the end of 2013, there are contracts
outstanding, however, with a marginal fair value. The fair
value of the contracts at the year-end 2012 was €4 million
loss, net of tax. We did not apply hedge accounting in
relation to these contracts.
In order to hedge the price risk of electricity that is used for
the Specialty Chemicals plants in Sweden and Finland, we
entered into future contracts on the power exchange Nord
Pool Spot, based on expected use of electricity over the
period 2014–2017. We apply cash flow hedge accounting
to these contracts in order to mitigate the accounting
mismatch that would otherwise occur. The effective part of
the fair value of these contracts amounted to a €16 million
loss net of tax recorded in equity (2012: €10 million net
deferred loss), which are expected to affect profit within
the next four years. All hedges were effective in 2013
and 2012.
Interest rate risk management
We are partly financed with debt in order to obtain more
efficient leverage. Fixed rate debt results in fair value
interest rate risk. Floating rate debt results in cash flow
interest rate risk. Fixed rate debt maturing within one
year is treated as floating rate debt. The fixed/floating
rate of our outstanding bonds shifted from 90 percent
fixed at year-end 2012 to 75 percent fixed at year-end
2013. During 2013, no interest rate swap contracts were
outstanding.
Fair value hedges closed out in previous years resulted in
an adjustment to the carrying amount of a bond of which
€12 million was amortized and recognized as income on
the interest line (2012: €13 million).
The effective interest rate on issued debt (excluding hedge
results) over 2013 was 5.6 percent (2012: 6.0 percent).
Combined with the amortization of interest rate swaps
closed out in 2011, the effective interest rate on issued
debt was 5.3 percent (2012: 5.6 percent).
Capital risk management
Our objectives when managing capital are to safeguard
our ability to satisfy our capital providers and to maintain
a capital structure that optimizes our cost of capital. For
this we maintain a conservative financial strategy, with the
objective to remain a strong investment grade company
as rated by the rating agencies Moody’s and Standard &
Poor’s. The capital structure can be altered, among others,
by adjusting the amount of dividends paid to shareholders,
return capital to capital providers, or issue new debt or
shares.
Consistent with other companies in the industry, we
monitor capital headroom on the basis of funds from
operations in relation to our net borrowings level (FFO/
NB-ratio). The FFO/NB-ratio for 2013 at year-end
amounted to 0.56 (2012: 0.30). Funds from operations are
based on net cash from operating activities after tax, which
is adjusted, among others, for the elimination of changes
in working capital, additional payments for pensions and
for the effects of the underfunding of pension and other
post-retirement benefit obligations. Net borrowings is
calculated as a total of long and short-term borrowings
less cash and cash equivalents, adding an after-tax
amount for the underfunding of pension and other post-
retirement benefit obligations and lease commitments. In
2013, a bond of $500 million matured.
151
AkzoNobel Report 2013 | Financial statements Fair value per financial instruments category
In € millions
2012 year-end
Other financial non-current assets
Trade and other receivables
Cash and cash equivalents
Total financial assets
Long-term borrowings
Short-term borrowings
Trade and other payables
Total financial liabilities
2013 year-end
Other financial non-current assets
Trade and other receivables
Cash and cash equivalents
Total financial assets
Long-term borrowings
Short-term borrowings
Trade and other payables
Total financial liabilities
Carrying value per IAS 39
category
Carrying
amount
Out of scope
of IFRS 7
Loans and
receivables/
other
liabilities
At fair value
through
profit or loss
Total
carrying
value
Fair value
1,297
2,698
1,752
5,747
3,388
662
3,242
7,292
965
2,536
2,098
5,599
2,666
961
3,218
6,845
977
244
–
320
2,438
–
1,221
2,758
–
–
1,240
1,240
674
220
–
894
–
–
1,258
1,258
3,388
662
1,990
6,040
291
2,301
–
2,592
2,666
961
1,944
5,571
–
16
1,752
1,768
–
–
12
12
–
15
2,098
2,113
–
–
16
16
320
2,454
1,752
4,526
3,388
662
2,002
6,052
291
2,316
2,098
4,705
2,666
961
1,960
5,587
335
2,454
1,752
4,541
3,713
678
2,002
6,393
301
2,316
2,098
4,715
2,837
965
1,960
5,762
Fair value of financial instruments
and IAS 39 categories
Loans, receivables and other liabilities are recognized
at amortized cost, using the effective interest method.
We estimated the fair value of our long-term borrowings
based on the quoted market prices for the same or similar
issues or on the current rates offered to us for debt with
similar maturities.
The carrying amounts of cash and cash equivalents,
trade receivables less allowance for impairment, short-
term borrowings and other current liabilities approximate
fair value due to the short maturity period of those
instruments.
The only financial instruments accounted for at fair value
through profit or loss are derivative financial instruments
and the short-term investments included in cash. The
fair value of foreign currency contracts, swap contracts,
forward rate agreements, oil contracts and gas and
electricity futures was determined by valuation techniques
using market observable input (such as foreign currency
interest rates based on Reuters) and by obtaining quotes
from dealers and brokers.
The following valuation methods for financial
instruments carried at fair value through profit or loss are
distinguished:
• Level 1: quoted prices (unadjusted) in active markets
for identical assets or liabilities
• Level 2: inputs other than quoted prices included within
level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from
prices)
• Level 3: inputs for the asset or liability that are not
based on observable market data (unobservable)
Level 1 fair valuation methods were used for €2.6 billion of
the long-term borrowings and €0.8 billion of the short-
term borrowings. All other fair values were determined
using level 2 fair valuation methods, except for €87 million
level 3 (discounted cash flow) fair valuation.
152
Financial statements | AkzoNobel Report 2013
Offsetting financial assets and financial liabilities
Gross amounts
of financial
instruments in
the statement
of financial
position
Note
Offset in
balance sheet
Net balance
sheet amount
Amount under
master netting
agreement
Net amount
In € millions
2012 year-end
Forward exchange contracts used for hedging
12
Commodity contracts used for hedging
Total financial assets
Forward exchange contracts used for hedging
19
Commodity contracts used for hedging
Total financial liabilities
2013 year-end
Forward exchange contracts used for hedging
12
Commodity contracts used for hedging
Total financial assets
Forward exchange contracts used for hedging
19
Commodity contracts used for hedging
Total financial liabilities
16
7
23
12
33
45
15
13
28
16
39
55
–
(7)
(7)
–
(7)
(7)
–
(13)
(13)
–
(13)
(13)
16
–
16
12
26
38
15
–
15
16
26
42
(9)
–
(9)
(9)
–
(9)
(7)
–
(7)
(7)
–
(7)
7
–
7
3
26
29
8
–
8
9
26
35
Master netting agreements
We enter into derivative transactions under International
Swaps and Derivatives Association (ISDA) master netting
agreements. In general, under such agreements the
amounts owed by each counterparty on a single day in
respect of transactions outstanding in the same currency
may be aggregated into a single net amount that is
payable by one party to the other. In certain circumstances
e.g. when a credit event such as a default occurs, all
outstanding transactions under the agreement may be
terminated, the termination value is assessed and a net
amount is payable in settlement of the transactions.
The table sets out the carrying amounts of recognized
financial instruments that are subject to above
agreements.
153
AkzoNobel Report 2013 | Financial statements
Sensitivities
Sensitivity object
Foreign currencies:
We perform foreign currency sensitivity analysis
by applying an adjustment to the spot rates
prevailing at year-end. This adjustment is based
on observed changes in the exchange rate in the
past and management expectation for possible
future movements. We then apply the expected
possible volatility to revalue all monetary assets
and liabilities (including derivative financial instru-
ments) in a currency other than the functional
currency of the subsidiary in its balance sheet
at year-end.
Commodity prices:
We perform our commodity price risk sensitiv-
ity analysis by applying an adjustment to the
forward rates prevailing at year-end. This
adjustment is based on observed changes
in commodity prices in the previous year and
management expectations for possible future
movements. We then apply the expected vola-
tility to revalue all commodity-derivative finan-
cial instruments in the applicable commodity in
our balance sheet at year-end. For the purpose
of this sensitivity analysis, the change of the
price of the commodity is not discounted to
the net present value at balance sheet date.
Sensitivity, measured at year-end 2013
Hypothetical impact
A 10 percent strengthening of the euro versus
US dollar
Profit: €5 million (2012: profit €4 million). Equity:
€nil (2012: €nil)
A 10 percent strengthening of the euro versus the
Pound sterling
Profit: €2 million (2012: profit €5 million). Equity:
€nil (2012: €nil)
A 10 percent strengthening of the euro versus
Swedish krona
Profit: €2 million (2012: profit €1 million). Equity:
€nil (2012: €nil)
Net investment hedge accounting is applied to
GBP250 million, which results in a sensitivity on
equity of €nil.
Electricity price Specialty Chemicals
Netherlands:
A 10 percent change in the forward price of
electricity (€5 per MWh) as compared with the
market prices
Electricity price Specialty Chemicals
Sweden and Finland:
A 10 percent change in the forward price on the
Nord Pool exchange electricity (€3.16 per MWh)
as compared with market prices
Oil price Specialty Chemicals Netherlands
and Denmark:
A 10 percent change in price of oil (€ 8 per barrel)
as compared with market prices.
Equity: €12 million (2012: €10 million)
We apply cash flow hedge accounting to the fair
value changes of electricity futures.
Equity: €6 million (2012: €10 million)
We apply cash flow hedge accounting to the fair
value changes of electricity futures.
Profit: € 6 million (2012: €8 million)
Over the full term of the (partially long-term)
contracts, net impact on profit will be €nil.
Interest rates:
We perform interest rate sensitivity analysis
by applying an adjustment to the interest rate
curve prevailing at year-end. This adjustment
is based on observed changes in the interest
rate in the past and management expectation
for possible future movements. We then apply
the expected possible volatility to revalue all
interest bearing assets and liabilities.
A 100 basis points increase of EURIBOR interest
rates
Profit: €2 million (2012 profit: €6 million)
A 100 basis points increase of US LIBOR interest
rates
Profit: €2 million (2012 loss: €4 million)
A 100 basis points increase of GBP LIBOR inter-
est rates
Profit: €1 million (2012 loss: €nil)
154
Financial statements | AkzoNobel Report 2013
Company financial statements
A
Note A: General information
The financial statements of Akzo Nobel N.V. have been
prepared using the option of section 362 of Book 2 of
the Netherlands Civil Code, meaning that the accounting
principles used are the same as for the consolidated
financial statements. Foreign currency amounts have
been translated, assets and liabilities have been valued,
and net income has been determined in accordance
with the principles of valuation and determination
of income presented in Note 1 to the Consolidated
financial statements. Subsidiaries of Akzo Nobel N.V. are
accounted for using the equity method.
As the financial data of Akzo Nobel N.V. are included in
the Consolidated financial statements, the statement of
income of Akzo Nobel N.V. is condensed in conformity
with section 402 of Book 2 of the Netherlands Civil Code.
The remuneration paragraph is included in Note 22 of the
Consolidated financial statements.
2013
680
44
724
2013
13,822
1,150
14,972
Statement of income
In € millions
Net income from subsidiaries, associates and joint ventures
Other net income
Total net income/(loss)
2012 1
(2,231)
139
(2,092)
Balance sheet as of December 31, before allocation of profit
Note
2012 1
In € millions
Assets
Non-current assets
Financial non-current assets
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Equity
Subscribed share capital
Additional paid-in capital
Change in fair value of derivatives
Other statutory reserves
Cumulative translation reserves
Actuarial gains and losses
Other reserves
Undistributed profit
Shareholders’ equity
Non-current liabilities
Provisions for subsidiaries
Long-term borrowings
Total non-current liabilities
Current liabilities
Other short-term debt
Total current liabilities
Total equity and liabilities
1 Restated for the revised IAS19.
13,358
553
13,911
13,822
66
1,084
485
319
(19)
275
(417)
(1,495)
5,802
644
B
C
D
E
B
F
G
13,358
80
473
478
174
(17)
264
61
(1,231)
8,205
(2,170)
454
7,345
348
5,764
5,594
7,799
348
13,911
490
8,533
355
9,023
355
14,972
155
AkzoNobel Report 2013 | Financial statements Movement in shareholders' equity
In € millions
Balance at January 1, 2012
Changes in fair value of derivatives
Changes in exchange rates in respect of subsidiaries,
associates and joint ventures
Post-retirement benefits
Net income
Comprehensive income
Dividend paid
Equity-settled transactions
Issue of common shares
Addition to other reserves
Acquisition of non-controlling interests
Balance at December 31, 2012 1
Changes in fair value of derivatives
Changes in exchange rates in respect of subsidiaries,
associates and joint ventures
Post-retirement benefits
Net income
Comprehensive income
Dividend paid
Equity-settled transactions
Issue of common shares
Addition to other reserves
Acquisition of non-controlling interests
Balance at December 31, 2013
1 Restated for the revised IAS19.
Statutory reserves
Subscribed
share capital
Additional
paid-in capital
Cash flow
hedge reserve
469
47
–
–
–
–
–
7
–
2
–
–
–
–
–
–
–
121
–
6
–
–
(9)
(8)
–
–
–
(8)
–
–
–
–
–
478
174
(17)
–
–
–
–
–
6
–
1
–
–
485
–
–
–
–
–
133
–
12
–
–
319
(2)
–
–
–
(2)
–
–
–
–
–
(19)
Other
Statutory
reserves
240
–
–
–
–
–
–
–
–
24
–
264
–
–
–
–
–
–
–
–
11
–
275
156
Cumulative
translation
reserves
Actuarial
gains and
losses
Other
reserves
Undistributed
results
Shareholders'
equity
(181)
8,061
400
9,031
4
–
57
–
–
57
–
–
–
–
–
–
–
(1,050)
–
(1,050)
–
–
–
–
–
–
–
–
–
–
–
43
–
112
(11)
–
–
–
(2,092)
(2,092)
(342)
–
–
(136)
–
61
(1,231)
8,205
(2,170)
–
(478)
–
–
(478)
–
–
–
–
–
–
–
(264)
–
(264)
–
–
–
–
–
(417)
(1,495)
–
–
–
–
–
–
46
–
(2,450)
1
5,802
–
–
–
724
724
(349)
–
–
2,439
–
644
(8)
57
(1,050)
(2,092)
(3,093)
(214)
43
8
–
(11)
5,764
(2)
(478)
(264)
724
(20)
(210)
46
13
–
1
5,594
Financial statements | AkzoNobel Report 2013 B
Note B: Financial non-current assets and provisions for subsidiaries
C
Note C: Trade and other receivables
Movements in financial non-current assets
Trade and other receivables
In € millions
Balance at January 1, 2012
Acquisitions/capital contributions
Divestments/capital repayments
Net income from subsidiaries, associates and joint ventures
Post-retirement benefits
Equity-settled transactions
Change in fair value of derivatives
Loans granted
Repayment of loans
Changes in exchange rates
Dividend/other changes
Transfer to provision for subsidiaries
Balance at December 31, 2012
Acquisitions/capital contributions
Net income from subsidiaries, associates and joint ventures
Post-retirement benefits
Equity-settled transactions
Change in fair value of derivatives
Loans granted
Repayment of loans
Changes in exchange rates
Dividend/other changes
Change to provisions for subsidiaries
Balance at December 31, 2013
1 Loans to these companies have no fixed repayment schedule.
Subsidiaries
Share in capital
10,560
156
–
(2,231)
(1,050)
35
3
–
–
78
(153)
150
7,548
1,436
680
(264)
39
(2)
–
–
(468)
(95)
36
8,910
Other financial
non-current
assets
90
–
(2)
–
–
–
–
–
–
–
(7)
–
81
–
–
–
–
–
–
–
–
13
–
94
Loans 1
5,289
–
–
–
–
–
–
1,856
(1,422)
6
–
–
5,729
–
–
–
–
–
1,385
(2,282)
(14)
–
–
4,818
Total
15,939
156
(2)
(2,231)
(1,050)
35
3
1,856
(1,422)
84
(160)
150
13,358
1,436
680
(264)
39
(2)
1,385
(2,282)
(482)
(82)
36
13,822
In € millions
2012
2013
Receivables from subsidiaries
Receivable from associates and joint
ventures
FX contracts
Other receivables
Total
25
14
6
35
80
11
15
4
36
66
D
Note D: Cash and cash equivalents
Cash and cash equivalents
In € millions
Short-term investments
Cash on hand and in banks
Total
2012
21
452
473
2013
645
439
1,084
E
Note E: Shareholder’s equity
Subscribed share capital
The holders of common shares are entitled to receive
dividends as declared from time to time and are entitled
to one vote per share at the Annual General Meeting of
shareholders. The holders of the priority shares are entitled
to dividend of 6 percent per share or the statutory interest in
the Netherlands, whichever is lower, plus any accrued and
unpaid dividends. They are entitled to 200 votes per share
(in accordance with the 200 times higher nominal value
per share) at the Annual General Meeting of shareholders.
In addition, the holders of priority shares have the right
to draw up binding lists of nominees for appoint ment to
the Supervisory Board and the Board of Management;
amendments to the Articles of Association are subject to
the approval of the Meeting of Holders of Priority Shares.
157
AkzoNobel Report 2013 | Financial statements Priority shares may only be transferred to a transferee
designated by a Meeting of Holders of Priority Shares and
against payment of the par value of the shares, plus interest
at the rate of 6 percent per annum or the statutory interest in
the Netherlands, whichever is lower. There are no restrictions
on voting rights of holders of common or priority shares.
The Articles of Association set out procedures for exercising
voting rights. The Annual General Meeting of shareholders
has in 2013 resolved to authorize the Board of Management
for a period of 18 months (i) to issue shares (or grant rights
to shares) in the capital of the company up to a maximum
of 10 percent, which in case of mergers or acquisitions can
be increased by up to a maximum of 10 percent, of the total
number of shares outstanding (and to restrict or exclude the
pre-emptive rights to those shares) and (ii) to acquire shares
in the capital of the company, provided that the shares that
will at any time be held will not exceed 10 percent of the
issued share capital. The issue or repurchase of shares
requires the approval of the Supervisory Board.
We held no common shares at year-end 2013 or 2012.
Earnings per common share are calculated by dividing
net income by the weighted average number of common
shares outstanding during the year.
Of the shareholders’ equity of €5.6 billion, an amount of
€4.8 billion (2012: €5.0 billion) was unrestricted and
available for distribution – subject to the relevant provisions
of our Articles of Association and Dutch law. Shareholders’
equity at year-end 2012 has been restated to reflect
Unrestricted reserves at year-end
In € millions
Shareholders’ equity at year-end
Subscribed share capital
Subsidiaries’ restrictions to transfer
funds
Statutory reserve due to capital
reduction
Reserve for development costs
Cash flow hedge reserve
Unrestricted reserves
2012
5,764
(478)
(181)
(61)
(16)
–
2013
5,594
(485)
(182)
(61)
(26)
–
5,028
4,840
158
the revised IAS19. In this respect, we consider negative
reserves for actuarial gains as restricted.
Statutory reserves have been recognized following section
373 paragraph 4 of Book 2 of the Netherlands Civil Code.
At the Annual General Meeting of shareholders of April
26, 2001, an amendment to the Articles of Association
was approved whereby the par value of the priority
shares was decreased to €400 and of the common
shares and the cumulative preferred shares to €2. As
the revised nominal values are lower than the original
par values, in accordance with section 67a of Book 2
of the Netherlands Civil Code, we recognize a statutory
reserve of €61 million for this reduction in subscribed
share capital. Statutory reserves also include €26 million
for capitalized development costs, as well as the reserves
relating to earnings retained by subsidiaries, associates,
and joint ventures after 1983.
Dividend
We will propose to the Annual General Meeting on April
29, 2014 a 2013 final dividend of €1.12 per share, which
would make a total 2013 dividend of €1.45 per share
(2012: €1.45). During 2013, we paid the 2012 final
dividend of €1.12 and the 2013 interim dividend of €0.33.
There will be a stock dividend option with cash dividend as
default.
F
Note F: Long-term borrowings
Long-term borrowings
In € millions
Debt issued
Debt to subsidiaries
Other borrowings
Total
For the fair value of the debenture loans, see Note 23 of
the notes of the Consolidated financial statements.
Debt issued
In € millions
7 1/4 % 2009/15 (€975 million)
8 % 2009/16 (£250 million)
4% 2011/18 (€800 million)
2012
630
305
791
2013
626
299
793
Total
1,726
1,718
We have a €1.8 billion multi-currency revolving credit for
which in 2013 the maturity has been extended with an
additional year to 2018. At year-end 2013 and 2012,
this facility had not been drawn. At year-end 2013
and 2012, none of the borrowings was secured by
collateral.
G
Note G: Short-term debt
Short-term debt
In € millions
Current portion of long-term
borrowings
Debt to subsidiaries
FX contracts
Borrowings from associates and
joint ventures
Short-term bank loans
Debt related to pensions
Debt related to other suppliers
Other liabilities
Total
2012
58
8
10
27
3
8
68
166
348
2013
32
29
9
28
4
8
56
189
355
2012
1,726
5,619
–
7,345
2013
1,718
6,725
90
8,533
We have US dollar and euro commercial paper programs
in place, which can only be used to the extent that the
equivalent portion of the €1.8 billion multi-currency
revolving credit facility is not used. We had no paper
outstanding at year-end 2013 and 2012.
Financial statements | AkzoNobel Report 2013 H
Note H: Financial instruments
J
Note J: Auditor’s fees
At year-end 2013, Akzo Nobel N.V. had outstanding foreign
exchange contracts to buy currencies for a total of €0.9
billion (year-end 2012: €0.9 billion), while contracts to sell
currencies totaled €1.7 billion (year-end 2012: €1.7 billion).
The contracts mainly related to US dollars, Pound sterling
and Swedish krona, and all have maturities within one year.
These contracts offset the foreign exchange contracts
concluded by the subsidiaries, and the fair value changes
are recognized in the statement of income to offset the fair
value changes on the contracts with the subsidiaries. For
information on risk exposure and risk management, see Note
23 of the consolidated financial statements.
