The Urethane Blog

Urethane Comments from BASF Investors’ Call

Martin Brudermüller

Let me add that Q1 and Q2, 2019 will be comparably weak quarters. Firstly, the first half of 2018 will benefit — still benefited from higher margins in isocyanates. That means, comparables are tough. Secondly, costs associated with the implementation of our strategy and a higher number of planned turnarounds compared to the first half of 2018 will negatively impact earnings. The decisive factor to achieve our targets for 2019 are an improved business performance, solid customer demand and first contributions from our excellence program in the second half of the year.

Thomas Wrigglesworth

Thanks, Stefanie. Thanks. Thanks, Martin for your presentation. Two quick questions, if I may. Firstly on the announcement that you would divest pigments and perhaps going wrapping up with Construction Chemicals as well in that, can you give us an update on where you are in the decision process around Construction Chemicals? And in pigments, can we assume that if you’re looking for a sale that attempts with — to potentially put this into a JV has — are now behind us and that a sale is the only route?

And could you provide some framework, just on these divestitures about how you’re going to define value realization for shareholders? Is there going to be price levels at which you just won’t sell and you’ll keep? And can you give us some framework?

Second question, if I may. Just looking at the fourth quarter I was just wondering if there are any — if you could just define for me the one-time effects? Obviously, you’ve identified the €200 million from the Rhine. Is that both from lower utilization rates and lower logistics? And is there — are there any insurance payments that have been received that are included in EBIT pre in that fourth quarter EBIT number? Thank you.

Martin Brudermüller

So, Thomas, a status on where we stand with the Construction Chemicals process. We are currently preparing the documents and the data room and then we will go into an open and clear auction process. We assume that it was the end of 2019 we came to a conclusion and know where we go. This will be very clearly a straight sale of this business.

The pigments part that really worked today. We announced today, certainly in an earlier step, we have to now prepared all the documents. I think the timing is right for that. You’re right; we have looked into different options. We came to the conclusion that a straight divestiture is the best option for this business.

This portfolio pruning, we are going forward as the new strategy. It’s very clear that this is no longer an innovation-driven business. Although a slow growth and it is not that deeply embedded in the Verbund. So with this, very clearly we think there could be better owners in environments to bring this business forward.

With regard to the Rhine impact, yes, most of what you — what this €200 million’s made up in Q4 is in fact the two things you mentioned. It is the reduction of utilization — or the reduced utilization rate of the plants and with this — the EBIT we could not capture, and it is definitely also from the higher transportation costs, because it could only bring about one-third of the volumes that are normally coming by ship to the road. And that has significantly higher transportation costs. And these are the two major effects. Hans, you say something to Q1 one-time costs?

Martin Brudermüller

Andrew about the guidance for Chemicals, just be aware that also the new segment Chemicals from 1st of January does not continue Monomers.

Andrew Stott

Yeah. So I said…

Martin Brudermüller

So the isocyanate part is definitely in the Materials segment. Indeed cracker margins are stressed in the moment in other regions particularly, however, very much in the U.S. which has to do with the additional ethylene capacities coming onstream over there. And however the other businesses look rather well.

And you’re right, Mins business I think is a very strong one, but also BDO business is something which is hard to improve margins. So, overall, I think, we have a good situation here, except the cracker margins. I think all over the other part of the portfolio is relatively stable. Yeah. With this, Hans, you do on the one-time costs and…

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