Tackling the challenges ahead

Transcription

1 Michael Heinz Chief Executive Officer & Global Integration Manager Ciba Vontobel Swiss Chemicals Day, Zurich August 27, 2009 Tackling the challenges ahead 1

2 1 Robust performance in difficult environment 2 Managing the downturn 3 Clear priorities for use of cash 4 Ciba integration 5 Outlook 2

3 Robust performance in challenging business environment Business development Q Cash generation remained strong; cost containment efforts show effects Earnings of chemical activities down; continued strong performance of Agricultural Solutions High special charges of 300 million due to Ciba integration Key figures Q vs. Q Sales: 12.5 billion (-23%) EBIT before special items: 1.1 billion (-53%) Net income: 343 million (-74%) Earnings per share: 0.37 (-73%) Adjusted EPS: 0.79 (-49%) Operating cash flow H1 2009: 3.6 billion (+39%) 3

4 BASF today a well-balanced portfolio Total sales 2008: 62.3 billion Percentage of sales 2008 Chemicals 18% Plastics* 15% Performance Products** 13% Functional Solutions 15% Agricultural Solutions 5% Oil & Gas 23% Inorganics Petrochemicals Performance Polymers Polyurethanes Dispersions & Pigments Care Chemicals Catalysts Construction Chemicals Crop Protection Exploration & Production and Natural Gas Trading Intermediates Paper Chemicals Coatings Performance Chemicals 4 * Styrenics are reported under Other following the transfer of the Specialty Plastics and Foams business units to the Performance Polymers division as of January 1, 2008 ** Performance Products segment as of April 1, 2009 (not including Ciba)

5 Oil & Gas and Agro businesses providing a stable earnings basis EBIT* before special items by activity in billion without non-compensable foreign taxes on oil production 7 Chemical activities Agro Oil & Gas *** 2002*** 2003*** ** 2008** 5 * Without Other ** 2007 and 2008 according to new segment structure (excl. Styrenics and corporate costs) *** Based on German GAAP

6 Relentless fixed cost management Index Absolute level of fixed costs stable compared to last trough, while business increased significantly Acquisitions in 2006 pushed up fixed costs slightly Fixed costs represent around 30% of total costs Fixed costs indexed Sales indexed EBITDA indexed 6

7 1 Robust performance in difficult environment 2 Managing the downturn 3 Clear priorities for use of cash 4 Ciba integration 5 Outlook 7

8 Acting swiftly with focus on cost and cash Short-term measures Temporary shut-down or reduction of capacity of around 200 plants worldwide, reducing global capacity temporarily to slightly above 60% Implementation of short-time work Strict management of inventories and accounts receivable Longer-term measures Continuous consolidation of production base Synergies from efficient integration of acquisitions Reduced capex spending Restructuring and efficiency program NEXT 8

9 Sustainable improvement of cost base Annual earnings contribution in million 2,500 2,000 1,500 1, NEXT Completed restructuring programs NEXT Project timeline: Potential earnings contribution: > 1 billion by 2012 Non-recurring costs: 300 million Investment: 700 million Personnel reduction: >1,000 employees

10 Solid financing as a key advantage in turbulent times Credit Rating Strong investment grade rating: Moody s: A1/P-1 outlook stable; Standard & Poor s: A+/A-1 outlook negative Committed to credit ratios that support a single A rating Bonds 100% Bonds for a total 4.0 billion and GBP400 million issued in 2009 Balanced bond maturity profile Commercial 4 Paper 6 % * Syndicated Loans No difficulties in issuing commercial paper Commercial paper program of $12.5 billion ($3.15 billion drawn by end of Q2 2009) Broadly syndicated undrawn long-term back-up lines of $6.0 billion Short-term syndicated credit facility of CHF 3.5 billion 10

11 1 Robust performance in difficult environment 2 Managing the downturn 3 Clear priorities for use of cash 4 Ciba integration 5 Outlook 11

