AkzoNobel Q3 2011 Media Presentation

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AkzoNobel Q3 2011 Media Presentation

  1. 1. October 20, 2011Hans Wijers, CEO – Keith Nichols, CFOPress Conference Q3 2011 results
  2. 2. Agenda• Q3 2011 value and innovation highlights• Financial review• Strategic ambitions and performance improvement program• Q&A Press conference Q3 2011 results 1
  3. 3. Q3 2011 value and innovation highlights Press conference Q3 2011 results 2
  4. 4. Q3 2011 highlights• Revenue up 5 percent driven by pricing actions to offset raw material cost inflation• Weaker economic conditions and continued raw material price inflation impact results, particularly in Decorative Paints• EBITDA* decreased to €507 million (2010: €574 million)• Net income from continuing operations €148 million (2010: €217 million)• Adjusted EPS €0.91 (2010: €1.19)• Interim dividend of €0.33 per share declared, up 3 percent• Major performance improvement program launched to deliver €500 million EBITDA in 2014* Before incidentals Press conference Q3 2011 results 3
  5. 5. Q3 2011 revenue and EBITDA € million Q3 2011 Δ% Revenue 4,051 5 EBITDA* 507 (12) Ratio, % Q3 2011 Q3 2010 EBITDA* margin 12.5 14.8 Revenue development Q3 2011 vs. Q3 201010 0% -2% 5 +6% +1% +5% 0 Volume Price/Mix Acquisitions/ Exchange rates Total divestments* Before incidentals Increase Decrease Press conference Q3 2011 results 4
  6. 6. Price increases coming throughQuarterly volume development in % year-on-year 15 10 4% 5 1% -1% 1% 0 -5 Decorative Paints Performance Specialty AkzoNobel Coatings ChemicalsQuarterly price/mix development in % year-on-year 10 8% 7% 6% 5 3% 0 -5 -10 Decorative Paints Performance Specialty AkzoNobel Coatings Chemicals 2010 2011 Press conference Q3 2011 results 5
  7. 7. Decorative Paints key facts2010• Revenue €5.0 billion• 21,950 employees• EBITDA: €548 million*• 38 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% 11% Mature Europe Emerging Europe 42% Asia Pacific 20% North America Latin America Other regions 17% 7%* Before incidentals Press conference Q3 2011 results 6
  8. 8. First ever global brand identity in theindustry• Vision: Fewer, clearly positioned and stronger brands• Deliver a consistent brand image around the world• Compete directly against local and regional players• Benefit from current and future global platforms (i.e. advertising & sponsorship)• Create more internal synergies and cost savings Press conference Q3 2011 results 7
  9. 9. Decorative Paints Q3 2011 € million Q3 2011 Δ% Revenue 1,435 5 EBITDA* 148 (25) Ratio, % Q3 2011 Q3 2010 EBITDA* margin 10.3 14.4 Revenue development Q3 2011 vs. Q3 201010 0% +3% -2% 5 +4% +5% 0 Volume Price/Mix Acquisitions/ Exchange rates Total divestments* Before incidentals Increase Decrease Press conference Q3 2011 results 8
  10. 10. Innovation: An automatic tinting machine at abreakthrough priceKey Features Customer Benefits• Half the cost of conventional tinting • Extends retailers’ colour offers machine with similar functionalities • Improving retailer’s profitability and• Innovative design and easy returns on investment maintenance Growth potential • Underpins our color leadership • Potential to drive distribution across high- growth markets • Roll-out in Latam, India, Turkey and SE Asia Press conference Q3 2011 results 9
  11. 11. Performance Coatings key facts2010• Revenue €4.8 billion• 21,020 employees• EBITDA: €647 million*• 47 percent of revenue from high growth markets• Leading positions in performance coatings• Innovative technologies, strong brandsRevenue by business unit Revenue by geography Marine and Protective 7% Mature Europe 17% Coatings 28% 9% Automotive and 30% Emerging Europe Aerospace Coatings Industrial Coatings Asia Pacific16% 20% North America Wood Finishes and Adhesives 9% Latin America 21% 18% Powder Coatings 25% Other regions* Before incidentals Press conference Q3 2011 results 10
