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Welcome
Amsterdam, December 8, 2009 AkzoNobel Specialty Chemicals Teach In
A Spotlight on AkzoNobel Specialty Chemicals 2
Today’s Program
1. Brief introduction to AkzoNobel – Keith Nichols
2. Spotlight on Specialty Chemicals – Rob Frohn
3. Surface Chemistry – Frank Sherman
4. Functional Chemicals – Bob MargevichQ&A session
Coffee break
5. Industrial Chemicals – Werner Fuhrmann
6. Pulp and Paper Chemicals – Jan SvärdQ&A session
7. Wrap-up and closing – Rob Frohn
3Brief introduction to AkzoNobel | Specialty Chemicals Teach In
AkzoNobel key facts
2008• Revenue €15.4 billion• 61,300 employees• EBITDA: €1.9 billion1
• EBIT: €1.4 billion1
• Credit ratings: BBB+ (S&P) and Baa1 (Moody’s)
1Before incidentals
Revenue by business area EBITDA1 by business area
Performance Coatings
Decorative Paints
Specialty Chemicals
29%
34%
37%27%
29%
44%
4Brief introduction to AkzoNobel | Specialty Chemicals Teach In
AkzoNobel strategic ambitions
Tied to incentives, both for value creation and sustainability
Leading in value creation• Outgrow our markets• EBITDA margin > 14 percent by end 2011• 0.5 percent improvement in operating
working capital (OWC) level, p.a.
Leading in sustainability• Top 3 Dow Jones Sustainability index• Reduction in total recordable injury rate• Step change in people development
5Brief introduction to AkzoNobel | Specialty Chemicals Teach In
Delivering the EBITDA margin ambition
0
6
12
18EBITDA margin, indicative
Organicgrowth
Operationaleffectiveness
Marginmanagement
End2011
ICIsynergies
2008performance
6Brief introduction to AkzoNobel | Specialty Chemicals Teach In
Key components of the strategicaction planICI synergies• €340 million structural cost savings
• Delivered more rapidly than originally planned
Organic growth• Leveraging our strong emerging markets positions for growth
• Emphasis on focused, bigger, bolder innovation
Margin management• Centralized procurement
• Systematic approach to managing the value chain
Operational effectiveness• Additional restructuring beyond the ICI synergies
• Leaner, more efficient organisation at all levels
7Spotlight on Specialty Chemicals | Specialty Chemicals Teach InA Spotlight on AkzoNobel Specialty Chemicals 7
Spotlight on Specialty Chemicals
Rob Frohn Board member responsible for Specialty Chemicals
8Spotlight on Specialty Chemicals | Specialty Chemicals Teach InA Spotlight on AkzoNobel Specialty Chemicals 8
Agenda
• Introducing Specialty Chemicals
• Introducing the Business Units
9Spotlight on Specialty Chemicals | Specialty Chemicals Teach In 9
Our Specialty Chemicals portfolio
National StarchIndustrial Chemicals
Surface ChemistryFunctional Chemicals Pulp and Paper Chemicals
Chemicals Pakistan
10Spotlight on Specialty Chemicals | Specialty Chemicals Teach In 10
Specialty Chemicals key facts
2008• Revenue €5.7 billion• 13,300 employees• EBITDA: €891 million1
• 35% of revenue from emerging markets• Major producer of specialty chemicals• Leadership positions in many markets
1Before incidentals
Revenue by business unit Revenue by geography
Europe
Asia Pacific
North America
Latin America
Other regions
Functional ChemicalsPulp and Paper ChemicalsIndustrial Chemicals
National Starch
Surface Chemistry
Chemicals Pakistan
29%
17%15%
14%
8%
17%
44%23%
9%2%
22%
11Spotlight on Specialty Chemicals | Specialty Chemicals Teach In 11
A clear focus
2004 review established the way forward:
• focus on market and technology leadership positions
Resulted in:
• growth platforms
• trimmed portfolio
• reduced cyclicality
Recent acquisitions have further strengthened the portfolio:
• LII Europe (Industrial Chemicals), Levasil (Pulp and Paper), ICI (Surface Chemistry, Functional Chemicals)
12Spotlight on Specialty Chemicals | Specialty Chemicals Teach In 12
The markets we serve
Revenue by market€ billion, 2008
0
1 000
Rubbe
r & pl
astic
s
Paper,
ing, p
ublis
hing
Food &
beve
rage
Manufa
cturin
g
Soaps
, dete
rgents
, etc.
