Slide 1: Investor Update Full-Year 2014 and Q4 results
Investor Update Full-Year 2014 and Q4 results Ton Büchner & Maëlys Castella February 12, 2015
Slide 2: Agenda
Agenda 1. 2014 highlights and operational review 2. Financial review 3. Conclusion 4. Questions Investor Update Full-Year 2014 and Q4 results 2
Slide 3: 2014 highlights and operational review
2014 highlights and operational review Ton Büchner Investor Update Full-Year 2014 and Q4 results 3
Slide 4: Key achievements during 2014
Key achievements during 2014 • Clear operational improvements visible in the results, despite challenging market conditions • Major transformation programs in all three Business Areas and support functions • Functional alignment through Global Business Services making clear progress and corporate co
Slide 5: Financial highlights of 2014
Financial highlights of 2014 Revenue Operating income Operating income Net cash from excl. incidental items operating activities -2% +20% +3% +13% 14,590 14.29 14,296 6 1,072 958 987 897 811 716 FY 2013 FY 2014 FY 2013 FY 2014 FY 2013 FY 2014 FY 2013 FY 2014 • Revenue down 2 percent, with positive v
Slide 6: FY 2014 revenue and operating income – underlying margins continue to improve
FY 2014 revenue and operating income – underlying margins continue to improve € million FY 2013 FY 2014 Δ% Revenue 14,590 14,296 -2 Operating income excluding incidentals 897 1,072 20 Operating income 958 987 3 Ratio, % FY 2013 FY 2014 Return on sales 6.6 6.9 Return on sales (excluding incidentals)
Slide 7: Fragile economic environment impacting all Business Areas
Fragile economic environment impacting all Business Areas Quarterly volume development in % year-on-year 2013 2014 6 2 -2% 0% -1% -1% -2 -6 Decorative Paints Performance Coatings Specialty Chemicals AkzoNobel Quarterly price/mix development in % year-on-year 5 2 +1% 0% 0% 0% -1 -4 Decorative Paints
Slide 8: Foreign exchange rates were no longer a headwind in Q4
Foreign exchange rates were no longer a headwind in Q4, but impacted full-year results Quarterly foreign exchange rate development in % year-on-year 2013 2014 4 +3% +1% +2% +1% 0 -4 -8 Decorative Paints Performance Coatings Specialty Chemicals AkzoNobel • Adverse currency effects, impacting first ni
Slide 9: FY 2014 operating income bridge
FY 2014 operating income bridge Operating income bridge FY2013 – FY2014 Increase € million Decrease 104 (85) 987 61 10 95 (19) (60) 45 958 1072 897 FY 2013 OPI Incidentals FY 2013 Currency / Volume Price/Mix Raw Reduction Other FY 2014 Incidentals FY 2014 OPI 2013 EBIT Acq / Div materials restructur
Slide 10: 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 FY2012 6.6 6.9 12 10.0 8 8.9 9.6 5.9 FY2013 8 4 FY2014 4 0 0 % FY2012 FY2013 FY2014 % FY2012 FY2013 FY2014 Return on sales 16 12 9.5 9.5 9.4 9.8 9.0 10.4 8 6.3 6.0
Slide 11: Manufacturing PMI
The majority of global manufacturing output is still anticipating expansion Purchase Managers’ Index (PMI)* January 2015 60 US Spain Sweden Japan India Manufacturing PMI Germany Brazil 50 France China Russia 40 *Bubble size=manufacturing output, 2015e (US$bn: 2010 prices) Sources: Oxford Economics,
Slide 12: Overall consumer confidence levels went down for many countries
Overall consumer confidence levels went down for many countries Consumer confidence, Q4 2014 Figures below 100 indicate some degree of pessimism 140 Recent trends compared 120 to Q3 2014 100 80 60 129 107 106 98 95 40 94 89 85 57 20 0 India China US Germany Brazil UK Netherlands Sweden France Source
Slide 13: Revenue by end-use segments
~42% 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 ~17% of revenues ~25% of revenues Consumer Durables Natural Resource and Energy Industries Consumer Packa
Slide 14: Decorative Paints Q4 2014 highlights
Decorative Paints Q4 2014 highlights € million = Q4 2013 Q4 2014 Δ% • Volumes down in Q4, mainly driven by weak demand in all Revenue 934 920 -1 regions Operating income excluding incidentals -52 16 131 • Price/mix flat as the effect from Operating income 146 16 -89 the sale of the German stores was
Slide 15: Performance Coatings Q4 2014 highlights
