We add value as one company - BASF – United States€¦ · BASF Capital Market Story March 2016 1...

BASF Capital Market Story March 2016 1

We add value as one company

Hans-Ulrich Engel Chief Financial Officer of BASF SE Roadshow London March 2, 2016


150 years

Cautionary note regarding forward-looking statements

This presentation may contain 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. Forward-looking statements may include, 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 and assumptions with respect to future events and financial performance. Actual financial performance 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. 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.


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,

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

~€54 billion market capitalization Feb. 2016

Perspective Ludwigshafen, Germany

Antwerp, Belgium

Nanjing, China

Kuantan, Malaysia Geismar,

USA Freeport, USA

Verbund site

Positioning

We create chemistry for a sustainable future

Performance

20

30

40

50

60

70

80

90

2008 2009 2010 2011 2012 2014 2013 2015


150 years

Percentage of sales 2015*

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

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


150 years

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

Example Ludwigshafen site: avoidance of 7 million metric tons of freight/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


Q4 2015 reporting

Business development

Path forward: Our priorities


150 years

Sales development Period Volumes Prices Portfolio Currencies

Q4’15 vs. Q4’14 4% (11%) (19%) 3%

FY’15 vs. FY’14 3% (9%) (5%) 6%

BASF with lower sales and earnings in difficult economic environment

Business performance* Q4’15 vs. Q4’14 FY’15 vs. FY’14 Sales €13.9 billion (23%) €70.4 billion (5%) EBITDA €1.9 billion (34%) €10.6 billion (4%) EBIT before special items €1.0 billion (30%) €6.7 billion (8%) EBIT €0.3 billion (81%) €6.2 billion (18%) Net income €0.3 billion (76%) €4.0 billion (23%) Reported EPS €0.37 (76%) €4.34 (23%) Adjusted EPS €1.01 (3%) €5.00 (8%) Operating cash flow €1.0 billion (53%) €9.4 billion +36%


150 years

0

1

2

3

4

5

2006 2007 2008 2009** 2010 2011 2012 2013 2014 2015

Strong free cash development 2015

* Cash provided by operating activities less capex (in 2006 before CTA) ** 2009 adjusted for re-classification of settlement payments for currency derivatives

Free cash flow* (in billion €)

3.5 3.2

2.5

3.2

3.9 3.7

2.6

3.2

1.7

3.6


150 years

Outlook 2016 Expectations for the global economy

2015 (actual)

GDP 2.4%

Chemicals (excl. pharma) 3.6%

Industrial production 2.0%

US$ / Euro 1.11

Oil price: Brent (US$ / bbl) 52

Forecast 2016

2.3%

3.4%

2.0%

1.10

40


150 years

Priorities 2016

Focus on capex discipline:

─ Reduce capital expenditures to €4.2 billion in 2016

Cost control and operational excellence:

─ DrivE targeting ~€1 billion earnings contribution by 2018

Portfolio optimization ongoing:

─ E.g. agreement to sell industrial coatings business to AkzoNobel

Strong commitment to innovation:

─ Maintain R&D spending at ~€1.95 billion in 2016


150 years

Outlook BASF Group 2016

Sales will be considerably below prior year, due to the divestiture of the Natural Gas Trading and Storage activities and the lower oil & gas prices.

Excluding the effects of acquisitions and divestitures, we expect higher volumes in all segments.

We expect EBIT before special items to be slightly below the previous year driven by drastically lower earnings of Oil & Gas. We plan higher earnings in our chemicals business and in the Agricultural Solutions segment.

EBIT after cost of capital is expected to be significantly below prior year. However, we still expect to earn a premium on our cost of capital.

In the volatile and challenging macroeconomic environment, we regard our targets for 2016 as ambitious. Achieving them will depend on the development of the oil price.


