Speech BASF Analyst Conference FY 2013

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Charts and Speech accompanying the FY2013 Analyst Conference for investors and analysts on February 25, 2014 Press Release: http://on.basf.com/1muft5z Read full report online at http://on.basf.com/1edHVqH as pdf http://on.basf.com/1hkrFEa (8MB)

Transcript of Speech BASF Analyst Conference FY 2013

  • BASF Analyst Conference FY2013 February 25, 2014, 15:30 (CET) Ludwigshafen, Germany Analyst Conference Call Script Kurt Bock, CEO Hans-Ulrich Engel, CFO The spoken word applies.
  • Page 2 BASF Analyst Conference FY2013 February 25, 2014 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 Analyst Conference FY2013; February 25, 2014 2 BASF increased sales and earnings Business performance Sales Q413 vs. Q412 FY13 vs. FY12 18.1 billion +1% 74.0 billion +3% EBITDA 2.6 billion +26% 10.4 billion +4% EBIT before special items 1.5 billion +18% 7.2 billion +8% EBIT 1.6 billion +55% 7.3 billion +8% Net income 1.1 billion +16% 4.8 billion 0% Reported EPS 1.24 +16% 5.27 0% Adjusted EPS 1.02 (24%) 5.37 (5%) Operating cash flow 1.9 billion +20% 7.9 billion +19% Sales development FY13 vs. FY12 5% BASF Analyst Conference FY2013; February 25, 2014 Prices Portfolio Currencies (2%) 2% (4%) 0% 1% 5% Volumes Q413 vs. Q412 Period (3%) 3
  • Page 3 BASF Analyst Conference FY2013 February 25, 2014 Kurt Bock Good afternoon ladies and gentlemen, Thank you for joining us and welcome to our annual investor and analyst conference for the full year 2013. [Chart BASF increased sales and earnings] Let me start with the business development in the fourth quarter 2013. Despite some first indications of recovery towards the end of last year, the global economic environment remained challenging in Q4. While important markets such as China and the US showed good volume growth and Europe stabilized, we faced strong currency headwinds in various countries, impacting both the top and the bottom line. Sales in Q4 increased slightly to 18.1 billion euros. Higher volumes and portfolio effects were almost offset by lower prices and negative currency effects. EBITDA rose strongly to 2.6 billion euros, up 26 percent primarily driven by a sharp increase in Oil & Gas. EBIT before special items increased by 18 percent to 1.5 billion euros due to a better performance of all five business segments. EBIT went up sharply to 1.6 billion euros as a result of higher earnings and a swing in special items year-on-year. While we incurred negative special items of 164 million euros in the fourth quarter of 2012, we recorded positive special items of 197 million euros in Q4 2013. The two main factors were:
  • Page 4 BASF Analyst Conference FY2013 February 25, 2014
  • Page 5 BASF Analyst Conference FY2013 February 25, 2014 Following a change of control of our joint venture GASCADE Gastransport GmbH, the subsequent deconsolidation led to a special gain of 429 million euros in Oil & Gas. This was lowered by negative special items due to the restructuring measures in Performance Products. At 1.1 billion euros, net income came in 16 percent higher than the prior-year quarter. Adjusted earnings per share were 1.02 euros compared to 1.35 in Q4 2012. The prior-year figure included a reversal of a tax provision. Before I highlight some of the major milestones we achieved last year, let me briefly review our full year 2013 results. Last year, sales and earnings improved despite weaker global economic development and lower industrial production than in 2012. Sales increased by 3 percent to 74 billion euros, primarily driven by higher volumes in Oil & Gas and Agricultural Solutions. In our chemical business, sales decreased by 2 percent because volume growth of 2 percent was more than offset by negative currency effects. EBITDA improved by more than 400 million euros and amounted to 10.4 billion euros. EBIT before special items rose by 8 percent to 7.2 billion euros. This was primarily attributable to an excellent performance of our Crop Protection business, a higher contribution of Functional Materials & Solutions as well as an earnings improvement in Other.
