Chief Financial Officer, Member of the Board of Executive Directors, Chairman of BASF Corporation and Chief Executive Officer of BASF Corporation
Yes. Thank you very much, Maggie, and good afternoon, ladies and gentlemen. Also from my side, thank you for joining us today. Let me start with an overview on the topics we would like to discuss today. First, in November 2012, we announced changes to BASF's segment structure, which came into effect on January 1, 2013. Today, I will explain these changes and how the former Plastics segment has been split between the Chemicals segment and Functional Materials & Solutions segment. Also from January 1, 2013 on, we have applied the new accounting rules IFRS 10 and 11 and IAS 19 revised. We will give you an overview of these new requirements and their impact on BASF Group. Third, we will show you the impact of BASF's new segment structure and the accounting changes on BASF reporting. Fourth, we will also address the impact of these changes on our 2015/2020 "We create chemistry" strategy targets.
Now let me say the following at the outset. Unfortunately, most of what we will cover is old news as we had covered it already in our annual report 2012. And to a large extent, it is very, very technical. But we thought it might make sense to provide you with some more details to help you with your work.
So with that, let's get into the new organization. An important part of BASF's "We create chemistry" strategy is to focus more on our customer industries and to adjust our business models accordingly. With the new segment organization, we are doing just that. We are bundling units close to our customer industries on the one hand, and the classical chemicals backbone of Verbund on the other hand.
What did we actually do? We split the Plastics segment between the Chemicals segment and the renamed Functional Materials & Solutions segment. At the same time, we have aligned the products within the Chemicals segment even more closely along the value chains. We now have 5 instead of 6 segments and 14 instead of 15 operating divisions. The Chemicals segment now consist of the following 3 divisions: Petrochemicals, Monomers, Intermediates. In the segment Functional Materials & Solutions, we established a new division, Performance Materials.
BASF develops its organization along the 3 basic business models of its strategy, which are classical chemicals, customized products and the functionalized materials and solutions. A separation of businesses with distinct business models helps to enhance the management focus. With this approach, we bring together competencies, technology and operational excellence in the upstream part of our portfolio and a materials platform, application know-how and customer proximity in the downstream part. The key success factors of the models are described on the chart.
To leverage the potential of our broad portfolio, it is important to work on an interdisciplinary basis and to have a deep understanding of customers and value chains. Let me characterize the differences. The classical chemicals business is the part of our portfolio that forms the core of our production Verbund and the starting point for most of our value chains, encompassing basic chemicals such as cracker products or ethylene oxide. Customized products comprised industry-oriented, differentiated offerings, which are usually linked and backward-integrated to the value chains of our production Verbund. In functionalized materials and solutions, we integrate more closely our R&D expertise, our technological know-how and our global access to key industries across disciplines. In this way, we aim to develop specific business areas in which know-how and chemistry plays a crucial role in developing innovative solutions. With a new segment structure, we have made a further visible step in order to separate the more customer-focused units from the Verbund backbone units.
What does this look like? Here you see our segment structure as of January 1, 2013. The Plastics segment was dissolved, some parts have been integrated into the Chemicals segment and some into the Functional Materials & Solutions segment. The large-volume monomers, like MDI, TDI, caprolactam, as well as basic polyamide polymers, have been transferred to the Monomers division in the Chemicals segment. The businesses that are developing tailored solutions for customers, for example, PU, Polyurethane systems and engineering plastics are now combined in the new division Performance Materials, which bundles our materials competency.
Let's turn first to the new division of our Chemicals segment, which we have aligned according to the chemical building blocks and value chains: the Petrochemicals division with the ethylene, propylene and butadiene value chains; the Monomers division with major building blocks for our polymers, mainly based on aromatics; the Intermediate division with the methane value chain.
In Petrochemicals, the changes are limited. The propylene oxide productions from Polyurethanes, which is cracker-based, has been added to the activities of Petrochemicals. Thus, all derivatives of propylene are now bundled in Petrochemicals. We want to create technological synergies, thus supporting the growth of downstream businesses. With this allocation, we strengthened our C3 value chain integration and Verbund structures.
Now onto Monomers. The new division Monomers combines the core of the former Inorganics division, such as sulfuric acid, nitric acid, chlorine activities and the ammonia value chain, with the building blocks from the formal Performance Polymers and Polyurethanes divisions, such as MDI, TDI, caprolactam, adipic acid, to name only a few. It also includes ammonia and sulfuric acid, which are required to produce caprolactam from cyclohexanone. Nitric acid is used in the production of nitrobenzene, a precursor for isocyanate. Chlorine is also part of the division. In this way, we've brought the main activities related to the benzene value chain up to the 2 Polyurethane precursors, TDI and MDI, together into 1 division, reduced interfaces and will benefit from a more integrated technology steering. Electronic Materials is set up as a separate business unit in the Monomers division, where it has a strong raw material integration.
The Intermediates division comprises all methane-based Chemicals in our Verbund, with the exception of the ammonia value chain, which is part of our Monomers division. The value chain from acetylene off-gas to methanol formaldehyde and methylamine is now part of Intermediates. The acetylene value chain will remain in Intermediates, as well as the formamide and formic acid value chains. Because the acetylene value chain includes butanediol, which serves as a monomer in the production of PBT plastics, we also transferred the production of PBT resins, previously within Performance Polymers, to the Intermediates division.
The benefits for the C1 value chain are: that all products and byproducts of the butanediol value chain are in one division; we reduced cross-divisional interfaces; and we can offer a broader portfolio of inorganic Intermediates for the pharmaceutical industry, complemented by other products from BASF's portfolio.
Now to Functional Materials & Solutions. In Functional Materials & Solutions segment, the new division Performance Materials combines the polymer materials platform for chemistry-enabled customer solutions. We allocated to this new division the following businesses: the downstream businesses of engineering plastics and specialty polymers of the former Performance Polymers division and the Polyurethanes division's Polyurethane systems, TPU, Cellasto and Polyol businesses; the epoxy systems business from the former Intermediates division; and styrenic foams from the former Performance Polymers division. The focus of the new division Performance Materials is on strengthening our "one face to the customer" approach and intensifying our approach to key industries, for example, automotive, construction, electrics and electronics. All other segments and operating divisions remained unchanged. And with this, I hand it over to Manfredo Rübens, who will give you more insights into IFRS 10 and 11 and IAS 19 revised.