Slide 1: Investor update Q1 2010 results
April & May 2010 Investor update Q1 2010 results
Slide 2: Agenda
Agenda • AkzoNobel at a glance • Strategic ambitions and action plans • Q1 2010 highlights and operational review • Financial review • Sustainability review • Outlook and medium-term targets
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 • Credit ratings: BBB+ (S&P) and Baa1 (Moody’s) Revenue by business area EBITDA* by business area 33% 32% 32% 41% Performance Coatings Decorative Paints 35% 27
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 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, p
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 s n t t r t co G el SF in on in pa am tu PP ob Pa Pa as Jo uP ls BA illi M Va oN n ai D -W po ns kz in ip Ka A w N er Sh Investor update Q1 2010 results 5
Slide 6: Excellent geographic spread of both revenue and profits
Excellent geographic spread of both revenue and profits High-growth markets are important (37% of revenue) % of 2009 revenue 39% 21% 7% ‘Mature’ Europe 20% North America ‘Emerging’ Europe Asia Pacific 9% Latin America 4% Rest-of-world High-growth markets profitability is above average Investor updat
Slide 7: Strong emerging markets growth potential
Strong emerging markets growth potential Mature Emerging Per Capita Per Capita Architectural 8 liters < 2 liters Paint Industrial and Special Purpose 13 liters < 6 liters Coatings Plastics ~100 kg ~20 kg ~170 ~170 kg kg ~25 ~25 kg kg Paper Source: Food & Agriculture Organization of the UN, 2005 data
Slide 8: We have strong brands across the full spectrum of our business
We have strong brands across the full spectrum of our business Biggest brands, per business area % of 2009 revenue 25% of Decorative Paints 23% of Performance Coatings 18% of Specialty Chemicals Investor update Q1 2010 results 8
Slide 9: Successful customer focus
Successful customer focus Sikkens Autoclear® LV Exclusive – Self-healing clearcoat A high gloss clearcoat that is not only highly resistant to scratches and easy to apply, but also features self-healing properties when exposed to heat. Ecosense – better for your world and the world To be launched in
Slide 10: Sustainability is integrated in everything we do
Sustainability is integrated in everything we do We have set ambitious sustainability targets: • Remain in the top three in the Dow Jones Sustainability Indexes • Reduce our total recordable injury rate* to 2 • Deliver a step change in people development We focus on long-term performance. By 2015 ou
Slide 11: Strategic ambitions and action plans
Strategic ambitions and action plans
Slide 12: AkzoNobel strategic ambitions
AkzoNobel strategic ambitions Leading in value creation • Outgrow our markets • EBITDA margin > 14 percent by end 2011 • 0.5 percent improvement in operating Tied to incentives, working capital (OWC) as % of revenue, p.a. both for value creation and Leading in sustainability sustainability • Top 3 D
Slide 13: Key components of the strategic action plan
Key components of the strategic action plan ICI synergies • €340 million structural cost savings • Being delivered more rapidly than originally planned Organic growth • Leveraging our strong emerging markets positions for growth • Emphasis on focused, bigger, bolder innovation Margin management • Ce
Slide 14: Q1 2010 highlights and operational review
Q1 2010 highlights and operational review
Slide 15: Q1 2010 highlights
Q1 2010 highlights • Improved volumes in March in most businesses underpins revenue growth of 6 percent • Stronger demand in high growth markets and some of our industrial markets; mature markets stable • EBITDA* was €399 million (2009: €289 million), at 12.3 percent (2009: 9.4 percent) • Margin man
Slide 16: Revenue and margin development per quarter to Q1 2010
Revenue and margin development per quarter to Q1 2010 Revenue in % year-on-year 10 7% 6% 6% 6% 5 0 -5 -10 -15 Decorative Paints Performance Specialty AkzoNobel Coatings Chemicals EBITDA* margin in % year-on-year 17.9% 20 13.6% 12.3% 15 7.8% 10 5 0 Decorative Paints Performance Specialty AkzoNobel Co
