Akzo Nobel N.V.

Good morning and welcome to Axel Nobel's Investor Update for the first quarter of 2025. I'm Kenny Che, Head of Investor Relations. Today, our CEO, Greg Puglione, and CFO, Martin De Vries, will take you through our results. We'll refer to the presentation, which you can follow by webcast or download from our website at axelnobel.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. In Q1, we delivered better than expected results despite softer markets with adjusted EBITDA, flat year-on-year at constant currencies. This performance was underpinned by positive pricing and strong cost reduction, demonstrating that our self-help measures are starting to deliver with more benefits to come. Organic sales were flat with 2% positive price mix offset by volumes down 2%, of which half was from the timing of an in-year commercial rebalancing in Turkey. We mitigated the impact of softer markets and cost inflation through our efficiency measures. OPEX was flat year-on-year despite wage and general cost inflation. Over 70% of the targeted 2,200 SG&A reductions we have planned are already effective, and not everyone who has left is off the payroll yet, so the full effect is still to come. Execution of the SG&A program is ahead of schedule, and recent collective labor agreement negotiations have been completed on target. Our industrial transformation plans also continue to gather pace, with restructuring in France underway, including stores and site closures. As the benefits of our actions flow through the P&L, we expect OPEX to be down year on year in Q2. Our adjusted leverage ratio came in at 2.8 times, reflecting seasonal working capital buildup and ongoing restructuring activities. We also successfully issued a €500 million 10-year bond at 4% in March, securing long-term funding at attractive terms ahead of market volatility. Let's now turn to slide four on volume development. Q1 reported volumes were down 2%, half of which, once again, was from the timing effect of an end-year rebalancing in Turkey. I mean, essentially, Our customers were using our products as a currency devaluation hedge in Turkey, and we adjusted our commercial terms to smoothen out the demand throughout the year in order to make our production more efficient. It's an in-year adjustment, so it's a timing issue more than anything. So excluding that, you're at 1% volume reduction in Q1. So overall, we held up well in softer markets, continuing to gain market share in powder and in marine and in protective. Let's start with decorative paints. In Europe, Middle East, and Africa, underlying demand remained stable. The modest decline in Q1 volumes was primarily due to what I mentioned in Turkey, to rebalance production volumes. And overall in Europe, the professional segment showed sequential improvement in the quarter, which is an encouraging sign. In Latin America, the market remained healthy. In Brazil, our volumes were temporarily impacted by the timing of our price increase ahead of more passive competitors. This is a cryptic way of saying that we took prices up and BSF, which was in the process of selling their business, did not. We expect that to normalize as the year progresses. In Southeast Asia, our Indian business outperformed in a temporary market low. Performance elsewhere in the region was mixed. In China, the year started better than expected, while we had anticipated a double-digit decline, actual performance was more favorable, with a solid sequential improvement versus prior quarter. This bodes well for the rest of the year. Turning to coatings, volumes were relatively more favorable than in DECO, even as demand in North America softened on increased macroeconomic uncertainties. In our powder business, Architectural and automotive experience weaker demand, while the industrial and consumer segment grew. Even in a softer demand environment, our leadership in powder enables us to continue to outperform the market and gain market share. Marine and protective delivered double-digit volume growth with continued momentum in marine new build, while protective accelerated. We have a clear pipeline of projects extending into 2027, And we expect growth rates to normalize over the year as we begin to lap strong prior year comps. In automotive and specialty, the slowdown in Q4 extended into Q1 for the automotive and vehicle refinish segments. Aerospace saw a strong start to the year, although trends in North America continue to be dictated by ongoing challenges at the main OEMs. In industrial coatings, good trends in packaging are momentarily distorted by volumes returning to appear after we stepped in during their supply outage last year. It was Sherwin had a fire. We stepped in to cover some of that volumes going back as planned. But overall, packaging is healthy. Coil was slightly down and wood was up. Looking ahead to Q2, we're closely monitoring trade dynamics, particularly for North America. Our DECO businesses are local for local and mostly driven by local consumer confidence and less by global trends. Our coding businesses are GDP-driven and generally more sensitive to macro events. Let's turn to slide five and talk about tariffs. We try to illustrate our business resilience by breaking down key trade flows to and from the U.S. Over the years, we deliberately localized both our procurement and production in the U.S. We also largely run China for China and use the rest of Asia instead as an export base. Finally, we've already reduced our reliance on China as a source of raw materials for global operations. As such, China and the U.S. at ExxonMobil are largely decoupled already. And globally, the vast majority of our business operates on a local-for-local basis, which significantly limits our direct exposure to tariffs. In the U.S., we import only 2% of finished goods sold in the U.S., and only 10% of the raw material is consumed in the U.S. Everything else is local. For this analysis, we're taking the existing 145% tariffs on China and 10% on everyone else by the U.S., and assuming the reciprocal measures against the U.S., essentially 125% from China and 10% by