We add value as one company

Transcription

1 January 2016 We add value as one company BASF Capital Market Story January

2 Cautionary note regarding forward-looking statements This presentation may contain forward-looking statements that are subject to risks and uncertainties, including those pertaining to the anticipated benefits to be realized from the proposals described herein. Forward-looking statements may include, in particular, statements about future events, future financial performance, plans, strategies, expectations, prospects, competitive environment, regulation and supply and demand. BASF has based these forward-looking statements on its views and assumptions with respect to future events and financial performance. Actual financial performance could differ materially from that projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and financial performance may be better or worse than anticipated. Given these uncertainties, readers should not put undue reliance on any forward-looking statements. The information contained in this presentation is subject to change without notice and BASF does not undertake any duty to update the forwardlooking statements, and the estimates and assumptions associated with them, except to the extent required by applicable laws and regulations. BASF Capital Market Story January

3 We create chemistry for a sustainable future Positioning Performance Perspective Geismar, USA Freeport, USA Ludwigshafen, Germany Antwerp, Belgium Nanjing, China Kuantan, Malaysia Verbund site The #1 chemical company 74 billion sales, 7.4 billion EBIT bsi in 2014 #1-3 in ~70% of businesses, in almost all countries 6 integrated Verbund sites, production in 60 countries A track record of strong sales and earnings growth 12% average annual dividend increase, >3% yield in every single year* ~ 59 billion market capitalization Jan Chemistry as an enabler BASF has superior growth opportunities: sustainable innovations investments emerging markets BASF Capital Market Story January 2016 * For

4 BASF today a well-balanced portfolio Total sales 2014: 74 billion Percentage of sales 2014* * Not depicted here: ~5% of Group sales reported as Other. Paper Chemicals results have been incl. in Performance Products BASF Capital Market Story January 2016 until the end of Thereafter Paper Chemicals has been dissolved; ** Natural Gas Trading has been sold Sep. 30, 2015 to Gazprom. 4

5 Verbund: Unique competitive advantage Verbund generates > 1 billion p.a. global cost savings* & supports sustainability Global reduction in carbon emissions of 6 million metric tons/a. and reduction of waste Example Ludwigshafen site: avoidance of 7 million metric tons of freight/a. = 280,000 fewer truckloads Shared use of on-site facilities: fire department, security, waste water treatment and analytics BASF Capital Market Story January 2016 * Savings include only tangible synergies. Additional (intangible) benefits and retained profits are not included. 5

6 Q reporting Business development Path forward: Our priorities BASF Capital Market Story January

7 Third-quarter sales and EBIT bsi down in a difficult economic environment Business performance Q3 15 Q3 14* vs. Q3 14* Sales 17.4 billion 18.3 billion (5%) EBITDA 2.9 billion 2.5 billion +14% EBIT before special items 1.6 billion 1.8 billion (10%) EBIT 1.9 billion 1.7 billion +8% Net income 1.2 billion 1.0 billion +19% Reported EPS % Adjusted EPS (14%) Operating cash flow 3.4 billion 2.2 billion +51% Sales development Period Volumes Prices Portfolio Currencies Q3 15 vs. Q3 14 (1%) (8%) 0% 4% * Previous year values restated due to dissolution of disposal group Natural Gas Trading BASF Capital Market Story January

8 Strong free cash development Q1-Q Free cash flow* (in billion ) ** Q1-Q * Cash provided by operating activities less capex (in 2005 before CTA) BASF Capital Market Story January 2016 ** 2009 adjusted for re-classification of settlement payments for currency derivatives 8

9 Revised Outlook 2015 Outlook 2015 We aim to increase volumes excluding the effects of acquisitions and divestitures. Due to the divestment of the gas trading and storage business as part of the asset swap with Gazprom and the lower oil price we expect sales to be slightly lower than in EBIT before special items is expected to be slightly below the level of The chemicals business is expected to provide a larger contribution than in Earnings from crop protection will most likely come in slightly below the level of In Oil & Gas, results will decline significantly caused by the lower oil price and the divestment of the gas trading and storage business. We aim to earn a substantial premium on our cost of capital, but on a lower level than in Assumptions 2015 GDP: +2.3% (+2.4%) Industrial production: +2.0% (+2.9%) Chemical production (excl. pharma): +3.5% (+3.8%) US$ / Euro: 1.12 (1.15) Brent oil price (US$ / bbl): 55 (60-70) BASF Capital Market Story January

