akzonobel q3 2011 media presentation

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Press Conference Q3 2011 results October 20, 2011 Hans Wijers, CEO Keith Nichols, CFO

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  • 1. October 20, 2011Hans Wijers, CEO Keith Nichols, CFOPress Conference Q3 2011 results

2. Agenda Q3 2011 value and innovation highlights Financial review Strategic ambitions and performance improvementprogram Q&A Press conference Q3 2011 results 1 3. Q3 2011 value and innovation highlights Press conference Q3 2011 results 2 4. Q3 2011 highlights Revenue up 5 percent driven by pricing actions to offset raw materialcost inflation Weaker economic conditions and continued raw material priceinflation impact results, particularly in Decorative Paints EBITDA* decreased to 507 million (2010: 574 million) Net income from continuing operations 148 million (2010: 217million) 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 500million EBITDA in 2014* Before incidentalsPress conference Q3 2011 results 3 5. Q3 2011 revenue and EBITDA millionQ3 2011% Revenue4,0515 EBITDA*507 (12) Ratio, % Q3 2011Q3 2010 EBITDA* margin 12.514.8 Revenue development Q3 2011 vs. Q3 201010 0% -2%5+6% +1% +5%0 VolumePrice/Mix Acquisitions/ Exchange rates Total divestments* Before incidentals IncreaseDecreasePress conference Q3 2011 results 4 6. Price increases coming throughQuarterly volume development in % year-on-year1510 4% 5 1% -1%1% 0-5Decorative Paints PerformanceSpecialtyAkzoNobel CoatingsChemicalsQuarterly price/mix development in % year-on-year108% 7%6% 5 3% 0 -5 -10Decorative Paints PerformanceSpecialtyAkzoNobel CoatingsChemicals 20102011Press conference Q3 2011 results 5 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 brandsRevenue by geography3%11%Mature Europe Emerging Europe 42% Asia Pacific20% North America Latin America Other regions17%7%* Before incidentals Press conference Q3 2011 results 6 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 savingsPress conference Q3 2011 results 7 9. Decorative Paints Q3 2011 millionQ3 2011% Revenue1,435 5 EBITDA* 148(25) Ratio, % Q3 2011Q3 2010 EBITDA* margin 10.314.4 Revenue development Q3 2011 vs. Q3 201010 0% +3% -2%5 +4% +5%0 VolumePrice/Mix Acquisitions/ Exchange rates Total divestments* Before incidentals IncreaseDecreasePress conference Q3 2011 results 8 10. Innovation: An automatic tinting machine at abreakthrough priceKey FeaturesCustomer Benefits Half the cost of conventional tinting Extends retailers colour offersmachine with similar functionalities Improving retailers profitability and Innovative design and easyreturns on investmentmaintenanceGrowth potential Underpins our color leadership Potential to drive distribution across high-growth markets Roll-out in Latam, India, Turkey and SE AsiaPress conference Q3 2011 results 9 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 Protective7% Mature Europe 17% Coatings 28% 9% Automotive and30% Emerging Europe Aerospace Coatings Industrial Coatings Asia Pacific16% 20% North America Wood Finishes and Adhesives 9%Latin America 21% 18% Powder Coatings25%Other regions* Before incidentals Press conference Q3 2011 results 10 12. Performance Coatings Q3 2011 million Q3 2011% Revenue 1,295 5 EBITDA*157(5) Ratio, %Q3 2011Q3 2010 EBITDA* margin12.113.4Revenue development Q3 2011 vs. Q3 201010 0% -3% 5 +7%+1% +5% 0Volume Price/Mix Acquisitions/ Exchange rates Total divestments* Before incidentals Increase Decrease Press conference Q3 2011 results 11 13. Innovation: First powder coating used on apassenger vehicle in EuropeKey featuresCustomers benefits Beautiful matt black textured finish, Fewer process steps reduces bothdeveloped with OEM stylists complexity and energy consumption Superior environmental advantages Improved environmental footprintGrowth potential Commercial launch by PSA is underdiscussion following successful trialswith prototype vehicle Potential penetration of the automotivebody-shell marketPress conference Q3 2011 results 12 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 unitRevenue by geography 6%Functional Chemicals3% 9% Mature Europe 17% Industrial Chemicals 36% Emerging Europe 20% 44% North America Pulp and Paper Chemicals Asia Pacific20%Surface Chemistry Latin America Other Regions21%Chemicals Pakistan21%3%* Before incidentals Press conference Q3 2011 results13 15. Specialty Chemicals Q3 2011 million Q3 2011% Revenue 1,349 6 EBITDA*238(6) Ratio, %Q3 2011Q3 2010 EBITDA* margin 17.6 20.0Revenue development Q3 2011 vs. Q3 2010-1%10 0%5-1%+8% +6%0 -5Volume Price/Mix Acquisitions/ Exchange ratesTotal divestments* Before incidentalsIncreaseDecrease Press conference Q3 2011 results 14 16. Innovation: Sustainable polymers for clearhair styling gelsKey FeaturesCustomer Benefits Novel polymer Clear hair gels with improved Provides humidity resistance in sustainability profilehair gels and styling products Attractive cost in useGrowth potential Launching in October 2011 Early evaluations at local andmultinational