May 2, 2014, 8:30 a.m. (CEST), Mannheim · 2018-11-17 · S . BASF 1. st Quarter 2014 Analyst Conference Call May 2, 2014, 8:30 a.m. (CEST), Mannheim . Analyst Conference Call Script

S

BASF 1st Quarter 2014 Analyst Conference Call May 2, 2014, 8:30 a.m. (CEST), Mannheim

Analyst Conference Call Script

Hans-Ulrich Engel Manfredo Rübens The spoken word applies.

First Quarter 2014Financial highlightsMay 2, 2014

Good start to the year in chemicals business, oil and gas business considerably down

Page 2

BASF 1st Quarter 2014 Analyst Conference Call May 2, 2014

Cautionary note regarding forward-looking statements

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

2BASF Q1 2014 Analyst Conference Call May 2, 2014

Good start to the year in chemicals business, Oil & Gas considerably down

Business performance Q1’14 Q1’13 vs. Q1’13 Sales €19.5 billion €19.7 billion (1%) EBITDA €3.0 billion €2.9 billion +3% EBIT before special items €2.1 billion €2.2 billion (3%) EBIT €2.2 billion €2.2 billion +4% Net income €1.5 billion €1.4 billion +2% Reported EPS €1.61 €1.57 +3% Adjusted EPS €1.64 €1.67 (2%) Operating cash flow €1.7 billion €2.0 billion (17%)

Sales developmentPeriod Volumes Prices Portfolio Currencies

Q1’14 vs. Q1’13 4% (3%) 1% (3%)

3BASF Q1 2014 Analyst Conference Call May 2, 2014

Page 3


Hans-Ulrich Engel Ladies and gentlemen, good morning and thank you for joining us.

[Chart 3: Good start to the year in chemicals business, Oil & Gas considerably down]

The macroeconomic environment has not materially improved in the

first quarter of 2014: Concerns about economic growth in emerging

markets and somewhat softer macro data in the U.S. due to the

harsh winter impacted economic activity. The ongoing crisis in the

Ukraine is adding uncertainty. However, we expect that global

economic growth remains on track and can gain momentum as the

year progresses.

In Q1 2014 the euro appreciated against almost all currencies

compared to the first quarter of last year. This negatively impacted

both our top and bottom line. The positive volume trend reported for

the last two quarters continued and led to a good start to the year in

our chemicals business as well as in Agricultural Solutions. Our Oil

& Gas business, however, came in lower than prior-year quarter. Let

me now comment on the financial performance of BASF Group in

Q1 2014:

Sales in the first quarter declined slightly to 19.5 billion euros.

Higher volumes were more than offset by lower prices and

pronounced negative currency effects.

EBITDA rose by 3 percent to 3.0 billion euros.

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EBIT before special items declined by 3 percent to 2.1 billion

euros. We were able to improve our earnings in the chemicals

business and in Agricultural Solutions. However, we saw

considerably lower earnings in Oil & Gas. The devaluation of

almost all major currencies against the euro impacted earnings

negatively by roughly 200 million euros compared to prior year.

EBIT increased by 4 percent to 2.2 billion euros as a result of a

swing in special items. While special items amounted to minus 45

million euros in the previous year’s first quarter, we incurred

positive special items of 109 million euros in the first quarter of

2014. These are primarily related to a gain from the divestiture of

selected E&P assets on the UK Continental Shelf to the

Hungarian MOL Group.

Income taxes grew by 5 percent to 525 million euros and the tax

rate slightly increased from 24.4 to 25.4 percent.

At 1.5 billion euros, net income came in 2 percent higher than in

the first quarter of last year.

Adjusted earnings per share amounted to 1.64 euros in Q1 2014

after 1.67 euros in Q1 2013.

At 1.7 billion euros, operating cash flow was again strong but

stayed by about 300 million euros below the level of the previous

year’s first quarter due to a higher increase in net working capital.

Free cash flow reached almost 800 million euros, compared to 1.2

billion euros in Q1 of 2013.

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Portfolio optimization & development

BASF Q1 2014 Analyst Conference Call May 2, 2014

Portfolio optimization in Oil & Gas Increasing backward integration in the US4

Strengthen competitiveness ofPerformance Products

Strengthening Verbund sites in Asia

Page 7


[Chart 4: Portfolio optimization and development] Ladies and gentlemen, we continued to further optimize our

positioning and portfolio:

As announced earlier this month, we had groundbreaking of our

integrated aroma ingredients complex at the Verbund site in

Kuantan, Malaysia. We also inaugurated our new plant for

superabsorbent polymers in Nanjing, China, including a backward

integration into acrylic acid.

