Slide 1: Investor Update Q3 2010 results
October 21, 2010 Investor Update Q3 2010 results
Slide 2: Agenda
Agenda • AkzoNobel at a glance • Strategic ambitions • Q3 2010 highlights and operational review • Financial review • Outlook 2010 Investor update Q3 2010 results 2
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 • Leader in Dow Jones Sustainability Index Revenue by business area EBITDA* by business area 33% 32% 32% 41% Performance Coatings Decorative Paints 35% 27% Spe
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 Q3 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% ‘Mature’ Europe 7% 21% ‘Higher-growth’ Europe North America 4% 20% ME&A Asia Pacific 9% Latin America High-growth growth markets profitability is above average Inve
Slide 7: Strong portfolio with leading positions
Strong portfolio with leading positions 2009 Revenue 2009 EBITDA* Leading market position results in superior level of profitability * Before incidentals Investor update Q3 2010 results 7
Slide 8: Strategic ambitions
Strategic ambitions Investor update Q3 2010 results 8
Slide 9: We want to be the world's leading Coatings and Specialty Chemicals company
We want to be the world’s leading Coatings and Specialty Chemicals company Our medium-term term strategic ambitions are: Value – accelerated growth Values – sustainable growth • Grow to €20 20 billion revenues • Top quartile safety • Increase EBITDA* each year, performance maintaining a 13-15% 15% m
Slide 10: Q3 2010 highlights and operational review
Q3 2010 highlights and operational review Investor update Q3 2010 results 10
Slide 11: Q3 2010 highlights
Q3 2010 highlights • Revenue €3.9 3.9 billion (2009: €3.4 billion), up 13 percent (5 percent in constant currencies) • EBITDA* €574 574 million (2009: €528 million), up 9 percent (2 percent in constant currencies) • EBITDA* margin 14.8 percent (2009: 15.4 percent) • Sale of National Starch completed
Slide 12: Revenue growth and margin development per quarter to Q3 2010
Revenue growth and margin development per quarter to Q3 2010 Reported revenue in % year-on on-year 18% 15% 13% 8% EBITDA* margin in % 20.0% 14.4% 13.4% 14.8% * Before incidentals 2009 2010 Investor update Q3 2010 results 12
Slide 13: Volume and price development per quarter to Q3 2010
Volume and price development per quarter to Q3 2010 Volume development Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Decorative Paints (9) - 5 1 - Performance Coatings (11) (2) 8 12 5 Specialty Chemicals (6) 4 15 15 10 AkzoNobel (8) 1 10 8 4 Price development Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Decorative Paints 4 (1) (1
Slide 14: Q3 2010 revenue and EBITDA
Q3 2010 revenue and EBITDA € million Q3 2010 % Revenue 3,867 13 EBITDA* 574 9 Ratio, % Q3 2010 Q3 2009 EBITDA* margin 14.8 15.4 +1% 0% +13% * Before incidentals Increase Decrease Investor update Q3 2010 results 14
Slide 15: Summary – Q3 2010 results
Summary – Q3 2010 results € million Q3 2010 Q3 2009 EBITDA* 574 528 Amortization and depreciation (146) (143) Incidentals (47) (39) Financial income & expense (70) (97) Minorities and associates (13) (16) Income tax (81) (32) Discontinued operations 21 (4) Net income total operations 238 197 Net cas
Slide 16: Q3 2010 incidentals
Q3 2010 incidentals € million Q3 2010 Q3 2009 Restructuring costs (53) (116) Results related to major legal, - (2) antitrust & environmental cases Results on acquisitions & divestments 15 19 Other incidental results (9) 60 Total (47) (39) Restructuring costs are mainly related to: • Impairment of a
Slide 17: Decorative Paints
Decorative Paints In Q3, Sikkens succesfully launched Alpha SanoProtex, a waterborne wall paint especially designed to prevent bacteria from multiplying. It proves to be a great solution for hospitals, clinics and social service buildings and other locations where hygiene is crucial and where the in
Slide 18: 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 19: Decorative Paints Q3 2010
Decorative Paints Q3 2010 € million Q3 2010 % Revenue 1,372 8 EBITDA* 198 - Ratio, % Q3 2010 Q3 2009 EBITDA* margin 14.4 15.6 0% 1% 0% * Before incidentals Increase Decrease Investor update Q3 2010 results 19
Slide 20: Decorative Paints Q3 2010 highlights
Decorative Paints Q3 2010 highlights • Revenue of €1,372 million (2009: €1,271 million), up 8 percent, with favorable currency impact of 7 percent • EBITDA* €198 198 million (2009: €198 million) • AkzoNobel to be primary paint supplier to Wal-Mart Wal • Strong revenue growth and increased investment
Slide 21: Performance Coatings
Performance Coatings The acquisition of Changzhou Prime Automotive Paint Co. Ltd. will significantly boost AkzoNobel’s presence in the Chinese automotive market. Prime is one of China’s largest vehicle refinish suppliers and a leader in the fast-growing fast mid-market segment. This sector is estima
