Akzo Nobel's Q2 Net Income 2% Lower.

Business Editors

ARNHEM, The Netherlands--(BUSINESS WIRE)--July 24, 2002

Akzo Nobel, the international pharmaceutical, coatings and chemicals company, today announced its second quarter earnings.

Highlights:

- Autonomous growth 7% - negative currency effect of 4%

- Operating income down 8% - caused by one-time charges for animal healthcare (Intervet)

- Human healthcare

- Remeron(R) - sales up 26%; U.S. patent lawsuits ongoing; SolTab(TM) launched in Europe

- oral contraceptives - generic competition in U.S.

- NuvaRing(R) - launch on schedule

- Arixtra(R)- U.S. process of hospital formulary approval on track

- gepirone ER - discussions with FDA ongoing

- Animal healthcare - one-time charges and impact of Latin America

Fritz Froehlich, Akzo Nobel's CFO, said: "Second quarter net results for the Company were 2% lower than last year. Coatings had a top quarter with strong sales and a 15% better operating income(2). Chemicals was able to equalize last year, a solid performance in difficult business conditions. In these sectors we are clearly beginning to see the results of our aggressive restructuring efforts that began last year. Pharma had a mixed performance. Sales(2) were up 5%, but earnings(2) declined 8%. Animal healthcare Intervet had a substantially lower second quarter due to the weak economy in Latin America and significant one-off charges. On the other hand, human healthcare Organon again scored strong autonomous sales growth: up 9%. Operating income was only somewhat higher due to additional expenditures for future growth. During the last few weeks of the quarter in particular we had to deal with the increasing influence of declining key currencies. We are also experiencing a slower than expected pick-up of the economy in our most important markets. Based on these recent facts, we now expect a net income(3) for 2002 that is slightly below 2001."

Pharma: sustaining growth

Pharma sales(2) increased 5% to EUR 1,025 million. Volume growth in Pharma was 6% with 1% higher selling prices, whereas weaker foreign currencies had a negative impact on sales of 4%.

Froehlich commented: "In human healthcare we were able to realize a strong autonomous growth of 9%. Our top products Remeron(R) and Livial(R) grew 26% and 15%, respectively. Although generic competition for oral contraceptives has resulted in lower sales, innovative products in our pipeline will help us accelerate growth in the near future.

The Company continues to invest in promising product launches in the United States - which accounts for one-third of our worldwide human healthcare sales. We recently launched the innovative antithrombotic Arixtra(R) in the US. The process of hospital formulary approvals is on track. Organon also recently introduced NuvaRing(R), a revolutionary new female contraceptive. We will continue to invest in promising indications in our core treatment franchises, Reproductive Medicine, CNS, and Anesthesiology."

"We are still awaiting the outcome of legal proceedings regarding generic competition for Remeron." Commenting on the introduction of the new antidepressant gepirone ER (Ariza) Froehlich added: "The FDA has addressed certain efficacy issues and Organon is cooperating fully. We expect the product will be introduced in 2003."

Intervet, the animal healthcare business of Akzo Nobel, was severely impacted by incidental items (especially obsolete inventories), weak currencies and market conditions in Latin America. Diosynth, our manufacturer of complex active pharmaceutical ingredients, continued to invest for further growth.

Coatings results significantly improved

Commenting on the turnaround in the Coatings business Froehlich said: "Coatings earnings(2) were up 15%, mainly as a result of our aggressive restructuring efforts and lower raw material prices. We can clearly see the benefits of restructuring coming through. Our Decorative Coatings business had a top quarter and demonstrated a good performance, Marine & Protective Coatings and Car Refinishes showed strong results and our industrial activities are doing better despite tough business conditions."

In order to further strengthen its world leading positions in Coatings, Akzo Nobel invested in high-growth regions by opening new facilities in Russia and China, and made a number of strategic bolt-on acquisitions.

Chemicals: stable performance under weak business conditions

Commenting on the performance of the Chemicals group, Froehlich said: "Chemicals realized a stable performance in weak business conditions, resulting in a flat operating income. The benefits of the ongoing restructuring offset the impact of the difficult business climate. Catalysts and Base Chemicals showed a strong improvement in operating income, while the market conditions had the greatest impact on Pulp & Paper Chemicals, Surface Chemistry and Polymer Chemicals." The June acquisition of Crompton Industrial Specialties (USD 95 million) further strengthened our Surface Chemistry business.

Improved balance sheet

Akzo Nobel continues to focus on strengthening the balance sheet. Net debt was down EUR 180 million since the beginning of this year. The Company issued a successful seven-year EUR 1 billion public bond to improve debt structure.

Restructuring on track

The previously announced restructuring programs continue to be implemented in Coatings and Chemicals. As a result of these measures in the first half-year, the workforce in the two groups was reduced by some 900 jobs. On balance, however, the Company increased its workforce by 1,100 jobs, from acquisitions and to support the high-growth Pharma business.

