Basf(US:BASFY)2021-10-28 13:51Financial Data and Key Metrics Changes - BASF reported a significant increase in prices by 36% and volumes by 6% compared to Q3 2020, leading to EBIT before special items rising by approximately €1.3 billion to €1.9 billion [4][11] - EBITDA before special items increased by €1.2 billion to reach €2.8 billion, with net income amounting to €1.3 billion compared to a loss of €2.1 billion in the prior quarter [24][26] - Adjusted EPS rose to €1.56 from €0.60 in the prior year quarter [27][28] Business Line Data and Key Metrics Changes - The Chemicals, Materials, and Industrial Solutions segments contributed significantly to earnings, while the Surface Technologies segment faced challenges due to the semiconductor shortage impacting the automotive industry [5][10] - Volume growth was most pronounced in the Chemicals, Industrial Solutions, and Materials segments, with Nutrition and Care and Agricultural Solutions also showing growth [10][12] - The Agricultural Solutions segment experienced increased sales despite supply constraints, particularly in South America [19] Market Data and Key Metrics Changes - Global chemical production increased by around 4% in Q3 2021, with BASF's sales volumes growing faster than the global average [8][9] - In North America and Europe, sales volumes grew significantly compared to the prior year, while Greater China saw a slight decline due to lower automotive production [9][10] Company Strategy and Development Direction - BASF is focusing on building a global battery materials value chain and has formed a joint venture with Shanshan [22] - The company aims to implement innovative, low-emission technologies at its production sites, including a new offshore wind farm [23] - BASF is adapting to regulatory changes and market demands, particularly in relation to CO2 emissions and energy efficiency [36][68] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in solid demand across various businesses despite challenges in the automotive sector due to semiconductor shortages [40] - The company anticipates continued supply chain constraints and rising costs in raw materials, energy, and transportation [41] - For Q4 2021, BASF expects sales in the range of €76 billion to €78 billion and EBIT before special items between €7.5 billion and €8.0 billion [42][44] Other Important Information - BASF faced significant challenges due to rising natural gas prices, which have impacted production costs and operations [32][33] - The company has long-term supply contracts in place to mitigate gas price exposure, but additional costs due to higher prices are expected to be around €600 million for the first nine months of 2021 [34] Q&A Session Summary Question: What feedback is BASF receiving from automotive customers regarding production plans for 2022? - Management indicated that automotive OEMs are currently operating on a week-to-week basis regarding semiconductor availability, which affects production plans [48][50] Question: Are BASF's assets facing any logistics or supply challenges? - Management acknowledged ongoing supply chain challenges due to various factors, including natural disasters and COVID-related port closures, but emphasized that they have managed to cope without significant production shutdowns [53][56] Question: What guidance can BASF provide regarding energy costs and hedging? - Management noted that while they have incurred additional costs due to rising energy prices, they are unable to provide specific guidance for 2022 due to market volatility [61][62] Question: How is BASF responding to recent Chinese government policies on petrochemical industry closures? - Management viewed the policies as a positive development for the industry, as they may lead to a more efficient chemical production landscape in China [66][68] Question: What are BASF's expectations for cash flow and dividends for 2021? - Management expects Q4 to be a strong cash provider and confirmed that they plan to pay dividends from free cash flow for the year [109]