everybody else. Taking into account both the raw material and finished good flows from the U.S. to the rest of the world, this annualized P&L impact of tariffs is anticipated at 25 million euros, with finished goods to Canada and Mexico the largest contributors. The tariffs on imports to the U.S. and for both raw materials and finished goods are estimated at 10 million euros EBITDA. This is after short-term mitigation actions, which are largely already underway, but it's before any pricing actions to mitigate. So, you know, look, it's an indicative number just to give you a feel for the fact that these are not very material impacts at ExxonMobil, given the way we are organized. But once again, we have mitigation potential beyond what you're seeing on this page. What's less predictable and likely more impactful is the broader macro effect. You know, changes in trade flows, consumer confidence, and overall customer investments could start to influence demand patterns. And while our products don't travel much, our customers do. But taking into account, as an illustration, our revenues in China that are generated on coatings that are applied to products that our customers are exporting. So essentially, product that we sell in China that goes onto customer products that are exported, you're only talking about 50 million of sales. So once again, that aspect of things is manageable. The question mark is more the macro demand environment, which will impact everybody one way or another. So in short, we've de-risked our direct exposure through localization and procurement anticipation, and the immediate impact is manageable. The bigger watch out is how this uncertainty affects the broader economic environment. Moving to slide six and an update on our SG&A actions. As previously mentioned, our Q1 OPEX is flat year on year, despite last year's 8% wage increase across ExxonBel in addition to general inflation. This was achieved through streamlining actions. We continue to make progress on our SG&A reductions, actually really good progress, We've already reduced our number of employees by 1,600 out of the 2,200 that we're targeting, meaning that we have implemented over 70% of the planned headcount reduction. There's more to come, and we will deliver on our commitment of 2,200 FT reductions, and we plan to do that essentially by the middle of this year. The reduction in staffing is already delivering financial benefits, even though some of the department employees have not yet left the payroll. The drop in headcount has helped drive sequential decline in total base pay, which you see on the right side of the slide. And there's a further reduction of 600 rules, 600 rules already announced. which will more than offset the 2025 wage increase from recently completed collective labor agreement negotiations. These CLA negotiations concluded at less than half the 2024 increase, in line with current economic realities and in line with what we were targeting. This year is already mapped out, and we have no doubt that we will achieve our saving targets. Martin will now provide an update on our financials on slide 7.

Thanks, Greg, and good morning, everybody. Organic sales were flat in the quarter. Reported revenue was down by 1%, mainly due to unfavorable foreign exchange rates. Our volumes were down 2%, mostly driven by softer performance in DECO, reflecting robust prior year comps, and the 1% impact from the rebalancing of Turkey, which Greg highlighted earlier in the call. At group level, price mix of positive 2% offset the volume decline, resulting in flat organic growth. Foreign exchange movements were a 1% headwind to revenue, mainly driven by the Turkish lira, Brazilian real and the Argentinian peso. The impact from foreign exchange rates became more unfavorable as we exited the quarter, which we anticipate will contribute to further FX translation headwinds in Q2. In terms of adjusted EBITDA, coatings delivered a solid quarter despite softer demand in North America. In DECO, lower volumes across all regions weighted on profit for the quarter. At group level, the adjusted EBITDA of €357 million resulted in an adjusted EBITDA margin of 13.7%. While flat at constant currency versus last year, our result was ahead of expectations. Operating working capital as a percentage of revenue was flat versus prior year at 18%. This reflects stable DIO, days inventory outstanding, and a smaller sequential build into the painting season compared to the prior year. That said, we remain focused on further improvements throughout the year and still expect to finish the fiscal year around 14.5% of revenue for working capital. As expected, seasonality in our Q1 trading period resulted in negative free cash flow of 183 million euro. The lower outflow from a smaller build in working capital was offset by higher cash out of 51 million euro from identified items. And I think it's also important to mention that we had a higher cash out from CAPEX of 30 million euro in the quarter versus last year. Return on investment was lower than prior year, largely due to lower trailing 12 months adjusted operating income and movements in our tax assets. Now moving to the outlook. While macroeconomic volatility continues to create an uncertain demand environment, our performance in Q1 bodes well for the rest of the year. We remain committed to our full year guidance of adjusted EBITDA above 1.55 billion euro at constant currency. We expect that the strengthening euro will increase our FX headwind in Q2, but this will be largely a translation effect. Our longstanding strategy of localized procurement and production has built agility and resilience into our business model, particularly against the first-order effects of the tariffs announced. That said, we acknowledge the lack of visibility on broader demand macro trends driven by tariff uncertainty. We will mitigate this by continuing to overdeliver on our efficiency measures. These actions are delivering tangible results and will support our bottom line. I'll now hand over to Kenny, who will close with information about upcoming events and the Q&A session.