BASF SE (BAS) Earnings Call Transcript & Summary

Welcome to the ordinary General Meeting of BASF SE and the year 2023 at Mannheim, Rosengarten. As Chair of the Supervisory Board, I will take the Chair of the AGM and according to Section 18 Figure 1, I take the Chair. I would like to welcome you, ladies and gentlemen -- ladies and gentlemen, shareholders, the shareholder proxies, the representatives of the press and also those people who have dialed in live via the Internet. I would also like to welcome those shareholders that follow this AGM online live via the online service. After -- the last 3 years where we held our AGM virtually due to the pandemic, we are now very, very pleased that this year, we are able to welcome you in attendance here at Rosengarten, Mannheim. The Board of Executive Directors and Supervisory Board have decided to turn back to a face-to-face format even if the legal regulations would allow to have this AGM also in a virtual form. As you all know, the main part of DAX companies this year will also meet virtually. We promised you last year that we will return to Rosengarten as soon as possible if and when the legal preconditions are present. But also independent from that, we are convinced that we want to communicate with you, the shareholders directly. You will have the opportunity to meet your Supervisory Board and your Board of Executive Directors here at Rosengarten. We believe that this is the best form of communication with you. And I'm also pleased that you obviously feel the same as we do at the Supervisory Board and Board of Executive Directors. What's new is that, we have an online transfer to the entire AGM for registered shareholders. You know that in the past, there was a public and non-public part and now you can dial in from home once you have registered beforehand. And that brings me to the people sitting up here on stage today. From the supervisory Board, we have all the members present with one exception, Dame Alison Carnwath cannot be here today. She could not travel to Mannheim. The Board of Executive Directors is here in full attendance. I would like to welcome Dr. Stephan Kothrade, sitting at my right, who since 1st of March 2023 is member of the Board of Executive Directors. He followed Saori Dubourg, who left the company by mutual agreement. You also see in the first row of the audience, Dr. Dirk Elvermann. Do you see him? Here he is. Who is the future CFO of BASF. He will succeed Dr. Engel, who is going to leave today after 35 years at BASF, 15 years in the Board of Executive Directors and 12 years as the CFO of BASF SE. Well, yesterday evening, we met with Mr. Engel yesterday and the Supervisory Board and the Board of Executive Directors. But today, Dr. Hans, thank you very, very much for everything that you did for BASF. Thank you for the wonderful cooperation. You gained great respect in the company and also outside of the company, we will certainly miss you. We are very pleased that with Dirk Elvermann and Stephan Kothrade, we have 2 extremely suitable successor, both have been with BASF for 20 years now in several functions in Germany and other countries. They're not only experts, but also personally, they are enriching our Board and very good members of the Board of Executive Directors. Also as the Chairman of the Supervisory Board, I'm looking forward to the future cooperation. Looking at the stage, you will see that the Board of Executive Directors after leaving the -- leaving of Saori Dubourg, only has one lady in its role, Ms. Maas-Brunner is responsible for research, but also for the big European sites. And last but not least, also for Ludwigshafen and has been a member of the Board of Executive Directors for 2 years now. Of course, BASF meets the women's quota. This is, however, not rating the promoting of young talent. Diversity is a precondition for an excellent team of the Board of Executive Directors. So apart from the gender, of course, a high degree of internationality of the members is important. And this is why international experience is indispensable, and it would be even better if we had a member with a non-German passport, and we are doing our best to do so in the future. The Board of Executive Directors has sophisticated aims for the development and promotion of women. Until 2030, the share of female leaders in the executive staff will raise from 27.2% to 30%. The Supervisory Board and also the Personnel Committee are, on a regular basis, looking at candidates for the Board of Executive Directors. I'm quite optimistic that we will see further progress. But let me also stress that, last but not least, at BASF, it is always the qualification of the candidates that's most important. And this too is what we owe you as our shareholders. Now let me talk about the formal instructions for today's AGM. This is quite long but necessary. The calling of this year's AGM was published in the Federal Gazette dated 16 March 2023. A specimen copy for the calling is taken with a notarial record. And I do state that the AGM was called [ duly ]. So before the proceedings of our agenda, let me just ask you to raise from your seats for a minute. As every year, we commemorate all the employees and pensioners who have deceased since the last AGM. Thank you very much. Until the end of the voting, you can cast the vote and instructions to the company proxies via the online service. Also