1998: Sales Up 14%, Net Income Excluding Nonrecurring Charge Slightly up.

ARNHEM, the Netherlands--(BUSINESS WIRE)--Feb. 22, 1999--"Akzo Nobel's sales for 1998 grew to NLG 27.5 billion, an increase of 14 percent; net income excluding nonrecurring items was NLG 1,630 million, slightly higher than the record of the previous year but restrained for the most part by softening market conditions. Acquisitions made an important contribution to sales growth - notably Courtaulds - while, continued double-digit organic growth in our Pharma operations also played a significant role" said Cees J.A. Van Lede, Chairman of Akzo Nobel's Board of Management at the announcement of the Company's full year results today.

"In the light of changed economic conditions that impacted our businesses from the half year onwards our results are not unsatisfactory" said Mr. Van Lede, emphasizing that "Our Pharma businesses continued to be the star performer with sales up 11 percent and operating income up a healthy 14 percent."

" Coatings received a substantial boost from acquisitions which propelled us into the leading position in the market. While the macroeconomic climate very slightly reduced margins, sales were up 25 percent and operating income increased by 18 percent" he said.

"Chemicals, through portfolio shifts, cost containment and increasing the emphasis on less cyclical businesses delivered robust margins with sales and operating income virtually on a par with the previous year" he added.

Turning to Acordis, the world class fibers company formed through the integration of Akzo Nobel's and Courtaulds' Fibers activities, Mr. Van Lede said "Acordis is getting ready for demerger and efforts to address profitability have resulted in sales up 21 percent in 1998 and operating income higher than that of 1997. "

Earnings slightly higher

Net income excluding nonrecurring items of NLG 1,630 million slightly exceeded the previous year's record of NLG 1,613 million. This translated into per share amounts of NLG 5.71 and NLG 5.66, respectively. Nonrecurring charges of NLG 287 million (after taxes), mainly relating to various restructurings and asset write-downs, reduced net income to NLG 1,343 million (1997: NLG 1,615 million).

"The first half of the year was marked by significant gains in earnings. However, in the second half of 1998 growth in operating earnings began to stagnate, and together with higher financing charges - related to the acquisitions made during the year - this caused a decline in net earnings relative to the corresponding period of 1997. Including acquisition financing charges, Courtaulds rendered a net negative contribution of NLG 55 million, mainly as a consequence of the unexpected decline in the fibers markets" said Mr. Van Lede.

At the General Meeting of Shareholders of April 22, 1999, a 1998 dividend of NLG 2.15 per common share (1997: NLG 2.13) will be proposed. In November 1998 an interim dividend of NLG 0.65 was declared and paid. The proposal would result in a dividend payment of NLG 613 million, a payout ratio of 38 percent relative to net income excluding nonrecurring items.

The Akzo Nobel share will be quoted ex 1998 final dividend on Monday, April 26, 1999.

Courtaulds integration well on track

Early in July 1998, the public offer for all ordinary shares of Courtaulds plc was declared unconditional and by the end of September the buyout procedure was completed, leading to 100-percent control. The Courtaulds accounts have been consolidated since the beginning of July 1998. The Courtaulds acquisition has clearly made Akzo Nobel the worldwide number-one company in Coatings and created a sound platform for a Fibers demerger. The integration of Courtaulds is progressing well and the new structure of the combined Coatings activities has been announced.

The Fibers operations have been brought together into a separate organization, named Acordis. As from January 1, 1999, Acordis has operated as an independent, self-supporting unit, with the ultimate objective of being demerged from Akzo Nobel.

The Architectural Paint (U.S.) and Packaging Coatings activities as well as a significant portion of the Polymer Products operations have been divested. The divestment of the last part of Polymer Products, Performance Films, is expected to be concluded in the near term. In addition, as a consequence of Akzo Nobel's undertaking to the European Commission the divestment process of the Courtaulds Aerospace Sealants and Coatings business has been initiated. The completion of the latter two divestments will further reduce the present Courtaulds acquisition goodwill amount of NLG 4.8 billion which has been written off against equity.

During the fourth quarter of 1998 the initial short-term acquisition financing was replaced by various long-term and short-term debt instruments or redeemed with the proceeds from divestments made.

Sales growth 14 percent

Sales of NLG 27.5 billion were up 14 percent from 1997. On balance, acquisitions and divestments added 12 percent, with Courtaulds accounting for 11 percent. Volumes gained 3 percent, while average selling prices were at the 1997 level. Currency translations had a negative effect of 1 percent.

