Stefanie Wettberg: So now we have Chris Counihan, Jefferies. We will then have Chetan Udeshi and then Tony Jones. But now first, Chris Counihan, Jefferies, please go ahead.
Chris Counihan: And I also pass on my thanks and best wishes for the future. I only have one question. Thanks for providing the segment cash flow now. I’m looking forward to this going forward. I just had a longer-term question on this one, Martin. Given you spearheaded the ramp-up of the China Verbund project over the next 5 years, obviously, you have staged ramp-up of production. What year would you expect that project to become free cash flow positive for BASF?
Martin Brudermuller: Maybe I’ll start on that. Normally, cash flow is [indiscernible], but this is a little bit of expectation about China. I mean, maybe, first of all, if you say — if you start a project like that, you have to have the long-term development in the focus. That you really hit the right timing when you start up such a plan that this is the best market moment, I think you cannot plan for this. We saw this also when we opened Nanjing. So I think the fundamentals are more important than really focusing on the team. So I would say we expect that we load the plants very quickly. Nevertheless, there’s one or the other area over capacities, but not so much on our lines. So I do expect that in ’26, we will be positive and have a good contribution from that already because the plant — the products are really products broadly used in the industry.
A lot of that stuff is imported today, and we substitute this with local production. That’s why we are really positive, and I think we will have a good contribution already in 2026.
Stefanie Wettberg: So now Chetan Udeshi, JPMorgan.
Chetan Udeshi: Just wanted to follow up on previous question on second quarter. I think Dirk, last time, you were, to some extent, sort of happy to confirm Q1 consensus. Just looking at the consensus today for second quarter. Would you say you’re still happy with the consensus because, to some extent, you need that level of earnings to come to the full year guidance, one would — one would say, but just looking for that confirmation if you can. And second, just a related topic. We’ve seen a lot of volatility in Chinese pricing throughout Q1, a slight increase and then big collapse, if you will, in the second half of Q1, especially in March and early April. Can you just confirm what you see in China? Is this still a recovery mode? Or are you starting to see the trends actually start to worsen because that would be the implications based on what we see from the pricing side.
Dirk Elvermann: Chetan, I’ll start with the quarter 2 question. And indeed, I think the confirmation for Q1 that we had provided was quite accurate. So now, obviously, the question about Q2. So what do we see? We see that also Q2 follows the trend in Q1, talking to all our business. There is not the feeling that there is anything now falling off the cliff, but it’s rather a continuation. Is it a further recovery? That is, I’d say, too early to say because whenever we are talking about demand patterns, we still are in the phase of saying this is mainly restocking, still cautious buying behavior. Yes, there is some demand, but it is not really completely changing out of the positive. So I would rather say it’s a continuation of what we see in Q1.
So it’s solid. And this is also the reason why, in terms of our guidance, we completely stick to it. We see for Q2 exactly this continuation and this is fully in line with our guidance. So not worsening, not improving dramatically, but holding the line.
Martin Brudermuller: About China, I mean, I think if you look at Q1, basically, the worldwide growth or the global growth of chemicals has been carried by China again because about 10% growth over there versus this 5.4%. So it’s basically pulled along from there. But we also said there’s still relatively low pricing level. I mean the plans are quite fill, I have to say. But there is not the pricing power, which also shows you it’s getting more dynamic, but it was under booming. And I think if you look at the confidence level of people, they still are cautious in terms of the buying behavior. I wanted to say, it’s not super happiness with the Chinese government overall. So people, like every human being, holds back a little bit money that you can see also in the retail area.
You see that on the car production, which is not really growing dramatically over there. So it’s coming back, but it’s also there not in the way, let me say, now in the next quarter, that is booming in China is pulling the world again. And I think this is one of the reasons adding to what Dirk just said, that we are a little bit cautious, but we are definitely out of the hole in China. That is very clear, and the load of our plant is on a relatively high level.
Stefanie Wettberg: Okay. Now we have Tony Jones. We will then have Laurent Favre and then Sebastian Bray. But now Tony Jones, Redburn Atlantic.
Tony Jones: All the best, Martin. Only a few months ago, Martin, you talked about the need to review your production network, particularly in Germany, given high cost and low growth. How are you thinking about this now with the strongest start to the year? And a quick one for Q2. Maybe you could give a little bit of color about how you see the divisional outlook as we go into the second quarter.
Martin Brudermuller: I’ll take the first one, Dirk, you take the second one. I mean overall, let me say, I think our decisions that we have taken already to shut down plants and to trim the Fubon to basically competitiveness framework and also to the demand in Europe, I think it was all right decisions. But there will be more to come because I think we will have a fundamental topic in Europe because base chemicals will be for good because of structurally higher energy costs, less competitive. So we have to trim it more to the European demand. In our case, in BASF, we will trim it more to our own internal consumption and sell less to the market because you have also to take into account that the base candidates are the CO2-intensive products.
