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April 19, 2012 Investor update Q1 2012 results
Highlights
• Revenue up 6 percent, mainly driven by pricing actions • EBITDA 3 percent lower at €423 million (2011: €437) million as weaker end markets and cost inflation impacted results • Cash from operating activities was impacted by a one one-time time pension payment and the seasonal build-up of operating working capital • Net income from continuing operations €70 million (2011: €132 million), due to higher incidental charges • Adjusted EPS €0.63 (2011: €0.72) • Performance improvement program on track • The economic environment and certain raw materials remain our principal sensitivities in 2012
* Before incidentals Investor update Q1 2012 results
2
Q1 2012 revenue and EBITDA Q1 2012
Δ%
EBITDA*
3,972 3 972 423
6 (3)
Ratio, %
Q1 2012
Q1 2011
10.6
11.6
€ million Revenue
EBITDA* margin
Revenue development Q1 2012 vs. Q1 2011 8 +2%
4 0
+2% +6%
-3%
+5%
-4 Volume
* Before incidentals
Price/Mix
Acquisitions/ Exchange rates divestments Increase
Total Decrease
Investor update Q1 2012 results
3
Price increases coming through, volumes remain soft Quarterly volume development in % year-on-year 10 5 0
-4%
-1%
-1%
-3%
-5 Decorative Paints
Performance Coatings
Specialty Chemicals
AkzoNobel
Quarterly price/mix development in % year-on-year 10
8% 6%
5%
5 1%
0 Decorative Paints
Performance Coatings
Specialty Chemicals
AkzoNobel
2011
2012
Investor update Q1 2012 results
4
Decorative Paints Q1 2012 highlights € million Revenue
Q1 2012 1 242 1,242
Δ% 4
EBITDA*
76
(16)
Ratio % Ratio,
Q1 2012
Q1 2011
6.1
7.5
EBITDA* margin R Revenue d development l t Q1 2012 vs. Q1 2011
5
Increase +1%
Decrease
+1% +4%
0 -4% 4%
+6%
Volume
Price/Mix
-5
• • • •
Acquisitions/ divestments
Exchange rates
Total
Revenue up 4 percent versus last year driven by favorable price/mix Weaker volume development in most regions EBITDA 16 percent behind last year, reflecting lower volumes and higher costs R t t i underway Restructuring d iin E Europe and dN North th A America i
* Before incidentals
Investor update Q1 2012 results
5
Performance Coatings Q1 2012 highlights € million Revenue
Q1 2012 1 369 1,369
Δ% 11
EBITDA*
164
15
Ratio % Ratio,
Q1 2012
Q1 2011
12.0
11.6
EBITDA* margin
Increase
Revenue development Q1 2012 vs. vs Q1 2011
15 10 5 0 -5
• • • •
+2% -1%
+8%
Volume
Price/Mix
Decrease
+2% +11%
Acquisitions/ divestments
Exchange rates
Total
Revenue up 11 percent and EBITDA up 15 percent, percent supported by margin management, acquisition and currency effects EBITDA margin at 12.0 percent (2011: 11.6 percent) Integration of acquired activities delivering results Continued focus on cost control and operational efficiencies
* Before incidentals
Investor update Q1 2012 results
6
Specialty Chemicals Q1 2012 highlights € million Revenue
Q1 2012 1 399 1,399
Δ% 4
EBITDA*
235
(2)
R ti % Ratio,
Q1 2012
Q1 2011
16.8
17.8
Increase
Decrease
EBITDA* margin Revenue development Q1 2012 vs. vs Q1 2011
6 4 2 0 -2
• • •
+2% +2% -1% 1%
+1%
Volume
Price/Mix
Acquisitions/ divestments
+4%
Exchange rates
Total
Revenue increased by 4 percent, mainly due to the Boxing Oleochemcials acquisition EBITDA decreased 2 percent to €235 million against a strong Q1 2011, driven mainly by Functional Chemicals EBITDA margin remained strong at 16.8 percent (2011: 17.8 percent)
* Before incidentals
Investor update Q1 2012 results
7
Summary – Q1 2012 results Q1 2012 423 (168) (64) (65) (10) (46) 1 71
Q1 2011 437 (148) (12) (63) (9) (73) (4) 128
(761)
(519)
Q1 2012
Q1 2011
EBITDA* margin (%)
10.6
11.6
Adjusted earnings per share (in €)
0.63
0.72
€ million EBITDA* EBITDA Amortization and depreciation Incidentals Net financing expense Minorities and associates Income tax Discontinued operations Net income total operations Net cash from operating activities Ratio
* Before incidentals Investor update Q1 2012 results
8
Strong operating returns on invested capital 30%
25.6%
27.6%
25%
20.8%
20% 15% 10% 5%
10.1%
10.9%
8.4%
0% Q2 09-Q1 10
Q2 10-Q1 11
Q2 11-Q1 12
