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Executives

Jonathan Atack – Director, IR

Ton Büchner – Chairman and CEO

Keith Nichols – CFO

Analysts

Tony Jones – Redburn Partners

Paul Walsh – Morgan Stanley

James Knight – Exane BNP Paribas

Jeremy Redenius – Sanford Bernstein

Dunwoodie – Deutsche Bank

Peter Clark – Société Générale

Mutlu Gundogan – ABN Amro

Jaideep Pandya – Berenberg

Arun Rambocus – Kempen

Andrew Benson – Citigroup

Michael Ray – Goldman Sachs

Jean-Francois Meymandi – UBS

Christian Frates – Macquarie

Sebastian Satz – HSBC

AkzoNobel Nv (OTCQX:AKZOY) Q4 2013 Earnings Call February 6, 2014 3:00 AM ET

Operator

Good morning, good afternoon and thank you for standing by. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a Q&A session. (Operator Instructions) Today’s call is being recorded. If you have any objections, you may disconnect at this time.

Now, I will turn the call over to Mr. Jonathan Atack. Please go ahead sir.

Jonathan Atack

Good morning, and welcome to the AkzoNobel 2013 Fourth Quarter Earnings Call. Today, we have our CEO, Ton Büchner, and our CFO Keith Nichols to guide you through our Q4 and full year results.

This morning, we will also be referring to the results presentation which you can either download from our website, www.akzonobel.com, or you can follow it on the screen at the same site. A replay of this call will also be made available. There will be a Q&A session after the prepared statements. For any additional information, you can contact Investor Relations after the call.

Before we start, I need to remind you of the Safe Harbor statement that is contained at the back of the presentation. Please note that this statement is also applicable to this conference call and the answers to your questions.

With this, I would now like to hand you over to Ton Büchner, who will start on slide four of the presentation.

Ton Büchner

Thank you very much, Jonathan. Good morning everybody also from my side. We wanted to start with a simple recap of 2013, a year where we have established a basis to change the company and drive towards our 2015 targets and to our vision of delivering leading performance from our leading market positions.

So 2013 has really been a year where we launched a new strategy. We have new targets, new team, new remuneration for the executives and new company values which are very important in driving the changes that we are aiming at for the coming years. We have also had some proof points, some clear signs that we are making progress with the strategy.

You see the underlying return on sales and return on investment improving. We had an announced focus on cash and you’ve clearly seen a significant reduction of our net debt and the performance improvement program which we have accelerated, we have delivered finalized it early and we have actually delivered more than we originally promised.

And all of this has been done by, first of all, divesting a set of non-strategic and weaker market positions at AkzoNobel. A continued factory consolidation for which you’ve seen the proof points also in the last four months where we have announced close to eight factory closures.

Significant product complexity reduction which you have seen in earlier presentations that we have done, an acceleration of our consolidation of ERP systems which will continue going forward. Standardizing processes and even changing reporting lines when it comes to HR, Finance, and IM. And certainly standardizing processes in the supply chain functions as well.

We started to delayer the organization simplifying it, easier decision-making. We adapted the distribution in places like Germany and others as well to make sure that we have the appropriate distribution cost associated with our market positions.

And we’ve driven further organic growth through innovation with a strong sustainability focus, but also by installing new capacities in China, expanding capacities in other regions where we have seen the growth going forward.

And again, I guess, we have been number one in sustainability as well which is something that we want to retain to be wherever we can.

And all of these actions have been done in a year which had clear two halves, a year where the first half was driven by weak market conditions and even also with some things that were done because of extended maintenance stops at AkzoNobel that took some production out.

But a second half that showed an improvement, stabilization of the markets, that translated into volume growth, but significant currency headwinds that have taken place.

One thing I think that is really important to note is, we did give a guidance in July for what we would deliver for the end of the year and most of the currency effects have actually taken place in the second half of the year and we have been able to compensate for those and deliver on the original promise that we made in July.

Moving over to slide number 5, it’s a reflection of the full year revenue and operating income. Revenue was down 5% but primarily driven by adverse currency effects and divestments. Volumes actually went up over the year; price mix was flat, very much driven by the two halves as I described them earlier.

Foreign currency headwinds were very much part of the second half of the year, they had a 4% adverse impact and of course you’ve seen the impact of divestments which are the 2% that you see in the chart itself.

With the completion of the performance improvement plan, our restructuring actions have been evident in improving return on sales levels, even though they are still partly clouded with the significant restructuring costs that are imposed on those.

In line with the guidance provided and despite all the currency effects that we have had, we have delivered on the operating income in line with the guidance at €897 million.

Return on sales, including all was 6.6% for the year, up from 5.9% last year, excluding the PIP cost and incidentals, return on sales improved to 8.5% from 8.2% in 2012. Also, return on investment improved a little from 8.9% to 9.6% in the previous year.

If we look at the overall highlights for 2013, we see that the fourth quarter volume development was positive in all three business areas and the return on sales excluding restructuring cost and incidentals increased for the company continuing the trend that we’ve seen in Q3 which is certainly the initial sign of stabilization although a fragile stabilization.

Revenue for both the fourth quarter and the full year were down 5% as mentioned due to adverse currency effects in divestments and the operating income at €958 that is including all the incidentals, if you take them out €897 which compares to €908 for 2012.

Net income attributable to shareholders €724 million, that compares to €386 million excluding impairment for last year and the EPS has gone up from €2.55 last year to €2.62, clearly decreased our net debt by divestitures, but also by reducing working capital and a clear reduction in CapEx and as a result, our net debt is now at €1.529 million, significantly down from almost €2.3 last year.

The total dividend that will be proposed through the AGM in April is €1.45 which is stable and in line with our policy and the performance improvement program has been delivered a year ahead of schedule and even with a number that’s larger than we originally communicated and I am confident that we are on track to deliver the 2015 targets despite the expected continued fragile economic environment.

Operator? Okay, should we review them? Operator could you give us some clarity of what happened please? We will hold the call for a small moment and we will try to dial in, if we can ask all participants to stay on the line please.

Jonathan Atack

Okay, we just had a message from one of you saying you can still hear us, we aren’t getting any feedback, operator. We will check on e-mail at the moment with the operator and for the moment and next couple of minutes Ton will continue.

Ton Büchner

We will continue the call and we will follow-up offline with what continues. So if we look at the Q4 revenue, we are talking slide number 7. We are also exactly in line with full year, have come down 5% in revenues but the largest impact has clearly been from exchange rates and of course also from acquisition divestments.

