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Speech & charts of BASF  Q1 2012
 

Speech & charts of BASF Q1 2012

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Charts and Speech accompanying the 1Q2012 Conference Call for investors and analysts on April 27, 2012

Charts and Speech accompanying the 1Q2012 Conference Call for investors and analysts on April 27, 2012

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    Speech & charts of BASF  Q1 2012 Speech & charts of BASF Q1 2012 Document Transcript

    • BASF 1st Quarter 2012 Analyst Conference CallApril 27, 2012, 8:30 a.m. (CEST), MannheimAnalyst Conference Call ScriptHans-Ulrich EngelThe spoken word applies.
    • Page 2BASF 1st Quarter 2012 Analyst Conference April 27, 2012
    • Page 3BASF 1st Quarter 2012 Analyst Conference April 27, 2012Hans-Ulrich EngelLadies and Gentlemen, good morning and thank you for joining us.[Chart 3: BASF with solid start to 2012] After a rather slow fourth quarter 2011, we have seen a significant improvement in business activity since the beginning of the year. However, in line with our assumptions demand in our chemical activities could not match the level of the exceptionally strong first quarter 2011, which benefitted from high consumption and re- stocking effects. The market environment for our Agricultural Solutions as well as the Oil & Gas businesses, on the other hand, was quite favorable, leading to a good start into 2012. In the first quarter, we increased sales by 6 percent to 20.6 billion euros. Overall volumes were flat. Volumes in our chemical activities declined by 5 percent due to lower demand as well as the modification of an earnings-neutral swap for cracker products. We were able to successfully raise prices by 5 percent. Higher raw material costs could not be fully passed on to the market. EBITDA amounted to 3.9 billion euros, up 16 percent versus the first quarter of last year. EBITDA as well as EBIT were positively impacted by the disposal gain of our fertilizer activities in Belgium and France in the amount of 645 million euros. EBIT before special items came in at 2.5 billion euros, 7 percent below the record first quarter of last year.
    • Page 4BASF 1st Quarter 2012 Analyst Conference April 27, 2012
    • Page 5BASF 1st Quarter 2012 Analyst Conference April 27, 2012 Net income was 1.7 billion euros, 28 percent lower than a year ago. Last year’s results included a capital gain of close to 900 million euros from the sale of our stake in K+S. Adjusted earnings per share were 1.57 euros in Q1 2012 after 1.94 euros in Q1 2011.
    • Page 6BASF 1st Quarter 2012 Analyst Conference April 27, 2012
    • Page 7BASF 1st Quarter 2012 Analyst Conference April 27, 2012[Chart 4: Important milestones in Q1 2012]In the first quarter, we achieved important milestones: We significantly strengthened our activities in battery materials through several smaller acquisitions. In January, we announced the acquisition of a stake in Sion Power, the global leader in the development of lithium-sulfur batteries. In February, we bought Ovonic, the global leader in nickel-metalhydride battery technology. We also signed the purchase agreement for Merck’s electrolyte activities. The transaction was closed last week. And just yesterday we announced the acquisition of Novolyte Technologies, a manufacturer of electrolyte formulations for lithium batteries. With production sites in Europe, the United States and Asia Pacific region we are now positioned as a global supplier in the electrolyte formulation business. Last but not least, our battery material plant in Ohio is on track to start operation in Q4 of this year. All these measures support our goal to become the leading supplier of battery materials. Last month, we signed a heads of agreement with PETRONAS for the expansion of our existing joint venture in Kuantan and the construction of a number of new downstream plants at PETRONAS’ new integrated RAPID complex in South Johor, next to Singapore. The projects are to be implemented between 2015 and 2018. In total, we plan joint investments of one billion euros. Finally, at the end of Q1 we completed the sale of our fertilizer activities. We realized a disposal gain of 645 million euros, which was booked as special item in ‘Other’.
    • Page 8BASF 1st Quarter 2012 Analyst Conference April 27, 2012
    • Page 9BASF 1st Quarter 2012 Analyst Conference April 27, 2012Now I will explain the financial performance of our businesssegments in more detail. The basis of comparison is the first quarter2011.[Chart 5: Chemicals – Margins improved over Q4 2011 thanksto higher prices]In the Chemicals segment we generated higher sales. TheStyrolution joint venture contributed positively to the top-linebecause feedstock sales to the JV are now reported as third partysales, which are shown as structural effect. Volumes droppedmainly due to an earnings-neutral swap agreement for propylene,which became effective in Q3 of 2011. On a comparable basis,volumes increased slightly. Due to ongoing high raw materialprices, EBIT before special items did not reach the high level of Q12011. In Petrochemicals, sales increased significantly. Prices for cracker products moved above prior year. Prices for all other product lines were below the very high prior year level. Margins declined because we could not fully pass on the high raw material costs to our customers. Overall, EBIT before special items was considerably lower. In Intermediates, sales decreased slightly. Demand was high from key customer industries such as plastics and coatings, but did not match the very good level of the previous year. Thus volumes and margins declined. Consequently, EBIT before special items came in lower.
