Investor overview. October 18, 2017

Transcription

1 Investor overview October 18, 2017

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

3 Strategy update Investing in UK production : We opened the world s most sustainable paint factory, capable of producing over 200 million liters of paint per year. Ashington will be the production center for Dulux, the world s leading paint brand.

4 Growth momentum continues while dealing with industry specific headwinds Higher volumes and increased revenue, despite challenging market conditions in selected areas Capacity expansions in Sweden and China Launched the world s most advanced and sustainable paint factory in Ashington, UK Industry specific headwinds continue, including higher raw material prices Measures to mitigate current market challenges: increased selling prices and additional cost control Investor overview 4

5 Creating two focused high-performing businesses Phase one of plan to create a fit for purpose Paints and Coatings organization Extraordinary General Meeting (EGM) to be held on November 30, 2017 Deliver 110 million savings in 2018, towards 2020 guidance 1 billion special cash dividend as advance proceeds to be paid on December 7, 2017 New management structure for Paints and Coatings Separation of Specialty Chemicals on track to be completed by April 2018 Investor overview 5

6 Phase one of creating a fit for purpose Paints and Coatings organization 1 2 Supply chain re-organization Consolidation of infrastructure 120m one-off costs 2017/ Leveraging support functions (SG&A and R&D) New management structure 110m annual cost savings from 2018 Investor overview 6

7 Separation of Specialty Chemicals on track to be completed by April 2018 Internal separation External separation Dual-track process Standalone corporate functions Paints Coatings Standalone corporate functions Specialty Chemicals Private sale Demerger Scope of requested shareholder approval Transaction scope IPO ~ 175m one-off costs 2017/ 2018 Investor overview 7

8 Operational and financial review Leading the way in sustainability : We are at the top of the influential Dow Jones Sustainability index within the Chemicals Industry Group, underlining our commitment to making a positive impact on the whole value chain.

9 Mixed market environment Marine and Protective Coatings Adverse currency effects Raw material cost inflation Disruption in the supply chain Specialty Chemicals EMEA (ex. UK) China South and SE Asia Powder Coatings Automotive and Specialty Coatings

10 Volumes and revenue up despite strong headwinds Volumes Revenue Novel technology platform for producing a wide range of ethylene amines 2% higher up 1% EBIT 383 million Interim dividend up 51% to 0.56 Product launches include Ultralavable (EasyCare) in Argentina and Forest Breath BioCare in China Investor overview 10

11 Volume growth for Paints and Coatings and higher positive price/mix in Chemicals Decorative Paints Performance Coatings Specialty Chemicals Quarterly volume development in % year-on-year 0 AkzoNobel Quarterly price/mix development in % year-on-year -3-1 * Includes acquisitions Investor overview 11

12 AkzoNobel Q3 2017: Higher revenue driven by increased volumes and acquisitions million Q Q Δ% Revenue 3,600 3,624 1 EBIT (Operating income excluding identified items) (13) Operating income (26) Ratio, % Q Q ROS* Moving average ROI* Revenue development Q Increase Decrease We opened a new plant in Ashington, UK for the production of Dulux, the world s leading paint brand. *ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital Investor overview 12

13 Decorative Paints Q3 2017: Continued positive volume developments million Q Q Δ% Revenue 1,021 1,007 (1) EBIT (Operating income excluding identified items) (23) Operating income (28) Ratio, % Q Q ROS* Moving average ROI* Revenue development Q Increase Decrease Heart Wood was unveiled as our latest Color of the Year, following continuous expert research into trends, insights and consumer behavior. *ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital Investor overview 13

14 Performance Coatings Q3 2017: Volumes and revenue higher million Q Q Δ% Revenue 1,406 1,428 2 EBIT (Operating income excluding identified items) (26) Operating income (23) Ratio, % Q Q ROS* Moving average ROI* Our new aerospace coatings facility in Dongguan will offer faster service to customers in the region and significantly reduce delivery times. Revenue development H Increase Decrease *ROS% = EBIT/revenue. Moving average ROI (in %) = 12 months EBIT/12 months average invested capital Investor overview 14

15 Specialty Chemicals Q3 2017: Improved further despite supply chain disruptions million Q Q Δ% Revenue 1,202 1,209 1 EBIT (Operating income excluding identified items) Operating income 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 We are investing 20 million to boost production of Expancel, which can improve the properties of many everyday items, from running shoes to wine corks. Investor overview 15

16 Free cash flow impacted by changes in working capital and provisions million Q Q EBITDA Interest paid Tax paid Changes in working capital, provisions* 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 16

17 IAS19 pension deficit remains at 0.8 billion in Q Key pension financial assumptions Q Q Discount rate 2.4% 2.5% Inflation rate 3.0% 3.0% Pension deficit development during Q Increase million Decrease Investor overview 17

18 Concluding remarks Paint recycling sat squarely at the center of AkzoNobel s involvement in this year s global BenchesCollective event in Amsterdam. Billed as the world s largest open air café, the annual initiative invites people to open a bench outside their home and interact with neighbors in the community. Organizing activities is also part of the event, with AkzoNobel employees collecting tins of leftover paint. This will be recycled and made available via thrift stores and societal organizations, building on the Give Paint a New Life project launched by AkzoNobel and partners in March. Since then, almost 3,000 kilos of paint has been reused in Amsterdam.

