Investor overview. July 25, 2017

Transcription

1 Investor overview July 25, 2017

2 Agenda Half-year and Q results AkzoNobel at a glance Specialty Chemicals Paints and Coatings Financial topics Investor overview 2

3 Continued focus on actions to improve shareholder relations Extensive dialog to date 285 meetings/calls with 212 investors in the past 6 months (vs 191 meetings/calls last year) 57 meetings/ calls with 104 investors in June (vs 26 meetings/calls last year) Shareholder survey conducted June 2017 delivered feedback from investors holding more than 42% of the total shareholding: Strategy well understood Further information sought: 1.Plans to achieve 2020 margin targets and growth 2.Specialty Chemicals business and separation 3.Consideration of PPG s proposals Next steps Program of meetings to introduce new CEO EGM on September 8, 2017 with agenda items: Appointment of Thierry Vanlancker Discussion regarding proposals made by PPG Creation of Supervisory Board committee for shareholder relations Appointed advisor for shareholder relations Senior Executive remuneration to be aligned to the new financial plan Augmented schedule of roadshows and conferences Enlarged program of analyst and investor webcasts and events Investor overview 3

4 Strategy update Micronutrients capacity being expanded in Europe: We re investing more than 10 million in Sweden to expand capacity for our chelated micronutrients, which are used as essential ingredients for agriculture. The project, at Kvarntorp, will help meet growing demand for micronutrients, particularly in regions with poor soil conditions. Due to be completed in 2018, the expansion will primarily add capacity for high performance iron chelates, in which we are the market leader.

5 Step change in growth and long-term value creation Strategy: Create two focused businesses Separation within 12 months Dual-track process with project teams in place Focused Paints and Coatings strategy Accelerating sustainable growth and profitability Clearer customer focus Fit for purpose organization and processes 150m savings per year from continuous improvement 2017 guidance 1 EBIT + 100m Paints and Coatings 2020 guidance 1 ROS 15% ROI >25% Increased shareholder returns: 50% higher dividend for bn special cash dividend Vast majority of net proceeds returned 3 Strong financial and operational foundation 1) Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption; 2) Dividend per share 1.65 for Paints and Coatings in 2018; 3) Specialty Chemicals separation Investor overview 5

6 Accelerating sustainable growth and value creation Capacity expansions in Brazil, Mexico, Sweden and Thailand Two acquisitions announced to strengthen Performance Coatings business Decorative Paint product launches including Levis in China and EasyCare in Brazil New set-up for Executive Committee Specialty Chemicals separation process on track for completion by April 2018

7 On track to create two focused high-performing businesses Alignment of leadership and organization structure underway Works Council engagement process ongoing Detailed roadmaps being implemented for critical transitions (including Legal and IT) All advisors appointed and working seamlessly with the AkzoNobel internal teams Commercial, Financial, Legal and Environmental due diligence taking place Separation process on track for completion by April 2018 Investor overview 7

8 Expect continuous improvement savings of m in 2017 ALPS 50% 90% KPIs improved OTIF >96% Engagement Focused on Paints and Coatings specific capabilities AkzoNobel Leading Performance System of Paints & Coatings sites Expanding into support functions GBS Delivering benefits Expansion opportunities IM HR Finance 5 regional hubs Serving 66% people Standardized Paints and processes ~75% Coatings ~75% Global Business Services Cash application payables

9 Operational and financial review Colorful mural celebrates community spirit: Artists from Argentina and Belgium have transformed one of the biggest slums in Buenos Aires. We donated more than 400 liters of our Alba decorative paints brand to help create a colorful open air gallery in Saldías. The main mural, which covers an area of around 800 square meters, celebrates the people and spirit of the local community.

10 Mixed market environment China Specialty Chemicals Powder Coatings ~ EMEA Latin America ~ South and SE Asia Marine industry Oil and gas industries

11 Continued growth while dealing with short-term headwinds Half-year 2017 Q Volumes Revenue Revenue Announced acquisition of Disatech 2% higher up 4% up 2% and for all Business Areas and Flexcrete EBIT up 1% Adjusted EPS up 4% at 2.40 Adjusted EPS 2% higher at 1.35 Official sustainability partner of the 2017/2018 Volvo Ocean Race Share repurchase program completed Investor overview 11

12 Volumes up for Paints and Chemicals and price/mix effects improving Decorative Paints Performance Coatings Specialty Chemicals Quarterly volume development in % year-on-year 0 AkzoNobel Quarterly price/mix development in % year-on-year * Includes acquisitions Investor overview 12