Performance Coatings Q4 2014 highlights € million Q4 2013 Q4 2014 Δ% • Q4 revenue was up 4 percent due to favorable currencies and Revenue 1,367 1,416 4 price/mix Operating income excluding incidentals 73 106 45 Operating income 73 106 45 • Overall volumes flat with growth in Marine & Protective Coa
Slide 16: Specialty Chemicals Q4 2014 highlights
Specialty Chemicals Q4 2014 highlights € million Q4 2013 Q4 2014 Δ% • Q4 revenue in line with previous year, with adverse impact of Revenue 1,200 1,194 -1 volumes and divestments offset by Operating income excluding incidentals 91 93 2 favorable currency effects Operating income -30 93 410 • Adverse
Slide 17: All three Business Areas are transforming and delayering
All three Business Areas are transforming and delayering in a significant way • New operating model in Europe • Take advantage of our scale in back office functions, combined Decorative Paints on a global and European level • More focused country Sales and Marketing organization • Restructuring of F
Slide 18: Global Business Services is making clear progress
Global Business Services is making clear progress Functional support activities: Human Resources Decorative Paints Finance Information Management HSE NPR Procurement Global Business Services Specialty Chemicals Customers Business Partner Performance Coatings Centers of Shared Service Expertise (CoE)
Slide 19: The net impact of a sustained lower oil price can have a positive impact in 2015
The net impact of a sustained lower oil price can have a positive impact in 2015 Freight and logistics Freight and logistics Raw materials Production Sales GDP Inventories Investor Update Full-Year 2014 and Q4 results 19
Slide 20: Downstream oil related products have clearly different dynamics
Downstream oil related products have clearly different dynamics Feedstocks Base Intermediates and more complex molecules (petro)chemicals Intermediates Monomers, More complex Precursors, etc. molecules Solvents Crude Oil Methanol Monomers & Latex (Shale) Gas Ethylene Coal Ethanol Bio based Propylene
Slide 21: Financial review
Financial review Maëlys Castella Investor Update Full-Year 2014 and Q4 results 21
Slide 22: FY 2014 - strong underlying performance
FY 2014 - strong underlying performance Operational Cash discipline Cash flow and EPS improvement • ROS 6.9%; +30bp • Capex €588 million • Net cash from operating activities €811 million • ROS 7.5%; +140bp • OWC as a percentage of excluding incidentals revenue 10.1% • Adjusted EPS €2.81 • ROI 10%; +
Slide 23: Summary – FY 2014 results
Summary – FY 2014 results € million FY 2013 FY 2014 Δ% EBITDA 1,513 1,690 +12% Amortization and depreciation (616) (618) Operating income before incidentals 897 1072 +20% Incidentals 61 (85) Operating income 958 987 +3% Net financing expenses (200) (156) Minorities and associates (54) (51) Income ta
Slide 24: Q4 operating income strongly affected by incidental items
Q4 operating income strongly affected by incidental items € million Q4 2013 Q4 2014 Δ% Revenue 3,482 3,517 1 Operating income excluding incidentals 55 169 207 Operating income 116 83 -28 Ratio, % Q4 2013 Q4 2014 Return on sales 3.3 2.4 Return on sales (excluding incidentals) 1.6 4.8 Return on sales
Slide 25: Summary – Q4 2014 results
Summary – Q4 2014 results – significant operational improvements offset by incidentals € million Q4 2013 Q4 2014 Δ% EBITDA 208 330 +59% Amortization and depreciation (153) (162) Operating income before incidentals 55 168 +205% Incidentals 61 (85) Operating income 116 83 -28% Net financing expenses (
Slide 26: Incidental and other items relevant for Q4 and full-year results
Incidental and other items relevant for Q4 and full-year results FY 2013 FY 2014 Incidentals – Positive P&L impact €61 million Incidentals – Negative P&L impact €85 million Divestment Building Adhesives (Decorative Paints) and Primary Amides (Specialty Fraud incident at our Chicago offices Chemicals
Slide 27: Cash flows – Increased cash from operating activities and lower Capex
