Akzo Nobel N.v. · EURONEXT:AKZA
Akzo Nobel — Q1 2020 Earnings Presentation
26 slides from Akzo Nobel's earnings presentation, Apr 22, 2020
Slide 1: Investor update Q1 2020
Investor update Q1 2020 April 22, 2020 Ultimate rust-busting metal paint launched A new wave of exterior water-based paint has been launched by AkzoNobel which offers superior metal protection. Hammerite Ultima can be applied directly onto any metal surface – as well as rust – without the need for a
Slide 2: Agenda
Agenda Key highlights Financial review Concluding remarks Q&A Investor update | Q1 2020 2
Slide 3: Key highlights
Key highlights Investor update | Q1 2020 3
Slide 4: Q1 2020 showed transformation on track, despite significant market disruption
Q1 2020 showed transformation on track, despite significant market disruption Adjusted operating income up 31% at €214 million (2019: €163 million), despite impact from COVID-19 ROS, excluding unallocated costs, increased to 12.4% (2019: 9.1%) with price/mix up 2% Operating income at €187 million (2
Slide 5: Progress towards 2020 financial ambition, even with initial impact from COVID-19
Progress towards 2020 financial ambition, even with initial impact from COVID-19 Q1 2020: ROS* Price/mix Adjusted EPS (continuing operations) Increased to 12.4% Up 2% 54% higher (2019: 9.1%) ROI** Adjusted operating €500 million share income buyback almost complete Up at 18.3% 31% higher (2019:16.2%
Slide 6: COVID-19 impact significant in China, increasing in other regions and segments
COVID-19 impact significant in China, increasing in other regions and segments Decorative Paints Performance Coatings Revenue development Q1 2020 (Δ%) Revenue development Q1 2020 (Δ%) Total 0% 0% China -50% -50% -100% -100% January February March January February March Investor update | Q1 2020 6
Slide 7: End market demand expected to be significantly lower in Q2
End market demand expected to be significantly lower in Q2 (relative headwinds) China ~ EMEA Industrial Marine and Coatings Protective South East and South Coatings ~ ~ ~ Asia Powder Coatings Automotive South and Specialty America Coatings Investor update | Q1 2020 7
Slide 8: Key parts of transformation paused, taking steps to rapidly reduce costs
Key parts of transformation paused, taking steps to rapidly reduce costs Sales force effectiveness Margin management Price/mix up 2% Innovation excellence Ongoing margin management in place Global Business Services GBS transitions: 8 completed, 18 remain in progress Integrated Business Planning ERP
Slide 9: Financial review
Financial review Investor update | Q1 2020 9
Slide 10: Q1 2020 ROS increased 330bps to 12.4%, despite softer end market demand
Q1 2020 ROS* increased 330bps to 12.4%, despite softer end market demand € million Q1 2019 Q1 2020 Δ% Δ%CC We estimate that the COVID-19 crisis has Revenue 2,185 2,058 (6%) (5%) negatively impacted Q1 Adjusted EBITDA 248 302 22% revenue by around 5% Adjusted operating income 163 214 31% Revenue was
Slide 11: Price/mix continued positive trend, volumes lower mainly due to COVID-19
Price/mix continued positive trend, volumes lower mainly due to COVID-19 Decorative Paints Performance Coatings Total Quarterly price/mix development in % year-on-year 11 8 2 9 6 7 7 7 6 6 0 4 5 4 5 1 5 0 5 5 4 1 3 3 3 2 2 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q1 18 Q2 18 Q3 18 Q4 18
Slide 12: Adjusted operating income 31% higher, with lower volumes offset by cost savings
Adjusted operating income 31% higher, with lower volumes offset by cost savings Adjusted operating income Positive impact Negative impact -8 ROS* 12.4% 44 ROS* 9.1% -2 50 214 - 88 163 55 Q1 2019 FX Volumes Price/mix Raw materials/ OPEX One-offs and other Q1 2020 Variable cost ROS = adjusted operatin
