strategy agricultural products - basf · 2018. 10. 3. · agricultural products division performs...
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Strategy Agricultural Products
Hans W. Reiners PresidentAgricultural Products Division
August 2005
1 | Agricultural Products Strategy Delivers Results
2 | Half-Year 2005 Performance
3 | Setting the Benchmark in Customer Satisfaction, Innovation and Profitability
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Pipeline
BASFTheChemicalCompany
Strategy:Focus on high-value• Markets• Products• Innovation
ProfitabilityProfitability
CustomerSatisfaction
PipelineProfitability
CustomerSatisfaction
Pipeline
Success intoday‘s and tomorrow‘s
agro markets
BASF – Top Player in Agricultural Products
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Our Strategy of Profitable Growth at Work Targets and Strategic Measures
• Profitable growth with new and innovative products
• Active cost optimization
• Strict asset management
We defined clear measures
* before special items
EBITDA*Margin
Assets
We set clear targets
5
0
25
50
75
2001 2002 2003 2004
Inventories
Accounts receivable
Joint efforts with our channel partners
• Sell closer to the planting season
• Reduce payment terms
• Reduce channel inventories
By further improving internal processes
• Reducing manufacturing lead times
• Increasing manufacturing efficiency
We Reduced Working Capital by One-ThirdStrict Asset Management
In % of sales (year-end)
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US Channel inventoriesat season-end September 30
Brazil Channel inventoriesat season-endMarch 31
Bar: million USDLine: in % of BASFseasonal net sales
• Ongoing management of channel inventories together with customers
• Down to just 25% of seasonal sales in the US
• Low channel inventories in Brazil: <10% of seasonal sales
• Current situation in Brazil: In Q2+3 we reduced drought-related field inventories by about 60 million USD, paving the way for the season 2005/6
We Cleaned Up Channel Inventories
Million USD250
2000/01 2001/02 2002/03 2003/040
20%
40%
0%
200
150
100
50
160
230
~90
~30
2001/02 2002/03 2003/04 2004/050 0%
25%
50%
100
50
130
Million USD
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We Have Exited 12 Sites Since 2001 Asset and Cost Optimization
EXITResearch sites and experimental stations
A.I. manufacturing and formulation sites
2002
2002
2001
2005
2005
2005
2002 2002
2003
2003
2002
2002
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Following the acquisition of American Cyanamid, we achieved cost improvements of more than 400 million EUR since 2001Corporate:• Realized synergiesR&D:• Reduced unproductive
infrastructure costs• Refocused R&D activitiesM&S:• Realized synergies• Increased focusOperations:• Site exits and site
consolidation• Process and sourcing
improvementsWe continue to reduce costs, especially in operations2001 2002 2003 2004
We Actively Reduced Costs in All Areas Strict Cost Management
0 50 100 150
Operations
Sales andMarketing
R&D
Corporate
Cost reduction in million EUR
9
• We increased share of sales in strategic markets to more than 85% of overall sales
• Presence in key markets is prerequisite for successful launch of pipeline products
• Rapid penetration of new, high-value segments
Strategic Markets Opportunity Markets
We Increased Sales in Strategic MarketsFocus on High-Value Markets
10
* Currency adjusted to 2004
552
98
1,196
2,8083,354
2001* Productportfolio rational./reduction
Divestitures Acquisition,product pipeline, product lifecycle innovation
2004
We Increased Sales with New Products Focus on High-Value Products
• New and innovative products drive sales growth- Product pipeline and
product lifecycle innovation
- Acquisition of fipronil package
• Product portfolio rationalization and divestitures reduce complexity and share of less profitable, particularly third-party products
Million EUR
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We Successfully Launched Our PipelineFocus on High-Value Innovations
• Youngest portfolio in the industry
• Introduced seven new active ingredients since 2000
Fungicides:Boscalid, Dimoxystrobin, F 500
Herbicides:Dimethenamid-P, Picolinafen, Tritosulfuron
Insecticide:Chlorfenapyr
Sales of pipeline products in million EUR
500
1,000
2001 2002 2003 2004 2005 +
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Our Strategy of Profitable Growth Works Targets and Achievements
* before special items
EBITDA*Margin(in % of
net sales)
Assets(in billion EUR)
2002 2003** 2004** ***** including acquired
fipronil package***IFRS adjusted
16.2
28.0
21.3
2005 goal of 25% set in 2002
18.9
5.15.5
5.0
6.4
2001
1 | Agricultural Products Strategy Delivers Results
2 | Half-Year 2005 Performance
3 | Setting the Benchmark in Customer Satisfaction, Innovation and Profitability
14
-3
+16
+7
-3
in €?%
24.0%28.5%EBIT*-margin
+12632679EBITDA*
30.8%33.9%EBITDA*-margin
+85,6935,540Assets
+21493571EBIT*
+22,0542,002Sales
in $?%
1 HY2004
1 HY2005
Agricultural Products Division PerformsOverview of Half-Year 2005 Performance
* before special items
In million EUR
Exchange Rate: 1 HY 2004: US$/€ = 1.227 1 HY 2005: US$/€ = 1.286
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Agricultural Products Division Performs Sales Development by Region
-34-37259163South America
+1-4999960Europe
-3
+1
+13
in €?%
+2
+5
+18
in $?%
2,0542,002TOTAL
142143Asia-Pacific
654736NAFTA
1 HY2004
1 HY2005
Exchange Rate: 1 HY 2004: US$/€ = 1.227 1 HY 2005: US$/€ = 1.286
In million EUR
16
2,054
418
775
861
1 HY2004
-3
-11
+4
-4
in € ?%
+2
-7
+9
+0
in $?%
372Insecticides/Other
2,002TOTAL
805Fungicides
825Herbicides
1 HY2005
Agricultural Products Division Performs Sales Development by Product Group
Exchange Rate: 1 HY 2004: US$/€ = 1.227 1 HY 2005: US$/€ = 1.286
In million EUR
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Agricultural Products Division Performs2005 Outlook
Agrochemical market:After 4.7% market growth in 2004, we expect the market to be slightly below last year’s level in 2005.
