Good afternoon, ladies and gentlemen. I hereby open the General Shareholders' Meeting, and I welcome you to this meeting. Good to see you all here. I see some familiar faces, Mr. Lahore, here in the front.
Mr. Vuerstein, your presence is much appreciated. But the same goes for the other attendees, even if I haven't mentioned you by name. So in this meeting, we'll be reporting on the financial year of 2017, and we will vote on several agenda items. You're used to having 1 shareholders meeting per year.
But as you know, last year, we held 3 meetings with you. And then for example, we talked extensively about the situation concerning PPG, and we've already been held accountable on that score. So for that reason, we don't intend to go into this subject again today. We've also received your approval for the demerger with Chemical Activities, Chemical Operations. And I'm sure you've heard that on the 27th March, we announced the sale of Specialty Chemicals to Carlyle.
It's not part of the agenda for this meeting, but our CEO, Thierry Van Nanker, will talk about this transaction during his presentation for Agenda Item 2. So you can ask any questions you might have. Then our CFO, Maarten de Vries, will talk about the current situation with the union after Mr. Von Lancker's presentation. So ladies and gentlemen, before we continue, I would ask you to please switch off all your devices except any auditory devices that you might need, any hearing aids you might need.
So this meeting is held in Dutch, will be conducted in Dutch, but you can, of course, ask questions in English. And if you want to follow the meeting in English, then we have headphones available. Channel 1 is for Dutch. Channel 2 is for English. Microphones are available in this room.
If you want to take the floor, then I would ask you to give your name and to ask your questions in a concise manner. Because for a good meeting order, that might mean that I will limit the number of questions or people speaking. So of course, I hope this won't be necessary. So then we'll move on to agenda item 2A, discussion of the financial year 2017. You have the report from the Board of Management.
You were able to read it and check it. And I will now give the floor to our CEO, the President of the Management Board, and he will discuss the operating results for 2017. Please go ahead. Yes. Thank you, Anthony.
I'd also like to welcome you. And like I said, I'm pretty new in this position, but we met each other so many times that I would love to be on a first name basis with you. So in this presentation, I will go over the highlights of 2017. Then I will also briefly talk about the announced sale of our Specialty Chemicals division. And after that, I would like to talk about what AkzoNobel's plans for the future are as paint and coatings company, including an overview of our new strategy, which we've called 15 by 20, 50% return on sales in 2020 as a proposed plan.
And of course, I will give you the opportunity to ask me questions. So 2017 was a transformative year. 2017 was an exceptional year, it is true, for ExxonMobil, which is why we met so often last year. But in all respects, it was also a transformative year. Since the announcement in April of last year of the division of the company into a focused paints and coatings company and a focused specialty chemicals company.
A lot has happened and great steps have been taken in this direction. But first, I would like to go over some of the main achievements and joint results because in spite of what happened in 2017, the actual results are very good. In 2017, the company again had a record EBIT and organic growth driven by higher volumes, both in the paint and coatings side of things and the specialty chemicals department. And that was supplemented by some complementary and very successful acquisitions. In October 2017, we also announced the first phase of creating a fit for purpose paints and coatings organization.
So the program is on course, on target, for €100 and £10,000,000 in savings next year. But during 2017, we also kept working in line with our core values, our principles when it came to safety, we were very successful because our statistics shows that both when it comes to paint and coatings and chemicals, we are now in the upper quartile of our industry when it comes to these metrics. We're also very proud that in 2017, again, we were chosen as the number one for the chemicals industry in the Dow Jones Sustainability Index, proof once more of us being able to link sustainability to great results. And we've also created 141, let's call it, walls of connection in cities all over the world, which shows that even in a very busy year like 2017, we didn't lose sight of our social contributions, societal contributions in the societies we're active in. In 2017, there was also an internal division of the Specialty Chemicals division that was started in order to prepare the external separation this year.
The internal separation was concluded at the end of 2017. And at the end of March, as we've said before, end of March 2018. That led to the announcement of the sale of which I will talk about more later. When this separation was announced in April of last year, some people were surprised because of the speed at which we wanted to do that within 12 months. So we're very proud to be able to tell you that we managed to do it in a record 11 months.
And I will speak more on that subject later as well. Like I said, 2017 was a transformative year. And on the next slide, you see some of the financial highlights of 2017. Over the entire year, the revenue went up by 4% when we exclude the currency impact, And the EBIT went up by 2%, which is a record value, like I said before. The adjusted EPS went up by 6% to €4,400,000 and the total dividend proposed for 2017 went up by 52% to €2.5 per share.
On top of that, in December 2017, for people with a very short memory, we also paid a special cash dividend of €4 per share as an advance for the separation of specialty chemicals. On the next slide, you will see some other investments that we made this year in order to build on our sites and plans, together with complementary acquisitions in order to support the organic growth of our I would like to go into some detail for several examples that you see on this slide. In the last moment of December 2016, we acquired the Industrial Coatings business of PSF. And in 2017, we did a further 3 complementary acquisitions: Dizotek in France, Flexcrete in the U. K.
And VipowderTech in Thailand. Another milestone was opening the opening of our Ashington plant in the U. K, which is the most advanced and the most sustainable paint plant in the world, not just in our network, but in the entire industry. So that is the new production center for the leading brand, Dulux, in the U. K.
And it's important in order to defend our leadership position in the U. K. And to continue to develop that leadership position, which is what we're doing this year. And Specialty Chemicals in 2017 announced 14 capacity extensions or completed them in order to support growth for clients in all regions. Like I've said before, in March of this year, we announced that an important milestone was reached in creating a focus on high performing paints and coatings company.
The supervisory board and the management board have concluded that a private sale to the Carlyle Group and the Singapore Investment Fund, GIC, is in the best interest of AkzoNobel of Specialty Chemicals and its stakeholders, including their employees, shareholders and clients. So that was the result of a very extensive dual track process where the management board looked at the legal demerger and also considered a sale. So the transaction is expected to be concluded by the end of 2018. And the net results will mostly be distributed to shareholders. Right now, we're looking into the various options to do so.
For example, paying a special dividend or buying back, repurchasing a number of shares. Further details will be announced at a later point, and we will try and keep the preferences of our shareholders in mind when making our choice. So I would like to add to that, that right now there is no clear preference. So the separation process that I just mentioned was an extraordinary monumental effort involving many people within our organizations, and these people worked very hard. So like I said, it's a real achievement to get such a tall order done within 11 months without any problems presenting themselves.
At the end of my presentations, of course, there will be time to ask me questions on this specific subject as well. I would also like to go into the strategy, paints and coatings winning together 15 by 20. So as Exxonobel, we're now a paints and coatings company with the announced sale of Specialty slide summarizes what we will look like as of now. As you can see, ExxonMobil has a very strange collection of worldwide leading brands like Deluxe, Sikkens, International and Intercom. In the markets where we are active, we often have a leading percent with about half from growth markets, emerging markets.
So that means faster and growing markets. And I do just want to say that almost onethree of AXA Nobel's revenue is being realized in Asia, which is a very strong growth market for us, but it's also one of the crown jewels of our operations. We're a company with a revenue of almost €10,000,000,000 meaning we're clearly one of the major players in the paints and coatings industry worldwide. Within the next slide, you'll see in the next chart, you'll see that Axonavale might be one of the leaders when it comes to paints and coatings, but it's not quite leading when it comes to performance. What you see in this graph is the thick blue line, and that's our profitability compared to relevant competitors.
And there you see that when Tom Buechner started, we were behind others, but he worked together with the team, and he managed to turn us into a company that only has to let a few other competitors go ahead. And that's the gap we want to close now with our return on sales of 15% by 2020. So via the strategy that I'll be discussing, we do expect that in 2020, we won't just be one of the biggest paints and coatings companies in the world. We also expect to be leading in all metrics in the entire industry. So maybe just very briefly about willing to get a 15 by 20, what that means.
