We add value as - BASF – United States...South Asia 10% Japan 12% South Korea 8% ASEAN €12.5...
Transcript of We add value as - BASF – United States...South Asia 10% Japan 12% South Korea 8% ASEAN €12.5...
We add value as one company
Amber Usman Investor Relations
Asia Pacific
BAML - German
Corporate Days
Hong Kong
November 19, 2014
BASF Capital Market Story November 2014 2
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 forward-
looking statements, and the estimates and assumptions associated with them, except to the
extent required by applicable laws and regulations.
BASF Capital Market Story November 2014 3
Chemistry as an enabler
BASF has superior growth
opportunities:
– sustainable innovations
– investments
– emerging markets
The #1 chemical company
€74 billion sales, €7.2 billion
EBIT bSI in 2013
#1-3 in >75% of businesses,
present in >200 countries
6 integrated Verbund sites,
production in 60 countries
A track record of strong
sales and earnings growth
14% average annual
dividend increase, >3%
yield in every single year*
~€64 billion market
capitalization
October 31, 2014
Performance Perspective
* For 2004-2013
Ludwigshafen,
Germany
Antwerp,
Belgium
Nanjing,
China
Kuantan,
Malaysia Geismar,
USA
Freeport,
USA
Verbund site
Positioning
We create chemistry for a sustainable
future
BASF Capital Market Story November 2014 4
Percentage of sales 2013*
* Not depicted here: ~6% of Group sales reported as ‘Other‘
BASF today – a well-balanced portfolio Total sales 2013: €74 billion
BASF Capital Market Story November 2014 5
Global reduction in carbon
emissions of 6.1 million metric
tons/a. and reduction of waste
Example Ludwigshafen:
avoidance of 7 million metric
tons of freight/a.
= 280,000 fewer truckloads
Shared use of on-site facilities:
fire department, security, waste
water treatment and analytics
Verbund generates >€1 billion p.a. global
cost savings*, supports sustainability
* Savings include only tangible synergies. Additional (intangible) benefits and retained profits are not included.
BASF Capital Market Story November 2014 6
Customers from 17 countries
More than 100 production sites
130 sales offices*
16,708 employees,
thereof ~700 R&D staff
Sales in 2013: €12.45 billion**
EBITbSI in 2013: €842 million
BASF in Asia Pacific
* Some sites are not shown due to scale. Site and office numbers refer
to companies of significant size where BASF holds a stake greater
than 50% .
** Sales by location of customer
Regional headquarters
Verbund site
Production site
R&D/Technical center
Asia Pacific service center
Singapore
Hong Kong
Japan South Korea
Mongolia
China
Pakistan
India
Sri Lanka
Bangladesh
Thailand Vietnam
Philippines
Indonesia
Taiwan
Malaysia
Australia
New Zealand
BASF Capital Market Story November 2014 7
Functional
Materials &
Solutions
30%
Sales* by segment
Chemicals
31%
Other
9%
Performance
Products
26% Greater
China
44%
Australia,
New Zealand (ANZ)
4%
South Asia
10%
Japan
12%
South Korea
8%
ASEAN
22%
€12.5
billion €12.5
billion
Sales by sub-region
Agricultural
Solutions
4%
Sales Asia Pacific 2013
South Asia: India, Pakistan, Bangladesh, Sri Lanka
ASEAN: Singapore, Philippines, Vietnam,
Thailand, Indonesia, Malaysia
*Sales to third parties by location of customers
BASF Capital Market Story November 2014 8
Business review
Growth Levers
BASF Capital Market Story November 2014 9
Q3 2014: BASF with higher sales and
earnings despite declining demand
Sales development
Period Volumes Prices Portfolio Currencies
Q3’14 vs. Q3’13 7% (4%) 0% 0%
Q1-Q3 2014 vs. Q1-Q3 2013 6% (3%) 0% (2%)
Business performance Q3’14 vs. Q3’13 Q1-Q3’14 vs. Q1-Q3’13
Sales €18.3 billion +3% €56.3 billion +1%
EBITDA €2.5 billion +1% €8.2 billion +4%
EBIT before special items €1.8 billion +9% €6.0 billion +5%
EBIT €1.8 billion +8% €6.1 billion +8%
Net income €1.0 billion (5%) €3.8 billion +3%
Reported EPS €1.14 (5%) €4.16 +3%
Adjusted EPS €1.27 (1%) €4.45 +2%
BASF Capital Market Story November 2014 10
Recent transaction with Statoil
Acquisition of participations
in oil & gas fields in Norway
Purchase price amounts to
US$1.25 billion
Increase of production to
~60,000 boepd in Norway
Additional reserves and
resources of ~170 million
boe
Restructuring of
Performance Products Strengthening of R&D platforms
Important corporate developments
BASF to sell textile
chemicals business to
Archroma
Paper Chemicals division to
be dissolved, product lines
moved to other divisions
Strategic options for parts of
kaolin business in evaluation
Total earnings improvement
of ~€500 million by 2017
Future set up of global
research platforms:
- Process Research &
Chemical Engineering,
led out of Europe
- Bioscience Research,
led out of North America
(from 2015)
- Advanced Materials &
Systems Research, led
out of Asia (from 2016)
BASF Capital Market Story November 2014 11
0
1
2
3
4
2004 2005 2006 2007 2008 2009** 2010 2011 2012 2013 Q1-Q32014
Strong free cash flow generation
* Cash provided by operating activities less capex (in 2005 before CTA)
** 2009 adjusted for re-classification of settlement payments for currency derivatives
Free cash flow*
in € billion
2.6
3.3 3.5
3.2
2.5
3.2
3.9 3.7
2.6
3.2
1.3
BASF Capital Market Story November 2014 12
0.851.00
1.50
1.95 1.95
1.70
2.20
2.50
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Growing dividend with attractive yield
Dividend of €2.70 per share for
2013, an increase of 3.8%
2004-2013: Average annual
dividend increase of ~14%
Attractive dividend yield of
3.5% in 2013**
Dividend yield above 3% in any
given year since 2004
* Dividend yield based on share price at year-end
Dividend payments
3.7% 3.2% 3.1% 4.1% 3.8% 7.0% 3.9%
Dividend yield*
4.6%
2.60 2.70
3.7%
** Based on BASF share price of €77.49 on Dec. 30, 2013
Dividend per share
in €
CAGR
14%
3.5%
BASF Capital Market Story November 2014 13
Average annual performance with dividends reinvested
0 3 6 9 12 15 18
Euro Stoxx 50
DAX 30
MSCI World Chemicals
+8.9%
Last 5 years November 2009 – October 2014
+18.1%
+5.9%
+11.5%
+13.7%
Last 10 years November 2004 – October 2014
BASF
+10.2%
+4.2%
+15.4%
Delivering consistent, long-term value
BASF Capital Market Story November 2014 14
We aim to increase our sales volumes excluding the effects of acquisitions and divestitures.
