Akzo Nobel N.v. · EURONEXT:AKZA
Akzo Nobel — Q4 2018 Earnings Presentation
33 slides from Akzo Nobel's earnings presentation, Feb 13, 2019
Slide 1: Investor update Q4 2018
Investor update Q4 2018 We’ve created a major buzz in the coatings industry with the launch and future capital allocation of our Paint the Future startup challenge. We want to combine our global scale, know-how and expertise with the ingenious solutions of startups and scale-ups across the planet. I
Slide 2: Agenda
Agenda Key highlights Financial review Future capital allocation Concluding remarks Q&A Investor update | Q4 2018 2
Slide 3: Key highlights
Key highlights Investor update | Q4 2018 3
Slide 4: 2018 was a landmark year
2018 was a landmark year Completed sale of Specialty Chemicals business on October 1, 2018; returning a total of €6.5 billion to shareholders Robust pricing initiatives and cost-saving programs successfully fueled revenue growth in constant currencies and higher profitability in the second half of t
Slide 5: Q4 2018 demonstrates positive impact of pricing initiatives and cost savings programs
Q4 2018 demonstrates positive impact of pricing initiatives and cost savings programs Revenue Price/mix €2 billion capital Cash top-up repayment and share payments of main UK consolidation plans settled completed in January 2019 Up 4% 9% higher In constant currencies (including 6% price) ROS* Final
Slide 6: 'Winning together: 15 by 20' strategy
‘Winning together: 15 by 20’ strategy delivering results and gathering momentum Sales force effectiveness Price/mix increased 9% in Q4 (6% price) Margin management Innovation excellence Launch of Paint the Future startup challenge Global Business Services Monthly IBP cycles for all BUs Integrated Bu
Slide 7: Dealing with market headwinds
Dealing with market headwinds Powder Coatings EMEA Industrial Coatings Automotive and Specialty Latin Coatings South America and South ~ East Asia Marine and China Protective Foreign exchange Raw materials Coatings ~ ~ Investor update | Q4 2018 7
Slide 8: Pricing initiatives and clear strategic mandates focus on value over volume
Pricing initiatives and clear strategic mandates focus on value over volume Decorative Paints Performance Coatings Paints and Coatings Quarterly price/mix development in % year-on-year 11 8 9 7 6 0 4 5 1 0 0 5 5 3 2 -3 -3 -3 -5 -1 -1 -1 -1 -1 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 17 Q2
Slide 9: Positive price/mix and cost savings offsetting higher raw materials
Positive price/ mix and cost savings offsetting higher raw materials Adjusted operating income bridge: Q4 2017 to Q4 2018 Positive impact Negative impact - 121 - -8 196 - 18 34 - 80 178 170 165 165 181 90 90 Q4 2017 Adjusted FX Volumes Price/mix Raw materials/ OPEX Other items Q4 2018 Adjusted opera
Slide 10: Financial review
Financial review Investor update | Q4 2018 10
Slide 11: Revenue up 4% in constant currencies and adjusted operating income higher
Revenue up 4% in constant currencies and adjusted operating income higher € million Q4 2017 Q4 2018 Δ% Δ%CC Revenue up 4% in constant currencies, with positive Revenue 2,283 2,308 1% 4% price/mix offset by lower Adjusted EBITDA 240 240 - volumes Adjusted operating income 178 181 2% Volumes in China
Slide 12: Decorative Paints revenue up in constant currencies, driven by pricing initiatives
Decorative Paints revenue up in constant currencies, driven by pricing initiatives € million Q4 2017 Q4 2018 Δ% Δ%CC Revenue 923 896 (3%) 3% Adjusted EBITDA 87 76 (13%) Adjusted operating income 58 52 (10%) Operating income 41 37 (10%) ROS%* 6.3% 5.8% ROI%* 12.5% 12.4% Revenue development Q4 2018 (%
Slide 13: Performance Coatings ROS higher, driven by pricing initiatives and cost savings
Performance Coatings ROS higher, driven by pricing initiatives and cost savings € million Q4 2017 Q4 2018 Δ% Δ%CC Revenue 1,372 1,403 2% 4% Adjusted EBITDA 165 187 13% Adjusted operating income 133 153 15% Operating income 132 130 (2%) ROS%* 9.7% 10.9% ROI%* 23.4% 20.5% Revenue development Q4 2018 (
Slide 14: Net income Q4 and full-year 2018 impacted by one-off non-cash items
Net income Q4 and full-year 2018 impacted by one-off non-cash items Q4 2017 Q4 2018 € million FY 2017 FY 2018 139 68 Operating income 825 605 (15) (23) Net financing expenses (78) (52) 2 6 Results from associates and joint ventures 17 20 126 51 Profit before tax 764 573 (81) (6) Income tax (253) (11
Slide 15: Q4 resulted in higher net cash from operating activities and free cash flow
Q4 resulted in higher net cash from operating activities and free cash flow Q4 2017 Q4 2018 in € millions FY 2017 FY 2018 45 45 Profit for the period 511 455 62 59 Amortization and depreciation 276 239 239 250 Changes in working capital (105) (177) (9) 45 Changes in provisions (338) (203) (2) (1) Of
Slide 16: Future capital allocation
Future capital allocation Investor update | Q4 2018 16
Slide 17: Updated capital allocation priorities
Updated capital allocation priorities 1. Chemicals separation Total of €6.5 billion returned to shareholders before end 2019 Clear mandates per (sub)segment and geography 2. Profitable organic growth Revenue growth ~2% and capital expenditure ~€250m per year Unallocated corporate center costs €140-1
