Sebastian Bray: Sorry, just to clarify, my question was the freight rate, the cost of shipping from China has declined substantially since the height of the Red Sea crisis. Are there any changes in the combined behavior of European customers observed yet on this basis? isabel
Dirk Elvermann: So there is an element of a cost decrease in it, is that also a matter of negotiations in procurement. Yes, yes, that’s the case. Sometimes costs to be passed on under this is really — I would not see that a clear pattern. This is a mixed picture, I have to say.
Sebastian Bray: All the best, Martin.
Martin Brudermuller: Thank you.
Stefanie Wettberg: So now Peter Clark’s turn.
Peter Clark: Yes. Yes. Yes. And well done on a very tough job. But 2 follow-ups really. The restocking question. Obviously, you’ve seen some restocking on the chemical production growth and what you said in Europe. Just wondering how you feel about any risk of destocking going forward? I’ve heard all your comments about no real changing trends. But clearly, inventory levels are still much lower than they would have been, I guess, a year ago in ’23, where we have that phase of aggressive destocking. And then looking at the cost-cutting side, encouraging to see most segments you point to the lower fixed costs. Obviously, a lot of work being done there. And that momentum is continuing, and it should build from here. So just your confidence that we’re going to keep reading about the lower fixed costs on the segment line as we go through ’24 and into ’25 as this momentum built on the cost cutting.
Martin Brudermuller: Peter, I’ll take maybe the first one. I mean, if you look at the volume growth in Europe, which was in the first quarter, quite solid, that does not fit to the overall industrial, let’s say, strength over there. We have said since about half a year that we see a kind of flattening out of building a foundation in the bottom. We reached the bottom. I think it’s very clear. If you look at the PMI in Europe, which increased a little bit from 46% to 46.5%, it’s still below 50%. So that means the shrinking really comes to a halt, but we are not yet in the European territory into a positive mode. That’s why we are cautious. That looks a little bit different in some of the other regions, I have to say, for example, particularly in — also in South America, you are positive — you are already positive in China.
It’s on — 51.1% in March now, so it increases above the 50%. So you see that the dynamic’s coming back, but it’s also not really fully dynamic and vital as it was before. And with that also goes the inventory policies. It has been extremely low over the recent months. And as I said, also with the supply chain constraints, people look that they are a little bit more in a healthy territory. But it’s not that they fill their stocks because they need the raw materials for ramping up their production [indiscernible] So that’s why we are still cautious. We are cautiously optimistic, I have to say, but we are cautious.
Dirk Elvermann: Yes. And on your question on the cost savings. I mean, the estimate is completely right. Now we see the cost savings kicking in, and this will now accelerate because at the beginning, you always have the onetime costs offsetting the savings. And now going forward, we’ll enjoy the run rate of the already achieved savings efforts. We are adding more cost-saving measures to it. To frame the numbers one more time and you know that from our Q3 call already, we expect annual cost savings in nonproduction areas of EUR 700 million by the end of ’26. And then we have a further EUR 200 million coming extra from our global services and digital and business services, and another EUR 200 million from the adaptation of the carbon structures in Ludwigshafen.
This is what we already have talked about, and then comes the extra effort on the top side. As we mentioned in key takeaway, we are fully on track with the cost saving measures. The onetime costs are, to a larger extent, realized already. So going forward, you will see that cost savings in our P&L.
Stefanie Wettberg: So now we have Andreas Heine, Stifel. That’s the last participant asking questions.
Andreas Heine: Yes, being the last, and I obviously also would like to thank you, Martin, for this decade-long discussion I had, and your very straightforward comments, which are always very helpful. Two questions. The first is on Agro on the second quarter. So you were talking about the positive mix in the first quarter by the seed business growing. The seed business is most seasonal. Actually most of the business is done in the first quarter. So I would assume that the picture looks in the second quarter much different before than the year-on-year comparison levels off in the second half. So is it right that this crop protection in the second half will come through and volume decline to a much more extent than what we have seen in one, the first question.
The second is actually on the oil price, which is now in the 90s. That will obviously impact upstream first by getting through the value chain. Do you see with the utilization rate you have right now already enough pricing power to push the higher raw material costs from the higher oil price in the upstream business on a short notice?
