BASF Aktie

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.

If you look at the competitors, you will see those are the same names that you will also find in the Monomer scene, the same names, but the market is a different one. If you look at the systems market, it is around about 60% that is commanded by the big 5, whereas still there is 40% and mainly this 40% happen in Asia of a market that is also penetrated by a lot of smaller system houses that buy a lot of these raw materials in the market and then formulate for their customers. So while you find the same competitors, it is a different market.

Ram, how does it look like in the Monomers?

So yes, as Martin alluded to, we have both in Monomers division and Performance Materials market leadership in our respective individual market segments. When you look at one of the big segments of our Monomers division, which is isocyanates, with 29% of our sales derived out of this segment, we have a leading market position in MDI being global #2. And in terms of TDI, we have top 3 positions.

It's not only on isocyanates. When you look at a broad portfolio of Monomers, when you move to polyamide 6 or in organics, we have a leading market position in the respective markets we serve.

When you look at the global footprint of our materials segment, for Monomers division, key essentials are in terms of back integration, economy of scale, competitive utilities and site structures is very critical. But it's also not that, but it's also to be close to our customers in their respective regions is very important for a robust, reliable supply chain, low logistics costs and at the same time, our ability to react to market changes and customer demands quite fast. With that, monomers operates its isocyanate assets in most of the key regions and integrated sites.

For example, here, in North America, we operate our isocyanate plants in Geismar. In Europe, we operate our isocyanate polyurethane assets in Ludwigshafen and in Antwerp. In Asia, in China, we have our isocyanate assets in Shanghai and in Chongqing and in rest of Asia, in Yeosu, Korea.

With this, we are the global player among all isocyanate producers, where we have all assets in all key regions, even in Asia, inside China, outside of China. With this global presence as well as we would say, Martin, we have a reasonable in terms of sales structure across all regions.

Indeed, like you see that the biggest sales for both of us is Asia. So that is a little bit also unusual if you compare that to an entire scheme of BASF. We have 40% of the value chain is in Asia, followed by a strong position in Europe and obviously, North America, then South America is by far a smaller market with this 3% here for us.

Now compared to the Monomer setup, we follow obviously the supply, but our asset structure is a totally different one. We have 26 system houses worldwide. And for us, the proximity to the customer centers, to the manufacturing centers of our customer is the most vital thing. Therefore, you see so many. Then you would say 26, goodness me, is that operational excellence? Yes, yes, it is. Because for us, it is always a kind of a consideration between supply chain, being close to the customer, at the same time, having scale and efficiency in our system houses. And that is a balance that we have to strike every day. This is why we have also closed four system houses in the last couple of years in Russia, Middle East, also two in Europe. And that is an exercise that is also ongoing. We're challenging our setup wherever it is every day to strike the balance between operational excellence and supply chain proximity to customers.

But it is not only the supply, it is also the know-how that you have to bring to the customers. Therefore, you see here also R&D centers as well as, we call it, creation centers. Those are cooperation centers where we interact with designers and many people from our customers. So it's not only the assets and the material, but also to have the people, the know-how and the right technical service at place in order to win projects and in order to convince customers and bind customers.

So perhaps if you look in the future, as we also talked about CapEx and asset development, we would also say that we have enough assets in place, 26 sizable number. And going forward, we can actually accompany any growth in the market by, number one, just putting people in the plant. That is what you do in these downstream plants or you just incrementally increase the capacity of our plants. So both is possible, and both is actually rather low budget. And actually, both of it will be in the next couple of years, definitely below the depreciation that Dirk and Markus have shown this morning.

So we are prepared for the future. But perhaps let's dive a little bit deeper into the chemistry that you will also later today see in the real assets. Ram, it starts with basic chemistry.

Yes, as was looked at this morning, Markus showed us different value chains. Within Monomers division, we start with our basic chemistry. We have nitrogen, sulfur and chlorine, and we start building our value chain. When you look at the polyurethane value chain for our downstream customers as well as third-party customers, we are the key raw material supplier with MDI, TDI and also PO.

We run our -- as I said, we run our key isocyanate assets in all the integrated sites globally. And with these value chains, we build our polyurethane downstream products for internal as well as external customers. Out of this, 25% of our sales is derived from transfers to the downstream division, which is Performance Materials. But we have also a significant portion of our third-party sales, 75% of Monomers sales is derived from third-party customers globally across all regions.

And our focus to be successful for both internal customers as well as for our third-party customer is to have a cost competitive asset and also having high asset utilization and effectiveness and with a focus on sustainability. Martin?

Yes, building on these building blocks and molecules, we start to formulate our formulations. So the main raw materials are the isocyanates, MDI. It is also propylene oxide that ends up in Polyols. And it is also adipic acid, not on this chart, different value chain, adipic acid that goes into polyesters and then later on also into systems.

So 50% of the raw materials in our polyurethanes value chain, 50%, we take from our brothers in the upstream division and then start to formulate. Polyols is the differentiating factor in the polyurethanes system. So we have around about more than 100 Polyols that we build on propylene oxide, then also polyesters, then we start to formulate and bring the polyurethanes systems to the market.

Also, thermoplastic polyurethane is built on the same kind of chemistry, a little bit of different processing. And also Cellasto, one of the specialties I will talk about a little bit more in detail later on, is also building on the same kind of chemistry.

So again, for us, it's about the application know-how. It is about the differentiation, understanding the application and being ready to formulate exactly for that. Now perhaps let's have a bit of a deeper look in what MDI is all about.

Thanks, Martin. So ladies and gentlemen, in the next few slides, we will dig a little bit deeper on the key value chains of the building block of polyurethanes.

Let's start with MDI. MDI, methylene diisocyanate is a versatile product, and it is growing. When you look at the applications, it is in wide applications with people's lives where it touches. It's in the construction industry, it is in the automotive industry. It's also in consumer industry, whether it is in the textiles or in footwear or in appliances.

The market is generally growing across all regions, specifically in China in the last years, and this market continues to grow above GDP. When you look at in 2024, the global market of MDI grew close to 300,000 tonnes. And in the last 5 years, the market grew more than 18% in total. When you look at this MDI market globally can absorb one world-scale capacity every year as long as this continues to grow.

And when you look at the main growth, as I indicated, is in Asia, specifically in China, but we expect Europe as well as North America, as was highlighted by Markus and Dirk, with the investments coming up in the infrastructure and construction industry, it is expected to come back to growth of MDI market in Western world.

When you look at our performance in the market of MDI in the last years, BASF has significantly grown in the last years with volume and capacity expansions. But it's not only on the volume side, we have also ensured that we have significant in terms of value creation for the group as well as for our Materials segment.

When you look at the future growth fields of this MDI, we are investing and doing capacity expansion, as I was showing in the first slide, with the expansion in North America, in Geismar, MDI, we would like to double our capacity close to 600,000 tonnes expected to start up in the second half of 2026.

At the same time, we are also doing a smart debottlenecking in our Asian plants, particularly in China, both in Shanghai as well as in Chongqing. It's not only the capacity addition, we are also coming back with new innovations in terms of sustainable products and also finding new applications, which I will touch a little later.

When you look at -- in terms of our story of MDI, it all started here in Antwerp. 50 years back as in 1975, the first MDI plant was started here in this location. It's the best to have the Capital Markets Day here today with all of you. We started the first plant with about 15,000 tonne capacity. Slowly, we expanded step-by-step, both in capacity and regional footprint, first going towards North America, then moving to Asia and then starting with Yeosu, then expanding into China. And today, we have a global capacity for MDI close to 2 million tonnes. And that's not the end. We are coming with expansion, as I highlighted, in Geismar, and we are also planning, again, smart debottlenecking further to expand our capacity in China.

As Martin alluded, innovation and sustainability are key to the success of our value chains. Here in MDI, we focus on innovations with the specifics on sustainable solutions for our customers. Here, we have examples -- a few examples I have shared.

One is B2Last. It's a new application of our aromatic isocyanate additive in the bitumen application. This improves the quality of roads, durability of roads at the same time, allowing lower emissions. It's not only that this is -- this enables for recirculation of old asphalt back into circulation. With this, we are able to launch new application for our MDI grades in the last years. It's not only on MDI application for -- in the road paving, but also BASF has been the first to launch a net zero Lupranat MDI in the market a couple of years back. It's not only in terms of application, but also on the net zero, we also look for circularity.

In terms of circularity for soft foam recycling, BASF has developed a process and together working with customers to launch them. If you have a chance to stay at our Renewable Hotel in Ludwigshafen, you will enjoy sleeping over our mattresses, which are made out of recycled Polyols out of these old foams.

We continuously focus on process optimization to improve our cash cost position, but at the same time, also reduce our CO2 footprint and to ensure highest level of energy integration. With these, we are positioned with many more innovations, sustainable solutions for MDI, but also other value chains within polyurethane segment.

It's not only that we are a market leader in the global presence in the global capacities of MDI. We also believe we are one of the benchmark in terms of product carbon footprint and sustainability solutions for MDI. Here, this slide gives you an example where we have best-in-class product carbon footprint in all the regions where we operate. It's not only in terms of having lowest PCF grade for our standard grades, we also bring low PCF products, even net zero product, as I highlighted with Lupranat Net Zero, which we launched a couple of years back. With this, we have quite a differentiation both for our internal customers as well as external customers.

Our objective is to nurture our MDI value chain further to ensure that we are growing with the capacity additions at respectable rates so that we can keep up our market leadership in terms of MDI in all regions where we operate.

Next, I would like to give you another important value chain of the PU, which is TDI. TDI, which is toluene diisocyanate, is mainly used in the flexible foams. Particularly in mattresses, in furniture, in automotive seats, in case applications, whether it is coatings, adhesives, sealants and elastomers. When you look at TDI market, it is a very difficult market in terms of -- for various reasons.

One is in the last years, the growth of TDI has slowed down. So it has been a slower growth compared to the past on the TDI market. It's globally. On top of it, there has been significant capacity additions on the TDI market, particularly and especially in China. This had put additional pressure on the TDI value chain. What we see is that is a reason -- main reason in terms of the supply-demand balance. It will -- because of the long market of the supply and demand balance of TDI, it will take a couple of years to absorb all the additional capacity.

With these reasons, not only on the capacity additions and supply-demand balance, but also on the energy cost high in Europe, we have taken a decision on the optimization of TDI value chain in the last years. We announced the shutdown of our TDI plant in Ludwigshafen in 2023. And this was the right decision to have made. And with that decision, we have shown we have improved significantly our global asset effectiveness, keeping our market share globally at a lower cost base. With that, we are able to make an EBITDA positive as well as cash positive in a very long market in 2024. With the same setup, we expect to deliver similar results as well in 2025.

Our objective to go forward for TDI is to keep our costs under check keep our cost competitiveness in all the assets where we operate, make sure that it is breakeven in terms of EBITDA and cash for the years until we could recover from the long market. With that, I would also hand over back to Martin to see how we are able to create value out of this quite a lot of number of molecules.

Indeed. So if you come back to the world of systems, this is where, as Markus phrased it this morning, the magic starts, the chemistry comes into play. And you see this myriad of applications of polyurethane systems, which had made a success of that molecule actually.

So you can formulate a very, very rigid insulation foam that you find in construction or in a fridge in appliances, to transportation foams that you find in all kind of applications in your car, in headliners, in trim, in seatings and wherever. And then you find it in footwear and as also you find it in so-called case application, which is coatings, adhesives, sealants and elastomers. So these are semi-rigid materials. You see the entire span of applications that is possible.

We're playing most or less in all of them, and that has obviously also implications. It has the implication that we have to mimic and understand all the processes that come with it. Like a double band line, a pilot line that we have to limit further to simulate our customers in the construction industry as well as rotating plate machine that we have in order to simulate the applications of our footwear industry.

So this is rather than intense in R&D. Therefore, we have an R&D intensity typically between 2% to 3%, and we have a vitality index of 20%, 20-plus percent. So we turn over 1/5 of our portfolio every 5 years. And if you look at it, innovation areas are obviously seen in the electromobility arena in, for instance, battery potting, I have an example here where the cylindric cells of a huge battery, these kind of things are as big or bigger as a mattress and the voids between these cells are filled with so-called battery potting. So a massive amount of polyurethane system, rigid stuff going into this one. These are very, very complicated applications because you can imagine the amount of testing that is done on this one, runaway situations and so forth. So typically, this is a kind of a multiyear project that we do with customers.

But then on the other hand, you have footwear customers where you have to formulate within a couple of weeks for the new series of an Adidas shoe, for instance. So there's a huge spectrum. And that means in the end, this business is all about complexity management. Complexity in assets, complexity in customers, complexity in formulations, complexity in raw materials, insights and so forth. And that is what you have to manage every day in order to come to the best cost position.

So again, I mentioned before, we have a stable market position, 16%, good positions worldwide, the strongest one in Asia. And perhaps also interesting in terms of customers, this business is rather unique because you have nearly as many products as customers and only 50% of our sales is made up with 100 customers. For the rest of the 50%, you need around about 3,500 customers. So again, customer management and small customer management is key. And as these formulations are very unique to the customers, you don't find a lot of distribution in this market, which is also pretty unique for polyurethane systems.

