Investor overview. Ton Büchner and Maëlys Castella February 15, 2017

Transcription

1 Investor overview Ton Büchner and Maëlys Castella February 15, 2017

2 Agenda Full-year and Q results AkzoNobel at a glance Business Areas Integrated Supply Chain Financial topics Investor overview 2

3 Strong track record of performance improvement Record ROS and ROI Volume Growth Acquisition of BASF s Industrial Coatings business ALPS Continuous improvement 75% sites 200+ million savings Progress on a new GBS model Employee engagement up for 6th year Safer operations 20% Eco-premium solutions Carbon Footprint reduced 300+ Human Cities projects 3

4 Building on our strong foundation of operational excellence to drive growth Decorative Paints Performance Coatings Specialty Chemicals Higher volumes and profitability Dulux Academy and virtual reality customer center, UK Fourth Decorative Paints plant in China (Chengdu) Visualizer app upgraded and downloaded 13+ million times Dulux Forest Breath sustainable interior paint - introduced in China Maintained structurally higher profitability Acquisition of BASF s Industrial Coatings business New Specialty Coatings and Powder Coatings facilities in India Launch of Aquasilk, water-based wood coating, in China Launched colorvation, digital technology that increases speed and accuracy in color matching Volume and profitability improvement Largest plant for organic peroxides in cross-linked rubber, China Partnership with Atul to produce MCA in India Dissolvine M-40 more sustainable chelating agent for detergents Launch of Berol DR-B1; surfactant for Safer Choice cleaning products Full-year and Q results Investor overview 4

5 Profitability improved further and EBIT was up despite adverse currencies Revenue ( million) EBIT* ( million) ROS %** Moving average ROI %** Net cash from operating activities 14,859 14,197 1,462 1, ,136 1,297 FY 2015 FY 2016 FY 2015 FY 2016 FY 2015 FY 2016 FY 2015 FY 2016 FY 2015 FY 2016 *EBIT = Operating income excluding incidentals **ROS% = EBIT/revenue and Moving average ROI (in %) = 12 months EBIT/12 months average invested capital Full-year and Q results Investor overview 5

6 Record ROS, ROI, adjusted EPS and net cash inflow from operating activities Full-year Volumes 1% higher Revenue down 4%, due to unfavorable currency and price/mix effects EBIT* up 3% at 1,502 million, positively impacted by volume growth, continuous improvement and lower costs ROS** up at 10.6 % and ROI** up at 15.0 % Adjusted EPS up 3% at 4.15 Total dividend proposed for 2016 up 6.5% to 1.65 Net cash inflow from operating activities up 14% Q4 Volumes up 2%, driven by Decorative Paints and Specialty Chemicals EBIT at 235 million, mainly due to higher restructuring expenses and weakness in the marine and oil and gas industries Adjusted EPS at 0.66 Completed acquisition of BASF s Industrial Coatings business Share repurchase program announced; anticipated to be concluded by the end of April 2017 Strong track record of performance improvement *EBIT = Operating income excluding incidentals **ROS% = EBIT/revenue ROI = 12 months EBIT/12 months average invested capital Full-year and Q results Investor overview 6

7 In 2016 seized opportunities for growth and adapted to challenging markets China South and SE Asia Latin America Specialty Chemicals ~ EMEA Automotive and Specialty Coatings Powder Coatings Oil and gas industries Marine industry 7

8 Updated expected growth rates for our relevant markets 2017 <0% 0-3% >3% Marine and Protective Coatings Mature Europe Latin America Industrial Coatings Automotive and Specialty Coatings Bleaching chemicals Salt-chlorine chain Ethylene oxide network Surfactants Asia Emerging Europe and Africa Powder Coatings Polymer chemistry Clear aim to build on the foundation we have created and grow in line or faster than our relevant market segments Full-year and Q results Investor overview 8

9 Strategy focused on delivering continuous improvement and growth Hardwire new organization model Deliver continuous improvement culture Build further operational excellence Drive organic growth and innovation Pursue value generating acquisitions Next steps Culture Core principles and values Sustainability Planet Possible Society Human Cities Full-year and Q results Investor overview 9

10 Structurally improved to achieve record levels of financial performance in 2016 Return on sales* % Return on investment* % Continuous improvement Delivering 200+ million savings Total reportable injury rate ( ) Engagement Guidance Hardwiring new organization model Guidance ( ) ROS% = EBIT/Revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital Full-year and Q results Investor overview 10

11 200+ million savings from continuous improvement and operational excellence ALPS 85% KPI s improved OTIF >96% Engagement ALPS Deliver starts in 2017 AkzoNobel Leading Performance System 75% of sites Expanding into support functions GBS Increased transparency Standardized Delivering processes benefits Global Business Services IM >90% Receivables HR Finance 5 regional hubs Serving 66% people All Business Areas >70% payables Full-year and Q results Investor overview 11

12 ALPS delivering continuous improvement and capacity for organic growth 5S Implemented, Latin America ALPS in action, Asia Full-year and Q results Investor overview 12

