BASF: Fit for 2012 and beyond Dr. Stefan Marcinowski Member of the Board of Executive Directors Paris December 08, 2011 BASF Strategy: We create chemistry November 2011 1
Business review BASF Today Trends Targets Strategic levers BASF Tomorrow Board priorities 2
BASF with good earnings in Q3 Highlights Q3 2011 Business performance Q3 11 vs. Q3 10 Sales 17.6 billion +12% EBITDA 2.7 billion (8%) EBITDA margin 15.4% 18.6% EBIT before special items (bsi) 2.0 billion (11%) EBIT bsi adjusted for non-comp. oil taxes 2.0 billion (1%) EBIT 1.9 billion (13%) Net income 1.2 billion (4%) EPS 1.30 (4%) Adjusted EPS 1.52 0% Further sales growth in chemical activities mainly due to successful price increases Acquired Cognis business continues to perform strongly; synergy targets increased Agricultural Solutions on track for record year in sales and earnings EBIT before special items amounted to 2 billion. Adjusted for Libya, which contributed 355 million in last year s quarter, EBIT before special items increased by 6% compared to Q3 2010. 3
Outlook 2011 confirmed Outlook 2011 We expect to generate significantly higher sales We aim to significantly exceed the 2010 EBIT before special items adjusted for non-compensable oil taxes (2010: 7.2 billion) We will earn a high premium on our cost of capital Dividend policy We aim to continuously increase the annual dividend, or at least maintain it at the level of the previous year. 4
Business review BASF Today Trends Targets Strategic levers BASF Tomorrow Board priorities 5
Outperformed global chemical production by 4 percentage points p.a. Sales to third parties in billion 70 60 50 40 30 33 14 12 6 11 64 BASF total growth BASF volumes + M&A BASF volumes Global chemical production 7.8% p.a. 6.6% p.a. 4.1% p.a. 3.0% p.a. 20 2001 Volumes Prices Currencies M&A 2010 6
Portfolio development towards more market driven and innovative businesses Acquisitions Crop protection Engineering plastics Electronic chemicals Custom synthesis Catalysts Construction chemicals Water-based coatings Pigments Plastic additives Oil & Gas Personal care & food 15bn (Sales) BASF core business Selected transactions 2001 today Strong partnerships Gazprom Monsanto Petronas Shell Sinopec Total Divestitures Pharma Fibers Printing systems Polyolefins Polystyrene Americas Agro generics Vitamins premix Fertilizers (planned) Styrolution (planned) 9bn (Sales excl. planned measures) 7
Strong and profitable growth in emerging markets Sales BASF Group excluding Oil & Gas in billion by location of customer EBITDA BASF Group excluding Oil & Gas in billion by location of customer 60 40 20 28 28% 22% CAGR 13% CAGR 5.4% 53 34% 10 8 6 4 2 2.5 25% CAGR 18% CAGR 12% 8.2 34% 0 2001 2010 0 2001 2010 Emerging markets Developed markets* * BASF definition: Developed markets include EU15, Norway, Switzerland, North America, Japan, Australia, New Zealand 8
Strong focus on operational excellence BASF Group 2001 2010 Index 300 250 200 CAGR 12 % 8 % 2 % EBITDA Sales Fixed costs 150 100 50 2001 2004 2007 2010 9
Continuous strong free cash flow generation Free cash flow in billion 2.8 2.6 3.3 3.5 3.2 2.5 3.2 3.9-0.5-0.1 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 * Cash provided by operating activities less capex (in 2005 before CTA) ** 2009 adjusted for re-classification of settlement payments for currency derivatives 10
Delivering consistent, long-term value Last 10 years Long-term performance December 2001 November 2011 (average annual performance with dividends reinvested) +13.8% BASF Last 5 years +13.9% 1.7% Euro Stoxx 50 7.2% +2.0% DAX 30 0.7% +7.1% MSCI World Chemicals +3.5% -1 2 5 8 11 14 BASF Strategy: We create chemistry November 2011 11