Now you've also seen about growth rates, perhaps an interesting observation here. Typically, the systems market is growing lower than the monomers market for the simple reason that huge customers start to formulate themselves. And that is exactly also the separation that we have between our divisions. I've been asked yesterday, how do you separate your customers? It's very easy. It comes from the customer buying behavior. As long as customers want to have formulation, that means technical service, technical advice, it's with us. If they want to buy molecules, they ring a phone at run. So this is very simple, and we constantly look at our portfolio and reshuffle customers back and forth dependent on their behavior.

Another very interesting and really exciting product line that we have in the polyurethanes is our so-called Cellasto business. I guess not a lot talked about here. It's a several hundred million business for us, and it's really a tier business to the industry. And what we do is we build so-called chance bumpers and top mount elements for suspension systems for car. You see one of them here, Monster. So this is part of a suspension system for Volkswagen MQB, so the big platform running on nearly all the midsized Volkswagen cars.

And what we manufacture are these chance bumpers that are the ultimate dampening element in a suspension system or top mounts, which you see embedded here. And we deliver this kind of stuff, even including the aluminum casting with our tollers really as a tier business to the automotive industry with a lot of success. We're doing this since 60 years and more than 400 platforms that we are serving and have a market share of more than 50%.

Now this business as the entire automotive industry is growing obviously fastest in Asia. And therefore, we also put our headquarter for this business to Shanghai, and that is also one of the winning factors, I would say, for that business that had been now growing above market because we could enter into Chinese OEM platforms. And also we could serve new needs in electromobility where the noise level and frequency level is a totally different one.

Now let's talk a bit perhaps about the sustainability side of it. Ram also alluded to this one. Everybody talks about plastics, microplastics, sustainability of plastics. I always put it in two parts. It's -- on the one hand side, it is the energy side of plastics that can be sometimes intense. A polyurethane system has around about 3 kg of product carbon footprint. Polyamide 66 has much more than that. So it's an important factor. So first of all, we try to bring down the product carbon footprint of our products and systems. And the way we do it is we buy from our upstream suppliers and Ram showed that he can produce the best PCF position in the market. Lupranat ZERO is one example. So we are able to trim down the product carbon footprint for our systems if we want and if customers are willing to pay for that.

The other part is the important part of circularity. And again, this has two aspects. It is, first of all, the recyclability, the recyclability of your material. If something today is not recyclable, then many of our customers, particularly in automotive industry, would start to discard the material because design for recycling is not possible and design for recycling becomes an important prerequisite in markets, predominantly in the European markets, but also the Asian OEMs are thinking in this way. So recyclability is, I would say, a ticket to play also for polyurethanes. Therefore, we spent a lot of time in the last years to demonstrate as Ram showed for the mattresses, but also for all our materials that polyurethane systems and materials are definitely recyclable, which is not chemically not so trivial.

So I show you two examples here. One is one example that we did with our customer, Vitra, iconic furniture maker, Southern Germany. And many of you might have this fantastic in chair and design icon. And what we did is we used their post-industrial waste, so out of their manufacturing, use this waste, remelted it in the extruder process and brought it back in the system. So what you see here and what Vitra is using is recycled foam. It looks like this. It's a little bit gray and the soft forms, which they use and they brought an entire line, you can see it on their homepage, where they also market this feature of recycled foam in their furniture. So it's very important for them. And therefore, we are very happy to show this.

A second one, which is perhaps also not so intuitive is what we did with our customer for fridges, Liebherr. Liebherr, again, a German fridge maker, a little bit niche. They make -- they are leaders in wine coolers, whoever is interested in wine coolers to the theme of last night. They are the leaders make very nice fridges, and they wanted to have recycled content in their fridges. So what we did with them is we went to scrap yards, looked at the fridges that are collected. They have to be collected actually in Europe and took out post-consumer -- post-consumer waste from the scrap yard and reformulated it as a kind of glycolysis procedure and brought it back as Polyol back to the fridge here.

So we showed in principle, it's possible. It's a matter also of cost. It's a matter of engagement in the value chain that is important. Nobody of us can do this alone. So it requires that you involve with people that are in waste, people that are in sorting, people are in collection and so forth and that you establish entire value chains.

If you want to learn more about this, this will be our big theme on our K fair. Next week is a big plastic fair starting on Wednesday in Düsseldorf. We will have super examples not only on the polyurethane value chain, but also a lot on plastics that we worked on in the last couple of months, and you also find some already on LinkedIn.

So far on sustainability of plastics, let's perhaps come back to the future of growth. As we've been talking about smart growth and low asset growth, I think here, we see a couple of examples that we still selectively invest in things that are really, really growing. Two of them, we invest in a new Cellasto line for this kind of business currently in India as well as in China to support our customers there. Very much wanted local content from our customers. And we also opened last year a technical center in Mumbai for our Indian formulation customers because it's important to have the know-how on ground.

Coming back to our Verbund site in South China. We opened our thermoplastic polyurethane line in '24. And just in line what Dirk and Markus said this morning, this start-up was extremely smooth, perfect, perfect execution, and now we started it up and get into the market. But also in Monomers, you continue to invest in our growth market Asia.

Of course, I need to be in line with your growth as well as third-party market growth across all regions. So as I hinted earlier, we continue to have a smart debottlenecking of our assets in Asia, particularly in China, which is -- continues to grow in the isocyanate market. We are implementing similar measures in the next years to bring up and debottleneck our capacities in Shanghai and Chongqing. And with that, we are in line to supply our internal demand as well as external customer growth.

Ladies and gentlemen, as you know, in terms of our polyurethane value chain, it's not only a global presence. We are proud of sustainability and innovation, but also it has to be a value creation. So as Markus alluded to it, two important themes of our new strategy is winning behavior and value creation. Every -- not only -- every quarter, we look at our performance and benchmark ourselves with our peers in the market, how are we performing? Even though it cannot be a one-to-one comparison directly, but it gives you a benchmark where we are positioned as a PU value chain within the market segments we operate.

Here is a comparison of some of the peers who operate in the PU value chain globally. And I would say from this, we are in a good track to say not only we deliver significant value, but we also continue to improve our performance over the years. Our objective is to keep our balance of upstream as well as downstream, focus on asset effectiveness, cost competitiveness and also focus on sustainability on the downstream, close to customer locations, improve on new innovations and specialty solutions for our customers with this balance we would like to grow our business and also make it profitable and value creation for us within the company also for our investors.

It's also not only just value creation, and I would like to reiterate the contribution of Materials segment to the growth of BASF and our commitment in 2028. As was highlighted already by our Board and by our head in the last year, we reiterate our commitment of our delivery of EBITDA margin in 2028. So we expect to increase from 2023 until to 2028, additional EUR 750 million to EUR 850 million from the Material segment so that we can grow our business profitably and also sustainably.

With this, we conclude our presentation. We are open for our discussions, any questions, and thank you for your kind attention.

Welcome back, ladies and gentlemen. With me on stage are now Mary Kurian and Thomas Kloster. Let me briefly introduce them.

Mary has been responsible for the Care Chemicals division since April 2023. She joined BASF in 2020 after holding various leadership positions in Air Products and Chemicals in the United States. Mary studied polymer engineering at the University of Pune in India and earned a PhD in Materials Science and Engineering from the University of Delaware in 2004.

Thomas has been responsible for the Petrochemicals division since January 2025. Before -- between 2021 and 2024, he has been the President of our Performance Chemicals division. He joined BASF in 2001 after working for the management consultancy McKinsey & Company. In 2002, Thomas received a PhD from the Faculty of Business Administration of Mannheim University.

Now the stage is yours, Mary, Thomas.

Thank you, Stefanie. Welcome back after lunch. I have the honor to get this session started. And I need to address a few comments I received yesterday night over dinner and also need to avoid some misunderstanding after Markus talking about petrochemicals here today.

So number one, I voluntarily signed up for that job. I had different options. Number two, my cracker business is profitable. Number three, and that I can fully echo, it's all about cost competitiveness. And we'll talk today about the EO value chain, which is a value chain that crosses several divisions.

We love to talk about core businesses and EO, the EO value chain is hard core. This value chain, the EO value chain crosses several segments of BASF. Today, the Chemicals and the Nutrition & Care segment are here to present our part of that value chain. In petrochemicals, we are the heart of the Verbund. This is where many value chains in BASF start. We provide all the key building blocks, several key building blocks and Monomers to our downstream divisions, including Care Chemicals.

And along with our sister division, Care Chemicals is part of the Nutrition & Care segment. And as Thomas mentioned here, we are part of a key value chain. We play two roles. Internally, within the core, we convert large quantities of upstream raw materials into valuable products and the EO value chain is a prime example of such a value chain, and we'll show you exactly what we mean by that.

In addition, both the Nutrition & Care businesses here are facing extremely attractive customer markets. And we will talk about the attractiveness of these markets and the ability to basically combine the value chain steering with differentiation to serve these attractive markets.

The EO value chain is highly relevant. to the core business as a whole, but especially to our two divisions and the two segments we are representing. You see here that our two segments account for more than 40% of the sales of core. And within this business, the ethylene oxide value chain accounts for around 20% of sales in this combined business. So it's one of our key value chains, I would say, even slightly more important than the polyurethanes value chain, but we will not continue that dialogue.

Let's start with a brief overview of the Petrochemicals division. And similar to Ram's presentation, today, we have two roles. We are supplying our internal customers in BASF with cost competitive Monomers building blocks for their businesses. But we also have a relevant merchant business. In our case, it is 70% external sales and 30% internal sales to internal customers. The external sales are either because we have leading market positions and attractive end-user markets we serve or it's because we need in order to achieve economies of scale in all our assets, also certain outlets for some monomers in order to keep that leading cost position.

The Care Chemicals division primarily serves three market segments that are shown on this slide, Personal care, home care, industrial and institutional cleaning and the industrial formulators business.

So for this afternoon's discussion, we will focus on the Home Care I&I and the Industrial Formulators business because these are the key outlets for what we will describe the products that come out of the EO value chain. And you can see that we, as Care Chemicals are the leaders globally when we look at these sectors, whether we look at personal care, whether we look at home care or going down to the industrial formulators where we enable applications in many industrial environments.

Several factors I want to point out on this slide, just coming back also the diversity of the products and the customers that we have in Care Chemicals. So our ingredients from Care Chemicals span a whole spectrum. starting with UV filters and sunscreen, going into the surfactants into laundry detergents and then being the key ingredients, for example, in metal surface treatment or agrochemicals. So you can just see the diversity that we have within this division.

Also evident from the pictures here, we are very close to end consumers. So when we look at our customer base, about 80% of our portfolio serves an end customer. And this brings particularly two aspects to Care Chemicals, which we will also highlight in this presentation. First and foremost, the importance of innovation. This is a huge differentiator, and I think Martin showed some excellent examples, and we will also try to show here. Innovation is a true differentiator and continues to help us maintain that portfolio quality when we think about Care Chemicals.

Second, we play an even more fundamental role when we think of BASF's ambition to enable the green transformation of our customers. Being close to end consumer industries, these industries are leading in terms of the transformation, in terms of sustainability requirements. And we as Care Chemicals serve as the channel to market and also in terms of translating this customer pull into real products. And again, we will show you examples of what that means.

We are well invested for growth. And here, we show you a picture that just shows the distribution, specifically of the petrochemicals and care chemicals value chain relative to EO and a couple of points that I'd like to point out. First and foremost, that we have a good distribution. We are well represented in all the important geographies in the world. And we also reinforce here similar to what you saw on the first -- in the first presentation, it supports our local-for-local strategy. So more than 80%, 90% of our products serve the local market.

And both Thomas and I are excited about two things. First and foremost, we're sitting at the site of one of our most recent expansions we are very proud of, and we have colleagues who are going to show us around. And this will show you why we think we can compete. And then importantly, we look forward to the onstream of our Zhanjiang Verbund site.

For the petrochemicals as well as for the Care Chemicals division, while it looks like a significant step up, it just enables us to have a better representation in the fastest-growing market in the world. And so with this, I want to now hand over to Thomas, who's going to talk about the integration itself and why do we believe that this is a competitive setup to win in each of these markets.

And I can build on the slide that Markus shared earlier today, shared this morning about the different steps of the EO value chain. And we zoom in now into the responsibility of petrochemicals and Care Chemicals in a minute.

So we start with crackers, with mixed feed crackers that we have in all regions. We get out of them the key building blocks, ethylene, propylene and butene. And yes, iso butenes are highly valuable olefins, Markus. And we can develop a lot of chemistry out of that. So while we, as a petrochemicals division, we really focus on the commodity part of the value chain with usually a handful products. This tree, this chemistry allows us to branch out into the 4,000, 5,000 products that contain an EO molecule.

