BASF Capital Market Story€¦ · BASF Capital Market Story, July 2016 3 150 years Chemistry as an...

BASF Capital Market Story, July 2016 1

Hans-Ulrich EngelChief Financial Officerof BASF SE

Roadshow Frankfurt

July 28, 2016

BASF Capital Market Story


150 years

Cautionary note regarding forward-looking statements

This presentation may contain forward-looking statements that are subject to risks anduncertainties, including those pertaining to the anticipated benefits to be realized from theproposals described herein. Forward-looking statements may include, in particular, statementsabout future events, future financial performance, plans, strategies, expectations, prospects,competitive environment, regulation and supply and demand. BASF has based these forward-looking statements on its views and assumptions with respect to future events and financialperformance. Actual financial performance could differ materially from that projected in theforward-looking statements due to the inherent uncertainty of estimates, forecasts andprojections, and financial performance may be better or worse than anticipated. Given theseuncertainties, readers should not put undue reliance on any forward-looking statements. Theinformation contained in this presentation is subject to change without notice and BASF doesnot undertake any duty to update the forward-looking statements, and the estimates andassumptions associated with them, except to the extent required by applicable laws andregulations.


150 years

Chemistry as an enabler BASF has superior growth

opportunities: – sustainable innovations– investments– emerging markets

The #1 chemical company €70.4 billion sales, €6.7

billion EBIT bSI in 2015 #1-3 in ~70% of businesses,

present in almost all countries

6 integrated Verbund sites, production in 60 countries

A track record of strong sales and earnings growth

>3.5% dividend yield in every single year from 2006-2015

~€66 billion market capitalization on July 25, 2016

PerspectiveLudwigshafen,Germany

Antwerp,Belgium

Nanjing,China

Kuantan,MalaysiaGeismar,

LouisianaFreeport,Texas

Verbund site

Positioning

We create chemistry for a sustainable future

Performance


150 years

Percentage of sales 2015*

* Not depicted here: ~4% of Group sales reported as ‘Other‘ ** Natural Gas Trading has been divested on Sep. 30, 2015.

BASF today – a well-balanced portfolioTotal sales 2015: €70.4 billion


150 years

Global reduction in carbon emissions of 6 million metric tons p.a. and reduction of waste

Example Ludwigshafen site:avoidance of 7 million metric tons of freight p.a.= 280,000 fewer truckloads

Shared use of on-site facilities: fire department, security, waste water treatment and analytics

Verbund: Unique competitive advantage

* Savings include only tangible synergies. Additional (intangible) benefits and retained profits are not included.

Verbund generates >€1 billion p.a. global cost savings* & supports sustainability


150 years

Financial figures Q2 2016 Q2 2015 Change

Sales €14.5 billion €19.1 billion (24%)

EBITDA €2.8 billion €3.0 billion (7%)

EBIT before special items €1.7 billion €2.0 billion (16%)

EBIT €1.7 billion €2.0 billion (16%)

Net income €1.1 billion €1.3 billion (14%)

Reported EPS €1.19 €1.38 (14%)

Adjusted EPS €1.30 €1.49 (13%)

Operating cash flow €2.3 billion €2.8 billion (17%)

Sales development Volumes Prices Portfolio Currencies

Q2 2016 vs. Q2 2015 2% (7%) (16%) (3%)

Q2 2016: Financial figures for BASF Group


150 years

0

1

2

3

4

5

2007 2008 2009** 2010 2011 2012 2013 2014 2015 1HJ2016

Free cash flow development

* Cash provided by operating activities less capex ** 2009 adjusted for re-classification of settlement payments for currency derivatives

Free cash flow*(in billion €)

3.2

2.5

3.2

3.9 3.7

2.6

3.2

1.7

3.6

1.4


150 years

Outlook 2016 for BASF Group confirmed

Outlook 2016 Sales will be considerably below prior year due to the divestiture of the natural gas trading

and storage activities and the lower oil and gas prices. We expect EBIT before special items to be slightly below the previous year level due to

significantly lower earnings in Oil & Gas.

