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SRI Investor update
Paris, December 16, 2010roadshow
SRI Investor update
Paris, December 16, 2010
• AkzoNobel at a glance
• Strategic ambitions
• Research, Development & Innovation
• Operational review
• Financial review
Agenda
• Outlook
Paris SRI Investor update
at a glance
Strategic ambitions
Research, Development & Innovation
Operational review
1
AkzoNobel key facts
2009• Revenue €13.0 billion• 54,738 employees• EBITDA: €1.7 billion*
• EBIT: €1.1 billion*
• Net income: €285 million• Leader in Dow Jones Sustainability Index
Revenue by business area
Paris SRI Investor update
* Before incidentals. All data after reclassification of National Starch
Revenue by business area
32%
35%
33%
AkzoNobel key facts
Leader in Dow Jones Sustainability Index
EBITDA* by business area
2
* Before incidentals. All data after reclassification of National Starch
EBITDA* by business area
Performance Coatings
Decorative Paints
Specialty Chemicals
32%
27%
41%
The global paints and coatings market is around €70 billion
Decorative
% of market100% is around
Decorative44%
Paris SRI Investor update
Performance56%
Source: Company ReportsPowder Coatings
8%
44%
The global paints and coatings market is 70 billion
Wood Finishes
General Industrial Coatings
Car Refinishes
% of market100% is around €70 billion
6%
10%
7%
3
Performance56%
Marine and Yacht
Protective coatings
Auto OEM, metal, plastics
Coil CoatingsPackaging Coatings
Special purpose
Powder Coatings
2%
9%
3%
3%
6%
2%
AkzoNobel is the world’s largestCoatings supplier2009 revenue in € billion
6
8
10
Paris SRI Investor update
0
2
4
AkzoNobel is the world’s largestCoatings supplier
4
Strategic ambitions
Paris SRI Investor update
Strategic ambitions
5
We want to be the and Specialty Chemicals
Paris SRI Investor update
the world’s leading CoatingsChemicals company
6
Our medium term strategic ambitions
Value – accelerated growth• Grow to €20 billion revenues• Increase EBITDA* each year,
maintaining a 13-15% margin level
• Reduce OWC percent of
Paris SRI Investor update
* Absolute earnings before interest, tax, depreciation and amortization, before incidentals** Operating Working Capital at year end as a percentage of quarter*4 revenue*** Dow Jones Sustainability Index
• Reduce OWC percent of revenues** year-on-year by 0.5 towards a 12% level
• Pay a stable to rising dividend
Our medium term strategic ambitions
accelerated growth20 billion revenues
Increase EBITDA* each year, 15% margin
Reduce OWC percent of
Values – sustainable growth• Top quartile safety
performance• Top 3 in DJSI***• Top quartile performance in
diversity, employee
7
Absolute earnings before interest, tax, depreciation and amortization, before incidentalsOperating Working Capital at year end as a percentage of quarter*4 revenue
Reduce OWC percent of year by 0.5
Pay a stable to rising dividend
diversity, employee engagement and talent development
• Top quartile eco-efficiency improvement rates
We are embarking on the next chapter of our journey to industry leadership
Portfoliotransformation
2003-2008
Paris SRI Investor update
We are embarking on the next chapter of our journey to industry leadership
Accelerated andAccelerated andsustainable
growthIntegration andrestructuring
2008-2010 2010-2015
8
How global megatrends affect our industry
Population growth fbillion in 2050*
Quality of life around 3 billion people emerging over the next 20 years*
Climate change efficiency and for low carbon & renewable energy sources*
Scarcity of natural resources since today we already use the replenishment capacity of 1.4 planets*
* Sources: UN World Population prospects, OECD, IPCC, World resources institute, WBCSD
Paris SRI Investor update
How global megatrends affect our industry
Population growth from 6.8 billion people today to >9 billion in 2050* is a strong driver for global demand
Quality of life will improve for a new middle class of around 3 billion people emerging over the next 20
Climate change will increase the need for energy efficiency and for low carbon & renewable energy sources*
Scarcity of natural resources will drive innovation since today we already use the replenishment capacity of 1.4 planets*
* Sources: UN World Population prospects, OECD, IPCC, World resources institute, WBCSD
9
We are very well positioned to benefit from megatrends
• Strong portfolio with leading positions
• Excellent geographical spread and ambitious growth plans
• Exciting RD&I pipeline with innovative solutions for key market
segments
• Clear sustainability focus
• Growth agenda to be supported by functional excellence
• Strong executive leadership team
Paris SRI Investor update
We are very well positioned to benefit from
Strong portfolio with leading positions
Excellent geographical spread and ambitious growth plans
Exciting RD&I pipeline with innovative solutions for key market
Clear sustainability focus
Growth agenda to be supported by functional excellence
Strong executive leadership team
10
