Kurt Bock Chairman and CEO BASF SE 10 th Annual Pan-European Strategic Decisions Conference Sanford C. Bernstein London October 1, 2013 Oil & Gas Chemicals Value Performance Products Agricultural Solutions Functional Materials & Solutions We add value as one company
Cautionary note regarding forward-looking statements This presentation may contain 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. Forward-looking statements may include, 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 and assumptions with respect to future events and financial performance. Actual financial performance 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. The information contained in this presentation is subject to change without notice and BASF does not undertake any duty to update the forwardlooking statements, and the estimates and assumptions associated with them, except to the extent required by applicable laws and regulations. BASF Capital Market Story October 2013 2
We create chemistry for a sustainable future Positioning Performance Perspective Geismar, USA Freeport, USA Ludwigshafen, Germany Antwerp, Belgium Nanjing, China Kuantan, Malaysia Verbund site The #1 chemical company 72.1 billion sales, 6.6 billion EBIT bsi in 2012* #1-3 in >75% of businesses, present in >200 countries 6 integrated Verbund sites, production in 60 countries 10 years of strong sales and earnings growth 16.5% average annual total shareholder return** 16% average annual dividend increase, >3% yield in every single year*** Chemistry as an enabler BASF has superior growth opportunities: sustainable innovations Investments emerging markets Ambitious financial targets BASF Capital Market Story October 2013 * Restated numbers, reflecting IFRS 10/11 changes ** September 2003 August 2013 *** for 2003-2012 3
BASF today a well-balanced portfolio Total sales 2012: 72.1 billion* Percentage of sales 2012** * Restated numbers, reflecting IFRS 10/11 changes, new segment structure effective Jan. 1, 2013 BASF Capital Market Story October 2013 ** Not depicted here: ~5% of Group sales reported as Other 4
Business review BASF strategy & growth targets Strategic levers BASF Capital Market Story October 2013 5
Q2 2013: BASF maneuvers well through challenging environment Business performance Q2 13 vs. Q2 12 H1 13 vs. H1 12 Sales 18.4 billion +3% 38.1 billion +4% EBITDA 2.5 billion (1%) 5.3 billion (8%) EBIT before special items 1.8 billion (5%) 4.0 billion +3% EBIT 1.8 billion +6% 3.9 billion (8%) Net income 1.2 billion (4%) 2.6 billion (11%) Reported EPS 1.26 (4%) 2.83 (11%) Adjusted EPS 1.40 (12%) 3.07 (2%) Operating cash flow 2.0 billion +6% 4.0 billion +18% Sales development Period Volumes Prices Portfolio Currencies Q2 13 vs. Q2 12 5% 0% 0% (2%) BASF Capital Market Story October 2013 6
Strong free cash flow generation Free cash flow* in billion 4 3.3 3.5 3.2 3.2 3.9 3.7 3 2.8 2.6 2.5 2.6 2.1 2 1 0 2003 2004 2005 2006 2007 2008 2009** 2010 2011 2012 H1 2013 * Cash provided by operating activities less capex (in 2005 before CTA) BASF Capital Market Story October 2013 ** 2009 adjusted for re-classification of settlement payments for currency derivatives 7
Delivering attractive shareholder returns Dividend per share in 1.50 CAGR 16% 1.95 1.95 1.70 2.20 2.50 2.60 Dividend payments Dividend of 2.60 per share for 2012 2003-2012: Average annual dividend increase of 16% Attractive dividend yield of 3.7% in 2012** 0.70 0.85 1.00 Dividend yield above 3% in any given year since 2002, total payout almost 17 billion 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Dividend yield* 3.1% 3.2% 3.1% 4.1% 3.8% 7.0% 3.9% 3.7% 4.6% 3.7% BASF Capital Market Story October 2013 * Dividend yield based on share price at year-end ** Based on BASF share price of 71.15 on Dec. 28, 2012 8
Delivering consistent, long-term value Average annual performance with dividends reinvested Last 10 years September 2003 August 2013 Last 5 years September 2008 August 2013 +16.5% BASF +15.7% +3.7% Euro Stoxx 50-0.8% +8.8% DAX 30 +4.8% +10.0% MSCI World Chemicals +4.3% 0 3 6 9 12 15 18 BASF Capital Market Story October 2013 9
Outlook 2013 Outlook 2013 We do not expect that global economic growth will accelerate in the second half of 2013 Nevertheless, BASF is targeting for 2013 to exceed the 2012 levels in sales and EBIT before special items in a volatile economic environment Our focus on growth markets and innovation, in combination with our measures to improve operational excellence and to raise efficiency, will contribute to this We aim to earn a high premium on cost of capital in 2013 Assumptions 2013 GDP: +2.0% (reduced from 2.4%) Industrial production: +2.7% (reduced from 3.4%) Chemical production: +3.1% (reduced from 3.6%) US$ / Euro: 1.30 (unchanged) Oil price (US$ / bbl): 105 (reduced from 110) BASF Capital Market Story October 2013 10
