Akzo Nobel N.v. · EURONEXT:AKZA
Akzo Nobel — Q3 2014 Earnings Presentation
89 slides from Akzo Nobel's earnings presentation, Oct 21, 2014
Slide 1: Investor Update Q3 2014 results
Investor Update Q3 2014 results Ton Büchner & Maëlys Castella October 21, 2014
Slide 2: Agenda
Agenda 1. Q3 2014 highlights 2. Operational review 3. Financial review 4. Conclusion 5. Questions Investor Update Q3 2014 results 2
Slide 3: Q3 2014 highlights
Q3 2014 highlights • Q3 volumes up 1 percent, more than offset by currency effects and divestments, resulting in revenues down 2 percent • Operating income of €335 million reflects benefits from improvement actions and lower restructuring charges • Return on sales (ROS) 9.1 percent (2013: 8.0 percen
Slide 4: Operational review
Operational review Investor Update Q3 2014 results 4
Slide 5: Return on Sales improvement continued in Q3 2014
Return on Sales improvement continued in Q3 2014 € million Q3 2014 Δ% Revenue 3,686 -2 Operating income 335 11 Ratio, % Q3 2014 Q3 2013 Return on sales 9.1 8.0 Return on sales (excluding restructuring costs) 10.6 10.0 Moving average return on investment 10.5 8.6 Increase Revenue development Q3 2014
Slide 6: Continued fragile economic environment impacting all Business Areas
Continued fragile economic environment impacting all Business Areas Quarterly volume development in % year-on-year 2013 2014 6 +2% 2 0% 0% +1% -2 -6 Decorative Paints Performance Coatings Specialty Chemicals AkzoNobel Quarterly price/mix development in % year-on-year 5 2 +1% -3% -1% -1% -1 -4 Decora
Slide 7: Foreign exchange rates have become less of a headwind in Q3
Foreign exchange rates have become less of a headwind in Q3 Quarterly foreign exchange rate development in % year-on-year 2013 2014 4 -1% -1% -1% -1% 0 -4 -8 Decorative Paints Performance Coatings Specialty Chemicals AkzoNobel • Adverse currency effects, impacting 1H 2014, were visible in all Busine
Slide 8: Revenue split by end-user segment
~44% of revenues ~16% of revenues New Build Projects Automotive OEM, Parts and Assembly Maintenance, Renovation & Repair Automotive Repair Building Products & Components Marine and Air Transport ~16% of revenues ~24% of revenues Consumer Durables Natural Resource and Energy Industries Consumer Packa
Slide 9: Decorative Paints Q3 2014 highlights
Decorative Paints Q3 2014 highlights = • Volumes were flat compared with € million Q3 2014 Δ% previous year Revenue 1,050 -8 • Revenues down 8 percent due to Operating income 113 6 divestments and adverse price/mix Ratio, % Q3 2014 Q3 2013 • Price/mix largely driven by the sale of the German stores
Slide 10: Performance Coatings Q3 2014 highlights
Performance Coatings Q3 2014 highlights • Volumes were up 2 percent € million Q3 2014 Δ% compared with previous year, Revenue 1,420 0 driven by Marine and Protective Coatings and Powder Coatings Operating income 135 -16 • Revenues were flat, with positive volumes offset by negative Ratio, % Q3 2014
Slide 11: Performance Coatings – New organizational structure
Performance Coatings – New organizational structure • An organization that is more customer focused, agile and lean, with Strategic Market Units directly managed by the Business Area • Easier execution of the diversified growth strategy – Stronger focus on capturing market opportunities in growth re
Slide 12: Specialty Chemicals Q3 2014 highlights
Specialty Chemicals Q3 2014 highlights • Volumes were flat compared with € million Q3 2014 Δ% the previous year Revenue 1,239 -1 • Revenues down 1 percent, due to Operating income 156 46 adverse currency effects and divestments Ratio, % Q3 2014 Q3 2013 • Operating income up 46 percent at €156 millio
Slide 13: Financial review
Financial review Investor Update Q3 2014 results 13
Slide 14: Summary – Q3 2014 results
Summary – Q3 2014 results € million Q3 2014 Q3 2013 EBITDA 487 456 Amortization and depreciation (152) (153) Incidentals - - Operating income 335 303 Net financing expenses (38) (56) Minorities and associates (10) (10) Income tax (84) (83) Discontinued operations 2 1 Net income attributable to share
Slide 15: Cash flows Q3 2014
