Keith Nichols, CFO London, June 12, 2008 UBS Global Basic Materials Conference

Transcription

1 Keith Nichols, CFO London, June 12, 2008 UBS Global Basic Materials Conference

2 The new AkzoNobel: Key facts Pro forma 2007 Revenue 14.4 billion Around 60,000 employees EBITDA: 1.9 billion EBIT: 1.4 billion Net income: 903 million Pension under funding 1,475 million Revenue by segment Decorative Paints Specialty Chemicals Performance Coatings 32% 31% 37% 2

3 AkzoNobel around the world Revenue by destination 21% North America (incl. 7% US Deco) 49% Europe (incl. 7% emerging Europe) 19% Asia Pacific 8% Latin America 2% Other regions Pro forma

4 Q operational performance 4

5 Q highlights Ongoing trend of underlying growth, in local currencies, in most business areas Autonomous growth of 6 percent offset by currency headwind Stable results in challenging economic environment Earnings per share of continuing operations up 6 percent Total net income 118 million, up 40 million New company, new brand, ICI integration underway 5

6 Stable performance mln 2008 Δ% Revenue 3,506 1 EBITDA 398 (1) EBIT Net income 136 (4) Ratio EBITDA margin, % EBIT margin, % Earnings per share Continuing operations before incidentals; 2007 pro forma 6

7 Autonomous growth of 6 percent offset by currencies % Total Volume Price Currency Acq./div. Decorative Paints (4) (2) 3 (6) 1 Performance Coatings 2 2 (6) 2 Specialty Chemicals (6) AkzoNobel (6) 1 Versus Q1, 2007 proforma 7

8 Integration Update 8

9 Status report (1) Integration process well underway Making good progress in preparing full integration plan Complimentary company cultures supporting the integration process More than 100 people active in the integration teams, strong mix of ICI and Akzo Nobel 9

10 Status report (2) New management structure established Regional & functional leadership has been appointed Appointment of local leadership in progress Capturing synergies Synergies of 340 million; up 20% 10

11 Coatings an attractive industry 11

12 Coatings an attractive industry with strong growth potential Attractive industry Strong and stable cash flow Low cyclicality Low capital intensity Fragmented industry clear signs of consolidation High growth potential 12

13 Stable margins through the cycle Coatings industry average LTM EBITDA margins (1) 15% 14% 13% 12% (1) Average LTM EBITDA Margins sourced from Capital IQ. Companies included: DuPont, Kansai Paint, PPG, RPM International, Sherwin Willliams and Valspar 13

14 Consolidation in Coatings Industry Market share of Top 10 coatings companies (1) 50% 45% 35% 29% 32% 37% 44% 25% Example: number of US coatings companies (2) 1,500 1,380 1, , (1 ) Sourced from Euromonitor and Akzo Nobel Internal Sources (2 ) Sourced from The ChemQuest Group and BB&T Capital Markets 14

15 15

16 Strong growth potential (1 ) Per annum 16

17 A perfect strategic fit in Decorative Paints Presence on all continents Ability to serve customers worldwide Complementary fit across regions, markets and brands Well positioned in highly attractive platforms for growth 17

18 Geographic expansion into high growth markets Akzo Nobel Decorative Paints today Decorative Paints Revenues in 2007 of 2.4 billion EMEA 84,7% ICI s leading Decorative positions in emerging markets China #2 India #3 Indonesia #2 Malaysia #1 Pakistan #1 Pro Forma combined Pro forma Decorative Paints Revenues in 2007 of 5.3 billion EMEA 53,8% 1,7% Asia - Pacific 13,6% Americas Thailand #2 Vietnam #2 Brazil #2 Argentina #1 Asia - Pacific 12,6% 33,6% Americas 18

19 Strong international position in Coatings EMEA North America Emerging Markets Decorative AN AN AN Paints ICI ICI ICI Performance AN AN AN Coatings ICI ICI ICI Weak Moderate Strong 19

20 U.S. decorative market Largest (25%) and most attractive coatings market worldwide Under pressure since mid-2006 New build account for 22% of Deco market Revised strategy initiated by ICI end of 2006 Improved margins and profits Conservative assumptions made 20

21 US Decorative paints within Akzo Nobel Pro forma US Deco paints sales: 1 billion or 7% of total company revenues US Deco market declined by 10% in 2007 ICI Deco sales declined by 6%, but margins were up New construction - nonresidential 10% New contruction - residential 12% Maintenance / Repaint 78% Commercial Institutional 46% Residential 54% 21

22 Leading positions in Performance Coatings Industrial Activities: wood, coil and plastic coatings Marine & Protective Coatings: marine, protective, aerospace and yacht coatings. Leadership in innovation Car Refinishes: technology driven Packaging Coatings: attractive new business 22

23 Raw materials on balance slightly up Decorative Paint: Packaging materials Titanium dioxide Coatings specialties Performance Coatings: Resins and precursors Solvents Colored pigments Metals 23

24 Best in class Specialty Chemicals 24

25 Chemicals turned into a focused best in class business One third of portfolio divested in period 2004/06 Five growth platforms with market leadership positions Best in class operational performance Investing in emerging markets ROI EBITDA margin % 21% % 17% 25

