basf capital market story · basf capital market story, november 2016. 2. 150 years. cautionary...
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BASF Capital Market Story, November 2016 1
BASF Capital Market Story
Ingo RoseDirector Investor Relations
BNY Mellon & Jefferies 2nd Annual Global ADR Conference
New York
November 28-29, 2016
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BASF Capital Market Story, November 2016 2
150 years
Cautionary note regarding forward-looking statements
This presentation may contain forward-looking statements that are subject to risks anduncertainties, including those pertaining to the anticipated benefits to be realized from theproposals described herein. Forward-looking statements may include, in particular, statementsabout 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 financialperformance. Actual financial performance could differ materially from that projected in theforward-looking statements due to the inherent uncertainty of estimates, forecasts andprojections, and financial performance may be better or worse than anticipated. Given theseuncertainties, readers should not put undue reliance on any forward-looking statements. Theinformation contained in this presentation is subject to change without notice and BASF doesnot undertake any duty to update the forward-looking statements, and the estimates andassumptions associated with them, except to the extent required by applicable laws andregulations.
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BASF Capital Market Story, November 2016 3
150 years
Chemistry as an enabler BASF has superior growth
opportunities: – sustainable innovations– investments– emerging markets
The #1 chemical company €70.4 billion sales, €6.7
billion EBIT bSI in 2015 #1-3 in ~70% of businesses,
present in almost all countries
6 integrated Verbund sites, production in 60 countries
A track record of strong sales and earnings growth
>3.5% dividend yield in every single year from 2006-2015
~€73.6 billion market capitalization on October 27, 2016
PerspectiveLudwigshafen,Germany
Antwerp,Belgium
Nanjing,China
Kuantan,MalaysiaGeismar,
LouisianaFreeport,Texas
Verbund site
Positioning
We create chemistry for a sustainable future
Performance
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BASF Capital Market Story, November 2016 4
150 years
Percentage of sales 2015*
* Not depicted here: ~4% of Group sales reported as ‘Other‘ ** Natural Gas Trading has been divested on Sep. 30, 2015.
BASF today – a well-balanced portfolioTotal sales 2015: €70.4 billion
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BASF Capital Market Story, November 2016 5
150 years
Global reduction in carbon emissions of 6 million metric tons p.a. and reduction of waste
Example Ludwigshafen site:avoidance of 7 million metric tons of freight p.a.= 280,000 fewer truckloads
Shared use of on-site facilities: fire department, security, waste water treatment and analytics
Verbund: Unique competitive advantage
* Savings include only tangible synergies. Additional (intangible) benefits and retained profits are not included.
Verbund generates >€1 billion p.a. global cost savings* and supports sustainability
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BASF Capital Market Story, November 2016 6
150 years
Q3 2016: Financial figures for BASF Group
Financial figures Q3 2016 Q3 2015 Change
Sales €14.0 billion €17.4 billion (20%)
EBITDA €2.4 billion €2.9 billion (15%)
EBIT before special items €1.5 billion €1.6 billion (5%)
EBIT €1.5 billion €1.9 billion (22%)
Net income €0.9 billion €1.2 billion (27%)
Reported EPS €0.97 €1.31 (26%)
Adjusted EPS €1.10 €1.07 +3%
Operating cash flow €2.5 billion €3.4 billion (25%)
Sales development Volumes Prices Portfolio Currencies
Q3 2016 vs. Q3 2015 4% (5%) (18%) (1%)
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BASF Capital Market Story, November 2016 7
150 years
0
1
2
3
4
5
2007 2008 2009** 2010 2011 2012 2013 2014 2015 Q1-Q32016
Free cash flow development
* Cash provided by operating activities less capex ** 2009 adjusted for re-classification of settlement payments for currency derivatives
Free cash flow*(in billion €)
3.2
2.5
3.2
3.9 3.7
2.6
3.2
1.7
3.6
2.9
Diagramm1
2007
2008
2009**
2010
2011
2012
2013
2014
2015
Q1-Q3 2016
Free Cash Flow
3.245
2.502
3.186
3.912
3.695
2.587
3.21
1.7
3.6
2.9
Sheet1
200720082009**201020112012201320142015Q1-Q3 2016
Free Cash Flow3.2452.5023.1863.9123.6952.5873.2101.73.62.9
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BASF Capital Market Story, November 2016 8
150 years
Outlook 2016 for BASF Group confirmed
Outlook 2016 Sales will be considerably below prior year due to the divestiture of the natural gas trading
and storage activities and the lower oil and gas prices. We expect EBIT before special items to be slightly below the previous year level due to
significantly lower earnings in Oil & Gas.