13 Higher volumes while increased raw material costs not yet fully compensated Increase Decrease * Other includes raw materials, restructuring costs and productivity improvements, wage inflation, depreciation and amortization Investor overview 13

14 Half-year 2017: Revenue up for all Business Areas million H H Δ% Revenue 7,141 7,446 4 EBIT (Operating income excluding identified items) Operating income (4) Ratio, % H H ROS* Moving average ROI* Revenue development H Increase Decrease Customers in the South East Asia region will benefit from a new 31million multi-site facility in Chonburi, Thailand. *ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital Investor overview 14

15 Q2 2017: Revenue up, mainly due to acquisitions million Q Q Δ% Revenue 3,711 3,785 2 EBIT (Operating income excluding identified items) (6) Operating income (10) Ratio, % Q Q ROS* Moving average ROI* Revenue development Q Increase Decrease Launch of new project to renovate outdoor artworks by Tomie Ohtake in Brazil. *ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital Investor overview 15

16 Decorative Paints half-year 2017: Higher volumes and profitability million H H Δ% Revenue 1,916 1,968 3 EBIT (Operating income excluding identified items) Operating income AkzoNobel has launched its Levis premium paint brand in the professional market segment in China. Ratio, % H H ROS* Moving average ROI* Revenue development H Increase Decrease *ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital Investor overview 16

17 Decorative Paints Q2 2017: Volume growth driven by Asia and LATAM million Q Q Δ% Revenue 1,055 1,046 (1) EBIT (Operating income excluding identified items) (8) Operating income (8) Artists in Malaysia created murals for Starbucks stores using colorful paints provided by AkzoNobel. Ratio, % Q Q ROS* Moving average ROI* Revenue development Q Increase Decrease *ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital Investor overview 17

18 Performance Coatings half-year 2017: Revenue up, driven by acquisition million H H Δ% Revenue 2,861 2,975 4 EBIT (Operating income excluding identified items) (5) Operating income (5) Ratio, % H H ROS* Moving average ROI* Revenue development H Increase Decrease AkzoNobel completed an expansion of its US research and development facilities in Houston, Texas. *ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital Investor overview 18

19 Performance Coatings Q2 2017: Continued weak demand in marine million Q Q Δ% Revenue 1,473 1,504 2 EBIT (Operating income excluding identified items) (9) Operating income (9) Ratio, % Q Q ROS* Moving average ROI* Revenue development Q Increase Decrease An expansion in Santo Andre, Brazil, will enable the company to be more agile in responding to local customer needs. *ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital Investor overview 19

20 Specialty Chemicals half-year 2017: Revenue and EBIT up due to higher volumes million H H Δ% Revenue 2,412 2,548 6 EBIT (Operating income excluding identified items) Operating income Ten start-ups will see their innovative ideas move a step closer after being named winners of AkzoNobel s global Imagine Chemistry challenge. Ratio, % H H ROS* Moving average ROI* Revenue development H Increase Decrease *ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital Investor overview 20

21 Specialty Chemicals Q2 2017: Revenue up, with growth in all regions million Q Q Δ% Revenue 1,206 1,259 4 EBIT (Operating income excluding identified items) Operating income Ratio, % Q Q ROS* Moving average ROI* Revenue development Q Increase Decrease Increased organic peroxide capacity for North American specialty chemicals market. *ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital Investor overview 21

22 Free cash flow impacted by higher tax paid and changes to provisions million H H EBITDA 1,129 1,154 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 Investor overview 22

23 IAS19 pension deficit 0.8 billion Key pension financial assumptions Q Q Discount rate 2.4% 2.4% Inflation rate 3.1% 3.0% Pension deficit development during H Increase million Decrease Investor overview 23

24 Concluding remarks A large area of Brazilian rainforest located within one of AkzoNobel's sites is being planted with around 12,000 seedlings of species native to the region as part of an ongoing project to safeguard the fragile ecosystem.

25 Investment in sustainability, innovation and society key for long-term value creation Investor overview 25

26 Outlook We continue to anticipate positive developments for EMEA (excluding the UK), North America and Asia, improving during the year, while Latin America is expected to stabilize. Market trends will remain challenging for the marine and oil and gas industries. We have improved our ability to respond to developments in our markets and continue taking appropriate measures, including structure to drive operational excellence and additional cost control, to deal with higher raw material prices in an inflationary environment. We continue to expect EBIT for 2017 to be around 100 million higher than 2016, as a result of growth momentum and continuous improvement, assuming no further material changes in market and economic dynamics, including foreign currencies.