  12. 12. Performance Coatings Q3 2011 € million Q3 2011 Δ% Revenue 1,295 5 EBITDA* 157 (5) Ratio, % Q3 2011 Q3 2010 EBITDA* margin 12.1 13.4Revenue development Q3 2011 vs. Q3 201010 0% -3% 5 +7% +1% +5% 0 Volume Price/Mix Acquisitions/ Exchange rates Total divestments* Before incidentals Increase Decrease Press conference Q3 2011 results 11
  13. 13. Innovation: First powder coating used on apassenger vehicle in EuropeKey features Customers benefits• Beautiful matt black textured finish, • Fewer process steps reduces both developed with OEM stylists complexity and energy consumption• Superior environmental advantages • Improved environmental footprint Growth potential • Commercial launch by PSA is under discussion following successful trials with prototype vehicle • Potential penetration of the automotive body-shell market Press conference Q3 2011 results 12
  14. 14. Specialty Chemicals key facts2010• Revenue €4.9 billion• 11,080 employees• EBITDA: €939 million*• 32 percent of revenue from high-growth markets• Major producer of specialty chemicals• Leadership positions in many marketsRevenue by business unit Revenue by geography 6% Functional Chemicals 3% 9% Mature Europe 17% Industrial Chemicals 36% Emerging Europe 20% 44% North America Pulp and Paper Chemicals Asia Pacific 20% Surface Chemistry Latin America Other Regions 21% Chemicals Pakistan 21% 3%* Before incidentals Press conference Q3 2011 results 13
  15. 15. Specialty Chemicals Q3 2011 € million Q3 2011 Δ% Revenue 1,349 6 EBITDA* 238 (6) Ratio, % Q3 2011 Q3 2010 EBITDA* margin 17.6 20.0 Revenue development Q3 2011 vs. Q3 2010 -1% 10 0% 5 -1% +8% +6% 0 -5 Volume Price/Mix Acquisitions/ Exchange rates Total divestments* Before incidentals Increase Decrease Press conference Q3 2011 results 14
  16. 16. Innovation: Sustainable polymers for clearhair styling gelsKey Features Customer Benefits• Novel polymer • Clear hair gels with improved• Provides humidity resistance in sustainability profile hair gels and styling products • Attractive cost in use Growth potential • Launching in October 2011 • Early evaluations at local and multinational customers in progress Press conference Q3 2011 results 15
  17. 17. Financial review Press conference Q3 2011 results 16
  18. 18. Strong operating returns on investedcapital 30% 28.2% 24.4% 25% 22.2 20% 15% 10% 5% 8.9% 11.0% 9.7% 0% Q4 08 - Q3 09 Q4 09 - Q3 10 Q4 10 - Q3 11 Moving Average ROI %* Operating ROI is calculated as EBIT before amortization divided by average invested capital excluding intangible assets Operating ROI %* Press conference Q3 2011 results 17
  19. 19. Year-on-year Operating Working Capital %of revenue reducing towards 12%OWC€ million 2500 18% 17% 15.6% 15.0% 16% 14.6% 15.3% 2000 14.9% 14.1% 14.5% 15% 13.9% 13.7% 14% 13% 1500 12% 2,007 1,691 2,037 2,346 2,191 2,016 2,317 2,389 2,433 11% 1000 10% 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 OWC OWC as % of LQ revenue*4 Press conference Q3 2011 results 18
  20. 20. Dividend increases Our policy is to pay a stable to rising dividend• An interim and a final dividend will be paid• Cash dividend default, stock dividend optional Intended 2011€1.20 dividend €1.45€1.80 share€1.35 3% €1.20 total per – up• 2011 interim dividend €0.33 per share, up 3%• Our intention is to grow the total 2011 dividend by around €0.05 per share to €1.45 Press conference Q3 2011 results 19
  21. 21. Strategic ambitions and performanceimprovement program Press conference Q3 2011 results 20
  22. 22. Our medium term strategic ambitions • 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% margin • Reduce OWC/revenues by 0.5 p.a. towards a 12% level • Pay a stable to rising dividend Press conference Q3 2011 results 21
  23. 23. High-growth markets will becomesignificantly more important% of revenue, indicative 32% ‘Mature’ Europe 9% 18% ‘Emerging’ Europe North America 25% 5% Asia Pacific ME&A 11% Latin America High-growth markets will be around 50% of revenue in this decade Press conference Q3 2011 results 22
