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BASF Capital Market Story December 2014 1
We add value as one company
Magdalena Moll Head of IR SocGen Premium Review Conference Paris December 4, 2014
BASF Capital Market Story December 2014 2
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 forward-looking statements, and the estimates and assumptions associated with them, except to the extent required by applicable laws and regulations.
BASF Capital Market Story December 2014 3
Chemistry as an enabler BASF has superior growth
opportunities: – sustainable innovations – investments – emerging markets
The #1 chemical company €74 billion sales, €7.2 billion
EBIT bSI in 2013 #1-3 in >75% of businesses,
present in >200 countries 6 integrated Verbund sites,
production in 60 countries
A track record of strong sales and earnings growth
14% average annual dividend increase, >3% yield in every single year*
~€67 billion market capitalization November 30, 2014
Performance Perspective
* For 2004-2013
Ludwigshafen, Germany
Antwerp, Belgium
Nanjing, China
Kuantan, Malaysia Geismar,
USA Freeport, USA
Verbund site
Positioning
We create chemistry for a sustainable future
BASF Capital Market Story December 2014 4
Percentage of sales 2013*
* Not depicted here: ~6% of Group sales reported as ‘Other‘
BASF today – a well-balanced portfolio Total sales 2013: €74 billion
BASF Capital Market Story December 2014 5
Global reduction in carbon emissions of 6.1 million metric tons/a. and reduction of waste
Example Ludwigshafen: 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
Verbund generates >€1 billion p.a. global cost savings*, supports sustainability
* Savings include only tangible synergies. Additional (intangible) benefits and retained profits are not included.
BASF Capital Market Story December 2014 6
Business review
Growth Levers
BASF Capital Market Story December 2014 7
Q3 2014: BASF with higher sales and earnings despite declining demand
Sales development Period Volumes Prices Portfolio Currencies
Q3’14 vs. Q3’13 7% (4%) 0% 0%
Q1-Q3 2014 vs. Q1-Q3 2013 6% (3%) 0% (2%)
Business performance Q3’14 vs. Q3’13 Q1-Q3’14 vs. Q1-Q3’13
Sales €18.3 billion +3% €56.3 billion +1%
EBITDA €2.5 billion +1% €8.2 billion +4%
EBIT before special items €1.8 billion +9% €6.0 billion +5%
EBIT €1.8 billion +8% €6.1 billion +8%
Net income €1.0 billion (5%) €3.8 billion +3%
Reported EPS €1.14 (5%) €4.16 +3%
Adjusted EPS €1.27 (1%) €4.45 +2%
BASF Capital Market Story December 2014 8
Recent transaction with Statoil
Acquisition of participations in oil & gas fields in Norway
Purchase price amounts to US$1.25 billion
Increase of production to ~60,000 boepd in Norway
Additional reserves and resources of ~170 million boe
Restructuring of Performance Products
Strengthening of R&D platforms
Important corporate developments
BASF to sell textile chemicals business to Archroma
Paper Chemicals division to be dissolved, product lines moved to other divisions
Strategic options for parts of kaolin business in evaluation
Total earnings improvement of ~€500 million by 2017
Future set up of global research platforms:
- Process Research & Chemical Engineering, led out of Europe
- Bioscience Research, led out of North America (from 2015)
- Advanced Materials & Systems Research, led out of Asia (from 2016)
BASF Capital Market Story December 2014 9
0
1
2
3
4
2004 2005 2006 2007 2008 2009** 2010 2011 2012 2013 Q1-Q32014
Strong free cash flow generation
* Cash provided by operating activities less capex (in 2005 before CTA) ** 2009 adjusted for re-classification of settlement payments for currency derivatives
Free cash flow* in € billion
2.6
3.3 3.5
3.2
2.5
3.2
3.9 3.7
2.6
3.2
1.3
BASF Capital Market Story December 2014 10
0.851.00
1.50
1.95 1.951.70
2.202.50
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Growing dividend with attractive yield
Dividend of €2.70 per share for 2013, an increase of 3.8%
2004-2013: Average annual dividend increase of ~14%
Attractive dividend yield of 3.5% in 2013**
Dividend yield above 3% in any given year since 2004
* Dividend yield based on share price at year-end
Dividend payments
3.7% 3.2% 3.1% 4.1% 3.8% 7.0% 3.9%
Dividend yield* 4.6%
2.60 2.70
3.7%
** Based on BASF share price of €77.49 on Dec. 30, 2013
Dividend per share in €
3.5%
We aim to increase our dividend each year, or at least maintain it at the previous year’s level.
