BASF Se

Stefanie Wettberg - Senior Vice President-Investor Relations Kurt Bock - Chairman Hans Ulrich Engel - Chief Financial Officer

Andrew Stott - UBS Andreas Heine - MainFirst Andrew Benson - Citi Laurence Alexander - Christian Faitz - Kepler Cheuvreux Tony Jones - Redburn Markus Mayer - Baader-Helvea Chetan Udeshi - JP Morgan Sebastian Bray - Berenberg Mutlu Gundogan - ABN Amro

Good morning, ladies and gentlemen. On behalf of BASF, I would like to welcome you to our Analyst and Investor Conference call on the Third Quarter of 2017.

On the call with me today are Kurt Bock, Chairman of the Board of Executive Directors; and Hans Ulrich Engel, BASF Chief Financial Officer. Kurt will explain the financial performance of BASF Group in the third quarter, while Hans will present the segment results and financial figures in more detail.

Kurt will conclude by providing BASF’s outlook for 2017. Please be aware that we already posted the speech on our website at basf.com/Q32017.

Additional information on the business development in the operating divisions can be found in the quarterly statement and our fact sheet published this morning. With this, I would like to hand things over to Kurt.

Yes, thank you, Steffi, and also good morning also from my side, thank you for joining us here for our earnings call. In the third quarter of 2017, the positive demand development continued.

Despite strong comparables in the prior-year quarter, we achieved solid volume growth. Overall, we considerably increased sales and earnings.

Our earnings mix was again characterized by strong results in the Chemicals segment. In contrast, sales price increases in our downstream businesses could only partially offset significantly higher raw material prices; thus margins remained under pressure.

Overall, EBIT before special items in our chemicals business, which comprises the Chemicals, Performance Products and Functional Materials & Solutions segments, has improved by 29% compared to last year. Turning to the financial figures compared to Q3 2016 in more detail.

Sales increased by 9% to 15.3 billion euros. This was mainly due to higher volumes and prices.

Volumes increased by 4%, supported by all segments. We achieved year-on-year volume growth for the sixth consecutive quarter.

We raised sales prices by 7%, especially in Chemicals. Currency effects amounted to minus 3%, while portfolio effects positively impacted sales by 1%.

EBITDA before special items increased by 12% to 2.8 billion euros. EBITDA with all special items increased 23% to 3.0 billion euros.

At 1.8 billion euros, EBIT before special items came in 16% higher due to considerably higher earnings in our Chemicals segment. We received another insurance payment of around 60 million euros related to business interruption losses incurred in Q2 2017 following last year’s accident in Ludwigshafen.

The hurricanes in the US had a negative earnings impact of around 50 million euros. Both amounts mainly pertained to the Chemicals segment.

At 2.0 billion euros, EBIT was 34% higher than in the same period last year. Special items amounted to plus 198 million euros in total and were mainly related to the closing of the transfer of BASF’s leather chemicals business to the Stahl Group.

This resulted in a special income of 203 million euros. The tax rate was 20.5%, compared to 17.3% in Q3 last year.

The prior-year quarter benefited from the release of tax provisions for previous years. Furthermore, earnings contributions from high-tax countries increased.

At 1.3 billion euros, net income rose by 50% compared with the prior-year quarter. Earnings per share were 1.45 euros in Q3 versus 0.97 euros last year.

Adjusted earnings per share rose by 27% to 1.40 euros. Cash provided by operating activities rose from 2.5 billion euros to 3.8 billion euros due to lower net working capital.

Furthermore, the operating cash flow was supported by the higher net income. Free cash flow amounted to 2.8 billion euros compared to 1.6 billion euros last year.

We continue to implement our “We create chemistry” strategy. In addition to organic growth, acquisitions are a key strategic lever to achieve our targets.

We want to acquire businesses which generate profitable growth above the industry average, are innovation-driven, offer a special value proposition to our customers, and reduce the earnings cyclicality of BASF. In addition, we have clear financial acquisition criteria in place.

During recent weeks, we announced two major transactions which perfectly met our criteria. In September, BASF and Solvay signed an agreement related to the sale of Solvay’s integrated global polyamide business to BASF for a purchase price of 1.6 billion euros on a cash and debt-free basis.

The acquisition will support BASF’s aim to grow profitably in innovation and solution-focused downstream businesses. The acquisition complements BASF’s engineering plastics portfolio and expands our position as a solution provider for the transportation, construction, industrial applications and consumer industries.

Regionally, the transaction enhances access to key growth markets in Asia and South America. At the same time, the purchase price will strengthen our polyamide 6.6 value chain through increased polymerization capacities and backward integration into the key raw material ADN.

In 2016, net sales of the business to be purchased from Solvay amounted to 1.3 billion euros and EBITDA to around 200 million euros. According to French law, the intended transaction is subject to consultations with the relevant social bodies of Solvay, following which both companies will enter a binding purchase agreement.

