Investor Release Despite declining demand, BASF increases sales and earnings in the third quarter of 2014 Sales 18.3 billion (plus 3%) EBIT before special items 1.8 billion (plus 9%) Chemicals and Oil & Gas segments improve earnings Earnings dip in Agricultural Solutions segment Outlook 2014: BASF continues to strive for slight increase in EBIT before special items in challenging environment Ludwigshafen, Germany October 24, 2014 Sales of BASF Group grew by 3% compared with the previous third quarter, reaching 18.3 billion. A sharp rise in volumes in the Natural Gas Trading business sector was mainly responsible for this growth. Income from operations (EBIT) before special items increased by 150 million to around 1.8 billion. The primary contributors to this development were the Chemicals and Oil & Gas segments, together with Other. The increase was dampened by a considerable earnings decline in the Agricultural Solutions segment. October 24, 2014 Investor Relations Contact BASF SE Magdalena Moll Lars Budde Tobias Höld Stefan Koch Martin Liedemit Ingo Rose Phone : +49 621 60-48230 Fax : +49 621 60-22500 ir@basf.com BASF Corporation Florian Greger Phone: +1 973 245 6013 florian.greger@basf.com BASF Asia Pacific Amber Usman Phone: +852 2731 5270 amber.usman@basf.com The economic environment remained challenging in the third quarter of 2014. Geopolitical tensions and increasing uncertainty about the global economic development significantly dampened demand for chemical products. Nevertheless, sales and earnings of BASF Group increased in the third quarter of 2014, said Dr. Kurt Bock, Chairman of the Board of Executive Directors of BASF SE. EBIT grew by 128 million to 1.8 billion compared with the third quarter of the previous year. EBITDA rose by 30 million to 2.5 billion. Income before taxes and minority interests increased by BASF SE 67056 Ludwigshafen Phone: +49 621 60-0 http://www.basf.com
Page 2 126 million quarter-on-quarter to 1.6 billion. Because of the higher tax rate and increased minority interests, net income declined by 53 million to 1.0 billion. Earnings per share were 1.14 in the third quarter of 2014, compared with 1.20 in the same quarter of 2013. Adjusted for special items and amortization of intangible assets, earnings per share amounted to 1.27, remaining at the same level as the previous third quarter ( 1.28). Outlook for the full year 2014 For the fourth quarter of 2014, BASF does not anticipate an upturn in demand. The company has adjusted its expectations for the global economy in 2014 as follows (previous forecast in parentheses): Growth of gross domestic product: 2.3% (2.5%) Growth in chemical production: 4.0% (4.4%) An average exchange rate of $1.35 per euro (unchanged) An average oil price (Brent) for the year of $105 per barrel ($110 per barrel) Bock: We assume that the environment will remain volatile and challenging. We nevertheless strive to slightly raise our EBIT before special items for the year 2014. Sales are likely to decrease slightly as a result of the divestiture of the gas trading and storage business planned for this year in addition to negative currency effects. Strategic sales and earnings targets for 2015 At the telephone conference, the company gave an update on the We create chemistry strategy and the related financial targets for 2015, which were originally published in 2011. From today s point of view, BASF will not achieve its ambitious financial targets for 2015 (sales: 80 billion; EBITDA: 14 billion). The growth rates for gross domestic product, industry and chemical production for 2010 to 2015 are lower than originally expected: BASF now expects the average annual growth of global gross domestic product to be about 0.8 percentage points lower (prior assumption: 3.4% p.a., current assumption: 2.6% p.a.).