today, granting, issuing, modifying, or revoking proxies or instructions to proxies are also possible at the front office and also at the special desk in the lobby. And this is also possible for the granting of or revoking of proxies to third parties. Information on casting your vote can also be found in the call in for today's AGM. The voting proxies according to your instructions will take the votes on the items on the agenda. The duly introduced or written postal votes will also be considered before the electronic vote. Your entrance on admission card has the necessary statutory attendance list and for the vote. This information is going to be allocated to the number of your individual AGM card. If you have several entrants card -- admission cards, you need 1 AGM card for every vote. We are obliged to correctly have the attendance list registered. Please help us with that. So if you leave the meeting before its end, please hand in your AGM card to the members of the service desk at the lobby. So we can adjust the attendance list. Apart from the deregistration, you can also grant proxy or authorization. Every AGM card contains 2 possibilities to grand proxy. If you don't grant proxy, your votes cannot be considered during the vote. On the proxy and on the entire voting procedure, please look at the explanations in the AGM card that you received. The notary, [ Ms. Zilla ]. Will do the notarization according to Stock Corporation Act. She sits at the right side of the audience to your right, and there is -- her place is in sign posted. Now to those of you who want to request the floor. We would request all the ladies and gentlemen, shareholders and proxies of shareholders who want to take the floor to register that it's 1 of the 2 registration desks by presenting your AGM card. Please register as soon as possible now, if possible, so that we can see how many speakers want to take the floor. We are looking forward to answering your questions by the members of the Supervisory Board and members of the Board of Executive Directors. Registered shareholders this year could register their texts until 25th of April 2023 via the online service. These contributions were made available to all shareholders in the online service and can be viewed until the end of this AGM. The AGM this year will be fully broadcast in the online service for shareholders. I already mentioned that at the beginning. We will ask you not to use audio or video recording, particularly not with your smartphones. This is against the personal rights of every individual. This and just to avoid interferences, we ask you to switch off your smartphones during the entire AGM or mute them. So if you didn't do that, please check your telephone and do it now. Thank you very much. Also this year, the attendance list will be made available electronically. 2 desks with monitors are available for that next to the desk of the notary in this room. Ladies and gentlemen, next to the main room, you have the possibility to follow the AGM in the [indiscernible] and the rooms [indiscernible] on Level 2 as well as adjacent rooms via video and audio. This year also, you can use several rooms in the Dorint Hotel, which is next to Rosengarten and you can reach the Dorint Hotel via the pedestrian bridge on Level 1. Please use these rooms, if you wish. So these are the preliminaries and the necessary formal instructions for today's AGM. Now let me talk about the management report, and I would like to give the floor to Martin Brudermuller and Martin, we are looking forward to your report. [Presentation]

Shareholders, ladies and gentlemen, courageous and down to earth, a team that gets going and will never be on the wrong track, even though there is a strong headwind, a team which is behind the change to climate neutrality. This is what we are about at BASF. And with this, I would like to very warmly welcome you to our AGM in Mannheim on site and also in front of the screens, a very warm welcome. We are very glad to see you after 3 virtual AGMs, we are back at Rosengarten, and we are very glad not only to talk in front of a camera but directly to you because we really appreciate exchange with you. Ladies and gentlemen, you know me. And you know that I openly address issues. So let me start by saying, well, stormy times for BASF, the chemical industry, specifically in Europe and Germany, is facing up to a lot of challenges. And unfortunately, we are familiar with the issues, a terrible wall in the center of Europe and human suffering is enormous. Also, the economic consequences of the Russian attack against Ukraine are enormous. Drastically, increased energy and raw material prices, high inflation and increasing interest rates and connected with this a demand of consumers, which is going down. So we find ourselves in a difficult economic environment with a lot of geopolitical tensions, which means uncertainties in the markets. And in addition to this, we have global transformation towards the climate neutrality and circular economy, an enormous task for this century. The green deal of the EU is a special challenge. Nowhere else, we have such an intensive, far-reaching and limiting regulation as in Europe. As a globally leading chemical company, we cannot get away from this because a lot of these topics affect BASF as well. This is why the share price after the start of the war went down considerably. Yesterday, it was EUR 50.15, much too