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 2026 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. The ISS 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 CFO Dirk Elbermann and Christian Jutzi, President of BASF's Corporate Finance Division. Please be aware that we have already posted the speech on our website at basf.com slash Q1 2026. Now, I would like to hand over to Dirk.

Yes, good morning, everyone. Christian Jutzi and I welcome you to our Q1 conference call for analysts and investors right before our annual shareholders meeting today. The first quarter unfolded in two phases. In the first two months, we saw moderate growth driven by China. Since March, developments have been shaped by the conflict in the Middle East and the closure of the Strait of Hormuz to seaborne transport of oil, gas, and chemicals. In this demanding market environment, BSS demonstrated resilience and achieved EBITDA before special items of 2.4 billion euros compared with 2.5 billion euros in the prior year quarter. Let's start with a closer look at the sales performance of BASF Group compared with the prior year quarter. Overall, sales declined slightly on account of strong currency headwinds and lower prices. However, we achieved solid volume growth. All segments increased volumes except for surface technologies, where they declined slightly. Volume growth was most pronounced in the petrochemicals, monomers, and nutrition and health divisions. Thanks to the successful and on-time startup of our new site in South China and already high utilization rates, the petrochemicals division was able to capture strong volume growth. Volumes in the monomers division rose significantly, especially for isocyanates and ammonia. Following the restart of our vitamin production in Ludwigshafen last summer, the nutrition and health division also recorded considerable volume growth. Compared with the prior year quarter, prices declined, particularly in the core businesses. This resulted from ongoing competitive pressure and lower average raw material prices in Q1, 2026. In the surface technology segment, we achieved significant price increases, mainly due to higher precious metal prices. In agricultural solutions, prices were almost stable. Due to the sharp rise in raw material prices in March, notably for NAFTA and natural gas, we announced price increases across our product portfolio as existing contracts allow. The impact of these price increases is expected to come through in the second quarter. Adverse currency effects dampened sales in all divisions and were mainly related to the depreciation of the U.S. dollar and the Chinese renminbi compared with the prior year quarter. Portfolio effects only slightly lowered sales and were mainly caused by the sale of BASF's decorative paints business on October 1st and BASF's food and health performance ingredients business on September 30th last year. Due to this underlying sales development, EBITDA before special items declined by 6% and came in at 2.4 billion euros. Disregarding the currency headwinds of more than 100 million euros, EBITDA before special items would have reached the level of the prior year quarter. Let's briefly turn to the regional volume and price development compared with the prior year quarter, excluding metals. We achieved volume growth in Greater China thanks to our new Fabun site in Guangdong province. Especially the chemical segment benefited from the new capacities and increased volumes. However, prices in Greater China declined, primarily due to the imbalance between supply and demand, particularly in the upstream businesses. In Asia-Pacific, excluding Greater China, we also recorded considerable volume growth driven by the nutrition and care and surface technologies segments. In this region, prices decreased, especially in the materials and chemicals segments. In Europe, the solid volume growth was mainly attributable to the materials, nutrition and care and agricultural solutions segments. Prices in Europe declined, especially in the chemicals, materials and industrial solutions segments. In North America, volumes were stable, while prices excluding metals slightly declined. Particularly in the chemical segments, prices were lower than in the prior year quarter. In the region South America, Africa, and Middle East, volumes declined mainly on account of materials. All segments recorded lower prices except for surface technologies. Please note that sales to customers in the Middle East accounted for less than 1% of BSF Group sales both in 2025 and the first quarter of 2026. Over the past weeks, we have received many questions regarding the conflict in the Middle East and the blockade of the Strait of Hormuz. Global supply chains are under severe stress, and feedstock availability is a challenge for the entire chemical industry. We have activated a cross-divisional crisis response team comprising procurement and the businesses to foster clear communication, mitigate risks, and capture opportunities. For the coming weeks, we do not see significant supply risk for our production. Our setup makes us more resilient and better positioned to keep our customers well supplied. What sets us apart from many of our competitors are the following factors. First, with our broad and well-diversified product portfolio, BASF serves numerous customer industries worldwide. Through our long and multiple-step value chains, we generate high value add. Second, BSS' local-for-local production approach and large integrated verbund sites in all regions ensure more stable production compared to standalone, non-backward integrated sites. In addition, we operate flex feed steam crackers in Antwerp, Sanjang, and Port Arthur that can use NAFTA and other feedstocks. This gives us flexibility in the use of raw materials. BASF is one of the few chemical companies with its own dedicated trading business for key feedstocks, which provides flexibility and optionality. We can source key raw materials such as naphtha, methanol, or benzene, either globally or locally, whichever makes more sense at the time. Importantly, our trading activities typically handle volumes that are significantly larger than what we use to cover BASF's own demand. This gives us broad access to the market, increased flexibility, and the ability to respond quickly when supply chains are under stress. In short, scale is a key source of resilience for BASF. As outlined in our Q2 2025 conference call, we have concluded two cornerstone gas supply agreements with Equinor and Chenier. In this way, we ensure long-term natural gas supply, high volume flexibility, and diversification across geographies, pricing models, and delivery modes. Excuse me. Let's now look at the EBTA before special items bridge. In Q1 2026, considerable earnings growth in the surface technology segment and slight earnings growth in the material segment were offset by lower contributions from the chemicals, agricultural solutions, and nutrition and care segments as well as others. Earnings in the industrial solution segment were stable. Compared with the prior year quarter, EBITDA before special items in the surface technology segment rose significantly, mainly due to environmental catalysts and metal solutions. The increase in earnings in the ECMS division resulted primarily from higher contributions from precious metal trading. Lower fixed costs as a result of one-off payments in connection with a successful resolution of a litigation matter also helped to boost earnings. In the material segment, earnings rose slightly on account of the monomers division. Lower fixed costs and higher contribution margins contributed to the improvement. EBDA before special items in the chemical segment declined considerably, mainly owing to lower contribution margins due to the global overcapacities. A higher turnaround intensity in comparison to the prior year quarter, for instance at the Port Arthur site, contributed to the decline in petrochemicals. Furthermore, we incurred higher fixed costs due to the startups of the new Farbun site in South China. Let me highlight, however, that in March, the Sanjiang Farbun site already delivered a positive EBDA before special items. This demonstrates how quickly economics can change in a volatile market environment. Overall, the earnings of the chemical segment improved gradually during the first quarter of 2026. Earnings in the industrial solution segment matched the level of the prior year quarter, as slightly higher contributions from the dispersions and resins division compensated for slightly lower contributions from the performance chemicals division. The nutrition and care segment generated considerably lower EBITDA before special items, owing mainly to the price-related decline in the contribution margins of the care chemicals division. By contrast, earnings in the nutrition and health division improved substantially thanks to significantly higher sales volumes as well as reduced fixed costs. In agricultural solutions, earnings decreased slightly, largely due to currency-related declines in contribution margins. Slight volume growth in all regions supported the earnings development. EBITDA before special items and other decreased significantly, largely due to a measurement effect from derivatives related to hedges. And with that, I will hand over now to you, Christian.

