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July 19, 2012Investor update Q2 2012 results
Agenda•   Highlights•   Operational and financial review•   Performance improvement program•   Conclusion                 ...
HighlightsTon Büchner              Investor update Q2 2012 results   3
Our strong businessesDecorative Paints• H1 2012 Revenue €2.8 billion• H1 2012 EBITDA: €251 million*                       ...
Solid performance in Q2• Revenue up 8 percent, mainly driven by pricing actions and  currencies• Volumes declined 2 percen...
In Q2 2012 both revenue and EBITDAincreased by 8 percent € million                                           Q2 2012      ...
Revenue growth leads EBITDA marginimprovementsReported quarterly revenue growth in % year-on-year   20   15               ...
Price increases coming through, volumesremain softQuarterly volume development in % year-on-year  10   5                 -...
Performance improvement program is ontrack to support EBITDAEBITDA* bridge H1 2011 – H1 2012      € million1.4001.200     ...
Operational and financial reviewKeith Nichols                            Investor update Q2 2012 results   10
Decorative Paints Q2 2012 highlights    € million                                                     Q2 2012             ...
Performance Coatings Q2 2012 highlights    € million                                                        Q2 2012       ...
Specialty Chemicals Q2 2012 highlights    € million                                                     Q2 2012           ...
Summary – Q2 2012 results € million                            Q2 2012             Q2 2011 EBITDA*                        ...
Strong operating returns on investedcapital  30%                  27.5%                            26.2%  25%             ...
Cash flows Q2 2012€ million                                                Q2 2012           Q2 2011Profit for the period ...
Pension deficit increases to €0.6 billion Key pension metrics                                              Q2 2012        ...
Pension cash contributions unrelated topositive IAS 19 accounting change impact    € million                             Q...
Performance improvement programTon Büchner                         Investor update Q2 2012 results   19
In October 2011 we committed to a€500 million performance improvement program                      •   Complexity Reductio...
Examples of projects that are now running                      • Site optimizations at ~50 manufacturing sites            ...
Significant FTE reductions as a result ofthe performance improvement programFTE bridge Q4 2011 – Q2 201258.00057.80057.600...
Performance improvement programdelivers €65 million benefits in H1 2012                        H1 2012      H1 2012       ...
Performance improvement program ontrack•   Benefits: €65 million EBITDA improvement YTD•   Total costs: €90 million YTD, i...
Conclusion             Investor update Q2 2012 results   25
Conclusion• A solid second quarter• Implementation of our performance improvement program on track• The major uncertainty ...
Appendix           Investor update Q2 2012 results   27
AkzoNobel key facts2011• Revenue €15.7 billion• 57,240 employees• EBITDA: €1.8 billion*• Net income: €0.5 billion• 40 perc...
Decorative Paints key facts2011• Revenue €5.3 billion• 22,340 employees• EBITDA: €440 million*• 40 percent of revenue from...
Performance Coatings key facts2011• Revenue €5.2 billion• 21,960 employees• EBITDA: €611 million*• 47 percent of revenue f...
Specialty Chemicals key facts2011• Revenue €5.3 billion• 11,510 employees• EBITDA: €906 million*• 33 percent of revenue fr...
The global paints and coatings market isaround €76 billion% of 2011 market100% is around €76 billion                      ...
AkzoNobel is the world’s largestcoatings supplier2011 revenue in € billion  12  10   8   6   4   2   0                    ...
Excellent geographic spread ofboth revenue and profits       High growth markets are important (40% of revenue)% of 2011 r...
Leading positions and strong brands2011 Revenue by market position              Some of our strong brands                 ...
Our strategic ambition                         Investor update Q2 2012 results   36
Our medium term strategic goals                            •   Top quartile safety                                performa...
How we will expand in both mature andhigh growth marketsOrganic growth• Expand focus from high to mid-market segments• Fue...
Aspirations for high growth markets(currently around 40 percent of our revenue)Double revenues in China• Grow from $1.5 to...
High growth markets will becomesignificantly more important% of revenue, indicative                                      3...
Exciting RD&I pipeline with innovativesolutions for key market segmentsHow innovation will support our                    ...
Clear sustainability focusAccelerated sustainability strategy will deliver:• Safety at 2.0 injuries per million hours• 30 ...
