Agricultural Solutions – Profitable Growth with Innovative Products
Markus Heldt President Crop Protection
15th Credit Suisse Ag Productivity Conference March 10, 2010
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Agricultural Solutions – a cornerstone in BASF’s portfolio Total sales BASF Group in 2009:€50.7 billion
Chemicals
Plastics*
15%
14%
Performance Functional Solutions Products 14% 18%
Inorganics
Performance Polymers
Dispersions & Pigments
Catalysts
Petrochemicals
Polyurethanes
Care Chemicals
Construction Chemicals
Paper Chemicals
Coatings
Intermediates
Performance Chemicals * Styrenics reported under ‘Other’
Agricultural Solutions 7%
Oil & Gas
Crop Protection
Exploration & Production and Natural Gas Trading
22%
Why is Agricultural Solutions so important in our portfolio? Strong performing and resilient business Agriculture is the only industry sector that has not been severely affected by the current economic crisis Independent from chemical cycle Above average contribution to BASF’s profitability Market of high attractiveness driven by innovations Highly promising pipeline Cost synergies & excellent know-how transfer by using Verbund advantages Light in tangible fixed assets
Strategy
Results 2009
Growth segments
R&D pipeline
New products
Outlook
Strategy: Growth through innovation Growth through innovation Concentration on high value markets Strong R&D investment to safeguard sustainable high profitability: - Continuous development of new active ingredients to strengthen our pipeline - Focus on innovative products optimally addressing the needs of our customers Develop innovative business models/new market segments (e.g. Plant Health, SeedSolutions®, Pest Control Solutions) Investment in capacity expansions Focused acquisitions to balance our portfolio (e.g. Sorex acquisition)
Strategy
Results 2009
Growth segments
R&D pipeline
New products
Outlook
Record performance in 2009 Excellent growth despite challenging market conditions FY 2009
FY 2008
Δ%
3,646
3,409
7
EBITDA**
980
906
8
EBIT**
776
706
10
EBIT after cost of capital**
336
265
27
4,681
4,352
8
Research and development expenses
355
325
9
Capex
175
87
102
million € Sales*
Assets (as of December 31)
* sales change at constant exchange rates and continued portfolio in FY 2009: +4% (Volumes 0%, prices +5%, portfolio +1%, currencies +1%) ** before special items
Strategy
Results 2009
Growth segments
R&D pipeline
New products
Outlook
Committed to ambitious profitability target BASF remains benchmark in industry EBITDA margin before special items in %
30 25
27.6
26.9
26.6
26.9
23.2
21.3
20.1
20 15 10 5 0
Sales (in million €) EBIT before special items (in million €)
2003
2004*
2005
2006
2007**
2008
2009
3,176
3,354
3,298
3,079
3,137
3,409
3,646
294
666
671
378
526
706
776
*2004 onwards reporting according to IFRS-guidelines; **2007 onwards corporate cost excluded
Strategy
Results 2009
Growth segments
R&D pipeline
New products
Outlook
Sales by region 2009 Higher prices drove sales growth
Total sales 2009 to third parties
Key facts
in million €
Europe & North America: Lower application of crop protection products based on late season start; higher pricing.
North America 910 (+4%)
Europe 1,520 (+1%)
Asia Pacific: Strong volume growth in emerging markets of China and India.
€3,646 Asia Pacific 378 (+11%) South America, Africa, Middle East 838 (+9%)
In brackets growth at constant exchange rates and continued portfolio in % vs. prior year
Strategy
Results 2009
Growth segments
R&D pipeline
South America, Africa, Middle East: High disease pressure resulted in high fungicide demand. Recovery of sugarcane market drove insecticide business. New products
Outlook
Strong sales growth in BRIC countries Global demand and technification drive rapid growth Sales in BRIC* countries
Average crop protection expenditures
in million €
in €/ha
800
700 +20
600
soybean
%
400 400
corn
200 wheat 0 2006
2009
0
50
BRIC * Brazil, Russia, India, China
Strategy
Results 2009
100
150
200
West Europe* / US
Source: int. estimates, FAO; *Average UK, France, Germany, Italy, Spain
Growth segments
R&D pipeline
New products
Outlook
Sales by indication 2009 Strong performance of fungicides
Sales by indication in million € Fungicides 1,708 (+9%)
Herbicides 1,165 (+0%)
Fungicides: Price increases in Europe and North America and strong demand in South America Herbicides: Lower demand for herbicides in North America offset by growth in Asia and Europe
€3,646
Insecticides/Other 773 (+2%)
Insecticides: Positive effects from recovery of sugarcane market in Brazil and acquired business of Sorex Group in Europe and North America
In brackets growth at constant exchange rates and continued portfolio in % vs. prior year
Strategy
Results 2009
Growth segments
R&D pipeline
New products
Outlook
Top 10 active ingredients Focus on high value innovative products
Share of Top 10 active ingredients
Portfolio
…in total sales 2003
2009
In 2009 our Top 10 active ingredients accounted for: - 60% of total sales - 70% of total profitability
50%
60%
… in total profitability 2003