The underlying business, volume and price mix have actually been in aggregate been positive. Restructuring charges were €204 million for the quarter, €89 million higher than the restructuring charges in the fourth quarter last year. We have accelerated the restructuring as we announced at the half year during our conference call at that point in time.

Please note that the full table of restructuring charges by quarter can be found in the appendix to this presentation.

Incidentals of €61 million in the quarter included the gain of €198 million on the divestment of buildings and adhesives and a €139 million non-cash impairment charge on a business held for sale in specialty chemicals.

Return on sales for the quarter is 3.3%, excluding the performance improvement program and incidentals, the return on sales is 7.4% up from 4.3% in the fourth quarter of the prior year. Return on investment for Q4 2013 improved to 9.6% from 8.9% in the same period of last year.

Now let’s have a look at the various aspects of the revenue development on page number 8. Market conditions do remain challenging, but the volumes have stabilized and in all of the business areas actually increased during the course of the fourth quarter.

Q4 volumes in decorative paints as you see, clearly higher in all markets. You’ve seen a positive volume development in performance coatings as well after a clearly weaker start at the beginning of the year and even at specialty chemicals which have had tough year in

2013.

Q4 volumes rose 3% and most businesses actually showed volume increases and of course in the last half year did not have the production issues that we were dealing with extended maintenance stops at the beginning of the year.

And we talk to Ethylene Amines, a repeated topic, the situation there has stabilized. It’s not been great, but it’s certainly better than it has been in the past and the price mix in the aggregate is negative 1% for the quarter with a largest impact from specialty chemicals where some price pressure was felt primarily in the pulp and performance business.

If we travel to slide 9, you see how much of an impact foreign exchange has had on the revenue of the fourth quarter. Having been positive last year, adverse currency effect was the biggest headwind in certainly the second half of 2013, but also for the year in the agro did with a 5% negative impact on the Q4 revenues alone.

All businesses were affected with the largest impact coming from high growth markets. What’s important to note though is that we have a significant natural hedge, not a perfect natural hedge, but a very significant natural hedge which means that we are producing by and large in the countries where we are delivering. It’s not perfect as I said.

But that natural hedge actually does help to protect our profitability whereas of course our absolute numbers are definitely impacted by these exchange rates. During 2013, several divestments were also concluded including the North American decorative paints, which has been removed from all of the numbers that you are looking at and it was reported in discontinued activities.

Buildings and adhesives was completed as a divestiture on the 1st of October with a divestment impact in decorative paints in the fourth quarter.

In addition, we conducted several smaller divestments, such as the primary Amines and Pure A businesses in the specialty chemicals side and we reached an agreement to sell the German stores in the decorative paints business in 2014.

As a reminder, at the final, final bids of 2012, we also divested Chemicals Pakistan, which is also part of some of the divestment effects that you see.

Going to the individual business areas starting with decorative paints, we see that the revenues in the quarter were down 6% but primarily due to adverse currency effects and the divestments of building adhesives. The volumes were higher not only in the agro goods, but they were higher in all regions against the low base in 2012.

The performance improvement program and the restructuring measures have lowered the cost of ex in the area of 3%, lower costs, lower restructuring charges and a €198 million gain on the sale of buildings and adhesives and incidentals, contributed to the face figure of the Q4 operating income of €146 million, which is more than double than previous year’s figures.

If you adjust for the performance improvement cost and the incidentals, return on sales improved to 1.4% for Q4 2013 from minus 0.8% in the same period last year.

Noting the seasonality which is always something that needs to be emphasized for decorative paints, Q4 and Q1 are typically the weaker quarters of the year in decorative paints. They also show the highest volatility in general. The main quarters of course are the two central quarters in the calendar year Q2 and Q3.

Going to performance coatings, quarterly revenue at performance coatings declined 2% as you see in the graph again primarily due to the adverse currency effects which added 5% to the revenue decline.

Overall volumes were actually up, as was the price mix. Powder coatings within the performance coatings business, the volume was very positive in the quarter, vehicle refinish results showed either a recovery or growth in most regions except Western Europe which did remain weak.

Some customer demand pick up continues in specialty finishes and aerospace and higher activity levels continue in the oil and gas sector while the marine coatings continue to be in a lower part of market activity. Q4 restructuring initiatives were accelerated with the announcements the communication of the intended closure of seven sites and bringing the quarter restructuring cost to €36 million higher than the same quarter last year.

Due to first currencies in the acceleration of the restructuring activities, Q4 operating income was down versus last year. Accordingly, return on sales came in at 5.3% for the quarter excluding PIP restructuring cost and incidentals return on sales was 11%, marginally down from the 11.1% in the same period of last year.

Stepping to specialty chemicals, revenue in specialty chemicals were down 9% primarily due to adverse currency effects and the Chemicals Pakistan divestment which contributed €72 million revenues in Q4 2012.

Volumes during the quarter were up, a positive development of 3% compared to the previous year with higher volumes in most businesses and a clear absence of the previous year’s production issues that we had.

Ethylene Amines was a noticeable stabilization in functional chemical during the quarter. Again, we are not saying it’s getting nice, we are saying it’s less bad than it was in the past. The divestment of both the primary Amines and Pure A businesses were completed to smaller non-strategic businesses within the business area.

Continued focus on cost control and margin management is apparent across all businesses with a very comprehensive restructuring program in functional chemicals announced at the second quarter closing and executed in the second half of the year, resulting in a fourth quarter performance improvement cost of €17 million higher than in the same period of last year.

Operating income was down on last year, largely due to a non-cash impairment charge of €139 million on a business held for sale as well as higher PIP cost bringing return on sales to a negative 2.5%. Excluding the restructuring cost and incidentals, return on sales is 9.9% for the quarter, an improved level compared to the 6.3 for the same period last year.

Slide number 13 summarizes some of the numbers that you’ve seen before, basically making it possible to compare the reported numbers and the numbers pre-PIP cost and pre-incidentals for the individual business areas in AkzoNobel as a whole.

Underlying improvements are clear in all businesses with the exception of specialty chemicals which had a challenging year of soft demand and extended maintenance stops and new plant start-ups during the course of the year. I am quickly going to ask Keith to present the PIP chart to see if I can quickly recover my voice.

Keith Nichols

You do that. So we are on slide 14, full year operating income bridge with the key elements broken out. You can see there are lot of moving parts including the incidental charges year-on-year and as Ton has said effects, translation effects clearly been much more of a headwind this year.

Volume development finished the year on a more positive note, while there is still a negative impact in price mix, but full year average raw material cost were down having stabilized during the year and we expect them to remain stable going into 2014.

