BASF Se

Good afternoon ladies and gentlemen, on behalf of BASF, I would like to welcome you to our analyst and investor conference call on the full year and fourth quarter 2019 results. On the call with me today are Martin Brudermüller, Chairman of the Board of Executive Directors; and Hans Engel, BASF’s Chief Financial Officer.

Please be aware that we already posted the speech on our website at basf.com/fy2019. With this, I would like to hand things over to Martin.

Good afternoon ladies and gentlemen and thank you for joining us. One thing right at the beginning.

The BASF team is doing a remarkable job in transforming into a new BASF for our customers. We are however, not satisfied is the financial results of the BASF group in 2019.

The better performance in all our downstream segments was not able to compensate for a significant decline in chemicals and materials segments. 2019 was a challenging year for BASF.

We had to manage significant macroeconomic headwinds in several one off event. The trade conflict between the U.S.

and China had severe negative impacts on our key markets. In addition, the continuing uncertainty associated with the Brexit reinforced the underlying trend towards was an economic slowdown.

In 2019, global economic growth amounted to 2.6% and was significantly below the prior year figures of 3.2%. While the service sector developed solidly industrial and chemical production crew is at significantly lower levels than expected.

Demand from key customer industry declined considerably. This was most pronounced in the automotive industry, where global production declined by 5.4%.

Beyond macroeconomic headwind, BASF upstream business was suffering from significantly lower [indiscernible] margins, driven by oversupplied markets. In addition, our planned turnarounds reduced earnings in our Chemicals segment.

Earnings in our Monomers division were negatively impacted by below-long-term-average isocyanates margins. In our Agricultural Solutions segment, the difficult market environment due to extreme weather conditions and distributor destocking in North America as well as the trade conflicts negatively impacted sales volumes.

A good season in South America in the second half of 2019 partially offset. Overall, Agricultural Solutions, Industrial Solutions and Surface Technologies considerably increased EBIT before special items.

Nutrition & Care slightly improved EBIT before special items compared to the prior year. During the year, we consistently implemented our corporate strategy to become a more responsive and customer focused organization.

We energetically drove our active portfolio management signing and closing several transactions. We also accelerated the implementation of our Excellence Program.

Before we have a closer look at our performance in 2019, let me remind you that we restated our figures following the agreement between BASF and Lone Star regarding the sale of BASF’s construction chemicals business. This had an immediate effect on our reporting.

Retroactively as of January 1, 2019, sales and earnings of the Construction Chemicals division are no longer included in sales, EBITDA, EBIT and EBIT before special items of BASF Group. The prior year figures were restated accordingly.

Until closing, earnings of the business will be presented as a separate item income after taxes from discontinued operations. Let’s now look at our performance, starting with our sales development.

Sales in 2019 were slightly below the prior year level and amounted to €59.3 billion. Overall, sales volumes decreased by 3%, mainly driven by the Chemicals and Materials segments.

From a regional perspective, sales volumes by location of customer increased in Asia Pacific, and in the region South America, Africa, Middle East. Volumes declined in Europe and in North America.

Prices decreased by 3%, especially on account of the Materials and Chemicals segments operating in oversupplied markets for upstream chemicals. Higher prices in Surface Technologies and in Agricultural Solutions could only partially compensate this decline.

Portfolio effects amounted to plus 2% and were mainly related to the acquisition of agricultural solutions businesses in August 2018. Currency effects amounted to plus 2% and were mainly due to the appreciation of the U.S.

dollar against the euro. All segments and divisions incurred positive currency effects.

Let’s move on to the earnings development. EBIT before special items came in at €4.5 billion, 28% lower than in 2018.

This was mainly driven by the considerably lower contributions of the Materials and the Chemicals segments. Compared to 2018, earnings of these two segments declined by €2.2 billion to €1.8 billion.

The sharp decline of isocyanate margins, lower cracker margins and the cracker turnarounds considerably weighed on earnings in these segments. Despite the challenging market environment, we saw a considerable improvement in our downstream businesses compared to 2018.

Industrial Solutions, EBIT before special items increased considerably in both divisions, primarily due to lower fixed costs, positive currency effects and higher margins. Surface Technologies, EBIT before special items rose considerably, primarily driven by our Coatings division.

Earnings in Coatings increased considerably due to lower fixed costs and higher margins. In Catalysts, earnings increased slightly, mainly on account of higher volumes in mobile emissions catalysts.

Nutrition & Care, EBIT before special items increased slightly due to considerably higher earnings in Care Chemicals on account of higher margins. This was supported by a contractual one-time payment in the personal care solutions business.

In Agricultural Solutions, EBIT before special items rose considerably, mainly as a result of higher sales. The acquired businesses from Bayer significantly contributed to the sales and earnings increase.

In Other, EBIT before special items increased considerably, largely due to valuation effects for our long-term incentive program. Let’s move on to BASF’s strategic targets and the status at the end of 2019.

As mentioned before, our sales volumes declined by three percent, mainly driven by the Chemicals and the Materials segments. Global chemical production increased by 1.8%.

EBITDA before special items decreased by 11% to €8.2 billion, again mainly on account of the upstream businesses. ROCE was 7.7% down from 12% in 2018.

This was due to the lower EBIT of the segments and the increased asset base following the acquisition of agricultural solutions assets as well as the implementation of IFRS 16. We stand by our dividend policy and propose to pay a dividend of €3.30 per share, an increase of €0.10.

Moving on now to our nonfinancial targets. Compared to 2018, BASF’s absolute greenhouse gas emissions decreased by 8% to 20.1 million metric tons.

This reduction was to a large extent due to the turnarounds of our big petrochemical plants. But we also achieved improvements in production.

Please be aware that emissions for 2020 are expected to increase to the 2018 level due to a lower number of planned turnarounds and the acquisition of Solvay’s polyamide business. A significant lever for the steering of our product portfolio is the Sustainable Solution Steering method.

We have set ourselves an ambitious target to considerably increase sales of Accelerator products to €22 billion by 2025. In 2019, these products accounted for around €15 billion in sales, compared to €14.3 billion in 2018.

The Accelerator target reflects our strong commitment to further drive innovation and sustainability. To achieve our goal, we deeply integrate Sustainable Solution Steering in the R&D pipeline, in business strategies and in M&A projects.

Already today, the majority of BASF’s R&D pipeline represents Accelerator products and solutions. They typically show stronger growth than comparable products in their markets, combined with higher margins.

In 2019, we significantly improved the performance of our downstream businesses. For the sake of comparison, excluding precious metals trading, EBITDA before special items of our downstream segments increased by 25% to €5.4 billion.

This slide shows you the corresponding economics for several items by segments, compared to 2018. The weighted average margin of our downstream business improved from 15% to 17% in 2019.