Pipeline 2012 – Q2Packaging Coatings - Beverage Inside Spray Coating           Water-based Bisphenol A-free spray liner fo...
Pipeline 2012 – Q2Decorative Paints- Three-in-One                         More convenient and faster paintingKey features ...
Pipeline 2012 – Q2Functional Chemicals - StimWell™               Breakthrough technology for the Oil and Gas IndustryKey f...
Variable costs represent 54.3% of revenue % of 2011 annual revenue*                                                       ...
Variable costs analysis   2011                                                                                            ...
Capital expenditure prioritization forgrowth• Capex 2011 was €708 million (including Ningbo €45)• Guidance for the medium ...
Year-on-year Operating Working Capital %of revenue to be reduced towards 12%OWC€ million  3000                            ...
Debt duration 3.3 years and no refinancingneeded in 2012Debt maturities*€ million (nominal amounts)   1.200     800     40...
Unchanged ambition to maintain strongbalance sheet € million                                                           Jun...
Q2 2012 incidentals    € million                                     Q2 2012             Q2 2011    Restructuring costs   ...
Q2 2012 EBITDA – Cash bridge€ million                                      Q2 2012             Q2 2011EBITDA before incide...
Safe Harbor StatementThis presentation contains statements which address such key issues asAkzoNobel’s growth strategy, fu...
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AkzoNobel Q2 2012 Investor Presentation

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  1. 1. July 19, 2012Investor update Q2 2012 results
  2. 2. Agenda• Highlights• Operational and financial review• Performance improvement program• Conclusion Investor update Q2 2012 results 2
  3. 3. HighlightsTon Büchner Investor update Q2 2012 results 3
  4. 4. Our strong businessesDecorative Paints• H1 2012 Revenue €2.8 billion• H1 2012 EBITDA: €251 million* Performance Coatings • H1 2012 revenue €2.8 billion • H1 2012 EBITDA: €377 million* Specialty Chemicals • H1 2012 revenue €2.8 billion • H1 2012 EBITDA: €490 million* * Before incidentals Investor update Q2 2012 results 4
  5. 5. Solid performance in Q2• Revenue up 8 percent, mainly driven by pricing actions and currencies• Volumes declined 2 percent, primarily due to the economic slowdown in Europe• EBITDA* margin 13.5 percent (2011: 13.4 percent)• Net income from continuing operations €197 million (2011: €251 million), primarily due to higher incidental charges• Adjusted EPS €1.12 (2011: €1.09)• Performance improvement program on track• The economic environment remains our principal sensitivity in 2012* Before incidentals Investor update Q2 2012 results 5
  6. 6. In Q2 2012 both revenue and EBITDAincreased by 8 percent € million Q2 2012 Δ% Revenue 4,406 8 EBITDA* 593 8 Ratio, % Q2 2012 Q2 2011 EBITDA* margin 13.5 13.4 Revenue development Q2 2012 vs. Q2 2011 10 6 +2% +4% +8% 2 -2% +4% -2 Volume Price/Mix Acquisitions/ Exchange Total divestments rates* Before incidentals Increase Decrease Investor update Q2 2012 results 6
  7. 7. Revenue growth leads EBITDA marginimprovementsReported quarterly revenue growth in % year-on-year 20 15 12% 10 8% 6% 6% 5 0 Decorative Paints Performance Specialty AkzoNobel Coatings ChemicalsQuarterly EBITDA* margin in % 20 17.8% 11.3% 14.5% 13.5% 15 10 5 0 Decorative Paints Performance Specialty AkzoNobel Coatings Chemicals* Before incidentals 2011 2012 Target range Investor update Q2 2012 results 7
  8. 8. Price increases coming through, volumesremain softQuarterly volume development in % year-on-year 10 5 -2% -2% -2% -2% 0 -5 Decorative Paints Performance Specialty AkzoNobel Coatings ChemicalsQuarterly price/mix development in % year-on-year 10 6% 5% 4% 5 2% 0 Decorative Paints Performance Specialty AkzoNobel Coatings Chemicals 2011 2012 Investor update Q2 2012 results 8
  9. 9. Performance improvement program is ontrack to support EBITDAEBITDA* bridge H1 2011 – H1 2012 € million1.4001.200 328 (88) 65 (201) 341.000 (110) 800 600 988 1,016 400 200 0 H1 2011 Currency Price/Mix Volume Raw PIP Other** H1 2012 materials* Before incidentals** Other includes wage inflation, acquisition impact and higher insurance claims Increase Decrease Investor update Q2 2012 results 9
