Akzo Nobel Aktie

Thank you for joining the AkzoNobel Q3 Results 2026 Call. My name is Claire, and I'll be coordinating your call today. [Operator Instructions] I would now like to hand over to Jan Willem, Head of Investor Relations at AkzoNobel to begin. Please go ahead.

Good morning, and welcome to AkzoNobel's Investor Update for the third quarter of 2026. I'm Jan Willem Enhus, Head of Investor Relations. Today, our CEO, Gregoire Poux-Guillaume; and CFO, Maarten de Vries, will take you through our results.

We'll refer to the presentation, which you can follow by webcast or download from our website at akzonobel.com. A replay of the webcast will also be made available following the event. There will be a Q&A session after the presentation. And for additional information, please contact our Investor Relations team. Before we start, a reminder of our forward-looking statements disclaimer on Slide 2. Please note, this also applies to the conference call and answers to your questions.

I will now hand over to Greg, who will start on Slide 3 of the presentation.

Thanks, Jan Willem. Good morning to everyone on the call. In Q3, we delivered a quarter of organic growth and continuing margin expansion. Many of our markets were challenging, yet we still grew organic sales by 2% on strong pricing performance of plus 5%. We priced decisively to protect margins while remaining focused on costs.

As a result, we increased profitability with adjusted EBITDA margin at 15.3%, up 20 basis points. That's our sixth quarter in a row of margin expansion. Adjusted EBITDA was EUR 388 million, in line with our guidance and up EUR 15 million at comparable scope and constant currencies. In parallel, we reached a new milestone in value realization with the sale of our Deco businesses in Southeast Asia for 21x 2025 EBITDA, more than twice our current trading multiple.

This transaction completes the review of our Deco positions in Asia. We're now set up for the long haul with the Deco portfolio of Europe, Latin America and China built on leading positions. Our balance sheet is in good shape. Leverage stood at 2.1x at quarter end, in line with our target of around 2x, and that's before any of the Asia proceeds coming in.

Finally, our industrial excellence program is coming to an end. We've closed 4 sites this year. We've got 2 more to come before the end of the year, and the program will be completed by year-end with significant carryover savings into 2027.

Turning to Slide 4. Q3 volumes were down 2% year-on-year, 2% lower in Coatings and 3% lower in Paints. In Coatings, Powder was flat with strong growth in North America standing out. Marine and Protective had a smaller quarter. Marine grew despite headwinds in the Middle East, while Protective was lower. Automotive and Specialty Coating volumes were slightly up with Aerospace delivering double-digit growth on a strong order book with plenty more runway ahead.

Refinish was up in Asia, but not rebounding yet in the U.S., while automotive remained slow. Industrial Coatings was down in the quarter. Coil was stable. Packaging continued to underperform and wood was impacted by low construction activity.

Turning to Deco. Europe, Middle East and Africa was flat with a strong sequential improvement in the U.K. and in the Benelux. Latin America was down single digit as Brazil was healthy, but impacted in Q3 by the timing of price increases. In China, our business continued to outperform in a depressed market. Southeast Asia had a good quarter, led by a strong performance in Vietnam. Year-to-date, volumes were down 1%, another year that held promise for growth in Q1 that was stunted by macro events. We will continue to make our own luck as we wait for a much delayed market rebound.

Handing over to Maarten on Slide 5. Maarten?

Yes. Thank you, Greg, and good morning, everybody. We achieved another quarter of organic growth with organic sales up 2% at group level. Pricing of 5% was partly offset by 2% lower volumes and a 1% negative mix impact. Changes in scope reduced revenue by 5%. FX translation turned into a tailwind this quarter after multiple years of headwinds, adding 3%. As a result, total revenue was flat in Q3.

Coatings delivered organic sales growth of 3% with 5% pricing more than offsetting 2% lower volumes and mix flat. In Deco, organic sales were up 1% with robust pricing of 5%, partly offset by 3% lower volumes and a 1% negative mix impact. Group adjusted EBITDA came in at EUR 388 million, up EUR 15 million or 4% at comparable scope and in constant currencies. The adjusted EBITDA margin improved by 20 bps year-on-year to 15.3%.

Both segments executed price measures on plan to offset raw material inflation. The inflationary impact was more pronounced in Coatings given its higher solvent content, while paints continued to benefit from structural cost savings from our industrial excellence program. In Q3, Paints adjusted EBITDA margin rose 200 bps to 19.4%, a level never attained outside of the event-inflated COVID DIY boom in Europe.

Turning to the next slide. Q3 was another operationally solid quarter. Trade working capital improved by 130 bps year-on-year, decreasing to 15.7% of revenue. This continued efficiency, combined with higher EBITDA supported a stronger return on invested capital, which increased to 13.7%. Higher EBITDA and continued working capital discipline underpinned resilient underlying cash generation in the quarter.

However, transaction costs incurred year-to-date stand at EUR 69 million, weighing on overall free cash flow. As a result, free cash flow came in at EUR 119 million in Q3 and EUR 83 million year-to-date. Supported by our underlying cash generation, we sequentially reduced leverage to 2.1x in Q3, already placing us within our target range of around 2x by year-end.

Now handing back to Greg for the next slide.

Thanks, Maarten. Looking ahead, we continue to expect to deliver 2026 adjusted EBITDA of around EUR 1.47 billion. Raw material and logistic inflation remains volatile. That said, with 1 quarter to go, we have good visibility on our input costs until year-end.

Pricing will continue to fully offset the inflation we currently see, and we will go further if required, including into next year. For Q4, volumes are forecasted to be flat. We expect pricing to be a slight net positive against raw material inflation, while OpEx savings will be delivered as per plan.

Turning to Slide 8. In October, we said we'd rebalance our Deco portfolio -- I'm sorry, in October 2024, almost 2 years ago -- actually 2 years ago, we said that we'd rebalance our Deco portfolio towards countries where we have a leadership position, that we monetize assets that are worth more to others than us and that we concentrate our capital on positions of differentiating scale, particularly in coatings. As part of this process, the strategic review of our Deco portfolio has not been successfully completed.

The final step of this Deco portfolio review came earlier this month when we signed a binding agreement to sell our Decorative businesses in Southeast Asia to Nippon Paint for an enterprise value of EUR 1.2 billion, $1.35 billion. That's 21x EBITDA with around EUR 900 billion -- I'm sorry, EUR 900 million of net cash proceeds after minorities and taxes. Indonesia closes separately in December, bringing in around EUR 200 million.

The remaining EUR 700 million follows in mid-2027, and all proceeds will be used for deleveraging. Together with India and Pakistan, the review realized more than EUR 2.6 billion of enterprise value at a blended multiple of 23x EBITDA. This outcome showcases that our active portfolio management creates significant value and highlights that Deco assets are more valuable than the market gives us credit for.

The end result is a sharper, more focused AkzoNobel going into the merger with Axalta with a more compact Deco portfolio composed of leadership positions. As we head towards closing, we also announced our new name, Axanzo. That's our new name, Axanzo. Axanzo will go further and faster than we ever could alone with the power to innovate, the strength to deliver and a commitment to excellence. As you know, the combination unites our legacies and ushers in a new era for our industry.

Axanzo will bring together a diversified and balanced portfolio of around 100 highly regarded and trusted brands across paints and coatings, spanning more than 160 countries. We will focus on delivering uncompromising performance to sharpen our competitive edge while establishing a profitable and sustainable path towards a world leader in coatings. By combining our expertise, the best of each of us will become the standard for all of us. So welcome to Axanzo.

Turning to Slide 10. Timing. Our merger is firmly on track with shareholders overwhelmingly approving the combination during the EGM in August. There's an EGM -- there's another EGM planned for the end of November, the 30th of November, and this is just a formality. It's to appoint the 3 additional Axanzo directors that have already been announced.

Regulatory clearances are advancing with 2/3 of regulatory approvals already secured. A few merger control clearances are in the final stages, including in the U.S. and in the EU. Although final sign-off is still pending, we can confirm that we're planning to divest AkzoNobel's European vehicle Refinish business and Axalta's North American wood business. We've not been asked to prepare any remedies on any other business in any jurisdiction.

We understand that these 2 divestitures will allow us to obtain regulatory clearance in Phase 1. As such, we remain on track to close in early 2027. So once again, Axalta Wood in the U.S. and AkzoNobel Refinish in Europe. Meanwhile, the integration work is progressing at pace. The Axanzo Executive Committee has been announced internally. The operating model is being refined and the teams remain focused on day 1 readiness and accelerating synergies.

The value case is unchanged by the proposed remedies, $600 million of cost synergies, around 90% within 3 years of closing and 100 to 200 basis points of revenue synergy uplift. Axanzo now has a name, a leadership team and a clear path to closing. Early next year, we will fully launch.

I'll now hand over to Jan Willem, who will close with information on upcoming events, and then we'll do the Q&A. Jan Willem?

Thank you, Greg. Before we start the Q&A session, I would like to draw your attention to the upcoming event Slide 11, on Slide 11. On November 30, an EGM will be held to propose the appointment of 3 additional nonexecutive directors for Axanzo.

This concludes the formal presentation, and we'll be happy to address your questions. [Operator Instructions] Operator, please start the Q&A session.

[Operator Instructions] Our last question comes from Katie Richards from Barclays.

I have 2, please. Firstly, just on volumes, you've changed the volume guidance. Could you explain to us what deteriorated relative to your expectations 3 months ago and whether you're seeing any evidence of volumes improving towards the end of Q3?

And my second question, please, would be on the Southeast Asian Decorative Paints disposal. Two parts to this. Firstly, would you -- could you explain what was behind the decision not to sell the Sri Lankan assets here? And secondly, would you expect any antitrust issues for these disposals? Because I noted that Nippon has 75% market share in Singapore, for example, and 50% in Australia.

Thanks, Katie. I'll take the Southeast Asia question, and Maarten will take the volume question. In Southeast Asia, we're essentially -- we're selling all our Deco businesses. Sri Lanka was part of what we called South Asia, which was India, Pakistan and Sri Lanka.

For a bunch of different reasons, we had to sell these countries separately, India because it was a listed entity. Pakistan because it was complicated to sell with India and Sri Lanka is a joint venture, and it's something that we're handling separately because we have a joint venture partner. But it's a very -- it's a small business. So it's -- this is more -- it's more of an additional step that we have to take, but one that will not be very noticeable by you guys because it's a small business, and we only own part of it.

In Southeast Asia, so Vietnam, Indonesia, Malaysia and the other countries that we've listed, we're selling everything. We're selling Indonesia separately because Indonesia is the one country where we have a joint venture partner. We own 55% of our business in Indonesia, but we have a partner that owns 45%. So it's a separate transaction. Everything else is being sold in one piece. All of it is going to Nippon.

And the merger agreement essentially puts the antitrust responsibility firmly in Nippon's hands. And we're confident that they'll handle that successfully. But once again, it's their responsibility. Did I answer your question on that one? And -- before Maarten jumps into volumes.

Yes.

Maarten?

Yes. So Katie, on your question on the volume guidance, I mean, if we look at Q3, then we've seen some impacts because of our -- phasing impacts because of pricing. So specifically, July and August were weaker, and we've seen a stronger September. And that is also the basis of our guidance for Q4, where we guide on flat volumes. So it is really the timing of the pricing implementation, which also drove the phasing of the volumes during the third quarter.

And just one follow-up. Sort of you raised the pricing now quite significantly. Do you think that's any reason for the volume decline we've seen?

We don't think so, Katie. We're looking at price elasticity really closely. Pricing doesn't seem to be what's impacting volumes currently. And once again, although Q3 looks a little bit weak, a lot of it is for timing reasons, as Maarten explained. It's more the -- just the economy globally is a little bit challenging and automotive is slower. There's a few markets.

China consumer demand is also depressed. It doesn't have -- it doesn't correlate to pricing, at least not in the elasticity analysis that we do, and we keep a very close eye on it. So not the issue for now, but clearly, there's a moment where you run into disposable income, certainly on the consumer side, but that's not where we are at this point.

The next question we have is from Laurent Favre from BNP Paribas.

Two questions, please. The first one on the remedy disposals. How does it impact the $600 million cost synergies, please? I understand that the wood part of the business may have been base case on the remedy, not necessarily refinish.

And then the second question, taking into account the Nippon disposal, the remedy disposals, on my numbers, you should be below 2x leverage during 2027 on pro forma on whatever it's called, Axanzo. How do you think about capital allocation? Could we see accelerated share returns, I guess, fairly quickly rather than in a back-end loaded manner?

Yes. Remedies, we always said that we were committing to the $600 million number of -- I'm sorry, remedies, the impact of remedies. We always said that we'd commit to the $600 million synergy number -- cost synergy number, kind of rain or shine. So we said it's independent remedies because we had calculated that number based on the possible remedy scenarios.

The outcome, the likely outcome because it still has to be executed, but of the antitrust process is, as we said, the disposal of 2 businesses, Refinish Akzo Europe, and Wood Axalta U.S. If you sum up these 2 businesses, you're talking less -- a bit less than EUR 500 million of revenue and the profitability is roughly at the target level for Axanzo, which was between 19% and 20%. So that kind of gives you the order of magnitude.

And once again, it leaves that $600 million number protected. We're certainly aiming to make that number higher than $600 million. But right now, we're just sticking to our message as we put the finishing touches to the regulatory process. That's for the remedies. If you have a follow-up, we'll take it afterwards.

And the leverage question, Maarten.

Yes. On the leverage ratio, Laurent, I mean, clearly, the cash flow out of the Southeast Asia disposal will support the faster deleveraging and therefore, also will support a faster situation of getting to normal capital allocation. I think it's too early to commit now to leverage ratios by 2027. But certainly, this is very supportive of our case.

And I would add to what Maarten said that the -- our aim is to be in a position to have a normal capital allocation as quickly as possible, and that includes share buybacks. And share buybacks are particularly attractive as long as the market continues not to reflect the value of the merger in our share price and in the Axanzo share price potentially. So to put ourselves in a position to be able to pull the trigger, I think, is healthy for the company.

Laurent, did we answer your questions?

Yes, absolutely.

The next question we have is from Christian Faitz from Kepler Cheuvreux.

Two questions, please. First of all, can you elucidate a bit why your pricing strategy in Brazil Deco is rather different from your key competitor in this market? Or is that in your view, the new owner still trying to get used to market dynamics in Brazil?

And my second question is also on Deco. When do you expect the Chinese market to recover? We have now seen several quarters of decline in the country. Any hope for a '27 recovery? What are your people in the country saying?

All right. I'll take the politically incorrect question on Brazil, and Maarten will take the macro question on China. On Brazil, why does our pricing strategy differ from that of Sherwin-Williams now that they've bought the Suvinil business, which is our main competitor.

Frankly, the Sherwin guys have been a little bit surprising. I would never have expected Sherwin to be volume-driven. That hasn't been their MO over the years. But for whatever reason in Brazil, they are dropping pricing and going after volumes. In most markets where that are fairly established, that's not a winning strategy, but we'll see how that unfolds over time.

We're sticking to our plan, and our plan is to continue to increase margins in Brazil through a combination of cost action and pricing and to make sure that we have enough pricing to mitigate the inflation that you have in Brazil. When -- you can actually compress your margins without decreasing your prices. All you have to do is not price for inflation and then the market sees that as a reduction.

I think, look, it's still in the early phase of the market stabilizing after the transfer of that significant business, Suvinil to Sherwin. And the Brazilian market overall is healthy. And then beyond that, whenever you do a price increase, usually, there is a little bit of volume that comes in before because people are buying before the price increase.

And there's a little bit of volume drop afterwards because the distribution has increased their inventories and therefore, doesn't have a need immediately afterwards. This is kind of normal operations in these businesses. Hopefully, I've answered that question.

Maarten, China?

Yes, Christian, on China, I mean, clearly, China is still -- our Deco business in China is still very much impacted by the weak property market. In fact, the market, as we see it, is down roughly 11% this year. I would see -- I mean, the scenarios we are using also for 2027 is that we don't expect a recovery of that market anytime soon, at least not for '27. What you see is that there is more movement and transactions in secondhand housing, but for sure, not in new build. So it remains a challenging market to operate in.

The next question comes from Chetan Udeshi from JPMorgan.

The first question I had was just to clarify on the scope of the remedies. I heard you talk about EUR 500 million of combined sales for Akzo's European Refinish business and Axalta's Wood Coating business. Can I clarify, is this $500 million or euros?

The second question was, have you started shopping these businesses around? Is it going to be like a sort of coordinated sale with one particular buyer because there are not that many buyers.

The reason I'm asking this is when I look at the pro forma multiple of the group, depending on what numbers you might use, 7 to 8x. But I'm just curious, all the asset sales or all the transactions we've done in or we've seen in the coating businesses happen in double-digit multiple range. Is it reasonable to assume you see the similar dynamic with the planned revenues? Or should we see more -- this is more like a source sale and hence, the multiples would be probably lower?

The second question was, I know you're not giving Q4 specific guidance, but should we tax out for EUR 1.47 billion minus first 3 quarters of the year? Or are there variables that are something we should keep in mind in terms of how Q4 may play out? So in other words, what is your visibility today for Q4? Because in Q3, you did give us a clear guidance.

And last question, I saw you raised the cash outflow -- or the cash out for identified items in -- for full year 2026. And I'm curious, is this going to be a constant trend now for the next 2 years as you deliver on these merger synergies that there is a chance that the total cash out just keeps ballooning because as you go deeper into the project, you probably have better visibility on the total cash cost.

All right. Thanks a lot. I'll take the remedy question, and Maarten will talk guidance and cash or identified items. On the remedies, I said the sum of the 2 businesses is less than EUR 500 million of revenue. If I convert it to dollars, it probably be around that EUR 500 million number too, but call it less than EUR 500 million of revenue.

It's -- have we launched a process yet? The Axalta guys are running a process for the wood business in the U.S. I think they put out a press release this morning or last night. And that started earlier because the regulatory discussions with the FTC came to a result on this a little bit earlier. So that one is ongoing and is a structured process.

And on Refinish Europe, AkzoNobel, we have started reaching out to potential buyers. We're in the early phases because that discussion has only recently come to fruition with the merger authorities in Europe. You have to keep in mind that the difference between the U.S. and Europe is that in the U.S. you have to close a remedy as a condition precedent to closing the merger, whereas in Europe, you have to have a signed agreement with an acceptable buyer. You don't have to have a closing.

So therefore, the fact that the process on Refinish Europe is only starting now doesn't necessarily put it on the critical path because it's handled differently at U.S. and European level. Hopefully, that answered that part of the question. If not, say so. I'll take that as a yes.

Maarten, go...

Do you expect -- yes.

Chetan, let me go into first Q4 guidance. So to be very specific, the assumptions below the Q4 guidance are really volumes flat. If you look at price versus raw material, we expect a slight -- to be slightly positive. And on top of that, we expect to deliver on our OpEx savings as we have done throughout the year. So these are the key building blocks for our Q4 assumptions.

On free cash flow, indeed, the merger-related cash out in the first half was pretty immaterial. -- but it started to be material in Q3. And that's why we have flagged also increased kind of the total cash out from identified items because the merger-related cash out for the full year will be roughly EUR 100 million, maybe just above EUR 100 million. And that is, of course, trending upwards in the second half versus the first half as we are preparing for the merger and also for the integration.

For next year, merger-related cash out is a little bit early to tell. But for sure, there will be still cash out as an example, the advisory fees for the bankers on both sides of the house on the Axalta side and on Akzo side. But again, that is a little bit early to tell at this moment. Is that clear?

Got it.

The next question comes from Sebastian Bray from Berenberg.

I have 2, please. The first is on the Refinish potential divestment in Europe. Can I confirm that this has a separate plant? Or is it meant to have some type of licensing agreement that enables a tech transfer together with the brands to a buyer?

And my second question is on the Asia business. Net of the divestments that have been announced, what is the run rate of the sales on an annual basis left in that segment?

I'll take the first question. Maarten will take the second. On Refinish Europe, there's different options. So we can offer -- your question was related to the plant. We can offer different things depending on what the potential buyers are looking for. It's too early to comment in more detail, but we can address different preferences, which will, I think, open up the market for it.

Maarten?

On the Asia sale, in scope of the divestment is a revenue level of just above the EUR 300 million. So what remains is, of course, our coatings business in Southeast Asia and of course, our Deco and Coatings business in China. But what you should take into account for the divestment is just above the EUR 300 million.

So just to confirm, the amount that is exiting the building is EUR 300 million a year sales to Nippon and the select other divestments. Is that right?

Yes. It's just above the EUR 300 million. Yes.

The next question comes from Jaideep Pandya from On Field Investment Research.

I'm going to try and ask the question Chetan was asking slightly in a different way. You've done a fantastic job selling your assets in the last 1 year and also the industry compared to the listed multiples at which these coating companies are trading. So just from a theoretical perspective, when we think about these assets, especially the remedy assets and potentially some more Deco divestments, how should we think about this? I mean, is there a massive value uplift that could be looked at? That's my first question.

Second question is just around the volume picture in Performance Coatings. Because Marine Coatings, I guess, grew volumes year-on-year, but Protective was down. So could you just give us some color around which areas do you see volume growth currently and in which areas you see a recovery potential into 2027? That's my second question.

And then the third question really is around price versus raw materials. Now if you can see into 2027, do we think that you could see a margin expansion in the second half if raw materials stagnate?

All right. Thank you, Jay. Maarten will take the 2027 margin expansion question. I'll take the first one, which you elegantly combine 2 questions into one, but I'll answer them both.

Your question -- you're asking the Chetan question again, which is what multiples are we expecting for the disposals, the remedy-driven disposals. And frankly, it's too early to have a view on that. And you -- I think you're also alluding to other Deco disposals. We're not planning to sell anything else in Deco. So that's a moot point in many ways. And then in terms of discussions about just multiples for our businesses, given the fact that we sold India for 25x, Deco, Southeast Asia for 21x, Pakistan for 14x.

We believe that our businesses are being undervalued by the market. That's for sure. But otherwise, I'd hide behind your -- I think the favorite disclaimer your institutions have a tendency to slap on the first page, which is that past performance is not an indication of future returns. So I'd leave it at that.

It's -- you have to fight for it every time, and it really depends on the business and the buyer universe. Your question on protection, what's going up, what's going down? What's going up in protection is data centers, that is a really good trend for our protective business. So we have marine and protective. You guys understand the trends in marine and protective.

You have data center construction, which is a real tailwind. And it's a tailwind because data centers, it's a lot of heat and these are big structures, and they need certainly things like passive fire protection, which is one of the key products in our protective business. What's down, construction in general in a lot of areas. And then what else is up, oil and gas is also pretty good. But once again, it's a mixed bag of things that are doing well and the construction market, the general construction market, which isn't the greatest right now.

Maarten, the second question?

Yes. So on the raw material trends, what we've seen is a slight upward trend from -- in our raw material basket. And to be honest, that will continue in the first half. And our view is that in the second half of next year, that should start to come down. Of course, I'm talking here about the raw material trends and how we see that translating in our P&L.

On the other hand, from a pricing perspective, we are now in a stage also to prepare our price increases for the beginning of next year. So that will also start to be a discussion. So bottom line, a slight inflationary trend still in the first half and then starting to come down in the second half and further price increases to be expected for the beginning of next year.

The next question comes from Tony Jones from Rothschild & Co.

I've just got one left. On Slide 4, just coming back to volume development, I was looking at this comparing it to the one of Q2, and it looks like on a year-on-year basis, 5 markets look like they're worse in this quarter compared to the prior one.

And I think the only one that's better is Deco EMEA. So if those trends continue, why do you think volumes will be flat in Q4? And maybe could you comment how do you see early '27 starting and maybe give us an early look about that?

Tony, Deco EMEA is better in Q3. Powder is also better in Q3. It particularly powder North America, which is a good sign. Deco Latin America is like a false positive. I don't know if it's a false positive or a false negative. I need to brush up on my terminology.

But essentially, it's this timing of price increases between us and Suvinil, which has a tendency to shift a lot of volumes in Brazil. So it means a weak Brazil for us in Q3 and in all likelihood, a strong Brazil for us in Q4. So it's not as clear cut as what you're saying. What China is more challenging. Deco China is more challenging, not China in general, but the Deco business certainly.

Southeast Asia continues to be really healthy. So I think I've covered all the Deco businesses. And what else? In Automotive and Specialty Coatings, Aerospace has been doing really well. But actually, Refinish Europe is also better in Q3. It's kind of buried in everything else, but Refinish Europe is also better in Q3. So it's more of a mixed bag that we -- that what the slide might lead you to conclude.

And once again, there's a lot of border effects in these unusual times when people are taking price increases for a bunch of different reasons, including the raw material cost absorption. There's a lot of border effects between quarters. I wouldn't read too much into that sequential stuff. from a volume perspective. I think you have to look over more quarters than that to extract trends of any significance.

Did I answer your question, Tony?

Yes, that's helpful.

The next question we have is from James Hooper from Bernstein Associate General Group.

I've got 2 left, please. First one is around raw material procurement strategy. I mean, with oil prices keeping up again and the strait still closed. Are you tempted to lock in volume commitments at lower prices or stick to the normal strategy?

And then the second question is just around on the slide you had on the merger work streams referring to day 1 readiness and accelerating synergies. Can you give us a little more detail of what is going on and particularly the accelerating synergies aspect? If you can give us any comments on the phasing that you're aiming for as the merger completes?

Thanks, James. On raw materials, I'd have a pretty -- I'll have a pretty basic answer, which is that our job is not to be commodity traders. So we're not trying to anticipate the cycles or trying to anticipate a turnaround of raw material prices or an easing of the constraints in Hormuz.

Companies that have tried to do that historically, it's usually ended in tiers because if we were any good at commodity trading, we'd -- I wouldn't be on this call. I'd be rich on a beach somewhere. So it's really more about negotiating individually with the suppliers and figuring out who needs what. If you can cut a good deal because somebody is looking to secure volumes, then sometimes that makes sense. But it's not a general trend that we're pursuing.

We're just trying to make sure that our inventory levels stay where they need to be and that we manage our working capital tightly. There's no commodity scarcity in the market in the sense that it's not like 2021, '22, where you couldn't get your hands on raw mat, so you had to hoard. You don't have to do that.

So our aim is not to try to anticipate the tipping point. By the way, people that try to do that were probably disappointed in Q3 because the market went the other way from what everybody was expecting. So I'll leave it at that.

What was the second question, Maarten?

Second question is on the integration and the synergy phasing, as I understand it well. I mean the focus for us is really on capturing the procurement synergies as well as SG&A synergies as fast as possible and to front-load these in year 1 and year 2.

And specifically, I mean, this is kind of 2/3 of the synergies, making sure that we are on an extremely healthy run rate by the end of year 1. So all the preparation apart from the preparation for day 1 is on preparing and underpinning these synergies so that we are kind of -- that we can push the button on day 1 and start to execute on those. Answering your question...

Speed is our friend.

Our next question comes from Tony Jones from Rothschild & Co.

I just had 2 more that just occur to me. On raw mats, could you tell us in percentage terms, what the inflation was in 3Q and what you're seeing for the fourth quarter? And then just wanted to finish up on Refinish. Helpful comments on EMEA looking better. What about North America? How is that looking?

Refinish North America is still at trough. It hasn't picked up. It will, but it hasn't picked up. And therefore, that is not supporting our performance in Q3.

Maarten, raw mats?

On the raw material inflation in Q3, it was high single digits up, and we see a similar trend in Q4.

We currently have no further questions waiting in the queue, and therefore, concludes our Q&A session. I'd now like to hand back to Greg for any closing remarks.

All right. Thank you very much. Thanks for your time and attention today. Look, lots of questions on antitrust and regulatory, and I fully understand why. Hopefully, this doesn't obscure the fact that we had a solid quarter in Q3 that in a market that has a lack of direction from a market perspective, we're continuing to deliver on our cost savings.

We're continuing to price successfully, and we're continuing to drive the improvement of the business and to expand margins, once again, 6 quarters in a row. So that plus working capital discipline, the operational elements of AkzoNobel are healthy and we'll continue to capitalize on that advantage to drive the business forward.

And as for the merger, what we tried to give you today were elements that show you that we're progressing well. We're progressing within the bands that we'd set for ourselves and that we are coming to conclusions with the regulatory bodies around the world. And therefore, we have a line of sight to closing.

We know what we need to do. We have 2 remedies that we have to address, and that work has started. And therefore, the -- it's now a sprint to the finish line. And we feel that we're in good shape given the level of preparation that we have with our friends at Axalta. It's -- both Maarten and I have done mergers before, and I think we're very satisfied with the level of cooperation, the level of granularity and just the quality of the work that's been done to date to make sure that we hit the ground running in -- on day 1.

On those words, I thank you for your time, and we'll talk soon. Thank you.

Thank you.

Thank you. This now concludes today's call, and I'd like to thank everyone for joining. You may now all disconnect your lines.

Hello, everyone, and thank you for joining the AkzoNobel Q2 Results 2026. My name is Claire, and I'll be coordinating your call today. [Operator Instructions] I would now like to hand over to Jan Willem, Head of Investor Relations at AkzoNobel to begin. Please go ahead.

Good morning, and welcome to AkzoNobel's investor update for the second quarter of 2026. I'm Jan Willem Enhus, Head of Investor Relations. Today, our CEO, Greg Poux-Guillaume; and CFO, Maarten de Vries will take you through our results. We'll refer to the presentation, which you can follow by webcast or download from our website, akzonobel.com. A replay of the webcast will also be made available following the event. There will be a Q&A session after the presentation. For additional information, please contact our Investor Relations team.

Before we start, a reminder of our forward-looking statements disclaimer on Slide 2. Please note, this also applies to the conference call and answers to your questions.

I will now hand over to Greg, who will start on Slide 3 of the presentation.

Thank you, Jan Willem. Good morning to everyone on the call. In Q2, we delivered a quarter of growth and margin expansion. Organic sales were up 2% year-on-year with pricing up 3% and volume stable with a 1% headwind from mix. We did what we said we would do. We implemented pricing to protect margins. We kept volumes stable and we continue to execute on cost. Profitability continued to trend up. Adjusted gross margin came in at 42.7%, up 70 basis points and adjusted EBITDA margin was 15.4%, up 40 basis points marking -- making this the fifth quarter in a row of margin expansion year-on-year.

Adjusted EBITDA was EUR 398 million, up 5% at comparable scope with disciplined pricing offsetting raw material inflation. On funding, we issued a EUR 750 million bond in June, completing the financing of the special dividend related to the proposed merger with Axalta. The merger preparations are progressing as planned with the shareholder vote to be held on August 5.

I'd also like to highlight a milestone and sustainability that I'm particularly proud of. We achieved our 50% reduction target for Scope 1 and 2 carbon emissions, and we did it 4 years ahead of schedule, showcasing that we continue to probably lead the way in our industry.

