Akzo Nobel N.v. · EURONEXT:AKZA
Akzo Nobel — Investor Day (February 2022)
76 slides from Akzo Nobel's investor day presentation, Feb 17, 2022
Slide 1: Investor Update Grow & Deliver
tre ( People. Planet. Paint. ) ¥ oe, 2 | INVESTO UPDATE GROW & DELIVER February 17, 2022
Slide 2: Agenda
Agenda Setting the stage Capital allocation GROW Concluding remarks Sustainable innovation Q&A DELIVER 2022 Investor update | Grow & Deliver 2
Slide 3: Disclaimer/forward-looking statements
Disclaimer/forward-looking statements Alternative performance measures (APM) This presentation does not constitute or form a part of any offer to sell, or any invitation or other solicitation of When presenting operating results, AkzoNobel uses any offer, to buy or subscribe for any securities in th
Slide 4: Speakers
Speakers Thierry Vanlancker Maarten de Vries Michael Friede Klaas Kruithof Karen-Marie Katholm Chief Executive Officer Chief Financial Officer Chief Commercial Officer Chief Technology Officer Chief Integrated Supply Chain Officer 2022 Investor update | Grow & Deliver 4
Slide 5: Setting the stage
Setting the stage Thierry Vanlancker 2022 Investor update | Grow & Deliver 5
Slide 6: A focused paints and coatings company
A focused paints and coatings company EMEA North America 12% 50% North Asia 18% 2021 key data €9.6bn revenue €1.1bn adjusted OPI €1.4bn adjusted EBITDA 16.0% return on investment (ROI) South Asia Pacific 32,800 employees South America 12% 8% Note: Full-year 2021 revenue by destination for all region
Slide 7: People. Planet. Paint.
People. Planet. Paint. Clear purpose as the engine of our organization 2022 Investor update | Grow & Deliver 7
Slide 8: Global paints and coatings industry
Global paints and coatings industry Leading global player in large and attractive market Peer revenue comparison € billion, 2021* Top 12 players ~€140bn ~50% 18 market of the market 16 14 12 10 8 6 4 2 0 * Revenue for BASF, Kansai Paint, Jotun, Asian Paints and Hempel is for 2020. 2022 Investor upda
Slide 9: From 15 by 20 to Grow & Deliver
From 15 by 20 to Grow & Deliver Significant culture change with margins in top tier Strong margin progress versus peers Organizational Health Index (OHI)** AkzoNobel Peer 1 Peer 2 Participation rate at 86% 19 Peer 3 Peer 4 Peer 5 17 72 15 70 13 ROS% 11 9 60 56 7 AkzoNobel 5 2018 2019 2020 2021 50 Q2
Slide 10: Grow & Deliver targets
Grow & Deliver targets Building on new and strong foundation 2018 2021 2023 €1bn €1.4bn €2bn Adj. EBITDA Adj. EBITDA Adj. EBITDA 8.6% 11.4% +150 bps ROS ROS ROS vs 2020* Grow at or above relevant markets * 2020 ROS margin at 12.9%. 2022 Investor update | Grow & Deliver 10 Assumes no significant mark
Slide 11: Grow & Deliver: €2bn adj. EBITDA by 2023
Grow & Deliver: €2bn adj. EBITDA by 2023 ~€200m Deliver results ~€350m €2.0bn Grow revenue Integrated Product supply chain Growth portfolio management €1.44bn adds 1% CAGR 2021-23 market CAGR at 6%* Pricing initiatives Sustainable innovation 150 bps ROS expansion versus 2020 2021 FY 2021 In-line wit
Slide 12: Stronger and faster pricing initiatives
Stronger and faster pricing initiatives Previous cycle as proof point for margin expansion Adj. OPI Price versus raw material costs impact y-o-y (€m) impact 400 15 by 20 Grow & Deliver 300 200 100 0 -100 -200 -300 -400 2017 2018 2019 2020 2021 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Slide 13: GROW
GROW Thierry Vanlancker Michael Friede 2022 Investor update | Grow & Deliver 13
Slide 14: Strong global coatings portfolio with leading positions in key markets
Strong global coatings portfolio with leading positions in key markets Business Market size Position Market Adj. market Current market dynamics ~€bn, 2021* by revenue growth growth value value ‘21-’23 ‘21-’23 Demand for sustainable solutions Powder Strong value proposition including technical qualit
