Slide 1: Q3 2009 results – Investor update
October 27, 2009 Q3 2009 results – Investor update
Slide 2: Agenda
Agenda • AkzoNobel at a glance • Strategic ambitions and action plans • Q3 Highlights and operational review • Financial review • Outlook and medium-term targets
Slide 3: AkzoNobel key facts
AkzoNobel key facts 2008 • Revenue €15.4 billion • 61,300 employees • EBITDA: €1.9 billion* • EBIT: €1.4 billion* • Credit ratings: BBB+ (S&P) and Baa1 (Moody’s) Revenue by business area EBITDA1 by business area 29% 27% 37% 44% Performance Coatings 29% Decorative Paints 34% Specialty Chemicals * Bef
Slide 4: AkzoNobel is the world's largest Coatings supplier
AkzoNobel is the world’s largest Coatings supplier 2008 revenue in € billion 10 8 6 4 2 0 s n t t r co t G el SF in on in pa am tu PP ob Pa Pa as Jo uP ls BA illi M Va oN n ai D -W po ns kz in ip Ka A w N er Sh Q3 2009 results 4
Slide 5: Excellent geographic spread of both revenue and profits
Excellent geographic spread of both revenue and profits Emerging markets are important (36% of revenue) % of 2008 revenue 40% 22% 7% ‘Mature’ Europe 20% North America ‘Emerging’ Europe Asia Pacific 8% Latin America 3% Rest-of-world Emerging markets profitability is strong (45% of EBIT) Q3 2009 resul
Slide 6: We have strong brands across the full spectrum of our business
We have strong brands across the full spectrum of our business Biggest brands, per business area % of 2008 revenue 25% of Decorative Paints 23% of Performance Coatings 18% of Specialty Chemicals Q3 2009 results 6
Slide 7: Strong emerging markets growth potential
Strong emerging markets growth potential Mature Emerging Per Capita Per Capita Architectural 8 liters < 2 liters Paint Industrial and Special Purpose 13 liters < 6 liters Coatings Plastics ~100 kg ~20 kg ~170 ~170 kg kg ~25 ~25 kg kg Paper Source: Food & Agriculture Organization of the UN, 2005 data
Slide 8: We continue to successfully innovate
We continue to successfully innovate Weathershield BackPack Roller System® • Complete painting system, combines the power of a pump to dispense and control paint from specially designed packs. UV LED spray gun for Autoclear® UV • Automotive spray gun introduced in May which paints and cures at the s
Slide 9: Low fixed costs as a percentage of revenue
Low fixed costs as a percentage of revenue % of annual revenue, indicative 100% Raw materials, energy, and other variable production costs Fixed production costs Selling, advertising, administration, R&D costs EBIT margin 0% Decorative Performance Specialty AkzoNobel Paints Coatings Chemicals Q3 200
Slide 10: Sustainability is integrated in everything we do
Sustainability is integrated in everything we do We have set ambitious sustainability targets: • Remain in the top three in the Dow Jones Sustainability Indexes • Reduce our total recordable injury rate • Deliver a step change in people development We focus on long-term performance. By 2015 our ambi
Slide 11: Strategic ambitions and action plans
Strategic ambitions and action plans
Slide 12: AkzoNobel strategic ambitions
AkzoNobel strategic ambitions Leading in value creation • Outgrow our markets • EBITDA margin > 14 percent by end 2011 • 0.5 percent improvement in operating Tied to incentives, working capital (OWC) level, p.a. both for value creation and Leading in sustainability sustainability • Top 3 Dow Jones S
Slide 13: Delivering the EBITDA margin ambition
Delivering the EBITDA margin ambition EBITDA margin, indicative 18 12 6 0 2008 ICI Organic Margin Operational End performance synergies growth management effectiveness 2011 Q3 2009 results 13