Thank you, Dirk, and good morning, everybody. Let's now take a brief look at key financial figures. At 2.4 billion euros, EBITDA before special items decreased slightly compared with the prior year quarter. Cash fixed costs declined by around 5% to 3.9 billion euros. This is the result of our ongoing restructuring efforts as well as positive currency effects. EBIT, not shown on the slide, improved slightly and amounted to 1.3 billion euros. In Q1, 2026, we incurred special charges in EBIT of around 170 million euros compared with around 430 million euros in the prior year quarter. Special charges were largely related to restructuring measures. Net income improved by €119 million and came in at €927 million. Free cash flow rose by €423 million to €-1.4 billion. You will find more details on the following slide. The increase in cash flows from operating activities by €185 million was primarily due to dividends received from Winter's Idea, which were paid after Winter's Idea had been reimbursed under the federal investment guarantees. Lower earnings with cash impact, higher severance and bonus payments, and increased cash consumption due to the price-related build-up of precious metal trading positions lowered the increase in cash flows from operating activities. As in the prior year quarter, changes in the networking capital led to a cash outflow of around 3 billion euros and were mainly related to changes in accounts receivable in our agricultural solutions business following the start of the season in the northern hemisphere. Payments made for property, plant and equipment and intangible assets were reduced by 238 million euros compared with the prior year quarter to 578 million euros. Free cash flow came in at minus 1.4 billion euros compared with minus 1.8 billion euros in Q1, 2025. Typically, DSS free cash flow is negative in Q1 and recovers over the course of the year. This is mainly due to the seasonal nature of the agricultural solutions business. Let's now turn to our balance sheet at the end of the first quarter compared with the end of March, 2025. At 81.8 billion euros, total assets were almost at the prior year level. The equity ratio amounted to 43.4% and remains solid despite the ongoing share buyback program. Net debt was unchanged from the end of March 2025 and higher than at year end, reflecting the seasonality in our agricultural solutions business. we continue to have a single A credit rating, which ensures unrestricted access to financial markets and favorable financing conditions. This is especially relevant in times of high volatility and unpredictability. Fitch, Moody's, and S&P are recently confirmed to have single A credit ratings. In the coming quarters, we will focus on deleveraging. The maturity profile of outstanding bonds and loans shown in the lower part of the slide will support this. In the first quarter, we already repaid a euro-denominated bond with a nominal value of 1 billion euros. In the following, I will give an update on the implementation of DSF's cost savings programs. We are convinced that we will achieve our targeted annual cost savings of around 2.3 billion euros by year-end. At the end of March, we had already achieved a total annual run rate of 1.9 billion euros. we continue to expect total one-time costs of around 1.9 billion euros, of which we incurred 1.6 billion euros by the end of the first quarter. This shows the positive momentum in bringing down our cost base and the ongoing management focus on this crucial topic. And with that, back to you, Dirk.

