BASF Se

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

Andrew Stott - UBS Laurence Alexander - Jeffries Stephanie Bothwell - Bank of America Merrill Lynch Andreas Heine - MainFirst Peter Clark - Societe Generale Chetan Udeshi - JPMorgan [Abrupt Start] various risks and uncertainties, and they are based on assumptions that may not prove to be accurate. Such risk factors include those discussed in the opportunities and risk reports from pages 111 to 118 of the BASF Report 2017.

BASF does not assume any obligation to update the forward-looking statements contained in this conference call above and beyond the legal requirements. I would now like to turn the conference over to Stefanie Wettberg, Head of Investor Relations.

Please go ahead.

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

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 of the fourth quarter in more detail.

Kurt will conclude by providing BASF’s outlook for 2019. Please be aware that we already posted the speech on our website at basf.com/fullyear2017 or FY2017.

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 a warm welcome from my side to our full year analyst call. On January 18, BASF announced preliminary figures for the 2017 business year because earnings exceeded analyst estimates, that’s the general a law.

Today, we will provide you with the detailed fourth-quarter and full-year 2017 results and the outlook for 2018. In 2017, demand was at a good and healthy level in all regions.

We achieved volume growth in all segments and significantly improved our profitability. With 12.5 billion euros in EBITDA before special items and 8.3 billion euros in EBIT before special items, we reached a high earnings level.

Free cash flow increased by 34% and amounted to 4.8 billion euros. Our Verbund concept and long-term investment strategy once again showed its advantages as we captured value within BASF.

EBIT before special items in our chemicals business which comprises the Chemicals, Performance Products and Functional Materials & Solutions segments improved by 1.5 billion euros to 7.3 billion euros. In Agricultural Solutions, we almost reached the earnings level of the prior year despite the challenging market conditions for crop protection products.

Earnings in Oil & Gas improved significantly, mainly as a result of higher Oil & Gas prices. At the Annual Meeting, we will propose to pay a dividend of 3.10 euros per share, another increase of 0.10 euros.

Turning to the financial figures of BASF for Q4 2017 compared to the prior-year quarter in more detail. Sales in the fourth quarter increased by 8% to 16.1 billion euros.

Prices were up by 9 % and volumes increased by 4%. Volumes in our chemicals business rose by 5 %.

Negative currency effects increased to 5 percent overall, while portfolio measures in total had no impact on sales. EBITDA before special items increased by 27 % to 2.9 billion euros.

EBITDA rose by 20% to 3.0 billion euros. EBIT before special items came in at 1.9 billion euros, 58 % higher than in the prior-year quarter.

Considerably higher earnings in Chemicals, Agricultural Solutions, Oil & Gas and in other more than compensated for lower earnings in Functional Materials & Solutions and Performance Products. At 1.4 billion euros, earnings in our chemicals business increased by 8 percent.

Special income in EBITDA amounted to 72 million euros compared to 47 million euros last year. In Q4, the reversal of impairments in Oil & Gas more than compensated special charges.

EBIT increased from 1.2 billion euros to 1.9 billion euros. The tax rate was 6.6% compared to 26.5% in the same period last year.

The reduction of the statutory U.S. corporate tax rate from 35% to 21% resulted in a one-time non-cash, deferred tax income of 379 million euros.

Net income more than doubled to 1.5 billion euros compared to last year. Reported earnings per share increased by 124% to 1.68 euros.

Adjusted EPS amounted to 1.29 euros; this compares with 79 cents last year. In the fourth quarter of 2017, operating cash flow declined by 689 million euros to 1.2 billion euros.

This was, among other things, driven by a business-related increase in net working capital. Payments made for property, plant, equipment and intangible assets increased by 160 million euros and amounted to 1.4 billion euros.

Thus, free cash flow came in at minus 202 million euros compared to 647 million euros last year. Sales and earnings in Q4 and going into Q1 2018 were impacted by two factors which are beyond our control, currency changes and severe weather conditions.

West China suffered from natural gas shortages related to cold weather, affecting our production there. Furthermore, we had to shut down plants on the U.S.

Gulf Coast due to freezing temperatures and a lack of raw material supply by our suppliers. We also had some operational issues in our plants.

We are doing our utmost to get those plants up again as fast as possible and are in close contact with our customers. I will now quickly comment on the full year 2017 and you have seen the numbers here are rather short [ph].

Sales of BASF Group increased by 12% to 64.5 billion euros on account of higher prices and volumes. The average price for Brent crude oil was $54 compared to 44 U.S.

the year before. To offset higher raw material prices, we implemented numerous price increases.

Overall, sales prices increased by 8%. For the full year, volumes were up by 4%.

Volumes in Asia Pacific were up by 7%, particularly driven by China, where volumes increased by 8% compared to the prior year. Currency effects amounted to minus 1% overall, while portfolio effects positively impacted sales by 1%.

At 12.5 billion euros, EBITDA before special items was 21% higher than in prior year. EBITDA amounted to 12.7 billion euros compared to 10.5 billion euros in 2016.

EBIT before special items increased from 6.3 billion euros to 8.3 billion euros. Higher earnings in Chemicals, Oil & Gas and in Other were the drivers.

In total, special items amounted to plus 194 million euros compared to minus 34 million euros a year ago. EBIT increased by 36% to 8.5 billion euros.

The tax rate decreased from 21.1% to 18.6%, mainly due to the deferred tax income related to the changes in the U.S. Net income exceeded the prior-year level by 50% and reached 6.1 billion euros.