"Strong internal growth in our Pharma businesses - Organon, Intervet and Organon Teknika - was accompanied by substantial sales growth in 1998 resulting from our major coatings acquisitions - Courtaulds, plus those of the Turkish paints company Marshall Boya and BASF's decorative coatings activities in Germany. Despite divestments and acquisitions, Chemicals' sales were almost at the level achieved in 1997, while Fibers sales improved 21 percent, again through Courtaulds," said Mr. Van Lede.

"Akzo Nobel's overall performance should be viewed against the backdrop of the economy in the second half of 1998. The first six months were strong and very much in line with the positive trend of the preceding year. However, in July a turning point came unexpectedly. First there was the indirect impact of the Asian crisis, which finally fed through the international trading system and began to make itself felt in our traditional markets. This situation was further aggravated when as a consequence of the banking crisis, business in and with Russia virtually dried up. Finally, Latin America experienced a serious economic slowdown. As a consequence, growth in operating earnings began to stagnate in the second half of 1998" he stated.

Operating performance up

Operating income before nonrecurring items of NLG 2,737 million exceeded the previous year's figure by 11 percent, of which Courtaulds contributed 5 percent. The remaining rise was mainly attributable to Pharma. Currency translations had a slight net negative effect.

In 1998, expenditures for R&D were NLG 1,432 million, against NLG 1,260 million in the previous year. The main driver was Pharma, which continued to account for roughly one half of these amounts. The other half of the increase was caused by R&D expenditures of Courtaulds.

Nonrecurring charges in 1998 of NLG 364 million (after taxes: NLG 238 million) principally relate to the consequences of the discontinuation of the corporate funded research and development as well as various restructurings and asset write-downs at Chemicals, Acordis and Coatings.

Significant increase in financing charges

The increase in financing charges from NLG 274 million in 1997 to NLG 456 million in 1998 was almost entirely due to interest on debt assumed in the context of acquisitions, predominantly Courtaulds. Interest coverage (based on operating income excluding nonrecurring items) decreased from 9.0 to 6.0.

Income taxes averaged 31 percent, somewhat higher than in 1997. The utilization of tax loss carryforwards from previous years, mainly in Sweden, reduced the tax charge by NLG 85 million in both 1998 and 1997.

Earnings from nonconsolidated companies before nonrecurring charges were NLG 99 million, compared with NLG 119 million in 1997. The decrease was mainly due to lower results from Methanor. Flexsys recorded higher results. A nonrecurring write-down in 1998 of NLG 49 million relates to Akzo Nobel's share in Enka de Colombia.

Pharma: Continued, healthy, double-digit growth

- Star performer - Excellent pipeline - Sales up 11% at NLG 5.1 billion, operating income up 14% at NLG

1,058 million (20.7% of sales) - Organon main growth driver

Pharma achieved strong growth in sales and income. Sales of NLG 5.1 billion surpassed the previous year's figure of NLG 4.6 billion by 11 percent, spurred by a volume gain of 12 percent. On balance, prices were practically at the 1997 level, while changes in currency exchange rates had a negative effect of 1 percent. Operating income before nonrecurring items rose 14 percent to NLG 1,058 million.

The main growth driver was Organon with a sales increase of 13 percent. The continuous success of the antidepressant Remeron(R), the fertility hormone Puregon(R) and the introduction of the oral contraceptive Mircette(R) resulted in sales growth of over 60 percent in the United States.

Organon Teknika also improved its performance, favored by strong volume growth. Intervet achieved good sales growth and excellent results under difficult market conditions. Diosynth's operating results remained strong but failed to reach the previous year's figure. Chefaro's earnings were slightly lower in a stagnant market.

Pharma was able to increase return on sales to 20.7 percent despite significantly higher expenses for research and development as well as for product introductions. Return on invested capital was 36.1 percent in 1998, against a long-term target of 40 percent.

"In 1999 Pharma can be expected to continue to contribute strongly to profits and to leverage its excellent product pipeline to the full" said Mr. Van Lede.

Coatings: Global leadership

- Through Courtaulds acquisition, Akzo Nobel No. 1 in coatings

worldwide - Sales up 25% at NLG 10.5 billion, operating income up 18% at NLG

883 million - Slightly reduced margins

"In the course of 1998 we acquired the leading position in Coatings world-wide. Being in this position provides not only opportunities to participate in further restructuring in this industry, but also to address the emerging markets from a position of great strength. While these markets may be out of favor in the short term, this is where the real growth for Coatings is going to be" Mr. Van Lede stated.

