BASF Se

Magdalena Moll - Head of Investor Relations Kurt Bock - Chairman and Chief Executive Officer Hans-Ulrich Engel - Chief Financial Officer

Paul Walsh - Morgan Stanley James Knight - Exane Jeremy Redenius - Bernstein Lutz Grüten - Commerzbank Thomas Gilbert - UBS Laurence Alexander - Jefferies Andreas Heine - MainFirst Andrew Benson - Citi Tony Jones - Redburn Peter Clark - Société Générale Markus Mayer - Baader Bank Christian Faitz - Kepler Cheuvreux Oliver Schwarz - Warburg Oliver Evgenia Molotova - Berenberg Patrick Lambert - Raymond James Jaidepp Pandya - Goldman Laurent Favre - Bank of America Merrill Lynch Martin Evans - JPMorgan

Yeah. Thank you, Emma, and good morning, ladies and gentlemen.

On behalf of BASF, I would like to welcome you to our third quarter 2015 conference call. Given the challenging economic environment, BASF experienced lower sales in the third quarter due to lower prices and slightly lower volumes.

EBIT before special items declined slightly. Higher earnings in Functional materials & Solutions as well as in Chemicals could not fully compensate for lower earnings in the other segments.

With me on the call today to explain the results are Kurt Bock, our Chairman & Chief Executive Officer; and Hans-Ulrich Engel, our Chief Financial Officer. Kurt will summarize the key financials and highlight important milestones.

Subsequently, Hans will review the segment results of the third quarter and Kurt will conclude with the outlook for 2015. Afterwards, both gentlemen will be happy to take your questions.

For your information, we have posted a longer version of the speech and charts together with the press documents on our website. And with this, I would like to hand over to Kurt.

Yeah. Thank you, Maggie, and good morning, ladies and gentlemen.

Thank you for joining us here today. In the third quarter of 2015, BASF showed a mixed picture of sales and earnings.

While EBITDA went up, our major performance metric EBIT before special items came in 10% below the level of 2014. The main reasons are lower earnings in Oil & Gas and in Agricultural Solutions driven by weak markets for hard and soft commodities.

Our Chemicals businesses achieved earnings slightly above last year's level despite lower sales prices, lack of volume growth and higher product costs. After a flat volume development in Q2, we experienced a pronounced summer lull and more importantly, no volume momentum in September.

This has continued into October which usually is a very strong month for us. Major markets like Brazil are in recession or face, like China, lower growth rates.

Against this background, we now expect the global chemical production to grow at 3.5% which is below our expectations from earlier this year of 4.2%. In Oil & Gas, we see an oil price of currently below $50 per barrel against our expectation of $60 to $70 at the beginning of this year.

At the end of September, we closed our asset swap with Gazprom, meaning that in Q4, there will be no sales and earnings from the natural gas trading business. Against this background, we adjust our guidance for 2015.

Our previous expectation that our Chemicals business and Agricultural Solutions will compensate for lower Oil & Gas earnings will not fully materialize. Firstly, Oil & Gas earnings will be lower than planned due to the lower oil and gas prices and the asset swap with Gazprom.

Secondly, the Agricultural Solutions business will face another tough quarter and will most likely not increase its earnings but will come in below last year's number. And most importantly, we do not foresee a quick recovery of our chemical demand given the low price environment, which we will be facing for quite some time.

This leads us to now expect sales and EBIT before special items to be slightly below the level of 2014. Not surprisingly, we continue to focus on cost and cash.

We will deliver the increased target of our STEP program of €1.3 billion of annual earnings improvement by the end of this year, and we successfully increased operating cash flow and free cash flow particularly in Q3. In the first nine months of 2015, we generated a free cash flow of €4.1 billion.

This marks the highest free cash flow ever during a nine-month period. Let's go quickly through the financial performance of BASF Group in the third quarter compared to the last year.

Sales decreased by 5% to €17.4 billion. Volumes declined slightly as higher volumes in Agricultural Solutions and Oil & Gas could not fully offset lower volumes in our Chemicals business.

Prices were down 8%, mainly attributable to the lower oil and raw material prices. We experienced currency tailwinds of 4%.

Lower raw material trading activities in Other also affected sales negatively. EBIT before special items decreased by 10% to €1.6 billion.

Higher earnings in Functional Materials & Solutions as well as Chemicals could not fully offset lower earnings in Oil & Gas, Performance Products, Agricultural Solutions and Other. Depreciation was up by around €210 million mainly due to our investment projects.

BASF recognized positive special items in EBIT of around €290 million, in particular, as a result of the asset swap with Gazprom. EBIT amounted therefore to €1.9 billion, an increase of 8%.

EBITDA came in 14% higher at €2.9 billion. The tax rate decreased from 27.6% to 26% mainly due to the tax-free disposal gain of the asset swap.

Net income increased by 19% to €1.2 billion. Adjusted earnings per share decreased to €1.07 after €1.24 last year.

In Q3, operating cash flow reached almost €3.4 billion, an increase of more than 50%. And as I said before, free cash flow significantly increased to €1.8 billion from €830 million last year.

Let me highlight some of the most important developments since Q2 reporting. On August 12, we started our new world-scale resin and electro coat plant in Shanghai.

