Slide 1: Investor update Q2 2012 results
July 19, 2012 Investor update Q2 2012 results
Slide 2: Agenda
Agenda • Highlights • Operational and financial review • Performance improvement program • C Conclusion l i Investor update Q2 2012 results 2
Slide 3: Highlights
Highlights Ton Büchner Investor update Q2 2012 results 3
Slide 4: Our strong businesses
Our strong businesses Decorative Paints • H1 2012 Revenue €2.8 billion • H1 2012 EBITDA: €251 million* Performance Coatings g • H1 2012 revenue €2.8 billion • H1 2012 EBITDA: €377 million* Specialty Chemicals • H1 2012 revenue €2.8 €2 8 billion • H1 2012 EBITDA: €490 million* * Before incidentals In
Slide 5: Solid performance in Q2
Solid performance in Q2 • Revenue up 8 percent, mainly driven by pricing actions and currencies • Volumes declined 2 percent, primarily due to the economic slowdown in Europe p • EBITDA* margin 13.5 percent (2011: 13.4 percent) • Net income from continuing operations €197 million (2011: €251 million
Slide 6: In Q2 2012 both revenue and EBITDA increased by 8 percent
In Q2 2012 both revenue and EBITDA increased by 8 percent € million Q2 2012 Δ% Revenue 4,406 4 406 8 EBITDA* 593 8 Ratio, % Q2 2012 Q2 2011 EBITDA* margin 13.5 13.4 Revenue development Q2 2012 vs. Q2 2011 10 6 +2% +4% +8% 2 +4% -2 -2% Volume Price/Mix Acquisitions/ Exchange rates Total divestments *
Slide 7: Revenue growth leads EBITDA margin improvements
Revenue growth leads EBITDA margin improvements Reported quarterly revenue growth in % year-on-year 20 15 12% 10 8% 6% 6% 5 0 Decorative Paints Performance Specialty AkzoNobel Coatings Chemicals Quarterly EBITDA* margin in % 20 17.8% 11.3% 14 5% 14.5% 13 5% 13.5% 15 10 5 0 Decorative Paints Performa
Slide 8: Price increases coming through, volumes remain soft
Price increases coming through, volumes remain soft Quarterly volume development in % year-on-year 10 5 -2% -2% -2% -2% 0 -5 Decorative Paints Performance Specialty AkzoNobel Coatings Chemicals Quarterly price/mix development in % year-on-year 10 6% 5% 4% 5 2% 0 Decorative Paints Performance Special
Slide 9: Performance improvement program is on track to support EBITDA
Performance improvement program is on track to support EBITDA EBITDA* bridge H1 2011 – H1 2012 € million 1.400 1.200 328 (88) 65 (201) 34 1.000 (110) 800 600 988 1,016 , 400 200 0 H1 2011 Currency Price/Mix Volume Raw PIP Other** H1 2012 materials *B Before f incidentals i id t l ** Other includes w
Slide 10: Operational and financial review
Operational and financial review Keith Nichols Investor update Q2 2012 results 10
Slide 11: Decorative Paints Q2 2012 highlights
Decorative Paints Q2 2012 highlights € million Q2 2012 Δ% Revenue 1 551 1,551 6 EBITDA* 175 (8) Ratio % Ratio, Q2 2012 Q2 2011 EBITDA* margin 11.3 13.1 R Revenue d development l t Q2 2012 vs. Q2 2011 Increase Decrease 6 4 0% +3% 2 +6% +5% 0 -2% 2% -2 Volume Price/Mix Acquisitions/ Exchange rates Tot
Slide 12: Performance Coatings Q2 2012 highlights
Performance Coatings Q2 2012 highlights € million Q2 2012 Δ% Revenue 1 472 1,472 12 EBITDA* 213 25 Ratio % Ratio, Q2 2012 Q2 2011 EBITDA* margin 14.5 13.0 Revenue development Q2 2012 vs. vs Q2 2011 Increase Decrease 12 +3% +5% 8 +12% 4 -2% 0 +6% -4 Volume Price/Mix Acquisitions/ Exchange rates Total
Slide 13: Specialty Chemicals Q2 2012 highlights
Specialty Chemicals Q2 2012 highlights € million Q2 2012 Δ% Revenue 1 431 1,431 6 EBITDA* 255 16 R ti % Ratio, Q2 2012 Q2 2011 EBITDA* margin 17.8 16.3 Revenue development Q2 2012 vs. vs Q2 2011 Increase Decrease 6 4 +2% +4% +6% 2 -2% 2% +2% 0 -2 Volume Price/Mix Acquisitions/ Exchange rates Total d
Slide 14: Summary – Q2 2012 results
Summary – Q2 2012 results € million Q2 2012 Q2 2011 EBITDA* EBITDA 593 551 Amortization and depreciation (170) (150) Incidentals (49) 27 Net financing expenses (82) (64) Minorities and associates (16) (14) Income tax (80) (99) Discontinued operations 4 17 Net income total operations 201 268 Net cash
Slide 15: Strong operating returns on invested capital
