Akzo Nobel N.V. (AKZA) Earnings Call Transcript & Summary

Ladies and gentlemen, I here by open this Annual General Meeting of shareholders. I'd like to extend a warm welcome to all of you participating virtually. Same as last year and considering that we still find ourselves in the midst of a pandemic, it was decided to hold this AGM virtually in order to comply with the government restrictions. I hope everybody listening to the AGM is safe and home and in good health. To ensure as much interaction as possible, Akzo Nobel offered the possibility to shareholders to submit questions regarding the agenda items prior to the start of this meeting. Our aim is to answer most of these meeting -- or questions during this meeting. Questions that we received in advance that will not be answered in the meeting because they were not relevant for the agenda. Items will have been answered on our website. In addition, questions may be submitted at any time during the meeting, using the chat box on the online routing platform. The meeting will be held in English. Also participating in this meeting are the members of the Supervisory Board, Ms. Sue Clark; Mr. Byron Grote; Mr. Michiel Jaski, Dr. Pamela Kirby; Mrs. Jolanda Poots-Bijl; Mr. Dick Sluimers and Mr. Patrick Thomas. Dick, who is Chairman of the Remuneration Committee, will act as the alternate chairman should my connection get -- against expectations get interrupted. Also present at the meeting is Mr. Thierry Vanlancker, our CEO; Mr. Maarten de Vries, our CFO; and Isabelle Deschamps, our Corporate Legal Counsel and Corporate Secretary, are also here. Furthermore, Bart Jan Kuck as a substitute designated by René Clumpkens, Civil Law notary, and acting as the independent proxy holder; and Mr. Fernand Izeboud, representing our external auditor, PWC, are attending the virtual AGM. Before we start, I would like to recap certain events that took place last year. 2020 was a year of challenges for the world and for the company due to the global pandemic. Safety of employees have been -- remained our top priority. And sadly, like most other companies, we have lost some of our employees to COVID-19 and our not only today, but during the year, has gone to their families and the loved ones. During 2020 and given the uncertainty of the COVID-19 pandemic, Akzo Nobel received limited government support in certain countries. I'd like to inform you that we are in process of repaying the government followed received in the U.K., and we did not submit any application under the NOE regulation in the Netherlands. The Supervisory Board has been impressed by the way Akzo Nobel and its employees have responded and how the organization has been able to generate positive momentum and to deliver on our winning together 15 by 20 ambition despite facing really considerable hurdles. Both the management team and employees to serve see compliments and thanks. It was very encouraging to see everybody's sense and pride in Akzo Nobel. As the organization rose to the arteries and continue to take important and significant stride forwards in the market at the same time as employee engagement was increasing. This remained our key focus with a clear ambition to become top quartile in both. Having restored competitiveness and strengthened profitability, Akzo Nobel is now ready for the next stage of its journey. Represented by the grow and delivery strategy that we presented at the beginning of 2020. During 2020, management has demonstrated that they can balance delivering short-term results with achieving long-term sustainability. The ability to address today's challenges while driving the changes necessary to thrive, tomorrow, will prove vital and the Supervisory Board is looking very much forward to the next chapter and being part of this very, very exciting journey. Before we continue Isabelle Deschamps, secretary of the meeting, will now explain the voting procedure. So we all know what to do during the meeting. Isabelle, over to you. Isabelle, you're on mute.

I think I'm no longer on us. Thank you, Nils. You may cast your votes on all voting items during the entire meeting. The voting has been opened since the very start of this meeting. The Chairman will clearly indicate when the voting will be closed after the last voting item and provide you with some time to check if you submitted all your votes. The slide now on your screen shows the instruction for navigating to the webcast, to the chat box and to the voting. After selecting the voting selection you can select for, against or we held for each of the agenda items. You can change your votes throughout the meeting until the Chairman closes the votes. Please submit your votes on all voting items, for further information on the virtual voting, I refer you to the manual, which is published on our website. Shareholders were also given the opportunity to vote remotely via the ABN AMRO website. Bart Jan Kuck, as a substitute designated by René Clumpkens, Civil Law Notary will cast the votes as the proxy and independent proxy third-party for the participating shareholders. For this meeting, March 25, 2021 was set as the record date. Anyone owning shares on that date was entitled to register to attend, to vote and participate in this meeting. Please be informed that the voting results of voting items will be announced at the end of the meeting, showing the number of votes and the percentages on the screen. The voting results will also be published on our website after the meeting. The notice and agenda were published on the Akzo Nobel website. The meeting has been properly convened to be held virtually in accordance with the provision of the temporary law COVID-19, justice and safety and is entitled to adopt legally valid resolutions on the agenda items. Thank you, and now back to you, Nils.

Thank you, Isabelle. The virtual registration of shareholders closed at 2:00 p.m., a share capital of approximately a EUR 71.2 million is represented. So that is approximately 142 million votes, and the level of attendance is approximately 75.8%. And you'll see the numbers on the slide. We'll now proceed with item 2 on the agenda. The report of the Board of Management for the financial year in 2020. You have been able to read and review the annual report for 2020, which was published on March 10, 2021, but for giving a little bit of flavor and color to it all, I'll now hand over to our CEO, Thierry Vanlancker, to discuss the company's performance during 2020. Thierry, over to you.

Thank you very much, Nils. And also from my side, a very warm welcome to all the participants. Let me indeed walk you through what happened in 2020. As 2020 began, we were all set for accelerating towards our winning together 15 by 20 ambition. However, like for so many other companies, it wasn't long before we too encountered unprecedented challenges due to the COVID-19 pandemic. We focused on ensuring employee health and safety, first of all, and then also to maintain, of course, business continuity. Various steps taken to continue serving customers and rapidly reduced cost while keeping the organization intact proved successful. Despite the odds somewhat being stacked against us, I am very proud of the organization to say that we delivered our 15 by 20 promise and achieved a really significant step change in the performance of the company. Return on sales, excluding unallocated costs for the full year of 2020 was 15%, exactly in line with our ambition set in 2017. And return on investment, excluding unallocated cost, was up at 20.6%, exceeding our 2020 ambition. Needless to say, we think this is a truly significant milestone for the company after 4 years of hard work from the whole Akzo Nobel team globally. And what's even more exciting is that we are only halfway in our journey of transformation. Our new grow-and-deliver strategy builds on what we have already achieved. And will truly reclaim Akzo Nobel's place as the reference in our industry. The next slide shows and puts in perspective what we have delivered not only have we delivered on our underlying ambitions, but we're really up there now with the leading peers when it comes to margin performance. This chart compares Akzo Nobel's performance on return on sales and return on investment from a period from 2016 and 2020, with the top 3 best performers of our industry over that period in paints and coatings. As you can see, we have now closed the gap both in terms of return on sales as well as return on investment, and we are truly well on our way to become a reference in our industry. So a genuine big and sincere thank you goes out to the whole organization whose dedicated efforts around the world have helped to get Akzo Nobel in good shape as it is today. And even to a really remarkable headwind filled here as 2020. On the next chart, you will see that the operational progress also has been reflected in our share price. We've delivered significant shareholder value since 2017 despite a global pandemic, and we will continue to build on these strong foundations going forward. In addition, we're very encouraged by the more recent progress in our share value, and we believe that the best is yet to come. But with that, I would like now to show you some highlights of 2020, an unprecedented year with highs and lows for our company and the world by sharing this short video. [Presentation]

