BASF Capital Market Story
150 years 150 years We add value as one company Hartwig Michels President Region Europe Nomura Global Chemical Industry Leaders Conference London March 26, 2015 BASF Capital Market Story March 2015 1 150 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 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 forwardlooking statements, and the estimates and assumptions associated with them, except to the extent required by applicable laws and regulations. BASF Capital Market Story March 2015 2 150 years We create chemistry for a sustainable future Positioning Ludwigshafen, Germany Antwerp, Belgium Perspective Performance 90 Nanjing, China 80 70 60 Geismar, USA Freeport, USA Kuantan, Malaysia 50 40 30 20 2008 2009 2010 2011 2012 2013 2014 2015 Verbund site The #1 chemical company €74 billion sales, €7.4 billion EBIT bSI in 2014 #1-3 in ~75% of businesses, in almost all countries 6 integrated Verbund sites, production in 60 countries BASF Capital Market Story March 2015 * For 2004-2014 A track record of strong sales and earnings growth 12% average annual dividend increase, >3% yield in every single year* ~€79 billion market capitalization end of February 2015 Chemistry as an enabler BASF has superior growth opportunities: – sustainable innovations – investments – emerging markets 3 150 years BASF today – a well-balanced portfolio Total sales 2014: €74 billion Percentage of sales 2014* BASF Capital Market Story March 2015 * Not depicted here: ~5% of Group sales reported as ‘Other‘. Paper Chemicals results have been incl. in Performance Products until the end of 2014. Thereafter Paper Chemicals has been dissolved. 4 150 years Strategy – Our purpose Sustainability is an integral part of our strategy BASF Capital Market Story March 2015 5 150 years Verbund: Unique competitive advantage Verbund generates >€1 billion p.a. global cost savings* & supports sustainability Global reduction in carbon emissions of 6 million metric tons/a. and reduction of waste BASF Capital Market Story March 2015 Example Ludwigshafen site: avoidance of 7 million metric tons of freight/a. = 280,000 fewer truckloads Shared use of on-site facilities: fire department, security, waste water treatment and analytics * Savings include only tangible synergies. Additional (intangible) benefits and retained profits are not included. 6 Business review Growth levers BASF Capital Market Story March 2015 7 150 years BASF with continued earnings growth Business performance* Sales Q4’14 vs. Q4’13 FY’14 vs. FY’13 €18.0 billion (1%) €74.3 billion 0% EBITDA €2.9 billion +11% €11.0 billion +6% EBIT before special items €1.5 billion +3% €7.4 billion +4% EBIT €1.7 billion +7% €7.6 billion +7% Net income €1.4 billion +26% €5.2 billion +8% Reported EPS €1.54 +25% €5.61 +7% Adjusted EPS €1.04 +4% €5.44 +2% Operating cash flow €2.0 billion +4% €7.0 billion * Previous year values restated due to dissolution of disposal group “Natural Gas Trading“ Sales development 1% FY’14 vs. FY’13 4% BASF Capital Market Story March 2015 Portfolio Currencies (4%) 0% 2% Q4’14 vs. Q4’13 Prices (3%) 0% Volumes Period (14%) (1%) 8 150 years Free cash flow development reflecting increased capex in recent years Free cash flow* in € billion 3.9 4 3.5 3.3 3.2 3.7 3.2 3.2 3 2.6 2.6 2.5 2 1.7 1 0 2004 2005 BASF Capital Market Story March 2015 2006 2007 2008 2009** 2010 2011 * Cash provided by operating activities less capex (in 2005 before CTA) ** 2009 adjusted for re-classification of settlement payments for currency derivatives 2012 2013 2014 9 150 years Attractive shareholder return Dividend policy Dividend per share (€) We want to grow or at least maintain our dividend Proposal: 3,0 3.00 2.50 2,5 2.50 2.70 2.80 Key facts 2.20 1.95 2,0 2.00 1.95 Dividend proposal of €2.80 per share, an increase of 3.7% 1.70 1.50 1,5 1.50 1,0 1.00 2.60 1.00 Average annual dividend increase of approx. 