BASF Capital Market Story August 2013

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The BASF Capital Market Story gives you an overview on BASF's historic performance and our portfolio, highlighting our strength in operational excellence.

The BASF Capital Market Story gives you an overview on BASF's historic performance and our portfolio, highlighting our strength in operational excellence.

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  • 1. We add value as one company Oil & Gas Agricultural Solutions Functional Materials & Solutions Performance Products Chemicals Value Capital Market Story August 2013
  • 2. BASF Capital Market Story August 2013 Cautionary note regarding forward-looking statements 2 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.
  • 3. BASF Capital Market Story August 2013  Chemistry as an enabler  BASF has superior growth opportunities: - sustainable innovations - investments - emerging markets  Ambitious financial targets  The #1 chemical company  €72.1 billion sales, €6.6 billion EBIT bSI in 2012*  #1-3 in >75% of businesses, present in >200 countries  6 integrated Verbund sites, production in 60 countries  10 years of strong sales and earnings growth  16.5% average annual total shareholder return**  16% average annual dividend increase, >3% yield in every single year*** Performance We create chemistry for a sustainable future Perspective ** August 2003 – July 2013 *** for 2003-2012 Ludwigshafen, Germany Antwerp, Belgium Nanjing, China Kuantan, MalaysiaGeismar, USA Freeport, USA Verbund site Positioning 3 * restated numbers, reflecting IFRS 10/11 changes
  • 4. BASF Capital Market Story August 2013 BASF today – a well-balanced portfolio Total sales 2012: €72.1 billion* Percentage of sales 2012** ** Not depicted here: ~5% of Group sales reported as ‘Other‘ * Restated numbers, reflecting IFRS 10/11 changes, new segment structure effective Jan. 1, 2013 4
  • 5. BASF Capital Market Story August 2013 Ongoing portfolio development Recent examples Crop protection investments (China, BR) Aroma ingredients investment, Kuantan Transactions with Statoil and Gazprom* Restructuring in Performance Products Photo: Øyvind Hagen 5* Gazprom deal not closed yet.
  • 6. BASF Capital Market Story August 2013 Business review BASF Today Trends Purpose and strategic principles Targets Strategic levers BASF Tomorrow – Board priorities BASF Strategy: We create chemistry__November 2011 Business review BASF strategy & growth targets Strategic levers
  • 7. BASF Capital Market Story August 2013 Q2 2013: BASF maneuvers well through challenging environment Business performance Q2’13 Q2’12 vs. Q2’12  Sales €18.4 billion €17.8 billion +3%  EBITDA €2.5 billion €2.5 billion (1%)  EBIT before special items €1.8 billion €1.9 billion (5%)  EBIT €1.8 billion €1.7 billion +6%  Net income €1.2 billion €1.2 billion (4%)  Reported EPS €1.26 €1.32 (4%)  Adjusted EPS €1.40 €1.59 (12%)  Operating cash flow €2.0 billion €1.9 billion +6% Sales development Period Volumes Prices Portfolio Currencies Q2’13 vs. Q2’12 5% 0% 0% (2%)  7
  • 8. BASF Capital Market Story August 2013 2003 2004 2005 2006 2007 2008 2009** 2010 2011 2012 H1 2013 Strong free cash flow generation * Cash provided by operating activities less capex (in 2005 before CTA) ** 2009 adjusted for re-classification of settlement payments for currency derivatives Free cash flow* in billion € 2.8 2.6 3.3 3.5 3.2 2.5 3.2 3.9 3.7 2.6 2.1 8
  • 9. BASF Capital Market Story August 2013 Delivering attractive shareholder returns  Dividend of €2.60 per share for 2012  2003-2012: Average annual dividend increase of 16%  Attractive dividend yield of 3.7% in 2012**  Dividend yield above 3% in any given year since 2002, total payout almost €17 billion * Dividend yield based on share price at year-end Dividend payments 3.7%3.2% 3.1% 4.1% 3.8% 7.0% 3.9% Dividend yield* 4.6%3.1% 2.50 0.70 0.85 1.00 1.50 1.95 1.95 1.70 2.20 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 9 2.60 Dividend per share (in €) 3.7% ** Based on BASF share price of €71.15 on Dec. 28, 2012