Slide 15: Strong global paints portfolio with leading positions in key regions
Strong global paints portfolio with leading positions in key regions Region Market size Position Market Adj. market Current market dynamics ~€bn, 2021* by revenue growth growth value value ‘21-’23 ‘21-’23 DIY demand stabilized at higher level Recovery of professional and project segments Paints EMEA
Slide 16: Strong start to Grow & Deliver
Strong start to Grow & Deliver Outgrew market by 1% in 2021, in line with strategy 2021 versus 2020 comparison (organic) 2021 versus 2019 comparison (organic) Revenue Outgrew market Revenue growth % in 2021 growth % by 1% revenue 14.8 14.5 18.4 11.9 12.9 10.0 13.2 8.5 8.5 0.4 -3.6 Market AkzoNobel P
Slide 17: Well-positioned in key growth markets
Well-positioned in key growth markets Growth businesses to drive additional 1% revenue CAGR 1/3 of portfolio well-positioned Powder to outgrow Packaging Aero relevant markets Paints China Yacht Paints Cons. LATAM Growth Elect. Wood Coil Marine Paints Paints Protective EMEA South Asia Vehicle Refinis
Slide 18: GROW Coatings
GROW Coatings Michael Friede 2022 Investor update | Grow & Deliver 18
Slide 19: Performance Coatings
Performance Coatings Leading global businesses; strong technologies and brands Marine and Automotive Powder Industrial and Specialty Protective Key sub- Architecture Packaging Marine Vehicle Refinishes segments Automotive Coil & Extrusion Protective Specialty Plastics Functional Wood Yacht Aerospace
Slide 20: Megatrends driving growth in Coatings
Megatrends driving growth in Coatings Liquid-to-powder conversion (low VOC* and waste) Sustainability and Electric vehicle growth with expected 30% market penetration** energy transition Shift from plastic to metal beverage packaging Asset investments into global energy transition Consumer preferenc
Slide 21: Powder Coatings
Powder Coatings Clear leadership position and aggressively investing for growth €10bn market Powder Coatings capital expenditures Key growth drivers: Liquid-to-powder conversion, e.g. North America architectural 8% +€41m New applications including market CAGR 2021-23 e-mobility and wood #1 in the ma
Slide 22: Packaging Coatings
Packaging Coatings Gaining share and success in beverage ‘can-ends’ €2.7bn market Packaging revenue growth Key growth drivers: Accelerated shift from plastic to metal Sustainable technology (BPAni) 8% 3% points of ~85 new can production lines to market CAGR 2021-23 growth driven 25 by can-ends launc
Slide 23: Aerospace Coatings
Aerospace Coatings Leading technology and strong customer relationship €0.5bn market Solid recovery in MRO Sub-segment revenue vs. 2018 Key growth drivers: Accelerated MRO recovery (index at 100) Rebound of OEM business 6% 110 100 Acceleration of film and markings 90 market CAGR 2021-23 Growth traje
Slide 24: Yacht Coatings
Yacht Coatings Attractive growth business with leading brands and technology €0.5bn market Yacht business split by € value Key growth drivers: Leading position in all segments, 6% Professional including maintenance with market CAGR 2021-23 complete offering Retail Increased retail demand from #1 in
Slide 25: GROW Decorative Paints
GROW Decorative Paints Thierry Vanlancker 2022 Investor update | Grow & Deliver 25
Slide 26: Decorative Paints
Decorative Paints One global brand portfolio with strong local positions EMEA LATAM North Asia South Asia UK and Ireland Brazil China retail India Key sub- Indonesia Benelux Argentina China project segments and Nordics, Eastern Colombia (Grupo Vietnam regions Europe Orbis) Middle East, Africa Revenu
Slide 27: Megatrends driving growth in paints
Megatrends driving growth in paints Strong demand for sustainable products supporting well-being & health Sustainability, Driven by legislation, e.g. EU Green Deal health and well-being Growing middle class in Asia leads to higher quality consumption in lower tier cities (especially China & India) S