As you all know, 20 was supposed to be the year, the final step where Akzonobel was going to deliver on winning together 15 by 20. But only weeks within that year, we were confronted with COVID-19 and the unprecedented social and economic impact that rolled throughout the whole year. It is therefore with great pride and great satisfaction to see how our organization focused, pulled through and delivered on the significant milestone for our company we did deliver on winning together 15 by 20. Throughout the year, our own people and our customers remained the key priorities. We had to reset our key objectives and really focus on what was important to deliver on. We changed the way we worked, agile, digital, being in the office, all sorts of supply chain issues we had to resolve. And even went so far as to suspend part of our transformation and to really suspend our financial ambitions for the year. It is through that focus and our own organization's determination that we came through and we weathered the storm much better than others. It is, therefore, the great pride on what we achieved because not only did we deliver on a very ambitious goal of 15 by 20, but we also came out as being a leaner, much more high-performing paints and coatings company. From where we were at the beginning of the journey, we can now truly say that we are pushing our way to be the leader and a front-runner in our industry. And in 2020, we were able to deliver on some really nice bolt-on acquisitions, 3 acquisitions that really strengthen each of our segments. We also continued to really capture the mind space around innovation Paint the Future continues to be an excellent tool to build the ecosystem of start ups, academia to really make us the front-runner on innovation in our industry. We're now in a great spot to really go on to the next 3 years of our journey, grow and deliver. We want to outperform competition in the markets that we operate in, and we want to continue to grow our bottom line. In fact, we said we want to grow our bottom line by 0.5 percentage point each year. And in that way, we will truly become in all metrics, the front-runner in our industry. It goes to show that even a 200-year old company can continue to evolve. It's captured in a new company purpose, pioneering a world of possibilities to bring services to life. We even revamped really deeply ingrained core value of the company, sustainability. We call it People, Planet, Paint. It's really stressing the action, not to talk on where we are good at and where we can even further lead the industry. So we're really ready to go for the next step and truly keep building our company.

Hopefully, you've enjoyed a brief video review of 2020. Let's now turn to some key financials for the last year, as shown on this slide. Our exceptional results for 2020, delivering on our 15 by 20 promises, was really driven by strong focus on costs and cash. Adjusted operating income was up 11% and adjusted earnings per share from continuing operations increased 25% to EUR 3.88 free cash flow, excluding pension top-ups, was 114% higher. We conducted share repurchases of EUR 545 million during 2020, and we have announced a further EUR 1 billion share buyback to be completed in -- by the first quarter of 2022. We also announced several acquisitions in 2020, including Stars Performance Powder Coatings, Titan Paint in Spain and New Nautical coatings. Our 15 by 20 strategy has created a very strong foundation for us and a positive momentum for the next phase of our strategy, grow and deliver. A disciplined approach to margin management has become part of who we are as a company. For example, gross margin was up 170 basis points for 2020. We continue to invest in innovation with regional versions of our industry-leading paint in the future challenge taking place in Brazil last year and recently launched in China. During the year, we continued to implement our global business services, with 80% of total finance transitions now completed despite all the COVID headwinds. Our ERP integration is also steadily moving forward with around 90% of our revenue in SAP applications and 65% of our revenue within our final one ERP solution by the end of 2020. We also delivered significant cost savings with EUR 243 million of total cost savings for the full year, of which EUR 115 million were structural savings related to our transformation initiatives. We continue to strive for a high-performance culture, and in the second half of 2020, we achieved our highest engagement scores from employees since 2017 when we started measuring our OHI, our Organizational Health Index. I'm also happy to welcome our newly appointed Chief Commercial Officer for Performance Coatings, [indiscernible] as of the middle of this year. When it comes to sustainability, Akzo Nobel is widely recognized as #1 in the paints and coatings industry. And our People, Planet, Paint approach to sustainable business should ensure that we continue to proudly lead the way. In line with our policy of paying stable to rising dividends, we have proposed a final dividend of EUR 1.52 per share. This will result in a total dividend for 2020, up 2.6% at EUR 1.95 per share. As mentioned earlier, adjusted earnings per share from continuing items was 25% higher at EUR 3.88 for the full year. As you've noticed, we also continue our modular approach to share buybacks. We completed a 500 million share buyback program in the first half of 2020 and completed a further EUR 300 million program earlier this month. And in addition, we recently announced a further 1 billion share buyback to be completed in the first quarter of 2022. As we have shown during 2020 and summarized today, we're delivering on our commitments. We continue investing for growth, paying stable to rising dividends, conducting value-creating acquisitions and carrying out share buybacks. One can say that we're truly firing on all cylinders. Executing with discipline has been key to our transformation. This is working well for us, and it is increasingly part of who we are. What is truly exciting is that we are literally only halfway on our journey for the transformation. Our new grow-and-deliver strategy as announced in February of last year represents this second stage of our journey, building on the strong foundations and positive momentum from 15 by 20 to double the profit from Akzo Nobel and reclaim our place as a reference in our industry. Going forward, we'll balance growth and profitability improvement. We target to grow at least in line with our relevant markets and deliver an average of 50 basis points increase in return on sales each year. And above it, sustainability remains poor and even a vital element to our new strategy, as shown on the next slide. Our ambitious targets as part of our newly branded People, Planet, Paint approach to sustainability, will ensure that we remain the reference in our industry. We target at least 30% female executives by 2025 and a top quartile engagement score. As discussed before, we monitor our culture closely to our organizational health index and saw an increase of 11 percentage points since 2018 in our OHI score. Our broader Management Team of about 300 people actually already scores in that top decile, and we're striving to keep improving by following up in key attention areas to reach our target score. Our efforts in this field are recognized by 2021 Top Employer Awards in many of the key countries where we operate in, such as the U.K., China, Brazil, the United States and the Netherlands. As announced last year, we're moving towards 0 waste as a company and aim to cut our carbon emissions in half by 2030. We'll do this by saving energy and using 100% renewable electricity. We also aim to generate more than 50% of our revenue from sustainable solutions by 2030. Our strong performance in the field of sustainability continues luckily to be recognized also externally. For example, we've received the highest MSCI rating possible, AAA, for 5 consecutive years now. We were also rewarded a platinum rating by EcoVadis for corporate social responsibility and sustainable procurement. So we can claim that here, we were, and we continue to be truly the reference in our industry. As a concluding remark, our results for the first quarter of 2021, as published yesterday, should be a nice proof point to show that we've made a good start to the year. Although 2021 also looks like it will not be an easy ride, with raw material costs inflation expected throughout the industry, especially in the second and the third quarter. However, I'm proud of the strong foundation that we have laid and continue to build on our strong positions in our high-performance culture. And with that, Nils, I gladly hand it back to you.

Thank you, Thierry. A great presentation, and we'll now answer the questions that are related to the -- the annual report of the company. In case we have any, but I think we have. Isabelle, could you please take us through the questions received?

Yes, We had received some questions from Eumedion and from Federated Hermes International. And here they are. When it comes to sustainability and People, Planet and Paint approach and related ambition, Mr. Vanlancker is asked to reflect on the people component as 2 ambitions originally set for 2020 organizational health score to be in the top quartile and 25% female executives were not achieved. Eumedion further notes that in terms of the planet ambition and climate, Akzo Nobel has set the target of a 50% reduction in greenhouse gas emission scope 1 and 2 by 2030. They would like to know whether Akzo Nobel considers setting a scope 3 emission reduction target and to show leadership by enabling shareholders to cast an advisory vote on the climate transition plan at the next annual meeting, following the example of Royal Dutch Shell and Unilever. The last question is from Eumedion on this agenda point, and it concerns the Paris agreement. Eumedion would like to know how Akzo Nobel ensures that its lobbying activities and those of trade association, Akzo Nobel is a member of, are aligned with the Paris agreement. They would also like to know how the transparency on internal processes and procedures to ensure search alignment of direct and indirect climate lobbying activities will be increased. And if there are any examples of action taken to address any misalignment when identified. Here are the questions and back to you, Nils.

Well, thank you very much. I think these were very relevant questions, very important areas. Thierry, would you care to give an answer to it?