We have a very sharp focus in everything we do in order to achieve the 15% return on sales by 2020. Our strategy to make that target is, like I said, is willing to get a 15% by 20% is that strategy, and it's based on 4 important pillars. The first one is the passion for paint. It might be a bit of an old expression, an old phrase, but as a conglomerate, we may have lost sight just a little bit of just how good pain can smell, which is why we'll be focusing again on our passion for paint, for producing paint and selling paint. And then our deep understanding of what our clients need will help us stay ahead of competitors.
So we do want to remain the first choice for our clients, meaning we're streamlining the entire company towards one end to end process, which is coming up with good paints and coatings, producing them in the best possible way and then selling them in the best customer oriented, sales oriented, profit oriented way. So that's the passion for paint. Then quickly looking at precise processes and how they work within the company, they're the integrated business planning that we've started with Oliver White, trying to roll that out throughout the company, which will lead to less waste in processes. It will lead to better planning in everything we do, and it will give a better and faster idea of all the information so we can make better decisions in future. We will also build on our track record when it comes to savings from continuous improvements.
Precise processes is all about speed and discipline, speed and discipline with which we execute processes. The 3rd pillar is powerful performance. That's really about a high performance culture. It's not about explaining what we'll be doing, but about producing results. So it's about focus and result oriented business.
So there's a whole step about what we will be doing and won't be doing within the business that we'll be keeping within the business. The last pillar is proud pillar. Like the transformative process in 2017 proved, the strength of our company is its people. So we'll continue to build on a strong, diverse worldwide team, which will develop a painting coatings company in a targeted way, a team of people which can be proud of representing our core values, sustainability and who also achieve results. So this is really about a feeling of ownership as a mentality, but also celebrating our successes with pride.
So that all sounds good, But I'll now show you on the next chart how we'll be achieving these results. So we've charted a clear path with a 10.6%, which is where we were at in 2017, and we won 15% by 2020. And you see this clear path here. Like I said, the Phase 1 of a fit for purpose organization is on track for €110,000,000 increase in profitability in 2018 by realizing these savings. That's part of the first element that you see here on this little bridge, and that would include making the sales department more effective, looking how we can create more synergies in our total production process.
In the Q1 of 2018, we'd only realized €10,000,000 mostly because of the usual inertia in the approval processes. But over the next quarters, you will see a sharp increase. And we're completely on track to actually deliver the €110,000,000 We always have a very good track record when it comes to savings through continued improvements. And these initiatives will cover at least inflation on our fixed costs. So that's the 2 other elements that you see on the bridge on the screen.
And also, by 2020, the integrated supply chain will lead to an additional €200,000,000 in savings per year. So we have very detailed plans and initiatives set up for this, like optimizing non product related expenses, reducing costs when it comes to raw materials and optimizing our network, both when it comes to sites and stores, warehouses. And when it comes to growth, we don't want to wait for external market growth or work with exorbitant expectations. We believe in our plans. We think we'll keep up at least keep up with the rest of the market.
But in our plans for achieving 15 by 20, we're using a more reticent external growth expectations, meaning we can work just a little bit harder in order to achieve the results. So this bridge that you see here will take us to the 15% in 2020 and will take us to the lead in the industry. And then just summarizing in the last slide, AkzoNobel, as of today, is a focused paints and coatings company with a very strong global brand network and leading positions in large and attractive markets. We're very well positioned to accelerate growth, but especially to enhance profitability now that we have this complete focus on paints and coatings. And we have a very clear transformation plan and a very clear path to achieve our targets.
That brings me to the end of my presentation. And after an intervention by Maarten, I would be happy to respond to any questions you might have. Yes. Thank you, Thierry. Like I said, you can ask questions later.
But now I'll ask Maarten to briefly explain and talk about the AkzoNobel pension fund. The media has said quite a bit about that over the past period, so we thought it'd be good for our CFO to briefly explain. Maarten, please go ahead. Yes. Thank you, Anthony.
Ladies and gentlemen, as you've been able to read in the press, the unions and also the retirees of AkzoNobelovas for a financial contribution by AkzoNobel to the Dutch pension fund, APF. We've explained to the unions that we cannot grant the request and also why we cannot. But we've declared ourselves
willing
to reach agreements about salary increases and a one off collective labor agreement bonus in advance of collective labor agreement negotiations. We've also indicated that we're willing to talk about an extension of the social plan. Of course, we are available and will continue to be available for constructive discussions with the unions. It's important to note that AXA Nobel in 2005 reached an agreement with the unions, and they then had the support of the majority of their members within AkzoNobel. And because of that agreement, the change was made in the Netherlands from a defined benefit to a defined contribution scheme.
The goal was that AXA Nobel would have no other financial obligations towards the APF than the annual payment of the pension contributions. At the time and ever since, that was clearly communicated to the employees and retired people, retired employees of AkzoNobel in the Netherlands. So for AkzoNobel, when it comes to pensions, everything is very clear. And looking at the coverage ratio for the pension fund, that is currently above the average coverage ratio for company pension funds in the Netherlands. So the APF is very well able to meet its payments obligations towards retired employees.
And they don't have any make they don't have to make any cuts to pensions, and they don't they won't need to in the short term either. So a more appeal was made to the company for additional means for the APF, and we looked at that. But unfortunately, we found that the defined contribution nature of the pension scheme would be jeopardized if we did so, And that would negatively affect the financial position and strength of the company. And it doesn't fit in with the decision that we made jointly in 2,005. External advice by experts recently confirmed our position, which is why we had to deny this request.
We would also like to note that the switch from defined benefit to defined contribution scheme has been a national and international trend for some time now. And within the group, all defined benefit schemes have been closed. And insofar as they still exist, no new employees are being admitted. Of course, we will continue to talk to the Works Council, the ABF and the unions. All right.
Thank you, Martin. Any questions about the financial year of 2017 and the report from the Board of Management as well as the intended sale of Specialty Chemicals can now be asked. I would ask you to only ask questions about these subjects and to ask all these questions about this agenda item in one go. Any questions about remuneration policy will come up at agenda item 2C. And questions about the audit, we'll have to wait until agenda item 3A.
Please be brief and ask all your questions in one go. Thank you. Thank
you. My name is Carolla van der Rohe. I work for Robeco, and I'm speaking on behalf of Robeco, but also for APG and NIP, Krautsoforsekering and Ensys. All the long term shareholders involved in AkzoNobel. In this item, I've got questions on 2 things: firstly, the sale of specialty chemicals and secondly, diversity.
Firstly, with the announced sale of specialty chemicals to Carlyle, a new chapter is added to the existence of AkzoNobel. You already indicated, Mr. Van Langer, that you've tried to make this sale in the interest of stakeholders and the environment at large. Can you please specify more clearly why this is so and what your further considerations were? Also, I'd like to ask if you can explain some more about the track record of Carlyle and GIC in the area of sustainability.
And please tell me if that track record is better than PPG. Also, what do you expect by way of impact on employment? I also had some questions on pension, but they were answered by Mr. De Vries already. Thank you.
I also had some comments on about the diversity at the top in AkzoNobel. Prior to this meeting, we talked to AkzoNobel about the diversity policy at large, diversity in the organization and management, both in terms of expertise, nationality, gender, age. And we specifically discussed the absence of female members in the Board of Management and in the Executive Committee. We understand that enlarging the enhancing the diversity is high on your agenda, and we encourage you to keep it there and to make steps. Thank you very much.
Jerry, can you go into the Specialty Chemicals questions, please? Yes. Thank you, one for the Specialty Chemicals, the question concerning Carlyle and GNC, GIC. We call the whole process dual track, but in fact, it was multiple track because there were so many people involved in the candidates and also in the public listing. There were a number of elements that we were looking at.
It was clear that the value was important item, of course, but we also looked at other elements for the stakeholders, employees, society. We looked at the track record of those parties, of various participants, the major private equity funds in that respect are quite more alert, have become more alert recently. And that showed that if you look at Carlyle and its track record that they were doing very well. As far as GIC is concerned, they have been one of our major shareholders for years, and we know them very well because they look very much at sustainability in their investments. And that, for us, was another an additional positive element in terms of Carlyle.
