Akzo Nobel N.V.

Thank you and good morning, everybody. I would like to welcome you all to the Axanable Q3 results 2024 conference call. My name is Brika and I will be coordinating your call today. During the presentation, you can register to ask a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two and for operator assistance at any point, it's star zero. Thank you. I would now like to hand you over to our host, Kenny Che, Head of Investor Relations, to begin. So, please go ahead, Kenny.

Thank you, Brika. Good morning and welcome to Axon Nobel's Investor Update for the third quarter of 2024. I'm Kenny Che, Head of Investor Relations. Today, our CEO, Greg Puglione, and CFO, Martin DeVries, will take you through our results. We'll 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. Good morning to everyone on the call. Apologies for my voice. I need to trade in my company bicycle for a company car probably in this weather, but hopefully you can hear me fine. Q3 is our fourth consecutive quarter volume growth. Volumes increased by 1% even as market conditions remain mixed. Price mix was flat as pricing benefits were offset by negative regional mix of 1%. Our gross margin continued to improve. Adjusted gross margin expanded by 60 basis points in Q3 and 180 basis points year to date. Adjusted EBITDA growth in the quarter was impacted by higher than expected adverse currencies. While OPEX was higher year on year, it was down sequentially from Q2 levels as our cost measures begin to yield benefits. This will only accelerate in the next quarters given the additional SG&A measures that we announced. Q3 adjusted EBITDA before hyperinflation accounting was 400 million euros in line with guidance, resulting in an EBITDA margin of 15%. Our net debt to EBITDA ratio while down year on year increased to three times from the prior quarter, mainly due to temporary elevated working capital. Moving to slide four, let's look at the initiatives that support our ambitions. In May, we announced the closure of three DECO European EMEA sites as part of our industrial efficiency program. These closures should be completed by year end with volume transfers nearly over already. The next wave of closures is in preparation and will be announced in early 2025. We reaffirm the benefit targets outlined in our half-year results, 25 million euros this year, 17 million euros next year, and north of 250 million euros overall. Incremental to our industrial efficiency program, we announced in September an SGMA program with cuts that will optimize our functional organization. We're too heavy and we have to get leaner, particularly with rising labor costs. We're simplifying and rationalizing our organization. This will lead to a reduction of 2,000 positions globally, functional positions, a lot of them in Europe, and we'll deliver annualized savings of 120 to 150 million euros. Actions are already underway and should be largely implemented by the end of Q1 2025, although the benefits will spread out over time as people exit our payroll, which takes a little bit of time in Europe. At the start of October, we initiated a strategic review of our portfolio. Our intent is to focus our capital allocation on positions of differentiating scale, particularly in our key coatings markets. The initial focus of the review is on decorative paints in South Asia, where ExoNobel is present in a number of countries. In India particularly, we have a premium, highly profitable position, but with limited market share in a market that is ripe for consolidation. We're well-placed to participate in this consolidation, and this can take different forms, which we are evaluating. We do not have a set timeline for this review, and we're focused on getting to the right outcome rather than a speedy outcome. We'll update you as we progress. Together, these initiatives position us to be a winner in our core markets. They'll sharpen our competitive edge and accelerate our transformation towards sustained profitable growth. Let's now turn to slide five. Organic volumes in Q3 were up 1% with 2% growth in coatings and flat performance in deco. Looking at our businesses one by one, starting with decorative paints. In deco, Europe, Middle East and Africa, Q3 volumes remain flat with robust performance in the UK and in the Benelux, offset by weaker demand in Central and Southeast Europe. we expect mixed trends to continue likely resulting in flat to slightly negative volumes in q4 turning to our emerging deco markets latin america delivered mid single digit growth on solid performance in brazil while colombia remained soft in southeast asia strong growth continued in q3 with double digit growth primarily primarily driven by indonesia and india while Vietnam stabilized. For Q4, we expect mid-single digit growth for these two regions combined. In China, demand continued to be weak due to a challenging real estate market and low consumer confidence. Although recent economic measures signal a potential rebound, we view this more as a 2025 opportunity. I'd highlight that, as you know, China is about 14% of our sales overall. Half of it is deco, half of it is coatings. uh the deco business is uh is uh is down significantly in terms of volume this year but the coating businesses are doing really well and continue to continue to grow so uh i i urge you to have a balanced view of china if you uh take our q3 numbers and coatings in china so not deco but coatings our volumes are actually up mid single digits let's now move to our coating businesses In Powder, we achieved another strong quarter with mid-single-digit growth despite flat markets and softness in the automotive side. Marine and Protective also performed well, driven by technical new builds in Marine, while Protective faced mixed market conditions. We expect mid-single-digit growth for these two businesses to continue in Q4. Automotive and specialty volumes were slightly lower with a clear slowdown in the automotive market and softness in vehicle refinish. Vehicle refinish in Q3 actually showed growth, but we see that market is a little bit softer going forward. Aerospace generated solid growth, particularly in our aircraft maintenance business, but the OEMs, Boeing and Airbus primarily, are slowing down production, either due to strikes in the case of Boeing or supply chain issues in the case of Airbus. For Q4, we expect volumes to be flat to down. And industrial coatings demand weakened in packaging and coil, while wood adhesives delivered solid performance. We anticipate further softening into Q4 on declining industrial demand, which could result in a mid-single-digit contraction. In summary, we're delivering growth despite flat to declining markets. Given further deterioration in some markets, we expect flat volumes in Q4. Maybe I'll take that as an opportunity to comment on the Q3 volumes if you exclude China decorative. Our Q3 volumes were actually closer to 3% to 4% up in Q3 if you exclude China decorative. And if you apply the same reasoning to Q4, we'll still be down double digit versus last year in Q4 in China decorative. So actually the underlying volume trends at Exxon Nobel excluding China decorative are more in the and the sort of low to mid single digits in Q3 and low single digits in Q4. So it's more robust than it looks, but China decorative hasn't bottomed out in the sense that it's not that the market is dropping. It's more that we're still chasing comps that are a little bit higher last year. But as the market settles and as some of these stimulus measures start taking hold, we think we'll see a little bit of an upswing in Q4. Martin, over to you.