Media update Q1 2011 results April 21, 2011 Keith...
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April 21, 2011 Keith Nichols, CFO Media update Q1 2011 results
Agenda •
Strategic ambitions
•
Q1 2011 value highlights
•
Q1 2011 innovation highlights
•
Financial review
•
Outlook 2011
Media update Q1 2011 results
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Strategic ambitions
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Our strategic ambition is to be
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Our medium term strategic goals •
Top quartile safety performance
•
Top 3 position in sustainability
•
Top quartile performance in diversity, employee engagement, and talent development
•
Top quartile eco-efficiency improvement rate
•
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
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Aspirations for high-growth markets 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 % of revenue, indicative
32% ‘Mature’ Europe
18% North America
9% ‘Emerging’ Europe
5% ME&A
25% Asia Pacific
11% Latin America
High-growth markets will be around 50% of revenue in this decade Media update Q1 2011 results
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Q1 2011 value highlights
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Q1 2011 revenue and EBITDA € million Revenue
Q1 2011
%
EBITDA*
3,762 437
16 10
Ratio, %
Q1 2011
Q1 2010
11.6
12.3
EBITDA* margin
Revenue development Q1 2011 vs. Q1 2010 20 15 10 5 0
+4% +3%
+2% +16%
+7% Volume
* Before incidentals
Price/Mix
Acquisitions/ divestments
Exchange rates Increase
Total Decrease
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Q1 2011 highlights
• • • • • • •
Stronger volumes and pricing drive revenue growth of 16 percent EBITDA* increased 10 percent to €437 million Raw material cost increases being mitigated Operating return on invested capital: 27.6 percent Net income increased to €128 million (2010: €81 million) Adjusted EPS (earnings per share) rose 38 percent to €0.72 Outlook reiterated: aiming for more than 5 percent revenue and EBITDA* growth in 2011, in line with strategic ambitions
* Before incidentals Media update Q1 2011 results
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Volume growth continues, price increases coming through Quarterly volume development in % year-on-year 15 10
9% 7%
7%
6%
5 0 Decorative Paints
Performance Coatings
Specialty Chemicals
AkzoNobel
Quarterly price/mix development in % year-on-year 6%
10 5
1%
3%
2%
0 -5 -10 Decorative Paints
Performance Coatings
Specialty Chemicals
AkzoNobel 2010
2011
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Decorative Paints Q1 2011 € million Revenue
Q1 2011 1,196
% 13
EBITDA*
90
10
Ratio, %
Q1 2011
Q1 2010
7.5
7.8
EBITDA* margin
Revenue development Q1 2011 vs. Q1 2010 15
+1%
10 5
+3% 0% +13%
+9%
0 Volume
* Before incidentals
Price/Mix
Acquisitions/ divestments
Exchange rates Increase
Total
Decrease
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Decorative Paints Q1 2011 highlights
• Revenue increased 13 percent and EBITDA* increased 10 percent • Walmart roll-out on track with 3.500 new stores reset • Continued growth momentum in the high growth markets, while mature markets stabilized • Selling price increases of 4 percent (excluding a 3 percent adverse mix effect) are on track to compensate for higher raw material costs
* Before incidentals Media update Q1 2011 results
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Performance Coatings Q1 2011 € million Revenue
Q1 2011 1,237
% 18
EBITDA*
143
-
Ratio, %
Q1 2011
Q1 2010
11.6
13.6
EBITDA* margin
Revenue development Q1 2011 vs. Q1 2010 20 15 10 5 0
+3% +2%
+6%
Price/Mix
Acquisitions/ divestments
+18%
+7% Volume
* Before incidentals
Exchange rates Increase
Total
Decrease
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Performance Coatings Q1 2011 highlights
• Revenue up 18 percent, with volumes up 7 percent • Improved revenue in all businesses • Selling price increases of 3 percent (before a 1 percent adverse mix effect) offset by continued raw material cost increases • EBITDA result maintained • Integration of acquired activities delivering results
* Before incidentals Media update Q1 2011 results
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Specialty Chemicals Q1 2011 € million Revenue
Q1 2011 1,351
% 17
EBITDA*
241
16
Ratio, %
Q1 2011
Q1 2010
17.8
17.9
EBITDA* margin Revenue development Q1 2011 vs. Q1 2010 20 15 10 5 0
+6%
0%
+5% +17%
+6% Volume
* Before incidentals
Price/Mix
Acquisitions/ divestments
Exchange rates
Increase
Total
Decrease
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Specialty Chemicals Q1 2011 highlights
• Revenue increased 17 percent: volume and prices increases of both 6 percent • Demand remained firm in both the high growth and mature markets • EBITDA increased 16 percent to €241 million • EBITDA margin 17.8 percent (2010: 17.9 percent) • Significant growth capital committed in the quarter: Pulp and Paper (Brazil), Bermocoll cellulose derivatives (China), Expancel (Sweden)
* Before incidentals Media update Q1 2011 results
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Q1 2011 innovation highlights