Solvay and BASF aim to close the transaction in the third quarter of 2018, pending customary regulatory approvals and the consent of a joint venture partner. In October, we signed an agreement to acquire significant parts of Bayer’s seed and non-selective herbicide businesses.

The all-cash purchase price is 5.9 billion euros, subject to certain adjustments at closing. The transaction will be an asset deal.

The assets to be acquired include Bayer’s global glufosinate-ammonium non-selective herbicide business, commercialized under the Liberty, Basta and Finale brands, as well as its seed businesses for key row crops in select markets: canola hybrids in North America under the InVigor brand using the LibertyLink trait technology; oilseed rape mainly in European markets; cotton in the Americas and Europe, as well as soybean in the Americas. The acquisition also includes Bayer’s trait research and breeding capabilities for these crops and the LibertyLink trait and trademark.

In 2016, these businesses generated sales of around 1.3 billion euros and an EBITDA of around 385 million euros. The transaction is subject to the closing of Bayer’s acquisition of Monsanto and approval by relevant authorities.

It is expected to close in Q1 2018. With this investment, we are seizing the opportunity to acquire highly attractive assets in key row crops and markets.

It will be a strategic complement to BASF’s well-established and successful crop protection business as well as to our own activities in biotechnology. I will now hand things over to Hans, who will provide more details on the development of the segments and then finally I will talk about the outlook for the remaining three months.

Hans?

Thank you, Kurt. Good morning ladies and gentlemen.

Let me highlight the financial performance of each segment compared to the third quarter of 2016 starting with Chemicals. Sales in Chemicals increased considerably.

Higher volumes and significantly higher prices in all divisions were the main driver for this development. Currency effects impacted sales negatively.

In a continued favorable market environment, we were able to increase margins in isocyanates, acrylic monomers, cracker products in Europe, and butanediol and derivatives. This resulted in an EBIT before special items of 1.1 billion euros, which is more than 600 million euros above the prior-year quarter.

All divisions contributed to this significant increase. The hurricanes in the US had a negative impact on earnings.

Sales in Performance Products increased slightly. Higher volumes in all divisions compensated for negative currency and portfolio effects.

Higher prices in Dispersions & Pigments and Care Chemicals were largely offset by significantly lower prices in Nutrition & Health, mainly in vitamins. Overall, sales prices were stable.

As raw material prices increased, margins remained under pressure. Therefore, EBIT before special items declined considerably.

EBIT increased by 21% due to the special income in Performance Chemicals attributable to the transfer of BASF’s leather chemicals business to Stahl. BASF now holds a 16% stake in the Stahl Group.

In Functional Materials & Solutions sales rose considerably. This was mainly driven by higher prices and the acquisition of Chemetall.

The positive portfolio effects more than compensated the negative currency effects. Volumes rose in every division except Catalysts, where we posted a considerable decline in precious metal trading volumes.

We continued to see good demand from the automotive and the construction industries. EBIT before special items did not reach the strong prior-year level, as our initiatives to increase prices could not offset significantly higher raw material prices.

The Agricultural Solutions segment continues to face challenging market conditions. Sales decreased significantly mainly due to the weak business development in Brazil and negative currency effects.

Overall, we were able to increase volumes by 5%, largely driven by higher demand for our herbicides. Sales rose considerably in Europe.

This was mainly due to higher herbicide and fungicide volumes, particularly in central and Eastern Europe. Sales in North America were up slightly on the prior-year quarter.

We increased herbicide volumes with our innovation Engenia and fungicide volumes with Xemium. Negative currency effects slowed sales growth.

Business in the region South America, Africa, Middle East continued to be dominated by the difficult situation in Brazil; sales decreased considerably. With the market environment deteriorating, farmers’ economic situation remained strained and competitive pressures were high.

This pushed down prices and sales volumes, especially of fungicides and insecticides. Negative currency effects also contributed to the decline in sales.

We increased sales considerably in Asia, mainly due to volume growth with fungicide innovations in India as well as higher volumes in South Korea and Southeast Asia. Compared with the prior-year quarter, EBIT before special items declined considerably.

This resulted primarily from the difficult market situation in Brazil and the lower average margins due to an unfavorable product mix. Furthermore, the recent hurricanes led to shutdowns of our production facilities in Beaumont, Texas, and Manatí, Puerto Rico.

Sales in Oil & Gas increased significantly due to higher oil and gas prices and higher volumes. The average price of Brent crude in Q3 2017 was $52 per barrel compared with $46 in the prior-year quarter.

In addition, gas prices on the European spot markets were significantly above the same period last year. Sales volumes, especially of natural gas, exceeded the level of Q3 2016 by 9%.

Production volumes were slightly higher compared to the prior-year quarter. The combined price and currency effect amounted to plus 11%.

