Basf Se · XETR:BAS

Basf — Investor Day (September 2015)

58 slides from Basf's investor day presentation, Sep 28, 2015

  1. Slide 1: We create chemistry for a sustainable future

    Kurt Bock Chairman of the Board of Executive Directors Hans-Ulrich Engel Chief Financial Officer BASF Investor Day Ludwigshafen September 28, 2015 150 years We create chemistry for a sustainable future

  2. Slide 2: Cautionary note regarding forward-looking statements

    150 years 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 m

  3. Slide 3: 'We create chemistry for a sustainable future' entering the 5th year

    150 years ‘We create chemistry for a sustainable future’ entering the 5th year What did we say in 2011? The chemical market will continue to grow at about 5% p.a. fueled by  a growing middle class in emerging markets  demand for innovations for higher living standards and more sustainable solution

  4. Slide 4: What did we not mention in 2011?

    150 years ‘We create chemistry for a sustainable future’ entering the 5th year What did we not mention in 2011? U.S. shale gas was seen as an opportunity, but not as an industry game changer. Coal in China We did not foresee the government’s move to incentivize coal over gas for chemical production.

  5. Slide 5: What do we want to achieve today and tomorrow?

    150 years What do we want to achieve today and tomorrow?  Enable you to deep dive into our business portfolio and introduce our business leaders to you  Demonstrate how we drive value  Highlight our approach to innovation and showcase specific examples  Provide a medium-term outlook BASF Investo

  6. Slide 6: Review of chemical industry's landscape

    150 years ► Review of chemical industry’s landscape ► BASF growth and earnings review ► The way forward: Our priorities BASF Investor Day 2015 – Keynote Speech 6

  7. Slide 7: Fundamental trends intact; environment for chemical industry more challenging

    150 years Fundamental trends intact; environment for chemical industry more challenging Market dynamics have changed CAGR 2010 - 2015 2011 view today’s view since 2011  Low growth in Europe, Japan and the U.S. Global GDP 3.4% 2.6%  Strong growth stimulus in China with spillover effects to other em

  8. Slide 8: Lower predictability and higher volatility in the economic environment

    150 years Lower predictability and higher volatility in the economic environment Exchange rates reflect geopolitical situations Highly volatile oil and natural gas prices (index 2010 = 100) 160 140 120 12 100 130 80 60 7 100 40 20 70 2 0 Jan-10 Dez-10 Nov-11 Oct-12 Sep-13 Aug-14 Jul-15 Jan-08 Jan-09

  9. Slide 9: Chemicals remains a growth industry

    150 years Chemicals remains a growth industry Agriculture Health & Energy & Construction Consumer Transportation Electrical & nutrition resources & housing goods Electronics Chemistry as enabler for current and future needs >9bn 70% 50% 30% …people …of the world …more primary energy …more food neede

  10. Slide 10: Emerging markets driving chemical production growth above global GDP

    150 years Emerging markets driving chemical production growth above global GDP Real chemical production excl. pharma Global GDP (in billion USD) Global GDP CAGR: Global GDP CAGR: 3.1% CAGR: 3.0% 2.6% CAGR* CAGR* 3.8% CAGR* 3.9% 5.000 3.9% +2% +3% 4.000 +2% +2% +2% +1% 3.000 +1% +3% +3% +4% +3% +0% 2

  11. Slide 11: China and India still have a huge economic catch-up potential

    150 years China and India still have a huge economic catch-up potential GDP per capita, 2014 Passenger cars, 2014 (in USD thousands) (per 1,000 driving population) 918 54 618 47 86 27 USA Germany China India Refrigerator ownership, 2013* (percent of households) 99 100 98 67 44 7 9 2 USA Germany Chin

  12. Slide 12: R&D efforts in chemicals are increasing, strongly driven by China

    150 years R&D efforts in chemicals are increasing, strongly driven by China R&D spending* in chemicals excl. pharma Number of chemical patents (in billion €) (in 1,000) 40 41 40 600 40 35 8 9 9 32 500 6 30 30 1 29 28 4 1 27 27 27 25 25 26 26 400 1 3 2 3 1 2 2 1 20 300 33 32 31 30 28 30 28 200 26 25

