We create chemistry for a sustainable future€¦ · 4 January 2018 | BASF Capital Market Story...

We create chemistry

for a sustainable futureHans-Ulrich Engel, Chief Financial Officer

German Investment Seminar, New York City

January 9, 2018

January 20182 | BASF Capital Market Story

Cautionary note regarding

forward-looking statements

This presentation contains forward-looking statements. These forward-looking statements

are based on current estimates and projections of the Board of Executive Directors and on

currently available information. These forward-looking statements are not guarantees of the

future developments and results outlined therein. Rather, they depend on a number of

factors, involve various risks and uncertainties, and are based on assumptions that may not

prove to be accurate. Such risk factors particularly include those discussed on pages 111 to

118 of the BASF Report 2016. The BASF Report is available online at basf.com/report.

BASF does not assume any obligation to update the forward-looking statements contained

in this presentation.


Agenda

At a glance1

Strategic levers2

Segments3


BASF shares – an attractive investment

▪ Growth above chemical industry average – driven by innovative and sustainable

products and solutions

▪ Unique Verbund concept – competitive advantage based on integrated sites,

operational excellence and best-in-class technologies

▪ Broad and resilient portfolio – with global market access and strong customer

relationships

▪ Earnings growth and strong cash flow generation – based on operational and

financial strength

▪ Long-term value creation with progressive dividend policy – grow or at least

maintain dividend at the previous year’s level


Chemicals – a growth industryGlobal annual growth rate of ~3.6%*

…more food needed

by 2050

…more primary energy

consumption by 2050

…of the world population

will live in cities by 2050

Agriculture Health & Nutrition

Energy & Resources

TransportationConstruction & Housing

Consumer Goods

…people by 2050

Electrical & Electronics

Chemistry as enabler to meet current and future needs

70% 50%~10 bn 30%

* Forecast average annual real change 2017–2019; BASF Report 2016, p. 121


Broad and resilient portfolio2016: Sales of €57.6 billion; EBITDA of €10.5 billion

* Not depicted here: ‘Other’ 3% of Group sales and EBITDA €(1.0) billion

Percentage of sales 2016*


Global market access through regional presence

Kuantan

Hong Kong

Nanjing

Freeport

Florham Park

Geismar

Ludwigshafen

Antwerp

São Paulo

Regional centers

Selected sites

Verbund sites

Selected research

and development sites

Asia Pacific

South America, Africa, Middle East

North America

Sales €14,042 million

EBIT €1,113 million

Employees 17,583



Employees 18,156


EBIT €432 million

Employees 7,307

2016: Sales by location of customer; EBIT by location of company

Europe



Employees 70,784


Verbund – unique competitive advantageActively managed in line with market requirements

▪ Annual cost savings of more than €1 billion through integrated production

▪ Verbund concept supports sustainability, reduces waste and avoids CO2 emissions of 6 million tons p.a.

Energy savings

>€300 million p.a.

Logistics savings


Infrastructure savings


People, Customers, Technology, Production


3.7

4.7 4.6

7.0 7.2

8.48.9

7.7

6.5

9.9

11.2

10.0 10.411.0 10.6 10.5

9.7

0

2

4

6

8

10

12

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q1-Q32017

0.7

2.2 2.2

4.5 4.85.5

6.0

4.6

2.8

6.7

8.0

6.7 7.27.6

6.2 6.36.6

Stepwise increase of earnings level

EBIT EBITDA Avg. EBITDA level in depicted years

EBIT and EBITDA*

billion €, 2001–2016CAGR

EBITDA

7%CAGREBIT

16%

9.7

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


2.3 2.3

4.9 4.65.3

5.9 5.8

5.0

5.7

6.5

7.16.6

8.1

7.0

9.4

7.7 7.6

0

2

4

6

8

10

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q1-Q32017

Free cash flowOperating cash flow

-0.5 -0.1

2.8 2.6

3.3 3.53.2

2.53.2

3.9 3.7

2.63.2

1.7

3.6 3.6

5.0

Strong cash flow development

Operating cash flow and free cash flow

billion €, 2001–2016


Attractive dividendWe want to grow or at least maintain dividend at the previous year’s level