Yeah, thank you, Christian. Before we move on to the outlook, I would like to reiterate ESS capital allocation framework. I will start with cash contributions shown on the left. As you are aware, we expect to close the coatings transaction with Carlyle in the second quarter, subject to customary regulatory approvals. We will receive pre-tax cash proceeds of around 5.8 billion euros at closing. Taxes are assumed to be in the mid-triple-digit million-euro range. We are also making good progress with the monetization of our oil and gas assets. in the first quarter proceeds from the sale of a portion of our Harbor Energy shares amounted to around 300 million euros. The largest tranche, 80 million shares, was sold by an accelerated book-building offering. Our remaining shareholding in Harbor Energy now stands at around 30% when considering all shares outstanding. As we have stated on several occasions, we consider our participation in Harbor Energy to be a financial investment and the other strategy remains to exit over time being mindful of the value. Furthermore, as mentioned earlier, we received dividends from Winter Saldea of almost 800 million euros related to the federal investment guarantees for expropriated assets in Russia in the first quarter. With these payments and the payments in the second half of 2025 amounting to 900 million euros, the insurance claims of Winter Saldea under the capital coverage have been settled. Now let's move on to the use of cash on the right-hand side. We are committed to attractive shareholder distributions. Subject to the approval of today's annual shareholder meeting, we will pay a dividend of 2 euros and 25 cents per share on May 6th. We have been buying back shares since November 2025. The program with a volume of up to 1.5 billion euros is scheduled to be concluded by the end of June. So far, we have bought back shares under this program for around 880 million euros, or around 2.2% of the outstanding shares. These share buybacks are part of the total buyback volume of at least 4 billion euros by the end of 2028, announced at our Capital Markets Day in September 2024. As mentioned before, we will use a considerable part of the cash proceeds to deleverage. Compared with the prior planning period, we will reduce capital expenditures in the next four years by roughly 20%. CapEx will consistently stay below depreciation until 2028. We will also consider value accretive M&A as a potential lever to strengthen and grow ESS core businesses. And now let's turn to our outlook. Given the high level of uncertainty about how the conflict in the Middle East will play out, BSF is not, at this time, changing its assumptions regarding the global economic environment in 26 that were presented in the BSF Report 2025. From today's perspective, the assumptions made in February regarding growth in global GDP, industrial production and chemical production may prove to be too optimistic. The oil price may be higher than our existing assumption owing to impeded production and exports as a result of the conflict in the Middle East. The US dollar may appreciate compared to the Euro, which would have a slightly favorable effect. For now, the BSF Group's forecast for the 2026 business year published in the BSF Report 2025 is therefore maintained, including EBITDA before special items of between 6.2 billion euros and 7 billion euros and free cash flow of between 1.5 billion euros and 2.3 billion euros. CO2 emissions will likely be between 17.2 million metric tons and 18.2 million metric tons. We are, of course, closely monitoring the situation in the Middle East and will leverage opportunities and mitigate risks. And now Christian and I are glad to answer your questions.

Ladies and gentlemen, I would now like to open the call for your questions. If you wish to ask a question, press star and then enter 11 on your telephone. For the best sound quality, we kindly ask you to be sure to unmute your phone and use your headset when asking your questions. Please limit your questions to only two at a time so that everybody has a chance to ask their questions in our short conference call right before the annual shareholders' meetings. We have quite a list already. We will start with Katie Richards from Barclays, then have Alex Vigil, and then Thomas Wigglesworth. But now, Katie Richards. Barclays, please go ahead with your question.

Thank you for taking my questions. I'll just ask a few on guidance, then, please. So you've chosen to maintain the range at $6.2 billion to $7 billion. Can you comment on whether the recent pricing and spread movements leave scope to exceed the higher end of this range, or is it too early to assess? And could you also give us some directional guidance on Q2, please? Do you think it would be fair to say it's stronger or in line with the estimates we've seen for Q1 today?

Yeah, Katie, good morning. Thank you for your question. Let me take this one. So first of all, when it comes to the outlook, let me say we are really satisfied how the first quarter came in. This is in a very challenging environment, I think, a great and tremendous achievement by the team. We are optimistic for the second quarter. We see pricing power across many of our businesses that will now unfold in the second quarter. The first quarter was still bound by contractual terms that were negotiated earlier, but now in the second quarter, I think the pricing power that is now coming up will unfold. So, short term, we are optimistic. And then, for the rest of the year, there is a question mark, of course, like everybody has a question mark right now, because we do not know for how long the crisis in the Middle East will continue, and we do not know yet how the demand pattern will continue. So far, we see no declines in demands, but we can, of course, not be certain that the current demand levels will uphold depending on how this crisis goes on. So, therefore, we said everything that we would now change would be arbitrary, so let's stick to the numbers that we have, which is still our best estimate. But of course, we are mindful that there might be changes in the second half of the year. And once we see that clearer, we will certainly react. But for now, we see no reason to change. And this is why we do not change it. Looking into the second quarter and giving you a little bit more flavor on the respective businesses, let me say the following. starting with upstream. For the chemicals and materials segments, we are expecting considerable improvements in earnings compared with the prior year quarter. And this, of course, has to do with the current situation in the Middle East. We are, the businesses are certainly benefiting from tighter supply conditions and also get pricing power. On top of that, also, Sanjiang, which already contributed positively in March, as I've said, will do its part to the results of chemicals. On the other hand side, we will also have a turnaround of a tracker in Ludwigshafen, so we should also not be too optimistic, but I think overall, for chemicals and materials, the picture for Q2 is good. For industrial solutions, make the story short here, we would also expect to come in above the prior year quarter. We are continuing with good restructuring. We also see solid demand and we see overall a good market environment for the second quarter. And then when it comes to nutrition and care, I would say We should come in around previous year's quarterly level. We have challenging market conditions, particularly in care chemicals, which are also likely to persist, but we also see some room for betterment here. And then on the health side, with the revamp of our vitamins grid, we should certainly see a continuation of positive contributions which we already shown in the first quarter. Surface technologies is expected to be below the previous year quarter level. Automotive market, as we all know, is lower compared to 2025 and the PGM prices are also doing their effect. And for agricultural solutions, the business is fundamentally really a good one, I have to say. um the result that we saw in the first quarter was impacted by ethics effects mainly otherwise the colleagues would have achieved more or less the same result as last year what is a slight watch out of course is the pricing and buying power of the farmers they anyway still suffer from soft commodity prices which are not very high and on top of that you'll see now Fertilizer price is also spiking due to trade-off hormones, and that is then impacting the buying power of the farmers as well. So putting all of this together for the second quarter, as I said, a positive outlook beyond the second quarter too early to tell.