Assumptions 2016 GDP growth: +2.3% Growth in industrial production: +2.0% Growth in chemical production (excl. pharma): +3.4% Exchange rate: $1.10 per euro Oil price (Brent): $40 per barrel


Business development

Path forward: Our priorities

Appendix – Q2 2016 reporting


150 years

Components of growth

* 2010, 2011 indicative, adjusted for IFRS 10 & 11

59.6

70.4+10.5 -1.4 +2.6 -0.9

20

40

60

80

2010 2015

Volumes

PricesFX M&A

Sales* analysis 2010 – 2015 (in billion €)

(in billion €) Net sales 2010 Volumes Prices FX M&A Sales CAGR 2010 - 2015

BASF Group w/o Oil & Gas 51.4 +2.8

(+1.1% CAGR) -0.9 +2.6 +1.6 +2.3%

Oil & Gas 8.2 +7.7 (+14.2% CAGR) -0.5 +0.0 -2.5 +9.6%

3.4%

CAGR


150 years

Functional crop care Personal care & food Omega-3 fatty acids Enzymes Battery materials Specialty plastics Selected assets in Oil & Gas Refinish coatings Surface treatment*

BASFcore business

Strong partnerships

Gazprom Monsanto Petronas Shell Sinopec Statoil Total Yara

Selected transactions 2010 − until today

Acquisitions

~ €5.2 billion salesin emerging and innovation-driven

businesses

Divestitures

Styrenics Fertilizers Selected assets in Oil & Gas Natural gas trading & storage Custom synthesis business Textile chemicals Polyolefin catalysts Industrial coatings*

~ €20 billion sales*in businesses with

limited fit and differentiation

potential

Portfolio development towards more market-driven and innovative businesses

* Closing expected in 2016


150 years

Steady earnings growth

* 2010, 2011 indicative, adjusted for IFRS 10 & 11; 2001 – 2009 as reported, without non-compensable foreign income taxes on oil production

EBIT and EBITDA*(in billion €, 2001 - 2015)

3.7

4.7 4.6

7.0 7.2

8.48.9

7.7

6.5

9.9

11.2

10.010.4

11.010.6

0

2

4

6

8

10

12

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015EBITEBITDA

0.7

2.2 2.2

4.5 4.85.5

6.0

4.6

2.8

6.7

8.06.7 7.2

7.6

6.2

CAGREBITDA

7.9%CAGREBIT

16.6%


150 years

50

100

150

200

250

300

350

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Strong track record in operational excellence

EBITDA

Sales

* Excl. companies with major IFRS 10/11 restatements, i.e. BASF YPC Nanjing, Libya onshore, other Oil & Gas and Catalysts companies

BASF Group* 2001–2015(indexed; CAGR 2001–2015)

Fixed Costs

CAGREBITDA

9%

CAGRSales

6%

CAGRFixed Costs3%


150 years

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2006 2009 2012 2015

2.90

We want to grow or at least maintain our dividend at the previous year’s level

Dividend of €2.90 per share, an increase of 3.6%

Dividend yield of 4.1% in 2015

Dividend yield above 3.5%in any given year since 2006

4.6%

Attractive shareholder return

Key facts 2015

Dividend per share (€)

0.50

1.00

1.50

2.00

* Dividend yield based on share price at year-end

4.1% 3.8% 7.0% 3.9% 3.7%Yield* 3.7%

2.50

3.5%

3.00

4.0% 4.1%

1.50

1.95 1.951.70

2.202.50 2.60 2.70

Dividend policy

2.80


150 years

Average annual performance with dividends reinvested

0 3 6 9 12 15

Euro Stoxx 50

DAX 30

MSCI World Chemicals

+5.5%

Last 5 yearsJuly 2011 – June 2016

+3.9%

+3.2%

+5.6%

+5.7%

Last 10 yearsJuly 2006 – June 2016

BASF

+6.9%

+0.7%

+12.4%

Delivering consistent, long-term value


150 years

Grow sales and earnings faster than global chemical production, driven by

– Continued focus on innovations

– Capital expenditures

– Acquisitions

– Operational excellence and Verbund advantages

Focus on cash generation/conversion

Continue with our progressive dividend policy

Focus on pruning our portfolio

Maintain industry-leading position in sustainability

The path forward: Our priorities


150 years

Managing volatility: BASF almost perfectly hedged on hydrocarbon price changesBASF production and consumption of oil and gas(in million boe, 2015)

BASF hydrocarbon consumption almost equals hydrocarbon production

Production of oil, liquids and gas Consumption of oil derivatives and gas

153

>100

Naturalgas

Oil and liquids

Natural gas for energy and as raw material

Naphtha and other oil-based raw materials

40

113


150 years

0

100

200

300

400

500

2001 2002 2003 2004 2005 2006* 2007* 2008 2009 2010 2011 2012restated

2013 2014 2015

EBITDA margin Chemicals / oil price(indexed, 2001 = 100)

Chemicals with stable profitability, little correlation to oil price

EBITDA margin Chemicals(as % of sales)

Oil price

* Without Catalysts (now part of Functional Materials & Solutions segment)


150 years

Strategic lever: Continuous portfolio development

Specialties and solutions

Differentiated commodities

target(in % of sales*)

