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Q2 2015 INVESTOR UPDATE – Akzo Nobel

Akzo Nobel · Jul 21, 2015 · 84 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 1
    Investor Update Q2 2015 results Ton Bchner & Malys Castella July 21, 2015
  2. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 2
    Agenda Highlights Operational review Financial review Conclusion Questions Investor Update Q2 2015 results 2
  3. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 3
    Strategic progress in Q2 2015 Strong performance improvement in all businesses Continued lowering of the cost base Changed operating model for each business and the functions Paper Chemicals divestment completed, generating 30…
  4. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 4
    Q2 2015 continued to show improved performance Revenue Operating income Return on Sales % Return on Investment % million million +6% +38% 3,949 486 12.3 11.7 10.1 353 9.5 3,710 Q2 2014 Q2 2015 Q2 2014 Q2 2015 Q2 2014 Q2…
  5. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 5
    42% of revenues 16% of revenues New Build Projects Automotive OEM, Parts and Assembly Maintenance, Renovation & Repair Automotive Repair Building Products & Components Marine and Air Transport 17% of revenues 25% of revenues…
  6. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 6
    Some mature markets continue to expand, while Brazil, Russia and China contract Purchase Managers Index (PMI)* June 2015 60 Netherlands US Germany India France Manufacturing PMI Sweden 50 UK Taiwan Russia China…
  7. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 7
    Consumer confidence remains low, although trends differ per country Consumer confidence, Q1 2015 Figures below 100 indicate some degree of pessimism 140 Recent trends compared 120 to Q4 2014 100 80 60 130 123 112 107 106 100…
  8. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 8
    Operational review Investor Update Q2 2015 results 8
  9. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 9
    Another consecutive quarter of operating margin improvement million Q2 2014 Q2 2015 % Revenue 3,710 3,949 6 Operating income 353 486 38 Ratio, % Q2 2014 Q2 2015 Return on sales 9.5 12.3 Return on sales (excluding restructuring…
  10. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 10
    Markets remain challenging and continued to impact all Business Areas Quarterly volume development in % year-on-year 2014 2015 6 2 -1% -3% 0% -2% -2 -6 Decorative Paints Performance Coatings Specialty Chemicals AkzoNobel…
  11. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 11
    Decorative Paints Q2 2015 highlights = Revenues up due to favorable million Q2 2014 Q2 2015 % currency effects. Volumes up in Revenue 1,074 1,134 6 Asia; down in Europe and Latin America Operating income 102 128 25 Price/mix flat,…
  12. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 12
    Performance Coatings Q2 2015 highlights Revenue up as favorable million Q2 2014 Q2 2015 % currencies offset lower volumes Revenue 1,434 1,550 8 Volumes declined in the quarter Operating income 178 220 24 mainly due to lower capital…
  13. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 13
    Specialty Chemicals Q2 2015 highlights Revenue up mainly due to million Q2 2014 Q2 2015 % favorable currency effects Revenue 1,228 1,290 5 Volumes flat: growth in some segments compensated for Operating income 124 192 55 lower demand…
  14. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 14
    Operating income up 39% during H1 2015 Operating Income bridge H1 2014 H1 2015 Increase million Decrease 800 34 700 112 758 792 54 69 (53) 7 600 569 500 0 H1 2014 OPI Currency / Volume Price/Mix Reduction Other H1 2015…
  15. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 15
    Continued progress towards financial targets Return on sales 2015 target 9.0% Return on investment 2015 target 14.0% * (Operating income / revenue) (Operating income / average 12 months invested capital) % % 12 10.5 16 8.0…
  16. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 16
    Commercial Excellence and continuous improvement basis for future benefits Delivering quality products and innovations to our Commercial Excellence customers at a lower cost to serve, on-time, in-full: driving: Improve customer…
  17. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 17
    Some business highlights from Q2 2015 Decorative Paints Performance Coatings Specialty Chemicals Embracing urban heritage Delivering leading Driving innovation performance We transformed a historic We provided our coatings As one of…
  18. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 18
    Financial review Investor Update Q2 2015 results 18
  19. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 19
    Strong financial performance in Q2 2015 Operational Cash discipline Shareholder returns improvement ROS 12.3%; +280bp CapEx 137 million Net income attributable to (3.5% Revenue) shareholders 331 million; ROS 11.4%; +190bp +61%…
  20. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 20
    Net income up 61% due to lower costs, divestments and favorable currencies million Q2 2014 Q2 2015 % EBITDA 509 610 +20% Depreciation and amortization (156) (158) Operating income before incidentals 353 452 +28% Incidentals - 34…
  21. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 21
    Higher profits drive increased net cash from operating activities million Q2 2014 Q2 2015 % Profit for the period from continuing operations 230 359 Amortization and depreciation 156 158 Change working capital (2) (40) Change provisions…
  22. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 22
