analyst conference call q3 2020 - basf · in q3 2020, provisions for onetime costs of ~€300...
TRANSCRIPT
Analyst Conference Call Q3 2020Ludwigshafen, October 28, 2020
October 28, 20202 | BASF Analyst Conference Call Q3 2020
Cautionary note regarding forward-looking statements
This presentation contains forward-looking statements. These statements are based on currentestimates and projections of the Board of Executive Directors and currently available information.Forward-looking statements are not guarantees of the future developments and results outlinedtherein. These are dependent on a number of factors; they involve various risks and uncertainties; andthey are based on assumptions that may not prove to be accurate. Such risk factors include thosediscussed in Opportunities and Risks on pages 139 to 147 of the BASF Report 2019. BASF does notassume any obligation to update the forward-looking statements contained in this presentation aboveand beyond the legal requirements.
October 28, 20203 | BASF Analyst Conference Call Q3 2020
(15)
(10)
(5)
0
5
1.0 2.0 3.0 4.0 5.0 6.0 7.0
Q3
Chemical production growth in China continues,recovery also visible in the U.S. and EuropeChemical production compared to prior-year quarter%
Global macroeconomic development Q3 2020 vs. Q3 2019 %GDP (4.3)
Industrial production (3.0)
Chemical production 0.9
Automotive production (1.9)
EU 27U.S.
Global
Asia excl. China
China
Source: BASF, data: IHS, Feri, NBS China, FED, Eurostat, LMC. Asia: India, Japan, South Korea, Taiwan, Thailand. Data partly estimated.
Q1 Q2 Q3 Q1Q4
2019 2020
Q2
October 28, 20204 | BASF Analyst Conference Call Q3 2020
BASF Group Q3 2020: Sales volumes in Greater Chinasignificantly above prior-year months
1 Location of customer
(4) (8)4
(8) (7)4
(6)
(20)
(6)
17 18 15
-24.0-20.0-16.0-12.0-8.0-4.00.04.08.0
12.016.020.0
Sales volumes development by region1
July/August/September 2020 vs. July/August/September 2019%
Europe North America Greater ChinaBASF Group
2020
Jul Aug Sep Jul Aug Sep Jul Aug Sep Jul Aug Sep
October 28, 20205 | BASF Analyst Conference Call Q3 2020
The gap in BASF’s average daily order entry is slowly closing,but visibility remains low
April 2020
(27)
(16)
(11)
(7)(6)
(4)(3)
(30)
(20)
(10)
0
May2020
June2020
July2020
Gap between average daily order entry April-October 2020 vs. April-October 2019%
August 2020
September2020
1 Until October 23, 2020
October1
2020
October 28, 20206 | BASF Analyst Conference Call Q3 2020
BASF Group Q3 2020: Volumes declined slightly, to a large extentdue to lower demand as a result of the pandemicSales volumes development by segment Q3 2020 vs. Q3 2019absolute (million €) terms
Chemicals(259)
Materials(125)
Industrial Solutions
(104)
Nutrition & Care
(5)
Surface Technologies
95
Agricultural Solutions
179
Other(128)
BASF Group(347)
relative (%) terms
(2%) (11%) (4%) (5%) 3% 0% 11% (19%)
October 28, 20207 | BASF Analyst Conference Call Q3 2020
BASF Group Q3 2020: Sales and EBIT before special items improved compared with Q2 2020, but are still below prior-year quarterSales bridge Q3 2020 vs. Q3 2019million €
Sales development
Q3 2020 vs. Q3 2019 (2%) 2% 1% (6%)
14,556 13,811(347) 274 201 (873)
0
5,000