One of the prime targets is to really support our high-value downstream businesses like the Care Chemicals business with high-value products, for example, the alkoxylates here displayed in green. And we've also displayed you here the market shares here for the European markets on the different steps of the value chain. We are in ethylene, not to be in ethylene, but to have access to cost competitive ethylene here in Antwerp, but also in Ludwigshafen. But we don't fight for higher share in ethylene. The value levers for this value chain is on the EO step, on the purified ethylene oxide step as well as on high-value downstream products like the alkoxylates. Yes, we also supply commodities like ethylene glycol in order to have really economies of scale in all our assets, but our target is really to keep the highest share, the highest market share in the high-value pockets of those value chains. And even though we show you here the European shares, this ratio is pretty much the same around the globe that the EO step, the market share is about 3 to 4x the market share we have on the ethylene step, which is, for sure, the bigger commodity.

Now let's dig deeper into the topic of cost competitiveness, and let's really share with you some facts and figures here. This is our cash cost curve on ethylene, and we've displayed you here our position in Antwerp. If I had given that presentation about 6 or 7 years ago, our position would have been right in the middle. This was before we started the feed flex project and enabled our cracker here in Antwerp to also use propane as a feedstock. And this also shows you what you can do in an existing asset footprint based on changing dynamics in the feedstock market in order to move you back into the first quartile of that cash cost curve.

As I have said, we are not in ethylene for the sake of being in ethylene. What is the most important cash cost curve for us today is the EO step. So we now take the ethylene we get from Antwerp plus our setup here where we have the economies of scale in Europe, where we have the leading technology, where we have the highest integration in all the European assets, and that clearly gives us the leading cost position on the EO step here in Western Europe. That is also competitive for sure, against imports, leaving aside that EO is not a molecule that travels easily. This chart also shows you there are several players still producing EO in Europe, and we expect consolidation to happen and to continue.

We are not leaning back on this cost position because this is a race. Our competitors will try to imitate, will try to catch up. And therefore, it is a program for both our divisions to continuously year-by-year look for opportunities to reduce the energy consumption to increase the yield, to reduce waste. And we have shown you here two examples that we have recently implemented in Antwerp and Ludwigshafen, pretty old, pretty established assets. And year-by-year, you come up with ideas, another EUR 3 million here, another EUR 4 million there. And this type of continuous improvement is the current game because it doesn't eat a lot of CapEx, and it immediately puts you back or defends the leading cost position that we have.

And indeed, this cost competitiveness coming from the back integration is a fundamental factor for us for our success. In addition, Care Chemicals has other integration within the Verbund. So when we talk about the EO value chain and the relevance for Care Chemicals, we are primarily focusing on the alkoxylation platform. And very simply described, we are taking the ethylene oxide, we are reacting or making new products using alcohols together with ethylene oxide. And we have capability not just on the ethylene oxide, but also important integration on the alcohols, technology that's very specific to some specific types of alcohols and hence, the ability to have differentiated asset bases.

So what you will see here are the large-scale alkoxylation plants. We also have differentiated products that are produced in smaller assets. Like Martin said, we have thousands of products going to thousands of customers. And so this is where we combine this cost competitiveness that is fundamental for us for our standard portfolio and then build on that with the specialization that we bring, whether it's through technology or whether it's through innovation.

And so within Care Chemicals, we have a large diversification. We have standard products, very similar, some remarks you heard also in the earlier presentation, going all the way down the value chain to the super specialties. And our challenge and our focus is on continuing to outpace the competition in the differentiated products. And we have some great examples that we would like to show you. And first and foremost, it begins with our innovation prowess, as I would put it, versus the competition and primarily driven by what is required by the customer. We have a globally distributed capability. So we have R&D centers. We have application support as well as technical service in all the growing markets. We are very particular about being close to the customer because specific customer industries, particularly for applications technology need to be specialized and tailor-made for the region.

When you look at our product -- patent portfolio, it's a healthy one. We add about 100 patents per year. Many of them also encompassing the applications area. And then when you look at the vitality index, particularly with our industry-leading innovation partnerships, we're looking at 35%. So a very high refresh rate of our new products generated in a 5-year cycle.

One point I would like to make here is that in addition to innovation and the cost competitiveness that we must bring in order to win, being close to consumers and being in products that are in our homes or products that we put on our body, the regulatory aspect is extremely important. And here, BASF brings this capacity, expertise and capability, not only in the forefront of anticipating the innovation requirements to meet these regulatory trends, but also working with our customers as well as industry associations on the advocacy efforts that are critical in terms of life cycle management and portfolio development in this space.

And of course, we like to say we are good. It's even better when our customers recognize us and award us with industry-leading awards. And one thing that I would reflect on is that what is not new is that in the past decade, we have always been at the top in terms of innovation awards. What has changed in the past 5 years is the importance of sustainability.

So when you talk to customers, it's about performance and sustainability. And particularly when you look at the leading global brands who are represented on this slide, whether it's Procter & Gamble, Henkel, Unilever, it's always about performance and sustainability. And this is also reflected in the work that we do with our customers. And we definitely aim for more than just a traditional supplier relationship.

And we're extremely happy that one of our most important global customers also agrees and in Carsten's own words, we go beyond the traditional relationship, and we find ways to collaborate across the entire supply chain. And here, again, you see that combination of performance and sustainability, particularly pioneering in the industry, some lighthouse projects, whether it's biomass balance, whether it's circularity of feedstocks. So great that we tell you this, but even better that our customers can give us a testimonial that's even more powerful.

So with that, let's look a little bit at the products, and we won't go into the deep chemistry of it, but we're talking about the alkoxylation platform. We're happy to have cost competitive, the best position on EO in Europe, and we combine this with alcohols of different types or amines and come up with a full portfolio of products and only a partial group are represented here. When Care Chemicals has a discussion with a customer, the customer often starts with the job to be done.

And there are four jobs to be done that are represented on this slide. So if you look on the left-hand side, the job to be done might be to remove the toughest stains on your laundry. If you go to the second example, you might be a restaurant owner and you need 100 dishes cleaned in under 10 minutes at perfect cleanliness so that your customer feels safe and comfortable eating in your restaurant. Or you could be a cement in the construction industry where you want to pour concrete, but you want to do it faster without sacrificing performance.

And last but not the least, we have a pretty significant piece of business focused on the agro segment. And particularly, what do we do here? We bring the surfactancy and our understanding of applications knowledge to improve the efficacy of crop treatment systems, for example.

So just a small section or cross-section of what we have exciting things going on in our portfolio. And I talked about the vitality index and the importance of innovation. And so just to say a little bit more about two examples that are recent and also highly relevant for the product portfolio.

On the left-hand side, you see the Sokalan EcoBoost series. These are non-ionic surfactants. And for every one of us who are consumers of laundry detergents, we know the push towards shorter wash cycles, energy-efficient machines where you want to do cold water wash or low temperature wash, and you don't want to sacrifice performance, but rather you want biodegradable products. So Sokalan EcoBoost meets these requirements and is found in the leading laundry detergents worldwide and was introduced in 2024.

On the right-hand side is a critically important product. This is also to give you a flavor for -- we know that we have this Zhanjiang Verbund site coming on stream. And we've done not only premarketing and relationship building with our customers, we also innovate in new products that are highly relevant for that market. And here, we have the floor effect series of non-ionic surfactants, and they're slated for introduction right as we bring this facility on stream next year.

And here, you can see the industrial cleaning example. So you want high performance, low foam. One thing I learned when I came into Care Chemicals was that foam was only for -- to make you feel nice. The cleaning happens without the foam. So if you are a restaurateur, you don't want the foam in your dishwashing liquids. So here, again, the strategic launch that is timed with the Zhanjiang Verbund site is exciting for us. And so what I hope I have shown you is that the importance of the intersection of performance with sustainability.

And here, we believe we have another distinguishing factor that sets us way apart from others that we compete with. And this is the ability to take what a customer wants. When we think about consumer industries, there is a push towards not just bio-based products, but low product carbon footprint. And on the right-hand side, you see that our major customers have ambitious goals to reduce carbon footprint -- CO2 footprint and then approach their net zero goals. And what we truly believe is that there is a transition pathway and part of that transition pathway is leveraging the strength of our interconnectedness to bring in feedstock flexibility.

And so here, I want to hand it to Thomas to explain this a little better.

And to build on your customers' needs, whatever they ask you to deliver, it's up to us in the Petrochemicals division to find the best cost option, the lowest cost option to make it work. We start from an excellent starting point when we talk about greenhouse gas emissions.

You see here the comparison of Antwerp to a European average and to a Chinese average. Our Zhanjiang Verbund site will be slightly below or slightly above Antwerp. There's a healthy competition between the two teams who can run the two plants even more effective, but it should also underline our ambition to enable our customers' green transformation in Europe, in Asia and all around the world.

And depending on what your customers need, Mary, is it more renewable carbon? Is it more green energy? Is it more low PCF feedstock? The opportunities in our machine park, in our assets in the Verbund to source either at a bio naphtha step or along the value chains are our opportunities to smartly decarbonize or reduce our carbon footprint and increase our green attributes without major investments.

And I'm very happy, Mary, that you shared so many innovative examples. I can assure you we have all the EO molecules you need. And we have the opportunity, of course, to divert our EO molecules to the most valuable pieces of our portfolio, and that's the benefit and the opportunity of an integrated setup. And here in the EO value chain, we even speak of a physical integration, best setup on one place, on one site or an integration via pipeline.

And that brings us to our closing slide, which is from the numbers, not a surprise to what Markus, Dirk, Ram and Martin have presented today. And we confirm our targets that we have published about a year ago. And even though that might surprise the one or the other, I can clearly say if I compare where we stand today compared to 1 year ago, on all the things we have in our own hands, I'm more comfortable and more confident to achieve that for two reasons. Next Tuesday, we will publish mechanical completion of all our assets in Zhanjiang. This is in time, below budget. We have already started our first plant that was in spec within 12 hours. We now come to the peak time every week, we'll start a new plant. But I hope you sense we are extremely optimistic and extremely proud of what our teams have achieved to keep a project of that size in time and below budget.

So one key pillar of that Chemicals segment EBITDA increase is really on track. But also the second part with the topic of cost reduction, efficiency program. Also here, Dirk shared some examples today. I can clearly state for my division we are much clearer now from a certain ambition level that we had, how we will do that. We have also communicated in several sites in several teams, how we will implement also that cost-saving program. And with that, I'm also more confident today that we'll achieve it, and we make it visible in the P&L.

And likewise, Thomas, thank you for that introduction and conclusion here. In the Nutrition & Care segment, along with our sister division, we are well invested in growth. And so the focus for us is loading and growing from these assets. We showed you in some glimpses of what we're doing already for Zhanjiang. And so it's a focus on execution. We have addressed competitiveness topics. So here, continuing to push on improving our competitiveness while also pulling innovation progress and strength to differentiate as we keep moving forward.

So we confirm here the increase in EBITDA before special items between $800 million and $900 million by 2028. And with that, we thank you for your attention, and we look forward to your questions.

Well, ladies and gentlemen, good morning, and a very warm welcome to our half year press conference of BASF SE, which today is done as a Teams call.

Thank you very much that you have dialed in. And today, we are going to present to you the financial figures for the second quarter 2025, and you're going to be talking to Markus Kamieth, who is the Chairman of the Board of Executive Directors; and Dirk Elvermann. CFO of BASF.

Let's start right away, just a few technical pieces of housekeeping. The conference language is German with a simultaneous interpretation into English. And the charts that you are going to see in the Teams meeting are in German, and the English version is available for a download under our press website, and you can see the link in the Teams chat. And I give the floor to you.

Thank you, Nina. Good morning, and welcome to our Teams or video call. Today, we are presenting our results for the second quarter and the first half year of 2025. On July 11, we pre-released some of our key figures due to the adjustment of our full year guidance. Dirk and I will provide you with more details today and the rationale for the revised outlook.

Before we take a closer look at the sales development, let me give you a brief overview of the quarter. BASF generated EBITDA before special items of around EUR 1.8 billion in the second quarter of 2025. The Agricultural Solutions segment considerably increased earnings. The Surface Technologies and Nutrition & Care segments achieved slightly higher earnings. In the base Chemicals businesses, margins remained under pressure due to high product availability on the market.

Let's now take a look at the sales performance of BASF Group. Overall, sales were almost at the level of the prior year quarter, thanks to volume growth. Volumes grew particularly strongly in the Agricultural Solutions and Surface Technologies segments. Prices declined in 4 of 6 segments, particularly in the Chemicals segment. We managed to achieve price increases in the Surface Technologies and Nutrition & Care segments. Contrary to the first quarter, currency effects in the second quarter dampened sales in all segments and were mainly caused by the significant depreciation of the U.S. dollar.

Reflecting this underlying sales development EBITDA before special items came in at EUR 1.8 billion compared with EUR 2 billion in the prior year quarter. Here, you can see how the markets, volumes and specific margins of our segments developed in the second quarter of 2025. In general, the business environment in our business -- upstream businesses was very challenging. Compared with the second quarter of previous years, we generated significantly lower EBITDA before special items in these divisions.

