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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 6-K
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REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
The Securities Exchange Act of 1934
April 07, 2005
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AKZO NOBEL N.V.
(Translation of registrant's name into English)
76, Velperweg, 6824 BM Arnhem, the Netherlands
(Address of principal executive offices)
0 - 017444
(Commission file number)
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Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F:
Form 20-F [X] Form 40-F [ ]
Indicate by check mark whether the registrant by furnishing the information
contained in this form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [ ] No [X]
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934 the registrant has duly caused this report to be signed on its behalf of
the undersigned, thereto duly authorized.
Akzo Nobel N.V.
Name : F.H. Hensel Name : J.J.M. Derckx
Title : Senior Vice President Title : Director Corporate Control
Finance
Dated : April 07, 2005
IFRS-based reporting for 2004
Presentation of financial information for 2004 in accordance with International
Financial Reporting Standards
Introduction
Up to December 31, 2004, Akzo Nobel published its financial statements under
Generally Accepted Accounting Principles in the Netherlands (NL GAAP). From 2005
onwards, the Company will issue its consolidated financial statements in
accordance with International Accounting Standards (IAS), International
Financial Reporting Standards (IFRS)*, and Interpretations. This change applies
to all financial reporting for accounting periods beginning on or after January
1, 2005. Akzo Nobel's first IFRS results will be those for the first quarter of
2005, and the Company's first Annual Report under IFRS will be that for 2005. As
the Company publishes comparative information for one year in its Annual Report,
the transition date to IFRS will be January 1, 2004.
The report "IFRS based reporting Q-1 - Q-3 2004" was published on December 14,
2004. Compared to this report, an adjustment was made to the IFRS-based balance
sheets, namely an increase in deferred tax assets and shareholders' equity of
EUR 17 million. The benefits receivable under the U.S. Medicare Prescription
Drug, Improvement and Modernization Act of 2003 are tax free, whereas in the
earlier report it was assumed that they would be taxable. This has no impact on
the results for the quarters of 2004. The information originally included in the
report "IFRS based reporting Q-1 - Q-3 2004" has been adjusted accordingly and
is now included in this report, so that it provides full and up-to-date
information on the impact of IFRS on all quarters and for the year 2004.
IFRS impact - net income up; shareholders' equity down; funds balance unchanged
This report gives a detailed overview of the consequences for the Company of
accounting under IFRS. In summary, the impact of IFRS on the Company's accounts
is an increase in net income for 2004 of EUR 89 million, but a decline in
shareholders' equity, at December 31, 2004, of EUR 410 million. This is mainly
attributable to the differences in the method of accounting under IFRS for
pensions and other postretirement benefits, the recognition of deferred taxes on
intercompany profit, the recognition of the payment received from Pfizer for the
asenapine cooperation, and the recognition of goodwill. For the most part, the
changed accounting is a matter of timing of the recognition of assets,
liabilities, and related results. Consequently, volatility of earnings under
IFRS could increase in the future. However, there is no impact on the underlying
cash flows of the businesses. We currently do not expect that the changed
accounting will have a significant impact on our dividend payments.
* References to IFRS in this document relate to International Accounting
Standards and International Financial Reporting Standards.
1
IFRS-based reporting for 2004
Presentation of IFRS-based information
The purpose of this report is to provide information on the expected impact of
the adoption of IFRS on the Company's reported performance and financial
position. It consists of the following:
- changes in accounting principles compared to NL GAAP, due to the adoption of
IFRS
- reconciliation of shareholders' equity at January 1, 2004
- breakdown of IFRS shareholders' equity at January 1, 2004
- IFRS-based balance sheet and segment reporting at January 1, 2004
- reconciliation of full year 2004 net income
- IFRS-based statements of income for the quarters and year 2004
- IFRS-based segment reporting for the quarters and year 2004
- reconciliation of shareholders' equity at December 31, 2004
- breakdown of IFRS shareholders' equity at December 31, 2004
- IFRS-based balance sheet and segment reporting at December 31, 2004
- IFRS-based statement of changes in shareholders' equity for the full year 2004
- IFRS-based statement of cash flows for the full year 2004
The figures in this report have been prepared on the basis of the standards
expected to be applicable to the Annual Report on 2005. However, IFRS is subject
to ongoing review and endorsement by the EU or possible amendment by
interpretative guidance from the IASB. IFRS could therefore be subject to
change. As a consequence, these figures and the discussion in this report should
be treated with appropriate caution as they may need to be revised in light of
such changes. This report is indicative of the Company's future results and, for
the reasons noted above, may not be representative of the impact of IFRS on the
Company's results of operations or financial condition for fiscal year 2005, or
any future period. We will update this information for any changes in standards
or interpretation as and when these changes are made. The figures in this report
are unaudited.
Changes in accounting principles due to the adoption of IFRS
Certain standards included in IFRS had already been incorporated in NL GAAP.
This concerns, inter alia, accounting for intangible assets other than goodwill,
which also includes accounting for development costs. As there are no
differences, this has not resulted in any changes in accounting principles.