26 Leading positions in specialty chemicals markets Pulp & Paper - #1 worldwide in bleaching Base Chemicals - #1 globally in MCA regional N/W Europe leadership in chlorine alkali business Functional Chemicals - leading positions in 3 market segments Surface chemicals - making good progress in turning around Polymer Chemicals - #1 globally in organic peroxides and metal alkyls 26

27 Raw materials relatively well positioned Specialty Chemicals - most important raw materials: - energy: hydro, nuclear, own co-generation facilities - ethylene one third of feedstock input linked to oil/gas prices large consumers are Pulp & Paper and Base Chemicals - salt, largely captive produced 27

28 Strategy going forward 28

29 Strategy going forward Accelerate organic growth, leveraging our leading positions Be an active consolidator throughout portfolio Capture the synergies of the ICI acquisition Further improve profitability through operational excellence Build a unique industrial brand 29

30 New AkzoNobel will be a top performer Attractive industry Strong portfolio Operational excellence Synergies Outgrow markets EBITDA performance to move to upper half of peer group 30

31 Peer group EBITDA performance Peer Group EBITDA Margins (1) DuPont 19.5% 19.0% 18.7% Hercules Inc. 18.3% 19.1% 19.4% BASF AG 17.7% 17.3% 16.7% PPG Industries Inc. 14.7% 15.2% 15.1% Sherwin-Williams Co. 14.3% 14.3% 14.0% Dow Chemical Co. 13.7% 12.6% 12.2% Kansai Paint Co. Ltd. 12.7% 12.9% 13.2% RPM International Inc. 12.7% 12.7% 12.4% Kemira Group 12.4% 10.9% 11.6% CIBA 12.1% 13.7% 14.1% Valspar Corp. 11.7% 11.4% 11.6% Arkema Sa 8.8% 9.7% 10.6% Average 14.1% 14.1% 14.1% Median 13.2% 13.3% 13.6% (2) Akzo Nobel 12.9% (1 ) Sourced from IBES Estimates and Capital IQ as at 21 Febuary, figures calendarised to December year end. Ranked by 2007 EBITDA margin estimates (2 ) Pro forma AN and ICI FY

32 Financial Strategy 32

33 Strong financial position mln March 31, 2008 Dec. 31, 2007 Equity 11,735 12,155 Net debt 3,483 2,832 Q1, mln Net cash from operating activities (400) (426) 2007 pro forma 33

34 Financial strategy post-2007 transformation Three guiding principles: - Solid capital structure - Attractive dividend payout ratio - Arm s length position for pensions 34

35 Solid capital structure Maintain investment grade rating (single A- to BBB+ range) FFO/adjusted net debt is key ratio Drivers Flexibility for growth strategy Avoid over-exposure to volatility of financial markets Continue to deal proactively with pension deficit 35

36 Create arm s length position on pension matters 2007 pro forma pension under funding 1.5 billion Committed to fund deficits over time Change to defined contribution (DC) for new entrants Ring fence other post retirement obligations 36

37 Return of additional cash to shareholders Initial 2007 share buyback program of 1.6 billion completed 2008/2009 capital return program: Share buyback program of 3.0 billion First tranche of 1.0 billion started mid March Completion expected by end Q1 / early Q YTD 14.2 million shares repurchased for 725 million 37

38 2007 dividend increased with 50% 2007 dividend up 50% to 1.80 per share Higher dividend triggered by Higher net income before incidentals Influence of initial share buyback: shares outstanding decreased by 10% Pay-out ratio of minimum of 45% of net income before incidentals (and fair value adjustments related to ICI deal) 38

39 Management Agenda 39

40 Management Agenda 2008 Outgrow our markets, further improve EBITDA margin Significant progress with integration ICI Capture first round of synergies Divesture of Specialty Starches Remedies divestures Roll out corporate brand program 40

41 Trading conditions 2008 AkzoNobel remains confident of outgrowing its markets At least maintaining results in line with

42 Questions? 42

43 Annex - Q results 43

44 Decorative Paints Strong top-line growth in Asia and Latin America Revenue down 4 percent, impacted by currency effects (-6 percent) US business affected by weak market conditions; US margins improved due to product mix effects and cost control programs EBITDA margin increased to 8.8 percent, ahead of

45 Decorative paints mln 2008 Δ% Revenue 1,165 (4) EBITDA EBIT Ratio, % EBITDA margin EBIT margin Before incidentals; 2007 pro forma 45

46 Performance Coatings Autonomous revenue growth of 4 percent 6 percent negative currency impact Slightly lower EBITDA margin of 11.6 percent Marine & Protective Coatings: another strong quarter Industrial Activities affected by weak US market conditions 46

47 Performance Coatings mln 2008 Δ% Revenue 1,096 EBITDA 127 (5) EBIT 103 (6) Ratio, % EBITDA margin EBIT margin Before incidentals; 2007 pro forma 47

48 Specialty Chemicals Strong autonomous growth of 11 percent; negative currency impact of 6 percent Pressure on margins from raw materials and energy compensated by price increases Slightly lower EBITDA margin of 17.1 percent Surface chemicals, Polymer Chemicals and Chemicals Pakistan leading improvement 48

49 Specialty Chemicals mln 2008 Δ% Revenue 1,199 5 EBITDA EBIT Ratio, % EBITDA margin EBIT margin Before incidentals; 2007 pro forma 49

50 Safe Harbor Statement This presentation contains statements which address such key issues as Akzo Nobel 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 50