winning together: 15 by 20 investor update q2 2018…revenue development marine and protective...

Winning together: 15 by 20Investor Update Q2 2019July 24, 2019

Investor update Q1 2019

Financial: Powerful performance

Operations: Precise processes

Commercial: Passion for paint

Strategy: Winning Together

Contents

2

3Winning Together | March 2018

Strategy: Winning Together

A focused Paints and Coatings company

€9.3 bn revenue

€1.0 bn EBITDA

€0.8 bn EBIT

10.6% ROS

12.6% ROI

34,500 employees

Asia Pacific

31%

Other regions

5%South America

9%

North America

12%Mature Europe

34%Emerging Europe

9%

Revenue by destinationAll figures are based on year-end 2018, excluding unallocated corporate center costs and invested capital

4

Global paints and coatings by market sector ~€110 billion, 2017

30%

8%7%

7%

6%

4%

3%

3%2%

Automotive OEM (metal); 7%

General Industrialand Other; 14%

Decorative paints

Powder coatings

Protective coatings

Wood finishes

Vehicle refinish

Specialty / plastics

Marine coatings

Coil coatings

Packaging coatings

Automotive OEM (metal)

General Industrial / Other


Top 3 player with leading positions in large and attractive markets

Source: KNG, Internal estimates

Top 3 players ~30% total market

Top 20 players ~60% total market

Global paints and coatings market

~€110 bn

AkzoNobel active markets

~€70 bn

AkzoNobel

market share

~€10 bn

North America; 10%

Performance versus peers improved; potential for further improvement remains

Winning Together | March 2018 6

AkzoNobel Paints and Coatings

0%

5%

10%

15%

2012 2013 2014 2015 2016 2017Source: Company data, internal estimates

ROS

13.9

25.0

2014 2017 2020 guidance²

Unallocated corporatecost and invested capital

9.4

13.5

1.5

2014 2017 2020 guidance²

Unallocatedcorporate cost

Well positioned to accelerate growth and enhance profitability

15

Return on investment 1

%

Return on sales1

%

>25


10.6

8.418.0

15.0

1) ROS% = EBIT/revenue and moving average ROI% = 12 months EBIT/12 months average invested capital2) Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption

Winning together: 15 by 20

Passion for Paint

Precise processes

Powerful performance

Proud people

*Excluding unallocated corporate center costs and invested capital; assumes no significant market disruptionWinning Together | March 2018 8

2020

guidance*

ROS 15%ROI >25%

Thierry VanlanckerCEO

Maarten de VriesCFO

Ruud JoostenChief Operating Officer

David PrinselaarChief Supply Chain Officer

Maëlys CastellaChief Corporate

Development Officer

Marten BooismaChief Human

Resources Officer

9

Management team in place to deliver

Isabelle DeschampsGeneral Counsel


New fit for purpose structure to increase customer focus and drive efficiency

Integrated supply chain

Integrated business planning

Bu

sin

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Customers

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SC

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SC

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SC

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SC

From… To…

Bu

sin

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s

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sin

es

s

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sin

es

s

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es

s

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ess


Clear path to deliver on 2020 guidance

Fixed cost inflation

10.6%

Continuous Improvement

Integrated Supply Chain

Transformation

SG&A and RD&I Transformation

Growth and net price/ mix

15%

*Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption

Unallocated corporate cost

2017 2020

2020

guidance*

ROS 15%ROI >25%


Commercial: Passion for paint

30Decorative Paints

Powder Coatings

Marine and

Protective Coatings

Automotive and

Specialty Coatings

Strong portfolio of businesses with leading positions in all segmentsSegment Strengths and opportunities

Industrial Coatings


• #1/#2 market positions where we play

• Strong brands and product portfolio

• Leverage global to win local!1

1/2

1

1

2/3

Position

by revenue

• Extensive product offering

• Strong position with top tier customers

• Urbanization and construction growth

• Interpon #1 global brand

• Sustainable coatings conversions

• Strong product/ technology capabilities

• Marine: consolidated market

• Protective: few global players

• Global technology leadership

• Growth of emerging market consumers

• Leader in digital color

Market growth

2-3%², 2017-20

Source: KNG, internal estimate1) Excluding ~ €40 billion in regions/segments where we are not present2) Total market growth (revenue weighted)

Market size

~€bn, 2017¹

12

8

12

11

50%revenue from

emerging markets

14

Decorative Europe: Winning model to capture benefits in recovering market

75

80

85

90

95

100

105

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Decorative Paints Europe Market Size Index*


Largest player in fragmented market Market expected to continue recovery

Grow market share and improve profitability:

Build winning brands and leading positions

Reduce complexity

Leverage scale

Optimize portfolio and route to market

Opportunities for consolidation

Leverage global to win local!