Nonetheless, sales will decline slightly compared with 2013 due to the divestiture of the gas
trading and storage business planned for autumn 2014 and negative currency effects.
Despite the challenging environment, we strive for a slight increase in EBIT before special
items.
Outlook 2014
GDP: 2.3% (previous: 2.5%)
Industrial production: 3.4% (previous: 3.7%)
Chemical production: 4.0% (previous: 4.4%)
US$ / Euro: 1.35 (unchanged)
Oil price (US$ / bbl): 105 (previous: 110)
Assumptions 2014
Outlook 2014
BASF Capital Market Story November 2014 15
Update on key assumptions
of the “We create chemistry” strategy
Growth 2010 – 2015
(today‘s view)
Global GDP 2.6% p.a.
Chemical production
(excl. pharma) 4.0% p.a.
Industrial production 3.4% p.a.
Growth 2010 – 2015 (‘We create chemistry’ *)
3.4% p.a.
4.9% p.a.
4.6% p.a.
* Rebased figures, new base year 2010
BASF Capital Market Story November 2014 16
EBITDA / EBITDA impact (billion €)
Projection 2015
Expected sales and
EBITDA in line with financial
market expectations for
2015
Market expectation for 2015
EBITDA between €10 - €12
billion. BASF aims to
achieve upper end of range
Detailed outlook for 2015
provided on Feb. 27, 2015
BASF Capital Market Story November 2014 17
Business review
Growth levers
– Portfolio development
– Market approach
– Innovations for a sustainable future
– Investments
– Acquisitions
– Operational excellence
BASF Capital Market Story November 2014 18
BASF outperformed global chemical
production by ~3 percentage points p.a.
Sales to third parties billion €
33
79
72
74
16.6
20.7 -4.8
13.7
-6.6 3.7 -0.5 -2.0 0.6
20
40
60
80
2001 2012 2012 restated
2013
Volumes
Prices
Currencies M&A
Volumes Prices Currencies M&A
IFRS
Impact
BASF Capital Market Story November 2014 19
Portfolio development Moving downstream towards customer industries
* Agriculture, Construction, Consumer Goods, Health & Nutrition, Electronics, Energy & Resources, Transportation
** Sales excluding Oil & Gas. Targets were published on November 29, 2011.
BASF Capital Market Story November 2014 20
Catalysts
Construction chemicals
Water-based resins
Pigments, plastic additives
Oil & Gas
Personal care & food
Battery materials
Functional crop care
Omega-3 fatty acids
Enzymes
…
BASF
core business
Strong partnerships
Gazprom
Monsanto
Petronas
Shell
Sinopec
Statoil
Total
Selected transactions
2004 − today
Acquisitions
~ €14 billion sales
Divestitures
Printing systems
Agro generics
Vitamin premixes
Styrenics
Fertilizers
Construction equipment, flooring and wall systems
Natural gas trading and storage business
Textile chemicals
…
~ €16 billion sales*
Portfolio development Towards more market driven and innovative businesses
* Without styrenics (transferred into Styrolution JV on Oct. 1, 2011). Natural Gas Trading: Closing expected in autumn 2014
BASF Capital Market Story November 2014 21
Restructuring in Performance Products Announced measures to strengthen competitiveness
Measures
Leather and textile
chemicals (March 18, 2013 & October 16, 2014)
Establishment of global innovation center in China
Divestiture of textile chemicals
Water, oilfield and
mining chemicals (March 27, 2013)
Establishment of global business unit to realize synergies
Divestment of industrial water management business
Plastic additives and
pigments (April 23, 2013)
Adjustments at sites in the Basel area to adapt to changed market
conditions
Downsizing of R&D activities
Pigments (October 23, 2013)
Optimization of global production network
Closure, restructuring and evaluation of strategic options for
production assets
Paper Chemicals (January 23, 2014 &
September 24, 2014)
Latex plant in EU shut down. Kaolin: Strategic options under
evaluation
From Jan. 1, 2015: Division dissolved, new set-up follows value
chains
Nutrition & Health (April 25, 2014)
Adaption of product portfolio and organizational processes to
market realities
Care Chemicals (June 5, 2014)
Set of measures to adapt to changed customer needs and market
conditions within its Home Care, Industrial & Institutional Cleaning
and Formulation Technologies businesses
Further measures Ongoing
Reduction of >2,400 positions
until end of 2017
Annual earnings
contribution
of ~€500 Million
from 2017 onwards
One-time costs
in the magnitude of ~€250-300 Million
BASF Capital Market Story November 2014 22
Monomers
Intermediates
Dispersions &
Pigments
Performance
Chemicals
Care
Chemicals
Paper
Chemicals
Coatings
Catalysts
Construction
Chemicals
BASF sales by first customer industry*
> 15 %
> 10 %
< 10 %
> 15 %
Consumer goods
Transportation
Construction
Energy & Resources
Market approach Cross-divisional customer industry approach
* Excluding Oil & Gas, Crop Protection and Other. 2012 numbers
Petro-
chemicals
Performance
Materials
Bubble Size: BASF divisional sales by first customer industry*/**
** Nutrition & Health sales predominantly into Health & Nutrition market
BASF Capital Market Story November 2014 23
E-textiles
Solar roof with transparent
organic solar panels and
OLED modules
Multifunctional seat
Infrared-reflective
coating
Infrared-reflective film
