Akzo Nobel Earnings in Line with Expectations; Solid Overall Performance Impacted by Currencies, Pensions and Remeron Competition in U.S

Business Wire, July 18, 2003

Business Editors/Health/Medical Writers

ARNHEM, the Netherlands--(BUSINESS WIRE)--July 18, 2003

Akzo Nobel, the international pharmaceuticals, coatings and chemicals company, reports second quarter net earnings(a) of EUR 201 million, 20% below the second quarter of 2002.

In presenting the report, Akzo Nobel's CFO Fritz Frohlich said: "All groups were under continued pressure from currencies and pensions. Pharma sales were impacted by generic competition to our key drug Remeron in the United States. Net income may be down, but given the challenging business conditions, results are quite acceptable. Coatings achieved a solid overall performance and Chemicals managed to keep up volumes and prices in weak markets. We are working hard to bring costs in line with lower sales. The headcount reduction program for the Company is on schedule. For the remainder of the year we assume no real improvement in the business conditions. Our outlook is unchanged, with net income(a) significantly below last year."

Operating income(a) for the Company in the second quarter lagged behind the previous year's figure by 20%. Excluding currency and pension factors operating income(a) was down 3% (EUR 12 million). Pharma felt the impact of strong generic Remeron(R) competition in the United States, being the most important catalyst for a 25% lower operating income. Coatings and Chemicals were down 12% and 14%, respectively. Their operational performance was again more than offset by currencies and pensions. At all three groups this impact was partially compensated by the results of cost-saving and restructuring programs.

Pharma - under continued pressure; cost savings contributing

Pharma sales were down 2%, excluding currency translations. Frohlich: "Generic competition to our antidepressant Remeron in the United States has led to pressure on Pharma. Our cost-saving programs are progressing well, with a workforce reduction of 440 so far this year. In addition to our ongoing restructuring program, we are pushing new products. The new contraceptive NuvaRing is gathering momentum and our antithrombotic Arixtra received

fast-track government approval for extended application in the United States. Animal healthcare business Intervet saw its decline in the United States almost offset by better performance in the rest of the world. Diosynth showed a strong performance."

Coatings - growth and restructuring produce solid overall performance

Akzo Nobel's Coatings' operating performance was slightly up, excluding the impact of pensions and currencies. Autonomous sales growth was 2%, mainly due to product mix improvement. Frohlich: "Our worldwide number one Coatings business showed a solid overall performance, based on a mix of sales growth and cost-cutting in the various businesses. However, we were not able to fully compensate the negative impact of currencies and pensions. The restructuring programs are progressing well. Workforce expansion in emerging markets was more than offset by restructuring and divestments. This resulted in a net decrease of 650 in the number of employees. Marine & Protective Coatings maintained an excellent performance and Powder Coatings improved further. Decorative Coatings was under pressure from the weak business conditions in Europe, while the industrial activities are holding up well."

Chemicals - robust performance in no-growth environment

The Akzo Nobel Chemicals business managed to protect volumes and prices in a no-growth environment. "Operating income excluding the impact of currencies and pensions was only marginally down, thanks to cost savings. A robust performance in a tough business climate," said Frohlich. "It's a mixed picture. Catalysts, Base Chemicals and Salt improved, while the operational performances of other businesses are still under pressure from weak market conditions. Nevertheless, cost-saving programs are progressing well and are making a clear contribution to the bottom line." In May, the Company announced a divestment program, mainly in Chemicals, which should generate proceeds of EUR 500 million to create room to maneuver for Akzo Nobel. Frohlich: "An update on this process can be expected in the fall."

Outlook for 2003 unchanged: net income(a) significantly down

Frohlich: "For the remainder of the year we assume no real improvement of the business conditions. As a consequence of accelerating competition against Remeron in the United States and the negative impact of currencies and pensions, our net income will be significantly below last year."

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Note for the editor

Akzo Nobel, based in the Netherlands, serves customers throughout the world with healthcare products, coatings and chemicals. Consolidated sales for 2002 totaled EUR 14 billion. The Company currently employs approximately 66,000 people in more than 80 countries. Financial results for the third quarter will be published on October 17, 2003.

Internet: www.akzonobel.com

Safe Harbor Statement(1)

This press release contains statements which address such key issues as Akzo Nobel's growth strategy, future financial results, market positions, product development, pharmaceutical products in the pipeline, and product approvals. Such statements, including but not limited to the "Outlook", 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 price fluctuations, currency fluctuations, developments in raw material and personnel costs, physical and environmental risks, legal issues, and legislative, fiscal, and other regulatory measures. Stated competitive positions are based on management estimates supported by information provided by specialized external agencies. 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. A copy of which can be found on the Company's website www.akzonobel.com.