low, and this is really very unsatisfying. I guess that you are concerned about BASF, but there is no reason for this because we consistently and decisively tackle challenges as we always do at BASF. It is not the first time for us. In the more than 158 years history of BASF, we have managed time and again to realign. Looking ahead, think of the change in the raw material space for us from the coal in the 19th century as a starting material for paints, then mineral coal and oil and natural gas since the 1980s up to renewable raw materials and energy for climate-neutral future. Shaping the change. This is part of BASF, and this is why we will succeed again this time. Our task as the Board of Managing Directors is to keep the company on track in this difficult situation. And by focusing on short-term aspects, not to lose sight of the holistic view. Our priorities remain unchanged to make BASF climate neutral and grow profitably, and we do so full of passion. Part of our task as Board of Executive Directors is to take a clear stance to explain and not to get tired of working for BASF and defending BASF. This is dear to my heart, and this is what I've done. For example, in spring last year, when there was a demand for [ first ] embargo against gas from Russia, it was important to introduce the view of the industry in this discussion and not to enter the embargo head over heels. Every single month in addition made it possible for us to make Germany more independent from Russian gas. Natural gas is our most important energy carrier, but also an important raw material for many products. At about 4% in 2021, we were the biggest industrial consumer in Germany, and this is the amount that the whole of Switzerland consumes. When gas from Russia, so to say, overnight, had to be replaced by other sources, the energy markets were completely upside down. Energy prices reached levels we had never seen before. And for BASF, this meant enormous additional cost, about EUR 3.2 billion globally in 2022. Our biggest concern was that especially the Ludwigshafen site wouldn't be supplied with enough gas. There still can be gas scarcity, especially in the next winter. In April of 2022, at less than 50% of gas supplies compared to 2021, we would have been forced to shut down the whole site. This is why we intensely worked on making BASF more independent of natural gas. Our teams look for solutions around the clock, and this commitment paid off. Today, we can even operate our biggest site if we were only to receive 30% of the gas supplies and starting in fall in an extreme situation, we can do with only around 10%. We can do so by not operating plants with a lot of gas consumption at full capacity utilization and a partial change of our power plants to use oil. So complete shutdown of the site is no longer a problem for us. This, again, is an enormous achievement of the BASF team. Another topic that we consistently look at is our share in Wintershall Dea. Exiting the oil and gas business was something we decided about before the war started, and we will stick to this. But given the attack against Ukraine on part of Russia, the basic conditions have changed completely. Via Wintershall Dea, we are part of a joint venture in Russia producing oil and gas. But now the Russian government expropriated Wintershall Dea in Russia. So last year, we had to go through an impairment for our holding Wintershall Dea to the tune of EUR 6.5 billion. For the BASF Group, this meant negative earnings after taxes. And of course, this hit us very painfully, but it opens up the path towards the future. We work full steam to find variance for exiting. And going public of Wintershall Dea will remain our preferred alternative, but we can also think of selling it to investors. And this cannot be done overnight. We need a lot of approvals from authorities and joint venture partners. However, we are very confident that we'll be able to do so in the foreseeable future. Ladies and gentlemen, the year 2022 was a year with light and shadow for BASF. Now let's take a look at the business figures. We proved to be resilient in this difficult environment. We had a very strong start with the historically best first semester ever, followed by the weakest operating second semester since 2008. Sales increased by 11% to EUR 87.3 billion. Our EBIT before special items amounted to EUR 6.9 billion. This was below the previous year's level, but within the range we had forecast. Businesses in the segment's Agricultural Solutions and Nutrition & Care were running extremely well. EBIT before special items was clearly increased. In case of Chemicals and Materials, we saw a clear decline in earnings. This is something we had expected. In case of Surface Technologies, earnings increased considerably. In case of Industrial Solutions, it slightly increased. And in case of both segments, we had expected a slight deterioration of earnings. Our available funds, free cash flow, amounted to more than EUR 3.3 billion. In addition to this, we earned a premium on our cost of capital. What do these business figures mean for your dividend? Board of Executive Directors and Supervisory Board proposed a dividend of EUR 3.40 per share for the 2022 business year. This is a high return of 7.3% based on the share price of EUR 46.39 at the end of the year. The payout totaled EUR 3 billion. And this amount is more than covered by our free cash