Thank you. So we move on to Alex Vigil, Santander.

Thank you for taking my questions. One is more strategic, looking at the situation in the Gulf. In your conversations with your client, you see additional boost to the resorting to be closer to the clients, to be local for local. That's the first question. And the second question is about your expectations in terms of net debt by the end of the year. I think there are many moving parts, the working capital reported, the divestments. If you can give us an indication of how you expect to be at the end of the year. Thank you.

Alex, I take the first question and Christian takes your financially related questions afterwards. So yes, indeed, Alex, we see that the resilience that we have built over the last couple of years is now playing out. I think the good Q1 result and also the A good prospect for the second quarter is thanks to a couple of factors, one being, and you mentioned it, the local for local production that we have. We have on average 90% local for local for sales, but also for the procurement side. We do not see so far in this crisis any supply shortage for us, so the physical product supply is secured also for the second quarter of the year. We have the possibility to play our long value chains also and this together with the closeness and proximity to our customers is really playing off. So we see this resilience point strongly playing out these days. And Christian?

Yes, thanks very much, Alex, for your question. So compared to the end of last year, where our net debt was at 18.3 billion euros, it went up now to 20.5, which is on the level of the last year, which is due to the seasonality of the ag business. Regarding the future now, evidently this will come down. You saw us in Q1 already. We paid back. 1 billion euro denominated bonds. And this will continue. There is further opportunity to reduce our net debt and pay back bonds and loans of 1.2 billion, which we will do. And then, of course, subject to the closing of our portfolio measures, we're considering further measures. There is a certain likelihood that we would potentially even pay back early some loans or bonds, and that would, of course, then further reduce net debt. So this is our plan. As Dirk has said, our clear capital allocation framework is laid out. We will deleverage. Thank you.

So now we move on to Thomas Wigglesworth. We will then have later on Christian Feitz, Matthew Yates, and Tony Jones. But now it's Tom Wigglesworth. Please go ahead, Morgan Stanley.

Thanks very much, Stephanie. Two questions, if I may. Firstly, just in terms of the more downstream focus divisions where you're exposed to automotive, maybe more of the consumer durable manufacturers, what are you – Two things. What is BFF's message to your downstream customers around availability and pricing over the next, you know, through 2026? Like, what are you actually communicating? And are you sensing any demand destruction in those downstream, noting that your upstream business is obviously passing through? And the second question, if I may, obviously the China – Zhangjiang, Vubunt, EBITDA positive in March, is that just a function of stocking effects that are one time in nature? Or do you feel that's actually an underlying step up in performance in the business that means going forwards, you know, the rest of the year will be at a minimum, you know, maybe not EBITDA positive to neutral? Thank you.

Yes, good morning. Let me start with the China question, and Christian is taking your downstream question. So, first of all, let's say we have been delighted that already in March we could show for the site in Sanjiang first time a positive EBITDA result. This is, of course, a function of a couple of factors. First of all, the ongoingly very successful startup of the site, which brought up the capacity utilization very quickly, all product inspect, and also very good customer relations on the ground. So that's first. Secondly, of course, we benefited from volatility, as I've said already in my speech. So we had the possibility to react quickly here at a time Asia was impacted by this Middle East crisis, so would we dare now to say after March we will stay continuously positive in Sanjiang for the rest of the year? Certainly no. We maintain our more cautious forecast for Sanjiang, saying it will probably be rather slightly negative, but at least this is already an early signal of strong resilience also in this new site, so we're happy about it, but I would not overdo it at this point in time.

And regarding the question on the, let's say, more downstream divisions, It's quite, let's say, a change in the first quarter. What you saw in the first two months of the quarter was really good volume development, of course, in the chemicals division, or chemical segment, and also in nutrition and care, but not so much in the other downstream divisions. And that changed in March. You really saw an uptick in volumes. Now, it's evidently very difficult to judge this because there are several things happening at the same time. On the one hand, if you look at consumer confidence, this is actually not very strong in any of the regions, neither in Europe nor in North America nor in China. And, of course, the Middle East crisis is also not helping. But we did see clearly an uptick in March. Also, the PMI in Europe went up. So, it's difficult to evaluate now. Are we talking about restocking effects? Or is this really an underlying demand development? Because at the end of the day, what you see in Asia, specifically in Southeast Asia, you see really a certain supply inavailability. And therefore, actually certain imports into Europe are not coming across the board anymore. So there's certain uncertainty, which is helping demand. This is, of course... different in some of the different businesses. There are businesses which are really growing simply strongly overall, like electronic materials, which is having a really good run. But others, you see really positive developments in terms of demand. because there are some products which are not simply shipped anymore to the same extent as before. So we're going to have to see, and this is what Dirk meant earlier, we have to see how long this lasts and if this is sustainable. Regarding pricing, evidently, we now see significantly higher break costs. We also see higher raw material costs. Those have to be pushed through, so this is why you see price increases across the board, and they are, to a large extent, also sticking.