13 634 million invested in sites to support organic growth and operational excellence Ashington, UK Shanghai, China Los Reyes, Mexico Strongsville, U.S. Pasadena, U.S. Ibbenburen, Germany Chengdu, China Mumbai, India Gujurat,India Cikarang, Indonesia Chonburi, Thailand Decorative Paints Performance Coatings Specialty Chemicals Ningbo, China Full-year and Q results Investor overview 13

14 363 million invested in driving innovation to support organic growth Launched AquaSilk in China, an innovative waterborne anti-scuff Introduced Dissolvine M-40 for the detergent industry Launched forest breath in China. It contains anti-bacterial properties that improve indoor air quality Visualizer App over 13 million downloads Virtual reality customer Centre in the UK Intertrac Vision, an award winning digital tool which predicts hull performance Full-year and Q results Investor overview 14

15 Value generating acquisitions and joint ventures supporting growth BASF s Industrial Coatings business Revenue ~ 280 #1 in coil coatings Completed for 425 million million 2017 Portion of production transferred Full profitability by end 2018 Synergies and additional production efficiencies Joint Ventures: Acquired outstanding shares in Eko Peroxide Cooperation for Salt production in Spain Partnership with Atul to produce MCA in India Production JV with Evonik for Chlorine in Germany Acquired controlling share in Egypt JV for Powder Coatings Full-year and Q results Investor overview 15

16 Further progress made towards our 2020 sustainability ambitions Eco-premium solutions with downstream benefits (in % of revenue) Cradle-to-Grave, Carbon Footprint (% reduction CO 2 (e) per ton of sales from 2012) REI Resource Efficiency Index (Gross margin/co 2 (e) indexed) Progress on our Planet Possible agenda Shipping industry s largest ever number of carbon credits Exploring feasibility of waste-to-chemicals Leading a consortium for purchase of wind power Sustainable steam project in Delfzijl Investor overview 16

17 Making people s lives more liveable and inspiring 300+ projects 175,000 liters of paint 9+ million people 17

18 Strong financial performance improvement continued in 2016 Full-year Volumes EBIT Record ROS and ROI Q4 Volumes 1% higher Up 3% Up 6% excluding currencies ROS 10.6% ( %) ROI 15.0% ( %) Up 2% Adjusted EPS 3% At 4.15 Total dividend proposed for 2016 Up 6.5% at 1.65 (2015: 1.55) Net cash inflow from operating activities Up 14% 1,297 million (2015: 1,136) Completed acquisition BASF's Industrial Coatings business Announced share buyback to neutralize the dilutive effect of stock dividends paid in 2016 Full-year and Q results Investor overview 18

19 Volume growth overall, driven by Decorative Paints and Specialty Chemicals Decorative Paints Performance Coatings Specialty Chemicals Quarterly volume development in % year-on-year AkzoNobel Quarterly price/mix development in % year-on-year Full-year and Q results Investor overview 19

20 EBIT growth driven by higher volumes and continuous improvement million FY 2015 FY 2016 Δ% Revenue 14,859 14,197 (4) EBIT (Operating income excluding incidental items) 1,462 1,502 3 Operating income 1,573 1,519 (3) Ratio, % FY 2015 FY 2016 ROS* Moving average ROI* Revenue development full-year Volume Price/Mix Acquisitions/Divestments Exchange rates Total *ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital 20

21 Q impacted by restructuring and Marine and oil and gas industries million Q Q Δ% Revenue 3,559 3,456 (3) EBIT (Operating income excluding incidental items) (12) Operating income (37) Ratio, % FY 2015 FY 2016 ROS* Moving average ROI* Revenue development Q vs. Q Increase Decrease 2 Volume -3-2 Price/Mix 0 Acquisitions/Divestments -2-2 Exchange rates -3-4 Total *ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital Full-year and Q results Investor overview 21

22 Decorative Paints full-year 2016: Higher volumes and profitability million FY 2015 FY 2016 Δ% Revenue 4,007 3,835 (4) EBIT (Operating income excluding incidental items) Operating income Flexa Color Tester - winner of the Dutch Our Color Best Product of the of Year, the Year Denim Drift, was launched Ratio, % FY 2015 FY 2016 ROS* Moving average ROI* Revenue development full-year Increase Decrease 3-4 Launched in Rio, our Unexpected Courts project uses paint to create Volume Price/Mix Acquisitions/Divestments -5-3 Courts and spaces in surprising Exchange rates Total places *ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital 0-6 Full-year and Q results Investor overview 22

23 Decorative Paints Q4 2016: Another quarter of volume growth million Q Q Δ% Revenue (4) EBIT (Operating income excluding incidental items) Operating income Ratio, % Q Q ROS* Moving average ROI* Revenue development Q vs. Q Increase Decrease -4 Recently launched our Dulux Forest Breath Eco-sense range of indoor decorative paints. Volume Price/Mix Acquisitions/Divestments Exchange rates *ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital Total Full-year and Q results Investor overview 23

24 Performance Coatings full-year 2016: Maintained structurally higher profitability million FY 2015 FY 2016 Δ% Revenue 5,955 5,665 (5) EBIT (Operating income excluding incidental items) (4) Operating income (7) Ratio, % FY 2015 FY 2016 ROS* Moving average ROI* Revenue development full-year Increase Decrease -2-3 We broke ground on a powder coatings Colorvation plant digital in technology Mumbai, - Price/Mix Exchange rates -6 which increases will speed provide and accuracy new lines, color -2 including matching. products for pipes Volume Acquisitions/Divestments Total *ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital 0 Full-year and Q results Investor overview 24-5