27 Questions AkzoNobel launches Human Cities Coalition: More than 150 stakeholders and 20 partners including Arcadis, Philips, ABN-AMRO, the Dutch Ministry of Foreign Affairs and Slumdwellers International have come together to form the Human Cities Coalition. Founded by AkzoNobel, its key focus is on realizing Goal 11 of the United Nations 17 Sustainable Development Goals: sustainable cities and communities.

28 AkzoNobel at a glance

29 Global paints, coatings and specialty chemicals company 14.2 billion revenue 1,502 million EBIT 80+ countries 46,000 employees Leadership positions in many markets Revenue by Business Area EBIT by Business Area Revenue by geographic region 33% 27% 40% Performance Coatings Decorative Paints Specialty Chemicals 7% 4% Mature Europe 36% 9% Asia Pacific 36% 43% North America 21% 17% 27% Latin America Emerging Europe Other

30 Revenue split per Business Unit Decorative Paints Performance Coatings Specialty Chemicals 31% 13% 56% EMEA Latin America Asia 48% 26% 26% Marine and Protective Automotive and Specialty Industrial and Powder 21% 19% 25% 35% Functional Industrial Surface Pulp and Performance

31 Buildings and infrastructure Transportation New build projects Maintenance, renovation & repair 44% Automotive repair Automotive OEM, parts and assembly 17% Building products and components of revenue Marine and air transport of revenue Consumer goods Industrial Consumer durables 18% Natural resource and energy industries 21% Consumer packaged goods of revenue Process industries of revenue

32 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 Investor overview 32

33 2016: 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

34 2016: 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 Investor overview 34

35 Delivering on our commitments Return on sales 1 % Return on investment 1 % EBIT 2 million Free cash flow 3 million 10, , ,3 7,5 8,2 10, guidance guidance outlook ROS% = EBIT/revenue and Moving average ROI (in %) = 12 months EBIT/12 months average invested capital 2 EBIT = Operating income excluding identified items and including exchange rate results 3 Before pension top-up payments Investor overview 35

36 Creation of two focused businesses is the logical next step 2017 onwards: Unlocking further value and accelerating growth Pre-2012: Historical challenges : Building the foundation 2016: Continuous improvement and growth Two focused businesses High-performing Scale and capabilities to stand on their own Strong cash generation Investor overview 36

37 Step change in growth and long-term value creation Strategy: Create two focused businesses Separation within 12 months Dual-track process with project teams in place Focused Paints and Coatings strategy Accelerating sustainable growth and profitability Clearer customer focus Fit for purpose organization and processes 150m savings per year from continuous improvement 2017 guidance EBIT + 100m Paints and Coatings 2020 guidance 1 ROS 15% ROI >25% Increased shareholder returns: 50% higher dividend for bn special cash dividend Vast majority of net proceeds returned 3 Strong financial and operational foundation 1) Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption; 2) Dividend per share 1.65 for Paints and Coatings in 2018; 3) Specialty Chemicals separation Investor overview 37

38 Accelerating growth momentum and enhanced profitability Paints and Coatings Specialty Chemicals guidance* 2020 guidance* guidance* 2020 guidance* ROS 10-12% ROS 15% ROS % ROS 16% ROI >25% ROI >18% ROI >16% ROI >20% Clear aim to grow faster than relevant markets 2020 guidance for AkzoNobel (current portfolio) ROS 14% and ROI >20% * Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption Investor overview 38

39 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) Investor overview 39

40 Strong culture to support a step change in growth and value creation Top quartile safety performance Our Code of Conduct: Engagement increasing for six years running Investor overview 40

41 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 Investor overview 41

42 Specialty Chemicals: Unleashing an industry leader to achieve its full potential

43 World class Specialty Chemicals business 4.8bn revenue 953m EBITDA North America 24% Mature Europe 43% Emerging Europe 4% Asia Pacific 17% 629m EBIT 13.2% ROS 17.9% ROI 9,000 people Balanced portfolio of interlinked businesses High profitability in all businesses Proven resilience of portfolio through cycles Leadership positions in high growth segments Latin America 10% * All figures are based on year-end 2016, excluding unallocated corporate center costs and invested capital Other countries 2% Key regions by revenue Investor overview 43