Moving to Slide 4. Q2 volumes were stable year-on-year, in line with our guidance. In Coatings, growth resumed with volume up 2%. Powder delivered mid-single-digit growth with architectural up in all regions and strong momentum in Asia continuing. Marine and Protective had a smaller quarter with Protective up in Asia, but project delays impacting the Middle East because of the Iran war. Marine was lower on tougher comparatives and also the fact that a lot of ships were stuck at sea.

Automotive and Specialty volumes were up mid-single digit with aerospace remaining a clear growth engine. Refinish returned to growth overall, while stabilizing further in North America. Industrial Coatings was up in the quarter, with growth in coil, partly offset by lower volumes in packaging.

In Deco, volumes were down 4%, mainly driven by EMEA, where slower DIY season in Western Europe was only partially offset by strong performance in Southern Europe. Latin America was up mid-single digits, driven by a strong performance in Brazil as well as in Colombia. China continued to outperform a soft market, while Southeast Asia delivered growth across all markets led by a strong volume momentum in Vietnam and in Indonesia.

I'll hand over to Maarten for the numbers.

Thanks, Greg, and good morning, everybody. At group level, organic sales returned to growth, up 2%, with 3% price and flat volumes, partly offset by a negative mix impact of 1%. The divestment of our liquid businesses in India reduced revenue by 3%. FX translation, which has been a headwind for some time, only had a slight negative impact this quarter. As a result, total revenue was down 1%.

Coatings delivered healthy volume growth of 2% with 2% pricing. Mix impact was negative 2%, mainly driven by lower packaging volumes. Lower volumes in Deco were more than offset by robust pricing of 3% and positive mix impact of 2%, resulting from lower DIY volumes in Western Europe.

Group adjusted EBITDA was EUR 398 million, representing a 5% increase at comparable scope, excluding our India disposal and in constant currencies. The EBITDA margin improved further to 15.4%, up 40 basis points year-on-year. Both segments improved on pricing with coatings also supported by growth in Aerospace and Refinish and Paints continuing to benefit from structural cost savings from industrial excellence program.

The next slide. Q2 was operationally solid. Trade working capital improved to 15.6% of revenue, 140 basis points below prior year. This contributed to a higher return on investment of 13.8%. We delivered EUR 108 million of free cash flow, driven by higher EBITDA and continued working capital efficiency, supported by the resilient underlying free cash flow, net leverage came in at 2.2x.

Now handing back to Greg.

Thanks, Maarten. Looking ahead, our 2026 adjusted EBITDA target of at or above EUR 1,470 million remains unchanged. The EUR 100 million step-up continues to be driven by what we control, EUR 90 million of net savings from our industrial program with SG&A carryover and productivity offsetting inflation. We remain firmly focused on completing the industrial program by year-end while maintaining strict cost discipline. Raw material and logistics inflation is starting to moderate in certain regions though the picture remains volatile, announced and implemented pricing will fully offset the inflation we currently see, and we will go further as required.

For Q3, we expect adjusted EBITDA of around EUR 390 million. Volumes are forecast to be broadly flat. Pricing will build further as the full impact of raw material inflation comes through, while OpEx savings will be delivered as per plan.

Moving to Slide 8. Merger preparations with Axalta are progressing as planned. The F4 became effective and the proxy was filed in late June. The shareholder votes to approve the merger is set for August 5. The value case here is substantial. We've identified north of $600 million of cost synergies with roughly 90% expected within the first 3 years post close. Beyond cost, we're targeting 100 to 200 basis points of revenue synergy uplift. In addition, the combined company will have a single listing on the New York Stock Exchange after 12 months of dual listing.

Looking past the vote, the road map is clear. We'll finalize integration planning to accelerate synergy capture, announce the operating model and the leadership team, a complete revenue synergy work supported by clean teams and obtain the remaining regulatory clearances. We remain firmly on course to close by the end of '26 or early '27. In short, this is a compelling combination. The preparations are fully on track, and we're focused on executing every step between here and close.

I will now hand over to Jan Willem, who will close with information about upcoming events and the Q4 session.

Thank you, Greg. Before we start the Q&A session, I would like to draw your attention to the upcoming events shown on Slide 9. The EGM for the merger with Axalta will be held in 2 weeks' time on August 5 and our Q3 results will be published on October 21. This concludes the formal presentation, and we'll be happy to address your questions. [Operator Instructions]

Operator, please start the Q&A session.

[Operator Instructions] Our first question comes from James Hooper from Bernstein General Group.

Two for me today, please. The first one is on the disposal strategy. So in terms of the orders that you've received, it's clear there is some interest in Deco. And in the past on these calls that you said that you're still looking into smaller disposals of the Asian businesses. These offers that change your strategy on those disposals, particularly given that the Asian volumes look like they're running much faster than EMEA or Chinese Deco volumes?

And then the second question is about Marine and Protective. So it's been a strong growth driver for a few years, but it had a slightly slower start to 2026. Do you think that the growth potential of this business has changed at all longer term? Is this a temporary effect, i.e., you can't put ships stuck in the Strait or do you think that there's -- or is there going to be a structural step-down in the growth of this business?

Thanks, James. I'll take your questions one by one. So the disposals, our strategy hasn't changed. We said -- I think it was in September 2024, we said that we would refocus our Deco portfolio on countries in which we have a leadership position. We didn't have a leadership position in India or Pakistan, but these countries where these operations were more valuable to people other than us, and we ended up selling them. We are asking ourselves the same question with the Deco Southeast Asia, and we are in the process of evaluating next steps for that business.

The fact that it's -- that business is growing only makes it more attractive. And I think that bodes well for a process if we decide to launch one. But it doesn't change anything to the fact that we have a leadership position in Vietnam, but the other countries are countries in which we have to do something to get to a leadership position. So no change, just more attractive.

Marine Protective. Marine Protective is one of our franchises. It's a great business. It had a slower Q2, not really for anything for any structural reasons. Protective was fine. Marine was a bit down. And Marine is down because as you rightly said, there's a lot of ships stuck at sea and the day rates are high. And even if they weren't stuck in Strait of Hormuz, they'd probably be sailing because now is not the time for most ship owners to go to dry docking. So there's a little bit of demand that's being pushed out into the future.

And also from an Akzo perspective, the Marine business is a fixed price business. You work on tenders that are generally multiyear tenders for multiple ships and you commit to a fixed price with some escalations, but the challenge is to make sure that you don't get caught out by the raw material cycle. And I think the current market environment lends itself to a little bit of caution because the direction of that raw material cycle is a little bit hard to predict.

So a combination of Strait of Hormuz, which is temporary and a little bit of cautiousness on our part as we wait to see in which way the wind is going to be blow in terms of the raw material cycle. But the business in itself has a lot of potential, and the story is far from over in terms of the rebound, not only in terms of growth, but also in terms of profitability. Did I answer your question, James?

Can I just ask a quick follow-up on the first one. So just to clarify, if you were to think about launching a process for the SEA businesses, that wouldn't -- you don't think that would impact the value of potential sales that perhaps some of the parties who've made you offers in the past few months?

The only party that has made an offer for all of Deco in the last few months is Nippon. And this is really a question that you'd have to ask them, not us. What we are is focused on our strategy, and our strategy is to refocus the business on leading positions. Now if Nippon has an interest and is willing to step up, then who knows. But the reality is that we're not a seller of these businesses, apart from a question mark on Southeast Asia.

And then the rest of it, Nippon's timing, they're coming in late in the game. And I'm not sure that anything needs to be discussed in a hurry because once again, we're focused on our merger, and we're focused on finding an outcome that we are happy with for Deco Southeast Asia. And everything else is a question for somebody else than us.

Our next question comes from Christian Faitz from Kepler Cheuvreux.

Yes. I had technical difficulty. So I might have missed some comments, but I'm going to ask these questions anyway. Can you comment a bit on the negative volumes you saw in Q2 in Deco in Europe and in China? And pertaining to Europe, could this be a weather-related issue due to the early heat waves we have seen in large parts of your relevant regions? And what kind of feedback are you getting, how those volumes in Europe have developed in the early part of Q3?

And my second question, powder. In powder, you saw a pleasing come back in Q2 on the volume side, I guess. Obviously, benchmarking against a rather weak Q2 last year. Any drivers behind this? Is this also automotive driven or also architecture?

Let me start with the first one on Deco EMEA first. What we saw in Deco EMEA is softer DIY volumes in Western Europe. It's very much consumer confidence driven, specifically in the U.K. But overall, we see -- I mean, this is also a quarter, of course, where we have increased prices. But overall, we see continuing trend, I mean, a stronger trend in Q3 and Q4 for Deco EMEA.

For China, it's more the real estate market. As you know, the real estate market is down, and that is impacting -- structurally impacting our volumes. But overall, we are pleased with the trajectory, specifically how Dulux is doing the premium -- Dulux brand is doing in the retail markets.

Okay. Thanks. And the powder?

Do you want to take that?

Yes. Powder has been doing well. Powder is rebounded in architectural and the U.S. market has been active. We've done well in pretty much all the geographies. And I mean, I'll get the proportions wrong, but powder is something like 30% or 40% architectural and about 20% is auto related. So that just shows you that after a little bit of disruption linked to tariffs on the auto side, we do a lot of wheel coating where there were debates about production in Mexico versus the U.S. and tariffs and the likes. That situation is normalizing.

And on the Deco -- on the architectural side, it means that there's good signs of life in the market. We're happy with the direction of the powder business. And think apart from North America was roughly flat in Q2 in Powder. But everywhere else in the world, we were growing volumes, and that bodes well for the rest of the year.

Our next question comes from Matthew Yates from Bank of America.

I just wanted to ask a question about the full year guidance. Consensus, it's a little bit below the guidance that you've reiterated today. And I guess, given you've been explicit about Q3, we can infer what is implied for Q4? And if I've done this math right, it looks like you're assuming a bit of a step-up in terms of year-on-year growth in Q4 compared to most recent quarters. What is the basis for that? Where would the optimism come from in terms of volumes or trajectory of cost savings as to why Q4 would land something like up 10% year-on-year?

Now our assumptions for Q4 are very similar as our overall assumptions in terms of our trajectory of our cost savings on the back of the industrial excellence program in terms of pricing versus pricing offsetting raw material. I think there is one thing to mention is that Q4 last year was a very weak quarter. So we have, I would say, easier comps from a volume perspective in Q4, and that will support some of the coatings businesses and also how we see the phasing in some coatings business, specifically in Marine and Protective, which is also a project business.

Our next question comes from Jaideep Pandya from On Field Investment Research.

First question is around actually sort of tying into what Matthew was asking. Could you give us some color of what price versus raw materials did in Q2? And then how do you see that developing in Q3 or H2 rather going into 2027. Because I suppose quite a few of your peers have commented that Q3 is probably going to be the most sort of painful price versus raw materials. So we'll be very curious to know what's happening there.

And then the second question sort of zooms in again around Decorative Coatings. Greg, could you give us some color of like once the industrial optimization program is over, how many large sites would you be left with in Deco? And what sort of margin uplift are you sort of expecting?

I guess, in other words, I'm trying to understand, Nippon is trying to pay you roughly 10x EBITDA for the current earnings. So obviously, you see higher potential here, and therefore, you're reluctant. So what sort of increase in expectations on the earnings or the multiple could we expect if this deal was to happen?

Jaideep, I'll take the Deco question and Maarten will take the price versus raw mat question. As you said, 10x current earnings for Deco, that EUR 7.5 billion number. It's more an intelligence test than it is an offer. I mean, I don't know who would transact at those levels, especially given the fact that we're taking -- industrially, we're taking EUR 90 million of cost out this year, and there's still EUR 110 million to come next year, which is not from new actions, but just the full impact of actions that have been taken last year and this year. So -- that's -- in 2 years, that's EUR 200 million in industrial cost. And actually, quite a bit of that goes to the Deco businesses because of the roughly 20 factories that will have closed, there's the lion's share is in Deco.

So you're looking at Deco businesses, which over time, you still have -- I don't want to start guiding on Deco specifically, but you have a few hundred basis points of profitability uplift still to come in these businesses. So the reason why we're not -- there are many reasons why we're not entertaining discussions on Deco is that, one, our strategy is to focus on Deco countries where we have a leadership. And the only exception to that is Southeast Asia where we're evaluating our options currently. Two, we're under a merger agreement where anything that's -- any offer that's for less than 50% of the asset base of Akzo cannot be considered unless Axalta is willing to go along with it.

And frankly, it's not a debate worth having because of the third point, which is that the value that's being talked about is in no way, shape or form representative of the value of the business today because buying current earnings at 10 or 11x is not a good offer for Deco business.

By any comparative basis, you just look at transactions in general and the cash-generative aspects of these businesses. And that goes -- that's even without the longer-term potential, the midterm potential that you look to. So hopefully, that's the last question today on Nippon and Deco because I think at some point, before going around in circles. But good businesses, they are going to be even better, a few hundred basis points of profitability to come, and we like those businesses very much as long as we're a leader. Maarten, price and raw mat?.

So when we had the Q2 -- the Q1 call, sorry, we have been talking about a second half mid-teens impact from raw material. Currently, we see for the second half raw material impact in the teens. What happened is that specifically in Asia, raw material has been moderating. Obviously, the situation is still pretty volatile. Let's also be clear, given the events in the last week.

In Q2, we have been ramping up our pricing actions with overall pricing of 3% and pricing and we've been able to offset raw material in the second quarter, that all the actions are implemented and we see further ramp-up of pricing. So overall, you should see kind of a mid-single-digit pricing coming through in the second half to offset the raw material increase in the second half. But again, situation remains volatile. And if further actions need to be taken, we will take them to make sure that we create that offset. I hope that clarifies the -- what we're doing and the underlying assumptions.

Just one small follow-up. You are not seeing any signs of a demand destruction at least at this point with regards to such sort of aggressive pricing?

No, we've not been seeing this. Volumes are resilient, as you see also in our numbers. The only thing we've seen, and we've also commented on that, is that we saw some prebuy at the end of April, but also the negative effect in May. But overall, throughout the quarter, volumes have been resilient, and you see it coming back in the numbers.

Our next question comes from Laurent Favre from BNP Paribas.

Actually following up on this point of, let's say, prebuy and the normalization in the second part of Q2. And I'm just wondering, where do you feel we are starting in Q3 in terms of volumes versus underlying demand? Do you think that we're a bit ahead, a bit below or in line? And is there any wide difference by unit? That's the first question.

And then the second one on CapEx, if I'm not mistaken, a cut from -- on the guidance on full year from EUR 350 million to EUR 300 million. Is it a delay of spending? Or is there an underlying cut? And can you talk about whether or not it's related to the merger, for instance?

No, on the CapEx, we are clearly very stringent and tight on our CapEx outlay, but we prioritize, of course, our industrial excellence program, which is the focus to be able to end the program by the end of this year. So we are just a little bit lower. And I would say it's more in line with what also the spend of last year.

On the volume question, we don't see any change in trajectory in -- to your question on what we see in July versus what we've seen how we ended the quarter in Q2. So nothing to comment at this stage.

Our next question comes from Tony Jones from Rothschild.

I've just got 2 left. Firstly, on Deco, you talked about Southeast Asia. But for Europe or EMEA, there are some market positions where you don't have market leadership either. What's the plan there, please? And then can you provide any update on what you expect the regulatory clearances beyond the AGM for H2?

Tony, your question on Deco, you're right that we don't lead in all the European markets. We lead in most of the European markets that we're in, certainly not all of them. But Europe is really being run like pretty much like one country. The reason why relative market share is important in Deco is that you win in Deco based on brand impact and distribution. And you also have to be cost competitive. And the wonderful thing about our business in Europe is that we do all the production as one region, and we optimize our assets and the products can move around because the products are allowed to move around in Europe.

So I guess Europe is the exception to the rule in the sense that even with low relative market share in a country as long as you've got the scale of the region industrially, you can still do really well. So we're not looking at -- we're not looking at selling anything in Europe. We would always consider adding to round out some of those positions because once again, a higher relative market share is beneficial, but we're not intending to sell anything in Europe. And Southeast Asia, I think we've addressed earlier in the conversation. Regulatory, Maarten?

Yes. So of course, the first step is the EGM on the August 5, and then the order step is regulatory antitrust. We are in discussions, obviously, it's U.S., EU and the U.K., but the specific focus is on EU and the U.S. So far, discussions are progressing, and we have constructive discussions, but there's not so much to say at this stage. More clarity will be post the summer, which direction this will take. So not so much to update at this stage.

The next question comes from Sebastian Bray from Berenberg.

I have 2, please. The first is on the full year EBIT...

Sebastian? Operator?

It appears we've just lost connection with Sebastian. [Operator Instructions]

I'd like to make it clear. This isn't censorship of Sebastian. We had no idea what question he was going to ask, but if he types it, we're more than ready to back in the queue. Yes, he is back in the queue.

We now have Sebastian.

Can you hear me?

Yes, yes.

I had 2 questions.

Moderator?

We have just lost connection with Sebastian again.

Another question. We'll go back to Sebastian afterwards. Let's keep this moving.

Our next question comes from Ranulf Orr from Citigroup.

Two questions, please. First one is just on cash flow, a bit below consensus and down year-on-year in Q2. How should we think about free cash flow in the second half, please? Any identified cash outs, working capital views would be super helpful? And then secondly, just as you've had some changes to your Russian asset base. Just kind of curious to better understand what is happening there, please, and whether you think you will retain those long term?

Yes. Maybe to start with Russia. As you've seen per the decree, our Russia entities have been temporary put under the state administration. We have also said, as you've seen that we will deconsolidate our Russia activities per the 13th of July. And we have stated that our net assets are EUR 214 million in Russia as well as we have an FX on our balance sheet of EUR 449 million. This situation is pretty recent. So we -- it's an evolving situation. So we are assessing how this will evolve. And there's not so much further to comment at this stage. And when we -- when we have more certainty where this will go, we will inform you. So that's...

Maybe what we can address also is that it's not material to our full year results. It's that business is less than 2% of sales. It's -- hence the fact that we don't feel any need to change our guidance.

And then the other question is on free cash flow. In fact, I'm pretty pleased specifically how working capital is evolving during the year. So for the full year, there were, in fact, no changes in our assumptions. Working capital for the end of the year is 14.5%. CapEx is lower, as we have indicated, roughly EUR 300 million. We have also included in our guidance that the cash out from identified items will be higher because that includes merger costs. So we talk about EUR 250 million roughly. And then, of course, the adjusted EBITDA, as we've guided. So for the full year, no change in our free cash flow trajectory.

Our next question is from Sebastian Bray from Berenberg.

Can you hear me?

Yes, yes.

I had a follow-up on Russia and one on the Ichthys litigation. So just on the topic of Russia, this business had over EUR 200 million of assets associated with it. Was it really basically making no money, which is why there's no impact on guidance? Because I suppose that the margins, one could say that the price/cost recovery may have been a bit better than expected. So Russia matters less than if these assets have been taken away, let's say, 2 or 3 months ago?

And my second question is on the Ichthys arbitration. Is this going to go ahead in '27? And if so, could you give an indication if it's likely to be the first or second half of the year? Or if there might be another delay that takes it out to '28. So any update on that is welcome.

No, your Ichthys question, we've stated that there will not be any judgment before the end of this year. So it will be in '27. It's -- at this stage, not clear when it will be during '27. So no -- I cannot answer your question on that point. On Russia, we've indicated, as Greg just said, that the overall revenue is less than 2% for the group. It's not material. It's -- the profitability is more or less in line with the average of the group. So again, on a total group level, this is not material for us.

That's helpful. And sorry for the difficulties dialing in.

Yes. Third time is luck. So all good. Any other questions?

We currently have no further questions waiting in the queue. I'd now like to pass back to Greg for any closing remarks.

No. Okay. Thank you very much. We'll wrap up. Look, this was a solid quarter for us. Organic sales up 2%, pricing up 3%. Margin expansion, gross margin, 70 basis points and an EBITDA percentage, 40 basis points and a robust cash flow. So it's -- in a quarter where there was quite a bit of uncertainty, I think we're able to answer a lot of these questions and it bodes well for the rest of the year because although you're seeing 3% in pricing, these price increases have gone through and they'll continue to be invoiced and therefore, to ramp up just as the raw material impacts are ramping up and pretty peaking in Q3.

So we feel confident about the rest of the year. And we also feel optimistic about the shareholder vote in the Axalta merger coming up soon and good shareholder support and good interaction. And we believe that, that merger will create a lot of value, and we're excited about it. So lots to look forward to. And we thank you for your time and for your attention, and we look forward to talking to you soon. Thank you.

Thank you. This now concludes today's call. I would like to thank everyone for joining, and you may now disconnect your lines.

Ladies and gentlemen, a warm welcome to all of you participating today, either in person or virtually. My name is Ben Noteboom, Chair of AkzoNobel's Supervisory Board, and I will be chairing today's meeting. I hereby open this Annual General Meeting of Shareholders. Together with me on stage are Wouter Kolk, Chair of the Remuneration Committee; Ute Wolf, Deputy Chair of the Supervisory Board and Chair of the Audit Committee; Greg Poux-Guillaume, our CEO; and Maarten de Vries, our CFO; and Charlotte van Meer, our General Counsel. Also, attending this meeting are the other members of the Supervisory Board, Ester Baiget, Jaska De Bakker, Hans Van Bylen and Joachim Muller.

This meeting will be held in English, at least, I try. Questions may be asked using the microphones available in the room or via the chat box on the online voting platform. Please, if you ask questions, start by stating your name and if applicable, the name of the shareholder you are representing. To ensure an efficient meeting and to allow others to speak, please say ask two questions that always seems turns out to be impossible, so but please limit the time you're speaking. Questions not answered during the meeting will be answered on our website. We would like to remind our shareholders that the proposed merger with Axalta will be the topic of our Extraordinary General Meeting to be held in the course of this year. Related questions will be addressed at that time. Before I continue, I hand over to Charlotte, Secretary of this meeting to explain the voting procedure. Charlotte?

Thank you, Ben. You may cast your votes on all voting items during the entire meeting. The voting has been open since the start of the meeting. The Chair will clearly indicate when the voting will be closed after the last voting item and provide you some time to check if you have submitted all your votes. The shareholders attending the meeting in person can use the instructions provided at registration to vote using their own electronic devices or the voting devices provided at registration. Should you have any questions, please raise your hand and one of the hosts will assist you.

For shareholders attending the meeting via the online voting platform, the next slide shows the instructions for navigating to the webcast, the chat box and the voting. For further information on virtual voting, I refer to the manual published on our website. You can change your votes throughout the meeting until the Chair closes the vote after the last voting item. Please submit your votes on all voting items. Shareholders were also given the opportunity to vote remotely via the ABN AMRO website. Mr. Bart Jan Kuck, civil-law notary is also attending today's meeting and will cast the votes as a proxy, an independent third party for the participating shareholders. For this meeting, the 26th of March '26 was set as the record date. Anyone owning shares on that date was entitled to register to attend, vote and participate in today's meeting.

The voting results of all 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 AkzoNobel website. A copy of the agenda and notes were available at the information desk outside the room. This meeting has been properly convened and is entitled to adopt legally valid resolutions on the agenda items. Back to you, Ben.

Thank you, Charlotte. The registration of shareholders closed at 2 p.m., a share capital of approximately EUR 69 million is represented, so that in total, 138,406,000 votes can be cast. The level of tenders is approximately 81%.

We will now proceed with Item 2A on the agenda, the report of the Board of Management of the financial year 2025. We have been able to read and review the annual report 2025, which was published on the 24th of December of this year. Our CEO, Greg will now discuss the company's performance during 2025. Greg?

Thank you, Ben. Good afternoon, and welcome to everyone joining us today, both here in Amsterdam and virtually. Do I have the clicker somewhere or somebody -- over here, all right. 2025 was a banner year of disciplined execution across AkzoNobel. We delivered tangible results across all our key priorities. Our efficiency programs delivered EUR 200 million in savings, reflecting both strong cost discipline and operational focus. The SG&A program was fully executed mid-2025 and our industrial transformation program remains firmly on track.

These actions translated directly into improved profitability with our adjusted EBITDA margin expanding 40 basis points year-on-year to 14.2%, demonstrating clear structural progress. We also significantly strengthened our cash generation. Improved working capital management drove free cash flow of more than EUR 600 million, up 65% year-on-year. Separately, our active portfolio management continued to create meaningful value. The key milestone was the sale of our India business, which delivered approximately EUR 900 million in proceeds at an attractive 25x EBITDA multiple.

Our portfolio review of paint positions in Southeast Asia continues in line with our strategy to focus on leadership positions and to monetize assets that are significantly more valuable to others. Finally, we announced the proposed all-stock merger of equals with Axalta in November, a transformational step that will bring together two highly complementary businesses and position the combined company at the forefront of the coatings industry. Sustainability continues to shape our industry, and we see it as a powerful opportunity aligned with AkzoNobel's strength in innovation and leadership.

We made strong progress towards our science-based target to reduce carbon emissions across our value chain by 50% by 2030 versus the 2018 baseline. In our own operations, emissions are already down 47%, well ahead of our original 2025 interim target and within striking distance of our 2030 goal. Renewable electricity now accounts for 69% of our consumption, reflecting strong progress towards our 100% target. We also made a step change in our supply chain carbon footprint, reaching a 19% reduction, a meaningful step up from 12% a year ago. This remains an ambitious journey, but through close collaboration with partners and continued investment in innovative solutions, we're driving the progress that is needed.

Alongside our carbon reduction, we continue to advance our circularity ambitions, including our focus on reducing waste to landfill. Last year, circular -- sorry, last year's circular use of materials improved to 75%, supporting the development of lower carbon solutions for our customers. On the social side, we achieved our goal of empowering more than 100,000 people through skills development in 2024, six years ahead of plan. While this milestone has been reached, our commitment to supporting communities around the world continues. Finally, the female representation at executive level rose to 27%, an important step in building the diverse leadership that will drive AkzoNobel forward.

Our strategy is anchored in four strategic pillars, and we achieved important milestones across each in 2025. Sustainability-driven innovation remains a key growth engine. Notable launches last year include our award-winning powder technology for protecting electrical vehicle battery bottom plates and a new waterborne refinish basecoat that reduces process time, energy use and emissions. We continue to invest selectively in attractive growth markets where we hold differentiated positions, including aerospace and marine and protective. Major capacity and capability upgrades at key sites in the U.S. and the U.K. further reinforce our leadership in these high-value technology-intensive segments. Active portfolio management remains central to our approach.

The completion of the India divestment marked a major milestone, while our broader portfolio review continues with particular focus on subscale paint positions in Southeast Asia. Operational excellence underpins everything we do. Our SG&A program has been completed, delivering EUR 200 million in structural savings. In parallel, our industrial transformation continues to advance with 12 sites closed as per the end of 2025, all executed without any impact to the business.

Our efficiency programs are translating directly into stronger financial performance. As the industrial transformation progresses, we're improving both the efficiency of our asset base and our profitability. Combined with the structural benefits from the SG&A program, this has driven a clear step-up in performance since 2022. Return on investment has improved from 9.8% to 13.5% and our adjusted EBITDA margin has expanded from 10.7% to 14.2%. We remain firmly on track to achieve our midterm targets of 16% to 19% return on investment and a 16% adjusted EBITDA margin by 2027 with the full benefits of our actions still to come through.

Cash generation was another highlight for the year. Free cash flow reached EUR 606 million, driven by disciplined working capital management. Trade working capital ended the year at 14.7% of revenue, well within our target range and achieved while absorbing the inventory build needed to support our industrial transformation. Combined with the proceeds from the India divestment, the strong cash performance allowed us to reduce net debt to below EUR 3 billion and bring leverage down to 2x net debt to EBITDA, fully in line with our leverage target.

In 2026, we aim to increase our full year adjusted EBITDA by at least EUR 100 million on a comparable basis. The step-up is driven by what we control, EUR 90 million of net savings from our industrial program with SG&A carryover and productivity offsetting inflation. We remain firmly focused on completing the industrial program by year-end while maintaining strict cost discipline. Although the Middle East conflict has limited impact in the first quarter -- had limited impact in the first quarter rather, raw material and logistics costs will ramp up throughout the year. The exact impact is still evolving, but additional pricing has been announced to fully offset the inflation we currently see, and we will go further if required.

On November 18, 2025, together with Axalta, we announced a proposed merger of equals that represents a transformational step for both companies. Combination creates a stronger, more resilient global coatings leader with enhanced margins and superior cash generation. Sustainability and innovation are core to both organizations. And together, our R&D capabilities will accelerate the development of high-performance solutions for customers.

The combined company will serve a broader range of end markets with leading positions across key segments. We see at least $600 million of cost synergies and a proven leadership team to execute with discipline. Closing is expected late this year or early next year. Merger preparations will run in parallel while our core execution agenda -- in parallel -- I'm sorry, with our core execution agenda, there will be no distraction from delivering against our 2026 outlook. Ben?

Thank you, Greg. Before answering your questions, we will continue with the next item on the agenda to be the implementation of the Dutch Governance Code 2022. The new code took effect on January 1 of last year and focuses on the risk management statement. A review of the company's internal risk management and control systems in the context of compliance with the code was performed and the gap analysis was carried out, highlighting certain areas of practices that required amendment. No significant amendment -- adjustments were required.

Further information on our compliance with the new code and our governance structure can be found in our annual report. We will now answer questions related to these agenda items. Any questions related to ESG should also be asked at this time. Please be reminded to start by stating your name and if applicable, the name of the shareholder you are representing. Whom can I -- yes, please go ahead.

My name is Martin Kaipos, and I represent the [ Man ] Asset Manager for several pension funds in the Netherlands, among which PME and PMT. First of all, we would like to thank you for the constructive pre-AGM dialogue that we had with the AkzoNobel team and for your continued openness to engage with investors. We also wish to complement the company on several positive developments that we noticed in the annual report, such as the informative case study on responsible AI, and that was one of the [indiscernible] focus points of this year. There are three topics I would like to address today. Two of them concern this agenda item. I'll ask them both, so you could respond to them at once.

The first question, during the analyst call, in connection with the announced merger, the CEO indicated that, that the ambition is to make the combined company a U.S. company. We would appreciate some further clarification on the statement, particularly in light of the fact that the combined company will be domiciled in the Netherlands statutorily and will be subject to the Dutch Corporate Governance Code. Can the Executive Board and the Supervisory Board confirm that both until and following the completion of the merger, the governance structure will continue to reflect the Dutch stakeholder model and that the newly appointed executive and nonexecutive directors will, in practice as well in conduct, ensure a balanced consideration of the interest of all stakeholders with the current rights of shareholders remaining fully respected and unchanged. That is my first question.

