Post on 07-Jun-2020
Analyst Conference Call Q2 2019Ludwigshafen, July 25, 2019
July 25, 20192 | BASF Analyst Conference Call Q2 2019
Cautionary note regarding forward-looking statements
This presentation contains forward-looking statements. These statements are based on currentestimates and projections of the Board of Executive Directors and currently available information.Forward-looking statements are not guarantees of the future developments and results outlinedtherein. These are dependent on a number of factors; they involve various risks and uncertainties; andthey are based on assumptions that may not prove to be accurate. Such risk factors include thosediscussed in Opportunities and Risks on pages 123 to 130 of the BASF Report 2018. BASF does notassume any obligation to update the forward-looking statements contained in this presentation aboveand beyond the legal requirements.
July 25, 20193 | BASF Analyst Conference Call Q2 2019
Key drivers for the earnings decline in H1 2019
Uncertainty even higher than expected; low visibility Slowdown in global industrial production stronger than
expected (+1.5% in H1 2019) Slowdown in global automotive production
(-6% in H1 2019) Slowdown in European and German chemical production
(Europe -0.5% and Germany -3.5% in H1 2019) Severe weather conditions in North America
(affecting agricultural sector) No ease of trade conflicts
Lower margins in isocyanates and crackerproducts
Turnarounds of steam crackers in Port Arthur and Antwerp
Margin development in isocyanates and cracker products even weaker than expected
Macro
Micro
UnexpectedExpected
July 25, 20194 | BASF Analyst Conference Call Q2 2019
BASF Group H1 2019 – Sales and EBIT before special items
-500
500
1,500
2,500
3,500
4,500
EBIT before special items by segment H1 2019 vs. H1 2018million €
Sales bridge H1 2019 vs. H1 2018million €
Sales development
H1 2019 vs. H1 2018 (4%) (2%) 4% 2%
Agricultural Solutions 23%
Nutrition & Care (6%)
Surface Technologies 4%
Industrial Solutions 14%
Materials (58%)
Chemicals (54%)
2,777
4,25331,483 31,335
-1,408 -669
1,248 681
10,000
15,000
20,000
25,000
30,000
H1 2018 Volumes Prices Portfolio Currencies H1 2019
Other (122%)H1 2018 H1 2019
July 25, 20195 | BASF Analyst Conference Call Q2 2019
BASF Group H1 2019 – Volume development
* Location of customer
(4%)
(4%)0%
Δ Volume H1 2019Δ Volume H1 2019 rest of the portfolio
(6%) (7%)
(2%)
2%
Cracker turnarounds
Lower demand from automotive
Adverse weather conditions in North America
EuropeNorth America
Asia Pacific
South America, Africa, Middle East
Volume development%
Volume development by region*%
July 25, 20196 | BASF Analyst Conference Call Q2 2019
Historically low North American cracker marginswith global repercussions*
0
200
400
600
800
1,000
1,200
1,400
1,600
01/2
015
04/2
015
07/2
015
10/2
015
01/2
016
04/2
016
07/2
016
10/2
016
01/2
017
04/2
017
07/2
017
10/2
017
01/2
018
04/2
018
07/2
018
10/2
018
01/2
019
04/2
019
07/2
019
Production cash margin, Naphtha feed
Naphtha, full range, spot average, CIF NWE ARA
Ethylene, contract incl. market typical discounts(estimated), delivered WE
0
200
400
600
800
1,000
1,200
1,400
1,600
01/2
015
04/2
015
07/2
015
10/2
015
01/2
016
04/2
016
07/2
016
10/2
016
01/2
017
04/2
017
07/2
017
10/2
017
01/2
018
04/2
018
07/2
018
10/2
018
01/2
019
04/2
019
07/2
019
Spot cash margin, Naphtha feed
Naphtha, full range, spot average C&F Japan
Ethylene, spot average, CFR NE Asia
0
200
400
600
800
1,000
1,200
1,400
1,60001
/201
504
/201
507
/201
510
/201
501
/201
604
/201
607
/201
610
/201
601
/201
704
/201
707
/201
710
/201
701
/201
804
/201
807
/201
810
/201
801
/201
904
/201
907
/201
9
Spot cash margin, weighted average feed
Ethane, purity, spot FOB Mont Belvieu
Ethylene, spot, pipeline delivered USGC
* All data according to IHS Markit
US$/mt North America North East Asia Western Europe
2015 2016 2017 2018 2019 2015 2016 2017 2018 20192015 2016 2017 2018 2019
July 25, 20197 | BASF Analyst Conference Call Q2 2019
Isocyanate margins on subdued level below historical averages*
* All data according to ICIS, Reed Business Information
