We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story....
Transcript of We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story....
We create chemistry for a sustainable futureAlex SokolowskiBASF Investor Relations
HSBC GEMs Investor Forum, New York CityJune 4, 2018
June 20182 | BASF Capital Market Story
Cautionary note regarding forward-looking statements
This presentation contains forward-looking statements. These statements are based on currentestimates and projections of the Board of Executive Directors and currently available information.Forward-looking statements are not guarantees of the future developments and results outlined therein.These are dependent on a number of factors; they involve various risks and uncertainties; and they arebased on assumptions that may not prove to be accurate. Such risk factors include those discussed inthe Opportunities and Risks Report from page 111 to 118 of the BASF Report 2017. BASF does notassume any obligation to update the forward-looking statements contained in this presentation aboveand beyond the legal requirements.
June 20183 | BASF Capital Market Story
Agenda
At a glance1
Strategic levers2
Emerging markets and Asia Pacific3
Segments4
June 20184 | BASF Capital Market Story
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
June 20185 | BASF Capital Market Story
Chemicals – a growth industryGlobal annual growth rate of ~3.4%*
…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 2018–2020; BASF Report 2017, p. 121
June 20186 | BASF Capital Market Story
Broad and resilient portfolio2017: Sales of €64.5 billion; EBITDA of €12.7 billion
* Not depicted here: ‘Other’ 4% of BASF Group sales and EBITDA of €(679) million
Percentage of sales 2017*
Dispersions & Pigments Care Chemicals Nutrition & Health Performance Chemicals
Functional Materials & Solutions
Catalysts Construction Chemicals Coatings Performance Materials
EBITDA €5.4 billion Petrochemicals Monomers Intermediates
25%
Performance Products
25%
Oil & Gas
Exploration & Production; Natural Gas Transport
5%
Agricultural Solutions
Crop Protection
9%
Chemicals
EBITDA €1.3 billionEBITDA €2.4 billion EBITDA €2.1 billionEBITDA €2.3 billion
June 20187 | BASF Capital Market Story
Global market access through regional presence
Kuantan
Hong KongNanjing
Freeport
Florham Park
Geismar
LudwigshafenAntwerp
São Paulo
Regional centersSelected sitesVerbund sitesSelected research and development sites
Asia Pacific
South America, Africa, Middle East
North AmericaSales €15,357 millionEBIT €1,236 millionEmployees 18,295
Sales €14,343 millionEBIT €2,209 millionEmployees 18,256
Sales €5,561 millionEBIT €335 millionEmployees 7,286
2017: Sales by location of customer; EBIT by location of company
EuropeSales €29,214 millionEBIT €4,742 millionEmployees 71,653
June 20188 | BASF Capital Market Story
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 >€600 million p.a.
Infrastructure savings>€100 million p.a.
