roadshow kuala lumpur - basf · 2016: sales of €57.6 billion; ebitda of €10.5 billion...
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Andrea FrenzelPresidentSouth and East Asia, ASEAN and ANZ
RoadshowKuala LumpurJune 5, 2017
We create chemistry for a sustainable future
2BASF Capital Market Story, May 2017
Cautionary note regarding forward-looking statements
This presentation contains forward-looking statements. These forward-looking statements are basedon current estimates and projections of the Board of Executive Directors and on currently availableinformation. These forward-looking statements are not guarantees of the future developments andresults outlined therein. Rather, they depend on a number of factors, involve various risks anduncertainties, and are based on assumptions that may not prove to be accurate. Such risk factorsparticularly include those discussed on pages 111 to 118 of the BASF Report 2016. The BASFReport is available online at basf.com/report. BASF does not assume any obligation to update theforward-looking statements contained in this presentation.
3BASF Capital Market Story, May 2017
Agenda
At a glance1
Strategic levers2
Asia Pacific3
Outlook4
Appendix5
4BASF Capital Market Story, May 2017
Growth above chemical industry average – driven by innovative and sustainable products and solutions
Unique Verbund concept – competitive advantage based on integrated sites, operational excellence and best-in-class technologies
Broad and resilient portfolio – with global market access and strong customer relationships
Earnings growth and strong cash flow generation – based on operational and financialstrength
Long-term value creation with progressive dividend policy – grow or at least maintain dividend at the previous year’s level
BASF shares – an attractive investment
5BASF Capital Market Story, May 2017
Chemicals – a growth industryGlobal annual growth rate of ~3.6%*
…more food needed by 2050
…more primary energy consumption by 2050
…of the world population will live in cities by 2050
Agriculture Health & Nutrition
Energy & Resources
Automotive &Transport
Construction &Housing
Consumer products
…people by 2050
Electric & Electronics
Chemistry as enabler to meet current and future needs70% 50%~10 bn 30%
* Forecast average annual real change 2017-2019; BASF Report 2016, p.121
6BASF Capital Market Story, May 2017
Broad and resilient portfolio2016: Sales of €57.6 billion; EBITDA of €10.5 billion
Percentage of sales 2016*
* Not depicted here: ‘Other’ 3% of Group sales and EBITDA €(1.0) billion
7BASF Capital Market Story, May 2017
Verbund – unique competitive advantageActively managed in line with market requirements
Annual cost savings of more than €1 billion through integrated production Verbund concept supports sustainability, reduces waste and avoids CO2 emissions of 6 million tons p.a.
Energy savings >€300 million p.a.
People, Customers, Technology, Production
8BASF Capital Market Story, May 2017
Global market access through regional presence
Kuantan
Hong KongNanjing
Freeport
Florham Park
Geismar
LudwigshafenAntwerp
São Paulo
Regional centersSelected sitesVerbund sitesSelected research and development sites
Asia Pacific
Europe
South America
North AmericaSales €14,042 millionEBIT €1,113 millionEmployees 17,583
Sales €26,039 millionEBIT €3,632 millionEmployees 70,784
Sales €12,165 millionEBIT €1,098 millionEmployees 18,156
Sales €5,304 millionEBIT €432 millionEmployees 7,307
Sales by location of customer; EBIT by location of company
9BASF Capital Market Story, May 2017
Stepwise increase of earnings levelEBIT and EBITDA*billion €, 2001–2016