12% (2005-2014) 0,5 0.50 0,0 2005 2008 2011 2014 Yield* 3.1% 4.1% 3.8% 7.0% 3.9% 3.7% 4.6% 3.7% 3.5% 4.0% * Dividend yield based on share price at year-end Attractive dividend yield of 4.0% in 2014** Dividend yield above 3% in any given year since 2005 ** Based on BASF share price of €69.88 on Dec 30, 2014 BASF Capital Market Story March 2015 10 150 years Delivering consistent, long-term value Average annual performance with dividends reinvested Last 10 years Last 5 years March 2005 – February 2015 March 2010 – February 2015 +16.1% BASF +4.8% Euro Stoxx 50 0 3 BASF Capital Market Story March 2015 6 +19.9% +9.1% +10.1% DAX 30 +15.3% +10.0% MSCI World Chemicals +14.7% 9 12 15 18 11 150 years Outlook 2015 Expectations for the global economy Forecast 2015 2014 (actual) GDP 2.8% 2.5% Chemicals (excl. pharma) 4.2% 4.0% Industrial production 3.6% 3.4% US$ / Euro 1.20 1.33 60-70 99 Oil price: Brent (US$ / bbl) BASF Capital Market Story March 2015 12 150 years Outlook BASF Group 2015 We aim to increase volumes and sales excluding the effects of acquisitions and divestitures. Sales are likely to be slightly higher than in 2014, driven by higher sales in the Performance Products and Functional Materials & Solutions segments. We expect EBIT before special items to be on the level of 2014. Higher earnings in our chemicals business and in the Agricultural Solutions segment are anticipated to compensate for considerably lower earnings in Oil & Gas. We aim to earn again a substantial premium on our cost of capital, but on a lower level than in 2014. BASF Capital Market Story March 2015 13 150 years Oil & Gas: Impact of the current oil price and measures Production split* 2014 Key Facts Liquids ~25% Natural Gas ~75% ~136 million boe Western European gas prices predominantly market-driven Gas markets outside of Europe partially regulated (e.g. Russia, Argentina) Annual oil price sensitivity for O&G segment: ±€20 million EBIT per ±$1 per bbl. (Brent) Oil price vs. Western European gas price (2010 = 100) 230 Measures Operational excellence 180 Cost optimization 130 CAPEX optimization 80 2010 2011 2012 2013 Natural Gas TTF Netherlands BASF Capital Market Story March 2015 2014 Active portfolio management Oil price Brent *Exploration & Production 14 150 years Outlook 2015-Forecast by segment EBIT before special items Million € 2014 Forecast 2015 Chemicals 2,367 slight decrease Performance Products Functional Materials & Solutions Agricultural Solutions Oil & Gas Other 1,455 1,197 1,109 1,795 (566) considerable increase considerable increase considerable increase considerable decrease slight decrease BASF Group 7,357 at prior-year level With respect to EBIT before special items, “slight” means a change of 1-10%, while “considerable” is used for changes greater than 11%. “At prior-year level” indicates no change (+/-0%). For sales, “slight” means a change of 1-5%, while “considerable” is used for changes of 6% and higher. “At prior-year level” indicates no change (+/-0%). BASF Capital Market Story March 2015 15 Business review Growth levers – Portfolio development – Market approach – Innovations for a sustainable future – Acquisitions – Investments – Operational excellence BASF Capital Market Story March 2015 16 150 years Portfolio development Moving downstream towards customer industries Classical Chemicals Chemical Industry 2001 in % of sales** 2010 in % of sales** 2014 in % of sales** 2020 in % of sales** Customized Products Functionalized Materials & Solutions First customer industries* ~ 50% ~ 50% ~ 40% ~ 60% ~ 35% ~ 65% ~ 30% ~ 70% BASF Capital Market Story March 2015 * Agriculture, Construction, Consumer Goods, Health & Nutrition, Electronics, Energy & Resources, Transportation ** Sales excluding Oil & Gas. Targets were published on November 29, 2011. 