Slide 17: Volume and price development per quarter to Q1 2010
Volume and price development per quarter to Q1 2010 Volume development Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Decorative Paints (16) (10) (9) - 5 Performance Coatings (20) (19) (11) (2) 8 Specialty Chemicals (16) (18) (6) 4 15 AkzoNobel (17) (16) (8) 1 10 Price development Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Decor
Slide 18: Q1 2010 revenue and EBITDA
Q1 2010 revenue and EBITDA € million Q1 2010 Δ% Revenue 3,246 6 EBITDA* 399 38 Ratio, % Q1 2010 Q1 2009 EBITDA* margin 12.3 9.4 Revenue development Q1 2010 vs. Q1 2009 10 8 -4% 6 +10% -2% +2% 4 +6% 2 0 Volume Price Acquisitions/ Exchange Total divestments rates * Before incidentals Increase Decrease
Slide 19: Summary – Q1 2010 results
Summary – Q1 2010 results € million Q1 2010 Q1 2009 EBITDA* 399 289 Amortization and depreciation (141) (139) Incidentals (34) (40) Financial income & expense (88) (105) Minorities and associates (13) (14) Income tax (53) (5) Discontinued operations 11 7 Net income total operations 81 (7) Net cash f
Slide 20: Q1 2010 incidentals
Q1 2010 incidentals € million Q1 2010 Q1 2009 Restructuring costs (17) (47) Results related to major legal, (9) 6 antitrust & environmental cases Results on acquisitions & divestments 1 9 Other incidental results (9) (8) Total (34) (40) • Restructuring activities are ongoing, mainly in Decorative Pa
Slide 21: Decorative Paints
Decorative Paints In China, where volumes were up 40 percent, we started a campaign for our Dulux product Safe & Beautiful Home Odorless through CCTV, a major national television channel. We rolled out a customized marketing program for individual cities to further develop our Dulux store network. I
Slide 22: Decorative Paints key facts
Decorative Paints key facts 2009 • Revenue €4.6 billion • 22,210 employees • EBITDA: €487 million* • 36 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 4% 10% Europe Asia
Slide 23: Leading Deco positions in all regions with strong brands
Leading Deco positions in all regions with strong brands AkzoNobel market positions by value 1 2/3 >3 Export countries Source: Euromonitor basis; AkzoNobel analysis 2009 Investor update Q1 2010 results 23
Slide 24: Combination of channel and application mix creates a relatively stable market
Combination of channel and application mix creates a relatively stable market % of total Decorative market 2009 Market breakdown Market breakdown by channel by application ~70% ~50% ~50% ~30% Retail Trade New build Maintenance Source: Euromonitor basis; AkzoNobel analysis Investor update Q1 2010 res
Slide 25: Decorative Paints Q1 2010
Decorative Paints Q1 2010 € million Q1 2010 Δ% Revenue 1,056 7 EBITDA* 82 71 Ratio, % Q1 2010 Q1 2009 EBITDA* margin 7.8 4.9 Revenue development Q1 2010 vs. Q1 2009 8 -1% 6 0% +3% 4 +7% 2 +5% 0 Volume Price Acquisitions/ Exchange Total divestments rates * Before incidentals Increase Decrease Investo
Slide 26: Decorative Paints Q1 2010 highlights
Decorative Paints Q1 2010 highlights • Revenue up 7 percent, volumes up 5 percent • EBITDA* at €82 million (2009: €48 million) • EBITDA* margin 7.8 percent (2009: 4.9 percent) • Ongoing restructuring contributed to better results in the mature economies • Significant growth in higher growth markets;
Slide 27: Performance Coatings
Performance Coatings AkzoNobel Packaging Coatings Latin America has recently launched Vitalure™ 740, a product line consisting of an interior coating and side seam stripe for paint cans. The can liner protects the steel can from corrosion by the paint and will extend the 'best by' time limit for the
Slide 28: Performance Coatings key facts
Performance Coatings key facts 2009 • Revenue €4.1 billion • 19,880 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 7% 15% 8% Marine a
Slide 29: Many market leadership positions