Cash flows Q3 2014 € million Q3 2014 Q3 2013 Profit for the period from continuing operations 219 168 Amortization and depreciation 152 153 Change working capital 137 183 Change provisions (48) (37) Other changes 29 85 Net cash from operating activities 489 552 Capital expenditures (137) (133) Acqui
Slide 16: Conclusion
Conclusion Investor Update Q3 2014 results 16
Slide 17: Conclusion
Conclusion • Fifth consecutive quarter of improvement in return on sales at group level and underlying return on sales improvement visible in all Business Areas • Continuous improvement programs are ongoing in all businesses, with expectation of at least €250 million restructuring costs in 2014 • Nu
Slide 18: Questions
Questions Investor Update Q3 2014 results 18
Slide 19: Safe Harbor Statement
Safe Harbor Statement This presentation contains statements which address such key issues as AkzoNobel’s growth strategy, future financial results, market positions, product development, products in the pipeline, and product approvals. Such statements should be carefully considered, and it should be
Slide 20: Appendices
Appendices Investor Update Q3 2014 results 20
Slide 21: Restructuring charges by quarter
Restructuring charges by quarter* FY Q1 Q2 Q3 YTD € million Q1 Q2 Q3 Q4 2013 2014 2014 2014 2014 Decorative Paints 7 24 8 66 105 22 23 1 46 Performance 11 5 9 77 102 15 17 41 73 Coatings Specialty 1 0 46 27 74 7 2 6 15 Chemicals Other 10 11 12 34 67 0 3 7 10 Total 29 40 75 204 348 44 45 55 144 * 201
Slide 22: Effects from Building Adhesives on FY 2013 results
Effects from Building Adhesives on FY 2013 results € million Q1 Q2 Q3 Q4 FY 2013 Revenue 45 49 47 - 141 Operating Income 4 5 3 - 12 • Divestment completed on October 1st, 2013 • Results still included in 2013 financials, impact on 2014 revenue development visible through acquisitions/divestments Inv
Slide 23: Q3 2014 Operating income – Cash bridge
Q3 2014 Operating income – Cash bridge € million Q3 2014 Q3 2013 Operating Income 335 303 Incidentals - - Depreciation & amortization 152 153 EBITDA before incidentals 487 456 Other 3 26 Change working capital 137 183 Change provisions (48) (37) Interest paid (24) (25) Income tax paid (66) (51) Net
Slide 24: IAS 19 pension deficit unchanged in Q3 2014
IAS 19 pension deficit unchanged in Q3 2014 Key pension assumptions metrics Q3 2014 Q2 2014 Discount rate 3.7% 4.0% Inflation rate 3.0% 3.1% Pension deficit development during Q3 2014 € million Decrease Increase (1,139) (1,143) 1 29 (616) 436 146 Deficit end Q2 Top-ups Discount rates Inflation Asset
Slide 25: Innovation Pipeline Q3 2014 Decorative Paints – Dulux Forest Breath
Innovation Pipeline Q3 2014 Decorative Paints – Dulux Forest Breath Key Features Customer Benefits Growth Potential • Waterborne interior woodstain • Family friendly: • Launched in China in May 2014 available as clear varnish and – low odor whilst painting • Drive cross-selling in retail opaque fini
Slide 26: Innovation Pipeline Q3 2014 Packaging Coatings - EvCote Water Barrier 3000
Innovation Pipeline Q3 2014 Packaging Coatings - EvCote™ Water Barrier 3000 Key Features Customer Benefits Growth Potential • Heat-sealable, abrasion- • 100% paper waste from • Significant growth opportunity resistant varnish with excellent production process recaptured secured over next five years
Slide 27: Innovation Pipeline Q3 2014 Functional Chemicals – ELOTEX CAST
Innovation Pipeline Q3 2014 Functional Chemicals – ELOTEX® CAST Key Features Customer Benefits Growth Potential • A new specialty additive for • Possibility to use any kind of • Elotex® CAST 700 and CAST dispersing and stabilizing available gypsum for leveling 710 launched in Q1/2013 and calcium sul
Slide 28: Our proposition: Leading market positions delivering leading performance
Our proposition: Leading market positions delivering leading performance AkzoNobel has gone through a significant amount of strategic change over the past five years Today, the company has • Excellent portfolio of businesses • Good long term growth potential on the basis of end-user segment growth •
Slide 29: Realistic 2015 financial targets focused on quality of earnings and value creation
