Slide 1: Investor update Q4 2011 results
February 16, 2012 Investor update Q4 2011 results
Slide 2: Agenda
Agenda • 2011 highlights • 2011 operational and financial review • Performance improvement program Investor update Q4 2011 results 2
Slide 3: Highlights
Highlights • 2011 revenue up 7 percent driven by pricing actions to offset raw material cost inflation • Weaker end markets and cost inflation impacted results • 2011 EBITDA 9 percent lower at €1,796 €1 796 million (2010: €1,964 €1 964 million) • Net income from continuing operations €469 million (2
Slide 4: Q4 2011 revenue and EBITDA
Q4 2011 revenue and EBITDA € million Q4 2011 Δ% Revenue 3,787 3 787 5 EBITDA* 301 (20) Ratio, % Q4 2011 Q4 2010 EBITDA* margin 7.9 10.4 Revenue development Q4 2011 vs. Q4 2010 8 +1% 0% 3 -2% 2% +6% +5% -2 Volume Price/Mix Acquisitions/ Exchange rates Total divestments * Before incidentals Increase D
Slide 5: FY 2011 revenue and EBITDA
FY 2011 revenue and EBITDA € million FY 2011 Δ% Revenue 15,697 15 697 7 EBITDA* 1,796 (9) Ratio, % FY 2011 FY 2010 EBITDA* margin 11.4 13.4 Revenue development FY 2011 vs. FY 2010 10 +1% -1% 5 +5% +2% +7% 0 Volume Price/Mix Acquisitions/ Exchange rates Total divestments * Before incidentals Increase
Slide 6: Price increases coming through
Price increases coming through Quarterly volume development in % year-on-year 15 10 5 2% -2% 2% -4% 4% -2% 0 -5 Decorative Paints Performance Specialty AkzoNobel Coatings Chemicals Quarterly price/mix development in % year-on-year 10 7% 5% 6% 4% 5 0 -5 -10 Decorative Paints Performance Specialty Akz
Slide 7: 2011 operational and financial review
2011 operational and financial review Investor update Q4 2011 results 7
Slide 8: Decorative Paints Q4 2011 highlights
Decorative Paints Q4 2011 highlights € million Q4 2011 Δ% Revenue 1 204 1,204 6 EBITDA* 11 (83) Ratio % Ratio, Q4 2011 Q4 2010 EBITDA* margin 0.9 5.5 R Revenue d development l t Q4 2011 vs. Q4 2010 Increase Decrease 10 +1% -1% 5 +4% +6% +2% 0 Volume Price/Mix Acquisitions/ Exchange rates Total dives
Slide 9: Performance Coatings Q4 2011 highlights
Performance Coatings Q4 2011 highlights € million Q4 2011 Δ% Revenue 1 326 1,326 7 EBITDA* 141 (4) Ratio % Ratio, Q4 2011 Q4 2010 EBITDA* margin 10.6 11.9 Revenue development Q4 2011 vs. vs Q4 2010 Increase Decrease +2% 0% 8 3 -2% +7% +7% -2 Volume Price/Mix Acquisitions/ Exchange rates Total divest
Slide 10: Specialty Chemicals Q4 2011 highlights
Specialty Chemicals Q4 2011 highlights € million Q4 2011 Δ% Revenue 1 285 1,285 2 EBITDA* 207 (6) R ti % Ratio, Q4 2011 Q4 2010 EBITDA* margin 16.1 17.6 Revenue development Q4 2011 vs. vs Q4 2010 Increase Decrease 5 0% +1% +2% 0 -4% 4% +5% 5% -5 Volume Price/Mix Acquisitions/ Exchange rates Total di
Slide 11: Summary – Q4 2011 results
Summary – Q4 2011 results € million Q4 2011 Q4 2010 EBITDA* EBITDA 301 377 Amortization and depreciation (168) (155) Incidentals (97) (63) Net financing expense (141) (56) Minorities and associates (9) (13) Income tax 52 40 Discontinued operations (6) 32 Net income total operations (68) 162 Net cash
Slide 12: Achieved price increases have caught up with most raw material price inflation
Achieved price increases have caught up with most raw material price inflation EBITDA* bridge FY 2010 – FY 2011 € million 3 500 3.500 3.000 2.500 2.000 1.500 1 964 1,964 1,796 , 1 000 1.000 500 0 2010 Currency Volume Price Raw Mix Other 2011 materials * Before incidentals Increase Decrease Investor
Slide 13: Strong operating returns on invested capital
Strong operating returns on invested capital 30% 27.7% 25% 23.2% 22.3% 20% 15% 10% 5% 9.2% 10.8% 8.9% 0% 2009 2010 2011 Moving average ROI % * Operating ROI is calculated as EBIT before amortization divided by average invested capital excluding intangible assets Operating ROI %* Investor update Q4 2
Slide 14: Cash flows 2011
Cash flows 2011 € million 2011 2010 Profit for the period 533 747 Amortization and depreciation 633 640 Change working capital (344) (124) - Pension provisions (410) (434) - Restructuring (4) (101) - Other provisions (84) (116) Ch Change provisions i i (498) (651) Other operating cash flows 1 (93) O
Slide 15: Pension deficit decreases to €0.5 billion
