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Good morning, ladies and gentlemen. On behalf of BASF, I would like to welcome you to our conference call on the third quarter 2020 results.

[Operator Instructions]. This presentation contains forward-looking statements.

These statements are based on current estimates and projections of the Board of Executive Directors and currently available information. Forward-looking statements are not guarantees of the future developments and results outlined therein.

These are dependent on a number of factors. They involve various risks and uncertainties, and they are based on assumptions that may not prove to be accurate.

Such risk factors include those discussed in opportunities and risks of the BASF report 2019. BASF does not assume any obligation to update the forward-looking statements contained in this presentation above and beyond the legal requirements.

On the call with me today are Martin Brudermuller, Chairman of the Board of Executive Directors; and Hans-Ulrich, Chief Financial Officer. Please be aware that we have already posted the speech on our website at basf.com/Q32020.

This brings us to the point where I give the floor to Martin Brudermuller.

Good morning, ladies and gentlemen, and thank you for joining us. We hope you and your families are doing well.

During the last couple of weeks, we have seen how difficult it is to contain the pandemic as the spread of the virus is sharply increasing again in many countries worldwide. At BASF, we are doing everything we can to work safely in this environment.

We have reintroduced stricter measures that were no longer necessary during the summer months, but now they are advisable again. On October 9, BASF released preliminary figures for the third quarter of 2020 and published an outlook for the full year 2020.

Today, we will provide you with further details. To begin with, let's turn to the macroeconomic environment.

The indicators for Q3 2020 are estimates as most countries have not yet published their figures for the quarter. Overall, the macroeconomic indicators improved in Q3 2020 compared with Q2 2020.

However, the future macroeconomic development remains very uncertain. According to the preliminary data, global chemical production was slightly positive in Q3 2020 compared with the prior year quarter.

The resilience of chemical demand in some highly relevant customer industries is one reason for that. Another reason is China.

The country continues its V-shaped recovery. Regarding the development in other regions, the bottom seems to have been reached and a gradual recovery is occurring.

Global GDP and global industrial production declined by 4.3% and 3.0%, respectively, compared with the prior year quarter. Global automotive production was still around 2% below the prior year quarter.

For the full year 2020, we now expect light vehicle production to decline by around 20%, while we previously had assumed a decline of 27%. On this slide, you can see how regional macroeconomic developments are reflected in our volume growth by region.

Overall, BASF Group sales volumes were 2% lower in Q3 2020 compared with Q3 2019. This was driven by lower volumes in July and August, while we achieved a 4% volume increase in September 2020 compared with September 2019.

In Europe, volume growth improved in the course of the quarter and turned positive in September. In the U.S., volume growth compared with the prior year months remained negative due to the outage of the steam cracker in Port Arthur, Texas.

Excluding this effect, volumes in the U.S. would also have turned positive in September.

In the meantime, the Port Arthur cracker is back on stream. In contrast, we recorded double-digit volume growth in Greater China across almost all segments over all 3 months in Q3 2020.

We continue to benefit from our strong position in China. The planned new for Verbund site in Guangdong province will further increase our presence and customer proximity in the dynamically growing Chinese market.

This graph shows the gap between average daily order entries in April to September compared with the prior year months, that it is slowly narrowing. A look at the October month-to-date figures reveals that daily orders are still slightly below the prior year month.

The recent worsening of the infection situation worldwide is jeopardizing this development and might again negatively impact our order entry in the coming months. As in the prior quarters, customers remain very cautious and are ordering lower volumes more frequently.

About 50% of our orders on hand across BASF are booked during the next month. Another 30% of all orders have a delivery date in the month after that.

This means that 80% of all our orders on hand will be booked within the next 2 months, and we continue to have no clear view beyond that. Let us now turn to the volume development by segment.

Compared with the prior year's quarter, sales volume declined by 2% on BASF Group level. This volume decline was mainly driven by the Chemicals segment.

Here, the cracker outage in Port Arthur burdened the volumes development. On a BASF Group level, the cracker outage had a negative volume effect of around 1% in Q3 2020.

It thus accounted for half of the decline. In the Materials and Industrial Solutions segment, we also recorded lower volumes, mainly due to lower demand from the automotive industry.

In Other, volumes declined on account of lower raw material trading activities. Volume in Nutrition & Care are almost stable, coming down from the elevated levels during the first half of 2020.

Volumes in Surface Technologies increased, and strongly so in Agricultural Solutions, which partially offset the overall volume decline. Let us move on to our sales and earnings development in Q3 2020 compared with the prior year quarter.

I will start with our sales development and the graph on the left. Sales decreased by 5% to EUR 13.8 billion.

Currency effects of minus 6% were the main driver for this. Currency headwinds were mainly caused by the devaluation of the Brazilian real and the U.S.

dollar. Lower volumes of minus 2% also contributed to the sales decline, as I already explained.

Prices increased by 2%. Considerably higher prices in Surface Technologies, especially due to higher prices for precious metals, and slightly higher prices in Agricultural Solutions were the reason for this.

Portfolio effects contributed plus 1%, mainly from the acquisition of Solvay's polyamide business. Moving on to the earnings development and the graph on the right.

EBIT before special items came in at EUR 581 million, 45% below Q3 2019. All segments recorded lower earnings.

However, EBIT before special items rose by EUR 355 million compared with EUR 226 million in Q2 2020. This was mainly driven by good business development in September.

In the Chemicals segment, compared with the prior year's quarter, both divisions recorded considerably lower EBIT before special items due to lower margins and volumes. The decline was most pronounced in the Petrochemicals division.

The cracker outage of the Port Arthur site had a negative earnings impact of around EUR 100 million in Q3 2020. In the Intermediates division, lower fixed costs could partially offset the earnings decline.