Dividend policy
BASF Capital Market Story December 2014 11
Average annual performance with dividends reinvested
0 3 6 9 12 15 18
Euro Stoxx 50
DAX 30
MSCI World Chemicals
+9.2%
Last 5 years December 2009 – November 2014
+16.8%
+6.4%
+12.2%
+12.8%
Last 10 years December 2004 – November 2014
BASF
+10.0%
+4.4%
+15.5%
Delivering consistent, long-term value
BASF Capital Market Story December 2014 12
We aim to increase our sales volumes excluding the effects of acquisitions and divestitures.
Nonetheless, sales will decline slightly compared with 2013 due to the divestiture of the gas trading and storage business planned for autumn 2014 and negative currency effects.
Despite the challenging environment, we strive for a slight increase in EBIT before special items.
Outlook 2014
GDP: 2.3% (previous: 2.5%)
Industrial production: 3.4% (previous: 3.7%)
Chemical production: 4.0% (previous: 4.4%)
US$ / Euro: 1.35 (unchanged)
Oil price (US$ / bbl): 105 (previous: 110)
Assumptions 2014
Outlook 2014
BASF Capital Market Story December 2014 13
Update on key assumptions of the “We create chemistry” strategy
Growth 2010 – 2015 (today‘s view)
Global GDP 2.6% p.a.
Chemical production (excl. pharma) 4.0% p.a.
Industrial production 3.4% p.a.
Growth 2010 – 2015 (‘We create chemistry’ *)
3.4% p.a.
4.9% p.a.
4.6% p.a.
* Rebased figures, new base year 2010
BASF Capital Market Story December 2014 14
EBITDA / EBITDA impact (billion €)
Projection 2015
Expected sales and EBITDA in line with financial market expectations for 2015
Market expectation for 2015 EBITDA between €10 - €12 billion. BASF aims to achieve upper end of range
Detailed outlook for 2015 provided on Feb. 27, 2015
BASF Capital Market Story December 2014 15
Business review
Growth levers – Portfolio development
– Market approach – Innovations for a sustainable future – Investments – Acquisitions – Operational excellence
BASF Capital Market Story December 2014 16
BASF outperformed global chemical production by ~3 percentage points p.a. Sales to third parties billion €
33
79
72
74
16.6
20.7 -4.8
13.7 -6.6
3.7 -0.5 -2.0 0.6
20
40
60
80
2001 2012 2012 restated
2013
Volumes
Prices
Currencies M&A
Volumes Prices Currencies M&A
IFRS Impact
BASF Capital Market Story December 2014 17
Portfolio development Moving downstream towards customer industries
* Agriculture, Construction, Consumer Goods, Health & Nutrition, Electronics, Energy & Resources, Transportation ** Sales excluding Oil & Gas. Targets were published on November 29, 2011.
BASF Capital Market Story December 2014 18
Catalysts Construction chemicals Water-based resins Pigments, plastic additives Oil & Gas Personal care & food Battery materials Functional crop care Omega-3 fatty acids Enzymes …
BASF core business
Strong partnerships
Gazprom Monsanto Petronas Shell Sinopec Statoil Total
Selected transactions 2005 − today
Acquisitions
~ €14 billion sales
Divestitures
Agro generics Vitamin premixes Styrenics Fertilizers Construction equipment,
flooring and wall systems Natural gas trading and
storage business Textile chemicals …
~ €19 billion sales*
Portfolio development Towards more market driven and innovative businesses
*Incl. Natural Gas Trading: Closing expected in autumn 2014; Excl. textile chemicals until closing
BASF Capital Market Story December 2014 19
Restructuring in Performance Products Announced measures to strengthen competitiveness
Measures
Leather and textile chemicals (March 18, 2013 & October 16, 2014)
Establishment of global innovation center in China Divestiture of textile chemicals
Water, oilfield and mining chemicals (March 27, 2013)
Establishment of global business unit to realize synergies Divestment of industrial water management business
Plastic additives and pigments (April 23, 2013)
Adjustments at sites in the Basel area to adapt to changed market conditions
Downsizing of R&D activities
Pigments (October 23, 2013)
Optimization of global production network Closure, restructuring and evaluation of strategic options for
production assets
Paper Chemicals (January 23, 2014 & September 24, 2014)
Latex plant in EU shut down. Kaolin: Strategic options under evaluation
From Jan. 1, 2015: Division dissolved, new set-up follows value chains
Nutrition & Health (April 25, 2014)
Adaption of product portfolio and organizational processes to market realities
Care Chemicals (June 5, 2014)
Set of measures to adapt to changed customer needs and market conditions within its Home Care, Industrial & Institutional Cleaning and Formulation Technologies businesses
Further measures Ongoing
