BASF: Fit for 2012 · BASF Capital Market Story November 2011 1. BASF: Fit for 2012. Dr. Hans...

BASF Capital Market Story November 2011 1

BASF: Fit for 2012

Dr. Hans EngelCFO of BASF SE,

Chairman and CEO of BASF Corporation

Boston & New York,

November 7-8, 2011


1 | Business review

2 | Focus on operational excellence

3 | Well positioned for profitable growth

4 | Outlook


Sales €17.6 billion +12%EBITDA €2.7 billion (8%)EBITDA margin 15.4% 18.6%EBIT before special items (bSI) €2.0 billion (11%)EBIT bSI adjusted for non-comp. oil taxes €2.0 billion (1%)EBIT €1.9 billion (13%)Net income €1.2 billion (4%)EPS €1.30 (4%)Adjusted EPS €1.52 0%

Business performance

Q3’11

vs. Q3’10

BASF with good earnings in Q3 Third quarter 2011 highlights

Further sales growth in chemical activities mainly due to successful price increasesAcquired Cognis business continues to perform strongly; synergy targets increasedAgricultural Solutions on track for record year in sales and earningsEBIT before special items amounted to €2 billion. Adjusted for Libya, which contributed €355 million in last year’s quarter, EBIT before special items increased by 6% compared to Q3 2010.


Growth in all segments except Oil & Gas

Segment€

million

Sales ΔQ3 2010

EBITDA EBITDA

margin

EBIT before SI

ΔQ3 2010

Chemicals 3,168 +10% 848 26.8% 621 +1%

Plastics 2,801 +8% 418 14.9% 317 (15)%

Performance Products 3,991 +25% 602 15.1% 440 +19%

Functional Solutions 2,907 +12% 258 8.9% 162 +3%

Agricultural Solutions 908 +9% 137 15.1% 95 +44%

Oil & Gas 2,195 (2%) 474 21.6% 350 (39%)


Major milestones in our active portfolio management achieved

Styrolution

JV set on track

Styrolution, 50-50 joint venture between BASF and INEOS, established on October 1, 2011With pro-forma sales of €6.4 billion in 2010* Styrolution is global market leader in its industryBASF received ~€600 million in October as compensation for its contributed business

Divestiture of fertilizer activities

Agreement with EuroChem signed to sell BASF‘s fertilizer assets in Antwerp BASF also plans to sell its 50%-stake in PEC-Rhin JV to EuroChemTotal transaction value ~€700 millionClosing expected by the end of Q1 2012

* unaudited


*

Cash provided by operating activities less capex

(in 2005 before CTA)** 2009 adjusted for re-classification of settlement payments for currency

derivatives

Continuous strong cash flow

Cash Flow (billion €)

Cash provided by operating activitiesFree cash flow*

-1

0

1

2

3

4

5

6

7

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

5.0

2.9

**

Q1-Q3


Average annual dividend increase of 14.5%(2001-2010)

Dividend yield above 3% in any given year since 2001

Attractive dividend yield of 3.7% in 2010*

3.9%

Key factsDividend per share (€)

2.20

0.65 0.70 0.700.85

1.00

1.50

1.95 1.951.70

0.0

0.5

1.0

1.5

2.0

2.5

2001 2004 2007 2010

0.50

1.00

1.50

2.00

3.1%

* Dividend yield based on share price at year-end

3.2% 3.1% 4.1% 3.8% 7.0%Yield* 3.7%

2.50

3.1% 3.9%

Attractive shareholder returns Record dividend


Delivering consistent, long-term value

Long-term performance October 2001 –

September 2011 (average annual performance with dividends reinvested)

+12.8%

-1.4%

+7.4%

-3 0 3 6 9 12 15

BASF

Euro Stoxx 50

DAX 30

MSCI World Chemicals

+2.5%


1 | Business review



4 | Outlook


Vertical and horizontal integration of production plants, energy and waste flows, logistics and site infrastructure

Know-how Verbund

Energy Verbund and combined heat and power plants lead to-

Savings of ∼2.6 million tons oil equivalent p.a.

