We create chemistry for a sustainable future

Transcription

1 We create chemistry for a sustainable future Michael Heinz, Member of the Board of Executive Directors, BASF SE Commerzbank Sector Conference, August 28, 2018

2 Cautionary note regarding forward-looking statements This presentation contains forward-looking statements. These statements are based on current estimates 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 are based on assumptions that may not prove to be accurate. Such risk factors include those discussed in the Opportunities and Risks Report from page 111 to 118 of the BASF Report BASF does not assume any obligation to update the forward-looking statements contained in this presentation above and beyond the legal requirements. 2 August 2018 BASF Capital Market Story

3 Agenda 1 At a glance 2 Strategic levers 3 Segments 3 August 2018 BASF Capital Market Story

4 BASF shares an attractive investment Growth above chemical industry average driven by innovative and sustainable products and solutions Broad and resilient portfolio with global market access and strong customer relationships Unique Verbund concept competitive advantage based on integrated sites, operational excellence and best-in-class technologies 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 4 August 2018 BASF Capital Market Story

5 Chemicals a growth industry Global annual growth rate of ~3.4%* Agriculture Health & Nutrition Energy & Resources Construction & Housing Consumer Goods Transportation Electrical & Electronics Chemistry as enabler to meet current and future needs ~10 bn 70% 50% 30% people by 2050 of the world population will live in cities by 2050 more primary energy consumption by 2050 more food needed by August 2018 BASF Capital Market Story * Forecast average annual real change ; BASF Report 2017, p. 121

6 Broad and resilient portfolio 2017: Sales of 64.5 billion; EBITDA of 12.7 billion Percentage of sales 2017* 25% 25% 9% 5% Chemicals Performance Products Functional Materials & Solutions Agricultural Solutions Oil & Gas EBITDA 5.4 billion Petrochemicals Monomers Intermediates EBITDA 2.4 billion Dispersions & Pigments Care Chemicals Nutrition & Health Performance Chemicals EBITDA 2.3 billion Catalysts Construction Chemicals Coatings Performance Materials EBITDA 1.3 billion Agricultural Solutions EBITDA 2.1 billion Oil & Gas 6 August 2018 BASF Capital Market Story * Not depicted here: Other 4% of BASF Group sales and EBITDA of (679) million

7 Global market access through regional presence North America Sales 15,357 million EBIT 1,236 million Employees 18,295 Antwerp Ludwigshafen Florham Park Europe Sales 29,214 million EBIT 4,742 million Employees 71,653. Asia Pacific Sales 14,343 million EBIT 2,209 million Employees 18,256 Freeport South America, Africa, Middle East Sales 5,561 million EBIT 335 million Employees 7,286 Geismar São Paulo Kuantan Regional centers Selected sites Verbund sites Selected research and development sites Nanjing Hong Kong 7 August 2018 BASF Capital Market Story 2017: Sales by location of customer; EBIT by location of company

8 Verbund unique competitive advantage Actively managed in line with market requirements People, Customers, Technology, Production Energy savings > 300 million p.a. Logistics savings > 600 million p.a. Infrastructure savings > 100 million p.a. Annual cost savings of more than 1 billion through integrated production Verbund concept supports sustainability, reduces waste and avoids CO 2 emissions of 6 million tons p.a. 8 August 2018 BASF Capital Market Story

9 BASF Group increases sales and earnings slightly solid volume growth in Q2, prices raised, currency headwinds persisted Financial figures Q Q Change % Sales 16,782 million 16,264 million 3 EBITDA before special items 3,295 million 3,291 million 0 EBITDA 3,232 million 3,233 million 0 EBIT before special items 2,356 million 2,251 million 5 EBIT 2,291 million 2,181 million 5 Net income 1,480 million 1,496 million (1) Reported EPS (1) Adjusted EPS (1) Cash flows from operating activities 2,224 million 2,969 million (25) Sales development Volumes Prices Portfolio Currencies Q vs. Q % 6% 0% (6%) 9 August 2018 BASF Capital Market Story