Strong operating returns on invested capital 30% 27.5% 26.2% 25% 20 2% 20.2% 20% 15% 10% 5% 10.8% 10.4% 8.3% 0% Q3 09-Q2 10 Q3 10-Q2 11 Q3 11-Q2 12 Moving average ROI % * Operating ROI is calculated as EBIT before amortization divided by average invested capital excluding intangible assets Operating
Slide 16: Cash flows Q2 2012
Cash flows Q2 2012 € million Q2 2012 Q2 2011 Profit for the period from continuing operations 218 273 Amortization, depreciation and impairments 186 153 Change working capital (38) (204) - Pension provisions (21) 22 - Restructuring (4) (34) - Other provisions (5) (58) Ch Change provisions i i (30) (
Slide 17: Pension deficit increases to €0.6 billion
Pension deficit increases to €0.6 billion Key pension metrics Q2 2012 Q1 2012 Disco nt rate Discount 4 2% 4.2% 4 5% 4.5% Inflation assumptions 2.3% 2.7% Pension deficit development during Q2 2012 € billion 00 0,0 -0,2 (347) 14 18 (589) -0,4 13 -0,6 (750) -0,8 463 -1,0 -1,2 Deficit end Top-ups Increa
Slide 18: Pension cash contributions unrelated to positive IAS 19 accounting change impact
Pension cash contributions unrelated to positive IAS 19 accounting change impact € million Q2 2012 Q1 2012 Top-up payments 14 322 • j y of the p The majority pension top-up p pp payments y have been made in Q1 2012 • Latest estimate is for additional top-up payment of approximately pp y €30 million
Slide 19: Performance improvement program
Performance improvement program Ton Büchner Investor update Q2 2012 results 19
Slide 20: €500 million performance improvement program committed October 2011
In October 2011 we committed to a €500 million performance improvement program • Complexity Reduction • RD&I focus Operational • Manufacturing excellence Professionalization • Procurement effectiveness • Margin Management • Finance Functional • Human Resources Excellence • Information Management • A
Slide 21: Examples of projects that are now running
Examples of projects that are now running • Site optimizations at ~50 manufacturing sites (€30 million in 2012) • RD&I: technology which enables using less Operational titanium dioxide Professionalization • Product and margin management in Powder Coatings g and Functional Chemicals (~€15 million) •
Slide 22: Significant FTE reductions from the performance improvement program
Significant FTE reductions as a result of the performance improvement program FTE bridge Q4 2011 – Q2 2012 58 000 58.000 57.800 57.600 570 57.400 (870) 640 57.200 57.000 57,580 57,240 56.800 56 600 56.600 56.400 56.200 56.000 year-end 2011 Acq/Div PIP Seasonal/New Q2 2012 hires Increase Decrease Inv
Slide 23: Performance improvement program delivers €65 million benefits in H1 2012
Performance improvement program delivers €65 million benefits in H1 2012 H1 2012 H1 2012 Reported Amount € million EBITDA due to PIP 2012 target Decorative Paints 251 37 Performance Coatings 377 13 Specialty Chemicals 490 15 Other (102) - Total 1,016 65 200 € million Q1 2012 Q2 2012 H1 2012 2012 tar
Slide 24: Performance improvement program on track
Performance improvement program on track • Benefits: €65 million EBITDA improvement YTD • Total costs: €90 million YTD, included in incidentals • Program on track to deliver €200 million EBITDA benefits in 2012 • Business unit adaptations and operational professionalization are expected to contribut
Slide 25: Conclusion
Conclusion Investor update Q2 2012 results 25
Slide 26: Conclusion
Conclusion • A solid lid second d quarter t • Implementation of our performance improvement program on track • The major uncertainty remains the global economic environment • We have a strong portfolio of complementary businesses, with many leading market positions and exposure to growth markets • F
Slide 27: Appendix
Appendix Investor update Q2 2012 results 27
Slide 28: AkzoNobel key facts
AkzoNobel key facts 2011 • Revenue €15.7 billion • 57,240 employees • EBITDA: €1.8 billion* • Net income: €0.5 billion • 40 percent of revenue from high growth markets • A leader in sustainability Revenue by business area EBITDA* by business area 34% 33% 31% Performance Coatings 46% Decorative Paint