3.7
4.7 4.6
7.0 7.28.4
8.9
7.76.5
9.9
11.2
10.010.4
11.0 10.6 10.5
0
2
4
6
8
10
12
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EBIT EBITDA
0.7
2.2 2.2
4.5 4.85.5
6.0
4.6
2.8
6.7
8.06.7 7.2
7.6
6.2 6.3
CAGREBITDA
7%CAGREBIT16%
* 2010, 2011 indicative, adjusted for IFRS 10 & 11; 2001–2009 as reported, without non-compensable foreign income taxes on oil production
Avg. EBITDA level in depicted years
10BASF Capital Market Story, May 2017
Strong track record in operational excellence
* Excl. companies with major IFRS 10/11 restatements, i.e. BASF YPC Nanjing, Libya onshore, other Oil & Gas and Catalysts companies
50
100
150
200
250
300
350
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EBITDA
Sales
Fixed Costs
CAGREBITDA
8%
CAGRSales
4%
3%
CAGRFixed Costs
BASF Group* 2001–2016 indexed; CAGR 2001–2016
11BASF Capital Market Story, May 2017
billion €, 2001 - 2016
2.3 2.3
4.9 4.65.3
5.9 5.85.0
5.76.5
7.16.6
8.1
7.0
9.4
7.7
0
1
2
3
4
5
6
7
8
9
10
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Free cash flowOperating cash flow
-0.5 -0.1
2.8 2.63.3 3.5 3.2
2.53.2
3.9 3.7
2.63.2
1.7
3.6 3.6
6.3%
Strong cash flow development
12BASF Capital Market Story, May 2017
Attractive dividendWe want to grow or at least maintain dividend at the previous year’s level
* Dividend yield based on share price at year-end
Dividend per share€
0.65 0.70 0.700.85
1.00
1.50
1.95 1.951.70
2.20
2.50 2.60 2.70 2.80 2.90
0
1
2
3
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Yield* 3.1% 3.9% 3.1% 3.2% 3.1% 4.1% 3.8% 7.0% 3.9% 3.7% 4.6% 3.7% 3.5% 4.0% 4.1% 3.4%
3.00
13BASF Capital Market Story, May 2017
Delivering consistent, long-term valueCurrent market capitalization: €82 billion*
Average annual performance (with dividends reinvested)
0 2 4 6 8 10 12 14
Euro Stoxx 50
DAX 30
MSCI World Chemicals
+5.3%
BASF
+6.9%
+1.0%
+11.7%
Last 10 years May 2007 – April 2017
0 2 4 6 8 10 12 14
Last 5 years May 2012 – April 2017
+11.4%
+12.2%
+13.0%
+10.7%
* As of April 28, 2017
14BASF Capital Market Story, May 2017
Sales growth – slightly faster than global chemical production
Deliver attractive returns – earn a significant premium on cost of capital
EBITDA growth – well above global chemical production
Remain a strong cash provider – continuously generate high levels of free cash flow
Progressive dividend policy – grow or at least maintain dividend at previous year’s level
Financial targets for the coming years
15BASF Capital Market Story, May 2017
Innovations for a sustainable future
Investments in organic growth
M&A opportunities and portfolio pruning measures
Our priorities
Cost discipline and operational excellence
We aim to grow sales and earnings faster than global chemical productionin the coming years, driven by
16BASF Capital Market Story, May 2017
Agenda
At a glance1
Strategic levers2► Portfolio development► Investments► Innovation► Sustainability► Operational excellence
17BASF Capital Market Story, May 2017
Continuous global portfolio development
target(in % of sales*)~50% ~50%
Maintaining a balanced portfolio
Divestment of businesses,e.g., due to loss of differentiation
Divestment of businesses,
e.g., due to lower market attractiveness
Commoditization leads to restructuring
Growth fields
Innovation pipeline
Acquisitions
Specialties and solutions Differentiated commodities
Attractive markets Differentiation by process
technologies and integration
Attractive markets Differentiation by customer
proximity and innovations
* Excluding Oil & Gas sales
18BASF Capital Market Story, May 2017
Portfolio development towards more market-driven and innovative businesses
