Transcript Presentation Title
Delivering Tomorrow’s Answers Today
Presentation to Meeting of Shareholders Amsterdam, April 27, 2009 Hans Wijers, CEO
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 www.akzonobel.com
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Agenda
1. Year 2008 review 2. Q1 2009 highlights 3. Outlook and medium term targets 4. Questions and answers session
Full year 2008
• Full year revenues above last year • Full year EBITDA before incidentals and National Starch, in constant currencies, in-line with guidance • Significant slowdown in most markets towards year-end • Effective margin management offset raw material price increases • ICI integration remains ahead of schedule • Market conditions caused impairment charge • Additional restructuring in progress • Dividend maintained • Share Buy Back program not completed
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Full year 2008 revenue: Effective margin management offset currency impact
€ mln
Revenue constant currencies Revenue reported
2008
16,202 15,415
Δ%
6 1
Total revenue growth 2008 vs. 2007 pro forma
6 5 4 3 2 1 0 -1 -1 Volume +6 Price +1 Acquisitions/ divestments -5 1 Currency Increase Total Decrease
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Full year 2008 results: resilient performance
€ mln
EBITDA constant currencies (excl National Starch)* EBITDA constant currencies* EBITDA reported* Net income from continuing operations* Net income/(loss) from total operations after incidentals
2008
1,841 742 (1,086)
Ratio
EBITDA margin reported (%)* Earnings per share (in €)*
2008
12.2
3.00
Δ%
(2) (14)
2007
13.2
3.11
*Continuing operations before incidentals; 2007 pro forma
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Restructuring and ICI integration at an advanced stage
Total
2008 and Q1, 2009
Net FTE reductions* Cash costs ( € million) Annualized savings ( € million)
ICI integration
750
Additional restructuring
1,300 96 137 103 67 2,050 199 204
We will continue to pursue efficiency improvements:
• Site rationalization and in-plant productivity improvement • Further reduction of overhead cost and third party spend • 2009 salary freeze for the Board of Management, more than 500 executives, and where possible for most other employees.
* The gross number of 3,805 was offset by new hires, acquisitions and seasonal staff
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Community Program
From 2005 – 2008
• More than 800 projects • More than 4,000 employees active as volunteers
2008 best practice competition 1 st Prize Decorative Paints Ho Chi Minh City:
More clean drinking water systems and training on sanitation for school children in Central rural Vietnam
2 nd Prize Powder Coatings Chengdu:
Additional support for schools hit by earthquake: cement floor, renovation library, pc’s and books, etc.
3 rd Prize Polymer Chemicals Shanghai:
Support for a school for migrant children near Shanghai
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Operational review Decorative Paints
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Decorative Paints: Margin management compensated for volume decline
• • • • • • Revenue in Europe in 2008, in constant currencies, stable Significant cost reduction in Europe UK market share holding up US revenue declined by 9 percent due to recessionary market conditions Asia delivered double-digit constant currency revenue growth in 2008; in Q4 volumes declined, compensated by margin management A year marked with restructuring, integration and margin management
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Decorative Paints full year 2008: resilient performance
€ mln
Revenue constant currencies Revenue reported EBITDA constant currencies EBITDA reported
2008
5,385 5,118 628 593
Δ%
2 (3) – (6)
Ratio, %
EBITDA margin reported
2008
11.6
2007
11.9
Total revenue growth 2008 vs. 2007 pro forma
+1 2 1 0 -1 -2 -3 -3 +4 Volume Price Acquisitions/ divestments
Before incidentals; 2007 pro forma
-5 Currency Increase -3 Total Decrease
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Operational review Performance Coatings 12
Performance Coatings: a mixed year
• • • • • Full year and Q4: continued strong performance at Marine & Protective Coatings Global economic downturn had greater impact on trading levels in Industrial Activities as the year developed Volumes at Car Refinishes close to 2007 Stable year for Packaging Coatings Multiple cost saving projects are aligning our cost structure to the changed market environment
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Performance Coatings full year 2008: stable results € mln
Revenue constant currencies Revenue reported EBITDA constant currencies EBITDA reported
2008
4,691 4,463 566 546
Ratio, %
EBITDA margin reported
2008
12.2
Δ%
4 (1) – (4)
2007
12.6
Total revenue growth 2008 vs. 2007 pro forma
6 4 2 0 -2 -1 +4 +1 Volume Price Acquisitions/ divestments
Before incidentals; 2007 pro forma
-5 Currency Increase -1 Total Decrease
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Operational review Specialty Chemicals 15
Specialty Chemicals: solid performance, but volume declined in Q4
• • • • • Solid performance for 2008, volume declined in Q4 Demand weakness in Polymer Chemicals and a significant decline in results for the Pakistan PTA business Functional Chemicals finished behind 2007 as demand softened in Q4 and sulfur prices declined sharply Industrial Chemicals and National Starch repeated their strong performance of 2007 Diverse markets and effective margin management led to improved performance at Surface Chemistry
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Specialty Chemicals full year 2008: solid performance but volume declined € mln
Revenue constant currencies Revenue reported EBITDA constant currencies EBITDA reported
2008
5,964 5,687 951 891
Δ%
10 5 3 (4)
Ratio, %
EBITDA margin reported
2008
15.7
2007
17.2
Total revenue growth 2008 vs. 2007 pro forma
15 10 5 0 -5 -1 +10 +1 Volume Price Acquisitions/ divestments
Before incidentals; 2007 pro forma
-5 Currency Increase 5 Total Decrease
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We continue to successfully innovate
Intersleek® 900
• Ship number 100 coated during 2008. Reduces fuel consumption with up to 6 percent.