*Source: KNG 2017, internal estimate

Smart packaging design

Global guidelines

Local brand assets

+2% CAGR

2016-20

50% #1 positions

30% #2 positions

AkzoNobel

Peer 1

Peer 2

Peer 3

Others

Winning Together | March 2018


Decorative Asia: continued expansion in highly profitable and fast growing markets

€10bn market

Strong growth drivers

#1 or #2 positions in many countries

Highly profitable and cash generative (despite lower ASP)

Leveraging global brands and innovation

Local expertise and strong customer understanding

Profitable growth in mass market and project business

Leader in sustainability

China

South East Asia

Developing a successful exterior proposition…

… and leveraging best practice from Europe

Growing demand for eco-premium products…

0

500

1000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Revenue Decorative Paints Asia (€ million)Doubledin 10 years


Marine and Protective Coatings: ongoing restructuring and portfolio rebalancing

Source: Clarkson Research. *Compensated gross tonnage

Industry headwinds in marine and oil and gas industries

0

100

200

300

60,000

80,000

100,000

120,000

140,000

2012 2013 2014 2015 2016 2017

Oil and gas capitalexpenditure ($ bn)

Marine order bookCGT*

13%

-5%

2% 11%

-7% -11%

Revenue development Marine and Protective coatings demonstrates lag effect

Rebalancing portfolio for Protective Coatings

2016 2020

Global market leader, defending strong positions

Focus on value pricing; restructuring ongoing

Maintain technology leadership, e.g. Intersleek UV-LED

Oil & Gas

Infrastructure,Power, Mining


Powder Coatings: Clear global #1 in fastest growing and highly profitable market

~€8bn market

Growth 2x industrial GDP

#1 with 2x relative market share

Multiple sources of growth (examples):

New

applications

Increased

capacity

Geographic

expansion

Product

innovation

Bolt-on

acquisitions

Architectural and

automotive coatings

Chengdu – Biggest powder

coatings plant in the world

Northern and Western

India and Western China

OneWheel, Interpon Cr

V.Powdertech, Thailand

Sustainability advantages of powder coatings over liquid coatings:

Zero Volatile Organic Compounds (VOCs)

Less waste during application (>95% usage efficiency)

AkzoNobel

Peer 1

Peer 2

Peer 3Others


Operations: Precise processes


AkzoNobel Leading Performance System:

Customer excellence

Operational excellence

Leading edge technology

2020 targets:

One organization with a common way of working and aligned set of targets

Note: Total reportable rate (TRR) 1.0 is equivalent to 0.2, in line with OSHA guidelines

15,000 people

123 sites

448 warehouses

€250m CAPEX/ yr

People

Top quartile

engagement

Safety

TRR <1.0

(Top quartile)

Service

98.5% Perfect

Order Index (OTIF)

Cost

4% annual

cost productivity

Capital

Inventories

25% lower

ALPS


Journey to build a world-class integrated supply chain

2014 - 2017

Today

20203

1

2

• Global functional strategy

• Common safety platform

• ALPS Plan, Source, Make, Deliver

End to endALPS customer and supplier focused

processes to support delivery of 15%

ROS by 2020

FunctionalALPS continuous improvement

processes and standardized ways of

working

IntegratedALPS Integrated Business Planning

process for all business units to

improve financial performance

+€200m

annual

cost

savings

by 2020

• Total quality and service excellence

• Supplier collaboration

• ALPS Digitization

• Organization transformation

• ALPS Integrated Business Planning

• Purchase to pay (procurement)

€120m

cost

savings

annually

Plan35%

planning entities

Source60%

organization

Make75%

sites

Deliver20%

warehouses


48 ALPS processes designed and deployed

3800 employees trained and certified

~700 ALPS improvement projects per year

67 site and warehouse closures 2014-17

ALPS continuous improvement1

Safety

TRR 1.0

(Top quartile)

Service

>95.5% OTIF

(Top quartile)

€120m annual cost savings run rate

2014-17

Implementation status (%)

95.5% →

98.5%Service (OTIF)