Strong Partnerships Gazprom PETRONAS Sinopec Total
Selected transactions 2010 − today
BASFcore business
~€5.4 billion salesin emerging and innovation-driven businesses
Acquisitions Functional crop care Personal care & food Omega-3 fatty acids Enzymes Battery materials Specialty plastics Selected assets in Oil & Gas Refinish coatings Surface treatment
Divestitures
~€20.7 billion salesin businesses with limited fit and differentiation potential
Styrenics Fertilizers Selected assets in Oil & Gas Natural gas trading & storage Custom synthesis business Textile chemicals Polyolefin catalysts Industrial coatings
19BASF Capital Market Story, May 2017
Clear acquisition criteria
We want to acquire businesses which …
provide a return on investment above the WACC
are EPS accretive by year three at the latest
We want to acquire businesses which …
generate profitable growth above the industry average
are innovation-driven
offer a special value proposition to customers
reduce earnings cyclicality
Acquisitioncriteria
Strategic acquisition criteria Financial acquisition criteria
20BASF Capital Market Story, May 2017
Investments in organic growthInvestments of ~€3.9 billion planned for 2017
Performance Products
21%
Oil & Gas23% €19.0 billion
Capex budget 2017-2021 (by segment)
Other13%
Chemicals24%
Capex budget 2017-2021 (by region)
Asia Pacific16%
North America22%
Agricultural Solutions4%
Other**3%
Functional Materials& Solutions
15%
€19.0 billion
South America*10%
* Including Africa and Middle East, ** Alternative sites currently being investigated
Europe 49%
Oil & Gas Europe
21BASF Capital Market Story, May 2017
Selected investments in Asia Pacificto be started up in 2017
Total investments >€500 million
Second coatingsplant within 3 years
Capacity: 50,000 metric tons
BASF’s first facility in Asia Pacific to produce process catalysts
New site to produce light-duty and motor-cycle emissions catalysts
Aroma ingredients complex
Kuantan, Malaysia
Automotive coatings
Caojing, China
Highly reactive polyisobutene
Kuantan, Malaysia
Chemical catalysts
Caojing, China
Mobile emissions catalysts
Rayong, Thailand
22BASF Capital Market Story, May 2017
Oil & Gas2%
Innovation will drive future growth
AgriculturalSolutions26%
Chemicals10%
Performance Products20%
Corporate Research21%
Key facts
€1.86 billion R&D expenditures in 2016
R&D expense to sales ratio ~3%
~10,000 employees in R&D
~3,000 projects
~850 new patents in 2016
Research Verbund: Cooperations with more than 600 excellent partners from universities, startups and industry
In 2016, sales of >€10 billion with products launched during last 5 years
R&D expenditures 2016
€1.86 billion
Functional Materials & Solutions
21%
23BASF Capital Market Story, May 2017
Innovation Campus Asia Pacific in Shanghai supporting growth industries
Phase II opened in Q4 2015 Focus on research on advanced
materials and polymers Integrated into global R&D network Global HQ for Advanced Materials
& Systems Research Total investment (phase I & II):
~€145 million Close cooperation with customers,
materials scientists, technical and business experts
First regional design consultation center in Asia Pacific, assisting designers in various phases ofproduct development
24BASF Capital Market Story, May 2017
Innovation Campus Asia Pacific in Mumbai An important hub for BASF’s global
R&D network
Startup of 20,000 m2 facility in March 2017
By 2020, around 300 scientists will collaborate globally and regionally
Target industries: crop protection, performance chemicals, resins and coatings, personal care
The BASF Innovation Campus Mumbai is part of a 100% BASF-owned entity.
