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AkzoNobel Q2 2011 Media Presentation
Hans Wijers, CEO of AkzoNobel, and Keith Nichols, CFO, held a press conference to discuss the company's Q2 2011 results. Revenue was up 8% driven by volume and pricing increases, however raw material inflation and challenging market conditions lowered EBITDA to €551 million. The outlook for 2011 expects full-year EBITDA to be at least in line with 2010, assuming no further deterioration in economic conditions. The company continues investing in growth, innovation, and emerging markets to achieve its strategic goals.
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AkzoNobel Q2 2011 Media Presentation
- 1. July 21, 2011 HansWijers, CEO - Keith Nichols, CFO Press conference Q2 2011 results
- 2. Agenda • Q2 2011 value highlights • Financial review • Strategy, growth & innovation highlights • Outlook 2011 • Q&A Press conference Q2 2011 results 1
- 3. Q2 2011 valuehighlights Press conference Q2 2011 results 2
- 4. Q2 2011 highlights •Revenue up 8 percent driven by volume and pricing, before currency headwind of 3 percent • Raw material inflation, challenging trading conditions and one-off factors lowered the quarter’s EBITDA* to €551 million (2010: €614 million) • Net income at €268 million (2010: €273 million) • Investments in growth and RD&I initiatives underpinning medium-term growth ambitions • Additional performance improvement measures underway, more details in H2 * Before incidentals Press conference Q2 2011 results 3
- 5. Q2 2011 revenueand EBITDA € million Q2 2011 Δ% Revenue 4,097 5 EBITDA* 551 (10) Ratio, % Q2 2011 Q2 2010 EBITDA* margin 13.4 15.7 Revenue development Q2 2011 vs. Q2 2010 10 +1% -3% 5 +4% +5% +3% 0 Volume Price/Mix Acquisitions/ Exchange Total divestments rates * Before incidentals Increase Decrease Press conference Q2 2011 results 4
- 6. Volume growth continues,price increases coming through Quarterly volume development in % year-on-year 15 10 6% 5 2% 3% 1% 0 Decorative Paints Performance Specialty AkzoNobel Coatings Chemicals Quarterly price/mix development in % year-on-year 10 8% 4% 5 2% 3% 0 -5 -10 Decorative Paints Performance Specialty AkzoNobel Coatings Chemicals 2010 2011 Press conference Q2 2011 results 5
- 7. Decorative Paints Q22011 highlights • Revenue increased 8 percent before a negative currency impact of 4 percent • EBITDA decreased 5 percent before a negative currency impact of 2 percent • Continued momentum in high-growth markets • Demand in mature markets declined in the quarter • Further price increases are being implemented to compensate for higher raw material costs • Weaker performance in Europe was the main driver of the lower EBITDA result * Before incidentals Press conference Q2 2011 results 6
- 8. Decorative Paints Q22011 € million Q2 2011 Δ% Revenue 1,461 4 EBITDA* 191 (7) Ratio, % Q2 2011 Q2 2010 EBITDA* margin 13.1 14.6 Revenue development Q2 2011 vs. Q2 2010 10 0% +2% -4% 5 +6% +4% 0 Volume Price/Mix Acquisitions/ Exchange Total divestments rates * Before incidentals Increase Decrease Press conference Q2 2011 results 7
- 9. Performance Coatings Q22011 highlights • Revenue increased 8 percent before a negative currency impact of 4 percent, volumes up 2 percent • EBITDA was down by 7 percent before a negative currency translation effect of 4 percent • Ongoing price increases to offset higher raw material cost • EBITDA margin at 13.0 percent (2010: 15.2 percent) • The Marine and Wood Finishes segments impacted by weaker economic conditions • Recent acquisitions contributed positively to results * Before incidentals Press conference Q2 2011 results 8
- 10. Performance Coatings Q22011 € million Q2 2011 Δ% Revenue 1,312 4 EBITDA* 170 (11) Ratio, % Q2 2011 Q2 2010 EBITDA* margin 13.0 15.2 Revenue development Q2 2011 vs. Q2 2010 10 +3% -4% 5 +3% +4% +2% 0 Volume Price/Mix Acquisitions/ Exchange Total divestments rates * Before incidentals Increase Decrease Press conference Q2 2011 results 9
- 11. Specialty Chemicals Q22011 highlights • Revenue increased 9 percent before a negative currency impact of 2 percent, volumes increased 1 percent • EBITDA was down by 12 percent before a negative currency translation effect of 2 percent • Utilization rates have continued to be high • Increased raw material costs and unfavorable currency effect compressed margins • Prolonged site maintenance stops impacted the quarter • EBITDA decreased to €220 million (2010: €257 million) • EBITDA margin was 16.3 percent (2010: 20.4 percent) * Before incidentals Press conference Q2 2011 results 10
- 12. Specialty Chemicals Q22011 € million Q2 2011 Δ% Revenue 1,350 7 EBITDA* 220 (14) Ratio, % Q2 2011 Q2 2010 EBITDA* margin 16.3 20.4 Revenue development Q2 2011 vs. Q2 2010 10 0% -2% 5 +8% +7% +1% 0 Volume Price/Mix Acquisitions/ Exchange Total divestments rates * Before incidentals Increase Decrease Press conference Q2 2011 results 11
- 13. Financial review Press conference Q2 2011 results 12
