October 21, 2010

Investor Update Q3 2010 results

Agenda

• AkzoNobel at a glance
• Strategic ambitions
• Q3 2010 highlights and operational review
• Financial review
• Outlook 2010

Investor update Q3 2010 results 2

AkzoNobel key facts

2009
• Revenue €13.0 billion
• 54,738 employees
• EBITDA: €1.7 billion*
• EBIT: €1.1 billion*
• Net income: €285 million
• Leader in Dow Jones Sustainability Index

Revenue by business area EBITDA* by business area

33% 32% 32%

41%

Performance Coatings

Decorative Paints
35% 27%
Specialty Chemicals

* Before incidentals. All data after reclassification of National Starch

Investor update Q3 2010 results 3

The global paints and coatings market is
around €70
70 billion
% of market
100% is around €70 billion
Wood Finishes

General Industrial Coatings

6%
10%

Car Refinishes
Decorative 7%
Decorative
44%
Performance 3% Marine and Yacht
56%
6%
Protective coatings
2%

9% Special purpose

8% 3%
2%
Auto OEM, metal, plastics

Coil Coatings
Packaging Coatings
Powder Coatings
Source: Company Reports

Investor update Q3 2010 results 4

AkzoNobel is the world’s largest
Coatings supplier
2009 revenue in € billion
10

Investor update Q3 2010 results 5

Excellent geographic spread of
both revenue and profits
High-growth
growth markets are important (37% of revenue)
% of 2009 revenue
39%
‘Mature’ Europe

7%
21% ‘Higher-growth’ Europe
North America

4% 20%
ME&A Asia Pacific

9%
Latin America

High-growth
growth markets profitability is above average
Investor update Q3 2010 results 6
Strong portfolio with leading positions

2009 Revenue 2009 EBITDA*

Leading market position results in superior level of profitability

* Before incidentals

Investor update Q3 2010 results 7

Strategic ambitions

Investor update Q3 2010 results 8

We want to be the world’s leading Coatings
and Specialty Chemicals company

Our medium-term
term strategic ambitions are:

Value – accelerated growth Values – sustainable growth

• Grow to €20
20 billion revenues • Top quartile safety
• Increase EBITDA* each year, performance
maintaining a 13-15%
15% margin • Top 3 in DJSI***
level • Top quartile performance in
• Reduce OWC percent of diversity, employee
revenues** year-on-year
year by 0.5 engagement and talent
towards a 12% level development
• Pay a stable to rising dividend • Top quartile eco-efficiency
improvement rates

* Absolute earnings before interest, tax, depreciation and amortization, before incidentals
** Operating Working Capital at year end as a percentage of quarter*4 revenue
*** Dow Jones Sustainability Index

Investor update Q3 2010 results 9

Q3 2010 highlights and operational review

Investor update Q3 2010 results 10

Q3 2010 highlights

• Revenue €3.9
3.9 billion (2009: €3.4 billion), up 13 percent
(5 percent in constant currencies)
• EBITDA* €574
574 million (2009: €528 million), up 9 percent
(2 percent in constant currencies)
• EBITDA* margin 14.8 percent (2009: 15.4 percent)
• Sale of National Starch completed on October 1
• Two bolt-on
on acquisitions closed in Performance Coatings
• Interim dividend of €0.32
0.32 declared, up 7 percent
• New medium-term
term ambitions announced
• Outlook unchanged: we remain cautiously optimistic

* Before incidentals

Investor update Q3 2010 results 11

Revenue growth and margin development
per quarter to Q3 2010
Reported revenue in % year-on
on-year
18%
15% 13%
8%

EBITDA* margin in %
20.0%
14.4% 13.4% 14.8%

* Before incidentals 2009 2010

Investor update Q3 2010 results 12
Volume and price development per quarter
to Q3 2010

Volume development Q3 09 Q4 09 Q1 10 Q2 10 Q3 10
Decorative Paints (9) - 5 1 -
Performance Coatings (11) (2) 8 12 5
Specialty Chemicals (6) 4 15 15 10
AkzoNobel (8) 1 10 8 4