The plant is fully integrated in our new automotive coatings plant to create synergies and high production efficiency. End of August, we also started up the MDI production in Chongqing in China.

This new plant enables us to serve and support our polyurethane customers in Western China. Together with our partner, Yara, we broke ground for a new world-scale ammonia plant at our Verbund site in Freeport in Texas.

Production start of this plant for 2017. Beginning of September, we also agreed with our strategic partner to participate with a 10% stake in the Nord Stream pipeline expansion [indiscernible] which will further improve the security of natural gas supply for Western Europe.

We continue to restructure our Performance Products segment. We completed the sale of our pharma custom synthesis business and part of our active pharmaceutical ingredients business to Siegfried Holding AG.

Furthermore, we announced the carve-out of our pigments business. And on September 30, we closed the asset swap with Gazprom.

With the swap, BASF further expands its production of oil and gas and finally exits the natural gas trading and storage business. In 2014, the directed activities contributed a total of around €12.2 billion to sales and €260 million to EBITDA.

In the first three quarters of this year, its contribution to sales was around €10 billion and the contribution for EBITDA before special items are around €320 million. At the end of September, we announced a new operational excellence program called DrivE.

It will run from 2016 to 2018 and we target to achieve an earnings contribution of €1 billion at the end of 2018. And with this, I hand over to Hans.

Yeah. Thank you, Kurt, and good morning also from my side.

I start with an overview on our segments, and there with Chemicals. Sales in the Chemicals segment came in considerably lower.

Declining prices in all divisions following the lower oil and raw material prices impacted sales negatively. Volumes went slightly down mainly driven by petrochemicals.

Currency effects had a positive impact on sales across the segment. The divestment of our participation in the Ellba Eastern joint operation negatively impacted sales.

Strong cracker margins in Europe and higher equity results from BASF YPC in Nanjing more than compensated for start-up cost and contributed to a slight increase in EBIT before special items. In Performance Products, sales declined slightly.

Positive currency effects were offset by lower volumes and prices. Lower demand especially in the pigments, paper, as well as the oilfield solutions businesses led to a volume decline.

In addition, the divestiture of textile chemicals had a negative structural effect on sales. EBIT before special items declined significantly also due to higher fixed cost mainly caused by several production startups.

In Functional Materials & Solutions, sales came in on the level of the prior year's third quarter. We experienced good demand in automotive and construction.

Low precious metals trading activities resulted in a slight decline of overall volumes. Price decreases mainly driven by precious metals were more than offset by favorable currency effects.

EBIT before special items was considerably up with the strong contribution from Performance Materials. In Agricultural Solutions, sales increased significantly as pronounced negative currency effects were more than offset by higher volumes and prices.

While our business in South America benefited from early orders, global market conditions remain challenging. EBIT before special items strongly declined burdened by higher cost related to increased capacities and inventory reduction measures.

Business in Europe declined considerably. Volumes in fungicide decreased due to earlier demand in Western Europe in the first half of the year and low disease pressure.

In addition, we saw less oilseed rape herbicides due to increasing generic competition. In North America, sales were up significantly on higher volumes and prices, as well as positive currency effects.

We experienced a good business development for fungicide and herbicides, especially for dicamba. Sales in South America rose significantly based on higher volumes and prices.

In anticipation of a further devaluation of the Brazilian real, farmers moved orders up and accepted some price increases in local currency. In Asia Pacific, sales dropped mainly due to a strong decrease in demand for soybean herbicides in India, following a very dry season with reduced acreages and higher generic pressure.

In the Oil & Gas segment, sales decreased slightly. This was driven by lower prices in Natural Gas Trading.

Higher production volumes in E&P including an offshore lifting in Libya and higher contributions from Norway, more than compensated for the lower oil price and led to a considerable increase in sales. The average price for Brent crude oil in euro decreased by 41% compared to the prior year quarter and came in €45 per barrel.

EBIT before special items in E&P came in significantly above prior year level as we realized higher production in Libya and in Norway. EBIT before special items in Natural Gas Trading was down significantly.

The prior-year quarter included higher earnings from price revisions. Special items amounted to around €270 million including a €331 million disposal gain following the asset swap with Gazprom.

The position special item was partially offset by impairment charges related to a gas development project in Norway. Net income came in at €625 million, an increase of around €390 million.

Please be reminded that due to the asset swap, today is the last time that we report our Natural Gas Trading activities. As of October 1, we have to eliminate the natural gas trading and storage activities as well as 50% of Wintershall Noordzee B.V.

from your financial models. To give you an indication, in Q4 2014, the divested activities generated sales of €3.3 billion and an EBITDA of around €70 million.

Sales in Other decreased significantly, mainly attributable to reduced raw material trading activities and the divestment of our shares in the ELLBA Eastern joint operation in Singapore. EBIT before special items in Other was down strongly, caused by a lower effect from the dissolution of provisions for our long-term incentive program compared to the prior year quarter.

Let me now turn to our cash flow, which developed strongly in Q3. Please be reminded that we will summarize the first nine months of 2015.

At €8.5 billion, cash provided by operating activities was up by €3.6 billion. Since the beginning of 2015, net working capital decreased by €2.5 billion, mainly attributable to lower inventories as a result of our strict inventory management and price declines.

