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Edited Transcript of AKZA.AS earnings conference call or presentation 24-Jul-19 7:00am GMT

Q2 2019 Akzo Nobel NV Earnings Call

Amsterdam Jul 27, 2019 (Thomson StreetEvents) -- Edited Transcript of Akzo Nobel NV earnings conference call or presentation Wednesday, July 24, 2019 at 7:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Lloyd Midwinter

Akzo Nobel N.V. - Director of Communications & Investor Relation

* Maarten Jan de Vries

Akzo Nobel N.V. - CFO & Member of Management Board

* Thierry F. J. Vanlancker

Akzo Nobel N.V. - Chairman of the Board of Management & CEO

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Conference Call Participants

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* Chetan Udeshi

JP Morgan Chase & Co, Research Division - Research Analyst

* Christian Faitz

Kepler Cheuvreux, Research Division - Equity Analyst

* Geoffrey Robert Haire

UBS Investment Bank, Research Division - MD and Equity Research Analyst

* Georgina Iwamoto

Goldman Sachs Group Inc., Research Division - Associate

* Gunther Zechmann

Sanford C. Bernstein & Co., LLC., Research Division - Research Analyst

* James Alexander Stewart

Barclays Bank PLC, Research Division - Chemicals Analyst

* Laurent Guy Favre

Exane BNP Paribas, Research Division - Research Analyst

* Markus Mayer

Baader-Helvea Equity Research - Lead Analyst of Chemicals

* Mubasher Ahmed Chaudhry

Citigroup Inc, Research Division - VP

* Mutlu Gundogan

ABN AMRO Bank N.V., Research Division - Analyst

* Nathalie Debruyne

Banque Degroof Petercam S.A., Research Division - Analyst

* Peter Anthony John Clark

Societe Generale Cross Asset Research - Senior Analyst, Chemicals

* Tony Jones

Redburn (Europe) Limited, Research Division - Partner of Chemicals Research

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Presentation

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Operator [1]

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Welcome and thank you for standing by. (Operator Instructions) This call is being recorded. If you have any objections, you may disconnect at this time.

May I introduce your speaker for today, Lloyd Midwinter, Director, Investor Relations. Please go ahead.

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Lloyd Midwinter, Akzo Nobel N.V. - Director of Communications & Investor Relation [2]

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Hello and welcome to the AkzoNobel Investor Update for Q2 2019.

I'm Lloyd Midwinter, Director, Investor Relations.

Today, our CEO, Thierry Vanlancker; and CFO, Maarten de Vries, will guide you through our results for the quarter. We'll refer to a presentation which you can follow on screen and download from our website akzonobel.com. A replay of this call will also be made available. There will be an opportunity to ask questions after the presentation. For additional information, please contact investor relations.

Before we continue, I would like to remind you about the disclaimer at the back of this presentation. Please note this is also applicable to the conference call and answers to your questions.

I now hand over to Thierry, who starts on Slide 4 of this presentation.

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Thierry F. J. Vanlancker, Akzo Nobel N.V. - Chairman of the Board of Management & CEO [3]

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Thank you, Lloyd. Good morning, everyone, and thank you for joining us on this call.

AkzoNobel's second quarter results proved clear progress is being made towards our 15 by 20 strategy, and that's despite continued external market headwinds. Adjusted operating income was 36% higher at EUR 305 million. Our return on sales excluding unallocated costs was 13.7% versus the 12.1% last year. Our ongoing focus on value over volume resulted in price/mix up 5%, while volumes were 6% lower. Cost savings programs delivered EUR 43 million in the second quarter.

Last week, we announced the intended acquisition of the French aerospace coatings manufacturer Mapaero. This will further strengthen our already strong global position in aerospace coatings and is accretive to our 15 by 20 margin target.

The second quarter was an important quarter for us to demonstrate that our strategy is working. It is therefore rewarding as a step for AkzoNobel's team and provides encouragements for the significant work still ahead of us as we continue our transformation journey. In the face of softer market trends, we continue to focus on delivering our strategy while investing in strategic growth opportunities to become recognized as the reference in the paints and coatings industry.

Some key financial highlights on the second quarter are shown on Slide #5. During the second quarter, our revenue was flat and up in 1% in constant currencies. Pricing initiatives in response to continued raw material inflation contributed to a positive price/mix of 5% overall. Return on sales, ROS, excluding unallocated costs was 13.7%. And adjusted operating income was 36% higher mainly due to pricing initiatives and cost savings programs despite market headwinds. Adjusted earnings per share was 85% higher. And our EUR 2.5 billion share buyback is well underway, with over EUR 1.5 billion completed in the first half of this year. We've also announced that we canceled the first tranche of 14 million shares.

Now turning to Slide #6. Our Winning together: 15 by 20 strategy is delivering results. Pricing initiatives continued to deliver positive price/mix mostly driven by pure price. During the finals event of our Paint the Future startup challenge, we selected 5 startups for future collaboration. The innovations ranged from automated printing heads for coating large surfaces to totally novel polymer technology. These collaborations will help AkzoNobel push the boundaries of our industry and develop even more innovative solutions for our customers in the future.

All AkzoNobel global business services hubs are now operational, with 18 country transitions now completed. 45 country transitions are currently in progress out of a total of 120 to be completed by 2020. We are also steadily moving forward with our ERP integration and have now completed 7 out of the 18 go-lives planned for 2019. This ERP integration will play a key role in enabling our future performance improvement.

We delivered EUR 43 million of cost savings in the second quarter and are on track to deliver the promised EUR 200 million bottom line impact by 2020 as announced in October 2018. We're also pleased to have now finally concluded the purchase price settlement for Specialty Chemicals. All of these items demonstrate our continuous focus on execution of the transformation plans in order to achieve our 15 by 20.

Now turning to the market trends, Slide 7. Headwinds continue in the external business environment. Unfavorable currencies continued to impact the results and were mainly related to the Brazilian real and the Argentinian peso, but also the Turkish lira and the pound sterling had a negative impact. Raw materials and other variable costs continue to increase with EUR 30 million inflation in the quarter. Raw material costs are, however, expected to stabilize at the current levels in the second half of 2019.

Performance Coatings experienced softer market demand, including a slowdown in automotive OEM which impacted our automotive specialty BU as well as our Powder Coatings businesses. Demand for aerospace coatings remained strong, and order pattern for vehicle refinishes normalized. Demand for packaging coatings has increased due to more conversion from single-use plastic bottles to cans but also through specific AkzoNobel customer wins, while demand for wood coatings globally remained slow.

