Speech Analyst Conference Q2 2012

BASF 2nd Quarter 2012 Analyst Conference Call

July 26, 2012, 11:00 (CEST), Ludwigshafen

Analyst Conference Call Script

Dr. Kurt Bock

Dr. Hans-Ulrich Engel

The spoken word applies.

BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012

BASF 2nd Quarter 2012 Analyst Conference Call 2

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.

Forward-looking statements


Sales €19.5 billion +6%

EBITDA €3.1 billion +4%

EBIT before special items €2.5 billion +11%

EBIT €2.2 billion +1%

Net income €1.2 billion (15%)

EPS €1.34 (16%)

Adjusted EPS €1.60 (9%)

Business performance Q2’12 vs. Q2’11

BASF shows solid developmentSecond quarter 2012 highlights

New second quarter record for sales and earnings in Agricultural Solutions

Oil & Gas outperformed mainly due to the resumption of oil production in Libya

Demand in chemical businesses did not match the strong previous year level

Weaker than expected demand in China

Overall sales and earnings in H1 2012 came in above H1 2011


Dr. Kurt Bock

Ladies and Gentlemen, good morning and thank you for joining us.

[Chart 3: BASF shows solid development]

The world economy experienced a turbulent first half of 2012 and

we saw uncertainty increase in all regions. The deepening of the

euro debt crisis overshadowed the global business sentiment in

the second quarter. Concerns were also raised by the slower

growth in China. All in all, chemical demand weakened more than

expected earlier this year, both in the developed and the

emerging markets.

In this challenging environment, BASF was able to deliver a solid

second quarter. At 19.5 billion euros, sales were 6 percent higher

than a year ago. Our topline benefited from the weaker euro.

In Agricultural Solutions we experienced excellent demand for our

innovative products and delivered an outstanding quarter – the

best second quarter ever.

In Oil and Gas, our strong growth was supported by improving

production volumes in Libya.

In our chemical businesses, however, volumes could not be

maintained compared to the very strong level of the previous

year’s second quarter. During the course of Q2 we saw a swing

towards lower raw material prices. This triggered cautious

customer behavior and order delays. Overall, prices were stable.


EBITDA came in at 3.1 billion euros, up 4 percent from last year.

EBIT before special items at 2.5 billion euros significantly

exceeded last year’s second quarter.

Special items in EBIT amounted to minus 261 million euros and

included restructuring charges as well as the impairment of an oil

field development project in Norway.

The tax rate increased to 39 percent mainly due to non-

compensable oil taxes in Libya. This burdened our net income.

Adjusted earnings per share decreased by 9 percent to 1.60

euros.

Overall, in the first half of 2012 we were able to exceed the

exceptionally high sales and earnings before special items of the

first half of the previous year.



Important milestones in Q2 2012

BASF acquired Mazzaferro‘spolyamide polymer business

Production of PA 6 and compounds in Brazil

Further strengthening position in engineering plastics and PA polymers in South America

Polymerization plant with a capacity of 20,000 metric tons

BASF to invest in new chemical production site in Dahej, India

Investment of €150 million

Production facilities for polyurethanes, care chemicals, polymer dispersions for coatings and paper

Production startup: 2014

Investments in emerging markets

Active portfoliomanagement

BASF acquired NovolyteTechnologies

Novolyte’s energy storage activities focused on developing, producing and marketing performance electrolyte formulations

BASF now becomes global supplier of lithium-ion battery electrolyte formulations

Strengthening of technology platform


[Chart 4: Important milestones in Q2 2012]

In the second quarter, we achieved several important milestones:

With its robust local industries, India is set to become a pillar of

growth in Asia Pacific. In order to ensure local supply for growing

markets and industries we have decided to invest 150 million

euros in a chemical production site in Dahej, on the West coast of

India. The new site will be an integrated hub for polyurethane

manufacturing and also host production facilities for care

chemicals and polymer dispersions for coatings and paper. The

startup of production is planned for 2014.

The acquisition of Novolyte Technologies was the latest in a

series of strategic steps to strengthen our technology position in

battery materials. The integration of Novolyte’s electrolyte

formulation activities now positions BASF as global supplier of

lithium-ion battery electrolytes with production sites in Europe, the

United States and Asia Pacific.

In Brazil, we acquired the polyamide polymer business of

Mazzaferro Group. We are thus further strengthening our

production presence with regard to engineering plastics and

polyamide polymers in South America, where demand for

polyamide in the automotive and extrusion industries is growing

strongly.



