Akzo Nobel N.v. · EURONEXT:AKZA
Akzo Nobel — Q2 2014 Earnings Presentation
91 slides from Akzo Nobel's earnings presentation, Jul 23, 2014
Slide 1: Investor Update Q2 2014 results
Investor Update Q2 2014 results Ton Büchner July 23, 2014
Slide 2: Agenda
Agenda 1. Q2 2014 highlights 2. Operational and financial review 3. Conclusion 4. Questions Investor Update Q2 2014 results 2
Slide 3: Q2 2014 highlights
Q2 2014 highlights • In Q2, volumes were positive in all three Business Areas • Revenue down 4 percent, mainly due to 5 percent adverse currency effects • Operating income €353 million (2013: €322 million) reflecting increased volumes and benefits from improvement actions • Return on sales (ROS) imp
Slide 4: Manufacturing PMI
The majority of global manufacturing output is still anticipating expansion Purchase Managers’ Index (PMI)* June 2014 60 US UK Spain Taiwan Italy Sweden Japan China Germany Indonesia Mexico Netherlands South Korea Russia India 50 Manufacturing PMI Greece Turkey Australia France Brazil 40 • Greece, B
Slide 5: Consumer confidence levels in parts of Europe are low, but rising
Consumer confidence levels in parts of Europe are low, but rising, while confidence in Latin America is declining Consumer confidence, Q2 2014 Figures below 100 indicate some degree of pessimism 120 Recent trends compared to Q2 2013 100 80 60 128 111 104 100 96 90 40 84 81 60 20 0 India China US Bra
Slide 6: Revenue split by end-user segments
~44% of revenues ~16% of revenues New Build Projects Automotive OEM, Parts and Assembly Maintenance, Renovation & Repair Automotive Repair Building Products & Components Marine and Air Transport ~16% of revenues ~24% of revenues Consumer Durables Natural Resource and Energy Industries Consumer Packa
Slide 7: Q2 2014 revenue and operating income
Q2 2014 revenue and operating income € million Q2 2014 Δ% Revenue 3,710 -4 Operating income 353 10 Ratio, % Q2 2014 Q2 2013 Return on sales 9.5 8.3 Return on sales (excluding restructuring costs) 10.7 9.3 Moving average return on investment 10.1 7.7 Increase Revenue development Q2 2014 vs. Q2 2013 D
Slide 8: Market conditions remain challenging but volumes continued to improve
Market conditions remain challenging but volumes continued to improve in all Business Areas Quarterly volume development in % year-on-year 2013 2014 6 +4% +3% +3% 2 +1% -2 -6 Decorative Paints Performance Coatings Specialty Chemicals AkzoNobel Quarterly price/mix development in % year-on-year 5 +2%
Slide 9: Foreign exchange rates continued to negatively impact our revenues in Q2
Foreign exchange rates continued to negatively impact our revenues in Q2 Quarterly foreign exchange rate development in % year-on-year 2013 2014 4 -5% -5% -4% -5% 0 -4 -8 Decorative Paints Performance Coatings Specialty Chemicals AkzoNobel • Higher volumes were offset by a 5 percent negative impact
Slide 10: 1H 2014 operating income bridge
1H 2014 operating income bridge Operating Income bridge 1H 2013 – 1H 2014 Increase € million Decrease 600 (17) 42 2 (20) (53) 76 500 569 539 400 300 0 1H 2013 Currency / Volume Price/Mix Raw materials Additional Other 1H 2014 Acq / Div restructuring costs * Other includes additional benefits from re
Slide 11: Financial targets – progress made to date
Financial targets – progress made to date Return on sales – 2015 target 9.0% Return on investment – 2015 target 14.0%* 12 16 AkzoNobel 8.0 FY2012 7.4 12 9.5 8 5.9 8.9 7.8 1H2013 8 4 1H2014 4 0 0 % FY2012 1H2013 1H2014 % FY2012 1H2013 1H2014 Return on sales 16 10.5 11.0 10.6 12 9.5 9.0 8.8 6.9 6.1 8
Slide 12: Decorative Paints Quarterly developments
Decorative Paints Quarterly developments • Exiting low margin contracts improved return on sales, but negatively impacted reported volume growth • Restructuring charges at €23 million are similar to last year (2013: €24 million). Underlying ROS% improves from 10.7% in Q2 2013 to 11.6% in Q2 2014 • E
Slide 13: Decorative Paints Q2 2014 highlights
Decorative Paints Q2 2014 highlights = • Volumes up 3 percent compared with € million Q2 2014 Δ% previous year Revenue 1,074 -9 • Revenues down 9 percent due to Operating income 102 0 divestments and adverse currency effects Ratio, % Q2 2014 Q2 2013 • Price/mix driven by the sale of the German store
Slide 14: Performance Coatings Q2 2014 highlights