17 150 years Portfolio development Towards more market driven and innovative businesses Acquisitions Catalysts Construction chemicals Divestitures BASF core business Selected transactions 2005 − today Agro generics Vitamin premixes Water-based resins Fertilizers Pigments, plastic additives Construction equipment, flooring and wall systems Personal care & food Omega-3 fatty acids Functional crop care Enzymes Oil & Gas Battery materials Specialty plastics … ~ €14 billion sales BASF Capital Market Story March 2015 Strong partnerships Styrenics Gazprom Styrene monomer Monsanto Textile chemicals Petronas … Shell Sinopec Statoil Total ~ €7 billion sales 18 150 years Market approach Cross-divisional customer industry approach BASF sales by first customer industry* Bubble Size: BASF divisional sales by first customer industry*/** Consumer goods > 15 % Transportation > 15 % Construction > 10 % Energy & Resources < 10 % Monomers Petrochemicals BASF Capital Market Story March 2015 Dispersions & Pigments Intermediates Care Chemicals Performance Chemicals * Excluding Oil & Gas, Crop Protection and Other. 2013 numbers Coatings Paper Chemicals Construction Chemicals Catalysts Performance Materials ** Nutrition & Health sales predominantly into Health & Nutrition market 19 150 years Strong commitment to innovation Innovations for a sustainable future R&D expenditures (€ billion) Key facts Further increase of R&D spending in 2015 2.0 2,0 1.8 1.9 1.7 1.6 1.5 1,5 Corporate Research 21% Oil & Gas 3% 1.5 Agricultural Solutions 27% 1,0 1.0 Functional Mat. & Sol. 20% Performance Products 19% 0,5 0.5 Chemicals 10% 0,00 2010 2011 BASF Capital Market Story March 2015 2012 2013 2014 ~10,700 employees in R&D ~3,000 projects Research Verbund: Cooperations with ~600 excellent partners from universities, start-ups and industry Target 2015: – €10 billion in sales from innovations launched within the last 5 years 20 150 years Innovation: Four-Way Conversion Catalyst (FWC™) FWC™ reduces emission of gaseous pollutants and particulates HC CO NOx Particulates N2 CO2 H2O Leading position: Global mobile emissions catalysts patents* 150 FWC™ Combines functionality of a 3-way conversion catalyst with integrated filter on a ceramic substrate Reduces gaseous emissions Precious metal-based catalytic coating removes exhaust gases from engine emissions** Removes particulates Filters & combusts particulates Complies with emissions limits Helps automakers meet new Euro 6c regulatory standards 100 50 0 BASF BASF Capital Market Story March 2015 Competitors FWC™ introduced in 2013 Sustains BASF’s leading technology position * 2009 – 2013 ** Hydrocarbons, carbon monoxide, nitrogen oxides *** https://www.basf.com/en/company/news-and-media/science-around-us/catalytic-converter.html 21 150 years Innovation: Green Sense® Concrete for sustainable construction BASF’s Green Sense® Concrete system consists of: Low 1) Innovative admixture products 2) Concrete mix services Hiigh Environmental Impact 3) Eco-efficiency analysis Replaces up to 70% of cement with recycled materials Superior eco-efficiency Applied in the construction of landmark projects, e.g. One World Trade Center, NYC Reference Concrete High BASF Capital Market Story March 2015 Total Cost of Ownership Low 22 150 years Innovation: Trilon® M Chelating agent for more sustainable detergents and cleaners Trilon® M – Alternative to phosphate for automatic dish washing High sustainability performance: Bio-degradable and eco-friendly Fast growing global market demand driven by regulatory changes and consumer demand for environmentally-friendly products 2010: Capacity expansion to 120,000 tons 2014: Announcement to build a new Trilon® M world scale plant in Alabama, USA Compared with alternative chelating agents Trilon® M Is readily biodegradable Meets eco-label requirements Has better eco-toxicology