BASF Aktie

Good morning, ladies and gentlemen, and a warm welcome to our press conference. Today, we are going to present the financial figures of BASF Group for the second quarter 2026. And I would like to welcome our Chairman of the Board of Executive Directors, Markus Kamieth, and Dirk Elvermann, our CFO. So before we begin, let me give you a few points of housekeeping. The conference language is German and there's going to be a simultaneous translation into English. The presentation is available for download at bsf.com, and the direct link for that will be found in the chat. So let's start with the presentation, and we are looking forward to your questions afterwards. And the floor is yours, Markus.

Thank you, Thomas. Before I start, welcome to you. It's your first press conference in your brand-new position, but welcome again, and we look forward to having a few more press conferences with you. Thank you. Good morning to you. Dirk Elvermann and I are pleased to welcome you to today's press conference. In mid-July, we already pre-released our results for the second quarter as our EBITDA before special items considerably exceeded average analyst expectations. We were able to increase earnings in nearly all segments. This was driven by stronger prices and higher volumes as well as lower cash fixed costs.

We thus further strengthened BASF's position in the market and made major advances with our restructuring as well as portfolio measures. At our annual press conference in February, I presented to you our priorities for 2026. Today, I'm pleased to say that we are making very good progress in all these areas. We have reduced our costs. We have brought down our capital expenditures. We have increased capacity utilization at our plants.

Our team in Zhanjiang successfully ramped up with the new Verbund site and the sale of our coatings activities marks an important step forward with our value-enhancing portfolio measures. As you can see, we are successfully implementing our winning Way strategy. We will provide you with more details about that later. To begin, let's take a closer look at BASF sales development and the key influencing factors. In light of the geopolitical developments, we are presenting monthly figures compared with the corresponding months of the prior year. These figures are adjusted to exclude the impact of metals on sales in the Surface Technologies segment.

At the beginning of the year, declining prices for key raw materials such as naphtha and natural gas resulted in lower sales prices. Following the escalation of the conflict in the Middle East and the blockade of the Strait of Hormuz, this trend reversed in the second quarter of 2026. In response, we successfully implemented significant price increases, particularly in our upstream businesses.

We also achieved considerable volume growth throughout the first half of 2026. This was supported by the start-up of our new Verbund site in China. Another decisive factor was our ability to maintain uninterrupted supply by leveraging our local-for-local production footprint by flex-feed steam crackers and dedicated trading operations to source key feedstocks. BASF's unique setup did and does provide a clear competitive advantage. Volume growth accelerated significantly in March. The high uncertainty in the markets led customers to secure supply through some advanced purchases. In the second quarter, volumes continued to grow considerably compared with the prior year months, particularly in the core businesses.

Currency headwinds eased over recent months. Moreover, portfolio effects were minor and were mainly caused by the sale of the decorative paints as well as the Food and Health Performance Ingredients businesses in the second half of 2025. A slightly positive portfolio effect resulted from the acquisition of AgBiTech, a company specializing in biological insect control solutions completed in March this year. Ladies and gentlemen, let's now take a brief look at regional volume and price developments compared with the prior year quarter, once again, excluding metal sales. Following the strong momentum in the first quarter of 2026, we continued to deliver considerable volume growth in Greater China, supported by the successful ramp-up of our new Verbund site in Zhanjiang. As a result of the Middle East conflict, prices rose significantly in Greater China as well as in almost all other regions, particularly in the upstream businesses. In Asia Pacific, excluding Greater China, we also recorded considerable volume growth, mainly driven by the Chemicals segment. In this region, too, prices rose considerably, especially in the Materials and Chemicals segments.

In Europe, all core businesses contributed to the volume growth. Prices in Europe increased strongly, especially in the Chemicals and Materials segments. In North America, we recorded slightly lower volumes, mainly on account of a scheduled turnaround of the steam cracker in Port Arthur, Texas. By contrast, prices increased considerably. Now let's move to earnings by segment.

EBITDA before special items rose significantly by 54% to EUR 2.4 billion. This increase was primarily driven by continued volume growth and higher specific margins. Earnings grew in all segments, except Surface Technologies. The strongest contributors were the core businesses, particularly the Materials, Chemicals and Industrial Solutions segments. Other also contributed to the considerable earnings increase, mainly due to commodity derivatives used for hedging. In the Materials segment, higher contribution margins and lower fixed costs led to a considerable increase in EBITDA before special items. The strongest contributions came from the polyurethane and ammonia value chains.

The Chemicals segment recorded a considerable increase in earnings, mainly driven by the Petrochemicals division due to higher contribution margins. Scheduled maintenance turnarounds in Ludwigshafen, and of the steam cracker at our Port Arthur site were a drag on earnings growth. The Industrial Solutions segment also delivered strong results.

The significant earnings improvement was driven by lower fixed costs in the Performance Chemicals division and higher contribution margins in the Dispersions & Resins division. In Nutrition & Care segment, earnings came in slightly above the level of the prior year quarter, mainly due to lower fixed costs in the Care Chemicals division. By contrast, EBITDA before special items in the Surface Technologies segment fell considerably. Compared with the prior year quarter, earnings in the ECMS division declined mainly because of lower earnings in Precious Metal Services. This was partly offset by higher earnings in the Emissions Catalysts business. In the Battery Materials division, Earnings declined due to the expiry of subsidies, which led to higher fixed costs compared with the prior year quarter.

Let's now turn to Agricultural Solutions in more detail. The next key milestone for our largest and most profitable stand-alone business is achieving IPO readiness by mid-2027, and we are well on track here. Agricultural Solutions delivered a very robust performance in the first half of this year. While sales declined slightly on account of currency headwinds and slightly lower prices, we captured volume growth in all regions. Volumes rose particularly in fungicides, herbicides and seed treatment. Thanks to the earnings increase in the second quarter, EBITDA before special items almost matched the strong level recorded in the first half of 2025. In the current market environment, this is a strong achievement by the team. At 29%, the EBITDA margin before special items almost matched the level of the first half of the prior year.

Ladies and gentlemen, as I mentioned at the start, we are continuing our efforts to further enhance BASF's competitiveness. We have once again accelerated the pace to make our global organization more streamlined and efficient. As you can see on this slide, in the first half of 2026, we already reduced more positions than in the prior 2 years combined. I'd like to emphasize 2 figures that further illustrate the momentum behind our efforts. From January 2024 until the end of June 2026, we reduced the number of employees worldwide by 7,000.

This figure excludes both the reductions resulting from divestitures and the workforce buildup associated with our Zhanjiang Verbund site. And in May 2026, the number of FTEs at BASF SE in Ludwigshafen was brought below 30,000 for the first time since 1954. This is an important and necessary step towards restoring the site's competitiveness. Now let me continue with further updates on the structural improvements at our Ludwigshafen Verbund site. We are well advanced with the necessary asset restructuring. Since 2024, the share of highly competitive production units at this site has increased from 78% to 88%. Ludwigshafen is by far our largest site with a very broad and diversified portfolio of upstream and downstream chemicals and a very high degree of integration.

Over the past few years, the site has increasingly focused on supplying the European market. This is in line with our global strategy of local-for-local production. More recently, plant utilization rates improved amid the supply disruptions caused by the Middle East conflict. We will continue to review and adjust our asset portfolio as needed so that we can be a reliable and best-in-class supplier for our customers from various industries. We are also fully on track with our cost saving programs and very confident of achieving our target of annual cost savings of around EUR 2.3 billion by the end of the year. At the end of June, the measures already implemented were equivalent to annual cost savings of EUR 2 billion. We continue to expect total onetime costs of at least EUR 1.9 billion by year-end 2026. We have also made progress with our portfolio measures. As you know, we successfully closed the Coatings transaction with Carlyle on June 30. The enterprise value of the transaction amounted to EUR 7.7 billion and the cash consideration received was around EUR 5.8 billion on a pretax basis. The disposal gain after taxes of EUR 3.5 billion is reflected in net income and earnings per share of BASF Group in the second quarter.

We now hold a 40% equity share in the company, Surventis. Through this equity stake, we will continue to participate in the future value creation of the Coatings business while sharpening BASF's strategic focus.

This successful closing marks a key milestone in the swift execution of our winning race strategy to unlock the value of BASF's stand-alone businesses. We have also accelerated the sell-down of our participation in Harbour Energy. Since March 2026, this has generated cash proceeds of more than EUR 800 million for BASF. We have monetized a significant portion of our participation in Harbour Energy and reduced our stake in the company to below 25%. This was achieved through the sale of 80 million shares via a so-called accelerated book building in March 2026, the agreed block sale of 150 million shares in May and a number of smaller share sales into the market. Our remaining share in the company is currently worth roughly EUR 1 billion. As communicated on various occasions, it is our strategy to exit the financial investment in Harbour Energy over time while being mindful of the value. Ladies and gentlemen, with the stand-alone businesses on their own successful paths, our core has become more focused and coherent. This creates new opportunities for our core businesses to unlock synergies and to work more effectively together across BASF.

As announced in May, we aim to operate the core businesses at up to 20% lower net cash fixed cost by 2029 compared with the 2024 baseline. In the first half of 2026, our ongoing measures to improve competitiveness already led to a 4% reduction in net cash fixed costs in the core compared with the prior year period. And there was strong positive momentum in the second quarter. This figure relates to BASF's core businesses and other and is adjusted for currency, portfolio and onetime effects, making it comparable. Since the baseline for CoreShift is 2024, part of the cost savings measures already initiated contribute to the program. However, CoreShift will go significantly further.

We will create a new tailor-made operating model for our core and leverage synergies across the core businesses, R&D, service units and corporate units. We focus our activities on what truly matters. We harmonize our processes across the core and expand the use of AI. And we standardize our systems and tools to create even more synergies, reducing variety, enforcing common solutions and focusing on what works best overall.

At the same time, we increase flexibility, for example, in task location and organizational design to realize cost savings and benefit from synergies through bundling. In a nutshell, we change what holds us back and boost what makes us strong. This will position us to win in our markets and create the financial flexibility we need to keep strengthening and growing our core businesses. I'm convinced that our core has the scale and strength to lead the focus to compete, the power to perform and, of course, the best team. And with that, I'll hand over to Dirk Elvermann.

Thank you, Markus, and good morning, ladies and gentlemen. Let's now take a look at the key financial figures of BASF Group in the first half of 2026 compared with the prior year period. At EUR 4.8 billion, EBITDA before special items improved significantly by EUR 750 million compared with the prior year period, especially the Materials, Industrial Solutions, Chemicals and Surface Technologies segments contributed to this increase. Cash fixed costs of BASF Group declined by around 4% to EUR 7.9 billion. This was a result of the ongoing restructuring efforts, particularly in our core businesses and favorable currency effects. Net income improved by EUR 4.2 billion and came in at EUR 5.1 billion. This includes the disposal gain of EUR 3.5 billion after tax from the Coatings transaction with Carlyle. Free cash flow decreased and came in at minus EUR 1.6 billion. Lower payments made for property, plant and equipment and intangible assets partly offset the decline in cash flows from operating activities.

Let's turn now to the cash flow development in the second quarter of 2026. Cash flows from operating activities declined to EUR 524 million, mainly due to higher cash tied up in the net working capital. This resulted primarily from 2 effects. First, higher sales led to higher trade accounts receivable. And second, capital tied up in inventories increased as a result of higher raw material prices. In addition, cash flows from operating activities were burdened by spending of around EUR 200 million related to the transformation of BASF Group. In particular, this was for cash effective restructuring measures and the introduction of the new ERP systems needed in Agricultural Solutions and the core businesses. Payments made for property, plant and equipment and intangible assets decreased to EUR 713 million. Free cash flow thus came in at minus EUR 189 million compared with plus EUR 533 million in the second quarter of 2025. We still expect to achieve our full year free cash flow forecast. In the second half of the year, our operating divisions are expected to collect even higher receivables than last year. The level of inventory reduction will largely depend on price levels. Payments made for property, plant and equipment and intangible assets are likely to come in below the EUR 3.4 billion forecasted for the full year.

Now we come to our capital allocation framework. On the left side, you can see the cash contributions, which Markus Kamieth has already largely covered. I will now focus on the use of cash on the right-hand side. We are committed to attractive shareholder distributions and paid a dividend of EUR 2.25 per share for the business year 2025 at the beginning of May. We're also making swift progress with the second pillar of shareholder distributions, share buybacks. I will provide more information on the next slide. As previously communicated, we used a significant share of the cash proceeds from portfolio measures to strengthen our balance sheet through deleveraging. We will continue to do so in order to support our single A credit rating. Compared with the prior year planning period, we will reduce capital expenditures by 20% in the 4-year planning period until 2028.

We expect CapEx to consistently stay below depreciation until 2028. At the same time, we will also consider value-accretive M&A as a potential lever to strengthen and grow BASF's core businesses. In the current market environment, the relative attractiveness of acquisitions versus organic growth has increased. Ladies and gentlemen, we have just announced a EUR 1 billion share buyback program that will be executed between August 2026 and April 2027. This is part of the total buyback volume of at least EUR 4 billion by the end of 2028 that was announced in September 2024.

This is the second part. Between November 2025 and June 2026, we already bought back around 3.5% of the outstanding shares for around EUR 1.5 billion. Given our strong cash position, we are now continuing this successful program with the next tranche. Furthermore, we are accelerating our deleveraging. This is supported by the maturity profile of outstanding both bonds and loans as well as the opportunity to repay liabilities earlier than planned at attractive conditions. In the first half of 2026, we repaid a bond with a nominal value of EUR 1 billion as well as a loan of EUR 250 million.

In the second half of 2026, we will repay maturing bonds and loans with a total value of EUR 900 million. In addition, we will redeem bonds and loans with a combined nominal value of around EUR 1.6 billion in 2026 ahead of their maturities, which extend through 2029. This includes bonds with a nominal value of EUR 1.25 billion that will already be redeemed in August. Let's now briefly touch on our balance sheet at the end of the second quarter compared with the end of June 2025.

At around EUR 84 billion, total assets increased by 8%, mainly on account of higher current assets.

The main reason is the considerable increase in cash due to the closing of the coating transaction and the related purchase price payment by Carlyle. BASF's equity ratio improved by 1.5 percentage points to 44.6% and remained very solid despite our ongoing share buyback program. Net debt declined by EUR 4.2 billion to EUR 17 billion. We continue to have a single A credit rating, which ensures unrestricted access to financial markets and favorable financial conditions. And with that, back to you, Markus.

Thank you, Dirk. In light of the better-than-expected business development, as you saw, we increased our earnings forecast for the full year 2026.

We now anticipate EBITDA before special items of between EUR 6.9 billion and EUR 7.7 billion in 2026. We kept the range between the lower and upper end of our forecast unchanged at EUR 800 million due to continuing geopolitical uncertainties. For free cash flow, we continue to expect between EUR 1.5 billion and EUR 2.3 billion in 2026. We anticipate higher earnings and lower capital expenditures to offset the higher working capital buildup. The forecast for CO2 emissions also remains unchanged. BASF's outlook is based on the adjusted assumptions regarding the global economic environment shown on the chart. And now Dirk and I will be glad to answer your questions. Thank you for your attention.

Thank you, Markus. Thank you, Dirk.

[operator instructions]

Now questions. German and then switch over to the English channel.

So I think Ms. Bieker of Manager Magazin is going to start.

Good morning to all of you. Thank you for the opportunity to ask questions. Now regarding acquisitions, Dirk Elvermann said potential acquisitions are more attractive right now. What is the direction BASF has in mind here?

Well, if that's your only question, let me start.

Yes, I wanted to give everybody else the opportunity to ask questions.

Acquisitions. We announced that, well, in the current environment in the chemical industry, we see more and more of a momentum regarding transactions, mergers, acquisitions, divestitures. So a lot of things going on in the market. On the other hand, since 2024, when we started the strategy, we said that, of course, we are basically or mainly interested in strengthening our core businesses. Restructuring and consolidation in the chemical industry is an opportunity for us.

Given the current environment where markets are getting tighter and the outlook regarding margins, especially in commodities becomes more difficult, I would put it this way, the relative attractiveness of acquisitions compared to investments, especially major investments is shifting at the moment. And this is why we are looking around in the current environment to find out what are the opportunities of strengthening our core businesses.

I don't want to be more specific, but you can derive from our strategy, it doesn't make any sense to acquire a stand-alone business. Of course, we would try to strengthen our core portfolio chemicals and to make sure that to become the preferred chemical company for the green transformation of customers to abide by this.

Now let me ask further in Europe or anywhere else?

Well, we are operating globally with our portfolio. We want to operate long value chains and if possible, have assets in the regions where we are active. And globally active companies, of course, would be a good match, but I don't want to continue with speculation. It's not our main task to look for acquisitions. But we are observing the market. And we think the current momentum is quite exciting. So we are looking at a few things here, but that's as specific as it gets.

Okay. Thank you, Markus. Thank you, Ms. Bieker. Ms. Martin Bloomberg is next.

Two brief questions. Zhanjiang first, you said it's starting now. Can you be more concrete? What about the current capacity utilization? And what do you expect for Q3 and Q4? And you said in the analyst call that you expect disruptions in Europe, even though you are well prepared. Maybe you can talk about your expectations regarding European supply chains, maybe more details on effects that you expect for BASF even though you have more ships that are operating and so on.

Okay. Zhanjiang, thank you for your questions, Ms. Martin. Capacity utilization in Zhanjiang is as expected and as we announced last year, very high. And this is a development we've seen very quickly. So the hypothesis, we are building something that is competitive and that makes it possible in the commodity markets to have high capacity utilization at a high speed. Well, this turned out to be true. We have a very good capacity utilization. I don't have the exact figures, but many of the core product lines in petrochemicals is close to 90% or higher regarding capacity utilization.

Some assets are operating at a lower capacity utilization at the moment, either because we are still in the middle of customer qualification processes. We are also producing for our Care Chemicals division, where the products go into consumer products like detergents or skin care products, and you have to go through customer qualification processes, which sometimes take a few months. So capacity utilization is increasing a little more slowly.

It's different from commodities where you switch on and are present in the market.

And some assets for technical reasons are not operated at full capacity utilization. But technically speaking, we can operate the site at a very high capacity utilization, and this will stay the same. And this will remain the same for the years to come. There won't be any significant changes in the future and ramping up of the Care Chemicals portfolio, I already mentioned it.

Okay. The Rhine River, of course, the low water levels are concerning us and site management teams and supply chain are looking into this. This means that we are taking a lot of measures to make sure that we do not see any negative economic effects. And as Markus said, we are much better prepared than in 2018.

And for the incoming products and for the outgoing products, we are preparing alternatives at the moment, not only the so-called low water barges. These are barges that can operate at low water levels, but we are also looking at alternative ways of transportation, trucks, trains and so on. And we think that we can managed quite well. I don't see any looming economic damage. Of course, logistics costs will increase in such a situation. But I think everything is under control, and we have to wait and see when we will have higher water levels.

In my comments in the analyst call, I don't know if you listened, I didn't want to say that this is no problem. It's a challenging situation, but I was on the Board of Executive Directors in 2018 and the difficulties are very grave and that led to economic downturns in our company in the comparison with 2018, I didn't want to compare. I just wanted to say how very much better we are prepared and how further developed we are and how our teams deal with it. So my comfort level, how the organization is very hands-on in tackling the situation and finding alternatives. It shows that when the pressure is high at BASF, there are people that do really smart things and make things possible. That's our observation now.

Okay. Then let's go on. Mr. Mr. Freytag, I think, is next of FAZ.

I have a few questions on the job reductions. It was said 7,000 and many -- how many of them are for Ludwigshafen and the job cuts, will it continue at this speed? And I also would be interested how the situation is in Ludwigshafen. Is Ludwigshafen profitable or is it not yet? And how many plants have been closed? And the third question, Mr. Kamieth , I would like you to tell me that the job reduction program costs EUR 1.9 billion, and we talk to somebody who is aged at the end of his 50s, and he can retire and until the end until his retirement, he gets 70% of his salary paid by BASF. And I would like to ask you, how does that contribute to the sentiment in the chemical industry and the industry going to Berlin and asking for help and an easier transformation path regarding less CO2 emissions. But at the same time, you can have enough money to pay a lot for people who go into retirement.

Well, let me start with the first part. The 7,000 jobs you're talking about. They were shown in an adjusted fashion because with the number of people that work at BASF, we have different effects of portfolio building; Zhanjiang and others. So since the beginning of 2024, it's these 7,000 positions that we have already eliminated. And of those, if I remember correctly, 2/3 have occurred in Germany. And the exact figure for Ludwigshafen, I don't have.

But there's always well, a ballpark because for us in Germany, Germany is always the biggest country, and it's not only Ludwigshafen, but 2/3 [indiscernible] in Germany. So the momentum that we see now, and we showed it on the chart is that there is a growing momentum '24, '25, '26, and that will still continue because the programs and the employee programs have fully started, restructuring programs are ongoing. Jobs are actually reduced. So we have a run rate for the first semester 2026 of approximately 300 to 350 positions per month that are being reduced, and that will go on like that for a while.

There's no target figure. So frequently, we have been discussing what is the target figure. We don't have it because we say, okay, we have measures. We do it by what we want to change positively and what will contribute to the value of BASF. And job reduction is the consequence of what we want to achieve. It's not a target as such, but we will see the same momentum for a while. The employee programs like severance programs, for example, they -- well, we are not the only ones that do that. But of course, we look at our peers. We try to compare.

We do not publish anything here, but we do look around and benchmark. And there are legal rules in Germany that we have, there is a legal environment. So in Germany, too, it is quite expensive for companies to do restructuring. That's also under discussion. We can't get out of this situation. And we have a site agreement, which is negotiated and which we have and we built upon. And so redundancies for operational reasons are excluded here. So you have to talk to your employees when you are affected. So we have to pay the severance payments, for example. And Dirk, what would you like to add?

Well, the severance payments are high. It's a fact that the industry in part or the part of the restructuring is carried by and paid by the companies and part of that is high severance payments. it's the severance payments and the one-off costs that are lower than the savings that you can achieve on an annual basis. So that's the calculation behind it.

So it is really worthwhile for a company when you can reduce the position and when you don't have this position any longer. But let me make this point once more. For Germany, it is a challenge when it comes to the competitiveness with other countries because in Germany and in other European countries, it is extremely expensive. And that may be a different field. But if you look at a growth field. The risk for companies to invest in Germany and to make a mistake, the risk is very high. And this is also due to our risk rigid legislation that we have. In part, of course, it is justified and it was good for Germany, but it should be rethought by politics. We need a good approach here. That would be a good idea.

Thank you. Okay. So then let's continue. Hartmut Reitz from SWR. He is next. Mr. Reitz.

Well, hello, yes.

Maybe that one question of Mr. Freytag is also interesting for me. It wasn't answered about profitability of the Ludwigshafen site. Maybe you can say something about that. And I was also very pleased that we have a ballpark figure when it comes to the employee figures. But I get the impression that FTEs cannot be compared with the figures that were published once a year so far compared to the employee figures because that also includes some halftime or share labor figures. Maybe you can also talk about the sales divestiture figures? What was your desired target? And maybe couldn't you have clarified that before that with the selling that wouldn't have been so attractive at this point in time.

Sorry, Mr. Freytag. -- obviously, I didn't answer your question on profitability that was not done on purpose. Okay. Let's talk about that. The profitability of Ludwigshafen is not high enough yet to carry the profitability of BASF SE in the group. But the productivity is making great headway. So with our restructuring measures, but also efficiency measures, we make good progress. And therefore, Ludwigshafen is closer to the point of making a positive contribution. So we are on the right path. But today, as of today, we cannot yet say that Ludwigshafen is profitable again. I would like to talk about the second aspect of Mr. Reitz.

Okay. Let me start maybe with the basic idea of selling the flats of BASF was that where real estate management is not part of the total figure, so it makes sense to look at it. So we have an auction process as we usually do. and it's a normal divestiture process, which has one specialty. Of course, we have social interest here. And this is why we added a social carta, -- and we said we will only sell to somebody who offers the price that we envisage and also takes over the social responsibility. And in the course of this process, which actually went well, we realized that in the environment in which we are moving, so the capital market environment, interest rate development and so forth, our price expectation is not met.

And so we said, okay, it's not the right point in time to do this now. And we suspended the process, which doesn't mean that we will go away from the idea of selling it, but it doesn't mean either that we will restart next week. So this is a full stop for the time being, and we will observe the market development. The tenants in our flats will know or know that their rights are safe. And Mr. Reitz, back to the point that I hear frequently, couldn't it have been avoided communicating first and then it doesn't work out and you don't sell and there's a lot of uncertainty. That's true. But the alternative would have been -- we would have done it behind the curtain secretly and somebody finds out, and that would have been a loss of trust.

Because then people say, well, BASF never tells us about their plans. And that holds true for many parts of the transformation happening at BASF just now. You do observe it very closely. We have a lot in terms of transformation. We, as Board of Executive Directors decided that the way to be honest with the people to tell them which ideas we have, even if we don't know yet 100% whether this will work out and how will we do it exactly and which individual people will be affected maybe in 2 or 3 years. But we try to be open and transparent in our communication in terms of what we plan and maybe also then risk the situation that we have now. We announced it. Many people were thrown into uncertainty, and we took it very seriously, and we now have to realize that this to be added value won't work out. And so we had to stop it. The alternative to do it behind the curtain is always worse because in times of strong transformation, trust is an important point, too.

And my experience is with unpopular decisions, which are communicated openly and honestly, well, that's something people can handle better than them feeling that we didn't tell them everything. It's a point of view. But as long as we will be part of the Board of Executive Directors, this will be our guideline and our direction open and transparent.

Okay. Why did we decide to show the FTEs rather than the headcount, but this was a conscious decision, right? Yes, a conscious decision because we also looked at the historic comparability. Normally, I know outward, we communicate the headcount. But internally, when we look at the correlation with HR expenses, we always mention the FTEs, full-time equivalents. This is how we control the employees, and this is what we do internally. And we said we want to show comparable figures. When were we at the state we are in at the moment, we had to translate it into FTEs. I mean it's not 100% precise, but we said FTEs below 30,000. The number of headcount would be slightly above 30,000, but it's not a major difference. It's not 10 or more percent, no.

But sorry for the confusion, slight confusion, but we wanted to show you clean figures in order not to compare apples and oranges. And looking at a period of 70 years, we have to be careful.

Okay. Let's continue. Ms. Weiss of Thomson Reuters, please.

Let me ask again regarding the earnings situation in Ludwigshafen. Did I understand you correctly? -- losses can be driven down this year, but you will not be back in the profit area. When will this happen? In the analyst call, you said 12% of assets in Ludwigshafen are not competitive at the moment, and you're looking into closing assets. Can you tell us what assets you're looking at and how many jobs are affected? And my last question, can you tell us on the basis of core shift, a shared service center will be relocated to India, how many jobs will be affected in Germany?

Okay. Last question, we cannot tell you because at the moment, we are developing the measures regarding core shift. So the development of a new operating model for our core businesses, this number doesn't exist because that's not the basis for our planning. But we are developing the measures. We are coming up with implementation plans and then organizational changes, adjustment figures will be the result. The analysis, the preparation of the implementation is ongoing at the moment, and we will definitely not publish figures externally prior to communicating everything to our employees, and we will do our best to do so in the months to come. So we cannot just come up with figures now.

The second question, let me try again, profitability in Ludwigshafen. It's rather complicated, and we don't want to evade the question by all means. But of course, it's interesting to understand how profitable is the Ludwigshafen site. Let me make some basic announcements. We are not controlling the profitability of individual sites, but the profitability of businesses. But of course, we need a Ludwigshafen site, which, as such, is a profitability-generating site because it's our biggest site. If the Ludwigshafen site is not financially healthy, things will become difficult. So we have to look at what is the Ludwigshafen site. Basically, it's a production site, which at a good capacity utilization is supposed to generate profitable business. And then -- the next thing is to regard Ludwigshafen as the corporate center as the core of research and so on. So the question, is Ludwigshafen profitable? It is not an easy question to answer. But what remains is what Dirk Elvermann just mentioned. Ludwigshafen, looking at all the different levels we are looking at, had an enormous profitability problem in recent years.

This is due to the productivity that went down and the lack of capacity utilization. We worked on both levers. We tried to explain this today. We are reducing costs in Ludwigshafen to a bigger extent than I can remember we've ever done since I've been with BASF, which is quite some time. And we are also improving the competitiveness of our assets. Plus in Europe, we have a more positive business environment than expected, which means that the profitability contributions from Ludwigshafen are showing a positive development at the moment.

How sustainable this is going to be? Well, we have to wait and see regarding the market environment. But we are developing the Ludwigshafen site in the right direction. And all the people in Ludwigshafen, I mean, of course, all the changes in Ludwigshafen are painful, but all of them make a contribution to make Ludwigshafen stronger and to streamline it. So we are optimistic. We are confident that we are on the right track, but there is no theoretical line that we have to pass here.

Next, you mentioned something else. The assets, the assets, right? Please bear with me that -- well, of course, we are quite courageous when it comes to the guidance where we are competitive and where we are not competitive with production lines. But we cannot give you individual plants for competitive reasons. I mean, we don't want to tell our competitors which plants we think are probably not competitive. And on the other hand, these are topics we are not discussing with our workforce to the full extent because sometimes it's calculations. Competitive does not mean profitable or not profitable.

It's an assessment of the cost situation of a specific plant compared to the competitors. So one is a strategic assessment and the next is discussing the real world, and we cannot provide this transparency.

Right. We can continue. Ms. Eschbacher Manheimer will be the next.

Question on the company flats. You did not stop the plan of selling them. You just postponed it. You're waiting for a better market environment and would try again, if I understood you correctly. It sounds as if the social carter was the crux of the matter that this was the reason why you did not get the price you had in mind. And another question. Can you tell us what the Strait of Hormuz effect is when it comes to the capacity utilization in Ludwigshafen and China and how sustainable this effect is?

Okay. The company flats. I think you misinterpreted in a way. We did not communicate that it was the social cater or the expectations of the buyers was the main thing here. We had several interested parties for the package. And of course, we assessed what kind of value this package of flats has for BASF. I mean, to be quite blunt, we don't do it because we need money because we think that somebody else would rate these flats much higher because it is core business for them and not for us. So you have to try to find somebody who gives it a higher rating than you yourselves in the environment, the market environment, there is a market for BASF for real estate. And of course, we tried to get some quotes and they didn't satisfy us. And we said it's better to keep the objects because then the value is higher.

This is not the process that is just starting and going on. No, no. It's a rather complicated process, and you will not try again 2 weeks from now. It's not a value-increasing solution for us. This is a decision as such, and we take it seriously. But the fact as such, owning real estate is not the core of BASF. This remains unchanged. And if in future, I cannot give you a date. But if in future, we again say maybe now we see a market environment that makes it possible for BASF to increase value by selling, we will tackle it again. But for now, it's done. So this was the first attempt. It didn't work. And from our point of view, we tried what we needed to do. And I think now everything is fine, and we will stick to this. Strait of Hormuz?

Well, the Strait of Hormuz, I can tell you that BASF so far has gone very well through this bottleneck.

We actively communicated. We started very early in time to well, network our logistics network with everybody. And until this very day, we haven't had any nonavailable product. So everybody has access to all the products that we need to this very day. And that it also had a positive effect, didn't it? Well, this is now coming, yes. And we were in the good situation to get more pricing power, particularly in Europe. Why did this happen? Well, it is not as if the entire goods import from Asia and China broke down, but it's a fact that the transport cost reduced or increased by 30% compared to the situation before the crisis, and that can be felt by the importers, particularly from Asia. And that lifted the price levels.

On top of that came the feeling of our customers, maybe it is not such a bad idea to have a customer next door and to buy maybe from a European supplier, chemical supplier. So pricing power, but also the reliability that we offer that helped us. So the crisis is not over. And -- for the third quarter, we still see an expansion of this pattern. Maybe it normalized a little bit. It is not just as an excited discussion as it was in April or May, but we still see that compared to the competitors, we went through quite smoothly.

Yes, I agree. Particularly in the chemical industry in North America, but also in Europe, we had a good economic development in the second quarter, a little better due to this disruption. Well, probably we'll have a number of companies that show a good second quarter. But within this field of companies, it shows our advantages, the size, economies of scale and to have different supply chains that we can rely on. So in this unforeseeable scenario, we well made up some headway compared to the competitors, and that makes us very confident that we, in difficult situations can fare well.

I see Ms. Ms. Bieker with another question. It is the last from the German language channel, and then we have 2 English-speaking ones. Okay. But Ms. Bieker first.

Well, yes, I didn't calculate it. But if I may, yes, let me learn more on building a new operating model that you showed on the core shift chart. Obviously, there's more behind it than getting more efficient and lowering costs. So you are telling us about harmonization, AI and everything. So BASF and the way it works, you want to put this on a different platform. Can you maybe elaborate on that?

Yes. I mean, let me make it as a big headline, so to speak. Our core business as such is a very large part of BASF. It's EUR 40 billion, and it is -- we are talking the diversity of petrochemicals to cosmetic products for the end consumer. So this is the range. It's a very complex portfolio. And the big journey that we have started with CoreShift is as follows. Over the last years, we have put ourselves in a very good starting position because the very complex and very heterogeneous stand-alone businesses were now hived off from the core. So they have stand-alone businesses.

And in the sense of coatings, it was -- or the majority of it was already divested. So the core business now has a more compact and even structure. despite all the complexity, we're still talking about the chemical business of BASF. And if you look at what opportunities we now have to go beyond this core business and to still go on harmonizing and standardizing. -- you see that it is now much easier because in the past, we had to harmonize the entire portfolio, including AP, coating, ECMS that always had very special requirements.

And for all functional areas, there are options to reduce variations to reduce diversity that was not wanted. It just grew. It became more diverse. And now against the background of CoreShift, we sat down with many employees from the different departments. And we said, okay, if we could, how would we organize the processes end-to-end, starting with HR or IT and also how we operate at the different sites. And there are great ideas coming up. Because they tell us, well, dear Board, if you let us and if maybe we can just leave out some of the holy grails that existed in the past, we could organize ourselves differently.

And my confidence actually grew by saying, okay, this target to have 20% less cost and operate this new structure, that seems achievable. So that will help us a lot. It will change maybe a number of things that we do at BASF, but we're very confident that until 2029, we can reach this target. So it is the right way how to operate this core. We still make chemicals. We will have large Verbund sites. We will have value-adding chains, but many, many things in 2 or 3 years' time will be done differently and more efficiently. So this is the big journey -- overall journey with CoreShift. And you hear it in my language. Well, I'm very optimistic. I have respect when it comes to this task, but I feel courageous and I feel confident that we can really be successful and make BASF a good new unit. Okay.

Please go ahead.

Great.

I've got a couple of questions. You've probably given your strongest commentary on M&A for a while. I want to ask what makes you think BASF is well suited to this situation of restructuring of picking up assets through this restructuring and consolidation of commodity assets? I mean you're more socially responsible than an Aurelius or an Akelius, or someone like that. So I'm just wondering, yes, why you think that -- why you think you're sort of best placed for the sort of heavy lifting with job cuts to make those challenged assets work?

The second is INEOS made an interesting comment, a short comment, but an interesting one yesterday. They exited the JV with Sinopec in Tianjin. Yes, they wanted to preserve cash, but they also said that they would like to take a more cautious approach strategically to China. So my question is, are you taking a more strategically cautious approach to China in the timing of your extension phase of Zhanjiang?

Yes. Thanks, Andrew. First of all, to your first question, I'm struggling a little bit with the references you're taking. If you understood our comments that we are looking for distressed assets and assets that are, let's say, of marginal value, and we try to do a heavy-hand restructuring as the only value creation lever, you've misunderstood our M&A comments and sorry for that. I think what we are -- what we have always said since 2024 in our winning Way strategy that our idea is to strengthen and grow the core.

And I think this idea that we need a portfolio that's strong, market-leading, innovative and allows us to play BASF strength to help at the end of the day, all our customer industries to go through their transformation. That's the leading thought in our view around portfolio development. All we are saying is that right now, in this time of market dynamics, in relative terms, M&A has become maybe more relative attractive to large-scale investments. And that's why I think both alleyways remain open for us. I think we would not see a strong value in buying assets that other companies would like dispose of because they are unhappy with the profitability or the cash generation. That probably is not our filter. -- but to look for synergistic and value-accretive acquisitions is, I think, the role of every Board. And as I said many times, I think the current dynamic in the chemical industry, including also pressure on consolidation and portfolio changes is an opportunity for BASF. But we are not driven and we are not forced to do anything. We just are an interested, let's say, participant in observing the market right now.

So no -- the examples you mentioned, this is not the playing field that we are looking at. China, very simple. I mean, we have also in our strategy announced that China continues to be a target market for us. Our ambition is to grow with the chemical market in China. In the past, we've grown significantly higher than the chemical market in China. So we have gained market share.

And given the competitive dynamics and the maturity also of both the chemical industry and also our customer industries in China, I think for us, it would be overambitious to say we want to outgrow the chemical market now forever. I think growing with the chemical market in China is what we're aiming at. We made a significant step with the Zhanjiang investment, but we will continue to invest in China in attractive businesses to grow with our customer industries there. So we stay committed to the Chinese market. We have a lot of strength there. We have -- we are approaching north teens or 18% to 20% of our share of business in China. we feel good about this, and we feel good about further ideas, but don't expect now a second Zhanjiang or a third Zhanjiang to happen in the next years. That's probably not going to happen. But we continue to invest in China. We like China. We like the market opportunities, and we like the innovation speed in China as well.

All right. So I think we'll come to the final question from Will [indiscernible]

I've got 2 questions related to the Middle East and one about the Rhine. First of all, on the Middle East, the closure of the Strait of Hormuz has obviously cut off global supplies of crude oil and refined products and petrochemical feedstocks like naphtha, which has affected Asia really badly so far, but not so much Europe. But this time around, the straight closed again and global inventories running really low. I'm just wondering how concerned you are that there could be potential shortages of petrochemical feedstocks, not just in Asia, but potentially in Europe? That's the first question. Secondly, on the Middle East, you got -- clearly got a really big boost from the market conditions that we saw in kind of March, April time after the war began. There was a bit of panic in the market. sentiment was really everyone is very concerned. I just wonder how are your customers behaving this time in Rhine, now that the state is closed again completely? How are their inventories looking? How is demand looking? How is customer sentiment at the moment? You -- one of you talked about in Q3, an expansion of the pattern of earlier in the year. Just wondering what you meant by that. And then just finally, on the Rhine, if you can say anything more about the impact of the Rhine. Is this the worst it's ever been, the lowest it's ever been? And you talked about no economic impact, but has there been any production impact on you? And do you -- how worried are you that you might have to issue a force majeure or that your suppliers might have to -- or there could be really serious logistical problems in Europe for chemical producers?

Two very complicated questions. But let me come back to the Rhine situation. Will it be -- I mean, first of all, I think what I have seen so far, when you look at the Rhine level, it is actually as low as it has been right now because of the extended drought here in Germany. But it's, of course, not the level that is so decisive. It's also the length of how long will it stay so low, right? Because then you, of course, have secondary tertiary effects if the time period is so long. We don't know this year. So far, we can say we are in a much better situation than we have been in the past in similar situation, not the first time we have low Rhine water levels. We discussed this earlier. And I also think it would not be wise to now exclude that there will be force majeure announcements or, let's say, product shortages in individual cases.

Because as you know, Ludwigshafen and also other chemical factories along the River Rhine, BASF is not the only one and on other rivers probably in Europe, and very complex Verbund structures and value chains and so forth. So sometimes it's only one raw material that's missing and then you have some ripple effect. So this all puts a lot of stress on the system. I have a lot of confidence that our teams are handling this fairly well. We already see some inflated logistics costs because we are bringing now things from the ship to rail or to trucks.

So we are seeing this already, but nothing that makes now the CEO, the CFO of BASF nervous when it comes to quarterly results or full year forecast. We're not in that category. That's why we said we didn't want to play it down. It's complicated, and it puts a lot of pressure on planning, on supply chain. And I don't want to rule out customer impacts and things where BASF will have to go out and say we have to curtail certain products. This could all happen in the next weeks. But from a financial impact, everything that we're seeing so far doesn't make us too nervous. And I think our teams have it very well under control and are mitigating these effects on a constant basis.

Middle East, what's different this time? I tried to explain this also in the analyst call this morning. When the war broke out in end of February and the Strait of Hormuz closed shortly thereafter, of course, everybody was facing a completely new situation. We had to deal with theoretical hypothetical scenarios. And of course, in this case, a lot of people then react towards, I want to be on the safe side. No matter what, I don't want to run out of product.

I will accept extraordinary conditions and pricing and so forth. So there was a lot of insecurity. The insecurity has not faded completely, but it has -- we have gotten used to this a little bit. And we have also seen that supply chains, global supply chains, energy refined products, but also finished products in the chemical industry have found ways to, let's say, deal with the different situation. And you can see it most prominently in China, the biggest chemical market, where already margins and supply-demand has already more or less in a lot of categories relaxed to where it was before the war.

So the system has, so to say, rearranged. And now these shocks like a couple of days ago, this increased oil shock again meets a much more prepared industry and a more resilient industry, so to say. That's why I expect these extreme reactions not to happen. But especially if we see elevated cost, limited supply over a longer period of time, it will lead to exactly what you said. The more upstream you go, the lower the inventories are. And that's why a few weeks ago, I also commented publicly in the media that if we continue to see a drain on crude oil inventories, eventually, we might see a bounce back of crude oil inventories -- crude oil prices again. And I think we're seeing the first shade of this. So I think it's a tense situation, but the chemical industry has dealt fairly well with it. We helped our customer industries to stay supplied. And I continue to see this also as a base case for the next at least 2 quarters.

I think no more questions for the time being. Everything was answered. That was it from our side. Thank you very much for taking part. Thank you for your interest in BASF. And of course, we appreciate this. If you need further information, our colleagues of our press department will be available.

And if you like, we also have pictures from the press conference that can be made available. The Q3 figures will be presented on 28th of October in form of a video conference, and we'd appreciate to see you again. So thank you, and have a great day. See you at the next event. Thank you.

Good morning, everyone. Welcome to BASF conference call for analysts and investors on the second quarter results. Today's presentation is being recorded. [Operator Instructions]

Today's presentation contains forward-looking statements. These statements are based on current estimates and projections of the Board of Executive Directors and currently available information. Forward-looking statements are not guarantees of the future developments and results outlined therein. These are dependent on a number of factors. They involve various risks and uncertainties, and they are based on assumptions that may not prove to be accurate. BASF does not assume any obligation to update the forward-looking statements contained in this presentation above and beyond the legal requirements.

With me on the call today are CEO, Markus Kamieth; and CFO, Dirk Elvermann. Please be aware that we have already posted the speech on our website at basf.com/Q22026. Now I would like to hand over to Markus.

Yes. Thanks, Stefie, and good morning, everyone. Happy that Dirk and I can welcome you today to our Q2 conference call. We pre-released second quarter results already as our EBITDA before special items considerably exceeded consensus expectations.

Stronger prices and higher volumes as well as lower cash fixed costs drove earnings growth in all but one segment. We strengthened our position in the market and advance our restructuring as well as portfolio measures. You may recall our priorities for 2026, which I presented during the full year conference call in February.

Today, I am pleased to share that we have achieved major progress in all 3 areas. We are successfully implementing our Winning Ways strategy. In the following, we will show you how we delivered on our priorities and created value in the first half of this year. As we already held a dedicated virtual deep dive on the Zhanjiang Verbund site in June, we will not address this achievement in detail today.

To begin with, let's take a closer look at the factors that drove BASF's sales development. In light of the geopolitical developments, we present monthly figures compared with the corresponding months of the prior year and excluding the impact of metals. At the beginning of the year, declining prices for key raw materials such as naphtha and natural gas resulted in lower sales prices. This trend reversed in the second quarter of 2026, following the escalation of the conflict in the Middle East and the blockade of the Strait of Hormuz. In response, we successfully implemented significant price increases, particularly in our upstream businesses.

From a volume perspective, we captured considerable growth throughout the first half of 2026. This was supported by the start-up of our new Verbund site in China and our ability to maintain uninterrupted supply by leveraging our local-for-local production footprint, flex-feeds steam crackers and dedicated trading operations to source key feedstocks. Our unique setup provided a clear competitive advantage.

Volume growth accelerated significantly in March. The high uncertainty led customers to secure supply through some advanced purchases. In the second quarter, volumes continued to grow considerably compared with the prior year months, particularly in the core businesses. Currency headwinds eased over the recent months. Portfolio effects were minor and were mainly caused by the sale of the decorative paints business as well as the food and health performance ingredients business in the second half of 2025.

A slightly positive portfolio effect resulted from the acquisition of AgBiTech, a company specializing in biological insect control solutions completed in March this year.

Let's now take a brief look at regional volume and price developments compared with the prior year quarter, excluding metals. Following the strong momentum in the first quarter, we continued to deliver considerable volume growth in Greater China, supported by the successful ramp-up of our new Verbund site in Zhanjiang.

As a result of the Middle East conflict, prices rose significantly in Greater China as well as in almost all other regions, particularly in the upstream businesses. In Asia Pacific, excluding Greater China, we also recorded considerable volume growth, mainly driven by the Chemicals segment. In this region, prices rose considerably too, especially in the Materials and Chemicals segments.

In Europe, all core businesses contributed to volume growth. Prices in Europe increased strongly, especially in the Chemicals and Materials segments. In North America, we recorded slightly lower volumes, mainly on account of a scheduled turnaround of the steam cracker in Port Arthur, while prices increased considerably. In South America, Africa, Middle East volumes increased significantly mainly because of the Agricultural Solutions, Chemicals and Industrial Solutions segment. Prices declined slightly, particularly on account of the Ag Solutions segment.

Moving on to the earnings bridge. EBITDA before special items rose significantly by 54% to EUR 2.4 billion. The increase was primarily driven by continued volume growth and higher specific margins. Earnings grew in all segments except Surface Technologies. The strongest contributors were the core businesses, particularly the Materials, Chemicals and Industrial Solutions segments. Other also contributed to the considerable earnings increase mainly due to commodity derivatives used for hedging.

In the Materials segment, higher contribution margins and lower fixed costs in both divisions led to a considerable increase in EBITDA before special items. The polyurethane and ammonia value chains contributed most strongly. The Chemicals segment recorded a considerable increase in earnings, mainly driven by Petrochemicals due to higher contribution margins. Scheduled maintenance turnarounds in Ludwigshafen and of the cracker at the Port Arthur site were a drag on earnings growth. Industrial Solutions also delivered strong results. The significant earnings improvement was driven by lower fixed cost in the Performance Chemicals division and higher contribution margins in the Dispersions & Resins division.

In the Nutrition & Care segment, earnings came in slightly above the level of the prior year quarter, mainly due to lower fixed cost in the Care Chemicals division. By contrast, EBITDA before special items in the Surface Technologies segment fell considerably compared with the prior year quarter. Earnings in the ECMS division declined mainly because of lower earnings in Precious Metal Services. This could partly be offset by higher earnings in the emission catalyst business. In the Battery Materials division, earnings declined due to the expiry of subsidies, which led to higher fixed cost compared with the prior year quarter.

Now let's turn to Agricultural Solutions in a bit more detail. The next key milestone for our largest and most profitable standalone business is reaching IPO readiness by mid-2027 and we are well on track to achieve this. Agricultural Solutions delivered a very robust performance in the first half of this year. While sales declined slightly on account of currency headwinds and slightly lower prices, we captured volume growth in all regions. Volumes rose particularly in fungicides, herbicides and seed treatment. Thanks to the earnings increase in the second quarter, EBITDA before special items almost matched the strong level of the prior year first half.

In the current market environment, this is a strong achievement by the team. Let me add that the second quarter growth in South America benefited to some extent from volumes brought forward ahead of the ERP system conversion in this region. At 29%, the EBITDA margin before special items remained almost at the level of the first half of last year.

This brings me to our efforts to further enhance BASF's competitiveness. We are successfully accelerating the streamlining of our global organization. This chart shows that in the first half of 2026, we already reduced more positions than in the prior 2 years combined. I would like to emphasize 2 figures that further illustrate the momentum behind our efforts. From January 2024 until the end of June 2026, we reduced the number of employees by around 7,000. Please note that this figure excludes both the reductions resulting from divestitures and the workforce buildup associated with our Zhanjiang Verbund site.

On the left-hand side, we highlight another milestone. In May 2026, the number of full-time equivalents at BASF SE in Ludwigshafen was brought below 30,000 for the first time since 1954. This is an important and necessary step toward restoring the site's competitiveness.

Let me continue with some further updates on the structural improvements at our Ludwigshafen site. We are well advanced with the necessary asset restructuring. Since 2024, the share of highly competitive production units at the site increased from 78% to 88%. With this broad and diversified portfolio of upstream and downstream chemicals, Ludwigshafen is by far the largest site in BASF Group and has a very high degree of integration.

Over the past few years, the site has increasingly focused on supplying the European market. This is in line with our local-for-local approach, which we apply globally. More recently, plant utilization rates improved amid the supply disruptions caused by the Middle East conflict. We will continue to review and adjust our asset portfolio as needed to be reliable and best-in-class supplier for our customers from various industries. In this context, I will provide a brief update on the progress of BASF's cost savings programs. We are confident of achieving our annual cost savings target of around EUR 2.3 billion by the end of this year. At the end of June, we already have achieved a total annual run rate of EUR 2 billion. We continue to expect total onetime cost of at least EUR 1.9 billion by year-end 2026.

We have also made progress on our portfolio measures. As you are aware, we successfully closed the Coatings transaction with Carlyle on June 30. The enterprise value of the transaction amounted to EUR 7.7 billion and the cash consideration received was around EUR 5.8 billion on a pretax basis.

The disposal gain after taxes of EUR 3.5 billion is reflected in net income and earnings per share of BASF Group in the second quarter. We now hold a 40% equity share in Surventis. Through this equity stake, we will continue to participate in the future value creation of the Coatings business while sharpening BASF's strategic focus. This successful closing marks a key milestone in the swift execution of our Winning Ways strategy to unlock the value of BASF's stand-alone businesses.

I would also like to mention that we have accelerated the sell-down of our participation in Harbour Energy and generated cash proceeds of more than EUR 800 million since March 2026. We have reduced our stake in Harbour Energy to under 25% of the voting shares. The reduction reflects the successful sale of 80 million shares via an accelerated book building in March 2026, the agreed block sale of 150 million shares in May 2026 and a number of smaller share sales into the market.

Our remaining share in the company is currently worth roughly EUR 1 billion. As communicated on various occasions, it is our strategy to exit the financial investment in Harbour Energy over time while being mindful of value.

With the stand-alone businesses on their own successful parts, our core has become more focused and coherent. This creates new opportunities to unlock synergies and to work more effectively across BASF's core businesses. As announced in May, we aim to operate the core businesses at up to 20% lower net cash fixed cost by 2029 compared with the 2024 baseline. In the first half of 2026, our ongoing measures to improve competitiveness already led to a 4% reduction in net cash fixed cost in the core compared with the prior year period and there was a strong positive momentum in the second quarter. And this figure relates to BASF's core businesses and other and is adjusted for currency, portfolio and onetime effects, making it comparable.

Since the baseline for CoreShift is 2024, part of the cost savings measures already initiated contribute to the program. However, CoreShift will go significantly further. We will create a new tailor-made operating model for our core and leverage synergies across the core businesses, R&D, service units and corporate units.

We focus on our activities on what truly matters. We harmonize our processes across the core and expand the use of AI. We standardize our systems and tools to create even more synergies, reducing variety, enforcing common solutions and focusing on what works best overall. We increased flexibility in task location and organizational design to realize cost advantages and benefit from synergies across -- through bundling.

In a nutshell, we change what holds us back and boost what makes us strong. This will position us to win in our markets and create the financial flexibility we need to keep strengthening and growing our core businesses. I am convinced that our core has the scale to lead the focus to compete and the power to perform and most importantly, the people to win.

And with that, I hand over to Dirk.

Thanks, Markus. Good morning, everyone. Let's now take a look at the key financial figures in the first half of 2026 compared with the prior year period.

At EUR 4.8 billion, EBITDA before special items improved significantly by EUR 715 million compared with the prior year period. Especially the Materials, Industrial Solutions, Chemicals and Surface Technologies segments contributed to this increase.

Cash fixed cost of BASF Group declined by around 4% to EUR 7.9 billion. This is the result of the ongoing restructuring efforts, particularly in our core businesses and the favorable FX development. Net income improved by EUR 4.2 billion and came in at EUR 5.1 billion. This includes the disposal gain of EUR 3.5 billion after tax from the Coatings transaction with Carlyle. Free cash flow decreased and came in at minus EUR 1.6 billion, lower payments made for property, plant and equipment and intangible assets partly offset the decline in cash flows from operating activities.