In our discussion with various candidates in the private sale, we strongly looked into the intentions as well. What's the what are the intentions with the business plan as made by the company? Carlyle has a very strong buy in, in the corporate in the present business plan, and that was discussed in April last year. There were also clear commitments made in terms of locations for the Netherlands and taking over employment conditions. So that seemed to be a very strong package to move in that direction.
Another question was what do things look like for PPG or in comparison? Maybe it's not the most relevant comparison because the PPG story was about paints and coatings when we were here talking about specialty chemicals. And for various reasons, PPG had left that branch altogether. So it was never part of our comparison in that whole story. My reason for that question was that last year, it was used as an explicit argument.
Yes, it was. So all right. All right. So as far as the chemistry question chemicals question is concerned, it never formed part of the story then. Well, both the Singaporean State Fund, GIC, and Carlyle have a very strong track record considering everything they've done in the chemical branch.
Well, of course, the track record must be good for stakeholders, employee sustainability, etcetera. As for diversity, I also had a question about employment. Well, all the employment contracts have been taken over. And for chemistry, that's less of an employment theme. It's more in the assets of the factory.
You've got a number of employees that operate the units. So that was less of a risk factor. But there, too, Carlyle made statements about what it expects and how it is going to handle employment. And there were very few issues, so very few differences or points for improvements to be made. As for diversity, I can say, yes, that is an item that is a bit painful.
You've seen the nice photo of the executive committee in the annual report. It's like a boys' band with a certain age. That's not our intention, but I can assure you we are really looking to supplement our team further to make the changes we can. But while you're very aware how things have moved in diversity, we made a step back last year, but I would like to stress very strongly that we will discuss that further on in this year. Right.
Who else would like the floor? Yes, please proceed. My name is Karin Rodeveld. I'm here for the VBDO, the Association of Investors For Sustainable Development. Our questions and comments concerned just like sustainability.
Firstly, congratulations on the division of Specialty Chemicals. But we would like to know what it means for long term value creation and what challenges in terms of the sustainability strategy there are. What did you come across when you decided to say goodbye to such a big section? How are you going to continue your sustainability strategy? Will there be an intensification of these strategies?
Can we expect targets for 2025 and 2030? The goodbye to the chemistry can mean a change in focus, and we are interested in hearing how your policy will be the sustainable development goals, how your adjustments in connection with that is going to what it's going to look like. Well, at the moment, the payment of livable wage is not taken into the profit and loss account when it may have a negative impact on the human capital of AkzoNobel. It's been indicated that the new due diligence and approach also goes into working hours and livable wage. You say so in your report on 20, Page 186.
Does this mean that AXO is going to pay livable wage to all its employees? And also, VDO sees that Ekso Nobel is making work of its suppliers' management in 150 in the last year, 100 and 50 suppliers responsible for 80% of your revenue were included. There are KPOs for water materials. From 2018, human rights will also be included in the KPIs. Will a livable wage also be included in that those considerations?
Well, thank you for your questions. I'll try to answer all of them. Okay. You're talking about sustainability. Are you talking about paints and coatings or about chemistry?
Well, with your changed focus, what kind of worries did you have about sustainability as a result? How are you going to shift your focus? Well, it's a well kept secret that we don't go in for sustainability's sake, but it's something that is supported by the whole company. We have been very leading in paints and coatings with waterborne coatings. So we have a leading position, and that is one of the key successes in a country like China, which is really focused on a more sustainable production.
In that sense, we've taken big steps this year, and we've looked at all the variable wages for everybody in the business. Part of that is based on what we call eco premium products, materials that have a clear advantage over competitors in terms of sustainability. That is a parameter in the variable wage of every external employee in the company. On the other hand, for every internal employee, especially in the production, we are going back to reducing the carbon footprint, both in terms of energy, wastewater, waste, etcetera. So now it's a direct connection that takes place between saving or getting a higher margin in addition to sustainability.
In the past, that used to be the case for a relatively small group, the top management of the company. But since 2018, it is embedded deeply in the organization for everybody. I'd like to indicate once again, we adhere value to sustainability. It's a fantastic part of our activities, I can assure you. As for chemistry and chemicals, I'm very certain.
The big success and the big driving force in Specialty Chemicals is the way in which that activity approached certain sustainability trends through the years, both in terms of its own energy and in terms of the products it marketed in the various segments. It is so intrinsically connected with the activities of the company that I find it hard to imagine that that could be decreased in a profitable manner. So I'm fairly satisfied with that. In addition, 15% of return on sales in 2020 is not just a story for us. We are we have very ambitious short term objectives as well.
If we want to have that transformation, we need to keep pressure on things to transform the company, to stay one of the leaders in the market for 2025, 2030. Well, that's exactly the point, sustainability. There, of course, part of our success will be to produce more waterborne coatings to use fewer solvents. So that will continue to be a very strong part of our focus. You also mentioned living wage.
Well, I'm going to assume that all our employees have a living wage. Our HR service here does what it should do. It is definitely our intention. If there's anybody walking around anywhere, then I would invite them hereby to report to us. 2nd point as for suppliers.
Yes, the situation is such that AkzoNobel very strongly integrated targets, those objectives in human rights, for instance. I think we are leading too in the way we clearly appeal to our suppliers to comply with obligations and regulations, both in terms of human rights, child labor, slavery, etcetera. And there's also a part of a living wage. So we are going to deal with that very emphatically, but it's a bit of a cat and mouse play. Well, we'll keep asking for information.
This is going to take continuous alertness to make sure that, that part of the supply chain also stays attuned. Right. Any other questions? Yes, I see. I'm from the Association of Stockholders.
Thank you. Firstly, Mr. Van Langer, I would like to compliment you on the way in which you have taken over from Thom Buchner. We are satisfied with that. I also understand that as new CEO, you have the legacy of the decisions that were made in the past.
So I hope that you can place your my questions in context. You gave a very clear explanation just now. I have a background as an accountant myself. I have to tell you that there are a number of points where I have certain doubts remaining about what you've shown us. I hope that the Chairman will give me enough time to indicate the points where my doubts were raised.
As you keep it succinct and brief. Well, it's not so much about the speed of your speaking, but it's about the conciseness of your question. Well, the conciseness, I tried to indicate that I'm just I'm not dropping out of the clear blue sky with my doubts. We think that last year, a number of profit warnings were issued. And in the Q1 of 2018, we see developments that we think are a bit disappointing as far as results are concerned, despite the very healthy economic growth worldwide.
We noticed that you did not make any concrete statements about 2018 when you are very concrete about the 15% in 2020. Why so? Why are you not prepared to be more concrete? That's my first question. The picture you just showed us where you could go from 10.6% to 15%, for us should be in the context of in the context of return on sales as it is now in this quarter.
And then as far as we can calculate, it's always difficult, of course, to do so that €600,000,000 to €800,000,000 will be required to get that return on sales to 15%. You speak of cost savings of €110,000,000 I had read in the annual report €150,000,000 But even the €110,000,000 there would still leave a very big gap. You show, and that's also a question, how are you going to bridge that gap? 2nd question. 3rd question, acquisitions.
You referred to it as a string of pearls in your annual report. It seems to me that those acquisitions, however beautiful they may be in and of them sales, are too small to suspend Axos growth from. So my question is, how are you going to go on with acquisitions in view of your very rigid criteria as far as acquisitions are concerned, which I agree with, by the way. So at a certain moment, we get a feeling when we read this, are you looking at things from through rosy colored spectacles? We do not really see how, as Don Bichner said it last year, the Chairman clearly indicated he does not want to return to the discussion about PPG.
But Bichner said that we have the better plan. And this better plan, although you have given some idea of that in your presentation, remains a bit vague as far as we are concerned. I hope you can help me towards more confidence on that item. So if I understand it correctly, you've asked 4 questions. Why don't you give any objectives for 2018?
Secondly, how are you going to bridge or close the gap as you've noticed it? What is your actual acquisition strategy? And finally, aren't you too rosy colored about this? Okay. Thank you.
Mr. Von Manker? Thank you. Firstly, I thank you for your first comment, compliment, but I'll reserve that until I've asked my four your four questions. Well, you discussed the concrete statements for 2018.