Overall, EBIT before special items was slightly below the prior-year quarter, which benefited from one-time earnings effects related to contract renegotiations. EBIT increased considerably due to special income from the sale of shares in a concession in Argentina.

Net income in Oil & Gas increased from 33 million euros to 139 million euros in Q3 2017. EBIT before special items in Other declined to minus 325 million euros, from minus 233 million euros in the prior-year quarter.

This was partly due to an increase of provisions for our long-term incentive program. Let’s now turn to our cash flow development for the first nine months of 2017.

Cash provided by operating activities increased by 1.8 billion euros to 7.6 billion euros. This was largely due to the higher net income.

At 3.4 billion euros, cash used in investing activities was 637 million euros higher than in the first nine months of 2016. One factor was the increase in financing-related receivables.

Moreover, fewer payments were received from the disposal of assets and divestitures. Payments made for tangible and intangible assets decreased by 11% and amounted to 2.6 billion euros.

Free cash flow rose from 2.9 billion euros to 5.0 billion euros in the first nine months of 2017. Financing activities led to a cash outflow of 1.5 billion euros, compared to an outflow of 1.9 billion euros in the first nine months of 2016.

And with that, back to Kurt for the outlook.

Okay, so you have seen that we confirm our 2017 outlook for sales, EBIT before special items, and EBIT. We expect BASF Group sales to grow considerably in 2017, which is quite obvious.

We target to considerably raise EBIT before special items compared with 2016. This forecast considers the very strong performance of the Chemicals segment during the first three quarters of this year.

EBIT is also expected to grow considerably. We strive to once again earn a significant premium on our cost of capital.

Deviating from our forecast at the end of July, we expect EBIT after cost of capital to increase considerably and not only slightly. What does that mean for the second half?

We now expect that EBIT before special items will considerably surpass the level of the second half of 2016. As shown on the slide, we slightly increased our underlying assumptions for the GDP growth and the growth in industrial production.

We did not change our exchange rate and oil price assumptions. This implies a slight upside potential from the oil price and a slight downside potential from the euro/dollar exchange rate.

And Hans and I are happy to take your questions.

Yes, thanks and good morning. So a couple of questions.

So firstly on crop protection, it is a long time since I have seen minus 8 on pricing in any of the – I guess, any of the players in this key industry, and I think I have to go back to 2010 to see a material negative number for you, which is minus 3. So, can you tell me what happened in Q3, sequentially you went from minus 3 to minus 8 on pricing, are we just clearing out inventory?

Is this a temporary situation or is this a genuine sort of [leg down] in Brazil that we should be concerned about for 2018? That was the first question, and the second question was just on Q3 detail on performance products, I didn't really fully understand why EBIT was down so much considering that your D&A was flat, so my point being that you are saying that Malaysia and Texas impacted the cost side of the equation, and I would have expected that to hit the D&A line and it didn’t.

so D&A was flat, so can you tell me the moving parts on margin year-on-year in nutrition? Thank you.

Hi, Andrew. Thank you for your questions.

Crop protection – this is of South America. If you look at – if we look at our price development, Europe slightly up, North America flat, Asia that might be a portfolio effect, very nicely up, and then steeply down in South America, which is essentially Brazil.

So this is all the follow up of the clean up, which I think the entire industry had to do in Q3 starting already late in Q2, and this by and large explains the development. And I may add, we know that Q3 is a relatively small quarter in crop, but volumes were up in Europe, volumes were up in North America, volumes were up in Asia, and very nicely up I have to say and they are down again in South America.

Although this is very much a Brazil thing, which means there is a clean-up, which also means that going forward and that was the second part of your question, the conditions should be better because I think at least BASF and other companies have done their homework there to reduce in field inventory and that should now enable us to have a better Q4, and as we all know this is a very important quarter for South America. Hans will you answer the more difficult question on [indiscernible] and earnings and crop development?

Yes. Andrew, what you see continuing is what we already experienced in Q2, performance products results compared to prior year quarter are down.

The key impact there continues to be high raw material prices. If I look at the specific situation in performance products overall, we are faced with costs increase in the order of magnitude of roughly 20% coming from raw material prices.

The businesses at least in part are not able to pass these type of price increases on. You are also aware of the special developments that we have in areas such as for example the vitamins.

I alluded to that briefly already. We are at historically low prices in vitamin E, which compares in Q3 of last year to the situation where in particular the Chinese competitors had to throttle their production in Q2, Q3 of 2016, which led to a nice increase in prices.

If I remember that correctly, vitamin E prices, just to give you a price point there, were around the 8 euros per kilogram mark last year, where they are in the range of 4.20 to 4.30 euros in Q3 of the year 2017. We have other businesses such as the hygiene business that goes to some difficult times resulting from over capacity.

Paper, is another area which suffers from over capacities, but you're well aware of these situations and overall that leads them to in performance products a decline in EBIT before special items order magnitude 100 million.

