Winning together: 15 by 20 Investor update Q4 2018

Transcription

1 Winning together: 15 by 20 Investor update Q February 13, 2019

2 Agenda Strategy: Winning Together Commercial: Passion for paint Operations: Precise processes Financial: Powerful performance Investor update Q Winning Together March

3 Strategy: Winning Together Winning Together March

4 A focused Paints and Coatings company Key regions by revenue 9.3bn revenue 1.0bn EBITDA 0.8bn EBIT 10.6% ROS 12.6% ROI 34,500 people North America 12% Mature Europe 34% Emerging Europe 9% Asia Pacific 31% South America 9% Other countries 5% All figures are based on year-end 2018, excluding unallocated corporate center costs and invested capital 4

5 Top 3 player with leading positions in large and attractive markets Global paints and coatings by market sector ~ 110 billion, 2017 Decorative paints Powder coatings General Industrial and Other; 14% North America; 10% Global paints and coatings market ~ 110 bn Protective coatings Wood finishes Vehicle refinish Specialty / plastics Marine coatings Coil coatings Packaging coatings Automotive OEM (metal) Automotive OEM (metal); 7% 2% 3% 3% 4% 6% 7% 7% 8% 30% AkzoNobel active markets ~ 70 bn AkzoNobel market share ~ 10 bn General Industrial / Other Source: KNG, Internal estimates Top 3 players ~30% total market Top 20 players ~60% total market Winning Together March

6 Performance versus peers improved; potential for further improvement remains ROS 15% 10% AkzoNobel Paints and Coatings 5% 0% Source: Company data, internal estimates Winning Together March

7 Well positioned to accelerate growth and enhance profitability Return on sales 1 % Unallocated corporate cost Return on investment 1 % Unallocated corporate cost and invested capital > guidance² guidance² 1) ROS% = EBIT/revenue and moving average ROI% = 12 months EBIT/12 months average invested capital 2) Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption Winning Together March

8 Winning together: 15 by 20 Passion for Paint Precise processes 2020 guidance* ROS 15% ROI >25% Powerful performance Proud people *Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption Winning Together March

9 Management team in place to deliver Thierry Vanlancker CEO Maarten de Vries CFO Ruud Joosten Chief Operating Officer David Prinselaar Chief Supply Chain Officer (effective March 1, 2019) Maëlys Castella Chief Corporate Development Officer Marten Booisma Chief Human Resources Officer Isabelle Deschamps General Counsel 9

10 Business Business Business Business Customer Customer Customer Customer Business Business Business Business Business Business Business Business New fit for purpose structure to increase customer focus and drive efficiency From To Customers Integrated business planning SC SC SC SC Integrated supply chain Winning Together March

11 Clear path to deliver on 2020 guidance 10.6% Growth and net price/ mix Continuous Improvement Integrated Supply Chain Transformation SG&A and RD&I Transformation 15% 2020 guidance* ROS 15% ROI >25% Fixed cost inflation *Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption Unallocated corporate cost Winning Together March

12 Commercial: Passion for paint Winning Together March

13 Strong portfolio of businesses with leading positions in all segments Segment Decorative Paints Marine and Protective Coatings Market size ~ bn, 2017¹ Market growth 2-3%², Position by revenue 1 1 Strengths and opportunities #1/#2 market positions where we play Strong brands and product portfolio Leverage global to win local! Marine: consolidated market Protective: few global players Global technology leadership 50% revenue from emerging markets Powder Coatings 8 1 Interpon #1 global brand Sustainable coatings conversions Strong product/ technology capabilities Industrial Coatings 12 1/2 Extensive product offering Strong position with top tier customers Urbanization and construction growth Automotive and Specialty Coatings 11 2/3 Growth of emerging market consumers Leader in digital color 1) Excluding ~ 40 billion in regions/segments where we are not present 2) Total market growth (revenue weighted) Source: KNG, internal estimate Winning Together March

14 Decorative Europe: Winning model to capture benefits in recovering market Largest player in fragmented market Market expected to continue recovery Others AkzoNobel Peer 1 Peer 2 Peer 3 50% #1 positions 30% #2 positions Decorative Paints Europe Market Size Index* % CAGR 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! Smart packaging design Global guidelines Local brand assets *Source: KNG 2017, internal estimate Winning Together March