-

Reduction of CO2

-emissions of ~6 million tons p.a.

10

Unique ‘Verbund’

concept Cost savings of >€500 million p.a. in Ludwigshafen alone

BASF site Ludwigshafen, Germany Verbund

Concept


Fixed costs represent around 30% of total costs

Only slightly higher fixed costs, despite major acquisitions(Engelhard, Degussa Construction Chemicals, Ciba and Cognis)

Ciba and Cognis synergies as well as NEXT program will drive fixed costs down–

Cost synergies Ciba:>€450 million by 2012

–

Cost synergies Cognis:

€145 million by 2013

Stringent fixed cost management

Key facts

Fixed costs indexed EBITDA indexedSales indexed

BASF Group development 2001-2010

50

100

150

200

250

300

2001 2004 2007 2010

Index

~170%

~100%

~20%

Δ


> 500 individual projects to simplify processes, structures and production sites in all regions

Project timeline:2008-2011

Annual earnings contribution of €600 million in 2010 achieved

Targeted earnings contribution by 2012: ≥€1 billion

Completed restructuring programs

New efficiency program NEXT

Sustainable improvement of cost base Efficiency program NEXT on track

New

EXcellence

Targets

(NEXT)Annual earnings contribution (million €)

0

500

1,000

1,500

2,000

2,500

2003 2005 2007 2009 2012


1 | Business review



4 | Outlook


Leading positions in growth industries

and emerging markets

Ongoing portfolio

optimization

Excellent innovation platform

We strive to outperform global chemical production growth by at least 2 percentage points p.a.

Well positioned for profitable growth

Continue expansion in emerging markets, especially AsiaTranslate megatrends into business growth

Continue with active portfolio managementDrive portfolio closer to end customer

Product and system innovation as growth driversMegatrend innovations for long-term growth

Growth target:


Leading positions in growth industries and

emerging markets

15


Emerging markets Significant sales growth in emerging markets

Sales 2010 in emerging markets: €14.5 billion (27%)

Investments in emerging markets 2005-2010:€3 billion

Ongoing increase of - sales force- regional R&D

Emerging markets definition, according to Dow Jones:35 countries *

* Bahrain, Brazil, Bulgaria, Chile, China, Colombia, Czech Republic, Egypt, Estonia, Hungary, India, Indonesia, Jordan, Latvia, Kuwait, Lithuania, Malaysia, Mauritius, Mexico, Morocco, Oman, Pakistan, Peru, Philippines, Poland, Qatar, Romania, Russia, Slovakia, Sri Lanka, South Africa, South Korea, Taiwan, Thailand, Turkey, United Arab Emirates

Emerging MarketsNet sales in billion €BASF Group (w/o Oil & Gas)

0

10

20

30

40

50

60

2005 2010

CAGR 7%22%

27%CAGR 13%

Emerging Markets (Dow Jones definition)

Developed Markets


Emerging markets Recently announced major projects

MDI plant Chongqing, China Expansion Verbund

site Nanjing*

Expansion Verbund

site Kuantan*

Acrylic acid complex, Brazil Expanding gas production, Russia* 15% Stake in South Stream* Memoranda of Understanding signed


6.5

12.5

20

0

5

10

15

20

2005 2010* 2020

BASF’s profitable growth path in Asia Pacific

Sales by location of customers (in billion €)

* Excluding Cognis

+14% p.a.

Achievements 2005-2010

Sales growth +14% p.a.(vs. Asian market growth +10.5% p.a.)Record EBITDA of €1.7 billion in 2010, resulting in an EBITDA margin of 14%

Target 2011-2020

Well on track to double sales by 2020(based on sales of €9 billion in 2008)Outgrowing Asian Pacific chemical market by 2 percentage points p.a. through

–

Innovations out of Asia–

Investments 2011-2015: €2.3 billion–

Generating 70% of sales based on local manufacturing

–

Strengthening market focus through industry and customer target groups


Ongoing portfolio optimization

19


BASFcore

businesses

Powerful partnerships

Major acquisitions Major divestitures

Pharmaceuticals

Fibers

Printing systems

Polyolefins (Basell)