In the Materials segment, EBIT before special items decreased considerably due to lower earnings in the Monomers division. Lower volumes and prices for polyamides were the main reason for this decline.

Higher isocyanate margins due to lower raw material prices and increased MDI volumes could only partially offset this. In Performance Materials, EBIT before special items increased slightly, mainly due to a positive contributions from the acquired businesses from Solvay.

Compared with Q2 2020, EBIT before special items in the Monomers and the Performance Materials division improved significantly. EBIT before special items in the Industrial Solutions segment came in slightly below the prior year quarter due to considerably lower contributions from Performance Chemicals.

This was mainly driven by lower volumes, for example, in fuel and lubricant solutions as well as in oilfield chemicals. In Dispersions & Pigments, EBIT before special items improved slightly, mainly due to lower fixed costs.

EBIT before special items in Surface Technologies segment almost matched the level of prior year quarter. In the Catalysts division, earnings improved slightly, mainly due to lower fixed costs.

In the Coatings division, earnings decreased compared with Q3 2019 due to lower sales volumes, especially in the automotive industry. Compared with Q2 2020, EBIT before special items in the Catalysts and the Coatings divisions improved especially strongly.

In Nutrition & Care, EBIT before special items decreased considerably on account of lower contributions from both divisions. The Nutrition & Health division recorded lower EBIT before special items primarily as a result of higher fixed costs.

The prior year quarter had benefited from an insurance payment. Earnings also declined considerably in the Care Chemicals division.

This was due to lower volumes and higher fixed costs. The figure for the prior year quarter included a contractual one-off payment in the personal care solutions segment or business.

In Agricultural Solutions, EBIT before special items came in considerably below prior year quarter. While volumes significantly increased and prices were slightly up, sales and earnings were burdened by the strongly negative currency effects.

The currency impact was most pronounced in South America and here mainly driven by the depreciation of the Brazilian real. In Other, EBIT before special decreased significantly compared with the third quarter of 2019.

And with this, I hand over things to Hans.

Thank you, Martin. Good morning, ladies and gentlemen.

Let us have a look at how the pandemic impacted our key customer industries. Due to limited data availability, this external data represents the aggregate of EU, China and the U.S.

and is preliminary for Q3. China has quite a high weight in many of these industries.

Therefore, the development is strongly impacted by the V-shaped recovery there. Nonetheless, these figures should give a good indication of global trends.

Besides the strong recovery in automotive, we are seeing a recovery of durable consumer goods and in construction activity. Information and communication technologies continue to show robust growth, owing to solid demand and the very high weight of China's production.

Demand in health and nutrition is less volatile and shows tendencies towards normalization. After describing the development of our customers' industries, I would now like to provide some further details regarding the noncash-effective impairments in Q3 2020.

Our impairment tests identified asset impairments of EUR 2.8 billion due to a considerably weaker macroeconomic environment and weaker demand outlook in certain industry segments as a consequence of the pandemic. The impairments were mainly booked in the following segments.

In Surface Technologies, the weaker future demand from the automotive and aviation industries led to impairment charges of around EUR 1 billion. In the Chemicals and Materials segments, the continued oversupply of basic chemicals and the associated margin pressure resulted in impairments of around EUR 1.3 billion in total.

In Agricultural Solutions, measures to streamline BASF glufosinate-ammonium production resulted in impairments of around EUR 300 million. In the Industrial Solutions and Nutrition & Care segments, impairments added up to less than EUR 200 million in total.

Let us move on to the measures we are implementing under the umbrella of our Excellence Program. Overall, we are well on track to achieve the targeted EUR 2 billion annual EBITDA contribution by the end of 2021.

Regarding the personnel cost savings, we targeted to reduce 6,000 positions globally by the end of 2020. According to our current estimates, around 10% of this reduction will likely be delayed to 2021 mainly due to labor market effects caused by the pandemic.

Let me also specify the EBITDA contribution and associated onetime costs we expect by the end of 2020. We now expect an EBITDA contribution of around EUR 1.4 billion by the end of December 2020.

This is a run rate. The associated onetime costs in 2020 are estimated to be around EUR 300 million.

At the end of September, we announced the realignment of BASF's Global Business Services unit. The division was established as of January 1, 2020.

As of that date, around 8,400 employees worldwide transferred to Global Business Services without further changes in the organization. Since then, the unit has been providing services for BASF Group, ranging from financial and logistical processes to services in the areas of communications, human resources and environment, health and safety, mainly following established processes.

By fundamentally simplifying and reorganizing processes with an end-to-end logic as well as utilizing digital solutions, the division wants to meet the needs of BASF business units flexibly and more competitively. As part of this, more services than before will be bundled in hubs, which will offer as many services as possible for the units in the BASF Group.

Following the bundling of services and resources and the implementation of a wide-ranging digitalization strategy, the number of employees in Global Business Services worldwide will be reduced by up to 2,000 by the end of 2022. This reduction is not part of the Excellence Program, which we will conclude at the end of 2021.

From 2023 onward, we expect to achieve annual cost savings of over EUR 200 million from the realignment of the Global Business Services unit. Provisions of around EUR 300 million for the necessary measures were recognized in Q3 2020.

Let me provide you with a short update on our portfolio measures. We closed the sale of the construction chemicals business to an affiliate of Lone Star on September 30.

The purchase price on a cash and debt-free basis is EUR 3.17 billion. The construction chemicals business now forms the newly founded MBCC Group.

The stand-alone business is very well positioned and -- on the construction chemicals market, and we wish the new team much success for the future. The sale of the assets and liabilities of the construction chemicals business and the related disposal gain, likely to be around EUR 300 million to EUR 400 million, will only be reflected in BASF's reporting on the fourth quarter of 2020.

