Investor Briefing Europe - BASF...BASF Investor Briefing Europe; May 3, 2016 2 Cautionary note...

Kurt BockChairman of the Board

of Executive Directors

Investor Briefing

Frankfurt a. M.

May 3, 2016

Chances and Challenges in Europe

BASF Investor Briefing Europe; May 3, 2016 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.


European political and business environment

BASF’s approach to European markets

Appendix


.

Moderate GDP growth expected for 2016

– recovery in the medium term

1.8 1.7 1.8

2015 2016 2016-2018

6.2 5.7 5.8

2015 2016 2016-2018

-2.1 -1.7

0.6

2015 2016 2016-2018

2.4 2.1 2.4

2015 2016 2016-2018

European Union

United States

South America

Emerging Asia

Source: BASF

GDP growth in key regions

(in % per year)

2.4 2.3 2.7

2015 2016 2016-2018

World


Key drivers for moderate European GDP

growth

Private consumption

Increasing real incomes in northwestern Europe

Low interest rates

Almost no inflation and low energy prices

Digitalization

“Industry 4.0”

Upgrading of digital infrastructure

Innovation

New high value-added products

Excellent research networks (corporate sector and academia)

Regional developments

Continued growth in western and eastern Europe

Stabilization in southern Europe


Recommended measures to stabilize and

accelerate growth in Europe

Keep integrity of European Union

Keep Schengen system

No Brexit

Upgrade infrastructure

Roads

Rail systems

Smart grids

Improve financial stability

Long-term consolidation of

sovereign debt

Deepen banking union

Enhance innovation policy

Improve openness to innovation

Promote innovation principle

Improve industrial policy and

investment climate

Better regulations

Balance energy & climate policy

Global level playing field in

emission reduction

Keep competitiveness (e.g. EEG)

Introduce balanced circular

economy package

Chemical leasing, mass balance

Prevent high costs

Extend free trade agreements

TTIP

CETA


Current European environment supports

only moderate economic growth

GermanyEurope

Growth-

supporting

factors

Growth-

constraining

factors

Weak Euro supports exports

Low oil prices and

accommodative monetary

policy support domestic

demand

Structural economic problems

(high sovereign debt, weak

labor productivity growth, aging

population)

Slow progress in economic

reforms

Deep integration of industrial

value chains, innovative products

Flexible education, powerful

innovation system

Export of sophisticated

investment goods and durables

Aging and decreasing labor

force

Increasing financial burden

from pension and social

security systems


Chemicals remains a growth industry

…more food needed

by 2050…more primary energy

consumption

by 2050

…of the world

population will live in

cities by 2050

Agriculture Health &

nutrition

Energy &

resources

Transportation Construction

& housing

Consumer

goods

Chemistry as enabler for current and future needs

…people

by 2050

70% 50% ~10

bn

Electrical &

Electronics

30%


Emerging markets driving chemical

production growth above global GDP

0

1,000

2,000

3,000

4,000

5,000

2010 2015 2020 2025

+0%

+4%

+0%

+3%

+1%

+5%

+2%

+4%

+1%

+2%

+2%

Global GDP

CAGR:

2.6%

Global GDP

CAGR:

3.0%

Real chemical production excl. pharma

(in billion US$**)

CAGR*

3.7%

CAGR*

3.7%

CAGR*

3.8%

+5%

+3%

+3%

+1%

+2%

+2%

Global GDP

CAGR:

3.1%

+6%

Asia Pacific

South America

Middle East, Africa

Western Europe

Eastern Europe

North America

* Real chemical production excluding pharmaceuticals; ** Measured in value of 2010


Chemical production in 2015

at ~US$765 billion*

Second largest market for

chemicals globally

Expected growth: ~1.2% p.a.

EU is a net-exporter of

chemicals

Strong export growth of

specialties and consumer

chemicals

EU turned from a net-exporter

of petrochemicals into a net-

importer

European chemical production

Source: Cefic; * Measured in value of 2010

Extra-EU trade balance for chemicals

(in billion € per year)

EU: A strong exporter of innovative

specialties and consumer chemicals

-10

0

10

20

30

40

50

2005 2010 2014

Petrochemicals

Basic inorganics

Specialty chemicals

Polymers

Consumer chemicals


Renewable energyConstruction

Specialty chemicals to drive growth of

chemical production in Europe

Wind energy

Photovoltaics

Smart grids

Electrical &

Electronics

Fuel cells

Solar cells

Automotive

Lightweight

Batteries

Electronics

Catalysts

Insulation

Smart homes




Appendix


.

