Decorative Paints


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Keith Nichols, CFO London, June 12, 2008 UBS Global Basic Materials Conference

The new AkzoNobel: Key facts Pro forma 2007

Revenue by segment Decorative Paints

• Revenue €14.4 billion • Around 60,000 employees • EBITDA: €1.9 billion

Specialty Chemicals Performance Coatings

32%

• EBIT: €1.4 billion

31%

• Net income: €903 million • Pension under funding €1,475 million

37%

2

AkzoNobel around the world Revenue by destination

21% North America (incl. 7% US Deco)

49% Europe (incl. 7% emerging Europe)

19% Asia Pacific

8% Latin America

2% Other regions Pro forma 2007 3

Q1 2008 operational performance

4

Q1 2008 highlights Ongoing trend of underlying growth, in local currencies, in most business areas Autonomous growth of 6 percent offset by currency headwind Stable results in challenging economic environment Earnings per share of continuing operations up 6 percent Total net income €118 million, up €40 million New company, new brand, ICI integration underway

5

Stable performance

€ mln

2008

Δ%

Revenue

3,506

1

EBITDA

398

(1)

EBIT

257

1

Net income

136

(4)

Ratio

2008

2007

EBITDA margin, %

11.4

11.6

7.3

7.3

0.52

0.49

EBIT margin, % Earnings per share

Continuing operations before incidentals; 2007 pro forma 6

Autonomous growth of 6 percent offset by currencies % Decorative Paints

Total

Volume

Price Currency Acq./div.

(4)

(2)

3

(6)

1

Performance Coatings



2

2

(6)

2

Specialty Chemicals

5

4

7

(6)



AkzoNobel

1

2

4

(6)

1

Versus Q1, 2007 proforma 7

Integration Update

8

Status report (1)

Integration process well underway • Making good progress in preparing full integration plan • Complimentary company cultures supporting the integration process • More than 100 people active in the integration teams, strong mix of ICI and Akzo Nobel

9

Status report (2)

New management structure established • Regional & functional leadership has been appointed • Appointment of local leadership in progress Capturing synergies • Synergies of € 340 million; up 20%

10

Coatings – an attractive industry

11

Coatings – an attractive industry with strong growth potential Attractive industry • Strong and stable cash flow • Low cyclicality • Low capital intensity Fragmented industry – clear signs of consolidation High growth potential

12

Stable margins through the cycle Coatings industry – average LTM EBITDA margins (1)

15%

14%

13%

12% 2002

2003

2004

2005

2006

2007

(1) Average LTM EBITDA Margins sourced from Capital IQ. Companies included: DuPont, Kansai Paint, PPG, RPM International, Sherwin Willliams and Valspar

13

Consolidation in Coatings Industry Market share of Top 10 coatings companies

(1)

50% 44%

45% 37%

35%

32% 29%

25% 1991

1995

2000

2006

2008

Example: number of US coatings companies (2)

1,500

1,380 1,040

1,000

735 600

500 1970

1980

1990

2000 14

(1)

Sourced from Euromonitor and Akzo Nobel Internal Sources

(2)

Sourced from The ChemQuest Group and BB&T Capital Markets

15

Strong growth potential

(1)

Per annum

16

A perfect strategic fit in Decorative Paints

ƒ Presence on all continents ƒ Ability to serve customers worldwide ƒ Complementary fit across regions, markets and brands ƒ Well positioned in highly attractive platforms for growth

17

Geographic expansion into high growth markets Akzo Nobel Decorative Paints today Decorative Paints Revenues in 2007 of €2.4 billion

EMEA

84,7%

1,7% 13,6% Asia - Pacific

Americas

ICI’s leading Decorative positions in emerging markets

China

#2

India

#3

Indonesia

#2

Malaysia

#1

Pakistan

#1

Thailand

#2

Vietnam

#2

Brazil

#2

Argentina

#1

Pro Forma combined Pro forma Decorative Paints Revenues in 2007 of €5.3 billion

EMEA

53,8%

12,6%

33,6%

Asia - Pacific Americas

18

Strong international position in Coatings EMEA

Decorative

Coatings

Emerging Markets

AN

999

AN

9

AN

ICI

99

ICI

99

ICI

999

AN

999

AN

AN

999

Paints

Performance

North America

9

ICI

9 Weak

99 Moderate

999 9

ICI

ICI

9

9

999 Strong

19

U.S. decorative market Largest (25%) and most attractive coatings market worldwide Under pressure since mid-2006 New build account for 22% of Deco market Revised strategy initiated by ICI end of 2006 Improved margins and profits Conservative assumptions made

20

US Decorative paints within Akzo Nobel

Pro forma US Deco paints sales: € 1 billion or 7% of total company revenues US Deco market declined by 10% in 2007 ICI Deco sales declined by 6%, but margins were up

New construction nonresidential 10%

New contruction residential 12%

Commercial Institutional 46%

Residential 54%

Maintenance / Repaint 78%

21

Leading positions in Performance Coatings

Industrial Activities: wood, coil and plastic coatings Marine & Protective Coatings: marine, protective, aerospace and yacht coatings. Leadership in innovation Car Refinishes: technology driven Packaging Coatings: attractive new business

22

Raw materials on balance slightly up

Decorative Paint:

Packaging materials Titanium dioxide Coatings specialties

Performance Coatings:

Resins and precursors Solvents Colored pigments Metals

23

Best in class Specialty Chemicals

24

Chemicals turned into a focused best in class business One third of portfolio divested in period 2004/06 Five growth platforms with market leadership positions Best in class operational performance Investing in emerging markets