Price development Q3 09 Q4 09 Q1 10 Q2 10 Q3 10
Decorative Paints 4 (1) (1) - 1
Performance Coatings 5 (3) (3) (3) -
Specialty Chemicals (5) (9) (6) (2) 2
AkzoNobel (1) (5) (4) (2) 1

Investor update Q3 2010 results 13

Q3 2010 revenue and EBITDA

€ million Q3 2010 %
Revenue 3,867 13
EBITDA* 574 9

Ratio, % Q3 2010 Q3 2009

EBITDA* margin 14.8 15.4

+1% 0% +13%

* Before incidentals Increase Decrease

Investor update Q3 2010 results 14
Summary – Q3 2010 results

€ million Q3 2010 Q3 2009

EBITDA* 574 528
Amortization and depreciation (146) (143)
Incidentals (47) (39)
Financial income & expense (70) (97)
Minorities and associates (13) (16)
Income tax (81) (32)
Discontinued operations 21 (4)
Net income total operations 238 197
Net cash from operating activities 378 817

Ratio Q3 2010 Q3 2009

EBITDA* margin (%) 14.8 15.4
Earnings per share (in €)) 1.02 0.85
* Before incidentals
Investor update Q3 2010 results 15
Q3 2010 incidentals

€ million Q3 2010 Q3 2009

Restructuring costs (53) (116)
Results related to major legal, - (2)
antitrust & environmental cases
Results on acquisitions & divestments 15 19
Other incidental results (9) 60
Total (47) (39)

Restructuring costs are mainly related to:

• Impairment of a former manufacturing site in US (Decorative Paints)
• Closure/ downsizing various Powder Coating sites (Performance
Coatings)
• Closure of the chlorine waste incinerator in Rotterdam (Specialty
Chemicals)

Investor update Q3 2010 results 16

Decorative Paints

In Q3, Sikkens succesfully launched Alpha SanoProtex, a

waterborne wall paint especially designed to prevent bacteria from
multiplying. It proves to be a great solution for hospitals, clinics and
social service buildings and other locations where hygiene is crucial
and where the infection risk needs to be controlled at all times.
Investor update Q3 2010 results 17
Decorative Paints key facts

2009
• Revenue €4.6 billion
• 21,940 employees
• EBITDA: €487 million*
• 36 percent of revenue from high-growth
high markets
• Largest global supplier of decorative paints
• Many leading positions, strong brands

Some of our strong brands Revenue by geography

4%
10%
Europe

Asia Pacific
21% 50%
North America

Latin America
15%
Other regions

* Before incidentals

Investor update Q3 2010 results 18

Decorative Paints Q3 2010

€ million Q3 2010 %
Revenue 1,372 8
EBITDA* 198 -

Ratio, % Q3 2010 Q3 2009

EBITDA* margin 14.4 15.6

0% 1% 0%

* Before incidentals Increase Decrease

Investor update Q3 2010 results 19
Decorative Paints Q3 2010 highlights

• Revenue of €1,372 million (2009: €1,271 million), up 8 percent,

with favorable currency impact of 7 percent
• EBITDA* €198
198 million (2009: €198 million)
• AkzoNobel to be primary paint supplier to Wal-Mart
Wal
• Strong revenue growth and increased investment in brands and
distribution in high growth markets
• Soft demand in the mature markets, particularly in Continental
Europe

* Before incidentals

Investor update Q3 2010 results 20

Performance Coatings

The acquisition of Changzhou Prime Automotive Paint Co. Ltd. will

significantly boost AkzoNobel’s presence in the Chinese
automotive market. Prime is one of China’s largest vehicle refinish
suppliers and a leader in the fast-growing
fast mid-market segment.
This sector is estimated to double in size within the next five years.
Investor update Q3 2010 results 21
Performance Coatings key facts

2009
• Revenue €4.1 billion
• 19,940 employees
• EBITDA: €594 million*
• 45 percent of revenue from high growth markets
• Leading positions in performance coatings
• Innovative technologies, strong brands

Revenue by business unit Revenue by geography

6%
15% 8%
Marine and Europe
Protective Coatings 30%
Car Refinishes 41% Asia Pacific
17% 20%
North America
Industrial Coatings
Latin America
Wood Finishes and 20%
Adhesives 18% 25% Other regions
Powder Coatings