10,000
15,000
20,000
Q3 2019 Volumes Prices Portfolio Currencies Q3 2020
EBIT before special items by segment Q3 2020 vs. Q3 2019million €
(300)
0
300
600
900
1,200
Q3 2019 Q3 2020
1,056
581
Nutrition & Care (82)
Industrial Solutions (19)
Surface Technologies (6)
Materials (49)
Agricultural Solutions (47)
Chemicals (205)
Other (67)
October 28, 20208 | BASF Analyst Conference Call Q3 2020
The pandemic is impacting key customer industries differently
(32)(25)
6 0 (6) (4)
(2) (8) (1)(10)
(2)
1 3 7 6 2
(2) 0
-36.0-32.0-28.0-24.0-20.0-16.0-12.0-8.0-4.00.04.08.0
12.0Automotive Energy and
resourcesConstruction
Information/ communication
technologiesHealth and
nutritionConsumer
goods
Sales volumes development of key customer industries1
Q1/Q2/Q3 2020 vs. Q1/Q2/Q3 2019%
2020
1 Source: IHS, LMC
Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3
October 28, 20209 | BASF Analyst Conference Call Q3 2020
Details on the impairments in the third quarter of 2020
Slower growth in the automotive and aviation industries due to the consequences of thecorona pandemic
Segments: mainly Surface Technologies Impairment: ~€1 billion
Oversupply of basic chemicalsputting ongoing pressure on margins
Segments: mainly Chemicals and Materials Impairment: ~€1.3 billion
Measures to streamline glufosinate-ammonium production: site in Michigan and one production plant in Germany to be closed by 2022
Segment: Agricultural Solutions Impairment: ~€300 million
October 28, 202010 | BASF Analyst Conference Call Q3 2020
Excellence Program 2019 – 2021: On track to achieve the targeted annual EBITDA contribution
1 Run rate; 2 One-time costs in the respective year
2019 actual 2020 2021
Annual EBITDA contribution1 €0.6 billion ~€1.4 billion €2.0 billion
One-time costs2 €0.5 billion ~€0.3 billion €0.05 – €0.15 billion
CategoryOperational excellence Measures focused on production, logistics and planning
Leaner structures Personnel cost savings: reduction of 6,000 positions targeted globally by end of 2020;around 10% of this reduction will likely be delayed to 2021, mainly due to the pandemic
Innovation R&D cost reduction via focusing budgets
Simplification Increased process efficiency, e.g., in procurement
October 28, 202011 | BASF Analyst Conference Call Q3 2020
Realignment of BASF’s Global Business Services unit – expected annual cost savings of >€200 million from 2023 onwards
About BASF’s Global Business Services unit
In January 2020, the unit was formed as part of the implementation of the corporate strategy. Around 8,400 employees transferred to the unit to become a global, flexible and demand-driven
service division that strengthens the competitiveness of the operating divisions and provides services in areas such as finance, HR, environmental protection, health and safety, intellectual property, communications, supply chain and consulting. Following the bundling of services and the implementation of a wide-ranging digitalization
strategy, the number of employees in this unit will decline by up to 2,000 by the end of 2022. Annual cost savings of over €200 million expected from 2023 onwards. In Q3 2020, provisions for one-time costs of ~€300 million were recognized in Other.