Slide 14: Key components of the strategic action plan
Key components of the strategic action plan ICI synergies • €340 million structural cost savings • Delivered more rapidly than originally planned Organic growth • Leveraging our strong emerging markets positions for growth • Emphasis on focused, bigger, bolder innovation Margin management • Centrali
Slide 15: Q3 Highlights and operational review
Q3 Highlights and operational review
Slide 16: Q3 Highlights
Q3 Highlights • Ongoing volume pressure • Strong company-wide focus on customers, costs and cash • Margin management and cost restructuring delivering results • Operating working capital reduced • Recovery remains fragile Q3 2009 results 16
Slide 17: Financial overview Q3 2009
Financial overview Q3 2009 • Revenue declined 10 percent to €3,639 million • EBITDA* of €549 million, EBITDA* margin at 15.1 percent • Restructuring continues • Net income: €197 million (2008: €152 million) • Operating working capital reduced to 14.5 percent of revenue (2008: 17.4 percent) • Interim
Slide 18: Revenue growth and margin development per quarter to Q3 2009
Revenue growth and margin development per quarter to Q3 2009 Reported revenue in % year-on-year 10 (12)% 5 (6)% (8)% (10)% 0 -5 -10 -15 Decorative Paints Performance Specialty AkzoNobel Coatings Chemicals EBITDA margin in % 20 16.1% 16.7% 15.2% 15.1% 15 10 5 0 Decorative Paints Performance Specialty
Slide 19: Q3 2009 revenue
Q3 2009 revenue € million Q3 2009 Δ% Revenue 3,639 (10) Revenue development Q3 2009 vs. Q3 2008 0 -1 -2 -3 -4 -8% -5 -10% -6 -1% -7 -8 -1% -9 -10 Volume Price Acquisitions/ Currency Total divestments Increase Decrease Q3 2009 results 19
Slide 20: Summary – Q3 2009
Summary – Q3 2009 € million Q3 2009 Q3 2008 Revenue 3,639 4,049 EBITDA* 549 527 Amortization and depreciation (158) (152) Incidentals (39) (79) Financial income & expense (98) (44) Minorities and associates (16) (13) Income tax (30) (94) Net income continuing operations 208 145 Discontinued operatio
Slide 21: Incidentals
Incidentals € million Q3 2009 Q3 2008 Restructuring costs (116) (28) Post-retirement benefits 58 Transformation costs (1) (9) Charges related to major legal, antitrust & environmental cases (2) (4) Results on acquisitions & divestments 19 (19) Other incidental results 3 (19) Total (39) (79) • Signif
Slide 22: EBITDA – Cash bridge
EBITDA – Cash bridge € million Q3 2009 Q3 2008 EBITDA before incidentals 549 527 Incidentals (cash) (21) (58) Change working capital 414 56 Change provisions (77) (214) Interest paid (16) (14) Income tax paid (21) (53) Net cash from operating activities 828 244 • Working capital improvements underpi
Slide 23: We are delivering on synergies and cost reduction
We are delivering on synergies and cost reduction Cumulative annualized savings € million 540 600 530 500 370 200 400 286 300 204 182 200 134 340 67 244 100 37 188 137 97 0 FY 2008 Q1 2009 Q2 2009 Q3 2009 FY 2011 target ICI synergies Additional restructuring Total cost savings targeted of at least €
Slide 24: ICI synergies and additional restructuring on track
ICI synergies and additional restructuring on track 2008 & YTD 2009 ICI Additional Total synergies restructuring Net FTE 1,742 2,240 3,982 reductions* Cash costs 142 167 309 (€ million) Annualized savings 244 286 530 (€ million) We will continue to pursue efficiency improvements: • Alignment of manu
Slide 25: Operational review Decorative Paints
Operational review Decorative Paints Q3 2009 results 25
Slide 26: Decorative Paints key facts