Reported earnings per share increased from 4.42 euros to 6.62 euros. Adjusted EPS were 6.44 euros, 1.61 euros above 2016.

Operating cash flow increased from €7.7 billion to €8,8 billion, thanks to our net income and our capital expenditures discipline from cash flow amounted to €4,8 billion, this is an increase of 34%. Let's have a regional look.

The global economy fairly in 2017 both advanced economies and emerging markets grew significantly stronger than in 2016. In the following I comment on BASF regional results for the full year.

In Europe, economy gained momentum in almost all countries, BASF's average in this region increased to 31% to $4.7 billion, mainly due to higher earnings in chemicals and Oil & Gas. Market growth in the U.S.

remain modest at the beginning of the year. However, it's improved although the cost of 2017, we were able to increase earnings in North America from €1.1 billion to €1.2 billion despite weather related outages in fall of 2017.

In emerging market in Asia, GDP growth was significantly higher than in the previous year. On the back of government investment incentives, the Chinese economy grew slightly faster.

BASF's business development reflected this. We experienced strong demand in Asia especially in China and we grew well above GDP.

In 2017, EBIT in the region doubled and reached €2.2 billion. This was primarily due to a higher average margins and volumes growth in all segments as we serve the production capacities we have built up over the past couple of years.

In South America, Brazil overcame the recession. The country's economy expanded due to higher agriculture exports and an increase in the industrial production.

However, BASF's earnings in the region South America, Africa, Middle East declined from €432 million to €335 million. The market situation for crop protection in South America remain challenging for most of the year.

However, in Q4 earnings in our ag business in Brazil improved conservatively. Ladies and gentlemen as you know, that we have committed to our dividend policy which means we want to increase the dividend year-over-year or at least keep it stable.

At this year's shareholder meeting, we proposed to pay dividend of 3.10 euros, an increase of 0.10 euros. Based on the share price of the end of 2017 which was roughly 92 euros, we offering attractive dividend yield of 3.4%.

Last year, we've bring couple of deals to further improve our portfolio aside from the partial exit from our leather chemicals business of following transactions are noteworthy: In September BASF and Solvay agreed on the purchase of Solvay's polyamide business which is back off integrated. It will complement BASF's engine and plastics portfolio and expand our offerings for the transportation construction, consumer goods industries especially in Asia.

The price that is €1.6 billion. We expect to close in Q3 after regulatory approval have been obtained.

In October, BASF signed an agreement to acquire significant part of bias seed and [indiscernible] businesses. The all cash purchase prices 5.9 billion euros subject to certain adjustments at closing.

This transaction will be in asset deals. The assets to be acquired include [indiscernible] ammonia, non-selected herbicide business and its seed businesses for [indiscernible] crop in select markets.

The acquisition also includes [indiscernible] trade research and breeding capabilities for these crops and delivered to link trade and trademark. Since the regulatory approval process for the acquisition of Monsanto, Bayer has been extended and now expect to close an off the transaction in the first half of 2018.

With this acquisition, we are seizing the opportunity to add highly attractive assets in key row crops and key markets to our portfolio. It will be a strategic complement to our successful crop protection business and our plant biotechnology activities.

Then in December, BASF and LetterOne signed a letter of intent to merge their respective Oil & Gas businesses. We plan to operate the joint venture under the name Wintershall DEA.

By combining these two German-based entities, BASF and LetterOne strive to create a basis for further profitable growth, optimize the portfolio of the combined business and realize synergies. Wintershall DEA would have significant growth potential and be one of the largest independent European exploration and production companies.

In the medium-term, both partners aim to list Wintershall DEA through an IPO. Currently, we are conducting a confirmatory due diligence and are negotiating definitive transaction agreements.

Closing could be expected in the second half of 2018, subject to customary regulatory approvals. In the next slide, you see a couple of investments which we have been making over the last 12 months essentially in the field of the automotive industry and also in China exemplifying our strong desire to grow that business considerably.

I will now hand things over to Hans to give you some more details regarding the development of our segments.

Thank you, Kurt. Good afternoon ladies and gentlemen.

I will highlight the financial performance of each segment in the fourth quarter 2017 compared with the fourth quarter 2016 starting with Chemicals. Sales in Chemicals increased considerably.

Significantly higher prices in all divisions and overall higher volumes were the main drivers for this development. Currency effects impacted sales negatively in all divisions.

Sales in Petrochemicals increased substantially in all major businesses and regions due to significantly higher volumes and prices. Our petrochemicals business in Europe also benefited from the fact that the North Harbor infrastructure at our Ludwigshafen site is fully operational again.

In Monomers, sales increased considerably. Significantly higher prices, especially for MDI and TDI, drove this growth.

Volumes in Monomers declined slightly, due in part to turnarounds and the force majeure at our Chongqing plant caused by a natural-gas supply-shortage at our syngas supplier. Considerably higher sales in intermediates were driven by higher prices in all businesses and slightly higher volumes.

In a continued favorable market environment, we were able to increase margins, especially for isocyanates, acids and polyalcohols, cracker products in Europe and acrylic monomers. This resulted in an EBIT before special items of almost 1.1 billion euros, which is more than 400 million euros above the prior-year quarter.

All divisions contributed to this significant increase. Sales in Performance Products increased slightly.

In all divisions, higher volumes more than compensated for negative currency effects. Overall slightly higher prices were offset by negative portfolio effects, mainly from the transfer of BASF’s leather chemicals business.

Sales in Dispersions & Pigments increased. This primarily resulted from higher volumes, especially in the dispersions business in Europe and Asia Pacific, in electronic specialties and pigments.

