Good morning, and welcome to our Investors Update. Thank you for taking the time to hear more about our strategy for the future for OXO Nobel. The video you just saw, I really like it because it truly shows that so many essential things in life are actually containing or covered by our products and really make their lives more livable and inspiring. I'm excited to stand here today to present to you the next phase of our strategy and the next steps in the AkzoNobel's journey to deliver long term value creation. And we do that with a number of announcements that we've seen this morning.
1 is, of course, a very strong first quarter results with clear growth momentum, but also the announcement where we are creating 2 focused businesses going forward to do this within a period of 12 months to increase the guidance for both of these two businesses and to increase the cash returns to shareholders in 2017 and for 2017. Now on to the business of the day. I'll soon be outlining the step change and the long term value creation for AkzoNobel. Thierry Van Dunker, who joined AkzoNobel in October from Chemours and previously DuPont, now leads the Specialty Chemicals business and will present our plans to unleash an industry leading business to achieve its full potential. I will then share our strategy to deliver sustained profitable growth as a focused paints and coatings company.
Melies will provide an update on various financial topics and provide more details about the increased shareholder returns we will deliver. I will then conclude with a short summary of the sustainable and superior value creation that our plan will deliver. There will afterwards, of course, be time for some questions. Going into the step change in growth and long term value creation, we have put the things that summarize today's presentation on one single slide. And therefore, this slide shows you what we want to deliver.
Over the last years, we've built a strong financial and operational foundation, and it's in place now to take the next logical step. During the next 12 months, we will create 2 focused businesses, Paints and Coatings and Specialty Chemicals, and we do this by adopting a dual track process to maximize value. Project teams are already in place and running, and preparations are in clear advanced stages. Our focused strategy for paints and coatings will accelerate growth and profitability with a clearer customer focus and a fit for purpose organization and processes. We have significantly increased our financial guidance for each of these businesses.
And for the Paints and Coatings businesses, we're clearly looking at 15% return on sales by 2020 and more than 25% return on investment by 2020. Starting with the guidance of CHF 100,000,000 additional EBIT in 2017, as Melis has indicated this morning as part of the Q1 result presentations. And that includes annual savings of €150,000,000 from continuous improvement programs compensating actually in excess of compensating for inflation. All of this underpins our confidence in the current momentum we have to accelerate growth and profitability across our company. This will allow us to deliver significant value for our shareholders.
And as a result, we are delighted to announce today a 50% step up in the regular dividend to €2.5 per share. This will be paid as an interim and final dividend in line with normal practice. The dividend for the paints and coatings company alone in the future from 2018 onwards will be €1.65 per share and this is in line with the previous level of dividend for AkzoNobel as a whole. What that means is that we're saying that the paints and coatings company will pay the same dividend and then have a stable or rising philosophy afterwards as AkzoNobel today does in total still having Specialty Chemicals as part of the group. We're also announcing that we are so convinced of the separation route for Specialty Chemicals that we are in advance distributing parts of the proceeds via a special cash dividend of €1,000,000,000 and are committing to returning to shareholders the vast majority of net proceeds received from the separation of Specialty Chemicals.
Many of these items come back during the course of the presentation, but this is the core summary of what we've announced this morning and that we would like to present today. We will deliver a step change in value creation, and we can summarize that in 6 key messages. Accelerating our growth momentum and enhanced profitability means now is the right time to increase our financial guidance in line with our vision of leading market positions delivering leading performance. We will create 2 focused companies as a logical next step and complete a clear separation within 12 months. We're committed to increasing returns to shareholders evidenced by the measures we've announced today, while continuing to create long term value for all stakeholders by investing in innovation, sustainability and the society that we operate in.
We at OXO Nobel are convinced that we are best placed to unlock the value of the company. Let me step in each individual ones of these 6 in the next couple of slides. We worked very hard on putting in place the foundation for growth during 2015 2016. And yes, with several markets and several geographies turning down, it was a concern for me as well when I didn't see that growth as strongly as I would have liked it in 2016. But that is also why it is great to see that decorative paints has grown 5 quarters in a row despite the downturn in Latin America, that specialty chemicals has accelerated its volume growth despite the raw material and energy price developments.
And that Performance Coatings was able to compensate for the downturn in the oil and gas and the marine sectors with growth in other segments as well as complete an acquisition that is adding to their growth. Our growth momentum is clearly accelerating. We're seeing positive developments in many of our markets, and the most recent quarter clearly confirms this trend. Coming to the company, I saw great people, amazing brands and fantastic market positions, but we also had a set of challenges to address. We first, in 2012, defined our 2015 targets, which for AkzoNobel at the time for the portfolio that we had were records.
We were able to over deliver on those 2015 targets and quickly define the next phase in terms of our financial guidance. And what we can see today that with the guidance for 2017, we are convinced that we will be operating at the top of our guidance that we provided in October 2015. And therefore, today is also the right time to actually establish a new guidance going forward. We've steadily increased our return on sales, our return on investment, our EBIT and our cash flow generation, a clear focus of auction Nobel in the last years. We've done so by tackling historical issues, pruning the portfolio and taking measures to simplify the organization and its processes.
Good results are visible, but as we've always said, further potential is clearly there and this management team is truly excited to make that potential come real for all of our stakeholders and clearly also very much so for our shareholders. The foundation, therefore, has been built for the next phase, which together with our accelerating growth momentum and enhanced profitability gives us the confidence to announce increased financial guidance. Paints and Coatings will achieve a return on sales level of 15% and a return on investment greater than 25%. Specialty Chemicals will achieve a return on sales of 16% and a return on investment greater than 20%. And we have a clear aim to grow faster than the relative market.
The above guidance is provided as we did with the previous guidance for comparison reasons so that the previous guidance is exactly along the same definitions as the guidance for 2020. For comparison sake only, we have translated it to an AkzoNobel guidance at the bottom, which of course in 2020 will not be in its present configuration. But it clearly shows a 300 basis point above our previous guidance definition for the overall company in its translation. Creating the 2 focus businesses is the logical next step. You've seen this chart from us before.
We indeed started tackling some significant historical issues in 2012 and those challenges were tackled head on by the management team. We built solid foundations during this first phase of the strategy. We focused on customer deliveries. We optimized our factory footprints. We reduced tens of thousands of stock keeping units out of our portfolios.
We consolidated ERPs and did many things more to create that foundation that we now have. This lead led to the achievement of the 2015 targets and allowed us to make the next step on the Phase 2 that we announced in October 2015. Since then, we have delivered continuous improvement, including through the AkzoNobel Leading Performance System program, returned to growth, have acquired and are now at the upper end of our second phase financial guidance that is there. What should be mentioned is that during this entire period, we assessed the portfolio aspects on a regular basis, including the portfolio aspects around specialty chemicals. We've looked at the options that were possible.
We designed organizational structures of both the paints and coatings and specialty chemicals companies. We assessed what would be the right time to implement the change. And pensions, of course, were a key consideration in making that decision. Specialty Chemicals, of course, with its solid cash flow, helped us to deal with de risking and of course providing top ups. But from now on, we have had this crossing point on the one hand of increasing performance, increasing cash flows, reducing pension top offs and derisked pension funds that allow us in 2017 to make that decision to separate Specialty Chemicals.
We will unlock further value to accelerate growth. We will create these 2 focused and high performing businesses. Both businesses have scale and capabilities to stand on their own and to deliver a strong cash generation in the future. Because of this crossroad of the derisking of pension funds and the increased cash flows that we have, 2017 was the logical year to have the decision. You know that we pulled it forward a bit, but exactly this crossroad would have made 2017 the year where the decision would have been on the table.
What does it mean unlocking the full potential of 2 focused companies? First of all, we believe that with the setup that we have right now and the strength and the leadership positions that these businesses have as independent businesses, they can clearly grow above market rates. Their customer focus can even be tighter than it already is today, and we've significantly improved it since 2012. Both businesses have world class global brands. Building global brands is an art, it is a skill set and it is a key value driver for many of our businesses.
They can do market leading innovation together with their customers. They have teams with a proven track record that can truly focus on the business overall. They can develop the market specific capabilities of their talent in the organization. And what is clear is that, of course, they can make clearly differentiated capital allocation decisions. Specialty Chemicals being a more acid intense and more people light business compared to the paints and coatings, which is more asset light and people intense, clearly asks for a differentiated capital allocation in the way going forward.
And Thierry Van Lanker will explain some of these allocations that he has in mind for the business. Both businesses can do targeted acquisitions. And of course, by being more cleanly present in their own industries, the valuation from the financial markets can be more cleanly compared with the peers in the industry. That does mean, of course, that we need to adapt the structures of both organizations. And we do this by continuing the cost discipline that we've had.
The support structures of Axt Nobel have continuously reduced in costs and continuously increased their efficiency through Global Business Services and other optimized processes and tools that we've implemented in the last years. But we're not done. We can still do more and that will continue for both businesses going forward. It's driven by standardized and automated processes, simplified tools and of course by clearly targeted talent management for the industries that these companies are in. Thierry Van Lunker will clearly explain to you the way forward for Specialty Chemicals.
For the Paints and Coatings business, we have actually decided to get a more even distribution between the businesses. So instead of having 2 businesses to develop 3 more market focused groups that can truly then have the corporation align a number of issues like collar development, like brands, like operational excellence, like integrated supply chain that will truly then be driven for the company overall. When we look at these structures and we've assessed what we can do that despite the fact that it will be 2 companies, we are clearly of the belief that we can take €50,000,000 of additional cost savings out of these support structures when we are 2 separate businesses. Now let me step into the separation of Specialty Chemicals. We will focus on doing this right.
That is the prime driver what we want to do. Now we're convinced we can do this right within a 12 month period, and we're convinced that the right way to do it to maximize value is to accommodate a dual track process for the best outcome for shareholders and other stakeholders. The business already operates rather separately in relationship to the Paints and Coatings organization. Over the years, as I indicated earlier, while we were assessing the situation, we've made sure that we did not create special interdependencies in tools, in structures, in legal entities and the like. We have also a new Head of Specialty Chemicals with Cheri Van Langer, who has experience in separations and that has already helped us in the project team setups and the way forward.
