Hello and welcome to AkzoNobel's Investor Update for Q4 2020. I am Lloyd Midwinter, Director of Communications and Investor Relations.

Today, our CEO, Thierry Vanlancker; and CFO, Maarten de Vries, will guide you through our results. We will refer to a presentation which you can follow on the screen and download from our website akzonobel.com.

A replay of this webcast will also be available. There will be an opportunity to ask questions after the presentations.

For additional information, please contact the Investor Relations team. Before we start, I would like to remind you about the disclaimer at the back of this presentation.

Please note, this also apply to the conference call and answers to your questions. I'll now hand over to Thierry, he will start on Slide 4 of the presentation.

Thank you very much Lloyd. Hello, everyone and a warm welcome everybody on the call.

And I hope you're doing well in this hopefully last months of the pandemic in most of the world. After such a turbulent pandemic impacted year like 2020 behind us, I hope you understand that with a certain smile and a lot of pride that we can say that we delivered on the 15 by 20, the promise we set out to fulfill in 2017.

And we're doing so that we achieved a really step change in the performance of the company. Return on sales, excluding unallocated costs for the full year 2020 was around 15%, in line with the ambition that we set in 2017.

And the return on investment, excluding unallocated costs was up at 20.6%, which in fact exceeds our 2020 ambition. This is truly a significant milestone for us here in Amsterdam.

And therefore it's just really, really genuine thank you to everyone at AkzoNobel whose passion and endurance over the last three years of this journey made this extraordinary performance possible. And what is really great and we'll talk about it probably more is, that we're only halfway through our value transformation.

Our new Grow & Deliver strategy builds on what we've already achieved with 15 by 20. And we're very determined to reclaim AkzoNobel's place as the reference in our industry.

Let's turn to Slide #5, really strong results for 2020, delivering on our 15 by 20 promises, were driven by a strong focus on costs and cash. The total cost savings were €243 million for the year, of which €150 million were structural savings related to transformation in this initiatives.

Net cash from operating activities significantly increased to €1.2 billion, driven by strong working capital management and discipline. We conducted share repurchases over the 2020 year of €545 million.

And we have today announced a further €1 billion share buyback to be completed in the first quarter of '22 and that's on top of the €300 million we announced earlier of where we are about halfway right now. We propose a final dividend of €1.52 per share, representing an increase in dividends per share of about 2.6%.

The list of other key financial highlights is shown on Slide #6. Our Q4 results are a strong conclusion to a 15 by 20 strategy, delivering frankly on all the metrics from growth, profit and cash and outperforming many.

Revenue for the fourth quarter was up 6% in constant currencies and adjusted operating income was 32% higher. Return on sales, excluding unallocated costs for the quarter increased to 15.3% versus 11% for the same period last year.

For the full year 2020, adjusted operating income was up 11% and adjusted earnings per share from continuing operations increased 25% to €3.88. Free cash flow excluding pension top ups was 114% higher.

Slide 7 shows a revenue development during the year. During the fourth quarter, the amount increased for most regions and segments after significant market disruption earlier in the year due to the pandemic.

This is the second quarter in a row we've delivered strong growth. Both volumes and revenue in constant currencies were 6% higher in Q4.

Coatings has now too returned to growth, driven by increased revenue from Industrial Coatings and Powder Coatings and for Paints, revenue in constant currencies was up in all regions. Let's now turn to Slide #8.

We target to grow at least in line with our relevant markets. Although the market trends continue to differ per region and segment, there are many more positive trends than the opposite.

Demand for paints is strong in all regions. Trends in EMEA are driven by both the professional and the Do-It-Yourself segments.

In China, the positive momentum continues, especially for our premium Dulux offering. We see signs of slow recovery for South Asia after being more heavily impacted by COVID-19 with widespread distribution channels being locked down for most of the regions for a big part of last year.

And we see strong demand continuing in South America. Growth trends for Powder Coatings are being driven both by increased demands, but also by market share gains, for example, in electrical vehicles and architectural applications.

Demand for Industrial Coatings is also very strong, particularly for metal coil and packaging segments. Automotive and Specialty coating trends are gradually returning to growth, especially vehicle refinishes and consumer electronics segments whereas the demand for Aerospace Coatings has stabilized albeit at a lower level after having been heavily impacted by COVID-19 in the previous quarters.

Demand for Marine & Protective Coatings has remained subdued as marine and oil and gas related projects continue to be impacted by the pandemic. Raw material inflation is expected but we have solid margin management and cost saving programs in place to compensate for.

Let's move to some of our key actions and achievements as shown on Slide 9. Our 15 by 20 strategy has created a very strong foundation and a really positive momentum for the next phase of our strategy, Grow & Deliver.

Our disciplined approach to margin management has become part of who we are as a company. As an example, gross margins were up 170 basis points for 2020.

We continue to invest in innovation with regional versions of our industry leading Paint the Future challenge taking place in Brazil last year, and recently launched also in China. During the year, we continue to implement our global business services, with 80% of the total finance transitions now completed.

Our ERP integration is also steadily moving forward with around 90% of our revenue in SAP applications, and 65% of our total revenue within our final ERP platform solution. Cost savings in the fourth quarter were €34 million, including €25 million transformation cost savings.

We continue to strive for a high-performance culture and in the second half of 2020, we achieved our highest engagement score and highest participation rate since 2017 when we started measuring OHI. When it comes to sustainability, AkzoNobel continues to be widely recognized as a number one in the paints and coatings industry.

And our People. Planet.

Paint. approach of sustainable businesses should ensure we continue to lead the way.

Now let's continue on Slide #10 and give a bit more color. We've achieved significant cost savings in 2020 and the recent years.

During the 15 by 20 phase of our transformation, we delivered a total of €335 million structural cost savings. For the full year of 2020, €150 million of the total €243 million cost savings were related to our transformation initiatives while the rest were temporary measures in response to COVID-19.

The total identified items associated with the transformation initiatives were €321 million, including €49 million of non-cash items. So we delivered our savings at a much lower expense than the €350 million initially estimated and announced.

