Basf Se · XETR:BAS
Basf — Investor Day (September 2024)
63 slides from Basf's investor day presentation, Sep 26, 2024
Slide 1: Strategy keynote
Strategy keynote Dr. Markus Kamieth, Chief Executive Officer Dr. Dirk Elvermann, Chief Financial Officer Dr. Katja Scharpwinkel, Member of the Board of Executive Directors BASF Capital Markets Day, September 26/27, 2024
Slide 2: Cautionary note regarding forward-looking statements
Cautionary note regarding forward-looking statements This presentation contains forward-looking statements. These statements are based on current estimates and projections of the Board of Executive Directors and currently available information. Forward-looking statements are not guarantees of the fu
Slide 3: Winning Culture Value Creation
Winning Culture Value Creation Keynote, September 26/27, 2024 2
Slide 4: BASF at a turning point
BASF at a turning point As value creation was below expectations in recent years, our strategic direction needed rethinking The chemical industry will remain attractive and essential, but the playing field is changing – so are we To create value for our shareholders, we are setting a new direction f
Slide 5: Our ambition: preferred chemical company to enable customers' green transformation
Our ambition To be the preferred chemical company to enable our customers’ green transformation Keynote, September 26/27, 2024 4
Slide 6: We create the foundation for attractive shareholder distributions
We create the foundation for attractive shareholder distributions Shareholder distributions via dividends and share buybacks 2025-2028: Corporate €10bn-€12bn >€12bn ~10% At least financial targets1 — EBITDA before special items 2028 — Free cash flow (cumul. 2025-2028) — ROCE 2028 €12 €2.25 At least
Slide 7: With our “Winning Ways” strategy, we target profitable growth and value creation
With our “Winning Ways” strategy, we target profitable growth and value creation Focus Accelerate Transform Win Keynote, September 26/27, 2024 6
Slide 8: Focus
Focus ◼ Strengthen the core and unlock the value of our standalones ◼ Enhance our footprint in high-growth markets ◼ Allocate capital based on clear portfolio roles Keynote, September 26/27, 2024 7
Slide 9: Clear distinction between core and standalone businesses
Our clear distinction between core and standalone businesses provides clarity, drives performance and creates value From a broadly diversified integrated company… …to a company focused on core and standalone businesses Core businesses Standalone businesses Keynote, September 26/27, 2024 8
Slide 10: Core and standalone businesses have different value creation levers
Core and standalone businesses have different value creation levers Core businesses Standalone businesses Industrial Nutrition & Surface Technologies Agricultural Chemicals Materials Solutions Solutions Care Petrochemicals Performance Dispersions Care Chemicals Environmental Battery Coatings Agricul
Slide 11: We are confident in our strength to win in the market with our core businesses
Core businesses We are confident in our strength to win in the market with our core businesses Core businesses ~75% hold one of the top three positions in their respective market Chemicals Materials Industrial Nutrition & Solutions Care ~80% supply industries growing in line with or above global GDP
Slide 12: Our core businesses supply growing customer industries worldwide
Core businesses Our core businesses supply growing customer industries worldwide BASF is a valued partner for innovative applications Examples Semiconductor materials Battery value chain Wind energy Health and personal care – e.g., ultra-pure bulk chemicals, – e.g., thermally conductive – e.g., curi
Slide 13: BASF's new Verbund site will be a major cash and earnings contributor
Core businesses BASF’s new Verbund site will be a major cash and earnings contributor €10 billion investment in world-class Verbund site in Zhanjiang will enhance our footprint in Asia Expected sales of between €4 billion and €5 billion and EBITDA of between €1.0 billion and €1.2 billion by 2030 Con
Slide 14: We will strengthen and profitably grow our core businesses