* Before incidentals

Investor update Q3 2010 results 22

Performance Coatings Q3 2010

€ million Q3 2010 %
Revenue 1,239 18
EBITDA* 166 (2)

Ratio, % Q3 2010 Q3 2009

EBITDA* margin 13.4 16.1

0% +5%

* Before incidentals Increase Decrease

Investor update Q3 2010 results 23
Performance Coatings Q3 2010 highlights

• Revenue €1,239
1,239 million, up 18 percent (2009: €1,051 million)
• Demand improved in all businesses, with volumes up 5 percent
• EBITDA* €166
166 million (2009: €169 million)
• EBITDA* margin of 13.4 percent (2009: 16.1 percent), impacted
by raw material prices
• Integration of acquired activities progressing well

* Before incidentals

Investor update Q3 2010 results 24

Specialty Chemicals

Our Pulp & Paper Chemicals business concept, Compozil Fx,

reduces energy consumption, fiber need and water usage for the
customer. Used on 7 of the 8 largest paper machines in the world, it
is the preferred sustainable choice on the growing Chinese paper
market.
Investor update Q3 2010 results 25
Specialty Chemicals key facts

2009
• Revenue €4.4 billion
• 11,140 employees
• EBITDA: €738 million*
• 32 percent of revenue from high-growth
high markets
• Major producer of specialty chemicals
• Leadership positions in many markets

Revenue by business unit Revenue by geography

4%
Functional Chemicals 9% 9%
Europe
Industrial Chemicals 16% 33%
20% 48% North America
Pulp and Paper
Chemicals Asia Pacific
Surface Chemistry
21% Latin America
Chemicals Pakistan 21% 19% Other regions

* Before incidentals

Investor update Q3 2010 results 26

Specialty Chemicals Q3 2010

€ million Q3 2010 %
Revenue 1,272 15
EBITDA* 254 29

Ratio, % Q3 2010 Q3 2009

EBITDA* margin 20.0 17.8

+2%
-5% +8%
+15%
+10%

* Before incidentals Increase Decrease

Investor update Q3 2010 results 27
Specialty Chemicals Q3 2010 highlights

• Revenue increased 15 percent to €1,272 million (2009: €1,109

million); volume increased 10 percent
• EBITDA* was up 29 percent to €254 million (2009: €197 million)
• EBITDA* margin 20.0 percent (2009:17.8 percent)
• Performance improvement in all businesses
• Sale of National Starch completed on October 1

* Before incidentals

Investor update Q3 2010 results 28

Financial review

Investor update Q3 2010 results 29

Year-on-year
year Operating Working Capital %
of revenue to reduce towards 12%

OWC
€ million

3000 19.1% 20%

19%
18%
2500 16.4%
16.2% 17%
15.6%
15.0% 16%
14.6% 14.1%
2000 15%
13.7%
14%
13%
1500
2,185 2,341 2,238 2,007 1,691 2,037 2,346 2,191 12%
11%
1000 10%
4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
OWC
OWC as % of LQ revenue*4
Investor update Q3 2010 results 30
Capital expenditure prioritization for
growth
• Capex 2010 expected to be around 3% of revenue (excluding
Ningbo €100
100 million and €40 million National Starch)

• Medium term: Capex level to be around 4% of revenues

Capex as a % of revenue

Investor update Q3 2010 results 31

A stable to rising dividend

Our dividend policy*

We intend to pay a stable to rising dividend:
• a cash interim and a final dividend will be paid

2010 interim dividend €0.32 per share – up 7% from 2009*

• Interim dividend to be paid on 3 November, 2010
• We intend to grow the 2010 total dividend by around € 0,05 per
share* €1.20 €1.20 €1.80 €1.35

• Therefore we are guiding towards a total 2010 dividend of € 1.40*

*The new dividend policy and dividend pay-out

out will be discussed at the 2011 Annual General Meeting

Investor update Q3 2010 results 32

EBITDA – Cash bridge

€ million Q3 2010 Q3 2009

EBITDA before incidentals 574 528

Incidentals (cash) (43) (21)
Change working capital 105 402
Change provisions (128) (58)
Interest paid (18) (15)
Income tax paid (112) (19)
Net cash from operating activities 378 817

