Post on 04-Jul-2020
transcript
Winning together: 15 by 20Investor Update Q2 2019July 24, 2019
Investor update Q1 2019
Financial: Powerful performance
Operations: Precise processes
Commercial: Passion for paint
Strategy: Winning Together
Contents
2
3Winning Together | March 2018
Strategy: Winning Together
A focused Paints and Coatings company
€9.3 bn revenue
€1.0 bn EBITDA
€0.8 bn EBIT
10.6% ROS
12.6% ROI
34,500 employees
Asia Pacific
31%
Other regions
5%South America
9%
North America
12%Mature Europe
34%Emerging Europe
9%
Revenue by destinationAll figures are based on year-end 2018, excluding unallocated corporate center costs and invested capital
4
Global paints and coatings by market sector ~€110 billion, 2017
30%
8%7%
7%
6%
4%
3%
3%2%
Automotive OEM (metal); 7%
General Industrialand Other; 14%
Decorative paints
Powder coatings
Protective coatings
Wood finishes
Vehicle refinish
Specialty / plastics
Marine coatings
Coil coatings
Packaging coatings
Automotive OEM (metal)
General Industrial / Other
5Winning Together | March 2018
Top 3 player with leading positions in large and attractive markets
Source: KNG, Internal estimates
Top 3 players ~30% total market
Top 20 players ~60% total market
Global paints and coatings market
~€110 bn
AkzoNobel active markets
~€70 bn
AkzoNobel
market share
~€10 bn
North America; 10%
Performance versus peers improved; potential for further improvement remains
Winning Together | March 2018 6
AkzoNobel Paints and Coatings
0%
5%
10%
15%
2012 2013 2014 2015 2016 2017Source: Company data, internal estimates
ROS
13.9
25.0
2014 2017 2020 guidance²
Unallocated corporatecost and invested capital
9.4
13.5
1.5
2014 2017 2020 guidance²
Unallocatedcorporate cost
Well positioned to accelerate growth and enhance profitability
15
Return on investment 1
%
Return on sales1
%
>25
Winning Together | March 2018 7
10.6
8.418.0
15.0
1) ROS% = EBIT/revenue and moving average ROI% = 12 months EBIT/12 months average invested capital2) Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption
Winning together: 15 by 20
Passion for Paint
Precise processes
Powerful performance
Proud people
*Excluding unallocated corporate center costs and invested capital; assumes no significant market disruptionWinning Together | March 2018 8
2020
guidance*
ROS 15%ROI >25%
Thierry VanlanckerCEO
Maarten de VriesCFO
Ruud JoostenChief Operating Officer
David PrinselaarChief Supply Chain Officer
Maëlys CastellaChief Corporate
Development Officer
Marten BooismaChief Human
Resources Officer
9
Management team in place to deliver
Isabelle DeschampsGeneral Counsel
10Winning Together | March 2018
New fit for purpose structure to increase customer focus and drive efficiency
Integrated supply chain
Integrated business planning
Bu
sin
es
s
Customers
Cu
sto
me
rB
usin
es
s
SC
Cu
sto
mer
Bu
sin
ess
SC
Cu
sto
me
rB
usin
es
s
SC
Cu
sto
me
rB
usin
es
s
SC
From… To…
Bu
sin
es
s
Bu
sin
es
s
Bu
sin
es
s
Bu
sin
es
s
Bu
sin
es
s
Bu
sin
es
s
Bu
sin
ess
Winning Together | March 2018 11
Clear path to deliver on 2020 guidance
Fixed cost inflation
10.6%
Continuous Improvement
Integrated Supply Chain
Transformation
SG&A and RD&I Transformation
Growth and net price/ mix
15%
*Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption
Unallocated corporate cost
2017 2020
2020
guidance*
ROS 15%ROI >25%
12Winning Together | March 2018
Commercial: Passion for paint
30Decorative Paints
Powder Coatings
Marine and
Protective Coatings
Automotive and
Specialty Coatings
Strong portfolio of businesses with leading positions in all segmentsSegment Strengths and opportunities
Industrial Coatings
Winning Together | March 2018 13
• #1/#2 market positions where we play
• Strong brands and product portfolio
• Leverage global to win local!1
1/2
1
1
2/3
Position
by revenue
• Extensive product offering
• Strong position with top tier customers
• Urbanization and construction growth
• Interpon #1 global brand
• Sustainable coatings conversions
• Strong product/ technology capabilities
• Marine: consolidated market
• Protective: few global players
• Global technology leadership
• Growth of emerging market consumers
• Leader in digital color
Market growth
2-3%², 2017-20
Source: KNG, internal estimate1) Excluding ~ €40 billion in regions/segments where we are not present2) Total market growth (revenue weighted)
Market size
~€bn, 2017¹
12
8
12
11
50%revenue from
emerging markets
14
Decorative Europe: Winning model to capture benefits in recovering market
75
80
85
90
95
100
105
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Decorative Paints Europe Market Size Index*
14Winning Together | March 2018
Largest player in fragmented market Market expected to continue recovery
Grow market share and improve profitability:
Build winning brands and leading positions
Reduce complexity
Leverage scale
Optimize portfolio and route to market
Opportunities for consolidation
Leverage global to win local!