Realistic 2015 financial targets focused on quality of earnings and value creation Return on sales Return on investment Net debt/EBITDA (Operating income/revenue) (Operating income/average x % 12 months invested capital) % 12 16 14.0 3 9.0 12 < 2.0 8 5.9* 6.6 8.9* 9.6 2 1.4 8 1.0 4 1 4 0 0 0 2012 20
Slide 30: AkzoNobel strategy introduced in 2013
AkzoNobel strategy introduced in 2013 • Organic growth • Operational excellence Investor Update Q3 2014 results 30
Slide 31: AkzoNobel today
AkzoNobel today • Revenue €14.6 billion • 49,560 employees • 44% of revenue from high growth markets • Major producer of Paints, Coatings and Specialty Chemicals • Leadership positions in many markets Revenue by Operating income Invested capital by Business Area by Business Area Business Area Perfor
Slide 32: The global paints and coatings market is around €80 billion
The global paints and coatings market is around €80 billion By market sector By end-user segment 2013, 100% = €80 billion 2013, 100% = €80 billion Yacht Aerospace Specialty Packaging Industrial Finishes Coil Decorative Consumer Buildings and Marine Paints Goods Infrastructure Wood (42%) Automotive O
Slide 33: AkzoNobel has many leading market positions
AkzoNobel has many leading market positions No.1 Position Other key players Multiple regions outside North PPG, regional players Decorative America North America* Sherwin-Williams PPG, regional players Protective Sherwin-Williams, Jotun Powder Axalta, Jotun, regional players Auto refinish Axalta PPG
Slide 34: High growth markets are 44% of revenue and their importance will increase
High growth markets are 44% of revenue and their importance will increase % of 2013 revenue 38% Mature Europe 15% 8% North America Emerging Europe 25% Asia Pacific 11% 3% Latin America Other regions Share of revenues from high growth markets will increase over time Investor Update Q3 2014 results 34
Slide 35: In aggregate variable costs represent 53% of revenue
In aggregate variable costs represent 53% of revenue Profit and loss breakdown* % of total • AkzoNobel is well positioned for economic recovery 100% • Variable costs represent 53% of revenue, down from 54% in 2012 • Decorative Paints is more driven by personnel costs in the distribution network, whi
Slide 36: We are actively addressing all components of operating expenses
We are actively addressing all components of operating expenses Operating expenses € 4.7 Research, Operating expense General & Selling Expenses Development & components Administrative Innovation € 1.4 € 3.0 € 0.4 Global Business Addressed by Commercial Excellence Initiatives Services Drives organic
Slide 37: Drive towards continuous improvement and commercial excellence
Drive towards continuous improvement and commercial excellence • Restructuring activities to continue into 2014, moving into continuous improvement which will enable us to achieve the 2015 targets – 2014 restructuring charges expected to total at least €250 million and will be more evenly spread ove
Slide 38: Sustainability is business; business is sustainability
Sustainability is business; business is sustainability of revenue by 2020 from products that are more sustainable for our customers than the products of our competitors more efficient resource and energy use across the entire value chain by 2020 (measured by carbon footprint reduction) (Resource Eff
Slide 39: AkzoNobel values drive cultural change
AkzoNobel values drive cultural change Investor Update Q3 2014 results 39
Slide 40: Leading performance; gaining momentum
Leading performance; gaining momentum Historical Vision 2015 Targets Culture issues & Strategy & Incentives & Values • ROS below peers • Organic growth • ROS 9% • Customer Focused • Not earning our cost • Operational • ROI 14% • Deliver on of capital excellence • Operating income - Commitments • Ina
Slide 41: Decorative Paints business at a glance
Decorative Paints business at a glance Revenue by end-user Revenue by geographic spread sub-segment 4% 16% 8% Mature Europe Maintenance, renovation and repair 14% Asia Pacific 49% Latin America New build projects Emerging Europe Other regions 25% 84% Decorative Paints key figures Key messages € mill
Slide 42: The global Decorative Paints market is attractive in terms of size and growth