Polystyrene North America

Agchem generics

Premix

Crop protectionOil & Gas (Revus)Engineering Plastics Electronic ChemicalsCustom synthesisCatalysts (Engelhard)Construction Chem.Water-based resinsPigments (Ciba)Plastic additives (Ciba)Care Chem. (Cognis)Nutrition & Health (Cognis)

15 billion Euro(Sales)

9 billion Euro*

(Sales)

GazpromMonsantoPetronasShellSinopecTotal

* Not including styrenics

and fertilizer businesses

Selected transactions 2001

to date

Styrenics(JV Styrolution established)

Fertilizers (contract signed)

Pro-active portfolio management

Sale of shares in K+S(Proceeds for BASF ~€1 billion)


TargetAcquisition EPS accretive as of 2012

Integration Costs€300 million one-time costs until end of 2013 −

thereof €200 million incurred by the end of Q3 2011

€120 million inventory step-up fully incurred already −

€60 million each incurred in Q4 2010 and Q1 2011

Synergies€290 million of additional annual EBIT targeted− €145 million cost synergies by the end of 2013− €145 million growth synergies by the end of 2015

Cognis

integration – Synergy target increased to €290 million


Active portfolio management pays off

Chemical activities

Agricultural Solutions

Oil & Gas, including non-deductible oil taxes

EBITDA by activity (in billion €, excluding Other)

0

2

4

6

8

10

12

2001* 2004 2007** 2010

Recent acquisitions reshaped portfolio–

Closer to end customers–

Innovation-driven–

Profitable growth above industry average

BASF’s EBITDA in 2010 (excluding Other) amounted to €11.7 billion

* Based on German GAAP**

As of 2007 according to new segment structure (excl. Styrenics

and corporate costs)

Our diversified portfolio is a key strength


Excellent innovation platform

23


Electromobility

Xemium®Kaurit®

Light

CypoSol®

Elastopave®

Ecovio®

Natugrain®

TS X-SEED® PCI Geofug®


smart forvision

–joint concept car by Daimler and BASF

Presented at the International Motor Show in Frankfurt in September 2011BASF solutions are based on three main technology platforms:1. Electrical energy efficiency

-

OPVs, OLEDs* support range extension

2. Multifunctional lightweight construction-

Composite body parts, wheel rims and car seats

3. Integrated temperature management-

Cool pigment coating, temperature reflecting foil

Chemical solutions by BASF are playing a key rolein bringing electromobility

quicker to the roads

* OPVs

= Organic Photovoltaics, OLEDs

= Organic Light Emitting Diodes

Innovations for the mobility of tomorrow


Further increase in R&D spending planned for 2011

Innovation will spur further growth

Total R&D expenditures 2010 (billion €)

€1.5 billion R&D expenditures in 2010 (2009: €1.4 billion)

~€8 billion R&D expenditures in the period 2011-2015

~9,600 employees in R&D

~3,000 projects and topics

Research Verbund: About 1,900 partnerships with universities, start-ups and industry partners

Strong commitment to R&D

Corporate Research22%

Agricultural Solutions

26%

Functional

Solutions12%

Performance

Products19%

Chemicals9%

Plastics10%

€1.5

billion

Other2%


0,0 0,00

5

10

15

20

4.53.5

Innovation pipeline worth €21 billion

* New or improved products or new applications, max. 5 years on market, including Growth Clusters

The pipeline NPV of €21 billion is a bottom-up aggregation of all R&D projects

High success rate due to stringent R&D controlling via Phasegate process

Expected Commercial Value:~50% of NPV (probability-weighted)

In 2010, sales of new products (5 years or younger) exceeded the target of €6 billion

Target 2015: up to €8 billion sales with new products

R&D contributes significantly to earnings growth

14% Performance Products7% Plastics3% Chemicals

8% Functional Solutions

46% Agricultural Solutions

2% Oil & Gas20% Corporate Research

2009 2010

€19 bn€21 bn

Net present value by segments (billion €)