People, Customers, Technology, Production
June 20189 | BASF Capital Market Story
BASF Group with slight earnings increase in Q1 2018
Financial figures Q1 2018 Q1 2017 Change€ € %
Sales 16,646 million 16,857 million (1)EBITDA before special items 3,439 million 3,507 million (2)EBITDA 3,448 million 3,502 million (2)EBIT before special items 2,512 million ^^ 2,457 million 2EBIT 2,521 million 2,451 million 3Net income 1,679 million 1,709 million (2)Reported EPS 1.83 1.86 (2)Adjusted EPS 1.93 1.97 (2)Operating cash flow 1,231 million 833 million 48
Sales development Volumes Prices Portfolio CurrenciesQ1 2018 vs. Q1 2017 2% 5% 0% (8%)
June 201810 | BASF Capital Market Story
3.74.7 4.6
7.0 7.28.4 8.9
7.76.5
9.9
11.2
10.0 10.411.0 10.6 10.5
12.7
3.4
0
2
4
6
8
10
12
14
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 2018
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 6.3
8.5
2.5
Stepwise increase of earnings level
EBIT EBITDA Avg. EBITDA level in depicted years
EBIT and EBITDA*billion €, 2001–2017
CAGREBITDA
8%CAGREBIT17%
12.7
* 2010, 2011 indicative, adjusted for IFRS 10/11; 2001–2009 as reported, without non-compensable foreign income taxes on oil production
June 201811 | BASF Capital Market Story
2.3 2.3
4.9 4.65.3
5.9 5.85.0
5.76.5
7.16.6
8.1
7.0
9.4
7.7
8.8
0
2
4
6
8
10
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
-0.5 -0.1
2.8 2.63.3 3.5 3.2
2.53.2
3.9 3.7
2.63.2
1.7
3.6 3.6
4.8
Free cash flowOperating cash flow
Strong cash flow development
Operating cash flow and free cash flowbillion €, 2001–2017
June 201812 | BASF Capital Market Story
Attractive dividend
* Dividend yield based on share price at year-end
0.65 0.70 0.700.85
1.00
1.50
1.95 1.951.70
2.20
2.50 2.60 2.70 2.80 2.90
0
1
2
3
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
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% 3.4%
3.00
Dividend per share€
Dividend policy We want to grow or at least maintain
our dividend at previous year’s level
Key facts Dividend of €3.10 per share,
an increase of 10 cents
Dividend yield of 3.4% in 2017
3.10
June 201813 | BASF Capital Market Story
Average annual performance with dividends reinvested
0 2 4 6 8 10 12 14
+5.9%
+6.1%
+2.0%
+9.5%
Last 10 years June 2008 – May 2018
0 2 4 6 8 10 12 14
Last 3 years June 2015 – May 2018
+2.5%
+1.1%
+3.4%
+6.3%
Delivering consistent, long-term valueCurrent market capitalization: €77 billion*
* As of May 31, 2018
Euro Stoxx 50
DAX 30
MSCI World Chemicals
BASF
June 201814 | BASF Capital Market Story
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 the previous year’s level
Financial targets for the coming years
June 201815 | BASF Capital Market Story
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 productionin the coming years, driven by
Our priorities
June 201816 | BASF Capital Market Story
We anticipate slightly* higher sales in 2018.
EBIT before special items is expected to be up slightly on the 2017 level.
EBIT is forecast to decline slightly in 2018.
We aim to once again earn a significant premium on our cost of capital in 2018. However, EBIT after cost of capital will decrease considerably, mainly due to lower EBIT as well as the additional cost of capital from the planned acquisitions.
Outlook 2018 for BASF Group confirmed
* For sales, “slight” represents a change of 1–5%, while “considerable” applies to changes of 6% and higher. For earnings, “slight” means a change of 1–10%, while “considerable” is used for changes of 11% and higher. This outlook takes into account the agreed transactions with Bayer and Solvay. The intended merger of our oil and gas activities with the business of DEA Deutsche Erdoel AG and its subsidiaries is not taken into account in this outlook.