flow. Looking at the payout, this is something we can support despite the negative earnings after taxes because this was a consequence of impairment, which did not have any effect on the cash situation. Now let's take a look at the most important parameters of Q1 2023. We generated sales of around EUR 20 billion and EBIT before special items of EUR 1.9 billion. These figures, as expected, are below the strong sales and earnings figures of the previous year's quarter. Dear shareholders, we are faced with a strong headwind at the moment, and we live with realities that we have to face up to today. One of these realities is the development of the global chemical market. In 2000, the regions, Europe, North and South America as well as Asia Pacific, each contributed 1/3 to the global chemical market. Up until 2030, the shares of Europe will go down to 17% and of North and South America to 13%. Asia Pacific will then represent around 70% of the global chemical market. Western markets hardly see any growth any longer. On the other hand, in Asia, we see a growth rate of probably 3.7% on average annually. If we compare these numbers with the regional footprint of BASF, the picture is very clear. Against the background of these market expectations, we have to expand our business in Asia Pacific. We need a more balanced regional position. This is a painful reality specifically for Europe. I'd like to explain to you today how we are going to do this. We defined 5 priorities, which are an integral part of our strategy. Based on these, we pave the way for profitable and sustainable growth. Our top priority is that we strengthen our competitiveness and our resilience in Europe and Germany. Our home market fills us with more and more concern. Profitability is by far not at the level that we've seen before. Last year in Germany, we had a negative operating result amounting to EUR 130 million. Of course, gas prices in Europe had an influencing factor here as well, but that's not only it. Europe's competitiveness has been suffering for many years because of the weak market growth. In addition to this, we have a regulation that is inundating us. Companies are suffocated by more and more red tape and the situation is getting worse. In addition to this, costs are increasing as well. In other regions of the world, the government strengthens industry. With the Inflation Reduction Act, the U.S. came up with a very pragmatic initiative. It combines economic growth with initiatives for green transformation. CO2-neutral production is turned into a business model that helps you to make money. This should be a role model for Europe. Europe needs more pragmatism as well to make sure that we don't fall by the wayside as a region. And we are concerned about the direction Europe is taking. The EU Commission focuses on the effect of detailed and expensive regulation. Around the Green Deal, we already have 14,000 pages, which are relevant for the Chemical industry. I want to be very clear, we support the goals of the Green Deal, but the way it is being implemented at the moment, it does not make international competitiveness possible, and this will not help anybody at the end of the day. Our competitiveness in Europe is challenged. And this is why we're trying to take corrective action as quickly as possible and as decisively as possible. We have 2 measure packages. First of all, we streamlined our structures outside of production, focusing on Europe and Germany. Starting at the end of 2024, we thus want to save more than EUR 500 million every year. Secondly, we adjust our production, specifically in Ludwigshafen. We shut down some plants for basic chemicals, which are extremely energy intensive. One of them is one of our ammonia plants. In case of high energy costs in the long run in Germany, such plants are no longer competitive, also due to the fact that we have seen overcapacities being developed in other regions at lower costs. These are painful steps, especially for the teams who have been operating these plants with a lot of passion over many years. The shutdowns also mean that we cut jobs, but we do it in a way we have always done at BASF, socially compatible in a responsible manner and in the direct exchange with the worker representatives. Many employees affected with a lot of experience and the ones we want to retain in the company. We need these qualified people because many will retire at BASF in the years to come. Dear shareholders. Based on these measures, our biggest site of Ludwigshafen in its 159th year will become fit for the future. Our Verbund is and remains resilient. And this is why we continue to invest in the updating of our plants and the transformation of the Verbund. In Ludwigshafen alone, we earmarked around EUR 2 billion every year in the long run. Our vision for Ludwigshafen is crystal clear. Ludwigshafen is supposed to be the role model site of climate-neutral chemical production in Europe. Here, we produce the broadest portfolio of products. The big Verbund opens up a lot of opportunities to test new technologies and integrate them into existing structures. Being close to research is a decisive advantage here. This is why we take many first steps for the transformation of our Verbund in Ludwigshafen. As a global company, we can balance between weaknesses in one region and strong contributions in others for our good regional portfolios. And this brings me to the