Performance Coatings Q2 2014 highlights • Volumes increased 1 percent € million Q2 2014 Δ% compared with previous year Revenue 1,434 -2 • Revenues down 2 percent, primarily Operating income 178 9 due to adverse currency effects • Operating income up 9 percent, Ratio, % Q2 2014 Q2 2013 return on sale
Slide 15: Specialty Chemicals Q2 2014 highlights
Specialty Chemicals Q2 2014 highlights • Volumes up 4 percent compared with € million Q2 2014 Δ% the previous year Revenue 1,228 -2 • Revenues down 2 percent, mainly Operating income 124 2 due to adverse currency effects • Operating income up 2 percent at Ratio, % Q2 2014 Q2 2013 €124 million, due t
Slide 16: Divestment of Paper Chemicals business
Divestment of Paper Chemicals business • Following a strategic review of the business’ fit within our portfolio we announced the intended sale of our paper chemicals business to Kemira for €153 million • Paper chemicals, part of the pulp and performance division within Specialty Chemicals, generated
Slide 17: Summary – Q2 2014 results
Summary – Q2 2014 results € million Q2 2014 Q2 2013 EBITDA 509 474 Amortization and depreciation (156) (152) Incidentals - - Operating income 353 322 Net financing expenses (40) (33) Minorities and associates (18) (19) Income tax (89) 38 Discontinued operations (1) 121 Net income attributable to sha
Slide 18: Cash flows Q2 2014
Cash flows Q2 2014 € million Q2 2014 Q2 2013 Profit for the period from continuing operations 230 333 Amortization and depreciation 156 152 Change working capital (2) (123) • Pension provisions (27) (19) • Restructuring (14) (16) • Other provisions (19) (3) Change provisions (60) (38) Other changes
Slide 19: IAS 19 pension deficit slightly higher in Q2 2014
IAS 19 pension deficit slightly higher in Q2 2014 Key pension assumptions metrics Q2 2014 Q1 2014 Discount rate 4.0% 4.1% Inflation rate 3.1% 3.1% Pension deficit development during Q2 2014 € million Decrease Increase (1,057) (1,139) 1 159 (269) 43 (16) Deficit end Q1 Top-ups Asset return over Disco
Slide 20: Conclusion
Conclusion • Volume development positive in all three Business Areas • Return on sales and return on investment improved in all Business Areas • Continuous improvement programs are ongoing in all businesses, with expectation of at least €250 million restructuring costs in 2014 • Continued investment
Slide 21: Questions
Questions Investor Update Q2 2014 results 21
Slide 22: 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
Slide 23: Appendices
Appendices Investor Update Q2 2014 results 23
Slide 24: Restructuring charges by quarter
Restructuring charges by quarter* FY Q1 Q2 YTD € million Q1 Q2 Q3 Q4 2013 2014 2014 2014 Decorative Paints 7 24 8 66 105 22 23 45 Performance 11 5 9 77 102 15 17 32 Coatings Specialty 1 0 46 27 74 7 2 9 Chemicals Other 10 11 12 34 67 0 3 3 Total 29 40 75 204 348 44 45 89 * 2013 charges related to Pe
Slide 25: Effects from Building Adhesives on FY 2013 results
Effects from Building Adhesives on FY 2013 results € million Q1 Q2 Q3 Q4 FY 2013 Revenue 45 49 47 - 141 Operating Income 4 5 3 - 12 • Divestment completed on October 1st, 2013 • Results still included in 2013 financials, impact on 2014 revenue development visible through acquisitions/divestments Inv
Slide 26: Q2 2014 Operating income – Cash bridge
Q2 2014 Operating income – Cash bridge € million Q2 2014 Q2 2013 Operating Income 353 322 Incidentals - - Depreciation & amortization 156 152 EBITDA before incidentals 509 474 Other 15 14 Change working capital (2) (123) Change provisions (60) (38) Interest paid (17) (27) Income tax paid (52) (39) N
Slide 27: Innovation Pipeline Q2 2014 Decorative Paints – Rubbol Satin
Innovation Pipeline Q2 2014 Decorative Paints – Rubbol Satin Key Features Customer Benefits Growth Potential • Cobalt-free technology • Long-lasting paint film • Launched by Sikkens France in • High whiteness and low • Very easy to apply March 2014 yellowing • Very good opacity and edge • Further la
Slide 28: Innovation Pipeline Q2 2014 Vehicle Refinishes – Sikkens AutoClear 2.0
Innovation Pipeline Q2 2014 Vehicle Refinishes – Sikkens AutoClear 2.0 Key Features Customer Benefits Growth Potential • High-performance clearcoat • Greater efficiency in bodyshop • Product gradually launched in finish based on patented processes: Europe in 2014 binder technology − reduced mixing a
Slide 29: Innovation Pipeline Q2 2014 Surface Chemistry – DERMACRYL 2.0
