Slide 1: Investor update Q4 2022
Investor update Q4 2022 February 8, 2023
Slide 2: Agenda
Agenda Key highlights Financial review Outlook Q&A Alternative performance measures (APM) AkzoNobel uses APM adjustments to the IFRS measures to provide supplementary information on the reporting of the underlying developments of the business. A reconciliation of the alternative performance measures
Slide 3: Revenue up 8% on strong pricing of 11%
Revenue up 8% on strong pricing of 11% Fourth consecutive quarter of positive pricing vs raws Q4 2022: Full-year 2022: Revenue Pricing Revenue €500m share buyback completed Up 8.4% Up 11% Up 13% (up 8.8% in Q4’21) (up 12.5% in Q4’21) (up 12% in FY21) Adjusted ROS1 Adjusted Final dividend operating i
Slide 4: Governance evolution
Governance evolution New CEO, Chairman and ExCo members representing Paints & Coatings 7 yrs at AkzoNobel 25 yrs at AkzoNobel Greg Poux- Ben Patrick Simon Guillaume Noteboom 18 yrs paints and Bourguignon Parker Former head of coatings experience Powder, Industrial, CEO, Chair of Chair of Supervisory
Slide 5: Q4 commercial highlights
Q4 commercial highlights Completed acquisition of Global refinish Lankwitzer’s wheel liquid coatings partner of Chinese business electric vehicle manufacturer BYD Supplier Partner of the Year Launch of biocide- by Tata Steel free fouling control for Yacht coatings Investor update | Q4 2022 5
Slide 6: Continued progress on ESG ambitions
Continued progress on ESG ambitions Q4 highlights Progress on 2030 ambitions1 Top ESG rated in the industry FY2022 2030 ambitions Sustainalytics: “Low Risk” rating maintained for 3rd consecutive year Carbon reduction in own operations2 25% 50% MSCI: AAA and “leader” status for 7th consecutive year R
Slide 7: Update on acquisitions Grupo Orbis and Kansai Paint Africa
Update on acquisitions Grupo Orbis and Kansai Paint Africa Grupo Orbis – performance ahead of plan Kansai Paint Africa – pending merger clearance Enterprise value of ~€0.5bn closed in April 2022 Intended acquisition announced in June 2022 with FY2022 revenue materially ahead of business case at ente
Slide 8: Current state of the market
Current state of the market North China South Asia America LATAM EMEA North Asia Pacific 13% 12% 46% 16% 13% Paints 40% Re-opening: Industrial 21% demand signals improving Powder 13% Automotive 13% and Specialty Marine and 13% Protective X% of 2022 revenue1 End market demand (volumes y-o-y): Strong
Slide 9: Financial review
Financial review Protecting the protectors We completed a repainting project in Vietnam as part of our Lighthouse Protection Campaign. Cu Lao Xanh – built in 1890 – was coated with more than 11,000 liters of Dulux Weathershield to help protect it against the elements. A great example of how our Peop
Slide 10: Revenue growth driven by 11% pricing
Revenue growth driven by 11% pricing AkzoNobel Paints Coatings (Q4 revenue development % y-o-y) (Q4 revenue development % y-o-y) (Q4 revenue development % y-o-y) 5 -1 8 -3 8 7 2 10 13 11 14 3 -9 -9 -9 Revenue FX & Revenue FX & Revenue Volumes Price/mix M&A FX Volumes Price/mix M&A Volumes Price/mix
Slide 11: Q4 profit impacted by macro headwinds
Q4 profit impacted by macro headwinds Adjusted OPI1 (€m) Positive impact Negative impact -209 275 ROS1 8.7% -8 - - -43 -16 -98 ROS1 4.8% 16 209 126 Q4 2021 FX Volumes Mix Price Raw material and OPEX Hyperinflation Q4 2022 freight cost and one-offs accounting 1. Alternative performance measure, for d
Slide 12: Positive €212m of pricing vs raws in 2022
Positive €212m of pricing vs raws in 2022 Raw material and freight inflation1 Pricing €1.9bn cumulative €2.0bn cumulative raw material inflation pricing 23.5% 22% 20.5% 4%‒6% 209 €80m‒ 19% 279 110m 11% 13% 321 16% 17% 334 19% 372 325 325 278 278 12.5% 12.5% 9% 9% 128 128 4.5% 4.5% 38 38 2% 2% Q1 Q2
