EVLN: BASF> (old fossil-fuel fossils want a piece of the EV action)

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EVLN: BASF> (old fossil-fuel fossils want a piece of the EV action)

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https://www.icis.com/resources/news/2017/10/04/10149467/electric-vehicles-could-be-next-big-thing-for-chemicals-basf-s-bock/
Electric vehicles could be next big thing for chemicals – BASF’s Bock
04 October 2017  Will Beacham

NEW YORK CITY (ICIS)--The nascent electric vehicle (EV) market could bring
significant opportunities for the chemical industry, according to BASF
Chairman Kurt Bock.

With startling growth rates forecast and a string of auto companies planning
to switch production over to EVs, chemical companies may be able to capture
a lot of new business from this sector, Bock said on Tuesday night at New
York’s Metropolitan Club ...

The chemical industry will need to adapt to EVs in the same way it did to
the shale gas revolution and the collapse in oil prices from $100/bbl to
$50/bbl, Bock said.

Bock Kavaler “So what’s happening next? I don’t know, but here is another
example – electrical mobility,” the chairman said. “General Motors and other
car companies are making a lot of noise about this. Currently market share
in the US is one percent. Projections are skyrocketing, and it’s a big
opportunity for our industry.”

[image]  Bock (pictured third from left) pointed out that for chemicals the
EV market is about battery technology and electrical chemistry, which is one
of BASF’s strengths. Picture credit Charlie Grosso, The Chemists’ Club

But, he cautioned, nobody really knows how fast and in what direction the EV
market will develop: “Everyone believes this is a gold mine, but very few
people are making money out of it right now. I think this will be a very
good business for BASF, but at the same time there are lots of
uncertainties, and I can’t tell you what is hope and what is real.”

Bock said it is important for chemicals executives to reflect about what
they do not know and cannot foresee and to be prepared to adjust business
models. “Ten-year business plans are created which are then set in stone,”
he said. “However, our ability to forecast events is limited to maybe two to
three years. Beyond that it is guesswork, frankly.” ...

He said there would be many more surprises to come that could be
opportunities for the industry.

“We have been constantly renewing and reinventing ourselves and our
companies, so I feel very positive about the future,” Bock said. “For that
reason I’m very thankful about receiving this award ...”

CHANGING COMPANY DNA

Bock said consolidation is an ongoing trend in the chemical sector, with
companies buying and selling assets with relative ease. Companies are
changing even if they look from the outside as if they are the same. A
company can still have the same name and size, but when you look at the
details beneath the surface a lot has been changing, he added.

“You can buy and sell relatively quickly, but what is more difficult is
changing the DNA of a company as this is deeply embedded,” Bock said. “Yet,
even the DNA can change – we have to constantly renew ways of doing
business. Going digital will help us reshape the way we do business.”

Bock believes that what drives much mergers and acquisitions activity is the
quest for growth and a perception that growth rates are declining.
Businesses are looking for growth by increasing market share because this –
combined with synergies – creates more market and pricing power plus growth.

“Chemicals is a growth industry,” he said. “Not all businesses are growing
everywhere, but by-and-large our industry is growing around the globe for
the simple reason that the population is growing and people want better
standard of living, better health, better food and better transportation.”

He said that it is up to the industry to provide new and better chemistries
to serve these growing markets.

“If we innovate, then we will be successful and continue to grow the top
line,” Bock said. “Without growth, there is no successful business in my
view. We have to pay attention to growing businesses – not just taking out
costs and consolidating.”

FINANCIAL ENGINEERING

Bock urged the chemical industry not to rely too much on driving growth and
shareholder value by cutting costs, taking advantage of the current low
interest rate environment.

“There is currently quite a lot of financial engineering going on which you
put on top of what you are doing operationally and strategically,” he said.
“You should create shareholder value long and short-term but find the right
balance between pure financial engineering and creating growth and
operational excellence.”

Bock said that it is not sufficient to have earnings-per-share accretion
just in year one or two – value must be created in the long term. “That’s a
much more demanding task than just beating down the cost of debt which is
currently one to two percent for a company like BASF,” he said.
[© icis.com]




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