Outlook 2012 confirmed

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:

• Given the weak demand outlook, we expect volumes to be flat in H2 2012 vs. H1 2012

• In 2012, EBIT before special items is expected to come in below the level of 2011

Outlook 2012

GDP: +2.3% (before: 2.7%)

Industrial production: +3.4% (before: 4.1%)

Chemical production: +3.5% (before: 4.1%)

US$/Euro: 1.30 (unchanged)

Oil price (US$/bbl): 110 (unchanged)

Revised assumptions 2012


[Chart 5: Outlook 2012 confirmed]

In our last quarterly conference call on April 27, we reiterated our

full year ambitions to exceed the previous year’s record levels of

sales and EBIT before special items. In the first half of 2012, we

were able to surpass the exceptionally high sales and earnings

levels of 2011.

However, the recent weakening of the global economy, which we

see reflected in our order books, led us to be more cautious in our

2012 macroeconomic assumptions. For 2012, we now expect global

GDP to expand only by 2.3 percent, down 0.4 percentage points

from our previous assumption. Industrial production we now see at

3.4 percent and chemical production at 3.5 percent, a reduction of

0.7 and 0.6 percentage points respectively.

Our assumptions for the Brent oil price at 110 US dollars per barrel

and the dollar/euro exchange rate at 1.30 remain unchanged.

Given the weak demand outlook, we now expect volumes in our

chemical businesses to be flat in the second half of this year

compared to the first half. Consequently, EBIT before special items

in our chemical businesses for the full year 2012 is expected to

come in below the level of 2011.

How is BASF addressing these challenges and the significant

political and economic uncertainties? First and foremost, it is our

objective to protect margins and to create value for our investors.

Our operational excellence program STEP which we announced in

November 2011 is on track to deliver one billion euros of earnings

contribution annually by the year 2015. Wherever possible we will


accelerate actions and evaluate our cost base and expenditures.

We are continuing to optimize our working capital as demonstrated

by the strong cash flow development in the second quarter. Due to

the uncertainty around the development of business in Asia, we will

slow down the planned build-up in personnel, particularly in the

emerging markets.

For BASF Group overall, our target is unchanged: we aim to exceed

the 2011 record levels in sales and EBIT before special items in

2012. Furthermore, we expect to again earn a high premium on our

cost of capital.

With this I’ll hand over to Hans.



ChemicalsEarnings impacted by weaker margins throughout the portfolio

Intermediates763+10%

Inorganics 426+21%

Petrochemicals2,159(8%)

€3,348-1%

674621

381467 436

0

200

400

600

800

Q2 Q3 Q4 Q1 Q2

EBIT before special items (million €)

20122011

Q2’12 segment sales (million €) vs. Q2’11

Sales development

Period Volumes Prices Portfolio Currencies

Q2’12 vs. Q2’11 (14%) (2%) 10% 5%


Dr. Hans-Ulrich Engel

Good morning ladies and gentlemen.

Let me highlight the financial performance of each segment in more

detail and focus on the respective business developments in

comparison to the second quarter of 2011.

[Chart 6: Chemicals – Earnings impacted by weaker margins

throughout the portfolio]

Sales in the Chemicals segment slightly declined mainly due to

lower volumes, plant turnarounds and the effects of an earnings

neutral swap agreement for different grades of propylene in the US.

As you might recall, since Q3 2011 we now swap like-for-like

propylene which does not show up as sales anymore. Feedstock

sales to Styrolution and to the recently divested fertilizer business

contributed positively to the topline. EBIT before special items

declined significantly due to lower margins.

In Petrochemicals, sales decreased due to weakening demand

in the course of the quarter. The scheduled eight week

turnaround of our cracker in Port Arthur, Texas, negatively

impacted volumes. Raw material prices started to drop from

record levels and consequently prices for all product lines went

down. As expected, margins were under pressure. This led to a

significant drop in earnings.


Sales in Inorganics increased significantly driven by feedstock

sales to the divested fertilizer activities as well as the startup of a

new sodium methylate plant in Brazil. EBIT before special items

came in above the previous year’s quarter.

In Intermediates, strong demand from important customer

industries, such as agrochemicals and plastics, as well as positive

currency impacts resulted in significantly higher sales.

Nevertheless, margins were under pressure as rising costs for

key raw materials could not be fully compensated by higher

prices. Accordingly, earnings came in below Q2 2011.



PlasticsSequential earnings improvement in challenging environment

Polyurethanes1,580+5%

PerformancePolymers

1,298(2%)

€2,878+2%

Sales development


Q2’12 vs. Q2’11 (5%) 0% 1% 6%


383

317

110

219256

0

200

400

Q2 Q3 Q4 Q1 Q2


20122011


[Chart 7: Plastics – Sequential earnings improvement in

challenging environment]

Sales in Plastics were slightly higher compared to a strong second

quarter in 2011. Favorable exchange rates were a strong support.

