BASF FY2011 results speech

BASF Full Year 2011 Analyst Conference
February 24, 2012, 4 pm (CET)
Ludwigshafen, Germany

Analyst Conference Script
Dr. Kurt Bock
Dr. Hans-Ulrich Engel

The spoken word applies.

BASF Full Year 2011 Analyst Conference February 24, 2012


Dr. Kurt Bock

Ladies and Gentlemen,
Good afternoon and thank you for joining us this afternoon at our
headquarters in Ludwigshafen and via webcast.

[Chart 4: Record year 2011]

 BASF achieved again new record sales in 2011: In the last
12 months, we reached sales of 73.5 billion euros, up 15 percent
compared with the full year 2010.

 EBITDA at 12 billion euros and EBIT before special items at
8.4 billion euros also marked new record highs.

 We also delivered on our promise to significantly increase EBIT
before special items adjusted for non-deductible oil taxes. We
achieved 8 billion euros, which represents an increase of
12 percent.

 EBIT came in slightly higher than EBIT before special items due
to the disposal gain from the formation of the Styrolution Joint
Venture.

 Net income climbed to 6.2 billion euros, an increase of
36 percent.

 Adjusted EPS reached 6.26 euros, up 9 percent, and finally

 Operating cash flow was 7.1 billion euros, up by 10 percent and
a new record as well.


 In the fourth quarter 2011, we saw – as expected – a slowdown
in business activities but we continued to pursue our value before
volume strategy. Moreover, customer orders were down due to
slowing demand and tight inventory management. This resulted in
lower volumes and margins across most of our chemical
businesses.

 Sales in Q4 increased by 10 percent to 18.1 billion euros,
primarily due to our successful price increases of 9 percent.

 BASF achieved again a record EBITDA in a fourth quarter of
2.9 billion euros, up 7 percent.

 EBITDA as well as EBIT of 1.9 billion euros were positively
impacted by the disposal gain of Styrolution in the amount of
593 million euros.

 EBIT before special items declined by 14 percent mainly due to
lower volumes and margins in several of our upstream
businesses. In addition, EBIT before special items was down as
the Styrenics activities were moved out of BASF into the
Styrolution joint venture.

 Net income was 1.1 billion euros, up 3 percent, and

 adjusted earnings per share were at 1.05 euros in Q4 2011.


[Chart 5: Major achievements in 2011]

What did we achieve in 2011?

 We are on track with our announced investments for future growth.
Just to name a few, we successfully started up the plants of the
second phase of investments at our Verbund site in Nanjing, and
commissioned Nord Stream and the OPAL pipeline.

 In 2011, we have completed the integration of Cognis and we are
on track to realize synergies of 290 million euros.

 Our Styrolution joint venture with Ineos successfully commenced
business in October.

 In September, we signed a contract with EuroChem to sell our
fertilizer activities in Antwerp, Belgium. In January of this year, we
announced that we signed a contract to also sell our 50 percent-
share in PEC-Rhin in Ottmarsheim, France, to our joint venture
partner GPN, a member of the French Total Group – thus
completing our exit from the fertilizer business.

 We also delivered on operational excellence: We finalized our
NEXT program, which will lead to more than 1 billion euros annual
earnings contribution this year.


[Chart 6: Strong and profitable growth in emerging markets]

 BASF already has leading positions and fast growing businesses
in the emerging markets and we will continue to build on these.

 BASF’s sales in the emerging markets increased to 21.2 billion
euros in 2011. This represents 34 percent of BASF’s total 2011
sales excluding Oil & Gas. Since 2001, we have generated a
compound annual growth rate of 13 percent with our activities in
the emerging markets.

 We will further spur organic growth in these countries by
increasing our sales forces, strengthening regional R&D, and
investing in new production capacities. We expect that in 2020,
emerging markets will contribute around 45 percent to BASF’s
sales excluding Oil & Gas.


