Slide 1: Investor update Q4 2016
Investor update Ton Büchner and Maëlys Castella February 15, 2017 20 Q4 16
Slide 2: Agenda
Agenda Highlights 2016 Operational review Financial review Conclusion Questions Investor update 2
Slide 3: Progress towards our vision
Progress towards our vision Investor update 3
Slide 4: Strong track record of performance improvement
Strong track record of performance improvement €200+ ALPS million Record Continuous savings Progress ROS Volume Acquisition improvement on a new GBS and ROI of BASF’s 75% sites model Growth Industrial Coatings business Employee engagement 20% 300+ up for 6th Eco-premium Human Cities year Safer solut
Slide 5: Building on our strong foundation of operational excellence to drive growth
Building on our strong foundation of operational excellence to drive growth Decorative Paints Performance Coatings Specialty Chemicals Higher volumes Maintained structurally Volume and profitability and profitability higher profitability improvement Dulux Academy and virtual reality Acquisition of B
Slide 6: Profitability improved further and EBIT was up despite adverse currencies
Profitability improved further and EBIT was up despite adverse currencies Revenue EBIT* (€ million) ROS %** Moving average Net cash from (€ million) ROI %** operating activities 14,859 14,197 1,462 1,502 15.0 14.0 1,297 10.6 1,136 9.8 FY 2015 FY 2016 FY 2015 FY 2016 FY 2015 FY 2016 FY 2015 FY 2016 F
Slide 7: Record ROS, ROI, adjusted EPS and net cash inflow from operating activities
Record ROS, ROI, adjusted EPS and net cash inflow from operating activities Full-year Q4 Volumes 1% higher Volumes up 2%, driven by Decorative Paints and Specialty Chemicals Revenue down 4%, due to unfavorable currency and price/mix effects EBIT at €235 million, mainly due to higher restructuring ex
Slide 8: In 2016 seized opportunities for growth and adapted to challenging markets
In 2016 seized opportunities for growth and adapted to challenging markets South China and SE Asia Automotive Powder and Coatings Specialty Coatings Specialty EMEA Chemicals Latin America ~ Oil Marine and gas industry industries
Slide 9: Updated expected growth rates for our relevant markets 2017
Updated expected growth rates for our relevant markets 2017 <0% 0-3% >3% Mature Europe Asia Latin America Emerging Europe and Africa Marine and Protective Industrial Coatings Powder Coatings Coatings Automotive and Specialty Coatings Bleaching chemicals Polymer chemistry Salt-chlorine chain Ethylene
Slide 10: Delivering on our strategy
Delivering on our strategy Investor update 10
Slide 11: Strategy focused on delivering continuous improvement and growth
Strategy focused on delivering continuous improvement and growth Hardwire Deliver Build further Drive organic Pursue value new continuous operational growth and generating organization improvement excellence innovation acquisitions model culture Next steps Culture Core principles and values Sustaina
Slide 12: Structurally improved to achieve record levels of financial performance in 2016
Structurally improved to achieve record levels of financial performance in 2016 Continuous improvement Return on sales* % Return on investment* % €200+ Delivering million savings 13-16.5 Total reportable injury rate 9-11 1.4 14.0 15.0 (2015 1.6) 9.8 10.6 10.9 7.5 Engagement 2014 2015 2016 Guidance 2
Slide 13: €200+ million savings from continuous improvement and operational excellence
€200+ million savings from continuous improvement and operational excellence ALPS GBS HR Finance 75% Increased IM 5 Engagement of sites regional transparency hubs 85% KPI’s Standardized Serving improved Delivering processes 66% ALPS benefits people Deliver Expanding OTIF All starts in into Business
Slide 14: ALPS delivering continuous improvement and capacity for organic growth
ALPS delivering continuous improvement and capacity for organic growth 5S Implemented, Latin America ALPS in action, Asia Operational review Investor update 14
