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.