Page 3 Growth of industrial production is now assumed to be 3.4% p.a., versus a previous assumption of 4.6% p.a. The company now assumes the growth of chemical production to be 4.0% p.a. instead of 4.9% p.a. still growing well above GDP and industrial production. Bock: The reasons for this weak global economic development are obvious: reduced growth dynamics of emerging markets and a delayed recovery in the European economy. In addition, there has been higher than expected margin pressure for some basic products and partially in the Performance Products segment. This is why BASF has initiated a restructuring program in this segment, which will contribute about 500 million to earnings from 2017 onwards. For 2015, BASF now expects sales and EBITDA to be in line with market expectations. For EBITDA, they are between 10 billion and 12 billion. As usual, the company will provide an outlook for 2015 at its Annual Press Conference on February 27, 2015, and give an update on its long-term targets. Bock: With regard to our strategic direction, we are on track. Even in this somewhat more difficult environment, we will continue to grow profitably. The operational excellence program STEP is ahead of schedule. By the end of 2015, we now aim to achieve improvements of 1.3 billion, 300 million more than initially planned, said Bock. New set-up of global research platforms Innovations are an essential pillar in the We create chemistry strategy. In 2020, BASF aims to generate 30 billion of sales with products that will have been on the market for less than 10 years. The basis for these innovations is effective and efficient research and development. To achieve this ambitious goal, BASF is further developing the research organization and bundling its competencies in three global platforms: Advanced Materials & Systems Research with headquarters at BASF s Innovation Campus Asia Pacific in Shanghai by 2016
Page 4 Bioscience Research headquartered in Research Triangle Park, North Carolina, starting January 2015 Process Research & Chemical Engineering headquartered in Ludwigshafen The stronger presence outside of Europe will create new opportunities for building up and expanding customer relationships and scientific cooperations. All three research platforms will be established globally to support the R&D needs of BASF s customers. This will strengthen the R&D Verbund and also increase BASF s attractiveness as a partner and an employer in the regions. Business development in the segments in the third quarter Sales in the Chemicals segment matched the level of the previous third quarter. The market environment in Asia was difficult; in Europe sales volumes declined. There was sharp volumes growth in the Petrochemicals division in North America. With 616 million, earnings in the segment exceeded the prior third-quarter level by 89 million, mainly due to higher margins in the Petrochemicals division. Sales reached the level of the previous third quarter in the Performance Products segment. Volumes and sales prices remained stable while currency effects were negative. Volumes increased significantly in the Performance Chemicals division. In the Paper Chemicals division, however, lower volumes led to a considerable decline in sales. Fixed costs were reduced, thanks in part to restructuring measures. Earnings of 376 million matched the level of the previous third quarter. In the Functional Materials & Solutions segment, sales exceeded the level of the third quarter of 2013 by 2%. Prices could be raised in most business areas, more than compensating for negative currency effects. Demand remained strong from the automotive industry, especially in the Catalysts division. Earnings increased by 10 million to 310 million, mostly through considerably higher contributions from the Coatings and Catalysts divisions.
Page 5 In the Agricultural Solutions segment, sales were 3% below the level of the third quarter of 2013. Continuously falling crop commodity prices and correspondingly cautious purchasing behavior were noticeable in nearly every market. Price increases in all regions were unable to compensate for a drop in sales volumes. Earnings in a generally seasonally weak quarter fell by 129 million to 43 million. In addition to lower volumes, this was largely a result of weaker margins due to a less favorable product mix as well as increased expenses for research and development, production, and distribution. Sales in the Oil & Gas segment grew by 17% compared with the previous third quarter. This was primarily attributable to sharply increased volumes in the Natural Gas Trading business sector. Sales growth was slowed by lower oil and gas prices. Earnings rose by 82 million to 504 million thanks to a higher contribution from the Natural Gas Trading business sector. Sales rose by 3% in Other, mainly through increased raw materials trading. EBIT before special items improved by 98 million to minus 7 million. Valuation effects for the long-term incentive program played a significant role here; the foreign currency result also improved. Business development in the regions in the third quarter Sales at companies located in Europe grew by 3% compared with the previous third quarter. This was mainly because of the considerably higher volumes in the Natural Gas Trading business sector; sales volumes in the Chemicals and Agricultural Solutions segments declined. Sales and volumes increased considerably in the Catalysts division. In the Petrochemicals division, lower plant availability dampened sales. EBIT before special items rose by 202 million to 1.1 billion, primarily due to considerably improved contributions from Chemicals, Oil & Gas, and Other. In North America, sales rose by 3% in both U.S. dollars and euros. This was mainly attributable to volume and price-related sales growth
Page 6 in the Petrochemicals division. At 342 million, earnings decreased slightly, due in part to a considerably lower contribution from Agricultural Solutions (third quarter of 2013: 355 million). Sales in Asia Pacific increased by 4% in both local-currency and euro terms, predominantly on account of higher volumes, especially in the Catalysts and Performance Chemicals divisions. Slightly declining sales prices and negative currency effects weakened sales growth in the region. At 173 million, earnings were 33 million below the level of the third quarter of 2013. This was largely the result of considerably lower earnings from basic products in the Chemicals segment. In South America, Africa, Middle East, sales grew by 8% in localcurrency terms and 4% in euro terms. Negative currency effects could be more than compensated for, mainly through higher prices. Particularly in the Oil & Gas segment, price increases led to a considerable rise in sales. Sales volumes improved considerably in the business with crop protection products in the third quarter. Earnings declined slightly, dipping 6 million to 197 million. In the Agricultural Solutions segment, earnings fell considerably as a consequence of weaker margins and strong competition from generic insecticides. About BASF At BASF, we create chemistry and have been doing so for 150 years. Our portfolio ranges from chemicals, plastics, performance products and crop protection products to oil and gas. As the world s leading chemical company, we combine economic success with environmental protection and social responsibility. Through science and innovation, we enable our customers in nearly every industry to meet the current and future needs of society. Our products and solutions contribute to conserving resources, ensuring nutrition and improving quality of life. We have summed up this contribution in our corporate purpose: We create chemistry for a sustainable future. BASF had sales of about 74 billion in 2013 and over 112,000 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. You can obtain further information from the internet at the following addresses:
Page 7 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 (from 11:00 a.m. CEST) basf.com/share basf.com/aktie Press photos basf.com/pressphoto-database basf.com/pressefoto-datenbank TV footage tvservice.basf.com/en tvservice.basf.com Forward-looking statements This release contains forward-looking statements. These statements are based on current 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 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.