ALPS Integrated Business Planning2

Organization transformation:

One operating model

Integrated Business Planning:

One end-to-end business process

Top Quartile

Performance

+75%Forecast

accuracy

25%Inventory

reduction


End to end processes3

Total quality and service excellence

Resource productivity

Asset network optimization

ALPS Digitization

Supplier collaboration

On

e o

pe

rati

ng

mo

de

l

an

d In

teg

rate

d B

usin

ess P

lan

nin

g

Further

€200m annual cost savings

by 2020in addition to ALPS continuous improvement

Cost of sales

~€5.4bn in 2017

Financial: Powerful performance


Passion for Paint

Precise processes

Decentralized businesses…

Differing levels of maturity…

Fragmented process and system

landscape…

Centrally driven sales excellence and

margin management…

Consistent across all businesses…

Simplified ERP and system platform...

Integrated end-to-end processes…

From… To…

Proud peopleDiverse cultures…

Fragmented incentive schemes…

One single global team…

Aligned incentives…

High-performance culture

Powerful performance

Independent businesses with

dedicated supply chain…

Many KPIs...

Lean fit-for-purpose organization…

Laser sharp focus on 15% ROS!

Winning together strategy leverages greater focus to accelerate improvements


Transformation plans in place with most projects already being initiated


2017 2018 2019 2020

Sales force effectiveness

Margin management

Innovation excellence

Global Business Services

Integrated Business Planning

ERP and systems platform

ALPS continuous improvement

Fit-for-purpose organization

Procurement excellence

High performance culture

Career and capability development

Core principles

Initiate Implement Complete


Clear path to deliver on 2020 guidance

Fixed cost inflation

~€100m/ yr

10.6%

Continuous Improvement

Integrated Supply Chain

Transformation€200m by 2020

SG&A and RD&I Transformation

Growth and net price/ mix

~2%/ yr

15%

Key initiatives:


(€110m in 2018)





Unallocated corporate cost

*Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption

2017 2020

2020

guidance*

ROS 15%ROI >25%

Updated capital allocation priorities

Total of €6.5 billion returned to shareholders before end 2019

Target leverage ratio of Net Debt / EBITDA of 1.0–2.0 by end 2020

Retain strong investment grade credit rating

Cash top-up payments of main UK plans settled (Q1 2019)

Stable to rising dividend (€1.80 per share for 2018)

Strategically aligned and value creating acquisitions

Clear mandates per (sub)segment and geographyRevenue growth ~2% and capital expenditure ~€250m per year

Unallocated corporate center costs €140-180m in 2019 and 2020

3. Acquisitions

2. Profitable organic growth

4. Dividend

5. Pension liabilities

6. Balance sheet

1. Chemicals separation

28

Net debt evolution towards 2020N

et D

eb

tN

et C

ash

Net Leverage

1.7x

Net Leverage

(5.6x)

Net Leverage

1.0x – 2.0x

Potential for further

capital returns to

shareholders

Return of proceeds from

Specialty Chemicals

(January 2019)

(February 2019) (February to

end 2019)(December 2017)

✓✓

29

✓✓

30

Strong bolt-on acquisitionsin last 18 months

Xylazel

Strengthens our position as a

leader in the decorative paints

market in Spain and means

we are now the leader in the

country’s woodcare segment

Fabryo

Agreement to acquire

Fabryo, becoming the leader

in the Romanian decorative

paints market

Colourland Paints

Strengthens our position as in

Malaysia and enhances our

global portfolio with a

much-loved local brand

Swire

Acquisition of minority interest

share to obtain full ownership of

Chinese JV, enabling strategic

flexibility

Investor update Q2 2019July 24, 2019

Operation Night Watch

We recently partnered with the Rijksmuseum for one of the most innovative

projects in the history of art – the live restoration of Rembrandt’s Night

Watch. In a spectacular fusion of old and new, Operation Night Watch will use

ground-breaking techniques to preserve the painting for future generations.

We’ll also be contributing our color expertise to the historic project.

