Investor Release BASF confirms outlook for 2012 despite growing economic risks 2 nd quarter 2012: - Sales up 6% and EBIT before special items up 11% compared with previous year s quarter - Strong business in Agricultural Solutions - Significant decrease in growth in China Outlook full year 2012: increase in sales and earnings targeted Ludwigshafen, Germany July 26, 2012 BASF s business performed solidly in the second quarter. The company improved sales by 6% to 19.5 billion and income from operations (EBIT) before special items increased by 253 million to 2.5 billion. While sales volumes declined in the chemicals business, which comprises the Chemicals, Plastics, Performance Products and Functional Solutions segments, the main contribution came from the strong performance of the Agricultural Solutions and Oil & Gas segments. In the first half of 2012, sales were 40.1 billion, 6% more than in the same period of the previous year. At over 5 billion, EBIT before special items matched the level of the first half of 2011. July 26, 2012 Investor Relations Contact BASF SE Magdalena Moll Florian Greger Dr. Ingo Rose Jochen Schneider Amber Usman Phone: +49 621 60-48230 Fax: +49 621 60-22500 investorrelations@basf.com BASF Corporation Markus Zeise Phone: +1 973 245 6013 markus.zeise@basf.com At the presentation of the company s second-quarter results, Dr. Kurt Bock, Chairman of the Board of Executive Directors, commented on the growing economic risks: Our customers are continuing to act BASF SE 67056 Ludwigshafen Investor Relations Phone: +49 621 60-48230 Fax: +49 621 60-22500 investorrelations@basf.com http://www.basf.com/share
cautiously and are reducing their inventories, also in expectation of falling prices due to declining raw material costs. In addition, the Chinese growth engine has started to stall leading to a decrease in BASF s sales in local-currency terms in Asia in the second quarter, as they also did in the first quarter of 2012, explained Bock. BASF confirms outlook for full year 2012 A look at the economic developments in the past months and at the order books have led BASF to become more cautious about its expectations for the global economy in 2012 than originally expected at the beginning of the year (previous forecast in parenthesis): Growth of gross domestic product: 2.3% (2.7%) Growth in industrial production: 3.4% (4.1%) Growth in chemical production: 3.5% (4.1%) An average euro/dollar exchange rate of $1.30 per euro An average oil price of $110/barrel in 2012 BASF does not expect an upturn in demand in the second half of 2012 compared with the first six months of the year. Pressure on margins will continue, although it may be somewhat lessened due to slightly lower raw material costs. Bock said: It remains our goal to increase sales and earnings compared with the second half of 2011. Our forecast is especially supported by the resumption of our crude oil production in Libya. It is unlikely that the earnings from our chemicals business will match the level of the previous year. We still aim to exceed the 2011 record levels in sales and EBIT before special items. To counter the challenges of the markets and the great political and macroeconomic uncertainties, BASF wants to protect its margins and
create value. The excellence program, STEP, announced in November 2011, which is expected to contribute around 1 billion to earnings each year as of the end of 2015, is fully on track. Measures will be accelerated and spending carefully analyzed. BASF is continuing to optimize its working capital, as is demonstrated by the good cash flow development in the second quarter. Although the company had planned a slight increase in its workforce in 2012, especially in emerging markets, it will slow this down due to the lack of visibility as to when business in Asia will pick up again. Second-quarter business development in the segments In the Chemicals segment, sales were slightly below the level of the previous second quarter, primarily due to lower sales volumes. Along with weaker demand, the optimization of the supply chain for steam cracker products, carried out in the third quarter of 2011, contributed to this decline in volumes. Sales to Styrolution Group companies had a positive impact on sales development for the segment. Earnings decreased significantly as a result of falling margins and the scheduled maintenance shutdown of several plants. Sales in the Plastics segment surpassed the level of the second quarter of 2011. While sales volumes were weaker, positive currency effects in particular boosted sales growth. Lower margins for some basic products led to a significant decline in earnings. Sales in the Performance Products segment grew slightly compared with the previous second quarter, largely as a result of positive currency effects. Sales volumes were lower. Increased raw material costs could not be fully passed on through higher sales prices. Earnings therefore declined due to lower margins and volumes.