  13. Slide 13: Innovations continue to drive growth

    150 years Innovations continue to drive growth Lightweight composites help to reduce weight in automobiles (Composite market potential) Complete new vehicle concepts Whole modules and assembly-systems Structural parts Replacement of Current models hang-on parts 2010 2015 2020 2025 2030 143g* 120g* 9

  14. Slide 14: Raw material specifics drive regional value chains

    150 years Raw material specifics drive regional value chains 5-year average 2010-2014 (heating value in €/Gigajoule) 25 Coal Natural gas Naphtha Sugar 20 15 10 5 0 USA Europe Western China Brazil  Shale gas driven  No feedstock cost  Evaluation of coal-  Renewables still projects to supply advan

  15. Slide 15: Overcapacities in Asia will be absorbed over time

    150 years Overcapacities in Asia will be absorbed over time Overcapacities in Asia will persist for some years (Industry capacities in kt, operating rate in percent) Capacity 2015 Est. operating rate 5.000 ~60% ~75% ~75% 2.500 ~70% ~70% 0 Acrylic acid Butanediol Caprolactam MDI TDI BASF benefits fro

  16. Slide 16: Political environment more challenging, but with opportunities for innovation

    150 years Political environment more challenging, but with opportunities for innovation Climate change / Greenhouse gas reduction  G7 call for “Decarbonization” by 2100  Europe: Ambitious reduction of 40% by 2030 (base 1990)  USA: Reduction target of 26-28% by 2025 (base 2005)  China: Announced

  17. Slide 17: BASF growth and earnings review

    150 years ► Review of chemical industry’s landscape ► BASF growth and earnings review ► The way forward: Our priorities BASF Investor Day 2015 – Keynote Speech 17

  18. Slide 18: Components of growth

    150 years Components of growth Sales* analysis 2010 – 2014 (in billion €) CAGR 5.7% 80 4,9 -1,7 2,8 8,7 74,3 FX M&A 60 Prices 59,6 Volumes 40 20 2010 2014 Sales CAGR Net sales 2010 Volumes Prices FX M&A 2010 - 2014 BASF Group +3.2 51.4 +3.9 -1.6 +2.2 +3.6% w/o Oil & Gas (+1.5% CAGR) +5.5 Oil & Gas 8

  19. Slide 19: Portfolio development towards more market-driven and innovative businesses

    150 years Portfolio development towards more market-driven and innovative businesses Acquisitions BASF Divestitures core business  Functional crop care  Styrenics Selected transactions  Personal care & food 2010 − 2014  Fertilizers  Omega-3 fatty acids  Construction equipment,  Enzymes floori

  20. Slide 20: Capital expenditures peaked in 2014, reduction in coming years planned

    150 years Capital expenditures peaked in 2014, reduction in coming years planned Investments* 2010 – FC 2015 (in billion €) 6 5 4 3 2 1 0 2010 2011 2012 2013 2014 FC 2015 BASF w/o Oil & Gas Oil & Gas Depreciation & Amortization * Investments in fixed assets, according to financial reporting (excl. n

  21. Slide 21: Innovations drive sales

    150 years Innovations drive sales Sales from innovations* (in billion €) 10,0 10 8 7,3 6 4,8 4 2,6 2 1,0 0 2011 2012 2013 2014 2015E BASF Investor Day 2015 – Keynote Speech * Launched since 2011 21

  22. Slide 22: Steady earnings growth

    150 years Steady earnings growth EBIT and EBITDA* (in billion €, 2001 - 2014) CAGR EBITDA CAGR 12 EBIT 11,2 8.9 % 11,0 19.8 % 10,4 9,9 10,0 10 8,9 8,4 7,7 8 7,2 8,0 7,0 7,6 6,5 6,7 7,2 6,7 5,9 6 6,0 4,7 5,5 4,6 4,5 4,8 4,6 4 3,7 4,0 2,8 2 2,2 2,2 0,7 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 20