Necro partial solutions EBITDA margin before special items increased from 18% to 23% in 2019. In contrast, the lower absolute margins and volumes led to a decline in the weighted average EBITDA margin for special items in BASF chemicals and material segments from 21% to 16%.

Ladies and gentlemen, we are committed to increase the dividend per share every year. Returning value to our shareholders is a top priority for us.

At this year’s annual shareholder meeting, we will therefore propose to pay a dividend of €3.30 per share an increase of €0.10. In total, you would pay out €3 billion to our shareholders, which is fully covered by our free cash flow in 2019.

We are offering an attractive dividend yield of 4.9% based on the share price of €67.35 at the end of 2019. Let me now give you a brief strategy update.

It is all about our customers. We want our customers to experience the new BASF.

Therefore, we are implementing dedicated strategic measures the full energy, passion and speed to deliver on that promise. We have reshaped our organization and reduce complexity.

We streamlined our administration, shopping the rows of service in the region and our simplifying procedures and processes. Already in 2019,we saw of course reduction affecting the P&L and we received positive feedback from customers on the changes at the SS.

On this slide, you will find details on what we accomplished in 2019. I will get directly to the last and very important point.

In order to foster an entrepreneur performance culture across the whole organization. We have adapted our remuneration system for all senior executives.

Still based on Rosie, we implemented a long term incentive plan which is tied to our strategic targets to grow faster than global chemical production, to increase profitability, and to grow CO2 neutrally, as well as to our total shareholder return. Thus the incentive system of PSF of the BASF team will be even more closely aligned with the interests of our shareholders.

We also updated our target force to a diverse and inclusive culture. By 2030 women shall hold 30% of all leadership positions in the BASF Group worldwide.

All these measures have one common goal is to put BASF with increased customer focus back on the profitable growth track. Let me also give you an update on our excellence program.

We accelerated our excellence program and are on track to achieve the targeted €2 billion annual EBITDA contribution by the end of 2021. We already realized positive contributions of €600 million in 2019.

The associated costs amount to around €500 million. By the end of 2019, 3,100 of the targeted 6,000 positions were already reduced globally.

By the end of 2020, we expect an EBITDA contribution in the range of €1.3 billion to €1.5 billion. This is a run-rate.

The associated one-time costs in 2020 are estimated to be around €300 million to €400 million. Furthermore, cost inflation must be considered.

Both the EBITDA contribution and the one-time costs increased compared to our initial guidance due to the accelerated implementation. We now target to achieve the reduction of the 6,000 positions already by the end of this year.

Initially, we targeted end of 2021. Before I touch on our Verbund project in Guangdong province, let me briefly reiterate the strategic relevance of Asia and especially China for BASF and the chemical industry overall.

With a share of 45% of the global chemical production in 2019, China is clearly the largest chemical market worldwide. By 2030, this share will increase to around 50%.

Over the last five years, the compounded annual growth rate of chemical production in Greater China significantly exceeds the average growth rate of global chemical production. Even more importantly, we increased our sales volumes in Greater China during this period significantly faster than the chemical production in this region.

Most importantly, BASF’s growth path in China is a highly profitable one. During the last five years, we have generated strong earnings and healthy margins.

EBITDA before special items increased on average by 30 percent per year. The outbreak of the Corona Virus will have a significant impact on demand and production in China this year.

Our thoughts are with all those affected by this difficult situation. The long-term trend, however, is intact and we will implement our investment projects in China, even if some years might be tougher.

We are well-placed to further expand our already strong position in this region and accelerate our organic growth. Ultimately, outpacing the global chemical market requires a strong participation in China’s growth.

In November 2019, BASF officially launched its Verbund project in Guangdong province. We expect the first plants to be operational in 2022.

These first plants will produce engineering plastics and thermoplastic polyurethane. Implementation of the entire project will take place in phases until 2030.

Peak investments will be between 2022 and 2024. In total, we estimate the investment to amount to $10 billion by 2030.

When the project is completed in 2030, the site will continue to be a preferred location for future investments in China. The Verbund site in Guangdong province will mainly supply customers based in South China and will enhance BASF’s presence in this still undersupplied market.

There is a fast growing local demand for innovative chemical products and solutions and BASF is and has been a successful company in China. That is compelling for profitable growth.

And now Hans will give you more details regarding our active portfolio management and the business development in Q4 and full year 2019.

Thank you, Martin. Good afternoon ladies and gentlemen.

With our active portfolio management, we are moving towards higher value and more focus. Let me mention the major, recently closed and agreed upon portfolio measures.

On January 31st, BASF closed the acquisition of Solvay’s polyamide business. The purchase price on a cash and debt-free basis amounts to €1.3 billion.

The business will be integrated into BASF’s Performance Materials and Monomers divisions. With a complementary portfolio, a stronger regional presence and improved supply reliability, we will deliver significant benefits to our customers in the polyamide value chain.

In December, BASF and Lone Star signed an agreement regarding the divestiture of BASF’s construction chemicals business. The purchase price on a cash and debt-free basis is €3.17 billion.

The transaction is expected to close in Q3 2020, subject to the approval by the relevant competition authorities. In August, BASF and DIC reached an agreement on the divestiture of BASF’s global pigments business.

The purchase price on a cash and debt-free basis is €1.15 billion. The transaction is expected to close in Q4 2020, subject to the approval of the relevant competition authorities.

On April 30, 2019, BASF and LetterOne completed the merger of Wintershall and DEA. With Wintershall and DEA, we have created the leading independent European exploration and production company with international operations in core regions.

BASF holds 72.7% and LetterOne 27.3% of the company. The integration is well on track and expected to be completed in December 2020.

We expect synergies of at least €200 million per year by 2022. The IPO is planned for the second half of 2020, subject to market conditions.

The acquisition of assets and businesses from Bayer was a successful move. It enabled us to evolve from a producer of crop protection products to a supplier of agricultural solutions.

BASF now supports farmers to optimize their yields and profitability by connecting crop protection, seeds and digital solutions. The acquired assets complemented BASF’s already strong crop protection portfolio, added an attractive seed and traits business, and strengthened our innovation pipeline.

We now also have the foundation to digitally enable our crop protection and seed portfolio to create opportunities for new digital income streams. This fundamentally changes the way we approach the market.

The integration was completed within one year, with business continuity from day 1. In 2019, the acquired assets and businesses generated sales of €2.2 billion and contributed more than €500 million to the EBITDA before special items.

Following the integration, we are now focusing on realizing top line synergies. By 2025, we target a mid-triple-digit million-euro amount in additional sales from the acquisition, and we are well on track to achieve this goal.

Let me turn to the financial figures of BASF Group for Q4 2019 compared to the prior year quarter in more detail. Sales in the fourth quarter of 2019 decreased by 2% to €14.7 billion.