Coatings' sales were NLG 10.5 billion in 1998, up 25 percent. Courtaulds accounted for 17 percent of this increase and other acquisitions for 6 percent. Volumes and average selling prices each were 1 percent higher. Currency translations had virtually no impact. Operating income before nonrecurring items was NLG 883 million, an increase of 18 percent. Of this gain, 14 percent was attributable to the contribution of the Courtaulds activities.

Car Refinishes, Industrial Products, and Resins again had a strong year and achieved a higher operating income. Results of Aerospace Sealants and Coatings were up due to solid volume growth. Decorative Coatings results were flat due in part to poor weather conditions in Europe. In consequence of the crisis in Russia, Industrial Coatings and Printing Inks could not match the performance of the previous year. Protective Coatings activities were negatively affected by the crisis in Asia. Earnings of Coil Coatings operations in the United States were lower due to strong price pressure.

Return on sales was 8.4 percent, down from the 9.0 percent attained in 1997, against the 10-percent long-term target set for Coatings. Return on invested capital was 21.1 percent in 1998, compared to the target of 25 percent.

Chemicals: Robust margins

- Stable margins from portfolio shift and cost containment - Sales NLG 7.5 billion, slightly down, operating income NLG 705

million, virtually on a par with 1997 - Increasing emphasis on specialties

Chemicals achieved a volume growth of 3 percent, while lower average selling prices and changes in exchange rates each had a negative effect of 1 percent. Including the net negative effect of acquisitions and divestments (2 percent), Chemicals' sales amounted to NLG 7.5 billion, slightly below 1997. Excluding the divestment of Salt America in 1997, operating income before nonrecurring items of NLG 705 million was virtually on a par with the prior year.

Results of Polymer Chemicals and Functional Chemicals surpassed the previous year's record levels due to higher volumes sold. Base Chemicals also did better. Surface Chemistry's earnings were unchanged from 1997, despite a weak market in Asia. Operating income of Pulp & Paper Chemicals was lower than in 1997 due to a depressed market situation for Bleaching Chemicals in the United States. Catalysts has made decisions to streamline certain manufacturing units - particularly for intermediate products - in view of the continuing decline in its markets. The results of Plastics and Processing Additives (Akcros Chemicals) weakened. Earnings of Salt were lower but remained satisfactory.

Return on sales was a robust 9.4 percent, relative to the target of more than 10 percent over the business cycle, despite the weakening business climate for chemicals. Return on investment was 12.2 percent, relative to a better than 15-percent target over the business cycle.

"There is now reduced cyclical risk in Chemicals' portfolio and in 1999 we will vigorously defend the margins we have built up" Mr. Van Lede stated.

Acordis: Ready to take off

- World-class Fibers operation created by Courtaulds acquisition:

Acordis - Acordis actively preparing for successful demerger - Sales up 21 percent at NLG 4.3 billion, operating income

increases to NLG 141 million (1997: NLG 93 million); strong

cashflow

The integration of the fibers activities of Akzo Nobel and Courtaulds is progressing well. As of January 1, 1999, Acordis is operating on a stand-alone basis and being prepared to take off as an independent company.

Acordis' sales of NLG 4.3 billion were up 21 percent and included NLG 1.0 billion of sales from the Courtaulds fibers activities. Excluding these sales, there was a decline of 6 percent caused by divestments. Volumes and average selling prices were at the prior year's level, while also currency translation had no impact. Acordis' operating income before nonrecurring items grew to NLG 141 million (1997: NLG 93 million).

The income gain was principally attributable to better performances of Industrial Fibers and Textile Fibers as well as the contribution from the Courtaulds activities. High capacity utilization, cost reductions, and improved productivity boosted earnings for Industrial Fibers. Textile Fibers achieved a turnaround in Viscose Filament from the very disappointing previous year, while Nonwovens also did better. Results of Aramid Products were negatively impacted by the crisis in Asia. Membrana's results were slightly lower than in 1997 as it continued to incur introduction costs for new products. Overall earnings performance of Viscose Staple was similar to that of the previous year. Tencel(R) fiber results were depressed due to overcapacity. In the meantime it has been decided to concentrate all production of Tencel(R) at the new plant in Grimsby, United Kingdom, and to mothball the original plant in Mobile, Alabama, USA. Acrylic Fibers' margins were impacted by a sharp price fall in the second half of 1998. Results of Acetate Chemicals were down from 1997 due to intensified competition.