customers in progress Press conference Q3 2011 results 15 17. Financial review Press conference Q3 2011 results 16 18. Strong operating returns on investedcapital30% 28.2%24.4%25% 22.220%15%10%5%8.9%11.0% 9.7%0% Q4 08 - Q3 09Q4 09 - Q3 10 Q4 10 - Q3 11Moving Average ROI %* Operating ROI is calculated as EBIT before amortization divided byaverage invested capital excluding intangible assets Operating ROI %* Press conference Q3 2011 results 17 19. Year-on-year Operating Working Capital %of revenue reducing towards 12%OWC million250018%17%15.6% 15.0% 16%14.6% 15.3%200014.9%14.1% 14.5%15%13.9%13.7%14%13%150012%2,007 1,691 2,037 2,346 2,191 2,016 2,3172,3892,43311%100010%3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q112Q113Q11OWCOWC as % of LQ revenue*4Press conference Q3 2011 results 18 20. Dividend increasesOur policy is to pay a stable to rising dividend An interim and a final dividend will be paid Cash dividend default, stock dividend optionalIntended 20111.20 dividend 1.451.80 share1.35 3%1.20total per up 2011 interim dividend 0.33 per share, up 3% Our intention is to grow the total 2011 dividend by around 0.05per share to 1.45 Press conference Q3 2011 results 19 21. Strategic ambitions and performanceimprovement programPress conference Q3 2011 results 20 22. Our medium term strategic ambitions Top quartile safetyperformance Top 3 position in sustainability Top quartile performance indiversity, employee engagement,and talent development Top quartile eco-efficiencyimprovement 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 dividendPress conference Q3 2011 results 21 23. High-growth markets will becomesignificantly more important% of revenue, indicative 32%Mature Europe9% 18% Emerging EuropeNorth America 25% 5% Asia PacificME&A 11%Latin AmericaHigh-growth markets will be around 50% of revenue in this decadePress conference Q3 2011 results 22 24. The next step in the evolution ofAkzoNobelAccelerated PortfolioIntegration &and sustainabletransformationrestructuringgrowth Divestiture of fibers Integration of ICI New Value & Valuesand pharma 340 million structural growth strategy Sept 10 Restructuring ofsynergies achieved Performancechemicals portfolio by 2Q2010 improvement program Acquisition of ICI Footprint rationalized, logical next step Building global scale key people retained Combination of drivingin paints & coatings More than 200operational excellence Onward sales of million of cost and restructuringNational Starch savings via underperforming parts ofcompleted restructuring the businessPress conference Q3 2011 results 23 25. Stepping up operational and functionalexcellence Underpin our growth and margin objectivesEnhance our ability to growExpected to bring us at or above the mid-point of our 13-15 percent EBITDA margin guidance. Delivers structural competitive advantageLeveraging scale, simplify support structures, reduce cost baseTransfer best practices, standardize key processesRestructuring of underperforming parts of the portfolio Full EBITDA impact of 500 million by 2014Expected total incidental costs 425 million2012: 200 million EBITDA, incidental costs of 200 millionReporting on program deliverables every six months Press conference Q3 2011 results 24 26. A comprehensive program Comprehensive all functions,all businesses Decorative Perf.Specialty Margin management, R&D and Paints Coatings Chemicalsrestructuring (~50%) Supply Chain and SourcingFinanceprojects (~40%) InformationManagement Research, Improvements implemented over Devt & Innov.three years (2012 to 2014)Human Resources Integrated All business areas contribute toSupply Chaindelivering the 500 million MarginManagement >40 percent Decorative Paints >30 percent Performance AcademyCoatings Close to 25 percent SpecialtyChemicals Press conference Q3 2011 results 25 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 factoriesReduce the cost of warehousing and transportationRD&I Delivering bigger, bolder, better and faster innovation by focusingon four key areas: Rationalizing RD&Is 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. Organization and governance Joint responsibility of the Executive Committee, led by CEO Hans Wijers The Executive Committee Support Office (ESO) will operate theimplementation to track progress, intervene where necessary and supportthe overall program Set priorities and identify improvement potential fromMasterplans 20design 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 identifiedInitiatives100 Risks and dependencies identified ExCo member still accountable, execution assigned tooperational management Press conference Q3 2011 results 27 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 potentialPress conference Q3 2011 results 28 30. Questions? Press conference Q3 2011 results 29 31. Safe Harbor StatementThis presentation contains statements which address such key issues asAkzoNobels 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 companys corporate website www.akzonobel.com.Press conference Q3 2011 results 30