Auditor's fees
In € millions
Audit
Audit-related
Tax
Other services
Total
Amsterdam, February 19, 2014
The Board of Management
Ton Büchner
Keith Nichols
The Supervisory Board
Karel Vuursteen
Sari Baldauf
Uwe-Ernst Bufe
Dolf van den Brink
Peggy Bruzelius
Antony Burgmans
Peter Ellwood
Louis Hughes
Ben Verwaayen
I
Note I: Contingent liabilities
Akzo Nobel N.V. is parent of the group’s fiscal unit in the
Netherlands, and is therefore liable for the liabilities of said
fiscal unit as a whole.
Akzo Nobel N.V. has declared in writing that it accepts joint
and several liability for contractual debts of certain Dutch
consolidated companies (section 403 of Book 2 of the
Netherlands Civil Code). These debts, at year-end 2013,
aggregating €0.6 billion (2012: €0.5 billion), are included in the
consolidated balance sheet. Additionally, at year-end 2013,
guarantees were issued on behalf of consolidated companies
for an amount of €2.4 billion (2012: €2.9 billion).
The debts and liabilities of the consolidated companies
underlying these guarantees are included in the consolidated
balance sheet or in the amount of long-term liabilities in
respect of operational lease contracts as disclosed in Note
20 of the consolidated financial statements. Guarantees
relating to associates and joint ventures amounted to
€9 million (2012: €10 million).
In the
Netherlands
Network
outside the
Netherlands
2.9
0.2
–
–
3.1
8.2
0.1
0.2
–
8.5
In the
Netherlands
Network
outside
the Netherlands
3.0
0.2
–
–
3.2
6.8
0.3
0.1
–
7.2
Total
2012
11.1
0.3
0.2
–
11.6
Total
2013
9.8
0.5
0.1
–
10.4
159
AkzoNobel Report 2013 | Financial statements information as required under Section 2:392 sub 1 at b - h
has been annexed. Further, we report that the report of the
Board of Management as set out on pages 1 to 110, to
the extent we can assess, is consistent with the financial
statements as required by Section 2:391 sub 4 of the
Netherlands Civil Code.
Amsterdam, February 19, 2014
KPMG Acountants N.V.
E.H.W. Weusten RA
Other information
Independent auditor’s report
To the Supervisory Board and the Annual General Meeting
of shareholders of Akzo Nobel N.V.
Report on the financial statements
We have audited the accompanying financial statements
2013 of Akzo Nobel N.V., Amsterdam, as set out on
pages 111 to 159. The financial statements include the
Consolidated financial statements and the Company
financial statements. The consolidated financial statements
comprise the consolidated balance sheet as at December
31, 2013, the consolidated statement of income,
comprehensive income, changes in equity and cash
flows for the year then ended and the notes, comprising
a summary of the significant accounting policies and
other explanatory information. The Company financial
statements comprise the company balance sheet as at
December 31, 2013, the company statement of income
for the year then ended and the notes, comprising a
summary of the accounting policies and other explanatory
information.
Management’s responsibility
Management is responsible for the preparation and fair
presentation of these financial statements in accordance
with International Financial Reporting Standards as
adopted by the European Union and with Part 9 of Book
2 of the Netherlands Civil Code, and for the preparation
of the report of the Board of Management in accordance
with Part 9 of Book 2 of the Netherlands Civil Code.
Furthermore, management is responsible for such internal
control as it determines is necessary to enable the
preparation of the financial statements that are free from
material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these finan-
cial statements based on our audit. We conducted our
audit in accordance with Dutch law, including the Dutch
Standards on Auditing. This requires that we comply with
ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free from material misstatement.
160
An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the
financial statements. The procedures selected depend
on the auditor’s judgment, including the assessment of
the risks of material misstatement of the financial state-
ments, whether due to fraud or error. In making those
risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of
the financial statements in order to design audit proce-
dures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effective-
ness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presenta-
tion of the financial statements. We believe that the audit
evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinion.
Opinion with respect to the Consolidated
financial statements
In our opinion, the Consolidated financial statements give
a true and fair view of the financial position of Akzo Nobel
N.V. as at December 31, 2013 and of its result and its
cash flows for the year then ended in accordance with
International Financial Reporting Standards as adopted
by the European Union and with Part 9 of Book 2 of the
Netherlands Civil Code.
Opinion with respect to the Company
financial statements
In our opinion, the Company financial statements give a
true and fair view of the financial position of Akzo Nobel
N.V. as at December 31, 2013 and of its result for the year
then ended in accordance with Part 9 of Book 2 of the
Netherlands Civil Code.
Report on other legal and regulatory requirements
Pursuant to the legal requirements under Section 2:393
sub 5 at e and f of the Netherlands Civil Code, we have
no deficiencies to report as a result of our examination
whether the report of the Board of Management, to the
extent we can assess, has been prepared in accordance
with Part 9 of Book 2 of this Code, and whether the
Financial statements | AkzoNobel Report 2013 Profit allocation and distributions
Profit allocation and distributions
Article 43
43.6
The Board of Management shall be authorized to
determine, with the approval of the Supervisory Board,
what share of profit remaining after application of the
provisions of the foregoing paragraphs shall be carried
to reserves. The remaining profit shall be placed at the
disposal of the Annual General Meeting of shareholders,
with due observance of the provisions of paragraph 7, it
being provided that no further dividends shall be paid on
the preferred shares.
43.7
From the remaining profit, the following distributions shall,
to the extent possible, be made as follows:
(a) to the holders of priority shares: 6 percent per share or
the statutory interest referred to in paragraph 1 of article
13, whichever is lower, plus any accrued and unpaid
dividends
(b) to the holders of common shares: a dividend of such
an amount per share as the remaining profit, less the
aforesaid dividends and less such amounts as the Annual
General Meeting of shareholders may decide to carry to
reserves, shall permit.
43.8
Without prejudice to the provisions of paragraph 4 of this
article and of paragraph 4 of article 20, the holders of
common shares shall, to the exclusion of everyone else,
be entitled to distributions made from reserves accrued by
virtue of the provision of paragraph 7b of this article.
43.9
Without prejudice to the provisions of article 42 and
paragraph 8 of this article, the Annual General Meeting of
shareholders may decide on the utilization of reserves only
on the proposal of the Board of Management approved by
the Supervisory Board.
Article 44
44.7
Cash dividends by virtue of paragraph 4 of article 20,
article 42, or article 43 that have not been collected
within five years of the commencement of the second
day on which they became due and payable shall revert
to the company.
Proposal for profit allocation
With due observance of Dutch law and the Articles of
Association, it is proposed that net income of €724 million
is carried to the other reserves. Furthermore, with due
observance of article 43, paragraph 7, it is proposed that
dividend on priority shares of €1,152 and on common
shares of €352 million (to be increased by dividend on
shares issued in 2013 before the ex-dividend date) will
be distributed. Following the acceptance of this proposal,
the holders of common shares will receive a dividend of
€1.45 per share of €2, of which €0.33 was paid earlier
as an interim dividend. The final dividend of €1.12 per
share (which under the conditions to be published by the
company and at the shareholders’ election will be paid
either in cash or in stock) will be made available from May
28, 2014.
Special rights to holders of priority shares
The priority shares are held by “Stichting Akzo Nobel”
(Foundation Akzo Nobel), whose board is composed of the
members of the Supervisory Board who are not members
of the Audit Committee. They each have one vote on the
board of the Foundation.
The Meeting of Holders of Priority Shares has the right
to draw up binding lists of nominees for appointment to
the Supervisory Board and the Board of Management.
Amendments to the Articles of Association are subject to
the approval of this meeting.
161
AkzoNobel Report 2013 | Financial statements Sustainability statements
Consolidated Sustainability statements
164
Additional sustainability information
Note 1: Managing our sustainability agenda
Note 2: Reporting principles
Note 3: Stakeholder engagement
Value chain
Note 4: Products and solutions
Note 5: Climate change
Note 6: Supply chain
Safety
Note 7: People health and safety
Note 8: Process safety
Note 9: Product stewardship
Note 10: HSE management
Employees
Note 11: Our people
Note 12: Restructuring
Note 13: Community
Environment
Note 14: Energy
Note 15: Greenhouse gas emissions
Note 16: Local air quality
Note 17: Raw materials efficiency
Note 18: Water
Note 19: Soil and ground water remediation
Independent assurance report
In this report
Case studies
Chairman’s statement
Strategy and targets
Risk management
Business performance
Supervisory Board Chairman’s statement
Report of the Supervisory Board
Corporate governance statement
Compliance and integrity management
Remuneration report
AkzoNobel on the capital markets
2
6
14
22
31
78
81
88
97
101
107
On our website (www.akzonobel.com/sustainability)
you will find additional information on processes, detailed
data and contacts to support:
Note 1: Managing our sustainability agenda
Note 2:
Reporting principles
Note 3:
Stakeholder engagement
Notes 4-6: Value chain processes and performance
Notes 7-10: Safety performance
Notes 11-13: Employee/community performance
Notes 14-19: Environmental performance
This Sustainability statements section of the Report 2013 is separate from, and
does not in any way form part of, the company’s annual financial report (“jaarlijkse
financiële verslaggeving”) as defined in article 5:25c of the Dutch Financial
Markets Supervision Act. This section contains summarized key performance
indicators (KPIs) relating to sustainability performance. Further information on
AkzoNobel’s sustainability strategy, activities and results can be found on our
corporate website: www.akzonobel.com/sustainability
165
167
169
171
173
174
176
180
181
182
183
184
186
186
189
189
191
192
193
193
194
195
196
197
Sustainability statements
Consolidated Sustainability statements
Sustainability topics have been integrated into
all sections of the AkzoNobel Report 2013.
This summary focuses on sustainability processes
and activities that span our businesses.
A fuller overview of our sustainability strategy, activities and results can be found in the
Sustainability section of our corporate website: www.akzonobel.com/sustainability
Consolidated Sustainability statements
Note
2010
2011
2012
2013
Ambition
2013
Target
2015
Target
2020
Value chain
Eco-premium solutions with downstream benefits
(% of revenue)
Eco-premium solutions (% of revenue)
Carbon footprint cradle-to-grave per ton of
product (% reduction from 2012)
Safety
Total reportable injury rate employees/supervised
contractors (per million hours)
Significant loss of containment (Level D)
REACH compliance second phase (%)
Employees
Employee engagement (ViewPoint score
1–5 scale)
% of internal promotion into executive level
% of female executives
% of executives from high growth markets
4
4
5
7
8
9
11
11
11
11
Environment
Operational eco-efficiency footprint measure
(% reduction from 2009)
Sustainable fresh water management (% of manu-
facturing sites)
Greenhouse gas emissions per ton of production
(own operations, in kg)
14–18
18
15
–
21
–
3.6
0
8
–
22
–
3.1
2
44
17
22
0
2.4
0
83
18
24
2
2.3
1
100
3.56
3.74
3.80
3.88
74
12
12
7
48
80
13
13
11
74
70
15
13
13
83
75
16
14
24
85
267
256
257
222
–
–
–
2.2
0
100
–
–
–
–
20
80
–
–
30
–
20
–
25–30
<2.0
<1.0
0
100
>4
80
20
20
30
100
245
0
100
–
–
>20
>20
–
100
<245
164
Planet Possible
In order to secure our own business success – and that of
our customers – we have to create more value from fewer
resources. To help us achieve this, we have adopted a
strategy called Planet Possible, which is our commitment
to doing more with less.
We believe the planet can support nine billion people by
2050, but only if we take the right approach and understand
the changes that will be needed. So we’re looking to
engage with partners who believe in our strategy and have
the same commitment to finding opportunities where there
don’t appear to be any. Welcome to Planet Possible.
Our strategic sustainability objectives are shown in the table
opposite and are explained in detail throughout this section.
Value chain
Details of our focus areas across the value chain can be
found in Notes 4–6 of this section. These cover aspects
of Sustainable business, Resource efficiency and Capable
engaged people.
These focus areas are underpinned by strong existing
foundations, which have been built up over many years:
Safety: Details of our objectives and performance for people,
process and product safety can be found in Notes 7–10.
Employees: Our objectives and performance in talent
management, employee engagement, diversity and
inclusion and community involvement are in Notes 11–13.
Environmental: Information regarding our environmental
objectives and performance for our own operations can be
found in Notes 14–19.
Integrity: Our sustainability activities are underpinned
by integrity management. For details of our compliance
objectives and performance, please refer to the
Governance and compliance section.
Sustainability statements | AkzoNobel Report 2013 1
Note 1: Managing our sustainability agenda
Strategic focus
Our sustainability agenda incorporates economic,
environmental and social aspects across the value chain.
The importance of sustainability to running our business
is firmly integrated into the AkzoNobel strategy, both
in the strategic focus areas and the core principles
underlying our new company values (safety, integrity and
sustainability). Sustainability helps us to enhance our
existing business, create new business opportunities and
minimize risks.
In 2012, we developed a new focus to our sustainability
strategy by reviewing our sustainability risks and
opportunities against global trends – population growth
and the new middle class, urbanization, long-term
constraints of natural resources and climate change – and
how these will impact our key market segments by 2050.
We express the outcome as a commitment to creating
more value from fewer resources across the value chain.
We are using Planet Possible as an overall description of
our related programs. We are committed to making our
products and operations more sustainable. As well as
driving our own success, putting sustainability at the heart
of everything we do means our customers and employees
– not to mention the planet – will also benefit. For details,
see the Strategy section of this Report 2013.
By focusing on the full value chain, we will drive business, resource and engagement benefits
Raw materials
Own operations
Customer operations
End-user
End-of-life
Energy/resource benefits in use
Sustainable
business
Cost savings
Cost savings
Improve revenue
and margin
Improve revenue and margin
Resource
efficiency
Reduced material
and energy use
Reduced
energy use
Reduced material and
energy use in customer
processes, application
Reduced material and
energy use in product use
Capable,
engaged
people
Engaged
suppliers
Engaged
employees
Engaged
customers
Engaged customers
and users
Foundations: HSE, product stewardship, employee practices, community involvement, Code of Conduct
Our 2020 targets are based on creating more value from
fewer resources (measured by a new Resource Efficiency
Index):
• Sustainable business: Creating business value
through products and solutions which provide both
functionality and other sustainability benefits, as well as
cost savings from operational efficiencies.
Target: 20 percent revenue from eco-premium solutions
with a downstream benefit by 2020
• Resource efficiency: Accelerating material and energy
efficiency across the value chain.
Target: reduction in cradle-to-grave carbon footprint per
ton of sales of 25–30 percent from 2012 to 2020
• Capable, engaged people: Engaging our people and
partnering with our suppliers and customers to deliver
significant changes. Overall objectives being defined
These targets are underpinned by strong programs for
safety (people, process and product safety/stewardship),
employees (employee practices/development and
community involvement), environmental management and
integrity management.
We have specified key performance indicators with 2020
targets to supplement or replace our 2015 targets. Other
short-term and long-term ambitions are set at functional
and business level. The Notes in the Sustainability
statements and other elements of this report illustrate our
performance against these goals.
Sustainability framework
Our new sustainability strategy is a natural next step
from our sustainability framework, which maps out a
progression towards sustainability. The framework has
three levels, which include environmental, economic and
social aspects:
• Invent: integrate sustainable value propositions
• Manage: include sustainability in all aspects of the
value chain
• Improve: continue to comply and ensure our license
to operate
165
AkzoNobel Report 2013 | Sustainability statements The Improve level, with an emphasis on risks – working on
integrity, governance and compliance with our standards and
applicable laws and regulations – is now part of the compliance
framework (see the Governance and compliance section).
The current strategy focuses on creating opportunities for
value creation through process excellence, innovation and
talent development, alongside continued integration of
sustainability in all aspects of the value chain.
Management structure
The Executive Committee has overall responsibility for
sustainability. They monitor the sustainability performance
of each Business Area through the operating and control
cycle using dashboards, which specify indicators against
strategic objectives.
We have established a Sustainability Council, which
advises the Executive Committee on strategy develop-
ments, monitors the integration of sustainability into
management processes and oversees the company’s
sustainability targets and overall performance. The council,
which meets quarterly, is chaired by the CEO and includes
representative Managing Directors from our Business
Areas, as well as the Corporate Directors of Strategy,
Supply Chain/Research and Development, Sourcing,
Human Resources, Sustainability and HSE, and
Communications. The Council maintains an external
perspective, with input from value chain partners and
thought leaders during regular meetings, in addition to
company involvement in leading external organizations.
The Corporate Director of Sustainability and HSE reports
directly to the CEO and has an expertise team for HSE
Sustainability framework
Level of development
Environmental
Economic
Social
Carbon policy
Eco-premium
solutions
Leadership
training
Eco-premium
Zero VOC
Eco-efficiency
analysis
Required
eco-analysis
Supportive
supplier visits
Operational
eco-efficiency
Market
propositions
Market
research
R&D
Investment
decisions
Sourcing
Manufacturing
Sales and
marketing
Environmental/product
stewardship
Integrity
Stretched safety
targets
Invent
Integrate sustainable value
propositions
Manage
Include sustainability in all aspects
of the value chain
Improve
Continue to comply and ensure
a license to operate
Examples of sustainability activity
Value chain aspects
166
and sustainability, including a group focusing on lifecycle
and sustainability assessments. In 2012, we formed a
team of senior Business Area representatives to work with
the central group and the business teams to ensure effec-
tive roll-out of the new strategy.
The Managing Director of each business defines their respec-
tive non-financial targets and reports on progress every
six months. All businesses have also appointed a sustain-
ability focal point to support the embedding of sustainability
throughout their operations. They bring together an appro-
priate team to develop and implement the sustainability
agenda for the business. Focal points from across the
company have regular meetings to exchange best practices
and identify opportunities for further development.
Meanwhile, each function in the value chain has identified
focus areas for sustainability, with targets where appropriate.
Functional management teams, such as HR, Supply Chain
and RD&I (which are made up of both corporate and busi-
ness representatives), are in place to support the imple-
mentation of functional strategy, including the sustainability
elements. The compliance framework and the manage-
ment structure for integrity and compliance aspects is
detailed in the Governance and compliance section under
Compliance and integrity management.
Management processes
We include key sustainability issues in our corporate,
business and functional processes – strategy and plan-
ning, risk management and internal control, com pliance,
the operational review cycle, as well as in our internal audit
and external assurance processes. Each year there are
two dedicated sustainability sessions in the Operational
Review Meetings.
We set global standards for health and safety, environ-
mental protection, product stewardship and compliance,
including social and labor aspects. Corporate compliance
and audit processes are supplemented by specialist
Sustainability statements | AkzoNobel Report 2013 2
Note 2: Reporting principles
functional audits. These standards are also the basis of
our supplier management processes and investment
assessments. Where there are specific sustainability risks
or issues of concern to stakeholders, we develop position
papers and an improvement plan owned by a subject
matter expert.
Overall progress in embedding sustainability is monitored
using an annual self-assessment benchmark completed
by each business, which reflects the content of the
sustainability framework and management processes.
In 2013, we added performance requirements to this
assessment. Three businesses each year are reviewed by
an internal audit team, with all assessment results being
reviewed at company level.
The results show that sustainability management process
and performance levels are “in place” or “mostly in place”
apart from a couple of elements in two businesses
which are undergoing significant organizational change.
During the year, there were encouraging improvements
in the areas involving R&D/eco-premium solutions and
in our carbon management activities. Processes around
Code of Conduct, people/process and product safety,
manufacturing and risk management remain at a high
level, though businesses need to maintain focus in order to
achieve the performance levels set by our targets.
We strive to empower all employees to contribute and
be accountable for our sustainability performance, using
training and other engagement processes, including
business and site level activity, as well as web-based
resources. This responsibility continues to be anchored
in the personal targets and remuneration packages of
managers and employees. Since 2009, half (from 2013
onwards 30 percent) of the conditional grant of shares
for Board members and all executives is based on
AkzoNobel’s performance in the RobecoSAM assessment
over a three-year period. (See Remuneration report in the
Governance and compliance section).
Reporting scope
This Report 2013 combines our financial and sustainability
reporting and is addressed to readers interested in both
areas. In particular, we seek ways of linking sustainability
performance to business results in areas such as
operational eco-efficiency, carbon emission reduction,
eco-premium solutions and people development and
engagement.
The information in this Report offers an update on our
implementation of the ten principles of the United Nations
Global Compact (UNGC). More sustainability information
is available on our corporate website, including: an index
of the Global Reporting Initiative (GRI) 3.1 indicators;
additional development work against the new G4
guidelines; and a summary of our UNGC communication
of progress.
The topics in this Report 2013 were selected on the
basis of the sustainability aspects of our strategy, the GRI
guidelines and input from various external stakeholders.
These include our engagement with:
• Shareholders
• Customers
• Employees
• Rating organizations, notably RobecoSAM – the rating
agency for the Dow Jones Sustainability Indices – and
the Carbon Disclosure Project
• Sustainability organizations such as the World Business
Council for Sustainable Development (WBCSD),
Forum for the Future and the International Integrated
Reporting Council
Reporting policies
Materiality
We have used the principle of materiality to assess the
topics to include in this Report 2013, which are current
and important for the company and key stakeholders. The
results are plotted in the matrix graph on the next page.
A summary of the process is available on our website.
Reporting boundaries
The AkzoNobel Report 2013 integrates sustainability
aspects of our processes and business operations in each
section, in particular the How we create value infographics,
and the Strategy, Business performance and Governance
and compliance sections.
This Sustainability statements section summarizes the
global, cross-business elements of the sustainability
agenda and company performance. It includes quantitative
and qualitative information relating to the calendar year
2013 and comparative data for 2012, 2011 and 2010. We
report on consolidated data from entities where AkzoNobel
is the majority shareholder (more than 50 percent) and joint
ventures where we have management control, but exclude
all data from entities where we have minority ownership, or
no management control.