US$/mt North America Asia Western Europe
500
1,500
2,500
3,500
4,500
5,500
6,50001
.201
703
.201
705
.201
707
.201
709
.201
711
.201
701
.201
803
.201
805
.201
807
.201
809
.201
811
.201
801
.201
903
.201
905
.201
9
TDI margin above toluene
Polymeric MDI margin above benzene
TDI, bulk, domestic, midpoint
Polymeric MDI, drummed, domestic, midpoint
500
1,500
2,500
3,500
4,500
5,500
6,500
01.2
017
03.2
017
05.2
017
07.2
017
09.2
017
11.2
017
01.2
018
03.2
018
05.2
018
07.2
018
09.2
018
11.2
018
01.2
019
03.2
019
05.2
019
TDI margin above toluene
Polymeric MDI margin above benzene
TDI, CFR South East Asia, spot, midpoint
Polymeric MDI, CFR China, spot, midpoint
500
1,500
2,500
3,500
4,500
5,500
6,500
01.2
017
03.2
017
05.2
017
07.2
017
09.2
017
11.2
017
01.2
018
03.2
018
05.2
018
07.2
018
09.2
018
11.2
018
01.2
019
03.2
019
05.2
019
TDI margin above toluene
Polymeric MDI margin above benzene
TDI, Western Europe, contract, midpoint
Polymeric MDI, Western Europe, contract, midpoint
2017 2018 2019 2017 2018 2019 2017 2018 2019
July 25, 20198 | BASF Analyst Conference Call Q2 2019
Strategy announced in November 2018 is being implementedwith speed and determination
People: Transform organization to be more agile and customer focused
Portfolio: Sharpen portfolio and strengthen the Verbund
Digitalization: Leverage automation/digitalization acrossthe company and develop new business models
Operations: Improve competitiveness through technological leadership and operational excellence
Sustainability: Drive long-term competitiveness via carbon management and circular economy approaches
Innovation: Innovate with impact for our customersby closely connecting research and development
July 25, 20199 | BASF Analyst Conference Call Q2 2019
BASF to reshape organization– Leaner structures and simplified processes
A lean Corporate Center with <1,000 FTE supports the Board of Executive Directors in steering BASF Group(Corporate Development; Finance; Legal, Compliance, Tax & Insurance; EHS; HR; Communications; Investor Relations; Corporate Audit)
Our Operating Divisions & Technology Platforms are empowered to drive growth and profitability
Service Units ensure a competitive, demand-driven and effective service delivery(Global Engineering Services, Global Digital Services, Global Business Services, Global Procurement)
The Regions & Countries focus on supporting and enabling the businesses locally
Our customers
July 25, 201910 | BASF Analyst Conference Call Q2 2019
Excellence program 2019-2021
Key facts Operational excellence with focus on production, logistics and planning
In digitalization and automation, smart supply chains and smart manufacturing are major contributors
Organizational development targets leaner structuresin the areas of services, R&D and headquarters (~€300 million) Significant parts of functional services embedded in businesses,
closer to our customers Leaner structures and simplification of process landscape
Estimated one-time costs of €0.8 billion over the 3-year period. This includes special charges in a mid-triple-digit million-euro-range
€2 billion annual EBITDA
contribution from 2021 onward
July 25, 201911 | BASF Analyst Conference Call Q2 2019
Active portfolio management
BASF to acquire Solvayʼs integrated polyamide business On January 18, 2019, the EU Commission granted conditional
clearance for BASF to acquire Solvay’s polyamide business Closing expected in H2 2019 after all remaining conditions have
been fulfilled, incl. the sale of the remedy package to a third partyOil & Gas Sales 2018: ~€4.1 billion Merger took place on May 1, 2019 IPO planned for H2 2020, subject to market conditions
Water and paper chemicals Sales 2018: ~€0.8 billion Closing took place on January 31, 2019
Construction Chemicals Sales 2018: ~€2.5 billion High interest from various parties; indicative bids received Signing expected by the end of 2019
Pigments Sales 2018: ~€1 billion Divestment process started Closing expected by the end of 2020 at the latest
AcquisitionsDivestitures and other strategic options
“Best-owner”: Asset and
technology fit Benefit from
or contributionto Verbund