In addition, lower accounts receivable had a positive effect on net working capital. Depreciation amounted to €2.8 billion compared to €2.3 billion in the prior year period.

Cash used in investing activities increased by €1.2 billion to around €5.0 billion. Capital expenditures amounted to €4.4 billion as a result of our ongoing investment projects.

We incurred a net cash inflow from divestitures and acquisitions of around €230 million as, for example, for the sale of our pharma custom synthesis business. Free cash flow came in at €4.1 billion, up by €2.8 billion compared to the prior year period.

This marks the highest free cash flow ever during the first nine months and already exceeds the full year 2014. Financing activities led to a cash outflow of €3.5 billion, thereof, the changes in financial liabilities resulted in a cash outflow of about €650 million.

And now to the most relevant developments in the balance sheet. Compared to the end of 2014, total assets slightly increased by around €1 billion to €72.3 billion.

Long-term assets were up by €1.8 billion and amounted to €45.7 billion. Investments accounted for using the equity method increased by €1.3 billion due to the asset swap with Gazprom, reflecting our participation in the Achimov Blocks IV and V, and the reclassification of our remaining 50% share in Wintershall Noordzee B.V.

Short-term assets decreased by €800 million to €26.6 billion. Inventories amounted to €9.7 billion, down by almost €1.6 billion.

Accounts receivable were down by €700 million and stood at €9.7 billion. The decline in inventories and trade accounts receivable was driven by our strict inventory management, the asset swap with Gazprom and the lower oil and raw material prices.

Following the conclusion of the agreement to divest selected upstream assets on the Norwegian Continental Shelf to Tellus Petroleum, we transferred the respective assets and liabilities to a disposal group. This led to assets under disposal of €1.1 billion and liabilities under disposal of €500 million.

Total liabilities decreased by €900 million to around €42.2 billion. Long-term liabilities decreased by almost €1 billion, mainly driven by a shift from long to short-term financial debt, as well as the asset swap with Gazprom.

Short-term liabilities were almost stable at €16 billion. Net debt increased to by about €80 million to €13.8 billion.

Our equity ratio increased from 39.5% to 41.6% and remains on a very healthy level. And with that, back to you Kurt.

Yeah. Thank you, Hans.

And with this, we come to the outlook. The macroeconomic environment remains challenging and major leading indicators continue to win over the last couple of weeks therefore, we reduce our macroeconomic assumptions for 2015 as follows.

The overall GDP growth is expected to be lower at 2.3%, industrial productions expected to grow by only 2%, we reduced the growth expectation for the chemical production to 3.5%. Let me remind you that at the beginning of this year we expect the GDP to grow at 2.8%, industrial production to increase by 3.6%, and chemical production by 4.2%.

We also slightly adjust our dollar exchange rate to 1.12%. Our assumption for the 2015 average oil price drop to $55 to their brand, about $10 below our expectation at the beginning of this year.

Due to this macroeconomic headwinds, the lower than the expected oil price as well as the impact of the recently closed asset swap with Gazprom on our Q4 2015 result. We adjust our full year 2015 guidance of BASF Group as follows.

Without the effect of acquisition and divestments, our target is to grow volumes in 2015. Due to the divestment of the gas trading and storage business as part of the asset swap with Gazprom, and the lower oil price we now expect sales to be slightly lower than in group sales to be slightly lower than in 2014.

We expect EBIT before special items to be slightly lower than in 2014. The Chemicals business is expected to provide a larger contribution than in 2014.

Earnings from crop protection will most likely come in slightly below the level of 2014 due to the more challenging business environment. In Oil & Gas, results will decline significantly caused by the lower oil price and the divestment of the gas trading and storage business.

We aim to earn again a substantial premium on our cost of capital but on a lower level than last year when we had a higher amount of positive special items from divestitures. Thank you now for your attention.

And we are happy to take your questions.

Yeah. Good morning, Maggie.

Good morning, gentlemen. I'm wondering if you could just help me understand the various factors within the changing guidance.

Clearly, the major piece is deconsolidating gas storage and trading from the fourth quarter. You've already pointed towards the fact that not €70 million of EBITDA maybe, €50 million, €60 million of at an EBIT pre-assign level.

Is that the biggest piece? Or do you see similar sizable impact from the general slowdown, the lower oil price, and perhaps slightly weaker age market.

So, I'm just trying to get a sense incrementally for where you think things have deteriorated most visibly?

Hi, Paul. Thank you for the question.

I think it is a combination of what you just mentioned. Clearly, the divestiture of the gas trading business, this is around €100 million.

This is what we had projected for Q4 to come in.

EBITDA, Kurt? Or is that EBIT pre SI?

EBIT.

Okay. Thank you.

Then, we had the lower - and you know these earnings in gas rating are kind of volatile between quarters and difficult to predict. That is essentially what was part of our forecast.

Then the oil price certainly plays the role. It is now below 50, and that's certainly - you know the math.

It has an impact on our bottom line. In Ag, we had overall, given the difficult environment especially in South America not too bad a result, I have to say essentially when you compare us to our competitors.

Yet we believe that in South America, we had some pre-buying simply because people were anxious to avoid a further depreciation of the Brazilian real. So, forecast in Q4 is a little bit difficult.