Volumes and prices were both down by 1%, mainly driven by the Chemicals, Materials and Industrial Solutions segments, as well as other. Portfolio effects also amounted to minus 1% and were related to the transfer of BASF’s paper and water chemicals business to Solenis.

With plus 1%, currency effects had a slightly positive impact on sales overall. EBITDA before special items increased by 20% to €1.7 billion.

EBITDA amounted to €1.5 billion compared to €1.3 billion in Q4 2018. EBIT before special items came in at €765 million 23% higher than in Q4 2018.

Considerably higher earnings in agricultural solutions and Nutrition & Care and Industrial Solutions and Surface Technologies growth is increased. Overall, these segments were able to more than compensate for the considerable earnings decline in chemicals and materials.

In addition, a better result in other contributed to the earnings increase. Special items and even amounted to €305 million compared to minus €151 million in Q4 2018.

Special charters were mainly related to other and industrial solutions in other solutions. In other special charters resulted from the implementation of our excellent program.

The divestment of BASF pigments business led to one-off in the industrial solutions segment. EBIT decreased by 2% to €460 million in Q4 2019.

The tax rate was 19.2% compared to 21.8% in Q4, 2018. Net income amounted to €150 million compared to €348 million in Q4 2018.

Reported earnings per share decrease from €0.37 to €0.16 in Q4 2019. Adjusted EPS amounted to €0.63 this comparison with €0.72 in the prior year quarter.

Cash flows from operating activities increased by €1.6 billion to €3.2 billion in Q4, 2019. This increase was mainly driven by cash inflow from changes in networking capital of €1.6 billion compared to the cash inflow of €123 million in Q4 2018.

Payments made for intangible assets and property plant and equipment decreased by €290 million and amounted to €1.2 billion. Free cash flow came in at €2 billion compared to €88 million in Q4 2018.

I will now quickly comment on the earnings development in the full year 2019. At €8.2 billion EBITDA before special items was 11% lower than in the prior year, EBITDA amounted to €8.0 billion, compared to €9 billion in 2018.

EBIT before special items decreased by €1.7 billion to €4.5 billion, EBIT decrease from €6 billion to €4.1 billion. In total special items amounted to minus €484 million compared with minus €307 million a year ago.

This mainly resulted from the implementation of our Excellence Program and the integration of acquired businesses. Tax rate increased from 21.3% to 22.9%.

Income after taxes from continuing operations declined from €4.1 billion to €2.5 billion. Income after taxes from discontinued operations increase from €863 million to €5.9 billion.

In this line item, we report our construction chemicals business and until end of April 2019 reported BASF oil and gas business. The deconsolidation of Wintershall following the merger with DEA led to book gain of around €5.7 billion.

Net income amounted to €8.4 billion this compared to €4.7 billion in 2018. Now turn to our full year cash flow.

Cash flows from operating activities decreased from €7.9 billion to €7.5 billion. This was mainly due to lower net income Africa reclassification of disposal gains to cash flows from investing activities.

In 2019, changes in net working capital resulted in a cash inflow of €1.4 billion compared to a cash outflow of €0.5 billion in 2018. Cash flows from investing activities amounted to €1.2 billion compared to €11.8 billion in 2018.

Payments made for intangible assets and property, plant, and equipment decreased by €70 million to €3.8 billion. In 2019, net cash inflows from acquisitions and divestitures amounted to €2.4 billion and were related to the repayment of shareholder loans and capital measures in the context of the merger of Wintershall and DEA.

In 2018, net cash outflows of minus €7.3 billion were mainly related to the acquisition of assets and businesses from Bayer. Free cash flow came in at €3.7 billion compared to €4 billion in 2018.

Our disciplined working capital management and even stricter prioritization of investments contributed to this. Cash flows from financing activities amounted to minus €6.4 billion compared to minus €52 million in 2018.

Changes in financial liabilities led to a net cash outflow of €3.3 billion due to the repayment of financial debt. In 2019, we paid €2.9 billion in dividends to the shareholders of BASF SE and €125 million to minority shareholders.

Turning to our balance sheet at the end of 2019 compared to year end 2018. Following the considerably higher net income and lower net debt, our balance sheet is even stronger than before.

Net debt decreased by €2.7 billion to €15.5 billion. Our equity ratio increased from 41.7% to 48.7% at the end of 2019, mainly due to the book gain on the deconsolidation of Wintershall.

Non-current assets increased by €12.6 billion. The main driver for this increase was the recognition of our participating interests in Wintershall DEA and Solenis at fair value.

The introduction of IFRS 16 led to an increase of property, plant and equipment by €1.3 billion. Current assets declined, largely due to the derecognition of the disposal groups for the oil and gas business and the paper and water chemicals business.

At the end of 2019, we have disposal groups for our construction chemicals and pigments businesses. And with that, back to Martin for the outlook.

Yes ladies and gentlemen, in the first two months of this year, we are already experiencing a high level of uncertainty in the global economy. The Corona Virus has added a new factor that is considerably hampering growth at the beginning of the year, especially in China.

Lower demand and production outages in many industries are already visible consequences of the measures taken to prevent the further spread of the virus. We anticipate that the negative effects of the Corona Virus will have a significant impact worldwide, particularly in the first and second quarters of 2020.

Our assumptions currently do not consider a worldwide spread of the virus that would lead to significant adverse effects on the global economy beyond the first half of this year. However, we do not expect the Corona Virus to be fully offset during the course of the year.

The global economy is therefore expected to grow by 2%, considerably lower than in 2019. For the global chemical production, we forecast growth of 1.2%, which is significantly below the level of 2019.

This would be by far the lowest growth rate since the financial crisis 2008, 2009. We assume an average exchange rate of $1.15 per euro and an average oil price of $60 per barrel Brent.

We expect slight growth in most of our customer industries. For the automotive industry, one of our most important customer industries, however, we anticipate a production decline compared to the already low level of 2019.

The main reason for this lower demand, extended production downtimes in China and possible interruptions in highly interconnected global supply chains. Based on these assumptions and due to the high level of global economic uncertainty, we have decided to provide ranges for our forecast 2020.

We strive to increase BASF Group sales to between €60 billion and €63 billion. EBIT before special items is expected to reach between €4.2 billion and €4.8 billion.

Compared to the situation before the outbreak of the Corona Virus, it will be much more difficult to achieve significant volume growth. The risk that the average upstream margins for 2020 will be below the 2019 averages has increased considerably.

We expect the BASF Group’s ROCE to reach between 6.7% and 7.7% and thus be below the cost of capital percentage of 9%. The average cost of capital basis will increase in 2020 due to the inclusion of the assets acquired from Solvay.

Additional information on the forecasts for the segments is available in the BASF report 2019 on Page 137. For the next five years, we are planning capital expenditures of €23.6 billion.