[Chart 7: €2.6 billion premium on cost of capital]

 In 2003, we set the goal of earning a premium on our cost of
capital. Since then we earned a premium every year, with the
exception of the crisis year 2009.

 In 2011, we again reached a significant premium of 2.6 billion
euros on our cost of capital.

 We achieved this high premium despite a higher cost of capital
rate: For 2011, the cost of capital rate increased from 9 to 11
percent, which explains the lower premium achieved. For 2012,
we are also calculating with a cost of capital rate of 11 percent.

 In the coming years, we strive to earn an average premium on
cost of capital of at least 2.5 billion euros per year.


[Chart 8: Attractive shareholder returns]


As you know shareholder return is of utmost importance to us!

 We stand by our dividend policy to increase our dividend each
year, or at least maintain it at the previous year’s level.

 We will propose to the Annual General Meeting to pay out a
dividend of 2.50 euros per share, an increase of 30 euro-cents or
13.6 percent. Over the past ten years, the compound annual
dividend growth was 15.2 percent.

 This reflects an attractive dividend yield of 4.6 percent, based on
the share price of 54 euros on December 30th, 2011.


[Chart 9: Delivering consistent, long-term value]

Moreover, we continue to deliver consistent long-term value for our
shareholders:

 Over the past ten years, the average annual return on BASF
stock was 14 percent, clearly outperforming the German and
European stock markets as well as the MSCI World Chemicals
index.

 In the last five years, which were impacted by the economic
crisis, the outperformance was even better.


[Chart 11: Outlook 2012
Expectations for global economy]

Let’s turn to the future. Obviously today the uncertainty about the
development of the next 12 to 24 months is much higher than
expected a year ago. Our plan for 2012 is based on the following
assumptions:

 In 2012, we expect GDP growth of 2.7 percent, the level achieved
in 2011.

 We expect global chemical production (without pharmaceuticals)
and industrial production to grow by 4.1 percent, respectively,
which is below 2011, and

 We assume an average oil price of 110 dollars per barrel as well
as an average exchange rate of 1.30 dollars per euro.


[Chart 12: Outlook 2012 by region
Chemical production (excl. pharma)]

 In 2012, global chemical production (excluding
pharmaceuticals) will continue to grow in all regions. While the
current uncertainties in financial markets will dampen growth
perspectives, the chemical sector will benefit from positive
impulses from emerging markets.

 In Europe, we expect growth at a lower rate. However, please
keep in mind that we saw a significant surge in demand in Europe
in 2011.

 In Asia (excluding Japan), growth continues to be strong at
approximately 8 percent. Despite an anticipated slowdown in
growth due to lower export demand, China is expected to still
grow strongly with nearly 9 percent in 2012.


[Chart 13: Outlook BASF Group 2012]

Based on these assumptions, our outlook for the year 2012 is as
follows:

 We strive to increase volumes in 2012 excluding the impact from
acquisitions and divestitures.

 We aim to exceed the record levels of sales and EBIT before
special items achieved by BASF Group in 2011.

 In the first half of 2012, we will most likely not achieve the excep-
tionally high results of the comparable period in 2011. However,
we expect to outperform the second half year results of 2011.

 More specifically, we plan to increase sales and earnings in all
our business segments with the exception of the segment
Chemicals, where we expect sales to be above the level of 2011
but earnings to decline due to margin pressure in petrochemicals
and intermediates. Sales and EBIT before special items in “Other”
will be lower than in 2011 due to the formation of Styrolution, now
accounted for at equity.

 Looking at 2012 and beyond – we announced at our Strategy Day
last November – that BASF wants to deliver an EBITDA of
15 billion euros by 2015, compared with 12 billion euros in 2011.


Dr. Hans-Ulrich Engel


I will focus in my presentation on the business development in the
fourth quarter of 2011 in comparison to the fourth quarter of 2010.