Turning to the cash flow development in the second quarter of 2026, let's have a look at more details. Cash flow from operating activities declined to EUR 524 million, mainly due to a higher cash tied up in the net working capital. This resulted primarily from 2 effects. On the one hand, higher sales led to higher trade accounts receivable. On the other hand, capital tied up in inventories increased as a result of higher raw material prices.

In addition, the cash flow from operating activities was burdened by spending of around EUR 200 million related to the transformation of BASF Group. In particular, this was for cash effective restructuring measures and the introduction of the new ERP system needed in Agricultural Solutions and the core businesses. Payments made for property, plant and equipment and intangible assets decreased to EUR 713 million.

Free cash flow, thus came in at minus EUR 189 million compared with plus EUR 533 million in Q2 2025. We still expect to achieve our full year free cash flow forecast. In the second half, our operating divisions are expected to collect even higher receivables than last year. The level of inventory reduction will largely depend on price levels. Payments made for property, plant and equipment and intangible assets are likely to come in below the EUR 3.4 billion forecasted for the full year.

Let us now turn to our capital allocation framework. On the left-hand side, you can see the cash contributions, which Markus has already largely covered. I will now focus on the use of cash on the right-hand side.

We are committed to attractive shareholder distributions and paid a dividend of EUR 2.25 per share for the business year 2025 at the beginning of May. We are also making swift progress with the second pillar of shareholder distributions, the share buybacks. I will provide more information on the next slide.

As previously communicated, we are using a significant share of the cash proceeds from portfolio measures to strengthen our balance sheet through deleveraging. We will continue to do so in order to support our single A credit rating. Compared with the prior planning period, we will reduce capital expenditures in the next 4 years by 20%. We expect CapEx to consistently stay below depreciation until 2028.

We will also consider value-accretive M&A as a potential lever to strengthen and grow BASF's core businesses. In the current market environment, the relative attractiveness of inorganic versus organic growth opportunities has increased. We have just announced a EUR 1 billion program to be executed between August 2026 and April 2027. This is part of the total buyback volume of at least EUR 4 billion by the end of 2028, announced in September 2024. Between November '25 and June '26, we have already bought back around 3.5% of the outstanding shares for around EUR 1.5 billion. Given our strong cash position, we are now continuing the successful program with the next tranche.

And furthermore, we focus on deleveraging, supported by the maturity profile of outstanding bonds and loans. In the first half of '26, we repaid the bond with a nominal value of EUR 1 billion and a loan of EUR 250 million. In the second half of 2026, we will repay maturing bonds and loans with a total value of EUR 900 million. And in addition, we will redeem bonds and loans with a combined nominal value of around EUR 1.6 billion in 2026, ahead of their maturities, which extend through 2029. This includes bonds with a nominal value of EUR 1.25 billion that will already be redeemed in August.

Let's now briefly touch on our balance sheet at the end of the second quarter compared with the end of June 2025. At around EUR 84 billion, total assets increased by 8%, mainly on account of higher current assets. The main reason is the considerable increase in cash due to the closing of the Coatings transaction and the related purchase price payment by Carlyle. BASF's equity ratio improved by 1.5 percentage points to 44.6% and remained very solid despite our ongoing share buyback program. Net debt declined by EUR 4.2 billion to EUR 17 billion. We continue to have a single A credit rating, which ensures unrestricted access to financial markets and favorable financing conditions.

With that, back to you, Markus.

Yes. Thanks, Dirk. In light of the better-than-expected business development, we have increased our earnings forecast for the full year 2026. We now anticipate EBITDA before special items of between EUR 6.9 billion and EUR 7.7 billion in 2026. The keep the range between the lower and the upper end of our forecast unchanged at EUR 800 million due to the continuing geopolitical uncertainties.

For free cash flow, we continue to expect between EUR 1.5 billion and EUR 2.3 billion in 2026. We anticipate higher earnings and lower capital expenditures to offset the higher working capital buildup. The forecast for CO2 emissions also remains unchanged. BASF's outlook is based on the adjusted assumptions regarding the global economic environment shown on this chart.

And now Dirk and I are glad to answer your questions.

[Operator Instructions] We will now start with Alex Vigil. We will then have Christian Faitz and then Katie Richards.

But now, Alex Vigil at Santander.

My first question is about the M&A. The comments you made about the opportunities and to be countercyclical probably in this context. If you can elaborate in which divisions do you think could be more interesting for BASF to be active in M&A.?

And the second question is about more general, the supply chain we are seeing in Europe all these problems in terms of the Rhine River and in general, in terms of supply and connectivity, which are the implications for your activity in Europe of this situation?

Thanks, Alex. A couple of comments maybe on the second question first on the current because I'm sure this is on top of everybody's mind. It's in the media a lot. The current weather situations put a strain on especially Rhine water levels. And as you know, we had quite a history at BASF as of Rhine water-related impact.

I have to say even under today's stress scenario with the Rhine water level is now reaching again very low levels. The work of the last year that the BASF team has done is really paying off. we are in a much better prepared position than we were, for example, in 2018, where we had a big impact of low Rhine water levels over an extended period of time. And through the deployment of specialized ships that can really still carry goods feedstocks, but as well products through the Rhine at very, very low water levels. And also due to various other contingency measures of shifting the mode of transport, we are in a very, very good shape right now.

However, the Rhine water levels are the record low level already this week, and we continue -- we expect this also to continue to be like this for a few weeks. So nothing that makes us overall concerned, but certainly will cause the one or the other disruption in value chains in Europe. But as I said, from a potential impact on BASF, much lower our expectation than it was in the past and give big credit to the team here in Ludwigshafen, in particular, of preparing us so much better.

M&A, as you said, we made a comment on this. I think it's fair to say that the M&A market in the chemical industry is certainly accelerating. So there's more activity out there. From our perspective, what we wanted to guide you on is really that we are also looking at opportunities in a market where value chain markets in all our verticals, but also regionally stay in tendency longer growth and strengthening our core through organic investments is in tendency getting more challenging.

On the other hand, there is the anticipated restructuring and consolidation of the chemical industry is going on. It's accelerating as we have already anticipated when we discussed the strategy. So we're looking at this, and I would say M&A in tendency becomes more competitive against other capital allocation measures like organic investments into large capacity expansions. And so we are observing this.

We keep a close eye on the market. However, we will not move away from our lens that we communicated in the strategy of being extremely focused on value creation and strengthening the core is our key mission. And I will leave it there. So we are an active observer. We are observing the consolidation of the industry, and we continue to see this as a potential opportunity for BASF.

So we move on to Christian Faitz, Kepler Cheuvreux.

Two questions, please. Also, one weather-related, one on crop protection. You already alluded to weather-related volume declines in Europe for Q2 in your Ag business, i.e., crop protection with the continued severe drought situation in Europe, what does this mean for Q3? I'm fully aware that Q3 is a low season quarter. But the question is really how low, low can be in such an environment? Or can you so far tackle this with -- tackle the higher channel inventories with buying back volumes?

And my second question is, thanks for Chart 4, very helpful. Can you elucidate this a bit in terms of underlying volume trends in your bigger operational pockets, namely in your traditional chemical activities? And also, if possible, adjusted for the successful Zhanjiang ramp. And in this context, again, I'm fully aware we are in seasonally low at present, yet would you see any signs of demand destruction as the consumer is facing more and more inflationary trends going into H2?

Thanks, Christian. I'll take the latter two questions, and maybe I'll look at Dirk looking at the Ag comment, maybe I'll give you some color there.

So I mean Europe, Europe has been certainly a strong volume driver. I mean overall, I think European volume growth across the portfolio has been very strong, almost 6% in Q2, if I remember correctly. So this is actually across the board, I have to say, across all our core businesses, we see very strong volume development or not, I would say, stronger than expected for sure, volume development in Europe. And be mindful that also in the second quarter, we have some significant turnaround activities in Europe, especially in our Petrochemicals division.

So you can see in front of that performance in Europe, the markets have been quite solid. Now we have seen, as I've also mentioned in my speech, we have seen some, I would say, prebuying or safety buying activities earlier in the quarter when the volatility and the perceived in security was still very high due to the Middle East conflict and that, of course, has phased a little bit, but I cannot rule out that some of that is still connected to this. But it certainly also has been positively influenced by some anxiety around supply from Asian suppliers.

So overall, across the board, strong volume growth, and I couldn't think of a segment, maybe apart from the automotive-related businesses who seem to be a little bit weaker, no surprise in Europe, as you look at the production numbers. Apart from this, we see volume strength across the board.

Now the latter point that you mentioned, of course, is a concern. We see in general inflationary trends and also consumer confidence not picking up and rather being quite shaky across major markets. We have not seen any demand disruption, I have to say. And also the momentum going into the third quarter is not surprising to us. So we don't see anything dropping off the table.

And as far as I can see, July numbers come in as expected. So trends that we have seen in Q2 are holding up. But of course, there is a risk that inflation further disruptions that undermine the confidence of consumers, et cetera, are going to have a negative drag on industrial growth, economic growth and consumer spend in the second half. Hence, why we are also a bit cautious on narrowing down our confidence level on the outlook because I think all these things are still hanging out there as potential downside risks. But nothing observed so far. Dirk?

On your Ag question. So first of I think you spotted rightly, Q3 is the low quarter for Ag and to say it upfront. This is expecting that our earnings in Q3 will be meeting or exceeding what we saw last year in Q3. You rightfully supported the headwinds that we currently have. This is weather across all regions. It is also the pharma income, and it's also the commodity prices, which remain on a relatively low level despite the recent increases that we saw here and there. So a challenging market environment. But the team is confident and is doing a good job also to deliver on Q3.

One thing I would like to mention in Q2, we had a certain preponement of sales in South America. Why did we do that? We had the big wave in the Agricultural Solutions business for the transformation of the ERP system. So this has been successfully implemented right now but required that we take some sales in South America upfront, and these sales, they are missing in the third quarter. So please keep this in mind, apart from that, Q3, we stay on track.

We will now move on to Katie Richards, Barclays and the following, we will then have Matthew Yates and then Laurent Favre.

But now Katie Richards, please.

Just 2 on the Middle East, please. I guess, my first is just have you seen any sort of structural changes in the last quarter? I guess the hope was that some companies were hoping they'd wins of European contracts longer term. And then also just quite interested in the current pricing dynamics we're seeing in the petrochemicals given the reescalation in the Middle East. It seems to be that oil prices have risen following the tensions, but the petchem prices like ethylene haven't reacted as quickly versus the spike we saw in March. So what's explaining the weaker pass-through this time if it is applicable?

And if you could guide us for the developments in the Chemicals and Materials divisions for Q3, that would be useful.

Thanks, Katie. Your last request was a big one. We will not now go through a single line commentary for the third quarter on segments. This would be a bit too premature. But let me comment on your first 2 questions.

First of all, in the Middle East. I think, of course, we are seeing some -- I would not consider them structure, but I would say more long-lasting changes because we know that certain capacities in the Middle East will be out of the market for a longer period of time. And so I would say supply chains are still in the course of readjusting dealing with it. But you also see with the normalization of some markets, at least pretty transparent before the very recent escalation -- reescalation of the conflict.

You can see that also global supply chains and chemical markets have, so to say, cope with the new normal of a Middle East, let's say, disruptive change that will go on for quite some time. Overall, the underlying currents of most chemical and feedstocks market, I would say, have not significantly changed, which is why I also would caution that, let's say, the very positive aspects that we have seen in the second quarter in the entire chemical industry, you have to always look at it what actually will stick longer term.

I think that's why I mentioned also that for us, at least, we feel that some of the things we benefited from in the second quarter are more structural for BASF because of our local-for-local setup in the regions, our capability to adjust to various different raw material scenarios and also raw material slates.

This is for us something that we feel was a pressure test that BASF passed with flying colors. And that's why for us, it is a positive. We are confident in our outlook also in a more volatile scenario. However, I would say, structurally, I would not consider any significant changes already structural from the Middle East situation. So maybe this helps. And we have seen markets, especially in Asia, have normalized rather quickly.

Pricing dynamics, that's an interesting question because, of course, in March, the situation in the Middle East was very difficult to gauge for everybody. I mean what would that mean? There was a huge amount of insecurity in there. Today, I think, everybody has -- markets have more or less accepted the level of underlying volatility in insecurity around the Middle East crisis. So that's why I would say there's a certain lower nervousness overall.

And we have also seen that demand, especially in -- if you look at it in a global way, has also not tremendously fundamentally change. So overall, the appetite to actually take risk on securing future supplies, for example, is lower than it was in March. And this is why I would expect that with the recent escalation of oil prices, we will not see across the board, commodities react in a similar fast way unless there are real physical constraints, which today are not so prevalent because, as I said, supply chains have more or less adjusted to the new normal.

So now we move on to Matthew Yates, Bank of America.

Two perhaps more longer-term questions, relates to, I think, Slide 13 in your deck about the core business and the cost base. I was wondering if you could just help me out here by -- you're talking about EUR 2.3 billion of cost reduction by the end of '26, what is the incremental therefore through '27, through '29 associated with that 20% reduction in cash fixed costs? If you could put a number on that, and what is the associated restructuring costs that we should be thinking about over the next couple of years?

And then the second question, maybe for is around the recent news out of Brussels around the carbon or ETS reforms. I would just love to get your take on what that means for BASF and its competitiveness.

It's Dirk speaking. I can take the first one. So for the EUR 2.3 billion. This is the run rate savings of our ongoing restructuring efforts. As you know, we will complete the program by the end of the year, where we achieved the EUR 2.3 billion for sure. Can this even be a little bit higher? Yes, it can be. And this is then a sustainable run rate.

With that, we are addressing by and large, I would say, 10% of our fixed cost of the BASF Group. When we are now talking about 20% on the core cost, then you can square the math. So it is not doubling it, but you can imagine that the second step that we are now taking is even bigger than the first one.

And let me add one thing, Matthew. I know this maybe announcement of 20% lower cash fixed cost is still difficult to put this in maybe a financial model, but let me point out one difference also how we communicate and how we steer the new CoreShift ambition or program, if you want to call it, versus the classical past restructuring programs.

In the past, we've looked at the savings in the gross way, so to say. So this was pre-inflation savings. And as you know, and as we've discussed many times, a lot of these savings that are real and as real as they can be, but they're eaten up by inflation. And at the end of the day, the question is always what ends up in the P&L. And this is always a difficult to predict and in hindsight, difficult to postmortem this.

But going forward, we are really focusing on net cash fixed cost savings. That means we are really looking at the end point where we want to be, and we are agnostic around inflationary effects because these inflationary effects will have to be absorbed along the way. So it's really a change of mindset also how we steer the cost management in the company, and we are really looking at now the endpoint where we want to sit and not so much focus on the gross savings part.

Your second question, of course, an interesting one. We have recently seen the EU has published the, let's say, its path forward for the European ETS system. I think there's a lot of good elements in there that indicate to me that they have also heard the voices of the industry that current -- the current ETS system with its very ambitious ramp down of free allocations is going to lead to a substantial increase in carbon pricing in Europe, and with this to higher costs for European industry, in particular, high emitting industries like the chemical industry. And so we've seen a lot of good elements that try to address this.

So for example, increasing the volumes of free allocations, let's say, changing the slope of the decline of carbon -- overall the carbon credits in Europe and so forth. So this should all lead to an easing of the carbon pricing pressure on European producers. However, the one element that I think is critical, and I've also commented on this publicly, is that the European Union now moves away from the original idea of having ETS as a market-based price to steel carbon emissions and is attaching or is changing this now towards an instrument trying to stimulate and steer investments.

And this, of course, is something that cannot stay like this, and we are at least trying to find a dialogue with the EU Commission because if you can only avoid increasing CO2 cost by being forced to invest into measures or projects that at the end of the day, have no business case themselves, that also is not an element to strengthen the industry.

So quite some good things in there, I would say, in the latest EU ETS revision proposal, but overlaid by this new element of making this condition on investment commitments that still need to be worked out. It's nothing final. So there's a lengthy process now that has to go on a consultation with the member states and with the parliament. And in this context, we are going to be an active partner, hopefully advising that some things need to be changed to improve competitiveness for European industry.

Okay. So now it's Laurent Favre, BNP Paribas. We will then have Chetan Udeshi and then Sebastian Bray.

Going back to the full year EBITDA guidance upgrade. I was wondering if you could give us a little bit of, I guess, parity around the divisions or the, I guess, some comments around the divisional guidance. I'm wondering if it's only really in materials that we are seeing and at least?

And then the second question, probably for the Ag Solutions IPO readiness. On the buildup of cost in terms of ERP, Investor Relations fees essentially building a corporate center, is this all booked as exceptional items for Ag? Is it booked as exceptional items for the corporate center? Is it all in the BASF Group Corporate Center? Or is it all staying in the Ag divisional EBITDA?

Let me take your questions. So first, on the guidance, you saw the guidance uplift, which I would say, means for the second half of the year that we are confident and cautious at the same point in time. So what makes us confident for the second half of the year. Certainly, the business momentum that we still see when we are talking to our businesses. But you've also heard us talking about the macro backdrop, which is still a mixed one. And therefore, we think that with the current guidance update, we are sitting in a good place. For sure, what I can say, Surface Technologies also in the second half of the year will be challenged.

You remember last year, in the second half, we had a tailwind also from 45X credits in the catalyst business, which will not recur to the same -- by far not by the same extent this year. So there is some headwind. You also heard us talking about preponement for the Agricultural Solutions business now in June. So there are a couple of elements which make us cautious.

On the other hand side, as we said, the underlying business and the feedback that we are getting from our business heads is quite a confidence building, and this is why we take it as such. We are not currently updating the outlook on the segment levels. but rather take it from the group perspective with the comments that I've made.

Second question, if I understood it correctly, was on the transformation costs and how we are handling them. Yes, indeed, they are special items in the earnings and the transformation cost we are talking about is on the one hand side, ERP transition is restructuring, predominantly due to severance payments, et cetera, but also cost related to plant restructuring, et cetera. And on earnings side, there are certainly special items.

On the cash side, there is nothing like a special item. And as we are also getting questions about cash flow performance, we thought it is really now the right time to make clear that we do have transformation costs because we are rebuilding the core of our company. And for that, there is a certain amount of cash that needs to be invested, I would call it good cost, but they are certainly cash out and this is why we highlighted them as transformation costs also in our press release and in our explanations.

Sorry, Dirk, my question was more specific on the Ag Solution IPO or the -- well, carve-out of IPO, the cost related to the carve-out, the ERP, building the Corporate Center for the Ag Solution IPO. Is that part of the segment EBITDA? Are you separating that within the special items for Ag? Or is it in the corporate center, the BASF Group Corporate Center?

No. I mean I would say, Laurent, it's -- I mean, we follow, of course, in this carve-out exercise, a clear accounting rule. So we cannot do whatever we want. There are elements that are booked as special items in Ag Solutions. For example, all transformation costs that are similar to what we do also in other segments, when we do, for example, the ERP costs that are booked as special items in Ag.

There are costs of building up structures in Agricultural Solutions to become a stand-alone company. You mentioned looking across the table here, you mentioned Investor Relations, for example, in the future, our Ag Solutions business will have an Investor Relations group. So they're building up a team. This is, of course, ongoing cost in the normal cost, and we are trying to seek a way to set up a stand-alone Agricultural Solutions company that is IPO-ready in the least cost increasing way and using, of course, also here smart ways to do this. But this is fully on the bill, so to say, of Ag Solutions.

And I would say, Dirk, there's only very few things that we would really handle outside of the Ag Solutions business, if at all, that would then move in others or something like this. So we keep it in the Ag Solutions business -- in the Ag Solutions segment. And we separate between transformational cost restructuring that can be booked as special items. And everything else is handled as a normal P&L EBITDA before special items relevant for Ag Solutions.

I can confirm that.

Okay. So now we move on to Chetan Udeshi, JPMorgan.

I had two. One, just a clarification in terms of the sale of the Coatings business. Can you please help us or clarify how much of the cash out on tax was already paid in second quarter? Or how much is left to be paid in H2? That would be the first question.

The second question was, it seems going into third quarter, there are a number of moving parts, it's not unusual in this industry, but just it seems you've got some prebuying in Ag, we had one-off in battery business last year from subsidies. You are talking about some margin normalization, but also a good underlying momentum. So do you have a sense of how we should think about or how we should model third quarter earnings for BASF? Consensus is just over EUR 1.5 billion. How do you think about that? Any comment on third quarter earnings to the extent you can, would be helpful.

Chetan, I'll start with the tax payment. The tax payment predominantly will happen in the next year. So we have received the full purchase price, EUR 5.8 billion and the roughly EUR 500 million -- a little bit less than EUR 500 million of tax payments will happen largely in the next year.

Third quarter, Markus or...

You can...

Yes, I can maybe give it a start. I think we made already some comments third quarter compared to last year, I think we will from everything that we hear at least meet the third quarter of 2025. There is potential for more depends all on the macro development that we will see for the next couple of weeks.

Okay. So now we move on to Sebastian Bray. We will then have James Hooper and then Jaideep Pandya.

But now please go ahead, Sebastian Bray, Berenberg.

I had one on the other segment and one on the level of inventories in bulk chemicals. It's quite rare to see a reference to big hedging effects, I think the press release makes reference to the hedging effects having a positive impact on the other segment. Could you elucidate what has gone on there that has driven the result into positive territory for Q2?

And my second question is on industry inventory. I think it was mentioned previously that the chemicals prices went up and then they went back down and now input costs might be reinflating but the chemical prices are often a little sluggish. Do you have any idea of what industry inventory is. There have been some market commentators who have suggested that there's been a rundown in China that might come to an end in October, if Iran crisis continues. But how much chemicals inventory on the upstream side do you think is there to absorb price shocks?

Sebastian, I will start with the second question, then I hand it over to Dirk on the other comment. I don't know. It's very difficult to make those statements for the chemical industry in terms of inventories and where are how a supply-demand situation looking like, because it's often value chain dependent, it's product dependent, it's country dependent and so forth. So -- but I give it a shot.

When I said that things have already normalized to some extent when it comes to supply chain disruptions and also maybe also anxiety I look at particularly China, for example, if you look at margins in China in the upstream business, they have in most, let's say, commodity value chains already normalized to pre-war levels. That is partly due to higher input costs because imported feedstocks in China, certainly still at an inflated level like naphtha, for example, but it also is because most products in China are well supplied. And this is why I don't see a significant change of now inventory or, let's say, supply chain impacts compared to what we have seen up to February.

So it's still an inflated overall world, of course, because feedstock prices, oil prices are inflated. But in general, the demand picture has not significantly changed. That's why you see this normalization effect. So also for me, China is a proxy because China is by far the biggest market for upstream chemicals. So that, of course, radiates then to the rest of the world. I would not anticipate that we have any kind of special inventory situation rather particularly high or particularly low at this point in the more upstream chemical arena.

This might be the case if you talk to companies who have a very specific value chain in mind or very specific product line in mind that they give you this kind of indication, but I would say across the board, that's not my picture. We're sitting at rather normal inventory levels. That's, by the way, also the case for BASF. We have inflated inventory in values, of course, because of the higher prices. But if you look, for example, at our inventory reach, we are at rather normal levels, maybe slightly below because our sales growth has been quite good, but also nothing out of the ordinary. So that would be my attempt to give you a flavor on this topic, but again, without going into detail, it's very hard to make a super intelligent comment on this.

Sebastian, on your first question, quite a technical explanation. I mean you can imagine that our hedging teams have been very active, more than usual during the exciting second quarter. And we hedge inventories in transit, predominantly against dropping prices. And in the course of the second quarter, prices indeed were dropping. So hedging results came in. Hedging results -- positive hedging results have also been locked in and realized, and this is one part of the strong result in other. The other is obviously the trading result, which was also elevated compared to, I would say, normal quarters.

And I tried to mention this in the beginning, and I want to make a plug because here, I think it's a bit of an unsung hero story also. I mean these capabilities that we have in our teams that deal in these upstream markets every day, but also, of course, with the trading skill set that we have and the trading desk we have on feedstocks, that in volatile times is, of course, they are playing out their strengths.

And this is why I think in this -- on this leg, we have had a very successful quarter, and we benefit from volatility, and that's not normal for a chemical company, but BASF has this capability. So a bit of an unsung hero story. We're very proud of the team, how they have not only kept our P&L stable, so to say, because we certainly locked in some pricing, but they also gained on some very smart business decision. So a pretty good story for us.

Okay. So now it's James Hooper, Bernstein, and then we will have a final question by Jaideep Pandya.

But now James Hooper, please.

I have 2, please. The first is on FCF. So you've taken the EBITDA guide, but not the FCF guide. And I was wondering if you could just take us through a little bit more of the moving parts around that. I mean, I'm reading the release this morning, it says there's a EUR 300 million cash impact from hedging. I wonder whether there was an inventory build related to the Ludwigshafen turnaround that might correct later in the year?

And then my second question is around pricing in Agricultural Solutions. I was interested to see that was down. Is this to do with kind of pharmaeconomics, generic competition? And then kind of alongside that, do you see that progress -- we crop futures up for 2027, do you see that pricing development changing later in the year or early next?

Yes, James, on the derivatives question, the way we were doing it, this was tying cash. It was important for us also to mention it because alongside the more cash tied in accounts receivable and inventory. This was one of the bigger items, and we wanted you to acknowledge and understand that. It is very technical. It is a cash tying position and I think this is more or less it. What we are not having here is an offset against the secured inventories. Inventories are measured at cost and the derivatives taken alone.

Just one additional comment on inventories because I think James, you asked specifically on inventory buildups for turnarounds and so on. This is, if at all, these are transitionary effects within let's say, a couple of months or so, but I don't think they play a big role because as I said, the inventory reached, so the inventory levels overall for BASF are rather lower than what we have seen in the past.

So there is no volume effect on inventories going into the cash flow thing. It's entirely value and pricing effects, both on the feedstock side, of course, on inventories, but as well as Dirk said also in the accounts receivable side. So this is kind of a natural element of our operating model, so to say, in chemicals that if feedstock prices increase and you are successful in increasing prices like we have been in the second quarter, very much so that you are, of course, absorbing a lot of cash into your current assets.

That's why I was a little bit surprised that there was some question and comments if EBITDA increases in such an inflationary environment, why is free cash flow not increasing? I can tell you, it's a pretty uphill battle to maintain free cash flow on a high level in times when inflation is so high. And this is just due to the fact that we have, of course, a current asset-intensive business model in the chemical industry.

And maybe, James, just to add, Second half of the year is certainly cash collection time for us. So the opportunity to collect more cash than the last year is obviously a higher one, and we will grasp this opportunity.

Ag pricing.

Yes?

Ag pricing.

Ag pricing, so you saw volumes for air going up. You saw the prices for Ag going in the other direction. And I think I mentioned earlier that the prices stay under pressure, and this will also be the case for the remainder of the year.

Okay. So now 1 or 2 final questions from Jaideep Pandya, On Field Research.

My question is mainly around Slide 9, which thank you very much for providing this.

Curious to know sort of in this slide, what 10% has become competitive since the cost saving actions started? And then the follow-up of that is the other -- like the current 12% that you alluded to, which is still at a competitive risk what sort of is those business lines?

And then the last sort of question along your European asset base upstream, which is Ludwigshafen and Antwerp, how much of exports are you still making from Europe to Asia or to the U.S. in this regard?

Yes. Thanks. To the second question, I do not have specific numbers on what is the share of exports from Ludwigshafen and Antwerp to rest -- or, let's say, our European sites to the rest of the world? I don't have that here available, I would say, guiding answer would be it's much less than it was in the past, of course, because of our strong buildup of capacities, in particular, in Asia. But also in North America to some extent. So I would say real substantial and structural exports from European sites to the rest of the world are predominantly in the downstream areas where you typically then have, let's say, only 1 or 2 production sites for the world, think in an extreme case, for example, agricultural active ingredients, we don't have an active site in every part of the world.

So we have them in Ludwigshafen or in Europe, and we supply the world from there. And we have a number of other specialty chemicals where this is the predominant supply model. But for the large part, in the more commoditized price-sensitive categories, we supply also -- we use Ludwigshafen and Antwerp for mostly as sites in Europe for Europe. So it is a lower share than it was in the past, but I cannot give you a specific number.

With regards to the competitiveness slide, one thing is always my disclaimer that this is a more strategic assessment of the, let's say, it's a fitness check for our production plants that we have here. And the base number here is roughly between 850 and 900 different lines -- production lines that we have here in Ludwigshafen and we do a fitness check and test them, how competitive are the cost compared to the best possible importer that we would see landed cost Europe.

And as you have seen, we have increased the share and this has a number of reasons. First of all, we have, of course, the last 2 years, taken a lot of very plant-specific measures to reduce the risk of losing competitiveness, and that has to do a lot with operational excellence. It has to do with reducing the cost to serve these plants, for example, with maintenance and technical support costs. But we have also closed quite a number of production lines. The total number has come down by 5% or 6%, I think, of a number of production lines here in Ludwigshafen.

So all of these effects come together. So it's a continuous fitness program because we would like to have the majority of the plants we operate here in a competitive window because only then we are, of course, willing to allocate also capital to these plants because we know they will be long-term cost competitiveness for landed cost Europe.

However, I also have to say as a disclaimer that does not mean that 90% of all our plants are already today profitable here in Europe because profitability and competitiveness, slightly different angle. And of course, price pressure, you're always exposed to price pressure and in certain times, profitability is not where you want it to be. But on a cost-for-cost basis, Ludwigshafen is becoming stronger and our measures are paying off, and that's what we wanted to say here that the core of our Ludwigshafen assets is really competitive.

I will not disclose now what are the 12% that are not competitive. And you can understand this is not something we would like to openly disclose because it is also a competitive element, of course. But we are constantly observing this 12% with a simple question, can we bring them into a competitive territory or are they plants that eventually we have to prepare down the road also for restructuring or closing.

We are now at the end of today's conference call. We will present our third quarter results on October 28. Around 1 month later, BASF will host a Capital Markets Day in Ludwigshafen on November 24, with the dinner with management on the prior evening. A significant portion of the event will be dedicated to our Agricultural Solutions business. This session will provide a strategic and operational overview of the business as a stand-alone entity, including its market opportunities, competitive positioning and innovation strength.

All 4 members of the Agricultural Solutions Management Board will present, providing an opportunity to get to know the team and hear directly from the executives leading the business. Further details on the agenda will be shared closer to the event. Should you have any further questions today, please do not hesitate to contact a member of the BASF IR team. Thank you for joining us today, and goodbye for now.

Hello, everyone, and welcome to our virtual deep dive for analysts and investors. In July 2018, I have the pleasure of moderating a conference call titled BASF investigates establishment of second Verbund site in China, shortly after the signing of a memorandum of understanding in Berlin. 8 years later, BASF's Zhanjiang Verbund site is operating successfully following a flawless startup in early 2026 and the official inauguration in March.

Before we begin, I'd like to provide some organizational details on today's conference call. The call is being recorded. [Operator Instructions]. The presentation contains forward-looking statements. These statements are based on current estimates and projections of the Board of Executive Directors and currently available information. Forward-looking statements are not guarantees of the future developments and results outlined therein. These are dependent on a number of factors. They involve various risks and uncertainties, and they are based on assumptions that may not prove to be accurate. BASF does not assume any obligation to update the forward-looking statements contained in this presentation above and beyond the legal requirements.

With me on the call today are Markus Kamieth, Chairman of the Board of Executive Directors; Stephan Kothrade, member of the Board of Executive Directors and Chief Technology Officer; as well as Haryono Lim, President, Mega Projects Asia and as of July 1, President and Chairman, BASF Greater China.

Now I would like to hand over to Markus.

Yes. Thank you very much, Stefie, and welcome, everybody, to our deep dive on Zhanjiang, a topic that we all have talked about a lot over the last year. So I'm really happy to have a bit of time with you to answer your questions and also introduce the site to you.

We have recently opened Zhanjiang as our seventh Verbund site in BASF globally. And this is the first Verbund site opening since 2005, where we opened the last one in Nanjing, and we'll talk about this in a second. It is -- the Zhanjiang investment marks BASF's largest single investment globally in our history and the largest investment by a German company in China. At the peak of construction, more than 35,000 people from over 150 companies worked at the site. And as Stefie said, we completed the project on schedule below the original budget and started up the project in line with our expectations.

Now let me take you back a little bit to the history of BASF in China. And BASF has a long history of over 140 years of doing business in China. And we started actually our production in China in 1969 with our first manufacturing site, and that was roughly the time when we started up our -- when we opened our Antwerp site in Europe. So we are certainly one of the longest invested chemical companies in China.

Since then, we have consistently increased our presence in Greater China, in line with our local-for-local approach, which we follow already for quite some decades. In 2025, the proportion of sales from local production in Greater China accounted to almost -- to around 80%. And we sourced around 90% of the required input factors locally. Today, BASF operates 29 production sites and has 28 major wholly owned companies, and we are partnering in 12 major joint ventures in the country.

Overall, 12,500 employees helped to generate sales of EUR 8.2 billion with customers in Greater China. And please keep in mind that this number EUR 8.2 billion does not include the roughly EUR 2 billion of sales generated by our main joint venture in China, BASF-YPC Company, which is a 50-50 joint venture with Sinopec operating our Nanjing Verbund site, and we consolidate or we account for this participation at equity. So the EUR 8.2 billion sales number does not account for this.

On the slide, you can also see that we have consistently delivered volume and earnings growth in Greater China between 2015 and 2025, so roughly over the last 10 years, sales volumes in Greater China have grown at 6% on a compounded average annual basis and profitability as measured by EBITDA before special items has grown on average 11% per year, and the performance has been stronger than in any other region for BASF.

Now let me turn for a moment to the macroeconomic environment in China's role in the chemical industry. We overall assume that the chemical production globally will grow at a rate of around 2.8% on per year in the time frame of 2025 to 2030. This growth will be predominantly driven by Greater China, which is expected to grow by 3.7% per year. And if you look at the middle of this chart, I think these are some remarkable numbers. If you look at the share of Greater China's -- of Greater China in the GDP, industrial and chemicals growth. You can see that 1/3 of the global GDP growth, roughly half of global industrial growth and 3/4 of global chemicals demand growth will come from Greater China in this time period.

This growth will be supported by robust domestic demand based on an expanding middle class with rising income and through export-oriented industries. Greater China will -- is and will remain the largest chemical market in the world. And already today, accounts for 55% of global chemical production. So I think it's important for the chemical industry cannot be over exaggerated.

On the next slide, you can see that the absolute growth, if you take this from a relative to an absolute growth perspective, the absolute growth in the chemical market in Greater China is expected to be nearly 3x higher than the rest of the world combined. All other regions will grow as well, at least to our estimates in the time frame, 2025 to 2030. And I think it's fair to say when you look at these numbers that the growth in China, certainly, will be unmatched by anything else that we see in the rest of the world. And this is why we have decided to invest into a second Verbund site in China.

Now the overall environment also politically is certainly providing us with some confidence that also the next years will be quite successful years for BASF. If you look at the political environment that comes through China's 15th 5-year plan, you can see that this creates a very favorable framework for companies like BASF. Our local scale, cost competitiveness and especially our innovation strength, foster long-term value creation. In addition, our broad portfolio means that we can grow by creating tailored solutions for our customers.

And we today talk about the big manufacturing site, but let me also remind you that in Shanghai, with our innovation campus, we have over the last 10 years, established a significant. And our second largest innovation center globally for our chemicals activities in China and this in line with our -- or in combination with our strong EHS reputation certainly gives us a strong credibility to develop future solutions for our customers in China.

Our strong commitment to sustainability supports the targeted transition of the Chinese economy to a low-carbon and circular economy. And in this regard, the Zhanjiang Verbund site shows what the future of chemistry will look like is a smart integrated Verbund structure on an industrial scale, efficient digital and sustainable by design, and you will see this in more details going forward.

Lastly, let me focus on the location and why we chose to invest this Verbund site in the south of China, namely in the province of Guangdong. Historically, BASF has grown significantly in the east of China. So we had more than 90% of our assets in the area around Shanghai and Jiangsu province. More and more China's economic growth has moved south and Guangdong is actually as a province today, the powerhouse of the Chinese economy. With nearly 128 million residents, Guangdong is the most populous province in China. And although in terms of GDP, it is the country's largest province with Jiangsu province, which is home to our Nanjing operations ranking second.

And to put things into perspective, the GDP of Guangdong is roughly equivalent to that of South Korea or Spain. The projected GDP growth of around 4% per year in Guangdong will be driven by industrial investments of important BASF customer industries, such as transportation, consumer goods, home and personal care as well as electronics. And it includes, of course, the strongly growing, let's say, area or economic zone around the Pearl River Delta, including Macao and Hong Kong.

In a nutshell, Guangdong Province is one of the most -- is one of the economic growth engines of China and detects as a powerhouse for BASF's key customer industries and provides fast-growing demand innovative chemical products and solutions. And until today, Guangdong as a province is a significant net importer of chemical products, and we assume that the strong economic growth in the Guangxi, Guangdong, Fujian and Hainan provinces will at the end of the day, stipulate a strong and successful future of our Verbund site in Zhanjiang.

And with this, I hand over to Hary, and please take us into the journey of the Zhanjiang site.

Yes. Thank you very much, Markus. Let me virtually bring you to Zhanjiang and explain to you a little bit about what is so special about the location, Zhanjiang. So the location is exactly on this Donghai Island. This is over excellent geographical advantages. I think thanks to proximity fast-growing industrial centers in Guangdong and the surrounding provinces in South China.

For those of you who have never been to Zhanjiang, so we are located on the western part of Province Guangdong. And today, you can reach us via high-speed rail train from Guangzhou just in 1.5 hours. So our site has direct access to the deep-water seaport. I think this is very important to us to run the Verbund because with the access to the deep seaport and operate our own JP, we are able to bring in large-scale raw material and as well as using the waterway to ship our finished goods to our customers. And the location itself also offers the shortest sea routes between Mainland China and the Southeast Asia market. And in addition, Zhanjiang has a rapidly evolving industrial ecosystem, enabling future synergies with co-location partners and core producers.

Next, I would like to give you some statistic about our site in Zhanjiang. So impressive statistic here. We have a size of full square kilometers, so 400 hectares since we are approaching the World Cup. So it is roughly 550 soccer fields just for you to compare to the soccer field. And as Stefie mentioned at the beginning, in early 2026, we have successfully started up our entire Verbund, including the worldscale flex-feed steam cracker. And as of May, we have started producing and also run successfully 19 of our plants and 33 production lines. And one more plant is coming, and this will be commissioned in 2028. This is the 3-decanol plant. So this is also on schedule. The total investment, as you know, it is an amount of EUR 8.7 million. This is the CapEx that we spend on the period of 2019 to 2028.

And as for the value chain. So we have this Verbund location with the upstream and downstream. So that gives us an advantage to also to manufacture a broad product portfolio. It is not just the cracker or cracker plus 1. We call it, The Cracker Downstream, but we have more products to offer through the integrated approach. We create a value chain for ethylene, propylene, C4.

And after Ludwigshafen and Antwerp Zhanjiang is the third largest Verbund for BASF. And today, we are employing around 2,000 people working at a site as a key platform for the long-term profitable and sustainable growth of BASF in China and Asia, the majority of the products that we produce in Zhanjiang will directly serve customers in China, particularly. And this is fully aligned with BASF local-for-local production approach.

And allow me also to share some key success factors for our Zhanjiang Verbund site. So running such a mega project require high commitment to safety, quality and also compliance. At the peak of our construction site, we have more than 35,000 people working for BASF and more than 150 companies working at our site. So it is UTmost important that we are committed to the safety and the quality of our site, making sure that not only the BASF employees, but also all our partners, they are giving us the same commitment as well.

And also, this is important to make sure that we have a very, very strict discipline in our executions, making sure that the timeline and as well as the CapEx are well under control. And what is also important for us for being a greenfield in China that we are also managing the interfaces with authority [indiscernible] partners extremely well, making sure that any issues that we have identified are also being addressed speedily. And of course, at the end, it is also about the people. So we are very proud that our team has executed this complex tasks with outstanding dedications and speed and exceptional level of commitment.

So this is just a couple of points that I want to highlight to you that summarize what we see as a key pillar for success. And also important is that we have started the recruitment processes very early at the beginning of our project, knowing that to get the right people and to train them and to qualify them to run such an important Verbund for BASF that requires time and also sufficient training for our stuff. But we are fortunate enough that in China, we are operating many sites, especially with our experience in Nanjing, our Verbund site in Nanjing, we are able also to train our colleagues in various production sites in China as well.

So -- and I think also what is impressive for us to make a comment here is also about the commissioning and start-up as well. I think running a Verbund is always a complex part. It has a chance if it works. But at the same time, we know that if anything doesn't fall into phases, may also create a lot of complexity and stress. So I think we are very happy to see that with our comprehensive commissioning plan, so we are able to start up our plants in sequences and achieve steady state operation already today.

So the next slide that I want to introduce to you is also about our Smart Verbund. So this is also a very unique opportunity for BASF for being a greenfield that we are able to bring our vision to life that with the digitalization and innovations, we are able to even get additional synergies, what already the Verbund could deliver. So we apply state-of-the-art digital solutions that are seamlessly integrated and enhanced with big data and artificial intelligence.

To achieve this, we implemented a best-in-class digital infrastructure and are leveraging 5G and cloud services, for example. And also to make this more tangible also, let me have some showcase for some features. So we are trying for our Verbund site to be paperless. We have implemented fully automated real-time integrations, and we have more than 8,000 utility measurements. We have AI-driven automations. If you see today in our site logistics, AI agents already automate 95% of our outbound delivery processes across multiple systems. And also with the help of digitalization. So we are moving from reactive to proactive, digital assistant leverages DSF data, analytics and AI to spot supply disruptions at early stage.

With all that, our Smart Verbund vision has become reality, something that is fascinating for me also as a chemical engineers. But based on this excellent foundation, we will continue to innovate. We are at the right place in China where today, AI, automation, robotics are very much on the front page of our activities. And here, we hope that we will continue making use of this opportunity to drive our Verbund even to more sustainable operation.

The next slide is about our unique cracker setup. Here, I would like to highlight that with the access of the deep seaport that we have, we are able also to bring the key cracker feedstock to our site. But also what is important to highlight here is that in Zhanjiang with our 1 million metric ton of ethylene flex-feed cracker we are able to process quite broad varieties of feedstock like naphtha and butane. And this will allow us to produce key raw material for our value chain, ethylene, propylene, Crude C4 reliably and efficiently.

Furthermore, this setup also allow us to optimize feedstock and to strive to achieve low cost. It is remarkable also that we are driving or utilizing 100% renewable energy today for our entire site. And one big contributor to this success is also the innovation that we apply here for our cracker that we drive the main compressor of our cracker also known as a e-drive, using 100% renewable energy. In conventional cracker, typically, those big compressor turbines are driven by steam generated and using the natural gas and cracker fuel gas.

And also, we make use of the surplus cracker fuel gas and CO2 off-gas produced by downstream plant like ethylene oxide. We are using those fuel gas and CO2 off-gas to produce our syngas, which is again important raw material for our downstream like for the Oxo alcohol. And not only just the -- utilizing the e-drives, but we also make sure that the so-called heat integration of our entire site is really at the top notch because with the heat integration, we are able to optimize further our site and reduce the CO2 and therefore, less fossil feedstock to be used compared to other sites.

The next one, I want to give you a little bit of our sustainability journey here in Zhanjiang, especially also to explain to you how we're able to bring our carbon footprint or reduce our carbon footprint more than half than conventional petrochemical side. So with the Verbund concept, obviously, we have already efficiencies. And what I mentioned before about the heat integrations. So that obviously also contributed to the lower use of the fossil fuel.

And with the e-drive using the 100% of renewable energy for the entire site, obviously, this is all contribute to bring down the CO2 emissions for our site. And how are we able to do that? I think to secure the renewable energies today, we have 3 main sources. One is we have a joint venture with Mingyang for offshore wind farm located 80 kilometers south of Zhanjiang. This is currently under construction and has a planned capacity of 500-megawatt.

And then we have also -- the second source is from the Power Purchase Agreement that we have signed with partners like State Power Investment Corporation, SPIC, and GEDI. This is a long-term supply contract for 25 years. And the third one is we also install wherever we can on our site, the solar panels that contribute also to the green energy source for our site.

With this, I would like to hand it over to Stephan.

Yes. Thank you very much, Hary. I would like to continue with an overview of the value chains and products of the Zhanjiang Verbund site to illustrate a little bit what the differences are between our site and the typical big sites you see in China from our competitors.

First of all, you know we have this Verbund setup, our Verbund production system that makes us more resilient because it's also less dependent on externally sourced precursors as we produce the vast majority ourselves. It provides us with cost advantages. But it's also important to highlight here that whilst most of our competitors focus just on 2, 3, 4 major commodity type products such as polyolefins, ethylene glycol or PTA, we have a very diversified product slate here.

Of course, we also produce polyethylene and ethylene glycol. We need these products as scale enablers to achieve economies of scale and cost benefits and also to have more flexibility. But let's say, the strategically relevant products are more diverse. And let me go through the 3 main value chains, starting with C2, ethylene. So ethylene oxide is a very important raw material for us because we produce surfactants and even precursors for brake fluids on our site.

Last year, during the investor update in Antwerp, we showcased the BASF EO Value Chain just to repeat a little bit. So we are a technology leader and also offer the lowest CO2 footprint with our downstream products because of lower energy consumption and high raw material yield. We also have the best safety technology in the industry. So this is a very strong foundation of this value chain.

When we come to the propylene C3 value chain, this is the basis for our acrylics business, acrylic acid and Oxo alcohols. And these are used to make further products, mainly for the adhesives and coatings industry. And Oxo products are also the feedstock for Specialty Intermediates. One byproduct is isobutyraldehyde that is a basis for neopentyl glycol, an intermediate that I will talk about in a couple of minutes.

And when it comes to the Crude C4 that we get out of our cracker, here, we extract isobutene, which is the starting point of the citral value chain to produce aroma ingredients and vitamins. Now in addition, we also have at the site engineering plastics compounding facilities and plant for thermoplastic polyurethanes, which both serve the automotive and electrical industries in South China, but are also used for sports shoes and sports equipment.

Now building on this product slate, I would like to show you on the next few slides some examples of customer success stories that show how our local-for-local production approach and the breadth of our customer industries works and plays into our hands. And here, it's also very important to notice what Markus has highlighted that we have a strong R&D footprint in China at our Shanghai campus that allows us to co-create with customers.

And let me start with one example, the partnership with Youyi. You are all familiar, of course, with adhesive tapes from your daily life, but I would bet it most of you haven't heard a name Youyi. It's definitely not a household name, but Youyi is a globally leading adhesive tape manufacturer that operates around 20 production sites in China and has a very strong market presence. It's a vertically integrated player from polypropylene film to the finished tape products. And they are a -- have been a partner for us for many, many years. Actually, we started our business with them from our Nanjing Verbund site and now with the Zhanjiang Verbund site in Guangdong. We also follow the production footprint of Youyi because they also build a new large-scale production plant in South China, not far from our Zhanjiang Verbund site.

So from a customer perspective, we offer here a long-term reliable acrylates supply. We talk about butyl acrylate and 2-ethylhexyl acrylate and we reduced the import dependency in South China for these products. And with our leading cost position in acrylics, thanks to our proprietary BASF technology and the favorable cost position offered by the site set up, we are here the partner of choice. So this customer alone purchases the production volumes equivalent to one world-scale butyl acrylate plant every year. And our Zhanjiang Verbund supplies more than 50% of its BA and 2-EHA production to China's fast-growing adhesives and the tape market, which has a compounded annual growth rate of around 11%. So this was an example from our Petrochemicals division.

Let's move on to the Intermediates division. And here, we have a success story around neopentyl gycol or NPG that I mentioned already. It's a key ingredient for powder coatings that are low VOC, low volatile organic compound coatings for a wide variety of applications. ranging from garden furniture to infrastructure elements, for instance, all the big construction parts you see at airports are typically coated with powder coatings.

To capture profitable growth, we have also built a world-scale NPG plant at the Zhanjiang Verbund site. NPG is expected to grow at around 5% per year on a global scale and Asia Pacific is by far the largest market, and it's also the fastest-growing region with an annual growth rate of around 6%. And now we are again close to our customer. Here, the company KHUA, it's one of the top ranking producers of the saturated polyester resins that are made with NPG and then used for powder coatings. And we signed an agreement with them to supply them from our new plant.

And again, here, we have the same pattern. We have been, for many years, a strong partner based on our production in Zhanjiang, at the Zhanjiang Verbund site, and now we replicate the success and tap into the market potential in South China. To give you just a number, KHUA recently expanded its production capacity by 150,000 tonnes to almost 400,000 tonnes. So quite a relevant customer for us.

Then let's move on to a different kind of product.

Now we talk about Ultramid and Ultradur, our engineering plastics based on polyamide and PBT. And here, It's, again, relevant to emphasize the co-creation aspect, co-creation in innovation with customers from our Innovation Campus in Shanghai. We are the -- we hold the #1 position in engineering plastics globally, Asia Pacific continues to be our largest and fastest-growing market. And for us, it's important to penetrate new application segments through innovation. And here, the company Orient Motion, a very dynamic, fast-growing mobility tech start-up from Suzhou in China is a nice example because they are specializing in the next generation by wire systems that replace traditional mechanical components in the automotive industry with electronic control. And we have co-developed here a break by wire pedal system.

You see the pedal on the upper left corner on the slide, on the right side, you see the control units where the mechanical signal is translated, transmitted into an electric signal. So our materials are nonconductive, lightweight, antistatic. It's about stiffness, mechanical properties, and you have to meet all the sophisticated GB codes. And we developed this system now together with Orient Motion within less than 2 years and brought it now as the first mass-produced electromechanical braking system to the market, benefiting from the innovation appetite of Chinese OEMs that are fast moving here into the electrification of all these systems.

Now let's talk a little bit also about the expected financial outcome of our investment. We have built a fantastic growth platform that benefits from the Verbund advantages. We have leading cost positions. And we also, as I hope I could show you, we enjoy customer proximity. We benefit from our local R&D capabilities. And as Hary has explained, we are also leading when it comes to sustainability and are well prepared for the green transformation in China.

So what we expect is that by 2030, we will achieve sales of between EUR 4 million and EUR 5 billion from the Zhanjiang Verbund site, this is roughly equivalent to around 10% of the current sales in our core businesses. The EBITDA is expected to reach between EUR 1 billion and EUR 1.2 billion by 2030. For '26, however, we have said this before, we anticipate still a slightly negative EBITDA. This has to do with the start-up cost with the fact that we are still further optimizing the infrastructure utilities to the sweet spot. So all this will come during the course of the year. And then the key inflection point is expected in 2027 when the site reaches full capacity utilization, the start-up costs phase out and the optimization measures begin to take effect. So against this backdrop, we clearly expect the site to contribute positively to EBITDA from 2027 onwards.

Now Hary already highlighted the very smooth start-up also project execution was, I would say, flawless really amazing what the team has achieved. And as a consequence, also the CapEx for the entire project from 2019 to 2028, amounts to just EUR 8.7 billion and is considerably below the original budget. Talking about depreciation. So depreciation is expected to amount to more than EUR 500 million per year in the future starting this year. Now it's also important, and this brings me to the end of our presentation to look ahead, what are the focus areas now following the successful start-up. And here, I can say that, of course, it's a new site. It's a new baby. However, the expectations from management to the performance of the team is just the same as if we talk to our teams in Nanjing, in Antwerp, in Freeport or in Ludwigshafen. So we expect continuous improvement. We expect high asset effectiveness. We expect a great performance when it comes to operational excellence measures.

So now transitioning into a steady-state operations. We started already with cost reduction programs, streamlining day-to-day operations. And here, I would say we have one fantastic advantage compared to other Verbund sites, and this is the amount and quality of data we have, we get out of our new plants because we invested into more sensors into all of the state-of-the-art opportunities that come with AI and digitalization. And this will help us to make a lot of progress on a steep learning curve and further optimize the setup and interaction between all the plants in Verbund.

We talked already about the advantages we have when it comes to green transformation, thanks to the 100% green power supply and the intrinsic advantages we have through the setup we have chosen for the site and the leading cost positions. And from that, I believe we have really built a fantastic platform here. And I'm also confident that you will hear many positive news in the years ahead of us.

And now we are glad to answer your questions.

Yes, I would like to open the call for your questions. [Operator Instructions] The first question will be from Christian Faitz, Kepler Cheuvreux. We will then have Chetan Udeshi. But now, first one is Christian Faitz.

