Rising material costs and deteriorating markets are not the ideal backdrop in
which to take charge of one of the world's largest industrial companies,
which completed its acquisition of British bellwether ICI ten months ago.
Here, chief executive Hans Wijers, a former economic minister in the
Netherlands, answers your questions on how he will rise to the challenge and
turn AkzoNobel into one of the world’s most environmentally responsible and
most profitable chemicals and coatings giants.
In view of the consolidation in the industry, does this represent any more
opportunities for AkzoNobel?
Ray, Singapore
"AkzoNobel has gone through a period of major transformation. In 2007, we
divested our pharma division and we bought ICI which re-emphasized our
position as the world’s largest coatings company. Furthermore, we sold
several parts of ICI to German based Henkel. In the next few years, a lot of
our energy is devoted to successfully integrating ICI and AkzoNobel. Not
only financially, but also culturally. We are getting closer to the first
year of the two companies combined, and I see a lot of passion, energy, and
cross-selling already. So, this major transformation means that other
transformational deals are not expected in the short term. In the past few
months, we made some bolt-on acquisitions and that trend is very likely to
continue. If there is a strategic fit for bolt-on acquisition opportunities,
we will evaluate the added value and the managerial span of control."
With forecasters predicting one year's recession at best and six years or
more at worst, how are you going to proceed on 1, Expansion, 2, Contraction
and 3, Leaving things untouched where possible, in different parts of the
business?
Steve Buckel, Braunau-am-Inn, Austria
"It is clear that global economic conditions are deteriorating and that
forward visibility is therefore limited. At this stage, the potential
severity of the economic cycle is still unclear. Recognizing this, AkzoNobel
will remain focused on working towards our medium-term target of an EBITDA
margin of 14 per cent by the end of 2011, on delivering the €340 million ICI
synergies faster; on driving margin management programs across the company;
and on rigorous cost management to deliver at least an additional €100
million in net cost savings."
I am working on my doctoral thesis about corporate citizenship in chemical
companies and I would be really interested to know how this concept fits
into AkzoNobel's strategy? Are all your employees involved and aware of your
Corporate Citizenship strategy?
Gustavo Huss, DBA Candidate
"Corporate citizenship is a very broad and generic term. It is very
important within AkzoNobel, and one of the reasons why we are ranked as one
of the leaders on the influential Dow Jones Sustainability Indices. All our
employees, across the globe, have personally signed our Code of Conduct.
Since you are writing a thesis, I would very much like to invite you to
contact our people further so we can provide you with the information you
need. Please send your questions to info@akzonobel.com
"
The current market sectors AkzoNobel covers have their own opportunities
for organic growth and further acquisitions. Do you believe you can satisfy
your shareholders with just these sectors, or do you believe that in the
medium term AkzoNobel will have to venture out into entirely new markets?
Ian, Guisborough, UK
"Post-transformation, AkzoNobel has a very good geo spread. Over 35 per
cent of our revenue is from developing markets, with close to 40 per cent of
operational profit from these markets. We are a very strong and focused
company, the world’s largest coatings company and one of the leaders in
speciality chemicals. Together with my 60,000 colleagues around the world,
we are working in this company towards our medium-term target, the most
visible being a 14 per cent EBITDA margin by the end of 2011. We have many
leadership positions (which are always more profitable) and we have strong
business across our portfolio including Dulux, Glidden, Sikkens,
International Paint and EKA."
How do you plan to grow in light of global slowdown?
Manish, New York
"It is clear that global economic conditions are deteriorating and that
forward visibility is therefore limited. At this stage, the potential
severity of the economic cycle is unclear. Recognizing this, AkzoNobel will
remain focused on working towards our medium-term target of an EBITDA margin
of 14 per cent by the end of 2011, on delivering the €340 million ICI
synergies faster; on driving margin management programs across the company;
and on rigorous cost management to deliver at least an additional €100
million in net cost savings."
How can you justify average price increases of 8 per cent to your coatings
customers in UK & Ireland for 2009, when the cost of oil and other raw
materials is falling sharply?
Darren, Co Down
"Both price increases as well as price decreases have a time lag in
passing through the entire supply chain, therefore you typically see this
concept of delay."
