Thierry Vanlancker - CEO AkzoNobel

A Global Perspective: Coatings in China

The paints and coatings company

2017 key figures

€9.6 bln revenue

€1.2 bln EBITDA

€0.9 bln EBIT

9.4% ROS

13.9% ROI

35,700 employees

Business activities

Decorative Paints

Powder Coatings

Marine and Protective Coatings

Automotive and Specialty Coatings

Industrial Coatings

2020 financial

guidance:

15%Return on sales

(EBIT/revenue)

>25%Return on investment

(EBIT/average invested capital)

3

AkzoNobel in China

Decorative Paints

Performance Coatings

Decorative Paints Brands:

Performance Coatings Brands:

Key BrandsYear end 2017

€1,5 bln Revenue

6,000 Employees

15 Production sites

4 Offices

4

0305

06

2018.03 BeijingAkzoNobel becomes

Recommended Supplier

of Automotive Refinishes

for Mercedes-Benz China

2018.05 ChangzhouAkzoNobel’s largest

powder coatings plant

opens in China

2018.06 ShanghaiNew Marine & Protective

Coatings Development

Lab Opens in China

2018.07 BeijingDulux EPS & CNIS

launch re-paints

standards

07

AkzoNobel in China

08

2018.08 ShanghaiDulux launches National

Talent-training Program

10

2018.09 ShanghaiDulux launches the

colour futures 2019

11

2018.12 GlobalForest Breath

awarded as

innovation of 2018

2018.11 ShanghaiAkzoNobel celebrates the 7th

anniversary of its China

student sustainability award

12

2018.12 China‘AkzoNobel acquires full

ownership of ANSP Joint Venture’

12

Economic growth rates in China remain high despite slowdown compared to other countries/region

US China Brazil

-10%

-5%

0%

5%

10%

15%

08 09 10 11 12 13 14 15 16 17 18

Real GDP (% change pa)

Eurozone

5

The manufacturing industry continually located in the expansion interval, while the pace of expansion has slowed down

Source: EIU / Source: China National Statistic Bureau Source: China National Statistic Bureau

26,6

5,4

5 %

10 %

15 %

20 %

25 %

30 %

2010 2011 2012 2013 2014 2015 2016 2017 2018

China’s fixed-asset investment (FAI) growth

cooled to 5.4 percent in first 9 months of 2018

YOY Growth rate of FAI

55,8

50,8

45 %

50 %

55 %

60 %

2010 2011 2012 2013 2014 2015 2016 2017 2018

Manufacturing Purchasing Managers' Index (%)

Total retail sales of consumer goods remained flat growth in recent years, with single digital growth rate since 2018

9,2

5 %

10 %

15 %

20 %

25 %

2010 2011 2012 2013 2014 2015 2016 2017 2018

Monthly Growth Rate of Total Retail Sales of Consumer Goods

Macro-economy in China

6

• Housing bubble slow down?

• China-US trade issues

• Speculation debt crisis/ de-leverage impact

Key challenges in Chinese Economy

7

• Capital flee debate not helping

• Fast changing sustainability policy

• Rising costs for skilled labor

Key challenges in Chinese Economy

8

China Existing House Sell-out Area YOY Growth(6 months lag)

China Decorative Paints Market Size (mn EUR) & Growth

Real-estate and Paints Market in China

Opportunities and Risks

Downward trend in decorative paint since 2018

Continuous signs of softening in real estate market

Growing demand for eco-premium products

9

Automotive OEM

CAGR Expectations in 2018 could be flat

Strong production growth 1st half year of 2018

2nd half shows decline. YTD -1.02% vs. PY

Trade tensions between China and USA brings

further uncertainty particularly for those spare parts

maker with export business

Vehicle refinishes

Car Parc expectations in 04-2018 were CAGR of

7,4% majorly contributed to Tier 2, 3 and 4 cities

3rd round insurance policy reform implemented

resulting in assumed – 5% to -10% repair rate

correction

Intensified competition at distribution level

*SOURCE: National Bureau of Statistic

Automotive and Refinish in China

Vehicle Output*

Car (and Light Commercial

Vehicle) Production YOY%2016 8%

2017 2%

2018 YTD(sep.) 0.9%

10

Market Size

Market is very fragmented with 4,000 players

Opportunities and Risks

Legislation change (VOC, pollution control) and Liquid to Powder conversion opportunity

Market upgrade/new tech/new application creates opportunity, but requires speed to market

Powder Coatings in ChinaFragmented and dynamic

6%

2%2%

2%

1%

1%

1% 1%

1%

1%1%

1%

1%1%

1%

1%

1%0%

74%

AkzoNobel

Peer 1

Peer 2

Peer 3

Peer 4

Peer 5

Peer 6

Peer 7

Peer 8

Peer 9

Peer 10

Peer 11

Peer 12

Peer 13

Peer 14

Peer 15

Peer 16

Peer 17

Others

China Powder Market *

10

*: China Powder Coating Association revenue data 2017

Looking forward – coatings in China

• China continuous to be a strategic growth market for AkzoNobel

• Global political developments will continue to influence the dynamics

• Local players grow aggressively

• Eco & high performance products become more trendy

• Intensive consolidation at end-user market

• Paint the future

Dulux Forest Breath

Colors and protects interior walls while keeping the air clean and fresh. Absorbs and destroys atmospheric particles such as formaldehyde.

Helping to meet growing demand in Asia for more sustainable paint products.

Q&A

Bringing color to aerospace customers The Embraer artwork is the latest in a series of striking aircraft designs created using AkzoNobel’s aerospace coatings. Recent examples

include a save the coral reefs message for the Mirpuri Foundation which was applied to Hi Fly-owned Airbus A380, and colorful livery

developed for Wizz Air’s 100th aircraft.

Thank you

AquasilkWater-based wood coating which contains substantially lower levels of VOCs. Specially developed for the Chinese furniture industry.

Delivers the highest standards of color and protection while meeting stricter sustainability standards.