Thank you very much. Good morning, ladies and gentlemen. We would like to welcome you to BASF's Q1 2014 conference call. BASF had a very good start into the year in all segments, with the exception of oil and gas. We saw robust volume growth, which more than compensated for negative currency effects.
With me on the call today to explain the results are Hans-Ulrich Engel, our CFO, and Manfred Rübsamen, President of the Finance Division. Hans will explain the financial highlights and important milestones, then he will review the Q1 2014 segment results, and he will finish with the outlook. Afterwards, Hans and Manfred will both be happy to take your questions.
Since today is our annual general meeting, our conference call will be limited to one hour. We already posted the charts and the speech as well as the press documents on our website at basf.com/share. With this, I would like to hand the call over to Hans.
Thank you, Maggie, and good morning also from my side. Let's start with macroeconomic environment, which has not materially improved in the first quarter of 2014. Concerns about economic growth in emerging markets and somewhat softer macro data in the U.S. due to the harsh winter impacted economic activity.
The ongoing crisis in Ukraine is adding uncertainty. However, we expect that global economic growth remains on track and can gain momentum as the year progresses. In Q1 2014, the euro appreciated against almost all currencies compared to the first quarter of last year.
This negatively impacted both our top and bottom line. The positive volume trend reported for the last two quarters continued and led to a good start to the year in our chemicals businesses as well as in agricultural solutions.
Our oil and gas business, however, came in lower than prior year quarter. Let me now comment on the financial performance of BASF Group in Q1 2014. Sales in the first quarter declined slightly to EUR 19.5 billion. Higher volumes were more than offset by lower prices and pronounced negative currency effects. EBITDA rose by 3% to EUR 3.0 billion.
EBIT before special items declined by 3% to EUR 2.1 billion. We were able to improve our earnings in the chemicals businesses and in agricultural solutions. However, we saw considerably lower earnings in oil and gas. The devaluation of almost all major currencies against the euro impacted earnings negatively by roughly EUR 200 million compared to prior year. EBIT increased by 4% to EUR 2.2 billion as a result of a swing in special items.
While special items amounted to -EUR 45 million in the previous year's first quarter, we incurred positive special items of EUR 109 million in the first quarter 2014. These are primarily related to a gain from the divestiture of selected E&P assets on the U.K.'s continental shelf to the Hungarian MOL Group.
Income taxes grew by 5% to EUR 525 million, and the tax rate slightly increased from 24.4% to 25.4%. At EUR 1.5 billion, net income came in 2% higher than in the first quarter of last year. Adjusted earnings per share amounted to EUR 1.64 in Q1 2014, after EUR 1.67 in Q1 2013.
At EUR 1.7 billion, operating cash flow was again strong, but stayed by about EUR 300 million below the level of the previous year's first quarter due to a higher increase in net working capital. Free cash flow reached almost EUR 800 million compared to EUR 1.2 billion in Q1 of 2013. Ladies and gentlemen, we continued to further optimize our positioning and portfolio.
As announced earlier this month, we had groundbreaking of our integrated aroma ingredients complex at the Verbund site in Kuantan, Malaysia. We also inaugurated our new plant for superabsorbent polymers in Nanjing, China, including a backward integration into acrylic acid. In oil and gas, our strategic portfolio optimization continued. We will divest our shares in the VNG gas transport business in Germany, and we sold selected E&P assets, as already mentioned, to MOL.
Furthermore, we are continuing our measures to further strengthen the competitiveness of our Performance Products segment as announced last Friday. In the Nutrition & Health division, we adjust our product portfolio and business models to market needs. Due to the planned measures, about 260 positions in production, marketing, and administration will be reduced globally by end of 2015.
Finally, we announce today that we are evaluating an investment in a world-scale methane-to-propylene complex at the U.S. Gulf Coast. This would be our largest single plant investment, not only in the U.S., but also globally so far. The on-purpose production of propylene would be used for captive demand and substitute purchases from third parties in North America. We would, thus, take further advantage of the very competitive gas prices in the U.S. due to shale gas and significantly improve our cost position.
The investment would be based on the same strategic rationale as the ammonia project planned together with Yara. That means cost advantage backward integration. Let me now briefly address the development in our segments. Sales in chemicals were at the level of the prior-year quarter. Higher volumes in all three divisions were offset by lower prices and negative currency effects.