Comparability
Previously, our policy was to report acquisitions within
one calendar year. From 2010, we report from the date of
purchase, recognizing that reporting improvements may be
required at these facilities. Recent significant changes:
• 2013 data includes the results of the divestment of
Chemicals Pakistan. We include data from Decorative
Paints North America until April 1, 2013, when it
was divested
• 2012 data includes the Boxing Oleochemicals
acquisition and our new facilities at Ningbo, both
in China
• 2011 data includes the acquisition of the Schramm/
SSCP businesses
Our value chain (cradle-to-grave) carbon footprint
is measured per metric ton of product sales leaving
AkzoNobel. In 2012, the definition of product was clarified
to reduce variability in the indicator. It now excludes sold
by-products and sold energy. Previous years’ data has
been restated on the same basis. For our own operations,
environmental impact and improvements are quoted
relative to production quantity, i.e. the product volumes
167
AkzoNobel Report 2013 | Sustainability statements leaving every manufacturing plant. In 2013, we carried out
a review of our key value chains, including the downstream
applications, used in our cradle-to-grave footprint reporting.
We now include the climate impact of VOCs in our overall
carbon footprint targets. The 2012 data has been restated
to provide a sound baseline for our 2012-2020 targets.
We identify issues that affect comparability in the text
or footnotes.
Reporting process and assurance
The reporting period is 2013. Data has mainly been
obtained from our financial management reporting systems,
corporate HR information management systems, corpo-
rate compliance information reporting systems and the
AkzoNobel corporate reporting systems for health, safety
and environment performance indicators, each of which
have associated approval and verification processes. These
processes continue to be updated and improved. Data
collection for the newer value chain reporting aspects is
carried out using standard templates and procedures. More
details on all reporting processes are available on
our website.
We are confident in the overall reliability of the data
reported, but recognize that some of the information is
subject to an element of uncertainty, inherent to limitations
associated with measuring and calculating data. Senior
managers approved the content and the quantitative data
used in the Sustainability statements section relating to
their respective areas of responsibility. The integration of
sustainability in day-to-day business is part of our routine
internal audit process.
The Sustainability statements section has been reviewed
by independent, external auditors. The Assurance report,
including the scope of the audit, can be found in the Inde-
pendent assurance report at the end of this section.
168
Materiality matrix
l
s
r
e
d
o
h
e
k
a
t
s
r
o
f
y
t
i
l
a
i
r
e
t
a
M
h
g
h
i
i
m
u
d
e
m
w
o
l
Economic
Environmental
Social
Process safety
Carbon emissions
Products and services
Supply chain issues
Health and safety
Training and education
Talent management
Product H&S
Innovation
Materials
Product stewardship
Employee engagement
Recruitment/retention
Employment
Non-discrimination
Freedom of association
Forced labor
Supplier assessment (HR)
Local communities
Political lobbying
Compliance (soc)
Supplier assessment
GMO
(soc)
Indirect economic Impacts
Transport impact
Customer privacy
Animal testing
Public policy
Security practices
Indigenous rights
Equal remuneration
Labor/mgmt relations
International operations
Climate change costs
Env mgmt system
Renewable materials
Energy use
Social mgmt system
Supplier engagement
Diversity and inclusion
Integrity
Employee benefits
Market presence
Customer engagement
Compliance
International operations
Land remediation
Product labelling
Strategy
Stakeholder engagement
Environmental protection
Water
Effluent, waste
Air emissions
Compliance, fines
Anti-trust
Market segments
Bio-diversity
Supplier assessment (env)
Stakeholder engagement
Supplier assessment (lab)
Ethics/integrity
Child/forced labor
Anti-corruption
Financial crisis
Energy pricing/supply
Driving safety
VOC in product
Compliance (product)
low
medium
high
Materiality for AkzoNobel
Sustainability statements | AkzoNobel Report 2013
3 Note 3: Stakeholder engagement
Our approach
The aim of our stakeholder engagement is to learn from
key financial, social and environmental stakeholder groups
and in collaboration to develop leading sustainability
solutions relevant to:
• Our stakeholder needs
• Implementation of strategic targets
• Management of risks and opportunities
Our key stakeholders are employees, customers,
suppliers, investors, communities, specific sustainability/
research organizations and NGOs. This section includes
some highlights. More details can be found on our website
and in the Strategy section and other chapters of this
Report 2013:
• Communities: Note 13 of this section
• Customers: Business performance section
• Employees: Note 11 of this section
• Investors: Governance and compliance section
• Suppliers: Note 6 of this section
• Specific sustainability/research organizations and
NGOs: Note 3 of this section
Stakeholder engagement in 2013
Our stakeholder engagement activities are linked to our
sustainability and business strategy, because becoming
radically resource efficient is a huge challenge which we
can’t accomplish alone. Investing in strategic, ongoing
dialog and partnering with our key stakeholders is an
important driver for realizing our targets.
In 2013, we launched a new concept which captures the
essence of the company’s strategy to deliver more value
from fewer resources. Known as Planet Possible, it’s not
only designed to help drive innovation and promote radical
efficiency, but will also inspire employees, customers and
suppliers and build on AkzoNobel’s consistently high
ranking on the Dow Jones Sustainability Indices.
Our commitment and primary partners
We support a number of charters and external organizations
to demonstrate our commitment to sustainability issues.
These include the UN Global Compact – we are an active
member of the Global Compact Netherlands Network
and a signatory of the Caring for Climate platform – the
UN Universal Declaration of Human Rights; the key
conventions of the International Labor Organization;
the OECD Guidelines for Multinational Enterprises; the
Responsible Care® Global Charter; and the CEO Water
Mandate, where we are represented on the steering
group. In order to contribute to, and keep up to date with,
important developments in sustainability, we participate in
meetings and task forces as a member of organizations
including the WBCSD, Forum for the Future, True Price and
the Dutch Sustainable Growth Coalition.
Customers and products
Our customers are increasingly looking for products and
solutions that will make their business more sustainable.
In order to continuously improve our product offering, we
encourage customers to challenge us and work together
with us on this. There are many specific examples in
the various case studies and the Business performance
section of this Report 2013. In addition, we are in the
process of improving our methods to monitor customer
engagement and customer satisfaction. This activity will be
further developed in 2014.
We have some notable NGO partnerships linked to
product areas, such as Ferrazone, a bioavailable iron
source to fight global anemia. Through the Amsterdam
Initiative on Malnutrition (AIM), the Global Alliance for
Improved Nutrition (GAIN) and the project Smarter Futures,
our Ferrazone iron fortificant is making an important
contribution to the Millennium Development Goals of
the United Nations. In 2013, approximately 25 million
people benefited from programs to fortify staple foods
with Ferrazone, for example in Africa, Asia and food aid in
refugee camps. Activities during the year included support
for the AIM secretariat, as well as a QC/QA laboratory
network. For this, AkzoNobel is participating in a Private
Public Partnership with NGOs, the Dutch Ministry of
Foreign Affairs and other leading companies. A particular
milestone was the fortification of fish and soya sauce with
Ferrazone in Cambodia.
AkzoNobel has been a strategic global partner of the
Forest Stewardship Council (FSC) in the paint industry
since 2010, which we proudly display on packaging
for our wood care products. In 2013, in the middle of
our five-year cooperation agreement with the FSC, we
emphasized the value of our relationship during FSC’s
In Good Company global conference. This year also
saw increased awareness of the AkzoNobel-sponsored
Smallholder Support Program with the launch of the Small
Community Label Option (SCLO). We continued to raise
FSC’s awareness inside, as well as outside, AkzoNobel
through the widest ever geographic coverage of the
FSC Friday event. As well as strengthening the link on a
global level, we will also be increasing the ten active local
partnerships we currently have in the Netherlands, UK,
Germany, Switzerland, Czech Republic, Brazil, Russia, the
Nordics, Argentina and Poland, year on year. In 2014, for
example, we will look into setting up local partnerships in
Belgium, South Africa and the Far East.
In addition, linked to our Pulp and Performance Chemicals
business, we co-signed a leadership statement on forest
certification which was issued through the WBCSD Forest
Solutions Group, committing to addressing the world’s
need for increased sustainable management of natural
forests and plantations.
Suppliers and sourcing
Working together with suppliers is crucial to our value
chain approach to sustainability. Our key supplier contracts
include sustainability aspects and we held detailed
discussions to identify joint development areas with some
of our biggest suppliers. One specific project is a detailed
review of titanium dioxide with value chain partners in order
to identify joint improvement opportunities. Another project
169
AkzoNobel Report 2013 | Sustainability statements
focuses on the introduction of renewable raw materials in
our supply chains in collaboration with selected partners.
In 2013, AkzoNobel joined Together for Sustainability (TfS),
a chemical sector initiative which is designed to create
more sustainable supply chains. TfS is a collaboration
founded by the Chief Procurement Officers of BASF, Bayer,
Evonik, Henkel, Lanxess and Solvay and aims to build
the industry’s standard for sustainable supply chains. The
TfS program utilizes high quality third party sustainability
assessments and audits in order to measure the supplier’s
sustainability performance against a pre-defined set of
industry best practice criteria.
To enhance the importance and development of
sustainable value chains, we again supported the
organization of the International Supply Management
Congress in Amsterdam. This was a joint initiative with
IDH (the Dutch Sustainable Trade Initiative), PwC, NEVI
(Dutch knowledge network for purchasing and supply
management), Rabobank, Shell and Unilever. The event
is a meeting point for sharing knowledge, experience
and best practices across supply chain professionals,
NGOs and thought leaders. The focus for 2013 was on
innovation and integration. Our CEO was the keynote
speaker, presenting our sustainability approach of creating
more value from fewer resources across the value chain.
Engaging employees
During 2013, we continued to engage employees from
around the world on the theme of sustainability through
the launch of our Planet Possible concept, which we
will continue to build on during 2014. In our Decorative
Paints business, employees participated in a sustainability
challenge, which helped build understanding of the
importance of the subject and our performance in the
area, as well as stimulating teams and individuals to
participate in achieving the targets. Employees are also
actively involved with sustainability through local Green
Teams and community activities around the world.
Energy and climate
Our renewable energy strategy is focused on making a
clear commitment to sustainable energy transition, while
maintaining cost competitiveness. For our energy-intensive
businesses, we are pursuing opportunities to participate
in large energy ventures. An important proof point of this
strategy was the announcement of an investment in wind
power in the Nordics region via the VindIn consortium in
2013.
In the field of lifecycle management, we co-chair the
WBCSD Chemicals Sector Working Group. Together
with peers, we have developed two chemical sector
guidelines to drive consistent and comparable reporting
of both the environmental footprint of chemical products
and carbon avoided emissions. This is the first time
that a group of companies has developed a consensus
approach on these topics. It is a global effort which also
involved relevant stakeholders in the process of developing
a harmonized approach toward the calculation of
environmental impacts along the value chain.
Developing good practice
We demonstrate commitment to protecting our planet
and embracing the incorporation of natural capital in
our company to ensure our business is sustainable as it
grows. Therefore, we continue to develop our biodiversity
priorities, working with the International Union for
Conservation of Nature’s (IUCN) business engagement
network Leaders for Nature. In 2013, there was continued
focus on identifying hot spots in some of our key value
chains in order to identify initial areas for action.
To help us in further developing integrated reporting and
transparency, AkzoNobel is one of the pilot companies for
the International Integrated Reporting Council program to
create a forward-looking company reporting framework.
We also provide company input to the Technical Task
Force. We have included the learnings from this program
into this Report 2013.
170
Shareholders, analysts and indices
We continuously developed our engagement with
shareholders on sustainability aspects by taking part
in conferences and meetings during the year, as well
as answering questions in telephone briefings and
questionnaires. Questions during 2013 focused on
financial and environmental benefits from sustainability
activity and solutions for customers, raw materials supply
and carbon policy, as well as safety and development and
training of employees. Sustainability aspects of business
are also included in many analyst and general shareholder
presentations. See also the AkzoNobel on the capital
markets chapter in the Governance and compliance
section.
During 2013, we achieved the number one position on the
Dow Jones Sustainability Index in the Materials industry
group. This further builds on our good track record
with DJSI, having been included in the top three for the
eighth consecutive year. We continued to be included
in the FTSE4Good index and took part in the Carbon
Disclosure project. We were also ranked number one in
the Sustainalytics benchmark for chemical companies.
In the Netherlands, we achieved a number two position
in the Transparency benchmark, which means we have
been ranked in the top three for three consecutive years.
In addition, as part of the company’s internal launch of
Together for Sustainability, our sustainability performance
was assessed by EcoVadis, a third party service provider
for CSR assessments. We achieved a rating which places
AkzoNobel among the best performing suppliers globally
in our segment.
Sustainability statements | AkzoNobel Report 2013
Value chain
The objective of our new strategy is to create more value
from fewer resources – right across the value chain.
• Value for our customers by providing products which
have excellent functionality and generate resource/
energy benefits ahead of competitive products
• Value for the environment through more effective use of
natural resources, and a significant reduction in specific
greenhouse gas emissions across the value chain
• Value for society through the positive impact of our
products in our end-user segments
• Value for our business by focusing on our end-user
segments – delivering growth and profitability
Resource Efficiency Index
The adoption of a Resource Efficiency Index as a key
financial indicator results from the conviction that global
population growth and increasing resource constraints will
drive new business models in the materials and energy
intensive industry sectors. In the chemicals industry,
sustained business success will require product and
process innovations that generate much more added value
from each unit of raw materials and energy used across
the value chain – be it with our suppliers, in our own
operations or with the users of our products.
The Resource Efficiency Index is defined as gross profit
(or gross margin) divided by cradle-to-grave carbon
footprint – reported as an index.
The index development was based on input from a range
of financial analysts and environmental specialists and
wide internal consultation.
Key performance indicators – value chain
Carbon footprint
Carbon footprint cradle-to-grave per ton of product
(% reduction from 2012)
Carbon footprint cradle-to-gate per ton of product
(% reduction from 2009)1
Carbon footprint own operations (Mton CO2(e))
Products
Eco-premium solutions with downstream benefits
(% of revenue)
Eco-premium solutions total (% of revenue)
VOC in product (% reduction from 2009)
Raw materials and suppliers
Critical PR2 spend covered by supplier management
framework (% of spend)
Product related suppliers signed Vendor Policy
(% of spend)
NPR3 suppliers signed Vendor Policy (% of spend)
Suppliers on SSV program since 2007
Own operations
Operational eco-efficiency footprint measure
(% reduction from 2009)
1 2010-2012 restated due to KVC review.
2 Product related (raw materials and packaging).
3 Non-product related.
2010
2011
2012
2013
Ambition
2013
Target
2015
Target
2020
–
1
–
3
0
1
2
4
5.2
4.8
4.7
3.9
–
21
<5
–
91
–
266
7
–
22
6
–
95
77
304
11
17
22
10
69
97
80
373
13
18
24
–
80
96
83
392
24
–
5
–
–
–
–
80
96
80
–
20
–
10
25-30
–
<4.6
<4.6
• We selected gross profit as an indicator of added value
as it is comparatively stable and captures the effects of
efficiency improvements
• Carbon footprint is a good proxy for resource efficiency
across our value chains
–
30
–
90
96
80
–
30
20
–
–
–
–
–
–
–
Resource Efficiency Index
gross profit/CO2(e) indexed
100
106
105
111
109
2009
2010
2011
2012
2013
REI 2009-2013 reflects the performance of AkzoNobel and is based on a constant
portfolio – as of the end of 2013. REI 2009-2011 is indicative and has been
approximated. Cradle-to-grave carbon data for 2009-2011 is based on:
• Cradle-to-gate carbon data as measured and reported
• Gate-to-grave carbon data has been extrapolated based on 2012 data, adjusted
for product volumes in 2009-2011
171
AkzoNobel Report 2013 | Sustainability statements extension of our sustainable fresh water risk
assessment work)
• Sourcing of renewable raw materials (an area under
development with our new strategy)
• Product assessments for our eco-premium solutions
(which already include land use)
The Resource Efficiency Index will be a long-term indicator
for AkzoNobel. Although margin variability may affect
performance in any given year, the trend must clearly be
upwards. A review on our performance over the past five
years reveals a gradually increasing trend. Many factors
have contributed to this, some of which are:
• Improvements in energy efficiency
• Increased renewable and low carbon energy supply
• The ongoing switch towards waterborne coatings
• Margin improvements as a result of higher value
added products
To continue to drive further improvements in resource
efficiency across the value chain, we will start measuring
the REI on an ongoing basis as of this year.
Lifecycle assessment
Lifecycle thinking is the basis for all our sustainability work.
It is included in many of our processes, including:
Product development and eco-premium
solution assessment
The eco-premium solutions concept includes sustainability
aspects along the value chain. It encourages the
development of more innovative, sustainable products.
We continuously aim to reduce the environmental footprint
of our product value chains.
Carbon footprint assessment
We measure the carbon footprint of all our key value
chains (376 in 2013) using a full cradle-to-grave, or
screening, lifecycle assessment.
Marketing propositions
We are developing environmental product declarations for
some products, as part of our marketing activity.
Investment decisions
Since 2008, it has been mandatory to include an
eco-efficiency assessment for investment proposals
exceeding €5 million.
Eco-efficiency analysis (EEA) is our standard assessment
method, based on a combination of lifecycle assessments
and lifecycle costing. Assessment work is carried out by
business and corporate specialists and is based on ISO
14040-44 and a corporate lifecycle assessment database.
Value chain impacts
While we focus on carbon footprint as a proxy for raw
material and energy efficiency, our lifecycle assessment
considers a range of impacts. Examples from 2013
include:
Raw materials
We have worked with value chain partners to gain a better
understanding of the value chain impact of titanium dioxide
(TiO2) and the main variables which affect carbon footprint.
The main drivers appear to be energy source and TiO2 co-
product/plant configuration rather than the process route.
Biodiversity
Working alongside the IUCN Leaders For Nature program,
our focus during 2013 was on three pilots to identify
hotspots in our value chains and case studies to raise
awareness of our reliance on stewardship of eco-systems
in our operations. We used the LCA impact assessment
tool ReCiPe to review pilot cases from three business units.
According to the Millennium Ecosystem Assessment, the
main drivers for biodiversity impact are habitat change
(land use change), over-exploitation, invasive alien species,
pollution and climate change. For our pilots, the main
impacts were up and downstream of our operations, with
the main drivers being land use/transformation and
climate impact.
This has given some initial focus areas for activity,
which align well with our overall sustainability programs,
for example:
• Continued focus on climate change (an important
element of the new strategy)
• Water use and discharge in water scarce areas (an
172
Sustainability statements | AkzoNobel Report 2013 4
Note 4: Products and solutions
Eco-premium solutions
Eco-premium solutions (EPS) are a fundamental driver of
our strategy for creating more value from fewer resources
and we continue to measure the proportion of revenue
that they generate. In future, we will focus on the tangible
downstream benefits that our products and services
deliver to customers. This includes improving their
resource efficiencies, as well as the environmental impact
of their manufacturing processes and products or services
in use and end-of-life. In due course, these improvements
will begin to impact the sustainable development of the
market segments in which we operate.
Our 2020 target is to achieve 20 percent of revenue from
products and services which provide customers and
consumers in our downstream value chain with a
significant sustainability advantage, compared with the
most commonly available equivalent commercial products
or industrial processes. This is in addition to our target of
increasing revenue share from eco-premium solutions (with
benefits at any stage of the value chain) to 30 percent
by 2015. Both are challenging goals because the
assessments are made against equivalent mainstream or
standard commercial products, and as such is an
upward moving target, as both we and our competitors
introduce new and more sustainable products into
the market.
Eco-premium solutions stimulate top line and bottom line
growth opportunities because they provide improvements
in areas such as raw material use (e.g. lower carbon
footprint, reduced volume or environmentally beneficial
alternatives); production and application (e.g. less
pollution and waste from manufacturing processes, lower
energy consumption during application); and product
performance (e.g. coatings that enable reduced energy
consumption or surface-active chemicals that enable
water-based formulations).
Driven by customer, market and societal needs, more
than two-thirds of our RD&I output is channeled towards
producing environmental innovations in the form of
new and improved products, new and cleaner or lower
footprint processes and customer applications with less
environmental impact.
In 2013, revenues from eco-premium products and services
with downstream benefits totaled €2.7 billion, or 18 percent
of total revenue. It may appear that we are already close
to realizing our 2020 target of 20 percent of revenue.
However, since this eco-premium solution metric compares
our products and solutions with the mainstream in the
market, our progress will be impacted by improvements in
competitor offerings and changes in legislation.
Eco-premium solutions with downstream benefits
in % of revenue
and gas industries to formulate more environmentally-
friendly stimulation fluids
• Berol ECO/AMC-1: US EPA approved concentrated
blends of surfactants that can be formulated into
solvent-free industrial degreasing products, enabling us
to meet customer and regulatory demands
• Intersleek 1100 SR: Biocide-free fouling control coating
which enables ship owners to achieve reduced drag,
improved fuel efficiency and lower CO2 emissions
• Interpon Align: Dual layer powder coating (i.e. primer
and topcoat) requiring a single curing step which
enables customers to coat substrates using less energy
• LaDox: Nonylphenol ethoxylate-free peroxide initiators
that allow manufacturers of emulsion explosives for
mining to avoid using a chemical of environmental
concern in their production processes
Target
17
18
Eco-premium solutions in % of revenue
20
Target
30
21
22
22
24
18
2012
2013
2012
2015
2020
Eco-premium solutions are measured using a quantitative analysis or a qualitative
assessment of performance in seven categories: toxicity, energy efficiency, use of
natural resources/raw materials, emissions and waste, land use/footprint, risks (e.g.
accidents) and health and well-being (added in 2013). The eco-premium solution
must be significantly better than currently available solutions in at least one criterion,
and not significantly worse in any. A solution with downstream benefits accrues its
sustainability benefit to our customer, the use phase, or in end-of-life.
The reported 2013 KPI figure for eco-premium solutions
with downstream benefits represents the combined
revenues achieved by Specialty Chemicals (16 percent),
Performance Coatings (13 percent) and Decorative Paints
(27 percent).
