Heading back to profitable growth

Transcription

1 Commerzbank German Investment Seminar 2010 New York January 12, 2010 Dr. Kurt Bock, CFO Heading back to profitable growth 1

2 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. 2

3 2009 A year of challenges Decisive actions in the crisis: Successful value before volume strategy Adjusting capacity to reduced demand Cost-cutting and efficiency improvement programs well on track Ciba integration accelerated Business conditions improving: Volumes improving sequentially from very low levels Positive impulses from Asia, especially China and from South America Business conditions in U.S. and Europe stabilizing 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 reported under Other

5 Outperforming sector margins due to well-balanced portfolio EBITDA margins* 20.0% 17.5% 15.0% 12.5% 10.0% 7.5% H1 BASF Group EBITDA margin excl. non-deductible oil taxes European chemical sector average** U.S. chemical sector average*** 5 * before special items ** Akzo Nobel, Bayer, Ciba, Clariant, ICI, Degussa, DSM, Rhodia, Solvay, LBI (since 2008) *** Dow, Dupont, Rohm&Haas, PPG, Lyondell (until 2007), Nova Source: Morgan Stanley, company reports

6 Strong cash flow generation In billion ** 2002** 2003** * Q Cash provided by operating activities Free cash flow* 6 * Cash provided by operating activities less capex (in 2005 before CTA) ** According to German GAAP

7 1 Focus on operational excellence 2 Well positioned for profitable growth 3 Outlook 7

8 Tenacious fixed cost management Index Fixed costs in 2008 at the same level as in the last trough 2001, while sales and earnings increased significantly Fixed cost increase from 2006 onwards related to acquisitions (Engelhard, Degussa Construction Chemicals) Fixed costs represent around 30% of total costs Sales indexed EBITDA indexed Fixed costs indexed 8

9 Sustainable improvement of cost base Annual earnings contribution in million New efficiency program NEXT Completed restructuring programs New EXcellence Targets (NEXT): 2,500 2,000 1,500 1, E 2012E > 500 individual projects to simplify processes, structures and production sites in all regions Project timeline: Estimated earnings contribution in 2009: ~ 300 million Targeted earnings contribution by 2012: > 1 billion 9

10 Higher than expected synergies at Ciba New target of at least 450 million Synergy ramp-up in million 500 New target: at least 450 million Synergies in percent of sales (2008: 4.0 billion) 12.5 Total integration costs Q1-Q3 2009: 470 million thereof: 457 million special items FY 2009E: 800 million thereof: 720 million special items E: 300 million thereof: 150 million special items end 2009 end /2012 Steady State 0 Headcount reduction by 3, Note: Ciba revenues 2008: CHF5,919 million or 3,986 million

11 1 Focus on operational excellence Stronger into the future 2 Well positioned for profitable growth 3 Outlook 11

12 BASF growth outpaces market Index 160 CAGR : Global chemical production* growth: 3.2% p.a BASF Group organic volume growth: BASF Group volume growth incl. M&A: 5.4% p.a. 7.6% p.a Chemical production* volume growth BASF organic volume growth BASF volume growth including M&A 12 * Without pharma

13 Well positioned for profitable growth Leading positions in growth industries and emerging markets Translate megatrends into business growth Drive growth in key customer industries Benefit from strong asset footprint in all major regions Continue expansion in Asia Ongoing portfolio optimization Continue with active portfolio management Drive portfolio closer to customers Excellent innovation platform Product and system innovation as growth drivers Strong pipeline of innovations Leading in patent index Growth target: We strive to outperform global chemical production growth by at least 2 percentage points 13

14 Future nutrition of growing world population Plant biotechnology pipeline taps into huge market potential Discovery Identifying genes & proof of concept up to 6 years Stage I Look for proof of concept II up to 4 years Stage II Early product development up to 3 years Stage III Advanced product development up to 2 years Stage IV Pre-Launch up to 3 years Market Value Superior agricultural productivity Better and healthier nutrition/feed Plants as renewable raw materials Yield & stress (corn, soybean, cotton, canola) Herbicide tolerance Fungal resistance Improved amino acid Healthier fatty acids (Omega-3&6) Amylopectin High oil > $2 billion* < $100 million** < $100 million** $ million** $ million** 14 * Valuation reflects annual gross sales value of trait in 2020 ( at farm gate level) for initial country of launch only ** Value generated through the plant biotech trait across the respective value chain