Decorative Paints key facts 2008 • Revenue €5.0 billion • 24,000 employees • EBITDA: €598 million* • 32 percent of revenue from emerging markets • Largest global supplier of decorative paints • Many leading positions, strong brands Some of our strong brands Revenue by geography 18% 49% 33% Asia Paci
Slide 27: Leading Deco positions in all regions with strong brands
Leading Deco positions in all regions with strong brands AkzoNobel market positions 1 2/3 >3 Export countries Source: Euromonitor basis; AkzoNobel analysis 2008 Q3 2009 results 27
Slide 28: Combination of channel and application mix creates a relatively stable market
Combination of channel and application mix creates a relatively stable market % of total Decorative market 2008 Market breakdown Market breakdown by channel by application ~70% ~50% ~50% ~30% Retail Trade New build Maintenance Source: Euromonitor basis; AkzoNobel analysis Q3 2009 results 28
Slide 29: Decorative Paints highlights Q3 2009
Decorative Paints highlights Q3 2009 • Revenue down 6 percent (Q2, 2009: 5 percent) • Volume decline of 9 percent (Q2, 2009: 10 percent) • EBITDA at €198 million (2008: €207 million) • Improved EBITDA margin at 15.2 percent (2008: 15.0 percent) • Trade market remains weak • Margins positively impact
Slide 30: Decorative Paints Q3 2009
Decorative Paints Q3 2009 € million Q3 2009 Δ% Revenue 1,299 (6) EBITDA* 198 (4) Ratio, % Q3 2009 Q3 2008 EBITDA* margin 15.2 15.0 Revenue development Q3 2009 vs. Q3 2008 0 -2 -6% -4 -9% -6 +4% +1% -2% -8 -10 Volume Price Acquisitions/ Currency Total divestments * Before incidentals Increase Decreas
Slide 31: Operational review Performance Coatings
Operational review Performance Coatings Q3 2009 results 31
Slide 32: Performance Coatings key facts
Performance Coatings key facts 2008 • Revenue €4.6 billion • 21,000 employees • EBITDA: €566 million* • 42 percent of revenue from emerging markets • Leading positions in performance coatings • Innovative technologies, strong brands Revenue by business unit Revenue by geography 3% 8% 7% Industrial F
Slide 33: Many market leadership positions
Many market leadership positions 1 Wood Industrial Coil 2 Adhesives Finishes Specialty Plastics 1 1 Powder Coatings Powder 1 Marine and Marine 2 Protective Protective Yacht Aerospace Car 3 Refinish Automotive OEM plastic Refinishes commercial 5 coatings 1 2 Packaging Coatings Beer & beverage Food ca
Slide 34: Performance Coatings highlights Q3 2009
Performance Coatings highlights Q3 2009 • Revenue decreased by 12 percent • Volumes down 11 percent (Q2, 2009: 19 percent down) • EBITDA up 12 percent at €166 million (2008: €148 million); EBITDA margin at 16.1 percent • Cost levels decrease as restructuring programs continue • Improving performance
Slide 35: Performance Coatings Q3 2009
Performance Coatings Q3 2009 € million Q3 2009 Δ% Revenue 1,030 (12) EBITDA* 166 12 Ratio, % Q3 2009 Q3 2008 EBITDA* margin 16.1 12.7 Revenue development Q3 2009 vs. Q3 2008 0 -5 -12% -11% +1% -1% -10 - -1% -15 Volume Price Acquisitions/ Currency Total divestments * Before incidentals Increase Decre
Slide 36: Operational review Specialty Chemicals
Operational review Specialty Chemicals Q3 2009 results 36
Slide 37: Specialty Chemicals key facts
Specialty Chemicals key facts 2008 • Revenue €5.7 billion • 13,300 employees • EBITDA: €909 million* • 35 percent of revenue from emerging markets • Major producer of specialty chemicals • Leadership positions in many markets Revenue by business unit Revenue by geography Functional Chemicals 2% 8% 9
Slide 38: Many market leadership positions
Many market leadership positions 1 Retention Pulp 2 and sizing Bleaching chemicals and Paper chemicals (globally) 1 1 Chlorine Industrial Monochloro- Merchant 2 Caustic acetic acid & salt merchant Chemicals (MCA) (Europe) (Europe) 1 Chelates & Functional micronutrients, 2 3 Salt sulfur products Ethy
