Slide 1: Investor Update Q2 2010 results
July 23, 2010 Investor Update Q2 2010 results
Slide 2: Agenda
Agenda • AkzoNobel at a glance • Strategic ambitions and action plans • Q2 2010 highlights and operational review • Financial review • Sustainability review • Outlook
Slide 3: AkzoNobel key facts
AkzoNobel key facts 2009 • Revenue €13.0 billion • 54,738 employees • EBITDA: €1.7 billion* • EBIT: €1.1 billion* • Net income: €285 million • Credit ratings: BBB+ (S&P) and Baa1 (Moody’s) Revenue by business area EBITDA* by business area 33% 32% 32% 41% Performance Coatings Decorative Paints 35% 27
Slide 4: The global paints and coatings market is around €70 billion
The global paints and coatings market is around €70 70 billion % of market 100% is around €70 billion Wood Finishes General Industrial Coatings 6% 10% Car Refinishes Decorative 7% Decorative 44% Performance 3% Marine and Yacht 56% 6% Protective coatings 2% 9% Special purpose 8% 3% 2% Auto OEM, metal
Slide 5: AkzoNobel is the world's largest Coatings supplier
AkzoNobel is the world’s largest Coatings supplier 2009 revenue in € billion 10 8 6 4 2 0 Investor update Q2 2010 results 5
Slide 6: Excellent geographic spread of both revenue and profits
Excellent geographic spread of both revenue and profits High-growth growth markets are important (37% of revenue) % of 2009 revenue 39% 21% 7% ‘Mature’ Europe 20% North America ‘High-growth’ Europe Asia Pacific 9% Latin America 4% Rest-of-world High-growth growth markets profitability is above avera
Slide 7: Strong high-growth markets potential
Strong high-growth growth markets potential Mature High-growth Per Capita Per Capita Architectural 8 liters < 2 liters Paint Industrial and Special Purpose 13 liters < 6 liters Coatings Plastics ~100 kg ~20 kg ~170 kg ~25 kg Paper Source: Food & Agriculture Organization of the UN, 2005 data for pape
Slide 8: We have strong brands across the full spectrum of our business
We have strong brands across the full spectrum of our business Biggest brands, per business area % of 2009 revenue 25% of Decorative Paints 23% of Performance Coatings 18% of Specialty Chemicals Investor update Q2 2010 results 8
Slide 9: Sustainability is integrated in everything we do
Sustainability is integrated in everything we do We have set ambitious sustainability targets: • Remain in the top three in the Dow Jones Sustainability Indexes • Reduce our total recordable injury rate* to 2 • Deliver a step change in people development We focus on long-term term performance. By 20
Slide 10: Strategic ambitions and action plans
Strategic ambitions and action plans
Slide 11: AkzoNobel strategic ambitions
AkzoNobel strategic ambitions Leading in value creation • Outgrow our markets • EBITDA margin > 14 percent by end 2011 • 0.5 percent improvement in operating Tied to incentives, working capital (OWC) as % of revenue, p.a. both for value creation and Leading in sustainability sustainability • Top 3 D
Slide 12: Delivering on our strategic ambitions
Delivering on our strategic ambitions EBITDA margin target reached • 14% EBITDA margin delivered, 1.5 year ahead of schedule • Performance driven by margin management, ICI synergies and additional restructuring measures ICI fully integrated, synergies achieved • €340 340 million structural cost savi
Slide 13: Q2 2010 highlights and operational review
Q2 2010 highlights and operational review
Slide 14: Q2 2010 highlights
Q2 2010 highlights • Revenue €3.9 3.9 billion (2009: €3.5 billion), up 13 percent (5 percent in constant currencies) • EBITDA* €614 614 million (2009: €506 million), up 21 percent (13 percent in constant currencies) • EBITDA* margin 15.7 percent (2009: 14.7 percent) • One year rolling EBITDA* margin
Slide 15: Revenue growth and margin development per quarter to Q2 2010
Revenue growth and margin development per quarter to Q2 2010 Reported revenue in % year-on on-year 19% 14% 13% 8% EBITDA* margin in % 20.4% 14.6% 15.2% 15.7% * Before incidentals 2009 2010 Investor update Q2 2010 results 15
Slide 16: Volume and price development per quarter to Q2 2010
Volume and price development per quarter to Q2 2010 Volume development Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Decorative Paints (10) (9) - 5 1 Performance Coatings (19) (11) (2) 8 12 Specialty Chemicals (18) (6) 4 15 15 AkzoNobel (16) (8) 1 10 8 Price development Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Decorative Pain
Slide 17: Q2 2010 revenue and EBITDA
Q2 2010 revenue and EBITDA € million Q2 2010 % Revenue 3,907 13 EBITDA* 614 21 Ratio, % Q2 2010 Q2 2009 EBITDA* margin 15.7 14.7 +13% * Before incidentals Increase Decrease Investor update Q2 2010 results 17
