Investor Update 2021 - BASF's new Verbund site in Zhanjiang
Investor Update 2021 BASF's new Verbund site in Zhanjiang - Transcript Q&A September 27, 2021
There is a Memorandum of Understanding that we signed with Sinopec in October
2018, where we also look into the opportunity of getting a participation at a new steam
cracker in Nanjing. We are talking about this. This is not yet close to an announcement,
but it's an opportunity for the future.
Laurent Favre (Exane BNP Paribas): To help us dimensionalize the EBITDA
scenario provided: At the current profitability for key products such as HDPE/acrylics
etc., how much higher than the €1.0 billion to €1.2 billion EBITDA would the site end
up currently? How much lower if we use 2019/2020 spreads?
Markus Kamieth: I have not spent too much time in predicting, let's say, hypothetical
profitability of 2030 if I plug 2020 and 2019 prices across 25 different products into this.
I can give you one piece of advice: When we project those types of profitabilities
towards a timeframe 2030, we, of course, look somewhat at a normalized market
development. We look at what you would probably consider mid-cycle margins. That's
a word I hear a lot from you. And we, of course, then try to project what the appropriate
margin level over raw materials will be.
Given the fact that we in 2020/21 have seen very high commodity margins and in 2019
have seen very low commodity margins, it's fair to assume that our projections of
average margin across the entire very complex portfolio would certainly fall within that
bracket.
Chetan Udeshi (JP Morgan): I would like to follow-up on a previous question on the
ROCE from the new Verbund site. 5% to 6% post-tax ROCE implies around 7% to 8%
pre-tax ROCE. This doesn't seem high. Are we missing something?
Stephan Kothrade: Infrastructure.
Markus Kamieth: The topic is, of course, if you look at the point in time, a view on
2030. You have to take into account that we have quite a significant share of
infrastructure investment that you have to assume in a greenfield site.
During this phase of ramping up the site and then establishing all the downstream
production assets, you have to swallow, so to say, this infrastructure investment. That
means that during a certain period of time, we will have this included in our ROCE
calculation. And this will, of course, over time then go out, and we will see the actual
ROCE contribution of the production assets on the site.
So, yes, there is an over-proportional impact on the ROCE of the non-productive capital
that sits in infrastructure; that's for sure.
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