44 Highly profitable, interlinked and resilient portfolio Business units Platforms Shared capabilities All three platforms: 18%-22% EBITDA margin* Resilient portfolio over cycle Surfactants Surface Chemistry Ethylene Oxide Network Functional Chemicals Polymer chemistry Functional Chemicals Salt-chlorine chain Industrial Chemicals Bleaching chemicals Pulp and Performance Chemicals Bio-based and ethoxylation Green electrochemistry Plastics industry Long-term customer partnerships Integrated value chains One ERP Innovation and sustainability *Excluding unallocated corporate center costs Investor overview 44

45 Substantially improved profitability Main profitability drivers from Portfolio management Expanded asset base in emerging markets EBITDA ( million)* Significant upgrade in long-term partnerships Continuous improvement and productivity programs Streamlined organization ROI (%)** *Excluding unallocated corporate center costs. ** Excluding unallocated corporate center costs and invested capital Investor overview 45

46 Leading positions driven by key customer relationships Strong business portfolio Over 80% in leadership positions Top quartile peer ranking for ROI Strong operational leverage Core competencies Key customers: Most relationships >10 years 98% retention of top 250 customers Global manufacturing: 30% in emerging markets Strong innovation and sustainability pipeline NPI 1 >12% and growing >5,000 active patents Eco-premium focus Top quartile safety and engagement 1 NPI = New product introductions, last five years

47 Outperform GDP due to focus on markets with strong growth drivers Key end-user segments Growth rate CAGR Share of our portfolio % Growth drivers Cleaning, personal care and pharma 5-7% 12% Replacement of phosphates, expanding middle class, developing countries, haircare Oil and gas (exploration, downstream, lubes and fuels) 5-6% 10% Recovery exploration, clean fuels (new markets) Cardboard packaging and tissues 4-5% 15% Sustainable packaging, e-commerce Plastics growth segments 3-4% 40% Light weighting, insulation and emission reduction, construction and consumer packaging Agriculture and food 3-4% 8% Population, changing dietary patterns, need for higher output per acre Construction 3-4% 8% Developing countries, GDP recovery Average 4% 93% Investor overview 47

48 Full focus on accelerating growth and value creation 3 Step change in growth post-separation Additional 200m EBITDA by Accelerating growth + 250m EBITDA by Continued operational excellence By 2020: 150m fixed cost savings, offsetting inflation 100m- 150m working capital release Investor overview 48

49 Continued operational excellence to accommodate significant growth 1 Continued operational excellence By 2020: 150m fixed cost savings offsetting inflation 100m-150m in working capital released through integrated business planning Operations productivity Maintenance reliability Manufacturing network optimization Indirect procurement Fit for purpose support functions Investor overview 49

50 Additional 250m EBITDA by Accelerating growth Debottlenecking to create volume leverage Asset-light strategy driven by technology leadership Supply/demand driven margin management Commercialize existing NPI pipeline Asset light strategy with ICL salt Processing 1.5m tons potash to high purity salt Competitive new position in Mediterranean 60m capex avoidance Performance advantage of CiD technology Unique, patented technology for PVC customers Improves customer productivity up to 30% Delivers better PVC quality 8 out of 30 large PVC players worldwide (+10 in pipeline) Investor overview 50

51 Well positioned to significantly improve performance: increased guidance Return on sales * % Return on investment * % 16 >20 13, ,9 20 9,5 10,4 14,2 14, guidance** guidance** *ROS% = EBIT/revenue and moving average ROI (in %) = 12 months EBIT/12 months average invested capital **Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption Investor overview 51

52 Opportunity for step change in growth post-separation 3 Step change in growth post-separation Incremental impact by 2022 (above stated guidance) Incremental growth investments ~ 100m annually m revenue + 200m EBITDA Attractive pipeline of projects: Emerging markets and high growth segments Growth with pipeline customers Commercialization of innovations Collaboration with start-ups and universities <4 year payback Investor overview 52

53 Unleashing an industry leader to achieve its full potential 3 Step change in growth post-separation Additional 200m EBITDA by Accelerating growth guidance 2020 guidance* 1 Continued operational excellence ROS % ROI >16% ROS 16% ROI >20% *Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption * Investor overview 53

54 SPECIALTY CHEMICALS Dual-track process for separation within 12 months Dual-track process Decision criteria Separate listed entity Sale IPO Spin-out Text In whole Strategy Value Speed/timeline Tax Pensions Stakeholders Legal Liabilities Risk Current estimated market value* 8bn- 12bn (8-12x EBITDA) Vast majority of net proceeds returned to shareholders In many parts Project teams in place to deliver *Based on analyst reports Investor overview 54