Payments received until September 30 in connection with this divestiture are, however, included in the statement of cash flows for Q3 2020 under cash flows from investing activities. The sale of our pigment business to DIC/Sun Chemical was expected to close in Q4 2020.

We now expect the closing to be delayed to Q1 2021. The project teams are jointly preparing the closing and the integration to allow for swift and seamless cutover once merger clearance from all relevant authorities has been granted.

With respect to Wintershall Dea, we are realizing the announced synergies. We are also working on IPO preparedness.

We now assume an initial placement in 2021, again, subject to market conditions. I will now focus on further details regarding the earnings and cash flow development of BASF Group in Q3 2020 compared with the prior year quarter.

EBITDA before special items decreased by 22% to EUR 1.5 billion. EBITDA amounted to EUR 1 billion compared with EUR 2.3 billion in Q3 2019.

EBIT before special items came in at EUR 581 million, 45% lower than in Q3 2019. Special items in EBIT amounted to minus EUR 3.2 billion compared with plus EUR 280 million in Q3 2019.

Around EUR 2.8 billion are related to the noncash-effective impairments. Around EUR 300 million are related to the realignment of BASF's Global Business Services unit.

EBIT thus decreased to minus EUR 2.6 billion from EUR 1.3 billion in Q3 2019. Net income amounted to minus EUR 2.1 billion compared with EUR 911 million in Q3 2019 mainly due to the noncash-effective impairments, the lower EBIT before special items and provisions for restructuring.

In Q3 2020, cash flows from operating activities increased by 5% to EUR 2.1 billion. The increase was mainly driven by lower miscellaneous items and cash released from net working capital.

In Q3 2019, miscellaneous items comprised the reclassification of the gain on the sale of the Klybeck site in Basel to cash flows from investing activities. Payments made for property, plant and equipment and intangible assets decreased by EUR 190 million to EUR 736 million.

Free cash flow increased by 27% to EUR 1.4 billion. Let's now turn to our cash flow in the first 9 months of 2020.

Cash flows from operating activities amounted to EUR 3.3 billion compared with EUR 4.3 billion in the prior year period. This was primarily due to the lower net income and the higher level of cash tied up in net working capital.

Net working capital increased by EUR 1 billion, mainly as a result of higher prices for precious metals affecting trade accounts receivable and the metal trading positions. Cash flows from investing activities amounted to minus EUR 674 million in the first 9 months of 2020 compared with plus EUR 47 million in the prior year period.

The decrease was mainly driven by lower net cash inflows from acquisitions and divestitures. Payments made for property, plant and equipment and intangible assets decreased by 23% to EUR 2 billion.

Financing activities led to a cash inflow of EUR 778 million in the first 3 quarters of 2020 compared with a cash outflow of EUR 4.7 billion in the prior year period. Free cash flow declined from EUR 1.7 billion in the prior year period to EUR 1.3 billion mainly due to the lower cash flows from operating activities.

Lower payments made for property, plant and equipment and intangible assets could partially offset the decline. Turning to our balance sheet at the end of September 2020 compared with year-end 2019.

Total assets were stable at EUR 87 billion. Compared with the end of December 2019, noncurrent assets decreased by EUR 4 billion to EUR 51.9 billion mainly driven by the noncash-effective impairments.

In addition, negative currency effects contributed to the decline. Current assets rose by EUR 4.1 billion to EUR 35 billion mainly due to higher cash and cash equivalents as well as higher other receivables.

Compared with the year-end 2019, net debt increased by EUR 196 million to EUR 15.7 billion. Compared with the end of Q2 2020, net debt decreased by EUR 4.8 billion.

At the end of September 2020, the equity ratio amounted to 39.8%. And with that, back to you, Martin, for the outlook.

Yes. Thanks, Hans.

Ladies and gentlemen, as already announced on October 9, we now expect 2020 sales of EUR 57 billion to EUR 58 billion, mainly to weaker demand because of the pandemic. We expect EBIT before special items of between EUR 3.0 billion and EUR 3.3 billion for 2020.

As a result of the impairments in the third quarter of 2020, we anticipate a return on capital employed of between 0% and 1%. For the fourth quarter of 2020, we expect a further improvement in EBIT before special items compared with the third quarter of 2020.

Our forecast assumes that severe restrictions on economic activity related to the pandemic, such as lockdowns, are not reintroduced. As we have been asked several times, let me also touch quickly on the dividend policy.

BASF remains highly committed to its progressive dividend policy. We have based our dividend policy on BASF's midterm macroeconomic assumptions and the related earnings expectations.

If the future macroeconomic environment reduces BASF's growth opportunities and significantly impacts BASF's profitability, we might have to adapt our dividend payout. However, I would like to make once more clear that we will only decide on this matter in February 2021 based on our actual cash flow in 2020 and a more reliable midterm forecast.

Let me conclude with our measures to further navigate BASF safely through the pandemic and to mitigate its financial impacts. With our customers in the center of all of our activities, our corporate strategy is the right answer to successfully operate in this environment, even more so than before.

We have significantly increased our cooperation with many of our customers during the pandemic to immediately respond to changes in their demand patterns. Our teams work now hard to achieve profitable growth supported by strategic agreements with customers.

In this context, we are running our global production network with high flexibility, and we are well positioned to benefit from a market recovery. We have a clear focus on further cost reduction and are fully on track to achieve the targeted earnings contribution from our Excellence Program.

In addition, the realignment of BASF's Global Business Services unit will further support BASF's efficiency. In these times, safeguarding cash is a top priority.