The second question relates to the subsidiaries in Russia. At last year's AGM, I asked for clearer insight into the governance and long-term strategy of these activities. And since then, we have observed limited progress in terms of disclosure and the annual report does not provide a clearer long-term direction. And in addition, transparency on taxes paid to the Russian authorities appears to be deferred until later this year whereas tax payments to other governments were already disclosed on 10th April. And given the sensitivity of this issue and the associated reputational risks, this timing raises questions on our end. So could the Board explain why a clear long-term strategy for the Russian activities has still not been articulated and how the delayed disclosure on tax payments to the Russian state aligns with AkzoNobel's stated commitments to transparency and responsible business conduct.

Yes. Thank you for the question. So I'll answer the first question. I don't remember literally what was said, but we will have -- we'll have U.S. listing. But we will stay a Dutch NV domicile in the Netherlands that automatically implies that we have to work according to the total governance as is valid in the Netherlands. So that is a yes to you. So that means we have to take into account and actually want to all stakeholders, whether or not future Board members will do that, we'll, of course, as with everybody is being appointed, make sure they do because that's our responsibility. So there's no question about that. Does this answer your question?

Yes, I think I was still looking for clarity on which governance framework will then be...

We'll be in the Netherlands. So we automatically will have to follow Dutch governance. Yes. I mean we will have, of course, the structure will be 1 tier Board, but that's also in accordance with Dutch governance. So there's no questions there. Russia, I go to the left, it must be coincidence.

Yes. Maybe first, the last part of your question. We have recently reported in terms of our tax transparency of last year. The reporting has been done consistent with the reporting of the previous year. So where we report the 15 key countries, and we are fully transparent about this. In fact, we will follow the EU directive in terms of tax transparency, which means that before the end of this year, we will do an additional reporting covering the countries following the EU directive in the country-by-country reporting, and it will include Russia.

We need some time to make sure that we collect the data, but also validate the data. On Russia itself, clearly, we are on a path to minimize our exposure to Russia. But as you know, there are limited strategic options to Russia. And therefore, I mean, from a governance perspective, we continue to manage this on arm's length. It's completely ring-fenced, and we have no direct involvement in Russia.

Yes. So as I stated, I asked similar questions last year. So that is why I raised them again. And regarding tax transparency, do you recognize that for investors, this poses also a reputational risk. I also need to report back to clients what the current status is and also whether taxes are paid or not. And that information is now available at the end of the year instead of together with the 15 countries that were selected for the country-by-country report. So I think our recommendation would be to disclose it in an earlier stage.

We will publish it as early as we can. So I mean, if you imply that we will wait completely until the end of the year, that's not the case. But we need some more time to do this publication. And I can assure you that we comply, of course, to the local tax rules in every country.

Yes. Please, if you have a question, go to the microphone.

Yes. Thank you, Chair. My name is [ Pim Postma ]. I represent the VEB European Investors. I actually have some questions centered around three themes. Let me start with the first one. So a couple of questions on the margins and the ROI on Coatings, specifically because AkzoNobel has been allocating more and more capital towards Coatings. And according to the annual report, and we also saw it just on the slide, the return on investment in Coatings is also higher than in paints. So that makes perfectly sense.

However, we noticed that the ROI calculation is heavily influenced by acquisition-related intangibles, such as goodwill and brand names, especially within paints. So roughly speaking, about EUR 2 billion of the EUR 3 billion invested capital in paints consists of intangible assets. If we exclude these acquisition-related items from the ROI calculation, the picture, well, changes quite significantly. And in that case, paints actually appears to be more efficient and more profitable than Coatings. Coatings also seems to be structurally more capital intensive, while its profit margins over the last decade have been structurally lower than paints.

So against that background, I have a couple of questions. And the first one is actually a strategic question. To what extent does it make sense for AkzoNobel to put even more emphasis on Coatings if within AkzoNobel, that business segment is actually more capital intensive and it does not come with higher margins? And the second question, on which of these 2 pillars does the company see the greatest room for meaningful improvement in Coatings? Is it on the capital intensity side? Or is it on the margin side?

And the third question around this theme. How does the Board explain the structural and long-standing margin gap between coatings and paints? And actually, I wrote it down. The statement was made that Coatings is high-value technology-intensive segment. And in theory, one could argue indeed that coatings is more technical, more specification driven, less exposed to regional pressure, et cetera, than paints. Yet that logic does not show up in the profitability margins at all. So I was just curious on the Board's view on this specific observation.

And finally, in the annual report, I noticed a specific statement on ongoing competitive intensity and increased competitive pressure in Coatings. To what extent does the Board consider these pressures to be structural? And does that not imply continued pressure on margins in the Coatings segment?

Okay. Thank you, Greg?

These are all intelligent questions and actually really well formulated. You've clearly done your homework. It's -- you're giving a snapshot, which is factually correct, but not necessarily in a dynamic sense. What I mean by that is the difference between the paints business and the coatings businesses is that the paints businesses are Deco is inherently local. The product doesn't travel because it's waterborne. The cost to weight doesn't make it favorable for it to travel. And therefore, you compete based on relative market share locally, which means that you win through branding and distribution. What that means is that if you're a leading player locally, you'll be a lot more profitable than if you're a follower because once again, you've got the brand recognition that allows you to have pull in the market and you've got the distribution that allows you to have reach.

When we say that we will increasingly allocate capital to the coating businesses, it doesn't mean we don't like the Deco businesses, and it doesn't mean that the Deco businesses are not good businesses. It means that growing in Deco makes sense if you reinforce existing local positions to increase your relative market share. But adding another flag in a country that you're not in doesn't really add anything. Whereas the coating businesses are global businesses where you sell the same product around the world, which means that growing in these businesses allows you to have scale, which allows you to distribute the same products without additional development costs that you can actually ship to some extent around the world because the cost to weight is more favorable, and therefore, you get a scale effect.

So if you're going to deploy capital to grow, it's better to do that in a business that is suited to the advantages of a global innovation-driven company than to do that in businesses where you compete on an even playing field with the independent local players, which is not a great situation to be in when you're a large corporate with expensive people like us. You want to make sure that you compete in the places where you have the best chances to win.

In addition to that, as you rightly said, the coating businesses are more innovation intensive. And that also plays to our strengths, which is that we are one of the leading innovation platforms in this industry, and that should allow us to generate higher returns over time. So then if you look at it in a static versus dynamic way, there are moments in time when Deco is going to be more profitable than coatings. And on average, a company like ours should be able to have -- to be very profitable in Deco in leading positions, will struggle to be as profitable in follower positions and should be able to increase margins in a disproportionate way with scale on the coating side of things.

Hence, our capital allocation debate. And as you look at the snapshot today, if you think back to Q1, the results that we've just announced, I know this is the AGM from last year, but I'll use that as an example. As you saw, our margins in Deco are 300 basis points up at 17.3%, I think -- and our margins in Coating are 100 basis points down at 13.6%, I think, off the top of my head. So you could say, well, AkzoNobel has its strategy the wrong way around. You should double down in Deco and -- but I go back to the explanation I just gave you.

And these businesses behave differently because the Deco businesses are driven by consumer confidence locally. And the coating businesses have a tendency to be driven by GDP and therefore, more sensitive to macroeconomic events. So once again, we -- it's not that we don't want to be in Deco. We want to be in Deco, but we want to be in Deco only where we have the cards to win, to have high relative market share. And what our disposal of our India business, and I know we're talking 2025, but Pakistan announced a few days ago, AkzoNobel trades at roughly 9x EBITDA over the last few months, which means that you as investors decide that our profits are worth 9x in terms of value.

But these outside investors that are buying our Deco businesses in the case of India, paid 25x and in the case of Pakistan paid 14x, which confirms once again the notion because these are both local players that these businesses are more valuable to you if they can allow you to increase significantly your relative market share. So not an exit from Deco. We like Deco, but a refocus to positions that are leading positions. And on the coating side, an allocation of capital, not to create new fronts and new coating businesses, but to increase scale in the business that we have, so we can be as competitive as we can in markets that are inherently a good fit for our skill set. Did I answer your question?

Yes, definitely. Maybe if I may. A follow-up question because -- do you then also see quite significant different margins in terms of, say, let's say, the Indian business or the Pakistan business, the Deco margins were done quite lower, I guess, if you don't have a market leader position there compared to the position, for example, in Europe. Is that correct?

Well, it's almost correct, but not because you're almost right. It's because there -- as in every rule, there are exceptions. In the case of India, we had 5% market share. The market leader had 50% market share. Now you could say our profitability should be much lower than the market leader. I think the difference in India is that the market leader was more of a mass market player, and we had the leading premium position. So your challenge is that you've got -- actually in India, we had a lucrative 5% position, essentially a high-margin 5% position.

But the problem is that over time, if you're a niche premium player, what happens is that the mass market guys have a tendency to migrate up. And also the brand with volume, the brand becomes better known and the distribution is more powerful. So over time, your mass market competitors that are multiple times your size have the elements, the tools to erode into your premium position, but also your premium profitability. And that's what's currently happening in India. There's an external player, actually a cement company, [ Birla ] that decided that they wanted to create a brand from scratch. And they build it and they will come. They built six factories. They launched the brand, and they said, here we are.

What you're seeing in India currently is you're seeing an erosion of that market profitability. And what you don't know over time is at what level that's going to settle. So the combination of the market uncertainty, our strong position at this moment in time and our inability to reinforce ourselves in India because as much as I can sell our business for 25x EBITDA, as a company trading at 9x, I can't buy a business in India 25x. You would rightly come back next year and tell me what the hell are you doing with your capital allocation?

So in some cases, it's better to let somebody else own the business and reallocate the capital to either to give it back to shareholders, which is always a good option, but also the other option is to reallocate it to businesses where that capital can actually generate outsized returns. That's the logic. If you take Pakistan, Pakistan is a lower profitability business. So it really depends.

But on -- in general, the rule is correct, which is that if you plot profitability against relative market share, you get a line. So it tells you there's a high correlation. But as in any correlation, you know, there are two things. You've got outliers. And India is a weird outlier, but a weird and wonderful outlier because we sold it for very good money to a good owner. People of our former business are excited for the next stage of their adventure. And we're excited to be able to reinforce our balance sheet and get ready for the next adventure.

All right. Yes. Now we're already talking about, for example, the Pakistan business and the India business. I have a couple of questions also centered around this theme. So if I may...

As long as you don't do the same thing I did, we'll just talk about 2026.

No, no, no, definitely not. As I understand it, well, AkzoNobel still has -- even though the merger with Axalta has announced, it still has the ability to monetize certain assets, right?

Yes.

Before the completion. And well, recent examples, as just mentioned, the India business and the Pakistan business, but I believe also some other businesses within the Deco in the China, Northeast Asia position, right?

Certainly not China. China is not something we're considering, but Deco businesses in the rest of Asia -- in China, we're #2 in retail. We have a strong position. In the rest of Asia, it's a mixed bag. So we're looking with the same critical eye at those assets. We don't have to do anything, but we are looking at whether it makes sense to do something.

Yes. And my feeling is probably you will also get high multiples then, I guess, right? Is the market there...

As we say in France, Inshallah.

Yes. Then a question is around that specifically because, well, if AkzoNobel is indeed able to sell these businesses at valuations multiples way higher than Akzo's own trading multiple of around 9x EBITDA. But does that not suggest that, let's say, part of the, let's call it, hidden value or excess value may effectively be shared with Axalta shareholders because the ownership ratio of 55%, over 45% is already fixed. And that was based on the 9x EBITDA multiple of Akzo.

I'll stop you by saying this is correct. So then you may want to know why is this acceptable?

Yes.

Should I answer that question?

Definitely.

Because if you're an Axalta shareholder, you're looking at this deal and you're saying the vehicle Refinish business, which is the largest and most profitable business at Axalta is currently at a historical low. The U.S. markets corrected by a bit more than 10% and the European market corrected by a bit less than 10%. And this is due to a temporary value crunch where that insurance premiums went up significantly and disposable income got compressed.

And essentially, there's a moment where households had to decide what they were going to spend money on. And in many cases, they decided to hold off on car repairs, just to not have to absorb the deductible. And what you're seeing currently is you're seeing the insurance premiums actually return to normal levels. And the average Axalta shareholder will tell you that they believe that business will return to its normative level. And then they ask themselves the question of why am I sharing that value with the Akzo shareholders.

So I think the a good merger is a merger in which nobody is really fully happy. Nobody is really fully unhappy because we think that we're sharing something with them. They think they're sharing something with us. Our collective view is that it's actually a balanced trade and that -- beyond that balanced trade, we're going to generate together $600 million of synergies plus revenue synergies, and therefore, it's the interest of not only shareholders, but also stakeholders.

I propose that we stick to 2025 because we'll discuss this in the AGM, whether it's a good idea or not. It's a good idea.

I already gave like such an extensive answer that we can probably move to the next question, right?

More or less balanced. I get that. I just wanted to make sure that the...

For the remaining of the meeting, I would like to stick to '25.

The merger was announced in '25, right? So these questions are quite valid.

I answered your questions.

Also, [ born ] in '25. We can't talk about the future either, we don't know. But...

It's not necessarily the future, but -- all right, thank you.

Thank you. We have a question, please.

Thank you very much. My name is [indiscernible]. I'm a private investor. I have one question. The defense sector offers a lot of opportunities regarding, for example, the German market and U.S., et cetera. Has AkzoNobel a large stake in this sector? Is the company actively working to have a bigger market share in this niche as it is quite a nice opportunity, especially after the merger.

We're present in this sector. We have a reasonable exposure, but not a very consistent exposure. We're strong with Navies. We're strong with the Navy, with the Coast Guard. We are historically weak despite being a leader in aerospace coatings, we're historically weak in coatings for aerospace defense. So said in a simpler manner, we're very good at coating Navy ships, but we have an underrepresentation in military airplanes. So the opportunity for us is to use our strength in the civil aviation business to progressively become a bigger player in the military aviation business.

But that takes a lot of time because these decisions are made at the beginning of a program, you know, the Eurofighter or the F-35. It's not -- they don't decide to change the plane along the way. The armies of this world or the defense companies of this world select somebody at the onset of the program. And therefore, between the moment when you decide to reinforce that position and the moment where it's visible in the numbers, there is this 5, 6, 7 years. So we're working on it, but with a good position in naval and a weaker position in aviation -- defense aviation.

And may I have second question about this item because you mentioned the naval opportunities. But even if there are today more drones, there's also a big opportunity for -- well, on the land, cars, tanks, et cetera, to paint. I presume that you're painting.

We're active in all these areas. But once again, with a historical underrepresentation in anything that's not navy and therefore, an opportunity to grow in these other areas, as you rightly said.

I saw a question in the back. Yes, please.

My name is [indiscernible]. I am part of the RM -- or I'm not part -- I also am the director, but also the only employee of the new [indiscernible], so I'm not just part. We are an association of faith-based investors, Christian Dutch investors, and those are not private investors, but those are Christian institution churches on both Protestant as well as Catholic side. I could make a joke about that your paint was probably -- you paint a lot of church buildings. But in addition to being clients and consumers, our members are also fairly heavily invested in AkzoNobel, we discovered. And so it's important for us to be here.

And I'm assuming one of the reasons they are invested in AkzoNobel and have been historically so is because of the sustainability performance historically that AkzoNobel has shown. I don't want to wax too philosophical and about -- or wax poetic. But back in the day, when I worked at the VBDO, AkzoNobel was one of the companies that was always very much scored very high on the different benchmarks. And I'm assuming that's part of the reason why our investors are invested in AkzoNobel. Recently, you were the first company in the Netherlands to reduce ESG-driven metrics for executive compensation. We've seen a lot of -- a number of Dutch publicly traded companies sort of follow your lead this year as well.

And in the proposed merger statement -- in the merger agreement, we don't see the word sustainability come back that often. Of course, it's less about a word, but more about actions and policy. So my question is, how can you reassure us as faith-based investors that sustainability will remain a core priority, given that you're being an NV here, but you will be moving -- working with an American company. And can you maybe provide a bit of insight because we're looking back on 2025, provide a bit of insight into the role sustainability played in your -- in these merger discussions.

Thank you. We do hope that our paint is on a lot of your churches because it protects edifices and objects forever. So it's a good fit. We are the market leader in sustainability and certainly in the paint and coatings industry. You don't have to believe us. All you have to do is look at the various rating agencies, MSCI, EcoVadis on just about any rating out there, you'll find us well ahead of anybody else. So the last thing that we do is to abandon these principles for the sake of a merger.

So yes, sustainability is a big part of what we're going to do with Axalta. You're right to say that American companies are less focused on this generally, and it's certainly less present in their remuneration metrics. It doesn't mean that this is opening the door for us not to care about sustainability. On the contrary, we're -- we've invested too much time and effort to not continue leading the pack. But it does mean that this is an opportunity as a combined company to take that to the next level. So we're not stepping back in our ambitions in any way. We're actually doubling down.

Now to your point of our reducing the weight of ESG in our remuneration metrics, we were probably too far ahead. I think we've gone to the point where it was 34% of LTI was ESG. And in a world where investors are skeptical about anything that is not fully audited and science-based, you get to a certain level where you start getting pushback about you're actually shifting your remuneration from things that I can measure to things that are measured, but are measured in a frame that's still evolving.

So as you saw, we stepped up in our sustainability reporting. We're also ahead of our obligations at this point. And we've aligned our remuneration metrics. We've kept ESG, of course, but we've set it at a level that talking to our investors, everybody was comfortable with and didn't raise questions as to our commitment. So we hope it was understood that way. That's what we were trying to do. And once again, this is -- the merger is an opportunity to also bring those innovations, those -- that knowledge about -- as to how to make a coatings company more sustainable, also bring that to the Axalta portfolio, and that's exciting.

Yes. And I think that's very encouraging to hear because you will be, as I think ESG investors and also companies that continue to focus on sustainability, you're facing significant headwinds. And let's just say, a few years ago, it was a lot easier to present about ESG and potential links with the Dow Jones Sustainability Index or whatever, but you're facing some significant headwinds there.

So then, again, as faith-based investors who care not just about sort of key metrics, but also something a little bit higher, then we would encourage you to continue on this path with sustainability and make sure that care for the people and also the planet is continued in there, and we look forward to following you. And if you're moving on to not a Dutch stock exchange, but American Stock Exchange, luckily, we have a U.S.-based sister organization that I'm meeting with the director after this. So we will gladly pass them on to you and continue the dialogue with them. Thank you for this.

Thank you. We look forward to it. And once again, our ambitions hasn't changed. I've been here for 3.5 years. My first AGM, I think there were 98% of the questions were on sustainability and nobody cared about the numbers. I think the world is rebalanced in the sense that I'm not encouraging you guys to ask 98% of the questions on sustainability because I think there's a balance. But you haven't seen us waver in our ambition and in our drive to improve our sustainability metrics. So these things come and go. Right now, sustainability is less of a focus for investors. It's not less of a focus for Akzo.

Great to hear.

Any more questions? No. One more question over there.

By the way, our Head of Sustainability is sitting in the front row, so you can grab him right afterwards. Wijnand. Wave your hand, Wijnand.

Yes. Pim Postma again from the VEB. I have a few questions about the announcement of the Axalta deal. So these are definitely 25 questions. So first, what stood out to us is that the market actually shown very little reaction to the, let's say, value of the announced synergies, right? So it was also on the slide just yet. The company talks about $600 million in annual cost synergies, which would normally imply several billions of value creation, right? And yet, on balance, the combined market value of AkzoNobel and Axalta barely moved following the announcement. So that was surprising to us. But how does AkzoNobel view this initial vote or disbelief, let's say it, in the value creation potential of both companies?

And second, AkzoNobel also mentioned something about expected revenue synergies of 1% to 2%, if I recall correctly. Can the company say something about when they can say a little bit more about these specific synergies? And then on a completely other topic, which is the foreign exchange headwind, which -- well, I actually went to the office and I calculated it back over the last decade or so. It's like 2.5% drag on the revenue growth on average per year. So it's quite significant foreign exchange headwind. So my question is, what is Akzo actually doing to reduce or mitigate this foreign exchange exposure? For example, does the company see more scope to rely more on foreign exchange hedges, for example, or natural hedges, something like that?

I'm going to start giving shorter answers. So I'd say for the ForEx drag, maybe start reporting in dollars. It's all translation. So it's because we report in euros. It's not transactional, it's translation. Your other question...

Stock price development.

Stock price. Why didn't people reflect their -- investors reflect their enthusiasm during the share price.

We didn't share anything.

It's really interesting. You'd want to have immediate gratification of you announce something that creates value and it's reflected in your share price. But the reality is that, given the way regulatory approvals work in the current environment, between the moment you announce and the moment you close the deal, it's 12 to 18 months. So what you're seeing increasingly in these transactions that are announced is that the share price doesn't move, and it doesn't move until investors feel that either you've put a lot more meat on the bone and they feel that this is immediate and it's time to position yourself or they feel either that the merger is very likely to happen or very likely not to happen.

We're still a few months away from a shareholder vote. We're still a few months away from regulatory approval. We're still -- I mean, closing earliest is at the end of the year. So in a market that has a lot of uncertainty, investors are not finding it urgent to position themselves on something on which they have time. So I sound like I know what I'm talking about. It's -- we spend a lot of time analyzing it with our advisers.

You should tell us actually.

And it seems to be the case.

This is the wrong way around.

Also, curious...

We want to move to the next question.

I'm just curious what you see and [indiscernible] reconcile this entire because that might give a feel that the market does not believe or whether there's some, let's say, discomfort...

[indiscernible] shareholders.

That's true. But what do you see as the biggest risk...

We strongly believe in the deal, obviously.

What do you see as the biggest risk if the deal not coming through reconcile from this specific market reaction?

There's very good shareholder support. We spend a lot of time talking to shareholders. We track how they feel about the transaction and what they intend to vote. And we feel that from all the information that we have, we have good support on both sides because shareholders on both sides will be voting. But once again, closing is end of the year. It's -- in a market where you have year-end, you don't know what's going to happen next week. So a lot of investors are sort of sitting on their hands and waiting for the dust to settle.

So no signs on, let's say, disbelief or take these votes from investors.

We'll see at the AGM. But again, I think we should not talk too long about the merger. We're going to -- in the middle of the year, have a lot of time to talk about all the questions on this topic.

See you then.

Yes, I'll proceed to agenda Item 3a, which concerns the adoption of the financial statements of the year 2025. Dennis van Ameijden, representing our external auditor, for that financial year of PricewaterhouseCoopers Accountants N.V. is present here today to answer any of your questions, except they will be guided through us because not all questions are already accountant, obviously. Dennis, can I ask you to comment on the controls performed by the PwC during this year, the financial year.

So good afternoon, shareholders. My name is Dennis van Ameijden, and I'm an audit partner with PricewaterhouseCoopers Accountants N.V. Today, I will briefly touch or outline on our 2025 assurance work for AkzoNobel covering both our audit of the financial statements and our limited assurance procedures conducted on the company's sustainability statements.

Over the year, we engaged with AkzoNobel's management and the Supervisory Board to define our audit scope, identify and assess risks and review the results as a result of our audit in a constructive manner. On February 23, 2026, we completed our assurance work and I personally signed our unqualified audit and limited assurance report confirming that the financial statements are fairly stated and that the sustainability statements comply with the European Sustainability Reporting Standards and EU taxonomy requirements.

We also confirmed that the Board of Management report is consistent with our findings of the audit and that we did not identify any material fraud. So first, let's discuss the audited financial statements. In an audit, we plan and perform our audit to achieve a reasonable level of assurance that the financial statements are not materially misstated, whether due to fraud or error. It goes without saying that I do not do this work just by myself. I have a central audit team at the group level, and there are audit teams in the 18 countries within our scope. We also involved experts in the areas of pensions, share-based compensation, forensics and valuations as well as specialists in the areas of tax, IT and treasury, all from PwC.

A large part of the work by my central team relates to the supervision and review of these foreign teams and specialists and experts, including performing site visits to meet with local management and local teams. Together, we spent roughly 80,000 hours covering our group audit of 45 components. For the components that are not in our scope, we perform procedures to corroborate our assessment that there were no significant risks of material misstatement within those components.

For more details on the procedures that we have performed, I refer to our audit report, which is in the annual report on Page 212 onwards. So let's move to the key audit matters or comps. These are those matters that in our professional judgment were of most significant in the audit of the financial statements. In determining which audit matters are considered key and thus require inclusion in our opinion, we assess the business context of AkzoNobel, the significant transactions in 2025, our significant audit risks and areas that inherently involve key accounting estimates and judgments and other matters that we generally report to management and the Supervisory Board of AkzoNobel.

In our 2025 audit report, you will find 4 key audit matters in line with our 2024 audit, the valuation of defined benefit obligations and the recoverability of deferred tax assets remain key in 2025, mainly because of their magnitude and the complex process and judgments underlying the valuations. In both these areas, we engage specialists and experts and specifically analyze the assumptions made like discount and inflation rates, salary developments, mortality assumptions as well as future taxable profits.

Compared to our 2024 auditor's report, we have added the recognition, measurement and disclosure of the provision and contingent liability related to Project Ichthys and the valuation of goodwill and brands with indefinite useful lives for the Decorative Paints, China and North Asia business units as a key audit matter. The inclusion of the claims associated with Project Ichthys [indiscernible] as a come was driven by 2025 developments in the court case and the impact it had on management judgment implied in context of the recognition or not or the individual elements of the claims.

The inclusion of the valuation of goodwill and brands with indefinite useful lives for the Decorative Paints China and North Asia business unit [indiscernible] was, amongst others, driven by the inherent complexity of the impairment testing process, which requires significant management judgment, the historical revenue trends for the business units in recent years and the implications of the transition to a new, more centralized organizational structure for the global Decorative Paint business and the impairment testing model for the business unit.

More details on our audit procedures conducted for these four key audit matters and our observations there too can be found in our long-form audit report. So let's move on to our second report covering the limited assurance on the sustainability statements of the -- including the annual report. As both management reporting and the associated auditor assurance is not mandatory yet by this law, our assurance engagement qualifies as a voluntary assurance engagement. Our work relating to the sustainability statements is performed centrally in the Netherlands combined with site visits in line with how management structure is set.

The procedures consist mainly of performing inquiries, reconciliations, analytical procedures and in some cases, sample testing in a limited number of items. Accordingly, the level of assurance obtained is therefore substantially lower than in an audit. Obviously, the DMA process is an important process for the management of the company. We have reviewed AkzoNobel's double materiality assessment update process, which leads to the material impacts, risks and opportunities and the scoping of ESRS disclosure requirements and data points. Our procedures consisted of understanding the DMA process as executed by AkzoNobel based on inquiries and assessing its compliance to the ESRS standards. Further, we have challenged management on assumptions, disclosures and other decisions made with regard to the DMA process and scoping.

For further details, I refer to our limited assurance report from Page 224 onwards in the financial statement -- in the annual report. Now normally, I close out with a looking ahead statement to the 2026 audit. However, 2025 is the final year of PwC auditing Akzo Nobel N.V. We have worked closely with EY as successor auditors, ensuring a smooth transition to them for the 2026 audit. We value our relationship with you as shareholders. On behalf of PwC, I thank you for your attention, and thank you for your trust.

And with that, I hand back to Ben for potential further questions.

Thank you, Dennis. As noted at the start of the meeting, you may cast your votes on all voting items during the entire meeting. Are there any questions on the 2025 financials, please?

Pim Postma again from the VEB. Actually, some questions for the auditor because there are two new key audit matters this year, right?

Correct.

So the first one on the goodwill and brand name impairment test for the Deco Paints China and North Asia. Actually, two questions on that topic. Because I understand that the valuation model has changed compared with the previous model used. What exactly has changed in the valuation model and why? And the second question is, did the auditor also assess whether both models would have led to the same valuation outcomes or the same valuation conclusion. Simply introducing a new model should obviously in itself not lead to a different valuation or outcome from your side, just curious.

Yes. So for the first question on the valuation model, the change in the model was solely derived from the fact that now the Deco business is managed from a central global perspective. These changes took effect in 2025, and that sort of drives how you allocate the central brand, the Dulux brand to the individual business units in the model. So that change was audited by us. And as a second thing and as good practice, management conducted the impairment test first under the old model before switching to the new model. We have audited both models and have the same outcome in terms of that there is no impairment for the business unit.

All right. And then some questions on -- sorry if I pronounce it dis-correct, but project -- Its correct? The Australian project, right? So some questions around that, I think more towards the Board. So first, how does the Board assess the risk that other claims could follow as well? I believe we're talking about nearly EUR 3 billion claim for which a EUR 300 million -- sorry, provision has been taken in the third quarter of last year.

So has AkzoNobel carried out more projects in Australia of this nature or elsewhere in the world? Does it see any risk there? And second..

You have a funny way of counting questions. I have question. I heard 3 questions, I have 1 more question...

Way too limited for my preparations. So to be a little bit creative there, right? So question 1.1 -- now my second question is, I'm also interested in how this matter has been taken into account in the discussions with the Axalta merger, right? Because my understanding from the annual report is that the timing of the judgment is still uncertain.

But AkzoNobel does not expect a ruling before 2027. Yes, that will most likely mean that this case is still ongoing at the time that Axalta shareholders will need to vote for the deal. And Akzo shareholders as well. But what is the eventual claim, for example, we become materially larger, would that not represent a significant risk to this transaction at all?

Well, it's a role, we're talking about EUR 3 billion. I think it's 1/3 of AkzoNobel's market valuation. So that's quite significantly. So I'm just curious how that was -- well, being treated in the merger discussions. And then question 2.1, I also understand that AkzoNobel has an insurance of EUR 500 million, right, insurance coverage for this matter. But is the company also considering to increase that coverage towards, let's say, the full EUR 3 billion in order to safeguard deal certainty?

That's -- if you are an insurance company, it will be a strange question, I mean it would be.

I have been to London and I've heard that they insured everything out there.

I mean I don't know if your house burns down and you call the insurance and then you ask them to increase the insurance. So on the insurance, you know it, the maximum coverage is EUR 500 million. So that is pretty straightforward. On the other projects, of course, we did an assessment on other projects. That is so -- that's not the case. Else we would have, of course, disclose that.

I would say this specific case in Australia is really a very unique case. But I cannot give further details. And then you had another question on the Axalta merger. Of course, Axalta on their side have made their assessments on this case. These are the simple answers.

Any more questions on this agenda item? No. Thank you, thank you. We'll now continue with Item 3B, the discussion on the dividend policy. The dividend policy of the company is to pay a stable to rising dividend. The dividend will be paid in cash. The final dividend of EUR 1.54 per share is proposed, which together with the interim dividend of EUR 0.44 with equal to a total of EUR 1.98 per share in 2025, similar to the amount paid as dividend in 2024.