second priority. We invest in growth markets. I already presented the fact the growth market for the Chemical industry is Asia, specifically China. China represents around 50% of global sales in the Chemical industry. In case of BASF, China only represents below 15% of total sales. We want to continue to grow enormously in China with a lot of profitability. This is why we invest there and we expand our Verbund site in Nanjing, plus we built a new Verbund site in Zhanjiang in Southern China. The investment is around EUR 10 billion by 2030. From the very beginning, we wanted to use this site as the trailblazer for sustainability. Our goal, 100% green power from day 1. This makes us the trailblazers in the chemical industry globally. This investment is important for BASF. One pillar in growth markets then compensates a lack of growth in Europe. And with this, we fund our investments for climate-neutral future all over the world. People keep asking us, is BASF becoming too much dependent on China? Are we neglecting geopolitical risks? I do understand that you think about this. After intensive and responsible consideration, our answer here is no. We analyze the risks and opportunities of our investment in China in great depth, of course, also in exchange with external experts. As a result, we assess the opportunities for BASF to be higher than the risks. Looking at our commitment in China, we act on the basis of global guidelines that is respecting human rights is part and parcel of our company philosophy. This is our compass for everything we do, including in China. Does this mean that BASF will withdraw from Europe? Definitely not. Europe is the cradle of BASF. And our basic principle is we produce where the customers are. We produce in China, for China, and we have important customers in all other markets around the world. And this is why we have to be and want to be strong in all important markets. At our Geismar site in the U.S., we are expanding our MDI capacities for USD 1 billion. MDI is an important precursor for phones, plastics and coatings, and we see a lot of potential for this in North America. This has been our biggest investment in North America so far. Some weeks ago, I visited the site. The know-how and the enormous motivation of the teams was impressive, and this shows our strength as a global company. At many other sides of the world, we are driving other investment projects. Ladies and gentlemen, if you want to grow in the long run, you need the right products. And this brings me to priority number three, we drive innovation for a sustainable future. With around EUR 2.3 billion R&D costs, we are the biggest chemical company active in research in the world. And I'm always excited how minute molecules help to manage enormous tasks, be it e-mobility, modern wind farms or solar roofs or feeding the world, all this takes our research and our innovation. In all businesses, we keep developing our product portfolio with our customers in order to reach sustainability. This includes new ingredients for detergents. They are good for your clothing. And if you use low temperatures when you clean your clothes, they will be clean. So this is 2 ways to do something for sustainability. You can wear your clothes longer and you use less energy when you use the washing machine. But we are also developing new business. And here, we have great plans for cathode materials. This material is part of batteries for e-mobility. It will be decisive how safe, how far and at what price you can drive electrically. Batteries are small chemical reactors. No electric car will work without them. And the market for battery materials is the globally biggest growth market in chemistry. And we are one of the few global producers for battery materials and sites in Europe, U.S. and Asia. And we are expanding this position. This takes experts, and we are experts. We are not only leading when it comes to new high-nickel content cathode materials, but we also invest in process research. We also invest the recycling. We also further develop the recycling of battery materials. Getting back the expensive metals such as lithium, nickel and cobalt is decisive when it comes to the economic visibility of the business at the end of the day. The first recycling plant is being built as we speak at our Schwarzheide site. And this is why our first own plant for cathode materials in Europe will go on stream. The demand in Europe is enormous, but supplies are limited. We make sure that we don't use too many resources and we closed the cycle for sustainable mobility. At BASF, we -- thus linked growth with climate protection at our customer side. But we, of course, understand that the chemical industry causes a lot of CO2 emissions and consumes an enormous amount of fossil raw materials. This is why we take it a step further. We are trailblazers of climate neutral production. That's our priority #4. We have ambitious goals. Up until 2050, we want to become climate neutral globally speaking. We want to strengthen the circular economy, and we want to change our raw material spaces from fossil to renewable materials. For a change towards climate neutrality, we must not lose any time. This really is dear to my heart. I want us to make a contribution to leave a world worth living in to the following generations. I'm very glad and proud that the BASF team here fully supports this. Our mission when it