Innovations introduced to the market in 2013 which
illustrate the new downstream sustainability benefit
target include:
• Dissolvine StimWell: Chelating agent derived from
natural resources which enables customers in the oil
2009
2010
2011
2012
2013
2015
Revenue from all eco-premium solutions (with benefits
anywhere in the value chain) were €3.6 billion, or
24 percent of total revenue. EPS revenues achieved
by Specialty Chemicals, Performance Coatings and
Decorative Paints were 26 percent, 13 percent and
35 percent, respectively.
173
AkzoNobel Report 2013 | Sustainability statements 5
Note 5: Climate change
VOC in products
We continue to focus on implementing our volatile organic
compound (VOC) reduction projects on a regional basis
using the comprehensive model we created in 2009 in
order to track and quantify the progress of our projects.
Our sales forecasts now show that the balance of growth
is shifting.
Our Carbon Policy and cradle-to-gate carbon footprint
intensity targets have been in place since 2009. In our
2020 sustainability strategy, carbon footprint takes an even
more important role – not only for its measure of impact
on climate change, but also because we are using it as a
proxy for how efficiently we are using raw materials and
energy in our products (see Value chain page).
15 percent from our own direct and indirect emissions
from energy consumption (Scope 1 and 2), and 45 percent
from the use and end-of-life phase (Scope 3 downstream).
Cradle-to-grave carbon footprint
in million tons of CO2(e)
Scope 3 upstream
Scope 1 & 2
Scope 3 downstream
% reduction CO2(e) per ton of sales
Target
0
27.5
2
26.5
0
5
10
15
20
25
30
25-30
30
25
20
15
10
5
0
2012
2013
2020
The carbon footprint of the six main greenhouse gases is measured from cradle-to-grave
based on the international Greenhouse Gas (GHG) Protocol and Lifecycle Assessment
ISO 14040-44. 2012 data has been restated to reflect changes in value chain models
and include the impact from VOC emissions.
Carbon footprint cradle-to-grave
Our target is to reduce our cradle-to-grave carbon footprint
by 25-30 percent per ton of sales between 2012 and 2020.
The cradle-to-grave footprint adds the impact from our
customer applications and end-of-life of our products to the
cradle-to-gate measure we have used since 2009. We also
include the impact from VOC emissions in our improvement
ambitions. We will achieve this through innovative products/
solutions, technology and energy management and by
creating more value from fewer resources.
This year indicates a total footprint of around 27 million
tons of CO2(e) and a reduction of CO2(e) per ton of sold
product of two percent since 2012. The cradle-to-grave
assessment indicates that around 40 percent is from raw
materials extraction and processing (Scope 3 upstream),
AkzoNobel carbon footprint in million tons of CO2(e)
11
4
< 1
8
3
Raw materials
and packaging
Production
inc. energy
Transport of goods
Customer use
Product and packaging
disposal/recycling
Product related carbon footprint based on 376 key value chains. Impact from VOC emissions included - about 3 million tons CO2(e). Raw materials and packaging category includes
other Scope 3 upstream activities, e.g. RM transport, energy related activities. Excludes non-product categories, e.g. employee travel, capital goods, investments.
First observed last year, we see increased growth in water-
borne wall paint products in all regions globally. We are,
however, experiencing a slower transition to a low VOC
content portfolio in China, where consumer demand for
low VOC content products has historically been lower, with
the market more favorable towards a product portfolio that
is on average higher in VOC content.
With regards to our Decorative Paints products, we are
introducing reformulated products with much reduced
and virtually zero VOC content. This reduction trend will
continue in the future. Our Performance Coatings business
is also achieving a declining average VOC content, despite
the significant technical challenges involved in maintaining
product performance while reducing VOC content.
We are keenly aware, however, that although we are
making technological progress, we must also keep up with
the market and match our product offering to customer
demand. As mentioned earlier, the Chinese coatings
market is not migrating as quickly as other regions towards
low or zero VOC products. We have key projects in place
to mitigate the absolute output of VOCs, and as our global
sales mix will increasingly shift towards China, we will
monitor the situation carefully.
Despite the changes in our global sales mix, we continue
to see results from our RD&I projects, and will continue
to measure and analyze the VOC content of our products
on an annual basis. Our evaluation for 2012 shows that
compared with our starting position in 2009, we have
realized a 10 percent reduction in average VOC content
across our coatings and paints product ranges.
174
Sustainability statements | AkzoNobel Report 2013
mainly in downstream use and end-of-life treatment of sold
products. 2012 data is restated on the same basis.
the entire value chain, for our suppliers and for
our customers.
The reduction derives mainly from reformulations and
higher sales of lower impact paints and from power
consumption with lower carbon footprint impact in
some facilities. Other changes in product mix and higher
production volumes in facilities with a less favorable energy
mix have limited the impact of these improvements.
Cradle-to-grave footprint per Business Area
in million tons CO2(e)
2012
Decorative Paints
Performance Coatings
Specialty Chemicals
5.0
13.0
9.5
2013
4.2
12.9
9.4
Scope 3 emissions
We have assessed all Scope 3 categories according to
the GHG Protocol Scope 3 standard. The results are
summarized in the table on this page. Impact from VOC
emissions is included: about three million tons CO2(e),
Management
Through the value chain focus in our strategy, company
targets and product development, we aim to use raw
materials produced in energy and material efficient processes
to produce products which are energy and material efficient
for our customers. For our own operations, we continue to
focus on improving energy efficiency and managing the fuel
mix of our energy intensive businesses.
Our businesses have developed quantified carbon
management plans which identify specific improvement
opportunities and programs. These include:
• Material strategies for key raw material groups
(e.g. solvents and resins) (see Supply chain)
• Joint activities with suppliers to reduce the footprint
of key raw materials (see Supply chain)
• Renewable raw materials (see Supply chain)
• Energy strategy including renewable energy
All Scope 3 categories million tons CO2(e)
(see Environment)
Purchase goods and services*
Capital goods
Fuel and energy-related activities*
Upstream transportation*
Waste generated in operations*
Business travel
Employee commuting
Upstream leased assets
Downstream transportation*
Processing and use of sold products*
End-of-life treatments of sold products*
Downstream leased assets
Franchises
Investments
Total
* Included in cradle-to-grave product footprint.
2012
2013
10
0.7
0.4
0.1
0.2
0.2
0.1
<0.01
0.2
8
3
<0.01
<0.02
0.4
23
10
0.8
0.3
0.1
0.1
0.2
0.1
<0.01
0.2
8
3
<0.01
<0.02
0.4
23
• Site programs to improve yields, reduce waste and
improve energy efficiency (see Environment)
• Reformulations using lower footprint raw materials
(see Products and solutions)
• New curing developments to reduce energy use during
product application (see Products and solutions)
These plans are summarized at a company level to
manage and follow up carbon reduction targets. We have
also developed additional common metrics, for example,
percentage of renewable raw materials, percentage of
renewable electricity/heat, to monitor progress on important
development activities.
Energy risk management
Energy pricing is seen as the most significant climate
change risk for AkzoNobel. This is not only related to the
competitiveness of our energy-intensive businesses, but also
to the impact energy pricing has for all our businesses, along
Regional differences in energy pricing related to existing
and future national and regional regulations and subsidies
creates a non-level playing field for energy on a global level.
Shale gas is influencing not only the energy market, but
also the markets of some major raw materials. The move
to renewable energy varies across regions and jurisdictions.
We are monitoring this with the new renewable electricity
indicator, as it is an important driver for footprint reduction
(see Environment: Renewable energy). We are managing
these risks by monitoring price developments, forecasting
around energy supply and spreading production in
different regions.
Renewable raw materials
Renewable raw materials are an important component
of our sustainability strategy, since a considerable share
of AkzoNobel’s carbon footprint is embodied in the raw
materials we buy. We have successfully progressed the
implementation of the renewable chemicals and white biotech
strategy by setting up novel supply chain partnerships (see
Supply chain: Renewable raw materials).
External engagement
In addition to activities to reduce energy use and greenhouse
gas emissions in our value chain, we participate in different
business initiatives, such as the WBCSD Chemicals Sector
project Reaching Full Potential, which sets guidelines for
reporting of avoided emissions. Our carbon management
and performance is reported through the Carbon Disclosure
Project.
More information on our assessment method for carbon
footprint can be found in the Reporting principles section.
175
AkzoNobel Report 2013 | Sustainability statements 6
Note 6: Supply chain
Working with our suppliers in order to create a sustainable
supply base and deliver customer benefits, as well as
improving resource efficiency, is a fundamental requirement
of our strategy. This means that we have to work together
effectively. We have supplier management programs in
place that support both performance improvement and
opportunities for joint developments.
We have identified two supplier segments for particular
attention, based on the potential risks and opportunities.
• Critical suppliers are those in high growth countries
where we want to build a long-term, mature supply
base. Selection may be based on risks associated
with labor conditions, environmental performance or
business integrity, or security of supply of important
materials
• Key suppliers are selected because of their importance
to the business – spend or dependency – as well as the
potential for partnership and joint innovation
Supplier management
In 2013, we reviewed our supplier sustainability initiatives.
In order to improve the alignment between our initiatives
for critical as well as key suppliers, we have enhanced and
formalized our sustainable supply framework, as
reflected below:
Sustainable supply
Supplier development
Supplier
Support Visits
program
Key supplier
management
Together for
Sustainability
Vendor Policy/Code of Conduct
Supplier management
Critical PR1 spend covered by supplier management frame-
work (% of spend)
Product related suppliers signed Vendor Policy (% of spend)
NPR2 suppliers signed Vendor Policy (% of spend)
Suppliers on SSV program since 2007 3
Third party online sustainability assessments
Third party on-site sustainability audits
1 PR = Product related (raw materials and packaging).
2 NPR = Non-product related.
3 SSV program targets are included in the new Critical PR spend coverage KPI.
2010
–
91
–
266
–
–
2011
–
95
77
304
–
–
2012
2013
Ambition
2013
Ambition
2014
Ambition
2015
69
97
80
80
96
83
373
392
–
–
–
–
80
96
80
–
–
–
85
96
80
–
200
20
90
96
80
–
400
40
Four supplier management processes are now in place to
support continuous improvement of suppliers, to prioritize
improvement activities across our supply base and to
accelerate delivery of our corporate sustainability goals.
In 2014 we will also have the assessments and audits from
the Together for Sustainability initiative to further secure
our critical spend coverage. Each of these processes is
further explained below.
In 2012, we announced a new KPI we would report from
2013: the critical PR (Product related) spend covered
by the supplier management framework. This KPI gives
a better view of the spend impact of the capability and
capacity building efforts with our suppliers. We have
reached our ambition to cover 80 percent of our critical
PR spend in 2013.
Vendor Policy
Covers 96 percent of the product related (PR) spend and 83
percent of the non-product related (NPR) spend, including all
critical suppliers and key suppliers. Our aim is to have all our
suppliers comply with the AkzoNobel Vendor Policy, which
includes our Code of Conduct, confirming their compliance
with environmental, social and governance factors.
We have defined critical spend as all PR spend (raw
materials and packaging) from high growth countries.
Spend is considered to be covered by this metric if one
of the following conditions is met:
1. The supplier is part of our key supplier process.
2. The supplier is part of our Supplier Support Visits
program and has been followed up according to the
program guidelines.
3. The supplier has a signed Vendor Policy, delivers less
than €5 million from high growth countries and is not
classified as a critical supplier (and therefore part of the
Supplier Support Visits program).
Supplier Support Visits
The SSV program is designed to develop long-term local
suppliers by raising their capability and performance. It
includes all critical suppliers and represents 24 percent
of our PR spend in high growth countries. Introduced in
2007, the visits focus on critical suppliers and are carried
out by teams from Procurement and HSE. The SSV
program remains highly successful, with 392 supplier sites
visited to date. Of all SSV, 47 percent have resulted in a
developmental score, which means actions have been
formulated and discussed with the supplier. Follow-up
visits are arranged to verify implementation and progress.
176
Sustainability statements | AkzoNobel Report 2013 Greening the supply chain
We’ve been making our manufacturing processes more
sustainable for some time now, but there are certain
limitations in terms of how far we can improve. Especially
when you consider that over 90 percent of the carbon
footprint linked to the paint and coatings that we sell
doesn’t relate to our own operations. It comes from the
raw materials that we buy and how the coatings are applied.
This makes our target of achieving a 25-30 percent reduction
in the carbon footprint of our products by 2020 a particularly
challenging one. Because we can’t get there by simply
improving our own operations. Which is why we’re looking
to work with partners such as Solvay.
One of the main raw materials used to produce epoxy
resins (used in our epoxy coatings) is epichlorohydrin. It is
conventionally produced out of oil via a relatively energy
intensive process. But Solvay has developed an alternative
method which uses glycerin (a biodiesel production
by-product) as a feedstock, and in turn consumes
significantly less energy and water.
The fact that we normally buy epoxy resins – and not
epichlorohydrin – could have been a stumbling block. But
we overcame that by striking an innovative deal whereby
AkzoNobel guarantees to buy volumes of glycerine-based
epichlorohydrin (or Epicerol®) indirectly via the epoxy resins
we purchase from Solvay’s customers. Via a “book and
claim” approach, an independent third party verifies how
much bio-based product is in our supply.
The benefit for AkzoNobel and our customers is a bio-based
and lower footprint raw material in our coatings, with exactly
the same performance, without incurring extra costs. For
Solvay, it’s a major commitment to their product and confirms
their commercial intuition.
Key supplier management
Covers 45 percent of our global PR spend. In 2013, as
part of our operational effectiveness program, we further
developed our key supplier management process. The
previous process focused primarily on suppliers of value
today. In the updated process, we have defined and
identified 51 suppliers that are critical to AkzoNobel both
now and in the future and manage them in a differential
way. These suppliers are essential to supporting us in
realizing our strategic objectives. With many of these key
suppliers we also have a formal key supplier agreement in
place, underpinning the aims of the key supplier process.
Together for Sustainability (TfS)
We joined this global initiative in the fourth quarter of 2013.
Implementation of the program will impact all supplier
segments, including product related and non-product
related suppliers. TfS is an industry initiative made up of
seven leading European chemical companies, and will
expand further. It aims to improve sustainability practices
within the global supply chains of the chemical industry,
building on established global principles such as the
United Nations Global Compact and the Responsible
Care® Global Charter. With TfS, our aim is to implement
effective, leading edge practices across the industry.
We are implementing standardized global assessments
and on-site audits to monitor and improve sustainability
practices in our supply chains.
Global implementation of Together for Sustainability will
provide the following benefits:
• Supplements our existing SSV program by ensuring
continued development of critical suppliers in high
growth markets
• Confirms compliance to our Vendor Policy standards
and Code of Conduct across a selected global supplier
portfolio
• Strengthens our risk identification and mitigation
processes
• Further integrates auditable corrective action planning
into the supplier development process
• Provides third party verification of AkzoNobel activities
against industry best practices
As part of the annual TfS assessment, the quality of our
corporate supplier management activities is verified against
industry best practice. Our 2013 Supplier Management
score puts us among the best performing companies
assessed by EcoVadis globally in our industry category.
Our Supplier Sustainability Framework provides an overall
approach to quantifying supplier progression and delivery
against key performance elements in both high growth and
mature markets.
Collaborative initiatives
We are a founding member of the International Supply
Chain Management Congress in Amsterdam. In 2013,
we were again part of the leadership for the organization,
sponsorship and support of the congress, which is
recognized as a valuable contributor to the development
of sustainability thinking and supply chain processes.
Strategies going forward
The procurement strategy for the next few years is to
move further beyond availability-price-synergy towards
cross-functional sourcing, integration and value chain
orientation. Buying on price will move towards total cost of
ownership, while selected supplier relationships will move
towards cooperation and partnering. We see this as a way
to leverage the size and scope of our global business, our
position with suppliers and to drive competitive advantage.
A cross-functional approach with our key suppliers is
now set as the standard in our updated key supplier
management process. This enables us to structure the
cooperation regarding joint sustainability and innovation
topics with our key suppliers.
During the year, we continued the development and
implementation of our raw material strategies. These
included elements such as material resource planning,
capacity and supply cover, supplier selection and sourcing
plans per region, “make” versus “buy” and renewable
materials. They are also an instrumental tool in reducing
the footprint of our global value chains. We continuously
review these strategies in an integrated cross-functional
Project Management Office, run monthly, to embed the
overall process and strategy. This process also ensures
that we have taken into account interdependencies with a
forward-looking perspective, including sustainability.
Complexity reduction
So-called slates of raw materials in key areas of spend
are being developed. These slates define a core list of
preferred materials/suppliers. Health and sustainability
aspects, such as product safety and environmental
concerns, are key criteria applied. The objective is to
migrate our materials/suppliers over time on to these core
materials, making our value chain less complex and more
sustainable. The slate approach gives clear information
on potential business opportunities to improve our value
chains – lower cost, improved sustainability and
reduced risk.
Renewable raw materials
Renewable raw materials are an important component
of our sustainability strategy, as a considerable share of
AkzoNobel’s environmental footprint is embodied in the
raw materials we buy. Over the next few years, we expect
to see the first commercial scale production facilities of
new renewable raw materials come online. In order to
lead the deployment of these materials in our markets, we
are setting up partnerships across the supply chain. This
supports the emergence of a new bio-based industry, and
at the same time enables AkzoNobel to tap into alternative
feedstock sources, to be able to offer more sustainable
products, and to reduce the cradle-to-grave
carbon footprints.
178
Sustainability statements | AkzoNobel Report 2013 • The AkzoNobel Academy now offers a full Lean Six
Sigma curriculum for the supply chain, operations and
other functions in the company
Safety, inventory levels and eco-efficiency have improved
throughout the company. The sustainability agenda has
also been updated, with more focus on material efficiency
throughout the full value chain. Continuous reduction
of both energy usage and carbon footprint remains an
integral part of our strategy going forward, including the
implementation of renewable energy. In addition, pilot
sites have been selected for a detailed assessment of
solar energy.
Investment decisions
All our major investment proposals (more than €5 million)
require a sustainability evaluation alongside the financial case.
This includes assessments at different stages in the project
development. At the point of application for capital, the
requirements include an eco-efficiency assessment, as well
as a full review of health and safety, process and product
safety, natural resource/raw material requirements and envi-
ronmental impacts. The proposals are reviewed by subject
matter experts, who give input to the Executive Committee,
to provide a strong basis for the investment decision.
In 2013, we announced partnerships for several of our key
raw materials:
• Bio-based solvents in Latin America: This partnership
with Solvay-Rhodia targets volumes of up to 10 kilotons
per year of bio-based solvents by 2017
• Algae-derived fatty acids: Together with biotech
company Solazyme, we are investigating options
for new sources of tailored fatty acids. We are also
considering a supply agreement for “drop-in” matches
to conventional oleochemicals as of 2014 in Brazil, for
use in surfactants and decorative paint applications
• Bio-based epichlorohydrin: In partnership with
Solvay, we plan to increase the use of bio-based
epichlorohydrin to 20 percent of AkzoNobel’s global
indirect use by 2016 (see case studies)
• Cellulosic-based acetic acid: Together with biorefinery
developer ZeaChem, we are exploring the potential for a
large-scale facility in Europe producing acetic acid (and
derivatives) from cellulosic sugars (e.g. from forestry
waste)
Total volume of raw materials in % per source
13%*
A
B
* 13 percent of organic
raw materials are from
renewable sources.
C
A Renewable raw materials (bio-based)
B Fossil-derived materials (petrochemicals)
C Inorganic materials (e.g. salt, minerals, clays)
5
35
60
In addition to these announced partnerships, we have
a number of projects in the pipeline to further improve
the sustainability of our supply chain. In order to monitor
progress on the increasing use of renewable raw materials,
we have also introduced a new KPI. In 2013, 13 percent
of all our organic raw materials came from renewable
(bio-based) sources (2012: 13 percent). This is 5 percent
of total volume of raw materials purchased, i.e. including
other raw materials such as salt, minerals and clays.
Logistics, distribution and car lease
As part of our performance improvement program, we
have started to manage warehousing and logistics at a
regional AkzoNobel level. This will result in a reduction of
warehouses and combined transport solutions. It will also
have a positive effect on our footprint.
We are involved with Smartway in the US and Green
Freight Europe in the EU, focusing on CO2 reduction.
The carbon emission ambition for our own passenger car
fleet is 130 g/km. In Europe, we reduced from 143 g/km
in 2011 to 136 g/km in 2012 and 132 g/km in 2013.
Operations management
Excellence in supply chain management and
manufacturing operations remains a key focus area for
AkzoNobel. The 2013 program delivered a number of
operational improvements in the full supply chain. For
example, standardized processes and production systems
based on Lean Six Sigma methodologies are being
implemented globally. We will continue rolling out the
program to all the company’s manufacturing facilities.
Highlights of recent improvements include:
• More than 75 manufacturing sites have started to
embed continuous improvement processes and have
implemented Lean Six Sigma projects
• Sales and operations planning processes have been
standardized to deliver the required customer service
and working capital improvements
179
AkzoNobel Report 2013 | Sustainability statements Safety
Key performance indicators – safety
People
Total reportable injury rate employee/supervised
contractors (per million hours)
Manufacturing sites with behavior-based safety
program (% of sites)
Life-Saving Rules implemented (% of sites)
Process
Regulatory actions (Level 3)
Significant loss of containment (Level D)
Product
Priority substances with management plan (%)
REACH compliance second phase (%)
Management
Safety incidents (Level 3)
Management and reassurance audits
2010
2011
2012
2013
Ambition
2013
Ambition
2014
Target
2015
3.6
72
–
4
0
–
8
10
61
3.1
76
–
0
2
23
44
8
66
2.4
76
–
3
0
42
83
3
61
2.3
96
100
8
1
62
100
0
56
2.2
100
100
0
0
60
100
0
–
2.0
100
–
0
0
80
100
0
–
<2.0
100
–
0
0
100
100
0
–
Our company-wide common HSE platform established
common improvement programs in people, process
and product safety. We aim to differentiate ourselves
by our thoroughness in embedding best practice
safety processes in all our operations, using common
approaches and systems. Behavior-based safety has now
been implemented at nearly all manufacturing locations
and an annual review of the program’s effectiveness will be
mandatory from 2014. A common set of Life-Saving Rules
(LSR) has been introduced for all employees. Breaches of
these rules, resulting in injuries or safety incidents, have
led to application of the maximum disciplinary sanction
allowed under local legislation.