Slide 18: Summary – Q2 2010 results
Summary – Q2 2010 results € million Q2 2010 Q2 2009 EBITDA* 614 506 Amortization and depreciation (148) (140) Incidentals (11) (55) Financial income & expense (113) (85) Minorities and associates (19) (14) Income tax (76) (71) Discontinued operations 26 14 Net income total operations 273 155 Net cas
Slide 19: Q2 2010 incidentals
Q2 2010 incidentals € million Q2 2010 Q2 2009 Restructuring costs (21) (71) Results related to major legal, 8 7 antitrust & environmental cases Results on acquisitions & divestments 1 3 Other incidental results 1 6 Total (11) (55) • Restructuring activities are ongoing, mainly in Decorative Paints i
Slide 20: Decorative Paints
Decorative Paints We’ve been working with The Home Depot in North America since 1979. We continued to invest in the Glidden brand resulting in a healthy sales increase and share expansion of the Glidden brand in the retail segment. The Glidden Gets You Going campaign won a top US marketing award in
Slide 21: Decorative Paints key facts
Decorative Paints key facts 2009 • Revenue €4.6 billion • 21,940 employees • EBITDA: €487 million* • 36 percent of revenue from high-growth high markets • Largest global supplier of decorative paints • Many leading positions, strong brands Some of our strong brands Revenue by geography 4% 10% Europe
Slide 22: Leading Deco positions in all regions with strong brands
Leading Deco positions in all regions with strong brands AkzoNobel market positions by value 1 2/3 >3 Export countries Source: Euromonitor basis; AkzoNobel analysis 2009 Investor update Q2 2010 results 22
Slide 23: Combination of channel and application mix creates a relatively stable market
Combination of channel and application mix creates a relatively stable market % of total Decorative market 2009 Market breakdown Market breakdown by channel by application ~70% ~50% ~50% ~30% Retail Trade New build Maintenance Source: Euromonitor basis; AkzoNobel analysis Investor update Q2 2010 res
Slide 24: Decorative Paints Q2 2010
Decorative Paints Q2 2010 € million Q2 2010 % Revenue 1,401 8 EBITDA* 205 20 Ratio, % Q2 2010 Q2 2009 EBITDA* margin 14.6 13.2 0% 0% * Before incidentals Increase Decrease Investor update Q2 2010 results 24
Slide 25: Decorative Paints Q2 2010 highlights
Decorative Paints Q2 2010 highlights • Revenue up 8 percent, with volumes up 1 percent • EBITDA* at €205 205 million, up 20 percent • EBITDA* margin 14.6 percent (2009: 13.2 percent) • Strong revenue growth and increased investment in brands and distribution in high growth markets • Soft demand in t
Slide 26: Performance Coatings
Performance Coatings AkzoNobel Industrial Coatings signed an agreement to acquire Lindgens Metal Decorating Coatings & Inks- Inks a proof point of our selective growth acquisition strategy. It will enhance our market position and complements our own packaging coatings business with products and expe
Slide 27: Performance Coatings key facts
Performance Coatings key facts 2009 • Revenue €4.1 billion • 19,940 employees • EBITDA: €594 million* • 45 percent of revenue from high growth markets • Leading positions in performance coatings • Innovative technologies, strong brands Revenue by business unit Revenue by geography 6% 15% 8% Marine a
Slide 28: Many market leadership positions
Many market leadership positions 1 Marine and Marine, 2 Protective, Protective Yacht 1 2 Car 3 Refinish, Automotive OEM plastic Refinishes Aerospace commercial 5 coatings Coil, 1 Specialty Industrial 2 Plastics, Coatings Beer & beverage Food cans 1 Wood Wood Finishes coatings, 2 Wood and Adhesives a
Slide 29: Performance Coatings Q2 2010
Performance Coatings Q2 2010 € million Q2 2010 % Revenue 1,260 19 EBITDA* 191 15 Ratio, % Q2 2010 Q2 2009 EBITDA* margin 15.2 15.6 +1% * Before incidentals Increase Decrease Investor update Q2 2010 results 29
Slide 30: Performance Coatings Q2 2010 highlights
Performance Coatings Q2 2010 highlights • Revenue up 19 percent, with volumes up 12 percent • EBITDA* at €191 191 million, up 15 percent • EBITDA* margin at 15.2 percent (2009: 15.6 percent) • Broad demand improvement in all industrial businesses • Powder Coatings started integration of acquired act
Slide 31: Specialty Chemicals
Specialty Chemicals More protection and convenient product application - an innovation within the Personal Care business of Surface Chemistry provides manufacturers of sunscreen products with polymer technology and customized formulation expertise, together with specialized sensory/consumer testing.