EBIT before special items declined due to margin pressure as well as project and startup costs related to our ongoing investments, primarily in the isocyanates and acrylic acid value chains. Sales and performance products came in on prior-year level.
Higher volumes compensated for strong adverse currency effects. Prices were almost stable. EBIT before special items increased considerably, supported by strict fixed cost management. Restructuring measures led to special items of EUR 13 million. Sales in functional materials and solutions were slightly higher.
We saw good demand globally, especially from the automotive industry. Our business with the construction industry suffered from the harsh weather conditions in North America. This was offset, however, by higher demand in Europe due to the mild winter. Adverse currency effects as well as slightly lower prices negatively impacted sales.
EBIT before special items increased strongly, driven by higher earnings in all divisions. Agricultural Solutions had a good start to the year. Sales rose thanks to high demand for our products, especially in the Northern Hemisphere. We were able to increase volumes and prices.
However, this was partly offset by negative currency effects. EBIT before special items increased slightly to more than EUR 500 million despite significant currency headwinds. Sales in Oil and Gas decreased considerably. This was due to lower sales in natural gas trading as a result of lower volumes and prices.
Sales in exploration and production were stable despite a decrease in the average Brent crude oil price of EUR 6 to EUR 79 per barrel. EBIT before special items declined significantly, mainly driven by lower earnings in natural gas trading. In addition, there was no contribution from our exploration and production activities in Libya in Q1 2014.
Net income, however, rose considerably to EUR 442 million due to disposal gain of around EUR 130 million from the sale of selected E&P assets to MOL, as already mentioned. Now to other. Sales in other increased slightly to EUR 1.1 billion, mainly due to higher volumes in raw material trading. EBIT before special items declined by EUR 21 million to -EUR 203 million.
Negative currency effects as well as valuation effects for our long-term incentive program were partly compensated by overall lower expenses. While the prior year quarter benefited from the reversal of a provision, we incurred charges in Q1 2014 for recognized provisions due to the positive share price development. There were only minor special items.
EBIT and other was stable. Cash provided by operating activities was EUR 1.7 billion in the first quarter of this year, a decrease of about EUR 300 million versus Q1 2013. The rise in net working capital led to an outflow of more than EUR 1 billion compared to EUR 700 million in Q1 2013. This was mainly related to an increase in inventories and other receivables. At EUR 770 million, cash used in investing activities was significantly less than a year ago.
CapEx increased to EUR 936 million compared to EUR 831 million in the previous year's quarter. We realized the cash inflow from the divestiture of selected E&P assets to MOL. In Q1 2013, the acquisition of Pronova BioPharma had caused a cash outflow of EUR 526 million. Free cash flow came in at EUR 800 million compared to EUR 1.2 billion in Q1 2013.
With that to the balance sheet. Compared to the end of 2013, total assets grew by EUR 3.6 billion to EUR 67.9 billion, primarily driven by a rise in short-term assets. While inventories were largely stable, we experienced an increase in accounts receivable of EUR 1.4 billion, driven by the seasonally strong business in Agricultural Solutions.
Cash and cash equivalents increased by EUR 1.3 billion to EUR 3.1 billion. Total liabilities increased by almost EUR 3 billion to EUR 39.6 billion. This was mainly attributable to two factors. Liabilities in the disposal group Natural Gas Trading increased by around EUR 700 million to EUR 2 billion due to a seasonal increase in accounts payable.
Over the course of the quarter, BASF issued three bonds to refinance expiring debt, increasing long-term debt by EUR 1.6 billion. Our financial indebtedness rose from EUR 14.4 billion to EUR 15.1 billion. Net debt decreased by roughly EUR 650 million to EUR 11.9 billion. At 42%, our equity ratio remained at a healthy level. Let me now come to the outlook for 2014.
Overall, we expect to perform well in a market environment that remains challenging. We keep our macroeconomic assumptions for the year unchanged. However, uncertainties have increased, especially with respect to the further development of the situation in the Ukraine. We continue to expect global chemical production to grow by about 4.4%.
