BASF Capital Market Story, Q2/2010

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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.

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BASF Capital Market Story, Q2/2010

  1. 1. Profitable growth loves ups and downs BASF Capital Market Story September 2010 1
  2. 2. Continued sales and earnings growth Sales (billion €) EBIT before special items (billion €) 20 2.5 2.2 15.5 16.2 2.0 16 2.0 12.5 12.8 13.2 1.5 12 1.5 1.2 1.1 8 1.0 4 0.5 0 0.0 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 2009 2010 2009 2010 Sales development Period Volumes Prices Portfolio Currencies Q2’10 vs. Q2’09 14% 9% 1% 6% Q2’10 vs. Q1’10 (2)%* 2% 0% 5% * +4% volume growth w/o Oil & Gas BASF Capital Market Story September 2010 2
  3. 3. Continuous strong cash flow Cash Flow (billion €) 7 6 5 4 3 2.7 1.8 2 1 0 2001* 2002* 2003* 2004 2005** 2006 2007 2008 2009 2010 -1 1HY Cash provided by operating activities * According to German GAAP ** Cash provided by operating activities less capex (in 2005 before CTA) Free cash flow** BASF Capital Market Story September 2010 3
  4. 4. Attractive shareholder returns Dividend per share (€) Key facts Average annual dividend increase of 12.8% 1.95 1.95 2.0 2.0 (2001-2009) 1.70 1.50 Dividend yield above 3% in any 1.5 1.5 given year since 2001 1.00 Attractive dividend yield of 1.0 1.0 0.85 3.9% in 2009* 0.65 0.70 0.70 0.5 0.5 Consistent, long-term value Jan 2001 – August 2010: Average annual performance 0.0 of BASF share** of 10% 2001 2002 2003 2004 2005 2006 2007 2008 2009 Yield* 3.1% 3.9% 3.1% 3.2% 3.1% 4.1% 3.8% 7.0% 3.9% * Dividend yield based on share price at year-end ** With dividends reinvested BASF Capital Market Story September 2010 4
  5. 5. 1 | Focus on operational excellence Costs 2 | Well positioned for profitable growth Earnings 3 | Outlook Earnings 5
  6. 6. Unique ‘Verbund’ concept Cost savings of >€500 million p.a. in Ludwigshafen alone BASF site Ludwigshafen, Germany Verbund Concept Vertical and horizontal integration of production plants, energy and waste flows, logistics and site infrastructure Know-how Verbund Energy Verbund and combined heat and power plants lead to - Savings of ∼2.6 million tons oil equivalent p.a. - Reduction of CO2-emissions of ~6 million tons p.a. 6BASF Capital Market Story September 2010 6
  7. 7. Tenacious fixed cost management BASF Group development 2001-2009 Key facts Since 2001 sales and earnings Index Trend increased significantly 250 Fixed costs represent around 30% of total costs 200 Ciba synergies and NEXT will drive fixed costs down 150 Synergies from Ciba integration 100 2010E: €350 million run-rate 50 2001 2003 2005 2007 2009 Fixed costs indexed Sales indexed EBITDA indexed BASF Capital Market Story September 2010 7
  8. 8. Sustainable improvement of cost base Annual earnings contribution (million €) New EXcellence Targets (NEXT) > 500 individual projects to simplify processes, structures 2,500 and production sites in all regions 2,000 Project timeline: 1,500 2008-2011 1,000 Annual earnings contribution of €600 million in 2010 expected 500 Targeted earnings contribution 0 by 2012: 2003 2005 2007 2009 2010E 2012 ≥€1 billion Completed restructuring programs New efficiency program NEXT BASF Capital Market Story September 2010 8
  9. 9. 1 | Focus on operational excellence Costs 2 | Well positioned for profitable growth Earnings 3 | Outlook Earnings 9
  10. 10. Well positioned for profitable growth Leading positions Ongoing Excellent in growth industries portfolio innovation and emerging optimization platform markets Translate megatrends Continue with active Product and system into business growth portfolio management innovation as growth Continue expansion in Drive portfolio closer drivers Asia to customers Strong pipeline of innovations We strive to outperform global chemical production Growth target: growth by at least 2 percentage points p.a. BASF Capital Market Story September 2010 10
  11. 11. Leading positions in growth industries and emerging markets BASF Capital Market Story September 2010 11