Two questions, please. First of all, how certain can you be of the expected still overproportionate growth of the Chinese market into 2030 as you elucidated on Slide 5 of your presentation. I mean for one, China is already more than 40% of global chemical markets. And according to our data, you just cited apparently even more than 50%. And some geopolitical factors have necessarily changed over the past 18 months or so, Liberation Day, Iran conflict, et cetera, just to name the most important ones. So would this mean a shift away from China, at least in terms of growth? Or what is your perspective there?

My second question, as we have the opportunity to talk to you, Markus, as CEO in the last month of Q2, would you mind providing us with the trading update of the key trends you have observed so far in Q2. Are chemical customers, for example, still panic buying as they are afraid that logistics globally might be more challenging going forward? And how do you assess underlying demand in your key customer industries?

Yes. Thanks, Christian. Markus here. I will try to take both questions, starting with the first one. Of course, these are projections, but please also look at the time frame that we have also taken here, we are not speculating now for the next 15 or 20 years. This is really an outlook for 2025 until 2030. So it's fairly certain. And I would say, also is very much in line with what we are observing already in 2026.

As you know, chemical market growth has in China been significantly above 5% last year in 2025 and also continues this year with a very strong demand. Now short term, this is certainly overproportionately driven by export growth of customer industries, but we still believe that there is a robust domestic demand developing also in China. And this is also, I think, from our perspective, at least underlined by a solid fundamental, let's say, policy directions in China. So short term, until 2030, I think we're fairly certain that this picture is valid. And it, of course, is also particularly impressive in comparison to the rest of the world where we do not see any chemical demand growth, and this is particularly due to the weakness that we are seeing in customer industries in Europe and in North America.

So yes, China looks a little bit better relative to other regions. But in general, the short-term outlook from our perspective is at least fairly robust, plus/minus the usual ups and downs, but China has, again, in the Iran conflict from my perspective, at least proven its resiliency when it comes to industrial value chains. China has, let's say, reacted or has been affected much less than people have predicted in early March.

Second question on Q2, let's say, current trading, I have not seen the May results, I have to say. But based on what I've seen in terms of volume development, I can say that the short term spike that we have seen when it comes to volume, especially in March, slightly lower than in April is somewhat normalizing. So May looks more like April than it looks like March. So this is what you call panic buying, I would say, this was certainly a certain insecurity in value chains in particular, in Europe, that is somewhat tailing off. But what we continue to see is a rather robust price development when it goes -- when you compare April, May, we still see some areas where pricing has even strengthened.

So overall, I would say, May looks like a continuation of a fairly strong April. So we expect that in Q2, we should be able to come in around analyst expectations given the current dynamics. But of course, we have to wait until June is in. We see somewhat of a, let's say, overall normalization, so no big hectic effects, but the inflation overall is, of course, not going away within security in Iran not tailing off.

Again, congrats on the site.

Now we move on to Chetan Udeshi, JPMorgan. We will then have Matthew Yates. But first, Chetan Udeshi. Please go ahead.

Quite impressive in terms of delivering this project within the budget. And I heard one of you guys talk about it being a baby. It doesn't look like a baby it at all, but just kidding here. The first question I had was just looking at that slide where you're talking about the growth in your business in China from 2015 to '25, 11% EBITDA growth. I was just wondering if you had any figures for how does your returns compare in China to BASF Group returns? Is China already, would you say accretive to your group returns at this point? If -- I mean, of course, the new Verbund is still ramping up, so it's probably dilutive. But I'm just curious if we were to strip that out, would you say your remainder of Chinese businesses are at this current point in time, accretive to your group returns? That would be the first question.

And second question, you talked about all of the new technologies that you adopted in your new Verbund site in China. Can you give us any sense of how for, let's say, the same product? I mean, you can take ethylene, ethylene oxide, vitamins, probably we don't produce vitamins there. But for the same set of products, how does the cost of this site compare on a like-for-like basis, what you say would have in terms of cost in Europe or U.S. for those products?

Thanks, Chetan, Markus here. I'll start, and then I'll ask Stephan to complement, especially first question. I can -- what I can say, first of all, I can say, Chetan, you're right, it's a baby, but it's a big baby. So that's for sure. So -- and the birth was also quite lengthy. So we're happy that it's out.

So return on our China business. I mean if you look back over the last 15, 20 years, and this, as you can imagine, we've done this extensively, you can say that our China business has been over almost every year accretive to BASF Group's profitability. Even when you look at very, let's say, holistic numbers like return on capital employed has always been in China above also some of the other reference sites that we would consider very good Verbund sites in our global network. So overall, the China business in general and even our Verbund site in Nanjing has been overproportionately profitable. And that is also our expectation, of course, now going forward that the China business is accretive to BASF Group results.

Now you're right, market has changed. China is much more competitive in the 2020s than it was in the 2010 and will likely be more competitive in the 2030s because it is now a really mature and very competitive chemicals market. That's why we brought our best stuff there, and that's why we bring our great -- best technologies there.

And with this, maybe Stephan, from your perspective, your comments on the profitability development and then maybe also product or technology comparisons.

We have always brought the latest technology to China. We did this at the Nanjing Verbund site, we did it at our sites in the Greater Shanghai area with the MDI asset we built in Chongqing, and this is paying off. It's a combination of the technologies we bring, but it's also the way how we operate the sites. And here, you can always make a difference. And this now brings me to this aspect of your question where you're asking, what do all the data and the digitalization and AI tools really help you in terms of achieving a cost advantage.

The point is at the end of the day, when you invest, it's important that your plants really run 24/7, 365 days a year. You don't want to have any hiccups. Any unwanted unplanned shutdowns. You want to be always back on track as soon as possible. And here, we can see when we compare to peers, but also when we compare BASF internally that our asset park in China shows the best performance globally. And I'm pretty sure that now with the newest technologies and what we built in Zhanjiang, this will even set new benchmarks over time when we advance on the learning curve.

Now comparing this between different regions is difficult because you have a different raw material base, you have different partners across the fence. But what I can say is, if you look now into the cost position of some of our key products like acrylic acid or butyl acrylate that I mentioned or NPG, products where already today, we are extremely cost competitive in China. Now if we compare the new plants in Zhanjiang with the assets in Nanjing, I can say this is, again, a further reduction in cash cost position. So we are very much to the left side. And in the example that I'm just mentioning, the cost leader in the Chinese producer landscape. So this will pay off over time and really further improves our position in key value chains of BASF.

And last point maybe, Chetan, what's always important is, for us, is the cost position in the region that our assets are in. So comparing now the absolute, let's say, cost of goods sold of Zhanjiang to Ludwigshafen to Geismar is not so relevant because most of our products actually do not travel so much. So we're not a polyethylene producer where you are moving your assets to the lowest feedstock region and then distribute from there to the world.

But our products that you've seen in Stephan's presentation are typically in the region for the region, and this is why you have to be competitive where you are. So for us, for example, despite the fact that we might have lower cost because we have newer assets in Zhanjiang for certain of our products, we would not -- it would not make sense for us to ship them from Zhanjiang to Europe because we have also very competitive assets here in Ludwigshafen even if they are older. So for us, the competitiveness in the respective markets is much more relevant. And that's why you heard us often talk so much about the relative cash cost position in China.

We move on to Matthew Yates, Bank of America. We will then have Sebastian Bray. But now, Matthew Yates.

A couple of questions, please. One, a bit short term in nature. You haven't updated the guidance for 2026, about a slight loss on the plant versus what you gave in Antwerp late last year. I would have imagined, given the comments Markus was making about the volume development, the feedstock flexibility that you've highlighted this site has that you haven't been able to more capitalize on the current situation with the feedstock constraints that the others have. Is that to say you haven't benefited or simply today wasn't the right time and format to review that guidance?

And then the more sort of longer midterm question, coming back to what you were saying about Chinese demand growing circa 4% over the coming years. I guess what we've seen is that supply has probably been growing at twice that rate. So in light of recent developments, have you seen or heard anything on the supply side of this industry that may mean some of the planned capacity additions from other companies are maybe deferred or canceled?

Yes. Thanks, Matthew. I would say how did you phrase it today is not the right format and the right time to update it. But let me give you some color on this. Of course, the last months have been extremely dynamic also in China. We started the year, January, February, as expected. And as you know, and I think Stephan has alluded to it, the start-up phase of such a big complex is, of course, coming with significantly additional costs. But we were super happy with the ramp-up that the team was able to do.

So we went, as we have also predicted here in some of these calls with you, into high utilizations amazingly quick. So that helped. And then, of course, March was a positive surprise. I think we even mentioned in the last quarterly update, that in March, the Zhanjiang site was positive because of the special effects, high -- or a lot of shortages in China. So strong price hikes that we've seen for some of our products in China. April was also positive. But we also have to now see what I said earlier, that Chinese is this big market with a lot of abilities to recalibrate and we're seeing already things in China normalizing somewhat. So yes, we had some special effects, but it's too early to call it a day.

So we stay cautious for the second half because we are seeing also now feedstock volatility, of course. And as you can imagine, if you have one naphtha cargo coming in and you bought it the wrong time, that puts your pressure on the margins also going forward. So this extreme volatility just lets us to be a little bit cautious. But I would say year-to-date better than we thought, whether that leads to a better outlook for 2026 on Zhanjiang is still to be seen. But anyway, I think, and as you heard maybe Dirk also say this, we're staying somewhat cautious for the second half of the year because of the situation in the Middle East.

Maybe your second question, Matthew, how do demand and supply develop over time in China. When it comes to demand as Markus said already, we are quite confident. Just to give you a number, every year, still 15 million people move from the countryside to cities in China. This is not to Beijing or Shanghai or Wuhan is to Tier 3 or 4 cities. But nevertheless, they get better paid jobs. They develop a more sophisticated lifestyle. This all translates into demand that we see ultimately in our customer industries.

Also the real income of households continues to increase. If you take the households with an income of more than 170,000 RMB in 2020 real terms. So this year, is currently increasing from 45% back in 2023 to 62% by 2030. So the purchasing power -- and this is the underlying -- one of the underlying reasons why we see still strong demand growth China. But you are absolutely right.

At the same time, we see a lot of investment in the chemical industry. There was like a backlog. It had to do with the COVID pandemic, and there are still capacities coming on stream. But what we see at the same time is also that for the first time, I would say, since I'm following this, the Chinese government is paying high attention also to the supply side. And very recently, you may have seen that the Ministry of Industry and Information Technology has issued document, document #72, it's called, where they announced a rolling plan starting next year to screen all assets in the oil and chemical industry that are older than 20 years and to apply a risk-based approach to decide if they have to be phased out, upgraded or reconstructed.

And this is now, I would say, a very tangible document that somehow shows the plan they have to really make it happen that they take out plants that are not only unsafe, but are also not up to date when it comes to emission control and energy efficiency. So I'm convinced this will medium term become visible. You won't see it now next quarter or beginning next year. But over the next 3, 4, 5 years, this will help to bring again demand and supply into a balance in China.

One additional point, and this gets from my perspective, still too little attention is, of course, now the sustainability direction that the Chinese government is taking under the 15th 5-year plan, which makes decarbonization targets now politically enforceable in China. You all have heard that in the past, provinces in China have competed with each other on GDP growth, and that spurred certainly a lot of investments because investment comes to GDP and so forth. So there was this competition on GDP numbers.

So in the new framework, there's a so-called 5+9 framework, and this includes 5 binding indicators, total emissions, carbon intensity, coal and oil consumption, non-fossil energy share and 9 supporting indicators that are binding targets for the provincial governments. And this will also lead to a curtailing of capacities that are not contributing to these factors. So this, again, as Stephan said, is nothing for the next 6 months, but it sets in motional direction that in China will lead to a higher quality and less so to say, evolution growth. And that's why also we believe that we are, with our leading carbon footprint site in China, in the right place at the right time.

We now move on to Sebastian Bray, Berenberg. We will then have Laurent Favre. [Operator Instructions]

Congratulations on the new facility. I have 3, please. The first one is what type of run rate is this facility going to hit in volume terms at the end of '26. Is it just maxed out? Is it running as hard as possible? My second is on the definition of mid- to upcycle. If I look at the Chemicals segment of BASF more broadly or even materials, the peak and trough EBITDA are multiples away from each other, and yet the mid- to up-cycle guidance of this plant is 1.0 to 1.2. If you were to broaden this to, let's say, all plausible outcomes with 0 being the lowest because it probably will be close to this year. What would you say is a potential high point?

And my third one is India. I remember BASF was toying with the idea of building a EUR 2 billion acrylics-focused facility in that geography a few years ago. Is this going to be an export facility for India? Or are there any plans even in the early 2030s to add capacity there?

Yes. Maybe let me take the first question about the run rate. I think the first good news is that all our assets are healthy. So not only that we have started them successfully at the beginning of this year starting from the cracker also to the downstream plants. So they have been commissioned and they are running fine today. So I would say there's also a little bit of mixed bags of the run rate because for products that we consider downstream, typically also, it requires a ramp-up time due to qualification of the customers, acceptance of the customers. So that differs from between product to products.

But for the upstream, typically, today, we don't have any raw material constraint and assuming that all economically support that, so we are aiming, of course, to run the site at a maximum rate that we can. Today, so on average, just to share that with you for the month of January to May, if I may already include May into the pictures. So we are probably close to around 80% of our run rate for the entire site on leverage. So definitely, this is also in line with also our statement that this year is still the year of optimization because the entire Verbund is brand new. So this is -- requires a lot of optimizations and also like downstream products require the acceptance of the customers. And -- but of course, our goal is to ramp up this as soon as possible.

So Stephan, maybe -- or Markus, for the question number 2?

Maybe I'll take the question -- on the very difficult question around mid- to, what do we call it, mid- to up-cycle conditions for margins. It's very difficult. And also I'm struggling with myself to whether I want to give you a number because I'm also struggling to be where do I put myself on the 0 to 10 scale because it's, of course, also product dependent.

There are products like -- let's take MEG as an example, which is certainly a product that in the past has been a significant import product in China. China has become much more resilient and is producing much more products for -- like MEG now locally and have different raw materials also. MEG is made in China from coal. It's made from naphtha as a product from the steam cracking and it's made also in other ways. So it's very difficult to now predict for each and every product and now where will we be in a few years.

In general, I have to say, even with the recent increase in commodity margins over the last the 2 to 3 months. We are still not overall globally at what we would call mid-cycle conditions, and we are still far away from what we have seen as up-cycle margin. So there's still a way to go. And since China is becoming more and more a price setter for product also in the rest of the world, especially in markets like Southeast Asia, India and Latin America and increasingly also in Europe, I would say that the supply-demand rebalancing in China will, at the end of the day, determine when we will be at mid- to up-cycle conditions, what we have anticipated also in our strategy. But it will certainly be towards the end of decade and not in 2026 or '27. So not a number, but I would say we are at least preparing us for a slow but steady recovery on top of the volatility that we are seeing, of course, the up and down will not go away.

India, Stephan, do you want to take?

Yes. India is definitely an interesting market. We have defined India as 1 of the 7 advanced countries in our winning ways strategy because we see that there is now more and more investment into industrial production, into manufacturing, which translates into demand in our customer industries. So the size of the Indian chemical market is becoming more relevant. But you also have to take into account that if you compare the Indian chemical market to the Chinese chemical market, there is a difference of a factor of 15, 1-5. So I would also say the Indian chemical market fits into one larger Chinese province. But nevertheless, it's fast growing. It's interesting.

But coming to one aspect of your question. India is definitely not a platform to produce chemicals or plastics for export. So if we look into opportunities in India, it's for the domestic market. We would need a very competitive setup in one of our key value chains. It's something we are considering, but we are not in a rush.

We are not in a need to do anything at this and you also know our guidance when it comes to CapEx. We want to stay below depreciation levels. So yes, there's opportunities. We will always look into opportunities in India, but it's too early now to come to a decision point or to make any announcements at this stage.

Yes, Sebastian, I think your question was also whether we are supplying maybe India from Zhanjiang. That is certainly not the intent. But as Stephan said, we believe in India, we believe India is a very promising market for chemicals in the next decade. So we are thinking about investment oppurtunities also in India because I don't believe that at the end, you can be long term successful by importing products into India. But we're doing this, of course, right now, successfully, for example, also from our Southeast Asian Verbund in Kuantan. But also from Europe, we are importing into India now with the new free trade agreement with India that even is more competitive. So overall, we are preparing India for the next growth phase, but we have nothing imminent yet, but we believe in strong local chemical production in India for the next decade.

So now it's Laurent Favre, BNP Paribas.

Yes. I guess my question is going back to supply and supply rationalization. I think that including your project from 2016 to 2030, we're meant to see I don't know, 25 million-plus tonnes of new capacity in China. I'm wondering in your thoughts on the recovery to mid-cycle on the other side, how much rationalization do we actually get? So maybe a further view on how many of those facilities don't make the 5+9 cut? And to what extent do you think that those facilities would not upgrade, modernize and decarbonize?

Yes. Of course, also, Laurent, difficult now to go product by product. But I would always caution when we look at these big numbers, so 25 million tonnes of additional capacity, if you deduct what is -- what I would consider products that are outside of our scope, polyolefins, PVC, those types of large-scale commodities, you come already to a much smaller number because most of the announcements, especially the large joint venture announcements that are now made by Middle Eastern players with some of the state-owned companies also private companies in China. They are mostly geared towards creating autonomy in China with regards to ethylene and ethylene plus 1 product. And that's not our playing field.

Yes, we also have a polyethylene plant, but there is this -- as Stephan said, is more a scale enabler. This is not a strategic business for us. So it's always a little bit from our perspective, at least over pronounced, so to say, if you look at these big headline numbers of capacities. However, also in our value chains, we have overcapacities in China, for sure. But as you have also seen, and that's why Stephan has mentioned also these customer examples. If you break it down to individual opportunities, value chains and locations, China is not one market. You have to look at what is happening in the province in Guangdong. Do you have customers that can provide you a baseload with these with these plants? You have seen this example of this long time -- long-term BASF customer, Youyi, they can take -- if you are successful with them, if you have a partnership with them, they can take the output of an entire BA plant at once, so to say, that's the annual demand. So there is no other customer like this in the rest of the world. It just doesn't exist outside of China.

So you have to break it down to the very individual level. And yes, we are fighting with overcapacity. We are fighting with long markets in China, and we're fighting with historically low margins at this point in time. But I'm sure that there's plenty of opportunities to position ourselves with these product lines that we have successfully also in the Chinese market. What we are seeing, however, is also when we talk to some of our partners, it's much more difficult to get permits for new capacities in China. And often, when a modernization or new capacity is planned, the Chinese government asks also for rationalization of old high energy consuming, high-emission plants, and we are seeing this also in the Nanjing cluster, for example, where we're operating, the restructuring of the ethylene landscape or cracker landscape in Nanjing will not lead to an overall expansion anymore.

It will lead probably to a modernization in line with the 5+9 targets, but the times where the Chinese government and local governments are incentivizing or endorsing significant capacity expansion seem to be over. And also the pipeline of announcements of Chinese competitors for new investments is from our perspective, at least slowing down. However, whether this becomes reality or not the next years will show. But at least from our perspective, the trend is clear. But again, we should not expect a fast-turning ship that this will be rather a slow turning tanker.

Maybe to add one aspect that shows how determined the Chinese government is to really stoped the agglomeration of new overcapacities. Until very recently, new cracker projects in China could be approved by NDRC, the National Development and Reform Commission, this is no longer the case. From now on the State Council has to do the formal approval. So it shows how serious this is now and that is on the radar screen even of the higher economics in government to avoid overcapacities long term.

There are no further questions. So this brings us to the end of today's virtual deep dive on our new Verbund site. We hope you found it informative and insightful. We will present our second quarter results July 29. Should you have any further questions today, please do not hesitate to contact a member of the BASF IR team. Thank you for joining us today, and goodbye for now.

Good morning, ladies and gentlemen. On behalf of BASF, I would like to welcome you to our conference call on the first quarter 2026 results. Today's presentation is being recorded. [Operator Instructions] Today's presentation contains forward-looking statements. These statements are based on current estimates and projections of the Board of Executive Directors and currently available information. Forward-looking statements are not guarantees of the future developments and results outlined therein. These are dependent on a number of factors. They involve various risks and uncertainties, and they are based on assumptions that may not prove to be accurate. BASF does not assume any obligation to update the forward-looking statements contained in this presentation above and beyond the legal requirements. With me on the call today are CFO, Dirk Elvermann; and Christian Jutzi, President of BASF's Corporate Finance Division. Please be aware that we have already posted the speech on our website at bsf.com/Q1-2026. Now I would like to hand over to Dirk.

Yes. Good morning, everyone. Christian Jutzi and I welcome you to our Q1 conference call for analysts and investors right before our Annual Shareholders Meeting today. The first quarter unfolded in 2 phases. In the first 2 months, we saw moderate growth driven by China. Since March, developments have been shaped by the conflict in the Middle East and the closure of the Strait of Hormuz to seaborne transport of oil, gas and chemicals. In this demanding market environment, BASF demonstrated resilience and achieved EBITDA before special items of EUR 2.4 billion compared with EUR 2.5 billion in the prior year quarter.

Let's start with a closer look at the sales performance of BASF Group compared with the prior year quarter. Overall, sales declined slightly on account of strong currency headwinds and lower prices. However, we achieved solid volume growth. All segments increased volumes, except for Surface Technologies, where they declined slightly. Volume growth was most pronounced in the Petrochemicals, Monomers and Nutrition & Health divisions. Thanks to the successful and on-time start-up of our new Verbund site in South China and already high utilization rates, the Petrochemicals division was able to capture strong volume growth. Volumes in the Monomers division rose significantly, especially for isocyanates and ammonia. Following the restart of our vitamin production in Ludwigshafen last summer, the Nutrition & Health division also recorded considerable volume growth.

Compared with the prior year quarter, prices declined, particularly in the core businesses. This resulted from ongoing competitive pressure and lower average raw material prices in Q1 2026. In the Surface Technologies segment, we achieved significant price increases, mainly due to higher precious metal prices. In Agricultural Solutions, prices were almost stable. Due to the sharp rise in raw material prices in March, notably for naphtha and natural gas, we announced price increases across our product portfolio as existing contracts allow. The impact of these price increases is expected to come through in the second quarter.

Adverse currency effects dampened sales in all divisions and were mainly related to the depreciation of the U.S. dollar and the Chinese renminbi compared with the prior year quarter. Portfolio effects only slightly lowered sales and were mainly caused by the sale of BASF's Decorative Paints business on October 1 and BASF's Food & Health Performance Ingredients business on September 30 last year. Due to this underlying sales development, EBITDA before special items declined by 6% and came in at EUR 2.4 billion. Disregarding the currency headwinds of more than EUR 100 million, EBITDA before special items would have reached the level of the prior year quarter.

Let's briefly turn to the regional volume and price development compared with the prior year quarter, excluding metals. We achieved volume growth in Greater China, thanks to our new Verbund site in Guangdong province, especially the Chemicals segment benefited from the new capacities and increased volumes. However, prices in Greater China declined primarily due to the imbalance between supply and demand, particularly in the upstream businesses. In Asia Pacific, excluding Greater China, we also recorded considerable volume growth driven by the Nutrition & Care and Surface Technologies segments. In this region, prices decreased, especially in the Materials and Chemicals segments.

In Europe, the solid volume growth was mainly attributable to the Materials, Nutrition & Care and Agricultural Solutions segments. Prices in Europe declined, especially in the Chemicals, Materials and Industrial Solutions segments. In North America, volumes were stable, while prices excluding Metals slightly declined. Particularly in the Chemicals segment, prices were lower than in the prior year quarter. In the region South America, Africa and Middle East, volumes declined mainly on account of materials. All segments recorded lower prices, except for Surface Technologies. Please note that sales to customers in the Middle East accounted for less than 1% of BASF Group sales, both in '25 and the first quarter of 2026.

Over the past weeks, we have received many questions regarding the conflict in the Middle East and the blockade of the Strait of Hormuz. Global supply chains are under severe stress and feedstock availability is a challenge for the entire chemical industry. We have activated a cross-divisional crisis response team comprising procurement and the businesses to foster clear communication, mitigate risks and capture opportunities. For the coming weeks, we do not see significant supply risk for our production. Our setup makes us more resilient and better positioned to keep our customers well supplied. What sets us apart from many of our competitors are the following factors: First, with our broad and well-diversified product portfolio, BASF serves numerous customer industries worldwide. Through our long and multiple step value chains, we generate high value add.

Second, BASF's local-for-local production approach and large integrated Verbund sites in all regions ensure more stable production compared to stand-alone non-backward integrated sites. In addition, we operate flex-feed steam crackers in Antwerp, Zhanjiang and Port Arthur that can use naphtha and other feedstocks. This gives us flexibility in the use of raw materials. Third, BASF is one of the few chemical companies with its own dedicated trading business for key feedstocks, which provides flexibility and optionality. We can source key raw materials such as naphtha, methanol or benzene, either globally or locally, whichever makes more sense at the time.

Importantly, our trading activities typically handle volumes that are significantly larger than what we use to cover BASF's own demand. This gives us broad access to the market, increased flexibility and the ability to respond quickly when supply chains are under stress. In short, scale is a key source of resilience for BASF. As outlined in our Q2 2025 conference call, we have concluded 2 cornerstone gas supply agreements with Equinor and Cheniere. In this way, we ensure long-term natural gas supply, high volume flexibility and diversification across geographies, pricing models and delivery modes.

Let's now look at the EBITDA before special items bridge. In Q1 2026, considerable earnings growth in the Surface Technologies segment and slight earnings growth in the Materials segment were offset by lower contributions from the Chemicals, Agricultural Solutions and Nutrition & Care segments as well as other. Earnings in the Industrial Solutions segment were stable. Compared with the prior year quarter, EBITDA before special items in the Surface Technologies segment rose significantly, mainly due to Environmental Catalyst and Metal Solutions. The increase in earnings in the ECMS division resulted primarily from higher contributions from precious metal trading. Lower fixed costs as a result of one-off payments in connection with the successful resolution of a litigation matter also helped to boost earnings.

In the Materials segment, earnings rose slightly on account of the Monomers division. Lower fixed costs and higher contribution margins contributed to the improvement. EBITDA before special items in the Chemicals segment declined considerably, mainly owing to lower contribution margins due to the global overcapacities. A higher turnaround intensity in comparison to the prior year quarter, for instance, at the Port Arthur site contributed to the decline in petrochemicals. Furthermore, we incurred higher fixed costs due to the start-ups of the new Verbund site in South China. Let me highlight, however, that in March, the Zhanjiang Verbund site already delivered a positive EBITDA before special items. This demonstrates how quickly economics can change in a volatile market environment.

Overall, the earnings of the Chemicals segment improved gradually during the first quarter of 2026. Earnings in the Industrial Solutions segment matched the level of the prior year quarter as slightly higher contributions from the Dispersions & Resins division compensated for slightly lower contributions from the Performance Chemicals division. The Nutrition & Care segment generated considerably lower EBITDA before special items, owing mainly to the price-related decline in the contribution margins of the Care Chemicals division. By contrast, earnings in the Nutrition & Health division improved substantially, thanks to significantly higher sales volumes as well as reduced fixed costs. In Agricultural Solutions, earnings decreased slightly, largely due to currency-related declines in contribution margins. Slight volume growth in all regions supported the earnings development. EBITDA before special items and other decreased significantly, largely due to a measurement effect from derivatives related to hedges. And with that, I will hand over now to you, Christian.

Thank you, Dirk, and good morning, everybody. Let's now take a brief look at key financial figures. At EUR 2.4 billion, EBITDA before special items decreased slightly compared with the prior year quarter. Cash fixed costs declined by around 5% to EUR 3.9 billion. This is the result of our ongoing restructuring efforts as well as positive currency effects. EBIT, not shown on the slide, improved slightly and amounted to EUR 1.3 billion. In Q1 2026, we incurred special charges in EBIT of around EUR 170 million compared with around EUR 430 million in the prior year quarter. Special charges were largely related to restructuring measures. Net income improved by EUR 119 million and came in at EUR 927 million. Free cash flow rose by EUR 423 million to minus EUR 1.4 billion. You will find more details on the following slide.

The increase in cash flows from operating activities by EUR 185 million was primarily due to dividends received from Wintershall Dea, which were paid after Wintershall Dea had been reimbursed under the federal investment guarantees. Lower earnings with cash impact, higher severance and bonus payments and increased cash consumption due to the price-related buildup of precious metal trading positions lowered the increase in cash flows from operating activities. As in the prior year quarter, changes in net working capital led to a cash outflow of around EUR 3 billion and were mainly related to changes in accounts receivable in our Agricultural Solutions business following the start of the season in the Northern Hemisphere.

Payments made for property, plant and equipment and intangible assets were reduced by EUR 238 million compared with the prior year quarter to EUR 578 million. Free cash flow came in at minus EUR 1.4 billion compared with minus EUR 1.8 billion in Q1 2025. Typically, BASF's free cash flow is negative in Q1 and recovers over the course of the year. This is mainly due to the seasonal nature of the Agricultural Solutions business.

Let's now turn to our balance sheet at the end of the first quarter compared with the end of March 2025. At EUR 81.8 billion, total assets were almost at the prior year level. BASF's equity ratio amounted to 43.4% and remains solid despite the ongoing share buyback program. Net debt was unchanged from the end of March 2025 and higher than at year-end, reflecting the seasonality in our Agricultural Solutions business. We continue to have a single A credit rating, which ensures unrestricted access to financial markets and favorable financing conditions. This is especially relevant in times of high volatility and unpredictability. Fitch, Moody's and S&P all recently confirmed BASF's single A credit ratings.

In the coming quarters, we will focus on deleveraging. The maturity profile of outstanding bonds and loans shown in the lower part of the slide will support this. In the first quarter, we already repaid a euro-denominated bond with a nominal value of EUR 1 billion. In the following, I will give you an update on the implementation of BASF's cost savings programs. We are convinced that we will achieve our targeted annual cost savings of around EUR 2.3 billion by year-end. At the end of March, we had already achieved a total annual run rate of EUR 1.9 billion. We continue to expect total onetime costs of around EUR 1.9 billion, of which we incurred EUR 1.6 billion by the end of the first quarter. This shows the positive momentum in bringing down our cost base and the ongoing management focus on this crucial topic. And with that, back to you, Dirk.

Yes. Thank you, Christian. Before we move on to the outlook, I would like to reiterate BASF's capital allocation framework. And I will start with cash contribution shown on the left. As you are aware, we expect to close the coatings transaction with Carlyle in the second quarter, subject to customary regulatory approvals. We will receive pretax cash proceeds of around EUR 5.8 billion at closing. Taxes are assumed to be in the mid-triple-digit million euro range. We are also making good progress with the monetization of our oil and gas assets. In the first quarter, proceeds from the sale of a portion of our Harbour Energy shares amounted to around EUR 300 million. The largest tranche, 80 million shares was sold via an accelerated bookbuilding offering. Our remaining shareholding in Harbour Energy now stands at around 30% when considering all shares outstanding.

As we have stated on several occasions, we consider our participation in Harbour Energy to be a financial investment and BASF's strategy remains to exit over time, being mindful of the value. Furthermore, as mentioned earlier, we received dividends from Wintershall Dea of almost EUR 800 million related to the federal investment guarantees for expropriated assets in Russia in the first quarter. With these payments and the payments in the second half of 2025 amounting to EUR 900 million, the insurance claims of Wintershall Dea under the capital coverage have been settled.

Now let's move on to the use of cash on the right-hand side. We are committed to attractive shareholder distributions. Subject to the approval of today's Annual Shareholder Meeting, we will pay a dividend of EUR 2.25 per share on May 6. We have been buying back shares since November 2025. The program with a volume of up to EUR 1.5 billion is scheduled to be concluded by the end of June. So far, we have bought back shares under this program for around EUR 880 million or around 2.2% of the outstanding shares. These share buybacks are part of the total buyback volume of at least EUR 4 billion by the end of 2028 announced at our Capital Markets Day in September 2024. As mentioned before, we will use a considerable part of the cash proceeds to deleverage. Compared with the prior planning period, we will reduce capital expenditures in the next 4 years by roughly 20%. CapEx will consistently stay below depreciation until 2028. We will also consider value-accretive M&A as a potential lever to strengthen and grow BASF's core businesses.

And now let's turn to our outlook. Given the high level of uncertainty about how the conflict in the Middle East will play out, BASF is not, at this time, changing its assumptions regarding the global economic environment in '26 that were presented in the BASF Report 2025. From today's perspective, the assumptions made in February regarding growth in global GDP, industrial production and chemical production may prove to be too optimistic. The oil price may be higher than our existing assumption, owing to impeded production and exports as a result of the conflict in the Middle East.

The U.S. dollar may appreciate compared to the euro, which would have a slightly favorable effect. For now, the BASF Group's forecast for the 2026 business year published in the BASF Report 2025 is therefore maintained, including EBITDA before special items of between EUR 6.2 billion and EUR 7 billion and free cash flow of between EUR 1.5 billion and EUR 2.3 billion. CO2 emissions will likely be between 17.2 million metric tons and 18.2 million metric tons. We are, of course, closely monitoring the situation in the Middle East and will leverage opportunities and mitigate risks. And now Christian and I are glad to answer your questions.

[Operator Instructions] We will start with Katie Richards from Barclays, then have Alej Vigil and then Thomas Wrigglesworth. But now Katie Richards, Barclays.

I'll just ask a few on guidance then, please. So you've chosen to maintain the range at EUR 6.2 billion to EUR 7 billion. Can you comment on whether the recent pricing and spread movements leave scope to exceed the higher end of this range? Or is it too early to assess? And could you also give us some directional guidance on Q2, please? Do you think it will be fair to say it's stronger or in line with the estimates we've seen for Q1 today?

Yes, Katie, thank you for your question. Let me take this one. So first of all, when it comes to the outlook, let me say we are really satisfied how the first quarter came in. This is in a very challenging environment, I think, a great and tremendous achievement by the team. We are optimistic for the second quarter. We see pricing power across many of our businesses that will now unfold in the second quarter. The first quarter was still bound by contractual terms that were negotiated earlier. But now in the second quarter, I think the pricing power that is now coming up will unfold. So short term, we are optimistic.

And then for the rest of the year, there is a question mark, of course, like everybody has a question mark right now because we do not know for how long the crisis in the Middle East will continue. And we do not know yet how the demand pattern will continue. So far, we see no declines in demand, but we can, of course, not be certain that the current demand levels will uphold depending on how this crisis goes on. So therefore, we said everything that we would now change would be arbitrary. So let's stick to the numbers that we have, which is still our best estimate. But of course, we are mindful that there might be changes in the second half of the year. And once we see that clearer, we will certainly react. But for now, we see no reason to change, and this is why we do not change it.

Looking into the second quarter and giving you a little bit more flavor on the respective businesses, let me say the following. Starting with upstream. For the Chemicals and Materials segments, we are expecting considerable improvements in earnings compared with the prior year quarter. And this, of course, has to do with the current situation in the Middle East. We are -- the businesses are certainly benefiting from tighter supply conditions and also get pricing power. On top of that, also Zhanjiang, which already contributed positively in March, as I've said, will do its part to the results of chemicals. On the other hand side, we will also have a turnaround of a cracker in Ludwigshafen. So we should also not be too optimistic. But I think overall, for Chemicals and Materials, the picture for Q2 is good.

For Industrial Solutions, make the story short here, we would also expect to come in above the prior year quarter. There we are continuing with good restructuring. We also see solid demand, and we see overall a good market environment for the second quarter. And then when it comes to Nutrition & Care, I would say we should come in around previous year's quarterly level. We have challenging market conditions, particularly in Care Chemicals, which are also likely to persist, but we also see some room for a betterment here.

And then on the Health side, with the revamp of our vitamins grid, we should certainly see a continuation of positive contributions, which we already shown in the first quarter. Surface Technologies is expected to be below the previous year quarter level. Automotive market, as we all know, is lower compared to 2025 and the PGM prices are also doing their effect. And for Agricultural Solutions, the business is fundamentally really a good one, I have to say. The result that we saw in the first quarter was impacted by FX effects, mainly otherwise, the colleagues would have achieved more or less the same result as last year.

What is a slight watch out, of course, is the pricing and buying power of the farmers. They anyway still suffer from soft commodity prices, which are not very high. And on top of that, you see now fertilizer prices also spiking due to Strait of Hormuz, and that is then impacting the buying power of the farmers as well. So putting all of this together for the second quarter, as I've said, a positive outlook beyond the second quarter, too early to tell.

So we move on to Alej Vigil, Santander.

One is more strategic, looking at the situation in the Gulf, in your conversations with your clients, you see additional boost to the reshoring to be closer to the clients, to be local for local. That's the first question. And the second question is about your expectations in terms of net debt by the end of the year. I think there are many moving parts, the working capital first quarter, the divestments. If you can give us an indication on how you expect to be at the end of the year.

Alej, I take the first question, and Christian takes your financially related questions afterwards. So yes, indeed, Alej, we see that the resilience that we have built over the last couple of years is now playing out. I think the good Q1 result and also the good prospect for the second quarter is thanks to a couple of factors. One being, and you mentioned it, the local for local production that we have. We have, on average, 90% local for local for sales, but also for the procurement side. We do not see so far in this crisis any supply shortage for us. So the physical product supply is secured also for the second quarter of the year. We have the possibility to play our long value chains also. And this, together with the closeness and proximity to our customers is really playing off. So we see this resilience point strongly playing out these days. And Christian?

Yes. Thanks very much, Alej, for your question. So compared to the end of last year, where our net debt was at EUR 18.3 billion, went up now to EUR 20.5 billion, which is on the level of the last year, which is due to the seasonality of the Ag business. Regarding the future now, evidently, this will come down. You saw us in Q1 already, we paid back EUR 1 billion euro-denominated bond, and this will continue. There is further opportunity to reduce our net debt and pay back bonds and loans of EUR 1.2 billion, which we will do.

And then, of course, subject to the closing of our portfolio measures, we are considering further measures. There is a certain likelihood that we would potentially even pay back early some loans and/or bonds, and that would, of course, then further reduce net debt. So this is our plan. As Dirk has said, our clear capital allocation framework is laid out. We will deleverage.

So now we move on to Thomas Wrigglesworth. We will then have later on Christian Faitz, Matthew Yates and Tony Jones. But now it's Thomas Wrigglesworth. Please go ahead, Morgan Stanley.

Two questions, if I may. Firstly, just in terms of the more downstream focused divisions where you're exposed to automotive, maybe more of the consumer durable manufacturers. What are you -- what is -- 2 things. What is BASF's message to your downstream customers around availability and pricing over the next -- through 2026? Like what are you actually communicating? And where -- and are you sensing any demand destruction in those downstream, noting that your Upstream business is obviously passing through?

And the second question, if I may. Obviously, the China Zhanjiang Verbund EBITDA positive in March, is that just a function of stocking effects that are onetime in nature? Or do you feel that's actually an underlying step-up in performance in the business that means going forward, the rest of the year will be at a minimum, maybe not EBITDA positive to neutral?

Yes. Let me start with the China question, and Christian is taking your downstream question. So first of all, let's say, we have been delighted that already in March, we could show for the site in Zhanjiang first time a positive EBITDA result. This is, of course, a function of a couple of factors. First of all, the ongoingly very successful start-up of the site, which brought up the capacity utilization very quickly. All products in spec and also very good customer relations on the ground. So that's first.

Secondly, of course, we benefited from volatility, as I've said already in my speech. So we had the possibility to react quickly here at time when Asia was impacted by this Middle East crisis. So would we dare now to say, after March, we will stay continuously positive in Zhanjiang for the rest of the year? Certainly, no. We maintain our more cautious forecast for Zhanjiang saying it will probably be rather slightly negative. But at least this is already an early signal of strong resilience also in this new site. So we are happy about it, but I would not overdo it at this point in time.

And regarding the question on the, let's say, more downstream divisions, it's quite, let's say, a change in the first quarter. What you saw in the first 2 months of the quarter was really good volume development, of course, in the Chemicals division or Chemicals segment and also in Nutrition & Care, but not so much in the other downstream divisions. And that changed in March. You really saw an uptick in the volumes. Now it's evidently very difficult to judge this because there are several things happening at the same time. On the one hand, if you look at consumer confidence, this is actually not very strong in any of the regions, neither in Europe nor in North America nor in China. And of course, the Middle East crisis is also not helping. But we did see clearly an uptick in March. Also the PMI in Europe went up. So it's difficult to evaluate now are we talking about restocking effects? Or is this really an underlying demand development? Because at the end of the day, what you see in Asia, specifically in Southeast Asia, you see really a certain supply in availability.

And therefore, actually certain imports into Europe are not coming across the board anymore. So there are certain uncertainty, which is helping demand. This is, of course, different in some of the different businesses, the business which are really growing simply strongly overall like electronic materials, which having really a good run. But others, you see really positive developments in terms of demand because there are some products which are not simply shipped anymore to the same extent as before. So this -- we're going to have to see, and this is what Dirk said earlier, we have to see how long this lasts and if this is sustainable. Regarding pricing, evidently, we now see a significantly higher freight costs. We also see higher raw material costs. Those have to be pushed through. So this is why you see price increases across the board, and they are to a large extent, also sticking.

So now we move on to Christian Faitz, Kepler Cheuvreux.

Two questions, please. First of all, on Agricultural Solutions. Given rather dry weather conditions throughout the Northern Hemisphere at this point in time, how is the inventory situation in crop protection products? And my second question would be on your share buyback program, which I believe is scheduled to be concluded by June, the first EUR 1.5 billion tranche. Are you considering to continue right after that with another tranche out of your overall EUR 4 billion buyback program?

Christian, I take the 2 questions. First, on the Agricultural Solutions, the channel inventory is currently not the biggest concern, I would say. So we see -- and you have seen a healthy volume development also in Agricultural Solutions. And on this side, I don't see a major topic. We will be able also for the rest of the year to push the volumes into the market. The bigger concern, as I was mentioning, is the buying power on the farmer side and therefore, the pricing power and of course, the ongoing FX effect. So these are the 2 bigger ones.

But fundamentally, and this I would also like to repeat, the Agricultural Solutions business is on track here to achieve what they want to achieve for the year 2026. On the share buyback program, I'm happy with the progress. I think we also see that the ongoing share buyback program is supporting us and our strategy. So we will, as planned, complete the program this tranche, EUR 1.5 billion by the end of June. And then we still have EUR 2.5 billion outstanding. For this EUR 2.5 billion, we have time until end of 2028. Will we continue immediately or take a little bit time, certainly also depends on cash in from, for instance, the coatings transactions and other elements. So long story short, we do not know yet whether we will immediately continue. It is not ruled out, but will be decided at a later point in time.

Okay. Great. Thanks, Dirk. And as always, at this time of the year, I wish you all good and most importantly, short AGM.

Okay. So now we move on to Matthew Yates, Bank of America.

A couple of quick ones. Can you just elaborate a little bit more on the extent of the maintenance schedule for Q2, just as we're trying to calibrate any constraints you may have to capitalize on this environment? And the second question is, I wondered if you could talk a little bit more about your trading business for feedstock, not necessarily something that we've talked about a lot in the past, but in this environment, as you say, potentially very interesting advantage. If you could just elaborate a little bit more on the size of that business and how it functions?

Matthew, I take your trading question, and then I think Christian can give you a short overview of the maintenance schedules. So our trading business, which we have in our so-called BASF Intertrade, this is a business that is not just -- which is apparently more than a procurement function. So we are trading on an ongoing basis, higher value volumes for all our relevant feedstock, naphtha, methanol, et cetera, et cetera, far beyond our own demand, which in normal times gives you, apart from your direct sales business, a trading result, which you typically see reflected under other.

But in these crisis times where we have to also secure our physical supply, it gives you more optionality with the higher volumes that we can procure worldwide to also put them into captive rather than to sell them on. So it gives us, I would say, a nice buffer on top of the financial support that it also yields. So that's the basic significance of the trading business, which works nicely. Secondly, in terms of market intel, obviously, we have very good insights into all the raw material feedstock markets worldwide and the Intertrading colleagues are, therefore, also an active part of our crisis response team. And with that, Christian, to maintenance.

Yes. So Matthew, regarding maintenance. So typically, in the first half of the year, you have the tar season. So this is the typical turnaround season in the chemical industry, and you saw this already in Q1, where we had Port Arthur down in the Chemicals segment. In the second quarter, the larger Ludwigshafen cracker will be offline. Of course, this will impact the Chemicals segment. We also have in intermediates, we have a couple of turnarounds in amines and a few others, formic acid that are going to impact, but that is all implied in the outlook that Dirk already gave.

So this is a material effect, but nothing unusual in this time of the season. One thing I would like to mention, as you are alluding to the current situation, we're actually taking active measures to make sure that we continue stability of supply and also supply our customers. So there, for example, in the Monomers division, we had planned for an ammonia turnaround in the second quarter, and we pushed this now into the fourth quarter in order to ensure continued supply for all our customers in the current environment.

So we will now move on to Tony Jones, Rothschild , and then we will have Sebastian Bray, Georgina Fraser and Chetan Udeshi. But now it's Tony Jones.

Firstly, on Ag Solutions, another good performance with volumes up, looks to be benefiting from your BASF's strong product mix. But I wanted to check, are there any gains in the quarter from quarterly phasing either delayed from last year or pulled forward from the next? And how are the new newly launched products going? Are there gains starting to come through there despite the credit tightness? And I suppose it would be good to check, is everything on track in the IPO process?

And then my second question is higher level really. Some companies are now starting to talk about exploring new investments in North America with the low cost and perceived lower political risk. Do you see any possibility BASF might look to assess whether it's the right time to invest again in North America either organically or via M&A?

Tony, I think I'll take both of your questions. First, on Ag, I would confirm this is Q1 has been a clean quarter. There was even due to market dynamics, I think, rather the need in the fourth quarter 2025 to do a little bit more. So if you will, the first quarter 2026 was even then a little bit weaker, but there is no big preponements or anything. So it is rather a clean quarter for the Ag division.

On U.S. investments, let's not forget, we are currently doing a very large investment with the MDI expansion in Geismar, which is fully on track, which is supposed to be completed by mid of this year. We will then ramp up quickly -- a start-up first and ramp up quickly still also within this year. So this is a big investment, which we are very hopeful for that it will also render its positive contribution extremely quickly. On top of that, as you know, we are at the end of an investment cycle. So we are fully invested, well-invested company right now. Therefore, nothing big out of the extraordinary can be expected neither in the U.S. nor elsewhere, but rather we focus now on other things and run the assets to the best of our abilities.

And best of luck for the AGM today.

Okay. So we move on to Sebastian Bray, Berenberg.

I have 2, please. The first is on regional profitability. The temptation when looking at these results is to say, well, BASF has benefited quite heavily from global footprint, particularly the U.S. upstream, given some of the peers have reported quite nice results there. Can you talk about the extent to which U.S. upstream chemicals were the primary driver of Q1? And give us any relative sense for the relative profitability of China, particularly with the new operations, Europe and the U.S.

My second question is on working capital. Is the EUR 3 billion in Q1 really seasonal? Or is there a chance that BASF needs to hang on to some of this because of the need to secure supply or be able to deliver for end customers together with raw material inflation?

Sebastian, I take your question on the regional split, and then I think Christian talks a bit about the working capital effects and development. So on the regional side, if you look into the top line, I think volume-wise, we were better, particularly in Asia, and they are driven by China. This has to do with the overall market dynamics still, but also, of course, with the contribution of our new site in Zhanjiang, if you one to split it a bit, I think, is a significant part of what we see as volume increase in China is coming from the new site, of course. Europe also in terms of volumes growing in the first quarter of 2026, whereas North America for us volume-wise was rather flattish. So this instinct that U.S. needs to go up now in this current situation, at least on the top line, we do not see in our books. It is the pattern Asia is driving, but also Europe showing here a nice contribution.

If you look into -- the prices in the first quarter, they still have been down compared to previous year's quarter for the reasons I explained, price increases not yet coming through. If you look into the earnings pattern here, you see -- start with North America, you see a slight improvement, but not something spectacular. Also here, you see the biggest contribution coming from Asia again. And then in our home market, we saw in the first quarter also an improvement in Germany, where Europe altogether was rather down. So again, a mixed picture, but nothing that is being driven yet by the U.S. Question to working capital.

Yes. Sebastian, thanks for the question. So while I was talking earlier about the demand development in Q1, which really picked up than in March more than in the month before, actually, on the pricing side, we did not see that same development. Actually, it was pretty much the same all over the quarter. So this really hasn't come through the price increases. This would be more in the second half. So regarding net working capital, for me, this is rather -- and you see we saw an impact of around EUR 3 billion, similar to what we saw in the last year's quarter, first quarter, so very similar development, mainly driven by the seasonality of the Ag business.

We, of course, also saw a little bit higher inventory that came from the start-up of the Zhanjiang Verbund site but nothing, let's say, spectacular. However, now looking into Q2, this will play a role. So regarding the free cash flow and the operating cash flow in the second quarter, last year, we had a free cash flow of EUR 0.5 billion in the second quarter. What you will see this year in line with what we said on CapEx, you will see lower CapEx between EUR 200 million and EUR 300 million lower because for the full year, we had already announced in February that we would go down by EUR 0.9 billion. So you will see this EUR 200 million to EUR 300 million also in the second quarter. But we will see higher net working capital due to the higher oil and gas price environment. And this, of course, will be a drain on cash flow. And therefore, expectation here is that operating cash flow will be lower than in the second quarter than last year. However, due to the lower CapEx, you will see this somewhat as a compensating effect here. So probably slightly down in free cash flow compared to prior year.

Given the fact that there are still 6 analysts in the queue, I suggest we move to one question or would appreciate if you could restrict yourself to one question. Now it's Georgina Fraser, Goldman Sachs. We then have Chetan, then Peter Spengler and then Laurent Favre. But now Georgina Fraser.

I do just have one question. It's on your outlook and this topic of supply security that we've spent a lot of time so far. In the materials that you published this morning, it read to me that you were highlighting a lot of downside risks to your outlook, but the commentary on the call has been a lot more positive, at least in the short term. So I want to dig in a little bit into the assumptions that you've made. You said there are no significant supply risks for now. Can you help us understand what are you looking out for? When would real supply risks commence if the Strait of Hormuz remains shut? And do you see competitors already facing supply issues in Europe that don't have the same feedstock diversification and trading platform and all of the advantages that you highlighted?

Georgina, I take this one. So if we say we do not see supply risk for now, I'm talking about the time horizon until end of Q2. As you can imagine, we are now doing both supply risk analysis, physical, but also pricing on a rolling basis. And the foresight that we have gives us confidence that until end of the second quarter, we will not see any major supply disruptions. We do see the major bottlenecks for supply still in Asia. If you look into the list of Force Majeure declared these days, they are all coming from Asia. They are not so much coming from Europe. Will this change over time? It's not to be excluded. But for now, it is still predominantly an Asian topic.

To our outlook, the trends that we've shown with regard to the assumptions that are the basis for the outlook are to demonstrate that there is currently a lot of volatility and that we can rather expect from today's perspective for GDP, et cetera, a downward trend. But no way is this alone sufficient to say we need to change our outlook because these days, we see a lot of countervailing factors. And the moment you see price increases due to higher feedstock on your raw material cost, but have the ability to pass on prices or even expand margins even the sensitivity analysis that we are typically doing is not so helpful. So therefore, we see currently downside risks, but we also see upside opportunities. It's, at this point, not possible to clearly make a net amount out of it. But it is certainly the case that for the first half of the year, we see for us, for our business, more opportunities than risks. And then we really have to see. So bear with us, we will keep you updated also then at the half year's call.

So we move on to Chetan Udeshi, JPMorgan.

Just one quick other clarification. So on Ag, I heard Dirk, you talked about the farmer economics. But if I just look at your Q2 last year, you had quite a strong volumes. Now there's always a phasing between comps and stuff. But I'm just curious, do you think in Q2, we should still assume the EBITDA to be down year-on-year because of FX, but also because the comps and volumes were quite -- or are quite tough. And the second question, Wacker yesterday was talking about orders in April basically going to Jan and Feb levels after a surge in March. Have you seen any of these dynamics across your business?

Chetan, let me start with your question on Ag Solutions. For the second quarter, we believe this will deliver, and I said already earlier, a season -- seasonally typical contribution, which will probably be broadly in line, maybe slightly below the previous year quarter. And the main factors being the reasons that I've mentioned, so commodity prices. I mentioned the fertilizer effect, which is not -- we are not in the fertilizer business, but it is obviously weighing on the buying power of the farmers, but this is more or less it. Economic conditions are certainly different. Currently, we have some dry conditions here in the middle of Europe, better in the South. So this is a mixed bag. So my tagline would really be expect a seasonable typical contribution maybe slightly below previous year's level. And Christian, on the second question?