But overall, we now assume that most likely in Ag we will come in below last year's EBITDA number. And our goal was to improve earnings in Ag in 2015 over 2014.

So, now we see a slight decline, and that certainly also has an impact. And then, from my point of view because these are all factors I've just discussed, which are kind of easy to describe and to identify.

The last factor is really the question of volume momentum and what do we see in oil markets. And I think I already made it clear when we met in September, late September that we really saw very lackluster demand development coming out of the summer lull.

This has continued going into October. And October, month-to-date, we haven't seen any real volume growth to make this very clear.

So, we perceive this as our customers being very, very cautious right now. They might be holding back orders in view of the - expecting further price reductions based on the low oil price.

But maybe this is also underlying macroeconomic weakness. And as I mentioned in my little speech, there are a couple of leading indicators who point into that direction.

Actually, if I look at our orders on hand and daily sales, it doesn't feel at all like there is any positive momentum. So, these four factors really in combination lead us to look at Q4 renewed and come to the conclusion that most likely results will be slightly below last year's total number for 2015.

That's very clear. And just on those cracker spreads, those fantastic cracker spreads we're seeing at the moment, Kurt.

Do you think - I guess you feel those are sustainable given the current tightness.

You have to be specific here. We had a terrific run in North America starting in 2014 going into 2015.

Margins have come down a bit. We see in Europe now additional capacity coming on-stream.

We had a couple of turnaround situations as you know. So, margins in the olefins business will come down in Q4, most likely, compared to Q3.

Yes, we do have also not rising raw material cost but our assumption is that margins, most likely, will be lower than what we have seen in the previous quarter; that also plays a role. And this again, Paul, goes back to this deflationary environment which we are facing now, I think, throughout our industry.

Sure. That's very clear.

Thanks very much, guys. Thank you.

Welcome.

Thank you for taking my questions. So, specifically on Ag, could you help us quantify the pre-buying effect?

I know it's difficult. But let's put it this way, would you expect for the second half given the overall ag environment to show volume growth or a volume decline?

Thank you.

That is a tough one, James, I have to say. The pre-buying to identify in a real number is very difficult for us.

What we - I mean, we are now talking South America essentially. We do think that the South American crop protection market this year will most likely, in U.S.

dollars denominated, will decline by 20% to 25%. That is a sizeable number.

This is not in South America just about volume development, it's, first and foremost, about price management because you have to compensate for the steep devaluation of the Brazilian real. And you have seen, in fact, that we had quite some good price development.

I think about 10% price increases in ag. This is basically us fighting against this depreciation in South America and this is actually make or break for the profitability of our business in that respective area.

So it's a combination of volumes and prices. Medium, long term, you might say, okay, with the devaluation in South America, these economies become more competitive again internationally and there should be, as I say, renewed volume drive, but for the time being, we are a little bit cautious in that respect.

Thank you.

Hi. It's Jeremy Redenius.

Thanks for taking my question. I'm wondering why CapEx is up year-over-year.

Can you talk about to the extent that is - let's say, your oil and gas partners continuing to spend, as you highlighted, at the Q3 results versus how much of the divisions are spending beyond their budgets. And how much of a factor is the weaker euro playing assuming that you're spending some of those projects in dollars and translating it back to euro [indiscernible]?

Thanks.

Yeah. Thank you for the question, Jeremy.

It, again, is a combination. Oil & Gas plays a role, something which we cannot fully control because - and I said this before, we are part of consortia and they are essentially handing us the bills and we have to pay.

Otherwise, the project will be stopped; it would be interesting. Then, the stronger U.S.

dollar or weaker euro also plays the role, just the translation effect of these investments. And then we saw a couple of projects where we were able, you might say, to implement faster than what we had expected.

This is not necessarily bad news because, obviously, then capacities are available a little bit earlier. This is the combination of factors here.

Are cost overruns playing a role in case here?

We had cost overruns in Brazil. I think we talked about that one.

We are at the finishing line here in Ludwigshafen with a big TDI complex where we had some delays due to the complexity of that endeavor. And with the delays also came slight cost overruns.

But actually, all in all, this doesn't really play a major role. When we look at our CapEx projects, we measure them with three criteria which is on budget, on time and quality.

We call this triple A. If you achieve triple A, then you are on safe territory.

And the vast majority of our projects come in at what we call triple A projects. This still doesn't mean that the market is always completely ready as we have noticed in Brazil to buy our product if there is a recession.

But we have a strong focus on executing our projects well.

Great. Well, thank you very much for that.

Morning. Just a quick one on cash flow.

The net working capital was nicely reduced again in the third quarter. Is this now sustainable based also for Q4 or should we expect here a reverse in the final quarter?

Thank you.

Yeah, Lutz. This is Hans.

In Q3, we actually had a much lower impact from the inventory than in the prior quarters. The inventory changes predominantly in Q1 and in Q2.

In Q3, stronger impact with respect to accounts receivable. And then when you look at the balance sheet just please keep in mind that there is also a significant impact in our working capital as a result of the asset swap.

But overall, thanks for noting. I think the entire team has done a great job there.