1 | Business review



4 | Outlook


We expect to generate significantly higher salesWe aim to significantly exceed the 2010 EBIT before special itemsadjusted for non-compensable oil taxes (2010: €7.2 billion)We will earn a high premium on our cost of capital

Outlook 2011

Outlook 2011 confirmed

We aim to grow sales on average by two percentage points per year faster than chemical production growthWe strive to grow our earnings further year by year, and to achieve an EBITDA margin of 18% by 2012

Medium-term targets

We aim to continuously increase the annual dividend, or at least maintain it at the level of the previous year.

Dividend policy

as of October 27, 2011; 3rd Quarter 2011 Reporting


This presentation includes forward-looking statements that are subject to risks and uncertainties, including those pertaining to the anticipated benefits to be realized from the proposals described herein. This presentation contains a number of forward-looking statements including, in particular, statements about 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 with respect to future events and financial performance. Actual financial performance of the entities described herein could differ materially from that projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and financial performance may be better or worse than anticipated. Given these uncertainties, readers should not put undue reliance on any forward-looking statements.

Forward-looking statements represent estimates and assumptions only as of the date that they were made. The information contained in this presentation is subject to change without notice and BASF does not undertake any duty to update the forward-looking statements, and the estimates and assumptions associated with them, except to the extent required by applicable laws and regulations.

Forward-looking statements


BackupMacro-economic assumptions 2011

BASF Capital Market Story November 2011

Macro-economic assumptions 2011

Previous forecast

GDP 3%-4%

Chemical production (excl. Pharma)

5%-6%

Industrial production 5%-6%

US$ / Euro 1.40

Oil price (US$ / bbl) 110

New forecast

2.5%-3%

4.5%-5%

4.5%-5%

1.40

110

as of October 27, 2011; 3rd

Quarter 2011 Reporting


BackupBusiness development Q3 2011


Chemicals Significant sales growth driven by strong price increases

Intermediates671+4%

Inorganics356

+11%

Petrochemicals2,141+12%

€3,168+10%

617537

765674

621

0

200

400

600

800

Q3 Q4 Q1 Q2 Q3

Sales developmentPeriod Volumes Prices Portfolio Currencies

Q3’11 vs. Q3’10 (3)% 18% 0% (5)%

Q3’11 segment sales

(million €) vs. Q3’10 EBIT before special items (million €)

2010 2011


Plastics Sales up mainly due to a strong Performance Polymers business

Polyurethanes1,480+2%

Performance

Polymers

1,321+16%

€2,801

+8%

371

285

393 383

317

0

200

400

Q3 Q4 Q1 Q2 Q3

Sales development Period Volumes Prices Portfolio Currencies

Q3’11 vs. Q3’10 2% 10% 0% (4)%



2010 2011



Q3’11 vs. Q3’10 (2%) 7% 23% (4)%

Performance Products Strong contributions from acquired Cognis

businesses

370294

554513

440

0

100

200

300

400

500

600

Q3 Q4 Q1 Q2 Q3

PerformanceChemicals

904+9%

Care Chemicals1,265+85%

€3,991+24%

Paper Chemicals423-6%



Nutrition & Health471+32% Dispersions

& Pigments

928

+5% 2010 2011



Q3’11 vs. Q3’10 4% 11% 3% (6)%

Functional Solutions Strong performance of Catalysts

Catalysts1,608+19%

ConstructionChemicals

5990%

Coatings700

+9%

€2,907+12%

158

33

142167 162

0

50

100

150

Q3 Q4 Q1 Q2 Q3



2010 2011


Agricultural Solutions On track for record year in sales and earnings

66

95

0

50

100

150

Q3 Q3



20112010

0

200

400

600

800

1.000

Q3 Q320112010

+9%

+44%


Q3’11 vs. Q3’10 12% 3% 0% (6)%

832908


272 225

0

200

400

600

Q3 Q3

Exploration &

Production534-39%

Natural Gas

Trading

1,661+23%

€2,195

-1%

Sales developmentPeriod Volumes Prices/Currencies Portfolio

Q3’11 vs. Q3’10 (25)% 24% 0%

EBIT bSI

Natural Gas TradingEBIT bSI

Exploration & Production Net income


(million €) vs. Q3’10 EBIT before special items/ Net income (million €)

