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
What can happen is that at the forefront of technology, in the digitalization area, in
semiconductors, there is more separation of technologies, where maybe some
companies have to distinguish more which technology they use where.
But, I think, all the talks with the politicians we have, clearly show that there is still a
favorable environment and that a strategy like ours makes sense.
I can only echo what Stephan said: We are contributing value to China all the time. We
pulled the chemical industry along with responsible care, with EHS. This is also, in the
long run, an important part to be in China.
I explained this several times: If you understand Chinese culture, you have to think
long term and you have to benefit and to contribute. I think that will be their decision
also on a company level: Which companies do that, and which don't? That is why I am
not so worried about this development.
Gunther Zechmann (Bernstein): Can you help quantify the benefit you expect from
government incentives including the free trade zone, and any tax breaks you may
receive?
Markus Kamieth: Since these are still ongoing discussions, also partly ongoing
discussions with the government and the authorities in China, I would not like to be
very specific here, but we, of course, tap into the opportunities you have as a foreign
investor to get support for investing into infrastructure, but also investment support.
These are sizeable and attractive numbers, but certainly not in an order of magnitude
that would influence our decision to invest there or not to invest there.
So, I have to say this very clearly: Our decision to invest in Zhanjiang is strategically
and commercially hopefully very plausible to you and is not influenced by incentives.
But we certainly enjoy a very constructive discussion with the Chinese government
around incentivizing attractive projects like our Verbund site.
Christian Faitz (Kepler Cheuvreux): Up until today, you were suggesting that the
new Verbund site requires an investment of up to US$10 billion. Now you are talking
of an investment of between €8 billion and €10 billion. At current FX, at least the upper
end of the range you provide today is quite a bit above the upper limit you suggested
before. In that context, how fixed are your contracts for building and construction at the
site, in the case we continue to see elevated raw material costs such as steel, concrete,
general engineering work, etc.?
Martin Brudermüller: First of all, when you take a decision to build and to execute,
you have to digest the framework conditions you have. If raw material goes up, if labor
is short or whatever, that increases the cost of the investment, that's a risk.
You never have the ideal situation in terms of when you start and what the costs are,
that you are right in time with each product for each product in the market in terms of
supply and demand balance. You have to be a little bit flexible.
Yes, we see a cost increase through the FX part at the moment. The originally
mentioned US$10 billion was what we said when we had the idea to build a Verbund
site over there. In the meantime, as we have alluded to, we have checked a lot of
options. We have also reflected with our customers; we have added the one or the
other plant. We have changed the capacities in certain products, also to reflect the
Page 7 of 12View entire presentation