Catalysts Moving on the fast track - BASF · PDF file• History – BASF ammonia ......

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Catalysts Moving on the fast trackWayne T. Smith

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Global chemical market growth: 3%

Catalysts market growth: 5%

BASF Catalysts growth target: 7%Maintain high margins!

Estimated growth rates 2007-2012:

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Performance Products

19%Plastics

23%

Chemicals• Inorganics• Catalysts• Petrochemicals• Intermediates

Oil & Gas20%

10%24%

• Customer-focused, technology-driven businesses

• Global R&D, manufacturing presence

• Approx. 5,000 employees

BASF: The #1 global catalyst supplier

*including other activities: 624 million Euro (4%)Q1 2007 Group sales: 14.6 billion Euro*

8%

Agricultural Products & Nutrition

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Alps VeniceLudwigshafen

reactants

products

energy

Reaction pathway

What does a catalyst do?

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5

VeniceLudwigshafen

reactants

products

energy

Reaction pathway

Tunnel

What does a catalyst do?

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1 | BASF Catalysts – moving on the fast track

2 | Leading position in fast growing markets

3 | Toward new levels of performance

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Combining the strengths of two catalyst pioneers …

BASF – a pioneer in industrial catalysis• History – BASF ammonia synthesis is key milestone for chemical industry

• Today 85% of all chemical processes use catalysts

• Leader in chemical process efficiency

Engelhard – a pioneer in emission-control catalysis• History – introduction of first three-way catalyst for automobiles

• Long-standing expertise in precious metal markets

• World’s leading catalyst supplier for automotive, refinery, polyolefin and chemical industry

BASF today: #1 position in global catalyst market

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… expanding the world’s leading catalyst business

Technology position• Leading catalyst position by combining complementary technology

portfolios, paired with global marketing capability

• Merging powerful R&D capabilities to exploit technological synergies

Market attractiveness• High growth, high profitability

• Innovation-driven

• High barriers to entry

• Lower volatility in earnings contributing to lower cyclicality for BASF

Strategic fit for BASF enhancing profitable growth

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Driving a successful integration

Key Engelhard integration achievements

• Organizational realignment and headquarters consolidation completed

• Successful retention of key personnel

• 800 headcount reduction on track

• Ahead of targeted 160 million Euro annual synergies*

• Over 50% of cost synergies to be realized through 2007 and over 80% through 2008

Maintaining catalyst market focus

• Approved investments of 110 million Euro to serve highly attractive, growing markets

• Operational performance exceeding expectations to date

* Full synergies expected to be realized by 2010 (includes 40 million Euro annual top-line growth)

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Catalysts portfolio focused on customer solutions

Materials Services supports precious metal-based catalyst businesses

Chemical catalysts

• Chemical and polyolefin catalysts

• Adsorbents

Refinery catalysts

• Catalysts and additives for fluidized bed catalytic cracking in oil refining

Emission-controlcatalysts

• Emission-control catalysts for cars, trucks and motorcycles

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#1 position in global catalyst market

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• #1 in emission-control catalysts

• #1 in chemical catalysts

• #3 in refinery catalysts

BASF market share in strategically relevant markets (excl. precious metals)

xx% BASF + BASF JVs

22%

Others (combined)

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• Platinum, palladium, rhodium, etc.

• Precious metal pricing trend, hedging and trading expertise

“Engelhard Price for Platinum”quoted daily on London Metal Exchange

• Market-driven R&D through constant feedback of precious metal trends

Extensive knowledge of precious metal markets

40-50% of total Catalyst division sales~ 2% EBITDA margin

BASF Materials Services

• Supplier information (mining companies)• Other precious metal consumers (e.g. industrial, jewelry)• Trading counterparts

• Demand in automotive and chemical industry• Future demand due to novel technologies (R&D)

External Information

Internal Information

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Catalyst demand driven by global trends

Increasing energy costs

• More efficient usage of crude oil, gas, coal and chemical feedstocks

• Raw material change

Tightening clean air regulations

• Transportation

• Industry

Emerging technologies

• Nanotechnology

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Targeting over two times chemical market growth

MarketEstimated growth rates 2007-2012:• Global chemical

market: 3% • Catalysts market**: 5%

BASF Catalysts• Growth target

(2007-2012): 7%• Maintain

high margins!