Business review BASF Today Trends Targets Strategic levers BASF Tomorrow Board priorities 12
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 13
Key trends for the chemical industry Growth will accelerate Innovation gains importance Sustainability as strategic driver Competitive landscape will change Industrial production > GDP Chemical production > GDP Emerging markets will outgrow developed markets Chemistry as enabler Chemical products replace traditional materials Create innovative sustainable solutions Use opportunities from sustainability Increase resource efficiency Renewables as raw materials Stakeholder dialogue Integrated chemical companies remain cornerstone Emerging markets players grow quickly Raw material players invest further downstream Chemical industry remains an attractive growth industry 14
Chemicals to outgrow key customer industries Chemical production growth CAGR 2010-2020 in % p.a. 10 9 8 7 6 5 4 3 2 1 0 in % Chemicals growth above customer industries Health & Nutrition Energy & Resources 23 138 Agriculture 219 127 100 Construction Electronics Transportation 0 1 2 3 4 5 6 7 8 9 10 Customer industry growth CAGR 2010-2020 in % p.a. 148 142 Consumer Goods Chemicals growth = customer industries growth = Market of 2020 in bn (real, 2008) Chemicals growth below customer industries Source: BASF 15
Business review BASF Today Trends Targets Strategic levers BASF Tomorrow Board priorities 16
Striving for strong profitable growth Sales* in billion CAGR ~6% Innovations Acquisitions ~115 Investments 64 Investments Innovations Acquisitions ~85 2010 Target Target 2015 2020 We will outperform chemical production by 2 percentage points p.a. * Potential impact of IFRS changes not included 17
All regions will deliver profitable growth Regional sales targets 2020 (by location of customers) in billion North America ~5.5% p.a. 20%* 13 ~22 2010 2020 South America, Africa, Middle East ~8% p.a. 8%* 19%* 5 ~11 2010 2020 10%* Europe ~4.5% p.a. 52%* 33 ~53 2010 2020 46%* Asia Pacific ~8% p.a. ~29 13 20%* 2010 2020 25%* * Percentage of total sales 18
Doubling EBITDA by 2020 EBITDA* in billion 11.1 Growth Op. Excellence CAGR ~7.5% Growth Acquisitions ~15 Op. Excellence Acquisitions ~23 2010 Target Target 2015 2020 * Assumptions 2010-2020: Exchange rate $/ Ø 1.40, Oil price Ø $110/bbl 19
Business review BASF Today Trends Targets Strategic levers Portfolio development Market approach Innovations for a sustainable future Investments Operational excellence BASF Tomorrow Board priorities 20
Portfolio Development We expand from chemicals to chemistry 1960 1970 1980 1990 2000 2010 2020 New molecules Improved applications Chemistry as key enabler for functionalized materials & solutions Deep understanding of customer value chains required Functionalized materials & solutions Batteries, membranes... 21
Portfolio Development A different look at our current portfolio... Oil & Gas Classical Chemicals Customized Products Functionalized Materials & Solutions 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 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 BASF Strategy: We create chemistry November 2011 22
Portfolio Development Oil & Gas: significant advantages for BASF Strong contributor to BASF s profitable growth Hydrocarbon hedge Significant cash flow and long-term profitability Technological synergies through BASF Verbund Oil & Gas 23