I can link that with your comment concerning the task ahead to attain the 15%. One short comment. I think that the plan that we issue to shareholders has changed slightly, and it's mixed in comparison with what Tom said last year. The plan in April last year was more focused on growth and on maintaining the performance internally. When I have made it clear in various other forums several times that the growth was screwed down a bit.
I'm still taking us to have some growth, but we don't see it as a condition for the delivery of 25%, 50% ROS in 2020. So within that context, I can talk about acquisitions too. Acquisitions are not a must for doing these things, which gives us the opportunity to place every acquisition in the optic in the view of is it going to help us toward that growth by 2020. I can assure you that in the whole pipeline, the string of pearls you referred to, some things went down the drain because they were based too much on hope or they failed. But they are really going to where will it fit in with our network and then synergy.
Well, it must help us have a stronger network. So it's more towards growth and based on the performance. Why don't we give a very concrete story about 2018 2020? I think we never gave an annual concrete guidance, But this also implies that if in our business meetings you should be present, there is the idea of fresh paint, the smell of fresh paint and hammering and sawing because it is quite a transformation that is taking place. To put it in perspective, firstly, you've got a whole change where we've moved from 11 side by side vertically integrated activities to 1 total activity with 8 business units only in 1 layer, 1 integrated supply chain, including production.
Mr. Allen is responsible for that, and you should almost see that as merging 11 different companies under one roof. Well, if you look at the bridge that is sketched, it is indeed a healthy amount that we have to produce, but I've also already clarified certain things. The first phase of the organization is the €110,000,000 The second one is inflation, and we can keep reducing inflation, thanks to continuous improvement. And the whole sourcing story that you saw there, the purchase of non product related materials, everything that is not raw material, involves a budget of around €2,000,000,000 And we think we can move very quickly to retrieve some several 100,000,000 from that.
And then we also have a number of optimizations. We've discussed with many shareholders the cost of poor quality. That does not mean we don't know anymore how to make points paint. We know that fairly well. But very often, it's in the planning in which materials are made.
They're stored in the warehouse, and you don't get any buyers. Well, after 18 to 20 months, that cannot be sold anymore. If you combine all of that, I think we have a credible path for moving from 10,600,000 to 15%. We'll discuss the remuneration policy later. Mr.
De Vries linking part of our salaries to that entirely. So I would wager a bet for a bottle of wine for the 15%. We wouldn't do so if we didn't see light in the darkness. So I think I have thereby answered most of your questions. Right.
You wanted to add something, Mr. Koster? You have not mentioned the return on sales, which is at 6.8% now. That is also without taking into account unallocated profit costs. That's integrated.
But you can point out, you see that the ROS in our industry in the Q1 has always been at a very low level. Briefly about the Q1, that was fully in line with what our internal budgeting looked like. The Q1 for Paints and Coatings is always low. January February is always a bit like touch and go. And we are going through an unprecedented series of price increases in the market, which gives quite some fluctuations for customers buying or delaying their purchases.
And in addition, early in March, we were skating on the canals in Amsterdam. In England, they had a snowball fight by the mid March. So this did not help paints in any way, I can assure you. Right. Another Costa shareholder, private shareholder.
I phoned twice for the annual report. I still haven't received it. I did speak to some very nice ladies at the phone, but if they do their work, I would have it. Then I would like to compliment Mr. Von Langer with his enthusiastic introduction.
I think there's always enthusiasm for good entrepreneurship. Good shareholders are slightly less enthusiastic. We would have liked to see the chemicals stay in the Netherlands. Well, for many products, it proudly says AkzoNobel. Will that only be reserved for painting?
Or can other people who sell various products still keep using the AkzoNobel brand? Well, I haven't read any documents. I haven't received an annual report. I do ask questions sometimes. Akzo has quite some debts.
The debts with the holding, are you selling them for a net price? Or do the acquisitions get part of that, too? How do you go about debts? A clear question. Thank you.
And otherwise, I'll be quiet today. Thank you, Mr. Costa. I'm very sorry. We apologize for not for the failure to arrive of the on your reports.
I'll definitely check that, and I'll go into that. So once again, our apologies. Well, what's going to happen to our name? Thank you. Well, rosy colored spectacles and enthusiasm.
Well, that maybe is the fate of someone from Flanders. You would have liked to keep things Dutch. Well, I'm from Ghent. Yesterday, we were in the Mauritshuis in The Hague, and I've seen that quite a number of Bruegels and Rubens paintings were hanging next side by side with Rembrandt. So the combination is okay.
As far as the name is concerned, AkzoNobel will definitely be reserved for paints and coatings. That's the way. If you have to share your household contents, then one gets this and the other one gets that. So I think we've reached a balanced position in the end. AGSO will be reserved for paints and coatings.
I'll leave it to the Specialty Chemicals Group and Karl Lau to decide when they are going to surprise you with the name of a new newly born company, if so. Well, maybe Maarten can go into the other question. As for the debts, it may be useful to explain specialty chemicals activity yielded by way of enterprise value of €10,100,000,000 Less the debts in Specialty Chemicals, about €400,000,000 It's also less the pension obligations, SEK500 1,000,000,000 less environmental obligations, around €200,000,000 and some other obligations, which leads to a sale at a purchase price of €8,900,000,000 So at the eventually, the 8,900,000,000 is basically the net price that Carlyle is paying. And from that, we've also taken a number of amounts like dealer costs, separation costs, tax and the derisk for our pension fund, which brings me to a net position of €7,500,000,000 Once again, though, in the bridge from enterprise value to the cash proceeds, the debts are included as you asked. Well, I would like to comment also, both for our business and various branches, I can assure you we are fairly healthy.
We see a very sustainable philosophy underlying all of this, and we deal with that in a fairly conservative manner, I can assure you. Next question. Right. Good day, Kunwinder. We are curious.
Thank you for your clear answer so far. There is one thing that's not entirely clear to me yet, though. Has Carlisle given you any job guarantees for the people employed in Specialty Chemicals? Or was that not part of your agreement? Job guarantees cannot really be enforced, especially not in the long term in that respect.
We had months of discussions with the various candidates who qualified for acquisition. They've what they've indicated is times and locations. People are going to do this, but it became very clear that all of that stays very consistent throughout those months of negotiations. I don't expect any major problems or changes. Can I understand from your answer that you don't give any job guarantees?
Well, certain statements have been made towards the U. S. Council, if you talk about legal guarantees, no, we haven't received any. Well, PPG did give such job guarantees in its final offer. Well, that may be the case.
It's also a story that never took place. So well, I do think that vis a vis employees that are now moving to a new owner, that's a very valid point. And in that respect, too, we think this was the right choice. In your 15 to 20 program, are you excluding compulsory dismissals? Well, we are not excluding or including anything.
We are working on those plans, and we'll see how the figures develop. I don't think that's the road we necessarily need to take, but it may definitely be part of the mix at a certain point in time. All right, proceed. Can I ask the next people addressing the meeting to ask their questions in one go? I am Sei from Amsterdam.
A few questions about the sale of specialty chemicals. Sale, have all the members of the supervisory board agreed unanimously with the sale at that price of €10,100,000,000 This is occasioned by an article that a former supervisory board member of AkzoNobel was against the sale of Organon at the time. So that's why I would like to know this. And the sale at SEK10.1 billion, is that the year or was that bid higher? Was that bid higher?
Or does that exceed the situation? Well, your first question, I can answer by saying yes, there was unanimity in the supervisory board. Maybe, Zafris, you can explain how the whole process of the price determination took place, also the comparison with the other, the alternative of a listing. Right. The process, Jerry referred to that earlier, we had a dual track process where at the same time, we did a private sale process with 4 parties still in the race.
And on the other hand, we were involved in possible listing. Well, those press processes moved simultaneously. And once we had received the bids, the binding bids of the 4 parties, we, of course, compared those to the value determination in case of a possible listing. Well, that was done by means of various advisers and banks involved. Well, the result of that was that the bid presented by Carlyle was superior to a possible listing.
So on the basis of that, the resolution was made to proceed to a sale to Carlisle.
All right. Thank you. Next question, please. The gentleman there on the left. Jaspary Jans, Association of Stockholders.