Moving average ROI % * Operating ROI is calculated as EBIT before amortization divided by average invested capital excluding intangible assets
Operating ROI %* Investor update Q1 2012 results
9
Cash flows Q1 2012 € million
Q1 2012
Q1 2011
84
148
173
150
(418)
(390)
Profit for the period Amortization and depreciation Change working capital - Pension provisions
(553)
(334)
- Restructuring
(4)
(2)
- Other provisions
11
(22)
Ch Change provisions i i
(546)
(358)
(54)
(69)
Operating cash flows
(761)
(519)
Capex
(143)
(130)
490
(12)
Dividends
(3)
(1)
Discontinued operations
(6)
-
2
15
(421)
(647)
Other operating cash flows
Changes from borrowings
Other changes Total cash flows
Investor update Q1 2012 results
10
Pension deficit decreases to €0.3 billion Q1 2012
Q4 2011
Disco nt rate Discount
4 5% 4.5%
4 6% 4.6%
Inflation assumptions
2.7%
2.5%
Key pension metrics
Pension deficit development during Q1 2012 € billion
0,2 0,1 0,0 -0,1 -0,2 -0,3 -0,4 -0 0,5 5 -0,6
(36) 239
(169) (347)
(505)
322
Deficit end Top-ups Contingent Decreased Discount Q4 2011 asset plan assets rates payment
(227)
Inflation
29
Other
Increase
Deficit end Q1 2012
Decrease
Investor update Q1 2012 results
11
Medium-term strategic ambitions unchanged • We are delivering on price increases • Performance Improvement Program on track - next update with half year results • The economic environment remains uncertain: - volumes remain soft - raw material costs remain a risk • Our solid fundamentals, strong brands and excellent geographic spread, give us every reason to be confident about the mediumterm
Investor update Q1 2012 results
12
Appendix
Investor update Q1 2012 results
13
AkzoNobel key facts 2011 • Revenue €15.7 billion • 57,240 employees • EBITDA: €1.8 billion* • Net income: €0.5 billion • 40 percent of revenue from high growth markets • A leader in sustainability Revenue by business area
EBITDA* by business area
31%
33%
34%
Performance Coatings Decorative Paints
46%
Specialty p y Chemicals
33%
23%
* Before incidentals Investor update Q1 2012 results
14
Decorative Paints key facts 2011 • Revenue €5.3 billion • 22,340 employees • EBITDA: €440 million* • 40 percent of revenue from high growth markets • Largest global supplier of decorative paints • Many leading positions, strong brands Some of our strong brands
Revenue by geography
12%
3% M t Mature Europe E
40% 20%
Emerging Europe Asia Pacific North America L ti A Latin America i
18%
7%
Other regions
* Before incidentals Investor update Q1 2012 results
15
Performance Coatings key facts 2011 • Revenue €5.2 billion • 21,960 employees • EBITDA: €611 million* • 47 percent of revenue from high growth markets • Leading positions in performance coatings industry • Innovative technologies, strong brands Revenue by business unit
15% 27% 18%
Revenue by geography
Marine and Protective Coatings
8%
4% 30%
Automotive and Aerospace Coatings Industrial Coatings
Mature Europe
20%
Emerging Europe Asia Pacific North America
Powder Coatings
10%
20% 20%
Wood Finishes and Adhesives
28%
Latin America Other regions
* Before incidentals Investor update Q1 2012 results
16
Specialty Chemicals key facts 2011 • Revenue €5.3 billion • 11,510 employees • EBITDA: €906 million* • 33 percent of revenue from high growth markets • Major producer of specialty chemicals • Leadership positions in many markets Revenue by business unit
Revenue by geography
Functional Chemicals
6% 17%
35%
9% 2% Mature Europe
Industrial Chemicals Pulp and Performance Chemicals
20%
43%
21%
Chemicals Pakistan
Asia Pacific North America
Surface Chemistry
21%
Emerging Europe
Latin America
22%
4%
Other Regions
* Before incidentals Investor update Q1 2012 results
17
The global paints and coatings market is around €70 billion % of market 100% is around €70 billion
Wood Finishes General Industrial Coatings
6% 10%
7%
Decorative
44%
Performance 56%
3%
Car Refinishes Marine and Yacht
6% 2% 9% 8%
Protective coatings Special purpose
2%3%
Auto OEM, OEM metal, metal plastics Powder Coatings
Coil Coatings Packaging Coatings
Source: Company Reports Investor update Q1 2012 results
18
