Basf Se S/Adr

Good morning, everyone. Welcome to BASF's conference call on the third 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 CEO Markus Kamid and CFO Dirk Elvermann. Please be aware that we have already posted the speech on our website at basf.com slash Q3 2024. Now, I would like to hand over to Markus.

Yeah, good morning, everyone. Welcome to our endless conference call today. Dirk and I will provide you with details on our business development in the third quarter. It's roughly one month since we presented BASF's new strategy at our Capital Markets Day. Thanks again to those of you who were able to attend either in person or virtually. And overall, we all have the impression that our key messages were understood and also in general were received. Let's now start with an overview of BSF's performance in Q3. With 15.7 billion euros, sales matched the level of prior year quarter. Volumes of BSF Group excluding precious and base metals increased by 7%. All segments achieved volume growth with the exception of surface technologies. Here, the volume in the catalyst division declined while the coatings division recorded higher volumes. Prices were slightly positive, excluding pressures and base metals. The pressure on sales prices thus continued to ease. Currency headwinds dampened sales growth by 3%. Negative currency effects were mainly related to the Argentinian peso and the Brazilian real. EBITDA before special items improved by 5% and came in at 1.6 billion euros. The positive earnings momentum in our core businesses, which was already visible in the first half of 2024, continued in the third quarter, driven by higher volumes and higher margins. Considerably higher earnings in BSS core businesses more than offset lower contributions from the standalone businesses in Q3. Here you can see a snapshot of how the markets and our segments volumes and specific margins developed in the third quarter. In a slightly improving market environment for base chemicals, we achieved strong volume growth in the chemical segment. The petrochemicals division increased specific margins while margins in the intermediates division remained stable. EBITDA before special items in the chemical segment increased considerably compared with the prior year quarter. In an overall stable market environment, the material segment benefited from slightly higher volumes, particularly in the MDI, propylene oxide, and ammonia value chains. The considerable increase in specific margins was largely driven by a few product lines in the monomers division and led to a significant increase in the segment's EBITDA before special items. Industrial solutions operated in an overall stable market environment. Both divisions achieved significant volume growth and improved specific margins slightly. In particular, this was driven by our businesses with the fuel and lubricants, coatings, and semiconductor industries. EBITDA before special items rose considerably. The market environment for nutrition and care remained favorable. The segment increased volumes thanks to the care chemicals division, which recorded higher sales to both the home and personal care markets. Specific margins improved strongly in both divisions, and EBITDA before special items of the segment increased considerably compared with the prior year quarter. Global automotive production declined by more than 5% in Q3 compared with the prior year quarter. In this environment, volumes in the surface technology segment declined due to lower volumes in the catalyst division, while coating still recorded volume growth. The overall lower volumes could not be offset by higher specific margins in both divisions. Therefore, EBITDA before special items declined in the service technology segment. The market for agricultural solutions showed a heterogeneous picture in Q3. On the one hand, low crop commodity prices and elevated financing costs impacted farmers' income and also buying behavior. On the other hand, lower channel inventories in Europe and North America were supportive. In this environment, the agricultural solution segment achieved strong volume growth, particularly in fungicides, seeds and traits, as well as in insecticides. However, considerably lower specific margins, partially due to lower prices, especially in South America, and a positive one-time effect in the prior year quarter from an insurance payment led to a decline in EBITDA before special items. In view of the earnings decline in BSS surface technology segment, let me provide you with some additional color on the current challenges that the automotive industry is facing. At the beginning of the year, we had assumed that global light vehicle production would be stable or slightly declining. After a weaker than expected third quarter for global light vehicle production, we have revised our assumptions for 2024 and now anticipate a global decline of up to 2.5% on account of lower production in Western Europe and in North America. Production figures for heavy-duty vehicles in 2024 will likely recede by around 2%. Light vehicle production in Western Europe benefited from pent-up demand in 2023, which was supported by the backlog in orders and the replenishment of inventories. These one-off effects have now faded. In North America, the automotive industry is burdened by a lack of demand and rising inventories. The industry is postponing and cancelling new models. Despite trade and subsidies, domestic demand in China is weak and the market for combustion engines is even declining. However, Chinese exports continue to increase and China is therefore likely to see a slight growth in the automotive production in 2024. Overall, the current momentum points towards a more challenging outlook for automotive production in Q4. The factors I have described led to the following developments in EBITDA before special items compared with the prior year quarter. Earnings in the core businesses, that means chemicals, materials, industrial solutions and nutrition and care, increased strongly and more than offset considerably lower contributions from the standalone businesses in the surface technologies and agricultural solution segments. Others also recorded lower earnings. Overall EBITDA before special items increased by 77 million euros. I would now like to highlight the structural measures in materials that contributed to the growth in EBITDA before special items in the segment. Already in February 2023, we announced several measures to adjust the production structures at the Ludwigshafen site to improve competitiveness and restore profitability. These measures were primarily related to the monomers division and contribute to our cost savings programs for BSF Group. As shown on the slide, the structural adjustments are related to the polyamide and ammonia value chains as well as TDI. Thanks to the decisive measures, we are already at a run rate of around 150 million euros for fixed cost savings in the monomers division. Related one-time costs since the start of implementation amount to around 160 million as of September 30th. We will continue to swiftly implement the outstanding measures, which include the full closure of the adipic acid plant and the shutdown of the production plant for cyclododecanone and cyclopentanone that we announced already in August. This latter plant is part of the intermediates division. In all our divisions, reviewing the competitiveness of our production assets is a continuous process and not a one-time activity. This is the basis for implementing measures to improve competitiveness or, in certain cases, also deciding to shut down plants. With that, I hand over to Dirk.