Very much, Nils, and indeed, very relevant questions for what's on our mind in the company. And thanks to Eumedion and Hermes for submitting these questions. As I just indicated, we really truly monitor our culture very closely to the organizational health index. We actually saw an increase of 11 percentage points since 2018 in our OHI score from 58 to 69. And our management team scores on the top decile, as I indicated. And this is, in fact, pretty impressive if you think about the heavy structure and everything that happened, the structural changes we had to make over that period. I can assure you that we are striving to keep improving by following up in key attention areas and targets at the top quartile score. And in fact, the quarter score is just above the 70. So we're extremely close to get in the top quartile for this total organization. Regarding the percentage of female executives, we target more than 30% female executives by 2025. We achieved a 3 percentage point increase in 2020 up at 21% versus 18% in 2019. And in fact, internally, we have taken further steps to ensure that we keep improving towards that target. We now have a very well-organized program in place to further boost the senior female leadership pipeline through both recruitment and succession planning. And we introduced an action plan for all the business units and functional management teams by launching different development options for women with leadership position. Regarding our planet ambitions, we have indeed set very ambitious targets, so we believe for carbon emission reductions when it comes to our own operations. Our 2030 ambitions are to reduce carbon emissions by 50%, 5-0, and move towards 0 waste to the company. We are also taking numerous steps to reduce our scope 3 emissions, both upstream and downstream. For example, our sustainable solutions can help our customers to reduce carbon emissions and open up business opportunities. As we prefer to focus on the things that are within our own control, we have set very ambitious quantified targets for scope 1 and scope 2. As a final remark on putting these plans to a vote, we consider sustainability targets integral to our overall company strategy, which is not subject to approval at AGM either. To the last point on lobbying activities, Akzo Nobel has a tradition of supporting and speaking out on climate action, and we have voiced strongly, I believe, our support for the Paris Climate agreement as well as the importance of a green recovery and making the success of the green deal. For example, through our participation in the recently founded CEO alliance. From that perspective, we at Akzo Nobel reviewed the positions of these associations, we are a member of. We ensure alignment via our internal stakeholder management process. And in case you would have examples of association where Akzo Nobel is a member that we take positions that would be disappointing to Eumedion or Hermes or positions that are against climate action, we hope you will bring that to our attention soonest. Back to you, Nils.

Yes. Thank you very much, Thierry. Isabelle, can we have the next round of questions?

Yes, we have more questions, and this comes from VBDO. VBDO notes that Akzo Nobel has communicated its commitment towards maintaining biodiversity. In line with Akzo Nobel's, recent actions on this issue, VBDO would expect Akzo Nobel for more comprehensively on progress towards its commitment -- and its commitment. In the coming years, can Akzo Nobel commit to report on the most salient biodiversity risk, the company's and report on its progress with regards to mitigating these risks, both in its own operations, in the supply chain and from the use of its products. Akzo Nobel has a range of products branded as sustainable solutions, which have benefit -- have a benefit in at least 1 of the 6 sustainability categories, identified by Akzo Nobel. Can Akzo Nobel provide more insight into the sustainability criteria in 2021, such as the minimum requirements of these products and the total breakdown of the products into the different sustainability categories. VBDO complements Akzo Nobel with accelerating its supplier ESG program in 2020. And notes that Akzo Nobel currently assessed 75% of its suppliers. However, 32% of evaluated suppliers do not meet Akzo Nobel's requirements. VBDO recognizes that Akzonobel engages with suppliers in order to have suppliers increase their score. Can Akzo Nobel report year-on-year on the number of suppliers that have improved their sustainable performance or at risk of -- or at risk of underperforming and with whom the relationship was ended for ESG considerations. VBDO also complements Akzo Nobel with the many diversity initiatives it has implemented, such as the executive sponsors of diversity networks, the unconscious buyers training and the policies to reduce buyers in recruitment and in promotion. VBDO is very curious to hear from Akzo Nobel whether and how these policies have affected the diversity and inclusion of the company. When can stakeholders expect Akzo Nobel to publish the results of the D&I efforts and can VBDO expect Akzo Nobel to start reporting on inclusion results, for example, through an inclusion index in upcoming annual reports. These are the questions and back to, Nils.

Well, thank you very much, Isabelle. And I think these questions are also best answered by our CEO. Thierry, over to you.

Thank you, of course, well, thank you very much, and thanks to VBDO for raising these items. After divesting our specialty chemicals business, biodiversity is no longer considered a material priority to Akzo Nobel's operations. The most important aspect of -- regarding biodiversity for Akzo Nobel today, and biodiversity and ecosystems is really focused on paints and coatings, and that means water use. And that is the clear explanation why we have set our ambition on 100% of our most water intensive sites reusing water by 2030. We also endorsed the UN's CEO water mandate and assessed the water-related risks at our manufacturing sites. In reply to the second item, we aim grow our sustainable solutions from around 40% of our revenue in 2020 to over 50% by 2030. The definition of sustainable solutions for us are those products that bring sustainability benefits comparing to mainstream solutions while not having any negative sustainability characteristics. In our sustainable product portfolio assessment, we used 6 criteria for this categorization, ranging from reduced carbon to recycled material use, et cetera, as described in our annual report. By using these criteria in communications to our customers, it helps them to achieve their own sustainability ambitions when buying products from Akzo Nobel. Regarding the question raised on our supplier ESG program, we've continued to assess and improve our supplier sustainability practices using programs provided by -- together for sustainability. Over the past years, we both -- both extended the scope of this program by lowering the spend threshold and including country and industry risks. In fact, most of our developmental suppliers are small or medium-sized companies based in risk regions. They typically require multiple assessments from our teams to reach the target score. We will continue to report on the supplies in our sustainability program. And together with EcoVadis, that gave us a platinum rating industry spend, we organize trainings to help suppliers improve. Finally, thank you for your question around diversity, which is really key to Akzo Nobel's People, Planet, Paint strategy. Indeed, as you indicated, we have rolled out several initiatives in 2020 to support the diversity and inclusion in the company such as indeed, as you mentioned, an unconscious bias training, an inclusive leadership guide and the launch of internal diversity networks, such as true colors and the women inspired network. We regularly run surveys within the different networks to see how we can improve going forward. So it is a key determination from my whole management team to really make big steps in this area. Back to you, Nils.

Thank you, Thierry. I think it's great that the company continue having a lot of focus on these areas because they are really, really important going forward. And both the investor community as well as our customers placing more and more emphasis on these things. We have more questions. Isabelle, can we the next round?

Yes. We have more questions at this time from European investors VEB. We have recently -- we have received a couple of questions on -- from VEB on the demand and pricing. So positive developments in decorative paints and within Performance Coatings in the powder and industrial segments, were mentioned at the full year 2020 results. VEB was wondering what this means for the positive pricing momentum and requests the Board of Management to share price/mix expectation going forward as well as to elaborate on which segments prove more difficult when it comes to pricing. The second question, which is around capital expenditures. VEB notes a gradual increase, both in absolute terms as well as in percentage of revenue over the past years. VEB asked whether Akzo Nobel foresees CapEx and as a percentage of revenue to remain around the 2020 levels. And finally, the final question relates to ROS, which was higher for decorative paints than Performance Coatings in 2020 and whether this is a fundamental change or a one-off? Back to you, Nils or Thierry.

Maybe, Nils, I'll take that question directly. Thanks to the VEB for -- indeed, we continue our strong focus on margin management, we were already planning to deliver 1% to 2% revenue from price increase in 2021, especially relevant for decorative paints and some other segments, such as vehicle refinish. Since then, we've taken into account our latest view of the raw material cost inflation and updated -- upgraded our pricing initiatives, as we've indicated yesterday during our first quarter announcements. Strong pricing power was demonstrated in that report yesterday as we published it for the first quarter. Q1 pricing was up already 2% overall, with a 4% higher prices for decorative paints and 1% for Performance Coatings, although price/mix, specifically given the growth of Asia was offsetting that in the mix to some extent. This is also a necessity given the inflation we see in our raw material costs. So this will -- the numbers that keep increasing our pricing numbers, percentages will keep increasing through the year. Regarding capital expenditures, as you may know, that the paints and coatings industry is not the most capital investment intensive given to its inherent batch process nature. Our spend tends to -- for the whole company in capital CapEx around EUR 250 million a year. This year, we will slightly be higher, but this will be in the tens of millions higher than what I just said. As we are both investing for growth, we are integrating our asset footprint, which also brings some transitional cost or capital investment with it. And we're, at the same time, upgrading significantly our ERP landscape. On your final point on the question on the return on sales, there is really no reason why decorative paints and Performance Coatings should be structurally different in terms of margin performance. That may have been the case in the past, but I think we've proven that, that is -- that we can definitely manage the businesses to equally ambitious target. Back to you, Nils.

