BASF SE (BAS) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to our R&D webcast. It's a pleasure to have you join us online. We are streaming this event from Ludwigshafen, a replay will later be available. Let me share further organizational details. Today's presentation contains forward-looking statements that may not prove to be accurate. We do not assume any obligation to update these forward-looking statements above and beyond the legal requirements. Now it is my pleasure to introduce Dr. Melanie Maas-Brunner to you. Melanie studied at Aachen University, where she received her PhD in chemistry in 1995 before joining BASF in 1997. She has held various roles in BASF ranging from production, research and also business management in Germany and also in Hong Kong, especially in the plastics value chain, I may add. And since February this year, she is a member of the Board of Executive Directors and, Chief Technology Officer role. She took over from Martin Brudermuller. Her current responsibilities include the currently 3 research divisions and BASF new business. The corporate Environmental Protection Health and Safety unit, the European side for Bund Management and Global Engineering Services. Melanie, now the floor is yours. We look forward to your presentation, sustainability starts and research.

Thanks, Stefanie, for the very kind introduction. Ladies and gentlemen, a very warm welcome to this year's R&D webcast. This is my first in the role of Chief Technology Officer. I'm passionate about research and our innovation. And this is my very first interaction with investors and analysts. I hope this comes across in this virtual format. I look forward to the Q&A session with you following my presentation. The earth's average temperature has already risen by 1.1 degree Celsius compared to the pre-industrial era. We are quickly approaching 1.5 degrees. Global climate change is human-induced, states the fixed IPC assessment report. It's becoming increasingly clear, climate change is the greatest challenge of the 21st century. Quick and decisive action is needed now. And this is the only way to reach the goals of the Paris Agreement. We are aware of our responsibility. We at BASF support the Paris Agreement target of limiting global warming to less than 2 degrees Celsius. The international community needs to address many issues simultaneously, climate protection, the use of limited resources, and providing the growing global population with food, water and energy. These are all tremendous challenges. At the same time, we live in an age with many groundbreaking innovations. The energy transformation is progressing faster and faster. Thanks to technological advances in solar and wind energy generation as well as in the use of electrical energy. Per kilowatt hour cost of solar or wind electricity are falling. There are very rapid improvements in battery technology, such as in electric vehicles. Another field of research also puts me in an optimistic mood quantum computing. It will launch a chain of disruptive innovations that will fundamentally change the chemical industry in the long term. We will be able to develop new products much faster. This technology makes it easier for us to model chemical reductions and molecular properties. And in future, we will also be able to better study larger molecules. This is why BASF has joined the QUTAC consortium. Quantum technology is the way of the future, and we want to use this technology in industrial applications. At BASF, innovations have always been the key to success. They enable us to transform our company and offer our customers products that are more sustainable, supporting the differentiation in their specific markets. For us, innovations begin in research and development. The know-how of our highly qualified staff is our most valuable resource and the foundation of our innovative strength. We are focusing on developing sustainable solutions for our customers to help them to reduce their carbon footprint, use resources more efficiently, all manufactured products in a more eco-friendly way, enabling a circular economy. This is how we safeguard our competitiveness in the long term, and we make our contribution to society with that. We have a very unique research and development landscape. Worldwide, around 10,000 employees working in research and development. Many of whom are based here in Ludwigshafen, but also in the U.S., in China and in different other places. We have continuously expanded this regional presence in the recent year. This enables us to react faster to regional growth trends. We invest around EUR 2 billion per year to develop new products, new fields of technology, new competencies. And we can generate annual sales of around EUR 10 billion with products launched on the market in the past 5 years that stemmed from R&D activities. To secure long-term success, we must further strengthen our customer proximity and leverage the advantages of our know-how for Verbund By this, I mean our technologies and the broad knowledge of our employees. To become even better, we will be reorganizing our global research activities next year. Business related research units, which previously belonged to 1 of the 3 groups research divisions will be embedded into the operating divisions. This will put them in an even better position to cater to the needs of our customers. Our aim is to further shorten the time to market for new products and to accelerate the company's organic growth. Many of our customer industries have very specific requirements. For example, in the automotive or personal care industries, new solutions from the laboratory and their application testing are very closely linked in these business areas. This integration will help us to react even more quickly to trends in these fast moving markets. Research activities that are relevant to several operating divisions will be bundled in the central research division headquartered in Ludwigshafen. This division will keep a global footprint with a presence in all regions. It will be aligned with our focus areas. As a result, we will create synergies and a stronger foundation for market trends. Developing new competencies is an ongoing task for us. For example, when it comes to further reducing our carbon footprint, developing concepts for biodegradable plastics or using digital tools more effectively. Ladies and gentlemen, we are and want to stay the innovation leader in the market. I have told you how our organizational realignment will contribute to this. Our corporate purpose, we create chemistry for a sustainable future, guides our actions. We have set ourselves an ambitious goal for 