For those standards not included in NL GAAP, we have adjusted our accounting
principles as described below. For accounting principles which we do not expect
to change, we refer to our Annual Report 2004, pages 80 to 83.
Employee benefits
Pensions and other postretirement benefits
Until December 31, 2004, the Company accounted for pensions and other
postretirement benefits in accordance with SFAS 87 and SFAS 106.
For the implementation of IAS 19 Employee Benefits in respect of pensions and
other postretirement benefits, the Company has to recognize the funded status,
at January 1, 2004, of the projected benefit obligation (PBO) in so far as this
is not covered by provisions or prepaid pension assets in the NL GAAP balance
sheet. Any unvested portion of past service cost at that date is to be excluded.
2
IFRS-based reporting for 2004
On January 1, 2004, the Company had a significant deficit for its pension and
other postretirement benefit plans. The deficit in excess of provisions and
prepaid pension assets in the NL GAAP balance sheet has been charged against
shareholders' equity in the IFRS opening balance sheet at January 1, 2004. This
concerns an amount of EUR 1,342 million after taxes. At December 31, 2004, this
amount was EUR 1,232 million after taxes.
In the NL GAAP balance sheet, the Company has also recognized a so-called
minimum pension liability for the deficit determined on the accumulated benefit
obligation (ABO) level, as required under SFAS 87. This consists of an after-tax
charge against shareholders' equity (January 1, 2004: EUR 824 million; December
31, 2004: EUR 759 million) and recognition of an intangible asset (January 1,
2004: EUR 165 million; December 31, 2004: EUR 137 million). As these are not
allowed under IAS 19, the minimum pension liability-related entries have been
reversed, partly offsetting the aforementioned recognition of the deficits on a
PBO basis.
The consequences of the U.S. Medicare Prescription Drug, Improvement and
Modernization Act of 2003 have also been taken into account in the IFRS opening
balance sheet. This has resulted in the recognition of a tax-free financial
noncurrent asset of EUR 43 million (at December 31, 2004: EUR 48 million).
Going forward, the full recognition of the deficit at January 1, 2004, will
result in lower net period pension costs for 2004, as the deferred losses under
SFAS 87 and SFAS 106 no longer have to be amortized. As a result of the improved
pension funding situation at December 31, 2004, IFRS-based 2005 pension charges
are expected to drop by some EUR 50 million, compared to 2004.
Included in the 2004 net income effect of IAS 19 is an after-tax gain of EUR 43
million for the settlements/curtailments as a consequence of the Catalysts
divestment.
Other employee benefits
IAS 19 requires provisioning of long-term employee benefits, such as payments on
the occasion of a service jubilee of an employee. This is not specifically
required under NL GAAP, where costs for such benefits often are recognized on a
pay-as-you-go basis. The required provision for other long-term benefits in
accordance with IAS 19 amounts to EUR 13 million, which is EUR 8 million after
taxes (at December 31, 2004: also EUR 13 million and EUR 8 million,
respectively).
Revenues
General
Revenue under IFRS is defined as the revenue from the sale and delivery of goods
and services and royalty income, net of rebates, discounts, and similar
allowances, and net of sales tax. Revenue is recognized when the significant
risks and rewards have been transferred to a third party.
3
IFRS-based reporting for 2004
The Company used to report royalty income under "Other results" in the statement
of income. Under IFRS, royalty income is reclassified to "Revenues". Also
proceeds for certain services rendered by the Company, which used to be deducted
from cost lines in the statement of income, have now been reclassified to
"Revenues".
Pfizer payment
In December 2003, the Company received an initial payment of EUR 88 million (EUR
70 million after taxes) from Pfizer for the codevelopment and comarketing
agreement for asenapine. In accordance with the contract and the spirit thereof,
this payment is a nonrefundable reimbursement of the expenses incurred by Akzo
Nobel in prior years for the development of asenapine-related know-how so far.
In accordance with NL GAAP, such payment was recognized as income immediately.
In accordance with IFRS revenue recognition rules, nonrefundable upfront fees
are initially reported as deferred income and will be recognized as revenue
based on the (expected) development costs over the remaining first part of the
development period, currently anticipated to be from 2004 to 2007. At December
31, 2004 an amount was deferred of EUR 56 million (EUR 45 million after taxes).
This has the consequence that this payment which had already been recognized in
2003 NL GAAP income, is again recognized in IFRS revenues but now over the years
2004-2007.
Income taxes
As allowed under NL GAAP, the tax effect on the elimination of intercompany
profit in inventories is based on the tax rate of the country of the company
sending the goods, thus fully eliminating the intercompany sale in the statement
of income. IFRS, however, prescribes that tax on such elimination is to be based
on the tax rate of the country of the company receiving the goods.
As a consequence, the deferred tax asset related to intercompany profit has
increased by EUR 76 million at January 1, 2004. At December 31, 2004, this
amount was EUR 33 million. Going forward, the impact on earnings will be
determined by the changes in levels of intercompany inventory in the various
countries.