This can be attributed to the high level of uncertainty and cautiousness of our customers in most markets globally. I'd like to highlight some segment-specific aspects. As mentioned, the market environment for base chemicals remained difficult. Nonetheless, volumes in the Chemicals segment were almost stable. Specific margins declined in both divisions, particularly in petrochemicals. Despite the tough market environment, the Materials segment showed robust volumes and earnings performance.

I will touch upon the stand-alone businesses only briefly as we have more detailed slides coming up. According to the latest data, global light vehicle production increased by 2.6% in the second quarter of 2025 compared with the prior year quarter, mainly on account of production growth in China. In this environment, the Surface Technologies segment recorded robust volume growth and outperformed the automotive market. Specific margins in this segment were almost flat.

In the Agricultural Solutions segment, we achieved strong volume growth and were able to considerably increase specific margins.

Now let's take a look at EBITDA before special items by segment. Considerable earnings growth in Agricultural Solutions and slight growth in Surface Technologies and Nutrition & Care partially offset lower earnings in the remaining segments. Earnings in Agricultural Solutions increased across all regions, particularly in North America, followed by South America and Europe.

In the Surface Technologies segment, the main earnings driver was the higher contribution from the Environmental Catalyst and Metal Solutions division, which added to a continued strong performance by Coatings. In the Nutrition & Care segment, EBITDA before special items increased thanks to improved earnings in the Nutrition & Health division. Here, earnings were supported by a low double-digit million euro insurance payment related to the fire that occurred 1 year ago at the iso-Phytol plant at the Ludwigshafen site.

In the meantime, production has resumed at our plants for vitamin A and E as well as for Aroma Ingredients. Force majeure for most products has been lifted. This will support volume growth in the Nutrition & Health division as of the second half of 2025. By contrast, earnings declined, particularly in the Chemicals segment because of the still unfavorable supply and demand situation for base chemicals. In addition, start-up costs related to our new Verbund site in Zhanjiang burdened earnings by around EUR 70 million in the second quarter of 2025. These startup costs will ramp up considerably during the next quarters to total around EUR 400 million in the full year 2025.

Lower earnings in the Industrial Solutions and Materials segments also contributed to the overall decline in earnings at group level. Compared with the second quarter of 2024, EBITDA before special items in Other was considerably weaker. This was mainly because of the reversal of bonus provisions in the prior year quarter. In BASF's new remuneration system, the influence of group ROCE has been reduced, while EBITDA before special items, cash flows and nonfinancial targets are gaining in importance.

In the following, I'll provide some additional color on the strong performance of the Agricultural Solutions and Surface Technologies segments. Compared with the prior year quarter, our Agricultural Solutions segment achieved remarkable growth of 21%. Volumes rose in all indications and sectors except for seed treatment. The absolute volume increase was most pronounced in herbicides. Compared with the second quarter of 2024, segment earnings improved by EUR 282 million to EUR 417 million. On a half year basis, earnings rose by a remarkable 8% to EUR 1.6 billion, resulting in a strong EBITDA margin before special items of 30%.

As forecasted in February, we continue to expect a slight increase in earnings for the Agricultural Solutions segment for the full year 2025.

Let's move on to the strong performance in the Surface Technologies segment. All 3 divisions in this segment achieved volume growth. Overall, volumes increased by 6.5% even when excluding volumes from precious and base metals. Compared with the second quarter of 2024, EBITDA before special items in the Surface Technologies segment rose by around 10% to EUR 350 million. All divisions contributed to this increase. The highest contribution came from Environmental Catalyst and Metal Solutions.

Now I'll provide a short update on our portfolio management. As announced at our Capital Markets Day in September 2024, our goal is to fully unlock the value of our stand-alone businesses. In the first step, we agreed in February to sell our Decorative Paints business to Sherwin-Williams. The purchase price amounts to USD 1.15 billion on a cash and debt-free basis. We are well on track to close the divestiture in the second half of 2025, pending approval from the relevant competition authority.

As planned and previously communicated, we approached the market in the second quarter of 2025 to explore strategic options for the remainder of our Coatings activities. These activities, which comprise automotive OEM coatings, refinish coatings and surface treatment generated sales of EUR 3.8 billion. We've received a considerable number of bids from private equity and strategic buyers and the process is well on track.

In the Agricultural Solutions segment, we are making good progress with our plans. This business has global scale, strong growth potential and attractive cash flow characteristics. We are currently focusing on executing the legal separation and the implementation of a dedicated industry-specific ERP system. In parallel, we are preparing for a potential listing. We remain committed to completing all internal preparations for a successful IPO by 2027.

In summary, we are executing our portfolio management strategy as announced. With that, I'll hand over to Dirk Elvermann.

Thank you very much, Markus, and good morning, ladies and gentlemen. I would like to begin by taking a closer look at the financial details of BASF Group for the first half of 2025.

At EUR 4.4 billion, EBITDA before special items was slightly below the level of the first half of 2024. The adjusted EBITDA margin before special items remained almost stable at around 15%. EBIT before special items reached EUR 2.5 billion compared with EUR 2.7 billion in the prior year period. Special charges were largely incurred for restructuring measures as well as for the sale of BASF's equity share in the Nordlicht 1 and 2 wind farms back to Vattenfall, which took place in the first quarter of 2025.

Net income decreased to EUR 887 million. Compared with the first half of 2024, net income from shareholdings declined significantly, mainly due to negative contributions from Harbour Energy, which was burdened by negative tax effects in the United Kingdom and from Wintershall Dea. Cash flows from operating activities amounted to EUR 603 million compared with EUR 1.4 billion in the first half of 2024. The decline was particularly driven by the lower net income and higher cash outflows from changes in net working capital.

Payments made for property, plant and equipment and intangible assets decreased by EUR 554 million compared with the prior year first half to EUR 1.9 billion. This shows that we have passed the peak investment phase for our South China Verbund site. Free cash flow was minus EUR 1.3 billion in the first half of 2025. In the second quarter of 2025, cash flows from operating activities decreased by EUR 365 million. Changes in net working capital led to a cash inflow of EUR 38 million compared with a cash inflow of EUR 710 million in the prior year quarter. The main reason for this was the change in trade accounts payable.

Payments made for property, plant and equipment and intangible assets decreased by EUR 428 million compared with the second quarter of 2024 to EUR 1.1 billion. Free cash flow increased and came in at EUR 533 million compared to EUR 471 million in the second quarter of 2024.

Ladies and gentlemen, now let us talk about the measures we are taking to protect our balance sheet. Our top priority is maintaining BASF's financial strength. We are fully committed to our financial policy. We aim for a single A credit rating, which is the best-in-class in the chemical industry. Standard & Poor's recently confirmed our single A credit rating, which is also our rating at Moody's and Fitch. Over the last 3 years, our financial debt and leverage ratio have increased. This was driven by lower earnings in a cyclical downturn and by our considerable investments, mainly in our Verbund site in South China.

This mega project is on time and below budget. We have already entered the commissioning phase and will start up most of the plants at the end of 2025. Our CapEx peaked in 2024, and we will bring it down below the level of depreciation as of 2026. At EUR 5 billion, payments made for property, plant and equipment and intangible assets in 2025 are expected to be EUR 200 million lower than forecasted in February. Furthermore, we will use part of the proceeds from divestitures to reduce our financial debt and to deleverage our balance sheet. We have also accelerated our cost savings programs.

We now expect to generate annual cost savings of EUR 1.6 billion by year-end 2025, EUR 100 million more than originally anticipated. Overall, we are well on track to achieve the targeted EUR 2.1 billion in annual cost savings by the end of '26. And finally, we continue to have a strict focus on further reducing inventories while remaining a reliable and trusted partner for our customers also in challenging times.

Now I would like to share some information about our energy and feedstock supply. To safeguard our long-term competitiveness and operational resilience in Europe, we have established a very robust and flexible setup for procuring natural gas with 2 cornerstone supply agreements. The first agreement with Equinor will start this October. Equinor will supply us with up to 23 terawatt hours of Norwegian natural gas annually for the next 10 years. This contract ensures long-term supply security, competitive terms and a lower product carbon footprint due to Norway's efficient infrastructure. It covers a substantial share of BASF's European gas needs, particularly for our major sites in Germany and Belgium.

The second agreement signed with Cheniere will start in mid-2026. BASF will receive up to approximately 12 terawatt hours of liquefied natural gas per year through 2043. This agreement introduces strategic price diversification via Henry Hub indexing and gives us full control over an end-to-end LNG supply chain. It offers a critical hedge against European gas price volatility and complements our pipeline gas portfolio. These 2 agreements ensure long-term energy and feedstock security as well as high volume flexibility for demand-driven operations.

Further advantages include diversification across geographies, pricing models and delivery modes and last but not least, a lower carbon footprint. Together, these 2 agreements form the backbone of our gas supply strategy, balancing reliability, cost efficiency and sustainability.

Okay. I will now comment on the outlook for the BASF Group that we pre-released on July 11. To account for the elevated macroeconomic and geopolitical uncertainties, we are now providing ranges for our assumptions regarding GDP, global industrial production and global chemical production in 2025. Particularly relevant for us is the continued high product availability in the chemical market, which is resulting in ongoing margin pressure, especially in the upstream businesses and base chemicals. Consequently, BASF expects earnings development to be weaker than previously forecasted and had adjusted its outlook for the full year 2025.

We now anticipate EBITDA before special items to reach between EUR 7.3 billion and EUR 7.7 billion. For free cash flow, we continue to expect a figure of between EUR 0.4 billion and EUR 0.8 billion due to lower expected payments for property, plant and equipment and intangible assets, among other reasons. The forecast for CO2 emissions remains unchanged.

As at our press conference in February, I'd like to emphasize today what we are focusing on in 2025. First, we will continue to execute our value-enhancing portfolio measures. We will also be starting up our new Verbund site in China. And we are working on structural cost reduction and establishing a winning culture across the entire BASF team. These are the things that are within our control, and we want to get them right, especially in this challenging environment.

To conclude, I have some news about the publication of our annual report and the format of our ASM. The audited BASF report 2025 will again be published at the end of February as you were accustomed to in the past. After successfully tackling the extended sustainability reporting requirements this year, the team is confident in its ability to accelerate the process. Furthermore, on the basis of the positive experience with the first virtual Annual Shareholders' Meeting, the Board of Executive Directors has decided to annually alternate the format of the ASM of BASF SE over the next 4 years. We will thus hold an in-person ASM again in 2026 and '28.

The proven virtual format will be used in 2027 and '29. This decision was made to meet the various expectations of our diversified investor base.

This brings me to the end and Dirk Elvermann and I are happy to answer your questions.

Thank you. We start with the Q&A session in teams. [Operator Instructions] The first question comes from Mr. Freytag, FAZ.

Two questions. First of all, regarding tariffs, Mr. Kamieth, maybe you can comment on the tariff situation for BASF and the industry as a whole. And secondly, your portfolio strategy. If we look at the interim report, we see that in the stand-alone businesses, the traffic light is green and in the core businesses, amber and red. So excluding the stand-alone businesses, BASF finds itself in a weak situation, a very weak situation. Does it concern you? And does this mean you will revise your portfolio strategy?

Thank you, Mr. Freitag. Well, let me answer right away. First of all, tariffs. From my point of view, there are no big news. In recent months, we have stressed time and again that the direct impact of tariffs, especially tariffs between the EU and the U.S., but the overall tariff regime, which is being changed all the time, is limited for BASF because we have a good local footprint in every region, so we don't rely on sending products or precursors through the region. So limited impact on part of tariffs.

This remains with the new deal that we probably have since Sunday. On the other hand, specifically the figures of the second quarter show that there is more and more uncertainty in global economy, which means that there is a restrained situation regarding our customers buying. And this volatility, of course, will reduce global growth. We all see this in the second quarter. And this will not change in the second half of the year.

Now we have to wait and see what the beginning deal between Europe and the U.S. looks like regarding our customers' industries. I guess we will see a few weeks of high uncertainty. Over the last 24 hours, we've seen that things are pending. And so I advise everybody to wait, and we think that the uncertainty will not disappear immediately. And we think the second half of the year will be governed by this restrained economic situation. This is why we adjusted our forecast.

Portfolio, you are right. Right now, what we call stand-alone businesses, especially Ag Solutions and Surface Technologies, these segments are running very well. We are glad about this, and it shows that we have a strong market position. And compared to competitors, we are faring well. This is why we say these businesses have an extraordinary value, and this is why they are entitled to expect a premium in the evaluation. Of course, we have to understand that in what we call core businesses, a lot of cyclical business is included like basic chemicals. This is part of the strategy. Of course, in a cyclical business, there are some elements where you have a down cycle. This definitely is the case for base chemicals at the moment. But it doesn't change our general assumption that due to our portfolio strategy, we can tap value by using other options for the stand-alone businesses and maybe looking at different owner structures.

