basf in europe setting course for higher growth...st. petersburg moscow minsk russia & cis...
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150 years
BASF Equity Story – Region Europe, November 2016 1
BASF in Europe –
Setting course for higher growth
Hartwig MichelsPresident Region
Europe
Redburn CEO Forum
November 29, 2016
150 years
BASF Equity Story – Region Europe, November 2016 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.
150 years
BASF Equity Story – Region Europe, November 2016 3
Leverage #1 position in BASF’s core market, outgrow markets
Seize growth opportunities
– Enhance sales & marketing to increase customer proximity
– Introduce innovative products and solutions
– Focus investments on fast growing markets
– Exploit opportunities in Eastern Europe, Middle East, Africa
Maintain highly efficient production sites, accelerate
operational excellence
BASF in Europe: Focused on stronger growth
150 years
BASF Equity Story – Region Europe, November 2016 4
Agenda
Business environment in Europe1
BASF in Region Europe2
Growth at different speeds3
150 years
BASF Equity Story – Region Europe, November 2016 5
Region Europe is a significant and growing chemicals market
639 646 670
238 280330
2010 2015 2020
Population of ~1.5 billion
people*
GDP and industrial production
growth of 1%-2% p.a. expected
Western Europe:
– Moderate growth resuming
– Southern Europe starting to
see improvement
Emerging Europe:
– Growing substantially faster
than Western Europe
Chemical production (excl. pharma) in Europe
(in billion US$, real production in prices of 2010)
Macroeconomic Situation
Source: BASF Economic Intelligence; * Europe, Africa, Middle East
Western Europe Emerging Europe
(Central & Eastern Europa, Middle East, Africa)
+1.3%
150 years
BASF Equity Story – Region Europe, November 2016 6
EU: A strong exporter of innovative specialties and consumer chemicals
Chemical production in 2015:
US$660 billion*
Second largest market for
chemicals globally
Expected growth: 0.8% p.a.
EU is a net-exporter of
chemicals
Strong export growth of
specialties and consumer
chemicals
EU turned from a net-exporter
of petrochemicals into a
net-importer
EU chemical production
Source: Cefic; * Measured in value of 2010
Extra-EU trade balance for chemicals
(in billion €)
-10
0
10
20
30
40
50
2005 2010 2015
Petrochemicals
Basic inorganics
Specialty chemicals
Polymers
Consumer chemicals
150 years
BASF Equity Story – Region Europe, November 2016 7
Specialty chemicals to drive growth of chemical production in Europe
Renewable
energyConstruction
Wind energy
Photovoltaics
Smart grids
Electrical &
Electronics
Fuel cells
Solar cells
Automotive
Lightweight
Batteries
Electronics
Catalysts
Insulation
Smart homes
150 years
BASF Equity Story – Region Europe, November 2016 8
Agenda
Business environment in Europe1
BASF in Region Europe2
Growth at different speeds3
150 years
BASF Equity Story – Region Europe, November 2016 9
.
