Good morning, ladies and gentlemen. On behalf of BASF, I would like to welcome you to our conference call on the full year 2020 results. Throughout today's recorded presentation, all participants will be in a listen only mode. The presentation will be followed by question and answer session. System.
This presentation contains forward looking statements. These statements are based on current estimates and Jack Jones of the Board of Executive Directors and currently available information. Forward looking statements are not guarantees of the future developments and results outlined therein. These are dependent on a number of factors. They involve various risks and uncertainties, and they are based on assumptions that may not prove to be accurate.
Such risk factors include those discussed in Opportunities and Risks of the BASF Report 2020. BASF does not assume any obligation to update the forward looking statements contained in this presentation above and beyond the legal requirements. On the call with me today are Martin Brudermuller, Chairman of the Board of Executive Directors and Hans Engel, Chief Financial Officer. Please be aware that we have already posted the speech on our website at brz.com/fy2020. This brings us to the point where I give the floor to Martin Brudemmler.
Good morning, ladies and gentlemen. Thank you for joining us. We hope that you and your families are doing well in this still challenging environment, which continues to be dominated by the pandemic. Recent developments such as the mutations of the coronavirus and the slower than expected vaccination progress in Europe show us that it will take more time We will see a significant and lasting relief from this pandemic. Despite these challenges, we had a strong finish to the year.
EBIT before special items exceeded our October forecast for the full year and was considerably above analyst consensus. Today, we will provide you with further details. Let me begin with some highlights of the strong Q4 of 2020. In Q4, we increased volumes across all regions. In Greater China, we continued to record double digit volume growth.
Volumes increased in almost all segments. In some commodity product lines, such as isocyanates, we considerably expanded our margins. Lower fixed costs also contributed to BASF's strong performance in the Q4 of 2020. Since the pandemic is still not behind us, We are doing everything we can to ensure safe operations for our employees that have to be on-site. All employees that can work from home I strongly encouraged to do so.
We continue to put strong focus on cash generation, cost control and reduction of capital expenditures for our ongoing business. We also maintained a higher liquidity level than usual. Our strong balance sheet and good credit ratings ensure BASF's Let us now turn to the macroeconomic data to put BASF's performance into perspective. The indicators for Q4 are estimates as most of the countries have not yet published their figures for the quarter. In Q4 2020, global chemical production increased by 4.9%, mainly on account of the growth in China.
China continued with its strong recovery, which already started in Q2 2020. Europe and North America also experienced A strong and continued recovery on chemical production in the second half of twenty twenty. On this slide, you can see our volume growth by region over the last four quarters compared with the respective quarters of 2019. During the last three quarters of the year, we recorded double digit volume growth in Greater China across almost all segments. We continue to benefit from our strong position in China.
The plan for Bonsai in Guangdong province will further increase our presence and customer proximity in the dynamically growing Chinese market. In Europe and North America, our volumes turned positive in Q4 2020 And we are above market growth according to current macroeconomic estimates. During the second and third quarter of 2020, Sales volumes in Europe and North America were still negatively impacted by the lockdowns. We now take a look at the volume development by segment. In the Q4 of 2020, and this is the upper graph, BASF Group sales volume sales volumes increased by 7%.
All segments were able to grow volumes, except for Agricultural Solutions, where volumes remained stable. The volume increase was most pronounced in the Surface Technologies, Materials and Industrial Solutions segments. The global recovery in automotive production was the main driver for this. In 2020, and this is the lower graph, We were able to almost match the volume level of 2019. Higher volumes in Agricultural Solutions and Nutrition and Care Could almost offset the decline in the remaining segments as well as in others.
Overall, BASF with its diversified portfolio Serving a broad range of customer industries has again proven to be resilient. On this slide, we will first focus on the graph on the left. The earnings development in Q4 2020 compared with the prior year quarter. EBIT before special items increased by 32% to €1,100,000,000 Considerably higher earnings in the Materials, Chemicals and Industrial Solutions segment were the driver for this. Lower contributions from the remaining segments as well as from others were more than offset.
Hans will provide you later with some further details on the quarterly earnings development by segment. I will move on to the full year earnings development depicted on the right hand side. Details can be also found in the BASF report. EBIT before special items came in at €3,600,000,000 23 percent below the prior year figure. Due to the impact of the pandemic, All segments recorded lower earnings with one exception.
The Industrial Solutions segment matched the 2019 level of EBIT before special items. On BASF Group level, the decline in earnings was particularly driven by considerably lower contributions from our Upstream businesses. The sharp drop in demand from the automotive industry especially burdened the earnings development in Surface Technologies segment. Let's now look at BASF's financial and non financial targets. As mentioned before, our sales volume were almost stable and came in Just 0.5% below 2019 level, global chemical production decreased in the same order of magnitude.
EBITDA before special items declined by around 11% to €7,400,000,000 mainly on account of lower contributions from the Chemicals in Service Technology segment as well as other. ROCE was at 1.7%, down from 7.7% in 2019. This was due to considerably lower EBIT, which was negatively impacted by noncash effective impairments in the amount of €2,900,000,000 Let me also touch on the performance based compensation of our employees at this point. ROCE determines the variable compensation. In 2020, ROCE was below the threshold for a bonus payment.
However, the Board of Executive Directors decided to pay a bonus of appreciation in these difficult times. With this, we want to acknowledge the great commitment of the BASF team during the corona pandemic in 2020. In total, we will pay out €360,000,000 in bonuses. Furthermore, we propose to pay A dividend of €3.30 per share. I will later elaborate on this proposal in some more detail.