Portfolio Development Moving downstream towards customer industries Classical Chemicals Customized Products Functionalized Materials & Solutions 2001 in % of sales** Chemical Industry ~ 50% First customer industries* ~ 50% 2010 in % of sales** ~ 40% ~ 60% 2020 in % of sales** ~30% ~ 70% * Agriculture, Construction, Consumer Goods, Health & Nutrition, Electronics, Energy & Resources, Transportation ** Sales excluding Oil & Gas 24
Market Approach Cross-divisional customer industry approach BASF sales by first customer industry* Bubble Size: BASF divisional sales by first customer industry (2010)** Consumer goods > 15 % Transportation Construction > 15 % < 10 % Energy & Resources < 10 % Inorganics Petro- Chemicals * Excluding Oil & Gas and Other ** Excluding Agricultural Solutions, Health & Nutrition, Oil & Gas and Other Construction Chemicals Catalysts Intermediates Coatings Dispersions & Pigments Care Chemicals Performance Chemicals Paper Chemicals Polyurethanes Performance Polymers 25
Innovations for a sustainable future Combining cross-divisional technology competencies with customer know-how Smart forvision joint concept car of Daimler and BASF Lightweight tridion cell High performance foams Solar roof with transparent organic solar panels and OLED modules E-textiles Infrared-reflective film Infrared-reflective coating Multifunctional seat All-plastic wheel 26
Innovations for a sustainable future Strengthening our R&D platform in Asia Pacific 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 BASF Strategy: We create chemistry November 2011 27
Innovations for a sustainable future Target EBITDA from innovations: 7 billion in 2020 Sales and EBITDA from innovations in billion ~30 Sales from innovations launched within last 5 years EBITDA from innovations launched within last 5 years ~10 ~2.5 ~7 Sales from innovations launched within last 10 years EBITDA from innovations launched within last 10 years 2015 2020 Targeted spending of ~3% of sales (w/o Oil & Gas) p.a. on R&D 28
Investments Investments will boost future organic growth Future investments in billlion ~15 15-20 10.9 30-40% 35-45% ~20% 2006 2010 2011 2015 2016 2020 Total investments Thereof investments in emerging markets 29
Investments Major projects in emerging markets MDI plant Chongqing, China Expansion Verbund site Nanjing* Expansion Verbund site Kuantan* Acrylic acid complex, Brazil Expanding gas production, Russia* 15% Stake in South Stream Emerging market sales target 2020: 45 % * Memoranda of Understanding signed 30
Operational Excellence New program STEP : Earnings contribution ~ 1 billion Annual earnings contribution in million 3,000 NEXT Program Annual earnings contribution of more than 1 billion will be achieved in 2012 2,000 1,000 0 Former cost saving programs 2012 2015 NEXT STEP STEP STrategic Excellence Program 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 31
Business review BASF Today Trends Purpose and strategic principles Targets Strategic levers BASF Tomorrow Board priorities 32
Key financial targets 2015 / 2020 Growth targets Profitability targets 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. 2015 Sales ~ 85 billion EBITDA ~ 15 billion 2020 Sales ~ 115 billion Double EBITDA to ~ 23 billion (compared with 2010) 33
Our strategy will create shareholder value Earnings per share* in CAGR ~9% STEP Share buy-back ~7.5 0.9 1.5 Margin 0.5 Tax rate 0.8 Share buy-back 4.96 Growth 1.30 Business growth 2002 2010 * Reported EPS; adjusted for 2:1 stock split in 2008 Target 2015
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 35
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. 36
We create chemistry
Backup BASF track record 2001-2010 BASF Strategy: We create chemistry November 2011 3838
