AkzoNobel China Shanghai, 5 March 2012… · Note: Paint market includes exterior paints, interior...

AkzoNobel China

Shanghai, 5 March 2012

Jonathan Atack Netherland

Lin Liangqi China

Introduction and welcome

AkzoNobel China – March 2012 2

1. China overview Lin Liangqi

2. China growth strategy Lin Liangqi

3. Business Areas introduction

Decorative Paintings Lin Liangqi

Performance Coatings Mike Cash

Specialty Chemicals Steve Hunt

4. Q&A Lin Liangqi

Mike Cash

Steve Hunt

Felix Jiang

Agenda


China overview

Lin Liangqi

29%

48%

23%

Deco

Performace Coatings

Specialty Chemicals

AkzoNobel China key facts 2011

2011

• Revenue € 1.38 billion (up 11% YoY in constant currency)

• EBIT before incidentals: € 124 million

• Operating income: € 118 million

• Capital expenditures: € 96 million

• A leader in sustainability

Revenue by business area


Current AkzoNobel footprint in China with a history and future

6

Decorative Paints

Performance Coatings

Specialty Chemicals

Guangzhou, Dongguan

Suzhou Shanghai

Langfang

Beijing

Shenzhen

Ningbo

Jiaxing

Tianjin

Chengdu

Taixing

Wuhan

Changzhou

• 7,400 employees 1

• 29 sites 2

Binzhou

AkzoNobel China – March 2012

Notes:

1. At year end

2. Sites in operation

Products and brands

Business Area Business Unit Sub Business Unit Manufacturing

sites (main

land China)

Market leadership

position

Product and brand

logos

Decorative

Paints

Deco China N/A 3 2

Performance

Coatings

Automotive &

Aerospace Coatings

CR, Aerospace's

Coating

2 1

Industrial Coatings Coil, Specialty &

Packaging Coating

3 1

Marine and

Protective Coatings

Marine coatings,

Protective Coatings

2 1

Powder Coatings Interpon & Resicoat 6 1

Wood Finishes and

Adhesives

3 1

Specialty

Chemicals

Functional

Chemicals

PA, EA/EO,

Chelates, Cellulosic

& Additives, XTP

6 1 - Sulfur, polysulfides,

organic peroxides

2 - Chelates, EA, Metal

alkyls, PA

Industrial Chemicals MCA 1 1

Pulp & Paper

Chemicals

N/A 2 3

Surface Chemistry Personal Care &

Surfactants

1 1 – Industrial Agricultural

2 – Home & Personal care

7Meet AkzoNobel China – March 2012AkzoNobel China – March 2012

Nearly 500 researchers and technologists based in China.

Located in laboratories in Baoan, Donguan, Jiaxing, Langfang, Ningbo,

Songjiang/Shanghai, Suzhou and Tianjin.

AkzoNobel China RD&I Center in Songjiang was opened in late 2007,

and became the home of three of our ECGs as well as three of our

Business Unit R&D groups.

China RD&I Center is one of the four AkzoNobel global shared

laboratories contributing to the company’s profitable growth through value

creation capabilities.

The first AkzoNobel China Chemical Sciences Awards were presented in

July, 2010 in partnership with Chinese Chemical Society

8

China RD&I Center

China Research, Development &

Innovation

Winners of AkzoNobel Chemical Sciences Award 2010

Meet AkzoNobel China – March 2012

China growth strategy

Lin Liangqi

Actively

engage

in M&A

Cross BU

selling

FinRD&I IT

Stretch

product

portfolio

to

Mid-tier

Enablers

Key Initiatives

Mission USD

3bn

Aggressively

drive

inland

Sustainability

Regional Approach

HR

Branding & Communication

ONE AKZONOBEL

SC

Government Relationship

One AkzoNobel

10Meet AkzoNobel China – March 2012


0

2

4

6

8

10

12

14

16

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2015

Specialty Chemical

Performance Coating

Deco

China GDP growth

We are embarking on the next chapter of our journey in China

11

Every three years

China has doubled revenue

(20% CAGR)

