Akzo Nobel N.v. · EURONEXT:AKZA
Akzo Nobel — Q3 2019 Earnings Presentation
32 slides from Akzo Nobel's earnings presentation, Oct 23, 2019
Slide 1: Investor update Q3 2019
Investor update Q3 2019 October 23, 2019 New dawn rises with 2020 Color of the Year Tranquil Dawn is AkzoNobel’s Color of the Year for 2020. A delicate, fluid shade somewhere between green, blue and grey, Tranquil Dawn also features in all four ColourFutures 2020 color palettes.
Slide 2: Agenda
Agenda Key highlights Financial review Concluding remarks Q&A Investor update | Q3 2019 2
Slide 3: Key highlights
Key highlights Investor update | Q3 2019 3
Slide 4: Q3 2019 results show continued progress with adjusted operating income up 23%
Q3 2019 results show continued progress with adjusted operating income up 23% Adjusted operating income up 23% at €300 million (2018: €243 million) ROS, excluding unallocated costs, increased to 13.8% (2018: 12.3%) Transformation on track and delivered €19 million cost savings Adjusted EPS from cont
Slide 5: ROS increased to 13.8% driven by pricing initiatives and cost-saving programs
ROS* increased to 13.8% driven by pricing initiatives and cost-saving programs Q3 2019: Revenue Price/mix Adjusted EPS Up 3% 4% higher 62% higher 2% up in constant currencies ROS* Adjusted Operating €2.2 billion shares Income repurchased 2019 YTD part of €2.5 billion share buyback to be completed by
Slide 6: Uncertain macro-economic environment with softer end market demand
Uncertain macro-economic environment with softer end market demand EMEA Powder South Coatings Industrial America Raw Coatings materials ~ ~ ~ South Marine and Protective Coatings China East Foreign and Automotive exchange South and Specialty Coatings ~ ~ Asia ~ Investor update | Q3 2019 6
Slide 7: Winning together: 15 by 20 strategy continues to deliver results
Winning together: 15 by 20 strategy continues to deliver results Sales force effectiveness Price/mix increased 4% (versus Q3 2018) Margin management Innovation excellence Moving towards ongoing margin management Global Business Services GBS: 28 country transitions complete; 43/120 transitions Integr
Slide 8: Pricing initiatives have successfully offset raw material cost inflation on a run-rate basis
Pricing initiatives have successfully offset raw material cost inflation on a run-rate basis Sales force effectiveness (€m) Margin management Innovation excellence 200 Global Business Services 100 Integrated Business Planning ERP and systems platform 0 ALPS continuous improvement -100 Fit-for-purpos
Slide 9: Global Business Services hubs fully operational and transitions ongoing
Global Business Services hubs fully operational and transitions ongoing Sales force effectiveness Margin management Innovation excellence Warsaw Global Business Services Suzhou Integrated Business Planning Nashville ERP and systems platform Pune ALPS continuous improvement Sao Paolo Fit-for-purpose
Slide 10: Transformation on track to deliver previously announced cost savings
Transformation on track to deliver previously announced cost savings Sales force effectiveness Cost savings (€m) Total €210m Margin management Achieved cost savings Innovation excellence 43 19 Carryover cost savings 33 Global Business Services 38 Integrated Business Planning 18 ERP and systems platf
Slide 11: Evolution of extended leadership team shows continued organizational development
Evolution of extended leadership team shows continued organizational development Sales force effectiveness Extended Leadership Team* tenure Margin management Innovation excellence Global Business Services More than half ELT Integrated Business Planning ERP and systems platform joined in last 2 years
Slide 12: Good progress and sustained focus on transformation plans
Good progress and sustained focus on transformation plans 2017 2018 2019 2020 Sales force effectiveness Margin management Innovation excellence Global Business Services Integrated Business Planning ERP and systems platform ALPS continuous improvement Fit-for-purpose organization Procurement excellen
Slide 13: Financial review
Financial review Investor update | Q3 2019 13
Slide 14: Revenue 3% higher and adjusted operating income up 23%
Revenue 3% higher and adjusted operating income up 23% € million Q3 2018 Q3 2019 Δ% Δ%CC Revenue was up 3%, and up 2% in constant currencies. Revenue 2,326 2,398 3% 2% Price/mix was up 4% overall, Adjusted EBITDA 303 387 28% mainly driven by pricing initiatives Adjusted operating income 243 300 23%
Slide 15: 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 Total Quarterly price/mix development in % year-on-year 11 8 9 6 7 7 7 6 6 0 4 5 4 5 1 0 0 5 5 5 4 3 3 2 -3 -3 -3 -5 -1 -1 -1 -1 -1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Slide 16: Positive price/mix and cost savings increased adjusted operating income