*Source: KNG 2017, internal estimate
Smart packaging design
Global guidelines
Local brand assets
+2% CAGR
2016-20
50% #1 positions
30% #2 positions
AkzoNobel
Peer 1
Peer 2
Peer 3
Others
Winning Together | March 2018
Winning Together | March 2018 15
Decorative Asia: continued expansion in highly profitable and fast growing markets
€10bn market
Strong growth drivers
#1 or #2 positions in many countries
Highly profitable and cash generative (despite lower ASP)
Leveraging global brands and innovation
Local expertise and strong customer understanding
Profitable growth in mass market and project business
Leader in sustainability
China
South East Asia
Developing a successful exterior proposition…
… and leveraging best practice from Europe
Growing demand for eco-premium products…
0
500
1000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Revenue Decorative Paints Asia (€ million)Doubledin 10 years
Winning Together | March 2018 16
Marine and Protective Coatings: ongoing restructuring and portfolio rebalancing
Source: Clarkson Research. *Compensated gross tonnage
Industry headwinds in marine and oil and gas industries
0
100
200
300
60,000
80,000
100,000
120,000
140,000
2012 2013 2014 2015 2016 2017
Oil and gas capitalexpenditure ($ bn)
Marine order bookCGT*
13%
-5%
2% 11%
-7% -11%
Revenue development Marine and Protective coatings demonstrates lag effect
Rebalancing portfolio for Protective Coatings
2016 2020
Global market leader, defending strong positions
Focus on value pricing; restructuring ongoing
Maintain technology leadership, e.g. Intersleek UV-LED
Oil & Gas
Infrastructure,Power, Mining
Winning Together | March 2018 17
Powder Coatings: Clear global #1 in fastest growing and highly profitable market
~€8bn market
Growth 2x industrial GDP
#1 with 2x relative market share
Multiple sources of growth (examples):
New
applications
Increased
capacity
Geographic
expansion
Product
innovation
Bolt-on
acquisitions
Architectural and
automotive coatings
Chengdu – Biggest powder
coatings plant in the world
Northern and Western
India and Western China
OneWheel, Interpon Cr
V.Powdertech, Thailand
Sustainability advantages of powder coatings over liquid coatings:
Zero Volatile Organic Compounds (VOCs)
Less waste during application (>95% usage efficiency)
AkzoNobel
Peer 1
Peer 2
Peer 3Others
18Winning Together | March 2018
Operations: Precise processes
19Winning Together | March 2018
AkzoNobel Leading Performance System:
Customer excellence
Operational excellence
Leading edge technology
2020 targets:
One organization with a common way of working and aligned set of targets
Note: Total reportable rate (TRR) 1.0 is equivalent to 0.2, in line with OSHA guidelines
15,000 people
123 sites
448 warehouses
€250m CAPEX/ yr
People
Top quartile
engagement
Safety
TRR <1.0
(Top quartile)
Service
98.5% Perfect
Order Index (OTIF)
Cost
4% annual
cost productivity
Capital
Inventories
25% lower
ALPS
Winning Together | March 2018 20
Journey to build a world-class integrated supply chain
2014 - 2017
Today
20203
1
2
• Global functional strategy
• Common safety platform
• ALPS Plan, Source, Make, Deliver
End to endALPS customer and supplier focused
processes to support delivery of 15%
ROS by 2020
FunctionalALPS continuous improvement
processes and standardized ways of
working
IntegratedALPS Integrated Business Planning
process for all business units to
improve financial performance
+€200m
annual
cost
savings
by 2020
• Total quality and service excellence
• Supplier collaboration
• ALPS Digitization
• Organization transformation
• ALPS Integrated Business Planning
• Purchase to pay (procurement)
€120m
cost
savings
annually
Plan35%
planning entities
Source60%
organization
Make75%
sites
Deliver20%
warehouses
21Winning Together | March 2018
48 ALPS processes designed and deployed
3800 employees trained and certified
~700 ALPS improvement projects per year
67 site and warehouse closures 2014-17
ALPS continuous improvement1
Safety
TRR 1.0
(Top quartile)
Service
>95.5% OTIF
(Top quartile)
€120m annual cost savings run rate
2014-17
Implementation status (%)
95.5% →
98.5%Service (OTIF)
22Winning Together | March 2018
ALPS Integrated Business Planning2