Return on sales was 3.3 percent with a return on invested capital of 4.5 percent, compared to Acordis' long-term targets of 8 and 12 percent, respectively.

" Acordis, a strong cash generator, aims to maximize returns from its mature businesses by concentrating on industrial end users and textile specialties, introducing product and business innovations, and actively participating in the restructuring of the man-made fibers industry" said Mr. Van Lede.

Higher gearing

The net balance of cash inflow and funds used for normal operations was NLG 1.0 billion positive. Including dividend payments the free cash flow of the company was NLG 0.3 billion. Proceeds from divestments added another NLG 0.6 billion.

Acquisition expenditures (net of cash acquired) amounted to NLG 6.6 billion, predominantly relating to Courtaulds, Marshall Boya, and Akcros.

The negative funds balance of NLG 5.6 billion was financed by means of debt instruments, including a DEM 1 billion bond, a USD 500 million bond, and increased commercial paper programs in the United States and Europe.

Expenditures for property, plant and equipment were NLG 1.8 billion (1997: NLG 1.4 billion), including Courtaulds' expenditures of NLG 0.2 billion. Mainly Pharma and Coatings exceeded their 1997 levels. Depreciation amounted to NLG 1.5 billion, compared with NLG 1.3 billion in 1997.

Authorizations for new projects totaled NLG 1.9 billion, an increase of NLG 0.2 billion compared to 1997, predominantly stemming from Courtaulds.

Invested capital at year-end 1998 amounted to NLG 18.6 billion, compared with NLG 14.8 billion at the beginning of the year. Acquisitions caused an increase of NLG 4.4 billion, while the decrease from divestments was NLG 0.7 billion. Lower exchange rates led to a reduction of NLG 0.8 billion. The remaining balance of NLG 0.9 billion mainly related to increased working capital and higher expenditures for property, plant and equipment.

The invested capital turnover ratio at year-end was 1.65, practically at the previous year's level.

Working capital as a percentage of annualized sales (based on fourth-quarter figures) was 19.3 percent, compared with 18.5 percent in 1997. The increase was principally attributable to higher inventories and lower taxes payable.

Equity was reduced significantly due to the goodwill write-off of NLG 5.3 billion. The increase of net interest-bearing debt by NLG 7.5 billion relates to debt assumed in the context of acquisitions, predominantly Courtaulds. As a consequence, gearing increased from 0.33 in 1997 to 2.39 in 1998.

People: The key to the Company's success

"The transition process we underwent in 1998 and will consolidate in 1999, inevitably puts pressure on people both at our businesses and at the corporate level. In such periods of strong change uncertainty is almost unavoidable. We have become more international and more diverse in one year than ever before and the challenge for 1999 is to continue to manage the diversity and the enhanced resilience it brings us" said Mr. Van Lede, emphasizing that "Akzo Nobel will continue to carry out organizational changes in a responsible way and in consultation with the employees affected, works councils and labor unions."

The number of employees rose from 68,900 at the end of 1997 to 85,900 at year-end 1998. Acquisitions added 20,200, including 16,800 employees of Courtaulds, while divestments caused a decrease of 2,900. Net of acquisitions and divestments, Pharma's personnel increased by 800, mainly at Organon, while there were staff reductions at Fibers, Chemicals, and Coatings.

Excluding deconsolidations and acquisitions, the number of employees is not expected to change materially in 1999.

Outlook for 1999: Year of consolidation

Giving an indication for the coming year, Mr. Van Lede stated that "1999 will be a year of consolidation following the tremendous activity of last year. Fundamentally, this means seeing through the successful demerger of Acordis, reaping the benefits of the Courtaulds acquisition in Coatings, maintain growth momentum in Pharma and vigorously defend our robust Chemicals margins."

"We will certainly aim for reducing our debt and further strengthening of the balance sheet in 1999. This means we will strive to achieve a financial surplus so as to reduce the present gearing and improve interest coverage. To this end we will concentrate on reducing the debt load through our strong cash flow, a restrictive investment and acquisition policy, and divestments. As a consequence, we expect expenditures for property, plant and equipment in 1999 in the order of NLG 1.7 billion" he stated.

