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When Hans Wijers, who will step down on Monday after nine years as chief executive of Akzo Nobel, first took the job, it was not clear how long the company would last.
The Akzo Nobel of 2003 was a loose-knit chemicals conglomerate based in the nondescript Dutch town of Arnhem, embracing everything from the world’s largest paint manufacturing operation to a struggling pharmaceuticals division, Organon, whose medicines were rapidly going off-patent.
Share prices had dropped more than 60 per cent in the previous year and many analysts believed the company was ripe for a break-up or takeover.
“It was a conglomerate with a clear portfolio question,” Mr Wijers recalls in an interview with the Financial Times. “There wasn’t much sense of what this company was all about. It was perceived as grey.”
Akzo Nobel might have joined the long list of major Dutch companies that have vanished over the past decade and a half, but Akzo Nobel has survived, and many chalk that up to Mr Wijers’ strategic decisions.
With sales last year of €15.7bn, Akzo Nobel has kept its position as the world’s top paint and coatings company. Profits have been squeezed by raw materials price hikes, but the share price is up 134 per cent since Mr Wijers took over, significantly better than competitors PPG and DuPont over that period.
“He was the guy who dared to take the drastic measures to get rid of the businesses he thought were subscale,” said Arun Rambocus of Kempen and Company.
Mr Wijers started by spinning off Organon to Schering Plough in 2007. The move ultimately spelt the end of the Netherlands’ last major pharmaceuticals brand, but it removed the most vulnerable division from Akzo Nobel’s balance sheet. And by selling Organon at the top of the market, Mr Wijers earned the cash he needed to take over rival British paint company ICI the following year, a critical move in helping Akzo Nobel globalise its sales.
Mr Wijers says while the merger was inevitable, which company was dominant might have been different had ICI not weakened its balance sheet with years of unlucky acquisitions. “I told [former ICI chief executive] John McAdam, it could have gone the other direction if his predecessors had made different decisions in their financial strategy,” he says.
With Organon gone and ICI integrated, Akzo Nobel has become tightly focused on coatings and speciality chemicals. It has acquired smaller companies in emerging markets, globalising its client base to protect itself against regional demand shocks. Last year 19 per cent of its revenue came from Asia, and 29 per cent from the Americas.
But acquisitions have come at a price: the investments have cut free-cash flow, and that has depressed shares. The ICI purchase came at the top of the housing bubble, and has been followed by years of tough housing markets that have hurt paint sales. After outperforming competitors before the financial crisis, Akzo Nobel has fallen short since.
“From a strategic point of view, we’ve achieved what we wanted to do, but the financial benefits are not yet enough,” Mr Wijers says. “Our profitability has to go up.”
While Akzo Nobel has survived, a different question is how Dutch it will remain. Mr Wijers says the company will continue to invest in its Dutch laboratories, as long as the country’s education system continues to turn out enough bright graduates. More broadly, he criticises European leaders’ failure to invest political capital in building the continental home market that European companies need to compete globally. “When I’m in Asia, or in the States, and I talk to people there, they gradually start to ignore Europe,” says Mr Wijers. He says there is “no alternative” to moving faster on European integration.
At the same time, he says his successor Mr Büchner has no alternative but to continue shifting Akzo Nobel’s focus abroad. “If we do not … at some point we will become the next TNT.”