Many market leadership positions 1 Marine and Marine, 2 Protective, Protective Yacht 1 2 Car 3 Refinish, Automotive OEM plastic Refinishes Aerospace commercial 5 coatings Coil, 1 Specialty Industrial Plastics, 2 Coatings Beer & beverage Food cans 1 Wood Wood Finishes coatings, 2 Wood and Adhesives a
Slide 30: Performance Coatings Q1 2010
Performance Coatings Q1 2010 € million Q1 2010 Δ% Revenue 1,048 6 EBITDA* 143 36 Ratio, % Q1 2010 Q1 2009 EBITDA* margin 13.6 10.6 Revenue development Q1 2010 vs. Q1 2009 8 6 -3% -1% +2% 4 +8% +6% 2 0 Volume Price Acquisitions/ Exchange Total divestments rates * Before incidentals Increase Decrease
Slide 31: Performance Coatings Q1 2010 highlights
Performance Coatings Q1 2010 highlights • Revenue increased by 6 percent, volumes up 8 percent • EBITDA* up 36 percent at €143 million (2009: €105 million) • EBITDA* margin at 13.6 percent (2009: 10.6 percent) • Strong volume recovery continues • Lower Marine maintenance activity • Restructuring pro
Slide 32: Specialty Chemicals
Specialty Chemicals The formal inauguration of the Ningbo site – which occupies a 50- hectare plot, is the largest plant investment ever and offers ideal opportunities for any future investments – will take place in November this year. AkzoNobel has more than 6,000 employees and 25 locations in Chin
Slide 33: Specialty Chemicals key facts
Specialty Chemicals key facts 2009 • Revenue €4.4 billion • 10,928 employees • EBITDA: €738 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 2% Functional Chemicals 9
Slide 34: Many market leadership positions
Many market leadership positions Chelates, Ethylene 1 1 sulfur products, amines, Functional polysulfides, Salt 2 3 metal alkyls, Chemicals organic Specialties Elotex, peroxides, (N. Europe) Bermocoll 5 CMC 1 1 Chlorine merchant, Industrial Monochloro- 2 Caustic merchant, Chemicals acetic acid Salt (
Slide 35: Specialty Chemicals Q1 2010
Specialty Chemicals Q1 2010 € million Q1 2010 Δ% Revenue 1,154 6 EBITDA* 207 37 Ratio, % Q1 2010 Q1 2009 EBITDA* margin 17.9 13.8 Revenue development Q1 2010 vs. Q1 2009 15 -6% 10 +2% +15% -5% 5 +6% 0 Volume Price Acquisitions/ Exchange Total divestments rates * Before incidentals Increase Decrease
Slide 36: Specialty Chemicals Q1 2010 highlights
Specialty Chemicals Q1 2010 highlights • Revenue increase of 6 percent, volumes up 15 percent • Broad demand improvement in both mature and high growth markets • EBITDA* increased 37 percent to €207 million (2009: €151 million) • EBITDA* margin 17.9 percent (2009: 13.8 percent) • Strong results in a
Slide 37: Financial review
Financial review
Slide 38: Cash management discipline
Cash management discipline Focus on • OWC reduction • Capex prioritization cash • Bolt-on acquisitions • Dividend policy unchanged • OWC reduced to 15.6% of revenue (Q1 2009: 19.1%) • Careful prioritization of Capex • We continue to look for attractive bolt-on acquisitions • Dividend policy remains
Slide 39: Continued focus on Operating Working Capital is delivering results
Continued focus on Operating Working Capital is delivering results OWC € million 3000 19.1% 20% 19% 18% 2500 16.2% 17% 15.6% 14.6% 16% 2000 15% 13.7% 14% 13% 1500 12% 2,341 2,238 2,007 1,691 2,037 11% 1000 10% 1Q09 2Q09 3Q09 4Q09 1Q10 OWC OWC as % of revenue Investor update Q1 2010 results 39
Slide 40: Capital expenditures remain disciplined
Capital expenditures remain disciplined • Capex 2009 actual spend was €534 million, unchanged from 2008 • Capex 2010 expected to approach €600 million (incl. Ningbo €100 million) OWC split at year-end 2009 2009 Capex split Other Perf 4% Deco 12% 30% Spec Ch 38% Deco 21% Spec Ch 63% Perf 32% Investor
Slide 41: Dividend policy unchanged – €1.05 final dividend proposed (2008: €1.40)
Dividend policy unchanged – €1.05 final dividend proposed (2008: €1.40) Dividend policy remains at least 45 percent of net income before incidentals and fair value adjustments related to the ICI acquisition € per share 2 57% 60% 55% 1,8 48% 1,6 45% 50% 40% 1,4 40% 1,2 1 30% 0,8 €1.20 €1.20 €1.80 €1.