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 China Growing demand for eco-premium products Leader in sustainability Doubled in 10 years 1000 Revenue Decorative Paints Asia ( million) South East Asia Developing a successful exterior proposition and leveraging best practice from Europe Winning Together March

16 Marine and Protective Coatings: ongoing restructuring and portfolio rebalancing Industry headwinds in marine and oil and gas industries Rebalancing portfolio for Protective Coatings 140, , ,000 80,000 Oil and gas capital expenditure ($ bn) Marine order book CGT* Oil & Gas Infrastructure, Power, Mining 60, Revenue development Marine and Protective coatings demonstrates lag effect 13% -5% 2% 11% -7% -11% Global market leader, defending strong positions Focus on value pricing; restructuring ongoing Maintain technology leadership, e.g. Intersleek UV-LED Source: Clarkson Research. *Compensated gross tonnage Winning Together March

17 Powder Coatings: Clear global #1 in fastest growing and highly profitable market AkzoNobel Multiple sources of growth (examples): Peer 1 Peer 2 New applications Architectural and automotive coatings Others Peer 3 Increased capacity Chengdu Biggest powder coatings plant in the world ~ 8bn market Growth 2x industrial GDP #1 with 2x relative market share Geographic expansion Product innovation Northern and Western India and Western China OneWheel, Interpon Cr Sustainability advantages of powder coatings over liquid coatings: Zero Volatile Organic Compounds (VOCs) Bolt-on acquisitions V.Powdertech, Thailand Less waste during application (>95% usage efficiency) Winning Together March

18 Operations: Precise processes Winning Together March

19 One organization with a common way of working and aligned set of targets 15,000 people 123 sites 448 warehouses 250m CAPEX/ yr AkzoNobel Leading Performance System: ALPS Customer excellence Operational excellence Leading edge technology Note: Total reportable rate (TRR) 1.0 is equivalent to 0.2, in line with OSHA guidelines 2020 targets: Safety TRR <1.0 (Top quartile) Service 98.5% Perfect Order Index (OTIF) Cost 4% annual cost productivity Capital Inventories 25% lower People Top quartile engagement Winning Together March

20 Journey to build a world-class integrated supply chain Today End to end ALPS customer and supplier focused processes to support delivery of 15% ROS by 2020 Integrated ALPS Integrated Business Planning process for all business units to improve financial performance Total quality and service excellence Supplier collaboration ALPS Digitization Organization transformation ALPS Integrated Business Planning Purchase to pay (procurement) + 200m annual cost savings by Functional ALPS continuous improvement processes and standardized ways of working Global functional strategy Common safety platform ALPS Plan, Source, Make, Deliver 120m cost savings annually Winning Together March

21 1 ALPS continuous improvement Implementation status (%) Plan 35% planning entities Source 60% organization Make 75% sites Deliver 20% warehouses 48 ALPS processes designed and deployed 3800 employees trained and certified ~700 ALPS improvement projects per year 67 site and warehouse closures Safety TRR 1.0 (Top quartile) Service >95.5% OTIF (Top quartile) 120m annual cost savings run rate Winning Together March

22 2 ALPS Integrated Business Planning +75% Forecast accuracy Organization transformation: One operating model Integrated Business Planning: One end-to-end business process 95.5% 98.5% Service (OTIF) 25% Inventory reduction Top Quartile Performance Winning Together March

23 One operating model and Integrated Business Planning 3 End to end processes Cost of sales ~ 5.4bn in 2017 Total quality and service excellence Supplier collaboration ALPS Digitization Asset network optimization Resource productivity Further 200m annual cost savings by 2020 in addition to ALPS continuous improvement Winning Together March

24 Financial: Powerful performance Winning Together March

25 Winning together strategy leverages greater focus to accelerate improvements Passion for Paint From Decentralized businesses Differing levels of maturity To Centrally driven sales excellence and margin management Consistent across all businesses Precise processes Fragmented process and system landscape Simplified ERP and system platform... Integrated end-to-end processes Powerful performance Proud people Independent businesses with dedicated supply chain Many KPIs... Diverse cultures Fragmented incentive schemes Lean fit-for-purpose organization Laser sharp focus on 15% ROS! One single global team Aligned incentives High-performance culture Winning Together March

