impact of new segment structure, ifrs 10/11 and ias 19 ......mar 22, 2013 · impact of new segment...
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Impact of new segment structure, IFRS 10/11 and IAS 19 (revised) on BASF Group's reporting
Hans-Ulrich Engel, Chief Financial Officer Manfredo Rübens, President Finance Conference call March 22, 2013 Ludwigshafen, Germany
BASF Presentation_March 22, 2013 2
Cautionary note regarding forward-looking statements
This presentation may contain forward-looking statements that are subject to risks and uncertainties, including those pertaining to the anticipated benefits to be realized from the proposals described herein. Forward-looking statements may include, in particular, statements about future events, future financial performance, plans, strategies, expectations, prospects, competitive environment, regulation and supply and demand. BASF has based these forward-looking statements on its views and assumptions with respect to future events and financial performance. Actual financial performance could differ materially from that projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and financial performance may be better or worse than anticipated. Given these uncertainties, readers should not put undue reliance on any forward-looking statements. The information contained in this presentation is subject to change without notice and BASF does not undertake any duty to update the forward-looking statements, and the estimates and assumptions associated with them, except to the extent required by applicable laws and regulations.
BASF Presentation_March 22, 2013 3
1
2
3
Topics
New segment structure of BASF as of January 1, 2013
Definition and requirements of IFRS 10/11 & IAS 19 (revised)
Impact of new structure, IFRS 10/11 & IAS 19 (revised) on BASF reporting
4 “We create chemistry” strategy – IFRS impact on financial targets
BASF Presentation_March 22, 2013 4
Janu
ary
2013
Petrochemicals
e.g. Amines
e.g. TDI
e.g. Monomers
e.g. Epoxy Systems
e.g. PU Systems
e.g. Ultramid®
Monomers
Intermediates
Unt
il 20
12
Petrochemicals
Classical Chemicals Functionalized Materials & Solutions
Performance Materials
Polyurethanes
Performance Polymers
Inorganics
New organization of divisional activities
Intermediates
BASF Presentation_March 22, 2013 5
Competencies for successful management of a diverse portfolio
Classical Chemicals
Performance Products
Functionalized Materials & Solutions
Operational and technology excellence
Scale, Verbund integration and raw material conditions
Reliable, low cost logistics
Complexity reduction
Deep understanding of customer value chain and multi-disciplinary know-how enables constant innovation
Customized services and solutions developed together with industry and application experts
Tailored offerings for markets and industries
Customer proximity and application know-how
Customized Products
Industry focus Product focus
BASF Presentation_March 22, 2013 6
Petrochemicals
Dispersions &
Pigments
Crop
Protection
Catalysts
New segment structure as of January 1, 2013
Monomers Care Chemicals
Construction Chemicals
Intermediates
Nutrition & Health
Coatings
Paper Chemicals
Performance
Materials
Performance Chemicals
Oil & Gas
Oil & Gas Agricultural Solutions
Functional Materials & Solutions
Performance Products Chemicals
BASF Presentation_March 22, 2013 7
Petrochemicals
Strengthening C3 value chain Realizing technological synergies
Basic Petrochemicals Cracker products Alkylene oxides &
glycols Industrial gases
Industrial Petrochemicals Acrylic acid Alcohols & solvents Plasticizers
Propylene oxide [from Polyurethanes]
BASF Presentation_March 22, 2013 8
Monomers
Strengthening production Verbund Minimizing cross-divisional interfaces
Monomers [from Polyurethanes] MDI TDI
Inorganic Chemicals [from Inorganics] Basic chemicals Technical salts Additives Standard
alcoholates Hydrosulfites
Glues & Resins and Specialties [from Inorganics] Ammonia, melamine Glues Impregnating resins Electronic materials Metal systems
Monomers/Basic Polymers [from Performance Polymers] Caprolactam,
adipic acid HMD, PA polymers
for extrusion, PA fibers, compounds
BASF Presentation_March 22, 2013 9
Intermediates
Classical intermediates Amines Diols Polyalcohols Organic acids &
specialties
Inorganic life science products [from Inorganics]
PBT base resin [from Performance Polymers]
Strengthening C1 value chain Extending BDO value chain
C1 based products [from Inorganics] (w/o Ammonia) Methanol
BASF Presentation_March 22, 2013 10