Prices improved slightly. In Care Chemicals, sales grew as well.

This was driven by higher volumes, particularly in hygiene and personal care solutions, and slightly increased prices. In Nutrition & Health, sales remained on the level of Q4 2016.

Volumes increased in animal nutrition and in pharmaceutical products. Following the force majeure declaration for citral and isoprenol-based aroma ingredients as well as for vitamin A, E and several carotenoid products, customers ordered significant portions of their allocated volumes already in Q4 2017.

We expect to restart the citral plant in Ludwigshafen end of March 2018. Sales in Performance Chemicals declined slightly.

Considerably higher volumes could not compensate for negative currency and portfolio effects related to the transfer of the leather chemicals business for the Stahl Group. The good volume development was predominantly driven by plastic additives and fuel and lubricant solutions.

Ongoing sales price increases across the segment were not sufficient to compensate for significantly higher raw material prices. Hence, margins remained under pressure.

Fixed costs increased, in part due to the startup of new plants, like the aroma ingredients complex and the fuel and lubricant solutions plant, both in Kuantan, Malaysia. Due to the ongoing margin pressure in all divisions and the shutdown of the citral plant in Ludwigshafen, EBIT before special items of Performance Products declined significantly.

Sales in Functional Materials & Solutions grew significantly. Higher prices were the main driver.

The acquisition of Chemetall also contributed to the sales increase. Volumes grew on higher demand from our main customer industries.

Currency effects had a significantly negative impact on sales. On a divisional [ph] level, Catalysts delivered a slight sales increase in Q4 2017 due to higher prices.

Despite growth in mobile emissions catalysts and battery materials, volumes decreased. This was due to lower precious metals trading volumes against a strong base of comparison.

Sales generated by precious metal trading, however, increased from 669 million euros in the prior-year quarter to 708 million euros because of considerably higher prices. Construction Chemicals reported higher volumes in all regions, most pronounced in Europe.

The region South America, Africa, Middle East also reported solid growth despite challenges in Qatar. The Coatings division saw a significant sales increase.

The integration of the Chemetall business, which developed positively, was the main driver. Volumes grew slightly, driven by good demand for OEM coatings and refinish coatings.

Prices were stable. In Performance Materials, we were able to raise prices significantly and experienced solid volume growth.

The transportation segment showed the most pronounced volume growth, followed by the consumer segment. EBIT before special items in Functional Materials & Solutions decreased considerably due to lower earnings in all divisions.

This mainly resulted from higher raw material and fixed costs. In particular, in our Performance Materials division, we could not fully pass on higher isocyanates prices.

Sales in Agricultural Solutions increased by 4%. Significantly higher volumes more than offset negative currency and price effects.

Volumes grew particularly in the Americas, mainly due to higher herbicide sales in North America and higher fungicide sales in South America. Overall, EBIT before special items increased significantly from 79 million euros to 207 million euros in the fourth quarter of 2017.

This was mainly due to the higher volumes and improved margins. Lower fixed cost also contributed.

In Europe, sales declined mainly due to lower volumes in the fungicide business. Sales in North America increased significantly, driven by higher volumes.

In particular, our herbicide business in the U.S. performed very well, driven by our innovative herbicides Engenia and [indiscernible].

In South America, we were able to slightly increase our sales. As a result of shifting sales closer to the application, volumes were up significantly.

Sales in Asia were flat higher volumes and prices were offset by negative currency effects. All major countries grew except for Japan where the market is facing higher channel inventories.

Despite continued challenging market conditions, full year 2017 sales increased by 2% to €5.7 billion due to higher volumes. At more than €1 billion, EBIT before special items almost matched the previous year's level.

The EBITDA margin reached 23%. Sales in Oil & Gas declined significantly mainly due to an 18% decrease in volumes.

In the prior year fourth quarter, we saw the full lifting from offshore Libya. In 2017, the lifting took place back in the second quarter.

In addition, we produced less Oil & Gas in Norway. In 2018, new fields such as Maria and Norway will contribute to higher production levels.

In Q4, 2017, the average price of Brent crude was at $61 per barrel, $12 higher than the same period of 2016. Gas prices on the European spot markets were also above the level of the prior year quarter.

The combined price and currency effect was plus 11%. Overall EBIT before special items increases considerably from €163 million to €260 million mainly due to higher prices.

In Q4, 2017 special income amounted to €176 million and was related to the necessary reversal of impairments in Norway and the Netherlands. Net income in Oil & Gas increased from €182 million to €318 million.

In 2017, we doubled net income to €719 million and again generated positive free cash flow in Oil & Gas. Now to the other.

EBIT before special items in other improved from minus €386 million to minus €38 million, this was mainly driven by a swing of around €190 million related to our long-term incentive program, while earnings in Q4, 2016 were negatively affected by an increase in provisions, Q4, 2017 benefitted from the release of provisions for the LTI program. With that to the full year cash flow.

cash provided by operating activities increased from €7.7 billion to €8.8 billion due to higher net income. In 2017, changes in net working capital reduced the cash flow by €1.2 billion mainly due to business-driven higher inventories and accounts receivable.

In 2016 changes in net working capital led to a cash inflow of €104 million. Cash used in investing activities decreased from €6.5 billion to €4 billion.

In 2016, net payments for acquisitions and divestitures amounted to €2.2 billion mainly due to the [indiscernible] acquisition. In 2017, we only had a minor cash inflow from acquisitions and divestitures.