June 201817 | BASF Capital Market Story
Agenda
At a glance1
Strategic levers2► Portfolio development► Investments► Innovation► Sustainability► Operational excellence
Emerging markets and Asia Pacific3
Segments4
June 201818 | BASF Capital Market Story
Continuous global portfolio development to maintain a balanced portfolio
target(in % of sales*)~50% ~50%
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
Specialties and solutions Differentiated commodities
Attractive markets Differentiation by process
technologies and integration
Attractive markets Differentiation by customer
proximity and innovations
* Excluding Oil & Gas sales
June 201819 | BASF Capital Market Story
Portfolio development towards more market-driven and innovative businesses
Strong Partnerships Gazprom PETRONAS Sinopec Total
Selected transactions 2010−today
BASFcore business
~€5.5 billion salesin 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
~€21.1 billion salesin 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
June 201820 | BASF Capital Market Story
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
Acquisitioncriteria
Strategic acquisition criteria Financial acquisition criteria
June 201821 | BASF Capital Market Story
Purchase price: ~€7.6 billion Sales 2016: ~€2.0 billion EBITDA 2016*: ~€550 million Subject to the closing of the acquisition
of Monsanto by Bayer and regulatory approvals, closing expected in Q2/Q3 2018
Update on recently announced M&A activities
* On a pro-forma adjusted basis
BASF and LetterOne intend to mergetheir oil and gas subsidiaries
BASF to acquire Solvayʼs integrated global polyamide business
Purchase price: ~€1.6 billion Sales 2016: ~€1.3 billion EBITDA 2016: ~€200 million Market CAGR: >3.5% BASF and Solvay aim for a closing
in Q3 2018
Pro-forma sales 2017: ~€4.7 billion Pro-forma EBITDA 2017: ~€2.8 billion BASF and LetterOne are conducting
a confirmatory due diligence and are negotiating transaction agreements
Closing could be expected in H2 2018
BASF to acquire agricultural solutions businesses and assets from Bayer
June 201822 | BASF Capital Market Story
BASF to acquire agricultural solutions businesses and assets from Bayer
All-cash purchase price
€7.6 billion (subject to certain adjustments at closing, asset and share deal)
Sales 2017Sales 2016
~€2.2 billion~€2.0 billion
Sales by region
~60% North America~15% South America~15% Europe, Middle East, Africa ~10% Asia Pacific
EBITDA 2016* ~€550 million
R&D expenses 2016 ~€350 million
Sites 5 chemical production and formulation sites 17 R&D sites Regional seed production and breeding facilities
BASF to become an even better partner for farmersby strengthening its crop protection portfolio and entering the seeds business in key agricultural markets
Cash EPS accretive in the first full fiscal year, EPS accretive by 2020
Financing through a combination of cash on hand, commercial papers and bonds
Subject to approval of the relevant merger control authorities
Following the closing of the acquisition of Monsantoby Bayer expected in Q2 2018, BASF also expectsto close most of the acquisition in Q2 2018, withthe vegetable seeds business closing in Q3 2018
Combined figures of transactions with Bayer Facts about transactions with Bayer
* On a pro-forma adjusted basis
June 201823 | BASF Capital Market Story
Agreement signed in October 2017Strong seeds for key row crops, non-selective herbicides and an excellent R&D platform
Sales 2017Sales 2016
~€1.5 billion~€1.3 billion
Sales by region
~70% North America~15% South America~10% Asia Pacific~5% Europe, Middle East, Africa
EBITDA 2016 ~€385 million
R&D pipeline and IP >250 patent families
Employees >1,800
Sites 5 chemical production and formulation sites 10 R&D sites Regional seed production and breeding facilities
Fully enabled seed and trait businesses
– Attractive seeds portfolio for canola/oilseed rape, soybean and cotton in the Americas and Europe
– Excellent trait research platform for canola, soybean and cotton
– LibertyLink® technology and related trademarks for herbicide tolerance
Complementary crop protection business
– Global glufosinate-ammonium-basednon-selective herbicide business
– State-of-the-art production facilitiesin the U.S., Canada and Germany
Experienced team of dedicated professionals
FiguresScope
June 201824 | BASF Capital Market Story
Agreement signed in April 2018Extended scope of agricultural solutions businesses and assets with high profitability and strong growth prospects
Global vegetable seeds business
Well-established seed treatment business
R&D platform for hybrid wheat
State-of-the-art digital farming platform
Other businesses and assets:
– Oilseed rape business in Australia
