Speech & charts of BASF Q1 2012
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Charts and Speech accompanying the 1Q2012 Conference Call for investors and analysts on April 27, 2012
Transcript of Speech & charts of BASF Q1 2012
- BASF 1st Quarter 2012 Analyst Conference CallApril 27, 2012, 8:30 a.m. (CEST), MannheimAnalyst Conference Call ScriptHans-Ulrich EngelThe spoken word applies.
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- Page 3BASF 1st Quarter 2012 Analyst Conference April 27, 2012Hans-Ulrich EngelLadies and Gentlemen, good morning and thank you for joining us.[Chart 3: BASF with solid start to 2012] After a rather slow fourth quarter 2011, we have seen a significant improvement in business activity since the beginning of the year. However, in line with our assumptions demand in our chemical activities could not match the level of the exceptionally strong first quarter 2011, which benefitted from high consumption and re- stocking effects. The market environment for our Agricultural Solutions as well as the Oil & Gas businesses, on the other hand, was quite favorable, leading to a good start into 2012. In the first quarter, we increased sales by 6 percent to 20.6 billion euros. Overall volumes were flat. Volumes in our chemical activities declined by 5 percent due to lower demand as well as the modification of an earnings-neutral swap for cracker products. We were able to successfully raise prices by 5 percent. Higher raw material costs could not be fully passed on to the market. EBITDA amounted to 3.9 billion euros, up 16 percent versus the first quarter of last year. EBITDA as well as EBIT were positively impacted by the disposal gain of our fertilizer activities in Belgium and France in the amount of 645 million euros. EBIT before special items came in at 2.5 billion euros, 7 percent below the record first quarter of last year.
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- Page 5BASF 1st Quarter 2012 Analyst Conference April 27, 2012 Net income was 1.7 billion euros, 28 percent lower than a year ago. Last years results included a capital gain of close to 900 million euros from the sale of our stake in K+S. Adjusted earnings per share were 1.57 euros in Q1 2012 after 1.94 euros in Q1 2011.
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- Page 7BASF 1st Quarter 2012 Analyst Conference April 27, 2012[Chart 4: Important milestones in Q1 2012]In the first quarter, we achieved important milestones: We significantly strengthened our activities in battery materials through several smaller acquisitions. In January, we announced the acquisition of a stake in Sion Power, the global leader in the development of lithium-sulfur batteries. In February, we bought Ovonic, the global leader in nickel-metalhydride battery technology. We also signed the purchase agreement for Mercks electrolyte activities. The transaction was closed last week. And just yesterday we announced the acquisition of Novolyte Technologies, a manufacturer of electrolyte formulations for lithium batteries. With production sites in Europe, the United States and Asia Pacific region we are now positioned as a global supplier in the electrolyte formulation business. Last but not least, our battery material plant in Ohio is on track to start operation in Q4 of this year. All these measures support our goal to become the leading supplier of battery materials. Last month, we signed a heads of agreement with PETRONAS for the expansion of our existing joint venture in Kuantan and the construction of a number of new downstream plants at PETRONAS new integrated RAPID complex in South Johor, next to Singapore. The projects are to be implemented between 2015 and 2018. In total, we plan joint investments of one billion euros. Finally, at the end of Q1 we completed the sale of our fertilizer activities. We realized a disposal gain of 645 million euros, which was booked as special item in Other.
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- Page 9BASF 1st Quarter 2012 Analyst Conference April 27, 2012Now I will explain the financial performance of our businesssegments in more detail. The basis of comparison is the first quarter2011.[Chart 5: Chemicals Margins improved over Q4 2011 thanksto higher prices]In the Chemicals segment we generated higher sales. TheStyrolution joint venture contributed positively to the top-linebecause feedstock sales to the JV are now reported as third partysales, which are shown as structural effect. Volumes droppedmainly due to an earnings-neutral swap agreement for propylene,which became effective in Q3 of 2011. On a comparable basis,volumes increased slightly. Due to ongoing high raw materialprices, EBIT before special items did not reach the high level of Q12011. In Petrochemicals, sales increased significantly. Prices for cracker products moved above prior year. Prices for all other product lines were below the very high prior year level. Margins declined because we could not fully pass on the high raw material costs to our customers. Overall, EBIT before special items was considerably lower. In Intermediates, sales decreased slightly. Demand was high from key customer industries such as plastics and coatings, but did not match the very good level of the previous year. Thus volumes and margins declined. Consequently, EBIT before special items came in lower.
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- Page 11BASF 1st Quarter 2012 Analyst Conference April 27, 2012 Sales in Inorganics were stable. EBIT before special items did not match the very good level of Q1 2011, mainly due to lower margins in basic products.
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- Page 13BASF 1st Quarter 2012 Analyst Conference April 27, 2012[Chart 6: Plastics TDI and MDI margins improved on higherprices vs. Q4 2011]In our Plastics segment sales decreased. Price increases could notcompensate for considerably lower volumes. The record margins forpolyamide precursors and polyurethanes, generated in Q1 2011,could not be sustained. Earnings were substantially below theexcellent level of the previous year. In Performance Polymers, sales were slightly lower. Slow textile fiber demand in Asia led to lower volumes and margins for caprolactam. On the other hand, continuously strong demand from the automotive industry, particularly in North America, lifted sales in engineering plastics. Foams sales exceeded the prior year quarter based on healthy demand from the construction and packaging industries. However, EBIT before special items dropped substantially mainly due to a margin decrease. Sales in Polyurethanes were down moderately. Sales to the appliance and construction industries weakened but demand from the automotive sector remained robust. The scheduled turnaround of our Geismar site also negatively impacted volumes. We continued to pursue our value-before-volume strategy and successfully implemented price increases for TDI and MDI. As a result, we saw margins in both TDI and MDI recover during the quarter. EBIT before special items was significantly below prior year given lower volumes and margins.
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- Page 15BASF 1st Quarter 2012 Analyst Conference April 27, 2012[Chart 7: Performance Products Solid demand but belowexceptionally high level of Q1 2011]Sales in Performance Products were stable. Demand for severalproduct lines was lower than a year ago. In the prior year quarter,we benefitted from tight markets in several products. However, priceincreases and positive currency effects compensated for lowervolumes. As we could not fully pass on higher raw material costs,margins were softer and EBIT before special items declined. In Dispersions & Pigments, sales rose significantly driven by higher volumes and prices. Pigment sales were strong in North America, but softer in Asia and Europe. Due to higher costs of idle capacities and an unfavorable product mix effect, EBIT before special items fell short of the prior year. In Care Chemicals, sales decreased. The challenging competitive environment led to lower volumes overall. Specialties, however, continued to perform strongly. Since price increases could not fully offset higher raw material costs, EBIT before special items fell significantly. Sales in Nutrition & Health increased slightly due to continued good demand in nearly all businesses. Pharma showed lower volumes. Margins in vitamins were affected by higher raw material costs, which could not be passed on fully. EBIT before special items was down on softer margins. In Paper Chemicals, we made substantial progress in our restructuring efforts. We were able to increase sales although the market remained challenging. EBIT before special items improved benefitting from higher selling prices and fixed cost reductions.
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