Europe is region with the largest sales and earnings contribution to BASF Group
* By location of customer
Sales* in Q4 2015 – Q3 2016
(in billion €)
45%
25%
21%
9%
58%
22%
13%
7%
Europe
North America
Asia Pacific
South America, Africa, Middle East
BASF Group
6.1
EBIT before SI in Q4 2015 – Q3 2016
(in billion €)
BASF Group
56.6
150 years
BASF Equity Story – Region Europe, November 2016 10
Regional organization close to customers
Antwerp
Ludwigshafen(regional headquarters)
Verbund site
Selected production sites /
sales offices
Major local headquarters
South Africa
138Production
sites
>125Countries
served
Sales
offices96
Employees
R&D
sites28
~70,000
150 years
BASF Equity Story – Region Europe, November 2016 11
Agenda
Business environment in Europe1
BASF in Region Europe2
Growth at different speeds3
► Western Europe
► Central Europe
► Emerging Europe
150 years
BASF Equity Story – Region Europe, November 2016 12
0
5
10
15
20
25
30
35
2012 2013 2014 2015 2016 YTD
Sales development chemicals business and crop
protection in Europe
(in billion €)
Stable business in past years, focus in the future on accelerated organic growth
Lean, centralized setup for
commodity businesses
Setup closer to customers in
downstream businesses
Dedicated responsibilities for
growth in emerging markets
Strong volume growth in 2016
despite price pressure due to
low oil price
Structural Excellence Program
Europe – Accelerate organic
business growth in EuropeVolumeCAGR ’12-’15
VolumeCAGR ’15-’16
0.9%
~4.5%
Volume growth above market; slight sales decline due to
lower oil price and lower commodity margins
150 years
BASF Equity Story – Region Europe, November 2016 13
Ludwigshafen
Western Europe: Core market of BASF
Western Europe
Population: 403 million
Real GDP: US$17.4 trillion
Chemical production:
US$646 billion
Core market of BASF
Expected chemical production
growth: 0.8% p.a.
Strong production set-up with
two Verbund sites
More than 20 global key
accounts steered from
Western Europe
Antwerp
Tarragona
Cheadle
Levallois
Cesano Maderno
Verbund site
Selected sites
150 years
BASF Equity Story – Region Europe, November 2016 14
Western Europe: Accelerate profitable growth
Set-up to capture growth
opportunities:
Accelerate profitable growth
– Stronger local presence
– Deeper customer
interaction, especially in
downstream businesses
– Using BASFʼs global
network to support
globalization of customers
Focus on innovation or
sustainability-driven industries
Upgrading of regional
production base
Managing costs
TDI plant in Ludwigshafen
Acetylene plantin Ludwigshafen
Sustainableconstruction
New bio-acrylamide plant in Bradford
Support globalizationof customers
Synvina: JV for biobased
furandicarboxylic acid
Innovations forthe automotiveindustry
150 years
BASF Equity Story – Region Europe, November 2016 15
Central Europe: Attractive market next door
Central Europe
Population: 103 million
Real GDP: US$1.5 trillion
Chemical production:
US$41 billion
Economies in transition from
emerging into developed stage
Expected chemical production
growth: 2.2% p.a.
Local presence especially in
downstream businesses and
crop protection
Bratislava
Warsaw
Zagreb
Ljubljana
Belgrade
Bucharest
Athens
150 years
BASF Equity Story – Region Europe, November 2016 16
Set-up to capture growth
opportunities:
Continuously expand market
position
Being close to our customers
Strengthen joint innovation
activities
Selective investments:
– Serve growing local markets
– Capitalize on lower cost
structure for export business
(e.g. catalysts in Poland)
Mobile CatalystsProduction
in Środa Śląska
Central Europe: Participate in local growth opportunities
Agro Field Days in Greece
PU system housein Slovakia
Automotive Systems in Hungary
Constructionsystems
in Romania
150 years
BASF Equity Story – Region Europe, November 2016 17
Russia & CIS: Localization and transformation offers growth opportunities
Almaty
Atyrau
Astana
Tbilisi
Kyiv
St. Petersburg Moscow
Minsk
Russia & CIS
Population: 206 million
Real GDP: US$2.4 trillion
Chemical production:
US$72 billion
Growth drivers: housing, food,
infrastructure, oil and gas
Expected chemical production
growth: 2.3% p.a.
Target industries:
– Crop protection products
– Construction chemicals
– Automotive coatings
– Energy & resources
150 years
BASF Equity Story – Region Europe, November 2016 18
Russia & CIS: Proximity to customers is key
Set-up to capture growth
opportunities:
Local presence ensures
customer proximity:
– Production of construction
chemicals
– Central production hubs
(e.g. coatings, PU systems)
to leverage economies of
scale
– Laboratories to support
technical sales initiatives
(e.g. fuel additives,
lubricants, automotive fluids,
mining, dispersions,
chemicals, cosmetics).