Our CFO, Maarten de Vries, will now answer any of your questions relating to this agenda item. Any questions on 198. No. Thank you.

Then me move on to agenda item 3C. The profit allocation and adoption of the dividend proposal. As explained for the financial year 2025, a dividend of EUR 1.98 per common share of EUR 0.50 is proposed. In November, an interim dividend of EUR 0.44 was declared and paid. Upon adoption -- sorry, I should have said financial year 2024, 198.

Upon adoption of the resolution, the remaining final dividend will be paid in cash on May 7 of this year, and the returns published by AkzoNobel. The Supervisory Board recommends adoption of this proposal of the final dividend for this year.

Are there any questions? I guess, if the one on the former, there's no either?

Okay. Thank you. Again, you can vote all the time. Agenda item 3D, the remuneration report 2025. I will now hand over to the Chair of the Remuneration Committee, Wouter Kolk, for a short presentation of the remuneration report, which is submitted to an advisory vote. Wouter, could you please take us through the remuneration report 2025.

Thank you, Ben. I will. I'm pleased to be here to address you today the '25 remuneration outcomes for the CEO and the CFO, as they are determined in accordance to the remuneration policy for the Board of Management as approved last year by the AGM following performance assessments conducted by the Remuneration Committee, we've conducted this report.

As you can see in the first slide, summons the main remuneration elements for the Board of Management. Although the remuneration report breaks down the remuneration received last year, I will give you some further explanation and I'm happy to take any questions later on. The Board of Management did not receive a salary increase in '25. The salary for the CEO remained at EUR 1,290,000 as last received per January 1, 2024. And the salary of the CFO remained at a level of EUR 830,000 as last adjusted in May 2023.

Moving on to the performance-related components of the remuneration package that incentivize the achievement of the stretching financial and strategic targets, which are assessed over a 1-year and a 3-year period, respectively. The slide now has shown -- outline the details of the '25 performance against the targets of the short-term incentive plan in short, the STI. The STI bonuses are based on company financial performance alongside individual contributions, which we measure over a year.

The achievements on the STI metrics, adjusted OPI and free cash flow was slightly below target for the adjusted OPI and above target for the free cash flow. The non-financial objectives for the Board of Management were evaluated above target, resulting in an overall above-target payout for '25 of a ratio of 115.6% of the salary for Mr. Poux-Guillaume and a level of 92.5% for the salary of Mr. Vries.

As explained in the remuneration report, personal objectives in '25 focused on organizational efficiency, industrial excellence, portfolio management and people. To enhance the efficiency of its functions, the company is simplifying operations, accelerating decision-making and streamlining the organization management structure.

The company industrial excellent program aims to reduce complexity, improve capacity utilization and modernize our manufacturing footprint. This program also includes making targeted investments such as the recently launched upgrades to our largest aerospace coating manufacturing facility in Waukegan in the U.S. and the upgrade of our site in Montataire in France. And OTIF, on-time, in-full remained stable at a percentage of 89%.

The third objective, called portfolio management, was to invest in market leadership positions and recycle capital to prioritize those areas. The company sold its stake in AkzoNobel India Limited and in November '25, AkzoNobel and Axalta agreed to combine in an all-stock merger which will create a premier global coatings company.

The people objective was measured on employee engagement. In a year marked by economic challenges and tough cost-cutting decisions the number of employees, who are very positive about AkzoNobel increased, and the employees Net Promoter Score is well above the benchmark.

The long-term incentive plan, in short the LTI, is intended to incentivize company performance over a period of 3 financial years. The vesting of the '23 LTI plan in '25 was based on performance metrics, adjusted EBITDA of 40%, ROI 20%, revenue growth 20% and ESG 20%. The Supervisory Board set stretching targets with the threshold for adjusted EBITDA at a level of EUR 900 million and the maximum of EUR 1.65 billion.

The threshold for ROI was set at a base of 8% and up to a maximum of 16%. As both adjusted EBITDA and ROI performance were above target in 25%, the correspondent vesting percentages for these specific parts for the LTI are 131% for the adjusted EBITDA and 108% on ROI. Revenue growth as a weighted average is compared with a defined industry peer group. Organic growth rates to calculate the performance take into consideration price, mix, volume and growth, and they excludes the effects of the exchange rates.

The Supervisory Board set the threshold for revenue growth at a level of minus 8% to the max of 2%, with a revenue growth of 0.55% compared to market. The realization of this metric was 114%. The ESG targets consist of 4 equally weighted targets related to our approach to sustainability. Actual performance on total recordable injury rate was below threshold, resulting in no vesting based on this metric.

The performance on energy use was 1.77%, resulting in 130% vesting on this metric. The performance on energy use -- sorry, the performance on total waste and on renewable electricity was above the maximum with 75% and 69%, respectively, resulting in 150% vesting percentage on these metrics.

In total, this resulted in a vesting percentage of 129.82%. This includes a 9.72% dividend yield and results in a total of 45,573 shares vesting for Mr. Poux-Guillaume and 20,916 shares vesting for Mr. De Vries. The company provided conditional shares to the Board of Management in '25.

These shares will only be released to them in '27 if the planned 3-year targets on adjusted EBITDA, ROI and ESG are achieved and will also be subject to -- further to a 2-year holding period to Mr. Poux-Guillaume, 46,137 shares were conditionally granted and a 22,264 shares were conditionally granted to Mr. De Vries.

Mr. De Vries was eligible for 1,338 matching shares on the '22 series. As Mr. Poux-Guillaume joined the company in '22, no matching shares have been received by him. In '25, Mr. Poux-Guillaume and Mr. De Vries both invested 50% of their net STI payment over '24 under the share matching plan. This resulted in 1,928 potential matching shares for Mr. De Vries and 4,276 potential matching shares for Mr. Poux-Guillaume.

To conclude this item, the remuneration of the Supervisory Board members of the Supervisory Board receive a fixed numeration based on the roles and responsibilities. And according with the code, members are not remunerated in shares. Travel expenses and facilities are borne by the company and are reviewed by the Audit Committee.

Implementation of the remuneration policy for the Supervisory Board in '25 resulted in the payout as shown on this slide. I would like to end by thanking you and back to Ben.

Yes. Thank you. Questions on the remuneration report, please. Yes, so you have to go to the microphone because there's also people on the Internet.

Well, I have one question. I just saw that your Board has 10 people. Is that correct?

No, no.

In the board and in the...

The people that left last year are still mentioned in the annual report. That might be a confusion.

Okay. But when I look -- how many are there now in it?

Yes. Almost 8.

Okay. We don't know about Axalta, not necessarily a question but more something which set out to me because on the non-financial side of the STI there seems to be a whole range of different indicators used. And yes, for shareholders, including myself, this makes it far from transparent, but management is actually being assessed on and which targets applied. So I just wanted to make this point, it was very unclear.

Okay. Thank you. That's for sure, not the intent. So we'll see if we can clarify it. We did our utmost, but we should do better. Thank you. Yes. Okay.

Next item, agenda Item 4A, the discharge from liability of the members of the Board of Management and offers in 2025 for the performance of their duties in that year. And agenda Item 4B, the discharge from liability of the members of the Supervisory Board in office in 2025 for the performance of their duties in that year. Any questions on these agenda items. No. Thank you.

Agenda Item 5, reappointment of Mr. De Vries and adoption of a supplement to the remuneration policy in line with this reappointment. AkzoNobel is going through an exceptional time as it prepares for the announced all-stock merger of equals with Axalta Coating Systems Limited to create a premier actually the biggest, the #1 global clothing company in the world.

As described in the remuneration report, it is essential that AkzoNobel maintained strong and stable leadership in its financial operations as it prepares for this proposed merger. In that respect, as announced on December 19, 2025, the Supervisory Board asked Mr. De Vries to extend his tenure despite his planned and announced retirement from AkzoNobel.

Mr. De Vries expertise, proven leadership and intimate knowledge of AkzoNobel's operations are critical to ensure a successful execution of our strategic objectives. Accordingly, the Supervisory Board considers securing and retaining Mr. De Vries during this critical period essential and highly valuable to the company and its stakeholders, I should add.

And like thereof, of today's agenda concerns the reappointment of our CFO, Maarten de Vries, as member of the Board of Management, a short resume as well as a summary of the main elements of his contract are published on our website. The holders of the priority shares resolved not to make use of their binding nomination right.

We are delighted that Mr. De Vries has agreed to the Supervisory Board's explicit request to remain in his role to support the proposed merger with Axalta and is therefore proposed to be reappointed for term ending at the earliest -- of the end of the AGM of the company to be held in 2027 or when that's earlier at the moment of completion of the merger.

Next item be regarding the adoption of a supplemental remuneration policy for the Board of Management in respect of Maarten de Vries. Wouter, could you please take us through the proposed supplement?

Yes, I will explain a little bit more on this topic. The supplement serves to grant Mr. De Vries a one-time cash retention payment of EUR 750,000 in addition, to the remuneration he is entitled according to the remuneration policy. The supplement will apply to Mr. De Vries only and does not serve to restrict the remuneration policy or any remuneration and benefit options available under the remuneration policy.

This resolution is subject to the adoption of this agenda point 5A, of course. The decision to grant a one-time cash retention payment of EUR 750,000 to Mr. De Vries in addition to his regular remuneration must be understood with the exceptional circumstances the company faced at the end of '25.

In July, as you remember, the Supervisory Board had already announced the planned transition to a new CFO, effective on the first of January 26. However, in November 25, the company entered into a merger of equals with Axalta, fundamentally transforming the company's strategic agenda. This presented a quite unique challenge to the organization, while we were preparing for a change in financial leadership while simultaneously embarking on one of the most complex transactions in its history.

Recognizing the heightened execution risk, the Supervisory Board reassessed the situation and concluded that the successful execution of a cross-border merger of this scale demanded deep institutional knowledge, immediate execution capability and credibility with the stakeholders.

Replacing the CFO at such a pivotal moment would have increased transaction risk, slow down decision-making and potentially diminished financial leadership at a time when it was most critical. Retaining Mr. De Vries and requesting him to postpone his retirement was therefore considered the most prudent course of action offering the highest probability of success and lowers the risk for all parties involved.

The retention bonus is not the result of negotiating leverage or means to enrich Mr. De Vries remuneration package. He did not seek an increase in base salary, changes in his contractual terms or additional discretionary awards. His only request was for a retention incentive in line with standard executive treatment in these major transactions.

The Supervisory Board ensured that the arranged -- that arrangement aligns with market practices is strictly limited to the extension period and is conditioned on Mr. De Vries continued service and active involvement in the transaction. Additionally, the incentive is explicitly tied to this exceptional situation, ensuring that it does not set a precedent for future cases.

The Supervisory Board firmly believes that this retention measure is in the best interest for shareholders and it is targeted proportionate and according to the corporate governance code. By securing critical leadership, it ensures continuity in financial management, stability during a pivotal transformation and maximizes the probability of a successful value creation and long-term shareholder protection. Back to you, Ben.

Thank you, Wouter. Any questions on this topic.

Yes. Thank you, Chair. Just wanted to make a statement first because from the VEB perspective, the retention payment is undesirable. We know that Mr. De Vries would, after his extended period of 1 year will anyhow be entitled to a severance payment of one-time his base salary as well as a target level settlement under the long-term incentive plan. Taken together that makes this proposal difficult to reconcile with the principle of pay for performance. It has significant upside with practical no risk.

And in addition, Mr. De Vries has chosen to be nominated to the Supervisory Board of Wolters Kluwer and in our view, that also weakens the company's arguments that this payment is justified by an inspected increase in workload in preparation of the merger. And take it together, this proposal is, in our view, not in line with reasonable pay performance remuneration policies.

And we do appreciate that AkzoNobel took the time to engage with us ahead of this meeting. However, we remain of the view I just outlined. We will therefore, vote against this proposal, but we still would like to ask 2 questions.

And the first 1 is actually directed to Mr. De Vries himself. Well, what happens if this proposal is voted down? Is that a deal breaker for you? And the second question, what is -- what plan does the Supervisory Board have in place if Mr. De Vries decided not to continue in the event that this proposal is rejected for shareholders before...

Yes. I don't think, to be honest, that's a fair question to ask because it's not the case. This is what we have agreed upon. If it will be voted down, then we have to will come up with an alternative or a solution to that fact that it's being voted down.

We always are looking at your other question at succession planning. So we do have talented people in the company that could potentially maybe rise to the occasion and become CFO, but again, it's not on the table today, but we look at that for all functions and not just for the CFO.

Okay. You imagine that it's for shareholders, quite important to know if this is a deal breaker, yes or no, before voting?

I know the voting has, to a large extent, been done. We have to cope with the fact if it's being voted down. We didn't get that question or any of the other topics. So it's, yes, -- we'll see what happens then. Will come up with an answer if that's...

For you, it's not a deal break necessary?

I'm sorry, I just said, I think it's an fair question to Mr. De Vries himself. We proposed it to him. He didn't ask for it. So I think we are here the other party, not Mr. De Vries. And thank you for your -- for the view. Ben?

Yes. More questions, yes, please.

Thank you very much. Martina Karpos from MN. I think we share similar concerns as those that were just raised by VEB. I have 2 questions on this topic as well, just to emphasize that this is an important topic for us as well. And let me start by saying that we recognize that the transaction involves a demanding process and that continuity in the CFO role is very valuable.

However, we remain concerned about the necessity and proportionality of awarding a discretionary retention payment on top of an already comprehensive remuneration package. This results in a stacking of largely guaranteed remuneration elements, which, in our opinion, appears disproportionate, weekends pay for performance alignment and risk setting and desirable precedent for transaction-related remuneration in the Dutch market.

My 2 questions are, could the Supervisory Board explain why the existing remuneration arrangements were deemed insufficient to ensure continuity? How the cumulative effect of the retention award, LTI treatment and severance provisions remains aligned with long-term shareholder interest and how the governance and market precedent or implications of this decision have been assessed?

And in addition, it is my understanding that amendments to the remuneration policy require a qualified majority. Given the publicly disclosed voting intentions of several major institutional shareholders opposing this proposal, could the Supervisory Board confirmed the applicable voting threshold and perhaps elaborate a bit more on how you assess the level of shareholder support at this point of time?

Yes. Thank you for your questions. Maybe a couple of comments. Of course, we have discussed this also with some other larger shareholders. We have benchmarked this and explained the exceptional situation. Of course, we have to wait for the votes, but we do know that explaining the unique situation of entering a new CFO in a company that he doesn't know and basically having the ability of Maarten to stay also to do all the work, not only preparing for a merger, but also for a listing in the U.S. every shareholder basically that I spoke to personally really understood the importance of retaining the CFO.

And therefore, we always look at retention at one point and performance at the other. And we've benchmarked also the amounts, which is -- which they deemed fair and as a good practice. So we did consult and we will wait for the votes.

Could you perhaps also elaborate on that part of the precedent this might?

No. As I said in my speech, this will not and we will not amend the -- if we want to amend the codes, we will have to come back to the shareholders, and that's what we're not proposing here. We're proposing this as an exception.

Thank you for elaborating.

The threshold you've asked...

Yes, the threshold is 75%. So yes of course, we will stick to the threshold.

Any more questions on this. No. Thank you. Now we move on to agenda point 6A, 6B and then 6C. It's concerned the reappointment of Mr. Ester Baiget and Mr. Hans van Bylen, who both are attending today's meeting. Supervisory Board is delighted that Ester and Hans confirmed that they are available for the reappointment of a second term.

Both Ester and Hans provided a positive contribution to the Supervisory Board for AkzoNobel, which the Supervisory Board would like to see continued. The resumes have been published on our website upon the convocation of this general meeting.

The next item agenda concerns the appointment of Mr. Robert Schuchna, who is also attending today's meeting. Robert represents Cevian Capital, who holds over 10% of the company's share capital.

AkzoNobel welcomes the support of Cevian Capital and see their commitment to investing in the company. This confirmation that there's significant value to be realized. I get emotional here. Robert's resume was published on our website upon the convocation of this general meeting. Robert, could you please introduce yourself?

Thank you, Ben, and hello all together. Maybe a few words on myself. My name is Robert Schuchna. I'm a partner at Cevian Capital, as Ben has said. Cevian Capital is AkzoNobel's largest shareholder, and we are a long-term long-only shareholder. So typically investment plan is actually 5, 7 years plus, so really long-term in the market.

My background is in finance and investments, and I've been covering for Cevian different investment and industry companies, including ABB, Rexel and Bilfinger. And I'm also serving on the Board of 2 of these companies. One of them is Bilfinger, which we exited actually last year after 11 years. I've been on the Board for 6 years, and I will have stepped down from this appointment in May.

And also in Rexel, we have been actually just appointed last October, which is a French-based electronics distributor. I look forward to contributing to the Board of AkzoNobel and advance the company further. And yes, looking forward.

Thank you, Robert. Are any questions on either of these 3 appointments, please?

Tim Bosman from VEB. What stood out to me is that the reappointment of -- apologies if I did not pronounce it correctly, Ester Baiget is being proposed for reappointment for only 1 year. Could you explain why such short reappointment has been chosen in this case?

And my second question is towards Mr. Schuchna. Well, should shareholders actually see you stepping in as a sign that Cevian Capital wants to be closer to the deal especially given the strategic importance of AkzoNobel, yes, with the proposed transaction with Axalta. And I believe that your intention is also to step down if the merger comes through, right?

You can answer because that's -- there's no matter of stepping down. Okay, I'll start with that question. I mean because we will have a new board at the moment, we would have the new co. So then every seat is newly available if you want. So that's why. Ester actually is a very, very busy person that has a job as a CEO plus some additional responsibilities.

And actually, Ester -- we convinced Ester to stay on until the closing because of our history with the company. We think it's very important as with Matt. That we keep the knowledge in the company in these difficult and complicated times. So we said we need you, Ester, and then she helped us actually by consent in another year stay or else we would have lost her now. So we're grateful to Ester and availability. That's the reason.

It's not that we said it's not good enough. We only want her 1 year. That's not how it works.

Then we go to Item 7, 2 voting items, which are proposed to the shareholders each year, the renewal of the authorization of the Board of Management to issue and grant subscription rights to shares up to a maximum of 10% of the total shares outstanding today, the 23rd of April 2026 and the renewal 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 shares or the granting of subscription rights in conformity with this agenda item, but only regarding shares issued pursuant to a decision of the Board of Management.

The authorizations are granted for 18 months and in accordance with the notes to the agenda of this meeting. Are there any questions on this topic? It could be a first in my life, but you never know.

Agenda Item 8 includes a proposal concerning the authorization of the Board of Management for a period of 18 months starting today or in case of a shorter period until the day the authorization is again renewed by the General Meeting of Shareholders to acquire common shares in the company's share capital at any time during this period.

The number of common shares to be required is limited to the maximum number of shares in the company's share capital as permitted by law and the Articles of Association that the company may hold in its own share capital at any given moment. The maximum number of shares that the company will hold in its own share capital at any time shall not exceed 10% of the issued share capital.

Common shares may be acquired through the stock market or otherwise at a price between par value at the Euronext Amsterdam N.V. market price on the day of purchase plus 10% on the condition that the acquisition price is not higher than the opening market price on the day of purchase plus 10%.

The proposal to allow the company to acquire shares also at a price of 10% in excess of the opening market 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 an upper limit, also a lower limit is required. Any questions on this very technical topic. Thank you.

[indiscernible] in the company.

Yes, we always look at what we do with capital. So all the options always pass the agenda. And then we decide accordingly. Yes. Thank you.

Okay. I now proceed to the final item on the agenda. Item 9, 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. Part of your answer.

The cancellation may be executed in one or more tranches. The number of common shares held by the company, which may be canceled, whether or not in tranches 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 8.

Cancellations may not be effected earlier than 2 months after resolution to cancel shares is adopted and publicly announced. This will apply for each tranche. Any questions on this topic? So, now that we receive any questions on our online voting platform.

No. We did not.

Did not. Thank you. And I kindly request you to check whether you have submitted your votes on all voting items. We now take 1 minute for you to check your votes, might be 50 seconds, you never know.

Yes. Okay. I would like the opportunity to say a few words of thanks to Mr. Dennis van Ameijden and his team at PwC. PwC team has handed over as our external auditor for -- has handed -- there's a mistake here in my text -- have been our external auditor for the last 10 years. On behalf of the entire Supervisory Board and the Board of Management, we thank Dennis and his team for the cooperation and their dedication, which was very pleasant. Thank you.

Even if you read you can't stop thinking, yes. Results of the voting items will now be shown on the screen. It might take a little bit of time. I was pre-warned. Okay. As you can see in the second column, all agenda items here have been accepted with North Korean percentages. Thank you.

Maybe Slide 2. Here, we also have acceptance of all items, 77.5% is above the 75%. So we're happy to see that. Thank you for your votes. I'll ask Charlotte to record the voting results. The voting results had also been published on our website.

And then I hereby close out today's meeting. Please be reminded to return the voting devices provided at the registration desk at the door when leaving the room. Refreshments will be offered in the area outside of the meeting room.

I thank you for participating and wish you a safe trip back home. Thank you.

Hello, and welcome to the Akzo Nobel Q1 Results 2026 Earnings Call. My name is Alex. I'll be coordinating today's call. [Operator Instructions] I will now hand it over to Jan Willem to begin. Please go ahead.

Good morning, and welcome to Akzo Nobel's investor update for the first quarter of 2026. I'm Jan Willem Enhus, Head of Investor Relations. Today, our CEO, Gregoire Poux-Guillaume; and CFO, Maarten de Vries, will take you through our results. We'll refer to the presentation, which you can follow by webcast or download from our website at akzonobel.com.

A replay of the webcast will also be made available following the event. There will be a Q&A session after the presentation. For additional information, please contact our Investor Relations team.

Before we start, a reminder of our forward-looking statements disclaimer on Slide 2. Please note, this also applies to the conference call and answers to your questions.

I'll now hand over to Greg, who will start on Slide 3 of the presentation.

Thanks, Jan Willem. Good morning to everyone on the call. In Q1, we delivered a clear beat with EBITDA of EUR 345 million, coming in 7% ahead of the EUR 323 million consensus. Organic sales were 1% lower year-on-year with a 1% pricing gain offset by 1% declines in both mix and volumes.

Profitability improved meaningfully. Adjusted EBITDA was up 7% at comparable scope, while adjusted EBITDA margin rose to 14.5%, up 80 basis points. This marks the fourth quarter of margin expansion year-on-year, driven by disciplined pricing and strong execution on our cost actions in soft end markets. Operationally, our industrial transformation will be completed by year-end. We closed a further 3 sites in Q1, bringing the total to 15 since the program's inception. We've done all of this without business interruption.

We also delivered a key milestone to our ongoing portfolio review in Deco Asia, signing the sale of our business in Pakistan at 14x EBITDA for an enterprise value of about EUR 50 million. Close is expected in the second half of the year. It's not a very large transaction, but it's another proof point after India that Deco assets are valuable, particularly to the right owner.

On financing, we issued a EUR 1.1 billion bond dual tranche in March, extending our maturity profile and reinforcing liquidity ahead of the proposed Axalta merger, which is on schedule. We enter the rest of the year from a position of strength, well equipped to navigate the raw material headwinds ahead.

Turning to Slide 4. In Q1, volumes were down 1% year-on-year, reflecting a mixed regional picture. We saw strong growth across Asia and South America, while North America and Europe remains slow.

In Coatings, volumes declined 2% in Q1 against the backdrop of continued macroeconomic uncertainties. Powder, specifically, Powder demand improved in both architectural and automotive. And the strong momentum in Asia continued. Marine, Protective delivered a lower quarter driven by project phasing and tougher comps in Marine, while Protective continued to grow, particularly in Asia.

Automotive and Specialty remained sequentially flat. Aerospace is a clear growth engine, while Refinish grew in Asia and stayed at trough levels in North America as expected. Industrial Coatings declined low single digit with growth in coil, more than offset by lower volumes in packaging.

Moving to Deco, Q1 was a solid quarter. Volumes grew strongly across Asia and South America, offset by lower volumes in Europe, Middle East and Africa, where the season started more slowly but accelerated through March and is also doing well in April. Latin America volumes were low single digits up, driven by Brazil's return to growth together with Colombia. In Asia, growth accelerated sequentially with continued outperformance in China and Vietnam, while Indonesia is showing signs of recovery.

I'd add as a comment in reaction to some of the questions we got this morning and some of the headlines that we saw that we don't see a whole lot of evidence of prebuying in either Deco or Coatings. I mean they're very different businesses. But once again, there's no evidence of significant prebuying in any part of our business at this point.

Take us to the next page, Maarten.

Yes. Thanks, Greg, and good morning, everybody. At group level, organic sales declined by 1%. Volumes were down 1%, while 1% price was offset by a negative mix impact of 1%. The divestment of India had a negative 3% impact on revenue. Finally, FX translation reduced revenue by 5%, resulting in a reported revenue decline of 9%.

Coatings were impacted by geopolitical uncertainty with volumes down 2%. Growth in Asia and South America was more than offset by lower volumes in North America and Europe. Deco delivered strong price mix of 2% on flat volumes. Group adjusted EBITDA was EUR 345 million, representing a 7% increase at comparable scope excluding our India disposal and in constant currencies.

The EBITDA margin improved to 14.5%, up 80 bps year-on-year. This improvement was driven by 300 bps margin expansion in Deco on strong pricing and structural cost savings. In Coatings, softer volumes and negative mix weighed on profitability.

Next slide. We delivered another quarter of free cash flow improvement by EUR 39 million at minus EUR 144 million versus minus EUR 183 million in Q1 last year. The first quarter is seasonal quarter with inventory build and related outflows.

Working capital also improved, ending the quarter at 16.8% and 20 bps below prior year. Notably, this was achieved while we closed 3 sites as part of our industrial transformation program, which requires inventory buildup to support volume redistribution. Return on investments rose to 13.6%, up from 13.1% last year. And finally, supported by the improved cash generation, we maintained our leverage ratio at around 2x.

Now handing back to Greg.

Thanks, Maarten. Moving to Slide 7, I think, tensions in the Middle East have pushed oil prices higher and caused significant disruption across the chemical value chain, driving expected high-teens raw material inflation for the remainder of the year.

In response, we moved decisively to protect margins and have announced price increases ranging from the mid-single digits to the low teens. The announced price increases will fully offset raw material and logistics inflation based on current market conditions. We'll execute further pricing actions if conditions worsen. So once again, these price increases have been announced, they've been discussed with customers, they're being implemented.

The last cycle demonstrated the strength of our ability to pass through inflation. If you think back to that time, '21, '22, EUR 2.3 billion of cumulative pricing to fully offset the EUR 2 billion of raw material inflation, although pricing took time to catch up.

This time around what we're building on that experience and we've acted faster, bringing pricing and inflation into closer alignment in the early stages of the cycle. We're not executing at pace with the P&L impact of our pricing actions ramping up in Q2 and the full effect visible in Q3.

Beyond pricing, we're actively managing input cost inflation contractual terms and competitive sourcing are limiting cost increases from suppliers, while our regional-for-regional sourcing model keeps supply continuity and act and provide resilience against further destruction. In short, we've navigated this before, our response is in motion, and we believe we have the track record to back our confidence.

Turning now to our outlook on Page 8. Looking ahead, our 2026 adjusted EBITDA target of at or above EUR 1.7 billion remains unchanged. The EUR 100 million step-up continues to be driven by what we control, EUR 90 million of net savings from our industrial program, with SG&A carryover and productivity offsetting inflation. We remain firmly focused on completing the industrial program by year-end while maintaining strict cost discipline.

Although the Middle East conflict has limited impact in the first quarter, raw materials and logistics costs will ramp up throughout the year. The exact impact is still evolving, but additional pricing has been announced, as I said, and we'll fully offset this inflation we see. And therefore, we believe that the actions that we have in place have neutralized that impact and we'll take further actions if needed.

For Q2, we expect adjusted EBITDA of around EUR 400 million. Volumes are forecasted to be broadly flat against comps that are less challenging than in Q1. And pricing will build progressively throughout the quarter, offsetting raw material inflation, while OpEx savings will be delivered as per plan.

Moving to Slide 9, the merger preparations with Axalta are progressing as planned with three critical work streams running in parallel. On integration, the management office is up and running with a strong cooperation between the teams, focus is on day 1 readiness and accelerating synergy capture.

The shareholder preparations continue to advance. The PCAOB audit is complete. The confidential F-4 filing was submitted end of March, and the EGM is expected to be held in early July. Separately, the regulatory process is underway with active dialogue across many jurisdictions, including the U.S., the EU and the U.K. We remain firmly on course to close by the end of the year or early next year.

I'll now hand over to Jan Willem, who will close with information about upcoming events, and then we'll start the Q&A session. Jan Willem?

Yes. Thank you, Greg. Before we start the Q&A session, I would like to draw your attention to the upcoming events shown on Slide 10. Our AGM that will be held tomorrow, April 23, the ex-dividend date on our 2025 final dividend, April 27, and the record date is April 28, followed by payment on May 6.

This concludes the formal presentation, and we'll be happy to address your questions. [Operator Instructions] Operator, please start the Q&A session.

[Operator Instructions] Our first question for today comes from Thomas Wrigglesworth of Morgan Stanley.

Two questions, if I may. Firstly, around the volume outlook that you have I mean clearly an evolving picture, but obviously, you've kept the volume picture flat and you're pushing through pricing. Are you expecting to see some demand erosion? Or do you think that is too early to tell or there are mitigating factors within there that mean that, that doesn't -- that shouldn't arrive this time around?

And secondly, just on the -- you successfully -- you very successfully passed through pricing in the previous cycle. But one of the issues we found was in the coatings industry, less so Akzo, was kind of unique components that were missing or became short.

Just in terms of your total inventory picture, how does that vary by region? How many weeks, how many days of inventory do you have in terms of visibility and in terms of lead time to get -- to enable you to get prices up?

Thanks, Thomas. I'll take the first question. Maarten will take the second. From a volume perspective, we've kept the outlook flat. When we look at -- so when we look under the hood, we're not really seeing -- we didn't see any prebuying of any significance, we are not seeing a slowdown either. We're essentially seeing a trend that is -- seems to be fairly stable.

So will -- if we stay in a world of higher inflation because that [indiscernible] inflation creates price inflation and creates inflation overall, would that have an impact on demand overall? I mean I think economic theory would tell you it would.

But it's -- one, it's not visible today. Two, it's too early to tell. Three, we're playing against easier comps starting in Q2. You have to remember, you had Liberation Day last year and all sorts of things that made our life exciting. So I'd say so far, so good. And March was healthy. April was healthy, too.