11 Fundamental trends intact; environment for chemical industry more challenging CAGR view today s view Global GDP 3.4% 2.6% Industrial production 4.6% 3.2% Chemical production (excl. pharma) thereof growth contribution of emerging markets 4.9% 3.9% 82% 91% Market dynamics have changed since 2011 Low growth in Europe, Japan and the U.S. Strong growth stimulus in China with spillover effects to other emerging markets Lower feedstock costs Proliferation of some technologies resulted in increased competition Faster build-up of significant new capacities in China resulted in overcapacities Faster than expected commoditization in selected product lines BASF Capital Market Story January

12 Components of growth Sales* analysis (in billion ) CAGR ,6 8,7 Volumes 5.7% 4,9-1,7 2,8 Prices FX M&A 74, BASF Group w/o Oil & Gas Net sales 2010 Volumes Prices FX M&A 51.4 Oil & Gas (+1.5% CAGR) +5.5 (+13.7% CAGR) Sales CAGR % % BASF Capital Market Story January 2016 * 2010, 2011 indicative, adjusted by IFRS 10 & 11 12

13 Portfolio development towards more market-driven and innovative businesses Acquisitions Functional crop care Personal care & food Omega-3 fatty acids Enzymes Battery materials Specialty plastics Selected assets in Oil & Gas ~ 4.5 billion sales in emerging and innovation-driven businesses BASF core business Selected transactions 2010 until today Strong partnerships Gazprom Monsanto Petronas Shell Sinopec Statoil Total Yara Divestitures Styrenics Fertilizers Construction equipment, flooring and wall systems Decorative paints in Europe Selected assets in Oil & Gas Natural gas trading Custom synthesis business ~ 20 billion sales* in businesses with limited fit and differentiation potential BASF Capital Market Story January 2016 * Includes sales of non-consolidated businesses (Styrenics, VNG participation) 13

14 Steady earnings growth EBIT and EBITDA* (in billion, ) ,7 4,7 4,6 7,0 7,2 4,5 4,8 CAGR EBIT 19.8 % 8,4 5,5 CAGR EBITDA 8.9 % 8,9 6,0 7,7 4,6 6,5 9,9 6,7 11,2 8,0 10,0 10,4 6,7 7,2 11,0 7,6 8,8 5,9 2 2,2 2,2 2,8 0 0, Q EBITDA EBIT BASF Capital Market Story January 2016 * 2010, 2011 indicative, adjusted by IFRS 10 & 11; as reported, without non-compensable foreign income taxes on oil production 14

15 Strong track record in operational excellence BASF Group* (Index; CAGR ) CAGR EBITDA 9% CAGR Sales 7% EBITDA Sales CAGR Fixed Costs 3% Fixed Costs BASF Capital Market Story January 2016 * Excl. companies with major IFRS 10/11 restatements, i.e. BASF YPC Nanjing, Libya onshore, other Oil & Gas and Catalysts companies 15

16 Attractive shareholder return Dividend per share (in ) , , , , , ,5 0,0 Yield* % 4.1% 3.8% 7.0% 3.9% % % % % 4.0% Dividend policy We want to grow or at least maintain our dividend Key facts Dividend paid out per share 2.80, an increase of 3.7% Average annual dividend increase of approx. 12% ( ) Attractive dividend yield of 4.0% in 2014** Dividend yield above 3% in any given year since 2005 BASF Capital Market Story January 2016 * Dividend yield based on share price at year-end ** Based on BASF share price of on Dec 30,

17 Delivering consistent, long-term value Average annual performance with dividends reinvested Last 10 years January 2006 December 2015 Last 5 years January 2011 December % BASF +7.0% +2.2% Euro Stoxx % +7.1% DAX % +7.4% MSCI World Chemicals +7.7% BASF Capital Market Story January

19 Our strategic principles We add value as one company. We drive sustainable solutions. We innovate to make our customers more successful. We form the best team. BASF Capital Market Story January

20 Fundamental trends intact; chemical production growing faster than GDP CAGR view today s view Global GDP 3.2% 3.0% Industrial production 3.7% 3.5% Chemical production (excl. pharma) 4.0% 3.9% thereof growth contribution of emerging markets 89% 82% BASF Capital Market Story January