High performance foams
Lightweight tridion cell
All-plastic wheel
Cross-divisional approach BASF’s technology Verbund combined with customer know-how
Daimler & BASF concept car ‘Smartforvision’
BASF Capital Market Story November 2014 24
Customer Verbund - adidas and BASF Working together for disruptive innovation: Infinergy™
BASF Capital Market Story November 2014 25
Strong commitment to innovation Innovations for a sustainable future
1.4 1.5
1.6 1.7
1.8
0.0
0.5
1.0
1.5
2.0
2009 2010 2011 2012 2013
€1.8 billion R&D expenditure in
2013, further increase of R&D
spending planned in 2014
~10,650 employees in R&D
~3,000 projects
Research Verbund:
Cooperations with ~600
excellent partners from
universities, start-ups
and industry
Target 2015 and 2020:
– €10 billion in sales from
innovations younger 5 years
– €30 billion in sales from
innovations younger 10 years
R&D expenditures
in € billion
Chemicals
10%
Performance Products
20%
Functional Mat. & Sol.
20%
Agricultural Solutions
26%
Oil & Gas
3%
Corporate Research
21%
Key facts
2.0
1.5
1.0
0.5
0
BASF Capital Market Story November 2014 26
Expand research capabilities in
Asia Pacific with new R&D centers
R&D Center Korea (2013)
Focus: electronics
R&D Center Singapore (2007)
Focus: water, membrane, oilfield
R&D Center Australia (2012)
Focus: mining
Innovation Campus Asia Pacific,
Shanghai (2012)
Focus: polymers & materials
Global R&D Center India (2014)
Focus: life science, agro
R&D Center Japan (2013)
Focus: battery materials
BASF Capital Market Story November 2014 27
Chemistry-based innovations Growth and technology fields
Growth fields
Resources,
Environment
& Climate
Food &
Nutrition
Quality of Life White
Biotechnology
Materials,
Systems &
Nanotechnology
Raw Material
Change
Key customer industries
Health & Nutrition
Consumer Goods
Transportation
Energy & Resources
Electronics
Agriculture
Construction
Technology fields Global needs
...
Batteries for Mobility
Enzymes
Heat Management for Construction
Organic Electronics
Functional Crop Care
Plant Biotechnology
E-Power Management
Wind Energy
Lightweight Composites
Water Solutions
BASF Capital Market Story November 2014 28
Growth field example: Enzymes Innovation-driven specialties for various markets
Become a major player in enzyme technology; sales target of > €400 million (2020)
Textile /
Leather
Oilfield Water
Biofuels
Detergents
Processed
food Beverages
Bakery Feed
Existing business mainly with
enzymes for animal nutrition
Acquired Henkel's detergent
enzyme technology
Entered into research and
license agreement with Dyadic
to access C1-host technology
Successfully acquired enzyme
biotechnology company
Verenium
R&D pipeline reinforced with
several new projects
Enzymes know-how leveraged
with chemical ingredients
Pulp &
Paper
The fungus Aspergillus niger is a powerful
production host for feed enzymes.
BASF Capital Market Story November 2014 29
Performance
Products
15%
Oil & Gas
20%
€20
billion
Functional
Materials &
Solutions
12%
Capex budget 2014-2018
Other
13%
Chemicals
33%
Capex budget 2014-2018
Asia Pacific
18%
€20
billion
South
America
4%
North America
25%
Europe
49%
Agricultural
Solutions
7%
Other
4%
by segment by region
Investments Capex budget 2014-2018 by segment and region*
* Source: BASF Report 2013
BASF Capital Market Story November 2014 30
Expansion oil & gas activities
Aroma Ingredients Kuantan, Malaysia
Investments Major projects
Ammonia and gas-to-propylene in USA*
MDI plant Chongqing, China
Acrylic acid complex Camacari, Brazil
TDI plant Ludwigshafen, Germany
* Under evaluation
BASF Capital Market Story November 2014 31
Major investment projects Asia Pacific
Planned start-up 2014 – 2016
Butanediol
Poly THF
Catamold®
Coatings
Resins
Catalysts
Ultramid®
Polyamide
Engineering
Plastics
TDI Expansion
Shanghai
Nanjing
Acrylic Acid
Superabsorbent
N-Butyle Acrylate
Ethylene oxide
Neopentylglycol
DMAPA, PEA
Korla
Taoyuan
MDI
Chongqing
Agro Chemicals
Rudong
Maoming
Isononanol
Dahej
Polyurethanes
Dispersions and Surfactants
Chennai
Catalysts
Current investment projects under execution
Production clusters
Selected production sites
Kuantan
Citral
> 21,000 engineers and construction workers are executing projects worth ~ 3 billion euros
BASF Capital Market Story November 2014 32
Acquisitions … will contribute to profitable growth in the future
Provide a minimum return on
investment of 8% p.a. after tax
Are EPS accretive by year three
at the latest
Financial acquisition criteria
Generate profitable growth
above the industry average
Are innovation-driven
Offer a special value proposition
to customers
Reduce earnings cyclicality
Strategic acquisition criteria
We want to acquire businesses which …
BASF Capital Market Story November 2014 33
0
1,000
2,000
3,000
4,000
2013 2015
Former cost saving programs
NEXT STEP
Operational excellence programs ~€1.3 billion earnings contribution from STEP by 2015
Annual earnings contribution
in € million Targeted annual earnings
contribution increased
from €1 billion to ~€1.3 billion
by end of 2015
Optimization of processes and
structures in all regions, e.g.