Innovation Pipeline Q2 2014 Surface Chemistry – DERMACRYL® 2.0 Key Features Customer Benefits Growth Potential • Waterproofing film-former • Improved skin feel • Launched globally in 2014 designed for use in ethanol- • Protection from exposure to • Builds on the market-leading based sunscreens sunli
Slide 30: Our proposition: Leading market positions delivering leading performance
Our proposition: Leading market positions delivering leading performance AkzoNobel has gone through a significant amount of strategic change over the past five years Today, the company has • Excellent portfolio of businesses • Good long term growth potential on the basis of end-user segment growth •
Slide 31: Realistic 2015 financial targets
Realistic 2015 financial targets focused on quality of earnings and value creation Return on sales Return on investment Net debt/EBITDA (Operating income/revenue) (Operating income/average x % 12 months invested capital) % 12 16 14.0 3 9.0 12 < 2.0 8 5.9* 6.6 8.9* 9.6 2 1.4 8 1.0 4 1 4 0 0 0 2012 20
Slide 32: AkzoNobel strategy introduced in 2013
AkzoNobel strategy introduced in 2013 • Organic growth • Operational excellence Investor Update Q2 2014 results 32
Slide 33: AkzoNobel today
AkzoNobel today • Revenue €14.6 billion • 49,560 employees • 44% of revenue from high growth markets • Major producer of Paints, Coatings and Specialty Chemicals • Leadership positions in many markets Revenue by Operating income Invested capital by Business Area by Business Area Business Area Perfor
Slide 34: The global paints and coatings market is around €80 billion
The global paints and coatings market is around €80 billion By market sector By end-user segment 2013, 100% = €80 billion 2013, 100% = €80 billion Yacht Aerospace Specialty Packaging Industrial Finishes Coil Decorative Consumer Buildings and Marine Paints Goods Infrastructure Wood (42%) Automotive O
Slide 35: AkzoNobel has many leading market positions
AkzoNobel has many leading market positions No.1 Position Other key players Multiple regions outside North PPG, regional players Decorative America North America* Sherwin-Williams PPG, regional players Protective Sherwin-Williams, Jotun Powder Axalta, Jotun, regional players Auto refinish Axalta PPG
Slide 36: High growth markets are 44% of revenue
High growth markets are 44% of revenue and their importance will increase % of 2013 revenue 38% Mature Europe 15% 8% North America Emerging Europe 25% Asia Pacific 11% 3% Latin America Other regions Share of revenues from high growth markets will increase over time Investor Update Q2 2014 results 36
Slide 37: In aggregate variable costs represent 53% of revenue
In aggregate variable costs represent 53% of revenue Profit and loss breakdown* % of total • AkzoNobel is well positioned for economic recovery 100% • Variable costs represent 53% of revenue, down from 54% in 2012 • Decorative Paints is more driven by personnel costs in the distribution network, whi
Slide 38: We are actively addressing all components of operating expenses
We are actively addressing all components of operating expenses Operating expenses € 4.7 Research, Operating expense General & Selling Expenses Development & components Administrative Innovation € 1.4 € 3.0 € 0.4 Global Business Addressed by Commercial Excellence Initiatives Services Drives organic
Slide 39: Drive towards continuous improvement and commercial excellence
Drive towards continuous improvement and commercial excellence • Restructuring activities to continue into 2014, moving into continuous improvement which will enable us to achieve the 2015 targets – 2014 restructuring charges expected to total at least €250 million and will be more evenly spread ove
Slide 40: Sustainability is business; business is sustainability
Sustainability is business; business is sustainability of revenue by 2020 from products that are more sustainable for our customers than the products of our competitors more efficient resource and energy use across the entire value chain by 2020 (measured by carbon footprint reduction) (Resource Eff
Slide 41: AkzoNobel values drive cultural change
AkzoNobel values drive cultural change Investor Update Q2 2014 results 41
Slide 42: Leading performance; gaining momentum