profile Shows high performance Trilon® M: Phospate free dish washing solution BASF Capital Market Story March 2015 23 150 years Innovation: SAVIVA™ Highly efficient Superabsorbent Polymers (SAP) SAVIVA™ – Based on a pioneering SAP technology platform SAVIVA™ the next generation of SAP Round-shaped particles with micro-pores initiates innovative liquid distribution mechanism Compared to other SAPs SAVIVA™ leads to: Efficiency gains: SAP reduction Fluff reduction Reduction of storage, packaging and transportation costs Improved sustainability: Better carbon footprint due to SAP and weight reduction Enabler for future diaper designs offering a new level of comfort and dryness SAVIVA™ round shaped particle BASF Capital Market Story March 2015 24 150 years Innovation: New acrylic acid technology BASF with best-in-class acrylic acid process Acrylic acid production technology benchmark Industry average costs = 100; normalized Key facts Lower production cost than industry average Efficiency gains: 100 run-time extension higher throughput 95 lower energy consumption 90 Proprietary technology, new process protected by 280 active patent families 85 80 BASF new process BASF Capital Market Story March 2015 BASF classic process Source: BASF estimate Industry average 3 out of 6 production sites already equipped: Ludwigshafen, Antwerp and Nanjing; Camaҫari (Brazil) is currently starting-up 25 150 years Growth fields for innovation Key customer industries Growth fields Technology fields Batteries for Mobility Enzymes Transportation Agriculture E-Power Management Materials, Systems & Nanotechnology Functional Crop Care Construction Energy & Resources Heat Management for Construction Lightweight Composites Raw Material Change Organic Electronics Consumer Goods Electronics Plant Biotechnology Water Solutions White Biotechnology Wind Energy Health & Nutrition BASF Capital Market Story March 2015 ... 26 150 years Acquisitions … will contribute to profitable growth in the future We want to acquire businesses which … Generate profitable growth above the industry average Provide a minimum return on investment of 8% p.a. after tax Are innovation-driven Offer a special value proposition to customers Are EPS accretive by year three at the latest Reduce earnings cyclicality Strategic acquisition criteria BASF Capital Market Story March 2015 Financial acquisition criteria 27 150 years Major investment project start-ups in 2015 Major capex projects for start-up in 2015 Nanjing Ludwigshafen Neopentylglycol +40,000 mt Specialty amines* Ethylene oxide* TDI complex +300,000 mt Specialty amines* Crop protection products* Theodore Chelating agents* Shanghai Geismar Formic acid +50,000 mt Polyurethane systems Cinderford Chongqing Precious metals recycling* MDI +400,000 mt Coating resins* Automotive catalysts* Polyamides +100,000 mt Yesan Camaҫari Chennai Acrylic acid +160,000 mt SAP +60,000 mt . Specialty plastics* Automotive catalysts* Upstream businesses Guaratingueta Pasir Gudang Crop protection formulations* Polymer dispersions* Maoming Isononanol* Downstream businesses BASF Capital Market Story March 2015 * Capacity not published 28 150 years Investments for organic growth Capex budget 2015-2019 by region Capex budget 2015-2019 by segment Performance Products 15% Functional Materials & Solutions 13% Agricultural Solutions 6% €19.5 billion Other 12% Chemicals 33% Asia Pacific 18% South America* 8% Other 2% Oil & Gas 21% €19.5 billion Europe 45% North America 27% * Includes also regions Africa and Middle East BASF Capital Market Story March 2015 29 150 years Operational excellence programs ~€1.3 billion earnings contribution by 2015 Annual earnings contribution in € million STEP program Targeted annual earnings contribution increased from €1 billion to ~€1.3 billion by end of 2015 4,000 3,000 €1 billion achieved by the end