BASF Capital Market Story October 2015 1 150 years 150 years
We add value as one company
150 yearsHans-Ulrich Engel
CFO of BASF SE
Roadshow Boston & New York
BASF Capital Market Story October 2015 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 October 2015 3 150 years 150 years
BASF – Share information
Symbol: BAS
Trading Platform: Deutsche Börse
ISIN: DE000BASF111
IPO: January 30, 1952
Type of shares: Registered shares
Trading lot: none, one share is tradable
Free float (according to Deutsche Börse):100 %
Number of subscribed shares outstanding (as of 12/31/2014):918,478,694
Symbol: BASFY
OTC Trading Platform: OTCQX
CUSIP: 055262505
Ratio: 1 ADR : 1 Ordinary Share
Depositary bank: Deutsche Bank Trust Company Americas– Tel: +1 212 250 9100 (New York broker desk)
– Tel: +44 207 547 6500 (London broker desk)
– E-mail: adr@db.com
– Website: www.adr.db.com
Depositary bank’s local custodian: Deutsche Bank AG, FrankfurtBASF Capital Market Story October 2015 4
Chemistry as an enabler
BASF has superior growth opportunities:
– sustainable innovations
– investments
– emerging markets
The #1 chemical company
€74 billion sales, €7.4 billion EBIT bSI in 2014
#1-3 in ~70% of businesses, in almost all countries
6 integrated Verbund sites, production in 60 countries
A track record of strong sales and earnings growth
12% average annual dividend increase, >3% yield in every single year*
~€63 billion market capitalization Sept. 2015 Perspective * For 2004-2014 Ludwigshafen, Germany Antwerp, Belgium Nanjing, China Kuantan, Malaysia Geismar, USA Freeport, USA Verbund site Positioning
We create chemistry for a sustainable
future
Performance 20 30 40 50 60 70 80 90 2008 2009 2010 2011 2012 2013 2014 2015BASF Capital Market Story October 2015 5 150 years 150 years
Percentage of sales 2014*
* Not depicted here: ~5% of Group sales reported as ‘Other‘. Paper Chemicals results have been incl. in Performance Products
until the end of 2014. Thereafter Paper Chemicals has been dissolved; ** Natural Gas Trading has been sold Sep. 30, 2015 to Gazprom.
BASF today – a well-balanced portfolio
BASF Capital Market Story October 2015 6
Global reduction in carbon emissions of 6 million metric tons/a. and reduction of waste
Example Ludwigshafen site: 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: Unique competitive advantage
* Savings include only tangible synergies. Additional (intangible) benefits and retained profits are not included.
BASF Capital Market Story October 2015 7
Q3 2015 reporting
Business development
Path forward: Our priorities
BASF Capital Market Story October 2015 8
Third-quarter sales and EBIT bSI down in a
difficult economic environment
Sales development
Period Volumes Prices Portfolio Currencies
Q3´15 vs. Q3´14 (1%) (8%) 0% 4%
Business performance Q3’15 Q3’14* vs. Q3’14*
Sales €17.4 billion €18.3 billion (5%)
EBITDA €2.9 billion €2.5 billion +14%
EBIT before special items €1.6 billion €1.8 billion (10%)
EBIT €1.9 billion €1.7 billion +8%
Net income €1.2 billion €1.0 billion +19%
Reported EPS €1.31 €1.11 +18%
Adjusted EPS €1.07 €1.24 (14%)
Operating cash flow €3.4 billion €2.2 billion +51%
* Previous year values restated due to dissolution of disposal group “Natural Gas Trading“
BASF Capital Market Story October 2015 9 150 years 150 years 0 1 2 3 4 5 2005 2006 2007 2008 2009** 2010 2011 2012 2013 2014 Q1-Q3 2015
Strong free cash development Q1-Q3 2015
* 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 €) 3.3 3.5 3.2 2.5 3.2 3.9 3.7 2.6 3.2 1.7 4.1
BASF Capital Market Story October 2015 10
We aim to increase volumes excluding the effects of acquisitions and divestitures.
Due to the divestment of the gas trading and storage business as part of the asset swap with Gazprom and the lower oil price we expect sales to be slightly lower than in 2014.
EBIT before special items is expected to be slightly below the level of 2014. The chemicals business is expected to provide a larger contribution than in 2014. Earnings from crop protection will most likely come in slightly below the level of 2014. In Oil & Gas, results will decline significantly caused by the lower oil price and the divestment of the gas trading and storage business.
We aim to earn a substantial premium on our cost of capital, but on a lower level than in 2014.