Slide 28: Strong brand recognition
Strong brand recognition Leveraging our unique global scale for local impact #1 choice Innovation Branding Professional loyalty for consumers and Easycare family Global leveraging Painter Academy professionals 31 markets 17 countries 10 countries Only paint brand listed €130m in 18 months 100k in to
Slide 29: Decorative Paints EMEA
Decorative Paints EMEA Distribution, brand leverage and strong innovation pipeline €24bn market Consumers preferring brands* Key growth drivers: (in AkzoNobel top seven markets) Higher DIY demand 5% EU Green Deal (+1% CAGR) market CAGR 2021-23 70% Expand distribution network 20 leading positions Eff
Slide 30: Paints EMEA outgrowing the market
Paints EMEA outgrowing the market Driven by strong brands and distribution AkzoNobel Decorative Paints Europe development (Excludes Middle East and Africa) (Index at 100) 130 120 110 100 90 2018 2019 2020 2021 AkzoNobel Volume AkzoNobel Revenue At market Above market Strongly outgrowing market Marke
Slide 31: Decorative Paints China
Decorative Paints China Geographic retail expansion with strong brand and sustainable products ~€6bn market Sub-segment revenue vs. 2018 (index at 100) Key growth drivers: Premium Mid-tier Project Geographic expansion focused on 6% 120 tier 3-5 cities market CAGR 2021-23 110 Digital ecosystem upgrad
Slide 32: Decorative Paints Latin America
Decorative Paints Latin America Expanding strong presence with Grupo Orbis acquisition €4bn market* Leader overall with Key growth drivers: Grupo Orbis Proactive margin management to offset 5% raw materials and FX impact market CAGR 2021-23 Developing premium business through innovation and branding
Slide 33: Grow & Deliver: €2bn adj. EBITDA by 2023
Grow & Deliver: €2bn adj. EBITDA by 2023 Grow revenue in line with the market and outgrow selected markets ~€350m Growth portfolio adds 1% CAGR Grow revenue Powder Packaging Aero Yacht 2021-23 market Paints China CAGR at 6%* Paints LATAM Pricing initiatives Sustainable innovation €2.0bn €1.44bn FY 2
Slide 34: Sustainable Innovation
Sustainable Innovation Klaas Kruithof 2022 Investor update | Grow & Deliver 34
Slide 35: Recognized sustainability leader in industry
Recognized sustainability leader in industry AkzoNobel Industry average Investors Customers Investors Europe Society Society Industry average Industry average Industry average Industry average Industry average Industry average AkzoNobel AkzoNobel AkzoNobel AkzoNobel AkzoNobel AkzoNobel Only P&C comp
Slide 36: People. Building a diverse, inclusive and caring organization
People. Building a diverse, inclusive and caring organization Female executives (in %) Demonstrating diversity and inclusion >30% Leading safety record in the industry 30 >1,000 projects to help revitalize 25 22 communities between 2020 and 2025 20 21 20 18 35,000 community members trained 15 betwee
Slide 37: Planet. 50% less carbon emissions from our own operations by 2030
Planet. 50% less carbon emissions from our own operations by 2030 Waste per ton of production (in kg) Ambitious 2030 environmental targets 22 100% renewable electricity >30% energy reduction* 100% 20 Towards zero waste: Renewable 100% reusable waste electricity in 100% of water intensive sites Europ
Slide 38: Paint. Delivering value by offering increasingly more sustainable solutions
Paint. Delivering value by offering increasingly more sustainable solutions From… Ambitious sustainable portfolio targets ~40% Revenue from sustainable >50% of revenue from sustainable solutions by 2030 solutions in 2021 50% recycled content to be used in plastic packaging by Deco Paints EU by 2025
Slide 39: Pioneering carbon reduction target validated by the Science Based Targets initiative