of 2014 2,000 Optimization of processes and structures in all regions, e.g. 1,000 manufacturing, maintenance supply chain 0 2014 Former cost saving programs pre- 2008 BASF Capital Market Story March 2015 2015 NEXT 2008-2011 STEP 2012-2015 engineering, best-cost country sourcing Project timeline: 2012–2015 One-time cost : ~€1 billion 30 150 years Restructuring measures in Performance Products strengthening competitiveness Reduction of ~2,400 positions until end of 2017 Annual earnings contribution of ~€500 million from 2017 onwards Run rate of €250 million by end of 2015 One-time costs in the magnitude of ~€250-300 million Future investments - Innovations and R&D - Organic growth incl. capital expenditures - Selected acquisitions in growth fields BASF Capital Market Story March 2015 31 150 years Operational excellence Strong track record BASF Group* 2001–2014 Fixes cost management (Index; CAGR 2001–2014) 350 Cost discipline and self-help remain key priorities CAGR 2001 – 2014 10 % 300 250 Restructuring of Performance Products on-track to achieve €500 million earnings contribution by 2017 (run rate ~€250 million by the end of in 2015) EBITDA 7% Sales 3% Fixed costs 200 STEP program: Targeted annual earnings contribution increased from €1 billion to ~€1.3 billion by end of 2015 150 100 50 2001 2003 BASF Capital Market Story March 2015 2005 2007 2009 2011 2013 2014 * Excl. companies with major IFRS 10/11 restatements, i.e. BASF YPC Nanjing, Libya onshore, other Oil & Gas and Catalysts companies 32 150 years BASF… • … is the #1 chemical company • … has a strong track record of profitable growth • … relentlessly focuses on Operational Excellence • … targets promising growth opportunities • … is committed to delivering high shareholder returns also in the future. BASF Capital Market Story March 2015 33 Appendix I – Q 4 2014 results BASF Capital Market Story March 2015 34 150 years Chemicals Petrochemicals drive earnings growth Q4’14 segment sales (million €) vs. Q4’13 Intermediates 686 (3%) €4,071 (3%) Petrochemicals 1,803 (10%) EBIT before special items (million €) 600 580 510 2,500 2,367 2,182 2,000 400 1,500 1,000 200 Monomers 1,582 +6% 500 0 Q4'13 Q4'14 +14% FY'13 FY'14 +8% Sales development Q4’14 vs. Q4’13 FY’14 vs. FY’13 3% BASF Capital Market Story March 2015 (3%) Prices Portfolio Currencies (4%) 0% 4% Volumes Period (3%) 0% 0% 35 150 years Performance Products Sales slightly up and earnings on prior year level Q4’14 segment sales (million €) vs. Q4’13 EBIT before special items (million €) Performance Chemicals 840 +5% Paper Chemicals 341 (1%) Nutrition & Health 492 (4%) Dispersions & Pigments 881 +1% 300 Care Chemicals 1,164 +1% 100 €3,718 +1% 216 217 Q4'13 Q4'14 200 1,600 1,400 1,200 1,000 800 600 400 200 1,455 1,365 0 0% FY'13 FY'14 +7% Sales development Period Volumes Q4’14 vs. Q4’13 FY’14 vs. FY’13 Portfolio (2%) 0% 0% 3% 1% 0% 0% BASF Capital Market Story March 2015 Prices Currencies (2%) 36 150 years Functional Materials & Solutions Continued robust demand from automotive Q4’14 segment sales (million €) vs. Q4’13 Performance Materials 1,585 +2% EBIT before special items (million €) 250 238 220 Catalysts 1,577 200 +19% €4,444 +8% 1,200 1,070 1,197 FY'13 FY'14 1,000 800 150 600 Construction Chemicals 511 +3% Coatings 771 +3% 100 400 50 200 0 Q4'13 Q4'14 (8%) +12% Sales development Period Volumes Q4’14 vs. Q4’13 FY’14 vs. FY’13 Portfolio 4% 0% 0% 4% 5% 0% 0% BASF Capital Market Story March 2015 Prices Currencies (2%) 37 150 years Agricultural Solutions Strong finish to the year Q4’14 segment sales (million €) vs. Q4’13 EBIT before special items (million €) 1,109 1,000 140 890 800 123 1,400 120 1,200 100 1,000 600 80 400 60 600 40 400 20 200 200 0 1,222 1,109 800 67 0 Q4 2013 Q4'13 Q4 2014 Q4'14 +84% FY'13 FY'14 (9%) Sales development Volumes Q4’14 vs. Q4’13 22% FY’14 vs. FY’13 5% 