Core businesses We will strengthen and profitably grow our core businesses ◼ Reinforce leading cost position in key value chains ◼ Focus on reliability and product quality through operational excellence Targeted EBITDA bsi in 2028 ◼ Enable green transformation of our customers and further build on o
Slide 15: Core and standalone businesses have different value creation levers
Core and standalone businesses have different value creation levers Core businesses Standalone businesses Industrial Nutrition & Surface Technologies Agricultural Chemicals Materials Solutions Solutions Care Petrochemicals Performance Dispersions Care Chemicals Environmental Battery Coatings Agricul
Slide 16: Our standalone businesses serve specific industries and compete with pure-play peers
Standalone businesses Our standalone businesses serve specific industries and compete with pure-play peers Standalone businesses ◼ Environmental Catalyst and Metal Solutions: Offers leading mobile emissions catalysts and precious metals Agricultural trading, recycling, and related products and servi
Slide 17: We will continue to invest in our standalone businesses and pursue portfolio options
Standalone businesses We will continue to invest in our standalone businesses and will pursue portfolio options where this adds value Standalone businesses Environmental Catalyst Battery Materials Coatings Agricultural Solutions and Metal Solutions Sales 2023 €9.8 billion1 €0.9 billion €4.4 billion
Slide 18: Our standalone businesses will continue to contribute considerably to earnings
Standalone businesses Our standalone businesses will continue to contribute considerably to BASF’s earnings ◼ Capitalize on deep industry expertise and leverage leading market positions ◼ Provide more strategic and operational flexibility to respond to the specific requirements of customers Targeted
Slide 19: Focus on the most attractive markets, reduce complexity, streamline organization
We will focus on the most attractive markets, reduce complexity and streamline our organization 28 countries account for >90% of sales in the core businesses Core countries – strong BASF position, moderate market growth, e.g., United States, Germany, Brazil Path forward: Adjust setup as necessary ac
Slide 20: We steer resource allocation to capitalize on growth in Advance countries
We steer our resource allocation to capitalize on growth in Advance countries Starting position Asia is the major growth driver for global chemical production Ambition Expected growth We aim to grow: 2035: >80% of per year until 2035:1 global chemical ◼ with the market in China ~5% China market grow
Slide 21: A new approach to capital allocation with focus on discipline and cash generation
We are taking a new approach to capital allocation with a focus on discipline and cash generation From… To… Focus on growth regions and businesses, as well as green transformation Board steering of individual capex projects Top down Allocation based on clear portfolio roles Grow Maintain Harvest Cap
Slide 22: We will bring down capex well below depreciation after Zhanjiang startup
We will bring down capex well below depreciation after startup of the Zhanjiang Verbund site Capex, IT projects and intangibles Billion € ◼ After peaking in 2024/2025 due to the Zhanjiang Verbund site investment, capex will: − decline well below the level of depreciation − return to the level of 201
Slide 23: Accelerate
Accelerate ◼ Empower our businesses through streamlined and differentiated group steering ◼ Simplify our organizational structure ◼ Harness AI to advance productivity and accelerate innovation Keynote, September 26/27, 2024 22
Slide 24: Accelerate by empowering our businesses and increasing accountability
We will accelerate by further empowering our businesses and increasing accountability Board of Executive Directors Operating divisions Focuses on the overall management and direction of BASF: Have increased accountability and empowerment for their ▪ Strategy businesses with division-specific incenti
Slide 25: New short-term incentive system rewards division performance
Our new short-term incentive system more strongly rewards performance of individual operating divisions Until 2023 As of 2024 — Bonus based on Group performance — 75% of bonus based on division performance Divisional Divisional Group ROCE Group ROCE financial KPIs non-financial KPIs 25% 50% 25% Keyn