Furthermore, IFRS specifically prescribes that current and deferred tax assets
and liabilities in countries which have separate tax rates for distributed and
undistributed profits are measured at the tax rate applicable to undistributed
profits. The income tax consequences of dividends are recognized when a
liability to pay the dividend is recognized.
For NL GAAP in certain circumstances such current and deferred tax assets and
liabilities can be measured at the tax rate applicable to distributed profits.
The impact of this difference on the Company's accounts is limited.
4
IFRS-based reporting for 2004
Business combinations
Under NL GAAP, purchased goodwill is capitalized and amortized. IFRS 3
prescribes that purchased goodwill must be capitalized and not amortized, but
tested for impairment annually.
Akzo Nobel has elected the transition option in IFRS 1 to apply IFRS 3
prospectively from the transition date. This option was chosen rather than to
restate all previous business combinations. The impact of IFRS 3 and associated
transitional arrangements on Akzo Nobel is as follows:
- all prior business combination accounting is frozen at the transition date;
and
- the value of goodwill is frozen at January 1, 2004, and amortization
previously reported under NL GAAP for 2004 is removed for financial
statements prepared under IFRS.
Provisions
Discounting
IFRS, in principle, prescribes discounting of all provisions, which is not
always the case in NL GAAP. The impact of discounting of provisions thus far
undiscounted at January 1, 2004, is a decrease in provisions of EUR 16 million,
which is EUR 11 million after taxes. At December 31, 2004, these amounts were
EUR 29 million and EUR 20 million, respectively.
Going forward, the interest accrued on discounted provisions will be recognized
under financing charges. Under NL GAAP, such charges were included in operating
income.
Restructuring provisions
In accordance with NL GAAP, restructuring provisions are recognized if the
restructuring had been announced to the employees involved before the date of
the financial statements. Under IFRS, a restructuring can only be recognized if
this is announced before the balance sheet date.
Restructurings for which provisions amounted to EUR 9 million (EUR 6 million
after taxes) were announced in January 2004. Therefore, these provisions do not
qualify for recognition under IFRS in the balance sheet at January 1, 2004, but
are recognized under IFRS in the first quarter of 2004. In the quarters of 2004,
certain restructuring provisions reported under NL GAAP also do not meet the
IFRS recognition criteria and are deferred for recognition in the next quarter.
At December 31, 2004, all provisions qualified for recognition under IFRS.
Share-based payments
In accordance with NL GAAP, the Company recognized expenses related to stock
options as a direct charge to shareholders' equity when the related payments
were incurred.
In accordance with IFRS 2, the Company's stock option plans qualify as so-called
cash-settled plans. As a consequence, the Company has to charge the fair value
of the stock options against income (first spread over the vesting period and
later over the remaining life of the options) and recognize a related liability
in the balance sheet. This liability at January 1, 2004, amounted to EUR 11
million, which is EUR 8 million after taxes. At December 31, 2004, these amounts
were EUR 16 million and EUR 10 million, respectively. The fair value has been
calculated using the binomial options valuation model. The charge to income over
the relevant option vesting periods is adjusted to reflect actual and expected
levels of vesting.
5
IFRS-based reporting for 2004
Nonconsolidated companies
Valuation of the Company's interest in nonconsolidated companies is based as
much as possible on IFRS, as adopted by Akzo Nobel. The impact of the difference
between NL GAAP and IFRS for nonconsolidated companies on the Company's accounts
is limited.
Jointly controlled companies
For interests in jointly controlled legally incorporated companies IFRS
prescribes that they must be either proportionally consolidated or equity
accounted as a nonconsolidated company. The chosen method has to be applied to
all such interests. Under NL GAAP, the Company equity accounts most of the
jointly controlled interests. However, the joint venture with Sanofi-Synthelabo
(for the antithrombotic Arixtra (R)) has been proportionally consolidated.
Under IFRS, the Company has elected to equity account all jointly controlled
interests. The impact of the deconsolidation in the January 1, 2004 balance
sheet of the joint venture with Sanofi-Synthelabo is not significant and does
not affect shareholders' equity or net income. Due to the change in setup in the
first quarter of 2004, this joint venture ceased to exist and was replaced by a
revenue arrangement, based on future sales from jointly developed antithrombotic
products.
It should be noted that the cooperation with Pfizer for asenapine is not legally
incorporated. As a consequence, this cooperation is proportionally consolidated
for both NL GAAP and IFRS.
Nonrecurring items
In its NL GAAP statements, the Company separately reported so-called
nonrecurring items. These relate to income and expenses resulting from normal
business operations, which, because of their size or nature, are disclosed
separately to give a better understanding of the underlying result for the
period. These include items such as restructurings and impairment charges,
significant gains and losses on the disposal of businesses, and costs related to
major lawsuits and antitrust cases, not meeting the requirements for
extraordinary items.
NL GAAP operating income before nonrecurring items is one of the key figures
management uses to assess the performance of the Company, as these figures
better reflect the underlying trends in the results of the activities.