Strong portfolio with leading positions
Leading market position results in superior level of profitability
Paris SRI Investor update
* Before incidentals
Strong portfolio with leading positions
Leading market position results in superior level of profitability
11
Excellent geographic spread ofboth revenue and profits
High-growth markets are important (% of 2009 revenue
‘
21%North America
High-growth markets profitability is above average
9%Latin America
North America
Paris SRI Investor update
Excellent geographic spread ofboth revenue and profits
growth markets are important (37% of revenue)
39%‘Mature’ Europe
7%‘Higher-growth’ Europe
growth markets profitability is above average
20%Asia Pacific
4%ME&A
12
How we will grow in both mature andhigh-growth marketsOrganic growth• Expand focus from high to mid market segments• Fuelling growth in high-growth markets
Innovation pipeline• Spend of around 2.5% of revenue makes us the clear peer group
leader in absolute spendleader in absolute spend• Emphasis on focused, bolder, sustainable innovation
Acquisitions• Wide range of opportunities• All Business Areas qualify• Value creating no later than in year 3
Paris SRI Investor update
How we will grow in both mature andgrowth markets
Expand focus from high to mid market segmentsgrowth markets
Spend of around 2.5% of revenue makes us the clear peer group leader in absolute spendleader in absolute spendEmphasis on focused, bolder, sustainable innovation
Wide range of opportunitiesAll Business Areas qualifyValue creating no later than in year 3
13
Aspirations for high
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• 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
Paris SRI Investor update
Aspirations for high-growth markets
Double revenues in ChinaGrow from $1.5 to $3 billion of revenues Make a step change in people development
Create significant footprint in India1 billion of revenues
Increasing footprint for all business areasIncreasing footprint for all business areas
Outgrow the competition in Brazil1.5 billion of revenues
Become clear market leader in all our activities
Expand in Middle East and Sub-Saharan Africa
14
High-growth markets will become significantly more important% of revenue, indicative
‘
18%North America
High-growth markets will be around 50% of revenue in this decade
11%Latin America
Paris SRI Investor update
growth markets will become significantly more important
32%‘Mature’ Europe
9%‘Higher-growth’ Europe
growth markets will be around 50% of revenue in this decade
25%Asia Pacific5%
ME&A
15
Exciting RD&I pipeline with innovative solutions for key market segmentsCurrent innovation strategy delivering:• 9% of revenue from “breakthrough”
innovations*• 20% of revenue from
Eco-premium solutions**
How innovation will support our How innovation will support our growth agenda:• Functional solutions in key market
segments• Increase spend in Big R&D• >15% of revenue from
“breakthrough” innovation*• >30% of revenue from
Eco-premium solutions**• Major innovations that result in a significant competitive advantage** Higher eco-efficiency than main competitive product
Paris SRI Investor update
Exciting RD&I pipeline with innovative solutions for key market segmentsCurrent innovation strategy
9% of revenue from “breakthrough”
Revenue by key market segment
43%13%
12%
How innovation will support our
32%
Residential construction
Non-residential construction
Transport
Consumer goods
How innovation will support our
Functional solutions in key market
Increase spend in Big R&D
“breakthrough” innovation*
Major innovations that result in a significant competitive advantageefficiency than main competitive product
16
Current sustainability strategy delivering:• Safety at 3.6 injuries/ million
hours• 20% of revenue from Eco
premium solutions• Energy savings• Pioneering carbon footprint
Clear sustainability focus
• Pioneering carbon footprint measurement
• 85% raw materials from suppliers with vendor policy signed
Paris SRI Investor update
Current sustainability strategy
Safety at 3.6 injuries/ million
20% of revenue from Eco-
Pioneering carbon footprint
Accelerated sustainability strategy will deliver:• Safety at 2.0 injuries/ million
hours• 30% of revenue from Eco-
premium solutions• Sustainable fresh water
management
Clear sustainability focus
Pioneering carbon footprint
85% raw materials from suppliers with vendor policy
management• 10% eco-efficiency
improvement• 10% carbon footprint reduction• 20% executives from high-
growth economies• Key supplier partnerships
delivering footprint reduction
17
Growth agenda to be supported by functional excellence
• Strong HR function to optimize support to our business• Facilitate “One AkzoNobel” culture• Employer of choice• Capitalize on diversity; 20% executives from high
economies
HR
Supply • Sourcing, manufacturing & distribution integrated in one
supply chain function: leveraging our scale
Finance
• Become “One Finance” organization• Simplify & integrate systems• Harmonize & standardize processes• Pro-active & continuous people development• Achieve 25% cost savings