Slide 22: 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 23: Performance Coatings Q3 2010
Performance Coatings Q3 2010 € million Q3 2010 % Revenue 1,239 18 EBITDA* 166 (2) Ratio, % Q3 2010 Q3 2009 EBITDA* margin 13.4 16.1 0% +5% * Before incidentals Increase Decrease Investor update Q3 2010 results 23
Slide 24: Performance Coatings Q3 2010 highlights
Performance Coatings Q3 2010 highlights • Revenue €1,239 1,239 million, up 18 percent (2009: €1,051 million) • Demand improved in all businesses, with volumes up 5 percent • EBITDA* €166 166 million (2009: €169 million) • EBITDA* margin of 13.4 percent (2009: 16.1 percent), impacted by raw material
Slide 25: Specialty Chemicals
Specialty Chemicals Our Pulp & Paper Chemicals business concept, Compozil Fx, reduces energy consumption, fiber need and water usage for the customer. Used on 7 of the 8 largest paper machines in the world, it is the preferred sustainable choice on the growing Chinese paper market. Investor update Q
Slide 26: 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 27: Specialty Chemicals Q3 2010
Specialty Chemicals Q3 2010 € million Q3 2010 % Revenue 1,272 15 EBITDA* 254 29 Ratio, % Q3 2010 Q3 2009 EBITDA* margin 20.0 17.8 +2% -5% +8% +15% +10% * Before incidentals Increase Decrease Investor update Q3 2010 results 27
Slide 28: Specialty Chemicals Q3 2010 highlights
Specialty Chemicals Q3 2010 highlights • Revenue increased 15 percent to €1,272 million (2009: €1,109 million); volume increased 10 percent • EBITDA* was up 29 percent to €254 million (2009: €197 million) • EBITDA* margin 20.0 percent (2009:17.8 percent) • Performance improvement in all businesses •
Slide 29: Financial review
Financial review Investor update Q3 2010 results 29
Slide 30: Year-on-year Operating Working Capital % of revenue to reduce towards 12%
Year-on-year year Operating Working Capital % of revenue to reduce towards 12% OWC € million 3000 19.1% 20% 19% 18% 2500 16.4% 16.2% 17% 15.6% 15.0% 16% 14.6% 14.1% 2000 15% 13.7% 14% 13% 1500 2,185 2,341 2,238 2,007 1,691 2,037 2,346 2,191 12% 11% 1000 10% 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 OW
Slide 31: Capital expenditure prioritization for growth
Capital expenditure prioritization for growth • Capex 2010 expected to be around 3% of revenue (excluding Ningbo €100 100 million and €40 million National Starch) • Medium term: Capex level to be around 4% of revenues Capex as a % of revenue Investor update Q3 2010 results 31
Slide 32: A stable to rising dividend
A stable to rising dividend Our dividend policy* We intend to pay a stable to rising dividend: • a cash interim and a final dividend will be paid 2010 interim dividend €0.32 per share – up 7% from 2009* • Interim dividend to be paid on 3 November, 2010 • We intend to grow the 2010 total dividend by
Slide 33: EBITDA – Cash bridge
EBITDA – Cash bridge € million Q3 2010 Q3 2009 EBITDA before incidentals 574 528 Incidentals (cash) (43) (21) Change working capital 105 402 Change provisions (128) (58) Interest paid (18) (15) Income tax paid (112) (19) Net cash from operating activities 378 817 • Incidentals mainly related to cont
Slide 34: Unchanged ambition to maintain strong balance sheet
Unchanged ambition to maintain strong balance sheet € million Sept 30, 2010 Dec 31, 2009 Total Equity 9,291 8,245 Net debt* 2,030 1,744 • Credit ratings confirmed in August at BBB+/Baa1, outlook improved to stable • National Starch proceeds will fund growth and potentially partly be used to further
Slide 35: Pension deficit improves to €1.5 billion
Pension deficit improves to €1.5 billion Key pension metrics Q3 2010 Q2 2010 Discount rate 5.0% 5.2% Inflation assumptions 2.7% 2.9% Pension deficit development during Q3 2010 € billion 0 -0.5 (1,793) (1,506) -1.0 195 (411) (3) -1.5 471 35 -2.0 Deficit Top-ups Increased Inflation Discount Other Defi
Slide 36: 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 37: Successful extension of debt duration will be further optimized over time
Successful extension of debt duration will be further optimized over time Debt maturity* € million (nominal amounts) 1.200 800 400 0 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.
Slide 38: 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 39: 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 40: Outlook 2010
Outlook 2010 Investor update Q3 2010 results 40
Slide 41: 2010 Outlook
2010 Outlook “Cautiously optimistic” Reasons for caution • Global economic outlook • Construction and housing markets remain soft in mature markets • Potential bubbles in high growth markets Reasons for optimism • Leading positions, scale and diversified markets • Strong balance sheet to fund growth
Slide 42: 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