We add value as one company - PDF Free Download

Goldman Sachs European Chemicals 2020 Vision Conference Dr. Kurt Bock Chairman of the Board of Executive Directors London June 18, 2012 We add value as one company

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

BASF today - The Chemical Company The leading chemical company worldwide - Sales 2011: 73.5 billion - EBIT before special items 2011: 8.4 billion - ~111,000 employees Customers in >200 countries and in virtually all industries # 1-3 market position in over 75% of businesses Unique Verbund concept for integrated production - Six Verbund sites in all major regions - Production sites in 41 countries Highly experienced management team - Senior executives from 36 countries 3

BASF today a well-balanced portfolio Total sales 2011: 73.5 billion Percentage of sales 2011* Chemicals Inorganics Petrochemicals Intermediates Plastics Performance Polymers Polyurethanes Performance Products Dispersions & Pigments Performance Chemicals Care Chemicals Nutrition & Health Paper Chemicals Agricultural Solutions Crop Protection Functional Solutions Oil & Gas Exploration & Production and Natural Gas Trading * not depicted here: 9% of Group sales reported as Other 4

Business review BASF Today Trends BASF strategic principles Purpose and strategic principles Targets Growth targets Strategic Strategic levers levers BASF Tomorrow Board priorities Fit for 2020 June BASF 2012 Strategy: We create chemistry November 2011 5

Demographic challenges set the stage for the future of the chemical industry Nine billion people in 2050 but only one earth Chemistry as enabler 6

Key trends for the chemical industry Growth will accelerate Innovation gains in importance Sustainability as strategic driver Competitive landscape will change Industrial production > GDP Chemical production > GDP Emerging markets will outgrow developed markets Chemistry as enabler Chemical products replace traditional materials Create innovative sustainable solutions Use opportunities from sustainability Increase resource efficiency Renewables as raw materials Stakeholder dialog Integrated chemical companies remain cornerstone Emerging markets players grow quickly Raw material players invest further downstream Chemical industry remains an attractive growth industry 7

Our purpose We create chemistry for a sustainable future. 8

Our strategic principles We add value as one company. We drive sustainable solutions. We innovate to make our customers more successful. We form the best team. 9

Striving for strong profitable growth Medium- and long-term sales target Sales* in billion CAGR ~6% Innovations Acquisitions ~115 Investments 64 Investments Innovations Acquisitions ~85 2010 Target Target 2015 2020 We will outperform chemical production by 2 percentage points p.a. * Potential impact of IFRS changes not included 11

Striving for strong profitable growth All regions will deliver profitable growth Regional sales targets 2020 (by location of customers) in billion North America ~5.5% p.a. 20%* 13 ~22 2010 2020 South America, Africa, Middle East ~8% p.a. 8%* 19%* 5 ~11 2010 2020 10%* Europe ~4.5% p.a. 52%* 33 ~53 2010 2020 46%* Asia Pacific ~8% p.a. ~29 13 20%* 2010 2020 25%* * Percentage of total sales 12

Striving for strong profitable growth Doubling EBITDA by 2020 EBITDA* in billion 11.1 Growth Op. Excellence CAGR ~7.5% Growth Acquisitions ~15 Op. Excellence Acquisitions ~23 2010 Target Target 2015 2020 * Assumptions 2010-2020: Exchange rate $/ Ø 1.40, Oil price Ø $110/bbl 13

Business review BASF Today strategic principles Trends Growth targets Purpose and strategic principles Targets Strategic levers Strategic Portfolio levers development Market approach BASF Tomorrow Board priorities Innovations for a sustainable future Investments Acquisitions Operational excellence Fit for 2020 June BASF 2012 Strategy: We create chemistry November 2011 14

We expand from chemicals to chemistry 1960 1970 1980 1990 2000 2010 2020 New molecules Chemistry as key enabler for functionalized materials & solutions Improved applications Functionalized materials & solutions Deep understanding of customer value chains required Batteries, membranes... 15

