basf "we create chemistry" strategy

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BASF Strategy: We create chemistry London November 29, 2011

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BASF plans to strengthen its position as the world’s leading chemical company. In its further developed strategy “We create chemistry”, BASF outlines how it wants to achieve this. This presentation was given at the Investor Day in London on November 29, 2011. For more see http://www.basf.com/group/corporate/en/about-basf/strategy/index

TRANSCRIPT

Page 1: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry

London November 29, 2011

Page 2: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 2

Forward-looking statements

This presentation includes forward-looking statements that are subject to risks and uncertainties, including those pertaining to the anticipated benefits to be realized from the proposals described herein. This presentation contains a number of forward-looking statements including, in particular, statements about future events, future financial performance, plans, strategies, expectations, prospects, competitive environment, regulation and supply and demand. BASF has based these forward-looking statements on its views with respect to future events and financial performance. Actual financial performance of the entities described herein could differ materially from that projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and financial performance may be better or worse than anticipated. Given these uncertainties, readers should not put undue reliance on any forward-looking statements.

Forward-looking statements represent estimates and assumptions only as of the date that they were made. The information contained in this presentation is subject to change without notice and BASF does not undertake any duty to update the forward-looking statements, and the estimates and assumptions associated with them, except to the extent required by applicable laws and regulations.

Page 3: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 3

What do we want to achieve today?

Explain where we stand today and how this supports our future growth

Share our view on major trends and growth perspectives of the chemical industry

Present our new strategic principles and financial targets

Show how our strategy will increase shareholder value

Page 4: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 4

Our strengths

Operational excellence

Investments

Growth

Sustainability

Acquisitions

Customer orientation

Innovation

Diversity & Inclusion Employer attractiveness

“The Chemical Company”

Portfolio development Team

Technology

Verbund

Page 5: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 5

BASF today Trends Purpose and strategic principles Targets Strategic levers BASF tomorrow – Board priorities

Page 6: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 6

Outperformed global chemical production by 4 percentage points p.a.

Sales to third parties in billion €

BASF total growth 7.8% p.a.

BASF volumes + M&A 6.6% p.a.

BASF volumes 4.1% p.a.

Global chemical production 3.0% p.a.

30

60

20

50

40

Prices

12

33

Volumes

14

64

M&A

11

Currencies

–6

70

2001 2010

Page 7: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 7

€9bn (Sales excl. planned

measures)

Portfolio development towards more market driven and innovative businesses

Acquisitions

Crop protection Engineering plastics Electronic chemicals Custom synthesis Catalysts Construction chemicals Water-based resins Pigments Plastic additives Oil & Gas Personal care & food

€15bn (Sales)

BASF core business

Strong partnerships

Gazprom Monsanto Petronas Shell Sinopec Total

Divestitures

Pharma Fibers Printing systems Polyolefins Polystyrene Americas Agro generics Vitamins premix Fertilizers (planned) Styrolution (planned)

Selected transactions 2001 − today

Page 8: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 8

Strong sales and earnings increase in all segments

Sales by segment in billion €

Chemicals

2001 2010

5.0

11.4

EBITDA by segment in billion €

Initiatives for growth

2001 2010

0.90

3.0

Plastics

2001 2010

5.4 9.8

2001 2010

0.53 1.7

New steam cracker in Port Arthur

Start-up of Verbund site in Nanjing

Expansion of Antwerp New technologies

(e.g. acrylic acid)

Integrated world-scale plants and technology leadership

New plants (MDI/TDI in China, HPPO in Antwerp)