We will allocate 41% of our investments to Asia Pacific and 34% to Europe. In last year’s CapEx planning for the coming five years, Asia Pacific accounted for only 27% and Europe for 43% of the rolling investment guidance.

Thus, you can clearly see the shift of our investments towards our growth reach in Asia. We focus our investments on growth opportunities, the expansion of our Asian business with our large investment projects in Guangdong and Mundra and battery materials.

Of the overall €23.6 billion, €8.2 billion are budgeted for this. For 2020, we are planning capital expenditures of €3.4 billion.

For 2019, our initially planned capital expenditures of €3.8 billion have been reduced to finally only €3.3 billion in additions to property, plant and equipment. The reclassification of assets to the disposal groups supported this reduction.

Ladies and gentlemen, Let me conclude with our priorities for 2020. Despite the increased challenges in the macroeconomic environment, we will persistently implement our corporate strategy and transform BASF into a more agile and customer-focused company.

We will actively drive sustainability and solution. We moved R&D closer to the businesses to better align customer needs and R&D projects.

We will push our positioning in growth markets in Asia and battery materials to outgrow global chemical production. The recent investment decision to build plants for cathode active materials in Harjavalta, Finland, and Schwarzheide, Germany is an important milestone and reinforces our commitment to support electromobility.

We are executing the announced portfolio measures. We are integrating the polyamide business from Solvay.

The major upcoming portfolio changes in 2020 will be the closing of the diversity of PSS construction chemicals and pigments business and the preparation of the IPO of Indus IDR. We will continue to implement our excellent programs at full speed.

Our corporate strategy is first and foremost a growth story and strategy. We are committed to implementing the defined strategic measures to achieve profitable and sustainable growth even in a challenging market environment.

And now we are glad to take your questions. Thanks.

Yes. Good afternoon.

Thanks for Martin and Hans. Martin, maybe first question for you.

So the guidance, obviously not an easy year to offer guidance given the current situation. But I suppose what I’m interested in most is a conviction you have them downstream.

Because you are already guiding growth overall downstream, including double-digit and Industrial Solutions, would it be right to think that the half is going to be well below in aggregate. And as the ladies come in, and maybe there is an assumption embedded as you said the Corona Virus effects tail away.

You should see a much stronger second half. So I guess what I could have said more simply is from what you have seen in January, February, is it right to think you can still grow downstream in the first part of the year?

That is the first question. Sorry, can I steal a second?

Hans as a Board member of Wintershall and DEA. I was intrigued by the comment that the integration is not complete until the end of 2020.

And yet, the plan is still to IPO in a second half. So how do you marry those two statements?

So how can you IPO before you have actually integrated the assets?

So, Andrew, thank you very much. I mean, first of all, when you talk about Excellence Program, you talked about run rate.

That means, more and more we go forward more and more, we will see also the cost savings kicking in and then also you see them actually even in the P&L. I mean, overall, let me say that downstream, I think we have done really a good job in 2019 it was already very difficult environment and we have actually showed that we can grow the business and grow them profitably.

So that is also what even in this moment. difficult environment in additional element of the Corona Virus now in the first half year is still think in an ambitious to continue that way forward.

And with this is certainly in the area of the first or in the time of the first two quarters, where there will be the one or the other surprising element from hampering global supply chains. There will be also the one or the other effect in the downstream.

So as this might be up, then there will be also a better more positive business environment which I would then also see more acceleration and then easier performance downstream, then in this in the second half. So I think your assumption in this respect are right.

I think it was important that we really, I think you are the first one having a clear view on Corona, because it is now really visible. We are the end of February and I mean nevertheless we see also the infection rates may be going down or peaking in China, there are still hundreds of infected everyday newly and receive now in other countries.

So we will also see the surprised how discussing globalization how much China is actually part of the value chain. And I think actually, by talking to the customers, I’m not sure whether everyone on the customer side is really aware how it will impact, there will be surprises in the supply chain.

So far, I think they work from the stock. Now you will see when staff has to be transported first produced and then transported from China to Europe that takes 6, 8 weeks or even more.

So they will be affect and this is I think this will also be visible in the downstream area. However, I think one we are also an upstream, where I think this whole effect generates an even more depressed environment, because demand is certainly low in an oversupplied market and this is why I think we all expected that we get a little bit relief also on the upside side, but now I think we have to really assume that the low margin level of Q4 is basically going into 2020.

And giving us not much, much leave it. Last month, we certainly push as much as we can now on the volumes also, that will be then a balance between volume and pricing.

But only during the year that to reduce the company is to participate in growth. And that has now to kick in even if the market is only with 1.2%.

That means the BASF has to grow above set. So that is a little bit the environment we are in but long answer to your question, but I think this is maybe also interest or the others.

And I think your basic assumptions are right in this system.

Hello, Andrew, your question on the Wintershall and DEA IPO. What we said all the time go to which is an IPO in the second half of 2020 depending on market conditions goes hand-in-hand with concluding the integration work by the end of 2020.

Now first of all, just to repeat this, we want to be IPO already in the second half of 2020. That is first point, second point is decisions off the shareholders will then depend on the market conditions, I think that is an obvious one.

What will be able to demonstrate in the second half of 2020? We will be able to demonstrate to potential investors that Wintershall DEA is delivering on the promises it has made.

And these are predominantly the one as the production growth and two also bringing in the synergies. With respect to the synergies, we said that was driving for minimum 200 million in synergies out of that on a run rate basis.

There is 100 million already in the back. So that can be shown, that can be proven and I think with that we are on a good path overall preparations for the IPO is ongoing.

And I don’t think that there is an issue with the fact that we saw that the integration will conclude by the end of 2020.

Okay. Thank you very much.

Since we have quite some analysts in the line and we will extend this call by probably 15 minutes. So don’t go, you will also get the time to ask your questions.

We now come to Thomas Wrigglesworth, Citi.

Thanks Stefanie. Thanks for the opportunity Martin and Hans for questions.

First question on the battery materials, plant and system that you have. You said start up in 2022.

Could you just share with us how you see this evolving in your plans, start up the same commercialization as you need in order to produce a 400,000 run rate start off with. When would you expect to achieve breakeven on that facility under your assumptions.

And then a second question, sorry to come back on the guidance, you have given a range, I’m going to be really interested to know what is defining the high end and the low end of that range. That would be very helpful.

Thank you.

Thomas, you broke off in the second part of your question, could you please repeat this?

Sorry. You have given a range, I will be very interested to learn what defines the high-end and the low-end of your range?

Any color around that would be, I know it is difficult to forecast but any color would that be helpful.

Okay, so with respect to the range, we are obviously in a relatively difficult position at this point in time. As you know, that has led to our decision to go with the range this time.