25 Performance Coatings Q4 2016: Weakness in marine and oil and gas million Q Q Δ% Revenue 1,482 1,398 (6) EBIT (Operating income excluding incidental items) (21) Operating income (30) Ratio, % Q Q ROS* Moving average ROI* Revenue development Q vs. Q Increase Decrease -1-2 Volume -3 Price/Mix 0 Acquisitions/Divestments -2-2 Exchange rates -6-6 Total Akzo Nobel inaugurates a first of its kind specialty coatings facility in India *ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital Full-year and Q results Investor overview 25

26 Specialty Chemicals full-year 2016: Volume and profitability improvement million FY 2015 FY 2016 Δ% Revenue 4,988 4,783 (4) EBIT (Operating income excluding incidental items) Operating income Inaugurated two new specialty chemicals plants at the multi-site in Ningbo, China. Ratio, % FY 2015 FY 2016 ROS* Moving average ROI* Revenue development full-year 2016 Increase Decrease 1 Volume -3-3 Price/Mix -1 Acquisitions/Divestments Exchange rates Total *ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital Full-year and Q results Investor overview 26

27 Specialty Chemicals Q4 2016: Volumes up 4% driven by Asia and Europe million Q Q Δ% Revenue 1,167 1,169 - EBIT (Operating income excluding incidental items) Operating income Ratio, % Q Q ROS* Moving average ROI* Revenue development Q vs. Q Increase Decrease Volume Price/Mix Acquisitions/Divestments Exchange rates Total *ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital Investments in multi-site in Ningbo and Tianjin, China Full-year and Q results Investor overview 27

28 EBIT increased due to higher volumes, continuous improvement and lower costs million %** +3% Increase Decrease FY 2015 OPI Incidentals FY 2015 EBIT Currency/ acq/div Volume Price/mix Other* FY 2016 EBIT incidentals FY 2016 OPI * Other costs includes raw materials, restructuring benefits, wage inflation, depreciation and amortization ** Excluding currencies Full-year and Q results Investor overview 28

29 Free cash flow continues to improve million FY2013 FY2014 FY2015 FY2016 EBITDA 1,513 1,690 2,088 2,108 Interest paid Tax paid Changes in working capital, provision* and other Capital expenditures (including intangible assets) Free cash flow, excluding pension top-up payments Pension top-up payments Free cash flow (from operations) *Provisions include recurring pension contributions Free cash flow (from operations) = Net cash from operating activities minus Capital expenditures and Investment in intangibles Full-year and Q results Investor overview 29

30 IAS19 pension deficit 1.0 billion Key pension financial assumptions Q Q Discount rate 3.5% 2.4% Inflation rate 2.8% 3.1% Pension deficit development in 2016 Increase million Decrease Deficit end Q Top-ups Discount rates on DBO Inflation on DBO Asset return over P &L UK Buy-in Other Deficit end Q (627) 297 (2,290) 2,394 (637) 207 (990) (334) Full-year and Q results Investor overview 30

31 Actively managing pension liabilities; lower top-ups due to foreign exchange Further de-risking through non-cash buy-in transactions totaling 3.3 billion in 2016 Around 60 percent longevity risk and around 80 percent interest rate and inflation risk is hedged Top-up schedule updated for actual payments 2016 and current exchange rates (2017 onwards) Estimated cash top-ups million Updated From escrow account Cash E 2018 E 2019 E 2020 E 2021 E 2022 E Relate mainly to two UK plans: ICI Pension Fund and the Courtaulds Pension Scheme Assumes 1: 0.86/$1.05 from 2017 Note: schedule includes non-cash transactions related to the CPS escrow account; Full-year and Q results Investor overview 31

32 Cash management discipline continues; Leading performance for working capital Operating Working Capital million Capital expenditures million Operating Working Capital OWC as % of LQ revenue * 4 16% Specialty Chemicals Performance Coatings CAPEX as % revenue Decorative Paints Other % 9.9% 10.1% 9.7% 10.2% 14% 12% 10% 5.4% % 4.1% 4.4% 4.5% % 6% 4% 2% % Full-year and Q results Investor overview 32

33 Positive net cash after dividends for second consecutive year million FY2013 FY2014 FY2015 FY2016 Free cash flow Dividend paid Other Net cash generation (from continued operations) excl. acquisitions and divestments Acquisitions Divestments Net cash generation (from continued operations) Cash flow from discontinued operations Net cash generation Net Debt 1,529 1,606 1,226 1,252 Other includes: Dividend from associates and joint ventures interest received and issue of shares for stock option plan and other changes Full-year and Q results Investor overview 33

34 Further increase in dividend shows we are confident in our cash flow generation Dividends per share +7% % 1.65 Dividend policy is to pay a stable to rising dividend each year Final dividend paid in cash, unless shareholders elect to receive a stock dividend Share repurchase program to neutralize the dilutive effect of stock dividends paid in Yield*: 2.6% 2.5% 2.5% 2.8% Final dividend Interim dividend * Based on year-end share price Proposed final dividend 1.28 resulting in total dividend for 2016 up 6.5% to 1.65 Full-year and Q results Investor overview 34