We announced price increases that we discussed with our customers without seeing them ramp up their orders or -- I think there's a view in the market that there's potentially a resolution on the horizon. But whether that's correct or not, we're not seeing anything that would lead us to change our volume outlook for the time being.

Maarten, do you want to take the second question?

Yes, on the pricing dynamics and maybe a few points to make. First of all, this is really a very abrupt price increase. But of course, there is a different picture per region and also per business or per business segment. So we use differentiated pricing, of course, in that context.

And on your question on lead time, what you see in general that in Asia and particularly in China, supply chains are significantly shorter compared to, for instance, Europe. So that's why in Asia, within shorter supply chain, but also a more material increase, you see also there a faster reaction to compensate.

It's really interesting, by the way, because Asia structurally has a higher impact from what's happening in the Middle East and the Strait of Hormuz just because where these oil and some of these refined products go.

And as Maarten said, it's a shorter supply chain. So you should say, well, there's going to be more of an impact in Asia and that impact will be felt earlier. But actually in Q1, what really pulled the performance is Asia. So it's holding up well at this point in terms of demand, once again, to link Maarten's answer on the second question to the first question.

Our next question comes from Laurent Favre of BNP Paribas.

Greg, how much of the pricing that you're targeting for the rest of the year is underlying pricing rather than surcharges, which I guess is a way of trying to understand how much carryover we get into 2027 as things are now?

And then the second question is on the Asia disposals in Deco. So you did Pakistan and obviously at a good valuation, but I guess the process there started before the war. So I'm wondering, to what extent you think the current Middle East situation is just going to push back all your, well, I guess, expectations around announcing more deals either from a valuation standpoint or just because just too much uncertainty and people don't want to [ move ] capital now?

Yes. Thanks, Laurent. I'll take your questions in reverse order. You're right, Pakistan, we started discussions before the war in Iran. But the war in Iran did not lead to a value erosion of that process or a fragilization of that process. So there was no time when potential buyers try to use that as a reason to either take down the price or push things back.

And if you look at what we have in mind for the rest of Asia, it's really interesting. I mean we're in this world where people WhatsApp you stuff all the time. And while we were getting ready for this call, I got a WhatsApp from a senior executive of a well-known company that asked me about the availability of one of our Deco businesses in Asia. So this is like real-time stuff.

So I -- what that tells you is that people look through the crisis. These are really good businesses. Nobody is trying to figure out whether -- what's the impact for 3 to 6 months. They're buying for the long term. And these are franchises, these are well-known brands with entrenched positions in countries. And I don't want to be cynical that things -- this too shall pass, but that's not how buyers look at assets.

And once again, a few data points, no change on Pakistan despite events and people actively knocking on our door pretty much in real-time for anything else that we might have in mind in Deco in Asia.

Your question on the price versus surcharges is -- I think it's a really good one. And we've explained in the past that about 25% of our business -- 25% of our revenue is based on formula indexes. So take Akzo overall, there's about 25% of our revenue where prices adjust based on the formula. In Industrial Coatings, for example, that's a significant part of it, but there's other places, too.

Those formulas, they're not very effective for small variations, but they're really effective and really impactful for big variations. And we're in big variation land. So essentially, I was touching base with the Industrial Coatings business. And essentially, they told me yesterday that these formulas have already been agreed to the impact, and it's already being passed on. So that's being rolled out in invoices in April, in May.

I think the tail end of that is things that go in on the 1st of June, no later than that. So it's kind of actually spread out between 1st of April, 1st of May, 1st of June. So that's about 25% of our revenue base.

And everywhere else, in some cases, we have longer-term contracts, but a lot of it is spot essentially. And there, you have the option of going with price increases or surcharges. Our preference is to go for price increases because these -- the surcharge stuff is -- you're right, it's less sticky, but it has an advantage, though, that usually you can implement it faster.

So overall, we've gone proportionally more for price increases, but there are certain areas of the business where we've gone for surcharges, usually in areas where that's the acceptable or accepted practice. But once again, that's not our preference, but that's something we do when that's the market practice and when we believe that speed is the essence.

Our next question comes from Matthew Yates of Bank of America.

A couple of questions. The first one just around cash flow and working capital management. If I think back to the prior cycle, you ended up consuming the best part of EUR 1 billion in additional working capital. Can you talk about sort of how you're thinking about the impact this time around and any lessons learned?

I think with the benefit of hindsight, I think you yourselves were prioritizing security of supply that then led to quite a prolonged effort to unworking that. How are you engaging with your raw material suppliers at the moment to balance what you need versus not buying too much at perhaps what is the top of the market?

And the second question, I'd like to follow up on what Laurent was asking around the process for Asia, and I'm a bit confused as to what the strategy here. I was under the impression that you were reviewing positions where you did not have a pathway to being a market leader.

Based on recent press reports, it suggests that you're taking a more holistic look at whether keeping any Asian business would be worthwhile if it has a lack of scale. And I'm just curious, how you're thinking about this process? Is it going to be piecemeal? Or are you looking at a total exit of your Asian Deco franchise?

Matthew, I'll take the second question. I'll start with that, and then Maarten will take the first one.

To clarify, our strategy hasn't changed. We love our Deco businesses, we believe that our capital is better allocated to leadership positions. And if you take Deco specifically, the part of the world where we don't always have a leadership position is actually Asia. So hence, the fact that in September, I think, 2024, we announced a review of our Deco Asia position. So it's not coatings at all, it's just Deco Asia.

We sold India. India was a great business with 5% market share. We sold Pakistan. And we're looking at some of these other positions.

And to your question of is that wholesale or retail, is that -- are we looking at potentially selling as a package? Or are we looking at assets individually? Right now, we're just having discussions in general. We're not -- we haven't decided anything, but we've been clear that if we're not the leader and we don't have a path to leadership, we will consider options. And that -- these are the options that we're talking about.

By the way, that discussion does not include China. China is a really good business that is recovering ahead of the market that we're excited about for the years to come. But it's -- the scope that we are looking at from a strategic perspective is essentially the rest of Asia, which once you've taken out India and Pakistan is about EUR 300 million of business at a profitability, which is a little bit higher than the Deco average. So hopefully, that answers the question.

But I don't have anything else to communicate on this at this point beyond the fact that we're continuing with the exact same strategy, taking a critical look at these assets, and we are having a bunch of conversations because it's not like we've been discrete about it. So people are calling up or to allude to my answer to Laurent's question, people are WhatsApping me. We're very modern.

Maarten, do you want to take the first question?

Yes. Yes, Matthew, it's a very good point. And obviously, we have taken the lessons learned from the previous cycle. We are operating at the moment end of Q1 at an inventory level, which sits just above 100 days and is in line with last year Q1, by the way, despite the massive transformation we are doing as part of our industrial footprint.

Clearly, we will -- and we are and we will manage our inventories at a tight level because it doesn't make sense to start to buy when prices of raw material have spiked already because the spike is already there in terms of raw material prices. So we manage it tightly, not buying at the highest level to make sure that we manage our working capital in a proper way.

And as you know, yes, in value, inventory goes up, but payables will also go up. So that compensates each other, and that underpins kind of the trajectory we see from -- for working capital throughout the year.

But Matthew, you're correct. Last time around in '21, '22, we did really well in terms of pricing to mitigate the impact. We did really badly in terms of anticipating raw material prices and availability, and we had a tendency to hoard. And when the situation started normalizing, we had 2 or 3 quarters of relative underperformance because we were still working down higher-priced inventories.

So in terms of lessons learned, that's lesson learned, which is we're going to keep a very close eye on days of inventories. And we haven't given our people relief, we haven't told them that target of getting under 100 days of the [ IO ] is suspended. Let's go out and buy whatever we can. That's absolutely not what we're doing. It's business as usual, but it's business as usual in a more dynamic way because the market is a little bit stretched.

Our next question comes from Katie Richards of Barclays.

Two questions from me, please. The first, I just want to understand, to what extent the positive margin momentum in the Deco side was driven by the higher inventory backlog you've been describing? Because you were talking about ahead of site closures, you are building inventories ahead of that.

And secondly, you mentioned earlier that now the market has a view that there's a resolution on the horizon, so I'd just be interesting to understand whether you're finding it more difficult to push through price increases now that the news headlines are focused on a ceasefire.

Thanks, Katie. The second question is -- I'm not trying to be a geopolitical commentator. I was explaining why -- I was giving a reason or an explanation of why we're not seeing a lot of prebuying. People are fairly calm in the value chain. But I think we all understand that even if there's resolution tomorrow, oil prices will remain at a higher level for the quarters to come and the chemical value chain will take some time to resorb.

The moment you open the Strait of Hormuz, in all likelihood, the ships that will be given priority are the VLCs, the very large crude carriers. And all the stuff that has chemicals on them will be at the back of the queue. So I think we all understand that whatever happens, this impact is going to be carried for the rest of the year.

There's no magic wand to go back to pre-Iran quickly. So no, whatever is happening is not impacting our price discussions. And also, I think people have gotten used to the fact that those discussions are a roller coaster. So no specific impact from that perspective.

Your point on Deco margins, you saw that our margins were up 300 basis points in Q1. And actually, your question is a really good question because you're essentially -- if I phrase it differently, you're asking whether that performance is supported by positive inventory revaluations. And the answer is that it's not.

The inventory revaluations have not impacted Q1. And therefore, that performance was achieved the old-fashioned way. And the old-fashioned way has been specifically to this, this industrial transformation that we undertook where we're closing a lot of factories, we're streamlining the business, we're taking out some of the overheads.

Over time, it pays off. And what you're seeing is those actions paying off. You're not seeing any kind of weird one-off accounting impact of raw [ mats ] go up and therefore, we do an inventory revaluation that's positive that underpins the Q1 performance. That's not the case. I can confirm that.

Our next question comes from Tony Jones of Rothschild & Co.

I've got two. On site closures, you have reported you've taken out 3 in this quarter, and I think you said that's 15 in total. Could you remind us what the target is for this calendar year and how that might split by division and region, if that's possible? And also, what are the criteria now with -- we're at the end of April, you have the Axalta merger hopefully on track for the next 6 to 12 months. Is that also starting to take effect?

And then in terms of the divestments, sort of circling back to early questions, how much of the divestment strategy, particularly Asia, is now starting to also consider the combined footprint with Axalta? Or is that just not relevant at this point?

Thanks, Tony. The site closure question, we said we've done 15. We never gave an overall target. But if you go back to where we were last year, we were at 12. And we said that we've done 6 for the year, and we said there were at least as many in 2026 as in 2025. So at least as many, it means above 18.

I'm sorry to be coy and to -- but you understand these things are sensitive. But roughly 18 plus, and all of those are going to happen. And none of that is changed by the impending Axalta merger. These are all things that we believe makes sense regardless of whether we merge with somebody else or the market environment. So we're going ahead with those.

And there was a divestment question, I think, Maarten?

Yes, there was a divestment question. And again, we are going ahead, as we mentioned earlier. And there is no relationship to the Axalta merger, also not related to the footprint. We are executing our stand-alone strategy. And we are focusing on this year, and the merger will come from early next year onwards.

And I think if I may add something to what Maarten said, it ties to a question we've been asked multiple times by investors, which the merger, there's really good investor support.

But if they have one gripe, it's -- this pushes returns out into the future because a lot of people look at this and go like, "Well, you're going to be busy with regulatory until closing. So that takes care of 2026. And in '27, you're going to spend $600 million to generate EUR 600 million of synergies. So that means that the earlier I can start seeing returns is 2028."

But the reality, if you read the merger agreement is that we've maintained the right to monetize some of our assets in Deco Asia. And as you can tell from what we're saying, we're continuing, which means that some of those returns are being brought forward by whatever we do with those assets specifically. And once again, no change, no change because of Axalta and no change because of the market. If anything, that those processes are generating quite a bit of interest.

Our next question comes from Chetan Udeshi of JPMorgan.

The first question I had was, Greg, you mentioned the local sourcing for local region strategy. But I mean, correct me if I'm wrong, I sort of remember in Europe, about 12% to 30% of your raw material requirement is actually typically imported from China. And I'm just curious, is this going to change how you look at importing from China in the future? Of course, the prices from China tends to be much lower.

But then if you have these sort of supply shocks like COVID, wars, does that make sense or does it make sense in your view to double down on local sourcing in Europe or rest of Asia, even if that means you have to pay higher prices to local suppliers?

The second question, just going back to the pricing, it seems to me at least that these are the price increases that you are pushing through. Can you give us any color on how the acceptance has been so far from your customers? Are they -- do they understand? Are they pushing back? Is it a kind of war? Because we all take the price increases on the face value, but of course, what matters is how much will stick.

Let me take the first question on regional or local sourcing. In fact, what happened post-COVID, we have focused more and more on local sourcing. And if you look at specifically Europe, and our local sourcing versus what we source from Asia, particularly China; that is, in fact, a very low piece. So it is significantly lower versus what you are mentioning. Currently, we are more or less at a 10% level. So our model has more change to regional/local sourcing.

Which, by the way, we talked about, I think, maybe 18 months ago or 2 years ago because the question was, are we taking advantage of the exceptionally low prices in China at a time, if you remember, it was when Europe was passing on tariffs on Chinese [ TiO2 ], antidumping.

And what we said at the time is that we had derisked our flows. We realized that there's a geopolitical risk associated to having too many eggs in the same basket and that we were willing to absorb a little bit more cost to have more certainty. So it's exactly what Maarten said. And if you kind of go back to what we said at the time, you'll see that it's very consistent.

The second question, Maarten?

It's on the price increases and customer acceptance.

Customer acceptance. It's -- I go back to my answer to Laurent's question. There's about 25% of our revenue, which is formula-based, and then that takes away a lot of the emotion.

On the B2B side, so the other coating businesses, it's been -- the industry reaction has been fairly kind of consistent across the board. If you look at the announcements that came out from different players, we're all pretty much saying the same thing. And our customers are also B2B players. So they're also looking to see how they pass on. So those discussions have been constructive.

On the Deco side, it really depends. In some Deco markets, we are still on the tail end of discussions for the annual price increase for 2026 because these things have -- they have a tendency to be settled at the beginning of the high season, and the beginning of the high season is essentially now.

So it puts a lot of things on the table at the same time, but everybody understands that this phenomenon is something that has to be mitigated. And actually, a lot of our customers are -- have already increased their prices in Deco. And any discussion that they have with us is more about margin expansion for them than it is about whether there's a logic to the price increases. But I'd say so far, so good, Chetan.

Our next question comes from Georgina Fraser of Goldman Sachs.

I wanted to just ask a bigger-picture question, just revisiting the strategy to shrink Deco and consolidate and get bigger in the Coatings business. Are there actually any dis-synergies to owning both of these businesses? Or how do you present the value-creation strategy behind this idea to shareholders? Or is the disposal strategy in Deco just about the fact that you haven't been able to delever organically? Looking at the balance sheet, it's -- we're kind of just stuck and have been for some time.

Thanks, Georgina. It really is not about the balance sheet at all. Our cash flow generation was really solid last year. We are delivering at a higher level also in Q1. We're -- we've been actively managing working capital. We're not worried about our ability to generate cash, and we're certainly not worried about the balance sheet.

And it's not at all about wanting to shrink Deco. It's about wanting to make sure that we are fighting battles that we can win, meaning that we have -- we want to focus in Deco on businesses, on countries where we have a leadership position because Deco is a local game, and it's a relative market share gain.

We're very strong in Latin America. We're the market leader in Colombia, we're the market leader in Argentina. The impact of having Colombia on Argentina is pretty much zero and vice versa. These are not different brands, the products don't travel from one country to the next, production is local. So the way you win in Deco is by having the strongest brand and the best distribution. So it's a relative market share gain.

So once again, if you look at the profitability of our businesses in Q1, I mean, Deco is at like 17.3%. It's 400 basis points higher than Coatings almost. Now it's a moment in time, Coatings is more impacted than Deco by what's happening in the world. But these businesses are really good businesses.

But once again, we want to be in the countries where we have a winning hand. And we are -- we've also demonstrated with India and Pakistan that in countries where we're not necessarily the leader, these businesses are way more valuable to people other than us. So I don't know that any investor will look at me strangely if I sell a business where we have 5% market share and the market leader has 50%, and we sell that business at 24x EBITDA, which is exactly the situation in India.

So once again, not about the balance sheet, it's about focus, it's about making sure that we are not to -- spread too thin. And to your question of are there dissynergies to owning both? Not really. I mean, I think the -- there's complexity, which is that it makes -- it forces investors to have conversations ranging from the weather in the U.K. to aerospace travel to whether people are crashing their cars in North America. So it makes the story a little bit more complex.

And from a management perspective, we're essentially within Akzo, we're running a B2B business, and then we're running a smaller version of Unilever. Deco is essentially an FMCG business, although it's -- the F is a small F, but it's very similar to those businesses and -- which means that you manage them and you allocate capital to them in a very different way as you would for the Coating businesses.

So that's all it is. It's not -- it's pretty straightforward, not about balance sheet, a little bit about complexity and a lot about capital allocation and value.

Our next question comes from Sebastian Bray from Berenberg.

There on the Refinish business, please, can you give an idea of the geographic distribution of sales at Akzo Nobel within Refinish? And any comments on both the underlying market development, given that volumes have been weaker in recent quarters? And the relative performance of Akzo's own business would be welcome.

I don't think we've ever given the geographical split of the Refinish business. What I would say is that we're top 4 in the U.S. and in Europe. We have a stronger position in Asia. Our Refinish business in Asia did very well in Q1. Refinish in the U.S., as you know, was impacted by that sort of tension between higher insurance premiums and lower disposable income, and that stabilized at a trough, but it hasn't picked up yet. And Europe was less impacted, but is not rebounding yet.

So if you run a Refinish -- if you own a Refinish business these days, what you have is growth in emerging markets, you have -- you're stabilized at a trough in Europe and the U.S. And -- but with an impending rebound that the bigger guys, PPG and Axalta, we're forecasting for the second half of the year, which might shift a little bit if gas is $4 per gallon at the pump in the U.S., maybe that has an impact on driving season.

But it's a business that continues to have significant pricing power because it's a business that differentiates on technology. For the body shops, the cost of the paint is not a big cost item. What makes a body shop profitable or not is essentially throughput and labor costs.

So if you offer a product that achieves a better result in less time, you're going to make good money and you're going to have pricing power. Hopefully, I've answered your -- I didn't give you percentages, but hopefully, I gave you some color.

At this time, we currently have no further questions. So I'll hand it back to Greg for any further remarks.

Thank you. Well, look, strong Q1 in a market that is a little bit distracted by what's happening in the world. The market was soft in the first place that is always a source of concern. But as we look at how our business unfolded, January, February, small months; March was actually a good month, April is looking pretty good, too. There doesn't seem to be any signs of panic or significant disruption in the market, no significant prebuying, no changes in consumer patterns that we can see at this point.

Once again, we're keeping a close eye on that for the rest of the year. But keep in mind that we're forecasting flat and our comps get easier. Our cost structure is really under control. We continue to take cost out, and it continues to have a positive impact, as you can see from the performance of Deco in Q1 as just one data point.

And then we were pricing up before Iran, and we've stepped up one level because of the raw material impact, once again, in the high teens in our basket for the rest of the year, but mitigated by already announced price actions that we believe will neutralize the effect. So that gives us some level of comfort for the rest of the year.

Once again, volumes are always the question mark, but so far, so good. We expect EBITDA to be about $400 million in Q2. And once again, you'll see progressively, you'll see the raw material impact materializing in our P&L, but you'll also see the corresponding price increases making their way through our P&L at the same time. And our aim is not to capitalize to expand margins. Our aim is really to price to neutralize the impact. Merger is making good progress.

And we thank you for your time and your attention today. Thanks.

This concludes today's conference call. Thank you all for joining. You may now disconnect your lines.

Hello, everyone, and welcome to today's Akzo Nobel Q4 and Full Year Results Call. My name is Seb, and I'll be the operator for your call today. [Operator Instructions] I will now hand you over to Jan Willem Enhus, Head of Investor Relations to begin the call. Please go ahead, when you're ready.

Good morning, everyone, and welcome to Akzo Nobel's investor update for the fourth quarter and full year 2025. I'm Jan Willem Enhus, Head of Investor Relations.

Today, our CEO, Greg Poux-Guillaume; and CFO, Maarten de Vries, will take you through our results. We'll refer to the presentation, which you can follow by webcast or download from our website at akzonobel.com. A replay of the webcast will also be made available following the event. There will be a Q&A session after the presentation. For additional information, please contact our Investor Relations team.

Before we start, a reminder of our forward-looking statements disclaimer on Slide 2. Please note, this also applies to the conference call and answers to your questions.

I will now hand over to Greg, who will start on Slide 3 of the presentation.

Thanks, Jan Willem. Good morning to everyone on the call.

In 2025, we made substantive strides towards a stronger Akzo Nobel. In tepid markets, our progress was rooted in price discipline and the relentless execution of our efficiency programs, resulting in a full year adjusted EBITDA of EUR 1.444 billion, adjusted for ForEx translation and our Indian divestment, this is within 1% of our initial constant currency guidance of [ EUR 15.50 ] given at the beginning of the year. And profitability is at 14.2% which is 40 basis points up versus last year.

In Q4, volumes were down 2% year-on-year with price/mix up 1%. Our adjusted EBITDA came in at EUR 309 million or EUR 343 million, excluding ForEx translation and the Indian divestment. This is 7% higher than last year on a comparable basis and corresponds to a 13% margin up 70 basis points year-on-year. Operationally, we achieved net OpEx savings of EUR 98 million year-to-date, EUR 28 million ahead of plan. Free cash flow came in materially higher at EUR 606 million on efficient working capital management. And we reduced leverage to 2x, bringing it in line with our midterm ambitions.

Overall, we delivered a banner year in operational execution alongside 2 major portfolio moves, value crystallizing divestment in India and our proposed merger with Axalta, which will reduce costs, boost innovation and accelerate growth.

Let's now turn to Slide 4. Q4 volumes were down 2% year-on-year with mixed performance between our segments. Overall, Deco volumes were slightly down at minus 1%. Europe, Middle East and Africa was flat, with growth in the U.K. and a recovery in Turkey, the continued weakness in France. Looking ahead, we expect 2026 to be stable with a European recovery further out.

Latin America declined mid-single digits, with Argentina doing well, but Brazil impacted by the BSF disposal. As you know, the Suvinil business was for sale, was bought by Sherwin, but there was a moment of -- there was a moment of lack of leadership of that business, which disrupted the Brazilian market in the middle of the year. But as Sherwin closed the deal and started running the business, this recovered and Q4 was a good quarter for us. Growth will resume in 2026 as Brazil returns to normal trading conditions, which Brazil has already returned to normal trading conditions. So, so far, so good.

China delivered low single-digit growth with our business continuing to outperform in a weak market. We expect this to continue in 2026 and for the Chinese market to finally rebound in 2027. Southeast Asia remained mixed with softer demand in Indonesia, more than offset by growth in Vietnam, where momentum is anticipated to remain solid throughout 2026.

Let's turn to Coatings now. In Coatings, volumes declined 3% in Q4, primarily due to market pullback in most of our segments in North America. Powder remain impacted by low architectural demand, although Asia continued its strong momentum, stabilization in North America is expected in the second half of 2026. Marine and Protective delivered a slower quarter with growth in yachts, but a lower marine on tougher comps. Market share in dry docking will underpin volumes in 2026, market share gains, clearly, in dry docking for 2026.

Automotive and Specialty improved sequentially to flat volumes overall. Aerospace outperformed while Refinish in North America remained at trough. Going forward, low single-digit growth will be driven by a strong Aerospace with a very strong order book and a stabilization in Refinish in the second half of 2026.

Industrial Coatings was down mid-single digits. Coil and Wood were in line with markets. Our Packaging business faces a temporary pullback due to an industry technology shift and the delayed approvals of our product. We are planning to lose market share in 2026 because of this, but we will rebound and recover market share in 2027 on new awards.

We're convinced we have best-in-class technology. So it's a temporary setback, but we will see a market share erosion in '26 before rebounding in '27 in Packaging. On balance, we expect full year volumes to be broadly flat in 2026. After Q1 with similar conditions to Q4 of last year, we anticipate an improving market trajectory in the second half of the year, particularly in North America.

Turning to Slide 5. We closed the sale of Akzo Nobel India Limited at an attractive 25x EBITDA multiple, generating approximately EUR 900 million of proceeds, which showcases that our active portfolio management creates exceptional value. We retained full ownership of our Powder business in India by buying out the minorities and also secured a recurring royalty stream from the liquid coatings assets we divested to JSW.

We continue our portfolio review in Asia as per our strategy to focus on leadership positions and to monetize assets that are significantly more valuable to other people than us. So there'll be more disposals in 2026 in Asia. All actions under our SG&A efficiency program were completed by mid-2025. We now expect around EUR 200 million of gross cost savings based on the elimination of 2,900 functional positions. This is EUR 80 million above our initial target, while also delivering a leaner and more focused operating model.

Meanwhile, our Industrial Excellence Program continues to gather pace. We've closed 12 sites to date in the last 2 years since the start of the program, all without disruption to the business and while improving service levels. All actions under the Industrial program are expected to be completed by end of 2026. We've got at least 6 more closures planned in 2026, and we're making good progress on this. In short, our programs are driving a leaner cost base, better return on capital and a more focused agile organization. The impact of these programs is detailed on Page 6.

Page 6, 2 years into our efficiency journey. I thought it would be helpful to present an overview of the phasing and the benefits of our 2 programs, very much like we did last year. Our SG&A program was fully executed in less than a year. We've achieved EUR 145 million in savings to date with at least EUR 50 million carryover in 2026, which will offset annual inflation alongside other productivity measures. In total, the program will deliver EUR 200 million of gross cost savings, EUR 80 million above the original plan, as I mentioned, with only EUR 50 million higher than originally envisaged cost. So EUR 80 million more value, only EUR 50 million more cost, all of this completed in less than a year, 2,900 positions, a lot of them in Europe. So you can see that we executed and we executed decisively.

Our industrial transformation program remains fully on track and will be completed at the end of 2026. The focus remains on footprint optimization, modernization of anchor sites and supply chain consolidation. We expect a benefit of EUR 90 million in 2026 alongside a slightly higher restructuring cost and corresponding cash outflow. With EUR 110 million of carryover benefit in 2027, the program is set to deliver total gross savings of EUR 300 million. If you take the 2 programs together, that's EUR 0.5 billion of cost takeout demonstrating that our self-help is working and delivering a leaner organization with meaningful operating leverage on any volume recovery.

Moving to Slide 7. Slide 7 is really a summary because the benefits of our efficiency programs, they're substantial. But sometimes they're obscured by the significant negative ForEx translation over the past 3 years, which does not impact profitability, but does make the reported numbers harder to read. We've tried in this table to isolate the effects with profitability gains in both Deco and Coatings and a more efficient use of capital as highlighted by our working capital improvement. We've made steady progress over the past 3 years, with adjusted EBITDA up 40% or almost EUR 0.5 billion on a comparable basis to 2022.

Our progress has been built on price discipline, a leaner organization with greatly improved service levels. This, in conjunction with product innovation, will allow us to capture more than our share of commercial opportunities even in softer markets. The actions already in place will pave our way to achieving our midterm targets and more.

And I'll now hand over to Maarten to discuss our Q4 performance on Slide 8. Maarten?

Yes. Thanks, Greg, and good morning, everybody.

At the group level, organic sales declined by 1%, with volumes down 2% and a positive price/mix effect of 1%. The divestment of India had a negative 1% impact on revenue for both Deco and Coatings. FX translation further reduced revenue by 6%, resulting in a reported revenue decline of 9%. In Deco, volumes decreased by 1%, primarily driven by LatAm. While positive pricing in EMEA and LatAm was offset by a negative mix, organic sales for Deco were down by 1%. In Coatings, volumes were down 3% reflecting ongoing weakness in North America.

Group adjusted EBITDA was EUR 309 million or EUR 343 million at constant currencies and adjusted for the India divestment. The EBITDA margin improved to 13%, up 70 bps compared to prior year. This improvement was due to margin expansion of 240 bps in Deco, supported by structural cost savings. Improvements in Coatings profitability continued to be muted by negative mix, particularly from weaker North America.

We delivered another strong quarter of free cash flow totaling EUR 362 million. For the full year, free cash flow reached EUR 606 million, primarily driven by significant improvements in our working capital position. At year-end, trade working capital was 14.7%, a full percentage point below the previous year and within the target range. Importantly, we achieved this while driving our industrial transformation, which requires inventory buildup to support volume redistribution.

Return on investment also improved to 13.5%, up from 13.3% last year. And finally, strong cash flow generation, together with the proceeds from the India divestment enabled us to reduce net debt to below EUR 3 billion and our leverage ratio to 2x, in line with our plan.

Turning now to our '26 outlook. Looking ahead, based on current market visibility, we don't anticipate a material recovery across our end markets in 2026. A weak first half is expected with the second half helped by easier comparisons. We will remain firmly focused on the implementation of our self-help programs and maintaining strict cost discipline.

In 2026, we aim to increase our full year adjusted EBITDA by at least EUR 100 million on a comparable basis, driven by costs rather than volume. Any volume recovery will be a plus. On a reported basis, including a EUR 40 million scope adjustment for the India divestment and an expected further EUR 35 million of FX translation impact, this should translate to a reported adjusted EBITDA at or above EUR 1.47 billion. The EUR 100 million step-up is driven by what we control with the Industrial program contributing EUR 90 million of savings. Carryover of the SG&A program will offset inflation combined with productivity as outlined in the overview table on Slide 6.

This provides a solid earnings baseline with any improvement in market conditions translating into potential upside. The first quarter is expected to look a lot like the fourth quarter. Soft volume trends continuing, some efficiency uplift and a negative FX impact of around EUR 30 million.

With that, back to Greg for the wrap-up.

Thank you. Moving to Slide 11. On November 18, together with Axalta, we announced a transformative step for both companies, a merger of equals to shape the future of our industry. This compelling combination builds a more resilient coatings leader with enhanced margins and superior cash generation. We see at least [ $600 million ] of cost synergies, and we have the experienced leadership team to execute them with discipline and convert them into a sustainable margin with the robust cash flow.

On top of this, we expect revenue synergies to boost gross by 100 to 200 basis points. We'll share more details on this in the coming months ahead of the shareholder votes. By joining forces, we will not only generate significant synergies, but will also create a company that will bring the best of both worlds to our customers, shareholders and employees. Closing is expected late in 2026 or early in 2027. Preparation for the proposed merger are ongoing, but will not deter or distract us from a more core execution agenda as we deliver against our 2026 outlook.

I'll now hand over to Jan Willem to close with information about upcoming events and then we'll start the Q&A. Jan Willem?