The global Decorative Paints market is attractive in terms of size and growth Decorative Paints sales € billion • Used for protection as well as decoration 50 • Consumption per capita 40 driven primarily by the frequency of repainting 30 • Demand growth closely correlated with GDP growth, 20 consume
Slide 43: High-growth markets are growing well and are increasingly trading up
High-growth markets are growing well and are increasingly ‘trading up’ Paint market growth* Paint market composition* $ billion % of total, by value • Paint markets in high-growth markets are still showing 100% 8% p.a. significant opportunities for growth • Spending power of the middle 75% class in
Slide 44: In Decorative Paints we hold strong market positions across all regions
In Decorative Paints we hold strong market positions across all regions Geographic size AkzoNobel Geographic area (€ billion) position Europe* 12.2 1 South East Asia and Pacific 1.7 1 China and North Asia 6.4 2 Latin America 2.5 2 India and South Asia 2.8 3 * Europe includes Africa and Middle East I
Slide 45: We are strong in the premium segment, but also compete successfully elsewhere
We are strong in the premium segment, but also compete successfully elsewhere AkzoNobel Decorative Paints revenue by segment % of revenue 100% 75% 50% 25% 0% Brazil China Indonesia South Africa Economy Mid-market Premium Investor Update Q3 2014 results 45
Slide 46: We have very strong brands linked by a global approach to branding
We have very strong brands linked by a global approach to branding • Our well-known brands are one of our key competitive advantages Consumer • We have a number of powerful, relevant brands occupying a number of positions across different markets (consumer, professional, and other such as woodcare)
Slide 47: Accomplishments to date
Accomplishments to date Area Beginning 2008 End 2013 Cost reductions* n/a > 200 million Number of FTEs 25,800 16,240 Brands 100 59 SKUs >90,000 69,000 Factories 80 45 Warehouses 160 135 ERP systems >40 1 * Related to Performance Improvement Program Investor Update Q3 2014 results 47
Slide 48: Fix Europe
Fix Europe Objectives: • Improve performance by driving operational excellence and changing the operating model in Europe • Ensure that we are positioned for organic growth in mature European markets when the market recovers (e.g. UK) • Pursue organic growth in select countries where there are attra
Slide 49: Fix Europe
Fix Europe Actions: • Implement a central operating model and simplify our organizational structure • Consolidate our manufacturing and distribution footprint • Develop and implement standardized and efficient marketing and sales platforms • Redesign back office processes to support back office cons
Slide 50: Changing our operating model in Europe
Changing our operating model in Europe Action 2012 2013 2014 2015 Integrate relevant European activities and management Rationalize product portfolio and raw materials Rationalize manufacturing footprint Fully implement sales excellence Outsource certain finance businesses Implement central operatin
Slide 51: Grow profitably in high-growth markets
Grow profitably in high-growth markets Objectives: • Outgrow the market • Ensure that we leverage our (global) scale to ensure that we improve relative profitability while we grow Actions: • Develop profitable mid-market business model(s) • Build and implement a robust distribution strategy framewor
Slide 52: Performance Coatings business at a glance
Performance Coatings business at a glance Revenue by end-user segment Revenue by geographic spread 14% Buildings and 4% Mature Europe 24% Infrastructure 11% 27% North America Transportation 8% Asia Pacific 25% Latin America Consumer Goods Emerging Europe 30% 20% 37% Industrial Other regions Performa
Slide 53: We are organized in four Business Units
We are organized in four Business Units 2013 revenue by Business Unit • Protective Marine & • Marine Protective Coatings • Yacht Marine & Protective Coatings 27% 32% • Vehicle Refinishes Automotive & Automotive & Aerospace • Specialty Finishes Aerospace Coatings Coatings • Aerospace Powder Coatings
Slide 54: The Performance Coatings market is based on twelve sectors
