Akzo Nobel Q3 2006: Delivering on profitable growth

Financial highlights

• Revenues - EUR 3,449 mln, up 5% compared to Q3 2005
• Operating income* - EUR 364 mln, up 14% compared to Q3 2005
• EBIT margin* improved from 9.7% to 10.6%
• Net income - EUR 313, up 79% compared to Q3 2005
* Excluding incidentals

Operational highlights
• Autonomous growth 6%, all businesses contributing
• Operational results sharply up, led by Organon and Coatings
• Trading conditions 2006: revenue growth and increased operational results at all segments expected

Arnhem, the Netherlands, October 18, 2006 – Akzo Nobel (Euronext Amsterdam: AKZ; Nasdaq: AKZOY) announces its Q3 results, which show a continued rise in revenues and operational earnings, driven by Organon and Coatings.

Autonomous growth for the group was 6%, total revenues reached EUR 3,449 million, with all segments contributing. Volume growth was 5% and selling prices increased by 1%. Excluding incidental items, operating income rose 14% from EUR 319 million to EUR 364 million. The EBIT margin significantly improved from 9.7% to 10.6%.

Net income surged 79% from EUR 175 million to EUR 313 million as a result of improved operational earnings and incidental benefits. Excluding incidental items, net income was up 19% from EUR 201 million to EUR 240 million.

Commenting on Akzo Nobel’s third quarter results, CEO Hans Wijers said: “We enjoyed a strong third quarter, building on an excellent first half year which demonstrates the company’s growth potential. Once again, Organon and Coatings lead the way. I expect 2006 to be a successful year, with revenue growth and increased operational results at all segments.”

Update on asenapine
Since 2003, Akzo Nobel and Pfizer have been partners in the development of asenapine, a fast dissolving novel psychopharmacologic agent with a unique human receptor signature. It is being developed for the treatment of schizophrenia and acute mania associated with Bipolar I Disorder.

We expect topline results from the last phase III schizophrenia trial for asenapine for US filing with the FDA in a couple of weeks time. The complete reports of the pivotal phase III trial results are due before the end of the year. Once these have been analyzed, the results will be shared at the usual scientific forums in due course.

The Phase III studies have indicated the following: for the indication acute mania, associated with bipolar I disorder, two short term studies and a nine week extension, have demonstrated asenapine’s efficacy and tolerability.

For the schizophrenia trial program to date, results are mixed. The package will be evaluated as soon as all results of the four efficacy trials are available. This may have a delaying effect on the earlier communicated filing date for asenapine, previously expected for early 2007.

The partners intend to discuss the full package with the FDA in a pre-NDA meeting early 2007.

A possible change in the timing of the filing of asenapine does not impact the intended separation of Organon BioSciences, announced by Akzo Nobel earlier this year.

Organon – continued growth, strong operational quarter
Revenues grew 6% to EUR 626 million, with volumes up 8%. NuvaRing® saw a year-on-year growth of 66% to EUR 53 million, primarily due to higher sales in the United States resulting from a successful marketing campaign. Esmeron® and Anzemet® boosted anesthesia revenues, which rose 32%. Operating income was up 41% on last year, benefiting from revenue growth and improved manufacturing efficiencies.

Intervet – autonomous growth of 7%, steady pharma margins
Revenues at Intervet were steady at EUR 276 million. Intervet continued to enjoy substantial autonomous growth of 7%, with EBIT margins close to 20%. New product approvals were granted for the PreveNileTM equine West Nile vaccine, which will strengthen Intervet’s growth in the United States companion animal market, and beef cattle product Zilmax®.

Coatings – another strong quarter, acquisitions contributing
Akzo Nobel Coatings achieved a strong quarter with year-on-year revenue growth of 12%. The acquisitions of Flood, Sico, Swiss Lack, Balakom and Zweihorn added 7% to revenues. Favorable demand in the global industrial markets has been driven by consumer electronics and construction industries. Strong growth was posted at all activities of Marine & Protective Coatings, although Marine profits are suffering from raw material price pressure (copper, zinc, and epoxy resins). Demand for coatings for superyacht construction was at record levels throughout Europe. Excluding incidental items, operating income grew 13% to EUR 161 million, while the EBIT margin neared 10%.

Chemicals – solid performance despite energy and raw material pressure
Akzo Nobel Chemicals revenues totaled EUR 912 million, a slight decrease on last year reflecting divestments. Polymer Chemicals had another strong quarter, driven by healthy demand in the PVC and commodity plastics markets. Functional Chemicals had a difficult third quarter. Results were under pressure due to continued raw material price increases, start-up costs and planned maintenance stops. Excluding incidental items, operating income was unchanged at EUR 83 million. The EBIT margin rose 0.5% to 9.1%.

Strong cash flow
Cash and cash equivalents increased EUR 337 million in the first nine months of 2006, compared with a decrease of EUR 357 million in 2005. This positive development was mainly attributable to the higher cash flow from operating activities. The seasonal increase in working capital was lower than in 2005.

Separation approved by shareholders
The separation, which will split the company into Akzo Nobel–active in coatings and chemicals–and Organon BioSciences, active in pharmaceuticals, was approved at the Extraordinary General Meeting of shareholders in September. Akzo Nobel will provide an update on next steps in due course.

Interim dividend unchanged – EUR 0.30
Akzo Nobel will declare an interim dividend for 2006 of EUR 0.30 per common share, unchanged from last year. Starting October 19, 2006, Akzo Nobel shares will trade ex-dividend. The interim dividend will be made payable on October 26, 2006.

Trading conditions 2006
Based on the developments to date, Akzo Nobel remains confident for the full year. The company will deliver on its main operational objectives for this year, being revenues growth and increased operational results at all segments.