IFRS does not allow this concept. Therefore, the Company will not report IFRS
earnings figures excluding nonrecurring items. However, for a better
understanding of the Company's earnings development, the most important elements
of nonrecurring items will now be reported on a separate line within operating
income in the statement of income.
6
IFRS-based reporting for 2004
Cumulative translation differences
The Company chose the option in IFRS 1 whereby cumulative translation
differences in shareholders' equity are deemed to be zero at the date of
transition. The negative NL GAAP balance of EUR 1,045 million at January 1,
2004, is deducted from "Other reserves", which therefore starts with a negative
balance of EUR 414 million. However, as 2004 net income is higher than dividends
paid during the year, the balance of "Other reserves" and "Undistributed profit"
at December 31, 2004, shows a positive balance of EUR 193 million. It should be
noted that if the Company would ever have negative "Other reserves", in
principle, it will still be able to pay dividends but then from "Additional
paid-in capital".
IFRS standards with a prospective impact
Financial instruments
IAS 39 and IAS 32 address recognition and measurement, and disclosure and
presentation for financial instruments. The Company has opted to apply the
transition provision of IFRS 1 to postpone the application of these standards
until January 1, 2005.
Implementation of these standards will result in most financial assets being
recognized at fair value and financial liabilities at amortized cost. Accounting
for the movements in fair value is dependent on the designation of the relevant
financial instrument; in principle such movements are to be recognized in the
statement of income, unless hedge accounting can be applied.
The Company in principle will not apply hedge accounting for forward foreign
currency contracts, except for certain significant contracts for future
commitments and cash flows. For interest derivatives, petroleum options, futures
for gas and electricity, and similar contracts the Company will apply hedge
accounting.
Information on the impact of IAS 32 and 39 will be published together with the
Report for the 1st Quarter of 2005 on April 19, 2005.
Emission rights
Starting in 2005, governments will grant CO2 emission allowances to certain
companies.
IASB and IFRIC recently issued guidance on accounting for such allowances, which
will have to be applied from 2006 onwards. The Company still has to decide
whether it will adopt this standard earlier for the 2005 financial statements.
Arnhem, April 7, 2005 The Board of Management
7
IFRS-based reporting for 2004
R E C O N C I L I A T I O N O F S H A R E H O L D E R S ' E Q U I T Y A T
J A N U A R Y 1 , 2 0 0 4
----------------------------------------------------------------------------------------------------------------------------------
Capital and Minimum Shareholders'
Millions of euros reserves pension liability equity
------------------------------------------------------- ------------------- -------------------- ---------------------
NL GAAP shareholders' equity
at December 31, 2003 3,326 (824) 2,502
Pensions and other postretirement benefits (1,299) 824 (475)
Deferred taxes on intercompany profit 76 76
Pfizer payment (70) (70)
Discounting of provisions 11 11
Other long-term employee benefits (8) (8)
Share-based payments (8) (8)
Restructuring provisions 6 6
Other 12 12
-------------------- -------------------- --------------------
IFRS shareholders' equity at January 1, 2004 2,046 2,046
==================== ==================== ====================
S H A R E H O L D E R S ' E Q U I T Y A T J A N U A R Y 1 , 2 0 0 4
----------------------------------------------------------------------------------------------------
Millions of euros IFRS NL GAAP
---------------------------------------------------------- ----------------- ---------------------
Subscribed share capital 572 572
Additional paid-in capital 1,803 1,803
Statutory reserves 85 85
Cumulative translation differences (1,045)
Other reserves and undistributed profit (414) 1,911
----------------- ---------------------
Capital and reserves 2,046 3,326
Minimum pension liability (824)
----------------- ---------------------
Shareholders' equity 2,046 2,502
================= =====================
8
IFRS-based reporting for 2004
C O N D E N S E D C O N S O L I D A T E D B A L A N C E S H E E T
A T J A N U A R Y 1 , 2 0 0 4
-----------------------------------------------------------------------------------------------------------------------------------
Millions of euros IFRS NL GAAP
------------------------------------------------------------------------- ------------------ ---------------------
Intangible assets 424 590
Property, plant and equipment 3,967 3,967
Deferred tax assets 923 429
Deferred tax asset for minimum pension liability 361
Other financial noncurrent assets 681 1,076
Inventories 2,119 2,133
Receivables 2,679 2,671
Cash and cash equivalents 727 727
------------------- ---------------------
Total 11,520 11,954
=================== =====================
Capital and reserves 2,046 3,326
Minimum pension liability (824)
------------------- ---------------------
Akzo Nobel N.V. shareholders' equity 2,046 2,502
