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Executives

Magdalena Moll – Senior Vice President-Investor Relations

Kurt W. Bock – Chairman-Executive Board

Hans-Ulrich Engel – Chief Financial Officer, Head-Corporate Controlling and Corporate Audit

Analysts

Peter Spengler – DZ Bank

Jeremy Redenius – Sanford C. Bernstein

Annett Weber – BHF Bank

Christian Faitz – Macquarie

Fabian Smeets – ING

Jean G. de Watteville – Nomura International Plc

James Knight – Exane BNP Paribas

Thomas Gilbert – UBS

Markus Mayer – Kepler Capital Markets

Anthony Jones – Redburn Partners

Richard Logan – Goldman Sachs

Jeremy Redenius – Sanford C. Bernstein & Co.

Martin Rödiger – Cheuvreux

BASF (OTCQX:BASFY) Q4 2011 Earnings Call February 24, 2012 10:00 AM ET

Magdalena Moll

Good afternoon, ladies and gentlemen, and welcome to the BASF 2011 Annual Results Conference here in Ludwigshafen. At the same time, I’d also like to welcome all, those of you who are watching the webcast or are listening on phone.

BASF posted again excellent results in 2011 despite moderate global economic growth and higher market volatility. Following a soft fourth quarter 2011, latest macro indicators signal a moderate sequential improvement of global economic momentum during the first half of 2012. And we will show you ladies and gentlemen, that BASF is in excellent shape and fit for 2012 and beyond.

With me today are Kurt Bock, our Chairman of the Board of Executive Directors; and Hans-Ulrich Engel, our Chief Financial Officer. Kurt will highlight BASF’s performance in 2011, and talk about the key strategic achievements of last year, before he will conclude with the outlook for the year 2012.

Hans will then review the fourth quarter 2011 segment results, explain some details with respect to the financial statements, and finally provide you with some projections and good numbers for year 2012. Afterwards, both gentlemen will be happy to take your questions.

Now please let me remind you that we are webcasting this event. We already posted the chart, speech as well as the press documents on our website at www.basf.com/share. Before we start, I also would like to ask you to please turn off your mobiles and BlackBerries, because they could interfere with our microphone system.

And furthermore, I would like you to take a look at the disclosure and forward-looking statements page here on the chart behind me. And actually, disposed already to the end of my introductory statements, and I would like to hand over to Kurt.

Kurt W. Bock

Yeah, thank you, Maggie, and also a welcome from my side. Ladies and gentlemen, we’re glad to have you here in Ludwigshafen for our 2011 earnings call so to say. Also welcome those of you who join us via webcast.

BASF achieved again new record sales in 2011. In the last 12 months, we reached sales of €73.5 billion, up 15% compared with the full year 2010. EBITDA at €12 billion, and EBIT before special items at €8.4 billion also marked new record highs.

We also delivered on our promise to significantly increase EBIT before special items adjusted for non-compensable oil taxes. We achieved €8 billion, which represents an increase of 12%.

EBIT came in slightly higher than EBIT before special items due to the disposal gain from the formation of the Styrolution joint venture, which we formed on October 1.

Net income climbed to €6.2 billion, an increase of 36%. And adjusted EPS reached €6.26, up 9%, and finally operating cash flow was €7.1 billion, up 10% and a new record as well.

In the fourth quarter 2011, we saw as expected a slowdown in business activities, but we continue to pursue our value before volume strategy. Moreover, customer orders were down due to slowing demand and tight inventory management. This resulted in lower volumes and margins across most of our chemical businesses.

Sales in Q4 increased by 10% to €18.1 billion, primarily due to our successful price increases of 9 %. BASF achieved again a record EBITDA in a fourth quarter of €2.9 billion, up 7%. EBITDA as well as EBIT of €1.9 billion were positively impacted by the disposal gain of Styrolution in the amount of €593 million.

EBIT before special items declined by 14% mainly due to lower volumes and margins in several of our upstream businesses. In addition, EBIT before special items was down as the Styrenics activities were moved out of BASF into the Styrolution joint venture. Net income was €1.1 billion, up 3%, and adjusted earnings per share were at €1.05 in Q4 which is a slight decline compared with 2010.

What did we achieve in 2011. We are on track with our announced investments for future growth. Just to name a few, we successfully started up the plan of the second phase of investments at our Verbund site in Nanjing, and commissioned Nord Stream and the OPAL pipeline.

In 2011, we have completed the integration of Cognis, and we are on track to realize synergies of €290 million. Our Styrolution joint venture with Ineos successfully commenced operation on October 1 as mentioned before.

And in September, we signed a contract with EuroChem to sell our fertilizer activities in Antwerp. In January of this year, we announced that we signed also a contract to sell our 50 % in PEC-Rhin in Ottmarsheim, France, to our joint venture partner GPN, a member of the French Total Group, thus completing our exit from the fertilizer business. We also delivered on operational excellence. We finalized our NEXT program, which will lead to more than €1 billion of annual earnings contribution.

BASF already has leading positions and fast growing businesses in the emerging markets and we will continue to build on these. BASF’s sales in the emerging markets increased to €21.2 billion in 2011. This represents 34% of BASF’s total 2011 sales excluding Oil & Gas. Since 2001, we have generated a compound annual growth rate of 13% with our activities in the emerging markets.

We will further spur organic growth in these countries by increasing our sales forces, strengthening regional R&D, and investing in new production capacities. We expect that in 2020, emerging markets will contribute around 45% to BASF’s sales excluding Oil & Gas.

In 2003, we set the goal of earning a premium on our cost of capital. Since then we earned a premium every year, with the exception of the crisis year 2009, which also includes and the first inclusion of Ciba. In 2011, we again reached a significant premium of €2.6 billion on our cost of capital. We achieved this high premium despite a higher cost of capital rate: For 2011, the cost of capital rate increased from 9% to 11%, which explains the lower premium achieved. For 2012, we are also calculating with a cost of capital rate of 11%. In the coming years, we strive to earn an average premium on our cost of capital of at least €2.5 billion.

Ladies and gentlemen, as you know share return is of utmost importance to us. We stand by our dividend policy to increase our dividend each year, or at least maintain it at the previous year’s level. We will propose as you have seen this morning to the Annual General Meeting to pay out a dividend of €2.50 per share, an increase of €0.30 or 14%.

Over the past ten years, the compound annual dividend growth rate was 15.2%. This reflects an attractive dividend yield of 4.6%, based on the share price of €54 euros on December 30 of last year.

Moreover, we continue to deliver consistent long-term value for our shareholders. Over the past ten years, the average annual return on BASF stock was 14%, clearly outperforming the German and European stock markets as well as the MSCI World Chemicals index. In the last five years, which were impacted by the economic crisis, the outperformance was even better.

Let’s me turn to the outlook for 2012, which obviously is much more important to you. Obviously today the uncertainty about the development of the next 12 to 24 months is much higher than expected a year ago. Our plan for 2012 is based on the following assumptions.

First, in 2012, we expect GDP growth of 2.7%, the level achieved in last year. Second, we expect global chemical production without pharmaceuticals and industrial production to grow by 4.1%, respectively, which is below last year’s number. And finally, we assume an average oil price of $110 per barrel as well as an average exchange rate of $1.30 per euro.

In 2012, global chemical production excluding pharmaceuticals again will continue to grow from our point of view in all regions. While the current uncertainties in financial markets will dampen growth perspectives, the chemical sector will benefit from positive impulses from emerging markets.

In Europe, we expect growth at a lower rate. However, please keep in mind that we saw a significant surge in demand in Europe in 2011. In Asia, excluding Japan, growth continues to be strong at approximately 8%. Despite an anticipated slowdown in growth due to lower export demand, China is expected to still grow strongly with nearly 9% this year.

Based on these assumptions, the outlook for the year 2012 is as follows. We strive to increase volumes in 2012 excluding the impact from acquisitions and divestitures. We aim to exceed again the record levels of sales and EBIT before special items achieved by BASF Group in 2011. However, in the first half of 2012, we will most likely not achieve the exceptionally high results of the comparable period of 2011. However, we expect to outperform during the second half, meaning higher results in the second half of 2012, in the second half of 2011.

More specifically, we plan to increase sales and earnings in all our business segments with the exception of the segment Chemicals, where we expect sales to be above last year’s level, but earnings to decline due to margin pressures in petrochemicals and intermediates. Sales and EBIT before special items in Other, will be lower than last year simple due to the formation of Styrolution, now accounted for at equity.

Looking at 2012 and beyond, we announced at our Strategy Day last November that BASF wants to deliver an EBITDA of €15 billion euros by 2015, compared with the €12 billion in 2011.

With that I’d like to hand over to Hans, who will review on some other details and the financials. Thank you.

Hans-Ulrich Engel

Yeah, thank you Kurt, and good afternoon ladies and gentlemen also from my side. I will focus in my presentation on the business development in the fourth quarter of 2011 in comparison to the fourth quarter of 2010.

I’ll start with Chemicals, in Chemicals, successful price increases in all divisions led to higher sales. In addition, the start-up of the Styrolution joint venture contributed positively to the top line because feedstock sales to the joint venture are now reported as third party sales. Due to the weakening demand and ongoing high raw material prices, EBIT before special items came in significantly lower.