Business review BASF strategy & growth targets Strategic levers BASF Capital Market Story October 2013 11
Demographic challenges set the stage for the future of the chemical industry Nine billion people in 2050 but only one earth Resources, Environment & Climate Food & Nutrition Quality of Life Chemistry as enabler BASF Capital Market Story October 2013 12
Key financial targets 2015 / 2020 are ambitious Growth targets Profitability targets Grow at least 2 percentage points above chemical production Earn a premium on cost of capital of at least 2.0 billion on average p.a. 2015 Sales ~ 80 billion EBITDA ~ 14 billion EPS ~ 7.50 2020 Sales ~ 110 billion EBITDA ~ 22 billion BASF Capital Market Story October 2013 13
Business review BASF strategy & growth targets Strategic levers Portfolio development Market approach Innovations for a sustainable future Investments Acquisitions Operational excellence BASF Capital Market Story October 2013 14
A different look at our current portfolio... Oil & Gas Classical Chemicals Customized Products Functionalized Materials & Solutions Excellent position and growth opportunities; synergies with chemical businesses Chemical business based on our production Verbund Customer-oriented specialties, backward integration in Verbund value chains Integration of competencies in chemistry: R&D, technology, market knowledge and global access to customer industries Exploration & production of oil and gas, gas trading activities Cracker products, plastizicers, acrylic acid, MDI/TDI PU systems, vitamins, personal care ingredients Battery materials, water solutions, crop protection agents, engineering plastics BASF Capital Market Story October 2013 15
...which we will further strengthen Oil & Gas Classical Chemicals Portfolio strategy Expand E&P in core regions Expand market positions outside of Europe Keep profitable production Verbund businesses Initiatives taken Achimov, Revus Nord Stream, South Stream Expansion of Nanjing New chemical complexes in China and Brazil Customized Products Functionalized Materials & Solutions Synergies and growth via technology and customer industry Verbund Expand market position downstream in existing and adjacent value chains Selectively enter materials and solutions business where chemical competence is growth driver Cognis Ciba Strong R&D pipeline Battery materials Crop protection Catalysts production Asia Pacific BASF Capital Market Story October 2013 16
Portfolio development Moving downstream towards customer industries * Agriculture, Construction, Consumer Goods, Health & Nutrition, Electronics, Energy & Resources, Transportation BASF Capital Market Story October 2013 **Sales excluding Oil & Gas. Targets were published on November 29, 2011. 17
Portfolio development Towards more market driven and innovative businesses Acquisitions Engineering plastics Electronic chemicals Catalysts Construction chemicals Water-based resins Pigments Plastic additives Oil & Gas Personal care & food Battery materials Functional crop care Omega-3 fatty acids BASF core business Selected transactions 2001 today* Strong partnerships Gazprom Statoil 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) Construction equipment, flooring systems ~ 16bn sales ~ 10bn sales** BASF Capital Market Story October 2013 * Only closed deals have been considered ** Without Styrenics 18
Market approach Cross-divisional customer industry approach BASF sales by first customer industry* Bubble Size: BASF divisional sales by first customer industry (2012)* / ** Consumer goods Transportation Construction > 15 % > 15 % > 10 % Energy & Resources < 10 % Monomers Dispersions & Pigments Care Chemicals Coatings Construction Chemicals Petrochemicals Intermediates Performance Chemicals Paper Chemicals Catalysts Performance Materials BASF Capital Market Story October 2013 * Excluding Oil & Gas, Crop Protection and Other ** Nutrition & Health sales predominantly into Health & Nutrition market 19
Cross-divisional approach: Smartforvision Technology competencies combined with customer know-how Lightweight tridion cell High performance foams Solar roof with transparent organic solar panels and OLED modules E-textiles Infrared-reflective film Infrared-reflective coating Multifunctional seat All-plastic wheel Daimler & BASF concept car Smartforvison BASF Capital Market Story October 2013 20
Strong commitment to innovation Innovations for a sustainable future R&D expenditures in billion 2,0 2.0 1,5 1.5 1,0 1.0 0,5 0.5 0,00 1.4 1.4 1.5 1.6 1.7 2008 2009 2010 2011 2012 Corporate Research 23% Oil & Gas 2% Agricultural Solutions 25% Functional Mat. & Sol. 20% Performance Products 20% Chemicals 10% Key facts 1.7 billion R&D expenditures in 2012, further increase planned for 2013 ~10,500 employees in R&D ~3,000 projects Research Verbund: About 1,950 partnerships with universities, start-ups and industry partners Target 2015 and 2020: 10 billion in sales from innovations younger 5 years; 30 billion in sales from innovations younger 10 years BASF Capital Market Story October 2013 21