Chemica
ls an
d m/m
fibers
Textile
s
Agro-ch
emica
lsPetr
oleum
Extrac
tion
Paints
Pharm
aceu
ticals
Electric
ity, g
as, w
ater
Agricu
lture,
fores
try, fi
sheri
esAero
spac
e
13Spotlight on Specialty Chemicals | Specialty Chemicals Teach In
Excellent geographic spread
Emerging markets are important (35% of revenue)% of revenue, 2008
‘Mature’ Europe
40%
Asia Pacific
22%
Rest-of-world
2%Latin America
9%
North America
23%
‘Emerging’ Europe
4%
14Spotlight on Specialty Chemicals | Specialty Chemicals Teach In 14
Attractive operating margins over the cycle€ billion
0
1
2
3
4
5
6
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009ytd Q3
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
revenue EBITDA margin
15Spotlight on Specialty Chemicals | Specialty Chemicals Teach In 15
Specialty Chemicals – a SWOT analysis
Opportunities
• geo expansion• market consolidation• innovation• sustainability
Opportunities
• geo expansion• market consolidation• innovation• sustainability
Strengths
• market positions• technology• global strength• performance • people
Strengths
• market positions• technology• global strength• performance • people
Threats
• market recession• regulations • raw material & energy volatility
Threats
• market recession• regulations • raw material & energy volatility
Weaknesses
• euro-zone production base• fragmentation
Weaknesses
• euro-zone production base• fragmentation
16Spotlight on Specialty Chemicals | Specialty Chemicals Teach In
Key components of the strategicaction planICI synergies• €340 million structural cost savings
• Delivered more rapidly than originally planned
Organic growth• Leveraging our strong emerging markets positions for growth
• Emphasis on focused, bigger, bolder innovation
Margin management• Centralized procurement
• Systematic approach to managing the value chain
Operational effectiveness• Additional restructuring beyond the ICI synergies
• Leaner, more efficient organisation at all levels
In other words, focusing on customers, cost and cash
17Spotlight on Specialty Chemicals | Specialty Chemicals Teach In
• Adding value to customers in attractive market segments
• Growing with customers in emerging markets
• Customer focused innovation delivers sustainable growth
• Increasing eco-premium product offerings to meet customer needs
17
Customer focus drives growth
18Spotlight on Specialty Chemicals | Specialty Chemicals Teach In 18
Remote controlled salt conversion units• Cutting-edge remotely-controlled chlorine production units. Gives environmental benefits (no dependence on chlorine transport) with a production capacity of 15,000 tons per year
Customer focused innovation
Continuous Initiator Dosing technology (CID)• Improves reactor output and product quality during the manufacture of PVC
RedisetTM WMX• Allows for lower paving temperatures saving energy and reducing emissions during asphalt paving as well as improving road durability and lifetime
Compozil Fx• System for the largest and fastest paper machines, reduces bothraw material costs and energy usage because of faster drying
Dissolvine® GL• A biodegradable, low-tox, phosphate free chelating agent for a wide range of applications including domestic and industrial dishwashing
19Spotlight on Specialty Chemicals | Specialty Chemicals Teach In 19
Reducing costs and increasing cash flow by margin managementFocus on
• Centralized purchasing
• Systematic approach to managing the value chain
• Sales force training
and
• Value pricing
• Energy efficiency
• Sustainable sourcing
20Spotlight on Specialty Chemicals | Specialty Chemicals Teach In 20
Reducing costs and increasing cash flow by improved operational effectivenessDisciplined approach:
• Improving Operating Working Capital
• Capacity optimization and restructuring
• Productivity gains in mature markets
• Sustainability – leading in safety and people development
21Spotlight on Specialty Chemicals | Specialty Chemicals Teach InA Spotlight on AkzoNobel Specialty Chemicals 21
Agenda
• Introducing Specialty Chemicals
• Introducing the Business Units
22Spotlight on Specialty Chemicals | Specialty Chemicals Teach In 22
Our Specialty Chemicals portfolio
National StarchIndustrial Chemicals
Surface ChemistryFunctional Chemicals Pulp and Paper Chemicals
Chemicals Pakistan
23Spotlight on Specialty Chemicals | Specialty Chemicals Teach In 23
The chemical industry value chain
‘End’products
Mining, oil, biomaterials
Basechemicals
Chemicalintermediates
Performance/functionalchemicals
Industrial Chemicals
Surface Chemistry
Pulp and Paper Chemicals
Functional Chemicals
Chemicals Pakistan
National Starch
24Spotlight on Specialty Chemicals | Specialty Chemicals Teach In 24
Different business approaches
Different models given the very different product portfolios
• Industrial Chemicals – geographically focused on Western Europe, emphasis on operational effectiveness
• Pulp and Paper Chemicals – global business with a specific emphasis on serving an industry
• Surface Chemistry and Functional Chemicals – global businesses, mostly based on customer intimacy model for each specific product group
• Chemicals Pakistan – national business with a broad offering: chemicals, coatings, fibers, pharma
• National Starch – global business with a specific emphasis on serving an industry
25Spotlight on Specialty Chemicals | Specialty Chemicals Teach In
• National Starch – a global, product-focused business with a strong market position.
• Revenue €890 million (2008), 2250 employees, active in more than 30 countries
• Leading supplier globally of specialty starches with focus on the food industry. Also serve niche papermaking markets
• Recently acquired Penford’s Australian Specialty Starches business
25
National Starch
26Spotlight on Specialty Chemicals | Specialty Chemicals Teach In 26
Chemicals Pakistan
• Chemicals Pakistan – a country-based, broad product line business. This business is continuing to grow and generate cash.
