we add value as...basf credit 9story october 2014 we aim to increase our sales volumes excluding the...
TRANSCRIPT
We add value as one company
Tobias Dratt Senior Vice President
Treasury
London
October 7, 2014
BASF Credit Story October 2014 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 Credit Story October 2014 3
Chemistry as an enabler
BASF has superior growth
opportunities:
– sustainable innovations
– investments
– emerging markets
Ambitious financial targets
The #1 chemical company
€74 billion sales, €7.2 billion
EBIT bSI in 2013
#1-3 in >75% of businesses,
present in >200 countries
6 integrated Verbund sites,
production in 60 countries
A track record of strong
sales and earnings growth
14% average annual
dividend increase, >3%
yield in every single year*
~€70 billion market
capitalization in Sept. 2014
Performance Perspective
* For 2004-2013
Ludwigshafen,
Germany
Antwerp,
Belgium
Nanjing,
China
Kuantan,
Malaysia Geismar,
USA
Freeport,
USA
Verbund site
Positioning
We create chemistry for a sustainable
future
BASF Credit Story October 2014 4
Percentage of sales 2013*
* Not depicted here: ~6% of Group sales reported as ‘Other‘
BASF today – a well-balanced portfolio Total sales 2013: €74 billion
BASF Credit Story October 2014 5
Global reduction in carbon
emissions of 6.1 million metric
tons/a. and reduction of waste
Example Ludwigshafen:
avoidance of 7 million metric
tons of freight/a.
= 280,000 fewer truckloads
Shared use of on-site facilities:
fire department, security, waste
water treatment and analytics
Verbund generates >€1 billion p.a. global
cost savings*, supports sustainability
* Savings include only tangible synergies. Additional (intangible) benefits and retained profits are not included.
BASF Credit Story October 2014 6
Business review
Credit strengths
BASF strategy & growth targets
Strategic levers
BASF Credit Story October 2014 7
BASF outperformed global chemical
production by ~3 percentage points p.a.
Sales to third parties billion €
33
79
72
74
16.6
20.7 -4.8
13.7
-6.6 3.7 -0.5 -2.0 0.6
20
40
60
80
2001 2012 2012 restated
2013
Volumes
Prices
Currencies M&A
Volumes Prices Currencies M&A
IFRS
Impact
BASF Credit Story October 2014 8
Operational excellence Strong track record
BASF Group* 2001–2013 Index
50
100
150
200
250
300
350
2001 2006 2009 2012
CAGR 2001 – 2013
10 %
8 %
3 %
EBITDA
Sales
Fixed costs
* Excluding companies with major IFRS 10/11 restatements, i.e. BASF YPC Nanjing, Libya onshore, other Oil & Gas and Catalysts companies
2013
BASF Credit Story October 2014 9
We aim to increase our sales volumes excluding the effects of acquisitions and divestitures.
Nonetheless, sales will decline slightly compared with 2013 due to the divestiture of the gas
trading and storage business planned for autumn 2014 and negative currency effects.
We expect a slight increase in EBIT before special items, especially as a result of
considerably higher contributions from the Performance Products and Functional Materials &
Solutions segments.
We aim to earn a high premium on our cost of capital once again in 2014.
Outlook 2014
GDP: +2.5%
Industrial production: +3.7%
Chemical production: +4.4%
US$ / Euro: 1.35
Oil price (US$ / bbl): 110
Assumptions 2014
Outlook 2014
BASF Credit Story October 2014 10
Business review
Credit strengths
BASF strategy & growth targets
Strategic levers
BASF Credit Story October 2014 11
Highlights of BASF’s credit
1. Solid business development in the first half of 2014
3. Strong commitment to keep a solid A rating
4. Diversified financing strategy with broad access to capital markets
Free cash flow of at least €2.5 billion in every single year for the last ten years
Focus on operational excellence
Advantageous cost position due to unique Verbund concept
Focus on cost management
6. Well positioned for profitable growth
Leading positions in growth industries and emerging markets
Ongoing portfolio optimization
Excellent platform for sustainable innovations
2.