In 2020, we will bring down our capital expenditures by EUR 600 million to EUR 2.8 billion. Together with a strict management of working capital, this will support a robust free cash flow even in a difficult year such as 2020.

Regarding our 5-year capital expenditures budget, you can be sure that we will continue to strictly review our projects and focus our spending. To support BASF's future profitable growth, we will continue to energetically pursue our investment project in Guangdong and our investments in the production of battery materials.

Let me conclude by saying that we are actively managing the crisis. Our diversified portfolio, a solid balance sheet and a robust cash flow have proven to be strong assets in these times.

Ladies and gentlemen, now we are happy to take your questions.

[Operator Instructions] We will start with Thomas Wrigglesworth from Citi, followed by Andrew Stott and Matthew Yates. So now it's Thomas Wrigglesworth, Citi.

First question, if I may. Looking at the guidance range that you've kindly provided, what makes the difference between the high end and the low end of that range?

And I was specifically interested on your views on how the PGM metals trading business fits into that. That's my first question.

My second question is on Agchem. A German competitor of yours gave quite a bearish outlook for Agchem for 2021.

I was wondering if you could share your views on how you see that market shaping up in the light of rising crop prices and the competition in soybean seeds.

Well, Thomas, with regard to the guidance, I mean, there's not so much here left, I would say. So clearly, I think the October business is so far running very strong.

We have also an outlook now with the orders. You know that about 50% of the orders at hand is basically the next month.

So we have a bit an overview or a good overview about November. And the concerning PGM metal trading, we clearly expect that what we gained over there is consistent and stays.

So basically, what we have here is then the uncertainty about macroeconomic effects and slowdowns maybe in December. But I think with this, we are relatively firmly positioned here.

Hans, do you want to say something to Agchem?

Yes. Thomas, this is Hans.

So your Agchem question 2021, maybe I'll start that with talking about 2020 first. If you look at the first 3 quarters of 2020, you see overall good business performance, slight improvement in earnings compared to first 3 quarters of the year 2019.

So overall, what I would call robust development in a still difficult environment. Business in Q4 is shaping up, I would say, okay.

This is business in South America predominantly, volumes developed nicely, and we have obviously the currency headwinds, both from the Brazilian real but also the Argentinian peso that we will have to deal with, and that will have an impact on the results of the business in Q4. A certain extent of that could also be seen already in Q3.

And then the question is how will the environment be going into the year 2021. There is a bit of concern because channel inventories, both in North America and in Europe, are relatively high.

So that may have an impact on the Northern Hemisphere business in 2021. But I want to say, too early to say.

We are in the midst of our budgeting round. Let's see what our friends in Ag Solutions have in their pockets and what they will present to us, and we'll have a clearer picture then in the beginning of December.

But one thing is for sure, we are not deeply concerned about that business going into the year 2021.

So the next question is coming from Andrew Stott, UBS.

A couple of questions, they're both on the same topic on capital allocation. Martin, you said at the end of your outlook that you're strictly reviewing your focus on spending on CapEx.

I was just wondering if you could add more to that, elaborate on specifically what you're looking at, if you can, geographically, time lines, and basically whether there's more flex to come given that we've already seen a EUR 600 million cut in 2020 CapEx. So that's the first question.

Second question was portfolio. Pigments Q1 next year, oil and gas IPO whenever markets allow.

Is that it at that point? Do you feel that portfolio-wise, you're done?

Or is there more to do?

Okay, Andrew. I mean capital allocation, I mean, I think we have clearly shown that we took everything tight this year.

You could expect also that this is going to prevail for the next years. So we will be really sharp on that.

I think we have showed you also one time that our strategic business units have been divided in so-called growth and core elements. We have now kept the core part very, very tight.

This is mainly to contribute cash, whereas we focus very much on where we have the growth. But we have also to say, I mean, now after also the volumes we have lost on the markets, we have currently capacity also for the next years to recover.

So we have quite some energy over there. That means we have also taken postponements on adding further capacities.

We will increase our OpEx budget again because that is always a good opportunity with a relatively low amount of money to debottleneck. So that will give us a leeway.

We are still prepared with capacities to contribute in the growth, but retard and postpone a bit the expansion of capacities. So that is something that will go beyond 2020.

But I have made also very clear that the pandemic does not change anything on our large growth opportunities, which is battery materials in China, because if you look, first of all, on the V-shaped recovery of China, which I think is very impressive and we benefit from that, but if you do further analysis with the U.S. decoupling, China and so on and with a stronger focus on their domestic market, actually, the market expectations for China look even better than before the pandemic.

So that gives us the confirmation that still, all the strategic assumptions long term for China is right. Same is for Battery Materials.

Yes, we have seen this strong decline in automotive, but it is also not a principal question that we drive more electric than the combustion engines. And actually, in the low numbers of new cars, the share of electric vehicles have actually increased, which gives, I think, also a certain proof that the assumptions are right.

Whether battery materials, which is an extreme growth predicted, is a little bit slower maybe over the next 2 years does not change anything, that battery materials and the volumes needed for all the cars to be produced is a positive environment and a positive node for BASF. So that is why we still focus on them.

We do -- we execute, but we are very tight with all the other businesses and very sharply go to those points where we have cost reductions and certain elements where we can diversify. With regard to the portfolio, Wintershall is next now, and I think Hans said this, we are looking to do something now in '21, also certainly condition to market conditions.

We have to look at that. But that is still something to do with the pigments we have to bring home finally.

And if you do the math to what we have done, what we have told you when we launched our corporate strategy, then there is a little bit left in sales, but that is no big chunks that are comparable what we have done so far, and we have no urgent need on that. So we will focus very much now on the organic growth.