Thank you, Thierry. Isabelle, did we receive any further questions under this item?

No, and we didn't receive any more questions on this item.

Thank you very much. And with that, we can go on to agenda item 3. And agenda Item 3A concerns the adoption of the 2020 financial statements of the company. Isabelle, I understand that we did receive some questions directly for our external auditor, PWC. Could you be kind enough to read out those questions?

Yes, absolutely. So we have questions from the VEB. And VEB refers to one of the key audit matters, transformation to deliver towards the winning together 15 by 20 strategy. And notes that the risk of management override of control was partially mitigated by suspending the ROS financial target. Why would the risk of override of controls have been mitigated while at the same time, remuneration targets were left unchanged. VEB further requests PWC to elaborate on the audit procedures perform regarding the design and the implementation of internal controls, aimed at mitigating fraud risk and the risk of management override control, in particular. And then now it's back to you, Nils.

Well, thank you very much. And we have, as I said at the beginning, representing our external auditor, PWC, Fernand Izeboud present. And Fernand, would you be kind of not to give an answer to these questions?

Yes, sure. Thank you, Nils, and good afternoon, ladies and gentlemen. So my name is Fernand Izeboud of Pricewaterhousecoopers. And I'm very happy to present our independent auditor's report on the 2020 financial statements. Thank you for the questions that were asked by you in advance of the meeting, and I will address them as part of my overall comments, and then I will take further questions thereafter. So on February 16, we issued 2 reports. One on the financial statements and one on nonfinancial indicators in the sustainability statements. And you can find them in the annual report on pages 132 to 139. I've signed these reports on behalf of PWC with my personal name, and this is to emphasize that I feel personally responsible to the users of our report to deliver a quality audit. Both reports are unqualified, and that means that, in our opinion, the financial statements are not materially misstated, and we have not found material statements in the sustainability KPIs. And we also concluded that the information in the management report is consistent with the results of our audit. In our reports, we discussed various aspects of our audit, including the application of materiality or scoping and key audit matters. You can read them on your own. So today, I would highlight a few specific items. So first, I'd like to give you a feel of the size of the audit. I do not do this on my own. So it involves over 100,000 hours by over 100 of my colleagues in 18 countries. That includes specialists in the areas of valuation, remuneration, tax, it, pensions, all of them from PWC. A large part of the work by my group team relates to the supervision and brief review of the work of these specialists and of the foreign teams. And as part of this, my group team performed site reviews virtually in 9 countries, and I was presenting most of them myself. Throughout the year, I met with a wide range of people within Akzo Nobel, including the Board of Management. We've had robust discussions with the Audit Committee and the Supervisory board. And there's active engagement and our insights are respected and taken seriously. So all this context has supported me and overseeing the audit and to satisfy myself that we're collectively doing what is needed for a robust audit. So I'd now like to take you through 2 specific elements from our audit, the impact of COVID-19 and the work relating to the 15 by 20 strategy. COVID-19 obviously affected our audit. We needed to understand the impact on Akzo Nobel itself, which is detailed in the annual report and translate that into audit procedures, and that's specific with respect to estimates. The pandemic also affected the actual execution of our work. We had to do that mainly remotely supported by our digital tooling. We significantly increased the frequency of communication between the PWC teams worldwide to make sure we were aware of developments. Where needed, we were able to conduct our work physically. And in China, for example, we were pretty much able to do our work on-site as usual. In our report, you will find 3 key audit matters or Cams, as they refer to. This is consistent with 2019, and I'd like to focus on one of them, which is the one related to the transformation efforts by the company to deliver towards the winning team together 15 by 2020 strategy. As you can read in our Cam and similar to last year, this transformation affects the company in multiple areas relevant to our audit. So first of all, there were changes to the systems, processes and controls which we needed to understand and adapt to. Secondly, there are precious targets accompanying the transformation, which inherently contribute to the risk of management override of control. I'll get to the question of the VEB shortly. We specifically considered the target to achieve 15% return on sales in this final year of the strategy. And thirdly, the changes, including the cost savings impact the assessment of the recoverability of assets such as deferred taxes and goodwill. We discussed our risk assessment on these points, planned, approach and our filings throughout the year with the Board of Management and the Supervisory Board. From the procedures performed, I can confirm we did not have material findings. To address the question from the VEB on our assessment of the pressures inherent to the 15 by 20 targets, I understand where your question comes from. So pressure comes from various sources. And the announcement by management of the suspension of the targets earlier in the year reduced the external expectations and, as such, mitigated some of the pressure. The pressure from the remuneration targets was unchanged. And as you can see from our report, our procedures remained largely consistent with prior year. The second VEB question concerns how we more generally consider internal controls related to fraud and management override. Now we, of course, evaluate the design and the implementation of internal controls that mitigate fraud risks. Of which important ones are segregation of duties and the process around whistle blowing. For a description of those processes by the company itself, I refer to the sections, risk management and integrity and compliance management in the annual report. Now we consider these controls, both at group and component level our local teams are best suited for this as they have the local knowledge, we didn't supervise their work. When addressing the override risk, and that's really the risk of that controls are circumvented by management we, of course, need to look beyond controls and do that -- do our work in combination with substantive procedures. And we do have a predominantly substantive approach in this area. So this concludes my comments. We value the relationship with you as shareholders. And on behalf of PWC, I'd like to thank you for your attention, and thank you for your trust. I'm happy to take further questions if there are any -- back to you, Nils.

I see no question to this point.

Nils, we have received some further questions, most likely related...

Good. let's hear them.

Some of the points put forth by Thierry. So first, there's a question from VBDO. Thank you for your answers on your questions. We have one follow-up questions related to our second question. Within the EU regulations coming up in the near future relating to supplier due diligence, VBDO would expect Akzo Nobel to increase its transparency on human rights and labor conditions related issue results. Can Akzo Nobel commit to provide additional details on its due diligence, process and improvement in the year 2021?

Thank you, Isabelle. Thierry, do you have -- do you have an answer to this?

Yes, gladly, we will see on the -- report.

Thierry, you're muted.

Can you hear me?

Now we can hear you.

So I was going to say the -- putting it in the 2021 report, I think there we'll give feedback on. But it's also good to put in perspective in that specific category the relatively limited exposure that we have as a paints and coatings company, we mostly make a cocktail of product that comes from other chemical companies and mostly relatively big other companies. So in that sense, the exposure on human rights and so on is relatively limited. But however, we've done special work, and we refer to that with the work with EcoVadis to really look at those suppliers in certain areas that are indeed or sensitive to make sure that we have a clear overview and clear mitigation for doing so. So we will definitely take it on to see how we can incorporate that in our 2021 sustainability report.

Yes. And if I may add here, I think the question is very justified again. All companies either have been or are on the journey of securing better surveillance and control of their suppliers. Both from an environmental point of view, from a labor point of view and so on and so forth. And without committing to any specific action for next year's report, I can assure VEB that this is something that we'll continue to improve our effort on, and it's definitely a focus area for all companies in the world and also and very strongly so for Akzo Nobel. Back to you, Isabelle. Any further questions under this point?

Yes, we have further questions from Mr. [indiscernible]. We have 4 questions coming in, and maybe I'll read them in turns or maybe two in a row and then maybe...

Two in a row.

Two in a row. So, here we go. Akzo Nobel mentioned that it was successful in building strong customer relationships, especially during the pandemic. Could you provide examples of this as well as comment on why this should be sustainable? This is one of the first questions. And maybe a question is also linked also to the growing delivery strategy. Akzo Nobel launched its growth and delivery strategy in February, as Akzo Nobel also reflected on its existing portfolio in identified segments and/or regions where it is underrepresented as part of the process cumulating in this new strategic plan? If so, could you comment on the conclusions?