– Certain glyphosate-based herbicides in Europe,used predominantly for industrial applications
– Canola-quality juncea research projects
– Certain non-selective herbicides research projects
– Nematicide research projects
Experienced team of dedicated professionals
FiguresScopeSales 2017Sales 2016
~€745 million~€710 million
Sales by region
~40% Europe, Middle East, Africa ~40% North America~10% South America~10% Asia Pacific
EBITDA 2016* ~€165 million
R&D pipeline and IP >250 patent families
Employees >2,500
Sites 7 R&D sites Regional seed production and breeding facilities
* On a pro-forma adjusted basis
June 201825 | BASF Capital Market Story
* 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 signed letter of intent to merge their oil and gas subsidiaries Wintershall and DEA
Combined business with pro-forma 2017 sales of €4.7 billion, EBITDA of €2.8 billion and net income of €740 million
Creation of one of the largest independent European exploration and production companies with significant growth potential, optimization of the portfolio footprintof 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 issuanceof a mandatory convertible bond to BASF*
BASF and LetterOne are currently conducting a confirmatory due diligence andare negotiating definitive transaction agreements; closing could be expected inthe second half of 2018, subject to customary regulatory approvals
Initial Public Offering (IPO) envisaged in the medium term
June 201826 | BASF Capital Market Story
BASF and Solenis to join forces by combining paper and water chemicals businesses
Solenis – a global producer of specialty chemicals for water intensive industries Sales 2017: ~€1.6 billion Employees: ~3,700 employees Manufacturing facilities in 35 countries worldwide Subject to the approval by the relevant authorities,
funds managed by Clayton, Dubilier & Ricewill hold a 51% share of the combined entity
Key capabilities Technology expertise World-scale manufacturing Markets and products: packaging, dry strength, paper
coloration, municipal waste water treatment, water treatment chemicals
Creating acustomer-focused global solutions
provider for the paper and water treatment
industries
BASF’s paper wet-end and water chemicals business Sales 2017: ~€0.8 billion Employees: ~1,300 Production sites and plants* in the UK, the U.S.,
Mexico, India and Australia Subject to the approval by the relevant authorities,
BASF will hold a 49% share of the combined entity
Key capabilities Customer intimacy Services: application domain experts, digital
solutions Markets and products: packaging, tissue, biocides,
wet and dry strength, industrial water treatment
* BASF’s paper wet-end and water chemicals production plants strongly embedded in the Verbund in Ludwigshafen, Germany, and Nanjing, China, are not transferred, and will deliver products and raw materials to the combined entity under mid- to long-term supply agreements. BASF’s paper coating chemicals portfolio is not part of the transaction.
June 201827 | BASF Capital Market Story
Performance Products – differentiated business strategies will drive profitable growth
Growth businesses Core businesses
Mid-term growth
EBITDA margin 2017
Area of bubbles = Sales of strategic businesses unit in 2017
Opportunistic businesses
Mid-term GDP growth rate
Hig
her
Low
er
Lower Higher
Ø EBITDA margin
Growth businesses Expand position through R&D activities, capex
and M&ACore businesses Focus on operational excellence, process
innovation, growth in emerging markets, new business models
Opportunistic businesses Changing market environment requires review
of strategic options
Strategic priorities for Performance Products Organic growth Commercial and operational excellence Portfolio management
June 201828 | BASF Capital Market Story
Agricultural Solutions4%
Investments in organic growthInvestments of ~€4.0 billion planned for 2018
Performance Products
16%Oil & Gas*18%
€19.0 billion
Capex budget 2018–2022 by segment
Other18%
Chemicals25%
Capex budget 2018–2022 by region
Asia Pacific14%
North America19%
Other**5%
Functional Materials& Solutions
19%
€19.0 billion
South America***8%
Europe 54%
* If the merger of BASF’s oil and gas activities with DEA is consummated as intended, these capital expenditures will no longer be reported as investments by the BASF Group. ** Alternative sites currently being investigated; *** Including Africa and Middle East
June 201829 | BASF Capital Market Story
Selected investment projects
Replacement of BASF’s acetylene plant in Ludwigshafen
~20 production facilities on the site use acetylene as a raw material 90,000 tons per year World’s most efficient
production process Startup end of 2019
New ibuprofen plant in Ludwigshafen; capacity expansion in the U.S.
