Akzo Nobel N.V.

Good morning and welcome to Axon Nobel's Investor Update for the fourth quarter of 2023. I'm Kenny Che, Head of Investor Relations. Today, our CEO, Greg Pouguillon, and CFO, Marvin DeVries, will take you through our results. Refer to the presentation, which you can follow by webcast or download from our website at axonobel.com. A replay of the webcast will also be made available following the event. There will be a Q&A session after the presentation. For additional information, please contact our investor relations team. Before we start, a reminder of our forward-looking statements disclaimer on slide two. Please note this also applies to the conference call and answers to your questions. I will now hand over to Greg, who will start on slide three of the presentation.

Thanks, Kenny, and good morning to everyone on the call. We'll start today's presentation with an overview of our performance for the fourth quarter and the full year. We'll then go over our guidance for 2024, as well as our midterm ambitions. Our Q4 results demonstrate a solid performance building on the positive momentum from previous quarters. Revenue increased 4% in constant currencies, primarily due to organic volume growth of 3%, with growth in all of our business units in the fourth quarter. We continue to benefit from raw material deflation, and this combined with resilient pricing and positive volumes resulted in a March expansion of 390 basis points. Adjusted operating income increased by 75% to 220 million euros in the fourth quarter. That 220 million euros was really 244 million euros in line with our guidance, excluding the big hyperinflation accounting correction triggered by the elections in Argentina. Improved profitability and a reduction in our working capital contributed to a strong free cash flow of €460 million in Q4, and this resulted in further deleveraging. We finished the year with a net debt to EBITDA ratio of 2.7 times. Overall, 2023 was a year in which AxoNobel delivered a clear rebound in performance. Despite facing soft market conditions in the first half, our businesses quickly stabilized and delivered flat volumes for the full year. a result of outperformance in many of our markets and a testament to the resilience of our portfolio. Despite persistent inflationary pressure and significant unfavorable currency effects during the year, our focus and execution enabled us to beat the targets we set ourselves, and there is more to come. Turning to slide four. Organic volumes were up 3% in Q4. We achieved positive volume growth in all our business units, the first since the second quarter of 2021, with Deco Asia, Marine and Protective, and Powder Coatings being the top performers. In Deco EMEA, I'm sorry, in Deco, looking at the regions one by one, EMEA bottomed out mid-year and exceeded our expectations by delivering low single-digit volume growth in Q4. In Latin America, Q4 performance was driven by strong volume growth in Brazil during its peak trading season at the end of the year. Asia largely followed the trend seen earlier in the year. In coatings, the momentum continues to gather pace. After a soft first half, the earlier than expected recovery in our powder business continued in Q4 with mid-single digit growth. In marine and protective, we continue to build a strong commercial pipeline and to grow market share. a trend that should continue given our successes in technical new builds. In automotive specialty coatings, we had a solid Q4 in our vehicle refinishes business, especially in Asia. And in consumer electronics, we're seeing signs that the cyclical downturn demand is close to bottoming out. That's also the case in the industrial coatings business unit, where Q4 volumes were up year on year despite our expectations for low single-digit declines. Coil did well in Asia and Europe. Packaging demand showed signs of improvement after stabilizing in Q3. This gives us good momentum going into 2024. We expect positive volumes driven by improving end market conditions and share gains across many of our businesses. Our coating businesses have room to rebound with volumes remaining well below 2019 levels. But this is true also in DECO EMEA, where we expect a progressive rebound over the next few years. The slow market recovery in DECO China is expected to continue in 2024, although we are mindful of difficult comps in China in the first half, impacting the phasing of our performance for the year. I now hand over to Martin to go to the numbers on slide five.