Reduction of >2,400 positions until end of 2017
Annual earnings contribution of ~€500 Million from 2017 onwards
One-time costs in the magnitude of ~€250-300 Million
BASF Capital Market Story December 2014 20
Monomers
Intermediates
Dispersions & Pigments
Performance Chemicals
Care Chemicals
Paper Chemicals
Coatings
Catalysts
Construction Chemicals
BASF sales by first customer industry*
> 15 %
> 10 %
< 10 %
> 15 %
Consumer goods
Transportation
Construction
Energy & Resources
Market approach Cross-divisional customer industry approach
* Excluding Oil & Gas, Crop Protection and Other. 2012 numbers
Petro- chemicals
Performance Materials
Bubble Size: BASF divisional sales by first customer industry*/**
** Nutrition & Health sales predominantly into Health & Nutrition market
BASF Capital Market Story December 2014 21
E-textiles
Solar roof with transparent organic solar panels and OLED modules
Multifunctional seat
Infrared-reflective coating
Infrared-reflective film
High performance foams
Lightweight tridion cell
All-plastic wheel
Cross-divisional approach BASF’s technology Verbund combined with customer know-how
Daimler & BASF concept car ‘Smartforvision’
BASF Capital Market Story December 2014 22
Customer Verbund - adidas and BASF Working together for disruptive innovation: Infinergy™
BASF Capital Market Story December 2014 23
Strong commitment to innovation Innovations for a sustainable future
1.4 1.5
1.6 1.7
1.8
0.0
0.5
1.0
1.5
2.0
2009 2010 2011 2012 2013
€1.8 billion R&D expenditure in 2013, further increase of R&D spending planned in 2014
~10,650 employees in R&D
~3,000 projects
Research Verbund: Cooperations with ~600 excellent partners from universities, start-ups and industry
Target 2015 and 2020:
– €10 billion in sales from innovations younger 5 years
– €30 billion in sales from innovations younger 10 years
R&D expenditures in € billion
Chemicals 10%
Performance Products 20%
Functional Mat. & Sol. 20%
Agricultural Solutions 26%
Oil & Gas 3%
Corporate Research 21%
Key facts
2.0
1.5
1.0
0.5
0
BASF Capital Market Story December 2014 24
Chemistry-based innovations Growth and technology fields
Growth fields
Resources, Environment & Climate
Food & Nutrition
Quality of Life White Biotechnology
Materials, Systems & Nanotechnology
Raw Material Change
Key customer industries
Health & Nutrition
Consumer Goods
Transportation
Energy & Resources
Electronics
Agriculture
Construction
Technology fields Global needs
...
Batteries for Mobility
Enzymes
Heat Management for Construction
Organic Electronics
Functional Crop Care
Plant Biotechnology
E-Power Management
Wind Energy
Lightweight Composites
Water Solutions
BASF Capital Market Story December 2014 25
Performance Products 15%
Oil & Gas 20%
€20 billion
Functional Materials & Solutions 12%
Capex budget 2014-2018
Other 13%
Chemicals 33%
Capex budget 2014-2018
Asia Pacific 18%
€20 billion
South America 4%
North America 25%
Europe 49%
Agricultural Solutions 7%
Other 4%
by segment by region
Investments Capex budget 2014-2018 by segment and region*
* Source: BASF Report 2013
BASF Capital Market Story December 2014 26
Expansion oil & gas activities
Aroma Ingredients Kuantan, Malaysia
Investments Major projects
Ammonia and gas-to-propylene in USA*
MDI plant Chongqing, China
Acrylic acid complex Camacari, Brazil
TDI plant Ludwigshafen, Germany
* Under evaluation
BASF Capital Market Story December 2014 27
Acquisitions … will contribute to profitable growth in the future
Provide a minimum return on investment of 8% p.a. after tax
Are EPS accretive by year three at the latest
Financial acquisition criteria
Generate profitable growth above the industry average
Are innovation-driven
Offer a special value proposition to customers
Reduce earnings cyclicality
Strategic acquisition criteria
We want to acquire businesses which …
BASF Capital Market Story December 2014 28
0
1,000
2,000
3,000
4,000
2013 2015
Former cost saving programs NEXT STEP
Operational excellence programs ~€1.3 billion earnings contribution from STEP by 2015
Annual earnings contribution in € million Targeted annual earnings
contribution increased from €1 billion to ~€1.3 billion by end of 2015
Optimization of processes and structures in all regions, e.g. manufacturing, maintenance supply chain engineering, best-cost country
sourcing
Project timeline: 2012–2015
Between €0.9 and €1 billion by the end of 2014 expected
One-time cost : ~€1 billion
STEP program
BASF Capital Market Story December 2014 29
Operational excellence Strong track record
BASF Group* 2001–2013 Index