10 Stepwise increase of earnings level 12.7 EBIT and EBITDA* billion, CAGR EBIT 17% CAGR EBITDA 8% EBIT EBITDA Avg. EBITDA level in depicted years 10 August 2018 BASF Capital Market Story * 2010, 2011 indicative, adjusted for IFRS 10/11; as reported, without non-compensable foreign income taxes on oil production

11 Strong cash flow development Cash flows from operating activities and free cash flows billion, Cash flows from operating activities Free cash flows 11 August 2018 BASF Capital Market Story

12 Attractive dividend 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 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% 12 August 2018 BASF Capital Market Story * Dividend yield based on share price at year-end

13 Delivering consistent, long-term value Current market capitalization: 75 billion* Average annual performance with dividends reinvested Last 10 years August 2008 July 2018 Last 3 years August 2015 July % BASF +5.3% +3.6% Euro Stoxx % +7.0% DAX % +7.3% MSCI World Chemicals +9.5% August 2018 BASF Capital Market Story * As of July 31, 2018

14 Financial targets for the coming years Sales growth slightly faster than 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 grow or at least maintain dividend at the previous year s level 14 August 2018 BASF Capital Market Story

15 Our priorities We aim to grow sales and earnings faster than global chemical production in the coming years, driven by Innovations for a sustainable future Investments in organic growth M&A opportunities and portfolio pruning measures Operational excellence and cost discipline 15 August 2018 BASF Capital Market Story

16 Outlook 2018* for BASF Group confirmed Slight sales growth Slight increase in EBIT before special items Slight decline in EBIT Significant premium on cost of capital with considerable decline in EBIT after cost of capital Underlying economic assumptions for 2018 GDP growth: +3.0% (unchanged) Growth in global industrial production: +3.2% (unchanged) Growth in global chemical production: +3.4% (unchanged) Exchange rate: US$1.20 per (unchanged) Oil price (Brent): US$70 per barrel (previous assumption: US$65 per barrel) * 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 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. 16 August 2018 BASF Capital Market Story

17 Agenda At a glance Strategic levers Portfolio development Investments Innovation Sustainability Operational excellence Segments 17 August 2018 BASF Capital Market Story

18 Continuous global portfolio development to maintain a balanced portfolio Growth fields Specialties and solutions Attractive markets Differentiation by customer proximity and innovations Differentiated commodities Attractive markets Differentiation by process technologies and integration Innovation pipeline ~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 18 August 2018 BASF Capital Market Story * Excluding Oil & Gas sales

19 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 Refinish coatings Surface treatment Seeds and crop protection ~ 7.7 billion sales in emerging and innovation-driven businesses BASF core business Selected transactions 2010 today Strong Partnerships Gazprom PETRONAS Sinopec Total Divestitures Styrenics Fertilizers Selected assets in Oil & Gas Natural gas trading & storage Custom synthesis business Textile chemicals Polyolefin catalysts Industrial coatings Leather chemicals ~ 21.1 billion sales in businesses with limited fit and differentiation potential 19 August 2018 BASF Capital Market Story

20 Clear acquisition criteria Strategic acquisition criteria 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 Acquisition criteria Financial 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 20 August 2018 BASF Capital Market Story

21 BASF acquired agricultural solutions businesses and assets from Bayer Facts about transactions with Bayer BASF to become an even better partner for farmers by 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 Combined figures of transactions with Bayer All-cash purchase price Sales 2017 Sales 2016 Sales by region 7.6 billion (subject to certain adjustments at closing, asset and share deal) ~ 2.2 billion ~ 2.0 billion ~60% North America ~15% South America ~15% Europe, Middle East, Africa ~10% Asia Pacific Closing took place in August 2018 EBITDA 2016* R&D expenses 2016 ~ 550 million ~ 350 million Sites 5 chemical production and formulation sites 17 R&D sites Regional seed production and breeding facilities * On a pro-forma adjusted basis 21 August 2018 BASF Capital Market Story

