Basf Se S/Adr

Good morning, ladies and gentlemen. Welcome to BASF's conference call for analysts and investors on the fourth quarter and full year 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. 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. BASF does not assume any obligation to update the forward-looking statements contained in this presentation above and beyond the legal requirements. The audited BASF report 2024 will be published on March 21. The key financial figures published today are therefore to be regarded as preliminary. From today's perspective, no adjustments are expected. With me on the call today are CEO Markus Kamid and CFO Dirk Evermann. Please be aware that we have already posted the speech on our website at bsf.com slash fy2024. Now I would like to hand over to Markus.

Thank you, Steffi. Good morning, everyone. Welcome to our first conference call in 2025. In a challenging market environment, BSF has performed well, thanks to the strong performance of our core businesses, where we leveraged our strong market positions to grow EBITDA before special items by 18% compared with 2023. Overall, EBITDA before special items of BSF Group increased by 2%. Lower than projected capital expenditures and our continued strong focus on networking capital led to a free cash flow of around 750 million euros, exceeding our forecast range of 100 to 600 million euros. We are also making good progress in terms of portfolio management. The signing of the agreement to sell BSF's decorative paints business to Sherwin-Williams marks an important step in unlocking the value of our standalone businesses. So let's begin. with an overview of BSF's performance in the fourth quarter. With 15.9 billion euros, sales matched the level of prior year quarter. Volumes of BSF Group excluding precious and base metals increased by 3%, thanks to the agricultural solution segment in particular. The chemicals and industrial solution segments also increased volumes in the last quarter of the year. Prices excluding precious and base metals were slightly positive. Overall, prices steadily recovered throughout 2024 compared with the respective quarter of the previous year. Currency headwinds slightly dampened sales growth and were mainly related to the Brazilian REI. In the fourth quarter of 2024, EBITDA before special items improved by 19% and came in at 1.6 billion euros. The considerable increase in earnings was supported by a strong finish in agricultural solutions. the fourth quarter earnings were also higher in the nutrition and care and chemical segments as well as in other here you can see a snapshot of how the markets and our segment volumes and specific margins developed in the fourth quarter in a slightly improved market environment for base chemicals we achieved solid volume growth in the chemical segment mainly on account of the petrochemicals division overall specific margins in the chemical segment declined declined slightly compared with the prior year quarter despite higher margins in intermediates. Both divisions contributed to the slight increase in EBITDA B4 special items in the segment. In an overall stable market environment, the materials segment recorded slightly lower volumes in both divisions. In the monomers division, volumes declined particularly in the PA66 and PA6, while in the performance materials division, volumes decreased mainly in engineering plastics. Specific margins improved in both divisions, with the highest contribution from the MDI value chain. Nonetheless, EBITDA before special items in the materials segment declined slightly. Higher earnings in the monomers division could not fully compensate for lower earnings in the performance materials division. The industrial solution segment operated in an overall stable market environment and achieved slight volume growth in both divisions. Specific margins declined slightly, most markedly in the performance chemicals division, in particular in plastic additives. The segments EBITDA before special items decreased considerably due to lower contributions from both divisions. The market environment for nutrition and care remained favorable. Nevertheless, higher volumes in care chemicals could not offset lower volumes in nutrition and health. Volumes in this division declined mainly due to the production outages in Ludwigshafen as a result of the fire at the isophytol plant at the end of July 2024. Specific margins improved significantly in both divisions. EBITDA before special items of the segment rose considerably compared with the prior year quarter, thanks to higher earnings in the care chemicals division. According to current data, global light vehicle production was stagnant in Q4 compared with the prior year quarter. and the proportion of ICE vehicles continued to decline. In this environment, the surface technology segment recorded lower volumes, particularly in mobile emission catalysts as well as precious metal services. The overall lower volumes in Q4 could not be offset by higher specific margins in both divisions. Therefore, EBITDA B4 special items declined slightly in the surface technology segment. Crop commodity prices remained below historical averages and financing costs were still elevated, resulting in unchanged and challenging farmer economics. Even so, in the final quarter of the