Materials Business [from Intermediates] Epoxy systems
Performance Materials
Materials Business [from Polyurethanes] PU Systems TPU Cellasto®
Polyols
Materials Business [from Performance Polymers] Biopolymers Engineering plastics Functional foams
Styrene and Foams [from Performance Polymers] Styropor ® Neopor ® Styrodur ® (Poly-)Styrene
Strengthening our "one face to the customer" approach Intensifying key industry focus
BASF Presentation_March 22, 2013 11
1
2
3
Topics
New segment structure of BASF as of January 1, 2013
Definition and requirements of IFRS 10/11 & IAS 19 (revised)
Impact of new structure, IFRS 10/11 & IAS 19 (revised) on BASF reporting
4 “We create chemistry” strategy – IFRS impact on financial targets
BASF Presentation_March 22, 2013 12
Full consolidation method – 100% inclusion of all financial figures – Elimination of intercompany relations between fully or pro-rata consolidated companies
Pro-rata consolidation method – Inclusion of financial figures according to participating interest – Only partial elimination of intercompany relations to match participating interest
Equity method – Proportional share of the company's net income increases financial assets – Net loss and a proportional payment of dividends decrease financial assets
Methods to include companies in consolidated financial statements
BASF Presentation_March 22, 2013 13
IFRS 10/11 Consolidation methods for subsidiaries and joint arrangements
Type of influence
Joint control
Joint Operation
Pro-rata consolidation
IFRS 11
Joint Venture
Equity method
Control
IFRS 10
Full consolidation
BASF Presentation_March 22, 2013 14
* Number of legal entities (as of December 31, 2012)
Impact of new requirements on BASF Group
Associated Company Joint Venture Joint Operation Subsidiary
BASF
Bef
ore
IFR
S 10
/11
Afte
r IF
RS
10/1
1
Equity method 14*
Pro-rata consolidation 22*
Associated Company Joint Venture Joint Operation Subsidiary
BASF
Equity method 14
Equity method 18
Full consolidation 304
4
14
Full consolidation 308*
Pro-rata consolidation: 8
BASF Presentation_March 22, 2013 15
IFRS 10/11 Impact on BASF Group reporting
Statement of income – Reduced sales, EBIT and financial result but no impact on net income – Equity results as separate income statement line item in EBIT – Reclassification of the equity results of associated companies from financial result into EBIT
Balance sheet
– Decrease in all asset line items, except financial assets – Higher financial assets due to increased investments accounted for using the equity method – Decrease of liabilities line items and reduction of equity as a result of lower minority interests
Statement of cash flows – Cash flow provided by operating activities slightly lower as only the dividend payments out of joint
ventures are recognized – Cash used in investing activities and financing activities decreases slightly as a result of the
elimination of investing and financing outflows of so far fully or pro-rata consolidated companies
BASF Presentation_March 22, 2013 16
IAS 19 (revised): Employee benefits Impact on BASF Group
First time adoption of the revised IAS 19 on January 1, 2013 Reduction in 2012 of around €80 million in BASF’s financial result leading to
a decrease of €60 million in net income with an EPS effect of minus €0.06 due to IAS 19 (revised)
Reduction of around €100 million in financial result expected in 2013
Reclassification of actuarial gains and losses from retained earnings to other comprehensive income (OCI)
BASF Presentation_March 22, 2013 17
1
2
3
Topics
New segment structure of BASF as of January 1, 2013
Definition and requirements of IFRS 10/11 & IAS 19 (revised)
Impact of new structure, IFRS 10/11 & IAS 19 (revised) on BASF reporting
4 “We create chemistry” strategy – IFRS impact on financial targets
BASF Presentation_March 22, 2013 18
BASF Group reporting Key financials
Million € 2012 restated 2012 ∆
million € ∆ %
Sales to third parties 72,129 78,729 -6,600 -8.4
EBITDA 10,009 12,516 -2,507 -20.0
EBIT before special items 6,647 8,881 -2,234 -25.2
EBIT 6,742 8,976 -2,234 -24.9
− thereof equity income 361 361
Financial result -765 -540 -225 -41.7 Income before taxes and minority interests
5,977 8,436 -2,459 -29.1
Income taxes 910 3,214 -2,304 -71.7
− thereof Libyan oil taxes 2,243 -2,243
Income before minority interests 5,067 5,222 -155 -3.0
Net Income 4,819 4,879 -60 -1.2
EBIT after cost of capital 1,164 1,534 -370 -24.1 EPS in € 5.25 5.31 -0.06 -1.13
Financial result Reduction due to reclassi-
fication of associated com-panies and IAS 19 (rev.)