Turning now to Slide 11. Our company wide engagement score is up 23% in just a couple of years and we're now in the second quarter with an ambition to reach top quarter.

Our top 300 manager's OHI score is even higher and puts it in the top deciles of the industry. In addition, we were once again accredited by the top employers Institute in key countries including Brazil, China, the Netherlands, the UK and the United States.

Slide #12 shows some of our key highlights related to sustainability. We continue to build on our leading track record with our People.

Planet. Paint.

approach to sustainable business. Around 40% of our revenue is already generated from sustainable solutions.

And we aim to increase this to more than 50% by 2030. In 2020, we announced our planet ambitions and we're steadily progressing towards our goals.

The percentage of renewable electricity we used in 2020 was 40%, up 8% versus 2019. We also reduced relative waste by 5% and achieved a 4% reduction in carbon emissions during the year.

I'm proud to say that we were and continue to be widely seen as the leader in paints and coatings. And our sustainability performance has been recognized by key benchmarks, including Sustainalytics, MSCI and EcoVadis as being by far, the number one in our paints and coatings industry.

So with that, let me hand it over to Maarten, who will run you through the financial results in more details from Slide 14 onwards. Maarten?

Yes, Sir. Thank you, Thierry and hello, everybody on the call.

I'll now go through some of the key messages from our quarterly results. During the fourth quarter, revenue was up 6% in constant currencies, driven by higher volumes and positive price mix.

Adjusted operating income increased with 32% to €294 million due to strong margin management and cost saving programs. This resulted in a return on sales, excluding unallocated costs, up 430 basis points to 15.3% for the fourth quarter.

Moving to Slide 15, shows the quarterly trends in volume and price mix. We achieved growth for the second quarter in a row.

Volumes were up 6% in the fourth quarter, mainly driven by 12% increase for paints, while coatings also returned to growth. Price mix was up 1% overall, due to margin management.

Geographic mix trends normalized for paints. Slide 16 shows the development of adjusted operating income during the fourth quarter.

We delivered 32% more profit in the fourth quarter resulting from higher volumes and cost savings. Revenue growth from volumes and price mix contributed €62 million and €7 million respectively, although foreign exchange rates had an adverse effect of €23 million during the quarter.

Cost savings of €25 million resulted from transformation initiatives and temporary measures added €9 million with a further €15 million from lower raw material and/or variable costs. Several one-off items impacted the year-on-year comparison, including higher royalty income and a one-off gain on a disposal in 2019, which both were reported in other activities.

Turning to Slide 17, the results for Decorative Paints during the fourth quarter. Revenue grew 14% in constant currencies, due to strong demand in all regions resulting in 12% higher volumes and price mix up 2%.

Strong growth in EMEA with revenue up 14% in constant currencies was driven by demand in both the professional and the DIY segments. South America also delivered strong performance with market share gains and demand recovering from the impact of COVID-19.

Although pricing initiatives and cost control was offset by significant currency devaluation. Positive growth momentum continued in China, especially for our premium offering.

And for South Asia, which has been more heavily impacted by COVID-19 showed signs of recovery. Revenue growth combined with ongoing margin management and cost discipline resulted in adjusted operating income of up 45% to €126 million and return on sales 400 basis points higher at 14% in the fourth quarter.

Moving now to the fourth quarter results of Performance Coatings. Revenue in constant currencies was up 1% due to higher volumes resulting from improving end market demand, particularly strong in Industrial and Powder Coatings.

Demand for Automotive and Specialty Coatings has returned to growth, especially for vehicle refinishes and consumer electronics segments, although of the demand for Aerospace Coating stabilized at a lower level after being heavily impacted by COVID-19 [bridges] for us. Revenue from Marine & Protective Coatings continues to be impacted by subdued demand for marine and oil and gas related projects.

Strong growth for Powder Coatings with revenue in constant currencies up 10% was driven by both increased demand and market share gains. Demand for Industrial Coatings was especially strong in the metal and packaging coating segments, resulting in 12% higher revenue in constant currencies.

Adjusted operating income was up 33% at €212 million due to volume growth, margin management and cost savings. Return on sales increased 460 basis points to 16.2%.

Now turning to Slide 19. In the fourth quarter of 2020, profits from continuing operations increased significantly to €182 million, up from €80 million last year and net income attributable to shareholders also more than doubled to €167 million.

Adjusted earnings per share from continuing operations, was 46% higher for the quarter and up 25% for the full year. For the full year, adjusted EBITDA increased 8% and was around 40% higher versus 2018.

This shows the structural profitability improvements from the first phase of our transformation. Moving now to cash flow on Slide 20.

We continue to maintain a strong focus on cash and working capital management. This resulted in significantly improved operating working capital as percentage of revenue to 9.9% in the fourth quarter from 11.9% last year.

At the same time, we continue to invest in our business with capital expenditures of €258 million for the full year, up from €214 million in 2019. Free cash flow improved 37% to €530 million in Q4 2020, mainly due to higher profit and working capital inflow.

AkzoNobel has now become a highly cash generating company. Excluding pension top up payments, which were substantial in 2019, free cash flow increased 114% to nearly €1 billion in 2020.

This represents a free cash flow yield of 11.6% of revenue. We ended the year with net debt around €1 billion and a leverage ratio of 0.8 times net debt/EBITDA.

We continue to target a leverage ratio of net debt/EBITDA of one to two times and remain committed to retain a strong investment grade credit rating. Now turning to shareholder returns on Slide 21.

In line with our policy of paying stable to rising dividends, we propose a final dividend of €1.52 per share. This will result in a total dividend for 2020, up 2.6% at €1.95 per share.

As mentioned earlier, adjusted earnings per share from continuing items was 25% higher at €3.88 for the full year. We continue our modular approach to share buybacks.

We completed a €500 million share buyback program in the first half of 2020 and a €300 million program was currently underway to be completed in the first half of this year. And today, we announced a further €1 billion share buyback to be completed in the first quarter of 2022.

And now our capital allocation priorities as shown on Slide 22, as we've shown during the fourth quarter and 2020 and summarized in this presentation, we're delivering on our commitments. We continue investing for growth paying stable to rising dividends, conducting value creating acquisitions and carrying out share buybacks.