year, the market for agricultural solutions showed positive volume momentum in all regions. Margin development differed by region, whereby South America continued to be impacted by competitive pressure paired with negative currency effects. In this environment, the agricultural solution segment achieved strong volume growth in all crop protection indications as well as in seeds and traits. The segment was also able to keep specific margins at the level of prior year quarter. Overall EBITDA B4 special items in the agricultural solution segment increased considerably in Q4. Now let's move on to the development of EBITDA B4 special items in the full year, 2024. As already mentioned, earnings in the core businesses increased by 18%. In the nutrition and care, industrial solutions, chemicals and material segments, EBITDA B4 special items grew mainly due to higher volumes. Overall volume growth in the core businesses was 5% in 2024 and a remarkable 6% in Europe. This is a testament to the strong competitive position of our core businesses in their respective markets. The strong performance of the core businesses more than offset lower contributions from the standalone businesses in the agricultural solutions and surface technology segments. Other also recorded lower earnings, overall EBITDA before special items of BSF Group rose slightly. Now let me provide some additional color on the challenges of our surface technologies and agricultural solution segments. According to current data, global light vehicle production reached 89.5 million units in 2024. and thereby decreased by around 1% compared with a strong prior year. In this environment, full-year earnings in the surface technology segment declined on account of the catalyst division, and particularly due to lower contributions from precious metals trading activities. In contrast, the coatings division was able to improve earnings slightly. In 2024, the market for crop protection and seed products was characterized by high channel inventories at the distributors, low customer demand, and continued destocking in an overall environment of falling prices. Compared with a record prior year, earnings in BSF's agricultural solution segment declined, mainly on account of the difficult market conditions in the glufosinate ammonium business. Overall, our agricultural solution segment performed well in a challenging market and competitive environment, finishing the year with a strong fourth quarter and a full year EBITDA margin before special items of 20%. As announced at our Capital Markets Day in September, we are becoming more active in portfolio management. With a focus on our standalone businesses, our goal is to unlock value. The signing of the agreement to sell our decorative paints business to Sherwin-Williams marked the first step in line with our winning ways strategy. The transaction multiple is at the higher end of previous multiples in the paints and coatings industry and significantly above the trading multiple of BASF. And we are glad that we have made such rapid progress in finding a new home for Souvenirs. In the second quarter of 2025, we will approach the market to explore strategic options for our remaining coatings activities, which include automotive OEM coatings, refinish coatings and service treatment. In agricultural solutions, we are advancing as announced in September, and we are currently focusing on executing the legal separation and the implementation of a dedicated ERP system by 2027. In parallel with the support of financial advisors, our team is beginning to prepare for the IPO readiness, which is also targeted for 2027. In summary, we are delivering what we outlined with regards to portfolio management. And with that, I hand over to Dick.

Thank you, Markus, and good morning, everybody. Let's now have a look at the financial details of the group for the full year 2024. EBITDA before special items rose by around 200 million euros thanks to the considerable increased earnings of our core businesses. The adjusted EBITDA margin before special items increased from 12.6% to 13.1%. In our core businesses, the margin improved by two percentage points compared with 2023 and amounted to 13% in 2024. EBIT before special items reached 3.9 billion euros, an increase of 3% compared with the prior year. Special items in EBIT amounted to minus 1.9 billion euros. I will provide further details in a moment. Net income came in at 1.3 billion euros compared with 225 million euros in 23. Net income from shareholdings increased by 798 million euros to 598 billion euros, mainly on account of higher earnings contributions from non-integral companies accounted for using the equity method. This was particularly due to a disposal gain of 390 million euros related to the sale of Winter Saldea assets to Haber Energy. Cash flows from operating activities decreased by 1.2 billion euros to 6.9 billion euros in 2024 and were in the forecasted range. we again managed to achieve cash inflows from changes in net working capital in 2024. With a cash inflow of €360 million, changes in net working capital were, however, considerably lower than in the strong cash inflow of €1.8 billion in 2023. Payments made for property, plant and equipment and intangible assets rose by €803 million to €6.2 billion particularly on account of the construction of