Yes. Thank you for the first 2 questions. We'll come back to the last 2. These are obviously for Thierry, but let me express some enthusiasm about getting commercial questions in the meeting. I think these are very -- 2 very good questions. Thierry, over to you.

Yes. Thank you, Nils. On the first one, on what we did to increase relationship with customers I think it all goes back to the size and the approach that Akzo Nobel had in those segments, size being the possibility of having multiple sources from us for our products to supply a customer, specifically during the rolling lockdowns when a country lock down on planned government orders. We actually had other places from where we could ship materials, so that gave definitely certainty of supply. And that we saw as a clear differentiator versus companies who could not do so. Secondly, another element was around the fact that we do have a strong balance sheet and, therefore, could support certain customers in their difficulties. I'll give one very specific example, which we've commented on quarterly results already is that in Latin America, for example, at 1 moment of time in Argentina and in Brazil, our distributors were completely shut down as so many other outlets by the government. They had inventory, but obviously had no income. So we extended payment terms quite significantly. As a result, we got -- they actually could survive during 2, 3 really painful months without income in some of those countries. And when the markets opened up not only did we get all our money paid back and sometimes even with interest rate because of the exchange currencies effect. But in addition to that, those people so that as helping them survive their companies and have shifted much more shelf space over to us out of gratitude. So those are some of the examples where we actually did things. And talking about the sustainability, how can you actually keep going to that. I think we see that happening ongoing. First of all, people have quite strong memories on what happened to them, who was with them and who was not with them during that period. And we see right now a very different way with raw material shortages. As many of our markets come out of COVID lockdown. We see exactly the same element where we try to work with customers and really go micro detailed on how many products should be on their shelf, how do we keep their plants running and go away from the normal planning. So I think we continue to focus there on customer back in our processes, and I think we will continue to be rewarded by our customers for that.

Thank you, Thierry. And the other question was, do we focus on new areas to grow in the deliver -- grow and deliver strategy. And I think the answer is clearly, yes, both geographically, but also deepening product categories. Isabelle, over to you again, can we get the last 2 questions?

Yes. And just to be precise, these questions are actually coming from the VEB. So there's 2 more questions. One, mostly likely for Maarten. Akzo Nobel's ERP implementation forms a crucial part of the company's transformation. What are the remaining steps to be taken and what is Akzo Nobel's time line? Then the last question will be for PWC, so maybe I can mention it afterwards.

Yes. Over to you, Maarten.

Thanks a lot for this question regarding our ERP road map. First of all, as Thierry mentioned in his earlier presentation, it's important to note that currently, 65% of our revenues is on our final ERP platform, which is called internally [ Saturn. ] And in fact, 90% is now on the big 4 SAP platforms. So the road map going forward is indeed ultimately to get 100% on our [ Saturn ] system as part of the [ Prison ] program. That will take us to early 2024. So by '23, we will have consolidated all the different ERP systems on the 4 SAP platforms. And then the next step is to consolidate those 4 into our ultimate 1 platform. I'd like to say here still that I'm very proud of the team. Because even during the COVID period, we have been able to manage implementations in a virtual way. And that is a completely new thing. We originally thought that it would not be possible, but apparently, there is much more possible if you just try it. So we are still made progress, and we continue to make progress in our ERP consolidation.

For -- not necessarily the last question for the next question for Fernand. Isabelle? Now we have no Fernand, we have no questions.

So I will ask -- 2 follow-up questions for Fernand. What examples of signals might have been overlooked during the audit as a result of a somewhat different audit design and approach due to COVID-19. Also for the auditor questions on the actions report on nonfinancial information in, its assurance report on nonfinancial indicators, Page 139 of the annual report, PWC reports that it has performed a limited assurance review. This included, among others, the identification of areas with a higher risk of material misstatements within the indicators. Could PWC give some color on the nature of these areas and how the materiality of these key assurance matters was set?

Sure. And thanks for those questions. It's nice to receive a late question. So let's see examples of areas that might be overlooked at, that's quite a hypothetical question. And as an auditor, it's one of the key things I always ask ourselves what did we potentially overlook. So it's very hard to give examples of what you may have overlooked, if I don't know what we actually may have. So let me turn that around. We did look at what do we usually do in a physical environment that we now have to do virtually. And what does that mean? And like I said in my earlier statement, we did intensify our communication with the local teams to understand the local circumstances and their assessment of what it meant and to make sure that we were comfortable with their audit approach and adjustment. And then to the audit approach. We also looked at which are the areas where we actually really need to have physical presence. So for example, looking at physical inventory count was required and we were able to do so, physically taking into account all of the measures that were there. From the company and has an ERB system with a lot of digital information. So a lot of that can be accessed remotely, and we did. So all in all, I think the usual impact on our audit from that perspective was limited. And I don't see any major areas where we last year would have addressed that physically and now remotely, that in my view were white spots. So I can't give you any real examples because I think my audit covered it sufficiently. As the second question on nonfinancial indicators. So we did a limited assurance engagement and that is akin to a review, as in always, in our work, we look at what is the risk of material misstatement. And for non-financial adders, that judgment is a little bit different than for financial indicators because you have to look at each of them individually. So we set the bars there, and then we look at what are the potential the potential risks that might adjust that. I might have addressed that. If you look at areas of higher risk, I would say that we listen to shareholders quite a bit and dp our analysis of what have -- you said as shareholders is important that's the materiality assessment done by management. So we obviously look at the same areas that questions have been asked at today previously in this meeting. And that includes water usage, carbon footprint and all of the individual indicators that we issued in our report. So let me leave it at that.

Thank you, Fernand. And have we, in the meantime, received further questions on this point, Isabelle?

No we have -- no, we have no further questions.

No further questions to 3A. So let me just remind you that you can vote any time during the meeting, as Isabelle said at the beginning. And I'll now continue with Item 3B on the agenda, which is the discussion of the dividend policy. The dividend policy is -- of the company is to pay a stable to rising dividend. And the dividend will be paid in cash a final dividend of EUR 1.52 per share, which together with the interim dividend of EUR 0.43 a share is equal to a total 2020 dividend of EUR 1.95 per share compared to the 2019 dividend of EUR 1.90. Isabelle, did we receive any questions to this during the meeting?

No, we have not received any questions, Nils.

No. So the next item on the agenda is Item 3C, the profit allocation and adoption of the dividend proposal. As explained for the financial year 2020, a dividend of EUR 1.95 per common share of of EUR 0.5 or EUR 0.50 is proposed. In November 2020, an interim dividend of EUR 0.43 was declared and paid and upon adoption of the resolution, the remaining final dividend of EUR 1.52 per share will be paid in cash on May 6, 2021 under the terms published by Akzo Nobel. The Supervisory Board recommends adoption of this final dividend. And before we move on, just Isabelle any questions to this?

No, Nils, we have not received any questions on this.

No questions to this. Okay. Thank you very much. And that moves us then to the next point, which is Item 3D on the agenda. And this concerns remuneration report of 2020. And I'll now hand over to the Chairman of the Remuneration Committee, Dick Sluimers, for a short presentation of the remuneration report 2020. In accordance with Dutch legislation, the remuneration report for 2020 needs to be submitted to the Annual General Meeting, shareholders for an advisory vote. And the remuneration report for 2020 is available in the annual report of 2020. Dick, could you please take us through the main points of the remuneration report, please? Over to you.