Continued weak demand for polyamide precursors resulted in lower

volumes. Overall, EBIT before special items was considerably down

but improved compared to Q1 2012.

In Performance Polymers, sales remained below the prior year’s

quarter. Polyamide precursors were impacted by lower textile

fiber demand in Asia. Engineering plastics benefitted from healthy

demand from the automotive industry in North America and Asia.

Based on lower volumes and lower capacity utilization, EBIT

before special items was significantly below last year.

Sales in Polyurethanes increased. Lower volumes in TDI and

MDI were mostly a result of scheduled turnarounds at several

sites. While volumes went down for basic products, prices could

be partially increased. Specialties were driven by strong demand

from the automotive sector. EBIT before special items was slightly

below the level of the previous year’s quarter due to the

turnarounds and higher raw material costs.



Performance ProductsHigher prices could not fully compensate weak demand vs.Q2 ‘11

PerformanceChemicals

944+4%

Care Chemicals1,237(9%)

€4,122+1%

Paper Chemicals427+2%


Nutrition & Health509+6% Dispersions

& Pigments1,005+7%

513440

220

452 446

0

200

400

600

Q2 Q3 Q4 Q1 Q2


Sales development


Q2’12 vs. Q2’11 (5%) 1% 0% 5%

20122011


[Chart 8: Performance Products – Higher prices could not fully

compensate weak demand vs. Q2 ‘11]

Sales in the Performance Products segment came in slightly

higher. Volumes were down due to a generally weaker economic

sentiment. However, we were able to increase prices, and we

profited from currency tailwinds. Earnings were significantly down

due to margin pressure given weak demand and higher raw material

prices.

In Dispersions & Pigments, positive currency effects and slightly

increased volumes resulted in higher sales. In North America,

sales increased significantly driven by strong demand and higher

prices. Europe experienced lower volumes mostly due to weaker

demand for pigments. EBIT before special items was down mainly

due to an unfavorable product mix.

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. Margins

were under pressure. Hence, EBIT before special items was

down significantly.

In Nutrition & Health, sales increased in all businesses and

regions except for Europe. Overall volumes were in line with Q2

2011. Favorable exchange rate effects and price increases

positively contributed to the topline. As a result of higher raw

material costs, earnings could not be maintained at the previous

year’s level.


Despite challenging market conditions sales in Paper Chemicals

increased, thanks to slightly higher prices and a positive currency

development. Volumes, though, were negatively impacted by

measures to streamline our portfolio. Nevertheless, EBIT before

special items came in higher mainly due to our continuing

restructuring efforts towards fixed cost reduction.

In Performance Chemicals, sales rose due to successful price

increases as well as currency impacts. Volumes were down due

to weaker demand. Earnings were up.



Functional SolutionsDemand from the automotive industry remained strong

Catalysts1,620+8%

ConstructionChemicals

621+8%

Coatings733

+6%

€2,974+8%


167 162

88

148134

0

50

100

150

200

Q2 Q3 Q4 Q1 Q2


Sales development


Q2’12 vs. Q2’11 0% (1%) 3% 6%

20122011


[Chart 9: Functional Solutions – Demand from the automotive

industry remained strong]

In our Functional Solutions segment, sales increased mainly due

to portfolio effects and currency tailwinds. Demand from the

construction industry in North America rose slightly. Earnings

though declined due to 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.

In Coatings, we saw strong demand for automotive OEM

coatings and industrial coatings. Margins were mostly maintained

thanks to successful price increases in all regions and the

optimization of our raw materials portfolio. EBIT before special

items however, came in slightly lower than in the previous year’s

quarter due to higher fixed costs.



Agricultural SolutionsRecord Q2 sales and earnings driven by strong demand

Q2’12 segment sales (million €) vs. Q2’11 EBIT before special items (million €)

20122011

0

200

400

Q2 Q2

20122011

0

500

1.000

Q2 Q2

1,467

Sales development


Q2’12 vs. Q2’11 14% 2% 0% 6%

414

331

1,205


[Chart 10: Agricultural Solutions – Record Q2 sales and

earnings driven by strong demand]

Our Agricultural Solutions segment delivered an outstanding

quarter, with sales increasing by 22 percent year over year. High

demand for our innovative products in all indications and in all

regions drove significant volume growth. The positive pricing trend

was intact for the fourth quarter in a row, and the stronger US dollar

led to tailwind on currency.

EBIT before special items reached a new second quarter record,

putting year-to-date earnings ahead of the full-year 2011 figure.