In Oil & Gas, our strategic portfolio optimization continued: We will

divest our shares in the VNG gas transport business in Germany,

and we sold selected E&P assets in the North Sea to MOL, as

already mentioned.

Furthermore, we are continuing our measures to further

strengthen the competitiveness of our Performance Products

segment, as announced last Friday. In the Nutrition & Health

division, we adjust our product portfolio and business models to

market needs. Due to the planned measures about 260 positions

in production, marketing and administration will be reduced

globally by end of 2015.

Finally, we announced today, that we are evaluating an

investment in a world-scale methane-to-propylene complex at the

U.S. Gulf Coast. This would be our largest single-plant investment

not only in the US, but also globally so far. The on-purpose

production of propylene would be used for captive demand and

substitute purchases from third parties in North America. We

would, thus, take further advantage of the very competitive gas

prices in the US due to shale gas and significantly improve our

cost position.

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This investment would be based on the same strategic rationale

as the ammonia project planned together with Yara.

Page 10


ChemicalsContinued volume increase, but lower prices

Intermediates711

+2%

Monomers 1,590

(5)%

Petrochemicals2,097

+4%

€4,3980%

650

495 527 510601

0

200

400

600

800

Q1 Q2 Q3 Q4 Q1

EBIT before special items (million €)

20142013

Q1’14 segment sales (million €) vs. Q1’13

Sales development Period Volumes Prices Portfolio Currencies

Q1’14 vs. Q1’13 8% (6%) (0%) (2%)


5

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[Chart 5: Chemicals – Continued volume increase, but lower prices]

Sales in Chemicals were at the level of the prior-year quarter.

Higher volumes in all three divisions were offset by lower prices and

negative currency effects. EBIT before special items declined due to

margin pressure as well as project and start-up costs related to our

ongoing investments, primarily in the isocyanates and acrylic acid

value chains.

In Petrochemicals, sales rose slightly driven by significantly

higher volumes in North America. Lower prices and currency

headwinds had a negative impact on sales. Higher margins in

cracker products in North America could not fully compensate for

lower margins in other product areas. As a consequence, EBIT

before special items came in lower than in the previous year’s first

quarter.

Sales in Monomers decreased as softer prices and adverse

currency effects were only partly offset by increased volumes.

Weaker margins, particularly for isocyanates in Asia as well as for

ammonia in Europe, led to a considerably lower EBIT before

special items. Project and start-up costs additionally impacted

earnings.

In Intermediates, sales were slightly above the first quarter of

2013 despite lower prices and negative currency effects. Volumes

increased, especially in amines and polyalcohols. EBIT before

special items rose significantly due to higher volumes and

improved margins.

Page 12


Performance ProductsContinued strong volume growth

PerformanceChemicals

818

0%

Care Chemicals1,264

(1)%

€3,8720%

Paper Chemicals344

(5%)


Nutrition & Health495

0% Dispersions& Pigments

951

+2%

379 394 376

216

427

0

200

400

600

Q1 Q2 Q3 Q4 Q1


20142013


Q1’14 vs. Q1’13 5% (1%) 0% (4%)


6

Page 13


[Chart 6: Performance Products – Continued strong volume growth]

Sales in Performance Products came in on prior-year level. Higher

volumes compensated for strong adverse currency effects. Prices

were almost stable. EBIT before special items increased

considerably, supported by strict fixed cost management.

Restructuring measures led to special items of 13 million euros.

In Dispersions & Pigments, sales were slightly up. Good volume

growth was mostly offset by negative currency effects and lower

prices. In Europe, we experienced higher demand mainly from the

construction and coatings industries. In the US, the cold weather

negatively impacted our business. EBIT before special items

increased slightly due to higher volumes.

Sales in Care Chemicals decreased slightly. We experienced a

positive volume development for personal and home care

products as well as formulation technologies. In hygiene, volumes

went down compared with the strong prior-year quarter, which had

benefitted from temporarily lower capacities in the market. Prices

were almost stable, but we faced strong currency headwinds.

EBIT before special items increased significantly driven by higher

volumes and better margins.