manufacturing, maintenance
supply chain
engineering, best-cost country
sourcing
Project timeline: 2012–2015
Between €0.9 and €1 billion by
the end of 2014 expected
One-time cost : ~€1 billion
STEP program
BASF Capital Market Story November 2014 34
Operational excellence Strong track record
BASF Group* 2001–2013 Index
50
100
150
200
250
300
350
2001 2006 2009 2012
CAGR 2001 – 2013
10 %
8 %
3 %
EBITDA
Sales
Fixed costs
* Excl. companies with major IFRS 10/11 restatements, i.e. BASF YPC Nanjing, Libya onshore, other Oil & Gas and Catalysts companies
2013
BASF Capital Market Story November 2014 35
Appendix I:
Q3 2014 Reporting
BASF Capital Market Story November 2014 36
Chemicals Earnings growth despite flat volumes
Intermediates
701
0%
Monomers
1,587
(1%)
Petrochemicals
1,913
(1%)
€4,201
(1%)
Q3’14 segment sales (million €) vs. Q3’13
Sales development
Period Volumes Prices Portfolio Currencies
Q3’14 vs. Q3’13 0% (1%) 0% 0%
EBIT before special items (million €)
527 510
601 570616
0
200
400
600
800
Q3 Q4 Q1 Q2 Q3
2014 2013
BASF Capital Market Story November 2014 37
Performance Products Sales and earnings stability during restructuring
Performance
Chemicals
847
+3%
Care Chemicals
1,203
0%
€3,919
(1%)
Paper Chemicals
344
(6%)
Q3’14 segment sales (million €) vs. Q3’13
Nutrition
& Health
522
(3%) Dispersions
& Pigments
1,003
0%
EBIT before special items (million €)
Sales development
Period Volumes Prices Portfolio Currencies
Q3’14 vs. Q3’13 0% 0% 0% (1%)
376
216
427 435376
0
200
400
600
Q3 Q4 Q1 Q2 Q3
2014 2013
BASF Capital Market Story November 2014 38
Functional Materials & Solutions Continued robust demand from automotive
Catalysts
1,572
+7%
Construction
Chemicals
565
(2%)
Coatings
736
+1%
€4,527
+2%
Q3’14 segment sales (million €) vs. Q3’13
Sales development
Period Volumes Prices Portfolio Currencies
Q3’14 vs. Q3’13 1% 2% 0% (1%)
300
238
311356
310
0
200
400
Q3 Q4 Q1 Q2 Q3
EBIT before special items (million €)
2014 2013
Performance
Materials
1,654
(1%)
BASF Capital Market Story November 2014 39
Agricultural Solutions Strong earnings decline in seasonally slow quarter
Q3’14 segment sales (million €) vs. Q3’13
Sales development
Period Volumes Prices Portfolio Currencies
Q3’14 vs. Q3’13 (4%) 2% 0% (1%)
0
100
200
Q3 Q3
0
300
600
900
1,200
Q3 Q3
1,018 (3%)
43
(75%)
172 1,054
EBIT before special items (million €)
2014 2013 2014 2013
BASF Capital Market Story November 2014 40
62
451*
194
265
0
100
200
300
400
500
Q3/2013 Net Income Q3/2014 Net Income
Oil & Gas Considerably higher sales and earnings
Exploration &
Production
611
(19%)
Natural Gas
Trading
3,059
+29% €3,670
+17%
Q3’14 segment sales (million €) vs. Q3’13 EBIT bSI/Net income (million €)
Natural Gas Trading
Exploration & Production
Net income
Sales development
Period Volumes Prices/Currencies Portfolio
Q3’14 vs. Q3’13 43% (26%) 0%
422
360
310
504
* Incl. one-time disposal gain of 164 million euros from the divestment of
a 15% stake in Edvard Grieg field
BASF Capital Market Story November 2014 41
Review of “Other”
Million € Q3’14 Q3’13
Sales 977 947
EBIT before special items (7) (105)
Thereof Corporate research
Group corporate costs
Currency result, hedges and other
valuation effects
Other business
(96)
(53)
100
23
(90)
(57)
(74)
59
Special items (20) (24)
EBIT (27) (129)
BASF Capital Market Story November 2014 42
Cash Flow Solid cash flow in Q1-Q3 2014
Million € Q1-Q3’14 Q1-Q3’13
Cash provided by operating activities 4,765 5,982
Thereof Changes in net working capital
Miscellaneous items
(739)
(425)
374
(327)
Cash provided by investing activities (3,625) (4,629)
thereof Payments related to tangible / intangible assets (3,426) (3,038)
Acquisitions / divestitures 355 (1,093)
Cash used in financing activities (995) (1,300)
thereof Changes in financial liabilities
Dividends
1,661
(2,656)
1,304
(2,604)
BASF Capital Market Story November 2014 43
Appendix II:
Chemicals Day
BASF Capital Market Story November 2014 44
Sales to other BASF segments
Sales to 3rd parties
Chemicals segment grows by selling into
the BASF Verbund and to the market
* IFRS 10 & 11 impact: -€1.3Bn; Impact of new segment structure: +€5.3Bn
** Without Catalysts (now part of Functional Materials & Solutions segment)
BASF Capital Market Story November 2014 45
0
100
200
300
400
500
2001 2002 2003 2004 2005 2006* 2007* 2008 2009 2010 2011 2012restated
2013
EBITDA margin Chemicals / oil price
Index 2001 = 100
Chemicals with stable profitability,
little correlation to oil price
EBITDA margin Chemicals
(as % of sales)
Oil price
* Without Catalysts (now part of Functional Materials & Solutions segment)
BASF Capital Market Story November 2014 46
EBIT after cost of capital Chemicals
EBIT after cost of capital*
in million €
restated
Chemicals earned a premium on cost of capital even during the 2008 / 2009 recession***
* EBIT after cost of capital concept was introduced in 2004.
