Slide 1: Investor update Q4 and FY 2010 results
February 17, 2011 Investor update Q4 and FY 2010 results
Slide 2: Agenda
Agenda • AkzoNobel at a glance • Strategic ambitions • Q4 and FY 2010 value highlights • 2010 values highlights • Financial review • Outlook 2011 Investor update Q4 and FY 2010 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 2009 revenue in € billion 10 8 6 4 2 0 Investor update Q4 and FY 2010 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 Q4 and
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 Q4 and FY 2010 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 Q4 and FY 2010 results 8
Slide 10: Our strategic ambition is to be
Our strategic ambition is to be Investor update Q4 and FY 2010 results 9
Slide 11: Our medium term strategic goals
Our medium term strategic goals • Top quartile safety performance • Top 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, maintaini
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 Q4 and FY 2010 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 Current innovation strategy Revenue by key market delivering: segment • 9% of revenue from “breakthrough” innovations* 12% • 20% of revenue from Eco-premium solutions** 13% 43% How innovation will support our growth agenda: • F
Slide 16: Clear sustainability focus
Clear sustainability focus Current sustainability strategy Accelerated sustainability delivering: strategy will deliver: • Safety at 3.6 injuries/ million • Safety at 2.0 injuries/ million hours hours • 20% of revenue from Eco- • 30% of revenue from Eco- premium solutions premium solutions • Energy
Slide 17: Q4 and FY 2010 value highlights
Q4 and FY 2010 value highlights Investor update Q4 and FY 2010 results 16
Slide 18: Full year 2010 highlights
Full year 2010 highlights • 2010 revenue growth at 12 percent in line with medium-term ambitions • 2010 EBITDA* 16 percent higher • Q4 revenue up 17 percent, Q4 EBITDA up 3 percent • Operating return on invested capital: 27.7 percent (2009: 23.2 percent) • Net income: €754 million (2009: €285 millio
Slide 19: Full year 2010 revenue and EBITDA
Full year 2010 revenue and EBITDA € million 2010 Δ% Revenue 14,640 12 EBITDA* 1,964 16 Ratio, % 2010 2009 EBITDA* margin 13.4 13.0 Revenue development 2010 vs. 2009 15 10 +6% +12% 5 0% 0% +6% 0 Volume Price Acquisitions/ Exchange Total divestments rates * Before incidentals Increase Decrease Investo
Slide 20: Summary – Full year 2010 results
Summary – Full year 2010 results € million 2010 2009 EBITDA* 1,964 1,690 Amortization and depreciation (590) (559) Incidentals (155) (276) Financial income & expense (327) (405) Minorities and associates (58) (56) Income tax (170) (141) Discontinued operations 90 32 Net income total operations 754 2
Slide 21: Full year 2010 incidentals
Full year 2010 incidentals € million 2010 2009 Restructuring costs (120) (349) Results related to major legal, (49) (38) antitrust & environmental cases Results on acquisitions & divestments 33 48 Other incidental results (19) 63 Total (155) (276) 2010 restructuring costs are mainly related to: • Ma
Slide 22: 2010 revenue growth and EBITDA margin in line with strategic ambitions
2010 revenue growth and EBITDA margin in line with strategic ambitions Reported revenue in % year-on-year 22% 19% 20 17% 15 11% 10 5 0 -5 -10 -15 Decorative Paints Performance Specialty AkzoNobel Coatings Chemicals EBITDA* margin in % 17.6% 20 5.5% 11.9% 10.4% 15 10 5 0 Decorative Paints Performance
Slide 23: 2010 volumes not yet back to 2008 levels, price increases coming through
2010 volumes not yet back to 2008 levels, price increases coming through Volume development in % year-on-year 15 10 5% 3% 1% 3% 5 0 -5 -10 -15 -20 Decorative Paints Performance Specialty AkzoNobel Coatings Chemicals Price development in % year-on-year 10 8% 4% 5 3% 2% 0 -5 -10 Decorative Paints Perf
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 Q4 and FY 2010 results 23
Slide 25: Q4 2010 revenue and EBITDA
Q4 2010 revenue and EBITDA € million Q4 2010 Δ% Revenue 3,620 17 EBITDA* 377 3 Ratio, % Q4 2010 Q4 2009 EBITDA* margin 10.4 11.9 Revenue development Q4 2010 vs. Q4 2009 20 15 +2% +8% 10 +4% +17% 5 +3% 0 Volume Price Acquisitions/ Exchange Total divestments rates * Before incidentals Increase Decreas
Slide 26: Summary – Q4 2010 results
Summary – Q4 2010 results € million Q4 2010 Q4 2009 EBITDA* 377 367 Amortization and depreciation (155) (137) Incidentals (63) (142) Financial income & expense (56) (118) Minorities and associates (13) (12) Income tax 40 (33) Discontinued operations 32 15 Net income total operations 162 (60) Net cas