Decade of outperformance in sector margins EBITDA margin in % 25 20 15 10 BASF Group EBITDA margin European chemical sector Ø* US chemical sector Ø** Asian chemical sector Ø*** 5 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 * 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 BASF Strategy: We create chemistry November 2011 39
Generating high EBITDA EBITDA in billion 7.7 8.2 9.7 CAGR (2001-2010) 12% 10.2 9.6 7.4 11.1 4.1 5.1 5.1 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 40
Generating strong EPS growth Earnings per share* in CAGR (2002-2010) 18% 3.19 2.87 4.16 3.13 4.96-0.10** 1.30 0.81 1.83 1.54 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 * Reported EPS; adjusted for 2:1 stock split in 2008 ** Excluding extraordinary income BASF Strategy: We create chemistry November 2011 41
Delivering attractive shareholder returns Dividend per share in 0.65 CAGR 14.5% 0.70 0.70 0.85 1.00 1.50 1.95 1.95 1.70 2.20 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Dividend payments From 2001 to 2010, BASF paid dividends in the amount of ~ 13 billion Share buy-backs From 2001 to 2010, BASF bought back shares in the amount of 8.9 billion This equaled ~25% of total shares outstanding Yield* 3.1% 3.9% 3.1% 3.2% 3.1% 4.1% 3.8% 7.0% 3.9% 3.7% * Dividend yield based on share price at year-end 42
Solid track record of earning a premium on cost of capital EBIT after cost of capital* in billion Target first established 1.8 2.4 2.1 2.9 1.6 3.5 0.6 0.6 0.2** 2.6 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 * Cost of capital rate varied from 9% to 13% ** Including Ciba integration costs of 0.8 billion BASF Strategy: We create chemistry November 2011 43
Best-in-class asset profitability Capital turnover improved by 2% p.a.* EBITDA on total assets in % 2001 25% 20% 15% 10% 5% AkzoNobel DSM Bayer SABIC DuPont Degussa Dow BASF 2010 Lanxess SABIC DSM Evonik DuPont Bayer Dow Celanese AkzoNobel BASF 0% Celanese 0 20 40 * Capital turnover = sales over total assets 60 80 0 Sales in billion BASF Strategy: We create chemistry November 2011 44 20 40 60 = EBIT 80
Strong sales and earnings increase in all segments Chemicals Plastics Performance Products 10% p.a. 11.4 5.0 14% p.a. 3.0 0.90 7% p.a. 9.8 5.4 14% p.a. 1.7 0.53 6% p.a. 12.3 7.4 17% p.a. 2.2 0.52 2001 2010 2001 2010 2001 2010 2001 2010 2001 2010 2001 2010 Functional Solutions 17% p.a. 9.7 20% p.a. 2.3 0.16 0.86 Agricultural Solutions 1.5% p.a. 7% p.a. 3.5 4.0 0.51 0.94 Oil & Gas 10% p.a. 10.8 4.5 7% p.a. 3.0 1.6 2001 2010 2001 2010 2001 2010 2001 2010 2001 2010 2001 2010 Sales in billion EBITDA in billion Growth rate p.a. 45
Backup Macro-economic assumptions BASF Strategy: We create chemistry November 2011 4646
Assumptions 2010 2020 Global GDP Chemical production (excl. Pharma) Growth 2010 2020 (Forecast*) 3.0% p.a. 4.0% p.a. Growth 2001-2010 2.5% p.a. 3.0% p.a. Industrial production 3.8% p.a. 2.4% p.a. * Assumptions 2010-2020: US$/ Ø 1.40. oil price Ø US$110/bbl 47
Backup Acquisition Criteria BASF Strategy: We create chemistry November 2011 4848
Acquisitions will contribute to profitable growth in the future We want to acquire businesses which Generate profitable growth above the industry average Are innovation-driven Offer a special value proposition to customers Are EPS accretive by year three at the latest Provide a minimum return on investment of 8% after tax Reduce earnings cyclicality Strategic acquisition criteria Financial acquisition criteria 49
Backup Emerging Markets BASF Strategy: We create chemistry November 2011 5050