*** The former Plastics segment also earned a premium on cost of capital during the 2008 / 2009 recession.
Chemicals is a strong earnings
contributor
0
500
1,000
1,500
2,000
2004 2005 2006** 2007** 2008 2009 2010 2011 2012 2013
2,000
1,500
1,000
500
0
** Without Catalysts (now part of Functional Materials & Solutions segment)
BASF Capital Market Story November 2014 47
2001 2002 2003 2004 2005 2006* 2007* 2008 2009 2010 2011 2012restated
2013
Chemicals generates strong and steady
free cash flow
Cash flow Chemicals
in million €
* Without Catalysts (now part of Functional Materials & Solutions segment)
Free cash flow (EBITDA – additions to plant, property & equipment)
Since 2001, Chemicals contributed ~€17 billion of free cash flow to BASF Group
Operating cash flow (EBITDA)
2,000
3,000
4,000
1,000
-1,000
0
BASF Capital Market Story November 2014 48
Shale gas in the U.S.: Lower energy and
feedstock cost
Increased U.S. shale gas
production disconnected
crude oil prices from natural
gas prices in North America
Increased production of
natural gas liquids (NGLs):
ethane, propane, butane
NGL price drop drives shift
to lighter cracker feed slates
– Improved profitability of
light feed crackers
– Narrow cracker output
Game changer shale gas
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Natural gas price Germany: Statistisches Bundesamt
“Grenzübergabepreis” Germany
BASF Capital Market Story November 2014 49
Chemicals supplies key raw materials to
BASF downstream segments
BASF Capital Market Story November 2014 50
Principles for internal supply driven and
merchant market driven products
Reliable supply
of key raw
materials
Access to
chemicals not
available in the
market
Internal supply driven
Capture value of
attractive chemicals
markets
Top-3 position in
target market
Merchant market driven
Economic advantages
through superior
technologies and
Verbund
BASF Capital Market Story November 2014 51
Merchant
Market
Value chains
of the
BASF
Verbund
Ethylene
Propylene
Butadiene
Close to entire cracker output in
Ludwigshafen is used within Verbund
<5%
Raffinates
Aromatics
…
Cracker products
Ludwigshafen
>95%
BASF-YPC Nanjing
supply for captive demand:
2006: 60% 2014: 75%
BASF SE, Ludwigshafen, Germany 51
BASF Capital Market Story November 2014 52
Philosophy of transfer pricing
Safe and flexible supply at competitive prices
Transfer prices linked to market prices
No cross-subsidizing
Value driven management in all steps of the
value chain
Additional Verbund benefits
Flexible planning along value chains
High security of supply, low logistics costs,
no sales and sourcing costs
Joint quality management
Joint engineering and process development
Cross-functional knowledge exchange
Additional capacity at Verbund sites
dilutes fixed costs
Chemicals is at the heart of the BASF
Production Verbund
Additional Verbund benefits
Transfer pricing
Downstream
divisions
Chemicals
segment
BASF Capital Market Story November 2014 53
High capex intensity commands extraordinary focus on capex allocation and project control
Extensive use of cash-cost benchmarking
Preparation of solid business cases for all projects ensures sound decision-making
Projects approved only if cost of capital is earned even at hypothetical marginal producer price level
Chemicals segment accounts for one
third of all capex
Capex budget 2014-2018
by segment
Other
13%
Chemicals*
33%
Performance
Products
15%
€ 20
billion
Agricultural Solutions 7%
Oil & Gas
20%
Functional
Materials
& Solutions 12%
* Including gas-to-propylene project U.S. Gulf Coast, TDI Ludwigshafen, MDI Chongqing, Isononanol Maoming
BASF Capital Market Story November 2014 54
0%
2%
4%
6%
8%
10%
12%
14%
16%
0
50
100
150
200
250
300
350
400
2000 2001 2002 2003 2004 2005 2006* 2007* 2008 2009 2010 2011 2012 2013 2014 2015 2016restated
Consolidated sales indexed
(2000 = 100)
Capex as
% of sales
Capex in line with revenues to support
top and bottom-line growth
Capex as % of sales
Chemicals segment
Consolidated sales
Chemicals segment
Capex outlook
* Without Catalysts (now part of Functional Materials & Solutions segment)
BASF Capital Market Story November 2014 55
Major Investment projects in the
Chemical segment
Ammonia and gas-to-propylene in USA*
MDI plant Chongqing, China
Acrylic acid complex Camacari, Brazil
TDI plant Ludwigshafen, Germany
* Under evaluation