35 Cash generation restored to invest in growth and improve shareholder returns 1. Profitable organic growth Innovation and capital expenditure 2. Dividend Pay a stable to rising dividend 3. Acquisitions Strategically aligned and value generating 4. Balance sheet Retain strong investment grade credit rating 5. Manage pension liabilities Limit risk and reduce uncertainty Full-year and Q results Investor overview 35

36 We are stronger, more agile, better able to adapt and grow Record ROS and ROI Volume Growth Acquisition of BASF s Industrial Coatings business ALPS Continuous improvement 75% sites 200+ million savings Progress on a new GBS model Employee engagement up for 6th year Safer operations 20% Eco-premium solutions Carbon Footprint reduced 300+ Human Cities projects 36

37 We are stronger, more agile, better able to adapt and grow We anticipate positive developments for EMEA, North America and Asia, improving during the year, while Latin America is expected to stabilize. Some economic and political uncertainty is expected to remain. Market trends experienced in the second part of 2016, including for marine and oil and gas industries, are expected to continue during the first half of We have structurally improved our ability to respond to developments in our markets. We are taking appropriate measures to deal with higher raw material prices in an inflationary environment. Our stronger operational and financial foundation means we are more agile and better able to seize growth opportunities, including acquisitions. We maintain our financial guidance for

38 AkzoNobel at a glance Investor overview 38

39 Global paints, coatings and specialty chemicals company 14.2 billion revenue 1.5 billion EBIT 80+ countries 46,000 employees Leadership positions in many markets Revenue by Business Area* Operating income by Business Area* Revenue by geographic region 33% 40% 27% * Based on 2015 numbers Performance Coatings Decorative Paints Specialty Chemicals 7% 4% Mature Europe 9% Asia Pacific 36% 36% 42% North America 21% 17% 27% Latin America Emerging Europe Other 39

40 Revenue split per Business Unit Decorative Paints Performance Coatings Specialty Chemicals 31% 13% 56% EMEA Latin America Asia 47% 26% 27% Marine and Protective Automotive and Specialty Industrial and Powder 21% 19% 25% 35% Functional Industrial Surface Pulp and Performance 40

41 Buildings and infrastructure Transportation New build projects Maintenance, renovation & repair 43% 17% Automotive repair Automotive OEM, parts and assembly Building products and components of revenue of revenue Marine and air transport Consumer durables Consumer packaged goods 18% 22% Natural resource and energy industries Process industries of revenue of revenue Consumer goods Industrial All percentages based on 2015 revenue

42 Present in large and attractive markets Global paints and coatings by market sector ~ 100 billion, % 1% 2% 2% 3% 6% 6% 6% Performance Coatings 58% 16% 6% 6% Decorative Paints 42% 42% Decorative Automotive OEM (metal) Wood finishes Vehicle refinish Protective coatings Powder coatings Coil coatings Marine Packaging coatings Auto plastics exterior Wireless/IT plastics Auto plastics interior Aerospace Yacht GI/Others Chemicals industry ~ 3,500 billion, % 5% 1% 1% Source: Global paints and coatings by market, Orr & Boss; Global chemical shipments by segment 2014, excluding pharmaceuticals, American Chemistry Council 11% 11% 16% 9% 17% 23% Manufactured fibres Coatings Adhesives and sealants Synthetic rubber Bulk petrochemical and intermediates Plastic resins Other specialties Agricultural chemicals Consumer products Inorganic chemicals AkzoNobel at a glance Investor overview 42

43 Strategy delivering results and building foundation for continuous improvement Transformation New operating models for all Business Areas Realignment of the functions Achievements Operational optimization; reduction in: Factory footprint Enterprise Resource Planning systems SKUs Portfolio optimization with selected divestments Proactive management of pension liabilities Continued focus on sustainability Core principles and values Human Cities AkzoNobel at a glance Investor overview 43

44 Support functions are progressing towards the future operating model Decentralized functions Function reporting and alignment Shared services/ outsourcing Global Business Services Human Resources Information Management Finance Procurement (non product related) AkzoNobel at a glance Investor overview 44

45 Core principles and values in place; Incentives aligned with strategy Core principles: Safety Integrity Sustainability Customer Focus Deliver on Commitments Passion for Excellence Winning Together We build successful partnerships with our customers We do what we say we will do We strive to be the best in everything we do, every day We develop, share and use our personal strengths to win as a team STI Element Metric * LTI Element Metric 20% Return on investment 20% Operating income 30% Operating cash flow 30% Personal targets partly related to strategic targets 35% Return on investment 35% Total Shareholder Return 30% Sustainability / RobecoSAM - DJSI *A new metric, revenue growth, was approved at the AGM It has been introduced for some executives. AkzoNobel at a glance Investor overview 45

46 Strategy will be maintained and move towards the next phase Historical issues Building the foundation External environment Continuous improvement Return on sales below peers Not earning our cost of capital Inadequate free cash flow Operating expenses too high Not leveraging scale Vision and strategy: Organic growth Operational excellence Sustainability 2015 targets: Limited economic recovery Slowing emerging markets Organic growth ROS 9%; ROI 14% Aligned remuneration Core principles and values AkzoNobel at a glance Investor overview 46