  23. Slide 23: EBITDA peak performance of 2011 again achieved in 2014

    150 years EBITDA peak performance of 2011 again achieved in 2014 EBIT and EBITDA* (in billion €, 2010-2014) CAGR EBITDA CAGR EBIT 2.8 % 3.3 % 12 11.2 11.0 10.4 9.9 10.0 10 8 8.0 7.6 7.2 5.9 6 6.7 6.7 4 4.0 2 0 2010 2011 2012 2013 2014 H1 2015 EBITDA EBIT BASF Investor Day 2015 – Keynote Speech * 201

  24. Slide 24: Strong track record in operational excellence

    150 years Strong track record in operational excellence BASF Group* 2001–2014 (Index; CAGR 2001–2014) 350 CAGR 300 EBITDA 9% EBITDA 250 CAGR Sales Sales 200 7% 150 CAGR Fixed Costs 3% Fixed Costs 100 50 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 BASF Investor Day 2015 – Ke

  25. Slide 25: Best-in-class asset profitability – Capital turnover improved by 2% p.a.

    150 years Best-in-class asset profitability – Capital turnover improved by 2% p.a.* EBITDA on total assets (in %) 2001 2010 25% BASF 20% SABIC AkzoNobel Lanxess 15% DuPont DSM Bayer DSM SABIC Bayer BASF Evonik 10% DuPont Dow Celanese AkzoNobel Dow 5% Degussa Celanese 0% 0 20 40 60 80 0 20 40 60 80 S

  26. Slide 26: Capital turnover slightly down due to margin decline and growth investments

    150 years Capital turnover slightly down due to margin decline and growth investments EBITDA on total assets (in %) 2010 2014 25% BASF 20% SABIC BASF SABIC Celanese DuPont Lanxess 15% DuPont Bayer Dow DSM Evonik Evonik 10% DSM Dow AkzoNobel Bayer Celanese AkzoNobel Lanxess 5% 0% 0 20 40 60 80 0 20 4

  27. Slide 27: Significant premium despite higher investments

    150 years Significant premium despite higher investments EBIT* after cost of capital (in billion €) 10 EBIT* Cost of capital 8 6 4 2 0 2010 2011 2012 2013 2014 ROA 12.5% 15.5% 11.0% 11.5% 11.7% BASF Investor Day 2015 – Keynote Speech * EBIT BASF Group without activities not assigned to segments and

  28. Slide 28: Free cash flow to recover after capex peaked

    150 years Free cash flow to recover after capex peaked Cash flow (in billion €) 9 8,1 8 7,1 7,0 7 6,5 6,6 6 5,1 5 3,9 3,7 4 3,2 3 2,6 2,3 2 1,7 1 0 2010 2011 2012 2013 2014 H1 2015 Operating cash flow Free cash flow BASF Investor Day 2015 – Keynote Speech 28

  29. Slide 29: BASF maintains solid A ratings with Standard & Poor's and Moody's

    150 years BASF maintains solid A ratings with Standard & Poor’s and Moody’s Net debt / EBITDA, as reported 2,0 1,5 1,0 0,5 0,0 2010 2011 2012 2013 2014 H1* 2015 BASF Investor Day 2015 – Keynote Speech * Last 12 months 29

  30. Slide 30: Delivering consistent, long-term shareholder value

    150 years Delivering consistent, long-term shareholder value Dividend per share Progressive dividend policy (in €)  We want to increase or at least maintain our dividend 3,00 Key facts  Delivered on progressive 2,80 dividend policy 2,80 2,70  Supported by strong cash 2,60 flow generation 2,60 2,5

  31. Slide 31: Capital allocation: Source and use of funds – 2003-2014

    150 years Capital allocation: Source and use of funds – 2003-2014 Source and use of funds (in billion €) total 41.5 40 9% 0% 25% total 8% total 30.9 28.5 30 6% 25% 8% 6% 7% 33% 14% 1% 4% 14% Financial 20% Dividend 9% 11% 20 investments* 30% 43% 3% Acquisitions Cash and financing 0% 3% 17% Working ca

  32. Slide 32: The way forward: Our priorities

    150 years ► Review of chemical industry’s landscape ► BASF growth and earnings review ► The way forward: Our priorities BASF Investor Day 2015 – Keynote Speech 32