Innovations: Ultramid®, Ultradur®, Neopor®, Ecoflex®

Page 9: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 9

Strong sales and earnings increase in all segments

Sales by segment in billion €

Performance Products

2001 2010

7.4

12.3

EBITDA by segment in billion €

Initiatives for growth

2001 2010

0.52 2.2

Functional Solutions

2001 2010

2.3

9.7

2001 2010

0.16 0.86

Ciba / Cognis Strong relations with

multinational companies New plants (Citral, SAP,

surfactants, PIB) Innovations: Personal

care and food ingredients

Engelhard / Degussa Construction Chemicals

Strong cooperation with leading OEMs

Innovations: Diesel Oxidation Catalyst, scratch-resistant coatings

Page 10: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 10

Innovations: F500®, Boscalid, Kixor®

Plant Health (AgCelence®) SeedSolutions Expansion in emerging

markets

Strong sales and earnings increase in all segments

Sales by segment in billion €

Agricultural Solutions

2001 2010

3.5 4.0

EBITDA by segment in billion €

Initiatives for growth

2001 2010

0.51 0.94

Oil & Gas

2001 2010

4.5

10.8

2001 2010

1.6 3.0

E&P expansion in Russia and Norway

1P reserves 2010: 1,123 million boe (R/P ratio = 10 years)

Gas for Europe Strategy

Page 11: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 11

Strong and profitable growth in emerging markets

0

20

40

60

2001

28%

34%

2010

53

28

Developed markets* Emerging markets *BASF definition: Developed markets include EU15, Norway, Switzerland, North America, Japan, Australia, New Zealand

22%

0

2

4

6

8

10

2001

34%

2010

8.2

2.5

25%

Sales BASF Group excluding Oil & Gas in billion € by location of customer

EBITDA BASF Group excluding Oil & Gas in billion € by location of customer

Page 12: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 12

Strong focus on operational excellence

BASF Group 2001–2010 Index

50

100

150

200

250

300

2001 2004 2007 2010

CAGR

12 %

8 %

2 %

EBITDA

Sales

Fixed costs

Page 13: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 13

Generating high EBITDA margins

EBITDA margin in %

Target range

2010 2001 2002 2003 2004 2005 2006 2007 2008 2009

14.6 15.3 17.6 18.5 19.3 20.5

17.4 15.3 15.8

12.7

18

14

Page 14: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 14

Decade of outperformance in sector margins

EBITDA margin in %

0

5

10

15

20

25

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

BASF Group EBITDA margin

European chemical sector Ø*

US chemical sector Ø**

Asian chemical sector Ø***

* AkzoNobel, Arkema, Clariant, DSM, Evonik (Degussa), Lanxess, Solvay

** Celanese, Dow, DuPont, Huntsman, PPG *** Formosa Plastics, Mitsubishi Chemicals, Mitsui

Chemicals, Sinopec Chemicals, Sumitomo Chemicals Source: Company reports, Thomson One, Reuters

Page 15: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 15

Solid track record of earning a premium on cost of capital

EBIT after cost of capital* in billion €

2010 2001 2002 2003 2004 2005 2006 2007 2008 2009

–0.2**

1.6

2.9

2.1 2.4

1.8

–0.6 –0.6

–2.6

3.5 Target first established

* Cost of capital rate varied from 9% to 13% ** Including Ciba integration costs of €0.8 billion

Page 16: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 16

Best-in-class asset profitability – Capital turnover improved by 2% p.a.*

EBITDA on total assets in %

2001

DuPont

DSM

Dow

Celanese

Bayer

AkzoNobel

25%

20%

15%

10%

5%

0% 80 60 40 20 0

BASF SABIC

Degussa

Sales in billion €

2010

80 60 40 20 0

BASF

SABIC Lanxess

Evonik DuPont DSM

Dow Celanese

Bayer

AkzoNobel

= EBIT * Capital turnover = sales over total assets

Page 17: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 17

Generating strong EPS growth

Earnings per share** in €

* Excluding extraordinary income ** Adjusted for 2:1 stock split in 2008

2010 2001 2002 2003 2004 2005 2006 2007 2008 2009

4.96

1.54

3.13

4.16

3.19 2.87

1.83

0.81 1.30

–0.10*

Page 18: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 18

From 2001 to 2010, BASF paid dividends in the amount of ~€13 billion

Delivering attractive shareholder returns

Dividend per share in €

* Dividend yield based on share price at year-end

1.701.951.95

1.50

1.000.850.700.700.65

2.20

2001 2004 2007 2010

Dividend payments

3.9% 3.1% 3.2% 3.1% 4.1% 3.8% 7.0% Yield* 3.7% 3.1% 3.9%

From 2001 to 2010, BASF bought back shares in the amount of €8.9 billion

This equaled ~25% of total shares outstanding

Share buy-backs

Page 19: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 19

Delivering consistent, long-term value – Last 10 years

Long-term performance November 2001 – October 2011 (average annual performance with dividends reinvested)