Strong focus on working capital management. And overall - and you've seen that we have generated €2.5 billion more in cash coming from - €2.5 billion in 2015 in the first three quarters, where last three quarters we had actually a cash consumption in the order of magnitude of €900 million in the working capital.

So a swing there of €3.4 billion.

Thank you.

Yeah. Good morning.

Following up from the Lutz's question. Can you remind - this is regarding - trying to get - to fish for a year-end net debt number.

Can you remind us what kind of disposal proceeds we should expect for already announced disposals this year in the fourth quarter? And are there any additional impact in the cash flow statement from the asset swaps yet to come in the last three months?

Thank you.

Thomas, last question first. Based on everything that I've seen, no cash impact to be expected.

It could be that there is a small compensation payment still to be done, but that will not have a major impact on the cash flow statement. Your first question again was with respect to disposal proceeds from announced divestitures in Q4.

The only one that we have announced not yet closed of a sizable nature is the Tellus transaction. On the Tellus transaction, we have disposal proceeds in the order of magnitude of €500 million to €600 million, so that gives you an idea there.

Okay. But in performance products [indiscernible] chemicals, pharmaceutical intermediate, everything done in [indiscernible].

We've closed the pharmaceutical transaction. We've closed the textile transaction.

We still have in Q4 to close the paper hydrous kaolin transaction. But that is a very, very small nature.

Thank you.

Good morning. Could you give a little bit of extra detail on the nutrition and health and catalyst segment results, and particularly are you seeing any sign of those businesses troughing or should we expect that to stay weak until year-end?

Okay. I start - Laurence, I'll start with nutrition.

What we've seen in nutrition is certainly a continued price pressure in Vitamin B6 just to name one of our favorite products to ask about. We work very hard to bring prices up there, but in Q3 we still had strong price pressures, which impaired our overall results.

Apart from that we had - this is part of the Performance Product segment. Obviously, we had in Nutrition also some production shortages.

Part of that is - the only related part of that is Citroën-related where we had lower shipment than what we had planned earlier this year. And with Catalysts?

Yeah. Laurence, to your question with respect to Catalysts, keep in mind, Catalysts business typically in Q3 impacted by the summer months and their sales to the automotive industry, in particular, in Europe, at a seasonal low.

Our expectation for Catalysts is actually that Q4 will be stronger than - business performance in Q4 will be stronger than the business performance that we've experienced in Q3.

Thank you.

Yeah. Hello.

I have a question on the volume trend. In the industrial business, you have not shown a volume increase this year and only minor last year.

But in contrast, you have invested quite heavily in capacity additions. How do you see these capacity additions and what you plan for the coming years with basically no volume growth?

And what you've highlighted in the trends obviously only going into Q4, does not show any pickup in volume and I don't know whether you can give any comment on 2016. But I would guess from today's point of view, it will not be a strong start in 2016 either.

Is it not the time to rethink that all these capacity additions have to be scaled backward, delayed a little bit, so that you really run down CapEx in the coming years?

Yeah. Hi, Andreas.

Thank you for your question. I think we have already indicated strongly that we want to reduce CapEx to a level slightly above depreciation levels.

And also acknowledging, as you said, that over the last 12 years we have had an investment spree, which we still think was necessary to capture growth essentially in emerging markets and to improve our production structure in North America and in Europe. So, part of those investments are clearly about growth.

That is essentially true for emerging markets. Part of those investments are about improving our Verbund structure.

And in United States it's quite obvious when we talk about topics like ammonia, which is pure backward integration where we have no growth coming, external growth coming versus trying to strengthen our bottom line. The same holds true for Europe in a certain way where we had this one big investment here in Ludwigshafen and TDI.

But here, again, please keep in mind, yes, we are expanding TDI in Ludwigshafen by around 300,000 tonnes. But at the same time, we are going to shut down a capacity in [indiscernible], which is 80,000 tonnes.

And we acquired a business, about two to three years ago in Poland, which is also going out of business, which is another 75,000 tonnes, so the net addition is 150,000 roughly. What I'm trying to say here is that we are very, very much aware and cognizant of supply-demand balances.

And we try to play our role in those respective markets. But we certainly want to invest in technologies and we have talked about this again and again in technologies and in for building structures where we see a competitive advantage for BASF.

Emerging markets, we see - at least what we see is a pronounced slowdown in Asia/China. We can only talk about our business, but that is what we are seeing right now.

And growth in China for us has been unsatisfactory over the last couple of quarters. There is no doubt about it.

We have a couple of new capacities coming on stream for [indiscernible] recently now MDI Chongqing. They are [indiscernible] and Nanjing.

They all will capture growth going forward, and there is underlying demand for these products. Most of these products actually grow below GDP, and I think we will demonstrate this going forward.

This is very much the upstream part of the business. In the downstream businesses, we have continued to invest in industries like automotive where we perceive competitive advantage for BASF.

Hans just talked about the Catalysts business. Yes, we built a plant in Poland.

Yes, we're expanding capacity in India and China because we do see growth in this market, and we have grown very, very nicely. And I think we have demonstrated this already to you that we were able to grow our automotive business in China, just one example, much faster, much faster.

And the underlying automotive market has developed. So, going forward, we will remain to be cautious.

I think we have also been cautious in the past. We will analyze it very, very clearly what's ahead of us at this point in time.

