We create chemistry for a sustainable future

Transcription

1 Sanjeev Gandhi Member of the Board of Executive Directors Tokyo February 28, 2017 We create chemistry for a sustainable future

2 Cautionary note regarding forward-looking statements This presentation contains forward-looking statements. These statements are based on current estimates and projections of BASF management and currently available information. Future 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 factors include those discussed in the Opportunities and Risks Report from pages 111 to 118 of the BASF Report We do not assume any obligation to update the forward-looking statements contained in this presentation. 2

3 Agenda 1 At a glance 2 Strategic levers 3 Asia Pacific 4 Outlook 3

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

5 Chemicals a growth industry Global annual growth rate of ~3.6%* Agriculture Health & Nutrition Energy & Resources Construction & Housing Consumer products Automotive & Transport Electric & 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 2050 * Forecast average annual real change ; BASF Report 2016, p.121 5

6 Broad and resilient portfolio 2016: Sales of 57.6 billion; EBITDA of 10.5 billion Percentage of sales 2016* * Not depicted here: Other 3% of Group sales and EBITDA (1.0) billion 6

7 Verbund unique competitive advantage Actively managed in line with market requirements People, Customers, Technology, Production Energy savings > 300 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. 7

8 Global market access through regional presence North America Sales 14,042 million EBIT 1,113 million Employees 17,583 Freeport South America Sales 5,304 million EBIT 432 million Employees 7,307 Europe Sales 26,039 million EBIT 3,632 million Employees 70,784 Antwerp Ludwigshafen Florham Park Geismar Kuantan São Paulo Asia Pacific Sales 12,165 million EBIT 1,098 million Employees 18,156 Nanjing Hong Kong Sales by location of customer; EBIT by location of company Regional centers Selected sites Verbund sites Selected research and development sites 8

9 Stepwise increase of earnings level EBIT and EBITDA* billion, CAGR EBIT 16% CAGR EBITDA 7% EBIT EBITDA Avg. EBITDA level in depicted years * 2010, 2011 indicative, adjusted for IFRS 10 & 11; as reported, without non-compensable foreign income taxes on oil production 9

10 Strong track record in operational excellence BASF Group* indexed; CAGR CAGR EBITDA 8% EBITDA CAGR Sales 4% Sales CAGR Fixed Costs 3% Fixed Costs * Excl. companies with major IFRS 10/11 restatements, i.e. BASF YPC Nanjing, Libya onshore, other Oil & Gas and Catalysts companies 10

11 Strong cash flow development billion, % Operating cash flow Free cash flow 11

12 Attractive dividend We want to grow or at least maintain dividend at the previous year s level Dividend per share* Proposal: 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% * Adjusted for two-for-one stock split conducted in 2008 ** Dividend yield based on share price at year-end 12

13 Delivering consistent, long-term value Current market capitalization: 82 billion* Average annual performance with dividends reinvested Last 10 years February 2007 January 2017 Last 5 years February 2012 January % BASF +12.6% +0.5% Euro Stoxx % +5.4% DAX % +6.9% MSCI World Chemicals +10.7% * As of January 31,

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 previous year s level 14

15 Fourth quarter sales and earnings significantly above prior-year quarter Financial figures Q Change Q FY 2016 Change FY 2015 Sales 14.8 billion 7% 57.6 billion (18)% EBITDA 2.5 billion 31% 10.5 billion (1)% EBIT before special items 1.2 billion 15% 6.3 billion (6)% EBIT 1.2 billion 278% 6.3 billion 0% Net income 0.7 billion 103% 4.1 billion 2% Reported EPS % % Adjusted EPS 0.79 (22)% 4.83 (3)% Operating cash flow 1.9 billion 97% 7.7 billion (18)% Sales development Volumes Prices Portfolio Currencies Q vs. Q % 1% 0% 0% FY 2016 vs. FY % (4)% (15)% (1)% 15

16 Agenda 1 At a glance 2 Strategic levers Portfolio development Investments Innovation Sustainability Operational excellence 16

17 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 ~ 5.4 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 ~ 20.7 billion sales in businesses with limited fit and differentiation potential 17

18 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 18

19 Investments in organic growth Investments of ~ 3.9 billion planned for 2017 Capex budget (by segment) Capex budget (by region) Other 13% Chemicals 24% Other** 3% South America* 10% Europe 49% Oil & Gas 23% 19.0 billion Agricultural Solutions 4% Performance Products 21% Functional Materials & Solutions 15% Asia Pacific 16% North America 22% 19.0 billion Oil & Gas Europe * Including Africa and Middle East, ** Alternative sites currently being investigated 19