2030. We want to reduce our absolute CO2 emissions by 25% compared to the level of 2018. And by 2050, we aim to achieve net 0 emissions at BASF. At the end of November, we announced that we are stepping up our efforts with a new project organization and the establishment of a unit called Net Zero Accelerator. This powerful structure will support us in our transformation. We have also set ourselves ambitious goals for our Circular Economy Program. By 2025, we want to process around 250,000 metric tons of recycled raw materials each year, and we aim to increase our sales of circular solutions to EUR 17 billion by 2030. That is double the current figure, by the way. An important steering instrument for our product portfolio is the Sustainable Solution Steering method, which is based on the sustainability performance of our products. In the following, I will give you 1 research example for each of these focus areas. Climate protection, Circular Economy and our Sustainable Solutions Steering. Chemistry requires vast amounts of energy. This energy currently comes primarily from fossil fuels. We have continuously further developed our plans and processes and have nearly exhausted the potential for CO2 reduction. We are reaching the technical limits. That is why we need completely new technologies and processes. One of these technologies is methane pyrolysis. When powered by green electricity, it is the key technology for CO2-free hydrogen in the coming decades. At our R&D webcast in 2019, Martin Brudermuller told you about our research into splitting methane into carbon and hydrogen. At that time, we had just tested an entirely new reactor concept at the lab scale. We talked about the challenge related to electrical heating. We now took the next major step in the pandemic time 2020, 2021, the construction and commissioning of our test plant in Ludwigshafen. This plant is now running in trial operations. And this is really a milestone for us. I want to say thanks to the very dedicated BASF team. They have done a fabulous job in these challenging times. There are now 2 challenges to overcome. The first is mastering the process technology, with the electrical heating and the use of novel materials with high temperature resistance in this reactor. The reactor can reach temperatures of up to 1,400 degrees Celsius. The second challenge is the right process control. This means finding out what the right operating window is for this specific reactor. CO2-neutral methane pyrolysis will contribute to sustainability and will be economically viable. We are convinced of this and it will help to combat climate change. But until we get that far, we still have hard work to do and some hurdles to overcome. Our next milestone will be the scale up. We want to achieve industrial application before 2030 already. Our climate is changing. And one of the crucial questions is, will it be possible to develop the urgently needed technologies to keep carbon an important raw material in circulation. The aim is to transform the carbon contained in industrial off-gases into valuable chemicals. Together with partners, we have already achieved a first success. Today, industrial off-gases are primarily incinerated or thermally recovered by -- and to produce electricity and steam. In both cases, CO2 is emitted. Our goal is to avoid these emissions and to recycle the main components of the off-gas so they can be used in chemical production. Our researchers have been working on this since 2018 with the American startup LanzaTech. This year, they made a breakthrough. With the help of special bacteria, they were able to produce an octanol for the first time from carbon monoxide and hydrogen. The alcohol in octanol is used in cosmetics, for example. Normally, microorganisms can't produce an octanol because it is toxic to them. But with biotech methods, LanzaTech was able to program the organisms in such a way that they can produce and tolerate an octanol dream gas fermentation. And in parallel, our BASF researchers developed a process that enables an octanol to be continuously separated and purified. We have successfully put this into practice in the lab already now. Now let's come to the green deal. For successful green deal, we want and must achieve climate neutral production in the future, but not only that. The EU goals will not be reachable without the chemical industry because we offer innovations for a more sustainable life. I would like to give you one example from our research in the area of biodegradable and bio-based materials. This is an example of innovative solutions that contribute to the green deal agenda. The Circular Economy and Sustainability are increasingly important, including for our customers. For example, in the detergents and formulators industry. That is why teams at BASF are working on the questions of how to best combine strong cleaning performance and good environmental compatibility. The focus is on new ingredients made from bio-based raw materials, which can be biodegrade at the end of their productive life cycle. This requires new approaches in research and development. Together with the academic partners, we are pursuing various projects to develop a fundamental understanding of how biodegradation processes occur under certain conditions. To this end, we are synchronizing the results of laboratory and field research. With the additional integration of new digital tools as well as faster screening and test methods, we can reduce our development times and develop high-performance environmentally-sound ingredients. This is true, not only for cleaning products, but also for cosmetics and industrial applications, such as agrochemicals. The chemical industry plays a central role in the transformation towards a climate-neutral society. One reason is because the industry currently emits relatively large amounts of CO2. Another reason is that the -- its innovative products will be especially needed in the future. These include materials for solar cells and wind turbines, battery materials for e-mobility, insulation materials and robust materials that protect against increasingly extreme weather. Chemical products are also indispensable in other areas of daily life, for example, in the pharmaceuticals or in agriculture. At the research press conference this morning, our experts presented innovations from 2 areas. Electric mobility and agriculture. This afternoon, I would like to focus on e-mobility, as the examples, nicely complement the insights we shared with you during the recent investor update. So the automotive industry, you all know is undergoing a massive shift, owing to the transformation of the powertrain