And referring to your remark about 2016, we would like to stick to our policy to update you on the 2016 outlook in February when we have our annual call. At this point in time, the outlook is a little bit murky and very difficult to interpret.

As I said before, we think that there are also some price-conscious buyers out there who, against the background of weak oil prices, are holding back, but there might also be an effect from a weakening overall global economy that at least what we are feeling.

Thanks a lot.

Yes. And thanks, Maggie.

Thanks, everyone. Historically, when you've seen these slowdowns, do you take an action in terms of - perhaps concerning production, which you seem to have done successfully in the working capital reductions, but are there any further measures in terms of efficiencies above and beyond the €1 billion new program that you've announced and/or constraint on cost that you think are likely - that are in the planning now to defend profitability?

There are a couple of programs under way. I mean, as you all know, this is an ongoing, continuous task for management.

The €1 billion program will start officially on January 1 and this will duly be executed and implemented. You also know that in Performance Products, we have an additional program running, aiming at about €500 million improvement savings by end of 2017.

We are well on track to achieve that all, but I have to acknowledge we also have countervailing forces in terms of price and margin pressure in some of those businesses. I think your question is more structurally oriented.

It's not just you know, do you reduce utilization rate of existing plant or do you also have to more fundamentally rethink some of your production footprint. I mentioned the TDI example here in Europe where we are very much also thinking in terms of industry structure and in supply/demand.

And in the past, I think BASF has always played an instrumental and positive role in that respect. And we've certainly analyzed which markets would require going forward more drastic actions.

But again, that is also - that also links a little bit more visibility but at this point in time, we don't have.

Okay. Thanks.

Hello. Good morning, everybody.

I just had a question on some of the plusses and minuses to EBIT in the quarter. I remember in Q2, you had some - I think you referred to earlier, you had some higher fixed costs.

I think you mentioned €350 million in Q2. Could you talk about whether that some of that reoccurred in Q3 and what should we be thinking about Q4?

And then also, could you help us think about what the EBIT gain was in Q3 from currency? I think it was €250 million in Q2.

Thank you.

We have to take all those numbers, Tony. But maybe I start with the fixed cost picture in general.

It's a major focus of all our activities. I mentioned this before.

We have a couple of effects here which we have to mention one certainly and not to forget about forex currency effects. We have about 7% to 8% fixed cost increase simply due to the weak euro.

This is something we cannot really avoid, so we see it on both sides so you see currency effects not just in sales but also in fixed cost. We have additional start-up costs this year, which essentially materialize over the course of Q3 and Q4, now going slightly up in Q4, simply because no capacity is coming on stream.

Then we have, I'll say, an underlying cost management, which is essentially quite effective, which keeps fixed cost without this effect essentially at last year's level. What we could not reduce - actually, we increased the number - is idle cost because starting early in Q2, we come back on capacity realization rate.

And this certainly has broad idle cost well above the level of 2014. And this is certainly a good - it's not a good but it is an explanation for the earnings shortfall in Q3 essentially.

And with this, I think Hans would have had enough time to think about forex effects in Q3.

Yeah. Certainly, Tony, this is Hans.

So, foreign exchange impact in the order of magnitude of €200 million to €250 million. So, a bit lower than what we had seen in the prior quarters and expect to, based on what I'm seeing with respect to currency developments, further diminishing in Q4.

Thank you. Appreciate it.

Yes. Good morning.

Thank you. Just looking at the macro cuts that you're forecasting now.

With the IP going down, I think that was slash 30% to 2%, but the chemical production still remaining. It was [indiscernible] 10% or so to 3.5%.

Obviously, there's a big gap. We don't normally see a gap like that between IP and chemical production.

I'm just wondering if it's something you see as a delay factor there in terms of hit to the chemical industry. There's indicators you seem to be suggesting quite a sluggish outlook ahead.

What are customer industries are doing? Everyone seems to be indicating inventory levels as far as they can tell, all being pulled down.

So, they are pretty low, but it's a number that stands out because we've had - we did this every time and the gap between chemical production and the IP is quite substantial. Thank you.

No. Duly observed obviously.

I think that you already gave the answer, Peter. There might be some delay and inventory management certainly also plays an important role, and that is what I described before.

I mean, we see this slow order entry pattern which from our point view indicates that people are - our customers are simply, simply uncertain about what they have to expect, and, therefore, they are holding back placing orders and might be holding back in the future.

Okay. Thank you.

Welcome.

Yeah. Good morning.

Thank you. You already elaborated on the [indiscernible] cost.

Could you maybe give us an indication on the start-up costs you had in Q3 and what you also expect for the start-up cost there?

Yeah. Markus, happy to do this.

This is Hans. So, what we've experienced during the course of 2015 and this is exactly as we have planned it is an increase of start-up cost to quarter-over-quarter.

So, Q3, so far is the highest with the start-up that we will have of TDI plant now next month. The start-up cost in Q4 will even increase a little bit, be above what we have experienced in Q3.

Overall, you recall we've given a guidance there for the segment Chemicals only where we said that the start-up costs are in the range of €150 million to €200 million. Again, that's for Chemicals only.

And we will be in that range, more towards the upper range, and have to give you a little bit more help, significantly less than 50% of the start-up costs in Q1 and Q2.