150 years

EBIT before special items

Million € 2015 Forecast 2016

Chemicals 2,156 considerable decrease Performance Products 1,366 slight increase Functional Materials & Solutions 1,649 slight increase Agricultural Solutions 1,090 slight increase Oil & Gas 1,366 considerable decrease Other (888) considerable increase

BASF Group 6,739 slight decrease

Outlook 2016 Forecast by segment

With respect to EBIT before special items, “slight” means a change of 1-10%, while “considerable” is used for changes greater than 11%. “At prior-year level” indicates no change (+/-0%).


Q4 2015 reporting




150 years

Components of growth

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

59,6

70,4 +[WERT] -[WERT] +[WERT] -[WERT]

20

40

60

80

2010 2015

Volumes

Prices FX 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

BASF core business

Strong partnerships

Gazprom Monsanto Petronas Shell Sinopec Statoil Total Yara

Selected transactions 2010 − until today

Acquisitions

~ €4.5 billion sales in emerging and innovation-driven

businesses

Divestitures

Styrenics Fertilizers Construction equipment,

flooring and wall systems Decorative paints in Europe Selected assets in Oil &

Gas Natural gas trading and

storage Custom synthesis business

~ €20 billion sales* in businesses with

limited fit and differentiation

potential

Portfolio development towards more market-driven and innovative businesses

* Includes sales of non-consolidated businesses (Styrenics, VNG participation)


150 years

Steady earnings growth

* 2010, 2011 indicative, adjusted by 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

8,4 8,9

7,7

6,5

9,9

11,2

10,0 10,4

11,0 10,6

0

2

4

6

8

10

12

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

0,7

2,2 2,2

4,5 4,8 5,5

6,0

4,6

2,8

6,7

8,0 6,7 7,2

7,6

6,2

CAGR EBITDA

7.9 % CAGR EBIT

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 (Index; CAGR 2001–2015)

Fixed Costs

CAGR EBITDA

9%

CAGR Sales

6%

CAGR Fixed Costs

3%


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

Dividend proposal 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*

Proposal:

3.7%

2.50

3.5%

3.00

4.0% 4.1%

1.50

1.95 1.95 1.70

2.20 2.50 2.60 2.70

Dividend policy

2.80


150 years

Average annual performance with dividends reinvested

0 3 6 9 12

Euro Stoxx 50

DAX 30

MSCI World Chemicals

+5.6%

Last 5 years February 2011 – January 2016

+5.1%

+3.7%

+6.7%

+5.4%

Last 10 years February 2006 – January 2016

BASF

+6.1%

+1.2%

+10.6%

Delivering consistent, long-term value


Q4 2015 reporting




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 way forward: Our priorities


150 years

Managing volatility: BASF almost perfectly hedged on hydrocarbon price changes BASF 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

Natural gas

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 Index 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%

Keep 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

Strategic lever: Capital expenditures – our philosophy

Differentiated commodities With proprietary technology and/or Verbund advantages

Focus on: – emerging markets – backward integration in the US – 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 Products 16%

Oil & Gas 24%

€19.5 billion

Functional Materials & Solutions 12%

Capex budget 2016-2020

Other 14%

Chemicals 30%

Capex budget 2016-2020

Asia Pacific 18%

€19.5 billion

South America* 9%

North America 26%

Europe 46%

Agricultural Solutions 4%

Other 1%

by segment by region

* Including Africa and Middle East


150 years

Strategic lever: Innovations – our philosophy

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*

* W/o Oil & Gas


150 years

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

~10,000 employees in R&D

~3,000 projects

Ranked No.1 in the Patent Asset Index™

~1,000 new patents in 2015

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

Strong commitment to innovation Innovations for a sustainable future

Key facts

1.6 1.7

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 €)

Chemicals 11%

Performance Products 20%

Functional Mat. & Sol. 20%

Agricultural Solutions 26%

Oil & Gas 2%

Corporate Research 21%

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 emissions Precious metal-based catalytic coating removes exhaust gases from engine emissions**