Leading performance; gaining momentum Historical Vision 2015 Targets Culture issues & Strategy & Incentives & Values • ROS below peers • Organic growth • ROS 9% • Customer Focused • Not earning our cost • Operational • ROI 14% • Deliver on of capital excellence • Operating income - Commitments • Ina
Slide 43: Decorative Paints business at a glance
Decorative Paints business at a glance Revenue by end-user Revenue by geographic spread sub-segment 4% 16% 8% Mature Europe Maintenance, renovation and repair 14% Asia Pacific 49% Latin America New build projects Emerging Europe Other regions 25% 84% Decorative Paints key figures Key messages € mill
Slide 44: The global Decorative Paints market is attractive in terms of size and growth
The global Decorative Paints market is attractive in terms of size and growth Decorative Paints sales € billion • Used for protection as well as decoration 50 • Consumption per capita 40 driven primarily by the frequency of repainting 30 • Demand growth closely correlated with GDP growth, 20 consume
Slide 45: High-growth markets are growing well and are increasingly 'trading up'
High-growth markets are growing well and are increasingly ‘trading up’ Paint market growth* Paint market composition* $ billion % of total, by value • Paint markets in high-growth markets are still showing 100% 8% p.a. significant opportunities for growth • Spending power of the middle 75% class in
Slide 46: In Decorative Paints we hold strong market positions across all regions
In Decorative Paints we hold strong market positions across all regions Geographic size AkzoNobel Geographic area (€ billion) position Europe* 12.2 1 South East Asia and Pacific 1.7 1 China and North Asia 6.4 2 Latin America 2.5 2 India and South Asia 2.8 3 * Europe includes Africa and Middle East I
Slide 47: We are strong in the premium segment, but also compete successfully elsewhere
We are strong in the premium segment, but also compete successfully elsewhere AkzoNobel Decorative Paints revenue by segment % of revenue 100% 75% 50% 25% 0% Brazil China Indonesia South Africa Economy Mid-market Premium Investor Update Q2 2014 results 47
Slide 48: We have very strong brands linked by a global approach to branding
We have very strong brands linked by a global approach to branding • Our well-known brands are one of our key competitive advantages Consumer • We have a number of powerful, relevant brands occupying a number of positions across different markets (consumer, professional, and other such as woodcare)
Slide 49: Accomplishments to date
Accomplishments to date Area Beginning 2008 End 2013 Cost reductions* n/a > 200 million Number of FTEs 25,800 16,240 Brands 100 59 SKUs >90,000 69,000 Factories 80 45 Warehouses 160 135 ERP systems >40 1 * Related to Performance Improvement Program Investor Update Q2 2014 results 49
Slide 50: Fix Europe
Fix Europe Objectives: • Improve performance by driving operational excellence and changing the operating model in Europe • Ensure that we are positioned for organic growth in mature European markets when the market recovers (e.g. UK) • Pursue organic growth in select countries where there are attra
Slide 51: Fix Europe
Fix Europe Actions: • Implement a central operating model and simplify our organizational structure • Consolidate our manufacturing and distribution footprint • Develop and implement standardized and efficient marketing and sales platforms • Redesign back office processes to support back office cons
Slide 52: Changing our operating model in Europe
Changing our operating model in Europe Action 2012 2013 2014 2015 Integrate relevant European activities and management Rationalize product portfolio and raw materials Rationalize manufacturing footprint Fully implement sales excellence Outsource certain finance businesses Implement central operatin
Slide 53: Grow profitably in high-growth markets
Grow profitably in high-growth markets Objectives: • Outgrow the market • Ensure that we leverage our (global) scale to ensure that we improve relative profitability while we grow Actions: • Develop profitable mid-market business model(s) • Build and implement a robust distribution strategy framewor
Slide 54: Performance Coatings business at a glance
Performance Coatings business at a glance Revenue by end-user segment Revenue by geographic spread 14% Buildings and 4% Mature Europe 24% Infrastructure 11% 27% North America Transportation 8% Asia Pacific 25% Latin America Consumer Goods Emerging Europe 30% 20% 37% Industrial Other regions Performa
