Akzo Nobel to expand sales of greener products

By Harro ten Wolde

AMSTERDAM (Reuters) - Dutch paint and chemical group Akzo Nobel is betting on its environment-friendly products to keep up with increasing global demand and head off raw materials shortages, its chief of sustainability says.

"Sustainability is a precondition for economic success nowadays. Companies that are able to contribute to economic growth at a lower input of raw materials and energy are the winners of the future," Akzo Nobel's Director of Sustainability Andre Veneman told Reuters in an interview.

Veneman said 18 percent of Akzo Nobel's revenue consists of sustainable products, and the company is aiming for 30 percent by 2015.

"We develop products that are produced with lower energy but also offer energy efficiency to our clients," Veneman said.

He said the company had made a 30 percent cut in energy use since 1990, saving 200 million euros a year at current energy prices.

The world's biggest paint company and producer of brands such as DuLux, Sikkens and Flexa needs high-margin products to offset margin pressure due to slowing housing markets in the United States and Europe.

Second-quarter margins on earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations and before incidentals dropped to 10.8 percent from 11.3 due to the weak housing conditions, and the company said markets would be soft until 2009.

One of the company's sustainable products is Intersleek 900, a paint for ships' hulls that allows large vessels to pass more efficiently through the water, reducing fuel consumption and transport costs by at least 6 percent. The paint costs five times more than a conventional hull coating, but could deliver up to $2.5 million savings in five years for a typical vessel, Akzo Nobel estimates.

"We no longer sell a product, we sell energy savings, and clients are willing to pay extra for it," Veneman said, declining to give details on prices and margins for competition reasons.

Among others products are an additive that enables steelmakers to produce steel at 4 percent lower costs, and car paint that cures in six minutes under ultraviolet light instead of an hour.

(Editing by Will Waterman)