Hans, can you just follow-up on the 20% number you gave me. Is that nine months or three, or is it the quarter?

That is the nine month figure. On the quarter basis it is slightly lower than that.

Okay, perfect. Thank you, very much.

Yes, thank you for taking my question. I would like to first address our net working capital if it has shown a strong improvement in Q3 and you have given some reasons for this.

Is that only temp raises. Do we see then a strong networking capital reversal in Q4 or is that what you have managed here sticky for also on the full-year base.

It's the first question. And then secondly, would you mind to give us an update on what you expect your availability in MDI and TDI will be next year.

So, referring if you've planned an MDI in China, is the expansion of MDI in Chongqing. The TDI plant in Ludwigshafen may be also major turnarounds you have.

So, what is what you can expect from this call the extremely profitable business?

Yes, thank you Andreas for your questions. As we talk about networking capital, I take the question as I sign it.

So, we had another good Q3, actually it was better than Q2. We have grown very nicely from margins, are very satisfying we have to say.

We don’t see any bottom leg going forward, if that is back on to your question in supplying the market in 2018. The ramp-up in Ludwigshafen continues, of course we will exchange the reactor in 2018 with a large one.

The original one was bigger than the current one. That means we also have more capacity available and we will certainly time that maintenance work to comply then or to be aligned with market development for a better way.

Then we have more capacity coming on-stream in Shanghai in our joint venture. And we are not yet at full capacity with our MDI plant in Chongqing, which also had a very good quarter in 3rd quarter in 2017.

And what you see is I think for Brent at work because we have a very good operating leverage in those businesses and with higher volumes and better prices. These investments are paying off very nicely, I have to say.

Hans?

Yes Andreas, this is Hans, good morning. Your question on networking capital.

Thanks for noting that, we've done a fine job there. Expect us not to reverse this in Q4.

We'll go through the typical seasonality in our business. You will see in our agricultural solutions business obviously a buildup of inventory to prepare for the season in the Northern hemisphere.

On that, it will depend on what we'll see happening with respect to raw material prices. But my expectation is that from a networking capital perspective, there may be slight cash utilization in Q4 and may also be flat but for sure you will not see a reversal of what you've seen happening in our cash flow statement in Q3.

Thanks a lot.

Yes, thanks very much. The cost pressures you are saying in due or two downstream divisions, when do you think one of the business is telling you they will leave they will fully pass on these cost pressures obviously excluding the one-off challenges within into the -- bit mentioned and do you see procurements that you talked about.

And secondly, you noted within your chemicals business upturn in acrylic, and I just wondered if you could down flash that out and how you see the prospects for that part of the business. Thanks.

Hi, Andrew. I'll answer the question on downstream and passing on higher fixed off cost.

We've had this earlier this year we said this takes three to six months. Sometimes its formula based, sometimes its contract renegotiation.

For performance products we expect now Q4 to be above last year's number for coming to materials and solutions that might be a bit difficult, simply because as you have to absorb obviously much higher cost in our performance materials business which by-and-large has been able to increase prices and had been able to pass on part of the higher raw material cost but no to the full extent. And that cannot be a surprise given this very steep increase in our especially I will sign it prices over the course of 2017.

So, this is again this is an ongoing task in some businesses as Hans alluded to. We do have pricing power and we use our negotiations to increase prices in other.

We are price takers and vitamins, vitamins is probably the most prominent example in that respect. Hans, you take?

On the acrylic acid prices, in fact we've seen overall what I would call a nice development from our perspective throughout the year 2017. Continuous improvement in prices in Europe, continuous improvement in prices in North America, Asia, little bit of a roller coaster right starting very high going into the year then dropping to 2016 mid-2016 year levels by mid-year.

And then there's a relatively sharp increase again during end of Q2 and the in Q3, which in fact continues. So, overall I'd say we're rather satisfied with what we've seen happening with respect to acrylic acid prices, also when looking at it from the perspective of margin over properly in demand around the global strong.

We see some impact still from the shut-ins, temporary shut-ins resulting from the storms effecting plants in the Gulf Coast in the U.S. but overall I think key driver that we see is the strong demand around the globe and that should certainly support pricing for acrylic acid.

Thanks, very much.

Maybe, one cent added to your --. Andrew, please keep in mind last year we had the North Harbor incident which also affected our production of acrylics and derivatives.

So, this effect has evaporated in 2017.

Okay, thanks very much.

Welcome.

Good morning. Could you give some detail on your volume trends in China, how are you what's happening in the upstream businesses compares with the downstream?

And can you flush out a little bit the comments around catalysts, what's happening excluding the precious metal pass through?

Okay. We have to look up the numbers for China to give you a little bit more detail here.

Overall, we had a pretty good volume growth in Asia; almost 10% in Q3. In China or the major factor contributed into that even slightly higher than the 10%.