Outlook 2015
GDP: +2.3% (+2.4%)
Industrial production: +2.0% (+2.9%)
Chemical production (excl. pharma): +3.5% (+3.8%)
US$ / Euro: 1.12 (1.15)
Brent oil price (US$ / bbl): 55 (60-70)
Assumptions 2015
BASF Capital Market Story October 2015 11
Q3 2015 reporting
Business development
Path forward: Our priorities
BASF Capital Market Story October 2015 12
Low growth in Europe, Japan and the U.S.
Strong growth stimulus in China with spillover effects to other emerging markets
Lower feedstock costs
Proliferation of some technologies resulted in increased competition
Faster build-up of significant new capacities in China resulted in overcapacities
Faster than expected
commoditization in selected product lines
Market dynamics have changed since 2011
Fundamental trends intact; environment
for chemical industry more challenging
CAGR 2010 - 2015 2011 view today’s view
Global GDP
3.4%
2.6%
Industrial production
4.6%
3.2%
Chemical production
(excl. pharma)
4.9%
3.9%
►thereof growth contribution
BASF Capital Market Story October 2015 13 150 years 150 years
Components of growth
* 2010, 2011 indicative, adjusted by IFRS 10 & 11 59,6 74,3 8,7 4,9 -[VALUE] 2,8 20 40 60 80 2010 2014 Volumes Prices FX M&A Sales* analysis 2010 – 2014 (in billion €)
Net sales 2010 Volumes Prices FX M&A Sales CAGR 2010 - 2014 BASF Group
w/o Oil & Gas 51.4
+3.2
(+1.5% CAGR) +3.9 -1.6 +2.2 +3.6%
Oil & Gas 8.2 +5.5
(+13.7% CAGR) +1.0 -0.1 +0.6 +15.7%
5.7%
BASF Capital Market Story October 2015 14
Functional crop care
Personal care & food
Omega-3 fatty acids
Enzymes
Battery materials
Specialty plastics
Selected assets in Oil & Gas
…
BASF
core business
Strong partnerships Gazprom Monsanto Petronas Shell Sinopec Statoil Total Yara Selected transactions 2010 − until todayAcquisitions
~ €4.5 billion sales
in emerging and
innovation-driven
businesses
Divestitures
Styrenics Fertilizers Construction equipment, flooring and wall systems Decorative paints in Europe
Selected assets in Oil & Gas
Natural gas trading
Custom synthesis business
~ €20 billion sales*
in businesses with
limited fit and
differentiation
potential
Portfolio development towards more
market-driven and innovative businesses
BASF Capital Market Story October 2015 15 150 years 150 years
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 - 2014) 3,7 4,7 4,6 7,0 7,2 8,4 8,9 7,7 6,5 9,9 11,2 10,0 10,4 11,0 8,8 0 2 4 6 8 10 12 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q1 - 3 2015 EBIT EBITDA 0,7 2,2 2,2 4,5 4,8 5,5 6,0 4,6 2,8 6,7 8,0 6,7 7,2 7,6 5,9 CAGR EBITDA 8.9 % CAGR EBIT 19.8 %
BASF Capital Market Story October 2015 16 50 100 150 200 250 300 350 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Strong track record in operational
excellence
EBITDA
Sales
* Excl. companies with major IFRS 10/11 restatements, i.e. BASF YPC Nanjing, Libya onshore, other Oil & Gas and Catalysts companies
BASF Group* 2001–2014 (Index; CAGR 2001–2014) Fixed Costs CAGR EBITDA 9% CAGR Sales 7% CAGR Fixed Costs 3%
BASF Capital Market Story October 2015 17 150 years 150 years
We want to grow or at least maintain our dividend
Dividend paid out per share €2.80, an increase of 3.7%
Average annual dividend increase of approx. 12% (2005-2014)
Attractive dividend yield of 4.0% in 2014**
Dividend yield above 3% in any given year since 2005
3.7%
Key facts Dividend per share
(in €) 0,0 0,5 1,0 1,5 2,0 2,5 3,0 2005 2008 2011 2014 0.50 1.00 1.50 2.00
* Dividend yield based on share price at year-end
3.1% 4.1% 3.8% 7.0% 3.9%
Yield*
** Based on BASF share price of €69.88 on Dec 30, 2014
4.6% 2.50 3.7% 3.00 3.5% 4.0% 1.00 1.50 1.95 1.95 1.70 2.20 2.50 2.60 2.70 2.80 Dividend policy
BASF Capital Market Story October 2015 18
Average annual performance
with dividends reinvested
0 3 6 9 12 15 18 21 24 27 30 33 36 39
Euro Stoxx 50
DAX 30
MSCI World Chemicals +6.7% Last 5 years October 2010 – September 2015 +11.9% +5.7% +9.2% +8.7% Last 10 years October 2005 – September 2015 BASF +7.5% +2.1% +35.2%
BASF Capital Market Story October 2015 19
Q3 2015 reporting
Business development
Path forward: Our priorities
BASF Capital Market Story October 2015 20
Our strategic principles
We add value
as one company.