50
100
150
200
250
300
350
2001 2006 2009 2012
CAGR 2001 – 2013
10 %
8 %
3 %
EBITDA
Sales
Fixed costs
* Excl. companies with major IFRS 10/11 restatements, i.e. BASF YPC Nanjing, Libya onshore, other Oil & Gas and Catalysts companies
2013
BASF Capital Market Story December 2014 30
Appendix I:
Q3 2014 Reporting
BASF Capital Market Story December 2014 31
Chemicals Earnings growth despite flat volumes
Intermediates 701 0%
Monomers 1,587 (1%)
Petrochemicals 1,913 (1%)
€4,201 (1%)
Q3’14 segment sales (million €) vs. Q3’13
Sales development Period Volumes Prices Portfolio Currencies
Q3’14 vs. Q3’13 0% (1%) 0% 0%
EBIT before special items (million €)
527 510601 570 616
0
200
400
600
800
Q3 Q4 Q1 Q2 Q3
2014 2013
BASF Capital Market Story December 2014 32
Performance Products Sales and earnings stability during restructuring
Performance Chemicals
847 +3%
Care Chemicals 1,203 0%
€3,919 (1%)
Paper Chemicals 344 (6%)
Q3’14 segment sales (million €) vs. Q3’13
Nutrition & Health 522 (3%) Dispersions
& Pigments 1,003
0%
EBIT before special items (million €)
Sales development Period Volumes Prices Portfolio Currencies
Q3’14 vs. Q3’13 0% 0% 0% (1%)
376
216
427 435376
0
200
400
600
Q3 Q4 Q1 Q2 Q3
2014 2013
BASF Capital Market Story December 2014 33
Functional Materials & Solutions Continued robust demand from automotive
Catalysts 1,572 +7%
Construction Chemicals
565 (2%)
Coatings 736
+1%
€4,527+2%
Q3’14 segment sales (million €) vs. Q3’13
Sales development Period Volumes Prices Portfolio Currencies
Q3’14 vs. Q3’13 1% 2% 0% (1%)
300238
311356
310
0
200
400
Q3 Q4 Q1 Q2 Q3
EBIT before special items (million €)
2014 2013
Performance Materials 1,654 (1%)
BASF Capital Market Story December 2014 34
Agricultural Solutions Strong earnings decline in seasonally slow quarter
Q3’14 segment sales (million €) vs. Q3’13
Sales development Period Volumes Prices Portfolio Currencies
Q3’14 vs. Q3’13 (4%) 2% 0% (1%)
0
100
200
Q3 Q30
300
600
900
1,200
Q3 Q3
1,018 (3%)
43
(75%)
172 1,054
EBIT before special items (million €)
2014 2013 2014 2013
BASF Capital Market Story December 2014 35
62
451*
194
265
0
100
200
300
400
500
Q3/2013 Net Income Q3/2014 Net Income
Oil & Gas Considerably higher sales and earnings
Exploration & Production
611 (19%)
Natural Gas Trading 3,059 +29% €3,670
+17%
Q3’14 segment sales (million €) vs. Q3’13 EBIT bSI/Net income (million €)
Natural Gas Trading
Exploration & Production
Net income
Sales development Period Volumes Prices/Currencies Portfolio
Q3’14 vs. Q3’13 43% (26%) 0%
422
360
310
504
* Incl. one-time disposal gain of 164 million euros from the divestment of a 15% stake in Edvard Grieg field
BASF Capital Market Story December 2014 36
Review of “Other”
Million € Q3’14 Q3’13 Sales 977 947 EBIT before special items (7) (105) Thereof Corporate research Group corporate costs Currency result, hedges and other valuation effects Other business
(96) (53) 100
23
(90) (57) (74)
59
Special items (20) (24)
EBIT (27) (129)
BASF Capital Market Story December 2014 37
Cash Flow Solid cash flow in Q1-Q3 2014
Million € Q1-Q3’14 Q1-Q3’13 Cash provided by operating activities 4,765 5,982 Thereof Changes in net working capital Miscellaneous items
(739) (425)
374 (327)
Cash provided by investing activities (3,625) (4,629) thereof Payments related to tangible / intangible assets (3,426) (3,038) Acquisitions / divestitures 355 (1,093) Cash used in financing activities (995) (1,300) thereof Changes in financial liabilities Dividends
1,661 (2,656)
1,304 (2,604)
BASF Capital Market Story December 2014 38
Appendix II:
Chemicals Day
BASF Capital Market Story December 2014 39
Sales to other BASF segments
Sales to 3rd parties
Chemicals segment grows by selling into the BASF Verbund and to the market
* IFRS 10 & 11 impact: -€1.3Bn; Impact of new segment structure: +€5.3Bn ** Without Catalysts (now part of Functional Materials & Solutions segment)
BASF Capital Market Story December 2014 40
0
100
200
300
400
500
2001 2002 2003 2004 2005 2006* 2007* 2008 2009 2010 2011 2012restated
2013
EBITDA margin Chemicals / oil price Index 2001 = 100
Chemicals with stable profitability, little correlation to oil price
EBITDA margin Chemicals (as % of sales)
Oil price
* Without Catalysts (now part of Functional Materials & Solutions segment)
BASF Capital Market Story December 2014 41
EBIT after cost of capital Chemicals
EBIT after cost of capital* in million €
restated
Chemicals earned a premium on cost of capital even during the 2008 / 2009 recession*** * EBIT after cost of capital concept was introduced in 2004.