Slide 27: Q4 2010 incidentals
Q4 2010 incidentals € million Q4 2010 Q4 2009 Restructuring costs (29) (115) Results related to major legal, (48) (49) antitrust & environmental cases Results on acquisitions & divestments 16 17 Other incidental results (2) 5 Total (63) (142) • Restructuring in mature markets continues, albeit at a
Slide 28: Decorative Paints
Decorative Paints • Expand distribution in China through ‘controlled stores’ • Continue to build our Dulux brand 2009 2010 3,000 stores 4,000 stores Investor update Q4 and FY 2010 results 27
Slide 29: 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 30: Decorative Paints 2010 highlights
Decorative Paints 2010 highlights • Full-year revenue increased 9 percent and EBITDA* increased 13 percent • All three regions reported higher revenue and profit in 2010 • Strong revenue growth and increased investment in brands and distribution in high growth markets • Soft demand in most of mature
Slide 31: Decorative Paints full year 2010
Decorative Paints full year 2010 € million 2010 Δ% Revenue 4,968 9 EBITDA* 548 13 Ratio, % 2010 2009 EBITDA* margin 11.0 10.6 Revenue development 2010 vs. 2009 10 5 6% 1% 9% 2% 0% 0 Volume Price Acquisitions/ Exchange rates Total divestments * Before incidentals Increase Decrease Investor update Q4
Slide 32: Decorative Paints Q4 2010
Decorative Paints Q4 2010 € million Q4 2010 Δ% Revenue 1,139 11 EBITDA* 63 (10) Ratio, % Q4 2010 Q4 2009 EBITDA* margin 5.5 6.8 Revenue development Q4 2010 vs. Q4 2009 15 10 2% 8% 5 1% 11% 0% 0 Volume Price Acquisitions/ Exchange Total divestments rates * Before incidentals Increase Decrease Investo
Slide 33: Performance Coatings
Performance Coatings • New tactile packaging developed by AkzoNobel • Appearing in stores across Europe • Texture gives impression of condensation and contents appear to be ice cold Investor update Q4 and FY 2010 results 32
Slide 34: 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 35: Performance Coatings 2010 highlights
Performance Coatings 2010 highlights • Full-year revenue up 16 percent, with volumes up 7 percent • EBITDA 9 percent up for the year • Margin management mitigating higher raw material costs • Better trading conditions in 2010, especially in Industrial Coatings, Car Refinishes and Powder Coatings • I
Slide 36: Performance Coatings full year 2010
Performance Coatings full year 2010 € million 2010 Δ% Revenue 4,786 16 EBITDA* 647 9 Ratio, % 2010 2009 EBITDA* margin 13.5 14.4 Revenue development 2010 vs. 2009 20 15 +3% +7% 10 -1% +16% 5 +7% 0 Volume Price Acquisitions/ Exchange rates Total divestments * Before incidentals Increase Decrease Inve
Slide 37: Performance Coatings Q4 2010
Performance Coatings Q4 2010 € million Q4 2010 Δ% Revenue 1,238 22 EBITDA* 147 (5) Ratio, % Q4 2010 Q4 2009 EBITDA* margin 11.9 15.2 Revenue development Q4 2010 vs. Q4 2009 25 20 +9% 15 +22% 10 3% +5% 5 0 +5% Volume Price Acquisitions/ Exchange Total divestments rates * Before incidentals Increase D
Slide 38: Specialty Chemicals
Specialty Chemicals • Sustainable Chemical Island concept in Brazil • To supply the world’s largest pulp mill • All latest technologies applied • Investment of close to €90 million Investor update Q4 and FY 2010 results 37
Slide 39: 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 6% Functional Chemicals 3
Slide 40: Specialty Chemicals 2010 highlights
Specialty Chemicals 2010 highlights • Full-year revenue increased 13 percent • Broad demand improvement in both mature and high growth markets • Performance improvement in all business units • Full-year EBITDA increase of 27 percent • National Starch divestment completed • Ningbo China site commissi
Slide 41: Specialty Chemicals full year 2010
Specialty Chemicals full year 2010 € million 2010 Δ% Revenue 4,943 13 EBITDA* 939 27 Ratio, % 2010 2009 EBITDA* margin 19.0 16.9 Revenue development 2010 vs. 2009 15 10 -4% +6% 5 +11% 0% +13% 0 Volume Price Acquisitions/ Exchange rates Total divestments * Before incidentals Increase Decrease Investo
Slide 42: Specialty Chemicals Q4 2010
Specialty Chemicals Q4 2010 € million Q4 2010 Δ% Revenue 1,259 19 EBITDA* 221 17 Ratio, % Q4 2010 Q4 2009 EBITDA* margin 17.6 17.9 Revenue development Q4 2010 vs. Q4 2009 20 15 +8% 10 +19% +3% +8% 0% 5 0 Volume Price Acquisitions/ Exchange Total divestments rates * Before incidentals Increase Decrea
Slide 43: 2010 values highlights
2010 values highlights Investor update Q4 and FY 2010 results 42
Slide 44: 2010 values results – working towards our medium-term ambitions