The PIP plan delivering €295 million additional benefit in the year and as many of you know the PIP charges or costs were more heavily weighted in the second half of 2013 with an incremental €56 million charge this year as we found more opportunities for continuous improvement.

Now in the other cost category, there was an increase of €224 which was mostly attributable to wage inflation including the high growth markets and this remains an area of focus as we embed continuous improvement culture to offset these ongoing inflationary pressures.

Now the performance improvement actions taken have been critical to more than offset currency price mix and cost inflation developments in the year and they position us to be more competitive going forward.

Ton Büchner

Thank you, Keith. On slide number 13, you have seen the different ways of depicting the return on sales, what you see on slide number 15 is actually the reported numbers in comparison with the target that we have communicated for 2015.

So we see the progression towards our 2015 targets for both the return on sales and return on investments, initially marginally but of course these numbers are heavily impacted by either restructuring costs and/or incidentals.

In February last year, we introduced these targets and we made it very clear it would not be a linear progression to achieve these, but it was a mid-term strategy that would require several years of execution and we feel we can realistically deliver on these 2015 targets.

Return on sales has improved to 6.6% from 5.9% last year. Our 2015 return on sales target being 9% and moving average 2013 ROI has improved to 9.6% with a target of 14% for 2015.

For both return on sales and return on investments at the business area level, decorative paints shows the most improvement even considering positive incidentals, while the other businesses have seen higher levels of restructuring and negative incidentals of separate benefits achieving thus far.

That being said, we are making clear progress. We are showing clear proof points on what we are doing, how we are doing it and individual milestone achievements are visible through us and yourselves and therefore we remain committed and are confident that we can deliver the 2015 targets.

And with that I hand over to Keith for the financial section.

Keith Nichols

Thank you very much, Ton. Moving forward on to the financial highlights on slide 17. As stated earlier, we are delivering on our mid-year guidance with operating income before incidentals coming in at €897 million despite the adverse currency improvements clearly impacted us in the second half.

I am also pleased to report progress with operating capital, which has reduced to 9% at year end. Capital expenditures was down at €666 million which represents 4.6% of 2013 revenue, compared to €826 million or 5.4% of 2012 revenue. A clear proof point again that we are reducing towards the target of 4% of revenues.

As stated earlier during 2013, we completed the sale of decorative paints North America, which resulted in a cash inflow of €779 million and a net profit of €141 million and in the fourth quarter we completed the sale of building adhesives resulting in a cash inflow of €247 million and a net profit of €198 million.

And net debt is down from €2.3 billion last year to €1.5 billion at the end of Q4. We further de-risked our pensions, specifically U.S. pension obligations by $655 million which required a $170 million cash contribution.

Turning to slide 18 for the fourth quarter, incidentals were €61 million, which included the gain that I mentioned earlier from the divestment of building adhesives of €198 million and it was offset by €139 million non-cash impairment charge within specialty chemicals.

Financing expenses increased by €10 million to €48 million for the quarter mainly due to lower discount rates for pensions and the tax rate for the fourth quarter or the effective tax rate for the fourth quarter is 30%. In line with our full year guidance, the full year tax rate is the same excluding one-offs, the non-deductible costs and we continue to report a lower full year cash tax rate of 23% also in line with earlier guidance.

Net income €51 million for the quarter and adjusted EPS was €0.01, negative down from prior year due to incidentals in the quarter and we are going to propose a final dividend of €1.12 per share which will make a total dividend for the year of €1.45 which is stable versus what we paid in 2012 and in line with our policy which is to pay a stable to rising dividend.

Moving to slide 19 for cash flows. Q4 results in a cash outflow of €69 million, working capital movements released €277 million representing the normal seasonality and ongoing attention on reducing working capital. Comparatively 2012 had an exceptional impact with €469 million that was released from working capital in the fourth quarter, but 2013 did come in lower at 9.9 for the year.

The change in pension provisions is driven by €127 million contribution to the U.S. pension plan as I mentioned to de-risk pension liabilities and the move in other changes relates mainly to that non-cash impairment charge of €139 million. That was included in profit from continuing operations.

Fourth quarter CapEx, €234 million, again below last year. I’ve mentioned what the full year was as we reduce towards 4.6% of revenues. Cash inflows from divestments, cost included building adhesives, but the smaller ones to that Ton mentioned of Pure A and primary amines.

And changes from borrowings resulted in repayment of $500 million denominated bond that matured on the 1st of December which had a coupon of 5.625%.

Turning to slide 20 for operating working capital, as I mentioned, ended the year 9.9%. This reduction being a further proof point of operational efficiencies and results of the PIP actions coming through.

On slide 21, coming back to net debt. As I mentioned in December, we paid off the 5.625% coupon U.S. dollar bond from existing resources and already this year in January 2014 on January 30 to be precise, we repaid €825 million bond which had a coupon of 7.75%.

Two important points to note. We’ve been able to do this from existing resources and have therefore reduced our gross debt significantly and we have also further reduced our average borrowing costs which have been coming down consistently for the last four years.

Our net debt-to-EBITDA ratio at one times is well under the two times ceiling we set for 2015 and down from 1.4 at the end of 2012.

Turning to slide 22, the pension deficit on an IFRS basis has fallen from just over €1 billion at the end of 2012 to €638 million at the end of 2013 and I would highlight the amount of top-ups made, the regular top-ups of 311 and additionally the euro-equivalent of the dollar de-risking, €127 million for the USA.

With that, I would like to hand back to Ton.

Ton Büchner

Thank you, Keith. On slide 24, you do see the strategy that we announced in the beginning of 2013 delivering leading performance from our leading market positions that we have in so many geographical areas in the world. In this icon you see an addition at the bottom called values and I will come back to that later.

Stepping to slide 25, that is the performance improvement program as it was announced as you’ve been updated on regularly split between operational excellence, functional excellence and individual business unit at a patience and as indicated before, we’ve delivered it a year early compared to its original planning and we were able to deliver €545 million EBITDA savings which exceeds the original promise.

Various actions are taken which includes product complexity reductions, factory closing sourcing optimization, manufacturing and distribution excellence, warehousing, logistics optimization, lots of margin management in difficult market circumstances and we are embedding all these components as part of that program in a process where we are actually able to make this a continuous habit as opposed to a project-driven improvement program.

Quarterly benefits and charges can be found in the appendix on page 39 and 40. In case you want to see per quarter what the charges have been and per quarter what the benefits have been of the program.