*Figures not adjusted for exchange rate fluctuationsMeet AkzoNobel China – March 2012

Accelerated and

sustainable

growthIntegration &restructuringPortfolio

transformation

AkzoNobel takes over of ICI

USD mn%


Business Areas introduction

Lin Liangqi

Mike Cash

Steve Hunt

13

Decorative Paints

Lin Liangqi


Decorative Paints China - Key facts 2011

• Established in 1990 as a JV with Swire Pacific (AN share 70%) for China paints

• Revenue: €437million

• 1,600 Employees

• High profitability with negative OWC

• 4 factories (3 in China and 1 in Taiwan)

• Leading business in Hong Kong & Taiwan

• Strong Dulux Brand

* Small-scale outlets selling to both consumers and professionals

** Larger -scale, ‘big box’ retailers, more consumer-oriented


2011 China Decorative Paints market

(€ millions)

Project

1,416

Retail

emulsion

1,100

Retail

woodcare

935

The market for Decorative Paints in China measures some €3.5 billion

Source: Internal market sizing analysis

Retail Market

59%

Project Market

41%

• Strong project market driven by infrastructure investment and affordable house expansion plan

• Retail market is slightly stagnated owing to estate macro control policy

• Growth in redecoration will increase market size

• AN/Nippon relative market share is 0.75

Note: This figure differs from previous market size estimates given because we are now addressing a broader market in terms of cities and projects.

Exchange rate: 1 Euro = 9.00RMB


The central government has imposed measures to cool down the property market

• Extended curbs on home purchases

– 42 more cities imposed property-purchasing restrictions in September 2011

– Growth turning negative in property transaction volumes and prices

• 5-year residency requirement for Beijing before non- permanent residents can buy

• PBOC cut the reserve requirement ratio by 50 basis points, effective on 24 Feb 2012, the second RRR cut since the tightening cycle in 2011

• Central bank interest rate increases

– Further 0.25% in July 2011

– Third rate hike in 2011, fifth since October 2010 (total 125bps)


GDP growth expected to remain strong while paints market growth falls behind

Note: Paint market includes exterior paints, interior paints, floor paints and roof paints.

Exchange rate : 9.05731

Market Size 3358 3428 3528 3775(€ millions)

• Overall GDP growth in China expected to remain in the high single digits

• Paints market growth expected to be dampened in 2011/2012 and then recover in 2013

Source: Oxford Economics, China National Coatings Industry Association & Industrial Research Institution with adjustment (1)外墙涂料，(2)内墙涂料，(3)顶棚涂料，(4)地面涂料，(5)屋面涂料

17AkzoNobel China – March 2012

18

Interior Walls –Trend & DriversConsumer Behaviours - repainting

• However, the market is still of low painting frequency, with

expressed desire to repainting more frequently, while hindered by

the hassle involved

Data source: 2010 China Consumer U&A

Repainting Frequency

(yrs)

By City Class (Yrs) Total Class A Class B Class C

Yr 2009 6.5 7.1 7.8 5.3

Yr 2010 6 6.6 6.1 5.7


Decoration Type

Total New House Old House

% % %

The repainting rate for old house is around 20%

Base: all

respondents1,650 1,000 782 437 868 563


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Revenue trend

We are investing to accelerate growth and further improve our position in the market

Past – Build the foundation for

growth

Now – Invest and build the momentum to further accelerate

the growth

Future – Sustain the momentum and increase profitability


Paint

generalistWoodcare Pre-Deco

Other

specialist

Consumer –

Super premium

to Mass(Traditional & Modern

channels)

Contractor /

Painter

(Professional channel)

B2B –

Super premium

to Mass(Project channel)

Consumer –

Economy(Traditional channel)

We are focusing our investment on fewer, bigger, more powerful brands

• We are continuing to rationalize our brand portfolio to reduce complexity

• We have one major brand for each end user segment that cuts across the main product categories