Organization transformation:
One operating model
Integrated Business Planning:
One end-to-end business process
Top Quartile
Performance
+75%Forecast
accuracy
25%Inventory
reduction
23Winning Together | March 2018
End to end processes3
Total quality and service excellence
Resource productivity
Asset network optimization
ALPS Digitization
Supplier collaboration
On
e o
pe
rati
ng
mo
de
l
an
d In
teg
rate
d B
usin
ess P
lan
nin
g
Further
€200m annual cost savings
by 2020in addition to ALPS continuous improvement
Cost of sales
~€5.4bn in 2017
Financial: Powerful performance
Winning Together | March 2018 24
Passion for Paint
Precise processes
Decentralized businesses…
Differing levels of maturity…
Fragmented process and system
landscape…
Centrally driven sales excellence and
margin management…
Consistent across all businesses…
Simplified ERP and system platform...
Integrated end-to-end processes…
From… To…
Proud peopleDiverse cultures…
Fragmented incentive schemes…
One single global team…
Aligned incentives…
High-performance culture
Powerful performance
Independent businesses with
dedicated supply chain…
Many KPIs...
Lean fit-for-purpose organization…
Laser sharp focus on 15% ROS!
Winning together strategy leverages greater focus to accelerate improvements
Winning Together | March 2018 25
Transformation plans in place with most projects already being initiated
Winning Together | March 2018 26
2017 2018 2019 2020
Sales force effectiveness
Margin management
Innovation excellence
Global Business Services
Integrated Business Planning
ERP and systems platform
ALPS continuous improvement
Fit-for-purpose organization
Procurement excellence
High performance culture
Career and capability development
Core principles
Initiate Implement Complete
Winning Together | March 2018 27
Clear path to deliver on 2020 guidance
Fixed cost inflation
~€100m/ yr
10.6%
Continuous Improvement
Integrated Supply Chain
Transformation€200m by 2020
SG&A and RD&I Transformation
Growth and net price/ mix
~2%/ yr
15%
Key initiatives:
Fit-for-purpose organization
(€110m in 2018)
Sales force effectiveness
Innovation excellence
Global Business Services
ERP and systems platform
Unallocated corporate cost
*Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption
2017 2020
2020
guidance*
ROS 15%ROI >25%
Updated capital allocation priorities
Total of €6.5 billion returned to shareholders before end 2019
Target leverage ratio of Net Debt / EBITDA of 1.0–2.0 by end 2020
Retain strong investment grade credit rating
Cash top-up payments of main UK plans settled (Q1 2019)
Stable to rising dividend (€1.80 per share for 2018)
Strategically aligned and value creating acquisitions
Clear mandates per (sub)segment and geographyRevenue growth ~2% and capital expenditure ~€250m per year
Unallocated corporate center costs €140-180m in 2019 and 2020
3. Acquisitions
2. Profitable organic growth
4. Dividend
5. Pension liabilities
6. Balance sheet
1. Chemicals separation
28
Net debt evolution towards 2020N
et D
eb
tN
et C
ash
Net Leverage
1.7x
Net Leverage
(5.6x)
Net Leverage
1.0x – 2.0x
Potential for further
capital returns to
shareholders
Return of proceeds from
Specialty Chemicals
(January 2019)
(February 2019) (February to
end 2019)(December 2017)
✓✓
29
✓✓
30
Strong bolt-on acquisitionsin last 18 months
Xylazel
Strengthens our position as a
leader in the decorative paints
market in Spain and means
we are now the leader in the
country’s woodcare segment
Fabryo
Agreement to acquire
Fabryo, becoming the leader
in the Romanian decorative
paints market
Colourland Paints
Strengthens our position as in
Malaysia and enhances our
global portfolio with a
much-loved local brand
Swire
Acquisition of minority interest
share to obtain full ownership of
Chinese JV, enabling strategic
flexibility
Investor update Q2 2019July 24, 2019
Operation Night Watch
We recently partnered with the Rijksmuseum for one of the most innovative
projects in the history of art – the live restoration of Rembrandt’s Night
Watch. In a spectacular fusion of old and new, Operation Night Watch will use
ground-breaking techniques to preserve the painting for future generations.