12 Strong history of cash flow generation In billion Cash provided by operating activities Free cash flow* ** 2002** 2003** * H * Cash provided by operating activities less capex (in 2005 before CTA) ** According to German GAAP

13 Use of cash adapted to current market conditions Reduction of net working capital by ~ 1 billion Focus on operating cash flow R&D Capex Acquisitions Dividend Stable Reduction of 20% compared with 2008* Focus on Ciba integration Increasingly difficult to maintain dividend at * Not including Ciba and Revus; Capex 2008: 2.5 billion

14 1 Robust performance in difficult environment 2 Managing the downturn 3 Clear priorities for use of cash 4 Ciba integration 5 Outlook 14

15 BASF has become the leading player in specialty chemicals BASF s position pre acquisition Position of combined businesses Plastic additives 4 1 Coating effects materials 4 2 Paper chemicals

16 Integration of Ciba s business lines into BASF structure Ciba businesses 2008 sales in billion BASF division Coatings Effects ~ 1.1 Dispersions & Pigments Plastic Additives Lubricant Additives Oilfield & Mining Chemicals Water Treatment Home & Personal Care Paper ~ 1.6 ~ 0.3 ~ 0.9 Performance Chemicals Care Chemicals Paper Chemicals Note: Expert Services will remain stand-alone unit 16

17 Ciba integration: Learnings from the discovery phase Ciba Global business units Limited differentiation of business models Diversified R&D activities Focus on individual sites Sub-optimal structures BASF actions Transfer to regional business units Reposition businesses Increase focus in R&D Optimize global production network Apply BASF excellence 17

18 Ciba integration: Extensive restructuring measures Personnel Reduction of ~3,700 positions, majority of reductions by end of 2010 Production sites 23 sites currently under strategic review, i.e. closure, divestiture or restructuring possible 32 production sites planned to be optimized and/or restructured, e.g. Bradford, Grenzach, Lampertheim and Maastricht Non-production sites 36 locations planned to be exited by 2010 Headcount reduction by region Asia 16% Europe 58% Production sites under review by region Europe 11 Asia 8 Americas 26% Americas 4 18

19 Ciba integration: Synergies Synergy ramp-up in million 500 Target: at least 400 million Synergies in percent of sales (2008: 4.0 billion) Synergies roughly equally allocated to Corporate functions Production Marketing & Sales R&D Procurement 0 40 end 2009 end /2012 Steady State 0 19 Note: Ciba revenues 2008: CHF5,919 million or 3,986 million

20 Ciba integration: Integration costs Million Cash costs 1) Non-cash costs 2) thereof step-up of inventories accelerated depreciation of IT system ) mainly severance costs 2) final amount of non-cash costs depends on final results of purchase price allocation and final decision on site closures 20

21 Completion of all major structural integration steps by end of Q Fast integration within 12 months after closing Major integration activities Discovery, concept and planning Q Q Q Q Global SAP roll-out to BASF standard Migration of finance, accounting and HR to BASF service platforms Restructuring of legal entities Completion of all major branding activities Decisions on sites currently under review 21

22 1 Robust performance in difficult environment 2 Managing the downturn 3 Clear priorities for use of cash 4 Ciba integration 5 Outlook 22

23 Severe challenges for BASF in 2009 Basic assumptions for 2009 Decline in global gross domestic product (-3%) global industrial production (-10%) global chemical production excluding pharma (-8%) Average exchange rate of $1.35 per Average oil price of $55/bbl Outlook for 2009 In view of the current economic environment and the expenses resulting from the Ciba integration, we anticipate a significant decline in sales and earnings. Therefore, BASF is unlikely to earn its cost of capital in

24 Forward-looking statements This presentation includes 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. This presentation contains a number of forward-looking statements including, 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 with respect to future events and financial performance. Actual financial performance of the entities described herein 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. Forward-looking statements represent estimates and assumptions only as of the date that they were made. 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. 24

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