* Compound annual growth rate ** Market figures excluding

precious metals

Strategically relevant marketsin billion Euro

Emission-control catalystsRefinery catalystsChemical catalysts

3.8 4.6

2.53.0

3.7

5.3

2007 2012

4.0%

4.0%

10.07.5%

12.9CAGR* = 5%

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Key growth elements in place

Powerful partnerships

Outstanding market dynamics

Unmatched technology position

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Achieve long-term technology leadership through R&D

Ludwigshafen

Iselin

• Former Engelhard’s R&D fully integrated into BASF’s established global technology platform

• Centers of excellence for core technologies strengthened

• Expanded cooperation with innovative customers

• Chemical catalysis expertise harnessed for all BASF customers and operating divisions using catalysts

Our more than 2,000 researchers in Chemicals Research and Engineering,

including 600 catalyst experts worldwide, form the best R&D team in the industry

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Exploit catalysts leverage potential for process technologies

• Catalyst performance drives manufacturing costs

• Catalyst performance determines overall production plant investment

• Strong customer partnerships

• High entry barrier for new players

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• Refinery yield increase by 1.2 volume % vs. industry benchmark

• 60,000 gallons additional fuel per day for average size refinery

• ~ 15 million USD additional annual refinery profitGasoline

& diesel

Crude oil

FCC process in refinery

New NaphthaMax IITM

& Flex-Tec for Fluid Catalytic Cracking (FCC)

Introduce next generation products in refinery catalysts

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Gas-To-Liquidsalliance with Sasol

• Long-term catalyst supply partnership and cooperative development since 1996

• Sasol is technology leader in G-T-L

• Two G-T-L projects (Qatar, Nigeria)

• DeMeern catalyst plant at full capacity

Refinery

Syngas

Gasoline& Diesel

Oil

Coal

Natural gas

Enabling technologies for converting alternative raw materials to liquid fuels

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Partnering across emission-control value chain

Engineered catalyst coating provides function to meet regulation

Catalyst coating technology leverages up to 90% of total catalytic converter costs

Integrators OEMCatalyst manufacturersSuppliers Canners

BASF

Precious metal

Substrate

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Emission-control technology turnover prevents commoditization

Tightening emission regulations

Improving engine performance

Each OEM has specific powertrain designs that require customized emission-control solutions

Reducing fuel consumption /using alternative fuels

Emission-control system

26Different phase-in of regulations in major cities versus nationwide in China and India

Vehicle emission regulations tighten globally

Euro 3

Euro 4India

RussiaChina

BrazilChinaRussia

Russia

India

Euro 1

Euro 2

Euro 5

Euro 6

US 2007

US 2010

US Tier 2,CA LEV II

Off Road Global 2014Global 2011

Europe

USA

Europe

Brazil

USA

India, Russia

Europe

China

USAPhase in

Europe

Europe

Europe

China

Europe

China (?)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Light Duty Heavy Duty Motorcycle

China

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∼

2010

SCR

NOxAdBlue®

10xBaseline price*

(DOC + CSF + SCR)

Increasing complexity brings increasing value

DOC: Diesel Oxidation Catalyst; HC: Hydrocarbon; CO: Carbon monoxide; CSF: Catalyzed Soot Filter;` SCR: Selective Catalytic Reduction; NOx: Nitrogen Oxide

* Industry estimates for typical Class 8 diesel truck emission-control catalyst substrate and coating, excl. precious metal

Particulate matter

∼

2007

CSF

7xBaseline price*

(DOC + CSF)

∼

2004

DOC

HC, CO

1Baseline price*

(DOC)

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Heavy duty diesel catalysts grow significantly above market

Part

icul

ate

Mat

ter (

PM),

g/kW

/hr

Oxides of Nitrogen (NOx), g/kW/hr

Increasingly stringent regulation …

0%

5%

10%

15%

20%

25%

30%

Heavy Duty Diesel

2007

-201

2 M

arke

t CA

GR

~GDP Growth

25%+

Vehicles Catalysts

… drives heavy duty diesel catalyst market growth

Off-road 2006

Euro 4

Euro 5 / Off-road 2011

US 2007

Off-road 2014

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

0.18

0.20

0 2 4

US 2010 / Euro 6

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Chemical synthesis

BASF

Novel-Metal-Zeolite

former Engelhard

Developing new technology for high growth HDD market through R&D synergies

Synergy

• Combination of former Engelhard’s materials know-how with BASF’s chemical synthesis expertise