26 Transformation plans in place with most projects already being initiated 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

27 Clear path to deliver on 2020 guidance 10.6% Growth and net price/ mix ~2%/ yr Continuous Improvement Integrated Supply Chain Transformation 200m by 2020 SG&A and RD&I Transformation 15% 2020 guidance* ROS 15% ROI >25% Fixed cost inflation ~ 100m/ yr Key initiatives: Fit-for-purpose organization ( 110m in 2018) Sales force effectiveness Innovation excellence Global Business Services ERP and systems platform *Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption Unallocated corporate cost Winning Together March

28 Strong bolt-on acquisitions completed during recent years BASF Industrial Coatings Expands our (technology) portfolio and strengthens our market positions, particularly in coil, protective and wood coatings sectors V.Powdertech Strengthens our leading global market position in powder coatings Fabryo Agreement to acquire Fabryo, becoming the leader in the Romanian decorative paints market Swire Acquisition of minority interest share to obtain full ownership of Chinese JV, enabling strategic flexibility Feb 2016: BASF Industrial Coatings Nov 2017: V.Powdertech June 2018: Fabryo Dec 2018: Swire Flexcrete Expands our offering in key industrial markets of downstream oil and gas, chemical processing, commercial infrastructure, power and water Note: Timeline shows date of acquisition announcement July 2017: Disatech July 2017: Flexcrete Disatech Brings new technologies and services that complement existing portfolio of coatings and films for the aerospace and transport sectors Sept 2018: Xylazel 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 Acquisition criteria: Strategically aligned and value generating Adding segment, geography and/or technology to the portfolio Disciplined approach 28

29 Investor update Q and future capital allocation February 13, 2018 We ve created a major buzz in the coatings industry with the launch of our Paint the Future startup challenge. We want to combine our global scale, know-how and expertise with the ingenious solutions of startups and scale-ups across the planet. It s all about connecting with new disruptive technologies and accelerating innovation in the dynamic world of paints and coatings.

30 Agenda Key highlights Financial review Future capital allocation Concluding remarks Q&A Investor update Q

31 Key highlights Investor update Q

32 2018 was a landmark year Completed sale of Specialty Chemicals business on October 1, 2018; returning a total of 6.5 billion to shareholders Robust pricing initiatives and cost-saving programs successfully fueled revenue growth in constant currencies and higher profitability in the second half of the year Progress towards delivering our Winning together: 15 by 20 strategy, despite continued headwinds from adverse currencies and higher raw material costs Phase one of our transformation to create a fit-for-purpose organization delivered on the 110 million planned savings for 2018 Next step taken in our transformation to deliver the next 200 million cost savings by 2020 Strong bolt-on acquisitions including Fabryo in Romania; Xylazel in Spain; Colourland Paints in Malaysia Acquisition of minority interest share to obtain full ownership of the AkzoNobel Swire Paints joint venture in China at opportune moment, enabling strategic flexibility Investor update Q

33 Q demonstrates positive impact of pricing initiatives and cost savings programs Revenue Up 4% In constant currencies Price/mix 9% higher (including 6% price) 2 billion capital repayment and share consolidation completed in January 2019 Cash top-up payments of main UK plans settled ROS* Increased to 9.0% (Q4 2017: 8.4%) Final dividend proposed for / share (post consolidation) 1 billion special cash dividend ( 4.50/ share) to be paid in February 2.5 billion share buyback to be commenced in February and completed by end 2019 *Excluding unallocated corporate center costs (continuing operations) Investor update Q

34 Winning together: 15 by 20 strategy delivering results and gathering momentum Sales force effectiveness Margin management Innovation excellence Price/mix increased 9% in Q4 (6% price) Launch of Paint the Future startup challenge 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 Monthly IBP cycles for all BUs Moving forward with ERP integration Continuous improvement > fixed cost inflation Fully delivered on 110m planned savings for 2018 Next step on track to deliver 200m by 2020 Successfully focused on value over volume Recognized as Top Employer in China and UK *Excluding unallocated corporate center costs Investor update Q

