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Letter to the Editor

Akzo Nobel Earnings Down Slightly from Record 2000 Q2

ARNHEM, The Netherlands -- Akzo Nobel achieved second-quarter net income of EUR 256 million (USD 223 million; GBP 155 million), slightly below last year's record EUR 265 million. The Company also booked a net loss for extraordinary and nonrecurring items of EUR 175 million. Restructuring plans in Akzo Nobel's Coatings and Chemicals businesses will impact 2,000 jobs at 30 sites worldwide.

Fritz Frohlich, Akzo Nobel's CFO: "We had acceptable results, especially considering the fact that the comparative quarter last year was our all-time high. Pharma continued its outstanding performance, but Coatings and Chemicals are under pressure and need major changes to structurally reduce cost levels. They are accelerating their restructuring programs, involving headcount reductions and rationalization of production sites."

Akzo Nobel's outlook for the full year remains unchanged. The company expects to deliver results in the same order of magnitude as in 2000, its best year ever.

Total sales of the Company in the second quarter were up 4 percent to EUR 3.7 billion, mainly driven by a 14 percent increase in the ongoing Pharma business.

About Coatings, Frohlich continued, "Our Coatings business has to deal with continued pressure on results, requiring restructuring programs to bring earnings to acceptable levels. We are the No. 1 coatings manufacturer in the world and our goal is to deliver industry- leading efficiency and financial performance as well. Markets for decorative and industrial coatings have been impacted by rising costs, while sales have suffered from the depressed economic climate. We see raw material prices starting to come down slowly, but we are also planning action ourselves. This involves a reduction of the Coatings workforce by some 1,000 jobs, mainly in Europe. These measures are expected to increase efficiency and bring profit margins to healthier levels."

The total restructuring of the company impacts 2,000 jobs on some 30 of Akzo Nobel's 300 production sites worldwide. Most of these 30 sites will be affected by rationalization, but there will be also complete closures. Some moves have already been announced, such as the closure of the Packaged Salt activities in Hengelo, the Netherlands. Other projects will be finalized shortly and discussed with employees and their representatives. Frohlich: "Our goal is to be among the best performers in our competitive environment and to provide superior long-term results. This restructuring will reduce cost levels over the next few years by well over EUR 100 million on an annual basis."

The total restructuring measures lead to a EUR 275 million (after tax) charge, which includes provisions for severance payments and other restructuring costs as well as value adjustments of non-performing assets.

Frohlich said, "In a tougher environment, we are moving more aggressively to structurally strengthen profitability, while realizing growth opportunities from our leadership positions. We are confident that we will deliver on these commitments and that we will achieve 2001 net income in the same order of magnitude as our record year 2000. This assumes no further deterioration of economic circumstances."

Note for the editor

Akzo Nobel's consolidated sales for 2000 totaled EUR 14 billion (USD 13 billion, GBP 8.5 billion). The company currently employs 67,500 people in more than 75 countries.

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