Akzo Nobel N.v. · EURONEXT:AKZA
Akzo Nobel — Q4 2020 Earnings Presentation
37 slides from Akzo Nobel's earnings presentation, Feb 17, 2021
Slide 1: Investor update Q4 2020
Investor update Q4 2020 February 17, 2021 Customers given new window of opportunity Window manufacturers can now make their production process more efficient and sustainable after we launched a new instant drying solution. The RUBBOL 100% UV cured exterior range of Sikkens wood coatings is the first
Slide 2: Agenda
Agenda Key highlights Financial review Concluding remarks 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 performan
Slide 3: Key highlights
Key highlights Investor update | Q4 2020 3
Slide 4: Delivered 15 by 20 promise and step-change in performance
Delivered 15 by 20 promise and step-change in performance Return on sales (ROS)* Return on investment (ROI)* Excluding unallocated cost (%) Excluding unallocated cost (%) 20.6 >20.0 15.0 15.5 18.0 16.6 17.2 12.0 14.5 10.6 10.6 FY 2017 FY 2018 FY 2019 FY 2020 FY 2020 FY 2017 FY 2018 FY 2019 FY 2020 F
Slide 5: Exceptional results for 2020 driven by focus on costs and cash
Exceptional results for 2020 driven by focus on costs and cash 15.0% ROS* excluding unallocated cost, delivering on our 15 by 20 promise ROI** excluding unallocated cost up at 20.6%, exceeding our 2020 ambition €243 million of cost savings, of which €115 million structural savings Net cash from oper
Slide 6: Strong growth, profit and cash in Q4
Strong growth, profit and cash in Q4 Q4 2020: FY 2020: Revenue ROS* ROS* Adjusted EPS In constant currencies Excluding unallocated cost Excluding unallocated cost From continuing operations Up 6% Increased to 15.3% Increased to 15.0% Up 25% at €3.88 (2019: 11.0%) (2019: 12.0%) Adjusted Initiated €30
Slide 7: Higher end market demand for most regions and segments during Q4
Higher end market demand for most regions and segments during Q4 Revenue development* FY 2020 (Δ%) Total Paints Coatings 20% Second consecutive quarter of growth 0% Paint demand strong in all regions -20% Coatings returned -40% to growth Q1 Q2 Q3 Q4 *4 week moving average; constant currencies Invest
Slide 8: Demand trends continue to differ per region and segment
Demand trends continue to differ per region and segment China Powder South America EMEA Industrial South Asia Automotive and Specialty Marine and Protective ~ Raw material inflation expected Investor update | Q4 2020 8
Slide 9: 15 by 20 created strong foundation and positive momentum for Grow & Deliver
15 by 20 created strong foundation and positive momentum for Grow & Deliver Sales force effectiveness Margin management Delivering strong margin management Innovation excellence Paint the Future regional challenges: Brazil (Q4), launched in China (Q1) Global Business Services 80% of total Finance tr
Slide 10: Significant cost savings achieved by transformation and temporary measures
Significant cost savings achieved by transformation and temporary measures Sales force effectiveness Cost savings (€m) 116 34 49 Margin management Transformation cost savings 25 Innovation excellence Temporary cost savings 27 44 38 Global Business Services 25 10 Integrated Business Planning 19 ERP a
Slide 11: Engagement continues to improve and recognized as top employer
Engagement continues to improve and recognized as top employer Sales force effectiveness Engagement (OHI) up 23% Margin management Innovation excellence (now second quartile) 80 69 Global Business Services Integrated Business Planning 60 ERP and systems platform 40 ALPS continuous improvement Q3 201
Slide 12: Continue to build on leading track record when it comes to sustainability
Continue to build on leading track record when it comes to sustainability Sales force effectiveness 2020 achievements #1 in benchmarks Margin management (paints and coatings) Innovation excellence Global Business Services Integrated Business Planning ERP and systems platform 40% of revenue from ALPS