Slide 26: We will make our organization simpler to enable faster decision making
We will make our organization simpler to enable faster decision making ◼ Sharpen role clarity, establish flatter Corporate center Corporate center hierarchies and reduce internal alignments v v Core Standalone Core Standalone ◼ Review and adjust spans of control to increase individual ownership ◼ St
Slide 27: We will exploit the possibilities of AI to speed up how we work
We will exploit the possibilities of AI to speed up how we work We are implementing … and will leverage AI across BASF … AI to enable ▪ Focus on concrete value ▪ Optimized value cases confirmed through management We expect to fast and effective pilots ▪ Augmented customer achieve a ▪ Global rollout
Slide 28: Transform
Transform ◼ Shape value-based transformation toward a sustainable product portfolio ◼ Drive sustainable-future solutions and net-zero measures at scale ◼ Make European operations more competitive Keynote, September 26/27, 2024 27
Slide 29: Customers benefit from product offerings with reduced carbon footprints
Our customers already benefit from product offerings with reduced carbon footprints BASF Non-BASF — — Conventional Reduced PCF1 Further reduced PCF1 Production Highly efficient production setup in BASF Verbund approach Continuous process optimization and CO2 reduction measures Utilities Combined hea
Slide 30: On track to at least 60% renewable electricity worldwide by 2030
Well on track to gaining access to at least 60% renewable electricity worldwide by 2030 Share of renewable electricity in BASF Group: Projection by region ~25% ~50% ~65% North America Europe China <1% 20% 60% 100% ~50% . South America Asia Pacific incl. China 2018 2023 2026 2030 Equals 2.6 TWh Consi
Slide 31: Dedicated unit for renewable feedstocks
Based on our approach for renewable energy, we will set up a dedicated unit for renewable feedstocks BASF Renewable Energy BASF Renewable Carbon Dedicated unit created in 2022 to: New dedicated unit will: ▪ Procure and trade renewable energy ▪ Leverage existing expertise within BASF ▪ Initiate new p
Slide 32: Verbund provides a pathway from gray to blue to green
Our Verbund provides a scalable and competitive pathway for a gradual transformation from gray to blue to green Verbund Downstream processes Customer industries and applications ▪ Agriculture Product ▪ Automotive attributes ▪ Chemicals Bionaphtha Olefins Bio- ▪ Construction Syngas based/BMB ▪ Consum
Slide 33: Shaping the transformation based on increasing customer demand
We are shaping the transformation based on and catering to increasing customer demand Phase Explore and implement quick wins ▪ Implement Scope 2 measures with clear business cases 1 ▪ Pilot new technologies and launch sustainable products Phase Focus on market demand ▪ Secure increasing volumes of r
Slide 34: Our phased transformation is reflected in our spending
Our phased transformation is also reflected in our spending Transformation-related spending Million € ◼ Transformation-related spending to average 600 €600 million per year from 2025 to 2028 Average 2025-2028 per year − €225 million per year for capex − €375 million per year for equity participation
Slide 35: Committed to our climate protection targets
We are fully committed to our climate protection targets and the transformation of the chemical industry 2030 2050 25% Scope 1 and Scope 2 CO2 emission reduction (compared with 2018) Net Scope 1, Scope 2 and Scope 3.1 15% Specific Scope 3.1 CO2 emission reduction (compared with 2022)1 zero CO2 emiss
Slide 36: Increasingly sustainable product portfolio
We enable our customers’ green transformation with an increasingly sustainable product portfolio Sustainable-Future Solutions Loop Solutions sales TripleS sales share1 Billion € 41% >50% €5bn €10bn 2023 2030 2023 2030 Sustainable-Future Solutions are products that offer Loop Solutions are products t
Slide 37: Ludwigshafen to be a leading, sustainable chemical site for Europe
Ludwigshafen to be a leading, sustainable chemical site for Europe and a strong pillar for BASF’s success Keynote, September 26/27, 2024 36