BASF growth fields focus on enabling technologies Resources, Environment & Climate Food & Nutrition Quality of life Chemistry as enabler Customer industries Transportation Construction Consumer Goods Health & Nutrition Electronics Agriculture Energy & Resources Batteries for mobility Heat management Enzymes Medical Organic electronics Plant biotechnology E-Power management Growth Fields* Lightweight composites Functional crop care Wind energy Water solutions Technology fields Raw Material Change Materials Systems & Nanotechnology White Biotechnology BASF Capital Market Story October 2013 * Including growth fields still under evaluation 22
Enabling technology: Battery Materials Driving the future of electromobility Business potential 2020 Strategic relevant market: >5 billion globally (~4 billion in Asia Pacific) Sales potential BASF: >500 million globally (~350 million in Asia Pacific) BASF activities 2012: Start of business unit Battery Materials Important technologies through dedicated acquisitions and investments Three digit million investment for R&D and production Additional R&D activities including partnerships with universities and industrial partners BASF s technology roadmap- Battery materials for today and tomorrow Technology Li-ion Li-ion HE/HV HE/HV Li-ion Generation 2: Current Generation 3: 2017 Generation 4: 2022+ From Li-ion to Lithium-sulfur Li-S Li-S** Driving range 0 100 200 300 400 (km)* BASF Capital Market Story October 2013 * Driving range (km) of an electric car (with a 100kg battery) 23
Source and use of cash: 2003 2012* Source of cash Use of cash Net income 45 % Depreciation Amortization 42 % Dividends 23 % Fixed assets 35 % 74 billion Share buy-back 10 % 74 billion Divestments 6 % Changes in financial liabilities 4 % Financial investments 3% CTA**, other 9% Current assets 5 % Acquisitions 18 % BASF Capital Market Story October 2013 * 2012 restated according IFRS 10 and 11 ** Contractual Trust Agreement 24
Investments will boost future organic growth Future investments in billion 15-20 ~15 10.9 30-40% 35-45% ~20% 2006 2010 2011 2015 2016 2020 Total investments Thereof investments in emerging markets BASF Capital Market Story October 2013 25
Investments Major projects Expansion Verbund site Nanjing, China* MDI plant Chongqing, China Acrylic acid complex Camacari, Brazil TDI plant Ludwigshafen, Germany Aroma Ingredients Kuantan, Malaysia Expansion oil & gas activities BASF Capital Market Story October 2013 * Memorandum of Understanding signed 26
Investments: Capex for organic growth* develops in line with business growth Index Revenue (2001 = 1) Ratio capex / depreciation Capex as percentage of sales 2,5 9% 2 1,5 1 0,5 0 Revenue Capex as % of sales Ratio capex/ depreciation 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 8% 7% 6% 5% 4% 3% 2% 1% 0% BASF Capital Market Story October 2013 * Without acquisitions 27
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% p.a. after tax Are EPS accretive by year three at the latest Reduce earnings cyclicality Strategic acquisition criteria Financial acquisition criteria BASF Capital Market Story October 2013 28
Operational excellence STEP program on track: ~ 1 billion earnings contribution by 2015 Annual earnings contribution in million 3.000 2.000 1.000 0 Former cost saving programs 2012 2015 NEXT STEP NEXT Program NEXT program successfully completed Annual earnings contribution of ~ 1 billion achieved in 2012 STrategic Excellence Program STEP Targeted annual earnings contribution of ~ 1 billion by end of 2015 Project timeline: 2012 2015 Program is on track Measures to optimize processes and structures in all regions, e.g. manufacturing, maintenance supply chain engineering, best-cost country sourcing One-time costs & investments: ~ 1 billion BASF Capital Market Story October 2013 29
Appendix 1: Charts from Roundtable Oil & Gas (London, September 13, 2013) BASF Capital Market Story October 2013 30
Oil & Gas provides earnings stability EBIT before special items BASF Group* (million ) Excluding non-compensable taxes on oil production 8.000 7.000 6.000 5.000 4.000 3.000 2.000 1.000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 EBIT bsi BASF Group w/o Oil & Gas EBIT bsi* Oil & Gas 2012 (restated) BASF Capital Market Story October 2013 * Excluding non-compensable taxes on oil production 31