The global approach to managing the risk of priority
substances has resulted in lists of phased out and
restricted substances being applied to all product
ranges. Key line managers have now received refresher
180
training in the company’s expectations and the required
competencies for HSE leadership. A single system for
HSE performance reporting has been in place for several
years and a new single system for reporting incidents and
analyzing incident trends has now been introduced.
will be provided to business teams. Responsibility for
implementing these programs lies with the businesses,
with leading units providing experience and best practice
which can be shared with others in order to accelerate
progress.
During 2014, AkzoNobel will extend behavior-based
safety selectively to non-production work locations and
groups, including stores, warehouses, laboratories and
technical service teams, using a risk-based approach.
Those who drive on company business will be included
in a company-wide program of training based on safe
driving behavior, including awareness training, e-learning
and practical training according to distances covered.
Following pilot programs in 2013, a process safety
management framework will be introduced at high hazard
sites. A product stewardship maturity framework will be
established and training in product stewardship principles
During 2013, management focus and employee engage-
ment at every level delivered a reduction of >15 percent in
the number of injuries. Particular contributions to meeting
our milestones came from the risk-based approaches of
our behavior-based safety program, and the focus and
support for sites that have consistently fallen short in terms
of performance.
Sustainability statements | AkzoNobel Report 2013 7
Note 7: People health and safety
Overall performance indicators for people safety show that
we continue to structurally improve towards targets set for
2015. The 2015 TRR target of <2.0 has been derived from
a top quartile safety performance peer analysis.
Specialty Chemicals is at the 2013 ambition of
2.2 (2012: 1.8). The Performance Coatings TRR slightly
increased to 2.8 (2012: 2.6)
• The overall downward trend in reportable injuries
Employee and contractor safety
The general downward trend in reportable injuries from
2010 onwards continued in 2013. Most notable was the
decrease in the total reportable injury rate of independent
contractors, reversing the recent increase.
• The TRR for employees and supervised contractors
decreased to 2.3 (2012: 2.4)
• The breakdown per Business Area shows that the TRR
for Decorative Paints decreased to 1.9 (2012: 2.7)
which is below the TRR 2015 ambition and the TRR for
Employee and supervised contractors total
reportable injuries injury rate
Target
3.6
3.1
2.4
2.3
2.0
2010
2011
2012
2013
2015
Independent contractors total reportable
injuries injury rate
3.5
3.5
4.2
3.0
2010
2011
2012
2013
The total reportable rate (TRR) is the number of injuries, including fatalities, resulting
in a lost time case, restricted work or requiring medical treatment by a competent
medical practitioner per million hours worked. In line with OHSA guidelines, super-
vised contractors are reported with employees, since day-to-day management is by
AkzoNobel. Independent contractors are managed by their own companies.
coincides with both the implementation of our Life-
Saving Rules at all our facilities, and the global roll-out of
the people, process and product safety programs that
are part of the common HSE platform. Implementation
was complemented by a strong focus on compliance
and operational discipline, performance monitoring
and enforcement if necessary. We will need to continue
focusing on continuous improvement through these
programs in order to achieve the 2015 target of a
TRR of less than 2.0 for employees and supervised
contractors
• During 2013, 96 percent of our manufacturing sites
implemented behavior-based safety. This program
raises safety awareness through peer-to-peer employee
interaction. Obstacles for safe behavior are subsequent-
ly removed. The behavior-based safety program applies
to employees and supervised contractors, as behavior
in routine operations within both categories falls under
the direct supervision of AkzoNobel line management.
Independent contractors hired for non-routine tasks are
managed under contract conditions and in standardized
company project management processes. The
behavior-based safety program will continue to be rolled
out in non-manufacturing locations in 2014
• There were no employee or contractor fatalities during
the year. However, three reported safety incidents
(see HSE management) involved severe injuries to
independent contractors
• The downward trend extended to the TRR of indepen-
dent contractors. Following an increase over the last
two years, the rate dropped again to 3.5 in 2013
Employee health
As well as ensuring a safe working environment and
healthy working conditions, we also foster employee
health and well-being, as well as managing illness-related
absenteeism.
Employee health
Total illness absence rate
Occupational illness rate
2011
2012
2013
2.0
0.3
2.0
0.2
2.1
0.1
Wellness Checkpoint use
>8,800
>11,300
>13,700
• The total illness absence rate has slightly increased
over 2012 (2.0 percent). It now stands at 2.1 percent.
We continue to monitor this indicator for the whole
company, aiming to stay at or below a level around
1.9 percent
• The occupational illness rate for employees and super-
vised contractors stands at 0.1 illnesses per million
hours worked (2012: 0.2). Through implementing HSE
standards and guidance notes, i.e. on laboratory safety
and occupational hygiene risk management, we further
try to eliminate occupational illnesses from occurring
• Our health risk appraisal tool, the Wellness Checkpoint,
is appreciated and is being used by an increasing
number of employees and their families. By the end of
2013, almost 14,000 people had joined the program
since its launch in 2008
181
AkzoNobel Report 2013 | Sustainability statements 8
Note 8: Process safety
Distribution and motor vehicle incidents
We have identified distribution and motor vehicle incidents
as a risk to employee and contractor safety.
AkzoNobel uses “loss of primary containment’’ as a main
indicator of process safety performance at its manufac-
turing sites.
Distribution incidents
Loss of containment incidents
Road
Sea
Rail
Air
Total
2010
82
5
4
0
91
2011
67
3
10
0
80
2012
44
2013
44
2
0
0
46
2
2
0
48
• The number of distribution incidents increased from
46 in 2012 to 48 in 2013. Most of these incidents
(44 out of 48), occurred on the road
Motor vehicle incidents
2010
2011
2012
2013
Incidents with injury
Fatalities – employees
34
1
29
0
28
1
19
0
• Fewer motor vehicle incidents were reported in 2013
than in the previous two years. The number dropped
from 28 in 2012, to 19 in 2013
• The company continues to monitor safe driving
performance and strives for improvement. During 2013,
current road safety training programs for company
drivers were evaluated. A best practice approach with
a focus on driver behavior will be implemented from
2014 onwards
Levels
D
C
B
A
1
(2012: 0)
Significant
20
(2012: 16)
Not contained at site
244
(2012: 209)
Not readily controlled but contained at site
1,150
(2012: 1,809)
Readily controlled and contained at site
Loss of containment is defined as an unplanned release of material, product, raw
material or energy to the environment (including those resulting from human error).
Losses of containment are divided into four categories, dependent on severity, from
small on-site spills (Level A) to a significant escape (Level D).
The results for 2013 present a varied picture.
• Level D incidents went up from zero in 2012 to one
in 2013
• At the same time, 2013 marked a general improvement
in the management of safety at our high hazard sites.
The number of these sites that have reached the
targeted maturity level has increased significantly – 93
percent reached the reference level for process safety
performance in our self assessment questionnaire (see
Note 10). A total of 78 percent achieved reference level
on all elements of the AkzoNobel HSE management
system, while 82 percent reached reference level for
safety leadership elements, which we consider an
182
indicator for the safety culture on site
• Current performance confirms the need for full
implementation of two common HSE platform projects
focused on process safety performance improvement,
specifically process safety management, and the
embedding of our self-assessment questionnaire
improvement processes
Process safety management
• Through a company-wide process safety management
(PSM) project, our mandatory company standards
have been revised to ensure they are compatible with
current and near future major PSM legislation (such as
Seveso-3 and OSHA 1910). These standards define the
minimum process safety requirements and
performance metrics
• In 2013, pilots were conducted at ten AkzoNobel sites
with varying hazard classification levels, located in
different regions and covering all three of the company’s
Business Areas. The pilot results will deliver a template
for process safety improvement actions, related to the
risks assessed
• The findings from the pilots will also be used to facilitate
global implementation of the standards, additional
guidance documents and company best practices
Sustainability statements | AkzoNobel Report 2013 9
Note 9: Product stewardship
We aim to be a leading company among our peers by
providing customers with safe products that meet their
needs. Based on the product stewardship objectives
included on our HSE Agenda 2011–2015, our focus during
2013 was on common HSE platform programs.
Priority substance management
We are committed to reducing the use of substances in
our products and processes that may pose a significant
risk to long-term health or the environment. We do
this by minimizing exposure to hazardous substances
and, where possible, by substituting them with more
sustainable materials.
Our priority substance management program takes a
systematic approach to the identification and review of
hazardous substances. We score each one on the basis of
their human and environmental hazards and where public
concern exists over their use. Substances with higher
scores are designated as priority substances and subject
to review by our experts. Where a more sustainable and
effective alternative exists, priority substances are removed
from our products and processes and substituted with
less hazardous and more sustainable materials. If this
is not currently possible, a full risk assessment on the
substance is carried out using state-of-the-art techniques
from the EU REACH regulation. Only when safe use of a
priority substance can be demonstrated is it allowed to be
used in our products and processes.
We are on target to review and risk manage all our
priority substances by 2015. We have now reviewed
and risk managed 90 (62 percent) priority substances,
meeting our objective for 2013. Of the priority substances
reviewed in the program so far, 48 will be phased out, 35
restricted to uses that are proven to be safe and seven
have been delisted as priority substances.
One example of a group of compounds to be replaced
with more sustainable alternatives is short-chained
chlorinated paraffins, as there are concerns over their
impact on the environment. These will be phased out
from the end of 2013. A restricted substance example
is respirable crystalline silica (RCS). Its use in paints and
chemical products should not exceed maximum levels.
Taking this proactive approach to substance management
means that we are prepared in advance of new and
changing regulations. It also enables us to take a leading
position in sustainable product stewardship and supports
the development and introduction of eco-premium
solutions to the market.
In 2014 we intend to extend the same substance scoring
methodology into our procurement process in order to
source fewer raw materials that may be harmful to long-
term human health and the environment.
Product distribution
To ensure our products are transported and distributed
safely by our contractors, we insist that all risks involved in
the distribution process are assessed, and that they take
the right safety measures. We also audit their performance.
In 2013, we issued a comprehensive guidance note
to all company personnel involved with selection of road
transport companies to make sure that appropriate
procedures are in place.
Regulatory affairs
We carefully monitor changes and prepare ourselves
for new regulations that will affect our products and
processes. In 2013, we developed a new company-wide
regulatory information system (RIS) which will ensure
that the latest information relating to product safety
legislation is available to all AkzoNobel regulatory affairs
professionals. This new system will go live in 2014.
During 2013, our primary activities included:
REACH compliance
We met our target to complete the submission of 181
substances for registration under scope of the second
phase of the EU REACH regulation by June 2013.
Our REACH team is now busy with tasks to support
these registrations and is working towards successful
submission of dossiers for registration under the
third REACH deadline in June 2018 for substances
manufactured or imported in quantities of between 1 and
100 metric tons per year.
Classification and labeling of AkzoNobel products
We are on schedule with implementation of the Global
Harmonized System (GHS) for labeling of chemical
substances and products. To ensure changes in labels and
datasheets resulting from the GHS rules are understood
across the company, we have issued an electronic aware-
ness training module (e-learning) for employees through
the HSE training academy.
Advocacy
We are active in industry associations at a local, regional
and global level. Our aim is to support legislation, stan-
dards and agreements that promote the use of safer and
more sustainable products in our industry.
For example, during 2013, the United Nations Environment
Program (UNEP) staged an International Lead Poisoning
Awareness Week. Through our involvement in industry
associations, we took the opportunity to call on the
183
AkzoNobel Report 2013 | Sustainability statements
10
Note 10: HSE management
coatings industry to follow action we took in 2011 to
remove lead compounds from all products and substitute
them with safer alternatives.
In the US, working closely with a major customer and the
Environmental Protection Agency (EPA), using an innova-
tive approach to testing, we obtained full approval for our
biodegradable and bio-based chelate (Dissolvine GL) for
use in household products under the EPA Design for the
Environment scheme.
Through our membership of the World Business Council
for Sustainable Development (WBCSD), we actively
participated in the working group on the release of harmful
substances, which is part of their Action 2020 program,
and will continue to support their initiatives in this area to
increase the market share of safer and more sustainable
products throughout the world.
Management systems
Operational excellence at our sites is supported by risk-
based management systems that follow the Responsible
Care® and Coatings Care® principles. Our HSE management
standards are set up and updated in accordance with
international standards such as ISO-14001, RC-14001,
OHSAS-18001 and PAS 55 (public standard for process
safety). Many sites and businesses have additional external
certification for their management systems, which are
subject to audit by our internal audit group and external
audits from certification authorities.
and applicable business requirements by filling in the SAQ.
The results are used to prepare site improvement plans,
while it also provides input to the corporate HSE audits.
Together, the corporate HSE regulations and auditing create
the assurance framework.
For most sites, the audit frequency is every five years. For
sites with an intrinsic high hazard rating this frequency is
every three years. In 2013, the intrinsic hazard rating for all
sites was reviewed and updated if necessary. This formal
review now takes place every year.
External certification
Management audits number of audits
in % of manufacturing sites
2010
2011
2012
2013
ISO-14001/RC-14001
OHSAS-18001/RC-18001
72
35
73
37
75
42
78
51
61
66
61
56
Maturity framework
We have a common maturity framework for measuring HSE
management progress at our sites through self-assessment
and audit. The HSE maturity framework is being used to drive
continuous improvement. The average improvement of sites
was 5 percent in 2013, while there was a further reduction
of 3 percent in the total reportable injury rate (TRR).
Self-assessment questionnaire (SAQ)
The SAQ, which covers all elements of the HSE manage-
ment system, is being repositioned as the company-wide
HSE improvement planning tool. Specific focus has been
placed on high hazard sites to ensure they achieve
reference level in all process safety elements. Sites facing
difficulties with achieving the designated performance
levels are being given special support.
HSE audit
The HSE audit process combines a continuous improve-
ment tool for sites with a periodic audit conducted by HSE
subject matter experts from the business and managed
by the global Internal Audit function. All sites carry out an
annual self-assessment against corporate HSE standards
2010
2011
2012
2013
During 2013, we carried out 46 corporate HSE audits
(2012: 54), four site closure audits (2012: 2) and six
reassurance audits (2012: 5), which are required for sites
with high risk findings. Learnings from the 2013 audits
indicate that in general, sites have improved their per -
formance. Like previous years, the lagging sites need to
continue to improve management of asset integrity and
process safety, health and safety and, to a lesser extent,
security. These sites are struggling to translate the HSE
requirements into daily work practices and demonstrate
safe operation of assets. The identified sites will receive
additional support.
In July 2013, nearly all auditors and new trainees from North
America, Latin America, Europe and Asia joined a three-
day training session in the Netherlands in which they were
trained in all relevant subjects to improve their performance
and consistency.
184
Sustainability statements | AkzoNobel Report 2013 To support the development of our product stewardship
and regulatory affairs (PS&RA) professionals, we have
designed a series of learning programs which are included
in our AkzoNobel PS&RA professional curriculum. During
2014, we will develop and deliver more specialized learning
programs (Levels 2 and 3). The next modules for HSE
professionals will also be developed.
Safety incidents
Safety incidents are incidents with an impact severity which
requires an independent investigation. The lessons learned
are shared company-wide.
Regulatory actions
We have defined three categories of regulatory actions, from
self-reported issues (Level 1) to formal legal notifications
with fines above €10,000 (Level 3).
We continue to strive for zero injuries and zero safety
incidents. We classify safety incidents based on severity of
outcome, from severe local impact (Level 1), to severe
impact on a specific business unit (Level 2) and on several
business units or the company as a whole (Level 3). The
total number of Level 1, 2 and 3 safety incidents dropped to
14 (2012: 23). Of these 14 safety incidents, three involved
severe injuries to independent contractors. All 14 incidents
were investigated, improvement actions were addressed
and the lessons learned shared, to avoid similar incidents
re-occurring. There were no Level 3 incidents in 2013.
More focus has been put on the follow-up of incident
investigation findings and recommendations, while both
investigation process and follow-up are consistently tracked.
Safety incidents (Level 3)
10
8
3
2010
2011
2012
0
2013
Safety incidents (Level 3) involve any loss of life; more than five severe injuries;
environmental, asset or business damage totaling more than €25 million; or extensive
reputational damage.
Regulatory actions
Regulatory actions
(Level 3)
2010
2011
2012
2013
4
0
3
8
Regulatory action Level 3: A formal notice of a criminal prosecution or (conditional)
penalty greater than €10,000. These are reported to indicate to management the
potential for reputation damage and effect on our license to operate.
The most probable explanation for the sharp increase in
the number of Regulatory Actions is a stricter definition of
the conditional fines recorded as Regulatory Actions.
HSE capability development
HSE professionals and line managers with critical HSE
functions develop their competencies based on our
integrated supply chain competencies framework, proficiency
levels and job profiles. Core training and development
programs are delivered and further developed by using a
blended learning approach which includes, for example,
e-learning, classroom training and webinars. In 2013, the
use of virtual classrooms was tested and this technology will
be used more often in 2014.
HSE capability development
2012
23%
2013
62%
Ambition
2013
Ambition
2015
35%
100%
0%
40%
35%
100%
% of target group
completed HSE Critical
Leaders workshop
% of target group
completed Level 1
PS&RA program
185
AkzoNobel Report 2013 | Sustainability statements Employees
11
Note 11: Our people
Key performance indicators – employees1
2010
2011
2012
2013
Target 2015
People data
Employee numbers (FTE)
Employee engagement
Employee engagement (ViewPoint score
(1-5 scale))
Diversity and inclusion
% of female executives
% of executives from high growth markets
% of female executive potentials
% of executive potentials from high growth markets
Talent management
% of online P&D Dialog participation
% of cross-BU moves of leadership talents
% internal promotion into executive level
% retention of leadership talent
% retention of leadership talent – under-
represented group (women and high growth
market employees)
Learning and development
ViewPoint score on Learning and growth (Q12)
(1-5 scale)
1 More details can be found on our website.
55,600
57,240
55,272
49,561
3.56
3.74
3.80
3.88
12
12
27
26
76
5
74
97
96
13
13
26
31
78
6
80
96
94
15
13
27
31
84
5
70
96
97
16
14
28
34
85
7
75
92
92
3.61
3.80
3.85
3.93
–
>4
20
20
30
30
95
10
80
95
95
>4
In the highly competitive markets in which we operate, it
is our people who are the differentiating factor in ensuring
our sustainable success. It is therefore our mission to
create a work environment in which people feel valued, are
engaged with our core principles and values and are given
the right conditions in which they can perform at their
best. We can only develop a high performance culture that
focuses on operational excellence when all our employees
are fully engaged to excel.
In 2013, we made significant progress. We embraced new
values and behaviors that address habits which have held
us back in the past, and support us in driving a culture of
excellence in business performance and integrity. See the
Strategy section for a detailed description.
In October, an awareness campaign was launched and
we have taken initial steps to integrate our new values
and behaviors into key HR processes – recruitment,
assessment, performance management and talent
development.
The new values and behaviors, and new talent manage-
ment approach, strongly support the implemen tation
of our strategy at all levels of the company, driving
an engaged workforce focused on delivering leading
performance.
Employee engagement
We want to be an employer of choice with an engaged
workforce. Regularly measuring employee engagement
helps us to manage and develop our human capital and
stimulate growth through people.
We use our ViewPoint employee engagement survey to
give employees the opportunity to have their say and
to monitor progress. This is based on the Gallup Q12
survey and provides a comparison against nearly 500
organizations. Some 2013 highlights:
• Almost 44,000 employees took part in the survey –
88 percent of the global workforce (2012: 88 percent)
186
Sustainability statements | AkzoNobel Report 2013 • Our overall engagement score improved to 3.88 on a
• Assisting managers, particularly those with low scores,
• Our recruitment policy now takes into consideration our
scale from 1 to 5 (2012: 3.80), which is a step towards
achieving our 2015 target of scoring above 4
• The engagement scores for each Business Area were:
Decorative Paints 3.93; Performance Coatings 3.85;
Specialty Chemicals 3.87
• Relatively high scores were achieved in the areas of
commitment to quality and the feeling that opinions
count. Scoring relatively low was clarity on what we
expect from our employees
• The biggest improvements came from teams that
followed up their actions to improve engagement levels
ViewPoint score employee engagement
(1 to 5 scale)
3.56
3.74
3.80
3.88
2010
2011
2012
2013
Plans to remedy the gaps are already in place, including:
• Embracing and living our company strategy through the
implementation of new values and behaviors
• Introduction of a new performance management
system which includes our new values and additional
functionalities to align and better track objectives,
helping to further clarify expectations from our
employees
• Improving the communication from senior managers to
employees by providing effective cascading tools
• Further engaging HR business partners in coaching
programs and a Community of Practice to support
managers and help improve people management skills
• Further grow and drive the global Community of
Practice of engagement catalysts who influence
and support people in their own environment to drive
engagement
with follow-up action planning with their teams
D&I ambition
• Offering global webinars for all people managers to
• To build an inclusive work environment, virtual employee
share best practice
networks have been created
In addition to actions that are taken around the ViewPoint
survey, other activities are also in place that drive
employee engagement:
• Successful engagement of teams worldwide in
community programs (see Note 13)
• Onboarding program for new employees
• Further implementation of internal social media channel
(Yammer)
• To increase gender diversity across AkzoNobel, we have
now connected with an expert organization externally
for training and skill building
As we move to the next phase of making D&I happen, our
focus is primarily on diverse talent acquisition and diverse
talent development. These initiatives will bring us closer to
our D&I aspiration for 2015.