[Chart 15: Chemicals]

In Chemicals, successful price increases in all divisions led to
higher sales. In addition, the start-up of the Styrolution joint venture
contributed positively to the top line because feedstock sales to the
joint venture are now reported as third party sales. Due to
weakening demand and ongoing high raw material prices, EBIT
before special items came in significantly lower.

In Inorganics, sales grew by 9 percent mainly as a result of higher
prices and slightly higher volumes. EBIT before special items was
significantly up driven by higher margins.

Following excellent results in the first three quarters of 2011, we
saw a softening of demand in Petrochemicals. However, sales
grew by 9 percent. We increased product prices due to higher
feedstock cost. Volumes were considerably down since customers
speculated on falling prices and consequently delayed their orders.

EBIT before special items came in substantially lower given
reduced volumes in many product lines and lower margins
particularly for cracker products in all regions.


Sales in Intermediates decreased by 4 percent due to customers’
destocking at year-end. Accordingly, we adjusted our global
capacity utilization and reduced our inventories. EBIT before special
items declined.

For the full year 2011, sales in Chemicals rose by 14 percent and
EBIT before special items reached a new high of 2.4 billion euros.


[Chart 16: Plastics]

Despite lower volumes in major product lines, sales in Plastics
increased due to higher prices primarily in the Performance
Polymers division. EBIT before special items declined considerably
due to lower margins as a result of weak demand and increased
raw material costs.

In Performance Polymers, sales went up by 8 percent. Polyamide
& Intermediates sales rose driven by price increases. In Engineering
Plastics, higher demand in North America compensated for lower
volumes in Europe and Asia. EBIT before special items was
however, significantly lower due to receding margins, especially in
intermediates.

Sales in Polyurethanes rose by 2 percent. We realized higher
prices in all businesses, with the exception of TDI. TDI prices and
margins remained under pressure since sizable new capacities
came on stream during the year and higher raw material costs could
not be passed on to our customers. EBIT before special items was
substantially down mainly due to lower TDI margins.

For the full year 2011, sales in Plastics rose by 12 percent and
EBIT before special items came in below the high level of the
previous year.


[Chart 17: Performance Products]

The Performance Products segment posted a 19 percent rise in
sales. The inclusion of the Cognis businesses as well as strong
price increases across all divisions contributed to this growth.
Volumes, however, declined by 6 percent, with a relatively strong
volume decrease in Paper Chemicals and Performance Chemicals.
EBIT before special items declined by 25 percent due to higher raw
material costs, margin pressure, and higher fixed costs partly
related to the integration of Cognis. Special items amounted to
125 million euros mainly related to the restructuring charges in
Paper Chemicals and the Cognis integration.

In Dispersions & Pigments, we posted higher sales in all regions
and in all product lines except in pigments. The sales growth was
driven by price increases and the inclusion of Cognis. Higher raw
material cost could partially be passed on to the market. EBIT
before special items declined substantially as a result of reduced
pigment volumes and lower margins.

Sales in Care Chemicals increased by more than 50 percent
thanks to the inclusion of Cognis. Price competition as well as tight
inventory management by our customers resulted in a slight volume
decline. However, ongoing price increases, especially for
detergents and formulators, compensated for the decline in
volumes. Integration costs related to Cognis negatively impacted
EBIT before special items.


In Nutrition & Health, the inclusion of the Cognis businesses and
slightly higher prices contributed to good sales growth. Higher fixed
and raw material costs as well as product mix effects outweighed
price gains. Consequently, EBIT before special items declined
substantially.

In Paper Chemicals demand was down because paper producers
ordered less given the weaker economic environment. Volume
losses could not be offset by higher selling prices. Despite these
challenges, EBIT before special items improved benefitting from
ongoing restructuring measures and stringent fixed cost reduction.

In Performance Chemicals, price increases and the inclusion of
Cognis lifted sales. However, volumes declined significantly due to
destocking activities at our customers. EBIT before special items
was lower due to reduced volumes and higher fixed costs.