Thank you, guys. Very clear.

So now we move on to Christian Seitz, Kepler Schubert. Please go ahead.

Yes, thanks. Good morning, dear Christian, Stephanie, and team. Two questions, please. First of all, on agricultural solutions. Given rather dry weather conditions throughout the northern hemisphere at this point in time, how is the inventory situation in crop protection products? And my second question would be on your share program, which I believe is scheduled to be concluded by June, the first 1.5 billion tranche. Are you considering to continue right after that with another trench out of your overall 4 billion buyback program?

Yeah, good morning, Christian. I take the two questions. First, on the agricultural solutions, the channel inventory is currently not the biggest concern, I would say. and you have seen healthy volume development also in agricultural solutions. And on this side, I don't see a major topic. We will be able also for the rest of the year to push the volumes into the market. The bigger concern, as I was mentioning, is the buying power on the farmer side and therefore the pricing power and of course the ongoing ethics effects. So these are the two bigger ones. But fundamentally, and this I would also like to repeat, the agricultural solutions business is on track here to achieve what they want to achieve for the year 2026. On the share buyback program, I'm happy with the progress. I think we also see that the ongoing share buyback program is supporting us and our strategy. So we will, as planned, complete the program this trans 1.5 billion by the end of June. And then we still have 2.5 billion outstanding. For these 2.5 billion, we have time until end of 2028. Will we continue immediately or take a little bit time? Certainly also depends on cash in from, for instance, the coating transactions and other elements. So long story short, we do not know yet whether we will immediately continue. It is not ruled out, but will be decided at a later point in time.

Okay, great. Thanks, Dirk. And as always at this time of the year, I wish you a good and most importantly short AGM.

Thanks very much. I appreciate it.

Okay, so now we move on to Matthew Yates, Bank of America. Your turn.

Hey, good morning, everyone. A couple of quick ones. Can you just elaborate a little bit more on the extent of the maintenance schedule for Q2, just as we're trying to calibrate any constraints you may have to catalyze it on this environment and The second question is, I wonder if you could talk a little bit more about your trading business for food stock, not necessarily something that we've talked about a lot in the past, but in this environment, as you say, potentially a very interesting advantage. Can you just elaborate a little bit more on the size of that business and how it functions? Thank you.

Hi, Matthew. I take your trading question, and then I think Christian can give you a short overview of the maintenance schedule. So our trading business, which we have in our so-called BSF InterTrade, this is a business that is not just, which is apparently more than a procurement function. So we are trading on an ongoing basis, higher value volumes for all our relevant feedstock, NAFTA, methanol, et cetera, et cetera. far beyond our own demands, which in normal times gives you, apart from your direct sales business, a trading result, which you typically see reflected on the other. But in these crisis times where we have to also secure our physical supply, it gives you more optionality with the higher volumes that we can procure worldwide to also put them into captive rather than to sell them on. So it gives us, I would say, a nice buffer on top of the financial support that it also yields. So that's the basic significance of the trading business, which works nicely. Secondly, in terms of market intel, obviously we have very good insights into all the raw material feedstock markets worldwide and the inter-trading colleagues are therefore also an active part of our crisis response team. And with that, a question to maintenance.

Yes. So, Matthew, regarding maintenance. So, typically in the first half of the year, you have the tar season. So, this is the typical turnaround season in the chemical industry. And you saw this already in Q1, where we had the Port Arthur down in the chemical segment. In the second quarter, the larger Ludwigshafen cracker will be offline. Of course, this will impact the industry. The chemical segment, we also have an intermediate. We have a couple of turnarounds in amines and a few others, formic acid, that are going to impact, but that is all implied in the outlook that Dirk already gave. So, this is a material effect, but nothing unusual in this time of the season. One thing I would like to mention, as you are alluding to the current situation, we're actually taking active measures to make sure that we continue stability of supply and also supply our customers. So there, for example, in the monomers division, we had planned for an ammonia turnaround in the second quarter, and we pushed this now into the fourth quarter in order to ensure continued supply for all our customers in the current environment.

Thank you very much.

So we will now move on to Tony Jones, Rothschild, and then we will have Sebastian Breit, Georgina Fraser, and Shetan Odeshi. But now it's Tony Jones, Rothschild. Please go ahead.

Good morning, everybody. Thanks for taking my questions. First thing on Ag Solutions, another good performance with volumes up, looks to be benefiting from your BSS strong product mix. But I wanted to check, are there any gains in the quarter from quarterly phasing, either delayed from last year or pulled forward from the next? And how are the new newly launched products going? Are there gains starting to come through there despite the credit tightness? And I suppose it would be good to check, is everything on track in the IPO process? And then my second question is higher level, really. Some companies... are now starting to talk about exploring new investments in North America with the low costs and perceived lower political risk. Do you see any possibility BASF might look to assess whether it's the right time to invest again in North America, either organically or via M&A? Thank you.