21 The way forward: Our priorities Grow sales and earnings faster than global chemical production, driven by Continued focus on innovations Capital expenditures Acquisitions Operational excellence and Verbund advantages Focus on cash generation / conversion Continue with our progressive dividend policy Focus on pruning our portfolio Maintain industry-leading position in sustainability BASF Capital Market Story January

22 Managing volatility: BASF almost perfectly hedged on hydrocarbon price changes BASF production and consumption of oil and gas (in million boe, 2014) 136 Oil and liquids Natural gas >100 Naphtha and other oil based raw materials Natural gas for energy and as raw material Production of oil, liquids and gas Consumption of oil derivatives and gas BASF hydrocarbon consumption almost equals hydrocarbon production BASF Capital Market Story January

23 Chemicals with stable profitability, little correlation to oil price EBITDA margin Chemicals / oil price Index 2001 = Oil price EBITDA margin Chemicals (as % of sales) * 2007* Q1-Q3 restated 2015 BASF Capital Market Story January 2016 * Without Catalysts (now part of Functional Materials & Solutions segment) 23

24 Strategic lever: Continuous portfolio development Growth fields Innovation pipeline Specialties and solutions Attractive markets Differentiation by customer proximity and innovations Differentiated commodities Attractive markets Differentiation by process technologies and integration ~ 50% ~ 50% target (in % of sales*) Acquisitions Divestment of businesses e.g. due to lower market attractiveness Commoditization leads to restructuring Divestment of businesses e.g. due to loss of differentiation Keep a balanced portfolio BASF Capital Market Story January 2016 * Excluding Oil & Gas sales 24

25 Strategic lever: Acquisitions We want to acquire businesses which Generate profitable growth above the industry average Are innovation-driven Offer a special value proposition to customers Provide a minimum return on investment of 8% p.a. after tax Are EPS accretive by year three at the latest Reduce earnings cyclicality Strategic acquisition criteria Financial acquisition criteria BASF Capital Market Story January

26 Strategic lever: Capital expenditures our philosophy Differentiated commodities With proprietary technology and/or Verbund advantages Focus on: emerging markets backward integration in the US upgrading our asset base in Europe Specialties and solutions Incremental investments for new products Regional expansion of businesses Oil & Gas Focus investment budget by active portfolio optimization to secure free cash flow Keep reserve-to-production ratio of approx. 10 years BASF Capital Market Story January

27 Implementation of increased capex program will drive profitable growth Selected major capex projects Aroma chemicals SAP Crop protection products Automotive catalysts Butadiene Admixture systems Specialty plastics Oil & Gas North America Cracker flexibilization and expansion Battery materials Dispersion polymers TDI complex Precious metal recycling Specialty amines Crop protection products Oil & Gas Chelating agents Polyurethane systems Formic acid Butanediol expansion Crop protection products Ammonia Europe Cracker expansion Amines Surfactants Acrylic acid & SAP Resins Specialty plastics Crop protection products Innovation Campus. China Asia Pacific* MDI Polyamides Butanediol / PolyTHF Neopentylglycol Specialty amines Ethylene oxide Isononanol Coating resins Automotive catalysts Process catalysts Capex spending Temporarily increased capex was necessary to build the base for further growth to strengthen our value chains to increase our footprint in emerging markets Automotive coatings Crop protection products Oil & Gas South America Acrylic acid & SAP Acrylates Crop protection products Oil & Gas Care chemicals Automotive catalysts Polymer dispersions Polymer dispersions Polyurethane specialties Specialty plastics Specialty plastics Aroma chemicals 2-Ethylhexanoic acid Polyisobutene Innovation Campus Start-ups Start-ups planned for BASF Capital Market Story January 2016 * w/o China 27

28 Investments for organic growth Capex budget (by segment) Capex budget (by region) Performance Products 15% Asia Pacific 18% Functional Materials & Solutions 13% Agricultural Solutions 6% Other 12% 19.5 billion Chemicals 33% Oil & Gas 21% South America* 8% Other 2% North America 27% 19.5 billion Europe 45% BASF Capital Market Story January 2016 * Includes also regions Africa and Middle East 28

