Q3 2014 Media update

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Media Update Q3 2014 results Ton Büchner & Maëlys Castella October 21, 2014

Agenda 1.

Q3 2014 highlights

2.

Visible results in Q3

3.

Conclusion

4.

Questions

Media Update Q3 2014 results

2

Q3 2014 Operational and financial review

Media Update Q3 2014 results

3

Q3 2014 highlights •

Operating income of €335 million reflects benefits from improvement actions and lower restructuring charges

•

Q3 volumes up 1 percent, more than offset by currency effects and divestments, resulting in revenues down 2 percent

•

Return on sales (ROS) 9.1 percent (2013: 8.0 percent). Excluding restructuring costs of €55 million (2013: €75 million), ROS is 10.6 percent (2013: 10.0 percent)

•

Net income attributable to shareholders was €205 million (2013: €155 million), due to higher operating income and lower financing expenses

•

Adjusted EPS increased 24 percent to €0.92 (2013: €0.74)

•

Interim dividend of €0.33 declared

•

Net cash inflow from operating activities €489 million (2013: €552 million)

•

On track to deliver 2015 targets despite the continued fragile economic environment

Media Update Q3 2014 results

4

Return on Sales improvement continued in Q3 2014 € million

Q3 2014

Δ%

Revenue

3,686

-2

335

11

Q3 2014

Q3 2013

9.1

8.0

Return on sales (excluding restructuring costs)

10.6

10.0

Moving average return on investment

10.5

8.6

Operating income Ratio, % Return on sales

Increase

Decrease

Revenue development Q3 2014 vs. Q3 2013 +1%

-1% -1%

Volume

Price/Mix

Acquisitions/ Divestments

-1%

-2%

Exchange rates

Total

Media Update Q3 2014 results

5

Continued fragile economic environment impacting all Business Areas Quarterly volume development in % year-on-year

2013 2014

6 2

+2%

0%

+1%

0%

-2 -6

Decorative Paints

Performance Coatings

Specialty Chemicals

AkzoNobel

Quarterly price/mix development in % year-on-year

5 2

-3%

-1%

+1%

-1%

-1 -4

Decorative Paints

Performance Coatings

Specialty Chemicals

AkzoNobel

Media Update Q3 2014 results

6

Foreign exchange rates have become less of a headwind in Q3 Quarterly foreign exchange rate development in % year-on-year

2013 2014

4 0

-1%

-1%

-1%

-1%

-4 -8

Decorative Paints

Performance Coatings

Specialty Chemicals

AkzoNobel

• Adverse currency effects, impacting 1H 2014, were visible in all Business Areas and any lost income related to this will not come back in our results

• Negative currency effects levelling off in Q3, with less impact on this quarter’s results

Media Update Q3 2014 results

7

~44% of revenues

~16% of revenues

New Build Projects

Automotive OEM, Parts and Assembly

Maintenance, Renovation & Repair Building Products & Components

~16% of revenues Consumer Durables Consumer Packaged Goods

Automotive Repair Marine and Air Transport

~24% of revenues Natural Resource and Energy Industries Process Industries

Media Update Q3 2014 results

8

Decorative Paints Q3 2014 highlights =

€ million

Q3 2014

Δ%

1,050

-8

113

6

Q3 2014

Q3 2013

Return on sales

10.8

9.4

Return on sales (excluding restructuring costs)

10.8

10.1

Revenue Operating income Ratio, %

• Volumes were flat compared with previous year • Revenues down 8 percent due to divestments and adverse price/mix • Price/mix largely driven by the sale of the German stores • Operating income was up 6 percent, mainly due to lower restructuring expenses and effects from restructuring programs contributing to results

Increase

Revenue development Q3 2014 vs. Q3 2013

0%

-3%

Decrease

-4% -8%

-4% -1% Volume

Price/Mix

Acquisitions/ Divestments

Exchange rates

Total

Media Update Q3 2014 results

9

Performance Coatings Q3 2014 highlights € million

Q3 2014

Δ%

Revenue

1,420

0

135

-16

Operating income Ratio, %

Q3 2014

Q3 2013

9.5

11.3

12.4

11.9

Return on sales Return on sales (excluding restructuring costs)

• Volumes were up 2 percent compared with previous year, driven by Marine and Protective Coatings and Powder Coatings • Revenues were flat, with positive volumes offset by negative price/mix and adverse currency effects • Operating income down 16 percent, return on sales at 9.5 percent (2013:11.3 percent), due to higher restructuring charges

Increase

Revenue development Q3 2014 vs. Q3 2013

Decrease

+2% Volume

-1% Price/Mix

0% Acquisitions/ Divestments

-1%

0%

Exchange rates

Total

Media Update Q3 2014 results 10

Specialty Chemicals Q3 2014 highlights € million

Q3 2014

Δ%

Revenue

1,239

-1

156

46

Q3 2014

Q3 2013

Return on sales

12.6

8.5

Return on sales (excluding restructuring costs)