We're basically firing on all cylinders. Executing with discipline has been key to our transformation.

This is working well for us and part of who we are. I'll now hand over back to Thierry for some concluding remarks on the next slide.

Thank you, Maarten. Our exceptional results for the fourth quarter and 2020 demonstrated a deep structural performance improvement from the first phase of our transformation.

Despite COVID-19 headwinds, our teams rose to the challenge and delivered our 15 by 20 promise, achieving 15% return on sales, and more than 20% return on investment. We continue to look after our customers despite very challenging supply chains and everyone at AkzoNobel deserves enormous credit for their passion, commitment and endurance, specifically in such a challenging year.

During our 15 by 20 journey, we transformed our systems and processes and brought back innovation to the forefront, like for example, our industry leading Paint the Future innovation ecosystem. We've also streamlined and accelerated our “People.

Planet. Paint.”

approach to sustainability and are being recognized by key benchmarks as the leader in the paints and coatings industry. We also are very focused on delivering for our shareholders and other stakeholders.

Turning to Slide 25, what is even more exciting to us is that we are literally only halfway through our transformation. Our new Grow & Deliver strategy that we announced in February last year, just before the pandemic, represents the second stage of the journey we started in 2017 with a purpose to build a strong foundation and positive momentum in 15 by 20, and to double from 2017 to 2023, to double the profit of AkzoNobel and reclaim our place as the reference in the industry.

And we're really only just halfway. Going forward we'll balance growth and profitability improvement.

We target to grow at least in line with our relevant markets and deliver an average 50 basis points increase in return on sales each year. Our ambitious targets as part of our People.

Planet. Paint.

approach to sustainability will ensure that we remain the reference in our industry. We target the top quartile engagement score and at least 30% female executives by 2025.

As announced last year, we're also moving towards zero waste as a company and aim to cut our carbon emissions in half by 2030. We'll do this by saving energy and using 100% renewable energy.

And we're also aiming to generate more than 50% of our revenue from sustainable solutions by 2030. Finally, turning to the Slide 26 which shows our outlook for 2021.

As mentioned, we target to grow at least in line with our relevant markets, although trends differ per region and segment as outlined earlier with raw material inflation expected, we have solid margin management and cost saving programs in place to deliver 50 basis points increase in return on sales. We target a leverage ratio of one to two times net debt/EBITDA, and commit to retain a strong investment grade credit rating.

And with that, I'll now hand it over to Lloyd for information about the Q&A session. Lloyd?

Thank you, Thierry. Before we start the Q&A, I would like to draw your attention to some upcoming events shown on Slide 27.

On March 10, we'll publish our annual report for 2020. We'll announce our Q1 results on April 21, followed by the Annual General Meeting of shareholders on April 22.

So this concludes our presentation, and we will be happy to receive your questions. Please state your name and company when asking a question and limit the number of questions to two per person so others can participate.

I now hand over to Ethan to start the Q&A session.

Maybe if we come back to get you in just a moment.

Can you hear me?

And we start with the -

I think we can hear you Gunther.

Yeah. Oh, fantastic.

I'm not sure what happened here. Good morning, gents.

Anyway, a couple of questions, if I can start with. Thierry, what do you consider a good number to look at for relevant market growth in 2021 please?

And I know it's a moving target. But any outlook, you can give any details or sensitivities around it, where you expect market growth to be in the year as a benchmark for your outlook would be very helpful.

And then the second one, Maarten, if I can ask you on cash flow, how sustainable is the cash flow that you produced in 2020, looking at if you return to growth in 2021, and you have had very low CapEx in 2020 as well. You're guiding to an increase in raw materials as we go through 2021, so any color you can give around where you expect to end up on cash flow for the year, please?

So Gunther, and for your first question and then you're right, it's always a bit difficult to judge the growth of the market, given the different baskets and dynamic - basket and segments, the dynamics, etc. But what we use when we say those sentences, we're assuming for market about 2% growth versus 2019.

So just to put it in perspective, and then it's probably going to be variations around the theme depending on how we all come out of the pandemic. But that is our underlying assumption, when we make the statements around how we're going to perform versus the market.

Does that answer your first question, Gunther?

Absolutely. Thank you.

And Maarten?

Yeah, on the cash flow, I think you're referring to first of all our strong cash generation in 2020. And by the way, it's good to know you mentioned lower CapEx.

In fact, our CapEx was €258 million in 2020, which was really in line with what we have also guided for, they are roughly €250 million. So in 2021, CapEx will be also roughly at a similar level.

I think it's good to know that by the end of 2020, we had a run up of payables, and it was very much given the demand fluctuations. We've been pulling in raw materials to satisfy the demand.

But overall, I expect very much and similar cash generative nature in 2021 as we are continuing our journey.

Great, thank you.

Thanks, Gunther.

Hi, good morning everyone, a couple of questions. Your revenue guidance is growing in line or faster than the market?

As you just mentioned, are there any specific products or geographies where you think you've gained share over the course of 2020 or expect to, going forward? The second question is around the buyback, I'm really just curious on your thinking here.

This modular approach, you could have considered, say a few 100 million euro buybacks now and then seeing what M&A opportunities arise. So it is the fact that you've announced €1 billion, suggest that the deal pipeline is relatively empty.

I'm just struggling to reconcile your messaging on the buyback with your Slide 22 that acquisitions have a higher priority for using capital?

Yeah, good question. So mostly, let me try then to give the answer then Maarten can build on it.

Revenue, at least in line with the segments and in fact show some confidence in where we go. Let me first talk about the Deco market.

The Deco market, despite all the brouhaha around it in 2020, is in fact, if you take the helicopter view, not that great. And it was more negatively impacted by COVID-19 than we often seem to be getting across to analyst.

Yes, it was significantly up in Western Europe. Everybody seems to be doing some home improvement.

But if you look at South America, which is a big market, very lucrative market for us, if you look at Southeast Asia, very lucrative market and it's like China's for a big part of the year last year, very lucrative markets for us and these were actually not up at all. So if you look globally for the whole year of 2020, it is very much influenced by the - the answer is, the very strong markets we had here in Western Europe.