Today, we confirm our outlook 2014 for BASF Group, despite the fact that we are experiencing stronger than expected negative currency impacts resulting from the appreciation of the euro against almost all other currencies. We aim to increase our sales volumes, excluding the effects of acquisitions and divestitures.
Nonetheless, sales will decline slightly compared with 2013 due to the divestiture of the gas trading and storage business planned for mid-2014. Last year, the business to be divested generated sales of EUR 11.7 billion for the full year 2013.
We expect a slight increase in EBIT before special items, especially as a result of considerably higher contributions from the performance products and functional materials and solutions segments. We aim to earn a high premium on our cost of capital once again in 2014. With that, I thank you for your attention, and Manfred Rübsamen and I are now happy to take your questions.
Yes, ladies and gentlemen, I would like to open up the call for questions and would ask to limit your questions if possible to one, because of the AGM today since we have limited time, but you are always welcome to rejoin the queue. With this, I would like to start with the first question from Thomas Gilbert from UBS. Good morning, Thomas.
Good morning, Maggie. Good morning, Hans. Thanks for the one question. It's on the on-purpose C3 facility in the United States. Coming back to the question we asked at the annual conference in Ludwigshafen, 13% of your CapEx budget in through to 2020 was classified as being non-allocated or other.
Is it fair to assume that the investments you make in ammonia and the one considered as of this morning fall into that category? You will absorb some of that budget and reallocate it into the chemical segment? Or does this announcement imply an increase in the capital expenditure guidance as per the annual report? If you can comment on that'd be great.
Yeah, Thomas, if you look at the five-year CapEx plan of BASF, you can assume that the investment, or let me say at this point in time, because if you look at the announcement, you clearly see that this is still very early stages, but you can assume that most of the investment is included in the five-year CapEx plan.
Thank you for that.
Now we are coming to the next question of Lutz Grüten from Commerzbank.
Yeah, hi there. Good morning. One question on regions. Could you give us some trading update on China? I'm especially interested here in the underlying demand and the short-term outlook. The second, on Russia. What's your latest news from the ground? Is the CapEx spending on budget? One word on the cooperation with Gazprom, please? Thank you.
Yeah. Thank you, Lutz. I think this was a combined somewhere in the order of magnitude of 3-5 questions, but we'll try to address them. I'll start with China. I think we all have seen the Q1 GDP figures, which came in, I would say, as expected, always keeping in mind that Q1 figures in China are obviously impacted by the Chinese New Year, which at least for me makes it a little difficult to get a really strong and thorough reading on these figures.
If I look at our business, we enjoyed a nice volume growth in China in the order of magnitude of what you expect in an emerging economy. In other words, our growth, our volume growth in China was stronger than GDP growth. From that perspective, I'd say fully in line with our expectations and also the start into the second quarter looks okay from our point of view. I get to Russia.
On Russia, at this point in time, we do not see any impact on our business neither in the chemical business nor in the E&P business in Russia. We also do not see an impact on our raw material supplies that we are getting from Russia. In other words, the crisis there on the business does not have an impact. Where we certainly see an impact is through currency.
You see the decrease in the ruble, that has an impact on our business. I think the third or fourth question that you asked related to the planned asset swap with Gazprom. There I can tell you that from our point of view, everything is on track. We have the necessary approvals to do the transaction, both from the EU as well as from the German government.
We are currently in the phase that you tend to be in roughly two months before closing a transaction. Detailed contract, I don't want to call that negotiations. It's fleshing out the last details there, making the necessary changes that are required in corporate setup. Everything on track there, and we're targeting closing that transaction mid-year, as we had announced it earlier.
Thank you very much.
That should cover it.
Now we're coming to Andreas Heine, and here I've also allowed that he can ask two questions. Go ahead, Andreas.
Very briefly on FX first, you had an impact of EUR 200 million in the first quarter. If you use not what your guidance is 1.3 for the US dollar and euro to euro, but the current rates of currencies, what do you expect the headwind from currencies will be for the full year? Very briefly, only an update on the schedule of your TDI plant in Germany and the MDI plant in China, when will these two plants be on stream? Thanks.
Andreas, thanks for your questions. The currency question, I'll ask Manfred to answer that, but don't expect us to give you really details on currency outlook. I think what we give you will be reference points from Q1 and also full year 2013, as well as what we have as the usual dollar sensitivity. Manfred, please.