Cash flows – Increased cash from operating activities and lower Capex € million Q4 2013 Q4 2014 Δ% FY 2013 FY 2014 Δ% Profit for the period from continuing operations 48 9 661 600 Amortization and depreciation 152 162 616 618 Change working capital 277 364 (13) 28 Change provisions (41) (4) (395) (4
Slide 28: Disciplined cash management
Disciplined cash management Operating Working Capital Capital Expenditures € million € million Operating Working Capital Specialty Chemicals Decorative Paints OWC as % of LQ revenue * 4 Performance Coatings Other 2.500 16% 5.4% 12.9% 14% 2.000 4.5% 4.6% 12% 10.7% 4.1% 9.9% 10.1% 3.7% € 826 10% 1.500
Slide 29: Operational cash inflow close to covering uses of cash
Operational cash inflow close to covering uses of cash Cash flow sources and uses • Restructuring and pension top-ups consume a significant 2012 2013 2014 proportion of cash • Performance improvement focus starts to address cash challenge • Remuneration metrics include cash generation • Positive cas
Slide 30: Continuously reducing costs of long term bonds
Continuously reducing costs of long term bonds Debt maturities € million Repaid 7.75% 4.00% € bonds £ bonds $ bonds 2.625% 7.25% 1.75% • Debt duration 4.8 years 825 8.00% 800 750 622 500 • Net interest expense down 320 by €74 million compared to 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Slide 31: IAS pension deficit increases to €0.8 billion in 2014
IAS 19 pension deficit increases to €0.8 billion in 2014 due to de-risking Key pension assumptions metrics Q4 2013 Q4 2014 Discount rate 4.2% 3.4% Inflation rate 3.2% 2.8% Pension deficit development during 2014 € million Decrease Increase (638) 300 (844) (841) 1,528 259 (1,936) 484 Deficit end Q4 T
Slide 32: Conclusion
Conclusion Ton Büchner Investor Update Full-Year 2014 and Q4 results 32
Slide 33: Dividend policy unchanged – stable to rising dividend
Dividend policy unchanged – stable to rising dividend Dividends paid (€) • Our dividend policy is to pay a stable to rising dividend each year 1.08 1.12 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
Slide 34: Conclusion
Conclusion • Improved underlying performance as efficiency programs take effect • Higher return on sales and return on investment, despite the volatile economic environment • Developing from transformation towards continuous improvement • Markets, raw materials and exchange rates expected to remain
Slide 35: Questions
Questions Investor Update Full-Year 2014 and Q4 results 35
Slide 36: 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 37: Appendices
Appendices Investor Update Full-Year 2014 and Q4 results 37
Slide 38: Decorative Paints FY 2014 highlights
Decorative Paints FY 2014 highlights € million = FY 2013 FY 2014 Δ% • Volumes up 1 percent, with increases in Asia offset by lower Revenue 4,174 3,909 -6 volumes in Latin America, Operating income excluding incidentals 200 248 24 reflecting difficult trading conditions. Flat volumes in EMEA Operatin
Slide 39: Performance Coatings FY 2014 highlights
Performance Coatings FY 2014 highlights • Volumes up 1 percent, mainly from € million FY 2013 FY 2014 Δ% growth in Marine and Protective Revenue 5,571 5,589 0 Coatings and Powder Coatings Operating income excluding incidentals 525 545 4 • Full-year revenue flat due to Operating income 525 545 4 adve
Slide 40: Specialty Chemicals FY 2014 highlights
Specialty Chemicals FY 2014 highlights • Revenue down 1 percent due to € million FY 2013 FY 2014 Δ% better volumes and price/mix more Revenue 4,949 4,883 -1 than offset by divestments and Operating income excluding incidentals 418 508 22 adverse currency Operating income 297 508 71 • Price pressure
Slide 41: Q4 2014 Operating income – Cash bridge
Q4 2014 Operating income – Cash bridge € million Q4 2013 Q4 2014 Operating Income 116 83 Incidentals (61) 85 Depreciation & amortization 153 162 EBITDA before incidentals 208 330 Other 20 (54) Change working capital 277 364 Change provisions (41) 8 Interest paid (61) (49) Income tax paid (94) (118)
Slide 42: Restructuring charges by quarter
Restructuring charges by quarter* FY Q1 Q2 Q3 Q4 FY € million Q1 Q2 Q3 Q4 2013 2014 2014 2014 2014 2014 Decorative Paints 7 24 8 66 105 22 23 1 34 80 Performance 11 5 9 77 102 15 17 41 75 148 Coatings Specialty 1 0 46 27 74 7 2 6 2 17 Chemicals Other 10 11 12 34 67 0 3 7 -2 8 Total 29 40 75 204 348
