march 10, 2011 investor visit akzonobel china… · ‘emerging’ europe investor visit akzonobel...
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Investor visit AkzoNobel China
March 10, 2011
• AkzoNobel & strategic ambitions – Marjan Oudeman
• China & AkzoNobel - Jorn Seiero
• Decorative Paints in China - Felix Jiang • Performance Coatings in China - Leon Ouziel• Specialty Chemicals in China - Geert Hofman
• Growth ambitions – Jorn Seiero
• Questions
Agenda
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AkzoNobel key facts
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2010• Revenue €14.6 billion• 55,590 employees• EBITDA: €2.0 billion*• Net income: €0.8 billion• 39 percent of revenue from high-growth markets• A leader in sustainability
* Before incidentals
Revenue by business area EBITDA* by business area
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Our strategic ambition is to be
3Investor visit AkzoNobel China
Our medium term strategic goals
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• 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
• Top quartile safetyperformance
• Top position in sustainability• Top quartile performance in
diversity, employee engagement, and talent development
• Top quartile eco-efficiency improvement rate
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Aspirations for high-growth markets
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Double revenues in China• Grow from $1.5 to $3 billion of revenues • Make a step change in people development
Create significant footprint in India• Grow from €0.25 to €1 billion of revenues• Increasing footprint for all business areas
Outgrow the competition in Brazil• Grow from €0.75 to €1.5 billion of revenues• Become clear market leader in all our activities
Expand in Middle East and Sub-Saharan Africa
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High-growth markets will become significantly more important
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% of revenue, indicative
High-growth markets will be around 50% of revenue in this decade
32%‘Mature’ Europe
25%Asia Pacific
5%ME&A
11%Latin America
18%North America
9%‘Emerging’ Europe
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China & AkzoNobel
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China snapshot
Investor visit AkzoNobel China
China key figures 2010
AkzoNobel China key figures 2010
GDP $5.5 trillion Revenue €1.25 billionPopulation 1.3 billion Employees1 6,700Per capita $4,200 EBIT2 €161 millionTrade surplus $147 billion
10 month ytd Oct 2010Operating income
€162 million
Foreign reserves
$2.6 trillion$900 billion in US Bonds
Invested capital3
€952 million
Cities 160>1 million people
Capital expenditures
€48 million
Mega-cities 9>10 million people
Sites 28
1 At year-end2 Before incidentals3 Excluding National Starch, divested in 2010
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AkzoNobel in China: a brief view
• AkzoNobel established its first manufacturing (license) agreement in 1982.
• We are already the biggest Paint, Coatings and Specialty Chemicals company in the world; we do have the same position in China.
• We are seeking sustainable growth: we will stay a leader in sustainability and continue to expand our delivery of eco-premium solutions (25% of sales in 2010) and reducing our carbon footprint; this ambition is aligned very well with Chinas ambition in their new 5-year Plan.
• China is our most important growth market and our action is to double our business 2009 -2014 to 20 Bn RMB.