Portfolio development towards more market driven and innovative businesses Acquisitions Crop protection Engineering plastics Electronic chemicals Custom synthesis Catalysts Construction chemicals Water-based resins Pigments Plastic additives Oil & Gas Personal care & food BASF core business Selected transactions 2001 today Strong partnerships Gazprom Monsanto Petronas Shell Sinopec Total Divestitures Pharma Fibers Printing systems Polyolefins Polystyrene Americas Agro generics Vitamins premix Fertilizers Styrenics (transferred into Styrolution JV on Oct. 1, 2011) ~ 15bn sales ~ 10bn sales* * without Styrenics 16

Moving downstream towards customer industries Classical Chemicals Customized Products Functionalized Materials & Solutions 2001 in % of sales** Chemical Industry ~ 50% First customer industries* ~ 50% 2010 in % of sales** ~ 40% ~ 60% 2020 in % of sales** ~30% ~ 70% * Agriculture, Construction, Consumer Goods, Health & Nutrition, Electronics, Energy & Resources, Transportation ** Sales excluding Oil & Gas 17

Building on our cross-divisional customer industry approach BASF sales by first customer industry* Bubble Size: BASF divisional sales by first customer industry (2010)** Consumer goods > 15 % Transportation Construction > 15 % < 10 % Energy & Resources < 10 % Inorganics Petrochemicals Construction Chemicals Catalysts Intermediates Coatings Dispersions & Pigments Care Chemicals Performance Chemicals Paper Chemicals Polyurethanes Performance Polymers * Excluding Oil & Gas and Other ** Excluding Agricultural Solutions, Health & Nutrition, Oil & Gas and Other 18

Combining cross-divisional technology competencies with customer know-how Smart forvision Joint concept car of Daimler and BASF Lightweight tridion cell Solar roof with transparent organic solar panels and OLED modules High performance foams E-textiles Infrared-reflective film Multifunctional seat Infrared-reflective coating All-plastic wheel 19

Cross-divisional approach Biopolymer for enhanced oil recovery Potential Increased incremental oil recovery of up to 10% on waterflooding. Sales potential to be defined after completion of trials Schizophyllum commune Approach Leverage BASF s Verbund knowhow in white biotechnology for Oil & Gas production Proprietary biopolymer from Schizophyllum fungus allows for enhanced oil recovery due to its high viscosifying efficiency Biopolymer is stable in high temperature and high salinity reservoirs Schizophyllan biopolymer Current activities Schizophyllan biopolymer to be produced at BASF Ludwigshafen via fermentation. First trial in mature Wintershall oil field starting in 2012 (Bockstedt, Germany)

Cross-divisional approach ecovio biodegradable plastic in paper applications Business potential 2020 Market size: opportunity to substitute > 200 kt of various products Sales potential for BASF: ~ 40 million (ecovio FS Paper for extrusion coating) Additional business opportunities in wet-end applications under evaluation (e.g. paper strength improvement) Concept Leverage BASF know-how on biodegradable plastics and paper chemicals to offer sustainable solutions for packaging and foodservice ware Current activities ecovio FS Paper launched in various markets since 2010 Business Model for sustainable Closed System throughout whole value chain (incl. waste management) R&D-projects for additional applications and solutions 21

Chemistry as an enabler for many customer industries Customer industries Transportation Construction Consumer Goods Health & Nutrition Electronics Agriculture Energy & Resources Batteries for mobility Heat management Enzymes Medical Organic Electronics Plant biotechnology Energy management Growth Fields* Lightweight composites Heat management Functional crop care Rare earth metals recycling Wind energy Water solutions Ongoing inflow of new growth fields Sustainability in customer industries will drive our innovative growth fields * Including growth fields still under evaluation 22