• Revenue €470 million (2008) with 1,350 employees
• Chemicals Pakistan comprises of a 75.8 percent share in ICI Pakistan Limited
• Earlier this year we divested the Pakistan PTA business
27Spotlight on Specialty Chemicals | Specialty Chemicals Teach In 27
Scope for this session
Pulp and Paper ChemicalsIndustrial Chemicals
Functional Chemicals
Surface Chemistry
28Spotlight on Specialty Chemicals | Specialty Chemicals Teach In 28
The right management team in place
Committed to deliver, each 25+ years of business experience
BobMargevich
FunctionalChemicals
JanSvärd
Pulp andPaperChemicals
WernerFuhrmann
IndustrialChemicals
WaqarMalik
ChemicalsPakistan
FrankSherman
SurfaceChemistry
James P. Zallie
National Starch
29Surface Chemistry | Specialty Chemicals Teach InA Spotlight on AkzoNobel Specialty Chemicals 29
Surface Chemistry
Frank ShermanManaging Director Surface Chemistry
30Surface Chemistry | Specialty Chemicals Teach In
Agenda
1. Business unit overview• Business summary• Key markets and customers• Cost Initiatives• Sustainability
2. Business unit strategy• Growth• Innovation• High Performance
31Surface Chemistry | Specialty Chemicals Teach In
Surface Chemistry key facts (2008)
• Revenue €820 million• 1,500 employees• Global reach with manufacturing and R&D in
every major region• Integrated National Starch specialty polymers
businesses• Unique combination of surfactants, synthetic polymers
and biopolymers• Over 40% of sales from eco-premium products• Leadership positions in attractive market segments
Revenue by market segment Revenue by geography
Asia Pacific
Europe
Americas
Home &Personal Care
Agro &Mineral
Manufacturing
Petroleum & Asphalt
31%
26%
25%
18% 11%
38%51%
32Surface Chemistry | Specialty Chemicals Teach In
Broad palette of product functionalities
Adhesion
Adjuvancy
Anti-agglomeration
Anti-microbial
Cleaning &conditioning
Dispersing
Emulsification/demulsification
Foaming/defoaming
Wetting
Scaleinhibition
Rheologymodification
Filmformation
33Surface Chemistry | Specialty Chemicals Teach In
Liquid droplets not able to penetrate waxy leaf surface
Surfactant formulation –able to penetrate waxy leaf surface
WettingAgro herbicide formulation
34Surface Chemistry | Specialty Chemicals Teach In
Demulsification of North Sea Crude
Oil micelle emulsified in water
Water micelle emulsified in oil
Emulsification and DemulsificationPetroleum production chemicals
35Surface Chemistry | Specialty Chemicals Teach In
Pigment Dispersed in water
DispersingCoatings formulation
36Surface Chemistry | Specialty Chemicals Teach In
Regional AssetsBackward IntegrationOperational Excellence
SurfactantsSynthetic Polymers
Biopolymers
Agrochemicals
Customer Intimacy
Solutions Superior Performance Sustainable Solutions
Hydrocarbon Efficiency
NeedsDemand Forecast
Voice of the CustomerMarket Research
Global SupplyChain
Application Knowhow
TechnologyPlatforms
ValueProposition
ValueCapture
ValueCreation
EnablerHigh Performance Matrix Organization
Personal Care
Oilfield
Asphalt Road PavingMining
Customers
Business modelUnique capabilities = Strong value proposition
37Surface Chemistry | Specialty Chemicals Teach In
*AkzoNobel estimate of target market
• Target Market size* ∼ €1 bln specialty ingredients
• Key Applications: hair and skin care
• Growth Drivers: natural ingredients, environmental regulations, anti-aging benefits, emerging countries
• Market Characteristics: large global formulators, high value-added ingredients and high entry barriers
• Major Customers: Procter & Gamble, Beiersdorf, Schering Plough, L’Oreal, Johnson & Johnson, Unilever, Henkel
Market CharacteristicsPersonal Care
38Surface Chemistry | Specialty Chemicals Teach In
*AkzoNobel estimate of target market
• Target Market size* ∼ €1.5 bln specialty ingredients
• Key Applications: fabric softeners and hard surface cleaners
• Growth Drivers: sustainability, environmental regulations, cost effective formulations, concentrates, and emerging countries
• Market Characteristics: global consumer and institutional cleaning companies, mega retailers
• Major Customers: Unilever, Procter & Gamble, Ecolab, JohnsonDiversey, Reckitt Benckiser
Market CharacteristicsFabric Care & Cleaning
39Surface Chemistry | Specialty Chemicals Teach In
*AkzoNobel estimate of target market
• Target market size* ∼ €1 bln inert ingredients
• Key Applications: herbicides, fungicides and insecticides
• Growth Drivers: biotechnology, biofuels, environmental regulations, farm policy, farming efficiency and population growth
• Market Characteristics: highly concentrated global agricultural chemical formulators, seasonality, competition from generics
• Major Customers: Monsanto, Bayer, Syngenta, BASF, Dupont
Market CharacteristicsAgricultural Chemicals
40Surface Chemistry | Specialty Chemicals Teach In
*AkzoNobel estimate of target market
Market CharacteristicsPetroleum
• Target Market size* ∼ €1.5 bln specialty ingredients
• Key Applications: oil and gas drilling, stimulation & productionand fuel & lubricant additives
• Growth Drivers: crude oil & natural gas prices, green chemistry, offshore deep-well drilling, secondary oil recovery, lower auto emissions and fuel efficiency
• Market Characteristics: cyclical, complex value chain, high entry barriers and growth of regional customers
• Major Customers: Baker Hughes, MI Drilling, Schlumberger, Halliburton, Lubrizol, Afton, Infineum
41Surface Chemistry | Specialty Chemicals Teach In
*AkzoNobel estimate of target market
Market CharacteristicsIndustrial Markets
• Target Market size* ∼ €1 bln processing aids
• Key Applications: mining, asphalt, textiles, coatings, etc.