Tony, good morning. I think I take both of your questions. First on EC, I would confirm this is Q1 has been a clean quarter. There was even due to market dynamics, I think, rather the need in the fourth quarter 2025 to do a little bit more. So if you will, the first quarter 2026 was even then a little bit weaker, but there is no big prepolment or anything, so it is rather a clean quarter for the EC division. On U.S. investments, let's not forget we are currently doing a very large investment with the MDI expansion in Geismar, which is fully on track, which is supposed to be completed by mid of this year. We'll then ramp up quickly a startup first and ramp up quickly still also within this year. So this is a big investment which we are very hopeful for that it will also render its positive contribution extremely quickly. On top of that, as you know, we are at the end of an investment cycle. So we are fully invested, well-invested company right now. Therefore, nothing big out of the extraordinary can be expected neither in the U.S. nor elsewhere, but rather we focus now on other things and run the assets to the best of our abilities.

Thank you, Dirk. Very helpful. And best of luck to the AGM today.

Okay, so we move on to Sebastian Breit, Bierenberg.

Hello, good morning, and thank you for taking my questions. I have two, please. The first is on regional profitability. The temptation when looking at these results is to say, well, BFF has benefited quite heavily from global footprint, particularly the U.S. upstream, given some of the peers have reported quite nice results there. Can you talk about the extent to which U.S. upstream chemicals were the primary driver of Q1? and give us any relative sense for the relative profitability of China, particularly with the new operations, Europe and the U.S. My second question is on working capital. Is the $3 billion in Q1 really seasonal, or is there a chance that BASF needs to hang on to some of this because of the need to secure supply or be able to deliver for end customers together with raw material inflation? Thank you.

Morning, Sebastian. I take your question on the regional split, and then I think Christian talks a bit about the working capital effects and development. So on the regional side, if you look into the top line, I think volume-wise, we were better, particularly in Asia, and they are driven by China. This has to do with the overall market dynamics still, but also, of course, with the contribution of our new site in Sanjiang. If you want to split it a bit, I think it's a significant part of what we see as volume increase in China is coming from the new site, of course. Europe also, in terms of volumes, growing in the first quarter of 2026, whereas North America for us volume-wise was rather flattish. So this instinct that US needs to go up now in this current situation, at least on the top line, we do not see in our books. It is the pattern Asia is driving, but also Europe showing here a nice contribution. If you look into the prices in the first quarter, they still have been down compared to previous year's quarter. for the reasons I explained, price increases not yet coming through. If you look into the earnings pattern here, you see, start with North America, you see a slight improvement, but not something spectacular. Also here, you see the biggest contribution coming from Asia again, and then in our home market, we saw in the first quarter also an improvement in Germany, where Europe altogether was rather down. So, again, a mixed picture, but nothing that is being driven yet by the U.S. Western to working capital.

Yeah. Sebastian, thanks for the question. So while I was talking earlier about the demand development in Q1, which really picked up then in March more than in the month before, actually on the pricing side, we did not see that same development. Actually, it was pretty much the same all over the quarter. So this really hasn't come through, the price increases. This would be more in the second half. So regarding networking capital, for me, this is rather, and you see, we saw an impact of around 3 billion, similar to what we saw in the last year's quarter, first quarter. So very similar development, mainly driven by the seasonality of the ag business. We, of course, also saw a little bit higher inventory that came from the startup of the Shenzhen Verbund side, but nothing, let's say, spectacular. um however now looking into q2 this will play a role so regarding the the free cash flow and the operating cash flow in the second quarter last year we had a free cash flow of 0.5 billion in the second quarter what you will see this year in line with what we said on capex you will see lower capex between two and three hundred million lowers lower because for the full year we had already announced in February that we would go down by 0.9 billion. So you will see these 200 to 300 also in the second quarter. But we will see higher net working capital due to the higher oil and gas price environment. And this, of course, will be a drain on cash flow. And therefore, expectation here is that operating cash flow will be lower in the second quarter than last year. However, due to the lower capex, you will see this somewhat as a compensating effect here. So probably slightly down in free cash flow compared to prior year.

That's helpful. Thank you.

Given the fact that there are still six analysts in the queue, I suggest we move to one question or would appreciate if you could restrict this up to one question. Now, it's Georgina Fraser, Goldman Sachs. We then have Chetan, then Peter Spengler, and then Laurent Fabre. But now, Georgina Fraser, please go ahead.

Thank you very much, and thankfully, I do just have one question. your outlook and this topic of supply security that we've spent a lot of time so far. In the material that you published this morning, it read to me that you were highlighting a lot of downside risks to your outlook, but the commentary on the call has been a lot more positive, at least in the short term. So I want to dig in a little bit into the assumptions that you've made. You said there are no significant supply risks for now. Can you help us understand what are you looking out for When would real supply risks commence if the Strait of Hormuz remains shut? And do you see competitors already facing supply issues in Europe that don't have the same feedstock diversification and trading platform and all of the advantages that you highlighted? Thank you.