This dual track process will take various options into consideration including creating a separate listed entity or selling the business and that is done to make sure that we keep tension in the process. Project teams are already in place. Immediately, of course, after becoming known both internally and externally, we could ramp up the teams and they are already running and moving forward. We will take into account a number of decision criteria including our strategy, the value, of course, the speed with which we can implement and a number of others, as you see on this slide. The current estimated market value based on analyst reports, not our own, is between €8,000,000,000 and €12,000,000,000 And as we mentioned earlier, the vast majority of net proceeds will be returned to shareholders.
AkzoNobel will have an ongoing commitment to invest in sustainability, innovation and the society we operate in. When we look at our products, 90% of the products we introduce are more sustainable than the products that they replace in our portfolio. 50% of our products provide sustainable benefits and 20% in excess of 20% of our products even provide sustainable benefits in excess of what competitors actually supply, a true driver of our innovation machine over the last number of years. To further drive our commitment to innovation, we will invest €1,000,000,000 between now 2020 for the periods for the Paints and Coatings company. We're also announcing an investment in paints and coatings, apologies, which on the basis of the Imagine Chemistry Success, which is an open innovation platform that we've created, we're actually starting something very similar for paints and coatings and are looking forward to the same amount of energy that comes to us and the sharing of ideas that we've already seen at Specialty Chemicals.
All of these investments are absolutely key together with the Human Cities projects that you've seen as well to the actual success of AkzoNobel going forward. Therefore, to summarize the same six key messages, we've seen clear accelerating growth momentum in Q1 and that growth momentum gives us the confidence and the foundation to enhance our profitability and clearly describe a higher guidance for both businesses. We'll be creating 2 focused businesses as a logical next step. We'll do that within a 12 month period. We're clearly increasing our short term return to shareholders, but we're keeping our long term strategy and our medium term strategy intact while doing so.
We're committed to investing in sustainability, innovation and society, and we're absolutely convinced based on the track record of this management team, based on the knowledge that we have of the businesses, based on the drive and the energy that is presently in the organization, we are best placed to unlock the value in AkzoNobel. Thank you very much. And then next, I would like to welcome Thierry to describe the Specialty Chemicals way forward. Thierry, the floor is yours.
Thank you, Tom. Good morning, ladies and gentlemen. It's always a pleasure to talk about a business that is already performing at the top of its quartiles on all its relevant key financial metrics. But there is a sort of added sense of pride when I can present on behalf of my whole management team the next plan to take it and unleash the full potential of this business. The way we're going to do this is by working on 3 strategical levers.
1 is a continued hygiene and drive of operational excellence. This is to offset cost inflation and to release more working capital out of the business. I'll come back to that to each of these levers in the following charts. Secondly, we have to accelerate growth. But as you will find out from the presentation, it's less about us accelerating growth than accommodating the accelerated growth of the long term key customers that we serve over many years.
All of these two initial levers are within the historical capital investment levels for this business. The separation and this is lever number 3 gives us an opportunity to step change the growth even further and basically add another €200,000,000 of EBITDA on an annual basis by 2022, but that is for later. The first two levers are really the basis why my management team and myself are comfortable to propose the new guidance to Mihailis and Tom for the next coming period. But before I go on, on how we're going to do this, maybe it's good to spend a little bit of time on what Specialty Chemicals is. I've talked to many people from outside the company and their opinion is very much aligned with what my opinion was before entering this business.
So it's probably good to put it a little bit in perspective. Specialty Chemicals is close to a €5,000,000,000 revenue business, almost an 18% return on investment. And currently 60% of our business is outside of mature Europe when we look at the current run rate. But of course, a business is more than a couple of numbers. When I joined AkzoNobel and I did my homework on analyzing the business, I have to admit I came to the same conclusion that some of you have externally about how this business is built up.
6 months in the 7 months in the role, I've been able to interact with all of the team to visit all of the sites, to look at all of the segments and the business plans and do a deep dive in what the future opportunities are. And I do have to admit there have been a number of wow moments while doing that. So there is more to this business. 9,000 highly capable and highly engaged people around the world who are really putting customer first and have an intimate deep knowledge of the segments that they serve. Each of the business units shows a similar level of profitability.
Let me repeat that. Each of our business unit shows a similar level of profitability despite what some of you may believe before getting into this room. And you see that momentum is on our side. Q1 2017, Specialty Chemicals delivered 7% higher revenue than the Q1 last year and 5% volume. So it's really going.
And this growth is for all of the business units. It's not one that is a locomotive for the others. And last but not least, and I'll try to explain that in future charts, the business portfolio has been highly resistant to macroeconomic cycles because the businesses balance each other out as they go through a cycle. So what is the secret behind that success? Yes, we look at this business as 4 reporting units or 5 business units as you see here.
But we run these businesses very much as 3 interlinked platforms and we really have the synergies to sharing world class capabilities across the network. So what are these 3 platforms that we look at? Well, first of all, let me point out that through the cycles, all of these 3 platforms have had similar profitability levels that vary between 18% 20% EBITDA, which explains the resilience of Specialty Chemicals because it really has 3 stable legs to stand on. The 3 platforms, 1 is our bio based and itoxylation chemistries, which in fact if you look at it has been the most impacted in the cycle to the oil and gas downturn the past years and margin pressure in our ethylene amines. Despite that, this business has stayed within that margin of profitability.
The second platform is the plastics industry. 3 of our businesses are catering to the plastics industry, be it on initiator, be it as a chlorine supply, etcetera, whereby polymer chemistry has the broadest portfolio of initiators which is a product that makes the polymerization happen of anybody out there. And industrial chemicals is really the key supplier of chlorine, which is essential for the polyurethane and PVC industry in Europe. Our 3rd platform is what we call the green electrochemistry. AkzoNobel is a renowned leader in electrochemistry, specifically when it goes around chlorine based products.
But we call it green because the electricity consumption hog that this business is, has now is based over 50% on renewable sources and in fact is the result of really active engagement in wind parks that we have developed in partnerships with companies like Google and Philips and more to come. I'm not going to dwell too long on the shared capabilities, but let me just pick out one. The whole €5,000,000,000 platform is running on one ERP system, which gives us an enormous granularity on the data that is being generated. And it's not just for the historians to look at the data, but it's increasingly used to do business analytics and business remediation moving forward. So what can we do to deliver more of the profitability?
Well, over the past years, the profitability has been driven by these 5 pillars. 1 is the fine tuning of the portfolio. One good example is how Specialty Chemicals exited about a year and a half ago the paper segment for our bleaching problem. Paper chemicals, it has a quite a low growth and has been doubling down on the cardboard and the tissue market, which shows a high growth. 80% of our past year's growth budget went into emerging markets which gives us now a solid and significant base to build on in the future in places like Brazil, China and India.
A strong contributor has also been the integration of our assets with key long term partners. And when I mean integration, I mean really inside interlinked units we have with our customers, specifically as an example for our pulp customers with our so called chlorate chemical islands. And then as Tom indicated also in Specialty Chemicals there has been impressive work done on continuous improvement and productivity programs which has been one of the reasons to drive the profitability through cycles on a continuous basis. So besides the financials, which have been improving, where does that lead us today for the business? Well, the hard work has resulted in both strong business portfolio and positions and on the other hand core competencies that let us build on the future.
Some of the proof points to illustrate that. 80% of our positions in segments are either in a number 1 or a number 2 position. So we have relevance where we are operating. Secondly, we are top quartile in ROI. So not only do we have the relevance, but we have the stamina to basically sustain and create the markets along with our customers.
Core competencies and I will come back to that has been the ability to retain winning customers. Pretty impressive is the 98% retention rate in our top 250 customers and that the vast majority of that list we have relationships with that are longer than 10 years. So it's a very strong customer intimacy that that entails. As I said through the investments, 30% of our asset base is now in emerging markets. So we're well positioned there.
We have more than 5,000 active and profit delivering patents, which really sustain our product pipeline and sustain in every sense of the word, the business work, but also the sustainability part of it. And last but not least around our people, very proud to say that AkzoNobel Specialty Chemicals is now in the top quartile in the 2016 peer ranking of the American Chemistry Council, which is a great achievement for the team. And also not to be forgotten that Specialty Chemicals scores extremely high on the Gallup engagement surveys for its own employees. So let me go back on this long term customer relationships and how important that is. And let me explain you what it really drives the bottom line and why that gives confidence that in our plant we have about 4% compounded average growth rate for our business.
If you have long term relationships with winning customers in winning segments, well then basically you're in the front seat for growth. And what this chart shows you is about 93% of our business portfolio and where our products end up with in which end user markets they end up with. It's based on an analysis to our key customers and their markets on what is driving the pull through for what we produce. Now obviously, I could speak for hours about this chart and I'm known to be doing this, but let me take three examples to explain why we are very confident about the growth here. In the first category, you see for the cleaning, personal care and pharma, we see the replacement of phosphates.
Well, our chelates business is well positioned with its biodegradable chelates range to be the replacement for phosphates in dishwasher detergents, phosphate which are banned in Europe going forward. So we're really in the front seat to capture that growth. For cardboard packaging and tissues, well our bleaching chemicals are predominantly focusing on cardboard. And unlike the paper industry, every single time one of us sits at the laptop and orders something via Internet sales, it invariably ends up at your doorstep in a cardboard box. And every single time you click it, there's a little thank you from our bleaching business because that's exactly a stronghold for our bleaching products on the cardboard and on lots of Internet based shipping around the world.
And last but not least, let me go back to the polymer chemistry and the plastics. We are a big supplier into, for example, the polyurethane industry, which is really growing fast right now based on light weighting of cars and the ever increasing demand for insulation for energy conservation. Also that is, as you see, a big part of our portfolio. So when I talk about growth going forward, it is really much more around accommodating the growth of our customers than any bonanza around market share growth independent of that. So let me now get a little bit more in detail on the 3 levers for growth.
The plan is built as I said on the 3 levers. 1 is the operational excellence hygiene and I'll come back to that. We deliver by 2020 about €150,000,000 of cost reduction to outpace inflation. We will decrease our working capital by about €100,000,000 to €150,000,000 over that cycle. Secondly, we will accelerate growth or accommodate the growth as I indicated which will deliver €250,000,000 euros of EBITDA by 2020 in our bottom line.
And then as I said, these two levers are all within the historical capital spend of our business. But if we take it to the separation, well, that gives us an opportunity to increase over and above that guidance the annual if we do more on our growth investment spend to create an additional €200,000,000 of EBITDA by 2022 over and above the guidance that we just gave. So let me just do a little short deep dive in each of these three levers. The first one continued operational excellence. For a big chemical global business, keeping hygiene and discipline around operational excellence is a must.
