Upload
basf
View
2.254
Download
6
Tags:
Embed Size (px)
DESCRIPTION
Charts and Speech accompanying the 1Q2012 Conference Call for investors and analysts on April 27, 2012
Citation preview
BASF 1st Quarter 2012 Analyst Conference Call
April 27, 2012, 8:30 a.m. (CEST), Mannheim
Analyst Conference Call Script
Hans-Ulrich Engel
The spoken word applies.
Page 2
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
Page 3
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
Hans-Ulrich Engel
Ladies and Gentlemen, good morning and thank you for joining us.
[Chart 3: BASF with solid start to 2012]
After a rather slow fourth quarter 2011, we have seen a significant
improvement in business activity since the beginning of the year.
However, in line with our assumptions demand in our chemical
activities could not match the level of the exceptionally strong first
quarter 2011, which benefitted from high consumption and re-
stocking effects. The market environment for our Agricultural
Solutions as well as the Oil & Gas businesses, on the other hand,
was quite favorable, leading to a good start into 2012.
In the first quarter, we increased sales by 6 percent to 20.6 billion
euros. Overall volumes were flat. Volumes in our chemical
activities declined by 5 percent due to lower demand as well as
the modification of an earnings-neutral swap for cracker products.
We were able to successfully raise prices by 5 percent. Higher
raw material costs could not be fully passed on to the market.
EBITDA amounted to 3.9 billion euros, up 16 percent versus the
first quarter of last year.
EBITDA as well as EBIT were positively impacted by the disposal
gain of our fertilizer activities in Belgium and France in the amount
of 645 million euros.
EBIT before special items came in at 2.5 billion euros, 7 percent
below the record first quarter of last year.
Page 4
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
Page 5
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
Net income was 1.7 billion euros, 28 percent lower than a year
ago. Last year’s results included a capital gain of close to 900
million euros from the sale of our stake in K+S.
Adjusted earnings per share were 1.57 euros in Q1 2012 after
1.94 euros in Q1 2011.
Page 6
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
Page 7
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
[Chart 4: Important milestones in Q1 2012]
In the first quarter, we achieved important milestones:
We significantly strengthened our activities in battery materials
through several smaller acquisitions. In January, we announced
the acquisition of a stake in Sion Power, the global leader in the
development of lithium-sulfur batteries. In February, we bought
Ovonic, the global leader in nickel-metalhydride battery
technology. We also signed the purchase agreement for Merck’s
electrolyte activities. The transaction was closed last week. And
just yesterday we announced the acquisition of Novolyte
Technologies, a manufacturer of electrolyte formulations for
lithium batteries. With production sites in Europe, the United
States and Asia Pacific region we are now positioned as a global
supplier in the electrolyte formulation business. Last but not least,
our battery material plant in Ohio is on track to start operation in
Q4 of this year. All these measures support our goal to become
the leading supplier of battery materials.
Last month, we signed a heads of agreement with PETRONAS
for the expansion of our existing joint venture in Kuantan and the
construction of a number of new downstream plants at
PETRONAS’ new integrated RAPID complex in South Johor, next
to Singapore. The projects are to be implemented between 2015
and 2018. In total, we plan joint investments of one billion euros.
Finally, at the end of Q1 we completed the sale of our fertilizer
activities. We realized a disposal gain of 645 million euros, which
was booked as special item in ‘Other’.
Page 8
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
Page 9
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
Now I will explain the financial performance of our business
segments in more detail. The basis of comparison is the first quarter
2011.
[Chart 5: Chemicals – Margins improved over Q4 2011 thanks
to higher prices]
In the Chemicals segment we generated higher sales. The
Styrolution joint venture contributed positively to the top-line
because feedstock sales to the JV are now reported as third party
sales, which are shown as structural effect. Volumes dropped
mainly due to an earnings-neutral swap agreement for propylene,
which became effective in Q3 of 2011. On a comparable basis,
volumes increased slightly. Due to ongoing high raw material
prices, EBIT before special items did not reach the high level of Q1
2011.
In Petrochemicals, sales increased significantly. Prices for
cracker products moved above prior year. Prices for all other
product lines were below the very high prior year level. Margins
declined because we could not fully pass on the high raw material
costs to our customers. Overall, EBIT before special items was
considerably lower.
In Intermediates, sales decreased slightly. Demand was high
from key customer industries such as plastics and coatings, but
did not match the very good level of the previous year. Thus
volumes and margins declined. Consequently, EBIT before
special items came in lower.