Assumptions 2016 GDP growth: +2.3% Growth in industrial production: +2.0% Growth in chemical production*: +3.4% Exchange rate: $1.10 per euro Oil price (Brent): $45 per barrel (previous forecast: $40 per barrel)
* Excluding pharma
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9
Business development
Path forward: Our priorities
Appendix – Q3 2016 reporting
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BASF Capital Market Story, November 2016 10
150 years
Components of growth
* 2010, 2011 indicative, adjusted for IFRS 10 & 11
59.6
70.4+10.5 -1.4
+2.6 -0.9
20
40
60
80
2010 2015
Volumes
PricesFX M&A
Sales* analysis 2010 – 2015 (in billion €)
(in billion €) Net sales 2010 Volumes Prices FX M&A Sales CAGR 2010 - 2015
BASF Group w/o Oil & Gas 51.4
+2.8 (+1.1% CAGR) -0.9 +2.6 +1.6 +2.3%
Oil & Gas 8.2 +7.7 (+14.2% CAGR) -0.5 +0.0 -2.5 +9.6%
3.4%
CAGR
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BASF Capital Market Story, November 2016 11
150 years
Steady earnings growth
* 2010, 2011 indicative, adjusted for IFRS 10 & 11; 2001 – 2009 as reported, without non-compensable foreign income taxes on oil production
EBIT and EBITDA*(in billion €, 2001 - 2015)
3.74.7 4.6
7.0 7.2
8.48.9
7.7
6.5
9.9
11.2
10.010.4
11.0 10.6
8.0
0
2
4
6
8
10
12
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1-Q32016
EBITEBITDA
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
5.0
CAGREBITDA
7.9%CAGREBIT
16.6%
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BASF Capital Market Story, November 2016 12
150 years
0
1,000
2,000
3,000
4,000
2015 2018
Annual earnings contribution(in million €)
Targeted annual earnings contribution of €1 billion from end of 2018 on
Optimization of processes and structures in all regions, e.g.– manufacturing– incremental capacities– productivity increase
Project timeline: 2016–2018
DrivE program
Strategic lever: Operational excellenceDrivE with ~€1 billion earnings contribution
NEXT 2008-2011 DrivE 2016-2018
STEP 2012-2015
Diagramm1
2015201520152015
2018201820182018
Sheet1!#REF!
NEXT
STEP
NewPro
1000
1300
1000
1300
1000
Sheet1
201420152018
NEXT100010001000
STEP100013001300
NewPro1000
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BASF Capital Market Story, November 2016 13
150 years
50
100
150
200
250
300
350
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Strong track record in operational excellence
EBITDA
Sales
* Excl. companies with major IFRS 10/11 restatements, i.e. BASF YPC Nanjing, Libya onshore, other Oil & Gas and Catalysts companies
BASF Group* 2001–2015(indexed; CAGR 2001–2015)
Fixed Costs
CAGREBITDA
9%
CAGRSales
6%
CAGRFixed Costs3%
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BASF Capital Market Story, November 2016 14
150 years
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2006 2009 2012 2015
2.90
We want to grow or at least maintain our dividend at the previous year’s level
Dividend of €2.90 per share, an increase of 3.6%
Dividend yield of 4.1% in 2015
Dividend yield above 3.5%in any given year since 2006
4.6%
Attractive shareholder return
Key facts 2015
Dividend per share (€)
0.50
1.00
1.50
2.00
* Dividend yield based on share price at year-end
4.1% 3.8% 7.0% 3.9% 3.7%Yield* 3.7%
2.50
3.5%
3.00
4.0% 4.1%
1.50
1.95 1.951.70
2.202.50 2.60 2.70
Dividend policy
2.80
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BASF Capital Market Story, November 2016 15
150 years
Average annual performance with dividends reinvested
0 3 6 9 12 15
Euro Stoxx 50
DAX 30
MSCI World Chemicals
+5.5%
Last 5 yearsNovember 2011 – October 2016
+12.5%
+8.3%
+11.7%
+9.9%
Last 10 yearsNovember 2006 – October 2016
BASF
+6.9%
+0.4%
+13.1%
Delivering consistent, long-term value
Diagramm1
MSCI World
DAX
Euro Stoxx
BASF
Ost
9.1%
12.0%
8.1%
6.9
5.5
0.4
13.1
Sheet1
MSCI WorldDAXEuro StoxxBASF
Ost6.95.500.413.1
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16
Business development
Path forward: Our priorities
Appendix – Q3 2016 reporting
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BASF Capital Market Story, November 2016 17
150 years
Grow sales and earnings faster than global chemical production, driven by
– Continued focus on innovations
– Capital expenditures