New Material

• Robust, stable operation under varying conditions

• Reducing emission control system complexity

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BASF is the undisputed automotive catalysts market leader in Asia

• ~ 43 % market share in Asia including our joint ventures in Korea and Japan

• Currently serving 50+% of global transplant business from Japan and Korea

• Leveraging BASF’s regional strength especially in rapidly growing Chinese market

Mobile emissions market share in Asia

BASF + BASF JVs

43%

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0%

5%

10%

15%

20%

25%

30%

2007-2012 market CAGR

5%

25%+

Two-wheel vehicles

Catalysts

Leveraging position in Asia to capture high growth motorcycle catalyst business

• 90% of two-wheel vehicles are manufactured in Asia

• Acquisition of REEcat – the global leader in motorcycle/small engine catalyst business

• Expanded customer base for advanced emission- control technologies

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Investing in growth opportunities to expand market leadership

• Total approved investments in 2007: 110 million Euro

• Seven capacity expansions underway worldwide- G-T-L- FCC- Diesel- Gasoline- R&D facilities

• Regional expansion in fast-growing markets (China, Russia, India, Europe)

3333

Growing more than two times global chemical market growth

Maintaining attractive, stable margins

Expanding technology leadership position

Leveraging BASF’s global reach

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Disclaimer

This presentation contains forward-looking statements under the US Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict and are based upon assumptions as to future events that may not prove to be accurate.

Many factors could cause the actual results, performance or achievements of BASF to be materially different from those that may be expressed or implied by such statements. Such factors include those discussed in BASF’s Form 20-F filed with the Securities and Exchange Commission. We do not assume any obligation to update the forward-looking statements contained in this presentation.

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• DOC: diesel oxidation catalyst systems originally developed to reduce hydrocarbons and carbon monoxide to meet US 1994 emission regulations

• CSR: catalyzed soot filter traps and destroys the carbon particulates or “soot” produced by diesel engines, using a proprietary coating that can enable the filter to burn soot during normal driving conditions

• SCR: selective catalytic reduction catalysts, originally designed for stationary applications, now meet tightening NOx emission standards for mobile applications as well

• Three-way catalysts: are designed to reduce nitrogen oxides (NOx), carbon monoxide (CO) and hydrocarbon (HC) emissions from gasoline engines

• FCC: fluid catalytic cracking catalysts are used by petroleum refiners to convert feedstocks into a variety of fuel products, including gasoline, diesel fuel, heating oil and lubricants

• Syngas: produced from natural gas or coal, is a key intermediate in several emerging technologies for gas-to-liquids (GTL), methanol-to-olefins, coal-to-liquids and fuel cells

Glossary I

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Glossary II

• Gas-to-liquids: or GTL is a refinery process to convert natural gas or other gaseous hydrocarbons into longer-chain hydrocarbons. Methane-rich gases are converted into liquid fuels either via direct conversion or via syngas as an intermediate, for example using the Fischer-Tropsch process

• NaphthaMax II® catalysts: allow petroleum refiners to produce significantly higher gasoline yields by using a unique technology (Distributed Matrix Structure – DMS – platform) that provides enhanced stability, activity and yield without the typically associated coke and gas penalties

• Flex-Tec™: catalysts enables petroleum refiners to significantly boost the amount of gasoline they can produce from "bottom-of-the-barrel" crude oil, also using the high-performance DMS technology platform

• AdBlue®: is BASF’s high-purity, synthetically produced 32.5% solution of urea; in the SCR emission-control system, AdBlue reduces nitrogen oxides in the exhaust gases of diesel-engined commercial vehicles to water and elementary nitrogen (a natural constituent of the atmosphere)

• Zeolite: a natural or synthetic inorganic molecular structure used in adsorbent, catalyst and separation technologies

Catalysts Moving on the fast track - BASF · PDF file• History – BASF ammonia ......

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