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Chemicals Toward new levels of performance Stefan Marcinowski
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Chemicals Toward new levels of performanceStefan Marcinowski

2

Chemicals – the heart of the Verbund

*including other activities: 2.5 billion Euro (5%)

2006 Group sales*: 52.6 billion Euro

Agricultural Products & Nutrition

Performance Products

19%Plastics

24%

Chemicals• Inorganics• Catalysts• Petrochemicals• Intermediates

Oil & Gas20%

10%22%

3

Strong positions across chemical spectrum

Inorganics PetrochemicalsIntermediatesCatalysts

• Inorganic chemicals

• Inorganic specialties

• Electronic chemicals

• Glues and resins

• Cracker products• Industrial gases• Alkylene oxides

and glycols• Plasticizers• Solvents

• Amines • Butanediol

and derivates• Polyalcohols and

specialties• Acids and special

intermediates

• Emission-control catalysts

• Process catalysts

• Precious metal services

1 | Building a stronger Chemicals segment (2001 – today)

2 | A strong portfolio focused on performance

3 | Toward new levels of performance

4

5

Sales more than doubled, EBIT quadrupled within last 6 years

CAGR 2001-2006:

• Global chemical production**: 3.6%

• Oil price: 13.6% (Euro/bbl)

• BASF Chemicals

Sales: 20.8%

EBIT***: 32.0%

** without pharma

*** before special items

0

2000

4000

6000

8000

10000

12000

14000

2001 2002 2003 2004 2005 2006*0200400600800100012001400160018002000

Sales* in million Euro

EBIT before special items* in million Euro

InorganicsPetrochemicals IntermediatesCatalysts

Sales: +21% p.a.

* Engelhard-Catalysts accounted from June 2006 onwards

6

Relentless focus on operational excellence drives profitability

Index

Drivers for improvement:

• High capacity utilization

• Higher margins

• Rationalization in older plants

• Investments into state- of-the-art technologies

• Business models and enterprise-resource- planning models

EBIT before special items indexed

Sales indexed

0

50

100

150

200

250

300

350

400

450

2001 2002 2003 2004 2005 20060

50

100

150

200

250

300

350

400

450

Fixed costs indexed (including depreciation and amortization)

7

BASF Chemicals

Powerful partnerships

• Total• Sinopec• Petronas• Shell

Major investments

Major capex• Verbund sites

(Nanjing, Port Arthur, Kuantan)

• PolyTHF (Caojing)

Acquisitions• Catalysts • Electronic chemicals• Plasticizers • Inorganic specialties

Major divestitures / closures

• Ethane cracker North America

• Butanediol restructuring

• Plasticizer restructuring

Today’s portfolio better than ever

1 | Building a stronger Chemicals segment (2001 – today)

2 | A strong portfolio focused on performance

3 | Toward new levels of performance

8

9

7%

20%

73%

Estimate 2007 (in % of sales)*

Growing share of formulated materials and customized solutions

*excluding Materials Services

20%

73% Chemicals & basic materials

Formulated materials

Customized solutions

10

Chemicals & basic materials

How we succeed:

• Cost leadership through Verbund - Product portfolio - Energy efficiency - Logistics

• Technology leadership• Innovation• Partnership /

cooperation

Chemicals & basic materials

7%

20%

73%

Estimate 2007 (in % of sales)*

*excluding Materials Services

7%

20%

73%

Chemicals & basic materials

Formulated materials

Customized solutions

11

Strong forward integration in a large portfolio of value added products (I)

