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.
Page 2
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
BASF 2nd Quarter 2012 Analyst Conference Call 3
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
Page 3
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
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.
Page 4
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
Page 5
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
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.
Page 6
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
BASF 2nd Quarter 2012 Analyst Conference Call 4
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
Page 7
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
[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.
Page 8
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
BASF 2nd Quarter 2012 Analyst Conference Call 5
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
Page 9
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 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
Page 10
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
Page 11
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
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.
Page 12
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
BASF 2nd Quarter 2012 Analyst Conference Call 6
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%
Page 13
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
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.
Page 14
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
Page 15
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
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.
Page 16
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
BASF 2nd Quarter 2012 Analyst Conference Call 7
PlasticsSequential earnings improvement in challenging environment
Polyurethanes1,580+5%
PerformancePolymers
1,298(2%)
€2,878+2%
Sales development
Period Volumes Prices Portfolio Currencies
Q2’12 vs. Q2’11 (5%) 0% 1% 6%
Q2’12 segment sales (million €) vs. Q2’11
383
317
110
219256
0
200
400
Q2 Q3 Q4 Q1 Q2
EBIT before special items (million €)
20122011
Page 17
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
[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.
Page 18
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
BASF 2nd Quarter 2012 Analyst Conference Call 8
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%
Q2’12 segment sales (million €) vs. Q2’11
Nutrition & Health509+6% Dispersions
& Pigments1,005+7%
513440
220
452 446
0
200
400
600
Q2 Q3 Q4 Q1 Q2
EBIT before special items (million €)
Sales development
Period Volumes Prices Portfolio Currencies
Q2’12 vs. Q2’11 (5%) 1% 0% 5%
20122011
Page 19
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
[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.
Page 20
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
Page 21
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
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.
Page 22
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
BASF 2nd Quarter 2012 Analyst Conference Call 9
Functional SolutionsDemand from the automotive industry remained strong
Catalysts1,620+8%
ConstructionChemicals
621+8%
Coatings733
+6%
€2,974+8%
Q2’12 segment sales (million €) vs. Q2’11
167 162
88
148134
0
50
100
150
200
Q2 Q3 Q4 Q1 Q2
EBIT before special items (million €)
Sales development
Period Volumes Prices Portfolio Currencies
Q2’12 vs. Q2’11 0% (1%) 3% 6%
20122011
Page 23
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
[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.
Page 24
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
BASF 2nd Quarter 2012 Analyst Conference Call 10
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
Period Volumes Prices Portfolio Currencies
Q2’12 vs. Q2’11 14% 2% 0% 6%
414
331
1,205
Page 25
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
[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.
Page 26
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
BASF 2nd Quarter 2012 Analyst Conference Call 11
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%
Page 27
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
[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.
Page 28
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
BASF 2nd Quarter 2012 Analyst Conference Call 12
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)
Page 29
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
[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.
Page 30
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 2012
BASF 2nd Quarter 2012 Analyst Conference Call 13
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
Page 31
BASF 2nd Quarter 2012 Analyst Conference Call July 26, 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
Top Related