Slide 1: Investor update Q1 2011 results
April 21, 2011 Investor update Q1 2011 results
Slide 2: Agenda
Agenda • AkzoNobel at a glance • Strategic ambitions • Q1 2011 value highlights • Q1 2011 innovation highlights • Financial review • Outlook 2011 Investor update Q1 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 Q1 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 Q1 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 Q1 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 Q1 2011 results 8
Slide 10: Our strategic ambition is to be
Our strategic ambition is to be Investor update Q1 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 Double revenues in China • Grow from $1.5 to $3 billion of revenues • Make a step change in people development Create significant footprint in India • Grow from €0.25 to €1 billion of revenues • Increasing footprint for all business areas Outgrow the competition i
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 Q1 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: Q1 2011 value highlights
Q1 2011 value highlights Investor update Q1 2011 results 16
Slide 18: Q1 2011 highlights
Q1 2011 highlights • Stronger volumes (7 percent) and pricing (4 percent excluding a 1 percent adverse mix effect) drive revenue growth of 16 percent • EBITDA* increased 10 percent to €437 million • Raw material cost increases being mitigated • Net income increased to €128 million (2010: €81 million
Slide 19: Q1 2011 revenue and EBITDA
Q1 2011 revenue and EBITDA € million Q1 2011 % Revenue 3,762 16 EBITDA* 437 10 Ratio, % Q1 2011 Q1 2010 EBITDA* margin 11.6 12.3 Revenue development Q1 2011 vs. Q1 2010 20 +4% 15 +3% +2% 10 +16% 5 +7% 0 Volume Price/Mix Acquisitions/ Exchange Total divestments rates * Before incidentals Increase Dec
Slide 20: Summary – Q1 2011 results
Summary – Q1 2011 results € million Q1 2011 Q1 2010 EBITDA* 437 399 Amortization and depreciation (148) (141) Incidentals (12) (34) Financial income & expense (63) (88) Minorities and associates (9) (13) Income tax (73) (53) Discontinued operations (4) 11 Net income total operations 128 81 Net cash
Slide 21: Q1 2011 incidentals
Q1 2011 incidentals € million Q1 2011 Q1 2010 Restructuring costs (9) (17) Results related to major legal, 1 (9) antitrust & environmental cases Results on acquisitions & divestments - 1 Other incidental results (4) (9) Total (12) (34) Q1 2011 restructuring costs are mainly related to the acquired p
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 18% 17% 20 16% 13% 15 10 5 0 Decorative Paints Performance Specialty AkzoNobel Coatings Chemicals Quarterly EBITDA* margin in % 17.8% 20 15 11.6% 11.6% 7.5% 10 5 0 Decorative Paints Perf
Slide 23: Volume growth continues, price increases coming through
Volume growth continues, price increases coming through Quarterly volume development in % year-on-year 15 9% 10 7% 6% 7% 5 0 Decorative Paints Performance Specialty AkzoNobel Coatings Chemicals Quarterly price/mix development in % year-on-year 10 6% 3% 5 1% 2% 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 Q1 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 Q1 2011 highlights
Decorative Paints Q1 2011 highlights • Revenue increased 13 percent and EBITDA* increased 10 percent • Walmart roll-out on track with 3.500 new stores reset • Continued growth momentum in the high growth markets, while mature markets stabilized • Selling price increases of 4 percent (excluding a 3 p
Slide 27: Decorative Paints Q1 2011
Decorative Paints Q1 2011 € million Q1 2011 % Revenue 1,196 13 EBITDA* 90 10 Ratio, % Q1 2011 Q1 2010 EBITDA* margin 7.5 7.8 Revenue development Q1 2011 vs. Q1 2010 15 +3% +1% 10 0% 5 +13% +9% 0 Volume Price/Mix Acquisitions/ Exchange Total divestments rates * Before incidentals Increase Decrease In
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 Q1 2011 highlights
Performance Coatings Q1 2011 highlights • Revenue up 18 percent, with volumes up 7 percent • Improved revenue in all businesses • Selling price increases of 3 percent (before a 1 percent adverse mix effect) offset by continued raw material cost increases • EBITDA result maintained • Integration of a
Slide 30: Performance Coatings Q1 2011
Performance Coatings Q1 2011 € million Q1 2011 % Revenue 1,237 18 EBITDA* 143 - Ratio, % Q1 2011 Q1 2010 EBITDA* margin 11.6 13.6 Revenue development Q1 2011 vs. Q1 2010 20 +3% 15 +2% +6% 10 +18% 5 +7% 0 Volume Price/Mix Acquisitions/ Exchange Total divestments rates * Before incidentals Increase De
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 Q1 2011 highlights
Specialty Chemicals Q1 2011 highlights • Revenue increased 17 percent: volume and prices increases of both 6 percent • Demand remained firm in both the high growth and mature markets • EBITDA increased 16 percent to €241 million • EBITDA margin 17.8 percent (2010: 17.9 percent) • Significant growth
Slide 33: Specialty Chemicals Q1 2011