Minority interest 140 140
------------------- ---------------------
Equity 2,186 2,642
Provisions 3,863 2,581
Provision for minimum pension liability 1,342
Deferred income 88
Long-term borrowings 2,717 2,717
Short-term borrowings 441 441
Current liabilities 2,225 2,231
------------------- ---------------------
Total 11,520 11,954
=================== =====================
Gearing 1.11 0.92
9
IFRS-based reporting for 2004
I N V E S T E D C A P I T A L A T J A N U A R Y 1 , 2 0 0 4
------------------------------------------------------------------------------------------------
Millions of euros IFRS NL GAAP
---------------------------------------------------------- ----------------- ----------------
Pharma 2,555 2,506
Coatings 2,041 2,043
Chemicals 2,586 2,604
Other 994 964
----------------- ----------------
Akzo Nobel 8,176 8,117
================= ================
R E C O N C I L I A T I O N O F F U L L Y E A R 2 0 0 4 N E T
I N C O M E
-----------------------------------------------------------------------------
Millions of euros Net income
---------------------------------------------------------- -----------------
NL GAAP net income 856
Pensions and other postretirement benefits 95
Deferred taxes on intercompany profit (43)
Pfizer payment 25
Termination of goodwill amortization 19
Discounting of provisions 9
Restructuring provisions (6)
Share-based payments (3)
Other long-term employee benefits -
Other (7)
------------------
IFRS net income 945
==================
10
IFRS-based reporting for 2004
C O N D E N S E D C O N S O L I D A T E D S T A T E M E N T O F I N C O M E
------------------------------------------------------------------------------------------------------------
Millions of euros January-December
------------------------------------------------------------------------------ ----------------------------
IFRS NL GAAP
------------- ------------
Revenues 12,893 12,688
Operating costs (11,558) (11,499)
Restructuring and impairment charges (196) (199)
Results on divestments 579 509
Charges related to legal and antitrust cases (191) (199)
------------- ------------
Operating income 1,527 1,300
Financing charges (144) (123)
------------- ------------
Operating income less financing charges 1,383 1,177
Taxes (412) (298)
------------- ------------
Earnings of consolidated companies, after taxes 971 879
Earnings from nonconsolidated companies (incl. nonrecurring items) 10 12
------------- ------------
Earnings before minority interest 981 891
Minority interest (36) (35)
------------- ------------
Net income 945 856
============= ============
Return on sales, in % 11.8 10.2
Interest coverage 10.6 10.6
Net income per share, in EUR
- basic 3.31 3.00
- diluted 3.30 2.99
EBITDA 2,097 1,893
Depreciation 542 540
Amortization 28 53
11
IFRS-based reporting for 2004
R E C O N C I L I A T I O N O F S H A R E H O L D E R S ' E Q U I T Y A T
D E C E M B E R 3 1 , 2 0 0 4
-----------------------------------------------------------------------------------------------------------------------
Capital and Minimum pension Shareholders'
Millions of euros reserves liability equity
---------------------------------------------------------- ----------------- ------------------ ------------------
NL GAAP shareholders' equity
at December 31, 2004 3,795 (759) 3,036
Pensions and other postretirement benefits (1,184) 759 (425)
Deferred taxes on intercompany profit 33 33
Termination of goodwill amortization 19 19
Pfizer payment (45) (45)
Discounting of provisions 20 20
Other long-term employee benefits (8) (8)
Share-based payments (10) (10)
Restructuring provisions - -
Other 6 6
----------------- ------------------ ------------------
IFRS shareholders' equity
at December 31, 2004 2,626 2,626
================= ================== ==================
S H A R E H O L D E R S ' E Q U I T Y A T D E C E M B E R 3 1 , 2 0 0 4
----------------------------------------------------------------------------------------------------
Millions of euros IFRS NL GAAP
---------------------------------------------------------- ----------------- --------------------
Subscribed share capital 572 572
Additional paid-in capital 1,803 1,803
Statutory reserves 85 85
Cumulative translation differences (20) (1,070)
Other reserves (759) 1,635
Undistributed profits 945 770
----------------- --------------------
Capital and reserves 2,626 3,795
Minimum pension liability (759)
----------------- --------------------
Shareholders' equity 2,626 3,036
================= ====================
12
IFRS-based reporting for 2004
C O N D E N S E D C O N S O L I D A T E D B A L A N C E S H E E T
A T D E C E M B E R 3 1 , 2 0 0 4
--------------------------------------------------------------------------------------------------------------
Millions of euros IFRS NL GAAP
------------------------------------------------------------------------- ---------------- ----------------
Intangible assets 448 561
Property, plant and equipment 3,535 3,535
Deferred tax assets 784 351
Deferred tax asset for minimum pension liability 354
Other financial noncurrent assets 624 1,048
Inventories 1,978 1,978
Receivables 2,761 2,767
Cash and cash equivalents 1,811 1,811
---------------- -----------------
Total 11,941 12,405
================ =================