Hi, Georgina. I take this one. So if we say we do not see supply risk for now, I'm talking about the time horizon until end of Q2. As you can imagine, we are now doing both supply risk analysis physical, but also pricing on a rolling basis. And the foresight that we have gives us confidence that until end of the second quarter, we will not see any major supply risk. We do see the major bottlenecks for supplies still in Asia. If you look into the list of false majeures declared, these days they are all coming from Asia. They are not so much coming from Europe. Will this change over time is not to be excluded, but for now it is still predominantly an Asian topic. To our outlook. the trends that we've shown with regard to the assumptions that are the basis for the outlook are to demonstrate that there is currently a lot of volatility and that we can rather expect from today's perspective for GDP, etc., a downward trend. But no way is this alone sufficient to say we need to change our outlook because these days we see a lot of counter-wheeling factors. And at the moment, you see price increases due to higher feedstock on your raw material cost, but have the ability to pass on prices or even expand margins. Even the sensitivity analysis that we are typically doing is not so helpful. So therefore, we see currently downside risks. But we also see upside opportunities. It's at this point not possible to clearly make a net amount out of it. But it is certainly the case that for the first half of the year, we see for us, for our business, more opportunities than risks. And then we really have to see. So bear with us. We will keep you updated also then at the half year's call.

Thank you so much.

So we move on to Chetan Udeshi, JP Morgan.

Yeah, hi, morning. Thanks for my questions. Just one quick clarification. So on ag, I heard, Dirk, you talked about the farmer economics, but if I just look at your Q2 last year, you had quite a strong volumes. Now there's always a phasing between comps and stuff, but I'm just curious, do you think in Q2 we should still assume the EBITDA to be down year-on-year because of FX, but also because the comps and volumes are quite tough? And the second question, you know, Wacker yesterday was talking about orders in April basically going to Jan and Feb levels after a surge in March. Have you seen any of these dynamics across your business? Thank you.

Yeah, good morning, Chetan. Let me start with your question on X Solutions. For the second quarter, we believe this will deliver, as I said already earlier, a seasonally typical contribution, which will probably be broadly in line, maybe slightly below the previous year quarter. and the main factors being the reasons that I've mentioned, so commodity prices. I mentioned the fertilizer effect, which is not, we are not in the fertilizer business, but it is obviously weighing on the buying power of the farmers, but this is more or less is it. Economic conditions are certainly different. Currently, we have some dry conditions here in the middle of of Europe better in the south. So this is a mixed bag. So my tagline would really be expect a seasonable, typical contribution, maybe slightly below previous year's level. And Christian, on the second question?

Yeah, so evidently in the current environment, The typical view that we have towards the next weeks actually has even been shorter now. So we have a view maybe towards the next four weeks or so at this point in time. It has even come down from two months currently due to this uncertain environment. But we have not seen a broad-based reduction in demand. Actually, we have a pretty good oil book. And we feel confident. Evidently, what I mentioned earlier, the consumer confidence is down. But on the other hand, due to all the, let's say, situation from less imports into Europe, for example, also a necessity to supply in Southeast Asia where there are shortages has not led to a reduction in our demand in the short, at least in the short foreseeable future. Thank you.

So now we have a question from . Yeah, good morning.

Thank you for taking my question. Cash proceeds of approximately around 5 billion net of tax are expected to be received in the second quarter from Carlyle. Can you help model the impact in the P&L and how should we think about the expected dividend contribution from the retained 40% stay going forward?

Yeah, Peter, good morning. So the net contribution a bit higher than you would expect. We said tax effect is middle triple digit, so I would expect that the net is coming in a little bit higher. On the joint venture side, so the joint venture will, do everything to increase its value. I would not expect that the joint venture with Carlyle obviously being the majority player and BASF holding the minority stake that this joint venture will pay dividends in the short term. The financial effect that we are getting from this transaction is, of course, higher. retained earnings and and the cash in event and we will use the cash that we are getting upon closing of the transaction as we've already alluded to with our priorities of the users of cash so we will use it to significantly leverage our balance sheet and then you know that we are also having a distribution framework and these are the uses of the proceeds and I think that is it. Thank you.

Thank you. So now we move on to Laurent Favre, and then two more to follow with Jaidee Pandia and James Hooper, but now it's Laurent Favre, BNP.

Thanks, Sophie. Part of the hope of recovery to mid-cycle was the sort of capacity shutdown that would offset some of the new additions, either in Europe or Asia. And I guess now we see margins that are much better for those who can run. And strategically, the situation shows that maybe you're not able to rely on upstream overcapacity to run your economy. So I'm wondering, do you think the situation is likely to slow down capacity shutdowns or on the other side, accelerate them for those who've already had to muck bold capacity and maybe they won't restart?

Oh, yes. It was very hard to understand you, so I tried to extract what I understood. So you were asking about the shutdowns, the ability to move TARS, and what to expect. So let me maybe first say, we have this year a higher turnaround intensity than last year. Amongst them, you have the five years turnaround in Port Arthur, which started... in the first quarter and is about to be closed now successfully very soon. We have the big tracker turnaround in Ludwigshafen to come up and those are things that you cannot postpone because they need to be done and are also planned for a long time. At the same time, we are showing flexibility with turnaround postponements. Christian alluded already to ammonia. If you want to take a fraction, so what can be postponed, what has to be done, I would say it's rather 80% has to be done, 20% overall can be successfully postponed so that we are able to deliver and supply our customers. So that's more or less the mix. And despite of the more intensive turnaround season that we have, you will see for the first half of the year, and now the better results of the upstream business is coming in, so we are able to overcompensate the turnaround effects, partly, of course, out of our working capital, but also partly due to the pricing power that we have recently gained. I hope this answers your question, because it was hard to understand.