- 14. Year-on-year Operating WorkingCapital % of revenue reducing towards 12 percent OWC € million 2500 18% 16.2% 17% 15.6% 15.3% 16% 14.6% 15.0% 2000 14.5% 15% 13.7% 14.1% 13.9% 14% 13% 1500 12% 2,238 2,007 1,691 2,037 2,346 2,191 2,016 2,317 2,389 11% 1000 10% 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 OWC OWC as % of LQ revenue*4 Press conference Q2 2011 results 13
- 15. Our dividend policy We intend to pay a stable to rising dividend • An interim and a final dividend will be paid • Cash dividend default, stock dividend optional 2010 total dividend €1.40 per share€1.80 4% from 2009 €1.20 €1.20 – up €1.35 • The final 2010 dividend of €1.08 was paid on May 10, 2011 • The 2011 interim dividend will be announced on October 20, 2011 Press conference Q2 2011 results 14
- 16. Raw materials havecontinued to rise in the quarter • Raw material prices have continued to rise in the second quarter and have impacted all three Business Areas • They are now around 20 percent higher than a year ago • With our margin management efforts still ongoing, we remain confident that we continue to make progress to mitigate this pressure Press conference Q2 2011 results 15
- 17. Strategy, growth &innovation highlights Press conference Q2 2011 results 16
- 18. Our medium termstrategic goals • Top quartile safety performance • Top 3 position in sustainability • Top quartile performance in diversity, employee engagement, and talent development • Top quartile eco-efficiency improvement rate • Grow to €20 billion revenues • Increase EBITDA each year, maintaining 13-15% margin • Reduce OWC/revenues by 0.5 p.a. towards a 12% level • Pay a stable to rising dividend Press conference Q2 2011 results 17
- 19. Aspirations for high-growthmarkets Currently around 40 percent of our revenue Double revenues in China • Grow from $1.5 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 billion of revenues • Increasing footprint for all business areas Outgrow the competition in Brazil • Grow from €0.75 to €1.5 billion of revenues • Become clear market leader in all our activities Expand in the Middle East Press conference Q2 2011 results 18
- 20. High-growth markets willbecome significantly more important % of revenue, indicative 32% ‘Mature’ Europe 9% 18% ‘Emerging’ Europe North America 25% 5% Asia Pacific ME&A 11% Latin America High-growth markets will be around 50% of revenue in this decade Press conference Q2 2011 results 19
- 21. Q2 2011 highlights Investingin growth • €140 million investment in Frankfurt site, Germany • €110 million proposed investment in new Decorative Paints site, UK • Opening global RD&I center in Deventer, Netherlands • Opening Fire Protection lab Felling, UK • Tio2 partnership with CAVA, China • Acquisition of Schramm Holding (Specialty Plastics in Asia) • Acquisition IBT’s Zeta Fraction Technology, USA Press conference Q2 2011 results 20
- 22. Pipeline 2011 Powder Coatings– LAT Pipe Coating In-field powder coating for pipe joints Key features Customers benefits • Coating application in-field • In-field powder coated field joints instead of in factory offer better protection • Reduced pre-heating of pipes • Lower temperature cure will result from 230°C to 180°C in energy savings for customers Growth potential • After successful trialing, product will be launched late 2011 • Immediate potential sale on large pipeline project • Allows penetration of new markets Press conference Q2 2011 results 21
- 23. Pipeline 2011 Industrial Chemicals– Meso tartrate (mTA) The next green generation anti-caking agent for salt Key Features Customer Benefits • Fully biodegradable and safe • 5 percent lower power consumption • Superior performance in • Increased lifetimes of membranes membrane electrolysis and electrodes chorine production • Costs savings for chlorine industry Growth potential • Successful launch into the European market • Being trialed in China – a 28M tonne/annum vacuum salt market • Extension into de-icing and edible salt applications Press conference Q2 2011 results 22
- 24. Pipeline 2011 Decorative Paints– Dulux Promise Extending the Dulux brand to mid tier market in India Key Features Customer Benefits • Highly durable water based • Great value paint in a popular price emulsion paint, ideal for dry or tier in high growth markets humid climatic conditions • Anti-fading properties helps protect • Best-in-class quality product at and retain the color on exterior walls parity pricing • Color guard technology Growth potential • Launched across India in 2011 • Record growth of 63 percent YTD, three times the category growth rates • Significant market share growth in mid tier exterior emulsion in the next years Press conference Q2 2011 results 23
- 25. Outlook 2011 Press conference Q2 2011 results 24
- 26. Outlook 2011 We expectfull-year 2011 EBITDA to be at least in line with the prior year, assuming no further deterioration in economic conditions Press conference Q2 2011 results 25
- 27. Q&A Press conference Q2 2011 results 26
- 28. Safe Harbor Statement Thispresentation 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 forecasted 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. 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. Press conference Q2 2011 results 27