Slide 13: Working capital and free cash flow
Working capital and free cash flow Impacted by raw material inflation and demand Operating working Free cash flow (FCF)2 €m capital (Trade)1 Working capital increase due as a % of revenue to raw material inflation Q4 FY Q3 Q4 18.0% Inventory reduction of €275m 16.9% 962 vs Q2’22 (€177m in CC) 13.5%
Slide 14: Leverage up temporarily
Leverage up temporarily Long-term debt maturities staggered to 2032 Debt maturity profile (€m) 5,875 Leverage Bonds are fixed rate 50% 3.8x Average coupon on bonds 1.6% Bonds 7% 4,089 Debt is covenant-free Other long-term LT debt 22% Nominal value of outstanding bonds 1,786 Commercial paper 21% Bank
Slide 15: Profitability impacted by weak demand
Profitability impacted by weak demand Stable dividend per share Adjusted EBITDA1 Adjusted earnings per share1 Dividend per share (DPS) (€m) (EPS) from continuing (€) operations (€) Q4 FY Number of shares (weighted average) Interim Final 191m 185m 175m 1,442 1,436 Q4 FY 1.95 1.98 1.98 1,157 3.88 4.07
Slide 16: Outlook
Outlook Partnership with electric vehicle maker BYD announced We’ve become the global refinish partner for BYD Auto Sales Company Ltd. – currently the world’s leading seller of electric vehicles. AkzoNobel has been a recommended supplier of vehicle refinish products and services to BYD in China sinc
Slide 17: Priorities for 2023
Priorities for 2023 Continue inflationary pricing in Q1 Pricing discipline Protect pricing during deflationary cycle (50% of portfolio is defensive) Realize benefit from Improve inventory turns, decrease working capital raw material deflation Average raw mats down, but low visibility in H2 Offset in
Slide 18: Projections for 2023
Projections for 2023 Adj. EBITDA €1.2bn ‒ €1.5bn Volumes y-o-y (5%) ‒ (1%) Pricing vs raws €250m ‒ €450m Projections are based on organic volumes and constant currencies, and assume no significant market disruptions. Investor update | Q4 2022 18
Slide 19: Projections for 2023: volume scenarios
Projections for 2023 Volume scenarios Soft demand trends to continue Paints EMEA -HSD% to -MSD% Weak in Q1 (higher baseline), easier comps in H2 Weak in Q1 Paints China +LSD% to +HSD% Accelerating in Q2 onwards Paints South Asia Growth in South Asia driven by India and Vietnam +LSD% to +MSD% Paints
Slide 20: Margin expansion potential in 2023
Margin expansion potential in 2023 Pricing versus raw material1 costs 450 Adj. OPI impact y-o-y (€m) 250 212 -153 y-o-y FY2021 FY2022 FY2023 Pricing retention on ~50% of Pricing +7% +14% portfolio during deflationary cycle Raw material costs1 +20% +24% -LSD% to -HSD% 1. Raw materials impact includes
Slide 21: OPEX savings to offset inflation
OPEX savings to offset inflation Adj. OPI1 impact y-o-y (€m) €200m savings benefit in 2023 Integrated supply ramping up from Q2 SG&A chain €240m run rate, €40m savings in OPEX inflation: Cost savings: 2024 -€200m +€200m Mainly related to restructuring, 21 focused on EMEA Others Energy Salaries and w
Slide 22: Mid-term focus: optimize ROI
Mid-term focus: optimize ROI Focus on asset utilization and profitability Pricing discipline and Targeted growth Strict capital allocation asset turnover Innovation-driven Pricing discipline Continue to de-lever selective growth through the cycle towards 2.0x Focus on leading Simplify for cost and S
Slide 23: Q4 Highlights, FY Highlights, 2023 Outlook
Q4 Highlights 2023 Outlook Pricing up 11% compared with Q4 2021. Revenue up 8% AkzoNobel expects the ongoing macro-economic Lower volumes driven by softer demand uncertainties to continue and weigh on organic volume Raw material and freight costs increased €209 million vs. growth. The company will f
Slide 24: Upcoming events