Thank you, Greg. Before we start the Q&A session, I would like to draw your attention to the upcoming events going on Slide 12. We will publish our annual report on February 24. This concludes the formal presentation, and we'll be happy to address your questions. Please state your name and company when asking a question and limit the number of questions to 2 per person so others can participate. Operator, please start the Q&A session.

[Operator Instructions] Our first one is from Thomas Wrigglesworth from Morgan Stanley.

Two questions, if I may. First question, on the EUR 100 million EBITDA constant currency growth, could you just help us understand the drivers of that? You've obviously talked flat volumes, but I assume positive mix. There should be a net pricing benefit in there, and then there's also cost savings. So just trying to figure out the moving parts because noting that net pricing environment is relatively positive. That's my first question.

Second question, if I may. You touched on the deal there with Axalta. Any further updates on timelines or synergy plans, have you guys been able to at least better understand the potential of the merger since the initial announcement?

Thank you, Thomas. I'll start with the Axalta question. The focus right now is to hit the ground running in terms of the critical path and the critical path of any merger like the one that we're planning with Axalta is the regulatory approvals. We've made really good progress. We're working well together. By the end of next week, the main regulatory filings are in Europe and in the U.S. And the one that's the most time consuming is Europe, very, very heavy detailed document upfront and a process that's a bit longer. So we wanted to make sure that we got it out very quickly. And by the end of next week, we'll have completed all the main filings, including Europe.

So we're tracking well from that perspective. And in parallel, we're doing work on detailing the synergy plans and also substantiating the revenue synergies that we want to talk about ahead of the shareholder vote. So all going well. Nothing to report beyond the fact that we're hitting our milestones and making good progress with still the aim to close by the end of 2026.

And in terms of the EUR 100 million step-up at -- on a comparable basis in EBITDA, it's essentially based on self-help. It's mostly driven by costs. We're not assuming the volume growth. We're assuming volumes to be flat. It's a crapshoot on volumes. There's a lot of macro uncertainty. We saw some of the reactions this morning from some of you guys that felt this might be a little bit conservative, but there's really not a whole lot to gain by getting ahead of ourselves and volumes at this point.

And then I think that your main question is the pricing question, but it's really the margin expansion question. Prices were up for us 1% in 2025. We plan to be priced up again in 2026. But the more important question is how that how the margin expansion works out because it's essentially price minus raws. And if you look at our plan in 2025, we were planning for more pricing, but also higher raws. The raws ended up being lower, which made some of the pricing gains more difficult to achieve. So it's really a question of how the market will unfold in 2026.

Right now, it's looking like raws in the first half of the year will be favorable. And in the second half of the year, prices will pick up and now become a little bit unfavorable. The pricing discussions are ongoing and it's about striking that balance with our customers, but we'll be priced up in '26, and we'll expand margins in '26.

Our next question is from Laurent Favre at BNP Paribas.

Two questions, please. The first one, I'm sorry, it's the boring one, but you just mentioned Q1 would be similar to Q4. I just wanted to clarify that I guess, what you meant was on the year-on-year organic development? And then the second one, maybe a little bit more interesting. You mentioned that there would be more disposals in Asian Deco for the year. I'm just wondering, are you thinking about specific areas where I guess you, like in India, don't have leadership? Or are you also considering countries where you do have leadership and are you also considering, I guess, big countries like China where I think the market is a lot more skeptical?

Maarten will take the Q1 question, I'll take the Asia question. We're considering -- we're working. I mean not considering, we're working on more disposals in Deco Asia. It's -- the starting point is always whether we feel that we've got a winning hand over time or whether our business might be more valuable to somebody else. We're not considering exiting China in Deco. It's a good business. It's a business in which the market was really down the last 2 years and everybody suffered. And we're on our way to a recovery.

We had a good year in 2025 despite the fact that the market was still going down mid-single digits. In '26, the market will still be going slightly down in China in Deco, but we are planning to continue on our current momentum, and we see a market recovery in 2027. So we're working on improving our business in China and getting ahead of the wave and fully capitalizing on that market recovery. That's our priority for the next few years.

Everything else in Deco Asia, we're assessing because once we announced that we were selling India and we closed that, you can imagine that, that generated inbounds. And we have views as to what the right moves are. We're working on some of them, but we don't plan to let the merger with Axalta slow down our momentum on this. We'll execute these moves at the timing whenever they make sense. That's what I'm trying to say. Maarten, do you want to take the Q1 question?

Yes, on your question on Q1. So Q1 sequentially versus Q4 is very much similar. You asked about the organic volume trends similar to Q4 and then the only thing which will differ in Q1 is that there will be additional efficiency gains from the industrial excellence program. And what I mentioned earlier is that the FX translation impact for Q1 will be again at EUR 30 million if you compare that to last year Q1. But Similar to Q4 with a bit of additional efficiency gains.

Laurent, anything else?

No. That's it.

Our next question is from Christian Faitz at Kepler Cheuvreux.

Two questions. First, back to China Deco. How long -- it seems to be a price mix problem rather than a volume problem for the time being. How long do you see this negative price mix to continue? Will it improve during '26?

And then second question, can you elucidate a bit the situation in Automotive Refinish? Is this business still hampered by people not having their cars repaired because they fear increasing insurance premiums?

Yes. Yes. So China Deco. China Deco, the driver of the market downturn in the last couple of years was the collapse of the real estate market in China, the property developers that went belly up. Construction really dropped significantly in China. That impacted the project side of the business a lot more than the retail side of the business because the retail side of the business is driven by renovation even in China. But although Akzo Nobel had a small presence in projects and is actually the #2 player in retail, we had the knock-on effect of some of our competitors shifting their volumes to -- shifting their capacity to try to gain volume on the retail side.

So essentially, that created a little bit of a price war driven by Nippon Paints in -- on the retail side and took the profitability of the market down overall. That volume trajectory still hasn't recovered. That's what I was trying to explain, hasn't recovered for the market. The market was down, I think I said mid-single digits in '25, but I think it was a little bit higher than that. It might have been even closer to high single digits. It's going to be down again, mid-single digits in '26.

What's interesting about Akzo is that we've been recovering and we've been rebounding from a profit perspective by essentially capitalizing on our position in premium, where we've been doing well, and we've been actually doing a lot better than the market. So what you're calling a price/mix, it's -- our recovery is being driven by premium. It's still a really competitive market. The price erosion has stopped. And I believe that in the market where there's been a lot of price give back, there are very good reasons for essentially the players in the market to have price discipline going forward, but it's not a market recovery yet.

That market recovery is really anticipated for 2027 based on projections of how the real estate essentially development is unfolding in the coming months. So China Deco good for us, not good overall as a market. We expect it to be good for us again in '26, but once again, it's due to our very specific positioning and our ability to win in premium. Vehicle Refinish, Maarten?

Yes. Vehicle Refinish, what we've seen is a continuing of the trend which we've seen in terms of the insurance, the higher insurance premium and a lower kind of softness in vehicle Refinish in North America and in EMEA while, by the way, we see growth in Asia. That trend will, for sure, continue in Q1 and Q2 and is expected to improve in the second half of '26.

Christian, did we answer your question?

Yes.

The next question is from Matthew Yates of Bank of America.

I've got a couple that probably for Maarten. First, can you just explain the corporate line in Q4 looked a bit lower than normal, let's say? And then I just had a question around the cash flow. Where you are on working capital now? Obviously, the metrics have improved. Just conscious, is that driven by volumes? Or is that price deflation coming through? I'm trying to understand where your physical stocks are sitting relative to what you need, given that your order book still seems to be going backwards at the moment?

And maybe just for Greg, just to come back on the pricing. I'm not entirely sure I understood the answer there. Do you think net pricing is definitely going to be positive in the first half and then the second half remains to be seen given whatever inflation we may or may not get in the raw material basket?

So let me first start with your first 2 questions. On the corporate line, we've seen a bit higher benefits in Q4. Of course, structurally on the back half also our SG&A saving program, but also we had some benefits in pension costs as well as insurance costs. So Q4 was indeed a little bit lower than normal. If you look going forward, in fact, in the past, this line has been roughly EUR 70 million on a total year basis. '25 was a little bit lower. Going forward, you should more think of between EUR 60 million and EUR 70 million. So it is going down, but Q4 was a little bit lower.

On the free cash flow, has been very much driven by the working capital takeout, 15.7% at the end of last year, 14.7% at the end of '24, 14.7% at the end of '25. In fact, on inventory levels, the DIO in days were flat versus the end of '24, but it included prebuy of raw materials and also inventory buildup because of the industrial efficiency program, the site closures in the first quarter. So overall, we are happy with the trajectory of inventory but also receivables and payables. And as we said, we will take further actions to reduce working capital. It will be around 14.5% or just below 14.5% at the end of this year.

To your pricing question, Matthew, I wasn't trying to confuse you what I was saying is that '25 was plus 1% price/mix, '26 should not be very different. It's not going to be a whole lot more and I'm pointing out the fact that the last year, the raw environment was projected to be more challenging than it ended up being. This year, raw mats will be favorable in the first half, less favorable in the second. And as you know, a lot of the price increases, particularly in Deco are things that we submit and we negotiate in the first half of the year. So it's really just a question of how quickly we come to a conclusion on that. And a lot of our customers look at price versus raws.

So it's -- we'll be expanding, but by how much remains to be seen, and it's not reflected significantly in our margin projections for 2026. So the EUR 100 million is not price heavy. Maarten, did I explain that well? Do you want to add anything?

Not -- maybe some color. I mean the EUR 100 million is very much self-help as we mentioned earlier. You have the EUR 90 million net benefit from initial excellence program. We have the carryover of the SG&A program of at least EUR 50 million additional productivity actions, but those are there to offset inflation because we will see again, wage inflation of roughly 3%. So that EUR 90 million is a net benefit and then -- and that's the main underpinning for the EUR 100 million step-up.

Our next question is from Tony Jones at Rothschild & Co.

Tony Jones at Rothschild. I've got 2. Firstly, on cash. With the merger still on track, can you update us on the share repurchase? I think it's EUR 400 million post the India sale. I understand the approvals in place. So can we assume that's front-loaded into the first half of '26? And then secondly, some of your peers have started to indicate where we are in a refurbishment cycle and how they're planning for that. How do you see Akzo's position?

The first question, I think, is a slight misunderstanding. When we announced the merger, we announced that both companies were suspending share buybacks. So the EUR 400 million share buyback at Akzo is not happening. But what's happening is that we're returning EUR 2.5 billion to our shareholders at closing to reflect the -- to get to the announced parity. So you're not getting the EUR 400 million as a share buyback upfront, but you're getting the EUR 2.5 billion if we proceed according to plan towards the end of the year as we close the transaction. The second question...

The EUR 2.5 billion, just to be clear, includes the regular dividend.

Yes, includes the regular dividend.

During the year.

And the second question was...

What was your second question?

Refurbishment.

I don't understand. What do you mean by the refurbishment cycle?

Yes. Some of your competitors have started to talk about extended volume cycles. So things like remodeling activity in certain countries or regions. Do you have a perspective on it?

No. We don't really have anything intelligent to say on this. I think it's -- it's a -- I mean it's a well known. I don't know if I can call it well known, but it's a normal kind of behavior pattern, which is that when the Deco market is driven by consumer confidence and when consumer confidence goes down, there's always been this philosophical debate of will customers paint less or will they paint with cheaper products. And what we've demonstrated over the last few cycles as it relates to Akzo is that we don't see a lot of trading down. So consumers are not shifting to cheaper products, but they have a tendency to space out the repainting. And -- but that's a confidence down scenario.

I think consumer confidence has been recovering. So we're not seeing any specific spacing out of repainting or renovations in homes. This is not an effect that will -- this is not an effect that we'll use as an excuse for anything.

Next question is from Chetan Udeshi with JPMorgan.

I had a couple of questions. First, just going back to the comments on Q1 sort of outlook. And I just wanted to clarify, typically, we see some seasonal uplift in Q1 versus Q4, it could be like 4%, 5%. Are you suggesting we won't see that? Or were your comments more from a year-on-year perspective being similar to what you saw in Q4, but we should still see some sequential improvement, I suppose, in Q1 versus Q4? That's the first question.

The second question was one of the drags on volumes over second half of last year at Akzo, but also your competitors have the U.S. weakness and we saw yesterday the manufacturing ISM print was very, very strong for month of Jan. And I was just curious if you've actually seen that reflect at all in your orders in the U.S.? Are you seeing any uplift in your order book in the U.S. that we saw come through in the ISM index print?

I'll take the second question. It's a bit early to talk about a rebound in the U.S., but in one of our coating businesses for which I do have the numbers for January, they're in line with what we were expecting in January, which is a good sign because sometimes there's a end of year effect where people are slow to get out of the starting blocks in January. It seems to be progressing according to plan. But it's really too early, Chetan, for us to read signs of an impending rebound in the U.S. from that. We're still expecting that the first half will be soft in general. Maarten, do you want to answer the other question?

Yes, on the other question, I mean Q4 and Q1 are traditionally the smaller quarters. And what we commented on is that we -- if we look sequentially, Q1 looks a lot like Q4. I commented earlier on the volume trajectory. And I also commented on the fact that we will see some of the efficiency actions coming through in Q1, which is then on top of Q4, but overall, similar trends.

Chetan, anything else?

Got it. No, that's fine.

Our next question is from James Hooper with Bernstein Societe Generale Group.

I kind of got one question, two parts. I just wanted where -- how do you see your market share has changed over 2025, Greg? I know you referenced packaging on the call. But there's also been some positive commentary out of some of your peers, for example, around auto refinish. And then around that, obviously, you've made -- you've shown on the slides you've made a lot of progress in the last few years on the cost side. But is there kind of now kind of -- is this the time for a more similar plan on the revenue side? Because if we compare your organic growth to peers, it's been slightly below not just fourth quarter, but also through 2025 as well.

The organic growth to peers, if I benchmark with PPG, they had a much better order in Q4 than we did. But overall, if I take the last 18 to 24 months, I'm pretty sure that if you benchmark the numbers, you'll see that we grew faster than they did. So I don't think we're at disadvantage to peers. I do think there's -- I do think PPG had a better quarter in Q4 from that perspective. But you take the quarters in isolation, it's really hard to reach any conclusion.

But once again, I don't think this is -- I don't think we're growing less than comparable companies. I think we've actually been doing a little bit better from that perspective. But your point is still correct, though. It's -- we've done a lot of work on costs that positions us to be very competitive as the market picks up. We haven't been trying to gain market share at the expense of pricing. So the combination of the cost takeout and the price discipline has been more about margin expansion than it has been about using price to gain volume.

If I take your market share question, Vehicle Refinish, we're not losing market share. I think these comments from peers were probably inelegant cryptic comments about companies getting sold and being distracted and the other guys picking up the pieces while the company is getting distracted, but it wasn't an Akzo comment. We're fine from that perspective. Packaging is a very isolated issue. It's linked to a product introduction. You've got approvals. We were more ambitious in the product development, but that ambition led us to be a little bit late to the party in terms of getting the approvals.

The approvals are all happening. There's no technical issue linked to that. It's just that it put us at the back of the queue. And therefore, it leads to a market share drop for 12 to 18 months, a bit of last year and most of '26 and then a recovery in '27. It's not ideal, but it's a temporary thing, and it's -- and we're very confident about the quality and the performance of our product. And on everything else in powder, I think we've been gaining market share if I look at our performance versus everybody else. In, let's see, what can I comment? In Marine Protective, clearly, we've been gaining market share. We've been recovering the last few years and our trajectory is very much a market share positive trajectory. And I made the comment that our growth in Marine in '26 was based on the dry docking market share gains.

And in Deco, we've been gaining certainly in Latin America. I know we gained market share in Colombia this year. Brazil was a weird year because of the Suvinil effect, as I explained. But I think Q4 was the first quarter where Akzo Nobel had a higher customer recognition than Suvinil in the retail market, knowing that historically, Suvinil was a leader. So that tells you that our trajectory is pretty good.

And in Deco in Europe, if you take the U.K. market, which is a really large market for us, our second largest customer went bankrupt last year, Homebase. And despite that, we're -- we didn't lose market share in 2025, which is really an incredible achievement if you think about it because what it means is that. Because by the way, we were over-indexed in Homebase. Homebase had a very premium paint segment, so we were over-indexed and we were essentially -- our market share in Homebase was higher than our market share overall in the U.K.

And despite Homebase disappearing and some of the stores getting closed and some of them changing formats, we maintained our market share in the U.K., which means that people were not buying at Homebase. They were buying Dulux. And when Homebase went away, people bought Dulux but somewhere else, which I think is an incredible reflection of the strength of the brand. So now from a market share perspective, we feel comfortable apart from the packaging points, which is a temporary issue that I pointed out. We feel comfortable that we are either defending or in the areas I've mentioned gaining.

But once again, in a market that doesn't have whole lot of direction and has a lot of softness, you have to decide whether you're willing to compromise on price in order to gain volumes. We clearly have competitors. If you take the powder market, we have competitors who are playing a price game right now. And some of those are competitors that I've mentioned in this long-winded answer. So it's -- different people have different game plans. Ours is to expand margins and that's what we'll continue to do. And then the volumes will come, but it's not -- our first priority is not volumes. We certainly want to defend our positions but we will grow only if that growth that comes with really strong price discipline.

Hopefully, I answered your question.

Yes, thank you. Very comprehensive answer.

Our next question is from Stefano Toffano with ABN AMRO and ODDO BHF.

Maybe just one question on the market share. I mean, a very comprehensive answer, so thank you very much for that. But I mean, looking at the results, I think, if I'm not mistaken, and please correct me if I'm wrong, this is the first negative organic growth quarter since, I believe, Q2 2020 according to my model, unless I made some mistake. But it does -- I mean, do I read too much into that? Because again, one of the first ideas here is yes, maybe you're focusing internally on the margin, et cetera, and not at the expense of some overall market share. So maybe if you can comment a little bit on that.

Second one, on working capital, I noticed that the midterm guidance for the working capital has been notched up a little bit to 13% to 14% and it was 13%. I was wondering what the idea was behind that. Last question, and just a technical one. If you can please remind me how much India adjusted EBITDA was in 2025?

Okay. Your first question, I gave a really long-winded answer the first time around. I'll give a really short one. Yes, you're reading too much into Q4. It's a small quarter. There's no valid extrapolation from that one data point. And as you rightly pointed out, the direction has been pretty consistently the other way around for the last few years and therefore, no, we're not dropping market share. I commented very transparently on packaging. A lot of companies would dance around these issues. Look, at the end of the day, it's -- sometimes you're first out of the gate, sometimes you're not first out of the gate. And it's important to understand how that unfolds.

But overall, we've had good momentum in a soft market. And once again, we're not arbitrating in the way you're implying. So I said it would be a short answer and then I can't resist giving you a longer one, but yes, you're reading too much. Working capital? Maarten?

On working capital, yes, our original guidance, which we gave 2 years ago was around 13%. We are saying now more in the range of 13% to 14%. I think it's also a reflection that the world is changing. And it's better to have a little bit more inventory, especially given the volatility in the markets and the tariff situation. So things have changed. But overall, we are on our improvement trajectory from working capital levels, which were 17%, 18%, coming now to 14.7%. And getting by '27 to that range of 13% to 14%. So -- and it's very much also benefiting on the back of our industrial efficiency program, where we are optimizing our footprint but also our supply chains.

So that's on the working capital. On India, and what we've said earlier is that compared to '25, you need to correct for EUR 40 million downwards. And the impact in December was EUR 6 million. So the total correction on adjusted EBITDA level is EUR 46 million, of which EUR 6 million sits already in December '25 and then '25 to '26, a correction of EUR 40 million.

I think this was the last question. Thanks a lot. We'll wrap up because you guys have a busy day. It's -- Q4 was -- Q4 was a soft quarter in terms of market momentum but it was a strong quarter in terms of execution as was 2025. We end the quarter and we end the year price up, profit up, cash up, so we're executing on what we can control. Once again, we're staying disciplined and we're working full speed ahead on getting to closing with Axalta as quickly as possible and targeting the end of 2026. And at least in this early phase, hitting our milestones to get there.

So that's all I have for you today. I thank you for your time and your interest, and we'll talk to you soon. Thank you.

Ladies and gentlemen, thank you for standing by. Welcome to the Axalta and AkzoNobel conference call. [Operator Instructions] As a reminder, this call is being recorded, and a press release and slide presentation regarding today's news are available on the Investor Relations section of each company's website.

I would also like to remind everyone that all statements made during the call that relate to future results and events, including the proposed merger, are forward-looking statements that are based on current expectations. Actual results and events could differ materially from those discussed here. Please refer to the information on the disclaimer slide in the presentation as well as the additional information contained in the regulatory filings for both companies.

I'll now turn the call over to Rakesh Sachdev, Chair of the Axalta Board of Directors.

Thank you. Welcome, everybody, and thanks for joining us. I'm Rakesh Sachdev, Chair of Axalta, and I'm delighted to open today's call also on behalf of Ben Noteboom, Chair of the Supervisory Board of AkzoNobel, and to welcome you to this analyst and investor presentation on the proposed merger of equals between AkzoNobel and Axalta. This strategic combination will create a global coatings leader with $17 billion in revenue and an enterprise value of $25 billion. Together, we will drive significant value for our stakeholders, including shareholders, customers, employees and the communities where we operate.

On today's call, Greg Poux-Guillaume, AkzoNobel's CEO; and Chris Villavarayan, Axalta's CEO, will walk through the transaction details and why we are all very confident in the value creation potential of this combination. The history of each of our companies dates back well over a century. Greg brings deep global leadership experience in industrials and has a strong track record of operational excellence. Chris is widely recognized for driving performance, innovation and customer-focused growth. Together, they will lead a world-class team as we bring these 2 great businesses together.

With that, I'll turn over to Greg on Slide 5 to kick us off with a deeper dive into the rationale for this transaction. Greg?

Thank you, Rakesh, and good morning, good afternoon to everyone. Today truly marks an important step forward for both AkzoNobel and Axalta, a moment when 2 outstanding organizations come together to shape the future of our industry. By joining forces, we're creating a global coatings leader with $17 billion in revenue and enterprise value of about $25 billion, a market leader with the scale, the capabilities and the ambition to set new benchmarks in the paints and coatings industry. This is a compelling combination. It delivers immediate benefits while opening the door to meaningful upside in the years ahead.

We see clear actionable opportunities for cost and operational synergies of $600 million, opportunities that we have specifically identified and therefore, are within our control. But this merger is about far more than synergies. It's rooted in deep and clear industrial logic. Together, we're creating a premier global coatings company with the portfolios, the technologies and the talent to lead our industry.

AkzoNobel and Axalta bring highly complementary strengths, leadership positions across key end markets, world-class innovation platforms and a shared commitment to serving customers with excellence. This combination brings those strengths together in a way that is simply stronger than either of our companies could achieve alone. With greater scale, broader commercial reach and enhanced capabilities, we will be better positioned to serve our customers, deliver superior value to our shareholders and invest in innovation and growth.

Both companies have grown to become global leaders, AkzoNobel in Powder and Aerospace and Deco and Marine Protective; Axalta in Refinish and Mobility by consistently investing in technology and long-standing customer relationships. Together, we will build on that heritage. Our focus will be on driving innovation that delivers tangible benefits to customers. This merger brings together 2 high-performing organizations with strong financial foundations. The combined company will have robust cash flow generation, providing the flexibility to invest in innovation and growth while supporting disciplined capital allocation and a clear commitment to maintaining an investment-grade rating.

Over the next few slides, Chris and I will show why this combination is such a powerful opportunity and how it positions us to lead the next chapter of value creation in the global paints and coatings industry.

Let's now turn to Slide 6, where we will walk you through the elements of the transaction structure. This is an all-stock merger of equals at no premium, with a special cash dividend to be paid to AkzoNobel shareholders equal to EUR 2.5 billion, minus any regular annual or interim dividends paid to AkzoNobel shareholders in 2026. So contrary to some of the -- what some of the more mathematically challenged members of the investment community wrote this morning who disregard the EUR 2.5 billion of special dividend. If you account for the special dividend to Akzo shareholders, you can see that this is a no-premium merger of equals.

Under the terms of the agreement, Axalta shareholders will receive AkzoNobel shares, so that AkzoNobel shareholders will own 55% of the combined company and Axalta shareholders will own 45% of the company. The combined group's strong cash flow generation, together with the realization of identified synergies, will support our clear strategic capital allocation priorities. We will remain firmly committed to strong shareholder returns, including dividends, while maintaining an investment-grade credit rating with a target leverage ratio between 2 and 2.5x net debt to EBITDA.

This transaction has received unanimous support from both our Boards, subject to shareholder approvals and customary regulatory clearances, we expect the transaction to close in late 2026 to early 2027. Following completion, the combined company will be solely listed on the New York Stock Exchange and domiciled in the Netherlands with dual headquarters in Amsterdam and Philadelphia.

Turning to Slide 7. For more than 1.5 cent, both AkzoNobel and Axalta, have shown resilience in successfully weathering industry shifts and led technological innovation to build well-established portfolios and brands. This merger brings together the very best of our 2 cultures, talented people, technical expertise and a shared passion for serving customers at the highest level. Both organizations have long recognized that sustainability and innovation are the engines on long-term value creation.

Across our combined 91 R&D centers, we are united in our drive to develop solutions that help customers improve performance, productivity and environmental footprints. Together, we will serve an exceptionally broad set of end markets from Powder, Industrials, Aerospace and Deco to Refinish and automotive with leading positions in our core segments. By combining our technologies, our talent and our customer relationships, we will be able to offer more depth and innovation than ever before. This is about creating a partner of choice with unmatched technical service and global reach.

Turning now to Slide 8. You can see clearly how the combination of AkzoNobel and Axalta reshapes the competitive landscape. The combination of AkzoNobel and Axalta immediately positions us as the #2 global coatings company with roughly $17 billion of revenue. Our scale, combined with a well-balanced mix of coatings, gives us one of the most diversified portfolios in the industry.

Compared to peers, the strength of our combined platform is clear. We gained the reach and the breadth, both technologically and commercially to lead in delivering value for our customers across our core markets. This is not just about size, it's about creating a stronger, more competitive company with the capabilities to drive sustained growth and value creation.

I'll now hand over to Chris to walk you through the details behind our combined strength. Chris?

Thank you, Greg. Moving -- bringing AkzoNobel and Axalta together is about unlocking value creation, accelerating sustainable growth and creating a stronger, more diversified leader in coating solutions, as Greg described.

On Slide 9, you will see how our best-in-class brands complement each other. Together, we will have first-rate franchises across 7 end markets, creating a balanced portfolio. Our combined global customers will gain access to an unmatched portfolio of coating solutions from the homes and cities where we live and work to the vehicles that transport us and our goods across land, sea and air. Our technologies will continue to meet the evolving needs of our customers worldwide. Our portfolio will be more diversified both in geography and by application and be differentiated by the breadth of solutions across approximately 100 well-known brands.

Turning to Slide 10. This combination meaningfully expands our geographic scale and strengthens our commercial reach. Together, we'll have a global footprint spanning approximately 173 manufacturing sites and 91 R&D facilities worldwide. This enhanced footprint unlocks meaningful value and enables us to accelerate innovation, optimize our cost structure and expand into attractive markets. Individually, we were strong. Together, we're even stronger, equipped with the resources and capabilities to shape the future of our industry.

By increasing our local presence in key geographies, we expect both AkzoNobel and Axalta's customers will benefit from the greater value we can deliver as one team through deeper channel access, broader product support and customer relationships.

Slide 11 captures one of the most powerful aspects of this merger, the depth of history, expertise and innovation that both companies bring. Each of our organizations have been industry leaders for more than a century, and we are united by a shared commitment to R&D and strong pipeline of solutions. Together, we will invest approximately $400 million in combined annual R&D spend, supported by 91 global R&D centers for local customer needs, approximately 4,200 research fellows, scientists and engineers and approximately 3,200 granted and pending patent applications. This scale and increased talent pool gives us the ability to accelerate innovation and deliver advanced differentiated products across all end markets.

Importantly, sustainability-driven innovation remains core to everything we do, ensuring our technologies meet customer needs today while shaping a more sustainable future. We're not just merging 2 companies, we're merging 2 innovation engines with a proven track record of shaping the industry.

Turning to Slide 12. This transaction presents a compelling opportunity to deliver meaningful incremental value to our shareholders that we could not deliver alone. By combining AkzoNobel and Axalta, we expect to unlock substantial synergy potential, further strengthening our financial profile. We anticipate that the combination will generate run rate synergies of approximately $600 million, 90% of which is expected to be achieved within the first 3 years following the close of the transaction. Their targeted synergies primarily stem from SG&A savings as well as streamlined procurement functions, footprint optimization and improved supply chain management.

Importantly, we believe these synergies will translate into tangible benefits such as higher margins, stronger cash flow and significant flexibility to support strategic and capital allocation priorities. Both organizations have a strong track record of focused execution, giving us confidence in our ability to deliver. For stakeholders, this means a more resilient, diversified business with enhanced profitability and long-term growth potential. Simply put, we believe this combination positions us to create long-term value, and we will have a clear line of sight on how to make this happen.

As you can see from Slide 13, we expect to have a highly attractive financial profile with strong adjusted EBITDA margins approaching 20% and substantial cash flow. With revenues of approximately $17 billion, adjusted EBITDA of $3.3 billion and pro forma adjusted free cash flow of $1.5 billion, we will be among the top in our industry in terms of profitability and cash conversion.

Putting it all together on Slide 14, this combination is unique -- as a unique opportunity to combine 2 iconic companies that we are confident will deliver superior value creation over the long term. This combined company's strong cash flow generation potential is expected to enable consistent capital returns through a regular dividend and the capacity to reinvest in innovation and growth.

Our net leverage is expected to be in the range of 2 to 2.5x, and the combined company is expected to be investment-grade credit rating. For shareholders, this means a stronger, more diversified business with enhanced profitability and the financial flexibility to invest in long-term value creation.

Before I move ahead, I want to take this moment to reflect on this monumental announcement. Over the past few years, Axalta has successfully transformed its culture, enhancing engagement, driving innovation and delivering operational efficiency across the organization. Our focused execution has been outstanding, and I'm immensely proud of the bold progress we have made. Looking forward, I'm excited to continue this journey alongside Greg and AkzoNobel.

As outlined on Slide 15, our stronger pro forma financial profile will underpin our ability to drive growth and create long-term value. This merger is more about the combination of 2 companies. It's about creating a stronger, more resilient coating leader that delivers for our shareholders, customers and employees alike. We have outlined the financial strength and the innovation potential and the global reach that will define our future. I'm confident in our ability to execute and deliver the exceptional value ahead.

With that, I'll turn it back to Greg.