Supply chain
supply chain function: leveraging our scale• Develop sourcing strategies for key raw materials• Build on a network of regional strategic sites
Paris SRI Investor update
Growth agenda to be supported by functional excellence
Strong HR function to optimize support to our businessFacilitate “One AkzoNobel” cultureEmployer of choiceCapitalize on diversity; 20% executives from high-growth economies
Sourcing, manufacturing & distribution integrated in one supply chain function: leveraging our scale
Become “One Finance” organizationSimplify & integrate systemsHarmonize & standardize processes
active & continuous people developmentAchieve 25% cost savings
supply chain function: leveraging our scaleDevelop sourcing strategies for key raw materialsBuild on a network of regional strategic sites
18
Strong executive leadership team
Hans WijersCEO
Werner Fuhrmann
Sven DumoulinGeneral Counsel
Paris SRI Investor update
Tex GunningBA Decorative Paints
Werner FuhrmannSupply Chain
Marjan OudemanHR & OD
Graeme ArmstrongRD&I
Strong executive leadership team
Hans Wijers
Keith NicholsCFO
Rob Frohn
19
Rob Frohn BA Specialty Chemicals
Leif Darner BA PerformanceCoatings
Tex GunningBA Decorative Paints
Strategic and financial reasons to accelerate growth in mature markets
Focus on EBITDA margin increasePursue additional restructuringDownsize lower margin stores
EBITDA impact
EBITDA margin vs. market shareDecorative Paints mature market example
40
60
80
100
2009
EBITDA impact (€ million)
Paris SRI Investor update
Strategic and financial reasons to accelerate growth in mature markets
Focus on EBITDA margin increasePursue additional restructuringDownsize lower margin stores
Focus on market share increaseInvest in brand building
Invest in channel management
EBITDA margin vs. market shareDecorative Paints mature market example
EBITDA impact
2015 2009 2015
million) EBITDA impact (€ million)
20
In high growth markets such as India, focusing on the mid
DecorativePaints
PerformanceCoatings
100
80
60
% o
f mar
ket
India market relevant for AkzoNobel, 2009
Paris SRI Investor update
20
0
60
40% o
f mar
ket
Market size
In high growth markets such as India, focusing on the mid-tier is crucial
Premium ~20% Typical focus for AkzoNobel(and other multinationals)
PerformanceCoatings
SpecialtyChemicals
India market relevant for AkzoNobel, 2009
21
Low price ~30%Low cost local value propositions, low end technology, and ‘service-lite’ business models
Mid-tier ~50%Intense battle between globalmulti-nationals ‘moving down’and local companies ‘moving up’
Market size
EBITDA margin vs. market share issuein the mid-tier segment
Focus on EBITDA margin increaseStay in the premium segment
Restrict cost growth
EBITDA impact
EBITDA margin vs. market shareAkzoNobel (all Business Areas) high growth market example
Paris SRI Investor update
EBITDA impact (€ million)
20406080
100120140
2009
EBITDA margin vs. market share issuetier segment
Focus on EBITDA margin increaseStay in the premium segment
Focus on market share increasePursue higher volume mid-tier
business models
EBITDA margin vs. market shareAkzoNobel (all Business Areas) high growth market example
EBITDA impact
22
million) EBITDA impact (€ million)
2015 2009 2015
Research, Development & Innovation
Paris SRI Investor update
Research, Development & Innovation
23
Innovation highlights from 2009/10
Dulux® Weathershield SunReflectLowers the temperature of external walls by up to 5reduces the need for air conditioning by reflecting up to 90 percent more infrared radiation that comparable exterior paints.
Compozil® FxA wet end management system for the largest and fastest paper machines. Top quality paper can be produced with higher productivity, better economy and reduced higher productivity, better economy and reduced environmental impact.
Colour Click®A web image tool, based on unique technology to help consumers accurately choose with their home environment.
Autoclear® LV ExclusiveA high-gloss clear-coat paint for car refinishing. Based on proprietary resin technology, it is not only highly resistant to scratches and easy to apply, it features remarkable selfhealing properties when exposed to gentle heat.
Paris SRI Investor update
Innovation highlights from 2009/10
SunReflect™Lowers the temperature of external walls by up to 5° C and reduces the need for air conditioning by reflecting up to 90 percent more infrared radiation that comparable exterior
A wet end management system for the largest and fastest paper machines. Top quality paper can be produced with higher productivity, better economy and reduced higher productivity, better economy and reduced
A web image tool, based on unique technology to help consumers accurately choose colors to match and coordinate
coat paint for car refinishing. Based on proprietary resin technology, it is not only highly resistant to scratches and easy to apply, it features remarkable self-healing properties when exposed to gentle heat.