Subject to the following assumptions:
• No major commodity price changes
• Improved liquidity situation in Latin America
• No extreme exchange rate volatility
• Normal weather conditions
BASF Agricultural Products:For the full year 2005 we expect slightly lower sales, but higher EBIT before special items and a higher EBITDA margin compared to the previous year.
1 | Agricultural Products Strategy Delivers Results
2 | Half-Year 2005 Performance
3 | Setting the Benchmark in Customer Satisfaction, Innovation and Profitability
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We Set New Benchmarks
Benchmark in• Customer Satisfaction• Innovation• Profitability
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We Set Benchmark inCustomer Satisfaction
Country
BASF in the eye of our customers:
Year 2004/5Year 2001USA #3 #1
Brazil n.a.France #5Germany #1 #1UK #2 #1Italy #2 #1Japan #9
#1#1
#7Source: Various independent customer satisfaction studiesStratus (USA), A Granja (Brazil), Eider (France), DLG (Germany), B2C (UK), CIF (Italy), Crecon (Japan)
We build on strong relationships withour customers
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Source: PhilipsMcDougall and own estimates. Based on 2004 sales of crop protection products.
Competitors
Sales of patented actives in % of total company sales:
A B C
• Customers enjoy steady flow of innovative products to safeguard quality and quantity of harvest
• Leading intellectual property position for BASF through successful commercialization of pipeline products
• Platform for generic defense and lifecycle extension
We have the Best Patent Protected PortfolioSuccessful Portfolio Management
0%
50%
100%
BASF
Patent Off-Patent
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F 500® fungicide
• Becoming the leading fungicide in the world
• Expect 2005 sales of F 500®-based productsto surpass 400 million EUR target, set inSeptember 2004
• Upgrade sales target for F 500® products againby 100 million EUR to over 500 million EUR by 2007
Boscalid fungicide
• Successful launch driven by excellent customer acceptance in Europe and North America
• Registrations in 36 countries and for over 100 crops
• Expect sales to increase to more than150 million EUR
We Launch Agro Innovations Successfully Successful Product Innovation
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We Set the Benchmark in Innovation Profitable Growth Through Powerful Late Stage R&D Pipeline
Specialty Crops1 Insecticide
Corn, Non-crop
Soybeans
2 Herbicides
1 Herbicide tolerance
Cereals, Rice, Specialty Crops
3 Fungicides
Non-crop1 Insecticide
Cereals, Corn3 Herbicides
Cereals, Soybeans, Specialty Crops
3 Fungicides
Peak Sales Potential
Major Crops/MarketsProjectsStage
*Almost 60% thereof reached in 2004. Products in launch have developed better than initial forecasts
InLaunch
InDevelop-
ment
1,100 MillionEUR*
700 MillionEUR
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New insecticide – Metaflumizone
• Innovative insecticide for specialty crops
• Strong on target pests
• Low risk to applicators, consumers and the environment
• New technology to be launched by 2006/7
We Develop New Insecticide Mode of Action Emerging Technology: Metaflumizone* Insecticide
* Provisionally approved common name
Untreated Potato
Treated Potato
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New Fungicide – expected to become a blockbuster
• Fourth generation of fungicides
• Broad range of solutions for effective andlong-lasting control of fungal diseases
• Strongly complementary to the currently available chemistry
• New technology to be launched by 2009/10
We Develop New Fungicide Mode of Action Emerging Technology
Without treatment
BASF new technology
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Innovation is the critical success factor inthe agrochemical market
We Invest in New TechnologiesStrong Commitment to Agrochemical R&D
Development ì• Broad market introduction of pipeline projects• Extending portfolio of new innovative actives
to new applications such as seed treatment and other new business opportunities (F 500, Boscalid, Fipronil)
Research ì• Further strengthening discovery of novel
fungicides and insecticides• Exploring new opportunities, such as in Plant
Health
2003 2007
Research
Develop-ment
7.5%of sales
9–10%of sales
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Financial Targets until 2010
• Average organic sales growth of 2-3% p.a. above market growth
• EBITDA margin above 25%
• Maintain profitability benchmark position in the industry
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Disclaimer
This presentation contains forward-looking statements under the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict and are based upon assumptions as to future events that may not prove tobe accurate.
Many factors could cause the actual results, performance or achievements of BASF to be materially different from those that may be expressed or implied by such statements. Such factors includethose discussed in BASF’s Form 20-F filed with the Securities and Exchange Commission. We do not assume any obligation to update the forward-looking statements contained in this presentation.
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