• Growth Drivers: infrastructure investment (roads, construction), reduced energy and water use, population growth, ore quality and emerging technologies
• Market Characteristics: customers depend on suppliers for process solutions
• Major Customers: PCS, Omya, GE, Perstorp, Kemphos, Oxiteno
42Surface Chemistry | Specialty Chemicals Teach In
Customers, Cost and Cash•Focusing on specialty markets and products
•Participating in industryrestructuring
•Consolidating operations
•Reducing cost and capital structure
•Margin management20%
25%
30%
35%
40%
45%
50%
2003 2004 2005 2006 2007 2008
Operating Cost as % of Sales
Operating Cost EfficiencyImproving Competitive Position
43Surface Chemistry | Specialty Chemicals Teach In
0
2
4
6
8
10
12
2005 2006 2007 2008 2009 YTD
Total Recordable Injury Rate
0
2
4
6
8
10
12
2005 2006 2007 2008 2009 YTD
Total Recordable Injury Rate
0
200
400
600
800
1 000
2006 2007 2008 2009 2010 Goal
VOC
s, M
etric
Ton
s
Volatile Organic Compound Emissions to Air
0
20
40
60
80
2009 2014
Eco Premium Products,% of Sales
0
20
40
60
80
2009 20140
20
40
60
80
2009 2014
Eco Premium Products,% of Sales
Sustainability in operations and products
44Surface Chemistry | Specialty Chemicals Teach In
Agenda
1. Business unit overview• Business summary• Key markets and customers• Cost Initiatives• Sustainability
2. Business unit strategy• Growth• Innovation• High Performance
45Surface Chemistry | Specialty Chemicals Teach In
StrategyGrowth, Innovation, High Performance
Drive growth by …• Targeting attractive market niche applications
• Promoting sustainable solutions• Investing in developing regions • Pursuing external business development
Drive innovation by…• Leveraging technology across market segments
• Exploiting unique surfactant-polymer technologysynergies
Drive high performance by …• Leveraging AkzoNobel scale & market synergies• Optimizing matrix organization to deliver customer value• Increasing diversity and investing in our people
46Surface Chemistry | Specialty Chemicals Teach In
Personal CareBiopolymer based hair gels
Proprietary Glyphosate AdjuvantsIncreased efficacy and concentration ofglyphosate herbicide
Fabric CareBiodegradable polymer improving the efficiency of fabric softeners
Household CleaningBiodegradable, aqueous cleaning formulationsreducing use of organic solvents
Drive Growth By…Promoting sustainable solutions
47Surface Chemistry | Specialty Chemicals Teach In
Significantly reduces paving temperatures resulting in lower VOCfumes, fuel savings and reduced operating cost
Rediset™ WMX Promoting sustainable solutions
48Surface Chemistry | Specialty Chemicals Teach In
% of revenue, 2008
‘Mature’ Europe
Asia Pacific
Rest-of-world
Latin America
North America ‘Emerging’ Europe
40%30%
11%11%
6%
2%
Plan to Increase our asset base
Drive Growth By…Investing where our customers are growing
49Surface Chemistry | Specialty Chemicals Teach In
A novel ingredient, developed for laundry… adapted to provide solutions in many other applications
Drive Innovation by…Leveraging technology across market segments
50Surface Chemistry | Specialty Chemicals Teach In
With Polymer
Without Polymer
Drive Innovation by...Exploiting surfactant-polymer technology synergies
Oilfield Stimulation Surfactant - Polymer Synergy
0% 1% 2% 3% 4%Surfactant Stimulant Concentration
Visc
osity
51Surface Chemistry | Specialty Chemicals Teach In
Drive High Performance by…
Optimizing matrix organization to deliver customer value
• Global market teams• Regional operating units• BU level functional platforms and
corporate infrastructure
Increasing diversity and investing in our people• Foster cross-regional, -business and –functional
transfers• Develop and promote women and non-Western
leaders • Invest in sales excellence and leadership
development
Leveraging AkzoNobel scale & market synergies• Technology transfer across BUs to provide unique
solutions to customers• Key account management across BUs• Consolidate back-office shared services
52Surface Chemistry | Specialty Chemicals Teach In
Tomorrow’s Answers Today!