We’ll also be contributing our color expertise to the historic project.
Q&A
Concluding remarks
Financial review
Key highlights
Agenda
Investor update | Q2 2019 32
33Investor update | Q2 2019
Key highlights
Adjusted operating income 36% higher at €305 million (2018: €225 million)
ROS, excluding unallocated costs, increased to 13.7% (2018: 12.1%)
Focus on value over volume resulted in price/mix up 5% and 6% lower volumes
Transformation on track and delivered €43 million cost savings
€1.5 billion of €2.5 billion share buyback program completed in H1 2019
Acquisition of Mapaero strengthens global position in aerospace coatings
Investor update | Q2 2019 34
Q2 2019 results show continued progress towards Winning together: 15 by 20 strategy
The intended acquisition of
Mapaero will improve
AkzoNobel’s position in the
structural and cabin coating
sub-segments and contribute
directly towards delivering our
2020 guidance.
35Investor update | Q2 2019
Profit up 36% and ROS* 13.7% driven by pricing initiatives and cost-saving programs
ROS*
Price/mix
Increased to 13.7%(Q2 2018: 12.1%)
Adjusted Operating
Income
Up 36%
Revenue
Up 1%In constant currencies
€1.5 billion shares
repurchased in H1part of €2.5 billion share buyback to
be completed by end 2019
5% higher
Adjusted EPS
*Excluding unallocated corporate center costs
Q2 2019:
85% higher
Investor update | Q2 2019 36
Sales force effectiveness
Margin management
Innovation excellence
Global Business Services
Integrated Business Planning
ERP and systems platform
ALPS continuous improvement
Fit-for-purpose organization
Procurement excellence
High performance culture
Career and capability development
Core principles
Price/mix increased 5% (versus Q2 2018)
Agreements signed with all Paint the Future finalists
GBS: 18 country transitions complete; 45/120 transitions in progress, to be completed by end 2020
7/18 ERP integration go lives for 2019
Winning together: 15 by 20 strategy delivering results and gathering momentum
Successfully focused on value over volume
Final purchase price settlement for the sale of Specialty Chemicals
*Excluding unallocated corporate center costs
Delivered €43m cost savings in the quarter, on track to deliver the next €200m by 2020
Raw materials
Dealing with market headwinds
Investor update | Q2 201937
South East and South Asia
Foreign exchange
Marine and Protective Coatings
China
~Automotive and Specialty Coatings
EMEA
South America
Powder Coatings
Industrial Coatings
~
~
~
38Investor update | Q2 2019
Financial review
Adjusted operating income 36% higherand revenue up in constant currencies
Investor update | Q2 2019 39
€ million Q2 2018 Q2 2019 Δ% Δ%CC
Revenue 2,446 2,451 -% 1%
Adjusted EBITDA 285 394 38%
Adjusted operating income 225 305 36%
Operating income 192 308 60%
ROS% excluding unallocated costs 12.1% 13.7%
ROS%1 9.2% 12.4%
ROI%2 excluding unallocated costs 12.2% 13.4%
Increase
Decrease
Revenue development Q2 2019 (%)
Price/mix up 5% overall, mainly driven by pricing initiatives
Volumes 6% lower due to value over volume strategy
ROS, excluding unallocated costs, increased to 13.7% (2018: 12.1%)
Operating income at €308 million included identified items of €3 million positive (2018: €33 million negative)