Pioneering carbon reduction target validated by the Science Based Targets initiative First paints and coatings company with a carbon reduction target for the full value chain Our target is to reduce carbon emissions for the whole value chain by 50% by 2030* Our target is aligned with the Paris agree
Slide 40: Sustainable innovation
Sustainable innovation Solutions beyond generations for our customers worldwide €1.25 billion spent on R&D in the last five years SCIENCE BASED TARGETS DRIVING AMBITIOUS CORPORATE CLIMATE ACTION 3,000 scientists employed worldwide 70 laboratories globally 5 global technology centers Patent positions
Slide 41: Collaborative innovation
Collaborative innovation Startup challenges Supplier challenges Academic program 2016-2026 Global – Brazil – China 2019-2021 Employing ~150 PhDs MEMBERS SUBMISSIONS SoMe REACH INVITEES SUBMISSIONS SoMe REACH Scientific leader: Prof. Ben Feringa, 10.008 750 71m 127 214 157k Nobel Prize Chemistry Laur
Slide 42: Collaborative Sustainability Challenge
Collaborative Sustainability Challenge 2022 Expanding our collaborative innovation ecosystem and collectively reducing our carbon footprint together with our value chain partners 42
Slide 43: DELIVER
DELIVER Maarten de Vries 2022 Investor update | Grow & Deliver 43
Slide 44: Strong foundation enables Grow & Deliver
Strong foundation enables Grow & Deliver Precise processes allow for further complexity reduction Current Towards 94% of revenue 1 ERP ERP on four main systems PRISM program SAP platforms Global Annual cost Business 6 GBS hubs productivity of 7-10% (~3,000 FTEs) through automation Services Foundatio
Slide 45: DELIVER Product management
DELIVER Product management Thierry Vanlancker 2022 Investor update | Grow & Deliver 45
Slide 46: Product management unlocking end-to-end value through complexity reduction
Product management unlocking end-to- end value through complexity reduction Legacy… High procurement Unleveraged scale complexity Too much Costly and vulnerable sourcing single sourced Small average High production costs and yield losses batch sizes Weak lifecycle Slow-moving and obsolete products m
Slide 47: Cross-functional collaboration is key to make product management successful
Cross-functional collaboration is key to make product management successful Delivering cost competitive portfolio… … Defining winning product range R&D Sales Optimized formulation Clear core product architecture assortment Procurement Security of supply and Product optimized raw management material
Slide 48: Product management in place
Product management in place Driving standardization and simplification Resulting in Half Double reduced complexity # of raw materials dual sourcing Fewer raw Increased Late Standardized Network materials batch size differentiation packaging optimization Number of raw materials decrease by half is fo
Slide 49: Case study 1: Product management Decorative Paints EMEA
Case study 1: Product management Decorative Paints EMEA From To High complexity in EMEA catalog of formulations and packaging Raw materials and Late differentiation for color, labeling and packaging packaging Reduced complexity in raw materials Finished products Leverage of manufacturing network thr
Slide 50: Case study 2: Resins manufacturing and supply
Case study 2: Resins manufacturing and supply Creating additional in-house value for sustainable growth Resins to support innovation, growth and sustainability Strategically positioned to leverage scale and generate value with 23 resin assets Investments to drive asset efficiency, secure raw materi
Slide 51: Resins: Value creation opportunity
Resins: Value creation opportunity Delivering more balanced supply at lower cost Our global Resin plants’ utilization (%) Resins assets to be better utilized Improving overall profitability 75% 50% 60% Driving supply chain resilience for one of our key raw material streams 2018 2021 2023F (2021: ~€1