24
Delivering results
KPIs
Innovation% Revenue from BreakthroughInnovations*
R&D Expenditure
Paris SRI Investor update
R&D Expenditure% Spend on ‘Big R + D’
Sustainability% Revenue from Eco-Premium Solutions**
• Major innovations that result in a significant competitive advantage** Higher eco-efficiency than main competitive product
Delivering results
2008 2009 2010EMedium
Termambition
5 7 9 >15
25
39 40 46 >60
Premium 18 20 22 >30
Major innovations that result in a significant competitive advantageefficiency than main competitive product
Insight into global mega
• A more sustainable planet
Paris SRI Investor update
• Social accountability & transparency
• Global economic & populationgrowth
• Accelerating technologydevelopment
• A specializing, solution-driven
• Well-being & personalization
• Convenience
Insight into global mega-trends
Mega-trend example
The world’s population grows and wealth increases, with significant
mid-market development in emerging economies
26
Serving the needs of the global mid-market
Affordable solutions in powders and machine-less tinting
transparency
population
driven world
AkzoNobel Solution Promises
Achieving zero footprint
Bringing products for well-being and identity
Serving the needs of the global mid-market
Paris SRI Investor update
Creating new horizons in functionality
Saving you time and effort
Achieving zero footprint
AkzoNobel Solution Promises
Achieving zero footprint
Bringing products for being and identity
Serving the needs of market
Rapid curing and totally water-borne
Surfaces to control vector-borne diseases
27
Creating new horizons
Achieving zero footprint
Coatings and energy management
totally water-borne
Market Insightinto Sustainable Construction
Insights
Materials
Paris SRI Investor update
Materials
Energy Management
Design, Maintenance & End-of-Life
Health & Wellness
Water Management
into Sustainable Construction
Innovative Solutions
Seasonally responsive coatings
28
Seasonally responsive coatings
‘Release-on-command’ bonding materials
Therapeutic/mood-controlling color scheming
Self-repairing coatings
Thin film solar panels for roofing & glazing
Scale & capability
‘Big R&D’ in global laboratories:• Deventer (NL)• Felling (UK)• Sassenheim (NL)• Slough (UK) • Songjiang (CN)• Strongsville (USA)• Strongsville (USA)
150 labs performing incremental ‘little d’ for regional & local customers
11% of R&D capability in China
Planning global R&D center in India
Paris SRI Investor update
Scale & capability
‘Big R&D’ in global laboratories:
150 labs performing incremental ‘little d’ for regional & local customers
11% of R&D capability in China
Planning global R&D center in India
29
Operational review
Paris SRI Investor update
Operational review
30
Decorative Paints key facts
2009• Revenue €4.6 billion• 21,940 employees• EBITDA: €487 million*
• 36 percent of revenue from high• Largest global supplier of decorative paints• Many leading positions, strong brands
Some of our strong brands
Paris SRI Investor update
* Before incidentals
Some of our strong brands
Decorative Paints key facts
36 percent of revenue from high-growth marketsLargest global supplier of decorative paintsMany leading positions, strong brands
Revenue by geography
31
Revenue by geography
Europe
Asia Pacific
North America
Latin America
Other regions
50%
15%
21%
10%4%
Making it happen in Decorative Paints
AkzoNobel Decorative Paints Leadership• We are the clear global market leader in
Decorative Paints• We will extend leadership in greater Europe• We will build leadership positions in China,
South East Asia, Brazil, Russia and Poland
AkzoNobel Decorative Paints Stewardship• Integration is a major success• We are fixing the US and Germany• We will invest to deliver growth and profit
Paris SRI Investor update
Making it happen in Decorative Paints
Decorative Paints LeadershipWe are the clear global market leader in
We will extend leadership in greater EuropeWe will build leadership positions in China, South East Asia, Brazil, Russia and Poland
Decorative Paints StewardshipIntegration is a major successWe are fixing the US and GermanyWe will invest to deliver growth and profit
32
We are the clear global market leader in Decorative PaintsDecorative Paints 2009 revenue € billion
3
4
5
* 2008 figure
0
1
2
Paris SRI Investor update
We are the clear global market leader in Decorative PaintsDecorative Paints 2009 revenue
33
Europe is the biggest market for Decorative Paints% of Decorative Paints market*100 % = €22 billion
4
60
80
100%1
* Only includes markets where AkzoNobel is active.Does not include non-paints sales or integrated distribution
Asia Europe0
20
40
60
LatinAmerica
Paris SRI Investor update
Europe is the biggest market for Decorative Paints% of Decorative Paints market*
11 6
Consumer
34
is active.paints sales or integrated distribution
Europe North AmericaBy-it-yourself
Professional
Europe will continue to be the biggest market for decorative paintsDecorative Paints market*€ billion
20
25
30
Paris SRI Investor update
2006 2007 2008 20090
5
10
15
* Only includes markets where AkzoNobel is active. Estimates made in 2009. Does not include nondistribution
Europe will continue to be the biggest market for decorative paints
NorthAmerica
35
2009 2010 2011 2012 2013 2014
Europe
LatinAmerica
Asia
is active. Estimates made in 2009. Does not include non-paints sales or integrated
We have a strong overall leadership position in Europe
19
Total Europe 2009 (%)100% = €10.1 billion
AkzoNobel
Others
8
44
362
Relative market share to our nearest competitor is 2.5 times
Paris SRI Investor update
We have a strong overall leadership position in Europe
AkzoNobel
36
8
4
Relative market share to our nearest competitor is 2.5 times
PPG
DAW
TikkurilaMateris
We will strengthen our leadership position in EuropeGain market share in “mature” Europe• UK, Benelux, France, Spain, Greece, etc
Capture market growth in “higher growth” Europe• Poland, Russia, Turkey, etc
Paris SRI Investor update
We are leveraging our global scale, brands & best practices
We will strengthen our leadership position
Gain market share in “mature” EuropeUK, Benelux, France, Spain, Greece, etc
Capture market growth in “higher growth” EuropePoland, Russia, Turkey, etc
37
We are leveraging our global scale, brands & best practices
Build leadership position in China
A strong AkzoNobel competitive position
Market leadership Market leadership
Paris SRI Investor update
Build leadership position in China
A strong AkzoNobel competitive positionStrong second overall
Market leadership today in the 4 ‘Tier 1’ citiesMarket leadership today in the premium segment
Large market today
+
38
Exciting growth potential
Large market today2010 market ~ €2.5 billion
Strong growth potential2010 growth rate = 9%
2010-2015 growth rate = ~10%
+
Aggressive investment in China to capitalize on potential• Increase positioning into the • Continue to build our Dulux• Extend distribution through
annually (year-end 2009: 3,000)
Paris SRI Investor update
5 years ago382 Tier 2 and 3 cities 588 Tier 2 and 3 cities
Aggressive investment in China to capitalize on potential
Increase positioning into the mid-tier markets and citiesDulux brand
Extend distribution through ‘controlled stores’: grow around 700 end 2009: 3,000)
39
Today588 Tier 2 and 3 cities
5 years from now647 Tier 2 and 3 cities
Build leadership position in Brazil
Above average market growth (>5% p.a.)