Decorative Paints showed good momentum in EMEA. In China volumes were lower partly as a result of our value over volume strategy. Volumes grew elsewhere in Asia, including India, Thailand, Malaysia and Vietnam. Positive developments continued for South America, excluding of course the adverse currency impacts.

Going forward, demand trends are expected to continue to differ per region and segment in an uncertain macroeconomic environment. We still expect revenue growth for 2019, while our 2% growth assumption is unlikely to materialize this year. In the face of softer market trends, we continue to focus on delivering our strategy while investing in strategic growth opportunities.

And with that, I'll now hand it over to Maarten, who will run through the financial results in more details from Slide 9 onwards.

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Maarten Jan de Vries, Akzo Nobel N.V. - CFO & Member of Management Board [4]

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Thank you, Thierry. And hello to everyone on the call.

A summary of our financial results is shown on Slide 9.

Revenue was flat and up 1% in constant currencies, with positive price/mix offset by lower volumes. Volumes were lower due to our value over volume strategy and softer market demand, including the automotive industry. Excluding Decorative Paints in China, volumes were 4% lower overall.

Adjusted operating income was up 36% to EUR 305 million driven by pricing initiatives and cost savings programs. Return on sales excluding unallocated costs increased to 13.7% versus the 12.1% in 2018. Operating income included net positive identified items of EUR 3 million mainly related to transformation costs of EUR 54 million and a gain on disposal of EUR 57 million, which related to the sale of our former paint factory in Slough, U.K.

Slide 10 shows the quarterly trends in volume and price/mix. We've been delivering positive price/mix for 6 quarters in a row resulting from our robust pricing initiatives. The 5% positive price/mix was on top of the 5% price/mix in the second quarter of 2018, which means we've almost fully offset the raw material price impact on a run rate basis. Decorative Paints price/mix was 4% higher in the second quarter, while volumes were 4% lower due to our value over volume strategy. Excluding China, volumes for Decorative Paints were flat. Continued focus on value over volume resulted in price/mix for -- of 7% for Performance Coatings, offset by 7% lower volumes, which were also impacted by external headwinds, including the slowdown in the automotive industry.

Slide 11 shows the main developments for adjusted operating income during the second quarter. The impact of foreign exchange rates remained unfavorable during the quarter and was mainly related to the Brazilian real and the Argentinian peso. The positive impact from our pricing initiatives contributed EUR 114 million price/mix partly offset by lower volumes. Higher raw material and other variable costs continued to be a headwind and adversely impacted the results by EUR 33 million in the quarter. Continuous improvement continues to offset wage and other fixed cost inflation, which together with our transformation plans delivered a total of EUR 43 million cost savings. As a reminder, in the second quarter of 2018 was negatively impacted by one-off items included within the operational results related to our transformation. These results show we are delivering towards our Winning together: 15 by 20 strategy.

Q2 results for Decorative Paints are summarized on Slide 12.

Decorative Paints improved profitability driven by continued strong performance in EMEA. Revenue was up 2% in constant currencies, with positive price/mix of 4% driven by pricing initiatives and acquisitions contributing 2%. Volumes were 4% lower due to our value over volume strategy and lower volumes in China. Excluding China, volumes were flat. Adjusted operating income increased to EUR 136 million, up 11% versus last year.

Continued pricing initiatives and cost savings more than offset higher raw material costs and lower volumes, resulting in an return on sales of 13.5% versus 12.2% in 2018. Adverse currency effects were driven by various currencies mainly related to the Argentinian peso and the Brazilian real as well as the Turkish lira and the pound sterling.

Turning now to Performance Coatings on Slide 13.

Revenue was flat in constant currencies, with 7% positive price/mix driven by pricing initiatives offset by lower volumes due to our focus on value over volume as well as softer market demand. Measures focused on restructuring and rightsizing, resulting in improved profitability for Marine and Protective Coatings. Industrial Coatings was impacted by lower demand for wood coatings in North America partly offset by strong demand of packaging coatings. Powder Coatings continued to focus on value over volume. Volumes were also lower for the automotive industry. As pictured, AkzoNobel made a major contribution to New York's Hudson Yards development by providing powder and industrial coatings for the project.

Adjusted operating income was up 15% at EUR 197 million, as pricing initiatives and cost savings more than offset higher raw material costs and lower volumes. Return on sales was up at 13.6% versus 11.8% in 2018. Operating income was adversely impacted by EUR 23 million identified items mainly related to the transformation.

Now turning to Slide 14. In the second quarter, adjusted EPS from continuing operations was 85% higher at EUR 0.96 mainly due to higher operating income. Profit from continuing operations increased to EUR 226 million in the second quarter versus EUR 123 million last year. Adjusted earnings per share also increased to the -- due to the positive impact from fewer shares following the capital repayment and share consolidation as well as the share buyback program.

Moving now on to Slide 15. Net cash from operating activities resulted in an inflow of EUR 152 million during the second quarter versus EUR 15 million in the second quarter of 2018. This increase was driven by higher profits for the period and lower outflow of working capital.

At the end of June 2019, net debt was EUR 62 million versus EUR 2.9 billion the same time last year. These developments are mainly due to the receipt of proceeds following the sale of Specialty Chemicals business and the subsequent returns to shareholders as well as seasonal operating working capital.

I'll now hand back to Thierry for concluding remarks on Slide 17.

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Thierry F. J. Vanlancker, Akzo Nobel N.V. - Chairman of the Board of Management & CEO [5]

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Thanks, Maarten.

In conclusion, we are very encouraged by the progress we show in the second quarter of 2019, as it proves that our AkzoNobel team is delivering towards our Winning together: 15 by 20 strategy.

Our adjusted operating income was 36% higher at EUR 305 million. And the return on sales, ROS, excluding unallocated costs increased to 13.7% versus 12.1% last year. Our ongoing pricing initiatives resulted in price/mix up 5%; and that is, as Maarten pointed out, on top of 5% in the second quarter last year. Our cost savings programs delivered EUR 43 million in the second quarter and are completely on track. Our share buyback program is well underway. And last week, we announced the intended acquisition of French aerospace coatings manufacturer Mapaero, which will strengthen our strong, already strong, global position in aerospace coatings.

Finally turning to Slide 18, which shows our updated 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 per segment in an uncertain macroeconomic 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 EUR 200 million cost savings by 2020, incurring one-off costs in 2019 and 2020, as outlined earlier. We target a leverage ratio of between 1 and 2x net debt-over-EBITDA by the end of 2020 and commit to retain a strong investment-grade credit rating.