Thanks, Chris. Let's turn to Slide 16 to discuss governance and leadership. We've designed a structure that is both balanced and combines the best experience needed to manage the combined company. The current Chair of Axalta, Rakesh Sachdev, will chair the Board with the current Chairman of AkzoNobel Supervisory Board, Ben Noteboom, serving as Vice Chair. I'll serve as CEO with Chris as Deputy CEO, a leadership model that reflects the collaboration at the heart of this merger of equals. The Board will also include independent directors to ensure a strong oversight and an external perspective.

Our approach to leadership is straightforward, ensure continuity where it matters most, make decisions anchored firmly in the long-term interest of the combined company, and hold ourselves accountable for delivering on the commitments we're making today. Both organizations bring deep experience in leading large integrations and transformations. We know this will require focus and discipline, and we're fully prepared to address challenges head on and execute with precision.

Finally, on Slide 17, let me touch on what this merger means for our stakeholders. For our employees, this creates new opportunities across a larger, more diverse organization. And every major integration has seen new career paths opened up, sometimes in roles or geographies that people never imagined. At the same time, we recognize that change brings uncertainty. Our commitment is to communicate early and consistently so people know where they stand. For shareholders, this combination is fundamentally about value creation, $600 million of identified cost synergies, superior margins, a stronger balance sheet with financial flexibility.

For our customers, the merger brings a broader portfolio and deeper technical expertise and stronger local support, all reinforced by global scale and a sharp focus on partnership and service. For our suppliers, we intend to build on existing strong relationships and use our combined reach to create new avenues for joint growth and innovation. And on sustainability and innovation, both companies have made real progress. We will continue pushing for practical, measurable improvements that help stakeholders meet their goals while strengthening our own long-term competitiveness.

On those words, that wraps up the presentation part of this meeting, and we're now happy to take your questions. I'll work with the moderator to dispatch them so you hear from all of us. Go ahead.

[Operator Instructions] And the first question today comes from the line of Laurent Favre with BNP Paribas.

The first question is on synergies. And I was, I guess, wondering if you could talk about the range of scenarios around the $600 million target. Can you help us understand how you derive the number? Is it bottom up or top down? But also, I guess, importantly, what is the sensitivity of that number to what may happen with the antitrust review? So is it highly sensitive to areas where you do have overlaps and therefore, there's risk around antitrust?

And then the second question, if I can, from a leadership standpoint, so you both arrived in the coatings industry at the same time. And I believe neither of you is particularly married to the industry. So can you help us understand the game plan on leadership post closing and on synergy capture has come through? Do you already have an agreement on who stays for how long and ultimately, who runs the show?

Yes. Thank you. Laurent, I'll take the first question, and Chris will take the second on leadership. I'd like to start by saying that this is a merger between an American company and a Dutch company. And the first question is, a French guy answering the question of a French guy, which feels strange, but we'll go with that anyway.

Synergies. The $600 million is something we worked on together. You know, Laurent, because you've been covering us for a long time that AkzoNobel and Axalta have considered the opportunity of a merger multiple times in the past. Almost every time we had those discussions, we did a joint synergy study. When we reinitiated these discussions recently, we undertook another joint synergy study. So we've done a lot of work on this. The work has been bottom-up in the sense that we've got teams from both businesses, including people from the segments of both businesses that contributed to this analysis. So it's a solid and surprisingly granular for a merger of 2 listed company, surprisingly granular plan. And we feel confident that this is something we can execute.

And Chris and I have done this before. Maarten de Vries, our CFO, also has been in similar situations as is Carl. So there's a team that knows how to deliver these things, and there's enough granularity and bottom-up elements that we feel we can hang our hat on this.

And then your question on antitrust. I mean, first of all, it's too early to speculate on any potential remedies. You have to keep in mind, this is a really fragmented industry where there's ample competition. But if you look at the synergies and you look at the breakdown that's in the presentation, the SG&A synergies mostly are not significantly impacted by remedies. The manufacturing and supply chain synergies are linked to the businesses. And procurement is a specific number linked to specific situations by commodity that we looked at. So rest assured that there's a lot of work that went behind us, and these are numbers that we feel strongly we can deliver.

And then on leadership, Chris, do you want to go ahead?

Sure, absolutely. And Laurent, thanks for the question. I think to your point, Greg and I came here -- came into the business at the same time. Obviously, Greg, from my perspective, the way we looked at this is to have a balanced leadership, both from a Board perspective as well as a leadership perspective. And when it came to the leadership perspective, it's specific to the CEO. Obviously, Greg has been running a larger organization. If you think about AkzoNobel with 33,000 employees, and Axalta. It's -- I think Greg has spent the last 2 years learning that business. I've obviously spent my time learning this business.

But what is complementary across the 2 businesses, we obviously have the 3 businesses when you look at Refinish. But Greg on his side also has Aerospace, has Marine. There are more businesses as well as Deco. And I believe that gives him the opportunity to also drive a strategic initiative here. And that is certainly the focus of the company going forward. If you look at the 7 end markets, obviously, Greg has more and that it made sense that this would be -- probably makes sense for Greg to lead this.

I'm supporting from -- as I look forward from the synergy standpoint. And as Greg pointed out, both of us are very, very good at this. Both our teams are exceptional. It's built into our DNA. It's something that, as you can see in our -- both our companies' performance in the last 2 years, we've both done an exceptional job.

And as Greg pointed out, we're supremely confident in achieving this. Even if we look at -- as Greg pointed out, on the materials bucket, that is about $6 billion. So there is ample opportunity, and we truly believe that this is something that we can execute and deliver on.

The next question is from the line of Christopher Parkinson with Wolfe Research.

This is Harris Fein on for Chris. Congratulations. Just maybe if we could spend a minute thinking about the capital structure for the combined entity. Will there be any incremental debt to fund the EUR 2.5 billion special dividend? That's my first question.

Yes. Maarten de Vries, the AkzoNobel CFO, who's sitting next to me, will take that one, and Carl can jump in afterwards if he wants to add anything. Maarten?

Yes. So thanks for the question. If you look at the special dividend of EUR 2.5 billion, which is, in fact, a combination of the regular dividends in 2026 as well as special dividends. Financing will be partly from available cash, but also from additional -- taking additional debt. But we don't see any issue to be able to handle that.

Carl, do you want to add anything?

Yes. Thanks, Greg. Harris, yes, as Maarten outlined, I think the combined companies and the focus and the strategy of ensuring we're investment grade will be the #1 objective as we move forward. So we -- with the amount of free cash flow generation here over the next 12 months plus, and as Maarten articulated, we feel very comfortable with being able to deliver on the target range of leverage as we move forward.

And I'd add to that. Keep in mind that we -- AkzoNobel, we just sold our Indian businesses. We got EUR 900 million of net proceeds. The deal is closing. I don't want to put pressure on our team, but like next week or the week after. And we've suspended the share buyback that we had planned associated to those proceeds. So the combination of the proceeds from the Indian disposal, the additional free cash flow we'll generate from now to closing, we see no issue with that special dividend.

Next part of your question, Harris?

Understood. Yes. And you mentioned a few times broader scale and commercial reach. Just curious if you're contemplating any potential for revenue synergies on either a regional or a customer basis as part of the combination. It would be good to hear your thoughts on the potential there?

Yes. Chris and I share the view, and I'll start, and Chris will jump in. Chris and I share the view that there are significant revenue synergies associated to the transaction. We'll have unrivaled global coverage. We've got synergistic product ranges. There's all sorts of things that we can do, but neither of us is of the belief that you should bake these things into the shareholder presentation as you announce a merger like this. We want to hang our hat on stuff which is mechanical. The cost synergies are mechanical. These are things that we will extract regardless of what happens in the market and the revenue synergies are the cherry on top.

Chris, do you want to add anything?

Yes. No, that's perfect. I think well said, Greg. For us, there's -- obviously, when we look at geographical scale and what we can do from the end markets, with -- we have teams that are complementary in many regions that can carry other product lines or adjacencies. So there's probably significant upside on revenue synergies. But as Greg pointed out, we don't have any of that baked up -- baked into our models here.

The next question comes from the line of James Hooper with Bernstein.

Congratulations, guys. I've just got a couple more from me. The first question is a simple one. Why now? Obviously, they've been on and off this merger for 10 years or so in various management teams.

And then the second question is a bit more going into the sort of cost synergy side of things. I mean, Greg, you spoke on Bloomberg TV this morning about U.S. governance and keeping the domicile. And you mentioned that there wasn't so many -- a lot of the SG&A synergies will be independent of antitrust. So to what extent is this -- when you were underwriting the synergies, is this just a kind of continuation of cost cutting that you've already been doing and this is just a kind of logical extension with perhaps a different domicile?

Yes. Thanks, James. I'll take both questions, although I'll ping the why now question also back to Chris, so you can check whether we believe we have the same answer. The first part, I mean, I'll start with your second question, the cost synergies it's -- I think you're talking about 2 different things. You're talking about the cost synergies and you're talking about the governance issues. The governance issues are -- we're making this as much of a U.S. company as you can be while being Dutch domiciled. Dutch domicile is attractive. Companies that want to domicile in Europe, usually, they look either at the Netherlands or at Ireland. And our friends at Axalta can attest to that.

So -- but at the same time, the coating space is led by U.S. investors. If you take Akzo today, 62% of our shares are in U.S. hands. So U.S. listing really makes a lot of sense. And to make this a U.S. company, we have to make it as close to the governance of a U.S. company as we can be. And some of that means having a 1-tier board system rather than the historical Dutch 2-tier board system. And it also means dismantling the shifting that investors intensely dislike. This foundation that sits at the top of the company that some of you guys see as a poison pill or anticapitalistic. So all of that is going away. It's a 1-tier board system. It's pretty much a U.S. company as an NV. And we think there's a lot of value to that, including in how that company is going to be rerated.

Now your question on the cost synergies. The cost synergies are, as I said, they're solid, the $600 million. I mean some of them clearly would be impacted by potential remedies. But my point has been that a lot of the synergies that you see on that page -- the details then are not directly correlated to whether we have to sell anything. The corporate stuff, for example, is regardless of whether the scope is adjusted a little bit or not, the corporate stuff is going to happen, and there's only going to be one team and there's only going to be one overhead structure. So the procurement stuff is also largely going to happen and adjusted for a little bit of scope potentially. But once again, it's too early to speculate on that.

The important part of your question, is this more of the same? And the answer is it isn't because if you look at what Akzo is doing, whether it's on our industrial transformation or on our functional cuts, the functional cuts are essentially already done. There's going to be a little bit more in 2026 because why stop now. And the industrial transformation, the factory rationalization, we said that program would be fully completed at the end of 2026.

So essentially, as the transaction closes, we will have delivered on the things that we committed to as AkzoNobel and the cost synergies that you're seeing are really the consequence of putting the 2 companies together and using the best of both worlds and relying on maximizing the value out of the assets that we have and getting rid of these surplus assets. So it's really straightforward. It's an addition. It's not a substitution.

Chris, you want to give flavor on why now?

Sure, absolutely. I think, James, simply put, and you asked the question on, hey, over the last 10 years, I personally believe or I truly believe there is no better platform. I think these 2 portfolios were meant to be together for the last 10 years. And I think, if you look at the compelling ability to create value, when you look at the synergies, you look at the rerate potential, this was a deal that needed to happen. The strategic rationale and the breadth of the portfolio that this brings together is bar none better than most that's out there or in my perspective, better than all that's out there.

And as I look at this going forward, the reason that this happened was both of us were able to work together to make this balanced, and really start both of us coming in new into the business, I think, helped. and really pulled it together. And it's also a true complement to both Boards of coming together and making this possible. I think right now, it was just the perfect time because we had the right mindset from a Board perspective and a leadership perspective.

The next question will be coming from the line of Matthew DeYoe with Bank of America.

Chris, U.S. investors would probably say size of sales is not an indication of value, and you've clearly done an excellent job lifting margins. So with that in mind, my first question is, what even is a Deputy CEO? And how will the 2 of you come to a conclusion if you fundamentally disagree on a solution?

Well, I think it's -- what Greg and I have worked on is what each of us are going to take as our responsibilities going forward. What I'm going to be focused on is really putting together and driving the synergy book and really driving the $600 million and coming up with the story and the implementation plans and have it ready to go on day 1. And it's something that we're going to work together.

Obviously, to James' question -- previous question on why now, we were able to work together to get this deal done. So I believe that we will certainly work together to develop and come up with the strategies around the synergy savings. It's -- as I've said in the previous questions, it is built into both our DNAs. I think we're exceptional, not only from our perspective, but from our team's perspective, on driving cost.

And so I think as Greg pointed out in the last question, I think we know the exact buckets. We know the work we need to do. We will certainly develop the strategy. I'll help him put that together. And so the focus is on accomplishing that and it's truly in both our benefits. So I don't think that there's going to be an issue that we're going to have too many disagreements on that side. In fact, I think knowing Greg and I will be pushing to higher numbers.

Chris and I are aligned. We speak the same language. And Matthew, we don't know each other well, but I don't want to leave you with the impression that Maarten and I at Akzo don't know what a U.S. investor is. I led the disposal of Alstom to GE and the integration of the Alstom businesses into GE. And Maarten led the disposal of TNT to FedEx and the integration. So we've done this before, and we'll do our best to speak proper English and make sure you guys understand this, but we understand what the challenge is and what the opportunity is.

Yes, Greg, I didn't mean to cast aside on you more.

No, I'm kidding, Matthew.

And what has been impressive with Chris. But look, I appreciate your answer. And I also appreciate you want to hang your hat on what's mechanical, but I think both sides of the pond are pretty frustrated by like a lack of organic growth across both franchises. And I know there's a lot of macro to blame here, but also creating a more diversified organization doesn't really mean higher value or growth. So like as you sat in your offices kind of pontificating sales synergies, like what did you come up with? What -- maybe you can expand a little bit or if it's really just too premature, it would be helpful to kind of understand that.

Greg, do you want to take that, and I'll follow up after you?

Yes. Sure. I'll start. And Matthew, it's a really fair question. If you look at this industry, the last few years have been really challenging for growth. The market has gone sideways at best. It doesn't mean that this is a long-term trend because if you look at many of our end markets, the coatings demand is still below 2019 levels. So at some point, there's going to be some type of recovery. But there's been areas that have been at times a little bit difficult. Refinish has been difficult this year, for example, but these things come and go.

What we see is we see the strength of the combined portfolio. We see the value of the combined geographical coverage. At Akzo, if you look at our coverage premerger, we are actually under-indexed in the U.S. The U.S. is only about 13% of our sales, but we do 30% of our sales in Asia. If you plug in the Axalta delivery model in the U.S., which has demonstrated value and impact and you take that model and you plug in the Akzo products and the Akzo businesses, and you do the same with the Akzo platform in Asia and Europe for the Axalta products, you can see that you can push harder and faster. So we're very comfortable that the combination of the product complementarity and the strengthened geographical coverage will lead to growth above and beyond the market. Chris?

Yes. And just very little to add. So I think what Greg has walked you through is how we will approach the market. And then just 2 data points on how we will support it, which both companies coming together, what I mean by being stronger is think about the ability of investing $400 million in R&D, we can certainly drive growth aspects of the business because of the fire potential we have in M&A. And then also in terms of capital and what we can deploy with our free cash flow, we believe we've built a company that will really be able to drive focused growth in areas we want to really drive growth in the future.

Our next question is from the line of Chetan Udeshi with JPMorgan.

My two questions. The first one is, what is the role of the Decorative Paints business within the broader combined Co? I remember, Greg, you alluded to this question on your third quarter results call that there are no real synergies between Decorative Paints and Industrial Coatings. And if you were able to scale your Industrial Coatings business with something, which seems to be this, then the eventual exit from Decorative Paints is not unfeasible? And the related question is, if you were to sell your decorative paints business, would you have -- would that have any impact on your synergy number?

And the second question is a bit more cynical one. Typically, we see these sort of mergers and all of the existing restructuring activities sometimes get lost. And we are aware, and I'm sure we all track Akzo's own industrial efficiency program. So are you still committed to delivering on the upside from that program? Or do we sort of somehow miss that as part of this transaction in the next 12 to 18 months?

Thanks, Chetan. I appreciate your self-described cynical question, and I'll answer your various points. On the existing cost actions, as I said earlier, our functional actions that we committed to, we initially said EUR 150 million of savings, and then we raised it to EUR 175 million. And as we explained, all that EUR 175 million is already implemented. So you haven't seen all of it in the P&L because you got carryover into next year. But at the end of -- on '26, you're going to see the full run rate of that EUR 175 million of cost synergies on the functions.

And then on the Industrial side, we said EUR 350 million.

EUR 300 million.

EUR 300 million, see I'm already raising the bar. We said EUR 300 million. And we said it was a 3-year program, and we said all the actions would be implemented by the end of '26. And we also gave clear milestones of how much of that you'd see in our P&L. It's all in our Q4 presentation. So we're committed to those. It's all going to be visible. It's all going to be fully pursued. And by the way, the deal closes late '26, early '27. And by that time, the actions on Akzo's side will be completed and they'll be measurable. So rest assured that we're fully committed and we will deliver.

And then your question on Deco, what we've been doing on Deco in Akzo is that we're the market leader in Europe. We're the market leader in Latin America. We have a mixed bag of businesses in Asia in Deco. And we have a few countries in which we have a leadership position, and then we have a bunch of countries in which we're a follower. And Deco is fundamentally a local business, which means that you can sell or you can manage these businesses independently from each other. So we're fully committed to realizing value from our Deco Asia assets wherever we don't have a leadership position. And we've made that commitment. We started delivering on that commitment by selling India for 25x EBITDA. As I said, the deal is closing in the next couple of weeks.

And as part of this merger, we've agreed with Axalta that we will continue monetizing these Deco Asia assets between signing and closing. So we're not stopping anything. I think it's known by the market that we're in the process of selling Pakistan and there's more to come. So that doesn't change, that continues.

And finally, the synergies are not on Deco, obviously, because the Axalta portfolio doesn't have any Deco. And therefore, if I had any synergies on Deco, I'd be contradicting myself from earlier on, which is to tell you that this isn't another cost program at Akzo. This is synergies from combining the operations of AkzoNobel and Axalta. And once again, if you think back to all the stuff that we're doing currently at Akzo, a lot of it actually impacts the Deco side. So you're not at risk of seeing the buckets commingled and things get lost in the fray.

Did I answer your question, Chetan?

Yes, very well.

The next question is from the line of Ghansham Panjabi with Baird.

Congrats again. So I guess on a pro forma basis, how should we think about the portfolio split between end market dynamics that are cyclical versus those that have secular tailwinds associated with them? Obviously, from a public market standpoint, one is worth just much more from a valuation standpoint than the other. And then related to that, I would love to hear your individual thoughts on whether you think the auto, Refinish volume challenges in the industry are secular or cyclical?

Chris, do you want to take the secular or cyclical question?

Sure. Obviously, Ghansham, thanks for calling in. Obviously, we look at it as cyclical. And we've positioned it and as we look at how it's -- how the year has played out and especially how we look at Q1 and Q2, we certainly believe the market will return to what we would define as more normal in the Refinish space by the end of Q1 into Q2. Specific to us, obviously, there was 2 issues that was driving our market. One is the normal decline that we saw or the decline that we saw in the Refinish space driven both by insurance rates and obviously, let's call it, consumer preference or consumer confidence. And the second one was a specific issue with destocking specific to one of our distributors acquiring another one and let's call it, the consolidation there led to what we saw.

We do believe that, that destocking element will play out by next -- by the end of Q1. And on top of that, the other element of this is we certainly are seeing a little bit more market stability. I mean, I think you've seen some recent announcements where you can also see that Q4 is starting to balance out a bit. So again, we do believe that this market will recover specific to Refinish.

Thanks, Chris. And I'll jump in, Ghansham. We're also active in Vehicle Refinish. We're much smaller than Axalta, but we concur with Chris' and Axalta's view. We're not smart enough to pick the bottom. But frankly, this deal is not about picking the bottom of anything. It's -- we're both exposed to the same macros, and we both have the conviction that Refinish is going to rebound as and is in a cyclical downturn. So on that, we're very much aligned.

And then your question on the portfolio in general, it's a mixed bag. I mean you've got businesses that are more naturally cyclical like Marine, shipbuilding has a cyclical element. But when you say Marine & Protective, Protective is a lot of infrastructure, which is a lot less cyclical. If you take auto, there's some cyclicality involved. If you take Aero, the order books are full for years to come. So whether you believe it's cyclical or not, you're not going to see that cycle in the next 5 years, probably, especially if you listen to the stuff on the Qatar Air Show today.

And then if you take a business like Powder. Powder is multiple end markets. There's a liquid to powder conversion. It's really not cyclical. Packaging, which is beverage cans and is not very cyclical. And Deco, which we talked about earlier, Deco is not very cyclical. Deco is linked to consumer confidence. So it breathes in and out based on whether people feel good about their prospects or not. But it really has nothing to do with industrial cycles.

At the end of the day, when you buy into a coatings business, what you're buying is the end market diversification. You're buying a portfolio of things that may have an element of cyclicality, but that taken together are a lot less volatile because these are not the same cycles or some of those businesses like Deco don't really have a cycle.

So hopefully, that answers your question, Ghansham.

Yes, it does.

The next question is from the line of Georgina Fraser with Goldman Sachs.

First one for Greg, and it's just a query around interim leadership at Akzo. Is Fredrik Westin out of a job? And second question for Chris, you mentioned rerate potential. Could you talk about what you would see driving that? I'm not seeing any peers trading at a premium. So just wondering what you think would be the driver?

And then final question for both of you. Timing-wise, it seems like the stars have really aligned for this longtime proposed transaction. Are you sensing that industry consolidation in general is back on the minds of your competitors as well?

Thanks, Georgina. I'll take the Greg question. Chris will take the Chris question, and then we'll take the timing question together. So your question is, is Fredrik Westin out of a job? I mean, Fredrik Westin is not in the company yet. He's joining 1st of January. As you can imagine, I let him know ahead of time that this transaction was in discussions. He -- we did that in all confidentiality. He also understood that -- understands that were the transaction to happen -- were to happen, he wouldn't be the CFO post closing. So all of that is things that he's aware of and has been aware of longer than you guys have for obvious reasons. And we still would very much like Fredrik to join, but we also understand that he's got questions to ask himself. And our job is to answer those questions and to find the best arrangements to make it work.

So I don't really have an answer for you. What I can tell you is that I've got Maarten de Vries sitting next to me. And I keep saying that Maarten is retiring, which pisses him off because Maarten is a very young 63 and is not looking to stop anytime soon, at least has all the energy in the world to do that. And Maarten also is incredibly loyal and dedicated to Akzo.

So regardless of what happens, we have people mining the till and we'll make sure that we have the best leadership team for AkzoNobel in this period between signing and closing, which is going to be a period of a lot of activity.

We expect them to start on January.

Yes. But at this point, as Ben rightly points out, we expect them to start on the 1st of January. And once again, it's -- the realization of this deal is from today. So give us a little bit of time to work that out with him. But we have our fingers crossed.

Chris, do you want to take the rerating question?

Sure, absolutely. Thanks for the question, Georgina. From my perspective, Axalta has 3 end markets -- 3 primary end markets. Akzo has about 5 and the combined company now has 7 (sic) [ 8 ]. And if you put it in perspective with our peer set, I think the closest one would be PPG, and we see them trading at obviously a higher multiple than both of us. I don't normally do comparisons with our competitors, but I do believe that we have significant upside from a rerate potential because the combined company, not only from a revenue perspective, but an enterprise value perspective of being getting -- I believe we can get on the S&P 500. The margin profile is significantly higher than most of our peers. And then the fact that we have $3.3 billion of EBITDA and $1.5 billion of free cash flow, I think all of that strength gives us an incredible opportunity to be able to rerate to the right spot. And I believe there's upside on the rerate potential for us.

Thanks, Chris. And the consolidation question, Georgina. Look, the market was closed for a while until sometime last year, the debt market was closed and then the debt market reopened, but the world was a complicated place, conflicts in different places and the tariffs. I think it made everybody really cautious. And also, you have to keep in mind that this is an industry where you take all the top companies, Sherwin, PPG, Akzo, Axalta, I could list a few others. There isn't a single CEO that's been in the job for less -- for more than 3 years. I'm actually the elder statesman, if you can believe that, of the people that I've listed.

So the combination of the market turmoil, the closed debt market and new CEOs finding their marks, I think, put consolidation on hold for a while. But you saw recently the BASF coating deal. Now you could say, well, there were no trade buyers, but that was a complicated portfolio for a trade buyer.

Now Chris and I are talking to you today about consolidation. And I'm pretty sure from the vibes I pick up from industry discussions that there are people asking themselves questions too, because at the end of the day, the coatings market is still fragmented and there's value to scale, and this industry would benefit from further consolidation. But at the end of the day, Chris are doing -- our part -- and then everybody -- everything else is somebody else's question to answer.

Chris, do you want to add anything?

Yes. I love the example, Greg, of using BASF. And Georgina, if we were to use from our perspective, the multiple that we believe that deal went through on as well as the synergy potential of that deal and the margin, we believe we have incremental upside and a great potential in the deal that we are here announcing today.

And Chris, if you believe, as I do, that Carlyle is a shred investor, and you know that they paid, what, 12x EBITDA for BASF coatings, I'm getting a hell of a deal. I don't want you to start renegotiating.

Not too late. No.

Our last question is from the line of Aleksey Yefremov with KeyBanc Capital Markets.

This is Ryan Weis subbing in for Alex this morning. Congratulations on the announcement. So just two questions for me. I guess the first one would just kind of be on the margin profile of the 2 businesses. If I think about Akzo, historically, EBITDA margins are pretty far below where Axalta has been. But when you kind of include the synergies, we're talking about something in the 20% range. So just when I think about where the synergies will be driven between the 2 businesses of Deco and Performance Coatings, wondering if maybe one has more opportunity than the other?

And then secondly, just on Refinish. I was hoping maybe you could talk about where some of the overlaps are between Axalta and Akzo. And maybe just does Akzo play more in mainstream premium economy segments kind of the Refinish market?

Thanks, Ryan. I'll say a word on Refinish. The overlaps, we're both active. Axalta is a much bigger business in Refinish. I think it's premature for us to talk about where things overlap and where they don't because we'll -- we're in the process of getting ready for regulatory filings. So let us handle all that diligently before we start answering those questions. If Chris wants to add anything to this, he can -- he'll do that after I tackle your synergy question.

The margin profile of Akzo, Akzo and Axalta are not in the same businesses. I mean, we have some overlaps. But there's a weighted average dimension to this. Vehicle Refinish is a very profitable business. We -- I'm not going to give you the profitability profile of all the businesses individually, but we, as Akzo have a margin commitment of north of 16x -- 16% EBITDA, I'm sorry, by 2027. So we're ramping up in terms of value extraction from these businesses. The synergies between Axalta -- maybe I'm picking a new name. Axalta and Akzo are on top of that. And clearly, the synergies are on the coating side. Deco doesn't really benefit from this transaction at all.

Did I answer your question, Ryan? And yes, did I answer your question?

Yes.

And Chris, do you want to answer the VR question in a more legalistic way than I did? I don't think this is something we should tackle now, but have a go.

No, I completely agree. I think certainly, we're filing in many jurisdictions, and we need to see how that plays out.

Next question is from the line of John Roberts with Mizuho.

Axalta was speculated to have had discussions with Nippon. PPG tried to acquire Akzo, -- even Sherwin doesn't really have any trust there with Akzo. How widely did you explore other combinations with both companies?

We didn't. We knew -- we've known for a long time that AkzoNobel and Axalta are a really good fit. First time that was tried was 2017. Hopefully, this is the last time because we'll get it across the finish line. And I can guarantee you, although I won't give you the exact dates that there were multiple other attempts in between. So it's -- the industrial logic has always been very clear, I think, certainly to both companies, but also to most observers. We weren't shopping the business around. We were really trying to build something stronger for the future. And I think we're doing that. Is your question an interloper question? Or what's your question exactly, John?

No, we could have created 2 large leaders here, I guess, 2 different combinations that might have occurred out there.

Yes. I mean I'll answer the PPG question because you've asked it. I wasn't around at the time, but PPG and AkzoNobel, it's pretty massive overlap and socially and regulatory -- from a social and regulatory perspective, really complicated. The logic of 2017 hasn't really changed. It doesn't mean that it couldn't work. but it means that it's a more -- it's much heavier lifting than what we're trying to do today.

Today, we have a clear path to value creation. And I think this clear path has a lot of value in a world where there's a lot of macro uncertainty. I think it's exciting to have 2 businesses that come together and that tell you we're going to deliver pretty much $6 billion of value through synergies over the next 3 years, come rain or shine.

Chris, do you want to add anything or talk about Nippon?

No, I think similar to you, obviously, I wasn't here when that happened. I think coming in and much like Greg and I, both of us looked at our plan of what we could do stand-alone with our companies. We probably looked at what other opportunities were there to really drive value and build -- create value for our shareholders and our stakeholders.

And as I said previously, I believe that there is no better platform. I think these portfolios were always meant to be together. They're absolutely complementary and they create a powerhouse. And certainly, it just made sense for both of us to get back together at this.

I think this is the last question.

Yes. That concludes our Q&A session. Sir, please go ahead.

If you'll allow me, I'll wrap up quickly. This is an exciting day for both AkzoNobel and Axalta. As you can tell from this conference call, it's a really fluid discussion between the 2 teams. We've worked a lot together on this. Our predecessors have also worked on it. So this has been a long time coming. And we think this is exciting for all stakeholders, particularly shareholders. We believe in the mechanical value creation of the synergies, and we believe we can get this across the finish line by the end of '26 to early '27.

It's a unique opportunity for our companies. And once again, we were able to put this together because both companies felt good about where they were. Both companies felt that they had further upside and a no premium merger is hard to pull off, but we feel we've got the components in place, including the EUR 2.5 billion special dividend for those of you who forgot to plug in into your model, you know who you are. And look, this is an exciting time. We hope you share our excitement, and we look forward to spending more time socializing this opportunity with you over the next few months, knowing that there's going to be a shareholder vote on both sides that's going to come towards the middle of the year.

So on those words, thanks again. Thank you for your time, and we'll talk to you soon.

Thank you. This will conclude today's conference. You may disconnect your lines at this time. We thank you for your participation.

Hello, everyone. Welcome to today's AkzoNobel Third Quarter Results for 2025. My name is Seb, and I'll be the operator for your call today.

[Operator Instructions] I will now hand over to Kenny Chae, Head of Investor Relations, to begin the call. Please go ahead.

Thank you. Good morning, and welcome to AkzoNobel's investor update for the third quarter of 2025. I'm Kenny Chae, Head of Investor Relations. Today, our CEO, Greg Poux-Guillaume; and CFO, Maarten de Vries, will take you through our results.