By 2020, we will have taken out about $150,000,000 of sorry of fixed costs to offset that inflation. You see 5 of the key drivers to do that. 1 is operational productivity. We do see opportunities to rationalize some of the workflows in our own plans, which would now create the capacity to in source work from 3rd parties and therefore reduce our spend out there. Very excited about the opportunity for maintenance reliability.
We've done some work to get from reactive maintenance, which is expensive and disruptive in our supply to proactive reliability by using digital means of analyzing big data. Very encouraged by that and we believe that would be another big driver. The third one in the proverbial low hanging fruits category is the indirect procurement. We have not been very good so far at leveraging our global spend for the non product related category. And we have seen already this year quite some step improvements and believe we can step that up even more to deliver more bottom line value.
Also want to spend some time on the working capital. We believe that we can release €100,000,000 to €150,000,000 of working capital through integrated business planning. And by that, I mean really a methodology uniform across all our businesses of connecting a much crisper demand signal with our capabilities internal of producing and therefore have less laying around in a warehouse. And we believe we can do that by keeping or improving the service levels to our customers. So this is an important chart here because that is about the delivery of the €250,000,000 of EBITDA by 2020.
As I said, we call this accelerating growth, but in fact it is accommodating the growth of our customers. It is great to have key customers that are growing and winning in growing segments, but it's only great to the point that you can actually supply them and fulfill their needs. And in many of our supply chains today because of the success we've had in the past years, we are at a very high utilization rate. And for those supply chains, basically the motto is valid. All we can make we can sell.
And frankly, all we could make more would deliver more to the bottom line. So increasing our output is a prime driver for enabling the growth of our customers. So how are we going to do this? One is debottlenecking and that is in the sense of the normal physical debottlenecking, a more drier, bigger reactor, etcetera, to get more product out of your unit. But it goes further.
It also goes around product wheel rationalization, so we have less yield losses, less stoppages, etcetera. So frankly, getting percentage by percentage more product out of our existing asset park. The asset light approach is an important one. We have great technology positions IP or deep know how or in-depth customer relations, which allows us not always to fork over the money ourselves to build the unit, but really play the whole spectrum of make versus buy to get to our customers. A good example I would mention here is our partnership with ICL in Spain.
In Europe, there is a pretty tight situation around high purity industrial salt. The normal reflex would be to invest, but we had a partner here who had a byproduct from Potash who really wanted to work with us together. It avoided for us a €60,000,000 CapEx investment we had to be doing otherwise ourselves. But at the same time, it really put in our lab about 1,500,000 tonnes of high purity industrial salt that we now basically can put in our existing network. Of course, when I talk about right size supply demand out there, it also gives quite some opportunities over the cycle for margin management, which the team is already on that as we speak to drive the bottom line.
And last but not least, I would talk about commercializing new products. And on purpose, I did not take one of the more sexy ideas out there, but really take an example of how you can make a real game changer in a very traditional industry like PVC. Our continuous initiated dosing offering, a patented technology which we call CID, allows a traditional PVC producer to get up to 30% higher output out of their units without capital investment. It actually improves the safety and it improves the overall product quality out there. So not a surprise that in this area, all of a sudden, we have an enormous high adoption of this technology across the globe for any of the PVC manufacturers.
And in a commodity market like PVC, any kilogram you can more out of output out of your units is like printing money. So let me summarize what I've explained to you so far. Specialty Chemicals is a world class business. It's highly profitable and mainly by having an interlinked and a very resilient business portfolio. We have a really robust collection of leading physicians and we have all reasons to be very optimistic about growth because we see it coming to our customers.
And 3, we have a strong place a plan in place to deliver. And as a result, we feel confident to deliver the increased value numbers both on return on sales and return on investment. Again, what I all mentioned so far is within historical capital investment levels. So where could we take it post separation? Over this increased guidance, as I've mentioned before, we have a very clear path and a very clear vision on delivering by 2022 €200,000,000 more of EBITDA to the bottom line.
We have identified growth investments for an additional 100,000,000 euros on an annual basis that would have in all of those cases paybacks less than 4 years after startup of those units. And we deliver €500,000,000 more revenue €200,000,000 annual EBITDA increase. Now these are not blue sky investments. These are very concrete market pull and market demands for investing in those units that we have. We will go in the category emerging markets and high growth segments.
We need expansion capacity in the next coming years for both XPAN cells and our liver cell, our colloidal silica product ranges. We just have started a new plant for polymer chemicals in Ningbo, China, but we already see that on the heels of that we will need additional world class capacity in Asia for similar products. If you look at growing the pipeline with our customers, we see in the next 3 years the need for an additional chlorate pulp chemical island as well as expansion of our chlorine capability in Europe. And last but not least, there's a whole list of very specific debottlenecking opportunities to get more out of our existing units. So in summary, when I look at the summary of the journey for Specialty Chemicals, Me and my team, we're very committed and we have the confidence in Specialty Chemicals as a business and to deliver the numbers we just talked about.
It's a world class business, highly profitable, highly interlinked and a highly resilient portfolio. We have built a robust portfolio of leading positions. We have the customers. We have the markets. We have the processes.
We have the people. We have a strong plan to deliver. So we're really ready for the journey to unleash this business to its full potential. Thank you very much. And before we have Tom, I believe we have a video.
Thank you.
Thank you, Thierry. It's been a great presentation on specialty chemicals. It's also fantastic to see the team, AkzoNobel, in action ahead of the Volvo Ocean Race. This is a very deliberate sponsorship, which will not only bring Aks Nobel's brand further alive in all of our key markets, but it will also be a showcase of our products and what they do best in terms of making an object faster, more sustainable, more efficient or simply better protected. We look forward to the race starting in Europe.
Now let's take a look at the new world of painting. As you can see, our new business will be a global painting coatings business and will be very significantly present in the high growth markets. We are well positioned to make the most of accelerating the growth around the world. We're talking here about a company that is close to €10,000,000,000 and close to 12% return on sales already last year. As you've seen similar charge at Chemicals, also the paints and coatings business has continuously increased over the last 5 years in the trajectory that I described earlier during my first presentation.
We've substantially grown our return on sales and return on investments, And our 2020 guidance represents the next step up as we accelerate growth and enhance profitability in the direction of 15% return on sales and in excess of 25% return on investment. What you also see is that this trajectory to the 2020 guidance is not a trajectory that we haven't done in the past. It's actually a continuation of the basis points improvements that we've shown over the last couple of years. At the Paints and Coatings Company, we do create everyday essentials to make people's lives more livable and inspiring. We have a very clear vision to take our leading brands, our leading positions and our leading talent and use those to very much deliver leading performance for all our shareholders and other stakeholders.
We will we're aiming to be the number one choice for our customers and we will build world class brands and color expertise while driving our digital and innovation agenda. All of these five boxes you see on this chart are key value drivers for the business going forward. We will continue to improve and excel as we've built continuous improvements both in the businesses, in the factories, in the supply chain as well as in the functions as part of the DNA of AkzoNobel. And we will continue to lead the way in sustainability while living our values and principles and developing our people going forward. As mentioned, these are the key drivers of value going forward and we'll step into each of these values later.
But before I do so, a very clear overview of some of the megatrends that of course we as an organization have been very much adapting to make sure that we're best positioned to benefit from them. We see continuous urbanization especially in the high growth markets and that requests a continuous increase of construction activities and people that want a livable and an inspiring home. And actually, while being there over different generations continue to renovate and make their homes adapted to the new fashions as well as their new lifestyle. Globalization asks for stronger global brands, global brands that need to be built, they need to be supported, they need to be invested in because only when you do that can they be a key driver of growth. Demographic shifts and clear wishes and desires for sustainability that come in consumers because they see that their environment is being hurt by past activities, are creating regulations and are creating opportunities for products that actually can be very successful addressing their needs.
And as you've seen already with ourselves in terms of consumers, but it will only continue the Internet proliferation in the way people look at things, find things, interact with the companies they want to buy something from or actually do direct e business when they want to be successful. These 5 megatrends are translated in 3 catalysts here and they clearly positively impact the key customer segments that we as a company are active in. As mentioned, we aim to be the number one choice for customers driving above market growth rates. The market overview shows that AkzoNobel is a clear leader in its markets. All of our positions are number 1, 2 or 3 positions and we occupy a significant portion of the applicable market for AkzoNobel.
AkzoNobel is a large player with all of our revenue coming from these number 1, 2 and 3 positions. And these strong positions allow us to drive growth over average market growth going forward. Now let's have a look at the individual market positions in this case for decorative paints. Here you see the true leadership that we have in so many regions. We've also clearly split the European region up in a number of areas, so that we're not looking at this entire region we look at number 1 positions.
But even in the subregions, we are a clear number 1 in any of the activities related either to consumers or to painters who buy and use our products every day. But what is also very apparent is the strong presence that we have in places like Latin America, in places like Southeast Asia and the Middle East and of course China, a key driver for us going forward. We are probably the only owner of true global brands when it comes to the decorative paints business. We have of course seen them as part of some acquisitions, but then we've truly invested in them to make them bigger and to make sure that we can use these global brands going forward. The combination of these brand strengths, the combination of these market positions will allow us to grow faster than the markets over here.
Markets are indicated at 2% to 3%. In our plans, we're looking at a 4% growth rate. 1 of these key markets that has been growing significantly because we have been driving that growth ourselves on top of the growth that the market itself has had. We've been seizing the growth in China very effectively. Geographically, we've continuously increased our points of sale that have driven of course the access of our customers to our products and our services.
We have also continued to elaborate on the portfolio of sustainable products. Now you may say China and sustainable products. Yes, very much so. Every time I visit China, the consumers and the painters that deal with these consumers are continuously being asked about what is in these products that I put into the rooms of myself and my kids and how can I make sure that they are truly not affecting the health of our family? This is something that is a key driver in China.
Together with Color, they have become certainly in the premium segment a very strong criteria also already in the past, but it will continue to be the case going forward. When it comes to the individual segments, we are an absolute leader when it comes to the premium and super premium sector. And we have continued to expand the width of the brand and the width of our point of sale to also address selectively mid and mass segments in such a way that we can do so while increasing our profitability as opposed to the other way around. So this China growth plan is something that we've seen really taking traction for many years and the foundation we have over there makes us very confident that we can do this going forward. The actual example you see here from a sustainable product is actually a product launch under the name of Forest Breath, which actually features an antibacterial property to improve indoor air quality.