2% BASF Capital Market Story March 2015 Prices (3%) Portfolio Currencies 0% 6% 0% Period (3%) 38 150 years Oil & Gas Lower oil and gas prices impacted earnings Q4’14 segment sales (million €) vs. Q4’13 Natural Gas Trading 3,277 0% Exploration & Production 728 (15%) €4,005 (3%) EBIT before special items / Net income (million €)* 800 2,000 1,856 1,795 1,450 1,412 600 502 400 361 347 1,000 1,730 288 637 200 141 59 0 Q4 '13 1,464 446 Q4 '14 Exploration & Production 406 383 0 FY '14 FY '13 Natural Gas Trading Net income * Pevious year values restated due to dissolution of disposal group “Natural Gas Trading“ Sales development 10% FY’14 vs. FY’13 14% BASF Capital Market Story March 2015 Portfolio (12%) Q4’14 vs. Q4’13 Price/Currencies Volumes Period (13%) 1% (1%) 39 150 years Review of ’Other’ Million € Q4 2014 Q4 2013 2014 2013 Sales 700 1,106 3,609 4,190 EBIT before special items (28) (114) (566) (618) Thereof corporate research costs group corporate costs currency results, hedges and other valuation effects other businesses (98) (59) 110 (102) (66) (109) (389) (218) (2) (386) (237) (190) 23 99 133 254 Special items 473 3 433 (46) EBIT 445 (111) (133) (664) BASF Capital Market Story March 2015 40 150 years Operating cash flow development in 2014 Million € 2014 2013* Cash provided by operating activities 6,958 8,100 Thereof changes in net working capital miscellaneous items (699) (953) 714 (720) Cash provided by investing activities (4,496) (5,994) Thereof payments related to tangible / intangible assets (5,296) (4,873) 373 (1,093) Cash used in financing activities (2,478) (1,874) Thereof changes in financial liabilities dividends 288 (2,766) 828 (2,702) acquisitions / divestitures * Previous year values restated due to dissolution of disposal group “Natural Gas Trading“ 2014 Free cash flow decreased to €1.7 billion; reduction due to a swing in net working capital and higher capex Payments related to tangible/intangible assets amounted to €5.3 billion (+€423 million) Continued high dividend payout in 2014: ~€2.8 billion BASF Capital Market Story March 2015 41 150 years Balance sheet remains strong Balance sheet 2014 vs. 2013 (billion €) Highlights 2014 71.4 64.2 64.2 Long-term assets 38.3 71.4 28.2 Stockholders’ Equity 15.4 Financial debt 22.1 27.8 Other liabilities Dec 31, 2013 Dec 31, 2014 44.0 27.7 14.4 Inventories Accounts receivable Other assets Liquid funds 9.6 10.2 9.6 11.3 10.2 10.4 3.7 1.8 4.0 1.7 Dec 31, 2013 Dec 31, 2014 Increase in long-term assets by €5.7 billion, due to capex and acquisitions Increase of pension provisions by €3.6 billion due to continued decline of discount rates Financial debt increased by €1.0 billion reflecting issuance of bonds Net debt: €13.7 billion Net debt/EBITDA ratio: 1.2 Equity ratio: 40% (Previous year values restated due to dissolution of disposal group “Natural Gas Trading“) BASF Capital Market Story March 2015 42 150 years BASF Europe – Setting course for higher growth BASF in Europe: Focused on stronger growth ► Leverage #1 position in BASF’s core market, outgrow markets ► Seize growth opportunities – Enhance sales & marketing to increase customer proximity – Introduce innovative products and solutions – Focused investments on fast growing markets – Exploit opportunities in Eastern Europe, Middle East, Africa ► Maintain highly efficient production sites, accelerate operational excellence BASF Equity Story – Region Europe, March 2015 44 Business environment in Europe BASF in Region Europe Growth at different speeds BASF Equity Story – Region Europe, March 2015 45 150 years Europe is a significant and growing chemicals market Chemical production (excl. pharma) in Europe (billion US$) +1.6% p.a. 320 230 Macroeconomic Situation Population of >2 bn people GDP and industrial production growth of ~2% expected Chemical market at US$910 bn in 2014 Western