In Inorganics, sales grew by 9% mainly as a result of higher prices and slightly higher volumes. EBIT before special items was significantly up driven by higher margins. Following excellent results in the first three quarters of 2011, we saw a softening of demand in Petrochemicals. However, sales grew by 9%. We increased product prices due to higher feedstock cost. Volumes were considerably down since customers speculated on falling prices and consequently delayed their orders.

EBIT before special items came in substantially lower given reduced volumes in many product lines and lower margins particularly for cracker products in all regions. Sales in Intermediates decreased by 4% due to customers’ destocking at year-end. Accordingly, we adjusted our global capacity utilization and reduced our inventories. EBIT before special items declined.

For the full year 2011, sales in Chemicals rose by 14% and EBIT before special items reached a new high of €2.4 billion. Despite lower volumes in major product lines, sales in Plastics increased due to higher prices primarily in the Performance Polymers division. EBIT before special items declined considerably due to lower margins as a result of weak demand and increased raw material costs.

In Performance Polymers, sales went up by 8%. Polyamide & Intermediates sales rose driven by price increases. In Engineering Plastics, higher demand in North America compensated for lower volumes in Europe and Asia. EBIT before special items was however, significantly lower due to the receding margins, especially in intermediates. Sales in Polyurethanes rose by 2%. We realized higher prices in all businesses, with the exception of TDI.

TDI prices and margins remained under pressure since sizable new capacities came on stream during the year and higher raw material costs could not be passed on to our customers. EBIT before special items was substantially down mainly due to lower TDI margins.

For the full year 2011, sales in Plastics rose by 12% and EBIT before special items came in below the high level of the previous year. The Performance Products segment posted a 19% rise in sales. The inclusion of the Cognis businesses as well as strong price increases across all divisions contributed to this growth. Volumes, however, declined by 6%, with a relatively strong volume decrease in Paper Chemicals and Performance Chemicals.

EBIT before special items declined by 25% due to higher raw material costs, margin pressure, and higher fixed costs partly related to the integration of Cognis. Special items amounted to €125 million mainly related to the restructuring charges in Paper Chemicals and the Cognis integration.

In Dispersions & Pigments, we posted higher sales in all regions and in all product lines except in pigments. The sales growth was driven by price increases and the inclusion of Cognis. Higher raw material cost could partially be passed on to the market. EBIT before special items declined substantially as a result of reduced pigment volumes and lower margins.

Sales in Care Chemicals increased by more than 50%, thanks to the inclusion of Cognis business. Price competition as well as tight inventory management by our customers resulted in a slight volume decline. However, ongoing price increases, especially for detergents and formulators, compensated for the decline in volumes. Integration costs related to Cognis negatively impacted EBIT before special items.

In Nutrition & Health, the inclusion of the Cognis businesses and slightly higher prices contributed to good sales growth. Higher fixed and raw material costs as well as product mix effects outweighed price gains. Consequently, EBIT before special items declined substantially.

In Paper Chemicals, demand was down because paper producers ordered less given the weaker economic environment. Volume losses could not be offset by higher selling prices. Despite these challenges, EBIT before special items improved benefitting from ongoing restructuring measures and stringent fixed cost reduction.

In Performance Chemicals, price increases and the inclusion of Cognis lifted sales. However, volumes declined significantly due to destocking activities at our customers. EBIT before special items was lower due to reduced volumes and higher fixed costs. For the full year 2011, sales of the Performance Products segment increased by 28% to €15.7 billion. EBIT before special items reached €1.7 billion, an increase of 11%.

Volumes in the Functional Solutions segment were up 6% driven by growing demand from the automotive industry for mobile emissions catalysts and automotive coatings. Demand from the construction industry increased slightly, primarily owing to improved building activity in North America and Asia.

EBIT before special items more than doubled. Catalysts’ sales increased by 17%, mainly due to higher sales volumes of mobile emissions catalysts particularly in Asia and North America. With €676 million, the sales contribution from precious metal trading was up by 3.4% driven by higher prices. EBIT before special items improved strongly.

In Construction Chemicals, sales were up 4%. The business environment in Southern Europe remained challenging. However, we experienced a positive development in demand in North America and Asia Pacific. EBIT before special items declined mainly due to higher fixed costs. We implemented restructuring measures to streamline our structures in Europe and Asia.

Sales in Coatings increased by 8% reflecting continued high worldwide demand for automotive OEM and refinish. EBIT before special items came in significantly above prior year. Coatings incurred high special items primarily in preparation of the planned divestment of Relius Decorative Paints. For the full year 2011, sales in Functional Solutions rose by 17 % to €11.4 billion and EBIT before special items was up 20% at €559 million.

Now to Agricultural Solutions, while reaching new records in both sales and earnings for the full year 2011, Agricultural Solutions saw a slight sales decline in Q4 due to pre-buying of our customers in Q3 in South America and portfolio optimization measures. In Q4, price increases of 2% were achieved, confirming guidance. Regionally, sales in Europe were driven by positive year-end business in France. In North America, sales were up due to higher fungicide sales.

BASF’s growing success in South America and other emerging markets has driven rapid growth of second half year Crop Protection sales over the past years, surging from €1.3 billion in 2009 to €1.7 billion in 2011. This corresponds to an increase of 31% in only two years. EBIT before special items in the fourth quarter almost matched the prior year’s level, despite an increase in R&D spending and selling costs. The investments for our future growth are reflected in the significantly increased peak sales potential of our R&D pipeline, which amounts to €2.8 billion.

For the full year 2011, sales in Agricultural Solutions rose by 3% to €4.2 billion and EBIT before special items was up 8% at €810 million.

In Oil & Gas, sales increased by 33% driven by higher sales volumes and prices in natural gas trading. In Libya, the onshore oil production restarted mid-October with 20,000 barrels per day, and reached 60,000 barrels per day at the end of December 2011 compared to a production capacity of 100,000 barrels per day. EBIT before special items for the entire oil and gas segment declined by 4% in Q4 2011 due to lower production levels in Libya.

Reported EBIT, however, came in 11% higher due to lower special items. Net income after minority interests went up by 20% to €276 million. Exploration & Production, volumes were below previous year’s level as a result of the curtailed oil production in Libya. However, higher oil prices partly compensated for the lower production volumes. Consequently, sales declined by only 4%. Sales in Natural Gas Trading rose strongly thanks to higher gas prices and volumes. Margins, however, continued to be under pressure by the relatively low price level on the spot market. This effect was more than compensated by additional earnings from the start-up of the OPAL pipeline.

For the full year 2011, the oil and gas segment reported sales of €12.1 billion, up 12%. EBIT before special items decreased by 13% to €2.1 billion. Adjusted for non-deductible oil taxes, EBIT before special items came in 16% higher at €1.7 billion. Net income rose by 15% to €1.1 billion.

In other, sales decreased by 30% due to the deconsolidation of Styrenics following the formation of the Styrolution joint venture with Ineos on October 1, 2011. EBIT before special items, increased by €128 million due to both, lower hedging losses as well as a lower provision for the long-term incentive program. Positive special items of €623 million resulted primarily from the disposal gain of Styrolution. For further details please refer to the Annual Report 2011.

We started the year 2011 with a cash position of €1.5 billion. With €7.1 billion, we again generated an excellent cash flow from operations in 2011 thereof €2.1 billion in Q4. Free cash flow reached €3.7 billion, thereof €768 million generated in the fourth quarter.

In 2011, we stuck to our priorities with regard to the use of cash. We spent €3.4 billion for capital expenditures, which was significantly up from previous years’ levels. Major projects which started operations in 2011 included the expansion of the Nanjing Verbund site in China and the new methylamine plant in Geismar, Louisiana. In addition, we completed the new Oleum plant in Antwerp, Belgium, and extended our natural gas pipeline grid with the OPAL and NEL pipelines in Germany.

Net cash-in mainly related to the formation of the Styrolution joint venture amounted to €0.5 billion. We paid €2.5 billion in dividends to our shareholders and minority interest holders. And we used €2.4 billion for the repayment of debt. Other cash inflows include mainly the proceeds of the K+S disposal. At the end of 2011, we had a cash position of €2 billion.

Let me turn to our balance sheet. Compared with 2010, total assets rose by €1.8 billion to €61 billion. Long-term assets declined by €445 million. Due to the sale of K+S shale’s, financial assets declined by €1.1 billion. The Styrenics net assets in the amount of €734 million, which were reported as assets of the disposal group were deconsolidated with the start-up of the Styrolution joint venture on October 1, 2011.

BASF’s 50% stake in the Styrolution joint venture will from now on be reported at equity. Our equity ratio improved from 38.1% to 41.5%. In 2011, we repaid two bonds in the amount of €1.2 billion.

We reduced net debt by €2.6 billion to €11 billion, a reduction of €650 million in Q4 alone. With this, our net debt-to-EBITDA ratio is now below one. With our A1, A+ rating and a well-balanced maturity profile of financial debt, BASF has an excellent financial position.

Now, I’d like to give you some additional information and start by our operational excellence program STEP. We are now taking the next STEP in operational excellence; key focus areas of the recently announced STEP program are fixed cost reductions and margin improvements across the entire Group. We expect the program to result in annual earnings contributions of about €1 billion by the end of 2015.