Capital and reserves 2,626 3,795
Minimum pension liability (759)
---------------- -----------------
Akzo Nobel N.V. shareholders' equity 2,626 3,036
Minority interest 140 140
---------------- -----------------
Equity 2,766 3,176
Provisions 3,608 2,479
Provision for minimum pension liability 1,240
Deferred income 56
Long-term borrowings 2,694 2,694
Short-term borrowings 258 258
Current liabilities 2,559 2,558
---------------- -----------------
Total 11,941 12,405
================ =================
Gearing 0.41 0.36
13
IFRS-based reporting for 2004
I N V E S T E D C A P I T A L A T D E C E M B E R 3 1 , 2 0 0 4
------------------------------------------------------------------------------------------------
Millions of euros IFRS NL GAAP
---------------------------------------------------------- ----------------- ----------------
Pharma 2,430 2,387
Coatings 2,067 2,057
Chemicals 2,047 2,043
Other 710 740
----------------- ----------------
Akzo Nobel 7,254 7,227
================= ================
S T A T E M E N T O F C H A N G E S I N S H A R E H O L D E R S '
E Q U I T Y
------------------------------------------------------------------------------------------------
Millions of euros IFRS NL GAAP
---------------------------------------------------------- ----------------- ----------------
Shareholders' equity at January 1, 2004 2,046 2,502
Net income 945 856
Dividend (343) (343)
Changes related to minimum pension liability 65
Share-based payments (2) (2)
Delivery of purchased shares - -
Changes in exchange rates in respect of affiliated
companies (20) (42)
----------------- ----------------
Shareholders' equity at December 31, 2004 2,626 3,036
================= ================
14
IFRS-based reporting 2004
C O N D E N S E D C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S
------------------------------------------------------------------------------------------------------------------
Millions of euros January - December
------------------------------------------------------------ -------------------------------------------------
IFRS NL GAAP
---------------------- ----------------------
Total earnings before minority interest 981 891
Depreciation and amortization 570 593
-------- --------
Cash flow 1,551 1,484
Pretax gain on divestments (579) (509)
Changes in working capital 164 156
Impairments 74 74
Changes in provisions and deferred tax assets and accrued
prepaid pension costs (42) (1)
Retained income of nonconsolidated companies 71 71
Other changes (2) (2)
-------- --------
Net cash provided by operations 1,237 1,273
Capital expenditures (551) (551)
Expenditures for intangible assets (28) (28)
Acquisitions (80) (80)
Proceeds from divestments 1,036 1,036
Investments nonconsolidated companies 11 (29)
Other changes 2 6
-------- --------
Net cash generated by investing activities 390 354
Dividends paid (366) (366)
-------- --------
Funds balance 1,261 1,261
Net cash used for financing activities (169) (169)
Effect of exchange rate changes on cash and cash equivalents (8) (8)
-------- --------
Change in cash and cash equivalents 1,084 1,084
======== =========
15
IFRS-based reporting 2004
C O N D E N S E D C O N S O L I D A T E D S T A T E M E N T O F I N C O M E
------------------------------------------------------------------------------------------------------------------
Millions of euros 1st quarter 2nd quarter 3rd quarter
------------------------------------ ----------------------- ------------------------ ------------------------
IFRS NL GAAP IFRS NL GAAP IFRS NL GAAP
---------- ----------- ---------- ----------- --------- -----------
Revenues 3,169 3,138 3,363 3,325 3,222 3,185
Operating costs (2,844) (2,846) (2,992) (2,990) (2,857) (2,856)
Restructuring and impairment charges (69) (61) (34) (64) (68) (42)
Results on divestments 4 4 458* 458
Charges related to legal and
antitrust cases (50) (50) (58) (58)
---------- ----------- ---------- ----------- --------- -----------
Operating income 256 231 291 225 697 687
Financing charges (38) (32) (40) (36) (33) (27)
---------- ----------- ---------- ----------- --------- -----------
Operating income less financing
charges 218 199 251 189 664 660
Taxes (83) (64) (87) (61) (144) (129)
---------- ----------- ---------- ----------- --------- -----------
Earnings of consolidated companies,
after taxes 135 135 164 128 520 531
Earnings from nonconsolidated
companies (incl. nonrecurring items) 6 6 (4) (5) (1) (1)
---------- ----------- ---------- ----------- --------- -----------
Earnings before minority interest 141 141 160 123 519 530
Minority interest (8) (8) (11) (11) (9) (9)
---------- ----------- ---------- ----------- --------- -----------
Net income 133 133 149 112 510 521
========== =========== ========== =========== ========= ===========
Return on sales, in % 8.1 7.4 8.7 6.8 21.6 21.6
Interest coverage 6.7 7.2 7.3 6.3 21.1 25.4
Net income per share, in EUR
- basic 0.47 0.47 0.52 0.39 1.78 1.82
- diluted 0.46 0.46 0.52 0.39 1.78 1.82
EBITDA 406 388 440 380 838 833
Depreciation 144 144 144 143 133 132
Amortization 6 13 5 12 8 14
* The impact of IAS 19 for pensions and other postretirement benefits on the
results of divestments of Catalysts and Phosphorus Chemicals was determined in
the fourth quarter of 2004.