comes to sustainability drives the teams every day. They have great plans and ideas. Take our researchers. They work on using microorganisms and enzymes to produce our products. These are processes of wide diode technology. They do not need a lot of energy and raw materials and very often, they are based on renewable raw materials. This way, we reduced the CO2 footprint of our products. The successful change towards a climate-neutral chemical production takes a whole range of processes and new technologies like these. This is why we are driving a lot of pilot projects. One of them is the world's first electrically fired steam cracker furnace. Here you see pictures of the groundbreaking ceremony in September of last year in Ludwigshafen, a historic moment for us. Why are we investing in this technology? This way, we can almost completely avoid the high CO2 emissions of our steam crackers. The steam crackers are the heart of our chemical production in the Verbund at the beginning of the value chain and as a starting point for thousands of our products. So far, we've been firing them with natural gas. Now we want to do so with our new electrical firing concept with green power. This is a great example to show how green transformation can succeed. But it also entails a lot of technological challenges. This is why we do so together with SABIC and Linde, 2 great partners. Together, we are a strong team with the intention to drive innovation for climate-neutral future. And politicians support us as well. We are very glad that the Federal Ministry for Economic Affairs and Climate protection is supporting our project. Ladies and gentlemen, this is what the future of the chemical industry looks like. I am convinced that we need to do something against climate change. And we, at BASF, are courageous enough to do so. We leave [indiscernible] and we open up new opportunities. Not all of the ideas will prevail, but we have to try new things to make sure that a climate-neutral future will turn into reality. But courage has to pay off. It would be an illusion to think that the decarbonization of our society works without additional costs. If this were the case, we would already be CO2 neutral. The required investments in plants and technologies also have to make a profit. Otherwise, they won't become reality. Our social ambitions will then remain just a dream. And let me be quite frank. We are talking about enormous investments. Today without a true business model, we are not making money yet, but still, we are going for it because those are the technologies for the future of the chemical industry. We have to start driving them today to make sure that we can upscale at a later point in time. We are convinced there will be a profitable market for all these technologies in the future. Almost all of our new technologies have one thing in common. They require a lot of power from renewable sources. This is why we developed a strategy to get hold of green power. We signed long-term contracts for green power. And as an industrial partner, we are part of projects, including the offshore wind farm, Hollandse Kust Zuid by Vattenfall. It's an impressive project. With 140 turbines at the Dutch North Sea Coast, it will be the, at the moment, biggest wind farm in the world without any subsidies. Construction work is approaching its end. And the wind across the North Sea is also blowing for BASF now because our Antwerp site and other sites as well are already supplied with offshore wind power. We do not only invest in wind power, but in solar energy as well in Schwarzheide, for example, a site, which since the reunification of Germany, has gone through many changes and modernizations, a former coal mining area today, the site of a solar park built with our participation. And this is an example of the overall transformation of the region there. So we are much greener when it comes to our energy supplies than you might think. More than 100 BASF sites all over the world are already supplied with no emission power with water, solar or wind energy. When it comes to changing our energy supplies, we want to make faster progress. But the bitter reality is there are not enough wind and solar farms that we can get a share in, especially in Germany. We do not have enough projects and not the required infrastructure. Based on the more and more ambitious goals, the expansion is taking place much too slowly. And one other reality is, we depend on the expansion of the public infrastructure for power grid. And again, here, we are not making progress fast enough. It's up to politicians to speed up here. It doesn't help when they announce more and more ambitious goals and don't supply in the end. What would help is an acceleration as in the case of the new German LNG terminals. Dear shareholders, transformation and profitable growth are 2 things that go hand in glove at BASF, 2 sides of 1 coin. And this brings me to the fifth priority. We are trailblazers for low CO2 and CO2-free products for our customers. BASF is the biggest global chemical company, and we do not only want to be a big company and profitable. We also want to be leaders when it comes to climate neutrality. And this can only be done with products with net zero CO2 emissions. These are the products our customers need in order to reduce their CO2 emissions. We are fully convinced that this is the future of the chemical industry. Our