Oil & Gas Strong earnings contribution to BASF Group Net income Oil & Gas (million ) 1.500 1.200 900 600 433 480 601 857 789 951 712 923 1.064 1.201 677 300 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1HY BASF Capital Market Story October 2013 32
Oil & Gas Strong free cash flow contribution to BASF Group Cash flow Oil & Gas* (million ) 2.000 1.500 1.000 500 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1HY Operating cash flow Oil & Gas Free cash flow** Oil & Gas 45% of operating cash flow delivered to BASF Group (Avg. 2003-2012) * Wintershall cash flow, not BASF Group consolidated view BASF Capital Market Story October 2013 ** Free cash flow: Operating cash flow less payments related to property, plant and equipment and intangible assets 33
Share of Oil & Gas in BASF portfolio Average EBITDA* 2008-2012 ( billion) Oil & Gas 2.2 (24%) Cumulative capex (plant, property, equipment) ( billion) Oil & Gas 5.2** (30%) 2008-2012 2008-2012 BASF Group w/o Oil & Gas 7.0 (76%) BASF Group w/o Oil & Gas 12.3 (70%) Key facts 2008-2012: Oil & Gas: Solid profit contributor to BASF Group Oil & Gas accounted for 30% of BASF Group capex EBITDA share of Oil & Gas in BASF s portfolio expected to remain in the same order of magnitude in the upcoming years Capex share of Oil & Gas business in BASF portfolio will slightly decline BASF Capital Market Story October 2013 * Excluding non-deductible oil taxes **Fixed assets, tangible assets from acquisitions, activated exploration expenditures 34
Active portfolio management Focus on profitable upstream activities 1 Focus Oil & Gas business 3 Exit natural gas on attractive E&P activities storage and trading business Upstream Exploration / Development / Production Natural Gas Transport Natural Gas Storage / Trading 2 Harvest gas transport business BASF Capital Market Story October 2013 35
Clear regional focus: Four core regions and two development regions Europe Russia North Africa. Caspian Sea Region Middle East South America Operating company / production Representative office Current activities Current activities in development region Core region Development region BASF Capital Market Story October 2013 36
Enabling technology: Schizophyllan BASF proprietary technology for enhanced oil recovery Key facts Production well Polymer injector Schizophyllan proprietary biopolymer Produced by a fungus in pilot scale plant at BASF General principle: Polymer added to injection water, which then becomes more viscous Remaining oil is then more effectively pushed towards production well Increased incremental oil recovery of up to 10% on waterflooding BASF Capital Market Story October 2013 37
Oil & Gas Excellent further growth opportunities Production volumes (million boe)* Key Facts 200 150 100 50 0 >160 126 2012* 2015 target South America Europe Russia North Africa/Middle East 2015 target maintained despite restatement (Effect: -18 million boe in 2012) Continue to significantly invest in core and development regions E&P Capex 2013-2015 ~ 2.0 billion** Russia/Caspian Sea ~ 0.5 billion Europe ~ 1.2 billion South America and Middle East ~ 0.3 billion * Restated, figures for 2012 adjusted to changes in IFRS; 2012 reported: 144 million boe BASF Capital Market Story October 2013 ** Without capex in financial participations 38
Oil & Gas Outlook 2013 2012 restated 2013 Financial performance Sales to 3 rd parties: EBIT before special items: Net income: 12.7 billion 1.9 billion 1.2 billion E&P: In 2013, we expect an increase in sales and earnings due to higher production volumes. Natural Gas Trading: Decrease in earnings due to margin pressure. Production volumes Total production: 126 million boe Overall higher production expected due to the further field development of Achimgaz and our transaction with Statoil in Norway. Sales volumes Natural gas sales: 47 billion m³ Natural gas sales expected on similar level. Investments*/ Expenditures Investments 2008-2012 (IFRS old):~ 5.2 billion thereof E&P: ~ 3.1 billion Investments** 2013-2015: thereof E&P: ~ 2.4 billion ~ 2.0 billion thereof Natural Gas Trading: ~ 2.1 billion thereof Natural Gas Trading: ~ 0.4 billion Macroeconomic assumptions Average oil price (brent): $112 per barrel Average exchange rate: $1.28 per Forecast 2013: $105 per barrel $1.30 per * Incl. tangible assets from acquisitions, activated exploration expenditures, without capex in financial participations BASF Capital Market Story October 2013 ** Without tangible assets from acquisitions and activated exploration expenditures 39 39
Appendix 2: Portfolio development BASF Capital Market Story October 2013 40
Ongoing portfolio development Photo: Øyvind Hagen Transactions with Statoil and Gazprom Crop protection investments (China, BR) Restructuring in Performance Products Aroma ingredients investment, Kuantan BASF Capital Market Story October 2013 41
BASF Capital Market Story October 2013 42 42