and the transition from internal combustion engines to e-mobility. We expect that by 2030, around 30% of all cars produced worldwide will be either fully electric vehicles or plug-in hybrids. This share will continue to increase significantly after 2030. For BASF, this offers major opportunities because the chemical content per vehicle will increase substantially. We anticipate that it will rise by a factor of 2.5 in a fully electric vehicle as compared to a car with an internal combustion engine. The largest share of this is added value will be in the batteries business. This transformation is very important for our company because the automotive industry is our key customer industry. Around 20% of BASF's group sales are currently associated with the automotive industry. In recent decades, we have proven that we are a strong solution supplier for the automotive industries, and we want to continue to be. The battery is the heart of every electric vehicle. We use an extensive toolbox of different methods to improve the performance, reliability and sustainability of batteries. My colleague, Markus Kamieth, presented our activities in battery materials during the investor update on September 27. Therefore, I will now focus on plastics, coolants and cortex. Plastics are indispensable in e-mobility. Plastics play a role in lightweight construction, heat conductivity, heat management and of course, safety. The share of plastics will also increase amid the transition to fully electric powertrains. In addition, BASF is developing new engine coolants. A battery electric vehicle will require roughly twice as much coolant as a car with an internal combustion engine. There's one particular challenge with electric vehicles. The formation of flammable hydrogen must be prevented in the event that coolant comes into the contact with high-voltage battery components. As could happen in the case of an accident, lowering the electrical conductivity of the coolant is key to success here. And one more important topic, corrosion protection. With the help of digital simulation, we have developed a cathodic dip coating, tailored to the specification of electric vehicles. It protects the car body from corrosion and at the same time, helps to lower CO2 emissions in production. This is good news for sustainable mobility. I will now present the selected examples from our Performance Materials, Performance Chemicals as well as Coatings divisions. So given the nature of electric vehicles, high-voltage transmitting components enable safe distribution of power. In electric cars, these components must be highlighted in bright orange. As you can see here, the connectors are depicted on the slide. This is important visual queue for car drivers and mechanics to help avoid accidental short circuits or electric shocks. The automotive industry requires that this color remains stable after being exposed to 140 degrees Celsius for 1,000 hours. Considering the heat these components must endure during the lifetime of a car, this really makes sense. Polyamides are one of the standard materials used for high-voltage connectors and electric cars. However, the chemical nature of polyamides leads to a severe discoloration when the material is exposed to heat over a long period of time. On the right side, you can see the variations of color with the standard polyamide and how it will turn brown at elevated temperatures over time. Our scientists have found a way to achieve long-lasting color durability at elevated temperatures. They developed a new formulation based on polyamide and the thermally stable pigment. This breakthrough represents the next level of color stability in polyamide formulations. In a nutshell, our durable color Ultrasim portfolio supports safe handling of high voltage components by car owners and mechanics. So let's look at the next example, that safety from the drivers and passengers perspective. Battery-powered vehicles tend to have shorter front-ends. The heavy battery needs to be protected. Furthermore, the weight and impact mass of an electric vehicle is higher overall compared to a conventional car. This all requires new safety concepts. Our R&D teams have contributed many solutions, including plastic front-ends with especially high energy absorptions. They are made of polyamide and glass fiber. The absorbers serve 2 purposes. They take up momentum in the event of a crash and channel the impact energy into the designated areas of the vehicle. When developing the absorbers, our researchers applied our digital simulation tool called Ultrasim to model the best material composition and component design. Our scientists had also developed structural parts in car bodies made of polyamide particle foam. OEMs can produce these in complex 3-dimensional shapes using standard particle foam molding processes. The polyamide foams keep their form even under high temperature. This allows them to be attached in the car even before the dip coating. This effectively reduces the need for an additional process step, afterwards, which helps the OEMs, obviously, saving time and resources. Protruded polyurethanes and thermoplastics profiles are extraordinary stiff and help keep the frame around the battery intact in case of an impact. They are also stiffened with glass fiber. These BASF innovations enable the next safety level for electric vehicles in the event of a crash. And the plastic materials are a lot lighter than metal, for example. This helps minimize the weight of the vehicle, while maintaining high safety standards. Now let's move on to coolants. The battery is the highest value part in an electric vehicle and is the key driver of its performance. A robust, finely tuned thermal management system is required to help protect the battery and ensure its longevity. This is where coolants come into play. I mentioned earlier that the chemical content in electric vehicles is higher than in conventional cars. This also holds true for coolants. We are talking about a twofold increase in terms of volume here. The reason is simple. In contrast to an internal combustion engine, where the area that needs to be cooled is rather small. The battery extends across almost the entire underside of an electrical vehicle. In addition, the electric engine needs to be cooled. This means to achieve optimal operation on the vehicle, car manufacturers need to ensure specific temperatures across a large area. A network of cooling plates or pipes ensures that the coolant can reach all relevant parts of the battery. These are the basic requirements for thermal management of an electric vehicle. There's another crucial aspect related to coolants and battery-powered