-1 2 5 8 11 14

BASF

Euro Stoxx 50

DAX 30

MSCI World Chemicals

+3.0%

+15.1%

Last 5 years

+8.2%

–1.0%

13.7%

–6.9%

–0.4%

4.0%

Page 20: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 20

BASF today

The leading chemical company

No. 1 – 3 market positions in over 75% of businesses

Active management of portfolio towards higher returns and less cyclicality

Focus on innovative products and solutions

Benchmark in operational excellence with unique Verbund concept

Strong earnings power, high cash flow generation and a strong financial profile

Generation of long-term attractive shareholder returns

Page 21: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 21

BASF today Trends Purpose and strategic principles Targets Strategic levers BASF tomorrow – Board priorities

Page 22: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 22

Demographic challenges set the stage for the future of the chemical industry

Nine billion people in 2050 but only one earth

Resources, Environment & Climate

Food & Nutrition Quality of life

Chemistry as enabler

Page 23: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 23

Key trends for the chemical industry

Integrated chemical companies remain cornerstone

Emerging markets players grow quickly

Raw material players invest further downstream

Competitive landscape will change

Use opportunities from sustainability

Increase resource efficiency

Renewables as raw materials

Stakeholder dialog

Sustainability as strategic driver

Chemistry as enabler

Chemical products replace traditional materials

Create innovative sustainable solutions

Innovation gains in importance

Growth will accelerate

Industrial production > GDP

Chemical production > GDP

Emerging markets will outgrow developed markets

Chemical industry remains an attractive growth industry

Page 24: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 24

Chemicals to outgrow key customer industries

Transportation

100

142

138219

23

127

0

1

2

3

4

5

6

7

8

9

10

0 1 2 3 4 5 6 7 8 9 10

in %

Construction Agriculture

Customer industry growth CAGR 2010-2020 in % p.a.

Energy & Resources

Electronics

Health & Nutrition

Consumer Goods

Che

mic

al p

rodu

ctio

n gr

owth

C

AGR

201

0-20

20 in

% p

.a.

= Market of 2020 in bn € (real, 2008)

148

Chemicals growth above customer industries

Chemicals growth below customer industries

Source: BASF

Page 25: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 25

BASF Today Trends Purpose and strategic principles Targets Strategic levers BASF tomorrow – Board priorities

Page 26: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 26

Our purpose

We create chemistry for a sustainable future.

Page 27: BASF "We create chemistry" strategy

Our strategic principles

Page 28: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 28

Our strategic principles

We add value as one company.

We innovate to make our customers more successful.

We drive sustainable solutions.

We form the best team.

Page 29: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 29

We add value as one company

Hedging

Operational excellence

Financial strength

Global reach

People Verbund

Customer Verbund

Production Verbund

Technology Verbund

Value chains

Construction

Electronics

Energy & Resources

Consumer Goods Transportation

Agriculture

Health & Nutrition

Page 30: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 30

BASF today Trends Purpose and strategic principles Targets Strategic levers BASF tomorrow – Board priorities

Page 31: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 31

Assumptions 2010 – 2020

Growth 2001 - 2010

Global GDP 2.5% p.a.

Chemical production (excl. pharma) 3.0% p.a.

Industrial production 2.4% p.a.

Growth 2010 – 2020 (Forecast*)

3.0% p.a.

4.0% p.a.

3.8% p.a.

* Assumptions 2010-2020: Exchange rate $/€ Ø 1.40, Oil price Ø $110/bbl

Page 32: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 32

Striving for strong profitable growth

Sales* in billion €

64

2010 Target 2020

Target 2015

Investments

Acquisitions Innovations

Investments

Acquisitions Innovations

~85

~115

We will outperform chemical production by 2 percentage points p.a. * Potential impact of IFRS changes not included

Page 33: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 33

All regions will deliver profitable growth

Regional sales targets 2020 (by location of customers) in billion €

North America

2010 2020

13

~5.5% p.a. ~22

South America, Africa, Middle East

~8% p.a.