Looking at the Performance Coatings business, a very similar situation, clear leading positions that we have in each of the Performance Coatings segments. Market growth in these segments in the aggregate is also around 2% to 3%. And also here with the very strong global brands that we have, we believe that we can clearly aim to grow faster than the market. In our plans, we've put 4% in. Also here, not only the brands, but very much also the global technologies that we've actually brought forward and have transported around the world in the different locations have really helped us and have been a key driver of value.
We're expanding our Coatings capacity across the world to be close to our customers in emerging markets. And here you see where our capital expenditure has gone in the last number of years. It highlights it's highlighted by the recent investments that we've announced in India and China and have added capacity there in a number of our businesses. And we've even created campus like environments where a multitude of our businesses are working together and are integrated in the way they're being served by supporting functions, tools and systems. 100% of the new production capacity for Coatings in 2017 will be deployed in emerging markets.
That is something that we will continue to do, adapting to where the markets continue to grow. Now let me step into these 5 key drivers for growth and margin that we highlighted in the earlier chart. A key driver for value will be our efforts on digital and innovation. We will drive our digital capabilities further to deliver growth. We believe we're absolutely leading in the industry.
We recently opened a virtual reality center for our customers in the U. K. And if you look at the Visualizer app that some of you may have used, we have actually had 13,000,000 downloads of this Visualizer app, clearly showing this is not a small app. And it not only gets us closer in the way we interact with our customers, but it gives us a wealth of data to show trends and the way we work. The great thing of this app is that we've now introduced it towards painters who will use it on a daily basis, giving us even more big data to put our marketing plans and our key drivers for growth and margin going forward.
Our InterPlan mobile app helps our protective coatings, which is a Performance Coatings business customers with effective maintenance and planning. And our InterTrak vision tool enables marine customers to predict the risks of whole fouling. These tools have really brought us closer to customers and we will continue to invest in these digital tools going forward. Innovation has been and will continue to be a big driver. We will invest €1,000,000,000 in the Paints and Coatings business from here until 2020.
Our commitment to drive innovation includes that enormous investment. Meanwhile, a couple of examples of which I'll show you a few slides later like Velvet Touch and Ambiance really show the next level of innovation when it comes to interior paints. But also in the Performance Coatings area, our Chartek fire protection coating systems delivers essential protection for buildings and constructions around the world, making a real impact on the safety and the sustainability credentials of our customers. You saw the video and our approach to building world class brands really is a key driver for not only growth but also for margin. Well, respecting the local nature of the industry, but building those global brands makes it possible for us to replicate campaigns, to replicate ways of working in such a way that we don't have to individually cost for the regions around the world.
We take such global assets like branding, advertising, digital and commercial insights and localize them to ensure that they are brought to life in the right way to the crucial point of sale. This creates real value and is a true competitive advantage. As we saw earlier in the video, this is one of the best examples we have to share with you showcasing some of our most exciting products in action also combined with a digital platform that not only products, but also the interactions are taking place with our customers. We are the number one supplier when it comes to the marine and yacht coatings in the world. And AkzoNobel Coatings will not only be on the AkzoNobel boat of the Volvo Ocean Race, it will be on all of the Volvo Ocean Race boats.
And the international brand is the truly global brand when it comes to Performance Coatings going forward. I mentioned 2 slides. I will go through them very quickly. But again, building global brands and seeing what paints can do to the environments is really helpful when it comes to seeing where value drivers are. This allows us to ask for a premium price just to offer additional features, additional possibilities to create exciting environments.
Similar of this particular rollout, this is one again that we can carbon copy over different regions and significantly save on the rollout of very different locations that this particular type of premium paint can be introduced. Color expertise is a truly important expertise for AkzoNobel. We invest on it significantly and it is a clear value driver for the company overall. We are a world leader when it comes to color knowledge and technology. And as I mentioned earlier, in the digital age, this has never been more important than today and going forward.
Our Color Futures and our Color of the Year trend reports have been an industry bible for 20 years and they are used by both our decorative paints and our Performance Coatings business. The color palettes we now offer across our brands include Dulux, Sikkens and allow our customers the widest choice available in the market. Building on my previous comments on digital, we are also having industry leading capabilities to digitize color and to actually make it possible to reengineer color in a very quick way, which is very helpful for our Refinish business to be having the most extensive and precise digitization of color capabilities in the world, and that drives extensive customer loyalty. Key driver for the Paints and Coatings business is continued commercial excellence focused on driving above market growth rates. We've done a tremendous amount of things when it comes to building the foundation of growth.
We've looked at all of our product market combinations, made a clear map and created differentiated target setting for each of these product market combinations in the regions where they're applicable. We have holistically defined what we call our 7 routes to markets. These 7 routes to markets, we assigned owners to it, who are real specialists in building these routes to markets in the most efficient way. These salespeople have been allocated to these routes to markets, the ones that fit their skills best. Trainings programs have been set up.
CRM systems and net promoter score measurements are taking place on a regular basis. And therefore, we are also able to drive our sales force in the right direction, in the perfect direction, I would say. And on top of what we've done is, we've actually adapted the sales force incentive systems to be totally aligned both with a differentiated target setting as well as the routes to market. This is a great value driver going forward. You've seen the effect on it in the last quarters.
We've clearly seen accelerating growth in decorative paints and in specialty chemicals. And we've also seen in Performance Coatings in areas other than marine and oil and gas that the acceleration of growth has taken place. But that doesn't mean this is only about growth. It is about growth and maintaining of course our discipline on the cost and efficiency side. During the last few years, we've been able to deliver significant productivity improvements over €200,000,000 a year for AkzoNobel as it is today.
By delivering on our continuous improvement drive, We moved from a restructuring mode in the early days since 2012 to continuous improvement and we've now been able to show 2 years of real traction where with a small amount of restructuring costs in the area of €70,000,000 to €75,000,000 we've been able to take €200,000,000 of cost out of the organization. In the future, our AkzoNobel leading performance system as well as our global business service program, the two examples that you see over here, will ensure we continue to improve and excel by delivering more than €150,000,000 savings per year for the focused paints and coatings company alone. We will continue to implement HELPS, as we call it, in our manufacturing side and we'll roll it out into the supply chain as well as into the functions across the company. We're already seeing the impact of these 2. And with 50% of sites have gone through to the ALPS system, you can see the potential that is still out there.
And with the statistics you see on GBS, you see there's still a significant way to go and the team is excited to make these potentials become real. If we look at what are the buckets of these savings, you may ask what are the individual parts. Clearly, it is about increased efficiency. And at times, it is about bottlenecking and productivity improvements taking place. It is also clearly about value engineering, taking our products, modularizing it, making sure that we actually can modularize it in a way that take cost out of the products.
We are working on an increased flexibility to change raw materials if they do move in individual prices. We're looking clearly at the indirect procurement, as Thierry already mentioned it, for specialty chemicals. That is also an area of improvement for paints and coatings. And we're certainly looking at combining some of these core value drivers that we showed you earlier as a key driver for potential further efficiencies and cost takeout. We will all do this as part of a strong culture that we've developed in the last number of years.
We have a clear set of core principles where safety is very high up into our rankings. We truly care about how our safety performance is. And after a number of years, we have clearly become part of the top quartile safety performers in the industry, something where we're really differentiating ourselves when it comes to treating our people. We have clear values, well penetrated into the organization, annually tested through engagement surveys, really being lived and people being asked, do you and your colleagues live these values? The engagement of the organization has increased 6 years in a row.
We have an incredibly energized crowd that truly believes in the plans that we have developed together and absolutely wants to deliver them going forward. Additionally, as I mentioned earlier, also for the Paints and Coatings business, sustainability and innovation truly is something that we want to continue to lead the way. It does generate money. It does create value. We really see that in those products where we can differentiate from our competition in benefits that we provide to our customer base, we can clearly look at additional margins because the actual benefit is so tangible for our customers.
We're continuing to drive our own energy usage into more renewable usage, therefore preparing ourselves for the times where carbon can be more priced than it is today and other examples you see over here. Coming back to the 5 core drivers of value and growth. Strategically, we have been driving them, but we can clearly accelerate them as part of the fit for purpose organization. We talked about accelerating growth to 4% a year by seizing opportunities in the emerging markets, by investing in brands and innovation, by leveraging digital and color expertise and by continuing to drive that commercial excellence with the examples that I provided earlier. On the operational excellence side, I provided you the buckets, where are these buckets, where those costs will come from.
And it's a continuation of the drive that you've already seen the proof of in the last couple of years with the Luxembourg leading performance system, with the global business services, with the leverage of the combined supply chain and the top quartile working capital management that we already have. With that, I would like to hand over to Melis to provide you more on the financial side. But before I do so, I guess a repetition of the guidance that we had These five drivers, these actions that we show are resulting in the guidance that we've done, a guidance that is a continuation of what we've done in the last number of years and a guidance that's really underpinned by actions going forward. Melies?
Good morning, everyone, and thank you, Thorne and Thierry, for presenting our exciting plan for the future. Those plans are clearly building on a strong foundation for growth and value creation. I will start by summarizing our Q1 results that we published this morning, very strong and great results that are clearly showing the strong momentum of growth. And we think we can continue in the future to build on this growth momentum and enhance further our profitability with the new target we've just presented. We will accelerate, as I said, and we will also create 2 focus business, which is a logical next step of the strategy as clearly explained by Tom.
We will unlock the value of our specialty chemical business within 12 months. And the vast majority of the proceeds net proceeds will be returned to the shareholder, and I will explain you how we do that. We will advance a part of this proceed with a special dividend that will be returned to you this year in a form of €1,000,000,000 to €4 per share. And on top of that, we will increase our dividend by 50%, clearly showing our confidence in the future of this take change in growth and value creation. So if we look at our Q1 results.
After a record year in 2015 where we exceeded our financial targets, we also made a 2016 record. This morning, when we highlight our Q1 results, you could see that it's another record for Q1 in term of profit, return on sale, return on investment. Our revenue was up 7% overall, an increase in all the business area, And that was the result of a 4% higher volume and a 2% contribution from acquisition. Our EBIT was also up 13% overall, and that reflects this positive effect of our gross momentum and our continuous improvement progress and the cost discipline across all our businesses. Our profitability improved with our return on sale of 10.3% and a return on investment of 15.2%.