Page 10
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
Page 11
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
Sales in Inorganics were stable. EBIT before special items did
not match the very good level of Q1 2011, mainly due to lower
margins in basic products.
Page 12
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
Page 13
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
[Chart 6: Plastics – TDI and MDI margins improved on higher
prices vs. Q4 2011]
In our Plastics segment sales decreased. Price increases could not
compensate for considerably lower volumes. The record margins for
polyamide precursors and polyurethanes, generated in Q1 2011,
could not be sustained. Earnings were substantially below the
excellent level of the previous year.
In Performance Polymers, sales were slightly lower. Slow textile
fiber demand in Asia led to lower volumes and margins for
caprolactam. On the other hand, continuously strong demand
from the automotive industry, particularly in North America, lifted
sales in engineering plastics. Foams’ sales exceeded the prior
year quarter based on healthy demand from the construction and
packaging industries. However, EBIT before special items
dropped substantially mainly due to a margin decrease.
Sales in Polyurethanes were down moderately. Sales to the
appliance and construction industries weakened but demand from
the automotive sector remained robust. The scheduled
turnaround of our Geismar site also negatively impacted volumes.
We continued to pursue our value-before-volume strategy and
successfully implemented price increases for TDI and MDI. As a
result, we saw margins in both TDI and MDI recover during the
quarter. EBIT before special items was significantly below prior
year given lower volumes and margins.
Page 14
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
Page 15
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
[Chart 7: Performance Products – Solid demand but below
exceptionally high level of Q1 2011]
Sales in Performance Products were stable. Demand for several
product lines was lower than a year ago. In the prior year quarter,
we benefitted from tight markets in several products. However, price
increases and positive currency effects compensated for lower
volumes. As we could not fully pass on higher raw material costs,
margins were softer and EBIT before special items declined.
In Dispersions & Pigments, sales rose significantly driven by
higher volumes and prices. Pigment sales were strong in North
America, but softer in Asia and Europe. Due to higher costs of idle
capacities and an unfavorable product mix effect, EBIT before
special items fell short of the prior year.
In Care Chemicals, sales decreased. The challenging
competitive environment led to lower volumes overall. Specialties,
however, continued to perform strongly. Since price increases
could not fully offset higher raw material costs, EBIT before
special items fell significantly.
Sales in Nutrition & Health increased slightly due to continued
good demand in nearly all businesses. Pharma showed lower
volumes. Margins in vitamins were affected by higher raw material
costs, which could not be passed on fully. EBIT before special
items was down on softer margins.
In Paper Chemicals, we made substantial progress in our
restructuring efforts. We were able to increase sales although the
market remained challenging. EBIT before special items improved
benefitting from higher selling prices and fixed cost reductions.
Page 16
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
Page 17
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
Sales in Performance Chemicals slightly increased. To
compensate for higher raw material costs, we raised prices. In a
competitive market environment, volumes were below the
previous year. As a consequence, EBIT before special items
decreased.
Page 18
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
Page 19
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
[Chart 8: Functional Solutions – Good performance driven by
high demand from automotive]
In our Functional Solutions segment, we slightly increased sales.
Demand from the automotive industry – especially from premium car
manufacturers – improved further. Lower precious metal prices and
volumes, however, had an offsetting effect. EBIT before special
items improved.
Sales in Catalysts dropped slightly due to lower prices and
volumes in precious metal trading, while we experienced high
demand for mobile emissions and chemical catalysts. EBIT before
special items increased due to the good volume growth in mobile
emissions and chemical catalysts.
Sales in Construction Chemicals grew by seven percent.
Demand in Asia and South America remained favorable and
North America showed a first positive development. Business in
Europe was affected by the cold weather and continuing
weakness in Southern Europe. We increased prices in all regions.
EBIT before special items slightly increased in this seasonally
weak quarter.
In Coatings, sales were up due to the continued high demand in
particular from premium car manufacturers as well as good
business in Asia and North America. In decorative paints, sales
declined due to lower volumes. We realized price increases
across all regions and for all major product lines. EBIT before
special items almost matched the good level of the previous year.
Page 20
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
Page 21
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
[Chart 9: Agricultural Solutions – Excellent start into the year]
Sales in Agricultural Solutions rose significantly. We were able to
grow volumes in all indications and implemented a three percent
price increase, thus maintaining the positive pricing momentum from
the previous two quarters. EBIT before special items was up
significantly.