First world-scale ibuprofen plant in Europe Additional capacity
expansion of ibuprofen plant in Bishop, Texas Investments: ~€200
million for both projects Startup in 2021
Expansion of BASF’s mobile emissions catalysts site in Poland
BASF’s largest emissions catalysts production site in Europe New production lines and
additional infrastructure Best-in-class technology
to meet tightening NOx and particulate emissions standards for diesel or gasoline engines
New plastic additives plant in Shanghai, China
Production of antioxidants, related forms and blends 42,000 tons per year Commercial production to
start by 2020
June 201830 | BASF Capital Market Story
Oil & Gas2%
Innovation will drive future growth
Agricultural Solutions27%
Chemicals7%
Performance Products21%
Corporate Research20%
Key facts
€1.9 billion R&D expenditures in 2017
R&D expense to sales ratio ~3%
~10,000 employees in R&D
~3,000 projects
~800 new patents in 2017
Research Verbund: Cooperations with more than 600 excellent partners from universities, startups and industry
In 2017, sales of >€9 billion from innovations launched on the market in the past five years
R&D expenditures 2017
€1.9 billion
Functional Materials & Solutions
23%
June 201831 | BASF Capital Market Story
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
materialsEnabling methods
Corporate Research: BASF’s key technology capabilities are bundled in seven focus areas
BASF’s key technology
capabilities
June 201832 | BASF Capital Market Story
Automotive is a growth business for BASF BASF sales to Automotive vs. global vehicle production(indexed)
50%
75%
100%
125%
150%
175%
200%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
BASF salesto Automotive
CAGR
6.7%
Global vehicleproduction
CAGR
3.0%
* Excl. precious metals, coatings refinish business; CAGR shown for 2007 – 2017
June 201833 | BASF Capital Market Story
BASF – capturing the fast-growing battery materials market
Market projections for 2025: 8-15 million electric vehicles* built per year 600-900 kt of CAM in e-mobility€18-24 billion CAM market size
Unparalleled access and commitment to the automotive industry Strategic global supply, technology and production partnerships
Rapid expansion to global, cost-competitive asset footprint
Well-established position in key CAM technologies (NCA & NCM)** Industry leading position in NCA capacity
E-mobility drives battery materials growth
Chemistry of cathode active materials (CAM) is key to
address e-mobility challenges
**NCA: nickel cobalt aluminum oxide; NCM: nickel cobalt manganese
BASF enables electromobility
*Electric vehicles: BEV, HEV and PHEV
20252017
~15-20% p.a.
Li-ion batterymarket
June 201834 | BASF Capital Market Story
Key supplier in battery materials, well-positioned for further growth
Shanghai, ChinaR&D, Application Technology Center
Onoda/Kitakyushu, JapanBASF TODA Battery Materials
Beachwood, OhioR&D, ApplicationTechnology Center
Elyria, OhioBASF TODA America
Europe, planned production
Amagasaki, JapanR&D, Application Technology Center
Battle Creek, MichiganBASF TODA America
Shanghai, China BASF Battery Materials Headquarters
Production siteTechnology center
Ludwigshafen, GermanyR&D, ApplicationTechnology Center
Innovation in battery materials Leading technology portfolio and core patents ~€250 million total R&D spent so far ~150 scientists at four R&D centers across all regions Highest energy density CAM commercialized for EV application
Market presence Triple-digit-million euro battery material sales Supplier to world’s largest cell producers Already supplying leading OEMs’ platforms Under qualification for future key platforms
June 201835 | BASF Capital Market Story
Sustainable Solution Steering®
Goal: Increase the share of Accelerators from 23% in 2014 to 28% by 2020
4.3% 0.1%
