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

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We create chemistry for a sustainable future Alex Sokolowski BASF Investor Relations HSBC GEMs Investor Forum, New York City June 4, 2018

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

Page 1: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

We create chemistry for a sustainable futureAlex SokolowskiBASF Investor Relations

HSBC GEMs Investor Forum, New York CityJune 4, 2018

Page 2: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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.

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June 20183 | BASF Capital Market Story

Agenda

At a glance1

Strategic levers2

Emerging markets and Asia Pacific3

Segments4

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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

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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

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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

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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

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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

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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%)

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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

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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

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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

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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

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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

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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

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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.

Page 17: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

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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

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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

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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

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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

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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

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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

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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

Page 25: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

Page 26: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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.

Page 27: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

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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

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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

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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%

Page 31: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

Page 32: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

Page 33: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

Page 34: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

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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

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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

Page 37: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

Page 38: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

Page 39: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

Page 40: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

Page 41: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

June 201841 | BASF Capital Market Story

Agenda

At a glance1

Strategic levers2

Emerging markets and Asia Pacific3

Segments4

Page 42: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

Page 43: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

June 201843 | BASF Capital Market Story

Page 44: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

Page 45: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

Page 46: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

Page 47: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

June 201847 | BASF Capital Market Story

Page 48: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

Page 49: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

June 201849 | BASF Capital Market Story

Page 50: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

June 201850 | BASF Capital Market Story * As of December 31, 2017

Page 51: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

Page 52: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

Page 53: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

Page 54: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

Page 55: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

Page 56: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

Page 57: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

Page 58: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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%

Page 59: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

Page 60: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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)

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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

Page 62: We create chemistry for a sustainable future - BASF€¦ · June 2018 | BASF Capital Market Story. Chemicals – a growth industry. Global annual growth rate of ~3.4%* …more food

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

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