22 Acquisition adds excellent businesses and assets from Bayer and enhances our innovation potential in Agricultural Solutions Insecticides Fungicides Functional Crop Care*. Digital Ag activities Herbicides Trait research R&D projects. Existing BASF Agricultural Solutions portfolio Seeds New parts of portfolio Significant seed businesses for key row crops, such as canola/oilseed rape, cotton and soybeans Global vegetable seeds business Complementary additions to portfolio Non-selective herbicides with strong market presence, ideal extension of our herbicide portfolio Attractive seed treatment business Promising seed and trait research, e.g., hybrid wheat and further R&D projects Highly innovative digital Ag activities * Including seed treatment New businesses and assets from Bayer 22 August 2018 BASF Capital Market Story

23 Pro-forma 2017 figures of future Agricultural Solutions segment Sales by region billion Asia Pacific South America, Africa, Middle East ~7.9 Europe Sales by business area billion Seeds Crop Protection ~7.9 BASF Crop Protection Acquired businesses North America Acquired businesses R&D expenses billion Acquired businesses ~0.9 BASF Crop Protection and Plant Biotech* EBITDA billion Acquired businesses ~1.8 BASF Crop Protection * Reported under Other 23 August 2018 BASF Capital Market Story

24 Update on further recently announced M&A activities BASF and LetterOne intend to merge their oil and gas subsidiaries Pro-forma sales 2017: ~ 4.7 billion Pro-forma EBITDA 2017: ~ 2.8 billion BASF and LetterOne conducted a confirmatory due diligence and are negotiating transaction agreements Closing could be expected in Q BASF and Solenis to join forces by combining paper and water chemicals Pro-forma sales 2017: ~ 2.4 billion BASF to hold a 49% share of the combined entity; funds managed by Clayton, Dubilier & Rice to hold 51% Closing is anticipated for the end of 2018 at the earliest BASF to acquire Solvayʼs integrated global polyamide business Purchase price: ~ 1.6 billion Sales 2016: ~ 1.3 billion EBITDA 2016: ~ 200 million On June 26, 2018 the EU Commission opened an in-depth investigation and will likely take a decision in Q August 2018 BASF Capital Market Story

25 Investments in organic growth Investments of ~ 4.0 billion planned for 2018 Capex budget by segment Capex budget by region Other 18% Chemicals 25% Other** 5% South America*** 8% Europe 54% Oil & Gas* 18% 19.0 billion Performance Products 16% Asia Pacific 14% 19.0 billion Agricultural Solutions 4% Functional Materials & Solutions 19% North America 19% * 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 25 August 2018 BASF Capital Market Story

26 Asia and China continue to dominate global chemical production Real chemical production (excl. pharma) (trillion US$, base year 2015) World Asia Pacific 17% 19% 7% % CAGR 3.4% 16% 15% 7% % 1% 7% 6% 5% 7% % CAGR 4.4% 1% 6% 5% 5% 5% % Asia Pacific North America Greater China South Asia South East Asia Europe Others Japan South Korea Australia, New Zealand 26 August 2018 BASF Capital Market Story Source: BASF

27 BASF investigates establishment of second Verbund site in China Legend Greater China headquarters Verbund site Asia Pacific headquarters Xinjiang Tibet 27 August 2018 BASF Capital Market Story Heilongjiang Jilin Liaoning Inner Mongolia Beijing Hebei Tianjin Ningxia Shanxi Shandong Qinghai Gansu Shaanxi Jiangsu Henan Nanjing Sichuan Shanghai Hubei Anhui Chongqing Zhejiang Jiangxi Hunan Guizhou Fujian Yunnan Guangxi Guangdong Hong Kong Hainan Parameters 100% BASF-owned and operated Potential investment of up to US$10 billion until around 2030 Investment to evolve in phases Startup of first plants in 2026 at the latest Most advanced Verbund site with smart manufacturing concept Environment, health and safety concept according to BASF s global standards and local laws and regulations Next step: Pre-feasibility study

28 Innovation will drive future growth R&D expenditures 2017 Key facts 1.9 billion R&D expenditures in 2017 Corporate Research 20% Chemicals 7% R&D expense to sales ratio ~3% ~10,000 employees in R&D Oil & Gas 2% Agricultural Solutions 27% 1.9 billion Performance Products 21% Functional Materials & Solutions 23% ~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 28 August 2018 BASF Capital Market Story