  • 10. BASF Capital Market Story August 2013 Delivering consistent, long-term value Average annual performance with dividends reinvested 0 3 6 9 12 15 18 Euro Stoxx 50 DAX 30 MSCI World Chemicals +9.0% Last 5 years August 2008 – July 2013 +15.1% -0.5% +5.0% +3.8% Last 10 years August 2003 – July 2013 BASF +10.4% +4.0% +16.5% 10
  • 11. BASF Capital Market Story August 2013  We do not expect that global economic growth will accelerate in the second half of 2013  Nevertheless, BASF is targeting for 2013 to exceed the 2012 levels in sales and EBIT before special items in a volatile economic environment  Our focus on growth markets and innovation, in combination 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 in 2013 Outlook 2013  GDP: +2.0% (reduced from 2.4%)  Industrial production: +2.7% (reduced from 3.4%)  Chemical production: +3.1% (reduced from 3.6%)  US$ / Euro: 1.30 (unchanged)  Oil price (US$ / bbl): 105 (reduced from 110) Assumptions 2013 Outlook 2013 11
  • 12. BASF Capital Market Story August 2013 Business review BASF Today Trends Purpose and strategic principles Targets Strategic levers BASF Tomorrow – Board priorities BASF Strategy: We create chemistry__November 2011 Business review BASF strategy & growth targets Strategic levers
  • 13. BASF Capital Market Story August 2013 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 13
  • 14. BASF Capital Market Story August 2013 Key financial targets 2015 / 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 targetsGrowth targets 2015 2020  Sales ~€80 billion  Sales ~€110 billion  EBITDA ~€14 billion  EPS ~€7.50  EBITDA ~€22 billion 14
  • 15. BASF Capital Market Story August 2013 Business review BASF Today Trends Purpose and strategic principles Targets Strategic levers BASF Tomorrow – Board priorities BASF Strategy: We create chemistry__November 2011 Business review BASF strategy & growth targets Strategic levers – Portfolio development – Market approach – Innovations for a sustainable future – Investments – Acquisitions – Operational excellence
  • 16. BASF Capital Market Story August 2013 Portfolio development We expand from chemicals to chemistry  Chemistry as key enabler for functionalized materials & solutions  Deep understanding of customer value chains required New molecules Improved applications Functionalized materials & solutions 1960 1970 1980 1990 2000 2010 2020 Batteries, membranes ... 16
  • 17. BASF Capital Market Story August 2013 Portfolio development Moving downstream towards customer industries * Agriculture, Construction, Consumer Goods, Health & Nutrition, Electronics, Energy & Resources, Transportation ** Sales excluding Oil & Gas. Targets were published on November 29, 2011. Functionalized Materials & Solutions Customized ProductsClassical Chemicals 2020 in % of sales** Chemical Industry First customer industries* 2010 in % of sales** ~ 40% ~ 30% ~ 70% 2001 in % of sales** ~ 50% ~ 60% ~ 50% 17
  • 18. BASF Capital Market Story August 2013  Engineering plastics  Electronic chemicals  Catalysts  Construction chemicals  Water-based resins  Pigments  Plastic additives  Oil & Gas  Personal care & food  Battery materials  Functional crop care  Omega-3 fatty acids BASF core business Strong partnerships  Gazprom  Statoil  Monsanto  Petronas  Shell  Sinopec  Total Selected transactions 2001 − today* Acquisitions ~ €16bn sales ~ €10bn sales** Divestitures  Pharma  Fibers  Printing systems  Polyolefins  Polystyrene Americas  Agro generics  Vitamins premix  Fertilizers  Styrenics (transferred into Styrolution JV on Oct. 1, 2011)  Construction equipment, flooring systems ** without Styrenics Portfolio development Towards more market driven and innovative businesses * only closed deals have been considered 18
  • 19. BASF Capital Market Story August 2013 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 ** Nutrition & Health sales predominantly into Health & Nutrition market Petro- chemicals Performance Materials Bubble Size: BASF divisional sales by first customer industry (2012)*/** 19
  • 20. BASF Capital Market Story August 2013 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: ‘Smartforvision’ Technology competencies combined with customer know-how Daimler & BASF concept car ‘Smartforvison’ 20
