Basf(BASFY) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Sales for Q3 2024 were €15.7 billion, matching the prior-year quarter, with volumes increasing by 7% excluding precious and base metals [7] - EBITDA before special items improved by 5% to €1.6 billion, with an EBITDA margin before special items increasing from 9.8% to 10.3% [8][19] - Net income rose to €287 million from a loss of €249 million in Q3 2023, supported by a disposal gain of €398 million from Wintershall Dea assets [21] - Cash flows from operating activities decreased by €633 million to €2.1 billion, primarily due to lower cash inflows from changes in net working capital [22] Business Line Data and Key Metrics Changes - The Chemicals segment saw strong volume growth and increased specific margins, leading to a considerable increase in EBITDA before special items [9] - The Materials segment benefited from slightly higher volumes and significant margin increases in the Monomers division, resulting in a considerable rise in EBITDA [10] - The Surface Technologies segment experienced a decline in volumes due to lower automotive production, leading to a decrease in EBITDA before special items [11] - The Agricultural Solutions segment achieved strong volume growth but faced lower specific margins, resulting in a decline in EBITDA before special items [12] Market Data and Key Metrics Changes - Global automotive production declined by over 5% in Q3 compared to the prior-year quarter, impacting the Surface Technologies segment [11] - The agricultural market showed mixed results, with low crop commodity prices affecting farmer income but lower channel inventories in Europe and North America supporting sales [12] Company Strategy and Development Direction - BASF is focused on executing its "Winning Ways" strategy, emphasizing value creation and a new direction in portfolio management and capital allocation [31] - The company is on track to achieve targeted annual cost savings of €2.1 billion by the end of 2026, with a current run rate of around €800 million [25] - Structural measures in the Materials segment are aimed at improving competitiveness and restoring profitability, particularly in the Monomers division [16] Management's Comments on Operating Environment and Future Outlook - The management anticipates a challenging outlook for automotive production in Q4, with a global decline of up to 2.5% expected in 2024 [13] - Despite a difficult economic environment, management remains confident in achieving the low end of the EBITDA forecast range for 2024 [29] - The company expects continued pressure from foreign exchange headwinds, particularly in the Agricultural Solutions segment [30] Other Important Information - BASF will publish its unaudited full-year results for 2024 on February 28, 2025, followed by the audited report on March 21, 2025 [26][27] - The Annual Shareholders' Meeting is scheduled for May 2, 2025, and will be held virtually [28] Q&A Session Summary Question: Guidance for Q4 performance - Management indicated that Q4 may see better performance than Q3 due to volume maintenance and cost improvement programs, despite typical seasonality suggesting a decline [33][34] Question: Impact of automotive shifts on coatings business - Management noted that regional shifts in automotive production do not significantly impact BASF due to its diversified asset base across major production areas [36] Question: Outlook for automotive demand into 2025 - Management expressed uncertainty about automotive demand in 2025, with slight growth projected but dependent on market conditions, particularly in China [39] Question: FX impact on agricultural solutions - FX effects have been a burden throughout the year, and management does not expect any tailwind from FX for the remainder of 2024 [41] Question: Fixed costs related to new site in China - Management confirmed that the new site in Zhanjiang will incur low triple-digit costs in 2024, with an expected €100 million per quarter in 2025 [44][57] Question: Restructuring and profitability in Germany - Management indicated that profitability in Germany is improving, with most segments showing significant improvement [62]