The Performance Coatings market is based on twelve sectors Performance Coatings market sectors € billion, 2013 7 2013 total market size ~ €50 billion 6 5 4 3 2 1 0 AkzoNobel competes in these market sectors Source: Orr & Boss 2011 for base data on market sectors; AkzoNobel analysis Investor Update Q
Slide 55: The five year outlook for most sectors is positive
The five year outlook for most sectors is positive Performance Coatings market sectors 3-5 % (>GDP growth) € billion, 2013 3% (at GDP growth) 7 See next slide 6 5 4 3 2 1 0 Protective Vehicle Powder Wood Marine Specialty Coil Packaging Aerospace Yacht Refinishes Finishes Source: Orr & Boss 2011 for
Slide 56: The Marine new build market may have now reached the bottom of the cycle
The Marine new build market may have now reached the bottom of the cycle... New build ship deliveries Million deadweight tons, 2007 = 95 -5.7% -30.1% ? +18.4% p.a. 2007 08 09 10 11 12 13 14 Delivered Range of outcome On order Source: Clarkson Research Services Limited, January 2014, AkzoNobel analys
Slide 57: AkzoNobel is the global market leader in Performance Coatings, excluding Automotive
AkzoNobel is the global market leader in Performance Coatings, excluding Automotive Performance Coatings revenue € billion, 2013 unless noted 6 5 4 3 2 1 0 Non-Automotive Automotive * 2012 data Source: Annual Reports; AkzoNobel analysis Investor Update Q3 2014 results 57
Slide 58: AkzoNobel has many leading market sector positions in Performance Coatings
AkzoNobel has many leading market sector positions in Performance Coatings Performance Coatings market sectors AkzoNobel market share x € billion, 2013 position (by value) 2013 1 7 3 1 6 5 1 4 1/2 1 3 1 2 2 1 1/2 1 0 Protective Vehicle Powder Wood Marine Specialty Coil Packaging Aerospace Yacht Refi
Slide 59: We successfully expanded our portfolio and global presence
We successfully expanded our portfolio and global presence • Performance Coatings has made four bolt-on acquisitions over the last few years that brought many benefits, including: – Expanding our global reach – Broadening our technology offering – Taking leadership positions – Extracting significant
Slide 60: We have a strong business but there is room for improvement going forward
We have a strong business but there is room for improvement going forward What we have done Room for improvement over the last three years over the next three years Grown the business in a difficult market environment Grow volume organically • Bolt-on acquisitions • Margin management actions Reduced
Slide 61: Drive performance improvement initiatives
Drive performance improvement initiatives Initiative Actions Roll out a common set of commercial processes Drive commercial excellence to increase to deliver both organic growth and sales effectiveness commercial efficiency Use a cross-business, cross-functional approach Deliver further complexity r
Slide 62: Drive commercial excellence to increase sales growth and commercial efficiency
Drive commercial excellence to increase sales growth and commercial efficiency Commercial excellence is a key Actions value driver in Performance Coatings • Best practice selling processes • Best practice and competency training will be effectiveness Sales force focused on business in growth markets
Slide 63: Complexity reduction and continuously reduce external spend
Complexity reduction and continuously reduce external spend Performance Coatings Actions 2013 Drive further complexity reduction: Profit and loss breakdown* • Harmonize recipes % of total • SKU reductions 100% Use a cross-functional approach to deliver year-on-year savings in external spend • Aggreg
Slide 64: Continuously improve operational productivity
Continuously improve operational productivity Supply Chain performance is a key element for Actions success in Performance Coatings Embed standard processes and continuous • Supply Chain cost improvement capabilities to achieve (Manufacturing, logistics and warehousing) year-on-year savings exceedin
Slide 65: Pursue differentiated growth strategies
Pursue differentiated growth strategies Outgrow the market organically Expected outcomes • Marine • Improved market share • Protective • Costs don’t grow as fast as revenue • Powder • Improved return on sales • Specialty Finishes in percentage terms Improve performance by Expected outcomes driving o