Generating a strong cash flow will remain a key priority for 2012, and we will continue to keep tight control on our working capital. Our priorities for the use of cash remain clearly set. We continue to put great emphasis on organic growth through innovations. Therefore, we plan to increase our global R&D expenditures from €1.6 billion to €1.7 billion in 2012. We project CapEx spending of about €3.5 billion.

As demonstrated again this year, we remain committed to our dividend policy. In conclusion, BASF continues to be fit for 2012 and beyond. Thank you very much for your attention. And we are now happy to take your questions.

Question-And-Answer Session

Magdalena Moll

Thank you very much, Hans. Ladies and gentlemen, we have a new system today with respect to our questions-and-answers. (Operator Instructions) So with this, I’d like to start with the first question from Nobert Barth, then comes Mathis Meya, and then Peter Spengler.

Norbert Barth – WestLB

Can I start? Mr. Bock, you said that the outlook statement is important for us, you are right. So perhaps, what I want to know a little bit or can you give us a little bit of flavor what happened especially with the beginning of the year 2012, so January, February already low. So, can you elaborate a little bit how that business goes by volume pricing and by order intake, and also perhaps regarding to your guidance, full year guidance 2012, you mentioned EBIT before special item, you know last year we had a special situation with this oil tax, where you exclude that guidance. So first question, is it – and what is it this time really. And I believe it’s now including the oil tax, would you keep the same or are you the same confident if you exclude in the EBIT before special items, also the oil tax because this year we have to expect some – because we got some from the oil tax side.

Kurt W. Bock

Yeah, I think it was a [referral] for the question. And how did we start into 2012? Let me start by talking briefly about Q4, because in Q4 we saw volume decline as you notice, also in chemicals. And as this means that essentially during Q4, there was inventory destocking effect, and customers became very, very cautious because they simply expected price declines.

What we saw then in January, and this now goes into February that they came back, and they buy, so this is improving. However, volumes are still below the very, very high level we had achieved in the first quarter of 2011, and you remember that the first quarter of 2011 was the absolute best performing quarter we have ever had. And I today, I’m not in a situation that I can tell you that we will have higher volumes in Q1 of 2012 than we had last year. That needs to be seen, but it’s coming back, and it’s getting much better than what we had in Q4 over the course of the first quarter.

Pricing is okay, we’re still, and I feel better to increase prices. Just to give you one example is, for the oil sands, MDI went out and put price increases forward, which highlights our strategy of value before volume. This is still our preferred strategy, I think this is the value creating strategy for the chemical industry, which could lead naturally sometimes also to volume losses because one or the other customer might say, okay, I don’t accept that, but we’re pushing very hard.

Order intake is robust, last year’s number, but that is certainly also affected by price effects because we have seen steady price increases over the course for 2011. Excluding oil and gas, what was the other part of your question? We give guidance now for full year, say we want to increase sales and earnings above the record levels of 2011. And we qualified this by saying, most likely during the first half we will not achieve the numbers of last year, which is service revenue, and extremely optimistic start into the year.

However, we think based on our economic assumptions, GDP growth, chemical production growth et cetera, that during the second half we should be able to outperform the numbers which we have achieved in the second half of 2011.

And we stick to that guidance. It includes oil and gas, and we will not now go into segmental guidance, we certainly strive, that’s quiet clear, we certainly strive to improve our chemical earnings as well, that to a certain degree will clearly depend on the upstream business, and we made one caveat, where we said in petrochemicals and intermediates, and I said this in my speech, we do not (inaudible) but most likely, we will see some kind of margin squeeze, because we are coming from extremely high as you all know, from extremely high margins, especially in petrochemicals in 2011.

Magdalena Moll

The next question is coming from [Markus Meijer] table 20.

Unidentified Analyst

First on your named de-stockings, can you give us a flavor from which regional and which end customers we see scraping that are coming from, and the second question on your STEP program, and can you give us a split from which business unit or business division does STEP program or the cost savings are coming from?

Kurt W. Bock

Actually, I don’t think that we have provided that detail of information about mix and STEP, which division, which segment will provide what number. What we have done over the past couple of years is that we detailed quarter-by-quarter essentially how much have we already achieved or what is the run rate, and actually we over performed compared to our €1 billion goal for the next program. So we are very confident that we will achieve the STEP €1 billion as well.

Destoking, that was a pretty big effect actually in Asia. Asia accrued down, you saw that also when you look at our quarterly numbers for Asia accrued down quite a bit. There were also some portfolio and mix effect. But I think Asia wasn’t effect, solid with and Europe as well and United States, Hans can probably better answer than I, because that’s his…

Hans-Ulrich Engel

Yeah, thanks Kurt. In the United States where we’ve seen, or in North America what we’ve seen there is, also in the fourth quarter tight inventory management. We’ve seen that in particular, going into the fourth quarter, and I think as a result of the overall feeling about economic development in North America getting better. We actually saw that the situation improved going into December, and it’s looking pretty good for the months of January now, and also going into the months of February. And there in particular, an industry that’s going strong is automotive.

Magdalena Moll

So then we come to the next question from Peter Spengler table, number nine, in front of us.

Peter Spengler – DZ Bank

Okay, thank you very much. Two questions if I may. First is, on your sales projection, can we add something like 2% to the chemical production cost in 2012, like always? And second question is on your business in United States, there’s quite a hype about shale gas and also oil production there. There’s talks about new production facilities, so do you have plans to expand your business there?

Hans-Ulrich Engel

You’re absolutely right. We refer to our target to increase our business by about 2% of that chemical production that is what we always have said. Obviously, this is a medium term kind of average tie, we cannot promise you that we would achieve those numbers in every single, particular year, no. I was striving to achieve something like that this year, quite clearly, yes, yeah. But again, too early to say.

Kurt W. Bock

Yeah, and your question on shale gas, that is certainly providing a competitive advantage here to the North American chemical industry. Just to give you an idea, average stock prices in the month of January in U.S. were right around $2.50 per million BTU, average spot price in Western Europe in excess of $8 per million Btu, gives you an idea on the environment there. What are we doing with respect to it, one we’ve started up last year in 2011, a new methylamines plant, which is natural gas methanol based. We’re looking at the situation, we haven’t announced any further major investments, but you see us taking advantage of that as an example now. With the revamp of our cracker in Port Arthur, where we will shift a little bit to lighter feet taking advantage of low natural gas prices.

Peter Spengler – DZ Bank

Welcome.

Magdalena Moll

We’re now moving to the next three questions, first is (inaudible) table 21, and Tony Jones, 25 and Martin Rödiger, table number 10.

Unidentified Analyst

Yeah. And my first question is on TDI actually, I think it’s the second consecutive quarter they report lower margins, and you’re also saying that additional capacities are hitting the market and deteriorating the prices here. What makes you so confident that your own capacity is coming on stream, I think end of 2014 along with your competitors, when it will be absorbed by the market, and you will come back to more healthy margins in TDI. That would be my first question, and the second one, more a housing keeping question, you talk about feedstock sales in chemicals becoming third party sales due to Styrolution joint venture, could you quantify that effect for the final quarter, please?

Kurt W. Bock

We have to think about the second question. Hans, do you have an answer, okay, give the answer.

Hans-Ulrich Engel

That effect is $350 million in sales. And what that is, is the net effect of losing the Styrolution sales and then having sales coming out of the petrochemicals operating division.

Kurt W. Bock

To TDIs, your observation is actually is correct, squeeze on TDI margins over the last couple of quarters. As expected, we have to say, we knew that, that was going to happen because obviously capacity which has been installed could be forecast early couple of years ago. And so there is no big surprise from our point of view.

Our investment for the TDI expansion here in Europe, in Germany is really based on mid-term forecasts, where we see a balancing out of supply and demand over time. And we will contribute to that as well, because I think we are aware that we will shutdown ultimately than our relatively small 80,000 ton capacity, which we have in Eastern Germany in (inaudible).

What is really important, new TI plan from our point of view as far as we observe the market, that have very, very attractive cash costs, extremely attractive cost position, and that makes us quite confident that we’re really able to reap some benefits from that investment, absolutely.

Unidentified Analyst

(Inaudible)

Kurt W. Bock

No.

Unidentified Analyst

No, thank you.

Kurt W. Bock

Sorry.

Magdalena Moll

So now we’re moving on with Tony Jones from Redburn, table number, 25.

Anthony Jones – Redburn Partners

And some others are trying to reconcile your new guidance in a period of fairly challenging visibility with that old market assumption, that at these kind of times visibility for BASF is like a few months, three months forward on the order book. So does that imply that the mix of the business over time has allowed you to get better visibility and your order book is further forward, and say just three months, especially some of the downstream business or you just hoping that margins recover on restocking? That’s the first one. And then secondly, last year a few of the businesses had quite big mismatch on input cost to selling prices, especially down stream especially, are you able to fix that, I mean are you looking at any measures to stay short in the price duration of certain contracts, is there any thing you can do to try and close that gap? Thank you.

Kurt W. Bock

Thanks, Tony, for that questions. I think those questions are related with each other. It’s an important point, did our portfolio change over time, has it changed and does it really benefit our ability to forecast path forward. There are a couple of things where we see upside potential for 2012.