  • 21. BASF Capital Market Story August 2013  Joint development with adidas, illustrating our customer focus  New cushioning material, provides highest energy return in the running industry  Solid granular material* is ‘blown up’, turned into 1000’s of small energy capsules  With their unique cell structure, these energy capsules store and unleash energy more efficiently in every stride  New shoe is available in stores since February, 2013 Innovation with adidas: Infinergy™ Technology competencies combined with customer know-how Key facts Photo: adidas * TPU (Thermoplastic polyurethane) 21
  • 22. BASF Capital Market Story August 2013 1.4 1.4 1.5 1.6 1.7 0,0 0,5 1,0 1,5 2,0 2008 2009 2010 2011 2012  €1.7 billion R&D expenditures in 2012, further increase planned for 2013  ~10,500 employees in R&D  ~3,000 projects  Research Verbund: About 1,950 partnerships with universities, start-ups and industry partners  Target 2015 and 2020: - €10 billion in sales from innovations younger 5 years; - €30 billion in sales from innovations younger 10 years Strong commitment to R&D Innovations for a sustainable future Key factsR&D expenditures (billion €) Chemicals 10% Performance Products 20% Functional Mat. & Sol. 20% Agricultural Solutions 25% Oil & Gas 2% Corporate Research 23% 22
  • 23. BASF Capital Market Story August 2013 Ongoing inflow of new growth fields Health & Nutrition Consumer Goods ConstructionTransportation Electronics Energy & Resources Agriculture Customer industries Water solutions Heat management Enzymes Plant biotechnology Batteries for mobility Lightweight composites Functional crop care Medical Organic electronics Growth Fields E-Power management Wind energy Chemistry as an enabler: Growth Fields Innovations for a sustainable future 23
  • 24. BASF Capital Market Story August 2013 Battery materials will play a key role in advancing electromobility of the future Focus and Target  Advanced cathodes and electrolytes development for lithium- ion batteries, as well as next-generation battery systems  Position BASF as a leading global solution provider for battery and cell manufacturers Business potential 2020  Overall market size: >€20 bn. globally (~€16 bn. Asia Pacific)  SRM size: >€5 bn. globally (~€4 bn. in Asia Pacific)  BASF sales potential: >€500 M globally (~€350 M Asia Pacif.) Activities  Acquisition of Novolyte Technologies, incl. production facility, Application Technology Center in Suzhou, China (April 2012)  New electrolytes R&D laboratory and Application Technology Center for Battery Materials in Amagasaki, Japan (2013)  Ongoing collaboration with leading universities, institutes and industry partners, as well as battery producers and OEMs 24
  • 25. BASF Capital Market Story August 2013 Future investments (€ billlion) Thereof investments in emerging markets Total investments 35-45% 15-20 30-40% ~15 2006 – 2010 2011 – 2015 2016 – 2020 10.9 ~20% Investments … will boost future organic growth 25
  • 26. BASF Capital Market Story August 2013 Expansion Verbund site Nanjing, China* MDI plant Chongqing, China * Memorandum of Understanding signed TDI plant Ludwigshafen, Germany Investments Major projects Expansion oil & gas activities Aroma Ingredients Kuantan, Malaysia Acrylic acid complex Camacari, Brazil 26
  • 27. BASF Capital Market Story August 2013 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 … 27
  • 28. BASF Capital Market Story August 2013 Operational excellence STEP program on track: ~€1 billion earnings contribution by 2015 Annual earnings contribution (€ million) 0 1,000 2,000 3,000 2012 2015 Former cost saving programs NEXT STEP  Targeted annual earnings contribution of ~€1 billion by end of 2015  Project timeline: 2012–2015  Program is on track  Measures to optimize processes and structures in all regions, e.g.  manufacturing, maintenance  supply chain  engineering, best-cost country sourcing  One-time costs & investments: ~€1 billion NEXT Program STrategic Excellence Program ‘STEP’  NEXT program successfully completed  Annual earnings contribution of ~€1 billion achieved in 2012 28
  • 29. BASF Capital Market Story August 2013 Appendix Business development Q2 2013