We will improve our position by focusing on a few ‘must-win battles’

Depth of penetration

• We will aggressively drive increase share in the key high growth cities

Win in the mass market

• We will win with Dulux in the dominant mass segment by building winning value propositions for the mass market

Educate the market & win in Redecoration

• We will grow the market & our share through inspiring people to redecorate and removing the barriers to doing so

Aggressively grow the Project business

• We will achieve double market growth in Projects through being a professional solution partner for key customer segments


We have extensive geographic coverage across regions and city tiers

East

South

North

West

5

Beijing

Chengdu

Shanghai

Guangzhou

• Regional headquarters in each of China’s four main regions

• Highest growth in China is expected in the West, where we are increasing our capacity and investing in distribution and talent

• Expansive controlled distribution model covering Tier 1 to Tier 4 cities (670 cities)

Geographic coverage City coverage

Revenue by city tier


The Dulux Decorator Center Network of controlled stores - the heart of channel strategy

• We initiated a new store design in 2010 to:

– Strengthen color leadership

– Inspire consumers to decorate

– Be more interactive with consumers and enhance conversion rate

– Better integrate emulsion and woodcare

– Be flexible to handle real store situations

• We aim to have ~400 DDC stores by 2016 (from 250 today)

• Overall we plan to expand our distribution from over 4,000 outlets today to ~7,000 by 2016 (with 2000 CSS and 4600 ISS)Note: DDC is for Dulux Decorator Center; CSS is for Colour Solutions

Store; and ISS is for Image Solutions Store


29%37%

44%43%

27% 20%

Market AkzoNobel Revenue

Market, revenue and CM by price segment (€ millions)

Premium Mass Economy

The mass market is the dominant segment in China, with 44% of total value

Note: Total market size includes both urban and rural market and both retail and project channel

Exchange rate: 9.00119

3,450

• AkzoNobel is weighted toward the premium segment

• The mass segment is slightly underrepresented in terms of share of our revenue relative to its share of the overall market

• The mass market is the fastest growing segment


437

We are driving the development of the redecoration segment

We will become the market leader in redecoration in both

consumer and B2B markets, educating the market and

delivering share growth through tailored repainting solutions

To do this we will:

• Grow the market & shorten repainting frequency through powerful & inspiring communication aimed at educating & inspiring consumers (category growth stimulation)

• Lock in those considering redecoration through targeted BTL activity and by providing hassle free, fast and reliable painting service through the Easy Paint Service (Brand stimulation)

• Develop differentiated products and ranges designed for the redecoration market

This will all be developed through the Dulux & Dulux Pro

Brands


Our Easy Paint service addresses this emerging segment

• A high quality, one-stop painting service from Dulux

• Makes re-painting hassle free and delivers the perfect end result with the minimum disruption

