Urethane Highlights from BASF Investors Call

Kurt Bock – Chairman and Chief Executive Officer

Let me highlight some of the most important developments since Q2 reporting. On August 12, we started our new world-scale resin and electro coat plant in Shanghai. The plant is fully integrated in our new automotive coatings plant to create synergies and high production efficiency. End of August, we also started up the MDI production in Chongqing in China. This new plant enables us to serve and support our polyurethane customers in Western China.

Thank you, Hans. And with this, we come to the outlook. The macroeconomic environment remains challenging and major leading indicators continue to win over the last couple of weeks therefore, we reduce our macroeconomic assumptions for 2015 as follows. The overall GDP growth is expected to be lower at 2.3%, industrial productions expected to grow by only 2%, we reduced the growth expectation for the chemical production to 3.5%.

Let me remind you that at the beginning of this year we expect the GDP to grow at 2.8%, industrial production to increase by 3.6%, and chemical production by 4.2%. We also slightly adjust our dollar exchange rate to 1.12%. Our assumption for the 2015 average oil price drop to $55 to their brand, about $10 below our expectation at the beginning of this year.

Due to this macroeconomic headwinds, the lower than the expected oil price as well as the impact of the recently closed asset swap with Gazprom on our Q4 2015 result. We adjust our full year 2015 guidance of BASF Group as follows.

Without the effect of acquisition and divestments, our target is to grow volumes in 2015. Due to the divestment of the gas trading and storage business as part of the asset swap with Gazprom, and the lower oil price we now expect sales to be slightly lower than in group sales to be slightly lower than in 2014.

We expect EBIT before special items to be slightly lower than in 2014. The Chemicals business is expected to provide a larger contribution than in 2014. Earnings from crop protection will most likely come in slightly below the level of 2014 due to the more challenging business environment.

In Oil & Gas, results will decline significantly caused by the lower oil price and the divestment of the gas trading and storage business. We aim to earn again a substantial premium on our cost of capital but on a lower level than last year when we had a higher amount of positive special items from divestitures.

Thank you now for your attention. And we are happy to take your questions.

We had cost overruns in Brazil. I think we talked about that one. We are at the finishing line here in Ludwigshafen with a big TDI complex where we had some delays due to the complexity of that endeavor. And with the delays also came slight cost overruns. But actually, all in all, this doesn't really play a major role.

The same holds true for Europe in a certain way where we had this one big investment here in Ludwigshafen and TDI. But here, again, please keep in mind, yes, we are expanding TDI in Ludwigshafen by around 300,000 tonnes. But at the same time, we are going to shut down a capacity in [indiscernible], which is 80,000 tonnes. And we acquired a business, about two to three years ago in Poland, which is also going out of business, which is another 75,000 tonnes, so the net addition is 150,000 roughly.

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