Sales in the Functional Solutions segment increased. In addition to the inclusion of 50% of the Korean joint venture Heesung Catalysts Corporation, positive currency effects were particularly responsible for sales growth. This was partially offset by lower prices, especially in precious metals. Earnings did not match the level of the previous second quarter, primarily as a result of higher raw material costs. Business was very successful in the Agricultural Solutions segment. Sales volumes increased in all indications and regions. Furthermore, higher sales prices and positive exchange rate effects contributed to significant sales growth. Earnings were also considerably above the level of the previous second quarter. At 833 million, EBIT before special items in the first six months of 2012 already exceeded the amount for the full year 2011 ( 810 million). Increased volumes as well as higher gas prices led to significant sales growth in the Oil & Gas segment. Volumes grew in natural gas trading due to greater demand on spot trading markets. After the suspension of production in Libya from February to October of the previous year, it was possible to continuously produce crude oil there throughout the second quarter of 2012. Earnings before tax therefore considerably exceeded the level of the previous second quarter. Net income in Oil & Gas declined. Other posted a decline in sales, largely as a result of the divestiture of the styrenic plastics business, which was contributed to the Styrolution joint venture as of October 1, 2011. Earnings in Other improved as a result of lower provisions for the long-term incentive program, while an expense had been incurred in the previous second quarter.
Business development in the regions In Europe, sales increased by 9% in the second quarter of 2012. Volumes in the Agricultural Solutions and Oil & Gas segments grew significantly. Sales rose considerably in the Chemicals segment due to portfolio effects. EBIT before special items grew by 467 million to 1.9 billion, thanks to the higher contribution from the Oil & Gas and Agricultural Solutions segments. In North America, sales in the second quarter fell by 15% in U.S. dollars and by 5% in euro terms. This was mainly the result of lower volumes due to plant shutdowns and the optimization of the supply chain for steam cracker products in the third quarter of 2011. Sales in the Agricultural Solutions segment grew in all indications thanks to high demand. Lower margins in the Petrochemicals division as well as higher fixed costs resulting from plant shutdowns led to a 127 million decline in earnings to 330 million. Compared with the same period of 2011, sales in the Asia Pacific region were down 1% in local-currency terms and up 9% in euro terms. Positive currency effects more than offset reduced sales prices. Sales rose significantly in the Catalysts division, mainly due to higher sales volumes. Weaker margins, especially in the Petrochemicals division, led to a 57 million decline in earnings to 229 million. Sales in the South America, Africa, Middle East region rose by almost 1% in local-currency terms and in euro terms. While the business with crop protection products was very successful, sales in the Catalysts division declined due to lower volumes. Earnings in the region decreased by 30 million to 54 million.
About BASF BASF is the world s leading chemical company: The Chemical Company. Its portfolio ranges from chemicals, plastics, performance products and crop protection products to oil and gas. We combine economic success, social responsibility and environmental protection. Through science and innovation we enable our customers in almost all industries to meet the current and future needs of society. Our products and system solutions contribute to conserving resources, ensuring healthy food and nutrition and helping to improve the quality of life. We have summed up this contribution in our corporate purpose: We create chemistry for a sustainable future. BASF posted sales of about 73.5 billion in 2011 and had more than 111,000 employees as of the end of the year. BASF shares are traded on the stock exchanges in Frankfurt (BAS), London (BFA) and Zurich (AN). Further information on BASF is available on the Internet at www.basf.com. On July 26, 2012, you can obtain further information from the internet at the following addresses: Interim Report (from 7:00 a.m. CEST) basf.com/interimreport basf.com/zwischenbericht Press Release (from 7:00 a.m. CEST) basf.com/pressrelease basf.com/pressemitteilungen Live Transmission (from 9:00 a.m. CEST) basf.com/pcon basf.com/pk Speech print version (from 9:00 a.m. CEST) basf.com/pcon basf.com/pk Live Transmission Telephone conference for analysts and investors as well as information about BASF shares (from 11:00 a.m. CEST) basf.com/share basf.com/aktie Note to Editors You can download press photos from the internet at the following links: Current press photos basf.com/pressphoto-database basf.com/pressefoto-datenbank
Current TV footage tvservice.basf.com/en tvservice.basf.com Forward-looking statements This release contains forward-looking statements based on current experience, estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict and are based upon assumptions as to future events that may not prove to be accurate. Many factors could cause the actual results, performance or achievements of BASF to be materially different from those that may be expressed or implied by such statements. BASF does not assume any obligation to update the forward-looking statements contained in this release.