Slide number 26 shows the waterfall when it comes to people, and there you see that we have reduced as part of the performance improvement program more than 3000 people. We have had seasonal hires and hires in emerging markets which have taken some of those reductions away, but for the most part, they have been in areas where growth has taken place and where wage costs so far have been significantly lesser in the mature markets.

Keith already spoke over about CapEx or about working capital actually to say and the continued reduction that has taken place over there. We have also worked very hard to reduce our CapEx as we have been indicating to you in earlier conference calls, where it was €826 million in 2012, very much driven by overhanging decisions taken in the past.

We have for 2013 been able still with certain overhangs to reduce our total CapEx to €666 million which is 4.6% of revenues which is almost 1% less than it was last year.

Specialty chemicals is the more capital-intensive business with just over half of the 2013 CapEx allocated to these businesses what we are striving for is to bring the overall CapEx over sales in the area of 4%.

If we then step into the next three slides, you will see details of what the individual business areas have been doing as part of their performance program. I do not intend to travel through every detail of the slide, but I will take some examples that individual business units have driven to.

You’ve seen manufacturing consolidation in decorative paints; you’ve seen clear stock keeping units SKU reductions in decorative paints for which we have shown slides in previous presentations.

Warehouse reductions, distribution optimization, you’ve seen it with the German store sales and again we’ve been integrating various parts simplifying the structure delayering it and making sure that our distribution costs are very much in line with our strategic market positions in the areas where we are.

We’ve streamlined and are still streamlining our support functions in Europe that is an extended process that will continue in 2014 as we’ve actively reduced our number of ERP systems to a single system for all business units.

So overall, good developments in decorative paints, clearly visible also in the underlying return on sales improvements and as you see also a very clear reduction in working capital. Great efforts in the supply chain of decorative paints, largely driven by inventory reduction in the overall execution of the business.

If we travel to performance coatings, also here, further manufacturing consolidations which results in FTE reductions, but still in consolidating those factories, truly increasing process efficiency and the ability to run factories at longer periods and better capacity levels.

Also here, lesser than in that cover with reduced working capital and we are very strongly concentrating on product and margin management in this particular business.

We are delivering on the reduction of organizational layers and we also here are reducing our ERP systems, all very important matters that will continue in 2014 going forward.

Specialty chemicals, we have very much in the bigger sites in the more asset-intensive side, really driven what we call lean projects through the organization. We have announced the closure, it wasn’t intended closure, but this year we’ve announced a closure of one of the sites in the Netherlands and discussions continue there.

We merged the engineering organization which we use for CapEx investments worldwide and truly established an engineering excellence center. We are going very strongly segment based in specialty chemicals also ERP reductions there and we are truly, truly in functional chemicals and the major steps as part of the performance improvement program to make a step change in underlying costs.

If we look at areas other than the business area on slide 31, you see that we have overarching that we believe are going to be part of our continuous improvement and commercial excellence project. The strategy is the strategy of organic growth and operational excellence and both legs are what we want to drive.

Commercial excellence is an overarching project that goes through all business areas on the basis of a common framework and moving from project-based improvements as we’ve shown in the PIP program to a continuous improvement that allows us to take cost out as inflation comes into the system it’s something that we are building in as we speak. It will be a big part of 2014.

We are certainly at the headquarters also streamlining processes, we have changed reporting lines for finance, HR and IM and we are introducing what we call a global business services function responsible for implementing standardized core functional processes throughout the organization and even bringing parts of it into shared service centers in other areas.

Moving towards slide 32. I talked about the values that are a fundamental part of the strategy. We are working on a change behavior on the inside when it comes to driving the 2015 target deliveries.

And these four targets together with what we call the core principles of safety, integrity and sustainability are a significant drive through the organization and with it, we are actually describing to people, how we want them to behave to drive these targets but also how we do not want them to behave as part of the new AkzoNobel.

On slide number 33, you see the actual governance issue related to aspects that go to the General Shareholder Meeting in April. The dividend, as Keith already indicated, the interim and the final dividend as proposed and you’ve also undoubtedly noted the additional press release that we’ve done where the supervisory board shows that they had a very controlled process when it came to organizing their succession.

Our Chairman had three terms which is the maximum number of term is that you can have in the Netherlands. So he is stepping back from the board and the board has actually proposed if the AGM agrees to the re-election of Mr. Antony Burgmans for him to become the next Chairman.

And Peter Ellwood was also stepping back, a controlled process of succession and an external search has resulted in the proposal of Mr. Byron Grote to join the board of AkzoNobel as per the General Assembly, that of course is, when the shareholders support the nominations.

Concluding, what we’ve seen is a year 2013 of two halves when it comes to market developments, weak trading conditions in the beginning, weaker currencies in the second half, but clearly stabilizing and in many areas growing volumes in the fourth quarter of 2013. It’s been a year of building the foundation to create a different strategy a different thrust and move towards a delivery of the 2015 targets.

As part of that, we have delivered the performance improvement program early and at a higher number than originally promised and we will continue to significantly restructure our business in 2014 reducing our cost and driving organic growth through commercial excellence.

We remain on track to deliver our 2015 targets although we do expect that the markets in 2014 may feel more stabilized specifically in Europe, but still will remain relatively fragile in that stabilizing factor.

With that, I would like to close the presentation. I will note that we are hosting the Capital Markets Day in London on March 11, 2014 where you can meet our new business area executive committee members and hear more about the respective businesses and how they will deliver our 2015 targets.

The strategy is the strategy and they will align with the strategy as is. It is not about new target, it is very much about the ability to deal directly with the people who are making it happen as part of the team.

With this, it concludes our formal presentation and we would be happy to take your questions.

Jonathan Atack

Operator, can we open for questions please?

Question-and-Answer Session

Operator

Thank you very much, certainly. We will now begin the Q&A Session. (Operator Instructions) One moment please for the first question. And the first question is coming from Tony Jones from Redburn. Please go ahead. Your line is open now.

Tony Jones – Redburn Partners

Good morning everybody. I’ve got a couple of questions. So, firstly on CapEx, so you are targeting 4% of sales, you’ve already outlined before that some of this will be coming from previous projects being finished off.

But, Ton, could you also help us think about whether you are tightening the internal hurdle rate or whether you are retrenching some expansion into the market?

Secondly, could you talk a little bit about sequential mix development? So, if we look at price mix, it came down a little bit in Q3 and Q4. So is that something we need to think about or is it not really a fair comparison given the seasonality? And then also, could you talk a little bit about raw materials and what your cost development expectations are for 2014? Thanks.