• Expand distribution from 7,500 outlets to 17,500• Invest in brand building for Coral (Dulux ‘brand cluster’)• ‘Own’ point-of-sale
Paris SRI Investor update
Significant organic growth potential in Brazil
Build leadership position in Brazil
Strong AkzoNobel competitive position+
from 7,500 outlets to 17,500for Coral (Dulux ‘brand cluster’)
40
Significant organic growth potential in Brazil
We are leveraging our scale through global brand positioning
Validated global segmentation
Dulux/Sikkens Pro
Dulux Consumer
Brand clusters
Paris SRI Investor update
Scale leverage in advertising and promotion
Metal paint/specialist paint
Pre-deco specialist
Wood care specialist
Mid-tier
We are leveraging our scale through global brand positioning
Validated global segmentation
41
Scale leverage in advertising and promotion
The ICI integration is a major success
Cost reductions
FTEs*
Brands
SKUs
N/A
25,800
100
>90,000
Area Beginning 2008
Paris SRI Investor update
* Clearly, we are adding FTEs, particularly in the high growth markets, to support growth. The reductions are estimated reductions due to synergy and related restructuring
SKUs
Raw materials
Factories
Warehouses
Packaging Types
>90,000
>8,000
80
160
>900
The ICI integration is a major success
N/A
25,800
100
>90,000
> €190 million
-/- 3,800
75
75,000
> €220 million
ongoing
<50
<60,000
Beginning 2008 End 2010 End(Generally 2012)
42
Clearly, we are adding FTEs, particularly in the high growth markets, to support growth. The reductions are estimated reductions due to synergy and related restructuring
>90,000
>8,000
80
160
>900
75,000
6,000
58
130
600
<60,000
<3,000
<50
<110
<300
The US turnaround challenge 2008
Turnaround . . . % of gallons sold
AkzoNobelAkzoNobel
Paris SRI Investor update
Market structure and dynamics drove need for a turnaround
The HomeDepot
Lowes
Wal-Mart
Independentdealers
The US turnaround challenge 2008
AkzoNobel AkzoNobel
43
Market structure and dynamics drove need for a turnaround
Independentdealers
Company-owned stores
Retail channel size
The US turnaround story
• Take $150 million costs out of the business• Relaunch Glidden through ‘Glidden Gets You Going’
• Quality• Packaging• Campaign film
• Strengthen relationship with Martha Stewart
• Relaunch Glidden Pro and increase
Paris SRI Investor update
The US turnaround story
Take $150 million costs out of the businessGlidden through ‘Glidden Gets You Going’
Turnaround . . . Integrate
Grow
Strengthen relationship with The Home Depot including
Glidden Pro and increase Stores business profitability
44
Glidden at Wal-Mart puts us ahead in the retail channel• Wal-Mart opts for icon brand Glidden to
strengthen its paint category at all of its 3,500 stores
• Wal-Mart is a major player in total US DIY market, including paint
• Complete program including, over time, all interior and exterior paints for both brand and Glidden
• Significant additional sales potential of around $250 million
• Financially sound transaction• Start up costs of $ 25-30 million (2010/2011) to
stores/ color centers reset• Optimal utilization of supply chain: no major
additional investments required
Paris SRI Investor update
Winning new business generates the highest returns
Mart puts us ahead in the
Mart opts for icon brand Glidden to strengthen its paint category at all of its 3,500
Mart is a major player in total US DIY
Complete program including, over time, all interior and exterior paints for both ColorPlace
Significant additional sales potential of around
Financially sound transaction30 million (2010/2011) to
stores/ color centers resetOptimal utilization of supply chain: no major additional investments required
45
Winning new business generates the highest returns
Winning globally
Paris SRI Investor update
Winning globally
46
Performance Coatings key facts
2009• Revenue €4.1 billion• 19,940 employees• EBITDA: €594 million*
• 45 percent of revenue from high growth markets• Leading positions in performance coatings• Innovative technologies, strong brands
Revenue by business unit
Paris SRI Investor update
Marine andProtective Coatings
* Before incidentals
Revenue by business unit
Car Refinishes
Industrial Coatings
Wood Finishes andAdhesivesPowder Coatings
18%
17%
15%
Performance Coatings key facts
45 percent of revenue from high growth marketsLeading positions in performance coatingsInnovative technologies, strong brands
Revenue by business unit Revenue by geography
47
Revenue by business unit Revenue by geography
Europe
North America
Latin America
Other regions
Asia Pacific30%
20%
41%20%
8%6%
25%
Making it happen in Performance Coatings
construction
Paris SRI Investor update
construction
consumer goods