July 25, 201912 | BASF Analyst Conference Call Q2 2019
BASF Group Q2 2019 – Sales decreased slightly; EBIT before special items considerably below prior-year quarterFinancial figures Q2 2019 Q2 2018 Change
€ € %Sales 15,158 million 15,783 million (4)EBITDA before special items 1,975 million 2,709 million (27)EBITDA 1,626 million 2,645 million (39)EBIT before special items 1,045 million 1,972 million (47)EBIT 548 million 1,906 million (71)Net income 6,460 million 1,480 million 336Reported EPS 7.03 1.61 337Adjusted EPS 0.82 1.77 (54)Cash flows from operating activities 1,946 million 2,224 million (13)
Sales development Volumes Prices Portfolio CurrenciesQ2 2019 vs. Q2 2018 (6%) (2%) 2% 2%
July 25, 201913 | BASF Analyst Conference Call Q2 2019
BASF Group Q2 2019 – Sales and EBIT before special items
-200
500
1,200
1,900
EBIT before special items by segment Q2 2019 vs. Q2 2018million €
Sales bridge Q2 2019 vs. Q2 2018million €
Sales development
Q2 2019 vs. Q2 2018 (6%) (2%) 2% 2%
Agricultural Solutions (56%)
1,045
1,97215,783
15,158
-869-349
321 272
10,000
12,500
15,000
Q2 2018 Volumes Prices Portfolio Currencies Q2 2019
Other (37%)Q2 2018 Q2 2019
Chemicals (74%)
Nutrition & Care 3%
Surface Technologies 7%
Industrial Solutions 14%
Materials (56%)
July 25, 201914 | BASF Analyst Conference Call Q2 2019
Cash flow development H1 2019
H1 2019 H1 2018million € million €
Cash flows from operating activities 2,319 3,455Thereof Changes in net working capital (904) (1,221)
Miscellaneous items (6,752) (351)
Cash flows from investing activities 452 (1,735)Thereof Payments made for tangible / intangible assets (1,722) (1,449)
Acquisitions / divestitures 2,292 64
Cash flows from financing activities (3,227) (518)Thereof Changes in financial and similar liabilities (215) 2,526
Dividends (3,013) (3,044)
Free cash flow 597 2,006
July 25, 201915 | BASF Analyst Conference Call Q2 2019
Balance sheet remains strong
Balance sheet June 30, 2019 vs. December 31, 2018billion € Total assets increased by ~€2.2 billion,
mainly due to the new IFRS 16 standard on leases and higher accounts receivables related to the acquired agricultural solutions businesses
Noncurrent assets increased by€16.0 billion, mainly due to the recognition of our participating interests in Wintershall Dea and Solenis
Net debt increased by €675 million to€18.9 billion
Equity ratio: 46% (June 30, 2019)
Liquid funds
Accountsreceivable
Noncurrentassets
Inventories
Other assetsOtherliabilities
Financialdebt
Equity
27.0 23.9
5.8
21.0 20.8
40.8 36.1
June 30, 2019 Dec. 31, 20182.1 2.6
14.63.8
3.2
11.2
10.712.4
12.2
59.343.3
June 30, 2019 Dec. 31, 2018
86.688.8 86.688.8
Liabilities of disposal group
* For the oil & gas business and the paper and water chemicals business
Disposalgroup*
July 25, 201916 | BASF Analyst Conference Call Q2 2019
Underlying assumptions for H2 and full year 2019
Continued low growth in global gross domestic product(H2 2019 vs. H1 2019: around +1%; FY 2019 vs. FY 2018: around +2.5%)
Continued low growth in global industrial production(H2 2019 vs. H1 2019: around +0.5%; FY 2019 vs. FY 2018: around +1.5%)
Further slowdown in global automotive production(H2 2019 vs. H1 2019: around -2%; FY 2019 vs. FY 2018: around -4.5%)
Global chemical production negatively impacted by further decline in automotive(H2 2019 vs. H1 2019: around -1.5%; FY 2019 vs. FY 2018: around +1.5%)
No ease of trade conflicts, but also no further escalation Normal weather conditions in the southern hemisphere, particularly in South America
Low margins in isocyanates and cracker products to persist Turnaround of steam cracker in Ludwigshafen
Macro
Micro
Expected
July 25, 201917 | BASF Analyst Conference Call Q2 2019
Outlook 2019 for BASF Group
* For sales, “slight” represents a change of 1–5%, while “considerable” applies to changes of 6% and higher. For earnings, “slight” means a change of 1–10%,while “considerable” is used for changes of 11% and higher. At a cost of capital percentage of 10% for 2018 and 2019, we define a change in ROCEof 0.1 to 1.0 percentage points as “slight,” a change of more than 1.0 percentage points as “considerable.”