And I think over the next 1 or 2, 3 years, you don't have to expect further very big portfolio measures. But you also know that this is also in the smaller part, always work that has to go on.

Now I will hand over to Matthew Yates, Bank of America. We will then have Tony Jones, Redburn; and Markus Mayer, Baader Bank.

Given the uncertainty around the trajectory of the pandemic, I thought I'd take the opportunity to ask Martin a couple of midterm questions, if that's okay. You said in your introductory remarks about the affordability of the dividend being based on midterm earnings power.

Should we infer from the write-downs taken today and the ongoing capacity build out in the industry by some of your competitors that you are indeed becoming less confident in the future earnings power of the business? And then the second question is, Martin, you recently made some quite interesting comments at the European Industry Conference on the political backdrop in Europe and the ambitious political goals on carbon reduction that we've seen coming out of the crisis.

I don't want to misquote you, but it was something along the lines of politicians not necessarily recognizing the financial impact on corporates and society of meeting those goals. Can you maybe just elaborate on that from a BASF context, how you think about your position in Europe could affect your cost base and competitiveness in the industry over the midterm?

Yes, Matthew, thank you for your question. I'll start with the last one.

I mean the European green deal is certainly a very, very high ambition. And what you read now and what you hear from the politicians, they are almost in a race to drive the ambitions and the vision up and up and up.

No one talks about really how to do it. And so that is why I pledge very much that we need now an intensive collaboration and a dialogue by detailing down what does such an ambition's vision need in terms of day-to-day measures, framework conditions to really make that happen.

I mean let me tell you, we have spent a lot of time in BASF to look on how we can electrify BASF because this is the only opportunity to get rid of the CO2. I would tell you very bullishly by saying, technically, I think we are very clear how to do that.

It's actually possible. But not everything of these measures has a price tag where you can say it's competitive in today's world.

And this is why we have to talk about the framework conditions. We will also do certain measures, and this is hundreds of measures to decarbonize BASF, which are, I think, already under today's point of view, economic.

So these are the first ones to do. But we have also to start with some of the newly developed technologies to start pilot plants and really prove whether, first of all, technologically, this is possible to do in large scale.

And then also use that to discuss with politics about the framework condition we need to make this happen. So overall, this European deal has to connect the ambition space, staying and keeping the industry competitive.

And I think there's a lot of work to do. Chemistry and BASF will contribute to the European deal, which I think is not doable or even, I would say, indispensable without BASF in the chemical industry, but we need also the conditions to do that in a healthy manner.

So I would say there is some pressure on us, the whole industry, but let me also say, without now going in details, there are also some opportunities come with it because we will have new markets and you saw also we have the product carbon footprint, so we will reduce the carbon foot print and accompany our customers to reduce their footprint. So this is all new business models, and this is also opportunities.

But this is also a new territory, which we're in charter to. So a very, very interesting thing.

We will keep you updated on that, on the opportunities and also some of the challenges. With regard to my statement about the dividends and the impairment part.

Indeed, we have certainly taking some assumptions, mainly for the commodity area and also for the automotive business, which forced us basically to do these impairments. And I think Hans has alluded to that, but that does not mean that this is an overly all depressive environment now for BASF going forward.

And this is why we have to substantiate this, really looking longer term, midterm, long term, what does this mean? And I think one part you just mentioned is Europe.

I mean the European great green deal can be an opportunity, but it can be also a challenge. And we have to get a better grip for that and to evaluate, and just remember that 40% of our business is today still in Europe.

So we depend on developing our business in Europe also positively. So this was why I would say what we have now done for the impairment does not necessarily mean that this is now the basis also for certain conclusions about the dividend.

I just mentioned this part of dividend because several people have raised to this, and I would really like to reiterate, give us the time to have the numbers for the cash flow, a better outlook, which we will then explain in February, and then we will take a decision over there.

So the next question is from Tony Jones, Redburn. We will then have, as I said, Markus Mayer, then Chetan Udeshi.

So I just see you've left the line. So we continue immediately with Markus Mayer.

Perhaps he's coming back, so it's Markus Mayer, Baader-Helvea.

The first one is on the potential Wintershall IPO. When you say the IPO is linked to market condition, does this relate to the equity market conditions or also to the oil and gas price?

Or in other words, what is more important, the overall business environment for Wintershall Dea or the equity market? That would be my first question.

Second question is on the guidance. Maybe you can shed some light what kind of lockdown buffer you have included in your guidance.

And I understand that not severe lockdowns are included, but I guess this kind of lockdown lights, they might now get included? And maybe you can help us on the effect you have baked in, in your guidance.

Yes. This is Hans.

I'll start with the Wintershall IPO questions. When we talk about market conditions, this includes the oil and gas market as well as the equity market.

And we want to make that move at the point in time where both markets cooperate. And we think that in the course of 2021, we'll find ourselves in an environment that would allow for an IPO that meets our expectations.

Markus, with regard to the lockdowns, I mean, we have an interesting discussion today here in Germany about what the next steps will be. But I think the overall learning from most of the government is that the first lockdown wave, they learned a lot.

I think everyone is refraining from doing something or repeating something like this. This is why we said in our assumption, we don't expect that this is a total lockdown.

I think, however, we are in France, and in Spain, we are close to this. But I think most of the other discussions are actually more -- having more impact on the service industry.

So it is about restaurants, it's about events, and that is not so much hampering industrial production. And this is why we don't assume that it will have so hard impact on that.

It can, however, certainly dampen the overall psychology of consumers. You'll never know whether this makes them a little bit more cautious on buying behavior, but we do not expect that this will be the general pattern.

