Coatings, again, very strong in terms of prices and volumes had the strongest quarter in its history in Q3. And the other divisions also benefiting from the Auto industry a little bit weaker behind Coatings, but overall, a very positive picture for Auto.
Christian Faitz: Thank you very much.
Stefanie Wettberg: So, the next questions are from Gunther Zechmann, Bernstein. Please go ahead with your questions.
Gunther Zechmann: Hi, good morning everyone. Can I just ask on your revised CapEx budgets, the cuts please? Especially on the in 2023 to 2027 one, a 14% reduction from original budget. So, the question is, do you assume a lower chemical production now? And do you still hold on to your ambition to outgrow global chemical production? Or would you be comfortable being diluted in volume terms if profitability is as low as it currently is in the upstream segment? Thank you.
Martin Brudermüller: Yes, Gunther, maybe let me also start with the China project because that’s a big chunk of that. Let me clearly say that we are in budget here because the environment is actually pretty good for investments. First of all, the China inflation is very low. It was 1.9% in 2022 and it’s only expected 0.7% in 2023. So, there’s no cost driving elements over there. And beyond that also, from the chemical — from the contractor side, they are rather will make good contracts, favorable contracts, for us to actually employ their people, and we also do not have the material price increase over there. So, that’s why our team made very, very good contracts over there. And let me really state here that we might even come below the budget at the very end with this whole project.
So, that’s one contribution here. The second element is certainly that the utilization rate now globally with this demand crisis is rather low. And that means we have to first, fil our plants. Again, I don’t have — a thing that happens overnight. That gives us also some time to consider and to think when do we do expansions and what is the right staggering, which projects we might hold by longer. So, that’s a kind of a postponing part. But we will also in the number of projects. We want to reduce the number of projects. And I think that’s normally what engineers come for. They also, all the time, have steel and iron solutions. You can also solve some of the topics by measures that need less CapEx, organizational, and alternative ones. And that is two elements that very clearly are due to this.
We will not refrain from our growth targets, very clear. So, we will not let ourselves dilute. But we simply keep our discipline here. And I think in this environment, this is the right thing to do and I would expect that will really give a good development for BASF to be a little bit more tight here on the capital in the years going forward.
Gunther Zechmann: Very clear. Thank you.
Stefanie Wettberg: Okay. So, we move on to Sam Perry, UBS.
Sam Perry: Hi, thanks for taking my questions. Two, please. Firstly, on inventories. You are around €1 billion lower than at the end of 2022. How much of that is a function of reducing your own volumes of inventory and how much mark-to-market for lower prices? And how much scope do you have to reduce this further by the year end? And then secondly, a more strategic question. And I acknowledge your comments in the opening remarks around dividend payout retention at these levels this year. If I think longer term, perhaps once you’ve managed to exit the Wintershall asset, and noting that the dividend from Wintershall has historically not been an insignificant portion of the free cash flow, do you think there would be scope for a discussion around resizing after this? Thank you.
Dirk Elvermann: Yes, thanks. Maybe I’ll start with the inventory question. So, we have it both. We have a significant portion in the inventory volume. So, the OIVs. We also have certainly, back wind from FX and prices, but a substantial part of the inventory reduction is coming from the volumes build down. So, we really started here a structural inventory improvement program, which is a rolling program, this goes further and further and we are intending to continue with that. Just to give you glimpse of an idea. We were in the years until 2017, running our inventory level of €10 billion and still able to generate EBITDA at a level of €10 billion to €11 billion. And I think this indicates now we’re currently sitting at €15.1 billion, that there is still room for improvement and we will vigorously continue with that. Yes, over to Martin.
Martin Brudermüller: Yes. Sam, to the dividend. I mean, I will not give any indications further for the future policy. But there’s no reason to now change anything in our guidance for the dividend policy. And I think what is also clear, we are in a business that has a certain cyclicality. We all know that. And for that reason, it’s also important to hold the expectations here. We had also in the past, in the 2014, actually, a cash flow — free cash flow that did not support the dividend payout also, by the way, in 2022 — in 2020, sorry. And to 2014, we increased the dividend. In 2020, kept it. So, I think this is an important part to monitor this and to also manage this. And I think given the fact that we have a very stable and solid balance sheet, that we have a good credit rating, that we have high equity rate so that is all supporting that we can manage this.
You also know that basically, the top which comes on top of normal BASF activity is our China development and this will then also add something on the CapEx side in 2024 and 2025, but then also return on normal levels. And I think we have to be clear that the China investment, where we are convinced that this is very important one, supporting also the growth of BASF is actually one source of the future capability to pay a dividend. So, you said something about the Wintershall dividend, which then might go out if we exit but we add something with the new Verbund side, which will encourage us and will also enable us to pay good dividends also going forward. So, I think this is what I have to say about this.
Sam Perry: Thank you very much.
Stefanie Wettberg: So, now the next question are from Matthew Yates, Bank of America. Please go ahead.
Matthew Yates: Hey thanks Stefanie. Morning everyone. Martin, when you took over as CEO, one of your priorities was to get better downstream performance. I appreciate it’s not been an easy environment at the moment. But to see the Nutrition & Care division loss-making is quite a dramatic outcome for a business with €8 billion of capital employed. What’s the strategy here to improve the profitability of the business? Is it simply just a matter of waiting for the volumes to come back? Or do you actually need to demonstrate some more market leadership in terms of your pricing strategy, especially around vitamins? And then the second question, if I can, again, Martin, perhaps for you, but I’m a bit confused on the strategy for your Catalysts business.
I mean, typically, when a company carves out an asset as a separate legal entity, it tends to signal the start of the disposal process, but you were pretty vocal in your remarks that, that wasn’t the case for BASF, at least not at the moment. So, what additional operational or strategic flexibility does this carve-out give you in navigating that transition in the combustion engine that you referenced? Thank you.