Yes. So evidently, in the current environment, the typical view that we have towards the next weeks actually has even been shorter now. So we have a view maybe towards the next 4 weeks or so at this point in time, had even come down from 2 months currently due to this uncertain environment. But we have not seen a broad-based reduction in demand. Actually, we have a pretty good order book, and we feel confident. Evidently, the -- what I mentioned earlier, the consumer confidence is down. But on the other hand, due to all the, let's say, situation from less imports into Europe, for example, also a necessity to supply in Southeast Asia, where there are shortages has not led to a reduction in our demand in the short -- at least in the short foreseeable future.

So now we have a question from Peter Spengler, DZ Bank.

Cash proceeds of approximately around EUR 5 billion net of tax are expected to be received in the second quarter from Carlyle. Can you help model the impact in the P&L? And how should we think about the expected dividend contribution from the retained 40% stake going forward?

Yes, Peter. So the net contribution a bit higher than you would expect. We said tax effect is mid triple digit. So I would expect that the net is coming in a little bit higher on the joint venture side. So the joint venture will do everything to increase its value. I would not expect that the joint venture with Carlyle obviously being the majority player and BASF holding the minority stake that this joint venture will pay dividends in the short term.

The financial effect that we are getting from this transaction is, of course, higher retained earnings and the cash in event, and we will use the cash that we are getting upon closing of the transaction, as we've already alluded to with our priorities of the uses of cash. So we will use it to significantly deleverage our balance sheet. And then you know that we are also having a distribution framework, and these are the uses of the proceeds. And I think that it is it. Thank you.

So now we move on to Laurent Favre and then 2 more to follow with Jaideep Pandya and James Hooper, but now it's Laurent Favre, BNP.

Part of the hope of recovery to mid-cycle was the sort of capacity shutdowns that would offset some of the new additions either in Europe or Asia. And I guess now we're seeing margins that are much better for those who can run. And strategically, the situation shows that maybe you're not able to rely on upstream overcapacity to run your economy. So I'm wondering, I mean, do you think this situation is likely to slow down capacity shutdowns or on the other side, accelerate them for those who've already had to mothball capacity and maybe they won't restart?

Laurent, yes, it was very hard to understand you. So I tried to extract what I understood. So you were asking about the shutdowns, the ability to move tars and what to expect. So let me maybe first say, we have this year a higher turnaround intensity than last year. Amongst them, you have the 5 years turnaround in Port Arthur, which started in the first quarter and is about to be closed now successfully very soon. We have the big cracker turnaround in Ludwigshafen to come up. And those are things that you cannot postpone because they need to be done and are also planned for a long time.

At the same time, we are showing flexibility with turnaround postponements. Christian alluded already to ammonia. If you want to take a faction, so what is what can be postponed, what has to be done, I would say it's rather 80% has to be done, 20% overall can be successfully postponed so that we are able to deliver and supply our customers. So that's more or less the mix. And despite of the more intensive turnaround season that we have, you will see for the first half of the year now the better results of the upstream businesses coming in. So we are able to overcompensate the turnaround effects, partly, of course, out of our working capital, but also partly due to the pricing power that we have recently gained. I hope this answers your question because it was hard to understand.

Jaideep Pandya, On Field Research.

I have a sort of similar question to actually what Laurent was trying to ask. When you look into the context of the sector prior to the war, I guess, overcapacity out of China or Middle East was the biggest headache for European/American chemical companies. Now that the cost curve is sort of pushed sort of steeper, how much of this you think is sort of structural, especially in China with the lack of availability of feedstock or some of the sort of really old plants having to take a run kind of mothball. So how much of this is really going to structurally help the upstream demand-supply balance when you look across the value chains? And then just sort of an added follow-up, if you could just highlight us your naphtha/ethane sourcing in Europe as well as in China, that would be great.

Yes. So first question, of course, is a little bit of a crystal ball question. So how much is structural, how much will change back. Let me try to narrow down a little bit the playing field here. So we have a huge production setup in Asia, mainly China, but then also ASEAN. And this very broad setup is hinging upon a very thin lifeline, which is the Strait of Hormuz where the preponderance of the feedstock for Asia is coming from. And the vulnerability that comes with that, we are currently seeing.

Do we see, as a result of that plant stoppages in Asia? Yes, of course, we see a lot of them. We see Force Majeure also. Do we see less supply into Europe? Yes, the pricing power that Europeans are currently getting is telling that. Is this long term or is it short term? For me, Jaideep, it's too early to tell. What is clear, customers in Europe are getting more sensitive about their procurement security. And what we see is that more customers are also diversifying their supplier base, also looking who, apart from an Asian supplier can supply us in Europe. And there, of course, in many, many cases, BASF is the first choice. So here, this effect, we clearly see, and this is certainly a positive. Would I call it structural right now, too early to tell, but this is certainly a positive thing. And Christian, maybe you add?

Sure. On the feedstock sourcing. So for European steam crackers, Ludwigshafen and Antwerp, the raw materials are primarily sourced in Europe and Northern Africa regarding naphtha as well as North America regarding liquefied propane because the cracker in Antwerp can actually use naphtha as well as propane. Our steam cracker in Zhanjiang is a flex feed cracker, so can use both naphtha and butane. So the raw materials are primarily sourced in the Middle East and North Africa, but also North America. So we talk naphtha here, butane. And at the Verbund site in Nanjing as well as in Port Arthur, the joint ventures are sourcing the raw materials. And this is, therefore, ensured that we also have in those crackers security of supply.

Sorry, just a follow-up. Are you sourcing any naphtha out of the Gulf? Or have you had any supply issues in China since the world war?

No, we have not. I mean, yes, there are some Middle East sources for Zhanjiang, but we also have other sources, and therefore, we have security of supply here is in short. We have not had issues regarding sourcing naphtha or other raw materials for any of our crackers, including Nanjing.

So now hopefully, one final question from James Hooper, Bernstein.

My question is a bit more on pricing and contracts. Can you tell us a little bit more about the pricing approach? Are you seeking to lock in customers for longer at the higher prices? And are you using surcharges? Or are you using full pricing? And then if I can ask a quick follow-up to the last question. How long in terms of time does it take to change your kind of feedstock power from one source to the other if the supply situation does get worse?

Yes, James, I'll start with the second one, the easier one. This feedstock change goes relatively quickly. I mean it's -- I would say, it's a matter of days or weeks. It's not a matter of months. So that's an actual and powerful flexibility that we have to change on relatively short notice. Why is the first question a little bit more difficult? It's a sensitive question where we need to be mindful of what to say about pricing. Let me say it in general, we entertain a mix of contract prices. We also have in certain business, of course, formula prices, as you would expect. And we also have a certain degree of spot prices.

Now if it comes to price increases, of course, to come to a higher spot price share, you take -- you need to take some time. This is why the price effects that we see will now come into the second quarter and were not visible really in the first quarter. First quarter was a volume game. Second quarter will also now be something where you will see price effects. And are we making comprehensive price increases or are we also passing on special price components. Also here, we have all kind of possible pricing approaches, always customary and in line with your compliance standards that you would like to have, but also in line with market standards. So it's really a broad base of things. Most importantly for me, we have regained pricing power and you will see it in the second quarter.

Ladies and gentlemen, we are now at the end of today's conference call. We will present our second quarter and half year results on July 29. Prior to that, we would like to invite you to a virtual deep dive on our Zhanjiang Verbund site, which we will hold on Monday, June 8, from 12:00 p.m. to 1:30 p.m. In May, we will provide further details on our website. Should you have any further questions, please do not hesitate to contact a member of the BASF IR team. BASF's Annual Shareholders' Meeting will be held at Congress Center Rosengarten now starting at 10:00 a.m. CEST. Thank you for joining us today, and goodbye for now.

[Interpreted] Ladies and gentlemen, good morning, and a warm welcome to BASF in Ludwigshafen. We are very pleased that you have accepted the invitation to our annual press conference. Some of you could not be present here in Ludwigshafen and will be connected with us live on the Internet. So warm welcome to you, too.

You will be talking today to Markus Kamieth, Chairman of the Board of Executive Directors; and Dirk Elvermann, the CFO of BASF. The conference, as mentioned, will be broadcast live on the Internet on our homepage and also on LinkedIn. The conference language is German with a simultaneous interpretation into English. During the discussion later, English questions will be answered in English. So if you're using a headset for the simultaneous interpretation or want to use them, you find the English channel on channel 1 and the German channel on channel 2.

For the photographers here in the room, during the first 5 minutes, you can take photos during the presentation. But afterwards or during these [ photos ], please switch off the flashlight and afterwards, please take your seats. All accredited guests should have received an electronic press folder with all the important documents via e-mail.

And that's all on housekeeping, and I give the floor to you, Markus.

[Interpreted] Thank you, Andreas. Good morning, and welcome to Ludwigshafen, and also to those in front of the monitors. First of all, thank you, Andreas, for you, for having taken over this job. You are doing this for the first time or have been doing this for the first time for a long time because Nina Schwab-Hautzinger left to join Roche, but you probably heard yesterday that we will welcome Thomas Biegi as successor of Nina Schwab-Hautzinger soon. And I think in future, he will take this job, but well, you will have to agree with him.

Dirk Elvermann and I will present and explain the most important figures and developments of the 2025 business year. 2025 marked by many geopolitical and headwinds in the world that unfortunately had a negative impact. Consequently, we, in the chemical industry, faced an uncertain and very volatile global market environment and with considerable headwinds. As previously stated, we, therefore, focus primarily on the things we can control within the framework of our Winning Ways strategy.

We successfully started up the major assets at our new Verbund site in Zhanjiang, and we also accelerated our cost savings programs and significantly streamlined BASF's organization. Moreover, we progressed swiftly and successfully with the announced portfolio measures. But let me also mention that the year 2025 and particularly the fourth quarter did not develop as we had anticipated. Our prerelease on January 22 already gave you an indication of this.

Let's now turn to the details of BASF's financial performance in the fourth quarter of 2025, always compared with the prior year quarter. Overall, sales declined considerably because of strong currency headwinds and slightly lower prices. At the same time, we achieved slightly higher volumes. All segments reported volume growth, except for the Chemicals segment. Volumes rose particularly in Surface Technologies, Agricultural Solutions and Nutrition & Care segments.

From a regional perspective, we achieved a remarkable volume increase of 13% in China and posted solid growth in North America. In Europe, we recorded slightly lower sales volumes. Compared with the fourth quarter of 2024, prices declined in 5 of our 6 segments, most notably in Chemicals and Materials due to ongoing competitive pressure. We could only increase prices in the Surface Technologies segment, primarily owing to higher precious metal prices. Currency effects burdened sales in all divisions and were mainly caused by the strong depreciation of the U.S. dollar, the Chinese renminbi and Indian rupee. Portfolio effects slightly dampened sales growth, and this was mostly related to the sale of our Decorative Paints business.

Based on this underlying sales development, EBITDA before special items came in at EUR 1 billion compared with EUR 1.4 billion in the prior year quarter. Currency headwinds lowered EBITDA before special items in the fourth quarter of 2025 by around EUR 110 million. Ladies and gentlemen, overall, BASF Group's EBITDA before special items reached EUR 6.6 billion in the full year of 2025. The decline compared with 2024 was mainly due to lower margins and negative currency effects, and the latter amounted to EUR 235 million in the full year 2025. Due to continued low market demand and pressure on margins, earnings in BASF's core businesses, especially in the Chemicals segment, declined considerably. Higher contributions from BASF's stand-alone businesses could only partially compensate for this decrease.

Let's now turn to our portfolio measures. Our agreement with Carlyle marks an important milestone in realizing the full value of our Coatings business. Prior to that, we had divested our Decorative Paints business to Sherwin-Williams. Under Carlyle's operational leadership, we want to continue to strengthen the leading position of the Coatings business. This will create further upside potential for the 40% equity share we will continue to hold after closing. We are on track to close the transaction in the second quarter, as previously announced. On the basis of the 2 transactions, BASF's Coatings business is valued at an enterprise value of EUR 8.7 billion.

Let's move on to Agricultural Solutions. Our team here once again delivered a very strong performance in 2025 and achieved an EBITDA margin before special items of 22%. We are on track to reach IPO readiness in 2027. Last year, excellent progress was made on the legal entity and ERP separation. By early 2027, the separation will be completed in all regions.

In November, we announced the future management Board for the Ag business. Its members combine extensive industry expertise with the required capital market experience. The management team headed by Livio Tedeschi will drive the transformation of Ag Solutions into an independently steered company focusing solely on the agricultural sector. The planned listing of our Agricultural Solutions business will mark the next decisive step to unlock additional value for our shareholders. The planned IPO is targeted to take place on the Frankfurt Stock Exchange.

And what is also good news is another piece of news. In January, we announced that BASF Agricultural Solutions is acquiring AgBiTech, a supplier of biological solutions to control insect pests. It has pioneered the use of nucleopolyhedrovirus technology to develop insect control solutions based on naturally occurring viruses. With operations in Brazil, the United States and Australia, AgBiTech serves farmers growing soybean, corn, and cotton as well as specialty crops. This acquisition is an important step in the value creation journey of Agricultural Solutions. The new technology will complement BASF's existing biosolutions portfolio and underscores the commitment to a more sustainable, holistic approach in agriculture, in line with the business strategy of Ag Solutions. The transaction is expected to close in the first half of 2026.

From the stand-alone Ag business, let's return to the beginnings of our value chain. We successfully started up all 32 key production lines at our Zhanjiang-Verbund site on time and below budget, a remarkable achievement and a testament to the capabilities of our teams. We also started up the steam cracker, the heart of the Verbund, without any lost time. This steam cracker is flexible, so we can use both naphtha and butane as feedstocks.

I was very pleased to hear Linde's CEO, Sanjiv Lamba, describe this as one of the fastest cracker starts up ever. Linde supports us with their cracker technology and engineering expertise and contributed to this major achievement of our teams in Zhanjiang. The team executed this complex task with outstanding dedication and success. We are confident that we will operate the site at high utilization rates even in the current market environment. Nevertheless, I want to note that we expect a slightly negative earnings contribution from the Zhanjiang-Verbund site in the first year of operations, mainly due to start-up related costs. From 2027, we expect the site to contribute positive earnings.

Ladies and gentlemen, MDI is an important product for BASF and a key component of our polyurethane value chain. It is indispensable in the construction, automotive, coatings, adhesives and furniture sectors. Classic applications include rigid and flexible foams. It can be found as insulation and upholstery material in your car. For example, I think you're not sitting on such a chair at the moment. In the United States, we are currently expanding our MDI plant in Geismar, Louisiana. The final phase is on track, and we are planning to start up production in the third quarter of 2026. At USD 1 billion in total, the project marks BASF's largest investment ever in the United States. Through this expansion, we are doubling our MDI capacity in Geismar to around 600,000 metric tons per year to serve the growing U.S. market.

With that, I will hand over to Dirk Elvermann.

[Interpreted] Well, thank you very much, Markus, and good morning. I would like to start by looking at the financial figures of BASF Group for the full year 2025 compared with 2024 as usual. EBITDA before special items came in at EUR 6.6 billion, representing a decline compared with the prior year. However, the EBITDA margin before special items, excluding metals, remained almost stable at 12.3%.

Net income improved by 25% to EUR 1.6 billion. Net income from shareholdings in 2025 amounted to EUR 1.3 billion compared with EUR 602 million in the prior year. This increase mainly resulted from higher earnings contributions from the at equity consolidated participation in Wintershall Dea.

Free cash flow increased by around EUR 600 million compared with 2024, and more information is provided on the next slide. Cash flow from operating activities amounted to EUR 5.6 billion as compared to EUR 6.9 billion in 2024. The decline was primarily driven by changes in other operating assets caused by an increase in precious metal trading positions. Furthermore, net income included higher noncash items and reclassifications than in the prior year.

Ladies and gentlemen, in 2025, cash flows from operating activities included a dividend from Wintershall Dea. Reimbursements that Wintershall Dea received under the federal investment guarantees were distributed to its shareholders as dividends. BASF, which holds 72.7% in Wintershall Dea, received around EUR 900 million after tax in 2025. In the first half of 2026, we expect to receive almost EUR 800 million after tax through the same mechanism of which around EUR 500 million was already paid out in January.

I think it is important to further explain this. Federal investment guarantees are insurance against political risks such as expropriation or the consequences of war. As with any insurance policy, coverage does not come for free. The guarantee beneficiary, in this case Wintershall Dea, paid insurance premiums for many years, a triple-digit million euro amount in total. Now Wintershall Dea is entitled to and has asserted its claim to insurance coverage.

Let's now turn to payments made from property, plant and equipment and intangible assets. In 2025, these decreased by almost EUR 2 billion to EUR 4.3 billion, which demonstrates that we have passed the peak investment phase for the Zhanjiang-Verbund site. Overall, free cash flow improved strongly and amounted to EUR 1.3 billion.

In terms of our balance sheet, total assets amounted to EUR 76.2 billion as of December 31, 2025, down by EUR 4.2 billion compared with year-end 2024. But this decline was caused by lower noncurrent assets, mainly on account of currency effects. At 45.1%, BASF's equity ratio remained stable and very solid. By year-end 2025, we have reduced our net debt to EUR 18.3 billion.

In 2026, we will use a substantial part of the cash proceeds from our portfolio measures to further strengthen our balance sheet. The maturity profile of outstanding bonds will allow us to further reduce net debt considerably this year, hereby underpinning our current single A rating.

Let's look ahead to BASF's capital expenditures between 2026 and 2029. We aim to grow with high capital efficiency by reducing capital expenditures, increasing the utilization of existing assets and optimizing our net working capital. After the successful start-up of our Zhanjiang-Verbund site, we are now bringing down CapEx below the level of depreciation. For BASF Group, we plan capital expenditures of EUR 13 billion between 2026 and 2029. This is 20% lower than the 4-year forecast we gave you last year and more than 30% lower than our planning for 2024 to 2027.

In 2026, we planned total capital expenditures of EUR 3.3 billion compared with EUR 4 billion in 2025. The reduction reflects lower CapEx for the Zhanjiang investment. We now expect only a further EUR 600 million in 2026 after EUR 1.6 billion in 2025. With our good current site and planned setup, we have sufficient own capacities in key markets to support our volume growth without requiring major new investments. And we say we are well invested by now.

Ladies and gentlemen, where do we stand with BASF's cost-saving programs? In a nutshell, we have accelerated the implementation. By the end of 2025, we already achieved a total annual cost reduction run rate of around EUR 1.7 billion, and this represents an increase of EUR 100 million compared with our original savings target for this date. In 2025, the associated onetime costs amounted to EUR 700 million, and this increase in onetime costs of around EUR 300 million was caused by higher provisions for severance payments. In contrast, the planned onetime costs for 2026 will be reduced from EUR 500 million to EUR 300 million. By the end of 2026, we now expect annual cost savings of EUR 2.3 billion instead of EUR 2.1 billion as planned. The cumulative onetime costs are now expected to amount to EUR 1.9 billion in total. And this shows our positive momentum in bringing down our cost base and our ongoing focus on this crucial topic that we are dedicated to.

On the right-hand side of this slide, you can see that between December 2023 and December 2025, we reduced the number of BASF senior executives by 11%. The number of employees decreased by 4,800 if we exclude the around 1,000 employees who were recruited at the Verbund site in China in the same period. This demonstrates that we are actively streamlining our global organization at all levels. In 2026, we will further advance in this direction.

We recently communicated our next steps to create more value, which will happen in BASF's service organizations. And these are Global Digital Services and Global Business Services. Why are we doing this? Against the backdrop of our successful portfolio measures and the differentiation between core and stand-alone businesses, we now also want to streamline IT, finance and HR services to meet the needs of BASF's core businesses. In Global Digital Services, we are rationalizing and harmonizing BASF's IT application landscape and sharpening the Digital Service portfolio through consolidation and standardization. In this context, we plan to open a cost-efficient digital hub in Hyderabad, India. We will adjust our existing location footprint and take out significant costs.

Building on competitive service levels and focused digitalization, these measures allow us to capture efficiency gains and achieve a significant reduction in the Digital Services workforce. Similarly, in Global Business Services, we intend to streamline the service portfolio, drive automation and establish cost-efficient global hubs. We, therefore, aim to bundle a significant portion of our business services in 2 global hubs in Asia. At the new global hub in India, we intend to bundle services with a focus on finance and HR. And the established hub in Kuala Lumpur in Malaysia is foreseen to focus on global supply chain services in the future. Existing regional hubs will complement this setup.

With these decisive steps, we aim to harvest synergies and secure structural cost advantages. Markus?

[Interpreted] Thank you, Dirk. A key objective of our Winning Ways strategy is attractive shareholder distributions via dividends and share buybacks. That is why we will propose a dividend of EUR 2.25 per share for the 2025 business year to the Annual Shareholders' Meeting. Based on the year-end share price, this represents an attractive dividend yield of 5.1%. The second pillar of our attractive shareholder distribution policy is our buyback program. In view of cash proceeds already received and further proceeds expected, particularly from portfolio measures, we started buying back shares in November 2025. By year-end 2025, we had repurchased shares of around EUR 355 million.

Moving on to our outlook for 2026. From today's perspective, we do not expect a meaningful market upswing or a significant easing of geopolitical tensions in the near term. Our forecast for the BASF Group assumes that GDP growth will be slightly lower and that global industrial production growth will be significantly lower than the 2025 level. We expect a further decline in chemical production in the mature economies and weaker growth in the emerging markets.

Our planning is based on an average oil price of USD 65 per barrel of Brent crude and an exchange rate of $1.20 per euro. Based on these assumptions, we expect EBITDA before special items to be between EUR 6.2 billion and EUR 7 billion in 2026. BASF Group's free cash flow is expected to be between EUR 1.5 billion and EUR 2.3 billion. Payments made for property, plant and equipment and intangible assets are estimated to be reduced to EUR 3.4 billion.

I'd like to add that from a market perspective, the start to the first quarter has been as challenging as expected. In January, volumes in China continued to develop very positively, which is partly related to the timing of the Chinese New Year. But in the remaining regions, volume development has been weak. Given the considerably stronger U.S. dollar in the prior year quarter, currency headwinds on EBITDA before special items could amount to up to EUR 200 million in the first quarter of 2026 alone. So 2026 is likely to be another transitional year with significant headwinds for our industry. Most of the improvements we aim to achieve will need to be driven by our own efforts. We expect a gradual recovery of market conditions in the later part of this year and in 2027 and see promising early indications. However, we are also mindful of short-term demand constraints due to geopolitical and trade-related effects.

Let me highlight 3 topics that we will continue to prioritize in 2026. We will continue to actively drive measures to structurally reduce costs by rigorously implementing our cost savings programs, and we will bring down CapEx significantly below the level of depreciation. In parallel, we will hunt for volumes to increase the utilization rates of our plants. And after the successful start-up of our new Verbund site in China, it's now all about filling the asset's increasing utilization rates. Based on our highly competitive cost position, we are confident that we will achieve this goal fairly quickly.

Furthermore, we will focus on the completion of the final phase of the MDI capacity expansion in Geismar to capture further profitable growth in North America. And we will build on our successful portfolio measures to crystallize and unlock the value of our stand-alone businesses. We will stay on course to further strengthen our core businesses by implementing the necessary measures.

In summary, delivering on our Winning Ways strategy means combining active portfolio steering with capital discipline and strong operational execution when it comes to CapEx and costs. And this way, we will create value for our company.

Thank you very much, Dirk and I are looking forward to your questions now.

[Interpreted] Thank you very much for your presentations. Now the Q&A session. And well, just raise a hand if you would like to take the floor, and I will call your name. [Operator Instructions] We will try to finish the conference by 11:30. [ Mr. Lisman ], Rheinpfalz, you are the first.

[Interpreted] Yes. [ Lisman ], Rheinpfalz. You just mentioned that you had to really ask for getting the insurance payment based on the federal guarantee. So were there court proceedings? And secondly, you announced that 4,400 flats in Ludwigshafen will be sold. What about the earnings you expect there? How do you want to use these funds? Does this mean strengthening the balance sheet in order to reduce indebtedness?

[Interpreted] Okay. Let me start with the federal guarantee. No, no litigation, no court proceedings, [ Mr. Lisman ]. That we really had to request it actively means you have to request this. The money doesn't come automatically, but you have to report that damage occurred. This is what we did. And then the whole process was handled very constructively and within the time line. So no litigation, but just handing in a justified request. Well, in case of sums like this, nobody just says, yes. So it has been looked into.

The flats. Well, I think as of now, we cannot give you a figure here that we expect. The process is starting now. We announced that this is a step we want to take. We asked a company to take care of selling the lion's share of these flats, and we will then wait and see what is being offered. But of course, on the basis of the flats, you can calculate for yourselves what the sum will look like.

And what we will use the funds for? Well, we cannot give you exactly what we will do, but strengthening the balance sheet means we free the capital tied up in the flats and make it available for the company. And you are familiar with our general strategy when it comes to investing in our future at Ludwigshafen, including new capacities, and it's about payouts to our shareholders. And we have of course, other opportunities to use our capital. So no clear definition how these funds will be used.

[Interpreted] Then Ms. Weiss, Thomson Reuters, please.

[Interpreted] Well, thank you very much. The worth or value increasing, portfolio increases were on your own set of priorities for 2026. And now there were some clear points that you already started. What's open on your list, what you have planned for when you took your term of office, and what can be still expected? And tariffs, the last verdict from the Supreme Court in the United States. So there are repayments of your U.S. company to -- well, into proceedings to gain back the monies from the tariff policy.

[Interpreted] Well, tariff policies can be done by Dirk Elvermann. And I take the other question. So let me remind you that the transaction of Carlyle with Coatings still has to be concluded this year. We expect that for Q2, and it looks very well. But as I said, this still has to succeed. And then there is the big ambition when there is the IPO for Agricultural Solutions for 2027. This is what we aspire. We take all the preparations and that is, well, a lot of work still for 2026. So let me say we are in the middle of everything still, and with our stand-alone businesses, we stick with ECMS too. So that is the quasi-automotive catalyst business that we have.

So we want to proceed with our stand-alone business journey completed and then lifted to a new level of ambition, but under the ownership of BASF. So we said we do not want to sell this business. And with batteries, the situation is as is. We focus on ourselves, but we are open for partnerships. And here, too, we have to check whether there are opportunities and possibilities to increase the value of our battery and battery materials business. So we are in the middle of everything, and there's still a lot of work to be done. Tariffs?

[Interpreted] Well, for the tariffs, the most recent developments, of course, have increased uncertainties. And we still don't have a final evaluation of the situation and how high the effects would be and what to do. I think last year, we already made it very clear that it is still valid that the direct effects of tariffs to us and our subsidiaries are relatively low, because we have a very strong local-for-local business, 80% to 90%, and that is still valid. And what concerns us most is the general uncertainty caused by these short-term tariff changes taking place, and that also affects our customer industries or mainly them, and that's still the state of the situation.

But still proceedings, litigations, well, this is mainly discussed very often. It is quite obvious. So if the entire regulatory situation changes, then there is a legal claim for BASF Corp to really follow up on this. But the question is, will this really happen, and to which extent? This is not quite clear. And many people are already dealing with it, and you can see it with other companies, too, that at the moment, the situation is very dynamic. And yes, we follow it closely.

[Interpreted] Okay. Let's continue with Mr. [indiscernible], please.

[Interpreted] Yes, you mentioned, well, investing -- going through with your investing, so that the world markets are productively tapped, so to speak. And BASF is still generating money. So this money is used for a restructuring or transforming of assets towards a green chemistry situation? Or is your track that you take rather that you check what you could acquire, that you could buy?

[Interpreted] Thank you. So first of all, well, do we invest in Germany? So to invest through to take our money and go through with it, that's not very obvious to explain. It is something that we use to explain that we use this wave of new investments. So we invested a lot of money in new capacities at the Ludwigshafen site, but also in Antwerp. We invested also in the United States and, of course, in Asia, particularly in China. So we come out of this wave now where we wanted to invest in new CapEx. So now we are through with our investment for the moment. So we used everything which was available for us on the market.

Of course, we will continue investing in maintenance and optimization of our asset portfolio. Also in Ludwigshafen, we significantly invest into maintenance at the site, and this is large amounts of money. So it shouldn't just sound like we turn off the tap and we don't invest any longer. But you're quite right, of course, that there are also other possibilities to change the portfolio. And in our strategy, we said that acquisitions in order to further strengthen the core of BASF and to prepare it for the next decade, make it stronger for our growth, and this is still the target of our strategy. But in today's market environment, this is not our highest priority. It still, however, remains an opportunity for BASF to establish in the consolidating European market, but also in the strong Asian market.

[Interpreted] Matthias Kros from Rhein-Neckar-Zeitung, please.

[Interpreted] So first of all, on the cost savings, you said that the program was accelerated. You might say that you expanded it too because the sum that you want to save is even higher. So what's the reason for it? Was it necessary to save more? Or did it just come along because you wanted to go through with it faster or deeper going? What is the background here?

Then headcount reduction, 4,800 was the number that you gave. Could you tell me how much of this number goes to the Ludwigshafen side? And this process is not concluded, obviously. Do we have to expect that the headcount here in Ludwigshafen goes below 30,000, would you say? And we also talked about shutting down assets last year. So to which extent will further shutdowns come for Ludwigshafen.

[Interpreted] Well, that's many, many questions all at once. On the cost-saving programs, Dirk, you can certainly add to what I now say. So accelerating and adding, you mentioned both. Well, this program, it always seems as if this program ends at a certain point, and then we don't continue it. But productivity increased and, of course, also cost saving never ends at the end of a program. So an acceleration always looks as if the last bar is higher, as if anything is added. But we always continuously continue that.

So the market for chemistry worldwide shows a certain picture, particularly in Europe, particularly with chemistry growth, which in Europe was negative. In Germany, very negative. So here, the cost pressure will stay. And so in the next years, from my point of view, we will have to look to increasing productivity and stabilizing costs and saving costs. So we will not get out of this phase. And our message to our employees is, and we really want to be very transparent here. There's never the moment when we are finished with saving costs. So the market and our competition will put pressure on us. And you saw it in the subject of services. We want to see the perspectives. We want to develop in a way that we can be better in competition.

[Interpreted] So let me complement on that. You asked whether it's necessary. Yes, in a way, it is. BASF was in a difficult environment in 2025, but everybody did a very good job. But at the same time, for Germany, with our earnings, we are in a negative situation. And this is why there is no alternative to continuing our cost saving, but also to take it one step further to see where we can increase productivity. The earnings situation of the company is at a low level right now. And I told you before, looking at our EBITDA margin, you can see very clearly that we have to make further efforts, and we do that continuously and very consistently.

[Interpreted] And back to your other question, a split of the number, 4,800 that Dirk mentioned before, I don't know the exact split. We do publish sometimes. Maybe [ Mr. Lisman ] has checked it up already, but I don't know what the exact split is for this number. A significant part of these 4,800 are in Europe. And a significant share of that, again, is in Ludwigshafen. But of course, we can do a fact check here because I don't have the exact figures now.

With a perspective, looking into the future for Ludwigshafen, what we want to do is we want to make Ludwigshafen leaner and stronger. Leaner and stronger means that we want to invest in our assets where we see the opportunity to be successful. Just now at the site, we see a lot of expansion investments that we mentioned before. We also have some small adjustments, but we are not planning for any major shutdowns at the core of the Verbund site at Ludwigshafen. But I cannot exclude it for all times.

This is the dynamics that we're in. We have to adjust to the market. We did that for tens of years, and we will do so in the future. But what is continuing to happen in Ludwigshafen, and you will have learned about that, too, we have a very strong program when it comes to cost savings, when it comes to personnel cost savings. And in 2025, we took a significant step forward here. You can see it in the one-off costs that Dirk mentioned before, and we will continue to do so in 2026 and 2027, and even accelerate this. So the reduction of headcount here at Ludwigshafen in production, but also in nonproduction areas will continue. And where we will land, what figure it will be? Well, I can't give you any figure here. I've always said this.

And I think with the benefit of hindsight, it was a good idea not to give any figures, because the situation has strongly changed already. So let's not forget, it always feels as if time flies since the day when Trump stood in the, yes, Rose Garden with his sign. And the world has changed. And we have to really keep adjusting and keep being flexible. So it was a good idea not to give you one exact factor. We work together with the employee and representatives. We work through the individual projects as best as possible. So today, again, you don't get a target figure.

[Interpreted] Okay. Mr. Freytag, FAZ, please.

[Interpreted] Regarding Ludwigshafen, one follow-up question. So what range is the loss? And what do you expect this year? Second question, Mr. Elvermann, when you ask tariffs to be back, how much have you paid here, to give us an idea? Mr. Kamieth, regarding the European chemicals policy in general. The EU with the critical chemical alliance would like to pick value chains which may be protected or are seen as worth to continue, may probably be subsidized. What are you hoping for here?

[Interpreted] Very complex questions. Let me start with chemicals, legislation, EU. Maybe you can take over then. Complicated issue, Mr. Freytag. Let me limit myself to Critical Chemicals Alliance. Otherwise, so many other topics will be added that are decided for us in Brussels. Critical Chemicals Alliance, developed from 2 different types of motivation. It's an initiative by the EU Commission. On the one hand, the shock after corona, because we realized in many value chains, Europe is not in a robust situation. And if we don't watch out, we will lose more value chains in Europe, and we will become even more dependent on other regions or even individual countries. Buzzword, rare earths. Buzzword, antibiotics. During COVID, it turned out, oh, it's not a good thing to be in that weak situation in Europe.

Secondly, a short-term aspect, and that's the import pressure that we experienced from the U.S. and from China regarding the chemical industry in Europe, because they put capacities in Europe under pressure. I say we caused this problem, of course, to a large extent, because competitiveness situation is very difficult here. So I welcome this approach. The industry, the EU Commission and many advisers want to sit down and discuss how can we come up with a regulatory framework to make sure that on the one hand, we maintain the European chemical industry. And on the other hand, we do away with the critical dependencies.

But I think we must not switch it in a way to come up with an island solution for Europe. We must not have a protectionist development in the chemical industry in Europe. That would be the wrong development. This is why we say we need a balanced approach where protection is necessary for reasons of resilience or, maybe in some cases, in a targeted way for competitive reasons. We are in favor. If it means that it will help, it's okay. But if it continues with noncompetitive situations in Europe, we are against.

As a chemical industry in Europe, we don't want to live in a zoo. We want to still live out in the wild. So my appeal to the EU Commission often is do not come up with too many specific aid packages, just make sure you take away the load from our shoulders, so that we can continue breathing. So that's my approach here. But of course, I could spend hours discussing this.

[Interpreted] Mr. Freytag, the other questions. Well, tariffs, I think it's too early to give you exact figures here. Let me tell you, we don't have such a high direct tariff burden, not even in the U.S. I mean, we're not talking about very, very high sums of money. But as Markus said, we look at this specifically. And once we have an opinion, we will announce it. But there is still a lot of momentum in this.

BASF SE, well, maybe I can give you one figure. EBIT of BASF SE this year, more than EUR 1 billion negative, of course, for different reasons. Let me start by saying, here on site, people are doing a great job and earnings figures increased on site compared to the prior year. We have a slightly higher capacity utilization, and a lot of things are developing in the right direction with a lot of helping hands. However, the structural weakness in Germany and Europe is continuing. It continues to be a burden. And due to restructuring, of course, we have one-off costs now. We cannot avoid that. And this is reflected also in the figures of our operating activities, but more than EUR 1 billion negative at SE level. This is more than compensated by the positive contributions from the group as a whole.

But let me add, that's really important. I understand that this is an interesting figure for you. And well, the earnings of BASF SE, but please bear in mind, BASF SE includes a lot of things. It's the company for our biggest production site, the competitiveness of which is dear to our heart, because people are doing a great job here to make sure that this site becomes fitter. On the other hand, BASF SE is the group company, the parent company here of the group. So it includes a lot of things that are not directly related to the production of this site. So it's a charged figure, so to say. We need to interpret it cautiously. And I always warn against to overinterpret fluctuations in this figure and then thinking you know about the competitiveness of the site. I take a close look. It's important to us to make the site of future fit for the future, fit for a green future, and we are right on track here.

[Interpreted] Okay. Did this answer all your questions? Thank you. Mr. Leo, Xinhua.

[Interpreted] Mr. Kamieth, in today's press release, we read that last year, the Zhanjiang-Verbund site was started up successfully. It's the third biggest production site of BASF globally. Why is BASF continuing to invest so much money in China? Looking at today's uncertain times, how important is the Chinese market in the global strategic approach of BASF?

[Interpreted] Thank you for the question. Yes, you are right. In the fourth quarter, so with the highlight of the steam cracker very early in January, we, from our point of view, successfully started up the site. As I said, 32 production assets were started up within only 4 weeks. And I would say, looking at the complexity and the success, I'm only talking about the technical start-up, not the construction, which was also great. But to achieving this with such a quality, I think this is the first ever in the chemical industry. So great performance by the team. And this goes to show that this is what our workforce really, really is able to do. We are very proud of this.

Of course, this does not protect us against a very difficult market in China. I said, well, the market is growing. There is volume growth in China. However, prices are under enormous pressure because of high overcapacities in China. This does not only go for the chemical industry. In China, for 40 months in a row, we have producer price inflation. So this producer price inflation is not what the consumer sees, but what the producing industry sees, and there is a strong margin pressure because of this in all Chinese industry. But we think in the mid to long term, this will be a successful site for BASF because the strategic location is fine in South China, in the Guangdong Province, where the heart of Chinese growth is to be found, and we are very competitive.

China represents almost 54% of the global chemical market. We are at the right location, with the right assets, with a site which, especially within China, but also at global level is producing with a very, very low CO2 footprint. So strategically speaking, very good. Operationally, in the short term, more difficult than expected. But still, we are convinced that this was the right decision. Even though in '26, 2027, the financial performance will be a little more difficult.

In China, we generate around 13% of group sales of the BASF Group. This will increase slightly with the new site to between 15% and 20% probably, but China will become more important for us. And you have to put it in perspective. I tend to compare this with the U.S. The U.S. will still be a much bigger, much more important market than China in future. Sometimes the press says, well, we are somewhat biased here, but we are not.

[Interpreted] I have 8 further questions. So let us please be brief, and also with the answers, brief answers, please. Ms. [indiscernible] next.

[Interpreted] Yes, I would like to come back to China for a minute. So you said Zhanjiang will be profitable starting 2027. I think that's what you said. Could you please go a little more in depth what about the development of the margins and why you assume that things are going to be better? Will overcapacities go down? Or is BASF so cost efficient? Or are the Chinese customers prepared to pay more for carbon or low-carbon products?

And maybe one question on India on top of that. So with the trade agreement with India, is the market more attractive now for BASF? Or, yes, the service centers that you established there, is that to do with the trade agreements? Or is it just a matter of time?

[Interpreted] Well, the elements that you just mentioned for the potential increase of profitabilities are all correct, but they will not happen in 2026 or 2027. So not on short time. The reason for increase in profitability, 2025, '26 and '27. '25, of course, we had high costs in investing. Now in '26, the direction will be better, but it is still below the 0 line. In 2027, it's getting better. So we are in a ramp-up situation just now, a gradient. And then in 2027, we will have a site which is full up and running with no ramp-up costs. So the ramp-up costs, required additional employees, people who help, additional costs occur.

And now we expect a gradual recovery of margins in China, nothing dramatic, but a steady development, I'd say, of the margins. And that's a scenario for the site. So in 2027, we will enter the positive region. But then medium term, some things will come in that you also mentioned. For example, the high attractiveness for low-carbon products that will come at the end of the decade in China. Then there's going to be a recalibration taking place of capacities in China, not very speedily, but over time. So all these things will then come, and this is why we stick to our profitability statements for 2030.

No, India -- sorry, India, maybe you?

[Interpreted] Well, it happens at the same time. So your second option. So in India, of course, we look at the growing market in India, and it is an interesting market for us. We said so in the strategy too. And it is also the location for competitive services, particularly in the transactional regions. So it happens at the same time. So we went there, and we also announced the hubs, but it is not as if a lot more has to be interpreted into that situation.

And the free trade agreement with India and also the free trade agreement with Mercosur, once it happens, both have no major impact on the chemical industry, because the chemical volumes in India are relatively low compared to the overall trade volume. So it's smaller portions. But there is a potential positive effect to the overall industry in Europe and particularly in Germany. So we really support free trade agreements. So we don't want to erect walls. We want to have free trade agreements. That's what we want to invest in. And that's what we like India, we like Mercosur, but the direct impact on BASF is small.

[Interpreted] Bettina Eschbach.

[Interpreted] I have 2 questions on India. The 2 new hubs, can you give us a figure, how many jobs will be created and maybe also how many come from Berlin, how many people will be maybe transferred from Ludwigshafen to the hubs?

[Interpreted] Well, first of all, Ms. Eschbach, it's going to be global hubs. They will be very important, and that goes both for the digital services, but also for the business services, and particularly for the transactional services. For business services, that is finance and personnel, so HR. So those are going to be global hubs.

And let me be very clear about this, for the further hubs that we have, particularly in Berlin, we do not plan to shut down Berlin. We want to continue our hub in Berlin, and the hub is going to be smaller when it comes to the jobs there, but it will play a major role for us and for the services rendered there.

A concrete figure, how much less Berlin will have and how much more India? Well, I can't give you that now. We have our direction of travel. We communicated that. We will further work on that. And of course, we, first of all, have to speak with the employee representatives. We have a very good exchange with them going on, and then there's going to be figures afterwards. Now it's early times.

[Interpreted] Okay. Ms. Martin, please, from Bloomberg.

[Interpreted] Well, one question on China, please. So what is the capacity utilization that you expect in 2026 and '27 and further? And another question on Wintershall. What about the situation there? Is it the payments that you set for 2026? Are those the last ones? Or will you receive further ones?

[Interpreted] Well, let me take the China question. We are very fast when it comes to high capacity utilization. And last year, we already communicated and discussed that with you. And in February, I saw that the steam cracker in Zhanjiang has full capacity utilization, and all downstream plants that you can ramp up quickly, because it's products that you can bring into the market without qualifications, they have high capacity utilization. And in 2026, they will already have a target capacity utilization of very high percentages. And that goes for many products.

There are a few exceptions where we are quite aware of being slower because the market situation looks difficult. That's the exception. But there are a few assets where only with the new products, we have to go through the specification and qualification process. We have our surfactants, for example, that's the detergents that go into consumer products. And here, typically, when you produce that from a new plant, a new asset, you have to go through a test period with the customer, and that's about 6 months' time. So here, the ramp-up is a little slower. So this time of the year, half capacity utilization, next year then 100%. But we do use the capacity utilization because it has a very cost-efficient position in China, so we can be quick here.

And on Wintershall, for 2025, we had EUR 900 million that we received. And in January, we got another EUR 500 million, and there's going to be EUR 300 additional millions to come. and that then fulfills our claim that we have into this capital coverage of Wintershall. So that's our share, the full share. And then there's going to be another EUR 100 million payment in 2027 and '28, but that will not come from guarantee payments, but it will come from a tax refund, because part of this amount is capital income tax. And then in end of 2027, the rest will come depending on how quickly the tax authorities will work.

[Interpreted] On my list, I still have Mr. Reitz, Ms. Dostert, Mr. Schreiber, Ms. Nehren-Essing, and Tom Brown. I hope that everything will be covered. And we do have a few minutes left. So let's continue with Mr. Reitz.

[Interpreted] Thank you. I have a question regarding the capacity utilization at the Ludwigshafen site. You mentioned that you are making progress. Maybe you can comment on the situation and the challenges ahead of you. And when it comes to selling the BASF-owned flats. To keep such a number of flats owned by the company is regarded as a commitment to society on part of the company. So are there financial reasons for selling this? Is the pressure too much?

[Interpreted] Okay. It's important, regarding your second question, to stress the following. We do understand that the news really made a lot of people uncertain in and around Ludwigshafen. That's understandable. And we do understand the irritation we triggered given those who are in charge at political level and of course, also the tenants in these flats. That's obvious. I experienced this personally. I grew up in a flat owned by [indiscernible] AG and my parents understood they sold the flat and my parents were very concerned what will happen to us now. But well, everything was fine in the end. But I do understand these concerns.

Of course, you can say social responsibility, yes, that is one aspect, definitely. But on the other hand, just as an experiment in theory, if we didn't have these flats today, and we stand here today and say, we have income, we have money, we'd like to buy 4,500 flats. There would be a lot of question marks. Why is BASF buying flats? So from a point of view of the company, it is capital tied up, which is a significant amount. And it shows where we have other challenges and where this capital could be used in a better way. I think you need a balanced approach.

And of course, we care about the responsibility we have for the Ludwigshafen site and the region. And this is why we will approach the process of this sale, as we announced, in a very responsible manner. And of course, we expect guarantees on part of the buyers that comply with our responsibility. We do not just want to neglect any kind of responsibility, but this is capital that can be used very well in different areas of the company. And from my point of view, for the tenants in Ludwigshafen, it can all be really, really fine. But we have to be successful, and we do everything we can to make it successful.

Now capacity utilization in Ludwigshafen, I don't have the figure. I don't know it. You indicated the capacity utilization in Ludwigshafen is going in the right direction. I cannot confirm this. Let me tell you, we are still at a low level. I cannot give you a clear figure. And I just mentioned, and that's correct. Capacity utilization compared to the prior year, which was at a low level, is going in the same direction. So this is the trend I can give you, but there are no significant changes that would be worth a headline. This is just saying a first step in the right direction. But these are just nuances in Europe.

In the region of Europe, the figure went down. But in all regions, we grew above market level. Maybe I should have made this part of my speech. So volume-wise, we grew ahead of the market. In Europe, we say our shrinkage was lower compared to the market. Ludwigshafen and Antwerp remain under pressure. If we have a slightly higher capacity utilization compared to prior year, it's minor figures. Capacity utilization-wise, we are still very much under pressure in Europe. This is why we have such a cost pressure, because we need to adjust to this situation.

[Interpreted] Ms. Dostert, SZ.

[Interpreted] Last year, you said you had a capacity utilization of 80%. Is that the bad type of capacity utilization? First question. Second question, in Ludwigshafen, when does BASF SE want to make a profit again? Or will you remain at the level where you are at the moment figure-wise? And number three, is there any segment which your new Verbund site in China covers where there are no overcapacities at the moment?

[Interpreted] The last question is a difficult one. Yes, yes, there are products we produce in Zhanjiang where there are no overcapacities. That's a matter of fact. But the majority of products we produce there, it's maybe 30 or 40. This operates in a well-supplied market of the chemical industry, well-supplied market that includes different degrees of available capacities ranging from balance to slight overcapacity, up to products which are under enormous pressure at the moment. So we have everything at the Zhanjiang site. But if you take the average with this site today, we enter an oversupplied market in China. I don't want to tell you anything about individual products, maybe I would make a mistake, so I do not want to do this.

The 80% last year for Ludwigshafen capacity utilization. The capacity utilization of Ludwigshafen site or of the BASF Group is not a figure I often take a look at, because it's such a huge KPI that doesn't help you when you control the company. It's easy to communicate. It's easy to remember, but I don't look at it so often. So I don't know what the 80% were. The capacity utilization at Ludwigshafen is at a historically low level. There was some tailwind because we took out some capacities over the last 5 years, TDI, adipic acid, caprolactam closures. Of course, this helps. But capacity utilization has not changed considerably, and this is because the European market is shrinking rather than growing. And so I cannot give you more details on the 80%.

Well, when will BASF have black figures? Well, as soon as possible. We don't have a specific BASF planning in our strategy, but we are working on whatever we have as part of the [ Lucid ] program as part of the strategy to make it a profit-generating pillar of the group. Otherwise, we will not reach the ambitious targets we have. Ludwigshafen should not be a drain on the group. So this is why there are a lot of expectations when it comes to Ludwigshafen. But we don't have a year I can give you now when we want to be in the area where we have positive figures again, but this is also how we communicate it to our team.

[Interpreted] Mr. Schreiber, please, brief question.

[Interpreted] Well, we heard about overcapacities in China. This means that a lot of chemicals are entering Germany and Europe. Prices are going down. Do you think prices will recover? Do you have a forecast here? And you said emission certificates were in the 3-digit million range. Can you give us a figure for 2025 here?

[Interpreted] 2025, it was a little more compared to 2024. Just look at the ETS price and then you will know. But the statement is true, in '25, it was slightly higher than 2024. We think prices will not go down dramatically. In case of many products, we still reached a level where many companies in the chemical industry are not really making a profit. You see how many companies are going bust in Europe. In China as well, a lot of companies are no longer operating profitably. So we have reached the bottom, so to say. Recovering -- well, I think in many products, we will not go down any further. But let me also tell you, we see so many products from China in Europe now.

It's important to state Europe is still a net exporter of chemical products. We, value-wise, export more products from Europe than importing them to Europe. But there is an imbalance, because we have a lot of import pressure from the U.S. and China when it comes to energy-intensive, high-volume products. And in public, this then rules the discussion about the chemical industry. But we are by far the biggest producer of specialty chemicals in Europe. Very often, we talk about ETS, about imports from China. These are the base products, what we call upstream products. But the BASF is not a pure upstream company. Pressure is enormous, but when it comes to specialty chemicals, Europe is very strong and a net exporter. That's important. I mean, import pressure from China is an issue, but not that much.

[Interpreted] Ms. Nehren-Essing.

[Interpreted] Well, many questions were already answered and were also already questioned, but I have one more. At the beginning of your presentation, you said that there are also signs heading into the direction of improvement of the situation. Maybe you can go into that a little more in detail. Where do you see this? And I have a question on the selling of the 4,400 flats of BASF. How high are the costs, the annual costs, because that will also play an important role once you sell flats, because they have to be maintained and all that.

Well, second question, I don't have an answer. Maybe you, Dirk.

Well, I do not have an answer on the running costs, but maybe I can put it into perspective. So the flats, what we do not want to do is that we want to save costs here. What we're talking about is how can we use the money reasonably for the company. And I said we have to focus, and we want to use our funds for good chemical production also here in Germany and at the site. And this is why we said, well, real estate administration is not what we want to do really. If we find a buyer that also takes over the social charter that we arranged for our rentees, then we can, of course, find a good solution and with our tenants. And I do not see any, well, proper costs or expenditures in our budget. We just want to use the funds where they best fit.

Let me just put it very simply. So the flats are operated today by BASF Bauen and Wohnen, that is a real estate administrator for us, and they actually have a business model that they do it as good as possible as a real estate administrator can do. So for us, it is not something where we say we can save costs here, because these costs remain in this real estate cycle with the tenants, and it's a different cycle.

[Interpreted] Positive signals. That's another subject that you alluded to. Looking at what is happening in the world just now, there's many things that can go wrong, a very high volatility, nervousness, well the tariff verdict in the United States, the war planes went into the Gulf War, U.S. war planes. So these are things that are difficult to rate. So it is sometimes also difficult to see positive signals. But let me start in Germany. The infrastructural package was announced with a lot of attention. And last year, we had to say, particularly for our Anglo-Saxon investors, we said it's not going to start in 3 months. But in 2026, we see the first signs and it really gets started.

I talk to people who, for example, work in the construction building business. They get this incentive from the government to invest in new buildings, in new barracks for the Army. Maybe you saw recently the purchasing index was mentioned with a figure of over 50. I don't remember the last time when it was over 50, that has to be many, many years ago. But there is a certain optimism, obviously, that in Germany, positive activity is to be expected. But it's too early to celebrate because there are other indicators that point in the different or in the other direction.

All in all, we see increased confidence with our consumer and customer partners that goes into the right direction. So well, we reached the trough, so to speak. And that's all I can say at this point. There are some signs for positive growth signals. But if that is going to be sufficient impulses to push us over the 0 line, so to speak, let's see. But if you look into the media, you can find a lot of connecting points to be a little more optimistic for the second half of 2026 and then in 2027 compared to looking back.

[Interpreted] Can I have an additional question, please? Coming back to the flats that you want to sell. You said you manage the flats from yourself, for your own company, as an own unit, you say. But once you sell the flats, that means that you need less people to administer these flats and maintain them, which again means, well, headcount reduction.

[Interpreted] Well, it can and might happen, but it doesn't have to. It's early times in this process. So we communicate things very early. We make a decision, and then we don't have all the answers right at the beginning. At BASF Bauen and Wohnen, as far as I remember, they have 80 to 90 staff. And then you have to see, in a potential new construction that has to take over Bauen and Wohnen. And of course, we will keep 1,400 flats because they are near the site, and we want to keep it. But you can see that it is not a subject which will have a big effect on our portfolio and our budget. But we have to accept that there are people who are concerned now, and we shouldn't speculate. But it might be that if the buyer doesn't have any capacities to do the administration of these flats and to maintain them, that these people will be again employed by this buyer. But it's early times, as I said.