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Business Areas/BUs in China
Performance Coatings
Specialty Chemicals
DecorativePaints
• One BU• Dulux brand Levis
brand• Homogenous
• Functional Chemicals
• Surface Chemistry
• Pulp & Paper Chemicals
• Industrial Chemicals(MCA only)
• Marine & Protective Coatings
• Automotive & Aerospace Coatings
• Powder Coatings
• Wood Finishes & Adhesives
• Industrial Coatings
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AkzoNobel China locations perBusiness Area
Decorative Paints Performance Coatings Specialty Chemicals
Guangzhou, Dongguan
Suzhou Shanghai
Langfang
Beijing
Shenzhen
NingboJiaxing
Tianjin
Chengdu
Taixing
Wuhan
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Where are we now
Business Area Business Unit Sub Business Unit Manufacturing sites
Decorative Paints 2 B2C & B2B 3
Performance Coatings
Automotive & Aerospace
2 Car Refinishes &Aerospace's Coating
1
Industrial Coatings 3 Coil, Specialty &Packaging Coating
3
Marine and Protective Coatings
2 2
Powder Coatings 2 Interpon & Resicoat 6
Wood Finishes and Adhesives
1 2
Specialty Chemicals Functional Chemicals 5 Elotex, EA/EO, Chelates, Cellulosic & additives
6
Industrial Chemicals 1 1
Pulp & Paper Chemical
1 2
Surface Chemistry 2 Personal Care & Surfactants
1
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We are embarking on the next chapter of our journey in China
One AkzoNobelapproach to
accelerated andsustainable
growthChina Steering
Committee(s)BU-by-(s)BU
~ RMB 5 b
~ RMB 10 b
RMB 20 b
• Build (s)BU teams• Build a strong customer
base, often based on ‘following’ customers abroad
• Set up (s)BU supply chains
• Opportunistic transfer of best practices
• Continue to build (s)BU organizations, customer bases, supply chains
• Develop a strong local talent base and benches in each (s)BU
• Set up a shared service organization (Legal, Tax, Treasury, HR, HSE)
• Move into a shared office
• Continue to build (s)BU organizations, customer bases, supply chains
• Develop China revenue and synergy targets
• Develop common approaches that maximize the market potential for AkzoNobel
• Operationally manage key functions across AkzoNobel
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Decorative Paints in China
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Decorative Paints China
• Established in 1990, first JV with Swire Pacific
• 3 Factories and 7 Regional Sales clusters, +1,300 employees
• Key Player in Decorative Paint Market
• Channel: Traditional Trade, Modern Trade & Project
• Consumers: BIY, DIY, HID
• Category: Emulsion, Woodcare, HPC & Pre-Deco
• Our Mission: we bring color to peoples lives
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Decorative Paints China
• 10 years consecutive growth significantly outpacing market pace
• Highly profitable. Negative operating working capital
• Superior DULUX brand innovating Super Premium to Mid Tier
• Expansive Controlled Distribution model covering Tier1 to Tier 3
cities
• Traditional, Modern, Projects channels
• Managed by a highly capable team accustomed to “winning”
• Business Conduct/Control/SSHE standards and performance are
high
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Our Business Portfolio
Traditional Trade
Modern Trade
Professional
Project
Channel
Our business is retail focus with majority business contributed by Traditional Trade, particular the DuluxControl stores.
Premium
Mid-Tier
Low-End
Woodcare& Others
Products
We have a balanced product portfolio to meet difference customer’s need with focus on Premium segment.
Tier 1
Tier 2
Tier 3
Geographic
We have covered +600 cities in China, focus on all T1, T2 and big T3 cities.
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Existing DDCN store format
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New DDCN design has been rolled out in H2 of 2010
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Easy Paint Service - Future Growth!
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Performance Coatings in China
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Performance Coatings- make it happen!
• Leading positions in China for most areas
• Global network is supporting the growth and development here in China
• Technology differentiation
• Exciting growth drivers
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Many market leadership positions
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Wood Finishes and Adhesives
PowderCoatings
Marine andProtective
Automotive & Aerospace Coatings
IndustrialCoatings
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35
RefinishOEMcommercial
Automotiveplasticcoatings
Powder
1
Aerospace
MarineProtectiveYacht
1
1
WoodAdhesivesSpecialty Plastics
Beer &BeverageCoilPackaging
Food cansother
2
1
CarAerospace
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Business approaches
Marine & Protective Coatings• Strategy: to continue No.1 position in China on global
shipbuilding; there is good opportunity for Protective Coatings in Geographical and market segment expansion.
Wood Finishes & Adhesives • Strategy: to maintain our No.1 position in the export
market while our biggest growth opportunity is expanding into the local market and introducing new technology.
Automotive & Aerospace Coatings • Strategy: both industries are expanding rapidly in China
and we are to maintain our leading position in technology.Powder Coatings
• Strategy: to maintain profitable growth ahead of the market by leading the development of new market segments for Powder Coatings; at the same time we compete with innovative propositions in the traditional ones.
Industrial Coatings• Strategy: to become the new one supplier in the aluminum
soft drink segment; to enhance our position in the food can market, which is a great opportunity for us.