On the dollar, I mean, maybe to the guidance with 1.30, we look at the signals on the monetary policy in the U.S. and also the growth differential between Euroland and the U.S. and that's why we still look at a guidance of 1.30 of the dollar.
Now, the EUR 200 million of EBIT impact compared to prior year compares basically to something that we told you for the full year 2013 of around EUR 300 million. Here you have to look that the currency devaluations, the relevant devaluations occurred in the second half. With that in mind and without being more specific, the last year's number is probably something to look at.
Thanks.
Second question, Andreas, was on TDI. TDI project in Ludwigshafen moving forward with that as planned and targeting to start up the TDI plant in Ludwigshafen in the beginning of 2015.
The MDI plant in China?
On the MDI plant in China, you saw that there were changes in the gas price that were set by the Chinese authorities. What that led to was reconsidering part of the entire setup, which is not the MDI plant that we are building, but some of the precursor plants.
We are currently in a situation that it looks like there is some delay, which would lead to a startup of the MDI plant beginning in the second quarter of 2015, compared to what we said so far, which is late 2014, early 2015.
Thanks a lot.
Now we come to the next question from Tony Jones from Redburn. Good morning, Tony.
Good morning, everybody. I just wanted to go back to the on-purpose unit, actually. I'm just thinking about the purpose of this. Clearly this is to try and improve costs and will be positive for margins. I was wondering whether as part of this project, will this lead to additional downstream capacity for things like acrylics or alcohols or something? Or is this purely just to optimize costs? I suppose the question is, will this be the start of sort of a renewed emphasis on building out your production base in the U.S.? Thank you.
Tony, if you think about the fact that we are in a net buyer position for propylene in North America, that's the key driver for considering an investment in propylene in the U.S. We are currently building dispersion plant, which also increases our propylene demand slightly.
We have downstream capacities, which at this point in time are not 100% utilized, so there's a bit of additional capacity there that could be supported. Can I exclude that there will be further considerations for downstream activities in an attractive market like North America? No, I don't wanna exclude that.
Let's now, first of all, think about this exciting project, and then we'll take it from there step by step. As I mentioned earlier, with respect to Thomas' question, this is really very early stages where we're making this announcement. There's a lot still that needs to be considered.
You've seen most probably our press release in which we said, investment amount needs to be detailed, capacity needs to be detailed, location of the plant needs to be detailed. Let us do all of what we need to do there, and then we'll take it from there.
Thank you very much.
We're moving on to the next question from Paul Walsh from Morgan Stanley.
Thanks. Morning, Maggie. One question from my side. Clearly in Chemicals, divisional volumes are quite strong and accelerating. At what point, Hans, do you think- Pricing power we brought back into that division. Can you give us a sense as where utilization rates are and at what point you could expect to see cash margins beginning to expand again? Thank you.
Paul, if you think about chemicals, yes, you're right. We have nice volume increase there to the tune of 8%. We have across all three businesses nice volume development. On the margin side, that looks slightly different. In petrochemicals, you and I talked about this, I think, roughly a month ago.
We have a situation where margins in North America, thinking about cracker margins, are highly attractive. In Asia, not so attractive, but in the process of improving. Can I give you a point in time where pricing power will be stronger than it at this point in time? I'd say that's very difficult, but what we certainly enjoy at this time is an increase in demand, which is clearly reflected in our volumes. I certainly hope that this will find its way then also into the margins.
Just on the one hand, are you seeing anything in the second quarter that's suggesting different trends from what you'd seen in the first quarter?
No. I'd say the dynamics that we've seen in Q1 continue into Q2. When you look at the upstream businesses, turnaround season is starting in Q2, that could actually help the situation.
Understood. Thank you very much.
Welcome.
This brings us to the next question of Andrew Benson from Citigroup. Morning, Andrew.
Morning. Thanks very much. I think you've talked a little bit to investors about the government insurance against nationalization of assets. Can you give some detail about that? Obviously, you know, the Russian government's been talking about energy interests if things deteriorate in Ukraine.
