Basf Se S/Adr

Good morning, ladies and gentlemen. On behalf of BASF, I would like to welcome you to our conference call on the first quarter 2023 results. Throughout today's recorded presentation, all participants will be in listen-only mode. The presentation will be followed by a question and answer session. If you have any difficulties hearing the conference, please press the star key followed by zero on your telephone for operator assistance. This presentation contains forward-looking statements. These statements are based on current estimates and projections of the Board of Executive Directors and currently available information. Forward-looking statements are not guarantees of the future developments and results outlined therein. These are dependent on a number of factors. They involve various risks and uncertainties, and they are based on assumptions that may not prove to be accurate. Such risk factors include those discussed in Opportunities and Risks of the BRSF Report 2022. BRSF does not assume any obligation to update the forward-looking statements contained in this presentation above and beyond the legal requirements. With me on the call today are Martin Brudermuller, Chairman of the Board of Executive Directors, and Hans Engels, Chief Financial Officer. Please be aware that we have already posted this speech on our website at bsf.com slash Q1 2023. Now, I would like to hand over to Martin.

Good morning, ladies and gentlemen. Hans Engel and I would like to welcome you to our analyst conference call for the first quarter of 2023. Two weeks ago, BASF released preliminary figures as we had a better start to the year than expected on average by analysts. Today, we will provide you with further details regarding our business development in the first three months of the year. Let's start with the development of global chemical production. Based on currently available data, global chemical production stagnated in Q1 2023 compared with the prior year quarter. Compared with Q4 2022, chemical production recovered by around 2% globally, excluding seasonal effects. From a regional perspective, chemical production grew only in China at almost 8%. However, this was due to a low baseline in Q1 2022. Chemical production declined in all other regions. The decline compared with Q1 2022 was most pronounced in Europe, followed by Asia excluding China and North America. From the second quarter of 2022 onwards, high inflation and record energy prices levels reduced consumer demand, particularly in Europe. Globally, demand from BASF's key customer industry in the first quarter of 2023 was rather disappointing with two exemptions. Global light vehicle production grew by an expected 5.7% compared with Q1 2022. Global agriculture production also continued to grow moderately in the first quarter of 2023. Moving on to BASF sales development, sales decreased by 13.4% in Q1 2023 to around 20 billion euros. This was mainly due to a decline in volume by 12.8%. All segments recorded lower volumes except for agricultural solutions where volumes will remain stable. Sales prices decreased by 0.7% overall. While prices in the chemicals, surface technologies, and material segments declined, we increased prices, especially in the agricultural solution segment, but also in the nutrition and care and industrial solution segment. Portfolio effects had a slightly negative impact on sales and were mainly due to the sales of the cow lean minerals business. Until the end of September 2022, this business had been part of the performance chemicals division. Current effects were slightly positive and mainly related to the US dollar. Let's move on to our earnings development by segment. The decline in BSS Group EBIT before special items largely resulted from considerably lower contributions from the chemicals and materials segment. In Q1 2023, these two segments contributed 484 million euros to BASF's group EBIT before special items compared with 1.6 billion euro in the prior year quarter. This decline was mainly due to considerably lower volumes and margins on the back of significantly lower demand overall. In nutrition and care industrial solutions, earnings also decreased considerably. In both segments, EBIT before special items declined mainly due to lower volumes resulting from lower demand. The service technology segment recorded EBIT before special items almost at the level of the prior year quarter. The agricultural solution segment achieved considerably higher earnings, reaching around 1.3 billion euros in the first quarter, an increase of almost 400 million euros. Let me provide you with further details regarding the very strong performance of our agriculture solution segment. We had a good start to the season in the northern hemisphere and showed a strong presence in South America. In the first quarter of 2023, sales increased by 14.5% to 3.9 billion euros. We increased prices across the portfolio, in particular for fungicides and herbicides. All regions contributed to the positive sales development, especially North America and Europe. Overall, volumes remain stable compared with Q1 2022. This was due to lower volumes in Europe compared with the strong prior year quarter volume growth in this region. We raised volumes in all other regions. As already mentioned, EBIT before special items increased to almost 1.3 billion euros. The sales growth more than compensated for higher raw material and energy prices. Crop commodity prices are trending lower in 2022, but remain higher than the average of the last five years. The automotive-related business of BASF also developed well. As mentioned earlier, global light vehicle production increased by 5.7% in Q1 2023, according to IHS Markit. Volume growth was most pronounced in Europe and North America, with 17 and 10% respectively, while the market in China declined by 8% due to weak demand. In the first quarter of 2023, BFF sales in the automotive industry, excluding sales in precious metal trading and precious metal sales, in the mobile emission catalyst business amounted to 1.9 billion euro, again an increase of 5.7%. Excluding precious metal trading activities, EBIT before special items in the service technology segment increased considerably. This was driven by significantly higher earnings contributions from the automotive catalyst business and a strong increase in EBIT before special items in the coatings division. In coatings, this was mainly due to price-driven higher margins. The 2023 outlook for the automotive industry remains favorable. For the full year, global light vehicle production is expected to grow by 3.8% according to IHS markets. And now I hand over to Hans for further details on our financial performance.