15 Growth in emerging markets Outgrowing Asian Pacific chemical market by 2 percentage points p.a. China S. Korea Pakistan Bangladesh Taiwan India Thailand Hong Kong Vietnam Malaysia Indonesia Regional headquarters Verbund site Chemical production site * Asia Pacific service center Singapore Australia Japan BASF expects to double sales to 20 billion in Asia Pacific by 2020: Strengthen market focus through industry and customer target groups Develop and market innovations in Asia for Asia Invest in Asia to generate 70% of sales through local production 2 billion investments planned for R&D center * * Some sites not shown due to scale New Zealand

16 Strength through diversity: Active portfolio management pays off EBIT before special items by activity in billion * (without non-compensable foreign taxes on oil production) Chemical activities Crop Protection Oil & Gas BASF Group more profitable in Q than in last trough ( ) as a result of: - rigorous cost savings - active portfolio management Oil & Gas and Agro businesses providing a substantial earnings basis ** 2002** 2003** *** 2008 Q * Without Other ** Based on German GAAP *** As of 2007 according to new segment structure (excl. Styrenics and corporate costs)

17 Innovation will spur further growth Functional Solutions Performance Products Agricultural Solutions 14% 17% 24% 11% Plastics 24% 1% 9% Oil & Gas Chemicals Corporate Research Targeted annual sales from product innovation*: : up to 6 billion : 6-8 billion Five Growth Clusters : - Nanotechnology - Energy Management - Plant Biotechnology - Industrial Biotechnology - Raw Material Change Budget for growth clusters ( ): up to 1 billion Total R&D expenditures 2008: 1.35 billion 17 R&D spending in 2009 planned on similar level * New or improved products or new applications, max. 5 years on market, including Growth Clusters

18 1 Focus on operational excellence 2 Well positioned for profitable growth 3 Outlook 18

19 The economic recovery remains slow and fragile Positive impulses from Asia, especially China and from South America Business conditions in U.S. and Europe stabilizing Still high uncertainty about sustainability of recovery, structural problems continue to exist e.g. overcapacities Basic assumptions for entire year 2009 Decline in global gross domestic product ( 2.5%), global industrial production ( 9.1%) and global chemical production* ( 6.1%) Average exchange rate of $1.40 per Average oil price of $60/bbl 19 * Without pharma

20 Outlook 2009 Q4: Further signs of recovery in October and November. EBIT before special items will probably match the level of Q3 09. Full year: We anticipate a significant decline in sales and earnings. Ciba integration accelerated. Higher integration costs will negatively impact earnings. Therefore, BASF is unlikely to reach its goal of earning its cost of capital in

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22 Q performance sequentially improved due to operational strength Million Q3 09 Q3 08 Δ% Q2 09 Δ% Sales 12,798 15,772 (19) 12,502 2 EBITDA 1,993 2,171 (8) 1, EBIT before special items 1,248 1,568 (20) 1,140 9 Net income (69) 343 (31) Earnings per share ( ) (68) 0.37 (30) Adjusted EPS ( ) (36) 0.79 (23) 22

23 Volumes improving sequentially from very low levels Volume development of industrial activities* compared to average 2008 North America Europe 20% 10% 0% -10% -20% -30% Q2 20% Q1 10% Q1 Q2 Q3 0% Q3 Q4-10% Q2 Q3* Q1-20% Q4 Q2 Q1-30% Q3* South America, Africa, Middle East Asia Pacific 20% 10% 0% Q2 Q3 Q3* 20% 10% 0% Q2 Q1 Q3 Q2 Q3* -10% Q1 Q4 Q2-10% -20% -20% Q4 Q1-30% Q1-30% 23 * Incl. Chemicals, Plastics, Performance Products, Functional Solutions and Styrenics; Catalysts without precious metals; without Ciba