• Further professionalizing Your AkzoNobel – an
Female executives in %
association of young, enthusiastic employees who have
been working for the company for less than five years
Target
20
15
16
Diversity and inclusion
Diversity and inclusion (D&I) at AkzoNobel is all about
creating winning teams. Our D&I initiative is built around
four key strategic ambitions:
• Create a sustainable and diverse workforce
• Build a strong and diverse leadership pipeline
• Engage managers to build and lead diverse teams
• Create a highly inclusive work environment
We have come a long way. Launched in 2008, our D&I
ambition today is represented in various HR and business
processes. We saw many positive D&I decisions in 2013 –
both in business moving closer to customers and growing
talents from within. Since 2008, female executives have
doubled and representation of executives from high growth
markets has increased by 40 percent. We achieved this by
continuous application of various D&I interventions across
business, function and corporate teams.
Other activities reflecting our progress made in D&I include:
• We have extended disability reporting to regions not
mandated by local regulations
• D&I and mentoring are well represented in our Talent
Management Process
12
13
10
8
2008
2009
2010
2011
2012
2013
2015
High growth market executives in %
Target
20
10
11
12
13
13
14
2008
2009
2010
2011
2012
2013
2015
Talent management
In order to deliver diverse and inclusive talent development,
we have integrated a new company-wide Talent Mana-
gement core process (see the Strategy section). From the
results of the annual ViewPoint survey, we see that we
have continued to increase employee engagement scoring
specifically on learning and growth. The ongoing investment
in the AkzoNobel Academy, with its focus on functional
excellence, has contributed to this improvement.
187
AkzoNobel Report 2013 | Sustainability statements
We continue to make progress on the representation of
both females and managers from high growth markets
in our executive population. The increase in executive
potentials from both groups suggests that the talent
pipeline is also improving. Furthermore, we continue
to improve the diversity of entry level participants to our
Global Graduate Management Trainee Program, which
specifically aims to recruit high potential graduates
in under-represented groups. After a rigorous selection
process, the graduates are given special development
support and the opportunity to work in three different
AkzoNobel businesses before being offered a permanent
position.
We have also seen an improvement in the number of
cross-business moves involving leadership talent from
5 percent to 7 percent, which has been helped by the
Talent Matching Forums held on a quarterly basis in our
key countries.
After a dip in 2012, we saw the percentage of internal
promotions to executive level increase to 75 percent,
which also reflects a strengthening of our leadership
pipeline. Our retention of leadership talent also remains
high, with the small decline from the previous year being
impacted by divestments.
Learning and development
To ensure that we attract and retain the best global talent,
we need to have an excellent learning and development
platform in place that is fully aligned with the company
strategy and its key focus areas and processes. To that
end, we offer all employees, at all levels of the organization,
opportunities to develop via on-the-job learning, new
challenges and assignments within their current role, as
well as online development opportunities. It is also crucial
that all our employees are trained in the core principles
underlying the new company values – safety, integrity and
sustainability.
188
In addition, our performance and development review
process, which is applicable for all employees, ensures an
ongoing focus on individual development to improve job
performance.
Based on the Gallup Q12 survey our “Learning and growth”
score improved to 3.93 on a scale from 1 to 5 (2012: 3.85),
which is a step towards achieving our 2015 ambition of
scoring above 4.
ViewPoint score on Learning and growth
(Q12) (1 to 5 scale)
3.61
3.80
3.85
• Generic role profiles and a Career Navigator connected
to the functional competency frameworks giving our
employees an impression of the deliverables and
competencies required by various key roles within
AkzoNobel
• A Development Compass which has been designed
to help our employees identify any gaps between their
current competencies and those required
• The addition of new 24/7 learning resources:
GetAbstract and Virtual Ashridge
• The design of 43 new functional training courses
reaching initially 10,000 employees supporting targeted
capability building
3.93
• The embedding of the “lessons learned” from
performance improvement program projects in the
Academy curriculum
2010
2011
2012
2013
In 2012, we launched the AkzoNobel Academy to drive
functional and operational excellence. It is now an established
learning portal for all employees, enabling company-wide
sustainable performance improvement. In 2013, in line with
our ambition to drive functional excellence, we integrated
functional capability frameworks and a structured training
curriculum for key functions, as well as a continuous
improvement curriculum. We also offer special training
programs to enable HR professionals to better support the
business, in addition to tailor-made programs for our top
talent at a number of prestigious business schools.
Also in 2013, the Academy introduced a number of new
development tools, including:
• Functional frameworks defining a set of competencies
– knowledge and/or skills critical for successful
performance within our key global functions to deliver
on the company strategy
Recruitment
The quest to attract the best talent while managing costs
continued with a major remodeling of the Recruitment
function. A new e-recruitment technology platform has
been launched in the Netherlands, UK, US, Sweden,
France, Brazil, India and China as the first module in a
future Talent Management Suite. This will improve the
efficiency and effectiveness of the recruiters, lead to
process standardization and increase direct sourcing, so
reducing costs and improving quality.
We also took a major step in utilizing social media
channels by partnering with LinkedIn, which resulted in a
160 percent increase in followers of our Linkedin profile, as
well as imparting training globally to our recruiters.
This will help us tap into the passive labor market, provide
a platform for communicating our new Employee Value
Proposition and help avoid expensive indirect channels
of recruitment.
Sustainability statements | AkzoNobel Report 2013 12
Note 12: Restructuring
13
Note 13: Community
In 2013, we continued to restructure our business to
execute our company strategy so we can meet the needs
of our customers sustainably in years to come. We are
aware of the impact this has on the employees involved
and, as a responsible employer, we are committed to
supporting our employees during such reorganizations.
We do this in compliance with legal requirements
and, where applicable, in consultation with employee
representative bodies. We strive to ensure clear and
ongoing communications, transparent selection processes
and, in many cases, support in the transition from work to
work, which can include training and out-placement.
During 2013 our workforce decreased due to ongoing
restructuring and divestments, but we also added to
the headcount, mainly through new hires in high growth
markets. For details of how our workforce changed, see
Note 4 of the Financial statements.
Wherever possible, we announce our restructuring plans
between 12 and 26 months in advance (recent examples
being restructurings in Gallenby, Sweden, and Nuremburg,
Germany). This allows for better planning in the transition
from work-to-work. In most countries, we use the services
of an external company to support employees in finding
their next position. Exceptions to this are in Italy, based
on an agreement with the Italian government, and the
Netherlands, where we operate an in-house mobility office
to support employees.
A new global on-boarding program has also been
launched whereby standard tools will now be used globally
to welcome new employees and enable them to integrate
as quickly as possible.
Winning two awards testifies to the progress we made
in 2013 in terms of developing as a leading employer.
AkzoNobel China was officially certified as one of the top
employers in China for exceptional employee offerings
by the renowned Top Employers Institute, which annually
recognizes leading employers around the world.
The company was also ranked Favorite Employer in the
Netherlands among Dutch graduates. The research was
conducted by Memory Magazine, the largest national
students’ magazine in the Netherlands.
HR Services
For basic administration, Human Resources is implement-
ing a standardized OneHR Services organizational and
working set-up. This is initially being introduced in our nine
key countries, based on three linked elements: standardized
processes, executed on a standardized IT platform (myHR),
by HR staff in an HR Service Center. This will enable us to
provide a consistent and quality service, while reducing costs
to benchmark levels. In addition, the OneHR Services project
will be pivotal to removing the different systems that exist
in the function today, therefore providing the foundation on
which we can focus on our core challenge – putting in place
a healthy talent pipeline and strong succession planning.
During 2013, OneHR Services went live in India and Brazil,
while the UK prepared for implementation. Furthermore,
the Integrated Talent Management Suite was launched,
a new global HR IT support for core HR processes
such as performance and development, learning, talent
management and succession planning.
As a global company, we fully understand our role and
responsibilities when it comes to society and contributing
to the communities in which we operate. It forms an
integral part of our sustainability agenda. Whenever
possible, we try to make a positive difference to the world
around us, engaging with people and organizations to
help bring the AkzoNobel brand to life while supporting
deserving and sustainable projects and causes, using our
products when appropriate.
Key to our success in this area has been our global “Let’s
Colour” program, which is inspiring people, through our
products, to revitalize their local communities. The initiative
– run by our Decorative Paints business – also includes the
participation of many of our employees. In fact, hands-on
involvement in local initiatives is something we encourage,
which is why we launched the AkzoNobel Community
Program in 2005. The development of young people
is another area we are passionate about. Since 1994,
with the help of the Plan International organization, we
have been supporting children around the world through
our Education Fund. We also run a global sponsorship
program, which focuses on two main areas – developing
talent in communities through education initiatives, and
supporting heritage, culture and the arts and sciences by
sharing our expertise.
Our products
When possible, we endeavor to assist society through our
products. Ferrazone, for example, is helping to improve
well-being in many communities, particularly in developing
countries. Used to fortify food, it is widely regarded as
being the most effective way to treat iron deficiency
anemia.
Another example is our partnership with the Forest Steward-
ship Counsil (FSC) in relation to our wood care products.
See Note 3 Stakeholder engagement for more details.
189
AkzoNobel Report 2013 | Sustainability statements “Let’s Colour” program
We believe in the regenerative power of color and
the positive effect it can have on people’s lives. We
express this through our global “Let’s Colour” program
(letscolourproject.com), which includes both charitable
donations of paint and community investment. Not only
does it embrace the physical improvement of deprived
neighborhoods, but it also facilitates educational
development and job training.
Working together with local communities, including
customers, employees and other influencers, we have
already created better living environments for millions of
people. Each initiative is designed to renew community
spaces and improve people’s well-being. Education is also
an important part of the process, both in terms of training
people to become painters and teaching children about
the value and science of color. By demonstrating our belief
through this program, we are also inspiring people to get
involved in making their world a better place.
During 2013, we donated around 160,000 liters of
paint, worth an estimated €420,000. Approximately
750 AkzoNobel employees were involved, volunteering
roughly 4,000 hours of their time to various “Let’s Colour”
programs across the globe. We also trained nearly
9,000 people as painters. In 2013, we estimate that we
positively impacted the lives of around six million people.
Community Program
Our Community Program encourages sites and individuals
to take part in projects where our products/resources and
the skills and knowledge of employees can benefit the wider
community. In the past eight years, this has led to a variety
of projects, from educating underprivileged youngsters to
creating more awareness about the impor tance of a clean
environment. It also provides opportunities for employees to
develop team-building and leadership skills.
Since the start of the program in 2005, more than
11,000 volunteers from around 55 countries have worked
on more than 2,200 projects, representing approximately
€14 million of investment. Our sites and offices initiate
between 200-250 projects each year. The majority of
projects have supported educational/employability and
healthcare/well-being activities, with environmental and
housing projects also well represented.
Cumulative Community Program involvement
Projects (number)
Volunteers (number)
Support (€ million)
10.0
7,000
10000
8000
6000
4000
2000
1,408
0
13.0
9,000
11.5
8,000
1,678
1,931
2,108
14.0
12.5
11,000
10
7.5
5
2.5
0
2010
2011
2012
2013
The economic slowdown has prompted more focus
on projects benefiting deprived, socially disadvantaged
groups. For example, involvement in the set up and
running of soup kitchens, shelters and day care centers
for the homeless, and vocational training for unemployed
youngsters and women, are taking place on a continuous
basis in various parts of the world.
The fund is also available to support post-relief efforts for
major disasters in countries where we operate, as long
as there is hands-on involvement by our employees. In
2013, our employees in Bitterfeld, Germany, teamed
up to help reconstruct a community center which was
severely damaged after massive floods. In Morris in the
US, disaster supplies were prepared after flooding hit the
area. These emergency kits, including buckets, coveralls,
gloves, safety glasses and dust masks, were then
distributed to families affected by the tornados that hit the
state of Illinois later in the year.
During 2013, 207 new projects were initiated. For
example, a cooperation was established with the “Let’s
Colour” program from Decorative Paints, as these painting
activities often touch on groups within the scope of the
Community Program. The employees involved were
encouraged to interact with these groups. Around
15 projects serving local communities resulted from this
initiative.
2013 projects by region
E
A Europe
B North America
C Latin America
D Asia
E Other regions
128
23
15
35
6
D
C
B
A
Education Fund
Focused on young people in developing countries, the
Education Fund has supported a wide range of projects
since its creation in 1994, from investing in school
infrastructure to teacher training and promoting health
and hygiene. Tens of thousands of young people have
benefited from the projects in countries such as Bolivia,
Brazil, China, Ecuador, India, the Philippines and Vietnam.
More attention is now being paid to supporting vocational
training of deprived youngsters.
Over the years, several thousand children aged three to
16 have directly benefited from the quality pre-school and
primary education that it helps to provide.
In addition, a special fundraising campaign staged in 2011
raised around €140,000, providing approximately 500
young people, mainly girls, in Vietnam, India and Brazil
190
Sustainability statements | AkzoNobel Report 2013
with vocational training opportunities. In 2012, our support
continued to focus on vocational training to help deprived
young people find decent and safe employment which
offers them long-term prospects.
During 2013, the Education Fund supported a project in
Brazil which involved training deprived young people in
Natal to become stewards for the 2014 football World
Cup at the Arena das Dunas stadium. A total of 147
underprivileged youngsters graduated from the program
in December 2013. Around 70 percent of the group was
female.
Global sponsorship program
Our global sponsorship program focuses on two main
areas – developing talent in communities through
education initiatives, and supporting heritage, culture
and the arts and sciences by sharing our expertise.
Among our most recent agreements are partnerships
with the Rijksmuseum and the Van Gogh Museum in the
Netherlands. Several sponsorships are also ongoing with
various other partners, including the Courtauld Institute
and the McLaren Group in the UK.
Environment
Key performance indicators – environment
Operational eco-efficiency footprint measure
(% reduction from 2009)
Sustainable fresh water management
(% of manufacturing sites)
Greenhouse gas emissions per ton of production
(own operations, in kg)
2010
2011
2012
2013
7
48
11
74
13
83
24
85
267
256
257
222
Ambition
2013
Ambition
2014
Target
2015
20
80
–
25
90
–
30
100
245
combines energy, water, waste and air emissions, as well
as cost elements. Weighting factors for each parameter
are used to calculate the absolute footprint. This number
is used in combination with production volume to calculate
the relative footprint improvement. Between 2009 and
2013, we achieved a relative footprint improvement of
24 percent. We are on track to achieve our target of a
relative footprint improvement of 30 percent by 2015, and
of 40 percent by 2017, with 2009 as the baseline.
Our OEE performance and trends (the footprint and
its related parameters) are transparent for the whole of
AkzoNobel via the EcoXchange platform. This platform
also provides access to know-how, best practices and
showcases on eco-efficiency related topics relevant for all
locations.
This section outlines the environmental impact
and improvements in our own operations. The key
performance indicators are mentioned in the table above.
Many of these improvements are driven through our
operational eco-efficiency (OEE) program.
Operational eco-efficiency program
The focus of the OEE agenda is to increase raw material
efficiency, reduce consumption of energy, decrease
emissions and production of waste. Improvements
include many small site contributions, upgrading existing
processes, rationalization of the manufacturing footprint
and application of best available technology for new
investments.
We measure progress on a quarterly basis using the eco-
efficiency footprint measure, a company indicator which
OEE footprint improvement
(% reduction from 2009)
Target
30
24
11
13
7
2010
2011
2012
2013
2015
The OEE footprint is calculated from the weighted average of nine footprint
parameters and production volume.
191
AkzoNobel Report 2013 | Sustainability statements Our Renewable Energy Supply Strategy has three
focus areas: protecting our current renewable share,
participating in cost effective, large energy ventures, and
exploring commercially feasible on-site renewable energy
generation. Specific projects in progress include:
• Investment in wind power in the Nordics as part-owner
of the VindIn consortium. Vindln already has 35 wind
turbines in operation, with many more to come over the
next couple of years (1,000 GWh targeted annually)
• A long-term power purchase agreement with the largest
and most efficient biomass power plant in the Benelux
region
• A custom-built, two-kilometer long pipeline providing
steam from a waste-to-energy plant to AkzoNobel’s salt
site in Hengelo, the Netherlands
14
Note 14: Energy
Energy use
Energy is important for all our operations, especially some
of our Specialty Chemicals businesses, because they use
energy as a major raw material for their products. Energy
efficiency and carbon efficient energy use are therefore
important metrics for our operations.
Energy use in 1000*TJ
Energy use
GJ per ton production
250
200
150
100
50
0
5.7
5.7
5.7
5.6
111
107
106
99
7.5
6
4.5
3
1.5
0
2010
2011
2012
2013
Energy use [TJ] is the sum of fuels, electricity, steam, hot water and other utilities
(expressed as fuel equivalents).
• Energy use per ton of production reduced slightly to 5.6
GJ/ton. Absolute energy use was down 7 percent to
99,000 TJ in line with lower production volumes
• The total costs of energy used in our production was
• In Stenungsund, Sweden, energy was saved by
optimizing the distillation section, resulting in a
significant reduction of energy, over 10,000 tons less
CO2 and more than €3 million in savings
• In Ibbenbüren, Germany, a new burner now allows
us to use hydrogen (which was flared) as fuel for the
production of steam, instead of natural gas
• In Barcelona, a boiler for hot oil was upgraded with
better control and heat recovery, resulting in an energy
reduction of 15 percent and a cost reduction of €26,000
• In Arnsberg, an innovative new chiller has reduced
energy use for cooling by more than 40 percent, and
costs by €80,000
Renewable energy
Renewable energy is an important aspect of the improve-
ments required to achieve our 2020 strategy carbon
footprint reduction. Our businesses have set themselves
ambitious targets to increase the share of renewable
electricity and heat used in our operations – equivalent to
45 percent renewable energy for AkzoNobel, a substantial
increase from the 2012 level of 33 percent. In 2013,
36 percent of the electricity and 12 percent of the heat
used on our sites came from renewable sources. This is
equivalent to 31 percent renewable energy, a drop from
2012 due to a change in some supply contracts.
about €0.6 billion
Total energy in % by source
• The indicative monetary value of the energy savings is
€20 million
• Total energy consumption for Specialty Chemicals was
92,000 TJ; Performance Coatings 5,000 TJ and for
Decorative Paints 2,000 TJ
• More details about the energy sources can be found on
our website
We use energy scans to identify savings opportunities in
all our Business Areas. During 2013, a series of scans
was carried out, and the outcomes are being, or will be,
implemented. For example:
192
A Renewable energy
B Natural gas
C Coal
D Nuclear
E Other fossil fuels
31
37
15
15
2
C
E
D
A
B
Sustainability statements | AkzoNobel Report 2013
15
Note 15: Greenhouse gas emissions
16
Note 16: Local air quality
Greenhouse gas emissions are primarily related to the fuel
and power we use, but also include some CO2, CH4 and
HFC process emissions. This section reflects the perfor-
mance of all our own operations covering the gate-to-gate
scope. More details on our Carbon Policy and cradle-to-
grave reporting can be found in Note 5 in this section.
Greenhouse gas emissions in million tons
Direct CO2(e) Mt
Indirect CO2(e) Mt
kg CO2(e) per ton of production
5
4
3
2
1
0
267
256
257
3.2
3.2
3.2
2.0
1.6
1.5
1.1
300
222
240
2.8
180
120
60
0
2010
2011
2012
2013
Total greenhouse gas emissions made up of direct emissions from processes and
combustion at our facilities and indirect emissions from purchased energy.
• Total greenhouse gas emissions per ton of production
decreased by 14 percent to 222 kg/ton CO2(e). Absolute
GHG emissions came down 17 percent to 3.9 million tons
of CO2(e). The divestment of Chemicals Pakistan had a
significant positive effect on direct CO2(e). Other positive
contributions came from the use of steam from neigh boring
waste incineration plants in Hengelo and Delfzijl (the
Netherlands), with both significantly reducing indirect
CO2(e). In Sweden, meanwhile, eight sites contributed by
purcha sing electricity generated with a low carbon footprint
• The combined direct and indirect CO2(e) emissions for
Specialty Chemicals were 3.5 million tons, Performance
Coatings 0.3 million tons and for Decorative Paints
0.1 million tons
• A detailed breakdown of our greenhouse gas emissions
is available on our website
Air monitoring around our operations is focused on volatile
organic compounds (VOC) and NOx and SOx emissions.
We monitor particulates at site level as required.
Volatile organic compounds (VOC) from operations
VOC emissions from our manufacturing operations
may lead to local low-level ozone creation, smog
formation and associated health problems for people
in surrounding areas. All our businesses will continue
to manage VOC emissions from sites, in line with
national or even supranational (EC) legal requirements.
The VOC reduction focus for our paints and coatings
businesses is increasingly concentrating on low/zero
VOC product design, rather than only controlling VOCs in
our operations. Reducing VOC emissions from our sites
remains part of the scope of our OEE program, while
our Research, Development and Innovation groups are
working on projects to reduce the solvent content of our
products – VOC in product (see Note 4 in this section).
VOC emissions per ton of production reduced by 10
percent to 0.17 kg/ton. Total VOC emissions reduced to
3.1 kilotons. This was achieved through improvements
Volatile organic compounds in kilotons
Volatile organic compounds
kg per ton of production
0.22
4.3
7.5
6
4.5
3
1.5
0
0.19
0.19
3.6
3.6
0.17
3.1
0.25
0.20
0.15
0.10
0.05
0
made at many sites, including Gebze, where vapor return
lines were installed, as well as no-spill connections in
transfer lines from tanker to bulk storage. Focused efforts
in the Surface Chemistry business to reduce their VOCs
also proved successful (e.g. in Boxing, Itupeva and
Singapore). Continued OEE program activities will keep us
on target to achieve our ambitions.
NOx and SOx
NOx and SOx emissions may have a significant impact on
local air quality because of their contribution to acidification.
Therefore, these compounds are monitored.