the Fairbairn site in South China, which is progressing on time and in budget. Overall, we remained 300 million euros below our original forecast of 6.5 billion euros. Free cash flow amounted to 748 million euros, exceeding the forecast range of 100 to 600 million euros. As I just mentioned, special items in EBIT amounted to minus 1.9 billion euros and were mainly caused by restructuring costs and impairments. Restructuring costs were incurred in all segments. They included restructuring in glyphosate ammonium in the agricultural solution segment and one-time cost for our ongoing efficiency programs. Impairments were focused on battery materials in the surface technology segment. Other charges were mainly related to the class settlement of the multi-district litigation proceedings related to aqueous film forming foam products in the United States. The settlement was reached in May 2024, and we agreed to it without the acknowledgement of a legal obligation. Now let's turn to BASF's group CO2 emissions. Despite BASF's volume growth, Scope 1 and Scope 2 emissions remained almost stable in 2024 compared with 2023 and amounted to 17 million metric tons. This figure is within the forecast range that we published in February 2024. Our progress towards our 2030 target is being driven by our strong focus on operational excellence measures to increase energy and process efficiency, as well as our efforts to increase the share of electricity from renewable resources. In 2024, the proportion of electricity from renewable resources rose to around 26% from around 20% in 2023. Specific scope 3.1 emissions amounted to 1.58 kilograms of CO2 per kilogram of raw materials purchased compared with 1.67 in 2023. The reduction was mainly achieved by a change in the raw materials portfolio. Furthermore, we sourced first raw materials with lower PCFs from selected suppliers. In Q4 2024, cash flows from operating activities decreased by €806 million to €3.5 billion, mainly due to lower cash inflows from changes in net working capital. In Q4 2024, changes in net working capital led to a cash inflow of €2.4 billion compared with a strong cash inflow of €3.2 billion in the prior year quarter. Given that net working capital cannot be reduced indefinitely, The Q4 2024 figure highlights our strong commitment to growth with high capital efficiency. Payments made for property, plant and equipment and intangible assets rose by €2.3 billion, particularly on account of the construction of the Verbund site in South China. Free cash flow amounted to 1.2 billion euros compared with 2.2 billion euros in Q4 2023. Let's now turn to our balance sheet at the end of December 2024 compared with year-end 2023. Total assets rose by 3 billion euros and amounted to 80.4 billion euros. The increase in non-current assets was mainly driven by additions to property plant and equipment due to our investments in the Verbund site in South China. Current assets declined slightly compared with the end of 2023. At the end of 2024, equity stood at around 37 billion euros, with 45.9% BSS equity ratio remained very healthy. Net debt increased by 2.2 billion euros to 18.8 billion euros at the end of 2024, mainly on account of higher long-term debt. BSF single A credit ratings reflect our strong balance sheet and prudent financial policy. Let's shift our focus to capital expenditures between 2025 and 2028. As announced at our Capital Markets Day, we aim to grow with high capital efficiency by reducing capital expenditures, increasing the utilization of existing assets, and optimizing our net working capital. After the start-up of the Sanjiang-Fabun site, which will begin in the second half of 2025, we will bring down capex below the level of depreciation despite significant cost inflation. For the BSF Group, we plan capital expenditures of 16.2 billion euros between 2025 and 2028. During this four-year period, around 3 billion euros relate to the new Verbund site in China, of which 2 billion euros will be spent in 2025. Overall, we plan total capital expenditures in 2025 of 5 billion euros compared with 6 billion euros in 2024. This reduction by 1 billion euros is primarily associated with lower capex for the Sanjiang site following the peak in 2024. And let me add that we have sufficient own capacities in our key markets to support volume growth without major new investments going forward. Now let's turn to a short update on the implementation of BASF's cost-saving programs. We are well on track to achieve the targeted 2.1 billion euros annual cost savings by the end of 2026. By the end of 2024, we already achieved a total annual cost reduction run rate of around 1 billion euros, of which around 100 million euros is related to the Ludwigshafen cost improvement programme announced in February 2024. We incurred cumulative one-time costs of approximately 0.9 billion euros related to the implementation of the cost-saving programmes by year-end 2024. The amount is about half of the total one-time cost we anticipate by the end of 2026. By then, we aim to have concluded all programs and will benefit from the full amount of savings on an annual basis. By the end of 2025, we expect to have achieved a total cost reduction run rate of around 1.5 billion euros and cumulative one-time costs of around 1.3 billion euros. And with that, back to you, Markus.