Making it happen in Performance Coatings
transportation
48
consumer goods
transportation
Performance Coatings has a balanced exposure to different end markets
Generalindustrial
Packaging
Specialty Plastics
Paris SRI Investor update
Coil
Powder
Protective
Wood
Plastics
Performance Coatings has a balanced exposure to different end markets
Transportation
ConstructionAutomotiveOEM
Marine
Revenue by key market segment
49
Consumer goods
OEM
VehicleRefinish
Protective
AkzoNobel’s competitive portfolio leaves room for growth
Market segments Global market size (€
Marine
Wood/ Coil/ Packaging
Protective
Paris SRI Investor update
Protective
Vehicle refinish
Powder
Automotive OEM
General industrial
Source: External sources and company estimates
AkzoNobel’s competitive portfolio leaves room for growth
Global market size € billion)
Global market share %
Position
3 20 – 25 1
7 15 – 20 1
6 10 – 15 1
50
6 10 – 15 1
5 10 – 15 3
5 10 – 15 1
6 < 5 < 5
8 < 5 < 5
Growth in both mature and high growth markets
High growthmarkets
Organic Wood Finishes and Adhesives in China, Vietnam and Bangladesh
Paris SRI Investor update
Innovation based Midwith new technology and new distribution
Selective acquisitions
Prime, Car Refinishes
Growth in both mature and high growth
High growthmarkets
Mature markets
Wood Finishes and Adhesives in China, Vietnam and Bangladesh
Specification selling, Protective Coatings
51
Mid-tier expansionwith new technology and new distribution
6i, Stickerfix, Autoclear LV, Car Refinishes
Prime, Car Refinishes Lindgens, Industrial Coatings Dow Powder, Powder Coatings
Value: excellent returns over the cycle
EBITDA* margin
Paris SRI Investor update
* Before incidentals** ROI% is calculated as EBIT of the last four quarters divided by the average invested capital of these quarters
Value: excellent returns over the cycle
Moving average ROI in %**
52
** ROI% is calculated as EBIT of the last four quarters divided by the average invested capital of these quarters
Values: embedding our ambitions
34567
SafetyTotal reportable rate of injuries per million hours
Paris SRI Investor update
Sustainability developments• Pro-active product stewardship• Developing technology based on renewable resources • Helping customers lowering their ecological footprint
012
2006 2007
Values: embedding our ambitions
Total reportable rate of injuries per million hours
53
Sustainability developmentsactive product stewardship
Developing technology based on renewable resources Helping customers lowering their ecological footprint
2008 2009 Q3 2010 Target
Specialty Chemicals key facts
2009• Revenue €4.4 billion• 11,140 employees• EBITDA: €738 million*• 32 percent of revenue from high• Major producer of specialty chemicals• Leadership positions in many markets
Revenue by business unit
Paris SRI Investor update
Revenue by business unit
Functional Chemicals
Industrial Chemicals
Pulp and PaperChemicals
Surface Chemistry
Chemicals Pakistan
21%
16%
9%
* Before incidentals
Specialty Chemicals key facts
32 percent of revenue from high-growth marketsMajor producer of specialty chemicalsLeadership positions in many markets
Revenue by business unit Revenue by geography
54
Revenue by business unit Revenue by geography
North America
Europe
Asia Pacific
Latin America
Other regions
33%
21%
48%20%
9% 4%
19%
Our Specialty Chemicals portfolio
Surface ChemistryFunctional Chemicals
Industrial Chemicals
Paris SRI Investor update
Our Specialty Chemicals portfolio
Surface Chemistry Pulp and Paper Chemicals
Industrial Chemicals
Chemicals
Chemicals Pakistan
55
The chemical industry value chain
Industrial Chemicals
Mining, oil, biomaterials
Base chemicals
Pulp and Paper Chemicals
Paris SRI Investor update
The chemical industry value chain
Industrial Chemicals
Chemical inter-mediates
Performance/functionalchemicals
‘End’ products
Surface Chemistry
Pulp and Paper Chemicals
Functional Chemicals
Chemicals Pakistan
56
We built many market leadership positions in attractive niches
FunctionalChemicals
IndustrialChemicals
1
Chelates, sulfur products, polysulfidesorganic peroxides,
1
Monochloroacetic acid (MCA)
1
Chemicals Pakistan holds strong positions in various markets in Pakistan
Pulpand Paper
SurfaceChemistry
1
IndustrialAgricultural
1
Bleachingchemicals
(MCA)
Paris SRI Investor update
We built many market leadership positions in attractive niches
3
3
CMC
polysulfides,
peroxides,
1
Monochloro-acetic acid
Chlorine merchant,Caustic merchant, Salt(all Europe)
12
1 Ethylene amines,metal alkyls, Elotex, Bermocoll
Salt Specialties (N. Europe)
12
Chemicals Pakistan holds strong positions in various markets in Pakistan
3
AgriculturalHome &Personal care
(all Europe)