First of all, we have some businesses, which we’re not performing at the level of access that you don’t understand, one is obviously paper chemicals, and we have talked about this for quite some time because it’s restructuring case coming from the combination of our business with Ciba’s business.

This is an ongoing process, we are making pretty good progress, I would say and this will help us through 2012 as well. The other one, where we are heavily affected by the business environment is construction chemicals, apparently. We expect a little bit of a bottoming out or the market, you see first indications in North America for that, all are at a very, very low level, and we shouldn’t really be overconfident here, but it means essentially that also in construction chemicals we see an opportunity to improve over what we have achieved in 2011.

Then we had Cognis integration, the Cognis integration did not just bring a very special item, it also had additional costs which are accounted for as normal ongoing cost, IT integration is just one example. Those costs will not re-happen again in 2012. These are all transporting activities as you notice.

Automotive, I think Hans already alluded to it. Automotive performed much better as an industry in 2011 than what we had expected, and we’re quite optimistic, frankly for the industry, and particularly for our customer portfolio which we serve, and Asia and North America would also, and Europe. And that tells us that there might be some upside potential as well.

The problem is still, and we’ve mentioned the level of visibility that the orders on hand, tell us something for the next, 2 to 3 to maximum four month. And beyond that, it’s pretty cloudy and actually pretty dark out there. So our full year guidance is only based on the underlying assumptions. Again, I repeat myself, there is global economic growth and also chemical industry and industrial growth. So I think, these are a couple of explanations, what we see, yes, the portfolio has shifted and yes we have opportunities.

What has happened in 2011 is also, you have to keep in mind when we talk about the downstream businesses. We had a huge surge in prices and margins, and we’re optimistic to the piece of petrochemicals, intermediates. These guys sell at market price to our downstream businesses. So these, our downstream people had to fight very, very hard to maintain their margins, bring up prices. This simply takes time as we all know, in some industries we have annual contract. So now, we’re working through this, and you will also will see some effect from that account of adjustment through 2012.

So these are essentially underlying positive developments we have realize, and still we have to work very hard to make them happen, but we have an opportunity here.

Magdalena Moll

Now, we come to next question from Martin Rödiger.

Martin Rödiger – Cheuvreux

Yes, two question from my side. First on Others segment, taking out the Styrenics business, and then also the fertilizer business, would it be fair to assume that this segment will generate a loss of €800 million on a normalized basis (inaudible)? Or should we keep in mind that you had some release of provisions for the [BOP] program or any freefall profits from the hedging result? And if so, can you give us an indication what was the effect from both in 2011?

And secondly, on financial results, could you provide us with a pro forma profit contribution figure for Styrolution in your financial result for 2012 or at least a pro forma for 2011? And may be an indication, which or how much of restructuring costs we have to assume for Styrolutions in the next years to come?

Kurt W. Bock

On Other, as your question is, can you assume €800 million in cost on an ongoing basis. I am just trying to think about that, with now Styrolutions moving out, with fertilizers moving out, I’d say that figure is slightly too high. What we have in Other, there is one, the cost for our cooperate R&D programs, it is because of our central corporate organization. So if I think about that, I’d say that figure of 800 is too higher overall.

Hans-Ulrich Engel

Financial results and Styrolution, please keep in mind, we will now account for Styrolution at equity, which means we do not control restructuring cost of Styrolution directly. And we are just one shareholder with 50% share. And we are sitting on the broader side working with the Styrolution management who essentially take those decision, and I cannot tell today, what kind of restructuring, what kind of costs they plan for 2012.

We expect, obviously based on the combination both businesses Ineos and BASF, we have a healthy financial income, that income is slightly effective when you look at our annual report, that is the beauty of having the annual report in front of you, a very discrete and detailed accounting for the options we have in place for placing our share to Ineos or Ineos asking us to sell to them, because under IFRS now, we have to, on a revenue basis determines a fair value of those options, and that will also impact the financial result. It’s some thing which doesn’t add any value, it keeps the accounts maybe happy, (inaudible) it’s amazing what you have to do today.

Magdalena Moll

This brings us on to the next question Jeremy Redenius from Sanford Bernstein, table 37.

Jeremy Redenius – Sanford C. Bernstein

Hi, this is Jeremy Redenius. Can you please give us an indication of the production level you achieved in Libya for the full year 2011. On my math, you averaged about 35% of your potential volume there, I’m wondering if you can confirm that, then also your expectation for 2012.

And then second, could you talk a little about your expectations for wage inflation in 2012, and also changes in headcount. Please, thank you.

Magdalena Moll

Jeremy, I didn’t get your first question. Could you repeat it again?

Jeremy Redenius – Sanford C. Bernstein

Could you give us an indication of the production volume you achieved in Libya in 2011 full year?

Kurt W. Bock

In Asia, it’s obviously much higher than in Europe, as we probably followed here in Germany. Right now, we have negotiations starting between the unions, and the employers and they expect 6%, and that is solely higher than what we want. So I do want to speculate about this, that in the past, we always had across the globe something like 2% to 3% wage increases on average.

Headcount increase, approximately 1,500 people globally, something like that. It’s not – in terms if you control very, very closely on a local level or business level, but apparently in some cases, it’s directly linked to volume as well and business opportunities. So it’s obviously little bit difficult to give you precise number for the entire year, this number will be adjusted according to business needs, obviously.

Hans-Ulrich Engel

Hello, Jeremy, your question on Libya. I tried to do the math quickly. We run in Libya to, let’s say roughly the end of February, using the full capacity that we have there, then we had a ramp-up phase during November, that got us to on average in the second half of December to 60,000 barrels per day. I’d say, if you take all of that together, we were probably somewhere in the range of 25% to 30% of the capacity that we have in Libya.

Magdalena Moll

Richard Logan from Goldman Sachs. Next question.

Richard Logan – Goldman Sachs

Okay. You’ve mentioned about some restocking going on at the start of the year, I just wondered if you could give us a sense of your perception with regards to inventories in the channel. And then secondly, I remember previously whenever you completed the Ciba integration, you announced the Cognis acquisition fairly shortly afterwards, given that you have now completed the Cognis integration, should we expect a significant acquisition in the coming months, and also with that, I mean are there any particular areas that you would say that are more likely than others. I mean would you potentially consider oil and gas assets? Thanks.

Kurt W. Bock

I’ll start with the Ciba, Cognis. So going by the [pad] on Ciba, Cognis obviously we’re working on the letter C right now. But seriously it’s too early to say. I mean we are not really motivated by, let’s say, our integration experts now being ideal, and let’s do something about it, but more by the strategic fit, and by the financial attractiveness and this is everything. I can say right now is not only to add – I wouldn’t expect a pattern that something has to happen, almost automatically. I agree for a couple of years we had, every other year we had a mid-sized acquisition from our point of view. And what you have seen obviously is that, we are quite busy building up capabilities in some areas, particularly in better ways, where we’re some three smaller acquisitions all capability driven, which is a different pattern apparently than acquiring Ciba or Cognis, new businesses or complementary business in some cases. And this is also important for creating future growth and earnings.

Hans-Ulrich Engel

If I get your question correctly, re-stocking, de-stocking, where are all the customers that was the question. Where are we, as always, not that easy to tell because our customers have a tendency not to tell us absolutely where they are with respect to their inventories, but what we’ve seen is that, basically everyone has managed their inventories tightly during Q4.

As a result of that, our assumption is that our customers are running their inventories at what’s called safety level. So not a lot of room to go below that, actually probably no room to go below that. And as a result of that, the expectation is that, we’ll see some restocking activities, still very early to tell because there is a number of – let me say norms out there in particular with respect to Asia that makes things a little bit difficult at this point in time to comment on. That simply has to do with the fact that, this year we have Chinese New Year already in January, while last year as we had in February. So comparing there, in particularly in Asia, you’ve got a distorted picture, which makes it a little bit difficult to comment on that, but overall as I said, based on what we see customers running on very, very low inventories.

Magdalena Moll

So now, next three questions coming first from Annett Weber, then Christian Faitz and finally and finally (inaudible), and that is table 24.

Annett Weber – BHF Bank

Just a quick housekeeping question on Cognis. You mentioned a couple of times that they have the integration costs in Q4 again that were not shown as special items, can you possibly quantify the impact on Q4 results in performance for us, at least for us in Q4?

And the second question relates to the pricing side, you posted a 9% price increase year-on-year across a whole group in Q4, when you look at this pricing number in comparison to Q3, where would we see the percentage price increase Q4 versus Q3. And then, the third question relates to the – overall question on the raw material cost increase that you have seen in Q4 compared to the prior year quarter, please?

Kurt W. Bock

Integration cost for Cognis not accounted for as special items, about €40 billion in Q4, that seem to be some kind of run rate as well. Price increase consecutively Q4 over Q3, I don’t have it at the tip of my finger, I have to say we have to look it up, and I’ll give you the number later on.

Raw material price increase was quite dramatic actually throughout 2011 going into the first quarter. And that as I said earlier, is still our biggest concern we have right now. If the oil prices really continues to go up, then the world would look probably differently. If the higher oil price would just be an indication of a good thriving global economy, that would be nice, but apparently the oil price is not entirely driven by economic considerations. The raw material effect, I don’t think we ever quantified this actually. We try to keep it a little bit opaque here.