We'll refer to the presentation, which you can follow by webcast or download from our website at akzonobel.com. A replay of the webcast will also be made available following the event. There will be a Q&A session after the presentation. For additional information, please contact our Investor Relations team.

Before we start, a reminder of our forward-looking statements disclaimer on Slide 2. Please note, this also applies to the conference call and answers to your questions. I will now hand over to Greg, who will start on Slide 3 of the presentation.

Thanks, Kenny. Good morning to everyone on the call. AkzoNobel delivered a solid quarter in a weak market environment. We remain focused on the elements we control, efficiency, pricing discipline and cash generation, and these continue to deliver results.

Our adjusted EBITDA came in at EUR 385 million or EUR 411 million, excluding ForEx translation. This corresponds to 15.1% margin, up 30 basis points year-on-year. That's very much in line with the consensus, and demonstrates our ability to expand margins despite external headwinds.

Volumes were down 1% versus prior year, showing a similar pattern to Q2. Deco performed well with a return to growth of plus 1%, while Coatings continued to be affected by soft markets, particularly in North America. Operationally, we achieved net OpEx savings of EUR 63 million year-to-date, which is ahead of the plan.

Free cash flow strengthened significantly to EUR 244 million, driven by improved working capital management. Leverage improved to 2.8x, with year-end leverage projected slightly above 2x on an adjusted basis, following the expected closing of the India transaction in December. Overall, we're executing with discipline and consistency towards our midterm ambitions in a market which doesn't make it easy.

Let's now turn to Slide 4. Our structural efficiency programs are delivering ahead of plan, and our disposal of part of our Indian activities is on track to close in Q4, as I said. As you know, we have aggressive efficiency targets in both SG&A and industrial operations. Our SG&A program is now fully implemented, with annualized savings increased to at least EUR 175 million, which is materially ahead of our original targets.

We have already reduced our functions by 2,500 positions since the middle of last year, compared to an initial target of 2,200 positions, while maintaining business continuity and service quality. This is significant in terms of speed and impact.

Our industrial program continues to progress well. Six factory closures have been announced year-to-date, including one in Q3. Consultations continue as planned, and we will deliver our target for the year.

And for the disposal of part of our Indian businesses, of which the lion's share is our local Decorative Paints business, all necessary regulatory approvals have now been received. We completed a 5% block sale during the quarter at a favorable price, generating about EUR 70 million in net proceeds, ahead of the main transaction with JSW.

We expect closing in December with proceeds to be used as planned, EUR 500 million for deleveraging and EUR 400 million for the share buyback, which will start in January.

Together, these actions are unlocking cost efficiencies and simplifying our footprint while maintaining strong service levels. Our organization is becoming more agile, purposeful and impactful, which positions us to deliver sustainably improved performance.

Let's now turn to Slide 5 and talk about the volume development in Q3. Group volumes were down 1% year-on-year in Q3 with mixed performance between Deco and Coatings. Deco delivered a solid quarter with volumes up 1% overall.

Europe, Middle East and Africa was flattish with continued weakness in France and Turkey offset by growth in Southern Europe. Latin America grew low single digits led by Brazil, where the recovery continues after a slow start to the year.

China delivered mid-single-digit growth, confirming our relative outperformance in a weak market. Southeast Asia remained mixed with strong growth in Vietnam more than offsetting softer demand in Indonesia. So our Deco businesses, which are mostly local businesses, are doing well.

Our global businesses in Coatings, we have volumes overall in Coatings down 2% for the quarter year-on-year, primarily due to the weakness of the North American market. Powder was impacted by low architectural demand, although Asia is regaining momentum. Marine & Protective continue to grow as we execute on the strong pipeline in Protective, while ongoing share gains in Marine MRO are adding further momentum.

Automotive & Specialty was lower overall, with Aerospace strong, but Refinish soft as North America remains a trough, while Europe demand in vehicle refinish was under pressure. Industrial Coatings declined mid-single digits as the drop in Packaging & Wood more than offset growth in Coil.

While market conditions remain challenging overall, our outperformance in selected markets shows that we are holding up and defending our positions.

Maarten will now provide an update of our financials on Slide 6. Maarten?

Thank you, Greg, and good morning, everybody, on the call. At group level, organic sales were up 1%, volumes were down less than 1%, and price/mix was up more than 1%. FX translation had a negative 5% impact on revenue, resulting in a reported revenue decline of 5%.

Decorative Paints delivered organic growth of plus 2%, with continued strong margins at 17.4%. Performance coatings organic sales was down 1%, driven by weaker volumes, mainly in North America.

Group adjusted EBITDA came in at EUR 385 million or EUR 411 million at constant FX. EBITDA margin improved to 15.1%, which is 30 bps higher versus prior year. Despite the impact from the strengthening of the euro, both segments continue to deliver strong -- solid profitability, reflecting the structural savings from our cost programs and our focus on high-quality earnings.

We had another strong quarter of free cash flow at EUR 265 million, which puts our year-to-date free cash flow at EUR 161 million higher versus prior year. The improvement was driven by working capital unwind, including disciplined management of inventory and receivables.

DIO was 103 days, an improvement of 6 days versus last year, and by 2 days sequentially versus prior quarter. Operating working capital ended the quarter at 16.7% of revenue, down from 17.7% a year ago. Return on investment was stable at 13.3%, reflecting continued solid profitability.

Turning now to Slide 8. We've taken a EUR 300 million provision in Q3 related to this long-running litigation case in Australia. The claim relates to coating degradation on pipework at the Ichthys LNG project in Darwin, Australia. Our coatings were applied between 2013 and 2015.

The main plaintiff, INPEX, initiated legal proceedings in 2021 under Australian Consumer Law, seeking damages from AkzoNobel. We want to emphasize again that AkzoNobel denies all liability, and is defending the matter vigorously. Our expectation is for first instance judgment in the second half of 2026 at the earliest, and appeals are likely regardless of the outcome.

We recognized a EUR 300 million provision in Q3 2025. This provision relates to the elements in the claims for which the IAS 37 accounting criteria are met. Other elements not meeting the requirements are presented as contingent liabilities.

AkzoNobel is insured with a maximum coverage of EUR 500 million were represented as a provision or as a contingent liability. This is obviously a noncash accounting charge in the quarter. It doesn't affect our operational performance or the underlying momentum of the business, and we remain steadfast in our legal position and defense.

With that, back to Greg.

Thanks, Maarten. Our full year adjusted EBITDA is expected to be around EUR 1.48 billion, which we remain on track to achieve despite the translation impact from the strengthening of the euro. While markets continue to be challenging, our performance is supported by increased savings from our SG&A and industrial programs.

Looking ahead into the fourth quarter, we expect volumes to remain slightly down, reflecting ongoing softness in North America and other select markets. Currency impact on adjusted EBITDA in Q4 is expected to be similar to Q3. Efficiency measures will continue to protect margins, and underlying cash generation is expected to remain strong, supported by seasonality.

Our deleveraging trajectory and capital allocation priorities remain unchanged, including the planned EUR 400 million share buyback following completion of the India transaction. With the Indian disposal expected to close in December, we anticipate leverage slightly above 2x net debt to adjusted EBITDA by the end of 2025. All in all, we continue to deliver on what we control, positioning AkzoNobel well for the next phase of value creation.

And I'll now hand over to Kenny, who will close with information about upcoming events, and then we'll open up for questions. Kenny?

Thank you, Greg. Before we start the Q&A session, I would like to draw your attention to the upcoming events shown on Slide 10. Ex-dividend date of our 2025 interim dividend of EUR 0.44 will be on October 27, followed by record date on October 28. Payment of our 2025 interim dividend will be on November 6, 2025. We will update the market on our fourth quarter and full year results on February 3, 2026.

And this concludes the formal presentation, and we will be happy to address your questions. [Operator Instructions] operator, please start the Q&A session.

[Operator Instructions] Our first question is from James Hooper at Bernstein Societe Generale Group.

First question. Greg, in the past, you've said your vision and there's going to be more investment in the Coatings business before. Are you -- would you consider kind of separating the Deco and Coatings business? Or are there synergies between the two divisions underappreciated in the markets? And the kind of side question to that is about the disposals for other of the Asian Deco businesses after India and their plans for further.

And the kind of second question is about the Refinish business. You mentioned this hit a trough in North America and Europe. What gives you confidence at this trough? I mean the press have been reporting that vehicle insurance prices are up again probably in the U.S. and the U.K. in 2026. Will it be kind of technological development that can counter this if insurance is going to be -- is less likely to follow through on cars?

Thanks, James. Let me take those one by one. Coatings versus Deco, are there synergies would we consider separating? I think I've always been clear whenever any of you guys have asked this questions that the synergies between Coatings and Deco are not massive.

Deco is mostly a local-for-local business. The coating businesses are global businesses. Deco is waterborne, the coating businesses are mostly solvent-borne. Deco is B2C. The Coatings stuff is mostly B2B. The differences are significant, and the factories are fully separated and the customers are different and the supply chains are different.

So I'm not making a very good case for synergies, am I? Now people usually say, well, there's big procurement synergies. The reality is if you look at the procurement basket in Deco and the procurement basket in Coatings, the overlap is about 25%. So all this to say that the synergies are not very significant.

The value of Deco when you have a Coatings business is that, that gives you local presence and local infrastructure, which you can piggyback on global businesses. So essentially, it allows you to have existing overheads that you can leverage as you roll out the coating businesses around the world. But that really is it.

And therefore, if you look at it purely from an economic perspective, there's not a strong case to be made that Deco and Coatings have to be together. And by the way, you see very successful businesses that are solely Coatings and you see very successful businesses that are solely Deco.

So why are these businesses together? Because if you look at what's been attempted in the past, I think there was an activist that looked at one of our competitors in 2019, and their pitch was we'll separate value -- Coatings and Deco and create value.

And they came to the conclusion that there's no strong evidence that these businesses trade at different multiples. Therefore, you're not liberating trapped value by splitting the businesses up. You're essentially just focusing the portfolio.

Where there's a multiple arbitrage is actually in Deco emerging markets versus kind of the rest of the world. And you saw that in our Indian Deco transaction. So all this to say that we have no plans to separate Deco from Coatings. We have a plan to narrow our Deco focus to the countries in which we can win. And we said very clearly that, that means pruning that portfolio in Asia because we have a lot of follower positions in Asia that are more valuable to people other than us. And over time, in the context of a wider industry move, you can completely entertain the idea of a combination that would lead to a split between Deco and Coatings. But I think this would have to be linked to gaining scale -- further scale in Coatings.

So hopefully, that answers the question, I think, extensively. And are there more disposals than just India? If you go -- if you type AkzoNobel Pakistan in your search engine of choice, you'll see that there's a company in Pakistan that made disclosure this morning that they are engaged in advanced discussions for the purchase of 100% of our business in Pakistan.

So it's a small business. It's not as exciting as India from a value perspective, but it's another data point that things are happening in the background, and we're continuing to execute our strategy.

Now I'll move on to the vehicle refinish question. North America is at a trough. Europe, it's not clear that Europe is at a trough. Europe is still dropping. But Europe has dropped less than North America. North America dropped because disposable income, insurance premium -- disposable income is down, insurance premiums were up. And it's not because collisions are dropping or people are not driving. It's really because insurance claims are down because people don't have the money to afford the deductible or the premium increase in next year. So it's more of a market event linked to a disconnect between purchasing power and the pricing of insurance.

And we're an active player in North America. You have players that are much bigger than we are like Axalta and PPG. And I think they've both stated that they expect that market to normalize. And as we see our operations and our trading in the U.S., we were dropping in Q2, we stabilized in Q3. And therefore, we think that trough is real, and we think that market will start picking up sometime next year.

Europe has been going down. And once again, it's less drastic than what we saw in the U.S., but the Europe vehicle refinish business is also down. And then there's the bigger question of is vehicle refinish a growth business. And I think the answer to that is vehicle refinish is a low-growth business.

It's -- there's a negative effect, which is that driving aids and the likes will lead to a lower percentage of collisions. And with high insurance premiums, you're more likely to get full write-offs than repairs. So that's a negative impact.

The positive impact is that we're focused on Europe and the U.S., but the car park worldwide is still going up, including the U.S. So you have more cars on the road, and that is a growth effect. And if you combine the two, vehicle refinish globally, I think, is a low growth, high profitability business.

Did I answer your question, James? I lost you or are we good?

Yes. We're good. Yes, very helpful.

The next question is from Katie Richards at Barclays.

I've got two. Just the first on the court case, if you can say any more, please. Can you just tell us about what is included in the EUR 300 million provision you booked today? And if there's anything that remains a contingent liability? And what would be the key accounting triggers for recognizing further provisions or insurance receivables going forward?

Second question, please. Just on your comments on the activist Cevian that you made on your Bloomberg interview this morning. You said that Cevian stake could get to around 10% by the end of the year. And I think the quote you said was that we might have a significant activist under the Christmas tree. Can you give a few more comments about the conversations you've been having and why you felt the stake might build to 10%? That would be quite an acceleration in the next 3 months.

All right. Maarten take Australia and I'll take Cevian. Maarten?

Yes. So on the Ichthys case, as we mentioned, I mean, this is a long-running case in Australia going back to 2013, 2015 period when we applied the coatings. We have mentioned earlier that the main hearings were completed in May earlier this year, May 2025.

But the federal court has continued their proceedings for substantive matters, but also for procedural matters. And the assessment we made at the end of the quarter has triggered the provision of EUR 300 million. Basically, it met the accounting criteria IAS 37.

You asked about the EUR 300 million. In fact, if you look at our accounts, it's EUR 275 million plus a EUR 25 million interest component. For the rest, we cannot share any details because clearly disclosing them would prejudice the company and the interest of the company in this ongoing litigation. But it is important to mention here that we feel that we are not liable, that our liability is 0. And of course, we are defending this case vigorously in the court.

Thanks, Maarten. I'll take the Cevian question and then will ask you whether you need follow up. Cevian, I don't know that I'll ever live down my activist under the Christmas tree comment on live television. It's the danger of putting me anywhere near live television.

But what I meant by that is that the Cevian guys have been talking to us for a long time. They're quite thoughtful and deliberate in their approach. They've attended every single road show we've done for the last 2 years. So it really was not a question of whether to us, at least whether they were going to come in, but more like when.

And they started accumulating. Over the summer, they crossed the 3% threshold at the end of August. They crossed the 5% threshold and made a disclosure -- market disclosure last week. And if you extrapolate on the rate of purchasing and you assume that they're going to continue roughly at that clip, you get to about 10% by late this year, late December, early January. I made it more colorful by saying for Christmas.

But I don't speak on behalf of Cevian. I don't think they've been public about where they intend to go, and they certainly haven't given us any clear commitments. But in our discussions with them, they did allude to the fact that they intended to deploy, they're roughly in line with their -- what their average capital deployment is in the companies that they invest in.

And if you go on their website and look at what they did, it's roughly EUR 1 billion per company. And for us, that gets you to about 10% of capital. And therefore, our expectation is that they'll continue accumulating roughly until the end of the year. And I think then the debate will be at what point they settle and if and when they ask for Board representation.

And my overall closing comment on this, and I'll let you follow-up if you want to, is that we're supportive, we're happy to have anybody who is supportive of our strategy and who is focused on value creation. We're very much value creation focused, and therefore, I have no discomfort whatsoever in the discussions that we've had or their focus as such.

That kind of answers my question -- the question. But Katie, do you need a follow-up on either of those points?

Do you feel that they are supportive of your strategy? You mentioned that there were activists in your competitors in 2019 talking about separating the business. Is that something that's been discussed?

No. It's not something that's been discussed. What has been discussed is that we need to refocus our portfolio on the positions on which we have winning cards and we can create the most value. And in the conversations that we had before they started accumulating, they were very supportive of our transaction in India, for example.

So look, at the end of the day, right now, they're buying. So we're not really talking because they have to make sure that they do this at arm's length and not on any information that comes from us. So if anything, we've been talking less since they've been buying than we were talking before.

But from what we understand from them, it's -- what they're looking for is a variation of what we're doing. But what's the Olympics motto? Faster, higher, stronger, and I'm comfortable with that. These might be famous last words, but I stand by them, Katie.

Our next question comes from Christian Faitz at Kepler Cheuvreux.

And before I forget, Maarten, all the best for your post-EXO career.

Maarten's still with us for 6 months. Don't give him the impression that he's running to the sunset. He still have a lot of work to do.

You seem to have given me a break.

Go ahead, Christian.

I'll give you a break, yes. Indeed, indeed. No, two questions, please. First of all, you talked about the negative mix effect in Deco Europe and also Latin America. Is that the consumer trading down to private label paints? And is that an ongoing trend as we speak?

And then second of all, can you please share your view about current trading conditions in both your segments and possibly give us a view of order visibility? Has anything improved in October versus September, for example?

I'll start with the answer and Maarten will jump in. When we talk about mix, we're not really talking about customers trading down. There's no visible signs of customers trading down in Deco in any of our significant markets. We're more talking about geographical mix within the region.

So if you take Deco Europe, countries like the U.K. and the Benelux, where we have higher market share, are more profitable than countries like France or Spain, where we have lower market share. And therefore, you can be flat in terms of volumes but with the mix change, a country mix change within the region, and that will impact profitability.

The business breathes in that sense. Things are not static. But there isn't anything that is a customer trend in terms of people trading down. And that comment applies to Latin America, too.

The profitability of Brazil, Argentina and Colombia are three big countries. The profitability is not the same. And therefore, depending on which country is going up, which country is going down, you'll have a mix effect within that region. That's really what the comment is.

You want to take current trading, Maarten?

Now if you look at current trading, it's very -- Q3 into Q4, we see some very similar trends along all our businesses. It's important, of course, to mention that Q4 is always a smaller quarter for Deco, specifically Deco EMEA. But overall, similar trends in Q4. And we also like to indicate that from a volume perspective, we will be slightly down in Q4, similar to what we've seen in Q3.

Yes, Q4 burn is what, volume slightly down, like a percent down or something like that. It's price mix slightly up on the same order of magnitude. The efficiency measures continue, so the cost base should continue to improve.

And then the ForEx is -- I mean ForEx is -- translation is roughly somewhere around EUR 30 million a clip per quarter for us at the current exchange rate. So it's significant. Hence, the fact that instead of saying above [ 1,480 ], we're saying around 1,480. We didn't want to adjust the 1,480 number for ForEx, but there's a EUR 30 million impact in Q3. So -- in Q4, I'm sorry.

Christian, you need a follow-up?

If I may follow-up, I mean fully aware that -- yes, just -- I mean, I'm fully aware that November and December are obviously seasonally weak. But leaving Deco aside, October will have seen similar trends like September. Is that a correct observation?

Similar trends, as I just mentioned, Christian, indeed.

Our next question is from Tony Jones at Rothschild & Co.

I have two. A bit of a follow-up really. So on the full year guidance, to get to the EUR 1.48 billion EBITDA, that implies Q4 earnings need to be high year-on-year after tracking lower for the previous 3 quarters. You just said that early view into the quarter is that demand is not really changing that much. So what do you see that's going to buck the trend?

And then following up on the portfolio, I appreciate the comments about Asia. But what about Europe? You flagged before that some of your country-based exposure, primarily in Deco, is weaker than you would like with low market positions and margins. What are your plans for that business over the next 12 months or so?

Thanks, Tony. I'll take the Europe portfolio question, and then Maarten will talk about the Q4 and the full year guidance. Europe in Deco is a different animal because as much as I state clearly that Deco is a local-for-local business where if you take Latin America, Argentina, Brazil and Colombia are pretty much operating independently from each other because you've got local production and local customers and the product doesn't travel very well.

Europe is the exception. Europe is geographically compact enough and the borders are open enough that you can actually have a European supply chain, which means that the paint that we sell in Netherlands is produced -- some of it is produced in Netherlands, but a lot of it is produced in France or Spain or Poland. And therefore, industrially, from a manufacturing and supply chain perspective, we run Europe as one.

What you're left with is the strength of the brand and the distribution locally, and we have some countries in which we're weaker than others. But the difficulty associated to selling a country in Europe is that a lot of it is Dulux and these are open borders.

So it's very hard to say, well, I'm not doing well in France, for example, and I want to -- or I'm not doing well in -- I'll use a country that doesn't make sense, in Liechtenstein. And I've decided that I'm going to sell my Liechtenstein business to somebody because if you're Dulux in Liechtenstein, what are you selling? You're selling -- are you selling a factory? Are you selling a brand? Are you -- what are you selling exactly? And the answer is it's very difficult to do.

So for Europe, for us, it's more a question of extracting the maximum value from our European assets. And what's really interesting is that our European Deco businesses have been improving in terms of profitability, and we still see a lot of operational upside. Our industrial transformation, a lot of it is focused on closing some of our excess capacity in Deco Europe and optimizing the supply chain.

And therefore, we believe that Deco Europe should be, over time, one of our most profitable businesses at AkzoNobel. And we certainly believe in the upside that comes from that business. So we're not looking at pruning in Europe. We're not looking at selling anything in Deco in Europe. We're really more looking at optimizing our positions elsewhere.

We weren't unhappy to not go through with the -- our transaction in Africa with Kansai, for example, because as much as we're not trying to sell anything in Europe, we're not trying to create a distraction to our operational plan by adding complexity. But once again, Europe Deco is not an area of selected exits. It's an area of significant operational improvement for us.

Maarten, do you want to take the 1,480 question?

Yes. I mean your question is very specific around Q4. We mentioned earlier in Q4, volumes roughly minus 1% versus last year, slightly down. What we also do see is raw material. Basically, we crossed the line in September. So raw material will be slightly down versus last year, while we are still, of course, being very price disciplined. So that's the second element.

The third element is, of course, our savings programs. We do expect a net OpEx savings of around EUR 20 million. Of course, the EUR 20 million is in a smaller quarter. And the last point I want to make, that if you compare to last year, specifically, the Deco business was not a good quarter. So we see improved profitability on the Deco side of that. So if you take these elements into account, you get to how we see the profitability for Q4.

And for the avoidance of doubt, because I think part of your question was, are we trying to talk up consensus. We're not trying to talk up consensus. What we're saying is that the trends that you see in Q3, you can extrapolate to Q4.

And we're saying that even with the ForEx impact, we're in the ballpark of where we said we were going to be. But there isn't anything that's accelerating from a market perspective or anything that's picking up in terms of activity. But once again, we're making our own luck by being diligent on our efficiency measures.

Do you have a follow-up? Or did we answer your questions?

No, that's great. Greg, Maarten, really appreciate the color there.

Our next question is from Laurent Favre from BNP.

My first question, and I'm sorry, but I need to go back to Ichthys. Can you just be a little bit more specific on what has changed in terms of the federal proceedings during Q3 as you, I guess, adjusted the tax -- the disclosure on Ichthys at the end of Q2. So why not take the provision at the end of Q2?

And the second question, Greg, going back to your comments on how -- and thank you for all the details on why splitting Deco and Coatings doesn't necessarily make sense, until it does. And you mentioned that it could, in the context of wider consolidation and adding scale in Coatings.

Just to be clear, is this something that is now part of your, I guess, strategic planning on a 2- to 3-year view? Is it something that -- where you think Akzo would be an active player or more somebody that would be consolidated? Can you maybe share a bit more color there?

Sure. You want to take the Ichthys question, Maarten? And then I'll do the consolidation thing.

Yes, Laurent, I mean, I mentioned it before. I mean, the proceedings in the federal court are ongoing. And of course, that means that quarter-by-quarter, we make our assessments, and that assessment has led to the provision of EUR 300 million. Again, it's a provision meeting the IAS 37 accounting criteria. It remains for the rest in contingent liability.

I also want to say, clearly, that we have, of course, the insurance of maximum EUR 500 million in place. That's covering provided, but also unprovided elements. But I cannot be more specific because any further details we give and anything -- any disclosure would -- which would basically harm our interest and the company's position in this ongoing litigation. So I really have to leave it like this.

I'll take the Deco versus Coatings question. You phrased it well. I don't disagree with anything you said. The separation doesn't make sense until it does, if I quote your words, and it could make sense in the context of a wider industry move, wider industry consolidation.

Is it part of our plan? It's always been part of our plan. I've never made any bones in the almost 3 years since I've been here that this is an industry that would still benefit from some -- from consolidation, and there are combinations that make a lot of sense.

And your question is, would we be active or passive. We're open to anything that creates value for shareholders, and we're always having conversations and always willing to have conversations. At the end of the day, in a lot of our businesses, scale matters, and there are combinations that do make sense.

And once again, we're not setting limits on ourselves. It's a conservative industry. So things don't always move very fast, but there would be value to some of the lines shifting. And once again, we're not saying this is anything that is imminent. We're saying that this is something that we believe in and we'd be willing to participate in.

Laurent, any follow-up?

No, nothing I can think of.

Our next question is from Chetan Udeshi from JPMorgan.

I had a couple of questions. You did probably, at least versus my numbers, better on cost savings, better on volumes. One place where I was a bit surprised is your adjusted gross margins down year-on-year, given that maybe the net pricing was still positive in Q3 and you have savings. So can you maybe just help us understand why the gross margins are not actually higher in Q3 on an adjusted basis?

The second question, again, I don't want anything specific to the Australian provision, but I'm just curious, could this become a sort of a precedent in terms of other operators looking at this project and trying to come after the coatings providers where they can to sue for any damages? So in other words, can this open a can of worms for the whole industry in general?

Chetan, I'll kill off the second one and Maarten will take the first one. It's not a precedent for anything. It's a very, very particular situation, which is linked to an unusual element. I'll call that unusual for lack of a better word, but unusual element of Australian law, which is that like a big Japanese LNG company can hide behind Australian consumer laws, which have been drafted to protect the Australian grandmother to essentially go after a provider.

And the reason why this is such an unusual case is that I'm not aware of anywhere else in the world where you could actually do that. So it's -- there's nothing wrong with the product that was applied. We don't have any other cases of this product be an issue. This is from 12 years ago. It's a really kind of really specific issue to Australia.

And it's irritating because it takes a lot of time, it generates a lot of legal fees, and it forces us to give regular updates on something which is a more significant risk than anything you should see in a paints and coatings company because we're not a projects business.

But once again, it's very specific to the situation and it's not something that I see happening anywhere else or not something that we have anything else of any similar scale, magnitude or even nature anywhere else in our portfolio. Hopefully, that was clear.

Maarten, take the other question. And Chetan, if you want to follow up, we'll ask you afterwards. Maarten?

Yes. On the sequential gross margin, I would say that sequentially Coatings operates, of course, in weaker markets. So in Coatings, you see, in general, a bit more price pressure compared to some of the other businesses. That is one. Secondly, interestingly, and this becomes a little bit technical, with raw materials starting to come down, we've also seen some stock, some inventory revaluation, which is, of course, a negative in the quarter, which supports the quarter afterwards. So it's a combination of factors, but you should not read too much into it.

Chetan, any follow up?

Thank you.

We have no further questions on the call at this time. So I will hand back to Greg for closing remarks.

Thank you very much. Q3 -- is there another question? All right. One more question. Go ahead. What's the question?

So the last question is from Georgina Fraser from Goldman Sachs.

Georgina, last but not least, go ahead.

It was just one last one. Could you talk to us about China, the recovery that's continuing there? And how optimistic are we about that continuing? And just any color you can give us there?

China is really interesting. We have -- we're active in pretty much all of our businesses in China, but we have three large businesses in China. We've got our Decorative Paints business, we've got our Powder Coatings business, and we got our Marine & Protective business.

Marine & Protective in China has been going well for the last few years. China does more than half of the world's shipbuilding. We're one of the market leaders in Coatings for the marine world. And therefore, we've been growing in China, and we've been quite dynamic. That part is not new.

Powder, the powder market in China is currently difficult and competitive, and volumes are slightly down. But actually, Akzo is going up in volumes. We're growing, and we're growing profitably, and we're increasing our bottom line, too. And this is the reflection of the fact that we've got the best products in the market, and we've got very good service levels.

And therefore, we're a desirable partner for people that have some of the more complex applications like the electric vehicle guys in China. And as we know, there's a lot of them. And we have a strong position in that market, and that's been serving us well.

And then Deco China, which was a tough spot for us the last 2 years, the market itself is still down, but we're back to growing in Deco China, and therefore, our business is improving and it's improving mostly because we're growing in retail.

The project part of the Chinese market in which we're not very active is still very much depressed because of lack of real estate development in China. But the retail part of the market has been active for us, and we've been doing well in it. So do we -- are we getting a lot of help from the market in Deco in China? We're not. But do we believe that we are on a growth trajectory that should continue? We do.

Anything else you want to ask on that, Georgina?

No, that's great. I'm just wondering, and specifically on raw materials trending a bit more positively into the fourth quarter. Is that something that you see in every region? Or is it more of a global comment and there's differences between the geographies?

Yes, Georgina, there are absolutely differences between geographies. First of all, it's more pronounced in Deco, specifically on the back of, for instance, TiO2, and it is more pronounced in the Asian regions. But yes, there are differences per geographies and there are differences per the businesses.

Anything else, Georgina?

Thank you very much.

I think there's no further question. I'll wrap up. Q3, we'd like to get some help in the market. We're not at this point, but we're making our own luck by continuing to deliver on our efficiency measures. And there's more to come. So that's going to be a continuing story well into next year.

And I think we've got a good handle on it. We're hitting our targets. We're ahead of plan, whether it's on the functional SG&A stuff or on the industrial side. So I'd say from that perspective, so far, so good. We expect, from a momentum perspective and from a ForEx perspective, Q4 to look like Q3, and we don't see an uptick. But once again, we're continuing to deliver on our measures.

We talked about Australia. We told you what we could tell you. This has been going on for 12 years. I've been living with it for 3, Maarten has been living with it for a lot longer. We're making sure that we're up to date on our disclosures and are -- and on IAS 37 because it is a very significant claim, and we really want to be diligent on this. But there's no change to our underlying view of whether we're liable or not. We clearly believe we're not liable.

Cevian, 3% at the end of August, 5% at the end of last week. We expect this to continue. Strike my Christmas tree comment from the record. But once again, from what we understand from them, knowing that we're not talking to them actively as they're accumulating, we -- we're pushing for the same things, and then it's always going to be a question of speed and quantum.

And India transaction closing in December, that seems very solid, and therefore, the proceeds will come in, and that will help our leverage ratio at the end of the year. And once again, part of that -- part of the proceeds will be deployed on a share buyback, which will start in January.

So that's my summary of the summary. We thank you very much for your time and your questions, and I hope you have a good day. Thank you.

Thank you.

This concludes today's conference call. Thank you all very much for joining, and you may now disconnect.