~ 50% ~ 50%

Maintaining a balanced portfolio

Divestment of businesses, e.g., due to loss of differentiation

Divestment of businesses, e.g., due to

lower market attractiveness

Commoditization leads to restructuring

Growth fields

Innovation pipeline

Acquisitions

* Excluding Oil & Gas sales

Attractive markets Differentiation by process

technologies and integration

Attractive markets Differentiation by customer

proximity and innovations


150 years

Provide a minimum return on investment of 8% p.a. after tax

Are EPS accretive by year three at the latest

Financial acquisition criteria

Generate profitable growth above the industry average

Are innovation-driven

Offer a special value proposition to customers

Reduce earnings cyclicality

Strategic acquisition criteria

We want to acquire businesses which …

Strategic lever: Acquisitions


150 years

BASF to acquire ChemetallTransaction highlights

Purchase price of US$3.2 billion (debt free)

All-cash offer, financing secured

Expected closing of transaction by the end of 2016

Synergies on industry-typical level

EPS accretive in year 1 excluding integration costs, in year 2 including integration costs

Transaction will significantly enhance BASF Coatings’ position as complete solutions provider

Chemetall – a global technology and innovation leader in metals surface treatment


150 years

Chemetall – a global leader in surface treatment products and services

FiguresFacts

Sales2015: US$845 million 2016E*: US$851 million2017E*: US$895 million

EBITDA2015: US$202 million2016E*: US$217 million2017E*: US$231 million

EBITDA margin2015: 24%2016E*: 25%2017E*: 26%

CAGR sales(2007 – 2015) ~7% (at constant exchange rates)

Key customer industries

Automotive, aerospace, coil,metal forming

Regional sales~50% Western Europe~30% North America~20% Emerging markets, mainly Asia

Employees ~2,500 (~50% sales professionals)

Sites 21 production sites in all regions10 R&D sites

One of the strongest globally managed brands in the sector

Proprietary manufacturing technologies, rigorous product quality and performance standards

Leading market positions in the automotive, aerospace and cold forming segments

Long-standing, service-intensive customer relationships

Significant global presence and record of accelerated expansion in emerging markets

Track record of strong growth and high profitability

* average analysts’ estimates


150 years

Chemetall complements BASF’s portfolio, adding highly attractive surface treatment

Chemetall

Pre-treatment

In-depth customer insights across wide industry range

Recognized technology leader in metal surface treatment

Complete portfolio beyond pure surface treatment

BASF

Coatings

Excellent customer access and approvals especially in automotive

Well recognized customer service offering in coatings

Chemical know-how and strong R&D platforms within BASF Group

Complete surface treatment provider

Offer full solution competence to customers across wide range of industries

Benefit from convergence of pre-treatment and coatings, offering superior product and process solutions

Develop superior application processes leveraging joint expertise

+


150 years

Chemetall – an excellent strategic fit for BASF Coatings

Technology adjacency

Compelling combination of surface treatment and coatings technologies Creates unmatched “solution competence” for customers

Access to key growth markets

Superior access to growth industries (e.g. automotive, aerospace) Global footprint with local production, technical centers in China and India

Downstream solution business

Complex formulation businesses based on application know-how Customer centricity, product quality and technical service as differentiators

Enhanced technology basis

Growth opportunities through combining broad technical and application competence with BASF’s chemistry and formulation know-how

Strong and robust financials

Excellent track record of growth above market and attractive margins “Asset light” business model with strong free cash flow conversion

Industry-leading expert team

High-quality resources and technical expertise ~1,200 sales professionals with in-depth application and process know-how


150 years

Strategic lever:Capital expenditures

Differentiated commodities With proprietary technology and/or Verbund advantages

Focus on:– emerging markets – backward integration in the U.S.– upgrading our asset base in Europe

Specialties and solutions Incremental investments for new products Regional expansion of businesses

Oil & Gas Focus investment budget by active portfolio optimization to secure free cash flow Keep reserve-to-production ratio of approx. 10 years


150 years

Investments for organic growth

Performance Products16%

Oil & Gas24%

€19.5billion

FunctionalMaterials &Solutions12%

Capex budget 2016-2020

Other14%

Chemicals30%

Capex budget 2016-2020

Asia Pacific18%

€19.5billion

South America*9%

North America26%

Europe46%

AgriculturalSolutions4%

Other1%

by segment by region

* Including Africa and Middle East


150 years

Strategic lever: Innovations

Allow for creativity

Balance incremental und disruptive innovations

Manage innovation pipeline efficiently on all levels

Build on our global R&D Verbund

Leverage external collaborations even more

Align R&D activities with business models:

