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
December 22, 2004
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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)
------------
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]
The following exhibit
is filed with this report
Akzo Nobel IFRS based reporting Q-1 - Q-3 2004
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 : December 22, 2004
IFRS based reporting Q-1 - Q-3 2004
Presentation of financial information for quarters one to three of 2004 in
accordance with International Financial Reporting Standards
Introduction
At present, Akzo Nobel prepares its financial statements under Generally
Accepted Accounting Principles in the Netherlands (NL GAAP). From 2005 onwards,
the Company will be required to prepare 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 the results 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.
IFRS impact - net income up; shareholders' equity down; funds balance unchanged
This report gives a detailed overview of the consequences for the Company of the
accounting under IFRS. In summary, the impact of IFRS on the Company's accounts
is an increase in net income for January-September of 2004 of EUR 26 million,
but a decline in shareholders' equity, at January 1, 2004, of EUR 473 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 for goodwill. For the most part, the
changed accounting is a matter of timing of the recognition of assets,
liabilities and related results and, 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. In the IFRS
opening balance sheet at January 1, 2004, the Company has negative Other
Reserves, which however are positive again at September 30, 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 policies due to adoption of IFRS, when compared to
NL GAAP
- reconciliation of shareholders' equity at the transition date of 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 net income for the period January-September 2004
- IFRS based statements of income for the first three quarters of 2004
- IFRS based segment reporting for the first three quarters of 2004
- IFRS based balance sheets at March 31, June 30, and September 30, 2004
- IFRS based statement of cash flows for January-September 2004
--------------------
*References to IFRS in this document relate to International Accounting
Standards and International Financial Reporting Standards.
1
IFRS based reporting Q-1 - Q-3 2004
The figures in this report have been prepared on the basis of the standards
expected to be applicable for 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 years 2004,
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 adoption of IFRS
Certain standards included in IFRS were already 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 for which we do not
expect that these will change, we refer to our Annual Report 2003, pages 78 to
81.
Employee benefits
Pensions and other postretirement benefits
Presently, the Company accounts 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 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.
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.
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 (EUR 824 million) and recognition of an
intangible asset (EUR 165 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.
2
IFRS based reporting Q-1 - Q-3 2004
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 financial noncurrent
asset of EUR 43 million (EUR 26 million after taxes).
Going forward, the full recognition of the deficit at January 1, 2004, results
in lower net period pension cost for the first three quarters of 2004, as the
deferred losses under SFAS 87 and SFAS 106 no longer have to be amortized.
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 (EUR 8 million after taxes).
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.
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 expected development costs over the remaining first part of the
development period, currently anticipated to be from 2004 to 2007.
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.
3
IFRS based reporting Q-1 - Q-3 2004
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. Going forward, the impact on
earnings is 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.
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
(EUR 11 million after taxes).
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.
4
IFRS based reporting Q-1 - Q-3 2004
Restructurings for which provisions amounted to EUR 9 million (EUR 6 million
after taxes) were announced in January 2004 and 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.
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 (EUR 8 million after taxes). 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.
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 it has
no impact on 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.
5
IFRS based reporting Q-1 - Q-3 2004
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 better insight into
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.
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 431 million. However due to retained income of the first nine
months of 2004, Other Reserves at September 30, 2004 shows a positive balance of
EUR 104 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. It should be noted that IAS 32 and 39 have not yet been
endorsed by the EU.
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. For interest derivatives, petroleum options, futures for gas
and electricity, and similar contracts the Company intends to apply hedge
accounting.
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, December 14, 2004 The Board of Management
6
IFRS based reporting Q-1 - Q-3 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
------------------------------------------------------------------------------------------------------------------------
Capital and Minimum pension Shareholders'
Millions of euros reserves liability equity
---------------------------------------------------------- ----------------- ------------------ -------------
NL GAAP shareholders' equity
at December 31, 2003 3,326 (824) 2,502
Pensions and other postretirement benefits (1,316) 824 (492)
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 2,029 2,029
------------------ ------------------- ---------------
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 (431) 1,911
----------------- ---------------------
Capital and reserves 2,029 3,326
Minimum pension liability (824)
----------------- ---------------------
Shareholders' equity 2,029 2,502
----------------- ---------------------
7
IFRS based reporting Q-1 - Q-3 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 906 429
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 11,503 11,954
---------------- ------------------
Capital and reserves 2,029 3,326
Minimum pension liability (824)
---------------- ------------------
Akzo Nobel N.V. shareholders' equity 2,029 2,502
Minority interest 140 140
---------------- ------------------
Equity 2,169 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 11,503 11,954
---------------- ------------------
Gearing 1.12 0.92
8
IFRS based reporting Q-1 - Q-3 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 977 964
----------------- -----------------
Akzo Nobel 8,159 8,117
----------------- -----------------
R E C O N C I L I A T I O N O F J A N U A R Y -
S E P T E M B E R 2 0 0 4 N E T I N C O M E
------------------------------------------------------------------------------
Millions of euros Net income
---------------------------------------------------------- ------------------
NL GAAP net income 766
Pensions and other postretirement benefits 40
Deferred taxes on intercompany profit (39)
Pfizer payment 18
Cease of goodwill amortization 15
Discounting of provisions (6)
Restructuring provisions (2)
Share-based payments (1)
Other long-term employee benefits -
Other 1
-------------------
IFRS net income 792
-------------------
9
IFRS based reporting Q-1 - Q-3 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 post-retirement benefits on the results of divestments of Catalysts and
Phosphorus Chemicals will be determined in the fourth quarter of 2004.