I had some questions as well. The first one was really about the internal organizations. I was here last year. Then Mr. Buchner had this whole process that he was talking about, but really they said that between 2012 2016, we worked really hard on the internal processes, internal organization.
Then on the 8th March, I saw a very interesting presentation, a very roundtable where you talked about which improvements are still possible. And to be honest, I was shocked at how much improvements were still possible. You were talking about decentralized driving, fragmented systems and processes, separate units, working and negotiating with separate suppliers. So really, for years, you led stockholders to expect that these processes were in order. But now you found a new pot of gold where you can still realize 100 of 1,000,000 in benefits.
Why didn't you do that before? And why didn't you communicate on this score before? That's my first question really. Well, maybe I do just want to say something on that score. It's an evolution.
If you
build the 2nd floor of a house, you first have to lay the foundations, then you have to build the 1st floor and then only the 2nd floor. So it's an evolution. I agree with you when you say, well, there's a pot of gold, but that's not the case. You can only reach that pot of gold once you've laid the foundations, once you build that first floor and then you start on that second floor, which is the pot of gold. I can assure you that when we're all back here in 2020 and Mr.
Van Langer is presenting his fantastic results that you'll be saying, Hey, but we're not done yet, because there's always improvements that are possible. So you continuously see that, that companies are improving, efficiency is improving. That's what the market markets demand, what consumers demand. Clients always want their products to be better, to be innovative and more efficient. So I do have to say that I can imagine that this has been your response.
But if you look at it in the light of the continuous progress that we are making and knowing that you can only make that progress if you take any earlier steps as well. Right. Thank you. I understand your response, but I was shocked that AkzoNobel is working with 37 ERP systems. I was surprised by that because I thought that was something that you've been streamlining over those 4 years.
And now it turns out not to be true. Yes. But now you see that Mr. Van Lange just painted this picture for you, just showed you this picture where he shows you the margins development at Aksut, a thick blue line that you saw. So Buechner took us from bottom place to somewhere in the middle.
And the management's plan now is to get from the middle bit to the top, and that takes time. And why didn't they do that 5 years ago? Why not this? Why not that? That's a completely different question.
In hindsight, sometimes you say, Oh, I could have done that before. I could have done that better. That's definitely also relevant here. But in principle, you shouldn't be surprised if, at a certain point, certain targets have been met and then you say, hey, now we'll continue. We'll build on that.
So if you see it if you look at it in that light, I do think it's a very credible story. Right. And then my second question, it was said just now. We think that the targets, the objectives are ambitious. But I also had a question about cash flow conversion.
That's a pretty important variable. If we look at things over the years, then we see that a large part of profits is not converted into cash. So could you maybe talk about the kind of conversion we'd be seeing in 2020? Could you maybe could we maybe get some more guidance on that? Well, we're not going to be giving you guidance, but I will ask Maarten to maybe attempt to shine some light on the subject.
Well, if you look at things in a broader perspective, then the company in the past few years has really been working hard to derisk the pension funds in the U. K. And in the past years, a lot of cash has been put into the U. K. Pension fund.
So what we're working on now is looking at whether we can derisk it completely, meaning we can just do away with that in one step, also looking forward. And if you do that, that would take us to the situation where we have a very healthy cash conversion looking at our CapEx compared to the EBITDA. And really, that's a cash conversion of about 80%. So in the context, if you look at the cash, the cash conversion, you should look at the context of the past few years and especially the pension obligations, the top up payments of the U. K.
Pension fund especially. Well, my last and third question is about the sale of Specialty Chemicals. And then I do want to go to PPG because I was here last year. And the message clearly was then, at AkzoNobel, we do things together with where clearly, they were talking about the employees. And now really, you're selling chemicals operations to an American private equity company, and there's a lot to do with personnel when it comes to pensions.
So my question is really, it seems as if the same arguments that were used to refuse PPG's proposal no longer apply now the chemicals are being sold, especially when it comes to employees. How does the first go with the second? What's your response there? Well, Mr. Van Lanka will say something on that score, but you're saying and rightly so, it seems as if, but Mr.
Van Lanka will explain that there is a difference. Yes. We were just talking about the pensions, and the pensions really have nothing to do with Carlyle, have nothing to do with separation or not separating. It has nothing to do with that. So I'd like to move discussion away from that because it's just irrelevant for all the scenarios that we had.
That's one point. And the second one, when it comes to PPG, PPG had nothing to do with chemicals. Again, you can look at the track record of PPG with its chemicals side of things. That might be good to check. And for that reason, I think that Carlyle does have a track record of being a very strong player with the chemicals sector and has a very good track record for companies that they've taken back into the market after 4, 5, 6 years, and they use that private period to make investments to improve things.
So I don't really see a contradiction there, quite the contrary. All signs point to this being a very serious owner that wants to create value in the long term, meaning an IPO would lead to a higher value as well. All right, next question. Oh, I see that we've answered all questions. Then we're going to close this agenda item, and we'll continue with agenda item 2B, which is the discussion of the implementation of the new Dutch corporate governance code.
On the 1st January 20 17, the new corporate governance code entered into force. And in light of that new code, we have made a detailed analysis of our corporate governance framework and our internal reporting systems. When necessary, we've changed our procedures and systems in order to comply with the requirements of the code. The new code has also been included in the regulations for the Board of Management and the Supervisory Board. In the corporate governance chapter of the annual report, this has been set out in detail.
If you have any questions Then we'll move on to agenda item 2C, which regards discussion of the implementation of the remuneration policy in 2017. So in a few minutes, I would like to give the floor to the Chair of the Humanitarian Committee, Mr. Dick Slammers. But before I do so, I would like to say something about Tom Buhner stepping down in 2017 also because in the media, there was some attention for his leaving arrangement, which you were able to read about in the report from the management board. So it's good for you to understand the circumstances correctly before we actually talk about his leaving arrangement.
So shortly before his leaving was announced on the 19th July 2017, Mr. Buechner called me. At the time, I was in the car with Mr. Groot, and we were driving towards the action of our offices. And Tom told me that for health reasons, he decided he'd have to step back as CEO.
We discussed this, and I had to conclude that my only option was respecting his decision and accepting that decision. I did indicate that once we'd gotten to the office, we'd call him back in order to discuss the case in greater detail. And then we, and that is the Chair of the Remuneration Committee, Dix Laimers, our Head of Legal Department, Sven Du Mounen and I again talked to Tom, and he explained the reasoning behind this decision. You understand that for him, but also for us, this was a very difficult moment, a very tense moment. So in close consultation with Tom, we drew up a press release announcing his decision.
Of course, we had to inform the market, and we had to inform the market quickly. So we decided to discuss the contractual aspects at a later moment. Tom's decision to step back was a difficult one for him. It was a decision for health reasons that cannot be seen separate from the extraordinary circumstances at the moment. So in that light, we then looked at the termination of his agreement.
So I'll now give the call to Mr. Slammers. Yes. Thank you. After Tom left as a member of the board at Akesson Bel, we looked at how he could terminate his agreement and in a way that would do justice to the man, to his hard work for the company and the extraordinary circumstances which forced him to make that decision.
It was clear that his leaving was not a standard situation. Tom was stepping back for health reasons, and we took that into account. If you compare his remuneration for 2017 to his remuneration for 2016, then you see 2 major differences and one similarity. Similarity is the annual payment because there was a notice period of 6 months and Tom left in July 2017. So for 2017, he received basically the same regular salary.
The first difference with 2016 is the additional termination compensation, which was almost 1 annual salary. In the annual report, you see that amount listed as termination and other benefits. This additional benefit followed largely from the fact that in Tom's contract, an arrangement had been agreed in case Tom would no longer be able to function as a member of the board because of health reasons. The agreed additional benefits for Tom, by the way, is significantly lower than was listed in his contract. So Tom very much met AXA Nobel halfway there.
The second major difference with the remuneration for 2016 is the amount in share awards. That's about double the amount of 2016, and that's to do with an accounting approach. Normally, the shares granted to our director are booked over 3 years, so onethree every year. So when someone leaves the company and the shares are actually granted to him, that method can no longer be used for the shares for 20 162017 because there are no 3, 30 years in which to book them. So those shares will then have to be booked for twothree or the full amount, and that's the main reason for the higher amount.