kn Reporting Factsheet Q3 2014 BASF Group (Million ) Q3 2014 Q3 2013 Change (%) Q3 2014 Q2 2014 Change (%) Sales 18,312 17,733 3.3 18,312 18,455 (0.8) Income from operations before depreciation and amortization (EBITDA) 2,524 2,494 1.2 2,524 2,714 (7.0) Income from operations (EBIT) before special items 1,842 1,692 8.9 1,842 2,053 (10.3) Income from operations (EBIT) 1,810 1,682 7.6 1,810 2,019 (10.4) Financial result (169) (167) (1.2) (169) (136) (24.3) Income before taxes and minority interests 1,641 1,515 8.3 1,641 1,883 (12.9) Net income 1,043 1,096 (4.8) 1,043 1,299 (19.7) Earnings per share ( ) 1.14 1.20 (5.0) 1.14 1.41 (19.1) Adjusted earnings per share ( )* 1.27 1.28 (0.8) 1.27 1.54 (17.5) EBITDA in % of sales 13.8 14.1-13.8 14.7 - Cash provided by operating activities 2,121 1,952 8.7 2,121 940 125.6 Additions to long-term assets** 1,314 2,995 (56.1) 1,314 1,171 12.2 Amortization and depreciation** 714 812 (12.1) 714 695 2.7 Segment assets (end of period)*** 59,618 56,062 6.3 59,618 57,617 3.5 Personnel costs 2,224 2,352 (5.4) 2,224 2,360 (5.8) Number of employees (end of period) 113,351 112,617 0.7 113,351 112,277 1.0 *) 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 3rd Quarter (Million ) 2014 2013 Change Change 2014 2013 (%) (%) 2014 2013 Change (%) Chemicals 4,201 4,224 (0.5) 616 527 16.9 615 442 39.1 Performance Products 3,919 3,939 (0.5) 376 376 0.0 366 322 13.7 Functional Materials & Solutions 4,527 4,439 2.0 310 300 3.3 311 292 6.5 Agricultural Solutions 1,018 1,054 (3.4) 43 172 (75.0) 43 168 (74.4) Oil & Gas 3,670 3,130 17.3 504 422 19.4 502 587 (14.5) thereof Exploration & Production 611 754 (19.0) 310 360 (13.9) 308 525 (41.3) Natural Gas Trading 3,059 2,376 28.7 194 62 212.9 194 62 212.9 Other* 977 947 3.2 (7) (105) 93.3 (27) (129) 79.1 BASF Group 18,312 17,733 3.3 1,842 1,692 8.9 1,810 1,682 7.6 *) Other includes the sale of raw materials, engineering and other services, rental income and leases. This item includes also earnings from currency conversion that are not allocated to the segments as are earnings from the hedging of raw material prices and foreign currency exchange risks. Factors influencing sales Changes in Thereof changes in % vs. Q3 2013 sales Q3 2014 Volumes Prices Currencies Acqu./Divest. Chemicals (1) 0 (1) 0 0 Performance Products (1) 0 0 (1) 0 Functional Materials & Solutions 2 1 2 (1) 0 Agricultural Solutions (3) (4) 2 (1) 0 Oil & Gas 17 43 (26)* 0 BASF Group 3 7 (4) 0 0 *) mix of price and currency effects
Segments Q3 2014 vs. Q3 2013 Chemicals: (sales: (1)%; v: 0%; p: (1)%; c: 0%; s: 0%)* Sales matched the level of the previous third quarter. The market environment in Asia was difficult; in Europe, sales volumes declined. There was sharp volume growth in the Petrochemicals division in North America. Earnings considerably exceeded the prior third-quarter level, mainly due to higher margins in the Petrochemicals division. Sales in Petrochemicals almost reached the level of the prior-year quarter, on higher prices but lower volumes. Our North American business benefitted from the expansion of the refitted Port Arthur cracker. In Europe, the ongoing outage at our Ellba joint venture with Shell in Moerdijk led to a sales decrease. In acrylics, volumes remained on a high level globally, but prices were under pressure especially in Asia Pacific. Earnings came in considerably higher due to the strong performance of our cracker products in North America and Europe. Sales in Monomers were on prior year s level. We experienced higher volumes in MDI and polyamides. Volumes in polyols were lower due to the outage at Moerdijk. Margins for caprolactam remained on a low level, while for isocyanates they came under significant pressure in Asia Pacific. Earnings decreased considerably. In Intermediates, sales matched the level of the previous third quarter. We noted a more pronounced seasonal drop in demand for basic products in Europe. This was counterbalanced by higher sales of specialties. Earnings were considerably up, supported by fixed cost reductions. Performance Products: (sales (1)%; v: 0%; p: 0%; c: (1)%; s: 0%)* Sales achieved the level of the previous third quarter. Volumes and sales prices remained stable while currency effects were slightly negative. We reduced our fixed costs, thanks in part to restructuring measures. The ongoing restructuring measures resulted in negative special items of 10 million. Earnings matched