Slide 29: Decorative Paints key facts
Decorative Paints key facts 2011 • Revenue €5.3 billion • 22,340 employees • EBITDA: €440 million* • 40 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% 12% M t Mature
Slide 30: Performance Coatings key facts
Performance Coatings key facts 2011 • Revenue €5.2 billion • 21,960 employees • EBITDA: €611 million* • 47 percent of revenue from high growth markets • Leading positions in performance coatings industry • Innovative technologies, strong brands Revenue by business unit Revenue by geography Marine an
Slide 31: Specialty Chemicals key facts
Specialty Chemicals key facts 2011 • Revenue €5.3 billion • 11,510 employees • EBITDA: €906 million* • 33 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: The global paints and coatings market is around €76 billion
The global paints and coatings market is around €76 billion % of 2011 market 100% is around €76 billion Wood Finishes General Industrial Coatings 5% 8% Vehicle Refinish 8% 42% Decorative Marine and Yacht Performance 5% 58% 8% Protective coatings 2% 10% Special purpose 7% 2% 3% A t OEM & Aerospace Au
Slide 33: AkzoNobel is the world's largest coatings supplier
AkzoNobel is the world’s largest coatings supplier 2011 revenue in € billion 12 10 8 6 4 2 0 Investor update Q2 2012 results 33
Slide 34: Excellent geographic spread of both revenue and profits
Excellent geographic spread of both revenue and profits High growth markets are important (40% of revenue) % of 2011 revenue 38% “Mature” Europe 7% 20% “Emerging” Europe North America 3% 22% Middle East Asia Pacific and Africa 10% Latin America High growth markets’ profitability is above average Inv
Slide 35: Leading positions and strong brands
Leading positions and strong brands 2011 Revenue by y market p position Some of our strong g brands Decorative Paints No. 2 or 3 32% No. 1 Performance Coatings position 59% Other 9% Specialty Chemicals • Our leading market positions provide us with scale benefits • Strong brands ensure customer loya
Slide 36: Our strategic ambition
Our strategic ambition Investor update Q2 2012 results 36
Slide 37: Our medium term strategic goals
Our medium term strategic goals • Top quartile safety performance f • Top 3 position in sustainability • Top quartile performance in di diversity, it employee l engagement, t and talent development • Top quartile eco-efficiency improvement rate • Grow to €20 billion revenues • Increase EBITDA each y
Slide 38: How we will expand in both mature and high growth markets
How we will expand in both mature and high growth markets Organic growth • Expand focus from high to mid-market mid market segments • Fueling growth in high growth markets Innovation pipeline • Spend of around 2.5 percent of revenue makes us the clear leader of our p peers in absolute spend p • Emph
Slide 39: Aspirations for high growth markets
Aspirations for high growth markets (currently around 40 percent of our revenue) Double revenues in China • Grow from $1 $1.5 5 to $3 billion of revenues • Already the biggest paint, coatings and specialty chemicals company in China Create significant footprint in India • Grow from €0.25 to €1 billi
Slide 40: 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 Middle East and Africa 11% Latin America g growth High g % of revenue in this decade markets will be around 50% Investor update Q2 2012
Slide 41: 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: g g segment • Functional solutions in key market segments 12% • Increase spend in big R&D • >15 percent of revenue from 13% 43% “breakthrough” innovations* •
Slide 42: Clear sustainability focus
Clear sustainability focus Accelerated sustainability strategy will deliver: • Safety at 2.0 injuries per million hours • 30 percent of revenue from eco-premium solutions • Sustainable fresh water management • 30 percent eco-efficiency improvement • 10 percent carbon footprint reduction (20-25 perce
Slide 43: Innovation in Decorative Paints
