Slide 1: Investor update Q2 2011 results
July 21, 2011 Investor update Q2 2011 results
Slide 2: Agenda
Agenda • AkzoNobel at a glance • Strategic ambitions • Q2 2011 value highlights • Q2 2011 growth & innovation highlights • Financial review • Outlook 2011 Investor update Q2 2011 results 1
Slide 3: AkzoNobel key facts
AkzoNobel key facts 2010 • Revenue €14.6 billion • 55,590 employees • EBITDA: €2.0 billion* • Net income: €0.8 billion • 39 percent of revenue from high-growth markets • A leader in sustainability Revenue by business area EBITDA* by business area 33% 33% 30% Performance Coatings 44% Decorative Paint
Slide 4: 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, metal, plastics Coil
Slide 5: 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 Q2 2011 results 4
Slide 6: Excellent geographic spread of both revenue and profits
Excellent geographic spread of both revenue and profits High-growth markets are important (39% of revenue) % of 2010 revenue 39% ‘Mature’ Europe 6% 20% ‘Emerging’ Europe North America 4% 21% ME&A Asia Pacific 10% Latin America High-growth markets profitability is above average Investor update Q2 201
Slide 7: Leading positions and strong brands
Leading positions and strong brands 2010 Revenue by market position Some of our strong brands 27% of Decorative Paints No. 2 or 3 37% No. 1 23% of Performance Coatings position 60% Other 3% 18% of Specialty Chemicals Investor update Q2 2011 results 6
Slide 8: Successful customer focus
Successful customer focus Dulux® Weathershield SunReflect™ Lowers the temperature of external walls by up to 5° C and reduces the need for air conditioning by reflecting up to 90 percent more infrared radiation than comparable exterior paints. Compozil® Fx A wet end management system for the largest
Slide 9: Strategic ambitions
Strategic ambitions Investor update Q2 2011 results 8
Slide 10: Our strategic ambition is to be
Our strategic ambition is to be Investor update Q2 2011 results 9
Slide 11: Our medium term strategic goals
Our medium term strategic goals • Top quartile safety performance • Top 3 position in sustainability • Top quartile performance in diversity, employee engagement, and talent development • Top quartile eco-efficiency improvement rate • Grow to €20 billion revenues • Increase EBITDA each year, maintai
Slide 12: How we will grow in both mature and high-growth markets
How we will grow in both mature and high-growth markets Organic growth • Expand focus from high to mid market segments • Fuelling growth in high-growth markets Innovation pipeline • Spend of around 2.5% of revenue makes us the clear peer group leader in absolute spend • Emphasis on focused, bolder,
Slide 13: Aspirations for high-growth markets
Aspirations for high-growth markets Currently around 40 percent of our revenue Double revenues in China • Grow from $1.5 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 billion of r
Slide 14: 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 ME&A 11% Latin America High-growth markets will be around 50% of revenue in this decade Investor update Q2 2011 results 13
Slide 15: 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: segment • Functional solutions in key market segments 12% • Increase spend in Big R&D • >15% of revenue from “breakthrough” 13% 43% innovations* • >30% of rev
Slide 16: Clear sustainability focus
Clear sustainability focus Accelerated sustainability strategy will deliver: • Safety at 2.0 injuries/ million hours • 30% of revenue from Eco-premium solutions • Sustainable fresh water management • 30% eco-efficiency improvement • 10% carbon footprint reduction (20-25% by 2020) • 20% executives fr
Slide 17: Q2 2011 value highlights
Q2 2011 value highlights Investor update Q2 2011 results 16
