The questions
1. World economic growth remains slow. Has your company taken particular financial measures as a precaution against a prolonged downturn? What are they?
2. Most corporates finance themselves with a combination of loans, bonds and commercial paper. How do you decide on the mix that’s right for your company?
3. Many banks use credit derivatives to transfer their lending risk. How do you feel about banks doing this with your loans?
4. Corporate treasurers are being encouraged to place spare cash in money market funds rather than bank deposits. What is your view of this trend?
5. Has the overall service you get from banks improved, got worse or stayed the same over the past 12 months? What kind of further service improvements would you like to see?
1. BASF takes a long-term view of growth and investments. We are investing in Asia, aiming to generate more than 20% of our group sales there by 2010. We are tightening our working capital and have adjusted our investment budget to strengthen our balance sheet. Our restructuring programme is bringing in cost savings of E1bn by the end of 2003.
2. We use mainly intercompany loans to finance our subsidiaries. Our commercial paper programme provides us with attractive rates and can be fine-tuned to our operational needs. A medium-term bond covers our longer-term funding needs. We fund in euro and US dollar, exploiting interest rate differentials and market opportunities.
3. As long as the terms and conditions offered to us by the banks are not negatively affected, we are not worried about this practice.
4. Actively managed money market funds bear the risk of not achieving the benchmark performance. However, in some cases they are attractive, especially for the medium-term investment horizon. For the short term (eg, overnight money), BASF mostly favours bank deposits.
5. The overall service of the banks has been satisfactory in the past 12 months. However, we observe increasing differences in service quality from bank to bank.