So as we see, South - Latin America coming back, and we see Southeast Asia coming back, and we see some really healthy growth with our Dulux paint in China, now two quarters in a row. That's why we're pretty confident that we can sustain that.

And that it actually is going to be outperforming the market. So that's on the Deco side.

And by the way, in Europe, surveys that we've done in November and December indicated 60% of the consumers in the Do-It-Yourself segment, now feel that they're going to do at least if not more home improvement in 2021. And I also want to point out that in Europe, the trade segment, so the professional painter segment, in fact, has been slightly down to the whole year, again because nobody wanted to have probably painters during the pandemic in their homes.

So we're very optimistic going forward in 2021 and beyond, for our Decorative Paint business. If I go to Performance Coatings, we can go to all of the segments, I would say, suffices to say that in Industrial Coatings, our coil segments and our packaging segments are for can, beverage cans, is doing very well.

And there we have actually, the markets are doing well, there's an intrinsic segment growth, but also a more sustainable non-bisphenol A containing products are obviously gaining share in that segment. So there the trends is very positive.

Powder Coatings, I know we go on like a broken record but you see the numbers, Powder Coatings just has structurally has the market going with them. We're now seeing really significant volume pickup in battery applications for electrical vehicles, which in fact, we were not really very present in the automotive market.

And that is in fact a very nice growing niche for us. And on top of that, technology, etc., the Stahl UV acquisition curing - for UV curing, we did last year is obviously already starting to show commercial application.

So rather we're anyway, generally okay. The two other segments where we see less buoyancy is on Marine & Protective.

It's holding its own, but it continues to be on both fronts, not necessarily a strong market. And if you look at Automotive and Specialty Coatings' refinish, we're obviously gaining share on both sides of the Atlantic.

And that's now becoming a pattern, actually throughout the year, which is very encouraging. And yes, our Aerospace Coatings, of course was impacted by the travel restrictions driven by COVID-19.

But as people stay at home, they have much more consumer electronics appliances and here in fact we saw an almost equal increase in our business in Asia. And so all-in-all, I think this seem a new solid also in our segments chart, much more positives than the negatives, also going into 2021 and beyond, to be honest.

And you can refer to our, what we showed in the February Investor Update on Grow & Deliver. The segments we highlighted are still very much the ones that who will be pushing as such.

Secondly, on the buyback and the modular approach, Matthew, I mean, in one side if we do modular approach, why don't you are not bothered to do a bolder step? When we do a bolder step, it's not a modular approach.

The reality is that we are very religious around our capital allocation. We are generating a lot of cash and in fact, at one point, we also want to stick to a leverage between one and two, which is not exactly very, very risky to start with.

So in that sense, it was well, what do we do with the cash? And there's M&A opportunities, with the most recent one goes to a level where, frankly, even after checking the batteries in our calculator that made no sense anymore, so that we don't want to go there.

We want to keep the discipline because that's what helps us. At the same time, we still have enough financial power to do any relevant or realistic acquisition we wanted to do this year.

So that's why we came to that conclusion of announcing once that billion share back acquisition. Maarten, if you want to add more?

So Matthew, I think it should be clear that given our capital allocation, and given the leverage ratio, yes, the announced €1 billion share back does not include - exclude a further M&A opportunities. We are looking at the pipeline.

And given the leverage ratio where we are now, we have still ample firepower and therefore opportunities to also in the meantime do M&A, so it doesn't exclude each other.

Does that answer your question, Matthew?

Absolutely understood. Thank you.

Thank you.

Hi, thank you for taking my question. Just, the first one is on the guidance.

You talk about the guidance of 50 bps of improvement in ROS. That looks a little bit conservative compared to where consensus is already, for example.

So given that 50 bps is a multi-year target, do you see any upside to these, to that target in 2021? And then the second question is around the cost savings.

You can help me understand the cash flow impact of the cost savings in 2021? And what the cost savings that you're targeting for 2021 are, some way to size those would be really helpful.

Thank you.

Yeah, thank you. Good question.

Let me do maybe the first one and then Maarten, if you do the second one. On the guidance, Basher, you know that we don't give guidance, we're not going to get tricked in giving guidance.

What we did say for the Grow & Deliver period that's for the ROS and there's no misunderstanding, that's the ROS for the company. So we're not talking about ROS excluding business etc., which was a necessity in the 15 by 20.

So what we set for the period of three years, we can basically see a 50% increase per year. And what we've indicated despite indeed raw materials increasing and all sorts of other topics and uncertainties that might be there in the market as we come out of the other end of the pandemic that we feel comfortable about indicating that we will also be able to stick to that in 2021.

And as you probably have noticed by now, we typically do statements that we can stick to in the 15 by 20 along the way. So that's - we would stick to that also.

But I would rather not go into guidance, we've been doing very well without giving guidance, and we're not going to start doing that either. But we just wanted to give the reassurance that we feel it is very much steady as it goes on the delivery that we had promised earlier.

Maarten, maybe on the --?

On your question on cost savings, I think it's important to mention that we really will continue our OpEx discipline to manage the OpEx or the cost levels at the current levels. That means that savings programs are in place to offset recurring inflation, because that's always the case, rates inflation but also other cost inflation.

And we continue with the number of transformation initiatives, one to mention is of course, our asset network footprint and our footprint rationalization and coupled to that, we will indeed have and that was your question - we will have identified items in 2021 one which sits in the bandwidth between €50 million and €75 million. So we go structurally to win on lower level of identified items.

And overall, this is supporting - all these actions are supporting the 50 bps return on sales improvement as we have indicated.

Does that answer your question, sir, Basher?

Yes, it was very helpful. Thank you.

Thank you.

Thanks, everybody. Good morning, Thierry and good morning, Maarten.

I've got two.

Good morning Tony.

Yeah, good morning. And firstly, on the temporary savings, I think that totaled up just over €150 million over the year.

Could you help us think about if any of that might start to reverse in 2021 as growth comes back? And then on Deco and Performance Coatings, could you talk a little bit about the price campaigns?