Europe: 265 – Moderate growth resuming 640 645 695 – Southern Europe starting to see improvement 2010 Western Europe BASF Equity Story – Region Europe, March 2015 2014 2020 Emerging Europe (Central & Eastern Europa, Middle East, Africa) Source: BASF Economic Intelligence Emerging Europe: – Growing ~3x faster than Western Europe 46 150 years Development of key customer industries* in Europe Agricultural Solutions Long-term fundamentals remain strong Growth above chemical market Construction Strong markets in Turkey and Saudi Arabia Growing confidence in the construction sector in Western Europe. Automotive Demand recovery in Western Europe – first increase of new car registrations since 2009 Strongly growing CEE production Chemicals Chemical production grew in EU28 in 2014 Strong growth in specialties and consumer chemicals BASF Equity Story – Region Europe, March 2015 * Without Oil & Gas 47 Business environment in Europe BASF in Region Europe Growth at different speeds BASF Equity Story – Region Europe, March 2015 48 150 years Europe is largest sales and profit contributing region of BASF Group Sales*; EBIT before special items (million €) North America Europe 55% North America Europe 65% 20% Sales* BASF Group 74,326 17% Asia Pacific BASF Equity Story – Region Europe, March 2015 21% 8% South America, Africa, Middle East * By location of customer . Asia Pacific EBIT before SI BASF Group 7,357 8% 6% South America, Africa, Middle East 49 150 years Regional organization close to customers South Africa Antwerp Ludwigshafen (regional headquarter) >125 96 Countries served Sales offices 132 28 ~71,500 Production sites R&D sites Employees Verbund site Selected production site / sales offices Business center hub BASF Equity Story – Region Europe, March 2015 50 Business environment in Europe BASF in Region Europe Growth at different speeds Western Europe Central Europe Emerging Europe BASF Equity Story – Region Europe, March 2015 51 150 years Stable business in past years, focus in the future on accelerated organic growth Sales development chemicals business and crop protection in Europe (billion €) Volume CAGR 1.2% 35 Structural Excellence Program Europe – Accelerate organic business growth in Europe Lean, centralized setup for commodity businesses 30 25 Setup closer to customers in downstream businesses 20 15 Dedicated responsibilities for growth in emerging markets 10 Continuously drive cost efficiency 5 0 2011 2012 2013 2014 Volume growth in line with market; slight sales decline due to lower oil price and lower commodity margins BASF Equity Story – Region Europe, March 2015 Program started in February 2015 52 150 years Western Europe: Core market of BASF Verbund site Western Europe Selected sites Population: 415 million Real GDP: US$16.9 trillion Cheadle Ludwigshafen Chemical production: US$645 billion Core market of BASF Antwerp Cesano Maderno Strong production set-up with two Verbund sites More than 20 global key accounts steered from Western Europe Levallois Tarragona BASF Equity Story – Region Europe, March 2015 Expected chemical production growth: ~1% p.a. 53 150 years Western Europe: Accelerate profitable growth Western Europe BASF VC investment in SmartKem New precious metals recycling plant in Cinderford Accelerate profitable growth – Stronger local presence – Deeper customer interaction, especially in downstream businesses Innovations for the automotive industry TDI plant in Ludwigshafen – Using BASF‘s global network to support globalization of customers Focus on innovation or sustainability driven industries Sustainable construction BASF Equity Story – Region Europe, March 2015 Upgrading of regional Support globalization production base of customers TDI plantinManaging costs Ludwigshafen 54 150 years Central Europe: Attractive market next door Central Europe Bratislava Warsaw Population: 