Slide 32: Specialty Chemicals key facts
Specialty Chemicals key facts 2009 • Revenue €4.4 billion • 11,140 employees • EBITDA: €738 million* • 32 percent of revenue from high-growth high markets • Major producer of specialty chemicals • Leadership positions in many markets Revenue by business unit Revenue by geography 4% Functional Chemic
Slide 33: Many market leadership positions
Many market leadership positions Chelates, Ethylene 1 1 sulfur products, amines, Functional 2 polysulfides, Salt metal alkyls, 3 Chemicals organic Specialties Elotex, peroxides, (N. Europe) Bermocoll 5 CMC 1 1 Chlorine merchant, Industrial Monochloro- Monochloro 2 Caustic merchant, Chemicals acetic
Slide 34: Specialty Chemicals Q2 2010
Specialty Chemicals Q2 2010 € million Q2 2010 % Revenue 1,258 14 EBITDA* 257 28 Ratio, % Q2 2010 Q2 2009 EBITDA* margin 20.4 18.2 -2% -6% +7% +15% +14% * Before incidentals Increase Decrease Investor update Q2 2010 results 34
Slide 35: Specialty Chemicals Q2 2010 highlights
Specialty Chemicals Q2 2010 highlights • Revenue increased 14 percent, with volumes up 15 percent • Broad demand improvement and favorable currency effects (7 percent) drive top line • EBITDA* at €257 257 million, up 28 percent • EBITDA* margin 20.4 percent (2009: 18.2 percent) • All units contribut
Slide 36: Financial review
Financial review
Slide 37: Cash management discipline
Cash management discipline Focus on • OWC reduction • Capex prioritization cash • Selective acquisitions • Dividend policy unchanged • Operating Working Capital reduced to 15.0% of revenue (Q2 2009: 16.2%) • Careful prioritization of capital expenditures • We continue to look for attractive acquisit
Slide 38: Continued focus on Operating Working Capital is delivering results
Continued focus on Operating Working Capital is delivering results OWC € million 19.1% 16.2% 15.6% 14.6% 15.0% 13.7% 2,341 2,238 2,007 1,691 2,037 2,346 OWC OWC as % of revenue Investor update Q2 2010 results 38
Slide 39: Capital expenditures remain disciplined
Capital expenditures remain disciplined • Capex 2009 actual spend was €534 million, unchanged from 2008 • Capex 2010 expected to approach €600 million (incl. Ningbo €100 million) OWC split at year-end end 2009 2009 Capex split Other Perf 4% Deco 12% 30% Spec Ch 38% Deco 21% Spec Ch 63% Perf 32% Data
Slide 40: Dividend policy
Dividend policy Dividend policy remains at least 45 percent of net income before incidentals and fair value adjustments related to the ICI acquisition € per share 2 57% 60% 55% 1,8 48% 50% 1,6 45% 40% 1,4 40% 1,2 1 30% 0,8 €1.20 €1.20 €1.80 €1.80 €1.35 20% 0,6 0,4 10% 0,2 0 0% 2005 2006 2007 2008 20
Slide 41: EBITDA – Cash bridge
EBITDA – Cash bridge € million Q2 2010 Q2 2009 EBITDA before incidentals 614 506 Incidentals (cash) (4) (54) Change working capital 2 62 Change provisions (137) (25) Interest paid (45) (111) Income tax paid (39) (69) Net cash from operating activities 391 309 • Higher net cash driven by higher opera
Slide 42: Ambition to maintain strong balance sheet & credit rating unchanged
Ambition to maintain strong balance sheet & credit rating unchanged € million Jun 30, 2010 Dec 31, 2009 Total Equity 9,444 8,245 Net debt 2,339 1,744 € million Q2 2010 Q2 2009 Net cash from operating activities 391 309 • Equity impacted by currency translation (€1,035 ( million), net income (€ 354 m
Slide 43: Pension deficit unchanged at €1.8 billion
Pension deficit unchanged at €1.8 billion Key pension metrics Q2 2010 Q1 2010 Discount rate 5.2% 5.4% Inflation assumptions 2.9% 3.3% Pension deficit development during Q2 2010 € billion 0 -0.5 (1,820) (1,793) -1.0 -1.5 532 (402) (101) 23 (25) -2.0 Deficit Top-ups Inflation Discount Decreased Other
Slide 44: Pro-active pension risk management
