Akzo Nobel unveils plan to combat sales slump

Chemistry and Industry, Nov 18, 2002

The problem? A sales hiatus, or in Akzo-speak, a 'current temporary slowing in performance', in the pharma businesses.

The diagnosis: post-1997 double-digit growth was arrested in the past eight months by the triple-whammy of US dollar and other currency devaluations, generics competition in the US (for the oral contraceptive Mircette) and US product launch costs (for the antithrombotic Arixta and its vaginal contraceptive ring, NuvaRing).

And the cure: more cost scrutiny, an Intensified hunt for collaborations in product development and marketing, plus product acquisitions, and continued 'heavy' investment in R&D.

This action plan was rolled out by Akzo Nobel's chief financial officer and deputy chairman Fritz Frohlich, during the company's Pharma analysts' and investors' day in London and New York (6 and 7 November 2002, respectively). Akzo Nobel's pharma businesses generate less than a third of its total sales, but half of its operating income.

In the first three quarters of 2002. The company's coatings division headed the sales league at [euro]4244m or $4291m (operating profit [euro]384m), followed by chemicals ([euro]3466m and [euro]265m) and pharma ([euro]3008m and [euro]588m).

Pharma board member Toon Wilderbeek, emphasising that organic growth 'remains our first priority', announced the establishment of a new and separate fourth business unit -- Nobilon -- aimed at enhancing the development, production and marketing of human vaccines.

Sales from the new business are not expected until 2007.