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Pipeline 2011 Surface Chemistry – Hybrid polymers Used in cleaning and personal care applications Key features • Advantages include: reliability of supply, sustainability and cost • Biodegradable and environmentally friendly
Growth potential • Major players in consumer cleaning markets showing interest • Biggest opportunity is in laundry and the second in automatic dishwasher detergents
Customers benefits • Cut back on CO2 emissions • Improving their green credential
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Pipeline 2011 Protective Coatings – Interchar® 1120 Intumescent Coating A water based Intumescent coating for onsite application Key Features • Reacts in the presence of intense heat to form an insulating layer • Extend structural integrity for up to 4 hours • Applied easily on-site during construction
Growth potential • Sustainable, “green” building becoming increasingly important in high growth areas such as China and India • Launched in the UK, Europe and China, soon in the United-States Customer Benefits • Ensures building is sustainable, during construction and occupation • Compliant with VOC regulations
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Pipeline 2011 Decorative Paints – Dulux Color Click™ Helping consumers choose designer color schemes online
Key Features • When used with a digital camera the unique Color Frame TM card ensures match with home furnishings, or any other objects you choose
Customer benefits • Expert advice on colors that go • Accurate and consistent match to any target color you choose to capture with your digital camera Growth potential • Successfully launched with Dulux in the UK and Ireland • Global roll-out planned for this year with our leading brands
• Easy access to a wide range of features on our websites to help with color choices
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Financial review
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Year-on-year Operating Working Capital % of revenue reducing towards 12% OWC € million
3000
20%
19.1%
19% 18% 2500 17%
16.2% 15.6% 14.6%
15.3%
15.0%
2000
14.1% 13.7%
16% 15%
13.9%
14% 13%
1500 2,341
2,238
2,007
1,691
2,037
2,346
2,191
2,016
2,317
12% 11% 10%
1000 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
1Q11
OWC OWC as % of LQ revenue*4 Media update Q1 2011 results
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Capital expenditure prioritization for growth • Capex 2010 was €534 million (including Ningbo €100 million and €40 million National Starch) • Medium term: Capex level to be around 4% of revenues Capex as a % of revenue
2010 Capex split 5 4
4% 16%
51%
3 2
29%
1 Specialty Chemicals
0 2008
2009
Base capex
Ningbo
2010
2011E
National Starch
Decorative Paints Performance Coatings Other
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A stable to rising dividend Our dividend policy* We intend to pay a stable to rising dividend: • A cash interim and a final dividend will be paid
2010 total dividend €1.40 per share – up 4% from 2009* • Interim dividend of €0.32 was an €0.02 increase per share compared to 2009 €1.20
€1.20
€1.80
€1.35
• The final 2010 dividend of €1.08* will be paid on May 10, 2011
* The new dividend policy and dividend pay-out will be discussed at the 2011 Annual General Meeting Media update Q1 2011 results
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Raw material costs represent around a third of revenue Primary packaging
Energy
Solvents 6%
Hybrid centralized/ BU approach
13%
6%
Chemicals & intermediates
Regional and/or local approach Global markets, global strategy
10%
24%
Additives
10%
Other Variable Costs*
3%
Pigments
3%
11% 8%
Resins Coatings Specialties
6%
Other raw materials** Titanium Dioxide
Around 2/3 of total spend is managed centrally to maximize scale advantages * Other variable costs include a/o variable selling costs (e.g. freight) and products for resale ** Other raw materials include cardolite, hylar etc. Media update Q1 2011 results
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Raw material price inflation to be compensated • Raw material prices have continued to rise and are now close to 15 percent higher than a year ago • We expect that 2011 prices will increase further, driven by basic feed-stocks such as metals, TiO2 and other oil related raw materials • Pricing and cost reduction actions are on-going and we remain confident that we will be able to compensate for these increases
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Outlook 2011
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Outlook: we expect to make progress on our medium-term strategic ambitions •
Top quartile safety performance
•
Top 3 position in sustainability
•
Top quartile performance in diversity, employee engagement, and talent development
•
Top quartile eco-efficiency improvement rate
•
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
And are aiming for more than 5 percent revenue and EBITDA growth in 2011 Media update Q1 2011 results
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Q&A
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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.
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