Pension deficit decreases to €0.5 billion Key pension metrics Q4 2011 Q3 2011 Disco nt rate Discount 4 6% 4.6% 5 0% 5.0% Inflation assumptions 2.5% 2.7% Pension deficit development during Q4 2011 € billion 02 0,2 0,0 -0,2 (508) (505) -0,4 (661) 661 203 (208) -0,6 8 -0,8 Deficit end Top-ups Increased
Slide 16: Triennial actuarial valuation of the ICI Pension Fund completed in January 2012
Triennial actuarial valuation of the ICI Pension Fund completed in January 2012 • Funding deficit has reduced reflecting trustees’ liability driven investment strategy and cash top-ups paid • Co Compared pa ed to o the e cu current, e , 6 yea year de deficit c recovery eco e y pplan: a • Top-up cont
Slide 17: Pension cash contributions expected to reduce in 2012
Pension cash contributions expected to reduce in 2012 € million 2010 2011 2012 E Regular 149 148 126 Top-up 375 354 358 T t l Total 524 502 484 • The one-off one off cash costs related to the termination of the contingent asset is expected to be €239 million in 2012 • The non-cash IAS 19 corridor me
Slide 18: Performance improvement program
Performance improvement program Investor update Q4 2011 results 18
Slide 19: The performance improvement program is on track to deliver €500 million EBITDA in 2014
The performance improvement program is on track to deliver €500 million EBITDA in 2014 • Development of 2012 overall plan on track • €28 million of restructuring provisions taken in Q4 2011 with around d €200 million illi expected t d iin 2012 • Further restructuring underway within Decorative Paint
Slide 20: Medium-term strategic ambitions unchanged
Medium-term strategic ambitions unchanged • 2011 was a challenging year due to the inflation of raw material prices and the continuing economic headwinds • Delivering on price increases • Implementing I l ti our performance f improvement i t program will ill b bring i significant benefits in 2012 an
Slide 21: Appendix
Appendix Investor update Q4 2011 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 €70 billion
The global paints and coatings market is around €70 billion % of market 100% is around €70 billion Wood Finishes 6% General Industrial Coatings 10% Car Refinishes 7% Decorative 44% Performance 3% Marine and Yacht 56% 6% Protective coatings 2% 9% Special purpose 8% 2%3% Auto OEM, OEM metal, metal pla
Slide 27: AkzoNobel is the world’s largest coatings supplier
AkzoNobel is the world’s largest coatings supplier 2010 revenue in € billion 12 10 8 6 4 2 0 Investor update Q4 2011 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 2010 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 Investor update Q4 2011 results 29
Slide 30: Our strategic ambition
Our strategic ambition Investor update Q4 2011 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: How we will expand in both mature and high growth markets
How we will expand in both mature and high growth markets Organic growth • Expand focus from high to mid-market mid market segments • Fueling growth in high growth markets Innovation pipeline • Spend of around 2.5 percent of revenue makes us the clear leader of our p peers in absolute spend p • Emph
Slide 33: Aspirations for high growth markets
Aspirations for high growth markets (currently around 40 percent of our revenue) Double revenues in China • Grow from $1 $1.5 5 to $3 billion of revenues • Already the biggest paint, coatings and specialty chemicals company in China Create significant footprint in India • Grow from €0.25 to €1 billi
Slide 34: 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 Q4 2011
Slide 35: 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 36: 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 37: Pipeline 2012
Pipeline 2012 Decorative Paints – End End-user user Smartphone Apps Key Features Customer Benefits • Browse colors • Helps customers picking colors and products • Pick colors from p photos p • Up-to-date product information for p • Access product information professional painters • Create shopping l
Slide 38: Pipeline 2012
Pipeline 2012 Aerospace Coatings - Aerobase CoatingSystem Key features Customers benefits • A high quality ‘wet look’ exterior • Significantly reduced down-time of aircraft coating for commercial aircraft • Reduced R d d costt off painting i ti • More durable, with greater protection • Extended in-s