  • 30. BASF Capital Market Story August 2013 Chemicals Lower earnings due to weaker demand Intermediates 716 (5%) Monomers 1,618 (1%) Petrochemicals 1,849 (6%) €4,183 (4%) Q2’13 segment sales (million €) vs. Q2’12 Sales development Period Volumes Prices Portfolio Currencies Q2’13 vs. Q2’12 1% (4)% 0% (1%)   EBIT before special items (million €) 601 569 445 650 495 0 200 400 600 800 Q2 Q3 Q4 Q1 Q2 20132012 30
  • 31. BASF Capital Market Story August 2013 Performance Products Restructuring measures ongoing Performance Chemicals 923 (2%) Care Chemicals 1,232 +1% €4,032 (1%) Paper Chemicals 370 (9%) Q2’13 segment sales (million €) vs. Q2’12 Nutrition & Health 544 +7% Dispersions & Pigments 963 (4%) EBIT before special items (million €) Sales development Period Volumes Prices Portfolio Currencies Q2’13 vs. Q2’12 2% (2%) 1% (2%)    20132012 442 344 183 379 394 0 200 400 600 Q2 Q3 Q4 Q1 Q2  31
  • 32. BASF Capital Market Story August 2013 Functional Materials & Solutions Continued good demand from the automotive industry Catalysts 1,463 0% Construction Chemicals 589 (5%) Coatings 752 +3% €4,503 +2% Q2’13 segment sales (million €) vs. Q2’12 Sales development Period Volumes Prices Portfolio Currencies Q2’13 vs. Q2’12 3% 2% (1%) (2%)  Performance Materials 1,699 +7%  216 231 228 239 293 0 200 400 600 Q2 Q3 Q4 Q1 Q2   EBIT before special items (million €) 20132012 32
  • 33. BASF Capital Market Story August 2013 Agricultural Solutions Attractive offering meets strong demand Q2’13 segment sales (million €) vs. Q2’12 Sales development Period Volumes Prices Portfolio Currencies Q2’13 vs. Q2’12 14% 3% 3% (2%)    0 200 400 600 Q2 Q2 0 500 1.000 1.500 2.000 Q2 Q2 1,727 485 4141,467 EBIT before special items (million €) 2013201220132012 33
  • 34. BASF Capital Market Story August 2013 88 208 59 280 0 100 200 300 400 Q2/2012 Net Income Q2/2013 Net Income Oil & Gas Higher production volumes drive earnings Exploration & Production 525 (10%) Natural Gas Trading 2,311 +17% €2,836 +10% Q2’13 segment sales (million €) vs. Q2’12 EBIT bSI/Net income (million €) Natural Gas Trading Exploration & Production Net income Sales development Period Volumes Prices/Currencies Portfolio Q2’13 vs. Q2’12 10% 0% 0% 330 242 323 382 34
  • 35. BASF Capital Market Story August 2013 Review of “Other” Million € Q2’13 Q2’12 Sales 1,072 968 EBIT before special items (217) (66) thereof Corporate research Group corporate costs Currency results, hedges and other valuation effects Other business (97) (58) (63) 37 (94) (61) 92 25 Special items 3 (117) EBIT (214) (183) 35
  • 36. BASF Capital Market Story August 2013 Strong operating cash flow in H1 2013 Million € H1’13 H1’12 Cash provided by operating activities 4,030 3,411 thereof Changes in net working capital Miscellaneous items (633) 646 (633) (407) Cash provided by investing activities (2,582) (1,035) thereof Payments related to tangible / intangible assets (1,884) (1,616) Acquisitions / divestitures (516) 430 Cash used in financing activities (823) (2,246) thereof Changes in financial liabilities Dividends 1,762 (2,585) 205 (2,446)  Net working capital impacted by lower inventories and higher accounts receivables  Strong free cash flow of €2.1 billion, despite higher capex (+€268 million)  Dividend payments to BASF SE shareholders amounted to €2.4 billion  Net debt increased by €1.3 billion to €12.5 billion; equity ratio of 41% First half 2013 36
  • 37. BASF Capital Market Story August 2013 Appendix Additional information from Investor Day Asia Pacific (June 5-6, 2013)
  • 38. BASF Capital Market Story August 2013 Innovation ~3,500 R&D staff Market €25 billion sales Portfolio >€2 billion sales from new biz and acquisitions People ~9,000 new jobs Investment 75% OMP ratio Excellence €1 billion cost savings We create chemistry in Asia Pacific: 2020 targets 38
  • 39. BASF Capital Market Story August 2013 20202012 restated New Business & Acquisitions Organic Growth Sales contributions € Billion Asia Pacific Organic growth drives top line growth 2012 restated = adjusted to changes in IFRS 10 & 11 New Sales Target: €25 billion €12.5 billion CAGR ~9% >€2 billion >€10 billion 39
  • 40. BASF Capital Market Story August 2013 40