    • Page 10BASF 1st Quarter 2012 Analyst Conference April 27, 2012
    • Page 11BASF 1st Quarter 2012 Analyst Conference April 27, 2012 Sales in Inorganics were stable. EBIT before special items did not match the very good level of Q1 2011, mainly due to lower margins in basic products.
    • Page 12BASF 1st Quarter 2012 Analyst Conference April 27, 2012
    • Page 13BASF 1st Quarter 2012 Analyst Conference April 27, 2012[Chart 6: Plastics – TDI and MDI margins improved on higherprices vs. Q4 2011]In our Plastics segment sales decreased. Price increases could notcompensate for considerably lower volumes. The record margins forpolyamide precursors and polyurethanes, generated in Q1 2011,could not be sustained. Earnings were substantially below theexcellent level of the previous year. In Performance Polymers, sales were slightly lower. Slow textile fiber demand in Asia led to lower volumes and margins for caprolactam. On the other hand, continuously strong demand from the automotive industry, particularly in North America, lifted sales in engineering plastics. Foams’ sales exceeded the prior year quarter based on healthy demand from the construction and packaging industries. However, EBIT before special items dropped substantially mainly due to a margin decrease. Sales in Polyurethanes were down moderately. Sales to the appliance and construction industries weakened but demand from the automotive sector remained robust. The scheduled turnaround of our Geismar site also negatively impacted volumes. We continued to pursue our value-before-volume strategy and successfully implemented price increases for TDI and MDI. As a result, we saw margins in both TDI and MDI recover during the quarter. EBIT before special items was significantly below prior year given lower volumes and margins.
    • Page 14BASF 1st Quarter 2012 Analyst Conference April 27, 2012
    • Page 15BASF 1st Quarter 2012 Analyst Conference April 27, 2012[Chart 7: Performance Products – Solid demand but belowexceptionally high level of Q1 2011]Sales in Performance Products were stable. Demand for severalproduct lines was lower than a year ago. In the prior year quarter,we benefitted from tight markets in several products. However, priceincreases and positive currency effects compensated for lowervolumes. As we could not fully pass on higher raw material costs,margins were softer and EBIT before special items declined. In Dispersions & Pigments, sales rose significantly driven by higher volumes and prices. Pigment sales were strong in North America, but softer in Asia and Europe. Due to higher costs of idle capacities and an unfavorable product mix effect, EBIT before special items fell short of the prior year. In Care Chemicals, sales decreased. The challenging competitive environment led to lower volumes overall. Specialties, however, continued to perform strongly. Since price increases could not fully offset higher raw material costs, EBIT before special items fell significantly. Sales in Nutrition & Health increased slightly due to continued good demand in nearly all businesses. Pharma showed lower volumes. Margins in vitamins were affected by higher raw material costs, which could not be passed on fully. EBIT before special items was down on softer margins. In Paper Chemicals, we made substantial progress in our restructuring efforts. We were able to increase sales although the market remained challenging. EBIT before special items improved benefitting from higher selling prices and fixed cost reductions.
    • Page 16BASF 1st Quarter 2012 Analyst Conference April 27, 2012
    • Page 17BASF 1st Quarter 2012 Analyst Conference April 27, 2012 Sales in Performance Chemicals slightly increased. To compensate for higher raw material costs, we raised prices. In a competitive market environment, volumes were below the previous year. As a consequence, EBIT before special items decreased.
    • Page 18BASF 1st Quarter 2012 Analyst Conference April 27, 2012
    • Page 19BASF 1st Quarter 2012 Analyst Conference April 27, 2012[Chart 8: Functional Solutions – Good performance driven byhigh demand from automotive]In our Functional Solutions segment, we slightly increased sales.Demand from the automotive industry – especially from premium carmanufacturers – improved further. Lower precious metal prices andvolumes, however, had an offsetting effect. EBIT before specialitems improved. Sales in Catalysts dropped slightly due to lower prices and volumes in precious metal trading, while we experienced high demand for mobile emissions and chemical catalysts. EBIT before special items increased due to the good volume growth in mobile emissions and chemical catalysts. Sales in Construction Chemicals grew by seven percent. Demand in Asia and South America remained favorable and North America showed a first positive development. Business in Europe was affected by the cold weather and continuing weakness in Southern Europe. We increased prices in all regions. EBIT before special items slightly increased in this seasonally weak quarter. In Coatings, sales were up due to the continued high demand in particular from premium car manufacturers as well as good business in Asia and North America. In decorative paints, sales declined due to lower volumes. We realized price increases across all regions and for all major product lines. EBIT before special items almost matched the good level of the previous year.
    • Page 20BASF 1st Quarter 2012 Analyst Conference April 27, 2012