47 Focus will shift towards continuous improvement and organic growth Hardwire new organization model Deliver continuous improvement culture Build further operational excellence Drive organic growth and innovation Pursue value generating acquisitions Next steps Culture Core principles and values Sustainability Planet Possible Society Human Cities AkzoNobel at a glance Investor overview 47

48 Vision confirmed; financial guidance Vision: Leading market positions delivering leading performance Guidance : Return on sales: 9-11% Return on investment: % Clear aim to build on the foundation we have created and grow in line or faster than our relevant market segments Key assumptions: Currencies versus : $1.1, 0.71, 7.1 Oil price ~$60/bbl ; no significant market disruption ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital AkzoNobel at a glance Investor overview 48

49 Visions confirmed; performance ranges Specialty Chemicals Vision: Delivering leading performance based on sustainable chemical platforms driving profitable growth in selected markets Performance range : Return on sales: % Return on investment: >16% Performance Coatings Vision: Leading market positions delivering leading performance Performance range : Return on sales: 12-14% Return on investment >25% Decorative Paints Vision: The leading global Decorative Paints company in size and performance Performance range : Return on sales: 8-10% Return on investment: >11.5% Clear aim to build on the foundation we have created and grow in line or faster than our relevant market segments Key assumptions: Currencies versus : $1.1, 0.71, 7.1 Oil price ~$60/bbl ; no significant market disruption ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital AkzoNobel at a glance Investor overview 49

50 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 chain by 2020 (measured by carbon footprint reduction) (Resource Efficiency Index) A new indicator measuring how efficiently we generate value (expressed as gross margin divided by cradle-to-grave carbon footprint) AkzoNobel at a glance Investor overview 50

51 A strong case for investment Portfolio of businesses with leadership positions in many markets Strong global brands in both consumer and industrial markets Long-term growth potential from end-user segments Balanced exposure across geographic regions Track record of improving returns and cash flow History of successfully commercializing innovation Clear leader in sustainability Commitment to Human Cities AkzoNobel at a glance Investor overview 51

52 Business Areas Investor overview 52

53 A global player with leading market positions Specialty Chemicals key figures Revenue by end-user segment* million 2016 Revenue 4,783 EBIT 629 Operating income 629 Return on sales 13.2% Return on investment 17.9% 47% 19% 28% 6% Buildings and Infrastructure Transportation Consumer Goods Industrial Employees 9,000 Key capabilities Understanding customer needs Management of integrated value chains Continuous technological advancement Engineering and project management 17% EMEA 49% Americas Revenue by geographic spread* 34% Asia Pacific * Based on 2015 numbers 53

54 Resilient portfolio organized in five strong chemical platforms Our main chemical platforms Our products Our business units Bleaching chemicals Sodium chlorate Hydrogen peroxide Pulp and Performance Chemicals Salt-chlorine chain Energy/Salt Caustic/Chlorine Monochloroacetic acid Chloromethanes Industrial Chemicals Polymer chemistry Organic peroxides Metal alkyls Polymer additives Polymer Chemistry Ethylene oxide network Ethylene oxide Ethylene amines Cellulosics Chelates/Micronutrients Ethylene and Sulfur Derivatives Surfactants Ethoxylates Natural oil and fat-based nitrogen surfactants Surface Chemistry Business Areas Investor overview 54

55 We continue with pursuing differentiated strategies Outgrow the market organically ~50% of portfolio Actions Capitalize on investments Successfully commercialize products for attractive applications Invest when attractive growth opportunities arise Growth range to 15% per year Average +3% Improve performance by driving operational excellence ~50% of portfolio Actions Reduce costs and further improve productivity in operations Improve raw material (cost) position Leverage existing production capacity Growth range to +5% Average -3% Business Areas Investor overview 55

56 Quality of business improved Revenue Operating income Strategic focus Product portfolio million, CAGR 2.5% Improve performance platforms Outgrow the market platforms Geo-spread Current products New product introductions Customer portfolio Europe Other accounts LV Rest Rest of of the world world Strategic customers Business Areas Investor overview 56

57 Continued market growth expected over the next few years Platform Bleaching chemicals Market size* billion, ,7 Market growth** % p.a., <1.5% Leading positions Revenue breakdown by position % of revenue, 2014 Salt-chlorine chain 6,6 <1.5% Polymer chemistry 1,9 >3% Ethylene oxide network 3,9 Surfactants 6, % 1.5-3% Global leadership Regional or segment leadership Other * Sum of sectors relevant to AkzoNobel **Related to AkzoNobel portfolio Source: AkzoNobel internal analysis Business Areas Investor overview 57

58 We have the right strategy in place Strategic focus areas Processes Action End-user segments Business Area Actions Drive functional excellence Supply chain and operations Commercial excellence Talent management Reduce organizational complexity Strengthen product and process innovation Capitalize on industry changes Build on our strong chemical platforms to deliver profitable growth in selected markets Business Areas Investor overview 58