Before that, let's move on to the our non financial targets. We aim to grow CO2 neutrally until 2,030. That means We aim to maintain total greenhouse gas emissions from our production sites and our energy purchases at the 2018 level of 21,900,000 metric tons of CO2 equivalents while increasing production. In 2020, these emissions amounted to 20,800,000 metric tons of CO2 equivalent, an increase of 3.5% compared with the previous year. The decline in emissions due to measures to increase energy efficiency and optimize processes as well as lower production volumes We are more than offset particularly by the integration of the polyamide business acquired from Solvay in January 2020.
In addition, we aim to achieve €22,000,000,000 in accelerator sales by 2025. In 2020, We generated sales of €16,700,000,000 with Accelerator Products. This is an increase of 11% compared with €15,000,000,000 in 2019. The positive development of Accelerator sales in the Surface Technologies And Agricultural Solutions segment was the main reason for this increase. In the effort to transition Towards a more sustainable business, we have reached important milestones in 2020.
In our carbon management program, We have completed the construction of a pilot reactor for methane pyrolysis and started it up. This is an important step towards industrial scale Production of hydrogen without CO2 emissions and in the midterm, a more energy efficient alternative to water electrolysis. 2 of our sites in Texas, Freeport and Pasadena, have recently secured access to renewable energy. In total, 19 of our Sites globally are already powered partially or fully with renewable energy. Currently, we are pursuing more than 5,000 operational stiffness measures, of which around 25% are related to carbon management.
In addition, we are advancing with the rollout of our product carbon footprints for all of our 45,000 products. Regarding our Circular Economy program, we have successfully marketed First, commercial volumes of C Cycle products. This year, we will further expand volumes and support our customers with There are plans to launch more commercial applications. The plant of our partner, QuantaFuel, in Denmark has started up with our support, Enabling the chemical recycling of mixed plastic waste. We have broadened the raw material base to end of life tires through an investment into the German start up company, Pyram Innovations and the supply agreement with the Hungarian start up company, New Energy.
By setting ambitious targets for circularity, we have defined our path forward and underlined our commitment to contribute to a circular economy. Let us move on to the status of our excellence program. In 2020, We realized positive EBITDA contributions of around €1,400,000,000 The associated costs amounted to around €200,000,000 We are well on track to achieve the targeted €2,000,000,000 annual EBITDA contribution by the end of this year. The values are run rates. The associated one time costs in 2021 are estimated to be between €50,000,000 €150,000,000 On top of this program, the realignment of our Global Business Services unit will result in additional savings of more than €200,000,000 for the year from 2023 onwards.
Ladies and gentlemen, despite the pandemic, We have achieved a solid cash flow and BASF has again proven to be resilient. A reliable dividend payment, Even in difficult times is a priority for the BASF Board. Therefore, we will propose a dividend of €3.30 per share at the Annual Shareholders Meeting. In total, we would pay out €3,000,000,000 to our shareholders as in the previous year. Based on the year end share price of €64.72 BSF would offer A high dividend yield of 5.1 percent, and we want to continue offering you an attractive dividend in the future.
Let me therefore provide you with some more further rationale regarding our dividend policy going forward. Our cash flows from operating activities in the coming years are expected to cover both the capital expenditures for our ongoing business and our dividend payments. Based on our midterm projections, we will even have some headroom to further reduce our financial debt. The new Verbund side in South China and our investments in battery materials will boost BASF's future growth. We will finance the strong organic growth in these areas with the proceeds from our divestitures.
Despite high investments in these growth projects during the next years, our future portfolio is expected to be less capital intensive following this transformation. And now, Hans will give you more details regarding our active portfolio management, the business development in Q4 and the full year 2020.
Thank you, Martin, and good morning, ladies and gentlemen, also from my side. I will start by giving you a short update on our major portfolio measures. On January 31, 2020, BASF closed the acquisition of Solvay's polyamide business. In the meantime, the businesses have been successfully integrated into BASF's Performance Materials and Monomers divisions. We closed the sale of the Construction Chemicals business to an affiliate of Lone Star on September 30, 2020.
The Construction Chemicals business is now part of the newly founded MBCC Group. The sale of our pigments business to DIC Sun Chemical is now expected to close in the first half of twenty twenty one. The project teams are well prepared to allow for a swift and seamless cutover once merger clearance from all relevant authorities has been granted. As of now, the transaction obtained merger clearance in 10 of 11 jurisdictions globally, including the Conditional clearances of the EU Commission and the Japan Fair Trade Commission, both granted in December 2020. Only the merger clearance process in the U.
S. Is still ongoing. With respect to Wintershall Dea, we are realizing the announced synergies. The integration was completed. We assume an initial public offering in 2021 subject to market conditions.
Let me turn to the financial figures of BASF Group for Q4 2020 compared with the prior year quarter in more detail. Sales in the Q4 of 2020 increased by 8% to €15,900,000,000 As explained by Martin, volumes were up by 7%. Prices also increased by 7%, mainly driven by the Surface Technologies, Agricultural Solutions and Materials segments. Portfolio effects contributed 1% and were related to the acquisition of Solvay's Polyamide Business. Currency effects Negatively impacted sales by 7%.
EBITDA before special items increased by 15% to EUR 2,100,000,000 EBITDA amounted to EUR 2,000,000,000 compared with EUR 1,600,000,000 in Q4 2019. EBIT before special items came in at EUR 1,100,000,000 32% higher than in Q4 2019. I will provide you with some further details on the quarterly earnings development by segment as this is not outlined in the BASF report 2020 published today. EBIT before special items in the Chemicals segment improved considerably compared with Q4 2019. Both divisions, Petrochemicals and Intermediates, Recorded significantly higher earnings due to lower fixed costs and improved equity results, especially from our participation in BASF YPC Nanjing.
EBIT before special items in the Materials segment improved even more considerably than in the Chemicals segment. Both divisions in Materials, particularly the Monomers division, recorded significantly higher earnings compared with Q4 2019. Higher margins as a result of demand recovery and partly due to lower product availability in the market were the main driver. In the Industrial Solutions segment, EBIT before special items also increased considerably. In the Dispersions and Pigments division, lower fixed costs and higher margins were the main driver.