Perhaps if I can ask a question on the first quarter. Sorry, Margit, feel free to ignore it. Just, you talked about startup losses being about EUR 200 million for the full year. Can you give an indication of how much there was in the first quarter?
Mm-hmm. Okay. Sure, Andrew. What we'll do is, Manfredo will take your first question, and I'll take your second question.
Yeah. On the government insurance, this capital insurance from the German government is quite a customary instrument that we have been using already for decades. I believe it started probably in the 1970s. It's not only Russia, but also other countries like China or Libya, where we use this capital insurance.
Looking at Russia, we probably have more than 90% of our original capital investment in participations that we have or in participation like loan structures, shareholder loan structures to joint ventures, partly also in dividends covered by those insurances.
Okay, I'll get to your startup cost question. As we said, we have roughly EUR 150-200 million in startup costs, expecting that in the year 2014. These are the costs which will not be capitalized for projects such as the MDI and the TDI plant that we already talked about, the dispersion plant in Freeport in the U.S., the formic acid plant, the acrylic acid and superabsorbent complexes both in China as well as in South America. That comes out to EUR 150-200 million in the year 2014. For modeling purposes, I'd say relatively evenly distributed over the four quarters.
Thanks very much.
Sure.
We come on to Christian Faitz from Macquarie.
Yes, good morning. Thanks for taking my question. Construction chemicals. Can you share with us the regional performance of construction chemicals? Because I believe, if I remember correctly from my coverage of SKW Trostberg, this was strong in Japan. Any driver there?
Christian, construction chemicals. Positive development overall in Europe, if you compare that to Q1 of last year, benefiting clearly from the mild winter in Europe, which had a positive impact on construction activities. North America, just the opposite.
You can also see that in the U.S. GDP figures, where construction is one of the culprits when it comes to explaining why GDP in Q1 2014 is so low. We experienced exactly that due to the cold winter, hardly any activities. Asia and rest of world pretty much in line with what we've seen in prior year quarter. Overall, in construction chemicals, nice earnings improvement as a result of the various restructuring measures that we've taken and implemented over the last 18-24 months.
Okay, thanks.
Welcome.
Our next question comes from James Knight from Exane.
Morning. Can I shift gears from C3 to C2? You'll be aware that a massive ethane export terminal's been announced recently in the U.S. I guess we'll talk a lot more about this, these themes next month. If I get an early BASF comment on this, do you think, or do you still think little ethane will end up in Europe in the longer term?
And, based on the answer to that, how might this impact BASF, if at all? And if I could chance a small second question on nutrition pricing pressure, are you indicating there that the announced rises haven't stuck? Thank you.
Yep. Okay. Ethane exports from the U.S. This is the sneak preview version with actually more than coming at our Chemicals Investor Day in London and the U.S., end of May and early June. Our expectation is that there will be relatively little ethane that's exported to Europe.
Two reasons. One, cost, and there in particular, logistic costs, which is a similar order of magnitude as the LNG supply chain. Second, the European facilities would need a significant amount of capital in order to convert them to be able to consume lighter feed. So far for the sneak preview.
Your question on nutrition and there in particular on vitamins and the price increases, what have we seen? We've seen overall that the I would call them relatively steep declines in vitamin E prices slow down. Your assumption is correct with respect to vitamin E.
The price increases did not stick. That's different with respect to the other vitamins, where we've seen that the price increases were accepted, which has also helped to improve the performance of our Nutrition & Health division.
Very quick follow-up. Are you seeing any change in that dynamic in the second quarter?
Based on what I can see so far, no.
Very clear. Thanks for the preview as well.
Welcome.
Now we're coming to Michael Rae from Goldman Sachs. Hello, Michael.
Yeah, hi there. Thanks very much for taking the question. Excuse me. Is it possible just to get a bit more detail on the fixed cost reduction measures in Performance Products? Can you quantify the saving in Q1 and let us know how this will look for the remaining quarters of the year? Thanks.
Yep. I can certainly try to do this for you. As you know, we've announced over the last 18 months a number of restructuring activities in our Performance Products segment. They're covering all the divisions in the Performance Products segment.
Based on what we have announced, we are looking at an earnings improvement in the order of magnitude of EUR 450 million-EUR 500 million in the year 2016. Roughly a reduction of 2,000 positions in the Performance Products segment and one-time cost in the order of magnitude of EUR 250 million-EUR 300 million.