Autoclear® UV
• Clearcoat which cures by UV light, saving energy and increases body shop productivity.
The Freshaire Choice™
• Zero VOC paint & colorant system launched in USA in 2008. Delivered in recyclable cans.
Compozil Fx
• System for the largest and fastest paper machines, reduces both raw material costs and energy usage because of faster drying
Dissolvine® GL
• Replaces phosphates in washing powder, better stain removal. Clean laundry at lower washing temperatures
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Highlights Q1 2009
Highlights and operational review Q1 2009
• Revenue declined 13% to €3,272 million • Volume decline evident in all three business areas, in all geographies • Some stabilization seen in trading conditions in March • EBITDA margin at 9.0 percent, EBITDA 33 percent lower at €296 million, • Net loss of €7 million • Refinancing completed – €750 million bond issue in March and £250 million in April • Ongoing management action with focus on customers, cost and cash • Restructuring programs on track
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Q1 2009 revenue
€ mln
Revenue constant currencies Revenue reported
Q1 2009
3,334 3,272
Δ%
(11) (13)
Revenue development Q1 2009 vs. Q1 2008
-1 -3 -5 -7 -9 -11 -13 -15 -17 -17% +5% +1% Volume Price -2% -13% Acquisitions/ divestments Currency Increase Total Decrease
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Q1 2009 results
€ mln
EBITDA* constant currencies EBITDA* reported Net income before FVA ** Net income
Ratio
EBITDA* margin reported (%) EPS (in €)
Q1 2009 Δ%
28 (7)
Q1 2009
9.0
(0.03)
2008
11.7
0.40
* Before incidentals ** Net income from continuing operations before fair value adjustments is the basis for the dividend pay out ratio
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Financial review 2008
Strong balance sheet maintained after share buy back and impairment
€ million Equity Net debt Pension deficit
Dec 31, 2008
7,913 2,084 988
Dec 31, 2007 1
12,091 2,910 1,510 € million Net cash from operating activities
2008
91
2007
643 • Equity impacted by share buyback, impairments and currency translation • Net debt and pension deficit reduced • Net cash impacted by pension top-ups and expenditures for working capital
1 Pro forma
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Strong liquidity headroom
€1.0 billion bond maturing in May 2009 already refinanced
Debt maturity, € million 1,200 800 400 0 2009 2010 € bonds 2011 2012 $ bonds 2013 2014 GBP bonds 2015
Maturity profile of debt book lengthened
2016 • Undrawn revolving credit facility of €1.5 billion available (2013) • Undrawn commercial paper program • Cash and cash equivalents €2.0 billion at end of Q1
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Dividend maintained, share buy back not completed
Dividend 2008
• Proposed dividend 2008 is €1.80 per share – payout ratio of 48% • Interim dividend of €0.40 and final dividend of €1.40
Dividend policy
• Pay-out ratio remains minimum of 45% of net income from total operations before incidentals and fair value adjustments related to the ICI acquisition
Share Buy Back
• 2008 €1.4 billion or 12% of outstanding shares cancelled • Share buy back not completed - prudent liquidity management • Outstanding number of common shares per year- end 2008: 231.7 million
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Outlook and medium-term targets
Actions underway to deliver future strength
Sound fundamentals
• Strong positions in diverse, highly attractive sectors • Wide geographic spread • Strong balance sheet
Actions
• Significant level of additional restructuring • Rigorous cost management • Prudent capital allocation without jeopardizing growth
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Outlook and medium term targets
• Global market conditions and lack of visibility do not allow certainty. We expect
2009
to be challenging.
Nevertheless, we remain focused on: • working towards our medium-term target of an
EBITDA margin of 14 percent
by the end of 2011 • delivering the €340 million
ICI synergies
faster • driving
margin management
programs across the company • rigorous
cost
management • remaining a leader in
sustainability
(top 3 DJSI)
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