In Nutrition & Health, sales were flat. Prices were overall stable,

and volumes increased due to a good business development in

human nutrition, pharma as well as aroma chemicals. In animal

nutrition, however, we experienced ongoing competitive pressure

in our vitamins business, which led to a volume decline. Adverse

currency effects had a negative effect on sales.

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The inclusion of Pronova BioPharma, which we acquired in Q1

2013, contributed positively, both to sales and earnings. EBIT

before special items rose strongly.

In Paper Chemicals, sales decreased mainly due to negative

currency effects and lower prices. Volumes were stable as the

decline in graphical paper applications was offset by higher

volumes in our Kaolin business. EBIT before special items

decreased because of a less favorable product mix.

Sales in Performance Chemicals were stable. The strong

volume growth was offset by adverse currency effects and slightly

lower prices. The positive volume trend in water, oilfield and

mining solutions continued. Demand for fuel & lubricant solutions,

plastic additives and textile & leather chemicals was strong as

well. Fixed cost reduction measures and lower raw material costs

also contributed to a substantial increase of EBIT before special

items.

Page 16


Functional Materials & SolutionsStrong demand from automotive industry

Catalysts1,458

0%

ConstructionChemicals

443

(3%)

Coatings721

+3%

€4,236+1%


239293 300

238

311

050

100150200250300350

Q1 Q2 Q3 Q4 Q1


20142013


Q1’14 vs. Q1’13 7% (1%) 0% (5%)

Performance Materials 1,614

+3%


7

Page 17


[Chart 7: Functional Materials & Solutions – Strong demand from automotive industry]

Sales in Functional Materials & Solutions were slightly higher. We

saw good demand globally, especially from the automotive industry.

Our business with the construction industry suffered from the harsh

weather conditions in North America. This was offset, however, by

higher demand in Europe due to the mild winter. Adverse currency

effects as well as slightly lower prices negatively impacted sales.

EBIT before special items increased strongly, driven by higher

earnings in all divisions.

Sales in Catalysts were stable. Currency headwinds and lower

prices were offset by higher volumes. Demand for mobile

emissions catalysts grew strongly especially in North America,

and heavy duty catalysts sold well in Asia. Volumes in refinery

catalysts were up, but demand for chemical catalysts decreased.

In precious and base metal trading, sales grew slightly. EBIT

before special items rose substantially due to the positive volume

development and improved margins.

Sales in Construction Chemicals declined slightly in this

seasonally weak quarter. Volumes grew, and we were able to

increase prices. However, currency effects, especially in North

America and Asia, as well as portfolio measures in Europe

negatively impacted sales. Our successful restructuring measures

led to lower fixed costs and contributed to a strong increase of

EBIT before special items.

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In Coatings, sales were slightly up. We increased volumes and

were able to raise prices. This was, however, partly offset by

strong currency headwinds. We saw very good demand for OEM

coatings, especially in Asia and Europe. Volumes in refinish

coatings grew particularly in Asia. Our decorative paints business

developed quite well despite the negative impact from the

devaluation of the Brazilian real. EBIT before special items

increased strongly, supported by lower fixed costs.

Sales in Performance Materials were slightly up, driven by

higher demand for engineering plastics, TPU and Cellasto. Prices

were stable, but we faced currency headwinds. Our sales to the

automotive industry grew in all regions. Demand from the

construction industry was strong in Europe. Fixed costs increased

due to capacity expansions. EBIT before special items rose

considerably.

Page 20


Agricultural SolutionsGood start to the year

Q1’14 segment sales vs. Q1’13 (million €)

Q1’14 EBIT before special items vs. Q1’13 (million €)

20142013

0

200

400

600

Q1 Q1

20142013

0

500

1.000

1.500

2.000

Q1 Q1

1,653 5104981,556


Q1’14 vs. Q1’13 9% 3% 0% (6%)

BASF Q1 2014 Analyst Conference Call May 2, 2014 8

Page 21


[Chart 8: Agricultural Solutions – Good start to the year]

Agricultural Solutions had a good start to the year. Sales rose

thanks to high demand for our products, especially in the Northern

Hemisphere. We were able to increase volumes and prices.

However, this was partly offset by negative currency effects. EBIT

before special items increased slightly to more than 500 million

euros, despite significant currency headwinds.

In Europe, we realized considerable sales growth. Supported by

mild and partially wet weather conditions, we saw strong

business in most parts of Western, Central and Eastern Europe.

Especially cereal fungicides sold well. Successful price increases

compensated for negative currency effects.