Naphtha,LPG

EO Ethylene glycol

Ethanolamines

Styrene Polystyrene

Oxo-C4

Butadiene

Isobutene

PolyamideCaprolactam

Dispersions

Plasticizers

SolventsButanols

2-Ethylhexanol

Superabsorbents

Engine coolants

Process chemicals

Fuel additives, sealantsPolyisobutene

Cyclohexane

Polyurethanes

Benzene

Acrylic Acid

PO

Ethylbenzene

Raw materials Selected products

Ethylene

C4

Propylene

Chemicals segment

Surfactants Detergents

12

Food conservations

Pharma, Agro

Textile fibers, polyurethanes

Coating resins, adhesive raw materials

Glues,

Glass industry, fertilizers

Chemicals, electronics, fertilizers

PVC

Alcoholates

Natural Gas

Sulfur

Salt

Acetylene

Ammonia

THF/pTHF®

Urea

Vinyl ether

Methanol Formaldehyde

Me-Formiate Formic acid

Melamine

NOx

SO2 , SO3

Nitrite, Nitrate

Sulfuric acid

Cl2 , NaOH EDC

Butanediol

Syngas

impregnating resins

Strong forward integration in a large portfolio of value added products (II)

Chemicals segment

Raw materials Selected products

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Diverse product portfolio with a strong propylene value chain

• Naphtha cracker matches BASF’s broad demand for cracker products better

• BASF operates metathesis plants to convert ethylene to propylene (Port Arthur)

• BASF is a net buyer of benzene and propylene

• Ethylene surplus is mostly covered through long-term contracts with strategic partners (e.g. Solvin)

to/to Ethylene Typical cracker output

BASF demand

Feedstock Ethane (1.3)

Naphtha (3.0)

2006

Ethylene 1.0 1.0 1.0

Propylene 0.02 0.55 1.09

Butadiene 0.03 0.17 0.16

Benzene 0.01 0.25 1.62

Toluene 0.0 0.04 0.17

Source: Ullmann, BASF

14

Global ethylene market segments

Source: CMAI, BASF

Ethylene surplus sold to 3rd parties account for 2% of total Chemicals sales

• 84% of produced ethylene consumed captive in value added products

• BASF participates over proportional in– EO derivatives – Styrene

• BASF will manage and balance the limited direct impact of Middle East ethylene derivatives imports inside the Verbund

59%

12%

7%

10 %

12%

Global ethylene market 2006:110 million tons

BASF net ethylene balance

BASF production* 2006:2.3 million tons

16%

8%

2%

25%13%

29%

7%

* BASF JV as per ownership share, 2006

EOPVCPolyethylene

Others Ethylene surplus sold to merchant market

Styrene

EO for MEG merchant market (68 % in China)

15 Source: BASF

Propylene captive demand in different spread of applications

65%

7%

4%

9 %

8%

Global propylene market 2006:66 million tons

BASF production* 2006:1.4 million tons

7 %

* BASF JV as per ownership share, 2006, from steamcracker and metathesis

Global propylene market segments

AcrylonitrilePOPolypropylene Acrylic acid

OthersOxo

• BASF participates over proportional in– Propylene oxide – Acrylic acid – Oxo products

• Can manage and balance the limited direct impact of Middle East propylene derivatives imports inside the Verbund

24%

12%

29%

35%

BASF net propylene balance

16

Unique energy efficient Verbund concept

(average tons/hour)

-1000 -500 0 500 1000

Heat producing processes

Heat consuming processes

Own energy power station

Steam consumption Steam production

16

Example Antwerp

17

0

25

50

75

100

Total manufacturingcosts

Net energy usage

• Cost leadership through consequent process innovation

• New feature: Increased selectivity by optimized feed gas

• Record in specific EO yield and energy efficiency

• Significant ethylene savings

Technology leadership through continuous improvement

Results of benchmarking study in %

BASF Antwerp

Best quartile world

Average world

Example EO technology

18

Ethylene

Butadiene

Propylene

Benzene

Toluene

BenzeneExpanding the feedstock basisto take advantage of market fluctuations e.g. benzene from steam-dealkylation

Propylene EthyleneTargeted closure of the captive supply/demand gape.g. Propane DeHydrogenation (PDH)

ButadieneCapturing market opportunities via dedicated productione.g. butadiene from butaneBASF own production

Global position

lowlow high

high

BA

SF c

aptiv

ede

man

dExpanding our technology leadership through process research

Over 80 R&D projects for new & improved processes

19

Capturing new markets through product research

• BASF uses proprietary reaction know-how for production

• Rapid introduction of new plasticizer to cope with changed regulations: from 0 to 30 kto in five years