In Performance Chemicals, EBIT before special items increased as well. In the Surface Technologies segment, EBIT before special items declined slightly. While margins were almost stable in Catalysts, EBIT before special items declined mainly due to higher fixed costs. In Coatings, lower fixed costs could more than compensate for slightly lower margins. Therefore, EBIT before special items in the Coatings division increased slightly.
EBIT before special items Nutrition and Care segment decreased slightly compared with Q4 2019, while EBIT before special items in the Care Chemicals division improved slightly due to lower fixed costs. Nutrition and Health recorded considerably lower EBIT before special items. Higher fixed costs offset the margin increase in the division. In Agricultural Solutions, earnings declined considerably compared with the strong Q4 of 2019. This was driven by negative currency effects, mainly from the Brazilian real as well as the U.
S. Dollar. Lower fixed costs partly had an offsetting effect. In other, higher fixed costs, including higher provision for BASF's LTI program and lower margins led to significantly lower EBIT before special items compared with Q4 2019. Now let us return to BASF Group figures.
Special items in EBIT amounted to minus €100 €81,000,000 compared with minus €263,000,000 in Q4 2019. EBIT increased by 61% to €932,000,000 in Q4 2020. Net income amounted to €1,100,000,000 compared with €150,000,000 in Q4 2019. The tax rate was 24.7% compared with 19 0.2% in Q4 2019. Reported earnings per share increased from €0.16 in the prior year quarter to €1.15 in Q4 2020.
Adjusted EPS amounted to €1.10 This compares with EUR 0.64 in the prior year quarter. Cash flows from operating activities decreased by EUR 1,100,000,000 to EUR 2,100,000,000 in Q4 2020. This decline was mainly driven by a lower cash inflow from changes in net working capital. In Q4 2019, changes in net working capital led to a cash inflow of EUR 1,600,000,000 compared with EUR EUR 600,000,000 in the operationally stronger Q4 2020. Payments made for intangible assets in property, plant and equipment decreased by €78,000,000 and amounted to €1,100,000,000 Free cash flow came in at €1,000,000,000 compared to €2,000,000,000 in Q4 2019.
I will now only quickly comment on the earnings development in the full year 2020. Sales were almost stable and amounted to €59,100,000,000 negative currency and volume effects were almost offset by higher prices and positive portfolio effects. At EUR 7,400,000,000 EBITDA before special items was 11% lower than in the prior year. EBITDA amounted to EUR 6,500,000,000 compared with EUR 8,200,000,000 in 2019. EBIT before Special items decreased by €1,100,000,000 to €3,600,000,000 EBIT decreased from €4,200,000,000 to minus €191,000,000 In total, special items in EBIT amounted to minus €3,800,000,000 compared with minus €442,000,000 in 2019.
This increase was mainly driven by noncash effective impairments in Q3 2020. Net income amounted to minus €1,100,000,000 This compares with €8,400,000,000 in 2019. This significant decline can almost entirely be explained with this year's special higher special charges and last year's book gain of around €5,700,000,000 from the deconsolidation of the Wintershall Companies following the mergers of Wintershall and DEA on May 1, 2019. The tax rate decreased from 22.9% to 5.8%. Let's now move on to our cash flow development in the full year 2020.
Cash flows from operating activities amounted €5,400,000,000 compared with €7,500,000,000 in the prior year. This was primarily due to lower net income and the higher level of cash tied up In net working capital, where the increase in accounts receivable and precious metal positions due to the strong business in Q4 and high precious metal prices could not be compensated by the reduction of inventories. In 2020, changes in net working capital led to a cash outflow of €400,000,000 compared with a cash inflow of EUR 1,400,000,000 in 2019. Despite the adverse impact of the pandemic on our business, We achieved a solid free cash flow of EUR 2,300,000,000 compared with EUR 3,700,000,000 in 2019. The decrease was mainly driven by lower net income and the higher level of cash tied up in net working capital.
Lower payments made for intangible assets and property, Plant and equipment had an offsetting effect. Turning to our balance sheet at the end of 2020 compared with the year end 2019. Total assets decreased by €6,700,000,000 to €80,300,000,000 Compared with the end of December 2019, noncurrent assets decreased by €5,500,000,000 to €50,400,000,000 mainly driven by noncash effective impairments and currency effects. Compared with the year end 2019, net debt decreased by €829,000,000 to €14,700,000,000 At the end of 2020, the equity ratio amounted to 42.8%. And with that, back to you, Martin, for the outlook.
Ladies and gentlemen, we expect the global economy to recover in 2021 after the sharp downturn resulting from the corona pandemic. However, uncertainty about future developments remains exceptionally high. Our forecast is therefore includes wide ranges to account for the possibility of significant disruptions to the global supply chains and negative effects on the entire economy. At the same time, let me say this very clearly. We are confident that without such negative impact, We will be able to achieve earnings at the upper end of the forecast range.
Our forecast assumes growth in our customer industries. For the automotive industry in particular, we are forecasting significant production growth compared with 2020. The global economy should see significant growth of 4.3% compared with minus 3.7% in 2020. Global chemical production is expected to expand by 4.4%, well above the prior year's level of minus 0.4%. We anticipate an average oil price of $50 for a barrel Brent crude and We expect an exchange rate of €1.18 per €1.8 per €1.
Based on these assumptions, We aim to increase our sales to between €61,000,000,000 and €64,000,000,000 up from €59,100,000,000 in 2020. The BASF Group's EBIT before special items is expected to be between €4,100,000,000 5 €100,000,000 up from €3,600,000,000 in 2020. As I mentioned, The upper end of the forecast range should be achievable given the strong business development during the 1st weeks of this year. The return on capital employed, ROCE, is expected to be between 0.0% 9.2%. To support faster profitable growth of BASF in the future, we will continue sorry, sorry.