customers confirm this. They ask, when will I get your product without CO2 footprint? We calculate the CO2 footprint of all our 55,000 products we sell around the world. Some of them are supplied today with lower CO2 or net zero CO2 footprint. We expect that by 2030, the market demand for CO2-free products will exceed the supplies. And the winner will be the company that can offer enough of such products. And this is what we, as BASF, would like to do. Especially in Europe, this means to grow faster than the market and win market share. What is decisive for the success is that we try to discuss with politicians, the correct regulatory tools and we agree on individual strategies in order to reduce emissions with customers and suppliers. Our teams are very committed and very creative to get the competitive edge for BASF here. Now let me explain this by using one example. Let's take this sneaker. Everybody has at least one pair of sneakers of that home. And this shoe includes our innovative material, Infinergy, a top performance product -- plastic product of BASF because it dampens the sole of sneakers. At the beginning, this meant a CO2 footprint of about 0.5 kilogram per sole and we were able to reduce the CO2 footprint by half. In future, it will go towards zero. How do we achieve this? We replaced power generated by natural gas by green power. Instead of fossil raw materials, we use regenerative, waste base or recycled raw materials, such as palm oil, [indiscernible] oil or pyrolysis oil from plastic waste. And with the method of the mass balance, we then allocate certain volumes of CO2 reduced elements to our products. And we thus adjust the CO2 footprint in a customized way to the requirements of the customer. This is just the beginning of a new generation of products, and we have the innovative power to go for these. How fast development is going towards this direction depends on our customers, whether they are willing to pay for this. And at the end of the day, it's up to you as consumers, ladies and gentlemen, because climate protection requires an economic basis, otherwise, we will not succeed. But we are convinced that the future belongs to emission-free products and BASF wants to be one of the leaders here. This way, we maintain our position as a globally leading company of the chemical industry. Ladies and gentlemen, our responsibility does not stop at the work sense. Entrepreneurial responsibility also means responsibility for society and the company needs orientation to be responsible. This is our corporate purpose. We produce chemistry for a sustainable future. i.e., we are based on triad of sustainability, the balance of economy, environment and society. We use all our power to achieve a successful transformation, and we are making good strides at BASF, but it's also about solid and promising compromise and agreements between society, politicians and industry. We enter into a dialogue to explain what will work, what doesn't work. As the current Cefic President, I do so, this is the European Association for the chemical industry. We met with political parties, trade unions, NGOs and the new commission to agree on a road map regarding the green deal for the chemical industry. It was difficult, and the plan definitely is not perfect, but it gives us a guideline for our goal, that is a European chemical industry, which is competitive and is by far ahead when it comes to the global race for innovative solutions. Ladies and gentlemen, we are convinced global challenges can only be met if we work together, this is what we do, and this is what we fight for in an open, cooperative and constructive manner. And this brings me to the end of my speech. We altogether work for the future of BASF. We invest in order to grow sustainably and profitably in growth markets, in emission-free technologies and in new generation of CO2-free products. We are trailblazers in our industry. This way, we'll be able to create value for you, dear shareholders, for the society and for our environment. The success of BASF thus is work for by our employees. They are a strong creative and entrepreneurial team. And I would like to thank them very much for the team effort, for their commitment for the extra mile they go. And based on this team spirit, we want to tackle the task of the future. I trust them fully. Thank you very much to all of you. I would also like to thank today our CFO and Deputy Chairman of the Board of Executive Directors. After 35 years with BASF, Hans-Ulrich Engel will leave the Board of Executive Directors today. Hans, over the many years, you were great and good colleague, companion and friend. As you say, you always looked at the reality the way it was and made the best of it for BASF. Thank you very, very much for this intense cooperation based on trust over these long years. All the best to you and your family. Dear shareholders, you saw it in the video before I started speaking to you. We, at BASF, we are strong, highly motivated and with both feet on the ground. We know what needs to be done when there is a problem. We will stick to this attitude and tackle it together, focusing on the future of BASF. How we shape it in a successful way? This is what I explained to you today. We are glad that you accompany us on this way, and I thank you for your trust.