25BASF Capital Market Story, May 2017
Sustainable Solution Steering®Novel methodology to screen and steer our portfolio
4.2% 0.3%
>60,000 product applications analyzed (€53.2 billion sales, 95.9% of BASF’s portfolio)
27.2% Accelerators
– outgrow their markets
– deliver margins above the average
– represent majority of BASF’s R&D pipeline
68.3% Performers
<1% Challenged products
Increase the share of Accelerators from 23% in 2014 to 28% by 2020
27.2%
68.3%
Substantial sustainability contribution in the value chain
Meets basic sustainability standards on the market
Specific sustainability issues which are being actively addressed
Significant sustainability concern,action plan developed
SustainableSolutionSteering
Percentage of sales 2016
26BASF Capital Market Story, May 2017
Carbon efficiencyResponsible use of raw materials by the chemical industry
BASF uses raw materials responsibly: ~80% of carbon converted to products, ~20% needed for processes*
Continuous efficiency improvements
22 million tons CO2 emissions by BASF in 2016 compared to 10-30 million tons p.a. for one coal-fired power plant
Chemical industry: only ~10% of global consumption of fossil resources**
Growing world population needs access to energy, housing, healthcare and food
Consumption of resources has to be reduced in order to limit global warming to <2°C
Chemistry as enabler for low-carbon technologies (e.g., lightweight parts, battery materials, insulation, etc.)
20% CO280%
products
*BASF carbon mass balance calculation (2016, non-audited) **IEA 2015
27BASF Capital Market Story, May 2017
0
1.000
Earnings contribution 2016 2017-2018 Total
Operational excellenceDrivE with ~€1 billion targeted earnings contribution
DrivE program
Targeted annual earnings contribution of €1 billion from end of 2018 on
Optimization of processes and structures in all regions, including
– manufacturing
– incremental capacities
– productivity increase
Project timeline: 2016–2018
€350 million
€650 million
Goal €1 billion
Annual earnings contribution DrivEmillion €
1,000
28BASF Capital Market Story, May 2017
Digitalization will support BASF’s growth and efficiencyDigital Business Models
Smart Innovation
Smart Supply Chain
Smart Manu-facturing
Growth
Digital business models Customer connectivity Digitalization of R&D
New revenue streams Increased supply share Higher innovation output
Predictive maintenance Augmented reality in production Smart supply chain
Increased capacity Increased work efficiency Reduced working capital
Efficiency
29BASF Capital Market Story, May 2017
Agenda
At a glance1
Strategic levers2
Asia Pacific3
Outlook4
Appendix5
30BASF Capital Market Story, May 2017
Asia and China continue to dominate global chemical productionReal chemical production (excl. pharma)(trillion US$)
2012CAGR3.7%2012 2020
World
CAGR5.6%1.6 2.5
Asia Pacific
2020
Source: BASF
3.2 4.3
50%
23%
18%9%
58%
18%
16%
8%
12%65%
6%
9%
7%
1%
9%
73%
5%
6%6%
1%
Greater China
South KoreaJapan
South Asia
ANZ
South East AsiaAsia Pacific
OthersEurope
North America
31BASF Capital Market Story, May 2017
BASF in Asia Pacific 2016
Nanjing
Hong Kong
Kuala Lumpur
Kuantan
* Only selected sites and offices are depicted in this chart. Site and office numbers refer to companies of significant size where BASF holds a stake greater than 50%.