– Differentiated commodities• Focus on improving processes and addressing raw material change • Launch selected product innovations

– Specialties and solutions• Develop new, tailored offerings in close collaboration with customers• Pursue solution-oriented approach

Keep annual R&D spending at ~3% of sales*

* Without Oil & Gas


150 years

€1.95 billion R&D expendituresin 2015; to be maintained in 2016

~10,000 employees in R&D

~3,000 projects

Ranked No.1 in thePatent Asset Index™

~1,000 new patents in 2015

Research Verbund: Cooperations with more than 600 excellent partners from universities, start-upsand industry

Strong commitment to innovationInnovations for a sustainable future

Key facts

1.61.7

1.8 1.9 1.95

0.0

0.5

1.0

1.5

2.0

2011 2012 2013 2014 2015

R&D expenditures (billion €)

Chemicals11%

Performance Products20%

Functional Mat. & Sol.20%

Agricultural Solutions26%

Oil & Gas2%

Corporate Research21%

2.0

1.5

1.0

0.5

0


150 years

0

50

100

150

BASF Competitors

FWC™Combines functionality of a 3-way conversion catalyst with integrated filter on a ceramic substrate

Reduces gaseous emissionsPrecious metal-based catalytic coating removes exhaust gases from engine emissions**

Removes particulatesFilters & combusts particulates

Complies with emissions limitsHelps automakers meet new Euro 6c regulatory standards

FWC™ introduced in 2013 Sustains BASF’s leading technology position

Leading position: Global mobile emissions catalysts patents*

* 2009 – 2013 ** Hydrocarbons, carbon monoxide, nitrogen oxides *** https://www.basf.com/en/company/news-and-media/science-around-us/catalytic-converter.html

FWC™ reduces emission of gaseous pollutants and particulates

HC

CO

NOx

N2

H2O

CO2

Particulates

Innovation: Four-Way Conversion Catalyst (FWC™)


150 years

Innovation: Green Sense®

Concrete for sustainable construction

BASF’s Green Sense® Concrete system consists of:

1) Innovative admixture products

2) Concrete mix services

3) Eco-efficiency analysis

Replaces up to 70% of cement with recycled materials

Superior eco-efficiency

Applied in the construction of landmark projects, e.g. One World Trade Center, NYC

Envi

ronm

enta

l Im

pact

ReferenceConcrete

High Low

Low

Total Cost of Ownership

Hig

h


150 years

Innovation: Trilon® MChelating agent for more sustainable detergents and cleaners

Trilon® M – alternative to phosphate for automatic dish washing High sustainability performance: bio-degradable and

eco-friendly Fast growing global market demand driven by

regulatory changes and consumer demand 2010: Capacity expansion to 120,000 tons 2015: Startup of a new Trilon® M world-scale plant in

Theodore, Alabama

Compared with alternative chelating agents Trilon® M Is readily bio-degradable Meets eco-label requirements Has better eco-toxicology profile Shows high performance


150 years

BASF Crop ProtectionEngagement in digital agronomic decision support

BASF invests in digital farming tools for improved decision support on the farm To focus on connecting data, technology and

people To improve productivity and sustainability

First tools are launched Maglis: New agricultural platform; offering a range

of practical and intuitive tools for gathering, interpreting and monitoring of crop management information

Tools: Maglis Crop Plan; Maglis Customer Navigator; Maglis Sustainability Assessment*


150 years

2.2% 0.2%

Novel methodology to screen and steer our portfolio*

26.6% Accelerators:– outgrow their markets

by 2-10%– deliver margins >10%

above the average– represent >60% of BASF’s

R&D pipeline 71% Performers <1% Challenged products

* More than 60,000 product applications analyzed representing €64.9 billion in sales or 95.4% of BASF’s portfolio.

Increase the share of Accelerators from 23% in 2014 to 28% by 2020

Strategic lever: Sustainability Sustainable Solution Steering

26.6%

71.0%

Substantial sustainability contribution in the value chain

Meets basic sustainability standards in the market

Specific sustainability issue which is actively addressed

Significant sustainability concern,action plan in development

SustainableSolutionSteering


150 years

0

1,000

2,000

3,000

4,000

2015 2018

Annual earnings contribution(in million €)

Targeted annual earnings contribution of €1 billion from end of 2018 on

Optimization of processes and structures in all regions, e.g.– manufacturing– incremental capacities– productivity increase

Project timeline: 2016–2018

DrivE program

Strategic lever: Operational excellenceDrivE with ~€1 billion earnings contribution