  • Page 6 BASF Analyst Conference FY2013 February 25, 2014
  • Page 7 BASF Analyst Conference FY2013 February 25, 2014 The devaluation of almost all major currencies against the euro had a negative earnings impact of roughly 300 million euros, most pronounced in our Performance Products business. Special items in EBIT amounted to plus 83 million euros, almost flat year-on-year. EBIT came in at 7.3 billion euros, an increase of more than 500 million euros compared with 2012. Income taxes grew by 630 million euros to 1.5 billion euros. The tax rate increased significantly, from 15.2 percent to 22.9 percent. 2012 included tax credits from impairment charges on a Norwegian oilfield development project as well as the reversal of tax provisions. As a result, net income remained at the prior-year level of 4.8 billion euros. Adjusted EPS was 5.37 euros, 5 percent lower than a year ago. Operating cash flow reached a record high of 7.9 billion euros, up 1.3 billion euros versus 2012. At 3.2 billion euros, free cash flow exceeded the prior-year figure despite a significant increase in capex.
  • Page 8 BASF Analyst Conference FY2013 February 25, 2014 Ongoing portfolio development Upstream Downstream Transaction with Statoil Gazprom asset swap BASF Analyst Conference FY2013; February 25, 2014 Pronova BioPharma Enzymes 4
  • Page 9 BASF Analyst Conference FY2013 February 25, 2014 [Chart Ongoing portfolio development] In 2013, we continued to shape our portfolio for future growth: We strengthened our downstream business through the acquisition of Pronova BioPharma and became a leading player in the attractive growth market of highly concentrated omega-3 fatty acids. We made a series of smaller transactions in enzymes to build a technology platform in our strategic growth field. This included the acquisition of Henkels detergent enzyme technology, a research and licensing agreement with Dyadic International as well as the R&D collaboration agreement with Direvo Industrial Biotechnology for the development of highly efficient feed enzymes for animal nutrition. In October, we successfully completed the acquisition of Verenium, which further strengthened our R&D capabilities in enzymes. We also made progress in the development of our Oil & Gas business: We completed the transaction with Statoil, leading to a rise in Wintershalls daily production in Norway from roughly 3,000 BOE to nearly 40,000 BOE. In December, we signed the swap agreement with Gazprom through which Wintershall will further expand its production of oil and gas and exit the gas trading and storage business. We expect to close this transaction in mid-2014. It will take retroactive financial effect as of April 1, 2013. Sales and earnings of BASFs Natural Gas Trading business will continue to be reported in the Oil & Gas segment until closing.
  • Page 10 BASF Analyst Conference FY2013 February 25, 2014 Investments for organic growth Capex budget 2014-2018 by segment Capex budget 2014-2018 by region Performance Products 15% Functional Materials & Solutions 12% Asia Pacific 18% South America 4% 20 billion Agricultural Solutions 7% Other 13% BASF Analyst Conference FY2013; February 25, 2014 Chemicals 33% Other 4% Oil & Gas 20% 20 billion Europe 49% North America 25% 5
  • Page 11 BASF Analyst Conference FY2013 February 25, 2014 [Chart Investments for organic growth] Ladies and Gentlemen, Last year, we spent a total of 1.5 billion euros for acquisitions, well below our long-term average spending. At the same time, we have significantly increased our capex spending. In 2013, we invested 4.4 billion euros in property, plant and equipment. For 2014, we plan capital expenditures in the same ballpark as 2013. For the next five year period 2014 to 2018 we have earmarked total investments of 20 billion euros, thereof 20 percent for Oil & Gas, and one third each for the Chemicals segment, and our downstream activities. The remainder is for R&D and infrastructure. This level of capex reflects our major investments such as TDI in Ludwigshafen, MDI in Chongqing, acrylics in Nanjing and Camaari as well as aroma chemicals in Kuantan and amm