Slide 1: Investor update Q3 2012 results
October 18, 2012 Investor update Q3 2012 results
Slide 2: Agenda
Agenda • Update on CEO status • Q3 highlights • Operational and financial review • Management update • Conclusion Investor update Q3 2012 results 2
Slide 3: Update on CEO status
Update on CEO status by Antony Burgmans, member of the Supervisory Board • This week, the Supervisory Board has received an update on the progress of Ton Büchner’s recovery • The medical specialists expects a full recovery and it is anticipated that Ton will return to work around year-end y • CFO Ke
Slide 4: Q3 highlights
Q3 highlights Keith Nichols Investor update Q3 2012 results 4
Slide 5: Solid operational performance in Q3, despite economic slowdown
Solid operational performance in Q3, despite economic slowdown • Revenue up 6 percent, mainly driven by currencies and pricing actions • Volumes declined 3 percent, primarily due to the economic slowdown in Europep • EBITDA* up 7 percent at €540 million (2011: €507 million) • Impairment of €2.5 bill
Slide 6: In Q3 2012 both revenue and EBITDA increased
In Q3 2012 both revenue and EBITDA increased € million Q3 2012 Δ% Revenue 4,280 4 280 6 EBITDA* 540 7 Ratio, % Q3 2012 Q3 2011 EBITDA* margin 12.6 12.5 Revenue development Q3 2012 vs. Q3 2011 8 4 +6% +6% +2% +1% 0 -3% -4 Volume Price/Mix Acquisitions/ Exchange rates Total divestments * Before incide
Slide 7: Prices being maintained in declining markets
Prices being maintained in declining markets Quarterly volume development in % year-on-year 10 6 2 -6% 0% -2% -3% -2 -6 Decorative Paints Performance Specialty AkzoNobel Coatings Chemicals Quarterly price/mix development in % year-on-year 8 5 2% 3% 2% 2 -1% -1 Decorative Paints Performance Specialty
Slide 8: Operational and financial review
Operational and financial review Keith Nichols Investor update Q3 2012 results 8
Slide 9: Decorative Paints Q3 2012 highlights
Decorative Paints Q3 2012 highlights € million Q3 2012 Δ% Revenue 1 456 1,456 1 EBITDA* 147 (1) Ratio % Ratio, Q3 2012 Q3 2011 EBITDA* margin 10.1 10.3 R Revenue d development l t Q3 2012 vs. Q3 2011 Increase Decrease 2 0 -2 0% +5% +1% -6% -4 4 +2% -6 Volume Price/Mix Acquisitions/ Exchange rates To
Slide 10: Performance Coatings Q3 2012 highlights
Performance Coatings Q3 2012 highlights € million Q3 2012 Δ% Revenue 1 467 1,467 13 EBITDA* 202 29 Ratio % Ratio, Q3 2012 Q3 2011 EBITDA* margin 13.8 12.1 Revenue development Q3 2012 vs. vs Q3 2011 Increase Decrease 15 10 +3% +7% +13% 5 +3% 0% 0 Volume Price/Mix Acquisitions/ Exchange rates Total di
Slide 11: Specialty Chemicals Q3 2012 highlights
Specialty Chemicals Q3 2012 highlights € million Q3 2012 Δ% Revenue 1 393 1,393 3 EBITDA* 227 (5) R ti % Ratio, Q3 2012 Q3 2011 EBITDA* margin 16.3 17.6 Revenue development Q3 2012 vs. vs Q3 2011 Increase Decrease 6 3 -2% -1% +1% +5% +3% 0 -3 Volume Price/Mix Acquisitions/ Exchange rates Total dives
Slide 12: Summary – Q3 2012 results
Summary – Q3 2012 results € million Q3 2012 Q3 2011 EBITDA* EBITDA 540 507 Amortization and depreciation (172) (155) Incidentals (2,601) (51) Net financing expenses (66) (70) Minorities and associates (5) (9) Income tax (56) (74) Discontinued operations (22) 1 Net income total operations (2,382) 149
Slide 13: Q3 2012 incidentals impacted by impairment
Q3 2012 incidentals impacted by impairment € million Q3 2012 Q3 2011 Impairment of intangibles (2 478) (2,478) - Restructuring costs (101) (47) j legal, Results related to major g ((5)) 2 anti-trust and environmental cases Results of acquisitions and divestments (6) (5) Other incidental results (11)
Slide 14: Operating returns on invested capital reflect economic slowdown
Operating returns on invested capital reflect economic slowdown 30% 28.2% 24.4% 25% 19 6% 19.6% 20% 15% 10% 5% 11.0% 9.7% 8.3% 0% Q4 09-Q3 10 Q4 10-Q3 11 Q4 11-Q3 12 Moving average ROI % * Operating ROI is calculated as EBIT before amortization divided by average invested capital excluding intangibl
Slide 15: Cash flows Q3 2012 clearly improved on last year
Cash flows Q3 2012 clearly improved on last year € million Q3 2012 Q3 2011 Profit for the period from continuing operations (2,350) 166 Amortization, depreciation and impairments 2,672 157 Change working capital 256 41 - Pension provisions (27) (63) - Restructuring 24 23 - Other provisions (136) 13
Slide 16: Pension deficit increases to €0.9 billion
Pension deficit increases to €0.9 billion Key pension metrics Q3 2012 Q2 2012 Disco nt rate Discount 3 9% 3.9% 4 2% 4.2% Inflation assumptions 2.1% 2.3% Pension deficit development during Q3 2012 € billion 00 0,0 -0,2 (589) -0,4 (879) 9 31 -0,6 (9) -0,8 (519) -1,0 198 -1,2 Deficit end Top-ups Increa
Slide 17: Management update
Management update Keith Nichols Investor update Q3 2012 results 17