Innovations for a sustainable future BASF growth field examples Growth Field examples Batteries for mobility Water solutions Plant biotechnology Business potential 2020 Market size: > 20 billion BASF sales potential: > 500 million Market size: ~ 20 billion BASF sales potential: > 800 million Market size: ~ 11 billion gross trait value BASF sales potential: 1.8 billion gross trait sales before partner share Existing Activities New global business unit for battery chemicals & materials Electrode material plant being built in Ohio. Acquired Novolyte, Merck s electrolytes, Ovonik, equity position in Sion Power R&D network with academia Sites in US, China, Europe BASF expertise and portfolio (high-performance flocculants, desalination and antifouling chemicals.) Acquired inge water-technologies (membranes) to offer module systems BASF as Trait Technology Partner of leading trait and seed companies Yield & Stress collaboration with Monsanto (corn, soy, cotton, canola and wheat) Targets Become the leading supplier of battery materials Target customers: Battery producers Leading supplier of innovative water solutions Forward integration into membrane technologies Contribute to more efficient agriculture, healthier nutrition Make Plant Biotechnology an operating division within the Agricultural Solutions segment 23

Innovation will spur further growth Total R&D expenditures 2011 in billion Chemicals 8% Plastics 9% Performance Products 21% Functional Solutions 12% 1.6 billion Corporate Research 23% 24% 1% Oil & Gas 1% Agricultural Solutions 26% Strong commitment to R&D 1.6 billion R&D expenditures in 2011 (2010: 1.5 billion) ~10,100 employees in R&D ~2,800 projects Research Verbund: About 1,950 partnerships with universities, start-ups and industry partners Increase R&D spending to 1.7 billion in 2012 24

7 billion EBITDA targeted from innovations in 2020 Sales and EBITDA from innovations in billion ~30 Sales from innovations launched within last 5 years EBITDA from innovations launched within last 5 years ~10 ~2.5 ~7 Sales from innovations launched within last 10 years EBITDA from innovations launched within last 10 years 2015 2020 25

Growth above market with increasing share from emerging markets Developed markets* Emerging markets 2001 in % of sales ( 28 bn**) ~ 78% ~ 22% 2010 in % of sales ( 53bn**) ~ 66% ~ 34% 2020 in % of sales** ~55% ~ 45% *BASF definition: Developed markets include EU15, Norway, Switzerland, North America, Japan, Australia, New Zealand ** Sales excluding Oil & Gas 26

Investments will boost future organic growth Future investments in billlion ~15 15-20 10.9 30-40% 35-45% ~20% 2006 2010 2011 2015 2016 2020 Total investments Thereof investments in emerging markets 27

Major investment projects * Memorandum of Understanding signed 28

Acquisitions will contribute to profitable growth in the future We want to acquire businesses which Generate profitable growth above the industry average Are innovation-driven Offer a special value proposition to customers Provide a minimum return on investment of 8% after tax Are EPS accretive by year three at the latest Reduce earnings cyclicality Strategic acquisition criteria Financial acquisition criteria 29

Strong focus on operational excellence BASF Group 2002 2011 Index CAGR 2002 2011 300 250 200 10 % 10 % 4 % EBITDA Sales Fixed costs 150 100 50 2002 2005 2008 2011 30

New operational excellence program STEP: Earnings contribution ~ 1 billion Annual earnings contribution in million 3,000 2,000 1,000 0 Former cost saving programs 2012 2015 NEXT STEP NEXT Program Annual earnings contribution of 1 billion will be achieved in 2012 Achieved by end 2011: > 800 million STrategic Excellence Program STEP Project timeline: 2012 2015 Measures to optimize processes and structures in all regions, e.g. manufacturing, maintenance supply chain engineering, best-cost country sourcing Fixed cost savings and margin improvements One-time costs & investments: ~ 1 billion Targeted annual earnings contribution: ~ 1 billion by end of 2015, thereof 100 million in 2012 (run-rate) 31

Key financial targets 2015 / 2020 Growth targets Profitability targets Grow at least 2 percentage points above chemical production Earn a premium on cost of capital of at least 2.5 billion on average p.a. 2015 Sales ~ 85 billion EBITDA ~ 15 billion EPS ~ 7.50 2020 Sales ~ 115 billion Double EBITDA to ~ 23 billion (compared with 2010) 33