* Dividend yield based on share price at year-end

0.65 0.70 0.700.85

1.00

1.50

1.95 1.95

1.70

2.20

2.502.60

2.702.80

2.90

0

1

2

3

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Yield* 3.1% 3.9% 3.1% 3.2% 3.1% 4.1% 3.8% 7.0% 3.9% 3.7% 4.6% 3.7% 3.5% 4.0% 4.1% 3.4%

3.00

Dividend per share

€


Average annual performance

with dividends reinvested

0 2 4 6 8 10 12 14

+4.8%

+6.8%

+0.8%

+10.3%

Last 10 years

January 2008 – December 2017

0 2 4 6 8 10 12 14

Last 3 years

January 2015 – December 2017

+13.4%

+6.4%

+9.6%

+11.0%

Delivering consistent, long-term valueCurrent market capitalization: €84 billion*

* As of December 31, 2017

Euro Stoxx 50

DAX 30

MSCI World

Chemicals

BASF


Outlook 2017 for BASF Group

* Excluding pharma

Outlook 2017 Now Previous

Sales Considerable increase Considerable increase

EBIT before special items and EBIT Considerable increase Considerable increase

EBIT after cost of capital Considerable increase Slight increase

Assumptions 2017 Now Previous

GDP growth +2.8% +2.5%

Growth in industrial production +3.1% +2.5%

Growth in chemical production* +3.4% +3.4%

Exchange rate US$1.10 per euro US$1.10 per euro

Oil price (Brent) US$50 per barrel US$50 per barrel


▪ Sales growth – slightly faster than global chemical production

▪ Deliver attractive returns – earn a significant premium on cost of capital

▪ EBITDA growth – well above global chemical production

▪ Remain a strong cash provider – continuously generate high levels of free cash flow

▪ Progressive dividend policy – grow or at least maintain dividend at previous year’s level

Financial targets for the coming years


▪ Innovations for a sustainable future

▪ Investments in organic growth

▪ M&A opportunities and portfolio pruning measures

▪ Operational excellence and cost discipline

We aim to grow sales and earnings faster than global chemical production

in the coming years, driven by

Our priorities


Agenda

At a glance1

Strategic levers2

Segments3

► Portfolio development

► Investments

► Innovation

► Sustainability

► Operational excellence


Portfolio development towards more market-driven and

innovative businesses

Strong Partnerships

▪ Gazprom

▪ PETRONAS

▪ Sinopec

▪ Total

Selected transactions

2010−today

BASF

core business

~€5.5 billion sales

in emerging and

innovation-driven businesses

Acquisitions

▪ Functional crop care

▪ Personal care & food

▪ Omega-3 fatty acids

▪ Enzymes

▪ Battery materials

▪ Specialty plastics

▪ Selected assets in Oil & Gas

▪ Refinish coatings

▪ Surface treatment

Divestitures

~€21.0 billion sales

in businesses with limited fit

and differentiation potential

▪ Styrenics

▪ Fertilizers

▪ Selected assets in Oil & Gas

▪ Natural gas trading & storage

▪ Custom synthesis business

▪ Textile chemicals

▪ Polyolefin catalysts

▪ Industrial coatings

▪ Leather chemicals


Clear acquisition criteria

We want to acquire businesses which …

▪ provide a return on investment above

the WACC

▪ are EPS accretive by year three

at the latest

We want to acquire businesses which …

▪ generate profitable growth above the industry

average

▪ are innovation-driven

▪ offer a special value proposition to customers

▪ reduce earnings cyclicality

Acquisition

criteria

Strategic acquisition criteria Financial acquisition criteria


Complementary acquisitions to strengthen the portfolio

of BASF Group

Solvayʼs integrated global

polyamide business

▪ Purchase price: ~€1.6 billion

▪ Sales 2016: ~€1.3 billion

▪ EBITDA 2016: ~€200 million

▪ Market CAGR: >3.5%

▪ Closing expected in Q3 2018

Significant parts of Bayerʼs seed and

non-selective herbicide businesses

▪ Purchase price: ~€5.9 billion

▪ Sales 2016: ~€1.3 billion

▪ EBITDA 2016: ~€385 million

▪ Sales CAGR: ~15% (2014–2016)