59 Process and product innovation enables growth across all businesses Dedicated RD&I resources in world class laboratories around the globe >500 highly qualified FTE s ~ 100m per annum; ~2% of sales End-user requirements/trends More than 5,000 patents Overarching technology programs Bio-based chemicals, Process technology, Shared applications Resource preservation Increasing end-use demands Co-operations with customers, suppliers, and academia High sustainability content, in line with our Planet Possible strategy Accelerated technology development Changing demographics and spending patterns Business Areas Investor overview 59

60 Regional opportunities enable additional growth North America Europe Middle East China Shale gas, increased investments in petrochemicals and plastics High valued add specialties Moving down the value chain. Expanding petrochemicals and plastics customers Urbanization, growing middle class. Improved safety and environmental controls Growth products: Polymer Chemistry, Surfactants Growth products: Surfactants, Chelates, Performance Additives, Expancel, Colloidal Silica Growth products: Polymer Chemistry, Ethylene derivatives Growth products: Polymer Chemistry, Ethylene Amines, Chelates and Micronutrients Latin America Africa India South East Asia Increased pulp production. Growing consumer markets Improved agriculture. Growing demand for housing Specialty chemicals growth (pharmaceutical and agriculture raw materials) Growth middle class Increased pulp production. Growing consumer markets Growth products: Surfactants, bleaching chemicals Growth products: Surfactants, Micronutrients, Performance Additives Growth products: Ethylene amines, MCA, Surfactants, Polymer Chemistry Growth products: Bleaching chemicals, Surfactants, Polymer Chemistry Business Areas Investor overview 60

61 Performance Coatings at a glance Performance Coatings key figures million 2016 Revenue 5,665 EBIT 759 Operating income 735 Return on sales 13.4% Return on investment 29.4% Employees 19,700 14% Buildings and 24% Infrastructure Transportation 22% Consumer Goods 40% Revenue by end-user segment* Industrial Key capabilities Industrial key account management Revenue by geographic spread* Technical support and service Design, color and color matching Continuous innovation in functionality and ease-of-use 33% 38% EMEA Americas Sustainable, safe solutions 29% Asia Pacific * Based on 2015 numbers 61

62 New simplified organization drives operational excellence and organic growth From Performance Coatings 4 business units 12 sub-business units To Performance Coatings 7 strategic market units Customer proximity Speed of decision-making 72 regional units 6 regions Accountability and collaboration Business Areas Investor overview 62

63 We have leading positions in the markets we serve x AkzoNobel market share and position (by value) 2014 Segment size billion, 2014 Segment growth / /4 Powder Specialty Plastics Aerospace Wood Finishes Coil Yacht Packaging Marine Protective Vehicle Refinishes >3% 2-3% <2% Source: Orr & Boss base data for segment sizes, AkzoNobel internal analysis Business Areas Investor overview 63

64 We have the right strategy in place Strategic focus areas Processes Action End-user segments Business Area actions Pursue differentiated growth strategies Drive overarching performance improvement initiatives Reduce external spend Improve our operations Commercial excellence Business Areas Investor overview 64

65 We are outgrowing our markets in targeted areas Sector Powder Coatings Protective Coatings Marine Coatings Action examples Full wheel offering including powder primer, liquid color and powder clearcoat Focus on downstream oil and gas and growth outside of oil and gas (Power) Continue to invest in fouling control, sustainability innovation and enhanced services Business Areas Investor overview 65

66 We are driving overarching performance improvement initiatives Ambition Achievements Focus areas Reduce external spend Standardize product range Double/triple source raw materials Local sourcing of raw materials Focus on indirect material spend Improve our operations Manufacturing footprint optimization: Closed 17 factories Operational excellence program focused on customer satisfaction, reducing costs and increasing yields Drive commercial excellence Sales force efficiency Margin management Sales force effectiveness Common processes and tools Sales force incentives Business Areas Investor overview 66

67 Growth through product, process and service innovation across all businesses Dedicated RD&I resources >2,000 highly qualified scientists and technicians ~3% of revenues Strategic research groups: Sassenheim (NL) Felling (UK) Strongsville (US) Songjiang (China) Bangalore (India) Strategic drivers Customer efficiency Customer benefits Global future trends Internal efficiency Business Areas Investor overview 67

68 Decorative Paints at a glance Decorative Paints key figures million 2016 Revenue 3,835 EBIT 357 Operating income % Buildings and Infrastructure revenue breakdown* Maintenance, renovation and repair New build projects Return on sales 9.3% Return on investment 12.8% 75% Employees 14,700 Key capabilities Branding Digital Distributor, wholesale, retail management Understanding and serving professional painters Consumer inspiration Quality management, including portfolio management 31% 13% 56% Revenue by geographic spread EMEA Latin America Asia *based on 2015 numbers 68

69 Changing growth expectations in maintenance, renovation and repair Maintenance and repair, excluding infrastructure and industrial construction $ billion, output Global Europe 0.1% p.a. Europe* 2.8% p.a. 0.4% p.a. Germany 3.9% p.a. 3.4% p.a. North America 3.4% p.a. 6.5% p.a. UK 4.7% p.a. Italy 1.6% p.a. China 4.7% p.a. 7.0% p.a. India 7.4% p.a. 4.8% p.a. -1.9% p.a. Brazil 1.8% p.a % p.a. -5.8% p.a. France 1.8% p.a. -3.5% p.a. Russia 0.2% p.a. 3.6% p.a. Turkey 3.4% p.a *Europe includes Russia and Turkey Source: IHS/Construction IC Business Areas Investor overview 69