Let me also touch on the accelerator sales and CO2 emissions first forecast for the BASF Group. We expect Accelerator sales to increase to between EUR 18,000,000,000 EUR 19,000,000,000 in 2021, up from €16,700,000,000 in line with the global economic recovery and growing demand for chemical products. Despite the global economic recovery and growing demand for chemical products, CO2 emissions are expected to stabilize at between 20,500,000,000 metric tons and 21.5 metric tons in 1,000,000 metric tons in 2021. With targeted measures, we will keep emissions roughly at the prior year's level of 20,800,000 metric tons. On this slide, we give you a few more explanations regarding our CapEx budget.
Between 2021 2025, We are planning capital expenditures of €22,900,000,000 The capital expenditures in the next 5 years will thus be lower Then in the prior planning period from 2020 to 2024. We will allocate 41% of our investments to Asia Pacific and 39% to Europe. A focus area is our investment project in Guangdong province in China to expand our business in Asia. For 2021, we are planning capital expenditures of €3,600,000,000 in total. Ladies and gentlemen, let me conclude with our priorities for 2021.
We will further implement strategic measures and push the transformation of BASF into a more agile and customer focused company. To support Faster profitable growth of BASF in the future. We will continue to pursue our investment project in Guangdong province and our investments in the production of battery materials. We will energetically drive sustainability and innovation with our Carbon Management and Circular Economy programs. During our Capital Markets Day on March 26, We will share further information on our aspirations in this field.
We are executing the announced portfolio measures. The major upcoming portfolio changes will be the closing of the sale of our pigment business and the IPO of HindosAlBIA, which is subject to market conditions. We will successfully conclude our excellence program and maintain a strict focus on capital and cost discipline. And with this, we are now glad to take your questions.
Ladies and gentlemen, I would now like open the call for your questions. For the best sound quality, we kindly ask you to be sure to unmute your phone and use your headset when asking your question. Please limit your questions to only 1 or 2 at a time so that everybody has a chance to ask their questions. The first question is from Andrew Stott, UBS. He will then be followed by Christian Faitz and Thomas Wrigglesworth, but now first, Anne will stop UBS.
Please go ahead.
Yes. Good morning, Stephanie. Thank you. Good morning to Martin and Hans. Two questions, please.
The first one was around the guidance for ag. So considering how important Q1 is In the context of the whole year, is the message that you've had a reasonably lackluster start when you also consider the FX imprint? Or is there a degree of conservatism? So that's the first question. The second question is a longer ranging question around the The announcement 2 weeks ago with Siemens, is that hydrogen Alliance, I think, as you called it.
Is that purely to help decarbonize your sites, In particular, Ludwigshalven, or is there a commercial side to that agreement in, for example, areas like catalysis? Thank you.
Andrew, I'll start with the second one. I mean the announcement with Siemens Energy is one of Partnerships and there will others follow over time where they help us in actually do the first steps on the decarbonization or carbon management agenda. It is basically that they help us with their technologies to establish certain pilot plants and first steps at the Ludwigshafen site. We agreed also that we will look into the catalysis of water electrolysis together, which is a kind of Development part together, which is, however, not exclusive. So that is mainly a partnership actually to establish the first steps in the decarbonization program here at the site in Ludwigshafen.
And the second question is Hans.
Yes. Good morning, Andrew. On your guidance for ag question, we had a good start to the year. We had a A strong January. So no complaints there at all.
A degree of conservatism, Yes, maybe, but certainly also an effect that will come due to FX. If you think about the first half of twenty twenty, the U. S. Dollar euro exchange rate was almost set at $1.10 We are currently at $1.21 $1.22 This is first half Northern Hemisphere Business. The U.
S. Dollar can have a significant impact here, and this is something that we're factoring into our guidance. But operationally, a good strong start into the season.
The next question is Sorry, Andrew, was that fine?
Yes, I was just saying thank you.
Okay, so fine. Thank you. And now Christian Faitz from Kepler Cheuvreux. Please go ahead.
Good morning, Hans. I'll also take the 2 question option, please. So first, can you please update us on current capacity outages, namely how your operations at Texas were affected by the freeze And how your isocyanate units globally are presently running. Second question also on ag. I mean, a lot can happen until the summer.
Yet, if my math is right, taking the current Brazilian real rate and comparing that to the average in the second half of last year, There's not much of a currency impact. Hence, the big ForEx bummer from 2020, at least in H2 for you, should not repeat itself. So why again are you so cautious in significantly more robust agricultural markets that we currently see? Thanks.
Good morning, Christian, the Sands. I'll take both of your questions. First of all, on the outages. As everyone else, we were hit by the freeze in the U. S.
Gulf Coast. A number of plants that are down, number of Slides that are down, some of them back up, some of them in the process of coming back. And this is based on the experience in With the freeze in 2018, where it came 4 weeks earlier, middle of January, and then 2012, where it was in the 1st week of February. It will take, based on that experience, about 2 to 3 weeks that the situation there shakes out, that Supply chains are stabilized. You know how closely interlinked and intertwined the production network is in the U.
S. Gulf Coast. And that's what we're currently expecting. Other than that, no major outages So in January or in February, but you asked specifically with respect to isocyanates. And yes, the isocyanates Plans in Geismar were affected, but based on what I heard yesterday, are back up And running smoothly.
So that's the current situation there. Your second question on FX impacts on the Ag business, I go back to what I just said. The predominant impact that we are expecting is resulting from the decline of the U. S. Dollar.
As I said, EUR 110,000,000 first half of last year. We're now sitting EUR 121, EUR 122,000,000,000, so that will have a significant impact. South America, you're absolutely right. That went through the system in Q4 with a significant impact there due to the Brazilian real But also the U. S.