▪ Closing expected in Q1 2018

Chemetall

Surface treatment business

▪ Purchase price: ~US$3.1 billion

▪ Sales 2015: ~US$845 million

▪ EBITDA 2015: ~US$200 million

▪ Sales CAGR: ~7% (2007–2015)

▪ Closed in December 2016


BASF signed agreement to acquire significant parts of

Bayer’s seed and non-selective herbicide businesses

Fully enabled seed and trait businesses

▪ Attractive and sizeable seed portfolio for canola/oilseed

rape, soybean and cotton in the Americas and Europe

▪ Excellent trait research for canola, soybean and cotton

▪ LibertyLink® technology for herbicide tolerance and

related trademarks

Complementary crop protection business

▪ Global glufosinate-ammonium-based non-selective herbicide

business

▪ State-of-the-art production facilities in the U.S., Canada

and Germany

January 201821 | BASF Capital Market Story * Application examples

Broader global scope

▪ Enhanced presence, especially in Asia and South America

▪ Stronger capabilities to serve global and regional customers

Wider range of engineering plastics

▪ Technyl®, Ultramid®, Ultradur®, Ultraform®, Ultracom®

Broadening technical skills and innovation capabilities*

▪ Heat-resistant and high-voltage electrical and electronic parts

▪ Tailor-made solutions for components in automotive

▪ Mechanically strong and thermally stable consumer goods

Improved reliability of supply

▪ Backward integration into all key raw materials for polyamide 6.6

▪ Fully integrated engineering plastics value chain

BASF to acquire Solvay’s global polyamide business


▪ Combined business with pro-forma 2016 sales of €4.3 billion, EBITDA of €2.2 billion

and net income of €326 million

▪ Creation of one of the largest independent European exploration and production

companies with significant growth potential, optimization of the portfolio footprint of

the combined business and realization of synergies

▪ BASF to initially hold 67% and LetterOne 33% in Wintershall DEA; value of

Wintershall’s gas transportation business to be reflected through the issuance

of a mandatory convertible bond to BASF*

▪ In the coming months, BASF and LetterOne will conduct a confirmatory due diligence

and negotiate definitive transaction agreements; closing could be expected in the

second half of 2018, subject to customary regulatory approvals

▪ Initial Public Offering (IPO) envisaged in the medium term

* No later than 36 months after closing, this bond will be converted into new shares in Wintershall DEA,

resulting in a higher shareholding ratio for BASF

BASF and LetterOne sign letter of intent to merge their oil and gas

subsidiaries Wintershall and DEA


Investments in organic growthInvestments of ~€3.9 billion planned for 2017

Performance

Products

21%

Oil & Gas

23%€19.0 billion

Capex budget 2017–2021

by segment

Other

13%

Chemicals

24%

Capex budget 2017–2021

by region

Asia Pacific

16%

North America

22%

Agricultural

Solutions

4%

Other**

3%

Functional Materials

& Solutions

15%

€19.0 billion

South America*

10%

* Including Africa and Middle East ** Alternative sites currently being investigated

Europe

49%

Oil & Gas Europe


Oil & Gas

2%

Innovation will drive future growth

Agricultural

Solutions

26%

Chemicals

10%

Performance Products

20%

Corporate Research

21%

Key facts

€1.86 billion R&D expenditures in 2016

R&D expense to sales ratio ~3%

~10,000 employees in R&D

~3,000 projects

~850 new patents in 2016

Research Verbund:

Cooperations with more than 600 excellent

partners from universities, startups and industry

In 2016, sales of >€10 billion from innovations

on the market since 2011

R&D expenditures 2016

€1.86 billion

Functional Materials

& Solutions

21%


Selected key technology capabilities reflect where BASF requires continued effort and resources

to safeguard today’s and tomorrow’s excellence in innovation.