Isononanol plant Maoming, China
Polyamides plant Caojing, China
BASF Capital Market Story November 2014 56
Continuous process innovation
leads to best-in-class
technology
Proprietary BASF technology,
with best-in-class process
Significant cost synergies due
to two parallel projects
(Nanjing, Camacari)
Acrylic acid will supply
downstream units
(superabsorbent polymers;
acrylates)
Cost curve case study: Acrylic acid China
Acrylic Acid cash cost curve, China
average cash costs 2015 in US$/kg
Cash
co
sts
BA
SF
c
las
sic
pro
ce
ss
BA
SF
n
ew
pro
ce
ss
Source: BASF estimate
Production capacity
BASF Capital Market Story November 2014 57
Leading single-train technology
New TDI plant strengthens and
benefits from Ludwigshafen
Verbund
Schwarzheide plant to be
closed after start-up of new
plant
New TDI plant re-balances
competitive environment of
European TDI market
Source: BASF estimate
TDI cash cost curve, Europe
average cash costs 2015 in US$/kg
New Ludwigshafen TDI plant
will provide superior cost
structure in Europe
Cost curve case study: TDI Europe
BASF Capital Market Story November 2014 58
BASF caprolactam production focused on captive demand
BASF plants well positioned on cost curve
Best-in-class cost position in Europe
Constant process improvement ongoing
Worldscale caprolactam plants supply downstream demand of polyamide 6 applications
Further cost improvement in North America after start-up of ammonia JV with Yara
Caprolactam cash cost curve
average cash costs 2015 in US$/kg
BA
SF
No
rth
Am
eri
ca
BA
SF
Eu
rop
e
Production capacity
Cash
co
sts
Cost curve case study: Caprolactam
Source: BASF estimate
BASF Capital Market Story November 2014 59
Converted Port Arthur
cracker with high feed
flexibility
# 2 chemical
producer in
the U.S.*
BASF
Shale gas is a major opportunity for
BASF
Low energy costs
(energy bill dropped by 55%
compared to 2007**)
Substantial profit
improvement
BASF will maximize
opportunity of low-cost
methane
Strengthen profitability
of the Verbund
Grow selected C1 value chains
* Based on sales to local customers ** U.S. data only, normalized costs for natural gas for energy production 59
BASF Capital Market Story November 2014 60
Natural Gas Liquids
Ethane
Propane
Butane
► Cracker Feed
Shale gas is beneficial for methane and
ethane based chemistry
Methane and ethane to retain their advantageous cost position in North America
Low transportability of ethane
► Shift to ethane crackers
Propane and butane easy to transport
► Export with link to global market
Very limited transportability of
methane
Methane to remain an abundant
product with low pricing in North
America (despite LNG projects)
Methane
► Power plants
► Ammonia
► Methanol
Composition
of shale gas
BASF Capital Market Story November 2014 61
Ammonia joint venture* enables low raw
materials costs for BASF downstreams
World-scale producer
economics plant with focus on
captive demand only (BASF)
Site: BASF Verbund site
Freeport, Texas
Capacity: 750 kt p.a.
Advantages of hydrogen &
nitrogen based technology:
– Lower capital investment
– No greenhouse gas
emissions
– Faster execution
Improved cost position for
BASF’s downstream products
Caprolactam Isocyanates Amines
Yara
…
Long-term sourcing contracts
Yara-BASF
joint venture
BASF Group
Ammonia
Nitrogen** Hydrogen**
merchant
market
* Project under evaluation ** Hydrogen and nitrogen are available in the Freeport area
BASF Capital Market Story November 2014 62
Gas-to-propylene complex* covers
internal demand at attractive conditions
U.S. Gulf Coast location
World-scale plant
Start-up: ~2019
Port Arthur cracker and new
on-purpose propylene
complex to cover entire
captive propylene demand
Mid-term no sales to merchant
market
Lower cost than alternative
PDH technology
Cost leading gas-to-propylene
technology covers supply gap
Propylene supply North America
Acrylic acid Oxo-alcohols Polyols …
Propylene Propylene
(Port Arthur cracker)
Downstream
products
Methanol
Methane (from shale gas)
Flexible feed
(NGL’s, Naphtha)
* Project under evaluation
BASF Capital Market Story November 2014 63
Appendix III:
Oil & Gas
BASF Capital Market Story November 2014 64
2009
2013
Cumulative capex** 2009-2013 (billion €)
BASF Group
w/o Oil & Gas 7.4 (76%)
BASF Group
w/o Oil & Gas 14.5 (69%)
Oil & Gas 2.3 (24%)
Oil & Gas 6.4 (31%)
2009
2013 -
-
Average EBITDA* 2009-2013 (billion € p.a.)
