Basf Se S/Adr

Good morning, ladies and gentlemen. Welcome to BASF's conference call on the second quarter 2024 results. Today's presentation is being recorded. All participants will be in listen-only mode throughout. 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. Today's 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 BASF Report 2023. BASF 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 Markus Kamid, Chairman of the Board of Executive Directors, and Dirk Elvermann, Chief Financial Officer. Please be aware that we have already posted the speech on our website at bsf.com slash Q2 2024. Now I would like to hand over to Markus Kamid.

Yeah, thanks, Steffi. Good morning, ladies and gentlemen. Dirk and I welcome you to our analyst conference call. And it's my first one since taking over as the chairman at the end of April. And I'm really looking forward to many more of those calls and our discussions about BSF. And you might have seen that something's changed, something's stayed the same. The music, at least, we have not changed while you were in the waiting line. We will provide you with details on our business development in the second quarter, and we will highlight some notable aspects today as well. Let's start with an overview slide. Overall, the development of EBITDA before special items in Q2 was in line with our expectations and the analyst consensus. We saw a continuation of the dynamics of the first quarter marked by positive volume momentum across most of our businesses. At BSF group level, volumes excluding precious and base metals increased by 2.4% compared with Q2 2023. Sales declined by 7% to 16.1 billion euros mainly due to lower prices. However, price pressure has eased. We achieved an EBITDA before special items of 2 billion euros, which is at prior year quarter level. Overall, stronger earnings in our chemical businesses were offset by considerably lower earnings in the agricultural solution segment due to a difficult market environment. Here is a snapshot of how the markets and our segment volumes and specific margins developed in the second quarter. In a slightly improving market environment for base chemicals, we were able to realize strong volume growth in both divisions in the chemical segment. EBITDA before special items increased considerably despite slightly lower segment margins due to a margin decline in the intermediates division. In the petrochemicals division, margins improved due to temporary supply constraints at competitors. The material segment benefited from slightly higher volumes, particularly in performance materials in an overall improving market. A considerable increase in margins was largely driven by a few product lines in the monomers division, especially in the ammonia value chain. Industrial solutions operated in an overall stable market environment. Nonetheless, both divisions achieved considerable volume growth and margin expansion. In particular, our dispersions and resins division contributed significantly to the strong performance of the segment. The global automotive production was basically flat in the second quarter. In this environment, volumes in our surface technology segment had a considerably negative impact on EBITDA before special items. In particular, environmental catalysts and metal solutions recorded lower volumes. Overall margins improved, mainly due to a continued strong performance of our coatings division. The market environment for nutrition and care further improved in the quarter. The considerable increase in EBITDA before special items compared with the prior year quarter was supported by higher volumes in both divisions as well as margin expansion, in particular in our personal care specialties and vitamins businesses. The crop protection market is characterized by continued destocking and faced adverse weather conditions that negatively affected business development in our agricultural solution segments. The segments EBITDA before special items was negatively impacted by considerably lower volumes and margins. The factors I have just described led to the following developments in EBITDA before special items compared with the prior year quarter. Despite the considerably lower earnings in agricultural solution segment, EBITDA before special items of BSF group was at the prior year quarter level. While the materials and the surface technology segments recorded slightly lower earnings, we were able to increase EBITDA before special items considerably in the industrial solutions, chemicals, and nutrition and care segments, as well as in other. With that, I would hand it over to Dirk.