  10. 10. Operational and financial reviewKeith Nichols Investor update Q2 2012 results 10
  11. 11. Decorative Paints Q2 2012 highlights € million Q2 2012 Δ% Revenue 1,551 6 EBITDA* 175 (8) Ratio, % Q2 2012 Q2 2011 EBITDA* margin 11.3 13.1Revenue development Q2 2012 vs. Q2 2011 Increase Decrease 6 4 0% +3% 2 +6% +5% 0 -2% -2 Volume Price/Mix Acquisitions/ Exchange rates Total divestments• Revenue up 6 percent on 2011, driven by favorable price/mix• Weaker demand in mature and South East Asian markets negatively impacted volumes• EBITDA* down 8 percent, mainly driven by weaker performance in Europe, reflecting challenging market circumstances• Improved results in North America due to a combination of strong margin management and restructuring• Restructuring continues in mature markets, particularly in Europe* Before incidentals Investor update Q2 2012 results 11
  12. 12. Performance Coatings Q2 2012 highlights € million Q2 2012 Δ% Revenue 1,472 12 EBITDA* 213 25 Ratio, % Q2 2012 Q2 2011 EBITDA* margin 14.5 13.0Revenue development Q2 2012 vs. Q2 2011 Increase Decrease12 +3% +5% 8 +12% 4 -2% 0 +6%-4 Volume Price/Mix Acquisitions/ Exchange rates Total divestments• Revenue up 12 percent, supported by margin management, acquisitions and currency effects• Underlying volume declined by 2 percent, with significant variability between individual markets• EBITDA* margin at 14.5 percent (2011: 13.0 percent) driven by margin management and operational efficiency• Integration of acquired activities supporting results• Protective Coatings and Industrial Coatings were the strongest growth contributors* Before incidentals Investor update Q2 2012 results 12
  13. 13. Specialty Chemicals Q2 2012 highlights € million Q2 2012 Δ% Revenue 1,431 6 EBITDA* 255 16 Ratio, % Q2 2012 Q2 2011 EBITDA* margin 17.8 16.3 Revenue development Q2 2012 vs. Q2 2011 Increase Decrease 6 4 +2% +4% +6% 2 -2% +2% 0 -2 Volume Price/Mix Acquisitions/ Exchange rates Total divestments• Revenue increased 6 percent, due to margin management, the Boxing Oleochemicals acquisition and currency effects• Volumes in most businesses slowed down during the quarter and customer ordering patterns became more cautious• EBITDA margin improved to 17.8 percent (2011: 16.3 percent), based on improved margins and continued cost restructuring* Before incidentals Investor update Q2 2012 results 13
  14. 14. Summary – Q2 2012 results € million Q2 2012 Q2 2011 EBITDA* 593 551 Amortization and depreciation (170) (150) Incidentals (49) 27 Net financing expenses (82) (64) Minorities and associates (16) (14) Income tax (80) (99) Discontinued operations 4 17 Net income total operations 201 268 Net cash from operating activities 401 165 Ratio Q2 2012 Q2 2011 EBITDA* margin (%) 13.5 13.4 Adjusted earnings per share (in €) 1.12 1.09* Before incidentals Investor update Q2 2012 results 14
  15. 15. Strong operating returns on investedcapital 30% 27.5% 26.2% 25% 20.2% 20% 15% 10% 5% 10.8% 10.4% 8.3% 0% Q3 09-Q2 10 Q3 10-Q2 11 Q3 11-Q2 12 Moving average ROI %* Operating ROI is calculated as EBIT before amortization divided by average invested capital excluding intangible assets Operating ROI %* Investor update Q2 2012 results 15
  16. 16. Cash flows Q2 2012€ million Q2 2012 Q2 2011Profit for the period from continuing operations 218 273Amortization, depreciation and impairments 186 153Change working capital (38) (204)- Pension provisions (21) 22- Restructuring (4) (34)- Other provisions (5) (58)Change provisions (30) (70)Other operating cash flows 65 13Net cash from operating activities 401 165Capex (173) (164)Changes from borrowings 22 (538)Dividends (178) (271)Discontinued operations - 11Other changes 3 6Total cash flows 62 (775) Investor update Q2 2012 results 16
  17. 17. Pension deficit increases to €0.6 billion Key pension metrics Q2 2012 Q1 2012 Discount rate 4.2% 4.5% Inflation assumptions 2.3% 2.7%Pension deficit development during Q2 2012€ billion 0,0 -0,2 (347) 14 18 (589) -0,4 13 -0,6 (750) -0,8 463 -1,0 -1,2 Deficit end Top-ups Increased Discount Inflation Other Deficit end Q1 2012 plan assets rates Q2 2012 Increase Decrease Investor update Q2 2012 results 17