Q&A

Concluding remarks

Financial review

Key highlights

Agenda

Investor update | Q2 2019 32

33Investor update | Q2 2019

Key highlights

Adjusted operating income 36% higher at €305 million (2018: €225 million)

ROS, excluding unallocated costs, increased to 13.7% (2018: 12.1%)

Focus on value over volume resulted in price/mix up 5% and 6% lower volumes

Transformation on track and delivered €43 million cost savings

€1.5 billion of €2.5 billion share buyback program completed in H1 2019

Acquisition of Mapaero strengthens global position in aerospace coatings


Q2 2019 results show continued progress towards Winning together: 15 by 20 strategy

The intended acquisition of

Mapaero will improve

AkzoNobel’s position in the

structural and cabin coating

sub-segments and contribute

directly towards delivering our

2020 guidance.


Profit up 36% and ROS* 13.7% driven by pricing initiatives and cost-saving programs

ROS*

Price/mix

Increased to 13.7%(Q2 2018: 12.1%)

Adjusted Operating

Income

Up 36%

Revenue

Up 1%In constant currencies

€1.5 billion shares

repurchased in H1part of €2.5 billion share buyback to

be completed by end 2019

5% higher

Adjusted EPS

*Excluding unallocated corporate center costs

Q2 2019:

85% higher



Margin management



Integrated Business Planning


ALPS continuous improvement


Procurement excellence

High performance culture

Career and capability development

Core principles

Price/mix increased 5% (versus Q2 2018)

Agreements signed with all Paint the Future finalists

GBS: 18 country transitions complete; 45/120 transitions in progress, to be completed by end 2020

7/18 ERP integration go lives for 2019

Winning together: 15 by 20 strategy delivering results and gathering momentum

Successfully focused on value over volume

Final purchase price settlement for the sale of Specialty Chemicals

*Excluding unallocated corporate center costs

Delivered €43m cost savings in the quarter, on track to deliver the next €200m by 2020

Raw materials

Dealing with market headwinds

Investor update | Q2 201937

South East and South Asia

Foreign exchange

Marine and Protective Coatings

China

~Automotive and Specialty Coatings

EMEA

South America

Powder Coatings

Industrial Coatings

~

~

~


Financial review

Adjusted operating income 36% higherand revenue up in constant currencies


€ million Q2 2018 Q2 2019 Δ% Δ%CC

Revenue 2,446 2,451 -% 1%

Adjusted EBITDA 285 394 38%

Adjusted operating income 225 305 36%

Operating income 192 308 60%

ROS% excluding unallocated costs 12.1% 13.7%

ROS%1 9.2% 12.4%

ROI%2 excluding unallocated costs 12.2% 13.4%

Increase

Decrease

Revenue development Q2 2019 (%)

Price/mix up 5% overall, mainly driven by pricing initiatives

Volumes 6% lower due to value over volume strategy


Operating income at €308 million included identified items of €3 million positive (2018: €33 million negative)

Impact Decorative

Paints China

Note: Other revenue includes service revenue related to services for the Specialty Chemicals business1ROS% = Adjusted operating income/revenue. 2ROI% = Adjusted operating income of the last 12 months as percentage of average invested capital for Decorative Paints and Performance

Coatings. It excludes unallocated corporate center costs and invested capital consistent with our 2020 guidance

-6 5

1 -1 01

Volumes Price/mix Acquisitions Other FX Total


Pricing initiatives and clear strategic mandates focus on value over volume

Organic volume development, does not include acquisition impact

-3 -3 -3 -5

0 4 5

86

4

Q1 17Q2 17Q3 17Q4 17Q1 18Q2 18Q3 18Q4 18Q1 19Q2 19

4

-1

33

-3 -3 -5

-7 -7 -6

Q1 17Q2 17Q3 17Q4 17Q1 18Q2 18Q3 18Q4 18Q1 19Q2 19

-1 -1 -1 -1

25 6

9

6 5

Q1 17Q2 17Q3 17Q4 17Q1 18Q2 18Q3 18Q4 18Q1 19Q2 19

-1

1 0 0 35

7

11

7 7

Q1 17Q2 17Q3 17Q4 17Q1 18Q2 18Q3 18Q4 18Q1 19Q2 19

0

-4

1

-2 -5 -3-7 -7 -8 -7

Q1 17Q2 17Q3 17Q4 17Q1 18Q2 18Q3 18Q4 18Q1 19Q2 19

9

35

12

-1 -2 -4

-6 -6 -4

Q1 17Q2 17Q3 17Q4 17Q1 18Q2 18Q3 18Q4 18Q1 19Q2 19

Quarterly price/mix development in % year-on-year

Decorative Paints Performance Coatings

Quarterly volume* development in % year-on-year

40

Total

Impact Decorative

Paints ChinaImpact Decorative

Paints China

225

305

1

64

33

114

43

21

Q2 2018 adjustedoperating income

FX Volumes Price/mix Raw materials/Variable cost

OPEX One-offs and other Q2 2019 adjustedoperating income


Positive impact

Negative impact

Positive price/mix and cost savings offsetting higher raw material costsAdjusted operating income bridge: Q2 2018 to Q2 2019