20 Selected recent investments in Asia Pacific Aroma ingredients complex Automotive coatings Highly reactive polyisobutene Chemical catalysts Mobile emissions catalysts Kuantan, Malaysia Caojing, China Kuantan, Malaysia Caojing, China Rayong, Thailand Total investments > 500 million Startups planned for 2017 Second coatings plant within 3 years Startup planned for second half of 2017 Capacity: 50,000 metric tons Startup planned for second half of 2017 BASF s first facility in Asia Pacific to produce process catalysts Startup planned for first half of 2017 New site to produce light-duty and motorcycle emissions catalysts Startup planned for first half of

21 Innovation will drive future growth R&D expenditures 2016 Key facts 1.86 billion R&D expenditures in 2016 Corporate Research 21% Chemicals 10% R&D expense to sales ratio ~3% ~10,000 employees in R&D ~3,000 projects Oil & Gas 2% 1.86 billion Performance Products 20% ~850 new patents in 2016 Agricultural Solutions 26% Functional Materials & Solutions 21% Research Verbund: Cooperations with more than 600 excellent partners from universities, startups and industry In 2016, sales of > 10 billion with products launched during last 5 years 21

22 Innovation Campus Asia Pacific in Shanghai supporting growth industries Phase II opened in Q Focus on research on advanced materials and polymers Integrated into global R&D network Global HQ for Advanced Materials & Systems Research Total investment (phase I & II): ~ 145 million Close cooperation with customers, materials scientists, technical and business experts First regional design consultation center in Asia Pacific, assisting designers in various phases of product development 22

23 Innovation Campus Mumbai An important hub for BASF s global R&D network Startup of 20,000 m 2 facility in March 2017 By 2020, around 300 scientists will collaborate globally and regionally Target industries: crop protection, performance chemicals, resins and coatings, personal care The BASF Innovation Campus Mumbai is part of a 100% BASF-owned entity. 23

24 Operational excellence DrivE with ~ 1 billion targeted earnings contribution Annual earnings contribution DrivE million 1, million Goal 1 billion DrivE program Targeted annual earnings contribution of 1 billion from end of 2018 on Optimization of processes and structures in all regions, including manufacturing incremental capacities productivity increase Project timeline: million Earnings contribution Total 24

25 Agenda 1 At a glance 2 Strategic levers 3 Asia Pacific 4 Outlook 25

26 Asia and China continue to dominate global chemical production Real chemical production (excl. pharma) (in trillion US$) World Asia Pacific 9% 18% 23% 50% 16% CAGR % % 8% 58% 1% 7% 9% 6% 12% % CAGR 5.6% 1% 6% 6% 5% 9% % Asia Pacific North America Greater China South Asia South East Asia Europe Others Japan South Korea ANZ Source: BASF 26

27 BASF in Asia Pacific 2016 BASF is present in 17 countries Customers from 38 markets Kuala Lumpur Nanjing Hong Kong Kuantan ~100 production sites * >120 sales offices * 18,156 employees ** ~ 12.2 billion sales *** Regional center Verbund sites Selected sites R&D/Technical centers Shared Services Center ~ 1.1 billion EBIT * Only selected sites and offices are depicted in this chart. Site and office numbers refer to companies of significant size where BASF holds a stake greater than 50%. ** As of December 31, *** Sales by location of customer. 27

28 BASF s performance in Asia Pacific Sales* (in billion ) EBIT (in billion ) 2016 Strong volume growth despite challenging environment Increased share of products produced in Asia R&D platform set up Cost discipline * By location of customer Negative top-line impact due to portfolio pruning Overcapacities and low oil price impact prices 28

29 BASF in Asia Pacific: Balanced portfolio Sales* by segment in 2016 (in billion ) Sales* by sub-region in 2016 (in billion ) Agricultural Solutions 4% Other 3% South Korea 9% Australia, New Zealand 3% 12.2 billion Chemicals 27% South Asia 11% 12.2 billion Japan 13% Functional Materials & Solutions 37% Performance Products 29% South East Asia 15% Greater China 49% * Sales to third parties by location of customer 29

30 Balanced asset base in Asia Pacific: Investments for profitable growth Selected major capex projects* Startup Startup planned for Care chemicals Polyurethane specialties Specialty plastics Engineering plastics Polymer dispersions 2-Ethylhexanoic acid Amines Surfactants Acrylic acid & SAP Resins Specialty plastics Crop protection products MDI (Chongqing) Innovation Campus (Shanghai) Polyamides China Neopentylglycol Isononanol Coating resins Automotive coatings Butanediol/PolyTHF Specialty amines Ethylene oxide Polyvinylpyrrolidone Aroma chemicals Automotive catalysts Highly reactive polyisobutene Innovation Campus (Mumbai) Automotive coatings Specialty plastics Plastic additives Asia Pacific** Process catalysts Emollients and waxes MDI (Caojing) Automotive coatings Plastic additives Planned investments : ~ 3 billion (16% of BASF Group) Increasing focus on investments where BASF: is technologically leading has a competitive advantage expects strong profitable market growth Target remains: ~75% own manufactured products by 2020 (today: ~59%) * Investments in property, plant and equipment (excluding acquisitions) ** Without China 30