13.1

12.2

Operating income Ratio, %

Increase

Revenue development Q3 2014 vs. Q3 2013

0%

+1%

• Volumes were flat compared with the previous year • Revenues down 1 percent, due to adverse currency effects and divestments • Operating income up 46 percent at €156 million, due to lower restructuring costs, cost control and improved mix • Continuous improvement measures continue in all businesses

Decrease

-1% -1%

Volume

Price/Mix

Acquisitions/ Divestments

Exchange rates

-1% Total

Media Update Q3 2014 results 11

Summary – Q3 2014 results € million

Q3 2014

Q3 2013

487

456

(152)

(153)

-

-

Operating income

335

303

Net financing expenses

(38)

(56)

Minorities and associates

(10)

(10)

Income tax

(84)

(83)

2

1

205

155

Q3 2014

Q3 2013

0.92

0.74

EBITDA Amortization and depreciation

Incidentals

Discontinued operations Net income attributable to shareholders

Ratio Adjusted earnings per share (in €)

Media Update Q3 2014 results 12

Visible results in Q3

Media Update Q3 2014 results 13

Progress in Q3

Media Update Q3 2014 results 14

Human Cities: Commitment to the Clinton Global Initiative We made a commitment to the Clinton Global Initiative by establishing a partnership with The Rockefeller Foundation through its 100 Resilient Cities program. We will contribute by: • Compiling an urban resilience guide for cities • Taking on special projects in four cities named on the 100 Resilient Cities list • Making our expertise in paints, coatings and chemicals available to the program’s advisory committees

Media Update Q3 2014 results 15

Conclusion

Media Update Q3 2014 results 16

Conclusion • Fifth consecutive quarter of improvement in return on sales at group level and underlying return on sales improvement visible in all Business Areas • Continuous improvement programs are ongoing in all businesses, with expectation of at least €250 million restructuring costs in 2014

• Number one ranking in our industry on the influential Dow Jones Sustainability Index (DJSI) for the third consecutive year • Continued investment in sustainability and innovation will help to further enhance our operational efficiency and stimulate organic growth and will also boost our market leading positions • We are on track to deliver the 2015 targets despite a continued fragile economic environment

Media Update Q3 2014 results 17

Questions

18

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.

Media Update Q3 2014 results 19

Appendices

Media Update Q2 2014 results 20

Innovation Pipeline Q3 2014 Decorative Paints – Dulux Forest Breath Key Features

Customer Benefits

Growth Potential

• Waterborne interior woodstain available as clear varnish and opaque finishes that are compatible with current color solutions

• Family friendly:

• Launched in China in May 2014

• Anti-bacterial properties

• Very easy to apply

• Improves indoor air quality by absorbing and destroying atmospheric formaldehyde

• Good hardness and scratch resistance

– low odor whilst painting – affordable anti-bacterial, easily cleanable surfaces throughout the home

• Drive cross-selling in retail channel through Dulux branded stores • Positioned as an eco-premium solution offering family-friendly, well-being advantages

High performance waterborne interior woodcare for the China market

Media Update Q3 2014 results 21

Reinventing the paper cup with EvCote paper coatings Key features: • Cups produced with EvCote are both recyclable and compostable • Produced from recycled PET and bio-renewable oils • Quantifiable sustainability through the reuse of paper fiber, recycling of waste materials, and reduced environmental impact

Customer benefits: • Enabling the industry to separate itself from the petro-chemical value chain • Low barriers to adoption and no capital expenses required

EvCote paper coatings offers the market a disruptive alternative to 40-year old polycoated cup technology

Media Update Q3 2014 results 22

Innovation Pipeline Q3 2014 Functional Chemicals – ELOTEX® CAST

Key Features

Customer Benefits

Growth Potential

•

•

Possibility to use any kind of available gypsum for leveling compounds and screeds

•

Elotex® CAST 700 and CAST 710 launched in Q1/2013 and Q2/2014, respectively

•

Savings on time and costs for raw material and logistics

•

Global potential in all regions with access to natural or synthetic gypsum (esp. RU, CN, BR, US, TR)

•

Opportunity for building product formulators to differentiate from competition and open new markets

•

A new specialty additive for dispersing and stabilizing calcium sulfate in mortar mixes, enabling the use of all gypsum types for flooring applications

Provides good workability and excellent levelling properties, resulting in high strength and smooth surface floors

•

Product is delivered in powder form which simplifies handling and product formulation

•

Sustainable contribution in an eco-premium product CALCIUM SULFATE TECHNOLOGY - a unique and innovative technology for gypsum floorings Media Update Q3 2014 results 23