Dollar. Let's hope that, that doesn't repeat itself. And with that, all of that, we came to the conclusion to guide for A slight increase. If it comes in better than that, I will be perfectly happy.
Thank you very much, Hans. Thanks.
Yes. Next question is from Thomas Wigglesworth, Citi. Please go ahead.
Thanks, Stefanie, hi, Martin Hans, my two questions. Martin, I think on the Q3 results call, you talked about the fact As you thought in China, that there might be some restocking element taking place. I wonder if your views have Expanded on that now, how has the Chinese order books developed into Chinese New Year and now the week after? I'd be very And to hear your thoughts on how you think China is going to progress through the quarter to 2021. The second question, if I may, It's on the kind of exit rate and the run rate for the Q1.
Obviously, noting your comments on Ag Solutions, but focusing on the kind of non ag business. Can you give us a little bit of a color there as to how strong it is? Obviously, kind of peak levels, BASF has been able to achieve EUR 2,000,000,000 plus Levels of EBIT as a group. It looks like the spreads are commensurate with that kind of level of performance. Is that how we should Thank you.
Thomas, good morning. I take the two questions. I mean, first off, China, indeed, when we talked the last time, I was not yet sure whether the consumer confidence, the retail sales do fit to the industrial I would say over the recent months, it has really become very solid. I mean, if you look in the terms, customer Consumer confidence is really high and industrial production stabilized. So we saw that also in January again with the double digit volume growth In China, so it really holds on.
If I talk to my team, if you go to people our people over there, they say basically life has turned to normal and The shopping malls are full. So I would say I'm very confident now that this really stabilized out and will transport further. That's why also The GDP data as well as the chemical market growth data for China are high, and we think they have a very I believe that this is also going to come. So China is really stabilizing and one of the factors also evidently that they Focus much more on their domestic market and their supply chains over there. So you asked a little bit about the guidance and where we stand with current rating.
I mean, Let me very clearly say, the full momentum which we had in the Q4, we have also seen so far this year. We had an exceptionally strong January. Also in February, business holds on very, very strong. We can This is throughout the businesses, and I would say it is also fairly good distributed between the regions. If you look on our orders at hand, they are actually a double digit increase both compared to Q4 last year as well as Compared to Q1 2020, if you look to our customers and the outlook we have, I would say it is all positive.
And with this, I clearly say we are very confident that we reach the consensus level for Q1 2021. And I think also if you look on Q2, which was a disastrous quarter last year, should be definitely higher. So I would say there should be a full confidence for the first half of the year. I think where our broad range comes from Is actually is it really fair to assume that everywhere in the world, we will not see any more wave of infection, any lockdown? In the current moment, no one can really say how it was on what the mutations of the virus do, what the vaccination progress, How that really is.
So I think there is high uncertainty that something might happen. And if you just reflected that With the lower part of the range, and I really repeat that here. If that is not going to happen, That we see these interruptions somewhere in one of the major markets or more of 1 market. We are confident to be at the upper range of the corridor we gave you, which is actually also the consensus you have given us in the moment.
Thank you very much. Very clear. Thank you.
The next question is from Jaydeep Pandia. He will then be followed by Laurent Favre and Chetan Udeshi. So now Jaydeep Pandia, please go ahead.
Thanks. The first question is on the carbon targets you have. Could you just tell us, If you just look at Europe, what sort of cut are you actually penciling in? Because obviously, you're growing capacity Quite a lot in Asia. So I'm assuming that Europe will have to sort of make room for that.
And then how much Allowances do you have currently? Are you still positive on the allowances? Or are you Going to have to buy carbon in the market in your sort of plan. And then the second question really is around upstream. If you can just give us some Sense of how much capacity in your opinion currently is offline in cracker products Regionally, that would be very helpful.
Thank you so much.
Charlie, we will give you a much more detailed overview about CO2 and where we're heading to and what the measures are at the Capital Markets Day in March 26. But I take it a little bit up. I mean, If you look on this target to grow carbon neutrally in 2030, it's exactly reflecting 2 effects. The one is continuous efficiency improvements and also switching purchased electrical energy to renewables And then also using increasingly renewables in our own setup where we clearly reduce our CO2 footprint in absolute numbers. But on the other hand, we have Measures where we increase.
I mean, you saw that also on last year's performance. Basically, we made good progress and then the Solvay Acquisition actually added quite a few a couple of 100,000,000 of CO2 to that balance. And also you're right, The China development and the China side will also add something, but we will teach you also there. We will build a petrochemical side with a significantly Lower CO2 footprint as of day 1. But this is these two effects.
So if you want to grow volumes, it is tough to actually, in absolute numbers, Reduce your CO2. But still, we have plans, even with the growth, to reduce further down. But I would like to keep that maybe for the Capital Markets Day. You asked about the allocations. I think certificates currently are trading around €30,000,000 €33 Per tonne, there are free allocations in the system.
But also here, we will see with the Green Deal several new How the ETF develops, how they use that for housing and mobility, how that will be included. And I think we have also to expect that Free allocations might go down quicker than we think today, and this is why the carbon management and why the active Action to really take the CO2 down are so important. But let's get a little bit excited on end of March.
David, this is Harald.
All right. Looking forward.
Thanks for your question on the outages In the Upstream area, no, I don't have the complete overview. What I can give you is the following. C2 capacity in North America, depending on where you look and which market intelligence you trust, Looks like currently 60% to 70% of total capacity in North America affected. LG's cracker after the fire in Korea is back on stream. Ennios, Switch had any or so starting with an E, not an I.
In Japan, had a cracker outage over quite some time. They are back into the system. So predominantly at this point in time, an issue with the C2 capacity in North America. Isocyanates, which we are tracking closely, I look at the MDI planned outages and the TDI planned outages there around the globe. So As to be expected after the freeze, all sites and with that the capacities in North America being affected, but our understanding is that they're coming back on stream step by step.