5.
BASF Credit Story October 2014 12
* Cash provided by operating activities less capex (in 2005 before CTA) ** 2009 adjusted for re-classification of settlement payments for currency derivatives *** Figures for 2013 in accordance with changes in IFRS and new segment structure as of January 1, 2013
Cash provided by operating activities
Free cash flow*
2.6 3.2
0.5
0
1
2
3
4
5
6
7
8
2004 2005 2006 2007 2008 2009** 2010 2011 2012 2013*** H1 2014
Continuous strong free cash flow
generation
Free cash flow in billion €
7.9
BASF Credit Story October 2014 13
Diversified Debt Financing Instruments As of June 30, 2014
Ensures solvency at all times
Limits financial risks
Optimizes cost of capital
Provides broad access to
capital markets
USD 12.5 bn commercial
paper program backed by two
broadly syndicated €3bn
backup-lines, maturing in 2018
and 2019
Funding Strategy Highlights
Commercial Papers
7%
Bank Loans
16%
EUR-denominated
Bonds
64%
€17.0 billion
Financing strategy
Keep a solid A rating (current ratings* S&P A+ / Moody’s A1) Our target:
* Last Confirmation Moody’s: April 8, 2014 Last Confirmation S&P: May 13, 2014
Other Bonds
13%
BASF Credit Story October 2014 14
1.3
2.2
1.1 1.1
1.8
0.8
0.3
0.7
1.0
0.5
2.1
0.0
0.5
1.0
1.5
2.0
2.5
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 >2024
* Excluding industrial revenue and pollution control bonds from BASF Corporation Group.
Profile as of June 30, 2014 (billion €)*
Well balanced bond maturity profile
BASF Credit Story October 2014 15
Global ESG Leaders Indices
Worldwide public
recognition for
sustainability and
transparency
15
Worldwide public recognition for
sustainability and transparency
BASF Credit Story October 2014 16
Business review
Credit strengths
BASF strategy & growth targets
Strategic levers
BASF Credit Story October 2014 17
Demographic challenges … set the stage for the future of the chemical industry
Nine billion people in 2050 but only one earth
Resources, Environment & Climate
Food & Nutrition Quality of Life
Chemistry as enabler
BASF Credit Story October 2014 18
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
EPS ~€7.50
EBITDA ~€22 billion
Key financial targets 2015 / 2020
are ambitious
BASF Credit Story October 2014 19
Business review
Credit strengths
BASF strategy & growth targets
Strategic levers
– Portfolio development
– Market approach
– Innovations for a sustainable future
– Investments
– Acquisitions
– Operational excellence
BASF Credit Story October 2014 20
Portfolio development Moving downstream towards customer industries
ture, Construction, Consumer Goods, Health & Nutrition, Electronics, Energy & Resources, Transportation
