21 July 2015
Q2
· Revenue up 6 percent, due to 9 percent favorable currency effects, offset by divestments and lower volume
· Operating income up 38 percent at €486 million (2014: €353 million), reflecting the positive effects of process optimization, lower costs, reduced restructuring expenses, divestment results and favorable currency developments
· ROS improved to 12.3 percent (2014: 9.5 percent); excluding incidental items, ROS was 11.4 percent (2014: 9.5 percent); ROI improved to 11.7 percent (2014:10.1 percent)
· Net income attributable to shareholders up 61 percent at €331 million (2014: €205 million)
· Adjusted EPS up 37 percent at €1.30 (2014: €0.95)
· Net cash inflow from operating activities was €407 million (2014: €393 million)
· Divestment of the Paper Chemicals business completed
Outlook
· The market trend in North America continues to be positive and Europe overall does not improve, while conditions remain challenging in many other countries, including Russia, Brazil and China
· On track to deliver 2015 targets
Key events
· ICI Pension Fund triennial review completed in July 2015, a new valuation and payment schedule was agreed with the Trustees (please refer to Investor Update for more information)
| € million unless stated | 2014 | 2015 | ||||
| otherwise | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 |
| Decorative Paints | 865 | 1,074 | 1,050 | 920 | 890 | 1,134 |
| Performance Coatings | 1,319 | 1,434 | 1,420 | 1,416 | 1,430 | 1,550 |
| Specialty Chemicals | 1,222 | 1,228 | 1,239 | 1,194 | 1,296 | 1,290 |
| Other | (23) | (26) | (23) | (13) | (25) | (25) |
| Group Revenue | 3,383 | 3,710 | 3,686 | 3,517 | 3,591 | 3,949 |
| EBITDA | 364 | 509 | 487 | 330 | 462 | 610 |
| D&A | (148) | (156) | (152) | (162) | (156) | (158) |
| Operating income excl. inc. | 216 | 353 | 335 | 168 | 306 | 452 |
| Incidentals | - | - | - | (85) | - | 34 |
| Decorative Paints | 17 | 102 | 113 | 16 | 50 | 128 |
| Performance Coatings | 126 | 178 | 135 | 106 | 170 | 220 |
| Specialty Chemicals | 135 | 124 | 156 | 93 | 163 | 192 |
| Other | (62) | (51) | (69) | (132) | (77) | (54) |
| Operating Income | 216 | 353 | 335 | 83 | 306 | 486 |
| Finance Income/expenses | (37) | (40) | (38) | (41) | (41) | (27) |
| Associates | 6 | 6 | 6 | 3 | (2) | 8 |
| PBT | 185 | 319 | 303 | 45 | 263 | 467 |
| Tax Charge | (43) | (89) | (84) | (36) | (82) | (108) |
| Non-controlling interests | (16) | (24) | (16) | (16) | (18) | (27) |
| Discontinued operations | 3 | (1) | 2 | 14 | (3) | (1) |
| Net Income attributable to shareholders | 129 | 205 | 205 | 7 | 160 | 331 |
| Tax Rate | 23% | 28% | 28% | 80% | 31% | 23% |
Q2 2015 highlights
- Decorative Paints: revenue increased 6 percent, mainly driven by favorable currency effects. Volumes up in Asia, down for Europe and Latin America. Operating income improved 25 percent due to the new operating model, lower costs, reduced restructuring expenses, strict cost containment and favorable currencies
- Performance Coatings: revenue up in all businesses, benefitting from favorable currencies and higher demand for premium products. Volumes declined mainly due to lower capital spending in the global oil and gas industry and significant exposure to Russia, Brazil and China. Operating income up 24 percent driven by cost reductions from performance improvement initiatives, margin management activities, manufacturing productivity and currencies
- Specialty Chemicals: revenue up 5 percent due to favorable currencies, partly offset by the impact of the divestment of the Paper Chemicals business (completed early May). Volumes flat; growth in some segments compensated for lower demand in oil and gas drilling. Operating income up 55 percent (31 percent excluding incidental items related to the divestment of the Paper Chemicals business), supported by increased production at new Frankfurt plant, operational efficiencies throughout the business and favorable currencies
- Profit on sale of the Paper Chemicals Business of €30 million included under incidentals
- Restructuring charges of €24 million in Q2 2015, compared to €45 million in Q2 2014
- Operating income in other activities lower than the previous year. Corporate costs higher due to planned functional transformation projects. Pension costs impacted by de-risking initiatives
- Raw material prices lower, although in certain regions foreign currency effects have adversely impacted raw material costs in local currencies
- Operating activities in Q2 resulted in a cash inflow of €407 million and net debt decreased to €2,138 million from €2,278 at Q1 2015
- De-risking of pension liabilities continues and buy-in transactions completed for a total of £1.5 billion during H1 2015
- Agreement reached with Trustees on ICI triennial review. Funding deficit lower at £850 million (£1.0 billion in 2012). Top-up payments reduced by £28.5 million in 2016 and 2017 to £150 million and recovery plan extended by £125 million per year from 2018 to 2021
Restructuring charges by quarter
| 2014 | 2015 | ||||||||||||
| Q1 | Q2 | Q3 | Q4 | FY | Q1 | Q2 | |||||||
| Decorative Paints | 22 | 23 | 1 | 34 | 80 | 5 | 11 | ||||||
| Performance Coatings | 15 | 17 | 41 | 75 | 148 | 6 | 10 | ||||||
| Specialty Chemicals | 7 | 2 | 6 | 2 | 17 | 0 | 3 | ||||||
| Other | 0 | 3 | 7 | (2) | 8 | 0 | 0 | ||||||
| Total | 44 | 45 | 55 | 109 | 253 | 11 | 24 | ||||||
Q2 revenue development in % versus Q2 2014
| Volume | Price/mix | Divestments | FX rates | Total | ||||||
| Decorative Paints | (1) | - | - | 7 | 6 | |||||
| Performance Coatings | (3) | - | - | 11 | 8 | |||||
| Specialty Chemicals | - | (1) | (2) | 8 | 5 | |||||
| Average development | (2) | - | (1) | 9 | 6 | |||||