    IAS19 pension deficit increases to 1.1 billion due to additional buy-ins Key pension assumptions metrics Q2 2015 Q1 2015 Discount rate 3.5% 3.1% Inflation rate 3.1% 2.8% Pension deficit development during Q2 2015 Increase million…
  23. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 23
    Triennial review of ICI Pension Fund now concluded Agreement reached with Trustees Funding deficit lower at 850 million (1.0 billion in 2011) Extensive de-risking of liabilities and low interest rate environment Top-up payments…
  24. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 24
    Conclusion Investor Update Q2 2015 results 24
  25. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 25
    Human Cities in action AkzoNobel partnered with Monocle magazine on its Quality of Life Survey 2015. The survey includes both data-driven elements (e.g., crime figures and business climate) as well as soft factors (e.g., commitment to…
  26. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 26
    Conclusion Strong performance improvement in all businesses Divestment of Paper Chemicals business completed Conclusion of ICI Pension Fund triennial review, including further de-risking Exchange rate movements, positive market…
  27. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 27
    Questions Investor Update Q2 2015 results 27
  28. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 28
    Appendices Investor Update Q2 2015 results 29
  29. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 29
    ICI Pension Fund top-up schedule Deficit Previous top-up schedule 2011 Extensive de-risking of million liabilities through buy-ins 1.0 (5.4 billion); cash impact billion reflected in new valuation 178.5 178.5 178.5 178.5 135 135 125…
  30. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 30
    Proactively managing or removing pension liabilities Active management of interest rate and inflation Interest rate / exposure, with around 70% of overall defined benefit Inflation hedging obligation (DBO) risks hedged Retain and…
  31. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 31
    All Business Areas making progress FY2012 H1 2014 Return on sales (Operating income / revenue) H1 2013 H1 2015 % 16 13.1 13.7 10.5 11.0 10.6 12 8.8 9.5 9.0 8.8 6.9 6.1 8 4 2.2 0 Decorative Paints Performance Coatings…
  32. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 32
    Restructuring charges by quarter million Q1 2014 Q2 2014 Q3 2014 Q4 2014 FY 2014 Q1 2015 Q2 2015 Decorative Paints 22 23 1 34 80 5 11 Performance Coatings 15 17 41 75 148 6 10 Specialty Chemicals 7 2 6 2 17 0 3 Other 0 3 7 -2 8 0 0 Total…
  33. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 33
    Revenue for Performance Coatings Updated following change in business structure million Q1 2014 Q2 2014 Q3 2014 Q4 2014 FY 2014 Marine & Protective Coatings 323 362 360 369 1,414 Automotive & Specialty Coatings 343 365 357 375 1,440…
  34. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 34
    Revenue for Specialty Chemicals Financial reporting aligned with chemical platforms million Q1 2014 Q2 2014 Q3 2014 Q4 2014 FY 2014 Functional Chemicals 440 447 446 423 1,756 Industrial Chemicals 322 305 308 295 1,230 Surface Chemistry…
  35. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 35
    Q2 2015 Operating income Cash bridge million Q2 2014 Q2 2015 Operating Income 353 486 Incidentals - (34) Depreciation & amortization 156 158 EBITDA before incidentals 509 610 Other 15 3 Change working capital (2) (40) Change provisions…
  36. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 36
    Innovation Pipeline Q2 2015 Decorative Paints Trim products Key Features Customer Benefits Growth Potential New formulations of Alba Similar application and finish Improved recipe and more efficient Standard solvent borne as the…
  37. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 37
    Innovation Pipeline Q2 2015 Protective Coatings Chartek 8E Epoxy Passive Fire Protection Key Features Customer Benefits Growth Potential Continuous temperature Allows application in areas Low weight solutions offering resistance to…
  38. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 38
    Innovation Pipeline Q2 2015 Chelates & Micronutrients Bolikel XP Key Features Customer Benefits Growth Potential Crop nutrition High longevity = cost effective Market launch in 2015 Next generation iron-chelate to Very good uptake by…
  39. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 39
    Reference Investor Update Q2 2015 results 40
  40. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 40
    AkzoNobel today Revenue 14.3 billion 47,210 employees 44% of revenue from high growth markets Major producer of Paints, Coatings and Specialty Chemicals Leadership positions in many markets Revenue by Operating income Invested…
  41. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 41
    High growth markets are 44% of revenue and their importance will increase % of 2014 revenue 37% Mature Europe 15% 8% North America Emerging Europe 26% Asia Pacific 10% 4% Latin America Other regions Share of revenues…
  42. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 42
    Our proposition: Leading market positions delivering leading performance AkzoNobel has gone through a significant amount of strategic change over the past five years Today, the company has Excellent portfolio of businesses Good long…
  43. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 43
    2015 financial targets focused on quality of earnings and value creation Return on sales Return on investment Net debt/EBITDA (Operating income/revenue) (Operating income/average x % 12 months invested capital) % 12 16 14.0 3 9.0…
  44. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 44