55 World leading Paints and Coatings company

56 The new world of Paints and Coatings 9.5bn revenue 1.4bn EBITDA 1.1bn EBIT 11.7% ROS 20.8% ROI 34,400 people North America 13% Mature Europe 33% Emerging Europe 8% Asia Pacific 33% Revenue by end-user segment 13% 9% Buildings and Infrastructure Transportation Consumer Goods 55% Industrial 23% Key regions by revenue Latin America 9% Other countries 4% All figures are based on year-end 2016, excluding unallocated corporate center costs and invested capital

57 Well positioned to accelerate growth and enhance profitability Return on sales * % Return on investment* % > , ,8 6,6 8, guidance** guidance** *ROS% = EBIT/revenue and moving average ROI (in %) = 12 months EBIT/12 months average invested capital **Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption Investor overview 57

58 Leading markets positions delivering leading performance Paints and Coatings Build world class brands and color expertise guidance* 2020 guidance* Drive digital and innovation #1 choice for customers Lead the way in sustainability ROS 10-12% ROI >20% ROS 15% ROI >25% Live our values, principles, and develop our people Continue to improve and excel Clear aim to grow faster than relevant markets: 4% * Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption Investor overview 58

59 Leading markets positions delivering leading performance Strategically aligned and value generating acquisitions Build world class brands and color expertise Accelerating growth: 4% per year Seizing growth opportunities in emerging markets Invest in brands and innovation Drive digital and innovation #1 choice for customers Lead the way in sustainability Leverage digital and color expertise Commercial excellence driving growth Live our values, principles, and develop our people Continue to improve and excel Operational excellence: 150m savings per year AkzoNobel Leading Performance System (ALPS) Global Business Services (GBS) Leverage combined supply chain Top quartile working capital management Investor overview 59

60 #1 choice for customers driving above market growth rate ~ 100 billion Global paints and coatings market Market leading positions AkzoNobel revenue ~ 10 billion, 2016 ~ 60 billion AkzoNobel active markets 10% #1 #2 #3 28% 62% ~ 10 billion AkzoNobel market share AkzoNobel revenue, 2016 Expand leadership positions through organic growth and acquisitions Paints and Coatings Investor overview 60

61 Paints: Seizing growth in China Geographically Increasing points of sale Portfolio Building on success of sustainable products Segmentation Increasing focus on premium, and high growth mid and mass segments Launched Forest Breath in China Features anti-bacterial properties that improve indoor air quality

62 Paints: Strong market positions in all our geographic regions Market size billion, 2016 Market position by value, 2016 Market growth %, Latin America UK & Ireland Eastern & Southern Europe & Africa North & West Europe South East & South Asia & Middle East China & North Asia 5.0 *Total market growth (revenue weighted) %* Clear aim to grow faster than relevant markets: 4% SOURCE: Global paints and coatings by market, Orr & Boss, excluding ~ 21 billion regions where we are not present Investor overview 62

63 Coatings: Strong market positions in all our global segments Market size Market position Market growth billion, 2016 by value, 2016 %, Powder Marine Protective Coil Specialty Plastics Aerospace Packaging Wood Finishes Vehicle Refinish %* Clear aim to grow faster than relevant markets: 4% *Total market growth (revenue weighted) SOURCE: Orr & Boss base data for segment sizes, excluding ~ 19 billion segments where we are not present Investor overview 63

64 Drive digital and innovation Virtual reality center opened in the UK Dronecontrolled imaging for inspection Interplan mobile app 13m downloads Visualizer app Intertrac Vision tool to assess and predict the risk of hull fouling to help customers with effective maintenance planning

65 Drive digital and innovation 12.6m in new innovation hub in the UK Velvet touch premium paints adding a visual and physical touch to walls Ambiance premium interior and special effects paints to personalize your walls Water-based can coating preserves taste and quality Forest Breath in China improves indoor air quality Chartek 7E low weight fire protection coating system

66 Build world class brands and color expertise Color Futures Color of the Year and trend report Colorvation Spectrophotometers to formulate paint for invisible car repair Roller wet testers Award-winning innovation Color palette for Rijksmuseum known as Sikkens RIJKS Colors 2m colors in new MIXIT app, launched this year

67 Continue to improve and excel Commercial excellence focused on driving above market growth rate Commercial excellence Best practice tools and sales processes for relevant go-to-market models Sales force training and capability building Customer relationship management (CRM) processes and systems Customer satisfaction measurement Sales force incentive program