3 Retentionand sizing chemicals
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Serving many market segments, driven by higher per capita income2/3 of revenue driven by consumer demand• Varying from cleaning
products to paper products• Innovative sustainable
solutions• Strong position in high-growth
markets
1/3 of revenue driven by construction & transport• Varying from PVC to asphalt
additives• Innovative energy-saving
solutions• Strong position in high-growth
markets
Paris SRI Investor update
Serving many market segments, driven by higher per capita income
16%12%
6%products to paper products
growth
Revenue by key market segment
66%
Residential construction
Non-residential construction
Transport
Consumer goods
Varying from PVC to asphalt
growth
58
Attractive operating margins over the cycle
€ billion
4
5
6
0
1
2
3
1998 1999 2000 2001 2002
Paris SRI Investor update
Attractive operating margins over the
12%
14%
16%
18%
20%
0%
2%
4%
6%
8%
10%
2002 2003 2004 2005 2006 2007 2008 2009 2010 H1
revenue EBITDA margin
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Different business
Industrial Chemicals
• Strategy: Protect and selectively grow
Pulp and Paper Chemicals
• Strategy: Grow, preferably in high• Strategy: Grow, preferably in highgrowth markets
Surface Chemistry and Functional Chemicals
• Strategy: Aggressively grow
Paris SRI Investor update
Different business approaches
Strategy: Protect and selectively
Pulp and Paper Chemicals
Strategy: Grow, preferably in high-Strategy: Grow, preferably in high-
Surface Chemistry and Functional
Strategy: Aggressively grow
60
Financial review
Paris SRI Investor update 61
Year-on-year Operating Working Capital % of revenue to reduce towards 12%
2500
3000
OWC€ million
19.1%
16.2%16.4%
1000
1500
2000
4Q08 1Q09 2Q09
2,185 2,238
Paris SRI Investor update
2,341
year Operating Working Capital % of revenue to reduce towards 12%
16%
17%
18%
19%
20%
16.2%15.6%
15.0%
10%
11%
12%
13%
14%
15%
16%
2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
OWC
OWC as % of LQ revenue*4
13.7%
14.6%15.0%
2,238 2,007 1,691 2,037 2,346
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2,191
14.1%
Capital expenditure prioritization for growth• Capex 2010 expected to be around 3% of revenue (excluding
Ningbo €100 million and
• Medium term: Capex level to be around 4% of revenues
Capex as a % of revenue
Paris SRI Investor update
Capital expenditure prioritization for
Capex 2010 expected to be around 3% of revenue (excluding 100 million and €40 million National Starch)
Medium term: Capex level to be around 4% of revenues
63
A stable to rising dividend
We intend to pay a stable to rising dividend: • a cash interim and a final dividend will be paid
Our dividend policy*
2010 interim dividend
€1.20 €1.20
*The new dividend policy and dividend pay-out will be discussed at the 2011 Annual General Meeting
• Interim dividend to be paid on 3 November, 2010• We intend to grow the 2010 total dividend by around
share*• Therefore we are guiding towards a total 2010 dividend of
Paris SRI Investor update
A stable to rising dividend
We intend to pay a stable to rising dividend: a cash interim and a final dividend will be paid
Our dividend policy*
2010 interim dividend €0.32 per share – up 7% from 2009*
€1.35€1.80
out will be discussed at the 2011 Annual General Meeting
Interim dividend to be paid on 3 November, 2010We intend to grow the 2010 total dividend by around € 0,05 per
Therefore we are guiding towards a total 2010 dividend of € 1.40*
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Unchanged ambition to maintain strong balance sheet
€ millionTotal EquityNet debt*
• Credit ratings confirmed in August at BBB+/Baa1, outlook improved • Credit ratings confirmed in August at BBB+/Baa1, outlook improved to stable
• National Starch proceeds will fund growth and potentially partly be used to further optimize capital structure, for example by repaying 2011 debt maturity and/or de
* Before net pension deficit of €1.5 billion September 30, 2010 (December 31, 2009
Paris SRI Investor update
Unchanged ambition to maintain strong
Sept 30, 2010 Dec 31, 20099,291 8,2452,030 1,744
Credit ratings confirmed in August at BBB+/Baa1, outlook improved Credit ratings confirmed in August at BBB+/Baa1, outlook improved
National Starch proceeds will fund growth and potentially partly be used to further optimize capital structure, for example by repaying 2011 debt maturity and/or de-risking pensions where possible
1.5 billion September 30, 2010 (December 31, 2009 €1.9 billion)
65
Pension deficit improves to
Key pension metricsDiscount rateInflation assumptions
0€ billion