19 Interim dividend up 51% to 0.56 per share Dividends per share Dividend policy is to pay a stable to rising dividend each year Interim dividend paid in cash, unless shareholders elect to receive a stock dividend (40% maximum) Yield*: 2.5% 2.5% 2.8% Final dividend Interim dividend Shares cancelled from the 160 million repurchase program in billion special cash dividend as advance proceeds for the separation of Specialty Chemicals * Based on year-end share price Investor overview 19

20 Extraordinary shareholder meeting to take place on November 30, 2017 Appointment of members of the Supervisory Board Appointment of Maarten de Vries as member of the Board of Management Approval of the separation of Specialty Chemicals business Investor overview 20

21 Outlook Positive developments for EMEA (excluding the UK), North America and Asia, while Latin America is expected to stabilize Industry specific headwinds continue, including higher raw material prices and challenges for marine and protective coatings Various measures to mitigate current market challenges, including increased selling prices and additional cost control EBIT for 2017 now expected to be in line with 2016, due to ongoing industry specific headwinds and supply chain disruptions Investor overview 21

22 Growth momentum continues while dealing with industry specific headwinds Higher volumes and increased revenue, despite challenging market conditions in selected areas Capacity expansions in Sweden and China Launched the world s most advanced and sustainable paint factory in Ashington, UK Industry specific headwinds continue, including higher raw material prices Measures to mitigate current market challenges: increased selling prices and additional cost control Investor overview 22

23 AkzoNobel at a glance Investor overview 23

24 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 Investor overview 24

25 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

26 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

27 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 27

28 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

29 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 29

30 Delivering on our commitments Return on sales 1 % Return on investment 1 % EBIT 2 million Free cash flow 3 million , , 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 30

31 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 31

32 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 32

33 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 33

34 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 34

35 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 35

36 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 36

37 Specialty Chemicals: Unleashing an industry leader to achieve its full potential Investor overview 37

38 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 38

39 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 39

40 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 40

41 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

42 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 42

43 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 43

44 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 44

45 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 45

46 Well positioned to significantly improve performance: increased guidance Return on sales * % Return on investment * % 16 > 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 46

47 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 47

48 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 48

49 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 49

50 World leading Paints and Coatings company Investor overview 50

51 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

52 Well positioned to accelerate growth and enhance profitability Return on sales * % Return on investment* % > 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 52

53 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 53

54 #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 54

55 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

56 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 56

57 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 57

58 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

59 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

60 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

61 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 Investor overview 61

62 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 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% Cash application payables AkzoNobel Leading Performance System Global Business Services Investor overview 62

63 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

64 Strong financial foundation for growth and value creation Investor overview 64

65 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 65

66 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 66

67 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 67

68 Cash management discipline continues; Leading performance for working capital Operating Working Capital million Capital expenditures million 3,000 Operating Working Capital OWC as % of LQ revenue * 4 16% Specialty Chemicals Performance Coatings CAPEX as % revenue Decorative Paints Other 2,500 2, % 9.9% 10.1% 9.7% 10.2% 14% 12% 10% 5.4% % 4.1% 4.4% 4.5% 1,500 1, ,572 1,384 1,418 1,385 1,405 8% 6% 4% 2% % Investor overview 68

69 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 69

70 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 70

71 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 71

72 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 72

73 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 73

74 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% Net debt ( billion)/ebitda Average cost of long-term bonds % Investor overview 74

75 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 Expectation of BBB+/Baa1 for Paints and Coatings Specialty Chemicals will have an investment grade credit profile Investor overview 75

76 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 76

77 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 77

78 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 Transition during 2017/2018 Currencies Assuming September 2017 exchange rates negative negative 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 anticipate positive developments for EMEA (excluding the UK), North America and Asia, while Latin America is expected to stabilize. Raw material prices higher compared with We take 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 Investor overview 78

79 Upcoming events Ex-dividend date of 2017 interim dividend October 20, 2017 Record date of 2017 interim dividend October 23, 2017 Election period cash or stock interim dividend October 24, 2017 November 15, 2017 Determination of exchange ratio November 16, 2017 Payment of cash dividend and delivery of new shares November 22, 2017 Extraordinary General Meeting (EGM) November 30, 2017 Ex-dividend date of special cash dividend December 4, 2017 Record date of special cash dividend December 5, 2017 Payment of special cash dividend December 7, 2017 Report for the full-year and the fourth quarter 2017* March 8, 2018 *Publication date of Report for the full-year and the fourth quarter 2017 has been changed to March 8, 2018 as a result of the process to separate Specialty Chemicals Investor overview 79

80 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 80