In Europe, positive business momentum continued especially in

Central and Eastern Europe, and in the United Kingdom. Our

Clearfield herbicides made a strong contribution, and our new

fungicide Xemium is living up to its blockbuster potential. Moreover,

last week it got approved for use in crop protection products in the

EU-27, which will help us to obtain registrations for Xemium-

containing products in additional countries. In North America,

significant sales growth was supported by excellent demand for our

Plant Health products and for herbicides, mainly Kixor. The

prevailing drought condition in the Midwest USA did not impact our

sales for the quarter, but is certainly something to watch out for.

Sales in South America also developed very well, as high demand

for our Fipronil insecticide and for F500 overcompensated weather

challenges affecting the South of Brazil and Argentina. In Asia,

sales were strongly up versus the previous year’s quarter, driven by

higher herbicide sales in India and by strong fungicide sales across

the region.



Oil & GasStrong growth supported by oil production in Libya

Exploration &Production1,251+122%

Natural GasTrading

2,334+23%

€3,585+46%

Q2’12 segment sales (million €) vs. Q2’11 EBIT bSI/Net income (million €)

63257

87 213269

0

200

400

600

800

1,000

Q2/2011 Q2/2012

880

Natural Gas Trading

Exploration & Production

Net income

Non compensable oil taxes(Q2 2011: €0 million; Q2 2012: €445 million)

332

793

Sales development

Period Volumes Prices/Currencies Portfolio

Q2’12 vs. Q2’11 31% 14% 1%


[Chart 11: Oil & Gas – Strong growth supported by oil

production in Libya]

Sales in Oil & Gas continued to grow strongly driven by higher

volumes both from Exploration & Production as well as Natural Gas

Trading. EBIT before special items increased significantly. Net

income came in slightly below 2011 due to higher taxes.

In Exploration & Production, sales were up by 122 percent

mainly due to the resumption of oil production in Libya. Thanks to

additional capacity in the export pipeline we could temporarily

raise our oil production in Libya from an average of 70,000 barrels

in Q1 up to roughly 80,000 barrels of oil per day in Q2. Strong

volumes and higher prices in euro led to substantially higher

earnings.

Sales in Natural Gas Trading increased strongly due to higher

prices and volumes. Earnings grew significantly due to higher

volumes and prices as well as due to concession income from the

OPAL pipeline.



Review of “Other”

Million € Q2 2012 Q2 2011

Sales 1,107 1,714

thereof Styrenics - 811

EBIT before special items (76) (163)

thereof Corporate research Group corporate costs Currency results, hedges and other valuation effectsStyrenics, fertilizers, other businesses

(95)(61)

52

13

(87)(59)

(118)

76

Special items (116) 27

EBIT (192) (136)


[Chart 12: Review of “Other”]

Sales in “Other” decreased significantly due to the divestment of

our styrenics activities into the Styrolution joint venture as well as

the sale of our fertilizer business.

EBIT before special items improved substantially because of

positive valuation effects associated with the long-term-incentive

program for executives. Special items in Other included provisions

for potential asset devaluations and restructuring costs which we

will allocate to the respective businesses as soon as the measures

are implemented.



Strong operating cash flow at €3.5 billion

Million € H1 2012 H1 2011

Cash provided by operating activities 3,460 3,038

thereof Changes in net working capital (651) (1,178)

Cash provided by investing activities (1,084) 81

thereof Payments related to tangible / intangible assets (1,669) (1,265)

thereof Acquisitions / divestitures 430 32

Cash used in financing activities (2,198) (2,764)

thereof Changes in financial liabilities Dividends

269(2,462)

(486)(2,278)

Increase in net working capital by €0.7 billion

Free cash flow amounted to €1.8 billion

Dividend payments to BASF SE shareholders €2.3 billion

Net debt decreased by €0.7 billion to €11.5 billion in comparison to H1 2011

First half 2012


[Chart 13: Strong operating cash flow at €3.5 billion ]

Let me now conclude with our cash flow for the first half of 2012.

Cash provided by operating activities came in at 3.5 billion euros in

the first half of 2012 and we recorded a strong free cash flow of 1.8

billion euros. Net working capital increased by 0.7 billion euros.

Cash used in investing activities amounted to 1.1 billion euros. As

planned, capex was up by 32% at 1.7 billion euros. The net

proceeds from acquisitons and divestitures amounted to 430 million

euros. This included the proceeds from the sale of our fertilizer

assets in Q1 as well as 278 million euros which we paid for various

smaller acquisitions.

Financing activities led to a cash outflow of 2.2 billion euros, mainly

due to dividend payments to shareholders of BASF SE and minority

shareholders in group companies.

Net debt decreased by 0.7 billion euros to 11.5 billion euros in

comparison to the end of the first half in 2011.

Thank you for your attention. We are now happy to take your

questions.

40BASF 4Q/FY’2010 Conference | February 24th, 2011

Speech Analyst Conference Q2 2012

Investor Relations

Transcript of Speech Analyst Conference Q2 2012