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
Yes, there is a whole portfolio where you can also change later. It's always a question
of money and whether the single cases make sense. But, you have a certain advantage
if you build something from scratch in the right way. That's what Markus alluded to with
the cracker. The whole industry uses steam-driven compressors because we are
traditionally an industry that has a lot of steam. So the rethinking in the direction of
electrification is that you electrify everything you can from scratch and you actually
minimize the steam consumption and the steam balance on the site. That, e.g., is a big
thing in an existing site. There are measures that have very, very high cost and a very
difficult return. But on the other hand, there is also a bunch of measures where you
convert a Verbund site with "old" technology into the future. So it's possible.
Markus Kamieth: It's fair to say that eventually this will also work the other way around
because we will deploy a lot of CO2-saving technologies for the first time here in
Ludwigshafen, of course, and they will also, once they are deployable, technologically
ready, be able to be deployed in Zhanjiang.
For our engineers, it is a little bit of a unique situation to plan a whole Verbund site from
scratch. Things that may appear small to you, like building a first Verbund site without
on-purpose steam generation, is quite a revolution, also to the way we set up such a
Verbund site. It certainly creates a lot of learning curves for us in all our sites globally.
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Laurent Favre (Exane BNP Paribas): Upstream seems to be going strong still, but
there are obvious headwinds in downstream automotive, China, raw material cost
inflation, logistical issues. Looking at the balance of both factors, how do you feel about
the latest Vara consensus for the third quarter of BASF?
Martin Brudermüller: To summarize in a few sentences: The dynamics are still quite
good, I have to say. It's solid across the regions and all the businesses this month; it
also went like this over the recent months. We have not seen an exceptional summer
lull. It was a little bit the normal seasonal thing, but not a real slump. Maybe one word
about Hurricane Ida: It hit us a little bit, but not in a significant way. There will be a
slight impact in Q3, but not comparable to what we had with the freeze or in other
years.
Concerning the earnings quality, I can say: This is a bit similar to Q2. Chemicals and
Materials certainly carry the big part of that. Margins have been reasonably well-
contained in the upstream areas.
The weak piece you mention - Hans and I have alluded to that already in February -
is the semiconductor shortage where I have to say: The automotive industry had played
this down a little bit. We already said in February that this is more severe. It shows now
that we have been right with this. It's nothing you can solve immediately. I think we had
at that time more than 83 million cars in mind. We are maybe closer to 80 million. IHS
already talks of 76 million this year. I think that shows that Q3 is an extremely weak
quarter for automotive, and that certainly also is visible, e.g., in our Coatings division.
If you produce fewer cars, you also need less paint.
Generally, maybe one remark on the downstreams: We have always said that the
business model is in such a way that it takes some time to digest the high raw materials.
Raw materials are still very much on the high side, so not all the downstreams have
really managed to pass everything on to the customer. This is currently ongoing. I
would say that gives you already enough description what you have to expect. For all
the rest, you have to wait until Hans and myself give you the Q3 numbers.
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