Percent. We're also seeing a progress on our adjusted earnings per share, which increased by 8%. So this is a very strong set of results, and that's why we are confident that we can, in 2017, increase our EBIT overall by €100,000,000 compared to 2016, of course, provided there is no major economic change in the dynamic we're seeing today. So this will bring us at the top of our current guidance. And together with the fact that we are announcing a new step with the creation of the 2 business, we are confident we can announce new financial guidance for 2020 for both business, painting, coating and specialty chemical, as was presented before.
We're also very confident in the future based on the fact that we have substantially improved our cash generation. When you look at this chart, you'll clearly see that there's been a clearly change of direction in term of the cash performance of the company. I'm very proud to see that the culture that Thomas present you, the new culture of the company is really about delivering on performance, passion for excellence, and we're clearly created a new culture of cash generation in all our businesses. That has been made possible by the fact we have increased the profitability substantially, that we have reduced our interest rate payments. We also have adopted a much more disciplined approach to capital expenditure, while in the same time driving the growth.
During this time, we'll also continue to really manage very tightly our working capital, and we have a working leading working capital management performance. In parallel end of this improvement in cash generation, what you've seen also is that the pension top up payment were progressively reduced. And that was following a significant derisking of our pension liabilities. Since 2014, if you look at the number of buy in that we have been executing in the UK, that represents a total amount of £8,700,000,000 And we also made a significant buyout in the U. S.
For €700,000,000 equivalent. So this derisking of the pension liability has played a crucial role, as explained by Tom, in allowing us today to create those 2 business separate with both having strong financial position. So as Thomas say, we are in this moment at a changed direction because of this situation, which has been enabled by our strong financial position. So we are accelerating our growth momentum and enhance our profitability. And that's why we are convinced that we can deliver another step change into profitability with this new guidance for 2020.
We have a clear plan. I think Thierry has clearly explained us how we're going to grow in above our markets, very strong position, leading position in all the market with also performing margin in all those business. In terms of plant of coating, Don has also allied to you in the strong strength in each of our markets. We think we can definitely have a strong position in term of growth, thanks to our leadership position, our brands, also the strong drive in term of innovation and sustainability that will definitely create superior value and increase our margin. We will also improve our guidance, thanks to our performance plan and additional saving to the current performance plan we have.
And if you look at the improvement overall for both business, that will represent a 300 basis point of additional margin. If you look at our track record between 2012 2016, we have been able to improve our return on sale by more than 400 basis points. So this is really a trajectory we feel confident we can continue to reach. And indeed, the separation of the chemical business we have announced will help us also to go a next step further in term of the efficiency, creating even leaner company and more focused business with a strong customer focus and organization fit for purpose. So that will clearly move us forward to our vision of leading market position, delivering leading performance.
The way we're going to construct those 2 business is also a logical next step, thanks to the way we're going to construct our balance sheet. With all the improvement we have made in term of cash generation and debt reduction, we have now a very strong situation and a balance sheet with A- rating for standard pools. This is the results, as I mentioned to you, of the cash generation and also the fact that we were able to derisk our pension liability. Going forward, we're going to create 2 separate businesses, which will benefit also for different capital allocation. We know and as highlighted Thierry that the capital spending in Kimiko are higher than the one in paint and coating.
We will design a new capital structure to aim for BBB plus for paint and coating and for specialty chemical depending on the separation which we will choose, we will have a rating that be equivalent to BBB. So with the strength of the balance sheet we have today, we believe we can indeed optimize further in the way we're going to create this company. And we will continue in the same time to manage our pension liability as we have done in the recent years, and we will ensure we fulfill our obligation. So now if you look a little bit about how we're going to do this dual track process, Tom has explained to you this process. We are confident we can do it within 12 months.
So if you look at other separation, it's indeed a quite challenging time line. But we are very confident we can do it within this time frame for three reasons. First, as we have explained to you, we have been OAG preparing and looking at this option for a while. What we have done this year is to put forward the decision, but we had OAD been working on this solution and working on several options. So we are prepared.
And secondly, we have also discussed and put in place advisor and bank already on this separation, along with internal team to be able to prepare this separation. So we have full team running right now. And we also have confirmed, based on the way we run the business, then this separation will be able to be done within this time frame. We are, anteriorly highlighted, managing this business in a quite separate way from the way we manage paint and coating. And when it come to the support function, we have built indeed some functional competency in the past year, taking account the possibility that one day we could have this separation happening.
Though we are in a good place for the timing. And one of the critical point also, which is the IT system, as mentioned by Thierry, we have been aligning our chemical business with 1 single ERP, which is different from painting coating, and that will allow us also to move quicker on this separation. Why do we think it's important to manage the dual track process? Because we think it's the best way to maximize the overall value for this separation. So we really want to do it the right way and maximize the value out of it.
So this dual track process will, in parallel run, as we say, possibly to list this company to create a separate company for a spin out on an IPO or we will also in the same time look at all the selling option. The only option we have already disregard is the fact to sell in multi parts. Why so? I think Thierry, as I lied to you, the very strong business we have altogether. They are indeed very strong interlink within this business.
And therefore, small digit separation will, in this case, lead to a lot of leakage of value and destruction of value. And we think the other way will indeed be much more value creating. So we are really looking for the best solution to maximize the value, taking into account all the criteria we have looked at we have put in this slide. And this is something we have, as I mentioned, been working on. As Thierry have shown you, we have a fantastic business.
We are very proud of our chemical business. I think since we have announced this separation, a lot of people start to look different at this business. Before, I think we didn't get a lot of question. We're very pleased to see there are more. And I think with the information we also have given you this morning, you can start to really appreciate the potential.
So not only the value add today, which is a very strong business with leading position compared to the peers and leading performance, but also a market with also a business with a strong potential in term of growth and also enhancement of its profitability. That's why we are convinced that the value of this business will be important. And the value we have mentioned on this slide is indeed the estimation currently by broker in the market from EUR 8,000,000,000 to EUR 12,000,000,000. I also want to mention that we receive OED a lot of interest for this business. We have, as I said, banks working with us and though we are positive in this separation.
So it is a great journey, and we are ready, really, for this change. Now if we look at our confidence for the future and also the return we want for shareholder. So in this slide, we show you that we want to also give to you a part of this increasing return. In term of the separation, as I announced, we are confident we can execute it in a 12 year in the 12 months period. And therefore, we are pulling forward a part of the proceed with a distribution of a special dividend this year of €1,000,000,000 and that will be paid in November.
Furthermore, the vast majority, as I mentioned, of the net proceeds will be returned to the shareholder. Of course, the way we will return depend on the method of separation. It could take various form. If it's a listed entity by a split or IPO, it could be in form of share. It could be also taking in form our dividend or share buyback.
But we will return to you majority of the net proceeds. We may elect to reserve a part of this proceeds for our pension obligation. But what then we would put aside will improve the cash generation of our paint and coating business. In addition to this special return linked to this separation, we have shown you that for the paint and coating, we have an increased guidance for the future. And therefore, to show you our confidence, we're also increasing our regular dividend by 50% to EUR 2.50 per share, which represents an average amount of EUR 600,000,000.
That's why for 2017 in total, we will return EUR 1,600,000,000 to the shareholder. And going forward, our confidence in our plan mean that we will continue to distribute a higher return and a higher dividend with for this paint and coating, the same dividend as we are doing today for AkzoNobel at 1.65. So it's a clear step up in the return to shareholder. So to summarize, we are today increasing our financial guidance for the future, building on our strong growth and the enhanced profitability. We have a clear plan to do so, and I hope we are giving you the confidence that we can deliver on it based on our track record and also the strong management team and the engagement of all our people around the world.
Secondly, we also are unlocking the value by separating our specialty chemical to create 2 focused business, the project TIMAOID in place and therefore, we can deliver on this separation within 12 months and the vast majority will be returned to the shareholder. And last but not least, we're increasing our return to shareholder with a special dividend in advance of the net proceeds for the specialty chemical and an increased dividend of 50% for our regular dividend. So that's really a step up, which show you that we are based placed to unlock the value of self and we are confident in our value creation in the short term and the long term for all our shareholders and stakeholders. Thank you very much. And now I will turn it to Trond.
Thank you, Melissa. Two slides left, 2 important slides summarizing the messages that we've provided before. 1, of course, is the key slide that I started off with. A clear step change summarizing all of the things that you've seen during the course of today's presentation as well as the commitments made when it comes to the guidance for 2017 as well as the paints and coatings guidance for 2020. And from Cheri, you heard the 2020 guidance for Specialty Chemicals.
Not only are we separating within 12 months, which is a foreseeable period with a clear timeline, We're choosing a maximizing process by choosing the dual track one. And we're also accelerating some of the fit for purpose organizational buildups that we have. We will create 2 focused businesses that can really be assessed both by the market in a very clean way as well as from the management team perspective focusing on their customers, their innovations, their brands and their success. But of course, as Melis already highlighted, we're also clearly talking about increased shareholder returns with a 50% higher dividend for 2017, a €1,000,000,000 extra dividend and a commitment to return the vast majority of the net proceeds for the separation of Specialty Chemicals to our shareholders. We can do this because we've built this strong financial and operational foundation.
We continue to drive the operations going forward. And the management team, Nelisse, myself, the colleagues, all of the managers and people of Aksen De Beel are truly driven by making this happen. There is an incredible excitement and incredible thrill in the organization. They've seen what we were able to achieve and they really want to deliver this plan going forward as well. And as I mentioned, we at Ox Nobel believe that by being a management team that knows the businesses that we operate, by being a management team that has been managing and improving this business and creating that momentum not only in operational excellence and financial results, but also when it comes to growth as you've seen in the last quarters.
This management team is best placed to unlock that value because this plan in our eyes provides you the shareholders superior value. It really is a plan that lifts us to the next level of value. It is a faster timing than things that you've seen otherwise. We're talking about a dividend in May, a special dividend including a 50% increased interim dividend in November. You're talking about an increased guidance for the end of the year.
You're talking about a separation of specialty chemicals in 12 months, a very foreseeable and near term time plan, but always from where we stand keeping the long term strategy of AkzoNobel intact going forward. There is more certainty. We do not need regulatory approvals for anything that we're doing over here. We know the track record. We know the road map.