Slide 55: We are organized in four Business Units
We are organized in four Business Units 2013 revenue by Business Unit • Protective Marine & • Marine Protective Coatings • Yacht Marine & Protective Coatings 27% 32% • Vehicle Refinishes Automotive & Automotive & Aerospace • Specialty Finishes Aerospace Coatings Coatings • Aerospace Powder Coatings
Slide 56: The Performance Coatings market is based on twelve sectors
The Performance Coatings market is based on twelve sectors Performance Coatings market sectors € billion, 2013 7 2013 total market size ~ €50 billion 6 5 4 3 2 1 0 AkzoNobel competes in these market sectors Source: Orr & Boss 2011 for base data on market sectors; AkzoNobel analysis Investor Update Q
Slide 57: The five year outlook for most sectors is positive
The five year outlook for most sectors is positive Performance Coatings market sectors 3-5 % (>GDP growth) € billion, 2013 3% (at GDP growth) 7 See next slide 6 5 4 3 2 1 0 Protective Vehicle Powder Wood Marine Specialty Coil Packaging Aerospace Yacht Refinishes Finishes Source: Orr & Boss 2011 for
Slide 58: The Marine new build market may have now reached the bottom of the cycle
The Marine new build market may have now reached the bottom of the cycle... New build ship deliveries Million deadweight tons, 2007 = 95 -5.7% -30.1% ? +18.4% p.a. 2007 08 09 10 11 12 13 14 Delivered Range of outcome On order Source: Clarkson Research Services Limited, January 2014, AkzoNobel analys
Slide 59: AkzoNobel is the global market leader in Performance Coatings, excluding Automotive
AkzoNobel is the global market leader in Performance Coatings, excluding Automotive Performance Coatings revenue € billion, 2013 unless noted 6 5 4 3 2 1 0 Non-Automotive Automotive * 2012 data Source: Annual Reports; AkzoNobel analysis Investor Update Q2 2014 results 59
Slide 60: AkzoNobel has many leading market sector positions in Performance Coatings
AkzoNobel has many leading market sector positions in Performance Coatings Performance Coatings market sectors AkzoNobel market share x € billion, 2013 position (by value) 2013 1 7 3 1 6 5 1 4 1/2 1 3 1 2 2 1 1/2 1 0 Protective Vehicle Powder Wood Marine Specialty Coil Packaging Aerospace Yacht Refi
Slide 61: We successfully expanded our portfolio and global presence
We successfully expanded our portfolio and global presence • Performance Coatings has made four bolt-on acquisitions over the last few years that brought many benefits, including: – Expanding our global reach – Broadening our technology offering – Taking leadership positions – Extracting significant
Slide 62: We have a strong business but there is room for improvement
We have a strong business but there is room for improvement going forward What we have done Room for improvement over the last three years over the next three years Grown the business in a difficult market environment Grow volume organically • Bolt-on acquisitions • Margin management actions Reduced
Slide 63: Drive performance improvement initiatives
Drive performance improvement initiatives Initiative Actions Roll out a common set of commercial processes Drive commercial excellence to increase to deliver both organic growth and sales effectiveness commercial efficiency Use a cross-business, cross-functional approach Deliver further complexity r
Slide 64: Drive commercial excellence to increase sales effectiveness
Drive commercial excellence to increase sales growth and commercial efficiency Commercial excellence is a key Actions value driver in Performance Coatings • Best practice selling processes • Best practice and competency training will be effectiveness Sales force focused on business in growth markets
Slide 65: Complexity reduction and continuously reduce external spend
Complexity reduction and continuously reduce external spend Performance Coatings Actions 2013 Drive further complexity reduction: Profit and loss breakdown* • Harmonize recipes % of total • SKU reductions 100% Use a cross-functional approach to deliver year-on-year savings in external spend • Aggreg
Slide 66: Continuously improve operational productivity
Continuously improve operational productivity Supply Chain performance is a key element for Actions success in Performance Coatings Embed standard processes and continuous • Supply Chain cost improvement capabilities to achieve (Manufacturing, logistics and warehousing) year-on-year savings exceedin