Slide 39: Specialty Chemicals highlights Q3 2009
Specialty Chemicals highlights Q3 2009 • Revenue decreased by 8 percent • Volumes down 6 percent (Q2 2009: 18 percent) • Cost and cash savings initiatives gathered momentum, with programs in all businesses • EBITDA at €220 million (2008: €242 million) with margin at 16.7 percent (2008: 16.8 percent)
Slide 40: Specialty Chemicals Q3 2009
Specialty Chemicals Q3 2009 € million Q3 2009 Δ% Revenue 1,319 (8) EBITDA* 220 (9) Ratio, % Q3 2009 Q3 2008 EBITDA* margin 16.7 16.8 Revenue development Q3 2009 vs. Q3 2008 0 -2 -6% -4 -8% -6 +3% -8 -5% -10 -12 Volume Price Acquisitions/ Currency Total divestments * Before incidentals Increase Decre
Slide 41: Financial review
Financial review
Slide 42: Cash management discipline
Cash management discipline • OWC reduction Focus on • Capex prioritization cash • R&D stable • Only bolt-on acquisitions • Dividend policy unchanged • OWC reduced to 14.5% of revenue (Q3 2008: 17.4%) • Careful prioritization of Capex • We continue to look for attractive bolt-on acquisitions • Divide
Slide 43: Continued focus on Operating Working Capital is delivering results
Continued focus on Operating Working Capital is delivering results OWC € million 3000 20% 19% 18% 17% 2500 16% 15% 14% 2000 13% 12% 11% 1500 10% 3Q08 4Q08 1Q09 2Q09 3Q09 OWC OWC as % of revenue Q3 2009 results 43
Slide 44: Ambition to maintain strong credit rating unchanged
Ambition to maintain strong credit rating unchanged € million Sept 30, 2009 Dec 31, 2008 Equity 8,223 7,913 Net debt 1,966 2,084 € million Q3 2009 Q3 2008 Net cash from operating activities 828 244 • Equity positively impacted by currency translation and net profit • Net debt decreased due to result
Slide 45: Pension deficit development
Pension deficit development First nine months of 2009 € million Pension funding deficit year-end 2008 (988) Top-ups into UK funds 250 Pension costs net of regular contributions (87) Net Balance sheet provision end Q3 2009 (825) Plan asset returns exceeding expectation 640 Increased DBO due to higher
Slide 46: Debt maturities lengthened
Debt maturities lengthened No major bonds maturing before 2011 Debt maturity, € million 1,200 800 400 0 2009 2010 2011 2012 2013 2014 2015 2016 € bonds $ bonds GBP bonds Significant liquidity headroom • Undrawn revolving credit facility of €1.5 billion available (2013)* • €1.5 & $1 billion commercia
Slide 47: Credit ratings
Credit ratings AkzoNobel is committed to maintaining a strong investment grade rating Standard & Poor’s: BBB+ (negative outlook) • Rating affirmed on August 25, 2009, unchanged since February 25, 2009 • AkzoNobel continues to benefit from its business position Moody’s: Baa1 (negative outlook) • Rati
Slide 48: Medium-term targets
Medium-term targets
Slide 49: Well positioned to meet current challenges
Well positioned to meet current challenges Sound fundamentals • Strong market positions and brands • Diverse geographic spread in highly attractive sectors • Strong operating cash flow Actions • Continued focus on customers • Rigorous cost restructuring • Cash protection • Prudent capital allocation
Slide 50: Outlook and medium-term targets
Outlook and medium-term targets Focus continues to be given to customers, cost reduction and cash generating actions so that the company is well positioned to meet the current challenges and, as a result, will be in good shape to take advantage of the recovery when it comes. However, the economic re
Slide 51: 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