Slide 39: Pipeline 2012
Pipeline 2012 Functional Chemicals – Suprasel Loso Loso™ OneGrain OneGrain™ Key Features Customer Benefits • An innovative salt for food • Addresses concerns about sodium consumption levels p to 50% reduced sodium • Up content and no loss of taste • Every salt grain can contain a full customized rec
Slide 40: 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 41: 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 42: Capital expenditure prioritization for growth
Capital expenditure prioritization for growth • Capex 2011 was €708 million (including Ningbo €45) • 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 2011 Performance
Slide 43: 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 2500 18% 17% 15.6% 15.3% 16% 15.0% 2000 14.5% 14.9% 14.1% 14.4% 15% 13.9% 14% 13% 1500 12% 2,037 2,346 2,191 2,016 2,317 2,389 2,433 2,196 11% 1000 10% Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011
Slide 44: Debt duration lengthened to 3.6 years and no refinancing needed in 2012
Debt duration lengthened to 3.6 years and no refinancing needed in 2012 Debt maturities* € million (nominal amounts) 1.200 800 400 0 2012 2013 2014 2015 2016 2017 2018 € bonds $ bonds £ bonds Strong liquidity position to support growth • Undrawn revolving credit facility of €1.8 billion (2016) or €1
Slide 45: Revenue growth and EBITDA margin performance 2010-11
Revenue growth and EBITDA margin performance 2010-11 Reported quarterly revenue growth in % year-on-year 20 15 10 6% 7% 2% 5% 5 0 Decorative Paints Performance Specialty AkzoNobel Coatings Chemicals Quarterly EBITDA* margin in % 20 16.1% 15 0.9% 10.6% 7.9% 10 5 0 Decorative Paints Performance Specia
Slide 46: Unchanged ambition to maintain strong balance sheet
Unchanged ambition to maintain strong balance sheet € million Dec 31, 2011 Dec 31, 2010 Total equity 9 743 9,743 9 509 9,509 Net debt* 1,895 936 • Credit ratings unchanged at BBB+/Baa1, BBB+/Baa1 outlook stable • Net debt increased mainly due to capital expenditures of €708 million, dividend payment
Slide 47: Q4 2011 incidentals
Q4 2011 incidentals € million Q4 2011 Q4 2010 Restructuring costs (55) (29) Results related to major legal, (33) (48) anti-trust and environmental cases Results of acquisitions and divestments (11) 16 Other incidental results 2 (2) Total (97) (63) • The increase Th i iin restructuring t t i costs t
Slide 48: Q4 EBITDA – Cash bridge
Q4 EBITDA – Cash bridge € million Q4 2011 Q4 2010 EBITDA before incidentals 301 377 Incidentals (cash) (38) (43) Change working capital 209 58 Change provisions (43) (20) Interest paid (48) (36) Income tax paid (111) (61) Net cash from operating activities 270 275 • Higher payments for income tax •
Slide 49: 2011 EBITDA – Cash bridge
2011 EBITDA – Cash bridge € million 2011 2010 EBITDA before incidentals 1 796 1,796 1 964 1,964 Incidentals (cash) (120) (128) Change working capital (344) (124) Change provisions (498) (651) Interest paid (282) (265) Income tax paid (227) (277) Net cash from operating activities 325 519 • Lower pro
Slide 50: Pension deficit decreases to €0.5 billion
Pension deficit decreases to €0.5 billion Key pension metrics Q4 2011 Q4 2010 Disco nt rate Discount 4 6% 4.6% 5 4% 5.4% Inflation assumptions 2.5% 3.0% Pension deficit development during 2011 € billion 0,2 0 2 0,0 -0,2 (505) 840 -0 0,4 4 (1 233) (1,233) -0,6 (1,049) (39) -0,8 622 354 -1,0 -1,2 Defi
Slide 51: Performance improvement program: stepping up operational and functional excellence
Performance improvement program: stepping up operational and functional excellence Underpin p our growth g and margin g objectives j • Enhance our ability to grow • Expected to bring us at or above the mid-point of our 13-15 percent EBITDA margin guidance. Deliver structural competitive advantage •
Slide 52: A comprehensive program
A comprehensive program • Comprehensive – all functions, all businesses • Margin management, R&D and restructuring (~50%) Decorative Perf. Specialty • Supply Chain and Sourcing Paints Coatings Chemicals projects j t (~40%) ( 40%) Finance Information • Improvements implemented over Management Researc
Slide 53: 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