So have you already put any price gains in or are there more in the pipe? Thank you.

Yeah, Maarten, why don't you take the first one. I'll take a second.

Yeah. So, on the temporary savings, which were €128 million in 2020, I think it's good to look at the fourth quarter.

And in the fourth quarter, in fact, our temporary savings were €9 million in two areas there, travel and entertainment and some advertising and promotion. If you look at the €9 million in the fourth quarter and cycle that forward, then roughly half will continue and that's mainly in the travel and entertainment area.

So that means talking about €128 million that most of that will come back and we will retain a piece of the €9 million as we've seen still in the fourth quarter.

So let me then get the second question around the price campaigns and details of raw material escalations that we see. Although to be honest, it's more the assurance of supply, given the impact of COVID-19 and some of the suppliers are having people in, etc., etc.

That's actually more of a headache in the last two, three months, I mean. But going on pricing, yes, there is a bit of an escalation, also oil price to go up and that will have a trickle through, as we through the year.

Now, the one thing is that we have, compared to two years ago, we have a very early warning system. So we saw this coming pretty early on, what was going to be the potential, if any, impact in 2021.

And the price campaigns in Deco, as we said, we were planning them anyway as a routine action so that we've been taking into account. And I have to say we see relatively good traction on that also.

Every other paint supplier sits exactly in the same situation, so we see quite some similar actions, as we hear it come from customers. So there, I think we feel pretty comfortable.

On the Performance Coatings, it is not in all the segments. And in some segments, we're able to get more than what in fact the inflation is, some others it's typically on the type of buyers or the consolidation of those markets, may be a bit more difficult.

But all-in-all, I think the actions are going as such that we can definitely offset any increase in raw materials in 2021, as we had predicted and in fact, maybe even get a little bit more of the inflate - I would say more of the year-over-year inflationary effect, also still covered. So we're pretty upbeat on where we go right now.

Thank you. That's really good.

Yeah. Thanks, Tony.

Yes, good morning, everyone. I had two questions.

The first one is a clarification, if I can. So if I add the 2% that you referred to, to the 2019 sales, I arrive at an expected sales of €9.5 billion, and that will be 5% above market expectations.

Is that correct? Is this what you meant with that remark?

And then secondly on Performance Coatings. I see on Slide 7 that the exit rate was some 10% of volume growth at the end of Q4, how has that growth evolved so far in the year?

Thank you.

Yeah, Maarten, you want to handle it?

Yeah, I think, on your first point, it's indeed a good clarification. Because if you look at our 2020 numbers, there has been, apart from decline in top line of 4%, there has been a significant FX impact to the tune of almost €400 million.

So you need to look at comparable rates versus 2019 how that will evolve. And based on comparable rates for versus 2019, we indicate that they're 2%.

I hope that helps in your thinking.

Yeah, and then the second thing on Performance Coating, I think the trend is indeed positive. The 10% seems a little bit enthusiastic, I think from your side, because the - so it is definitely up.

If you look at our revenue in constant currencies, in the fourth quarter, it was up 1%. So that must be a bit of a misread, I think on the chart here but the trends are actually quite positive.

I think we went through it. If we go to the, first of all, Powder Coating is, definitely very, very strong.

So I think that's, that's in an order of magnitude and even slightly higher than what you just indicated. In Automotive and Specialty Coatings, you have the not so good, the aerospace, but you have offset that with a very good, which is consumer electronics.

So that balances it out to some extent. We did see very strong traction in Industrial Coatings, both on the packaging side and in metal coatings.

With wood, in fact, returning because that has been pretty depressed so that actually is getting back to what it was in the previous years. And then Marine & Protective, as you've indicated, that continues to - its stable, but it continues to be stable at a low level.

So there in fact, we don't see necessarily an uptick, also not termed as not what we take into account given where the markets are going. So maybe we have to take it offline on what your perception is versus what we stated about.

All right. Thank you.

Yeah. Thank you.

Brilliant, thank you very much. Good morning, gentlemen.

Just a couple from me, then. Just a few kind of qualifications of some of your comments already.

On the price versus raw materials, some of your peers have talked about a kind of mid single digit increase in the raw material basket just is this similar to what you see? And therefore when you say you expect to offset this, you need some sort of 2% positive pricing at a Group level to do that, if it is a mid-single digit, raw material increase.

Just to turn on that. Is that the right types of order of magnitude that you're seeing, both from a raw material perspective but also from a price perspective?

And then second question on the saving.

Can I handle that?

Yes.

Charlie can I give you one on that?

Yes, of course.

I think we see low, low single digit. So the mid is an overstatement on that.

So we saw a low single digit. And yeah, pricing effect of this, we will be upsetting all that but I just want to correct that.

Yeah, we've seen that also but that's what we see.

So we see low single digit raw material price impact and we compensated, as Thierry mentioned earlier, with our pricing actions, which are more or less in the range of 1% to 2%.

And they'll maybe offset by the combination of price and mix, by the way.

Yeah.

So there are other ways of offsetting it, but there just to make sure that we underline that. Sorry, Charlie, I interrupted you but that's probably an easy one to answer.

Now, that's great. Thank you very much.

And then just again, following up on the savings. So that is both temporary and structural.

So on the structural side, obviously, we're targeting is this 50 basis point, ROS improvement CAGR over the next two years, in absolute terms. And there's a number of factors that play into that.

But from a structural savings perspective, you talk about being halfway through this, the structural transformation of AkzoNobel. Is it right to assume then that we're talking about some sort of €300 million of incremental structural savings from where we are today?

Or is that the wrong way to interpret that given, that's what you do with it €335 million thus far? And just understanding what that halfway through this transformation really implies and I'm not expecting exact numbers, but just rough orders of magnitude.

And then just on the temporary savings, you kind of said €9 million is the right run rate, just to be crystal clear. Does that mean saying we're able to keep hold of roughly €35 million €40 million of these temporary savings in 2021?

That's the message?

Yeah, Charlie, thanks for the question. Let me maybe do the overall picture.