Martin Brudermuller: Maybe Andreas, thanks also for your words. I’ll maybe start with the oil price. I think what the major worry is that this very cautious dynamics that’s coming back in worldwide economy is actually hampered by high oil prices because that takes cost off — on and makes everything a little bit more tight. I said earlier, we have not yet really fully pricing power back. So it is still a play on raw material prices also. The raw material prices are going down, and they have also been tracking down the prices. We could relatively well secure margins, but with the raw materials within [indiscernible]. So we don’t see that yet, but the logic consequence would be that raw materials going up. And with that, we have always to pull the prices up.
Whether this is over proportionately the case that we can expand the margins, I don’t know. It’s not very probable. But let’s see how sustainable that is. I think there is a component in that, which is definitely from the Middle East crisis. Whether this is normalizes, then the overall assumption that this is not ending in a war, I think it will also help to keep the oil price, at least at a level of it’s not going further up and then giving more confidence. So a little bit early to say what this is, but there is the normal mechanisms, which you know very well, and [indiscernible] goes into March and we will see it has to do with the demand.
Dirk Elvermann: Yes, on your Ag question, and first of all, say, you know that the typical pattern of our Ag business. It is front loaded. Q1 is typically the strongest. And indeed for Q2, due to the seasonality, I would not expect now a big contribution from the Ag business in Q2. We certainly see some buying behavior over from the distributors a little bit closer to their actual demand. So in this regard, there is certainly still something also to come in the second quarter, but this is not — if you compare to last year, this is not compensating by farmers what we have not achieved in ag in the first quarter compared to the second — to the first quarter 2023. What we believe though is that there is a business to come also in the second half of the year, so the Southern Hemisphere for which the team is already preparing. So all in all, business development in the second quarter should not surprise us also for the Ag business yet.
Stefanie Wettberg: Yes. Okay, ladies and gentlemen, before we close, I would briefly like to hand back to Dirk.
Dirk Elvermann: Yes. And finally, I would like to take on what many of you have already said and expressed. And I expressed my warmest thank you to you, Martin, as our Chairman of the Executive Board of BASF. After 36 years of BASF, Martin, you will retire from the Board of Directors at the end of today’s Annual Shareholder Meeting. You joined the Board in 2006 and became our CEO in 2018. Since becoming CEO, you have presented BASF results over 24 quarters. I think it is fair to say that you have enjoyed the open and sometimes tough exchange with analysts and investors. And vice versa, they value, I think we can say that, your insights into the chemical industry and the macroeconomic nature. Martin, I know you personally for 15 years, and I would like to thank you wholeheartedly for your support, in particular, since I took over as CFO last year. It has been both an honor and a pleasure to work with you and to serve with you on the Board.
Martin Brudermuller: Yes. Thanks, Dirk.
Dirk Elvermann: And maybe one more. You will continue to remain active in the business world following today, for example, a designated Chair of the Supervisory Board of [indiscernible]. But I hope, however, that you find also a little bit more time — extra time for yourself, for your private life, for your family and with, all the [indiscernible].
Martin Brudermuller: Yes. Thank you very much, dirk, really rewarding words. Always difficult to keep emotions under control at the very end. I would like to take that opportunity, first of all, to thank you all. I have always found that these exchanges have been very, very interesting. They have been effective. They have been also fair. And I have to say also, to a certain extent, amicably, you have to do your job and we have to do our jobs, but I enjoy very much the physical meetings we had where we got all the close into a dialogue, and we have some wine tasting next to it. So I really like that. I have to say I have to live — to learn to live without BASF. It will take me a little bit of time, but it’s definitely also a life outside of chemical markets, and I’m looking forward to this.
I would like to also take this opportunity to thank my team, particularly Stefie, and all the guys, which you cannot see sitting here also in the room, who have actually always have to prepare and to give you the best possible information where you can do your job. So a great and big thank you to all of you, and certainly also with you, Dirk, who has come to do the last meetings over the last year together with you. So all the very best. Thank you very much. All the very best to you personally and certainly also to your careers. And with that, stay healthy and maybe we meet somewhere else again. Thank you very much.
Stefanie Wettberg: We are now at the end of today’s conference call. Should you have any further questions, please do not hesitate to contact a member of the BASF IR team. Today, I clearly last [indiscernible] because others will work on now also the Annual Shareholders Meeting that will be held starting at 10:00 today. We are again hosting the meeting in person at the Congress Center Rosengarten in Mannheim. We will present our second quarter results on July 26. Thank you for joining us this morning, and goodbye for now.