** Sales excluding Oil & Gas. Targets were published on November 29, 2011.
BASF Credit Story October 2014 21
Catalysts
Construction chemicals
Water-based resins
Pigments, plastic additives
Oil & Gas
Personal care & food
Battery materials
Functional crop care
Omega-3 fatty acids
Enzymes
…
BASF
core business
Strong partnerships
Gazprom
Monsanto
Petronas
Shell
Sinopec
Statoil
Total
Selected transactions
2004 − today
Acquisitions
~ €14 billion sales
Divestitures
Printing systems
Agro generics
Vitamin premixes
Styrenics
Fertilizers
Construction equipment, flooring and wall systems
Natural gas trading and storage business
…
~ €16 billion sales*
Portfolio development Towards more market driven and innovative businesses
* Without styrenics (transferred into Styrolution JV on Oct. 1, 2011). Natural Gas Trading: Closing expected in autumn 2014
BASF Credit Story October 2014 22
Monomers
Intermediates
Dispersions &
Pigments
Performance
Chemicals
Care
Chemicals
Paper
Chemicals
Coatings
Catalysts
Construction
Chemicals
BASF sales by first customer industry*
> 15 %
> 10 %
< 10 %
> 15 %
Consumer goods
Transportation
Construction
Energy & Resources
Market approach Cross-divisional customer industry approach
* Excluding Oil & Gas, Crop Protection and Other. 2012 numbers
Petro-
chemicals
Performance
Materials
Bubble Size: BASF divisional sales by first customer industry*/**
** Nutrition & Health sales predominantly into Health & Nutrition market
BASF Credit Story October 2014 23
E-textiles
Solar roof with transparent
organic solar panels and
OLED modules
Multifunctional seat
Infrared-reflective
coating
Infrared-reflective film
High performance foams
Lightweight tridion cell
All-plastic wheel
Cross-divisional approach BASF’s technology Verbund combined with customer know-how
Daimler & BASF concept car ‘Smartforvision’
BASF Credit Story October 2014 24
Customer Verbund - adidas and BASF Working together for disruptive innovation: Infinergy™
BASF Credit Story October 2014 25
Strong commitment to innovation Innovations for a sustainable future
1.4 1.5
1.6 1.7
1.8
0.0
0.5
1.0
1.5
2.0
2009 2010 2011 2012 2013
€1.8 billion R&D expenditure in
2013, further increase of R&D
spending planned in 2014
~10,650 employees in R&D
~3,000 projects
Research Verbund:
Cooperations with ~600
excellent partners from
universities, start-ups
and industry
Target 2015 and 2020:
– €10 billion in sales from
innovations younger 5 years
– €30 billion in sales from
innovations younger 10 years
R&D expenditures
in € billion
Chemicals
10%
Performance Products
20%
Functional Mat. & Sol.
20%
Agricultural Solutions
26%
Oil & Gas
3%
Corporate Research
21%
Key facts
2.0
1.5
1.0
0.5
0
BASF Credit Story October 2014 26
Chemistry-based innovations Growth and technology fields
Growth fields
Resources,
Environment
& Climate
Food &
Nutrition
Quality of Life White
Biotechnology
Materials,
Systems &
Nanotechnology
Raw Material
Change
Key customer industries
Health & Nutrition
Consumer Goods
Transportation
Energy & Resources
Electronics
Agriculture
Construction
Technology fields Global needs
...
Batteries for Mobility
Enzymes
Heat Management for Construction
Organic Electronics
Functional Crop Care
Plant Biotechnology
E-Power Management
Wind Energy
Lightweight Composites
Water Solutions
BASF Credit Story October 2014 27
Growth field example: Enzymes Innovation-driven specialties for various markets
Become a major player in enzyme technology; sales target of >€400million (2020)
Textile /
Leather
Oilfield Water
Biofuels
Detergents
Processed
food Beverages
Bakery Feed
Existing business mainly with
enzymes for animal nutrition
Acquired Henkel's detergent
enzyme technology
Entered into research and
license agreement with Dyadic
to access C1-host technology
Successfully acquired enzyme
biotechnology company
Verenium
R&D pipeline is reinforced with
several new projects
Enzymes know-how leveraged
with chemical ingredients
Pulp &
Paper
The fungus Aspergillus niger is a powerful
production host for feed enzymes.
BASF Credit Story October 2014 28
Performance
Products
15%
Oil & Gas
20%
€20
billion
Functional
Materials &
Solutions
12%
Capex budget 2014-2018
Other
13%
Chemicals
33%
Capex budget 2014-2018
Asia Pacific
18%
€20
billion
South
America
4%
North America
25%
Europe
49%
Agricultural
Solutions
7%
Other
4%
by segment by region
Investments Capex budget 2014-2018 by segment and region*
BASF Credit Story October 2014 29
Expansion oil & gas activities
Aroma Ingredients Kuantan, Malaysia
Investments Major projects
Ammonia and gas-to-propylene in USA*
MDI plant Chongqing, China
Acrylic acid complex Camacari, Brazil
TDI plant Ludwigshafen, Germany
* Under evaluation
BASF Credit Story October 2014 30
Acquisitions … will contribute to profitable growth in the future
Provide a minimum return on
investment of 8% p.a. after tax
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 …
BASF Credit Story October 2014 31
0
1,000
2,000
3,000
2013 2015
Former cost saving programs
NEXT STEP
Operational excellence programs STEP program on track: ~€1 billion earnings contribution by 2015
Annual earnings contribution
in € million Targeted annual earnings
contribution of ~€1 billion by
end of 2015
Optimization of processes and
structures in all regions, e.g.