Perfect. Thanks.

Yes. Good morning.

Thanks for taking my one question. When I look at your regions, and particularly Germany, saw a significant sales and profit decrease.

Can you qualify which segments or customer groups this came from or was it just the gas trading? Thank you.

Markus, this is Hans. So, what we have on the sales side that is, in fact, in particular gas trading in Western Europe and there, in particular in Germany, that has increased and present sale is up.

And when you ask the same question with respect to earnings before special items, we're certainly benefiting there from the very strong margin environment in petrochemicals that we've experienced in Q3. And with two crackers in Germany, that also helps.

Okay. But your - sorry, just to ask again, but EBIT was down.

If my numbers are correct, 28% in Germany, from €592 million to €426 million. What's behind that?

Give me a second. I need to look into that.

And I'll answer that in a second.

Thanks.

Yeah. Thank you.

Just a quick one on the Ag business. If we exclude South America, could you give us your view on how prices and volumes are likely to progress into Q3, Q4?

How is the inventory level at the customers there? Do you expect some form of pre-buying or are customers basically holding out, hoping for lower prices in 2016?

Thank you.

Yeah, Oliver. As you know, Q3 is very much a Southern Hemisphere quarter.

It's kind of difficult to now speculate on Q4, essentially, than Q1 of 2015. We have had a pretty robust business this year.

We had some specific issues which we really cannot foresee, like drought, very dry season in some part of Europe. So fundamentally, I'm still optimistic for these markets because underlying they should develop nicely.

We have very a special situation in South America due to currency and due to the large crops, soy and corn, which are essentially export products for South America to Asia. And this is not the case in Europe.

So Markus, this is again Hans. Sometimes, it helps to look at the numbers and refresh the memory.

So what do we have, and this is again, Germany effect. One is last year, we had in the gas trading business, a price revision which we didn't have this year.

As a result of that, the results in gas trading significantly lower than where they were last year. The second impact that we have and we've described that is our long-term incentive program where we had a reversal of the provision this year.

But we also had a much, much higher reversal of the provision last year. And that is then the explanation for the reduction in the order of magnitude of €160 million that you see in EBIT before the special items for Germany.

Hello. Good morning.

Thanks a lot for taking my question. I just wanted to ask, if possible, on the idle costs and the fact that you're bringing capacities at the moment into a slightly or not so slightly oversupplied markets, and the demand pickup is probably developing slower.

So, what will it do to the return capital employed over the lifetime of these assets, and how does it fall within your strategy of [indiscernible] growth? And just some clarification, so €200 million - €150 million to €200 million in Chemicals.

If you could give guidance on the start-up cost and Performance Product as well. And also, do these €200 million include idle cost as well or idle cost come on top?

Thank you.

Yeah. Thank you, Evgenia, for your question.

Our start-up cost in Performance Product in Q3 has been in the order of magnitude of about €20 million for that is a much smaller number obviously than in Chemicals. Then your first question is really would be more fundamental question about what is the outlook for the investment, which we have made obviously and this was asked before.

We expect now growth to pick up for some of these new plants because they are now starting to produce. Actually, market environment might be a little bit more difficult with that.

And again, talking in the upstream, and I was very clear with that, there might be some margin pressure. But in terms of overall profitability, what we try to do is when we approve projects, we do not rely on one thing or case but we look at scenarios, trying to understand how our investments would perform under different circumstances.

And we certainly will not approve a project based on peak margins and endless growth scenarios. So, we also have to take into account that some of these products by nature is cyclical and some of that cyclicality we now witness in 2015.

Thank you. And just a follow-up question, do start-up costs include idle cost?

No. No.

That is actually a separate item.

And you wouldn't quantify those?

I don't think so.

Okay.

No. Thank you.

Thank you.

Hi, Maggie. Thanks.

One quick question regarding oil and gas again. A lot of company are finding difficult to get the cash flow to invest.

And I was just wondering about Gazprom especially in Achimov I. Do you see the same urgency of ramping up Achimov I as you do?

Or basically, what is the situation in terms of expanding in [indiscernible]? Thanks.

Your question - this is Hans - Patrick, with respect to what do we see in Achimov I, we've laid out the development plan for that field in 2011 and 2012. And since then, we are implementing exactly according to plan.

There will be a total of if I recall the number correctly, between 120 and 130 wells producing there. We are ramping up exactly in line with the plan that we've developed.

I don't have the exact figure but I think at this point in time, there's 90 wells up and running and we haven't seen a slow down by the way in our joint venture as we've also not seen any type of impact on the production plans that were developed for the year 2015. So, also there everything is working exactly according to plan.

With respect to the new fields, actually more four and five, I can tell you that the working teams met for the first time a week ago. They are developing the plans.

I will get to see that most probably by the beginning of next year, the first time and then no more.

Okay.

But no indication for any time, any type of delay.

So, the current over supply of gas in Russia is not an issue for Gazprom?

I cannot...

And you?

I think that is a question in the end that will have to be asked of Gazprom. I can always speak with respect to the projects that we are involved in.

And again, Achimov I which is the one where we are currently drilling new holes is moving forward exactly as planned.

Thank you.

Thank you. So, I joined the call a bit late.