70 AkzoNobel has a strong 1 or 2 market position in all regions where present AkzoNobel regions* UK & Ireland Market size million, AkzoNobel market share position* (by value) 2014 x Segment growth % p.a., % South America 1 >3% South East & South Asia & Middle East 2 >3% China & North Asia Eastern & Southern Europe & Africa 2 1 >3% >3% North & West Europe % *Arranged by market size. Containing the countries where AkzoNobel is present Business Areas Investor overview 70

71 Unique competitive positioning demonstrating resilient business model Diversified, exposure outside mature geographies Tikkurila Jotun Nippon Valspar AkzoNobel Diversified, mostly mature geography Cromology PPG Focused, exposure outside mature geographies Focused, mature geography 2014 revenues millions Masco (Behr) Asian Paints Sherwin-Williams Business Areas Investor overview 71

72 We have updated our strategic actions to reflect our new priorities Strategic focus areas Processes Actions End-user segments Business Area actions Win locally Leverage our scale: Innovation Commercial excellence Digital Painters Color Supply chain Brands Sustainability Business Areas Investor overview 72

73 Winning locally by leveraging our scale Innovation Products and services Color Multi-functional approach Recognized as passionate color expert Commercial excellence Menu to facilitate winning locally Supply chain Continued emphasis on procurement (including localization) Continuous improvement Digital Building on our award-winning Visualizer global launch Brands Consumer and Professional Link to other AkzoNobel brands and programs Painters Global needs-based research Next steps as appropriate, including digital Sustainability Leverage our credentials through Planet Possible and lead market to water-based Business Areas Investor overview 73

74 Decorative Paints innovation agenda End-user segment requirements/trends Mass market growth (emerging markets) Well-being Regulatory compliance Differentiation in large scale outlets (LSOs) Energy-efficient solutions Beyond commoditization of color (aesthetics) Innovation agenda implication Lower cost solutions Waterborne trim and other wood solutions Zero volatile organic compounds (VOC) and zero emissions Customization at point of order or purchase Significant focus on sustainability Coatings that help manage energy use Highly differentiated color Business Areas Investor overview 74

75 Transforming Integrated Supply Chain to deliver leading performance

76 Our supply chain is fundamental to our success Largest function in the company, with close to 22,000 colleagues across our three Business Areas Backbone of company, responsible for processes to design, deploy and deliver our products We deliver to our customers from over 200 manufacturing sites Each Business Area has different supply chain characteristics and customer service model We contribute to our long-term sustainability goals by improving energy/material efficiency across the value chain Integrated Supply Chain Investor overview 76

77 The Supply Chain vision and targets support delivering leading performance Strategic imperatives World class safety, operational and customer service performance Cost position creates competitive advantage in our industry Leveraging size and infrastructure to serve most effectively Create sustainable value through standard, best-in-class, work processes Building a global performance-based continuous improvement culture Taking pride and ownership in delivering leading performance World class metrics Safety TRR Zero process safety incidents Service OTIF Lean six sigma quality Cost Cost productivity Supply Chain cost % of revenue Procurement effectiveness Capital Days Inventory People Top quartile in engagement TRR = Total reportable injury rate OTIF On-time in-full Integrated Supply Chain Investor overview 77

78 Leading performance is gaining momentum 1 3 years 3 6 years 7+ years Internal best performance Industry best performance World class performance Objective: Today Functional excellence and capability transformation to operate at peak performance Objective: Delivering leading and sustainable performance in functional and operational excellence Objective: Delivering world class functional and operational excellence Initiatives (launched 2014): New organization model ALPS deployment - Plan, Source, Make and Deliver Initiatives (launch 2016 onwards): Advanced manufacturing excellence ALPS continuous improvement Commitment-based safety culture Initiatives (launch 2016 onwards): World scale integrated production World class Supply Chain Integrated Supply Chain Investor overview 78

79 We are implementing the AkzoNobel Leading Performance System (ALPS) Processes Processes Standard and integrated work processes Clear goals and metrics Behaviors Performance-driven, continuous improvement culture Change management Behaviors ALPS Enablers Enablers Capability development Leading edge principles, methods and IT systems Organization Organization Clear roles and responsibilities Lean organization structure Integrated Supply Chain Investor overview 79

80 Robust organization utilizing rigorous process Design Deploy Deliver Decorative Paints deploy team Center of Excellence Performance Coatings deploy team Specialty Chemicals deploy team 5 CI experts 100+ CI team members Governance process GO LIVE 200+ sites worldwide Maturity audit Boot camp Assessment Foundational Processes Primary Processes Embed and mature Continuous improvement 4 days 3 days 3-6 months 4-13 weeks months Process optimization Integrated Supply Chain Investor overview 80

81 Average cycle time Decorative Paints: ALPS improvement in productivity Filling line down-time dropped 79% after ALPS implementation Batch production time reduced by 11% + less variation ALPS implementation ALPS implementation Oct 2014 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Weeks Source : AkzoNobel analysis Integrated Supply Chain Investor overview 81