Yeah, thank you, Greg. And hello, everybody on the call. As Greg highlighted, we delivered another quarter of strong results, concluding a successful year of rebounding performance despite significant currency headwinds. Our revenue for the fourth quarter increased by 4% in constant currencies and was down 3% in reported revenue. Organic volumes in both paints and coatings rose by 3%, further improving on flat volumes from the third quarter. Pricing continued to hold up well for both paints and coatings. M&A contributed 1% to revenue growth, mainly from the Huarong acquisition in China. Similar to the third quarter, FX continued to pose a considerable challenge as our basket of currencies weakened, particularly in Argentina, where we experienced a sudden devaluation of the peso in December. The macroeconomic situation in Argentina also resulted in an unexpected increase in the impact from hyperinflation accounting in the fourth quarter. Despite the effects and hyperinflation accounting headwinds, I'm pleased to report that our Q4 adjusted operating income improved by 75% year over year to 221 million euro, with return on sales expanding 390 bps, as we continue to benefit from raw material tailwinds in our P&L. Now turn to slide six. Our adjusted EBITDA for the fourth quarter was €313 million, representing a 42% increase from previous year. For the full year, adjusted EBITDA was up 24% to more than €1.4 billion, with our EBITDA margin expanding to 13.4% from 10.7% in 2022. We delivered the upper end of our original guidance, and even more so when considering the FX headwinds we faced throughout the year. We are pleased to report further progress on the reduction of our working capital in the quarter. As a percentage of revenue, our working capital decreased to 15%, which is 2% lower than both Q3 and prior year level. This is a market improvement compared to the level we reached in Q1 2023, where the combined impact of low demand and high cost inventory led working capital to peak at 18.6%. Notwithstanding the impact of seasonality, we expect to make further progress on returning to normalized level in 2024. Together with the improvement in profitability, working capital reduction contributed to a strong year-on-year increase in free cash flow, which was €460 million in the fourth quarter. Our free cash flow for the full year was also much improved at €840 million, compared to a negative €21 million in the previous year. Moving to the next slide. Lower profitability and the unprecedented inflationary cycle drove our leverage from 1.9 times to 4.2 times in the first quarter of 2023, in a short period of just one year. 2023 has been a year of strict capital allocation with our focus on the leveraging. The improvement in profitability and free cash flow in the fourth quarter contributed to a further reduction in our net debt to EBITDA ratio, which fell to 2.7 compared to 3.2 in the previous quarter. We forecast our leverage ratio to improve to around 2.3 by the end of 2024, reflecting our continued focus to reduce the absolute level of net debt and improve our working capital position. At year-end, net debt was approximately €3.8 billion, representing a reduction of €300 million for the end of 2022. Interest on our long-term debt of €3.2 billion currently averages around 2%, while our short-term debt, including commercial paper of €2.4 billion, averages around 4.5% interest. Again, reducing net debt remains a key priority for us in 2024 as we continue to deleverage in 2024. Turning now to the next slide. We are proud that Accionobel continues to be the clear leader in the paints and coatings industry when it comes to sustainability. 2023 marked another year of solid progress towards our key sustainability ambitions for 2030. We made progress on reducing our own emissions, scope one and two, as well as scope three, which encompasses our supply chain. We maintained industry-leading ratings for ESG performance from the key rating agencies and are capturing the opportunities that sustainability presents as a catalyst for innovation to reach our 2030 targets as well as driving organic growth in the years to come. This is already the case across many of our businesses. In powder, we are pushing the boundaries of this exciting technology. In recent months, we launched an industry-first powder for architectural use that cures at 30 degrees lower than traditional powder coatings, cutting energy consumption by up to 20%. We're excited about helping our customers reduce both their carbon footprint and their costs. Moving now to our 2024 outlook on the next slide. Based on current market conditions and at constant currencies, we expect to deliver adjusted EBITDA of between 1.5 and 1.65 billion euro in 2024. As Greg outlined earlier, this is based on our expectation of low single-digit organic volume growth. We will continue to remain disciplined on pricing and, for at least the first half of the year, realize the benefits from raw material deflation, driving further margin expansion in 2024. As we outlined with our Q3 results, we expect our industrial efficiency measures to deliver the first P&L benefits in 2024, a still modest 25 million euro with a lot more to come towards our 250 million euro commitment. Our guidance for CAPEX reflects the incremental investment to drive these efficiencies as highlighted last quarter. We anticipate a leverage ratio of around 2.3 times a year end with continued improvement to our working capital position. Our policy of stable to rising dividends remains unchanged while we expect our dividend per share in 2024 to be stable compared to 2023. For the first quarter especially, we anticipate adjusted EBITDA to be around €340 million, slightly higher than Q4, excluding hyperinflation. And I'll now hand over to Greg to speak about our midterm priorities.