31 Agenda 1 At a glance 2 Strategic levers 3 Asia Pacific 4 Outlook 31

32 Economic environment (forecast) 2016 (actual) GDP (%) Chemical production excl. pharma (%) Industrial production (%) US$/Euro Oil price: Brent (US$/bbl)

33 Outlook 2017 for BASF Group We expect BASF Group sales to grow considerably in the 2017 business year. We want to slightly raise EBIT before special items compared with BASF Group EBIT is also expected to grow slightly in We are likely to once again earn a significant premium on our cost of capital in

34 Appendix 1 Other financial data 2 Additional information and examples Portfolio development Investments Innovation and sustainability Recent acquisition 34

35 Chemicals Significantly higher earnings driven by strong volume growth and increased prices Sales Q vs. Q million EBIT before special items million Intermediates % 3, % Petrochemicals 1,207 +8% % ,000 2,000 1,000 (4%) 2,156 2,064 Monomers 1, % 0 Q Q FY 2015 FY 2016 Sales development Volumes Prices Portfolio Currencies Q vs. Q % 6% 0% 0% FY 2016 vs. FY % (11)% 0% 0% 35

36 Performance Products Earnings slightly up due to improved margins Sales Q vs. Q million EBIT before special items million Performance Chemicals 947 (4)% 3,602 (1)% Dispersions & Pigments 1,034 (1)% % ,000 1,000 1, % 1,745 Nutrition & Health % Care Chemicals 1,178 +1% 0 Q Q FY 2015 FY 2016 Sales development Volumes Prices Portfolio Currencies Q vs. Q % 0% (2)% 1% FY 2016 vs. FY % (2)% (2)% (1)% 36

37 Functional Materials & Solutions Profitable growth based on continued strong demand from the automotive industry Sales Q vs. Q million EBIT before special items million Performance Materials 1,740 +9% Catalysts 1, % % 458 2,000 1, % 1,946 Coatings % 4, % Construction Chemicals 564 0% Q Q ,000 0 FY 2015 FY 2016 Sales development Volumes Prices Portfolio Currencies Q vs. Q % (1)% 0% 0% FY 2016 vs. FY % (5)% 0% (1)% 37

38 Agricultural Solutions Sales grew considerably due to higher volumes; earnings burdened by higher fixed costs Sales Q vs. Q million 2,000 EBIT before special items million 200 2,000 1,000 1, % 1, (45)% 79 1,000 0% 1,090 1,087 0 Q Q Q Q FY 2015 FY 2016 Sales development Volumes Prices Portfolio Currencies Q vs. Q % (2)% 0% 3% FY 2016 vs. FY 2015 (2)% 0% 0% (2)% 38

39 Oil & Gas Sales and earnings increased significantly, mainly due to higher volumes Sales Q vs. Q million EBIT before special items / Net income million 1, % 922* 500 2, * * 163* 1,000 1, , * Q Q Q Q ** FY 2015 FY2016 Exploration & Production Natural Gas Trading Net income Sales development Volumes Prices / Currencies Portfolio Q vs. Q % 3% 0% FY 2016 vs. FY % (3)% (79)% * Including transportation business ** Natural Gas Trading divested to Gazprom end of September 2015 as part of the asset swap 39

40 Review of Other million Q Q FY 2016 FY 2015 Sales ,018 2,790 EBIT before special items (386) (114) (1,050) (888) Thereof Costs for corporate research (131) (95) (395) (402) Costs of corporate headquarters (57) (61) (222) (233) Foreign currency results, hedging and other measurement effects (182) (11) (331) (220) Other businesses (12) Special items (57) (21) (41) (97) EBIT (443) (135) (1,091) (985) 40

41 Cash flow development in 2016 million Cash provided by operating activities 7,717 9,446 Thereof Changes in net working capital 104 1,347 Miscellaneous items (734) (336) Cash used in investing activities (6,490) (5,235) Thereof Payments made for tangible / intangible assets (4,145) (5,812) Acquisitions / divestitures (2,164) 436 Cash used in financing activities (2,160) (3,673) Thereof Changes in financial liabilities 579 (933) Dividends (2,767) (2,806) Free cash flow 3,572 3,634 41