Slide 18: Net debt evolution towards 2020
Net debt evolution towards 2020 Net Leverage Net Leverage Net Leverage 1.0x – 2.0x 1.7x (5.6x) Net Debt Potential for further capital returns to Net Cash shareholders (February 2019) (February to (December 2017) end 2019) (January 2019) Return of proceeds from Specialty Chemicals Investor update
Slide 19: Cash top-up payments of main UK plans settled (Q1 2019)
Cash top-up payments of main UK plans settled (Q1 2019) IAS19 pension surplus of €0.4 billion, following sale of Specialty Chemicals Negotiations on triennial review of UK defined benefit pension schemes concluded (February 2019) Cash top-ups updated for actual payments 2018 and future payment sched
Slide 20: Proposed final dividend of €1.43 per share
Proposed final dividend of €1.43 per share Dividend € per share Related to the Speciality Chemicals business Final dividend 2.50 Interim dividend 0.85 1.80 1.55 1.65 1.45 Total 2018 dividend of €1.80 per share 1.09 1.43 Dividend policy remains to pay a “stable to 1.28 1.12 1.20 rising” dividend Divi
Slide 21: Concluding remarks
Concluding remarks Investor update | Q4 2018 21
Slide 22: 2018 was a landmark year
2018 was a landmark year Completed sale of Specialty Chemicals business on October 1, 2018; returning a total of €6.5 billion to shareholders Robust pricing initiatives and cost-saving programs successfully fueled revenue growth in constant currencies and higher profitability in the second half of t
Slide 23: Outlook
Outlook 2020 guidance* ROS 15% ROI >25% We are delivering towards our 'Winning together: 15 by 20' strategy and continue creating a fit-for- purpose organization for a focused paints and coatings company, contributing to the achievement of our 2020 guidance. Demand trends differ per region and segme
Slide 24: Upcoming events
Upcoming events Ex-dividend date of special cash dividend February 20, 2019 Record date of special cash dividend February 21, 2019 Payment of special cash dividend February 25, 2019 Publication annual report March 7, 2019 Report for the first quarter 2019 April 24, 2019 Annual General Meeting of sha
Slide 25: A focused, high performing, paints and coatings company
A focused, high performing, paints and coatings company Strong global brands Leading positions in large and attractive markets 2020 Balanced geographic exposure: 50% revenue from emerging markets guidance* Well positioned to accelerate growth and enhance profitability ROS 15% ROI >25% Transformation
Slide 26: Disclaimer/ forward-looking statements
Disclaimer/ forward-looking statements This presentation does not constitute or form a part of any offer to sell, or any invitation or other solicitation of any offer, to buy or subscribe for any securities in the United States or any other jurisdiction. Some statements in this presentation are 'for
Slide 27: Appendix
Appendix Investor update | Q4 2018 27
Slide 28: Pricing initiatives and cost savings compensating for higher raw material costs
Pricing initiatives and cost savings compensating for higher raw material costs € million FY 2017 FY 2018 Δ% Δ%CC Revenue was 4% lower, although up 1% in constant Revenue 9,612 9.256 (4%) 1% currencies. Volumes were Adjusted EBITDA 1,181 1,037 (12%) 5% lower versus an exceptionally strong last year
Slide 29: Full-year 2018: Decorative Paints
Full-year 2018: Decorative Paints € million FY 2017 FY 2018 Δ% Δ%CC Revenue was 5% lower, although up 1% in constant Revenue 3,898 3,699 (5%) 1% currencies Adjusted EBITDA 472 438 (7%) Price/mix effects were up Adjusted operating income 351 346 (1%) 4% overall. Volumes were 3% lower, driven by our O
Slide 30: Full-year 2018: Performance Coatings
Full-year 2018: Performance Coatings € million FY 2017 FY 2018 Δ% Δ%CC Revenue was 3% lower and up 1% in constant Revenue 5,775 5,587 (3%) 1% currencies. Pricing initiatives continued to gain traction, Adjusted EBITDA 817 767 (6%) with further increases Adjusted operating income 669 629 (6%) planned
Slide 31: IAS19 pension surplus following sale of Specialty Chemicals
IAS19 pension surplus following sale of Specialty Chemicals Key pension financial assumptions Q4 2017 Q4 2018 Discount rate 2.4% 2.7% Inflation rate 3.0% 3.1% € million Continuing operations 1,200 (41) 1,000 800 461 Increase (479) 600 (31) Decrease (57) 41 400 187 200 524 361 442 0 (163) (200) Q4 20
Slide 32: €6.5 billion return to shareholders
€6.5 billion return to shareholders to be completed before end 2019 Apr 19, 2017 Dec 7, 2017 Oct 1, 2018 Jan 22, 2019 Before end 2019 Announced separation Advance proceeds of Closed sale of €2 billion capital €2.5 billion share of Specialty Chemicals separation paid as Specialty Chemicals to repayme
Slide 33: Breakdown of total raw material spend
Breakdown of total raw material spend 2018 (%) Titanium dioxide Additives 12 16 Specialty resins 14 Commodity resins 19 10 Solvents 7 11 11 Latex and monomers Pigments and colorants Packaging Investor update | Q4 2018 33