Removes particulates Filters & combusts particulates

Complies with emissions limits Helps 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

Envi

ronm

enta

l Im

pact

H

iigh

Reference Concrete

High Low

Low

Total Cost of Ownership

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


150 years

Innovation: Trilon® M Chelating agent for more sustainable detergents and cleaners

Trilon® M: Phospate free dish washing solution

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 for environmentally-friendly products

2010: Capacity expansion to 120,000 tons

2015: BASF started-up a new Trilon® M world scale plant in Alabama, USA

Compared with alternative chelating agents Trilon® M

Is readily biodegradable

Meets eco-label requirements

Has better eco-toxicology profile

Shows high performance


150 years

Innovation: SAVIVA™ Highly efficient Superabsorbent Polymers (SAP)

SAVIVA™ – Based on a pioneering SAP technology platform

SAVIVA™ the next generation of SAP Round-shaped particles with micro-pores initiates

innovative liquid distribution mechanism Compared to other SAPs SAVIVA™ leads to:

Efficiency gains: – SAP reduction – Fluff reduction – Reduction of storage, packaging and transportation

costs

Improved sustainability: – Better carbon footprint due to SAP and weight

reduction – Enabler for future diaper designs offering a new

level of comfort and dryness

SAVIVA™ round shaped particle


150 years

Lower production cost than industry average

Efficiency gains:

– run-time extension – higher throughput – lower energy consumption

Proprietary technology, new process protected by 280 active patent families

3 out of 6 production sites already equipped: Ludwigs-hafen, Antwerp and Nanjing; Camaҫari (Brazil) is currently starting-up

Innovation: New acrylic acid technology BASF with best-in-class acrylic acid process

80

85

90

95

100

BASFnew process

BASFclassic process

Industry average

Acrylic acid production technology benchmark (Industry average costs = 100; normalized)

Key facts

Source: BASF estimate


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

* 60,000 product applications analyzed; covering 98.3% of the relevant portfolio or €66.3bn. in sales (2014 data)

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

Sustainable Solution Steering


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 by end of 2018

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

Project timeline: 2016–2018

DrivE program

Strategic lever: Operational excellence DrivE with ~€1 bn earnings contribution

NEXT 2008-2011 DrivE 2016-2018

STEP 2012-2015


150 years

Profitability of BASF will grow faster than global chemical production

Sales growth* Slightly faster than the global chemical production

EBITDA growth Well above global chemical production

Remain a strong cash provider Continuously generate high levels of free cash flow

Financial targets for next years

Deliver attractive returns Earn a significant premium on cost of capital

* Without considering Natural Gas Trading and Storage business

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


Appendix I – Q4 2015 reporting


150 years

Chemicals Significant earnings decline due to lower cracker margins

Intermediates 671 (2%)

Monomers 1,396 (12%)

Petrochemicals 1,122 (38%)

€3,189 (22%)

580

249

0

200

400

600

Q4'14 Q4'15

Q4’15 segment sales (million €) vs. Q4’14 EBIT before special items (million €)


Q4’15 vs. Q4’14 (5%) (19%) (2%) 4%

FY’15 vs. FY’14 (2%) (17%) (2%) 7%

0

1.000

2.000

3.000

FY'14 FY'15

(57%) (9%)

2,367 2,156


150 years

Performance Products Slightly higher earnings on improved margins

Performance Chemicals 987 (4%)

Care Chemicals

1,168 0%

€3,627 (2%)

Q4’15 segment sales (million €) vs. Q4’14

Nutrition & Health 429 (13%)

Dispersions & Pigments

1,043 +1%

217 228

0

100

200

300

Q4'14 Q4'15


Q4’15 vs. Q4’14 0% (4%) (2%) 4%

FY’15 vs. FY’14 (1%) (4%) (1%) 7%

EBIT before special items (million €)

1,3661,455

0

500

1,000

1,500

FY'14 FY'15

+5% (6%)


