2003, A Year of Transition

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Akzo Nobel's Chairman Cees van Lede gives New Year's Address 2003, A Year Of Transition Arnhem, the Netherlands, January 8, 2003 - "Your efforts have given our Company a strong starting position in what threatens to be a difficult year. A year in which the same priorities of focusing on customers, cost and cash prevail. A year in which we should keep cool and consistently continue to do what we are good at," said Cees van Lede, Chairman of Akzo Nobel in his final New Year's Address to the more than 67,000 employees worldwide. "It will be a year of transition. In the first place, hopefully, from a weaker to a more supportive business environment. And in the second place, Hans Wijers will take over from me this year." Looking back to 2002, Van Lede said: "We believed and hoped that the recession would bottom out in the course of 2002 and that growth would re-ignite the economy in the second half of the year. How wrong have we been. The economy fell victim to a series of unprecedented incidents in financial markets, undermining consumers' and investors' confidence. Today, our stock price stands at a level comparable to year-end 1996, although our operating income in that year was just over half of what it is now. "On top of this negative business environment, we were unfortunate with the introduction delay of a new product for Organon in the United States. And just before Christmas we lost an important court case concerning our star performer Remeron. This creates a real challenge for Organon which today produces more than a quarter of our operating income." Akzo Nobel's earnings also had to absorb substantial increases in pension costs and a considerable negative impact of exchange rates. "But in spite of all this bad news, our operating income in 2002 will end only slightly below that of the preceding year," said Van Lede, confirming the previously given outlook for Akzo Nobel for 2002. "We protected our earnings in time. We already changed course when the economy was at its peak and confidence was still unshakable. We set our focus on operational excellence and internal efficiency. We also cut our investments and successfully reduced our working capital. This further strengthened our already sound balance sheet, which stands us in good stead in today's depressed markets." "The limited investments we have made were very much in line with our strategy. Pharma invested substantially over their depreciation level. Geographically, we favored China and Central Europe. It is interesting to see how these two areas maintain growth rates in the order of 7% in these turbulent times." Looking forward to this year Van Lede said: "The business climate is still highly uncertain. The economy is flat in most countries, and few positive signals suggest a pick-up shortly. Confidence and trust in financial markets is still shaky. Markets lack direction, and the threat of a war against Iraq makes consumers and investors cautious. "It is therefore unrealistic to assume that this year will be any easier than last year. Pension charges will again go up and currencies will certainly be negative for us during the first six months of the year. It will be a tough year where an aggressive, yet conservative approach is warranted. Let's make a virtue out of this necessity and focus company- wide on three critical priorities: Customers, Costs and Cash. We have to use our imagination to serve our customers better than our competitors. We must use the Akzo Nobel synergy and purchasing power to the full in order to reduce costs. Under no circumstances can we relax on our financial targets, because we want to maintain our financial strength and benefit from it. And for the rest: let's keep our heads cool." Cees van Lede (60) has been Chairman of the Board of Management of Akzo Nobel since 1994. He will be succeeded by Hans Wijers (51) on May 1, 2003. Note for the editor Akzo Nobel, based in the Netherlands, serves customers throughout the world with healthcare products, coatings and chemicals. Consolidated sales for 2001 totaled EUR 14 billion. The Company currently employs over 67,000 people in more than 80 countries. Financial results for the full year 2002 will be published on February 11, 2003. Internet: www.akzonobel.com Not for publication - for more information please contact: Akzo Nobel N.V. John de Munnik, Corporate Media Relations, tel. +31 26 366 4343 ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2003/01/08/20030108BIT00680/wkr0001.doc http://www.waymaker.net/bitonline/2003/01/08/20030108BIT00680/wkr0002.pdf