  18. 18. Pension cash contributions unrelated topositive IAS 19 accounting change impact € million Q2 2012 Q1 2012 Top-up payments 14 322• The majority of the pension top-up payments have been made in Q1 2012• Latest estimate is for additional top-up payment of approximately €30 million in H2 2012 € million 2012E 2011 IAS 19 charges in EBITDA 35 59 IAS 19 charges in interest costs 64 33 Total non-cash IAS 19 charges 99 92• Due to changes in IAS 19 from 2013, the majority of the above charges will no longer be charged in the P&L Investor update Q2 2012 results 18
  19. 19. Performance improvement programTon Büchner Investor update Q2 2012 results 19
  20. 20. In October 2011 we committed to a€500 million performance improvement program • Complexity Reduction • RD&I focus Operational • Manufacturing excellenceProfessionalization • Procurement effectiveness • Margin Management • Finance Functional • Human Resources Standardization • Information Management • AN – Academy Business Unit • Various BUs Adaptations Investor update Q2 2012 results 20
  21. 21. Examples of projects that are now running • Site optimizations at ~50 manufacturing sites (€30 million in 2012) • RD&I: technology which enables using less Operational titanium dioxideProfessionalization • Product and margin management in Powder Coatings and Functional Chemicals (~€15 million) • Reducing the number of ERP-systems in use, to less then 10 in medium-term Functional • Standardize purchase-2-pay process Standardization (~€15 million) • Academy: hardwiring our learnings • Decorative Paints North America restructuring (~300 FTE) Business Unit • Decorative Paints Europe organizational Adaptations redesign (~500 FTEs) • Performance Coatings & Specialty Chemicals BUs all have significant restructuring projects Investor update Q2 2012 results 21
  22. 22. Significant FTE reductions as a result ofthe performance improvement programFTE bridge Q4 2011 – Q2 201258.00057.80057.600 57057.400 (870) 64057.20057.000 57,580 57,24056.80056.60056.40056.20056.000 year-end 2011 Acq/Div PIP Seasonal/New Q2 2012 hires Increase Decrease Investor update Q2 2012 results 22
  23. 23. Performance improvement programdelivers €65 million benefits in H1 2012 H1 2012 H1 2012 Reported Amount€ million EBITDA due to PIP 2012 targetDecorative Paints 251 37Performance Coatings 377 13Specialty Chemicals 490 15Other (102) -Total 1,016 65 200€ million Q1 2012 Q2 2012 H1 2012 2012 targetPIP costs 46 44 90 200 Investor update Q2 2012 results 23
  24. 24. Performance improvement program ontrack• Benefits: €65 million EBITDA improvement YTD• Total costs: €90 million YTD, included in incidentals• Program on track to deliver €200 million EBITDA benefits in 2012 • Business unit adaptations and operational professionalization are expected to contribute around 90% of the expected 2012 EBITDA improvement• 3-year program 2012-2014 • To deliver €500 million EBITDA in 2014 • At a total cost of €425 million Investor update Q2 2012 results 24
  25. 25. Conclusion Investor update Q2 2012 results 25
  26. 26. Conclusion• A solid second quarter• Implementation of our performance improvement program on track• The major uncertainty remains the global economic environment• We have a strong portfolio of complementary businesses, with many leading market positions and exposure to growth markets• Focus on customer satisfaction, return on capital, cash generation and organic growth• We will be providing an update on strategy on October 18 & 22nd. Investor update Q2 2012 results 26
  27. 27. Appendix Investor update Q2 2012 results 27
  28. 28. AkzoNobel key facts2011• Revenue €15.7 billion• 57,240 employees• EBITDA: €1.8 billion*• Net income: €0.5 billion• 40 percent of revenue from high growth markets• A leader in sustainabilityRevenue by business area EBITDA* by business area 34% 33% 31% Performance Coatings 46% Decorative Paints Specialty Chemicals 23% 33%* Before incidentals Investor update Q2 2012 results 28
  29. 29. Decorative Paints key facts2011• Revenue €5.3 billion• 22,340 employees• EBITDA: €440 million*• 40 percent of revenue from high growth markets• Largest global supplier of decorative paints• Many leading positions, strong brandsSome of our strong brands Revenue by geography 3% 12% Mature Europe Emerging Europe 40% Asia Pacific 20% North America Latin America Other regions 18% 7%* Before incidentals Investor update Q2 2012 results 29