With all this gloom around you are still sending positive message about
profitability for the near future. That’s nice music for investors. However,
they are interested to know also whether this profitability will be achieved
with higher leverage levels or otherwise.
Joseph Farrugia, Attard, Malta
"We have been very clear in communicating our medium-term ambition. Next
year is going to be tough, and further visibility is limited. However, we
still see opportunities to further improve our businesses. AkzoNobel is
committed to maintaining it’s A- rating, and is comfortable with its very
conservative leverage, which will not become higher. At this stage, the
potential severity of the economic cycle is still unclear. Recognizing this,
AkzoNobel will remain focused on working towards our medium-term target of
an EBITDA margin of 14 per cent by the end of 2011, on delivering the €340
million ICI synergies faster; on driving margin management programs across
the company; and on rigorous cost management to deliver at least an
additional €100 million in net cost savings."
In emerging economies where price is a key factor when deciding which
product to buy, how can we make environmentally friendly products with
competitive prices so the consumers can afford them? And do you think
environmental friendly products can become mainstream products in emerging
economies or they always be niche products?
Arthur Carneiro, AkzoNobel Employee - International Paint Brazil
"To start with your second question, our mainstream paint products are
already environmentally friendly. For example, our complete range of latex
paints is already water based and nearly all are very low in Volatile
Organic Compounds (VOC) or contain no VOC at all. This includes our ranges
in the developing markets too. To answer your first question, our
sustainability strategy is to do more with less. This means developing or
re-formulating new products using those raw materials that have less of an
impact on the environment, and a more positive one (for the customer) on the
price of the product."
Innovation is one of the pillars of growth for AkzoNobel. How to you plan
to balance the investment in long-term Research and Development with the
economic challenges currently facing the world? Do you increase investment
to take ensure a strong position with innovative products as markets free up
or do you cut back on investment in research and development to help
preserve the bottom line?
Nigel Cordery
"It is always a fine balance, especially in these economic times. But we
are very committed to R&D because this is a key to future growth.
Innovation is key to our future growth plans, recent very successful
launches include Dulux Paintpod, Freshaire in the United States, Dissolvine
and Intersleek 900."
Will the current recession affect AkzoNobel's commitment to support the ICI
pensions scheme? Or is there a force majeure let-out?
D Wilson, ICI Pensioner
"We are very committed to supporting our pensions schemes around the
world."
Why don't they stop making poisonous chemicals?
Anonymous
"Chemicals are a fact of life. There is no way that the world could be
the same without the use of chemicals, or we would no longer be able to use
toothpaste, eat ice cream, pave roads etc. Wherever we have to work with
more sensitive ingredients, we have extremely stringent safety precautions.
We adhere to all environmental laws and in many cases we are already ahead
of new legislation."
Do you see AkzoNobel continue to move towards specialty chemicals and does
the current climate provide any more opportunities for consolidation?
Raytoei
"AkzoNobel is arguably the world’s largest speciality chemicals company.
Following the major transformation in the past years, the focus will be on
making the company even better. However, the focus will not be on
transformational deals."
AzoNobel paid some 40 per cent above the then market price to acquire ICI.
What price would have been too much? Isn’t this a trophy asset? Synergies
and better management could not justify such a premium.
Daniel
"We have always stated we paid a full price. However, we are convinced
that this combination will create value (EVA positive) after 3 years. Let’s
keep in mind that a few months before the acquisition, we divested our
pharma division also for a very full price of €11 billion. That transaction
was used to pay for the ICI acquisition, I am now very pleased we could pay
in cash. Our Decorative Paints business was centered in Europe, adding ICI
made us also the world leader in Decorative Paints, adding significant
positions in emerging markets including Asia and Latin America. Apart form
the financial angle, I am also very pleased to see there is a very good
cultural fit."
Ah the fabled Hans Wijers, who pulled the plug from Fokker. Any regrets
about that?
Richard Weed, London
"That was a very long time ago, but still one of the most emotional processes
to be involved in. It was by the way the German majority shareholder Daimler
Benz that pulled the plug. I still believe it was right not to put
unrestricted public money in a bankrupt company."