Magdalena Moll

So, Christian Faitz, table number 11.

Christian Faitz – Macquarie

Yeah, thanks. Just quickly two things, first of all agricultural solutions, can you give us an update about current trading conditions, however still you’re started, how is the crop season started for you on the volume side and pricing side?

And then second, maybe more complex question. How do you deal at the moment or maybe for the business year, the spreads between your oil linked contracts for you gas trading activities, and the spot market and gas, because apparently there seems to be somewhat of a gap which could at some point lead to certain loss situation in natural gas trading simple because of the – just because my understanding is, you are buying oil-linked, oil linked gas price from gas plant. And so you can only give obviously the spot market, a price into your customer base. Thanks.

Kurt W. Bock

The question about for – about our ag business, first of all, let me state that just looking at Q4 is not really a good indication where we are in that particular business because Q4 is kind of a – just a final part of the year, clearly absurd to say housekeeping. The start into the first quarter was excellent. What we’ve seen so far, we are very confident for 2012 to see good volume growth often based on the overall, our underlying good conditions in the industry, for instance in the United States, because here we expect record acreage to be grown, 95 million acres, we have never seen that before.

So, yeah, I think the preconditions for good growth are there. On top of that we have an excellent portfolio, we had in press release, talk about that later last year about our pipeline and you notice that we increased the pipeline value of our products about 2.1, if I remember correctly, €2.1 billion to €2.8 billion based on very innovative EBITDAs, which we have and very good formulation. So we’re optimistic for 2012, probably good year. The big disclaim is always the weather, that’s what I understood here.

Kurt W. Bock

So fine yes, but it’s still February, I mean, to have some early deliveries, and those are picking up, but let’s see and wait. I thought we are seeing so far good news. Now with a situation that you describe, and whether it’s with respect to the natural gas trading business, we’re dealing since late 2008, early 2009. That was the point in time when we started to see the decoupling of the spot prices from the oil linked contract prices. We’ve taken a number of measures over this period of time now to deal with that situation. We have to the extent possible used the flexibility that we have in our long-term contracts. We have renegotiated contracts as everyone else in the industry has done. We are buying spot in the market there so we have a whole portfolio there and you see how our natural gas trading business has performed in the year 2011, which is at or slightly higher than the level that we performed at in 2010. If you look at Q4 the same is true there, positive quarter with roughly, if I recall – get the figure correctly, €120 million in EBIT. So you see us in a very difficult environment there. On one hand side adjusting our purchase portfolio and then do in the market what we need to do to keep our profitability in that business.

Magdalena Moll

So we’re coming to the next question from (inaudible).

Unidentified Analyst

Yes, hello. I have one question that is meant to Libya. Obviously you said you have ramped up to 60,000 barrels per day, full capacity would be 100,000 per day. What is your goal? When do you believe you might come back to full capacity? I have an accounting question, IAS 19 pension accounting, the change here which was just implemented and you should implement over the next years. What might that has an impact on your equity? And on the Others line in Q4, obviously it was still quite low. Where there any reversal of option plan or was it, lets say what has driven the Others line to such a low level?

Kurt W. Bock

Yeah, I will start with an answer to your Libya questions, its pure speculation, if I would give you an answer and say here is the point in time when we think we will be back at 100,000 completely depends on the infrastructure. We could ramp up the production quickly, basically immediately but it all depends on what can actually go through the pipelines in the terminals, and that’s where we have restrictions as of this point in time. And I can tell you when that situation will move, so that we’re able to produce 100,000 and ship the 100,000 barrels again.

On your Others question, please keep in mind that in Others, you have the profit from the sale of the – to Styrolution, that is one thing. And you mentioned rightfully that there is compared to prior years, when we compare to prior year there is a significant impact there that comes from the long-term incentive program as a result of the lower ship price in the end of 2011, compared to the year 2010.

On your IAS 19 question, and the equity impact, I can’t give you an answer at this point in time.

Magdalena Moll

So the next question Fabian Smeets from ING, table number 41.

Fabian Smeets – ING

Two questions from my side. In the review on Nutrition & Health, your indicated results in 2011 where hampered by higher fixed and raw material costs, as well as product mix effects. But in your guidance, I think you’re quite optimistic on the division and in case you expect a significant improvement in earnings, what makes you so confident on passing on the raw material prices or maybe the mixed effects in 2012. And secondly, I think you already highlighted it a little bit oil, it is reaching new highs in euros everyday, and what is the response you’re hearing from your clients to price hikes you are currently implementing or what is the response you expect maybe to see in the next months when oil prices move higher?

Kurt W. Bock

Okay. I’ll try to take the question on Nutrition & Health. Yeah, we’re quite confident for 2012, we had to absorb higher feedstock cost last year that was quite a burden. We have lot of price increases that would certainly help. It is a mixed bag of activities that you have to keep in mind, it’s not just one, let’s say homogeneous business that we are talking here about vitamins for instance, but we still see a more or less good pricing. We talk about Aroma Chemicals, which is doing well right now, we also see some restocking there. So overall, the start into the year was good, and so that’s not really what we can add to that.

Hans-Ulrich Engel

Yeah, on the oil price we’ve seen quiet a development during the last three, four weeks, I’d say. But I think what you see in there reflected our, let me call them geopolitical issues that are driving the oil price, in particular the oil price in Brent up at this point in time. We were at 124 earlier in the day, you know what our forecast is with respect to oil we say Brent on average 110 in the course of the year 2012.

Obviously, with the volatility that we got used to over the last four or five years when you look at oil price. Our expectation is that we see a certain, let me say normalization of the oil price once the geopolitical issues cease to exist, could that develop in a different direction, could the oil price increase further, absolutely, then the question will be where will that have a negative impact on the overall growth environment.

Magdalena Moll

So with this I break for a moment and I’m plugging in one question that came via email, and this question is from Andrew Benson. And he asked, will BASF buy back shares in 2012 post the AGM approval?

Kurt W. Bock

Yeah, hi, Andrew, thanks for the question. As you rightfully noticed we at our shareholders meeting AGM now to approve again stock buyback program, which we had in place until 2008 where we for about 10 years bought back about 20% of our outstanding stock. This is a precautionary measure, so to say at least to be seen and over the course of the year what kind of ideas that we have. So far we are cash flow positive and we have reduced our net debt quite nicely and if this is, for us an opportunity to improve our capital structure, I think that Hans will come forward with a propose about simply too early to say it depends really on investments, maybe we have an idea with regard to M&A, I think Hans can still add to the IAS 19 just to extend also how detailed our Annual Report is at that point.

Hans-Ulrich Engel

Yeah, the quick check with the experts allows me to say that we do not expect any significant impact or we do not expect an impact there at all. Page 155 of the Annual Report.

Magdalena Moll

So in this – we go now Jean de Watteville, Nomura International, table 45.

Jean G. de Watteville – Nomura International Plc

Yes, hi, good afternoon. Jean de Watteville from Nomura. Just two question, the first one, I think you mentioned on some of the areas where you would be interested by acquisition, you mention water chemicals. I am just wondering whether you could elaborate a little bit on that subject. What are the technologies and assets that BASF currently has in water chemicals? And what would be a nice complement, is that you’re looking for technology, market access, more assets, higher market share, just elaborate a little bit what you’re looking for here?

And the second subject is going back to the shale gases, obviously, significant difference of comparativeness for the petrochemicals between North America and Europe. We know that there is some potential shale gas projects in Europe, it’s very early days, we’ve talked about Poland, may be in France. I am just interested what’s the ASAP position here, obviously, you’re a major consumer of gas, you’re also in gas trading, you’re an E&P company. Are you actively lobbying for the development of shale gas in Europe? Are you seeking technological partnership so that you can play role in the development of shale gas in Europe, or you’re just an observer what could happen here? Thank you very much.

Kurt W. Bock

Yeah, thanks, Jean, for the question about water chemicals. I think it’s fair to say that water serve itself is a big mega trend under a growing business opportunity. What we want and let me start by what we want, we will not go into servicing water plants, forget about that, that is not our business. What we will do is to develop, we are acquired actually a water chemicals business with Ciba as you know to develop additional chemicals to further improve the processing of water, wastewater, et cetera.

One core technology in that respect are membranes. And I don’t know if you know that we made a pretty small acquisition of a German-based company called inge watertechnologies, a few dozen people actually, but they are very well-regarded specialist for membranes. And the big issue now is for us, how can we combine their expertise and their market access with our knowledge especially in certain specialty plastic to come up with better membrane technology. And that for us is a path forward to really offer better technological solutions to our customers.

Just providing another chemical, which is already in the market doesn’t make a lot of sense, for us, it’s really about innovation and new technology. It’s a – let’s say emerging field of activity, we have this water chemical business, but now we are working on the membranes. And we might take a look at other opportunities as well, whether we can fasten up the development process maybe we are making one or the other smaller acquisition, but it’s simply too early to say.

What we have done, we identified the area as a growth opportunity for BASF. We have expertise, which we now combined with something which we have acquired and I think we can go from there.