    Realistic expected 2015 outcomes Expected Outcomes 2012 2015 16 Return on 12.0 12.0 sales 12 9.5 9.0 7.5 8 4 2.2 0 % Decorative Paints Performance Coatings Specialty Chemicals Return on 32 25.0 investment 24 21.7 13.6…
  45. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 45
    Progress made to date FY2012 FY2013 FY2014 16 12 9.5 9.5 9.4 9.8 9.0 10.4 Return on 6.3 8 6.0 sales 2.2 4 0 Decorative Paints Performance Coatings Specialty Chemicals % 32 21.7 21.3 22.0 24 13.7 13.6 14.8 Return on…
  46. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 46
    AkzoNobel strategy introduced in 2013 Organic growth Operational excellence Investor Update Q2 2015 results 47
  47. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 47
    The global paints and coatings market is around 100 billion By market sector By end-user segment 2014, 100% = 100 billion 2014, 100% = 100 billion Yacht Industrial Others Aerospace Consumer Buildings and Decorative Packaging…
  48. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 48
    AkzoNobel has many leading market positions No.1 Position Other key players Multiple regions outside North PPG, regional players Decorative America North America* Sherwin-Williams PPG, regional players Protective…
  49. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 49
    In aggregate variable costs represent 53% of revenue Profit and loss breakdown* % of total AkzoNobel is well positioned for economic recovery 100% Variable costs represent 53% of revenue Decorative Paints is more driven by…
  50. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 50
    We are actively addressing all components of operating expenses Operating expenses Research, Operating expense General & Selling Expenses Development & components Administrative Innovation Global Business Addressed by…
  51. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 51
    Sustainability is business; business is sustainability of revenue by 2020 from products that are more sustainable for our customers than the products of our competitors more efficient resource and energy use across the entire value…
  52. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 52
    Human Cities By 2050, more than 75 percent of the worlds population will live in cities. 60 percent of our products are in the Buildings & Infrastructure and Transportation In June 2014, we launched our Human Cities initiative,…
  53. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 53
    AkzoNobel values drive cultural change Investor Update Q2 2015 results 54
  54. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 54
    Leading performance; gaining momentum Historical Vision 2015 Targets Culture issues & Strategy & Incentives & Values ROS below peers Organic growth ROS 9% Customer Focused Not earning our cost Operational ROI 14% Deliver on of…
  55. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 55
    Decorative Paints business at a glance Revenue by end-user Revenue by geographic spread sub-segment 4% 8% Mature Europe 25% Maintenance, renovation and repair 14% Asia Pacific 46% Latin America New build projects Emerging…
  56. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 56
    We have very strong brands linked by a global approach to branding Our well-known brands are one of our key competitive advantages Consumer We have a number of powerful, relevant brands occupying a number of positions across…
  57. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 57
    Fix Europe Objectives: Improve performance by driving organic growth and operational excellence and changing the operating model in Europe Actions: Implement a central operating model and simplify our organizational structure…
  58. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 58
    Changing our operating model in Europe Action 2012 2013 2014 2015 Integrate relevant European activities and management Rationalize product portfolio and raw materials Rationalize manufacturing footprint Fully implement sales…
  59. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 59
    Grow profitably in high-growth markets Objectives: Outgrow the market Ensure that we leverage our (global) scale to ensure that we improve relative profitability while we grow Actions: Develop profitable mid-market business…
  60. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 60
    Performance Coatings business at a glance Revenue by end-user segment Revenue by geographic spread 14% Buildings and 3% Mature Europe 21% Infrastructure 11% 27% North America Transportation 8% Asia Pacific 28% Consumer Latin…
  61. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 61
    We cover a uniquely broad set of markets with leading global brands 2014 revenue by Reporting Unit Protective Marine & Marine Marine & Protective Protective Coatings 25% Coatings 49% Vehicle Refinishes Automotive &…
  62. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 62
    AkzoNobel is the global market leader in Performance Coatings, excluding Automotive Performance Coatings revenue billion, 2013 unless noted 6 5 4 3 2 1 0 Non-Automotive Automotive * 2012 data Source: Annual Reports;…
  63. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 63
    AkzoNobel has many leading market sector positions in Performance Coatings Performance Coatings market sectors AkzoNobel market share x billion, 2013 position (by value) 2013 1 7 3 1 6 5 1 4 1/2 1 3 1 2 2 1 1/2 1 0…
  64. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 64
    Pursue differentiated growth strategies Outgrow the market organically Expected outcomes Marine Improved market share Protective Costs dont grow as fast as revenue Powder Improved return on sales Specialty Finishes in percentage…