16
IFRS-based reporting 2004
C O N D E N S E D C O N S O L I D A T E D S T A T E M E N T O F I N C O M E
------------------------------------------------------------------------------------------------------------------------
Millions of euros 4th quarter January-June January-September
--------------------------------------- ------------------------ ------------------------- ------------------------
IFRS NL GAAP IFRS NL GAAP IFRS NL GAAP
--------- ------------ ----------- ------------ --------- ------------
Revenues 3,139 3,040 6,532 6,463 9,754 9,648
Operating costs (2,865) (2,807) (5,836) (5,836) (8,693) (8,692)
Restructuring and impairment charges (25) (32) (103) (125) (171) (167)
Results on divestments 117* 47 4 4 462 462
Charges related to legal and antitrust
cases (83) (91) (50) (50) (108) (108)
--------- ------------ ---------- ------------ --------- ------------
Operating income 283 157 547 456 1,244 1,143
Financing charges (33) (28) (78) (68) (111) (95)
--------- ------------ ---------- ------------ --------- ------------
Operating income less financing charges 250 129 469 388 1,133 1,048
Taxes (98) (44) (170) (125) (314) (254)
--------- ------------ ---------- ------------ --------- ------------
Earnings of consolidated companies,
after taxes 152 85 299 263 819 794
Earnings from nonconsolidated
companies (incl. nonrecurring items) 9 12 2 1 1
--------- ------------ ---------- ------------ --------- ------------
Earnings before minority interest 161 97 301 264 820 794
Minority interest (8) (7) (19) (19) (28) (28)
--------- ------------ ---------- ------------ --------- ------------
Net income 153 90 282 245 792 766
========= ============ ========== ============ ========= ============
Return on sales, in % 9.0 5.2 8.4 7.1 12.8 11.8
Interest coverage 8.6 5.6 7.0 6.7 11.2 12.0
Net income per share, in EUR
- basic 0.54 0.31 0.99 0.86 2.77 2.68
- diluted 0.53 0.31 0.98 0.85 2.76 2.67
EBITDA 413 292 846 768 1,684 1,601
Depreciation 121 121 288 287 421 419
Amortization 9 14 11 25 19 39
* Includes the impact of IAS 19 for pensions and other postretirement benefits
on the results of divestments of Catalysts and Phosphorus Chemicals.
17
S E G M E N T R E P O R T I N G
-----------------------------------------------------------------------------------------------------------------------
Millions of euros 1st quarter 2nd quarter 3rd quarter
------------------------------------- ------------------------ ------------------------- -------------------------
IFRS NL GAAP IFRS NL GAAP IFRS NL GAAP
---------- ------------ ---------- ------------ ---------- ------------
Revenues
Pharma 841 821 825 808 826 801
Coatings 1,238 1,231 1,405 1,397 1,388 1,381
Chemicals 1,121 1,118 1,152 1,147 1,037 1,033
Other (31) (32) (19) (27) (29) (30)
--------- ------------ ---------- ------------ ---------- ------------
Akzo Nobel 3,169 3,138 3,363 3,325 3,222 3,185
========= ============ ========== ============ ========== ============
Operating income
Pharma 154 150 71 49 84 69
Coatings 91 82 131 101 118 136
Chemicals 101 93 84 76 510 499
Other (90) (94) 5 (1) (15) (17)
--------- ------------ ---------- ------------ ---------- ------------
Akzo Nobel 256 231 291 225 697 687
========= ============ ========== ============ ========== ============
Invested capital,
at end of quarter
Pharma 2,708 2,633 2,707 2,638 2,536 2,484
Coatings 2,264 2,260 2,215 2,208 2,204 2,193
Chemicals 2,630 2,629 2,662 2,657 2,212 2,206
Other 820 798 894 863 868 811
--------- ------------ ---------- ------------ ---------- ------------
Akzo Nobel 8,422 8,320 8,478 8,366 7,820 7,694
========= ============ ========== ============ ========== ============
Depreciation and amortization
Pharma 44 45 40 41 42 43
Coatings 31 34 32 35 30 33
Chemicals 72 75 76 78 67 68
Other 3 3 1 1 2 2
--------- ------------ ---------- ------------ ---------- ------------
Akzo Nobel 150 157 149 155 141 146
========= ============ ========== ============ ========== ============
18
IFRS-based reporting 2004
S E G M E N T R E P O R T I N G
--------------------------------------------------------------------------------------------------------------
Millions of euros 4th quarter January-June
------------------------------------------------- --------------------------- ------------------------------
IFRS NL GAAP IFRS NL GAAP
------------ ----------- ------------ ---------------
Revenues
Pharma 909 816 1,666 1,629
Coatings 1,247 1,240 2,643 2,628
Chemicals 1,007 1,007 2,273 2,265
Other (24) (23) (50) (59)
------------ ----------- ------------ ---------------
Akzo Nobel 3,139 3,040 6,532 6,463
============ =========== ============ ===============
Operating income
Pharma 146 130 225 199
Coatings 56 41 222 183
Chemicals 174 94 185 169
Other (93) (108) (85) (95)
------------ ----------- ------------ ---------------
Akzo Nobel 283 157 547 456
============ =========== ============ ===============
Depreciation and amortization
Pharma 39 39 84 86
Coatings 30 33 63 69
Chemicals 57 59 148 153
Other 4 4 4 4
------------ ----------- ------------ --------------
Akzo Nobel 130 135 299 312
============ =========== ============ ==============
19
IFRS-based reporting 2004
S E G M E N T R E P O R T I N G