53Safe Harbor Statement | Specialty Chemicals Teach InA Spotlight on AkzoNobel Specialty Chemicals 53
Functional Chemicals
Bob MargevichManaging Director Functional Chemicals
54Safe Harbor Statement | Specialty Chemicals Teach In
Agenda
1. Business unit overview• Business unit description• Key growth activities• Sustainability
2. Business unit strategy• Customers• Cost• Cash
55Functional Chemicals | Specialty Chemicals Teach In
Meet the new Functional Chemicals
• Effective January 1, 2010 Polymer Chemicals will be merged into Functional Chemicals
• Very diverse product offering, used in many end-use applications
• Our Functional Chemicals business makes chemical intermediates, performance chemicals and end-products
• Our portfolio will include cellulosic specialties, chelates, ethylene amines, metal alkyls, micronutrients, organic peroxides, polysulfides, redispersable powder polymers, salt specialties and sulfur products
• These chemicals are used in everyday items such as detergents, vinyl, automotive parts, agricultural products, pharmaceutical products, food products, wallpaper adhesives, plastic bags and cosmetics
56Functional Chemicals | Specialty Chemicals Teach In
Functional Chemicals key facts
2008• € 1.7 billion sales1
• Approximately 4,100 employees• 38 manufacturing locations• 6 R&D locations• 5 JV’s (Chelates, Sulfur Derivatives and Organic
Peroxides)• Worldwide presence in all businesses (except Salt
Spec.)
Revenue by segment/market Revenue by destination1
Asia Pacific
Europe
Americas
Food
Building
Agro
Cleaning
Other
35%
6%5%
48%
7%
18%
51%
31%
1Combined sales Functional Chemicals and Polymer Chemicals
57Functional Chemicals | Specialty Chemicals Teach In
Strong global positions
Salt Specialties
N. Europe
Elotex OrganicPeroxides
Sulfur Products
Paint application
Bermocoll Chelates
Polysulfides
CMC
MetalAlkyls
Ethylene Amines
‘End’products
Mining, oil, biomaterials
Basechemicals
Chemicalintermediates
Performance/functionalchemicals
58Functional Chemicals | Specialty Chemicals Teach In
The New Functional ChemicalsReaching customers globally
Functional Chemicals & Polymer Chemicals
Functional Chemicals
Polymer Chemicals
Sales offices
Production sites
59Functional Chemicals | Specialty Chemicals Teach In
Key growth drivers
Geographic expansion• Construction Chelates and Ethylene Amines sites and associated infrastructure in Ningbo, China
Industry consolidation• Participation in industry consolidation (Organic Peroxides, Sulfur Products)
GDP growth in emerging markets• Broad product offering supplied to basic and specialized end-use applications
Green Chemistry• Dissolvine GL – Green alternative to EDTA, NTA, Phosphonates and Phosphates• Fuzebox – Sustainable breakthrough in corrosion protection and chrome replacement in automotive industry
60Functional Chemicals | Specialty Chemicals Teach In
Diversity & Inclusiveness and management development• Developing the talents of our people by advanced programs
Sustainability in practice
Cradle to cradle• Investigation environmental impact of processes and products versus competition in all aspects
Green Chemistry• Polysulfides – Energy savings construction material• Peridur – Leads to lower energy consumption in production of steel
Health• Salt Specialties One Grain Technology - One-on-one full salt replacement that brings pure NaCl and salt replacers into a single salt grain• Ferrazone - Iron source to treat iron deficiency anemia
61Functional Chemicals | Specialty Chemicals Teach In
Agenda
1. Business unit overview• Business unit description• Key growth activities• Sustainability
2. Business unit strategy• Customers• Cost• Cash
62Functional Chemicals | Specialty Chemicals Teach In
Customers
• Very broad customer base: apart from 100’s of markets and 1000’s of customers, we serve bigger customers like Chevron Philips, Johnson Diversey, BASF and DOW
• We follow our customers globally (e.g. Ningbo, China)
• Global own sales coverage in all markets
• B2B sales channel
• Key customer technical development agreements
63Functional Chemicals | Specialty Chemicals Teach In
Dissolvine® GL – Clean and Green
Market requirement for a readily bio-degradable chelateClose cooperation with big soapers
64Functional Chemicals | Specialty Chemicals Teach In
Elotex: Water resistant films in mortars
Market requirement to increase wet properties of Redispersable Polymer Powders
65Functional Chemicals | Specialty Chemicals Teach In
Ningbo: Strengthening local presence in ChinaNingbo, phase I (approved, €275 million
investment)• Infrastructure (2009)
• Chelates (2009)
• Ethylene Oxide (2010)
• Ethylene Amines (2010)
• Organic Peroxides (2010)
66Functional Chemicals | Specialty Chemicals Teach In
Costs
• Restructuring of our business for 5 – 8 years (cost reduction). Build up excellent track record
• Synergy on cost and quality expected from merger
• Operational Excellence projects at all sites
• One SAP system to stimulate standardization
• Central Purchasing of raw materials and transportation
• Energy reduction projects
67Functional Chemicals | Specialty Chemicals Teach In
Cash
• Renewed focus on OWC reduction
• Strong cash generative capacity
• Despite strong growth initiatives in 2009 & 2010, we expect to be cash positive in both years
68Functional Chemicals | Specialty Chemicals Teach In
Focus activities 2010
• Improve Health & Safety performance
• Strict adherence to all Business Principles
• Full integration of Polymer Chemicals into Functional Chemicals
• Management of Ningbo growth projects
• Strict Margin Management
• Cost reduction through restructuring
• Reduction of Working Capital
• Continue Operational Excellence
69Safe Harbor Statement | Specialty Chemicals Teach In
Thank you!
and… Please Be Safe!