[Interpreted] Tom Brown.

Just a quick one to close off. In light of the bearish environment this year and the insolvencies we've seen in Germany, especially, like do you have a projection on how much capacity you expect to leave the European market? And just kind of building from that, looking at Ursula von der Leyen's comments in Antwerp and the delays in EU Mercosur as well as the delays to funding for Ukraine, do you think there's an argument for centralizing greater power in Europe at the Brussels level?

The second question, it's a very fundamental question. I think if you would ask anybody in Europe, [indiscernible] form of the European Union and its constituents or processes, so to say, you would find a high vote. And I would say even people in the European Commission would say, yes, it would be needed because we are struggling with the 27 votes, 27 Unity votes on a lot of big decisions. But there's also no easy answer. And I think, for me, it is not appropriate to now use the word like you used, centralization. It's an oversimplification of what is needed.

Everybody wants to make Europe successful. We want to make Europe successful. We have to make Europe successful. I can only warn that especially parties that are making public noise around criticizing that the EU is maybe not good for Germany, that they don't get, let's say, too much airtime with their oversimplistic arguments, because Europe is good for us, Europe is good for European industry, Europe is good for most citizens in Europe, but we could use a more future-ready European Union, so to say, I would say. And I think there probably even Mrs. von der Leyen would subscribe to this. Your first question was on insolvencies...

Yes, insolvencies...

I don't know. We have published this -- the Cefic has published this in January. You have maybe seen this if you were in Antwerp, that over the last 3, 4 years, already 9% of the European chemical capacity has been closed with a consequence that 90,000 jobs have already been -- direct and indirect jobs have been affected. And if you look at the dynamics, we are not at the end. So there is more capacity that will be closed. There are insolvencies, there's restructuring. And I would say there's also delayed restructuring now with some asset sales that are happening in Europe.

So I would say the time of restructuring in the European chemical industry is not yet over from a BASF perspective. This is also something we feel is necessary. So that's why I said earlier, a protectionism in Europe is not good for the industry, and it's also not good for BASF, because to some extent, the overcapacity also in Europe has to be addressed. The overcapacity is not only in China, it's also in Europe.

And noncompetitive assets have to also be restructured. And we believe that this actually is a source of relative competitive advantage for BASF, because we have, in Europe, very competitive assets. In sites like Ludwigshafen and Antwerp, with a high degree of integration, a low cost base in terms of asset cost and good energy integration will actually play out their relative advantage compared to many other chemical sites in Europe, smaller nonintegrated that will get into difficulties.

[Interpreted] Thanks. We have to come to an end because we have some other calls coming on. And if you have any further questions, we will have to do that later. So thank you very much for the presentation. Thank you very much for your questions and your interest. And before we close the conference, I would like to give you a few points of housekeeping. Today's AGM is going to take place on the 30th of April in the Congress Center Rosengarten in-person attendance, and we will inform you also on the results of the first quarter 2026. We will have a media office area installed for you, and we would love to welcome you there. For the TV and radio teams registered for short interviews with Mr. Kamieth and Mr. Elvermann, please don't approach us here. We have reserved some quiet rooms. Please just contact my colleagues at the door to the lobby.

So that's the end of our annual press conference. Thank you very much for your interest. We are looking forward to further exchanges with you and invite you for a little refreshment in the lobby. Thank you very much.

Good morning, everyone. Welcome to BASF's conference call for analysts and investors on the fourth quarter and full year 2025. Today's presentation is being recorded.

[Operator Instructions]

Today's presentation contains forward-looking statements. These statements are based on current estimates and projections of the Board of Executive Directors and currently available information. Forward-looking statements are not guarantees of the future developments and results outlined therein. These are dependent on a number of factors. They involve various risks and uncertainties, and they are based on assumptions that may not prove to be accurate.

BASF does not assume any obligation to update the forward-looking statements contained in this presentation above and beyond the legal requirements.

With me on the call today are CEO, Markus Kamieth; and CFO, Dirk Elvermann. Please be aware that we have already posted the speech on our website at basf.com/fY2025. Now I would like to hand over to Markus.

Yes. Thank you, Stefie. Good morning, everyone. Dirk and I welcome you to our first conference call of 2026. Let me start by highlighting the important milestones we have achieved in implementing our Winning Ways strategy. In an uncertain and very volatile global market environment with strong headwinds for the chemical industry, we are focused on the things we can control.

We successfully started up all major assets at our Zhanjiang Verbund site. We accelerated our cost savings programs and streamlined BASF's organization significantly. We progressed swiftly and successfully with the announced portfolio measures. But let me also mention that the year 2025 and particularly the fourth quarter did not develop as we had anticipated. Our pre-release on January 22 already gave you an indication of this.

Let's turn to the details of BASF's financial performance in the fourth quarter compared with the prior year quarter. Overall, sales declined considerably because of strong currency headwinds and slightly lower prices. We nevertheless achieved slightly higher volumes. All segments reported volume growth except for the Chemicals segment. Volumes rose particularly in the Surface Technologies, Agricultural Solutions and Nutrition & Care segments.

From a regional perspective, we achieved a remarkable volume increase of 13% in China and posted solid growth in North America. In Europe, we recorded slightly lower volumes. Compared with the fourth quarter 2024, prices declined in 5 of our 6 segments, most notably in Chemicals and Materials due to ongoing competitive pressure.

We could only increase prices in the Surface Technologies segment, primarily owing to higher precious metal prices. Currency effects burdened sales in all divisions and were mainly caused by strong depreciation of the U.S. dollar, the Chinese RMB and the Indian rupee. Portfolio effects slightly dampened sales growth. This was mostly related to the sale of our Brazilian decorative paints business. Based on this underlying sales development, EBITDA before special items came in at EUR 1 billion compared with EUR 1.4 billion in the prior year quarter.

Currency headwinds lowered EBITDA before special items in Q4 by around EUR 110 million. Here, you can see a snapshot of how the markets and our segment volumes and specific margins developed in the fourth quarter. Due to the ongoing supply-demand imbalance and the resulting pressure on margins, the business environment remained challenging, particularly in our upstream segments. Despite the strong market headwinds, the Chemicals segment recorded only slightly lower volumes.

Prices declined considerably in the Petrochemicals division due to lower raw material prices and continued price pressure from global overcapacities. Specific margins in this segment decreased slightly, mainly driven by petrochemicals. The Materials segment achieved slight volume growth because of higher volumes in Monomers. Prices declined in both divisions, resulting in overall slightly lower margins.

The Industrial Solutions segment operated in a subdued market environment. Electronic Materials were the notable exceptions. Overall, the segment was able to increase volumes slightly with prices and specific margins declined slightly. For Nutrition & Care, market conditions remained challenging in the fourth quarter. Nevertheless, the segment posted slightly higher volumes because of strong growth in the Nutrition & Health division.

The slight volume decline in Care Chemicals was driven by lower demand, especially in our home care, industrial and institutional cleaning as well as oleo surfactants businesses. In times of low confidence, consumers increasingly switched to white label products, leading to lower demand from global brand owners, a stronghold of BASF. The segment recorded lower prices on account of the Nutrition & Health division, especially driven by lower vitamin prices.

The Care Chemicals division almost maintained its Q4 2024 price levels. The segment reported considerably lower specific margins because of the challenging market dynamics and competitive pressure.

Let's move on to Surface Technologies. Please note that this segment no longer includes the automotive OEM coatings, automotive refinish coatings and the surface treatment businesses. These businesses have been classified as discontinued operations following the signing of the transaction agreement with Carlyle. The Surface Technologies segment comprising ECMS and Battery Materials recorded considerably higher volumes and prices in both divisions. The segment accordingly delivered strong specific margin growth.

Finally, let's look at Agricultural Solutions. Crop commodity prices remained below historical averages and financing costs for farmers were still elevated. Under these market conditions, the Agricultural Solutions segment managed to increase volumes and keep prices almost at the level of the fourth quarter 2024. As a result, the segment specific margins remained virtually stable.

Let's move on to the development of EBITDA before special items in the full year 2025. Overall, EBITDA before special items of BASF Group reached EUR 6.6 billion. The decline compared with 2024 was mainly due to lower margins and negative currency effects. The latter amounted to EUR 235 million in the full year 2025. Due to continued low market demand and pressure on margins, earnings in BASF's core businesses, particularly in the Chemicals segment declined considerably. Higher contributions from BASF stand-alone businesses could only partially compensate for this.

I would now like to turn to our portfolio measures and what we achieved in 2025. Our agreement with Carlyle signed shortly after we successfully divested our Decorative Paints business to Sherwin-Williams marks an important milestone in unlocking the value of our Coatings business. Under Carlyle's operational leadership, we want to create a leading coatings company and further upside potential for the 40% equity share we will continue to hold after closing. We are on track to close the transaction in Q2, as previously announced.

On the basis of the two transactions, BASF's Coatings business is valued at an enterprise value of EUR 8.7 billion. The implied 2024 EV to EBITDA multiple before special items of approximately 13x is evidence that we are unlocking the value of the Coatings businesses.

Let's move on to Agricultural Solutions. Our Agricultural Solutions team once again delivered a very strong performance in 2025. With sales of EUR 9.6 billion and EBITDA before special items of EUR 2.1 billion, the business achieved an EBITDA margin before special items of 22%. The team also demonstrated its cash generation power and delivered a segment cash flow of EUR 1.5 billion in 2025. We are on track to achieve IPO readiness for this business in 2027. During the last 12 months, excellent progress has been made on the legal entity and ERP separation.

By early 2027, the separation will be completed in all regions. In November, we have announced the Management Board for the business, which combines extensive industry experience with the required capital market experience. This management team headed by Livio Tedeschi will drive the transformation of Agricultural Solutions into an independently steered pure-play company.

We also announced that we are targeting the Frankfurt Stock Exchange as a listing location. The planned IPO of our Agricultural Solutions business will mark the next decisive step to unlock additional value for our shareholders. One more promising update on our agricultural business. In January, we agreed to acquire the Biological Insect Control Group, AgBiTech. This company has pioneered the use of nucleopolyhedrovirus technology to develop insect control solutions based on naturally occurring viruses.

With operations in Brazil, the United States and Australia, the company serves farmers growing soybean, corn and cotton as well as specialty crops. This acquisition is an important step in the value creation journey of Agricultural Solutions. The new technology will complement our existing biosolutions portfolio and underscores the commitment to a more sustainable holistic approach to agriculture, in line with the business strategy of Agricultural Solutions. The transaction is expected to close in the first half of 2026.

Now from the stand-alone Ag business to the most upstream part of our portfolio. On time and below budget, we successfully started up all 32 key production lines at our integrated Zhanjiang Verbund site, a remarkable achievement and a testament to the capabilities of our team. The start-up includes a world-scale flex feed steam cracker, which can use both naphtha and butanes as feedstocks.

According to Linde's CEO, this was one of the fastest cracker start-ups ever. Linde supports us with their cracker technology and engineering expertise and continues and contributed to this major achievement by our team in Zhanjiang. The team executed this complex task with outstanding dedication and success. We are confident that we will operate the site at high utilization rates even in the current market environment. Nevertheless, we expect a slightly negative earnings contribution from the Zhanjiang Verbund site in its first year of operations, mainly due to start-up related costs. From 2027 onwards, we expect the site to contribute positive earnings.

Moving on to our MDI expansion in Geismar, Louisiana. Also here, we are on track to conclude the final phase and are planning to start up in the third quarter of 2026. At USD 1 billion in total, the project marks BASF's largest investment ever in the United States. Through this expansion, we are doubling our MDI capacity in Geismar to around 600,000 metric tonnes per year. This supports our growth in the profitable polyurethane value chain and the growth of our customers in MDI applications such as transportation, automotive, footwear and furniture. With this key project, we are deploying our leading MDI technology for the growing U.S. market.

And with that, I will hand over to Dirk.

Thank you, Markus, and good morning, everybody. Let's now take a look at the financial figures of BASF Group for the full year 2025 compared with 2024. At EUR 6.6 billion, EBITDA before special items declined compared with the prior year. However, the EBITDA margin before special items, excluding metals remained almost stable at 12.3%. Net income improved by 25% to EUR 1.6 billion. Net income from shareholdings amounted to EUR 1.3 billion in 2025 compared with EUR 602 million in the prior year. This increase mainly resulted from higher earnings contributions from the at-equity consolidated participation in Wintershall Dea.

Free cash flow increased by around EUR 600 million compared with 2024. More information is provided on the next slide. Cash flows from operating activities amounted to EUR 5.6 billion compared with EUR 6.9 billion in the same period of last year. The decline was primarily driven by changes in other operating assets caused by an increase in precious metal trading positions. Furthermore, net income included higher noncash items and reclassifications than in the prior year.

In 2025, cash flows from operating activities included a substantial dividend from Wintershall Dea. Reimbursements that Wintershall Dea received under the federal investment guarantees were distributed to the shareholders as dividends. BASF, which holds 72.7% in Wintershall Dea, received around EUR 900 million after tax in '25. In the first half of 2026, we expect to receive almost EUR 800 million after tax through the same mechanism, of which around EUR 500 million was already received in January.

Let me further explain this. Federal investment guarantees are insurances against political risks such as expropriation or war. As with any insurance policy, coverage does not come for free. The guarantee beneficiary, Wintershall Dea had paid insurance premiums for many years, a triple-digit million amount in total. Now Wintershall Dea is entitled to and has asserted its claim to insurance coverage.

I will now turn to payments made for property, plant and equipment and intangible assets. These decreased by almost EUR 2 billion to EUR 4.3 billion in '25, which demonstrates that we have passed the peak investment phase for the South China, Verbund site. Overall, free cash flow improved strongly and amounted to EUR 1.3 billion.

Let's move on to our balance sheet. Compared with year-end 2024, total assets decreased by EUR 4.2 billion to EUR 76.2 billion at the end of 2025. The decline was caused by lower noncurrent assets, mainly on account of currency effects. At 45.1%, BASF's equity ratio remained stable and very solid. By year-end 2025, we reduced our net debt to EUR 18.3 billion. In '26, we will use a substantial part of the cash proceeds from our portfolio measures to further strengthen our balance sheet. The maturity profile of outstanding bonds will allow us to further reduce net debt considerably this year, hereby underpinning our current single A credit rating.

Let's turn to BASF's capital expenditures between '26 and '29. We aim to grow with high capital efficiency by reducing capital expenditures, increasing the utilization of existing assets and optimizing our net working capital. After the successful start-up of our Zhanjiang Verbund site, we are now bringing down CapEx below the level of depreciation.

For BASF Group, we plan capital expenditures of EUR 13 billion between '26 and '29. This is 20% lower than the 4-year forecast we gave you last year and more than 30% lower than our planning for 2024 to '27. In 2026, we plan total capital expenditures of EUR 3.3 billion compared with EUR 4 billion in '25. The reduction reflects lower CapEx for the Zhanjiang investment. We now expect only a further EUR 600 million in '26 after EUR 1.6 billion in '25.

With our current site and plant setup, we have sufficient own capacities in key markets to support our volume growth without requiring major new investments. In the following, I will give you an update on the implementation of BASF's cost saving programs. We are on an accelerated path. By the end of 2025, we already achieved a total annual cost reduction run rate of around EUR 1.7 billion. This represents an increase of EUR 100 million compared with our original year-end target.

In 2025, the associated onetime costs amounted to EUR 700 million. The increase in onetime cost in '25 of around EUR 300 million was caused by higher provisions for severance payments. In contrast, the planned onetime cost for '26 will be reduced from EUR 500 million to EUR 300 million. By the end of 2026, we now expect annual cost savings of EUR 2.3 billion instead of EUR 2.1 billion. The cumulative onetime costs are now expected to amount to EUR 1.9 billion in total. This shows the positive momentum in bringing down our cost base and the ongoing focus of management on this crucial topic.

On the right-hand side of this slide, you can see that between December '23 and '25, we reduced the number of senior executives by 11% and the number of employees by around 4,800 if we exclude the around 1,000 employees who were recruited at the Verbund site in China in the same period. This demonstrates that we are actively streamlining our global organization at all levels. In 2026, we will further advance in this direction.

Let's switch to our next value creation step in BASF service organizations. Against the backdrop of our successful portfolio measures and the differentiation between core and stand-alone businesses, we are now streamlining Global Digital Services and Global Business Services to meet the needs of our core businesses.

In Global Digital Services, we are rationalizing and harmonizing BASF's IT application landscape and sharpening the digital service portfolio through consolidation and standardization. In this context, we plan to open a cost-efficient digital hub in Hyderabad, India. We will streamline our existing location footprint and take out significant costs. Building on competitive service levels and focused digitalization, these measures allow us to capture efficiency gains and achieve a significant workforce reduction.

Similarly, in Global Business Services, we intend to streamline the service portfolio, drive automation and establish cost-efficient global hubs. We aim to bundle a significant portion of our business services into global hubs in Asia. At a new global hub in India, we intend to bundle services with a focus on finance and HR. The established hub in Kuala Lumpur, Malaysia is foreseen to focus on global supply chain services in the future. Existing regional hubs will complement the setup. With these decisive steps, we aim to harvest synergies and secure structural cost advantages.

And with that, back to you, Markus.

Yes. Thanks, Dirk. The Board of Executive Directors of BASF is fully committed to attractive shareholder distributions via dividends and share buybacks as part of our Winning Ways strategy. In line with our shareholder distribution policy, we will propose a dividend of EUR 2.25 per share for the business year 2025 to the Annual Shareholders' Meeting. Based on the year-end share price, this offers an attractive dividend yield of 5.1%. In total, we will pay out dividends of around EUR 2 billion to our shareholders.

The second pillar of BASF's attractive shareholder distribution policy is our buyback program. In view of cash proceeds already received and further proceeds expected, particularly from portfolio measures, we started buying back shares in November 2025. By year-end 2025, we repurchased shares of around EUR 355 million. The program, which has a volume of up to EUR 1.5 billion is scheduled to be concluded by the end of June 2026. It is part of the share buyback announced at the Capital Markets Day in September 2024 with a total volume of at least EUR 4 billion until the end of 2028.

The earlier start of the program demonstrates our confidence in the financial strength of BASF. From 2025 to 2028, BASF aims to distribute at least EUR 12 billion to shareholders via dividends and share buybacks.

Now moving on to our outlook for 2026. From today's perspective, we do not expect a meaningful market upswing or a significant easing of geopolitical tensions in the near term. Our forecast for BASF Group assumes that GDP growth will be slightly lower and that global industrial production growth will be significantly lower than in the 2025 level. We expect a further decline in chemical production in the mature economies and weaker growth in the emerging markets.

Our planning is based on an average oil price of USD 65 per barrel of Brent crude and an exchange rate of $1.20 per euro. Based on these assumptions, we expect EBITDA before special items to be between EUR 6.2 billion and EUR 7 billion in 2026. The Nutrition & Care and Chemicals segments are likely to increase their earnings significantly, while Industrial Solutions expects a slight increase in earnings.

In the Materials and Agricultural Solutions segments, we forecast slightly lower earnings due to currency effects. EBITDA before special items in the Surface Technologies segment is expected to decrease significantly in 2026, mainly due to positive onetime effects in the ECMS division in 2025.

The BASF Group's free cash flow is expected to be between EUR 1.5 billion and EUR 2.3 billion. Payments made for property, plant and equipment and intangible assets are estimated to be reduced to EUR 3.4 billion, of which roughly EUR 0.6 billion stem from our Zhanjiang Verbund site investment.

Let me add that from a market perspective, the start to the first quarter has been as challenging as expected. In January, volumes continue to develop very positively in China, which is partly related to the timing of Chinese New Year. In the remaining regions, however, volume development has been weak. Given the considerably stronger U.S. dollar in the prior year quarter, the currency headwinds on EBITDA before special items could amount up to EUR 200 million in the first quarter of 2026 alone.

As I just outlined, 2026 is likely to be another transitional year with significant headwinds for our industry. Most of the improvements we aim to achieve will need to be driven by our own efforts. We expect a gradual recovery of market conditions in the later part of this year and in 2027 and see promising early indications. However, we are also mindful of short-term demand constraints due to geopolitical and trade-related effects.

Let me highlight 3 topics that we will continue to prioritize in 2026. First, we will continue to actively drive measures to structurally reduce costs by rigorously implementing our cost savings programs, and we will bring down CapEx significantly below the level of depreciation. In parallel, we will hunt for volumes to increase the utilization rates of our plants.

Second, after the successful start-up of our new Verbund site, it's now all about filling the assets and increasing utilization rates. Based on our highly competitive cost position, we are confident that we will achieve this goal fairly quickly. Furthermore, we will focus on the completion of the final phase of the MDI capacity expansion in Geismar to capture further profitable growth in North America.

Third, we will build on our successful portfolio measures to crystallize and unlock the value of our stand-alone businesses. We will stay on course to further strengthen our core businesses by implementing the necessary measures. In summary, delivering on our Winning Ways strategy means combining active portfolio steering with capital discipline and strong operational execution when it comes to CapEx and costs. Coupled with a winning culture, this will create value for BASF and our shareholders.

And now Dirk and I are glad to answer your questions.

[Operator Instructions]

We will begin with Alex Vigil from Santander. We then have Katie Richards and then Christian Faitz. But now Alex, please go ahead with your question.

My first question is about the European chemical market. We are seeing all this news about potential regulatory support, the CO2 discussion as well, German fiscal stimulus plan. If you can elaborate how you are pricing these potential tailwinds in your guidance?

And the second question is about the shareholder distributions. My question here is if considering the difficult market environment, if the total distribution of EUR 12 billion, about EUR 3 billion every year is aggressive in the current market context?

Yes. Thanks, Alex. I will take the first question, and Dirk will maybe take the second one. Alex, it's, I think, a very fair observation that there's a lot of dynamic now also in the European market picture. Overall, I would say the actual demand picture in Europe stays challenging. We had last year 2025, a negative volume development of the chemical market in Europe by 2%. And we also expect a slightly negative development for 2026 in Europe.

However, I believe that both on the European level and as well in member states in the European Union, governments and regulators have understood that an improvement of the framework conditions, not only for the chemical industry, but for the entire industrial, let's say, ecosystem in Europe is needed, and that's why we are actually quite encouraged by the recent discussions also on the European level for easing some of the let's say, challenging elements of the current regulation, and you named one is, of course, the ETS system with the carbon costs currently increasing prospectively in Europe.

And we have seen very constructive discussions on a European level, although it's too early to put this into any quantitative model, but we will for sure -- we have, for sure, raised the awareness of, for example, ETS benchmark changes and so forth on the European level. So I expect positive contributions based on the scenario that we had a few months ago.

On the other hand, there are, as I said, positive indications on some elements of the European economy. You've named the German stimulus package. And if you look at, for example, the recent development of the PMI so the purchasing manager index in Germany, we are, for the first time in February above 50 for a long time. We haven't been there. And that has to do with now the stimulus package, the infrastructure package also becoming effective in real world. I talked to a CEO of a big construction company. And he also told me that now these requests for proposals are really coming through. So there is the expectation that there will be some effect now in 2026.

So some indications on the positive side, I would say, for Europe. But overall, it stays a challenging market from a demand perspective. And with this, Dirk?

Alex, I'll take your question on distribution. Let me first say, management is fully committed to the EUR 12 billion distribution as also announced in the context of our strategy. Out of that, at least EUR 8 billion from dividends and at least EUR 4 billion from share buybacks. You just heard also our progress in this regard, and you heard our dividend proposal for the year 2025. I would not call this approach aggressive. I would call it balanced with the cash flow that we are getting plus the incoming cash proceeds from our portfolio measures, we will be in a position to do both to distribute the amount to the shareholders, but at the same time, also to significantly deleverage and therefore, strengthen our balance sheet.

Fortunately so, for the time being, we do not have a big capital expenditures plan. We are now fully invested with the China investment coming on stream and the MDI investment in the U.S. coming on stream in '26. So there's no big capital expenditures to be expected from us in the next couple of years. And as you know, we are also trimming the company on the cost side. So being very cash-minded also in this regard. And with all of that, we are very confident that we can deliver on the EUR 12 billion.

Okay. So now we move on to Katie Richards, Barclays.

I've got two, please. One on Zhanjiang and then also one on ETS. Firstly, on Zhanjiang, could you give us a little more color on the earnings contribution you would expect in 2026 from this site, please? And in this regard, I'm looking at the income from integral companies line in the P&L, where you classify the BASF YPC joint venture with Sinopec. This line has fallen from EUR 675 million in 2021 to about EUR 2 million in '24, now negative in '25, although I appreciate for other reasons. In this vein, why should investors believe that the new Verbund ramp-up will deliver any earnings at all beyond 2026, please?

And my second question would be to follow up on the ETS and the recent headlines, which, as you just said, were constructive. I appreciate this is a significant headwind for BASF over time. But thinking long term, don't you think Europe risks weakening its decarbonization leadership if the ETS is diluted, especially when China's upcoming 5-year plan is explicitly accelerating the green transition.

Thanks, Katie. I will take the second part of the question. I'm looking at Dirk, you covered in the first part on Zhanjiang and the earnings contribution from other facilities. Katie, I think the view on ETS is -- it's a very complex one. We are not advocating for removing or completely abandoning the ETS system in Europe. We just feel that the current system is too rigid and actually, at the end of the day, incentivizes decarbonization primarily in the chemical industry, I have to say, primarily to shut down assets or transfer production outside of Europe.

So we need a revision of the system. We need a smarter system, actually, the one that incentivizes and does not -- incentivizes the green transformation does not put European industry at a competitive disadvantage. I agree with you that overall, let's say, a strong momentum, but also potentially a leadership role of the EU in the green transformation is desirable. But it from my perspective, requires a bit of a smarter system and a revision of the ETS CBAM system.

So I think I'm thinking along the same lines, but short term, we have to make sure that the competitive disadvantage of European production does not become overproportionately big and at the end of the day, continue to erode European competitiveness short term. And with this, Dirk.

Katie, so first, maybe on Zhanjiang, we are expecting for the year '26 after a very successful start-up of the plant and still negative EBITDA contribution of, let me say, up to EUR 100 million. This will -- this is still due to ongoing start-up costs. Even after the start-up, you have some start-up costs. So this will still burden our business contribution in Zhanjiang, particularly in the first half of the year. Let me say at the same time that the earnings contribution from Zhanjiang to the segment Chemicals will be significantly stronger, i.e., much less cost than in the last year.

But yes, still in this year, we are expecting a negative contribution. For BYC, which you have -- so the BASF Sinopec joint venture in Nanjing, which you have correctly spotted in others, we had a massive turnaround in the year 2025. And with that, the result for BYC was turning negative in the year 2025. Going forward, we are, of course, mindful that with this big machine park that we have with the partner under operations there, we are turning into the positive territory again.

So we will now move on to Christian Faitz from Kepler Cheuvreux. The following in the queue then Laurent Favre, then we will have Chetan Udeshi and then Sebastian Bray. But now it's Christian Faitz, Kepler Cheuvreux.

Yes. 1.5 questions, please. What is BASF's current order book visibility in your traditional chemical activities? And in that context, what is the feedback from your salespeople on the ground in China, how demand has developed since the end of the Chinese New Year celebrations?

That's a very recent question, Christian. I have not talked to all our salespeople in China over the last days. But I can tell you, maybe coming to that question, order book visibility. I mean, we have not seen a significant change now over the last, I would say, couple of quarters. This phenomenon that we, I think, talked in this call also quite a lot about is the shorter and shorter visibility of order books. That is not materially changing throughout the portfolio, I would say.

The insecurity in the market is still high. I would say, as I said earlier, confidence in Europe, in particular, seems to be coming back on the producer side somewhat with a more positive outlook on 2026. But we also have, of course, in the U.S., consumer confidence now going in the other direction. So there's still a lot of movement there. And this is why cautious order behavior is still there, more short-term order behavior certainly is still the name of the game, so to say.

In China, as I said also in my speech, we have seen a tremendous volume growth in the fourth quarter and a very strong January as well. Of course, that is here, Zhanjiang is already contributing. We had almost with the early start with almost a full January of operation and also now in February where operations have run fairly well. So this continues to strong growth.

And also on the demand side, I don't hear any major challenges. In China, it's pricing. And you have seen maybe statistics that China has now seen 40 months, of continued producer price deflation. And that, of course, is a big problem for the industry in China in general, also our customers. But volume in China is still growing at fairly high rates and our outlook for the chemical market in China also this year is again significantly above everywhere else in the world. So volume is positive.

Okay. So now it's Laurent Favre, BNP Paribas.

Two questions, please. The first one, Markus, around this ETS points. I mean when we used to talk about natural gas in Europe and the end of war, I remember you telling us that energy prices were not a magic wand and that more likely than not, you wouldn't necessarily benefit from lower natural gas prices as, I guess, margins conditions or utilization rate conditions would be such that you would pass on lower cost to customers. What is different with the ETS situation, please? That's the first question.

And the second one around cash flow and share buybacks. At EUR 1.5 billion to EUR 2.3 billion, can I make sure that this includes -- this free cash flow guidance includes the federal guarantees? And should we assume that at the end of the first tranche of the buyback in June, you start straight ahead the second tranche? Or are you looking for a certain catalyst to start it up?

Thanks, Laurent. Dirk will take the second part. I'll try to get a little bit closer to your first question. You always have to, I think, a little bit differentiate, Laurent, when we make these -- some of these statements, whether we're looking at BASF Group in general or whether we're looking at competitiveness of specific value chains and assets. And if we look on a product and asset level, of course, the cost contributions of ETS are already today significant. And our message on ETS is that it is going to become a significant offset if we are not careful.

And if we continue to restrict the amount of certificates in Europe, then ETS costs, so CO2 cost per tonne in Europe will become triple digit relatively soon and will move further significantly up. And that's, of course, on a product and asset level, a significant disadvantage to the same people and also get producing the same product elsewhere.

Now you're right, on a company level, this is just one of many effects. So the ETS costs alone are not as big. And of course, natural gas is something that is predominantly a market equilibration. So natural gas is in Europe an LNG-based market mechanism. And in times of long gas markets, for example, we also have a chance to bring down the cost gap to U.S. and Middle East significantly. And markets typically adjust to this.

Product markets adjust much good to politically induced price signals like ETS taxes, for example. And so we are dealing with a lot of customers that also have buying opportunities in various different regions. And that's why I see a slight difference between, let's say, a totally market-based LNG price scheme versus a politically induced special regime in Europe that induces additional cost to producers with the European assets. So maybe that gives you some -- I know it's a complicated topic, but I hope it gives you some color on how I'm looking at this.

But to be clear, you're talking about the avoidance of an incremental negative if CO2 costs start to go up and you get Q1 free allowances as opposed to removing the cost that you have that you are incurring today?

I didn't quite get that question. Sorry, Laurent.

The removal of ETS, point was the removal of the ETS that would be -- it would be the removal of a potential incremental risk in the future. It's not improving the situation of today.

Yes. I mean we have significant cost of ETS today. I mean we talk -- and I think I've been saying this also publicly that I talked about a triple-digit million euro amount already in '24 and '25. So it's a significant cost item. But the discussion we have in Europe right now is about avoiding significant increases now in the next years because with the tightening of the ETS market and the end of free allocations, I expect actually, if we don't give that perspective of more free allocations that the ETS cost will increase significantly.

And this is what I'm worried about today in that order of magnitude, you know the P&L of BASF it is not the one and only golden bullet to reachieve competitiveness. But of course, it could become a big headache if politics don't act. And that's what we're advocating for. And as I said earlier to Alex's questions, I think we're optimistic that politics have understood this. And you've maybe seen also some politicians in Brussels indicating that there's an openness to discuss, for example, extension of reallocations, which from my perspective, would be a good recipe.

Laurent, I'll take your questions on cash flow and share buybacks. So first confirm that our cash flow guidance of EUR 1.5 billion to EUR 2.3 billion includes the payments for the federal investment guarantee, which I outlined in my part of the speech. Secondly, on the share buybacks, we will, as was mentioned by Markus, complete our first tranche, EUR 1.5 billion by June 2026. Whether we will start a second tranche immediately or later is not yet decided. We will decide that later in this year.

So I would not rule out anything, but would also not yet say we will do that immediately. One thing is clear, the EUR 4 billion minimum share buyback program until end of '28. This is confirmed, but the timing of the second tranche is not yet decided.

Okay. Given the time and the length of our queue, I ask you to really restrict questions to the minimum. We have now Chetan Udeshi, JPMorgan. He will then be followed by Sebastian Bray, Tom Wrigglesworth and Jaideep Pandya. But now Chetan, please go ahead.

I actually have two quick ones. Just on Q1. I was just wondering if you can give us a little bit more color. So I heard you, Markus, you talked about EUR 200 million of FX headwind. I suppose we should have some underlying decline on top as well because you talked about margin pressure, weaker volumes. So should the base case be that we at least have EUR 300 million, EUR 400 million year-on-year decline in EBITDA in Q1?

The second question, I was just surprised by your guidance on Nutrition & Care about earnings increase. What will drive that? Because the vitamin prices are worse than last year. And you yourself talked about the challenges that you have in your Care Chemicals business, especially given that you're so levered to the bigger customers who are losing share to regional customers, and there is also a reference to pricing pressure in some of those businesses. So what will drive earnings growth in Nutrition & Care this year?

Thanks. Maybe on your Q1, I mean, you explained or you brought, I think, the right elements. I think your hunch that Q1 could be lower than last year is the right one, although the order of magnitude that you have indicated from my perspective is too dramatic. But I don't want to now give a specific Q1 guidance, but I think that's why I mentioned it in the speech. Q1 is a very peculiar one because we have a couple of things that we face as headwinds. The biggest one is currency because we have this overproportional sensitivity on currency in Q1 because of our ag business. And of course, the spread is now between almost EUR 120 million, and I think last year it was EUR 105 million or something like this in the first quarter. So it's a pretty significant comp issue that we have here.

And the second one is that we also have some additional cost elements, especially early in the year coming from some turnarounds. We are in a turnaround season now for two of our main crackers, one in Europe, one in U.S., so Port Arthur, and we have also a vitamin turnaround in Q1. So we are starting with a bit of headwinds on cost and FX on Q1. That's why, yes, there is a likelihood that we will be below prior year. But as I said, your order of magnitude is a bit too steep for me.

Nutrition & Care, yes, you're right. I mean the vitamin prices are low right now, both in E and in A. But overall, we are expecting, of course, a significant increase in volumes in the next year because we are still after the force majeure, especially in Nutrition & Health now in the phase of really increasing the volumes and the volume increase is pretty steep. So that will help to absorb also the fixed cost in our manufacturing and drive profitability up even at low vitamin prices, of course, and the incremental profitability increase is still pretty significant.

And also on the Care Chemicals side, I think your comment was a bit too negative. I think I didn't want to portray it so negative in my speech. Yes, we had a challenging dynamic over the last, I would say, 6 months, as I described it. But I would say overall Care Chemicals markets, also home care, personal care and also industrial and institutional cleaning is overall healthy, and we see also a volume recovery, and we have also strong self-help measures plus.

We, of course, see also in Care Chemicals now new capacities coming on stream, and we are targeting already to have our new capacity in China, for example, filled up to 50% in this business in 2026. So we have a lot of upsides also in Care Chemicals. So I don't believe that the current -- that the momentum we've seen in the last month is going to sustain.

Move on to Sebastian Bray, Berenberg.

Can I ask one on the Surface Tech guidance? I was surprised to see that this is so conservative that it's down year-on-year at EBITDA for '26. Platinum Group Metals prices are up. It looks as if Battery Materials did better in Q4. Auto Catalyst seems to be doing quite well. Why would the earnings in this segment decline year-on-year?

My second one is on agriculture. It looks as if BASF is calling the top of the market a bit and saying that the segment's EBITDA might decline slightly in '26, although I appreciate there's an FX headwind. What is the company seeing at the moment on the pricing and volume side across Seed and Crop Protection as we move to Q1?

Yes. Thanks, Sebastian. I'll take the Surface Technologies question, and then Dirk will try to give you an answer on the ag part. Yes, the guidance is down. We have had a significant onetime effect in 2025. That was very significant, and it was a catch-up effect of the last few years. This was -- I don't know what the technical term is, so we say refund or government grant, if you want, on this. So this certainly inflated the results 2025 somewhat. We will not have this in this order of magnitude going forward. It will be a continued effect, but it will be in the low double-digit million. So not so material in this -- for the segment going forward.

On the precious metals pricing, you're right. We have seen, of course, a strong increase in precious metals pricing, rhodium, platinum, palladium all up and steeply up. So we saw a lot of volatility, which typically also brings up our trading results quite a bit. So it's not only the absolute level of pricing, but it's the volatility that drives, of course, profits in that segment. And our scenario for 2026, at least is that we will see a moderation of PGM prices. There's no guarantee, but that's the underlying assumption of the guidance for Surface Tech.

So less government grants, significantly less government grants and a moderation of PGM prices and less volatility. That's basically the summary why we say as a net, it's a significant decrease, but still a strong performance. I will tell you that because we are very happy with the performance of the ECMS business in particular. And we also see that the Battery Materials team is doing a good job in increasing its profitability and in a tough market environment using all their levers.

Sebastian, to your question on ag, the ag business fundamentally will deliver another strong year. Agronomic conditions remain positive or are very positive in 2026. Also, the channel inventories from the customers that we see right now are in the normal range. And so fundamentally, the business is good. So two things are dragging the business. And first and foremost is the FX effect. We already mentioned it now a couple of times. So the rollover from '25 to '26 was all smooth, but for the FX effect. So this is dragging us. And then, of course, on top of that, the soft commodity prices, they remain under pressure. Farmers still are not back to the normal level of earning and buying power. So these, I would say, are the two factors. But fundamentally, we are okay for the business, say, for the FX effect.

So now Tom Wrigglesworth, Morgan Stanley.

I'll ask my one question. Just on the free cash flow expectations for 2026, you've called out very clearly the reimbursement benefits, you've identified lower CapEx. I mean those together equate to EUR 1.7 billion improvement in free cash flow year-over-year. So I'm interested to understand what you see as the offsetting negatives and headwinds that your free cash flow generation will face to get to the midpoint of your '26 guide?

Thomas. Dirk speaking. Maybe I take this one. The negative is, in a way, a positive because we will incur in 2026 quite a high amount of severance costs from our ongoing restructuring. We already told you in the speech that we put into our P&L higher severance cost, EUR 300 million more than originally anticipated. And this is because we are able to accelerate our programs, which means we are quicker achieving a positive run rate on the underlying cost. But of course, it comes with a onetime cost, and this is the cash out for restructuring in the context of the restructuring.

Second one, certainly, the precious metal effects. As you know, we have quite some cash tied into precious metal. And depending on the price development, you saw already quite a big effect in 2025. You will see that ongoingly. And with Battery Materials business going up, you will see positives on the P&L, but you certainly see more cash than also tied in the cash perspective. So that I would say are the two big effects that I would like to share with you.

So now we will move on to Jaideep Pandya On Field Research. We will then have Tony Jones, James Hooper and then Geoffrey Haire. But now Jaideep Pandya, please go ahead.

First question is around sort of the BDO investigation, which happened in Europe around the antidumping. Have you seen any change sort of in the approach towards antidumping from the EU? And could we see more products like BDO falling in the category given that the increased pressure on imports from both China but also from North America and the Middle East. I've been reading also about the shortening of the investigation time horizon.

And the second question is around MDI. Given the expansion, could you just give some color around the trading dynamics, import-export balance and the margin dynamics in the U.S., given this was predominantly an import market back in the day for MDI and how it will benefit you with the capacity expansion?

Yes. Jaideep, Markus here. Maybe I cannot comment now on the individual antidumping case. Maybe 2 -- a few comments on this. First of all, you are right, the number of antidumping cases, in particular in Europe against Chinese producers has increased significantly over the last years. It's a pretty steep increase. That's just given the overall market dynamics and the strong export activity of Chinese companies. And there's actually quite a ground for a lot of these antidumping cases from my perspective right now.

We have active discussions also with the EU Commission. Because on the one hand side, the increasing number of antidumping cases stresses also the resources. It's a very practical problem for the EU Commission because they don't have enough people to work on these cases. And that extends the time period now quite a bit.

So we have active discussions that I think from my perspective, at least the legal framework in the EU also would allow for a much swifter implementation of, for example, provisional duties. And here, we already see that in the BDO case, I think there is discussions on the -- either the BDO or the adipic acid case, I don't remember. There are already provisional duties put into place swifter than what we have seen in the past. So there's active discussion on that, but there is no also super quick fixed solution in the political space.

But I think it's something that we strongly advocate is needed in Europe. So I am positive. And I also believe that you will see a counter reaction by the European Union much stronger on protection against anticompetitive imports. MDI, maybe Dirk is nodding. He can comment on this.

So maybe on MDI. First of all, let me say this is and remains a very strong product for us. It's one of the reasons why we are obviously also doing the investment in Geismar. Now overall, if I look into what happened recently, the overall specific margins decreased recently due to weaker prices in all regions and that is particularly driven by weaker demand that we saw in '25. But if I look into '26, I mean, one important driver is demand from construction. This is at least expected to improve slightly, driven by restocking that we will see in Europe, but also North America.

And then we will have to see how this is developing now in China after the Lunar New Year's holidays. But fundamentally, I would say this is and remains a strong product for us.

And let me just add to MDI. I mean, at the end of the day, the excess MDI capacity, if there is any, it is in China. And so the path for, let's say, importing into the U.S. would be product from China. And that, of course, given the current trade politics has become more difficult. So I think that overall is a case where the U.S. trade policy certainly provides headwind for BASF and the MDI expansion in Geismar, so provides tailwind, sorry, support for this investment in Geismar.

So overall, I think our investment is a significant contribution to further growth of the domestic industries in the U.S. and to the self-sufficiency of U.S. market with regards to that key ingredient.

So now Tony Jones, Rothschild.

I've got two. It's a 2-part question really. On the guidance, some of the positive comments that you talked about earlier on the call like potential regulatory easing, German stimulus and some of the customer feedback. Can you confirm if any of these factors are captured within the guidance range or just too late to make it into the targets?

And then secondly, related to it, in the Chemicals segment, EBITDA margins are now around 8%. So the implied return on capital is low single digits. With the guidance being quite cautious, does that now trigger another strategic review of your German and European upstream assets?

I take the second question. I mean, given the overall market dynamics that we are seeing, especially in upstream now, we don't consider now an additional or a new view -- strategic view on our upstream assets sites or business strategies because we are -- we have gone through this assessment, as we said in 2024, of which assets in Europe, in particular, are fundamentally competitive versus our peers. And where we have not seen this, we have either taken already the appropriate action or we have flagged assets for potential restructuring in case they get into profitability issues.

So that strategic view is done, and it's still robust today. So there's no need to review this. Of course, we will operationally react to the market situation, market dynamics and margin situation that we have. But strategically, for the most part, we are, let's say, well set up and our strategies remain intact. We have, on the last capital market update, given you a view on a few major construction sites, as I call it, in our portfolio, namely the polyamide upstream business, the plastic additives business, the vitamins business and the BDO business.

And here, we continue to challenge, of course, also the asset footprint with ongoing efforts but no fundamental reassessment of our asset footprint. We believe we are competitive in Europe and North America and China in our major markets. And we just have to sustain at the end of the day, a trough in the overall market situation with this asset setup.

Tony, maybe shortly on your first question, I can assure you that everything that we said today and shared today is reflected in the guidance. So the guidance is really updated. We didn't stop to have a look into what we can share and offer today until the very last day. So what will make us busy and still will keep the business on a relatively low basis will be the FX effect that we talked about. This is a significant effect and also the ongoing margin pressure and price pressure that Markus has talked about.

We have fully factored in the self-help measures that we will be taking also this year. We also factored in the positive volume effects that we also talked about by the segment. I think the relatively wide range that we have to offer here is due to the ongoing uncertainty. I mean we are all hearing and listening to the news each and every day, and we remain in a world of uncertainty. You see that also in the confidence levels of the customer industries. So we have to come up with a relatively broad range in the guidance. But I think this is as good as it can get today. And we are, I would say, confident with the guidance that we are providing today.

Given the time, I suggest we can only take 3 more analysts in the queue, but really ask you to only ask one question. It's James Hooper, Geoffrey Haire and then Matthew Yates. So now James Hooper, Bernstein.

My one question, can you give us a little bit of detail about the energy cost outlook just because you've got your partnership with Cheniere, and we're expecting a lot more LNG supply coming into Europe.

James, it's quite simple. I mean, energy outlook, we gave you the short-term outlook on oil. I mean we are forecasting, of course, always or we are doing our planning based on oil, and we do the same on natural gas. The outlook on natural gas as the most important energy carrier for the chemical industry, especially in Europe, is actually quite simple. We believe that it is midterm going to be an LNG-based pricing mechanism in Europe. And that means that on the long run, LNG pricing in Europe in a balanced market scenario will always be a certain -- will always have a certain offset versus the export price, U.S. Gulf Coast or Middle East.

And this is also the picture that we see, for example, today in future markets. If you look out to 2028, 2029, you can already buy natural gas futures in Europe, and this is in that range. So we see a balanced market and the LNG market dynamics globally will determine the -- will anchor, so to say, the energy cost for natural gas in Europe. That's our outlook. And so we are not so concerned. But we have to also acknowledge there will always be an offset of natural gas cost in Europe versus U.S., order of magnitude, $5 to $7 per MMBtu.

Geoffrey Haire, UBS.

I just want to ask at the lower end of your guidance of EUR 6.2 billion, what do you assume? Is that just a continuation of what we're seeing in Q1? Or is it that the world gets worse?

That's, of course, a tough one. But I mean, it's the lower end of the guidance for a reason. And this counts in that also there's a lot of things in 2026 that could go also south. Dirk answered the question on the guidance and made a comment also on the wide range of the guidance. And I can only remind everybody, I mean, we're giving a guidance for the next 10 months. The year-end is 10 months away.

If you look 10 months back, it was Independence Day, April 2, Mr. Trump standing in the Rose Garden. So a lot of things can happen in 10 months. And yesterday, I've seen pictures of U.S. aircraft carriers in the Persian Gulf. So I also don't know what the next months will be like.

We just wanted to indicate with a rather wide range that there's a lot of insecurities. And we, of course, looked at some challenging scenarios for 2026 that could emerge, and that's how we set the lower end of the range, if that gives you any feeling. So it's the best guess we have today, late February 2026, but end of May or end of March, actually, there's a meeting between Mr. Trump and Mr. Xi. Nobody knows what the outcome of this meeting is, and that could drive dynamics in 2026, also to the much more positive than what we have in the books today, I might say that as well. So high unpredictability, I think, and that's why you see the guidance as it is.

So now final question from Matthew Yates, Bank of America.

So the midpoint of your free cash flow guidance, if I understand correctly, excluding the Wintershall compensation, is only a bit over EUR 1 billion. That's less than half your dividend and despite having CapEx at really minimum levels. Maybe we're at the bottom of the cycle and in profits recovery. But if not, it makes me wonder whether BASF needs to push even harder with its cost cutting.

I see your European headcount last year was down about 3% and maybe it goes down further in light of the provisions you took. But in that context, why did you agree in December to the labor agreement in Ludwigshafen, no compulsory redundancies for another 3 years. So I'm just wondering whether BASF needs to be more aggressive in how it's tackling its cost base in light of the environment we find ourselves in.

Matthew, maybe we split this into two parts. I'll start with the ongoing cost savings, and you are spot on. The cost savings that we have already now launched. They bring us to a point, but they will not bring us to an end. But what we said is rather than coming with new cost programs with certain amounts, we rather now engage in continuous productivity gains, continuous efficiency measures and a token of that is what you have seen in our announcement for the restructuring of the back-end service organizations.

We are for both big services, digital and business services and now going with parts of what we are currently doing in high-cost Europe. We are going to low-cost locations in Asia, notably to India. So this is another measure that we are taking because we know exactly that with our programs so far, we will not do the full trick. And therefore, spot on, we need to stay on the cost and cash awareness, and we will do that going forward. And maybe with that, over to you, Markus.

Also from my side, I mean, you can be assured that cost and, let's say, adoption of -- or adaptation of cost to the market outlook that we have stays #1, #2 and #3 priority for us at this point in time because it is going to be key. You will see also when you look at personnel cost or personnel development, you will see an acceleration in 2026 versus 2025. And the reason is that, of course, some of these processes, in particular, in Europe and in Germany are slower than you would wish for, but that is just also the nature of the environment that we operate in. I cannot change this.

To your question on the labor agreement, I would also say that of course, it is also often simplified as this is the agreement that, let's say, we commit not to lay off people for operational reasons. But that is an oversimplification of what was actually agreed upon. The new labor agreement for the site in Ludwigshafen here gives us much more flexibility to do structural changes than the old one. So we have actually gained a lot of flexibility here because we had a consensus with our workers' council and the unions that further restructuring is needed to make the site more competitive for the future.

So this is actually a very positive step in the right direction that we took jointly. And the limiting factor for operational redundancies in Germany is actually not the site agreement. It is the German labor law. And that is the toughest or the limiting, let's say, regime that we have to apply to. And this is why the site agreement, I can only say for us as a Board is a significant positive step in the right direction. It offers us more opportunities to do a structural adaptation at the site than ever before but I cannot get out of the German labor law regime, which is something that is compulsory for every company that operates in Germany.

We are now at the end of today's conference call. We will present our first quarter results on April 30, right before our Annual Shareholders Meeting at the Rosengarten in Mannheim. Should you have any further questions, please do not hesitate to contact a member of the BASF IR team. Thank you for joining us today, and goodbye for now.

Good morning, and welcome to our press conference, and thank you that you have dialed in. Today, we are going to present and explain the financial figures of BASF Group for the third quarter 2025. You will be talking to Markus Kamieth, Chairman of the Board of Executive Directors; and Dirk Elvermann, CFO.

And before we begin, let me give you a few points of housekeeping. The conference language is German with a simultaneous interpretation into English, and that's a Teams meeting. So in the Teams meeting, you see all the charts in German. If you want to see the charts in English, you will find the link in the chat or you will also find it as a download on the BASF website under Quarterly Statement Q3. That's it for introduction, and I give the floor to you.

Thank you, Nina. Good morning, everyone. Dirk Elvermann and I welcome you to this press conference from Ludwigshafen, and we will present and explain our third quarter figures. The third quarter of 2025 continued to be challenging market dynamics wise. Margins for Basic Chemicals were still under pressure. Customer buying behavior in almost all industries and regions remain cautious. Even in this demanding market environment, however, BASF's earnings came in slightly above market expectations and only slightly below the level of the prior year quarter.

I'll start by looking at the sales performance of BASF Group compared with the prior year quarter as usual. Overall, sales declined slightly on account of continued strong currency headwinds and lower prices. We were, however, able to achieve slightly higher volumes, thanks to growth in the Surface Technologies, Chemicals and Materials segments. From a regional perspective, we recorded 12% volume growth in China, slight volume growth in South America and fairly stable volume development in Europe.

In North America, volumes were slightly down. Compared with the prior year quarter, prices declined in 4 of our 6 segments, particularly in the Chemicals segment. And Nutrition & Care segments, we managed to achieve price increases. Currency effects dampened sales in all divisions and were mainly related to the strong depreciation of the U.S. dollar, the Chinese renminbi and the Indian rupee.

Reflecting this underlying sales development, EBITDA before special items came in at over EUR 1.5 billion compared with EUR 1.6 billion in the prior year quarter. Here, we provide you with an overview of how the markets and our segments' volumes and specific margins developed in the third quarter of 2025. Due to a continued imbalance between supply and demand and the resulting pressure on margins, the business environment in our upstream segments remain challenging. Nevertheless, BASF achieved solid volume growth in both divisions of the Chemicals segment. However, the segment faced significantly lower prices, so margins declined sharply. In the Materials segment, despite the difficult market environment, BASF recorded slightly higher volumes due to increased volumes in the Monomers division and stable volume development in the Performance Materials division. Prices declined in both divisions.

Overall, margins in the Materials segment were lower, owing mainly to developments in the Monomers division. The Industrial Solutions segment operated in a subdued market environment. Volumes slightly declined in both divisions. Specific margins decreased considerably, particularly in the Performance Chemicals division. The market environment for the Nutrition & Care segment became considerably more challenging in the third quarter of 2025. BASF recorded lower volumes in both divisions, but was able to achieve slightly higher prices in this segment. The specific margins in the Nutrition & Care segment declined. Lower fixed costs and improved margins in the Nutrition & Health division were more than offset by lower margins in the Care Chemicals division.