So, this is moving on in the right direction. We have seen a higher utilization rates and for instance in our MDI plant in Chongqing, which has we have in the upstream businesses.

But given the overall let's say 10% 12% growth, I would say that we have grown across the boat in most of our businesses, especially everything which is automotive and contractually related and this is really important for them for the downstream businesses. So overall, I think this was continuously good development in Asia and in China in particular in 2017.

And the second question I think I will hand over to Hans.

Yes Laurence, your question with respect to catalysts and the effects that we have there from our precious metal trading business. What we've experienced in Q3 are relatively sharp price increases for precious metals, in particular palladium prices which for the first time and I don’t know how many years are now higher than the price for platinum.

And what this has led to is that our customers in particular in the automotive industry have decided to adjust to these steep increasing prices and apparently are hoping for prices to come down in Q4 and Q1 of next year. So, I think that is the key explanation there.

Net of this, there we see overall nice business development in catalyst across all businesses, in particular in our automotive catalyst business.

Thank you.

Thank you.

Yes. Good morning Stephanie, good morning gentlemen.

Two questions, please. First of all, just after Laurence's question in catalyst, can you please talk about the kind of order situation with a different aspect?

Would it be a correct assumption that the mix is shifting a bit at present away from more complex, easing exhaust systems to simpler gasoline exhaust systems. And then the second question would be looking at the operating result of Latin America in Q3, I would have expected a much worse EBIT performance given the relative size of agricultural solutions and also I would figure a weak décor coatings business in Brazil.

So, what are the good performance in this region? Thank you.

Hi, Christian. Good performance in South America certainly was oil and gas.

Please keep that in mind. Decorative paints was okay but Ag obviously was pretty bad probably as bad as we ever had it.

Catalyst, these are discussions very much a German discussion actually. We see relatively a little consumer changing, consumers changing their behavior in other European markets.

They continue to buy diesel cars because diesel cars are good for both CO2 and they can be cleaned up completely, for instance using BASF's technology. In Germany and you see the registration of new cars.

The numbers have come down. I think we have to explain even more that diesel is a very good technology.

And if you want to achieve our CO2 objectives especially for the transportation in automotive industry, we need a high diesel share for this is an ongoing debate and BASF was actively participating that debate.

Thank you.

Welcome.

Morning, Kurt and Hans. I've got two questions left.

Firstly, in Q3 you worked out I think the EBIT margin for the three downstream businesses had dropped to only about 8%. And we're just looking though the R&D to sales ratio.

So, these are supposed to be high quality specialty growth businesses. But R&D to sales is only about 3%.

And I just wonder whether that could be increased, seems low compared to peers and whether that was part of the issue in terms of degree of specialization. And then probably related to that.

In the segments where you are struggling to get prices up to offset the cost, how are you thinking about the status of some of those businesses within the BASF group? Thank you.

Yes, thank you for the questions, Tony. Let's start with the second question.

We continuously review the performances of our businesses. We do this on a peer-to-peer pure play basis, so we compare ourselves to our relevant competitors obviously which includes by the way also the research intended to you, so R&D as player of sales, we don’t see that we would underspend in any relevant business.

I'll give you one example, catalyst, very obviously very innovation driven where we continuously innovate new products. But in the downstream businesses we also and I think Hans alluded to it, we also have bloody commodities.

We never said that performance products is only specialties, whatever the definition of specialty is, they aren’t commodities which are supplied in a month and then those businesses who have relatively little balance power which leads then to a second question of what are we going to do about it if we can’t raise prices and module continue to be unsatisfactory. There is certainly an ongoing restructuring, we have to continuously adopt our production capacity and this will continue also in the future.

We have also decided to divest on natural businesses if we believe that another owner can do a better drop or a combination creates a different view and one example is, oleochemical is relatively small business which we merge with Star group and that I think will lead to a very, very strong competitor and pre-pass that business for a brighter future then what it had been if it had remained within BASF and I think we take a very rational approach on all these options one by one and then we make our mind and take a decision at the right point in time.

Thank you very much.

You’re welcome.

The next question will be from Patrick Lambert, Jeremy Redenius and then Stephanie Bothwel. We will start with Patrick Lambert, Raymond James, please go ahead.

Hi Stefanie, good morning everybody. Two quick questions, this one is on the ag, but if could help us understanding the fact of – the production problems in Puerto Rico, in Beaumont and the impact on EBIT and also more generic question with that.

Insurance payment versus underlying EBIT, not just on ags but also in the clinical segment, if you could help us timing of the payments of insurance if any both for business use and the second not 100% sure you can answer that but – could you comment a bit on the free cash flow generation of the oil and gas business?

Thank you, Patrick. Hans will take the question on free cash flow of oil and gas which is very important one obviously for us as well.