Thank you, Markus, and good morning, everyone. Let's now have a look at further financial details of the group for the third quarter of 2024. EBITDA before special items increased by 5%. thanks to the considerably improved earnings of our core businesses. Overall, the EBITDA margin before special items increased from 9.8% to 10.3%. The EBITDA margin before special items in our businesses improved by 3.6% percentage points compared with the prior year quarter. A bit before, special items amounted to 635 million euros, an increase of 59 million euros or 10% compared with the prior year quarter. Special items amounted to minus 385 million euros, more than half of which was related to the agricultural solutions segment. This is primarily due to the planned closure of the glufosinate-ammonium production and formulation facilities in Knapsack and Frankfurt, which we announced already in July 2024. The remaining special charges were mainly related to group-wide restructuring measures, particularly in connection with the ongoing cost-saving programs. Net income came in at 287 million euros compared with minus 249 million euros in Q3 2023. In the prior year quarter, a lower earnings contribution from non-integral companies accounted for using the equity method had negatively impacted net income. This contribution included special charges for impairments and restructuring measures at Vindasaldea. In Q3 2024, earnings were supported by the disposal gain of €389 million resulting from the transfer of Vindasaldea assets to Haber Energy. In Q3 2024, cash flows from operating activities decreased by 633 million euros to 2.1 billion euros, mainly due to lower cash inflows from changes in net working capital. During this quarter, changes in net working capital led to a cash inflow of 487 million euros, a decrease from the strong cash flow inflow of 1.4 billion euros in Q3 2023. Payments made for property, plant and equipment and intangible assets rose by €262 million to €1.5 billion, particularly on account of the construction of the Verbund site in South China, which is progressing on time and in budget. Free cash flow amounted to €569 million compared with €1.5 billion in Q3 2023. Let's now turn to our balance sheet at the end of September 2024 compared with the end of September 2023. Total assets decreased by 3.2 billion euros and amounted to 79.4 billion euros. Non-current assets decreased slightly by 0.5 billion euros. There were additions to property, plant and equipment due largely to our investment in the Verbund site in South China. Furthermore, financial assets increased due to our investments in the wind park projects Nordlicht 1 and 2. These developments were more than offset, among other things, by lower intangible assets and lower non-integral investments accounted for using the equity method due to the transfer of Winder Saldea assets to Haber Energy at the beginning of September 2024. Current assets declined by 2.7 billion euros to 31.7 billion euros, mainly due to the strong reduction in working capital. Net debt increased slightly to 19.7 billion euros at the end of September 2024, compared with 18.9 billion euros at the end of September 2023. With 45.4%, our equity ratio at the end of September 2024 remained solid. BASF's good credit ratings reflect our strong balance sheet and prudent financial policy. Moving on to a short update of the implementation of BASF's cost-saving programs. We are on track to achieve the targeted €2.1 billion annual cost savings by the end of 2026. The implementation of the cost-saving programs announced in February 2023 is in full swing. As of the end of September 2024, we already achieved a cost reduction run rate of around 800 million euros, which is associated with one-time costs of around 500 million euros. By the end of this year, we now expect a cost reduction run rate of more than 800 million euros. The associated one-time costs are expected to amount to around 550 million euros. We are also moving forward as planned with the additional cost savings program focused on improving our competitiveness in Ludwigshafen. In October, the units at the site were informed about the contributions they are expected to deliver by the end of 2026. Before I hand back to Markus, I would like to briefly outline changes regarding the publication of BASF's annual report. Due to the extended sustainability reporting requirements resulting from the Corporate Sustainability Reporting Directive and the European Sustainability Reporting Standards, we will have two publication dates in the future. On February 28, 2025, BASF will publish its unaudited full-year results for the business year 2024 via an online report in combination with an investor and news release. These documents will contain all important financial and non-financial figures for 2024, as well as the outlook for 2025, and they will form the basis for our analysts and press conferences on that day. The audited BSF report 2024 will be published on March 21st, 2025. The integrated report will contain all legally required financial and ESG information. The report will be provided in the form of an online report and as a clickable PDF. A print version will no longer be produced. And with that, back to you, Markus.