Upcoming events Publication annual report 2022 March 1, 2023 Annual General Meeting of shareholders April 21, 2023 Report for the first quarter 2023 April 25, 2023 Ex-dividend date of 2022 final dividend April 25, 2023 Record date of 2022 final dividend April 26, 2023 Payment of 2022 final dividend
Slide 25: Disclaimer/forward-looking statements
Disclaimer/forward-looking statements This presentation1 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 26: Appendix
Appendix Partner power driving collective reduction of carbon emissions Value chain partners have teamed up with AkzoNobel in the fields of circular solutions, process efficiency and solvent reduction in a determined effort to collectively reduce carbon emissions in the paints and coatings value cha
Slide 27: 2023 planning assumptions
2023 planning assumptions EBITDA 2023 €1.2bn–€1.5bn Volumes y-o-y (5%)–(1%) Pricing vs raws y-o-y €250m–€450m Pricing Pricing retention on ~50% of portfolio during deflationary cycle Raw materials (LSD%)–(HSD%) OPEX y-o-y €200m savings programs to offset OPEX inflation Identified items €100–125m Eff
Slide 28: Revenue 13% higher in 2022 despite weaker volumes
Revenue 13% higher in 2022 despite weaker volumes AkzoNobel Paints Coatings (2022 revenue development % y-o-y) (2022 revenue development % y-o-y) (2022 revenue development % y-o-y) +14% price +12% price +16% price -% mix -1% mix +1% mix 2 13 2 10 3 3 16 4 5 17 14 11 -7 -8 -7 Revenue FX & Revenue FX
Slide 29: Robust pricing initiatives continue; Q4 pricing up 11%
Robust pricing initiatives continue; Q4 pricing up 11% AkzoNobel Paints Coatings Quarterly price/mix development (% y-o-y) +11% price +12% price +12.5% price +14% price +2% mix +10% price +2% mix -% mix -% mix +10% price +1% mix 1616 -% mix 12.5 11 1919 9 8 1313 6 12 7 7 7 14 1414 5 6 6 54 11 4 5 4
Slide 30: Raw material headwinds fully offset by pricing initiatives in 2022
Raw material headwinds fully offset by pricing initiatives in 2022 Adjusted OPI1 (€m) Positive impact Negative impact -1,143 1,355 ROS1 11.4% 23 -319 -164 -45 -10 ROS1 7.3% - - 1,092 789 FY2021 FX Volumes Mix Price Raw material and OPEX and one-offs Hyperinflation FY2022 freight cost accounting A 1.
Slide 31: Performance measures
Performance measures Definitions of alternative performance measures Adjusted earnings per share are the basic earnings per share from operations, excluding identified items and taxes thereon Adjusted EBITDA is operating income excluding depreciation, amortization and identified items Adjusted opera
Slide 32: Additional financial information
Additional financial information Consolidated statement of free cash flows1 Operating income to net income Q4 Q4 Q4 Q4 2021 2022 € million 2021 2022 2021 2022 € million 2021 2022 299 198 EBITDA 1,469 1,076 205 103 Operating income 1,118 708 — — Impairment losses 3 6 (8) (51) Financing income and exp
Slide 33: Alternative performance measures
Alternative performance measures Q4 Q4 Q4 Q4 Average invested capital (€m) 2021 2022 Δ% 2021 2022 Δ% Operating income (€m) 2021 2022 Δ% 2021 2022 OPI margin (%) 2021 2022 102 49 (52%) Decorative Paints 622 392 (37%) 10.7 4.8 Decorative Paints 15.6 9.0 Decorative Paints 2,872 3,678 28% 128 84 (34%) P
Slide 34: 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 Sustainability fully integrated with our People. Planet. Paint. purpose Science Based Targets carbon reducti
Slide 35: Recognized sustainability leader in industry
Recognized sustainability leader in industry AkzoNobel Industry average Investors Customers Investors Europe Society Society Industry average Industry average Industry average Industry average Industry average Industry average AkzoNobel AkzoNobel AkzoNobel AkzoNobel AkzoNobel AkzoNobel Only P&C comp