Slide 67: Pursue differentiated growth strategies
Pursue differentiated growth strategies Outgrow the market organically Expected outcomes • Marine • Improved market share • Protective • Costs don’t grow as fast as revenue • Powder • Improved return on sales • Specialty Finishes in percentage terms Improve performance by Expected outcomes driving o
Slide 68: Specialty Chemicals business at a glance
Business at a glance Revenue by end user segment Revenue by geographic spread 5% Buildings and Mature Europe 18% infrastructure 10% 2% North America Transportation 6% 44% Asia Pacific Consumer 17% 57% Latin America 19% goods Emerging Europe Industrial 22% Other regions Specialty Chemicals key figure
Slide 69: The chemical industry is large and growing
The chemical industry is large and growing Chemicals industry over time, by geography $ trillion • $3.5 trillion market Other China 6.3 Asia Pacific • Solution provider for society North America – manufacturing Western Europe – food production – climate change 3.4 • Continuous growth 1.3 0.9 • Stron
Slide 70: Five well positioned platforms in their industries
Five well positioned platforms in their industries Our Business Units Our Platforms Bleaching Chemicals Pulp & Performance chemicals 60% of Pulp & Performance chemicals Salt-chlorine chain Industrial Chemicals 100% of Industrial Chemicals Polymer Catalysts 40% of Functional Chemicals Functional Chem
Slide 71: Platforms operate world scale plants based on advanced technologies
Platforms operate world scale plants based on advanced technologies Our main chemical platforms Key products • Sodium chlorate Bleaching chemicals • Hydrogen peroxide • Energy/Salt • Monochloroacetic acid Salt-chlorine chain • Chlorine • Chloromethanes • Organic peroxides Polymer catalysts • Metal a
Slide 72: We have invested in the recent past and are well-prepared for future growth
We have invested in the recent past and are well-prepared for future growth BA Specialty Chemicals capital expenditure € million 500 400 300 200 100 0 2010 2011 2012 2013 Capital Expenditure Depreciation and Amortization Major projects and timing of spend Investment project 2010 2011 2012 2013 2014
Slide 73: Accomplishments to date
Accomplishments to date Area 2010 2013 Delta Number of operations integrated with customers 15 17 +13% Sales per FTE (k€) 445 467 +5% Capacity expansions (>10%) 12 units Number of manufacturing sites 109 102 -7% Sales/site (€ million) 42.6 48.5 +14% Renewable energy usage n/a 31% Waste (ton/€ millio
Slide 74: Four operational improvement initiatives
Four operational improvement initiatives Improve Strengthen Reduce Enhance product productivity of commercial organizational and process supply chain and excellence costs innovation operations • Asset optimization • Customer value • Restructuring • New applications • Production system creation and p
Slide 75: Differentiated strategies per platform
Differentiated strategies per platform Outgrow the market organically Actions ~ 50% of portfolio • Capitalize on investments Main platforms • Grow by successfully • Bleaching chemicals • Surfactants commercializing products for attractive applications Improve performance by driving Actions operation
Slide 76: Salt-Chlorine chain: Right at the heart of the customer base
Salt-Chlorine chain: Right at the heart of the customer base Steam cracker Refinery Olefin consumer Refinery & olefin producer Pipelines* * Pipelines transporting crude oil (RAPL), nafta (PALL), industrial gasses, ethylene and propylene Investor Update Q2 2014 results 76
Slide 77: Ethylene oxide network: Capitalizing on China investments
Ethylene oxide network: Capitalizing on China investments Bio-treatment facility Chelates Surfactants Hydrogen Organic Cyanide Peroxides Ethylene Oxide Ethylene Amines Cellulosics Site plan Investor Update Q2 2014 results 77
Slide 78: Surfactants: Growing with attractive end markets
Surfactants: Growing with attractive end markets Oilfield Lubricants Mining Agriculture Investor Update Q2 2014 results 78
Slide 79: Our platforms build on value chains
Our platforms build on value chains Raw Base Chemical Performance/ materials chemicals inter-mediates functional ‘End’ products chemicals Bleaching chemicals Salt-chlorine chain Polymer catalysts Ethylene oxide network Surfactants Investor Update Q2 2014 results 79