EBITDA margin

ROI 2007 2004 15%

21%

2007 2004 15%

17%

25

Leading positions in specialty chemicals markets Pulp & Paper - #1 worldwide in bleaching Base Chemicals - #1 globally in MCA regional N/W Europe leadership in chlorine alkali business Functional Chemicals - leading positions in 3 market segments Surface chemicals - making good progress in turning around Polymer Chemicals - #1 globally in organic peroxides and metal alkyls

26

Raw materials – relatively well positioned

Specialty Chemicals - most important raw materials: - energy: hydro, nuclear, own co-generation facilities one third of feedstock input linked to oil/gas prices large consumers are Pulp & Paper and Base Chemicals - ethylene - salt, largely captive produced

27

Strategy going forward

28

Strategy going forward

Accelerate organic growth, leveraging our leading positions Be an active consolidator throughout portfolio Capture the synergies of the ICI acquisition Further improve profitability through operational excellence Build a unique industrial brand

29

New AkzoNobel will be a top performer

Attractive industry Strong portfolio Operational excellence Synergies

Outgrow markets EBITDA performance to move to upper half of peer group

30

Peer group EBITDA performance Peer Group EBITDA Margins(1) 2007

2008

2009

DuPont

19.5%

19.0%

18.7%

Hercules Inc.

18.3%

19.1%

19.4%

BASF AG

17.7%

17.3%

16.7%

PPG Industries Inc.

14.7%

15.2%

15.1%

Sherwin-Williams Co.

14.3%

14.3%

14.0%

Dow Chemical Co.

13.7%

12.6%

12.2%

Kansai Paint Co. Ltd.

12.7%

12.9%

13.2%

RPM International Inc.

12.7%

12.7%

12.4%

Kemira Group

12.4%

10.9%

11.6%

CIBA

12.1%

13.7%

14.1%

Valspar Corp.

11.7%

11.4%

11.6%

Arkema Sa

8.8%

9.7%

10.6%

Average

14.1%

14.1%

14.1%

Median

13.2%

13.3%

13.6%

Akzo Nobel (2)

12.9%

31 (1)

Sourced from IBES Estimates and Capital IQ as at 21 Febuary, figures calendarised to December year end. Ranked by 2007 EBITDA margin estimates

(2)

Pro forma AN and ICI – FY 2007

Financial Strategy

32

Strong financial position

€ mln

March 31, 2008

Dec. 31, 2007

Equity

11,735

12,155

Net debt

3,483

2,832

Q1, € mln

2008

2007

Net cash from operating activities

(400)

(426)

2007 pro forma 33

Financial strategy post-2007 transformation

Three guiding principles: - Solid capital structure - Attractive dividend payout ratio - Arm’s length position for pensions

34

Solid capital structure

Maintain investment grade rating (single A- to BBB+ range) • FFO/adjusted net debt is key ratio Drivers • Flexibility for growth strategy • Avoid over-exposure to volatility of financial markets • Continue to deal proactively with pension deficit

35

Create arm’s length position on pension matters

2007 pro forma pension under funding € 1.5 billion Committed to fund deficits over time Change to defined contribution (DC) for new entrants Ring fence other post retirement obligations

36

Return of additional cash to shareholders

Initial 2007 share buyback program of €1.6 billion completed 2008/2009 capital return program: • Share buyback program of €3.0 billion • First tranche of €1.0 billion started mid March • Completion expected by end Q1 / early Q2 2009 • YTD 14.2 million shares repurchased for €725 million

37

2007 dividend increased with 50%

2007 dividend up 50% to € 1.80 per share Higher dividend triggered by • Higher net income before incidentals • Influence of initial share buyback: shares outstanding decreased by 10% • Pay-out ratio of minimum of 45% of net income before incidentals (and fair value adjustments related to ICI deal)

38

2008 - Management Agenda

39

Management Agenda 2008 Outgrow our markets, further improve EBITDA margin Significant progress with integration ICI Capture first round of synergies Divesture of Specialty Starches Remedies divestures Roll out corporate brand program

40

Trading conditions 2008

AkzoNobel remains confident of outgrowing its markets At least maintaining results in line with 2007.

41

Questions?

42

Annex - Q1 2008 results

43

Decorative Paints

Strong top-line growth in Asia and Latin America Revenue down 4 percent, impacted by currency effects (-6 percent) US business affected by weak market conditions; US margins improved due to product mix effects and cost control programs EBITDA margin increased to 8.8 percent, ahead of 2007

44

Decorative paints

€ mln

2008

Revenue

1,165

EBITDA

Δ% (4)

102

3

52

16

2008

2007

EBITDA margin

8.8

8.1

EBIT margin

4.5

3.7

EBIT Ratio, %

Before incidentals; 2007 pro forma 45

Performance Coatings

Autonomous revenue growth of 4 percent 6 percent negative currency impact Slightly lower EBITDA margin of 11.6 percent Marine & Protective Coatings: another strong quarter Industrial Activities affected by weak US market conditions

46

Performance Coatings

€ mln

2008

Δ%

Revenue

1,096



EBITDA

127

(5)

EBIT

103

(6)

Ratio, %

2008

2007

EBITDA margin

11.6

12.2

9.4

9.9

EBIT margin

Before incidentals; 2007 pro forma 47

Specialty Chemicals

Strong autonomous growth of 11 percent; negative currency impact of 6 percent Pressure on margins from raw materials and energy compensated by price increases Slightly lower EBITDA margin of 17.1 percent Surface chemicals, Polymer Chemicals and Chemicals Pakistan leading improvement

48

Specialty Chemicals

€ mln

2008

Δ%

Revenue

1,199

5

EBITDA

205

1

EBIT

143

4

Ratio, %

2008

2007

EBITDA margin

17.1

17.8

EBIT margin

11.9

12.0

Before incidentals; 2007 pro forma 49

Safe Harbor Statement

This presentation contains statements which address such key issues as Akzo Nobel’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.

50