Hans-Ulrich Engel

Shale gas in Europe, a lot of discussion, a lot of talk about Shale gas in Europe. You already mentioned some of the hotspots, you mentioned Poland, in particular Exxon is active there and interestingly enough Exxon is looking for [firm end] partners, which Exxon does not usually do when there are a lot of positive aspects with respect to their E&P activities, you mentioned France, if I understand the situation correctly, France, does not allow the hydrofracking, which is essential to produce shale gas, so I don’t see a real potential there in France, you asked with respect to our activities in shale gas, do we have any shale gas activities at this point in time, no, we don’t. Do we have the technology in our portfolio, the hydrofracking technology, yes, we have that.

We have licenses in North Rhine-Westphalia, where we are actually doing desktop studies, but we haven’t drilled any wells or anything like that. If you compare the situation in the U.S. to the situation that you find in Europe, I think there are a number of major differences. The first difference that you have is population density, and when you look at a shale gas field, and you look at the number of wells, and you look at how many wells need to be drilled, it’s a lot more than in conventional gas drilling and gas production.

As a result of that, I think we’ll run into, we would run into some environmental discussions and issues in particular in Western Europe, when it comes to shale gas production. The regulatory environment is different in the U.S. compared to Western Europe in particular. I think that probably the highest prospects for shale gas being produced eventually, you have in Eastern Europe and there in Poland because Poland tries to become independent of natural gas import. There is also discussion about shale gas in Hungaria, Bulgaria and Romania, but I would say very, very early stages. Our assumptions are the shale gas in the European market will not play a significant role in the next 10 years.

Magdalena Moll

So, I think it’s a next question from James Knight, Exane BP. Jim, please?

James Knight – Exane BNP Paribas

Hi, good afternoon. I’ve got two questions. Firstly, in chemicals, you’ve indicated in intermediate some of the product lines that might see low margins this year, could you do the same in petrochemicals either on product line or by region. Second question is referring to chart on page 104, which is the risks and opportunities section, I’m probably reading too much into this, but you’ve added a line on acquisitions or corporations, which optically suggests it’s not going to be particularly active year BASF in M&A this year. Am I reading too much into that?

Hans-Ulrich Engel

I guess I got the answer of that one.

Kurt W. Bock

Yeah, you probably are reading too much in to that. I mean, we have to put something into our annual report. As I said before, we are not driven by the desire to keep our integration experts busy that cannot be the determining factor. It’s really about again strategic fit to refine something that really makes sense, both strategically and operationally and is it financially attractive.

Hans-Ulrich Engel

Yeah, I think there are lots of reading stuff in front of you, you can go through all those pages and you can discover Petrochemicals, we saw slowdown in Q4, that’s quite clear, especially in Asia as we experience it, the start into the New Year is actually quite good, a little bit better than what we had expected coming out of the fourth quarter, in terms of margins, I mean you follow this also very, very closely for the major products.

What I can say here is for us, we are a propylene net buyer. We are an ethylene small net seller, very small net seller, what is really important, the majority of what we produce it goes downstream for captive demand, and I alluded to that early on when I talk about some of our downstream folks, we had to cope with the high feedstock raw material cost in 2012, and who might now see a little bit of room to maneuver, which still doesn’t mean they should reduce prices, but improve their margins obviously.

Magdalena Moll

So the next question from Thomas Gilbert, UBS, table 44.

Thomas Gilbert – UBS

Yeah, thank you for taking my two questions there on the segmental guidance, you’ve provided in the annual report. First wearing the bullish glasses sounds like from listening to you and from reading that the Performance Products segment is really the big swing factor for the earnings this year. I mean you are exiting $0.11 with $0.147 EBITDA margin, I think the target (inaudible) segment for ‘12 was 20, the difference is $800 million EBITDA, will you make the 20% margin in 2012 or how close can you get, that is the first question, the second question is, now wearing the more bearish glasses, you are guiding in plastics, the EBIT in the nylon chain down TDI is difficult and remains so, that means if I – the MDI you must have been very bullish on MDI or system houses, what are you seeing in these product lines going into 2012. Is this really making up for the weaknesses elsewhere, because you are guiding I think the segment up in earnings for 2012?

Kurt W. Bock

Yeah, let me start with plastics, we talk about TDI that is a (inaudible) obviously polyamide [Tefro] we had a record as you know record pricing and margins in 2011, and we expect that will be a, there you see guiding down, there will be a slight decline of pricing which we already have seen in Q4, and subsequently also of margins, however we are talking here about very high levels of prices and margins, so reflecting obviously, reflecting supply and demand, which overall is still quite healthy.

So we are not talking about going back to 2009, ’08 numbers, we are talking about very substantial profitability still in this entire value chain. MDI, we are in the midst of fighting from price increase because we think that the underlying supply demand conditions justify with this. So we try, we’ve seen how successful we will be, we are determined this again reflects our strategy, value before volume and this that system house is, that is a growing business for us, it’s a profitable business, it’s a very important outlet for our precursors, MDI, TDI polyols, obviously so that’s highly, highly profitable performance product, yes, its room for improvement, we fully agree it. And I already mentioned a couple of reasons why we should see some improvement there.

You asked specifically, can we guarantee the 20% EBITDA for 2012, I think that’s a little bit too early to say and as you have noticed probably with the exception of Ag, which has a very specific business model, which really relates itself to EBITDA as a specific target. We have, when you look at the Annual Report we also shied away from providing you with EBITDA guidance for our particular segments, because there was couple of reasons which makes this really difficult.

Oil & Gas, is under sort of case in itself. But even other cases if you have price inflation, which we have seen now for a couple of years, we have seen price inflation for three years up about 10% a year, obviously it was a denominator of that equation. EBITDA of our sales increases quite a bit and brings down, yeah, profitability. And for that reason we really prefer talking about absolute, absolute earnings and that is also guidance we provided to increase absolute earnings for BASF Group. So that 20% might be little bit of a stretch, but there is room for improvement in absolute terms. I agree.

Magdalena Moll

So the next question is coming now from (inaudible) table 1.

Unidentified Analyst

Yes, hello, thank you. Two questions, the first is related to the capital cost issue, can you just briefly explain which assumptions are behind the lift from 9% to 11% is this telling us to, well saying that you might have reached a fraction point for value-adding cost of [coupon] result to increase the run rate because your content of specialties or higher value-added business has increased over time.

Secondly, working capital, can you explain the measures behind, well, the aim to further trim working capital? Is this like last year when you had noticeable downsizing of receivables or is this related to inventories, although oil prices might stay high, so this might be very challenging when it comes to inventory downsizing? Thank you.

Kurt W. Bock

Your question on our cost of capital, the increase from 9% to 11% that we’ve seen for the year 2011 and going into the year 2012, simply has to do with the cost-of-capital model. The fact the representation of our equity and the debt that we carry, as a result of that, it increased from 9% to 11% in the year 2011 and we see that at the same level going into the year 2012.

Magdalena Moll

Could you repeat your second question one more time? I didn’t catch it quite.

Unidentified Analyst

The second question is, dealing with the planned measures to further trim working capital requirement. So does this come from downsizing inventories or receivables or what is likely to happen, I mean, this year?

Kurt W. Bock

It’s an ongoing effort to reduce our working capital. Firstly, our [measured] days outstanding both for inventories and for receivables. We have seen good progress with regards to receivables in 2011, with regard to inventories, there was a slight increase over the course of the first quarter because obviously demand came down a little bit and we had to adjust capacities which was – there was a little bit of a time lag, so we are one or two days above what we like to achieve. It’s the biggest swing factor apparently for our cash flow development, also in 2012. I think overall if you look at the entire year, 2011, we have managed our working capital required, quite nicely. The increase is really well below what you’d expect if you look at volume growth and price developments and that is what we tried to achieve in 2012.

Magdalena Moll

So we have our next from (inaudible), table number 4.

Unidentified Analyst

Hi, thanks for your time. Can you guys elaborate on your strategy a little bit on the newly formed battery materials division and some of the various upstream battery materials business is of interest to you such as lithium chemicals or other products?

Kurt W. Bock

We try to build a position in battery chemicals, correct. We gained a position in that particular business by acquiring Engelhard by the way in 2006. We had a foothold in that technology and point in time nobody spoke about automotive and batteries. We are in the midst of building a plant in Ohio and Elyria for cathode materials, and that already tells your story, we are interested in battery chemicals. So we are talking cathode materials, electrolytes, we are not talking stacks, packages, building the battery. From our point of view, the sweet spot in that technology is really better innovative chemicals, and we are closely cooperating with French car manufactures, but also with battery producers to develop new chemical entities.

What we have done now is, we formed a business unit, Battery Materials, which is based in New Jersey. We have also made a couple of acquisitions, small ones by our standards, but they’re entirely, if you call, capability-driven, three happened over the last couple of weeks, which at new technology, some of the technology is 10 years old from now. Lithium-sulfur technology for batteries is nothing, which we materialize over the next 10 years. It is the fourth generation, so to say, of battery materials, which has much higher density, longevity et cetera.

So, for us, this is a long-term play. It’s based on the assumption, which I think is realistic that electrical mobility will grow significantly in developed countries and in developing countries and for making that happen batteries and battery materials are the core technology to make that happen at the end of the day. And we are quite confident, we can build a position in that business. The plant which we are building in Ohio right now will come on stream third, fourth quarter of this year.