* Excluding non-deductible oil taxes; restated figures from 2012 onwards in accordance with changes in IFRS
** Including additions to property, plant, equipment resulting from acquisitions, capitalized exploration, restoration obligations
and IT investments; restated figures from 2012 onwards in accordance with changes in IFRS
2009-2013:
– Oil & Gas: Solid profit
contributor to BASF Group
– Oil & Gas accounted for ~30%
of BASF Group capex
Oil & Gas will remain a significant
contributor to BASF’s total EBITDA
Capex share of Oil & Gas
business in BASF’s portfolio will
decline
Key facts
Share of Oil & Gas in BASF portfolio
BASF Capital Market Story November 2014 65
Strong earnings contribution
from Oil & Gas
* Positive impact from special income due to the deconsolidation of Gascade Gastransport GmbH and
the disposal of a share in the Edvard Grieg oilfield (BASF Report 2013, pp. 86-87)
480 601
857 789
951
712
923 1,064
1,201
1,780
1,100
0
500
1,000
1,500
2,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013* Q1-Q32014
Net income Oil & Gas (million €)
BASF Capital Market Story November 2014 66
Strong free cash flow contribution to BASF
Group
Cash flow Oil & Gas* (million €)
0
500
1,000
1,500
2,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Operating cash flow Oil & Gas
* Wintershall cash flow ** Free cash flow: Operating cash flow less payments related to property, plant and equipment and intangible assets
Free cash flow** Oil & Gas
40% of operating cash flow to BASF Group (avg. 2004-2013)
BASF Capital Market Story November 2014 67
Oil & Gas value chain
Upstream Downstream
Exploration / Development / Production Transport Storage / Trading
Midstream Upstream
Focus on attractive
E&P activities Maintain gas
transport
business
Exit natural gas
storage and
trading business 1 2 3
Oil & Gas – Focus on upstream activities
BASF Capital Market Story November 2014 68
Clear strategy for further profitable
growth
”Growing at the source”
Focus Technology Partnerships
BASF technology
Verbund
Enhanced oil
recovery (EOR)
Strategic partnerships
with regional resource
holders
Long-term profitable growth
E&P
Core regions
Limited exploration
risk
BASF Capital Market Story November 2014 69
Four core regions and one development
region
North Africa
Europe Russia
Middle East
South America
Core region
Development region
Operating company
Current activities
.
BASF Capital Market Story November 2014 70
Regional footprint 2013
Russia stands for roughly 50%
of total production
In 2013, natural gas accounted
for approx. 75% of total
production
Production
Russia provides strong reserve
base
Gas accounts for approx. 75%
of total reserves
Reserves
Russia 53%
North Africa/ Middle East 9%
Europe 18%
South America 20%
132 million
boe
North Africa/ Middle East 9%
Europe 13%
South America 13%
Proved 1P reserves by region 2013
1.5 billion
boe
Russia 65%
Production by region 2013
BASF Capital Market Story November 2014 71
Production volumes (million boe)
0
50
100
150
200
2013 2015 target 2018 target
~190
132
Russia
South America
North Africa/Middle East
Europe
>160
* Without capex in non-consolidated participations
Continue to significantly invest in
core and development regions
Capex* of ~€4 billion between
2014 and 2018, thereof
– 70% Europe and Russia
– 15% North Africa/Middle East
– 15% South America
Key facts
Oil & Gas – Excellent further growth
opportunities
BASF Capital Market Story November 2014 72
R/P ratio increased to 11 years
Total 1P reserves amounted to
~1.5 billion boe (2013)
Gas accounts for approx. 75%
of total reserves
Strong contribution to reserve
replenishment from assets in
Norway and Russia
Key facts 1P Reserves* (million boe) R/P (years)
Oil Natural gas R/P
* According to SEC guidelines; Libya onshore 51%
Reserve Replacement Rate (RRR, in percent)
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
102 50 52 48 389 116 89 89 131 100 280
** 2013 adjusted to new conversion factor from m3 gas to barrel of oil equivalent (5,600 scf = 1 boe instead of 6,000 scf = 1 boe)
0
2
4
6
8
10
12
0
200
400
600
800
1,000
1,200
1,400
1,600
2003 2006 2009 2012 **
Reserves and R/P
BASF Capital Market Story November 2014 73
Norway
25% in Maria Norway
32.7% in Brage
Active portfolio management –
Focus on promising projects
UK North Sea
14 licenses
15% in Luno II
Norway
Add. 2.5% in
Brage
Argentina
50% in Aguada Federal
Germany
15.79% of VNG
Acquisitions
Germany**
50% of WINGAS
WIEH, WIEE, Astora
Netherlands**
50% of Wintershall
Noordzee
73
Norway
15% in Gjøa
30% in Vega
(closing dates)
Own/joint-operated Divestitures (closing dates)
Norway
Add. 24.5% in
Vega 24% in Aasta
Hansteen*,
Add. 5% in Gjøa,
19% in Asterix
Non-own operated
Russia**
25% in
Achimov IV/V
Norway
Shares of
14 licences
* Including 13.2% in Polarled Pipeline ** Closing expected in autumn 2014; transaction financially retroactive to April 1, 2013
2011 2013 2012 2014 Expected
closing
BASF Capital Market Story November 2014 74
2011 2012 2014 2013
Nov. signing of
legally binding
basic agreement
Dec. signing of
final agreement
Oct. signing
of framework
agreement
Dec. approval
by EU
Commission
2015 2016
Planned
production
start area IV/V
Effective date:
April 1
Implementation
of the swap
(e.g. developing new
company structure)
Autumn
expected
closing
2017
Status of the asset swap with Gazprom –
Timeline
Activities to be divested contributed in total ~€12 billion to sales and ~€500 million to EBITDA of BASF Group in 2013