vehicles. If the coolant comes into contact with high voltage battery components, for example, after a crash, there is a risk that hydrogen will be generated. Essentially, the water in the coolant may be split into hydrogen and oxygen by the electric car from the battery components. And this is maybe 1 experiment, you remember from high school. The production of oxyhydrogen, a gas mixture that self ignites. And this is something you don't want to have to happen. The trick is to decrease the electric connectivity of the glycol water system that makes up the coolant. If you look at the left side on the slide, you see how the new BASF coolant Glysantin Electrified compares to conventional coolant. In automotive OEM would ideally want the coolant to reach the maximum performance in all the categories. This means it would reach the outer most boundaries in all corners of the graph. Conventional coolants perform very well in terms of low flammability, low viscosity, high thermal capacity and connectivity, excellent material compatibility. The term material compatibility refers among other things, to how well the coolant protects the coolant circuit from corrosion. However, conventional coolants performed poorly when it comes to electrical connectivity, meaning they show very high electrical conductivity, therefore, transmitting electrical current at a rate that is too high. Glysantin Electrified is markedly less conductive for electricity, and it still performs very well in all other categories. This is not easy because tweaking the coolant impacts other favorable characteristics, getting there was the result of thorough R&D work. Our experts achieved the low electrical connectivity by using non-ionic additives and the lower polarity solvent, which simultaneously ensures that the coolant circuit is well protected from corrosion. With Glysantin Electrified, our researchers could significantly reduce the risk of hydrogen generation by an impressive 98%. As you can see on the right side of the slide. The Performance Chemicals division introduced Glysantin Electrified to the market this year. With this innovation, we help improve the safety of the battery and contribute to reducing the risk of dangerous situations like overheating, fires or explosions if an accident occurs. Moving on now to an example from our Coatings division. Every car owner wants protection against rusting and corrosion. This is also important for the structural stability of the vehicle and the key determinant of its lifetime. Unsurprisingly, the requirements for battery-powered cars can also differ here. For safety reasons, their rocker panels and tools, essentially the base of the vehicle can feature thicker metal than in conventional vehicles. This has implications for the process in which the corrosion protection is applied. During this process, the car frame is dipped into a cathodic electrocoat or e-coat. Afterwards, the metal of the chassis is seated up to ensure the cross-linking of the various e-coat components on its surface. This is crucial to achieve the full level of corrosion protection. Thicker metal takes longer to heat up. If we were to simply apply the corrosion protection used for conventional cars, this could lead to an uneven production of the electric cars' individual parts. In this context, it is important to know that car manufacturers apply dip coating for all types of vehicles on the same manufacturing line. The challenge for our R&D team was to offer one paint solution that works for all vehicles, employing smart tools, they run several digital simulations to help accelerate the development. We can now offer our customers our new CathoGuard technology, featuring increased reactivity. This means that the crucial cross-linking happens at lower metal temperatures. This has been achieved by optimizing the dispersion and the pigment paste components of the products. In addition, this is a very important achievement. There is no compromise when it comes to the industry's high sustainability standards. Our new CathoGuard technology offers an additional sustainability benefit. Due to its higher reactivity, OEMs can reduce the olefin temperature for the dip coating process by 20 degrees Celsius. The baking process can also be shortened. When you compare the left and the right graphs, you can see that our technology works at a much broader range of temperatures. The areas highlighted in orange indicate the upper range of temperatures at which the technology can still work, but must be tested on the OEMs manufacturing line. The shaded area at the bottom indicates the area meeting the specifications for corrosion protection in the interior of the vehicle. The requirements here are different since these car parts are not as exposed to the environment as the exterior of the vehicle. Please note that these graphs show the temperature of the metal. The temperature in the olefins will be about 15 to 20 degrees Celsius higher. Today, metals are usually heated up to 155 to 160 degrees Celsius. Our CathoGuard technology enables the process to be run with a metal temperature of only 140 degrees. We are thus offering a lever to reduce the energy required in the process with a positive impact on CO2 emissions. With this technology, CO2 emissions can be reduced by up to 35% per unit in this process step, depending a little bit on the curing temperature and time. Our teams are already working on a new concept that would even further increase the reactivity and further reduce the required energy. This slide shows the selection of products and solutions we have in our pipeline, specifically for electric mobility. As you can see, we have already launched new products in 2021. Over the next years more of the innovations are presented today will become available, and there will be more solutions to come. As the largest chemical supplier to this automotive industry, our expertise and networks enable us to anticipate new trends and have a head start when it comes to developing new industry standards. This is a key driver for growth, together with the battery materials business, we are continuously expanding. So to conclude my speech, I would like to return to my opening statement. Tremendous challenges have to be mastered simultaneously. And time is of the essence. This means we must now boldly tackle the transformation of the economy and society, rely on innovations and be open to new technologies. This is the path we are taking, resolutely and systematically. Research and development is the core of BASF, and we have an incredible great team. This makes me very optimistic. And now I'm looking forward to taking your questions.