Slide 42: EBITDA – Cash bridge
EBITDA – Cash bridge € million Q1 2010 Q1 2009 EBITDA before incidentals 399 289 Incidentals (cash) (38) (42) Change working capital (289) (194) Change provisions (366) (300) Interest paid (166) (10) Income tax paid (65) (60) Net cash from operating activities (525) (317) • Working capital change re
Slide 43: Ambition to maintain strong balance sheet & credit rating unchanged
Ambition to maintain strong balance sheet & credit rating unchanged € million Mar 31, 2010 Dec 31, 2009 Total Equity 8,774 8,245 Net debt 2,312 1,744 € million Q1 2010 Q1 2009 Net cash from operating activities (525) (317) • Equity positively impacted by currency translation (€436 million) and net p
Slide 44: Pension deficit €1.8 billion in Q1 2010
Pension deficit €1.8 billion in Q1 2010 Key pension metrics Q1 2010 Q4 2009 Discount rate 5.4% 5.6% Inflation assumptions 3.3% 3.2% Pension deficit development during Q1 2010 € billion 0 -0.5 (1,867) (1,820) -1.0 273 (150) -1.5 (37) 307 (346) -2.0 Deficit Top-ups Increased Inflation Discount Other D
Slide 45: Pro-active pension risk management
Pro-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 over time • Total defined benefit pension plans cash contri
Slide 46: No 2010 refinancing needs
No 2010 refinancing needs Debt maturity, € million (nominal amounts) 1,200 800 400 0 2009 2010 2011 2012 2013 2014 2015 2016 € bonds $ bonds GBP bonds Significant liquidity headroom • Undrawn revolving credit facility of €1.5 billion available (2013)* • €1.5 & $1 billion commercial paper programs un
Slide 47: Credit ratings
Credit ratings AkzoNobel is committed to maintaining a strong investment grade rating Standard & Poor’s: BBB+ (negative outlook) • Rating affirmed on August 25, 2009, unchanged since February 25, 2009 • AkzoNobel continues to benefit from its business position Moody’s: Baa1 (negative outlook) • Rati
Slide 48: 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 49: 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 50: Sustainability review
Sustainability review
Slide 51: Sustainability is the essential element in the period of new growth
Sustainability is the essential element in the period of new growth Population growth is a strong driver for demand in high- growth markets Quality of life will improve for a growing number of people Climate change will force a price on green house gas emissions and will increase the need for renewa
Slide 52: We see sustainability as a business opportunity
We see sustainability as a business opportunity Examples Level of development Environmental Economic Social Invent Integrate Carbon and Eco-premium sustainable value water policies propositions Manage Include Sales sustainability Market Investment Manu- Sourcing R&D and in all aspects research decis
Slide 53: Our Research Development & Innovation has a significant sustainability focus
Our Research Development & Innovation has a significant sustainability focus 4,000 people employed globally Over 60 percent of projects sustainability driven 2009: 2.4 percent of revenue spent (> €300 million) on RD&I Geographic spread of RD&I 57% 21% 22% Europe Asia Pacific Americas Investor update
Slide 54: Eco-premium solutions are gaining momentum
Eco-premium solutions are gaining momentum Eco-premium solutions In % of revenue 30 25 30% 20 15 182 20% 18% 18% 10 5 188 0 2007 2008 2009 2015 target Eco-premium products have a significantly higher eco- efficiency than the mainstream product available Investor update Q1 2010 results 54
Slide 55: Our products make a positive contribution
Our products make a positive contribution The chemical industry saves 2.7 tons carbon for each ton emitted* *Source: McKinsey Investor update Q1 2010 results 55
Slide 56: Our sustainability commitment has been recognized externally
Our sustainability commitment has been recognized externally 2004 No ranking 2005 Top 10% 2006 2nd Place 2007 Super sector leader 2008 Joint 2nd place 2009 2nd place Investor update Q1 2010 results 56
Slide 57: Outlook and medium-term targets
Outlook and medium-term targets
Slide 58: Well positioned to meet current challenges
Well positioned to meet current challenges Sound fundamentals • Strong market positions and brands • Diverse geographic spread in highly attractive sectors • Low cyclicality due to resilient portfolio • Sustainability is integrated in everything we do Strong track record • Operational excellence • S
Slide 59: Outlook and medium-term targets
Outlook and medium-term targets • On-track to achieving our strategic ambitions, including an EBITDA margin of 14 percent by the end of 2011 • Focus on customers, cost reduction and cash generation continues • Investments to capture growth will remain a priority, particularly in high-growth markets
Slide 60: 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