So this is a bit the assumption we have. If we would now see escalations over the next 1 or 2 weeks that this goes really sky rocking and is out of control and politicians would make more harsh statements, then okay, that could have an impact.

But I think we made clear also on how October run, which was so far very well. And also looking at our orders at hand for November, then not so much is left for December.

And December is anyway then a weaker month normally because also customers do inventory management and so on. So then we should have home -- more significant part for the first -- for the fourth quarter.

So that is, I think, I hope, gives you a little bit of framework on how we have put the assumptions into our math.

Tony Jones is back on the line. So I would now like to hand over to him.

Tony, the floor is yours.

Thanks, Stefie. I've got two, one for Hans, then a big picture one for Martin.

So firstly, for Hans. On the balance sheet, I see nearly EUR 12 billion of non-integral investments.

Could you indicate how much of that can be oil and gas and maybe how you get to that number? And then for Martin, how do you think about the opportunities for chemical companies in hydrogen?

And maybe more importantly, do you think BASF should be playing a role in that market over the medium term?

Tony, then I start with the hydrogen part. I mean, I could take now a long time to talk about that.

I mean, in principle, let me say, hydrogen as an energy carrier and as one to actually store electrical energy from renewables, I think, there is not much choice than hydrogen. It's also -- if you look on the periodic table, it's a very small, high-energy molecule or atom.

That is, I think, really the right choice. However, if you look on the economics of it, I would doubt that anyone earns with that quickly money.

You know that the focus is on green hydrogen. That is water cleavage.

Water is, unfortunately, a very stable molecule in nature. That means you have to bring up a lot of electrical energy to cleave that molecule into hydrogen and oxygen.

And renewable energy is also not cheap in today's time and a scarce resource. That means hydrogen will be -- a green hydrogen will be very expensive.

It's about 3 to 4x as more expensive as it is from steam reforming, which is a normal process chemical industry does. Steam reforming comes with 10x of CO2, which certainly can leverage the 2 because when there are CO2 costs, the gray hydrogen is getting more expensive.

But taking investments and taking operating costs, this will be a burden without public funding that is definitely needed to kick-start that. And so I think many will contribute and would like to contribute to that but not really earning money with it.

We explain you one time when we have more space for that, maybe on one of the Capital Market Days or so, what we want to do with this. For us, hydrogen is not a business opportunity, but hydrogen is one part of our way to decarbonize and to get rid of our CO2 footprint, not only using hydrogen in products but also using hydrogen partly really to, for example, convert CO2, rest CO2 and to use it as an energy carrier.

So for us, this is an integral part, and this is also why we do research on that, particularly on the methane pyrolysis. But it is not a business area for us.

This is Hans. So your question on the non-integral investments, EUR 11.9 billion.

More than 90% of that is our Wintershall Dea financial participation. The remainder is pretty much the participation that we have in Solenis.

And reflected in this number is obviously the impairment to the tune of around about EUR 800 million on Wintershall Dea that we had in Q2.

Okay. So now we move on with Chetan Udeshi, JPMorgan.

We will then have Charlie Webb, Morgan Stanley; and Laurent Favre, Exane BNP. So now it's Chetan Udeshi, JPMorgan.

Just 2 questions. Number one was can you maybe help us understand if there was a material benefit from PGM price revaluation gains in third quarter in Surface Tech?

That would be first. And second question, I'm just looking at the personnel expenses in third quarter.

And based on what you've reported, seems it's flat year-on-year. So I'm just trying to understand, where is the benefit from the ongoing improvement programs visible in terms of numbers?

I just repeat. Your first question was on PGM and the influence, and then on personnel cost, why it was flat in Q3.

Correct?

Yes, because, I mean, I see there are a number of 6,000 employees planned to be cut by end of this year. But where is the benefit of that in terms of P&L because personnel expenses are flat?

Yes. Understood.

Okay, Chetan, I'll take your 2 questions. I'll start with the question on PGM's impact -- of PGMs on Surface Technologies.

There is a significant impact that comes from the PGM prices in the sales increase that you see, and that simply has to do with -- if you look at the development of rhodium prices, if you look at the development of palladium prices during the course of the year 2020, but also then, in particular, during the course of the third quarter 2020, as Martin has already mentioned, expectation is that we'll stay at this price level also then in Q4. And certainly, the first 4 weeks in October support that statement.

On the personnel costs and personnel cost development, let me start with the overall development in the first 9 months of the year because if you look at the first 9 months of the year, you see a decline in personnel costs. And I think that's a much more meaningful number because during -- looking only at 1 quarter, you always have special developments in there as we had, for example, in Q3 as a result of the decline of interest rates.

And with that discount rates, our pension obligation increased, and that's reflected, to a certain extent, then also in the personnel costs in Q3. So overall, first 9 months, reduction of 3% despite the fact that we had the usual personnel increases in 2020, personnel -- or salary increases in 2020.

We also had, as you may recall, the acquisition of the assets and businesses from Solvay closing there on January 31, if I recall correctly, that came within personnel increase. So I think the take-home message is really all the first 9 months reduction in personnel costs despite these developments as explained by 3%.

Can I follow up quickly on the first point? Are you seeing the impact from PGM prices are only on sales but not so much in -- on earnings?

No, Chetan. That's not what I'm saying.

What I say is significant impact in sales but also a significant impact on the earnings. I can imagine what your next question is.

Without this kind of EBIT contribution, Surface Technologies would not have delivered the results it delivered in Q3.

Okay. We move on to Charlie Webb, Morgan Stanley.

First off, just on China. Obviously, you had an exceptionally strong Q3.

Just wondering what you're seeing as the main drivers of that. How sustainable do you think this very strong bounce back in demand is in China?