-

---

-


Decorative Paints ROS up, driven by strong performance in EMEA

€ million Q2 2018 Q2 2019 Δ% Δ%CC

Revenue 1,006 1,005 - 2%




ROS%* 12.2% 13.5%

ROI%* 11.8% 12.2%


Increase

Decrease

Impact Decorative

Paints China

-4

4

2 -2 0

2

Volumes Price/mix Acquisitions FX Total

*ROS% = Adjusted operating income/revenue. ROI% = 12 months adjusted operating income/12 months average invested capital.

Our Dulux Valentine decorative

paint brand in France has roared

onto the market with a new

EasyCare product called Color

Resist. The EasyCare range (also

known as EasyClean) has now

been introduced in 26 countries

worldwide, including brands such

as Dulux and Marshall.


Performance Coatings ROS higher: focus on pricing initiatives and cost savings

Increase

Decrease

€ million Q2 2018 Q2 2019 Δ% Δ%CC

Revenue 1,454 1,445 (1%) -%




ROS%* 11.8% 13.6%

ROI%* 19.9% 20.6%

New York’s historic Hudson Yards

development – which is changing

the city’s iconic skyline – has

reached its latest milestone, and

AkzoNobel has made a major

contribution.

-7

7-1 -1

7




Adjusted EPS increased 85%mainly due to higher operating income


Q2 2018 Q2 2019 € million H1 2018 H2 2019

192 308 Operating income 300 421

(28) (18) Net financing expenses (9) (31)

6 5 Results from associates and joint ventures 10 10

170 295 Profit before tax 301 400

(47) (69) Income tax (46) (100)

123 226 Profit from continuing operations 255 300

165 16 Profit from discontinued operations 307 16

288 242 Profit for the period 562 316

(17) (11) Non-controlling interests (38) (20)

271 231 Net income from total operations 524 296

Q2 2018 Q2 2019 Earnings per share (in €) H1 2018 H1 2019

1.06 1.07 Total operations 2.07 1.32

Q2 2018 Q2 2019 Adjusted earnings per share (in €) H1 2018 H1 2019

0.52 0.96 Continuing operations 0.87 1.40

Q2 free cash flow improveddriven by increased EBITDA

45Investor update | Q2 2019*Cash top-up payments for main UK pension plans of €479 million. Excludes pre-funding of escrow account €161 million.

Net Debt 2,887 62

Q2 2018 Q2 2019 € million H1 2018 H1 2019

252 397 EBITDA 420 595

- - Impairment losses - 33

(2) (66) Pre-tax results on acquisitions and divestments (22) (66)

(222) (116) Changes in working capital (582) (537)

(10) (1) Pension top-up payments (185) (479)*

(8) 7 Other changes in provisions (18) (13)

(10) (15) Interest paid (14) (21)

14 (57) Income tax paid (37) (87)

1 3 Other changes (3) 3

15 152 Net cash from operating activities (441) (572)

(42) (46) Capital expenditures (79) (83)

(27) 106 Free cash flow (520) (655)


Concluding remarks


Q2 2019 results show continued progress towards Winning together: 15 by 20 strategy

Adjusted operating income 36% higher at €305 million (2018: €225 million)


Focus on value over volume resulted in price/mix up 5% and 6% lower volumes

Transformation on track and delivered €43 million cost savings

€1.5 billion of €2.5 billion share buyback program completed in H1 2019

Acquisition of Mapaero strengthens global position in aerospace coatings

Our pioneering Paint the

Future startup challenge

proved to be a huge success,

with five business agreements

being awarded by AkzoNobel

at the accelerator event held

in May.

Outlook

We’re delivering towards our Winning together: 15 by 20 strategy and continue creating a fit-for-purpose organization for a focused paints and coatings company, contributing to the achievement of our 2020 guidance. Demand trends differ per region and segment in an uncertain macro-economic environment. Raw material inflation is expected to stabilize during the second half of this year. Continued pricing initiatives and cost saving programs are in place to address the current challenges. We continue executing our transformation to deliver the next €200 million cost savings by 2020, incurring one-off costs in 2019 and 2020. We target a leverage ratio of between 1.0-2.0 times net debt/EBITDA by the end of 2020 and commit to retain a strong investment grade credit rating.