Ton Büchner

Thank you, Tony. When it comes to CapEx, indeed of course, we had CapEx a bit of a bow wave on the CapEx in the past where we’ve really built lots of facilities specifically in the emerging markets such as Brazil and China and some of that is just that we do not actually have those significantly projects at this point in time anymore.

In addition though, we have rally scrutinized future CapEx stronger and we are really having harsher discussions when it comes to hurdle rates, so it’s a combination of both. It’s a combination of not having the very large CapExs of the past but also a more stringent evaluation of the CapExs that come to our table.

When it comes to mix development, you already raised that yourself part of it is seasonality in a relatively weak quarter. Second is, it’s a mixture of geo mix and product mix and that gets changes kind of over small quarters specifically. So overall, I wouldn’t read too much in the mix effect of this particular quarter.

When it comes to raw materials, we’ve seen the raw materials stabilize in the second half. If you would compare 2013 to 2012, it’s clearly been a down also largely driven by titanium dioxide which is specifically for decorative paints a significant purchase.

Tony Jones – Redburn Partners

Thanks very much.

Jonathan Atack

Thank you. Next question, please.

Operator

And the next question is coming from Paul Walsh from Morgan Stanley. Please go ahead. Your line is open now.

Paul Walsh – Morgan Stanley

Thanks very much. Morning everyone. Just three questions from me please. All pretty short. Ton, I wonder if you could quantify the potential savings that go hand in hand with the €250 million of PIP costs in 2014 and to what extent the €295 delivered last year fully in the numbers or is there an animalization effect this year?

Second question, just following up on raw materials, what’s the outlook for 2014 and then just finally one for Keith please. On the refinancing, you manage to repay those bonds out of existing cash balances.

Should we then just assume that all the interest on those bonds disappears from the P&L in 2014 which is what sort of €80 million or something like that, i.e. can you give some guidance on the financing charges? Thank you.

Ton Büchner

All right, so I’ll take the first two and then Keith will take the last one. When it comes to the savings, as we’ve earlier indicated, a little bit less than one-time’s cost is what comes back as an annual savings and that would be very similar on the average for that 250. If you talk about the 295 that is the year’s effect, some of that is not a full year effect yet.

So it will actually roll into 2014 as something more than that. Coming to raw materials, we expect it to remain reasonably benign, certainly in the next six months, after that it gets harder to predict.

But overall, what we foresee at this point in time is a reasonably flat development of raw materials, the basket that we are acquiring; we are not only talking about individual pieces of that. Then I would hand over for the last question to Keith.

Keith Nichols

Yes, at one level, Paul, you are right all that expense, that coupon will disappear completely. Of course, there is some seasonality during the year. So we will from time-to-time be borrowing short-term.

For example with commercial paper, so you have to make an assumption as to have a seasonality flows through the year. But you are right, those high coupon bonds are disappeared and largely out of cash, but during the year we will borrow a bit short-term.

Paul Walsh – Morgan Stanley

Okay, thank you.

Jonathan Atack

Very good. Next question, please.

Operator

And the next question is coming from James Knight from Exane. Please go ahead. Your line is open now.

James Knight – Exane BNP Paribas

Good morning. Thank you for taking my questions. I’ve got three or four really. Firstly, on theme to your emerging markets, you mentioned about natural hedges, could you just maybe quantify the raw material split. How much – for example, titanium dioxide you buy in dollars in emerging markets and whether is there anything on the margin side for 2014, we should be thinking about for that?

And also in emerging markets, maybe give a very quick thought through the demand of volume side of the equation at the moment if you are seeing any disruption?

Then on marine, some hopes of recovery. So how should we think about or general markets hopes of recovery, how should we think about the lead times that’s feeding through to Akzo? And then final question on amines, I think if I am right, there is one last part expansion is due this year. Do you see that having a significant impact on margins in the first half? Thank you.

Ton Büchner

All right, they were three-and-a-half questions indeed. Emerging markets, there is a natural hedge. You are indeed, what I said is we have a significant natural hedge it is not perfect example. So there are countries – I’ll just take an example, Brazil that does not have titanium dioxide available locally.

So there we would be buying titanium dioxide in dollars and importing it into Brazil for production. The issue being that all of our competitors in the same business would have the same challenge.

If you look at that for India, that would be very similar. So, overall, I guess, there we were not naturally hedged from the aspect of raw materials we are facing the same headwinds when it relates to currencies that most of competitors in those markets would do as well.

But that’s exactly where our natural hedge is not perfect. There is also areas in specialty chemicals where we are actually delivering cross-border where we are not perfectly naturally hedged. But overall, I guess, it is for most of our paints and coatings businesses, on that production cost side something that is very reasonable natural hedge.

On some of the raw materials, it’s less strong and in specialty chemicals it is kind of an average on both sides. If I do a quick tour, I guess the developments of January and early February, are specifically on the currency front, this concerning for many of these emerging markets, you’ve seen people responding very differently.

Of course, very much depending on their individual situations, countries like Turkey, India and others are increasing their interest rates and people of course are expecting that that would also throttle their economic growth and I would be – I can’t deny that that would potentially have an impact on the businesses of AkzoNobel as well.

If I look at China, of course, January and February are always impacted by a Chinese New Year factor that distorts the first two months of the year and makes it very difficult to make a conclusive statement.

But overall, china on the domestic businesses has been reasonably strong in 2013 and we haven’t seen a fundamental reason why that would significantly change. India again seems to show some increased strengthening from an underlying economy perspective.

But of course, the increasing interest rate may have a mid to long-term impact South America, very similar in that sense. Difficult from the perspective of currencies, but buying, they’ve actually had a reasonable strength during the last parts of 2014.

To your second question, marine, specifically one segment. There is mixed messages on marine, on the one side you have a lot of news that there are initial orders coming back into the markets which would indicate that the bottom of the ship order cycle has been reached.

That does normally need about 12 sometimes even 18 months to result in AkzoNobel orders and growth that would be taking place. On the counter side, some of the indicators of bulk charges and alike, we have actually seen a reduction in 2014 January. So we still get mixed signals out of marine even when the positive signals would be true there will be a delay before it comes into AkzoNobel.

And when you talked about ethylene amines indeed, 2014 will be a year where another plant located in the Middle East will come on stream and that will certainly take some time before demand and supply has been stabilized again. So that’s one of the reasons why we are not sharing on ethylene amines although we have seen a more stable environment in the fourth quarter than we’ve seen for at least the year-and-a-half before that.

James Knight – Exane BNP Paribas

Very clear, thank you very much.