The impact so far in Q1 2014. If I look at benefits from the programs compared to one-time cost, that is pretty much a wash. Over the next quarters, we should start to see some impact, positive PNL impacts, from the restructuring measures.
Okay. Many thanks.
Welcome.
Now we are moving on to Ronald Köhler, MainFirst.
Yes, good morning. If I may ask for a slight outlook for second quarter in oil and gas. Obviously, you informed us that you shifted this offshore lifting into the second quarter. Would that imply that I just can add EUR 100 million on Q1, and that is roughly kind of what I should expect for the second quarter in oil and gas, ex oil and gas exploration, excluding gas trading, obviously.
Ronald, I like your question, but I don't want to fill your spreadsheet. Let me answer this the following way. As you know, we don't give specific guidance on quarters. We give full year guidance, and we don't give specific guidance on quarters in specific segments.
Oil and gas, indeed, we have disappointing result there in Q1 for a number of reasons that I'm happy to explain if that's of interest. One of the key drivers is that in fact, the offshore lifting in Libya, and by the way, offshore production in Libya continues unaffected by the strikes, which led us to shutting in our onshore activities.
That offshore lifting we had in Q1 of the year 2013, and we expect this now in Q2 for the year 2014. As I'm sure you will do, you'll factor in that in our gas trading business Q2, you know, certainly it does not seasonally benefit. Let me put it that way.
Okay. As you just said, could you please highlight what happened in Q1 and what was disappointing from your perspective besides Libya?
All right. Let's start with Libya. Onshore activities shut in, so no contribution in Q1 from Libya onshore. No earnings contribution from Libya offshore, as already explained, they are going to be in Q2. Third, in euros, the oil price dropped from EUR 85 in Q1 2013 to EUR 79 in Q1 2014.
Fourth, we have in our natural gas trading business the impact from the warm winter in northwestern Europe, meaning significantly less volume but also a much weaker margin than what we had in Q1 of the year 2013. Then also on with respect to earnings on the negative side, as you know, we deconsolidated Caspian.
As a result of that, we now show only the equity earnings of Caspian in Q1 2014. On the positive side, we have the contributions from the asset swap that we've done with Statoil last year, but that by far does not outweigh all the negative impacts that we experienced in Q1.
Thank you.
Now we're moving on to Laurence Alexander from Jefferies.
Just a question on the catalyst business. There was a comment about volumes being up in the quarter. Is this a matter of share gains, a timing issue in terms of outages, in a particular region?
Which business you're talking about, Laurence?
Sorry, catalysts. Sorry, refinery catalysts.
Catalysts.
Yep.
Yeah.
Again, your question on catalyst is the comment that we made on chemical catalysts, which were-
No, no. Sorry, it's the comment on refining catalysts where you comment volumes were up.
Yeah.
I guess most of the other participants have had a very weak environment because of timing of outages. I was wondering if this is a share shift or if it's just where your geographic footprint is?
To be honest, Laurence, I can't answer that question. Refinery catalyst always depends what's the point in time where your customers reorder. A positive development in our business compared to the competitors that you are referring to based on one quarter would not lead me to say there's a share shift or we're gaining market share. I would have to see more than just one quarter, and let's see what Q2, Q3, and Q4 will bring this year. So far, we had a good start into the year in our catalyst division overall.
Okay, we're moving on to Peter Clark now from Société Générale.
Good morning. Yes, it's drilling down into the performance products again. I know you review the businesses, obviously, and there's been some that were up for sale and then stayed in the portfolio. Looking at businesses like paper chemicals that seem to be you're fighting against clearly a structural shift in the market.
I'm just wondering how regularly you review how they fit the portfolio, 'cause quite clearly a lot of positive work is going on across that division to improve the performance. But in some markets, it might well be it's just holding water. Just wondering how the board look at businesses like this and how often they're reviewed. Thank you.
I mean, we review our portfolio, Peter, on a regular basis. This is part of the blocking and tackling that you do in each and every business. Our paper chemicals business we positioned as a restructuring case from the point in time where we combined our paper business with Ciba Paper business.