Outlook - net income(3) slightly below 2001

Earlier this year, the Company expected that net income(1) would exceed record year 2000 (EUR 956 million), assuming that the economy would resume growth in the second half of this year and that there would be no major changes in currency exchange rates.

Froehlich: "Going forward, we now expect to achieve a net income(3) for 2002 that is slightly below 2001's result of EUR 930 million. This new outlook is caused by the fast weakening of a number of our key currencies and the slower than expected pick up of the economy in our important markets."

Note for the editor

Akzo Nobel, based in the Netherlands, serves customers throughout the world with healthcare products, coatings and chemicals. Consolidated sales for 2001 totaled EUR 14 billion. The Company currently employs over 67,000 people in 80 countries. Financial results for the third quarter will be published on October 23, 2002.

Internet: www.akzonobel.com

For more information please contact:

Akzo Nobel N.V., John de Munnik, Corporate Media Relations, tel. [phone].

(1) Excluding extraordinary and nonrecurring items.

(2) Continued operations.

(3) Excluding extraordinary and nonrecurring items. Assuming that

the present currency exchange rates and the current conditions

in those sectors of the economy which are most important to

Akzo Nobel will prevail for the remainder of the year.

Report for the 2nd Quarter of 2002

For tabular information please visit: www.akzonobel.com

Second-quarter net income(2) 2% lower

- Autonomous growth 7% - negative currency effect of 4%

- Operating income down 8% - caused by one-time charges for animal healthcare (Intervet)

- Human healthcare

- Remeron(R) - sales up 26%; U.S. patent lawsuits ongoing; SolTab(TM) launched in Europe

- oral contraceptives - generic competition in U.S.

- NuvaRing(R) - launch on schedule

- Arixtra(R)- U.S. process of hospital formulary approval on track

- gepirone ER - discussions with FDA ongoing

- Animal healthcare - one-time charges and impact of Latin America

Outlook revised - net income(2) slightly below 2001

(1) Continued operations.

(2) Excluding extraordinary and nonrecurring items.

(3) At December 31.

The Report for the 3rd Quarter of 2002 will be published on October 23.

Note

The data in this report are unaudited.

The 2001 figures have been restated for the change in accounting principles in respect of pensions and other postretirement benefits.

Unless indicated otherwise, discussions in the report, such as earnings developments, refer to the continued operations, and exclude extraordinary and nonrecurring items.

Continued operations include acquisitions, but exclude divestitures, such as the Diagnostics business at Pharma and Printing Inks at Coatings.

Safe Harbor Statement(a)

This report 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, and legislative, fiscal, and other regulatory measures. Stated competitive positions are based on management estimates supported by information provided by specialized external agencies.

(a) Pursuant to the U.S. Private Securities Litigation Reform Act 1995.

For tabular information please visit: www.akzonobel.com

Second-quarter net income(1) 2% lower

Second-quarter net income(1) amounted to EUR 250 million, 2% below last year. Per share this was EUR 0.87 (2001: EUR 0.89). The earnings contribution from autonomous growth of the three groups and lower financing charges was more than offset by the impact of higher pension charges, the weakening of certain key currencies, and lower results from nonconsolidated companies. Furthermore, Intervet incurred certain one-time charges, which also impacted second-quarter earnings.

Half-year net income(1) of EUR 484 million was 3% higher than last year. This translated into net income(1) of EUR 1.69 per share (2001: EUR 1.64).

Negative currency effects impacting sales

Second-quarter sales were down 2% to EUR 3.6 billion. For continued operations, sales were up 1%. Autonomous growth was 3%, with 2% volume growth and 1% higher selling prices. Currency translation had a negative effect of 3%, which mainly relates to the U.S. dollar, the Brazilian real, the pound sterling, and various Asian currencies. Sales development was as follows (in %):

For tabular information please visit: www.akzonobel.com

In the first half of 2002, sales aggregated EUR 7.1 billion, down 1%. For the continued operations, sales rose 2%.

Operating income down 5%

Operating income for the second quarter was EUR 412 million, down 5%. Earnings were affected by a negative currency translation effect of some EUR 20 million, while quarterly pension charges(2) were EUR 20 million higher. Earnings of Coatings were up 15%, while Chemicals operating income was virtually equal to last year. The 8% decline in Pharma's results was attributable to Intervet, which incurred one-time charges and suffered from weak market conditions in Latin America.

In the first half of 2002, operating income was EUR 797 million (2001: EUR 806 million).

Return on sales was 11.3%, compared with 11.7% in the second quarter of 2001. For January-June this ratio was unchanged at 11.2%.

(1) Excluding extraordinary and nonrecurring items.