Impact Decorative
Paints China
Note: Other revenue includes service revenue related to services for the Specialty Chemicals business1ROS% = Adjusted operating income/revenue. 2ROI% = Adjusted operating income of the last 12 months as percentage of average invested capital for Decorative Paints and Performance
Coatings. It excludes unallocated corporate center costs and invested capital consistent with our 2020 guidance
-6 5
1 -1 01
Volumes Price/mix Acquisitions Other FX Total
40Investor update | Q2 2019
Pricing initiatives and clear strategic mandates focus on value over volume
Organic volume development, does not include acquisition impact
-3 -3 -3 -5
0 4 5
86
4
Q1 17Q2 17Q3 17Q4 17Q1 18Q2 18Q3 18Q4 18Q1 19Q2 19
4
-1
33
-3 -3 -5
-7 -7 -6
Q1 17Q2 17Q3 17Q4 17Q1 18Q2 18Q3 18Q4 18Q1 19Q2 19
-1 -1 -1 -1
25 6
9
6 5
Q1 17Q2 17Q3 17Q4 17Q1 18Q2 18Q3 18Q4 18Q1 19Q2 19
-1
1 0 0 35
7
11
7 7
Q1 17Q2 17Q3 17Q4 17Q1 18Q2 18Q3 18Q4 18Q1 19Q2 19
0
-4
1
-2 -5 -3-7 -7 -8 -7
Q1 17Q2 17Q3 17Q4 17Q1 18Q2 18Q3 18Q4 18Q1 19Q2 19
9
35
12
-1 -2 -4
-6 -6 -4
Q1 17Q2 17Q3 17Q4 17Q1 18Q2 18Q3 18Q4 18Q1 19Q2 19
Quarterly price/mix development in % year-on-year
Decorative Paints Performance Coatings
Quarterly volume* development in % year-on-year
40
Total
Impact Decorative
Paints ChinaImpact Decorative
Paints China
225
305
1
64
33
114
43
21
Q2 2018 adjustedoperating income
FX Volumes Price/mix Raw materials/Variable cost
OPEX One-offs and other Q2 2019 adjustedoperating income
Investor update | Q2 2019 41
Positive impact
Negative impact
Positive price/mix and cost savings offsetting higher raw material costsAdjusted operating income bridge: Q2 2018 to Q2 2019
-
---
-
Investor update | Q2 2019 42
Decorative Paints ROS up, driven by strong performance in EMEA
€ million Q2 2018 Q2 2019 Δ% Δ%CC
Revenue 1,006 1,005 - 2%
Adjusted EBITDA 145 177 22%
Adjusted operating income 123 136 11%
Operating income 111 166 50%
ROS%* 12.2% 13.5%
ROI%* 11.8% 12.2%
Revenue development Q2 2019 (%)
Increase
Decrease
Impact Decorative
Paints China
-4
4
2 -2 0
2
Volumes Price/mix Acquisitions FX Total
*ROS% = Adjusted operating income/revenue. ROI% = 12 months adjusted operating income/12 months average invested capital.
Our Dulux Valentine decorative
paint brand in France has roared
onto the market with a new
EasyCare product called Color
Resist. The EasyCare range (also
known as EasyClean) has now
been introduced in 26 countries
worldwide, including brands such
as Dulux and Marshall.
Investor update | Q2 2019 43
Performance Coatings ROS higher: focus on pricing initiatives and cost savings
Increase
Decrease
€ million Q2 2018 Q2 2019 Δ% Δ%CC
Revenue 1,454 1,445 (1%) -%
Adjusted EBITDA 207 241 16%
Adjusted operating income 172 197 15%
Operating income 162 174 7%
ROS%* 11.8% 13.6%
ROI%* 19.9% 20.6%
New York’s historic Hudson Yards
development – which is changing
the city’s iconic skyline – has
reached its latest milestone, and
AkzoNobel has made a major
contribution.
-7
7-1 -1
7
Volumes Price/mix Acquisitions FX Total
Revenue development Q2 2019 (%)
*ROS% = Adjusted operating income/revenue. ROI% = 12 months adjusted operating income/12 months average invested capital.