The range is only with before special items as you have seen from 4.2 to 4.8, what this reflects in the end, is the kind of uncertainty as we have it now, at the end of February. Various factors, and if I walk you through how we in the end came up with this, I can tell you that only in the beginning of this week, we were at a point where we had looked at all the scenarios we had put together, all the different data points that we could put together.

And that end led to this decision and this kind of arrange, frankly, we came to the conclusion we cannot be any more specific and we cannot do any better guidance than what we are seeing considering various scenarios. The plan would be to shrink this range during the course of the year 2020, the more visibility we gain, the smaller the range that we will get in.

So, Thomas one word and the battery materials, I mean we are in the qualification of the materials, we talked to quite a few people we have also some MOU signed on that, but also not to finally decide about all the volumes to whom they go I think there is a lot of demand in the market because, actually if you take only half of the dreams of the OEMs in Europe, there will be a shortage of at least material in the region. So, we don’t expect and we finally also allocate this material, but this is not having full commercial contracts or no all the volumes.

It means also I cannot exactly tell you when there will be the breakeven but you can assume and I assume that the plan will be loaded rather quickly. And if that is the case already, almost from the beginning then also we should have very early breakeven point.

This is a rather complicated process because there is a lot of technical assessment in qualifying the material, you certainly come also from material or you start with materials from pilot plans, but you have also later on to verify that this material is coming from production as the same quality, that it is a rather quick thing is clear cannot take them a long time and corners, but there will be also a qualification from the materials from the plans finally. But given the fact that there is a lot of growth in electromobility and not so much material, we don’t see that this is a major material parts and maybe let me also add, we are part of the IPCEI which is Important Project of Common European Interest, which gives us also some support in terms of economics later in this plant.

Okay. thank you both very much.

Next question is from Tony Jones, Redburn. He will then be followed by Christian Faitz and then Mathew Yates.

So now Tony Jones, Redburn please.

Everybody, thank you very much to let me ask two questions. I have got two.

And I have got one for Hans and one from Martin. And Firstly, would you be able to go through and walk through the operating cash flow factors.

How you best see them developing over the year, so we can bridge free cash flow and get a bit more comfort on the midterm outlooks for the dividend. And I’m particularly interested in how you think working capital might unfold with demands maybe down and low raw material costs.

And then for Martin bit more strategic really, we have got multiple value chains with margins at trough and too much capacity may be even more to come. As a global leader, are you thinking or prepared to act and permanently close some of your own capacities to bring things back into balance?

Thank you.

Okay, Tony, I will start with one of the questions and I will not disappoint you. I will take the first one on the cash flow.

Operating cash flow during the course of the year with the already with the divestiture of our gas trading and gas storage business. And an even more so with the acquisition of the buyer assets.

Our cash flow profile has changed quite a bit. It has changed to in a way that the second half of the year is should be significantly stronger than the first half of the year because in the first half of the year this is when seeds and crop protection products in the Northern Hemisphere are sold and payments are to be expected for that then in Q3 and in Q4 after the harvest is sold.

And you see this already in a pronounced way and you saw it already after as I said the divestiture of gas trading and gas storage, but in a more pronounced way now, in particular in the year 2019, where we now have a full cycle of the sales of the buyer efforts where in 2018, we missed the northern hemisphere season where these assets. How working capital will play into this remains to be seen.

You saw what we generated out of working capital in particular in the fourth quarter 2019. Frankly spoken, we set there with inventories, which let’s say at the end of Q2 were not 100% in line with the market developments that we saw.

And we have used all efforts to bring inventories into line with an overall slower environment. And we succeeded with that, as you can see in the fourth quarter.

So what is going to happen there in 2020 with respect to working capital index on cash flow. Here is what I think we will we are going to see the environment at least in Q1 is slow, we will address our production to it.

We will see to it that we do not produce too much into inventory at the same point in time we will need cash and have cash use for in particular again the Ag business which has its strong part of the season in Q1 and Q2. So expect to see a pattern overall, weaker cash flow generations Q1, Q2, stronger than in Q3 and Q4.

Tony, on your question about our positions in the change in base chemicals upstream . We have not really on the list now that we have to shut down assets, because if we look on our bench markers and the industry cost curve.

I would say most of the plans we operate, we are very well positioned on one hand from a cost side, it is been integrated on the Verbund, but on the other hand, also from a technology part. So I think that would not make sense.

We have done in the past is and then the last one we did is actually capacity we took out from caprolactam and [indiscernible] but I think this is not us who should go out and you should also consider that a lot of the materials we produce upstream is actually internally processed for our downstream plans. And what we do however, going forward to having a situation we certainly absolutely minimize our CapEx in these areas.

So, we have now finished the selling plan which was an important building block really starting to improve cost position expand and replacing an old plans and we have not many product - projects now on our plan. There is one action in which you have seen as an oxide and derivatives in [indiscernible] but that is an example that is clearly driven by the need of care chemicals to develop actually their portfolio further which is in the downstream position and you only place the remaining volumes on the market.

So I think what we should do is we should really operate the plants nicely and try to fill them even in difficult environment, but reduce CapEx to the minimum. So that would be rather how we react.

Thank you. That is really appreciated.

The next question is from Christian Faitz, Kepler Cheuvreux.

Yes, thanks Stefanie. Hello Hans, hello Martin.

Two questions, please. First of all, this COVID 2019, I appreciate that the demand situation is changing on a daily basis as we speak.

And yet outside of China, can you please comment on demand you are relevant to your profits, specifically for your product chemical activities in Western Europe and in North America? And then second question, I’m just trying to get a better understanding of your seat setup would it be possible to give us an idea of the split between field seats and battery seats?

Thank you.

Christian, let me start a little bit. I mean, you don’t have a clear picture.

Let’s say North America and I have always been in a circle last week, this many meeting with about 100 CEOs from different industries, also partially our customer and you see it, many of them and they have all individual problems, whether they can start their plans and they have no concerns about raw material supply, about the missing key part coming from China, not having a packaging material. So it is really individual problems.

What we have to do now is to really be in intensive dialogue with our customers to understand it and also see how we can actually support them. And I would expect, as you said, the daily learning on the virus and its impact.

So this is the same also from our customer side. But what we can see overall is a very, very cautious ordering behavior.

So they rather prolong and drive their inventories down, that is what they have done, also over the - at the end of the year and if not refill them. So, it is a little bit more living from hand to mouth.

So, I think we will now see over the next weeks what is happening. But I think what is also clear by seeing how he develops and now you see Germany coming up, France has some cases, Italy has some cases, they will not be the end of the development.

Iran now not so important for the Canadian market, but you see there is a huge explosion on most of infection. So I think we will learn from all of that and so will our customers.