35 Dealing with market headwinds Industrial Coatings EMEA Powder Coatings Automotive and Specialty Coatings ~ South and South East Asia Latin America Foreign exchange Raw materials Marine and Protective Coatings ~ China ~ Investor update Q

36 Pricing initiatives and clear strategic mandates focus on value over volume Decorative Paints Performance Coatings Quarterly price/mix development in % year-on-year Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Paints and Coatings Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Quarterly volume development in % year-on-year Impact Decorative Paints China Impact Decorative Paints China -7 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 (continuing operations) Investor update Q

37 Positive price/ mix and cost savings offsetting higher raw materials Adjusted operating income bridge: Q to Q Positive impact Negative impact Q Adjusted operating income FX Volumes Price/mix Raw materials/ Variable cost OPEX Other items Q Adjusted operating income (continuing operations) Investor update Q

38 Financial review Investor update Q

39 Revenue up 4% in constant currencies and adjusted operating income higher million Q4 2017¹ Q Δ% Δ%CC Revenue 2,283 2,308 1% 4% Adjusted EBITDA Adjusted operating income % Operating income (51%) ROS% excluding unallocated costs 8.4% 9.0% ROS% 1 7.8% 7.8% ROI% % 12.6% Revenue development Q (%) -7 Increase Decrease Impact Decorative Paints China 1. ROS% = Adjusted operating income/revenue. ROI% = 12 months adjusted operating income/12 months average invested capital. (continuing operations) Revenue up 4% in constant currencies, with positive price/mix offset by lower volumes Volumes in China have normalized to 2016 levels Overall volumes were 7% lower (2% lower, excluding China) Adjusted operating income higher, driven by pricing initiatives and cost saving programs despite 8m adverse impact from foreign currencies Operating income includes 113m adverse impact from identified items, mainly related to one-off non-cash pension costs based on a UK legal precedent set in October 2018.* Investor update Q

40 Decorative Paints revenue up in constant currencies, driven by pricing initiatives million Q Q Δ% Δ%CC Revenue (3%) 3% Adjusted EBITDA (13%) Adjusted operating income (10%) Operating income (10%) ROS%* 6.3% 5.8% ROI%* 12.5% 12.4% Revenue development Q (%) -6 Increase Decrease Impact Decorative Paints China *ROS% = Adjusted operating income/revenue. ROI% = 12 months adjusted operating income/12 months average invested capital. Asian acquisitions underline commitment to key markets. We acquired Colourland Paints in Malaysia, which will boost our growth ambitions in the country itself and throughout South-East Asia. Investor update Q

41 Performance Coatings ROS higher, driven by pricing initiatives and cost savings million Q Q Δ% Δ%CC Revenue 1,372 1,403 2% 4% Adjusted EBITDA % Adjusted operating income % Operating income (2%) ROS%* 9.7% 10.9% ROI%* 23.4% 20.5% Revenue development Q (%) Increase Decrease Yacht owners can now benefit from advanced coatings technology Awlgrip HDT which passed the ultimate test during the latest edition of the Volvo Ocean Race. *ROS% = Adjusted operating income/revenue. ROI% = 12 months adjusted operating income/12 months average invested capital. Investor update Q

42 Net income Q4 and full-year 2018 impacted by one-off non-cash items Q Q million FY 2017 FY Operating income (15) (23) Net financing expenses (78) (52) 2 6 Results from associates and joint ventures Profit before tax (81) (6) Income tax (253) (118) Profit from continuing operations ,814 Profit from discontinued operations 393 6, ,859 Profit for the period 904 6,729 (17) (10) Non-controlling interests (72) (55) 75 5,849 Net income from total operations 832 6,674 Q Q Earnings per share (in ) FY 2017 FY Total operations Q Q Adjusted earnings per share (in ) FY 2017 FY Total operations Continuing operations (continuing and discontinued operations) Investor update Q