Adjusted EPS increased 85%mainly due to higher operating income
44Investor update | Q2 2019
Q2 2018 Q2 2019 € million H1 2018 H2 2019
192 308 Operating income 300 421
(28) (18) Net financing expenses (9) (31)
6 5 Results from associates and joint ventures 10 10
170 295 Profit before tax 301 400
(47) (69) Income tax (46) (100)
123 226 Profit from continuing operations 255 300
165 16 Profit from discontinued operations 307 16
288 242 Profit for the period 562 316
(17) (11) Non-controlling interests (38) (20)
271 231 Net income from total operations 524 296
Q2 2018 Q2 2019 Earnings per share (in €) H1 2018 H1 2019
1.06 1.07 Total operations 2.07 1.32
Q2 2018 Q2 2019 Adjusted earnings per share (in €) H1 2018 H1 2019
0.52 0.96 Continuing operations 0.87 1.40
Q2 free cash flow improveddriven by increased EBITDA
45Investor update | Q2 2019*Cash top-up payments for main UK pension plans of €479 million. Excludes pre-funding of escrow account €161 million.
Net Debt 2,887 62
Q2 2018 Q2 2019 € million H1 2018 H1 2019
252 397 EBITDA 420 595
- - Impairment losses - 33
(2) (66) Pre-tax results on acquisitions and divestments (22) (66)
(222) (116) Changes in working capital (582) (537)
(10) (1) Pension top-up payments (185) (479)*
(8) 7 Other changes in provisions (18) (13)
(10) (15) Interest paid (14) (21)
14 (57) Income tax paid (37) (87)
1 3 Other changes (3) 3
15 152 Net cash from operating activities (441) (572)
(42) (46) Capital expenditures (79) (83)
(27) 106 Free cash flow (520) (655)
46Investor update | Q2 2019
Concluding remarks
Investor update | Q2 2019 47
Q2 2019 results show continued progress towards Winning together: 15 by 20 strategy
Adjusted operating income 36% higher at €305 million (2018: €225 million)
ROS, excluding unallocated costs, increased to 13.7% (2018: 12.1%)
Focus on value over volume resulted in price/mix up 5% and 6% lower volumes
Transformation on track and delivered €43 million cost savings
€1.5 billion of €2.5 billion share buyback program completed in H1 2019
Acquisition of Mapaero strengthens global position in aerospace coatings
Our pioneering Paint the
Future startup challenge
proved to be a huge success,
with five business agreements
being awarded by AkzoNobel
at the accelerator event held
in May.
Outlook
We’re delivering towards our Winning together: 15 by 20 strategy and continue creating a fit-for-purpose organization for a focused paints and coatings company, contributing to the achievement of our 2020 guidance. Demand trends differ per region and segment in an uncertain macro-economic environment. Raw material inflation is expected to stabilize during the second half of this year. Continued pricing initiatives and cost saving programs are in place to address the current challenges. We continue executing our transformation to deliver the next €200 million cost savings by 2020, incurring one-off costs in 2019 and 2020. We target a leverage ratio of between 1.0-2.0 times net debt/EBITDA by the end of 2020 and commit to retain a strong investment grade credit rating.
* Excluding unallocated corporate center costs and invested capital: assumes no significant market disruption Investor update | Q2 2019 48
2020
guidance*
ROS 15%ROI >25%
Upcoming events
Report for the third quarter 2019 October 23, 2019
Report for the full-year and the fourth quarter February 12, 2020
Investor update | Q2 2019 49
A focused, high performing, paints and coatings company
Investor update | Q2 2019
Strong global brands
Leading positions in large and attractive markets
Balanced geographic exposure: 50% revenue from emerging markets
Well positioned to accelerate growth and enhance profitability
Transformation plans in place and clear path to deliver
Significant returns to shareholders
50* Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption
2020
guidance*
ROS 15%ROI >25%
Disclaimer/forward-looking statements
This presentation does not constitute or form a part of any offer to sell, or any invitation or other solicitation of any offer, to buy or subscribe
for any securities in the United States or any other jurisdiction.
Some statements in this presentation are 'forward-looking statements'. By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on circumstances that may occur in the future. These forward-looking statements
involve known and unknown risks, uncertainties and other factors that are outside of our control and impossible to predict and may cause
actual results to differ materially from any future results expressed or implied. These forward-looking statements are based on current
expectations, estimates, forecasts, analyses and projections about the industries in which we operate and management's beliefs and
assumptions about possible future events. You are cautioned not to put undue reliance on these forward-looking statements, which only
speak as of the date of this presentation and are neither predictions nor guarantees of possible future events or circumstances. We do not
undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the
date of this presentation or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.