We are addressing the performance issues that we have. Some of the restructuring measures in performance products, some of the first steps that we announced related to our paper chemicals business, and rest assured that we're working on it and working on increasing the profitability there. Thank you.
With this, we are moving on now to Jaideep Pandya from Berenberg.
Yeah, thank you. Just a question on Ag. I mean, you have another very strong quarter with 9% growth. Could you just tell us how much of this is really coming from the products that you have launched in the last two years and, you know, what should we expect? Because last year was also a very strong year. Just a small follow-up, could you just remind us how much of a net buyer position you have in the U.S. in propylene? Thank you.
Yeah. I'll take your first question on AP volume. Do we break this down and tell you exactly how much sales, additional sales we generate through our new product? No, we don't. I can clearly tell you that the market introductions that we did over the last two years, Kixor as well as Xemium, are contributing significantly to the very nice performance that we're seeing in our AgChem business in Q1. Which by the way, I'd say we see a continuation of the very good performance that we've seen in the years 2012 to 2013.
That is clearly driven by the fact that we are supporting our Agricultural Solutions business with significant R&D funds that help to position the portfolio the way we would like to see it. That then generates volume growth for us as we've seen it in Q1 with 9%.
Not only that, we've also seen a positive development on prices to the tune of, if I recall that correctly, 3%. That led to the very nice performance of the Agricultural Solutions segment. Even despite the fact that we had strong currency headwinds, the business delivers this performance.
Good. comes the second question. What's the second?
What was the second? Sorry.
What was the second question?
Just if you can remind us.
Sorry, that was the net buyer position.
Yeah. Thank you.
I tried to elegantly avoid to answer that, because we actually don't disclose for obvious reasons in what kind of position we are. I'll give you volume there. I can clearly say that we are in a net buyer position.
Okay. Can I ask it the other way? Would you be a merchant seller with this acquisition, with this investment or it's-
This is not what we want to develop in with this investment.
Right. Very clear. Thank you.
Welcome.
Now we move on to Patrick Lambert from Nomura.
Hi, good morning. Thanks, Maggie. A quick one on Ag again. Is there any Monsanto contribution from your JV at this stage? Or when do you see it now that we have some traits being developed, the on your EBIT line? That's the first question. Second, very quick one. I don't see any Citral impact at all in Q1. I guess that's the case. Yeah, that's it. Thanks.
Yeah. Patrick, your Monsanto contribution question, Manfredo will answer, and then I'll take Citral.
On the Monsanto question, you know that we are just accessing the market with the first product, DroughtGard. It's in the market. It's starting. It has a good start, but the contributions to the bottom line at this point in time are still small.
On your Citral, yes, as you know, with the outage there, we had to declare force majeure. Let me put it this way. That had a small impact on the P&L of the Nutrition & Health division, but nothing major. Plant is back up and running. I think we have that behind us and actually that should be it.
Okay, thanks.
Now we're moving on to Markus Mayer from Kepler.
Yeah, good morning. One question on the demand again. Other competitors said that the demand momentum is less volatile this year than last year. Is this also true? Do you also see this? Second question, this related to the net working capital increase, is this also due to the expected restocking and therefore, together with this demand momentum, a more stable and forecastable environment?
Okay, your first question on demand and environment. If you look across our portfolio, I'd say in general in our chemicals businesses, as reflected by the volume growth that we have in each and every, so that's in Chemicals, Performance Products, Functional Materials and Solutions.
Overall, as we stated, a nice development. When you look in the underlying businesses, you see differences here and there. That's why it's just difficult to comment on a question that broad in light of our portfolio. If I pick something like natural gas trading, I can only say that the demand that we've seen was very low as a result of the winter.
I'd say a fair statement would be overall Chemical Segment, we've seen good volume development based on demand. We've seen strong volume development in our Agricultural Solutions segment based on demand. We hope that this development will continue also going forward into Q2. Now, your second question is the question on cash, if I understood that correctly, needed for working capital purposes. Is that understanding correct?
No. The question was if the net working capital build-up is also due to an expected restocking. This is then to come in Q2, or yeah.
I'd say this, stocking, destocking, restocking is always very difficult to answer. What do we see? As already mentioned, we've seen good volume development. That's then certainly reflected also in the case that our net working capital, and there in particular, the inventory increases.