We have really had the same dedication going forward as we've had in delivering our commitments of the past. And this is certainly one where the stakeholder engagement aspects are truly positive when it comes to the growth aspects of the business, the investment in return in research and development, the commitment to the talent of our people. This is a team that wants to deliver this plan. It's designed it as the next logical phase of creating value going forward. We want to deliver it and we will deliver it.
Thank you very much. Good day. Here with us, Melis and Cheri maybe for questions. There will be 2 people in the room with microphones, Diana on the left, Lloyd on the right. We hope that we can take a significant number of questions, And I think we have about 30 to 40 minutes addressed for it.
Lloyd, do you want to take the first?
Thank you very much for your presentation. It's Tom Ricklesworth from Citi. Two questions, if I may. Firstly, on the strategy. Obviously, a strong focus on organic growth.
Could you talk to us a little bit how about you think about M and A, given that as you've highlighted with the separation of the businesses you'll have lower credit ratings and obviously you're paying out a significant amount of cash in returns to shareholders? And the second question is, in your Specialty Chemicals step changing growth post separation, the looks of it, you've got a effectively a 40 percent EBITDA margin coming through from these new projects. Could you elaborate on your conviction on getting such an elevated margin relative to the business from those projects? Thank you. All right.
Thank you for your questions. I'll answer the first one. I'll hand the second one to Thierry. So the AkzoNobel strategy clearly includes on the one side continued operational excellence with cost takeouts that exceed the inflation that we have in the system, clearly includes organic growth of which we've shown you many of the core drivers of value not only on the growth side, but also on the margin side. And it does include acquisitions.
But what you also see is that these acquisitions, when they exceed a certain size, we would have to come back to the shareholders and say, do you agree? So with the vast proceeds of specialty chemicals being returned to shareholders, we can certainly do bolt on acquisitions going forward. They can even be of a rather reasonable size. But for large acquisitions, we would have to come back to you the shareholders.
Okay. So maybe on the 40% and the additional growth investment, the reason why we are pretty convinced that this is going to happen is that if the examples I gave are either markets which we are constraining ourselves right now. So the market is there not only in the existing applications, but also the growing application. That is correct for a product like Expansele and for our Iluvacell product range. The other examples I gave are, as it is typical in the chemical industry, if you're joined to the hip with your customers, key customers who have given us the planning that that's when they need more capacity from us and are willing to commit to that.
So of the projects I mentioned which is the vast majority for it, those are projects that have a high degree of certainty and a high degree of commitment for those people who are going to be receiving our products. The debottleneckings that I mentioned is in the similar category. We have a vast area of our supply chains where if we can get 3%, 5%, 7% more product out, the market demand is there.
Diana, could you take the next question?
Thanks very much. It's Paul Walsh from Morgan Stanley. Tom, Miley and Thierry. Two questions, please. On the cost savings that you've talked about today, can you just differentiate what's new versus the existing ALPS program?
I know in Specialty Chemicals, there are some reduced costs because of the separation. But can you just help us understand what's really new in those additional savings? And secondly, it seems from the commentary, if you're using the proceeds to return to shareholders, that a spin seems somewhat unlikely. So if we assume either a trade sale of that business or an IPO, can you talk a little bit about the tax implications of those processes and how we should think about that, please?
Right. So maybe you want to take the second question. When it comes to the cost takeout that we described, I think Jerry was quite clear in what he was saying about the continuous improvement within specialty chemicals. And for those of you that have seen that chart where there is the AkzoNobel leading performance system as well as the global business services on, actually for AkzoNobel as a whole, the number of sites where it's been rolled out is actually 75, right? For paints and coatings, it's 50.
So you see that there's still a significant potential in paints and coatings to do more when it comes to site rollouts of ALPS and in terms of the rollout of global business services going forward. By the time you've done the sites, what is a logical next step is that you go into the front end supplier chain, that you actually go into logistics, that you go into warehousing, that you go into looking at the efficiency of those processes. You lift it at the same time into the functions. And this is the nice part of this AkzoNobel leading performance process. It never stops on the one side within the area that you do it, but you can roll it out new into the next step of the areas.
So you've seen 50% in the sites. That is where you normally start. And then you roll it forward into the other areas, including the functions. What you see as well is that when it comes to the indirect procurement that both Thierry and myself have meant is this is an area where we do believe ourselves. It's the part related not to the raw materials for the production, but all of the other stuff that we there have next steps to make that we haven't made so far yet.
You can always ask why didn't you do it yet. The thing is we have priorities. We took the big cost buckets first and we rolled into the next ones. And in this way, I can go through several steps of things that are new, that are different and we'll continue that drive for improved margin.
So on your question about the spin and versus the return of the proceeds, the way we have designed this €1,000,000,000 of advanced proceeds, it and then taking into account all the possibility of separation, including the spin. If we would separate it, we can leverage the company as we have mentioned it. And therefore, this DKK 1,000,000,000 is taking into account the leverage we can put in the new entity and also take into account the other type of liability and including potentially, as we say, some form that we would have to reserve for the pension funds. So don't want to exclude this part because as you mentioned, it's also tax efficient way to separate, though we want to keep, as we've seen, the dual process, all the option open to maximize. And therefore, this would be still a way forward.
We have shown you the strong potential of chemicals. So we know that whatever the route we can make a value. So in the tax leakage, as I say, this route will minimize it. On the other way to sell it, we're working to indeed also try to optimize the tax. But that will be clearly one of the criteria we'll take into account to separate.
So the return indeed to the shareholder of EUR 1,000,000,000 is independent of the separation. That is something we will do and execute fully in November.
Lloyd, you have another question.
It's Martin Dunwoody from Deutsche Bank. If I can come back to acquisitions and M and A a little bit there. If we assume if I take the middle of the range that you've put on the slide, €10,000,000,000 that you get for Specialty Chemicals, your intention is obviously to return the vast majority of the proceeds. But would you be ruling out a large acquisition if the right opportunity became available? I know you said small bolt ons, but if a large acquisition was the right thing, are you ruling that out?
Or is that something you would still consider? And then secondly, again, the strong financial position you're in obviously allows you to invest in the business a bit more. You flagged that Chemicals will get a little bit more CapEx going forward. But I wonder if you can just outline the kind of guidance you would give for Paints and Coatings CapEx and maybe the Specialty Chemicals CapEx as a percentage of sales maybe going forward.
Okay. So the last question I will provide to Maeli is When it comes to the clear commitment that we make that the vast majority of proceeds will be returned to shareholders, That inherently does not provide the immediate opportunity for a very large acquisition. Now the definition of large is in the eye of the beholder, but it does restrict us. And as I said earlier, to the question I think of Paul or to yourselves, where you we will then in the case of a significant and a very large acquisition, we'll have to come back to the shareholders. But first, we want to get through this process.
We want to clearly make this a process that provides proceeds either in the form of shares or cash. We are giving an advance payment on it. We're making a clear commitment, which certainly makes certain size acquisitions not possible out of our own funds anymore. And therefore, we would have to come back to shareholders.
On the guidance for CapEx for painting and coating, I think you can consider around 3%, which is clearly below what we had in the past because we know chemical are indeed more in the range of 7% or plus with the new guidance that Chiriat lighted. And this is clearly also one of the benefit of the separation is you have 2 different business with clearly different capital allocation and different way to consider the CapEx. So we're unleashing the possibility for chemical to invest while painting, coating will have a lower CapEx.
Good. Diana?
Hi, it's Jeremy Rodenius from Bernstein. Thanks for the presentation. Basically, I think the key message here is we really have to believe in volume growth. Because I look at the costs that you've talked about and I think the message from before and again today is that you're managing costs better than cost inflation, which is very clear. And so the new information really is to me is the volume growth, the new targets.
And so that leads to a few different questions actually. So I guess looking back at the October 2015 presentation, you said we're turning the company's focus to a balance of volume and growth. So what's the key thing you're doing differently related to growth today than versus what you talked about on October 2015? Secondly, we've always talked about the operating leverage being something like 20% to 30% in the company. You've always talked about it as an average of averages.
And I calculate the incremental margins that we're talking about here are something like 35%. So I'm wondering if something's changed in your mind to give you greater operating leverage than before? And then thirdly, in Specialty Chemicals in particular, just looking back at the older presentation, I think your predecessor had growth targets between less than 1.5% to maybe greater than 3%, which is smaller than everything on the page you've got today. So I'm wondering what was misjudged or what are you seeing differently other than market recovery that leads to those higher numbers?
All right. So let me start with the first two and then Cheri can take the latter one. So when it what's different from October 2015 when we provided the financial guidance on the 2nd phase of our trajectory where we are now clearly embarking on the 3rd phase. At that point in time, markets were in a very different shape. At that point in time, we clearly saw already then that the Marine and the Oil and Gas segments were turning down.
We were seriously concerned around the situation in Latin America. Recovery in Europe had not been tangible at all at that point in time. Asia had question marks in terms of how it were going. But what we decided to do internally is to make sure that we actually, after building that DNA of operational excellence and proving that with this continuous improvement that we wanted to add an additional DNA of organic growth. And the examples I gave earlier when it came to clearly making a very granular assessment around product, markets, geographies and then assess differentiated targets to those was a very important step associated with a very clear delineation of the routes to markets that these businesses have put owners in terms of people that know that route to market well.
They then design it as a process. They then hire the right salespeople for these routes to markets. They then create the right educational programs to make it happen. And we've done that while going through these adverse market conditions in Latin America as well as marine and oil and gas and several of the others. We continue to change our sales force incentive systems and we've been working with a very simplified but very effective set of sales force incentive systems where previously we had a very large number of sales force incentive systems throughout the organization.
So all of these things created that next foundation, the foundation first we built in operational excellence, that next foundation then to have the underlying tools, systems, processes, owners and conceptual clarity when it comes to driving organic growth. And it's interesting to see that during the course of 2016, several headwinds did not make it very visible, but that visibility has clearly accelerated in the last quarters that you've seen. Decorative Faints growing 5 quarters in a row, clearly showing growth even despite the Latin American situation that you see accelerating growth in specialty chemicals when it comes to the volumes that you see despite some of the difficulties in the raw material challenges and energy challenges that were there. And the fact that Performance Coatings has been able to compensate entirely for the very significant downturn in the two negative segments is also a good signal. So these signals prove that these structural changes that we've made to drive organic growth are actually starting to bite.