I'll follow. Thank you.

Jaideet Pandya on field research. Your turn now. Hi.

I have a sort of similar question to actually what Laura was trying to ask. You know, when you look into the context of the sector prior to the war, I guess overcapacity out of China or Middle East was the biggest headache for European slash American chemical companies. Now that the cost curve is sort of pushed sort of steeper, how much of this you think is sort of structural, especially in China, you know, with the lack of availability of feedstock or some of the sort of really old plants having to take a run cut or a mothball. So how much of this is really going to structurally help the upstream demand supply balance, you know, when you look across the value chains? And then just sort of an added follow-up, if you could just highlight us, you know, your NASDAQ plan. you know, in Europe as well as in China. That would be great. Thanks a lot.

Yeah. So the first question, of course, is a little bit of a crystal ball question. So how much is structural? How much will change back? Let me try to narrow down a little bit the playing field here. So we have a huge production set up in Asia. mainly China, but then also ASEAN. And this very broad setup is hinging upon a very thin lifeline, which is the Strait of Hormuz, where the preponderance of the feedstock for Asia is coming from. And the vulnerability that comes with that we are currently seeing. Do we see as a result of that plant stoppages in Asia? Yes, of course. We see a lot of them. We see false majeures also. Do we see less supply into Europe? The pricing power that Europeans are currently getting is telling that. Is this long-term or is it short-term? For me, Gianni, it's too early to tell. What is clear, customers in Europe are getting more sensitive about their procurement security. And what we see is that more customers are also diversifying their supplier base, also looking who, apart from an Asian supplier, can supply us in Europe. And there, of course, in many, many cases, BASF is the first choice. So here, this effect we clearly see, and this is certainly a positive, would I call it structural right now, too early to tell, but this is certainly a positive thing. And Christian, maybe you add.

Sure. On the feedstock sourcing, so for European steam crackers, Ludwigshafen and Antwerp, the raw materials are primarily sourced in Europe and Northern Africa regarding NAFTA, as well as North America regarding liquefied propane, because the cracker and Antwerp can actually use NAFTA as well as propane. Our team cracker in Shenzhen is the cracker, so can use both NAFTA and . So the raw materials are primarily sourced in the Belize, in North Africa, but also in North America. So we talk NAFTA here, butane, and at the Verbund site in Nanjing, as well as in Port Arthur, the giant ventures are sourcing the raw materials, and this is therefore ensured that we also have in those crackers security of supply.

Sorry, just a follow-up. Are you sourcing any NAFTA out of the or have you had any supply issues in Xinjiang since 2001?

No, we have not. I mean, yes, there are some Middle East sources for Xinjiang, but we also have other sources, and therefore we have security of supply here. In short, we have not had issues regarding sourcing nafta or other raw materials for any of our crackers, including nanjing. Okay, thank you.

So now hopefully one final question from James Hooper, Bernstein. Please go ahead.

Thank you very much for the chance to ask the question. My question is a bit more on pricing and contracts. Can you tell us a little bit more about the pricing approach? Are you seeking to lock in customers longer at higher prices? And are you using surcharges or are you using full pricing? And then I can ask a quick follow-up to the last question. How long in terms of time does it take to change your kind of feedstock power from one source to the other if the supply situation does get worse? Thank you.

James, I start with the second one, the easier one. This feedstock change goes relatively quickly. I would say it's a matter of days or weeks. It's not a matter of months. So that's an actual and powerful flexibility that we have to change on relatively short notice. Why is the first question a little bit more difficult? It's a a sensitive question where we need to be mindful of what to say about pricing. Let me say it in general. We entertain a mix of contract prices. We also have in certain business, of course, formula prices, as you would expect. And we also have a certain degree of spot prices. Now, if it comes to price increases, of course, to come to a higher spot price share, you need to take some time. This is why the prices effects that we see will now come into the second quarter and were not visible really in the first quarter. First quarter was a volume gain. Second quarter will also now be something where you will see price effects. And are we making comprehensive price increases or are we also passing on special price components? Also here we have all kind of possible pricing approaches, always customary. and in line with your compliance standards that you would like to have, but also in line with market standards. So it's really a broad base of things. Most importantly for me, we have regained pricing power, and you will see it in the second quarter.

Thank you. Thank you. Ladies and gentlemen, we are now at the end of today's conference call. We will present our second quarter and half-year results on July 29. Prior to that, we would like to invite you to a virtual deep dive on our Sanjiang Febun site, which we will hold on Monday, June 8, from 12 p.m. to 1.30 p.m. In May, we will provide further details on our website. Should you have any further questions, please do not hesitate to contact a member of the BASF IR team. BASF's annual shareholders meeting will be held at Congress Center Rosengarten now, starting at 10 a.m. CESC. Thank you for joining us today, and goodbye for now.