29 Strategic lever: Innovations our philosophy Allow for creativity Balance incremental und disruptive innovations Manage innovation pipeline efficiently on all levels Build on our global R&D Verbund Leverage external collaborations even more Align R&D activities with business models: Differentiated commodities Focus on improving processes and addressing raw material change Launch selected product innovations Specialties and solutions Develop new, tailored offerings in close collaboration with customers Pursue solution-oriented approach Keep annual R&D spending at ~3% of sales* BASF Capital Market Story January 2016 * W/o Oil & Gas 29

30 Strategic lever: Innovations Innovation types Developing solutions for many aspects of life (Innovation examples) Processes Innovation types Solutions Products BASF Capital Market Story January

31 Strategic lever: Sustainability Sustainability goals along the value chain Suppliers BASF Customers Evaluation of 70% of relevant suppliers with regard to their sustainability performance by 2020 Energy & climate protection Greenhouse gas reduction* of 40% by 2020 (base 2002) Energy efficiency: Introduction of certified energy management system at all major sites by 2020 Water Introduction of sustainable water management at all relevant sites by 2025 Safety, health and security Risk assessment of products by 2020 >99% Health Performance Index** (annual goal) >0.9 Lost-time injuries*** by Process safety incidents*** by Increase the share of Accelerators from 23% to 28% by 2020 Employees Women in leadership positions Non-German senior executives Senior executives with international experience >80% BASF Capital Market Story January 2016 * Per metric ton of sales products/excluding oil and gas production; ** Highest possible score 1.0; *** Per one million work hours 31

32 Strategic lever: Sustainability Sustainable Solution Steering 74.1% 23% Sustainable Solution Steering 2.6% 0.3% Substantial sustainability contribution in the value chain Meets basic sustainability standards in the market Specific sustainability issue which is actively addressed Significant sustainability concern, action plan in development Novel methodology to screen and steer our portfolio* 23% Accelerators: outgrow their markets by 2-10% deliver margins >10% above the average represent >60% of BASF s R&D pipeline 74% Performers <1% Challenged products Increase the share of Accelerators from 23% in 2014 to 28% by 2020 BASF Capital Market Story January 2016 * 60,000 product applications analyzed; covering 98.3% of the relevant portfolio or 66.3bn. in sales (2014 data) 32

33 Strategic lever: Operational excellence DrivE with ~ 1 bn earnings contribution Annual earnings contribution (in million ) 5,000 4,000 3,000 2,000 1,000 DrivE program Targeted annual earnings contribution of 1 billion by end of 2018 Optimization of processes and structures in all regions, e.g. manufacturing incremental capacities productivity increase Project timeline: NEXT DrivE Former cost saving programs pre STEP BASF Capital Market Story January

34 Profitability of BASF will grow faster than global chemical production Financial targets for next years Sales growth* Slightly faster than the global chemical production EBITDA growth Well above global chemical production Deliver attractive returns Earn a significant premium on cost of capital Remain a strong cash provider Continuously generate high levels of free cash flow Progressive dividend policy We want to grow or at least maintain our dividend BASF Capital Market Story January 2016 * Without considering Natural Gas Trading and Storage business 34

35 Appendix I Q reporting BASF Capital Market Story January

36 Chemicals Slight earnings growth despite start-up costs Q3 15 segment sales (in million ) vs. Q3 14 EBIT before special items (in million ) Intermediates % Monomers 1,522 (4%) 3,640 (13%) Petrochemicals 1,411 (26%) Q3 Q4 Q1 Q2 Q Sales development Period Volumes Prices Portfolio Currencies Q3 15 vs. Q3 14 (2%) (16%) (2%) 7% BASF Capital Market Story January

37 Performance Products Earnings impacted by challenging market conditions Q3 15 segment sales (in million ) vs. Q3 14 EBIT before special items (in million ) Performance Chemicals 1,009 (2%) Nutrition & Health 496 (5%) 3,899 (1%) Dispersions & Pigments 1,176 +1% Care Chemicals 1,218 +1% Q3 Q4 Q1 Q2 Q Sales development Period Volumes Prices Portfolio Currencies Q3 15 vs. Q3 14 (2%) (4%) (1%) 6% BASF Capital Market Story January