Jonathan Atack

Next question, please.

Operator

And the next question is coming from Jeremy Redenius from Sanford Bernstein. Please go ahead. Your line is open now.

Jeremy Redenius – Sanford Bernstein

Hi, good morning. It’s Jeremy Redenius. Thanks for taking the questions. Three questions, first, I’d like just you described how the organization reacting to the changes that you’ve been making in terms of incentives and this focus on continuous improvement?

And second, could you talk more about the nature of the restructuring charges that you’ve announced for 2014? And then thirdly, would you describe or could you describe that there is more work that you would like be doing on the company’s portfolio overall? Thanks very much.

Ton Büchner

Okay, your first question was related to the change in – I would call it strategy targets, incentives, values, way to behave, getting things done in a continuous improvement environment. It’s a sizable change for the organization and I would make far too big statement if I would say it’s done.

It’s far from done. We are in the process of that change. I think I have mentioned many times, this is probably a three year change process as opposed to a 12 month restructuring. There are a lot of people in the organization that are really liking it and you also see proof points of change.

Our net debt has seriously reduced, because our cash focus which is reasonably new compared to previous times, also as part of the remuneration has clearly resulted in a reduction of net debt and that is what you see whereas we on the inside see that people are truly focusing on the cash.

We are looking at the project-driven improvements which have special trackers or we are saying, no guys, we want to really track you on different aspects and KPIs in the income statement and we do see that people are getting very used to that.

It may be tight, leisure that people are on, but it also clearly shows that you can deliver what you promise if you manage it proactively with forward-looking indicators and forward-looking income statements.

So, overall, generally a positive response, but change always takes a while to get used to. If you ask about the nature of the restructuring charges, basically it’s a continuation of what we’ve done in the last years. We are going to have further consolidation of manufacturing footprints.

We are going to have further optimization of processes not only in the business areas but also at the headquarters where we are moving things to shared service centers, some captive and some even sub-contracted.

So, that will all contribute to the restructuring charges that again are by and large taking people out of the system. And if you ask about portfolio for 2015, we’ve clearly said that the highest value creation is in driving the return on sales and return on investment levels up and that will be our focus between now and 2015.

Smaller reconsiderations of strategically weak positions would be something that we continuously do but they wouldn’t affect the overall concept of AkzoNobel.

Jeremy Redenius – Sanford Bernstein

Great, thank you very much.

Jonathan Atack

Okay, Jeremy. Next question, please.

Operator

And the next question is coming from Martin Dunwoodie from Deutsche Bank. Please go ahead. Your line is open now.

Dunwoodie – Deutsche Bank

Yes, thank you. Good morning all. A couple of questions, firstly, if I come back on to the emerging markets, I know you’ve talked about the potential for interest rates to rise in certain areas and potentially an impact on demand.

But, you’ve obviously kept very well with what we’ve seen in the various stresses so far in terms of FX. But if you do see any kind of further impacts happening, what kind of things can you do to compensate further, I presume there is more restructuring to compensate for these but if you can give a bit more color around that?

And then secondly, looking at the pricing environment, you said you expect a fairly benign raw materials environment going forward. So, I imagine that we can’t expect too much in terms of price rises to be going through.

But can you talk a little bit about what’s changed in the past year or so in terms of how you focus on pricing internally, because it looks like even in a fairly benign environment with raw materials going down, you are managing to hold the prices and in certain areas push them up. So it looks like there is a stronger focus on pricing, but if you could give a bit more color around how you are increasing the focus there? Thanks.

Ton Büchner

Okay, well, again I guess, currencies, we have managed the currency piece, so the only thing that we can do as a strategy is to make sure that where we can we are naturally hedged.

Some of the manufacturing consolidation brings some of the factory footprints closer to the places where we sell and with that move of manufacturing footprint, you do get a better natural hedge and that is the only strategic underlying thing that we can drive as a company to protect our profitability, although our absolute numbers will definitely be impacted.

From a pricing environment, it has been the case that we have been able to really focus on what we call margin management and it has to do with product line assessment, it has to do with SKU reductions and it has to do with process optimizations and also then with very, very clear value discussions with customers to make sure that this is something that we focus on. That has improved clearly in the last 18 months and it’s something that we will continue to work on.

Jonathan Atack

Operator, next question and just a message, given the timing, perhaps we could limit them to two questions please. There is lot of people in the queue. Next question please.

Operator

Certainly, thank you very much. And the next question is coming from Peter Clark from Société Générale. Please go ahead. Your line is open now.

Peter Clark – Société Générale

Good morning. I had three, but I’ll keep it to two. The first one is on the performance improvement program what’s coming through and looking at the targets, you talk about leading performance from leading positions here and obviously you’ve got 2015 targets out.

I know you do a lot of benchmarking. But to me this is still a quite a significant performance gap, particularly on the closing. Just how you recognized out yourself internally, given your benchmarking against, particularly the U.S. peers I would say and then moving back from that, into deco, obviously seasonally low point – but there is nothing in the commentary about the UK and the Southern Europe.

I’m just wondering, assuming nothing has changed there and I am thinking particularly in the UK when I look at 2014, with Valspar in the full effecting be in queue with the tinting business. Within this of course, Q4 was going to so much tougher comp year-on-year than the Q3 was and you saw little bit of volume advance for the region. Thank you.

Ton Büchner

All right, going through leading performance out of leading market positions, 2015 we’ve always said was a realistic intermediate point on the way to leading performance. We’ve also in discussions with you always said we are very aware of what our peers are doing.

We are doing individual benchmarking for the individual business areas at AkzoNobel. Everybody is very clear and open about it, 2015 is not the end result. So, the targets should not be confused with achieving the mission. There will be continued road after that.

When it comes to deco, Southern Europe, there we have actually seen probably some recovery from very low levels. It’s certainly in the latter part of the year. If we talk about the UK, specifically situations around Valspar, they have absolutely not changed in relationship to previous discussions that we had.

Peter Clark – Société Générale

Thank you.

Jonathan Atack

Next question, please. Operator?

Operator

Yes and the next question is coming from Mutlu Gundogan from ABN Amro. Please go ahead. Your line is open now.

Mutlu Gundogan – ABN Amro

Yes, good morning. Two questions. The first on the outlook. I was wondering why you haven’t provided the full year outlook for 2014 especially considering that several drivers should be positive and your 2015 targets imply significant growth.

And then secondly, on your balance sheet you have divested several businesses, I mean, net debt is significantly below your 2015 target. Can I just ask what your intentions are with the room you have created on your balance sheet? Thank you.