150 years

Functional Materials & Solutions Strong operating performance drives earnings up

Catalysts 1,545 (2%)

Construction Chemicals

562 +10%

Coatings 809 +5%

€4,506+1%


220

389

0

100

200

300

400

Q4'14 Q4'15

1,197

1,649

0

400

800

1,200

1,600

FY'14 FY'15


Q4’15 vs. Q4’14 3% (7%) 0% 5%

FY’15 vs. FY’14 0% (4%) 0% 9%


Performance Materials 1,590 0%

+77% +38%


150 years

1,1671,109

0

200

400

600

800

1,000

1,200

Q4 Q4

Agricultural Solutions Strong finish despite tough market environment


2015 2014

123

144

0

40

80

120

160

Q4'14 Q4'15


Q4’15 vs. Q4’14 3% 6% 0% (4%)

FY’15 vs. FY’14 1% 5% 0% 1%


1,0901,109

0

400

800

1,200

FY'14 FY'15

+17% (2%)


150 years

59

288

[WERT]

[WERT]* -200

0

200

400

600

383 [WERT]

940

1,464

1,050

Oil & Gas Earnings drop due to significantly lower oil and gas prices

Q4’15 segment sales (million €) vs. Q4’14 EBIT before special items / Net income (million €)

FY '14 FY '15

Sales development Period Volumes Price/Currencies Portfolio

Q4’15 vs. Q4’14 3% (4%) (81%)

FY’15 vs. FY’14 15% (9%) (20%)

Natural Gas Trading Exploration & Production Net income

0

1,000

2,000 1,795

1,366

Q4 '14 Q4 '15

1,412

3,277

728

0

1,000

2,000

3,000

4,000

Q4 Q42015 2014

347

127*

4,005

731*

* Including transportation business


150 years

Review of ’Other’

Million € Q4 2015 Q4 2014 2015 2014

Sales 660 700 2,790 3,609 EBIT before special items (114) (28) (888) (566) Thereof corporate research costs group corporate costs currency results, hedges and other valuation effects other businesses

(95) (61) (11)

75

(98) (59) 110

23

(402) (233) (220)

170

(389) (218)

(2)

133

Special items (21) 473 (97) 433

EBIT (135) 445 (985) (133)


150 years

Million € 2015 2014 Cash provided by operating activities 9,446 6,958 Thereof changes in net working capital miscellaneous items

1,347 (336)

(623) (1,029)

Cash provided by investing activities (5,235) (4,496) Thereof payments related to tangible / intangible assets (5,812) (5,296) acquisitions / divestitures 436 373 Cash used in financing activities (3,673) (2,478) Thereof changes in financial liabilities dividends

(933) (2,806)

288 (2,766)

Record operating cash flow of €9.4 billion Free cash flow more than doubled to €3.6 billion High dividend payout in 2015 of €2.8 billion

2015

Cash flow development in 2015


150 years

Balance sheet remains strong Balance sheet 2015 vs. 2014 (billion €)

Liquid funds

Accounts receivable

Long-term assets 31.5

15.2

24.1

44.0

10.4

1.7

Other liabilities

Financial debt

Stockholders’ Equity

Dec. 31, 2014

Dec. 31, 2014

Dec. 31, 2015

Dec. 31, 2015

71.4

28.2

15.4

27.8 Inventories

Other assets 4.0

71.4

Highlights 2015

Total assets almost stable Long-term assets up by €2.3

billion as a result of our investment projects

Short-term assets down by €2.9 billion due to strict working capital management and the asset swap

Equity grew by €3.4 billion Provisions for pensions down

by €1.0 billion Net debt decreased to €13.0

billion Net debt/EBITDA ratio: 1.2 Equity ratio: 45%

46.3

9.5

2.2

9.7

3.1

70.8 70.8

11.3


150 years

We add value as one company - BASF – United States€¦ · BASF Capital Market Story March 2016 1...

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