43 Q4 resulted in higher net cash from operating activities and free cash flow Q Q in millions FY 2017 FY Profit for the period Amortization and depreciation Changes in working capital (105) (177) (9) 45 Changes in provisions (338) (203) (2) (1) Of which pension top-up payments (221) (187) (44) (48) Interest paid (81) (89) (62) (53) Income tax paid (266) (164) Other changes Net cash from operating activities (85) (54) Capital expenditures (250) (160) Free cash flow (from operations) Free cash flow, excluding pension top-up payments Net Debt 1,951 (5,861) (continuing operations) Investor update Q

44 Future capital allocation Investor update Q

45 Updated capital allocation priorities 1. Chemicals separation 2. Profitable organic growth 3. Acquisitions Total of 6.5 billion returned to shareholders before end 2019 Clear mandates per (sub)segment and geography Revenue growth ~2% and capital expenditure ~ 250m per year Unallocated corporate center costs m in 2019 and 2020 Strategically aligned and value creating acquisitions 4. Dividend Stable to rising dividend ( 1.80 per share for 2018) 5. Pension liabilities 6. Balance sheet Cash top-up payments of main UK plans settled (Q1 2019) Target leverage ratio of Net Debt / EBITDA of by end 2020 Retain strong investment grade credit rating Investor update Q

46 Net Cash Net Debt Net debt evolution towards 2020 Net Leverage 1.7x Net Leverage (5.6x) Net Leverage 1.0x 2.0x Potential for further capital returns to shareholders (December 2017) (January 2019) (February 2019) (February to end 2019) Return of proceeds from Specialty Chemicals Investor update Q

47 Cash top-up payments of main UK plans settled (Q1 2019) 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 Estimated cash top-ups million Updated 630 Cash Cash to escrow account E 2020 E 2021 E 2022 E 2023 E 2024 E Relate mainly to two UK plans: ICI Pension Fund and the Akzo Nobel (CPS) Pension Scheme Investor update Q

48 Proposed final dividend of 1.43 per share Dividend per share Related to the Speciality Chemicals business Final dividend 2.50 Interim dividend Total 2018 dividend of 1.80 per share Dividend policy remains to pay a stable to rising dividend Dividend paid in cash (scrip option suspended) Dividend Yield* % 2.5% 2.8% 2.6%** 2.6% *Based on year-end share price **Based on rebased dividend Investor update Q

49 Concluding remarks Investor update Q

50 2018 was a landmark year Completed sale of Specialty Chemicals business on October 1, 2018; returning a total of 6.5 billion to shareholders Robust pricing initiatives and cost-saving programs successfully fueled revenue growth in constant currencies and higher profitability in the second half of the year Progress towards delivering our Winning together: 15 by 20 strategy, despite continued headwinds from adverse currencies and higher raw material costs Phase one of our transformation to create a fit-for-purpose organization delivered on the 110 million planned savings for 2018 Next step taken in our transformation to deliver the next 200 million cost savings by 2020 Strong bolt-on acquisitions including Fabryo in Romania; Xylazel in Spain; Colourland Paints in Malaysia Acquisition of minority interest share to obtain full ownership of the AkzoNobel Swire Paints joint venture in China at opportune moment, enabling strategic flexibility Investor update Q

51 Outlook 2020 guidance* ROS 15% ROI >25% We are delivering towards our 'Winning together: 15 by 20' strategy and continue creating a fit-forpurpose 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 macroeconomic environment. Raw material inflation is expected to continue during the first half of 2019, although at a lower rate than Robust 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 We target a leverage ratio of between 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 Q

52 Upcoming events Ex-dividend date of special cash dividend February 20, 2019 Record date of special cash dividend February 21, 2019 Payment of special cash dividend February 25, 2019 Publication annual report March 7, 2019 Report for the first quarter 2019 April 24, 2019 Annual General Meeting of shareholders April 25, 2019 Ex-dividend date of 2018 final dividend April 29, 2019 Record date of 2018 final dividend April 30, 2019 Payment of 2018 final dividend May 6, 2019 Investor update Q

53 A focused, high performing, paints and coatings company 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 2020 guidance* ROS 15% ROI >25% * Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption Investor update Q