*** The former Plastics segment also earned a premium on cost of capital during the 2008 / 2009 recession.
Chemicals is a strong earnings contributor
0
500
1,000
1,500
2,000
2004 2005 2006** 2007** 2008 2009 2010 2011 2012 2013
2,000
1,500
1,000
500
0
** Without Catalysts (now part of Functional Materials & Solutions segment)
BASF Capital Market Story December 2014 42
2001 2002 2003 2004 2005 2006* 2007* 2008 2009 2010 2011 2012restated
2013
Chemicals generates strong and steady free cash flow
Cash flow Chemicals in million €
* Without Catalysts (now part of Functional Materials & Solutions segment)
Free cash flow (EBITDA – additions to plant, property & equipment)
Since 2001, Chemicals contributed ~€17 billion of free cash flow to BASF Group
Operating cash flow (EBITDA)
2,000
3,000
4,000
1,000
-1,000
0
BASF Capital Market Story December 2014 43
Shale gas in the U.S.: Lower energy and feedstock cost
Increased U.S. shale gas production disconnected crude oil prices from natural gas prices in North America
Increased production of natural gas liquids (NGLs): ethane, propane, butane
NGL price drop drives shift to lighter cracker feed slates
– Improved profitability of light feed crackers
– Narrow cracker output
Game changer shale gas
Source: IHS Inc. The use of this content was authorized in advance by IHS. Any further use or redistribution of this content is strictly prohibited without written permission by IHS. All rights reserved. Natural gas price Germany: Statistisches Bundesamt “Grenzübergabepreis” Germany
BASF Capital Market Story December 2014 44
Chemicals supplies key raw materials to BASF downstream segments
BASF Capital Market Story December 2014 45
Principles for internal supply driven and merchant market driven products
Reliable supply of key raw materials
Access to chemicals not available in the market
Internal supply driven
Capture value of attractive chemicals markets
Top-3 position in target market
Merchant market driven
Economic advantages through superior technologies and
Verbund
BASF Capital Market Story December 2014 46
Merchant Market
Value chains of the BASF
Verbund
Ethylene Propylene Butadiene
Close to entire cracker output in Ludwigshafen is used within Verbund
<5%
Raffinates Aromatics …
Cracker products Ludwigshafen
>95%
BASF-YPC Nanjing supply for captive demand:
2006: 60% 2014: 75% BASF SE, Ludwigshafen, Germany 46
BASF Capital Market Story December 2014 47
Philosophy of transfer pricing Safe and flexible supply at competitive prices Transfer prices linked to market prices No cross-subsidizing Value driven management in all steps of the
value chain
Additional Verbund benefits Flexible planning along value chains High security of supply, low logistics costs,
no sales and sourcing costs Joint quality management Joint engineering and process development Cross-functional knowledge exchange Additional capacity at Verbund sites dilutes fixed costs
Chemicals is at the heart of the BASF Production Verbund
Additional Verbund benefits
Transfer pricing
Downstream divisions
Chemicals segment
BASF Capital Market Story December 2014 48
High capex intensity commands extraordinary focus on capex allocation and project control
Extensive use of cash-cost benchmarking
Preparation of solid business cases for all projects ensures sound decision-making
Projects approved only if cost of capital is earned even at hypothetical marginal producer price level
Chemicals segment accounts for one third of all capex
Capex budget 2014-2018 by segment
Other 13%
Chemicals* 33%
Performance Products 15%
€ 20 billion
Agricultural Solutions 7%
Oil & Gas 20%
Functional Materials & Solutions 12%
* Including gas-to-propylene project U.S. Gulf Coast, TDI Ludwigshafen, MDI Chongqing, Isononanol Maoming
BASF Capital Market Story December 2014 49
0%
2%
4%
6%
8%
10%
12%
14%
16%
0
50
100
150
200
250
300
350
400
2000 2001 2002 2003 2004 2005 2006* 2007* 2008 2009 2010 2011 2012 2013 2014 2015 2016restated
Consolidated sales indexed (2000 = 100)
Capex as % of sales
Capex in line with revenues to support top and bottom-line growth
Capex as % of sales Chemicals segment
Consolidated sales Chemicals segment
Capex outlook
* Without Catalysts (now part of Functional Materials & Solutions segment)
BASF Capital Market Story December 2014 50
Major investment projects in the Chemicals segment
Ammonia and gas-to-propylene in USA*
MDI plant Chongqing, China
Acrylic acid complex Camacari, Brazil
