Kurt Bock, CFO UBS Best of Germany Conference New York, September 17, 2009 Tackling the challenges ahead 1 Sep 2009
1 Robust performance in difficult environment 2 Managing the downturn 3 Clear priorities for use of cash 2
Robust performance in challenging business environment Business development Q2 2009 Cash generation remained strong; cost containment efforts show effects Earnings of chemical activities down; continued strong performance of Agricultural Solutions High special charges of 300 million due to Ciba integration Key figures Q2 2009 vs. Q2 2008 Sales: 12.5 billion (-23%) EBIT before special items: 1.1 billion (-53%) Net income: 343 million (-74%) Earnings per share: 0.37 (-73%) Adjusted EPS: 0.79 (-49%) Operating cash flow H1 2009: 3.6 billion (+39%) 3
BASF today a well-balanced portfolio Total sales 2008: 62.3 billion Percentage of sales 2008 Chemicals 18% Plastics* 15% Performance Products** 13% Functional Solutions 15% Agricultural Solutions 5% Oil & Gas 23% Inorganics Petrochemicals Performance Polymers Polyurethanes Dispersions & Pigments Care Chemicals Catalysts Construction Chemicals Crop Protection Exploration & Production and Natural Gas Trading Intermediates Paper Chemicals Coatings Performance Chemicals 4 * Styrenics are reported under Other following the transfer of the Specialty Plastics and Foams business units to the Performance Polymers division as of January 1, 2008 ** Performance Products segment as of April 1, 2009 (not including Ciba)
Oil & Gas and Agro businesses providing a stable earnings basis EBIT* before special items by activity in billion without non-compensable foreign taxes on oil production 7 Chemical activities Agro Oil & Gas 6 5 4 3 2 1 0 2001*** 2002*** 2003*** 2004 2005 2006 2007** 2008** 5 * Without Other ** 2007 and 2008 according to new segment structure (excl. Styrenics and corporate costs) *** Based on German GAAP
Increasing share of specialty chemicals Development of sales and EBITDA Sales in billion * EBITDA in billion * 40 30 20 10 52 48 53 47 55 45 63 37 62 38 7 6 5 4 3 2 1 48 52 49 51 49 51 49 51 53 47 0 2004 2005 2006 2007** 2008** 0 2004 2005 2006 2007** 2008** Specialties Commodities * Excluding Precious & Base Metal Services, Oil&Gas and Other ** Excluding Styrenics commodity business 6
Relentless fixed cost management Index 250 200 150 100 Absolute level of fixed costs stable compared to last trough, while business increased significantly Acquisitions in 2006 pushed up fixed costs slightly Fixed costs represent around 30% of total costs 50 2001 2002 2003 2004 2005 2006 2007 2008 Fixed costs indexed Sales indexed EBITDA indexed 7
1 Robust performance in difficult environment 2 Managing the downturn 3 Clear priorities for use of cash 8
Acting swiftly with focus on cost and cash Short-term measures Temporary shut-down or reduction of capacity of around 200 plants worldwide, reducing global capacity temporarily to slightly above 60% Implementation of short-time work Strict management of inventories and accounts receivable Longer-term measures Continuous consolidation of production base Synergies from efficient integration of acquisitions Reduced capex spending Restructuring and efficiency program NEXT 9
Sustainable improvement of cost base Annual earnings contribution in million 2,500 2,000 1,500 1,000 500 NEXT Completed restructuring programs NEXT Project timeline: 2008 2011 Potential earnings contribution: > 1 billion by 2012 Non-recurring costs: 300 million Investment: 700 million Personnel reduction: >1,000 employees 0 2003 2004 2006 2008 2010 2012 10
Solid financing as a key advantage in turbulent times Credit Rating Strong investment grade rating: Moody s: A1/P-1 outlook stable; Standard & Poor s: A+/A-1 outlook negative Committed to credit ratios that support a single A rating Bonds 100% Bonds for a total 4.0 billion and GBP400 million issued in 2009 Balanced bond maturity profile Commercial 4 Paper 6 % * Syndicated Loans No difficulties in issuing commercial paper Commercial paper program of $12.5 billion ($3.15 billion drawn by end of Q2 2009) Broadly syndicated undrawn long-term back-up lines of $6.0 billion Short-term syndicated credit facility of CHF 3.5 billion 11
1 Robust performance in difficult environment 2 Managing the downturn 3 Clear priorities for use of cash 12
Strong history of cash flow generation In billion Cash provided by operating activities Free cash flow* 6 5 4 3 2 1 0-1 2001** 2002** 2003** 2004 2005* 2006 2007 2008 H1 2009 13 * Cash provided by operating activities less capex (in 2005 before CTA) ** According to German GAAP
Use of cash adapted to current market conditions Reduction of net working capital by ~ 1 billion Focus on operating cash flow R&D Capex Acquisitions Dividend Stable Reduction of 20% compared with 2008* Focus on Ciba integration Increasingly difficult to maintain dividend at 1.95 14 * Not including Ciba and Revus; Capex 2008: 2.5 billion
BASF has become the leading player in specialty chemicals BASF s position pre acquisition Position of combined businesses Plastic additives 4 1 Coating effects materials 4 2 Paper chemicals 4 1 15
Integration of Ciba s business lines into BASF structure Ciba businesses 2008 sales in billion BASF division Coatings Effects ~ 1.1 Dispersions & Pigments Plastic Additives Lubricant Additives Oilfield & Mining Chemicals Water Treatment Home & Personal Care Paper ~ 1.6 ~ 0.3 ~ 0.9 Performance Chemicals Care Chemicals Paper Chemicals Note: Expert Services will remain stand-alone unit 16
Extensive restructuring measures related to Ciba integration Personnel Reduction of ~3,700 positions, majority of reductions by end of 2010 Production sites 23 sites currently under strategic review, i.e. closure, divestiture or restructuring possible 32 production sites planned to be optimized and/or restructured, e.g. Bradford, Grenzach, Lampertheim and Maastricht Non-production sites 36 locations planned to be exited by 2010 Headcount reduction by region Asia 16% Europe 58% Production sites under review by region Europe 11 Asia 8 Americas 26% Americas 4 17
Cost synergies related to Ciba integration Synergy ramp-up in million 500 Target: at least 400 million 400 100 300 200 260 100 Synergies in percent of sales (2008: 4.0 billion) 10 7.5 400 5 2.5 Integration costs Total cash costs: ~ 550 million (thereof 150 million in 2009) Non-cash costs: ~ 500 million (thereof ~ 400 million in 2009) 0 40 end 2009 end 2010 2011/2012 Steady State 0 18 Note: Ciba revenues 2008: CHF5,919 million or 3,986 million
Attractive shareholder return policy Dividend in per share 2,00 1,50 1.95 CAGR of dividend (1999-2008): 15% Attractive dividend yield of 6.8% in 2008* 1,00 0,50 0,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 19 Dividend Special dividend * Based on the share price of April 30, 2009 ( 28.57)
Severe challenges for BASF in 2009 Basic assumptions for 2009 Decline in global gross domestic product (-3%) global industrial production (-10%) global chemical production excluding pharma (-8%) Average exchange rate of $1.35 per Average oil price of $55/bbl Outlook for 2009 In view of the current economic environment and the expenses resulting from the Ciba integration, we anticipate a significant decline in sales and earnings. Therefore, BASF is unlikely to earn its cost of capital in 2009. 20
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. 21
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