  65. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 65
    Business at a glance Revenue by end user segment Revenue by geographic spread 5% Buildings and Mature Europe 18% 2% infrastructure 10% North America Transportation 6% 43% Asia Pacific 18% Latin America 57% Consumer 19% goods…
  66. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 66
    The chemical industry is large and growing Chemicals industry over time, by geography trillion 3.5 trillion market Other China 6.3 Asia Pacific Solution provider for society North America manufacturing Western Europe food…
  67. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 67
    Five well positioned platforms in their industries Our Business Units Our Platforms Bleaching Chemicals Pulp & Performance chemicals 60% of Pulp & Performance chemicals Salt-chlorine chain Industrial Chemicals 100% of Industrial…
  68. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 68
    Platforms operate world scale plants based on advanced technologies Our main chemical platforms Key products Sodium chlorate Bleaching chemicals Hydrogen peroxide Energy/Salt Monochloroacetic acid Salt-chlorine chain Chlorine…
  69. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 69
    We have invested in the recent past and are well-prepared for future growth BA Specialty Chemicals capital expenditure million 500 400 300 200 100 0 2010 2011 2012 2013 2014 Capital Expenditure Depreciation and Amortization…
  70. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 70
    Four operational improvement initiatives Improve Strengthen Reduce Enhance product productivity of commercial organizational and process supply chain and excellence costs innovation operations Asset optimization Customer value…
  71. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 71
    Differentiated strategies per platform Outgrow the market organically Actions 50% of portfolio Capitalize on investments Main platforms Grow by successfully Bleaching chemicals Surfactants commercializing products for attractive…
  72. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 72
    Salt-Chlorine chain: Right at the heart of the customer base Steam cracker Refinery Olefin consumer Refinery & olefin producer Pipelines* * Pipelines transporting crude oil (RAPL), nafta (PALL), industrial gasses, ethylene and…
  73. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 73
    Ethylene oxide network: Capitalizing on China investments Bio-treatment facility Chelates Surfactants Hydrogen Organic Cyanide Peroxides Ethylene Oxide Ethylene Amines Cellulosics Site plan Investor Update Q2 2015…
  74. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 74
    Surfactants: Growing with attractive end markets Oilfield Lubricants Mining Agriculture Investor Update Q2 2015 results 75
  75. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 75
    Our platforms build on value chains Raw Base Chemical Performance/ materials chemicals inter-mediates functional End products chemicals Bleaching chemicals Salt-chlorine chain Polymer catalysts Ethylene oxide network…
  76. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 76
    Disciplined cash management Operating Working Capital Capital Expenditures million million Operating Working Capital Specialty Chemicals Decorative Paints OWC as % of LQ revenue * 4 Performance Coatings Other 2.500 16% 5.4%…
  77. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 77
    Operational cash inflow close to covering uses of cash Cash flow sources and uses Restructuring and pension top-ups consume a significant 2012 2013 2014 proportion of cash Performance improvement focus starts to address cash…
  78. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 78
    Continuously reducing costs of long term bonds Debt maturities million Repaid 7.75% 4.00% bonds bonds bonds 2.625% 7.25% 1.75% Debt duration 4.8 years 825 8.00% 800 750 622 500 Net interest expense down 320 by 74 million…
  79. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 79
    2015 target: net debt to EBITDA ratio of less than two Net debt/EBITDA x We have a strong liquidity position to support business needs: net cash and cash equivalents 1,5 1.7 billion* Undrawn revolving credit facility of 1.8 billion…
  80. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 80
    Dividend policy unchanged stable to rising dividend Dividends paid () Our dividend policy is to pay a stable to rising dividend each year 1.08 1.12 1.12 1.12 1.12 1.05 An interim and final dividend will be paid in cash unless…
  81. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 81
    Both short & long term incentives are aligned with our priorities Executive short term incentive 2015 Executive long term incentive 2015 STI Metric LTI Metric Element Element 20% Return on investment 35% Return on investment 20%…
  82. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 82
    Variable costs analysis 2014 Packaging Energy & other variable costs* Solvents Raw materials 6% 7% 26% Chemicals and intermediates*** 17% 4% Other raw materials** 5% 10% Titanium Additives 6% dioxide 3% 16% Coatings…
  83. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 83
    The net impact of a sustained lower oil price can have a positive impact in 2015 Freight and logistics Freight and logistics Raw materials Production Sales GDP Inventories Investor Update Q2 2015 results 84
  84. Q2 2015 INVESTOR UPDATE – Akzo Nobel – slide 84
    Downstream oil related products have clearly different dynamics Feedstocks Base Intermediates and more complex molecules (petro)chemicals Intermediates Monomers, More complex Precursors, etc. molecules Solvents Crude Oil…

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