** As of December 31, 2016.
*** Sales by location of customer.
BASF is present in 17 countries
Customers from 38 markets
~100 production sites*
>120 sales offices*
18,156 employees**
~€12.2 billion sales***
~€1.1 billion EBITRegional centerVerbund sitesSelected sitesR&D/Technical centersShared Services Center
32BASF Capital Market Story, May 2017
BASF’s performance in Asia Pacific
0.0
0.5
1.0
1.5
2012 2013 2014 2015 2016 Q1 2017
0.5
0
5
10
15
2012 2013 2014 2015 2016 Q1 2017
12.5 12.4 12.3 12.3
EBIT (billion €)
0.9 0.80.7
0.4
Sales* (billion €)
* By location of customer
1.1
3.5
12.2 Strong volume and earnings growth Positive portfolio effect from
Chemetall acquisition Some negative top-line impact due to
portfolio pruning Inauguration of automotive catalysts
plant and Innovation Campus in India Cost discipline
Developments in Q1 2017
33BASF Capital Market Story, May 2017
BASF in Asia Pacific: Balanced portfolioSales* by segment in 2016(billion €)
Sales* by sub-region in 2016(billion €)
Functional Materials & Solutions37%
Performance Products 29%
Other3%
Chemicals27%
Agricultural Solutions4%
€12.2 billion
South East Asia15%
Greater China49%
Australia, New Zealand3%
South Asia11%
Japan13%
South Korea9%
€12.2 billion
* Sales to third parties by location of customer
34BASF Capital Market Story, May 2017
Balanced asset base in Asia Pacific: Investments for profitable growth
Planned investments 2017–2021: ~€3 billion (16% of BASF Group)
Increasing focus on investments where BASF: − is technologically leading − has a competitive advantage − expects strong profitable market
growth
Target remains: ~75% own manufactured products by 2020(today: ~59%)
** Without China
Selected major capex projects*
Care chemicals Polyurethane specialties
Specialty plasticsEngineering plasticsPolymer dispersions2-Ethylhexanoic acid
AminesSurfactants
Acrylic acid & SAPResins
Specialty plasticsCrop protection products
MDI (Chongqing)Innovation Campus (Shanghai)
PolyamidesNeopentylglycol
IsononanolCoating resins
Automotive coatingsButanediol/PolyTHF®
Specialty amines Ethylene oxide
Polyvinylpyrrolidone
Startup 2012–2016
Startup planned for 2017-2021
China
Asia Pacific**
Process catalystsEmollients and waxesMDI (Caojing)Automotive coatingsPlastic additives
Aroma chemicalsAutomotive catalystsHighly reactive polyisobuteneInnovation Campus (Mumbai)Automotive coatingsSpecialty plasticsPlastic additives
* Investments in property, plant and equipment (excluding acquisitions)
35BASF Capital Market Story, May 2017
Agenda
At a glance1
Strategic levers2
Asia Pacific3
Outlook4
Appendix5
36BASF Capital Market Story, May 2017
Assumptions 2017
Outlook 2017 for BASF Group confirmed
Outlook 2017 We expect BASF Group sales to grow considerably in the 2017 business year.
We want to slightly raise EBIT before special items compared with 2016.
BASF Group EBIT is also expected to grow slightly in 2017.
We are likely to once again earn a significant premium on our cost of capital in 2017.
GDP growth: +2.3%Growth in industrial production: +2.3%Growth in chemical production* +3.4%Exchange rate: US$1.05 per euroOil price (Brent): US$55 per barrel
* Excluding pharma
37BASF Capital Market Story, May 2017
Agenda
At a glance1
Strategic levers2
Asia Pacific3
Outlook4
Appendix5
38BASF Capital Market Story, May 2017
BASF Group Q1 2017Sales and earnings considerably above prior-year quarter
Financial figures Q1 2017 Q1 2016 Change
Sales €16.9 billion €14.2 billion 19%
EBITDA €3.5 billion €2.8 billion 25%
EBIT before special items €2.5 billion €1.9 billion 29%
EBIT €2.5 billion €1.9 billion 31%
Net income €1.7 billion €1.4 billion 23%
Reported EPS €1.86 €1.51 23%
Adjusted EPS €1.97 €1.64 20%
Operating cash flow €833 million €1,046 million (20)%
Sales development Volumes Prices Portfolio CurrenciesQ1 2017 vs. Q1 2016 8% 8% 1% 2%
39BASF Capital Market Story, May 2017
ChemicalsConsiderably higher earnings driven by increased margins and volumes
Intermediates752+16%
Monomers1,699+44%
Petrochemicals1,654+38%
€4,105+36%
Sales Q1 2017 vs. Q1 2016*million €
EBIT before special items* million €
457 458 488629
958
0
200
400
600
800
1,000
Q1 Q2 Q3 Q4 Q1
Sales development Volumes Prices Portfolio CurrenciesQ1 2017 vs. Q1 2016 10% 24% 0% 2%
2016 2017
* Effective January 1, 2017, the Monomers and Dispersions & Pigments divisions’ activities for the electronics industry were combined into the global ElectronicMaterials business unit and allocated to the Dispersions & Pigments division in the Performance Products segment. The 2016 figures have been adjusted accordingly.