  12. 12. Ambitious targets for 2020 Regional sales targets 2020 Profitable growth to more than €90 billion in sales by 2020 Europe, including Outgrow global chemical North America Africa, Middle East production growth by p.a . 2 percentage points p.a. 5-6% 4-5 % €17 Earn premium on cost of €9 bn bn* €49 bn** capital in all regions €30 2009 2020 bn Asia Pacific . p.a % 2009 2020 7-8 €20 South America bn €9bn . a. ~8% p 2009 2020 €6 bn €3 bn 2009 2020 * corresponds to sales of €17 billion in 2020, assuming $/€ of 1.40 ** oil price assumption of $75/bbl until 2013, thereafter increase to ~$100/bbl up to 2020 BASF Capital Market Story September 2010 12
  13. 13. Growth in emerging markets Outgrowing Asian Pacific chemical market by 2 percentage points p.a. China BASF expects to double sales to €20 billion in Asia S. Korea Japan Pacific by 2020: Pakistan Strengthen market focus Bangladesh Taiwan through industry and customer Hong Kong target groups India Thailand Vietnam Develop and market Malaysia innovations in Asia for Asia Singapore Invest in Asia to generate 70% Indonesia of sales through local production Regional headquarters – €2 billion investments Verbund site planned for 2009-2013 Australia Chemical production site * Asia Pacific service center R&D center * * Some sites not shown due to scale New Zealand BASF Capital Market Story September 2010 13
  14. 14. Ongoing portfolio optimization BASF Capital Market Story September 2010 14
  15. 15. Pro-active portfolio management Selected transactions Major acquisitions 1999 to date Major divestitures Crop protection Pharmaceuticals Superabsorbents BASF Fertilizers Oil & Gas (Revus) core Refineries Engineering Plastics businesses Fibers Electronic Chemicals Printing systems Custom synthesis Polyolefins (Basell) Catalysts (Engelhard) Construction Chem. Polystyrene Powerful North America Water-based resins partnerships Agchem generics Pigments (Ciba) Gazprom Premix Plastic additives (Ciba) Monsanto Cognis Petronas Styrenics (acquisition announced) (to be divested) Shell 16 billion Euro* Sinopec 10 billion Euro** (Sales) Total (Sales) * not including Cognis ** not including Styrenics business BASF Capital Market Story September 2010 15
  16. 16. Active portfolio management pays off EBITDA by activity (in billion €, without Other) Our diversified portfolio is a key strength 10 Recent acquisitions reshaped portfolio 8 - Closer to customers 6 - Innovation-driven - Solution provider 4 BASF Group EBITDA 2 considerably higher in 2009 0 compared to last trough 2001, supported by all activities 2001* 2003* 2005 2007** 2009 Chemical activities * Based on German GAAP Agricultural Solutions ** As of 2007 according to new segment structure (excl. Styrenics and corporate costs) Oil & Gas, including non-deductible oil taxes BASF Capital Market Story September 2010 16
  17. 17. Cognis A global leader in value-added products Care Chemicals Nutrition & Health Functional Products Products and formulations for Products, formulations and Specific solutions based on the personal and home care concepts for functional food, renewable resources for markets beverage, dietary supplements mining, synthetic lubricants, and pharma coatings and crop protection industries Sales 2009: €1,457 million Sales 2009: €325 million Sales 2009: €786 million EBITDA margin 2009: 13.2% EBITDA margin 2009: 13.2% EBITDA margin 2009: 11.2% BASF Capital Market Story September 2010 17
  18. 18. BASF + Cognis Clear targets Integration into Performance Products segment with the following objectives Growing >2% points faster than the relevant market Achieve 20% EBITDA margin in the Performance Products segment by 2012 Acquisition accretive as of 2012 Integration costs of €200-250 million until end of 2012 Cost synergies of at least 5% of 2009 net sales fully achieved by 2013 BASF Capital Market Story September 2010 18
  19. 19. Excellent innovation platform BASF Capital Market Story September 2010 19
  20. 20. Innovation will spur further growth Total R&D expenditures 2009 (billion €) Strong commitment to R&D R&D investments: 3.5% of sales* Chemicals Corporate Research 9% 23% More than 9,300 employees involved in R&D Plastics 9% Around 1,900 partnerships with 24% Other €1.4 universities, startup companies Performance 2% and industry partners Products billion 1% Five Growth Clusters: 20% - Nanotechnology Functional Agricultural - Energy Management Solutions Solutions - Plant Biotechnology 12% 25% - Industrial Biotechnology - Raw Material Change Budget for Growth Clusters (2009-2011): up to €1 billion R&D spending in 2010 planned on similar level * Excluding Oil & Gas BASF Capital Market Story September 2010 20