  30. 30. Performance Coatings key facts2011• Revenue €5.2 billion• 21,960 employees• EBITDA: €611 million*• 47 percent of revenue from high growth markets• Leading positions in performance coatings industry• Innovative technologies, strong brandsRevenue by business unit Revenue by geography Marine and Protective 15% Coatings 4% 8% Mature Europe 27% Automotive and 30% Emerging Europe Aerospace Coatings Industrial Coatings 20% Asia Pacific18% North America Powder Coatings Latin America 20% 10% 20% Wood Finishes and Other regions Adhesives 28%* Before incidentals Investor update Q2 2012 results 30
  31. 31. Specialty Chemicals key facts2011• Revenue €5.3 billion• 11,510 employees• EBITDA: €906 million*• 33 percent of revenue from high growth markets• Major producer of specialty chemicals• Leadership positions in many marketsRevenue by business unit Revenue by geography Functional Chemicals 6% 9% 2% Mature Europe 17% Industrial Chemicals 35% Emerging Europe 20% 43% Pulp and Performance Asia Pacific Chemicals North America 21% Surface Chemistry Latin America Other Regions 21% Chemicals Pakistan 22% 4%* Before incidentals Investor update Q2 2012 results 31
  32. 32. The global paints and coatings market isaround €76 billion% of 2011 market100% is around €76 billion Wood Finishes General Industrial Coatings 5% 8% Vehicle Refinish 8% 42% Decorative Marine and Yacht Performance 5% 58% 8% Protective coatings 2% 10% Special purpose 7% 2% 3% Auto OEM & Aerospace Powder Coatings Coil Coatings Packaging CoatingsSource: Company Reports Investor update Q2 2012 results 32
  33. 33. AkzoNobel is the world’s largestcoatings supplier2011 revenue in € billion 12 10 8 6 4 2 0 Investor update Q2 2012 results 33
  34. 34. Excellent geographic spread ofboth revenue and profits High growth markets are important (40% of revenue)% of 2011 revenue 38% “Mature” Europe 7% 20% “Emerging” Europe North America 3% 22% Middle East Asia Pacific and Africa 10% Latin America High growth markets’ profitability is above average Investor update Q2 2012 results 34
  35. 35. Leading positions and strong brands2011 Revenue by market position Some of our strong brands Decorative Paints No. 2 or 3 32% No. 1 Performance Coatings position 59% Other 9% Specialty Chemicals• Our leading market positions provide us with scale benefits• Strong brands ensure customer loyalty• Established relationships with key specifiers and regulatory approvals lead to significant barriers to entry Investor update Q2 2012 results 35
  36. 36. Our strategic ambition Investor update Q2 2012 results 36
  37. 37. Our medium term strategic goals • 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 • Grow to €20 billion revenues • Increase EBITDA each year, maintaining 13-15 percent margin • Reduce OWC/revenues by 0.5 p.a. towards a 12 percent level • Pay a stable to rising dividend Investor update Q2 2012 results 37
  38. 38. How we will expand in both mature andhigh growth marketsOrganic growth• Expand focus from high to mid-market segments• Fueling growth in high growth marketsInnovation pipeline• Spend of around 2.5 percent of revenue makes us the clear leader of our peers in absolute spend• Emphasis on bolder, focused, sustainable innovationAcquisitions• Wide range of opportunities• All business areas qualify• Value created in less than three years Investor update Q2 2012 results 38
  39. 39. Aspirations for high growth markets(currently around 40 percent of our revenue)Double revenues in China• Grow from $1.5 to $3 billion of revenues• Already the biggest paint, coatings and specialty chemicals company in ChinaCreate significant footprint in India• Grow from €0.25 to €1 billion in revenue• Increasing footprint for all business areasOutgrow the competition in Brazil• Grow from €0.75 to €1.5 billion in revenue• Become clear market leader in all our activitiesExpand in the Middle East Investor update Q2 2012 results 39