– Acquisitions
– Operational excellence and Verbund advantages
Focus on cash generation/conversion
Continue with our progressive dividend policy
Focus on pruning our portfolio
Maintain industry-leading position in sustainability
The path forward: Our priorities
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BASF Capital Market Story, November 2016 18
150 years
€1.95 billion R&D expendituresin 2015; to be maintained in 2016
~10,000 employees in R&D
~3,000 projects
Ranked No.1 in thePatent Asset Index™
~1,000 new patents in 2015
Research Verbund: Cooperations with more than 600 excellent partners from universities, start-upsand industry
Strong commitment to innovationInnovations for a sustainable future
Key facts
1.61.7
1.8 1.9 1.95
0.0
0.5
1.0
1.5
2.0
2011 2012 2013 2014 2015
R&D expenditures (billion €)
Chemicals11%
Performance Products20%
Functional Mat. & Sol.20%
Agricultural Solutions26%
Oil & Gas2%
Corporate Research21%
2.0
1.5
1.0
0.5
0
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BASF Capital Market Story, November 2016 19
150 years
Hyundai Motor and BASF showcase joint development of RN30 concept car
Body coating: Color Pro IC waterborne basecoat and iGloss® clearcoat
Fender and spoiler: Elastolit® rigid foam and reaction injection molding systems
Seat cover and steering wheel: unique surface technology valure™
Electronics and electric: Ultramid® advanced plastics for sophisticated components
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BASF Capital Market Story, November 2016 20
150 years
Automotive is a growth business for BASF
* Excl. precious metals, coatings refinish business;
BASF sales to Automotive vs. global vehicle production(indexed)
50%
75%
100%
125%
150%
175%
2007 2008 2009 2010 2011 2012 2013 2014 2015
BASF salesto Automotive
CAGR6.7%
Global vehicleproduction
CAGR shown for 2007 – 2015
CAGR
2.8%
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BASF Capital Market Story, November 2016 21
150 years
Investments for organic growth
Performance Products16%
Oil & Gas24%
€19.5billion
FunctionalMaterials &Solutions12%
Capex budget 2016-2020
Other14%
Chemicals30%
Capex budget 2016-2020
Asia Pacific18%
€19.5billion
South America*9%
North America26%
Europe46%
AgriculturalSolutions4%
Other1%
by segment by region
* Including Africa and Middle East
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BASF Capital Market Story, November 2016 22
150 years
Functional crop care Personal care & food Omega-3 fatty acids Enzymes Battery materials Specialty plastics Selected assets in Oil & Gas Refinish coatings Surface treatment*
BASFcore business
Strong partnerships
Gazprom Monsanto Petronas Shell Sinopec Statoil Total Yara
Selected transactions 2010 − until today
Acquisitions
~ €5.2 billion salesin emerging and innovation-driven
businesses
Divestitures
Styrenics Fertilizers Selected assets in Oil & Gas Natural gas trading & storage Custom synthesis business Textile chemicals Polyolefin catalysts Industrial coatings*
~ €20 billion salesin businesses with
limited fit and differentiation
potential
Portfolio development towards more market-driven and innovative businesses
* Closing expected in 2016
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BASF Capital Market Story, November 2016 23
150 years
Provide a return on investment above the WACC
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 …
Strategic lever: Acquisitions
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BASF Capital Market Story, November 2016 24
150 years
2.2% 0.2%
Novel methodology to screen and steer our portfolio*
26.6% Accelerators:– outgrow their markets
by 2-10%– deliver margins >10%
above the average– represent >60% of BASF’s
R&D pipeline 71% Performers
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BASF Capital Market Story, November 2016 25
150 years
Four-Way Conversion Catalyst removes particulates
Trilon M® high-performance phosphate alternative
SLENTITE® high-performance insulation material
ecovio® biodegradable polymer solution
Green Sense® resource efficient concrete production
Solutions for a sustainable future
Acronal® MB – from biomass to dispersions