Payments made for property, plant equipment and intangible assets decreased by 149 million euros to 4.0 billion euros. At 4.8 billion euros, free cash flow was up by 1.2 billion euros compared to 2016.

Cash provided by financing activities amounted to plus 394 million euros in 2017. Changes in financial liabilities led to a net cash inflow of 3.2 billion euros mainly due to the issuance of bonds.

We paid 2.8 billion euros in dividends to the shareholders of BASF SE and almost 120 million euros were paid to minority shareholders. Finally, let’s look at our balance sheet at the end of the year 2017 compared to the year-end 2016.

Total assets increased by 2.3 billion euros to 78.8 billion euros due to higher cash and cash equivalents in preparation of the financing of the announced acquisitions. Non-current assets decreased by 2.9 billion euros.

Intangible assets decreased from 15.2 billion euros to 13.6 billion euros, especially due to currency effects. Tangible fixed assets decreased by 1.2 billion euros to 25.3 billion euros, also mainly driven by currency effects.

Current assets amounted to 31.1 billion euros compared to 25.9 billion euros at year end 2016 due to higher cash and cash equivalents. Inventories and accounts receivable increased slightly following the business growth in 2017.

Total liabilities remained stable at around 44 billion euros. Non-current liabilities increased by around 520 million euros to 29.1 billion euros.

Lower provisions for pensions and similar obligations were more than offset by higher long-term financial debt following the issuance of bonds to finance, among other things, the announced acquisitions. Current liabilities decreased by 437 million euros to 14.9 billion euros.

Financial debt went up by 1.7 billion euros to 18.0 billion euros following the issuance of bonds. More importantly, net debt amounted to 11.5 billion euros, a decrease of 2.9 billion euros.

Our equity ratio was at 44.1% at the end of 2017. And with that, back to Kurt for the outlook.

Yeah, thank you Hans. I will try to give you a quick overview how we see 2018 developing.

The outlook is slightly more complex and of course we have to make a couple of assumptions also with regards to the transactions which we have underway. So, let’s start with the economic assumptions.

At 3.0 percent, we assume that the global economy will grow at almost the same rate as last year. We expect economic momentum in Europe to ease slightly.

The U.S. will presumably grow slightly stronger.

Asia Pacific will continue to grow, but we expect growth rates to slightly decline due to lower economic momentum in China. In South America, we assume a continuation of the slow recovery in Brazil and Argentina.

We anticipate the global chemical production to grow at 3.4% compared with 3.5% in 2017. We expect a slightly weaker growth rate in the advanced economies, while growth in emerging markets should pick up slightly.

We assume an average exchange rate of $1.20 per euro and an average oil price of $65 per barrel Brent. Despite the generally favorable market environment, risks remain.

Among others, rising interest rates in the U.S., a volatile U.S. dollar/euro exchange rate, protectionist tendencies and imbalances in China could negatively impact economic growth in 2018.

Our outlook takes into account the agreed transaction with Bayer. Based on the timing of the acquisition, the seasonality of the businesses and the anticipated integration cost, the transaction is likely to have a positive impact on sales and a negative impact on earnings for the Agricultural Solutions segment and BASF Group in 2018.

This forecast also includes the intended acquisition of Solvay’s integrated polyamide business in the third quarter. However, we do not expect this transaction to have any material effect on sales and earnings from the group point of view.

We have not yet included the intended merger of our Oil & Gas activities with DEA. After the signing of definitive transaction agreements, the Oil & Gas segment’s results would no longer be included in sales and EBIT for the BASF Group retroactively as of January 1.

Rather, they would be presented in the income before minority interests of the BASF Group as a separate item, namely income from discontinued operations. From the transaction closing date, we would presumably account for BASF’s share of income before minority interests generated by the joint venture, Wintershall DEA, using the equity method and include this in EBIT for the BASF Group.

The gain from the change from full consolidation to the equity method would be shown in income before minority interests from discontinued operations. Based on the described assumptions for the economic environment and taking into account the agreed upon transactions with Bayer and Solvay, we provide the following outlook.

We anticipate slightly higher sales in 2018, largely as a result of volume growth. EBIT before special items is expected to be up slightly on the 2017 level.

EBIT for BASF Group is forecast to decline slightly in 2018. We anticipate special charges in the form of integration costs in connection with the agreed acquisitions.

We aim to once again earn a significant premium on our cost of capital in 2018. However, compared with the previous year, the BASF Group’s EBIT after cost of capital will decrease considerably.

This will mainly be due to lower EBIT, including M&A-related special charges, as well as the additional cost of capital from the planned acquisitions. We are planning total capital expenditures of around 4.0 billion euros in 2018.

For the period from 2018 to 2022, we plan capital expenditures totaling 19 billion euros that is by and large the same number which we had foreseen last year for a five-year period. In the Oil & Gas segment, our currently planned investments for the next five years are forecast with around 3.5 billion euros.

If the merger of our Oil & Gas activities with DEA is consummated as intended, these capital expenditures will no longer be reported as investments by the BASF. The next slide summarizes the outlook 2018 for EBIT before special items by segment.

As described previously, EBIT before special items of BASF Group is expected to be up slightly on the 2017 level. This will be mainly driven by significantly higher contributions from the Performance Products, Functional Materials & Solutions and Oil & Gas segments.

We are forecasting a slight improvement in the earnings generated by Other. After an extraordinary result in 2017, we expect considerably lower EBIT before special items in the Chemicals segment, primarily as a result of lower margins.

Due to the aforementioned specifics of the agreed transaction with Bayer, we anticipate a slight decrease in Agricultural Solutions. Excluding this transaction, we launched grow at before special items in this segment slightly.