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Recent developments in Powder Coatings
• 30% sales growth in 2010
• Opening of 6th factory in China: Wuhan
• First Autobody coated in China with Powder
• First replacement of liquid by Powder in ACE
• First Powder topcoat in Laptops
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Market growth drivers
• Development of infrastructures• Railways• Airports• Construction equipment
• Urbanisation• Building activity• Household fittings and appliances
• Improvements in farming• Agricultural equipment
• Environmental regulations & attitudes• Search for eco-efficient paint solutions
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Infrastructure developments
(km) 2010 2020
Total rail network 79000 120000High speed 4000 16000
Sound barriersSeat frames (SMC)Interiors
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Infrastructure developments (cont.)
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Improvements in farming
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18,000,000 Agricultural tractorsin use in ChinaSource FAO 2007
DongFeng Tractor
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Rapid urbanisation…going greener
• Half the world buildings built between now and 2020 will be in China
• 400 new cities to be created by 2020• Currently 10 projects for >600m buildings and
50 for >300m• 45 new airports planned in 5 years• New regulations in Chinese main cities ask for
energy reductions of 50% in all new buildings• 25% of buildings in medium size cities and 10%
in small cities refurbished “greener” by 2020• 1000 new “special” projects / year (high rise
buildings, shopping centres, sport facilites, etc…)
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Creating new markets for Powder Coatings
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We are succeeding!
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Specialty Chemicals
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The formal inauguration of the Ningbo site – which occupies a 50-hectare plot, is the largest plant investment ever and offers ideal opportunities for any future investments – took place in November 2010
Ningbo multi-site inauguration
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The chemical industry value chain
Industrial Chemicals
Surface Chemistry
Pulp and Paper Chemicals
Functional Chemicals
Mining, oil, biomaterials
Base chemicals
Chemical inter-mediates
Performance/functionalchemicals
‘End’ products
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Many market leadership positions in China
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FunctionalChemicals
IndustrialChemicals
Pulpand Paper
SurfaceChemistry
3
1
1
3IndustrialAgricultural
Home &Personal care
sulfur products, polysulfides, organic peroxides,
1Monochloro-acetic acid (MCA)
1
Chelates, Ethylene amines,metal alkyls, Elotex, Bermocoll
2
3 Retentionand sizing chemicals
Investor visit AkzoNobel China
Business approaches
Industrial Chemicals• Strategy: Our MCA business doubled its
capacity in 2010 and are now running at 100% we look for new way of expanding capacity
Pulp and Paper Chemicals • Strategy: We have just established a new
silica factory in Guangdong to meet growing market need
Surface Chemistry • Strategy: we provide mid market solutions that
allow local market leaders to enhance and differentiate their products in the global market
Functional Chemicals • Strategy: The New Ningbo plant open-end in
2010 will meet demand over the next year and leave us room for significant expansion
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Growth ambitions
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China’s Mega Trends are a huge opportunity for AkzoNobel• Population growth in China will stagnate unless a
ease of the 1 child policy is implemented. The total population 1,4 Bn is aging and the active workforces is shrinking.
• Quality of life will improve for all Chinese and a huge new middle class of millions of people will develop . The overall purchasing power will increase as the ppp is expected to quadruple in the next 10 year.
• Climate change will increase the focus on low carbon emission in China. This is already a key element in the government plan and will become more and more prominent. AkzoNobel is well equipped to meet this challenges.
• Scarcity of natural resources will drive innovation. And China need a lot of innovating and are likely to work with people / company there can and will help them.
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Market size opportunity
1.3 million tons = 47 billion RMB (2008) 3.2 million tons = 93 billion RMB (2014)
6.6 trillion RMB (2009)
Growing 2 to 3 % above GDP
Key players:Sinopec: $206 billionCNPC: $176 billionSinoChem: $30 billionCNOOC: $30 billionChem China: $15 billionOthers: $530 billion
4.5 million tons = 109 billion RMB (2008)7.5 million tons = 208 billion RMB (2014)
Market potentialMarket potential
Decorative Paints
Specialty Chemicals
Performance Coatings
>10,000 Paints and Coatings registered
producers!