This presentation also 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 understood that many factors could cause forecast and actual results to differ from these statements. These factors include, but
are not limited to, price fluctuations, currency fluctuations, developments in raw material and personnel costs, pensions, physical and
environmental risks, legal issues, and legislative, fiscal, and other regulatory factors. Stated competitive positions are based on
management estimates supported by information provided by specialized external agencies. For a more comprehensive discussion of the
risk factors affecting our business please see our latest annual report., a copy of which can be found on the company’s corporate website
www.akzonobel.com
Investor update | Q2 2019 51
52Investor update | Q2 2019
Appendix
H1 2019: Profit up 25% and ROS* 11.5%
Investor update | Q2 2019 53
€ million H1 2018 H1 2019 Δ% Δ%CC
Revenue 4,622 4,636 -% 1%
Adjusted EBITDA 494 642 30%
Adjusted operating income 374 468 25%
Operating income 300 421 40%
ROS% excluding unallocated costs 10.5% 11.5%
ROS%1 8.1% 10.1%
ROI%2 excluding unallocated costs 15.9% 16.5%
Increase
Decrease
Revenue development H1 2019 (%)
Price/mix up 5% overall, mainly driven by pricing initiatives
Volumes 6% lower due to value over volume strategy
ROS, excluding unallocated costs, increased to 11.5%
-7
Impact Decorative
Paints China
Note: Other revenue includes service revenue related to services for the Specialty Chemicals business1ROS% = Adjusted operating income/revenue. 2ROI% = Adjusted operating income of the last 12 months as percentage of average invested capital for
Decorative Paints and Performance Coatings. It excludes unallocated corporate center costs and invested capital consistent with our 2020 guidance
* Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption
-6 5
1 -1 01
Volumes Price/mix Acquisitions Other FX Total
Investor update | Q2 2019 54
H1 2019: Decorative Paints
€ million H1 2018 H1 2019 Δ% Δ%CC
Revenue 1,852 1,849 - 2%
Adjusted EBITDA 224 272 21%
Adjusted operating income 179 196 9%
Operating income 159 220 38%
ROS%* 9.7% 10.6%
ROI%* 11.8% 12.2%
Revenue development H1 2019 (%)
Increase
Decrease
Impact Decorative
Paints China
-5
5
-20
2
Volumes Price/mix Acquisitions FX Total
*ROS% = Adjusted operating income/revenue. ROI% = 12 months adjusted operating income/12 months average invested capital.
Revenue flat and up 2% in constant currencies
Continued focus on pricing initiatives contributed to positive price/mix of 5%, while volumes were lower
Acquisitions contributed 2% to revenues
Adjusted operating income increased to €196 million (2018: €179 million)
Continued pricing initiatives and cost savings offset higher raw material costs and lower volumes, resulting in ROS of 10.6% (2018: 9.7%)
Investor update | Q2 2019 55
H1 2019: Performance Coatings
Increase
Decrease
€ million H1 2018 H1 2019 Δ% Δ%CC
Revenue 2,796 2,784 - (1%)
Adjusted EBITDA 376 423 13%
Adjusted operating income 306 335 9%
Operating income 283 271 -4%
ROS%* 10.9% 12.0%
ROI%* 19.9% 20.6%
-7 6
1 0
Volumes Price/mix Acquisitions FX Total
Revenue development H1 2019 (%)
*ROS% = Adjusted operating income/revenue. ROI% = 12 months adjusted operating income/12 months average invested capital.