Target picture2023
In 2023, the unit will be a fully dedicated service division with the sole purpose of providing solutions for BASF Group with the best possible cost-to-serve offer:- Simpler end-to-end processes offering more flexibility- More automation in process steps- Bundling of tasks in central hubs
October 28, 202012 | BASF Analyst Conference Call Q3 2020
Major portfolio measures in 2020 and 2021
Sales 2018: ~€1 billion BASF and DIC reached an agreement
on the acquisition of BASF’s pigments business in August 2019
Purchase price of €1.15 billion1
Closing is expected in Q1 20212
Sales 2019: ~€2.6 billion BASF and Lone Star Funds signed
agreement in December 2019 Purchase price of €3.17 billion1
Transaction closed on September 30, 2020
Sales 2018: ~€4.1 billion Merger took place on May 1, 2019 Realization of synergies on track Integration expected to be completed
in January 2021 IPO planned for 2021, subject to market
conditions
DIC to acquire BASF’spigments business
Initial public offering (IPO) of Wintershall Dea
Lone Star Funds acquired BASF’s construction chemicals business
1 On a cash and debt-free basis; 2 Subject to the approval of the relevant competition authorities
October 28, 202013 | BASF Analyst Conference Call Q3 2020
BASF Group Q3 2020: Key financial figures
Q3 2020 Q3 2019 Change€ € %
Sales 13,811 million 14,556 million (5)EBITDA before special items 1,542 million 1,980 million (22)EBITDA 1,044 million 2,259 million (54)EBIT before special items 581 million 1,056 million (45)EBIT (2,638) million 1,336 million .Net income (2,122) million 911 million .Reported EPS (2.31) 1.00 .Adjusted EPS 0.60 0.89 (33)Cash flows from operating activities 2,100 million 1,998 million 5Free cash flow 1,364 million 1,072 million 27
Sales development Volumes Prices Portfolio CurrenciesQ3 2020 vs. Q3 2019 (2%) 2% 1% (6%)
October 28, 202014 | BASF Analyst Conference Call Q3 2020
Cash flow development Q1 – Q3 2020
Q1 – Q3 2020 Q1 – Q3 2019
million € million €
Cash flows from operating activities 3,312 4,317
Thereof Changes in net working capital (1,043) (177)
Miscellaneous items 739 (6,849)
Cash flows from investing activities (674) 47
Thereof Payments made for property, plant and equipmentand intangible assets (2,031) (2,648)
Acquisitions / divestitures 1,452 2,254
Cash flows from financing activities 778 (4,745)
Thereof Changes in financial and similar liabilities 3,913 (1,730)
Dividends (3,139) (3,016)
Free cash flow 1,281 1,669
October 28, 202015 | BASF Analyst Conference Call Q3 2020
Strong balance sheet
Balance sheet September 30, 2020 vs. December 31, 2019billion €
Liquid funds
Accountsreceivable
Noncurrentassets
Inventories
Other assets Otherliabilities
Financialdebt
Equity
29.5 25.2
1.0
21.618.4
34.642.4
Sept. 30, 2020 Dec. 31, 2019
1.3
5.9 2.94.0
5.13.8
9.39.1
10.511.2
51.9 56.0
Sept. 30, 2020 Dec. 31, 2019
87.087.0 87.087.0
Liabilities of disposal groups1
Disposal groups1
1 BASF’s pigments business and construction chemicals business
4.3
Total assets stable at €87.0 billion
Noncurrent assets decreased by€4.0 billion, mainly due to the non-cash-effective impairments and currency (translation) effects
Current assets increased by€4.1 billion, mainly due to higher cash and cash equivalents and higher other receivables
Equity ratio on September 30, 2020: 39.8%
October 28, 202016 | BASF Analyst Conference Call Q3 2020
Outlook 2020 for BASF Group
Outlook 2020Sales €57 billion – €58 billionEBIT before special items €3.0 billion – €3.3 billionReturn on capital employed (ROCE) 0.0% – 1.0%
Underlying assumptions GDP growth: -5.0% Growth in industrial production: -5.0% Growth in chemical production: -2.5% Average exchange rate: US$1.15 per euro Average oil price (Brent crude): US$40 per barrel