Now I hand it over to Lloyd for information about upcoming events and the Q&A session.

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Lloyd Midwinter, Akzo Nobel N.V. - Director of Communications & Investor Relation [6]

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Thank you, Thierry.

Before we start the Q&A session, I would like to draw your attention to some upcoming events shown on Slide 19. We will publish our report for the third quarter 2019 on October 23, and our full year and fourth quarter results will be published on February 12, 2020.

This now concludes the formal presentation, and we'll be happy to receive your questions. (Operator Instructions)

Operator, please start the Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Excuse me, speakers. We have 10 questions in queue. Our first question comes from Tony Jones from Redburn.

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Tony Jones, Redburn (Europe) Limited, Research Division - Partner of Chemicals Research [2]

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(technical difficulty) two. Firstly, can you talk a little bit about what you're seeing from a volume perspective as you look into second half; and maybe give us a bit of color in terms of how you see customer activity and also continued impact from volume over -- sorry, value over volume? And then secondly, on raw materials, my quick math this morning got me to about 4% cost inflation for Q2, so well down on the sort of 10% we saw in Q1. Could you just let me know whether my numbers are even vaguely right? And if we see that trend continuing, is there any reason why we shouldn't get a cost tailwind coming through by the end of the year?

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Thierry F. J. Vanlancker, Akzo Nobel N.V. - Chairman of the Board of Management & CEO [3]

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Okay. Thanks, Tony. Thanks for your questions. Let me tackle the -- maybe the first one. And then Maarten, maybe you can do the second one, on the raws. On the value perspective for the second half, if you look at the charts we show on the volume evolution, you see that we basically are more or less stabilizing now. The year-over-year comparison versus 2018 will probably get much easier now for the second half of the year. You already see in the charts we showed that in deco we basically are holding our volume. The only difference you still see year-over-year is the exit we did in the very beginning of 2018 where we exited the really low-end and really at 0 margin economy lines in deco paint in China. So that is going to be year-over-year relatively now a much more normal comparison. The same effect is also what you see in Performance Coatings. So the comparisons become better because we have been shedding already in 2018 the low end, so the -- we aren't in fact shedding volume anymore. It's [really] the year-over-year comparison. So having said that, for the second half of the year, the volume comparison would be, more or less, even might be slightly negative, but it would really be in the very, very low single-digit-percentages difference across the board.

Now on the markets, what we see, there's ups and downs. I think in deco, except for that effect that is now a transient effect from the low end in China, we are actually pretty happy around the volume development we see around the world. Latin America is doing well, but of course the currency is impacting that quite significantly. And our home market in Europe, Middle East, Africa is doing in fact very well; also Southeast Asia. If you go to Performance Coatings, I would say the bigger impact macro economically is around the automotive industry. It does have an effect, although for us it's a minor impact than some other peer companies, but it does have an impact. And it does shave about 1% in growth out of -- out of the company for probably the second half of 2019. And then if you go to the different extremes, I would say on the real winners you would say aerospace is still very strong. Packaging is doing very strong. Not only the market, but we are gaining also because of new technology. And then the second, on the other hand, I would say automotive, as already just mentioned. Wood coating business is in a -- continues to be in a change -- both a change in the market but not helped by the China-U. S. tariffs. So Tony, I would say that's, without getting into a big expose, these are probably the bigger differences I would see on volume, but you would probably see a year-over-year comparison that is more flat going forward. On the second question, Maarten, maybe you want to tackle it.

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Maarten Jan de Vries, Akzo Nobel N.V. - CFO & Member of Management Board [4]

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Yes, yes. Tony, on the second question, on the raw material, as we've said earlier, we've seen kind of raw material at a high point at the end of last year. That's also flowing through our bottom line. We've seen that in the first quarter with a EUR 77 million and the second quarter with a EUR 33 million. Just post the end of last year, we have seen some softening of the raw material markets, but going forward we expect kind of a flat environment for the second half of the year, which basically supports our pricing initiatives and creates kind of the margin spreads we've been looking for. Because we have been, over the past kind of 6 quarters, trailing the raw material price increases, which are now, yes, almost cumulative EUR 900 million. And we believe, with the -- all the pricing initiatives, that we kind of have almost offset this headwind of almost EUR 900 million on a run rate basis by the end of Q2.

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Operator [5]

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The next question comes from Peter Clark from Societe Generale.

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Peter Anthony John Clark, Societe Generale Cross Asset Research - Senior Analyst, Chemicals [6]

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Two questions, please. The first one, I don't expect a comment obviously on Axalta itself, but you made it quite clear no major deals as you rightsize the company is the plan. On the bolt-ons, obviously you've done some nice deals now over the last 18 months, capped by the recent aerospace. In the past, of course, you were restricted with the pension and having Specialty Chemicals. Where do you see the sort of bolt-on growth you can get? Because obviously you were a laggard, reflecting your history. And we -- you talk about this nice, active pipeline. Can it -- on a trend line, can it be sort of between 1% and 2%? I know it depends on the deals appearing, but clearly historically you were nearer 1%, which was lagging the industry, reflecting I think your legacy business and pension. And then the second question is really just around the U.K. and the U.K. deco. There clearly seems to be 2 winners in this market at the moment. Have you got some sort of volume growth in the U.K. or a reasonable volume environment? And how comfortable are you, given all the uncertainty we've still got, that you and your other peer continues to do pretty well potentially against the other weaker players in the market in a difficult environment?

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Thierry F. J. Vanlancker, Akzo Nobel N.V. - Chairman of the Board of Management & CEO [7]