n Reporting Factsheet Q2 2012 BASF Group (Million ) Q2 2012 Q2 2011 Change (%) Q2 2012 Q1 2012 Change (%) Sales 19,481 18,461 5.5 19,481 20,590 (5.4) Income from operations before depreciation and amortization (EBITDA) 3,132 3,015 3.9 3,132 3,890 (19.5) Income from operations (EBIT) before special items 2,490 2,237 11.3 2,490 2,532 (1.7) EBIT bef. SI adjusted for non-compensable oil taxes 2,045 2,237 (8.6) 2,045 2,081 (1.7) Income from operations (EBIT) 2,229 2,217 0.5 2,229 3,120 (28.6) Financial result (112) (121) 7.4 (112) (73) (53.4) Income before taxes and minority interests 2,117 2,096 1.0 2,117 3,047 (30.5) Net income 1,229 1,454 (15.5) 1,229 1,724 (28.7) Earnings per share ( ) 1.34 1.59 (15.7) 1.34 1.88 (28.7) Adjusted earnings per share ( )* 1.60 1.75 (8.6) 1.60 1.57 1.9 EBITDA in % of sales 16.1 16.3-16.1 18.9 - Cash provided by operating activities 1,889 783 141.3 1,889 1,571 20.2 Additions to long-term assets** 1,171 859 36.3 1,171 739 58.5 Amortization and depreciation** 903 798 13.2 903 770 17.3 Segment assets (end of period)*** 53,139 49,250 7.9 53,139 52,547 1.1 Personnel costs 2,114 2,273 (7.0) 2,114 2,394 (11.7) Number of employees (end of period) 111,995 110,289 1.5 111,995 111,533 0.4 *) Adjusted for special items and amortization of intangible assets **) Intangible assets and property, plant and equipment (including acquisitions) ***) Intangible assets, property, plant and equipment, inventories and business-related receivables Segments Sales EBIT bef. special items EBIT 2 st Quarter (Million ) 2012 2011 Change Change Change 2012 2011 2012 2011 (%) (%) (%) Chemicals 3,348 3,392 (1.3) 436 674 (35.3) 435 686 (36.6) Plastics 2,878 2,828 1.8 256 383 (33.2) 256 383 (33.2) Performance Products 4,122 4,095 0.7 446 513 (13.1) 382 456 (16.2) Functional Solutions 2,974 2,766 7.5 134 167 (19.8) 134 165 (18.8) Agricultural Solutions 1,467 1,205 21.7 414 331 25.1 414 331 25.1 Oil & Gas 3,585 2,461 45.7 880 332 165.1 800 332 141.0 thereof Exploration & Production 1,251 563 122.2 793 269 194.8 713 269 165.1 Natural Gas trading 2,334 1,898 23.0 87 63 38.1 87 63 38.1 Other* 1,107 1,714 (35.4) (76) (163) 53.4 (192) (136) (41.2) BASF Group 19,481 18,461 5.5 2,490 2,237 11.3 2,229 2,217 0.5 *) Other includes the carved-out businesses with styrenic plastics, fertilizer activities, the sale of feedstock, engineering and other services, as well as rental income and leases. This item also includes foreign currency results from financial indebtedness and results from hedging for raw material prices that are not allocated to the segments. Factors influencing sales Changes in Thereof changes in % vs. Q2 2011 sales Q2 2012 Volumes Prices Currencies Acqu./Divest. Chemicals (1) (14) (2) 5 10 Plastics 2 (5) 0 6 1 Performance Products 1 (5) 1 5 0 Functional Solutions 8 0 (1) 6 3 Agricultural Solutions 22 14 2 6 0 Oil & Gas 46 31 14* 1 BASF Group 6 0 1 5 0 *) mix of price and currency effects
Segments Q2 2012 vs. Q2 2011 Chemicals: (sales: (1)%; v:(14)%; p:(2)%; c:+5%; s:+10%)* Sales slightly below level of previous second quarter, primarily due to lower volumes resulting from lower demand. Sales to Styrolution Group companies and to the recently divested fertilizer business had a positive impact on sales development. Earnings decreased significantly as a result of falling margins and the scheduled maintenance shutdown of several plants. Sales in Inorganics increased significantly mainly driven by portfolio effects. After the divestiture of our fertilizer activities, the delivery of basic products for fertilizer production is now reported under sales to third parties. Furthermore, we increased our sales prices. Earnings improved, mostly as a result of lower fixed costs. Sales in Petrochemicals decreased despite positive portfolio effects from the divestiture of our styrenics activities. Weaker sales volumes and lower prices negatively impacted our business. Lower margins in almost all product lines and the scheduled maintenance shutdown of the steam cracker in Port Arthur, Texas, led to significantly weaker earnings than in the previous second quarter. In Intermediates, sales grew significantly, thanks in part to positive currency effects and higher demand from important customer sectors such as the agrochemicals and plastics industries. Nevertheless, margins were under pressure as rising costs for key raw materials could not be fully compensated by higher prices. Earnings therefore did not match the high level of the previous