Slide 52: DELIVER: Integrated supply chain
DELIVER: Integrated supply chain Karen-Marie Katholm 2022 Investor update | Grow & Deliver 52
Slide 53: Fit-for-purpose integrated supply chain
Fit-for-purpose integrated supply chain Focusing on customer centricity with our 2023 ambitions in mind ~14,000 People 2023 ambitions Safety Safety Service 120 Manufacturing Sites Remain Top notch best-in-class service levels 330 Warehouses Cost Efficiency People ~€300m CapEx/Year offsetting fixed T
Slide 54: Turning supply chain into a competitive advantage
Turning supply chain into a competitive advantage Plan Source Make Deliver Enhanced operating Digital Network optimization End-to-end visibility model transformation with insourcing in logistics capabilities Standardized and Enhanced Optimized integrated processes forecasting Continuous warehouse an
Slide 55: State-of-the-art demand & supply planning
State-of-the-art demand & supply planning Increased reliability, responsiveness and visibility for value-driven decisions From Through To Multiple versions of truth Optimally centralized Efficiently leveraged Plan Manual, disconnected supply planning and resilient supply chain network planning Stand
Slide 56: Digital procurement transformation
Digital procurement transformation Unlocking further value through sourcing efficiency and supply security Challenges Our response Towards 2023 Optimizing operating Increase dual-sourcing model through portfolio Supply optimization disruptions Inflation Improving forecasting Improve supplier risk ca
Slide 57: Customer-centric network optimization
Customer-centric network optimization Organized through manufacturing archetypes, while investing for growth Simple and Lowest total cost for high CAPEX shifting volumes at consistent quality towards growth efficient Example: White wall paint, 60% packaging coatings ~30% of volumes growth Many end p
Slide 58: Driving operational efficiency
Driving operational efficiency Continuous improvement via digitization & automation to offset fixed cost inflation 3+% efficiency gains on average Improvement in OPI per (year-on-year) site vs peers by 2023* 3500 0.33 OPI, €m per site 0.325 3000 0.32 2500 0.315 2000 0.31 0.305 1500 0.3 1000 0.295 0.
Slide 59: Improved customer service
Improved customer service Enabled by transparency and agility at competitive cost levels Improved service levels* Freight optimization COVID-19 Predictive analytics 100 88 93 90 80 70 Warehouse management 60 Network optimization 50 2018 2019 2020 2021 2022F 2023F Optimized warehouse network Tailored
Slide 60: Grow & Deliver: €2bn adj. EBITDA by 2023
Grow & Deliver: €2bn adj. EBITDA by 2023 Deliver efficiency gains and cost optimization ~€200m Deliver results Integrated supply chain Planning optimization Product management Increased productivity Raw material and and archetypes product standardization Network optimization Reduced complexity Impro
Slide 61: Capital allocation
Capital allocation Maarten de Vries 2022 Investor update | Grow & Deliver 61
Slide 62: Total shareholder return
Total shareholder return Significant value unlocked since 2017 Share price Share price Total shareholder €59.71 €94.56 return (per share) Share price 130 appreciation Rebased to AkzoNobel (€) €34.85 +102% 105 Regular +58% dividends +57% €9.28* 80 Special shareholder 55 returns** €17.28 Share price T
Slide 63: Delivering on capital allocation priorities
Delivering on capital allocation priorities Profitable organic growth ~3% capital expenditures/revenue Dividend Stable to rising Acquisitions Strategically aligned and value creating Shareholder returns Modular share buybacks Net debt/EBITDA target 1-2x Retain strong investment grade credit rating 2
Slide 64: On the way to €2bn adj. EBITDA by 2023