54 Appendix Investor update Q

55 Pricing initiatives and cost savings compensating for higher raw material costs million FY 2017¹ FY 2018 Δ% Δ%CC Revenue 9, (4%) 1% Adjusted EBITDA 1,181 1,037 (12%) Adjusted operating income (12%) Operating income (27%) ROS% excluding unallocated costs ROS% ROI% Revenue development full-year 2018 (%) Increase Decrease Impact Decorative Paints China 1. ROS% = Adjusted operating income/revenue. ROI% = 12 months adjusted operating income/12 months average invested capital. Revenue was 4% lower, although up 1% in constant currencies. Volumes were 5% lower versus an exceptionally strong last year in China, and driven by our value over volume strategy Adjusted operating income at 798 million (2017: 905 million), was impacted by adverse currencies, higher raw material costs and lower volumes, partly compensated by pricing initiatives Savings from continuous improvement more than offset fixed cost inflation. Creating a fit-for-purpose organization fully delivered on the 110 million planned savings for 2018 (continuing operations) Investor update Q

56 Full-year 2018: Decorative Paints million FY 2017 FY 2018 Δ% Δ%CC Revenue 3,898 3,699 (5%) 1% Adjusted EBITDA (7%) Adjusted operating income (1%) Operating income (8%) ROS%* ROI%* Revenue development full-year 2018 (%) Increase Decrease Impact Decorative Paints China Revenue was 5% lower, although up 1% in constant currencies Price/mix effects were up 4% overall. Volumes were 3% lower, driven by our value over volume strategy and versus an exceptionally strong last year Adjusted operating income was 5 million lower, and up in constant currencies. Higher selling prices and cost savings offset higher raw material costs Operating income was impacted by 38 million identified items relating to the transformation of the organization *ROS% = Adjusted operating income/revenue. ROI% = 12 months adjusted operating income/12 months average invested capital. Investor update Q

57 Full-year 2018: Performance Coatings million FY 2017 FY 2018 Δ% Δ%CC Revenue 5,775 5,587 (3%) 1% Adjusted EBITDA (6%) Adjusted operating income (6%) Operating income (14%) ROS%* ROI%* Revenue development full-year 2018 (%) 7 Increase Decrease Revenue was 3% lower and up 1% in constant currencies. Pricing initiatives continued to gain traction, with further increases planned. Volumes were lower Adjusted operating income decreased. The impact of pricing initiatives, asset network optimization and cost control did not yet fully offset adverse currencies, higher raw material costs and lower volumes Operating income was adversely impacted by 52 million identified items relating to the transformation of the organization *ROS% = Adjusted operating income/revenue. ROI% = 12 months adjusted operating income/12 months average invested capital. Investor update Q

58 IAS19 pension surplus following sale of Specialty Chemicals Key pension financial assumptions Q Q Discount rate 2.4% 2.7% Inflation rate 3.0% 3.1% million Continuing operations 1,200 1,000 (41) (200) (163) Q4 2017* 524 Sale of Specialty Chemicals** Q Top-ups Discount rates on DBO Inflation on DBO (479) Asset return over P&L (31) (57) UK Buy-ins UK GMPs cost 41 Increase Decrease 442 Other Q *Includes discontinued operations **Does not include movements from Q to end Q Investor update Q

59 6.5 billion return to shareholders to be completed before end 2019 Apr 19, 2017 Dec 7, 2017 Oct 1, 2018 Jan 22, 2019 Before end 2019 Announced separation of Specialty Chemicals business within 12 months Advance proceeds of separation paid as special dividend of 1 billion ( 4/ share) Closed sale of Specialty Chemicals to The Carlyle Group and GIC 2 billion capital repayment and share consolidation 2.5 billion share buyback program Nov 30, 2017 Mar 27, 2018 Nov 13, 2018 Feb XX, 2019 EGM to approve separation of Specialty Chemicals Announced sale of Specialty Chemicals for 10.1 billion to The Carlyle Group and GIC EGM to approve capital repayment and share consolidation 1 billion special cash dividend Investor update Q

60 Breakdown of total raw material spend 2018 (%) Titanium dioxide Additives Specialty resins Commodity resins 19 Solvents Pigments and colorants Packaging 11 Latex and monomers Investor overview 60

61 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 Investor update Q