• Operating in 25 cities with highly trained surveying and painting teams

• Removes the barriers for consumers to repaint

• High levels of consumer satisfaction

• Pitfalls

a. Painters

b. Proposition

Consumers call 400 hotline

400 hotline introduces EP service

Service clerk arranges site visit & consultation

Surveyor gives price & product / colour advice

Painter conducts paint job on site

400 hotline calls back for service quality check


In Summary

With great brand awareness and an extended distribution

network, AkzoNobel is well positioned for accelerated growth &

share gain

• Balanced business portfolio & well positioned to deal

with market uncertainty

• Clear focus on key opportunities & growth areas

• Development and positioning of product portfolio

remains key

• Continued investment necessary in supply chain,

brand & people

• Balanced growth ambitions in the context of

economic cycle


Performance Coatings

Mike Cash

Performance Coatings key facts

2011• Revenue €5.2 billion

• 21,960 employees

• 50 percent of revenue from high growth markets

• Leading positions in performance coatings globally and in China

• Innovative technologies, strong brands

Revenue by business unit Revenue by geography

* Before incidentals

30Meet AkzoNobel China – March 2012 30

Powder Coatings

32

China Powder Coatings facts

• We are the leading supplier of

powder coatings in China

• We have 1250 employees in China

• We manufacture in 6 factories,

geographically located throughout

China

• We operate a dedicated RD&I

center in China, and employ more

than 100 chemists and technicians

• Powder coatings are solvent-free

paints applied to metal and other

conductive surfaces

• We supply eight key market sectors

– appliance, architectural,

automotive, functional, furniture,

general industry, general trade

coaters and IT – with our global

brands Interpon® and Resicoat®

Meet AkzoNobel China – March 2012 32

China Market Share(based on volume)

33Meet AkzoNobel China – March 2012 33

34

Our Key Priorities in China

Use Segment Approach to Grow at

High End of Market

Emphasize Technology Advantage

Extend to Middle Market

Build and Invest in our Talent Base

Align Operations with our Growth

Aspirations

Managing Margins is Everyone’s

Business


A & AC China

A&AC China Overview

36

• China AAC portfolio VR, Trade, CV, APC, ANAC and BSU

• High growth in 2011

• VR-Premium ~30% market share(Number one position)

• Trade ~10% market share(Number two position)

• APC ~10% market share(Number six position)

• ANAC ~50% market share(Number one position)


CR = Car Refinish = VR = Vehicle Refinish

CV = Commercial Vehicle

Trade = Med-segment

APC = Automotive Plastic Coatings

BSU = Business Supply Unit = Suzhou factory

ANAC = Aerospace Coatings

Market Environment

37

• China is already one of the biggest

automotive market in the world

• Market size of auto refinishes in China is

estimated $400 millions

• Over 200 auto refinishes producers, with

21% players occupying about 73% of

total refinishes market

• 85% domestic production, 15% imported

• All top automotive coating companies are

trying to consolidate and/or build up a

market position

• No official VOC regulation in China yet,

the level of discussion for the need is

increasing

• Expansion of OEM bodyshops move to

tier 3&4 cities, inland away from coastal

regions

• Key market players: AkzoNobel, PPG,

Dupont, Strong, Prime, Planet, etcMeet AkzoNobel China – March 2012

38

Changzhou Prime Automotive Co Ltd

• Acquisition in September 2010

• Prime were manufacturers, marketers and distributors of coatings

(primarily refinish) in China.

• Located in Changzhou, Jiangsu Province.

• 7 shareholders; two brothers held majority share of Prime.

• Around +100 employees.

• Active in medium to high end of the trade segment in China.

• Four VR Trade brands

Prime

Furuiya

Fute

Peilide

• Distribution via independent agents

• In house R&D capability


AN Strength:

• Technology Pipeline

• Global network

• Engagement with Government and

Shipbuilding Industry on Sustainability

and Legislation

• Highly trained Technical Support on the

ground

Market Comments:

• Total marine market value in China is around

€800M, AN market share around 21%;

• NB: China remains global No.1, However

the NB market will soften due to global

oversupply

• M&R: The Chinese fleet is growing rapidly -

China will have the worlds second largest

fleet, behind Greece, by 2015.

China Marine Market

New Building Maintenance and Repair

DWT Output 2011 Deep Sea Dry Docking Allocation


AN

20%AN

21%

Market SectorApprox. Size

(million liters)

Protective Coatings 700

Power 100

OEM 160

Petro-chemical 80

Port Machinery 30

HVI 180

Regional – Others

Mining & Mineral 20

O&G – Upstream 20

Bridge 60

Pipeline 30

Water & WW 10

Pulp & Paper 10

China Protective Coatings Market

AkzoNobel Protective Coatings

• 1 mega manufacturing site in China

• local and foreign management &

specialist team

Our competitive advantages:

• leading performance products

• brand reputation

• quality and service

• global network and global product range

• well-managed on-site technical service

and support

AkzoNobel Competitors in Protective

Coatings

• 20 MNC /foreign brands…25% market

share

• 50 big and medium sized local and

hundreds of smaller local

competitors…75% market share


Industrial Coatings

Strategic plan initiatives

Market

Tablet, e-Book, Accessories, Paint film on metals

Operational

Optimize production/logistics lead time

Strengthen Technology capability and service

Functional

Partnership with OEM, ODM, applicator

Design or co-development with key customers

Build RD &I in China.