Slide 13: Financial review
Financial review Investor update | Q4 2020 13
Slide 14: Q4 ROS improved 430bps to 15.3% due to higher volumes and cost savings
Q4 ROS* improved 430bps to 15.3% due to higher volumes and cost savings € million Q4 2019 Q4 2020 Δ% Δ%CC Revenue 2,242 2,209 (1%) 6% Adjusted EBITDA 312 380 22% Adjusted operating income 223 294 32% Operating income 173 243 40% ROS* excluding unallocated cost 11.0% 15.3% ROS* 9.9% 13.3% Our Coral b
Slide 15: Realized growth second quarter in a row; Q4 revenue up 6% in constant currencies
Realized growth second quarter in a row; Q4 revenue up 6% in constant currencies Decorative Paints Performance Coatings Total Quarterly price/mix development in % year-on-year +2% price 11 -6% geo-mix 9 8 2 7 7 7 6 4 5 5 6 6 5 0 4 5 1 4 2 3 5 3 0 3 0 1 0 2 4 1 2 2 1 -4 -1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Slide 16: Higher volumes and cost savings delivered 32% more profit in Q4
Higher volumes and cost savings delivered 32% more profit in Q4 Adjusted operating income (€m) €25m transformation Positive impact €9m temporary Negative impact ROS* 15.3% 34 - 24 7 15 ROS* 11.0% 62 - 23 - 294 223 Q4 2019 FX Volumes Price/mix Raw materials/ Transformation and One-offs and other Q4 2
Slide 17: Paints ROS up 400bps at 14.0% in Q4, driven by strong demand in all regions
Paints ROS up 400bps at 14.0% in Q4, driven by strong demand in all regions € million Q4 2019 Q4 2020 Δ% Δ%CC Revenue 869 901 4% 14% Adjusted EBITDA 127 160 26% Adjusted operating income 87 126 45% Operating income 75 122 63% ROS* 10.0% 14.0% ROI** 13.5% 20.5% Our new bio-based paint is a breath of
Slide 18: Coatings volumes up 1% overall in Q4 with improving end market demand
Coatings volumes up 1% overall in Q4 with improving end market demand € million Q4 2019 Q4 2020 Δ% Δ%CC Revenue 1,365 1,306 (4%) 1% Adjusted EBITDA 200 253 27% Adjusted operating income 159 212 33% Operating income 138 215 56% ROS* 11.6% 16.2% ROI** 20.7% 20.7% Revenue development Q4 2020 (%) We’re
Slide 19: Adjusted EPS for continuing operations up 46% in Q4 and 25% higher for 2020
Adjusted EPS for continuing operations up 46% in Q4 and 25% higher for 2020 Q4 2019 Q4 2020 € million FY 2019 FY 2020 Adjusted EBITDA €m 173 243 Operating income 841 963 (18) (16) Net financing expenses (76) (69) Results from associates and joint 4 7 20 25 ventures 159 234 Profit before tax 785 919
Slide 20: Free cash flow increased 114% in 2020; strong working capital management
Free cash flow* increased 114% in 2020; strong working capital management Q4 2019 Q4 2020 € million FY 2019 FY 2020 Free cash flow (FCF) €m FCF yield*% excl. pension pre-funding 272 333 EBITDA 1,201 1,324 and top-up payments 5 9 Impairment losses 66 10 Pre-tax result on acquisitions and 11.6% (12) (
Slide 21: €1 billion share buyback announced; Final dividend up 2% to €1.52 per share
€1 billion share buyback announced; Final dividend up 2% to €1.52 per share Dividend per share Adjusted earnings per share (EPS) (€) from continuing operations (€) 3.88 Modular share buybacks Final dividend Interim dividend 1.95 3.10 1.80 1.90 €500m share buyback completed in H1 2020 1.91 €300m shar
Slide 22: Delivering on capital allocation priorities
Delivering on capital allocation priorities Profitable organic growth ~2.5% capital expenditures/revenue Dividend Stable to rising Acquisitions Strategically aligned and value creating Shareholder returns Modular share buybacks Net debt/EBITDA Target 1-2x Retain strong investment grade credit rating
Slide 23: Concluding remarks
Concluding remarks Investor update | Q4 2020 23
Slide 24: Exceptional results for 2020 driven by focus on costs and cash