Growth above market with increasing share from emerging markets Developed markets* Emerging markets 2001 in % of sales ( 28 bn**) ~ 78% ~ 22% 2010 in % of sales ( 53bn**) ~ 66% ~ 34% 2020 in % of sales** ~55% ~ 45% *BASF definition: Developed markets include EU15, Norway, Switzerland, North America, Japan, Australia, New Zealand ** Sales without Oil & Gas 51
Backup Innovation BASF Strategy: We create chemistry November 2011 5252
Innovations for a sustainable future Chemistry as an enabler Sustainability in customer industries will drive our innovative growth fields Customer industries Transportation Construction Consumer Goods Health & Nutrition Electronics Agriculture Energy & Resources Batteries for mobility Heat management Enzymes Medical Organic Electronics Plant biotechnology Energy management Growth Fields* Lightweight composites Heat management Functional crop care Rare earth metals recycling Wind energy Water solutions Ongoing inflow of new growth fields *including growth fields still under evaluation 53
BASF s global R&D footprint today North America: 1,330 employees in R&D Europe: 7,500 employees in R&D South America: 220 employees in R&D Asia 550 employees in R&D Major R&D site BASF Strategy: We create chemistry November 2011 54
Backup Business development Q3 2011 BASF Strategy: We create chemistry November 2011 5555
Chemicals Significant sales growth driven by strong price increases Q3 11 segment sales (million ) vs. Q3 10 EBIT before special items (million ) Intermediates 671 +4% 3,168 +10% Inorganics 356 +11% Petrochemicals 2,141 +12% 800 600 400 200 0 765 617 674 621 537 Q3 Q4 Q1 Q2 Q3 2010 2011 Sales development Period Volumes Prices Portfolio Currencies Q3 11 vs. Q3 10 (3)% 18% 0% (5)% 56
Plastics Sales up mainly due to a strong Performance Polymers business Q3 11 segment sales (million ) vs. Q3 10 EBIT before special items (million ) Polyurethanes 1,480 +2% 2,801 +8% 400 200 371 285 393 383 317 Performance Polymers 1,321 +16% 0 Q3 Q4 Q1 Q2 Q3 2010 2011 Sales development Period Volumes Prices Portfolio Currencies Q3 11 vs. Q3 10 2% 10% 0% (4)% 57
Performance Products Strong contributions from acquired Cognis businesses Q3 11 segment sales (million ) vs. Q3 10 EBIT before special items (million ) Care Chemicals 1,265 +85% Nutrition & Health 471 3,991 +24% Performance Chemicals 904 +9% +32% Dispersions Paper Chemicals & Pigments 423 928-6% +5% 600 500 400 300 200 100 0 554 513 440 370 294 Q3 Q4 Q1 Q2 Q3 2010 2011 Sales development Period Volumes Prices Portfolio Currencies Q3 11 vs. Q3 10 (2%) 7% 23% (4)% 58
Functional Solutions Strong performance of Catalysts Q3 11 segment sales (million ) vs. Q3 10 EBIT before special items (million ) Catalysts 1,608 +19% 2,907 +12% Construction Chemicals 599 0% 150 100 50 158 33 142 167 162 Coatings 700 +9% 0 Q3 Q4 Q1 Q2 Q3 2010 2011 Sales development Period Volumes Prices Portfolio Currencies Q3 11 vs. Q3 10 4% 11% 3% (6)% 59
Agricultural Solutions On track for record year in sales and earnings Q3 11 segment sales (million ) vs. Q3 10 EBIT before special items (million ) 1.000 800 600 400 200 832 +9% 908 150 100 50 66 +44% 95 0 Q3 2010 Q3 2011 0 Q3 2010 Q3 2011 Sales development Period Volumes Prices Portfolio Currencies Q3 11 vs. Q3 10 12% 3% 0% (6)% 60
Oil & Gas EBIT before SI on last year s level (adjusted for non-compensable oil taxes) Q3 11 segment sales (million ) vs. Q3 10 EBIT before special items/ Net income (million ) Exploration & Production 534-39% 2,195-1% Natural Gas Trading 1,661 +23% 600 400 200 0 573 503 272 70 123 Q3 2010 Non-compensable oil taxes 224 350 227 Q3 2011 225 Sales development EBIT bsi Exploration & Production EBIT bsi Natural Gas Trading Net income Period Volumes Prices/Currencies Portfolio Q3 11 vs. Q3 10 (25)% 24% 0% 61