The Supervisory Board feels that this package, because of the extraordinary circumstances, the contractual agreement and TORM's attitude, is reasonable and fair and in line with the spirit of the corporate governance code. Stipulations of the code have not been written for these kinds of specific situations. We did want to very much comply with the spirit of that code with this package. It wasn't a director who wants to take early retirement, who had plans to do something else, but it was someone who felt forced, for health reasons to step down. So from that perspective, we tried to honor his contract as much as possible.
That's what I wanted to say about Torbjorn Buegner's position. Right. Thank you, Dick, for that explanation. Is there anyone here who has a question on the subject? Mr.
Costa, please go ahead. Yes. Thank you. It's an unfortunate subject. You're going to think so too.
And I understand the explanation. Thank you for that. It does clear things up. But wouldn't it have been better if it had been announced sooner that such a clause had been included in Mr. Buchner's contract.
We're all pretty active in the market, and there are continued rumors about other aspects that played a part in his leaving. So I do appreciate you raising this issue because it's not good. When it comes to these kinds of sensitive matters, things are not clear. So I'd like to ask very specifically, was that really the only reason? Because from time to time, we've heard that other aspects played a role as well.
But now with this explanation of the contract of Mr. Bufner, that changes things, and it shows very clearly why things have gone the way they did. Mr. Costa, I can assure you that the way in which I've just told you it happened, and that's exactly why I wanted to tell you the whole process again. That is the way it happened.
So I can be very clear about that. I do believe that with these kinds of issues, it's good to not pay too much attention to rumors. We have to look at the facts, and I've shared the facts with you very clearly here. And I've indicated that it wasn't just a conversation between me and Mr. Buchner, but an hour later, it was a conversation between Mr.
Buchner, me and 3 others. And things have gone the way I've just represented them to you. It was our intention to be clear about that again at this meeting. And I can assure you that this these are the effects of the matter. Right.
I appreciate that very much. And as you know, we're all about transparency. And the point really is more that I don't even want to hear the rumors really, and that could have been prevented by maybe announcing to the market at an earlier stage, and this was all according to contract because it seemed more and more that there were other things playing a role. But thank you for that explanation. Well, I'm sure you've heard it said that those who know do tell, and those who don't know or those who do tell, don't know.
And that's something I'd ask everyone to keep in mind. So we made an exception now because those who do know are now telling you. No, that's right. You were just telling me. But I agree with you.
We need clarity on this subject. Right. Well, thank you for making the exception to that rule then. All right. Thank you for that appreciation.
Are there any other questions about the subject? No? Right. Then we'll move on. Item or can I just maybe ask a very brief question, small question?
Because I was kind of curious about his conditional shares. So how did you deal with those? Because I couldn't quite deduce that from the annual report. Mr. Slammers, Dick?
Well, no, I'm just what happened is that the shares that have been granted have vested for 2016 2017. And like I was saying, they were then included in the annual report in one go, which why it was twice as much. So it's 100% vesting. Yes. All right.
That's very clear. All right. Then we'll move on to the adoption of the financial statements for 2017. Any questions about the accountants' report and the external audit? We have PwC present, represented by Mr.
Dekkers over there. So we just ask him to stand up. He can ask sorry, he can answer any questions about the order done by PwC. Is there anyone who has a question? So you see your sole presence is enough to put people's minds at ease, and that's how a good accountant should work.
If there are no other questions, I'm going to close the discussion of this agenda item as well. Then the registration of shareholders was closed at 2.25 and the attendance list has been checked. Capital of EUR 365,229,732 is represented here. So in total, €182,614,866 votes can be cast. So the attendance percentage is 72.12%, which is great.
Before we vote, I would ask our secretary, Charlotte van Meeer, to explain several procedural issues. Charlotte? Yes, thank you. In order to vote, you have a voting device, a chip card and a ballot. On the back, you'll find instructions about how to vote.
If you have any questions, please raise your hand, and Tomo will come to explain the device to you. You're currently requested to leave the voting device and the chip card at the registration desk when you leave. Shareholders had the possibility to vote remotely via the ABN AMRO website. Mr. Glumpfumsen Notary will cast the votes as an independent panel on behalf of the participating shareholders.
On Thursday, 29th March 28, was set as the record date for this meeting, meaning that entitled to vote are the shareholders who were registered as such on that date. In the notice for the meeting, the method of registration was explained. The notice and the agenda were published on the websites of AkzoNobel and Securities Info. There's also a copy of the notice and the agenda with explanation. It can be seen at the information desk.
The meeting was called in the correct way, meaning legal decisions can be taken. Thank you. Thank you, Charlotte. Then we'll now have a vote about adopting the financial statements for 2017. I will try and clearly indicate when I'm opening the vote, and I will also let you know when I'm closing the vote.
After the vote, you will see the results on screen. And you'll see the number of votes and the percentages as well. After that, I will announce whether a proposal has been adopted or rejected. And after the meeting, the results will also be published on our website. Right, we'll get started.
We'll open the vote. So the results are now visible on the screen, as you can see. So I see that the proposal has been adopted. And then I would ask the secretary to make note of that result. Then we'll move on to agenda item 3B, which is a discussion of the dividend policy.
In the report of the Board of Management, you've seen that the dividend policy is aimed at paying a stable and rising dividend every year. Dividend in cash is the standard and stock dividend is optional. For the dividend policy, no changes are proposed. If there are any questions with regards to the dividend policy, as set out in the report by the Board of Management, we're very happy to answer those now. Our CFO, Martin de Vries, is very willing to answer any questions you might have insofar as they're concerned, the Board of Management report for 2017 and the dividend set out in that report.
Who would like this law? No one? Then we'll move on to agenda item 3C. That is the profit allocation and adoption of the dividend for 2017. For the year 2017, a dividend of €2.5 per common share is proposed.
In November 2017, an interim dividend of €0.56 was already paid. In December 2017, a super dividend of €4 per share was also paid for the separation of Specialty Chemicals. Once the of €194 per share will be paid out on the 25th May according to the conditions published by Exxon Nobel, unless a shareholder in its stead prefers to be paid out in stock. It is to be noted that a maximum of 40% of the total dividend will be available as stock dividend. The supervisory board recommends adopting the proposed dividend policy for 2017.
Are there any questions about the dividend proposal? No? Then we'll have a vote. The vote is now open. So the vote's been closed.
And you see the results behind me on the screen. And I see that the proposal has been adopted. And I again would ask the secretary to make note of that. Then the next item for discussion is item 4A, discharge of the members of the Board of Management in office in 2017 from liability in relation to the exercise of our duties in the fiscal year 2017. Any questions on this item?
Then we'll have a vote. And the results is now visible on the screen. And I see that the proposal has been adopted. So again, I ask the secretary to make note of that. Then I'd like to raise agenda item 4 B, discharge of the members of the supervisory board in office in 2017 from liability in relation to the exercise of their duties in the fiscal year 2017.
Are there any questions about this proposal? Yes. Ms. Fremont? Yes.
Thank you. I'm still speaking on behalf of Ropeko, APG, Gautier Schekering and Mensis. And as you said, when it comes to this agenda item, we're talking about the actions of the Supervisory Board in 2017. We think the Supervisory Board should always be led by the interest of both the company and the stakeholders with a vision of long term value creation. And we're of the opinion that the supervisory board in 2017, in some aspects could have acted better and should have.
First of all, AkzoNobel during the takeover talks wasn't open to serious talks with PPG, exploratory talks. So we think that at that point, the company didn't act in the interest of all its stakeholders. And secondly, the supervisory board has the duty to seriously consider a request from long term stakeholders. And there was a long term stakeholder who, in June 2017, proposed an appointment of a member of a supervisory board. And that candidate had a solid background, so we thought ExxonMobil would give him a serious chance and would talk to him.