• Sales potential: 80 million Euro in 2010

• Market share to grow from 11% (2006) to 30% (2010) (plasticizers in sensitive applications)

Hexamoll DINCH® is a new plasticizer for sensitive applications: medical devices, toys, food contact uses

20

Leverage partnerships A new butadiene value-chain with CDon

• New highly efficient process, using butadiene and laughing gas from the Verbund

• Oxidation with laughing gas in worldwide first large- scale production

• Long-term contract signed with EMS-Chemie

• New plant under construction, launch 2010

• Sales potential: 50 million Euro

65 R&D projects for new productsin category of chemicals and basic materials

CDon (Cyclododecanone) is used as intermediate for engineering plastics and flavor/fragrances

21

How we succeed:

• Product performance• Innovation• Joint development with

customers• Broad application

know-how within BASF • Proprietary technology

Extend into customized solutions and formulated materials for chemicals

Customized solutions and formulated materials

7%

20%

73%

*excluding Materials Services

7%

20%

73%

Estimate 2007 (in % of sales)*

Chemicals & basic materials

Formulated materials

Customized solutions

22

Customized solution provider BASF – active in high growth markets

• Electronic chemicals 3%

• Inorganic specialties >4%

NAFTA

2007 – 2016, p.a.

• Electronic chemicals 3%

• Inorganic specialties >6%

Europe

• Electronic chemicals 9%

• Inorganic specialties >6%

Asia

• Environmental catalysts 7%

• Process catalysts 4%

Global

23

Electronics industry – value chain

Joint development with customers in electronic chemicals

*2005

Chemicals Formulations / materials Components End-consumer

products

USD 48 bn USD 400 bn USD 1100 bnInnovation circle

BASF today:Integrated system house

Market size*: USD 4 bn

24

CMP – Chemical and mechanical polishing: Polishing method, combining chemical and mechanical forces to level each layer on a chip

• Global CMP slurry market (2006): 450 million Euro, 10% growth p.a.

• BASF participates in the development of next generation CMP slurries with customers and partners

• From 2009, BASF will enter the market with new CMP products

Success through innovation and product performance

With CMP

Without CMP

80 R&D projects for new products in category formulated materials and customized solutions

1 | Building a stronger Chemicals segment (2001 – today)

2 | A strong portfolio focused on performance

3 | Toward new levels of performance

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Active portfoliooptimization

• Strongly grow solution provider business

• Acquisitions in leading technologies and growth markets

Excellentinnovation platform

• Innovation pipeline filled with > 200 promising projects

• R&D spending average 2007-2011: 200 million Euro p.a.

Good position ingrowth markets

• Maintain profitability with strong value chains and technology leadership

• Extend into new products and growth markets

• Optimal supply to Verbund of raw materials and intermediates

• Capex budget 2007– 2011: 2.4 billion Euro

Our strategy for profitable growth

27

Targets Chemicals 2010

*oil price assumption 2010: $45 bbl

2006 2010Sales to 3rd parties of 11.6 billion Euro

Best in class in operational excellence Sales* to 3rd parties >13 billionEuro

EBIT after cost of capital of 479 million Euro

Earning a premium on cost of capital

28

BASF Chemicals – our unique strengths

• A more diverse, less cyclical portfolio of chemicals than other manufacturers – we are not an ethylene company

• Lean supplier of chemicals to internal and external customers

• High leverage through Verbund and technology leadership

• Economy-of-scale investments with strong partners in growth markets

• Growing through product and process innovation together with customers in high growth markets

• Profitable growth exploiting Verbund synergies

29

Disclaimer

This presentation contains forward-looking statements under the US 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 to be 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 include those 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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Glossary

• C4 Raw materials with four carbon atoms • CMAI Chemical Market Associates, Inc.• EDC Ethylenedichloride• EO Ethylene oxide• JV Joint venture• LPG Liquefied petroleum gas• Me-Formiate Methylformiate• MEG Monoethyleneglycol• Oxo-C4 Oxo alcohols with four carbon atoms• PO Propylene oxide• PolyTHF, pTHF Polytetrahydrofurane• PVC Polyvinylchloride• THF Tetrahydrofurane


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