Pro-active active pension risk management • 2004 pro forma (including ICI) pension under funding was around €4 billion • Defined Benefits closed to new entrants, major plans closed in 2001 (ICI) and 2004 (Akzo Nobel) • Committed to further de-risk de over time • Total defined benefit pension plans c
Slide 45: No 2010 refinancing needs
No 2010 refinancing needs Debt maturity, € million (nominal amounts) 1.200 800 400 0 2009 2010 2011 2012 2013 2014 2015 2016 € bonds $ bonds GBP bonds Significant liquidity headroom • Undrawn revolving credit facility of €1.5 billion available (2013)* • €1.5 1.5 & $1 billion commercial paper program
Slide 46: Credit ratings
Credit ratings AkzoNobel is committed to maintaining a strong investment grade rating Standard & Poor’s: BBB+ (negative outlook) •Rating Rating affirmed on August 25, 2009, unchanged since February 25, 2009 •AkzoNobel AkzoNobel continues to benefit from its business position Moody’s: Baa1 (negative
Slide 47: Low fixed costs as a percentage of revenue
Low fixed costs as a percentage of revenue % of 2009 annual revenue* 100% Raw materials, energy, and other variable production costs Fixed production costs Selling, advertising, administration, R&D costs EBIT margin 0% Decorative Performance Specialty AkzoNobel Paints Coatings Chemicals * Rounded pe
Slide 48: Raw materials, energy and other variable costs represent around half of revenue
Raw materials, energy and other variable costs represent around half of revenue Primary packaging Energy Solvents 6% 13% Chemicals & 6% intermediates 10% Regional and/or local approach Other Additives 24% Variable 10% Global markets, Costs* global strategy 3% Hybrid Pigments centralized/BU 11% 3% 6%
Slide 49: Sustainability review
Sustainability review
Slide 50: We see sustainability as a business opportunity
We see sustainability as a business opportunity Examples Level of development Environmental Economic Social Invent Integrate Carbon and Eco-premium sustainable value water policies propositions Manage Include Sales sustainability Market Investment Manu- and Sourcing R&D in all aspects research decis
Slide 51: Our Research Development & Innovation has a significant sustainability focus
Our Research Development & Innovation has a significant sustainability focus 4,000 people employed globally Over 60 percent of projects sustainability driven 2009: 2.4 percent of revenue spent (> €300 million) on RD&I Geographic spread of RD&I 57% 21% 22% Europe Asia Pacific Americas Investor update
Slide 52: Sustainability focus paying off
Sustainability focus paying off Dulux® Weathershield SunReflect™ Lowers the temperature of external walls by up to 5° 5 C and reduces the need for air conditioning by reflecting up to 90 percent more infrared radiation that comparable exterior paints . Intergard® 10220 Waterborne Peelable Coatings T
Slide 53: Our sustainability commitment has been recognized externally
Our sustainability commitment has been recognized externally 2004 No ranking 2005 Top 10% 2006 2nd Place 2007 Super sector leader 2008 Joint 2nd place 2009 2nd place Investor update Q2 2010 results 53
Slide 54: Outlook
Outlook
Slide 55: Well positioned for growth
Well positioned for growth Sound fundamentals • Strong market positions and brands • Diverse geographic spread in highly attractive sectors • Low cyclicality due to resilient portfolio • Sustainability is integrated in everything we do Strong track record • Operational excellence • Strong operating
Slide 56: Outlook
Outlook • We are emerging from the global economic crisis in better shape underlined by the early achievement of our 2011 EBITDA margin target of 14 percent • The developed markets remain challenging, but we are cautiously optimistic despite the economic uncertainty • We remain focused on accelerati
Slide 57: 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