Ag is impacted by the production interruption in Beaumont and in Puerto Rico that is a lower double digit number so we should put it into perspective. We had a negative impact but it doesn’t explain obviously the difference, the negative from last year which is again couldn’t driven by the South American business development.

With regard to hurricane Irma and Harvey I don’t think that we have any chance to increase any major insurance payment for that, we had actually made structural damage this was all related to logistics issues and our employees couldn’t have come to work for the simple reason that their homes were flooded and they had to take care of belongings and most of the families – this was the main reason why we had interruption. And Puerto Rico was then – even more difficult because obviously infrastructure is quite weak in Puerto Rico and efforts to support and hub this island started slowly and I think we’ve been affected by that one as well.

And we should figure out Q4 too right?

Yes.

I will take your question on free cash flow in oil and gas, I will start with last year let me remind even in this very difficult environment last year where the oil and gas business was free cash flow positive or magnitude, almost to 200 million in 2016 when you look at the improvement in results that we have and keep in mind that we, from a CapEx perspective has been same or magnitude maybe slightly less than we did last year. You can expect to see that business with what I would consider to be the appropriate improvement in the free cash flow in the year 2017.

Excellent, thanks.

Now we have Jeremy Redenius with Bernstein. Q - Jeremy Redenius Hi it’s Jeremy reading in from Bernstein, good morning and thanks for taking the questions.

First, I just wanted to come back to the ag business once more, I saw you mentioned price decreases in LATAM, I think that’s where first time we referred in quite some time. I wonder if you could talk a little more about the nature of those price decreases, are you seeing a competition from generics producers or are you seeing price competition from R&D driven competitors as well, just a little bit more detail where that price competition is coming about?

And then second topic, we’ve also talked about before has been – some of the supply out of China, I guess there has been a series of environmental occurring throughout the country, I think some cases shutting down some of your competitors compared like – I would like to hear if that was the factor that played into some of the results in Q3 and if you see this having a meaningful impact on reducing available capacity out of China for competitors in this Q4 and the next year in conversely would that actually have any impact on any of your customers in a meaningful way? Thanks very much.

Good morning Jeremy, kind of difficult to answer the second question. We do know and the party [indiscernible] tries to become more concerned about obviously environmental issues and one way – no quality of growth about growth itself and so we might, going forward we might see the government, the regulators become even a bit more and forcing environmental laws and regulations just in point of view, by and large as a good and positive effect because we’re on the good side of that problem, obviously.

It is very difficult for us to contribute any specific earnings number in Q3 to any supply outage in China and sometimes if we delivery like this is probably more about perception and customers getting nervous about the situation rather than extra supply availability but again, I cannot put a number behind that but it drives market sentiment and sometimes some events coincide that and then it becomes even more relevant for the market. For that happens from time to time.

South America, price decrease for us essentially a mix effect so we had to hire products with weaker margins and lower prices and – was essentially to relatively stiff innovation competition in some of our products which is to be expected I have to say, and this is because of corporate action business that over the last cycle of products, new competition arises and then price increases and to try to count as the new formulation and different price point which normally is quite effective to maintain share and earnings but you cannot always be right – price decline. I hope this helps.

Can I just to clarify for example, within factor side you might have seen basically trading down to more value based or value priced --?

I accept your idea.

Thank you very much.

Welcome.

The next question is Stephanie Bothwell, Bank of America Merrill Lynch, please go ahead.

Yes, good morning and thank you very much for taking my two questions. The first one on construction chemicals, within your commentary you said those volumes were up slightly in South America, Africa and the Middle East.

That commentary looks quite different compared to what you put out at the H1 stage where you essentially said that demand in the Middle East had been going considerably. So I wondered if you could give us update in terms on how underlying trends were looking there?

And the second one was a very quick follow up. Can you confirm that the impact of hurricane Harvey was around 50 million at the EBIT level and if that was the case can you split it between the impact on chemicals and within ag?

Thanks.

Hi Stephanie, Hans will answer the question on the hurricane effect construction chemical, actually our business in the Middle East decreased, continue to decrease though it’s a difficult market environment but this is part of our European definition so Middle East is part of Europe at the FS, and Europe overall we had lower volumes so – and Europe we had slightly higher volume overall, but again, Middle East down so the European market developed quite nicely and I think you alluded to that in our construction market and Europe always a strong. Europe is always a Middle East to be precise.

Your question with respect with the inflict of the hurricane, the figure there is 50 million Euros to the EBIT line for Q3 somewhere from a split perspective actually think about it in a way that’s it’s pretty much evenly split over chemicals, agriculture solutions, function materials and solutions and performance products and we’re expecting another 30 million to 50 million EBIT impact for Q4.

Thank you very much.

The next question is from Peter Clark with Societe Generale, please go ahead.

I have actually got a still couple of left, I was drilling down in functional solutions, and obviously you made note of the higher fixed cost effect of the ramp up and I can see actually the CapEx is quite significantly up year-on-year so presumably you can have quite a bit of ramp up cost going forward. I was just wondering if you can put a number on that how significant was for the functional solutions.

