Akzo Nobel N.V. · EURONEXT:AKZA
Akzo Nobel — ICI — Q2 2007 Earnings Presentation
43 slides from Akzo Nobel's earnings presentation, Aug 2, 2007
Slide 1: Second Quarter and First Half Results 2007
Second Quarter and First Half Results 2007 2 August 2007
Slide 2: Agenda
Introduction Agenda Highlights John McAdam Operating review and outlook Alan Brown Strategic update John McAdam Q&A 2
Slide 3: Highlights
leadership in formulation science Highlights John McAdam
Slide 4: Second Quarter Group Highlights
Highlights Second Quarter Group Highlights 4% comparable1 sales growth for continuing operations 12% comparable1 growth in trading profit for continuing operations 12.1% trading margin (2006 Q2: 11.2%) 13% growth in Group adjusted PBT to £154m 22% growth in Group adjusted net profit to £12
Slide 5: First Half Group Highlights
Highlights First Half Group Highlights Group adjusted PBT £255m, 12% ahead of 2006 Net profit after special items £1,055m1 including £908m profit on sale of Quest Adjusted earnings per share 16.8p up 20% First interim dividend of 4.95p per share (2006: 4.15p) Net cash £271m, improvement of
Slide 6: Trading Highlights
Highlights Trading Highlights Underlying trading conditions: - Asia, Latin America and Continental Europe buoyant - North American construction markets weak - Managing cost inflation for certain raw materials Over £65m investment in acquisitions focused on developing markets in last three months
Slide 7: Operating Financial Review
Operating and Financial Review Alan Brown
Slide 8: Group Results: Sales
Operating and financial review Group Results: Sales Q2 2007 Growth % H1 2007 Growth % Comparable1 Group Sales2 4% 5% Foreign exchange translation effects (6)% (7)% Business acquisitions and divestments - - Reported Sales2 £1.3bn (2)% £2.4bn (2)% 1 “Comparable” excludes the effects of currency transl
Slide 9: Group Results: Sales by Region
Operating and financial review Group Results: Sales by Region Continuing Group Comparable H1 2007 Sales by customer location growth1 Q2 H1 Europe Asia 31% 27% Asia 9% 10% - Decorative Paint 19% 20% - National Starch2 12% 11% Latin America 15% 12% Latin North America (4)% (2)% America 9% - Decorative
Slide 10: Paints
Operating and financial review Paints Comparable Q2 2007 H1 2007 Q2 H1 % of H107 continuing reporting segments Sales: £632m £1,186m 2% 3% Sales Trading Trading profit1: £81m £127m 7% 10% 49% Profit Trading margins: 12.8% 10.7% 47% Decorative UK and Republic of Ireland (23% of Paints2): Sales up 3%
Slide 11: Paints continued
Operating and financial review Paints continued Comparable Q2 2007 H1 2007 Q2 H1 % of H107 continuing reporting segments Sales: £632m £1,186m 2% 3% Sales Trading Trading profit1: £81m £127m 7% 10% 49% Profit Trading margins: 12.8% 10.7% 47% Decorative North America (34% of Paints2): Sales 8% lower
Slide 12: Paints continued
Operating and financial review Paints continued Comparable Q2 2007 H1 2007 Q2 H1 % of H107 continuing reporting segments Sales: £632m £1,186m 2% 3% Sales Trading Trading profit1: £81m £127m 7% 10% 49% Profit Trading margins: 12.8% 10.7% 47% Decorative Latin America (8% of Paints2): Sales grew 16%
Slide 13: National Starch: Adhesives
Operating and financial review National Starch: Adhesives Comparable Q2 2007 H1 2007 Q2 H1 % of H107 continuing reporting segments Sales: £268m £527m 5% 6% Sales Trading Trading profit1: £25m £44m - 2% 22% Profit Trading margins: 9.1% 8.3% 16% Sales up 5% with good growth in all regions Growth i
Slide 14: National Starch: Specialty Starches
Operating and financial review National Starch: Specialty Starches Comparable Q2 2007 H1 2007 Q2 H1 % of H107 continuing reporting segment Sales: £132m £263m 10% 11% Sales Trading Trading profit1: £17m £33m 36% 39% 11% Profit Trading margins: 12.9% 12.7% 12% Sales up 10%; good demand in all region
Slide 15: National Starch: Specialty Polymers
Operating and financial review National Starch: Specialty Polymers Comparable Q2 2007 H1 2007 Q2 H1 % of H107 continuing reporting segment Sales: £72m £139m 12% 13% Sales Trading Trading profit1: £15m £29m 38% 32% 6% Profit Trading margins: 21.0% 20.5% 11% Sales up 12%, all regions ahead, with str
Slide 16: National Starch: Electronic Materials
Operating and financial review National Starch: Electronic Materials Comparable Q2 2007 H1 2007 Q2 H1 % of H107 continuing reporting segment Sales: £48m £96m 1% 2% Sales Trading Trading profit1: £11m £23m (11)% (5)% 4% Profit Trading margins: 22.7% 24.1% 9% Sales up 1%; reflecting slower growth in