  40. 40. High growth markets will becomesignificantly more important% of revenue, indicative 32% “Mature” Europe 9% 18% “Emerging” Europe North America 25% 5% Asia Pacific Middle East and Africa 11% Latin America High growth markets will be around 50% of revenue in this decade Investor update Q2 2012 results 40
  41. 41. Exciting RD&I pipeline with innovativesolutions for key market segmentsHow innovation will support our Revenue by key marketgrowth agenda: segment• Functional solutions in key market segments 12%• Increase spend in big R&D• >15 percent of revenue from 13% 43% “breakthrough” innovations*• >30 percent of revenue from eco-premium solutions** 32% Our more centrally led RD&I efforts aim at delivering solutions for the future needs of our end markets Residential construction Consumer goods Non-residential construction Our scale leads to superior absolute Transport spend versus our peers* Major innovations that result in a significant competitive advantage** Higher eco-efficiency than competing comparable product Investor update Q2 2012 results 41
  42. 42. Clear sustainability focusAccelerated sustainability strategy will deliver:• Safety at 2.0 injuries per million hours• 30 percent of revenue from eco-premium solutions• Sustainable fresh water management• 30 percent eco-efficiency improvement• 10 percent carbon footprint reduction (20-25 percent by 2020)• 20 percent of executives will come from high growth economies• Key supplier partnerships will deliver footprint reduction Embed safety and sustainability in everything we do Investor update Q2 2012 results 42
  43. 43. Pipeline 2012 – Q2Packaging Coatings - Beverage Inside Spray Coating Water-based Bisphenol A-free spray liner for beverage cansKey features Customers benefits• Bisphenol A-free • Improved environmental profile compared• Waterborne product with 38% with epoxy-based coatings reduction in carbon footprint • Interior can coating not compromising• Wide application window and robust taste & quality of beverage overall performance• Compliant with demanding FDA standards Growth potential • To be launched in NA in Q3 2012; other regions to follow in Q1 2013 • Potential to fully replace current product platform, depending on market & legislation dynamics • It will strengthen and potentially grow our current position within the beverage can coatings market Investor update Q2 2012 results 43
  44. 44. Pipeline 2012 – Q2Decorative Paints- Three-in-One More convenient and faster paintingKey features Customers benefits• Fills, primes and paints in a single • Takes the preparation and priming steps operation out of painting• Covers nail holes and hair line cracks. • Saves time and money, allowing the job to• Excellent coverage over dark colors, be completed faster scuff marks and stains• Eliminates the flashing/shadowing found with spackle Growth potential • True Innovation - the first of its kind • Goes beyond the 2-in-1 products already in the market place • Drives added value for both AN and The Home Depot • Helps grow the Glidden brand Investor update Q2 2012 results 44
  45. 45. Pipeline 2012 – Q2Functional Chemicals - StimWell™ Breakthrough technology for the Oil and Gas IndustryKey features Customers benefits• A bio-based stimulation aid for oil and • A stimulation solution for deep, high natural gas recovery temperature wells with critical corrosion• Non-corrosive, thermally stable, needs biodegradable product with excellent • Less damage to well casings than existing stimulation performance technology• Applicable in both fracking and shale • Ability to stimulate wells that are beyond formations the reach of existing technology Growth potential • Significant global sales potential for both oil & gas recovery, once proof of principle established in various applications Investor update Q2 2012 results 45
  46. 46. Variable costs represent 54.3% of revenue % of 2011 annual revenue* 100%Raw materials,energy, andother variablecostsFixed productioncostsSelling, advertising,administration, R&DcostsEBIT margin 0% Decorative Performance Specialty AkzoNobel Paints Coatings Chemicals* Rounded percentages, all data excluding incidentals Investor update Q2 2012 results 46