29 Corporate Research: BASF s key technology capabilities are bundled in seven focus areas Selected key technology capabilities reflect where BASF requires continued effort and resources to safeguard today s and tomorrow s excellence in innovation. BASF s key technology capabilities Biotechnology Catalysis Production processes Materials Polymer technologies Biodegradable and bio-based materials Enabling methods 29 August 2018 BASF Capital Market Story

30 BASF capturing the fast-growing battery materials market E-mobility drives battery materials growth Chemistry of cathode active materials (CAM) is key to address e-mobility challenges ~15-20% p.a Li-ion 2025 battery market Market projections for 2025: 8-15 million electric vehicles * built per year kt of CAM in e-mobility billion CAM market size BASF enables electromobility Unparalleled access and commitment to the automotive industry Strategic global supply, technology and production partnerships Well-established position in key CAM technologies (NCA & NCM)** Rapid expansion to global, cost-competitive asset Industry leading position in NCA capacity footprint 30 August 2018 BASF Capital Market Story *Electric vehicles: BEV, HEV and PHEV **NCA: nickel cobalt aluminum oxide; NCM: nickel cobalt manganese

31 Key supplier in battery materials, well-positioned for further growth Elyria, Ohio BASF TODA America Europe, planned production Onoda/Kitakyushu, Japan BASF TODA Battery Materials Battle Creek, Michigan BASF TODA America Amagasaki, Japan R&D, Application Technology Center Beachwood, Ohio R&D, Application Technology Center Production site Technology center Ludwigshafen, Germany R&D, Application Technology Center Shanghai, China R&D, Application Technology Center Shanghai, China BASF Battery Materials Headquarters 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 31 August 2018 BASF Capital Market Story

32 Sustainable Solution Steering Goal: Increase the share of Accelerators from 23% in 2014 to 28% by 2020 Percentage of sales % Substantial sustainability contribution in the value chain >60,000 product applications analyzed 27.3% Accelerators strong growth in their markets 68.3% Sustainable Solution Steering Meets basic sustainability standards on the market Specific sustainability issues which are being actively addressed deliver margins above the average represent majority of BASF s R&D pipeline 68.3% Performers <1% Challenged products 4.3% 0.1% Significant sustainability concern identified and action plan developed 32 August 2018 BASF Capital Market Story

33 BASF products and solutions in everyday life Innovations for a sustainable future Nutrilan Superabsorbents Sokalan Omega-3 ecoflex / ecovio Trilon M Tinuvin Ultramid Tinosorb Luquafleece Coatings Cellasto Infinergy 33 August 2018 BASF Capital Market Story

34 Resource efficiency Responsible use of carbon sources 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 CO 2, 1% waste* Comparisons with European emissions trading benchmarks show that our chemical plants operate at above-average energy efficiency 23 million tons of CO 2 emissions by BASF worldwide in 2017 compared to 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 CO 2 equivalents (thereof 6% attributable to BASF)** In 2017, BASF achieved CDP leadership status once again * 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) 34 August 2018 BASF Capital Market Story

35 Operational excellence DrivE with ~ 1 billion targeted earnings contribution from end of 2018 onwards Annual earnings contribution DrivE million 1,000 0, million 150 million Goal 1 billion DrivE program Optimization of processes and structures in all regions, including manufacturing incremental capacities million 650 million productivity increase Project timeline: Total 35 August 2018 BASF Capital Market Story

36 Strong track record in operational excellence BASF Group* indexed; CAGR CAGR EBITDA 8% CAGR Sales 5% EBITDA Sales CAGR Fixed Costs 3% Fixed Costs August 2018 BASF Capital Market Story * Excl. companies with major IFRS 10/11 restatements, i.e. BASF YPC Nanjing, Libya onshore,other Oil & Gas and Catalysts companies