So we are not getting nervous. It's part of the ordinary business. And the performance that we see in a difficult environment in the core businesses also is an incentive to continue to make our businesses more competitive. So we regard this as a confirmation of our portfolio strategy.

Thank you very much. So I'm looking around who is next the questions. That's Ms. Weiss from Reuters.

I have a few questions also on Alice, but the commissioning of the new Verbund site in China next year is going to be in a difficult market environment and less margin experience. Maybe you can go into that a little more in depth and also maybe explain your statement that this is ideally the last big cost savings program at BASF. And then on tariffs, maybe a short question. Maybe you have an overview or you can tell us whether there are exceptions maybe for some chemicals with 0%. And do you know which products there will be? And will BASF benefit from that -- from these exceptions?

Well, thank you very much, Ms. Weiss. I will try to take the 2 questions from the analyst call and put them into perspectives, and maybe Dirk can also do that later.

First, Zhanjiang, we start there with a Verbund site, which all in all, or a major part of this site and the products that are being produced there are base chemicals, what we could call base chemicals. So not very raw material-intensive product, but it is a very broad portfolio. But generally and basically, it is a product portfolio which comes into a market today, which is much longer and where the supply capability is much higher in the market than we had expected when we planned the site. This is a fact.

In China, you also learned that there is a lot of overcapacity just now due to an investment cycles that went upwards. So you have a site and you enter a market now, which has lower margins than was originally expected. But that also goes for commodity products, for all commodity products. We are used to go through cyclical movements, and we are now at the valley of one of these cycles for this site. But that also means that you have to concentrate more on cost competitiveness and efficiency, and that is given in Zhanjiang. So everything that we commissioned there is at the positive side of the cost curve. So we will start with a high capacity utilization, but then have to accept lower margins in the markets lower than we expected.

But over the years, like in every commodity business, it will level out. Supply and demand will adapt. And then we expect in the long run, a profitability, which we also expected for the site of Zhanjiang.

Then on cost lowering programs, don't misunderstand me here because what I said in the analyst call this morning, it is a philosophy which we really try to transport also into the company. And sometimes I compare it also with a picture, with an image. Every 3 years, you can try and tidy up your garage, for example. You can do that and then you have a clean garage afterwards. But you can also make an effort that you do that every day, look at the garage every day. And that's a philosophy that good companies have to do. Look at the business and competitiveness on an everyday basis, making sure that productivity compared with the competitive or compared to the competitive is at the correct level. So you can't have a restructuring -- you can't have a restructuring program every few years. And that means you haven't made it.

We don't want to repeat the restructuring program every 3 years at BASF. We want to continuously improve our competitiveness. And this is why I want to get away from one restructuring program after the other. No, we want to commit ourselves to working around productivity. And I think, Dirk, we're on the right way, and it's also part of our Winning Ways strategy.

The third question was tariffs, whether we already know which chemicals have exceptions. Well, Ms. Weiss, with the tariffs, it's quite astonishing really. So on a daily basis, you get new information. What we said 3 or 4 months ago or 3 months actually is still holding true today. So the direct effects on the tariffs for us are still low. That is -- well, a nonsignificant million figure, I will say. And what we really feel are the indirect effects, the uncertainty with the customers is very high. We typically have an order book visibility of 3 to 4 months. And now we are glad if we can look into it for a month's time. And that, of course, also shows the exemption.

Some of the chemicals are privileged in part with lower tariffs. Sometimes they are completely exempt, but that's a moving target. I'm still waiting for the day where we can say, okay, that's it. And that's the solution for us, for example. So the solution that we saw on the weekend, the alleged solution is not the final point yet, I guess. So we are absolutely -- we see it as absolutely system critical. So the negotiators on both sides look at the chemical sector very closely and then choose which chemicals can be tariffed in order not to stop the entire apparatus.

But a final -- well, view on it, we don't have. Well, maybe a short story. When on 2nd of April, the Liberation Day, the U.S. tariffs were announced, there was an annex 2. So an annex to this, well, executive order and all the exceptions were listed. And I looked at it, it was, I think, 30 pages and an 80% -- 90% of these pages were chemicals really. So the Americans look at very closely at which products cannot be produced in the United States. And so I expect that there will again be a long list of exceptions, which will be written, which we, however, don't know yet. And we just heard about it on the weekend, and we don't have any details whether the list is going to change, and we will learn about it over the next days and weeks and months.

So let's continue. The next question is from Mr. Reitz of Sudweste.

You say that the cost lowering programs are proceeding well. A major part is going to be saved in Europe and a site in Ludwigshafen. So what about the Ludwigshafen site? What's the situation there? And can you see or foresee that further plants are going to be closed because you didn't exclude them?

Well, let you -- let me give you a short heads up. So you are right, a big part of our cost lowering program, EUR 2.1 billion all in all, and to drive that forward take place in Europe and particularly in Ludwigshafen. And here at the Ludwigshafen site, we also made good progress. So both on the part of adjusting plans and also lowering costs when it comes to lowering expenditures, for example, in purchasing and procurement, but also structural measures, personnel measures, we have achieved a lot already. And we can only say we don't exclude further closures of plants and assets and teams look at those assets, which in the framework of our strategy were identified as having risks on a long-term basis.

But you don't make these decisions to close an asset spontaneously. You need time because it's processes that will last a number of years. And we announce things when we announce things, when we actually have decided upon closing another plant, and then we will communicate it. But I will ask you to understand that we don't want to speculate, and we want to have internal useful discussions here first because then it's irreversible decisions to make and we want to do them cautiously.

The next speaker is [ Frudsen ] of Handelban.

I have a follow-up question regarding China, regarding the challenging market environment. Do you stick to your concrete target for the new Verbund site in China? I think you were talking sales, EUR 4 billion to EUR 5 billion, EBITDA, EUR 1 billion to EUR 1.2 billion. So is this still true? Do you stick to this?

Yes, Mr. [ Frudsen ], we stick to this. Now let's take a look at this. Of course, we are glad and proud of the fact that the investment is within time and below -- significantly below budget, and this will be true when we look towards the end of the year, everything looks well, and we will be ready for production. We are also very confident that from the very beginning, we will have a good capacity utilization. In addition to the commissioning, we are doing the premarketing as we speak, and we are confident that we will have a high capacity utilization, and we will be able to bring the product to market.

A lot of it immediately to the Guangdong province around our site. Guangdong province has a GDP of South Korea more or less, so strong economically speaking, and then more product to the rest of China. That's very good. And then the margin level, and Markus Kamieth already mentioned that when we start the plant, this will be below our expectations because we are finding ourselves in a down cycle, and we have to grow into this, so to say. We are confident because we have an excellent fixed cost level there that is from the very beginning, we will be competitive. We stick to our targets, EUR 1 billion to EUR 1.2 billion EBITDA by 2030. And the decisive question is how long will this last. So how steep will the curve be? And well, you shouldn't expect too much in the year 1.

And we welcome Andrew Noel from Chemical ESG.

The first is on Ag Solutions. 2026 could be a busy year for IPO and listings in that sector. There could be sort of 3 to 4 businesses coming to market. I wanted to ask you about your strategy. Would it be better to get out in front of the pack or perhaps wait and see and let some others set a valuation floor. Interested to see where you sit on that one.

And the second one is on your R&D. Do you feel like after the sale of coatings and Surface Technologies, both of those, you're well known for your R&D and your technology. But post those sales, do you think you might need to sort of downsize your R&D operation because you're sort of -- you're less focused on these sort of specialist sectors?

Well, Andrew, thanks for your question. I'll take the second question and then Dirk, you might comment on non-ag, Andrew knows more IPO candidates than I do. Just on the R&D intensity. Andrew, one thing is very important to us. Of course, Coatings and also our Environmental Catalyst and Metal Solutions business, for example, are very well positioned in their respective markets and their market positions are also based on deep technology know-how, excellence in R&D and always, let's say, creating competitive advantage through constantly launching new innovations. But that's also true for the majority of our core businesses.

And if you look at both our R&D spend as well as our R&D success, so measured by launching new products into the market, our core businesses actually overproportionately contribute. Only if you look at our core businesses, the amount of products that we sell in 2024 that are not older than 5 years is more than EUR 6 billion. and that overproportionately contributes to that factor.

So your easy picture to say these are the Coatings and ECMS just because they are stand-alone businesses are somewhat more technology-intensive or R&D intensive. It's just factually not true. We have a huge amount of specialty businesses that even have significantly higher R&D intensities than those 2 businesses. It's slightly different with Ag. Of course, in Ag, this is an innovation-driven business and that has by far the highest R&D intensity. And in ag alone, we spent roughly EUR 1 billion or close to EUR 1 billion, I think, overall in R&D per year. So this easy picture to say coatings and maybe ECMS are somewhat more R&D intensive than the core is just not true.

And then maybe to Ag, the IPO.

Andrew, on the Ag IPO, we have, first statement, a high confidence in the value proposition of our Ag business. We will bring it to the market when it is IPO-ready and when there is the right time. IPO-ready will be -- the business will be in 2027. Until then, we do a lot of things that will finally be very value accretive for the business. We are setting up the right ERP system. We are configuring the legal entities in a way that this is highly operative, strategic and limited value leakage also. We are staffing the teams in the right way. We are looking into the business and the operating model. All of this takes a little bit of time. And then as of '27, we will be ready.

I think personally, this will be a business that has a unique selling proposition. So I'm not so much concerned about what others might do in the meantime or later on because this is really a unique business that also deserves really a premium on where it is currently trading. Personally, I'm not aware of 3 or 4 IPOs coming already in '26. So maybe we get a surprise here. But I think for the value that we can capture with an IPO, this is of limited importance also. So we are quite confident with the right proposition that we can also capture the value.

Okay. The next question comes from Ms. [ Doster Zhudoichi ]

I also have a question on an analyst conference question. Mr. Kamieth, you were talking repeatedly about a stagnant, a flat demand. And have I understood you correctly that basically real growth is only possible in China and the rest of the world is somewhere down there. And Mr. Elvermann, maybe you can say you said you are significantly below budget in South China. Maybe you can give us some figures there?

Well, Ms. [ Doster ], maybe very briefly on the chemical industry and how I described it. This morning, I tried to put it into perspective because looking at the global figures in the chemical industry global growth, 2.5% to 3% was forecasted for this year is the best that we can read from the situation. And that only takes place or almost only in China. This is because China shows 50% of the worldwide chemical market. And if China grows as it grows, that leads to high growth figures worldwide or good figures, 2.5% to 3%. But if you separate it in China and rest of the world, you can see that just now our forecast for 2025 is that a slightly shrinking Chinese market, 0.2% or 0.3% is the shrinking here.

But it's a difficult figure because there are so many subcategories, so we shouldn't overinterpret it. But it shows the different dynamics, different momentum that we find in the market, no or very low growth in the rest of the world and growth in China. The problem is that there is volume growth in China. But as I said, the margins in China are very low because there is a high product availability and in part also overcapacity. So the incremental volume that you can win there in terms of growth doesn't lead to incremental profit so much. So that's difficult.

And for the rest of the world, particularly in Europe, we see a contradicting or a contracting chemical market. We will have a negative growth in Europe because of the weakness of our customer industry -- our industries here in Europe. And that shows how important it is to be successful in China because this is where growth will take place also in difficult global times.

Ms. [ Dostadt ], maybe briefly on the question, budget and planning, cost planning for Zhanjiang. I can't give you any exact figures now. I think it is important to understand that significantly below budget is not that EUR 50 million less, that it's more. But we'll see at the end. And then in the end, we will give you a figure of what it costs. But in perspective, it goes in the right direction. And for a project of this size, it is absolutely remarkable that we stay so much below the budget that we originally planned.

Yes, let me underline it, remarkable. It is -- the building phase 3 years, we have had 3 years of building, even a little longer. And you can just imagine that what during the 3 and 3.5 years happened in the world, how much inflation we saw, how many difficulties when it comes to supply chains. And then after 3 years, to be able to say, okay, we are on track and we are below the budget that we planned is a phenomenal performance. Can't be over-evaluated and the figures that are below the planning is so significant that we will not stop talking about it.

Okay. The next question comes from Ms. Lisman from Reinfeld.

I have a question on coatings or 2 questions rather. So you said you have different offers, collected offers for the business, and I would be interested if these offers correspond to your expectations. And secondly, which strategic options for coatings are most interesting?

Mr. Lizman, this is a very competitive competition, I would say. So there are both private equity bidders, but also strategic ones, and we are still talking about different constellations here and the interest is very high. I cannot give you any figures here either. But just to see that there is high interest that many make an effort to get a foot into the door. You can see here that we are moving in the right direction. And well, we want to have all the strategic options open. We want to choose the one which generates most value and which creates most value. And that's what we're going to take eventually.

And it seems as if we have already questioned all the questions. I will wait another 30 seconds. So maybe somebody wants to decide to ask another question, then of course, we will pick your question too. Well, it says no questions on our screen. So if your name is no questions, then please speak now. Okay. But it seems as if we answered all the questions.