  33. Slide 33: Fundamental trends intact; chemical production growing faster than GDP

    150 years Fundamental trends intact; chemical production growing faster than GDP CAGR 2015 - 2020 2011 view today’s view Global GDP 3.2% 3.0% Industrial production 3.7% 3.5% Chemical production (excl. pharma) 4.0% 3.9% ► thereof growth contribution of emerging markets 89% 82% BASF Investor Day 2015

  34. Slide 34: Fundamental growth trends intact; but increased volatility

    150 years Fundamental growth trends intact; but increased volatility  Emerging markets with lower growth dynamics  Potential overcapacities due to shale gas induced US-investments  Oil price has to go up: when, how much? This will require constant adaptation:  Balancing risks through diversified

  35. Slide 35: Our strategic principles

    150 years Our strategic principles We add value We drive as one company. sustainable solutions. We innovate to make We form our customers more the best team. successful. BASF Investor Day 2015 – Keynote Speech 35

  36. Slide 36: The way forward: Our priorities

    150 years The way forward: Our priorities  Grow sales and earnings faster than global chemical production, driven by – Continued focus on innovations – Capital expenditures – Acquisitions – Operational excellence and Verbund advantages  Continue to prune our portfolio  Maintain industry-leading p

  37. Slide 37: Verbund remains the cornerstone of BASF

    150 years Verbund remains the cornerstone of BASF Verbund: the basis Verbund: a different perspective Example: Copper-Chabazite catalysts Verbund generates Industry-leading technology for NOx control >€1 billion p.a. global cost savings & Intermediates Catalysts supports sustainability N + HO- Cost

  38. Slide 38: Managing volatility: BASF almost perfectly hedged on hydrocarbon price changes

    150 years Managing volatility: BASF almost perfectly hedged on hydrocarbon price changes BASF production and consumption of oil and gas (in million boe, 2014) 136 Oil and 31 >100 liquids Naphtha and other oil based raw materials Natural 105 gas Natural gas for energy and as raw material Production o

  39. Slide 39: Strategic lever: Continuous portfolio development

    150 years Strategic lever: Continuous portfolio development Specialties and Differentiated solutions commodities  Attractive markets  Attractive markets  Differentiation by customer  Differentiation by process proximity and innovations technologies and integration Growth fields Innovation target

  40. Slide 40: Strategic lever: Acquisitions

    150 years Strategic lever: Acquisitions We want to acquire businesses which …  Generate profitable growth  Provide a minimum return on above the industry average investment of 8% p.a. after tax  Are innovation-driven  Are EPS accretive by year three at the latest  Offer a special value proposit

  41. Slide 41: Strategic lever: Capital expenditures – our philosophy

    150 years Strategic lever: Capital expenditures – our philosophy Differentiated commodities  With proprietary technology and/or Verbund advantages  Focus on: – emerging markets – backward integration in the US – upgrading our asset base in Europe Specialties and solutions  Incremental investments

  42. Slide 42: Implementation of increased capex program will drive profitable growth

    150 years Implementation of increased capex program will drive profitable growth Selected major capex projects Capex spending Cracker expansion MDI Aroma chemicals TDI complex Amines Polyamides Surfactants Butanediol / PolyTHF®  Temporarily increased SAP Precious metal Acrylic acid & SAP Neopentylg

  43. Slide 43: Strategic lever: Innovations – our philosophy

    150 years Strategic lever: Innovations – our philosophy  Allow for creativity  Balance incremental und disruptive innovations  Manage innovation pipeline efficiently on all levels  Build on our global R&D Verbund  Leverage external collaborations even more  Align R&D activities with business m

  44. Slide 44: Strategic lever: Innovations Industry 4.0

    150 years Strategic lever: Innovations Industry 4.0 Computer performance and speed of information sufficient to impact physical world World of information and services Physical world / Industry 4.0 Media Logistics Hotel Healthcare Electrical, Automotive, Farming Consumer Utilities and Energy Retail

