Akzo Nobel announces plan to invest 425M over three years in performance improvement program to bolster competitiveness, enhance ability to grow, simplify support structures, reduce cost base

Alison Gallant

Alison Gallant

Oct 21, 2011 – Akzo Nobel

AMSTERDAM , October 21, 2011 (press release) – * Next step in the evolution of the company, leveraging its scale
* Program to ensure delivery of medium-term profitability ambitions
* Stepping up operational and functional excellence at lower costs across the company
* Full EBITDA impact of €500 million in 2014
* Expected total incidental costs of €425 million over three years

AkzoNobel has launched a performance improvement program to strengthen its competiveness, enhance its ability to grow, simplify its support structures and reduce its cost base. The program will restructure underperforming parts of the portfolio, transfer best practices and standardize, as well as simplify key processes.

The Executive Committee (ExCo), which was established on January 1, 2011, has defined a comprehensive three-year plan to improve the company’s performance and deliver €500 million EBITDA. Twenty master plans with over 100 detailed initiatives have been developed in the areas of Supply Chain and Sourcing; Research and Development; Shared Services for Finance; Information Management; and Human Resources.

The program also includes business restructuring; for example, in Decorative Paints Europe and North America and in Performance Coatings’ Wood Finishes and Adhesives business. Company-wide programs to further improve margin management capabilities – as well as employee recruitment and training, particularly in high growth markets – are also being rolled out.

Approximately 40 percent of the anticipated benefits will come from the Supply Chain and Sourcing programs, and a further 50 percent from margin management, Research and Development initiatives, and business restructuring programs. These benefits will accrue across AkzoNobel’s business areas, with more than 40 percent of the benefits in Decorative Paints, more than 30 percent in Performance Coatings and close to 25 percent in Specialty Chemicals. The benefits expected in 2012 amount to €200 million, with a similar level of incidental costs in the same year. The total costs to deliver the program are estimated to be €425 million.

Ownership for all the various plans rests with the company’s ExCo, supported by a program office to coordinate and monitor progress. The company will report on the deliverables of the program every six months.

Commenting on the launch of the program, CEO Hans Wijers said: "This performance improvement program represents a major change in the way AkzoNobel is run and managed. It is a logical next step which will leverage our scale to support the delivery of the growth strategy that we announced in September 2010. We have a coherent portfolio of leading businesses in paint, coatings, and specialty chemicals, and delivering further operational and functional excellence will be a source of value creation across our company.

"The establishment of the Executive Committee was an essential step in creating a platform for change at the top. The perfect storm of unprecedented raw material price inflation, in combination with the effects of the financial crisis, only adds to our sense of urgency to capture the benefits of the program. I am confident that this program will provide focus, structural improvements and lower costs, which will underpin the delivery of our growth ambitions and create an EBITDA level at or above the mid-range of our 13 to 15 percent guidance."

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