  24. 24. The next step in the evolution ofAkzoNobel Accelerated Portfolio Integration & and sustainable transformation restructuring growth • Divestiture of fibers • Integration of ICI • New Value & Values and pharma • €340 million structural growth strategy Sept ‘10 • Restructuring of synergies achieved • Performance chemicals portfolio by 2Q2010 improvement program • Acquisition of ICI • Footprint rationalized, logical next step • Building global scale key people retained • Combination of driving in paints & coatings • More than €200 operational excellence • Onward sales of million of cost and restructuring National Starch savings via underperforming parts of completed restructuring the business Press conference Q3 2011 results 23
  25. 25. Stepping up operational and functionalexcellence• Underpin our growth and margin objectives • Enhance our ability to grow • Expected to bring us at or above the mid-point of our 13-15 percent EBITDA margin guidance.• Delivers structural competitive advantage • Leveraging scale, simplify support structures, reduce cost base • Transfer best practices, standardize key processes • Restructuring of underperforming parts of the portfolio• Full EBITDA impact of €500 million by 2014 • Expected total incidental costs €425 million • 2012: €200 million EBITDA, incidental costs of €200 million • Reporting on program deliverables every six months Press conference Q3 2011 results 24
  26. 26. A comprehensive program• Comprehensive – all functions, all businesses Decorative Perf. Specialty • Margin management, R&D and Paints Coatings Chemicals restructuring (~50%) • Supply Chain and Sourcing Finance projects (~40%) Information Management Research,• Improvements implemented over Dev’t & Innov. three years (2012 to 2014) Human Resources Integrated• All business areas contribute to Supply Chain delivering the €500 million Margin Management • >40 percent Decorative Paints • >30 percent Performance Academy Coatings • Close to 25 percent Specialty Chemicals Press conference Q3 2011 results 25
  27. 27. Performance improvement initiativesexamplesSupply Chain – Creating a sustainable, customer-driven supply chain thatoperates at world-class safety, operational and customer service levels:• Improve the efficiency of all of our 225 factories• Reduce the cost of warehousing and transportationRD&I – Delivering bigger, bolder, better and faster innovation by focusingon four key areas:• Rationalizing RD&I’s footprint in Europe and North America• Reducing the number of raw materials we use• Improving the efficiency of our manufacturing processes• Linking customers’ needs more effectively to our research activitiesDecorative Paints – Restructuring will continue in mature markets:• In North America and Europe, focus will be placed on reducing product complexity, optimizing distribution and increasing employee productivity Press conference Q3 2011 results 26
  28. 28. Organization and governance • Joint responsibility of the Executive Committee, led by CEO Hans Wijers • The Executive Committee Support Office (ESO) will operate the implementation to track progress, intervene where necessary and support the overall program • Set priorities and identify improvement potential fromMasterplans 20 design stages, build into a business case and action plan • ExCo members to lead each plan • Defined measures to address priority opportunities • Clear objectives and deliverables identified Initiatives 100 • Risks and dependencies identified • ExCo member still accountable, execution assigned to operational management Press conference Q3 2011 results 27
  29. 29. In summary• Strong fundamentals with leading positions and brands• Diverse geographical spread• Delivering on price increases• Medium term strategic ambitions unchanged• Actions underway to further unlock value potential Press conference Q3 2011 results 28
  30. 30. Questions? Press conference Q3 2011 results 29
  31. 31. 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. Press conference Q3 2011 results 30

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