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Okay. Peter, thanks for your questions. You are right. Everything that we had to say around Axalta, I think, and that rumor, we have said. On the bolt-ons, not sure if I would necessarily share your description as being a laggard. I would say, over the last 2 years, I think we had a lot of things going on with Specialty Chemicals and all the other stuff and getting our house in order. I would rather say that we wanted to be very disciplined instead of just going for stuff to become bigger. Now I just want to point out that, that last year, we did 10 acquisitions, which I think is in -- is probably bigger than anybody out there last year. But for the bolt-on acquisitions, I think we pointed it out. It remains the same philosophy. First of all, we want to do acquisitions that are relevant for our business. So you probably will not see us venture too much into adjacencies, et cetera because we believe there's plenty of stuff to do in boosting our current market segments in geographies and technologies in there. Secondly, I think we want to be disciplined in the sense that we want to have -- we either want to pay multiples for items that have -- that are not higher than our own or we want to go for companies that really have -- are accretive to 15 by 20 at this moment of time. And there we've been pretty clear. If the choice is between going on a rampant acquisition or returning that money to our shareholders, this -- and that it creates more value, we'll go for the second one anytime because I think that's what we need to do. So I think it's more on the discipline. Now where is that happening? I think on deco there's still a significant amount of companies that we have in our pipeline. Now as we said before, those are often companies that either are family owned or are not listed, and that becomes always you have to soak on both sides a little bit. And the timing is not easily foreseeable. Since we are gainfully employed right now by doing the stuff we do in the company, we're not obsessing about that either. So we have a pipeline. You saw the Mapaero one coming out, something that we've been looking for, for 2 years, I mean, to see can we get there. So very happy with that deal. And then there might be some spurts still this year, or not, as things are coming out, but one of the items that we keep hands on in the management team is really focused on 15 by 20. It's getting the house in order, the systems, the processes in place so that we can deliver the value when we do an acquisition versus just throwing up mud when -- at the moment of the acquisition.

On the second part, on deco. On those markets I would say the deco market's underlying are quite stable. So in that sense it's more a GDP kind of business for us. I think we're very encouraged by the resilience of our businesses, and I will say there's 2 secrets to it. And a lot of moving parts also in our business is one, getting our distribution right both in our own stores, the network [as] distributors, all the channels. There's a lot of work ongoing in all of the markets very tailored to what we need to do. We did it in the Netherlands, doing it in France. Did it in the U.K., and we continue to do this around the world. So distribution is obviously a strong element for winning or losing in this market. And secondly, innovation. We have -- around the world, I think, where we're using our global portfolio of products allows us to introduce new products in another geography that haven't been there before. And in that sense I think we can renew the product line. Helps in pricing but helps also in just being relevant for customers. Not sure if -- Peter, if I answered your questions.

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Peter Anthony John Clark, Societe Generale Cross Asset Research - Senior Analyst, Chemicals [8]

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Well, it was just the second question was about the U.K. specifically. Obviously, you and your American peers seem to be doing pretty well. Others are suffering. Just how confident you are looking ahead with all the uncertainty we have in the U.K.

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Thierry F. J. Vanlancker, Akzo Nobel N.V. - Chairman of the Board of Management & CEO [9]

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Yes. Well, actually we're a bit more optimistic about the U.K. now. We've -- we'd commented before around consumer confidence. There was a doom-and-gloom period. And maybe that just is still there, but it's just worn off. People just get on with it and start painting the shed in the garden just to get rid of their frustration. So the market has been holding up. The pound has dropped, so that didn't help us, but I think there again I would go to the reach we have both in the big boxes, as in our own stores, [as through] distribution. I think that, of course, with our Dulux brand we are so visible in that market that we're probably the first choice for consumers in the U.K.

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Operator [10]

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The next question comes from Laurent Favre from Exane BNP Paribas.

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Laurent Guy Favre, Exane BNP Paribas, Research Division - Research Analyst [11]

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Yes. My 2 questions, I guess, are related to -- on the first side, on organic growth and on the cost side. On the volume side, could you maybe give us an update on the volume decline in Q2? And how much of that was in the different buckets between, I would say, what you regretted versus what was voluntary and maybe other? And then the second question is on the OpEx side. I think it was in the past few quarters EUR 34 million gain, EUR 38 million. Now EUR 43 million. Thierry, you keep on saying that the progression to 2020 is not going to be linear, and I'm just wondering if we should be expecting at some point in time that this OpEx saving will go nonlinear or whether we should continue to assume a small improvement from EUR 43 million into the second half and 2020.

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Thierry F. J. Vanlancker, Akzo Nobel N.V. - Chairman of the Board of Management & CEO [12]

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Yes, okay. So let me address the first question, on the organic growth. And then Maarten, maybe you can handle the OpEx question, where I don't want to duck the fact that I said that, Laurent. So just call me out on it,[if you] don't get a satisfactory answer. On the organic growth, I think we -- overall the buckets are still more or less there. 1/3 is -- 1/3 is market. 1/3 is nonregretted losses and 1/3 is regretted losses, but maybe put a bit more depth on it by business. I would say -- on decorative paint, I would say its market is relatively flattish if you take everything together. You see also our volume being flat, so I think we're in line with the market. The really only loss we still show is the nonregretted loss in the economy part of Decorative Paints in China. So in deco I think it's a much more straightforward case. If I look at Performance Coatings, I would say 1% or 2% is -- probably, out of the 7% that we've shown, is related to markets. Mostly wood, automotive is the key drivers there. I would say then for us walking away from business is probably another 3 percentage points, which is the nonregretted loss, mostly in the low end of the Industrial Coatings businesses, some of the Metal Coatings businesses, et cetera. And then I would say 2% is really, I would say, regretted loss because of prices. That's about the split I would give on that. I just want to point out, though, that -- and I -- hopefully, that became clear, that sequentially we're really not walking away from business anymore. In marine and protective, you still see us optimizing somewhat between not very attractive marine projects; and putting that in much more attractive protective project, protective business projects. So it's flat overall, but there is under the waterline kind of a shift from one part of the business to the other part of the business. But sequentially you would, we would see a much more stable situation where we wouldn't be moving away from business voluntarily anymore. Not sure, Laurent, if that answered your questions. Then I would go for Maarten for your OpEx question.

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Laurent Guy Favre, Exane BNP Paribas, Research Division - Research Analyst [13]

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Yes. Maybe another follow-up on -- just on the volume side very quickly. Did you see any strange pattern on demand in Europe in deco in Q2 because of the weather, which has been mentioned by others? So either too hot or too wet. And do you think that maybe there is a bit of a catch-up into Q3 because of the weather in Europe in deco?

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Thierry F. J. Vanlancker, Akzo Nobel N.V. - Chairman of the Board of Management & CEO [14]

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No, not really, to be honest. I mean the -- now weather, of course, Laurent, is always you can do anything with weather. It's raining always. And it always rains somewhere, I would say, but not really. So I don't think that's really an issue that we've seen, no, I mean.