For the full year 2011, sales of the Performance Products
segment increased by 28 percent to 15.7 billion euros. EBIT before
special items reached 1.7 billion euros, an increase of 11 percent.


[Chart 18: Functional Solutions]

Volumes in the Functional Solutions segment were up 6 percent
driven by growing demand from the automotive industry for mobile
emissions catalysts and automotive coatings. Demand from the
construction industry increased slightly, primarily owing to improved
building activity in North America and Asia. EBIT before special
items more than doubled.

Catalysts’ sales increased by 17 percent, mainly due to higher
sales volumes of mobile emissions catalysts particularly in Asia and
North America. With 676 million euros, the sales contribution from
precious metal trading was up by 3.4 percent driven by higher
prices. EBIT before special items improved strongly.

In Construction Chemicals, sales were up 4 percent. The
business environment in Southern Europe remained challenging.
However, we experienced a positive development in demand in
North America and Asia Pacific. EBIT before special items declined
mainly due to higher fixed costs. We implemented restructuring
measures to streamline our structures in Europe and Asia.

Sales in Coatings increased by 8 percent reflecting continued high
worldwide demand for automotive OEM and refinish. EBIT before
special items came in significantly above prior year. Coatings
incurred high special items primarily in preparation of the planned
divestment of Relius Decorative Paints.

For the full year 2011, sales in Functional Solutions rose by
17 percent to 11.4 billion euros and EBIT before special items was
up 20 percent at 559 million euros.


[Chart 19: Agricultural Solutions]

While reaching new records in both sales and earnings for the full
year 2011, Agricultural Solutions saw a slight sales decline in Q4
due to pre-buying of our customers in Q3 in South America and
portfolio optimization measures.
In Q4, price increases of 2 percent were achieved, confirming
guidance.

Regionally, sales in Europe were driven by positive year-end
business in France. In North America, sales were up due to higher
fungicide sales.

BASF’s growing success in South America and other emerging
markets has driven rapid growth of second half year Crop
Protection sales over the past years, surging from 1.3 billion euros
in 2009 to 1.7 billion euros in 2011. This corresponds to an increase
of 31 percent in only two years.

EBIT before special items in the fourth quarter almost matched the
prior year’s level, despite an increase in R&D spending and selling
costs.

The investments for our future growth are reflected in the
significantly increased peak sales potential of our R&D pipeline,
which amounts to 2.8 billion euros.

For the full year 2011, sales in Agricultural Solutions rose by
3 percent to 4.2 billion euros and EBIT before special items was up
8 percent at 810 million euros.


[Chart 20: Oil & Gas]

In Oil & Gas, sales increased by 33 percent driven by higher sales
volumes and prices in Natural Gas Trading. In Libya, the onshore oil
production restarted mid-October with 20,000 barrels per day, and
reached 60,000 barrels per day at the end of December 2011
compared to a production capacity of 100,000 barrels per day. EBIT
before special items for the entire Oil & Gas segment declined by
4 percent in Q4 2011 due to lower production levels in Libya.
Reported EBIT, however, came in 11 percent higher due to lower
special items.
Net income after minority interests went up by 20 percent to
276 million euros.

Exploration & Production, volumes were below previous year’s
level as a result of the curtailed oil production in Libya. However,
higher oil prices partly compensated for the lower production
volumes. Consequently, sales declined by only 4 percent.

Sales in Natural Gas Trading rose strongly thanks to higher gas
prices and volumes. Margins, however, continued to be under
pressure by the relatively low price level on the spot market. This
effect was more than compensated by additional earnings from the
start-up of the OPAL pipeline.

For the full year 2011, the Oil & Gas segment reported sales of
12.1 billion euros, up 12 percent. EBIT before special items
decreased by 13 percent to 2.1 billion euros. Adjusted for non-
deductible oil taxes, EBIT before special items came in 16 percent
higher at 1.7 billion euros. Net income rose by 15 percent to
1.1 billion euros.