AkzoNobel is the world’s largest coatings supplier 2010 revenue in € billion 12
10
8
6
4
2
0
Investor update Q1 2012 results
19
Excellent geographic spread of both revenue and profits High growth markets are important (40% of revenue) % of 2011 revenue
20% North America
38% “Mature” Europe
7% “Emerging” Europe 3% Middle East and Africa
22% Asia Pacific
10% Latin America
High growth markets’ profitability is above average Investor update Q1 2012 results
20
Leading positions and strong brands 2011 Revenue by y market p position
Some of our strong g brands
Decorative Paints No. 2 or 3 32%
Performance Coatings
No. 1 position 59% Other 9%
Specialty Chemicals
Investor update Q1 2012 results
21
Our strategic ambition
Investor update Q1 2012 results
22
Our medium term strategic goals •
Top quartile safety performance f
•
Top 3 position in sustainability
•
Top quartile performance in di diversity, it employee l engagement, t and talent development
•
Top quartile eco-efficiency improvement rate
•
Grow to €20 billion revenues
•
Increase EBITDA each year, maintaining 13-15 13 15 percent margin
•
Reduce OWC/revenues by 0.5 p.a. towards a 12 percent level
•
Pay a stable to rising dividend
Investor update Q1 2012 results
23
How we will expand in both mature and high growth markets Organic growth • Expand focus from high to mid-market mid market segments • Fueling growth in high growth markets Innovation pipeline • Spend of around 2.5 percent of revenue makes us the clear leader of our p peers in absolute spend p • Emphasis on bolder, focused, sustainable innovation Acquisitions • Wide range of opportunities • All business areas qualify • Value created in less than three years
Investor update Q1 2012 results
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Aspirations for high growth markets (currently around 40 percent of our revenue) Double revenues in China • Grow from $1 $1.5 5 to $3 billion of revenues • Already the biggest paint, coatings and specialty chemicals company in China
Create significant footprint in India • Grow from €0.25 to €1 billion in revenue • Increasing footprint for all business areas
Outgrow g the competition p in Brazil • Grow from €0.75 to €1.5 billion in revenue • Become clear market leader in all our activities
Expand in the Middle East
Investor update Q1 2012 results
25
High growth markets will become significantly more important % of revenue, indicative
32% “Mature” Europe
18% North America
9% “Emerging” Europe 5% Middle East and Africa
25% Asia Pacific
11% Latin America
g growth g % of revenue in this decade High markets will be around 50% Investor update Q1 2012 results
26
Exciting RD&I pipeline with innovative solutions for key market segments How innovation will support our growth agenda: g g
Revenue by key market segment
• Functional solutions in key market segments 12%
• Increase spend in big R&D • >15 percent of revenue from “breakthrough” innovations*
13% 43%
• >30 percent of revenue from eco-premium solutions** 32%
Residential construction Consumer goods g Non-residential construction Transport
* Major innovations that result in a significant competitive advantage ** Higher eco-efficiency than competing comparable product Investor update Q1 2012 results
27
Clear sustainability focus Accelerated sustainability strategy will deliver: • Safety at 2.0 injuries per million hours • 30 percent of revenue from eco-premium solutions • Sustainable fresh water management • 30 percent eco-efficiency improvement • 10 percent carbon footprint reduction (20-25 percent by 2020) • 20 percent of executives will come from high growth economies • Key supplier partnerships will deliver footprint reduction
Embed safety and sustainability in everything we do
Investor update Q1 2012 results
28
Innovation in Decorative Paints Coral Rende Muito
Value for money paint, without compromising quality of finish
Key Features
Customer Benefits
• A concentrated paint emulsion y up p to 80% • Paint can be diluted by • More coverage per liter paint with same quality finish