  21. 21. Strong innovation pipeline New product New technology New product Kaurit® Light CypoSol® Natugrain® TS Light-weight wood-based Contact free and eco-friendly Feed additive for cost-efficient panels printing of solar cells with and more sustainable animal 30% less weight than metallization inks nutrition ("more from less") conventional chipboard while Lead-free and solvent free An enzyme used in poultry feed offering the same strength formulations improving energy utilization Potential to revolutionize Increased process yield due White biotechnology based furniture market to reduction of cracking rates production process BASF Capital Market Story September 2010 21
  22. 22. Innovation pipeline worth €19 billion Net present value by segments (billion €) R&D contributes significantly to earnings growth 20 €19 billion Net Present Value (NPV) 4% Chemicals represents discounted earnings 7% Plastics after tax from R&D projects 15 17% Performance Products after deduction of R&D 9% Functional Solutions expenditures 10 Major contribution from Agricultural Solutions and 45% Agricultural Solutions Performance Products 5 History of high success rate 3% Oil & Gas due to consequent R&D 15% Corporate Research controlling and Phasegate 0 3.5 4.5 process, including life cycle management * New or improved products or new applications, max. 5 years on market, including Growth Clusters BASF Capital Market Story September 2010 22
  23. 23. 1 | Focus on operational excellence Costs 2 | Well positioned for profitable growth Earnings 3 | Outlook Earnings 23
  24. 24. Outlook 2010 Expectations for global economy Previous Forecast New Forecast GDP 2.7% 3% - 4% Chemicals (excl. Pharma) 5.3% 7% - 8% Industrial production 4.9% 7% - 8% US$ / EURO 1.40 1.30 Oil price (US$ / bbl) 75 75 BASF Capital Market Story September 2010 24
  25. 25. Outlook Short-term targets 2010 We expect that in Q3 BASF will again perform significantly better then expected. We expect sales to outpace global chemical production growth. We expect to substantially increase sales and to significantly improve EBIT before special items. We expect to earn a sizable premium on our cost of capital. We expect to increase the dividend. Medium-term targets We aim to grow sales on average by two percentage points per year above chemical market growth. We strive for an EBITDA margin of 18% until 2012. Dividend policy We aim to continuously increase the annual dividend, or at least maintain it at the level of the previous year. BASF Capital Market Story September 2010 25
  26. 26. Forward-looking statements This presentation includes 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. This presentation contains a number of forward-looking statements including, 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 with respect to future events and financial performance. Actual financial performance of the entities described herein 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. Forward-looking statements represent estimates and assumptions only as of the date that they were made. 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 September 2010 26
  27. 27. BASF Capital Market Story September 2010 27
  28. 28. BASF today – a well-balanced portfolio Total sales 2009: €50.7 billion Percentage of sales 2009 Chemicals Plastics* Performance Functional Agricultural Oil & Gas Products Solutions Solutions 15% 14% 18% 14% 7% 22% Inorganics Performance Dispersions & Catalysts Crop Exploration & Polymers Pigments Protection Production and Petrochemicals Polyurethanes Care Construction Natural Gas Chemicals Chemicals Trading Intermediates Paper Coatings Chemicals Performance Chemicals * Styrenics reported under ‘Other’ BASF Capital Market Story September 2010 28