So for what Specialty Chemicals are concerned maybe one correction. There is quite an amount of margin management in there versus just volume. So it's not just volume on it. Answering your question around why was it more careful in October 2015, I would have to echo what Ton was saying. I mean, the oil and gas industry was down.
There was a part of the agrochemical business that we were catering to that wasn't necessarily doing too well. There was still a high exposure to the paper industry, which has now been, as I indicated, has gone to the cardboard and tissue market, which is developing completely different. If you look at the lines, I would say to credit, and there's many credits to my predecessor who was a Class Act and left behind the Class Act business, he was actually correct. I mean, we saw the volumes only seen coming back in 2016. So his prediction was pretty much correct.
Hence, business developing the muscle on continuous improvement, cost, working capital, etcetera, which is as volumes come back as evidenced by the last three quarters, that is going to be a tailwind to deliver more of the bottom line. But it's a combination and it's in fact looking at what we can as I indicated how much we can get to our own network. So it's pretty balanced volume, margin and cost picture.
The question I did answer was a question around leverage. Nothing has fundamentally changed. Especially for decorative paints, the Q1 is generally a smaller quarter. It very much depends on where the volume growth takes place. That establishes that leverage.
But fundamentally, nothing has changed. It really depends on which geography, which segment and which factory that leverage and that's which supply chain that leverage comes on top of. And therefore, fundamentally, it's still the same. Generally spoken, of course, with Specialty Chemicals, the leverage is a bit less than it is for Paints and Coatings. And that, again, depends on which region that takes place.
But fundamentally, nothing has changed.
Lloyd?
Yes. Thank you, Thomas. One for you to begin with, the Coatings margin, the 300 basis point improvement. Now on my numbers, that closes the gap with the top best in class basically. And that's adjusting mix for mix, but maybe not geography.
So I'm just wondering the confidence you have of achieving that on performance excellence, maybe a bit of operating leverage coming through and not hard cost cutting? And then following on from that, again, a bit like Jeremy's question about this growth target, I think 4% across all divisions. You've had no volume growth in the last 10 years in the 3 businesses, Performance Deco or in the Specialty Business. I can see that there's some momentum now for the growth coming through. But obviously, a key part is the emerging markets here.
And the real operating leverage of the work you've done is something like Deco in Europe, where the growth remains pretty lackluster, I think, on your estimates. So just squaring those circles, so the margin on Coatings and also the operating leverage question really coming through.
Yes, there's 2 things. I think, yes, growth is an integral part of the plan that you're seeing today. Growth was also an integral plan part of the plan in 2012, right? And we have, I think, shown that if we actually don't see the growth to the extent that we see it coming, we have the ability to go and have a look at our cost structures. But growth is an integral part over here.
Leverage is an integral part of the plan that is there. It is not entirely true that we haven't grown over the last 10 years. We've certainly divested a number of businesses. The company is about the same size as prior to the divestments of these businesses. So therefore, that underlying growth is partially not visible because of the divestitures that have taken place.
Overall, we have seen growth. We have not had the underlying processes system simplicity that I described as an answer to Jeremy's question to drive that growth structurally. And therefore, we believe that the basis that we have right now, both in driving that growth in the front end as well as executing that growth with a very high on time delivery in full to our customer base, it is that combination. You can sell something, but you need to be able to have the underlying process to then deliver it. And in that, the DNA of the company has improved so much in the last 5 years that we have a true confidence in delivering.
Chetan Udeshi from JPMorgan. I had similar question to the ones asked. If I look at your 2015 business is actually mature below GDP growth. And now you're talking about growing faster than the market about GDP. So what has changed in like 18 months' time?
That is number one question. And on the second question is on the sustainability of the increased dividend. If I look at the free cash flow at the moment, it's €700,000,000 plusminus, including specialty chemicals. If that goes away, will you have the coverage to cover your dividends in
full? Okay. So I'll first ask Thierry to answer the differences on the market side and maybe you can describe the dividend.
Yes. So maybe I think I've answered part of the question before on that. So the plan is not just volume. It is margin. It is improvement.
It is in cost. It's a number of elements around it. What has changed is basically a number of markets have changed. What would probably be worthwhile is to walk you through the list of the end use segments because frankly that is data that comes back from our customers and what they see happening. Again, since we are in many cases the supplier or one of the 2 suppliers to big producers, they are very keen to know are we going to be able to supply them as they see their forecast.
So it's kind of a combination of what those markets are. And again, I think you should not underestimate the shift in focus from segments from before. Again, we are not predicting a 4% volume growth over the next 5 years. Although we are operating at a higher volume growth that would not be realistic. We are looking at what is the traction, the revenue growth that would come from that.
But it's probably good to go to each one. It's either legislation, it's either items that have changed. One example I could mention is the situation for high purity salt in Europe where specialty chemicals of AkzoNobel has a real strong position in there. It is a significant change in that market where frankly we have to put all hands on deck to supply even with asset light strategies to supply the amount of high quality and high purity salt that the market needs in there. So it's a shift in dynamic in some of the markets.
It's a shift in segments we look at. And I think there's a general, I would say, tailwind versus 18 months ago in some of the key segments we operate in.
And I think you've seen it as part of our guidance as well that we truly see positive developments in many of our segments and our geographical markets. And that is a clear change if you track our guidance from the time that we were in October 2015, where many of these markets were still either just in anticipation of a downturn or at least relatively lackluster in the terms of the way they were moving. But as we've shown already from our Q4 result presentation, a clear set of positive signs. Marillise, on the dividend question?
Yes. On the dividend question, as I mentioned, there's 2 things that were different. First, the fact that we will consider the different way of structure balance sheet with more leverage, and we also may consider to have a part of our pension obligation secured through a part of the separation, which will free up the pension top up partly that we're appearing today. So this with a combination of the increased guidance we have, that mean an increased cash generation will enable us to continue to distribute in the painting and coating only the same dividend as we are. And this year, as we mentioned, for overall of the company, we will have a higher leverage.
Yes. Thank you. Tim Jones from Deutsche Bank. I'm a bit surprised I'm the first person to actually mention PPG in this whole set of presentations. So I apologize to be the 1st person to bring it up.
But I have 2 sort of PPG related questions. The first is, Ton, in your eyes, is there no realistic share price offer within the current ranges PPG could make that offsets your concerns over other stakeholder issues, whether it's antitrust or workers' rights or jobs? And that is the reason why the Board refuses to engage at the moment. And the second issue on PPG is, if AXA remains independent and we go sort of 12 months down the line, does this PPG approach turn out to be a good thing for you? In that I presume in any organization the size of AXO, always going to be groups that are reluctant to change.
But this obviously gives you an opportunity really to push through those changes, which helps you accelerate the cost cutting, helps you break up the conglomerate structure. So any thoughts around that would be great. Thank you.
Thank you for the two questions. We have today been able to present the plan that we have been developing and that we have been assessing over a period of time. This plan in our eyes creates superior value. The plan also is executable along a clear time line. It is a plan that contains significantly less uncertainty and risks and does take better care of the stakeholders that we have.
In the case of PPG, we have received 2 offers. We have very clearly assessed these 2 offers. We've assessed them with our legal and our financial advisers. And we've really dissected the different parts. We've given 2 very clear responses.
And that's really where we stand today. We have a plan that we believe has superior value to any of the proposals that has been on our table. And that superior value is what we are excited about to deliver because it's not only a value matter, but also a timing, a clarity of plan, a higher level of certainty because of a complete lack of any form of regulatory approval that you would require. So from these perspectives, this is the plan that our energy is going to delivering this is what we are focused on going forward. Your second question was?
It was in relation to Since you took over as CEO,
you've been saying that there
must be some groups that are resistant to that. And does this really give you a nice final push to get it all through the stuff you've wanted to do for years ultimately?
Well, overall, I think what you've seen since 2012 and I have received that feedback from shareholders that they do seem to notice a clear change of culture, a clear change of urgency, a clear change of incremental steps in profitability improvement, a clear change of how to run things, a clear change in coherence in the organization and the culture that people are driving. So we've actually been able and part of that was by, of course, also changing some of the people that you indicate may have been hesitant pre-twenty 12. But overall, there's been a significant change of culture already taking place. That sense of urgency has been there. But what of course has been clear is that there's 3 phases in the way we've worked.
And the market sometimes supports you in a phase and sometimes it doesn't support you in a phase and then you keep adapting to what's happening overall. But what I really want to emphasize is that the sense of urgency is high. People want to deliver this plan. They're excited about this plan. We as a management team are excited about this plan.
And when I walk through the various buildings and facilities that I've walked through in the last number of weeks, the amount of energy is actually incredibly high. So do not worry about the sense of urgency. It is truly high today.
And if I may add, as a newcomer to the company, I think the alignment was there. I think we just talk about it more now.
Yes. Okay. Good. Diana, you have a next
Hi. Good morning. Thank you for the presentation. You talk a lot about the margin goal before the corporate costs, but the fact is that corporate expenses are a cash drain on the business. You're losing potentially €1,000,000,000 of EBITDA.
And along with that, you're shedding about €50,000,000 of central costs, which still leaves you with €200,000,000 of central cost for the remaining 2 smaller businesses. Do you feel like that sort of that level of corporate expense is necessary to run a business that's now smaller? That's my first question. And the second one is, I think your point about the broker estimates for the chemical business between €8,000,000,000 and €12,000,000,000 If you discovered in 6 months' time that actually you could only get €6,000,000,000 to 8 €1,000,000,000 for example, would you still sell the business? Or would you prefer to keep it and wait until such date that you could get the price you wanted?
Thank you.
Yes, indeed. To make sure that all of you could actually compare our different guidances that we've provided in the past with each other as opposed to having a different jolting of guidance with different definition. It's the reason why we provided the guidance going forward. To incorporate the support functions and corporate costs, we've always kind of we've also created what I would call a slightly artificial number, which is when you have that corporate cost included into the AkzoNobel organization as it is today even for 2020. That shows you that 300 basis point improvements.
So we're trying to be very transparent in saying this is how we've done it so far so you can compare it. And this is what it would be if you include these costs there. We believe that if we take €50,000,000 costs out of these corporate structures and in case and that depends on the separation option, you would then split it between the two businesses that that is an efficient way of running these businesses, but we will continue to drive efficiency going forward. Then in terms of the separation option, I don't know, Melissa, if you want to provide an option, we will update you while we go along. That is an effect of having pulled forward slightly the decision on the separation of Specialty Chemicals.