EBITDA Reduction mainly due to
Wintershall AG
EBIT IFRS 10/11 reclassification
leads to reduction in EBIT Partially offsetting effect
due to inclusion of equity income of associated companies in EBIT
Sales Decrease mainly due to
Wintershall AG: -€2,748 million and BASF-YPC: -€1,337 million
BASF Presentation_March 22, 2013 19
Million € 2012 restated 2012 ∆
million € ∆ %
Long-term assets 35,259 35,538 -279 -0.8
− thereof property, plant and equipment 16,610 18,177 -1,567 -8.6
− thereof financial assets 4,331 2,925 1,406 48.1
Short-term assets 27,467 28,789 -1,322 -4.6
Equity 25,621 25,804 -183 -0.7
Liabilities 37,105 38,523 -1,418 -3.7
− thereof financial indebtedness
12,798 13,355 -557 -4.2
Total 62,726 64,327 -1,601 -2.5
BASF Group reporting Balance sheet*
Short-term assets Decrease mainly due to
reduction of trade receivables and inventories
Property, plant and equipment Decrease mainly due to
BASF-YPC, Wintershall AG
Financial assets Increase of investments
accounted for using the equity method
Liabilities Decrease mainly due to
BASF-YPC, Wintershall AG
Financial indebtedness Decrease mainly due to
BASF-YPC
* As of December 31, 2012
BASF Presentation_March 22, 2013 20
BASF Group reporting Statement of cash flows
Million € 2012 restated 2012
Cash provided by operating activities 6,602 6,733 - thereof Changes in net working capital -844 -955
Cash used in investing activities -3,977 -4,088 - thereof Payments related to tangible / intangible assets -4,015 -4,149
Acquisitions / divestitures -319 -319
Cash used in financing activities -2,904 -2,928 - thereof Changes in financial liabilities
Dividends
-343
-2,560
-286
-2,641
Free cash flow 2,587 2,584
Payments related to intangible assets and property, plant and equipment reduced by €134 million Free cash flow remains unchanged Net debt of €11.2 billion (previously €11.6 billion)
Restated figures
BASF Presentation_March 22, 2013 21
Million € 2012 restated 2012
Sales 17,887 13,824
Petrochemicals 8,260
Monomers 6,772
Intermediates 2,855
EBITDA 3,021 2,409
EBIT before special items 2,171 1,717
EBIT 2,173* 1,718
EBIT after cost of capital** 1,040 911
** Cost of capital rate 2012 and 2013: 11%
* Thereof equity income: €29 million
Chemicals Key figures
BASF Presentation_March 22, 2013 22
Million € 2012 restated 2012
Sales 17,049 11,460
Catalysts 5,568 6,184
Construction Chemicals 2,315 2,315
Coatings 2,961 2,961
Performance Materials 6,205
EBITDA 1,363 894
EBIT before special items 932 561
EBIT 806* 435
EBIT after cost of capital** -548 -657
** Cost of capital rate 2012 and 2013: 11%
* Thereof equity income: €40 million
Functional Materials & Solutions Key figures
BASF Presentation_March 22, 2013 23
Million € 2012 restated 2012
Sales 12,740 16,700
Exploration & Production 2,584 5,330
Natural Gas Trading 10,156 11,370
EBITDA 2,445 4,721
EBIT before special items 1,876 4,104
EBIT 1,676* 3,904
Net Income 1,201 1,201
EBIT after cost of capital** 530 884
** Cost of capital rate 2012 and 2013: 11%
* Thereof equity income: €233 million
Oil & Gas Key figures
BASF Presentation_March 22, 2013 24
Impact on regional sales
2012