Outlook 2019* Since July 8, 2019 PreviousSales Slight decline Slight increaseEBIT before special items Considerable decline of up to 30% Slight increaseROCE Considerable decline Slight decline
Further underlying assumptions for 2019 Exchange rate: US$1.15 per euro (unchanged) Oil price (Brent): US$70 per barrel (unchanged)
July 25, 201919 | BASF Analyst Conference Call Q2 2019
ChemicalsSales declined on lower volumes and prices; earnings decreased due to lower volumes and margins
Sales Q2 2019 vs. Q2 2018million €
EBIT before special items million €
Sales development Volumes Prices Portfolio CurrenciesQ2 2019 vs. Q2 2018 (17%) (6%) 0% 1%
457398
257306
119
0
400
800
Q2 Q3 Q4 Q1 Q22018
Intermediates 717(11%)
Petrochemicals1,463(26%)
€2,180(22%)
2019
July 25, 201920 | BASF Analyst Conference Call Q2 2019
MaterialsSales down on lower prices and volumes; earnings decreased mainly due to lower isocyanate margins
EBIT before special items million €
Sales development Volumes Prices Portfolio CurrenciesQ2 2019 vs. Q2 2018 (5%) (12%) 0% 1%
Sales Q2 2019 vs. Q2 2018million €
765664
155
323 334
0
200
400
600
800
Q2 Q3 Q4 Q1 Q2
Performance Materials
1,562(8%)
Monomers1,399(22%) €2,961
(16%)
2018 2019
July 25, 201921 | BASF Analyst Conference Call Q2 2019
Industrial SolutionsSales decreased primarily due to portfolio effects; earnings up on higher margins and lower fixed costs
EBIT before special items million €
Sales development Volumes Prices Portfolio CurrenciesQ2 2019 vs. Q2 2018 (2%) 0% (8%) 1%
Sales Q2 2019 vs. Q2 2018million €
213164
61
264 243
0
200
400
Q2 Q3 Q4 Q1 Q2
Performance Chemicals805(15%)
Dispersions & Pigments1,336(4%)
€2,141(9%)
2018 2019
July 25, 201922 | BASF Analyst Conference Call Q2 2019
Surface TechnologiesSales increased mainly due to higher prices; earnings up on lower fixed costs and higher margins
EBIT before special items million €
Sales development Volumes Prices Portfolio CurrenciesQ2 2019 vs. Q2 2018 (4%) 11% 0% 2%
Sales Q2 2019 vs. Q2 2018million €
178142
211
159190
0
100
200
300
Q2 Q3 Q4 Q1 Q2
* Until signing of a transaction agreement, Construction Chemicals will be reported under Surface Technologies
Construction Chemicals* 680+2%
Catalysts2,222+18%
Coatings939(2%)
€3,841+9%
2018 2019
July 25, 201923 | BASF Analyst Conference Call Q2 2019
Nutrition & CareSales increased primarily due to higher product availability; earnings mainly up on lower fixed costs
EBIT before special items million €
Sales development Volumes Prices Portfolio CurrenciesQ2 2019 vs. Q2 2018 5% (3%) 0% 2%
Sales Q2 2019 vs. Q2 2018million €
214189
79
222 220
0
100
200
300
400
Q2 Q3 Q4 Q1 Q2
Care Chemicals1,004(4%)
Nutrition & Health491+26%
€1,495+4%
2018 2019
July 25, 201924 | BASF Analyst Conference Call Q2 2019
Agricultural SolutionsEarnings down due to seasonality of the acquired businesses and lower volumes in crop protection
Sales development Volumes Prices Portfolio CurrenciesQ2 2019 vs. Q2 2018 (12%) 3% 28% 1%
H1 2019 vs. H1 2018 (9%) 3% 43% 1%
Sales H1 2019 vs. H1 2018million €
Seed Treatment 256
+38%
Fungicides1,237(7%)
Insecticides383
+34%
€4,445+38%
Seeds & Traits1,037-
Herbicides1,532+8%
EBIT before special items Q2 2019 vs. Q2 2018 andH1 2019 vs. H1 2018million €
121
278
861
701
0
200
400
600
800
1,000
Q2 2019 Q2 2018 H1 2019 H1 2018
July 25, 201925 | BASF Analyst Conference Call Q2 2019
Review of “Other”
Financial figures Q2 2019 Q2 2018million € million €
Sales 744 689
EBIT before special items (182) (133)
Thereof Costs of corporate research (100) (90)
Costs of corporate headquarters (66) (66)
Foreign currency results, hedging and other measurement effects (13) 32
Other businesses 39 17
Special items (191) (16)
EBIT (373) (149)