At an earlier meeting, you indicated that there was no such talks that took place with this candidate and the nomination certainly with the nomination committee. So we think that the supervisory board failed in its duty towards the shareholders and other stakeholders. And finally, we also weren't clear on the termination benefits for Mr. Buegner, but that issue was just explained to us clearly, And it's clear that there was a contractual obligation that was being met. But based on the issues I just raised, several of the shareholders that I represent will vote against this item.
And I'd like to say in concluding that we're looking back on past year for this item. We think things could have gone better then. But we also like to look forward, and we see that AkzoNobel in the past month has taken some serious strides in order to improve Investor Relations or shareholder relations and is now taking shareholder and stakeholder interest seriously. So we're hoping that this is just a onetime no vote.
Right. Thank you. You will understand I'm not going into your arguments any further. In the special shareholder meeting, I think it was counter in detail. All these answers are available and can be found on our website as well.
I've heard your what you've said and will write it down. Any further questions? Mr. Costa, one more point, and I'm linking up with the previous speaker. We do have some criticism on the way in which you communicated with the market.
We would like to ask attention for the interest that in the situation as it has arisen, it would definitely have been useful if the market had been approached in a slightly different way and the timeliness of the information could have been improved as well. Thank you. Any further questions? Then we're going to vote. Please cast your vote.
Vodges closed now. And you see the result on the screens. I conclude that the proposal was adopted, and I ask the secretary to write it down. On we go to item 5 on the agenda, the proposed appointment of Mr. Anderson and the reappointment of Mr.
Grothe as members of the Board the Supervisory Board. For the discussion of Part A of this item, I give the floor to Mr. Grothe, who, as a member of the search committee, was in charge of the search for my successor. Byron, please go ahead.
Today, we're voting on the appointment of Niels Anderson as a new member of the Supervisory Board. The nomination of Niels Anderson concludes an extensive search and selection process that was conducted by the Supervisory Board with the assistance of an international executive search firm. We also consulted our major shareholders on the nomination of Mr. Anderson in advance of the announcement that we made on the 5th March. At that time, we also announced that the Supervisory Board plans to appoint Niels Anderson as Chairman, following shareholder support of his appointment to the Supervisory Board at this meeting.
Niels Anderson has a wealth of relevant experience gained through an extensive international career in the consumer goods, energy and shipping industries. Diels is a Non Executive Director at BP and at Unilever, where he serves on the audit committees in both companies. Niels was the Group Chief Executive at AP Moller Maersk until 2016 and prior to that was President and Chief Executive of Carlsberg. I'll be happy to answer any questions you might have in relationship to the process and the appointment of Mr. Anderson prior to the voting.
At this time, I'll pass it back to the Chairman.
Thank you, Byron. Von Darrs? Thank you, Byron. Today, we are also going to talk about the reappointment of Byron Grothe himself. We are pleased that Byron has said he is eligible for a second term of office as member of the Supervisory Board.
He's been a member of this Board since 2014. And apart from Vice Chairman, since 2015, he's also been the Byron has extensive experience with complex multinational environments and profound financial expertise. We would love to see the valuable and positive contribution of Byron to continue, and that's why we propose him for reappointment as a member of the Supervisory Board. The appointment of the 2 candidates proposed today will be for a term of office of 4 years starting tomorrow and ending in 2022. Niels and Byron are both present at this meeting.
May I please ask you to stand up and perhaps give a brief introduction of yourself? Yes, please.
So ladies and gentlemen, it's I'm very proud to stand here before you today. It's a great honor to be considered for the role of Chairman of an iconic company like AkzoNobel. As Baron just told you, I've had a career in 2, 1st and foremost, in 2 iconic Danish companies, one being Carlsberg, which is today the 3rd largest brewer in the world and the other one being AP Miller Maersk, which is the largest container shipping company in the world and actually part of a conglomerate, including, among other things, a large port company, which happened to be situated in The Hague with the headquarter here. So and the reason why I'm very enthusiastic about the group is that I think it is a fascinating task that lies ahead of the company now. It's been transformed over the last years from being a conglomerate into being a company that is focused on its core business, being paints and protective coatings.
And being part of developing the company into the future and taking advantage of this focused strategy, I think, is a fantastic challenge. And I would look forward to meeting this challenge, working together with the Supervisory Board and the new management team in charge of this. So I'm looking very much forward to the challenge. And needless to say, I hope I'll be elected in a few moments. Thank you for your attention.
Sure. Thank you. Well, thank you very much. Now there is an opportunity to ask questions about this agenda item. Where Niels Andersen is concerned, Mr.
Grothe will answer questions. Who would like the floor? Right. Maison, I may say, I have a question about Mr. Anderson.
It says here that he has 3,300 companies, shares in the company. I was wondering when he acquired those shares. Mills? I have 3,300 shares in AkzoNobel. The question is which year did you buy those?
Of course. Of course. Yes. Next question. Yes, still on behalf of the parties mentioned earlier, I would we want to trust we have confidence in Mr.
Anderson, and we will answer for his appointment. And we are calling on Mr. Anderson here to really make work of stakeholder management, and we hope that he will continue on the improved road of conversing with shareholders. That's been started. We wish him all the best in his new post.
Thank you for your supporting words there. Are there any other questions? Right. Then we'll put this to the vote. We'll start with Mr.
Anderson, not with Mr. Groot first. We'll deal with the nomination of Mr. Anderson. Please cast your vote.
The vote is now closed. The result can be seen on the screens. I conclude that the appointment of Mr. Anderson has been achieved. Congratulations, Niels.
On we go with the appointment or the reappointment, I should say, of Mr. Grotte. Please cast your vote now. Well. Congratulations, Mr.
Grothe. On we go to agenda item 6, the change the amendment to the remuneration policy for the Board of Management. Dick Slomers, who is the Chairman of the Remuneration Committee, will give some comment on the proposed changes. Afterwards, you can ask questions. Dick, thank you very much, Anthony.
Well, ladies and gentlemen, it's a pleasure to present the new remuneration policy of the Board of Management. In the past few months, we discussed it extensively in the remuneration committee and the Board. As you all know, on the 19th April 2017, we announced our new strategy for accelerated growth and value creation with 2 well performing company sections, namely painting coatings and specialty chemicals. Part of this strategy were increased financial objectives for 2020. In July 2017, we confirmed that we would bring the remuneration of senior executives in line with these financial objectives, also suggested by the explicit desires of the shareholders.
With this new strategy at the back of our mind, the remuneration committee and the supervisory board again held up the remuneration policy for this Board of Management against the light. After careful evaluation and recommendation from the remuneration committee, we propose to amend the current remuneration policy in such a way that it links up well with our new strategy in line with the wishes of shareholders. In short, the inclusion of return on sales as short term incentive parameter and the determination that the supervisory board can each year choose a maximum of 4 financial parameters to determine the performance of the short term incentive. Secondly, the long term incentive will be focusing on 2 elements, return on investment and total shareholder return and thirdly, the introduction of a 2020 performance incentive plan, which is based on the target of 15% ROS, which will replace the share matching plan for the next 3 years. The most important goal of the proposed remuneration policy is to promote the attaining of the financial objectives of 2020.
The proposed remuneration policy also aims at the promotion of the performance of achievements in the highest quartile of the sector. The The proposed change to the remuneration policy does not lead to a change of the base salary. The target levels for the potential remuneration from short term incentives and long term incentives will also not be changed. We have consulted an important part of our shareholders about the change in the policy. We think that we have accommodated their desires appropriately.
So far, the proposal to amend the remuneration policy for the board. I give the floor back to the Chairman. Thank you, Dick. Are there any questions relating to the proposed change? Floor is yours.
My last question for today, I'm still speaking on the parties mentioned before. We understand the rationale for the proposed change. It's very useful to bring the remuneration policy in line with the new strategy of the enterprise. We'll support this adjustment, this amendment. But I have a question about relation between remuneration and the sustainable strategy of Akzo because the new policy does not have any sustainability indicators in the long term bonus anymore.
In your first conversation, you also already said it means it does not mean that sustainability receives less priority, but it will get more attention within the whole organization. But within this new policy, it's not clear which performance indicators are used in the short term bonus. So we would ask you to be transparent about those key performance indicators in the short term. So your reaction, please. Chairman, it's always very nice that implicitly APG is asking me questions.