How sustained do you think that will be through the start of next year? And are you seeing any stocking effects in Q3 and perhaps leading into Q4 in China in particular?

Or is this all just improved demand? That's the first question.

Second question. Just on Surface Tech, following up a little bit.

I mean we talked obviously around the PGM piece. But maybe that aside, what have you seen in the other parts of Surface Tech that led to sharp snapback in profitability?

Was it a better quarter for catalysis? Or was it more on the coatings side?

So just an understanding on what's the driving force beyond PGMs, which you obviously commented on that it was better year-on-year. Just sequentially, trying to understand what the other improvements were, that would be helpful.

Charlie, I'll take your question on China. If I phone to our team over there, they'll just tell me how overwhelming the positive spirit is in this country.

And I mean now we have seen this over months, that also the increase in volumes and demand was very strong and very consistent. I mentioned more than once before that you have to look long term, whether the retail development and the industrial production is in sync.

This is not yet fully the case. Retail is getting better, but it's still a little bit more cautious.

So I think the consequence out of that is that some stuff is produced into stock. And this is always why I said, if that should be a strong long-term development, the both have to come into sync.

But I think with every month more, I think this is getting more optimistic. And it is extremely dynamic.

And what my people tell me, decision-making and really going forward this project is just amazing if you are here in Europe and you see the situation. So we have no indication that this is kind of a blip only.

It really looks like they manage this overall very consistently and to make this a very consistent development. And I think that the Chinese government is refocusing from export-driven to more domestic.

They have actually a better toolbox also to stimulate that, and that is actually what we see. So we are very bullish and very positive about the China development to go on over the next months and quarters.

Yes, Charlie, I'm happy to give you a little bit more -- shed a little bit more light on the developments in Surface Technologies compared to prior year quarter. Compared to prior year quarter, we have improved earnings in the precious metal trading business that we mentioned already.

We have an automotive catalyst business, which is at the level of the prior year quarter. And that is driven, in particular, by very strong business in Asia, and there, again, as we explained also for the second quarter, predominantly by the business in China due to the new China 6 regulation and being there with the right product at the right point in time.

In the chemical catalyst business as well as the refinery catalyst business, that is weaker than it was in the prior year quarter in both businesses. We see in both businesses that catalyst is typically run over a longer period of time.

So the customers come back more slowly than they do under normal circumstances, which also obviously has to do with lower run rates, in particular, in refinery. And last but not least, our battery materials business contributes higher earnings in 2020 in Q3 than it did in 2019.

On the cooling side of things, we see overall weaker numbers than in Q3 of last year. That should not be a big surprise.

I think the important take-home message here is significant improvement compared to Q2.

[Operator Instructions]. We will now have Laurent Favre and then Andreas Heine, Christian Faitz, Peter Clark and Sebastian Bray.

So now Laurent Favre, Exane BNP Paribas.

Well, I need to kick one then. Maybe for Hans, on the cost side of things.

I think Slide 10 is pointing towards EUR 600 million of incremental EBITDA contribution from the structural savings program into 2021. Can you talk about the temporary savings that you must have had this year and to what extent that will offset, I guess, the plus EUR 600 million on structural savings?

Can I talk please about what, Laurent? I didn't fully get that.

The temporary savings.

Yes, temporary savings, a difficult topic. This is primarily on the side of the discretionary savings.

As you can imagine, we've driven that down in a year like this wherever we could. So anything from T&E, so travel and entertainment, to advertisement, is down.

How this will then -- what this will mean for the year 2021, I'd say, remains to be seen. I think we are very clearly on a path, cost-wise, at least, to do more with less, meaning run the business on overall reduced fixed costs.

And you can expect us to be at least as disciplined in the year 2021 as we were in the year 2020.

And Hans, as an order of magnitude, are we talking about low 3-digit, mid-3-digit, high 3-digit?

And if I give you the either low or mid, we then start talking about where it is exactly. No, in fairness.

I'd say we're probably talking somewhere lower triple-digit.

Laurent, maybe some of our people still think some postponement will come back. I tell you it will not come back in 2021.

We take care of that.

So the next question is from Andreas Heine, MainFirst.

I'd like to go to the cash flow. Last year, the cash flow was very strong in Q4 with EUR 2 billion.

I will not expect this, but with the agri business having some volatility in net working capital towards year-end, what is what you see in net working capital in Q4 in line with what you have given as a guidance for the full year? So what then reflect the free cash flow.

I should restrict myself to one, but maybe for clarification, usually, you mention 3 big projects: the battery materials, Verbund site and the acrylic site in India. You haven't mentioned your acrylic site in India.

So is that one on hold?

Andreas, I'll start with views on cash flow, free cash flow development in Q4. Typically, the most difficult thing to forecast because fully dependent on what your business expand, will it be on the same level or will it shrink?

Clear benefit that we had in Q2 and Q3 with our cash flow generation, as we had expected, it came with an overall shrinking business. The key question is now what's going to happen here in Q4.

October, Martin has already explained, the development that we had in September continued. So if we'll see an expansion of the business that we'll need some cash to be supported.

But I think that would be fine because it would also then come with higher earnings that we would generate. So from that perspective, that'd be okay.

Overall expectation is strong cash flow development, robust cash flow development for the full year 2020. Let's see where we will actually come out then with our Q4 operating as well as free cash flow.

But I can also assure you that the measures that we have put in place, such as the cost reduction measures already asked by Laurent as well as capital expenditure measures, the reduction there, that we expect this also to contribute in Q4.

Andreas, to be precise, we have -- at the beginning, we also talked about 3 projects in Asia because we have also the Nanjing expansion and have also India. But what I mentioned to you is the 2 projects where BASF can decide what we want to do.