70Safe Harbor Statement | Specialty Chemicals Teach In
Q&A
Rob FrohnBoard member responsible for Specialty Chemicals
Frank ShermanManaging Director Surface Chemistry
Bob MargevichManaging Director Functional Chemicals
Industrial Chemicals | Specialty Chemicals Teach In 71A Spotlight on AkzoNobel Specialty Chemicals 71
Industrial Chemicals
Werner FuhrmannManaging Director Industrial Chemicals
Industrial Chemicals | Specialty Chemicals Teach In 72
Agenda
1. Industrial Chemicals overview• Value chain, products and markets• Key growth activities• Sustainability
2. Business unit strategy• Customers• Cost• Cash
Industrial Chemicals | Specialty Chemicals Teach In 73
Industrial Chemicals key facts
2008• Revenue €970 million, excluding joint ventures• 1,800 employees, manufacturing plants in seven
countries• Chlor-Alkali, Energy, Salt, Monochloroacetic Acid • Primarily focused on Europe
Revenue by segment/end-market Revenue by destination
Chemicals & m/m fibersManufacturingRubber & plasticsFoodPaperAgroPaint
92%
Asia PacificEuropeAmericas
5%3%
53%4%
9%
5%
10%4%
11%
4%
Other
Industrial Chemicals | Specialty Chemicals Teach In 74
• Purity:
• Rock salt : 96 – 99%
• Solar salt : 99,5%
• Vacuum salt : 99,9%
• Applications: Chemical Transformation, Specialties, De-icing
Primary building block: High Purity Salt
water raw brine
450 - 500 m
Industrial Chemicals | Specialty Chemicals Teach In 75
Value chain of integrated businesses
Chlor
Alkali
20% captive
80% public grid
Electricit
y
Process
Steam
Salt
• MCA
• Chloromethanes
• Water Treatment
• Ethylene Amines jv
ENERGY• Process steam• 300 MW base load generation (AN share)
SALT• 4.200 kt CT
(via waterways)• 800 kt Specialties
• 500 kt De-icing
CHLOR-ALKALI • 1.100 kt chlorine
(via pipelines)• 1.200 kt caustic lye
• 300 MW base load requirement
DERIVATIVES • Worldwide business positions with the exception of water treatment
50% captive
50% merchant
20% captive
80% merchant
merchant
business
Industrial Chemicals | Specialty Chemicals Teach In 76
Operations & Market Positions
LeMoyneTaixing
OhmiSkoghall
Mariager
DelfzijlDeventer
RotterdamArnhem
BitterfeldHengelo
Ibbenbüren
Frankfurt
Amersfoort
Europe Worldwide
MCA 1
Chlorine (merchant) 1
Caustic lye (merchant) 1
Salt (chemical transformation) 1
Manufacturing
Joint ventures
R&D
Industrial Chemicals | Specialty Chemicals Teach In 77
• Growing with the customer
• Value chain extension
• Secondary use of caverns
• mTA (meso-Tartrate) anti-caking agent
• Small salt conversion units
• Participation in industry consolidation
Key growth activities
Industrial Chemicals | Specialty Chemicals Teach In 78
Sustainability
ENERGY• Co-generation ( 50%
higher fuel efficiency)• Renewable fuels
- Biomass
- Energy from waste
- Fuel cells & windparks
SALT• Secondary use of
caverns• Advanced anti-
caking agent (meso-Tartrate)
• Innovative crystallization technologies
CHLOR-ALKALI • Electrolysis efficiency
- From mercury tomembrane
- Zero gap technology
• Small salt conversion units
DERIVATIVES • High concentration
hypochlorite
• CO2 based chemicals
Chlor
AlkaliElectr
icity
Process
Steam
Salt
• MCA
• Chloromethanes
• Water Treatment
• Ethylene Amines
Industrial Chemicals | Specialty Chemicals Teach In 79
Agenda
1. Industrial Chemicals overview• Value chain, products and markets• Key growth activities• Sustainability
2. Business unit strategy• Customers• Cost• Cash
Industrial Chemicals | Specialty Chemicals Teach In 80
Fulfilling our customers’ needs and dreams
Functionality and hassle free delivery
Industrial Chemicals | Specialty Chemicals Teach In 81
Long-term business alliances
Chlor-Alkali Rotterdam:At the heart of our customers
AkzoNobel
Incinerator
Shin-EtsuEDC / VCM
HuntsmanMDI
HexionECH
Cl2
HCl
HCl
HClWaste
External waste
EDC
CausticHypo
Delamine
WasteWaste
Steam
Salt
Electricity
Industrial Chemicals | Specialty Chemicals Teach In 82
Costs - The Delfzijl cluster
Salt mining Salt production CA MCA
Ethylene Amines
3rd party customers
Energy
Ethylene AminesEnergy
Chlor-AlkaliMCA
Salt
Industrial Chemicals | Specialty Chemicals Teach In 83
• Scale and state of the art technology
• Integrated manufacturing chains (horizontal/vertical)
• Restructuring paying off
• Realigned chlor-alkali set-up
• Realignment of MCA supply chain
• Outsourcing of services
• Focus on Operational Excellence
• Flexible and efficient management of energy, the lifeline of our business
Costs
Industrial Chemicals | Specialty Chemicals Teach In 84
• Low OWC levels
• Favorable investment turnover
• Strong positive contribution to cash flow
• Plants in excellent shape
• Maintenance concept based on life cycle
• Chlor-Alkali 75% on membrane
• Energy mainly off-balance
Cash
Industrial Chemicals | Specialty Chemicals Teach In 85
Business leadership
Cost leadership
• Chemical Transformation Salt • Downstream products • Caustic lye
Marketleadership
• Existing sites
• New clusters
Business
Leadership
Industrial Chemicals | Specialty Chemicals Teach In 86
Thank you!