Slide 43: 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 44: IAS 19 pension deficit reduces to €0.8 billion in Q4 2014
IAS 19 pension deficit reduces to €0.8 billion in Q4 2014 Key pension assumptions metrics Q3 2014 Q4 2014 Discount rate 3.7% 3.4% Inflation rate 3.0% 2.8% Pension deficit development during Q4 2014 € million Decrease Increase (844) (1,143) 225 (68) 1 762 (857) 236 Deficit end Q3 Top-ups Discount rat
Slide 45: Innovation Pipeline Q4 2014 Decorative Paints – Dulux stain removal
Innovation Pipeline Q4 2014 Decorative Paints – Dulux stain removal Non-additive interior paint Key Features Customer Benefits Growth Potential • Nano shell binder technology • Good dirt resistance • Launched in Dec 2014 • Premium stain removal • Easy clean • Keeping leading position in performance
Slide 46: Innovation Pipeline Q4 2014 Specialty Coatings - Leather Touch Clearcoat
Innovation Pipeline Q4 2014 Specialty Coatings - Leather Touch Clearcoat Key Features Customer Benefits Growth Potential • A soft-feel, clear coat for plastic • Compatible with current • Good growth envisaged, driven coated electronic devices standard plastic substrates and by the increasing market
Slide 47: Innovation Pipeline Q4 2014 Industrial Chemicals – Steam savings
Innovation Pipeline Q4 2014 Industrial Chemicals – Steam savings in chlorine production Key Features Innovation Benefits • Reduction in the consumption • Innovative use of advanced • Significant savings on steam of process steam in chlorine modelling and process use production by recovery of enginee
Slide 48: Reference
Reference Investor Update Full-Year 2014 and Q4 results 48
Slide 49: AkzoNobel today
AkzoNobel today • Revenue €14.3 billion • 47,210 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 11% Pe
Slide 50: High growth markets are 44% of revenue
High growth markets are 44% of revenue and their importance will increase % of 2014 revenue 37% Mature Europe 15% 8% North America Emerging Europe 26% Asia Pacific 10% 4% Latin America Other regions Share of revenues from high growth markets will increase over time Investor Update Full-Year 2014 and
Slide 51: 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 52: 2015 financial targets focused on quality of earnings and value creation
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 10.0 6.9 12 < 2.0 8 5.9 * 6.6 8.9 * 9.6 2 1.4 8 1.0 1.0 4 1 4 0 0 0 20
Slide 53: 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 54: AkzoNobel strategy introduced in 2013
AkzoNobel strategy introduced in 2013 • Organic growth • Operational excellence Investor Update Full-Year 2014 and Q4 results 54
Slide 55: The global paints and coatings market is around €100 billion
The global paints and coatings market is around €100 billion By market sector By end-user segment 2014, 100% = ~ €100 billion 2014, 100% = ~ €100 billion Yacht Industrial Others Aerospace Consumer Buildings and Decorative Packaging Paints Goods Infrastructure Marine (43%) Spec. finishes Coil Powder
Slide 56: 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 57: 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 • Decorative Paints is more driven by personnel costs in the distribution network, while Specialty Chemicals
Slide 58: We are actively addressing all components of operating expenses
We are actively addressing all components of operating expenses Operating expenses Research, Operating expense General & Selling Expenses Development & components Administrative Innovation Global Business Addressed by Commercial Excellence Initiatives Services Drives organic growth * All costs in €
Slide 59: Drive towards continuous improvement and commercial excellence
Drive towards continuous improvement and commercial excellence • We are moving into continuous improvement which will enable us to achieve the 2015 targets – 2014 restructuring charges amounted to €253 million – From 2015 onwards, more normalized levels of restructuring costs, around 1% of revenues