Almaty
Astana
Elastokam(JV with NKNC, PU sytems)
in Nizhnekamsk
Crop protectionformulations
in KirovAutomotive coatingsin Moscow
MoscowKasan
St. Petersburg
Admixtures & constructionsystems
150 years
BASF Equity Story – Region Europe, November 2016 19
Turkey & Middle East: Focus on locally consuming industries
Turkey & Middle East
Population: 273 million
Real GDP: US$3.1 trillion
Chemical production:
US$124 billion
Growth drivers: housing, food,
consumer goods, infrastructure
Expected chemical production
growth: 3.9% p.a.
Focus on Turkey and Arabian
peninsula
Target industries:
– Energy & resources
– Chemicals & plastics
– Construction
Gebze
Istanbul
Izmir
Dubai
150 years
BASF Equity Story – Region Europe, November 2016 20
Set-up to capture growth
opportunities:
Regional hubs: Istanbul, Dubai
~3,000 customers
Accelerated market penetration
by being close to local
industries and markets, e.g.:
– Food ingredients for bakery
and dessert production
– Customer specific plastic
additives blends in Bahrain
– Gas treatment solutions for
LNG production
– BASF concrete admixture
solutions for Burj Khalifa
– Automotive in Turkey
Nutrition lab in Istanbul
Turkey & Middle East:Understand and tap on local market needs
Plastic Additives in Bahrain
Sustainableconstruction
Gas treatmentsolutions
Nutrition lab in Beirut*
* Operated by distributor on behalf of BASF
150 years
BASF Equity Story – Region Europe, November 2016 21
Africa (target market)
Population: 466 million
Real GDP: US$1.6 trillion
Chemical production:
US$43 billion
Large, dynamic but
heterogeneous market
Expected chemical production
growth: 3.6% p.a.
Fastest urbanization rate
Improving economic
performance
Focus on four regional clusters
► Africa presents a profitable
growth opportunity
BASFSouth Africa (Pty.) Ltd.
Midrand
BASF Maroc S.A.Casablanca
BASFEast Africa Ltd.
Nairobi
BASF West Africa Ltd.Lagos
Africa: Growth opportunities in a heterogeneous market
Northern Africa
Eastern Africa
Southern Africa
Western Africa
150 years
BASF Equity Story – Region Europe, November 2016 22
Set-up to capture growth
opportunities:
Business focused on
– Construction chemicals
– Crop protection products
– Consumer goods
– Energy & Resources
Strengthened local presence
– 13 legal entities
– 9 production sites
– Sales >€500 million
Africa: Market penetration by presence and new concepts
Construction Chemicals
in Lagos
Establishment ofBASF Tanzania Ltd.
Dar es Salaam
BASF Ivory Coast Ltd.Abidjan
Construction Chemicals expansion in South Africa
Construction Chemicals retail concept in Egypt
New agro distribution concept
Northern Africa
Eastern Africa
Southern Africa
Western Africa
150 years
BASF Equity Story – Region Europe, November 2016 23
Leverage #1 position in BASF’s core market, outgrow markets
Seize growth opportunities
Enhance sales & marketing to increase customer proximity
Introduce innovative products and solutions
Focus investments on fast growing markets
Exploit opportunities in Eastern Europe, Middle East, Africa
Maintain highly efficient production sites, accelerate
operational excellence
BASF in Europe: Focused on stronger growth
BASF Capital Market Story, November 2016 24
BASF Capital Market Story
BASF Capital Market Story, November 2016 25
150 years
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 2016 26
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
Perspective
Ludwigshafen,
Germany
Antwerp,
Belgium
Nanjing,
China
Kuantan,
MalaysiaGeismar,
Louisiana
Freeport,
Texas
Verbund site
Positioning
We create chemistry
for a sustainable future
Performance
BASF Capital Market Story, November 2016 27
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
BASF Capital Market Story, November 2016 28
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
BASF Capital Market Story, November 2016 29
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%)
BASF Capital Market Story, November 2016 30
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
3.93.7
2.6
3.2
1.7
3.6
2.9
BASF Capital Market Story, November 2016 31
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