Additional information is available as Stefanie already said in the annual reports 2017 that was also published today. And with that, we are happy to take your questions.

Yeah good morning, Stefanie and good morning Hans. Thanks for the questions.

So just a couple. First of all, on the start to 2018, you said your circle is more complex this year, I guess it's also complex because we got the outages, not just citral but also enchanting with MDI.

And I think one or two other smaller ones. At this stage, can you give an idea of perhaps an EBIT impact?

And also, how are you thinking about insurance proceeds. And indeed, were there any in Q4 in performance products that sit --.

Thank you. The second one is just coming back to guidance on ag for the year.

Do I take it that you're sort of assuming now rather than booking 9 months, you're probably going to book closer to 6 months, or is it really the integration costs are going to be fairly material? I wasn't quite sure as to the assumption within that.

Thank you.

Yeah, hi Andrew, thanks for the questions. I will take the first one and Hans will second one on integration cost.

2018 yes, it’s a little bit more complex also due to the outages and I mentioned this in my speech, we have external effects and we cannot control one obviously. And clearly magnitudes were unexpected it's a shortage of natural gas was enchanting which is not operating as we speak, and we certainly have some double-digit EBIT impact.

Quite clearly, we hopefully back in late February early March needs to be seen. Then we had freezing temperatures earlier this year in Q4 and on the U.S.

Gulf Coast, also some of our supplier side at issues that has impaired production volumes. And this is again a double-digit impact.

Volume growth overall in January has been good as planned. It's too early to talk about February still a couple of days to go.

As you know that in some of our businesses, volumes come in rather late final days of the months, the sales are booked. So, it's a bit of uncertainty.

However, we look at the underlying economic drivers, underlying growth in all regions, most businesses of our customers are still positive about the outlook. And that I think justifies our intention to slightly improve last year's earnings.

Performance, products and specifically citral, no, no insurance payment received in Q4 and too early to talk about Q1. Actually, we are extremely busy in reinstalling capacity.

The reason why we have this situation is we have a relatively small incident of fire however it impacted the cabling of the citral [indiscernible] the entire plant is down. As you can follow by the way you can follow the reburied [ph] in detail on our internet as a daily reburied [ph] about the progress which we are making and we are certainly aware that our customers are quite concerned about the situation we do our utmost to provide as much product as possible also coming in from Quantin from Malaysia but [indiscernible] for citral related products and this hasn’t impacted also on the bottom line in Q1 integration cost.

I got your question correctly. It was about the guidance that we’re giving in for the agricultural solution segment, now what’s happening there as a result of the point in time at which we expect to acquire the business, most of the season will be already behind us.

So, in other words what we will experience in the year 2018 is predominantly cost and not so much revenue and income and as a result of that and that’s the key driver we expect to see a slight decline in the earnings of the agricultural solutions business versus a slight increase that we would have seen without the acquisition. Hope this helps?

Sorry it’s actually Alice on the call for Paul. So just two questions from me, if you don’t mind.

The first question is could you just explain why you decided against a bigger dividend given the EPS growth that you achieved and then the second question is in regards to your FY’18 forecast statement. What is the assumptions behind the consumables increase in the chemicals EBIT for FY’18.

Thank you.

Yeah, thanks for your questions. Forecast for chemicals segment, clearly, we had earnings in margin improvements in 2017 which were way above what I would describe as normal cyclicality of the supply demand driven especially in isocyanate, we simply do not believe that this is going to repeat in 2018.

Would be great if at other [ph] case but from today’s point of view the likelihood that we will be staying low last year is higher than the likelihood that will stay above last year, much higher actually. And then as you know considerable decrease means more than 10% and that is certainly possible giving the very high level of earnings in that segment.

Dividend, obviously we discuss it internally quite a bit, should we change the steps from something like $0.10 to 20% even people out there who said you know that this could approximately final year and we should say goodbye and ways good bye with a big dividend increase, that obviously is not happening. We have a clear policy in place where we say we want to increase dividend year-over-year in a very predictable way and we have done this as one exception right after the financial crisis in 2009 which I think is fully understood.

We have now a payout ratio and you refer to that which is below 50% if you take that as a yardstick which we do not really do. We also had for years our payout ratio was 75%.

So, for us it’s a steady stage, predictable cash return improvement is of importance and we’re seeing this as something we should continue to do. Whether or if the board decided in future to change the steps and to increase the magnitude needs to be seen, but for 2017, we just felt this to be the right thing to do.

Good morning. I guess two questions.

First, with the shift of the Oil & Gas segment to a JV is there, an opportunity to transfer some leverage to the JV or how should we anticipate the balance sheet evolution for BASF? And secondly for the Chemicals business, do you anticipate over the medium-term margins returning to the levels we saw earlier in the decade, or do you think rather than new level that while down for 2017 is more sustainable?

Hi, Laurence, when you talk about the Chemicals business, you mean, the Chemicals segment, so this is more cyclical…

Yes. The Chemicals segment.

Yes, yes.

…. off stream business.

Okay. Very good question.

It is new normal where we have to stay, I mean, there’s an underlying improvement in our business, I think, we have costs well under control, supply, demand healthy markets are growing for the time being, yes, there’s new capacity in some markets coming on stream, but with cyclicality disappear and volatility disappear, I doubt it. I think, we will still see swings in earnings and margins.

I don’t know yet, whether this will go back to the -- let’s say very difficult levels which we had at some point in time, not necessarily. We exited a couple of businesses where we felt uncomfortable as you know.