second quarter. Plastics: (sales: +2%; v:(5)%; p:0%; c:+6%; s:+1%)* Sales in the Plastics segment surpassed the level of the second quarter of 2011. While volumes were weaker, positive currency effects boosted sales growth. Lower margins in basic products led to a significant decline in earnings. Sales in Performance Polymers division decreased slightly despite positive currency effects. Volumes fell, mainly as a result of weaker demand for polyamide precursors. Capacity utilization rates declined, in part due to a scheduled plant shutdown in Ludwigshafen. Because of this and because of the lower sales volumes, earnings decreased significantly compared with the second quarter of 2011. Polyurethanes sales were above the level of the same period of the previous year. Positive currency effects, high demand from the automotive industry and increased sales prices more than compensated for lower volumes. As a result of higher raw material costs and scheduled plant shutdowns in our MDI and TDI production at several sites, earnings did not quite match the level of the previous second quarter. Performance Products: (sales: +1%; v:(5)%; p:+1%; c:+5%; s:0%)* Sales grew slightly compared with the previous second quarter, largely as a result of positive currency effects. Volumes were lower. We were not able to fully pass on increased raw material costs through higher prices. Earnings therefore declined due to lower volumes and margins. In the Dispersions & Pigments division, sales grew mostly as a result of positive currency effects. Especially in North America, sales improved considerably thanks to currency effects and higher volumes. Lower demand for pigments was chiefly responsible for a decline in volumes in Europe. Due to a less favorable product mix, earnings did not match the level of the previous second quarter. In Care Chemicals, sales declined as a result of cautious customer behavior in anticipation of falling raw material prices. Consequently, volumes were below the previous year quarter. Margins were under pressure. Hence, EBIT before special items was down significantly. Nutrition & Health posted sales growth especially in North America and Asia. In addition to slightly increased prices, positive currency effects were largely responsible for this development. We were only partly able to pass on higher raw material costs; earnings therefore remained below the level of the previous second quarter. Sales in Paper Chemicals were up compared with the second quarter of 2011. This increase was driven by positive currency effects and higher sales prices, which more than compensated for a decline in volumes resulting from weaker demand. Thanks to progress in restructuring our business, we exceeded the earnings level of a year ago. Sales in Performance Chemicals rose due to successful price increases as well as currency impacts. Volumes fell, especially due to lower demand in Europe and North America for fuel and lubricant additives as well as for plastic additives. We were able to improve earnings. Functional Solutions: (sales: +8%; v:0%; p:(1)%; c:+6%; s:+3%)* Sales increased largely due to positive currency effects and portfolio measures. Volumes matched level of previous years quarter. This was partially offset by lower prices, especially in precious metals. Earnings did not match the level of the previous second quarter, primarily as a result of higher raw material costs and lower results in precious metal trading. Catalysts sales rose mainly attributable to continuous strong demand for mobile emission and chemical catalysts. Slightly higher volumes, however, could not fully compensate for the high raw material costs as well as the lower trading results in precious metals. As a result, earnings were below the strong quarter of the previous year. Sales in Construction Chemicals were up due to successful price increases as well as positive exchange rate and portfolio effects. Volumes increased in North America and Asia but remained below the previous year s quarter in Europe. Earnings before special items were up given higher prices and improved margins. Sales in Coatings exceeded the high level of the previous second quarter, thanks to increased prices, positive currency effects and high volumes for industrial coatings and coatings for the automotive industry. We were partly able to pass on increased raw material costs to the market. Higher fixed costs led to lower earnings than in the same quarter of the previous year.