37 Digitalization will support BASF s growth and efficiency Digital Business Models Growth Digital business models New revenue streams Smart Innovation Customer connectivity Digitalization in R&D Increased supply share Higher innovation output Smart Supply Chain Efficiency Predictive maintenance Increased capacity Augmented reality in production Increased work efficiency Smart Manufacturing Smart supply chain Reduced working capital 37 August 2018 BASF Capital Market Story

38 Agenda At a glance Strategic levers Segments Chemicals Performance Products Functional Materials & Solutions Agricultural Solutions Oil & Gas 38 August 2018 BASF Capital Market Story

39 Chemicals Earnings slightly down due to higher fixed costs and lower cracker margins, but still on a high level Sales Q vs. Q million EBIT before special items million Intermediates % 4,132 +2% Petrochemicals 1,593 +1% 1, ,120 1,102 1,053 1,134 1,074 Monomers 1,731 +1% 0 Q2 Q3 Q4 Q1 Q Sales development Volumes Prices Portfolio Currencies Q vs. Q % 5% 0% (4%) 39 August 2018 BASF Capital Market Story

40 Performance Products Slightly higher earnings driven by higher margins Sales Q vs. Q million Performance Chemicals 974 (1%) Nutrition & Health 391 (16%) 3,949 (5%) Dispersions & Pigments 1,396 (3%) Care Chemicals 1,188 (6%) EBIT before special items million Q2 Q3 Q4 Q1 Q Sales development Volumes Prices Portfolio Currencies Q vs. Q (2%) 2% (1%) (4%) 40 August 2018 BASF Capital Market Story

41 Functional Materials & Solutions Sales growth on higher prices and volumes, earnings decline due to higher fixed and raw material costs Sales Q vs. Q million Performance Materials 1,997 +3% Coatings 995 0% 5,540 +5% Catalysts 1, % Construction Chemicals % EBIT before special items million Q2 Q3 Q4 Q1 Q Sales development Volumes Prices Portfolio Currencies Q vs. Q % 6% 0% (5%) 41 August 2018 BASF Capital Market Story

42 Agricultural Solutions Earnings increased slightly due to a more favorable product mix Sales Q vs. Q million 2,000 (2%) 1,526 1,501 EBIT before special items million % 278 1, Q Q Q Q Sales development Volumes Prices Portfolio Currencies Q vs. Q % 1% 0% (7%) 42 August 2018 BASF Capital Market Story

43 Oil & Gas Considerably higher sales and earnings Sales Q vs. Q million EBIT before special items million Net income million 1,200 1, % Q Q Q Q Q Q Sales development Volumes Prices/Currencies Portfolio Q vs. Q % 18% 0% 43 August 2018 BASF Capital Market Story

44 Review of Other Financial figures Q Q million million Sales EBIT before special items (134) (151) Thereof Costs of corporate research (90) (93) Costs of corporate headquarters (66) (58) Foreign currency results, hedging and other measurement effects Other businesses 17 (12) Special items (17) (30) EBIT (151) (181) 44 August 2018 BASF Capital Market Story

45 Cash flow development 1st half 2018 Cash flow development H H million million Cash flows from operating activities 3,455 3,802 Thereof Changes in net working capital (1,221) (1,684) Miscellaneous items (351) 178 Cash flows from investing activities (1,735) (2,365) Thereof Payments made for tangible / intangible assets (1,449) (1,642) Acquisitions / divestitures 64 (65) Cash flows from financing activities (518) (886) Thereof Changes in financial liabilities 2,526 1,932 Dividends (3,044) (2,837) Free cash flow 2,006 2, August 2018 BASF Capital Market Story

46 Balance sheet remains strong Balance sheet June 30, 2018 vs. December 31, 2017 billion Long-term assets Inventories Accounts receivable Other assets Liquid funds Disposal group Jun 30, 2018 Dec 31, Jun 30, 2018 Dec 31, 2017 Equity Financial debt Other liabilities Total assets increased by 3.1 billion, mainly due to higher accounts receivable, trade as well as cash and cash equivalents Net debt increased by 1.1 billion to 12.6 billion Equity ratio at 43.1% as of June 30, August 2018 BASF Capital Market Story

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