manufacturing, maintenance
supply chain
engineering, best-cost country
sourcing
Project timeline: 2012–2015
Program is on track
Total of ~€600 million achieved
by the end of 2013
One-time cost & investments:
~€1 billion
STEP program
BASF Credit Story October 2014 32
Appendix:
Additional information
BASF Credit Story October 2014 33
Overview of bonds (1/2) as of March 31, 2014
Bond Term Issuer Volume ISIN Code
EUR Floating Rate Note 2014/2017 BASF SE € 300 million XS1043167433
2.5% Euro Bond 2014/2024 BASF SE € 500 million XS1017833242
1.375% Euro Bond 2014/2019 BASF SE € 750 million XS1017828911
3.89% USPP Series A 2013/2025 BASF SE USD 250 million N/A
4.09% USPP Series B 2013/2028 BASF SE USD 700 million N/A
4.43% USPP Series C 2013/2034 BASF SE USD 300 million N/A
EUR Floating Rate Note 2013/2016 BASF SE € 200 million XS0963402572
3.675% NOK Bond 2013/2025 BASF SE NOK 1.45 billion XS0932079717
EUR Floating Rate Note 2013/2020 BASF SE € 300 million XS0931272776
2.875% EUR Bond 2013/2033 BASF SE € 200 million XS0932307100
EUR Floating Rate Note 2013/2018 BASF SE € 300 million XS0903325206
3.25% EUR Bond 2013/2043 BASF SE € 200 million XS0888667200
3% EUR Bond 2013/2033 BASF SE € 500 million XS0885399583
1.875% EUR Bond 2013/2021 BASF SE € 700 million XS0883560715
BASF Credit Story October 2014 34
Overview of bonds (2/2) as of March 31, 2014
1 Guaranteed by BASF SE
Bond Term Issuer Volume ISIN Code
2.0% EUR Bond 2012/2022 BASF SE € 1 billion DE000A1R0XG3
1.5% EUR Bond 2012/2018 BASF SE € 750 million XS0836260975
4.25% EUR Bond 2009/2016 BASF SE € 200 million XS0439773002
4.625% EUR Bond 2009/2017 BASF SE € 300 million XS0437957086
5.875% GBP Bond 2009/2017 BASF SE GBP 400 million XS0420401779
5.125% EUR Bond 2009/2015 BASF Finance Europe N.V. 1 € 2 billion XS0412154378
4.5% EUR Bond 2009/2016 BASF Finance Europe N.V. 1 € 150 million XS0414672070
3.625% CHF Bond 2008/2015 BASF Finance Europe N.V. 1 CHF 200 million CH0039943292
4.5% EUR Bond 2006/2016 BASF SE € 500 million DE 000 A0JRFB0
4.875% EUR Bond 2003/2018 Ciba Specialty Chemicals
Finance Luxembourg S.A. € 500 million XS0170386998
BASF Credit Story October 2014 35
BASF Creditor Relations Team
Frank Wilhelmi
Head of Capital Market Financing
Hannes Koske
IR Manager Creditor Relations
Contact Details:
Email: [email protected]
Hotline: +49 621 60 48230
Websites: www.basf.com/bonds
www.basf.com/anleihen
Juliane Beckmann
Senior Specialist
Capital Market Financing
Lüthje Brandt
Specialist
Capital Market Financing
BASF Credit Story October 2014 36