TDI plant Ludwigshafen, Germany
* Under evaluation
Isononanol plant Maoming, China
Polyamides plant Caojing, China
BASF Capital Market Story December 2014 51
Continuous process innovation leads to best-in-class technology
Proprietary BASF technology, with best-in-class process
Significant cost synergies due to two parallel projects (Nanjing, Camacari)
Acrylic acid will supply downstream units (superabsorbent polymers; acrylates)
Cost curve case study: Acrylic acid China
Acrylic Acid cash cost curve, China average cash costs 2015 in US$/kg
Cas
h co
sts
BAS
F
clas
sic
proc
ess
BAS
F
new
pro
cess
Source: BASF estimate
Production capacity
BASF Capital Market Story December 2014 52
Leading single-train technology
New TDI plant strengthens and benefits from Ludwigshafen Verbund
Schwarzheide plant to be closed after start-up of new plant
New TDI plant re-balances competitive environment of European TDI market
Source: BASF estimate
TDI cash cost curve, Europe average cash costs 2015 in US$/kg
New Ludwigshafen TDI plant will provide superior cost structure in Europe
Cost curve case study: TDI Europe
BASF Capital Market Story December 2014 53
BASF caprolactam production focused on captive demand
BASF plants well positioned on cost curve
Best-in-class cost position in Europe
Constant process improvement ongoing
Worldscale caprolactam plants supply downstream demand of polyamide 6 applications
Further cost improvement in North America after start-up of ammonia JV with Yara
Caprolactam cash cost curve average cash costs 2015 in US$/kg
BAS
F N
orth
Am
eric
a
BAS
F Eu
rope
Production capacity
Cas
h co
sts
Cost curve case study: Caprolactam
Source: BASF estimate
BASF Capital Market Story December 2014 54
Converted Port Arthur cracker with high feed flexibility
# 2 chemical producer in the U.S.*
BASF
Shale gas is a major opportunity for BASF
Low energy costs (energy bill dropped by 55%
compared to 2007**)
Substantial profit improvement
BASF will maximize opportunity of low-cost methane
Strengthen profitability of the Verbund
Grow selected C1 value chains
* Based on sales to local customers ** U.S. data only, normalized costs for natural gas for energy production 54
BASF Capital Market Story December 2014 55
Natural Gas Liquids Ethane Propane Butane
► Cracker Feed
Shale gas is beneficial for methane and ethane based chemistry
Methane and ethane to retain their advantageous cost position in North America
Low transportability of ethane ► Shift to ethane crackers
Propane and butane easy to transport ► Export with link to global market
Very limited transportability of methane
Methane to remain an abundant product with low pricing in North America (despite LNG projects)
Methane ► Power plants ► Ammonia ► Methanol
Composition of shale gas
BASF Capital Market Story December 2014 56
Ammonia joint venture* enables low raw materials costs for BASF downstreams
World-scale producer economics plant with focus on captive demand only (BASF)
Site: BASF Verbund site Freeport, Texas
Capacity: 750 kt p.a.
Advantages of hydrogen & nitrogen based technology:
– Lower capital investment
– No greenhouse gas emissions
– Faster execution
Improved cost position for BASF’s downstream products
Caprolactam Isocyanates Amines
Yara
…
Long-term sourcing contracts
Yara-BASF joint venture
BASF Group
Ammonia
Nitrogen** Hydrogen**
merchant market
* Project under evaluation ** Hydrogen and nitrogen are available in the Freeport area
BASF Capital Market Story December 2014 57
Gas-to-propylene complex* covers internal demand at attractive conditions
U.S. Gulf Coast location
World-scale plant
Start-up: ~2019
Port Arthur cracker and new on-purpose propylene complex to cover entire captive propylene demand
Mid-term no sales to merchant market
Lower cost than alternative PDH technology
Cost leading gas-to-propylene technology covers supply gap
Propylene supply North America
Acrylic acid Oxo-alcohols Polyols …
Propylene Propylene (Port Arthur cracker)
Downstream products
Methanol
Methane (from shale gas)
Flexible feed (NGL’s, Naphtha)
* Project under evaluation
BASF Capital Market Story December 2014 58
Appendix III:
Oil & Gas
BASF Capital Market Story December 2014 59
2009
2013
Cumulative capex** 2009-2013 (billion €)
BASF Group w/o Oil & Gas
7.4 (76%)
BASF Group w/o Oil & Gas
14.5 (69%)
Oil & Gas 2.3 (24%)
Oil & Gas 6.4 (31%)
2009
2013 -
-
Average EBITDA* 2009-2013 (billion € p.a.)