Slide 15: €634 million invested in sites to support organic growth
€634 million invested in sites to support organic growth and operational excellence Ashington, UK Shanghai, China Strongsville, U.S. Decorative Paints Ibbenburen, Germany Performance Coatings Chengdu, China Specialty Chemicals Pasadena, U.S. Mumbai, India Chonburi, Thailand Gujurat,India Los Reyes,
Slide 16: €363 million invested in driving innovation to support organic growth
€363 million invested in driving innovation to support organic growth Launched AquaSilk in China, Introduced Dissolvine M-40 Launched forest breath in China. an innovative waterborne anti-scuff for the detergent industry It contains anti-bacterial properties that improve indoor air quality Visualize
Slide 17: Value generating acquisitions and joint ventures supporting growth
Value generating acquisitions and joint ventures supporting growth BASF’s Completed Joint Ventures: Industrial Portion of for €425 production Acquired outstanding Coatings shares in Eko Peroxide business million transferred Cooperation for Salt Revenue Synergies production in Spain ~€280 and Partner
Slide 18: Further progress made towards our 2020 sustainability ambitions
Further progress made towards our 2020 sustainability ambitions Eco-premium solutions with downstream Cradle-to-Grave, Carbon Footprint REI – Resource Efficiency Index benefits (% reduction CO2(e) per ton of sales from 2012) (in % of revenue) (Gross margin/CO2(e) indexed) 18 19 19 20 20 25 -30 113 1
Slide 19: Making people's lives more liveable and inspiring
Making people’s lives more liveable and inspiring 300+ projects 9+ million people 175,000 liters of paint
Slide 20: Strong financial position provides foundation for growth
Strong financial position provides foundation for growth Investor update 20
Slide 21: Strong financial performance improvement continued in 2016
Strong financial performance improvement continued in 2016 Full-year Q4 Volumes EBIT Record Volumes ROS and ROI 1% higher Up 3% ROS 10.6% (2015 9.8%) Up 2% Up 6% excluding currencies ROI 15.0% (2015 14.0%) Adjusted EPS Total dividend Net cash inflow Completed acquisition proposed for 2016 from opera
Slide 22: EBIT growth driven by higher volumes and continuous improvement
EBIT growth driven by higher volumes and continuous improvement € million FY 2015 FY 2016 Δ% Revenue 14,859 14,197 (4) EBIT (Operating income excluding incidental items) 1,462 1,502 3 Operating income 1,573 1,519 (3) Ratio, % FY 2015 FY 2016 ROS* 9.8 10.6 Moving average ROI* 14.0 15.0 Revenue develo
Slide 23: Q4 2016 impacted by restructuring and Marine and oil and gas industries
Q4 2016 impacted by restructuring and Marine and oil and gas industries € million Q4 2015 Q4 2016 Δ% Revenue 3,559 3,456 (3) EBIT (Operating income excluding incidental items) 268 235 (12) Operating income 345 217 (37) Ratio, % FY 2015 FY 2016 ROS* 7.5 6.8 Moving average ROI* 14.0 15.0 Revenue devel
Slide 24: Volume growth overall, driven by Decorative Paints and Specialty Chemicals
Volume growth overall, driven by Decorative Paints and Specialty Chemicals Decorative Paints Performance Coatings Specialty Chemicals AkzoNobel 2015 Quarterly volume development in % year-on-year 2016 6 4 6 2 4 3 2 2 2 2 2 1 1 1 1 1 0 -1 -1 -1 -3 -2 -2 -2 -2 -2 -3 -3 -4 Quarterly price/mix developme
Slide 25: Decorative Paints full-year 2016: Higher volumes and profitability
Decorative Paints full-year 2016: Higher volumes and profitability € million FY 2015 FY 2016 Δ% Flexa Color Tester - winner of the Our Color Dutch of the Best Product of Year, the Year 2016- Revenue 4,007 3,835 (4) Denim Drift, was launched 2017 EBIT (Operating income excluding incidental items) 345
Slide 26: Performance Coatings full-year 2016: Maintained structurally higher profitability