10
IFRS based reporting Q-1 - Q-3 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-June January-September
------------------------------------------------- ----------------------------- -----------------------------
IFRS NL GAAP IFRS NL GAAP
------------- -------------- ------------- -------------
Revenues 6,532 6,463 9,754 9,648
Operating costs (5,836) (5,836) (8,693) (8,692)
Restructuring and impairment charges (103) (125) (171) (167)
Results on divestments 4 4 462 462
Charges related to legal and antitrust cases (50) (50) (108) (108)
------------- -------------- ------------- -------------
Operating income 547 456 1,244 1,143
Financing charges (78) (68) (111) (95)
------------- -------------- ------------- -------------
Operating income less financing charges 469 388 1,133 1,048
Taxes (170) (125) (314) (254)
------------- -------------- ------------- -------------
Earnings of consolidated companies, after taxes 299 263 819 794
Earnings from nonconsolidated companies (incl.
nonrecurring items) 2 1 1
------------- -------------- -------------- --------------
Earnings before minority interest 301 264 820 794
Minority interest (19) (19) (28) (28)
------------- -------------- -------------- --------------
Net income 282 245 792 766
------------- -------------- ------------- -------------
Return on sales, in % 8.4 7.1 12.8 11.8
Interest coverage 7.0 6.7 11.2 12.0
Net income per share, in EUR
- basic 0.99 0.86 2.77 2.68
- diluted 0.98 0.85 2.76 2.67
EBITDA 846 768 1,684 1,601
Depreciation 288 287 421 419
Amortization 11 25 19 39
11
IFRS based reporting Q-1 - Q-3 2004
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 803 798 877 863 851 811
--------- ------------ ---------- ----------- ---------- -------------
Akzo Nobel 8,405 8,320 8,461 8,366 7,803 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
--------- ------------ ---------- ----------- ---------- -------------
12
IFRS based reporting Q-1 - Q-3 2004
S E G M E N T R E P O R T I N G
------------------------------------------------------------------------------------------------------------
Millions of euros January-June January-September
------------------------------------------------- -------------------------- ----------------------------
IFRS NL GAAP IFRS NL GAAP
------------ ------------ ------------ -------------
Revenues
Pharma 1,666 1,629 2,492 2,430
Coatings 2,643 2,628 4,031 4,009
Chemicals 2,273 2,265 3,310 3,298
Other (50) (59) (79) (89)
------------- ------------ ------------- -------------
Akzo Nobel 6,532 6,463 9,754 9,648
------------- ------------ ------------- -------------
Operating income
Pharma 225 199 309 268
Coatings 222 183 340 319
Chemicals 185 169 695 668
Other (85) (95) (100) (112)
------------- ------------ ------------- -------------
Akzo Nobel 547 456 1,244 1,143
------------- ------------ ------------- -------------
Depreciation and amortization
Pharma 84 86 126 129
Coatings 63 69 93 102
Chemicals 148 153 215 221
Other 4 4 6 6
------------- ------------ ------------- -------------
Akzo Nobel 299 312 440 458
------------- ------------ ------------- -------------
13
IFRS based reporting Q-1 - Q-3 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 917 419 889 401 898 423
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 11,633 12,086 11,622 12,065 12,341 12,763
---------- ------------ ---------- ------------ ---------- -------------
Capital and reserves 2,241 3,549 2,125 3,392 2,609 3,877
Minimum pension liability (853) (851) (834)
---------- ------------ ---------- ------------ ---------- -------------
Akzo Nobel N.V. shareholders' equity 2,241 2,696 2,125 2,541 2,609 3,043
Minority interest 145 145 139 139 144 144
---------- ------------ ---------- ------------ ---------- -------------
Equity 2,386 2,841 2,264 2,680 2,753 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 11,633 12,086 11,622 12,065 12,341 12,763
---------- ------------ ---------- ------------ ---------- -------------
Gearing 1.09 0.91 1.17 0.99 0.53 0.46
14
IFRS based reporting Q-1 - Q-3 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 - September
---------------------------------------------------------------- -----------------------------------------------------
IFRS NL GAAP
------------------------- --------------------------
Total earnings before minority interest 820 794
Depreciation and amortization 440 458
------------ ----------
Cash flow 1,260 1,252
Pre-tax gain on divestments (458) (458)
Changes in working capital (33) (36)
Impairments 39 39
Changes in provisions and deferred tax assets and accrued
prepaid pension costs (74) (24)
Retained income of nonconsolidated companies (10) (11)
Other changes (5) (5)
------------ ----------
Net cash (used for)/provided by operations 719 757
Capital expenditures (379) (379)
Acquisitions (57) (57)
Proceeds from divestments 870 870
Repayments nonconsolidated companies 122 84
Other changes (12) (12)
------------- -----------
Net cash generated by investing activities 544 506
Dividends paid (273) (273)
------------ -----------
Funds balance 990 990
Net cash used for financing activities (164) (164)
Effect of exchange rate changes on cash and cash equivalents 6 6
------------ -----------
Change in cash and cash equivalents 832 832
------------ -----------
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IFRS based reporting Q-1 - Q-3 2004
S H A R E H O L D E R S ' E Q U I T Y A T S E P T E M B E R 3 0 , 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 45 (1,003)
Other reserves 104 2,420
------------------ --------------------
Capital and reserves 2,609 3,877
Minimum pension liability (834)
------------------ --------------------
Shareholders' equity 2,609 3,043
------------------ --------------------
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 may be present different results than 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
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