the level of the previous third quarter. wfewf In Dispersions & Pigments, sales remained at the prior third-quarter level. In Europe demand slowed, whereas in Asia Pacific we experienced good volume growth across most product groups. Earnings slightly exceeded the level of the previous third quarter due to the reduction in fixed costs following restructuring measures. In Care Chemicals, sales were flat on lower volumes but higher prices. Especially volumes in hygiene were down due to aggressive competition and better product availability. In Q3 2013, the market was tight due to the outage of a competitor s SAP plant. Personal care specialties also saw a decrease in demand. Earnings went slightly down. In Nutrition & Health, sales declined slightly. We saw higher demand for animal nutrition as well as aroma chemicals, but faced tough competition in human nutrition and pharma. Prices remained stable. The market environment for vitamins remained competitive. Earnings decreased slightly. Sales in Paper Chemicals decreased significantly driven by declining demand in the graphical paper market. Our fixed cost reduction measures helped to maintain earnings on prior-year level. Sales in Performance Chemicals slightly exceeded the level of the third quarter of 2013. Considerably higher volumes more than compensated for slightly lower prices as well as negative currency and portfolio effects (divestiture of PolyAd business). We were especially able to achieve significant volume increases in the fuel and lubricant additives businesses as well as in oilfield & mining chemicals and water treatment. Earnings rose slightly. Functional Materials & Solutions: (sales: +2%; v: +1%; p: +2%; c: (1)%; s: 0%)* Sales slightly exceeded the level of the third quarter of 2013. We raised prices in most businesses, more than compensating for negative currency effects. Demand remained strong from the automotive industry, especially in the Catalysts division. We slightly increased our earnings, through considerably higher contributions from Coatings and Catalysts. sssfsf Sales in Catalysts increased significantly on higher volumes and prices. Volume growth was driven by high demand from mobile emission and chemical catalysts. Sales from precious metals trading grew to 685 million versus 657 million a year ago. Earnings increased considerably driven by higher volumes. In Construction Chemicals sales came in slightly lower, as higher volumes and prices could only partially compensate the structural effect related to the divestment of our German wall systems business in Q4 2013. While we experienced a positive business development in North America, demand in most European countries was subdued. Fixed cost reductions from our efficiency program triggered a slight improvement of earnings. Sales in Coatings were slightly up due to higher prices. For OEM coatings and refinish coatings we saw good demand in Europe and North America, robust business in Asia Pacific and a decline in volumes in South America. Industrial coatings developed very positively due to better business with coil and wind energy coatings. Sales in decorative paints slightly decreased, as higher prices could not fully offset lower volumes. We were able to considerably raise earnings supported by effective fixed cost control. Sales in Performance Materials were almost stable with volumes being flat. Engineering plastics and our specialties such as Cellasto and Ultrason developed positively due to high demand from the transportation industry. PU systems, however, saw lower demand for appliances and construction applications, especially in Europe. Prices were slightly down. Plant start-ups and higher R&D expenses led to an increase in fixed costs and earnings decreased significantly. Agricultural Solutions: (sales: (3)%; v: (4)%; p: +2%; c: (1)%; s: 0%)* We experienced a disappointing business in this seasonally slow quarter. Excellent crop conditions led to good harvests for key crops globally, strongly pushing down crop commodity prices. Our sales decreased, mainly due to lower volumes in North America and Europe. Nevertheless, we were able to increase prices in all regions. Earnings fell considerably on lower volumes, a less favorable product mix and higher fixed costs. For the remainder of the year we see business momentum building up in South America and we currently experience no significant negative exchange rate impact on earnings.