Ladies and gentlemen, we would like to move on to the Q&A session. [Operator Instructions] Let me also introduce Dr. Detlef Kratz, who joins us on stage for the Q&A session. Detlef studied chemistry at the University of Heidelberg, where he received his Ph.D. in 1991. And in 1992, he joined BASF has have various positions, operational roles, technology and strategy roles. Since November 2018, he is President, Process Research and Engineering, and he is the designated President for the new Central Research Division that will be established in Q2 2022. So I would like to open the Q&A. And the first question is from Christian Faitz, Kepler Cheuvreux. BASF has always had central research functions in my recollection with the reorganization by how much R&D headcount will the central research setup grow? What is the current status there? I think you could both answer this question.

Let me answer and then I hand over to Detlef. Nowadays, we have 10,000 people working in research and development. When we do now the embedding in the operating divisions, round about 1,800 people will move from those former central divisions into the operating divisions. And the new central platform will consist of round about 3,500 chemists and researchers and developers and supporting people. And I think I better hand over to Detlef to explain what the central platform is actually doing.

Yes. Thank you, Melanie. So as mentioned, central platform will have 3,500 employees fundamentally, and we talked about it, 1 division is you have the R&D part. It will be mainly the research part for the core of what BASF does, but it will also be the enabling units because everybody will need units such as analytics, toxicology, scale-up of pilot plants. So this will be the core of what we do, and that is chemists, engineers, toxicologists, biologists, but also, for example, the biotechnology part that we were talking about today will be included, including the scale up and the whole idea is actually to have a whole innovation value chain from idea all the way to process and finally to the customer. And that, of course, is based on the competencies that we then have bundled in this one unit.

I have another question from Christian Faitz from Kepler Cheuvreux. He's curious about -- curiosities, I'll read out. BASF made big steps in computing a few years ago with the Supercomputer Quriosity, has this paid out? Or offer you as Quriosity was mainly also geared at research and development functions, how easily can you update or upgrade this computer with the newest computing power?