Slide 38: On track to deliver ~€2.1 billion total cost savings by end of 2026
We are on track to deliver targeted ~€2.1 billion total cost savings by the end of 2026 Total cost savings (run-rate) ~€2.1 billion ◼ Implementation of the cost savings programs 2.0 announced in February 2023 in full swing Additional cost savings ◼ Identification of cost savings measures related to
Slide 39: Additional cost savings of €1 billion in Ludwigshafen
Additional cost savings of €1 billion in Ludwigshafen through optimized processes, adjusted operations and structures Ludwigshafen Cost Improvement Program – around 80% fixed-cost related Operations Spend Verbund Structure Plant Group Research Ludwigshafen Ludwigshafen Optimization Adjustment Modifi
Slide 40: Analysis confirms competitive key Verbund assets in Ludwigshafen
Comprehensive analysis confirms strong and competitive key Verbund assets in Ludwigshafen Results of detailed asset competitiveness analysis of nearly 900 production units 6% 16% High short- and long-term competitiveness Short- to medium-term ◼ All major value chains can compete in their competitive
Slide 41: Solid chemical demand from European customer industries
Analysis shows solid chemical demand from European customer industries over the long term Growth rates of chemical demand by major customer industry ◼ Broad and diverse portfolio of customer industries Paris-compatible scenario 4 Agriculture Electronics CAGR 35-45 Automotive Energy and resources Che
Slide 42: Flexible response to growing European demand for sustainable products
We can respond flexibly to growing European demand for sustainable products Demand split for selected customer industries in 2045 ◼ Growth in market demand for sustainability Paris-compatible scenario attributes offers business opportunities ◼ Demand for chemical products with sustainability attribu
Slide 43: Ludwigshafen Verbund: pathway from gray to blue to green
Our Ludwigshafen Production Verbund is a powerful, scalable, de-risked pathway for the transformation from gray to blue to green Our journey toward net-zero Today Transition of Verbund Future Verbund ◼ Adjustment measures for ◼ Gradual transformation of product ◼ Inherent energy and resource selecte
Slide 44: Future European markets supplied competitively from Ludwigshafen
Future European chemical markets can be competitively and flexibly supplied from the Ludwigshafen site Moderate market growth Leading position Market Green Production Market growth transformation Verbund position Solid demand for chemicals Increasing demand for Key Verbund assets with Leading positi
Slide 45: Win
Win ◼ Drive change toward a winning culture ◼ Step up accountability, speed and performance orientation ◼ Foster a mindset of continuous improvement Keynote, September 26/27, 2024 44
Slide 46: Strengths of the BASF team
Strengths of the BASF team 112,000 colleagues with diverse and deep expertise 91% of our employees are strongly motivated 86% of our employees understand their contribution to BASF’s success 80% of our employees feel that they trust and respect each other Source: BASF global employee survey 2024 Ke
Slide 47: Clear employee expectations
Clear employee expectations 54% 65% 24% — — — Only 54% of employees say 65% say we are not 24% say that they seek that we make it easy to get rewarding exceptional more strategic clarity things done performance Source: BASF global employee survey 2024 Keynote, September 26/27, 2024 46
Slide 48: High performance catalyzed by our winning culture
Accountability. Speed. Improvement Mindset. We own it. We drive it. We excel in it. High performance catalyzed by our winning culture Keynote, September 26/27, 2024 47
Slide 49: We will fundamentally change the way we incentivize and give feedback
We will fundamentally change the way… …we incentivize leaders and employees, e.g., with a differentiated short-term incentive approach, focusing on divisional targets …we recognize performance, e.g., with timely recognition of above-average and top performance contributions using various financial a
Slide 50: Delivering profitable growth and value creation
Delivering profitable growth and value creation Keynote, September 26/27, 2024 49
Slide 51: Foundation for attractive shareholder distributions