Pension deficit development during Q3 2010
-2.0
-1.5
-1.0
-0.5
0
Deficitend Q2 2010
Top-ups
(1,793)
35
Paris SRI Investor update
Pension deficit improves to €1.5 billion
Q3 2010 Q2 20105.0% 5.2%2.7% 2.9%
Pension deficit development during Q3 2010
(3)
(1,506)
(411)471
Increasedplan assets
Inflation Discount Other Deficitend Q3 2010
Decrease Increase
rate
195
66
• 2004 pro forma (including ICI) pension under funding was around €4 billion
• Defined Benefits closed to new entrants, major plans closed in 2001 (ICI) and 2004 (Akzo Nobel)
• Committed to further de
• Total defined benefit pension plans cash contribution expected to reach €490 million in 2010 (2009:
Pro-active pension risk management
Paris SRI Investor update
reach €490 million in 2010 (2009: around €350 million of “top
• Cash pension top-ups around in 2011
• Non-cash IAS19 financing expenses related to pensions and other post-retirement benefits expected to be 2010 (2009: €174 million)
2004 pro forma (including ICI) pension under funding was
Defined Benefits closed to new entrants, major plans closed in 2001 (ICI) and 2004 (Akzo Nobel)
Committed to further de-risk over time
Total defined benefit pension plans cash contribution expected to 490 million in 2010 (2009: €414 million), which includes
active pension risk management
67
490 million in 2010 (2009: €414 million), which includes 350 million of “top-up” payments (2009 €240 million)
ups around €350 million expected to continue
cash IAS19 financing expenses related to pensions and retirement benefits expected to be €105 million in
174 million)
Successful extension of debt duration will be further optimized over time Debt maturity*€ million (nominal amounts)
400
800
1.200
• Undrawn revolving credit facility of • €1.5 & $1 billion commercial paper programs in place• Net cash and cash equivalents
Significant liquidity headroom*
02010 2011
€ bonds
* At the end of Q3 2010
Paris SRI Investor update
Successful extension of debt duration will be further optimized over time
Undrawn revolving credit facility of €1.5 billion available (2013)1.5 & $1 billion commercial paper programs in place
Net cash and cash equivalents €1.8 billion
Significant liquidity headroom*
2012 2013 2014 2015 2016
$ bonds GBP bonds
68
Low fixed costs as a percentage of revenue% of 2009 annual revenue*
Raw materials,energy, andother variableproduction costs
Fixed productioncosts
Paris SRI Investor update
Selling, advertising,administration, R&Dcosts
EBIT margin
* Rounded percentages, all data excluding incidentals
DecorativePaints
Low fixed costs as a percentage of
100%
69
* Rounded percentages, all data excluding incidentals
0%Decorative Performance
CoatingsSpecialty
ChemicalsAkzoNobel
Raw materials, energy and other variable costs represent around half of revenue
10%
10%
6%6%
Additives
Solvents
Primarypackaging
Chemicals &intermediates
Paris SRI Investor update
* Other variable costs include a/o variable selling costs costs (e.g. freight) and products for resale** Other raw materials include cardolite, hylar etc.
8%11%
3%
10%
CoatingsSpecialties
Resins
Pigments
Around 2/3 of total spend is managed centrally to maximize scale advantages
Raw materials, energy and other variable costs represent around half of revenue
13%
24%
Regional and/orlocal approach
Global markets,
Energy
OtherVariableCosts*
70
* Other variable costs include a/o variable selling costs costs (e.g. freight) and products for resale** Other raw materials include cardolite, hylar etc.
3%6%
global strategy
Hybridcentralized/BUapproach
Costs*
Other raw materials**
TitaniumDioxideCoatings
Specialties
Around 2/3 of total spend is managed centrally to maximize scale advantages
Outlook
Paris SRI Investor update 71
Outlook
Reasons for caution • Global economic outlook • Construction and housing markets remain soft in mature markets• Potential bubbles in high growth markets
“Cautiously optimistic”
Reasons for optimism• Leading positions, scale and diversified markets• Strong balance sheet to fund growth• Evidence of sustained industrial demand beyond re• Delivery beyond ICI synergies
Paris SRI Investor update
Global economic outlook Construction and housing markets remain soft in mature marketsPotential bubbles in high growth markets
“Cautiously optimistic”
Leading positions, scale and diversified marketsStrong balance sheet to fund growthEvidence of sustained industrial demand beyond re-stockingDelivery beyond ICI synergies
72
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
Paris SRI Investor update
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
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
73
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.