60%
Strategy
Results 2009
Portfolio with clear focus on high value innovative products Young Top 10 portfolio: Average launch year 1991
2009
70%
Growth segments
R&D pipeline
New products
Outlook
BASF outperforms market in high growth segments Above average growth* segments vs. BASF profitability
Portfolio management
Profitability vs. BASF‘s Ø profitability
in % Corn F
Strong performance in high growth segments Above average growth segments represent 30% of our sales in 2009
Soybean F
Focus on segments with above average profitability
Sugarcane I
Investment directed to successful portfolio development
Grapes F Cereals F Sugarcane H 0
50
100
Market growth Strategy
Results 2009
150
200
BASF growth Growth segments
R&D pipeline
*CAGR 2001-08 Source: Internal source (CAGR, Profitability)
New products
Outlook
SeedSolutions® business Seed treatment at BASF
Global seed treatment market 2008: €1.5bn Growth rate*
in million € Global
+10%
Europe
+5%
NAFTA
+20%
Protection and support of the germinating seed by preplanting applications Attractive and fast growing market driven by high value GMO seed BASF is a global player since 2003 Current market position: #3
LAM
+13%
Asia
+2% 0
500
*CAGR 2003-08 Source: PMD
Strategy
Results 2009
1.000
2003
1.500
2008
Growth segments
BASF grows by leveraging Verbund technologies through innovative product offers Product launches planned in SeedProtection, SeedVitality and SeedTechnology
R&D pipeline
New products
Outlook
Strong growth in SeedSolutions® segment BASF SeedSolutions® sales 2003-2009
Strong performance
in € million
Since 2003 BASF has more than doubled the sales in this highly profitable market (CAGR: 17%)
>250 250 200
New technologies and product launches will support sustainable growth in all regions
175
% +17
150 100
BASF seed treatment business and R&D activities focus on soybeans, corn, cereals and vegetables
70 50 0 2003
2009
2015 TARGET
Fungicides Strategy
Results 2009
Insecticides Growth segments
R&D pipeline
New products
Outlook
Agricultural Solutions is a strongly innovation driven business Total R&D expenditures 2009 in billion €
Chemicals 9% Plastics 9% Functional Solutions 12%
€1.4 billion
Oil & Gas 1% Corporate Research 23% Agricultural Solutions 25%
Performance Products 20%
Other 1%
R&D spending in 2010 planned on similar level Strategy
Results 2009
Growth segments
R&D pipeline
New products
Outlook
Strong commitment to R&D Crop Protection R&D expenditures Crop Protection
Strategy
in million €
In 2009, intentional increase of R&D expenditures for innovative products
400
+6% 300
Safeguarding sustainable profitability by investing each year about 9-10% of sales in R&D
200
Focus on high value products and markets Leading position driven by innovative portfolio and continuous development of new active ingredients and formulations
100
0 2006
Strategy
Results 2009
2009
Growth segments
R&D pipeline
New products
Outlook
Powerful R&D pipeline – peak sales potential increased by €100 million Phase*
Launch year
Projects
Market segments
F 500® (F), Boscalid (F), Dimoxystrobin (F),
Launched
In launch
In development
2002-2004 Tritosulfuron (H)
Peak sales potential
Field crops, specialty crops Field crops
Chlorfenapyr (I)
Non-crop
Metrafenone (F), Orysastrobin (F)
Field crops, specialty crops
€1,500 million**
2005-2009 Topramezone (H), F 500® seed treatment (F) Field crops Metaflumizone (I)
Specialty crop
2 Fungicides
Field crops, specialty crops, seed treatment
2010-2015 1 Herbicide (Kixor™), 2 Herbicide tolerance projects***
1 Insecticide
Field crops
€700 million
Specialty crops
Total
€ 2,200 million
*
Launched: First registration in major market in 2002 (or elder than 5 years to current year), In launch: First registration in major market 1 to 5 years prior to current year In development: First registration in major market in current year or within next 5 years after current year ** thereof products launched and in launch reached >70% in 2009 *** One of the herbicide tolerance projects is also included in the BPS pipeline communication
Strategy
Results 2009
Growth segments
R&D pipeline
New products
Outlook
Kixor™– novel herbicide sets benchmark Upgraded peak sales potential Projected global weed control market
Key facts
in billion €
Highly attractive weed control market
20
BASF offers broad herbicide portfolio
15 will be sold in both the selective and non-selective herbicide markets
10 5 0 2007
2008
2013
2018
2020
non-selective herbicides and herbicide trait fees (GMO market)
Kixor™: highly effective against all important broadleaf weeds in key crops - important glyphosate resistance management tool - Market launch during growing season 2010 Peak sales potential further increased by €100 million
selective herbicides (conventional market)
Kixor™ global peak sales potential: >€200 million Strategy
Results 2009
Growth segments
R&D pipeline
New products
Outlook
Fungicide Boscalid – further increase of global peak sales potential Key facts
Sales development Boscalid
New mode of action for efficient disease control
180
350
(index)
40 %
p. a
.