[Chart 21: Review of “Other”]

In “Other”, sales decreased by 30 percent due to the
deconsolidation of Styrenics following the formation of the
Styrolution joint venture with Ineos on October 1st, 2011.

EBIT before special items, increased by 128 million euros due to
both, lower hedging losses as well as a lower provision for the long-
term incentive program.

Positive special items of 623 million euros resulted primarily from
the disposal gain of Styrolution. For further details please refer to
the Annual Report 2011, page 161.


[Chart 22: Excellent operating cash flow in 2011]

 We started the year 2011 with a cash position of 1.5 billion euros.

 With 7.1 billion euros, we again generated an excellent cash flow
from operations in 2011 thereof 2.1 billion euros in Q4.

 Free cash flow reached 3.7 billion euros, thereof 768 million
euros generated in the fourth quarter.

 In 2011, we stuck to our priorities with regard to the use of cash:

– We spent 3.4 billion euros for capital expenditures, which
was significantly up from previous years’ levels. Major
projects which started operations in 2011 included the
expansion of the Nanjing Verbund site in China and the
construction of a methylamine plant in Geismar, Louisiana.
In addition, we completed the new oleum plant in Antwerp,
Belgium, and extended our natural gas pipeline grid with
the OPAL and NEL pipelines in Germany.

– Net cash-in mainly related to the formation of the
Styrolution joint venture amounted to 0.5 billion euros.

– We paid 2.5 billion euros in dividends to our shareholders
and minority interest holders.

– And we used 2.4 billion euros for the repayment of debt.

– Other cash inflows include mainly the proceeds of the K+S
disposal.

 At the end of 2011, we had a cash position of 2 billion euros.


[Chart 23: Balance sheet remains strong]

 Let me finally turn to our balance sheet.

 Compared with 2010, total assets rose by 1.8 billion euros to
61 billion euros.

 Long-term assets declined by 445 million euros.

 Due to the sale of K+S, financial assets declined by 1.1 billion
euros.

 The Styrenics net assets in the amount of 734 million euros which
were reported as assets of the disposal group were
deconsolidated with the start-up of the Styrolution joint venture.
BASF’s 50 percent stake in the Styrolution joint venture will from
now on be reported at equity.

 Our equity ratio improved from 38.1 percent to 41.5 percent.

 In 2011, we repaid two bonds in the amount of 1.2 billion euros.
We reduced net debt by 2.6 billion to 11 billion euros, a reduction
of 650 million euros in Q4. With this, our net debt EBITDA ratio is
now below one [0.9].

 With our A1 / A+ rating and a well-balanced maturity profile of
financial debt, BASF has an excellent financial position.


Now, to help you with your projections for 2012, I would like to give
you some additional numbers:

 Literally, we are now taking the next STEP in operational
excellence: Key focus areas of the recently announced STEP
program are fixed cost reductions and margin improvements
across the entire Group. We expect the program to result in
annual earnings contributions of about 1 billion euros by the end
of 2015.

 Generating a strong cash flow will remain a key priority for 2012
and we will continue to keep tight control on our working capital.

 Our priorities for the use of cash remain clearly set:
We continue to put great emphasis on organic growth through
innovations. Therefore, we plan to increase our global R&D
expenditures from 1.6 billion euros to 1.7 billion euros in 2012.

 We project CAPEX spending of about 3.5 billion euros.

 As demonstrated again this year, we remain committed to our
dividend policy.

In conclusion, BASF continues to be fit for 2012 and beyond!

Thank you for your attention. We are now happy to take your
questions.


[Backup: Financial Highlights Agricultural Solutions]

BASF FY2011 results speech

Recomendados

Recomendados

Mais conteúdo relacionado

Mais procurados

Mais procurados (20)

Destaque

Destaque (6)

Semelhante a BASF FY2011 results speech

Semelhante a BASF FY2011 results speech (20)

Mais de BASF

Mais de BASF (20)

Último

Último (20)

BASF FY2011 results speech