Positive price/mix and cost savings increased adjusted operating income Adjusted operating income Positive impact - 14 ROS* 13.8% Negative impact 4 19 - ROS* 12.3% - 4 95 - 51 300 243 Q3 2018 FX Volumes Price/mix Raw materials/ OPEX One-offs and other Q3 2019 Variable cost *Excluding unallocated cor
Slide 17: Decorative Paints revenue and ROS up with higher profitability in all regions
Decorative Paints revenue and ROS up with higher profitability in all regions € million Q3 2018 Q3 2019 Δ% Δ%CC Revenue 951 977 3% 2% Adjusted EBITDA 138 174 26% Adjusted operating income 115 135 17% Operating income 112 130 16% ROS%* 12.1% 13.8% ROI%* 12.6% 12.5% Revenue development Q3 2019 (%) 1 I
Slide 18: Performance Coatings ROS up at 13.7% driven by pricing initiatives and cost savings
Performance Coatings ROS up at 13.7% driven by pricing initiatives and cost savings € million Q3 2018 Q3 2019 Δ% Δ%CC Revenue 1,388 1,418 2% -% Adjusted EBITDA 204 238 17% Adjusted operating income 170 194 14% Operating income 164 156 (5%) ROS%* 12.2% 13.7% ROI%* 20.2% 20.8% Revenue development Q3 2
Slide 19: Adjusted EPS up 62% at €0.97
Adjusted EPS up 62% at €0.97 Q3 2018 Q3 2019 € million Q3 YTD 2018 Q3 YTD 2019 237 247 Operating income 537 668 (20) (27) Net financing expenses (29) (58) 4 6 Results from associates and joint ventures 14 16 221 226 Profit before tax 522 626 (66) (51) Income tax (112) (151) 155 175 Profit from conti
Slide 20: Q3 free cash flow improved mainly due to higher EBITDA
Q3 free cash flow improved mainly due to higher EBITDA Q3 2018 Q3 2019 € million Q3 YTD 2018 Q3 YTD 2019 297 334 EBITDA 717 929 - 28 Impairment losses - 61 (18) (5) Pre-tax results on acquisitions and divestments (40) (71) 155 35 Changes in working capital (427) (502) (1) (2) Pension top-up payments
Slide 21: Interim dividend of €0.41 per share
Interim dividend of €0.41 per share Dividend € per share Related to the Speciality Chemicals business Final dividend 2.50 Dividend policy remains to pay a “stable to rising” 0.85 1.80 dividend 1.55 1.65 1.45 1.65 Dividend paid in cash 1.28 1.09 1.43 1.12 1.20 0.37 0.56 0.37 0.41 0.33 0.35 2014 2015
Slide 22: Concluding remarks
Concluding remarks Investor update | Q3 2019 22
Slide 23: Q3 2019 results show continued progress with adjusted operating income up 23%
Q3 2019 results show continued progress with adjusted operating income up 23% Adjusted operating income up 23% at €300 million (2018: €243 million) ROS, excluding unallocated costs, increased to 13.8% (2018: 12.3%) Transformation on track and delivered €19 million cost savings Adjusted EPS from cont
Slide 24: Outlook
Outlook We are delivering towards our Winning together: 15 by 20 strategy and continue creating a fit-for- 2020 purpose organization for a focused paints and guidance* coatings company, contributing to the achievement of our 2020 guidance. ROS 15% Demand trends differ per region and segment in ROI >
Slide 25: Upcoming events
Upcoming events Ex-dividend date of 2019 interim dividend October 25, 2019 Record date of 2019 interim dividend October 28, 2019 Payment of 2019 interim dividend November 6, 2019 Report for the full-year and the fourth quarter February 12, 2020 Investor update | Q3 2019 25
Slide 26: 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 27: 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 28: Appendix
Appendix Investor update | Q3 2019 28
Slide 29: YTD 2019: Profit up 24% and ROS 12.3%
YTD 2019: Profit up 24% and ROS* 12.3% € million YTD 2018 YTD 2019 Δ% Δ%CC Price/mix up 5% overall, mainly driven by pricing Revenue 6,948 7,034 1% 1% initiatives Adjusted EBITDA 797 1,029 29% Volumes 6% lower due to Adjusted operating income 617 768 24% value over volume strategy Operating income 5
Slide 30: YTD 2019: Decorative Paints
YTD 2019: Decorative Paints € million YTD 2018 YTD 2019 Δ% Δ%CC Revenue 2,803 2,826 1% 2% Adjusted EBITDA 362 446 23% Adjusted operating income 294 331 13% Operating income 271 350 29% ROS%* 10.5% 11.7% ROI%* 12.6% 12.5% Revenue development YTD 2019 (%) Increase -1 1 2 Decrease -5 5 Volumes Price/mi
Slide 31: YTD 2019: Performance Coatings
YTD 2019: Performance Coatings € million YTD 2018 YTD 2019 Δ% Δ%CC Revenue 4,184 4,202 - (1%) Adjusted EBITDA 580 661 14% Adjusted operating income 476 529 11% Operating income 447 427 (4%) ROS%* 11.4% 12.6% ROI%* 20.2% 20.8% Revenue development YTD 2019 (%) 0 1 Increase Decrease -6 5 Volumes Price/
Slide 32: IFRS 16 has limited impact; adopting the modified retrospective approach
IFRS 16 has limited impact; adopting the modified retrospective approach Third quarter January - September Restated As Restatement opening reported at due to Before including before including € million balance at Impact € million Impact December adoption IFRS 16 IFRS 16 January 1, IFRS16 IFRS16 31,