• SOx emissions (from process emissions and energy)
reduced to 0.26 kg/ton of production. Absolute
emissions were down 39 percent at 4.6 kilotons. The
major reason for the reduction was the divestment of
our Chemicals Pakistan activities and projects in
LeMoyne in the US. The emissions per ton for our three
sulfur derivatives plants in Germany, the US and
Argentina were also down
• NOx emissions from our sites were down 26 percent at
0.08 kg/ton of production. Total emissions were down
to 1.3 kilotons. The major reason for the reduction
was the divestment of our Chemicals Pakistan
activities and projects in Morris (US) and Boxing (China).
A new incinerator in Mons (NOx reduction over
50 percent) was started in Q4 and will further reduce
NOx emissions
NOx and SOx emissions
in kilotons
NOx
NOx kg/ton
SOx
SOx kg/ton
2010
2011
2012
2013
2.0
0.10
7.1
0.36
2.0
0.11
7.7
0.41
1.9
0.10
7.6
0.41
1.3
0.08
4.6
0.26
2010
2011
2012
2013
VOC emissions may lead to local low-level ozone creation, smog formation and
associated local health issues. We measure halogenated and non-halogenated
organic compounds discharged to air.
Emissions may form acid rain that can lead to acidification. The gases are emissions
from manufacturing and combustion of fuel that we burn. The total quantity of NOx/
SOx emissions from manufacturing processes discharged directly to air (e.g. after
any abatement process) and the quantity of NOx/SOx emissions calculated from the
use of fuels.
193
AkzoNobel Report 2013 | Sustainability statements
17
Note 17: Raw materials efficiency
Waste
Effective waste management helps to increase raw
materials efficiency in our manufacturing operations while
reducing both our environmental footprint and costs. Our
focus is on reducing total waste and eliminating hazardous
waste to landfill. The exception is asbestos waste – mainly
from demolishing old equipment and buildings – where the
preferred current safe disposal route is properly designed
landfill facilities.
• Total waste per ton of production generated and leaving
our sites was down 18 percent to 9.0 kg/ton. The total
waste volume fell to 161 kilotons, a decrease of 21
percent. The indicative monetary value of the total waste
reduction is €16 million
• The total waste for Specialty Chemicals was 64 kilotons,
Performance Coatings 54 kilotons and for Decorative
Paints 39 kilotons, while non-Business Area related
totaled 4 kilotons
• Non-reusable waste was reduced to 65 kilotons. The
amount of non-reusable waste per ton of production
generated and leaving our sites was down 21 percent to
3.6 kg/ton. This reduction was achieved by implemen-
ting projects in our OEE program, and an increased
focus on waste at many of our sites. Examples include
collaborating with suppliers to re-use packaging
materials at Suzhou in China, and working with a
supplier in the US to use our own reconditioned drums
• Our program for waste prevention through alternative
outlets for obsolete paint materials is proving successful.
Around 11,000 tons of obsolete materials have been
sold as by-product, which is being used as raw material
for paint. This material would otherwise have been
dis carded as waste. Sustainable outlets have also been
found for other by-product streams, such as alpha
cellulose to the paper industry and powder coating fines,
which are also being used as raw material for paint
• Hazardous waste per ton of production reduced to
3.5 kg/ton
• The non-reusable hazardous waste to landfill was down
29 percent to 1.9 kilotons
Total waste in kilotons
Reusable
Non-reusable
Total kg per ton of production
250
200
150
100
50
0
13.1
155
11.6
11.0
9.0
103
121
118
96
85
96
65
15
12
9
6
3
0
2010
2011
2012
2013
Waste means any substance or object arising from our routine operations which we
discard or intend to discard, or we are required to discard. Reusable waste is waste
which is used e.g. for resource recovery, recycling, reclamation, direct re-use or
alternative uses e.g. composting. All other waste is non-reusable waste.
Hazardous waste in kilotons
Reusable
Non-reuseable not landfill
Non-reuseable to landfill
Total kg per ton of production
50
40
30
20
10
0
3.9
3.8
48
45
3.8
51
3.5
44
24
23
18
4.7
3.0
2.7
15
1.9
2010
2011
2012
2013
4.0
3.2
2.4
1.6
0.8
0
Hazardous waste is waste that is classified and regulated as such according to the
national, state or local legislation in place.
Ozone depleting substances
Emissions of ozone depleting substances are at a very low
level – 2.9 tons (2012: 1.75 tons). They are mainly due to
Freon22 from maintenance in older air conditioning and
cooling units, which are replaced when appropriate.
194
Sustainability statements | AkzoNobel Report 2013
18
Note 18: Water
Fresh water availability
Sustainable water supply is essential to life – and to
the sustainability of our business. We rely on water
for raw materials production, product formulation and
manufacturing, as well as power generation, cooling,
cleaning, transporting and for the effective use of some
products. Around 88 percent of our fresh water intake is
from surface water and 88 percent of our intake is used
for cooling and is only slightly heated. In addition to the
intake of fresh water, the emission of contaminated water
from our sites to surface waters may negatively impact
fresh water resources and eco-systems. We continue to
reduce the chemical oxygen demand (COD) of our effluent
to surface water.
We monitor our progress using a fresh water risk assess-
ment tool, which is completed at least bi-annually by each
manufacturing site. The tool assigns risk levels to water
sources, supply reliability, efficiency, quality of discharges,
compliance and social competitive factors. Sustainable
fresh water management is defined as a low risk score in
all categories. In 2013, the assessment was carried out,
and the major risk identified was sourcing water in water
scarce areas.
Sustainable fresh water management
in % of manufacturing sites
Target
48
74
83
85
100
2010
2011
2012
2013
2015
Sustainable fresh water management is defined as a low risk score in all categories
in the AkzoNobel sustainable fresh water assessment tool: water sources, supply
reliability, efficiency, quality of discharges, compliance and social competitive factors.
• 85 percent of our sites (2012: 83 percent) have
sustainable fresh water management in place, as
measured by the AkzoNobel fresh water management
risk assessment tool
Water emissions
Reductions in COD in effluent are being achieved across
the company.
• The COD load to surface water per ton of production
• Fresh water use per ton of production is down to
reduced to 0.08 kg/ton (2012: 0.09 kg/ton)
14.9 m³/ton (2012: 15.3 m³/ton)
• The total COD load to surface water was down 10
• Total fresh water use was 265 million m³, a decrease of
percent to 1.4 kilotons (2012: 1.6 kilotons)
6 percent (2012: 283 million m³)
Fresh water use in million m3
Fresh water consumption
m3 per ton of production
15.7
15.6
15.3
14.9
309
291
283
265
500
400
300
200
100
0
2010
2011
2012
2013
Fresh water use is the sum of the intake of ground water, surface water and
potable water.
Chemical oxygen demand (COD) in kilotons
Chemical oxygen demand
kg per ton of production
0.10
0.10
1.9
1.8
0.09
1.6
0.08
1.4
6
4.8
3.6
2.4
1.2
0
0.20
0.16
0.12
0.08
0.04
0
2010
2011
2012
2013
COD is the amount of oxygen required for the chemical oxidation of substances in the
waste water effluent that is discharged into surface waters.
20
16
12
8
4
0
195
AkzoNobel Report 2013 | Sustainability statements
19
Note 19: Soil and groundwater remediation
Soil and groundwater remediation
There are substantial costs associated with the assess-
ment and remediation of historical soil and groundwater
contamination. We periodically review contamination at
our sites, taking remedial action when required, and have
procedures to prevent new contamination.
In line with IFRS accounting rules, we make provisions
for environmental remediation costs when it is probable
that liability will materialize and the cost can be reason-
ably estimated. We have set aside €329 million, which we
believe is sufficient for the sites where we have ownership
or responsibility (see also Note 16 of the Financial state-
ments).
196
Sustainability statements | AkzoNobel Report 2013 Independent assurance report
To the readers of the AkzoNobel Report 2013
We were engaged by the Board of Management of Akzo
Nobel N.V. (further AkzoNobel) to provide assurance on
the sustainability information in the AkzoNobel Report
2013 (further the Report). The Board of Management
of AkzoNobel is responsible for the preparation of The
Report, including the identification of material issues. Our
responsibility is to issue an assurance report based on the
engagement outlined below.
Scope
Our assurance engagement was designed to provide:
• Limited assurance on whether the information in the
Sustainability statements section (further Sustainability
statements) and in the Compliance and integrity
management chapter (pages 97 to 100) (further
Compliance and integrity management chapter) of the
Report is presented fairly, in all material respects, in
accordance with the reporting criteria
• Reasonable assurance on whether the information
in Note 1: Managing our sustainability agenda of
the Sustainability statements of the Report (further
Managing our sustainability agenda) is presented, in
all material respects, in accordance with the reporting
criteria as defined by AkzoNobel
We do not provide any assurance on the achievability of
the objectives, targets and expectations of AkzoNobel.
Procedures performed to obtain a limited level of
assurance are aimed at determining the plausibility
of information and are less extensive than those for a
reasonable level of assurance.
Reporting criteria and assurance standard
AkzoNobel applies the Sustainability Reporting Guidelines
( 3.1) of the Global Reporting Initiative supported by
internally developed guidelines as described in the
Reporting principles section. It is important to view the
performance data in the context of these criteria.
We conducted our engagement in accordance with the
Dutch Standard 3410N: Assurance engagements relating
to sustainability reports, which is a specific part of the
International Standard for Assurance Engagements (ISAE
3000): Assurance Engagements other than Audits or
Reviews of Historical Financial Information, issued by the
International Auditing and Assurance Standards Board.
This standard requires, among others, that the assurance
team possesses the specific knowledge, skills and
professional competencies needed to provide assurance
on sustainability information, and that they comply with
the requirements of the Code of Ethics for Professional
Accountants of the International Federation of Accountants
to ensure their independence.
Work undertaken
Our procedures for limited assurance included:
• A risk analysis, including a media search, to identify
relevant sustainability issues for AkzoNobel in the
reporting period
• Reviewing the suitability of the internal reporting criteria
including conversion factors used
• Evaluating the design and implementation of the
systems and processes for the collection, processing
and control of the information in scope for limited
assurance, including the consolidation of the data
• Interviewing management at corporate and business
level responsible for the sustainability and compliance
and integrity policies, implementation, management,
internal controls, monitoring and reporting
• Interviews with relevant staff at corporate and business
level responsible for providing the information and
consolidating the data for the Sustainability statements
and Compliance and integrity management chapter
• Evaluating internal and external documentation, based
on sampling, to determine whether the information in
the Sustainability statements is supported by sufficient
evidence
• Joining an audit of HSE (Health, Safety, and Environ-
ment) management at the Functional Chemicals site in
Cologne, Germany
• Reviewing the relevant work of Internal Audit function
Our additional procedures for reasonable assurance
included:
• Testing the relevant work of Internal Audit function in
respect of the information in Managing our sustainability
agenda
• Joining the sustainability assessment questionnaire
review at Decorative Paints in Sassenheim, the
Netherlands, together with the Internal Audit team to
evaluate the implementation, and test the operating
effectiveness of controls at local level in respect of the
information in Managing our sustainability agenda
Additionally we determined, as far as possible, whether the
information concerning sustainability in the other sections
of the Report is consistent with the information in scope
for assurance.
During the assurance process we discussed the necessary
changes in the Sustainability statements and in the
Compliance and integrity management chapter and
reviewed the final version of the Report to ensure that it
reflects our findings.
Conclusion and opinion
Based on our procedures for limited assurance, nothing
has come to our attention to indicate that the information
in the Sustainability statements and in the Compliance and
integrity management chapter is not fairly presented, in all
material respects, in accordance with the reporting criteria.
In our opinion, the information in Managing our
sustainability agenda is presented, in all material respects,
in accordance with the reporting criteria. We also report,
to the extent we can assess, that the information on
sustainability in the rest of the Report is consistent with
the information in the Sustainability statements and in the
Compliance and integrity management chapter.
Amsterdam, February 19, 2014
KPMG Sustainability,
Part of KPMG Advisory N.V.
W.J. Bartels RA, Partner
197
AkzoNobel Report 2013 | Sustainability statements Summaries
Financial summary
Sustainability performance summary
Index
Glossary
Financial calendar
200
204
207
208
210
Summaries
Financial summary
Consolidated statement of income
In € millions
Revenue
Operating income
Financing income and expenses
Income tax
Results from associates and joint ventures
Profit for the period from continuing operations
Minority interests attributable to minority shareholders
Discontinued operations
Net income, attributable to shareholders
Common shares, in millions at year-end
Dividend
Number of employees at year-end
Average number of employees
Employee benefits
Average revenue per employee (in €1,000)
Average operating income per employee (in €1,000)
Ratios
ROS%
ROI%
Net income in % of shareholders’ equity
Employee benefits in % of revenue
Interest coverage 4
Per share information (in €)
Net income
Adjusted earnings per share
Shareholders’ equity
Highest share price during the year
Lowest share price during the year
Year-end share price
2004
12,833
1,588
(205)
(412)
10
981
(36)
–
945
285.8
343
61,400
63,600
3,216
202
25
12.4
20.8
40.6
25.1
7.7
2005 1
13,000
1,492
(162)
(338)
6
998
(37)
–
961
285.8
343
61,300
61,400
3,221
212
24
11.5
19.4
32.0
24.8
9.2
2006
2007
10,023
10,217
887
(134)
(96)
87
744
(29)
438
1,153
287.0
344
42,700
61,900
2,158
162
14
8.8
16.3
30.5
21.5
6.6
778
(151)
(166)
(20)
441
(31)
9
419
262.3
472
42,600
42,600
2,215
240
18
7.6
14.6
122.9
21.7
5.2
2008 2
15,415
(577)
(232)
(260)
25
(1,044)
(65)
23
(1,086)
231.7
417
60,000
61,300
3,022
251
(9)
– 3
– 3
– 3
19.6
– 3
3.31
3.36
4.02
33.82
(4.38)
9.12
33.79
24.87
31.38
11.95
40.18
30.82
39.15
14.44
49.41
38.30
46.18
42.06
65.56
44.41
54.79
32.21
57.11
22.85
29.44
2009
13,028
855
(405)
(141)
21
330
(77)
32
285
232.3
325
54,700
56,300
2,955
231
15
6.6
7.3
3.7
22.7
2.1
1.23
2.06
33.47
46.52
26.01
46.40
2010
14,640
1,219
2011 5
14,604
1,145
(327)
(170)
25
747
(83)
90
754
233.5
320
55,600
55,100
2,980
266
22
8.3
9.6
8.4
20.4
6.4
3.23
3.71
38.48
47.70
37.18
46.49
(336)
(233)
24
600
(64)
(59)
477
234.7
304
52,020
51,100
2,765
286
22
7.8
9.1
5.2
18.9
4.7
2.04
3.10
39.25
53.74
29.25
37.36
2012 6
15,390
(1,198)
(205)
(203)
13
(1,593)
(63)
(436)
(2,092)
239.0
214
50,610
52,200
3,018
295
(23)
– 3
– 3
– 3
19.6
– 3
(8.82)
2.55
24.12
49.98
34.85
49.75
2013
14,590
958
(200)
(111)
14
661
(68)
131
724
242.6
210
49,560
50,200
2,950
291
19
6.6
9.6
12.9
20.2
5.1
3.00
2.62
23.06
56.49
42.47
56.34
1 The 2004–2005 figures have not been restated for the Organon BioSciences divestment.
2 Continuing operations from ICI are included as from 2008. The 2008 figures have not been restated for the National Starch divestment.
3 Not meaningful as operating income and net income were losses.
4 Until 2009: operating income divided by net financing expenses, as from 2010: operating income divided by net interest on net debt.
5 Restated to present Decorative Paints North America as a discontinued operation.
6 Restated for the revised IAS19.
200
Summaries | AkzoNobel Report 2013 Consolidated balance sheet
In € millions
Intangible assets
Property, plant and equipment
Financial non-current assets
Total non-current assets
Inventories
Receivables
Cash and cash equivalents
Assets held for sale
Total current assets
Shareholders’ equity
Minority interests
Total equity
Provisions
Long-term borrowings
Other non-current liabilities
Total non-current liabilities
Short-term borrowings
Current liabilities
Current portion of provisions
Liabilities held for sale
Total current liabilities
Average invested capital 5
Capital expenditures
Depreciation
OWC
Ratios
2004
448
3,535
1,418
5,401
1,978
2,761
1,811
–
6,550
2,605
140
2,745
2,877
2,392
200
5,469
560
2,677
500
–
2005 1
488
3,432
1,800
5,720
1,987
2,910
1,486
322
6,705
3,415
161
3,576
2,210
2,702
183
5,095
357
2,571
766
60
2006
682
3,346
1,706
5,734
2,042
2,919
1,871
219
7,051
4,144
119
4,263
2,132
2,551
181
4,864
410
2,652
571
25
2007
669
2,203
1,402
4,274
1,177
2,164
11,628
–
14,969
11,032
97
11,129
1,598
1,954
133
3,685
1,635
2,276
518
–
2008 2
7,172
3,357
1,848
2009
7,388
3,474
1,783
2010
7,308
3,384
1,977
2011 3
7,392
3,705
2,664
2012 4
4,454
3,739
2,628
12,377
12,645
12,669
13,761
10,821
1,781
2,977
1,595
4
6,357
7,463
450
7,913
2,072
2,341
715
5,128
1,338
3,510
845
–
1,441
2,666
2,128
–
6,235
7,775
470
8,245
1,919
3,641
674
6,234
384
3,220
797
–
1,678
2,896
2,851
–
7,425
8,984
525
9,509
1,855
2,880
589
5,324
907
3,761
593
–
1,924
3,035
1,635
–
6,594
9,031
529
9,560
2,392
3,035
541
5,968
494
3,782
551
–
1,545
2,789
1,752
921
7,007
5,764
464
6,228
2,677
3,388
434
6,499
662
3,632
455
352
2013
3,906
3,589
2,219
9,714
1,426
2,622
2,098
203
6,349
5,594
427
6,021
1,938
2,666
389
4,993
961
3,438
601
49
3,737
3,754
3,658
4,429
5,693
4,401
5,261
4,827
5,101
5,049
7,631
7,576
8,034
6,629
9,311
12,578
11,467
11,537
11,817
10,007
551
540
514
528
371
349
359
330
534
453
513
424
534
435
658
419
826
463
666
472
2,359
1,691
2,016
1,891
1,572
1,384
Equity/non-current assets
Inventories and receivables/current liabilities
Operating working capital as % of revenue
0.51
1.77
0.62
1.90
0.74
1.87
2.60
1.47
0.64
1.36
16.5
0.65
1.28
13.7
0.75
1.22
13.9
0.73
1.31
13.2
0.58
1.19
10.7
0.62
1.18
9.9
1 The 2004– 2005 figures have not been restated for the Organon BioSciences divestment.
2 Continuing operations from ICI are included as from 2008. The 2008 figures have not been restated for the National Starch divestment.
3 Restated to present Decorative Paints North America as a discontinued operation.
4 Restated for the revised IAS19.
5 Restated to current definition from 2011.
201
AkzoNobel Report 2013 | Summaries Business Area statistics
In € millions
Decorative Paints
Revenue
Operating income
ROS% (excluding goodwill impairment)
Average invested capital 3
ROI% (excluding goodwill impairment)
Capital expenditures
Average number of employees
Average revenue per employee (in €1,000)
Average operating income per employee (in €1,000)
Performance Coatings
Revenue
Operating income
ROS%
Average invested capital 3
ROI%
Capital expenditures
2008
2009 1
2010
2011 2
2012
2013
5,006
(669)
3.5
6,515
2.7
120
4,573
4,968
4,201
133
2.9
275
5.5
235
5.6
6,169
4,908
5,032
2.2
112
5.6
154
4.7
155
4,297
(2,012)
2.2
4,701
2.0
206
4,174
398
9.5
2,896
13.7
171
24,600
22,900
21,800
17,100
17,200
16,800
203
(27)
4,575
444
9.7
2,010
22.1
89
200
6
4,112
433
10.5
1,868
23.2
61
228
13
4,786
487
10.2
2,063
23.6
87
246
14
250
(117)
5,170
5,702
458
8.9
2,267
20.2
116
542
9.5
2,499
21.7
123
248
24
5,571
525
9.4
2,463
21.3
143
Average number of employees
21,000
20,200
20,600
21,300
21,700
21,300
Average revenue per employee (in €1,000)
Average operating income per employee (in €1,000)
Specialty Chemicals
Revenue
Operating income
ROS%
Average invested capital 3
ROI%
Capital expenditures
218
21
5,687
130
2.3
3,797
3.4
305
204
21
4,359
422
9.7
3,435
12.3
319
232
24
4,943
604
12.2
3,464
17.4
273
243
22
5,335
622
11.7
3,406
18.3
365
263
25
5,543
500
9.0
3,678
13.6
484
262
25
4,949
297
6.0
3,609
8.2
346
Average number of employees
12,900
11,400
11,100
11,300
11,800
10,600
Average revenue per employee (in €1,000)
Average operating income per employee (in €1,000)