Yeah, thank you, Markus. Good morning, ladies and gentlemen. I will start with some further details regarding the development of our agricultural solution segment in the first half of 2024. ABTA before special items declined by 18% in the first half of 2024 compared with a strong prior year period and reached 1.5 billion euros. To a large extent, this was driven by herbicides, particularly glufosinate ammonium or GA for short. The GA business is increasingly affected by generic competition, alternative technologies as well as high energy and raw material costs. Hence, we took decisive action and will cease production of this active ingredient at the Knapsack and Frankfurt sites by the end of 2024. The formulation in Frankfurt will end in 2025. The closure of the GA production and formulation plants will result in additional special charges in a low triple-digit million-euro range in the third quarter of 2024. In the future, we will source the active ingredient from third-party suppliers. This will secure our competitiveness and profitability in the GA market in the long term. Let's now have a look at further financial details of the group for the second quarter of 2024 compared with Q2 2023. As Markus already mentioned, EBITDA before special items matched the level of the prior year quarter and was actually slightly higher. A bit before, special items amounted to 969 million euros and was dust almost at the prior year quarter level. Special items amounted to minus 453 million euros, of which around minus 300 million euros was related to the PFAS class settlement agreement between BASF Corporation and the US Public Water Systems announced in May. This amount was booked as a special item in other. The remaining special charges were mainly caused by restructuring measures, particularly in connection with the ongoing cost-saving programs focusing on Europe and the adjustments of production structures at the Ludwigshafen site. Net income came in at 430 million euros, 70 million euros below the figure of the prior year quarter. Cash flows from operating activities decreased by 10% to 2 billion euros, and free cash flow was 471 million euros compared with 905 million euros in Q2 2023. I will comment on the cash flow development in more detail on the next slide. With 44.5% at the end of June 2024, BASF's equity ratio remains solid and reflects our prudent financial policy. I will now continue with our cash flow development in Q2 2024. Cash flows from operating activities decreased by €228 million to €2 billion, mainly on account of lower dividend payments from equity-accounted companies. In Q2 2024, BASF received €363 million less in dividends from its equity-accounted companies compared with the prior year quarter. In Q2 2023, cash flows from operating activities had included a dividend payment of €291 million from Winter Saldea and a payment of 87 million euros from BSF YPC. In the second quarter of 2024, we did not receive dividend payments from these entities. In addition, lower cash inflows from charges changes in networking capital contributed to the decline in cash flows from operating activities. Payments made for property, plant and equipment and intangible assets rose by 16% to 1.5 billion euros particularly on account of the construction of our new verbund site in South China, which is progressing on time and in budget. Free cash flow amounted to 471 million euros compared with 905 million euros in the previous year's second quarter. On a half-year basis, free cash flow of minus 986 million euros was at the same level as the minus 977 million euros recorded in the first half of 2023. Here, it should be noted that the development of BSF's free cash flow has a strong seasonality due to our ex-solutions segment. Let's now turn to our balance sheet at the end of June 2024 compared with year-end 2023. Total assets increased by 5.1 billion euros to 82.4 billion euros. Non-current assets increased by 2.8 billion euros to 48.7 billion euros. mainly due to additions to property plant and equipment as a result of our investment in the new Verbund site in South China. Higher defined benefit assets, as well as our investment in the wind park projects Nordlicht 1 and 2, which are accounted for using the equity method, also contributed to the increase. Current assets rose by 7% to 33.8 billion euros. This was largely because of higher trading accounts receivable mainly due to the seasonality of our Exolutions business. Net debt increased to €21.4 billion at the end of June 2024, compared with €16.6 billion at the end of December 2023. Compared with net debt of €20.2 billion at the end of June 2023, the increase was slight. As mentioned, with 44.5%, our equity ratio at the end of June 24 remains healthy, and BASF's good credit ratings underline our solid balance sheet and overall financial policy. Finally, a short update on the implementation of BASF's cost savings programs. We are on track to achieve the targeted 2.1 billion euros annual cost savings by the end of 2026. The implementation of the cost savings programs announced in February 2023 is in full swing. As of the end of June 2024, we achieved a cost reduction run rate of around 700 million euros, which is associated with one-time cost of around 500 million euros. By the end of this year, we expect a cost reduction run rate of around 800 million euros and one-time cost of around 550 million euros in the aggregate. We are also making good progress with the program focused on the Ludwigshafen site that was announced in February 2024. The identification of cost-saving measures is almost completed and they will soon be implemented and swiftly. On top of previously announced programs, this program will deliver annual cost savings of around 1 billion euros by the end of 2026. The related one-time costs are expected to be around 1 billion euros. And with that, back to you, Markus.