Exceptional results for 2020 driven by focus on costs and cash 15.0% ROS* excluding unallocated cost, delivering on our 15 by 20 promise ROI** excluding unallocated cost up at 20.6%, exceeding our 2020 ambition €243 million of cost savings, of which €115 million structural savings Net cash from oper
Slide 25: Our Grow & Deliver strategy balances growth and profitability improvement…
Our Grow & Deliver strategy balances growth and profitability improvement… Top quartile engagement score 30% female executives by 2025 Revenue growth ROS +50bps ≥ market CAGR CAGR Moving towards zero waste 50% less carbon emissions by 2030 100% renewable electricity by 2030 >50% sustainable solution
Slide 26: Outlook 2021
Outlook 2021 AkzoNobel targets to grow at least in line with its relevant markets. Although trends differ per region and segment with raw material inflation expected, margin management and cost-saving programs are in place to deliver 50 basis points increase in return on sales. The company targets a
Slide 27: Upcoming events
Upcoming events Publication annual report 2020 March 10, 2021 Report for first quarter 2021 April 21, 2021 Annual general meeting of shareholders April 22, 2021 Ex-dividend date of 2020 final dividend April 26, 2021 Record date of 2020 final dividend April 27, 2021 Payment of 2020 final dividend May
Slide 28: 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
Slide 29: 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 30: Appendix
Appendix Investor update | Q4 2020 30
Slide 31: Full-year 2020
Full-year 2020 € million FY 2019 FY 2020 Δ% Δ%CC Revenue 9,276 8,530 (8%) (4%) Adjusted EBITDA 1,341 1,442 8% Adjusted operating income 991 1,099 11% Operating income 841 963 15% ROS* excluding unallocated costs 12.0% 15.0% ROS* 10.7% 12.9% ROI** excluding unallocated costs 17.2% 20.6% Revenue devel
Slide 32: Full-year 2020: Decorative Paints
Full-year 2020: Decorative Paints € million FY 2019 FY 2020 Δ% Δ%CC Revenue 3,670 3,558 (3%) 3% Adjusted EBITDA 573 714 25% Adjusted operating income 418 573 37% Operating income 425 551 30% ROS* 11.4% 16.1% ROI** 13.5% 20.5% Revenue development FY 2020 (%) Increase 0 Decrease 1 2 1 -6 -3 Volumes Pr
Slide 33: Full-year 2020: Performance Coatings
Full-year 2020: Performance Coatings € million FY 2019 FY 2020 Δ% Δ%CC Revenue 5,549 4,957 (11%) (8%) Adjusted EBITDA 861 854 (1%) Adjusted operating income 688 700 2% Operating income 565 665 18% ROS* 12.4% 14.1% ROI** 20.7% 20.7% Revenue development FY 2020 (%) Increase Decrease -9 1 0 -11 2 -3 Vo
Slide 34: Performance measures and assumptions
Performance measures and assumptions ROS and ROI comparison Assumptions for 2021 % 2017 2018 2019 2020 Revenue growth ≥ market CAGR ROS* +50bps CAGR ROS* 9.4 8.6 10.7 12.9 Other activities €140-180 million ROS* excluding unallocated cost 10.6 10.6 12.0 15.0 Effective tax rate 27% ROI** 13.9 12.6 14.
Slide 35: Other activities 2020
Other activities 2020 Adjusted operating income, Other activities (€m) Positive impact Negative impact -115 Cost savings offset 3 by incentive plans -174 and other items -22 - -33 -7 FY 2019 FX Royalties and Gains on disposals Other FY 2020 service income (2019) A Investor update | Q4 2020 35
Slide 36: Alternative performance measures
Alternative performance measures Q4 Q4 FY FY Q4 Q4 ROS (%) FY FY ROI (%) 2019 2020 Δ% Operating income (€m) 2019 2020 Δ% 2019 2020excluding unallocated costs 2019 2020 excluding unallocated costs FY 2019 FY 2020 75 122 63% Decorative Paints 425 551 30% 2,242 2,209 Total revenue 9,276 8,530 Average i
Slide 37: Revenue segmentation representation 2019
Revenue segmentation representation 2019 Q1 2019 Q2 2019 Q3 2019 Q4 2019 € million Reported Represented Reported Represented Reported Represented Reported Represented Decorative Paints EMEA 506 498 620 611 573 565 462 455 Decorative paints South America 99 98 103 102 121 120 139 137 Decorative Paint