Amsterdam, April 7, 2011 ING Benelux Conference The business case of sustainability Andre Veneman Corporate Director Sustainability

Transcription

1 Amsterdam, April 7, 2011 ING Benelux Conference The business case of sustainability Andre Veneman Corporate Director Sustainability

2 Agenda AkzoNobel at a glance Strategic ambitions Eco-premium solutions Sustainability throughout the supply-chain Sustainability & risk management Attracting and retaining talent Summary The business case of sustainability 1

3 AkzoNobel key facts 2010 Revenue 14.6 billion 55,590 employees EBITDA: 2.0 billion* Net income: 0.8 billion 39 percent of revenue from high-growth markets A leader in sustainability Revenue by business area EBITDA* by business area 33% 33% 30% Performance Coatings 44% Decorative Paints Specialty Chemicals 34% 26% * Before incidentals The business case of sustainability 2

4 AkzoNobel is the world s largest Coatings supplier 2009 revenue in billion The business case of sustainability 3

5 How global megatrends affect our industry Population growth 6.8 billion people today to over 9 billion in 2050 Climate change Increase the need for energy efficiency and low carbon & renewable energy sources Quality of life A new middle class 3 billion people emerging over the next 20 years Scarcity of natural resources Drives innovation Today we use replenishment capacity of 1.5 planets * Sources: UN World Population prospects, OECD, IPCC, World resources institute, WBCSD The business case of sustainability 4

6 Sustainability is the essential element in this period of new growth Demographics/ globalization Scarcity of natural resources Climate change Quality of life Requires paradigm shifts in technology and our institutions Dematerialization Recycling Global emission rights Renewable energy The business case of sustainability 5

7 Our strategic ambition is to be The business case of sustainability 6

8 Our medium term strategic goals Grow to 20 billion revenues Increase EBITDA each year, maintaining 13-15% margin Reduce OWC/revenues by 0.5 p.a. towards a 12% level Pay a stable to rising dividend Top quartile safety performance Top 3 position in sustainability Top quartile performance in diversity, employee engagement, and talent development Top quartile eco-efficiency improvement rate Sustainable growth is a prerequisite for future profitability The business case of sustainability 7

9 High-growth markets will become significantly more important % of revenue, indicative 32% Mature Europe 18% North America 9% Emerging Europe 5% ME&A 25% Asia Pacific 11% Latin America High-growth markets will be around 50% of revenue in this decade The business case of sustainability 8

10 Exciting RD&I pipeline with innovative solutions for key market segments Previous innovation strategy delivering: 9% of revenue from breakthrough innovations* 25% of revenue from Eco-premium solutions** Medium term innovation ambitions will support our growth agenda: Functional solutions in key market segments Revenue by key market segment 13% 32% 12% 43% Increase spend in Big R&D >15% of revenue from breakthrough innovations* >30% of revenue from Eco-premium solutions** Residential construction Consumer goods Non-residential construction Transport Major innovations that result in a significant competitive advantage ** Higher eco-efficiency than main competitive product The business case of sustainability 9

11 Clear sustainability focus Previous sustainability strategy delivered: Safety at 3.6 injuries/ million hours 25% of revenue from Ecopremium solutions Energy savings Pioneering carbon footprint measurement 91% raw materials from suppliers with vendor policy signed Accelerated sustainability strategy will deliver: Safety at 2.0 injuries/ million hours 30% of revenue from Ecopremium solutions Sustainable fresh water management 10% eco-efficiency improvement 10% carbon footprint reduction 20% executives from high-growth economies Key supplier partnerships delivering footprint reduction Embed safety and sustainability in everything we do The business case of sustainability 10

12 Our sustainability framework Examples Level of development Environmental Economic Social Invent Integrate sustainable value propositions Carbon and water policies Eco-premium Manage Include sustainability in all aspects of the value chain Improve Continue to comply and ensure a license to operate Market research Investment decisions Required eco-analysis Sourcing Supportive supplier visits Code of Conduct Manufacturing R&D Sales and marketing Stretched safety targets Aspect of sustainability (linked to SAM) The business case of sustainability 11