"In light of market uncertainties and the intended demerger of Acordis, we refrain from giving a forecast for income in 1999. However, given the strong first six months of 1998, it will be difficult to match those earning levels. Much will depend on the way the economy develops in the second half of the year but in the uncertain economic climate ahead, the strength of Akzo Nobel lies in the enhanced resilience we built up in the course of 1998." said Mr. Van Lede in closing.

Fourth quarter results

                                                  pro forma(1)
Millions of guilders                       1998     1998    1997  %(2)
--------------------                      ------   ------  ------ ----

Net income excluding nonrecurring items     307      355     359   -14


Net income excluding nonrecurring
 items per share, in NLG                   1.08     1.24    1.26

Net sales                                 7,440    6,084   5,928   +26

Operating income(3):
 - Pharma                                   299      298     254   +18
 - Coatings                                 155      106     129   +20
 - Chemicals                                154      153     145    +6
 - Fibers                                    28       31      41   -32
 - Total Akzo Nobel                         623      586     559   +11

Return on sales(3)                         8.4%     9.6%    9.4%

(1) Pro forma figures exclude all effects of the Courtaulds
    acquisition
(2) Percentage change of 1998 figures compared to 1997.
(3) Before nonrecurring items.

     Sales were up 26%, boosted by Courtaulds and Pharma. Total
operating income increased by 11%, which together with the higher
financing charges from acquisitions lead to a decline in net income of
14%.

     Pharma achieved an operating income improvement of 18%,
particularly due to the continued success of Organon (predominantly
Remeron(R) and Puregon(R)) and to Organon Teknika. Coatings benefited
from the acquisitions made, mainly Courtaulds. Industrial Coatings
suffered from the softening of the macroeconomic climate and the
crisis in Russia. Chemicals' operating performance was up despite
weakening markets. Acordis suffered from the Fibers cycle,
predominantly in the textile areas.



Full Year Earnings Slightly Higher as Market Conditions Continue to
Soften

                                                  pro forma(1)
Millions of guilders (NLG)                 1998    1998    1997   %(2)
--------------------------               ------- ------- ------- -----
Net income excluding nonrecurring items    1,630   1,685   1,613    +1
Net income                                 1,343   1,398   1,615   -17

Per share in NLG
Net income excluding nonrecurring items     5.71    5.91    5.66
Net income                                  4.71    4.90    5.67

Net sales                                 27,507  24,804  24,052   +14

Operating income(3)
 - Pharma                                  1,058   1,057     931   +14
 - Coatings                                  883     778     751   +18
 - Chemicals                                 705     704     730 -3(4)
 - Fibers                                    141     123      93   +52
 - Total Akzo Nobel                        2,737   2,617   2,471   +11

Return on sales(3)                         10.0%   10.6%   10.3%
Return on invested capital(3)              16.4%   17.2%   17.2%
Net sales/average invested capital          1.65    1.63    1.67

Number of employees, at year-end          85,900  72,100  68,900

Highlights

-    Earnings per share excluding nonrecurring items: NLG 5.71, up
     from NLG 5.66
-    Sales : NLG 27.5 billion, up 14%
-    Net income excluding nonrecurring items: up to NLG 1,630 million
     from NLG 1,613 million in 1997. - Dividend : Proposal of NLG 2.15
     (1997: NLG 2.13)
-    Pharma : Star performer, continued healthy double-digit growth -
     excellent pipeline
-    Coatings : Global leadership
-    Chemicals : Robust margins maintained
-    Fibers : Platform for demerger created by addition of Courtaulds
-    Outlook : Uncertain market conditions, difficult first half year
     1999

(1) Pro forma figures exclude all effects of the Courtaulds
    acquisition
(2) Percentage change of 1998 figures compared to 1997
(3) Before nonrecurring items
(4) Excluding divestments of Salt America, earnings were virtually on
    a par with 1997.

Akzo Nobel, based in the Netherlands, serves customers throughout the world with healthcare products, coatings, chemicals and fibers. The fibers business, now known as Acordis, is intended to be demerged in the course of the second half of 1999. The company currently employs some 86,000 people in more than 60 countries. As from 1999 the Euro will be Akzo Nobel's external reporting currency. Consolidated sales for 1998 totaled NLG 27.5 billion (EUR 12.5 billion / USD 13.8 billion / GBP 8.4 billion). Financial results for the first quarter of 1999 will be announced on April 21.