441
11
382
37
445
54
472
55
470
42
467
28
1 Restated for transferred businesses and excluding National Starch, divested in 2010.
2 Restated to present Decorative Paints North America as a discontinued operation.
3 From 2010 restated to current definition.
202
Summaries | AkzoNobel Report 2013 Regional statistics
In € millions
2009
2010
2011
2012
2013
2009
2010
2011 1
2012
2013
2009
2010
2011
2012
2013
The Netherlands
Other European countries
China
Revenue by destination
Revenue by origin
Capital expenditures
Average invested capital
Number of employees 2
792
1284
104
1,748
4,800
Revenue by destination
Revenue by origin
Capital expenditures
Average invested capital
Number of employees 2
Germany
1,088
1,089
19
1,035
3,700
Sweden
803
1,537
84
1,390
5,000
1,160
1,096
22
949
694
1,646
144
1,384
5,200
1,284
1,228
31
945
745
1,601
110
1,326
5,200
1,258
1,219
69
861
765
1,600
94
1,175
5,300
1,176
1,143
87
736
3,095
2,211
69
2,390
9,400
US and Canada
2,600
2,712
55
3,398
2,336
83
2,518
9,100
2,954
3,074
63
2,902
2,131
3,500
3,800
3,600
3,100
10,100
10,300
Revenue by destination
Revenue by origin
Capital expenditures
Average invested capital
423
1,284
37
509
468
1,475
19
502
515
1,481
54
551
486
1,505
70
539
473
1,411
38
471
Brazil
732
715
25
714
844
815
23
753
3,702
2,459
98
2,641
8,900
2,092
2,222
67
1,722
5,100
949
903
54
704
3,647
2,400
85
2,127
8,500
2,294
2,413
70
1,742
5,100
987
909
123
621
3,531
2,330
66
1,406
8,000
2,155
2,287
62
1,739
5,000
925
851
70
558
997
929
143
817
1,249
1,177
147
862
6,100
6,700
249
200
6
141
332
251
17
140
India
1,376
1,361
96
1,089
7,400
359
283
18
130
1,621
1,699
135
1,295
7,700
371
288
16
122
1,643
1,690
104
1,330
7,400
353
270
17
119
1,400
1,600
1,700
1,800
1,900
Other Asian countries
1,336
1,189
21
680
1,448
1,263
31
548
1,559
1,344
46
656
1,716
1,491
55
605
1,380
1,193
23
493
Number of employees 2
3,500
3,400
3,300
3,200
3,000
2,800
2,700
2,800
2,900
2,900
5,400
5,600
6,100
5,000
5,200
UK
Other Latin American countries
Other regions
Revenue by destination
Revenue by origin
Capital expenditures
Average invested capital
Number of employees 2
768
830
22
1,443
3,800
798
854
28
1,531
3,900
841
879
27
1,512
3,900
901
967
68
1,433
3,800
887
948
74
1,314
3,700
415
244
5
58
550
353
7
67
566
379
12
153
636
435
16
163
628
431
13
155
533
341
7
144
636
409
10
168
667
419
11
218
728
463
9
210
674
436
18
178
1,500
1,600
1,700
1,700
1,600
2,200
2,200
2,100
2,100
2,500
1 Restated to present Decorative Paints North America as a discontinued operation.
2 At year-end.
203
AkzoNobel Report 2013 | Summaries Sustainability performance summary
Economic/Governance/Social
Area
Product
Eco-premium solutions with downstream benefits
Eco-premium solutions
Business integrity
% of revenue
% of revenue
Code of Conduct alleged complaints handled by the Compliance Committee
number
Code of Conduct trained
Health and Safety
Fatalities employees
Total reportable injury rate employees/supervised contractors
Lost time injury rate employees/supervised contractors
Occupational illness rate employees
Total illness absence rate employees
Fatalities contractors (supervised plus independent)
Total reportable injury rate independent contractors
Manufacturing sites with behavior-based safety program
Distribution incidents
Motor vehicle incidents with injury
Employees
Employee numbers (FTE)
Female executives
Executives from high growth markets
Online P&D Dialog participation
Employee engagement index 1
Community Program investment
Reliable operations
Management audits plus reassurance audits
Safety incidents (Level 3)
Safety incidents (Level 1, 2, 3)
Significant loss of containment (Level D)
Regulatory actions (Level 3)
Sourcing
Critical PR spend covered by supplier management framework
Product related suppliers signed Vendor Policy
NPR suppliers signed Vendor Policy
Suppliers on SSV program since 2007 2
Renewable raw materials
204
% employees
number
/million hours
/million hours
/million hours
% of sites
number
/million hours
%
number
number
number
%
%
%
1-5 scale
in € millions
number
number
number
number
number
% of spend
% of spend
% of spend
number
% organic RM
2009
2010
2011
2012
2013
Target
2015
Target
2020
18
19
95
0
3.7
1.5
0.4
2.0
3
2.8
52
31
21
23
95
1
3.6
1.6
0.3
1.9
0
3.0
72
91
34
22
24
95
2
3.1
1.3
0.3
2.0
1
3.5
76
80
29
17
22
24
96
2
2.4
1.1
0.2
2.0
0
4.2
76
46
28
18
24
9
95
0
2.3
1.3
0.1
2.1
0
3.5
96
48
19
54,700
55,600
57,240
55,272
49,561
10
11
72
80
1.4
66
9
33
1
3
–
85
–
185
–
12
12
76
3.56
1.5
61
10
32
0
4
–
91
–
266
–
13
13
78
3.74
1.5
66
8
36
2
0
–
95
77
304
–
15
13
84
3.8
1.5
61
3
23
0
3
69
97
80
373
13
16
14
85
3.88
1.0
56
0
14
1
8
80
96
83
392
13
–
30
–
–
0
<2.0
1.3
–
1.9
0
–
100
–
–
–
20
20
95
>4
–
–
0
–
0
0
90
96
80
–
–
20
–
–
–
0
<1.0
–
–
–
0
–
–
–
–
–
–
–
–
–
–
–
0
–
0
0
–
–
–
–
–
Summaries | AkzoNobel Report 2013 Environmental
Area
Raw material efficiency
Total waste
per ton of production
Total non-reusable waste
per ton of production
Hazardous waste total
per ton of production
Hazardous waste non-reusable
per ton of production
Hazardous waste to landfill
per ton of production
Maintain natural resources/fresh air
Fresh water use
per ton of production
COD emissions
per ton of production
Manufacturing sites with sustainable fresh water
VOC emissions
per ton of production
NOx emissions
per ton of production
SOx emissions
per ton of production
Direct CO2(e) emissions (Scope 1)
per ton of production
Indirect CO2(e) emissions (Scope 2)
per ton of production
Total energy consumption
per ton of production
Value chain
Total CO2(e) emissions (cradle-to-grave) 3
per ton of product 3
Total CO2(e) emissions (cradle-to-gate) 4
per ton of product 4
kiloton
kg/ton
kiloton
kg/ton
kiloton
kg/ton
kiloton
kg/ton
kiloton
kg/ton
million m3
m3/ton
kiloton
kg/ton
%
kiloton
kg/ton
kiloton
kg/ton
kiloton
kg/ton
million tons
kg/ton
million tons
kg/ton
1000TJ
GJ/ton
million tons
ton/ton
million tons
kg/ton
2009
2010
2011
2012
2013
249
14.7
89
5.2
71
4.2
30
1.8
4.9
0.29
270
15.8
2.5
0.15
38
4.2
0.25
2.1
0.12
6.2
0.37
1.9
110
2.8
162
97
5.7
–
–
14.6
980
258
13.1
103
5.3
77
3.9
29
1.5
4.7
0.24
309
15.7
1.9
0.10
48
4.3
0.22
2.0
0.10
7.1
0.36
2.0
102
3.2
165
111
5.7
–
–
15.9
960
217
11.6
96
5.1
71
3.8
26
1.4
3.0
0.16
291
15.6
1.8
0.10
74
3.6
0.19
2.0
0.11
7.7
0.41
1.6
85
3.2
171
107
5.7
–
–
16.1
950
203
11.0
85
4.6
71
3.8
20
1.1
2.7
0.15
283
15.3
1.6
0.09
83
3.6
0.19
1.9
0.10
7.6
0.41
1.5
82
3.2
175
106
5.7
27.5
1.7
15.9
950
161
9.0
65
3.6
62
3.5
17
1.0
1.9
0.11
265
14.9
1.4
0.08
85
3.1
0.17
1.3
0.08
4.6
0.26
1.1
64
2.8
158
99
5.6
26.5
1.6
–
–
1 From 2010 employee survey changed from % favorable to Gallup Q12 GrandMean: average of mean scores for each question (out of five).
2 SVV program targets are included in the new critical PR spend coverage KPI.
3 Reported from 2012. Includes impact from VOC emissions.
4 Reported up to 2012.
Target
2015
–
10.0
–
–
–
–
–
–
–
–
–
–
–
–
100
–
0.19
–
–
–
–
–
-10%
–
-10%
–
–
–
–
–
-10%
Target
2020
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
-25–30%
–
–
205
AkzoNobel Report 2013 | Summaries Driving improvements for customers
Primers play an essential role in a wide variety of different
coating applications, especially when striving for the perfect
finish on a multi-layer coating system. This is particularly
relevant in the automotive industry, where environmental
considerations and cost efficiency are just as important as
product quality.
Our Powder Coatings business has long been a major
supplier of products used on vehicles produced by many of
the world’s biggest auto manufacturers, all of whom have
strict specifications and are continually looking to make
improvements in all parts of the production process. In an
effort to help our customers increase productivity and cut
energy use, we developed a new low cure technology to
supply the global wheel market.
The new Interpon primer is capable of reducing the curing
window dramatically. Up until now, the window for standard
systems has been between 170°C (20 minutes) and 200°C
(10 minutes). The latest Interpon product reduces this to
15 minutes at 150°C or ten minutes at 170°C, allowing our
customers to reduce their oven steeling or increase their line
speed to boost productivity.
Already approved by the automotive industry in the EU, the
new primer system was developed by our coatings experts in
Arnsberg, Germany, where the product is now being
manufactured to the highest quality standards to supply the
global market.
With no VOCs, less waste and reduced energy usage during
application, powder coatings have become an attractive
proposition in many of our end-user segments, with the
transportation industry beginning to show an increasing
interest.
Index
Audit Committee
Auditor’s report
Automotive and Aerospace Coatings
Board of Management
Borrowings
Business Area statistics
Business performance
Carbon Policy
Cash and cash equivalents
Chairman’s statement
Code of Conduct
Community Program
Company financial statements
Consolidated balance sheet
Consolidated statement of cash flows
Consolidated statement of changes in equity
Consolidated statement of comprehensive income
Consolidated statement of income
Contingent liabilities and commitments
Continuous improvement
Core principles and values
Corporate governance
Cradle-to-grave carbon footprint
Decorative Paints
Divestments
Dividend proposal
Earnings per share
83
Employees
160
End-user segments
56
74
144
202
Executive Committee
Financial calendar
Financial instruments
Functional Chemicals
31
Glossary
174
136
Health and Safety
History
6
How we create value
97
Industrial Chemicals
189
155
113
114
115
112
112
146
18
19
Industrial Coatings
Innovation
Intangible assets
Integrated supply chain
Internal controls
Invested capital
Let’s Colour
Marine and Protective Coatings
Net debt and cash flows
Nomination Committee
186
Profit allocation
9
74
210
152
Property, plant and equipment
Provisions
Pulp and Performance Chemicals
Raw materials
68
Regional statistics
208
181
211
Remuneration
Remuneration Committee
Report of the Supervisory Board
Cover flap
Resource Efficiency Index
68
57
18
131
176
76
35
Return on investment
Return on sales
Risk management
Segment information
Shareholders’ equity
Specialty Chemicals
Strategic targets
189
Strategy
56
35
85
Supervisory Board
Surface Chemistry
Sustainability statements
88
Operating income
35, 126
Sustainability framework
33
38
34
107
112
Outlook
Pensions
Performance Coatings
Performance improvement program
Planet Possible
36
Talent management
138
Ten-year financial summary
Waste
48
35
14
57
183
Eco-premium solutions with customer benefits
33
Powder Coatings
Emissions
193
Product stewardship
161
133
144
69
194
203
101
85
81
33
32
32
22
116
156
60
32
5
79
69
163
165
18, 187
200
194
207
AkzoNobel Report 2013 | Summaries
Glossary
Adjusted earnings per share
Basic earnings per share from continuing operations
excluding incidentals in operating income, amortization
of intangible assets and tax on these adjustments.
Eco-efficiency
Eco-efficiency means doing more with less; creating goods
and services while using fewer resources and creating less
waste and pollution.
Eco-premium solutions
A measure of the eco-efficiency of our products. An
eco-premium solution is significantly better than competing
offers in the market in at least one eco-efficiency criterion
(toxicity, energy use, use of natural resources/raw materials,
emissions and waste, land use, risks, health and well-being),
and not significantly worse in any other criteria.
Invested capital
Total assets (excluding cash and cash equivalents,
investments in associates, the receivable from pension
funds in an asset position, assets/liabilities held for sale) less
current income tax payable, deferred tax liabilities and trade
and other payables.
Key value chain (KVC)
Used to map the carbon footprint of our businesses. Key
value chains are product groupings with similar footprint
characteristics, which are representative of the majority of
total business unit revenue/production.
Eco-premium solutions with downstream benefits
Provide tangible material or energy efficiency benefits for our
customers, compared with competitive products.
LCA
Lifecycle assessments are the basis of our value chain
sustainability programs. Eco-efficiency analysis (EEA) is our
standard assessment method.
EMEA
Europe, Middle East and Africa.
Emerging Europe
Central and Eastern Europe (excluding Austria), Baltic States
and Turkey.
Emissions and waste
We report emissions to air, land and water for those
substances which may have an impact on people or the
environment: CO2, NOx and SOx, VOCs, chemical oxygen
demand, hazardous and non-hazardous waste. Definitions
are in the Sustainability statements section.
Loss of containment
A loss of containment is an unplanned release of material,
product, raw material or energy to the environment
(including those resulting from human error). Loss of
containment incidents are divided into four categories,
dependent on severity, from small, on-site spill up to
Level D – a significant escape.
Mature markets
Mature markets comprise of Western Europe, the US,
Canada, Japan and Oceania.
GHG
Greenhouse gases, including CO2, CO, CH4, N2O and HFCs,
which have a global warming impact. We also include the
impact of VOCs in our targets.
Natural resource use
We do not report specific natural resource use, except
water. We do report our use of energy and waste from
our operations, and indicate the main raw materials used
in our products.
HSE
Health, safety and environment.
Net debt
Defined as long-term borrowings plus short-term
borrowings less cash and cash equivalents.
BBS
Behavior-based safety. A global program run at AkzoNobel
manufacturing facilities and other sites.
Carbon footprint
The carbon footprint of a product or organization is the total
amount of greenhouse gas (GHG) emissions caused during
a defined period, or across the total or part of a product
lifecycle. It is expressed in terms of the amount of carbon
dioxide equivalents CO2(e) emitted.
Code of Conduct
Our Code of Conduct defines our company values and how
we work. It incorporates fundamental principles on issues
such as business integrity, labor relations, health, safety,
environment and security and community involvement.
Community Program
AkzoNobel’s global Community Program encourages and
gives financial support for employees to get involved, hands-
on, in their local communities.
Comprehensive income
The change in equity during a period resulting from
transactions and other events, other than those changes
resulting from transactions with shareholders in their
capacity as shareholders.
Earnings per share
Net income attributable to shareholders divided by the
weighted average number of common shares outstanding
during the year.
EBITDA
Operating income before depreciation, amortization and
incidental items.
208
Summaries | AkzoNobel Report 2013 Operating income
Operating income is defined in accordance with IFRS
and includes the relevant incidental charges.
ROS% (return on sales)
This is a key profitability measure and is calculated as
operating income divided by revenue. For 2012, we
excluded the goodwill impairment from operating income.
VOC
Volatile organic compounds.
Operational cash flow
We use operational cash flow to monitor cash generation. It
is defined as operating income excluding depreciation and
amortization, less capital expenditures.
Operational eco-efficiency
Refers to the eco-efficiency of our manufacturing operations.
Our aim is to improve operational eco-efficiency by reducing
the resources used and emissions/waste from our sites
during the manufacture of our products.
P&D Dialog
The Performance & Development Dialog (P&D Dialog) is
AkzoNobel’s global performance and appraisal system
for employees.
RD&I
Research, Development and Innovation.
Safety incident
We have defined three levels of safety incidents. The highest
category – Level 3 – involves any loss of life; more than five
severe injuries; environmental, asset or business damage
totaling more than €25 million; inability to maintain business;
or serious reputation damage to AkzoNobel stakeholders.
Shareholders’ equity per share
Akzo Nobel N.V. shareholders’ equity divided by the
number of common shares outstanding at year-end.
RobecoSAM assessment
Assesses the sustainability performance of companies
selected for the Dow Jones Sustainability Index (DJSI).
The DJSI tracks the performance of the global sustainability
leaders. The index comprises the top 10 percent in each
sector for the 2,500 largest companies.
Regulatory action
We have defined three categories of regulatory action,
from self-reported issues (Level 1) to formal legal
notifications with fines above €10,000 (Level 3).
Total reportable rate of injuries (TRR)
The number of injuries per million hours worked. Full
definitions are in the Sustainability statements.
REI
Resource Efficiency Index is gross profit divided by cradle-
to-grave carbon footprint. The index measures value created
from use of raw materials and energy.
ROI% (return on investment)
This is a key profitability measure and is calculated as opera-
ting income divided by average invested capital. For 2012,
we excluded the goodwill impairment from operating income.
TSR (total shareholder return)
Used to compare the performance of different companies’
stocks and shares over time. It combines share price
appreciation and dividends paid to show the total return
to the shareholder. The relative TSR position reflects the
market perception of overall performance relative to a
reference group.
Vendor policy/SSV
Vendor policy, Supplier Support Visits, Key Supplier
Management and Together for Sustainable are all elements
of our supplier sustainability program.
209
AkzoNobel Report 2013 | Summaries Financial calendar
2014
April 17
April 29
May 2
Report for the
first quarter
Annual General
Meeting of
shareholders
Ex-dividend date of
2013 final dividend
May 6
May 7 – May 22
May 23
May 28
Record date of 2013
final dividend
Election period cash
or stock final dividend
Determination of
exchange ratio
Payment date cash
dividend and delivery
of new shares
July 23
October 21
Report for the
second quarter
Report for the
third quarter
2015
February 12
Report for the
year 2014 and the
fourth quarter
210
Summaries | AkzoNobel Report 2013 A brief timeline
2013
New strategy launched focused on leading market positions
delivering leading performance
2008
Akzo Nobel acquired ICI and
changed its name to AkzoNobel
1969
Akzo formed following the merger of
Dutch companies AKU and KZO
1998
UK company Courtaulds, whose
products include hi-tech industrial
coatings, acquired by Akzo Nobel
1871
KemaNobel established in Sweden. Later,
in 1984, KemaNobel merged with Bofors
to form Nobel Industries, which in
turn was acquired by Akzo in
1994 to create Akzo Nobel
1895
Alfred Nobel founded Elektrokemiska Aktiebolaget,
known as Eka. Today, Eka is part of our Pulp and
Performance Chemicals business
More than 350 years of history and innovation
1646
Bofors forge founded in Sweden
We’ve been at the forefront of cutting-edge innovation and have been
supplying trusted brands and products for over three centuries.
The name AkzoNobel hasn’t been around as long as that, only since
the late 20th century in fact, but the history of our company can be
traced all the way back to 1646.
And it’s a heritage we’re extremely proud of, not least because one of our
founding fathers was Alfred Nobel (pictured), of Nobel Prize fame. His indus-
trial legacy became part of Nobel Industries in Sweden, which merged with
Dutch company Akzo in 1994 to create Akzo Nobel. Then, following
the acquisition of ICI in 2008, a major rebranding resulted in a subtle change
to the AkzoNobel name we use today.
It’s been an exciting journey, full of pioneering developments and break-
through research. And it’s a journey which is entering a new age of discovery
as we continue to introduce revolutionary and sustainable technologies to
meet the growing demands of our fast-changing world.
211
AkzoNobel Report 2013 | Summaries Integrated Report 2013
AkzoNobel’s annual financial report has been combined with
the sustainability report into one Report 2013. The Report
2013 includes elements of the reporting guidelines issued
by the International Integrated Reporting Council (IIRC).
The sustainability sections, however, in no way form part of
the company’s annual report as the company is required to
publish pursuant to Dutch law.
Brands and trademarks
In this Report 2013, reference is made to brands and trade-
marks owned by, or licensed to, AkzoNobel. Unauthorized
use of these is strictly prohibited.
Disclaimer
In this Report 2013, great care has been taken in drawing up
the properties and qualifications of the product features. No
rights can be derived from these descriptions. The reader is
advised to consult the available product specifications them-
selves. These are available through the relevant business units.
In this publication the terms “AkzoNobel” and “the company”
refer to Akzo Nobel N.V. and its consolidated companies in
general. The company is a holding company registered in the
Netherlands. Business activities are conducted by operating
subsidiaries throughout the world. The terms “we”, “our” and
“us” are used to describe the company; where they are used
in the chapter “Business performance”, they refer to the busi-
ness concerned.
Safe harbor statement
This Report 2013 contains statements which address such
key issues as AkzoNobel’s growth strategy, future financial
results, market positions, product development, products in
the pipeline and product approvals. Such statements 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, devel-
opments in raw material and personnel costs, pensions,
physical and environmental risks, legal issues, and legisla-
tive, fiscal and other regulatory measures. Stated competitive
positions are based on management estimates supported by
information provided by specialized external agencies.
Design
Claire Jean Engelmann, Amsterdam
AkzoNobel Corporate Communications
Photography
Simone van Es
Additional photography supplied by
AkzoNobel businesses
We welcome feedback on our Report.
You can contact us as follows:
Akzo Nobel N.V.
Strawinskylaan 2555
P.O. Box 75730
1070 AS Amsterdam, the Netherlands
T +31 20 502 7555
F +31 20 502 7666
www.akzonobel.com
AkzoNobel Corporate Communications
T +31 20 502 7833
F +31 20 502 7604
E info@akzonobel.com
AkzoNobel Investor Relations
T +31 20 502 7854
F +31 20 502 7605
E investor.relations@akzonobel.com
Printing
Tesink B.V., Zutphen, the Netherlands
Paper
Heaven 42, printed with bio-ink
www.akzonobel.com
AkzoNobel is a leading global paints and
coatings company and a major producer of
specialty chemicals. We supply industries
and consumers worldwide with innovative
products and are passionate about developing
sustainable answers for our customers. Our
portfolio includes well-known brands such
as Dulux, Sikkens, International and Eka.
Headquartered in Amsterdam, the Netherlands,
we are consistently ranked as one of the leaders
in the area of sustainability. With operations in
more than 80 countries, our 50,000 people
around the world are committed to delivering
leading products and technologies to meet the
growing demands of our fast-changing world.
© 2014 Akzo Nobel N.V. All rights reserved.
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