Slide 18: Q2 2011 highlights
Q2 2011 highlights • Revenue up 8 percent driven by volume and pricing, before currency headwind of 3 percent • Raw material inflation, challenging trading conditions and one-off factors lowered the quarter’s EBITDA* to €551 million (2010: €614 million) • Net income at €268 million (2010: €273 milli
Slide 19: Q2 2011 revenue and EBITDA
Q2 2011 revenue and EBITDA € million Q2 2011 % Revenue 4,097 5 EBITDA* 551 (10) Ratio, % Q2 2011 Q2 2010 EBITDA* margin 13.4 15.7 Revenue development Q2 2011 vs. Q2 2010 10 +1% -3% 5 +4% +5% +3% 0 Volume Price/Mix Acquisitions/ Exchange Total divestments rates * Before incidentals Increase Decrease
Slide 20: Summary – Q2 2011 results
Summary – Q2 2011 results € million Q2 2011 Q2 2010 EBITDA* 551 614 Amortization and depreciation (150) (148) Incidentals 27 (11) Net financing expense (64) (113) Minorities and associates (14) (19) Income tax (99) (76) Discontinued operations 17 26 Net income total operations 268 273 Net cash from
Slide 21: Q2 2011 incidentals
Q2 2011 incidentals € million Q2 2011 Q2 2010 Restructuring costs (20) (21) Results related to major legal, 21 8 antitrust & environmental cases Results on acquisitions & divestments 26 1 Other incidental results - 1 Total 27 (11) • Q2 2011 restructuring costs are mainly related to smaller projects
Slide 22: Revenue growth and EBITDA margin in line with strategic ambitions
Revenue growth and EBITDA margin in line with strategic ambitions Reported quarterly revenue in % year-on-year 25 20 15 7% 10 4% 4% 5% 5 0 Decorative Paints Performance Specialty AkzoNobel Coatings Chemicals Quarterly EBITDA* margin in % 20 16.3% 15 13.1% 13.0% 13.4% 10 5 0 Decorative Paints Perform
Slide 23: Volume growth continues, price increases coming through
Volume growth continues, price increases coming through Quarterly volume development in % year-on-year 15 10 6% 5 2% 3% 1% 0 Decorative Paints Performance Specialty AkzoNobel Coatings Chemicals Quarterly price/mix development in % year-on-year 10 8% 4% 5 2% 3% 0 -5 -10 Decorative Paints Performance
Slide 24: Further volume recovery underpins earnings potential
Further volume recovery underpins earnings potential EBITDA* bridge 2008-2010 € billion 2,0 98 (89) 504 (334) 1,964 1,5 1,785 1,0 EBITDA Volume Lower costs Price Other EBITDA 2008 2010 * Before incidentals, restated for National Starch Increase Decrease Investor update Q2 2011 results 23
Slide 25: Decorative Paints key facts
Decorative Paints key facts 2010 • Revenue €5.0 billion • 21,950 employees • EBITDA: €548 million* • 38 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% 11% Mature Euro
Slide 26: Decorative Paints Q2 2011 highlights
Decorative Paints Q2 2011 highlights • Revenue increased 8 percent before a negative currency impact of 4 percent • EBITDA decreased 5 percent before a negative currency impact of 2 percent • Continued momentum in high-growth markets • Demand in mature markets declined in the quarter • Further price
Slide 27: Decorative Paints Q2 2011
Decorative Paints Q2 2011 € million Q2 2011 % Revenue 1,461 4 EBITDA* 191 (7) Ratio, % Q2 2011 Q2 2010 EBITDA* margin 13.1 14.6 Revenue development Q2 2011 vs. Q2 2010 10 0% +2% -4% 5 +6% +4% 0 Volume Price/Mix Acquisitions/ Exchange Total divestments rates * Before incidentals Increase Decrease Inv
Slide 28: Performance Coatings key facts
Performance Coatings key facts 2010 • Revenue €4.8 billion • 21,020 employees • EBITDA: €647 million* • 47 percent of revenue from high growth markets • Leading positions in performance coatings • Innovative technologies, strong brands Revenue by business unit Revenue by geography Marine and Protect
Slide 29: Performance Coatings Q2 2011 highlights