So thank you very much for your interest, and thank you very much for your time. If you have any questions afterwards, there is the team of the Media Relations team available for you. And the next event with the call for the third quarter will take place on the 29th of October, and we will be pleased to have you again. Thank you very much, and have a good and safe day.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Good morning, ladies and gentlemen. On behalf of BASF, I would like to welcome you to our conference call on the second quarter 2025 results. Today's presentation is being recorded. [Operator Instructions] The presentation will be followed by a question-and-answer session.

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/Q22025. Now I would like to hand over to Markus.

Yes. Good morning, everyone. Welcome to our conference call here on Q2 and H1 results 2025. As you are aware, we pre-released already on July 11 due to the necessary adjustment of our full year guidance. Today, we will provide you with more details on our performance and the rationale for the revised outlook.

BASF generated EBITDA before special items of around EUR 1.8 billion in the second quarter of 2025. The Agricultural Solutions segment considerably increased earnings, while the Surface Technologies and Nutrition & Care segments achieved slightly higher earnings. In the Upstream businesses, margin continued to remain under pressure due to the high product availability in the market.

Let's start with a closer look at the sales performance of BASF Group. Overall, sales were almost at the prior year quarter level, thanks to volume growth. Volumes grew particularly strong in Agricultural Solutions and in Surface Technologies.

Prices declined in 4 out of our 6 segments, particularly in the Chemicals segment. The exceptions that managed to achieve price increases were Surface Technologies and Nutrition & Care.

Contrary to the first quarter of 2025, currency effects in the second quarter dampened sales in all segments and were mainly caused by the significant depreciation of the U.S. dollar. Reflecting this underlying sales development, EBITDA before special items came in at EUR 1.8 billion compared with EUR 2.0 billion in the prior year quarter.

Here is a snapshot of how the markets and our segments volumes and specific margins have developed in Q2. In general, the business environment in our upstream businesses was very challenging. Compared with the second quarter of previous years, we generated significantly lower EBITDA before special items in the upstream divisions in Q2 2025. This can be attributed to the high level of uncertainty and cautiousness of our customers in most markets globally.

Let me highlight some segment-specific aspects. As mentioned, the market environment for base chemicals remain difficult. Nonetheless, volumes in our Chemicals segment were almost stable. Specific margins declined in both divisions, particularly in petrochemicals. In an overall tough market environment, the Materials segment showed robust volumes and earnings performance.

I will touch on the stand-alone businesses only briefly as we have more detailed slides to follow. According to the latest data, global light vehicle production increased by 2.6% in the second quarter compared with the prior year quarter, mainly on account of production growth in China. In this environment, the Surface Technologies segment recorded robust volume growth and outperformed the automotive market. Specific margins in this segment were almost flat. In Agricultural Solutions, we achieved strong volume growth and were able to considerably increase specific margins.

Now let's look at the EBITDA before special items by segment. Considerable earnings growth in Agricultural Solutions and slight growth in Surface Technologies and Nutrition & Care partially offset lower earnings in the remaining segments. Earnings in Agricultural Solutions increased across all regions, particularly in North America, followed by South America and Europe. In the Surface Technologies segment, the main earnings driver was the higher contribution from the Environmental Catalyst & Metal Solutions division, which added to a continued strong performance by Coatings. In the Nutrition & Care segment, EBITDA before special items increased, thanks to the improved earnings in the Nutrition & Health division. Here, earnings were supported by a low double-digit million euro insurance payment related to the fire at the isophytol plant at the Ludwigshafen site. In the meantime, our production plans for vitamin A and E as well as for Aroma ingredients in Ludwigshafen have restarted and are ramping up as expected. Force majeure for most products has been lifted. This will support volume growth in the Nutrition & Health division as of the second half of 2025.

By contrast, earnings declined, particularly in the Chemicals segment because of the still unfavorable supply and demand situation for base chemicals. In addition, start-up costs related to our new Verbund site in South China burdened earnings by around EUR 70 million in the second quarter of 2025. These startup costs will ramp up considerably during the next quarters to total around EUR 400 million in the full year 2025. Lower earnings in the Industrial Solutions and Materials segments contributed to the overall decline in earnings at group level.

Compared with the second quarter 2024, EBITDA before special items -- considerably weaker and turned negative, mainly because of the reversal of bonus provisions in proportion to earnings in the prior year quarter. In BASF's new remuneration system, the influence of group ROCE has been reduced, while EBITDA before special items, cash flows and nonfinancial targets are gaining in importance.

In the following, I will provide some additional color on the strong performance of the Agricultural Solutions and Surface Technologies segments. Compared with the prior year quarter, Agricultural Solutions achieved remarkable volume growth of 21%. Volumes rose in all indications and sectors, except for seed treatment. The absolute volume increase was most pronounced in herbicides. Compared with Q2 2024, segment earnings improved by EUR 282 million to EUR 417 million. On a half year basis, earnings rose by a remarkable 8% to EUR 1.6 billion, resulting in a strong EBITDA margin before special items of 30%. As forecasted in February, we continue to expect a slight increase in earnings for the Agricultural Solutions segment for the full year 2025.

Now let's move on to the strong performance in Surface Technologies compared to the prior year quarter. In this segment, we achieved volume growth across all 3 divisions. Overall, volumes increased by 6.5%, even when excluding volumes from pressures and base metals as shown on this slide. Compared with the second quarter 2024, EBITDA before special items in Surface Technologies rose by around 10% to EUR 350 million. All divisions contributed to this increase. The highest contribution came from Environmental Catalyst and Metal Solutions.

Next, I will provide you a short update on our portfolio management. As announced at our Capital Markets Day in September 2024, our goal is to unlock the value of our stand-alone businesses. In February 2025, we agreed to sell our Decorative Paints business to Sherwin-Williams. The purchase price amounts to USD 1.15 billion on a cash and debt-free basis. We are well on track to close the divestiture in the second half of 2025, pending approval from the relevant competition authority.

As planned and previously communicated, we approached the market in Q2 2025 to explore strategic options for our coatings activities, excluding the decorative paints business. These activities, which comprise automotive OEM coatings, refinish coatings and surface treatment, generated sales of EUR 3.8 billion in 2024. We have received a considerable number of bids from private equity and strategic buyers. The process is well on track.

In Agricultural Solutions, we are advancing as announced and are currently focusing on executing the legal separation and the implementation of a dedicated industry-specific ERP system. In parallel, we are preparing a potential listing of a minority share to start unlocking the value of agricultural solutions. This business has global scale, strong growth potential and attractive cash flow characteristics. We remain committed to completing all internal preparations for a successful IPO by 2027.

In summary, we are executing our portfolio management strategy as announced. And with that, I will hand over to Dirk.

Thanks, Markus. Good morning, everybody. Let's now take a closer look at the financial details of BASF Group for the first half of 2025. At EUR 4.4 billion, EBITDA before special items was slightly below the level of the first half of 2024. The adjusted EBITDA margin before special items remains almost stable at around 15%. EBIT before special items reached EUR 2.5 billion compared with EUR 2.7 billion in the first half of 2024. Special charges were largely incurred for restructuring measures as well as for the sale of BASF's equity share in the Northeast 1 and 2 wind farms back to Vattenfall, which took place already in Q1 2025.

Net income decreased to EUR 887 million. Compared with the first half of 2024, net income from shareholdings declined significantly mainly due to negative contribution from Harbour Energy, which was burdened by negative tax effects in the United Kingdom and from Wintershall Dea.

Cash flows from operating activities amounted to EUR 603 million compared with EUR 1.4 billion in the first half of 2024. The decline was particularly driven by the lower net income and higher cash outflows from changes in net working capital.

Payments made for property, plant and equipment and intangible assets decreased by EUR 554 million compared with the prior year first half of EUR 1.9 billion. The decline shows that we have passed the peak investment phase for our South China Verbund site.

Free cash flow was minus EUR 1.3 billion in the first half of 2025. I will provide more details on the next slide.

In the second quarter of 2025, cash flows from operating activities decreased by EUR 365 million. Changes in net working capital led to a cash inflow of EUR 38 million compared with a cash inflow of EUR 710 million in the prior year quarter. The main reason was the change in trade accounts payable. Payments made for property, plant and equipment and intangible assets decreased by EUR 428 million compared with the second quarter of 2024 to EUR 1.1 billion. Free cash flow increased and came in at EUR 533 million compared with EUR 471 million in Q2 2024.

Now let's focus on the measures we are taking to protect our balance sheet. The top priority in our capital allocation framework is to maintain BASF's financial strength. We are fully committed to our financial policy. We aim for a single A credit rating, which is best-in-class in the chemical industry. S&P recently confirmed our single A credit rating, which we also enjoy at Moody's and Fitch.

Over the last 3 years, our financial debt and leverage ratio have increased. This was driven by lower earnings in a cyclical downturn and also by our considerable investments mainly in South China. This mega project is on time and below budget. We have already entered the commissioning phase and will start up most of the plants as of the end of 2025.

Our CapEx peaked in 2024, and we will bring it down below the level of depreciation as of 2026. At EUR 5 billion payments made for property, plant and equipment and intangible assets in 2025 are expected to be EUR 200 million lower than forecasted in February. Furthermore, we will partially use proceeds from divestitures to reduce our financial debt and to deleverage our balance sheet.

We have also accelerated our cost-saving programs. We now expect to generate annual cost savings of EUR 1.6 billion by year-end 2025, EUR 100 million more than originally anticipated. Overall, we are well on track to achieve the targeted EUR 2.1 billion in annual cost savings by the end of 2026.

Finally, we have a strict focus on further reducing inventories while remaining a reliable and trusted partner for our customers also in challenging times.

Now I would like to touch on a topic that we address less frequently. To safeguard BASF's long-term competitiveness and operational resilience in Europe, we have established a very robust and flexible setup for procuring natural gas by concluding 2 cornerstone gas supply agreements.

The first agreement with Equinor will start in October 2025. Equinor will supply us with up to 23 terawatt hours of Norwegian natural gas annually for the next 10 years. This contract ensures long-term supply security, competitive terms and the lower product carbon footprint due to Norway's efficient production and transport infrastructure. It covers the substantial share of the BASF European gas needs, particularly for our major sites in Germany and Belgium, and supports our transition strategy by securing cleaner fossil energy in the current transformation phase.

The second agreement with Cheniere will start in mid 2026 and comprises several steps. BASF will receive up to circa 12 terawatt hours of liquified natural gas short LNG per year under a long-term contract through 2043. This agreement introduces strategic price diversification via Henry Hub indexing and gives us full control over an end-to-end LNG supply chain. It offers a critical hedge against European gas price volatility and complements our pipeline gas portfolio.

These 2 agreements ensure long-term energy and feedstock security, high-volume flexibility for demand-driven operations, diversification across geographies, pricing models and delivery models and the lower product carbon footprint for our products. Together, they form the backbone of our gas supply strategy, balancing reliability, cost efficiency and sustainability. This results in clear competitive advantages for BASF in Europe.

And with that, back to you, Markus.

I will now comment on the outlook of BASF Group that we pre-released already on July 11. To account for the elevated macroeconomic and geopolitical uncertainties, we are now providing ranges for our assumptions regarding GDP, global industrial production and global chemical production in 2025, as shown on this slide. Most relevant for us is the continued high product availability in the chemical market, which is resulting in ongoing margin pressure, especially in the upstream businesses. Consequently, BASF expects earnings development to be weaker than previously forecasted and has adjusted its outlook for the full year 2025. We now anticipate EBITDA before special items to reach between EUR 7.3 billion and EUR 7.7 billion. For free cash flow, we continued [ EUR 0.4 billion ] [ and ] EUR 0.8 billion in 2025. We stick to our forecast due to lower expected payments for property, plant and equipment and intangible assets amongst other reasons. The forecast for CO2 emissions also remains unchanged.

The content of this slide is familiar to you from our conference call in February. I would like to emphasize today that we are focusing -- what we are focusing on in 2025. The execution of our value-enhancing portfolio measures, the successful start-up of our new Verbund site in China, structural cost reduction and the rollout of our winning culture. These are the things that are within our control. And we want to get them right, especially in view of the unsupportive economic environment.

To conclude, I would like to briefly outline the decisions we recently took regarding the publication of our annual report and the format of our Annual Shareholders Meeting. The audited BASF Report 2025 will again be published at the end of February, as you were accustomed to in the past. After successfully tackling the extended sustainability reporting requirements this year, the team is confident in its ability to accelerate the process. Furthermore, on the basis of the positive experience with this year's virtual Annual Shareholders' Meeting, the Board of Executive Directors of BASF SE has decided to annually alternate the format over the next 4 years. This decision was made to meet the expectations of our broad and diversified investor base. In 2026, we will, therefore, again organize an in-person meeting.

And with this, Dirk and I are glad to answer your questions.