5 ~11

Europe

~4.5% p.a.

33

~53

Asia Pacific

~8% p.a.

13 ~29

2010 2020

2010 2020 2010 2020

19%* 20%* 46%* 52%*

25%* 20%* 10%* 8%*

* Percentage of total sales

Page 34: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 34

Doubling EBITDA by 2020

EBITDA* in billion €

2010 Target 2020

Target 2015

11.1

~23

~15 Op. Excellence

Growth

Acquisitions

Op. Excellence

Growth

Acquisitions

* Assumptions 2010-2020: Exchange rate $/€ Ø 1.40, Oil price Ø $110/bbl

Page 35: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 35

BASF today Trends Purpose and strategic principles Targets Strategic levers BASF tomorrow – Board priorities

Page 36: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 36

Our strategic levers

Portfolio development

Market approach

Innovations for a sustainable future

Investments

Acquisitions

Operational excellence

Page 37: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 37

BASF today Trends Purpose and strategic principles Targets Strategic levers – Portfolio development – Market approach – Innovations for a sustainable future – Investments – Acquisitions – Operational excellence

BASF tomorrow – Board priorities

Page 38: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 38

Successfully managing an integrated company

Performance

Mar

ket a

ttrac

tiven

ess hi

gh

low

low high Circle size: Strategic Business Unit sales

= €1bn

Divested businesses: - Fertilizers (planned) - Styrenics (planned) - Polyolefins - Printing inks - Fibers

76 Strategic Business Units Majority of businesses in

attractive markets due to active portfolio management

Performance is a weighted score based on operating profitability and competitive position (e.g. market share)

Market attractiveness is a weighted score based on market growth and market size, innovation opportunities and competitive environment

Page 39: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 39

We expand from chemicals to chemistry

Chemistry as key enabler for functionalized materials & solutions

Deep understanding of customer value chains required

New molecules

Improved applications

Functionalized materials & solutions

1960 1970 1980 1990 2000 2010 2020

Batteries, membranes ...

Page 40: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 40

A different look at our current portfolio...

Excellent position and growth opportunities; synergies with chemical businesses

Chemical business based on our production Verbund

Customer-oriented specialties, backward integration in Verbund value chains

Integration of competencies in chemistry: R&D, technology, market knowledge and global access to customer industries

Functionalized Materials & Solutions

Classical Chemicals Customized Products

Oil & Gas

Exploration & production of oil and gas, gas trading activities

Cracker products, plastizicers, acrylic acid, MDI/TDI

PU systems, vitamins, personal care ingredients

Battery materials, water solutions, crop protection agents, engineering plastics

Page 41: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 41

...which we will further strengthen

Selectively enter materials and solutions business where chemical competence is growth driver

Classical Chemicals

Customized Products

Functionalized Materials & Solutions

Synergies and growth via technology and customer industry Verbund

Expand market position downstream in existing and adjacent value chains

Expand market positions outside of Europe

Keep profitable production Verbund businesses

Portfolio strategy

Oil & Gas Expand E&P in core regions Grow natural gas business in Europe

Battery materials Crop protection Water solutions

Cognis Ciba Strong R&D pipeline

Expansion of Nanjing New chemical

complexes in Malaysia and Brazil

Initiatives taken

Achimov, Revus Nord Stream, South

Stream

Page 42: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 42

Moving downstream towards customer industries

* Agriculture, Construction, Consumer Goods, Health & Nutrition, Electronics, Energy & Resources, Transportation ** Sales excluding Oil & Gas

Functionalized Materials & Solutions Customized Products Classical Chemicals

2020 in % of sales**

Chemical Industry First customer industries*

2010 in % of sales**

~ 40%

~30% ~ 70%

2001 in % of sales**

~ 50%

~ 60%

~ 50%

Page 43: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 43

Oil & Gas business provides significant advantages for BASF

Oil & Gas

Strong contributor to BASF’s profitable

growth

Significant cash flow

and long-term

profitability

Hydrocarbon hedge

Technological synergies through BASF

Verbund

Page 44: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 44

BASF today Trends Purpose and strategic principles Targets Strategic levers – Portfolio development – Market approach – Innovations for a sustainable future – Investments – Acquisitions – Operational excellence