Specialty Chemicals Q1 2011 € million Q1 2011 % Revenue 1,351 17 EBITDA* 241 16 Ratio, % Q1 2011 Q1 2010 EBITDA* margin 17.8 17.9 Revenue development Q1 2011 vs. Q1 2010 20 15 +5% 10 0% +6% +17% 5 +6% 0 Volume Price/Mix Acquisitions/ Exchange Total divestments rates * Before incidentals Increase Dec
Slide 34: Q1 2011 innovation highlights
Q1 2011 innovation highlights Investor update Q1 2011 results 33
Slide 35: Pipeline 2011: Surface Chemistry – Hybrid polymers
Pipeline 2011 Surface Chemistry – Hybrid polymers Used in cleaning and personal care applications Key features Growth potential • Advantages include: reliability • Major players in consumer of supply, sustainability and cleaning markets showing interest cost • Biggest opportunity is in laundry • Bio
Slide 36: Pipeline 2011: Interchar 1120 Intumescent Coating
Pipeline 2011 Protective Coatings – Interchar® 1120 Intumescent Coating A water based Intumescent coating for onsite application Key Features Growth potential • Reacts in the presence of • Sustainable, “green” building becoming intense heat to form an increasingly important in high growth insulating
Slide 37: Pipeline 2011: Dulux Color Click
Pipeline 2011 Decorative Paints – Dulux Color Click™ Helping consumers choose designer color schemes online Customer benefits • Expert advice on colors that go • Accurate and consistent match to any target color you choose to Key Features capture with your digital camera • When used with a digital c
Slide 38: Financial review
Financial review Investor update Q1 2011 results 37
Slide 39: Superior operating returns on investment
Superior operating returns on investment 30% 27.6% 25.6% 25% 21.5% 20% 15% 10% 5% 8.6% 10.1% 10.9% 0% Q2 08 - Q1 09 Q2 09 - Q1 10 Q2 10 - Q1 11 Moving Average ROI % * Operating ROI is calculated as EBIT before amortization divided by average invested capital excluding intangible assets Operating ROI
Slide 40: Year-on-year Operating Working Capital % of revenue reducing towards 12%
Year-on-year Operating Working Capital % of revenue reducing towards 12% OWC € million 3000 19.1% 20% 19% 18% 2500 16.2% 17% 15.6% 15.3% 16% 15.0% 14.6% 2000 14.1% 15% 13.9% 13.7% 14% 13% 1500 2,341 2,238 2,007 1,691 2,037 2,346 2,191 2,016 2,317 12% 11% 1000 10% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4
Slide 41: Capital expenditure prioritization for growth
Capital expenditure prioritization for growth • Capex 2010 was €534 million (including Ningbo €100 million and €40 million 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
Slide 42: 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 total dividend €1.40 per share – up 4% from 2009* • Interim dividend of €0.32 was an €0.02 increase per share compared to 2009 €1.20 €1.20 €1.80 €1.3
Slide 43: EBITDA – Cash bridge
EBITDA – Cash bridge € million Q1 2011 Q1 2010 EBITDA before incidentals 437 399 Incidentals (cash) (5) (38) Change working capital (390) (289) Change provisions (358) (366) Interest paid (153) (166) Income tax paid (50) (65) Net cash from operating activities (519) (525) • Working capital change re
Slide 44: Unchanged ambition to maintain strong balance sheet
Unchanged ambition to maintain strong balance sheet € million Mar 31, 2010 Dec 31, 2010 Total Equity 9,358 9,509 Net debt* 1,578 936 • Credit ratings confirmed in August at BBB+/Baa1, outlook improved to stable • Cash balance will fund growth and potentially partly be used to further optimize capita
Slide 45: Pension deficit improves to €0.7 billion
Pension deficit improves to €0.7 billion Key pension metrics Q1 2011 Q4 2010 Discount rate 5.5% 5.4% Inflation assumptions 3.1% 3.0% Pension deficit development during Q1 2011 € billion 0,0 -0,2 (708) -0,4 (1,049) -0,6 (85) 16 (103) -0,8 172 341 -1,0 -1,2 Deficit end Top-ups Decreased Inflation Disc
Slide 46: 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 47: 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 48: 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 49: Raw material costs represent around a third of revenue
Raw material costs represent around a third of revenue Primary Regional and/or packaging local approach Energy Global markets, Solvents global strategy 6% Hybrid centralized/ 13% Chemicals & 6% BU approach intermediates 10% Other 24% Variable Additives 10% Costs* 3% Pigments 3% 11% 6% 8% Other raw m
Slide 50: Raw material price inflation to be compensated for during 2011
Raw material price inflation to be compensated for during 2011 • Raw material prices have continued to rise and are now close to 15 percent higher than a year ago, driven by basic feed-stocks such as metals, TiO2 and oil related raw materials. • Pricing and cost reduction actions are on-going and we
Slide 51: Outlook 2011
Outlook 2011 Investor update Q1 2011 results 50
Slide 52: Outlook: we expect to make progress on our medium-term strategic ambitions
Outlook: we expect to make progress on our medium-term strategic ambitions • 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 re
Slide 53: 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