87Safe Harbor Statement | Specialty Chemicals Teach InA Spotlight on AkzoNobel Specialty Chemicals 87
Pulp and Paper Chemicals
Jan SvärdManaging Director Pulp and Paper Chemicals
88Safe Harbor Statement | Specialty Chemicals Teach In
Agenda
1. Business unit overview• Business unit description• Key growth activities• Sustainability
2. Business unit strategy• Customers• Cost• Cash
89Pulp and Paper Chemicals | Specialty Chemicals Teach In
Pulp and Paper Chemicals key facts
2008• Revenue €1.0 billion
• 2,700 employees
• Production in 27 countries
• Pulp and Paper Chemicals, Specialty Products
• A global supplier to the pulp and paper industry
Revenue by segment/end-market Revenue by destination
Asia PacificEuropeAmericas
PulpPaperSpecialties
55%31%
14% 15%
45%
40%
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A valuable brand in the pulp and paper industry
Eka was established in 1896 and has grown to become a brand which is associated to quality, safety, innovation and knowledge in the pulp and paper chemicals business.
91Pulp and Paper Chemicals | Specialty Chemicals Teach In
Pulp and Paper Chemicals
Chemicals increase the sustainability, quality and value of paper
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Function
Water treatment
CoatingRetention Sizing Wet strengthBleaching Deinking
Application CoatingPaper machinePulp manufacturing Pulp
Where Eka adds value
Eka Chemicals adds value
Eka Chemicals Vision:
Be the preferred supplier of bleaching and performance chemicals to the worldwide pulp and paper industry
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Eka Chemicals 31%
Eka is the world’s leading supplier of pulp bleaching chemicals
Kemira13%
Erco ww16%
On site12%
Arkema3%
Others9%
Tronox4%
Canexus13%
Global Sodium Chlorate Market Supply 2008
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Eka is an innovative player in retention
What do we mean when we say Retention?We want to minimize the loss of valuable components
Example of poor retention
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Paper produced with Eka retention systems
1980 - 2008
Eka Chemicals is growing faster than the market
0
10
20
30
40
50
60
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Million Tons Paper & Board
96Pulp and Paper Chemicals | Specialty Chemicals Teach In
-1%
6%
5%
4%
3%
0% 10% 20% 30% 40% 50% 60% 70%
0%
1%
2%
80% 90% 100%
Demand growth is moving to emerging markets
Demand growth by region through 2024, %/a
Share of consumption in 2008, %
Source: RISI World Pulp and Recovered paper Forecast, August 2009
Average 2.4%/a
China
Res
t of A
sia
East
ern
Euro
peME
A
Latin
Am
eric
a
Western Europe Japan
North America
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We are active wherever pulp and paper is produced
Eka Chemicals production
Eka Chemicals sales offices or sales representatives
Production sites
The majority of pulp and paper production is still based in mature markets
Recent investments
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We invest where the growth is!
Different regions demand different strategies and we have more than 20% of our turnover in emerging markets
Traditional Paper and Board markets
(N. Am, W. Europe, Japan, S. Korea)
Regions with high growth in demand(China, other SEA, Brazil)
Regions with low costs and available
raw materials(S. America, Indonesia, Russia)
Paper & Board
PulpMajor asset restructuring and cost reductions in the supply chain
Growth investments in pulp and paper chemical plants and in technical support organization
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Paper is more than just newsprint
We are particularly strong in the packaging board segment
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World demand growth by product segment through 2024
Source: RISI World Pulp and Recovered paper Forecast, August 2009
2,5%
2,0%
1,5%
1,0%
0,0%
90%80%70%60%50%40%30%20%10% 100%
3,5%
Other
Containerboard
Tiss
ue
New
sprin
t
0%
0,5%
-0,5%
4,0%
3,0%
Printing and Writing
Demand growth, %/a
Share of consumption in 2008, %
Average 2.4%/a
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1970 1980 20001990 2010
New Eka Technologies leading to increased partnerships
We file more than 15 patents every year
New bleaching product for
mechanical pulp
New bleaching product for chemical
pulpNew bleaching
technology replacing chlorine
New products improving printability
of paper
New bleaching sequence reducing energy consumption
New wet strength
products for food contact applications New water treatment
technology replacing traditional biocides
Chemical Island
Remote controlling
ChemicalsManagement
New paper chemical technology for
retention
New nano-particle retention systems for
high speed paper machines
Chlorine dioxide concept
Remote monitoring of chemical plants
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Our sustainability priorities
Fiber
Energy
Water
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Our products reduce customers’ use of fiber, water and energy Eka Products Our Priorities Eka solutions
High filler concept
Compozil FX
Reduced grammageconcept
Eka integrated solutions improve the total sustainability performance of our customers
Chemical Islands
Eka Purate
Fiber
Water
Energy
• Eka NP 2180
• Eka Purate
• Eka Compozil
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Before treatment
White water tank for packaging board treated with Eka Purate
Treated with Eka Purate®
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Agenda
1. Business unit overview• Business unit description• Key growth activities• Sustainability
2. Business unit strategy• Customers• Cost• Cash