Performance Coatings full-year 2016: Maintained structurally higher profitability € million FY 2015 FY 2016 Δ% Revenue 5,955 5,665 (5) EBIT (Operating income excluding incidental items) 792 759 (4) Operating income 792 735 (7) Ratio, % FY 2015 FY 2016 ROS* 13.3 13.4 Moving average ROI* 29.4 29.4 Rev
Slide 27: Specialty Chemicals full-year 2016: Volume and profitability improvement
Specialty Chemicals full-year 2016: Volume and profitability improvement € million FY 2015 FY 2016 Δ% Inaugurated two new specialty Revenue 4,988 4,783 (4) chemicals plants at the multi-site in Ningbo, China. EBIT (Operating income excluding incidental items) 578 629 9 Operating income 609 629 3 Rat
Slide 28: EBIT increased due to higher volumes, continuous improvement and lower costs
EBIT increased due to higher volumes, continuous improvement and lower costs Increase € million +6%** Decrease +3% -111 17 -44 86 -321 319 1.573 1.519 1.462 1.502 FY 2015 OPI Incidentals FY 2015 EBIT Currency/ Volume Price/mix Other* FY 2016 EBIT incidentals FY 2016 OPI acq/div * Other costs include
Slide 29: Free cash flow continues to improve
Free cash flow continues to improve FY2013 FY2014 FY2015 FY2016 € million EBITDA 1,513 1,690 2,088 2,108 Interest paid -228 -206 -151 -87 Tax paid -230 -258 -261 -285 Changes in working capital, provision* and other 69 -145 -224 -175 Capital expenditures (including intangible assets) -695 -612 -688
Slide 30: Cash management discipline continues; Leading performance for working capital
Cash management discipline continues; Leading performance for working capital Operating Working Capital € million Capital expenditures € million Operating Working Capital Specialty Chemicals Decorative Paints OWC as % of LQ revenue * 4 Performance Coatings Other 3.000 16% CAPEX as % revenue 14% 5.4%
Slide 31: IAS19 pension deficit €1.0 billion
IAS19 pension deficit €1.0 billion Key pension financial assumptions Q4 2015 Q4 2016 Discount rate 3.5% 2.4% Inflation rate 2.8% 3.1% Pension deficit development in 2016 Increase € million Decrease Deficit end Discount Inflation Asset return Deficit end Q4 2015 Top-ups rates on DBO on DBO over P &L
Slide 32: Actively managing pension liabilities; lower top-ups due to foreign exchange
Actively managing pension liabilities; lower top-ups due to foreign exchange Further de-risking through non-cash buy-in transactions totaling €3.3 billion in 2016 Around 60 percent longevity risk and around 80 percent interest rate and inflation risk is hedged Top-up schedule updated for actual paym
Slide 33: Positive net cash after dividends for second consecutive year
Positive net cash after dividends for second consecutive year FY2013 FY2014 FY2015 FY2016 € million Free cash flow 21 199 448 646 Dividend paid -286 -280 -281 -336 Other 66 57 29 29 Net cash generation (from continued operations) -199 -24 196 339 excl. acquisitions and divestments Acquisitions -34 -
Slide 34: Strong financial position provides foundation for growth
Strong financial position provides foundation for growth 4 1,5 3,5 Net debt (€ billion)/EBITDA Seek to maintain investment grade rating of BBB+ (currently A-) 3 1.0 1 Net debt at €1.25 billion (0.6 x EBITDA) 2,5 Average interest rate reduced with repayment of high interest debt 2 0.6 0.6 Renewal of
Slide 35: Cash generation restored to invest in growth and improve shareholder returns
Cash generation restored to invest in growth and improve shareholder returns 1. Profitable organic growth Innovation and capital expenditure 2. Dividend Pay a stable to rising dividend 3. Acquisitions Strategically aligned and value generating 4. Balance sheet Retain strong investment grade credit r
Slide 36: Concluding remarks
Concluding remarks Investor update 36
Slide 37: Further increase in dividend shows we are confident in our cash flow generation