• Incidentals mainly related to continued restructuring activities

• Working capital inflow less pronounced than last year
• Change in provisions mainly impacted by higher cash-out
cash from
provisions for pensions

Investor update Q3 2010 results 33

Unchanged ambition to maintain strong
balance sheet

€ million Sept 30, 2010 Dec 31, 2009

Total Equity 9,291 8,245
Net debt* 2,030 1,744

• Credit ratings confirmed in August at BBB+/Baa1, outlook improved

to stable
• National Starch proceeds will fund growth and potentially partly be
used to further optimize capital structure, for example by repaying
2011 debt maturity and/or de-risking
de pensions where possible

* Before net pension deficit of €1.5

1.5 billion September 30, 2010 (December 31, 2009 €1.9 billion)

Investor update Q3 2010 results 34

Pension deficit improves to €1.5 billion

Key pension metrics Q3 2010 Q2 2010

Discount rate 5.0% 5.2%
Inflation assumptions 2.7% 2.9%

Pension deficit development during Q3 2010

€ billion
0

-0.5

(1,793) (1,506)
-1.0
195
(411) (3)
-1.5 471
35
-2.0
Deficit Top-ups Increased Inflation Discount Other Deficit
end Q2 2010 plan assets rate end Q3 2010

Decrease Increase
Investor update Q3 2010 results 35
Pro-active
active pension risk management

• 2004 pro forma (including ICI) pension under funding was

around €4 billion
• Defined Benefits closed to new entrants, major plans closed
in 2001 (ICI) and 2004 (Akzo Nobel)
• Committed to further de-risk
de over time
• Total defined benefit pension plans cash contribution expected to
reach €490
490 million in 2010 (2009: €414 million), which includes
around €350
350 million of “top-up”
“top payments (2009 €240 million)
• Cash pension top-ups
ups around €350 million expected to continue
in 2011
• Non-cash
cash IAS19 financing expenses related to pensions and
other post-retirement
retirement benefits expected to be €105 million in
2010 (2009: €174
174 million)

Investor update Q3 2010 results 36

Successful extension of debt duration will
be further optimized over time
Debt maturity*
€ million (nominal amounts)

1.200

800

400

0
2010 2011 2012 2013 2014 2015 2016
€ bonds $ bonds GBP bonds

Significant liquidity headroom*

• Undrawn revolving credit facility of €1.5 billion available (2013)
• €1.5
1.5 & $1 billion commercial paper programs in place
• Net cash and cash equivalents €1.8 billion
* At the end of Q3 2010

Investor update Q3 2010 results 37

Low fixed costs as a percentage of
revenue
% of 2009 annual revenue*
100%

Raw materials,
energy, and
other variable
production costs

Fixed production
costs
Selling, advertising,
administration, R&D
costs

EBIT margin
0%
Decorative Performance Specialty AkzoNobel
Paints Coatings Chemicals

* Rounded percentages, all data excluding incidentals

Investor update Q3 2010 results 38

Raw materials, energy and other variable
costs represent around half of revenue
Primary
packaging
Energy
Solvents

6% 13%
Chemicals & 6%
intermediates
10% Regional and/or
local approach
Other
Additives 24% Variable
10% Global markets,
Costs* global strategy
3%
Hybrid
Pigments centralized/BU
11% 3%
6% approach
8% Other raw materials**
Resins
Titanium
Coatings Dioxide
Specialties

Around 2/3 of total spend is managed centrally to maximize

scale advantages
* Other variable costs include a/o variable selling costs costs (e.g. freight) and products for resale
** Other raw materials include cardolite, hylar etc.

Investor update Q3 2010 results 39

Outlook 2010

Investor update Q3 2010 results 40

2010 Outlook

“Cautiously optimistic”
Reasons for caution
• Global economic outlook
• Construction and housing markets remain soft in mature markets
• Potential bubbles in high growth markets

Reasons for optimism

• Leading positions, scale and diversified markets
• Strong balance sheet to fund growth
• Evidence of sustained industrial demand beyond re-stocking
re
• Delivery beyond ICI synergies

Investor update Q3 2010 results 41

 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.

Investor update Q3 2010 results 42