NEXT 2008-2011 DrivE 2016-2018

STEP 2012-2015


150 years

Profitability of BASF will grow faster than global chemical production

Sales growthSlightly faster than the global chemical production

EBITDA growthWell above global chemical production

Remain a strong cash providerContinuously generate high levels of free cash flow

Financial targets for the coming years

Deliver attractive returnsEarn a significant premium on cost of capital

Progressive dividend policy We want to grow or at least maintain our dividend


150 years

ChemicalsHigher volumes, but continuing margin pressure

Intermediates680(8%)

Monomers1,371(13%)

Petrochemicals1,322(20%)

€3,373(15%)

EBIT before special items million €

548633

249

465 467

0

200

400

600

800

Q2 Q3 Q4 Q1 Q2


Q2 2016 vs. Q2 2015 4% (17%) 0% (2%)

20162015

Sales Q2 2016 vs. Q2 2015million €


150 years

Performance Chemicals958(10%)

CareChemicals

1,178(3%)

€3,846(6%)Nutrition

& Health497(11%)

Dispersions& Pigments

1,213(3%)

304 319

228

547503

0

200

400

600

Q2 Q3 Q4 Q1 Q2


Q2 2016 vs. Q2 2015 2% (3%) (3%) (2%)


20162015


Performance ProductsSignificant increase in earnings driven by lower fixed costs, improved margins and higher volumes


150 years

Functional Materials & SolutionsConsiderable earnings increase supported by all divisions

Catalysts1,508 (11%)

Coatings800(2%)

€4,703(4%)

Performance Materials1,766(1%)

458

371 389456

535

0

200

400

600

Q2 Q3 Q4 Q1 Q2

ConstructionChemicals

629+1%



Q2 2016 vs. Q2 2015 5% (6%) 0% (3%)

20162015



150 years

Agricultural SolutionsDecrease in sales and earnings due to lower volumes and currency headwinds

1,678 1,459

3,576 3,239

0

1,000

2,000

3,000

4,000

Q2 2015 Q2 2016 H1 2015 H1 2016

(9%)

365 320

939 911

0

200

400

600

800

1,000

Q2 2015 Q2 2016 H1 2015 H1 2016

(12%)

Sales Q2 2016 vs. Q2 2015/H1 2016 vs. H1 2015million €

EBIT before special items Q2 2016 vs. Q2 2015/H1 2016 vs. H1 2015million €

(13%)


Q2 2016 vs. Q2 2015 (8%) 1% 0% (6%)

(3%)


150 years

Oil & GasSignificantly lower sales and earnings

Natural Gas Trading

Exploration & Production

Net income

Sales development Volumes Prices/Currencies Portfolio

Q2 2016 vs. Q2 2015 2% (3%) (82%)

143

288

94250

1000

200

400

600

Q2 2015 Q2 2015 Q2 2016 Q2 2016

EBIT before special items, net income million €


431

2,964

617

704

0

1,000

2,000

3,000

4,000

5,000

Q2 Q220162015

Salesmillion €

(83%)

3,668

704

Natural Gas Trading

Exploration & Production


150 years

Review of “Other”

million € Q2 2016 Q2 2015

Sales 485 757

EBIT before special items (212) (63)

Thereof Corporate research costs (88) (102)

Costs of corporate headquarters (56) (64)

Foreign currency results, hedging andother measurement effects (116) 151

Other businesses 33 30

Special items 65 (20)

EBIT (147) (83)


150 years

Cash flow in 1st half 2016

million € H1 2016 H1 2015

Cash provided by operating activities 3,339 5,143Thereof changes in net working capital (1,045) 877

miscellaneous items (122) (32)

Cash used in investing activities (1,988) (3,331)Thereof payments related to tangible/intangible assets (1,979) (2,845)

acquisitions/divestitures 51 (15)

Cash used in financing activities (1,814) (1,033)

Thereof changes in financial liabilities 944 1,723

dividends (2,768) (2,803)


150 years

Strong balance sheet

Total assets increased by €1.3 billion on higher trade accounts receivable and deferred taxes

Inventories were stable at €9.7 billion

Provisions for pension obligations increased by €3.3 billion

Net debt at €14.1 billion Equity ratio: 40%

24.1 27.3

15.215.9

31.529.0

Dec 31,2015

June 30,2016

2.2 1.83.1 3.6

9.5 10.6

9.7 9.7

46.3 46.5

Dec 31,2015

June 30,2016

Liquid funds

Accountsreceivable

Long-termassets

Inventories

Other assets

70.8 72.2 70.8 72.2

Otherliabilities

Financialdebt

Equity

Balance sheet June 30, 2016 vs. December 31, 2015 billion €


150 years

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