Then you see an effect in there which has to do with our precious metal business. As you are aware, the strikes in South Africa are continuing. As a result of that, we made a decision going into the year 2014 that we increase our precious metal, and this is physical, in order not to run into any supply issues.
Mm-hmm. Okay. Thanks.
Now we're coming down to the last three questions. The first one is from Laurent Favre from Bank of America.
Good morning. Two, if I can squeeze them. One is on Brazil and paints. You're specifically talking about volumes being up when your two key competitors have talked about volumes down in line with the market. I'm just wondering if that market share again, which I guess is the only explanation, is the result of specific actions or whether it's just, you know, a function of, I guess, just dynamics for this quarter. The second question, very quick, a way to rephrase Jaideep's question on the propylene project. Before the investments in Port Arthur towards lighter feedstock, were you a net buyer of propylene?
Yeah. Start with the second question first. The answer is a clear yes.
Okay.
We were a net buyer, already, prior to lightening the feed for the cracker in Port Arthur. On your second question, if you go back to Q1 of the year 2013, I think we clearly said that we were not very happy with the development in our decorative paint business in Brazil.
I think we've done a better job in Q1 of 2014. Now, with respect to market share and market share gain, I'd like to answer that in a similar way as I did with one of the earlier questions. One quarter, at least for me, is not enough to say.
Sure
We're gaining market share, we're losing market share. You got to look at this over a longer period of time.
Sure. Thank you.
Welcome.
The next question is from Martin Evans, and the final question then from Andreas Heine. Martin?
Thanks, Maggie. Yeah, just on the M&A, really, given what's been happening recently in equity markets and so on, and your cash flow, again, which is strong. I mean, how are you feeling about M&A potentially at the moment in terms of the availability of businesses and prices and whether your sort of confidence to move forward with a significant deal has increased or not? Thanks.
M&A. Martin, look at what we've done over the last two years. Compare that to what we've done between 2006 and 2010. Look at the stronger focus on organic growth that we have in the BASF group, supported by an increase in our CapEx programs. I think that gives you a picture, and it gives you the mindset that we are in. If you combine that then with the current very high multiples, if you look at transactions, that gives you an additional piece, and I think I would just leave it at that.
Thanks very much.
Now we come to the final question from Andreas Heine.
Big exposition.
Yeah, I'd like to come back to the oil and gas segment. After the consolidation of the Statoil fields, there were many moving parts in this segment, but basically, the Statoil earnings never showed up, at least in the reported numbers. Are these Statoil fields on track? If everything runs more normal in the coming quarters that we see contributions here, or is something worse than you expected at the beginning?
No, absolutely not, Andreas. As you know, we acquired the activities July first of last year. They deliver what they are supposed to deliver, which is in the range of 35,000-40,000 barrels per day. Happy with the production, with the development there, and the Statoil activities that we acquired, delivering perfectly in line with what our expectations were.
Thanks.
You should see the respective contribution. I mean, I explained the distortions that we have in Q1. If you look at the E&P business and look at the fact that if I've got my numbers memorized correctly, I think we're down there by EUR 36 million in EBIT before special items.
This despite the fact that we don't have the offshore lifting from Libya in Q1, despite the fact that the oil price dropped in euros from EUR 85-EUR 79. You already see there that there is a nice contribution coming out of the acquired Statoil activities.
Mm-hmm. Thanks.
Welcome.
Ladies and gentlemen, this brings us now to the end of our conference call. I would like to thank you all for joining so early this morning and for your good questions. We would like to inform you that we will next report on our second quarter 2014 results on July 24. Actually, we don't give you so much time until July 24.
We would like that you join us earlier than that, namely at our Chemicals Investor Day, which will take place in London on May 22, as Hans-Ulrich Engel has elaborated. It will be Kurt Bock, our Chairman, as well as Wayne T. Smith, a Member of the Board responsible for chemicals, and the three divisional presidents of the chemical segment. They are all looking forward to an in-depth discussion of the chemical segment with you.
Please reserve this date and join us in London. Should you have any further questions today, then please do not hesitate to contact any member of the investor relations team, and we will be happy to help you. With this, we all wish you a very nice day. Thank you so much. Bye-bye.