Agricultural Solutions: (sales: +22%; v:+14%; p:+2%; c:+6%; s:0%)* The Agricultural Solutions segment had a very successful quarter. We increased volumes in all indications and regions. Business development was very positive for fungicides in particular. Furthermore, higher prices and positive exchange rate effects contributed to considerable sales growth. Earnings were also significantly above the level of the previous second quarter. Oil & Gas: (sales: +46%; v:+31%; p/c:+14%; s:+1%)* Increased volumes as well as higher gas prices led to significant sales growth in the Oil & Gas segment. In natural gas trading volumes increased. We were able to continuously produce crude oil in Libya throughout the second quarter of 2012. Earnings therefore considerably exceeded the level of the previous second quarter. By contrast, net income declined. Other: Other posted a decline in sales, largely as a result of the divestiture of our styrenics activities to Styrolution as of October 1, 2011. Earnings in Other improved as a result of the reversal of provisions for our long-term incentive program for executives, while an expense had been incurred in the previous second quarter. *v=volume; p=price; c=currency; s=structure; earnings = EBIT before special items Financials Special items in income from operations of - 261 million in Q2 2012 (Q2 2011: - 20 million) resulted from restructuring charges as well as the impairment of an oil field development project in Norway. Income taxes Q2 2012: 826 million (Q2 2011: 545 million). Non-compensable oil taxes Q2 2012: 445 million (Q2 2011: none). Tax rate Q2 2012: 39.0% (Q2 2011: 26.0%). Underlying tax rate Q2 2012: 22.8% (Q2 2011: 26.0%). Financial result Q2 2012: - 112 million (Q2 2011: - 121 million). Cash provided by operating activities H1 2012: 3,460 million (H1 2011: 3,038 million). Increase in net working capital in H1 2012 by 0.7 billion (H1 2011: 1.2 billion increase). Free cash flow H1 2012: 1.8 billion (H1 2011: 1.8 billion). Capex H1 2012: 1.7 billion (H1 2011: 1.3 billion) below corresponding depreciation and amortization. As of June 30, 2012: Equity ratio 38.6%; net debt decreased by 0.7 billion to 11.5 billion compared to end of Q2 2011. Outlook Revised assumptions for 2012: Global GDP: +2.3% (before: +2.7%) Global industrial production: +3.4% (before: +4.1%) Global chemical production (excl. pharma): +3.5% (2012 before: +4.1%) Average US$/ exchange rate of US$1.30/ (unchanged) Average oil price of US$110 per barrel (unchanged) Forecast 2012: For the FY 2012, BASF aims to exceed the record levels of sales and EBIT before special items achieved in 2011 BASF will strive again to earn a high premium on cost of capital Chemical businesses: o Given the weak demand outlook, we expect volumes to be flat in H2 2012 vs. H1 2012 o In 2012, EBIT before special items is expected to come in below the level of 2011 Forward-looking statements This document may contain forward-looking statements. These statements are based on current expectations, estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict and are based upon assumptions as to future events that may not prove to be accurate. Many factors could cause the actual results, performance or achievements of BASF to be materially different from those that may be expressed or implied by such statements. Such factors include those discussed in BASF s Report 2011 on pages 104ff. We do not assume any obligation to update the forward-looking statements contained in this document.