Innovation in Decorative Paints Coral Rende Muito Value for money paint, without compromising quality of finish Key Features Customer Benefits • A concentrated paint emulsion • Higher value for money for our customers y up • Paint can be diluted by p to 80% p g rate • Best-in-class spreading • More
Slide 44: Innovation in Performance Coatings
Innovation in Performance Coatings Marine Coatings - Interline® 9001 Next generation low absorption, easy-to-clean lining for chemical cargo tanks Key features Customers benefits • New coating for chemical cargo tanks • Greater efficiency and flexibility in • Low chemical absorption enables operatio
Slide 45: Innovation in Specialty Chemicals
Innovation in Specialty Chemicals Pulp and Performance Chemicals – Bindzil CC Improving the quality of waterborne coatings K F Key Features t C t Customer B Benefits fit • Solves stability and compatibility • Enables paint and lacquer producers to issues in waterborne coatings up-grade their product
Slide 46: Variable costs represent 54.3% of revenue
Variable costs represent 54.3% of revenue % of 2011 annual revenue* 100% Raw materials, energy, and other variable costs Fixed production costs Selling, advertising, administration, R&D costs EBIT margin 0% Decorative Performance Specialty AkzoNobel Paints Coatings Chemicals * Rounded percentages, a
Slide 47: Variable costs analysis
Variable costs analysis 2011 Energy & other Packaging variable costs* Solvents Raw materials 7% 7% 28% Chemicals and intermediates*** 13% 8% 7% Additives Other raw materials** 2% 8% Pigments 12% 8% Titanium dioxide Resins Coatings’ specialties i lti * Other variable costs include variable selling co
Slide 48: Capital expenditure prioritization for growth
Capital expenditure prioritization for growth • Capex 2011 was €708 million (including Ningbo €45) • Guidance for the medium term: Capex level to be at least 4 percent of revenues Capex as a % of revenue 2011 Capex split 5 3% 16% 4 3 52% 29% 2 1 Specialty Chemicals 0 Decorative Paints 2008 2009 2010
Slide 49: Operating Working Capital % of revenue to be reduced towards 12%
Year-on-year Operating Working Capital % of revenue to be reduced towards 12% OWC € million 3000 20% 15.6% 18% 2500 14 3% 14.3% 13.8% 16% 14.2% 14.2% 13.6% 14% 2000 12% 1500 10% 2,155 2,279 2,341 2,079 2,502 2,537 8% 1000 6% 4% 500 2% 0 0% Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 OWC OWC as %
Slide 50: Debt duration 3.3 years and no refinancing needed in 2012
Debt duration 3.3 years and no refinancing needed in 2012 Debt maturities* € million (nominal amounts) 1.200 800 400 0 2012 2013 2014 2015 2016 2017 2018 € bonds $ bonds £ bonds Strong liquidity position to support growth • Undrawn revolving credit facility of €1.8 billion (2016) or €1.5 and $3 bill
Slide 51: Unchanged ambition to maintain strong balance sheet
Unchanged ambition to maintain strong balance sheet € million Jun 30, 2012 Jun 30, 2011 Total equity 9 995 9,995 9 314 9,314 Net debt* 2,844 1,808 • Credit ratings unchanged at BBB+/Baa1, BBB+/Baa1 outlook stable • Net debt increased due to pension top-ups and an additional pension payment in Q1, as
Slide 52: Q2 2012 incidentals
Q2 2012 incidentals € million Q2 2012 Q2 2011 Restructuring costs (44) (20) Results related to major legal, 3 21 anti-trust and environmental cases Results of acquisitions and divestments - 26 Other incidental results (7) - Total (48) 27 • IIncrease in i restructuring t t i costst due d tot provisio
Slide 53: Q2 2012 EBITDA – Cash bridge
Q2 2012 EBITDA – Cash bridge € million Q2 2012 Q2 2011 EBITDA before incidentals 593 551 Incidentals (cash) (28) 8 Change working capital (38) (204) Change provisions (30) (70) Interest paid (42) (58) Income tax paid (54) (62) Net cash from operating activities 401 165 • Lower cash outflows from wor
Slide 54: Safe Harbor Statement
Safe Harbor Statement This presentation Thi t ti contains t i statements t t t which hi h address dd suchh kkey iissues as AkzoNobel’s growth strategy, future financial results, market positions, product development, products in the pipeline, and product approvals. Such statements should be carefull