Dear, Martin -- Mr. Brudermuller, I would like to warmly thank you for this detailed and committed report. Many of the topics that you have touched upon are going to remain with us during the general debate, I'm sure. And now let me point out to the representatives of press that we are extremely grateful for your interest in our event. But please bear in mind that an AGM is not a public event, so please refrain from audio and video recording from this point onward. And this holds true for all the participants in this room. And now let's move on to the agenda. I will have to read out quite a bit of text here. The annual financial statements and the approved consolidated financial statements as well as the management report of BASF SE and the BASF Group for 2022, including the explanatory reports in line with Sections 289a and 315a of the German Commercial Code have been published together with additional documents in line with the statutory requirements and can be inspected there. The annual financial statements of the BASF SE as well as the consolidated financial statements of the group as well as the management reports of both BASF SE and the BASF Group have been audited by the appointed auditor and have received the unqualified auditor's opinion. The annual accounts and their consolidated annual financial statements have been approved by Supervisory Board. The annual financial statements has been adopted. And now let me move on to the report of the Supervisory Board. You will find the detailed comprehensive report in our printed business report. We have a small number of copies in printing and it amounts to almost 300 paydays. I will, therefore, keep it short here. As Mr. Brudermuller pointed out, in the last year, BASF was faced with extraordinary and unexpected challenges, mainly due to Russia's attack on Ukraine. The dislocations on the raw material and energy markets have fundamentally and permanently changed the framework conditions for the chemical industry and in particular, BASF. Following a good start into the year, we saw a disappointing sales and earnings performance. Add to this, the extraordinary burdens as a result of the revaluation of our shareholding in Wintershall Dea. Dr. Brudermuller has just pointed out the details. And the work of the Supervisory Board has been strongly marked by these developments. The Supervisory Board has fulfilled its legal and statutory obligations with great diligence. It has received regular information by the Board of Executive Directors within and outside our regular meetings. It has monitored the management's work and the strategic development of the company as well as key individual measures. 5 meetings were held during the 2022 fiscal year, during which all the members participated. In particular, the Supervisory Board has dealt intensely with the effects on the dislocations -- of the dislocations of the raw material and energy markets on the operational business and the short- and long-term competitiveness of key businesses and sites as well as their recoverability. The further development of BASF Group in view of increasing geopolitical risk was also at the center of its considerations. Even outside our meetings, the CEO and myself regularly exchanged our opinions and views on the current development of the business situation and key business events. The Supervisory Board has considered the remuneration of the Board of Executive Directors during various meetings and has resolved on such remuneration. Dr. Martin Brudermuller mandate has been extended by 1 year up until the end of the AGM of 2024. And Dr. Dirk Elvermann has been appointed successor to our CFO, Dr. Hans-Ulrich Engel. For the Supervisory Board, 2022 was a year of personnel change. Since the last AGM, it has 5 new members. So since the last ordinary elections to the Supervisory Board, 7 of the 12 members are new on the Board. The Supervisory Board meets all its targets in terms of composition and competencies. In difficult times like these, smooth and solution-oriented cooperation between the Supervisory Board and the Board of Executive Directors is more important than ever. The Supervisory Board thanks the Board of Executive Directors for its extraordinary performance in view of the fundamental new challenges. In particular, the measures taken immediately in order to mitigate our dependence on natural gas and to maintain the Verbund production, in particular, in Ludwigshafen, they deserve our particular recognition. And this includes public statements on the relevance of securing competitive gas supply for both the Chemical industry and Germany as a business location. We would also like to extend our thanks to all the employees globally for their impressive commitment in times of major uncertainty. With a view to the further activities of the Supervisory Board, I would like to point out that there is a detailed written report as well as a corporate governance report in the BASF report on Pages 169 to 178. The remuneration report can be found online at basf.com/[indiscernible] An overview of the remunerations of the Board can be found on Page 288 of the BASF report 2022. This is the end of the public broadcast on the Internet. I would like to thank all the viewers who have pursued and followed our AGM to this point for their interest. Shareholders have the opportunity to follow the further course of the AGM live via the online service. [Statements in English on this transcript were spoken by an interpreter present on the live call.]