Thank you, Martin, and good morning, ladies and gentlemen, also from my side. In the following, I will provide you with further details of BASF Group's financial figures in the first quarter of 2023 compared with the strong prior year quarter. I will start with EBITDA before special items, which decreased by 23.5% and amounted to 2.9 billion euros. EBITDA amounted to around 2.8 billion euros, a decrease of almost 900 million euros. At 1.9 billion euros, EBIT before special items declined by 31.5%. Special items in EBIT amounted to minus 65 million euros, compared with minus 34 million euros in the first quarter of 2022. Special items were mainly related to the carve-out of the recently established BASF Environmental Catalyst and Metal Solutions Unit, and BASF Group's cost savings program with focus on euro. EBIT decreased by 33% to 1.9 billion euros in Q1 2023. Net income from shareholdings increased from minus 797 million euros to plus 183 million euros in Q1 2023. In the prior year quarter, net income from shareholdings was negatively impacted by non-cash effective impairments resulting from the Russia-related business of InterSaldea. Net income rose by 27.9 percent to 1.6 billion euros in the first quarter of 2023. Let's turn to the development of energy prices and the financial impact on BASF. Compared with Q1 2022, energy costs came down from very high levels, but nevertheless remained considerably above the level of the first quarter of 2021. In the first quarter of 2023, BASF's global energy costs were around 700 million euros lower than in the prior year quarter. Of this amount, 600 million euros were related to lower natural gas costs. Most of the reduction in natural gas costs was achieved in Europe due to lower natural gas prices and lower production volumes compared with Q1 2022. Let me add that in Q1 2023, European natural gas prices were still trading at 53 euros per megawatt hours more than three times higher than the 2015 to 2020 average of 16 euros per megawatt hours. To mitigate these higher costs, we have implemented and will continue to implement measures to reduce our natural gas consumption. We already presented several such measures as part of our full year 2022 reporting in February. Let's now look at the details of our cash flow development in Q1 2023. Cash flows from operating activities amounted to minus 1 billion euros, a decrease of 725 million euros compared with the prior year quarter. Net income improved by 340 million euros compared with Q1 2022, which had included non-cash effective impairments of 1.1 billion euros on the equity accounted shareholding in Wintersaldea. Excluding the equity results, which are connected via miscellaneous items, net income declined by 579 million euros year over year. This was the main driver for the decline in cash flows from operating activities. Cash flows from investing activities amounted to minus 703 million euros in the first quarter of 2023, after minus 579 million euros in the prior year quarter. Payments for property, plant and equipment and intangible assets rose by 44% to 867 million euros in Q1 2023. Cash flows from financing activities amounted to plus 1.8 billion euros, a decrease of 877 million euros compared with Q1 2022, mainly caused by lower net additions to financial and similar liabilities. Free cash flow declined by almost 1 billion euros to minus 1.9 billion euros in Q1 2023. The equity ratio remains strong and increased to 48.8% compared with 45.3% at the end of the prior year quarter. And with that, back to you, Martin.