Yes, let me start again. I think Quriosity is really a great tool, and it's really used heavily by the researchers. It helps in modeling cars, modeling difficult systems. It helps them speeding up when calculating something. It also help, by the way, in the corona crisis by supporting different external partners in developing something that might help with the COVID crisis. So we are -- it's so fully booked that we are now on the way of deciding to add here capacity, and this is then also maybe answer on your question, this will also then enhance the capability of the Quriosity computer.

Nothing to add. So the next question is from Andrew Stott, UBS. Thanks for the presentation. In revenue terms, where do you think you have the most scope from your project pipeline in e-mobility? Is it plastics, coolants or coatings? We haven't quantified, but perhaps you can give a qualitative indication.

I'm a little bit coming from the plastics arena, and I think the e-mobility batteries first, plastics and then comes the rest.

Short answer, but very precise. So the next question is from Sebastian Satz, Barclays. On methane pyrolysis, what do you intend to do with the solid carbon? Would that be a major challenge for large-scale application of this technology? Detlef?

Yes. I think I'll take that question. I mean, as a pilot plant that Melanie showed is in my units. For sure, we have been thinking about this because it's a typical question. So the hydrogen is split into hydrogen and highly purified carbon. I think this is very important to note. You come out with extremely high carbon quality, different to what you have typically from refining in pet coke and other carbon sources. So the beauty of the system is that you can use it in various formats. And the carbon that we see will be substituting for example, activities, and we're talking about mobility in anodes, for example, in the battery segment. That is one. But that can be in the electrical vehicles, but also in large-scale applications. This is a core of where carbon goes. Again, with the purification effect, it has an enhancement. But there are many other carbon uses. You can use it as a soil improver for example. Of course, you know carbon from tires, asphalt and the like. And it's really about tweaking the properties of this carbon highly pure as it is to the different uses. We are already there. We have, of course, sampled this already, and we know that carbon has many uses. So we do not really see the problem to substitute a certain amount of hydrogen with the methane pyrolysis and then adding the carbon as an additive use. And please remember the carbon also is CO2 neutral. And that is, I think, an added benefit, even though we haven't even calculated into the benefit calculation of the hydrogen. So actually have 2 CO2-neutral products because it's all based on renewable energy.

Thank you. We have, and we also take these questions, a retail investor that wants to know which of your low emission technologies has the largest emission reduction potential? You showed some -- I mean in March, we showed also the abatement -- yes, perhaps.

So the largest -- so the question was on the largest CO2 reduction potential? Okay. I would like to differentiate the question a little bit. So one is direct operational excellence has it -- in terms of the amount of energy, CapEx and even energy we required to reduce CO2, the quickest impact. So -- and it's huge with BASF because we have so many potential plants. All the savings of the past and many came exactly from that. So that's 1 bucket. And then we still focus that also in the new century division because this is where the operational excellence ideas come from. The other one is fundamentally looking at the biggest CO2 emitters. And it is the steam cracker, right? At the beginning of the value chain, the hydrogen, which is connected to ammonia. Those 2 alone will make up, I would say, those 2 alone make the biggest bars. So hydrogen and to give you an indication, has a potential of about 3 million tonnes of CO2 savings. And if you put that into perspective, Melanie mentioned, our ambition of 25% coming from the 22% we have now, this would be a huge achievement and a huge lever to do that. Where are the hydrogen goes? So that is one, and the other is a steam cracker. And then comes the whole value chain, which we also focus on, but which is, let's say, a little bit more fundamental in changing the technologies. But those 2 are the big ones.

We have another question from Andreas Heine, Stifel. How much will the share of group sales to the automotive industry be by the end of the decade? Which polymer materials benefit most from the new properties required in EVs? Which polymers might see a lower demand?

Yes, let me take this. I think I mentioned in the presentation that the chemical demand in value terms is 2.5x higher in an e-vehicle than in a combustion engine. With this, you can compare a little bit the EUR 12 million sales that we are right now doing to what kind of potential could open us for us. On the plastic questions, I think the plastics portfolio we have in hand right now is a well-suited portfolio also for the e-mobility. We just have to tweak, and I'll show the 1 example there here -- a little bit here and there to make this also usable and beneficial for e-vehicles. It's like the column example I mentioned or like the plastic as protective material for the lower part of the car. So it's -- I think we have the right portfolio, and we can live with this. So we don't have to think in terms of different plastic material adding something that's completely new to us. We will work with what we have in our hands.