Polymer technologies

Biotechnology

Production processes

Materials

Catalysis

Biodegradable & bio-based

materials

Enabling methods

Corporate Research: BASF’s key technology capabilities

are bundled in seven focus areas

BASF’s key technology

capabilities


BASF products and solutions in everyday lifeInnovations for a sustainable future

Luquafleece®

Tinosorb®

Infinergy®

Nutrilan®

Sokalan®

Cellasto®

Coatings

Tinuvin®

Superabsorbents

Ultramid®

Trilon® M

ecoflex® /

ecovio®

Omega-3


Sustainable Solution Steering®

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

4.2% 0.3%

▪ >60,000 product applications analyzed

▪ 27.2% Accelerators

– Strong growth in their markets

– deliver margins above the average

– represent majority of BASF’s R&D

pipeline

▪ 68.3% Performers

▪ <1% Challenged products

27.2%

68.3%

Substantial sustainability

contribution in the value chain

Meets basic sustainability

standards on the market

Specific sustainability issues

which are being actively addressed

Significant sustainability concern

identified and action plan developed

Sustainable

Solution

Steering

Percentage of sales 2016


0

0,.001

Earnings contribution 2016 2017–2018 Total

DrivE program

▪ Targeted annual earnings contribution of

€1 billion from end of 2018 on

▪ Optimization of processes and structures in

all regions, including

– manufacturing

– incremental capacities

– productivity increase

▪ Project timeline: 2016–2018

€350 million

€650 million

Goal €1 billion

Annual earnings contribution DrivE

million €

1,000

Operational excellenceDrivE with ~€1 billion targeted earnings contribution


Digitalization will support BASF’s growth and efficiency

Digital Business Models

Smart Innovation

Smart Manu-facturing

Smart Supply Chain

Growth ▪ Digital business models

▪ Customer connectivity

▪ Digitalization in R&D

New revenue streams

Increased supply share

Higher innovation output

▪ Predictive maintenance

▪ Augmented reality in production

▪ Smart supply chain

Increased capacity

Increased work efficiency

Reduced working capital

Efficiency


Agenda

At a glance1

Strategic levers2

Segments3► Chemicals

► Performance Products

► Functional Materials & Solutions

► Agricultural Solutions

► Oil & Gas


BASF Group Q1–Q3 2017Considerably higher sales and earnings

Financial figures Q1–Q3 2017 Q1–Q3 2016 Change

€ € %

Sales 48.4 billion 42.7 billion 13

EBITDA before special items 9.6 billion 8.0 billion 20

EBITDA 9.7 billion 8.0 billion 21

EBIT before special items 6.5 billion 5.1 billion 26

EBIT 6.6 billion 5.0 billion 31

Net income 4.5 billion 3.4 billion 35

Reported EPS 4.94 3.67 35

Adjusted EPS 5.15 4.04 27

Operating cash flow 7.6 billion 5.8 billion 30

Sales development Volumes Prices Portfolio Currencies

Q3 2017 vs. Q3 2016 4% 8% 1% 0%


BASF Group Q3 2017Considerably higher sales and earnings

Financial figures Q3 2017 Q3 2016 Change

€ € %

Sales 15.3 billion 14.0 billion 9

EBITDA before special items 2.8 billion 2.5 billion 12

EBITDA 3.0 billion 2.4 billion 23

EBIT before special items 1.8 billion 1.5 billion 16

EBIT 2.0 billion 1.5 billion 34

Net income 1.3 billion 0.9 billion 50

Reported EPS 1.45 0.97 49

Adjusted EPS 1.40 1.10 27

Operating cash flow 3.8 billion 2.5 billion 52


Q3 2017 vs. Q3 2016 4% 7% 1% (3%)


ChemicalsHigher earnings driven by increased margins and higher volumes

Sales Q3 2017 vs. Q3 2016*

million €

* Effective January 1, 2017, the Monomers and Dispersions & Pigments divisions’ activities for the electronics industry were combined into the global Electronic Materials business unit

and allocated to the Dispersions & Pigments division in the Performance Products segment. The 2016 figures have been adjusted accordingly.