>60,000 product applications analyzed
27.3% 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
27.3%
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 concernidentified and action plan developed
SustainableSolutionSteering
Percentage of sales 2017
June 201836 | BASF Capital Market Story
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
June 201837 | BASF Capital Market Story
Resource efficiencyResponsible use of carbon sources
* BASF carbon mass balance calculation (2017, non-audited) ** Based on the chemical industry standard of the International Council of Chemical Associations (ICCA) and the World Business Council for Sustainable Development (WBCSD)
We are committed to resource efficiency and climate protection
BASF uses carbon raw materials responsibly: 82% of carbon converted to products, 17% consumed for process energy and converted to CO2, 1% waste*
Comparisons with European emissions trading benchmarks show that our chemical plants operate at above-average energy efficiency
23 million tons of CO2 emissions by BASF worldwide in 2017 compared to 10–30 million tons p.a. for one coal-fired power plant
Customers’ use of BASF’s climate protection products sold in 2017 avoided 570 million tons of CO2 equivalents (thereof 6% attributable to BASF)**
In 2017, BASF achieved CDP leadership status once again
June 201838 | BASF Capital Market Story
0
0,.001
2016 2017 2018 Total
DrivE program
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 DrivEmillion €
1,000
Operational excellenceDrivE with ~€1 billion targeted earnings contribution from end of 2018 onwards
500
€500million
€150million
June 201839 | BASF Capital Market Story
Strong track record in operational excellence
* Excl. companies with major IFRS 10/11 restatements, i.e. BASF YPC Nanjing, Libya onshore,other Oil & Gas and Catalysts companies
50
100
150
200
250
300
350
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
EBITDA
Sales
Fixed Costs
CAGREBITDA
8%
CAGRSales 5%
BASF Group* 2001–2017 indexed; CAGR 2001–2017
3%
CAGRFixed Costs
June 201840 | BASF Capital Market Story
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
June 201841 | BASF Capital Market Story
Agenda
At a glance1
Strategic levers2
Emerging markets and Asia Pacific3
Segments4
June 201842 | BASF Capital Market Story
Today’s emerging markets are expected to account for around 65% of global chemical production in 2025
BASF sales* in emerging markets
* Percentage of BASF Group sales (excluding Oil & Gas) by location of customer
June 201843 | BASF Capital Market Story
June 201844 | BASF Capital Market Story
We participate in innovative and growing markets
Electronics
6.7%
3.1%
Agriculture
2.9%
Transportation
4.9%
Consumer Products
Source: BASF
Estimated CAGR 2015–2020 for selected industries, Asia Pacific
4.4%
Construction
June 201845 | BASF Capital Market Story
BASF is growing in and with Asia Pacific
1890First business
contact in India
1982Ulsan site started in
South Korea
1966First
production in China
1954First business contact in South Korea
1989Business
startedin Malaysia
2001Inauguration of Kuantan Verbund site
2005Inauguration
of Nanjing Verbund site
2012Inauguration of Shanghai Innovation Campus
2014Inauguration of Dahejsite
1885First
delegate in China
2015Inauguration of Chongqing MDI plant
1988First productionin Japan
1850s 2010s1950s 1970s 1990s
2017Inauguration of Mumbai Innovation Campus
June 201846 | BASF Capital Market Story
BASF is present in 18 markets
~100 production sites*
~125 sales offices*
18,256 employees**
~€14.3 billion sales***
~€2.2 billion EBIT
BASF in Asia Pacific 2017
Nanjing
Hong Kong
Kuala Lumpur
Kuantan
* Only selected sites and offices are depicted on this chart. Site and office numbers refer to companies of significant size where BASF holds a stake greater than 50%.