Thank you, Nils. In my role as Chairman of the Remuneration Committee, I'm delighted to be here to address you today. If it's going all right, you will see the first slide, and it summarizes the main elements of remuneration of the Board of Management, Mr. Vanlancker and Mr. de Vries in 2020. Their compensation terms follow the remuneration policy, which is noted in the annual report. As the report breaks down the remuneration that both executives received last year, I propose to give you an overview of it rather than spend time on the details. But before I start, I would like to mention the following. In preparation for the AGM, we have received input and feedback on the remuneration report over 2020. And it is clear, that we have not been able to convince a number of our shareholders on this item. And we'd like to express that we will make sure to take this important feedback into consideration by reaching out to our stakeholders to first on this topic and to address these learnings in our remuneration report for next year. Now back to the presentation. In summary, the executive's annual base salaries rose by 2.75% in 2020. For 2021, we are proposing a new remuneration policy. We will discuss the elements of this new policy when we cover the topic in the agenda, including the proposed annual salaries for the Board of Management for 2021. The remainder of the compensation packages largely comprised performance-related components. Those incentivize the achievements of stretching, financial and strategic targets, which are assessed over a 1 year and a 3-year period. Executive STI bonuses are based on a company's financial performance, alongside their individual contribution, which you measure over 1 year. The ROS and OCF targets that the Board has set at the start of 2020 were stretching. We have much to be proud of. Although we suspended our financial ambition as a result of COVID-19, the company's returns on sales improved to 15% at the end of 2020. And although somewhat below target financial performance on OCF improved significantly together with an above target performance on the nonfinancial elements for, amongst others, successfully delivering on our transformation programs and improving our employee engagement. And this has resulted in bonus payouts that were above targets for both executives. The LTI incentivizes company performance over a period of 3 financial years. The plan promotes the creation of shareholder value as it assesses the share price performance via a relative TSR metric and profit performance via ROI. Akzo Nobel TSR performance during the performance period resulted in the 6th position within the ranking of the peer group companies. The ranking resulted in a vesting of 50% of this part of the long term incentive. Over the last few weeks, questions were asked, amongst others by ISS, about the vesting percentage of ROI, return on investment and the supplementary information that has been published on our website on April 8. The Supervisory Board want to reflect on that by stating that it recognized that an ROI target as set as in 2018 proved to be overambitious compared to the industry and could be detrimental to the Supervisory Board desired to see Akzo Nobel, investing in innovation, commercial and plant modernization to enable its growth faster than the industry as a whole. The Supervisory Board did not reduce the target on ROI. They use the discretionary power to evaluate performance against the ROI target as defined and communicated by the company during an investor event in February 2020. Akzo Nobel has shown a very strong ROI performance also in comparison to our peers, as explained earlier in the presentation of Thierry Vanlancker. It was felt by the Supervisory Board that measuring performance against the ROI target under the new growth and delivery strategy was appropriate. And that resulted in investing of 106% for this specific part of the long term incentive. Based on the company's combined ROI and TSR performance and after including the dividend yield, of 14.37%, the final vesting of the 280 conditional grounds equaled 89.21%. A result, 18,020 shares vested for Mr. Vanlancker and 15,344 shares vested for Mr. de Vries. These shares are subject to a further 2-year holding requirement for both executives. The company provided conditional shares to both executives in 2020. These shares will only be released to them in 2023, if the planned respective 3 years relative TSR and ROI targets are achieved and will be subject to a further 2-year holding period. 18,747 shares were conditionally granted to Mr. Vanlancker and 12,616 shares were conditionally granted to Mr. de Vries. In 2018, it was agreed at the general meeting that year to temporary test to suspend the annual share matching plan and to replace it by a one-off 3-year performance incentive plan to support the company's 15 by 20 growth -- sorry, profit growth ambition. You will know that the share matching plan was still suspended following that agreement. In determining the outcome of the performance incentive plan, the actual level of performance was critically assessed in light of the assumptions made at the beginning of the year and a decision to post and to suspend the 15 by 20 ambition. This also included an assessment of the progress made with the strategic objectives under the prevailing market conditions. Next to this, the Supervisory Board carefully considered performance in comparison to our main competitors. That relatively performance was quite good, as you have seen in the presentation of Mr. Vanlancker earlier in this meeting. As the actual ROS performance was 15% and this resulted in an on-target payout of 200% for both executives. Members of the Supervisory Board and that is, you can see that on the next slide, receive a fixed remuneration based on the roles and responsibilities. In accordance to the code, members are not remunerated in shares, travel expenses and facilities are borne by the company and reviewed by the Audit Committee. Implementation of the remuneration policy to the Supervisory Board in 2020 resulted in a payout as presented in the slide that you see in front of you. I would like to end this explanation by thanking you for your support, and back to you, Nils.

Thank you, Dick. Isabelle, did we receive any questions during the meeting?

No, Nils. We have not received.

Thank you. Then we will move to the next item on the agenda, which is Item 4A. And this is a discharge from liability of the members of the Board of Management and office in 2020 for the performance of their duties during 2019. Agenda Item 4B concerns the discharge from liability from the members of the Supervisory Board in 2020 for their performance of their duties in 2020. And the management team should also be for 2020, obviously, apologies. Isabelle, did we receive any questions for this item?

Yes. We did not receive any questions on this item, but European investors, VEB, notes that they regret that the Supervisory Board decided to grant an additional share grant to Mr. Vanlancker without submitting this arrangement to the shareholder meeting for approval, which gave you, not to be in line with the shareholders right directive two. European Investor, VEB, notes that they will, therefore, abstain from voting on agenda Item 4B as well as agenda Item 6A. So back to you, Nils.

Noted. And this -- well, we'll just note that. I think we probably should address the comment on the share grant on the agenda item 6A, if you agree with that. Isabelle, if any other questions apart from this?

No, we didn't receive any other questions during the meeting.

Good. Then we move to agenda Item 5 and on the agenda for Item 5A, it's concerning the amendment of the remuneration policy for the Board of Management and agenda item 4B concerning the amendment of the remuneration policy for the Supervisory Board. I'll hand over to the Chairman of Remuneration Committee, Mr. Dick Sluimers again for a short presentation of this. Dick, over to you.

Yes. Thank you, Nils. Akzo Nobel has a clear strategic focus to become the reference in the paint and coatings industry with the strong global brands, leading market positions and a balanced geographic exposure across all regions. We strive to outperform our competitors to deliver a solid return to our shareholders and to achieve sustainable value creation over the long-term to all our stakeholders. To realize our strategy and the sustainable long-term value, we aim for the policy is designed to attract and to retain high-caliber members for the Board of Management, offering remuneration that is competitive within the European context as this is the labor market reference for Akzo Nobel. To this end, the Supervisory Board evaluated the remuneration policies for the Board of Management and the Supervisory Board in 2020. We are putting new policies up for your approval today. The Supervisory Board has concluded that the proposed remuneration policy for the Board of Management is in line with the objective of the company, in drafting this remuneration policy, the Supervisory Board as considered: One, the experience with an evaluation of the current remuneration policy. Second, feedback on this policy and its implementation received in shareholders' consultation. Three, principles and best practices of Dutch Corporate Governance code 2016 and the revised EU directive to encourage long-term shareholder engagement, SRD two. With this, the remuneration committee also consulted with external professionals to get an understanding of the broader public perspective in light of the proposed policy. With these considerations, the supervisory report is of the opinion that it has sufficiently taken into account the interest of all relevant stakeholders in proposing this remuneration policy. The proposed remuneration policy will reference total direct compensation to a European peer group in line with institutional guidelines. And the first slide, you see in front of you shows the changes that will be made in the labor market pay group to align to the European context. We are removing U.S.-based companies as remuneration levels in U.S.-based companies are and cannot be the reference for actionable. We are also reducing the number of Dutch companies and replacing them with European headquartered companies as Akzo Nobel's looks for talent for talented potential Board members is in a European context and not just in a Dutch context. The next slide summarizes the main elements of the remuneration policy for the Board of Management. With the realization of the 15 by 20 ambition, the performance incentive plan has ended. And consequently, as you can see on the slide, the share matching plan is being introduced again. As you can see on the next slide, the base salary is positioned around the medium of the European peer group, resulting in a proposed salary increase from Mr. Vanlancker of 11% and of 2% for Mr. de Vries. The position to the on-target STI payment at the medium of the European peer group, the on-target percentage for the CFO will increase from 65% to 80% of his base salary. And the one for Thierry Vanlancker will remain the same. The overriding importance of Akzo Nobel long-term sustainable value creation is reflected in the composition of the remuneration package. The LTI is increased for the CEO to strengthen the competitive character of the remuneration package. And this means that about half of the at-target value of total compensation is directly target at long-term value creation. The LTI level at-target is here by said, between medium and third quartile of the European peer group, well both salary and STI are set at medium level. Share matching plan is being reactivated. I will explain a bit more about this new share matching plan later in this presentation. To promote transparency and alignment with the strategic plan, the Supervisory Board sets performance target derived directly from the growth and deliver strategy. As you can see on the next slide, for the STI 2 elements that have considered that are considered crucial to realize long-term value creation are adjusted operating income and operating cash flow. These are supplemented with quantitive personal targets supporting the strategic execution of our plans. On Slide 5, the next slide, you see the proposed changes for the long term incentive. Here, its adjusted EBITDA return on investment ROI and revenue growth are considered crucial to realize long-term value creation. Additionally, environmental, social and governance, the famous ESG targets are also included to add a focus on sustainability. Furthermore, you see on this slide the proposed metrics for the new share matching program. Akzo Nobel encourages its top management to build up a sizable shareholding in the company to foster alignment with the company and its shareholders. This is supported by an unchanged shareholding requirement that is for the CEO's 3x base salary within 5 years of appointment and a mandatory 25% investment of the net STI payout in the share matching plan. Previously, mandatory investment was only required when the shareholder requirement was not met. Building to the required shelling is facilitated by one, an increase of the LTI grant for the CEO as described above; and two, simplification of the current share matching plan, allowing managing Board members to voluntarily invest up to 50%, 5-0, 25% mandatory and 25% voluntarily of the net STI profits for the ground of bonus shares. Those shares will be matched on a one-on-one basis on to the full investment. The last slide I would like to present to you is the slide that summarizes the main elements of the remuneration policy for the Supervisory Board. The Supervisory Board has concluded that only one adjustment needs to be made to the policy as approved by the AGM last year. In view of the Supervisory Board the remuneration, if provides is balanced, but alignment to the European labor market peer group is required which requires some increase of the base fees. Committee fees and attendance fees are in line with the relevant market and will remain unchanged. So that's for me, Nils, and back to you.

