Q2 2011 Earnings Call

July 28, 2011 8:00 AM ET


Magdalena Moll – SVP, IR

Kurt Bock – Chairman of the Board of Executive Directors

Hans-Ulrich Engel – CFO; Chairman and CEO, BASF Corporation


Neil Tyler – JPMorgan Securities Ltd.

Jeremy Redenius – Sanford C. Bernstein Ltd.

Mutlu Gundogan – Royal Bank of Scotland NV

Rhian Tucker – Credit Suisse Securities Ltd.

Peter Clark – Société Générale

Tony Jones – Redburn Partners LLP

Richard Logan – Goldman Sachs International Ltd.

Andrew Benson – Citigroup Global Markets Ltd.

Ronald Köhler – MainFirst Bank AG

Andreas Heine – Unicredit Bank AG

Joe Dewhurst – UBS Ltd.

Jaideep Pandya – Joh. Berenberg, Gossler & Co. KG

Annett Weber – BHF-BANK AG

Laurent Favre – Merrill Lynch International Ltd.

Christian Faitz – Macquarie Capital Ltd.

Martin Rödiger – Crédit Agricole Cheuvreux SA

Jenny Barker – Nomura International Plc



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Good afternoon, ladies and gentlemen. This is the Chorus Call Conference operator. Welcome to the BASF Interim Report Second Quarter Results 2011. 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 of 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 final performance maybe 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 turn the conference over to Magdalena Moll, Head of Investor Relations. Please go ahead, madam.

Magdalena Moll

Good afternoon, ladies and gentlemen. On behalf of BASF, I would like to welcome you to our second quarter 2011 conference call. As you have all have probably seen, BASF businesses continued to develop successfully in the second quarter thanks to ongoing strong demand for our products. Higher raw material costs could largely be passed on to the market and adjusted for Libya, EBIT before special items increased by 16% to EUR2.2 billion.

With me on the call today to explain the results are Kurt Bock, our CEO and Hans-Ulrich Engel, our Chief Financial Officer. Kurt will briefly elaborate on business performance and the important milestones reached in the second quarter. He will then discuss with you the outlook for the year 2011. Subsequently, Hans, will review the segment results and cash flow in detail. Afterwards, both gentlemen will be happy to take your questions.

As always we have posted the numbers and charts, which will be discussed during this call as well as all the press documents on our website, With this I would like to hand the call over to Kurt.

Kurt Bock

Yeah, thanks Maggie, and also welcome from my side, ladies and gentlemen. After a powerful start into the year, we had another good and very solid quarter. Sales grew by 14% to EUR18.5 billion compared to 2010. More importantly, we succeeded to grow volumes in our Chemical business by 5%. For the first time in 2011, the weakening of the U.S. dollar led to a negative sales effect of 6%, which however, was largely compensated by the excellent performance of the acquired former Cognis business.

In Oil and Gas, growth was purely driven due to the shutdown of our operations in Libya. The missing sales and earnings from Libya and we do not see our operations being restarted in 2011 also affected the year-over-year earnings comparison. Adjusted for Libya, EBIT before special items increased by 16% to EUR2.2 billion. Adjusted earnings per share grew by 17% to EUR1.75.

What we saw in Q2 was a continued upward trend in raw material costs. Our sales prices rose by 13% in total and 12% in the Chemicals business. However, we were able to pass on the cost increases to a very large degree.

We also had planned and unplanned plant outages which affected earnings negatively, most notably, the turnaround of a cracker as well as the disruption of our acetylene plant in Ludwigshafen which impacted our butanediol value chain.

At the end of the second quarter, we saw some inventory destocking at our customers, above all in Asia. We interpreted this as a sign that the exceptionally high growth rates of the last couple of quarters are going to normalize as expected. We therefore reiterate our guidance for full year sales and earnings.

In the second quarter, we also achieved important milestones. As you all know, BASF and INEOS plan to combine major parts of their global styrene monomer, polymer and copolymer business activities into a new joint venture called Styrolution.

In the second quarter, we took important steps towards the establishment of the joint venture Styrolution. In May, the companies signed the joint venture contract. Meanwhile, the new joint venture has already been approved by the U.S. Federal Trade Commission and the EU Commission. We are still awaiting approvals on antitrust authorities in a few countries and expect closing in the fourth quarter.

In May, we announced our plans to build the world’s largest single-train TDI plant in Europe. TDI as you all know is a key component for the polyurethanes industry. It is widely used in the automotive industry, for example, in seating cushions and interior applications as well as in the furniture industry, for example, in flexible forms for mattresses and cushions.

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