Ton Büchner

All right, we have provided 2015 target. That’s what we are driving towards and we have clearly indicated as well that this will not be a straight-line to get there. So, it is the 2015 target that we are guiding towards.

That is the one that we have committed to and therefore we have not been specific on the actual, whether it’s a return on sales level or an absolute number for 2014 and we are certainly maintaining that mid-term target as opposed to the short-term target.

And when it come to the balance sheet, we have indeed improved the ratios that we have. As we have indicated, do not expect any significant size acquisitions from Akzo-Nobel there may be some ballpark here, maybe some more bolt-offs. But that’s really how we want to manage our balance sheet. Do not forget we also still have a significant pension liability as well.

Jonathan Atack

Okay, Mutlu? Next question, please.

Mutlu Gundogan – ABN Amro

Yes, thank you.

Operator

And the next question is coming from Jaideep Pandya from Berenberg. Please go ahead. Your line is open now.

Jaideep Pandya – Berenberg

Yes, thank you. I have two questions. First, on performance coatings, can you walk us through this business a bit what is really structurally happening here? Because, if I track back last two years, you roughly lost about 1% in volume and you claim that you gained €197 million of cost savings in this business.

But your EBIT rise pre-PIP is really sort of roughly flat. I know it’s a very profitable business for you and marine has been having some challenges. But I just want to understand really what is really going on and where are the headwinds and what is the future of this business?

That’s the first question and the second question is just to understand the whole cost – PIP cost-cutting and inflation argument together. Again, you had €224 million of other costs. Just want to understand how much of this is recurring and how should we look at this three blocks together in 2015 and beyond that? I mean should PIP offset cost-cutting – sorry cost for the PIP and the inflation cost please? Thank you.

Ton Büchner

All right, performance coatings, shortly, performance coatings has I would say several businesses that have seen serious, serious headwinds. Some of it has been the marine business as we have raised before. All the business that have been supplying in the construction industry and part of that has been in the protective business, other parts have been in the wood business where actually coating the furniture.

They have actually had quite some tough times and all of that has been compensated by the businesses that have been very strong such as the places in the oil and gas activities, some parts of the powder activity.

So it’s been a – it’s a portfolio by itself and it’s been very actively managed, and although they have seen the same headwinds and the same weaknesses in Europe and the same deterioration in various market conditions that others have seen.

There is segment distribution and they are the only business area that supplies all four segments and therefore have shown a more stable development going forward in comparison to the others. But, also there, we have continuously driven factory consolidations that we have accelerated in 2013 and it will continue in 2014 and also there we are doing significant optimizations at business area level.

So, yes, the growth may have been flat, but the underlying businesses as a portfolio have responded very differently to the markets. The cost of the PIP, your point is very well taken, the 224 is by and large inflation, wage inflations in the different areas and of course a big part of that wage inflation is wage inflations in the emerging markets.

I mean, we really, really do everything to control it in the mature markets. We do the same in the emerging markets but the levels of inflation are significantly higher and therefore we want to move from a project-driven 200 plus improvement to a continuous improvement.

That actually just makes it a habit that we compensate for that going forward. That’s the whole drive towards continuous improvement to make sure that if we do have price and volume gains that are not partially eaten up by the inflation part.

Jaideep Pandya – Berenberg

Very clear. Thank you.

Jonathan Atack

Thank you. Next question, please.

Operator

And the next question is coming from Arun Rambocus from Kempen. Please go ahead. Your line is open now.

Arun Rambocus – Kempen & Co

Yes, good morning gentlemen. Just a couple of questions on the 2015 targets. I mean, of course on the one hand you had the PIP program, but on the other hand, if I look at the press release of last year’s Capital Markets Day, there was also the 4% sales CAGR looking for the next three years.

So where are you in this process of achieving this 4% sales CAGR? And do you still think it’s realistic and if not, will it be more future cost savings to offset a lower sales growth to achieve the 2015 targets? That’s the first question.

Second question is on the free cash flow target. If I am correct, there was also a target to become free cash flow positive as of 2015. Now we see strong improvements in the lower CapEx working capital is coming down. Do you think you can achieve that target a bit earlier given these positive developments? Thank you.

Ton Büchner

All right, in February 20 2013, when we announced the targets, we said, the two targets that we have is really return on sales and return on investment, the 9% and the 14%. The net debt over EBITDA was basically an indication that we were not going to be doing large acquisitions and the growth was an assumption that we communicated.

We immediately stated during Feb 20 as well, if the growth does not occur, we double up, triple up, quadruple up, whatever it takes to make those targets. And that’s exactly what you’ve seen us doing in July last year. We said growth is not going according to our assumptions.

So we are doubling up on restructuring. And that we will continue to do. At this point in time, in our present assessment 4% sales is something that maybe the assumed GDP growth, still if you look at various statistics, we are not counting on it and therefore we are making sure that all the measures that we are taking are driven toward delivering the return on sales and return on investment targets.

Growth is not a target. That was the past strategy, at this point in time, quality of earnings is our target. To grow the free cash flow, we have certainly done a lot of efforts. We have indeed said in 2015, we want to be cash neutral and we will continue with that commitment.

Arun Rambocus – Kempen & Co

Thank you.

Jonathan Atack

Next question, please.

Operator

And the next question is coming from Andrew Benson from Citi. Please go ahead. Your line is open now.

Andrew Benson – Citigroup

Yes, thanks very much. On the chemicals division, that’s the only one where you haven’t got any positive price momentum and the pricing fell from flat in the third quarter to down through the fourth quarter. We talked about our new ethylene amines capacity in the Middle East, but can you explain what you think is going on there? What you think is likely and when you think the pricing cycle might turn?

And then, just a couple of qualifications, because I didn’t quite understand couple of answers to historic questions. On the divestment side, Ton, I think you said that we know significant divestments. And on the interest line, again, can I just qualify you are expecting an €18 million reduction in net financial charges assuming no incremental portfolio changes this year. Is that right?

Ton Büchner

Maybe I’ll take the first two; I’ll pass the next one on to Keith. When it comes to the prices, first of all, the good news is that the volumes actually grew in specialty chemicals in the fourth quarter.

And I think that was a positive sign. Prices did fell and I mentioned earlier during the presentation it was primarily driven by the pulp and performance business where prices were weak. The rest of the business did not see any significant price weakness during the course of 2013 in the aggregate.

When it comes to divestments, what I stated is that the focus is on what creates the highest value for the portfolio and therefore, our focus is on improving the return on sales on all three lines in the portfolio. So again, if people would say, are you doing something with complete legs?