Moving on to the Surface Technologies segment and its main customer industry, automotive. According to the latest data, global light vehicle production in the third quarter of 2025 increased by around 4% compared with the prior year quarter, mainly because of considerable growth in China. For the full year 2025, we expect global automotive production to increase by around 2% compared with 2024. In this environment, the Surface Technologies segment recorded volume growth, mainly in the Environmental Catalyst & Metal Solutions, ECMS division and overall prices were up considerably. Specific margins in the Surface Technologies segment also increased slightly.

Finally, in the segment overview, let's look at the Agricultural Solutions segment. Crop commodity prices remained below historical averages. Farmers still faced elevated financing costs, resulting in unchanged and challenging economics for them. In this market environment, the Agricultural Solutions segment recorded slightly lower volumes and prices compared with the prior year quarter. By contrast, the segment achieved considerably higher specific margins in a seasonally low quarter -- in a seasonally slow quarter.

Let's now look at EBITDA before special items by segment in the third quarter of 2025. Considerable earnings growth in the Surface Technologies and Agricultural Solutions segments as well as improved earnings in Other were offset by lower earnings in the core businesses. Compared with the prior year quarter, EBITDA before special items in the Surface Technologies segment increased significantly due to the ECMS division. The earnings increase at ECMS was driven by significantly lower fixed costs, a strong precious metal trading business and volume growth. Lower fixed costs resulted from continuous cost improvement measures and U.S. government grants for which ECMS is eligible as a leasing -- leading recycler of platinum group metals.

As we communicated at the capital market update in Antwerp at the beginning of the month, after the successful carve-out, ECMS has a stronger setup and we will keep the business as part of BASF Group for longer. We expect to benefit from strong cash contributions from ECMS amounting to a cumulative cash flow of roughly EUR 4 billion from 2024 to 2030. This brings us to the Agricultural Solutions segment. Earnings in this segment rose considerably, mainly due to improved margins. The successful market launch of glufosinate p-ammonium and lower manufacturing costs, both contributed to this development. We continue to expect that a slight increase in full year earnings is achievable.

The core businesses recorded lower earnings, mainly due to the previously mentioned lower margins, which were partly offset by lower fixed costs. As the deviations from average analyst expectations were largest in the Nutrition & Care segment, I will give you a few more details. Compared with the third quarter of 2024, we generated considerably lower earnings in the Nutrition & Care segment. The Nutrition & Health division increased earnings primarily thanks to lower fixed costs. The Care Chemicals division, on the other hand, recorded a decline in earnings. The main reason for this was continued margin pressure, which was particularly pronounced in the Personal Care applications businesses.

I will now give a brief update on our new Verbund site in South China. We will complete this mega project with capital expenditures around EUR 1.3 billion lower than originally planned. We achieved this significant CapEx reduction through tight budgetary discipline, scope changes and excellence in procurement. As a result of the currently long markets in China, the ramp-up of earnings contributions will be slower than originally anticipated.

In the years to come, we expect most markets and value chains to rebalance. We, therefore, confirm the targeted EBITDA before special items of EUR 1 billion to EUR 1.2 billion by 2030. This slide illustrates the impressive progress that Zhanjiang team has achieved since May. This includes the successful mechanical completion of the steam cracker and downstream petrochemical plants. The infrastructure and utility plants are already in steady operation. Additionally, we have safely and successfully started up various downstream plants, including butyl acrylate, 2 ethylhexyl acrylate from aldehyde, neopentyl glycol and glacial acrylic acid with more starts to come. We are thus transitioning the project from construction to operational readiness.

Full operational start-up for the site is expected as of the end of 2025. Let's now move on to the binding transaction agreement on BASF's Coatings business, which we announced on 10th of October. This agreement with Carlyle marks an important milestone in focusing our portfolio and unlocking the value of our Coatings business. It demonstrates our strong commitment to swiftly execute BASF's winning way strategy and create a leading Coatings company under Carlyle's operational leadership. The enterprise value of this transaction amounts to EUR 7.7 billion.

If we achieve regulatory approvals within the typical time frames, which we anticipate, the transaction is expected to close in the second quarter of 2026. At closing, BASF will remain invested in the coatings entity with a 40% stake and will receive pretax cash proceeds of approximately EUR 5.8 billion. We believe in the future value creation and potential of the Coatings business and want to continue to participate in its success. Together with the divestiture of BASF's Decorative Paints business to Sherwin-Williams, which closed on October 1, BASF's entire Coatings division is valued at an enterprise value of EUR 8.7 billion. The implied 2024 EV EBITDA multiple before special items of approximately 13, clearly demonstrates that we are unlocking the value of the Coatings division.

With that, I will now hand over to Dirk.

Yes. Well, thank you, Markus, and good morning, ladies and gentlemen. What are the implications of the Coatings transaction agreed with Carlyle in terms of BASF's financial information being presented today? As of September 30, 2025, and until closing of the transaction, we will report coatings in the P&L as discontinued operations. Therefore, sales and earnings of the business are no longer included in sales, EBITDA and EBIT of BASF's group with retroactive effect as of January 1, 2025. The prior year figures have been restated accordingly.

The results of this business are presented as income after taxes from discontinued operations. Between September 30, 2025, and closing of the transaction, there is no impact of or change on BASF's statement of cash flow. The business will be considered as before in the respective line items of BASF's cash flow statement. As of closing, BASF's minority stake of 40% will be accounted for as a financial investment using the equity method and will be reported in EBITDA and EBIT before special items of Other. The cash inflow from the transaction will be reported in cash flows from investing activities in the line item payments received from divestitures.

After closing of the transaction, dividend payments from the business to BASF Group will be reported in BASF's cash flows from operating activities. This table provides a comprehensive overview of major changes in BASF's reporting following the classification of the automotive OEM coatings, automotive refinish coatings and surface treatment businesses as discontinued operations. In the quarterly statement published today, for ease of comparison, we provide all relevant financial figures on both a pro forma basis, meaning with Coatings still fully included in the segment result of Surface Technologies as well as excluding the discontinued Coatings operations. The Decorative Paints business sold to Sherwin-Williams is not affected by the retroactive restatement.

It remained part of the Surface Technologies segment until its divestment on October 1, 2025. This means that the figures for the Coatings division in the third quarter segment reporting refer exclusively to the Decorative Paints business, which was already classified as a disposal group in the first quarter of this year.

Now I would like to explain the capital allocation framework and how BASF will use the considerable cash proceeds from the portfolio measures that have already been completed or will be completed. As you know, we closed the sale of BASF's Food and Health Performance Ingredients business to Louis Dreyfus Company on September 30, 2025. This is reflected in the quarterly statement for the third quarter of 2025. The sale of BASF's Brazilian Decorative Paints business to Sherwin-Williams was closed on October 1, 2025. The purchase price amounted to $1.15 billion on a cash and debt-free basis. For our Coatings transaction with Carlyle, which is expected to close in the second quarter of 2026, we will receive pretax cash proceeds of around EUR 5.8 billion. At maximum, we assume taxes to be in a mid-triple-digit million euro range.

We also are also making further progress with the monetization of our oil and gas assets. In 2025, we will receive around EUR 200 million from our participation in Harbour Energy from dividends and Harbour Energy's ongoing share buyback program. I would like to stress yet again, we consider our participation in Harbour Energy to be a financial investment, and our strategy remains to exit at the right time to realize the value of this participation. There is also good momentum in the topic of federal investment guarantees. Wintershall Dea received a first installment from the German federal government in the third quarter, and we expect a final decision soon. Proceeds will be distributed by Wintershall Dea via dividends and will contribute to BASF's Group's operating cash flow in 2025 and 2026.

As we previously announced and recently confirmed, we are targeting IPO readiness of BASF's Agricultural Solutions division by 2027 with the potential listing of a minority share as the next step. In other words, cash proceeds from this event would be beyond the 2025, 2026 window. Now let's move on to the use of cash with a focus on the rest of this year and next year. We are clearly committed to paying an annual dividend of at least EUR 2.25 per share, subject to approval by the Annual Shareholders Meeting. Furthermore, we will use a substantial part of cash proceeds to deleverage the balance sheet and secure our financial strength.

The maturity profile of outstanding bonds will allow us considerable deleveraging in 2026. As announced yesterday, we will start buying back shares as of November 2025. This is a considerable acceleration compared with our initial plan to buy back shares from 2027 onwards. More details on that in a minute. Larger acquisitions are currently not in focus, while smaller to midsized acquisitions remain possible and capital expenditures will be significantly reduced in 2026 and beyond. They will consistently stay below depreciation level until at least 2028.

Ladies and gentlemen, we are swiftly delivering on our Winning Way strategy, and we are fully committed to attract shareholder distributions. Therefore, and in view of quick progress on the portfolio side, we have announced that we will start a share buyback program with a volume of up to EUR 1.5 billion in November that is scheduled to be executed by the end of June 2026. This is part of the share buyback announced in September 2024, with a total volume of EUR 4 billion until the end of 2028. The earlier start of the program demonstrates management's confidence in the underlying financial strength and true value of our company, which, in our view, is not fully reflected in the current share price.

Now is the right time to return capital to our shareholders and reduce the number of shares while bringing down debt. Let's now take a look at the financial details of BASF Group for the first 9 month of 2025 compared with the same period of last year. All these figures still include the discontinued operations. At EUR 5.9 billion, EBITDA before special items declined slightly compared with the first 9 months of 2024, the EBITDA margin before special items, excluding metals, remained almost stable at 13.6%. EBIT before special items reached EUR 3.1 billion compared with EUR 3.4 billion in the same period last year. Special charges resulted primarily from restructuring measures as well as the sale of BASF's share in the Nordlicht 1 and 2 wind farms back to Vattenfall in the first quarter of 2025.

Special income from the sale of BASF's Food and Health performance Ingredients business had a partially compensating effect. Net income declined by EUR 1 billion and amounted to EUR 1.1 billion. In the prior year period, net income from shareholdings included special income in connection with the transfer of Wintershall Dea asset to Harbour Energy. Cash flows from operating activities amounted to EUR 2 billion compared with EUR 3.5 billion in the same period last year. The decline was primarily driven by changes in other operating assets, lower net income and higher cash outflows from changes in net working capital. Compared with the first 9 months of 2024, payments for property, plant and equipment and intangible assets decreased by EUR 1.1 billion to EUR 2.8 billion.

This clearly indicates that we have passed the peak investment phase for our South China Verbund site. Free cash flow was minus EUR 868 million in the first 9 months of '25. Here, you can see some more details on our cash flow. I will focus on the development in the third quarter, shown on the right-hand side. In the third quarter of 2025, cash flows from operating activities came in at EUR 1.4 billion. The decline compared with the prior year quarter was mainly due to changes in other operating assets. Payments made for property, plant and equipment and intangible assets decreased by EUR 510 million compared with the third quarter of 2024. Free cash flow amounted to around EUR 400 million.

And with that, back to you, Markus.

Thank you, Dirk. Our assumptions regarding the global economic environment in 2025 remain unchanged. Likewise, our outlook for 2025 remains unchanged content-wise. As a result of the reclassification of the automotive OEM coatings, automotive refinishing coatings and surface treatment business as mentioned by Dirk, we have made a necessary technical adjustment to our outlook. The adjusted outlook range for EBITDA before special items is now between EUR 6.7 billion and EUR 7.1 billion, and the difference compared with the previous outlook range of between EUR 7.3 billion and EUR 7.7 billion reflects the expected full year contribution of the Coatings business that are part of the transaction with Carlyle. This business is retroactively reported as discontinued operations as of January 1, 2025. The forecast for free cash flow and for CO2 emissions are unaffected by the restatement and thus remain unchanged, and now we'll be happy to answer your questions.

[Operator Instructions] The first question comes from Mr. Fröndhoff from Handelsblatt.

One question to both of you, maybe more to Mr. Kamieth. If we look at the earnings figures, you have grown in the carved-out businesses and the core business, which represents the future, here, figures declined. And looking at the earnings contribution of coatings, well, this year, there will be no more contributions. That is a high figure with a high return. So the question here is, does BASF really bet on the right part of the business because you seem to keep the declining businesses.

Okay, that was your question already. Thank you very much, Mr. Fröndhoff for your question. Our strategy was announced very clearly last year, and we started to restructure our portfolio with that. From my point of view, it's a little simplified to say we will get rid of our stand-alone businesses. This is not true. We already announced that the ECMS business will be kept in the group and in recent -- in the years to come, we will generate cash contributions, and it will remain part of the BASF Group. But obviously, as a stand-alone business, it will be managed differently from our core businesses.

The Ag Solutions business, a significant earnings contribution business will also, after the IPO, remain a fully consolidated business of the BASF Group and contribute to our earnings figures. And the business we are discussing now is the Coatings business, as you mentioned, and of course, if you look at BASF Group's figures, well, this business will no longer be part of this because we are deconsolidating, and we have a share now in this business. But the true importance of this transaction, I think, was described clearly. For our shareholders, we can show the value of the business with an EBITDA multiple of 13, which is much better, a very good evaluation and this means an immediate offset and compensation, and it means that funds are coming in immediately.

I think this is a good strategy. And the success story in the core is being continued because even in a difficult market environment, our core businesses are doing reasonably good, and we bet on our innovative strength, our cost advantages and the core businesses, of course, do have a justified future with profitable growth. So our portfolio strategy from our point of view is the right one and the high earnings contributions and the high evaluation of coatings, I think, confirms our strategy. I don't know whether Dirk, you want to add something.

Mr. Fröndhoff, from the financial point of view, I described that the business is being reclassified, but it fully contributes to our 2025 earnings figures in cash flow also. And only from an accounting point of view, it is shown in a different way. And also when it comes to the future, we are selling 60%, which gives us a cash share of EUR 5.8 billion before taxes for the 60%, we will have a 40% stake. And our stake, I tried to show this to you, will be reflected in the EBIT in the future. As soon as the closing is complete, the performance of this joint business under operational leadership by Carlyle will be shown in BASF's EBIT. So it doesn't disappear, but we still have a minority share.

And if you look at the profitability of coatings over several years, then looking at the strength in earnings, looking at return on capital, it is not much different from our downstream businesses in the core business. So your hypothesis that this is less profitable is not true.

Andrew, your question, please.

Can you hear me okay?

Yes, we can hear you.

Yes.

I've got 3, and I'll try to keep them brief. The first one is on -- you've mentioned I mean small to medium M&A. Sorry, I'm getting a terrible echo. I don't know how to get rid of it, but I'll continue. You've mentioned small to medium M&A. Given the focus on the Verbund and getting everything inside the tent, so to speak, what would that look like? Are you referring to sort of the stray commodity assets in Europe, for instance, because it's hard to picture how you would buy anything given your retrenchment around Verbund. That's the first.

I take your point on ECMS and Ag and how they are good stand-alone businesses. But given you've sold coatings, you sold food and health, I'm struggling to sort of work out how something like Cognis fits in. It's got a ton of SKUs. It's cosmetic actives, anti-aging, palm oil, natural ingredients. So it feels like less of an overlap with coatings. So are there more businesses that could come out like that? And I've forgotten the other. Yes. I'll leave it there. You only get 2. And Nina, good luck with your next role in Roche.

Thank you, Andrew.

Do we answer in English or in German?

In English.

In English. Okay. Thanks, Andrew. Thanks for the question. I'll take a stab at them. First of all, M&A, I mean, the notion that we say we consider small- to medium-sized M&A or acquisitions is at the end of the day, also a financial statement, so to say, that we put in the context of our financial use of cash, so to say, right? So we wanted to make sure that we are not now sitting here and targeting major transformational M&A as a group, at least for the time being.

I would say your statement that everything has to fit under one tent is a little bit black and white from my perspective. Of course, we are focusing a lot on our strength in our Verbund sites. And we have also said recently that about 80% of what we do in the Verbund is linked to 1 of our value chains. But that also leaves a lot of room for attractive, high-growth, high-profit businesses that we run that are not necessarily always linked to a value chain and are not present at our Verbund side. So I don't think this is an exclusive view so much.

And the business, in particular, that you mentioned in your second part of your question, we consider as one of our strong downstream businesses. We have also a very integrated business, by the way, in the personal care space, starting from fatty alcohols all the way to a large amount of personal care ingredients. And we are going to market with one of the broadest and I would say, most powerful portfolios into an industry that, of course, also benefits a lot from other products that come out of the Verbund in Ludwigshafen, the EO value chain, for example.

So overall, we like the Personal Care business a lot. We have shown that we can run this operationally very well. We are one of the market leaders, and it shows also an over-average profitability for us. So we don't discard anything just but it's not in Ludwigshafen or just because it's not linked to a Verbund value chain, but we look at it case by case, and we see what businesses fit to us and where are we the best owner? And this is also, I would say, the lens we put on potential small- to medium-sized acquisitions. And this is not a super high priority for us right now, but we wanted to indicate that we have the capabilities to do so.

Yes. I remember the last one, just super quick. In 2024, you announced a deal with International Process Plants to sell some of the ammonia, methanol and melamine plants in Ludwigshafen. Did that -- did they get relocated and shipped off? Or has it been written off? Was it a positive experiment that you could do again or...

Andrew, to be honest, I really don't know the answer to this question. I think -- some of the media -- some of the attention this got in the media was, from my perspective, blown a little bit out of proportion. There's an active market for people who are looking for distressed plant and pieces of equipment. Like you have scrap yards in automotive, you have people that are looking for these types of equipment pieces. It's not a big deal. It's not strategic, certainly not on the radar screen of the BASF Board.

And then we switch to Mr. Reitz from SWR.

I would like to ask about 2 aspects. Firstly, the site in South China, you were always talking about EUR 10 billion. So now you assume approximately EUR 9 billion investment there. And if you then operate the site with all the overcapacities, is it too big maybe now even if it is more cost efficient? And then maybe a word on the site in Ludwigshafen, you are talking with the Works Council on the site agreement? And can we expect a solution soon?

Well, let me start with China, if that's okay. You are right. At the beginning of October, on the Capital Markets Day, we gave you a new figure, a more accurate figure rather because with such a major project, you have to wait and see until everything is really approximately finalized. And now we drew a line and said, okay, EUR 8.7 billion is the figure, not the EUR 10 billion that we said at the beginning. But we wanted to see really. It's like when you build a house, you remain cautious until everybody left -- the last craftsman left the site.

So EUR 8.7 billion is the figure. Your question whether it's too big, whether the site is too big? No. Because on the one hand, we have longer markets in China. What does that mean? That means that there is slight overcapacities on the market in China, the entire chemical industry has this situation, but size and scale, of course, is the point that makes us competitive starting with upstream, the steam cracker. You can't build it half as big because then it's too expensive, and then you can forget it in China. You have to be big here, think big, then it is competitive.

Then you have competitive downstream assets, which you integrate as well as possible. And that's what BASF and that's what we believe is able to do compared to many Chinese competitors. Maybe we are better here. And so the site is big. But in a cost curve in China, it is at a very favorable position, and that allows us to really, well, go and fight on this tough market in China and to confront the Chinese competitors successfully. So yes, it's big, but it has to be big in order to be cost efficient, and this is the game that we have here with commodity materials.

Okay. Yes, site agreement. Second question, no news here. There's talks going on between employee representation and under Katja Scharpwinkel, she's a Labor Director here in Ludwigshafen and her team. And you might imagine that in these times, these are difficult and intensive talks. I'm not personally involved here, but I learn that this is on good track and both sides make constructive contributions even if it is hard work to find a solution. But I'm quite confident because I said so time and again, I think a site agreement was always good for us. It regulates like in a coalition agreement for politicians, it regulates a certain period of time, and it's good to have such a document. You can rely on it, and we just rely on it to be a solution for us, for the Board, but also for employee representatives and employees for the transformation that we're faced with.

A question from Jakob Weizman from Politico.

Can you hear me okay?

Yes.

Yes, we can hear you fine.

My question is regarding the Verbund site in South China. As BASF's largest investment to date is now progressing with lower cost than originally planned. I wanted to ask more for a new policymaking level, given Europe's ongoing struggle with the chemicals industry with high energy costs, tight regulation and less demand. Does the growing investment footprint in China signal crucial shift away from Europe's chemical base as you see many plants go across Europe with Dow, LyondellBasell and Covestro and especially with Sir Jim Ratcliffe mentioning the stress calls for the decline of Europe's chemical industry. I wanted to ask, from a Brussels perspective, what can the EU policymakers do to stop the industrialization and keep production innovation at home, especially with Europe's fight to decarbonize as well across the Green Deal transition.

Yes. Thanks, Jakob. I mean, of course, especially the last part of your question would be enough to fill an entire hour or 2 on debate about EU policy. But let me come back to your first part -- to the first part of your question. I think the picture of things shifting from Europe to China is fundamentally flawed because China is a growing market for chemicals. It's a growing market in general for many industries. And Europe is a stagnating to right now, even slightly shrinking market for chemicals and also customer industries of the chemical industry.

So you have 2 very different dynamics. And if you are a global company, you have to accommodate for both of these trends because you have assets and you have ambition to be profitable and to have market-leading positions in both of these regions, which is true for other regions as well. That means you have to have in China a smart growth strategy, investing into competitive assets that allows you to grow with the market to continue to deal with your customers in China and also to compete successfully against local competition. And at the same time, you have to have an appropriate strategy in Europe to deal with a high cost environment with lack of growth in most of our end markets, and with a continued denser regulatory environment that is often guided by the thought of leading and regulating a green transformation.

Very different market environments, and we have to have appropriate strategies in both regions. Like we do, have to have a successful strategy for North America. So I'm always speaking back against a little bit of the notion that something is shifting. We are just executing a game plan in China, and we're executing a game plan in Europe. But in Europe, the game plan is about rationalization. The chemical industry has significant overcapacities in Europe for the European market. And this is, I would say, significantly also influenced by a denser and partially destructive regulatory framework that we are facing here in Europe. And this is also what you hear other people pointing out very clearly.

And if we talk to politicians in Brussels, we very much mention, first of all, the high level of regulation that is not necessarily helping with the competitiveness of the European industry and the high degree of bureaucracy that has emerged, especially over the last years, which is also partially toxic for an investment climate. The second thing is, of course, the increase in cost for CO2 in Europe, which fundamentally, I think when it all started with the ETS system and the idea to establish a CBAM system might have been a good idea, but it shows that, a, it is becoming very, very difficult for the industry in Europe to deal with the rigidness of this system and the incredibly increasing CO2 cost that we might have in the next decade, if we don't change it. And the other -- on the other hand, the matter of fact that the rest of the world is not playing along. So CO2 prices in the rest of the world are not increasing. And that, of course, sets back the chemical industry in Europe.

And thirdly, I would say that in general, the European commission or people in Brussels still have to do a much better effort to focus on industrial competitiveness by, for example, really committing to the recommendations that were in the Drage report. And I just mentioned the full commitment to creating a single market in Europe because I think that's the only chance of making Europe strong enough to, at the end of the day, compete with the U.S. and with China on an eye-to-eye level because we have the theoretical potential to do it. But in real life, I think we shoot ourselves in the foot way too often.

Let's continue with Mr. Kros, Rhein-Neckar-Zeitung.

I have a follow-up question regarding the Ludwigshafen site. You have ambitious savings plans here. Do you think from today's point of view, that you will be able to achieve your targets here without dismissals for operational reasons? Maybe you can give us a status report here. And you also mentioned Wintershall installment you received from the federal government. I think it's about investments in Russia. Could you tell us how much this installment is and how much you expect in future? So what do you think -- to how much money are you entitled here?

And the third question regarding coatings. The share of 40% you keep, has this been the plan of -- from the very beginning that you keep such a share? And what is the background for this? Didn't Carlyle want more? Or do you want to take part in profit? Or do you want to have a same strategy in the future as well?

Okay. Would you like to answer the first 2 questions?

Yes. Good morning, Mr. Kros. The Ludwigshafen site. I'd like to repeat what I've already mentioned in recent quarters, very briefly. So we continue with the savings program along the lines that we had. It's even faster. EUR 100 million we announced additional savings for this year. So we are faster. Yes. And we do this along the lines of the framework we have. For the Ludwigshafen site, we will not have dismissals for operational reasons. This is a savings program that we will execute without dismissals for operational reasons. Wintershall Dea, yes, we are making progress as a matter of fact. And I already received a significant amount of money, but please bear with me we agreed with the federal government and the parties involved that we only qualify the success once we have received it. And currently, the money that we received is with Wintershall Dea. There are some formal aspects we have to look into until they can forward the money.

Once we've received it, I will let you know. And yes, this is a first installment that we received. And as a matter of fact, we expect another payment, and we hope that this will come smoothly.

Mr. Kros, thank you very much for your questions regarding coatings. I will try to be as simple as possible here. When you start, you have many parties who say, yes, we are interested. We think it's a good business. And I think over many years, we have shown that this is a great business. And we always said that we believe in the future of the business. And there are other parties who say, we'd like to have 100%, and there are other parties who say we want to have a small share and everything in between. And we have been open from the very beginning because we decided it's not about a specific amount of cash that we want to have by selling this or by starting a joint venture.

But the important thing was what is the best structure when we look at this business. And Carlyle turned out to be a partner that has great strength and good experience where we thought this may work excellently in a partnership. On the other hand, they have a similar evaluation logic when it comes to the business and they confirmed the value we had in mind. And when combining these strengths, this means we can continue to operate the business successfully. However, the operational leadership of the business is with Carlyle. They have 60% share, and we have a financial share, and I think Carlyle appreciates our share and our future commitment regarding the business, but operational leadership and strategic management, this will be decided by Carlyle.

Still, I think it's an excellent combination. And at the end of the day, it's reflected in the evaluation of the business. We are very satisfied, but this was not the plan from the very beginning.

The next question comes from Mr. [ Lisman ] from Reinfeld.

My question is on the employees, on 30th of September, the headcount there. I see an accelerated decline by 1,400 over the year. And I would be interested in what stands behind that and whether this decline in head count will take place in Ludwigshafen?

Would you like to do that?

Yes, I can start. Mr. Lisman, yes, definitely. The program in Ludwigshafen, of course, is picking up speed and which means that the number of employees at the site is reduced. It's always when you take personnel measures, it needs a certain preparation time with all the negotiations, which are right and also necessary. And then, of course, everything gains momentum. And this is why now we see a stronger decline. It doesn't surprise us. To the contrary, it is exactly what we had planned.

Mr. Lisman, maybe I would like to comment on that, too. At the beginning of October, we showed you a figure to show what the momentum, the dynamics is. It was a global figure, but you know that Ludwigshafen always is a major part of BASF Group, and we always say that increasing head count in Zhanjiang is external. We don't include that now because we need people there. But since 2024, we've reduced about 3,000 employees for BASF in the framework of several restructuring and optimization programs, which shows we see a certain momentum.

It differs from quarter-to-quarter. It's volatile. For example, in the third quarter, in Ludwigshafen, we employ trainees, apprentices in Ludwigshafen. So quarterly figures are difficult to evaluate and to rate. And this is why we want to report once a year on the headcount figures at BASF. But you are right. There is momentum. Things are happening and head count decline has actually happened just as we had planned for in the Ludwigshafen cost improvement program.

Do you have another question, Mr. Lisman? Okay. You freeze on the screen, no but that's okay. Okay. Ms. Hofler is next.

I have 2 questions also with regard to China. One question, you were talking about volume growth of 12% in China? And where does that come from? Has demand recovered? Or have you opened further assets, and this is why you have more supply now? And the second question is you said that the project scope in Zhanjiang has been adjusted. So what does that exactly mean? Have you left out 3 or 4 assets? Or can you be a little more concrete about that?

Yes. Thank you very much, Ms. Hofler. First of all, 12%, where do they come from? Well, the Chinese -- Chinese market in 2025, the chemical market in China, again, has massively increased. I think we are talking, if I remember correctly, in the first 3 quarters, we are talking 7%. That's how much the chemical market in overall China grew. So there's a strong growth, and that is due to the customer industry that we serve there with an exception of the construction industry, which in China has a difficult life too, but all the rest is growing. And if you then look at the chemical industry worldwide, in 2025, we saw the growth coming from China. And the rest of the world, excluding China, is shrinking.

So we have a growth in markets in China, yes, but a market that is growing by 7%, we grew by 12%. And this is not because of new capacities because we didn't have so many more capacities in 2025 in China, but we gain market shares and some of our business fare very well when it comes to volume in China. But what is also true is that in China, the 12% of volume growth goes hand-in-hand with the lower price structure. The price structure in China is very difficult. There's a lot of capacity. So the market is very competitive. But in this market, we show that we have what it takes. So we do have the plants. We do have the assets and the competitiveness to be strong on this market.

And the investments, yes, of course. Maybe take 2 steps back when we started. Maybe you remember that originally, when we started planning Zhanjiang and also started communicating, we were talking about a Phase 1 and Phase 2. So after what we now see as the scope of the investment, afterwards, there was a kind of second phase, which comprised a number of plants. And then 2 years ago, we had a closer look at -- and that makes a sense in the Chinese situation. We looked back on Phase 1, and we -- well, put some of the plans on ice because it made sense.

So we planned a number of assets that were not part of Phase 1 because the resources were still to be discussed. But a number of other assets were put on ice because on the market today, these projects would not pay off. And so maybe we can buy these products from the Chinese market for the time being. So nothing has really shrunk, but it has been adjusted, I would say.

Let's continue with Mr. Eckl-Dorna from Bloomberg.

I have 4 short questions. I'd like to know how you are affected by the dollar weakness. Maybe you can tell us something about that. So which are the areas where you are hit worse? Second question, decline in demand in many segments. When do you think will the demand catch up and in which segments? Thirdly, the acquisitions, you don't have any priority, but how many of these possible acquisitions do you have planned or in mind? Maybe you can tell us where you would become -- would like to become stronger with acquisitions. And fourth, Battery Materials business, this has been a hope for growth for quite some time. Is there still hope? Or will there be more restructuring measures? If so, what kind of measures are planned here?

So far from my side, a whole package. Yes, we will try to be brief but still clear. So let me start and then we reach a topic where Dirk is the expert.

Battery materials. We always said that with battery materials, we are looking for partnerships along the value chain because in the last 2, 3 years, the market for battery materials in Europe and all over the world, has gone through a difficult development. And looking at the technology development here and the technology demands, the situation has become more difficult. So we are trying to have full capacity utilization rather than investing in new assets. I think the strategy has worked quite well. The team did an excellent job to leave the expansion mode and focus on we will deliver profitability from the existing business and changing the business in this way.

This worked excellently. And we are still together with customers in the value chain trying to establish this new strategy. And with CATL, the leading cell manufacturers, we announced that we will start with a supplier partnership. And when it comes to our plant in Schwarzheide, we have been able to come up with new partnerships. So it will remain a difficult business, a business that will remain challenging for the years to come, but we think we have good assets, and we think that with this strategy, we can get the best value for BASF.

How many M&A ideas do we have? We won't tell because this is a discussion. It depends on whom you ask. If you ask our M&A department, they have more ideas than the Board of Executive Directors maybe wants to look at, but we do have ideas. It does not make a lot of sense to look at acquisitions or parts of a company that would be stand-alone businesses within BASF because we decided we want to strengthen our core businesses and grow them. And of course, we prefer to look for businesses that match our core businesses, classical chemical businesses when it comes to profitability and growth potential.

If they are a good match and match our technology scope and business models, that would be good. And if they allow us to enter stronger growth markets, for example, in Asia, if we can tap those then, well, this would be the ideal praise, so to say. But how much we have in the pipeline, I won't tell today.

When will demand catch up? Well, it's really difficult to predict. You know that a major part of the economic and industrial weakness in the world is shaped by difficult predictability. You know that 2nd of April, there is one topic dominating the world, so to say. And I'm not able to tell you that this unpredictability will change in the months to come. We think that the economic development will continue as it is in 2026. Whether there is or will be a catalyst in the weeks and months to come, which means that we have higher GDP growth rates and maybe higher industrial production rates. I think this is pure speculation. It might happen. And in the world of today, it might happen any time.

If between the U.S. and China, we see an enormous breakthrough regarding their trade relationship, of course, this could trigger some very positive effects in the world, but we all know how shaky the world is at the moment. And so we expect a vertical economic development, but we are well prepared, of course, the horizontal economic development, but we are well prepared. And well, if the situation changes, we want to benefit from this as well.

Well, regarding your currency question, the negative XF effects do have an adverse effect across the board, so to say. And in a quarter such as Q3, it costs a double-digit million amount when it comes to earnings. So it is significant, and it has been with us since the beginning of the year. Now let me add to M&A here. I think it's important to understand that next year, we have the focus to reduce our debts. And I mentioned it briefly in my presentation. We will reduce debt in addition to the share buyback program. And as Mr. Kamieth already mentioned, M&A will become more normal, but the focus for next year is strengthening our balance sheet.

Yes. regarding my comments on M&A, please don't misunderstand me. This is not something that we are thinking of all the time. But I think in every company, you have to look at what is happening out there, but Dirk is right. At the level of the Board of Executive Directors, we are not always discussing M&A. Right now, we are focusing on what Dirk mentioned, reducing debt, making sure that the portfolio transaction runs smoothly. But of course, we always have M&As in the view.

So the question of Mr. Freytag by FAZ.

Mr. Kamieth, maybe a word on the debate on the European emission trade. So where is your position there? Are you also in favor of the energy-intensive industry to be without cost or get without cost certificates for their emissions. And I would be interested in a cost calculation, how expensive would the certificates be if the price were EUR 80 or EUR 100 per tonne of CO2.

So thank you, Mr. Freytag. Maybe let me start with the overall positioning that we take. It might take a few minutes because it is a sensitive, a delicate discussion, which is in the interest of the wide public, I believe. So the idea to introduce an ETS system in Europe with a market-oriented certificate price is a good idea basically and was the best system for a long time that we could think of. And a market-based system in which eventually the CO2 price is regulated is a good system. But over the past years, a lot of things changed.

On the one hand, we realized that CO2 transformation in the chemical industry, and this is what I can talk about best and most competently, that it doesn't happen as quickly as everybody had hoped for 6 or 8 years ago. So that has to do with the framework conditions in Europe, look at energy prices, electricity prices and other things that make life a little more difficult for the chemical industry than we thought. Secondly, there were 2 basic assumptions. So the first assumption was that a CBAM system, which would avoid the famous carbon leakage. And it is also based on the image that in Europe, the production of green products, so product with a low carbon emission or a smaller product carbon footprint would be better than in the rest of the world.

And meanwhile, we have realized that this is not realistic. So we and other chemical companies in China, the United States and India can produce much more cost efficiently because the energy is much cheaper than in Europe, for example. So the ETS concept is not fitting to today's situation. So the CO2 price in Europe in the next years for CO2-emitting companies will go up if we continue like that, and we are talking about really large figures. The rest of the world doesn't go along. There are no significant movements in the rest of the world to talk about CO2 prices. So the CO2 prices will not go up, for example, in the United States. And thus, the competitiveness in Europe and the rest of the world will shift, will be distorted. And this will not only happen in 2039 when ETS has reached 0 formally.

But now there are no more free allocation, supply and demand for the certificate is short. And in the next years, the prices will go up significantly. And for that reason, the system needs a fundamental reform and that can be done and addressed simple, easily. So for example, to extend free allocations for CO2. That's a short-term measure that would be practicable, I believe. But you can, of course, also have a political discourse on whether we can have a better system against the background that a CBAM over a longer period of time will not be viable in Europe. So there are other companies also together with us to work out such proposals and then discuss it with the politicians and that will last some time.

Basically, I believe that a discussion on the free allocations, free certificates and extending them, we can't go around it, because if not in the next years, the trend towards of shutting down chemical plants will accelerate. So we need this debate. It is, of course, necessary and these debates have to be led clearly, and we have to see what's on the table, namely the competitiveness of the whole of Europe. And this is why I believe that we should be very transparent about it in our communication, and I give you a figure for now.

In 2024, we had a 3-digit million figure in Europe, buying CO2 certificates. And this figure in the next decade, according to our model, if the ETS stays as it is, will be over EUR 0.5 billion, and at the end of the next decade, it will be EUR 1 billion even. So these would be costs because we produce in Europe. And we wouldn't have it if we produce the products in China, United States or India, and you see this competitiveness disadvantage that we have in Europe and then multiply that with the tiny market share that we have in Europe with the CO2 emission and then you get figures that will clearly, well, be of harm to the chemical structure in Europe.

Well, we do have one more question, namely coming from Mr. Burger at Reuters.

Two short questions. Maybe again on Coatings. What is the expected book profit -- booking profit of coatings? Was that communicated already, the book gain? And the second question, financial debts of the head company, were they transferred to coatings or -- well, that would be the 2 questions.

Yes, Mr. Burger. Let me answer the question. The book gain, we don't know exactly because we have a transaction in the closing accounts approach. So we still have to do some computing. But I can tell you what the book gain of the transaction business is, EUR 3.3 billion. And so we will have a significant book gain, and we cannot give you the exact figure right now, unfortunately.

Okay. This is it for today. Thank you very much for your interest. Oh, no, sorry, sorry. Okay.

Debt -- well, no debt when handing over the business.

But before you say goodbye to everybody, please give me 1 minute. I'd like to thank you. Maybe it's not your last press conference with BASF, but the last press conference of the 2 of us together. And on behalf of everybody here, I'd like to thank you for the 5 years. You will stay for some time now, but thank you very much for your commitment for what you contributed to BASF, for your support and how you accompanied me personally and always gave good advice and support, and we wish you all the best for your future. I envy the company that can benefit from the fact that you will join them. I know for you personally, it's a good step. So thank you very much. You will stay for some time still. So it's not a farewell speech, but thank you very much. Thank you.

Thank you. Well, we will do our best for the next 3 months to benefit. And of course, I will stay in touch with you and stay connected with you. And if after the press conference, you have questions, of course, our press team will be available. There will be the next press conference, face-to-face. Unfortunately, I will not be with BASF then scheduled for the 27th of February 2026 here in Ludwigshafen, a face-to-face meeting, where we will present the 2025 figures, figures for the full year. We'd appreciate if you came and all the best, and have a great day. Thank you. Bye-bye. All the best.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Good morning, everyone. Welcome to BASF's conference call for the third quarter of 2025. Today's presentation is being recorded. [Operator Instructions]

Today's presentation contains forward-looking statements. These statements are based on current estimates and projections of the Board of Executive Directors and currently available information. Forward-looking statements are not guarantees of the future developments and results outlined therein. These are dependent on a number of factors. They involve various risks and uncertainties, and they are based on assumptions that may not prove to be accurate. BASF does not assume any obligation to update the forward-looking statements contained in this presentation above and beyond the legal requirements.

With me on the call today are CEO, Markus Kamieth; and CFO, Dirk Elvermann. Please be aware that we have already posted the speech on our website at basf.com/Q32025.

Now I would like to hand over to Markus.

Yes. Thank you, Stefie. Good morning, everyone. Dirk and I welcome you to our Q3 conference call. In the third quarter of 2025, market dynamics for the chemical industry continued to be challenging. Upstream margins were still under pressure and customer buying behavior in almost all industries and regions remained cautious. Even in this demanding environment, BASF earnings came in slightly above market expectations and only slightly below the level of the prior year quarter.

Let's start with a closer look at the sales performance of BASF Group compared with the prior year quarter. Overall, sales declined slightly on account of strong currency headwinds and lower prices. We were, however, able to achieve slightly higher volumes due to growth in the Surface Technologies, Chemicals and Materials segments.

From a regional perspective, we recorded 12% volume growth in China, slightly -- slight volume growth in South America and fairly flat volume development in Europe. In North America, volumes were slightly down.

Compared with the prior year quarter, prices declined in 4 out of our 6 segments, particularly in Chemicals. In the Surface Technologies and Nutrition & Care segments, we managed to achieve price increases. Currency effects dampened sales in all divisions and were mainly related to the strong depreciation of the U.S. dollar, Chinese RMB and the Indian rupee. Portfolio effects slightly supported sales growth. Reflecting this underlying sales development, EBITDA before special items came in at over EUR 1.5 billion compared with EUR 1.6 billion in the prior year quarter.

Here is a snapshot of how the markets and our segments' volumes and specific margins developed in the third quarter. Due to a continued imbalance between supply and demand and the resulting pressure on margins, the business environment in our upstream segments remained challenging. Despite these market headwinds, the Chemicals segment achieved solid volume growth in both divisions. However, the segment faced significantly lower prices and sharply reduced specific margins.

The Materials segment recorded slightly higher volumes despite the difficult market environment due to higher volumes in Monomers and stable volume development in Performance Materials. Prices declined in both divisions. However, our overall margins in the segments were lower driven by the Monomers division.

The Industrial Solutions segment operated in a subdued market environment. Volumes declined slightly in both divisions. Specific margins declined considerably, particularly in the Performance Chemicals division. The market environment for Nutrition & Care became considerably more challenging in the third quarter 2025. Both divisions recorded lower volumes, but the segment achieved slightly higher prices. The specific margins in the Nutrition & Care segment declined. Lower fixed costs and improved margins in the Nutrition & Health division were more than offset by lower margins in the Care Chemicals division.

Let's now move on to Surface Technologies and its main customer industry, the automotive industry. According to the latest data, global light vehicle production in the third quarter increased by around 4% compared with the prior year quarter, mainly because of considerable growth in China. For the full year 2025, we expect global automotive production to increase by around 2% compared with 2024. In this environment, the Surface Technologies segment recorded volume growth, mainly in the Environmental Catalyst and Metal Solutions Division, or ECMS. Overall, prices were up considerably. Specific margins in the Surface Technologies segment also increased slightly.

Finally, let's look at the Agricultural Solutions segment. Crop commodity prices remained below historical averages, and financing costs were still elevated for farmers, resulting in unchanged and challenging economics for them. In this environment, the Agricultural Solutions segment recorded slightly lower volumes and prices compared with the prior year quarter. By contrast, the segment achieved considerably higher specific margins in a seasonally lower quarter.

Let's now look at EBITDA before special items by segment. In Q3 2025, considerable earnings growth in the Surface Technologies and Agricultural Solutions segments as well as improved earnings and other were offset by lower earnings in the core businesses. Compared with the prior year quarter, EBITDA before special items in the Surface Technologies segment increased significantly due to Environmental Catalyst and Metal Solutions. The earnings increase in this division was primarily driven by significantly lower fixed cost, a strong precious metal trading business and volume growth. Lower fixed costs resulted from continuous cost improvement measures and U.S. government grants for which ECMS is eligible as a leading recycler of platinum group metals.

Let me reiterate what we communicated at the Capital Market Update in Antwerp at the beginning of this month. After the successful carve-out, ECMS has a stronger setup, and we will keep the business for longer. Accordingly, we expect to benefit from strong cash contributions from ECMS amounting to a cumulative cash flow of roughly EUR 4 billion from 2024 to 2030.

Turning to Agricultural Solutions. Earnings in this segment rose considerably, mainly due to improved margins, particularly the successful market launch of glufosinate-P-ammonium and lower manufacturing costs contributed to this development. We continue to expect that a slight increase in full year earnings is achievable.

The Core business recorded lower earnings mainly due to the previously mentioned lower margins, which were partially offset by lower fixed cost. As the deviations from average analyst expectations were largest in Nutrition & Care, I will give you a few more details on this segment.

Compared with the third quarter of 2024, the Nutrition & Care segment generated considerably lower earnings. The Nutrition & Health division increased earnings, mainly due to lower fixed cost, while the Care Chemicals division recorded a decline. The main reasons for this was continued margin pressure, which was particularly pronounced in Personal Care, where Asian competition is strong.

I will now give a short update on our Verbund side in South China. Let me begin with what we communicated at the recent Capital Market Update in Antwerp. We will complete this mega project with capital expenditures around EUR 1.3 billion lower than originally planned. We achieved this CapEx reduction through tight budgetary discipline, scope changes and excellence in procurement.

As a result of the currently long markets in China, we will have a slower-than-anticipated ramp-up of the overall earnings contributions. In the coming years, we expect most markets and value chains to rebalance. We, therefore, confirm the targeted EBITDA before special items of EUR 1 billion to EUR 1.2 billion by 2030.

Now this slide illustrates the impressive progress the Zhanjiang team has achieved since May. This includes the successful mechanical completion of the steam cracker and downstream petrochemical plants. The infrastructure and utility plants are already in steady operation. Additionally, we have safely and successfully started up various downstream plants, including butyl acrylate, 2-ethylhexyl acrylate, formaldehyde, neopentyl glycol and glacial acrylic acids with more start-ups to come. Thus, we are transitioning the project from construction to operational readiness. These achievements mark steady progress towards the site's full operational start-up at the end of 2025.

Let's now move on to the binding transaction agreement on BASF's Coatings business, which we announced on October 10. The agreement with Carlyle marks an important milestone in focusing our portfolio and unlocking the value of our Coatings business. It demonstrates our strong commitment to swiftly execute BASF's Winning Ways strategy and create a leading coatings company under Carlyle's operational leadership. The enterprise value of this transaction amounts to EUR 7.7 billion.

Subject to customary regulatory approvals, the transaction is expected to close in the second quarter 2026. At closing, BASF will hold a 40% equity stake and will receive pretax cash proceeds of approximately EUR 5.8 billion. We will remain invested with a considerable minority share because we believe in the future, value creation of the Coatings business, and we want to participate in the upside potential.

Together with the divestiture of BASF's Decorative Paints business to Sherwin-Williams, which we closed on October 1, BASF's entire Coatings division is valued at an enterprise value of EUR 8.7 billion. The implied 2024 EV to EBITDA multiple before special items of approximately 13x is evidence that we are unlocking value for this division.

And with that, I will hand over to Dirk.

Yes. Thank you, Markus, and good morning, everybody. Let me first address the implications of the Coatings transaction agreed with Carlyle in terms of BASF's statement of income and statement of cash flows. As of September 30, 2025, and until closing of the transaction, BASF will report the business in its P&L as discontinued operations. Therefore, sales and earnings of the business are no longer included in sales, EBITDA and EBIT of BASF Group, with retroactive effect as of January 1, 2025. The prior year figures have been restated accordingly.

Income after taxes of the business is presented in the income after taxes from discontinued operations. Between signing and closing, depreciation is suspended. Regarding cash flows between September 30, 2025 and closing of the transaction, there is no impact or change. As before, the business will be considered in the respective line items of BASF's statement of cash flows.

As of closing, BASF's minority stake of 40% will be accounted for as a financial investment under the equity method and will be reported in EBITDA and EBIT before special items of other. The cash inflow from the transaction will be reported in cash flows from investing activities in the line item payments received from divestitures. After closing of the transaction, dividend payments from the business to BASF Group will be reported in BASF's cash flow from operating activities. Within BASF's cash flows from operating activities, the equity result of the business will be eliminated.

Now this table provides a comprehensive overview of the major changes in BASF's reporting following the classification of the automotive OEM coatings, automotive refinish coatings and surface treatment businesses as discontinued operations. In the quarterly statement published today, we provide all relevant financial figures on both a pro forma basis, i.e., with coatings still fully included in the segment result of Surface Technologies as well as excluding the discontinued coatings operations.

It should be noted that the Decorative Paints business sold to Sherwin-Williams is not affected by the restatement. It remained part of the Surface Technologies segment until its divestment on October 1, 2025. This means that the figures for the Coatings division in the Q3 segment reporting refer exclusively to the Decorative Paints business, which was already classified as a disposal group in Q1 of this year.

Now I would like to turn to BASF's capital allocation framework and explain how we will use the considerable cash proceeds from portfolio measures that we have already generated and are about to generate soon. As you know, we closed the sale of BASF's food and health performance ingredients business to Louis Dreyfus Company on September 30, 2025. This is reflected in the quarterly statement for Q3 2025. The sale of BASF's Brazilian Decorative Paints business to Sherwin-Williams was closed on October 1, 2025. The purchase price amounted to USD 1.15 billion on a cash and debt-free basis.

For our Coatings transaction with Carlyle, which is expected to close in Q2 2026, we will receive pretax cash proceeds of around EUR 5.8 billion. At maximum, we assume taxes to be in the mid-triple-digit million euro range. We are also making further progress with the monetization of our oil and gas assets. In 2025, we will receive around EUR 200 million resulting from dividends from Harbour Energy and our participation in Harbour Energy's ongoing share buyback program.

As we have stated on several occasions, we consider our participation in Harbour Energy to be a financial investment, and BASF's strategy remains to exit at the right time, being mindful of the value. There's also good momentum on the topic of federal investment guarantees. Wintershall Dea received a first installment from the German federal government in Q3 2025, and we expect a final decision soon. Proceeds will be distributed by Wintershall Dea via dividends and will contribute to BASF Group's operating cash flow in 2025 and 2026.

As announced at our Capital Markets Day in 2024 and confirmed at our update earlier this month, we are targeting IPO readiness of BASF's Agricultural Solutions division by 2027 with a potential listing of a minority share as a next step. In other words, this cash event is beyond the 2025, 2026 window.

Now, let's move on to the use of cash with a focus on the rest of this year and next year. We are clearly committed to paying an annual dividend of at least EUR 2.25 per share, subject to approval by the AGM. Furthermore, we will use a substantial part of cash proceeds to deleverage the balance sheet and secure our financial strength. The maturity profile of outstanding bonds will allow us considerable deleveraging in 2026.

As announced yesterday, we will start buying back shares as of November 2025. This is a considerable acceleration compared with our initial plan to buy back shares from 2027 onwards. I will provide more details on the next slide.

Large acquisitions are currently not in focus while smaller to midsized acquisitions remain possible. Capital expenditures will be significantly reduced in 2026 and beyond and will consistently stay below depreciation until at least 2028.

Ladies and gentlemen, we are swiftly delivering on our Winning Ways strategy, and we are fully committed to attractive shareholder distributions. Therefore, and in view of our quick progress on the portfolio side, we have announced that we will start a share buyback program with a volume of up to EUR 1.5 billion in November that is scheduled to be executed by the end of June 2026. This is part of the share buyback announced at the Capital Markets Day in September 2024, with a total volume of EUR 4 billion until the end of 2028.

The earlier start of the program demonstrates management's confidence in the underlying financial strength of our company. In our view, this is not fully reflected in the current share price. Now is the time to return capital to our shareholders and reduce the number of shares while bringing down debt.

Let's now take a brief look at the financial details of BASF Group for the first 9 months of 2025 compared with the same period last year. All these figures still include the discontinued operations. At EUR 5.9 billion, EBITDA before special items declined slightly compared with the first 9 months of 2024. The EBITDA margin before special items, excluding metals, remained almost stable at 13.6%.

EBIT before special items reached EUR 3.1 billion compared with EUR 3.4 billion in the same period last year. Special charges were largely incurred for restructuring measures as well as for the sale of BASF equity share in the Nordlicht 1 and 2 wind farms back to Vattenfall in Q1 2025. Special income from the sale of BASF's food and health performance ingredients business had a partially compensating effect.

Net income declined by EUR 1 billion to EUR 1.1 billion. In the prior year period, net income from shareholdings included special income in connection with the transfer of Wintershall Dea assets to Harbour Energy. Cash flows from operating activities amounted to EUR 2 billion compared with EUR 3.5 billion in the same period last year. The decline was primarily driven by changes in other operating assets, lower net income and higher cash outflows from changes in net working capital.

Compared with the first 9 months of 2024, payments made for property, plant and equipment and intangible assets decreased by EUR 1.1 billion to EUR 2.8 billion. This clearly indicates that we have passed the peak investment phase for our South China Verbund side. Free cash flow was minus EUR 868 million in the first 9 months of 2025.

Now this slide shows some more details of our cash flow. I will focus on the development in the third quarter, shown on the right-hand side. In the third quarter of 2025, cash flows from operating activities came in at EUR 1.4 billion. The decline compared with the prior year quarter was mainly due to changes in other operating assets. Payments made for property, plant and equipment and intangible assets decreased by EUR 510 million compared with the third quarter of 2024. Free cash flow amounted to around EUR 400 million.

With that, back to you, Markus.

Yes. Thanks, Dirk. Our assumptions regarding the global economic environment in 2025 remain unchanged. Likewise, our outlook for 2025 remains unchanged content-wise. Let me repeat this. Likewise, our outlook for 2025 remains unchanged content-wise. As a result of the reclassification of the automotive OEM coatings, automotive refinish coatings and surface treatment business, we have made a necessary technical adjustment.

The adjusted outlook range for EBITDA before special items is now EUR 6.7 billion to EUR 7.1 billion. The difference compared with the previous outlook range of EUR 7.3 billion to EUR 7.7 billion reflects the expected full year contribution of the Coatings businesses that are part of the transaction with Carlyle and are reported now as discontinued operations retroactively as of January 1, 2025. So that is the sole reason for the different number in the outlook. The forecast for free cash flow and for CO2 emissions are unaffected by the restatement and thus remain unchanged.