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Maarten Jan de Vries, Akzo Nobel N.V. - CFO & Member of Management Board [15]

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Yes. So then moving to the -- to your question on OpEx. So first of all, I think it's important to reconfirm. So we have announced a EUR 200 million savings program. We announced it at the end of last year. We've indicated EUR 100 million this year and EUR 100 million next year. I think it's important to realize that we still have a carryover effect of the saving program of last year. We indicated that in Q1, and still a piece of that sits also in the second quarter. So for the second half, if you compare to the EUR 43 million -- so we've been ramping up the savings for this new program from the first quarter onwards, but for the second half, so Q3 and Q4, that run rate will be lower versus the EUR 43 million and then adds -- that adds then up to the EUR 100 million. Purely because of the, second quarter, we still have some carryover, I would say, in the tune of EUR 10-plus million sitting from carryover of last year's program. I hope that helps.

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Laurent Guy Favre, Exane BNP Paribas, Research Division - Research Analyst [16]

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Yes.

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Operator [17]

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The next question comes from Gunther Zechmann from Bernstein.

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Gunther Zechmann, Sanford C. Bernstein & Co., LLC., Research Division - Research Analyst [18]

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Thierry, Maarten and Lloyd, 2 questions from my side as well. First is going back to pricing. Thierry, you said in your speech you implemented price increases in response to raw material price increases despite the market headwinds. Is there any scope or what's going on in the operating part of the business for proactive price action to get to the 15 by 20 target? And what's the endgame for the value before volume strategy? And the second one, a quick bolt-on, pun intended, question to the M&A discussion: Would you ever buy an asset below the 15% margins expected for 2020?

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Thierry F. J. Vanlancker, Akzo Nobel N.V. - Chairman of the Board of Management & CEO [19]

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Okay, Gunther, on pricing it's probably a bit of a tag-teaming between Maarten and myself. Yes, it was a response. As we all said, we wanted to recover what we'd lost since the beginning of -- actually the end of 2016, to be precisely. So I think we have arrived, as the GPS tends to say, on doing that. So that was on a catch-up mode. What you've seen is that, as the raw materials stabilized, we've been chasing the raw material increases and therefore couldn't necessarily show it to the extent in the bottom line. As raw materials stabilized, as Maarten answered, we -- finally we see the spreads where you basically see the amount of effort that the organization has put in. On proactive pricing management, definitely where we went to all hands on deck to recover what was being lost, there's 2 elements on that. One is, I would say, more on the value pricing where our segments is maybe less blanket but much more targeted on what is our value offering versus the rest of the market and where can we really value versus just doing the cost absorption. And secondly, I think for us also it's a learning but probably learning in the industry or across the whole industry that the maintenance of pricing maybe over the last 3, 4 years has been a little bit lost. And that would have helped a lot, I think, if the discipline had been in place for our company at least to do this ongoing pricing management. I don't know, Maarten, if you want to add on the pricing here...

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Maarten Jan de Vries, Akzo Nobel N.V. - CFO & Member of Management Board [20]

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Yes. So we -- I mean we stated that also before, that we really need to go and want to go to an structural pricing management. And you could call that in the category of pricing maintenance, where we structurally on a yearly basis implement price increases to compensate basically for structural inflation. So that would be kind of the -- an regular pricing per early year, and that will in this case be per early 2020.

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Thierry F. J. Vanlancker, Akzo Nobel N.V. - Chairman of the Board of Management & CEO [21]

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On your second question, Gunther, on would we ever do an M&A on a company that is less than 15%. I think the answer of that would be yes, but then we would have to be sure that -- with the synergies and the way that it helps our business case, that it actually gets us to close on the 15% and that it's not dilutive. That is actually less to do with the 15 by 20 but actually more overall hygiene. I think, if people come up with proposals -- and in fact it's not if. When they come up with proposals to the executive committee, it's really like are we doing this just to boost the top line. Or are we doing this because it makes our business better? And that is definitely, I think, the focus we're going to keep. And there's also certain businesses we said we're not going to invest in that for M&A. We're just going to improve what we have. And there's others and our team knows that have a priority. The aerospace one we did, obviously aerospace for us is a key attention, we have an extremely big role in that one. It is a very attractive segment. So as you might imagine, Mapaero basically crossed all the boxes because it was in that segment. It was accretive to 15 by 20, and we do see quite some synergies in the delivery to big customers. But that, I think, is kind of how we think about M&A.

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Maarten Jan de Vries, Akzo Nobel N.V. - CFO & Member of Management Board [22]

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Yes.

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Operator [23]

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The next question comes from Geoff Haire from UBS.

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Geoffrey Robert Haire, UBS Investment Bank, Research Division - MD and Equity Research Analyst [24]

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Could you help us by splitting out the price and mix part in Q2 of your price/mix up 5%? And then looking forward into the second half, do you expect price/mix to remain positive year-on-year given the strong performance you had in the second half of last year?

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Maarten Jan de Vries, Akzo Nobel N.V. - CFO & Member of Management Board [25]

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Yes. So if you look at price/mix in the second quarter 5%, basically on top of the 5% price/mix in the second quarter of 2018. In both cases, that is mainly price. So if you take kind of the total 10%, you should kind of think of that we are sitting at roughly 8%-plus [true] price compensating the raw material impact. And that's also the reason why we stated that kind of we've almost covered the total pricings impact -- the raw material pricing impact of '17, '18 on a run rate basis at the end of Q2. If you look at the second half and -- we will still see kind of the carryover of our pricing initiatives, but it will be in a moderated way. So the price/mix effect in the second half will be moderated versus what we've seen in the first half of the year.

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Operator [26]

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The next question comes from Alex Stewart from Barclays.

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James Alexander Stewart, Barclays Bank PLC, Research Division - Chemicals Analyst [27]

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Two quite simple questions, I hope. First one, you have since the beginning of the year discussed the 1 to 2x leverage target, which may include another buyback program at some point. Could you give us some idea of when you might tell the market how you're going to spend that cash? It'd be very useful. And then secondly, Maarten, this is a quick question for you. The depreciation charge in Decorative Paints was EUR 41 million in the second quarter but only EUR 35 million in the first quarter. Could you possibly tell us why the D&A charge was materially higher in the second quarter and whether we should use EUR 35 million or EUR 41 million as a guide for the second half of the year?