And I guess you will get very regular updates with communication points that have been set. But our commitment is to the separation of specialty chemicals and to actually provide the vast proceeds, the net proceeds back to shareholders. I don't know if you want to add
So coming back on your comment about the market and the Gouton, I think we clearly show you that we are at a moment where Kimiko have really worked on its portfolio on its potential. And you really have a clear strategy forward where we're thinking the timing is right. Though in term indeed of the separation we are running internally to be ready within this 12 months. We do also think right now that having the dual track to have all the option open will enable us to act when we can depending on the market. And that's why we want to run this dual track process till the end to ensure we both keep tension in the process and we maximize also the chance to best value this business.
Lloyd, do you have the next question? Sorry.
Thanks. Christian Faitz from Kepler Cheuvreux. Three questions, if I may. First of all, Maelis, you already mentioned that you might think about other pension plan options. But status quo, if you did split the companies to a coatings company and a specialty chemical company, would the assumption be correct that looking at your historical acquisitions that most of the pension obligations would actually stay with the coatings business Paints and Coatings business?
Then, Tom, you mentioned in your early part of the presentation that you would split the Paints and Coatings business into 3 different segments. Can you elucidate which 3 different segments that would be, Deco plus to others, I would believe? And then a third question, looking 10 years down the road, let's assume you lived in a PPG free world going forward. I see the Deco and Coatings business as having 2 bigger gaps. 1 is the North American Deco exposure.
I believe you sold that business to a company which slipped my mind. And then second of all, automotive OEM, where you have no exposure. Other automotive OEM companies are claiming that refinish and automotive OEM actually fit quite nicely together. So any plans on that looking at your longer term strategy? Thanks.
Okay. So for your first question, indeed, the majority of our pension liability in the UK are linked to the paint and coating. And that's why also I mentioned clearly that through the separation, we may elect to have a part to dedicate to the pension obligation to ensure that the paint and coating indeed have less burden in the future. And that will be part under consideration when we'll separate the business.
When I tackle your last question, when it comes to our positions, we have in the last years, especially in the start of the period around 2012, said we want to put our money in those places where we are absolutely leading. And you've seen the leading market positions in the slides that I've presented. And therefore, you see that, yes, we have taken, for example, a conscious choice in 2012 to say we are not leading in the U. S. We can actually we need to spend significant money to become leading.
Therefore, why don't we take that money and put it in those places where we can build the distribution networks, where we can build the technologies for those people. So these were conscious choices. And I do believe that if a company like us would step back either into the U. S. Or into an automotive business, we would only do so when it would we provided a strong strategic position and not just a partial position.
We are a very successful player in the vehicle refinish business, which proves that you can be a premium player, a positive player in that business without being in the OEM business. But we would not embark on going into a half position in some of these very relevant markets. That is exactly what we decided not to do in 2012. Your second question, can you quickly repeat? Okay.
What of course, what we said is that we're going to create 3 more even organizational units. They're going to be more market facing groups. We are going to be able to coordinate digital innovation, supply chains and other aspects more as a company overall. We want to have the discussions with the workers' councils first before we would actually give the entire clarity. We will update you while we go.
Yes?
Thank you, Alan, for the invitation to the Capital Markets Day. It's It's Victor Slavenski from Elliott Advisors here. So as you know, we became shareholders in AXA Nobel on the belief that significant value could be created by the separation of the Specialty Chemical business. So we appreciate the additional detail and information that you provided us with today. But what we, as owners of the business, hoped to hear today was a comprehensive and objective evaluation of the stand alone strategy that Axo has alongside a comparison of the potential alternative with a transaction with PPG.
And we didn't get that. And we think that the Board of AXA is really failing in their corporate governance duties to present to shareholders an objective and fair evaluation of the 2 strategies. So that let us basically that forced us to call the EGM to remove the Chairman of the company. And we would have hoped that by doing that, you would take your corporate governance duty seriously and present today an objective and fair evaluation of the 2 options rather than just focusing on one of these options. When we convened the AGM, I think the comment you made publicly was that, and let me quote here, the proposed agenda item to remove Mr.
Bergman's will be rejected. And frankly, we don't know what that means. And I think I've seen 4 different interpretations in the Dutch media of what that means. So maybe today, in this public forum, you could clarify what you meant by that. And also, as you know, under Dutch law, shareholders holding in excess of 10% of the capital of the company can actually have an EGM convened with such an agenda item.
So perhaps you could explain on what basis AXA claims to have the right to reject that. We would really appreciate some clarity on this point.
Let me start about what today is truly about. Today is truly about our plan of generating value going forward. We have asked you to have us present it today. We're very happy that there is so much interest of people coming here. It is our conviction that the plan today is a plan that creates superior value with significantly lower risks and a very clear timing associated with it.
What we intend to do going forward is to continue to reach out to our shareholders as we've done in the last weeks, months years and have the discussion around the questions that people may have, the clarity that they ask and then of course listen as we've done very carefully. And I believe you do recognize a number of issues that shareholders in their interactions with us have said in today's presentation and then clearly provide answers to questions that people have and provide input on those questions. That is what today is about. That is what our focus is. And we do believe strongly that this is the better plan for Oxonobel, that this is the plan that has a higher value creation, as I mentioned, with a clearer timing aspect attached to it, with less regulatory or other risks.
And this is a conviction that we have quite strongly. When it comes to your question on governance, I think we've been in communications on the governance side of things, where the Supervisory Board fully support Mr. Berthmans. They are strongly supporting him based on his experience. They have unanimously decided, together with the Board of Management, to the approach that we have taken.
So this unanimous decision is part of what we've communicated to the market transparently. We received 2 proposals. These two proposals, we have deemed after very detailed analysis to be inadequate. On the governance side of things, I guess the articles of association and the Dutch law and the potential statues of AkzoNobel are very clear on it. And the Supervisory Board is doing nothing else than following their fiduciary duty in making their decisions.
Andrew Stock from UBS. I've got a couple. The first is antitrust. You've mentioned antitrust. You mentioned it before today in many of the press conferences and public comments, but you haven't tackled it head on.
I just wondered if you could share some maths around the potential, perhaps, value dilution that PPG's equity offer, which ultimately is part of the offer, how that impacts the mathematics. So I'm wondering why you haven't tackled that head on and if you can do that. And the second one is the disposal process. So you have ruled out one thing, which is to sell chemicals in parts.
In a multitude of parts.
In a multitude of parts. So is that a specific set of reasons, maybe physical separation of assets? Or is it an implied message on the interest you have in the asset as a whole?
Okay. Let me answer the 2 parts. You want to answer the second question? Or one of you wants to answer and add to it? Overall, we are 2 leaders in the industry.
We lead in many of the geographies. We meet, and that means in the form of competing virtually every day, every hour when it comes to running this business. As you've seen, we are a number 1 in many of our places. And those places where we're not, we're mostly a number 2 or a number 3. And we do see them as a co leader in many of these industries.
And we believe that this will result in certain discussions. This will result in potential divestitures. It will certainly result in a requirement of time that is unclear in the way it would happen. It is not for us to provide details numbers that you may be asking for, but it should be clear that this is not a trivial topic. It is a relevant topic that will determine an insecure time line.
It will also be determined by an outcome that cannot be predetermined. And this is one of the reasons why we've mentioned it as a relevant aspect of the evaluation of the proposal. Melies, in terms of the separation?
Yes. So on the separation, I would say, which one thing is clear is indeed to separate Specialty Chemicals from Print and Coating. This is, as we say, relatively easy in terms of operation because they are 2 separate business. But if we look at Kimco as a whole, indeed, there, if you start to really looking at putting in part, there you have a lot of entertainment between the business. Thierry has shown you the different platform.
They are clearly supplier interaction, procurement that are linked, the way we operate all these plants, even the physical location. And that's why we had Study and as we say, we have been working on this project for a while. So we clearly have a set that will not create benefit. And last but not least, as you say, we also see that there is a potential on the market and mark of interest we have for the business overall. So we do clearly believe that selling in multiple will not be a way that will create the most value.
But we will continue, as we say, to the assess in parallel all the other way to make sure we get it the best way we can.
All right. I see a signal over here. One last question there from the back of the room.
That's Laurent Favre from Evercore ISI. Two questions, if I can. Quick ones. The first one, can you talk about the flex that you may have to get to the margin target for 2020 if the 4% volume growth doesn't come through? I end up with the same number as Jeremy on operating leverage at 35% versus 20% to 30% that you've talked about in the past.
And the second one on antitrust and uncertainties on the PPG side. Can you talk about the uncertainties that an appropriate breakup fee couldn't tackle? Thank you.
So when it comes to the leverage, as Jeremy already said, we always talked about this kind of the 25 plus ish percent as an average of averages, an average between specialty chemicals and paints and coatings, an average between what is happening in Asia and when we have to reinvest to increase capacity, shift or maybe even 2 extra shifts. So in the individual businesses, those leverages are slightly different. Especially if there is small growth in the mature areas, the leverage is quite high. When the leverage now is taking place on an asset base that we've built in Asia that actually has an ability to accommodate additional volume, The leverage is also becoming quite healthy. So these would all kind of confirm the things that you've made.
That's certainly on the chemical side. You generally need to invest significantly, which generally kind of throttles the leverage a little bit. Whereas on the paints and coatings side, we do have the capacity in place because the manufacturing facilities are less determined by sweating the assets, but by being close enough to the customer with a product that doesn't travel so far. So that's part of the leverage question overall. And again, we have raised on your second question the antitrust issue because of the clear time line difficulty, the actual unclarity of what the outcome would be.
And of course, what people sometimes underestimate is the actual impact it has on the operations when these things are actually taking place in terms of our customers responding, our talent and our employees responding, our suppliers responding to a situation like that. And money doesn't do all the answering on that. It is something that we've looked at in detail. And we believe that having these 2 true leaders in the market, we're talking about the 2 out of the top 3 players out there that you can expect significant issues in the discussions affecting both timeline as well as outcome. Good.
With that, I thank you very, very much for all of the questions, for listening to the presentation. We look forward to future discussions that will undoubtedly happen in the near weeks months. And we really as an organization are committed to delivering what we've told you today. Thank you very much.