We innovate to make
our customers more
successful.
We drive
sustainable solutions.
We form
BASF Capital Market Story October 2015 21 150 years 150 years
CAGR 2015 - 2020
2011 view
today’s view
Global GDP
3.2%
3.0%
Industrial production
3.7%
3.5%
Chemical production (excl. pharma)
4.0%
3.9%
►thereof growth contribution of
emerging markets
89%
82%
Fundamental trends intact; chemical
production growing faster than GDP
BASF Capital Market Story October 2015 22
Grow sales and earnings faster than global chemical production,
driven by
–
Continued focus on innovations
–
Capital expenditures
–
Acquisitions
–
Operational excellence and Verbund advantages
Focus on cash generation / conversion
Continue with our progressive dividend policy
Focus on pruning our portfolio
Maintain industry-leading position in sustainability
The way forward:
BASF Capital Market Story October 2015 23 150 years 150 years
Managing volatility: BASF almost perfectly
hedged on hydrocarbon price changes
BASF production and consumption of oil and gas
(in million boe, 2014)
BASF hydrocarbon consumption almost equals hydrocarbon production
Production of oil, liquids and gas Consumption of oil derivatives and gas 136 >100 Natural gas Oil and liquids
Natural gas for energy and as raw material
Naphtha and other oil based raw materials
31
BASF Capital Market Story October 2015 24
Strategic lever:
Continuous portfolio development
Specialties and
solutions
Differentiated
commodities
target (in % of sales*)~ 50%
~ 50%
Keep a balanced portfolio
Divestment of businesses e.g. due to loss of differentiation Divestment of businesses e.g. due to lower market attractiveness Commoditization leads to restructuring Growth fields Innovation pipeline Acquisitions
* Excluding Oil & Gas sales
Attractive markets
Differentiation by process technologies and integration
Attractive markets
Differentiation by customer proximity and innovations
BASF Capital Market Story October 2015 25 150 years 150 years
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 …
Strategic lever:
BASF Capital Market Story October 2015 26
Strategic lever:
Capital expenditures – our philosophy
Differentiated commodities
With proprietary technology and/or Verbund advantages
Focus on:
–
emerging markets
–
backward integration in the US
–
upgrading our asset base in Europe
Specialties and solutions
Incremental investments for new products
Regional expansion of businesses
Oil & Gas
Focus
investment budget by active portfolio optimization to secure free cash flow
BASF Capital Market Story October 2015 27 150 years 150 years
Selected major capex projects
Implementation of increased capex
program will drive profitable growth
Temporarily increased capex is necessary
– to build the base for further growth
– to strengthen our value chains
– to increase our footprint in emerging markets
Capex peaked in 2014 with €5.4 billion**
Capex spending
* W/o China; ** Investments in property, plant and equipment (without acquisitions)
. Care chemicals Polymer dispersions Polyurethane specialties Specialty plastics North America Cracker flexibilization and expansion Battery materials
Dispersion polymers Asia Pacific*
South America
Automotive coatings Crop protection products Oil & Gas
Europe
Aroma chemicals SAP Crop protection products Automotive catalysts Butadiene Admixture systems Specialty plastics Oil & Gas
China
Cracker expansion Amines Surfactants Acrylic acid & SAP Resins Specialty plastics Crop protection
products Innovation Campus
Start-ups 2011 - 2014 Start-ups planned for 2015 - 2017
TDI complex Precious metal recycling Specialty amines Crop protection products Oil & Gas
Acrylic acid & SAP Acrylates
Crop protection products Oil & Gas
Chelating agents Polyurethane systems Formic acid
Butanediol expansion Crop protection products Ammonia MDI Polyamides Butanediol / PolyTHF® Neopentylglycol Specialty amines Ethylene oxide Isononanol Coating resins Automotive catalysts Process catalysts Automotive catalysts Polymer dispersions Specialty plastics Aroma chemicals 2-Ethylhexanoic acid Polyisobutene Innovation Campus