* Excluding unallocated corporate center costs and invested capital: assumes no significant market disruption Investor update | Q2 2019 48

2020

guidance*

ROS 15%ROI >25%

Upcoming events

Report for the third quarter 2019 October 23, 2019

Report for the full-year and the fourth quarter February 12, 2020


A focused, high performing, paints and coatings company


Strong global brands

Leading positions in large and attractive markets

Balanced geographic exposure: 50% revenue from emerging markets

Well positioned to accelerate growth and enhance profitability

Transformation plans in place and clear path to deliver

Significant returns to shareholders

50* Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption

2020

guidance*

ROS 15%ROI >25%

Disclaimer/forward-looking statements

This presentation does not constitute or form a part of any offer to sell, or any invitation or other solicitation of any offer, to buy or subscribe

for any securities in the United States or any other jurisdiction.

Some statements in this presentation are 'forward-looking statements'. By their nature, forward-looking statements involve risk and

uncertainty because they relate to events and depend on circumstances that may occur in the future. These forward-looking statements

involve known and unknown risks, uncertainties and other factors that are outside of our control and impossible to predict and may cause

actual results to differ materially from any future results expressed or implied. These forward-looking statements are based on current

expectations, estimates, forecasts, analyses and projections about the industries in which we operate and management's beliefs and

assumptions about possible future events. You are cautioned not to put undue reliance on these forward-looking statements, which only

speak as of the date of this presentation and are neither predictions nor guarantees of possible future events or circumstances. We do not

undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the

date of this presentation or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.

This presentation also 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 forecast 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 factors. 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


http://www.akzonobel.com/


Appendix

H1 2019: Profit up 25% and ROS* 11.5%


€ million H1 2018 H1 2019 Δ% Δ%CC

Revenue 4,622 4,636 -% 1%




ROS% excluding unallocated costs 10.5% 11.5%

ROS%1 8.1% 10.1%

ROI%2 excluding unallocated costs 15.9% 16.5%

Increase

Decrease

Revenue development H1 2019 (%)

Price/mix up 5% overall, mainly driven by pricing initiatives

Volumes 6% lower due to value over volume strategy

ROS, excluding unallocated costs, increased to 11.5%

-7

Impact Decorative

Paints China

Note: Other revenue includes service revenue related to services for the Specialty Chemicals business1ROS% = Adjusted operating income/revenue. 2ROI% = Adjusted operating income of the last 12 months as percentage of average invested capital for

Decorative Paints and Performance Coatings. It excludes unallocated corporate center costs and invested capital consistent with our 2020 guidance

* Excluding unallocated corporate center costs and invested capital; assumes no significant market disruption

-6 5

1 -1 01

Volumes Price/mix Acquisitions Other FX Total


H1 2019: Decorative Paints

€ million H1 2018 H1 2019 Δ% Δ%CC

Revenue 1,852 1,849 - 2%




ROS%* 9.7% 10.6%

ROI%* 11.8% 12.2%


Increase

Decrease

Impact Decorative

Paints China

-5

5

-20

2



Revenue flat and up 2% in constant currencies

Continued focus on pricing initiatives contributed to positive price/mix of 5%, while volumes were lower

Acquisitions contributed 2% to revenues

Adjusted operating income increased to €196 million (2018: €179 million)

Continued pricing initiatives and cost savings offset higher raw material costs and lower volumes, resulting in ROS of 10.6% (2018: 9.7%)


H1 2019: Performance Coatings

Increase

Decrease

€ million H1 2018 H1 2019 Δ% Δ%CC

Revenue 2,796 2,784 - (1%)



Operating income 283 271 -4%

ROS%* 10.9% 12.0%

ROI%* 19.9% 20.6%

-7 6

1 0




Revenue flat, and 1% lower in constant currencies

Price/mix was more than offset by lower volumes

Adjusted operating income increased to €335 million (2018: €306 million) as pricing initiatives and cost control more than compensated for higher raw material costs and lower volumes


Second quarter January - June

Before

IFRS16Impact

including

IFRS 16€ million

before

IFRS16Impact

including

IFRS 16

367 27 394 Adjusted EBITDA 588 54 642

370 27 397 EBITDA 541 54 595

(63) (26) (89) Depreciation/amortization (123) (51) (174)