BASF Capital Market Story, November 2016 32
Business development
Path forward: Our priorities
Appendix – Q3 2016 reporting
BASF Capital Market Story, November 2016 33
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&ASales CAGR
2010 - 2015
BASF Group
w/o Oil & Gas51.4
+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
BASF Capital Market Story, November 2016 34
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*
BASF
core 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 sales
in businesses with limited fit and differentiation
potential
Portfolio development towards more
market-driven and innovative businesses
* Closing expected in 2016
BASF Capital Market Story, November 2016 35
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)
3.7
4.7 4.6
7.0 7.2
8.48.9
7.7
6.5
9.9
11.2
10.010.4
11.010.6
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 4.8
5.56.0
4.6
2.8
6.7
8.0
6.7 7.27.6
6.2
5.0
CAGREBITDA
7.9%CAGREBIT
16.6%
BASF Capital Market Story, November 2016 36
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 Costs
3%
BASF Capital Market Story, November 2016 37
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 1.95
1.70
2.20
2.50 2.60 2.70
Dividend policy
2.80
BASF Capital Market Story, November 2016 38
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
BASF Capital Market Story, November 2016 39
Business development
Path forward: Our priorities
Appendix – Q3 2016 reporting
BASF Capital Market Story, November 2016 40
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
BASF Capital Market Story, November 2016 41
150 years
0
100
200
300
400
500
2001 2002 2003 2004 2005 2006* 2007* 2008 2009 2010 2011 2012restated
2013 2014 2015 Q1-Q32016
EBITDA margin Chemicals / oil price
(indexed, 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 2016 42
150 years
Strategic lever:
Continuous portfolio development
Specialties and
solutions
Differentiated
commodities
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
* Excluding Oil & Gas sales
Attractive markets
Differentiation by process
technologies and integration
Attractive markets
Differentiation by customer
proximity and innovations
BASF Capital Market Story, November 2016 43
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
BASF Capital Market Story, November 2016 44
150 years
BASF to acquire Chemetall
Transaction highlights
Purchase price of US$3.2 billion (debt free)
All-cash offer, financing secured
Expected closing of transaction by the end of 2016
Synergies on industry-typical level
EPS accretive in year 1 excluding integration costs, in year 2 including integration costs
Transaction will significantly enhance BASF Coatings’ position as complete solutions provider
Chemetall – a global technology and innovation leader in metals surface treatment
BASF Capital Market Story, November 2016 45
150 years
Chemetall – a global leader in surface
treatment products and services
FiguresFacts
Sales
2015: US$845 million
2016E*: US$851 million
2017E*: US$895 million
EBITDA
2015: US$202 million
2016E*: US$217 million
2017E*: US$231 million
EBITDA margin
2015: 24%
2016E*: 25%
2017E*: 26%
CAGR sales
(2007 – 2015)~7% (at constant exchange rates)
Key customer
industries
Automotive, aerospace, coil,
metal forming
Regional sales
~50% Western Europe
~30% North America
~20% Emerging markets, mainly Asia
Employees ~2,500 (~50% sales professionals)
Sites21 production sites in all regions
10 R&D sites
One of the strongest globally managed
brands in the sector
Proprietary manufacturing technologies,
rigorous product quality and performance
standards
Leading market positions in the automotive,
aerospace and cold forming segments
Long-standing, service-intensive customer
relationships
Significant global presence and record of
accelerated expansion in emerging markets
Track record of strong growth and high
profitability* average analysts’ estimates
BASF Capital Market Story, November 2016 46
150 years
Strategic lever:
Capital expenditures
Differentiated commodities
With proprietary technology and/or Verbund advantages
Focus on:
– emerging markets
– backward integration in the U.S.