Ladies and gentlemen, we are now at the -- sorry, ladies and gentlemen, we are now entering our Q&A session. [Operator Instructions] We will start with Alex Vigil from Santander, then have Christian Faitz and then Tom Wrigglesworth. But now Alex Vigil, Santander.

Yes. One question about the outlook of '25. You have significantly reduced the EBITDA guidance, but the free cash flow is unchanged. So if you can bridge this gap between the lower EBITDA and maintaining the free cash flow change. That's the first question.

And the second is, in general, about the European regulation. We have seen the German government and also the European Union with some proposals to support the chemical industry in Europe. If you can elaborate on that, what is the potential impact on your company?

Alex, this is Dirk speaking. I'll start with your first question. Indeed, we are very confident to keep our free cash flow guidance in line. First, we were -- and this came in the speech already, we will lower the CapEx again. We will save another EUR 200 million, I would say, at least in CapEx for the year 2025. And we have an ongoing focus on working capital management, and these 2 components together make us confident that we will reach our free cash flow guidance.

Alex, Markus here. Your question on EU regulation and let's say, how much supports the intentions of the European Commission and maybe also the German government is giving the chemical industry, it's really difficult to answer in short term because overall, we're getting a lot of positive intentions and signals both to recent announcements on the European level, for example, the chemistry, the chemicals industry action plan that was announced, but also certainly from the new coalition agreement in Germany. So I would say, overall, the narrative is positive. It has some very positive intentions, and it's clear that both on European and German level politicians have understood that the chemical industry will be key to securing industrial competitiveness of Europe. And I would say the events over the weekend have shown how important it is to remain competitive and strong as a European Union with regards to industry.

However, I will also say that as always, in these times of strong narrative changes in communications, actions will have to prove itself, and we are still waiting for implementation of many of these announcements. So too early to call it a tailwind yet, but [ 2 of the ] signs are turning much more positive than they were 12 or 18 months ago. That's how I would summarize it.

Okay. The next questions are from Christian Faitz. We will then have Tom Wrigglesworth and then Georgina Fraser. But now Christian Faitz, please go ahead.

Yes. Two questions, please. One observation. It's pleasing to see the 2 segments performing, which are on their way out. Congrats on the solid performance in Ag Solutions with weather having been rather try during a good chunk of Q2 in Europe. Would you see some channel buildup in this region, i.e., you and your peers having to buy back some of Q2 volumes sold over the next couple of quarters?

And my second question would be again, a very solid performance in Surface Technology. Can you elucidate a bit the improved volumes? Is this automotive OEM driven? And how much would you attribute to OEMs in Q2 having tried to produce/ship as much as possible in order to circumvent upcoming tariffs? And what would this mean for Q3 volumes, particularly in automotive.

Christian, Dirk speaking. I take your first question. Indeed, an excellent performance of the team in the second quarter. I think we indicated it already a little bit during the road shows prior to the quiet period that this is going well and that we have a good momentum.

Channel buildup and buying back, we do not see. I did not get from the teams any indication in this direction, but the demand that we are fulfilling appears to be real. And this is not only volume, but this is also quality of earnings. And I would really like to highlight one thing that we have improved significantly. Last year, we talked about the calamity of the glufosinate ammonium where we had to take a restructuring measure. The team did a fourth full turnaround, came in with an innovation, called glufosinate ammonium on an asset-light approach now, which is significantly contributing to this great result in the second quarter. So higher quality of the business compared to last year due to forceful action and I do not see a big risk of significant channel inventory.

Christian, I'll take the second question with regards to Surface Technologies. I mean overall, as I said in the speech, the automotive market actually grew quite a bit over the last -- over the last 2 quarters. I think, year-to-date, we are up 1 million cars per -- 1 million cars globally versus last year. It doesn't feel like this when you're in the Western world because solely this growth is coming from Asia and particularly China. And overall, Asia is up 2 million. The rest of the world is down 1 million cars. That's roughly the picture year-to-date. So there is growth in automotive. And of course, both in our -- or in all of our automotive related divisions, we are overproportionately present in China. And when you are in China, you also have volume growth in automotive. And here, we are benefiting from our strong partnerships of -- with OEMs that are also in China increasing market share. And even in our environmental catalyst and Metal Solutions business, we are benefiting from the strong drive towards hybrid models at this point in time.

So overall, I would say the market is not so unfavorable, but we are still in this environment, outperforming on a volume basis, this market, especially due to our strong presence of all businesses in China, and we do not see any pronounced, let's say, tactical supply chain actions by tiers or by OEMs with regards to the tariff situation. So we do not see any prebuying or offshoring or something like this. So this, for us, are just small and anecdotal stories, but not in the meat of the business.

Okay. Now it's Tom Wrigglesworth, Morgan Stanley.

First question, if I may. The -- I just wanted to unpack the assumptions that you've made around the upstream Chemicals business for the second half of the year in your new guidance. Just -- do you cite chemical growth and production at 2.5% to 3%, and yet your own upstream business is probably running at negative 0.5% to negative 0.7%. So have you just assumed the conditions from June continue through the second half in this new guidance?

And the second question, if I may, Markus, obviously, you spent time in China. You are obviously adding capacity in China through the new Verbund. And at the same time, we've started to see the Chinese make statements around what they call anti-involution. I was intrigued to understand whether you'd received or any insight on this policy and what they're trying to get at in terms of oversupply in the chemicals industry.

Yes. Thanks, Tom. First of all, let me come to the assumptions for chemical growth and also our growth. I mean I -- we're not going to specific growth expectations per segment. But overall, we do not expect, let's say, a demand increase from what we have seen in the second quarter for our full year outlook. So we basically, from here on out, expect a rather flattish demand environment. So if there is any revival of markets of our customer industries, positive surprises on volumes, there certainly would be an upside.

When you look at the overall world figure, this, of course, is always quite an intriguing figure, 2.5% to 3% global chemical growth this year. But if you look into the composition -- regional composition, this is solely China. If you take China out, the rest of the world is negative. So our assumption is that there will be slightly negative chemical market growth outside of China. And you know that from our regional distribution, and that's true for most, Western chemical companies. Our market share in China is, of course, always significantly underrepresented. So this overall global headline figure always seems a bit too positive. So overall, I would say we're looking at a flat market environment. Next year, then, of course, we will see a significant boost of growth also in China for us coming from our new capacities that we have put in there. So overall, I would say we should not be too optimistic about significant growth outside of China for the rest of the year. We are not. We are planning for a flat environment. And we continue to show also in our figures a strong volume growth in China as well.

Now your second question is quite interesting because for a long period of time, the sense was that the Chinese government and authorities are sort of dodging the discussion around overcapacities and buildup of, let's say, unhealthy capacities in many of the industries. I think if you now see in the run-up of the new -- the 15 5-year plan, which will be put in effect in March next year, you see now first signs of intentions to work on supply-side reforms. And as you said, also this address this, what they call involution or rat race or however you want to call it. And I personally think that the -- this will also have an effect on the chemical industry because I was in China a few weeks ago, and I think I got some good -- we had some good conversations around bringing 2 of the big intentions together on the one hand side, the supply chain, the supply side reforms addressing overcapacities and the low profitability of many chemical companies in China, especially small and medium ones. But also on the other hand, the green transformation and achieving carbon peak in 2030. And our intention is to pitch for addressing both things at the same time. And I think this will happen now over the next years, you will see capacity adaptations also in the chemical industry also addressing assets with high energy efficiency, subscale and high emissions in China.

So I think supply side reforms are becoming more popular. You will probably not hear the word overcapacities a lot, but this will be communicated differently, but we have positive expectations, and that will lead to this picture that we always say a rebalancing of chemical value chains, chemical market by the end of the decade in China. So the last weeks have been rather positive in this aspect.

We will now have Georgina Fraser, Goldman Sachs; and then [indiscernible] and then Chetan. But now it's Georgina.

I've actually got a question that follows on quite nicely from the previous discussion from Thomas. We're seeing that even U.S. chemical companies are under enormous pressure with global oversupply at the moment. Your competitor, Dow, has recently cut its dividend. And I think a lot of investors felt that U.S. companies would be better off than European ones because they have a favorable cost position. Can you say a bit more about the structural dynamics that you see at play outside of China and whether BASF can act as a consolidator to strengthen its core asset base and come out of this downturn in a better competitive position?

And then second question, if you could please give us a little bit more detail around the CATL battery material supply agreement that you recently announced.

Yes, Georgina. I'll try to do my best in the first one because this is -- this, of course, also is a multidimensional question. I'll try to be simple. I think we always have to be very cautious if we make statements like U.S. players have favorable cost positions if we project this out to an entire chemical industry. There's enormously many subsegments in the chemical industry. And if you look at the BASF portfolio, we produce about 50,000 different chemicals. And the statement to say there is clear raw material or there's clear advantages, cost advantages for people that are close to, let's say, cheap feedstock regions like U.S. or Middle East is only true for a small portion of this. It's true for large-scale commodities. And if you are -- if you have a portfolio that is, for example, heavy on polyolefins, polyethylene, polypropylene, then you are, of course, much more exposed to these raw material feedstock cycles, but also to the advantages compared to a company like BASF, where we have a variety of different midstream, downstream businesses and typically long value chains, and we make very different things out of our olefins than polyethylene and polypropylene. So that just as a disclaimer.

On the competitiveness side, I would say we have certainly looked at our asset set up globally and where we are potentially where we have risks with regards to competitiveness also as it relates to the trade flows from low feedstock regions. And we have been very vocal about our analysis here in Europe in Ludwigshafen, in particular, that most of the assets we have here are actually going to be long-term competitive also against imports from low feedstock regions. And the same holds true for our portfolio also in the U.S.

So since we are not a company that is comparable to some of these upstream-only, very cyclical, commodity-heavy companies. I think we are much less a proxy for this kind of discussion.

So you asked also whether we are potentially a consolidator in this industry. I think here, we've also been very clear, and I said this very consciously at the Capital Markets Day that this is, of course, something we are taking a look at because in an industry that in low growth regions like North America and also Europe for the next 10 years will go through a phase of consolidation and restructuring as one of the market leaders in almost all businesses that we're in, we certainly will see and look whether there are opportunities for BASF in this consolidation phase. However, this does not mean that we are now on a shopping spree when it comes to buying noncompetitive assets from other companies. So we feel that we have competitive assets, and we are rather opportunistic, but we believe there are opportunities and benefits for BASF in the phase of consolidation and restructuring because we fundamentally feel our asset base is robust, and our market positions our doing good.

Your question to CATL. This was announced, I think, a few days ago. CATL is, by far, the biggest producer of battery cells in the world. I think their market share, if you look at public figures, is about 1/3 when you look at EV type batteries. So by far, the largest player. We've had a long collaboration history also with CATL a few years ago. We have also announced plans to look at value chain collaboration with them. And now we have just agreed on looking at very concrete opportunities to supply CATL with our cathode active materials over the next years with high-performing materials for their new investments, both in China and in Europe. So that's just a confirmation of our joint intent to increase the business between BASF and CATL. And not much else more to say about this.

So now we have James Hooper, Bernstein; and then Chetan; and then Laurent. But now, James Hooper, please go ahead.

I have 2, please. The first is that you've said on this call that your outlook is predicated on flattish demand. In the case the demand does deteriorate, what actions can you take to protect cash flow and EBITDA guidance? Are there more CapEx savings that can be taken further management or acceleration of cost savings?

And then my second question is also about cost savings. You've clearly done a good job of executing the plan so far for 2025 and accelerated those. But the current plan ends in 2026. What are the plans for beyond 2026? Are there more structural savings you can make in the urban business in particular, that's core?

Okay. So this is Dirk speaking. I'll take your first question. Of course, we are always standing on the tip toes in these times. So in the case that demand was further decreasing, we, of course, will have a sharp look again into our cash and cost. These are the sales measures that you typically can command. In terms of cash, I think I already gave an indication saying we are in CapEx down by EUR 200 million. Could we even go lower? Certainly, we could.

In terms of cost savings, we are accelerating already by EUR 100 million. Is there always a little bit more that you can do? Certainly, there is.

In terms of the outlook, overall, I would say we have now taken a reasonable look, and it is half a year, a little bit less than half a year to go. So I'm hopeful that we found the right corridor and that we have the right measures in place.

Yes, James, Markus here. I can only confirm I think we're all on the same page. We're also not expecting any further significant deterioration. I think there's already significant, let's say, I would call it a wait-and-see attribute in almost all industries that we see. And apart from certain subsegments of the global economy, everything that has to do with AI, with the digitalization, data centers, everything that the data center needs, everything else is rather already, I would say, at a very conservative part. So we don't expect any further deterioration. But of course, as Dirk said, I think you always are looking at also additional measures that you can take. But right now, we are -- like that picture, we are [indiscernible] almost every day.

Second thing to cost savings. I said this also in the past. I think we have announced now this EUR 2.1 billion until end of 2026. My ideal scenario would be that this is the last ever real big program that we would announce. Because from my perspective, a company is running excellent if you are constantly improving on productivity and costs, let's say, leadership position.

