BASF : 1st Quarter 2021 Results

Analyst Conference Call Q1 2021

Speech

April 29, 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 Q1 2021

April 29, 2021

Martin Brudermüller

Good morning ladies and gentlemen,

Thank you for joining us today.

[Chart 3: BASF with strong start to 2021 business year: EBIT before special items plus 42% compared with Q1 2020]

Let me begin with the highlights of the first quarter of 2021.

We had a strong start to the year. The positive earnings momentum of the fourth quarter of 2020 continued. On a comparable basis we posted record earnings for a first quarter: EBIT before special items rose by 42 percent to 2.3 billion euros compared with the prior-year quarter.

Overall, we were able to grow sales volumes by 9 percent. All segments and regions contributed to this strong volume growth. Prices increased by 13 percent. They rose significantly in the Surface Technologies, Chemicals and Materials segments.

In our upstream chemicals businesses earnings rose considerably due to higher prices and volumes compared with Q1 2020. Cracker margins increased in all regions, most pronounced in the U.S. Higher demand and some outages, especially on the U.S. Gulf Coast, led to tighter supply demand balances. In some commodity product lines, such as isocyanates, stronger demand supported margin increases.

As a result of the recovery of the global automotive production, we also achieved considerably higher earnings in our Surface Technologies segment.

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BASF Analyst Conference Call Q1 2021

April 29, 2021

[Chart 4: Recovery of global chemical production continued in Q1 2021]

Let us now turn to the macroeconomic data. The indicators for Q1 are estimates as most of the countries have not yet published their figures for the quarter.

Global chemical production volume increased by 10 percent in Q1 2021, mainly due to the above average growth in China. The country continued its strong recovery which started in Q2 2020. The rest of Asia and Europe also experienced a recovery in chemical production. The U.S. recorded a decline in chemical production because of the strong freeze on the Gulf Coast in the first quarter.

With an increase of 9 percent, BASF Group's sales volumes grew in the same order of magnitude as global chemical production.

[Chart 5: BASF Group Q1 2021: Volume growth across all regions]

On this slide, our volume growth by region is depicted. Sales volumes are compared with volumes in the respective prior-year quarters.

During the past four quarters, we recorded double-digit volume growth in Greater China across almost all segments. In Q1 2021, volumes in Greater China rose by 43 percent compared with the prior-year quarter, which was heavily impacted by the pandemic.

Our sales volumes also continued to grow in Europe and North America after turning positive already in Q4 2020. According to current macroeconomic estimates, our growth in these regions was above market growth.

[Chart 6: BASF Group Q1 2021: Volume growth across all segments]

Moving on to the volume development by segment.

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BASF Analyst Conference Call Q1 2021

April 29, 2021

In the first quarter of 2021, the absolute volume increase was most pronounced in the Surface Technologies, Materials, Agricultural Solutions and Chemicals segments.

Overall, we benefitted from our diversified portfolio serving a broad range of customer industries which nicely recovered during recent months.

[Chart 7: BASF Group Q1 2021: BASF with strong start to 2021 business year]

Let us now look at our sales and earnings development in Q1 2021 compared with the prior-year quarter.

Sales increased by 16 percent to 19.4 billion euros. As just shown, higher prices and volumes were the driver for this. Currency effects of minus 6 percent were mainly related to the devaluation of the U.S. dollar as well as the Brazilian real.

EBIT before special items came in at 2.3 billion euros, 42 percent higher than in Q1 2020. We achieved considerably higher earnings in the Materials, Chemicals and Surface Technologies segments. EBIT before special items of the Agricultural Solutions segment matched the strong level of the prior-year quarter. The Industrial Solutions segment recorded slightly lower EBIT before special items, while earnings in the Nutrition & Care segment declined considerably.

Let me provide you with further details on the quarterly earnings development by segment:

• In the Chemicals segment, EBIT before special items rose considerably compared with the first quarter of 2020 in both divisions, especially in Petrochemicals. Earnings development was driven by higher margins as a result of a recovery in demand,

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BASF Analyst Conference Call Q1 2021

April 29, 2021

an improvement in income from equity-accounted companies, and lower fixed costs.

• In the Materials segment, the considerable increase in EBIT before special items was mainly driven by a considerably higher earnings contribution from the Monomers division due to improved isocyanate margins. EBIT before special items rose slightly in the Performance Materials division. Volume growth more than offset lower margins from higher raw materials prices.
• In the Industrial Solutions segment, EBIT before special items was slightly below the prior-year quarter. Considerably higher earnings in Dispersions & Pigments were unable to completely offset the significantly lower earnings contribution from Performance Chemicals. This was mainly due to lower margins as a result of increased raw materials prices and negative currency effects. The increase in earnings in Dispersions & Pigments primarily resulted from lower fixed costs and volume growth. The division's earnings were weighed down by negative currency effects.
• EBIT before special items in the Surface Technologies segment rose considerably compared with the first quarter of 2020. This was largely driven by volume growth in both divisions. The positive development in earnings was supported by lower fixed costs, especially in the Catalysts division.
• In the Nutrition & Care segment, EBIT before special items decreased considerably compared with the strong prior-year quarter. The decline in earnings impacted both divisions and primarily reflected lower margins as a result of lower sales. The development of sales was primarily impacted by negative currency effects, mainly relating to the U.S. dollar.