  29. 29. Delivering consistent, long-term value Long-term performance January 2001 – August 2010 Committed to (average annual performance with dividends reinvested) shareholder value BASF total return well above benchmark levels 10% BASF Average annual dividend increase of 12.8% (2001-2009) -3.5% Euro Stoxx 50 Attractive dividend yield of 3.9% in 2009, based on share -0.9% price at year-end DAX 30 Aim to increase dividend each year, or at least maintain it at 5.1% MSCI World Chemicals the previous year‘s level -5 0 5 10 15 BASF Capital Market Story September 2010 29
  30. 30. Chemicals Strong demand and better margins boost earnings Q2’10 segment sales (million €) vs. Q1’10 EBIT before special items (million €) Intermediates Inorganics 687 648 325 600 +11% +15% 461 €2,970 400 364 315 258 +15% 200 Petrochemicals 1,997 0 +16% Q2 Q3 Q4 Q1 Q2 2009 2010 Sales development Period Volumes Prices Portfolio Currencies Q2’10 vs. Q2’09 21% 36% 0% 7% Q2’10 vs. Q1’10 2% 8% 0% 5% BASF Capital Market Story September 2010 30
  31. 31. Plastics Positive volume momentum Q2’10 segment sales (million €) vs. Q1’10 EBIT before special items (million €) Polyurethanes 400 349 1,400 +15% 279 251 216 €2,584 200 +18% 138 Performance Polymers 1,184 0 +21% Q2 Q3 Q4 Q1 Q2 2009 2010 Sales development Period Volumes Prices Portfolio Currencies Q2’10 vs. Q2’09 27% 14% 0% 7% Q2’10 vs. Q1’10 8% 4% 0% 6% BASF Capital Market Story September 2010 31
  32. 32. Performance Products Earnings further up, additional synergies realized Q2’10 segment sales (million €) vs. Q1’10 EBIT before special items (million €) Paper Chemicals Performance Chemicals 500 471 440 806 419 +5% +11% 400 286 €3,151 300 209 +10% 200 Dispersions & 100 80 Care Chemicals Pigments 1,048 857 0 +4% +19% Q2 Q3 Q4 Q1 Q2 2009 2010 Sales development Period Volumes Prices Portfolio Currencies Q2’10 vs. Q2’09 16% 4% 4% 5% Q2’10 vs. Q1’10 4% 2% 0% 4% BASF Capital Market Story September 2010 32
  33. 33. Functional Solutions Demand from automotive industry recovers Q2’10 segment sales (million €) vs. Q1’10 EBIT before special items (million €) Catalysts Construction Chemicals 165 1,225 576 150 +15% +33% 111 106 101 €2,453 100 +17% 48 50 Coatings 652 0 +10% Q2 Q3 Q4 Q1 Q2 2009 2010 Sales development Period Volumes Prices Portfolio Currencies Q2’10 vs. Q2’09 19% 11% 1% 9% Q2’10 vs. Q1’10 8% 2% 1% 6% BASF Capital Market Story September 2010 33
  34. 34. Agricultural Solutions Strong herbicide but weaker fungicide business 1HY’10 segment sales (million €) vs. 1HY’09 EBIT before special items (million €) 2,500 2,320 +2% 2,356 800 711 -10% 641 2,000 600 1,500 400 1,000 200 500 0 0 1HY 1HY 1HY 1HY 2009 2010 2009 2010 Sales development Period Volumes Prices Portfolio Currencies Q2’10 vs. Q2’09 1% (4)% 0% 6% Q2’10 vs. Q1’10 2% (1)% 0% 5% 1HY’10 vs. 1HY’09 1% (2)% 0% 3% BASF Capital Market Story September 2010 34
  35. 35. Oil & Gas Higher gas trading volumes positively impact sales Q2’10 segment sales (million €) vs. Q2’09 EBIT before special items / Net income (million €) Exploration & 800 Production 854 600 506 515 (10)% 37 €2,374 95 400 (3)% Natural Gas 200 469 420 Trading 181 148 1,520 0 +1% Q2 Q2 2009 2010 EBIT bSI Natural Gas Trading Net income Sales development EBIT bSI Exploration & Production Period Volumes Prices/Currencies Portfolio Q2’10 vs. Q2’09 4% (7)% 0% Q2’10 vs. Q1’10 (27)% 1% 0% BASF Capital Market Story September 2010 35
  36. 36. Acquisition of Cognis Transaction highlights Purchase price equity: €700 million LTM*-EBITDA, reported: €386 million LTM*-EBITDA, adjusted: €422 million (before special items) Enterprise value: €3.1billion – Represents a multiple of 7.3 x LTM*-EBITDA adjusted 100% cash consideration, no financing conditions Expected closing in November 2010 BASF Capital Market Story September 2010 *LTM = last twelve months 36
  37. 37. Ciba integration: synergies exceed targets Structural integration of Ciba completed Expected synergy run rate (million €) Impact of Ciba acquisition Integration costs 500 >450 2009: €785 million 450 Synergy 2010: ~€200 million 400 Target 2011/2012: ~€100 million 350 Net reduction of positions 300 - Target: 3,800 200 130 Ciba non-production sites 100 - To be consolidated: 58 0 23 Ciba production sites 2009 2010 2011/2012 Steady under strategic review State - Planned exit: 14* Synergy run rate Effective in 2009 * On two sites exit of production activities only BASF Capital Market Story September 2010 37

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