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Thierry F. J. Vanlancker, Akzo Nobel N.V. - Chairman of the Board of Management & CEO [28]

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Okay, Alex. Thanks. I'll entertain you with the first question, so Maarten can think about the second one. On the 1 to 2x leverage, in fact, that is a conversation we have in the board of management and then to propose to the Supervisory Board. As we said, I mean, we want to get -- we haven't said much more than that. We want to go between 1 and 2x leverage. It's relatively straightforward to do the math, on where we're going to be 0 leverage by the end of the year, what that actually would indicate. It's -- we also have been pretty quiet around is this through some acquisitions. Is this through share buyback? Is it through dividend? Honestly, I think it's going to be somewhat decided on the spur during the year of 2020, depending on whether the -- are there acquisitions that come on the table, as I just indicated. Those are a bit choppy in many of those middle-sized acquisitions. And then either we might announce a share buyback or we might announce a special dividend, but we haven't necessarily decided that. And it might very well be that, that is during the year 2020 or at the end of '19 that we start indicating what those partial plans are. Again, the intent is pretty clear on where we want to end up at the end of 2020. And then that amount of money that would flow out of our balance sheet, I would say, would then be in those 3 buckets, but we haven't decided yet.

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Maarten Jan de Vries, Akzo Nobel N.V. - CFO & Member of Management Board [29]

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Yes. And on the second question, on the depreciation. You might be aware our depreciation is impacted by the implementation of IFRS 16 per the 1st of January. You're right. There is an -- a change between Q1 and Q2 of some EUR 5 million, yes. It could be that it is kind of a catch-up of the implementation of IFRS 16 because this is an -- is a major project, but maybe the best is that we still separately come back to you if there is any specifics in there.

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Operator [30]

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The next question comes from Mutlu Gundogan from ABN AMRO.

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Mutlu Gundogan, ABN AMRO Bank N.V., Research Division - Analyst [31]

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Two questions as well. The first, on the volumes. These were down 6% in the quarter. Can you talk about the development within the quarter? So how was the performance in April, May and June? And also, since we are already in Q3, can you share with us how July has started given all the negative news that we have seen? And then secondly, on price/mix, how you talked about it. It was up 5% year-on-year in the quarter. Just can you talk to us, tell us how the sequential pricing have -- has been in Q1, in Q2 and then going into Q3?

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Thierry F. J. Vanlancker, Akzo Nobel N.V. - Chairman of the Board of Management & CEO [32]

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Okay. Okay. I think -- on the sequential price/mix, I think that's probably in our data, but I think Maarten can probably walk you through that. On the volumes in the quarter, now of course, you have seasonality in there. So every month is very different, so -- as you go. And there you may have some weather patterns, but that just shifts it from 1 week to the other, so I'm not sure that we are too hung up on that. I would say the beginning of the quarter was maybe slightly stronger than at the end, but I'm not sure that you can draw any conclusions out of that because then you have to go back to the order pattern in the first quarter. So I mean that becomes probably a little bit too micromanaging, to do those kinds of stuff. So I would say, suffice it to say it was a relatively normal quarter on volume developments, as far as the second quarter goes. On the third quarter, how it started: I mean again there. I mean we're like 2, 3 weeks in. July is typically a big month. I'm not sure that I would really want to comment on that. I don't think we've seen any extraordinary there on either side of that equation. Sorry to be a bit evasive for it, but I wouldn't want to have a 1-week trading positive or negative influence the view because that's really not how our business works given the supply chains, the inventory in all the -- in the whole trajectory. It's not that precise. On the second one, price and mix...

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Maarten Jan de Vries, Akzo Nobel N.V. - CFO & Member of Management Board [33]

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Yes. So I think what you've seen -- and I am now basically looking at the sequential price/mix over the past quarters, where in Q4 we were at 9% which [had then] also a mix component. In Q1, we were at 6%, and in second quarter, it's 5%. What you see and we've also indicated that, that we have still implemented pricing initiatives in the first half, very much focused on the first quarter and early second quarter, which is now coming through in our numbers. And that's why (inaudible) going forward a more moderated effect as these pricing initiatives are coming through our numbers. So from an sequential perspective, the -- yes, most of the pricing initiatives have been now implemented and we will see that impact coming through.

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Operator [34]

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The next question comes from Mubasher Chaudhry from Citi.

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Mubasher Ahmed Chaudhry, Citigroup Inc, Research Division - VP [35]

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Just on the pensions. Now that the triennial review has been done, we shouldn't expect any large costs going forward, but can you just confirm how much of the pensions are not covered by the insurance buy-in, if there are any? And then just second on the corporate costs. 2Q came in quite low. Now the overall guidance is EUR 150 million to EUR 180 million for the year. Now should we be modeling lower than that given that the 2Q was lower than the run rate expected?

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Maarten Jan de Vries, Akzo Nobel N.V. - CFO & Member of Management Board [36]

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Yes, let me first start with your last question, on the corporate costs, unallocated costs. So you are right. The first half, we were at EUR 63 million. And indeed also compared to last year -- in the second quarter, we indicated at the time that there was a one-off in the corporate costs. That also was the reason why last year, the second quarter, it was substantially higher. For the full year, we've indicated the range between EUR 140 million and EUR 180 million. And as we sit right now, I would say we would come in at the lower end of this range between EUR 140 million and EUR 180 million, where we recognize that Q2 was somewhat lower than the -- than a normal run rate, but this is always we have some pluses and minuses, whether that is related to insurances or pensions or other stuff.

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Thierry F. J. Vanlancker, Akzo Nobel N.V. - Chairman of the Board of Management & CEO [37]

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I just want to point out also that there were -- when we announced 15 by 20, there were some dark spirits who believed that we were going to shovel as much cost as possible in corporate costs just to get those business ROSes up. Hopefully, this is a proof point of what we've been saying, that, that was not the plan all along. Because we would feel doing that is a bit cheating yourself, to be very honest, because it's really around resetting the company. So hopefully, it's a proof that we keep the hygiene there between the buckets.

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Maarten Jan de Vries, Akzo Nobel N.V. - CFO & Member of Management Board [38]

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Yes. And on the pension question. So first of all -- but it was a Q1 event. We're very pleased that we have settled basically the top-up payments for the U.K. pension funds. And we've also indicated going forward that we kind of see on a yearly basis maybe kind of an -- roughly a EUR 10 million top-up per year for the other remaining pension funds, which is mainly U.S. and Germany.

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Operator [39]

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The next question comes from Christian Faitz from Kepler Cheuvreux.

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Christian Faitz, Kepler Cheuvreux, Research Division - Equity Analyst [40]

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Just a couple of questions, please. First of all, in deco in Asia, can you give us a rough idea of price and volume moves in that segment again, just in Asia? And then second, in automotive refinish, can you give us an idea of your geographical split? Some of your peers seem to be suffering, particularly in North America.