68 Continue to improve and excel Continuous improvement will deliver 150m savings per year ALPS 90% KPIs improved OTIF >96% Engagement Focused on Paints and Coatings specific capabilities AkzoNobel Leading Performance System 50% of sites Expanding into support functions GBS Delivering benefits Expansion opportunities IM HR Finance 5 regional hubs Serving 66% people Standardized Paints and processes ~75% Coatings ~75% Global Business Services Cash application payables

69 Lead the way in sustainability Industry leader in sustainability 10% fuel saving and carbon credits for ship owners Intersleek Consortium leader for purchase of wind power 100% renewable energy and carbon neutral by % energy saving through heat reflection Weathershield 25-30% lower carbon emissions by 2020 (2012 base) 50% of products with sustainability benefits Key for long-term sustainable value creation

70 Live our values, principles, and develop our people Strong culture to support a step change in growth and value creation Top quartile safety performance Our Code of Conduct: Engagement increasing for six years running Investor overview 70

71 Strong financial foundation for growth and value creation

72 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 Investor overview 72

73 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 Investor overview 73

74 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 Investor overview 74

75 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% ,572 1,384 1,418 1,385 1,405 8% 6% 4% 2% % Investor overview 75

76 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; Investor overview 76

77 Further de-risking of pension liabilities including 0.3 billion non-cash buy-ins* Other post-retirement benefits Other pension plans Various activities to reduce liabilities 8.7 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 March 2017 Investor overview 77

78 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 Investor overview 78

79 1.6bn return to shareholders for 2017 Intention Amount Method Increased growth and profitability 2020 guidance* 50% higher dividend for bn total 2.50 dividend per share for dividend per share for Paints and Coatings in 2018 Stable to rising policy Separation of Specialty Chemicals Advance proceeds Unlocking value 1bn special cash dividend Vast majority of net proceeds returned to shareholders 4 special dividend per share paid in November 2017 Depending on separation option *Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption Investor overview 79

80 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 2,5 1,5 0,5 Net debt ( billion)/ebitda Average cost of long-term bonds % 1,5 1 0, Investor overview 80

81 Creation of two focused businesses is the logical next step Results to date Increased profit and cash generation Repayment of high interest bonds Net debt reduced to 0.6x EBITDA De-risked pension liabilities Upgraded to A- by S&P in 2016 Future Optimize capital structure for two focused companies Aim for BBB+ for Paints and Coatings Specialty Chemicals BBB, depending on separation option Investor overview 81

82 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 Investor overview 82

83 Capital allocation driving step change in growth and long-term value creation 1. Profitable organic growth Innovation and capital expenditure 2. Dividend Stable to rising dividend 3. Acquisitions Strategically aligned and value generating 4. Manage pension liabilities Limit risk and reduce uncertainty 5. Balance sheet Retain strong investment grade credit rating Investor overview 83

84 Breakdown of total raw material spend 2016 Packaging Latex and monomers Titanium dioxide 10% 9% 8% Solvents 8% 22% Chemicals and intermediates* 23% 15% Resins 5% Additives Pigments *Chemicals and intermediates include caustic soda, acetic acid, tallow, ethylene, ethylene oxide, sulfur, amines etc. Investor overview 84

85 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 Investor overview 85

86 2017 Financial assumptions Category Comments / assumption FY Revenue FY EBIT Acquisition Acquired 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: We continue to anticipate positive developments for EMEA (excluding the UK), North America and Asia, improving during the year, while Latin America is expected to stabilize. Market trends will remain challenging for the marine and oil and gas industries Raw material prices higher compared with 2016: We have improved our ability to respond to developments in our markets and continue taking appropriate measures, including structure to drive operational excellence and additional cost control, 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 Investor overview 86

87 Upcoming events Extraordinary General Meeting of shareholders September 8, 2017 Report for the third quarter 2017 October 18, 2017 Report for the full-year and fourth quarter 2017 February 8, 2018 Report for the first quarter 2018 April 24, 2018 Annual General Meeting of shareholders April 26, 2018 Report for the second quarter 2018 July 18, 2018 Report for the third quarter 2018 October 17, 2018 Investor overview 87

88 Disclaimer/ forward-looking statements This presentation does not constitute or form a part of any offer, or any invitation or other solicitation of any offer, to buy or subscribe for any securities in AkzoNobel N.V. 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 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 Investor overview 88