Slide 66: Business at a glance
Business at a glance Revenue by end user segment Revenue by geographic spread 5% Buildings and Mature Europe 18% infrastructure 10% 2% North America Transportation 6% 44% Asia Pacific Consumer 17% 57% Latin America 19% goods Emerging Europe Industrial 22% Other regions Specialty Chemicals key figure
Slide 67: The chemical industry is large and growing
The chemical industry is large and growing Chemicals industry over time, by geography $ trillion • $3.5 trillion market Other China 6.3 Asia Pacific • Solution provider for society North America – manufacturing Western Europe – food production – climate change 3.4 • Continuous growth 1.3 0.9 • Stron
Slide 68: Five well positioned platforms in their industries
Five well positioned platforms in their industries Our Business Units Our Platforms Bleaching Chemicals Pulp & Performance chemicals 60% of Pulp & Performance chemicals Salt-chlorine chain Industrial Chemicals 100% of Industrial Chemicals Polymer Catalysts 40% of Functional Chemicals Functional Chem
Slide 69: Platforms operate world scale plants based on advanced technologies
Platforms operate world scale plants based on advanced technologies Our main chemical platforms Key products • Sodium chlorate Bleaching chemicals • Hydrogen peroxide • Energy/Salt • Monochloroacetic acid Salt-chlorine chain • Chlorine • Chloromethanes • Organic peroxides Polymer catalysts • Metal a
Slide 70: We have invested in the recent past and are well-prepared for future growth
We have invested in the recent past and are well-prepared for future growth BA Specialty Chemicals capital expenditure € million 500 400 300 200 100 0 2010 2011 2012 2013 Capital Expenditure Depreciation and Amortization Major projects and timing of spend Investment project 2010 2011 2012 2013 2014
Slide 71: Accomplishments to date
Accomplishments to date Area 2010 2013 Delta Number of operations integrated with customers 15 17 +13% Sales per FTE (k€) 445 467 +5% Capacity expansions (>10%) 12 units Number of manufacturing sites 109 102 -7% Sales/site (€ million) 42.6 48.5 +14% Renewable energy usage n/a 31% Waste (ton/€ millio
Slide 72: Four operational improvement initiatives
Four operational improvement initiatives Improve Strengthen Reduce Enhance product productivity of commercial organizational and process supply chain and excellence costs innovation operations • Asset optimization • Customer value • Restructuring • New applications • Production system creation and p
Slide 73: Differentiated strategies per platform
Differentiated strategies per platform Outgrow the market organically Actions ~ 50% of portfolio • Capitalize on investments Main platforms • Grow by successfully • Bleaching chemicals • Surfactants commercializing products for attractive applications Improve performance by driving Actions operation
Slide 74: Salt-Chlorine chain: Right at the heart of the customer base
Salt-Chlorine chain: Right at the heart of the customer base Steam cracker Refinery Olefin consumer Refinery & olefin producer Pipelines* * Pipelines transporting crude oil (RAPL), nafta (PALL), industrial gasses, ethylene and propylene Investor Update Q3 2014 results 74
Slide 75: Ethylene oxide network: Capitalizing on China investments
Ethylene oxide network: Capitalizing on China investments Bio-treatment facility Chelates Surfactants Hydrogen Organic Cyanide Peroxides Ethylene Oxide Ethylene Amines Cellulosics Site plan Investor Update Q3 2014 results 75
Slide 76: Surfactants: Growing with attractive end markets
Surfactants: Growing with attractive end markets Oilfield Lubricants Mining Agriculture Investor Update Q3 2014 results 76
Slide 77: Our platforms build on value chains
Our platforms build on value chains Raw Base Chemical Performance/ materials chemicals inter-mediates functional ‘End’ products chemicals Bleaching chemicals Salt-chlorine chain Polymer catalysts Ethylene oxide network Surfactants Investor Update Q3 2014 results 77
Slide 78: Our platforms build on value chains