Slide 80: Our platforms build on value chains
Our platforms build on value chains Raw Base Chemical Performance/ materials chemicals inter-mediates functional ‘End’ products chemicals Bleaching chemicals Electrochemistry Salt-chlorine chain Polymer catalysts Serving plastics industry Ethylene oxide network Ethoxylation chemistry Surfactants Inv
Slide 81: Capital expenditure will be more in line with depreciation and amortization
Capital expenditure will be more in line with depreciation and amortization Capital Expenditures (millions €) 5.4% 4.5% 4.6% € 826 3.7% € 708 • 40-50% of capital expenditure is € 666 growth related € 534 • Going forward, capital expenditure will be around 4% of revenues, in line with depreciation an
Slide 82: Performance improvement actions release cash in Operating Working Capital
Performance improvement actions release cash in Operating Working Capital Operating Working Capital € million Operating Working Capital OWC as % of LQ revenue*4 2.500 16% 12.9% 14% • Operating Working Capital as % of revenue has 2.000 12% reduced towards 9.9% 10.7% 9.9% 10% • Significant seasonality
Slide 83: 2015 target: net debt to EBITDA ratio of less than two
2015 target: net debt to EBITDA ratio of less than two Net debt/EBITDA x • We have a strong liquidity position to support business needs: net cash and cash equivalents 1,5 €2.1 billion* • Undrawn revolving credit facility of €1.8 billion 1,0 (2018) €1.5 and $3 billion commercial paper programs, back
Slide 84: Continuously reducing costs of long term bonds
Continuously reducing costs of long term bonds Debt maturities € million Repaid € bonds £ bonds $ bonds 7.75% 4.00% 2.62% 7.25% 5.62% • Debt duration 3.6 years 825 8.00% 800 750 622 379 • Improving cash flow and 306 divestments enabled full 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 repayment
Slide 85: On track to deliver cash positive after dividend in 2015
On track to deliver cash positive after dividend in 2015 Cash flow sources and uses • Restructuring and pension 2012 2013 top-ups consume a significant proportion of cash • Performance improvement focus starts to address cash challenge • Remuneration metrics include cash generation • Positive cash i
Slide 86: Proactively managing or removing pension liabilities
Proactively managing or removing pension liabilities • ICIPF’s active management of interest rate and inflation Interest rate / exposure, with around 80% of defined benefit obligation Inflation hedging (DBO) risks hedged to date Retain and • Courtaulds (CPS) longevity swap with Swiss Re in 2012 Mana
Slide 87: Pension cash flow guidance
Pension cash flow guidance Defined benefit pension cash top-ups • Top-ups relate mainly to the 2 big UK plans, the ICI Pension Fund € million and the CPS Pension Scheme 2013 actual* 311 • Top-ups are based on prudent actuarial valuation of liabilities, 2014 -17 est.** ~330/year which differs from ac
Slide 88: Dividend policy unchanged
Dividend policy unchanged Dividends paid (€) • Our dividend policy is to pay a stable to rising dividend each year 1.08 1.12 1.12 1.12 1.05 • An interim and final dividend will be paid in cash unless shareholders elect to receive a stock dividend 0.30 0.32 0.33 0.33 0.33 2009 2010 2011 2012 2013 Fin
Slide 89: Realistic expected 2015 outcomes
Realistic expected 2015 outcomes Expected Outcomes 2012 2015 16 Return on 12,0 12,0 sales 12 9,5 9,0 7,5 8 4 2,2 0 % Decorative Paints Performance Coatings Specialty Chemicals Return on 32 25,0 investment 24 21,7 13,6 15,0 16 12,0 8 3,0 0 % Decorative Paints Performance Coatings Specialty Chemicals
Slide 90: Variable costs analysis
Variable costs analysis 2013 (excluding Decorative Paints North America) Packaging Energy & other variable costs* Raw materials Solvents 6% 7% 29% Chemicals and intermediates*** 17% 3% Other raw materials** 10% 5% Additives 6% Titanium 2% dioxide 15% Pigments Coatings’ specialties Resins * Other var
Slide 91: Both short & long term incentives are aligned with our priorities
Both short & long term incentives are aligned with our priorities Executive short term incentive 2014 Executive long term incentive 2014 STI Metric LTI Metric Element Element 20% Return on investment 35% Return on investment 20% Operating income 35% Total Shareholder Return 30% Operating cash flow 3