And this is China, the battery materials. So it is our decision.

The other parts always involve other parties, which certainly also look into their planning, and this is why we have not talked about this because we depend also what others do, and we are looking into this. And if there are news on it, we certainly come back.

The next question is from Christian Faitz, Kepler Cheuvreux.

Just a question on portfolio, maybe potential future portfolio measures, small business. Your key competitor in the deco coatings business in Brazil is claiming to have one significant market share, apparently quite recently.

Can you confirm this? Deco Brazil is pretty much the only business-to-consumer activity you are engaging in aside from agriculture, obviously.

How much sense does it make for you to continue to own this rather small activity in the bigger context of the BASF portfolio?

Yes, Christian, this is Hans. Happy to take your question.

First of all, what do we see in our South American deco business. We see very good business development there in Q3, very happy.

Sometimes when competitors refer to market share and the development there, and I add this all up and look at my own figures, I come to the conclusion that the market must have significantly more than 100%. And I think I'll leave it at that.

On the portfolio question, it's a business that both from an earnings as well as from a cash flow perspective is an interesting business for BASF. Yes, it's stand-alone, that's right.

But if you look at the Suvinil brand and the value that it has, not only on a stand-alone basis but also overall for the reputation of BASF Group, I want to say it's a good and attractive business that we have there. So no need to rethink its positioning.

So we move on to Peter Clark, Societe Generale.

Just going back to the impairment, particularly on the Surface Tech side. I heard your comments about auto Europe.

I think also metal coatings was mentioned. I'm just wondering, is there a definitive split there between the coating and the catalyst business?

Because I am presuming that there is an element of the charge for chemical, the deal in 2015. So it's just some feel for your change in assumptions on the Surface Tech side.

Yes, Peter, this is again Hans. Happy to take your question.

Yes, there is an element of Surface Tech India. If you think about the Surface Tech business, that business has an auto exposure, order of magnitude 50% to 60%.

It has an aviation exposure in the order of magnitude of, let's say, 10% to 20%. And looking at the overall development there, the business will not be able to generate in the early years now.

So in the years '21, '22, most probably '23, the kind of cash flows that we had expected, our expectation is that we'll see clear recovery in both markets. But it will take us till end of 2022, 2023 for aviation, maybe even a little longer, to get back to where we were in 2019.

And that, we had to reflect then also in this kind of impairment.

And specifically on Chemical, is something there for that?

Specifically on Chemical is...

There's some charge allocated to Chemical.

That's what -- sorry, that's what I tried to say. There is an element that relates to the Surface Tech and i.e., to the Chemical business.

So now it's Sebastian Bray, Berenberg.

It's on the impairment in upstream chemicals. Is there either a geographic or value chain focus to where the impairment is implied?

And how do the assumptions, either in terms of value chain and time horizon that flow into this impairment, differ from those related to the investments in Guangdong sites? And to be more specific, is it that you think Chinese capacity supply/demand will recover on a 4- to 5-year view, but the impairment refers primarily to a shorter period of time?

Or is it mainly geographical?

I mean, overall, I mean, it is a perception and I think an estimation about commodity business, the supply/demand. I think we have talked more than once about that, that this is certainly all a detailed view look by value chain.

But it is an overall pattern that is basically true for many of the big lines over there. This is why several of the commodity lines are part of that impairment, and certainly also plans and business cases in certain regions, but it's not one thing.

It is a more broad picture. If you look on China, then this is certainly something where supply/demand is a challenge, but it is also at the same time, the only market that has significant growth rates, and that is actually the market.

And particularly with what I said earlier, with a strong focus on the domestic demand and even higher growth rates in the Chinese market, that is normally the market because of size that also can digest this imbalance as much quicker than others. And this is why if it makes at all somewhere sense to build commodities, then it is in China.

And we have reduced all our expectations in CapEx for commodities in most areas of the world, in lines. But certainly, in China, if you build Verbund site, where you need also the first step of the value chain to build up these chains and these networks, and you look then on the different markets, then you see some markets where within 12 months, 15 months, you can digest -- or this market can digest one world-scale plant.

So I think if you have then the right concept for it embedded in this Verbund idea, then it makes sense. If you're more stand-alone, I would doubt that this will make sense.

So we will talk about you what we do in detail and in China a little bit later and give you the frame about that. But that's roughly what is behind these thoughts.

So the commodity markets in China long term still interesting because of size and growth rates.

One follow-up question, but it will be really definitely the final question from Laurent Favre now, Exane BNP Paribas.

I've got a very similar question on the impairments in Ag compared to all the other questions you've had on impairments. So a bit surprised by the magnitude of these impairments.

Is it just glufosinates? Have you done anything on dicamba, for instance?

And why do you now think that there's overcapacity in your network on glufosinates? And therefore, why the need to rationalize capacity?

Yes, Laurent, this is Hans. Happy to take your question.

It is exclusively glufosinate-ammonium. You look at the generic competition there and the cost position that competitors have, we came to the conclusion we must rationalize our production footprint.

This means we will have to close the plant in Muskegon. We will have to close one of the lines in Germany and then produce the active ingredient in the remaining 2 lines in Germany.

That should improve our cost position significantly. We're also taking a number of other measures to put this business overall in a better position.

But the short answer to what you have asked is exclusively glufosinate-ammonium.

And not LibertyLink related on intangibles?

Pardon me? Again?

And not related to intangibles on LibertyLink on the Liberty platform?

No.

Ladies and gentlemen, this brings us to the end of our conference call. We will report on our full year results on February 26.

To conclude, I would like to wish you all the best, stay healthy, and let's keep in touch virtually. Thank you for joining us today, and goodbye for now.