Continue Color trend and color Design

Strengths

• Broad product range

• Quality consistency and strong technical support.

• Design/color trend services43

Special Plastics - Asia Strategic Plans

Basic Facts

• Market share by AN:16.2%

• 3 sites, total employees around 200


Packaging Coatings - China key facts

2011

• High growth in 2011

• FTE 110, +68 new hire

• No. 1 volume share in the market

• Manufacturing sites in Shanghai, Jiashan, Guangzhou and Taiwan

• Planned investment in Songjiang site

Revenue by Product & Geography


B2I: Beverage 2-piece internal

B2E: Beverage 2-piece external

FCG: Food can general line

INKS & PSS: Inks and powder side spray

44

• China coil coatings started in

Suzhou in 2003

• Market size: 125k tonnes of

paint

• More than 200 coil coating lines

• No single paint supplier

dominate the market

• Three main customer groups

Large Private Owned or Listed

companies

Large SOE - Integrated steel

producers

Taiwanese Coaters

45

Coil Coatings - Market information

Rainbow, 4%

Ya Tu, 4%

Akzo Nobel, 8%

Zheng Hua, 9%

Bao Xing, 4%

Valspar, 4%

Ya Li, 6%Beckers, 11%

KCC, 10%Hai Ba,

4%

Nippon, 18%

Others, 20%


BU Wood Finishes and Adhesives


30%

25%10%

15%

20%

Akzo

Valspar/ Huarun

Sherwilliam

Taiho

Locals

Export Furniture Market Share

Overview and market share

47

• Three plants in China, Donguan, Tianjin and Jiashan.

• Historically focused on premium export market

• Strategy have been shifting to the domestic market in

China

Meet AkzoNobel China – March 2012AkzoNobel China – March 2012

Specialty Chemicals

Steve Hunt

48

Introduction Specialty Chemicals

Specialty Chemicals key facts

49

2011

• Revenue €5.3 billion

• 11,500 employees

• EBITDA: €906 million* (17%), EBIT: €625 million*

• ROI% 17.3%

• 32 percent of revenue from high-growth markets

• Leadership positions in many markets

* Before incidentals

Revenue by business unit Revenue by geography


We built many market leadership positions in attractive niches

50

Functional

Chemicals

Industrial

Chemicals

Pulp &

Performance

Chemicals

Surface

Chemistry

3

3

1

1

3Industrial applications

Agricultural applications

Home &

Personal care

Chelates,

Cross-linking,

Org Peroxides,

Sulfur Derivatives,

Ethylene Amines,

1 1

1

Bleaching chemicals

Expancel

Colloidal Silica

Monochloro-

acetic acid

Caustic merchant,

Chlorine merchant,

Salt, DME merchant

(all Europe)

1 1

1

Metal Alkyls

Performance Additives

Salt Specialties

(N. Europe)

1

2


Ningbo multisite update- euro370m investment with 2/3 already spent

51

Plant statusUtilization

2011

Utilization

2012

Infra + waste water complete

Chelates complete 25% 45%

Ethylene Amines complete 65% 70%

XTP Q1 2012 65%

Bermocoll 2013

DCP 2014

Total

Planned: waste water extension, metal alkyls, SC ethoxylation, MPP


Functional Chemicals

52


Functional Chemicals in China

• All 7 sub Business Units active in China

• Significant growth in 2011

• Approximately 950 employees

• 6 manufacturing locations

• Cost leadership position and technology

advantages over local competitors

2011 Revenue % by SBU

18%

51%

31%

53

41%

22%

21%

10%

2% 4%

EA

HP

XTP

PA

SD

Chelates

Salt

53


Functional ChemicalsChina growth focus and investments

• Polysulfides production in Taixing (April 2007)