On the way to €2bn adj. EBITDA by 2023 Increasing return on invested capital 16.1% 16.0% ~€200m 14.1% ~€350m €2bn 12.6% ROI Adj. EBITDA 1,341 1,442 1,436 (€m) 1,037 2018 2019 2020 2021 Grow Deliver 2023 2022 Investor update | Grow & Deliver 64
Slide 65: Working capital and free cash flow
Working capital and free cash flow Impacted by raw material inflation and supply constraints Operating working capital Free cash flow (FCF) €m (Trade) as a % of revenue excl. pension pre-funding and top-up payments FCF yield* Working capital lower 13.0% versus comparable peers 11.9% 1.8% 5.0% 11.6%
Slide 66: Capital expenditures
Capital expenditures Directing investments to support growth businesses CAPEX expansion to support Grow & Deliver ... …with increased focus on Asia 3.0% 3.0% 2018 2021 350 3.30% 300 2.3% 2.80% 8% 6% 250 2.0% 288 2.30% 258 11% 15% 200 1.80% 46% 150 214 1.30% 184 54% 100 0.80% 27% 33% 50 0.30% 0 -0.20
Slide 67: Shareholder returns
Shareholder returns Significant reduction in shares through share buybacks 256 29% of shares canceled vs 2018 200 191 182 €2.5bn cash returned from Specialty 172* Chemicals divestment in 2019 2,534 New share €1.8bn*** in Q4 2019-22 YTD 1,135 buyback 545 0 500 132 announced €500m new share buyback to
Slide 68: Dividends and earnings per share
Dividends and earnings per share Stable to rising dividends and significant EPS growth Dividends per share (€) Adj. earnings per share* (EPS) (€) 2.3% 113% avg. dividend adj. EPS yield 2018-21 growth 4.07 1.90 1.95 1.98 2018-21 3.88 1.80 3.10 1.49 1.52 1.54 1.91 1.43 0.37 0.41 0.43 0.44 2018 2019 20
Slide 69: Executing on capital allocation priorities
Executing on capital allocation priorities Deployed >75% of cash to shareholder returns (2020-21) (0.4)x* 0.7x 0.8x 1.6x Cash deployment 2020-21 (€m) 2,000 17% 1,500 4% 1,000 54% 25% 500 0 2018 2019* 2020 2021 Year-end net leverage CAPEX Acquisitions Dividend Share buybacks * Adjusted for the cash r
Slide 70: Track record of strategic M&A
Track record of strategic M&A Spain 2018 Leading woodcare position Romania Track record of accretive Leading paints position acquisitions Malaysia Leading paints position Clear mapping to business and Aerospace regional gaps and opportunities 2019 Cabin/interior coatings Delivered 1% CAGR of inorgan
Slide 71: M&A case study: Decorative Paints Spain
M&A case study: Decorative Paints Spain Building on strong foundations with series of acquisitions €600m* market Revenue AkzoNobel paints Spain (€m) Logical +172% fit Leading position** #1 position** Leading local brands: ▪ #1 brand** in color (Bruguer) ▪ #1 brand** in premium wall paint (Titan) ▪ L
Slide 72: GROW & DELIVER recap
GROW & DELIVER recap Thierry Vanlancker 2022 Investor update | Grow & Deliver 72
Slide 73: EBITDA margin on par with US peers
EBITDA margin on par with US peers Adj. EBITDA margin (%) Evolution of EV to trailing 12 months adj. EBITDA** 22x 17.5 20x 16.9 17.3 16.4 15.9 14.4 15.0 18x ~17x 12.5 12.3 11.2 16x 14x ~14x 12x 10x 8x 2018 2019 2020 2021 Q4 2021 Jan-20 Jun-20 Nov-20 Apr-21 Sep-21 Feb-22 AkzoNobel Average US peers* A
Slide 74: Grow & Deliver: €2bn adj. EBITDA by 2023
Grow & Deliver: €2bn adj. EBITDA by 2023 Step-up underpinned by growth and operational efficiencies ~€200m Deliver results ~€350m €2.0bn Grow revenue Integrated Product supply chain Growth portfolio management €1.44bn adds 1% CAGR 2021-23 market CAGR at 6%* Pricing initiatives Sustainable innovation
Slide 75: Appendix
Appendix 2022 Investor update | Grow & Deliver 75
Slide 76: Performance measures and assumptions
Performance measures and assumptions Definitions of alternative performance measures Assumptions for 2021-2023 Adjusted earnings per share are the basic earnings per share from Revenue growth ≥ market CAGR* operations, excluding identified items and taxes thereon Adjusted operating income is operati