North America
Europe
2012 restated
Sales by location of company Billion €
Asia Pacific
South America, Africa, Middle East
45.7
14.6
13.9
4.5
78.7
41.5
14.4
11.7
4.5 72.1
58.0%
18.5%
17.7%
5.8%
57.5%
20.0%
16.2%
6.3% -2.2
-0.2
-4.2
BASF Presentation_March 22, 2013 25
Impact on investments
2012
Performance Products
Chemicals
2012 restated
Capex Million €
Functional Materials & Solutions
Agricultural Solutions
Oil & Gas
8% 5%
28%
5%
18%
12%
5%
5%
28%
Other
Performance Products
Chemicals
Functional Solutions Agricultural Solutions
Oil & Gas
Other
Plastics
4,215 4,081
14%
22%
18%
32%
BASF Presentation_March 22, 2013 26
Currency impact on BASF Group Annual impact of US$ change ($ exchange rate: -$0.01 per €)
Million € IFRS old IFRS new Sales to third parties +200 +140
EBIT +50 +40
Oil price impact on segment Oil & Gas Annual impact of oil price change (1US$/bbl rise in annual average Brent oil price) Million € IFRS old IFRS new Sales to third parties +60 +40
EBIT +30 +10
Impact on factors influencing sales and earnings
BASF Presentation_March 22, 2013 27
Outlook BASF Group 2013
Excluding the effects of acquisitions and divestitures, we strive to increase our sales volumes in 2013.
We aim to exceed the 2012 restated levels in sales and EBIT before special items.
The expected increase in demand, together with our measures to improve operational excellence and raise efficiency, will contribute to this.
We aim to earn a high premium on cost of capital once again in 2013.
BASF Presentation_March 22, 2013 28
1
2
3
Topics
New segment structure of BASF as of January 1, 2013
Definition and requirements of IFRS 10/11 & IAS 19 (revised)
Impact of new structure, IFRS 10/11 & IAS 19 (revised) on BASF reporting
4 “We create chemistry” strategy – IFRS impact on financial targets
BASF Presentation_March 22, 2013 29
“We create chemistry” strategy Adjusted key financial targets for 2015 and 2020
Sales Billion €
64
2010 2012
~79 ∆ -7
2012 restated
~72 ~85
2015*
∆ -5 ~80
2015 adjusted
~115
2020*
∆ -5
2020 adjusted
~110
* Communicated on November 29, 2011
∆ = IFRS 10/11 impact
BASF Presentation_March 22, 2013 30
“We create chemistry” strategy Adjusted key financial targets for 2015 and 2020
EBITDA Billion €
* Communicated on November 29, 2011
11.1
2010
~12.5 ∆ -2.5
2012 2012 restated
~10 ~14
2015 adjusted
~22
2020 adjusted
~15
2015*
∆ -1
~23
2020*
∆ -1
∆ = IFRS 10/11 impact
BASF Presentation_March 22, 2013 31
“We create chemistry” strategy Earnings per share target for 2015
Earnings per share €
Business growth 1.30
4.96
2002 2010
0.5
0.9
0.8
1.5 Margin
Tax rate
Share buy-back
Target 2015*
~7.5
„STEP“
Share buy-back
Growth
* Communicated on November 29, 2011
BASF Presentation_March 22, 2013 32
“We create chemistry” strategy Overview: Adjusted key financial targets for 2015 and 2020
Grow at least 2 percentage points above chemical production
Earn a premium on cost of capital of at least €2.0 billion on average p.a.
Profitability targets Growth targets
2015
2020
Sales ~€80 billion
Sales ~€110 billion
EBITDA ~€14 billion
EBITDA ~€22 billion
EPS ~€7.50
BASF Presentation_March 22, 2013 33 33