So I don't really like this ongoing announcement and then tracking of individual restructuring programs because in this day and age, the world is turning so fast that then individual programs overlap, and you are not really managing a company responsibly.

From my perspective, we -- right now, we have to get the company into a constant productivity increase mode. I think our current restructuring efforts help to get us started, but we do not expect any cost savings initiative, productivity programs or let's say, striving for benchmark cost positions initiatives to end in 2026, rather the opposite. And we accept that real cost leadership and being best-in-class cost in almost everything we do is part of being competitive as a chemical company, and I don't need to announce an ongoing wave of restructuring programs for this.

We move on to Chetan Udeshi, JPMorgan.

I have 2. One is you -- Markus, you mentioned previously that you will see strong growth in China next year, which makes sense from the startup of your open plant. I'm just curious, at some point, a few years back, you guys talked about EUR 1.2 billion EBITDA from the Chinese Verbund. But if you were to mark-to-market to today's reality, which is the pricing and margins are probably much lower, do you have a number what the mark-to-market EBITDA will look like? Will it be half? Even less than half?

The second question was just going to this whole discussion around cost savings, and I appreciate you mentioned you guys are accelerating the cost savings this year. But then when I look at your personnel expenses, they are up 10% year-on-year in second quarter 2025. I mean first half is up 5%. I'm just trying to tie those 2 things together of cost savings that are being accelerated where while personnel expenses are rising so substantially. Maybe you can help us there.

Yes. Okay. So I'll take the first question. You are right. I mean, next year will be, of course, a year of first year of operation for our new South China Verbund site. And the plan is still to ramp up utilization of this plant relatively quickly for most of the operations. So volumes will actually come in rather quickly. The reason is because almost all assets have favorable positions in the cost curves in China, in South China. So if you want, they all have a right to have a high utilization.

Now we've talked about this repeatedly that we feel with comparing this, for example, with our Nanjing situation, we're relatively sure about that. So volumes will come.

As you rightfully say and expect that currently, margins in most of the upstream chemicals in China are at very low levels, some of them at all-time lows. So 2026 will be, from a margin perspective, a very tough year to start up new capacities in China, for sure. But we also expect that towards year-end, there will be a rebalancing of most value chains with regard to supply and demand.

So if you want the simple picture is that compared to our original expectations, we will still get to the level of profitability that we have also communicated, but we will have a slower ramp-up. So the years 2026 and 2027 would certainly be more challenging years in the commodity space in China than what we originally thought when we decided to build this plant.

But that is nothing unusual in commodities. That commodities are a cyclical business, and it always depends on what timing of the cycle you're starting your plants in, the only new element is that China now also has a pronounced cycle, which was never the past for the last 20 years, at least not so much. So we are starting now in the bottom end of the cycle, but we still expect that our profitability expectations are realistic and plausible, but they might come a bit later than what we originally expected. That's maybe the picture I can give you today and then more to come once we have actually started up the plant and we know what the margins will actually look like in '26 and '27 in China.

On the personnel expense, I give it a simplistic answer, and then I look at the Dirk whether he can give color on this. You're right, the personnel expenses, as reported, are going up. First of all, when you look at our restructuring programs, a lot of that has to do, of course, with the reduction of headcount. And that, of course, always takes a while. Until the paycheck is actually out of the out of the company is always takes some time. We still are, of course, seeing increases or inflation coming from wage salary increases in most, especially European countries.

But you also have to see that in times of restructuring and especially personnel restructuring, your personnel costs typically also go up because you're paying severances. And that also is part of the personnel expense. So whenever you do high restructuring, you see personnel expenses first go up before they go down in the P&L, you see as special items.

But of course, if you only look at personnel expenses, you see it all in. So you have to take this a bit apart. But the intention is, of course, that as a result of our restructuring measures, eventually, our personnel expenses will go down significantly. I'm looking at Dirk.

I can just confirm that and put one more number into context. The EUR 2.1 billion savings that we want to achieve until end of '26, this is a fixed cost reduction for the group of 10%. So it is an enormous effort that is currently going on in the company, and this comes with the severance payments that we have to pay now. But from my perspective, this is rather than investment into the efficiency of the future. So yes, the number is high, but it is good money to be spent, I have to say, in order to achieve the restructuring target.

We will now move on to Laurent Favre, and then have 3 more analysts in the queue, Sebastian Bray, Matthew Yates and finally, Geoff Haire. But now it's Laurent Favre, BNP Paribas Exane. Please go ahead.

Yes. Two questions, please. The first one around M&A. In the presentation, you mentioned that proceeds would be partially used to reduce leverage. And I was wondering if you could talk about the time frame of that comment. I understand that this year, free cash flow is not going to cover dividend, but I would have thought that for next year with CapEx below D&A -- you -- I mean, I guess, deleveraging wouldn't be top of mind, and you would also think about, I guess, other things with the cash flow.

The second question is around the start-up costs, the EUR 400 million. I understand that the ramp-up, I guess, there's more of those costs in Q2 than Q1 and in H2 than in H1. But can you be a little bit more specific on that split? And what should we be assuming for next year as well?

Laurent, Dirk speaking. I start with your first question with the use of funds from M&A proceeds, et cetera. I do not have a concrete timing for you, but direction of travel, I think, should be very clear. So this year, we are surpassing the investment peak that we had last year, but it's still high on CapEx. We have spent quite a lot in investments in the last couple of years. We'd say after completion of Zhanjiang and then also MDI Geismar, we are what we call a fully invested.

So we have now funds available that are coming in from operating cash flow, but also from the proceeds from the projects that we can use in order to strengthen our balance sheet, but then also think about our shareholders and do more on shareholder distribution. So what we really want to say is we want to strengthen the balance sheet. We want to do more for the shareholders. The letter you only can do balance sheet. So this is really the emphasis that we are now taking as a Board. And the concrete timing, I do not have for you, but you shouldn't need to wait too long.

Okay. Maybe just a comment for [indiscernible].

Quick maybe -- quick guidance on -- maybe guidance is a strong word. But if you have the picture in mind that these are, of course, start-up costs, you automatically, I think you have a good gut feel that this becomes more the closer you get to actual start-up. So if you look at the total figure that we have communicated and try to give you something to model with, I would say, if you split that number into roughly 1/3 first half, 2/3 the second half, you will not be totally out of proportion.

And [indiscernible] for next year then?

Well, next year, we still have, of course, let's say, extraordinary costs because just imagine, I mean, we're starting up the steam cracker in, let's say, very late in 2025. So there will definitely be a spillover of start-up costs. I don't have now a number in my head that I could give you to kind of guide or model this. But just remember that we also -- next year, we still have a pretty significant share of CapEx also to finish up the plant. So I think we still have roughly EUR 1 billion for 2026 in the books for CapEx to finish off this plant. Because it's so big, it will have a tail, and that also holds true for operational start-up costs. So overall, I don't have a picture now, but it will tail off. How quickly and how fast in 2026, I cannot tell you off the top of my head.

So now we move on to Sebastian Bray, Berenberg.

I have 2, please. One is on the natural gas supply agreement signed with Equinor, that I think covers quite a large portion, if not the majority of BASF European demand. Is this a fixed price or floating rate per contract or a mixture of both? Does it have any impact on the sensitivity of BASF's earnings to a future decline in gas prices?

And my second question is on the Coatings divestment. Is there any sense from your side on a willingness to use bridge financing to -- once an acquisition is announced, to finance things like a buyback? Or would this be a case of literally waiting on the proceeds? It's quite a large asset, and I imagine regulatory hurdles are pretty significant. And do you have any sense of the amount of tax leakage that might be associated with this transaction?

Sebastian, starting with the natural gas. So we are not disclosing the exact commercial terms that we have. What I can give you, it is a agreement that gives us a very high reliability on the pricing conditions. It is, from our perspective, an excellent agreement also giving us high planning security and also a competitive edge which is certainly also due to the high volumes that we are procuring the 23 terawatts. This is, I think, the biggest volume by one supplier that we have ever secured.

In terms of share buybacks. The idea is not to finance share buybacks via debt. So we rather would wait for the proceeds in order to have the money at hand before we think about distribution to the shareholders. So it's rather about accelerating and confirming and wrapping up the deals that we have in the pipeline. And then only do share buybacks once the money is on the bank account.

In terms of tax leakage, there is no exact number that I can give you here. But be -- and rest assured that the tax departments are on it to make the deal as effective also post tax as possible.

Now Matthew Yates, Bank of America.

I had a question about the strategy and the portfolio. I'm trying to imagine what BASF's cash flow would have been this year without the contribution and resilience from its Coatings and Agriculture business. It strikes me that if you execute on your divestments over the next couple of years, BASF is going to be more volatile and fundamentally less cash-generative company unless we see a significant improvement in upstream spreads. So my question is whether a less diversified profile is actually consistent with your financial framework for leverage, which is getting up to 3x and a fixed dividend commitment rather than something that's more flexible in terms of the payout that would allow you to take advantage of countercyclical actions and the way that I think you appear doubt has just admitted that they sort of regretted.

So I guess as my question is whether you're rethinking the amount of debt that BASF can carry and dividends it can pay in light of losing the cash flow streams that you have in Agriculture and Coatings.

Matthew, I think I'll give it a start and maybe Markus wrapping that and also for the broader perspective. I can just say, so first of all, not all the stand-alone businesses, we are losing. Let's just take the example of Agricultural Solutions where we have announced a partial IPO, which would, even after an initial floating, leave us with a consolidated business in the BASF. So that is one. So it will all take its time.

Secondly, we are fully aware, management team is fully aware that with a business profile change, we also have to take decisive actions then with the capital base that we have, with the leveraging profile that we have, with the approach to shareholders, et cetera.

So we have given, I think, a consistent framework until 2028 also in terms of dividends and share buybacks. We have emphasized that a single A rating for us has a huge benefit, particularly in these times where resilience is so important. And you also heard me saying earlier that funds from proceeds that we are expecting, we will invest into the robustness and financial health of the company. So we are fully aware the wheel that we are spinning has to be adjusted if the cash flows that we can expect are a little bit lower.

On the other hand side, we have strong confidence in our core businesses to prosper over the next couple of years. And we have also said that in the longer term, we are not categorically excluding M&A. So at the end, this all relates on each other, but we will make sure that the leverage is not surpassing the 3 and going further north. And we will also make sure that we stay on a healthy equity ratio.

Yes. Not much to add. I would just say that, of course, Matthew, with the new look on our portfolio in the real world, not as much will change so quickly, as Dirk just alluded to. But also on a more conceptual world, of course, we are now looking also at the core a bit more as a hypothetical, how would the core perform, how it -- if it would be a company or something like this.

And of course, the ambition and our plans is to make sure that the core in itself can be strengthened and grown profitably. So that also the core in itself earns a premium on its cost of capital. And I think with the size, the scale and the portfolio we have, we're very confident that this is something we can achieve over the next years.

And just to give you a data point, sometimes in this discussion, it sounds like the core becomes somewhat smaller under critical. The core -- only the core businesses of BASF are still the biggest chemical company in the world outside China. So we have ample opportunities to strengthen the portfolio, to work on operational excellence and to, at the end of the day, also achieve cost competitiveness to outperform our markets and use the size, the scale that we still have in the core to be competitors.

So we're very confident, and we hope that we can give you more color on this when we do the Capital Market update in October because we will be in Antwerp and we will showcase a bit why we are so confident about the core.

So to conclude this call, we now have Geoff Haire, UBS. Your turn.

Just wanted to really come back to the natural gas contracts. I was wondering if Dirk could help us by giving some idea that if you had these contracts in place in 2022, what would have been the savings that you would have generated from having these in place.

Geoff, as I said, we cannot really comment on the commercial terms in detail. Would I like to have the deal in place already in 2022? I think when we met Equinor, when I met the CEO of Equinor to sign the deal, we both were of the opinion that earlier would even have been better, but sometimes matters take their time. So we are happy that we have it for 10 years.

I am particularly happy that we have it from Norway, which comes with the low PCF simply due to the -- a very optimal Norwegian conditions in exploration and production. It is very stable. And I think it is -- let me just end with saying it is really just a good deal. Everybody acknowledges in the industry that this was the deal to be made between a big consumer and the biggest supplier from Norway and terms satisfying for both sides. I think that's the key message.

Ladies and gentlemen, we are now at the end of today's conference call. Let me draw your attention. Markus already mentioned it. BASF's upcoming capital market update, which will take place in Antwerp. The program will begin on October 1 with a dinner with management at the Royal Museum of Fine Arts on October 2. The program comprises a keynote by the CEO and CFO and presentations on the polyurethanes and ethylene oxide value chains by the respective division presidents as well as a site tour. We sent out personal invitations at the end of June already, and we would be very pleased if you could register as soon as possible. If you are interested in attending the event but have not received an invitation, please contact me. On October 29, we will then present our third quarter results. Should you have any further questions regarding the second quarter results, 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.