Akzo Nobel India : AGM 2023 Transcript

"Akzo Nobel India Limited"

August 03, 2023

PRESENT:

Management: Mr. Oscar Wezenbeek, Chairman

Mr. Rajiv Rajagopal, Managing Director Mr. Krishna R, Wholetime Director and CFO

Mrs. Smriti Rekha Vijay, Independent Director and Chairperson of the Audit Committee and Corporate Social Responsibility Committee Mr. Amit Jain, Independent Director, Chairman of Nomination and Remuneration Committee and the Risk Management Committee Mr. Hemant Sahai, Independent Director and Chairperson of Stakeholders Relationship Committee

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Akzo Nobel India Limited

August 03, 2023

Moderator:Dear shareholders, good afternoon and a warm welcome you all to the 69th Annual General Meeting of Akzo Nobel India Limited through video conferencing or other audio-visual means. As a reminder for the smooth conduct of the meeting, the members will be in the mute mode. The audio and video will be open for speaker shareholders to speak at the AGM as per the pre- registration. Please note that as per the requirements, the proceedings of the Annual General Meeting will be recorded and available on the website of the company. I now request Mr. Oscar Wezenbeek, Chairman, Akzo Nobel India Limited, to kindly initiate the proceedings of 2023 AGM. Over to you, sir.

Oscar Wezenbeek: Distinguished shareholders, namaste. It is now 2.30 pm and I find that the quorum is present, so I call this meeting to order. On behalf of the entire board, it is indeed my pleasure in welcoming you to the 69th Annual General Meeting of your company, Akzo Nobel India Ltd. Let me start the proceedings by introducing my fellow board members who join me today in this AGM through video conferencing and other audiovisual means.

Let me begin by introducing the board members. To my extreme left is Mrs. Smriti Rekha Vijay, Independent Director and Chairperson of the Audit Committee and Corporate Social Responsibility Committee. Next to her is Mr. Amit Jain, Independent Director, Chairman of Nomination and Remuneration Committee and the Risk Management Committee. To my immediate left is Mr. Rajiv Rajagopal, your company's Managing Director. Sitting immediately to my right is Mr. Krishna R, your company's Whole Time Director and CFO. And next to Krishna is Mr. Hemant Sahai, independent director and chairperson of Stakeholders Relationship Committee. I also acknowledge the presence of the representatives of Statutory Auditors, M/s PriceWaterhouse Chartered Accountants, LLP, the Secretarial Auditors, M/s A K Labh & Company, and Cost Auditors M/s Chandra Wadhwa & Company in this meeting.

Please note, all statutory registers are available during the AGM for inspection at the NSDL website. Before starting the formal business, I would like to share a few opening remarks. Dear shareholders, namaste and good afternoon. It is truly my honour to welcome you to the 69th Annual General Meeting of your company. The year gone by has shown that the world's transformation into a global village continues to accelerate.

The impact of uncertainties and developments elsewhere are impacting businesses across the world faster than ever before. If you look at the big picture of 2023, global economic growth is expected to further taper down to 2.8%. In this dynamic backdrop, only those companies that are resilient, agile, strategic, innovative and sustainable in their ways of working will grow today and also be relevant in tomorrow's marketplace. At Akzo Nobel, we pride ourselves on supplying sustainable and innovative paints and coatings that our customers, communities and the environment are increasingly relying on.

Our world-class portfolio of brands, including Dulux, International, Sikkens, and Interpon, is trusted by customers around the globe. From a global perspective, Mr. Gregoire Poux Guillaume

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took charge as our new CEO in November 2022 and launched four strategic priorities for 2023. These include, first of all, margin management, secondly, operating expense, thirdly, working capital management, and fourth, integrated supply chain.

Together, these steer Akzo Nobel's ambitions to balance growth and profitability worldwide. Talking of India specifically, I firmly believe that this is India's age of coming in a new global order. The Indian economy is emerging as a global engine of growth. With a projected GDP growth of over 7% for the current financial year 2023-2024, India is the world's fastest growing major economy.

In the medium term, tailwinds such as, first, favorable demographic dividend, secondly, a strong domestic consumption, thirdly, a government and private investment in infrastructure and manufacturing, fourth, increasing digitalization, and fifth, a rapid urbanization are expected to continue to drive the Indian economy and inter alia the prospects of the paint and coatings industry. The industry is estimated to grow from INR62,000 crores today to INR100,000 crores within the next five years. So where does your company fit in the larger picture?

Our commitment to innovation, industry-leading sustainability focus, cross-continental experience in 150 plus countries worldwide, over two centuries of expertise in paint and coatings industry, and most importantly, our proud people who are in sync with the pulse of the market put Akzo Nobel in a unique position. As a leading global player and a well-known international brand in India, your company's ambition is clear, to grow faster than industry while growing profitability too.

In this presentation shortly, your company's managing director will share more details on our strategy that brings alive our India ambitions. Esteemed shareholders, your company's annual report for the financial year 2022 and 2023 has already been circulated. For the year ending March 31st, 2023, we delivered a record performance across multiple financial metrics. First of all, our revenue from operations, which stood at INR 38,021 million, was a new high. With an accelerated 21% top line growth, we cemented our position as a top two incremental share gainers in the Indian paint and coatings industry for the second year in a row.

Secondly, our EBIT surpassed INR 4,000 million mark for the first time and was a significant 24% increase over last year. Thirdly, calibrated pricing actions, better mix and enhanced operating efficiencies translated into a record EBIT of 11.6%. And fourth, at INR 3,351 million, our profit of after tax before exceptional items too was the highest ever. While growing faster, we continue to deliver double digit profitability for the fourth straight year. Our operating cash too was strongest ever.