BASF tomorrow – Board priorities

Page 45: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 45

Building on our cross-divisional customer industry approach

BASF sales by first customer industry*

Bubble Size: BASF divisional sales by first customer industry (2010)**

* Excluding Oil & Gas and Other ** Excluding Agricultural Solutions, Nutrition & Health, Oil & Gas and Other

> 15 %

< 10 %

< 10 %

> 15 %

Inorganics Petro- chemicals

Construction Chemicals

Dispersions & Pigments

Catalysts Intermediates Coatings Care Chemicals

Performance Polymers

Poly- urethanes

Performance Chemicals

Paper Chemicals

Consumer Goods

Transportation

Construction

Energy & Resources

Page 46: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 46

Combining cross-divisional technology competencies with customer know-how

Smart forvision – joint concept car of Daimler and BASF

E-textiles

Solar roof with transparent organic solar panels and OLED modules

Multifunctional seat

Infrared-reflective coating

Infrared-reflective film

High performance foams

Lightweight tridion cell

All-plastic wheel

Page 47: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 47

Significant opportunities in wind energy

Epoxy systems and adhesives (Intermediates)

Paint (Coatings) Core foams (Plastics)

Sales potential by 2020: ~ €300 million

Blades

Grouts and admixtures (Construction Chemicals)

Paint (Coatings)

Tower and base

Hydraulic fluids and gear oils (Performance Chemicals)

Nacelle

Tower and base

Blades

Nacelle

Page 48: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 48

BASF today Trends Purpose and strategic principles Targets Strategic levers – Portfolio development – Market approach – Innovations for a sustainable future – Investments – Acquisitions – Operational excellence

BASF tomorrow – Board priorities

Page 49: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 49

Sustainability will become even more important

SUPPLY DEMAND

1976 2010

Annual regenerative capacity of the planet

Human beings now demand more from the Earth than can be regenerated

Earth’s resources

Consumption of Earth’s resources

+

Page 50: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 50

Advancement of sustainability: Integration into everyday business

1960s 1970s 1980s 1990s 2000s Beyond 2010

Safety

+ Emission control

+ Climate protection

+ Social responsibility

+ Integration / portfolio

Motivation

Regulatory Cost

Value generation Sources: Booz & Company; UN World Commission on Environment and

Development; Archive company data and reports

Page 51: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 51

Chemistry as an enabler for many customer industries

Sustainability in customer industries will drive our innovative growth fields

Health & Nutrition

Consumer Goods Construction Transportation Electronics Energy &

Resources Agriculture

Customer industries

Energy management

Water solutions

Wind energy

Rare earth metals

recycling

Heat management

Enzymes Plant biotechnology

Batteries for mobility

Lightweight composites

Heat management

Functional crop care

Medical Organic Electronics

Growth Fields*

*Including growth fields still under evaluation

Ongoing inflow of new growth fields

Page 52: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 52

Growth field: Batteries for electromobility

Market size: > €20 billion Sales potential for BASF: > €500 million

Business potential 2020

Chemicals & materials for lithium-ion batteries

Work on battery concepts for Generation IV Intensive collaboration with universities &

industry partners

Existing activities

Position BASF as a system supplier for cell manufacturers

Utilize technology and business synergies Expand electrolyte activities

Targets

Page 53: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 53

Growth field: Water Solutions

Market size: €20 billion BASF sales potential: > €800 million

Business potential 2020

High-performance flocculants, desalination and antifouling chemicals & polymers used in membranes (BASF & Ciba)

Acquired know-how on membrane technologies and module systems (inge watertechnologies)

Position BASF as the leading supplier of innovative chemical solutions worldwide

Forward integration into membrane technologies Leverage synergies to develop improved

additives, flocculants and polymers

Targets

Existing activities

Page 54: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 54

Global trait value in 2020: ~€11 billion Expected gross trait sales potential of plant biotech

pipeline before partner share in 2020: €1.9 billion

Business potential

Yield & Stress collaboration with Monsanto (corn, soy, cotton, canola and wheat)

Further collaborations with Bayer, Cargill, CTC, Embrapa and KWS

Position BASF as “The Trait Technology Partner” Achieve more efficient agriculture and healthier

nutrition Implement a Plant Biotechnology operating

division within the Agricultural Solutions segment

Targets

Existing activities

Growth field: Plant biotechnology

Page 55: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 55

AgBalance™ – Manage progress in agriculture sustainability

Farm profits Variable and

fixed costs Subsidies ...