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BASF Capital Market Story, November 2016 26
150 years
Sustainability goalsOverview
Procurement Goal 2020 2015
Sustainability performanceassessment of relevant suppliers 70% 31%
Employees Goal 2021 2015
Women in leadership positions 22-24% 19.5%
Long-term goal 2015
Non-German senior executives 35.6%
Senior executives with international experience >80% 82.9%
Production Goal 2025 2015Process safety incidents1) ≤0.5 2.1
Lost-time injury rate1) ≤0.5 1.4
Annual goal 2015
Health Performance Index >0.9 0.97
Product stewardship Goal 2020 2015
Risk assessment of products2) >99% 67.8%
Energy & climate protection Goal 2020 2015
Greenhouse gas emissions3) −40% −34.6%
Introduction of ISO 50001 energy management system4) 90% 39.5%
Water Goal 2025 2015
Sustainable water management at Verbund sites and water stress areas 100% 36.2%
Products & Solutions Goal 2020 2015
Proportion of “Accelerators”5) in product portfolio 28% 26.6%
1) per one million working hours2) for products >1 metric ton per year 3) per metric ton of sales products; excl. Oil & Gas, baseline 20024) at all relevant sites (primary energy demand, local energy prices)5) products with substantial contribution to sustainability
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BASF Capital Market Story, November 2016 27
150 years
Profitability of BASF will grow faster than global chemical production
Sales growthSlightly faster than the global chemical production
EBITDA growthWell above global chemical production
Remain a strong cash providerContinuously generate high levels of free cash flow
Financial targets for the coming years
Deliver attractive returnsEarn a significant premium on cost of capital
Progressive dividend policy We want to grow or at least maintain our dividend
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28
Business development
Path forward: Our priorities
Appendix – Q3 2016 reporting
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BASF Capital Market Story, November 2016 29
150 years
ChemicalsHigher volumes, but margin pressure in Petrochemicals and Intermediates
Intermediates662(6%)
Monomers1,405(8%)
Petrochemicals1,310(7%)
€3,377(7%)
EBIT before special items million €
633
249
465 467 497
0
200
400
600
800
Q3 Q4 Q1 Q2 Q3
Sales development Volumes Prices Portfolio Currencies
Q3 2016 vs. Q3 2015 5% (12%) 0% 0%
20162015
Sales Q3 2016 vs. Q3 2015million €
Diagramm1
Q3
Q4
Q1
Q2
Q3
EBIT bSI
633
249
465
467
497
Sheet1
Q3Q4Q1Q2Q3
EBIT bSI633249465467497
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BASF Capital Market Story, November 2016 30
150 years
Performance Chemicals945(6%)
Performance ProductsSignificant increase in earnings driven by higher volumes, improved margins and lower fixed costs
CareChemicals
1,175(4%)
€3,771(3%)Nutrition
& Health504+2%
Dispersions& Pigments
1,147(2%)
Sales development Volumes Prices Portfolio Currencies
Q3 2016 vs. Q3 2015 2% (3%) (2%) 0%
EBIT before special items million €
Sales Q3 2016 vs. Q3 2015million €
20162015
319228
547503 464
0
200
400
600
Q3 Q4 Q1 Q2 Q3
Diagramm1
Q3
Q4
Q1
Q2
Q3
EBIT bSI
319
228
547
503
464
Sheet1
Q3Q4Q1Q2Q3
EBIT bSI319228547503464
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BASF Capital Market Story, November 2016 31
150 years
Functional Materials & SolutionsSignificantly higher earnings on continued good demand in automotive and construction as well as lower fixed costs
Catalysts1,552+5%
Coatings790+5%
€4,6603%
Performance Materials1,712+2%
ConstructionChemicals
606(1%)
EBIT before special items million €
Sales development Volumes Prices Portfolio Currencies
Q3 2016 vs. Q3 2015 8% (3%) (1%) (1%)
Sales Q3 2016 vs. Q3 2015million €
20162015
371 389456
535497
0
200
400
600
Q3 Q4 Q1 Q2 Q3
Diagramm1
Q3
Q4
Q1
Q2
Q3
EBIT bSI
371
389
456
535
497
Sheet1
Q3Q4Q1Q2Q3
EBIT bSI371389456535497
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BASF Capital Market Story, November 2016 32
150 years
Agricultural SolutionsSignificantly higher earnings due to improved margins andlower fixed costs
Sales development Volumes Prices Portfolio Currencies
Q3 2016 vs. Q3 2015 (4%) 0% 0% 1%
Sales Q3 2016 vs. Q3 2015million €
2016201520162015
1,077 1,049
0
