BASF Full Year 2010 Analyst ConferenceFebruary 24, 2011, 4 p.m. (CET)LudwigshafenAnalyst Conference ScriptDr. Jürgen HambrechtDr. Kurt BockThe spoken word applies.
Page 2BASF Full Year 2010 Analyst Conference February 24, 2011 BASF in excellent shape, optimistic for 2011 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 forw ard-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, 4Q/FY’2010 Conference and the estimates and assumptions associated with them, except to the extent required by Ludwigshafen, February 24, 2011 applicable laws and regulations. BASF 4Q/ FY’ 2010 Con ference | Februar 24 th, 2011 y 2 Full year results 2010 Business performance 2010 vs. 2009 Sales €63.9 billion +26% EBITDA €11.1 billion +51% EBITDA margin 17.4% 14.6% EBIT before special items €8.1 billion +68% EBIT €7.8 billion +111% Net income €4.6 billion +223% Adjusted EPS €5.73 +90% Record sales and record EBIT before special items Chemical businesses take advantage of strong economic recovery Consistent long term value generation BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 3
Page 3BASF Full Year 2010 Analyst Conference February 24, 2011Dr. Jürgen HambrechtLadies and Gentlemen,Good afternoon and thank you for joining us today at ourheadquarters in Ludwigshafen and via webcast.[Chart 3: Full year results 2010] The title of our presentation puts it in a nutshell: BASF is in excellent shape! We reached record sales of almost 64 billion euros, up 26 percent compared with full year 2009. EBITDA at 11.1 billion euros and EBIT before special items at 8.1 billion euros also reached new record levels. The EBITDA margin in 2010 climbed to 17.4 percent, and is well on track to reach the EBITDA margin target of 18 percent by 2012. Besides the strong recovery of the world economy, the excellent business performance in 2010 is also attributable to our strict cost reduction efforts. Our efficiency program NEXT is running at full speed and had contributed about 600 million euros to earnings by the end of 2010. We increased net income by 223 percent to 4.6 billion euros and reached an adjusted EPS of 5.73 euros. In 2011, we will continue on our path for profitable growth and strive to significantly exceed the record earnings level of 2010 based on the assumption that operating in Libya will be restarted in a short period of time.
Page 4BASF Full Year 2010 Analyst Conference February 24, 2011 Fourth quarter 2010 highlights Business performance Q4’10 vs. Q4’09 Sales €16.4 billion +25% EBITDA €2.7 billion +21% EBITDA margin 16.5% 16.9% EBIT before special items €1.8 billion +19% EBIT €1.7 billion +68% Net income €1.1 billion +142% Adjusted EPS €1.39 +31% Record sales boosted by ongoing strong demand Strong earnings growth despite significant one-off costs not recurring in 2011 Highest net income ever in a fourth quarter BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 4
Page 5BASF Full Year 2010 Analyst Conference February 24, 2011[Chart 4: Fourth quarter 2010 highlights]The fourth quarter supported the strong performance of the year2010. I will briefly highlight a few points, Kurt will give you moredetails on the business development of each segment later. Sales in Q4 increased by 25 percent to 16.4 billion euros compared with the previous year’s quarter. BASF achieved record EBITDA in a fourth quarter of 2.7 billion euros. Despite one-off costs of more than 200 million euros not recurring in 2011, EBIT before special items increased by 19 percent to 1.8 billion euros. However, significantly higher fixed costs were caused by the long-term incentive plan and an extra employee bonus for the extraordinary management of the crisis. In addition we used the strong margin momentum into 2011 to intensify clean-up work towards year-end by accelerating maintenance, restructuring and other non-recurring items. Net income climbed to 1.1 billion euros, up 142 percent compared with the same quarter in 2009. Adjusted earnings per share were at 1.39 euros, 33 euro-cents higher than in Q4 2009.
Page 6BASF Full Year 2010 Analyst Conference February 24, 2011 Attractive shareholder returns Dividend per share (€) Key facts Average annual dividend increase of 14.5% 2.5 2.50 Proposal: (2001-2010) 2.20 1.95 1.95 Dividend yield above 3% in any 2.00 2.0 1.70 given year since 2001 1.50 1.50 1.5 Attractive dividend yield of 1.00 3.7% in 2010** 1.0 1.00 0.85 0.65 0.70 0.70 0.5 0.50 0.0 2001 2004 2007 2010 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 ** With dividends reinvested BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 5
Page 7BASF Full Year 2010 Analyst Conference February 24, 2011[Chart 5: Attractive shareholder returns]Ladies and Gentlemen,As you know shareholder return is of utmost importance to us! The Board proposed this morning to pay out a dividend of 2.20 euros per share, an increase of 50 euro-cents. This reflects an attractive dividend yield of 3.7 percent, based on the share price of 59.70 euros on December 31st, 2010.
Page 8BASF Full Year 2010 Analyst Conference February 24, 2011 Delivering consistent, long-term value Long-term performance January 2001 – December 2010 (average annual performance with dividends reinvested) +13.9% BASF - 2.7% Euro Stoxx 50 +0.7 % DAX 30 +7.1% MSCI World Chemicals -3 0 3 6 9 12 15 BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 6
Page 9BASF Full Year 2010 Analyst Conference February 24, 2011[Chart 6: Delivering consistent, long-term value]Moreover, BASF is delivering consistent long-term value for itsshareholders:Over the past ten years, the average annual return on BASF’s stockwas almost 14 percent, clearly outperforming the German andEuropean stock markets as well as the MSCI World Chemicalsindex.