* Excluding non-deductible oil taxes; restated figures from 2012 onwards in accordance with changes in IFRS ** Including additions to property, plant, equipment resulting from acquisitions, capitalized exploration, restoration obligations and IT investments; restated figures from 2012 onwards in accordance with changes in IFRS
2009-2013: – Oil & Gas: Solid profit
contributor to BASF Group – Oil & Gas accounted for ~30%
of BASF Group capex
Oil & Gas will remain a significant contributor to BASF’s total EBITDA
Capex share of Oil & Gas business in BASF’s portfolio will decline
Key facts
Share of Oil & Gas in BASF portfolio
BASF Capital Market Story December 2014 60
Strong earnings contribution from Oil & Gas
* Positive impact from special income due to the deconsolidation of Gascade Gastransport GmbH and the disposal of a share in the Edvard Grieg oilfield (BASF Report 2013, pp. 86-87)
480 601
857 789 951
712 923
1,064 1,201
1,780
1,100
0
500
1,000
1,500
2,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013* Q1-Q32014
Net income Oil & Gas (million €)
BASF Capital Market Story December 2014 61
Strong free cash flow contribution to BASF Group
Cash flow Oil & Gas* (million €)
0
500
1,000
1,500
2,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Operating cash flow Oil & Gas
* Wintershall cash flow ** Free cash flow: Operating cash flow less payments related to property, plant and equipment and intangible assets
Free cash flow** Oil & Gas
∼40% of operating cash flow to BASF Group (avg. 2004-2013)
BASF Capital Market Story December 2014 62
Oil & Gas value chain
Upstream Downstream
Exploration / Development / Production Transport Storage / Trading
Midstream Upstream
Focus on attractive E&P activities
Maintain gas transport business
Exit natural gas storage and trading business 1 2 3
Oil & Gas – Focus on upstream activities
BASF Capital Market Story December 2014 63
Clear strategy for further profitable growth
”Growing at the source”
Focus Technology Partnerships
BASF technology Verbund
Enhanced oil recovery (EOR)
Strategic partnerships with regional resource holders
Long-term profitable growth
E&P Core regions Limited exploration
risk
BASF Capital Market Story December 2014 64
Four core regions and one development region
North Africa
Europe Russia
Middle East
South America
Core region
Development region
Operating company
Current activities
.
BASF Capital Market Story December 2014 65
Regional footprint 2013
Russia stands for roughly 50% of total production
In 2013, natural gas accounted for approx. 75% of total production
Production
Russia provides strong reserve base
Gas accounts for approx. 75% of total reserves
Reserves
Russia 53%
North Africa/ Middle East 9%
Europe 18%
South America 20%
132 million
boe
North Africa/ Middle East 9%
Europe 13%
South America 13%
Proved 1P reserves by region 2013
1.5 billion
boe Russia
65%
Production by region 2013
BASF Capital Market Story December 2014 66
Production volumes (million boe)
0
50
100
150
200
2013 2015 target 2018 target
~190
132
Russia
South America
North Africa/Middle East Europe
>160
* Without capex in non-consolidated participations
Continue to significantly invest in core and development regions
Capex* of ~€4 billion between 2014 and 2018, thereof – 70% Europe and Russia – 15% North Africa/Middle East – 15% South America
Key facts
Oil & Gas – Excellent further growth opportunities
BASF Capital Market Story December 2014 67
R/P ratio increased to 11 years
Total 1P reserves amounted to ~1.5 billion boe (2013)
Gas accounts for approx. 75% of total reserves
Strong contribution to reserve replenishment from assets in Norway and Russia
Key facts 1P Reserves* (million boe) R/P (years)
Oil Natural gas R/P
* According to SEC guidelines; Libya onshore 51%
Reserve Replacement Rate (RRR, in percent)
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
102 50 52 48 389 116 89 89 131 100 280
** 2013 adjusted to new conversion factor from m3 gas to barrel of oil equivalent (5,600 scf = 1 boe instead of 6,000 scf = 1 boe)
0
2
4
6
8
10
12
0
200
400
600
800
1,000
1,200
1,400
1,600
2003 2006 2009 2012 **
Reserves and R/P
BASF Capital Market Story December 2014 68
Norway 25% in Maria Norway
32.7% in Brage
Active portfolio management – Focus on promising projects
UK North Sea 14 licenses
15% in Luno II
Norway Add. 2.5% in Brage
Argentina 50% in Aguada Federal
Germany 15.79% of VNG
Acquisitions
Germany** 50% of WINGAS
WIEH, WIEE, Astora
Netherlands** 50% of Wintershall Noordzee
68
Norway 15% in Gjøa 30% in Vega
(closing dates) Own/joint-operated Divestitures
(closing dates) Norway Add. 24.5% in Vega 24% in Aasta
Hansteen*, Add. 5% Gjøa, 19% in Asterix
Non-own operated
Russia** 25% in
Achimov IV/V
Norway Shares of
14 licences