– upgrading our asset base in Europe
Specialties and solutions
Incremental investments for new products
Regional expansion of businesses
Oil & Gas
Focus investment budget by active portfolio optimization to secure free cash flow
Keep reserve-to-production ratio of approx. 10 years
BASF Capital Market Story, November 2016 47
150 years
Investments for organic growth
Performance
Products
16%
Oil & Gas
24%
€19.5
billion
Functional
Materials &
Solutions
12%
Capex budget 2016-2020
Other
14%
Chemicals
30%
Capex budget 2016-2020
Asia Pacific
18%
€19.5
billion
South
America*
9%
North America
26%
Europe
46%
Agricultural
Solutions
4%
Other
1%
by segment by region
* Including Africa and Middle East
BASF Capital Market Story, November 2016 48
150 years
Strategic lever:
Innovations
Allow for creativity
Balance incremental und disruptive innovations
Manage innovation pipeline efficiently on all levels
Build on our global R&D Verbund
Leverage external collaborations even more
Align R&D activities with business models:
– Differentiated commodities
• Focus on improving processes and addressing raw material change
• Launch selected product innovations
– Specialties and solutions
• Develop new, tailored offerings in close collaboration with customers
• Pursue solution-oriented approach
Keep annual R&D spending at ~3% of sales*
* Without Oil & Gas
BASF Capital Market Story, November 2016 49
150 years
€1.95 billion R&D expenditures
in 2015; to be maintained in
2016
~10,000 employees in R&D
~3,000 projects
Ranked No.1 in the
Patent Asset Index™
~1,000 new patents in 2015
Research Verbund:
Cooperations with more than
600 excellent partners from
universities, start-ups
and industry
Strong commitment to innovationInnovations for a sustainable future
Key facts
1.6
1.71.8 1.9 1.95
0.0
0.5
1.0
1.5
2.0
2011 2012 2013 2014 2015
R&D expenditures
(billion €)
Chemicals
11%
Performance Products
20%
Functional Mat. & Sol.
20%
Agricultural Solutions
26%
Oil & Gas
2%
Corporate Research
21%
2.0
1.5
1.0
0.5
0
BASF Capital Market Story, November 2016 50
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
BASF Capital Market Story, November 2016 51
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
<1% Challenged products
* More than 60,000 product applications analyzed representing €64.9 billion in sales or 95.4% of BASF’s portfolio.
Increase the share of Accelerators from 23% in 2014 to 28% by 2020
Strategic lever: Sustainability
Sustainable Solution Steering
26.6%
71.0%
Substantial sustainability
contribution in the value chain
Meets basic sustainability
standards in the market
Specific sustainability issue
which is actively addressed
Significant sustainability concern,
action plan in development
Sustainable
Solution
Steering
BASF Capital Market Story, November 2016 52
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
BASF Capital Market Story, November 2016 53
150 years
Sustainability goalsOverview
Procurement Goal 2020 2015
Sustainability performance
assessment of relevant suppliers70% 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 2015
Process 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 areas100% 36.2%
Products & Solutions Goal 2020 2015
Proportion of “Accelerators”5) in
product portfolio28% 26.6%
1) per one million working hours
2) for products >1 metric ton per year
3) per metric ton of sales products; excl. Oil & Gas, baseline 2002
4) at all relevant sites (primary energy demand, local energy prices)
5) products with substantial contribution to sustainability
BASF Capital Market Story, November 2016 54
150 years
Ludwigshafen siteSustainably maintaining the basis
500
700
900
1,100
1,300
1,500
1,700
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Maintenance, replacement, retrofitting, modernization
Forecast
*
million €
BASF Capital Market Story, November 2016 55
150 years
SafetyContinual improvement in operational safety
1.5
2.0
2.5
3.0
3.5
2011 2012 2013 2014 2015 2016
BASF SE
Jan.-Sep.