BASF Capital Market Story October 2015 28
Investments for organic growth
Performance Products 15%
Oil & Gas 21%
€19.5
billion
Functional Materials & Solutions 13% Capex budget 2015-2019 Other 12% Chemicals 33% Capex budget 2015-2019 Asia Pacific 18%€19.5
billion
South America* 8% North America 27% Europe 45% Agricultural Solutions 6% Other 2%(by segment) (by region)
BASF Capital Market Story October 2015 29 150 years 150 years
Customers BASF
Suppliers
Energy & climate protection
Greenhouse gas reduction* of 40% by 2020 (base 2002) Energy efficiency: Introduction of certified energy
management system at all major sites by 2020
Water
Introduction of sustainable water management at all relevant sites by 2025
Safety, health and security
“Risk assessment” of products by 2020 >99% Health Performance Index** (annual goal) >0.9 Lost-time injuries*** by 2025 0.5 Process safety incidents*** by 2025 0.5
Employees
Women in leadership positions Non-German senior executives
Senior executives with international experience >80%
Evaluation of 70% of relevant suppliers with regard to their sustainability
performance by 2020
Increase the share of Accelerators from 23% to 28% by 2020
Strategic lever: Sustainability
Sustainability goals along the value chain
BASF Capital Market Story October 2015 30
2.6% 0.3%
Novel methodology to screen and steer our portfolio*
23% Accelerators:
– outgrow their markets by 2-10%
– deliver margins >10% above the average
– represent >60% of BASF’s R&D pipeline
74% Performers
<1% Challenged products
* 60,000 product applications analyzed; covering 98.3% of the relevant portfolio or €66.3bn. in sales (2014 data)
Increase the share of Accelerators from 23% in 2014 to 28% by 2020
Strategic lever: Sustainability
Sustainable Solution Steering
23%
74.1%
Substantial sustainability contribution in the value chain
Meets basic sustainability standards in the market
Specific sustainability issue which is actively addressed
Significant sustainability concern, action plan in development
Sustainable
Solution
Steering
BASF Capital Market Story October 2015 31 150 years 150 years 0 1,000 2,000 3,000 4,000 5,000 2015 2018
Annual earnings contribution
(in million €)
Targeted annual earnings
contribution of €1 billion by end of 2018
Optimization of processes and structures in all regions, e.g.
– manufacturing
– incremental capacities
– productivity increase
Project timeline: 2016–2018
DrivE program
Strategic lever: Operational excellence
DrivE with ~€1 bn earnings contribution
Former cost saving programs pre- 2008
NEXT 2008-2011 DrivE 2016-2018
BASF Capital Market Story October 2015 32
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
* Without considering Natural Gas Trading and Storage business
Progressive dividend policy
BASF Capital Market Story October 2015 33
Appendix I – Q3 2015 reporting
BASF Capital Market Story October 2015 34
Chemicals
Slight earnings growth despite start-up costs
Intermediates 707 +1% Monomers 1,522 (4%) Petrochemicals 1,411 (26%)
€3,640
(13%)
Sales developmentPeriod Volumes Prices Portfolio Currencies
Q3’15 vs. Q3’14 (2%) (16%) (2%) 7%
Q3’15 segment sales (in million €) vs. Q3’14 EBIT before special items (in million €)
616 580 726 548 633 0 200 400 600 800 Q3 Q4 Q1 Q2 Q3 2015 2014
BASF Capital Market Story October 2015 35 150 years 150 years Performance Chemicals 1,009 (2%)
Performance Products
Earnings impacted by challenging market conditions
Care Chemicals 1,218 +1%
€3,899
(1%)
Nutrition & Health 496 (5%) Dispersions & Pigments 1,176 +1% Sales developmentPeriod Volumes Prices Portfolio Currencies
Q3’15 vs. Q3’14 (2%) (4%) (1%) 6%
Q3’15 segment sales (in million €) vs. Q3’14 EBIT before special items (in million €)
376 217 515 304 319 0 200 400 600 Q3 Q4 Q1 Q2 Q3 2015 2014
BASF Capital Market Story October 2015 36
Functional Materials & Solutions
Earnings growth on continued good demand in automotive
and construction
Catalysts 1,472 (6%) Construction Chemicals 614 +9% Coatings 753 +2%€4,517
0%