That means we produce them, we sell them to the people, and then we have to reduce with high cost for CO2. That doesn’t make sense anymore. That’s why we will really use that to fuel basically our chains with the raw materials. And there’s a little bit more to come, and this is what the new Board will do when they talk about the target picture of [indiscernible], which is basically revised and renewed, I have to say, with the current framework. So I would expect that, particularly in the upstream area, the European chemical industry will be weaker in software and this lower participation in global share than it has been in the past. So that will be our work, and there’s still a little bit to be done, but I think we are very happy with the first step.
Dirk Elvermann: Yes, Tony, and just speaking — talking a little bit about the divisional outlook going forward. So starting with Chemicals and Materials, as I said already that the first quarter was okay, was good. And we have also benefited here from the one or the other special effect. Rest of World already mentioned, one of the other turnaround for outage of the competitor, which we benefited from. Now second quarter of fundamentals, I would say, more on this unchanged, but now also we will have some turnaround. So I’d rather see that flat. Then for Industrial Solutions, I think full year, we are forecasting here a considerable increase, have nice a trend in both businesses is a volume to a large extent right now like dispersions and for instance, benefiting from that.
So positive trend going forward. Surface Technologies comprising of Catalysts, the Batteries, but also the Coatings business here for the entire segment, the site was on prior year level, depends also a little bit on development of the precious metals prices, which are, again, at a very low level, as we appreciate. Nutrition & Care, we see a positive trend also going forward with the measures that we have taken now gaining traction. And Agricultural Solutions, we said early, after a record year last year, this will be lower volumes, while certainly, price is also getting more under pressure. But as I said, we have a more favorable mix now with higher portion of seats in our sales. So I’d rather say slight decrease and nothing dramatic happening there.
So that would be my short summary of the outlook.
Stefanie Wettberg: So now we have Laurent Favre, Exane BNP.
Laurent Favre: Yes. I guess, comments to not Christine and the others from and it’s certainly been a fun ride. My first question to you, Martin, is regarding what you — I guess what you told Jaideep. You said that there’s a clear path forward for BASF. And I guess for years, the path has been to go more downstream, and there was a lot of M&A, and I guess that was before 2018. And when we look back to 2018 and we think about your time as CEO, obviously, there’s been a lot of mess to deal with decarbonization, COVID, et cetera, and the investment in China. My question to you is, what is that clear path going forward in terms of upstream versus downstream because it’s certainly not clear to me. And the second question for Dirk as you’ve gone through all the — all the business lines.
On the other line itself, I understand there was a higher provision for the LTIP mark-to-market in Q1. Is there also a provision for higher bonuses that we should assume will be sent back to the divisions later this year?
Martin Brudermuller: Laurent, first of all, let me say, I will not communicate the strategy of the new Board team. That will be happening in a couple of months when Marcus and his team will tell you how they it, basically, what they have on their minds for the next years. I mean it will be a kind of an evolutionary thing. This is very clear. That is, I think, what was always BASF. There’s also some considerations they have, which differ from what I had. I mean I can only say when I started 2018, I had hoped for different 6 years than we actually had that we handle from one crisis to the other was really not what I had in mind, also not presenting the numbers in 2023 as they are. I hope we have a better result here, but life is as it is.
I think what is important that my team, which is very much also, to a large extent, Markus’ team, we have been working on trimming the structures of BASF. And I think this is the basis also for going forward that we really have been looking how we get closer to the customers, how we get more efficient, how do we get cost out, how we differentiate between the businesses. And I think this is my pride, I have to say, that we got along with all these targets despite of the crisis. So we have not made compromises on that, and that includes also the decisions to close down plan. So I think that’s a great basis, but have a little bit more excitement for what is coming then as the new strategy update for Marcus and the team.
Dirk Elvermann: Laurent, your question to others, you seized right. So provisions in — due to bonus accruals, due to — or to take them results proportional, but there’s also the longer-term elements in it, the LTI part. And then there are some things like the captive insurance payments. There was one that is booked here in others. And then it’s typically also to a minor extent, some consolidation effects. So that will be the 4 buckets that you’ll find another.
Laurent Favre: But that is this bonus provision just in line with, I guess, the guidance that you provided externally? Or have you added to the bonus provision based on the better start to the year in Q1?
Dirk Elvermann: In line with guidance, Laurent.
Stefanie Wettberg: Okay, now Sebastian Bray, and then we will then have 2 more analysts. That’s Peter Clark and Andreas Heine to conclude. But now Sebastian Bray, on that.
Sebastian Bray: I have one on the equity shareholdings income in the Chemicals segment. This seems to have fared less well than the segment as a whole. What happened to the contribution from shareholdings accounted using the equity method in chemicals? And just as a follow-up to questions that have been made on April trading. I can see the composite freight rates have dropped substantially since the peak of the Red Sea crisis in early Q1. Are there any observable trends toward customer propensity to start resourcing material from China at or that hasn’t been observed as we moved into April and into Q2?
Dirk Elvermann: Starting with the equity results. This is our joint venture in Nanjing. This talk of BYC, and this is bringing in lower results this year. A little bit also in line with the overall performance of the Chinese chemical markets, nothing outrageous, but in line a little bit with the development. Will the results get better? Again, definitely the case. On the Red Sea, I’m not sure whether I fully got your question. I understand incoming materials from China that are still to be expected?
