Post on 20-Sep-2020
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Heading back to profitable growth
Commerzbank German Investment Seminar 2010 New York
January 12, 2010
Dr. Kurt Bock, CFO
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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.
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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
2009 – A year of challenges
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BASF today – a well-balanced portfolio Total sales 2008: €62.3 billion
* Styrenics reported under ‘Other’
Percentage of sales 2008
Chemicals
18%
Plastics*
15%
Functional Solutions15%
Performance Products13%
Agricultural Solutions5%
Oil & Gas
23%
Construction Chemicals
Inorganics
Petrochemicals
Intermediates
Performance Chemicals
Coatings
Dispersions & Pigments
Performance Polymers
Polyurethanes
Crop Protection
Exploration & Production and Natural Gas Trading
Care Chemicals
Catalysts
Paper Chemicals
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7.5%
10.0%
12.5%
15.0%
17.5%
20.0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 H1
EBITDA margins*
European chemical sector average**BASF Group EBITDA margin excl. non-deductible oil taxes
U.S. chemical sector average***
* 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
Outperforming sector margins due to well-balanced portfolio
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Strong cash flow generation
Cash provided by operating activities Free cash flow*
* Cash provided by operating activities less capex (in 2005 before CTA)** According to German GAAP
-1
0
1
2
3
4
5
6
2001** 2002** 2003** 2004 2005* 2006 2007 2008 Q1-3 2009
In billion €
5.4
3.5
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1 | Focus on operational excellence
2 | Well positioned for profitable growth
3 | Outlook
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8
Index
Fixed costs indexed
• 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
EBITDA indexedSales indexed
Tenacious fixed cost management
50
100
150
200
250
2001 2002 2003 2004 2005 2006 2007 2008
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Annual earnings contribution in million €
0
500
1,000
1,500
2,000
2,500
2003 2004 2005 2006 2007 2008 2009E 2012E
New EXcellence Targets(NEXT):
• > 500 individual projects to simplify processes, structures and production sites in all regions
• Project timeline: 2008 – 2011
• Estimated earnings contribution in 2009: ~ €300 million
• Targeted earnings contribution by 2012: > €1 billion
Completed restructuring programs
New efficiency program NEXT
Sustainable improvement of cost base
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Higher than expected synergies at Ciba New target of at least €450 million
Note: Ciba revenues 2008: CHF5,919 million or €3,986 million
Total integration costs
Q1-Q3 2009: €470 million• thereof:
€457 million special items
Headcount reduction by 3,800
290
100
450
600
100
200
300
400
500
end 2009 end 2010 2011/2012 Steady State
Synergy ramp-up in million €
Synergies in percent of sales (2008: €4.0 billion)
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New target: at least €450 million
≥5
0
7.5
2.5
12.5
FY 2009E: €800 million• thereof:
€720 million special items
2010-2012E: €300 million• thereof:
€150 million special items
Stronger into the future
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1 | Focus on operational excellence
2 | Well positioned for profitable growth
3 | Outlook
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Index
Chemical production* volume growth
BASF volume growthincluding M&A
BASF organicvolume growth
BASF growth outpaces market
80
100
120
140
160
2001 2002 2003 2004 2005 2006 2007 2008
CAGR 2001-2008:
Global chemical production* growth: 3.2% p.a.
BASF Group organic volume growth: 5.4% p.a.
BASF Group volume growth incl. M&A: 7.6% p.a.
* Without pharma
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Well positioned for profitable growth
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
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 allmajor regions
• Continue expansion in Asia
Growth target: We strive to outperform global chemical production growth by at least 2 percentage points
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Future nutrition of growing world populationPlant biotechnology pipeline taps into huge market potential
Superior agricultural productivity
Plants as renewable raw
materials
Better and healthier
nutrition/feed
< $100 million**
$100-200 million**
Market Value
DiscoveryIdentifying
genes & proof of concept
up to 6 years
Stage ILook for proof of
concept IIup to 4 years
Stage IIEarly
product developmentup to 3 years
Stage IIIAdvanced product
developmentup to 2 years
Improved amino acid
High oil
> $2 billion*
< $100 million**
Healthier fatty acids (Omega-3&6) $300–500 million**
Stage IVPre-Launch
up to 3 years
Herbicide tolerance
Amylopectin
Fungal resistance
Yield & stress (corn, soybean, cotton, canola)
* 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
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New Zealand
Australia
China
Pakistan
Bangladesh
India Thailand
Singapore
Indonesia
Taiwan
JapanS. Korea
Malaysia
VietnamHong Kong
Asia Pacific service center
Regional headquarters
Verbund site
Chemical production site *
R&D center *
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Growth in emerging markets Outgrowing Asian Pacific chemical market by 2 percentage points p.a.
• 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 2009-2013
* Some sites not shown due to scale
BASF expects to double sales to €20 billion in Asia Pacific by 2020:
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EBIT before special items by activity in billion € *(without non-compensable foreign taxes on oil production)
* Without ‘Other’** Based on German GAAP*** As of 2007 according to new segment structure (excl. Styrenics and corporate costs)
Oil & GasCrop ProtectionChemical activities • BASF Group more
profitable in Q1-3 2009 than in last trough (2001-2003) as a result of:- rigorous cost savings - active portfolio
management
• Oil & Gas and Agro businesses providing a substantial earnings basis
Strength through diversity: Active portfolio management pays off
0
1
2
3
4
5
6
7
2001** 2002** 2003** 2004 2005 2006 2007*** 2008 Q1-32009
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Total R&D expenditures 2008: €1.35 billion
R&D spending in 2009 planned on similar level
24%
24%
14%
17%
11%9%
Agricultural Solutions
Functional Solutions
Performance Products
PlasticsChemicals
Innovation will spur further growth
Corporate Research
• Targeted annual sales from product innovation*: - 2010: up to €6 billion - 2015: €6-8 billion
• Five Growth Clusters : - Nanotechnology - Energy Management - Plant Biotechnology - Industrial Biotechnology - Raw Material Change
• Budget for growth clusters (2009-2011):up to €1 billion
* New or improved products or new applications, max. 5 years on market, including Growth Clusters
1%
Oil & Gas
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1 | Focus on operational excellence
2 | Well positioned for profitable growth
3 | Outlook
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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
* Without pharma
2020
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 2009.
Outlook 2009
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Q3 09 Q3 08 Δ% Q2 09 Δ%
Sales 12,798 15,772 (19) 12,502 2
EBITDA 1,993 2,171 (8) 1,576 26
EBIT before special items 1,248 1,568 (20) 1,140 9
Net income 237 758 (69) 343 (31)
Earnings per share (€) 0.26 0.82 (68) 0.37 (30)
Adjusted EPS (€) 0.61 0.96 (36) 0.79 (23)
Million €
Q3 2009 performance sequentially improved due to operational strength
23* Incl. Chemicals, Plastics, Performance Products, Functional Solutions and Styrenics; Catalysts without precious metals; without Ciba
Volumes improving sequentially from very low levels
Q1 Q2Q3
Q2Q3*
Q1Q4
-30%
-20%
-10%
0%
10%
20%
Europe
Q1
Q2
Q3 Q3*Q2
Q4 Q1
-30%
-20%
-10%
0%
10%
20%
Asia Pacific
Q1
Q2
Q3
Q2 Q3*Q4
Q1
-30%
-20%
-10%
0%
10%
20%
North America
Q1
Q2
Q3
Q2
Q3*
Q4
Q1-30%
-20%
-10%
0%
10%
20%
South America, Africa, Middle East
2008 2009 2008 2009
2008 20092008 2009
Volume development of industrial activities* compared to average 2008