October 28, 202017 | BASF Analyst Conference Call Q3 2020
Measures to navigate BASF through the pandemic– well positioned to benefit from market recovery
Adapting to an uncertain environment Measures Early and decisive management actions to ensure
continuity of operations worldwide The customer is at the center of all our activities; we closely interact, even more
so during the pandemic We adapt our utilization rates according to market demand using our proprietary
Verbund simulator
Clear focus on cost control We are on track to achieve €2.0 billion annual EBITDA contribution from the Excellence Program by the end of 2021
We realign BASF’s Global Business Services unit and expect annual cost savings of >€200 million from 2023 onwards
High capital expenditure discipline We reduce planned capital expenditures from €3.4 billion to €2.8 billion in 2020
Strong liquidity based on a robust balance sheet We increased our liquidity to €5.9 billion on Sept. 30, 2020;with 39.8%, the equity ratio remains strong
Focus on cash generation We increased free cash flow by 27% to €1.4 billion in Q3 2020
October 28, 202019 | BASF Analyst Conference Call Q3 2020
Chemicals
Sales Q3 2020 vs. Q3 2019million €
EBIT before special items million €
Sales development Volumes Prices Portfolio CurrenciesQ3 2020 vs. Q3 2019 (11%) (13%) 0% (3%)
Intermediates 614(12%)
Petrochemicals1,169(32%)
€1,783(27%)
251
115
174
(2)
46
(50)
50
150
250
Q3 Q4 Q1 Q2 Q32019 2020
October 28, 202020 | BASF Analyst Conference Call Q3 2020
Materials
EBIT before special items million €
Sales development Volumes Prices Portfolio CurrenciesQ3 2020 vs. Q3 2019 (4%) (7%) 7% (4%)
Sales Q3 2020 vs. Q3 2019million €
266
80
209
(80)
217
(100)
100
300
500
Performance Materials
1,410(6%)
Monomers1,247(10%) €2,657
(8%)
Q3 Q4 Q1 Q2 Q32019 2020
October 28, 202021 | BASF Analyst Conference Call Q3 2020
Industrial Solutions
EBIT before special items million €
Sales development Volumes Prices Portfolio CurrenciesQ3 2020 vs. Q3 2019 (5%) (5%) 0% (3%)
Sales Q3 2020 vs. Q3 2019million €
205
108
273
163186
0
100
200
300
Q3 Q4 Q1 Q2 Q3
Performance Chemicals644(19%)
Dispersions & Pigments1,200(10%)
€1,844(13%)
2019 2020
October 28, 202022 | BASF Analyst Conference Call Q3 2020
Surface Technologies
EBIT before special items million €
Sales development Volumes Prices Portfolio CurrenciesQ3 2020 vs. Q3 2019 3% 29% 0% (7%)
Sales Q3 2020 vs. Q3 2019million €
206 236 220
(151)
200
(200)
(100)
0
100
200
300
Catalysts3,310+38%
Coatings832(11%)
€4,14225%
Q3 Q4 Q1 Q2 Q3
2019 2020
October 28, 202023 | BASF Analyst Conference Call Q3 2020
Nutrition & Care
EBIT before special items million €
Sales development Volumes Prices Portfolio CurrenciesQ3 2020 vs. Q3 2019 0% (1%) 0% (5%)
Sales Q3 2020 vs. Q3 2019million €
225
126
254 256
143
0
100
200
300
Q3 Q4 Q1 Q2 Q3
Care Chemicals938
(8%)
Nutrition & Health489(2%)
€1,427(6%)
2019 2020
October 28, 202024 | BASF Analyst Conference Call Q3 2020
Agricultural Solutions
EBIT before special items million €
Sales development Volumes Prices Portfolio CurrenciesQ3 2020 vs. Q3 2019 11% 2% 0% (19%)
Sales Q3 2020 vs. Q3 2019million €
1,561 1,474
0
1,000
2,000
3,000
Q3 2019 Q3 2020
(6%)
73
26
0
50
100
Q3 2019 Q3 2020
(64%)
October 28, 202025 | BASF Analyst Conference Call Q3 2020
Review of “Other”
Financial figures Q3 2020 Q3 2019million € million €
Sales 484 698
EBIT before special items (237) (170)
Thereof Costs of corporate research (95) (91)
Costs of corporate headquarters (53) (57)
Foreign currency results, hedging and other measurement effects (15) (15)
Other businesses 21 53
Special items (408) 330
EBIT (645) 160