The start of the new season in the Northern hemisphere was strong.
In Europe, the recent launch of our new fungicide Xemium® is
already a success: Q1 sales in the three major fungicide markets –
France, Germany and UK – confirm that Xemium has blockbuster
potential. Our crop protection business in the Eastern European
growth markets also developed favorably.
In North America, the early start of the season supported sales
growth, especially in herbicides. Our plant health business also
developed well.
Sales in Asia came in slightly lower, as the increased demand in
China could not fully compensate for a weaker season in Japan.
South American sales increased due to strong demand for Fipronil-
based products for sugar cane applications.
Page 22
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
Page 23
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
[Chart 10: Oil & Gas – Higher volumes and prices boosted
sales and earnings]
Sales in Oil & Gas increased strongly driven by Natural Gas
Trading as well as Exploration & Production. EBIT before special
items rose sharply.
Sales in Exploration & Production were up by 25 percent
primarily driven by higher prices and volumes. With an average of
119 dollars per barrel Brent, the oil price was considerably above
the level of the prior year’s quarter. Volumes also grew as a result
of higher oil production in Libya and higher gas production in
Russia and the Netherlands. As a result, earnings soared.
In Natural Gas Trading, sales grew substantially given higher
volumes and prices. Due to the cold temperatures in Europe in
the first quarter, we were able to significantly expand trading
volumes. Earnings strongly improved due to higher natural gas
volumes as well as from operations of the new OPAL pipeline.
Non-compensable taxes on oil production amounted to 451 million
euros compared to 280 million euros in the first quarter of the
previous year.
Net income was 416 million euros, an increase of 110 million euros
versus Q1 of last year.
Let me give you a brief update on the situation in Libya. In Q1, we
achieved to increase our production to roughly 70,000 barrels of oil
per day. At this point, we cannot predict when we will be back at a
production level of 100,000 barrels per day. The technical condition
of the infrastructure remains the bottleneck.
Page 24
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
Page 25
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
[Chart 11: Review of ‘Other’]
In ‘Other’, sales decreased by almost 30 percent due to the
deconsolidation of Styrenics following the formation of the
Styrolution joint venture with Ineos.
EBIT before special items declined to minus 330 million euros,
mainly due to the missing contribution from Styrenics and a higher
provision for the long-term incentive program.
Special items were positive due to a 645 million euros disposal gain
from the sale of the fertilizer business.
Page 26
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
Page 27
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
[Chart 12: Operating cash flow at €1.6 billion in Q1 ‘12]
Cash provided by operating activities was 1.6 billion euros in the
first quarter of this year. The rise in working capital of roughly 430
million euros reflected increased raw material prices compared with
one year ago.
Cash from investing activities amounted to 159 million euros. This
includes a cash inflow of roughly 680 million euros primarily
resulting from the divestiture of our fertilizer activities. The prior year
figure contained proceeds of almost 900 million euros from the K+S
disposal. Capex rose by 173 million euros to 720 million euros
compared to the previous year’s quarter.
Free cash flow came in at 0.9 billion euros compared to 1.7 billion in
Q1 2011.
From the beginning of this year, we were able to reduce net debt by
1.5 billion euros to 9.4 billion euros.
Page 28
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
Page 29
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
[Chart 13: Outlook 2012 confirmed]
Our outlook for 2012 remains unchanged:
We strive to increase volumes in 2012.
We aim to exceed the record levels of sales and EBIT before
special items achieved by BASF Group in 2011.
And – as stated at our analyst conference at the end of February
– in the first half of 2012, we will most likely not achieve the
exceptionally high results of the comparable period in 2011.
However, based on our assumption that the chemical demand will
pick up in H2 we expect to outperform the second half year
results of 2011.
Finally, we strive to earn a high premium on our cost of capital
again in 2012.
Page 30
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
Page 31
BASF 1st Quarter 2012 Analyst Conference April 27, 2012
[Chart 14: Delivering attractive shareholder returns]
Please understand that our earnings call has to be rather short
today due to our AGM this morning. Two of the key topics there will
be the approvals for
a dividend of 2.50 euros per share, which is an increase of
thirty euro cents over prior year
and a new share buy-back program for up to ten percent of
BASF’s shares over the next five year period.
And with that on to your questions.