And this is also why we have said we are prudent, we are now at the end of February and we are far away from normalization. This is why this whole thing will go into the second quarter and then have even the next one or two months after that some impact.

So, we really have to learn that, but what we can see by talking to the customers, that basically this is spreading out to be a global topic.

Terrific. Okay, so far January, February also in terms of demand Western Europe, North America, not much going on, right?

That is what I read from your comments.

Yes. Slower at least then we have anticipated.

Okay. Thanks.

Yes, Christine your question on the seeds business, what is the split there between field crops and veggies. It is about 1.4 billion in sales that we have in seeds in total and the rough split there is 70% field crop seeds and 30% veggies.

Very helpful. Thanks Martin.

Thanks Hans.

The next question is from Mathew Yates Bank of America. Please go ahead.

Hi, thanks very much. A couple of questions.

The first one, Slide 20, where it talks about the priorities, I’m not sure if these are deliberately ranked, but number one, the implementation and transformation into a more agile customer focused company. So last year you thought you had 600 million of EBITDA contribution from the measures and 2020 you are guiding for an extra 800 million as a run rate.

Please help me understand where exactly we see that come through into the P&L? You said it would take time.

But obviously, given the context of the group guidance, where should we be looking to kind of audit the delivery of this restructuring? The second question maybe is for Hans, just as a follow-up to the Q3 call when you are asked about Wintershall budgeting for 2020.

Are you able to be a bit more explicit in the other line? How much would be central overheads?

And how much you are budgeting for Wintershall contribution?

Yes, happy to take your question directly. I will take both of them.

The first question was on where do we see the excellence program reflected in your P&L? And the honest answer is all over the place.

I mean, there is everything in there from top line measures to cross measures. These are hundreds of measures that we are implementing, and we are actually making good progress that 2019, end of 2019.

We are where we wanted to be i.e. as a level of EBITDA contribution.

I think we said originally 500 million were a bit above that was 600 million and with the measures in place to continue with the program and achieve also in 2020 what we are looking for. And I’m not trying to tease you here; it is really measures that are affecting P&L in various places, starting with offline and in obviously also what you would expect from an excellence program, i.e.

their cost reduction measures and they are also affecting each and every cost item that you can think of. From variable costs, i.e.

raw material costs by way of improving processes, using less raw material to cost reductions in fixed cost across the board. I hope that helps to put things a little bit into perspective.

Your second question was then on the, if I got that correctly, on the guidance for other and what is happening there. What are the contributing factors to an overall better performance in others?

Is that correct understanding Matthew.

Yes, exactly.

Okay. So, what do we expect to see in 2020 that drives this improvement?

There is in particular, as you can see in our notes the fact that both equity and equity shown participations, i.e., Wintershall DEA and Solenis are negative in the year 2019. That is not a surprise if you think about the fact that these businesses go through a significant amount of restructuring and related effects then come through in the net profits and our respective share in these net profits.

There is another element that is important to understand which is and I give you this in the case of Wintershall DEA. We went basically through an entire purchase price allocation for Wintershall DEA.

So we looked at each and every asset. And we reflected market value of these assets, then in our balance sheet and in the equity participation.

This is not by choice, this is simply following IFRS rules. What this leads to is then the significant deconsolidation gain that you have seen but also a step up of the respective assets, that then needs to be written off overtime.

And the effect of that in the case of Wintershall DEA the year 2019 is €200 million. The other thing that you need to keep in mind is we are showing Wintershall DEA results for the time period of May to December, and will obviously have full year impact then in 2020.

Hope that helps to put things in perspective there. Other corporations to the extent we can forecast such as, for example, the corporate costs that we have in other or the corporate research costs in other.

Our expectation that there will be also lower than what we had in 2019. Look at the level we have reached in Q4 of 2019.

That should give a relatively good guidance for what to expect there in 2020.

Understood. Thank you.

The next question is from Lawrence Alexander, Jeffries, we then have a [Indiscernible] and then Chetan Udeshi. Now Lawrence Alexander Jeffries, please.

Hi just a quick question again on the outlook comments. The tornado charge of sensitivities that you present in the annual reports is heavily skewed to the downside.

I think there is like five factors that are more skewed on the downside rather than the upside interest of risk weightings. How do you think about sort of the range and are you trying to give a little bit of a more optimistic range or did you see it as a or do you see that as sort of a countervailing factor that isn’t included in that framework?

Lawrence I will try to take that one. It is obviously not an easy one, because there is not an academic and precise answer to it.

What you have in the opportunities and risk report is and when you compare that to prior years, it is not so different from what you have seen there in prior years. What gives you really the key impacts, our market growth, our margins.

So that picture hasn’t changed that much. And it is less these, the usual I would call them risk factors that we are reflecting in giving you a guidance.

It is more the elevated or heightened uncertainty that we have at this point in time. We are used keep developing on a daily basis.

We are frankly, just to give you an idea. We started looking at our supply chains, getting a clear understanding on raw materials on technical goods on inventories that we have on the reach of inventories about a month ago.

End of last week of January, we started to assess the potential impacts. We gained more and more insight.

And with that insight to a certain extent to also the uncertainty increased, and this is what you see reflected now in the type of guidance that we are giving. It is less reflecting what you have in the transition risk report is more reflecting the uncertainty that results from the very, very recent events, which by the way, and not sure that I should say that at this point in time, when I glanced over the comments that all results cost, I was a bit surprised by the fact that the big miss with respect to consensus was highlighted.

If you think about consensus and consensus that goes back to February 5th, and where we are today, I think we all should agree that we learned a whole lot more than what we knew on February 5th.

That was very helpful. Thank you.

Now Jaideep Pandya, Millennium. Please go ahead.

First question is just on the oil and gas. So I appreciate that it is difficult to answer this.

But considering where the gas markets on the oil investor psyche is today with ESG and all. What is the plan B, if I may ask, if market conditions are not good in H2 for the IPO.

I mean, if you can just give us some kind of thinking in terms of how do you think about this asset and if there is any possibility that oil and gas actually might come back to BASF where you can actually sell it to private equity or other strategic parties. So, some thoughts around that would be really helpful.

The second question is for you Martin around CO2 targets. So it is a really challenging and interesting target that you want to be neutral by 2030.

I just want to understand how could you achieve that considering you are putting so much OpEx, especially in upstream around on the ground in Asia as you say, in the next decade. So just want to understand, where are you actually going to see net CO2 reduction in the portfolio?

And then sorry for this question. Finally, appreciated very, very early in the year.

But the setting of this year is very similar last year. And you said last year that you don’t mind borrowing a bit to pay or maintain the dividend.

So should we think that the fundamental philosophy of exactly the same. And then finally we really like to say Martin leader, I know its last day today, and so I really appreciate his help and support and good luck.

Thank you.