Revenue flat, and 1% lower in constant currencies
Price/mix was more than offset by lower volumes
Adjusted operating income increased to €335 million (2018: €306 million) as pricing initiatives and cost control more than compensated for higher raw material costs and lower volumes
Investor update | Q2 2019 56
Second quarter January - June
Before
IFRS16Impact
including
IFRS 16€ million
before
IFRS16Impact
including
IFRS 16
367 27 394 Adjusted EBITDA 588 54 642
370 27 397 EBITDA 541 54 595
(63) (26) (89) Depreciation/amortization (123) (51) (174)
304 1 305Adjusted operating
income465 3 468
307 1 308 Operating income 418 3 421
(17) (1) (18) Net financing expense (28) (3) (31)
215 - 215 Net income 280 - 280
125 27 152Net cash from operating
activities(626) 54 (572)
(1,507) (27) (1,534)Net cash from financing
activities(4,835) (54) (4,889)
12.4% - 12.4% ROS% 10.0% 10.1%
€ million
As
reported at
December
31, 2018
Restatement
due to
adoption
IFRS 16
Restated
opening
balance at
January 1,
2019
Intangible assets 3,458 (35) 3,423
Property, plant and equipment 1,748 (30) 1,718
Right-use-of asset - 420 420
Other financial non-current assets 1,965 - 1,965
Current assets 11,613 - 11,613
Total assets 18,784 355 19,139
Group equity 12,038 - 12,038
Non-current liabilities 3,066 264 3,330
Current liabilities 3,680 91 3,771
Total liabilities 18,784 355 19,139
IFRS 16 has limited impact; adopting the modified retrospective approach
Investor update | Q2 2019 57
IAS19 pension surplus following cash top-up payments
899799
24024
66
1
229
0
200
400
600
800
1,000
1,200
Q1 2019 Top-ups Discount rates onDBO
Inflation on DBO Asset return overP&L
Other Surplus end Q2 2019
€ million
Decrease
Increase
Key pension financial assumptions Q1 2019 Q2 2019
Discount rate 2.3% 2.1%
Inflation rate 3.1% 3.1%
-
--
-
IAS19 pension surplus of €0.4 billion, following sale of Specialty Chemicals
Negotiations on triennial review of UK defined benefit pension schemes concluded (February 2019)
Cash top-ups updated for actual payments 2018 and future payment schedule
Relate mainly to two UK plans: ICI Pension Fund and the Akzo Nobel (CPS) Pension Scheme
Investor update | Q1 2019
297 275187
1030
10 10 10
2016 2017 2018 2019 E 2020 E 2021 E 2022 E 2023 E 2024 E
Cash
630
Estimated cash top-ups € million
Cash top-up paymentsof main UK plans settled (Q1 2019)
Updated
58
Cash to escrow account
470
158
€6.5 billion return to shareholders to be completed before end 2019
Dec 7, 2017
Advance proceeds of
separation paid as
special dividend of
€1 billion (€4/share)
Nov 30, 2017
EGM to approve
separation of Specialty
Chemicals
Jan 22, 2019
€2 billion capital
repayment and share
consolidation
Oct 1, 2018
Closed sale of
Specialty Chemicals to
The Carlyle Group and
GIC
Investor update | Q2 2019
Mar 27, 2018
Announced sale of
Specialty Chemicals
for €10.1 billion to The
Carlyle Group and GIC
59
Nov 13, 2018
EGM to approve capital
repayment and share
consolidation
Feb 25, 2019
€1 billion special cash
dividend
Before end 2019
€2.5 billion share
buyback program
Apr 19, 2017
Announced separation
of Specialty Chemicals
business within 12
months
16
19
1111
7
10
14
12
Breakdown of total raw material spend2018 (%)
Specialty resins
Additives
Pigments and
colorants Packaging
Latex and monomers
Solvents
Commodity resins
Titanium dioxide
60Investor update | Q1 2019
Disclaimer/ forward-looking statements
This presentation does not constitute or form a part of any offer to sell, or any invitation or other solicitation of any offer, to buy or subscribe
for any securities in the United States or any other jurisdiction.
Some statements in this presentation are 'forward-looking statements'. By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on circumstances that may occur in the future. These forward-looking statements
involve known and unknown risks, uncertainties and other factors that are outside of our control and impossible to predict and may cause
actual results to differ materially from any future results expressed or implied. These forward-looking statements are based on current
expectations, estimates, forecasts, analyses and projections about the industries in which we operate and management's beliefs and
assumptions about possible future events. You are cautioned not to put undue reliance on these forward-looking statements, which only
speak as of the date of this presentation and are neither predictions nor guarantees of possible future events or circumstances. We do not
undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the
date of this presentation or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.
This presentation also 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 understood that many factors could cause forecast and actual results to differ from these statements. These factors include, but
are not limited to, price fluctuations, currency fluctuations, developments in raw material and personnel costs, pensions, physical and
environmental risks, legal issues, and legislative, fiscal, and other regulatory measures as well as the sale of the Specialty Chemicals
business. State competitive positions are based on management estimates supported by information provided by specialized external
agencies. For a mor comprehensive discussion of the risk factors affecting our business please see our latest annual report., a copy of
which can be found on the company’s corporate website www.akzonobel.com
Investor update | Q1 2019 61