2010 values results – working towards our medium-term ambitions Eco-premium solutions Carbon emission in % of revenue equivalent per ton product 30% 100% 25% 97% 20% 18% 90% 2008 2009 2010 2015 2009 2010 2015 ambition ambition Total recordable injury rate Female executives per mln hrs worked 20% 4.6
Slide 45: Pipeline 2011: Decorative Paints – Dulux Weathershield
Pipeline 2011 Decorative Paints - Dulux Weathershield (SunReflect™ & Keep Cool™) Solar reflectance feature Customer benefits • Ordinary paints absorb heat– • Savings of up to 15% on the new pigment technology energy used for air conditioning reflects more of the solar, • Available across 60% of the
Slide 46: Pipeline 2011: Performance Coatings – Sikkens Autosurfacer UV
Pipeline 2011 Performance Coatings - Sikkens Autosurfacer UV Key application features Benefits for body-shop owners • 50% less energy consumption • Less paint consumption • 2 coats instead of 3 • Increased throughput • Extremely short drying times • Reduced labor and energy costs • Reduced process t
Slide 47: Pipeline 2011: Specialty Chemicals – High Filler Concept
Pipeline 2011 Specialty Chemicals – High Filler Concept Replaces tree fiber with non- Growth potential wood filler • Sales to customer higher than • de-watering/retention system standard papermaking additives using novel on-line treatment of • Growth potential in both high- fillers growth and mature
Slide 48: Financial review
Financial review Investor update Q4 and FY 2010 results 47
Slide 49: 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% 16% 15.0% 14.6% 2000 14.1% 15% 13.7% 13.9% 14% 13% 1500 2,341 2,238 2,007 1,691 2,037 2,346 2,191 2,016 12% 11% 1000 10% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 OWC OWC
Slide 50: 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 51: 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 52: EBITDA – Cash bridge
EBITDA – Cash bridge € million 2010 2009 EBITDA before incidentals 1,964 1,690 Incidentals (cash) (157) (261) Change working capital (95) 650 Change provisions (651) (493) Interest paid (265) (170) Income tax paid (277) (196) Net cash from operating activities 519 1,220 • Incidentals mainly related
Slide 53: EBITDA – Cash bridge (Q4)
EBITDA – Cash bridge € million Q4 2010 Q4 2009 EBITDA before incidentals 377 367 Incidentals (cash) (72) (144) Change working capital 87 380 Change provisions (20) (110) Interest paid (36) (34) Income tax paid (61) (48) Net cash from operating activities 275 411 • Incidentals mainly related to conti
Slide 54: Unchanged ambition to maintain strong balance sheet
Unchanged ambition to maintain strong balance sheet € million Dec 31, 2010 Dec 31, 2009 Total Equity 9,509 8,245 Net debt* 936 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 opt
Slide 55: Pension deficit improves to €1.0 billion
Pension deficit improves to €1.0 billion Key pension metrics Q4 2010 Q4 2009 Discount rate 5.4% 5.6% Inflation assumptions 3.0% 3.2% Pension deficit development during 2010 € billion 0,0 -0,5 159 (1,049) (1,867) (427) 59 -1,0 652 -1,5 375 -2,0 Deficit end Top-ups Increased Inflation Discount Other D
Slide 56: Pension deficit improves to €1.0 billion (Q4)
Pension deficit improves to €1.0 billion Key pension metrics Q4 2010 Q3 2010 Discount rate 5.4% 5.0% Inflation assumptions 3.0% 2.7% Pension deficit development during Q4 2010 € billion 0,0 -0,5 (1,049) (1,506) 108 -1,0 10 9 -1,5 748 (418) -2,0 Deficit end Top-ups Increased Inflation Discount Other*
Slide 57: No additional 2011 cash-out for pensions expected
No additional 2011 cash-out for pensions expected • 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 (AkzoNobel) • Total defined benefit pension plans cash contribution expected to reach €5
Slide 58: 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 59: 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 60: 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 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
Slide 61: Raw material price inflation to be compensated during 2011
Raw material price inflation to be compensated during 2011 • Raw material prices increased in 2010, particularly in the second half of the year • The average increase over the full basket in 2010 was mid-single digit percentage • We expect that 2011 prices will increase by at least the same amount,
Slide 62: Outlook 2011
Outlook 2011 Investor update Q4 and FY 2010 results 61
Slide 63: 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 position in sustainability • Top quartile performance in diversity, employee engagement, and talent development • Top quartile eco-efficiency improvement rate • Grow to €20 billion reve
Slide 64: 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