EBIT before special items*

million €

Intermediates

728

+10%

Monomers

1,770

+41%

Petrochemicals

1,525

+16%

€4,023

+25%

488

629

958

1,120 1,102

0

400

800

1,200

Q3 Q4 Q1 Q2 Q3

20172016


Q3 2017 vs. Q3 2016 6% 22% 0% (3%)


Performance ProductsEBIT before special items declined, EBIT increased due to special income

from transfer of leather chemicals business

Sales Q3 2017 vs. Q3 2016*

million €

EBIT before special items*

million €


Q3 2017 vs. Q3 2016 6% 0% (1%) (3%)

Performance Chemicals

980

+4%

Nutrition & Health

451

(11%)

Care Chemicals

1,213

+3%

Dispersions & Pigments

1,339

+3% 473

237

515

405 385

0

200

400

600

800

Q3 Q4 Q1 Q2 Q3

20172016

* Effective January 1, 2017, the Monomers and Dispersions & Pigments divisions’ activities for the electronics industry were combined into the global Electronic Materials business unit

and allocated to the Dispersions & Pigments division in the Performance Products segment. The 2016 figures have been adjusted accordingly.

€3,983

+2%


Functional Materials & Solutions Sales increased on good demand from automotive and construction, earnings declined

Sales Q3 2017 vs. Q3 2016

million €

EBIT before special items

million €


Q3 2017 vs. Q3 2016 0% 6% 4% (3%)

20172016

Coatings

951

+20%

Catalysts

1,506

(3%)

Construction

Chemicals

618

+2%

Performance Materials

1,900

+11%

€4,975

+7%

497458

531

422 397

0

200

400

600

800

Q3 Q4 Q1 Q2 Q3


Agricultural SolutionsEarnings decreased, primarily due to the difficult market situation in Brazil

Sales Q3 2017 vs. Q3 2016

million €

EBIT before special items

million €


Q3 2017 vs. Q3 2016 5% (8%) 0% (3%)

97

21

0

100

200

300

Q3 2016 Q3 2017

(78%)

1,049 987

0

1,000

2,000

Q3 2016 Q3 2017

(6%)


618

739

0

500

1,000

Q3 2016 Q3 2017

Oil & GasHigher oil and gas prices and volumes, EBIT before special items lower

due to one-time earnings effects in the prior-year quarter

Sales Q3 2017 vs. Q3 2016

million €

EBIT before special items, net income

million €

Sales development Volumes Prices/Currencies Portfolio

Q3 2017 vs. Q3 2016 9% 11% 0%

+20%

194180

33

139

0

100

200

300

Q3 2016 Q3 2017

EBIT before special items Net income


Review of “Other”

Financial figures Q3 2017 Q3 2016

million € million €

Sales 548 538

EBIT before special items (325) (233)

Thereof Costs of corporate research (93) (77)

Costs of corporate headquarters (57) (54)

Foreign currency results, hedging and other measurement effects (116) (101)

Other businesses 13 15

Special items (5) (23)

EBIT (330) (256)


Cash flow development Q1–Q3 2017

Cash flow development Q1–Q3 2017 Q1–Q3 2016

million € million €

Cash provided by operating activities 7,597 5,840

Thereof Changes in net working capital 94 (393)

Miscellaneous items (190) (172)

Cash used in investing activities (3,413) (2,776)

Thereof Payments made for tangible/intangible assets (2,606) (2,915)

Acquisitions/divestitures (44) 212

Cash used in financing activities (1,546) (1,898)

Thereof Changes in financial liabilities 1,276 837

Dividends (2,841) (2,753)

Free cash flow 4,991 2,925


Balance sheet remains strong

Balance sheet September 30, 2017 vs. December 31, 2016

billion €

▪ Total assets decreased slightly to

€76.0 billion

▪ Provisions for pension obligations

decreased by €1.4 billion to €6.8 billion

▪ Net debt at €12.3 billion

(December 31, 2016: €14.4 billion)

▪ Equity ratio at 43.9%

(December 31, 2016: 42.6%)

* Including marketable securities

Liquid funds*

Accountsreceivable

Long-termassets

Inventories

Other assets

Otherliabilities

Financialdebt

Equity

27.6 26.5

16.3 16.2

32.6 33.3

Dec 31, 2016 Sep 30, 2017

1.9 3.93.03.9

11.010.6

10.010.0

50.6 47.6

Dec 31, 2016 Sep 30, 2017

76.5 76.0 76.5 76.0

We create chemistry for a sustainable future€¦ · 4 January 2018 | BASF Capital Market Story...

Documents

Transcript of We create chemistry for a sustainable future€¦ · 4 January 2018 | BASF Capital Market Story...