EMEA at this point in time, both for MDI and for TDI Looks okay. A number of scheduled turnarounds during Q2. And in Asia If I see that correctly, that also looks more or less okay. I am aware of the situation with ammonia, where 10 of the big global plants are at this point in time affected So by either turnarounds or unplanned outages, again, also due to the freeze in North America. Hope that picture helps a little bit and that description and explanation helps a little bit to put things in perspective.
Thank you so much.
So now we move on to Laurent Fabre, Exane BNP. Please go ahead.
Thank you, Stefi. Good morning all. Two questions please as well. The first one is around the dividend framework. It sounds like you are structuring the framework around exceptional CapEx and base CapEx.
So when we look at CapEx of EUR 2,900,000,000 last year, €3,600,000,000 this year and I guess something around €5,000,000,000 for the following years. Can you give us a sense of what that exceptional CapEx Was last year and is going to be in that EUR 3,600,000,000 budget for this year? Thank you. And then second question, I guess, on ag, sorry. But regarding LatAm, 2 of your peers have talked about high inventory levels to finish the season given the short term season.
I was wondering, I guess, if you're taking corrective measures of destocking to have a better chance of getting pricing for the bidding of next Susan, are you not seeing those issues on inventories as your peers? Thank you.
I mean, Laurent, let me start with this dividend framework. I think Actually that we proposed a dividend of €3.30 per share. I think given the difficult year Of 2020, I think it radiates confidence for the future. This is also why we gave you this explanation where actually this confidence comes from. And I think we have to look On the BASF Group with its core businesses, you know that we have cost discipline and we go for more Agility with customers, and I think we progress very well on that.
If you look on that and our projection going forward, we really see that this Operational cash flow should be strong enough to really pay for the CapEx, the restricted CapEx for the ongoing business as well as for the dividend. We wanted to really make clear that if you have an extraordinary investment like we have now in China, I mean, If you finance that from the normal cash flow of in that order of magnitude, I mean, I think you have to look differently into this. And that's why we have to really Outline again that this is part of the portfolio management. I mean, we divested businesses. We don't want to be in anymore that do not fit to BASF.
And instead of Getting proceeds from divestiture and acquiring new companies, we go for a different way, which is actually organic investment. And I told you many times that I think organic investment done very well and executed well is more profitable than an acquisition. So for that reason, we have also to consider that we have to Spread out the capital over several years, and it will come as a cap basically on top of what we spend for our ongoing businesses. And this is, I think, why we have to separate this a little bit and wanted to give you that outline. If we look on 2020, There was not so much money in there still because what we do is actually ramping up the team that is cost, but there is not big expenditure yet.
And it starts That's actually now this year. The part that was last year in the CapEx, but it's in the ongoing part is actually the 2 first plants, which we had built I started to build in China, and they are actually on the site, but they are anyway in the normal program we have. So it starts, it will ramp up with first costs this year and then certainly it will go up. And I think the order of magnitude you pointed out That we will be in the peak in the order of magnitude, which you have outlined, is right. And that will then most probably peak in 2023 and 2024 because 25, we will already going towards completion.
So I leave it with that. I think that should give you An idea again how we connected on one hand the growth aspirations and the capital we need for that and on the other hand our confidence also which we radiate about the dividend. I hope that explains your question.
Sure. And Martin, on that basis, you would expect the start up of the main cracker when during 2025 or earlier than that?
The start up, you mean?
Of the cracker, yes, in Guangdong.
Yes, in 2025.
2025. Thank you.
Laurent, this is Hans. I'm taking your question on the season ending inventories in South America for ag. Talking to Vincent Gros yesterday, who runs our Ag Division, I did not walk away from That discussion with the impression that there are elevated levels of inventories at the end of the season. What he described to me is normal inventory levels for season ending. So Expectation is to go there into the 2020 2021 season with So a normal inventory level for BASF Products.
Thank you. That's perfect. Thank you.
Looking at the time and also the list of analysts that still want to ask We will now move on to Chetan Udeshi, JPMorgan, Then it will be Tony Jones and then Marcus Myers. And now Chetan Udeshi. Please go ahead.
Yes, hi. My question is actually one just on Maybe 2 questions there. But this first one was just looking at the 2020 to 2024 CapEx Budget, it still seems to be the same as was communicated previously despite the fact that You guys have decided to not invest in the acrylic acid plant in India. So can you maybe help us understand why that number hasn't gone down? And the second question just related to the CapEx guidance of €3,600,000,000 in 2021, just reading the annual report, It says it doesn't include CapEx on intangibles and right of use lease Expenses.
So can you maybe help us understand what are those additional CapEx or what is the additional CapEx on right of use, lease expenses and intangibles. Thank you.
Did I make this very short on the CapEx? I mean, if you look on the 5 years Outlook 2021 to 2025, this is actually lower than we had outlined for 2020 to 2024. And part of that is The Indian project that is not going to come at least at the current point of time and some other certainly Some other decisions, you know that this is always a sum up of many, many line items. So you see it actually in a lower number outlined for 2020 1 to 2025.
Chetan, on your second question with respect to CapEx for Property, plant and equipment and what's not included in there in the SEK 3,600,000,000 figure, that's predominantly IT projects Out of which part will be capitalized, that's not included in there. And that depends, obviously, on the year. To give you A rough figure there. I'd say if you calculate with an order of magnitude of €150,000,000 to €200,000,000 of CapEx projects to be capitalized, that should be a good figure.
Thank you.
So now it's Tony Jones, Redburn.
Yes. Good morning, Stefan, Hans and Martin. I had a question about the cracker products. So propylene looks like It's going to be very short in the first half, even before the problems in the U. S, maybe also Europe and Asia.