Performance Coatings Q2 2011 highlights • Revenue increased 8 percent before a negative currency impact of 4 percent, volumes up 2 percent • EBITDA was down by 7 percent before a negative currency translation effect of 4 percent. • Ongoing price increases to offset higher raw material cost • EBITDA
Slide 30: Performance Coatings Q2 2011
Performance Coatings Q2 2011 € million Q2 2011 % Revenue 1,312 4 EBITDA* 170 (11) Ratio, % Q2 2011 Q2 2010 EBITDA* margin 13.0 15.2 Revenue development Q2 2011 vs. Q2 2010 10 +3% -4% 5 +3% +4% +2% 0 Volume Price/Mix Acquisitions/ Exchange Total divestments rates * Before incidentals Increase Decreas
Slide 31: Specialty Chemicals key facts
Specialty Chemicals key facts 2010 • Revenue €4.9 billion • 11,080 employees • EBITDA: €939 million* • 32 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 32: Specialty Chemicals Q2 2011 highlights
Specialty Chemicals Q2 2011 highlights • Revenue increased 9 percent before a negative currency impact of 2 percent, volumes increased 1 percent • EBITDA was down by 12 percent before a negative currency translation effect of 2 percent • Utilization rates have continued to be high • Increased raw ma
Slide 33: Specialty Chemicals Q2 2011
Specialty Chemicals Q2 2011 € million Q2 2011 % Revenue 1,350 7 EBITDA* 220 (14) Ratio, % Q2 2011 Q2 2010 EBITDA* margin 16.3 20.4 Revenue development Q2 2011 vs. Q2 2010 10 0% -2% 5 +8% +7% +1% 0 Volume Price/Mix Acquisitions/ Exchange Total divestments rates * Before incidentals Increase Decrease
Slide 34: Q2 2011 growth & innovation highlights
Q2 2011 growth & innovation highlights Investor update Q2 2011 results 33
Slide 35: Q2 2011 highlights: Investing in growth
Q2 2011 highlights Investing in growth • €140 million investment in Frankfurt site, Germany • €110 million proposed investment in new Decorative Paints site, UK • Opening global RD&I center in Deventer, Netherlands • Opening Fire Protection lab Felling, UK • Tio2 partnership with CAVA, China • Acqui
Slide 36: Pipeline 2011: Powder Coatings – LAT Pipe Coating
Pipeline 2011 Powder Coatings – LAT Pipe Coating In-field powder coating for pipe joints Key features Customers benefits • Coating application in-field • In-field powder coated field joints instead of in factory offer better protection • Reduced pre-heating of pipes • Lower temperature cure will res
Slide 37: Pipeline 2011: Industrial Chemicals – Meso tartrate (mTA)
Pipeline 2011 Industrial Chemicals – Meso tartrate (mTA) The next green generation anti-caking agent for salt Key Features Customer Benefits • Fully biodegradable and safe • 5 percent lower power consumption • Superior performance in • Increased lifetimes of membranes membrane electrolysis and elect
Slide 38: Pipeline 2011: Decorative Paints – Dulux Promise
Pipeline 2011 Decorative Paints – Dulux Promise Extending the Dulux brand to mid tier market in India Key Features Customer Benefits • Highly durable water based • Great value paint in a popular price emulsion paint, ideal for dry or tier in high growth markets humid climatic conditions • Anti-fadin
Slide 39: Financial review
Financial review Investor update Q2 2011 results 38
Slide 40: Superior operating returns on invested capital
Superior operating returns on invested capital 30% 27.5% 26.2% 25% 21.3% 20% 15% 10% 5% 8.5% 10.8% 10.4% 0% Q3 08 - Q2 09 Q3 09 - Q2 10 Q3 10 - Q2 11 Moving Average ROI % * Operating ROI is calculated as EBIT before amortization divided by average invested capital excluding intangible assets Operati
Slide 41: Year-on-year Operating Working Capital % of revenue reducing towards 12%
Year-on-year Operating Working Capital % of revenue reducing towards 12% OWC € million 2500 18% 16.2% 17% 15.6% 15.3% 16% 14.6% 15.0% 2000 14.5% 15% 14.1% 13.9% 13.7% 14% 13% 1500 12% 2,238 2,007 1,691 2,037 2,346 2,191 2,016 2,317 2,389 11% 1000 10% 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 OWC
