BASF CEO Discusses Q3 2010 Results – Earnings Call Transcript

BASF CEO Discusses Q3 2010 Results â¿¿ Earnings Call Transcript
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BASF (

BAS.PK

)

Q3 2010 Earnings Call

October 28, 2010; 08:30 am ET

Executives

Jürgen Hambrecht – Chairman and Chief Executive Officer

Kurt Bock – Chief Financial Officer

John Feldmann – Board Member

Magdalena Moll – Head, Investor Relations

Analysts

Rhian Tucker - Credit Suisse

Jenny Barker – Barclays Capital

Neil Tyler – J.P. Morgan

Anthony Jones – Unidentified Analyst

Thomas Gilbert – UBS

Sophie Jourdier – Citigroup

Peter Clark – Société Générale

Nobert Barth - WestLB

Jeremy Redenius - Sanford Bernstein

Andrew Stott – Merrill Lynch

Christian Faitz - Macquarie Securities Europe

Jaideep Pandya - Berenberg Bank

Tony Jones - Redburn

Andreas Heine – UniCredit

Martin Rödiger - CA Cheuvreux

Ronald Köhler - MainFirst

Paul Walsh – Morgan Stanley

Annett Weber – BHF Bank

Davis Nigel – ICIS

Presentation

Operator

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Ladies and gentlemen, this is the Chorus Call conference operator. Welcome to the BASF third quarter conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. (Operator Instructions)

This presentation includes forward-looking statements that are subject to risks and uncertainties including those pertaining to the anticipated benefits to be realized from the proposals described herein. This presentation contains a number of forward-looking statements including, in particular, statements about future events, future financial performance, plans, strategies, expectations, prospects, competitive environment, regulation, and supply and demand.

BASF has based these forward-looking statements on its views with respect to future events and financial performance. Actual financial performance on the entities described herein could differ materially from that projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections and financial performance may be better or worse than anticipated. Given these uncertainties, readers should not put undue reliance on any forward-looking statements.

Forward-looking statements represent estimates and assumptions only as of the date that they were made. The information contained in this presentation is subject to change without notice and BASF does not undertake any duty to update the forward-looking statements, and the estimates and assumptions associated with them except to the extent required by applicable laws and regulations.

Ladies and gentlemen, at this time I would like to the turn the conference over to Magdalena Moll, Head of Investor Relations. Please go ahead, madam.

Magdalena Moll

Yes. Good afternoon, ladies and gentlemen. On behalf of BASF, I would like to welcome you to our third quarter 2010 conference call. BASF again delivered a significantly better than expected performance in the third quarter. The global economy continue to recover, and business dynamics remained strong throughout the period. BASF was able to take advantage of these market dynamics through our improved portfolio and enhanced operational excellence.

With me on the call today are Jürgen Hambrecht, Chairman and CEO of BASF; Kurt Bock, our Chief Financial Officer; and John Feldmann, Board Member responsible for Performance Products.

As the numbers have already been published and I hope you had a chance to review the materials, since we had posted the charts and the comments on our website already this morning, Dr. Hambrecht would like to give you just a quick overview of the performance during the period and he will give a statement on the outlook for the rest of the year.

We would then like to use the bulk of the time to answer any questions you might have. And all three gentlemen will be happy to take your question. We would also propose that we first take some questions from analysts, and then in the second round we will take questions from journalist.

With this, I would like to immediately hand over to Jürgen Hambrecht.

Jürgen Hambrecht

Yes, thank you, Magi. Good afternoon and thank you for joining us today. And let me go straight into the numbers. This €15.8 billion BASF generated record sales for our third quarter in a row. Sales were 23% above the level of Q3 2009 and only slightly below the second quarter 2010, which is an impressive result given normal seasonality.

EBIT before special items at €2.2 billion increased by more than 75% per year and was in line with the level achieved in Q2 2010. Net income increased dramatically year-over-year to €1.25 billion, which is also a 5% increase over the second quarter. Adjusted EPS amounted to €1.52, an increase of €0.91 versus last year and up €0.02 versus Q2.

Additionally, cash flow from operations at €5.3 billion for the first nine months was very strong, and free cash flow amounted to €3.8 billion BASF SE cash machine. As a result of this positive cash flow development, we were able to reduce net debt by €2.1 billion to €11.4 billion during the last three months. These are impressive results, which reflect the strong position of BASF. The results were driven by a solid performance across all of our segments with positive impacts from volumes, margins and currencies.

However, the most important driver for this transformation from my perspective are first, our sustained and relentless efforts to increase operational excellence and to reduce costs demonstrating our leading position as the chemical operator.

Second, our fast integration and realization of synergies from our acquisitions, which will lead to an optimized less cyclical portfolio and finally and from my perspective most importantly, the extraordinary performance and teamwork of the best team in the industry.

As a consequence, we raised our outlook. We expect to achieve a record year 2010, with sales to reach approximately €63 billion and an EBIT before our special items above €8 billion.

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