We create the foundation for attractive shareholder distributions Shareholder distributions Corporate €10bn-€12bn >€12bn ~10% 2025-2028: financial — — — targets1 EBITDA before Free cash flow ROCE 2028 special items 2028 (cumul. 2025-2028) At least Capital allocation Maintain financial Grow with high
Slide 52: We will use all drivers to boost our profitability
We will use all drivers to boost our profitability EBITDA before special items Target 2028: EBITDA Billion € before special items1 Billion € Core businesses2 ~2.0 ~2.0 ~€7bn-€9bn ————————— 0.5 – 1.5 Standalone businesses2 10 – 12 2.0 – 3.0 10-12 ~€3.5bn-€4bn 7.7 7.7 ————————— BASF Group CAGR (based
Slide 53: We will regain our free cash flow strength
We will regain our free cash flow strength Operating cash flow2 Billion € ~€30bn ————————— Capex2 ~€17bn Free cash flow 5-year average (2019-2023) ————————— Free cash flow2 2023 2024 2025 2026 2027 2028 >€12bn Operating cash flow Capex1 Free cash flow ————————— 1 Payments made for property, plant an
Slide 54: Committed to attractive shareholder distributions
We are committed to attractive shareholder distributions In the mid-term, we target an overall distribution to Further upside potential shareholders on the level of the last years through for shareholders a combination of dividends and share buybacks from better operational performance and M&A We wi
Slide 55: A very disciplined approach to capital allocation
We are taking a very disciplined approach to capital allocation Maintain Grow with high Sharpen financial strength capital efficiency the portfolio ▪ Prudent financial policy with ▪ Increased utilization of existing ▪ Strategic flexibility for standalone strong balance sheet asset base businesses ▪
Slide 56: We will maintain our financial strength
We will maintain our financial strength High equity ratio Attractive financing Low net pension obligations % Dec. 31, 2023 Funding status (%) Commercial paper 0% Net defined benefit liability (€ billion) 49 48 48 47 42 43 Bank loans Other bonds 12% 93 90 25% 81 72 73 72 Gross debt 8.4 €19.3 billion
Slide 57: We will grow with high capital efficiency
We will grow with high capital efficiency Increase asset utilization Reduce capex Optimize net working capital ~€300m Capex plan Billion € Balance sheet Billion € 2022 2023 EBITDA ~25 16.0 ~20 13.9 ~17 12.1 10.4 8.4 6.7 1% point 2023-2026 2024-2027 2025-2028 Inventories Accounts receivable Accounts
Slide 58: We will sharpen our portfolio
We will sharpen our portfolio Core businesses Standalone businesses Industrial Nutrition & Surface Technologies Agricultural Chemicals Materials Solutions Solutions Care Continuous portfolio pruning with exit from Unlock value by differentiated steering to compete with non-strategic or low-return bu
Slide 59: We exit our oil and gas business with cash inflow of ~€2 billion
We exit our oil and gas business with cash inflow of ~€2 billion in 2024 ◼ Sale of Wintershall Dea’s E&P business (excluding Russia-related activities) to Harbour Energy closed on September 3, 2024; BASF received cash proceeds of $1.56 billion (~€1.4 billion) ◼ Following a lock-up period of 6 months
Slide 60: Leverage strong cash flow and balance our uses of cash
We will leverage our strong cash flow and balance our uses of cash Cash balance 2025-2028 Billion € Better operational Further potential for dividends and At least performance; divestitures share buybacks; M&A headroom Share buybacks Dividends ~4 ~8 Shareholder distributions €12 Operating 30 billion
Slide 61: Reasons to invest in BASF
Reasons We are leading in the chemical industry, which is essential for growth We are committed to long- term value creation and attractive distributions to to invest industries worldwide shareholders in BASF We deliver continuous product and process We are shaping the transformation to net zero inn
Slide 62: We create chemistry
O- BASF We create chemistry
Slide 63: Our ambition and strategic levers
Our ambition To be the preferred chemical company to enable our customers’ green transformation Strategic levers Focus Accelerate Transform Win Strengthen the core and unlock the value of Empower our businesses through Shape value-based transformation toward a Drive change toward a winning culture o