So Jaideep let me start this with CO2 target. I mean, just to make this year we said CO2 neutral grows until 2013.

I want to also differentiate us here that we are much closer targets, which is everything else in a walk in the park. We are much more precise in terms of what we do.

There are no other companies saying, well, I’m carbon-neutral in 2050 and everyone in stable is retired until then. So what we actually do is we have to do hard work.

Also on still, let’s say improving the operation. So we, every year, we get a couple of hundred thousand tones out there with hundreds of measures, which is really efficiency gains.

We also have a relatively big legal in terms of energy purchases from outside which we can convert from partially higher fuel to load to so called green energy. This is another balancing effect.

And believe me, if you would be on the table when we discuss how the project in Guangdong will look like and you are right when you start that up, we will have a step up into you too, but we discussing they are totally different concepts in order to operate a plant or an integrated Verbund sides, then you would have done 10 years ago. So there will be a step up, but there will be also another step up which you might think and then think about the India project, where we from day one plan actually something which is not contributing CO2 additionally, because this will be a setup driven by wind and solar.

But it will be an ambitious target to achieve it until 2030. And then in 2030, we hopefully have the technologies or is it let’s say, hopefully - we are convinced that the technologies then to reduce further by investments in absolute terms.

So this is how we do that. And you asked me, this is now a copy from last year.

Believe me a few weeks ago, we actually thought to cagier a different guidance here, but I think he also said in the recent days, we learned indivisibility is certainly low with everything here. But I think nevertheless, it is not fully like a same picture as last year because we don’t expect recovery in economic development, we just expect that the corona effect is not further going until the first two quarters.

So that is I think a little bit different. But I cannot change that there is so much uncertainty.

And I think we are now the first ones who actually think they are in corona in our guidance here. And I think that provides some is the best pictures picture we can actually have today.

Yes. Charlie this is Hans, on your question with respect to Wintershall DEA.

I already said with respect to Andrew’s earlier question that we have a clear plan in place that we will follow. There is also a clear agreement between the shareholders on what to do.

I think that is also quite important to understand. And if the market environment in the second half of 2020 is not ready for an IPO well, then it is not ready, and nobody will force us to IPO at that point in time.

But the IPO, I think is for sure to happen. Can I guarantee that this will be in the second half of 2020?

No, I cannot. That is why we always said, it will depend on market conditions.

Very clear. Thank you so much.

Now take Chetan Udeshi, JPMorgan.

Yes, hi. Couple of questions.

First, can you quantify how much have you assumed impact from Corona Virus in your guidance for Q1, Q2, that will be useful? Second question is, do you have any more color on the recent litigation associated with Dicamba in the U.S.

and maybe help us understand what is your exposure in terms of sales and earnings to that particular product. Thank you.

Chetan, somehow we hope not to get this question, the first one on the impact, because it is all what you said about uncertainty, it is not easy to say what is impact is, but if you now insist on that, I think from a day’s point of view, it could be €400 million or €500 million.

That is on sales or earnings?

Earnings.

Okay, thank you.

Well the next question is which earnings level it is on EBIT level? Your second question Chetan was Dicamba?

Yes, yes.

On Dicamba. Situation that we have there, in brief words is the following.

There is a jury verdict. I think from February 15, industrial jury verdict.

There two decisions. First one is on regular, I would call them damages in the amount of €16 million where the jury decided that Monsanto and BASF to be jointly and severally liable for that.

And then there is a second decision of the jury in which the jury decided that the punitive damages should be paid by Monsanto. It did not decide that this should be paid by BASF.

Where are we in the process. The verdict now is moving on in due process way to be confirmed by the judge.

We have the usual motions in that process. One of the motions coming from the plaintiff also not much to our surprise is that also means actually liable.

For the punitive damages, it is now up to the judge to decide. Our view with respect to the entire case, it has from our point of view no foundation.

We will file, have filed the necessary motions in this first instance now, depending on what the outcome will be of the governance decisions we will immediately appeal. And I think that is all that I can say with respect to this case at this point in time.

Thank you.

We have five more analysts on the line. And next will be Andreas Heine, then Sebastian Bray and Laurent Favre.

And finally Markus Mayer and Peter Clark. Now is Andreas Heine MainFirst.

Please go ahead.

Thanks for giving me the chance to ask question. Again obviously on the guidance more than macro picture looking into what has happened in the second half at least I observed some recovery in Asia and U.S.

delivered at the beginning of the year. I would have assumed the macro picture to be let’s say, flat versus the last year on the chemical market is your forecast is going from 1.8 to 1.2 this year, then dedicated exclusively to the Corona Virus or would you have expected the chemical grows to be also lower if the Corona Virus would not have come on this?

That is the first. And the second on upstream.

Margins are indeed pretty low basically average due to things can get lower from here. What do you see right now as a run rate.

Thanks, let’s say in your outlook if you take the midpoint as the most realistic one, and related to upstream, it is an oversupply and market. And you invest quite heavily in Asia in new capacities.

Would you be open to delay this investments? If the markets do not meet this quantities?

Or is it kind of fixed that you have to be scheduled for the two sides?

I mean, Andreas concerning the recovery in the second half, and we talk particularly about China. I mean, not everything that was missed out in the first half can be big leak, be caught up in the second half.

If you should also be aware, first of all, if you are GDP level that the Chinese GDP is also driven by services and everything that you missed out cannot be done. So if you not have been in a restaurant in the cinema, you can most probably don’t watch the movie twice in the second half.

So this is why we think it cannot be caught up. Also, if you look, for example, our automotive on the heavy cuts, there is done now in the first 6, 8 weeks.

They don’t have a spare capacity on 20% and suddenly in the second half to catch up with all that. And by the way, I don’t think that they are consumer, the only thing, way they think about after being out of the quarantine to go back to the showroom and buy a car, because there is also a lot of uncertainty out there.

So if we take the GDP numbers before and after. So our plan was already that it closed down a little bit from the 6.1% in the last year.

So goes maybe slightly below 6. And we are assuming now for GDP totally for 2010 for China about 4.5.

So that gives you an effects for what is before and after the [indiscernible].

Yes and this is Hans. On your upstream margins, very good description of the situation.

Margins both in our chemicals and also material segments coming down consistently during the year 2019. Looks like with end of Q4 2019 bottom was reached, and it goes with this then into the year 2020.

We have not assumed that there will be a lot of margin improvements. You see this also reflected in our guidance for the materials and for the chemicals segments.

And I guess with respect to China and what kind of impact the current margin is situation and demand supply situation has on our Verbund project in China. I will give that back to the Martin.

Andreas. First of all, I think I missed out when I talked about China, the chemicals we took that down from 4.3% to about 3% close, because not only the GDP level.