** As of December 31, 2017.
*** Sales by location of customer.
Regional centerVerbund sitesSelected sitesR&D/Technical centersShared Services Center
June 201847 | BASF Capital Market Story
June 201848 | BASF Capital Market Story
Functional Materials & Solutions36%
Agricultural Solutions4%
BASF in Asia Pacific: Balanced portfolio
Sales* by segment in 2017(billion €)
Sales* by sub-region in 2017(billion €)
Performance Products 29%
Other3%
Chemicals28%
€14.3 billion
ASEAN15%
Greater China51%
Australia, New Zealand3%
South Asia11%
Japan12%
South Korea8%
€14.3 billion
*Sales to third parties by location of customer; figures do not include sales of joint ventures consolidated at equity such as BASF-YPC Ltd., Nanjing, China
South Asia: India, Pakistan, Bangladesh, Sri Lanka
ASEAN: Singapore, Philippines, Vietnam, Thailand, Indonesia, Malaysia, Myanmar
June 201849 | BASF Capital Market Story
June 201850 | BASF Capital Market Story * As of December 31, 2017
June 201851 | BASF Capital Market Story
China is the third largest market for BASF globally
China nominal GDP growth 2017: 6.9%
≥ 9%
6.9% − <9%
< 6.9%
GDP growth rate 2017:
Tibet
Qinghai
Sichuan
Yunnan
Hainan
Hebei
Heilongjiang
Liaoning
Shanxi
BeijingTianjin
Shandong
Henan Jiangsu
ZhejiangShanghaiAnhui
Jiangxi
Guizhou
Chongqing
Fujian
Hubei
Hunan
GuangdongGuangxi
Inner Mongolia
Gansu
Ningxia
Shaanxi
Xinjiang
Jilin
China chemical production 2020: US$1.7 trillion; around 70% of Asian real chemical production
Initiatives such as One Belt One Road and Made in China 2025 expected to boost growth and innovation
More stringent enforcement of laws related to protection of the environment
Chemistry will enable innovationsin downstream industries
Source: National Bureau of Statistics and provincial bureaus of statistics, P.R. China
June 201852 | BASF Capital Market Story
BASF’s extensive network guarantees access to major local markets
Greater China
* As of December 31, 2017 ** By location of customer *** Some sites are not shown due to scale.
Mainland China, Hong Kong, Taiwan 25 major wholly-owned subsidiaries
7 joint ventures
25 production sites
24 sales offices
8,982 employees*
~€7.3 billion sales** in 2017(excl. BASF-YPC, Nanjing)
Asia Pacific headquarters
Verbund siteProduction siteSales office
Greater China headquartersR&D and Technical Centers
Legend ***
Jiangsu
Taiwan
Liaoning
Jilin
Shandong
Guangdong
Beijing
ZhejiangChongqing
Guangxi
Tianjin
Hong Kong
ShanghaiSichuan Anhui
Fujian
Xinjiang
June 201853 | BASF Capital Market Story
Innovate with our partners: network for Asian Open Research (NAO)
* Tsinghua University
* Beijing University of Chemical Technology
* Fudan University
* Changchun Institute of Applied Chemistry
* Kyoto University
* The Chinese University of Hong Kong
Zhejiang University
* Sichuan University
* Seoul National University
* Universities with long time collaboration or at least 2 collaboration projects
Open innovation
June 201854 | BASF Capital Market Story
Agenda
At a glance1
Strategic levers2
Emerging markets and Asia Pacific3
Segments4► Chemicals► Performance Products► Functional Materials & Solutions► Agricultural Solutions► Oil & Gas
June 201855 | BASF Capital Market Story
ChemicalsIncreased earnings driven by higher margins and volumes
Sales Q1 2018 vs. Q1 2017million €
EBIT before special items million €
Intermediates784+4%
Monomers1,723+1%
Petrochemicals1,779+8%
€4,286+4%
Sales development Volumes Prices Portfolio CurrenciesQ1 2018 vs. Q1 2017 3% 8% 0% (7%)