Oil & Gas: (sales: +17%; v: +43%; p/c: (26)%; s: 0%)* Sales grew considerably compared to the previous third quarter. This was primarily attributable to sharply increased volumes in Natural Gas Trading. Lower oil and gas prices had a negative effect. Earnings rose considerably thanks to a higher contribution from Natural Gas Trading, especially through the procurement-end price revisions implemented in the third quarter. Net income came in at 265 million, a decrease of 186 million. In Q3 2013, we had recognized a disposal gain of 164 million from the divestment of a 15 percent stake in the Edvard Grieg field in the North Sea. Other: Sales were up by 30 million to now 977 million mainly due to increased raw materials trading. Earnings improved strongly from minus 105 million to minus 7 million due to a better currency result and the recent share price development which led to the dissolution of provisions for our long-term incentive program. *v=volume; p=price; c=currency; s=structure Financials Q3 2014: Special items Q3 2014: minus 32 million (Q3 2013: minus 10 million). This was partially related to restructuring measures especially in Performance Products. Income taxes Q3 2014: 465 million (Q3 2013: 350 million). Tax rate Q3 2014: 28.3% (Q3 2013: 23.1%). Net income Q3 2014: 1,043 million (Q3 2013: 1,096 million). Cash provided by operating activities in Q3 2014: 2,121 million (Q3 2013: 1,952 million). Cash provided by operating activities Q1-Q3 2014: 4,765 million (Q1-Q3 2013: 5,982 million). This was due to a cash outflow in the net working capital of minus 0.7 billion related to the reduction of trade accounts payable as well as a planned build-up in inventories to prepare for maintenance shutdowns. Capex in Q3 2014: 1,301 million (Q3 2013: 1,154 million). Capex Q1-Q3 2014: 3,426 million (Q1-Q3 2013: 3,038 million). Free cash flow in Q3 2014: 820 million (Q3 2013: 798 million). Free cash flow Q1-Q3 2014: 1,339 million (Q1-Q3 2013: 2,944 million). Equity ratio 39.3% (September 30, 2014); net debt: 13.9 billion (FY 2013: 12.6 billion). Outlook Underlying assumptions for 2014: Global GDP: 2.3% (previous: 2.5%). Global industrial production: 3.4% (previous: 3.7%). Global chemical production (excl. pharma): 4.0% (previous: 4.4%). Average US$/ exchange rate of US$1.35/ (unchanged). Average oil price of US$105 per barrel Brent (previous: US$110 per barrel Brent). Outlook 2014: We aim to increase our sales volumes excluding the effects of acquisitions and divestitures. Nonetheless, sales will decline slightly compared with 2013 due to the divestiture of the gas trading and storage business planned for autumn 2014 and negative currency effects. Despite the challenging environment, we strive for a slight increase in EBIT before special items. Projections 2015: We now expect 2015 sales and EBITDA to be in line with current financial market expectations. Analysts currently foresee 2015 EBITDA between 10 billion and 12 billion. Our operational excellence program STEP is ahead of schedule. By the end of 2015, we will most likely achieve improvements of 1.3 billion euros, 300 million euros more than planned. We will as usual provide you with the outlook for 2015 at our annual analyst and investor conference on February 27, 2015. That day we will also discuss our updated long-term targets. Forward-looking statements This Factsheet contains forward-looking statements. These statements are based on current 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 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 Factsheet. For further information on opportunities and risks, please refer to the BASF Report 2013 (opportunities and risks report, pages 106-114).