Highlights
• Revenues up 7% to EUR 3.6 billion, operating income up 9% to EUR 365 million
• Net income nearly doubles to EUR 361 million
• Organon – double-digit growth, excellent operational performance
• Intervet – autonomous growth of 6%
• Coatings – record quarter, strong profit growth on significantly higher revenues
• Chemicals – autonomous growth of 7% 
• Divestment program close to finalization 
• Preparations for the separation of our Pharma business on track; update to follow later this year as planned
• Strong financial position

Arnhem, the Netherlands, July 20, 2006 – Akzo Nobel (Euronext Amsterdam: AKZ; Nasdaq: AKZOY) today reported substantially higher revenues and operational earnings, driven by Organon and Coatings. Operating income excluding incidentals was up 9% from EUR 334 million to EUR 365 million.

Revenues were up 7% to EUR 3.6 billion (2005: EUR 3.4 billion). Autonomous growth was 8%, with all segments contributing. Volume growth was 6% and selling prices increased by 2%.

Excluding incidentals, operating income rose 9% from EUR 334 million to EUR 365 million. Including incidentals, operating income increased 3% to EUR 352 million. Incidentals in the second quarter of 2006 resulted in a net loss of EUR 13 million (2005: gain of EUR 7 million). Restructuring and impairment charges of EUR 20 million were taken, related to various restructuring activities at Coatings and Chemicals.

Net income nearly doubled from EUR 182 million to EUR 361 million as a result of improved operational earnings and one-time tax benefit. Excluding incidentals, net income was up 23% from EUR 199 million to EUR 245 million.

Commenting on the company’s performance, CFO Rob Frohn said: “Our businesses performed well in the second quarter, with both top and bottom line improving significantly, particularly at Organon and Coatings. Energy prices and raw materials remain a concern. Nevertheless, we look ahead with confidence to the second half of the year.” 

Strong financial position
Invested capital at June 30, 2006, amounted to EUR 8.4 billion, EUR 0.4 billion higher than at December 31, 2005. This increase was attributable to the seasonal increase of working capital and acquisitions, partially offset by negative currency translation effects.

Equity was up EUR 0.3 billion to EUR 3.9 billion, mainly because of first half-year retained income. Net interest-bearing borrowings increased by EUR 0.2 billion to EUR 1.7 billion, as a consequence of the seasonally negative funds balance. Gearing was 0.45 (December 31, 2005: 0.44).