  47. 47. Variable costs analysis 2011 Energy & other Packaging variable costs* Solvents Raw materials 7% 7% 28% Chemicals and intermediates*** 13% 8% 7% Additives Other raw materials** 2% 8% Pigments 12% 8% Titanium dioxide Resins Coatings’ specialties* Other variable costs include variable selling costs (e.g. freight) and products for resale** Other raw materials include cardolite, hylar etc.*** Chemicals and intermediates include caustic soda, acetic acid, tallow, ethylene, ethylene oxide, sulfur, amines etc. Investor update Q2 2012 results 47
  48. 48. Capital expenditure prioritization forgrowth• Capex 2011 was €708 million (including Ningbo €45)• Guidance for the medium term: Capex level to be at least 4 percent of revenuesCapex as a % of revenue 2011 Capex split 5 3% 16% 4 3 52% 29% 2 1 Specialty Chemicals 0 Decorative Paints 2008 2009 2010 2011 Performance Coatings Base capex Ningbo National Starch Other Investor update Q2 2012 results 48
  49. 49. Year-on-year Operating Working Capital %of revenue to be reduced towards 12%OWC€ million 3000 20% 15.6% 18% 2500 14.3% 13.8% 16% 14.2% 14.2% 13.6% 14% 2000 12% 1500 10% 2,155 2,279 2,341 2,079 2,502 2,537 8% 1000 6% 4% 500 2% 0 0% Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 OWC OWC as % of LQ revenue*4 Investor update Q2 2012 results 49
  50. 50. Debt duration 3.3 years and no refinancingneeded in 2012Debt maturities*€ million (nominal amounts) 1.200 800 400 0 2012 2013 2014 2015 2016 2017 2018 € bonds $ bonds £ bonds Strong liquidity position to support growth• Undrawn revolving credit facility of €1.8 billion (2016) or €1.5 and $3 billion commercial paper programs• Net cash and cash equivalents €1.0 billion** At the end of Q2 2012 Investor update Q2 2012 results 50
  51. 51. Unchanged ambition to maintain strongbalance sheet € million Jun 30, 2012 Jun 30, 2011 Total equity 9,995 9,314 Net debt* 2,844 1,808• Credit ratings unchanged at BBB+/Baa1, outlook stable• Net debt increased due to pension top-ups and an additional pension payment in Q1, as well as higher operating working capital• In September 2011, we renewed our five year multi-currency syndicated revolving credit facility for €1.8 billion (previously €1.5 billion)* Before net pension deficit of €0.6 billion June 30, 2012 (June 30, 2011 €0.4 billion) Investor update Q2 2012 results 51
  52. 52. Q2 2012 incidentals € million Q2 2012 Q2 2011 Restructuring costs (44) (20) Results related to major legal, 3 21 anti-trust and environmental cases Results of acquisitions and divestments - 26 Other incidental results (7) - Total (48) 27• Increase in restructuring costs due to provisions in relation to the performance improvement program• Restructuring costs mainly related to Decorative Paints in North America and Europe Investor update Q2 2012 results 52
  53. 53. Q2 2012 EBITDA – Cash bridge€ million Q2 2012 Q2 2011EBITDA before incidentals 593 551Incidentals (cash) (28) 8Change working capital (38) (204)Change provisions (30) (70)Interest paid (42) (58)Income tax paid (54) (62)Net cash from operating activities 401 165 • Lower cash outflows from working capital mainly due to a lower autonomous increase in operating working capital • Together with an improved EBITDA performance, there is a significant improvement in net cash from operating activities Investor update Q2 2012 results 53
  54. 54. Safe Harbor StatementThis presentation contains statements which address such key issues asAkzoNobel’s growth strategy, future financial results, market positions, productdevelopment, products in the pipeline, and product approvals. Such statementsshould be carefully considered, and it should be understood that many factors couldcause forecasted and actual results to differ from these statements. These factorsinclude, but are not limited to, price fluctuations, currency fluctuations, developmentsin raw material and personnel costs, pensions, physical and environmental risks, legalissues, and legislative, fiscal, and other regulatory measures. Stated competitivepositions are based on management estimates supported by information provided byspecialized external agencies. For a more comprehensive discussion of the riskfactors affecting our business please see our latest Annual Report, a copy of whichcan be found on the company’s corporate website www.akzonobel.com. Investor update Q2 2012 results 54
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