200
400
600
800
1,000
1,200
Q3 Q3
(3%)
7
97
0
25
50
75
100
125
Q3 Q3
€90million
EBIT before special items million €
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BASF Capital Market Story, November 2016 33
150 years
Oil & GasConsiderably lower sales and earnings due to disposalof gas trading business as well as lower prices
Sales development Volumes Prices/Currencies Portfolio
Q3 2016 vs. Q3 2015 3% (3%) (83%)
Natural Gas Trading
Exploration & Production
Net income
79
292
194
625
330
200
400
600
Q3 2015 Q3 2015 Q3 2016 Q3 2016
EBIT before special items, net income million €
Sales Q3 2016 vs. Q3 2015million €
371
2,939
618
667
0
1,000
2,000
3,000
4,000
5,000
Q3 Q320162015
(83%)
3,606
667
Natural Gas Trading
Exploration & Production
* Including transportation business
* Including transportation business
**
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BASF Capital Market Story, November 2016 34
150 years
Review of “Other”
million € Q3 2016 Q3 2015
Sales 538 685EBIT before special items (233) (98)Thereof Corporate research costs (77) (104)
Costs of corporate headquarters (54) (53)
Foreign currency results, hedging andother valuation effects (101) 22
Other businesses 15 30
Special items (23) 26
EBIT (256) (72)
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BASF Capital Market Story, November 2016 35
150 years
Cash flow Q1 – Q3 2016
million € Q1 – Q3 2016 Q1 – Q3 2015
Cash provided by operating activities 5,840 8,494Thereof changes in net working capital (393) 2,500
miscellaneous items (172) (497)Cash used in investing activities (2,776) (4,955)Thereof payments related to tangible / intangible assets (2,915) (4,387)
acquisitions / divestitures 212 227
Cash used in financing activities (1,898) (3,504)
Thereof changes in financial liabilities 837 (649)dividends (2,753) (2,900)
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BASF Capital Market Story, November 2016 36
150 years
Strong balance sheet
24.1 27.6
15.215.8
31.529.7
Dec 312015
Sep 302016
2.2 3.53.1 3.59.5 9.8
9.7 9.8
46.3 46.5
Dec 312015
Sep 302016
Liquid funds
Accountsreceivable
Long-termassets
Inventories
Other assets
70.8 73.1 70.8 73.1
Otherliabilities
Financialdebt
Equity
Balance sheet September 30, 2016 vs. December 31, 2015 billion €
Total assets increased by €2.3 billion, mainly due to higher liquid funds
Inventories were stable
Provisions for pensions and similar obligations increased by €3.6 billion
Net debt declined by around €600 million to €12.3 billion
Equity ratio: 41%
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BASF Capital Market Story, November 2016 37
150 years
Slide Number 1Cautionary note regarding �forward-looking statements We create chemistry �for a sustainable futureBASF today – a well-balanced portfolio�Total sales 2015: €70.4 billionVerbund: Unique competitive advantageQ3 2016: Financial figures for BASF GroupFree cash flow developmentSlide Number 8Slide Number 9Components of growth�Steady earnings growthStrategic lever: Operational excellence�DrivE with ~€1 billion earnings contributionStrong track record in operational excellence Slide Number 14Slide Number 15Slide Number 16The path forward: �Our prioritiesSlide Number 18Hyundai Motor and BASF showcase joint development of RN30 concept carAutomotive is a growth business for BASF Investments for organic growthPortfolio development towards more market-driven and innovative businessesStrategic lever: �Acquisitions Strategic lever: Sustainability �Sustainable Solution SteeringSolutions for a sustainable future�Sustainability goals�OverviewProfitability of BASF will grow faster than global chemical productionSlide Number 28Chemicals�Higher volumes, but margin pressure in Petrochemicals and IntermediatesPerformance Products�Significant increase in earnings driven by higher volumes, improved margins and lower fixed costs Functional Materials & Solutions�Significantly higher earnings on continued good demand in automotive and construction as well as lower fixed costsAgricultural Solutions�Significantly higher earnings due to improved margins and�lower fixed costsSlide Number 33Review of “Other” Cash flow Q1 – Q3 2016�Strong balance sheetSlide Number 37