Our platforms build on value chains Raw Base Chemical Performance/ materials chemicals inter-mediates functional ‘End’ products chemicals Bleaching chemicals Electrochemistry Salt-chlorine chain Polymer catalysts Serving plastics industry Ethylene oxide network Ethoxylation chemistry Surfactants Inv
Slide 79: Capital expenditure will be more in line with depreciation and amortization
Capital expenditure will be more in line with depreciation and amortization Capital Expenditures (millions €) 5.4% 4.5% 4.6% € 826 3.7% € 708 • 40-50% of capital expenditure is € 666 growth related € 534 • Going forward, capital expenditure will be around 4% of revenues, in line with depreciation an
Slide 80: Performance improvement actions release cash in Operating Working Capital
Performance improvement actions release cash in Operating Working Capital Operating Working Capital € million Operating Working Capital OWC as % of LQ revenue*4 2.500 16% 12.9% 14% • Operating Working Capital as % of revenue has 2.000 12% reduced towards 9.9% 10.7% 9.9% 10% • Significant seasonality
Slide 81: 2015 target: net debt to EBITDA ratio of less than two
2015 target: net debt to EBITDA ratio of less than two Net debt/EBITDA x • We have a strong liquidity position to support business needs: net cash and cash equivalents 1,5 €2.1 billion* • Undrawn revolving credit facility of €1.8 billion 1,0 (2018) €1.5 and $3 billion commercial paper programs, back
Slide 82: Continuously reducing costs of long term bonds
Continuously reducing costs of long term bonds Debt maturities € million Repaid € bonds £ bonds $ bonds 7.75% 4.00% 2.62% 7.25% 5.62% • Debt duration 3.6 years 825 8.00% 800 750 622 379 • Improving cash flow and 306 divestments enabled full 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 repayment
Slide 83: On track to deliver cash positive after dividend in 2015
On track to deliver cash positive after dividend in 2015 Cash flow sources and uses • Restructuring and pension 2012 2013 top-ups consume a significant proportion of cash • Performance improvement focus starts to address cash challenge • Remuneration metrics include cash generation • Positive cash i
Slide 84: Proactively managing or removing pension liabilities
Proactively managing or removing pension liabilities • ICIPF’s active management of interest rate and inflation Interest rate / exposure, with around 80% of defined benefit obligation Inflation hedging (DBO) risks hedged to date Retain and • Courtaulds (CPS) longevity swap with Swiss Re in 2012 Mana
Slide 85: Pension cash flow guidance
Pension cash flow guidance Defined benefit pension cash top-ups • Top-ups relate mainly to the 2 big UK plans, the ICI Pension Fund € million and the CPS Pension Scheme 2013 actual* 311 • Top-ups are based on prudent actuarial valuation of liabilities, 2014 -17 est.** ~330/year which differs from ac
Slide 86: Dividend policy unchanged
Dividend policy unchanged Dividends paid (€) • Our dividend policy is to pay a stable to rising dividend each year 1.08 1.12 1.12 1.12 1.05 • An interim and final dividend will be paid in cash unless shareholders elect to receive a stock dividend 0.30 0.32 0.33 0.33 0.33 2009 2010 2011 2012 2013 Fin
Slide 87: Realistic expected 2015 outcomes
Realistic expected 2015 outcomes Expected Outcomes 2012 2015 16 Return on 12,0 12,0 sales 12 9,5 9,0 7,5 8 4 2,2 0 % Decorative Paints Performance Coatings Specialty Chemicals Return on 32 25,0 investment 24 21,7 13,6 15,0 16 12,0 8 3,0 0 % Decorative Paints Performance Coatings Specialty Chemicals
Slide 88: Variable costs analysis
Variable costs analysis 2013 (excluding Decorative Paints North America) Packaging Energy & other variable costs* Raw materials Solvents Chemicals and intermediates*** Other raw materials** Additives Titanium dioxide Pigments Coatings’ specialties Resins * Other variable costs include variable selli
Slide 89: Both short & long term incentives are aligned with our priorities
Both short & long term incentives are aligned with our priorities Executive short term incentive 2014 Executive long term incentive 2014 STI Metric LTI Metric Element Element 20% Return on investment 35% Return on investment 20% Operating income 35% Total Shareholder Return 30% Operating cash flow 3