    • Page 21BASF 1st Quarter 2012 Analyst Conference April 27, 2012[Chart 9: Agricultural Solutions – Excellent start into the year]Sales in Agricultural Solutions rose significantly. We were able togrow volumes in all indications and implemented a three percentprice increase, thus maintaining the positive pricing momentum fromthe previous two quarters. EBIT before special items was upsignificantly.The start of the new season in the Northern hemisphere was strong.In Europe, the recent launch of our new fungicide Xemium® isalready a success: Q1 sales in the three major fungicide markets –France, Germany and UK – confirm that Xemium has blockbusterpotential. Our crop protection business in the Eastern Europeangrowth markets also developed favorably.In North America, the early start of the season supported salesgrowth, especially in herbicides. Our plant health business alsodeveloped well.Sales in Asia came in slightly lower, as the increased demand inChina could not fully compensate for a weaker season in Japan.South American sales increased due to strong demand for Fipronil-based products for sugar cane applications.
    • Page 22BASF 1st Quarter 2012 Analyst Conference April 27, 2012
    • Page 23BASF 1st Quarter 2012 Analyst Conference April 27, 2012[Chart 10: Oil & Gas – Higher volumes and prices boostedsales and earnings]Sales in Oil & Gas increased strongly driven by Natural GasTrading as well as Exploration & Production. EBIT before specialitems rose sharply. Sales in Exploration & Production were up by 25 percent primarily driven by higher prices and volumes. With an average of 119 dollars per barrel Brent, the oil price was considerably above the level of the prior year’s quarter. Volumes also grew as a result of higher oil production in Libya and higher gas production in Russia and the Netherlands. As a result, earnings soared. In Natural Gas Trading, sales grew substantially given higher volumes and prices. Due to the cold temperatures in Europe in the first quarter, we were able to significantly expand trading volumes. Earnings strongly improved due to higher natural gas volumes as well as from operations of the new OPAL pipeline.Non-compensable taxes on oil production amounted to 451 millioneuros compared to 280 million euros in the first quarter of theprevious year.Net income was 416 million euros, an increase of 110 million eurosversus Q1 of last year.Let me give you a brief update on the situation in Libya. In Q1, weachieved to increase our production to roughly 70,000 barrels of oilper day. At this point, we cannot predict when we will be back at aproduction level of 100,000 barrels per day. The technical conditionof the infrastructure remains the bottleneck.
    • Page 24BASF 1st Quarter 2012 Analyst Conference April 27, 2012
    • Page 25BASF 1st Quarter 2012 Analyst Conference April 27, 2012[Chart 11: Review of ‘Other’]In ‘Other’, sales decreased by almost 30 percent due to thedeconsolidation of Styrenics following the formation of theStyrolution joint venture with Ineos.EBIT before special items declined to minus 330 million euros,mainly due to the missing contribution from Styrenics and a higherprovision for the long-term incentive program.Special items were positive due to a 645 million euros disposal gainfrom the sale of the fertilizer business.
    • Page 26BASF 1st Quarter 2012 Analyst Conference April 27, 2012
    • Page 27BASF 1st Quarter 2012 Analyst Conference April 27, 2012[Chart 12: Operating cash flow at €1.6 billion in Q1 ‘12]Cash provided by operating activities was 1.6 billion euros in thefirst quarter of this year. The rise in working capital of roughly 430million euros reflected increased raw material prices compared withone year ago.Cash from investing activities amounted to 159 million euros. Thisincludes a cash inflow of roughly 680 million euros primarilyresulting from the divestiture of our fertilizer activities. The prior yearfigure contained proceeds of almost 900 million euros from the K+Sdisposal. Capex rose by 173 million euros to 720 million euroscompared to the previous year’s quarter.Free cash flow came in at 0.9 billion euros compared to 1.7 billion inQ1 2011.From the beginning of this year, we were able to reduce net debt by1.5 billion euros to 9.4 billion euros.
    • Page 28BASF 1st Quarter 2012 Analyst Conference April 27, 2012
    • Page 29BASF 1st Quarter 2012 Analyst Conference April 27, 2012[Chart 13: Outlook 2012 confirmed]Our outlook for 2012 remains unchanged: We strive to increase volumes in 2012. We aim to exceed the record levels of sales and EBIT before special items achieved by BASF Group in 2011. And – as stated at our analyst conference at the end of February – in the first half of 2012, we will most likely not achieve the exceptionally high results of the comparable period in 2011. However, based on our assumption that the chemical demand will pick up in H2 we expect to outperform the second half year results of 2011. Finally, we strive to earn a high premium on our cost of capital again in 2012.
    • Page 30BASF 1st Quarter 2012 Analyst Conference April 27, 2012
    • Page 31BASF 1st Quarter 2012 Analyst Conference April 27, 2012[Chart 14: Delivering attractive shareholder returns]Please understand that our earnings call has to be rather shorttoday due to our AGM this morning. Two of the key topics there willbe the approvals for  a dividend of 2.50 euros per share, which is an increase of thirty euro cents over prior year  and a new share buy-back program for up to ten percent of BASF’s shares over the next five year period.And with that on to your questions.