Slide 17: Regional and Industrial
Operating and financial review Regional and Industrial Comparable Q2 2007 H1 2007 Q2 H1 % of H107 continuing reporting segments Sales: £103m £196m (1)% 1% Sales Trading Trading profit1: £10m £13m 14% (14)% 8% Profit Trading margins: 9.9% 6.6% 5% Sales slightly lower; good sales growth in ICI Pakis
Slide 18: Group trading profit to adjusted profit before tax
Operating and financial review Group Results Group trading profit to adjusted profit before tax As reported growth Q2 2007 H1 2007 Q2 2007 H1 2007 Continuing reporting segments £159m £269m Corporate and other £(7)m £(16)m Trading profit1 £152m £253m 6% 6% Discontinued operations - £12m Income from a
Slide 19: Adjusted profit before tax to net profit
Operating and financial review Group Results Adjusted profit before tax to net profit Q2 2007 H1 2007 As reported growth Adjusted profit before tax1 £154m £255m 13% 12% Tax £(26)m £(43)m Special items – Continuing2 £(23)m £(45)m Special items – Discontinued2 £2m £909m Net profit after special items2
Slide 20: Foreign Exchange Translation
Operating and financial review Foreign Exchange Translation Main impact from USD depreciation £14m adverse profit impact on translation in H1 1 cent movement ~ £1.4m full year trading profit impact Indicative figures only, based on H1 profit mix and average July 2007 rates GBP/USD Q1 Q2 Q3 Q
Slide 21: Cash flow before acquisitions and divestments
Operating and financial review Cash flow before acquisitions and divestments H1 2007 H1 2006 £m £m EBITDA – continuing operations 314 303 EBITDA – discontinued operations 12 62 Total Group EBITDA 326 365 Working capital movements (191) (201) Post-retirement benefit charges in EBITDA 23 30 Post retir
Slide 22: Cash flow from acquisitions, divestments and other activities
Operating and financial review Cash flow from acquisitions, divestments and other activities H1 2007 H1 2006 £m £m Cash flow before acquisitions and divestments (289) (226) Net disposal proceeds 1,185 5 Post retirement benefit payments – disposal related (226) - Tax in relation to disposals (11) - A
Slide 23: Post-retirement benefits
Operating and Financial Review Post-retirement benefits Adjustments to Balance Sheet Deficit IAS19 basis £m 31 December 2006 post-retirement benefit liabilities (1,305) Top-up contributions in 2007 151 1 Top-up contributions in 2007 – disposal related 226 Net actuarial gain 303 Additional longevity
Slide 24: ICI UK Pension Fund
Operating and Financial Review ICI UK Pension Fund Funding deficit Interim valuation as at 31 March 2007 indicated funding deficit of c.£350m based on 2005 triennial valuation assumptions Some evidence that fund members living longer than assumed in 2005 The Company and Trustee have agreed fur
Slide 25: Conclusions and Outlook
Conclusions and Outlook Conclusions Second quarter continued strong start to the year Performance in line with the strategy: - strong growth in particular in developing markets - Decorative North America leadership team making progress in tough market conditions - focus on improved operational e
Slide 26: Strategic Update
Strategic Update John McAdam
Slide 27: Strategic update
Strategic Update Strategic update Strategic objectives Performance indicators Strengthen target market positions Deliver higher growth from developing Accelerating markets (3 times GDP) profitable growth Innovation driving growth (at least 25% of sales) Improved operational Top quartile trad
Slide 28: World leading businesses
Strategic Update World leading businesses Paints Adhesives Electronic Materials Specialty Polymers Specialty Starches Asia =#1 Asia #1 Ablestik #1 Alco #2 Specialty Latin America #1 Strengths in rheology starches #1 Number 1 in chosen fields: modifiers and water North America - semi conductor packag
Slide 29: Paints: Decorative Market Positions
Accelerating Profitable Growth Paints: Decorative Market Positions North America Europe Asia “Maintain aggressively” “Grow selectively” “Grow aggressively” Canada #1 China #2 UK #1 USA #2 India #3 Rep of Ireland #1 Indonesia #2 France #3 Malaysia #1 Poland #3 Pakistan #1 Latin America Spain >5 Sri L
Slide 30: Paints: Continued growth developing markets
Accelerating Profitable Growth Paints: Continued growth developing markets will contribute to strong top-line growth Decorative Asia 15%2 20%1 3%1 Decorative 34%2 Europe Decorative 8%2 11%1 Latin America Packaging 9%2 10%1 Coatings 3%1 Decorative 34%2 North America 3 year average comparable sales gr