38 Functional Materials & Solutions Earnings growth on continued good demand in automotive and construction Q3 15 segment sales (in million ) vs. Q3 14 EBIT before special items (in million ) Performance Materials 1,678 +1% Coatings % 4,517 0% Catalysts 1,472 (6%) Construction Chemicals % Q3 Q4 Q1 Q2 Q Sales development Period Volumes Prices Portfolio Currencies Q3 15 vs. Q3 14 (1%) (5%) 0% 6% BASF Capital Market Story January

39 Agricultural Solutions Difficult market environment impacts earnings in seasonally slow quarter Q3 15 segment sales (million ) vs. Q3 14 EBIT before special items (million ) ,018 +6% 1, Q3 Q Q3 7 Q3 Sales development Period Volumes Prices Portfolio Currencies Q3 15 vs. Q3 14 6% 10% 0% (10%) BASF Capital Market Story January

40 Oil & Gas Higher earnings in Exploration & Production Q3 15 segment sales (million ) vs. Q3 14 EBIT bsi/net income (million ) Natural Gas Trading 2,939 (4%) 3,606 (2%) Exploration & Production % * Q3/2014 Net Income Q3/2015 Net Income Sales development Period Volumes Price/Currencies Portfolio Q3 15 vs. Q3 14 2% (6%) 2% Exploration & Production Natural Gas Trading Net income BASF Capital Market Story January 2016 * Previous year values restated due to dissolution of disposal group Natural Gas Trading 40 9

41 Oil & Gas Impact of projects with Gazprom on BASF s P&L At-equity consolidation (share of net income shown in the EBIT) Proportionally/ fully consolidated Wintershall AG (Libya) 51% Upstream Oil & Gas EBIT Wintershall Achimgaz Noordzee (Achimov area IA) (Netherlands) Financial results 50% 50% Upstream Yuzhno Russkoye Gas Mktg C. 100% Planned Achimov area IV/V* 25% + 1 share GASCADE 50.02% Planned Nord Stream (II) (offshore) 10% Yuzhno Russkoye (SNGP) 35%** Natural Gas Transport Nord Stream (I) (offshore) 15.5% 50.02% NEL = Income before taxes and minority interests./. Income taxes./. Minority interests = Net income 100% Natural Gas Transport OPAL 50.02% 49.98% entitled to Gazprom 50.02% entitled to BASF BASF Capital Market Story January 2016 * incl. Gas Marketing Company ** Economic interest of BASF 41

42 Review of Other Million Q3 15 Q3 14 Sales EBIT before special items (98) (7) Thereof corporate research costs group corporate costs currency results, hedges and other valuation effects other businesses (104) (53) (96) (53) Special items 26 (20) EBIT (72) (27) BASF Capital Market Story January

43 Cash Flow Strong cash flow in Q1-Q Million Q1-Q3 15 Q1-Q3 14* Cash provided by operating activities 8,494 4,932 Thereof changes in net working capital miscellaneous items 2,500 (497) (900) (181) Cash used in / provided by investing activities (4,955) (3,785) Thereof payments related to tangible / intangible assets (4,387) (3,587) acquisitions / divestitures Cash used in financing activities (3,504) (995) Thereof changes in financial liabilities dividends (649) (2,900) 1,661 (2,656) Q1-Q Cash flow from operating activities increased by 72% to 8.5 billion Cash inflow from changes in net working capital of 2.5 billion Free cash flow improved to 4.1 exceeding free cash flow of FY 2014 BASF Capital Market Story January 2016 * Previous-year figures restated due to dissolution of disposal group Natural Gas Trading 43

44 Balance sheet remains strong Balance sheet September 30, 2015 vs. December 31, 2014* (in billion ) Highlights September 30, 2015 Total assets increased slightly by ~ 1 billion to 72.3 billion Long-term assets Disposal group Inventories Trade accounts receivable Other assets Liquid funds Equity Financial debt Disposal group Provisions & other liabilities Inventories decreased by ~ 1.6 billion Trade accounts receivable down by 0.7 billion Net debt nearly unchanged at 13.8 billion Equity up ~ 2 billion and an equity ratio of 42% Dec Sep Dec Sep BASF Capital Market Story January 2016 * Previous year values restated due to dissolution of disposal group Natural Gas Trading 44

45 BASF Capital Market Story January