Chemicals - a transformation story

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Chemicals a transformation story Leif Darner

Chemicals Transformation

Portfolio review

Clear direction

Growth

Divestments

5 Platforms

Accelerating

Restructuring

Focused

Beyond peers

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Akzo Nobel outperforming peer group ROI % 2004 Peers: •Chemtura •Ciba •Clariant •Degussa •DSM •Hercules •ICI •Kemira •Lanxess •Rohm&Haas •Solvay

15 12

Peers

Akzo Nobel Akzo Nobel Chemicals

But below company target of 17.5% 3

Chemicals 2 years ago ƒ Uncertainty internally & externally about Chemicals’ future in Akzo Nobel ƒ New leadership creating expectation of change ƒ Urgent need for clarity of purpose and firm direction

Î A program for repositioning the Chemicals portfolio was initiated

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40+ business segments in 2004

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Ambitions A portfolio with clear focus on selected market segments: ƒLeading position with significant size ƒGlobal scope and opportunity to grow ƒClear competitive advantage ƒSustainable above average financial performance

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Focus on selected market segments Organic growth / Acquisition Polysulfides DME.

Cell. Spec.

Salt

Sulf.Prod. Sulf.Prod. Cl/Alk. Cl/Alk.

Bleaching

EA.

Org.Perox. Org.Perox.

Solar Salt

MCA

Poly.add

Profitability MA

At par

Oleo.Chem.

Chel.Micros. Chel.Micros.

Paper Chem

Salt Spec.

HPMO Surfactants

Restructuring

Above

Expansel

PVC Add.

Below D

n e stm e iv

ts

# 4-10

Ink&Adh.Resins Poly.Cats. MACC

# 2-3 Market position

#1 7

Divesting segments not meeting ambitions

1. Kemi-Interessen 2. Sekab 3. Ink & Adhesive Resins 4. Polymerization Catalysts 5. Helianthos 6. Oleo Chemicals 7. EMC 8. Salt Solar 9. Lubricants 10. MPP Systems

Divested

11. PVC Additives 12. Methyl Amine/Choline Chloride 13. Carbide

In progress

14. Salt Specialties

Withdrawn 8

Continuous restructuring

Employees

Sites

BU’s

2003:

14.900

122

9

Divestments:

-2.000

- 17

Restructuring:

-3.800

- 25

2006 Q3

~10.000

80

5 9

Producing results

Year

2003

2004

2005

2006 Q3

Revenues

4,470

4,320

3,890

2,930

OI excl.incidentals 341

389

352

280

ROS

7.2%

9.0%

9.0%

9.5%

ROI

14%

15%

16%

> 17.5%

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Chemicals Transformation

Portfolio review

Clear direction

Growth

Divestments

5 Platforms

Accelerating

Restructuring

Focused

Beyond peers

11

5 platforms Pulp & Paper Chemicals

Global leader following the Pulp & Paper producers

Polymer Chemicals

Global leader following the Polymer producers

Surfactants

Global leader in specialty surfactants to selected applications

Functional Chemicals

Global leader in selected intermediates and functional chemicals

Base Chemicals

Regional leader in energy- salt-chlorine chain 12

Pulp & Paper Chemicals

“follows pulp & paper producers worldwide” 13

Pulp & Paper Chemicals Application Paper machine

Pulp manufacturing Pulp

Coating

Function Bleaching

De-inking

Retention Sizing Wet strength Coating

• Nr.1 in bleaching • Leader in retention & sizing • Portfolio gives “critical mass” with customers

• • • •

Tissue paper High tech packaging Containerboard Coated woodfree paper 14

Polymer Chemicals

“follows polymer producers worldwide” 15

Polymer Chemicals

Refinery

Polymer Producers

Reactor additives

• Nr.1 in organic peroxides • Leader in metal alkyls • Portfolio gives “critical mass” with global customers

Polymer Processing

Post-Reactor additives

• Automotive parts • Industrial tanks • Adhesives tapes, Artificial marble • Golf balls, sport shoes, snowboards 16

Surfactants

Change to industrial application

“global leader in selected applications” 17

Surfactants

Segment Cat-ionics Non-ionics An-ionics

Agro Asphalt Mining Petro Cleaning Pers.Care V V V

V V

• Nr.1 in specialty surfactants • Leader in selected value add segments: • Agriculture • Asphalt, mining & petroleum • Cleaning & personal care

V V

V V

V V

V V V

• Bring pesticides into weeds • emulsify asphalt • separate ore from stone-substrate • softener and cleaners in cosmetics and hair products • reduce solvents in paints & cleaning products

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Functional Chemicals

“ global leader in selected intermediates and functional chemicals”

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Functional Chemicals Ethylene Oxide Chain

Sulfurproducts

Chemicals Intermediates

Ethylene Amines

CS2

Functional Performance Chemicals

Cellulosics Chelates Micronutrients

Polysulfides

• Nr.1 in MCA, Sulfur products, Chelates, Micro-nutrients, Polysulfides, • Leader in Ethylene amines, Cellulosics

Extended Chlorine chain MCA

Salt specialties

• Ice cream, Bakery goods

• Diapers, deodorants, toothpaste • Fertilizers • Latex paints, concrete mixes, PVC • Sealants (Aerospace, windows) 20

Base Chemicals

“regional leader in energy-salt-chlorine” 21

Base Chemicals Hydrogen Electricity Gas

Electrolysis Cogeneration Steam

Chlorine

Iron Salts

Hydrochloric acid

Caustic Hypochlorite

Dissolving underground salt

Brine evaporation

Salt

• Chlorine chain producer, highly integrated internally and with customers • Strong regional position

• plastics, paper • glass • medicines & disinfectants • water treatment 22

Chemicals Transformation

Portfolio review

Clear direction

Growth

Divestments

5 Platforms

Accelerating

Restructuring

Focused

Beyond peers

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Ambition to grow faster than peers

Sales

5 platforms

3.1% p.a.

2002

2006

Years 24

Strong growth drivers

ƒ Grow with our customers – Stora Enso, Dow, Monsanto, Shin Etsu

ƒ Invest in emerging markets – China, Brazil, Russia, India

ƒ Innovate for our customers – Fuel emulsions in oil-sands, ferrazone, EVCO

ƒ Participate in industry restructuring – Selective acquisitions

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Investing for Growth ƒ Sweden – Ethylene Amines in Stenungsund and Ferric Chloride in Skoghall (€ 26 mln) – Cellulose derivatives expansion in Örsnoldsvik (€ 24 mln)

ƒ Netherlands – Chlorine in Rotterdam & Delfzijl , MCA in Delfzijl (€ 200 mln)

ƒ Brazil – Pulp bleaching in Bahia (€ 70 mln)

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Accelerating growth in China ƒ Pulp & Paper: 1 plant running, 1 in construction ƒ Polymer: 2 plants sold out, 3rd plant planned ƒ Surfactants: marketing alliance with Feixiang Chemicals ƒ Functional: MCA and chelates operating, new polysulfides plant in construction ƒ New Chemicals Multi-site Ningbo planned – MoU signed – Plans in preparation for : Ethylene amines, Chelates, Cellulosics, Organic peroxides 27

Chemicals Transformation

Portfolio review

Clear direction

Growth

Divestments

5 Platforms

Accelerating

Restructuring

Focused

Beyond peers

28

Fit For the Future

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