105 million Real GDP: US$1.4 trillion Chemical production: US$44 billion Ljubljana Belgrade Economies in transition from emerging into developed stage Expected chemical production growth: ~2.5% p.a. Zagreb Bucharest Business growth (~10% p.a.) outpacing chemical production Local presence especially in downstream businesses and crop protection BASF Equity Story – Region Europe, March 2015 55 150 years Central Europe: Participate in local growth opportunities Mobile Catalysts Production in Sroda Slaska Construction systems in Czech Republic Central Europe Continuously expand market position Being close to our customers Agro Field Days in Romania Strengthen joint innovation activities Selective investments: – Serve growing local markets PU system house in Slovakia BASF Equity Story – Region Europe, March 2015 Construction systems in Romania – Capitalize on lower cost structure for export business (e.g. catalysts in Poland) 56 150 years Emerging Markets: Turkey & Middle East – Focus on locally consuming industries Turkey & Middle East Gebze Population: 268 million Real GDP: US$2.9 trillion Chemical production: US$120 billion Istanbul Growth drivers: housing, food, consumer goods, infrastructure Expected chemical production growth: ~4% p.a. Izmir Dubai Focus on Turkey and Arabian peninsula Target industries: – Energy & resources – Chemicals & plastics – Construction BASF Equity Story – Region Europe, March 2015 57 150 years Emerging Markets: Turkey & Middle East – Focus on locally consuming industries Nutrition lab in Istanbul Turkey & Middle East Regional hubs: Istanbul, Dubai Sustainable construction ~3000 customers Accelerated market penetration by being close to local industries and markets, e.g.: – Food ingredients for Bakery and Dessert production – Customer specific plastic additives blends in Bahrain Plastic Additives in Bahrain Gas treatment solutions BASF Equity Story – Region Europe, March 2015 – Gas treatment solutions for LNG production – BASF concrete admixture solutions for Burj Khalifa 58 150 years Emerging Markets: Africa – Growth opportunities in a heterogeneous market BASF Maroc S.A. Casablanca Africa (target market) Population: 450 million Real GDP: US$1.5 trillion Chemical production: US$35 billion BASF West Africa Ltd. Lagos BASF East Africa Ltd. Nairobi Large, dynamic but heterogeneous market Expected chemical production growth: ~4% p.a. Fastest urbanization rate Northern Africa Eastern Africa Southern Africa Western Africa BASF Equity Story – Region Europe, March 2015 BASF South Africa (Pty.) Ltd. Midrand Improving economic performance Focus on four regional clusters ►Africa presents a profitable growth opportunity 59 150 years Emerging Markets: Africa – Growth opportunities in a heterogeneous market Setup to capture growth opportunities: Business focused on Construction Chemicals in Kenya – Construction chemicals – Crop protection products – Consumer goods – Energy & resources Ultra-filtration for drinking water in Ghana Strengthened local presence – 13 legal entities New laboratory for the mining industry – 9 production sites Dispersions in South Africa – Sales >€500 million Northern Africa Eastern Africa Southern Africa Western Africa BASF Equity Story – Region Europe, March 2015 60 BASF in Europe: Focused on stronger growth ► Leverage #1 position in BASF’s core market, outgrow markets ► Seize growth opportunities – Enhance sales & marketing to increase customer proximity – Introduce innovative products and solutions – Focused investments on fast growing markets – Exploit opportunities in Eastern Europe, Middle East, Africa ► Maintain highly efficient production sites, accelerate operational excellence BASF Equity Story – Region Europe, March 2015 61 150 years BASF Equity Story – Region Europe, March 2015 62
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