This is a start. If the business grows according to our expectations, there will be additional investments needed, obviously, if we can come up with better materials and better technologies that we are quite confident that, bringing the entire expertise of BASF together with also some required expertise that we will be a front-runner in that particular industry.

Magdalena Moll

So this brings us to the next question of Markus Mayer from Kepler, table 20.

Markus Mayer – Kepler Capital Markets

Yeah, two questions from me, you said in this outlook you’re quite optimistic on the automotive sector. And the question is as several, despite big OEMs, which has premium products, all the others are quite negative for 2012. So what is your positive tune, this is legislation change for example in capital, which makes it positive or do you see several other trends, which are then of importance? That’s the first question. And the second question is, we had already some question on the margin target, and on your Functional Solutions business, and you gave out a target 2012 of EBITDA margin of 18% for the group. Is this target still valid or is it also you part away to say there is still a valid target?

Kurt W. Bock

Start with automotive and then I’ll go.

Hans-Ulrich Engel

Yeah, if you look at the developments in automotive, what have we seen there. Let’s go back to the year 2010, you saw 74 million units being sold in the year 2010. Go to the year 2011, where you had roughly 79 million units, and you look into the forecast for the year 2012, and you’re talking 84 million units.

So you see significant growth in that area. If you look here in Europe, I fully agree, different picture depending on where the producer sits and what brand and what spectrum of the portfolio the producer is in, but we hear from the producers in Germany be it Daimler, BMW or VW actually quite positive. If you look into North America the figures there, last year we were at 12.8 million. The sales forecast for this year is roughly 1 million higher. The news that’s coming out of Detroit in general very positive.

So we see in transportation or automotive, we see strong underlying growth which in part has to do in particular North America with the average age of the fleet which just requires you to replace your old car at a certain point in time and there is obviously significant further growth also coming from emerging markets and they are in particular out of Asia.

Hans-Ulrich Engel

EBITDA, I think that’s an important point to talk about for a minute. When we made that announcement of the guidance in 2008, we said we want to achieve 18% in 2012 actually we had just finished the year 2007 when we had 17.6% EBITDA [outside it]. So we might say that wasn’t really that much of a challenge, why did you come up with just 18%. Now we are at about 16%. So what has happened in between, first of all we added about 2 billion absolute terms of EBITDA during those years.

Secondly we have and in fact because the denominator, I said this before, the denominator just went up higher or slightly higher pricing in general which dilutes these kinds of profitability measure. And certainly there was a big change in our performance structure as well, including oil and gas and its size.

I’ll give you another example, the precious metals business, which is a high volume, very low margin business. And for that reason and we discussed this in November when we met with some of you in London, for that reason, we really decided we want to set ourselves an absolute target. And we came forward with this medium target, which is €15 billion in 2015; we are currently at €12 billion, so we might say, it’s just €3 billion, nevertheless, it’s something like 20% increase and that needs to be materialized, and we are fully determined to achieve that particular target. I think that provides you with at least equally good guidance with regard to the overall profitability target we have as BASF.

Magdalena Moll

With this, we move on then to our next (inaudible)

Unidentified Analyst

A quick follow-up question on the chemical segment in Q4. The reclassification of the sales to this evaluation joint venture of establishing sales to the joint venture now, and that draw a significant sales impact, but did it also have an earnings impact in Q4?

Hans-Ulrich Engel

No, no.

Unidentified Analyst

No.

Hans-Ulrich Engel

Because sales gets consolidated or deconsolidated, earnings just is earnings, it doesn’t change really, whether it’s intra-company or external, it is just earnings for us because we sell at market, okay.

Magdalena Moll

So the next one is Anthony Jones from Redburn, table 25.

Anthony Jones – Redburn Partners

Yeah, just two last questions. The cost saving programs and then also your capital allocation, your CapEx plan. Could you help us understand, which businesses will benefit most over next years, two years that would be helpful, so to think about growth especially.

And then finally going back to Libya, I know you’ve had a lot of questions about this, but is there any option fee to renegotiate yield tax, your tax regime there over the next year?

Kurt W. Bock

Yeah. I’ll start with the Libya tax question. If we go back roughly one year, we had negotiated our EFSA4 agreement. It’s fixed there, it’s ready to be signed, that would lead to a completely different tax situation that we have currently, but you followed the events in Libya. So the agreement is sitting there. And I can tell you as pretty much the same question as with respect to infrastructure on what’s going to happen there.

I can tell you at this point in time, if and when we get back to talking about moving from the current concession agreement environment to an EFSA agreement. Just to know, the full focus of the National Oil Corporation at this point in time is that, ramping up oil production, they came back much quicker than we would have actually expected. The oil production is much higher than where we thought it would be in the January, February timeframe. But frankly there is not a lot of focus at this point in time in the NOC on any type of contractual discussion. So agreements are honored as they are, but the point in time where we can talk again about moving from concession agreement to EFSA, I can tell you.

Hans-Ulrich Engel

Tony, talking about CapEx, actually, you find this also in our annual report, and very detailed on page 117 breakdown by segments, and regions. But to give you an idea, 20%, roughly 20% goes into chemicals, 13% is plastics, performance products 14%, functional solution, 6%, Ag is about 4%; and oil & gas is pretty big chunk with 31%.

Regionally, it still looks like it’s tilted towards Europe, because Europe has 65%, but you have to keep in mind that essentially includes a 35% oil & gas piece, which we account for as – even if it happens for instance in Northern Africa, you should take that piece out of the oil & gas piece. I think a pretty good chunk of our investments also goes to the – what we call markets emerging markets, again you’ll find the detail in the annual report.

The cost savings program next, it goes across our STEP, it goes across all businesses. Frankly there is no exception, everybody participates, everybody joins in these programs, which cover our productivity enhancements, cost reductions, margins, improvements because you have better yield, better management of clients, et cetera.

It’s quite difficult for me to give you another specific breakdown by segment. But I think it would be fair, take oil & gas out, because we run a different scheme here. But it would be fair if you look at this from, let’s say sales proportional point of view, it pretty much reflects also the rate of the contributions of the respective segments to that program.

Magdalena Moll

Now, we’re coming to (inaudible), and then Christian Faitz.

Anthony Jones – Redburn Partners

Yes, another question on natural gas trading, it’s one of the areas in your annual report where you actually say earnings might be lower in 2012 versus 2011. We have seen quite a volatile spike in spot market price, and I know you have potential for building gas reserves, so you have the potential for building gas reserves perhaps so between these spikes. Would that mean that, an event like that might be so positively contributed to potentially could do better than what you’re guiding?

And one additional question on that, you said you renegotiated your contract. Do you still have this lag effect by higher oil prices selling versus your selling prices or it is also now out after this renegotiations?

One question to your overall group targets, and yeah, you have obviously the 2015, ‘20 targets. And I just spoke about, you are committed to that, do you have a kind of special incentive management, incentive program which is kind of linked to the targets to increase the commitment of upper management, middle management?

Kurt W. Bock

I’ll start with your question on the time lag. For the oil price linked part in the contracts, the time that still exists, still the same. You look at the average of your last nine months in your purchasing contracts and to the extent you sell, you sell based on the average of the first six of this nine months period of time.

So no change there, does the cold spell that we had here it leads to, lead us to changing our guidance for natural gas trading results? No it does not. Let’s first of all see how the month of February comes in, and then we have a better picture and a better understanding on what’s that, that actually is done. Volume certainly went up as a result of a very cold weather.

Hans-Ulrich Engel

Talking about medium-term targets. Let's explain, there’s a little bit coming from all our corporate governance structure, which we have here at BASF. We have an Executive Board, have a target agreement with our Supervisory Board. And that target agreement certainly encompasses our budget for 2012 that is an old brand. But it also has medium-term targets and longer-term targets. And obviously, the implementation of the strategy, which we put forward in November, which we had a chemistry is a major part of our target agreement, and we’re a part of Supervisory Board as well how we are doing with regard to implementing those specific measures of achieving our targets.

So one year, full-time target is also medium and long-term targets. Apart from that, even if you did not have that target agreement, I mean we set forward and said, okay, this is what we want to achieve, again based on certain assumptions about economic growth and production growth that are globally, and I can assure you that this team works extremely hard to make this happen absolutely, because we do not want to disappoint you. That's quite clear.

Magdalena Moll

I’m inserting one question that came from Jeff via e-mail, and the question is, could you give some guidance on the tax rate for 2012?

Hans-Ulrich Engel

The tax rate for 2012, I'll give that, I’ll give that a try. You've seen our tax rate come down significantly by roughly 5 percentage points from 31% to 26% in 2011. The big driver for that drop, we’ve mentioned a number of times already that's the oil production in Libya that comes with that extremely high tax.

I would expect us to be in a more normal environment in the year 2012, which means a total tax rate in the low 30s, and that means an underlying tax excluding all oil & gas business in the mid-20s.

Magdalena Moll

So, now we come to our last four questions. There is a one from Christian Faitz, and one from [William Cross]; from Jeremy Redenius and Richard Logan. I would like to William Cross, because he didn’t have a question yet, so please, William, go ahead.

Unidentified Analyst

Oh, mine is on, sorry.