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Thierry F. J. Vanlancker, Akzo Nobel N.V. - Chairman of the Board of Management & CEO [41]

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Yes. Christian, thanks for your question. Deco Asia, of course, is a very heterogeneous bunch, so maybe let me split it up before we go on a country view where it would be -- probably would be out of my depth here either, to be honest. But if you go to North Asia, which is basically China; and then South Asia, I think 2 dynamics. I think the price for price increase for us were -- has been -- for Dulux has been relatively modest. The biggest change in seasonal average price is that we exited that low-end business which would have been at a 0 margin or a negative margin even by now if we hadn't moved prices on that. So if you were buying a pot of Dulux paint 18 months ago, the price hasn't gone up that much, but the mix in our business has been significantly different. Southeast Asia, there has been quite some pricing movements. Also sometimes, with new product introductions, that allow you then to reset your pricing points there significantly. Volumes in Southeast Asia have not been impacted that much, so that has been much more of an, I would say, handling of the normal business but a bit more aggressive, I would say, on pricing.

Secondly, on the automotive refinish. Well, as you well know, I mean a big part (inaudible) business is, of course, here in Europe, in the home market. We are a #3 player in the -- in North America. And we are a #3, #4 player in Asia. So we are a smaller player out there, whereas we are -- of course, have the bulk of our business here in Europe. Not sure if I've answered your question, though, Christian.

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Christian Faitz, Kepler Cheuvreux, Research Division - Equity Analyst [42]

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No, that helps immensely.

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Operator [43]

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The next question [comes] from Nathalie Debruyne from Degroof Petercam.

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Nathalie Debruyne, Banque Degroof Petercam S.A., Research Division - Analyst [44]

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My question was actually around the unallocated costs, but you basically answered it. But I was, yes, following up on that, wondering what should we model going forward, rather towards the lower end of that range? Or I mean it can vary from 1 year to the other.

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Maarten Jan de Vries, Akzo Nobel N.V. - CFO & Member of Management Board [45]

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Yes. So for this year, as I indicated, you should think of more at the lower end of the range between EUR 140 million and EUR 180 million. For next year, we stick to the range of the EUR 140 million to the 80 (sic) [EUR 180 million]. And the assumption would be that we, yes, more or less would sit in that midpoint of that range, but for this year, as I indicated, with the pluses and minuses, it would be more to the lower end of this range.

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Operator [46]

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The next question comes from Markus Mayer from Baader-Helvea.

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Markus Mayer, Baader-Helvea Equity Research - Lead Analyst of Chemicals [47]

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Only one question remaining, on the Performance Coatings division. We've heard from other companies, for example, Covestro, that demand for industrial and protective coating came down, but when I look into your [part], that is not that much [wreck]. Maybe you can give us some light on this, if you see any kind of demand slowdown there or if any customers highlighted CapEx cut in particular in the protective coating environment.

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Thierry F. J. Vanlancker, Akzo Nobel N.V. - Chairman of the Board of Management & CEO [48]

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Yes. No, actually it's a bit the contrary. So if you look at the marine and protective business, the top line has actually been pretty stable, but it's a little bit like a duck on water. I mean, if you look under the water, there's a lot of stuff happening in there. So what you see in marine, that market is still relatively flattish. In fact, the team is still very selective on the projects we go after so that they really manage the margin. So you would probably see that a little bit still reduced in our portfolio. At the same time, protective, however, is picking up quite, quite nicely. Now our focus in marine -- in the protective business and our forte for the business has been oil and gas related, the hardcore chemical industry where corrosion protection, chemical protection, fire protection is really -- is actually at the top end of what you need to have. And those markets are in fact doing quite well, and we see in fact an increasing pipeline. And that is more or less around the globe. So while marine and protective looks like it's pretty stable, there is a shift from one leg of the business to the other leg of the business ongoing. I would also like to point out that, that business is -- margin-wise has a significant step-up; and has, I would say, regained -- if this is a bicycle race, they've regained their place in the key group of performers. And that's been done by pricing the portfolio management and costing that they've taken out, but you do see a shift here to protective. So in our oil and gas segments, on the contrary, we see actually a very healthy pipeline.

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Operator [49]

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The next question comes from Georgina Iwamoto from Goldman Sachs.

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Georgina Iwamoto, Goldman Sachs Group Inc., Research Division - Associate [50]

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Thierry, Maarten, I've got 2 questions. The first one is if we can just take a step back and look at the big picture view of 15 by 20. I think it's fair to say that you have both sounded consistently, nothing less than very confident on delivering on 15 by 20 over the past year. And I think that's despite the demand environment being a bit less supportive than you could have imagined. Can you remind us what gives you such confidence on delivering now that we're really getting down to it and what you're currently focusing on? And then my second question is your peers in the U.S. have been later in price-raising initiatives than you have, so pricing for them seems to be more in focus for the second half than volumes. Do you see a market share gain opportunity ahead?

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Thierry F. J. Vanlancker, Akzo Nobel N.V. - Chairman of the Board of Management & CEO [51]

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Yes. Thanks for -- Georgina, for your questions. I think, on the first one, we've -- as you know, we've actually kind of tailored down the growth for the company because we didn't want to bet on the market for achieving 15 by 20. In hindsight, that was the right decision because the market hasn't panned out as was -- as you would hope as a tailwind. So I think walking to the bridge. And I think, Maarten, you want to do that. The bridge is still completely intact because we were not expecting strong markets, and that has been the buffer that allows us to achieve it. A couple of elements, I think, when we walk to the cost buckets and then the margin: One of the elements, that as these programs get mature and they roll out, there's an enormous amount of work that's happening between our RD&I, our research organization; our integrated supply chain manufacturing organization; and procurement around what we would call value engineering. And that goes to really getting order; in our suppliers, getting to multiple suppliers, e-auctioning, tail management, et cetera, which is probably a self-created tailwind that is an additional buffer in case markets would deteriorate more. So it is on the self-help, but Maarten, maybe you want to walk a bit through the buckets, yes.

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Maarten Jan de Vries, Akzo Nobel N.V. - CFO & Member of Management Board [52]

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Yes. So I mean the interesting thing is that indeed we have been very consistent, but our bridge is still very consistent with what we've said earlier. And basically if you take the 10.6% starting point of last year, reaching to the 15% in 2020, it is really half is margin expansion through our pricing initiatives and creating that spread versus -- pricing versus raw material as we have trailing -- as we have been trailing the raw material price increases. So -- and the other half is really our OpEx cost-saving actions on the back of the EUR 200 million which we've indicated, plus some kind of carryover of the EUR 100 million program we did last year. So that bridge is still very much intact. And in fact, in my view, the second quarter results reconfirm that bridge, as the second quarter is very much coming in, in line with our own expectations and our own planned trajectory towards 15 by 20.

