Akzo Nobel Annual Results 2006: Record year

Operational highlights 
 
 • Revenues up 6% – growth in all segments  
 • Record net income of EUR 1.15 billion – up 20% 
 • Operational results up 14% 
 • Incidentals positive contribution of EUR 152 million 
 • Organon – revenues growth of 8%; EBIT before incidentals up 34% 
 • Intervet – autonomous growth of 6% across all regions and product lines 
 • Coatings – strong revenues growth of 12%; EBIT before incidentals up 22% 
 • Chemicals – autonomous growth of 5%; steady EBIT at high performance level 
 • Strong cash flow  – cash generated from operating activities up EUR 0.5 billion  
 • Dividend  – EUR 1.20 per share to be proposed to shareholders 
 
Financial highlights  
 
EUR mln                           FY 2006              FY 2005          % change 
Revenues                          13,737                13,000                      6
EBIT before incidentals      1,310                  1,152                    14
EBIT margin in %                    9.5                      8.9 
Net income                          1,153                     961                    20

Arnhem, the Netherlands – Akzo Nobel (Euronext Amsterdam: AKZ; NASDAQ: AKZOY) has announced its full year results for 2006, which confirm that the company is fit for the future. Revenues were up 6% to EUR 13.7 billion and net income surged 20% to a record EUR 1.15 billion. 
 
The results were boosted by growth in all segments. Revenues grew 8% at Organon, driven by strong sales of NuvaRing® and fertility products, while Intervet also performed well, delivering autonomous growth of 6%. Coatings revenues rose 12% (4% from acquisitions), and the ongoing Chemicals operations generated revenues growth of 5%. 
 
EBIT (operating income) before incidentals was EUR 1.31 billion, up EUR 158 million from 2005. EBIT margin was 9.5% (2005: 8.9%).  
 
Commenting on the figures, Akzo Nobel’s CEO Hans Wijers said: “Our results show that our strategy is paying off. Over the last few years we have built up a very strong portfolio, demonstrated by the record net income of EUR 1.15 billion.  We delivered on our objectives for the year, including further revenues growth, stepping up our expansion strategy and creating enhanced shareholder value. Akzo Nobel is fit for the future”. 
 
 
Organon – increase in revenues driven by 8% volume growth  
Strong performances from its NuvaRing®, Puregon®, Implanon® and Esmeron® products drove Organon’s growth in revenues—up 8% to EUR 2,611 million. EBIT before incidentals rose 34% to EUR 362 million. Sales of NuvaRing® grew by 25% or more in all major markets (in the U.S. by more than 80%), while biotechnology fertility product Puregon®/Follistim®—Organon’s best-selling product—had another record year, with sales increasing by 8%.  U.S. sales of Anzemet® (in-licensed from sanofi-aventis) also added to the topline, as well as the final service payments from Ligand for Avinza®. Pharmaceutical ingredients revenues showed a slight increase compared with 2005. 
 
Intervet – strong 6% autonomous growth across regions and franchises 
Revenues at Intervet increased by 3% to EUR 1,125 million boosted by strong autonomous growth of 6% across all regions and product lines. Outpacing market growth, EBIT before incidentals increased 2% to EUR 213 million, resulting in an EBIT margin of 18.9%. Divestments and acquisitions had a negative impact on revenues of 3%. In Europe, autonomous growth was 5%, while in North America, revenues from ongoing operations grew 12%. At the end of the year, Intervet received important product approvals for Zilmax® and PreveNile®.  
 
Coatings – revenues up 12%; acquisitions contributing 4% 
Revenues at Coatings grew 12% to a record EUR 6,209 million and EBIT before incidentals was up 22% to EUR 518 million. Car Refinishes continued its turnaround, with revenues rising 4%. Industrial activities posted double digit revenues growth, while revenues at Marine & Protective Coatings exceeded EUR 1 billion for the first time. Decorative Coatings revenues grew by 12% in 2006. This revenue growth could not be translated into similar growth of margins due to price pressure in mature markets. Raw material prices had an impact on most businesses, but this was more than offset by continued restructuring. 
 
Chemicals – autonomous growth of 5%; steady EBIT at high performance level 
With the divestment program almost complete, revenues of the ongoing Chemicals operations increased by 5% to EUR 3,502 million. Total EBIT before incidentals amounted to EUR 351 million. Results at Pulp & Paper Chemicals rose significantly and Base Chemicals turned in a record performance. Revenues at Surfactants were 2% higher, while Polymer Chemicals saw revenues improve by almost 10%. The fourth quarter performance of Functional Chemicals impacted their good results of the first nine months due to start-up issues at two new plants. 
 
Strong cash flow – cash generated from operating activities up EUR 0.5 billion 
Invested capital at December 31, 2006, amounted to EUR 8.1 billion, up EUR 0.1 billion on January 1, 2006. Interest-bearing borrowings decreased EUR 0.5 billion to EUR 1.1 billion. Equity increased EUR 0.7 billion as a result of retained income. As a consequence, year-end gearing improved to 0.26 (January 1, 2006: 0.44) and the interest coverage was up from 9.5 to 13.2. 
 
Dividend unchanged – EUR 1.20  
Akzo Nobel will declare a dividend of EUR 1.20, unchanged from last year. The pay-out ratio is 39% of net income before incidentals and in line with our policy. 

Fourth quarter 2006  
The fourth quarter figures showed revenues totaling EUR 3.3 billion. Operating income before incidentals increased 11% to EUR 249 million, with an EBIT margin of 7.5%. Autonomous growth for the fourth quarter amounted to 4% (3% volume and 1% price) while currencies had a negative effect of 3%. Incidentals contributed positively (EUR 25 million) although approximately EUR 200 million lower than the previous year.  Net income was down 27%. 
 
Outlook 2007  
Akzo Nobel is well positioned for profitable growth, supported by favorable signs about the world economy. Provided that no major discontinuities occur, Akzo Nobel believes that it is well placed to outgrow its markets and further improve the financial returns in Coatings and Chemicals. Finally, Akzo Nobel is confident that the proposed separation of its pharmaceutical business will create further value for shareholders. 
 
Note to editors 
Akzo Nobel is a Global Fortune 500 company and is listed on both the Euronext Amsterdam and NASDAQ stock exchanges. It is also included on the Dow Jones Sustainability Indexes and FTSE4Good Index. Based in the Netherlands, we are a multicultural organization serving customers throughout the world with human and animal healthcare products, coatings, and chemicals. We employ around 61,880 people and conduct our activities in these four segments, with operating subsidiaries in more than 80 countries. Consolidated revenues for 2006 totaled EUR 13.7 billion. The financial results for the first quarter will be published on April 24, 2007.  
 
Internet: www.akzonobel.com
 
Not for publication – for more information 
Akzo Nobel nv 
Corporate Media Relations, tel. +31 26 366 43 43 
Contact: Tim van der Zanden  
 
 
 
Safe Harbor Statement* 
This press release contains statements which address such key issues as Akzo Nobel’s growth strategy, future financial results, market positions, product development, pharmaceutical 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, progress of drug development, clinical testing and regulatory approval, developments in raw material and personnel costs, pensions, physical and environmental risks, legal issues, and legislative, fiscal, and other regulatory measures. Stated competitive positions are based on management estimates supported by information provided by specialized external agencies. For a more comprehensive discussion of the risk factors affecting our business please see our Annual Report on Form 20-F filed with the United States Securities and Exchange Commission, a copy of which can be found on the company’s corporate website www.akzonobel.com.  
 
* Pursuant to the U.S. Private Securities Litigation Reform Act 1995.