Slide 60: 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 61: AkzoNobel values drive cultural change
AkzoNobel values drive cultural change Investor Update Full-Year 2014 and Q4 results 61
Slide 62: 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 63: Decorative Paints business at a glance
Decorative Paints business at a glance Revenue by end-user Revenue by geographic spread* sub-segment 4% 8% Mature Europe 25% Maintenance, renovation and repair 14% Asia Pacific 49% Latin America New build projects Emerging Europe 75% Other regions 25% Decorative Paints key figures Key messages € mil
Slide 64: 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 65: 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 66: Fix Europe
Fix Europe Objectives: • Improve performance by driving organic growth and operational excellence and changing the operating model in Europe Actions: • Implement a central operating model and simplify our organizational structure • Consolidate our manufacturing and distribution footprint • Develop a
Slide 67: 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 68: 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 69: 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 21% Infrastructure 11% 27% North America Transportation 8% Asia Pacific 28% Consumer Latin America Goods Emerging Europe 37% 30% 20% Industrial Other regions Perform
Slide 70: We are organized in four Business Units
We are organized in four Business Units 2014 revenue by Business Unit • Protective Marine & • Marine Protective Coatings • Yacht Marine & Protective Coatings 27% 31% • Vehicle Refinishes Automotive & Automotive & Aerospace • Specialty Finishes Aerospace Coatings Coatings • Aerospace Powder Coatings
Slide 71: 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 Full-Year 2014 and Q4 results 71
Slide 72: 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 73: 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 74: 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 figur
Slide 75: 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 76: 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 77: 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 78: 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 2014 Capital Expenditure Depreciation and Amortization Major projects and timing of spend Investment project 2010 2011 2012 2013
Slide 79: 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 80: 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 81: 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 Full-Year 2014 and Q4 results 81
Slide 82: 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 Full-Year 2014 and Q4 results 82
Slide 83: Surfactants: Growing with attractive end markets
Surfactants: Growing with attractive end markets Oilfield Lubricants Mining Agriculture Investor Update Full-Year 2014 and Q4 results 83
Slide 84: 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 Full-Year 2014 and Q4 results 84
Slide 85: 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 €1.7 billion* • Undrawn revolving credit facility of €1.8 billion 1,0 (2018) €1.5 and $3 billion commercial paper programs, back
Slide 86: Proactively managing or removing pension liabilities
Proactively managing or removing pension liabilities • Active management of interest rate and inflation Interest rate / exposure, with around 70% of overall defined benefit Inflation hedging obligation (DBO) risks hedged Retain and • Courtaulds (CPS) longevity swap with Swiss Re in 2012 Longevity he
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 and the CPS [Status February 2013] Pension Scheme € million • Top-ups are based on prudent actuarial valuation of liabilities, which differs from 2014 actual 300 accoun
Slide 88: Variable costs analysis
Variable costs analysis 2014 Packaging Energy & other variable costs* Raw materials Solvents 6% 7% 26% Chemicals and intermediates*** 17% 4% 5% Other raw materials** 10% Additives 6% Titanium 3% dioxide 16% Pigments Coatings’ specialties Resins * Other variable costs include variable selling costs (
Slide 89: 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