AkzoNobel, DSM Reap Fruits Of Restructuring

The CEOs of AkzoNobel and DSM, two top Dutch chemical companies, say their intensive corporate restructurings over the past several years have started paying off.

In separate briefings to investors and analysts in recent days, the companies charted how their focus on specialty businesses—albeit in different sectors—has permitted strong performances this year despite difficult economic times.

At an analysts' conference in London, AkzoNobel CEO Hans Wijers reviewed the sale of his company's pharmaceutical business and use of the proceeds to acquire ICI at the beginning of this year. That major transformation streamlined and refocused the company, he said. "It's now time for us to deliver on what we promised and, in today's very different economic landscape, significantly improve our performance," Wijers added.

The company has set a new operating profit margin target of at least 14% for 2011, up from the 2007 level of 12.9%. It aims to achieve by 2010 all of the almost $500 million in savings predicted from the ICI acquisition, rather than the 85% originally forecast. Rigorous cost management will yield an additional cost savings of close to $150 million, Wijers said. And by 2011, the company will have shed some 3,500 jobs out of 60,000, the current total.

Wijers also confirmed that AkzoNobel expects its 2008 operating earnings to be close to the 2007 pro forma level for the combined company despite a world economy that "has now clearly entered a phase of lower growth, particularly in the mature markets."

Meanwhile, at DSM's investor conference in Vaalsbroek, the Netherlands, Chairman Feike Sijbesma confirmed his company's targets for 2010. Sijbesma and his predecessor, Peter Elverding, have pushed a transformation of DSM from a company making a variety of commodity and specialty chemicals to one wholly focused on life and materials sciences.

Sijbesma raised DSM's 2008 forecast for operating earnings by about 5%, on the back of continued strength in some of the company's businesses, particularly DSM Agro.

"DSM continues to benefit from favorable market conditions, particularly in nutrition and fertilizers, and our materials sciences activities are showing sufficient resilience to the more difficult macroeconomic environment from which, of course, nobody is completely immune," Sijbesma said.

DSM recently completed carving out most of the businesses that don't fit with its new focus. A controlled auction process has begun for the divestment of DSM Agro and businesses in melamine, elastomers, and urea licensing, Sijbesma added.