• Higher value for money for our customers p g rate • Best-in-class spreading • Lower transport costs for better sustainability performance
Growth potential • Six-fold increase in product line sales since it was launched • High expectations for global mid-tier markets
Investor update Q1 2012 results
29
Innovation in Performance Coatings Marine Coatings - Interline® 9001
Next generation low absorption, easy-to-clean lining for chemical cargo tanks
Key features
Customers benefits
• New coating for chemical cargo tanks
• Greater efficiency and flexibility in operation of chemical tankers • Increased vessel earning potential due to extended coating lifetime • Reduced risk of contamination between (high purity) cargoes
• Low chemical absorption enables reduction in cleaning time and materials
Growth potential • Launched globally in 2011 with high expectations • Potential penetration into high purity chemical tanker trade • Potential extension into other protective coatings markets where chemical resistance is required q
Investor update Q1 2012 results
30
Innovation in Specialty Chemicals
Pulp and Performance Chemicals – Bindzil CC Improving the quality of waterborne coatings
K F Key Features t
C t Customer B Benefits fit
• Solves stability and compatibility issues in waterborne coatings
• Enables paint and lacquer producers to up-grade their products in a cost-effective and more sustainable way
• Reduces dirt pick pick-up up in waterborne deco paints • Improves weather resistance in silicate paints • Complies with eco-labeling regulations
• Better ease of application for users • Approved in Europe for direct food contact applications
Growth potential • Market expected to exceed 1000 tons in 2012 • New applications in concrete floor polishing and non-stick coatings for cookware k under d d development l t • Longer term potential for application in laminate floorings and kitchen work-tops
Investor update Q1 2012 results
31
Variable costs represent 54.3% of revenue % of 2011 annual revenue* 100% Raw materials, energy, and other variable costs Fixed production costs Selling, advertising, administration, R&D costs EBIT margin 0% Decorative Paints
Performance Coatings
Specialty Chemicals
AkzoNobel
* Rounded percentages, all data excluding incidentals Investor update Q1 2012 results
32
Variable costs analysis 2011
Energy & other variable costs*
Packaging Solvents
Raw materials
7% 7%
Chemicals and intermediates***
28% 13%
8%
Additives
7%
Other raw materials** 2% 8%
Pigments
12%
Resins
8%
Titanium dioxide
Coatings’ specialties i lti
* Other variable costs include variable selling costs (e.g. freight) and products for resale ** Other raw materials include cardolite, hylar etc. *** Chemicals and intermediates include caustic soda, acetic acid, tallow, ethylene, ethylene oxide, sulfur, amines etc. Investor update Q1 2012 results
33
Capital expenditure prioritization for growth • Capex 2011 was €708 million (including Ningbo €45) • Guidance for the medium term: Capex level to be at least 4 percent of revenues Capex as a % of revenue
2011 Capex split 5
3% 16%
4 52%
3 2
29%
1 Specialty Chemicals
0 2008
2009
B Base capex
Ni b Ningbo
2010
2011
N ti National l St Starch h
Decorative Paints Performance Coatings Other
Investor update Q1 2012 results
34
Year-on-year Operating Working Capital % of revenue to be reduced towards 12% OWC € million
20%
3000 2500 13.1%
14.2%
13.8%
15.6%
14 3% 14.3%
18% 16%
13.6%
14%
2000
12% 1500
1,899
2,155
2,279
2,341
2,079
2,502
10% 8%
1000
6% 4%
500
2% 0
0% Q4 2010
Q1 2011
Q2 2011
Q3 2011
OWC
Q4 2011
Q1 2012
OWC as % of LQ revenue*4 Investor update Q1 2012 results
35
Debt duration 3.4 years and no refinancing needed in 2012 Debt maturities* € million (nominal amounts)
1.200 800 400 0 2012
2013 € bonds
2014
2015 $ bonds
2016
2017
2018
£ bonds
Strong liquidity position to support growth • Undrawn revolving credit facility of €1.8 billion (2016) or €1.5 and $3 billion commercial paper programs • Net cash and cash equivalents €0.9 billion* * At the end of Q1 2012 Investor update Q1 2012 results
36