One question really on natural gas. Could you tell us that if fundamentally natural gas prices in Europe go down, what implication does it have on your upstream business and if your Ludwigshafen and Antwerp crackers have the flexibility to crack enough natural gas?

That's my first question. And second question is basically on the upstream business, could you just put in perspective in Petrochemicals, the profitability that you saw in Q3, in context on the last one and a half year, how good has it been basically?

Is this the best quarter that you've seen in Petrochemicals in Q3? Thank you.

So, let me start with the last question about Petrochemical. Q3 was a good quarter.

It was not the best quarter for Petrochemicals. We have had a strong run starting in 2014 going into 2015.

All of the quarters were quite excellent. And I said this earlier.

I don't know if you're already on the call then. We also had some special sectors.

There was a, for instance, a couple of turnaround situations in Europe, which helped to improve margins. But overall, we have seen a pretty steady development until recently.

No margins tend somehow lower. And with regard to the crackers here in Ludwigshafen, these crackers are actually due to use NAFTA because that is essentially what we need as a feedstock structure.

And we have no plans to flexibilize them like we did in North America where we actually take advantage of the cheaper natural gas. And as you know, natural gas in Europe is, in relative terms, less attractive than in North America.

And overall, the market situation in natural gas in Europe, Hans, do you want to say a few words about that?

What we currently see, Jaidepp, is certainly what I would call depressed prices for natural gas. I think the average price on a U.S.

dollar basis in Q3 was at $6.80 compare that to where we were a year ago. We were in the range of 9 to 10 if I recall that correctly.

And going into the fourth quarter, we see a bit of a further decline of natural gas prices in Europe. Not only in Europe, when I checked this morning, also the Henry Hub price had come down significantly in the U.S.

So, overall, for natural gas at this time, depressed environment. Let's see what kind of a winter we'll experience in the northern hemisphere.

A few cold days, as we all know, have the tendency to change natural gas prices rather quickly.

Thank you. If I can just sneak in one follow-up on performance - sorry.

Okay. No problem.

Thank you. Thank you.

Yes. Thank you, Maggie.

Good morning. My question is actually fairly boring on the tax rate.

If I look at the note to the EPS calculation, it looks like your tax rate on an adjusted basis was 34% in Q3. And I see that U.S.

earnings were down less than everything else and Germany earnings were down more. So, can you basically give us some kind of sense of where the tax rate will settle now that the Gazprom swap is done?

And assuming that the current speed of geographical earnings stays, is it still above 30% or does it go back to - closer to 26% and there was something exceptional in Q3? Thank you.

No. Let's start maybe at the lower end in Q3, Laurent.

I think the tax rates was at 26.0%, which compares to 26.7% or 27.6% in the prior year quarter. Obviously, an impact there from the gains from the asset swap which were not taxed.

Our general guidance with respect to tax rate does not change. We expect our tax rate to be in the range of 25% to 30%.

And that is with the current regional setup that we have and the current business setup that we have. Should that change, that may have an impact but we'll stick to our general guidance.

And you know that we've slightly moved that up as a result of the stronger weight that our highly-taxed Norwegian oil and gas activities have.

But page 40 in the calculation of adjusted earnings, it shows a tax of 5.37 on a pre-tax of 1.577, so all on an adjusted basis, which is 34%. Is there something exceptional essentially negative in the minus 5.37?

Not that I'm aware of. But let's do this, let's take that offline and look it up...

Thank you.

...and Investor Relations will get back to you.

Thank you.

Yeah. Thanks.

One of the strong performers in the third quarter was the Functional Materials division. And you do refer specifically here to good demand in automotive and construction, just it did appear in your comments about how the quarter ended and activity levels in for the fourth quarter.

Does your caution just in general terms, extend to those two industries or into construction or do you see them holding out for longer until this sort of general macroeconomic pressures bite because it's encouraging to see for example a recovery in construction chemicals demand in Europe but would you see these sorts of indicators weakening as well fairly quickly? Thanks.

Martin I think that this is a question, what is market and was really our own measures to improve our business. We do believe and we do think that automotive still will grow slightly this year.

A very, very small increase overall globally. At that certain time, too exciting but we have increased our penetration rate quite successfully especially in China including which is very important, including the national companies.

It's not just the joint ventures and [indiscernible] automotive companies here had a very good run with national accounts as well and they are looking for a better technology, actually they want to have best in class technology and they are turning to companies like BASF because they know they get what they want. In construction, we are all aware and we have talked about this year, for a couple of years that the development in construction wasn't really satisfying for quite some time.

I think we have done our homework here. We now see the effects in 2015, again still relatively weak background for instance in Europe.

We do manage our business quite effectively, creating some growth and more importantly earnings. We had particularly, a good run in the Middle East where we have strong market position so we still also see some good underlying growth but essentially I think we have done our homework in that business.

Thanks very much.

Welcome.

Yeah. Basically, the question was asked.

Thanks.

Well, then, ladies and gentlemen, with this, we come to the end of our conference call. We will next report on our full-year 2015 results on February 26, 2016.

I would like to thank you for joining us this morning. Should you have any further questions, please contact any member of the IR team and we will be happy to help you.

With this, Kurt Bock, Hans Engel and the Investor Relations team would like to say good-bye and wish you a nice day.