Slide 18: Senior management changes
Senior management changes • Leif Darner has agreed to step down as Executive Committee member responsible for Performance Coatings at next year’s AGM in April. • He will be succeeded by y Conrad Keijzer, j , currentlyy Managing g g Director of Industrial Coatings • Werner Fuhrmann, currently ExCo me
Slide 19: Conclusion
Conclusion Keith Nichols Investor update Q3 2012 results 19
Slide 20: Conclusion
Conclusion • Solid S lid thi third d quarter, t despite d it economic i slowdown l d • Implementation of our performance improvement program on track • Focus remains on return on capital and cash generation • The major uncertainty remains the global economic environment Investor update Q3 2012 resul
Slide 21: Appendix
Appendix Investor update Q3 2012 results 21
Slide 22: AkzoNobel key facts
AkzoNobel key facts 2011 • Revenue €15.7 billion • 57,240 employees • EBITDA: €1.8 billion* • Net income: €0.5 billion • 40 percent of revenue from high growth markets • A leader in sustainability Revenue by business area EBITDA* by business area 34% 33% 31% Performance Coatings 46% Decorative Paint
Slide 23: Decorative Paints key facts
Decorative Paints key facts 2011 • Revenue €5.3 billion • 22,340 employees • EBITDA: €440 million* • 40 percent of revenue from high growth markets • Largest global supplier of decorative paints • Many leading positions, strong brands Some of our strong brands Revenue by geography 3% 12% M t Mature
Slide 24: Performance Coatings key facts
Performance Coatings key facts 2011 • Revenue €5.2 billion • 21,960 employees • EBITDA: €611 million* • 47 percent of revenue from high growth markets • Leading positions in performance coatings industry • Innovative technologies, strong brands Revenue by business unit Revenue by geography Marine an
Slide 25: Specialty Chemicals key facts
Specialty Chemicals key facts 2011 • Revenue €5.3 billion • 11,510 employees • EBITDA: €906 million* • 33 percent of revenue from high growth markets • Major producer of specialty chemicals • Leadership positions in many markets Revenue by business unit Revenue by geography Functional Chemicals 6% 9
Slide 26: The global paints and coatings market is around €76 billion
The global paints and coatings market is around €76 billion % of 2011 market 100% is around €76 billion Wood Finishes General Industrial Coatings 5% 8% Vehicle Refinish 8% 42% Decorative Marine and Yacht Performance 5% 58% 8% Protective coatings 2% 10% Special purpose 7% 2% 3% A t OEM & Aerospace Au
Slide 27: AkzoNobel is the world’s largest coatings supplier
AkzoNobel is the world’s largest coatings supplier 2011 revenue in € billion 12 10 8 6 4 2 0 Investor update Q3 2012 results 27
Slide 28: Excellent geographic spread of both revenue and profits
Excellent geographic spread of both revenue and profits High growth markets are important (40% of revenue) % of 2011 revenue 38% “Mature” Europe 7% 20% “Emerging” Europe North America 3% 22% Middle East Asia Pacific and Africa 10% Latin America High growth markets’ profitability is above average Inv
Slide 29: Leading positions and strong brands
Leading positions and strong brands 2011 Revenue by y market p position Some of our strong g brands Decorative Paints No. 2 or 3 32% No. 1 Performance Coatings position 59% Other 9% Specialty Chemicals • Our leading market positions provide us with scale benefits • Strong brands ensure customer loya
Slide 30: Our strategic ambition
Our strategic ambition Investor update Q3 2012 results 30
Slide 31: Our medium term strategic goals
Our medium term strategic goals • Top quartile safety performance f • Top 3 position in sustainability • Top quartile performance in di diversity, it employee l engagement, t and talent development • Top quartile eco-efficiency improvement rate • Grow to €20 billion revenues • Increase EBITDA each y
Slide 32: High growth markets will become significantly more important
High growth markets will become significantly more important % of revenue, indicative 32% “Mature” Europe 9% 18% “Emerging” Europe North America 25% 5% Asia Pacific Middle East and Africa 11% Latin America g growth High g % of revenue in this decade markets will be around 50% Investor update Q3 2012
Slide 33: Exciting RD&I pipeline with innovative solutions for key market segments
Exciting RD&I pipeline with innovative solutions for key market segments How innovation will support our Revenue by key market growth agenda: g g segment • Functional solutions in key market segments 12% • Increase spend in big R&D • >15 percent of revenue from 13% 43% “breakthrough” innovations* •
Slide 34: Clear sustainability focus