Slide 31: Adhesives: Strong position in developing markets
Accelerating Profitable Growth Adhesives: Strong position in developing markets will drive accelerated profitable growth 2%1 Europe 26%2 Asia 22%2 11%1 Latin America 7% 2 20%1 9%1 North America 31%2 EEMEA 3%2 56%1 2%1 Japan, Australia & NZ 11%2 3 year average comparable sales growth 1 Percentages ba
Slide 32: Electronics: strong long-term market growth
Accelerating Profitable Growth Electronics: strong long-term market growth Semiconductor unit shipment growth 25% 20% 15% 10% 5% 0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007e 2008e 2009e 2010e 2011e -5% -10% -15% -20% -25% Long-term expectations for strong growth remain unchanged Source: IC
Slide 33: Specialty Polymers: Opportunities in growth market segments
Accelerating Profitable Growth Specialty Polymers: Opportunities are dominated by growth market segments Fabric & Water Waterproofing Flooring Home Care Treatment & Repair Hair Spray Aggressively Sun Care Strategic stance Skin Care Hair Cleansing Tiling Oilfield Selectively Paper Coating Plaster & I
Slide 34: Starches: Business refocused on higher margin food markets
Accelerating Profitable Growth Starches: Business refocused on higher margin, growth food markets 800 Food Sales Strong growth over the last 700 five years CAGR: 7% 600 Improved mix of higher 500 US$ Millions margin business 400 300 Impact of innovation 200 Larger benefit from 100 emerging m
Slide 35: Starches: Capture value via market segmentation
Accelerating Profitable Growth Starches: Capture value via market segmentation and product differentiation Increasing customer value and price This is where we Biopolymers (e.g. Personal Care) Biopolymers (e.g. Personal Care) have leadership Replacement Targeted Delivery of synthetics Targeted Deliv
Slide 36: Starches: Growth platforms delivering revenue growth
Accelerating Profitable Growth Starches: Growth platforms are now delivering significant revenue growth £m 2001 2006 500 A more profitable h Growth o wt platforms Gr portfolio better 25% 22% 400 AGR positioned for Growth 9% C future growth 300 Growth in excess Core food Core of global GDP Core f
Slide 37: Technology: ICI's leverage
Accelerating Profitable Growth Technology: ICI’s leverage Individual Centres of Research Science & Technology Pillars business Homogeneous Polymer Systems research Heterogeneous Polymer Systems Molecular Science Reactive Chemistry and Polymer Modification Process Research Complex Fluids an
Slide 38: Technology: Delivering innovation
Accelerating Profitable Growth Technology: Delivering innovation ICI now focused on three critical functionalities - coating, bonding, structure Leverage of science and technology across ICI through much simplified applied research organisation Applied research and product development built in
Slide 39: Paints: restructuring and growth to strengthen trading margins
Improving Operational Effectiveness Paints: restructuring and growth in developing markets will strengthen trading margins Objective: to achieve best-in-class margins Paint 10.6% 7 12 Analysis of 2006 performance Investment in cost-to-serve initiatives already generating sales force effectiven
Slide 40: Adhesives: opportunities to improve trading margins and returns
Improving Operational Effectiveness Adhesives: good opportunities to improve trading margins and returns Objective: to achieve best-in-class margins Adhesives 7.9% 5 10 Analysis of 2006 performance Significant operational efficiencies still to be obtained from our current programme of investme
Slide 41: Conclusions
Conclusions Well positioned world class businesses - Strategy in place to deliver accelerated profitable growth - Restructuring and performance improvements delivering increased margins and higher returns on capital Acquisitions; good opportunities to acquire in developing markets and through ni
Slide 42: leadership in formulation science
leadership in formulation science
Slide 43: Forward looking statements
Forward looking statements This document contains statements concerning the Group’s business, financial condition, results of operations and certain of the Group’s plans, objectives, assumptions, projections, expectations or beliefs with respect to these items. These statements are intended as forwa