42 Balance sheet remains strong Balance sheet 2016 vs billion Long-term assets Equity Financial debt Total assets increased by 5.7 billion, mainly as a result of the Chemetall acquisition Equity ratio at 42.6% Provisions for pensions and similar obligations increased by 1.9 billion Net debt increased by 1.5 billion to 14.4 billion Inventories Accounts receivable Other assets Liquid funds* * Including marketable securities Dec 31, 2015 Dec 31, Dec 31, 2015 Dec 31, 2016 Other liabilities 42

43 Outlook 2017 by segment EBIT before special items million Forecast 2017* 2016 Chemicals** at prior-year level 2,032 Performance Products** slight increase 1,777 Functional Materials & Solutions slight increase 1,946 Agricultural Solutions slight increase 1,087 Oil & Gas considerable increase 517 Other considerable increase (1,050) BASF Group slight increase 6,309 * With respect to EBIT before special items, slight means a change of 1-10%, while considerable is used for changes greater than 11%. At prior-year level indicates no change (+/-0%). ** Effective January 1, 2017, the Chemicals and Performance Products segments activities for the electronics industry were merged and allocated to the Performance Products segment as the Electronic Materials global business unit. To facilitate comparability, the 2016 figures for both segments have been adjusted accordingly. 43

44 Appendix 1 Other financial data 2 Additional information and examples Portfolio development Investments Innovation and sustainability Recent milestones and acquisition of Chemetall 44

45 Continuous global portfolio development 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 Maintaining a balanced portfolio * Excluding Oil & Gas sales 45

46 Investment projects with startup in 2017 Aroma ingredients complex Kuantan, Malaysia BASF and PETRONAS further expand joint activities in Malaysia Investment: around 500 million Ammonia plant Freeport, Texas BASF and Yara are building worldscale ammonia plant in the U.S. 750,000 tons per year; hydrogen-based process Engineering plastics Schwarzheide, Germany Expansion of annual capacity by 70,000 tons Increasing BASFʼs global compounding capacity to more than 700,000 tons 46

47 Innovate in Asia Pacific for Asia Pacific and the world Acronal ECO series for better indoor air quality Low VOC acrylic dispersions for interior paints that meet growing consumer demand and stricter environmental regulations Add-on functionalities: stay clean and non-stain stick tailored for Asian customers Sokalan HP 20 technology for first super-concentrated detergent in China Special polymer that enhances whiteness and compatibility performance in detergents 47

48 Innovations for a sustainable future Examples with significant contributions to sustainability SLENTITE high-performance insulation material Trilon M phosphate alternative for dishwashing detergents Acronal MB from biomass to dispersions ecovio biodegradable polymer solution Green Sense resource-efficient concrete production FWC Four-Way Conversion catalyst removes particulates 48

49 Sustainable Solution Steering Novel methodology to screen and steer our portfolio Percentage of sales % Substantial sustainability contribution in the value chain >60,000 product applications analyzed ( 53.2 billion sales, 95.9% of BASF s portfolio) 68.3% Sustainable Solution Steering Meets basic sustainability standards on the market Specific sustainability issues which are being actively addressed 27.2% Accelerators outgrow their markets deliver margins above the average represent majority of BASF s R&D pipeline 68.3% Performers 4.2% 0.3% Significant sustainability concern, action plan developed <1% Challenged products Increase the share of Accelerators from 23% in 2014 to 28% by

50 Carbon efficiency Responsible use of raw materials by the chemical industry Growing world population needs access to energy, housing, healthcare and food Consumption of resources has to be reduced in order to limit global warming to <2 C Chemistry as enabler for low-carbon technologies (e.g., lightweight parts, battery materials, insulation, etc.) BASF uses raw materials responsibly: ~80% of carbon converted to products, ~20% needed for processes* Continuous efficiency improvements 22 million tons CO 2 emissions by BASF in 2016 compared to million tons p.a. for one coal-fired power plant Chemical industry: only ~10% of global consumption of fossil resources** 20% CO 2 80% products *BASF carbon mass balance calculation (2016, non-audited) **IEA

51 Milestones Q Acquisition of Chemetall closed Divestiture of industrial coatings business completed BASF to increase capacity of plastic additives production network BASF to increase MDI capacity in North America 51

52 Chemetall a global leader in surface treatment products and services Significant global presence and record of accelerated expansion in emerging markets Key facts One of the strongest globally managed brands in the sector Proprietary manufacturing technologies, rigorous product quality and performance standards Leading market positions in the automotive, aerospace and cold forming segments Long-standing, service-intensive customer relationships BASF Coatings site Chemetall site Track record of strong growth and high profitability An excellent strategic fit for BASF Coatings 52

53 53 BASF Investor Day 2015 Keynote speech 53