And then Maarten you can fill in as you like to do anyway, on the gruesome details of the numbers as you go through it. Maybe take a step back, Charlie, so in 2017 when the new management team got in place, our ambition was to double the EBITDA of the company in about five, six years' time.

So in 2017, by 2023, we wanted to lift the paints and coatings business from what was then above the €1 billion EBITDA to about €2 billion EBITDA. The first step which was clear to us is that we had to do quite some housekeeping items around costs, around margin, and just setting up the systems and the processes to do that.

That was in fact, 15 by 20. So we put a stick in the ground, and halfway of the first three years, we want to be at halfway with all the programs.

And then in fact, is about €1.5 billion EBITDA which is what, that's about where we landed on that. So that was the mystique of 15 by 20.

The second step is around Grow & Deliver. So yes, we're going to keep the discipline on costs.

But it's a bit of a different situation, we want to finish the processes and the systems that we have in place on our ERP systems, integrated business planning, etc., by the way that gives us now the flexibility, foresight, etc., to go after growth in an intelligent way. Because that basis, we felt was not necessarily there in 2017.

You have to have a transparency on your costs and your abilities to just go after specific markers. So in the second part, I would say, of the story on getting to this €2 billion EBITDA is basically Grow & Deliver.

So it's going to be much more focusing on continuing to build the margins, continuing to build our franchises in the markets. We really want to go back to growth.

And that is the first part of the two, we want to keep the discipline on the cost etc. and I say, implicitly with Maarten already indicated around identified items will be significantly lower than we had in previous years already indicates that will continue to be part of the mix to but a much lesser extent than we had in the last three years.

I don't know Maarten if you want to put more on the cost?

Yeah. So on the cost, it is indeed a continuation of the cost discipline which we have shown, and clearly also making sure that we keep on offsetting recurring inflation, recurring cost inflation.

I just want to correct you on one thing on the temporary cost savings, what I've said is that if you look at your run rate in Q4 which was €9 million roughly half is related to travel and entertainment, so €4 million to €5 million. And if you take that forward, that would be kind of the run rate, which we see still as temporary cost savings, going forward.

So if that would be the whole year the case and we will see how that pans out that would lead to and close to €20 million. But that depends on how the pandemic and impact on travel and entertainment costs will continue.

That's really helpful. Yeah, that so Maarten, just to be crystal clear, so in that, if we take the €5 million and roll that forward, that's an incremental saving in 2021.

Is that correct? Or are we saying we're reversing the rest?

No, that's a retention because we talked about €128 million temporary savings, and it's a retention out of €128 million temporary savings,

Perfect, very clear. So thank you.

So because the question was outcome that has been affected, most of it comes back, this would be just the retention.

Yes, no, very clear. Thank you very much, both.

Yeah.

Thank you. So first of all, well done, well done and well done.

Well done for achieving 15 by 20, well done for walking away from Tikkurila and well done for giving us buyback. Now, first question is, Thierry, if we go back to 2017 and if I just do the math of price minus raws, cumulative, you're currently at €150 million positive.

So you've more than achieved what you sort of set out in terms of raw material inflation. If I was to say to you that can you keep this and €150 million positive or will it be that point in time, raw materials will run away from pricing or is the industry now in our shape where if raws go up prices continue and therefore this €150 million is actually a retained benefit for Akzo?

That's the first question. The second question was really, I think it's the first time in 10 years that Deco margins are higher than Performance Coating margin, so just very simply, are you over earning in the Deco as of last year and under earning in Performance Coatings or is this something ramping to negative on your performance?

Thank you.

Yeah, good. Well, first of all, thanks Geordie, but was your thank you, thank you, thank you's for the three questions you have.

I mean, okay. Let me try to answer on the raw material inflation.

To be fair, I haven't done the said calculation on how it is versus 2017. But we already indicated that we went from pricing, forward with price, price, which we had to do, which was really a correction of the past to go into margin management.

And if you wanted to keep the margin versus the raw materials to keep that at least the same on expanding, as so you are correct, it isn't we are - that works really well and in fact right now also this year which is a bit of an upward situation that seems on raw material costing. That seems to be working well.

It is indeed our intent to keep that doesn't have between our prices and our input cost indeed to same or expanding, depending on what it is. So we definitely do not want to have that run away from us.

And if like the transparency that we have with our ERP systems, now the transparency that we have on connecting, sourcing, procurement input, much closer toward the business are doing in the market. Now we have the systems in place to also assure that.

So that's the first answer on that. Secondly, on Deco margins and Performance Coatings margins.

Well, to be fair the Performance Coatings businesses, this year has been kind of a tough year, given the re and protective, typically very profitable, has been down for most of the year. A number of very, very, very good franchises in our Automotive and Specialty Coatings business including aerospace have been down so that mix-wise I would say gives us a bit of a reset.

So I think that's going to come back in 2021. On Deco over earning, I'm not sure Geordie if I see quite some more stretch in there.

I just want to point out that we are very, very encouraged by getting from what was probably seven, eight years ago, a breakeven situation for Deco in Europe to having now a really very attractive business. But and this is important, it is still the lower margin business versus what we have in all the other regions of the world.

So the reasons why I may sound a bit more encouraged is that what we see, the significantly higher profitability of our business in Asia and Latin America is actually kind of an example to see, well, why don't we get there in Europe too? Although that EMEA business is already in a very healthy place.

So I'm not saying it's a question of over earning and under earning. To be honest, if you look at the Deco business, we have extremely strong franchises, extremely significant market positions in countries, probably the set of the strongest brands in our industry, you would expect me to brag about it, but I actually think that it is true.

So in that sense, with the somewhat consumer width in those businesses, you would expect that we can keep extending that margin and that's what we are setting out to do.

Great, thanks a lot.

Yeah, thank you.

Thank you.

Yes, good morning all. And two questions, please.

The first one is related to, I guess, the cadence of volumes in and growth in Q4. And we saw a sharp acceleration towards the end of the quarter, which is also when we had, I would say, a big improvement or big increase in expectations of inflation in particular in raw materials.

So, I was wondering if you think you've seen some restocking in some chains that really helped Q4 or can you characterize where inventories are in some of the key markets. That's the first question.