And now Dirk and I are glad to answer your questions.

[Operator Instructions] We will now start with Christian Faitz. We will then have Tom Wrigglesworth and then Tony Jones. But now it's Christian Faitz, Kepler Cheuvreux.

Congrats on the results. Two questions, please. I guess all of us are fully aware that the current business environment is pretty bad to say the least. Yes, can you share with us some thoughts on current order income with October being the last really relevant month for the year? And also, will some major automotive OEM producers canceling their production on the back of the new chip crisis have an impact, particularly on your emission control business?

And then my second question is on Ag. You cite adverse weather conditions impacting European sales in Q3. Can you please elucidate what happened there? Was this largely an inventory effect, i.e., BASF Agricultural Solutions buying back inventory from actually Q2 adverse weather conditions?

Thanks, Christian. I will take maybe the first 2 questions. We currently do not see any major changes in the macroeconomic environment and also relates to the dynamics going into Q4. As we have said in our speech, almost all verticals, I mean, everything outside of, let's say, semiconductors, everything around AI, data centers and so forth, everything else in the normal overall industrial sectors that we typically serve are rather slow and moving sideways. So no real negative or positive development right now that is also reflected in the momentum we take into Q4.

As we have also said in the speech, the only exception on the volume side is China right now. China is growing quite strongly, overall macro, the chemical market in China is growing healthily. And we have also, I think, with 12% volume growth in Q3 have seen a good volume momentum and that also relates, for example, to the automotive industry.

Your second question on automotive OEM, I'd say, shutdown there's, of course, now for a few weeks, I would say, high nervousness again in the OEM landscape, particularly here in Europe, I would say, we have not seen any adverse impact, and we're not expecting any major impacts from this. And please remember that in all of our automotive-related businesses, our source of strength right now and our source of growth is mainly our significant market share in China.

And for the Ag question, I might hand it over to Dirk.

Christian, on Ag, you're right, there was extremely dry weather conditions in part of Western European countries that were also impacting us. But I would say, overall, first of all, the third quarter is a seasonally low quarter for Ag. The results came in more or less as we have expected it and checking with the business going forward for the end of the year. I believe that Agricultural Solutions business will hit the forecast for the segment at least maybe a little bit better, but the business is fully on track to deliver the year-end result.

So we move on to Tom Wrigglesworth, Morgan Stanley.

So firstly, obviously, on the bridge you provided on Slide 5, in Surface Technologies, the EUR 179 million year-on-year improvement in EBITDA. Could you just break out some of the components of that, specifically this comment you've made around gaining subsidies and grants in the U.S. I guess we're keen to know what's an underlying improvement in this business versus what's a kind of onetime factor?

And then second question is regarding free cash flow. Can you help us understand the moving parts, excluding EBITDA changes in 2026 that you expect to be influencing free cash flow. So the kind of the CapEx level and how that might drop. Obviously, the sale of coatings, what free cash flow net kind of loss that will be from the divestiture of that.

And then obviously, the working capital buildup has been substantial this year in the China Verbund. What -- how should we be thinking about that? Clearly, with the sale of coatings, people are questioning the free cash flow generation of the business. So we're just trying to get a kind of post the divestiture, what that looks like.

Tom, this is Dirk speaking. I'll start with ECMS. So the ECMS -- EBITDA for ECMS was significantly -- was up, and this was due to significantly lower fixed cost as you have rightfully pointed, but also on the back of a strong precious metal trading business and volume growth. So it's a multiple component effect that we have here. And the lower fixed cost, apart from the efficiency measures taken by the business are indeed also due to grants in the U.S. as we have clearly stated. Now what we are seeing in the third quarter is a cumulative effect from -- not only from 2025 but also from the years '23 and '24.

And going forward, there will also be a positive effect, and you might think about this effect on a net basis as a low double-digit million euro amount per year that the business is benefiting from.

In terms of free cash flow, indeed, we can keep our outlook here for the full year. Markus already mentioned that we are significantly below in CapEx numbers also from the investment in China, but also beyond. And we are now calculating as a company with a CapEx for the year of around about [ EUR 4.5 a little bit more maybe billion ]. So this will significantly alleviate the pressure on free cash flow.

Apart from that, all the businesses are super focused on working capital management for the last quarter of the year. As you know, this is the cash collection quarter for BASF and everybody is also super focused on inventory levels.

And with regard to the free cash profile of the Coatings business, I would say, so far, it is still a part of the group's cash flow, as outlined a little bit earlier going forward. We will then also show these data differently, but you can be assured with everything that we want to achieve strategically. The underlying cash flow will be sufficient to cater for our capital allocation ambitions.

So now it will be Tony Jones. We have then in the queue, Georgina Fraser and Chetan. But now Tony Jones, Rothschild & Co.

I have 2. Firstly, on currency and impact to EBITDA. For this quarter, my simple math got me to about a EUR 90 million, EUR 100 million negative to EBITDA. Firstly, is that in the right sort of region? And then secondly, what is now the dollar euro sensitivity. Could you give us an indication for the core businesses?

And then my second question refers to the well-known oversupply of chemicals and materials, particularly China. How do you see this developing by region over the next year or so? So for China, do you think there's still going to be net capacity additions? Or will it slow in Europe, capacity closure seem to have paused. So what do you think is happening with that? And then North America, do you see any need for further capacity? And if there is, would you participate?

Maybe, Tony, I'll take the second part of the question, and then Dirk will answer the question on currency effects. Generally, I would say the oversupply situation is not changing quarter-by-quarter. So we can only repeat what we have said over the last, let's say, 2, 3 quarters, situation remains unchanged. In China, we have significant overcapacity in most chemical categories, I would say, upstream a little bit stronger than downstream. But for sure, everything is quite well available in China. However, we are seeing already, let's say, a slowdown of investment capacity, and we still see significant domestic demand growth.

So overall, we continue to stay in our model that we expect a rebalancing of capacities over the next years, and that certainly will be supported also by the Chinese government in what they call supply-side reforms in -- to what level and to which extent we will have to see. But overall, I would say this is a slow-moving system, but it will re-equilibrate to some extent. That's at least our model as of today.

In Europe, I do not necessarily share your view that the capacity adjustments have stopped because I think there is ongoing stream of announcements, and I also expect that over the next years, continued capacity rationalizations are going to be observed in Europe, just be reminded that from announcement to actually closing and shutting down a plant or a site 2 or 3 years can sometimes be necessary. So overall, we expect this to continue because we expect that quite a number of chemical assets in Europe are currently operating at not sustainable profit levels.

And the situation in North America is that North American market, we expect to have modest growth also going forward for chemical products. It is a reasonably, let's say, midterm growing market. So capacity additions will certainly be needed in certain products, but we have no major plans now for big capacity additions in North America because also here, we're well invested. We have competitive assets all over the country. And with our latest investment project in the MDI expansion in Geismar, I think we have done the 4 BASF most attractive step right now. So also in the U.S. for the next foreseeable future, we expect a positive development, supply demand overall, and we don't have any major investments planned for the next couple of years.

Tony, on your more technical questions, FX impact on the earnings side, third quarter, your assumption is right, rather EUR 90 million than EUR 100 million negative. And for the sensitivity, mid-double-digit per U.S. dollar cent change. So let's say, roughly EUR 50 million per U.S. cent change compared to the dollar.

That's great. That's very, very helpful.

So now it's Georgina Fraser, Goldman Sachs.

I've got 2 questions. One on Care Chemicals. I was a bit surprised to see the negative volumes, but prices up in the segment, and we also saw margins deteriorate a lot. Could you explain a little bit more of what's going on there because it's an unusual dynamic?

And then the second question is a follow-up to Tony. So if I take your answer on the overcapacity situation, it sounds like it will be resolved by a growth of demand in China, and capacity rationalization in Europe. Given you've already announced a lot of your own capacity rationalization, could you talk about value chains you think are most likely to see meaningful consolidation that BASF would be able to benefit from on the other side?

Yes, Georgina, I will also take the second part, give Dirk some time to think about the first part. It's hard to pick and pinpoint, I would say, certain value chains. But it's sure that if you look at capacity rationalization in Europe, in particular, you're looking at energy-intensive product or energy-intensive value chains where, let's say, the asset base is often also subscale compared to what is -- how things are produced in other areas. And that addresses 2 of the, let's say, sources of uncompetitiveness is, number one, the relatively high raw material costs, especially natural gas, other feedstocks in Europe compared to other regions.

And second of all, also the age and certainly, the capacity of some of these assets compared to offshore assets that we have. So I would say in the area of high raw material and energy intensive production upstream, this is where certainly the hotspot of restructuring efforts will be. And if you see the announcements of the last, let's say, 12 to 18 months, a lot of that has been circled around upstream assets, cracker, cracker plus 1, especially in nonintegrated setups where often a lack of integrated value chain is happening at the site.

So that's certainly the area where I would expect most. And if you look at the setup of BASF, like we have also discussed at our Capital Markets update. This is often not a setup. We are operating in Europe because we have at least on the commodity side often highly integrated structures in Antwerp and Ludwigshafen, where we have a significant value add beyond, say, the cracker and cracker plus 1 step. So I don't say that our assets are necessarily totally shielded by this, but we, for sure, have a higher resilience compared to other companies when it comes to running these assets because we provide significant value-add downstream. And that if you look at the chemical industry, it is not the case for many of the more isolated and nonintegrated assets that we see.

And with this, Dirk, Care Chemicals.

Georgina, I'll take your question on Nutrition & Care. I'd say the entire segment, including Care Chemicals has EBITDA significantly below previous year's quarter, and it is mainly driven by lower contribution margins. And this is mainly on account of high price margin pressure, but also lower volumes. You see that in many areas, it's hard to pick an example here, but you could take, for instance, UV filters. You see here and there higher price developments, but this is not a margin expansion widely, but rather on the back of higher raw material costs.

And finally, for Q4 for the outlook, I would not expect a fundamental change in the market dynamics for the rest of the year. It's only 2 months still ahead of us. So I would assume that the current trend is also following us for the rest of the year.

We will move on to Chetan and then we will have James Hooper, followed by Laurent Favre and Geoff Haire. So now Chetan Udeshi, JPMorgan.

Again, I just wanted to discuss Surface Technologies and maybe in the hindsight, we should have seen some of this metal trading benefit come through because a few of your peers have also indicated the same. But just it would be useful to just remind us how is your business in terms of PGM different from that of Umicore or Johnson Matthey? I think you have a much bigger trading operations rather than refining and recycling. So I think in a nutshell, the question is, are you much more exposed to the trading volumes rather than the pricing? And in that context, is the trading volume uplift that you saw in Q3, more one-off? Or is that something that you think can sustain if prices remain high? That's one.

The second question is, just going back to the government grants. You said it's about low double-digit million per annum sort of a benefit that you expect going forward. But because in Q3, you've seen the benefit, which has been accumulated or it's the benefit of a number of years. Are we talking about the benefit in Q3, specifically more closer to EUR 100 million then? Just curious in terms of the magnitude in Q3 from that contribution?

Yes, Chetan, Markus here. To the second point, I think Dirk has given you already quite an indication here, I would say. And please also understand that the government grants are also linked to our specific business model that we run and which is slightly also different than maybe what our competitors do. So we would not like to disclose more as Dirk has said, and let me repeat this, that this was an accumulative effect of roughly 3 years.

And on an ongoing basis, we expect a low double-digit million euro range. And I think you can do the math and get into the right ballpark here. So with respect to the difference to our competitors. Also here, I would like to not go too much into detail. I do not think that we have a fundamental different setup and business model. Of course, the size, especially of recycling operations are different, especially since one of our competitors or actually both competitors have significantly larger scope in terms of metal recycling, they recycle more metals than just PGM metals. We are focused very much on PGM. However, we have, of course, a leading position in the recycling of actual emission catalysts. So we have a much more integrated loop, if you want, on this side.

And on the relative size of the trading business, this is -- I don't actually know this by heart, but I would say this also always depends a bit on the market conditions. So this is also not something that's carved in stone. So I'm not sure that this is a very helpful answer for you, but I would also not like to give much more details on this. And I think if you follow our competitors as well, you will do -- we will be able to do the read across of it.

So now James Hooper, Bernstein.

I've got 2, please. The first one on Nutrition & Care. Can you provide a little bit more color on the kind of care chemicals and the Asian competition margins and whether that's imports, exports or any reason specifically? And how do you expect capacity situations in those markets to change? And also just on Nutrition & Care as well. Can you provide some updates on the dynamics of the vitamin markets and your production ramp-up?

And then secondly, on Zhanjiang. On Slide 6, just looking at the -- from next year, the negative ramp-up cost bar seems slightly larger than the blue positive one. Should we be reading this that Zhanjiang will still be a negative contributor in 2026? Or do you have levers to potentially reduce losses here?

Yes, Markus here. The second question, I mean, we discussed this already on the Capital Markets Update in Antwerp that there is, of course, now with the ramp-up being late in the year 2025, we will have significant start-up efforts still in 2026 because you can imagine that ramping up a steam cracker plus 20-plus downstream plants is not happening within a couple of weeks.

And that, together with, of course, a challenging -- currently challenging margin picture, which could change within a few quarters significantly. It's very difficult to predict now with all these moving parts, an accurate number for 2026. We will try to do our best, giving you this as part of an outlook in February.

But we have indicated this so because there is a likelihood that this number will be negative next year and there's a good likelihood that it could be positive next year. And this is the most honest and most transparent indication we can give you right now. And yes, that's basically also our state of knowledge right now. We're compiling all the numbers for '26, but we are expecting this to hover around the 0 range, slightly positive to negative that's why we painted it this way.

Dirk, any comments on Nutrition & Care and the moving parts?

So to the moving parts in Nutrition & Care, maybe no particularities here for China to be told. But maybe on the volume picture here, as we have already indicated, volumes decreased in both divisions. And if it comes to vitamins, you also saw here the decrease which was compared to higher than maybe even expected inventory sell-offs for the last previous year's quarter.

I would say, position and outlook for Nutrition & Care, very much in line with the other chemicals divisions here. We expect high uncertainty for the fourth quarter. We expect still ongoing weak demand and ongoing price margin pressure to persist globally. And therefore, also in Nutrition & Care, we are very much concentrating on our self-help measures, which for the nutrition part is certainly our efficiency program plus the further ramp-up of our vitamin production. And in the Care Chemicals, we also have a running efficiency program. As you know, so this is currently the main focus point for us and also for the rest of the year.

Now we move on to Laurent Favre, BNP Paribas Exane.

Yes. Can you hear me?

Yes.

Sorry to go back to Chetan's point on ECMS. But I'd just like to understand, I guess, where the improvements in the trading side are mostly linked to realized gains? Or is there also a component of inventory mark-to-market. So this is more of an accounting, I guess, a question. And I'm wondering whether, therefore, we can assume that if everything stays the same, there might be a further improvement into Q4?

And the second question is more about the guidance, I guess, I know that last year, you kept the guidance, Markus, you mentioned that you had a fighting chance of getting there. I'm wondering whether it's something similar this year, i.e., if we have a abnormal seasonality into Q4, you would feel confident with the guidance? Or is there something else that gives you that confidence to reach at least the low point, if not more?

Chetan -- sorry, Laurent, I'll take the second one. We are expecting Q4, as I said earlier, to stay more or less similar to Q3 in dynamics plus the normal seasonality that we have in our businesses. So in ag, of course, an uptick in activity in some of our more seasonal businesses that are, for example, construction-related serving downside, and we expect normal year-end behavior of customers.

So this is our expectation. And based on this, we feel comfortable with our range. But we all know the volatility in the world is right now is very high in news can change this every day to the positive and to the negative. We know that this week, the U.S. President and the Chinese President are meeting, so who knows what's going to happen.

So we are basing this on a rather stable outlook compared to Q3, and this is also what all our customers are telling us is going to happen in Q4. So we feel this is a robust outlook and -- but we certainly cannot exclude any surprises on both sides of this.

Laurent, to your -- to your ECMS question, trading. This is a real trading result. There's also some valuation effects, which are -- but anyway, as you know, largely hedged. So this is a decent trading result we are talking about.

Okay. And when we -- maybe a follow-up, we now have disclosure for the last 2.5 years. So we can see ECMS -- well, I guess the wider Surface Tech division printing EBITDA between EUR 70 million and EUR 170 million and a big step-up in Q3. If you look at the last 2.5 years, in those 6 quarters prior to Q3, was there any abnormally low result from trading? Or were all those quarters roughly normal and it's just that Q3 is so good this year?

Not that I'm aware of. No.

Now we have Geoff Haire, UBS and the final speaker will be Sebastian Bray from Berenberg. But now Geoff Haire.

I want to ask a slightly longer-term question. Given the volume environment we've had now for what the best part of 3 years in terms of very lackluster volume, are you concerned that the industry is going to start chasing volumes, particularly in more downstream products. You've obviously seen big price declines in upstream. But what is your fear that, that moves into the downstream area and we start to see effectively a price war for volume?

That was it? All right. Only one question, Geoff. Thank you very much. Actually, I'm not scared, but I'm conscious that this is already happening. If you look at the commentary of also, let's say, more singular downstream competitors, more in the specialty area. They all will tell you that margins are compressed compared to what we have seen in the past. So competitiveness, race for competitiveness and with this also, let's say, a further competition on who has the best asset setup is also happening downstream. And this is why also we have addressed the Capital Market update also that we have restructuring need also in some of our downstream divisions because in general, the chemical company -- the chemical industry gets more competitive and that's true upstream and it's also true downstream.

I would say, in general, downstream, of course, pricing cycles are much slower. There's also a lot of pricing and value components that go beyond the physical product, it is application know-how, it is innovation opportunity.

So there's not a direct let's say, correlation between what's going on upstream in commodity areas and in downstream business solution type areas, but the trend that most of the businesses in the chemical industry become more competitive because a number of competitors are increasing and let's say, capabilities are commoditizing.

That's certainly true, but that is also part of our outlook for the industry. That's part of our strategy because we bank on all of our businesses, especially also in the core being on top of the -- on top of the pile, so to say, when it comes to competitiveness and innovation capabilities. So we're not afraid of this, but it's a trend that is certainly materializing over the last 10 years, I would say, already.

So now a final question from Sebastian Bray, Berenberg.

Congratulations on a good set of numbers. I have 2, please. The first is on agriculture. The -- how is the company thinking about the pricing moving into '26 because some of this was starting to slip in Q3. I appreciate there's a danger of reading too much into 1 quarter, but I'm curious about the view on this.

Can I also ask a secondary question on the terminology that BASF uses for describing its ambitions to IPO the business. Why does the company always use the term partial IPO rather than, let's say, full IPO? Is the ambition to remain indefinitely a long-term shareholder in this business or to divest completely eventually?

And related to that, if we are looking at available proceeds, let's say, the German government insurance program pays out, the company has got more than it expected, probably 1.5 years ago for Coatings, is EUR 4 billion a firm number for buyback by '28? Or is it a number that offers some upside if cash proceeds continue to roll in?

Sebastian, I'll take your questions then. First on the Ag business. The Ag business and the agricultural industry altogether is still suffering from low soft commodity prices. There's, as you know, also uncertainty, particularly in the northern hemisphere with the farmers with regard to their purchasing power. So this is the more critical part.

On the other hand side, I would say we have a healthy channel inventory. So demand substantially we see for our products. This is also why we are optimistic for the rest of the year that the Ag Solutions segment will deliver on its plans.

Going forward, we see the business really in a competitive shape because we have last year taken a lot of measures, the restructuring of the glufosinate ammonium, which is now paying off and other efficiency measures taken in the division, which really give us a good competitive position. So I would say, despite the low price levels that we currently still see in the business, we feel good about the business also going into the next year. But certainly, it will be helpful at one point in time if the soft commodity cycle is then gaining momentum to the upside again.

So with regards to the partial IPO, we are saying it's a partial IPO because we have no intention to launch 100% of the shares at the inception. We use the term partial IPO to show and to say that this business also beyond the IPO event will be a business that is consolidated into our group financials, and it's a business that we also like. We have not set any definitive portion of shares that we are going to launch on IPO at this point in time. We will do so at the right moment in time. And then what happens over time remains to be seen. But clearly, at inception, it will be a partial IPO, and this is what we are clearly saying.

With regard to your question on proceeds, you are right, we have announced a EUR 4 billion share buyback program. I think we have confirmed it. And at the same time, we are now accelerating a substantial part of it, which I think should be a good sign of strength of the company. And this is it for the time being. I'm not excluding anything, but I'm also not changing anything here. It's the EUR 4 billion until 2028. And we said always this is the minimum.

But let me also very clearly say that apart from share buybacks, the company has a job to do next year, particularly to deleverage the debt, and there's a good opportunity next year to do that because next year, we will have maturities of roundabout a little bit more than EUR 2.5 billion, and that will be also a priority for the use of funds that we will significantly deleverage the company in 2026 alongside the share buyback program that we have announced.

We are now at the end of today's conference call. Let me take this opportunity to draw your attention to a dinner with BASF Board members that we will host in London on Wednesday, December 3, we will send out invitations to investors and analyst next week. Should you have any further questions regarding our Q3 reporting, please do not hesitate to contact a member of the BASF IR team. Thank you very much for joining us today, and goodbye for now.

Good afternoon, ladies and gentlemen. On behalf of BASF, I would like to welcome you to our conference call on the Coatings Transaction, BASF and Carlyle announced today. Besides analysts and investors, journalists have joined the call. In the first part of the Q&A, we will address questions from financial market participants. We will then move on to questions from attending media participants. During the media Q&A, we are happy to switch to German if preferred.

Both audiences, please be reminded that on today's call, we will only answer questions related to the Coatings transactions. No other topics will be discussed. The conference call is being recorded.

[Operator Instructions].

Today's presentation contains forward-looking statements. These statements are based on current estimates and projections of the Board of Executive Directors and currently available information. Forward-looking statements are not guarantees of the future developments and results outlined therein. These are dependent on a number of factors. They involve various risks and uncertainties, and they are based on assumptions that may not prove to be accurate.

BASF does not assume any obligation to update the forward-looking statements contained in this presentation above and beyond the legal requirements.

With me on the call today are CEO, Markus Kamieth; and CFO, Dirk Elvermann. Now I would like to hand over to Markus.

Yes. Thank you, Stefanie, and good afternoon, everyone. Welcome to this conference call, and thanks for making yourself available on such short notice. As announced an hour ago, we have reached an important milestone in focusing our portfolio and unlocking value. BASF and Carlyle reached a binding transaction agreement on BASF's Coatings business. Our goal is to jointly create a leading stand-alone coatings company. Our Coatings business has everything it takes to win, outstanding market positions, deep technical expertise and trusted customer relationships and of course, a world-class team, the best in the coatings industry.

The business is highly focused on automotive, including the collision repair aftermarket. In surface treatment, it also serves the aerospace industry and various additional industrial applications. These are large markets with high customer loyalty.

In 2024, BASF Coatings, excluding the decorative paints business we already divested, generated sales of EUR 3.8 billion, around EUR 1 billion in surface treatment under the Chemetall brand, around EUR 2 billion in automotive OEM coatings and around EUR 800 million in automotive refinish coatings with Glasurit, R-M and other leading brands.

Our agreement with funds managed by Carlyle in partnership with Qatar Investment Authority is a significant step in unlocking the value of BASF stand-alone businesses. The enterprise value of the transaction amounts to EUR 7.7 billion. Subject to customary regulatory approvals, the transaction is expected to close in the second quarter of 2026.

At closing of the transaction, we will hold a 40% equity stake and will receive pretax cash proceeds of approximately EUR 5.8 billion. We stay invested with a minority share because we believe in Coatings future value creation and its upside potential, building on today's success to shape an even stronger future.

The agreement with Carlyle is based on the principle of partnership. Their sector experience will help position BASF Coatings for long-term success. Carlyle will leverage its strong track record and extensive experience in successful carve-outs of industrial and chemical assets. Merging the strength of BASF Coatings with Carlyle's capabilities will open new opportunities for the team to create additional value. This will drive accelerated growth and support the team to unlock its full potential as a stand-alone entity.

For us, as a minority shareholder, closing the transaction with Carlyle in the second quarter of 2026, will be the next big step in implementing our winning waste strategy with speed and determination.

Together with the successful divestiture of BASF's decorative paints business to Sherwin-Williams, which we closed last week, BASF's entire Coatings division is valued at an enterprise value of EUR 8.7 billion. With the 2 coatings transactions, we are realizing a significant premium compared with the valuation of the division as part of BASF Group. The implied 2024 EV over EBITDA multiple before special items of approximately 13x is evidence of that.

And now, Dirk and I are glad to answer your questions.

[Operator Instructions]

We will begin with Tom Wrigglesworth, Morgan Stanley, and then move on to Christian Faitz and then Geoff Haire. So now Tom Wrigglesworth from Morgan Stanley.

Markus and Dirk, my two questions. Firstly, in terms of your holding of the new entity, your 40% stake going forward, how do you see yourself realizing value? Is there a tenure at which point you would exit? Or do you envisage holding that stake in kind of perpetuity? I'm just kind of interested to see how you see future value realization from that 40%?

And my second question, if I may, is the pretax proceeds of EUR 5.8 billion, is that just for the stake for the 60% of BASF Coatings because for 60%, that implies not a EUR 7.7 billion EV. So we're all a little wondering how we get to the EUR 5.8 billion?

All right. So I'll take the first part. And the second part, I trust that Dirk can give you some clarity on this. So Tom, thanks for your question. The 40% holding is, of course, is a testament to our confidence in the business and also confidence in what the partner brings to the table and really confidence in the business plan and the value creation potential for this business going forward.

Now of course, the idea is that at one point and as normally with an investment fund or a private equity company, there is, of course, going to be an exit at one point in time. And our, let's say, ingoing hypothesis is that we will also jointly be working on this exit at one point in time. But other than that, everything else is, I think, right now speculation, but you can trust that we and our partner are clearly aligned on the value creation plan and also on potentially creating the conditions for a joint exit.

Tom, this is Dirk. I'll take your second question. You should look at the transaction as being a EUR 7.7 billion transaction for the enterprise value. And it is a equity value of altogether around about EUR 7 billion. Out of that EUR 7 billion, EUR 5.8 billion pretax will be paid in cash upon closing and the equity stake that we have in the joint venture, where we hold the minority position is worth. I would say, round about EUR 1.2 billion. Now there must be a little bit of rounding for the closing accounts approach that we have taken. But I think basically, these are the elements, EUR 5.8 billion cash, EUR 1.2 billion paper and the rest is the bridge to EV.

So now Christian Faitz, Kepler Cheuvreux.

Yes. Hope you can hear me. Markus, Dirk, Stefanie and team, congrats on the transaction. I also have a question on that EUR 5.8 billion pretax proceeds. Can you give us an indication of the estimated tax but you will have on that? And my second question would be -- is there a contractual minimum time line to divest these 40%? I know obviously, Markus, you already talked about the rationale for the 40%. And if that 40% eventually is being sold, is that back to any milestones, profitability goals, et cetera?

Second question, Christian, thanks for the question. Second question, I can -- to both parts of your question, I can say no, relatively straightforward and now tax, Dirk.

And Christian, for the tax, it is a, I'd say, up to triple-digit million number of tax leakage, not sorted out in detail, of course, but that, I think, is the maximum we have to incur.

We move on to Geoff Haire, UBS.

Just kind of come back on the EUR 5.8 billion. So the equity value is EUR 7.8 and you're getting EUR 5.8 billion. That means that's 82% of the EUR 7 billion, not 60%. So I think there's some confusion as to why there's such a difference between what would the implied 60% value would be and what you're actually receiving. I was wondering if you could just help us understand the difference?

Look, Geoff, this is a result of a negotiation, and this is how the transaction looks like. We after a, I'd say, very competitive bidding round came to a compelling conclusion with Carlyle. And it was the agreement that BASF will receive EUR 5.8 billion in cash upfront. And so the rest is, if you will, then the residual amount because I gave you the entire value for equity, which is the EUR 7 billion do not maybe try to find more rocket science in it. I think it was a competitive transaction, and here we go with the result.

So now we have [ Gabriel Simmons ] from Goldman Sachs. We will then move on to Tony Jones and then have Alex Vigil. But now Goldman Sachs. Please go ahead, Gabriel.

So I have 2. The first one is on the planned increase in margins that you had for this division that you presented in the CMD of 2024. So you basically mentioned an increase of around 400 bps for the margin. So I just wanted to understand how far ahead you are with that plan? How much upside is still left? And if this was one of the reasons why you decided to keep a stake in the business?

And the second question is regarding the CapEx requirement. So still, given that you're still invested in the business, how much should we expect in terms of CapEx for the remaining portion that you still have?

This is again, Dirk. Let me take these questions. I think it is fair now just announcing the transaction. We are happy with the margin development. But from now on and with regard also to CapEx going forward, I think we should not preempt it and speculate. BASF will hold after closing a 40% minority share will be a financial participant in this joint venture, and it will be up to the operating equity partner, which is Carlyle also to strategically steer that. So I don't speculate on the CapEx with the business, how we bring it into this joint venture, I think we are confident and happy.

Maybe Gabriel, also, Markus, just to reconfirm, I mean, we have announced financial ambitions, also target margin ambitions for the Coatings business. And I can only say through the first half of 2025, we are extremely happy with the performance of our Coatings business also relative to peers. As we have also indicated last week, especially since the announcement of the new strategy, the team has done an outstanding job of delivering both on the P&L as well as on the cash side.

We now move on to Tony Jones, Rothschild.

I've got a couple left. Related to that, with your equity stake, would the cash restructuring charges be allocated across the new ownership structure? And then in terms of transaction and in terms and conditions, are there any assets or employees which are off limits from restructuring and any barriers to additional bolt-on transactions through the life of the new entity?

Yes. I'll take the second part, Markus here. I'll take the second part. There are only, let's say, very customary conditions with regards to employee protection, for example, that are not out of the ordinary for such transactions. I don't want to disclose any details here, but there's nothing out of the ordinary involved in the transaction agreement. And your second part of the question was, yes. Anything of limits? I don't -- I wouldn't think so, but.. no.

To your question on the -- on any extraordinary activities and encumbrances. So first of all, not again speculating. First of all, this is a going concern. We bring this business in good standing into the joint venture. And then again, it's up to the majority partner, Carlyle, also to set the strategic direction and everything that will be done within the joint venture will then also be shared in the joint venture. So it's a full joint venture structure. So in this regard, nothing unusual. It's a market standard transaction.

So we move on to Banco Santander, Alex Vigil.

A key question for me is also the use of proceeds. I don't know if it's part of this call, but I would love to have your thoughts about the use of this EUR 5 billion that you will cash in. And the second is some of my colleagues ask something similar. If you see this 40% stake in Coatings more as a source of dividends, more cash or is more on the growth M&A side?

As I said in my statements as well, I mean, we believe in the future of this business, and we believe that in this combination together with Carlyle, we have significant additional value creation potential because of the strong market position that the business has in all of the three global business units.

So for us, it is a clear commitment to capturing part of that value and of course, eventually also participating in a successful exit together with Carlyle. That's the driving force. That's why we stay invested, and that's why we also mentioned this year so clear as a commitment and as a clear vision also that we see the strength of this business. And as you know, also, I personally like this business very much. Second part of the question, maybe to Dirk.

And just to clarify, I mean, there is also then in the still to be worked out financial policy, certainly also right to retain dividends. So this is not excluded. But as Markus said, this is not our first priority at this point in time. Now coming to the cash proceeds, and this is exactly as we communicated a week ago in our capital market update. So cash proceeds will be used in line with our capital allocation framework. And this means that we will use cash proceeds certainly to strengthen our balance sheet, i.e., to deleverage. But also, as I mentioned last week, share buybacks may start earlier than 2027.

Okay. Now we have Chetan Udeshi, JPMorgan, on the line. He will be followed by James Hooper and then Oliver Schwarz. But now Chetan Udeshi, your turn.

Congrats on the deal. I just wanted to check one thing, Dirk. Did I hear you say the maximum tax outflow you said is triple-digit million. So it will be up to EUR 100 million. Is that -- my understanding is correct? The second question is, I was just curious, retaining the stake, it seems it's more from you as BASF management team that you actually wanted this minority stake rather than the buyers probably forcing you to do that? And I'm just asking this in the context of having done the same with Wintershall and Harbour Energy. You issued Harbour Energy stake at value of 360p and now the Harbour value stake is 200p. So I was just curious, why not take what you get right away? Or maybe you were probably -- it was required as part of the deal for you to keep the stake. I'm just curious why not take what you get because with Harbour, it's been -- it's not been the right strategy so far based on the value of the Harbour share price.

Chetan, I'll take the second part, and then Dirk again goes to the tax question. I mean, if you have a negotiation on a deal like this, I mean, it's a little bit -- I don't know if it's so helpful to look back who asked for what. I think at the end of the day, it's a meeting of the mind. I think it's a really win-win situation for both partners here because we believe in the business. We believe that this business has a good future, has value upside. And of course, also from the other side, there was the appreciation that this also is -- that BASF has a lot to bring in also as a shareholder into this joint venture.

So I think it's more of a meeting of the minds kind of thing. It's for me a perfect combination of interest. And I don't think your reference to Harbour is a very good one, to be honest. I think if you want to do a reference, my closest reference would be the exit that we had on the Water and Paper side with Solenis, where we had a very successful partnership with a private equity company at the time. We took a minority share, and we participated in an exit that brought us a multiple of the actually stand-alone value that we had in our water paper business. So that's kind of -- if you want -- if you're looking for a reference in a model, that's the model that I would choose. And that's what we have in mind here. And so I think if you would ask Carlyle, they would probably see it the same way. It's a real win-win situation.

Chetan, I'm grateful for your clarification question on the tax leakage. I hope I said or at least I meant to say mid triple-digit million amount in terms of tax leakage as a maximum.

James Hooper, Bernstein.

Congratulations on the deal. My first question is that, Markus, you referred in your speech to a value creation plan. Has this been set between you and the other shareholders? And do you have a say in this? And I guess it kind of leads on to the question that some firms looking at it would be thinking of breaking up the businesses. Would this be something allowed by the plan?

And then the second question is about governance and whether you're expecting lots of BASF management time to be spent there and what that looks like?

Yes, James, Markus here, relatively straightforward. I mean, Carlyle with a -- as a majority shareholder, certainly is the controlling party here, has certainly behind their bid for the business, a very detailed value creation plan and business plan. This is not ours to look into or decide on the value creation plan is there to deliver. And with regards to governance, we have agreed that in the future Board structure of the joint venture, there is a certain share between BASF representatives and Carlyle representatives or Carlyle nominated representatives.

ow big the Board will be, I don't really know at this point in time. Maybe it's even not even fixed yet, but the ratio will be the same, and that will be the governance. So we will appoint BASF people into the Board of this company.

So we now move on to Oliver Schwarz, Warburg, and we'll then have Laurent Favre followed by Jaideep Pandya. But now Oliver Schwarz, please.

Just one remains from my side. And that is after the closing of the deal, will this entity be recognized in BASF's balance sheet as an integral company accounted for using the equity method or would it be a nonintegral company, which basically implies whether it will be part of BASF's EBITDA or not?

Yes, Oliver, Dirk speaking. I'll take this one. As of closing, that's for sure, BASF's minority stake will be accounted for as a financial investment under the equity method, and it will be reported in the EBITDA before special items probably in the segment of other. Whether there is the distinction still of relevance for integral versus non-integral, we'll have to see after implementation of IFRS 18, but I think very clear where the category sits.

So now Laurent Favre, BNP Paribas Exane.

I just have one clarification question. I'm really sorry, I have to go back to that EUR 5.8 billion, EUR 7.7 billion bridge. Dirk, you mentioned that the equity value, your 40% equity value would be around EUR 1.2 billion. And that would imply, I guess, that the whole equity value would be around EUR 3 billion. So am I correct to assume that the entity will have more than EUR 4 billion of leverage, i.e., 6x, 7x leverage?

Laurent, Dirk speaking, on the leverage, I mean, this will certainly be a joint venture levered up according to market practice in such a combination case. You will probably have seen higher leverages also with a leading PE. So not too concerned about it. And for the equity, I just do the calculation the other way around. We concluded on an equity value of the EUR 5.8 billion plus the EUR 1.2 billion. The rest comes naturally via this equity to EV bridge, as I said, don't try to apply more rocket science to it. And as for the leverage, as I said, I think customary for a deal of this nature.

Jaideep Pandya, On Field Research, please.

Just two questions. Firstly, it's a little bit overall autos question for BASF's exposure to the auto end market. Will this meaningfully change your positioning in the auto end market? And strategically, how are your customers going to react to this? Because BASF has obviously been a very strong and reliable partner for the auto industry. So how does this strategically change your BASF's positioning in the auto sector?

And the second question is really around the goodwill that you're carrying, especially around the Kennametal acquisition that you did a few years back. Can you just remind us what is the goodwill that is on the books for the Coatings asset? And will there be any impact from the equity value that you've sold the business or the transaction that you've done today with?

Thanks, JD. I'll take the first one. Of course, our, let's say, relationship to the automotive industry, as you have said, is deep, it's broad, and it's also characterized by a strong innovation partnership in quite a number of businesses, I have to say, from automotive fluids to performance materials, so everything plastics, polyurethanes to automotive catalysts and also, of course, the Coatings business.

So there's a lot of deep and very sound relationships we have with automotive OEMs and the Tier 1 ecosystem. Of course, there is a certain expertise, a certain, let's say, weight that also BASF Group has with all these different businesses. But if you really look at it operationally, there's also very little synergies between the business and the actual execution. And this is also the setup that we have discussed last year in the Capital Markets Day when we went in this direction of creating stand-alone businesses.

And I can say a little bit bluntly, I don't think we've ever sold a pint of paint more because we have a nice automotive catalyst business and the other way around. So I think it gives us depth and breadth and understanding for the automotive industry, and we carry a lot of, let's say, also brand recognition and reliability. So in this industry and we actually believe that also with our continued investment into the new coatings stand-alone company, we bring some of that also to this new company. And I can assure you that our customers, both on the OEM side as well as the aftermarket and also the surface treatment customers can continue to rely that BASF will support this company also with everything we have in regards to knowledge and experience in the industry.

And with this, over to Dirk to the goodwill question.

To the goodwill question. What I can give you is the book value by the end of 2024 for the Coatings business that we are transacting here, this is EUR 3.3 billion. So there will be apparently an attractive book gain coming here. How this is exactly, we still have to figure out because there are some netting positions. There is a goodwill part in it. I don't have a number here for you to disclose, but it is certainly by far, the smaller part of the book value. So if you take the EUR 3.3 billion as book value, I think you're good.

Now we have one journalist on the line, Alexander Hutner Reuters. You go ahead in English or German, as you like.

Okay. I can do it in English. Just one more question on this valuation issue. Did I get this right? You will be getting EUR 5.8 billion in cash at the closing of the transaction and will reinvest EUR 1.2 billion in equity in this joint venture? Or didn't I get this right?

And the second question would be, can you clarify how large the stake is that Qatar Investment Authority will take in the joint venture? Or are there only 2 partners, and this is an internal thing between QIA and Carlyle? And last question, the Head of the Coatings business, Mr. Kothari, will he stay on the Board of BASF or will he stay within the new company?

So I'll take the question 2 and 3, and Dirk, I would refer to you for the question number one. So first of all, the parties, so to say, that were mentioned also today. So our contractual partner is Carlyle. And Carlyle will be also the controlling partner in this joint venture.

Now on a higher level, Carlyle has partnered with QIA and QIA is, so to say, in this and a co-investor into a Carlyle fund that ultimately is our -- is a joint venture partner holder, so to say. So this is the construct. So we are dealing with Carlyle to say it a little bit bluntly and also the controlling party in the JV. Just to clarify, Anup Kothari is a member of the Board of Executive Directors. He has many more responsibilities than just overseeing the Coatings division. So he's responsible for the entire Industrial Solutions segment, the entire Surface Technologies segment, and he also oversees our U.S. business. So overall, here's a lot more things to do, and we will not give him up so lightly.

On this question of reinvesting. So maybe here, I should clarify a bit. What we are actually doing is that we are retaining this 40% stake. This is done in a kind of a rollover and the technical -- more technical impression for this would be to reinvest. But we are not taking cash proceeds we are receiving also to reinvest into the business, but we get -- we are receiving the EUR 5.8 billion in cash. We receive this equity stake as we have a couple of times now commented on in the joint venture. And this is the way to look at it. It's more a retention, a rollover and technically spoken, it's a reinvestment.

Ladies and gentlemen, we are now at the end of today's short conference call. On Wednesday, October 29, we will present our third quarter results. Thank you for joining us today, and goodbye for now.

Good morning, everybody. Welcome to our Capital Market Update. It's a pleasure to have you join us here in Antwerp as well as online. We are streaming this first part of today's event, the keynote and the subsequent Q&A live, from our Verbund site in Belgium. The other parts of the program will not be live streamed. However, PDFs of all presentations will be available shortly before they begin. And later today, you will find replays on our Investor Relations website.

Please let me begin with a few organizational remarks. Today's presentations contain 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. Please be aware that we will only take questions from analysts and investors in the room today. Please just raise your hand if you would like to ask a question later in the Q&A sessions. In the unlikely event of an emergency alarm, the manager of the conference center will inform us what to do and where to go.

Now moving on to today's presentations. Markus Kamieth, Chairman of the Board of Executive Directors, will kick off our Capital Market Update with the keynote, which also includes a section that will be presented by Dirk Elvermann, Chief Financial Officer. Later today, the 4 presidents of the relevant divisions will present on the polyurethanes and ethylene oxide value chains in 2 separate sessions.

Now let's get started with a keynote. Markus, the floor is yours.

Yes. Thank you, Stefie. And also welcome from my side here in Antwerp. Somebody's phone is ringing. I hope that's good news. So let me -- first, a few introductory comments. First, you have seen a small video to kick us off today. You might -- some of you might remember the words that were said in the video. This was also the video we kicked off our Capital Markets Day with last year, roughly 1 year ago. However, this time, we underlaid it with some pictures of our event from last year where we had our kickoff event with our executive team in Copenhagen last year. And the voices were also real BASF managers, underlining again what the essence of our strategy was, and this was this creating a winning spirit, our winning ways going forward. So I thought it's a nice kickoff today.

And of course, we are here to give you an update 1 year into the new strategy where we are. And we also today want to distinctively take a closer look at our core businesses because since last year, since we differentiate in our portfolio steering between stand-alone and core businesses, we've spent a lot of time talking about the direction of travel for our stand-alone businesses, and I will also give you an update on this today. But of course, we want to today focus on the core businesses and what better place to do this than in Antwerp.

Antwerp is, as you have seen, maybe on the one or the other side, a very proud site. It has a motto that I will not try to pronounce this in Flemish, but it is something like, [Foreign Language], something like this. And this translated means something like the coolest site in chemicals. And you will see today that this has some merit to it. It's really a very cool site and a very successful site.

So why are we in Antwerp today has a lot of good reasons for it. First of all, it's, of course, a strategic relevance of Antwerp, not only for the chemical industry, but particularly, of course, for BASF. It is the second largest Verbund site of BASF Group in the world. And it is a site that really symbolizes the concept of integration at Verbund very well. For example, it's one of the highest integration -- has one of the highest degrees of energy integration of any chemical site in the world. And I think at least in some parts of the year when the temperature is not too extreme, the site, for example, is energy neutral. So you don't have to have any steam production here on site because the energy integration is so well. And you will see this later on.

It is, of course, a strong footprint for our core businesses. All our 8 core business units or operating divisions are present here in the Antwerp site and the 4 divisions that are going to be highlighted today along the 2 major value chains that we will discuss today are, of course, big asset owners here in Antwerp. And the site was built 60 years ago and 40 -- roughly 35 years ago, roughly, we started up the steam cracker here in Antwerp. And it's still until today, Europe's largest steam cracker and will also stay Europe's largest steam cracker for quite some time, I would guess.

We have, as I said today, the opportunity to take a look at 2 of our major value chains here in Antwerp, the polyurethane and the EO value chain, just to show you a little bit how we think about our value chains, their value, their characteristics and why this matters so much to us. And of course, Antwerp in itself has, of course, a lot of advantages. For example, being close to one of Europe's most, let's say, capable, most powerful. I don't know whether it's the biggest, but certainly for chemicals, one of the most important ports and has an excellent location. And what you can also see here in Antwerp is sustainability in action. As I said, high energy integration and a lot of ideas how to drive the green transformation, which is so important to us and our industry along the lines that we have described in the strategy here, you can all see this in action. So this is why we're in Antwerp today, and you can experience later also in the site tour, the coolest site in chemicals.

So as I said, Winning Ways strategy, we have launched this last year, roughly 1 year ago. And I think it's fair to say that we set a new course for BASF to get BASF on its winning ways for the future, and we focus predominantly on the topics of portfolio steering, capital allocation and also establishing what we call a performance culture or winning culture in BASF. So that was the start a year ago. And I think when you reflect or when we reflect 1 year back, first of all, I have to say also with all the things that happened over the last 12 months, and it has not been the most steady time in the world, as you know, we still, from today's perspective, think we have picked exactly the right topics to transform, to initiate change and to focus on in the course of the strategy.

So despite all the macroeconomic developments that we have seen, we stay very convinced that we have picked the right strategy and also the areas that we picked as focus areas are the right ones. And we will show you today that we are making significant progress also on implementing our strategic initiatives for the strategy implementation despite all the headwinds that we are seeing currently in our markets. And we are just increasing our appetite to focus even more on self-help measures, and we will talk about this later that in the current environment in the chemical industry, this is absolutely key.

So just a quick reminder what our strategy was all about. This was the, let's say, narrative structure around our strategy that we presented a year ago, always starting from our ambition to be the preferred chemical company to enable our customers' green transformation. And we have structured our strategy implementation around these 4 levers, focus. So this is a lot about what is the portfolio we're going to strive towards in the future, how do we create and unlock value out of our broad portfolio in BASF, how do we improve capital allocation, internal capital allocation for our businesses. Accelerate is a lot of internal transformation, making BASF leaner, making BASF more streamlined, a faster and at the end of the day, also a much more productive company. And also bringing AI as a new enabler and as a new muscle, if you want, into the organization to really bring BASF to the next performance level.

Transform was all about how to shift focus in the green transformation away from a target-driven transformation to a market-driven transformation, lowering our risk profile and making our green transformation pathways more adaptable to the quite volatile way that green transformation happens in our customer industries and also to the unpredictability that we are seeing in the regulatory environment. So I think we made great strides here. And of course, it was about making our European sites more competitive. And this means a lot of focus was put over the last year on getting our costs down in Ludwigshafen in particular, but also in other sites around the world, and we'll give you an update on this as well.

Last but not least, we said our pillar win is all about culture, driving a performance culture in BASF top to bottom. So from the boardroom all the way to the shop floor. It has a lot to do with how we deal with each other, which kind of behaviors we're trying to promote in the company. Here, I have to say this is a very -- topic that I'm very passionate about. And we're making great progress. And if you talk to BASF people, many of them will tell you that over the last year, the conversations in the company have changed a lot when it comes to culture, when it comes to performance orientation, output orientation and also speed, for example, of how we make decisions and how we move the company forward.

And we have also introduced quite a number of, let's say, more hardwired things in this win column, for example, we've changed the entire performance management system in the group now also for all employees. So for all more than 100,000 employees worldwide, we changed from a very monolithic performance management, how, let's say, annual bonuses, for example, were paid to a very, let's say, agile and also more targeted performance management system where each individual is at the end of the day, rewarded based on the performance of his or her respective division. So overall, that was the canvas, so to say. That's a solution suite for our strategy implementation. As I said, from our perspective, we're on a great way, and we will try to convince you that you see it the same way after today.

So let's start with portfolio. Last year, we've introduced the concept of separating BASF's portfolio into what we call core businesses and stand-alone businesses. You can see this on this slide, our 4 segments: Chemicals, Materials, Industrial Solutions and Nutrition & Care, along with the 8 operating divisions that compose these segments are what we call our core business. And you can see that we have laid out clear financial ambitions for the year 2028 to take it from EUR 5.4 billion EBITDA, the core businesses to EUR 7.9 billion (sic) [ EUR 7 billion to EUR 9 billion ] over the next years.

And on the other hand side, we have what we call stand-alone businesses. These are the businesses where we do not have a strong connection to the core. They are not integrated in our value chains, and they are also competing in the market typically with companies that are, let's say, doing nothing else than this one. So a much different business environment, a different competitive environment and also different success factors. And we've also said that we want to look for ways to unlock the value that we have in the stand-alone businesses that often where there's quite a number of times a situation where these businesses could command a clear premium over the valuation they have as part of a chemical company, and we will update you in the next slides on where we are with all these stand-alone businesses. But the main focus then later on will be on the core, and we will talk a lot today about the value chains, about the Antwerp side and about 4 of the divisions that are part of the core, and that's the focus today.

So let's start with an update on the directions of travel, as we call it, for our 4 stand-alone businesses. And let's start with our -- we call it ECMS business, so our automotive catalyst and precious metal services -- business (sic) [ Environmental Catalyst and Metal Solutions ] business. As you know, we have already started the carve-out, the internal carve-out of this business quite a while back. I think we started in 2022, if I remember correctly. And I have to say, in hindsight, this internal carve-out and the repositioning of this business towards a, let's say, low growth, maybe eventually even a declining market in automotive catalyst has been a real success story. The team has done an outstanding job in reinventing themselves in creating new structures, more targeted fit-for-purpose structures and also, of course, significantly reduced the capital requirements. And we are now putting this business really in a mode where we have the optimum setup to extract quite attractive cash flows from this business for quite some time.

In the market, I have to say the -- even over the last year, the expectation for the length or the market development for the automotive catalyst market or for the internal combustion engine also has changed quite a bit. I think today, many people would subscribe to what I also said at the last Capital Market Day in September, where I said if this is a sunset business, it will be a very long sunset. And I think the statement holds now more true than it was even 12 months ago. So we believe this business has a bright future. It has still a long future. And with the setup that we have chosen, we also gave it the right environment to be a very successful business in BASF.

As you can see here, we are expecting from 2024 to 2030, a cumulative cash flow contribution from this business to the group of roughly EUR 4 billion. So it's a very significant cash contributor to the group based on the new operating model. And this also means that BASF is a very good owner for this business because, of course, we can value the cash flows typically higher than any other company would do at this point in time. So we believe that this business is set up stronger for longer and also will maintain -- will remain part of BASF Group for quite some time in this more stand-alone and independent fashion.

Short update on batteries. Here, the market situation has turned out to be as challenging as we described it also last year, especially outside of China. A lot of developments in the market have been very volatile in the battery market, both with cell manufacturers, but also with battery materials manufacturers. So I think also here, our path that we have chosen last year proved to be exactly right. We have reduced significantly our fixed cost and basically ramped down our capital spend to 0, basically derisking our pathway at least for the next year significantly because of the volatile market environment that we have, especially in Europe right now around battery manufacturing. So I think this was the prudent thing to do, and the team has done an outstanding job of restructuring this business based on this market volatilities and headwinds.

We have worked very hard on delivering on this idea to create partnerships along the value chain that help us to enter then the phase of profitable growth once the market comes back. And you've seen maybe also that we have announced one of these collaborations with the market leader in battery cell manufacturing, the company, CATL from China, and we have agreed to form a strategic supply relationship here with CATL. And we are very confident that we will now, over the next years, fill our existing assets. We have 190,000 tons of capacity for cathode active materials, so we can grow a long way without having to build new capacities in this business. So overall, I would say, in a tough market environment for everybody, I think, in the chemical -- in the battery value chain, I think we've chosen exactly the right path.

Short update on Coatings. You know that we have approached this portfolio journey or the direction of travel in 2 separate steps. The one actually we have concluded last night. You might have seen this. We have -- it was published last night that we have actually successfully closed the divestment of our decorative paints business in Brazil, the so-called Suvinil business. This has been divested to Sherwin-Williams for an overall purchase price of USD 1.15 billion, and this transaction was closed last night. And this means that from announcement to closing, we have done this in 1 year, which also plays a little bit into our strategy theme of speed. And I think this was a very successful transaction.

The rest of the Coatings business, roughly EUR 3.8 billion in sales. We've also announced that we are looking for ways to unlock the value out of this business in either forming a joint venture or a divestiture. And we have started the process in the second quarter, went to the market, got a lot of interest both from the financial sponsor side as well as from strategic investors, and we are currently in discussion with, I would say, highly motivated parties to come to a conclusion here, and we expect that there is a decision then going to be published in the fourth quarter. So we are in the middle of it and stay confident that we have chosen actually the right approach. And also, we are happy with the response that we got from the market.