Kurt W. Bock

Thanks.

Unidentified Analyst

Could you just amplify on your philosophy with respect to share repurchase? Because it did seem the important part of your presentation at the end of November, but if I am reading correctly your comments about the change in the cost of capital, you don’t expect to move sharply to a higher leverage.

And there are many companies that think of it as an accordion to the extent that an acquisition doesn’t appear and they are unpredictable, then you’ll use the repurchase authorization. But perhaps that’s not the way you are thinking about it. It would be helpful just to hear your philosophy about it, beyond the term precautionary measure, which could mean many different things.

Kurt W. Bock

I think we’ve used it in the past very aggressively, actually we – as I said, we bought back about 20% of our outstanding stock, and very consistently so. I think every single year between 1999 and 2008, we bought back stock. And that was almost a very pragmatic decision when we had surplus capital of finance available we bought back and that meant that we increased our leverage quite dramatically. So we had a much more efficient capital structure.

We still some certain uncertainties today in our capital markets, financial markets. That is certainly something we have to keep in mind. But all other things being equal, I would foresee, if we have to reduce our leverage or increase buybacks, we would go for the most cost-efficient solution and that could mean buybacks frankly, but again, it is [seen] when this is going to happen. And the other disclaimers always, if you have a great idea, how to spend money operationally, strategically that then is still the first consideration if we have surplus money available than we buyback, which also, as you say it, reduces our cost of capital profoundly. Does it answer your question?

Hans-Ulrich Engel

And you did think of this as what you will use in the event that larger acquisitions will consume the cash flow down to peer and so it’s an [Aquarian]. Yeah.

Unidentified Analyst

(inaudible)

Hans-Ulrich Engel

Okay. Thank you.

Magdalena Moll

Good. Then I want to go back two questions. I still had a question. Is that correct?

Unidentified Analyst

Yeah. Just two quick questions. One is Nutrition & Health. You talked about adverse mix effects in Q4. Can you elucidate on those piece? And then second, I just want to pick your frames because I’m sure your frames are bigger than mine, at least combined, if I look at the general perception, it seems that, the market seems to think Q3 and Q4 are kind of the exception to the norm that they were lower, but if I look at a nominal chemical business here, I would strictly also assume, because of a typical seasonality in Q3 and Q4, and maybe in addition in the future in Q1, because of the Chinese New Year, you would typically book 60% roughly of your profits on the chemical side in the first half, and 40% in the second half as such, would you actually believe that maybe the years 2010 and 2011, sorry 2009 and 2010 were rather the exception to the rule, that you had fairly strong and actually also sequentially accruing earnings in the second half of the these respective years, what is your feel on that? Thanks.

Kurt W. Bock

It’s tricky, all I have say. You’re right, essentially we make more money in the first half and in the second half reflecting essentially seasonality impact. However, over the last ten years that kind of synergy has come down or was reduced quite dramatically. For instance, now Q4 that is also a positive quarter, which never had been the case in the past.

I think it's hard to say from today's point of view, well, let’s say an underlying change or business just let’s say a reflection of industry economic cycle. We saw obviously the uncertainty grew over the course of the second half of 2011.

I’ll come back to what I said earlier on, our guidance for 2012 is based on the assumption that we have underlying economic growth. We see no reason why that should not be the case. And that over the course of the year, the situation will not deteriorate, but might even become a little bit better. There are a couple of positive factors you can mention, I mean Japan has a rebound, et cetera. The big question mark is always the emerging markets in Asia to what extend can they still continue to grow at that growth rate? That is probably the one big risk factor apart from the oil price, which I see.

The other question was about nutrition and health, and how we are doing there? First of all let me start, we had an excellent performance in 2011, which was really, really good, incorporating by the way the [coatings] business, which is a major piece or is the major piece of that particular business. Trading conditions so far are good. I wouldn’t say they are denied, they are certainly challenging, but they are good.

And we aim to increase our earnings for the year. And this reflects certainly further growth opportunities, which materialized coming from the Cognis integration, which is not just about cost, but also about growth, growing with our customers. It also means that we have work through some of the integration issues, which we were facing last year.

Unidentified Analyst

All tight. Just going back to the -- your (inaudible) use in the Q4 statements, but there was an adverse mix effect, I was wondering whether you can illustrate on that?

Kurt W. Bock

Yeah, about the vitamins…

Unidentified Analyst

Yes.

Kurt W. Bock

That E, C, B, D, you know – there is always (inaudible) and sometimes it’s…

Unidentified Analyst

All right.

Kurt W. Bock

The weights are shifting a little bit.

Unidentified Analyst

Yeah, but nothing structural?

Kurt W. Bock

Yeah.

Unidentified Analyst

Okay. Thanks.

Magdalena Moll

So then last three questions now. So Richard Logan, but please only one more question. Richard Logan, first, and Jeremy Redenius, and Martin Rödiger, you get the final one. So with Richard Logan we start.

Richard Logan – Goldman Sachs

Just within the Care Chemicals area, you talked about price competition, I wondered if you could elaborate on that to some extent in terms of how the market there has developed, how you see it going forward, has it been in line with your expectations in terms of the industry and how competitors have reacted to you acquiring Cognis? Thanks.

Kurt W. Bock

I would say, yes. As you implied, it has developed according to our expectations and integration has been a positive experience for us, and experience also with our customers is very positive. They’ve reacted very, very positively to BASF acquiring the business, that gives us a solicitation of the Cognis operation extending of the product portfolio, the offerings. And it has really opened up new avenues for BASF also entering certain industries, and most importantly certain large customers. So we have a certain share of business, but now this company is much bigger, much more important and also more successful.

Magdalena Moll

Jeremy Redenius, table number 37.

Jeremy Redenius – Sanford C. Bernstein & Co.

You mentioned earlier that your net short propylene, propylene has been structurally tight for the last several years, probably due to ethane cracking, partly due to refiners running on lower operating rates. Do you see this persisting for many years from here, and do you see anything that will change that, or is there anything that you can do to address that? Thanks.

Kurt W. Bock

Apparently, it affects especially North America, due to the shift for the feedstock for the crackers. Some people are talking about dedicated C3 plans now, for instance we have one in Tarragona in Spain that might happen. The price differences have grown quite attractive in some cases, so there might be a rebalancing happening over time. For us, again, we are a small, relatively small net buyer; it hasn’t had really that much often effect. For us, access to profit is important, I’ll give you one example, we announced last year that we will build acrylics complex in Brazil and that was only possible because we’re able to conclude a contract with Braskem to provide the propylene, which we need for that particular investment, which is a $0.5 investment, acrylics, dispersions, butyl acrylate and SAP as well. So, so far we have been able to secure raw materials for our growth.

Magdalena Moll

So Martin, you have the final question.

Martin Rödiger – Cheuvreux

Coming back to acquisitions, you already talked about the smaller acquisitions like and better reason also, water technologies. When it comes to bigger size acquisitions and I mean with some [harder] whatsoever and those kinds of, I know you have several acquisition criteria. Could you please prioritize these kinds of acquisition frontiers, what is the first ranked criteria, is it more the position being closed to end customers helping BASF to reduce the cyclicality or is it similar to the small acquisitions that you want to get technology enabling you to generate innovations or so?

Kurt W. Bock

I would say the first criteria is really, how can we make money, acquiring that company, how can we creat actually the value and that is all based on cash flow models, which we have explained at other occasions already it has to be financially attractive, generally attractive to help us to grow the business. We are not that shortsighted, but it has to be in all cases accretive in year one and especially when we talk about capability related acquisition small ones, which are essentially below your radar screen I would say. You can not expect that there we will have a decent returns, but into the first couple of years, it’s really about building long-term growth and profitability.

With regard to strategic positioning, what we have said in the past. So that was true we’re especially interested in acquisition which are technology driven, which have high barriers to entry where innovation really makes a difference, but we can differentiate ourselves from our competition, and if you look at the entire pattern, our portfolio changes over the last couple of years. Moving out of, let’s say commodity type of products. Fertilizer is the last one. Styrolution and acquiring businesses which are more technology driven. I think you can clearly understand this is also the fast forward.

And we have done, you say that we have done very, very few acquisitions in chemicals, in the segment Chemicals and then in the segment Plastic for instance. Sometimes for lack of opportunity, sometimes because we already have a very strong, inherently strong position based on (inaudible), it doesn’t make sense to adjust at something on which essentially dilutes your earnings power and doesn’t really create additional value.

Kurt W. Bock

Okay, thank you very much for your questions and for being with us today.

Magdalena Moll

Ladies and gentlemen this brings us to the end of our Analyst Conference. I would like to thank you for joining us here in Ludwigshafen, at the same time I would also like to thank all of the guests who have listened via the web or on the phone. Secondly, we hope that with our special gift today, namely that we handed out our hot of the print annual report to you. This will help you to do a good analysis on BASF. And we wish you happy reading and good analysis. And should we have any further questions please contact us in the IR team, we will be happy to help you.

We will next report on our first quarter 2012 results, on April 27, already at 8.30 in the morning, because this isn’t the day of our annual general meeting. With this I’d like to say, good bye to all of those who have joined us electronically and for those who are here I’d like to invite you now that we will have dinner together at the casino.

Thanks again.

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