AgBalanceTM

Independent assurance of functionality and coherence received by:

Unique and holistic method that assesses sustainability in agriculture

Creates value for customers, stakeholders and BASF:

Helps our customers (e.g. farmers) to differentiate with more sustainable solutions

Fosters more rational debate on sustainability in agriculture

Guides BASF`s own strategy and portfolio development with specific focus on sustainable solutions

Consumers Fair trade Future

Generations ...

Biodiversity Water Use Soil Emissions ...

Page 56: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 56

Sustainability as future growth driver

Connect – in our team and with society

Enable our customers to develop more sustainable solutions

Deliver excellence in our operations

Creating value

Reducing risk

We fully integrate sustainability into our strategic decision making

Page 57: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 57

Asia will lead in R&D spending in 2020

€1bn €3bn

€15bn €25bn

~ €200bn ~ 6% CAGR

Brazil

United States

Mexico

Canada

Spain Italy

Poland

Egypt

Finland

U.K.

France

Israel

Hungry Serbia

Czech Belgium

Netherlands

Denmark

Sweden

Malaysia Singapore

Japan

India

Philippines

Russia

China

Thailand

Vietnam Taiwan

Australia

~ €190bn ~ 6% CAGR

~ €240bn ~ 9% CAGR

Ireland Germany

Switzerland Austria

Page 58: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 58

BASF’s global R&D footprint today North America: 1,330 employees in R&D

Europe: 7,500 employees in R&D

Major R&D site

Asia 550 employees in R&D

South America: 220 employees in R&D

Page 59: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 59

Strengthening our R&D platform in Asia Pacific to accelerate growth

Innovation in Asia for Asia

8 R&D sites plus technical centers in Asia Pacific

R&D experts to increase from 550 to more than 800 by 2020

€55 million investment includes innovation campus and Greater China head office

Leverage global R&D capabilities with Competence Centers in Singapore, India and China

Co-operations with ~100 institutes and universities BASF‘s new innovation campus in Shanghai

Page 60: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 60

Targeted €7 billion of EBITDA from innovations in 2020

Sales and EBITDA from innovations in billion €

2015 2020

~10

~30

Targeted spending of ~3% of sales (excluding Oil & Gas) p.a. on R&D

Sales from innovations launched within last 5 years

Sales from innovations launched within last 10 years

~2.5

~7 EBITDA from innovations launched within last 5 years

EBITDA from innovations launched within last 10 years

Page 61: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 61

BASF today Trends Purpose and strategic principles Targets Strategic levers – Portfolio development – Market approach – Innovations for a sustainable future – Investments – Acquisitions – Operational excellence

BASF tomorrow – Board priorities

Page 62: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 62

Emerging markets will contribute 60% to global chemical production in 2020

Global chemical production (excl. pharma) Trillion $ (real 2005)

Emerging markets Developed markets*

of which China

World

~1.2 1.1 ~1.4

1.0

0

0.5

1.0

1.5

2.0

3.0

0.9

0.4

~2.1

~3.1

~1.3

2.5

~45% ~40%

1995 2010 2015

~1.3

~1.8

~50%

2020

*BASF definition: Developed markets include EU15, Norway, Switzerland,

North America, Japan, Australia, New Zealand

Source: BASF

Page 63: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 63

Growth above market with increasing share from emerging markets

*BASF definition: Developed markets include EU15, Norway, Switzerland, North America, Japan, Australia, New Zealand

** Sales excluding Oil & Gas

2020 in % of sales**

2010 in % of sales

(€53bn**)

2001 in % of sales

(€28 bn**)