Last but not least, the fourth stand-alone business, of course, our most valuable business, so to say, if you want. And this is our Agricultural Solutions business, quite a lot of noise in the Agricultural Solutions space over the last days, I would say. We have decided to also here pursue this pathway of carving this business out internally, setting it up in own legal entity structures and giving it also the right process and IT environment to operate as a stand-alone entity. And then prepare this business for an IPO, and we target IPO readiness by 2027, then to take a partial IPO then as a next step.

I have to say I'm very impressed by how the team has taken this and then how far we are already in this process, extremely diligent and professional. And so we're very confident that this IPO preparation phase, so to say, will be on time and according to our expectations. And so overall, we can report here good progress and that we stay on course for this direction of travel that we have published. And let me also -- based on the recent news that you have seen, let me also again say that we are very firm and we are very convinced that our strategic model, so to say, of having an integrated business model between crop protection and seeds is exactly the right one with a strong focus on crop systems and our key drive countries as we have it. So with a focused approach when it comes to crop systems and target markets that this is exactly the right one, and we believe that this is the winning model at least for BASF also going forward.

And with this, I would just briefly introduce this and then would ask Dirk to join me here on stage to go through the financials. And I would just wanted to reconfirm that for 2028, we had announced the financial targets in a way that we have said EUR 10 billion to EUR 12 billion of EBITDA before special items. A free cash flow cumulative of EUR 12 billion over the period 2025 to 2028 and a targeted ROCE by 2028 of larger than 10%. And today, despite the fact that certainly 2025 for the chemical industry in general has turned out to be much more challenging, we want to confirm the targets and stay focused on self-help measures and everything that is in our control to execute what we have under our wings to stay on course to deliver those targets.

And with this, Dirk, I would ask you to take it over from here.

Yes. Thanks, Markus. We confirm, ladies and gentlemen, our midterm financial targets. Markus, you just said that. We are also confirming the shareholder distributions that we have announced last year. So we will stick to the dividend policy that we have announced last year with the strategy, saying that at least EUR 2.25 per share, we will pay out to our shareholders each and every year, plus share buybacks, which should bring the overall shareholder distribution in the period between '25 and '28 to at least EUR 12 billion. So with this confirmation of both the corporate financial targets and also the distribution policy comes a new capital allocation framework that we have already introduced last year to you.

And I would like to present an update on this one, giving quite specific examples also what we have done in the meantime in order to reinforce our capital allocation framework. Basically, it is about 3 things. First of all, maintain our financial strength, which will require that we are protecting our balance sheet, will require that we are deleveraging the current debt level of the company. Secondly, grow with high capital efficiency, which will require that we are using our capacity reserves that we have in the system. You might remember last year, we gave you one data point saying each and every percentage point of additional utilization that we are getting from our machine park will bring us around about an EBITDA contribution of EUR 300 million-plus. And so you will see where the value pockets within BASF are sitting. Thirdly, we are sharpening our portfolio. We already alluded to this one, and this will allow us to channel the funds that we have available in the company to those activities that are moving the needle for us and avoid funding it to things that are rather distracting us.

Now let me give you some more substantial information, also some examples about our capital management that we have started since launching the strategy. First of all, we will bring down our CapEx in this period until 2028 significantly. With the completion of the Zhanjiang Verbund site with the completion next year of the MDI plant in the U.S., we are considering ourselves as a very well-invested company. So the big things, the big program that we had is then done, and we are well invested. And this means for us that we can live with the machine park that we have for quite a while, and it allows us even to further reduce the CapEx amount that we have announced last year.

Last year at the strategy launch, we told you that we'll probably, until 2028, spend CapEx of EUR 17 billion. In the meantime, we are very comfortable to say it will be at most EUR 16 billion. We drive the asset utilization, which I already alluded to. And going forward, also very importantly, we are directing more of the CapEx, the majority of the CapEx to growth regions and growth businesses, which also tells you a little bit how we are thinking about our capital allocation going forward, being more selective.

On this slide here, you see on the photo a very recent image of our new Verbund site in Zhanjiang. And I'm sharing here with you 3 examples of how we are spending or not spending CapEx going forward. Let's start with Zhanjiang. This project has been executed according to schedule. We are very confident that until end of the year, the site is up and running. And it has been delivered significantly below budget. We are alluding to this since quite a number of quarters, but now I have a number for you. We are completing the project with a lower CapEx of EUR 1.3 billion. So the EUR 10 billion project that we have announced is basically an EUR 8.7 billion project.

And that is thanks to very disciplined management approach that the team was taking. It's thanks to some rescoping, but not in the portfolio field, but rather in the field of technical setup, which helped us to save some money here. And it's thanks to a very smart procurement approach, which also was leveraging on the tight and intense conditions on the engineering market during COVID and after COVID, so that we can now safely say with procurement savings, with some rescoping, we are achieving this project at EUR 8.7 billion, which I think is also news for you.

Second example, we are also not shy to not do certain things if situation is changing, if environment is changing, and we have the feeling that deploying capital right now is not the best use of our money for a certain project. And this was the case for the joint low-carbon ammonia project that we evaluated with our partner, Yara, where both partners came to the conclusion, this is actually, at that point in time, not the best use of capital. So we stopped that for good and rather said, let's -- for the ammonia demand that we have, let's go to the market and source it and let's look into other possibilities. So we stopped this project.

And the third one is a, I would say, smart investment into our integrated site in Ludwigshafen, where we have announced already the investment into a semiconductor-grade sulfuric acid plant. And this plant will come on stream in 2027, which nicely coincides with the demand that our partners have because they are also expanding capacity for their semiconductor business up into 2027. So that's an investment that is planned exactly for the demand that we already see coming for us. So we are doing things cheaper. We are not doing certain things, and we are smartly investing incremental capacity in those businesses, which are yielding good profits.

This picture you are probably very familiar with, and you hear me repeating that we are on very good track with our cost-saving programs. I say it again, but then also would like to give you some good examples for that. We are indeed accelerating our cost-saving program. We have a current program of EUR 2.1 billion, as you know, which is basically addressing 10% of the overall fixed cost of the BASF Group. If you look into the addressable fixed cost of the group, you would even say it's 13%, 14%. So it's quite a big program, I have to say. We have accelerated this and are confident that we will achieve savings of EUR 1.6 billion as a run rate already by the end of this year and the remaining EUR 500 million by the end of last year, so fully on track.

We are now also gradually seeing the effects of this cost saving in the P&L because apparently, the onetime cost to achieve in delta to the run rate that we are achieving now, the gap is getting wider, and we are seeing the effects that we wanted to see. So this is in full swing. It is accelerated and it will be delivered as planned. Notably, once we have ended the project, and this is one of the questions we always get, are you then done? So we, as a Board, but also as a management team say under certain -- the current conditions, we are never done, but the cost savings will continue. We go into a continuous improvement, continuous productivity improvement mindset. So we will deliver the EUR 2.1 billion, and then we move forward.

Let me also here be a bit more specific. On the page here, you see the site in Ludwigshafen. And we are addressing the Ludwigshafen site specifically with a program, which is part of the EUR 2.1 billion, of EUR 1 billion. So what are we doing there? We have a number of project groups to achieve these savings, and I would like to give you 3 concrete examples what we are currently tackling. A, is the further streamlining of our asset park. We have already announced a couple of plant closures after we have looked meticulously into each and every plant to see whether this is competitive under hard current conditions. We have already announced the closure of the adipic acid plant, of the CDon plant, of the CPon plant. And now we take the next step and have also announced the closure of the hydrosulfite plant in Ludwigshafen, which is a plant that is not contributing to the earnings of the site anymore, which is not per se critical for the Verbund itself. So we have a clear case to close this plant also. So we are going to do that.

Big saving potential we do have in the non-operations part, including all the services, all the site services. And here, we have just taken one measure to consolidate all the central maintenances into one unit in Ludwigshafen. Sounds a little bit trivial. It was so far scattered in various units. We are consolidating that. By that, reducing a lot of interfaces, by that also achieving a significant headcount reduction, which is exactly the way to go. And the third example is in site procurement. We are not solely addressing the fixed cost side, but we are also addressing variable costs. And with a new procurement approach using vigorously not only AI, but also game theory, we are currently in the position to significantly lower our spendings in Ludwigshafen.

Another aspect is the working capital. As you know, we have, together with our strategy, also set a very clear and distinct cash target. So it's not only about earnings, it's also very much about cash. We are setting cash flow targets for the units and each and every unit in the meantime is laser focused, I'd say, on the working capital levels. And we have already proven that we can reduce our working capital between mid of 2023 and mid of 2025, we have taken roughly EUR 3 billion of cash out of the system by simply reducing the working capital. This trend will continue. There is, of course, some offsetting now when we are ramping up Zhanjiang. We have to fill the plants. This will lead to new inventory levels, but the overall trend, bringing down the inventories, bringing down the DSOs on the accounts receivable side, this is to be continued.

And this will lead to what we see on this page, namely the inflection point, I would call it, for the cash performance. Going forward, we are now assessing an operating cash flow until end of '28 of around about EUR 29 billion. We have reduced our CapEx plan, as I've already said, to EUR 16 billion, which will then enable us to reach the at least EUR 12 billion cumulated free cash flow by the end of 2028.

And with that, I would like to conclude my part with a little bit of a longer slide on the cash contributions and cash allocations, including some good news that partly already heard also from Markus. So let's go first to the left-hand side to the cash contributions. We have executed the sale of our food and health performance ingredients businesses on September 30. We have agreed with our partner that we are not disclosing the purchase price in the commercial terms, alone the fact that you find it on the slide tells you that it is for us a meaningful thing. So it's positive news. Second, Markus, you said it, the Brazilian deco paints business is now successfully closed and sold to Sherwin-Williams. This happened last night.

We are also making good progress on the further monetization of our oil and gas assets. In terms of our participation in Harbour Energy, we have -- you may have seen this recently participated in the share buyback program that the company has set up. We are receiving our base dividends. And together, probably this year, we'll get a cash inflow from Harbour Energy in the order of magnitude of EUR 200 million. On top of that, the federal investment guarantee that is sitting in Wintershall Dea is making good progress. I know I also say this since quite some time, but now I can confirm that it is really concretizing.

We see first smaller money inflows via dividends out of the federal investment guarantee from Wintershall Dea, and there's a bigger payment made to Wintershall Dea still sitting in Wintershall Dea for booking reasons. But what I can say is we are trending there in the right direction. I am reasonably optimistic that within the year 2025/'26, we will be able to resolve the majority of this topic. Then, of course, on the cash contribution side, if there is a successful coatings transaction, this would lead to meaningful cash inflows and the same goes apparently for the potential IPO of the minority shares in the Ag business, where we confirm that we are targeting IPO readiness by mid-2027.

Going to the right-hand side, what are we going to do with the money that we are expecting? First of all, and I come back to my first slide, we are confirming the ordinary dividend on the level of at least EUR 2.25 per share annually. Secondly, we want to delever and support our balance sheet, and we want to maintain the current single A rating that we have with all 3 agencies that are rating us with a stable outlook. We want to maintain this. So it's also a commitment of the management team. Thirdly, we are focused on the share buyback programs that we have already announced. And you know we have said the latest beginning of '27 and at least EUR 4 billion until the end of '28, we want to deliver under the current circumstances and depending on a successful closing of a coatings transaction, we may consider to accelerate that and to start even earlier with a share buyback program then by the beginning of 2027.

Acquisitions. Here, we would say large acquisitions are currently not in our focus. Small or midsized acquisitions, and with midsize, we mean up to and around EUR 2 billion. This is always a possibility. There, the firepower of the company is always there to do this without distracting us too much. So this is a possibility. But also here, do not expect something imminently. This is a possibility that we would not rule out going forward. And for CapEx, I think I said my part, we are invested now. We have to make use of the invested assets that we have, and we will certainly invest for the next couple of years until end of '28 below depreciation level, which is probably on a level of EUR 4.5 billion. So that's the depreciation level annually. So we will certainly stay below that.

Markus?

Yes. Thanks, Dirk. This is very clear. And let me now switch back to the topic of the day is our core portfolio. So we're taking decisive steps to increase the earnings in our core businesses. As you've seen, we have ambitious targets to drive earnings growth in our core businesses. And we, of course, already described the strength of our core business, we go much deeper today, but we've described it already last year. Some of the characteristics of the core, I think it's worthwhile to spend some time on.

We're building on very strong key value chains. And I'm going to show you some examples of this and how relevant this is. And also, I think this becomes clear then why we believe this core is actually fundamentally a good portfolio to have and to run and why this also belongs together. As Dirk said, we are focused very much on filling existing capacities now. We are coming out of a wave of high investment or years of high investments. We have capacity to grow, partly by design because we've invested, partly also because the last year, certainly in terms of volume growth in all markets have been below expectations. So we have ample opportunities to grow. And we're doing this based on very strong market positions.

In our core business, 75% of all our businesses have a top 3 market position in their respective markets. So we are often operating from a position of strength. And of course, also, as you will see later in quite some detail, also in a position of good competitiveness. And last but not least, the core is and remains the innovation engine also for BASF. And you will see that over proportionately, this part of the portfolio, the core contributes to profitable growth coming from innovation.

But let's start with one project that Dirk already announced. He showed a nice picture of our new investment in Zhanjiang. And here, again, I just want to reconfirm we are on track to start the site up in late 2025. That's the current plan. Dirk has already alluded to the CapEx budget, EUR 8.7 billion. This is all in. So everything we spent from 2019 all the way to 2028. And as we also discussed in length, I think, over the last months or in many individual discussions and in many calls, of course, the site now starts up in a Chinese market that is very different than what we thought when we made the decision for the plant. It's much longer. A lot more capacities came on stream that were not necessarily all anticipated. And the Chinese market growth has been at least during the COVID years, somewhat lower than expected. So overall, we see much longer markets in most value chains.

But that also means that in these markets, the players who have competitive capacities are in the low end of the cash cost curve have, let's say, a strong right to run at high utilizations, and that's actually the expectation we have also for our Zhanjiang site. Most of our plants will be in very favorable cost positions also in the Chinese market, and we expect a fast ramp-up of our capacities as basically given by our technical capabilities. However, due to the fact that we currently see very low margins in most of the commodity markets in China, we will have a slower-than-anticipated ramp-up of the overall profitability, but we still expect most markets and value chains to rebalance in China over the next years towards the end of the decade so that we confirm our overall outlook of the site profitability of EUR 1 billion to EUR 1.2 billion EBITDA before special items.

But if you want to ramp up towards this time will certainly be more challenging, and we're also looking next year at a lower than originally expected EBITDA contribution, which might be either slightly positive or even negative, depending also on the ramp-up costs that we have to incur and also, of course, of the market development. But overall, we stay confident on the site, its cost position, its competitiveness in the Chinese market, and we stay overall also very confident of the rebalancing of the Chinese market in most value chains based on strong demand growth, which we continue to see in China even today and also some of the measures that were also prominently discussed over the last months in the public space, for example, the anti-involution measures as they are now called. And some of these will certainly be concretized in the upcoming 5-year plan.

So overall, this is the outlook for the Zhanjiang side. And as you can imagine, with a tougher market environment that we already see, we have, before even starting up the site already initiated now efficiency programs to make sure we're reaching benchmark cost positions also in the nonproduction areas, so services overhead and contracting, for example, much earlier than originally anticipated. So the pressure certainly is on, and we will deliver a great project in a tough market with a strong earnings outlook midterm.

I have already talked about the core portfolio is the engine of innovation for BASF. And here, you can see also some numbers, products that were launched in the last 5 years or products that were introduced new to the market make up 15% of the sales in core businesses. The number is EUR 6 billion. So this is a very sizable part of the portfolio we crank out of our R&D machine every 5 years. And the projection is that this number even goes up now over the next year. So the big driver in the core business and the innovation is the trend towards sustainability, the green transformation. And all of the divisional presentations that you will see later will have examples also that you can see really what we're spending on -- how we are spending our R&D money, how we're driving the green transformation and how that leads to a relative improvement of the competitive position of BASF and how we really make this -- transform this into profitable growth for us. So we're very confident about our capabilities to make a difference through R&D, through innovation in the core.

And I say this so prominently because sometimes over the last year, I got the feeling that the perception is that our core is a very commodity-heavy portfolio, which it is not. If you look at really the composition of the core, this by far is still the largest specialty chemicals entity in the world and has, of course, a certain base chemicals, commodity chemicals character because of the upstream divisions, but there's also a good reason for it. And that's what I want to introduce today because today, we will talk a lot about value chains, and why this matters so much to BASF.

And I brought one value chain as an example that will be discussed in much more detail later with Mary and Thomas, which is the EO value chain. And I just want to go through the general logic and our thinking so that you also see why we are making such a big deal about value chains and why if you look at, for example, the current restructuring of the chemical industry in Europe, we are not so much alike other chemical companies that have made announcements, for example, when it comes to cracker restructuring or asset rationalization. So this is a very rough and very high-level depiction of our EO value chain. Thomas and Mary will show you this in much more detail.

So we start with ethylene. And typically, when BASF makes ethylene, we make it with a steam cracker. So we have mixed feed steam crackers in all regions of the world, and we make ethylene. But we are not making ethylene to make predominantly market products based on ethylene plus 1. So we're not in this ethylene market to make MEG or to make polyethylene. This is not our business. Our business is to make magic with ethylene and to make many, many different products out of ethylene, partly with a value add that increases then 10x and even higher over the course of this value chain.

You see the outlets that we have for ethylene oxide here on this chart. It goes all the way from still relatively commoditized products where you're talking, for example, about commodity surfactants, ethanolamines, stuff like that, all the way to specialties in the agricultural formulation or even in the pharma excipient space, where the molecule of ethylene experiences a huge value add. And this is basically what we talk about when we talk about Verbund. I know we have abused the word Verbund for many things in the past, but this is really what the core of the Verbund is.

And you can see the value add over a molecule of ethylene for us looks very different from somebody who has a nonintegrated business and runs a steam cracker, maybe even an ethane steam cracker makes polyethylene out of it and then is merchant with polyethylene. This is a completely different exposure to an ethylene cycle and so forth. We are exposed to the ethylene cycle as well because it's a key raw material for us. But of course, we have a very different perspective on why we, for example, also run a cracker than other companies. So very important to understand this, and this will be the core theme of our presentations when we look at the polyurethane and the EO value chain in the course of the day.

And here are 4 examples of our -- 4 of our key value chains that we have in BASF, the ethylene oxide and the polyurethane value chains we will discuss today, but we have other examples like the C3, acrylics value chain or the C4, isobutene value chain. These 4 value chains represent roughly 50% of the entire core business. So 80% of the core business overall is linked to one of our value chains, and these 4 represent 50%. So these are very meaningful parts of the core portfolio, which means also that it is for us not a very straightforward idea that sometimes floating around in capital markets to say, shouldn't BASF split up the core any further? For us, this is a very strange thought because we believe the value destruction potential of splitting up these very powerful and very well-positioned and competitive value chains has a lot of potential to destroy value. So this is why this topic is so important to us.

And if you look at isobutene, for example, it's always a fascinating example to me. Isobutene is if you want -- now sorry for some petrochemicals experts, but let's say, isobutene is a bit of a byproduct in a cracker. Most people actually in the world, probably 2/3 of all isobutene gets made into MTBE or rubber. We make sophisticated stuff out of isobutene because in the last decades, BASF chemists have invented great technologies to upgrade this isobutene molecule into really fancy things, like, for example, fuel additives, like vitamins, like fragrances. Our entire fragrance portfolio is built on isobutene.

So this is what we do with chemistry. This is what the Verbund is all about, and this is why we are different despite the fact that we have an upstream business, we run crackers, but we are not a, let's say, cracker-centered company. Thomas might see this a little bit differently from his perspective, but we run crackers to make magic with chemistry along our value chain. So this is what I wanted to say with regards to this setting up the presentations later.

Last, I also will address that we have issues in the core portfolio. We have what I call construction sites. And in the portfolio of our core, we also have pruning opportunities. We said this also last year. And you've seen, for example, yesterday or the day before, we have announced that we are looking now for strategic options of our feed enzymes portfolio, for example. But we also have a lot of businesses where we feel the gap towards target profitability is still substantial. But our attitude here is really to look very carefully what can we fix, what do we have in our control and where can we focus on improving profitability.

And here, we want to be quite open with 4 construction sites that we have where current profitability levels are not according to our expectations. This is partly due to significant global overcapacities like in the case of butanediol or I would say, partly also upstream polyamide value chains. And partly, this is due to, for example, increased competition like in plastic additives, where a lot of Asian competition has emerged over the last 10 years or even asset-related issues like in our vitamins value chain. As you know, we had also issues with our own production assets.

So we are very much focusing on this also as an executive team because these construction sites, if we fix our issues, so to say, and we put ourselves in the position to have the steering wheel here in our hands, we can actually lift the profitability of the core quite a bit. And these 4 construction sites alone, and we as a Board have spent quite some time really deep diving into these. And you can see some of the measures, which are quite assertive, often include asset restructurings here as well, will deliver an earnings lift of EUR 400 million by 2028 by addressing the obvious pain points here. So there's a lot of self-help that we also have in the portfolio when you look at parts of the core portfolio that are not performing according to expectations.

We also put pressure on the organization to get leaner, to accelerate. This was the topic of accelerate in our strategy. And of course, the current headwinds in the macroeconomic environment are a strong trigger to accelerate this -- making the company leaner and overall, let's say, creating a more fit-for-purpose setup for the core also means that we can accelerate here. And here, just 2 numbers and what we have seen so that you really also see there's a lot happening in BASF also on this side. Dirk always talks about these savings, the EUR 2.1 billion savings. But if you look at what is really happening in BASF, it's quite remarkable.

Over the last year, we have announced this also last year, we have dissolved the regional organization in BASF, and we have taken an entire access, so to say, out of our 3-dimensional matrix organization. And we have, of course, focused a lot on restructuring existing organizations, for example, in Europe, in Ludwigshafen and Dirk has given you some examples. And that led to the fact that since last year, we've reduced 10% of all our senior executive positions in BASF Group. And we have reduced the number of employees by 3,000 since 2024. And that is before the buildup of Zhanjiang. Of course, in Zhanjiang, we have to add now operators to run the site. But if you take Zhanjiang out, we've reduced 3,000 positions.

So it means a lot is happening in BASF. There's a lot of, let's say, self-help that we really focus on now. And it is also partly planned, but partly also accelerated based on the currently difficult market environment. So overall, our core businesses, we feel have a very strong setup, strong leading market positions, strong technology positions. You will see this also. We have the ability to run the business now for quite some time, as Dirk said, at lower CapEx levels. The core businesses will roughly out of the EUR 16 billion over 4 years that you've shown will roughly have a run rate of EUR 3 billion or less per year for the core businesses.

We will continue to build our strength based on these deep and long high value-add value chains that we run across our portfolio. And of course, we are preparing our core more and more, and you will also see some examples of this later for enabling the green transformation of our customers, increasing our offer for sustainable solutions when it comes to low carbon footprint, high circularity or bio-based materials where the Verbund and the value chains that we run are the perfect setup to drive this green transformation with a low risk profile. So this is the program for the core businesses.

You will deep dive later, and I will close with a chart that I've also shown as a first slide in the Capital Markets Day a year ago. And this is what we want to leave behind as a current Executive Board. We want to leave behind a path for BASF that is focused on value creation, value creation for our shareholders, in particular, and we want to leave behind a winning culture. And especially in tough times like we have right now for the chemical industry in general, execution is the #1, the #2 and the #3 priority for us. So thank you very much.

Thank you, Markus and Dirk. So we are now open to answer your questions.

[Operator Instructions] And then we begin with Laurent Favre, BNP Paribas Exane.

Can I ask a question about Slide 16? So that's the one where you show operating cash flow, CapEx and SCF. And I mean, without the magic ruler, it looks like you see 2026 operating cash flow in line with 2024, which implies about EUR 1 billion of improvement compared to this year. So I'm just wondering, can you talk about the different buckets of EBITDA, working capital and other to get to that number? And does that include the federal guarantees, which I assume it does?

Yes, Laurent, let me take this question. It includes 2 assumptions. First of all, a certain push apparently also from the earnings power that we have in the company with all the self-help that we also have explained. And then also dividends from equity reported companies, which once cash inflow is happening, would also be reported as free cash flow. So this is a contributor as well. Yes, I confirm that.

And the federal guarantees?

Yes, that would be part of it because once we are receiving money, so Wintershall Dea as a net equity reported company, they have to book it and then distribute it via dividend and then it would flow in as equity result from the franchise.

So we now move on to Christian Faitz, Kepler Cheuvreux, and then I have noted Chris Counihan.

Yes. Two questions, please. First of all, can you give us a specific example of the scope reevaluation you're talking about in Zhanjiang? And then the second question is, I mean, if you won EUR 10 billion in the lottery or generated through on cash flow or asset sales, which region would you invest this in, in the current geo situation? I mean we are in overregulated Europe, unpredictable U.S. and an oversupplied China.

First of all, we're not playing the lottery just for the record. We try to stay away from this. We have better ideas what to do with our money than playing the lottery. But first question on Zhanjiang. We had originally planned, when we designed the project between 2018 and 2020, we had designed even the project in several phases. And we have also still ideas today on paper where we could say we could extend some of the value chains even further downstream. Given the current market environment, this is not something we have a strong appetite for. I think we are focusing on rounding out the Verbund as we have it in what we originally at one point in time, we call it Phase 1. We added a few minor assets to where it was smart to actually do this. And we are approaching now every asset decision that we would build in Zhanjiang basically in front of the current market environment and with a strong make or buy focus as well.

So we have actually decided, for example, to source certain materials in the Chinese market for quite some time because the market is long, it's available, and that seems to be advantageous right now. That is not a stop for investments in Zhanjiang, but I would say the time of that this project gets any kind of air cover because it's a new Verbund site is over. So every investment project now that when divisions have an idea to put a new asset into Zhanjiang, it has to fulfill our overall profitability expectation. And right now, we would say, for the time being, in Zhanjiang, we're done.

If we would have, let's say, if we have a focus area for further investments, I mean, we have been very outspoken also in the strategy about our capital allocation when it comes to regions. From my perspective, it is very prudent to look at Asia and continue to look at Asia as the market for growth. In the next 10 years, more than 80% of all growth of the chemical industry will happen in Asia, will happen in 7 countries in Asia, China, India, 5 ASEAN countries. Today, 2025, more than 100% of chemical market growth globally is in China. The rest of the world is shrinking.

So China continues to be the growth engine of the chemical industry. And we are well invested in China. China has become a more cyclical and more competitive place. So we are, of course, now changing our focus very much to South India -- to South Asia, meaning India, but also Southeast Asia, ASEAN as the next, let's say, opportunities for us to invest. Challenge is these markets are significantly smaller than China, but they offer opportunities because you will see strong growth of the domestic manufacturing and domestic chemical industry in these markets. And this would be -- if I could make a wish, this would be my next areas for hopefully, very profitable organic investments for BASF.

Okay. So we move on to Chris Counihan, Jefferies and then Tony Jones after that.

And I found the China ramp-up slide very interesting, showing the overhang in start-up costs, but also the limited earnings contribution or still loss-making, as you said, in 2026. And so while I'm not trying to draw you on a 2026 guidance, it appears you're implicitly saying upstream markets globally remain under pressure, not just in China. So what are the implications of this across the broader BASF upstream portfolio into 2026 and beyond? And how should we be thinking about that path to 2030 towards the EUR 1 billion to EUR 1.2 billion and how the market balances over time?

Yes. I mean I start, maybe you can complement if I forget something. But you are right. Our current view into 2026 for most markets is actually not that we are sitting here and expect end-to-end markets and/or, let's say, chemical markets to change significantly in momentum in 2026 versus 2025. We are seeing now since April 2, quite, let's say, difficult end market development, very little volume growth in most end-use markets and a continued challenging environment in especially upstream commodity markets with low margins across the Board discussed many times.

I don't think this scenario will fundamentally change next year. We might see some improvements. We have some, let's say, positive triggers certainly next year, things like in Europe, for example, which is still our biggest market, the stimulus package of the German government, generally, the appetite to invest more in defense and other sectors will certainly be a bit of a tailwind, but it's not going to change the picture fundamentally. So that's why we have not gone through the exercise now with all our divisions of doing operational planning for 2026. But our guidance is don't plan with too much growth next year unless you have a particular situation, you're starting up a very competitive capacity, you have locked-in contracts, you have certain market segments where you launch a new thing.

But in general, don't expect too much from the market and focus on self-help measures. And we have a big machine, both in terms of cost and in terms of assets where there's a lot of self-help. And then it's always the question, how fast can you execute this, to actually drive your profitability. And that's where we put a lot of effort, focus and pressure also on to be as quick as possible because I don't expect a lot of tailwinds for 2026, particularly not in upstream.

And maybe -- I couldn't agree more, maybe just one more data point. If you look into our volume performance year-to-date, and that goes upstream to downstream, we're holding up in terms of volumes. It's rather prices that are the challenge and even more so FX. But I think FX most of it. But I think it's fair to say that the company is holding up quite nicely in the volume development. And as we said earlier, we are in a position now to use our reserve capacities, I would call it. So there is room, I think, on the basis of the self-help that we do to push more into the market. So I think this is one lever that we will also pull in the next years.

So also, as I said, I mean, right now, if you look at the picture that I just showed you -- that I just described, China is growing as a market -- chemical market now. Rest of the world rather contracting, probably slightly negative numbers for 2025. Last number I've seen is year-to-date, we are still volume positive year-to-date versus last year. And you know that we are rather small in China. Our footprint in China is not big, only 13% of our sales in China. So that shows you that we're holding up volume-wise also fairly well in this difficult environment, and that shows the strength of our businesses. But it's a tough market and it will stay probably challenging for 2026 would be my guidance.

So now we move on to Tony Jones, Rothschild & Co. And after that, Tom Wrigglesworth.

I've got 2. So firstly, if we see more China production volumes exported to Europe and then less to the U.S., how do you see the BASF and market response if margins stay low for longer? And then on the Verbund, years ago, you used to talk about roughly EUR 1 billion of savings from the Verbund model. I don't think you've disclosed that anymore. But with the portfolio changes and then the new China complex, could you update us about what the savings could be to the group?

Yes. I start with the second one. I know the EUR 1 billion, we have communicated this in the past. This was probably based on a lot of questions. Can you somehow put a number to this Verbund advantage? For me, this is -- it's a bit of a theoretical thing. Think about the value chain, the EO value chain that I've shown you. You can, of course, now do calculations, transport cost of not transporting stuff between sites. You can come up with inventory that you don't need because you have this all in one site or in one company. But I think this is, at the end of the day, a bit theoretical. I don't know whether this EUR 1 billion has ever been really tangible.

What at the end of the day, you have to realize is if you have this value chain and you are competitive on all steps, and that's always the prerequisite, right? A long value chain does not help you if you are uncompetitive at certain steps. You have to make sure both on your upstream side as well as on your late last downstream asset, you are competitive against your respective peers. The true value comes, of course, from resilience because, of course, upstream and downstream markets have very different price volatilities. And it's, of course, supply security and it's, let's say, value transfer and steering opportunities that you have. That's the true value.

And if you would split this up into, let's say, 10 -- if you split our EO value chain up in 10 companies, and they all have to negotiate with each other every quarter for pricing, for volumes, for green attributes, for how to share value, you can already sort of sense that this is probably not going to be over the cycle a very profitable setup versus ours. Of course, if you have situations where upstream markets are long and everything is available and commodity prices are down, you could get away with a nonintegrated downstream business and be really happy with it. But over the cycle, I think this long value chain setup, if you have it competitive on each step is a really strong, robust segment and setup, and that's why we are pretty happy with it.

Your second question was?

It was on the inflow from China on the imports to Europe.

By the way, just one thing, and we talked about it with Thomas a few weeks ago, it's -- right now, if you look at the imports into Europe, it's not only China, it's also U.S., of course, right? Because in the U.S., especially C2 value chain built at the U.S. Gulf Coast based on ethane crackers, based on low input cost, low feedstock cost, that was all built for China. And so this material is now not going so much into China. So there's also a lot of stuff coming into Europe. So -- but this is predominantly, again, cracker, cracker plus 1 products. And from China, it's more, let's say, C3 downstream products. This is more what we see in our portfolio coming from China.

So again, you have to be very careful with making these assumptions. China is flooding the European chemical market with chemicals. You have to look at value chain by value chain, but the pressure is certainly increasing. You can ask also later the 4 division presidents. I think in all their divisions, they're struggling also now with more import volumes from opportunistic exporters from China, but also, I would say, especially in Thomas' case, from the U.S. now. Think about the tariffs also went away when it was 6.5%, now it's 0%. That also brings tailwind for U.S. competitors.

So it's -- Europe is a more vulnerable place, I would say. But that only means that in Europe, you have to be competitive against imports. And of course, you are never insured and insulated against, let's say, not so value-oriented behavior of competitors that dump products that are very opportunistic in export businesses. But there's also an increasing number of antidumping cases now in the EU. So that extreme end of the spectrum, I think, can be handled. If we will be faster, they will be better. But in general, what only helps is you have to have competitive assets in Europe. And we told you last year, and we stick to this, that most of our assets that we run in Europe are competitive also against imports from China, from Middle East or from the U.S.

And so we feel we have a good setup. But of course, if there's overcapacity in China, China is half of the market, a little overcapacity in China is a big overcapacity for the rest of the market. So it will only finally go away when China rebalances, and that will take a few years. So we brace ourselves for stronger competition also in Europe. Here and there, certainly, we will also address this via measures like antidumping cases where they're justified. But at the end of the day, there's no golden bullet other than run competitive assets. And we believe that not everybody in Europe will be set up as robust as BASF. We will show you later as well.

So now Tom Wrigglesworth, Morgan Stanley. And we will move then, I think, Matthew Yates also and then Chetan.

Kind of 2 maybe follow-on questions. I guess what we're talking about here is, to some extent, pricing power or the balance of pricing power. So you have cost-saving programs to keep you competitive. But at the moment, what we've seen is we don't see any effect on the P&L. Maybe that's unfair. But in essence, you kind of give away your cost savings because of the competitive nature in the market. So how do you strike that balance? And when we look at the core, how much of that business is taking those molecules as far downstream as they need to versus being sold as a [ C+2 ] or a cracker plus 2 step. So that's the first question.

Second question, if I may, is, again, around this, clearly, the coatings business has a lot of value. What assurances can you give shareholders today about value realization there that you'll be able to really extract the medium-term prospects in a challenging market for that business?

First question, I think you will see some data around the degree of integration also at least for the 2 big value chains that we will discuss today later, we will have even some numbers also how integrated this is. So I think we are -- the value chain never is perfectly set up because typically, what you have is you build upstream assets as big as possible because you have to be competitive. So you need scale. And then you never have the perfect downstream integration. So you always have outlets that you also need upstream to be in the merchant market to play.

And so this is why this is never a fully closed value chain. We have -- because of the fact that we run these long value chains, we have a significant merchant exposure with upstream commodities, which in good times is a wonderful thing. In bad times, it can be challenging. So that's just the cyclicality of the upstream portfolio. There's not much you can do about it.

On your dynamic of the P&L, the way you describe it, it's, I think, a little bit backwards. At the end of the day, for most of the cyclical, more commoditized chemicals, there is -- these are -- yes, these are commodities by nature. Everybody in the market is a price taker. So you get the price that the market gives you. And the cost efforts we take in the company is, of course, to compensate some of the margin losses that we expect in low price environments as we see it today for many chemicals. But these are almost not -- you don't do this one because there's the other. Because the cost savings and becoming more competitive, becoming more productive, making your assets -- getting your asset effectiveness up, these are all non-regret move. We would do this even if there's -- if the margins would be better. So it's not a reactive move as it is a, let's say, move to become mid, long term as competitive as we can be in an environment that will no longer allow us to be -- to have any kind of fat.

So -- but short term, the margin level that we achieve or that you achieve in commodity markets is not something that you can influence. The only thing you can really influence is, as I said, your cost position and your competitive position and how, let's say, high your utilization is. And if you're the marginal player, you have a tough time these days because then you cannot run your assets and you will not be able to place your volumes. And that's what we see. We see quite a big gap in utilization rates. And I always quote the example in China because it is out there. I've said it many times.

In China, the average cracker utilization is 70%. By the way, in Europe, it's not much higher. In Europe, it's also 75% cracker utilization and cracker utilization in the U.S. also in this area. But we run our Nanjing cracker at 95-plus percent. We run it as hard as we can because we are at a very low point in the cash cost curve, we can still create value out of the ethylene and the propylene that comes out of the cracker when a lot of other players in China who don't have that downstream integration can no longer do it and they have to shut down. And that's why you see the shutdown and start-up mentality of many of our competitors because they don't have the cost position and the integration.

This is really the key. That's what you can influence. This is why I'm always preaching so much about we have to have competitive assets in Europe. And then despite the fact that the weather is bad in Europe, we will still be able to win our races.

Coatings?

Coatings?

Value realization.

I can give it a start. I think, Tom, you are spot on. So we have to capture the value from this business, and this is what we will do. This is also why we said we are not disposing the asset because we are in urgent need of cash or so. But what we want to do is to unlock the value of the business. And if there is a transaction, we still say there might be different kinds of transaction, whether Markus, you said it is a joint venture or is a straight sale. At the end, we will only decide on a transaction if we have confidence that the full value of the business is also reflected in this transaction.

This is why we gave us the time to do it with all the speed attributes that, of course, are important for us. And also why we said we are a little bit agnostic what a transaction structure would look like because we have to make sure that the value is unfolded and that we are with our share participating in the full value of this business.

And that's why I, for example, never like when I read that this is a disposal process. It's a value -- for us, it's really an unlocking value exercise. And that's the lens to which we look at this. That's why we are agnostic. We are open, I think, also towards different ways on how to do it. And we're fully aware that there's a lot of value you can leave on the table if you do it wrong. So the assurance I can give you is only that we take this part of that consideration very seriously, and you have to somehow trust us that we're not eager to throw value away.

Okay. We move on to Matthew Yates, Bank of America.

Maybe just a follow up on Coatings. I'm trying to understand the accelerated share buyback as to what is different today versus a year ago? Because I wouldn't necessarily think the balance sheet is stronger than you would have thought a year ago. So is the delta that a cash transaction in Coatings is now more likely than a JV or some other structure? Or is there any other reason why you feel you're in a position to accelerate the buyback?

Maybe let me take this, Matthew.

I hope you take this one.

I'm more than happy to do it. So let's maybe move away a little bit from a specific transaction. I think if there were a transaction, then it is obviously a valuable one. It's a rich, it's a big one. The fundamental thinking is we are now carving out the stand-alone businesses and have various forms of transactions for them. And the core business is, for the time being, at least is getting a bit smaller. So we also have to address apparently then also the capital structure, starting with reducing the debt levels, which will also allow us from a position of strength also to do the shareholder distribution that we have promised.

And currently, our confidence level is as such that we say if there is a coatings transaction coming, then we are in a position that we can do, a, upholding our promise on the dividend. That's very clear. Secondly, can do meaningful deleveraging with a clear goal to maintain our single A rating and c, also accelerate share buybacks.

Let me just add. I mean, the question of share buybacks is also dependent on -- we believe the company today is significantly undervalued. So timing is not bad for share buybacks right now because the value of the company is low, is attractive. It's an attractive buy for us. It's my simplistic view on this.

Markus, I have a separate question about this idea of value chains. And I'm sure by the end of the day, we will have learned a lot more about it. Do you think the value of that is the same as it was 5 or 10 years ago? Because it strikes me that there's more capacity, there's more competition in multiple parts of these value chains. And if we think forward 5 to 10 years from now, will the value of that integrated strategy still be the same?

My answer would be yes, but your hypothesis is still true because all of the businesses in my little iconic chart there with the EO value chain with all these outlets, in all of these businesses, they have all commoditized. They have all more competitors now than they had 10 years ago. So the value capture, so to say, in each of these outlets has been under pressure more than it was 10 years ago. That's true.

But generally, the delta between running this integrated or nonintegrated has stayed the same. So it just both has been, let's say, it's more difficult right now to capture high value adds and, let's say, overall competitive pressure is there. And that's what we are seeing in the chemical industry now for, let's say, quite a number of years and decades that there is this sliding commoditization of most products. And we are working against this with our big R&D machine cranking out new products. But overall, there is this trend. And I still believe the relative advantage of running this in an integrated fashion has stayed the same.

So we move on to Chetan Udeshi now, JPMorgan.

You're not taking questions from audience on the webcast. I'm getting a lot of questions on 1 common question, which is we heard you provide some trading update last evening. Maybe for broader audience, if you can just provide a bit more granular update on how you see things. And for me, the most striking thing was not that margins are under pressure in your Chemical business, but was more the comments on Ag starting to come under pressure. So maybe if you can provide that -- some granularity on third quarter, helpful.

The second question -- sorry, I've noted down a few questions. Second was German insurance payment. Can you remind us the magnitude at some point, it was EUR 2 billion, EUR 2.5 billion. Is that the magnitude we are still looking for from a BASF perspective?

The third question I had was actually on cost savings. It feels like cost savings are just neutralizing the fixed cost inflation, at least from what I can see. Will that change next year? Are you expecting cost savings to actually more than offset the inflation, so you have a net contribution?

And last question on Zhanjiang. Will the EBIT loss be worse next year than this year because you also will have a big step-up in D&A, I suppose. So if EBITDA is not improving, can the EBIT loss be higher than what you have this year? Sorry for 4 questions.

Four questions -- CFO heavy, I would say.

Yes, I'll start with the first 3 maybe and then -- good, so let me start with the FIG. So we are still not disclosing the exact amount, have never done this. There's a lot of speculation how much it is, but the rules of the game are to stick to confidentiality here. I think I gave you a couple of data points today where you see we are making concrete progress. More, unfortunately, is not possible. It's not reflected in our books, though. So whatever we are collecting is an upside to the current investment case, I would argue.

On the cost side, for sure, inflation is the biggest counter effect to our ongoing cost-saving measures. I showed you the one slide where the cost to achieve. Apparently, for the program, they are stopping by the end of the year. So this will be helpful because the run rate delta versus cost to achieve is getting bigger and bigger. So that's helpful. And secondly, we also have to be very clear. We have to address the inflation bucket and see which parts of inflation as part of the self-help you can influence and do that. And thirdly, there will have to be one point where pricing power will have to come back in order to sustain the model. That's also very clear. So you cannot just do it on cost saving each year alone. But for the time being, we feel in this trough situation where we have to come out, cost saving is the way to go.

Current trading, yes, you -- I'm building on what we said at Q2. And Q3 is trending, I would say, in the same direction. So we are holding up volumes quite nicely. Prices, I would say, a little bit subdued, but also not significantly. The big thing for euro-denominated companies, obviously, is also then the FX effect. But overall, don't expect a significant shortfall, but also don't expect at this point in time, recovery.

What we also said yesterday was there are some pockets where we really have nice results. The semiconductor supply was already mentioned yesterday evening, where we have a strongly growing business, admittedly on a smaller basis. The auto business with a particular emphasis on China is holding up quite nicely, which I think is also better for BASF than for other companies with auto exposure. And especially to the Ag business, as you asked, we are very confident that the Ag business in a not easier environment is delivering on what was planned at the beginning of the year.

On Zhanjiang, I will not give you now a '26 detailed breakdown of the P&L. We probably will get a little bit more precise when we get closer to it and also do our planning for next year. But roughly, since you also mentioned depreciation, I mean, we gave you the CapEx number, EUR 8.7 billion. We depreciate over 15 years. So no rocket science. We will be facing roughly EUR 500 million roughly depreciation. Order of magnitude, I don't know whether it's a real right number. So don't crucify me if it turns out to be a bit different, but that's my back of an envelope calculation. We have start-up costs this year. The start-up costs will still be significant next year. So we will have a spillover.

Technically, we will start up the plants at the end of the year, but you know when you run a big assets, there's quite a lot of hangover of real start-up costs of additional people you need to make this stable. So it's a bit of a dynamic picture. So that's why I cannot be as precise and I would like to be to give you a guidance on what the net EBIT impact will be from Zhanjiang next year. We'll do our best to do this maybe in one of the next calls to give you a bit of an impact there. But right now, I don't want to pull this number out of my pocket, but that depreciation number gives you one element that can help you bridge that -- these numbers maybe a little bit.

[Operator Instructions] We have the next analyst is Alex from Santander, and we will then have James Hooper.

My question is about the decision to keep the Environmental Catalyst division, the rationale on that, if you tackle the market and you thought the valuations -- potential valuations were not attractive enough, you can elaborate on that process.

Yes, it's relatively simple. It's as you have said it. I mean we have, of course, when we carved out this business, we have received a lot of interest also. People were asking what is the future of this business. We prepared do the internal carve-out actually already a potential strategic option, as we said, even in the original announcement said we are willing to look at strategic options. But what it shows is that a business that has this sunset character, I call it now, because eventually, probably we will see a declining market, has, of course, by most people that would be interested in taking over such a business, they assign a very low terminal value to this business.

And that leads to a valuation that at the end of the day, gives you potential EBITDA multiples, let's stay in that very easy, easy part that is lower than what BASF Group has. And so with a business that I feel is doing operationally very well, we are gaining market share in this business. So we are doing operationally very well. We are in the right markets with the right technologies. I have ample opportunities to the carve-out to rebase my cost structure. And I have, of course, now a time where I have to spend only very little CapEx. I can extract quite a number -- quite a good cash flow out of this business. And I gave you a number today, which is also an updated number. So that is roughly a run rate of EUR 500 million cash to the group every year.

You can compare this also to other people in this industry of similar size. That's a very attractive cash flow. And I believe that given my valuation as BASF Group, my investors can value these cash flows higher than a potential person who buys this business from me. And that's why I say not only am I a good operational owner of this business because I'm showing I can run it really well or my team runs it very well. I don't run anything. But I'm also a good financial owner of this business if I maintain this cash flow strength. And I believe personally, it will last even beyond 2030 for quite some time.

Okay. So now we move on, James Hooper, Bernstein.

I just want to ask about the CapEx cut from EUR 17 billion to EUR 16 billion. What were the key drivers of this? Is this the Zhanjiang saving? Or is this higher hurdle rates? And also, does this leave you flexibility for other kind of growth investments? You mentioned Southeast Asia, India in your presentation. Obviously, the German government is doing a very large infrastructure defense program that probably will need help from the chemical industry.

Yes, true. Starting from the end, you're right. I mean the stimulus package in Europe is an upside. There's also other upsides. I think there's pent-up demand in infrastructure in many economies in the -- at least Western world, particularly in Europe. The infrastructure spend or the bucket of EUR 500 billion now is a clearly compartmentalized bag of money that will come. It will not come as fast as some people think. I think it will take some time. German bureaucracy, planning processes, permits and so forth. But we will see this probably towards the latter half of 2026. It will make a difference.

Still, I would say today, looking at the asset setup that we have in Europe and most other chemical companies have in Europe, this will not trigger investments in capacities in Europe. Let's also keep things in perspective. It's EUR 500 billion over, I think, 10 years. So it's not going to now put Europe into space in terms of growth rates. But it's a tailwind for sure. And we will capture this. We are very strong, by the way, also in all things that go into especially the construction sector because don't forget, for every building, for every school that's been built, it's not only the cement and the construction material. You need to insulate the building, you need to put carpet in, you need to put paint on the wall, you need to put plugs and cables in these buildings.

This is what drives chemical demand. Building, like no other chemical -- like no other industry drives chemical demand. So there is this upside. Now is there room for additional CapEx? For sure. However, we will, over the next years, run a tight ship in CapEx, and that's basically the answer to your first question, coming from EUR 17 billion to EUR 16 billion, there is no, let's say, strategic guideline we give out. This is going through all projects and challenging every project to say, what can we move out? Given the latest and greatest market outlook that we have, what can take a year longer, what can we postpone and what can we maybe also put on the waiting list?

So this is not a very strategic discussion, very operational. It's very execution driven. And you can ask over lunch also the division presidents, CapEx is a tough discussion right now in the company. So Dirk is running a really tight ship here, and I think it's appropriate. However, we have ideas. And Dirk also mentioned this on one of the slides, we want to allocate, of course, from our growth CapEx. We want to allocate this to the markets that will eventually grow. And we are very committed to doing all of these smart investments in areas where markets will grow. But we're talking always about a time frame '25 to '28. Even if we would decide today, let's say, we do make a big project in Vietnam or in India, the spending would come towards the end of that period. So it's not going to make a big dent in it. So I think we have to reassess this also over this course of the next years. But for the time being, the direction is clear. We will stay very disciplined on capital.

And just one small addition. So the reduction in CapEx is not financial engineering. It's real.

Being mindful of the time, I would like to close this Q&A. And with that, we are at the end of the live stream. We thank you very much for joining us online. Replays of the keynote and the Q&A as well as the 2 further presentations will be available later today.

Thank you.

So we will now take a short break and resume the program with the presentation on the polyurethanes value chain at 11:00 a.m. So please feel free to refresh yourself and have a drink, et cetera.

[Break]

Welcome back, ladies and gentlemen. With me on stage are Ramkumar Dhruva and Martin Jung.

Ram has been responsible for the Monomers division since 2019. He joined BASF in 1996. Yes. After earning a doctorate in Organic Synthesis, Photo and Electro Chemistry from the Indian Institute of Technology, Madras. He has managed businesses in various industries across different regions, driving innovation, sustainability and operational excellence.

Martin has been responsible for the Performance Materials division since 2019. He joined BASF in 2000 after receiving a PhD in polymer chemistry from Eindhoven University of Technologies in the Netherlands. He has managed businesses across different regions and sectors and has had a particular focus on the automotive industry for the last decade.

So with that, Ram and Martin, the floor is yours.

Thank you, Stefanie. Ladies and gentlemen, it's a great pleasure for Martin and I to present to you our polyurethane value chain in BASF.

We chose this picture on the title side for a few reasons. This was taken a couple of weeks back close to New Orleans Port. And this depicts one of the modules of our MDI expansion in Geismar. And as you see, this is in the final stages of implementation, and this also shows that we are investing in the future.

We are also doing things in a new ways. As you can see, this is the first modular MDI plant of BASF, and we are reinventing ourselves. By doing so, we would like to keep the project in time and on budget. As we ship BASF as we are, we are also on the move, and we are making progress. Yes, perfect picture to start our presentation on polyurethane value chain in BASF.

In the next slide, you will see the segments of BASF, the four segments of core of BASF. And within that, when today's presentation for us in terms of polyurethane, our polyurethane value chain is divided among the two operating divisions, Monomers and Performance Materials. Together, this comprises of Materials segment.

For us, in Monomers, our focus is on having broad portfolio of basic monomers and polymers. Within the polyurethane value chain, we would like to focus on big volume isocyanates with a clear emphasis on cost competitiveness and sustainability. Martin?

Yes, ladies and gentlemen, in the Performance Materials division, we offer 6,500 mostly tailor-made products along the product lines of polyurethane systems, our topic today, thermoplastic polyurethanes, engineering plastics and a couple of specialty products.

Now our customers, they expect from us that, first of all, we understand the application that we can help them solving their issues and certainly always offering a competitive price. So for instance, if we develop a crash absorber with one of our customers in the automotive industry, they expect from us that we give consultancy in the material choice but also in the processing choice, testing, simulation and eventually, the crash absorber has to work in a car, and we all rely on the functioning crash absorber.

So it is rather a big know-how that we have to bring to our customers. The business is know-how heavy, people heavy. And therefore, half of our 7,700 people are working actually in the front end. That means in sales, technical sales, marketing, tech development and R&D. So pretty heavy on people and know-how.

Sustainability is a big topic for both of us as it is in the entire plastics industry. And we will talk about this in more detail for the polyurethane value chain because it is a complicated thing in sustainability in the polyurethane value chain. And I think we have good examples how we tackle it, both from the energy product carbon footprint side as well as from the circularity side.

As Markus has shown this morning, the Materials segment is rather substantial for the core. It is 30% of the core. Last year, EUR 13.5 billion of sales, half-on-half between our divisions. And actually, the lifeblood between our divisions, that's the polyurethane value chain that makes up 50%, 50% of both our divisions. So you see how Markus phrased it yesterday, both our divisions are connected at the hip, especially through this polyurethane value chain.

Both of us command pretty good market positions in this. You see here on the right-hand side on the Performance Materials side, our main franchises and the market shares on the left-hand side, Monomers. You see for us in polyurethanes, this is 26% in sales of the entire segment. And we have worldwide a #1 market position in polyurethane systems. Mainly in the Western markets, higher market shares above the 20s in Europe as well as in U.S. and then lower market shares in the countries outside of China and lower again in China, which is a very big, big and competitive market.