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Thierry F. J. Vanlancker, Akzo Nobel N.V. - Chairman of the Board of Management & CEO [53]

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On your second question, Georgina, on the competition being later in raising their prices. And if they put more emphasis on that, give -- does it give an opportunity for us for share gain? I would say yes. I think I'd confirm, by the way, the (inaudible) [perverse] way we're probably managing the volume evolution that, if we were to perk up on volume, we would probably ask the individual business leaders whether there is an opportunity for pricing. Because either we are that good in the segment, and that happens; or something else is happening with somebody else's prices if all of a sudden you're much more popular. So I would say that it would be a balanced view to see where we can do margin expansion, but at the same time I think we are committed to not losing more volume either. So I think we want to maybe more orient ourselves a bit on what the others are doing. And I don't know, Georgina, if that answers your 2 questions.

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Georgina Iwamoto, Goldman Sachs Group Inc., Research Division - Associate [54]

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Absolutely. Very helpful.

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Operator [55]

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The next question comes from David Symonds from JPMorgan.

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Chetan Udeshi, JP Morgan Chase & Co, Research Division - Research Analyst [56]

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It's Chetan here from JPMorgan actually. I just wanted to just clarify one point on the deco pricing because it seems all of the volume decline was China. So I'm surprised you said there was no mix element to it. It's all pricing. That's number one. And number two, probably I joined the call late, so I don't know whether this was discussed, but just looking in the past, typically when the raw materials flatten out or decline, the paints industry pricing has usually followed with a lag. I mean what are your thoughts at the moment on [pricing evolution] beyond maybe, say, 1 or 2 next quarters? How would the raw material environment, as you see at the moment, feed through in terms of the industry pricing environment?

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Thierry F. J. Vanlancker, Akzo Nobel N.V. - Chairman of the Board of Management & CEO [57]

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Yes. Okay. So maybe on the first one, on the mix one for China. So that there's no confusion. In China, if you look at deco paint, we haven't done that much on the like-for-like pricing. Prices went up to offset some of the raw materials, but the biggest effect in China in deco has been on the mix, where we stepped away from the nonvalue-adding and literally 0 margin low end of the business which was big volume but frankly didn't contribute to the bottom line. So yes, in China, obviously there is a mix effect, but I think what Maarten's comment was around the price/mix effect for the total company. And in the scheme of things, that's probably part of this low single-digit mix effect, but the rest is all on pricing. So hopefully, that's clarified with that. On the past on pricing, et cetera and what we're going to do: I think, as we forecasted that the raw material environment is stabilizing, we definitely as a company want to keep managing our margin versus what the raw materials are. We also indicated on getting back to good, old-fashioned pricing hygiene, on annual cycles; and looking at your pocket margins. So us -- definitely want to keep managing our margin in view of where the raw materials are and, in fact, to keep that expanded margin or even slightly improving that expanded margin across the board. I don't know, Maarten, if you want to comment more on that.

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Maarten Jan de Vries, Akzo Nobel N.V. - CFO & Member of Management Board [58]

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No. We've commented earlier and on your question what will we see in the second half. We still will see a moderated price/mix impact, a positive impact, but it is really the carryover from all the initiatives we've taken in the first half. And as we said earlier and indicated, that as part of the pricing maintenance, we are looking to go to annual price increases. And early 2020 will be part of that.

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Thierry F. J. Vanlancker, Akzo Nobel N.V. - Chairman of the Board of Management & CEO [59]

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Does it answer your question?

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Chetan Udeshi, JP Morgan Chase & Co, Research Division - Research Analyst [60]

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Understood. And actually -- yes, it did. And just coming back to -- I think there was a previous question on second half volumes. And I think you broke out sort of thoughts of -- by different buckets in terms of deco or Performance Coatings. For the group overall, at this point given what you see in terms of dynamics, would you say it's looking more like down volumes again in second half? Or the previous comment around flat volumes are still possible in the current environment.

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Thierry F. J. Vanlancker, Akzo Nobel N.V. - Chairman of the Board of Management & CEO [61]

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I think that will be more the case because in fact, as we said, we are not really walking away from volume anywhere at this point of time. So it's more the sequential effect, if you compare it to the second quarter of 2018 and all the steps that we're taking in the meantime. So I think year-over-year comparisons are going to be flattish. Now that might be depending on some key markets, like automotive might be 1% down, might be 2% down, might be 1% up, but it's going to be probably very much the volume we have right now.

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Lloyd Midwinter, Akzo Nobel N.V. - Director of Communications & Investor Relation [62]

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Great. I think we have time for one more question.

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Operator [63]

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The next question comes from Laurent Favre from Exane BNP Paribas.

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Laurent Guy Favre, Exane BNP Paribas, Research Division - Research Analyst [64]

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Yes, just one final one on the Slough disposal, and I'm just wondering. As you're doing more asset footprints and assets rationalization, should we expect a few more disposals of sites you no longer need or you may have been shutting down? Maybe not as big as Slough, but anything there to be aware of?

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Maarten Jan de Vries, Akzo Nobel N.V. - CFO & Member of Management Board [65]

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Good question. So first of all, Slough indeed was an -- a very exceptional deal and a large deal. And we also felt we have to separately indicate that -- and you've seen, that that benefit of EUR 57 million is part of the identified items. Yes, we might see some, but it will be smaller ones. And of course, there is always a lag effect in terms of the footprint actions we take and then ultimately the sale of the real estate here and there. It's difficult to guide on this, but there might be here and there some smaller stuff coming on the market.

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Thierry F. J. Vanlancker, Akzo Nobel N.V. - Chairman of the Board of Management & CEO [66]

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[To align --] align with that, Laurent, I think there's a number of legacy things that we'll be cleaning up. The pension was one of them. And this is -- the Slough site was one of it, too. So yes, there's going to be some background noise of smaller deals, but don't expect too much. Unless you want to have, you want to buy a villa on a piece of land in a Chinese industrial park, just give us a call and we'll have a deal for you, but not sure that's going to be significant in our numbers.

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Lloyd Midwinter, Akzo Nobel N.V. - Director of Communications & Investor Relation [67]

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All right, thank you very much for everybody who joined the call and for your continued interest in AkzoNobel. All the details are available on our website akzonobel.com, and feel free to reach out to investor relations in case of further questions.

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Operator [68]

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And that concludes today's conference. Thank you for your participation. You may now disconnect.