I can tell you that the broadening, as Thierry indicated, you should think that the LTI, the scope for the LTI involves 300 officers when the STI, the short term incentives, that pertains to 17,000 employees. I hope you understand that it is not as if on that point we can approach it like one size fits all for all 17,000. Of course, it will be focused specifically on those 17,000 people and their jobs. And wherever we can be transparent and give you a general survey, we shall definitely do so in the next annual report. We appreciate that very much.
Thank you. Are there any further questions? Yes, I think that's Mr. Koster again. In and of itself, we support this link between the performance and the remuneration structure.
I would I've been in a supervisory job for 12 years. And I must note that this does put some pressure on the board members. Of course, that can't hurt. I'm still hoping to cash in on that bottle of wine we referred to earlier, but I would like to propose to you that the 15% that is attained in 2020, well, a term like a short term incentive also should include long term continuity. Wouldn't it be wise to think of that bonus for 2020 and to link it to the stability of the performance in 2021 so that you don't want to get some kind of whipped cream way of looking at costs, and that's a question for the audit committee, too.
It's everybody's interest that there is no doubts. Sometimes they think about 14% to 15% or 15% to 17%. Well, with as Mr. De Vries knows well, within an organization like AXA, there are so many elements that you can debate. They give you some leeway.
And I don't think it would be wise if any doubt were to materialize. Thank you for this contribution on your part. Would you go along with the proposal to take this on board? And next time, when there is a new narration committee, we'll discuss that with you and that we'll not react to it in detail now. Thank you.
Could I ask 2 small questions? First one, about the link being made with the long term is that you committed yourself to? The second question is why not look also include the ROI in the 20 20 bonus plan because you can increase your margin. And the CapEx could also lead to wrong figures. So where that criterion has been left outside when it is part of the long term strategy?
Well, firstly, 14% 15%, you have been able to read in the explanation to the explanatory notes to the agenda, there's an extensive story. The threshold for the system lies at 14%. And if that ROS is attained, then you get a payment of 1 annual salary. But thereby, the chair matching plan has been put out of operation. That's also almost 1 annual salary.
So if you attain a percentage of 14, then in fact, on balance, the Board of Management does not get any additional bonus. If it's less than 14%, I'm also looking at Costa and his valuable bottle of wine. It would not be it would be nothing. And then the Board of Management loses its share matching plan amounting to 1 annual salary. If it is 15% when the targets are attained, then we are indeed speaking of 2 annual salaries.
But on balance, that will be 1 extra annual salary to be divided. That's how the structure is the structure of the scheme is. The second thing, well, the ROI is in the long term incentive, and that is in the share plan. So on the one hand, we are using the ROI. And on the other hand, for the 2020 plan, we use the ROS because we are devoting attention to both.
And that's the idea. Are there any further questions? No. Well, then we're ready to vote again. Please cast your vote.
The vote is closed. I conclude that the proposal has been adopted, and the secretary will neatly write this down. And it will be minuted, Julie. On we go to agenda item 7. This has 2 points you can vote on.
I'll first explain the 2 items, after which we will proceed to the vote for each item. This item is presented every year as the issue of shares and the restriction or exclusion of preferential rights requires the authorization of the shareholders meeting. 7a is about the extension of the authority of the Board of Management to issue and grant rights to subscribe for shares up to a maximum of 10% of the total number of shares issued on the 26th April 2018. This is lower than the authorization that we always used to ask because that amounted to a total of 20%. 7b concerns the extension of the authority, the power of the Board of Management to restrict or exclude the preferential right upon the issue of shares or the granting of rights to subscribe for shares in accordance with Agenda Item 7A.
The powers to be granted will apply for a period of 18 months and otherwise as described further in the agenda. Are there any questions about these proposals in this sudden darkness? We saw this coming for some time already. Sven de Moulin said, it's beginning to look more and more like a disco. Well, I assume that this is not impeding you in any way.
Please don't hold it against me if I simply continue in the dark. But are there any questions about this proposal? No? Then we shall put 7A to the vote. So first, 7A, the vote is open.
Please cast your vote now. For us, this is not much more much pleasanter, I can assure you a few spotlights. The vote is closed in the dark and open the disco, please. Well, behind me, you can still see the result, and I conclude that this agenda item has been adopted. Now we shall vote on Item 7B.
Please cast your vote now. The vote is closed. And again, I conclude that the proposal has been adopted. Thank you. On we go to agenda item 8, the authorization of the Board of Management for an 18 months period to be started on the 26th of April 2018 or if that is short until the date on which the power will again be extended by the general meeting of shareholders during this period to acquire ordinary shares in the company's own share capital.
The number of shares to be ordinary shares to be acquired is limited to the maximum number of shares which the company can hold in its own share capital as granted by the law and by the articles of association. Ordinary shares can be acquired via the share market or otherwise at a price between the nominal value and the list the price on Euronext Amsterdam on the day of the purchase plus 10% on condition that the price cannot be higher than the opening price on the day of purchase. Are there any questions about this proposal? Fortunately not. Please pass your vote on this item then.
The vote is closed. And I see that this proposal has been adopted as well, which brings us to the last point, the last item we can vote on, the cancellation of ordinary shares held or acquired by the company. A cancellation can be executed in several tranches. The number of ordinary shares to be canceled, whether or not in a tranche, will be determined by the Board of Management but will not amount to more than 10% of the issued share capital as at the 26th April 2018. Are there any questions or comments about this proposal?
Then we can put it to the vote. Please cast your vote now. So it is closed. You see the result. Again, this proposal has been adopted as well.
This brings us to item number 10, closing. Before the meeting is closed, I'm giving you opportunity to ask any remaining questions. I would like to remind you that this is only intended to raise subjects that have not been discussed earlier during this meeting. I see that Mr. Koster is already at the microphone.
Thank you, Mr. Chairman. You have presented ambitious objectives for 2020. Well, the transition is not for something is not overnight. There is a snag, though, you must be aware of.
Maybe I'm a bit distrustful. Well, if you don't succeed in that entirely and the eyes of the Pittsburgh people are still targeted on you. That's a nice tidbit. And suddenly, you can't succeed, and then you may go out for more money. And then the whole situation changes, and then well, will increases in the price help us then?
I think that's a big danger that you can still move in various ways. We understand your worries. Are there any other questions at I've got one more question. Speaker so far is inaudible. It's a comment on a small private shareholder.
Last time I asked the question whether you had carried out an active lobby to do away with the dividend tax, then you answered negatively. I'm pleased that I found out now that you weren't speaking the truth in contrast to what we've seen in Parliament when people were still beating about the bush. So my compliments for your clarity on these points. Well, it's late, but there is some appreciation after all. Somebody shouting from the house about the same time for the shareholder meeting.
Any other questions? Well, then finally, I would like to ask your attention for the following. I would like to thank Louis Hughes. He is saying goodbye today as a member of the supervisory board. He was on that board for the same time as I, and I can assure you his contribution was special and significant, and we owe great thanks to him.
And I think this should also be stated in the minutes. Lou, thank you so much for the work you've done. Finally, I give the floor to the Vice Chairman who has asked me for this.
Thank you, Antti. On behalf of the entire Supervisory Board, I'd like to thank Anthony Bergman for his commitment to Axle Nobel over the past 12 years. As a Supervisory Board member and since 2014 as our Chairman. His extensive experience and professional expertise has greatly benefited this company, and he's played an essential role in the transformation of AkzoNobel to a focused paints and coatings business. His leadership of the Board has been key to addressing the challenges the firm has faced in recent years and in particular over the past year.
We wish him well in all his future endeavors. Thank you, Anthony. Thank you, Brian.
Ladies and gentlemen, thank you very much. I do just want to respond to that. For me, this is also a special moment, this meeting. I always saw it as a major privilege to contribute to be allowed to contribute to this wonderful company, Akzo, in this role. And in spite of everything, I think I've always had the feeling that I've always represented and defended the shareholders' interest.
Again, I'm convinced
of
the vitality and the future of this company, and I wish OXXO and its shareholders the very best.