82 Performance Coatings: ALPS improvement in on-time in-full On-time in-full improved 58% after ALPS implementation 90% 92% 93% 94% 95% 95% 95% 95% 85% 80% 75% 60% On-time in-full target Actual 2015 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec ALPS implementation Source : AkzoNobel analysis Integrated Supply Chain Investor overview 82

83 Specialty Chemicals: ALPS improvement in productivity Productivity offsets inflation after ALPS implementation 2,5% 2,0% 1,5% 1,0% 0,5% 0,0% 0-0,5% -1,0% -1,5% Q1 Q2 Q3 Q (2.000) Productivity YTD % (4.000) Productivity value YTD (6.000) --- Productivity target % (8.000) Source : AkzoNobel analysis ALPS implementation Integrated Supply Chain Investor overview 83

84 Building a strong financial foundation to deliver leading performance

85 Strong financial position provides foundation for growth Seek to maintain investment grade rating of BBB+ (currently A-) Net debt at 1.25 billion (0.6 x EBITDA) Average interest rate reduced with repayment of high interest debt Renewal of 1.8 billion undrawn credit facility Debt maturities million (average debt duration 5 years 6 months) 4.000% 2.625% 1.750% 1.125% 4 3,5 3 2,5 2 1,5 1 0,5 0 1, ,23 1, ,5 Net debt ( billion)/ebitda Average cost of long-term bonds % 1 0, Financial topics Investor overview 85

86 Further de-risking of pension liabilities including 2.8 billion non-cash buy-ins* Other post-retirement benefits Other pension plans Various activities to reduce liabilities 8.5 billion insurance buy-ins for UK schemes ( ). $0.7 billion buy-out relate to a US scheme (2013) CPS UK ICI PF UK Active management of interest rate and inflation exposure, with around 80 percent of overall defined benefit obligation risks hedged Almost 60 percent of longevity risk is covered by insurance contracts and hedging Defined benefit obligations Interest and inflation hedging Longevity hedging *Total year to date December 2016 Financial topics Investor overview 86

87 Breakdown of total raw material spend 2015 Packaging Coatings specialties Titanium dioxide 7% 10% 9% Solvents 9% 22% Chemicals and intermediates* Resins 24% 4% 15% Additives Pigments *Chemicals and intermediates include caustic soda, acetic acid, tallow, ethylene, ethylene oxide, sulfur, amines etc. Financial topics Investor overview 87

88 The net impact of a sustained lower oil price can have a positive impact Raw materials Freight and logistics Production Freight and logistics Sales GDP Inventories Financial topics Investor overview 88

89 Downstream oil related products have clearly different dynamics Feedstocks Base (petro)chemicals Intermediates and more complex molecules Intermediates Monomers, Precursors, etc. Solvents More complex molecules Crude Oil (Shale) Gas Coal Bio based Renewables Methanol Ethylene Ethanol Propylene Benzene Xylenes Etc. Monomers & Latex Resins Packaging Additives Financial topics Investor overview 89

90 2017 Financial assumptions Category Comments / assumption FY Revenue FY EBIT Acquisition BASF s Industrial Coatings business. The full profitability of the acquisition will be realized by the end of 2018, in line with the stated financial guidance for the Performance Coatings business ~ 280 mln Currencies Assuming December 2016 exchange rates ( : $1.05, 0.86, RMB 7.3) = / + = / + Transition during 2017/2018 Continuous improvement Seek year-on-year productivity gains from continuous improvement (e.g. ALPS and GBS) to at least offset inflation N/A mln (positive effect) Inflation Inflation on fixed cost base 2.5-3% Restructuring Medium term guidance 0.5-1% of revenue; 2017 in line with 2016 N/A ~ 70 mln Market growth Raw materials 2-3% (volume and price/mix), based on relevant geographic and market presence. Market trends in marine and oil & gas experienced in the second part of 2016 are expected to continue during the first half of 2017 We are likely to see higher year-over-year input costs in 2017 due to the inflationary environment, while there are various supply and demand dynamics related to our raw materials basket. We are taking appropriate measures to deal with higher raw material prices in an inflationary environment Tax rate ETR 28-29% Cash deployment Other Capital expenditures at 4-4.5% of revenue and RD&I at ~2.5% of revenue WACC ~7%, interest rate ~3.3%, OWC 10-12% of revenue Financial topics Investor overview 90

91 Manufacturing indices up in all regions and countries Purchase Managers Index (PMI)* Figures below 50 indicate pessimism Purchase Managers Index (PMI)* December US Japan Indonesia India US France Vietnam Russia China Sweden UK Netherlands Germany Eurozone China 40 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec Brazil *Bubble size=manufacturing output, 2016e (US$bn: 2010 prices) Sources: Oxford Economics, Markit (incl. US) Financial topics Investor overview 91

92 Foreign exchange a headwind in 2016 Decorative Paints Performance Coatings Specialty Chemicals Quarterly foreign exchange rate development in % year-on-year AkzoNobel % 0% -10% -20% -30% USD GBP CNY SEK BRL Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Financial topics Investor overview 92