So I mean, in terms of impact now on our large Verbund project. I think we had to think long-term and different things and what is the best setup, but also in terms of towards was touched earlier.

So, how we really constructed smartly and we certainly look in the business plans and everything, but I think now looking on margin development short-term and long-term. I think we have to look on the long term supply demand and it will not have much impact on that one, because you either believe that story or not.

And even if this whole thing might come to a slower development and maybe something like a 4% growth or even slightly below, there is not change the overall picture. So, this is continue with that plan and using the time now to finally optimize and then basically speaks to the scope of the whole investment.

Thanks.

Now Sebastian Bray, Berenberg. Please go ahead.

Good afternoon and thank you for taking my question, I would have two please. The first one is on the battery facilities.

The cathode plant in Europe, could you perhaps give a bit more color as if this plant is coming online at the start of 2022, or at the end of the year? The second question is on CapEx.

Relative to expectations two years ago, the FX will in 2020 forego about €700 million of capital spending. Where is this coming from and what is the growth cost of doing this?

Thank you.

So I would answer quickly on the battery materials. I mean, as I said earlier, I think it is a good assumption if you expected that we go operational middle of the year.

Thank you.

And I will quickly address your CapEx question most of us and if you look at the environment that we were in, when we gave CapEx guidance three years ago, the environment was much more friendly than it is today. What do you do in situations like this?

You tighten the belt and this is exactly what you have seen in 2019. And what we continue to do in 2020.

Am I right in saying that there was a number of debottlenecking projects plant industry in chemicals in Europe that have grown. There haven’t been a big ticket cancellations of projects by BASF in the meantime, is it just all small names?

Yes. But what you do is you look at your projects, some of the projects that you have in the out years that have not yet caused significant amount of spending other than planning, you decide on the timing there.

There weren’t any cancellations. But I mean, as a prudent businessman, what do you do in situations like this.

You tighten the belt and this s exactly what we have done and we will continue to do in 2020.

Alright. Thank you.

And now it is Laurent Favre, Exane BNP.

Good afternoon. That is actually a follow-up to Sebastian’s question.

To build from 3.4 billion to five year target. I mean, we need to add about two billion on average between 2020 in the follow year.

So I’m wondering is it a case that the belt is going to be loosened again to user expression. And or, should we assume that there is limited flexibility on the five billion or so of annual CapEx for 2021, 2022?

Thank you.

Well I mean, I think what you see from the picture is that the core [indiscernible] as which really tighten the belt and do only put the money we need into to cater the growth, there is no space for extra green. So we allocate a lot to the battery materials and now to the growth programs in Asia.

That is one of the other flexibility, but you also asked on the other hand, when is this operation mid of 2022, so you don’t have much leeway to shift money here. And also from the Asia point of view, I mean we have also basically then in the years of 2022 to 2024 actually spend this money.

So yes, this is the framework where we actually have and I think going forward maybe we have to explain to you also a little bit better than what does this mean in the future, what is coming in, in terms of earnings and everything we will do overtime, but we have to certainly also then spend the money when you want to execute these projects very concisely.

Understood. Thank you.

Now Markus Mayer, Baader Helvea. Please go ahead.

Good afternoon. Two questions from my side as well.

Firstly, come back to cash flow again. Can you quantify what you expect from restructuring outflows for 2020?

That was my first question. My second question is basically more a small one, on this 20% positive catalyst price effect.

How much of this was due to PGM prices?

Can you repeat the second one? We did not understand.

Yes, sure. The 20% price affects the catalyst of the fourth quarter.

How much of this price effect was due to higher PGM cost - PGM prices.

Markus to start with your second question, I don’t have that at my fingertips. But we will provide it to you after the call.

One thing is for sure who are on the price side, the precious metals, were significant driver. If you think about the fact that rhodium as an example, we started the year with 3000 and we ended the year at 10,000.

So, that gives you rough idea what happened on prizes, but Stefi and the team will provide you that information after the call. And then you asked for cash outflows.

You have seen that our special items will be a bit higher as a result of restructuring, but also integration in 2020. Then in 2019, my expectation that is roughly half of what we show as special items will cash outflows in the year 2020.

So let’s say around about €300 million.

Okay, perfect. Thank you.

Now, the final question comes from Peter Clark. I hope there is only one, Société Générale.

Please go ahead.

Yes, well it is actually two. I must apologize for that.

But my quick ones, I hope, the free dividend policy, obviously, we know you want to cover the dividend with a free cash flow. And obviously, in the old days it was also premium on the cost of capital, as you two remember when it was that was the one we use for testing.

As just the commitment to that, if 2020 you don’t actually have a home a cash flow. You have made it quite clear, you are expecting no premium the cost of capital, how long you prepared to stick with that policy of feeling for that.

And then the second one, just on the act guidance is the one that probably surprised me most. Because I thought there was quite a lot of integration costs within the number in 2019.

And also there was a one of things of course with very adverse weather last summer. So just wondering on that guidance for a slight increase, I was expecting more than that.

Thank you.

So Peter, I mean, we have a commitment to the riser for the progresses dividend policy. And this is also why I think you can expect this in 2020.

I can say this. We will explain to you also the inflowing money and what we are going to spend and maybe a little bit more in detail.

So I think, if there is a year or two where maybe the free cash flow is not working, because we have to invest in our or not sufficient because we have to invest in our gross protests. Then this is I think, with a very dear protection, I think, the right thing to do.

And this is actually what we are going to do here rebuild the company to be able to lower costs things to actually get more out of what we do. We streamline our portfolio and I think we should all go in this direction to close that gap.

And if this is the one or two years happening, then I think the story is still intact. So be sure that we now can really committed to this dividend policy.

Peter on your Ag questions. I mean, if you look at the results that Ag generated in 2019, I think that is a nice set of figures that they delivered now going into 2020.

We took a hard look at where do we see general inventories of what is going on in this world and other among other things, looks like Canada will not be able to export canola oil to China that may have an impact there. And through that also on our canola seed business.

If your assumption is correct, that the guidance should have been higher year and in the end, Ag solutions delivers higher results. I’m perfectly fine with that and I’m happy to take it

Okay. Thank you very much.

Ladies and gentlemen, this brings us to the end of our conference call. And we will report on our first quarter results on April 30th.

Our annual shareholders meeting will also take place on this day. Please allow me to end with a personal note after seven years of excellent work in Investor Relations, Martin Liedemit, will, as Vice President assume responsibility for the unit strategic market in polyamide effective March 1st.

So this is, as Jaideep already mentioned, indeed his last day in investor Relations. Please join me in congratulating him and rest assured that going forward, we will do our best to support the analysts and investors who have been in close contact with Martin.

Today, he is still available to take your calls as will the entire Investor Relations team be. Thank you very much for joining us today and goodbye for now.