(2) The poor performance of the stock markets in 2001 had a

negative influence on the investment results of Akzo Nobel's

pension funds. In accordance with the rules of SFAS 87, this

resulted in an increase of 2002 pension costs of EUR 20

million per quarter, affecting all groups.

Financing charges were significantly lower, as a result of lower short-term interest rates, the weaker U.S. dollar, and reduced net borrowings. Interest coverage in the second quarter improved to 7.6 from 6.2 in 2001.

The income tax charge decreased to 31% (2001: 32%), reflecting changes in the geographic distribution of the Company's results.

Earnings from nonconsolidated companies declined from EUR 17 million to EUR 11 million, due to lower results for Flexsys, ECI Elektro-Chemie, and Methanor.

Major restructurings at Coatings and Chemicals progressing well

In order to structurally improve earnings, the Company is executing major restructuring programs at Coatings and Chemicals initiated in 2001. This will ultimately lead to a workforce reduction of 3,500 employees worldwide. The implementation of these programs is on schedule. So far the work force reduction totaled 1,100 (2001: 200; 2002: 900).

Workforce - on balance up

At June 30, 2002, the number of employees was 67,400, compared with 66,300 at the end of 2001. Growth of activities, mainly at Pharma, resulted in an increase of 1,200, while acquisitions added 800. Restructurings, cost-saving measures, and divestments at Coatings and Chemicals led to a reduction of 900 in the first half year.

Outlook revised - net income(1) slightly below 2001

On the basis that the present currency exchange rates and the current conditions in those sectors of the economy which are most important to us, will prevail for the remainder of the year, we expect to achieve a net income(1) for 2002 that is slightly below 2001.

(1) Excluding extraordainary and non-recurring items.

Pharma - growth continuing; investing in product launches

- operating income down 8% caused by Intervet

For tabular information please visit: www.akzonobel.com

- Autonomous growth 7% - negative currency effect of 4%

- Operating income down 8% - caused by one-time charges for animal healthcare (Intervet)

- Human healthcare

- Remeron(R) - sales up 26%; U.S. patent lawsuits ongoing; SolTab(TM) launched in Europe

- oral contraceptives - generic competition in U.S.

- NuvaRing(R) - launch on schedule

- Arixtra(R)- U.S. process of hospital formulary approval on track

- gepirone ER - discussions with FDA ongoing

- Animal healthcare - one-time charges and impact of Latin America

In the second quarter, Pharma was able to generate 7% autonomous growth, due to 6% volume growth with 1% higher selling prices. Sales were affected by generic competition for oral contraceptives in the United States and weak market conditions for the animal healthcare activities in Latin America and South Africa. Currency translation had a negative effect of 4%. Acquisitions added 2% to Pharma's sales, while divestments caused an 8% decrease.

Pharma's operating income was down 8% to EUR 195 million, with a return on sales of 19.0% (2001: 20.2%). This decline was solely caused by Intervet, which incurred one-time charges and suffered from weak market conditions in Latin America and South Africa. Earnings of Organon and Diosynth were somewhat higher. To secure future growth, expenses for R&D (up 12% to EUR 150 million) and marketing (up 7% to EUR 344 million) were increased. Furthermore, earnings were affected by weaker currencies and higher pension charges.

Human healthcare (Organon) sales were up 5%, despite significantly weaker key currencies. The sales development for the main products was as follows:

For tabular information please visit: www.akzonobel.com

Organon's sales in the United States totaled EUR 226 million, up 5% on the second quarter of 2001, despite the lower U.S. dollar exchange rate and increasing generic competition for oral contraceptives. One-third of Organon's sales are generated in this market. The launch of NuvaRing(R) in the United States is on schedule.

For the introduction of the pentasaccharide antithrombotic Arixtra(R) in the United States, the process of hospital formulary approval is on track. In the meantime, Arixtra(R) was also launched in Europe by our joint venture partner Sanofi-Synthelabo(1).

Remeron(R) sales were up 26%. The lawsuits Organon filed against generic pharmaceutical companies in the United States for infringement of its U.S. patent covering the use of Remeron(R) with SSRIs are ongoing. Early in July, Remeron(R) SolTab(TM) was launched in Europe. Organon is currently discussing the approval of the new antidepressant gepirone ER (Ariza) with the FDA.

Earnings of the animal healthcare activities were substantially lower due to one-time charges for inventory write-downs and small restructurings, depressed market conditions in Latin America and South Africa, and the weakening of key currencies. Business in Asia is doing better.

(1) Akzo Nobel will receive a royalty for the Arixtra(R) sales

made by Sanofi-Synthelabo outside North America. The

activities of the joint venture in North America are

proportionally consolidated.

The Coatings operations achieved autonomous growth of 3% with 2% higher volumes and 1% higher selling prices. Sales decreased 3% due to weaker foreign currencies. Acquisitions added 1%, while the impact of divestments was a 3% decrease.