Europe is region with the largest sales

and earnings contribution to BASF Group

North America

SouthAmerica,

Africa,Middle East

Asia Pacific

Europe

* By location of customer

Sales*

BASF Group

70,449

Sales*; EBIT before special items in 2015

(in million €)

North America

Asia Pacific

Europe

EBIT

before SI

BASF Group

6,739

SouthAmerica,

Africa,Middle East

67%

6%6%

21%

52%

8%

18%

22%


BASF’s approach for Europe:

Accelerate profitable growth

Being close to our customers

– Stronger local presence

– Deeper customer interaction

– Support globalization of

customers

– Strengthen joint innovation

activities

Focus on innovation and

sustainability-driven industries

Upgrading of regional

production base; selective

investments to serve growing

local markets

Maintain highly efficient sites,

operations and processes

TDI plant in Ludwigshafen

TDI plant in Ludwigshafen

Sustainableconstruction

Innovations forthe automotiveindustry

Mobile emissionscatalysts production

in Środa Śląska

Constructionsystems in

Czech Republic

Agro Field Days in Romania

BASF site

Verbund site

Leverage #1 position in BASF’s

core market




Appendix


Steady earnings growth

* 2010, 2011 indicative, adjusted by IFRS 10 & 11; 2001 – 2009 as reported, without non-compensable foreign income taxes on oil production

EBIT and EBITDA*

(in billion €, 2001 - 2016)

3.7

4.7 4.6

7.0 7.2

8.48.9

7.7

6.5

9.9

11.2

10.010.4

11.010.6

2.8

0

2

4

6

8

10

12

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q12016

EBITEBITDA

0.7

2.2 2.2

4.5 4.8

5.56.0

4.6

2.8

6.7

8.0

6.7 7.27.6

6.2

1.9

CAGREBITDA

7.9 %CAGREBIT

16.6 %


0.0

0.5

1.0

1.5

2.0

2.5

3.0

2006 2009 2012 2015

2.90

4.6%

Key facts 2015

Dividend of €2.90 per share,

an increase of 3.6%

Dividend yield of 4.1%*

Dividend yield above 3.5%

in any given year since 2006

Dividend per share

(in €)

0.50

1.00

1.50

2.00

* Dividend yield based on share price at year end

4.1% 3.8% 7.0% 3.9% 3.7%Yield* 3.7%

2.50

3.5%

3.00

4.0% 4.1%

1.50

1.95 1.95

1.70

2.20

2.50 2.60 2.70

Dividend policy

We want to grow or at least

maintain our dividend at the

previous year’s level2.80

Attractive shareholder return


Profitability of BASF will grow faster than

global chemical production

Sales growth

Slightly faster than the global chemical production

EBITDA growth

Well above global chemical production

Remain a strong cash provider

Continuously generate high levels of free cash flow

Financial targets for next years

Deliver attractive returns

Earn a significant premium on cost of capital

Progressive dividend policy

We want to grow or at least maintain our dividend


Grow sales and earnings faster than global chemical production, driven by

– Continued focus on innovations (R&D spending about 3% of sales*)

– Capital expenditures (slightly above depreciation levels)

– Acquisitions

– Operational excellence and Verbund advantages

Continue to prune our portfolio

Maintain industry-leading position in sustainability

Focus on cash generation / conversion

The way forward:

Our priorities

* Excluding Oil & Gas sales


Sales development Volumes Prices Portfolio Currencies

Q1 2016 vs. Q1 2015 0% (6%) (22%) (1%)

Q1 2016: BASF with slightly lower earnings

compared to strong prior-year quarter

Financial figures Q1 2016 Q1 2015 Change

Sales €14.2 billion €20.1 billion (29%)

EBITDA €2.8 billion €2.9 billion (3%)

EBIT before special items €1.9 billion €2.1 billion (8%)

EBIT €1.9 billion €2.0 billion (6%)

Net income €1.4 billion €1.2 billion +18%

Reported EPS €1.51 €1.28 +18%

Adjusted EPS €1.64 €1.43 +15%

Operating cash flow €1.0 billion €2.4 billion (56%)


Outlook 2016

Sales will be considerably below prior year, due to the divestiture of the natural gas trading

and storage activities and the lower oil and gas prices. Excluding the effects of acquisitions

and divestitures, we expect higher volumes in all segments.

We expect EBIT before special items to be slightly below the previous year driven by

drastically lower earnings of Oil & Gas. We plan higher earnings in our chemicals business

and in the Agricultural Solutions segment.

EBIT after cost of capital is expected to be significantly below prior year. However, we still

expect to earn a premium on our cost of capital.

Assumptions 2016

GDP growth: +2.3%

Growth in industrial production: +2.0%

Growth in chemical production (excl. pharma): +3.4%

Exchange rate: $1.10 per euro

Oil price (Brent): $40 per barrel

Outlook 2016 confirmed

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