  45. Slide 45: 150 years

    150 years BASF Investor Day 2015 – Keynote Speech 45

  46. Slide 46: Industry 4.0 will benefit BASF in the future

    150 years Strategic lever: Innovations Industry 4.0 will benefit BASF in the future Applications along BASF’s value chain Digital innovation Verbund Predictive Digital ecosystem optimization maintenance business models Sourcing Manufacturing Marketing & Sales R&D Supply Chain ERP* integration with s

  47. Slide 47: Strategic lever: Innovations

    150 years Strategic lever: Innovations Innovation types Developing solutions for many aspects of life (Innovation examples to be presented tomorrow) Processes Innovation types Solutions Products BASF Investor Day 2015 – Keynote Speech 47

  48. Slide 48: Sustainability and transparency are key to BASF's strategy

    150 years Sustainability and transparency are key to BASF’s strategy Clear sustainability targets, e.g. Public recognition for sustainability and transparency** Status Target 2015 2020 Energy & climate protection  Greenhouse gases* -34% -40% Global ESG Leaders Indices Safety, security and health 

  49. Slide 49: Sustainability goals along the value chain

    150 years Strategic lever: Sustainability Sustainability goals along the value chain Suppliers BASF Customers Energy & climate protection Evaluation of 70% of  Greenhouse gas reduction* of 40% by 2020 (base 2002) Increase the share  Energy efficiency: Introduction of certified energy of Accelerato

  50. Slide 50: Sustainable Solution Steering

    150 years Strategic lever: Sustainability Sustainable Solution Steering  Novel methodology to screen Substantial sustainability contribution in the value chain and steer our portfolio* 23%  23% Accelerators: – outgrow their markets Meets basic sustainability by 2-10% Sustainable standards in the m

  51. Slide 51: Operational excellence DrivE with ~€1 bn earnings contribution

    150 years Strategic lever: Operational excellence DrivE with ~€1 bn earnings contribution Annual earnings contribution DrivE program (in million €)  Targeted annual earnings 5,000 contribution of €1 billion by end of 2018 4,000  Optimization of processes and structures in all regions, e.g. 3,000 –

  52. Slide 52: Strategic direction chemicals business: Profitable growth

    150 years Strategic direction chemicals business*: Profitable growth  Utilize and expand unique Verbund integration  Flexible business models  Strong operational excellence  Specialties and solutions: – Focus on fast-moving, customer-facing end markets – Differentiate through knowledge-based off

  53. Slide 53: Strategic direction Agricultural Solutions: Feeding a growing population

    150 years Strategic direction Agricultural Solutions: Feeding a growing population  Continue profitable growth in all indications  Differentiate through strong innovation pipeline  Continue to expand our portfolio to Innovations beyond Crop Protection  Net sales target of €6 billion in 2015 and

  54. Slide 54: Strategic direction Oil & Gas: Selective growth in E&P

    150 years Strategic direction Oil & Gas: Selective growth in E&P  Continue to generate industry-leading profit margins  Continue to provide hydrocarbon hedge  Strengthen E&P activities in core regions and activities with limited exploration risk  Focus on – key partnerships – operational excelle

  55. Slide 55: Profitability of BASF will grow faster than global chemical production

    150 years Profitability of BASF will grow faster than global chemical production Financial targets for next years  Sales growth* Slightly faster than the global chemical production  EBITDA growth Well above global chemical production  Deliver attractive returns Earn a significant premium on cost

  56. Slide 56: The way forward: Our priorities

    150 years The way forward: Our priorities  Grow sales and earnings faster than global chemical production, driven by – Continued focus on innovations (R&D spending about 3% of sales*) – Capital expenditures (slightly above depreciation levels) – Acquisitions – Operational excellence and Verbund adv

  57. Slide 57: 150 years of excellence: numbers to take home

    150 years 5 numbers to take home >€15 billion free cash flow* >€18 billion invested into new or expanded capacities* ~€12 billion dividends paid* ~€9 billion investments into R&D* 150 years of excellence BASF Investor Day 2015 – Keynote Speech * Aggregated figures 2010 - 2014 57 58

  58. Slide 58: 150 years

    150 years 150 years BASF Investor Day 2015 – Keynote Speech 58

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