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0
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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2015
AkzoNobel China Revenue (Mn US$)
China GDP (US$)
Growth in AkzoNobel China
*Figures not adjusted for exchange rate fluctuations
Every three years China has doubled sales (20% CAGR)
Decorative PaintsPerformance CoatingsSpecialty Chemicals
New Building and Wood
AkzoNobel takes over of ICI
Hans Wijers statement in 2007: $2 Bn by 2012
New Vision:$ 3 billion
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How we will grow
Organic growth• Normal market development we believe this to be as you say 8 – 10% YoY
+ 2 -3 % in addition for our industry this will• Geographical growth we are mainly active in the coastal area and there are
huge opportunity in relative developed area in west, north can add market share
• Key Account management is the opportunity to get a better cross BU grip on the market and by the find new opportunities for all business
• Define and develop midmarket is a huge opportunity and also a must to avoid losing out to successfully entrants into this segment but other MNC or strong local company
• Scales up the present of non resident (s)BU not really present in China today
Innovation pipeline• Product • Emphasis on focused, value for money, sustainable innovation
Market developmentThere is obviously opportunity form M&A and partnership arrangement
• Wide range of opportunities • All Business Areas qualify
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Taking on the massive shift of growth into mid-market segments
Typical MNC entry point‘Global’ value propositions, technology and business models
Typical focus of local competitorsLow cost ‘local’ value propositions, low-end technology and business models
Intense battle between global companies moving down and local companies moving up
TopSegment
Middle Market
Low-end
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Innovation
First powder-coated vehicle in ChinaInterpon® in cooperation with C&C Trucks China embedded green concept into pioneering applications in China
Dulux® Ecosure™ Matt Light & Space™Uses revolutionary LumiTec technology to reflect up to twice as much light around the room making even the smallest of rooms look and feel more spacious compared to our conventional emulsion paints.
Stickerfix™ Easier than easy!You can repair and protect your car using a unique easy to apply and remove vinyl technology. It’s coated with professional car maker approved repair systems of Sikkens, Lesonal and Dynacoat.
Automotive Solid Colour MonocoatIn production by TATA motors
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Compozil® Fx – Better performance. Exceptional results A wet end management system for the largest and fastest paper machines helping to deliver top quality paper faster with higher productivity, better economy and reduced environmental impact.
How it worksThree key elements
Sustainability assessment
tools
Anti-corrosion additives
knowledge
Hazardous chemicalhandling
Communitiesof Practice
ExpertCapability
Groups
Business Resources
Business specific capability & applications knowledge
Expert centres in six core sciences
Networks to leverage
knowledge
Bigger innovations
Faster solutions
Environmentally friendly
polysulfides
In-line mixing and dispersion of
slurries
Novel powder coatings
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Growth accelerators
• Insight into global and local trends & innovation needs e.g. the 12th 5 year plan
• Right balance of bolder innovation with incremental development
• Capitalizing on AkzoNobel’s scale in China and building capability & talent
• Open for innovation & strategic partnering
• Continue and accelerate the move to North and West China
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AkzoNobel Solution Promises
Creating new horizons in functionality
Saving you time and effort
Move towards zero footprint
Bringing products for well-being and identity
Coatings and energy management
Serving the needs of the Chinese mid-market
Rapid curing and totally water-borne
Surfaces to control vector-borne diseases
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How we embed safety and sustainability into the strategic agenda
Economic
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InnovationValue propositions for a resource constrained world
Accelerated growthEco-premium solutions that deliver eco-footprint reduction across the value chain
Global mid-marketSolutions for people demanding both higher living standards and affordability
Functional excellenceSafety, operational eco-efficiency, product stewardship, supplier visits
Capital and cash managementProcess safety and sustainable investment evaluation
Industry-leading Talent FactoryEmployee engagement, development and training
Culture of confidence, cooperation and co-creationDiversity and inclusion, partnerships, stakeholder involvement, Community Program
How China contributes to our medium term strategic ambitions
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Questions
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Safe Harbor Statement
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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.