Sales in North America were up despite the cold winter and the

weak US dollar. We saw high herbicide and fungicide orders from

US distribution channels. Due to the delayed start of the season,

less product than usual has been applied at this point. However,

we currently do not expect atypical inventory levels at the end of

the season.

Business in Asia grew as well, however, was impacted by strong

negative exchange rate effects. We enjoyed good demand in

China, Japan and India, particularly for fungicides.

South American sales decreased compared to previous year

quarter mostly because of currency effects. In Brazil, adverse

weather conditions impacted our business.

We expect sustained underlying demand growth for our innovative

product portfolio. Despite increased uncertainties related to currency

and crop price volatility, we remain confident to increase sales and

earnings in 2014.

Page 22


Oil & GasLower sales and earnings, net income increased

Exploration &Production

792

0%

Natural GasTrading 3,484

(10%) €4,276-8%

Q1’14 segment sales (million €) vs. Q1’13 EBIT bSI/Net income (million €)

162397

65

442

0

200

400

600

800

Q1/2013 Net Income Q1/2014 Net Income

Natural Gas Trading

Exploration & Production

Net income

630

Sales development Period Volumes Prices/Currencies Portfolio

Q1’14 vs. Q1’13 (7%) (4%) 3%

468


494

429

9

Page 23


[Chart 9: Oil & Gas – Lower sales and earnings, net income increased]

Sales in Oil & Gas decreased considerably. This was due to lower

sales in Natural Gas Trading as a result of lower volumes and prices.

Sales in Exploration & Production were stable despite a decrease in

the average Brent crude oil price of 6 euros to 79 euros per barrel.

EBIT before special items declined significantly, mainly driven by

lower earnings in Natural Gas Trading. In addition, there was no

contribution from our Exploration & Production activities in Libya in

Q1 2014.

Net income, however, rose considerably to 442 million euros due to a

disposal gain of around 130 million euros from the sale of selected

E&P assets on the UK Continental Shelf which are not operated by

Wintershall to MOL.

Sales in Exploration & Production were stable despite a lower

oil price. Different to prior year there was no offshore lifting in

Libya this quarter. However, we realized higher sales in Norway.

The average price for Brent crude oil decreased by 6 euros to 79

euros per barrel. EBIT before special items came in slightly lower.

The missing contribution from Libya and the lower oil price could

not be compensated by our activities in Norway.

Sales in Natural Gas Trading were significantly down. The mild

temperatures in Europe led to a considerable decrease in trading

volumes as well as to lower prices. The deconsolidation of our

GASCADE transport business, which is reported at-equity since

the beginning of this year, further impacted sales negatively.

EBIT before special items dropped substantially.

Page 24


Review of “Other”

Million € Q1’14 Q1’13Sales 1,077 1,065EBIT before special items (203) (182)thereof Corporate research

Group corporate costs Currency results, hedges and other valuation effectsStyrenics, fertilizers, other businesses

(102)(49)(95)

50

(98)(56)

56

59

Special items (8) (28)

EBIT (211) (210)


Page 25


[Chart 10: Review of ‘Other’]

Sales in ‘Other’ increased slightly to 1.1 billion euros mainly due to

higher volumes in raw material trading.

EBIT before special items declined by 21 million euros to minus 203

million euros. Negative currency effects as well as valuation effects

for our long-term incentive program were partly compensated by

overall lower expenses. While the prior-year quarter benefitted from

the reversal of a provision, we incurred charges in Q1 2014 for

recognized provisions due to the positive share price development.

There were only minor special items; EBIT in ‘Other’ was stable.

Page 26


Strong operating cash flowMillion € Q1’14 Q1’13Cash provided by operating activities 1,704 2,041thereof Changes in net working capital

Miscellaneous items(1,052)

578(713)

615

Cash used in investing activities (770) (1,637)thereof Payments related to tangible / intangible assets (936) (831)

Acquisitions / divestitures 263 (514)Cash provided by financing activities 389 363thereof Changes in financial liabilities

Dividends 413(24)

429(66)


Page 27


[Chart 11: Strong operating cash flow]

Cash provided by operating activities was 1.7 billion euros in the first

quarter of this year, a decrease of about 300 million euros versus

Q1 2013.

