BASF : 2nd Quarter 2021 Results

Analyst Conference Call Q2 2021

Speech

July 28, 2021

Martin Brudermüller

Chairman of the Board of Executive Directors

Hans-Ulrich Engel

Chief Financial Officer

The spoken word applies.

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BASF Analyst Conference Call Q2 2021

July 28, 2021

Martin Brudermüller

Good morning ladies and gentlemen,

Thank you for joining us today.

On July 9, BASF released preliminary figures for the second quarter of 2021 and increased the outlook for the full year. Today, we will provide you with further details.

[Chart 3: Q2 2021: BASF with very strong second quarter supported by higher prices and volumes]

Let us begin with the highlights of the second quarter of 2021.

The strong growth momentum of the previous two quarters has continued. We achieved volume growth and price increases across all regions and all segments compared with the prior-year quarter. In some businesses we were able to restore and, in some cases, increase our margins with the price increases; in others there is still some way to go.

EBIT before special items rose by more than 2 billion euros compared with Q2 2020 and reached 2.4 billion euros. This is also considerably above the pre-pandemic level of 1 billion euros in Q2 2019.

Considerably higher earnings in our upstream businesses were the main driver for the strong increase in earnings overall. Compared with Q1 2021, margins in some commodity product lines such as isocyanates, slightly declined in Q2 2021 but remained on a high level.

In our downstream segments, we managed to increase volumes and prices based on strong demand. However, pressure from increased raw materials prices remained high in several downstream businesses.

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BASF Analyst Conference Call Q2 2021

July 28, 2021

[Chart 4: Recovery of global chemical production continued in Q2 2021]

Let us now turn to the macroeconomic data. The indicators for the second quarter are estimates, as most of the countries have not yet published their figures.

According to the currently available data, global chemical production increased by almost 10 percent in Q2 2021 compared with the prior- year quarter. With an increase in volumes of 28 percent, BASF Group grew well above global chemical production.

All regions recorded strong demand growth; this was most pronounced in Asia excluding China, and in Europe. In the prior-year quarter, these regions, as well as North America, were significantly impacted by the COVID-19-related lockdowns. In comparison, chemical production in China had already grown in Q2 2020.

[Chart 5: BASF Group Q2 2021: Volume growth across all regions]

This slide shows our volume growth by region. Sales volumes are compared with volumes in the respective prior-year quarters. During the past three quarters, we increased volumes in all regions.

In Greater China, we recorded double-digit volume growth during the past five quarters. In Q2 2021, volume growth in China was less pronounced as the recovery was already in full swing in the second quarter of 2020. Volume growth, however, remained strong at 10 percent.

In Europe and in North America, volumes grew considerably in Q2 2021 as the prior-year quarter in these regions was heavily impacted by the lockdowns due to the pandemic.

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BASF Analyst Conference Call Q2 2021

July 28, 2021

[Chart 6: BASF Group Q2 2021: Volume growth across all segments]

We move on to the volume development by segment.

In Q2 2021, we increased volumes in all our segments. The volume increase was strongest in the Surface Technologies and Materials segments. Volumes also grew considerably in Industrial Solutions, Chemicals and Agricultural Solutions.

Overall, volumes increased by 28 percent or 3.5 billion euros in absolute terms compared with the prior-year quarter.

[Chart 7: BASF Group Q2 2021: Sales increased considerably due to higher prices and volumes]

We now look at our sales development compared with the second quarter of 2020.

Sales of BASF Group increased by 56 percent to 19.8 billion euros. As already alluded to, considerably higher prices and volumes were the driver for this. In total, organic sales growth amounted to 63 percent in Q2 2021.

Currency effects of minus 7 percent were mainly related to the depreciation of the U.S. dollar. Portfolio measures had a negligible impact on sales.

[Chart 8: BASF Group Q2 2021: Very strong earnings growth]

As I already mentioned, EBIT before special items came in at

2.4 billion euros. We achieved considerably higher earnings in the Chemicals, Materials, Surface Technologies and Industrial Solutions segments. Further details on the earnings development in these segments can be found in the Half-Year Financial Report published this morning.

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BASF Analyst Conference Call Q2 2021

July 28, 2021

In the Nutrition & Care and Agricultural Solutions segments, EBIT before special items declined considerably. I will talk about this in more detail on the following slide.

Earnings in Other also declined considerably compared with Q2 2020; this was mainly due to higher additions to provisions for variable compensation components as a result of the strong earnings development.

[Chart 9: Nutrition & Care and Agricultural Solutions: Main drivers for EBIT before special items development in Q2 2021]

Let me now provide you with further details about the performance of Nutrition & Care and Agricultural Solutions in Q2 2021. Both segments were able to increase volumes and prices but recorded a considerable decline in EBIT before special items.

In Nutrition & Care, EBIT before special items declined by 46 percent. The earnings decline was mainly driven by the Nutrition & Health division. Compared with the strong prior-year quarter fueled by an exceptional demand during the pandemic, margins declined on account of negative currency effects, lower prices and higher variable costs due mainly to higher raw material costs. In animal nutrition, the earnings decline was most pronounced. Lower volumes in vitamin A, particularly due to the tie-in and start-up of the vitamin A capacity expansion in Ludwigshafen, as well as higher costs from several turnarounds in Q2 were the main drivers. As announced, we plan to bring our vitamin A plant expansion on stream in the second half of 2021. The project is well on track.

In the Care Chemicals division, earnings also declined - compared with a strong second quarter in 2020. This was mainly driven by higher raw material prices that put pressure on margins. Higher fixed costs, in part due to higher maintenance activities, also had an impact.