* Including 13.2% in Polarled Pipeline ** Closing expected in autumn 2014; transaction financially retroactive to April 1, 2013
2011 2013 2012 2014 Expected closing
BASF Capital Market Story December 2014 69
2011 2012 2014 2013
Nov. 2012 signing of legally binding basic agreement
Dec. 2013 signing of final agreement
Oct. 2011 signing of
framework agreement
Dec. 2013 approval by
EU Commission
2015 2016
Planned production start area IV/V
Effective date: April 1, 2013
Implementation of the swap (e.g. developing new company structure)
Autumn 2014 expected closing
2017
Status of the asset swap with Gazprom – Timeline
Activities to be divested contributed in total ~€12 billion to sales and ~€500 million to EBITDA of BASF Group in 2013
BASF Capital Market Story December 2014 70
Russia – Production ramp up Achimgaz Production development Achimgaz Block IA* (%)
* 100% share. Russian Standard Conditions (RSC)
Full field development Pilot phase Plateau production
Wells in production
Plateau production by 2018: Up to 8 billion m3 p.a.*
BASF Capital Market Story December 2014 71
Recent transaction with Statoil Strategic rationale of the transaction
* Pipeline project will provide route for produced gas from Aasta Hansteen field to onshore processing facilities
To strengthen Wintershall’s position in Norway by increasing participation in producing oil and gas fields
To participate jointly with Statoil in promising development project “Aasta Hansteen”
To get access to additional reserves and resources (2P/2C) of ~170 million boe and assets with material exploration perspectivity
To increase production of Wintershall Norge from currently around 40,000 boe/day to about 60,000 boe/day
To expand position as field operator in Norway and to gain experience with subsea operations by taking over operatorship in the Vega field*
To significantly increase Wintershall’s EBIT and future operating cash flow
BASF Capital Market Story December 2014 72
Wintershall expands its oil and gas production and reserves in Norway
Intensification of the cooperation with Statoil, the leading Norwegian oil and gas major, on exploration and development projects
Wintershall acquires shares in assets from Statoil containing reserves and resources (2P/2C) of ~170 million boe and a stake in the Polarled pipeline project*
Purchase price of US$1.25 billion plus up to US$50 million if Aasta Hansteen field development is executed according to current project plan
Effective date January 1, 2014
Transaction closed December 1, 2014
Recent transaction with Statoil Transaction summary
* Pipeline project will provide route for produced gas from Aasta Hansteen field to onshore processing facilities
BASF Capital Market Story December 2014 73
Production growth from solid project pipeline (major projects)
* Closing expected autumn 2014
Length of development phase
2013 2015 2017 2019 2021
Norway
Length of development phase
Skarfjell
Achimgaz (FFD) Achimov Blocks IV / V*
Block 4N
Shuwaihat
F 17 Area
Hibonite Ravn
Fenix Unconventionals CMA1 extension Vega Pleyade
Maria Aasta Hansteen
Edvard Grieg Knarr
BASF Capital Market Story December 2014 74
Natural gas transportation business generates stable earnings
Key facts Nord Stream (offshore)
– Wintershall share: 15.5% – Capacity: 55 billion m3/a – Both lines in operation – Total capex: €7.4 billion
South Stream (offshore) – Wintershall share: 15% – Planned capacity: 63 billion
m³/a via 4 pipelines – Total capex (offshore):
>€10 billion – Start-up: End of 2015
Natural Gas Transportation
Poland Belarus
Ukraine Hungary
Romania
Russia
Bulgaria
Serbia
Slovenia Caspian Sea Black Sea
Georgia
Germany
OPAL 36 bn. m³/a
NEL 20 bn. m³/a
Nord Stream 55 bn. m³/a
South Stream 63 bn. m³/a
Yuzhno Russkoye
Achimov fields
Gas pipelines in operation Nord Stream in operation South Stream offshore (planned) South Stream onshore (planned)
Production fields
1
2
Jamal 33 bn. m³/a
Transgas 95 bn. m³/a
* Start of production is planned not before 2016
BASF Capital Market Story December 2014 75
Pipeline network well connected to major European distribution hubs
Natural Gas Transportation
Ludwigshafen
Düsseldorf
Krefeld
Aachen
Köln
Kassel
Hameln
Emden
Greifswald
Hamburg Schwerin
Berlin
OPA
L Brandov
Frankfurt/O.
Erfurt
NEL
STEGAL
Kiel
Netherlands
France
Poland
Czech Republic
Nürnberg
GASCADE pipelines
Major european distribution hubs
Brüssel
Zeebrügge
Balgzand
Bunde
NetConnect
Gaspool JAMAL
Burghausen
Prag
Bacton
Belgium
NBP
TTF
ZBH
Key facts GASCADE
– Wintershall share: 50% – Length: 2,400 km – In operation since 1992
OPAL – Wintershall share: 40% – Capacity: 36 billion m³/a – Length: 472 km – In operation since 2011
NEL – Wintershall share: 25.6% – Capacity: 20 billion m³/a – Length: 441 km – In operation since 2012/2013
BASF Capital Market Story December 2014 76