At this point in time, our focus is, improving the returns, improving the quality of earnings, improving the cash flow and any other discussions around portfolio are not taking place until we actually achieve that part of what we’ve done. And from the interest side, I think it’s a similar question, but I am passing on to Keith.

Keith Nichols

Hi, Andrew. Yes, in very simple terms, the interest on those bonds will disappear. We have that benefit. So, simple interest gone then the cash flow going forward and how we fund that and there will be some short-term borrowings. But you are right; eliminating that bond eliminates that level of interest charge.

Andrew Benson – Citigroup

Thanks, very much.

Jonathan Atack

Next question, please.

Ton Büchner

I think, we are getting to the end of the queue, yes, three people left.

Operator

And the next question is coming from Michael Ray from Goldman Sachs. Please go ahead. Your line is open now.

Michael Ray – Goldman Sachs

Hi there. Thanks for taking my two questions. Firstly, just on functional chemicals. Can you comment just on how the year has started? I know you are noting a recovery in 4Q in ethylene amines. But is it reasonable to expect that to continue this year based on what you can currently see?

And then secondly, I assume it won’t, but will the impairment in the specialty chemicals segment lead to a lower depreciation charge going forward? Thanks.

Ton Büchner

The functional chemicals side, I guess, ethylene amines is only one part. It’s a significant part of functional chemicals, but not the only parts. And again recovery is a big word. We see the stabilization things have not gotten worse, it’s got a little bit better and as indicated by one of your colleagues earlier, there is new capacity coming up to the market in 2914 and we will have to wait how that new supply and demand curve balances out.

It’s one of the reasons why we don’t call a recovery on ethylene amines for this year. But there has been a stabilization and let’s see if we can keep it stable during the course of 2014. And then when it comes to the impairment charge that’s been a non-cash impairment charge, not related to depreciation. Amortization-wise I don’t think it has a significant impact.

Michael Ray – Goldman Sachs

Okay, many thanks.

Jonathan Atack

Next question, please.

Operator

And the next question is coming from Jean-Francois Meymandi from UBS. Please go ahead. Your line is open now.

Jean-Francois Meymandi – UBS

Hi, good morning. Thanks for taking my questions. I have one more – on PIP there. Just first, how do you see those €250 million shaping during the year? Because you obviously had a strong H2 in 2013, will you have a stronger H1? And then things fading to a new normal in H2 2014/2015 with 2015 having a normalized level of PIP and also what is driving in general your change in PIP policy in terms of how much you want to save?

The first block and the second block is actually on performance coatings. Coming back to previous questions, it’s a good cash flow generator, but when we look comparatively to peers and obviously your slightly different portfolio, that it seems to under grow peers, don’t you think this business you could invest a bit more in that business to grow faster in performance coatings?

Ton Büchner

Thank you for those two questions. Coming to the €250, in 2013 it was very back-end loaded. So, it was very Q4 loaded and we do expect that the €250 that we’ve indicated for 2014 is going to be more evenly spread over the year.

I do believe that it will be still a little bit lighter in the first half and the second half, but it will not have the extreme distribution of 2013. And indeed, in 2015, we expect to go back to normalized levels which in the past we’ve indicated as something between a €100 million and €150 million.

Second question, which is related to performance coatings, performance coatings has a return on capital employed that is in excess of 20%. That is clearly the highest in the organization and many of you know that I am a return on capital employed-driven individual. If they come with good CapEx approvals, they are one of the ones that get open ears from both Keith and myself.

Jean-Francois Meymandi – UBS

Okay.

Jonathan Atack

Very good. I am watching the time but I think there is just two questions left. So, next one please

Operator

And the next question is coming from Christian Frates from Macquarie. Please go ahead. Your line is open now.

Christian Frates – Macquarie

Yes, good morning. Thanks for taking my question. In previous quarters you said that the UK as a stronger one for deco Europe. I did see this mentioned in your before release and also before you talked about your territories seeing volume gains, but you also did not specifically point out in today’s release. Can you walk us through current trends you see in the region in deco? Thank you.

Ton Büchner

All right, specifically, Europe, are your two questions, UK has clearly shown through the course of 2013 positive developments in the housing markets reflected in positive developments for our business, not only deco, but even some of the others specifically one that related to general economic activity or the housing industry.

So the UK has been a positive exception certainly in the beginning, but also in the second half of the year. When it came to the European periphery there in the second half, we’ve seen a stabilization from a pretty awful level.

Of course, where they have gone through in the past, but we’ve seen actually some positive developments in Spain, less so in Italy, but even some stabilizing developments in places like Greece. So overall the periphery has found itself a bottom or it has actually been starting to grow out of the box.

Christian Frates – Macquarie

Okay, very helpful. Thank you.

Jonathan Atack

And operator, our last question please.

Operator

And the last question is coming from Sebastian Satz from HSBC. Please go ahead. Your line is open now.

Sebastian Satz – HSBC

Yes, thanks very much. I have two questions left please. First, on currencies again, could you just give us an indication by how much your margin, your underlying margin in deco was impacted by FX in the fourth quarter? And the second question is again on restructuring, over the past few years, you’ve consistently found new opportunities of the lead order, and spent more on restructuring.

What gives you the confidence and that this is over now that from 2015 onwards really restructuring spends come back down to a normalized level of €100 million to €150 million, particularly given the comments you’ve just made around wage inflation running at around €200 million plus? Thank you.

Ton Büchner

All right, thank you for the two questions. I do not think that we gave any monetary clarity on the currency impacts on OPIs, EBITs and things like that. I am looking at Keith, but I think that’s a level of detail that was generally not provided, apologies for that.

And when it comes to restructuring, we of course, as we said, do regular benchmarking with peers, we are establishing what it takes to get there. Some people would actually say that €100 million to €150 million is still a lot of money. But I do believe that a €15 billion corporation actually probably has that kind of general restructuring/continuous process improvement taking place.

Of course, we are also doing a lot in commercial excellence which should be driving organic growth that also helps us from a leverage perspective. So overall, with the plans that we have today, I am convinced that we not only can deliver on the 2015 targets, but also at that point in time bring our restructuring back to what we call normalized levels.

Sebastian Satz – HSBC

Thank you.

Jonathan Atack

Okay, operator, that brings the close.

Ton Büchner

Thank you very much everybody for joining us today and for your interesting questions and I wish all of you a great remaining part of the day. Bye-bye.

Operator

Thank you for participating in today’s conference call. You may disconnect your lines now.

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