------------------------------------------------------------------------------------------------------------
Millions of euros January-September January-December
------------------------------------------------- -------------------------- ----------------------------
IFRS NL GAAP IFRS NL GAAP
------------ ----------- ------------ -------------
Revenues
Pharma 2,492 2,430 3,401 3,246
Coatings 4,031 4,009 5,278 5,249
Chemicals 3,310 3,298 4,317 4,305
Other (79) (89) (103) (112)
------------ ----------- ------------ ------------
Akzo Nobel 9,754 9,648 12,893 12,688
============ =========== ============ ============
Operating income
Pharma 309 268 455 398
Coatings 340 319 396 360
Chemicals 695 668 869 762
Other (100) (112) (193) (220)
------------ ----------- ------------ ------------
Akzo Nobel 1,244 1,143 1,527 1,300
============ =========== ============ ============
Depreciation and amortization
Pharma 126 129 165 168
Coatings 93 102 123 135
Chemicals 215 221 272 280
Other 6 6 10 10
------------ ----------- ------------ ------------
Akzo Nobel 440 458 570 593
============ =========== ============ =============
20
IFRS-based reporting 2004
C O N D E N S E D C O N S O L I D A T E D B A L A N C E S H E E T
-----------------------------------------------------------------------------------------------------------------------
Millions of euros;
at end of quarter 1st quarter 2nd quarter 3rd quarter
------------------------------------- ------------------------ ------------------------- -------------------------
IFRS NL GAAP IFRS NL GAAP IFRS NL GAAP
--------- ------------ ---------- ------------ ---------- ------------
Intangible assets 439 598 443 595 453 598
Property, plant and equipment 3,889 3,889 3,881 3,884 3,663 3,663
Deferred tax assets 934 419 906 401 915 423
Deferred tax asset for minimum
pension liability 371 371 364
Other financial noncurrent assets 704 1,130 633 1,044 593 985
Inventories 2,181 2,181 2,186 2,186 2,100 2,100
Receivables 2,995 2,990 3,197 3,191 3,075 3,071
Cash and cash equivalents 508 508 393 393 1,559 1,559
--------- ------------ ---------- ------------ ---------- ------------
Total 11,650 12,086 11,639 12,065 12,358 12,763
========= ============ ========== ============ ========== ============
Capital and reserves 2,258 3,549 2,142 3,392 2,626 3,877
Minimum pension liability (853) (851) (834)
--------- ------------ ---------- ------------ ---------- ------------
Akzo Nobel N.V. shareholders' equity 2,258 2,696 2,142 2,541 2,626 3,043
Minority interest 145 145 139 139 144 144
--------- ------------ ---------- ------------ ---------- ------------
Equity 2,403 2,841 2,281 2,680 2,770 3,187
Provisions 3,750 2,446 3,792 2,513 3,823 2,520
Provision for minimum pension
liability 1,382 1,379 1,356
Deferred income 80 73 65
Long-term borrowings 2,741 2,741 2,747 2,747 2,737 2,737
Short-term borrowings 356 356 306 306 282 282
Current liabilities 2,320 2,320 2,440 2,440 2,681 2,681
--------- ------------ ---------- ------------ ---------- ------------
Total 11,650 12,086 11,639 12,065 12,358 12,763
========= ============ ========== ============ ========== ============
Gearing 1.08 0.91 1.17 0.99 0.53 0.46
21
IFRS-based reporting 2004
Safe Harbor Statement*
This unaudited report contains certain forward-looking statements which address
such key issues as Akzo Nobel's future financial results following the
transition from NL GAAP to IFRS, including, in particular, the expected impacts
of such change on employee benefit and pension accounting, revenue recognition,
the method of accounting for income taxes and business combinations, provisions,
share-based payments, investments in nonconsolidated companies, nonrecurring
items, translation differences and certain other prospective changes related to
the transition from reporting in NL GAAP to reporting under IFRS. Such
statements are subject to change and 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,
changes in regulations or interpretations related to the implementation and
reporting under IFRS, decisions to apply a different option of presentation
permitted by IFRS, and various other factors related to the implementation of
IFRS. For a more complete discussion of the risk factors affecting our business
please refer to our Annual Report on Form 20-F filed with the United States
Securities and Exchange Commission.
The financial information presented contains details of the transitional
adjustments required to present certain historical financial results of the
Company under IFRS. Future presentation of this historical financial information
may be in a different format or the figures presented could differ from those in
this report. The transitional adjustments presented have been calculated on the
basis of the specific facts of the transaction and should not be used as
indicators of future adjustments between NL GAAP and IFRS that will be required,
due to the risk and uncertainty surrounding events in the future. This report
should not be used as a projection of future results or financial condition.
* Pursuant to the U.S. Private Securities Litigation Reform Act 1995.
Akzo Nobel N.V.
Velperweg 76
P.O. Box 9300
6800 SB Arnhem
The Netherlands
Tel. + 31 26 366 4433
Fax + 31 26 366 3250
E-mail ACC@akzonobel.com
Internet www.akzonobel.com
22