BASF Agriculture Solutions Capital Markets Day Highlights and Analysis
BASF Agriculture Solutions Capital Markets Day Highlights and Analysis
Index
Overview
Rationale of the Spinout
BASF Business Overview and Strategic Priorities from Capital Markets Day
“Most customer centric organization in the agricultural industry”
Biologicals
Research and Development
Differentiated Steering
Final Thoughts
Overview
Last week, it was reported that BASF was reorganizing their businesses:
One of the major changes was moving the Agricultural Solutions business to be stand alone, and targeting an IPO by 2027.
BASF stock was up ~6% on the week after the news.
Using comprisons’s to other ag companies, like Corteva and FMC, it could put the BASF Ag Solutions business value at more than €20 billion.
Rationale of the Spinout
The news wasn’t a surprise
In December 2023, BASF said in an investor presentation that they “seen a clear trend toward pure-play competitors that cater to the specific needs of the respective industries and customers they serve.”
They were wanting to move the Ag Solutions division to operate more independently and flexibly, enabling the ag solutions division to break from the tradition of their industrial and engineering competency, to be able to move towards new business models that “provide farmers with agricultural solutions connecting crop protection, seeds and traits as well as digital solutions” and “generate new business models.”
I went on to state about the news:
The effort ultimately raises the question of whether BASF does spin off the agriculture solutions division entirely. Investors want focused businesses; they want to diversify for themselves, and they do not want that to be done by the business itself operating across various industries. This means, not only are there benefits internally for BASF to move in this direction, but there is opportunity to derive better multiples from investors, increasing stock prices.
The change was targeting the Agricultural Solutions business to be stand alone by 2027.
However, internal initiatives would start rapidly.
Consider Syngenta Group has been trying to IPO for several years. They are unique with Chinese ownership, however, it’s hard to ignore that IPOing with several years of poor results can be challenging.
BASF has had a particularly hard first half, with revenue down over 13% and EBITDA down a whopping 68%:
BASF Business Overview and Strategic Priorities from Capital Markets Day
BASF shared their revenue splits more in depth:
BASF also laid out their priorities:
They aim for these priorities to drive improved EBITDA margins and total EBITDA.
The priorities are worth breaking down.
The first is focusing on cropping systems:
They determined their focus cropping systems to be: soybean, wheat, fruit and vegetable and rice:
They went onto mention an ecosystem of digital products:
Given the share of their business that is in North America (40%), if this is a strategic priority one has to assume they will look to launch more products from xarvio into the market, whether that is “healthy fields” or an emphasis on their JV with Bosch, ONE Smart Spray: