2015 review annual general meeting of shareholders… · annual general meeting of shareholders:...

2015 review Annual General meeting of Shareholders

Ton Büchner

April 20, 2016

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Annual General Meeting of Shareholders: 2015 review 2

Essential ingredients

Essential protection

Essential color

…in salt for

cooking

…on sports

stadiums …in

people’s

homes

WE CREATE EVERYDAY ESSENTIALS TO MAKE PEOPLE’S LIVES MORE LIVEABLE AND INSPIRING


Agenda

Questions

Summary and conclusion

Strategic update

Introduction

2015 review

Global paints, coatings and specialty chemicals company

5

€14.9 billion revenue (2015)

€2.1 billion EBITDA (2015)

80+ countries

45,600 employees (2015)

Leadership positions in many markets

Revenue by Business Area

Annual General Meeting of Shareholders: 2015 review

45%

20%

35%

17%

10%

36%

7%

27%

3% North America

Latin America

Mature Europe

Emerging Europe

Asia Pacific

Other

40%

27%

33%

PerformanceCoatings

DecorativePaints

SpecialtyChemicals

Operating income by Business Area Revenue by geographic region

Introduction

6 Annual General Meeting of Shareholders: 2015 review

Achieved our 2015 financial targets

Built a foundation for continuous improvement:

− New operating models

− AkzoNobel Leading Performance System (ALPS)

− Global Business Services

Other achievements:

– Recognized as a leader in sustainability for the fourth year running

– Human Cities initiative evolved

– Engagement levels increased and safety improved

Launched next phase of our strategy and

announced new financial guidance for 2016-2018

Highlights from a year of significant progress towards our vision

Introduction

8.9* 9.6 10.0

14.0 15.0

14.0

0

4

8

12

16

2012 2013 2014 2015** 2015 2015Target


Return on sales %

(Operating income/revenue)

Return on investment %

(Operating income/average 12 months invested capital)

We delivered all 2015 financial targets

* Excluding impairment (€2.1 billion) and after IAS19

** Excluding incidental items

5.9* 6.6 6.9

9.8 10.6

9.0

0

4

8

12

2012 2013 2014 2015** 2015 2015Target

Exceeded 2015 targets

Net debt/EBITDA = 0.6 (target: <2.0)

Introduction


We achieved records in profitability and cash flow

Introduction

1,918 1,719 1,597 1,513

1,690

2,088

900

1300

1700

2100

2010 2011 2012 2013 2014 2015

Operating income € million

Cash flow from operating activities € million

519 396

737 716 811

1,136

0

400

800

1200

2010 2011 2012 2013 2014 2015

1,293 1,157 972 958 987

1,573

400

800

1200

1600

2010 2011 2012 2013 2014 2015

EBITDA € million

Adjusted earnings per share € per share

3,71 3,10

2,55 2,62 2,81

4,02

2,00

3,00

4,00

5,00

2010 2011 2012 2013 2014 2015

Strategic update


Agenda

Introduction

2015 review

Questions

Summary & conclusion

Consumer Goods

10 Annual General Meeting of Shareholders: 2015 review % based on 2015 revenue

New build projects

Maintenance, renovation and repair

Building products and components

Automotive OEM, parts and assembly

Automotive repair

Marine and air transport

Consumer durables

Consumer packaged goods

Natural resource and energy industries

Process industries

17%

Industrial

Building and Infrastructure

22%

44% 17%

Transportation

2015 review

-1% 0%

-1%

6% 4%

Volume Price/Mix Acquisitions/Divestments

Exchange rates Total

Financial performance full-year 2015 showing continued operational improvement

€ million FY 2014 FY 2015 Δ%

Revenue 14,296 14,859 4

Operating income excluding incidentals 1,072 1,462 36

Operating income 987 1,573 59

Ratio, % FY 2014 FY 2015

Return on sales 6.9 10.6

Return on sales (excluding incidentals) 7.5 9.8

Return on sales (excluding incidentals & restructuring costs) 9.3 10.3

Moving average return on investment 10.0 15.0

Increase

Decrease

Revenue development FY 2015 vs. FY 2014

11 Annual General Meeting of Shareholders: 2015 review 2015 review

10.9 14.0

10.0

15.0

FY 2014 FY 2015FY 2014 FY 2015

Full-year 2015 represents another year of improved financial performance

Revenue € million

Return on Investment %

Net income attributable to shareholders up 79 percent at €979 million (2014: €546 million)

Adjusted EPS up 43 percent at €4.02 (2014: €2.81)

Net cash inflow from operating activities up 40 percent to €1,136 million (2014: €811 million)

987

1,573

FY 2014 FY 2015

Operating income € million

14,296

14,859

+4% +59%

Return on Sales %


7.5 9.8 6.9

10.6

FY 2014 FY 2015

Excluding incidental items

2015 review

75%

25% Maintenance, renovationand repair

New build projects

Decorative Paints at a glance

13

Key capabilities Branding

Digital

Distributor, wholesale, retail management

Understanding and serving professional painters

Consumer inspiration

Quality management, including portfolio

management

Decorative Paints key figures

Buildings and Infrastructure

revenue breakdown

Revenue by geographic spread

€ million 2015

Revenue 4,007

EBITDA 495

Operating income 345

Return on sales 8.6%

Return on investment 11.7%

Employees 14,900


56%

14%

30% EMEA

Latin America

Asia

2015 review

Performance Coatings at a glance

14

Performance Coatings key figures

Revenue by end-user segment


€ million 2015

Revenue 5,955

EBITDA 938




Employees 19,300


24%

40%

22%

14% Buildings andInfrastructure

Transportation

Consumer Goods

Industrial

38%

29%

33% EMEA

Americas

Asia Pacific

Key capabilities

Industrial key account management

Technical support and service

Design, color and color matching

Continuous innovation in functionality and ease-of-use

Sustainable, safe solutions

2015 review

Specialty Chemicals at a glance

15

Key capabilities

Understanding customer needs

Management of integrated value chains

Continuous technological advancement

Engineering and project management

Specialty Chemicals key figures

Revenue by end-user segment


€ million 2015

Revenue 4,988

EBITDA 898




Employees 9,100

49%

34%

17% EMEA

Americas

Asia Pacific


19%

6%

28%

47%

Buildings andInfrastructure

Transportation

Consumer Goods

Industrial

2015 review

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Life without

AkzoNobel film

(1m00sec)

Annual General Meeting of Shareholders: 2015 review 16 2015 review

Cash management discipline continues

17

1,785 1,418

2,026

2,017 1,870

1,385

12.1%

10.1%

14.1% 12.8%

12.4%

9.7%

0%

2%

4%

6%

8%

10%

12%

14%

16%

0

500

1.000

1.500

2.000

2.500

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Operating Working Capital

€ million

Capital Expenditures

€ million

Other

Decorative Paints

Performance Coatings

Specialty Chemicals


Operating Working Capital

OWC as % of LQ revenue * 4

Capex as % of revenue

4.44.1

4.65.4

2013

588 666

2012

826

2014

651

2015

2015 review


Increase in dividends a clear sign we are more confident about cash flow generation

Dividend policy is to pay a “stable to rising”

dividend each year

Interim and final dividend paid in cash, unless

shareholders elect to receive a stock dividend

(normal uptake 35-40 percent)

Interim dividend up 6 percent

Proposed final dividend €1.20 per share (paid

May 19, 2016)

Total dividend up 7 percent to €1.55 per share

0.33

1.12

2015

0.35

2014

0.33

1.12

2013

0.33

1.12

2012

0.33

1.12 1.20

Interim dividend

Final dividend Dividends € per share

18 2015 review


Agenda

Introduction

2015 review

Questions


Strategic update


Strategy delivering results and building foundation for continuous improvement

Achievements

*In the materials industry group

Transformation | New operating models for all Business Areas

Realignment of the functions

Operational optimization; reduction in:

– Factory footprint

– Enterprise Resource Planning systems

– SKUs

Portfolio optimization with selected divestments

Proactive management of pension liabilities

Continued focus on sustainability; #1 in Dow Jones Sustainability Index*

Core principles and values | Human Cities

Strategic update

Focus on continuous improvement and organic growth

Next steps

Culture

Core principles and values

Sustainability – Planet Possible

Society – Human Cities

Drive organic growth and innovation

Pursue value generating bolt-on acquisitions

Build further operational excellence

Deliver continuous improvement culture

Hardwire new organization model

Strategic update Annual General Meeting of Shareholders: 2015 review


Vision confirmed; financial guidance 2016-2018

ROS = EBIT/revenue

ROI = EBIT/average 12 months

invested capital

Guidance 2016-2018:

Return on sales: 9-11%

Return on investment: 13-16.5%

Clear aim to build on the foundation we have created and grow in line or faster than our relevant market segments

Vision: Leading market positions delivering leading performance

Key assumptions:

Currencies versus €: $1.1, £0.71, ¥7.1

Oil price ~$60/bbl; no significant market disruption

Strategic update

Sustainable steam

generation Signed a multi-year agreement with

Eneco to purchase sustainably

generated steam for Delfzijl

Paint that

keeps you cool A long-lasting exterior wall paint which

protects against the elements and

reflects UV rays to reduce energy use

Carbon credits

program for shipping Created first carbon credit methodology

for international shipping industry

4-dimensional

profit and loss Partnering to create new insights for

decision-making

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRxqFQoTCOqDoZXe-McCFcy0FAodOU0I9A&url=http://www.sonnuocminhtoan.com/2015/06/son-chong-nong-giai-nhiet-cho-mua-he.html&psig=AFQjCNHissP7Z9QLonJ7mqEi2kBCTgotnw&ust=1442396017086864

Human Cities

24 Annual General Meeting of Shareholders: 2015 review Strategic update

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Human Cities

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Strategic update

Strategic update


Agenda

Introduction

2015 review

Questions



All financial targets for 2015 achieved and improved cash generation

Build a foundation for continuous improvement in all businesses

Propose final dividend for 2015 up 7 percent to €1.20;

making the total dividend €1.55 per share

Continued focus on sustainability, ranking #1 in the Dow Jones

Sustainability Index for the Materials Industry Group

Further evolved Human Cities initiative

Launched next phase of our strategy and announced new financial

guidance for 2016-2018

Clear aim to build on the foundations we have created to support our

vision of leading market positions delivering leading performance


Summary and conclusion

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WE CREATE EVERYDAY ESSENTIALS TO MAKE PEOPLE’S LIVES MORE LIVEABLE AND INSPIRING

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.


http://www.akzonobel.com/

Implementation of the Remuneration Policy in 2015

Annual General Meeting 2016

Remuneration of the Board of Management (page 1)

2Annual General Meeting 2016

The remuneration of the members of the Board of Management consists of the following components:

Component Explanation

Annual base salary Paid in 12 equal monthly installmentsReviewed annually

Short-Term Incentive

Paid in cash1 year performance period

70% related to financial performance (ROI, OPI, OCF)30% related to personal performance

Long-Term Incentive

Conditional grant of performance shares3 year performance period3 performance measures (TSR (35%), ROI (35%), SAM (30%))Equity settled (2 year holding restriction)

Remuneration of the Board of Management (page 2)


Component Explanation

Post contract benefits Premiums paid over the base salary and for the CEO also the short-term incentive in order to enable build up of old age benefits

Shareholding requirements 3 times gross base salary for the CEO; 1 time for the CFO*

Share matchingUp to 1/3rd of the net STI can be matched in shares after 3 years of sustained performance

Matching arrangement at CEO appointment in 2012:In 2012 the CEO invested personal funds on AkzoNobel sharesShareholders approved that the investment on shares would be matched by AkzoNobel after 4 years in case of sustained performance and continuous employment as CEOThe four years condition will be met April 23, 2016. As stated in the annual report (page 136), the share matching amounts to 11,582 AkzoNobel shares

* CFO shareholding requirements will be increased to 150% after the first 4-years term as CFO


Reappointment of Mr. A.C.M.A. Büchner

CEO reappointmentRemuneration components


The components of the CEO’s remuneration remain unchanged. The CEO’s base salary will be adjusted in order to position his total direct compensation around the median of the peer group (as per approved policy)

Component Explanation Value

Annual base salary Paid in 12 equal monthly installmentsReviewed annually 936,000

Short-Term Incentive

Paid in cash1 year performance period- 70% related to financial performance (ROI, OPI, OCF, Revenue Growth*)- 30% related to personal performance

100% of base salary

Long-Term Incentive

Conditional grant of performance shares3 year performance period3 performance measures (TSR (35%), ROI (35%), SAM (30%))Equity settled (2 year holding restriction)

150% of base salary

Post contract benefits

Premiums paid over the base salary and the short-term incentive in order to enable build up of old age benefits 22.5%

Shareholdingrequirements &share matching

3 times gross base salary Up to 1/3rd of the net STI can be matched in shares after 3 years of sustained performance


Review of the short term incentive performance metrics

Review of the short term incentive performance metrics


In 2013 AGM amended remuneration policy, authorizing the Supervisory Board to annually select 2 to 3 financial metrics from a list of 6 and determine their relative weighting for the purpose of awarding STI– Approved list of financial metrics: (i) EBITDA; (ii) EBIT; (iii) Operating

income (OPI); (iv) Net income (to shareholders); (v) Operating cash flow (OCF); (vi) Return on investment (ROI)

In order to ensure the continued alignment of the remuneration policy and the company organic growth strategy, it is proposed to:– add ‘Revenue Growth’ to the list of financial metrics– authorize the Supervisory Board to select 3 to 4 metrics from the list of 7

financial metrics

The chosen metrics together with their weighting will be published in the annual report

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