Originally developed for specialty crop market Field Crops
+
250 100 (index)
150
. + 5% p.a
Specialty Crops
50
-50
Now strongly growing in field crops
2006
Boscalid is used in - >100 crops - >70 countries - >200 indications Peak sales potential further increased by €50 million
2009
Global peak sales potential: >€300 million Strategy
Results 2009
Growth segments
R&D pipeline
New products
Outlook
AgCelence® – pioneering a new market segment Plant Health AgCelence®
Plant health effects
Benefits for the farmer Standard
® delivers
incremental value through a range of benefits beyond established disease control
Beyond efficient disease control, treated crops show: Better stress tolerance: high water use efficiency
Yield increase of >10% results in higher return on investment
Better growth performance: e.g. higher nitrogen uptake
Production efficiency: harvest efficiency, storability, processability
Plant strength: seedling vigor, uniform emergence, plant vigor Strategy
Results 2009
Growth segments
R&D pipeline
High quality crops
New products
Outlook
AgCelence® – helping farmers around the globe North America: Incremental AgCelence® sales
Key facts
in %
AgCelence® launched globally
+35% CAGR
300 200 100
250 (index)
100
AgCelence® will represent a growing share of fungicide sales in the future
(index)
0 2007
2008
2009
2010 FC
South America: Incremental AgCelence® sales 480
in % 500
69% + GR CA
400
Increasing R&D efforts
(index)
F500® is the core active ingredient of our Plant Health concept F500® total peak sales potential €700 million
300 200 100
100 (index)
0 2007 Strategy
2008 Results 2009
2009
2010 FC
Growth segments
R&D pipeline
New products
Outlook
Our R&D investments are paying off Strong track-record of launching innovative products Share of innovative new active ingredients in total sales
Innovation is key to success
Sales in million €
R&D expenses 2009: €355 million (25% of BASF’s total R&D expenditures)
1,000 1,000
CA GR
30 %
800 600
30%
400
Continued sales growth with innovative new active ingredients launched since 2002 Compound annual growth rate 2002-2009 at 30%
200
High vitality of portfolio: In 2009 sales share of active ingredients launched since 2002 amounts to 30%
6% 0 2002
2009
Active ingredients launched since 2002 Strategy
Results 2009
Growth segments
R&D pipeline
New products
Outlook
Agricultural Solutions – a cornerstone in BASF’s portfolio Total sales BASF Group in 2009:€50.7 billion
Agricultural Solutions 7%
Oil & Gas
Catalysts
Crop Protection
Care Chemicals
Construction Chemicals
Plant Biotechnology
Exploration & Production and Natural Gas Trading
Paper Chemicals
Coatings
Chemicals
Plastics*
15%
14%
Performance Functional Solutions Products 14% 18%
Inorganics
Performance Polymers
Dispersions & Pigments
Petrochemicals
Polyurethanes
Intermediates
22%
Performance Chemicals * Styrenics reported under ‘Other’
Strategy
Results 2009
Growth segments
R&D pipeline
New products
Outlook
Future nutrition of growing world population Plant biotechnology pipeline taps into huge market potential Development
Discovery
Stage I
Stage II
Stage III
Stage IV
Identifying genes & proof of concept up to 6 years
Look for proof of concept II up to 4 years
Early product development
Advanced product development up to 2 years
Pre-Launch
up to 3 years
up to 3 years
Yield & stress (corn, soybean, cotton, canola) Superior agricultural productivity
Better and healthier nutrition/feed
> $2 billion
Yield & stress (sugarcane1, sugar-beet2)
Herbicide tolerance
< $100 million
Fungal resistance
< $100 million
Improved amino acid $300–500 million
Healthier fatty acids (Omega-3&6)
Plants as Amylopectin renewable raw materials High oil
$100-200 million
* Value generated through the plant biotech trait across the respective value chain;
Strategy
Market Value*
Results 2009
Growth segments
1
Partner CTC;
R&D pipeline
2
Partner: KWS
New products
Outlook
Crop Protection – Outlook 2010 Profitable growth targeting 25% EBITDA margin Key factors affecting business development in 2010: - Remaining channel inventory - Development of important currencies (USD, JPY, BRL) - Volatility and level of soft commodity prices - Weather conditions Positive momentum from - Launch of our new blockbuster herbicide Kixor™ - Volume ramp-up of F500® in the Americas Expansion of business in emerging markets Prudent credit management strictly in place, esp. in emerging markets (Latin America, Eastern Europe) Continued high commitment to R&D Æ Rising sales despite challenging market conditions Æ Aim to maintain high earnings level Strategy
Results 2009
Growth segments
R&D pipeline
New products
Outlook