We maintained businesses like isocyanates where we think we have a good market position, good technology and good cost position or acrylic assets give you another example, where we have an excellent cost position, where we see a room for improvement in 2018. So, we really have to go product by product and there is no demand Chemical cycle any more, it’s really product wise and you have to be very specific.

So, some products might go up, margins go up, some might come down. On average we believe for Chemicals, for the segment, margins most likely will come down a bit, certainly not with the level which you described.

And then Oil & Gas leverage for the joint-venture, but also consequently for BASF Group.

Yeah, Laurence, thanks for the question. Now let’s go back to, quickly to what Kurt said earlier where we are in the transaction we’re currently going through confirmatory due diligence.

We have started discussion with LetterOne on financing of the joint-venture, but it would be premature to answer your question on whether or not there’s potential to transfer some leverage to the joint-venture company. It will be certainly finance and that you can expect it from us and also from LetterOne that in a way that this company will be very competitive from the -- will be positioned for growth and will financed accordingly.

What it means for BASF's P&L? Kurt has explained that already.

It will be at the point of signing, it will be shown as a discontinued operation. So separate line, no more sales, separate line above the net profit line.

And then from the point in time where we close according to what's being discussed so far, it will be consolidated at equity. So, the assets and the debt that we show at this point in time will then be replaced by the financial participation that we have at BASF in the joint venture.

Yes, thank you very much and thanks for opportunity to ask my two questions. So firstly, on new projects.

From the acquisition that you've made, could you just walk us through which projects are expected to contribute positively to EBIT and during 2018? And linked to the earlier question on Oil & Gas, can you just update us with a CapEx guide for 2018-2019 whether we should expect again a significant deviation and given the Oil & Gas transaction?

Stephanie, the €3.5 billion for 5-year period you can probably divide that by 5 and then come up with by and large the number for 2018 maybe slightly higher than needs to be seen. But again, what is important in this context as of signing a transaction agreement, those numbers will not be include anymore in the BASF Group's counts.

It's still, but there is still has a cash relevant, but as Hans said, the joint venture is supposed to be a standalone financed entity and should be able and capable to find its own growth trajectory. New projects, we have a couple of new capacities coming on stream.

One is, which I already mentioned, is the [indiscernible] trial investment obviously, which is now going into higher gear and in 2018. We also just completed an NDI investment in our joint venture in Shanghai, this will also contribute to sales and cash flow and hopefully also earnings given the level of margin in that business.

We have a couple of smaller startups and somewhat I mentioned in my presentation especially in the automotive industry. So, we want to continue to grow the business organically.

And I think 2017 has shown that this is paying off because we captured growth especially in Asia and especially in China because we had made a couple of investments, major investments in the years before, and this is going to continue to provide growth for BASF going forward. I hope that answers your question?

Yes, I have. First, I'd like to ask the question on the outlook.

So, you said that the team EBIT should be up and reported EBIT will be down. Is it then fair to assume seeing that the difference between these two numbers and that we should look at this point and to an increase more in the range of 0 to 5% rather than in the upper half?

And secondly also related to the outlook, if you look to what you said on the acquisition and the impact that might have on 2018 EBIT and with acquisitions with Agro being in the negative and so then not being significant that the net of these two acquisitions is rather a loss than a positive contribution. Is that on the outlook and maybe you can give also an update on where you are in the ramp up of Quantin of the whole complex as far as I know that should be as big as a Lutic one and should change then the tight market in citral as that plant could be rent up quickly.

Thank you.

Andreas I would take your second question and Hans would try to come to a conclusion what he will say about the first one which is a little bit more complex to answer. Quantin, yes, we are in the ramp up mode.

This is working quite nicely; the site of the plants is comparable that’s correct. Obviously, we see incident here in Lutic’s half, we had to change plans and tracks so we will essentially ship everything as quickly as possible to Europe to fill our pipeline year and to make sure our customers get as much product as possible, meaning that some of the subsequent steps in Quintin will be delayed slightly.

Then we see a restart of Citral end of March, early April I hope that things will go back to normal as quickly as possible. And now Hans will give more specifics on the outlook.

I can fully understand Andreas, but I think we’ll simply speak to the guidance that we gave there. Andreas what’s important to understand is that when you compare EBIT in ’17 to the outlook that we are giving for ’18.

Please keep in mind that we had a considerable amount of positive special items there, overall total 194 million for the year 2017 as a result of divestitures but also as a result of reversing impairments for oil fields in Norway and the Netherlands that we did in 2016 if I recall that correctly. So that’s important to keep that in mind.

And then yes as a result of the acquisitions that we’ve built into the outlook i.e. the acquisition of the bio assets as well as Solvey.

We’ve worked with what I would call preliminary integration figures which due to the status of the two transactions you will understand that we will not disclose anything there and that then overall leads to the difference in guidance that you duly noted in EBIT before special items and the EBIT.

And let me add Andreas we will certainly try to give you more detail in our call early May, May 05th. We hope to know much more by then.

What is important to see business by definition is extremely seasonal. I mean the major chunk of the business is done in Q1, so if closing is not in Q1 obviously we don’t have sales and earnings but essentially will get all the cost for the reminder of the year.

This is then later reflected in the purchase price adjustment, but obviously it has impacts also, closing date really has impact on the forecast here and for that reason we’ve made it for specific talking. What we currently see as the most likely timeline.

Hi, yes, good afternoon, everybody. Two questions please.

The first one is on capital allocation and we talked about it I guess a bit today on the dividend. You’re guiding CapEx flat or down for the next five years, earnings are at least for next year, not to mention the Oil & Gas potential deleveraging.