Comprehensive. And Isabelle, any questions? Isabelle?

We received some questions. Yes, we have received some questions. European investors, VEB, would like to understand the reasons for the weight of the ROI target being reduced from 50% to 20% considering Akzo Nobel's focus on value creation. They further refer to the replacement of the ROS target in the STI by an absolute measure of profitability, while at the same time, an adjusted EBITDA target is introduced for LTI and request the Supervisory Board, can you comment on these changes? Back to you, Nils.

Yes. Thank you. It's a very relevant question. We've discussed this a lot, but Dick, would you explain why we've taken this decision?

Yes, Nils. I think it's important that -- and I think that as we stated at my presentation that we reduced somewhat the ROI percentage, the weight of the ROI to give room to more specific metrics that really represent the growth and deliver strategy because there, I mean with the metrics we introduced there, they are very much aligned to this long-term strategy. And we would like to have them also in the LTI approach just to create more alignment with the LTI with our strategy. I think that's basically be it.

Yes. I think if I may add something to this point, the wish and the -- of the Supervisory Board and the management team is to see AkzoNobel having more focus on growth than we've had during the last strategy period. And therefore, we decided to put in EBITDA as an important measure. EBITDA is a combination of the -- this -- the arrow, the return on sales and the sales volume in reality or the sales turnover. And it's very important if we are to create shareholder value that the company grows, profitably grow, of course, but grows. And that's what is really reflected in the new policy. Any further questions, Isabelle?

Yes, we have received 2 follow-up questions on the proposed remuneration policy, and here they are. For what reasons are capital requirements, CapEx invested capital, of less relevance in the proposed remuneration policy? ESG is another question. ESG is introduced...

Yes, I couldn't understand. Sorry for the interruption.

I will repeat the first one again.

I couldn't hear you very well. Please, again, Isabelle, if you can.

Yes. Let me repeat the first question. For what reasons are capital requirements, CapEx invested capital, of less relevance in the proposed remuneration policy? And the second question is, ESG is introduced as a new performance metric for the LTI. Could the Supervisory Board elaborate on what targets have been set to measure progress on ESG performance? And will these targets apply for the entire 3-year performance period?

Thank you. Dick, will you take these 2 questions?

Yes. To start with -- thank you for the questions. To start with ESG, we will very much align the targets of ESG with the targets that were set out at the people, profit and paint (sic) [ People. Planet. Paint. ] approach. And we will quantify them in the same way as we go forward with the targets that were set out on that policy. Now back to the first question, to be very honest, I tried to understand what the reason is behind the question that CapEx investment should be less relevant in the remuneration policy. Maybe it's somewhat the same question or is referring to the same element that we have reduced the ROI component -- the ROI metrics in our remuneration policy. But from that respect, I think we already have answered it. But -- and maybe the one who has asked the question could elaborate a little bit more on this because I have difficulty to grasp the real meaning of this question.

I think if I may comment here. I think the meaning of the question is that [ Audio Gap ] component, we are awarding the management less for restraint on investment in CapEx and in assets or in other kinds of growth of the company. And that is correct because what we have decided is the best way to create value for our shareholders, in our opinion, is to have more focus on growth. It doesn't help that you save your way to higher profitability related to sales or related to investment if the company grows smaller as a result. So it's a conscious decision, and we did realize that not everybody may agree with it, but we did discuss it at length with a lot of our large shareholders. And we think we have convinced them, but we understand why the question is asked, but that has been our evaluation of what is best for the company's future.

But basically, again, Nils, it is more or less a question with the same background as the first one. And I think we clearly explained why we have shifted in our remuneration policy. More to growth than to margins.

Absolutely. Thank you. So if there are no questions on this -- at this point, then we'll move to the next agenda point, which is the Board of Management. And here under the reappointment of Mr. Thierry Vanlancker, which is a voting point. A short resume as well as a summary of the main elements of his contract have been published on our website. The holders of the priority shares result not to make use of their binding nomination rights. And we are delighted that Mr. Vanlancker is available to be appointed for another terms of 2 -- return of 2 year -- 2 years, sorry. Isabelle, could you please take us through any other questions received, if there are any?

Yes, we have some questions. So Eumedion and Federated Hermes International request a more granular disclosure on the additional restricted share grant 2021 awarded to Mr. Vanlancker as part of his recent contract renewal, including the number and value of such grant. They further request to be assured that the additional share grant will be clawed back should Mr. Vanlancker be reappointed for another term at the 2023 AGM. European Investors, VEB, would like to understand the reasons for Mr. Vanlancker to be appointed for a 2-year term. They also requested the details of the additional share grants such as the number of shares and the applicable performance targets. Back to you, Nils.

Thank you. Let me start by addressing the VEB's earlier comment during the shareholders rights -- regarding the Shareholder Rights Directive II. Under Dutch law, which includes the implementation of the Shareholder Rights Directive II and the Dutch Corporate Code, the remuneration policy may include discretionary power for the Supervisory Board in determining the remuneration of the members of the Board of Management. In line with the requirement of the Shareholder Rights Directive II, the current remuneration policy for the Board of Management was approved by the general meeting of the AGM in 2020 and includes such discretionary power. The Supervisory Board exercised its discretion as a temporary derogation from the current remuneration policy for the Board of Management to support the special share grant. The reappointment is for 2 years. As the reappointment is for 2 years, the short-term incentive will not fully pay out in every year and the long-term incentives will not fully vest every year, even if the performance levels are met, due to the pro rata calculation that will [ reply ] at the end of the 2 years term. The Supervisory Board wishes to ensure that Mr. Vanlancker continues to serve in his role to finish the transformation of AkzoNobel and deliver on the strategy and the ambitions for the 2021 to 2022 period, and we consider this an exceptional circumstance that justifies the temporary derogation. The special grants represents 70% of the long-term incentive compensation forgone taking into consideration to the 2-year term. The additional share grant is part of Mr. Vanlancker's remuneration in '21, and as such, will be included in the remuneration report 2021, which will be put to an advisory vote of the AGM in 2022. Should Mr. Vanlancker be appointed to another term in 2023, the additional share grant will be revisited to ensure it remains compliant with the remuneration policy and the long-term incentive plan, acting within corporate governance principles. But Thierry, I think it's up to you to comment on the 2-year term and why this is the right decision for you and the company.

