Q4 2016 Real-Time Call Brief

Highlights

Sales in Q4 increased by 7% to EUR14.8 billion.

For BASF Group as well as our Chemicals business, which comprises the chemical performance products and functional materials and solutions segment, volumes rose by 6%.

Sales prices increased slightly by 1%.

EBITDA before special items increased by 10% to EUR2.3 billion.

EBITDA rose by 31% to EUR2.5 billion.

Income from operations before special items came in at EUR1.2 billion, 15% higher than last year.

At EUR1.3 billion, earnings in our Chemical business increased by more than 50%.

Special items in EBIT amounted to plus EUR47 million.

In the prior year quarter, which was broadened by impairment charges in oil and gas, special items in EBIT amounted to minus EUR698 million.

EBIT increased from EUR325 million to EUR1.5 billion.

Income taxes amounted to EUR264 million compared with the tax income of almost EUR250 million in the prior year quarter.

In Q4, 2016, the tax rate was 26.5%.

Net income doubled to EUR689 million,

Reported earnings per share increased by almost 40% to EUR0.75.

Adjusted EPS amounted EUR0.79.

This compares with EUR1.01 in the prior year quarter.

Operating cash flow increased by EUR925 million to EUR1.9 billion in Q4.

Payments for property plant equipment and intangible assets were down by 14% and amounted to EUR1.2 billion.

Free cash flow came in at EUR647 million.

Sales of BASF Group declined by 18% to EUR57.6 billion.

During the first nine months of 2015, the divested oil and gas activities generated sales of EUR10.1 billion.

The average price of Brent crude in 2016 amounted to $44 compared to $52 in 2015.

As a result of lower raw material prices, sales prices declined by 4% and minus 1% currency effect had a slightly negative impact.

Volume dynamic increased over the course of 2016. For the full year volumes were up by 2%.

In our Chemicals business volumes increased by 4%.

Volumes in Asia were up by 5% particularly driven by China where volumes increased by 12% compared to the prior year.

EUR10.3 billion EBITDA before special items was 2% lower than prior year.

EBITDA almost matched the level of the prior year and amounted to EUR10.5 billion.

EBIT before special items declined from EUR6.7 billion to EUR6.3 billion.

Special items amounted to minus EUR34 million compared with the minus EUR491 million a year-ago.

In 2016, special income from several divestitures could compensate for expenses related to restructuring measures. As a result EBIT was on the previous year's level of EUR6.3 billion

At EUR1.1 billion income taxes were around EUR100 million lower.

Tax rate decreased from 23% to 21%.

Net income came in at EUR4.1 billion compared to EUR4 billion in 2015.

Reported earnings per share increased from EUR4.34 to EUR4.42.

Adjusted EPS were EUR4.83, EUR0.17 below 2015.

Operating cash flow decreased from a record high of EUR9.4 billion to EUR7.7 billion in 2016.

Our strict capital expenditure discipline, free cash flow amounted to EUR3.6 billion.

We will propose as a shareholders meeting to pay out a dividend of ERU3 per share and increase of EUR0.10 or 3.4%.

Based on the share price of EUR88 at the end of 2016 we are offering attractive dividend yield of 3.4%.

We continue to invest in our future growth with the completion of several large projects capital expense reduced by EUR1.3 billion to EUR3.9 billion in 2016 compared to the EUR4.2 billion forecast we had given one year goal.

In November we announced our plans to globally invest more than EUR12 million in our plastic additives business during the next five years. Approximately half of the amount will be invested in Asia.

Chemicals EBIT before special items more than doubled compared to a weak prior year quarter and came in at EUR635 million. Special items of minus EUR86 million were mainly related to restructuring measures especially in the capital lifetime value chain in Europe.

Agriculture Solutions full year sales slightly decreased to EUR5.6 billion due to lower volume and currency headwinds. At EUR1.1 billion EBIT before special items was on prior year level.

Agriculture Solutions EBITDA margin reached 23.4% compared to 22.7% in 2015.

In Q4 2016 the average price of Brent crude was $29 per barrel $5 higher than in the same period of 2015.

Oil & Gas volumes rose by 23% and particular due to higher production in Libya, Norway, Russia, and Argentina.

Oil & Gas combined price and currency effect was plus 3%.

Oil & Gas overall EBIT before special items increased from EUR127 million to EUR163 million.

Net income in Oil & Gas increased from minus EUR184 million to plus EUR182 million.

Other EBIT before special items declined to minus EUR386 million, down from minus EUR114 million. This was mainly driven by a swing of around EUR200 million related to our long term incentive program.

With that to our full year cash flow inline with our expectations cash provided by operating activities decreased record high of EUR9.4 billion to EUR7.7 billion.

In 2016, changes in net working capital led to a cash inflow of EUR104 million compared to EUR1.3 billion in 2015.

Cash used in investing activities increased from EUR5.2 billion to EUR6.5 billion.

Payments made for property, planned equipment, and intangible assets decreased by EUR1.7 billion to EUR4.1 billion.

At EUR3.6 billion free cash flow matched the high level of 2015.

Cash used in financing activities amounted to EUR2.2 billion in 2016.

We paid EUR2.7 billion in dividends to our shareholders. Around EUR100 million were paid to minority shareholders in 2016, compared to about EUR230 million in 2015.

Total assets increased by EUR5.7 billion to EUR76.5 billion, mainly as a result of the acquisition of Chemetall. Long terms assets were up EUR4.3 billion.

Intangible assets increased from EUR12.5 billion to EUR15.2 billion.

The value of tangible fixed assets increased by EUR1.2 billion to EUR26.4 billion.

Short term assets amounted to EUR26 billion compared to EUR24.6 billion at yearend 2015.

While inventories were almost stable, accounts receivable increased by EUR1.4 billion mainly due to higher sales in Q4 2016 as well as currency effects.

On the liability side, long term debt increased by a EUR3.6 billion to EUR28.6 billion.

This was particularly attributable to higher provisions for pensions and similar obligations. As a result of the lower interest rates, they increased by EUR1.9 billion compared to December 31, 2015.

Compared to September 30, 2016 however, provisions for pensions and similar obligations were down by EUR1.7 billion.

Financial debt increased by around EUR1.1 billion to EUR16.3 billion.

Net debt amounted to EUR14.4 billion, an increase of EUR1.5 billion compared to year end 2015.

The net debt-to-EBITDA ratio is at 1.4.

Our equity ratio remained at a healthy level of 42.6% at the end of 2016.

We anticipate global chemical production to grow at 3.4% and that's a same rate as last year.

We assume an average oil price of US$55 per barrel and an average exchange rate of US$1.05 per Euro.

For the next five-year period, 2017 to 2021, we plan total investments of EUR19 billion.

In 2015 we have initiated our operational excellence program drive. With this program we want to achieve additional earnings contributions of around EUR1 billion from the end of 2018. The earnings impact from the end of 2016 amounted to EUR350 million.

Our restructuring program in performance products is on track to achieve the targeted earnings contribution of EUR500 million by the end of this year. At the end of last year, we have reached roughly EUR400 million.