9581,120 1,102 1,053 1,134
0
400
800
1,200
Q1 Q2 Q3 Q4 Q12017 2018
June 201856 | BASF Capital Market Story
Performance ProductsHigher prices could not compensate for negative currency effects and outage-related lower volumes; earnings declined slightly
Performance Chemicals938-7%
Nutrition & Health424-13%
Care Chemicals1,305
-4%
Dispersions & Pigments1,324
-5%
€3,991-6%
EBIT before special items million €
Sales development Volumes Prices Portfolio CurrenciesQ1 2018 vs. Q1 2017 (1%) 2% (1%) (6%)
Sales Q1 2018 vs. Q1 2017million €
515
405 385
111
470
0
200
400
600
Q1 Q2 Q3 Q4 Q12017 2018
June 201857 | BASF Capital Market Story
Functional Materials & Solutions Earnings declined considerably due to lower margins and higher fixed costs
Coatings940-6%
Catalysts1,736+3%
ConstructionChemicals
544-3%
Performance Materials1,919-2%
€5,139-1%
EBIT before special items million €
Sales development Volumes Prices Portfolio CurrenciesQ1 2018 vs. Q1 2017 1% 6% 0% (8%)
Sales Q1 2018 vs. Q1 2017million €
531
422 397
267333
0
200
400
600
Q1 Q2 Q3 Q4 Q12017 2018
June 201858 | BASF Capital Market Story
Agricultural SolutionsEarnings negatively impacted by currency headwinds, higher fixed costs and a late start to the season
EBIT before special items million €
Sales development Volumes Prices Portfolio CurrenciesQ1 2018 vs. Q1 2017 3% (2%) 0% (8%)
Sales Q1 2018 vs. Q1 2017million €
1,8551,728
0
1,000
2,000
Q1 2017 Q1 2018
533
423
0
200
400
600
Q1 2017 Q1 2018
-7%-21%
June 201859 | BASF Capital Market Story
Oil & GasEarnings increased considerably, mainly due to higher prices and volumes as well as lower depreciation
EBIT before special items / net income million €
Sales Q1 2018 vs. Q1 2017million €
170140
365
165
0
100
200
300
400829
945
0
500
1,000
Q1 2017 Q1 2018
Sales development Volumes Prices/Currencies PortfolioQ1 2018 vs. Q1 2017 11% 3% 0%
+14%
Q12017
Q12018
Q12017
Q12018
EBIT before special items Net income
June 201860 | BASF Capital Market Story
Review of “Other”
Financial figures Q1 2018 Q1 2017million € million €
Sales 557 610
EBIT before special items (213) (250)
Thereof Costs of corporate research (80) (81)
Costs of corporate headquarters (53) (52)
Foreign currency results, hedging and other measurement effects 41 (31)
Other businesses (8) 5
Special items (8) 7
EBIT (221) (243)
June 201861 | BASF Capital Market Story
Cash flow development Q1 2018
Cash flow development Q1 2018 Q1 2017million € million €
Cash provided by operating activities 1,231 833Thereof Changes in net working capital (1,345) (1,985)
Miscellaneous items (30) 58
Cash used in investing activities (634) (1,215)Thereof Payments made for tangible / intangible assets (627) (767)
Acquisitions / divestitures 34 (22)
Cash provided by financing activities 201 831Thereof Changes in financial liabilities 220 811
Dividends (19) 6
Free cash flow 604 66
June 201862 | BASF Capital Market Story
Balance sheet remains strong
Balance sheet March 31, 2018 vs. December 31, 2017billion €
Total assets increased by €1.7 billion, mainly due to higher accounts receivable as well as cash and cash equivalents
Net debt decreased by €1.0 billion to €10.5 billion
Equity ratio at 45.2% as of March 31, 2018
Liquid funds
Accountsreceivable
Long-termassets
Inventories
Other assetsOtherliabilities
Financialdebt
Equity
26.3 26.0
17.8 18.0
36.4 34.8
Mar 31, 2018 Dec 31, 2017
7.3 6.54.0 3.2
12.1 11.2
10.4 10.3
46.7 47.6
Mar 31, 2018 Dec 31, 2017
80.5 78.8 80.5 78.8