Slide 42: Capital expenditure prioritization for growth
Capital expenditure prioritization for growth • Capex 2010 was €534 million (including Ningbo €100 million and excluding National Starch) • Medium term: Capex level to be around 4% of revenues Capex as a % of revenue 2010 Capex split 5 4% 16% 4 3 51% 29% 2 1 Specialty Chemicals 0 Decorative Paints 2
Slide 43: Our dividend policy
Our dividend policy We intend to pay a stable to rising dividend • An interim and a final dividend will be paid • Cash dividend default, stock dividend optional 2010€1.20 total dividend €1.20 €1.40 per share€1.80 – up 4% from €1.35 2009 • The final 2010 dividend of €1.08 was paid on May 10, 2011 • T
Slide 44: EBITDA – Cash bridge
EBITDA – Cash bridge € million Q2 2011 Q2 2010 EBITDA before incidentals 551 614 Incidentals (cash) 8 (4) Change working capital (204) 2 Change provisions (70) (137) Interest paid (58) (45) Income tax paid (62) (39) Net cash from operating activities 165 391 Change in working capital impacted by: •
Slide 45: Unchanged ambition to maintain strong balance sheet
Unchanged ambition to maintain strong balance sheet € million Jun 30, 2011 Dec 31, 2010 Total Equity 9,314 9,509 Net debt* 1,808 936 • Credit ratings unchanged at BBB+/Baa1, outlook stable • Net debt increased mainly due to operating cash outflow of €354 million, capital expenditures of €294 million
Slide 46: Pension deficit improves to €0.4 billion
Pension deficit improves to €0.4 billion Key pension metrics Q2 2011 Q1 2011 Discount rate 5.5% 5.5% Inflation assumptions 3.1% 3.1% Pension deficit development during Q2 2011 € billion 0,0 -0,2 (432) -0,4 (708) (38) (37) 138 -0,6 0 213 -0,8 Deficit end Top-ups Increased Inflation Discount Other Def
Slide 47: Lower 2011 cash-out for pensions expected
Lower 2011 cash-out for pensions expected • 2004 pro forma (including ICI) pension under funding was around €4 billion • Defined Benefits (DB) closed to new entrants, major plans closed in 2001 (ICI) and 2004 (AkzoNobel) • Total DB pension plans cash contribution expected to be €500 million (2010: €
Slide 48: Debt duration of 3 years and no refinancing needs in 2011
Debt duration of 3 years and no refinancing needs in 2011 Debt maturities* € million (nominal amounts) 1.200 800 400 0 2011 2012 2013 2014 2015 2016 € bonds $ bonds GBP bonds Strong liquidity position to support growth • Undrawn revolving credit facility of €1.5 billion (2013) or €1.5 & $1 billion c
Slide 49: Low fixed costs as a percentage of revenue
Low fixed costs as a percentage of revenue % of 2010 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 50: Raw material costs represent a little over 1/3 of revenue
Raw material costs represent a little over 1/3 of revenue H1 2011 Packaging Regional and/or Energy local approach Solvents 6% Centrally managed 12% 7% Other Chemicals & Variable 15% Costs* Intermediates*** 15% 4% Other raw materials** 9% 8% Additives 2% 8% Titanium 14% Dioxide Pigments Coatings Resi
Slide 51: Raw materials have continued to rise in the quarter
Raw materials have continued to rise in the quarter • Raw material prices have continued to rise in the second quarter and have impacted all three Business Areas • They are now around 20 percent higher than a year ago • With our margin management efforts still ongoing, we remain confident that we co
Slide 52: Outlook 2011
Outlook 2011 Investor update Q2 2011 results 51
Slide 53: Outlook 2011
Outlook 2011 We expect FY 2011 EBITDA at least in line with the prior year, assuming no further deterioration in economic conditions Investor update Q2 2011 results 52
Slide 54: 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