Further increase in dividend shows we are confident in our cash flow generation Dividends € per share Dividend policy is to pay a “stable to rising” +6.5% dividend each year +7% 1.65 1.55 1.45 1.45 Final dividend paid in cash, unless 1.20 1.28 1.12 1.12 shareholders elect to receive a stock dividend
Slide 38: We are stronger, more agile, better able to adapt and grow
We are stronger, more agile, better able to adapt and grow €200+ ALPS million Record Continuous savings Progress ROS Acquisition improvement on a new GBS Volume of BASF’s and ROI Growth 75% sites model Industrial Coatings business Employee engagement 20% 300+ up for 6th Eco-premium Human Cities year
Slide 39: We are stronger, more agile, better able to adapt and grow
We are stronger, more agile, better able to adapt and grow We anticipate positive developments for EMEA, We have structurally improved our ability to North America and Asia, improving during the respond to developments in our markets. year, while Latin America is expected to stabilize. We are taking
Slide 40: Upcoming events
Upcoming events Annual report 2016 March 1, 2017 Report for the first quarter 2017 April 24, 2017 Annual General Meeting, Amsterdam April 25, 2017 Report for the second quarter 2017 July 25, 2017 Capital Markets Day, Amsterdam September 26, 2017 Report for the third quarter 2017 October 18, 2017 Rep
Slide 41: And now for questions
And now for questions Investor update 41
Slide 42: A strong case for investment
A strong case for investment Portfolio of businesses Strong global brands in Long-term growth Balanced exposure with leadership both consumer and potential from end-user across geographic positions in many industrial markets segments regions markets Track record of History of successfully Clear lead
Slide 43: 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 44: Appendix
Appendix Investor update 44
Slide 45: Manufacturing indices up in all regions and countries
Manufacturing indices up in all regions and countries Purchase Managers’ Index (PMI)* Purchase Managers’ Index (PMI)* Figures below 50 indicate pessimism December 2016 60 65 Sweden 60 US UK France Netherlands 55 Japan 50 Germany Indonesia Vietnam Russia 50 China US India Eurozone 45 Brazil China 40
Slide 46: Foreign exchange a headwind in 2016
Foreign exchange a headwind in 2016 Decorative Paints Performance Coatings Specialty Chemicals AkzoNobel 2015 Quarterly foreign exchange rate development in % year-on-year 2016 10 5 7 7 10 11 9 8 8 2 5 6 0 4 5 4 3 3 -5 -4 -7 -7 -2 -2 -5 -4 -5 -2 -3 -1 -3 -2 -2 -5 -10 10% 0% -10% -20% -30% USD GBP CN
Slide 47: Decorative Paints Q4 2016: Another quarter of volume growth
Decorative Paints Q4 2016: Another quarter of volume growth € million Q4 2015 Q4 2016 Δ% Revenue 931 898 (4) EBIT (Operating income excluding incidental items) 46 51 11 Operating income 46 51 11 Ratio, % Q4 2015 Q4 2016 ROS* 4.9 5.7 Moving average ROI* 11.7 12.8 Increase Revenue development Q4 2016
Slide 48: Performance Coatings Q4 2016: Weakness in marine and oil and gas
Performance Coatings Q4 2016: Weakness in marine and oil and gas € million Q4 2015 Q4 2016 Δ% Revenue 1,482 1,398 (6) EBIT (Operating income excluding incidental items) 192 152 (21) Operating income 192 135 (30) Ratio, % Q4 2015 Q4 2016 ROS* 13.0 10.9 Moving average ROI* 29.4 29.4 Increase Revenue d
Slide 49: Specialty Chemicals Q4 2016: Volumes up 4% driven by Asia and Europe
Specialty Chemicals Q4 2016: Volumes up 4% driven by Asia and Europe € million Q4 2015 Q4 2016 Δ% Revenue 1,167 1,169 - EBIT (Operating income excluding incidental items) 90 118 31 Operating income 91 118 30 Ratio, % Q4 2015 Q4 2016 ROS* 7.7 10.1 Moving average ROI* 16.3 17.9 Increase Revenue develo
Slide 50: 2017 Financial assumptions
2017 Financial assumptions Category Comments / assumption FY Revenue FY EBIT BASF’s Industrial Coatings business. The full profitability of the acquisition will be Transition during Acquisition realized by the end of 2018, in line with the stated financial guidance for the ~€280 mln 2017/2018 Perfor