Revenue growth and EBITDA margin performance per quarter Reported quarterly revenue growth in % year-on-year 20 15
11%
10
4%
6%
4%
5 0 Decorative Paints
Performance Coatings
Specialty Chemicals
AkzoNobel
Quarterly EBITDA* margin in % 20
16.8% 12.0%
15 10
10.6%
6.1%
5 0 Decorative Paints
* Before incidentals
Performance Coatings
Specialty Chemicals 2011
2012
AkzoNobel
Target range
Investor update Q1 2012 results
37
Unchanged ambition to maintain strong balance sheet € million Total equity Net debt*
Mar 31, 2012 9 742 9,742 2,860
Mar 31, 2011 9 358 9,358 1,578
• Credit ratings unchanged at BBB+/Baa1, BBB+/Baa1 outlook stable • Net debt increased mainly due to the additional one-time payment of €239 million as well as higher operating working capital. • IIn September S t b 2011, 2011 we renewed d our five fi year multi-currency lti syndicated revolving credit facility for €1.8 billion (previously €1.5 billion)
* Before net pension deficit of €0.3 billion March 31, 2012 (March 31, 2011 €0.7 billion) Investor update Q1 2012 results
38
Q1 2012 incidentals € million Restructuring costs
Q1 2012 (46)
Q1 2011
(22)
(9) 1
anti-trust and environmental cases Results of acquisitions and divestments
-
-
Other incidental results
4
(4)
(64)
(12)
Results related to major legal,
Total
•
IIncrease in i restructuring t t i costs t due d to t provisions i i iin relation l ti tto the performance improvement program
•
Restructuring g costs mainly y related to Decorative Paints in North America and Europe
•
Increase of provision for environmental case in Sweden
Investor update Q1 2012 results
39
Q1 2012 EBITDA – Cash bridge € million
Q1 2012
Q1 2011
EBITDA before incidentals
423
437
Incidentals (cash)
(55)
(5)
Change working capital
(418)
(390)
Change provisions
(546)
(358)
Interest paid
(117)
(153)
(48)
(50)
(761)
(519)
Income tax paid Net cash from operating activities
•
Higher cash outflows from working capital mainly due to a higher autonomous increase in operating p g working g capital p
•
Higher payments related to pension provisions primarily due to the additional one-time payment of €239 million into the UK ICI Pension Fund Investor update Q1 2012 results
40
Performance improvement program: stepping up operational and functional excellence Underpin p our growth g and margin g objectives j • •
Enhance our ability to grow Expected to bring us at or above the mid-point of our 13-15 percent EBITDA margin guidance.
Deliver structural competitive advantage • • •
Leveraging scale, simplify support structures, reduce cost base Transfer best practices, standardize key processes Restructuring of underperforming parts of the portfolio
Full EBITDA impact of €500 million in 2014 • • •
Expected total incidental costs €425 million 2012: €200 million EBITDA, incidental costs of €200 million Reporting on program deliverables every six months
Investor update Q1 2012 results
41
A comprehensive program •
Comprehensive – all functions, all businesses • •
Margin management, R&D and restructuring (~50%) Supply Chain and Sourcing projects j t (~40%) ( 40%)
Decorative Paints
Perf. Coatings
Specialty Chemicals
Finance
•
Improvements implemented over three years (2012 to 2014)
•
All business areas contribute to delivering the €500 million • • •
>40 percent Decorative Paints >30 percent Performance Coatings Close to 25 percent Specialty Chemicals
Information Management Research, Dev’t & Innov. Human Resources Integrated Supply Chain M Margin i Management Academy
Investor update Q1 2012 results
42
Safe Harbor Statement
This presentation Thi t ti contains t i statements t t t which hi h address dd such h kkey iissues 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 f t d and d actual t l results lt to t differ diff from f these th statements. t t t These Th factors f t 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 iti are b based d on managementt estimates ti t supported t db by iinformation f ti provided id d b 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.
Investor update Q1 2012 results
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