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Knowledge in customers’ operations
Key success factors
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Key success factors
Attractive employer for highly skilled people in all regions
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Key success factors
Innovative and focused R&D
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Smart use of IT
Key success factors
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Key success factors
Strong product lines with superior cost position
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Technology accepted in all regions of the world
Key success factors
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We do business with the largest pulp and paper companies
Almost all large paper producers are also large pulp producers
Sou
rce:
Fis
her I
nter
natio
nal
0 2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 18 000 20 000
Norske
Mondi
Sappi
Smurfit-Stone
SCA
Smurfit Kappa
Nine Dragons
Abitibi Bowater
Nippon Paper
Oji
Asia Pulp&Paper
Georgia-Pacific
UPM
Stora Enso
International Paper
Paper & Board Capacity 1000 t/a
North AmericaWestern EuropeEastern EuropeLatin AmericaAsia PacificRest of the World
Source Fisher International
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Pulp mill responsibility
Delivery points
GENERATOR
WATER
ClO2-gas
REDUCINGAGENT
H2O2
ACID
SODIUMCHLORATE ClO2
STORAGE
ClO2CONCENTRATION
ANALYSIS
AB
SOR
BTI
ON
The traditional way of making ClO2(chlorine dioxide)
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WASTE PRODUCTS
GENERATOR
WATER
ClO2-gas
ClO2STORAGE
AB
SOR
BTI
ON
New delivery pointClO2
Pulp & Paper Chemicals responsibility
Close collaboration with the customer is a must to reduce costs
Eka ClO2 concept moves delivery point
REDUCINGAGENT
H2O2
ACID
SODIUMCHLORATE
ClO2CONCENTRATION
ANALYSIS
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Changing delivery point – a way of working closer with the customer
Tres Lagoas opened in April 2009; one of more than 20 successful Eka Chemical Islands
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Making remote seem close with Eka IT solutions
MILL B
OnlineData Transfer
MILL D
MILL E
MILL F
MILL A
MILL C
Eka Chemicals Technical Support- Trouble shooting- Specific problem- Benchmarking- 24/7/365
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Process Development
Production Planning
Benchmarking
Logistics
Maintenance
ReducingConsumption
Staffing
Production Planning
VMI
New products
Improving quality
New services
Staffing
Maintenance
Utilization
Maintenance
Logistics
VMI
Raw materials
Utilization
Supplier’s Cost
VariableCosts
Fixed Costs
Customer’sCost
Customer’sPrice
We improve costs in all steps of the value chain
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It’s not about moving costs around,It’s about removing them all together
Mutual Benefits
We go beyond chemicals
• Lower dosage
• Lower supply chain costs
• Lower energy consumption
• Lower usage of fresh water
• Remote monitoring and controlling with Industrial IT
• Total solutions for Chemicals Management
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Cost reduction actions 2009
• Plant in Mo i Rana, Norway closed
• Production lines in Sweden, Finland, France and USA shut down for part of the year
• Research organization rationalized in Germany
• Various projects to reduce variable costs implemented
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Capital intensive yes, but…
• Generated positive cash flow every year since 1999
• Technical life of installations longer than 10 years
• We invest less than depreciation and can still grow
• OWC has been a priority for several years:
• Chemical islands
• VMI solutions
• High focus on product portfolio management
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Summary
We will grow profitably by:
• Continued asset restructuring and cost reductions inmature markets
• Continued investments and further improved servicecapabilities in growing regions
• Innovative chemistry and new products
• Use of modern industrial IT to eliminate costs and improveefficiency in the value chain
• Continued positive cash generation
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Inspired….by Eka!
Thank you!
123Safe Harbor Statement | Specialty Chemicals Teach In
Q&A
Rob FrohnBoard member responsible for Specialty Chemicals
Werner FuhrmannManaging Director Industrial Chemicals
Jan SvärdManaging Director Pulp and Paper Chemicals
124Safe Harbor Statement | Specialty Chemicals Teach In
Wrap-up
Rob FrohnBoard member responsible for Specialty Chemicals
125Safe Harbor Statement | Specialty Chemicals Teach In
Safe Harbor Statement
This presentation contains statements which address such key issues as AkzoNobel’s growth strategy, future financial results, market positions, product development, products in the pipeline, and product approvals. Such statements should be carefully considered, and it should be understood that many factors could cause forecasted and actual results to differ from these statements. These factors include, but are not limited to, price fluctuations, currency fluctuations, developments in raw material and personnel costs, pensions, physical and environmental risks, legal issues, and legislative, fiscal, and other regulatory measures. Stated competitive positions are based on management estimates supported by information provided by specialized external agencies. For a more comprehensive discussion of the risk factors affecting our business please see our latest Annual Report, a copy of which can be found on the company’s corporate website www.akzonobel.com.