So, I’m just wondering, given, what’s happened to the dividend. Could you consider complementing this progressive dividend with a buyback, I think in the past you said you given once you do it without having the headroom to do a proper one, but could you consider now doing a buyback given the underleverage on the balance sheet?

And then the second question is on Nanjing and the YPC JV, it looks like now you’ve got a dividend of about 200 million euros, there as well you have deleveraging, should we expect Nanjing to become a source of dividend stream [ph] or should we expect at some point in time, plus significant investments there?

Thanks, Logan, for the two questions. Nanjing, yes, we had good results.

It’s a 50:50 joint-venture as you know and the order of magnitude is about 230 million to 240 million euros of earnings. It is obviously also a decision whether we want to keep the money in the country or pay a dividend and that then relates to the second part of your question any major investments, foreseen we’ve invested a bit over the last couple of years in Nanjing and it’s fairly a discussion and an ongoing discussion with a SINOPEC whether more could be done, we have one start-up coming up which is 2020 in Neopentylglycol and we have one start-up in 2019 which is Propionic Acid.

So, a couple of things still going on in Nanjing. Overall, we are pretty satisfied with the development in our joint-venture with SINOPEC.

Capital allocation in general, I mean, you know our priorities, we want to grow the company in a profitable way, earning our premium cost of capital, we’ve always said that buybacks financed via additional debt is not really what we want to do, I know, this is kind of a fashion, in the United States, but we don’t deem this to be a really a very intelligent strategy for BASF. There’re really a lot of ifs in your question, if there is a deleveraging due to Oil & Gas, if there is a continued vertically low investment at the level of depreciation and if we have continued good business development, then we might become very cash rich and then we have to think about what to do and I would be surprised with that, I would be surprised with the management of BASF, to take interest into account.

Talking about buybacks, it’s also interesting, we get different feedback from our investors quite clearly. Some like at and some clearly dislike it.

So, this is not a unified opinion but our buybacks are really the greater thing on earth. But again, if all the ifs work out as described I think we have a good problem solved.

Yes, good afternoon thank you. Two questions, on the investment five-year outlook the €19 billion obviously Oil & Gas is little less than you had last year in there.

But the other infrastructure R&Ds, I'm just wondering is that more of a push in R&D or is it just not allocated yet. And then second question H&A question this will, in performance products regarding for this considerable increase in EBIT this year.

I mean that's always proved the most challenging of your segments to forecast. If raw materials were to stay pretty much where they are, when do you think you will catch up with that margins squeeze whereas you've had in terms of your pricing and also the work due on the cost base.

It is something you envision in the second half of this year, or do you really need the raw material pressure to alleviate. Thank you.

Thanks Peter for the questions. I'll leave the CapEx question to Hans and try to answer the performance question.

First of all, we clearly see need to improve margin very blindly put. I mean we are not satisfied with the development in 2017.

Obviously Citral then was another curve ball which we did not expect to have we had our last question. The currency effect was frankly quite negative in Q4 and most likely this is going to continue going now into 2018.

What we have seen on the raw material/margin/sales price front is a slight improvement meaning the margin squeeze has diminished now coming almost there passing on. Raw material price increases too our customers.

But we haven't yet seen the full expect and for the totally for the complete year of 2017 the effect was still quite negative. We have put a couple price increases overall into effect also on January 1.

Even if we in some cases might suffer a bit of a volume setback, we said this is now the point in time where we have to almost across the ball have to increase prices given the raw material cost position and underlying demand patterns in our markets. We have a couple of businesses frankly, where we are essentially supply demand driven and performance also have some demand driven products, price adjustment is not feasible, but in others we can implement and I would be surprised if this doesn't payoff now going into Q1 and Q2.

But this is clearly an uphill battle and frankly this is a benefit I'd say with all of this was taking long off than what we expected above the year goal. But please keep in mind all those raw material cost and oil price increase relatively strongly late last year.

Yeah, Peter. With respect to your question on CapEx, the €19 billion there is hardly anything there for CapEx in research and development.

That is almost exclusively expensed with R&D expense in the order of magnitude of let's say around about €2 billion per year. Expect that to increase a bit as a result of the Bayer acquisition because that is a business that requires support through research and development.

Please keep in mind that about a quarter of our entire research and development budget in the BSF group is allocated to our ex-solutions business and that will increase a bit as a result of the Bayer acquisition but again in CapEx there is hardly anything in there for R&D.

Good afternoon, thanks for taking my two questions. The first one is it related to the tax impact in the US.

I think you gave us 2017 non-cash impact if you could help us with tax rate impacts or actually your cash flow impact on the tax reform, especially post the Oil & Gas accounting changes. The second question is just a calculation on cash flow from Oil & Gas just to make sure whether I’m doing the right math.

I find about 650 million is that the correct number, that’s it from me. Thanks.

I start with the second part or your second question Patrick. That figure is about right, you are with respect to free cash flow you are 90 million short, to round figures you’re 1200 million short.

The tax impact in the US, we’ve provided you with the non-cash impact we had in 2017, roughly 400 million, I think the exact figure is 379 million for 2017. Now to give you a figure going forward.

I did the same that you are doing with our tax experts, they can tell me clearly that the corporate tax rate goes down by 14 percentage points but then all the other changes that you have the assumptions that you need to make, makes it extremely difficult. Our guidance with respect to the tax rate for the BSF group would be in the mid-20s by the way as in the past Oil & Gas trade a bit of a roll there because we would expect higher earnings there and as a result of that typically aim higher governance or corporate government takes or higher taxation there.