A more general question from Chetan Udeshi, JPMorgan. How does BASF evaluate the effectiveness of BASF's huge R&D spending per year, externally, we can't see any obvious benefit in terms of faster growth and/or higher margins versus closest peers? You presented the figures.

Yes. Yes. This is always also obviously a question we are internally discussing up and down. And I think we have this topic that we have EUR 10 billion sales generated from products not older than 5 years coming out of the R&D pipeline. I think this isone thing you might then really discuss is this figure really moving over time. What I foresee now, especially with our new organization to speed up in the operating divisions, the innovation cycles and loops together with customers will help us significantly in generating more organic growth with that. So we will be able to start tailor-made projects earlier, and we will also be able to stop some of them if you see that they are not valuable for the customers. And with this, we will have also a better output here. And I think this would be then also the KPI that we will see moving once this new organization is really up and running.

Maybe you want to put your -- add -- yes. Maybe another point to add to this. I mean, one is the new products we make. The other one is the processes we make. So we have actually divided this into 2 categories because new processes sustainable ones, obviously, the ones that will drive what we want to do. And of course, we calculate new products with new processes together. And I mentioned the operational excellence should never be discarded that alone saves around 200,000 tonnes of CO2 and also that incurs a profitability on both sides. It is, of course, sustainable in account of being, of course, valuable in terms of business, but also in terms of sustainability. And we have a whole database calculating that as well.

The next question is again from Christian Faitz from Kepler Cheuvreux. For innovations in electromobility, you are missing 1 chemical that contribute significantly to weight reduction in the car body, polycarbonate. Would you ever consider investing into polycarbonates, obviously, via an acquisition?

I think that comes with the statement I made before, I said I'm quite happy with the plastics portfolio we have in our hands.

Now a question from Sam Perry, Crédit Suisse. How much demand are you seeing from customers for solutions, which enable them to reduce their Scope 3 emissions versus 2 years ago? How much of the pricing and market share growth opportunity does this present? So focus is on Scope 3, whether this is of interest for our customers and how does it compare to 2 years ago?

If you -- I think, basically defining us as Scope 3 for our customers, yes, there's lots of discussions ongoing. I think what customers are -- they have all their -- depending on the industries, a little bit faster, defined their climate targets. So they have also very significant targets to reduce their CO2 footprints for their consumers, and we are part of the game, obviously. What we do, we have created this transparency. So that we really can talk about the CO2 footprint of each of our products. We have now a carbon footprint for each of our 45,000 products that we are selling. And this is really helping with the discussion with the customers. We can clearly say there is a product with a certain footprint, you can compare this. You can also ask us for reducing the footprint by using bio-based materials, for instance, or by inventing a new technology. And then for us, also this discussion is quite useful because we can then make it very transparent. This comes obviously also, most of the time, with a little bit higher cost. And then we can discuss, is this worthwhile in reducing the Scope 3 from a customer perspective when we change something in our system. And we are able to change now and tweak here and there and offer already very good solutions, and it's really accepted. It was completely different maybe 5 years ago when there was no kind of feedback coming when we are starting something. Now it's really the whole industry, regardless where they are active in is changing here.

We have a retail investor question. It's a bit of a personal question. Which sustainable innovation are you working on that is most impressive for you? We talked a little bit about that where you said the little tweaks are sometimes also what is really important and great.

I think Detlef mentioned the very bold technology moves we are doing. This is impressive because it takes some courage to do this. It's with high investment. It's obviously also with high risk. We need endurance. It needs time. Something like a methane pyrolysis is not developed within 2 or 3 years, it takes time. But when you look at the possibility of the 45,000 products we are selling to offer really customer solutions by having kind of smaller, sustainable benefits being created faster. And you add this up, I think this is a kind of huge portfolio, and this is maybe something which is even more impressive that we are able in the chemical industry to support our customers here.

Since there I think no more immediate questions at this time. I think it has been a long year also for analysts and investors. We are happy you joined us, but we have come with us to the end of our R&D webcast. We hope you found it informative and interesting to learn about specific examples. Please do not hesitate to contact a member of the IR team if you have any further questions on the topics presented today or on any other topics where you might want to learn more. Thank you very much for joining us today, and we wish you all the best for the holiday season already today. Thank you.