And the on the coaching, I asked this with Q2, I mean if I try and adjust or the M&A effects of chem industrial business going to access, it does look like the EBIT is probably running 20% might or more year-on-year and I’m just wondering if there is anything specific to try like that because I try and adjust for the decor in Brazil etcetera and I’m just looking at the pay group that seems to be worse on the pay group. I’m just wondering how things stack up coatings business?

Thank you.

Coatings Peter, we had lots in the industrial coating business as this away as that is a negative effect, by and large we were able to maintain profitability in coatings, but as you alluded to there is continuous price pressure coming from the automotive industry which is not surprising obviously. Hans on the development?

I think the question Peter was specifically on fixed cost, ramp on effect that we have on the portfolio apart from the solution, they are about twice the amount compared to the year 2016, but we’re talking very low double digit million when we talk about them of course, in functional material that’s included.

We have five more participants in the line that would like to ask questions we will start with [indiscernible].

Good morning. Thanks for taking my question.

my question is actually on oil and gas. On the Argentinean disposal, can you talk about, can you give us more detail i.e., all those assets that are currently in production, all those assets which were in growth – an expiration license which we were those for many types?

Second question is there a cash impact from memory the issue that we had – that you could note with country – and then said more generally in oil and gas obviously say very specific case? Thank you.

I will start with the last question, consider this to be the huge role portfolio that we do oil and gas, you have seen us in the U.S. where we could not send cash out of Argentina, building positions in Argentina and also to protect us against the significant amount of inflation, this move here is one where in the new Okin province we have a big position in the LatAm on our term.

The government decided to split this between the East and the West there a concession. We are staying in one concession and we are divesting the other part of the concession.

Winter I think is in development with first pilots and we will focus and now you got me. I think we'll focus now on the East and have divested the West, but it could be the other way around and if that should be the case we'll confirm after the call.

But that's the context and as I mentioned already, since the marquee government is in place, we are able to do dividend payments out of Argentina and Argentina is actually has become significantly better place to do business after the change in government that we've experienced.

And with regard to what our plans in oil and gas business, the good thing about oil and gas is that you can actually design cash flow profiles very nicely by deciding which prospects you want to develop, which fields you want to own, where do you want to X it, where do you want to grow. And our overall goal is to have enhance and share it, to have a healthy free cash flow.

And 2017 looks like we are advancing very nicely in that direction. And at the same time drive operational excellence, which is much easier at in a low oil price environment and to have continuous production and region of growth.

And so far we have been able to combine this very nicely. So, this continues to be a good investment even under the current relatively low oil and gas prices.

Thank you.

For taking my two questions, basically three questions. Firstly, I saw an article that's the association of metals producers claim a middle digit EUR million amount for from the TDI quality province in Ludwigshafen.

Maybe you can shed some light what your estimates are here for this kind of claim. And also is there any kind of insurance coverage for this kind of issue?

And secondly, maybe you can give us some insight of how the demand is going into Q4, October versus September. And then lastly, also from the Ag chem space, it looks like that you're becoming a little bit more positive on the outlook for Q4 but also for 2018.

Maybe you can quantify the flow, maybe just explain why this is the case?

Yes, thank you Markus. Outlook for Ag, I mean, I think I said that we are now entering into the most important period in South America.

So, this is no make or break for Brazil Q4. Essentially it's far too early to speculate about 2018 obviously.

But I think a couple of industry observers believe that the industry is prone for an improvement after they have had a pretty rocky time over the last couple of years, since 2014, 2015 growth, and especially brought a big growth and now industry has slowed down a bit. So, clearly to say but if there are more market opportunities and this is also based on our innovation pipeline, BASF will go for it.

October, so far as planned. We slightly increased our outlook for the second half which you certainly noticed and we don’t see any indication in October which would change based on yesterday's sales number frankly which would base change our regarding our forecast.

TDI as we saw this is well. What we are doing here, we are turning product from our direct customer's prog which has not yet been formed or even if it had been formed but not yet converted into for instance metals we turn it to BASF.

And we have to absorb the financial cost obviously. The metals producers, they can rest assured that there is no head risk, this has now been confirmed several times also by independent institutes which I think is very important.

And we are working with them to find and amicable solution for both sides. But one thing is clear, I mean there has to be a proof that BASF product is involved obviously and that claims they are making in the market cannot be substantiated due to the product from BASF.

And then we look at this and we feel responsible for what has happened obviously. But again we have to sit down and find a rational solution to that problem.

Your question was then insurance and to buy and large here. That is also something you can insure against and that is the case but that is not our foremost concern.

The foremost concern is to reduce the contents of our customers and to have them to continue but do you think as quickly and as much as possible. I hope that answers your questions.