Could you talk about what you think that might mean for the BASF Supply Chain, whether that could cause any problems? And what do you think that might mean for margins across the division? And if I could maybe just sneak in Any updates on the timing of the oil and gas IPO would be great. Thank you.
Toni, this is Hans. Thanks for your question. On C3, what do we see currently? I could go back To what I described already with respect to ethylene, it's a North America situation because PDHs are down, in particular, the enterprise PDH also due to the run rates of the refineries. There is less propylene output there.
Remains to be seen how this will develop as The PDH plans come back. Other than that, I'm not aware of any major issues So with respect to propylene outside of the U. S, propylene prices obviously They have increased sharply since the middle of last year to be expected In the kind of environment that we are finding ourselves in, you asked the question with respect what does that mean for your downstream divisions. Here is the general answer that I can give you, which is, yes, they have to cope with higher input prices. But at the same point in time, they are enjoying a significant increase in demand, which allows them to pass on these kind of raw material price increases, sometimes with a bit of a time delay.
But overall, it's an environment Where they can pass on the price increases that they get on the raw material side.
That's great. Thank you.
And on the sorry, I didn't want to skip your question on Wintershall DEA. If you think about The lead time that you have for an IPO, We're talking here second half of the year, and second half means beginning in September.
Perfect. Thank you, Hans.
So now Markus Mayer, Baader Helvea. Please go ahead.
Good morning, Martin and Handel and Stefan. One question on the guidance, which basically split into 2. This buffer you've baked in for the significant supply chain disruption. Is this correct to read? Is that Basically from the midpoint of the guidance to the up end of the guidance, I.
E, the €500,000,000 is this the kind of security buffer you've baked in? And the second part on the guidance would be this considerable higher earnings at the other divisions. Could you give us the moving parts and also the magnitude of the effects there?
Markus, I'll start with it and then Hans can come in. I mean, the guidance, let me clearly say that does not necessarily mean that It's always about the midpoint because that is you know that market risk and market chances or upsides and downsides are not equally Distributed. I mean, as I said earlier, what is behind that is that from the lower end? I mean, first of all, I said no one can, I think, say from today's Point of view, whether there will not be further lockdowns? Just imagine that the corona mutations, I mean, they maybe create more Severe and more infections overall, then I think the governments will react.
You can also not see anywhere in the world from any government Any, let's say, creativity and then locking down. So it's the current question, should it be 4 weeks more lockdown? So I mean, no one really knows this. Then you have also to keep in mind, if you look on the GDP, what are people doing now in the first half when they are locked down? They order stuff.
So if they might come in the period after the lockdown, there could be also that there is a reshuffling of some spending From investment to also more services. People will travel, they will go restaurants in Leves Leisure, they will travel. And that means also that could have impact also on our business. I think no one is able to predict all of that at the same time. On the other hand, I said, for example, automotive, where you have now the semiconductor issue in the first half, we expect rather that the second half will be stronger in automotive than the first half.
So There are many effects of this. We just wanted to radiate, if it comes worse to worse, then we will have other waves Where simply the governments react on harsh lockdowns, it will have impact on our business. And it can just not be that it Continue so strong as it is now in January all over the year. And I think this is what we wanted to expect that if everything goes bad, we Can be at the lower part of that, but I think I made very clear in the speech and also in the comments afterwards, we are confident That we are at the upper part of that, and we will not face that severe lockdowns anymore going forward. I hope that explains and on other front.
Perfect. Thank you. Yes. Thanks for your question, Markus. So why do we guide for an improvement there?
As you know, others is a hodgepodge of activities. Among other things, you have in there our raw material trading business. Now the raw material trading business, as you can also see in the significant sales decline that we have of more than €500,000,000 didn't generate too much profit in 2020. We are expecting that This will change in the year 2021, so there's a big driver there. You're aware of the various Cost reduction measures that we have in the BASF Group, so we will see a contribution coming out of that.
Among other things, we have corporate center cost in other, which is a factor. We have The corporate research in there, so there will be the expectation to see some improvement in that. And we also had in other, we also have Our captive insurance activities, where the returns weren't as high in 2020 as they were in 2019 for obvious reasons. And we are expecting some improvement there, and all of that Leads then to the guidance that we gave. Okay.
Very clear. Thank you.
Okay. The next Question is from Matthew Yates. We will then have Chris Cooneyhan and then Charlie Webb. But please make sure only one question now. Matthew Yates?
Hi, thank you. I'd just like to come back to the dividend point. I apologize, I haven't followed the company for that long. But has the group ever distinguished in the past Between maintenance CapEx and growth CapEx when looking at dividend affordability, maybe China is just a truly outsized investment Or is this telling us something about how dependent the credit rating has become on extracting capital from Wintershall? And if those market conditions don't allow an IPO in September, how would you be thinking about a plan B?
Matthew, I'm trying to take that one because Martin had the pleasure to talk about the dividend already multiple times. And I think everything is said. We have a dividend policy in place. And if you think about what we're doing for a year like 20 Which is a crisis year. We're paying out a dividend at the level of the year or for the year 2019.
And I That is an important thing to keep in mind. As BASF, we made a commitment. We strive to and Stick to that commitment. And looking at what we expect the business to deliver, I think we are in a good position to put our money where our mouth is. And I guess That's all that I can say, yes, and I hope this helps.
Understood. Thank you.
Now it's Chris Cunningham, Credit Suisse. Please go ahead.
Yes. Good morning all. I was looking into my model this morning and the 2020 EBITDA on the XL had a note next to it So from the November 2011 Capital Markets Day, which you both spoke out, it mentioned a 2020 EBITDA target of €23,000,000,000 which I think we subsequently revised down to 22,000,000,000 with sales in the range above €100,000,000,000 Now I know there's lots of swings and roundabouts for long term estimates like This including an oil price that's come in half the expected level back in the day. And I know you've revised those targets back in 2015 2018 again. But I suppose if I even exclude a 2020 for COVID related demand reasons, I don't think there's any year throughout 2010s, you came within €10,000,000,000 or 50 percent of this EBITDA target.