Yes. Thank you, Nils. And indeed, it is very much my decision to commit to a 2-year term. I've been with AkzoNobel since 2016, and in the CEO role now for 4 years. The big -- I would say the big appeal for me was to do the transformation journey for AkzoNobel from where we were in 2017 at about a EUR 1 billion EBITDA company to where we want to be in 2023, a EUR 2 billion EBITDA company, and we're halfway in that transformation. So the feeling was that the combined certainty for the company on what that succession planning should be, but also for what motivates me in the role, is that it was better to be transparent around my desire to do 2 years. So that allows to finish as we did the 15 by 20, but also to make sure that the Grow & Deliver strategy is delivered in full. So it was very much my personal decision to commit only for 2 years.

Yes. Thank you for committing for another 2 years. And I think in addition to meeting Thierry's personal wishes, it also makes the succession issue easier to cope with because it's now decided when it's going to happen, and we can -- as a Supervisory Board and a management team, we can have very open discussions about this, which, in many cases, is not taking place. So we look forward to that process as well and look forward to 2 great years with Thierry in lead of the company. Thank you very much. Isabelle, did we receive any further questions on this item or anything that's not yet addressed?

No, Nils, we have not received any further questions at this point in time.

Okay. Thank you. So I'll proceed with the next item on the agenda, which is Item 7a, and that is the reappointment of Mr. Patrick Thomas. We are, in the Board, delighted that Mr. Thomas has confirmed that he is available to be reappointed for another term of 4 years. Mr. Thomas was appointed as a member of the Supervisory Board in 2017. And since then, since June '18, Patrick has been a member of the Audit Committee. He has a proven track record of success within the chemicals and materials science industry. And Mr. Thomas provides a very positive contribution to the Supervisory Board of AkzoNobel, which the Supervisory Board would very much like to see continued. And I think no questions were received for this agenda item before the meeting. Did we receive any questions during the meeting, Isabelle?

No, Nils, we didn't receive any questions on this point.

Thank you. Then furthermore, under this point, Mrs. Sue Clark and Mr. Michiel Jaski are retiring as members of the Supervisory Board today, and I'll come back to the excellent contribution to the Supervisory Board at the end of this meeting. But given the current size of the company and the required expertise and the fact that the required expertise is sufficiently reflected in the Supervisory Board today, it has -- it was deemed appropriate to organically reduce the number of the Supervisory Board members to 6. And if there are no comments or further things here, then I will go on to agenda Item 8, which consists of 2 voting points that are proposed to the shareholders each year. It is the extension of the authority of the Board of Management to issue and grant subscription rights to shares up to a maximum of 10% of the total number of shares outstanding today, April 22, 2021; and an extension of the authorization of the Board of Management to restrict or exclude the preemptive rights allowed to shareholders by virtue of the law in respect of the issue of share -- of issuer of shares of the granting -- or the granting of subscription rights in conformance with Agenda 8a, but only regarding shares issues -- issued pursuant to the decision of the Board of Management. The authorizations are granted for 18 months and in accordance with the notes to the agenda of the meeting. Isabelle, did we receive any questions or comments to this point?

No, Nils. We didn't receive any comments or questions.

Thank you. So then I'll go on with agenda Item 9. And this is the authorization to the Board of Management for a period of 18 months starting on April 22, 2021. In case of a -- or in case of a shorter period until the day of authorization is again extended to the General Meetings of Shareholders to acquire common shares in the company share capital at any time during this period. The number of common shares to be agreed -- acquired is limited to the maximum number of shares in the company's share capital as permitted by the articles of -- by law and the Articles of Association that the company may hold on its own share capital at any given moment. The maximum number of shares that the company will hold of its own share capital at any time shall not exceed 10% of the issued share capital. Common shares may be acquired through the stock exchange or otherwise at a price between par value and the Euronext N.V. price on the day of purchase plus 10% on condition that the price is no higher than the opening price on the day of purchase. The proposal to allow the company to acquire also a 10% in excess of the opening price has been inspired by the desire to have more flexibility in case price fluctuations occur during the day. The lower limit of the par value has been included in the proposal as the law stipulates that besides the upper limit -- that besides the upper level, also a lower limit is required. Isabelle, did we receive any questions for this during the meeting?

No, Nils. We didn't receive any questions.

Neither. Super. Thank you. And I'll now -- proceed now with the final item on the agenda, which is agenda Item 10, which is -- which concerns the proposal to reduce the issued share capital of the company by canceling common shares held or to be acquired by the company in its own share capital. The capital may be executed in one or more tranches, the number of shares held by the company, which shall be canceled, whether or not in a tranche shall determined -- shall be determined by the Board of Management but shall not exceed the maximum of the number of shares that may be acquired in accordance with the authorization referred to under agenda Item 9, which we just dealt with. Cancellations may be effected earlier than 2 months after -- may not be effected earlier than 2 months after a resolution to cancel shares is adopted and publicly announced. And that this will apply for each tranche. Isabelle, any questions for this point?

No questions on this point, Nils.

No questions for this point either. Did we receive any questions or certain items that were not yet addressed?

No. Looking at the chart, we did not receive any further questions.

No. No further questions. Thank you. And then as promised by Isabelle at the beginning, I'll remind you to vote if you haven't done it already. And we'll wait a minute and for you -- to give you time to check whether you have voted and are satisfied with the outcome. [Voting]

That was a long minute. I apologize for that, but I'm sure that, that has given everybody the chance to do the correct voting. And while we are busy counting the shares, then I would like to say a few words to thank Sue and Michiel for their contribution to the Board and the company during the time that they have been on the Board. Sue and Michiel, together with Patrick, joined the Board in 2017 when the company was under very severe pressure, both from a hostile takeover as well as significant activist activity in and around the company, and the whole tone and the whole situation of the company was very, very unpleasant. So I'm not, think, disclosing any secrets when I say that the last 4 years have required really heavy lifting. A Supervisory Board that worked closely with the Board of Management to overcome the many challenges, and you've done that and you've been part of that in a very, very important way. And Sue has been active in the Remuneration Committee, which has not always been easy. And Michiel has given a strong contribution also in the Audit Committee. So you've done some really heavy lifting and been a very important part -- members of the team during that period. And on behalf of all your colleagues and the Board, thank you very much for that. You've been a very important part of the journey. So thank you very much. So we wish you all the best for the future, and I'm sure there will be plenty of things and tasks that you can devote your capabilities to going forward. Thank you very much. So now we're going on to the results of the voting. If we are finished counting? Good. The first results are now shown on the screen. And I conclude that Item 3d, the remuneration report for 2020, has received a negative advisory vote. As stated by Dick as well, we'll make sure to take this feedback into consideration by reaching out to our shareholders to further engage on this topic and address the learnings in the remuneration report in 2021. I conclude that each of the other items showing on the screen has been adopted by the Annual General Meetings of Shareholders. On the next slide, the following voting items are shown, and I conclude that each these voting items have been adopted. The final slide shows the remaining items. Maybe I'm going a little bit fast here. The remaining items and also these voting points have been adopted. And I ask the Corporate Secretary to record the voting results. The voting results will be published on our website as well, so you can go in and see them if you didn't manage to get all the numbers memorized this time. Before I close today's meeting, I would like to thank the management team and all our employees for doing such a great job ensuring our company continue to work well during these very, very difficult times. We have a large number of employees around the world that are doing a fantastic job every single day. And as Thierry mentioned during -- and there was a question, commercial question related to it, this has meant that we've been able to deepen our relationship, both with them within the company, but certainly also with our customers and partners around the world. So thank you for everybody -- to everybody who's done this great job. And so all of you who attended the meeting today, thank you for attending. Thank you for having an interest in the company, being investors and spending time with us today. We wish you a safe -- it's not really a return, but we wish you safe, good health until we hopefully meet you again next year. Thank you very much, and have a great day.