Overall, we are a stronger Akzo Nobel today. At the same time, we remain steadfast to contribute meaningfully to a sustainable future. Three key 2030 sustainability ambitions drive our India business. These are first of all, reducing our carbon emissions by 50%, secondly, utilising 100% renewable energy, and thirdly, moving towards zero waste. We continue to act on these ambitions. For example, nearly 75% of the energy requirements at a Bangalore site are met by renewable energy.

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Akzo Nobel India Limited

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Likewise, nearly 60% of raw materials purchased during the full year of 2023 were sustainably sourced. Innovation also has a key role to play here. We continue to offer our customers solutions that enable them to reduce their own emissions and material use. Currently, nearly 30% of our revenue is coming from sustainable solutions. Our societal initiatives in three focus areas of economic development through skill building, education and community health care continue to benefit local communities.

In the full year of 2022-2023, the Akzo Nobel Paint Academy provided sustainable lived livelihood opportunities to 3,800 underprivileged youth. And secondly, our education initiative benefited more than 6,700 children. Thirdly, 25,000 daily consultations were provided to painter families and communities around our sites. And fourth, your company also contributed to the NITI Aayog's Aspirational Districts Program.

Our committed efforts to drive a more diverse, inclusive, and empowered future for local communities continue to be recognized with prestigious corporate social responsibility awards by the CII ITC Centre of Excellence, Institute of Company Secretaries of India, and the leading industry body FICCI. While growing profitably and sustainably, doing business with integrity continues to be our core driver.

My heartfelt gratitude to the dynamic, diverse and experienced board members of your company who augment our robust corporate governance framework. I'm happy to announce that at today's meeting, the Board of Directors has recommended reappointment of Mr. Rajiv Rajagopal as Managing Director of the company for a further period of five years, with effect from November 1st, 2023, subject to your approval, which will be sought through postal ballot.

With full year 2022-23 behind us and full year 2023-24, a year of opportunities ahead, I take this opportunity on behalf of all the board members to thank you, our valued shareholders, for your continued support, loyalty and above all, for your trust in Akzo Nobel India. Reciprocating this faith in you, the Board has recommended a final dividend of INR40 per share, over and above the interim dividend of INR25 per share, taking the total dividend for the year to INR65 per share.

This takes our company's total shareholder return to over 20% year on year. Looking ahead, the market will be more competitive. Notwithstanding the many variables, be it entry of new competition, evolving consumer needs, new marketplaces, brand spans and shifts in the industry, we are cautious yet optimistic. This optimism stems from my confidence in our solid foundation and robust strategic initiatives across both paints and coatings.

The future looks promising indeed, as we are geared up to unleash new excitement in the market and further build on our growth momentum in India. Dhanywad and thank you once again. Now before we move on to the formal business of the day, as outlined in the notice of this meeting, I would like to invite our Managing Director, Mr. Rajiv Rajagopal to share with you some highlights about the business of the company.

Rajiv Rajagopal: Thank you Chairman sir. Good afternoon to all the shareholders. Chairman sir and to all members of the board, I would like to thank all of you and all the shareholders for the trust and

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Akzo Nobel India Limited

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faith reposted me. I'd like to thank all of you for the reappointment subject to shareholders approval. And all I can promise is to continue to work diligently and make sure that I am able to take the company to the next level.

We will now start with the presentation that I have over the next 20 odd minutes. And I'll run you through my thoughts and give you some idea of what Akzo Nobel and Akzo Nobel in India is sort of geared to do. I shall quickly walk you through a little bit about us, the business environment, business updates and the financial performance.

I would also like to talk a little about ESG, which is a key focus area

So, first about us, just wanted to remind everybody, Akzo Nobel is a EURO 10.8 billion revenue company in 2022. We are the third largest global player in paints and coatings. We've had a 7.3% return on sales in 2022. We are available or selling across 150 countries and we've got more than 35,000 employees.

On Akzo Nobel India, I'm proud to showcase to you the Gwalior factory, we call it Narmada. We have got about 1500 employees, we have five manufacturing sites, in Mohali, Gwalior, Thane, Hyderabad and in Bangalore, where we manufacture paints and coatings. A lot of work is happening on capacity augmentation and expansion plans are in place. We are scaling up distribution through both our online and offline channels, and I shall walk you through this.

A 50% increase is what we've seen in our network and our abilities to now start moving towards 5,000 plus towns, which is quite a shift that we've had with our Distribution 2.0 strategy. We cover more than 20,000 paint retailers, and we've got around 4,000 B2B customers. We've got a world class color center for Automotive Paints, which is a global color center. I'm really proud of that team. And a low-cost innovation center is operating at Thane site where we are driving for differentiated products and techniques.

In terms of business environment, I think our Chairman has already mentioned to you. If one looks at the GDP growth in different economies, , one can clearly see that India is an outlier in terms of growth; while one may argue whether it is 6 or 7, the fact is it is still one of the fastest growing economies and I think hence it is fantastic to be in this point of time in India and also play in a sector which is really going to see good growth over the next few years.

One of the things which is really benefiting and for those of you who have seen our quarterly results which we have just announced, we are seeing some benefit of the crude price, the crude has been softening; in the course of the last few weeks we have seen a little bit of upward movement of the crude price, but nevertheless, they are significantly lower compared to a similar period last year. Fortunately for us the rupee is now very stable which augurs well for us, because both the crude price and the rupee are the two variables which impact the overall buying index.

We are seeing a good rebound in the core sector growth and one of the things that we are seeing is the fact that the interest rates have got slightly elevated and this is felt by most of us who are buying homes and taking home loans. Nevertheless, despite that, I still believe that India is still in the cusp of the next few years seeing good growth subject to the environment remaining stable.

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