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Best practice case study: The BASF Factbook

Innovations in IR practice can have a major impact on the way businesses are assessed in financial markets. Magdalena Moll and her colleague Tobias Höld explain the success of the Factbook.

 

The purpose of good IR is simple: effective communication between a company and its financial audiences, to promote understanding and drive valuation. But what if the company in question is far from simple? This is the challenge we face at BASF because, by any measure, BASF is a large and complex organisation. With total sales in 2015 of over €70bn, we operate across five major segments, subdivided into 13 operating divisions with over 80 strategic business units. BASF products range from oil and gas exploration to new surfaces and colours for cars and eco-friendly cement for construction. We have a manufacturing presence in every continent and customers in almost every country in the world.

Furthermore, the global chemicals industry is evolving rapidly – we cannot stand still for a moment if we are to retain our competitive edge. BASF employs around 10,000 people in research and development (R&D) alone, and recent years have seen significant corporate restructuring as we transition from commodity chemicals to specialised, high-tech products and solutions. So the BASF portfolio is also constantly changing. Unsurprisingly, even sector-specialist analysts who have followed BASF closely for many years will freely admit that distilling all this into just one number – a target share price – is a daunting prospect. Our job is to make it possible.

Immediate impact
When we developed our first Factbook our aim was to provide an overview of the BASF universe in a way that was comprehensive, but manageable. Its impact was immediate and, since then, we have continued to produce a Factbook every year; it has become an integral part of our communications with the financial community and a mainstay of our ambition to provide best practice in IR. We have refined it over time and now it complements the annual and interim reports and the capital markets story, adding narrative colour to the financial data and providing audiences with a full suite of resources.

We enjoy more freedom of expression in the Factbook than in our regulatory publications. Yes, we have to distil a large volume of information in the Factbook to merit its title, but we can present it in creative and visually appealing ways. It gives us an opportunity to showcase recent achievements: product innovations, expansion into new markets, collaboration with partners, and progress in sustainability and green technologies, all illustrated with case studies. Concepts which set BASF apart from its peers – such as the ‘Verbund’ system of maximising efficiency – can be discussed in depth. 2015 was the company’s 150th anniversary, and we celebrated this in the Factbook by looking back at some of the major milestones in our corporate history.

Innovation at the heart
To be a useful tool to a variety of users, the Factbook must be accessible and easily navigable so the readers can find the level of detail they require. Therefore, its basic structure is fairly straightforward. The first section starts with a bird’s eye view of the whole group, including an ‘at a glance’ summary of corporate structure and the headline financial figures. We outline our perspective on the challenges facing the world in which we operate, how that influences our strategic thinking, and how BASF adds value as one company. Innovation is at the heart of BASF, so the first section includes a detailed review of how we organise R&D and an update on significant developments. Other topics will include a re-cap of management structure, marketing strategy, and portfolio management. In addition we provide details on our capex plans as part of our growth strategy. The second section studies each of the five main business segments individually, outlining their 13 divisions and major product areas, and breaking down the financial data for those who want to dig deeper into the numbers. There are statements on the competitive landscape and BASF’s market positions, and an update on efficiency programmes. Innovation examples are used throughout to illustrate the message. The third and final section is ‘Financials’: an analysis of the share price performance, and a 10-year summary of the group’s results.

Producing the annual Factbook is a major undertaking, particularly given our commitment to best practice status. We insist that the production values are every bit as high as those we apply to our annual report. There is a vast body of information to be gathered and verified; the graphics must be both interesting and intuitively informative; the photography must be relevant and eye catching; and the case studies must be carefully selected to encapsulate what we do and why. The overall tone and style must send the right message about how we see ourselves. The final result is a comprehensive document which is a portrait of BASF today.

Best in class
Fortunately, the feedback tells us that we are getting it right. Analysts and investors often comment that they refer back to the Factbook frequently throughout the year. One recently told us: “Whilst the annual report is something for my spreadsheet, the Factbook gives me a very good overview of the business and products that I don’t get anywhere else.” We know that the Factbook is widely used by other audiences too, especially internally – most BASF managers keep a copy close at hand. It is available via the website and, in 2015 it was downloaded 3,000 times, in addition to 2,500 printed copies. Numerous competitors have followed our lead and produced their own version, but we are proud that BASF’s Factbook is consistently named as ‘best in class.’ Now we just have to keep it there!

BASF is changing fast, continuing its transition further downstream into a leading edge developer of specialised, solutions-driven products with a huge range of applications that are helping to solve many global challenges. The Factbook is an invaluable tool to ensure that we bring the investment community along with us on that journey. 

Published: 24 March, 2016