Operating income rose 15% to EUR 161 million. Return on sales was significantly up from 9.3% to 10.8% in 2002. Results of almost all business units were up due to higher margins and cost savings, partially offset by the impact of weaker currencies and higher pension costs.

The implementation of the major restructuring programs is progressing well. The first benefits of these programs became visible.

Earnings of Decorative Coatings were significantly up, especially in Germany and the United Kingdom. The business in Turkey is improving, but currently remains unstable. Results of Car Refinishes were higher, particularly as a result of the strong performance in the United States. The industrial coatings activities did somewhat better, although the business climate remains weak. Marine & Protective Coatings and the wood coatings operations sustained the positive trend in Asia. The impregnated-paper business is increasingly doing better.

Capital expenditures decreased to EUR 25 million (2001: EUR 47 million). This quarter, the decorative coatings plant in Moscow, Russia, the coil coatings facility in Suzhou, China, and the powder coatings plant in Ho Chi Minh City, Vietnam, started production.

In June, the acquisition of the worldwide marine and aerospace coatings businesses of U.S. Paint was completed, which includes the renowned AWLGRIP(R) brand.

In Indonesia, a new decorative paints joint venture was formed, in which Akzo Nobel will hold a 65% stake. In South Korea, the Company will expand its shareholding in the marine coatings joint venture to 60% and acquire the manufacturing site in Chilseo. In the United Kingdom, the Company bought the specialty paint business of Plascon UK. In Germany, a significant portion of the decorative paint distributor Wumeg was acquired.

For tabular information please visit: www.akzonobel.com

Second-quarter sales of EUR 1.2 billion were 2% below last year. Autonomous growth was 2%, with both volumes and selling prices up 1%. Currency translation had a negative effect of 3%. Divestments caused a 1% decrease.

At EUR 86 million, operating income was almost on a par with 2001. Return on sales was 7.5% (2001: 7.4%). Benefits from the restructuring programs, which are aggressively pursued, and lower energy and raw material prices could not fully compensate the impact of the weak economic conditions and higher pension costs.

Catalysts again turned in a substantially better performance due to the closure of the Los Angeles site and benefited from lower energy prices. Base Chemicals also improved significantly.

At Pulp & Paper Chemicals, the results for bleaching chemicals remained under pressure, mainly in the United States. Surface Chemistry and Polymer Chemicals suffered from weak market conditions.

Totaling EUR 57 million, capital expenditures were 75% of depreciation. In June, the new MCA plant in Taixing, China, became operational.

Early in April, the lead stabilizer activities were divested to the management of this business.

At the end of June, the Company acquired Crompton Corporation's Industrial Specialties business, which generated sales of USD 165 million in 2001, for USD 95 million. Specialty surfactants is one of Akzo Nobel's global businesses with high growth potential. This bolt-on acquisition strengthens the Company's presence in the market for agricultural and oilfield chemical surfactants, while broadening the product line for the cleaning, personal care, and other industrial markets. In addition, it further strengthens Chemicals' position in North America.

For tabular information please visit: www.akzonobel.com

Strong operational cash flow

Cash flow from operations in the first half year was EUR 589 million, compared with EUR 516 million in 2001. The increase was mainly attributable to the lower seasonal increase in working capital, due to better control by the Company.

Capital expenditures totaled EUR 318 million (101% of depreciation) with key focus on growth of Pharma.

Acquisition expenditures primarily related to Crompton's Industrial Specialties and some Coatings acquisitions, while proceeds from divestments principally stemmed from the sale of Printing Inks.

The net outflow of funds (funds balance) of EUR 72 million was somewhat higher than last year, as proceeds from divestments were significantly lower, partially offset by reduced acquisition expenditures.

In the first half of 2002, net cash generated by financing activities was the net effect of the placement of the EUR 1 billion public bond in May 2002 and the redemption of short-term borrowings.

For tabular information please visit: www.akzonobel.com

Balance sheet - gearing improved

Invested capital at June 30, 2002, amounted to EUR 9.3 billion, an increase of EUR 0.1 billion compared with year-end 2001. Seasonal working capital effects added EUR 0.3 billion, while acquisitions caused an increase of EUR 0.1 billion. Due to lower currency exchange rates invested capital decreased EUR 0.3 billion.

Equity increased EUR 0.4 billion due to January-June income, partially offset by negative currency translation effects. Net interest-bearing borrowings were down EUR 0.2 billion on year-end 2001, mainly due to the lower U.S. dollar exchange rate. Gearing improved to 1.24 (December 31, 2001: 1.47).

The borrowings structure was improved by the placement of a EUR 1 billion public bond in May 2002, maturing in 2009. As a portion of the proceeds was utilized to redeem U.S. dollar commercial paper, EUR 500 million of this bond was swapped from fixed-interest euro liabilities into floating-interest U.S. dollar liabilities.