Slide 13: Decorative Paints ROS up 130bps at 8.5%, despite COVID-19 impact mainly in Asia
Decorative Paints ROS up 130bps at 8.5%, despite COVID-19 impact mainly in Asia € million Q1 2019 Q1 2020 Δ% Δ%CC Revenue 836 754 (10%) (8%) Adjusted EBITDA 95 100 5% Adjusted operating income 60 64 7% Operating income 54 58 7% ROS1 7.2% 8.5% ROI2 12.0% 14.1% Revenue development Q1 2020 (%) Increase
Slide 14: Performance Coatings ROS 330bps higher, while end market demand lower
Performance Coatings ROS 330bps higher, while end market demand lower € million Q1 2019 Q1 2020 Δ% Δ%CC Revenue 1,333 1,295 (3%) (3%) Adjusted EBITDA 182 230 26% Adjusted operating income 138 190 38% Operating income 97 182 ROS1 10.4 14.7 ROI2 20.1 22.0 Revenue development Q1 2020 (%) Increase The B
Slide 15: Q1 adjusted EPS up 54% at €0.71
Q1 adjusted EPS up 54% at €0.71 mainly due to higher operating income € million Q1 2019 Q1 2020 Outstanding share capital was 199.9 million common shares at Operating income 113 187 the end of March 2020 Net financing expenses (13) (13) The weighted average number Results from associates and joint v
Slide 16: Strong balance sheet and solid cash position
Strong balance sheet and solid cash position € million Q1 2019 Q1 2020 Excluding the impact of pension pre-funding and EBITDA 198 277 pension top-up payments the Impairment losses 33 - cash generation in Q1 2020 improved by €82 million, Changes in working capital (421) (353) mainly due to higher EBI
Slide 17: Capital allocation priorities unchanged
Capital allocation priorities unchanged Pension liabilities de-risked €500m share buyback almost completed Profitable organic growth ~2.5% capital expenditures/revenue Leverage ratio 1-2x Dividend Stable to rising net debt/EBITDA Acquisitions Strategically aligned and value creating Retain strong in
Slide 18: Concluding remarks
Concluding remarks Investor update | Q1 2020 18
Slide 19: Q1 2020 showed transformation on track, despite significant market disruption
Q1 2020 showed transformation on track, despite significant market disruption Adjusted operating income up 31% at €214 million (2019: €163 million), despite impact from COVID-19 ROS, excluding unallocated costs, increased to 12.4% (2019: 9.1%) with price/mix up 2% Operating income at €187 million (2
Slide 20: Outlook
Outlook AkzoNobel has paused key parts of the company’s transformation and suspended its 2020 financial ambition in response to the significant market disruption resulting from the COVID-19 pandemic. Headwinds related to COVID-19 are increasing for most parts of the world and will have a significant
Slide 21: Upcoming events
Upcoming events Annual general meeting of Shareholders April 23, 2020 Report for the second quarter July 22, 2020 Investor update | Q1 2020 21
Slide 22: 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 Balanced geographic exposure: 50% revenue from emerging markets Well positioned to accelerate growth and enhance profitability Transformation plans in place and clear path t
Slide 23: 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 'forw
Slide 24: Appendix
Appendix Investor update | Q1 2020 24
Slide 25: Representation of revenue 2019
Representation of revenue 2019 Q1 2019 Q2 2019 Q3 2019 Q4 2019 € million Reported Represented Reported Represented Reported Represented Reported Represented Decorative Paints EMEA 506 498 620 611 573 565 462 454 Decorative paints South America 99 98 103 102 121 120 139 137 Decorative Paints Asia 240
Slide 26: Assumptions 2020
Assumptions 2020 ROS = adjusted operating income as percentage of revenue (excluding unallocated cost) ROI = adjusted operating income of the last 12 months as percentage of average invested capital (excluding unallocated cost and invested capital) Other activities/eliminations €140-180m Leverage 1-