BASF Capital Market Story November 2014 75
Russia – Production ramp up Achimgaz
Production development
Achimgaz Block IA* (%)
* 100% share. Russian Standard Conditions (RSC)
Full field development Pilot phase Plateau production
Wells in production
Plateau production by 2018: Up to 8 billion m3 p.a.*
BASF Capital Market Story November 2014 76
Recent transaction with Statoil
Strategic rationale of the transaction
* Pipeline project will provide route for produced gas from Aasta Hansteen field to onshore processing facilities
To strengthen Wintershall’s position in Norway by increasing participation
in producing oil and gas fields
To participate jointly with Statoil in promising development project
“Aasta Hansteen”
To get access to additional reserves and resources (2P/2C) of ~170 million
boe and assets with material exploration perspectivity
To increase production of Wintershall Norge from currently around
40,000 boe/day to about 60,000 boe/day
To expand position as field operator in Norway and to gain experience with
subsea operations by taking over operatorship in the Vega field*
To significantly increase Wintershall’s EBIT and future operating cash flow
BASF Capital Market Story November 2014 77
Wintershall expands its oil and gas production and reserves in Norway
Intensification of the cooperation with Statoil, the leading Norwegian
oil and gas major, on exploration and development projects
Wintershall acquires shares in assets from Statoil containing reserves and
resources (2P/2C) of ~170 million boe and a stake in the Polarled pipeline
project*
Purchase price of US$1.25 billion plus up to US$50 million if Aasta Hansteen
field development is executed according to current project plan
Effective date January 1, 2014
Closing expected by the end of 2014
Recent transaction with Statoil
Transaction summary
* Pipeline project will provide route for produced gas from Aasta Hansteen field to onshore processing facilities
BASF Capital Market Story November 2014 78
Production growth from solid project
pipeline (major projects)
* Closing expected autumn 2014
Length of development
phase
2013 2015 2017 2019 2021
Norway
Length of development phase
Skarfjell
Achimgaz (FFD) Achimov Blocks IV / V*
Block 4N
Shuwaihat
F 17 Area
Hibonite Ravn
Fenix Unconventionals CMA1 extension Vega Pleyade
Maria Aasta Hansteen
Edvard Grieg Knarr
BASF Capital Market Story November 2014 79
Natural gas transportation business
generates stable earnings
Key facts
Nord Stream (offshore)
– Wintershall share: 15.5%
– Capacity: 55 billion m3/a
– Both lines in operation
– Total capex: €7.4 billion
South Stream (offshore)
– Wintershall share: 15%
– Planned capacity: 63 billion
m³/a via 4 pipelines
– Total capex (offshore):
>€10 billion
– Start-up: End of 2015
Natural Gas Transportation
.
Poland Belarus
Ukraine Hungary
Romania
Russia
Bulgaria
Serbia
Slovenia Caspian
Sea Black Sea
Georgia
Germany
OPAL 36 bn. m³/a
NEL 20 bn. m³/a
Nord Stream 55 bn. m³/a
South Stream 63 bn. m³/a
Yuzhno
Russkoye
Achimov fields
Gas pipelines in operation
Nord Stream in operation
South Stream offshore (planned)
South Stream onshore (planned)
Production fields
1
2
Jamal 33 bn. m³/a
Transgas 95 bn. m³/a
* Start of production is planned not before 2016
BASF Capital Market Story November 2014 80
Pipeline network well connected to major
European distribution hubs
Natural Gas Transportation
Ludwigshafen
Düsseldorf
Krefeld
Aachen
Köln
Kassel
Hameln
Emden
Greifswald
Hamburg Schwerin
Berlin
OP
AL
Brandov
Frankfurt/O.
Erfurt
NEL
STEGAL
Kiel
Netherlands
France
Poland
Czech
Republic
Nürnberg
GASCADE pipelines
Major european
distribution hubs
Brüssel
Zeebrügge
Balgzand
Bunde
NetConnect
Gaspool JAMAL
Burghausen
Prag
Bacton
Belgium
NBP
TTF
ZBH
Key facts
GASCADE
– Wintershall share: 50%
– Length: 2,400 km
– In operation since 1992
OPAL
– Wintershall share: 40%
– Capacity: 36 billion m³/a
– Length: 472 km
– In operation since 2011
NEL
– Wintershall share: 25.6%
– Capacity: 20 billion m³/a
– Length: 441 km
– In operation since 2012/2013
BASF Capital Market Story November 2014 81
Oil & Gas – Outlook 2014
2013 2014
Financial
performance
Sales to 3rd parties:
EBIT before special items:
Net income:
€14.776 billion
€1.969 billion
€1.780 billion
Sales expected to be considerably below 2013
due the asset swap with Gazprom.
Slight increase in EBIT before special items due
to the first all-year inclusion of the acquired
activities from Statoil** and the expansion of the
Achimgaz production.
Production
volumes
Total production: 132 mmboe Production expected on similar level despite the
suspension of the onshore production in Libya.
Sales volumes Natural gas sales: 52 billion m³ Divestment of natural gas trading and storage
activities planned for autumn 2014.
Investments/
Expenditures
Investments* 2013:
thereof E&P:
thereof Natural Gas Trading:
~€2.954 billion
~€2.834 billion
~€0.120 billion
Investments*** 2014-2018: ~€4.0 billion (Predominantly in E&P)
Macroeconomic
assumptions
Average oil price (brent):
Average exchange rate:
$109 per barrel
$1.33 per €
Forecast 2014: $105 per barrel
$1.35 per €
* Incl. tangible assets from acquisitions, activated exploration expenditures, without capex in non-consolidated participations
*** Without tangible assets from acquisitions and activated exploration expenditure, without capex in non-consolidated participations
** Former Statoil transaction with closing in 2013
BASF Capital Market Story November 2014 82