Q3’15 segment sales (in million €) vs. Q3’14
Sales development
Period Volumes Prices Portfolio Currencies
Q3’15 vs. Q3’14 (1%) (5%) 0% 6% Performance Materials 1,678 +1%
EBIT before special items (in million €)
310 220 431 458 371 0 200 400 600 Q3 Q4 Q1 Q2 Q3 2015 2014
BASF Capital Market Story October 2015 37 150 years 150 years
Agricultural Solutions
Difficult market environment impacts earnings
in seasonally slow quarter
Sales development
Period Volumes Prices Portfolio Currencies
Q3’15 vs. Q3’14 6% 10% 0% (10%)
Q3’15 segment sales (million €) vs. Q3’14
0 50 100 Q3 Q3 0 300 600 900 1.200 Q3 Q3 1,077 7 43 1,018
EBIT before special items (million €)
2015
2014 2014 2015
BASF Capital Market Story October 2015 38
Oil & Gas
Higher earnings in Exploration & Production
Sales development
Period Volumes Price/Currencies Portfolio
Q3’15 vs. Q3’14 2% (6%) 2%
* Previous year values restated due to dissolution of disposal group “Natural Gas Trading“
9 176 236 79 625 0 100 200 300 400 500 600 700
Q3/2014 Net Income Q3/2015 Net Income Exploration & Production 667 +9% Natural Gas Trading 2,939 (4%)
€3,606
(2%)
Q3’15 segment sales (million €) vs. Q3’14 EBIT bSI/Net income (million €)
Natural Gas Trading Exploration & Production
Net income
436*
260
292
BASF Capital Market Story October 2015 39 150 years 150 years
* incl. Gas Marketing Company ** Economic interest of BASF
Oil & Gas
Impact of projects with Gazprom on BASF’s P&L
Oil & Gas EBIT Financial results
= Income before taxes and minority interests
./. Income taxes ./. Minority interests = Net income OPAL 50.02% At-equity consolidation
(share of net income shown in the EBIT)
Achimgaz (Achimov area IA) Wintershall AG
(Libya)
51%
Nord Stream (I) (offshore)
15.5%
GASCADE
50.02%
Planned Nord Stream (II)
(offshore) 10% NEL Planned Achimov area IV/V* 25% + 1 share Wintershall Noordzee (Netherlands) 50% 50% Yuzhno Russkoye (SNGP) 35%** Yuzhno Russkoye Gas Mktg C. Upstream
Natural Gas Transport
100%
100%
49.98% entitled to Gazprom Upstream
Natural Gas Transport
50.02%
50.02% entitled to BASF Proportionally/
BASF Capital Market Story October 2015 40
Review of ’Other’
Million € Q3´15 Q3´14
Sales 685 977
EBIT before special items (98) (7)
Thereof corporate research costs group corporate costs
currency results, hedges and other valuation effects
other businesses (104) (53) 22 30 (96) (53) 100 23 Special items 26 (20) EBIT (72) (27)
BASF Capital Market Story October 2015 41 150 years 150 years
Million € Q1-Q3’15 Q1-Q3’14*
Cash provided by operating activities 8,494 4,932
Thereof changes in net working capital miscellaneous items
2,500 (497)
(900) (181)
Cash used in / provided by investing activities (4,955) (3,785)
Thereof payments related to tangible / intangible assets (4,387) (3,587)
acquisitions / divestitures 227 355
Cash used in financing activities (3,504) (995)
Thereof changes in financial liabilities dividends
(649) (2,900)
1,661 (2,656)
* Previous-year figures restated due to dissolution of disposal group “Natural Gas Trading“
Q1-Q3 2015
Cash flow from operating activities increased by 72% to €8.5 billion
Cash inflow from changes in net working capital of €2.5 billion
Free cash flow improved to €4.1 exceeding free cash flow of FY 2014
Cash Flow
BASF Capital Market Story October 2015 42
Balance sheet remains strong
Balance sheet September 30, 2015 vs. December 31, 2014* (in billion €) Liquid funds Trade accounts receivable Long-term assets 10.4 1.7 Dec 31 2014 Sep 30 2015 Inventories Other assets 11.3 4.1 9.7 1.8 9.7 4.3 28.2 27.8 30.6 43.9 71.4 72.3 45.7 15.4 25.3 15.5 1.1 0.5 Disposal group Highlights September 30, 2015 Total assets increased slightly
by ~€1 billion to €72.3 billion
Inventories decreased by ~€1.6 billion
Trade accounts receivable down by €0.7 billion
Net debt nearly unchanged at €13.8 billion
Equity up ~€2 billion and an equity ratio of 42% Provisions & other liabilities Financial debt Equity Sep 30 2015 Dec 31 2014 71.4 72.3 Disposal group 28.2 27.8 30.1 15.4 26.2 15.5 0.5
BASF Capital Market Story October 2015 43 150 years 150 years