As a result of that mid-20s is probably a good figure that you can use when you run your calculations.

It is still including Oil & Gas forecast.

That still includes Oil & Gas and as mentioned by Kurt earlier we would not expect that transaction to close earlier than towards the end of Q3.

Hello and thank you for taking my questions. I have two please.

May be a bit earlier to say but the you have any guidance on the potential impact of moving Oil & Gas out of the group on the tax rate and/or the returns profile in terms of returns on capital employed? And then the second question relating to CapEx projects, are you going to start construction of your cathode materials facility in Europe this year?

Thank you.

First question and second question, I will try to answer. This is a joint effort as you know- we’re sitting down with [indiscernible] to secure the supply of cobalt which is instrumental for the success of that entity and we are in the midst of planning and digital engineering phase.

So, stay tuned. Yeah.

Now on the tax rate without Oil & Gas, I’m sorry, Sebastian, but I need to be as far as in my prior answer, simply very difficult to predict number of assumptions, you have to make where is the oil price, where is the gas price, what will be earnings be like, I think it is the best to say at this point in time with the general guidance that we’re giving for mid-20s for tax rate for the BASF Group. Oil & Gas is an asset heavy business, you can look this up in our annual report, you see the asset base there of Oil & Gas, order of magnitude 13 billion euros, that’s not in the calculation anymore for returns.

That should improve the return profile as an example on a return on capital employed basis overall.

Yeah. Hi, thanks.

I had a question on margin in Performance Products and Functional Materials segments, if you look at the year-on-year decline in the margin, I mean the year-on-year decline in margin, both of those segments was much higher than what we actually saw in each of the past three quarters. So, I mean, I’m not sure why we are not seeing any impact of the price increases that were initiated right through 2017 in those two segments.

That’s number one. And so, do you think by Q1, Q2, like you said at the response to earlier question, that by Q1, Q2 you should see improvement there?

So, when you say improvement, are we looking at the margins beginning to go up year-on-year or is it more like reducing the pace of decline in those two businesses? That’s number one point.

And number two point or number two question rather is, maybe just a perception at the moment, but maybe you can give more color on is, has BASF been unlucky over the last 12 months to 18 months in terms of number of production issues that we’ve seen in different plants or do you think just from a statistical perspective, this is nothing much different than in the past? Thank you.

Sorry, thanks for the questions, Chetan. I think I’ve tried to explain it before both in Performance Products and Functional Materials & Solutions, margin pressure continued yet, yes, we’ve been able to increase prices, increasingly s the negative impact of quarter -- sequentially quarter-on-quarter has come down quite significantly.

If that trajectory continues into Q1 and Q2 we should see positive rebound happening. What hit us and I mentioned this as well in Q4 is really the currency effect which was quite negative actually for the first time in 2017.

And this continues going into 2018. But purely a raw material cost price increases yes, I could use your word the pace of decline has come down but it has come down quite dramatically.

And as I said we also announced and implemented a couple of price increases early 2018, which has helped in that respect. Production issues given the size of BASF there is always something which works perfectly and this is also always something which doesn't really work as planned.

We look very, very carefully at what we call unplanned outages. And obviously in Q4 the number has come up quite a bit.

And I mentioned the reason external factors weather related going also into Q1. Supplier related and then we have one issue which was really Citral, which is internal and internal issue during the startup phase.

That is order of magnitude and number of incidents, that is not out of the normal other than we have this I would say quite unlikely combination of weather and raw material related issues in Q4, Q1. What we have never have before frankly is, that in China frankly, we are being told don't expect any natural gas supply full stop for the next couple of months and don't even argue about it.

That was a new experience which obviously is also beyond our control.

Thank you very much. Again, on CapEx, maybe you can indicate the CapEx that this is now more maintenance CapEx versus in the past.

This is the first question. And then the last question is again on Citral.

I am still struggling you had at least this stage, any prebuying of the related products like vitamins but at the same times margins are down significantly. Can you indicate what have been the underlying margins including this negative share effect.

Thank you.

Yeah thanks for the question. I don't have the numbers at the tip of my finger with regard to underlying margins, and I don't think we will provide them.

And any way with regard to CapEx. Our CapEx by and large is not maintenance related.

For instance, in Germany, we do not capitalize maintenance cost that this is an expense which goes directly into P&L. And those numbers, maintenance spending of BAFS has not come down year-over-year.

So, we keep this as a very high level. Also reflecting on what we just talked about with regard to asset availability and what we called internally asset effectiveness how we run our plants.

Yes, and that is probably what I can say about our CapEx spending. A good chunk of that is actually growth driven, and then there is another chunk which is EH&S related as always but the major piece of this spending is not maintenance related but it's really growth driven.

So, the pressure is on, it was really a very small one. In the CapEx guidance for the next five years, the R&D infrastructure line have gone up about 1 billion euros since the 2016 report.

I was wondering what was that and whether that was related to the battery investment because a billion is quite significant. Thank you.

As always will be five years plans, you have almost 100% certainty of what’s coming in year one. You have about 60% certainty and commitment for year two and from there on out the numbers are significantly declining.

So, we could have also addressed this other infrastructure R&D as simply other or not yet 100% specified.

Okay, ladies and gentlemen this brings us to the end of our conference call. On May 4, we report on the first quarter 2018 results at 8:30 AM, on the same day our annual shareholders meeting will take place.

Should you have any further questions, please do not hesitate to contact a member of the BSF IR team. Thank you for joining us today and good bye.