And then the second question would be to push you a little bit more on inflation. Rather than talking about variations for the full year, could you perhaps talk about what you are seeing, where you have visibility, which I guess by now is through, I guess, most of H1, so both Q1 and Q2?

Because you were saying that you were a bit less negative than your peers but you've also well, in the past few weeks, we've also seen quite a big increase in price in [electroplating]. So I'm just wondering, what gives you that level of confidence?

Yeah, Laurent, thank you. Thank you very much.

Let me try to do the first one and then Maarten, you can maybe take the second one. On the inventories, of course, it's again, I don't want to take you on an excursion through the whole business on that but I would say the - if anything, the inventories in the channel are probably relatively low, I wouldn't say they drive but are probably relatively low.

That is mostly driven by some of the, I would say conservatism in many of our regions and segments from customers on having their cash tied up in inventory, which is kind of understandable. So we see some of that happening.

But I think it's only a minor part of it. What you do see in the fourth quarter is taking Deco, for example, you have in Southeast Asia, many markets were still closed until the third quarter.

So that means the distribution channels were actually closed. Big markets for us, Indonesia, Vietnam, I mean, India has a lot of these closures.

So with that opening up, you see people ordering again, and that probably gives it a little bit of an upward traction in the fourth quarter. Same as in South America, where you have now the - it's the high season.

So there people were on the pandemic holding back and then basically were reordering. So I think there's some of that.

In Performance Coatings, I think it's much more subdued, I would say. So I'm not sure that it was really restocking with the inventories of anything, there's not really much of an uplift.

And it's interesting to note, by the way, you may not have registered that but the last the ending of 2019 was in Performance Coatings for virtually every supply was a bit disappointing. So I think you also have a contrast there in percentage wise versus what you see in the fourth quarter Performance Coatings, but long answer to say the inventory in the channels are probably a little bit more at the lower end than being high.

Second question is more on the raw material.

Yeah, on the raw materials, I think we've said already earlier that we started to see raw material price indexes going up from early Q4 onwards. That's what we flagged I think, a quarter ago.

As we said earlier, from an inflation perspective, we are looking at low single digit impact in the Asia in '21. But if you then see with the delay factor, because that's also always what we indicated then the impact will still be limited in the in the first quarter.

And then from there on, in the second quarter and onwards, we will see some further impact but still for a total year as indicated, low single digits. I think that's - I hope it helps to give you a little bit of flavor.

Well, Laurent, does that answer your questions?

And that so on the raw materials, if you look at Q2, for instance, is that a comment on the sequential inflation or is it year-on-year as Q2 levels of raw materials was very low?

Yeah, that's versus the previous year. So what I'm saying is old versus 2020.

Okay, thank you.

Yeah, hi. Just two quick questions, actually, just one was clarification on the total transformation costs, which were, I think, €335 million in total.

How much of that is yet to hit the cash flows? In other words, how much of the cash out from that is yet to be seen in numbers, will be useful?

And the second point or second question, rather, was just looking at the Asian constant currency revenue, which was up I think up to 2% in Q4, just looking at some of the markets like China, India, in terms of your local peers, they have been reporting very, very strong growth. So just wondering why the actual was lagging to some extent in that particular region?

Is it just a factor of maybe one particular country, which might still be significantly impacted from lockdown? Just trying to understand the Asian base?

Thank you.

Yeah, so let me try to take the second question. And then Maarten can come back on the cash cost for that.

Our Asian business is doing fantastic. So first of all, you may be aware that we are focusing on paints and coatings, and that we have refrained from starting to sell mortar tile kits, facades stuff, waterproofing, etc.

Which by the way, yes, growth wise some players there are outperforming growth, but just look at what's less than the bottom line. Here I just want to point out, we don't give necessarily the numbers for each of our businesses.

But if I look at our Decorative Coatings business in Asia, it is at the very high end of our profitability of any of our businesses. So I think that we have a healthy base there, it is growing in the segments that we've chosen to play higher than the market.

That is the case for Dulux in retail in China. And that's definitely been the case also in other places in Southeast Asia.

Now, some of the countries where we are pretty big end, have been still under lockdown. If you look at our Southeast Asia business, we are not that big in India.

If you look at the other places, they actually - it starts looking much brighter right now as some of these countries, Malaysia, Vietnam, Indonesia, etc., are coming out of lockdown. So let me explain certain items.

But again in 15 by 20, we were not in window dressing to ship stuff with no margin. And if you analyze some other players there, that seems to be exactly what's happening.

So our Asian business is accretive to the average of the company. And definitely that's not surprising, that now that we have the basis for it and the clarity on what we want to offer in the market, we can go for growth and continue to expand the franchise.

But the second thing maybe Maarten, it's good for you to answer the question.

Yeah, so the transformation cost, first of all, I think it's good and neat and Thierry mentioned it earlier, the €321 million compares to the €350 million, which we announced at the end of 2018. So we have been very much consistently executing on our savings, but also on the expected transformation related costs.

Out of the €320 million, still roughly €40 million will flow as cash out beyond 2020. And that mainly relates to the restructuring provisions we've taken in the fourth quarter.

So that will be the flow over effect. Just to indicate, I mean, there is - every year there is a flow over effects.

So that is not the kind of an - it doesn't give them an impact on the recurring cash flow, let's say like this.

Chetan, does that answer your questions?

Yes, thank you.

All right. Thank you.

Yes, everyone, I just want to come back on deck. I've heard all your comments but I'm just wondering, I mean, obviously your peers talked about a record UK in the fourth quarter.

Obviously for you we can look at a record UK, I think for the full year, a record Northern Europe, which is the most profitable part of the business in Europe. I'm just wondering how you see the Northern European business year-on-year in 2021.

I know a lot of things are still going on. You talk about structural uplift in demand.

I know some of the trade business was weak for part of the year but then got stronger. I'm just wondering how you think about that year-on-year because obviously that was going to be quite crucial on how far the Deco business advances as a whole.

And then on the auto refinish side, you're now seeing volumes up which is a little bit better than you peer. Presumably region was part of that but I'm just wondering how you see that pan out?