Perfect. Thanks very much, yes.

Yes, hi. Two questions from me would be, can I get your view on what you think in terms of sustainability of this trend we've seen the upstream prices.

Do you think all of this can be sustained into next year or do you think some of this is temporary which was reversed and if it does reverse next year or whenever it does? How do you see that playing out in terms of group earnings because you yourself mentioned that the downstream businesses have had difficult time raising the prices to sort of offset the raw material headwinds?

And my second question is you mentioned about innovation in your catalyst business. But one of your competitors in auto cat is talking about significant share gains in diesel over the next one or two years.

Is that something you subscribe to or you think your share remains intact over the next two years. Thanks.

Yes. Thank you Chetan for your questions.

And then your prices in chemicals, very difficult to say obviously business supply demand driven. We are aware that in some markets and in some products new supplies going to come to the market.

That could have an effect however as long as you see healthy demand and it looks like we have momentum going into 2018. I think this is a positive precondition for keeping up margins but I don’t really want to speculate for how long and to what extent.

If in the case if margins or prices would come down in upstream, obviously this means with a very short time lag lower raw material cost for our downstream businesses that showed improved margins obviously. Then there will be an ongoing discussion with our customers about prices again because they also are aware about our import costs are.

But nevertheless you normally have then at least temporarily a margin expansion. With regard to catalyst.

This is a very good business overall because it's very much innovation driven. Innovation driven means you have to qualify at the OEMs.

There is a competition about best technology and what you have seen here over the last couple of years is sometimes shifting market share, sometimes somebody has new technology introduced and then gains, as has been the case with BASF. Then somebody else, that's the same.

So, this is not unheard of. And we are quite confident that we can continue to grow the businesses especially in the businesses especially in Asia and in China where we do have a leading market position and for instance in China the diesel technology doesn't play any role at all for light duty vehicles, passenger cars.

Thank you.

Good morning, and thank you for taking my questions. I would have two both on agriculture.

Firstly, could you please give some sense of the differential in terms of pricing development in different geographies? So, if I were to guess for example that Europe were I don’t know down free to fall.

What exactly in relative terms will Brazil and LatAm be down, which regions have suffered aside from Brazil, the most pronounced mix and all pricing is excellent. And secondly, just on the acquisition of the Bayer assets.

Are there any plans and if so when exactly would we start to see the fruits of these? I think it was mentioned in terms of biologics to bundle things like the Becker Underwood biologic treatment solutions with the seeds portfolio Bayer.

Thank you.

Yes, thank you requesting for the questions. The Bayer acquisition first of all we have to close it.

This is still an ongoing process. We have integration team in place which is very important because the timelines all of this are very short and very demanding.

Obviously part of the story on our side is also to combine this knowledge. Our knowledge person and try to research, very important but also in core protection in especially in biologicals where we do see an opportunity to combine.

And this is to the benefit of pharma's and ultimately also to the benefit or the benefit of BASF. Quite a few good ideas in that respect but I would propose that the brief view on the more details in really in 2018 when we after we have closed.

I think this is the appropriate point in time to give you a little bit more backlog with regard to why we believe that this is a good growth story for BASF. Pricing per region, yes.

Prices in Europe, very small quarter again and slightly up this more single digit pricing. And North America essentially stable.

Pricing in Asia, up by a two digit and pricing in South America most importantly down by two digit. Which is a painful and I think I already explained that this is also effect of a mix and portfolio.

And what we have to keep in mind especially for South America we should look to Q3 and Q4 than in combination because that would really cover the entire season into southern hemisphere.

Thank you, very much.

You're welcome.

Yes, good afternoon everyone. Two questions on catalyst, please.

So first of all on precious metals trading, can you tell me why you had lower volumes here? Was that relating to the higher palladium prices that you alluded to?

Do you see a hoarding in the vertical channel? And then secondly, on the catalyst business excluding metal trading.

If my calculations are correct, that was up 4% year-on-year despite negative volumes and also despite negative FX. You had a very strong price mix.

Can you explain to me why that was?

Yes. Let me start with your question on the precious metal trading.

Yes, that's exactly the reason. Automotive buyers decided looking at the high prices that we have in Q3 and the price increases in particular in palladium to postpone their approaches versus that we've seen this also in prior periods with similar developments.

So, from my perspective I look at this and say to myself this is not lost business, this business that will come at a different point in time. And therefore I understood you correctly, there was a bit of background noise but if you can give a conclusion that taking out the effects that we see in the precious metal trading business that the catalyst business has done reasonably in Q3, I would confirm that.

Yes. And the question was that it was mainly related to price mix.

So, is that the case and can you tell me why it means so strong?

Prices overall in catalyst have seen nice increase and that is driven well. I don’t, I have to say I don’t have the details here but overall there is a 8% price increase in Q3, which is a good solid number.

Okay, that's very helpful. Thank you.