Work-related accidents
Lost-time injury rate per 1 million working hours
* Source: BG RCI
Safety has top priority at BASF
Significantly fewer work-related
accidents than the average in
the chemical industry in
Germany*
Same safety standards for the
partner companies of BASF
Regular audits and inspections
BASF Capital Market Story, November 2016 56
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 excellence
DrivE with ~€1 billion earnings contribution
NEXT 2008-2011 DrivE 2016-2018
STEP 2012-2015
BASF Capital Market Story, November 2016 57
150 years
Profitability of BASF will grow faster than
global chemical production
Sales growth
Slightly faster than the global chemical production
EBITDA growth
Well above global chemical production
Remain a strong cash provider
Continuously generate high levels of free cash flow
Financial targets for the coming years
Deliver attractive returns
Earn a significant premium on cost of capital
Progressive dividend policy
We want to grow or at least maintain our dividend
BASF Capital Market Story, November 2016 58
Business development
Path forward: Our priorities
Appendix – Q3 2016 reporting
BASF Capital Market Story, November 2016 59
150 years
ChemicalsHigher volumes, but margin pressure in Petrochemicals and
Intermediates
Intermediates
662
(6%)
Monomers
1,405
(8%)
Petrochemicals
1,310
(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 2015
million €
BASF Capital Market Story, November 2016 60
150 years
Performance
Chemicals
945
(6%)
Performance ProductsSignificant increase in earnings driven by higher volumes,
improved margins and lower fixed costs
Care
Chemicals
1,175
(4%)
€3,771
(3%)Nutrition
& Health
504
+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 2015
million €
20162015
319
228
547503
464
0
200
400
600
Q3 Q4 Q1 Q2 Q3
BASF Capital Market Story, November 2016 61
150 years
Functional Materials & SolutionsSignificantly higher earnings on continued good demand in
automotive and construction as well as lower fixed costs
Catalysts
1,552
+5%
Coatings
790
+5%
€4,660
3%
Performance
Materials
1,712
+2%
Construction
Chemicals
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 2015
million €
20162015
371 389
456
535497
0
200
400
600
Q3 Q4 Q1 Q2 Q3
BASF Capital Market Story, November 2016 62
150 years
Agricultural SolutionsSignificantly higher earnings due to improved margins and
lower fixed costs
Sales development Volumes Prices Portfolio Currencies
Q3 2016 vs. Q3 2015 (4%) 0% 0% 1%
Sales Q3 2016 vs. Q3 2015
million €
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 €
BASF Capital Market Story, November 2016 63
150 years
Oil & GasConsiderably lower sales and earnings due to disposal
of 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
33
0
200
400
600
Q3 2015 Q3 2015 Q3 2016 Q3 2016
EBIT before special items, net income
million €
Sales Q3 2016 vs. Q3 2015
million €
371
2,939
618
667
0
1,000
2,000
3,000
4,000
5,000
Q3 Q3
20162015
(83%)
3,606
667
Natural Gas Trading
Exploration & Production
* Including transportation business
* Including transportation business
*
*
BASF Capital Market Story, November 2016 64
150 years
Review of “Other”
million € Q3 2016 Q3 2015
Sales 538 685
EBIT before special items (233) (98)
Thereof Corporate research costs (77) (104)
Costs of corporate headquarters (54) (53)
Foreign currency results, hedging and
other valuation effects(101) 22
Other businesses 15 30
Special items (23) 26
EBIT (256) (72)
BASF Capital Market Story, November 2016 65
150 years
Cash flow Q1 – Q3 2016
million € Q1 – Q3 2016 Q1 – Q3 2015
Cash provided by operating activities 5,840 8,494
Thereof 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)
BASF Capital Market Story, November 2016 66
150 years
Strong balance sheet
24.127.6
15.215.8
31.529.7
Dec 312015
Sep 302016
2.2 3.53.1 3.5
9.59.8
9.79.8
46.346.5
Dec 312015
Sep 302016
Liquid funds
Accountsreceivable
Long-termassets
Inventories
Other assets
70.873.1
70.873.1
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%
BASF Capital Market Story, November 2016 67
150 years