AkzoNobel is embarking on a “new era of accelerated and sustainable growth” that includes a revenue goal of 20 billion euros ($27.4 billion US) and aggressive market gains in China, India and Brazil.
“Having successfully transformed our portfolio and completed the phase of integration and restructuring, we are now entering a new chapter of accelerated and sustainable growth,” Hans Wijers, CEO of the world’s largest paint and coatings company, said Tuesday (Sept. 28) at its Capital Markets Day in London.
Wijers outlined the company’s new medium-term strategy to financial markets one day after AkzoNobel announced a shake-up in its global leadership and establishment of a nine-member Executive Committee.
Value and Values
Wijers said AkzoNobel would leverage global mega-trends, geographical spread and leading market positions to realize its new ambitions.
The new corporate strategy combines “Value” ambitions regarding revenue with “Values” ambitions that reflect sustainability. The company’s theme: “Tomorrow’s Answers Today: Making it Happen.”
“Recent economic developments have enabled us to develop a deeper understanding of the shifting global marketplace and how we can seize opportunities to capitalize on our diversified portfolio, leading market positions and worldwide scale,” Wijers said.
The company’s “Value” goals include:
- Growing revenue to 20 billion euros ($27.4 billion US);
- Increasing absolute Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA), before incidentals, maintaining a 13% to 15% margin;
- Reducing OWC year-on-year as a percentage of revenue by 0.5 percent to a 12 percent level; and
- Stable to rising dividends.
With high-growth markets currently representing close to 40 percent of revenue, AkzoNobel “believes that these markets will become significantly more important and intends to grow revenue to 50 percent during the course of the decade.” It will also focus more resources on gaining market share in the mid-segments of these markets.
Specific country targets, some of which were announced previously, include:
- Doubling revenue in China to $3 billion from $1.5 billion;
- Creating a significant footprint in India by growing revenue from 250 million euros (about $343.2 million US) to 1 billion euros (about $1.4 billion US); and
- Outgrowing the competition in Brazil by increasing revenue from 750 million euros (about $1 billion US) to 1.5 billion euros (about $2 billion US).
AkzoNobel was recently named Super-Sector Leader of the chemicals industry by the Dow Jones Sustainability World Index, and sustainability underscores the company’s “Values” goals. These include:
- Remaining in the top three on the Dow Jones Sustainability Indexes; and
- Being in the top quartile of its peer group in safety, diversity, employee engagement, talent development and eco-efficiency improvement rates.
“AkzoNobel is well positioned to benefit from global mega-trends affecting our industry, such as population growth, improvement in quality of life in high-growth markets, climate change, and scarcity of natural resources,” Wijers said.
Assets and Resources
AkzoNobel is well positioned to achieve its goals, Wijers said, with:
- Strong leadership positions across its businesses;
- Excellent geographical spread;
- Focus on organic growth, particularly in high-growth markets;
- Ability to consider attractive acquisitions; and
- A new Executive Committee leadership team.
Innovation and Eco-Efficiency
The company also cited its “innovation pipeline,” with current RD&I spending of about 2.5 percent of revenue, “making AkzoNobel the clear sector leader” in absolute expenditures.
AkzoNobel says 9% of its revenue currently derives from what it calls “breakthrough” innovations (those that result in a significant competitive advantage) and 22% from “eco-premium solutions“ (those that have a higher eco-efficiency than the main competitive product).
With a greater investment in R&D, AkzoNobel is aiming to achieve more than 15% of its revenue from “breakthrough” innovations and more than 30% from “eco-premium solutions.” The “innovation strategy will be underpinned by a clear sustainability focus,” the company said.
Balance Sheets, Dividends
In August, the company’s credit ratings were confirmed at BBB+/Baa1 with outlook improved to stable. Proceeds from the disposal of National Starch will fund growth and may be used to strengthen the company’s capital structure by, for example, re-paying 2011 debt maturity or de-risking pensions where possible, the company said.
In addition, the company has announced a simplified dividend policy and intends to pay a stable to rising dividend, whereby a cash interim and final dividend will be paid. The 2010 interim dividend will be increased 6.7 percent to 0.32 euros (about 44 cents US) per share, which will be paid on Nov. 3, 2010.
AkzoNobel intends to grow the 2010 total dividend by about 0.05 euros per share (about 7 cents US).
Outlook: ‘Cautious Optimism’
“The uncertain global economic outlook, consumer caution, and construction and housing markets give reason for caution,” the company said. “However, AkzoNobel’s leading positions, scale and presence in diversified markets, strong balance sheet to fund future growth, and evidence of sustained industrial demand beyond re-stocking give reasons for cautious optimism.”
Said Wijers: “We have a clear vision of the path ahead and are confident that we can achieve our medium-term strategic ambitions.”