20112010

503227

573

350Non-compensable

oil taxes 224

70 123

Oil & Gas EBIT before SI on last year’s level (adjusted for non-compensable oil taxes)


Review of “Other”

Million € Q3 2011 Q3 2010Sales 1,637 1,452thereof Styrenics* 739 683

EBIT before special items (21) 58thereof Corporate research

Group corporate costs Currency results, hedges and other valuation effects Styrenics, fertilizers, other businesses

(86) (58) 104

82

(67) (54) 104

77

Special items (33) (68)

EBIT (54) (10)

*

Since January 1, 2011, Styrenics

only includes the carved-out Styrenics

businesses; the previous year’s values were adjusted accordingly.


Million € Jan -

Sep 2011

Jan -

Sep 2010

Cash provided by operating activities 5,028 5,307thereof Changes in net working capital (1,337) (783)

Cash used in investing

activities (957) (1,175)thereof Payments related to tangible / intangible assets (2,101) (1,518)

Cash used in financing activities (4,105) (3,814)thereof Changes in financial liabilities

Dividends (1,727) (2,378)

(2,003) (1,811)

Operating cash flow strong at €2.0 billionFree cash flow again high at €1.2 billion Net debt further reduced by ~€650 million to €11.6 billion since end of Q2 2011

Third quarter 2011

Operating cash flow remains strong


Financial highlights

Million € Q3 2011 Q3 2010 Δ% Q2 2011 Δ%Sales

changes due to - volumes - prices - portfolio - currencies

17,607 15,781 +12%

(3)% +14% +5% (4)%

18,461 (5)%

EBITDA 2,709 2,934 (8)% 3,015 (10)%

EBIT before special items 1,964 2,213 (11)% 2,237 (12)%

EBIT before special items

adjusted for non-compensable oil taxes 1,964 1,989 (1)% 2,237 (12)%

Special items (82) (58) - (20) -

EBIT 1,882 2,155 (13)% 2,217 (15)%

Net income 1,192 1,245 (4)% 1,454 (18)%

EPS (€) 1.30 1.35 (4)% 1.59 (18)%

Adjusted EPS (€) 1.52 1.52 0% 1.75 (13)%


BackupBusiness overview 2010


Excellent segment performance 2010

Segment€

million

Sales Δvs. 2009

EBITDA EBITDA

margin

EBIT before SI

Δvs. 2009

Chemicals 11,377 +51% 3,000 26.4% 2,302 +126%

Plastics 9,830 +38% 1,721 17.5% 1,284 +123%

Performance Products 12,288 +31% 2,162 17.6% 1,554 +123%

Functional Solutions 9,703 +36% 861 8.9% 467 +123%

Agricultural Solutions 4,033 +11% 938 23.3% 749 (4%)

Oil & Gas 10,791 (5%) 2,977 27.6%* 2,430 +6%

* Excluding non-compensable oil taxes: 18.5%


BackupCapital expenditures


FunctionalSolutions

6%

Other (Infrastructure, R&D)

12%

By region

Oil & Gas* 35%

Chemicals15%

Alternative sitesunder review

2%South America, Africa, Middle East4%

North America14%

Europe**63%

By segment

AgriculturalSolutions4%

Plastics14%

Asia Pacific17%

€12.6

billion

€12.6

billionPerformance

Products14%

Planned capital expenditures 2011-2015

** Thereof ~€4.4 billion for Oil & Gas* Excluding investments in Nord Stream

BASF: Fit for 2012 · BASF Capital Market Story November 2011 1. BASF: Fit for 2012. Dr. Hans...

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Transcript of BASF: Fit for 2012 · BASF Capital Market Story November 2011 1. BASF: Fit for 2012. Dr. Hans...