So my question sort of surrounds the past and the future. Firstly, reflecting back upon These targets, what's been the greatest areas of variance relative to your expectations? But then looking forward, how can you future proof BASF and the business against these issues? And do you ever foresee the targets detailed in 2012 as achievable for BASF?
Chris, I'll give it a this is Hans. I'll give it a try. So yes, you're absolutely right. We had much higher expectations, but then there was a point in time and Thanks for referring to that, which was in 2015 when reality kicked in. And I think what we're doing now, And you follow us closely over the years.
You followed in particular what we said in 2018, What we wanted to achieve strategically, and I think that is the key point, you see us delivering. You see us exactly executing along the lines of What we said in 2018, did we foresee a pandemic in the year 2020? No, we did not, Absolutely not. But I think what's important to see is BASF put a strategy in place in 2018, And we deliver on that strategy step by step, be it the portfolio changes that we addressed, Be it the cost reduction measures that we put in place with the excellence program, be it The change in the regional footprint with the new Verbund site in China, be it the growth projects For battery materials, we're delivering on that step by step. And I hope when you and I talk 10 years down the road, the 2 of us I will most probably be in a different position then.
The 2 of us will then come to the conclusion that, In fact, we did deliver.
I'm looking forward to that conversation. Thanks, Hans.
Okay. We'll try to We tried to answer the questions of Charlie, Sebastian and Andreas, and I apologize that we cannot take the other questions. We would refer them, please, or ask The colleague at the analyst to refer to the IR team. So now Charlie Webb with a short question, please.
Thank you, Stephanie. Good morning, Martin.
Good morning, Hans. Just one on MDI and TDI, the isocyanates. Clearly, current spreads look pretty tight, and I guess the disruptions in Texas We'll keep things that way for now. I'm just wondering how you see those markets kind of moving into the latter half of the year. A peer of yours was fairly conservative in the potential normalization that we might see.
So just wondering whether you share that view or whether you have a slightly different view. I'm just interested How you're thinking about those markets?
Yes, Charlie, this is Hans again. So on the isocyanates, frankly, we were Positively surprised by what we saw happening in Q4 and are also going into Q1, very strong business in January, very strong business in February. Our is that during the course of the year, we'll see a normalization there in the business. So yes, I guess that's all that I can say with respect to isocyanates, where frankly, we were surprised by The strong improvement in a very short period of time.
Okay.
Thank you very much.
Now it's Sebastian Bray, Berenberg. Please go ahead.
Hello, good morning and thank you for taking my questions. They are on oil and gas. I can't find the book value at which Wintershall is held in the BASF accounts. How much of the €10,800,000,000 of at equity Investments is Wintershall. And could you give us an idea of the income contribution from this business that would be At the guidance price of $50 a barrel or any type of sensitivity around that?
Thank you.
Sebastian, Hans again. So out of the 10.8, More than 90% is Wintershall Dea. I can give you the exact figure, which is EUR 10,200,000,000. On the guidance and what's factored in, I can tell you that Since we show Wintershall Dea below the EBIT, Sure. There's no contribution of Wintershall Dea factored into our EBIT guidance and with that obviously also
Understood. Thank you.
Okay. So now the Final question from Andreas Heine, Stifel. Please go ahead.
Yes. I basically have a question on all the prices we can see in chemicals and also in materials. And this looks to be very transparent, then you would clearly exceed what the consensus Has on its mind in Q1, but I'm not sure how real these prices are. Maybe you can elaborate what you see from Q4 In your upstream portfolio as margin improvement and how you have what you have in your book and what you see in prices compared to what all these agencies report every week on price increases. Thanks.
Andreas, this Hans again. I'll try to answer this one. So the price is, I think it's fair to say in Chemical Upstreams have gone up across the board, Have gone up across the board in all regions. They are following, to a large extent, oil price development because Oil and its derivatives are part of the raw material portfolio there. We've seen that as a result also of the strong demand improvement that we have Experience.
Key question that you're asking is obviously the right one for Upstreams, which is what does that all mean for margins. And I can say also as a general comment, so far, we are able to pass on The raw material price increases and maybe for in certain product lines do also a little bit more than that. But that is also required if you think about the price development that we've experienced from, let's say, 2nd half of twenty nineteen on the steep drops that we have experienced there. So we need to come back, bring prices further up because that then will also have, obviously, the required impact on profitability. So a lot to be done.
But overall, and I think that's the key point, demand has given us there the support to
Being mindful of the time we are at the end of our conference call today, let me take this opportunity to draw your attention on our virtual Capital Markets day on March 26. In the keynote section of our Capital Markets Day, Martin Brudermuller will illustrate BASF's aspiration to lead the chemical industry in terms of CO2 reductions by developing and investing in new technologies and electrification vacation based on Renewable Energy. During the subsequent Q and A, he will be joined by Hans Engel. In the following sections, 2 BASF segments. Industrial Solutions and Nutrition Care will be presented in more detail.
Markus Kamit will give a presentation on the Industrial Solutions segment. During the Q and A following his presentation, he will be joined by of the Dispersions and Pigments and Performance Chemicals divisions. In the 3rd section that Aurelio Boor will give a presentation on our Nutrition and Care segment During the Q and A, following her presentation, she will be joined by the Presidents of the Care Chemicals and the Nutrition and Health divisions. Beginning of next week, we will you will receive an e mail with further information, including registration instructions. To conclude, I would like to wish you all the best.
Stay healthy and take care. Thank you for joining us today and goodbye for now.