Certainly it looks like lockdowns are going to start easing here in a month or two. But just wondering how you see auto refinish this year?

Yeah, Peter, thanks. Good question.

First of all, on the Deco North Europe, we believe that for 2021 the situation will probably be for most of Northern Europe, still the same for the first half of the year, which typically is the stronger season. So there's not going to be much difference.

So we think that's going to be on that respect maintain, you say is the most - the highest profitability part of the business. Well, yeah, I mean, if you exclude Asia and you exclude Latin America, and you exclude some other places in Europe, it is a good business.

So in that sense, we're not too worried about that. But it is indeed, on the retail side, it is somewhat inflated.

Again, the trade situation is still running behind, which is for us an equally good business. In that sense, there is none of us who is actually afraid that this is going to be completely negative trends or anything.

So again, we count that Europe may get out of lockdown sometime by summertime, to be honest. And then we - that would probably keep rather safe dynamic.

Now, it's interesting you say that, Peter, because we did quite some in-depth surveys in November and December, also in the UK, by the way, we're about 60% of the consumers. This was retail oriented, were indicating that they were in fact going to continuing the work that they had started, or actually even do more than they did.

So that has been correlated now also with some of our retail partners in the market who see exactly the same response of the home improvement situation kicking in. So we're not too worried about that.

Now secondly, on the volume up, and I think you specifically talked about refinish. When we talk about refinish, the regional impact is a bit excluded.

If you look at the regions like North America and Europe, it is the same trend. So it's not like it's an overall mix around the globe, it's really on the regions themselves, that we see the dynamic, which is very positive for us.

Now, the pandemic hasn't had that much impact, to be honest, on refinish. It has had it for a while in the very beginning.

But frankly, since then what we believe, at least, and that's anybody's guess, and you may have, you may hear alternative stories. But what we seem to hear is much - there may be less people on the road going to their - there are much less people in the offices, but more people are specifically in Europe are driving and not taking public transportation.

So if we look at the data there is not that much difference, to be honest, on the amount of cars that are on the road. And if you look at the statistics, mobility statistics, that seems to indicate that too.

And one would expect to there's not going to be a massive change during the year even if people come out of lockdown, I think then other dynamics starts kicking in. So at least those closer to those markets, and some of our channel partners don't see a big change there, anytime soon, in the accident or incident rate with cars.

Does that answer your question, Peter?

It does. Thank you.

Certainly it is picking up here, by the way, the traffic in London has moved up markedly in the last few days.

And we love having a lot of drivers on the road who have lost a little bit the habit of driving. That's the stuff our business is made from.

Thank you.

Good morning, Rob Hales, Morningstar. Thanks for taking my question.

Maybe just a couple on Protective Coatings. You talked about maintenance being delayed before and just wondering, how long can that maintenance be delayed?

Is it one year, is it five years, just kind of the time there when people have to do it? And then is there you know, opportunities, new entry applications, like the offshore wind or solar and can you play in there or what's the opportunity around your energy applications?

Yeah. Good question, Rob.

On Protective, we start seeing signs that in fact the procrastinating of maintenance is coming a bit to an end. I mean, as you know, I mean, rust does not stop during a recession.

So that's coming back. And of course, a lot of our business effect is more focused versus gas, natural gas than the oil part.

But in fact, the energy costs of prices going up, of course, always gives traction for the mothballing, if you can say on some of the projects, etc. So our team is somewhat upbeat for the rest of the year.

But we are very careful there because we've been upbeat a couple of times, so we have them in our minds as a whole and if they over perform, we'll be as happy as a baby, if that's - it's happening. So, we do see that with the again with the energy costs going up, typically that triggers some of the pent-up demand for those things.

Secondly, on solar and wind turbines, solar is less of a factor in our business for coatings in general, but for wind turbines similar to this necessarily known to people that we're by far market leader when it comes to wind turbines both on the blades and on the quality of the shaft of the wind turbine. So there we have a very strong position.

And as that grows, we see that this is also growing into pretty demanding coatings applications. So there we're well positioned.

But for the time being, in fact you look at liters of products, it's still on the oil and gas business, it's still bigger than what you can make up on the wind turbine business. But there we have a very strong position.

Does that answer your question?

Yeah, very helpful.

Yeah, thank you. I think we have time for one last question.

Good morning. Thank you for giving me the last question.

Just kind of one follow up. Thierry, you mentioned that you have market share gains, I think in order of refinish.

Could you help us like to say where those are and quantifying them?

Quantifying, we'd rather not do but I think because again, in car refinished, those changes tend to be at a glacial speed because it's the body shops in the end who use the product tend to be pretty loyal to the product. So it's a body shop by body shop change.

But where it is? It's basically North America and in Europe, we see now since a while, already kind of a nicely comforting trend of seeing some share gains in body shop gains, etc.

But I mean, quantifying probably is not that meaningful at this moment of time. But you - I mean be its pretty noticeable to us.

And sort of quick, are the gains driven by your product or on other services, or how have you managed to persuade body shops to change to you from others?

I think it's a couple of elements, I think it is. Like in North America it is up more to distribution where we get a position and obviously there, we are a number three player in that market.

So we've obviously had quite some gains in those distributions. So that might be either on commercial terms, or because there's a feeling that the partnership with us is slightly more preferred than with an existing incumbent supplier in them.

So that's a typical North America dynamic. In Europe then, which is our big market, there I think it's based on frankly, the continuation and the service to the customers during the whole period.

We have not exactly, in automotive refinish, we have not saved at the front end. I think we've tried to leverage our internal resources, so one would guess that customers see the same market activity and offerings, including all sorts of IT services that they have continued and are accelerating, probably versus what they've seen from some others and therefore make their choice to move over.

So I think our team has been very active on the ground, even though pandemic and even accommodating customers who had - who went through some really difficult periods earlier in the year.

Okay, thanks.

Thanks.

Great, thank you. So that's about all we have time for today.

Thank you very much for joining the call and your continued interest in AkzoNobel. Please do get in touch with Investor Relations if you have any further questions.

Enjoy the rest of your day.