304 1 305Adjusted operating

income465 3 468

307 1 308 Operating income 418 3 421

(17) (1) (18) Net financing expense (28) (3) (31)

215 - 215 Net income 280 - 280

125 27 152Net cash from operating

activities(626) 54 (572)

(1,507) (27) (1,534)Net cash from financing

activities(4,835) (54) (4,889)

12.4% - 12.4% ROS% 10.0% 10.1%

€ million

As

reported at

December

31, 2018

Restatement

due to

adoption

IFRS 16

Restated

opening

balance at

January 1,

2019

Intangible assets 3,458 (35) 3,423

Property, plant and equipment 1,748 (30) 1,718

Right-use-of asset - 420 420

Other financial non-current assets 1,965 - 1,965

Current assets 11,613 - 11,613

Total assets 18,784 355 19,139

Group equity 12,038 - 12,038

Non-current liabilities 3,066 264 3,330

Current liabilities 3,680 91 3,771

Total liabilities 18,784 355 19,139

IFRS 16 has limited impact; adopting the modified retrospective approach


IAS19 pension surplus following cash top-up payments

899799

24024

66

1

229

0

200

400

600

800

1,000

1,200

Q1 2019 Top-ups Discount rates onDBO

Inflation on DBO Asset return overP&L

Other Surplus end Q2 2019

€ million

Decrease

Increase

Key pension financial assumptions Q1 2019 Q2 2019

Discount rate 2.3% 2.1%

Inflation rate 3.1% 3.1%

-

--

-

IAS19 pension surplus of €0.4 billion, following sale of Specialty Chemicals

Negotiations on triennial review of UK defined benefit pension schemes concluded (February 2019)

Cash top-ups updated for actual payments 2018 and future payment schedule

Relate mainly to two UK plans: ICI Pension Fund and the Akzo Nobel (CPS) Pension Scheme


297 275187

1030

10 10 10

2016 2017 2018 2019 E 2020 E 2021 E 2022 E 2023 E 2024 E

Cash

630

Estimated cash top-ups € million

Cash top-up paymentsof main UK plans settled (Q1 2019)

Updated

58

Cash to escrow account

470

158

€6.5 billion return to shareholders to be completed before end 2019

Dec 7, 2017

Advance proceeds of

separation paid as

special dividend of

€1 billion (€4/share)

Nov 30, 2017

EGM to approve

separation of Specialty

Chemicals

Jan 22, 2019

€2 billion capital

repayment and share

consolidation

Oct 1, 2018

Closed sale of

Specialty Chemicals to

The Carlyle Group and

GIC


Mar 27, 2018

Announced sale of

Specialty Chemicals

for €10.1 billion to The

Carlyle Group and GIC

59

Nov 13, 2018

EGM to approve capital

repayment and share

consolidation

Feb 25, 2019

€1 billion special cash

dividend

Before end 2019

€2.5 billion share

buyback program

Apr 19, 2017

Announced separation

of Specialty Chemicals

business within 12

months

16

19

1111

7

10

14

12

Breakdown of total raw material spend2018 (%)

Specialty resins

Additives

Pigments and

colorants Packaging

Latex and monomers

Solvents

Commodity resins

Titanium dioxide


Disclaimer/ forward-looking statements

This presentation does not constitute or form a part of any offer to sell, or any invitation or other solicitation of any offer, to buy or subscribe

for any securities in the United States or any other jurisdiction.

Some statements in this presentation are 'forward-looking statements'. By their nature, forward-looking statements involve risk and

uncertainty because they relate to events and depend on circumstances that may occur in the future. These forward-looking statements

involve known and unknown risks, uncertainties and other factors that are outside of our control and impossible to predict and may cause

actual results to differ materially from any future results expressed or implied. These forward-looking statements are based on current

expectations, estimates, forecasts, analyses and projections about the industries in which we operate and management's beliefs and

assumptions about possible future events. You are cautioned not to put undue reliance on these forward-looking statements, which only

speak as of the date of this presentation and are neither predictions nor guarantees of possible future events or circumstances. We do not

undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the

date of this presentation or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.

This presentation also 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 forecast 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 as well as the sale of the Specialty Chemicals

business. State competitive positions are based on management estimates supported by information provided by specialized external

agencies. For a mor 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


http://www.akzonobel.com/

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