Clear sustainability focus Accelerated sustainability strategy will deliver: • Safety at 2.0 injuries per million hours • 30 percent of revenue from eco-premium solutions • Sustainable fresh water management • 30 percent eco-efficiency improvement • 10 percent carbon footprint reduction (20-25 perce
Slide 35: Innovation in Decorative Paints
Innovation in Decorative Paints Dulux Guardian A premium interior paint that’s good for your family and the environment Key Features Customer Benefits • A premium, low-VOC and low-odor • Offers a ‘good for my family and the soft-sheen emulsion for interior environment’ well-being proposition at an w
Slide 36: Innovation in Performance Coatings
Innovation in Performance Coatings Wood Adhesives - Forward Integration Intelligent software package allowing effective control and optimization of the gluing process Key features Customers benefits • Patent pending technology allowing • Increased productivity and reduced effective optimization of g
Slide 37: Innovation in Specialty Chemicals
Innovation in Specialty Chemicals Surface Chemistry- Chemistry Armovis® EHS A biodegradable thickening agent for enhancing oil and gas recovery K F Key Features t C t Customer B Benefits fit • A thermally stable viscosity • Improved oil and gas extraction under modifying system for oil and gas chall
Slide 38: Variable costs represent 54.3% of revenue
Variable costs represent 54.3% of revenue % of 2011 annual revenue* 100% Raw materials, energy, and other variable costs Fixed production costs Selling, advertising, administration, R&D costs EBIT margin 0% Decorative Performance Specialty AkzoNobel Paints Coatings Chemicals * Rounded percentages, a
Slide 39: Variable costs analysis
Variable costs analysis 2011 Energy & other Packaging variable costs* Solvents Raw materials 7% 7% 28% Chemicals and intermediates*** 13% 8% 7% Additives Other raw materials** 2% 8% Pigments 12% 8% Titanium dioxide Resins Coatings’ specialties i lti * Other variable costs include variable selling co
Slide 40: Capital expenditure prioritization for growth
Capital expenditure prioritization for growth • Capex 2011 was €708 million (including Ningbo €45) • Guidance for the medium term: Capex level to be at least 4 percent of revenues Capex as a % of revenue 2011 Capex split 5 3% 16% 4 3 52% 29% 2 1 Specialty Chemicals 0 Decorative Paints 2008 2009 2010
Slide 41: Year-on-year Operating Working Capital % of revenue to be reduced towards 12%
Year-on-year Operating Working Capital % of revenue to be reduced towards 12% OWC € million 3000 20% 15.6% 18% 14.2% 2500 14 3% 14.3% 13 9% 13.9% 13.8% 16% 14.2% 13.6% 14% 2000 12% 1500 10% 2,155 2,279 2,341 2,079 2,502 2,537 2,391 8% 1000 6% 4% 500 2% 0 0% Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2
Slide 42: Debt duration 4.4 years and no refinancing needed in 2012
Debt duration 4.4 years and no refinancing needed in 2012 Debt maturities* € million (nominal amounts) 1.200 800 400 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 € bonds $ bonds £ bonds Strong liquidity position to support growth • Undrawn revolving credit facility of €1.7 €1 7 billion (
Slide 43: Revenue growth leads EBITDA margin improvements
Revenue growth leads EBITDA margin improvements Reported quarterly revenue growth in % year-on-year 20 15 13% 10 6% 3% 5 1% 0 Decorative Paints Performance Specialty AkzoNobel Coatings Chemicals Quarterly EBITDA* margin in % 16.3% 20 13 8% 13.8% 12 6% 12.6% 10.1% 15 10 5 0 Decorative Paints Performa
Slide 44: Pension cash contributions unrelated to positive IAS 19 accounting change impact
Pension cash contributions unrelated to positive IAS 19 accounting change impact € million Q3 2012 Q2 2012 Q1 2012 Top-up payments 9 14 322 • j y of the p The majority pension top-up p pp payments y have been made in Q1 2012 • Latest estimate is for additional top-up payments of approximately pp y €
Slide 45: Unchanged ambition to maintain strong balance sheet
Unchanged ambition to maintain strong balance sheet € million Sep 30, 2012 Sep 30, 2011 Total equity 7 590 7,590 9 589 9,589 Net debt* 2,597 1,595 • Credit ratings unchanged at BBB+/Baa1, BBB+/Baa1 outlook stable • Total equity mainly decreased by the net loss • Net debt increased y-o-y mainly due t
Slide 46: Q3 2012 EBITDA – Cash bridge
Q3 2012 EBITDA – Cash bridge € million Q3 2012 Q3 2011 EBITDA before incidentals 540 507 Incidentals (cash) (90) (51) Change working capital 256 41 Change provisions (139) (27) Interest paid (10) (6) Income tax paid (77) (55) Net cash from operating activities 480 409 • Higher cash inflows from oper
Slide 47: Safe Harbor Statement
Safe Harbor Statement This presentation Thi t ti contains t i statements t t t which hi h address dd suchh kkey iissues as AkzoNobel’s growth strategy, future financial results, market positions, product development, products in the pipeline, and product approvals. Such statements should be carefull