The rise in net working capital led to an outflow of more than 1

billion euros compared to 0.7 billion euros in Q1 2013. This was

mainly related to an increase in inventories and other receivables. At

770 million euros, cash used in investing activities was significantly

less than a year ago. Capex increased to 936 million euros

compared to 831 million euros in the previous year’s quarter. We

realized a cash inflow from the divestiture of selected E & P assets

to MOL. In Q1 2013 the acquisition of Pronova BioPharma had

caused a cash outflow of 526 million euros.

Free cash flow came in at 0.8 billion euros compared to 1.2 billion

euros in Q1 2013.

Page 28


Balance sheet remains strongBalance sheet March 31, 2014 vs. December 31, 2013 (billion €)

Liquid funds

Accountsreceivable

Long-termassets

37.1

9.4

1.8

Otherliabilities

Financialdebt

Stockholders’equity

Dec 312013

Mar 312014

Mar 312014

Dec 312013

64.4

Inventories

Other assets

9.6

3.7

Highlights March 31, 2014 Short-term assets increased by

€3.2 billion

Inventories rose slightly by €0.3 billion

Accounts receivables grewseasonally by €1.4 billion

Liquid funds up by €1.3 billion

Financial indebtedness rose by €0.6 billion to €15.1 billion

Net debt reduced to €11.9 billion

Equity ratio: 42%

37.5

10.8

3.1

9.9

3.9

67.9

2.7Disposal group

Disposalgroup

12

2.8


27.8

20.9

64.4

1.3

28.4

22.4

2.0

67.9

15.114.4

Page 29


[Chart 12: “Balance sheet remains strong”]

And now to the balance sheet.

Compared to the end of 2013 total assets grew by 3.6 billion

euros to 67.9 billion euros, primarily driven by a rise in short-term

assets.

While inventories were largely stable, we experienced an increase

in accounts receivables of 1.4 billion euros, driven by the

seasonally strong business in Agricultural Solutions.

Cash and cash equivalents increased by 1.3 billion to 3.1 billion

euros.

Total liabilities increased by almost 3 billion to 39.6 billion euros.

This was mainly attributable to two factors:

Liabilities in the disposal group natural gas trading

increased by around 700 million euros to 2 billion euros

due to a seasonal increase in accounts payable.

Over the course of the quarter BASF issued three bonds

to refinance expiring debt, increasing long-term debt by

1.6 billion euros.

Our financial indebtedness rose from 14.4 billion euros to 15.1

billion euros. Net debt decreased by roughly 650 million euros to

11.9 billion euros.

At 42 percent, our equity ratio remained at a healthy level.

Page 30


We aim to increase our sales volumes excluding the effects of acquisitions and divestitures.

Nonetheless, sales will decline slightly compared with 2013 due to the divestiture of the gas trading and storage business planned for mid-2014.

We expect a slight increase in EBIT before special items, especially as a result of considerably higher contributions from the Performance Products and Functional Materials & Solutions segments.

We aim to earn a high premium on our cost of capital once again in 2014.

Outlook 2014

GDP: +2.8%

Industrial production: +3.7%

Chemical production: +4.4%

US$ / Euro: 1.30

Oil price (US$ / bbl): 110

Assumptions 2014

Outlook 2014 confirmed


Page 31


[Chart 13: Outlook 2014 confirmed]

Let me now come to our outlook for 2014. Overall, we expect to

perform well in a market environment that remains challenging.

We keep our macroeconomic assumptions for the year unchanged.

However, uncertainties have increased especially with respect to

the further development of the situation in the Ukraine.

We continue to expect global chemical production to grow by about

4.4 percent.

Today we confirm our outlook 2014 for BASF Group, despite the

fact that we are experiencing stronger than expected negative

currency impacts resulting from the appreciation of the euro against

almost all other currencies:

We aim to increase our sales volumes excluding the effects of

acquisitions and divestitures.

Nonetheless, sales will decline slightly compared with 2013 due

to the divestiture of the gas trading and storage business planned

for mid-2014. Last year, the business to be divested generated

sales of 11.7 billion euros for the full-year 2013.

We expect a slight increase in EBIT before special items,

especially as a result of considerably higher contributions from

the Performance Products and Functional Materials & Solutions

segments.

We aim to earn a high premium on our cost of capital once again

in 2014.

Thank you for your attention. We are now happy to take your

questions.

Documents

May 2, 2014, 8:30 a.m. (CEST), Mannheim · 2018-11-17 · S . BASF 1. st Quarter 2014 Analyst Conference Call May 2, 2014, 8:30 a.m. (CEST), Mannheim . Analyst Conference Call Script