Emerging markets Developed markets*

~ 66%

~55% ~ 45%

~ 78%

~ 34%

~ 22%

Page 64: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 64

Investments will boost future organic growth

Future investments in € billlion

Nanjing expansion Expansions in Malaysia MDI plant in Chongqing TDI plant in Europe Acrylic acid complex

including superabsorbents in Brazil

Sodium methylate plants in South America

Antioxidants in Bahrain Achimov Blocks IV and V Battery materials in the

United States

Current major projects

Thereof investments in emerging markets

Total investments

35-45%

15-20

30-40%

~15

2006 – 2010 2011 – 2015 2016 – 2020

10.9

~20%

Page 65: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 65

BASF today Trends Purpose and strategic principles Targets Strategic levers – Portfolio development – Market approach – Innovations for a sustainable future – Investments – Acquisitions – Operational excellence

BASF tomorrow – Board priorities

Page 66: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 66

Acquisitions will contribute to profitable growth in the future

Are EPS accretive by year three at the latest

Provide a minimum return on investment of 8% after tax

Financial acquisition criteria

Generate profitable growth above the industry average

Are innovation-driven

Offer a special value proposition to customers

Reduce earnings cyclicality

Strategic acquisition criteria

We want to acquire businesses which…

Page 67: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 67

BASF today Trends Purpose and strategic principles Targets Strategic levers – Portfolio development – Market approach – Innovations for a sustainable future – Investments – Acquisitions – Operational excellence BASF tomorrow – Board priorities

Page 68: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 68

Annual earnings contribution of ≥€1 billion from NEXT will be achieved in 2012

> 500 individual projects to simplify processes, structures and production sites in all regions

Project timeline: 2008-2011

Annual earnings contribution of €600 million in 2010 achieved

Annual earnings contribution of more than €1 billion will be achieved in 2012

Annual earnings contribution in € million

NEXT New EXcellence Targets

0

500

1,000

1,500

2,000

2,500

2003 2005 2007 2009 2012

Completed restructuring programs

Operational excellence program NEXT

Page 69: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 69

New operational excellence program STEP: Earnings contribution ~€1 billion

Annual earnings contribution in € million

Optimization of processes, structures and production sites in all regions

Measures: – Fixed cost savings – Margin improvement – Capacity increase – Better sourcing

Project timeline: 2012 - 2015 Targeted earnings contribution of

about €1 billion by end of 2015

STEP STrategic Excellence Program

0

1,000

2,000

3,000

2012 2015

Former cost saving programs NEXT STEP

Page 70: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 70

BASF today Trends Purpose and strategic principles Targets Strategic levers BASF tomorrow – Board priorities

Page 71: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 71

Key financial targets 2015 / 2020

Grow at least 2 percentage points above chemical production

Earn a premium on cost of capital of at least €2.5 billion on average p.a.

Profitability targets Growth targets

2015

2020

Sales ~€85 billion

Sales ~€115 billion

EBITDA ~€15 billion

Double EBITDA to ~€23 billion (compared with 2010)

Page 72: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 72

Cash generation enables business growth and shareholder returns

Source of cash (2001-2010) in €

Use of cash (2001-2010) in €

Cash and financing 5%

Earnings after tax 35%

Depreciation 44%

Acquisitions 19%

Dividend 20%

Capex 35%

Divestitures 15%

Share buy- back 13% €68

billion €68

billion

Working capital 5%

CTA* % others 8%

Financial investments

& Other 1%

* Contractual Trust Agreement: transfer of pension obligations to external trust

Page 73: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 73

Our financial policies

Pursue capital discipline

Focus on tight working capital management

Support growth with profitable acquisitions

Grow dividend

Consider share buy-back program

Maintain a solid A credit rating

Page 74: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 74

Our strategy will create shareholder value

Earnings per share in €

Business growth 1.30

4.96

2002 2010

0.5

0.9

0.8

1.5 Margin

Tax rate

Share buy-back

Target 2015

~7.5

„STEP“

Share buy-back

Growth

Page 75: BASF "We create chemistry" strategy

BASF Strategy: We create chemistry__November 2011 75

BASF tomorrow – Roadmap to 2020

We add value as “One company”

Continued top and bottom line growth with key focus on emerging markets

Expansion of portfolio downstream towards functionalized materials and solutions

Strong focus on sustainability and innovation

Commitment to deliver long-term shareholder value