• Chelates & Micronutrients and XTP sBU global

HQ moved to Shanghai (August 2008)

• Performance Additives start up production

plant in Songjiang (November 2008)

• Chelates & Ethylene Amines Ningbo start up in

December 2009 (Chelates) and September 2010

(Ethylene Amines)

• Ningbo inauguration (November 2010)

• Performance Additives (Bermocoll) Ningbo

ground breaking ceremony (October, 2011)

• Ningbo XTP DCP announcement (Nov, 2011)

• Ningbo XTP start up production (Jan, 2012)

• Feasibility studies for Metal Alkyls plant and

expansions XTP and Ethylene Amines

5454

Surface Chemistry

Boxing Oleochemicals acquisition –completed in January 2012


• Global leader supplier of

specialty surfactants

• Product and application

knowhow

• Expertise and experience

as solutions provider

• Portfolio of new,

innovative, eco-premium

technologies

• State of the art

manufacturing technology

• Leadership position in

China and Asia

• Expertise in fatty acids,

amines, glycerine and

derivatives

• Ester-amines and ester-

quats facility

• Strong local

manufacturing operation

in the region

BoxingSurface ChemistryAkzoNobel

Uniquely positioned to

provide local customers

(mid-tier markets) with

customized solutions to

meet their specific needs

Broader portfolio of

sustainable products and

technologies

Superior process and

production capabilities at

Shandong site

Integration and further synergies will boost new products introduction to the Asian

marketplace and ultimately the progress of local customers.

Strengthening our growing surfactant business in Asia


• Strengthens our global leadership position in specialty

surfactants, with #1 position and 500 employees in China

• Reinforces our commitment to our customers by providing local

production and minimal reliance on western imports

• With a third of the Asian demand for amines coming from China

alone, Asia will grow to 25% of the business

• Reemphasizes our focus on bringing innovative products and

solutions to local mid-tier markets

Shandong, China.

Industrial Chemicals (MCA)

Leading position in high growth market

59

Market breakdown in region

Yangtze delta

North China

rest of China

290

333

265

338 355

373 393

415 438

2007 2008 2009 2010 2011 2012 2013 2014 2015

MCA 100% market size China(kT/yr)

• 2010 based on actuals Q1-2010

• From 2011 based on 8% annual growth rate on 2010 actuals for Chinese MCA market with no growth for glycine for

glyphosate (123 kT 100%)


• 100,000 tons capacity in

Taixing is planned

• Lowest cost producer

• Scale and technology

advangtage

Pulp and Paper Chemicals

Market Share for Paper Chemicals in China (2010)


Eka Suzhou Plant:

Total Area: 40,000 square meters.

Employees: 90 employees

Eka Guangzhou Plant

Total Area: 20,035 square meters.

Employees: Total is 33 employees

12%

17%

9%

15%

47%

AN

BASF

Nalco

Kemira

Local others

Summary

AkzoNobel has a long term commitment to China

• Well established and profitable

• Long history

• In line with our other strong positions in high growth markets

Our target is to reach USD3bn sales in 2015

We have a broad range of activities

• Most BUs are represented

• They have leading market positions

• We benefit from scale and efficiencies

AkzoNobel is well placed to capture growth

• Continuing investment

• Innovation

• Competitive positioning

Our business is diverse and resilient

• Addressing a wide variety of end consumer markets


Q&A

Lin Liangqi

Mike Cash

Steve Hunt

Felix Jiang

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.


http://www.akzonobel.com/

AkzoNobel China Shanghai, 5 March 2012… · Note: Paint market includes exterior paints, interior...

Documents

Transcript of AkzoNobel China Shanghai, 5 March 2012… · Note: Paint market includes exterior paints, interior...