40BASF Capital Market Story, May 2017
Performance ProductsSales increased, earnings impacted by lower margins
Performance Chemicals1,013+6%
Nutrition & Health4860%
Dispersions & Pigments1,399+11%
Care Chemicals1,362+13%
€4,260+9%
Sales development Volumes Prices Portfolio CurrenciesQ1 2017 vs. Q1 2016 7% 2% (2%) 2%
555512 473
237
515
0
200
400
600
800
Q1 Q2 Q3 Q4 Q1
EBIT before special items* million €
2016 2017
Sales Q1 2017 vs. Q1 2016*million €
* Effective January 1, 2017, the Monomers and Dispersions & Pigments divisions’ activities for the electronics industry were combined into the global ElectronicMaterials business unit and allocated to the Dispersions & Pigments division in the Performance Products segment. The 2016 figures have been adjusted accordingly.
41BASF Capital Market Story, May 2017
Functional Materials & Solutions Earnings grew significantly, mainly driven by continued strong demand from automotive
Coatings999+35%
Catalysts1,689+15%
ConstructionChemicals
560+5%
Performance Materials1,950+17%
€5,198+18%
456535 497
458531
0
200
400
600
800
Q1 Q2 Q3 Q4 Q1
EBIT before special items million €
Sales development Volumes Prices Portfolio CurrenciesQ1 2017 vs. Q1 2016 8% 3% 4% 3%
2016 2017
Sales Q1 2017 vs. Q1 2016million €
42BASF Capital Market Story, May 2017
1,780 1,855
0
1,000
2,000
Q1 2016 Q1 2017
Agricultural SolutionsSales increased slightly, earnings impacted by less favorable product mix
+4%591
533
0
200
400
600
800
Q1 2016 Q1 2017
EBIT before special items million €
Sales development Volumes Prices Portfolio CurrenciesQ1 2017 vs. Q1 2016 2% 0% 0% 2%
-10%
Sales Q1 2017 vs. Q1 2016million €
43BASF Capital Market Story, May 2017
Oil & GasSales and earnings up, mainly due to higher prices
611
829
0
500
1,000
Q1 2016 Q1 2017
Sales Q1 2017 vs. Q1 2016million €
+36%
66
170
47
140
0
100
200
300
Q1 2016 Q1 2017
EBIT before special items, net income million €
Sales development Volumes Prices/Currencies PortfolioQ1 2017 vs. Q1 2016 12% 24% 0%
EBIT before special items Net income
44BASF Capital Market Story, May 2017
Review of “Other”
million € Q1 2017 Q1 2016
Sales 610 477
EBIT before special items (250) (219)
Thereof Costs of corporate research (81) (99)
Costs of corporate headquarters (52) (55)
Foreign currency results, hedging and other measurement effects (31) 68
Other businesses 5 18
Special items 7 (26)
EBIT (243) (245)
45BASF Capital Market Story, May 2017
Cash flow development Q1 2017million € Q1 2017 Q1 2016
Cash provided by operating activities 833 1,046
Thereof Changes in net working capital (1,985) (1,248)
Miscellaneous items 58 (39)
Cash used in investing activities (1,215) (1,258)
Thereof Payments made for tangible / intangible assets (767) (1,001)
Acquisitions / divestitures (22) 0
Cash provided by financing activities 831 1,997
Thereof Changes in financial liabilities 811 1,996
Dividends 6 (4)
Free cash flow 66 45
46BASF Capital Market Story, May 2017BASF Investor Day 2015 – Keynote speech 46
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