13 Eco-premium solutions have a superior growth rate and profitability Eco-premium solutions In % of revenue 25% 30% Eco-premium solutions* Are products that have a higher eco-efficiency than the main competitive product 18% 20% Give us a competitive edge, are more profitable and have a superior growth rate compared to other products The 30% ambition is a moving target, requires a significant RD&I investment ambition * An eco-premium solution is measured using a quantitative analysis or a qualitative assessment focusing on six categories: toxicity, energy efficiency, use of natural resources/raw materials, emissions and waste, land use and risks (eg accidents). The eco-premium solution must be significantly better than currently available solutions in at least one criterion, and not significantly worse in any. The business case of sustainability 12

14 Pipeline 2011 Decorative Paints - Dulux Weathershield (SunReflect & Keep Cool ) Solar reflectance feature Ordinary paints absorb heat new pigment technology reflects more of the solar, without affecting the color. Increased reflectance reduces internal temperatures by up to 5 C. Customer benefits Savings of up to 15% on the energy used for air conditioning Available across 60% of the color range Growth potential SunReflect launched in India and Keep Cool in SEAP. Roll-outs planned in similar climates. The business case of sustainability 13

15 Pipeline 2011 Performance Coatings - Sikkens Autosurfacer UV Key application features 50% less energy consumption 2 coats instead of 3 Extremely short drying times Reduced process time Benefits for body-shop owners Less paint consumption Increased throughput Reduced labor and energy costs Strengthens market position by Completing our UV-cure system offering The business case of sustainability 14

16 Pipeline 2011 Specialty Chemicals High Filler Concept Replaces tree fiber with nonwood filler de-watering/retention system using novel on-line treatment of fillers Cost of filler up to 10x lower than fiber Growth potential Sales to customer higher than standard papermaking additives Growth potential in both highgrowth and mature markets Of interest to all fine paper producers Helping customers save costs ~10% less tree fiber to purchase up to 50% lower energy for drying The business case of sustainability 15

17 Supply chain sustainability initiatives Vendor policy Supportive supplier visits Carbon reduction Key supplier agreements Open innovation The business case of sustainability 16

18 Question: Where in the coatings supply chain is the most carbon dioxide emission? A. Suppliers B. Coatings industry C. End users The business case of sustainability 17

19 Carbon intensity in our own scope is low... Million tons CO2 equivalents, Suppliers AkzoNobel Use / end of life The business case of sustainability 18

20 Carbon intensity in our own scope is low But the picture changes when we take a supply chain view Million tons CO2 equivalents, Suppliers AkzoNobel Use / end of life*... Making it necessary to work collaboratively * estimate The business case of sustainability 19

21 Raw materials: both risk and opportunity % of 2010 annual revenue* Raw materials, energy, and other variable production costs 100% Fixed production costs Selling, advertising, administration, R&D costs EBIT margin Decorative Paints Performance Coatings Specialty Chemicals AkzoNobel 0% * Rounded percentages, all data excluding incidentals The business case of sustainability 20

22 Institutional change required The business case of sustainability 21

23 Institutional change required The business case of sustainability 22

24 Institutional change required The business case of sustainability 23

25 We want to be the employer of choice Our company is not amongst the most admired To achieve our growth ambition, we need to: Attract & develop talent in all our markets Brand value and reputation increasingly important Sustainability is a key element in corporate reputation The business case of sustainability 24

26 Sustainability makes a great business case Sustainability helps reducing risks Eco-premium solutions give us a competitive edge and superior growth rates compared to other products Sustainability requires collaboration throughout the supply chain Sustainability helps us to attract & develop talent in order to achieve our growth ambition Therefore we will continue to use sustainability as an important measure in management remuneration The business case of sustainability 25

27 Sustainability and long-term shareholder value go hand in hand Source: SAM (Sustainability Asset Management) The business case of sustainability 26

28 Safe Harbor Statement This presentation 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 The business case of sustainability 27