Page 10BASF Full Year 2010 Analyst Conference February 24, 2011 Successful value creating strategy BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 7 Well positioned for profitable growth Leading positions Ongoing Excellent in growth industries portfolio innovation and emerging optimization platform markets Continue expansion in Continue with active Product and system emerging markets, portfolio management innovation as growth especially Asia Drive portfolio closer drivers Translate megatrends to end customer Megatrend innovations into business growth for long-term growth We strive to outperform global chemical production Growth target: growth by at least 2 percentage points p.a. BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 8
Page 11BASF Full Year 2010 Analyst Conference February 24, 2011[Chart 7 + 8: Well positioned for profitable growth]2010 was a record year for BASF due to our operational excellence,the successful execution of our long-term value creating strategyand the extraordinary performance of the BASF team.Looking into the future, I am confident that we are well positionedfor further solid profitable growth. As you know, our growth strategybuilds on three pillars: We have leading positions in growth industries and emerging markets and we intend to strengthen these further, We will continue with our active portfolio management, driving the portfolio even closer to the end customer, and We will grow organically via numerous product and system innovations as well as innovations for megatrends. Overall, our target is to outperform global chemical production growth by at least two percentage points per annum and achieve an EBITDA margin of 18 percent by 2012. As already shown in the past, we deliver on this promise: Between 2001 and 2010 we outpaced the growth in global chemical production by roughly 3 percentage points. With an EBITDA margin of 17.4 percent in 2010, we are well on track to achieving our 18% EBITDA margin target.On the next slides I will highlight important developments for eachone of the three pillars.
Page 12BASF Full Year 2010 Analyst Conference February 24, 2011 Leading positions in growth industries and emerging markets BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 9 Emerging markets Significant sales growth in emerging markets B ASF Group (w/o Oil & Gas) Emerging Markets Net sales in billion € Sales 2010 in emerging markets: €14.5 billion (27%) 60 Investments in emerging 50 markets 2005-2010: 3% R1 27% €3 billion C AG 40 Ongoing increase of R 7% 22% CAG - sales force 30 - regional R&D 20 Emerging markets definition, according to Dow Jones: 10 35 countries * 0 * Bahrai n, Brazil, Bul garia, Ch ile, Ch ina, C olombia, C zech 2005 2010 R epubli c, Eg yp t, Estonia, H ungary, India , Ind onesia, Jo dan, r L atvi a, Kuwait, Lithu ania, Mala ysi a, Mauriti us, Mexico, Morocco, Oman, Pakista n, Peru, Phil ippin es, Poland , Qatar, Emerging Markets (Dow Jones definition) R oman ia, Russia , Sl ovakia, Sri Lanka, South Afri ca South , Kore a, Tai wan, Thail and, Turkey, United Ara b Emirates Developed Mark ets BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 10
Page 13BASF Full Year 2010 Analyst Conference February 24, 2011[Chart 9: Leading positions in growth industries and emergingmarkets] BASF already has leading positions and fast growing businesses in the emerging markets and we will continue to build on these.[Chart 10: Emerging Markets] Our strong presence in emerging markets will further contribute to BASF’s growth. (We use the term “emerging markets” as defined by Dow Jones, thus including 35 countries.) BASF’s sales in these emerging markets almost doubled in absolute terms during the last five years to 14.5 billion euros, which is about 27 percent of total sales in 2010, excluding the Oil & Gas segment. We will further spur organic growth in these countries by increasing our sales forces, strengthening regional R&D, and investing in new production capacities. From 2005 to 2010, investments in emerging markets amounted to 3 billion euros. From 2011 to 2015, we will invest a further 2.6 billion euros in new capacities in emerging markets.
Page 14BASF Full Year 2010 Analyst Conference February 24, 2011 BASF’s profitable growth path in Asia Pacific Sales by location of customers (in billion €) Achievements 2005-2010 Sales growth 14% p.a. 20 (vs. Asian market growth 10.5% p.a.) 20 Record EBITDA of €1.8 billion in 2010, resulting in an EBITDA margin of 14% 15 Target 2011-2020 . 12.5 Well on track to double sales by 2020 p .a % (based on sales of €9 bn in 2008) 10 14 Outgrowing Asian Pacific chemical market 6.5 by 2 percentage points p.a. through 5 – Innovations out of Asia – Investments 2011-2015: €2.3 billion – Generating 70% of sales based on 0 local manufacturing 2005 2010* 2020 – Strengthening market focus through industry and customer target groups BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 * excluding Cognis 11
Page 15BASF Full Year 2010 Analyst Conference February 24, 2011[Chart 11: Strong sales and earnings growth in Asia Pacific] Special focus of our growth strategy will be on Asia Pacific as almost two thirds of future growth in the chemical industry will come from this region. Between 2005 and 2010, we increased our sales on average by 14 percent per year, 3.5 percentage points more than the market average of 10.5 percent in Asia Pacific. In 2010, we achieved sales of 12.5 billion euros, well above the pre-crisis level, generating already roughly a quarter of BASF Group sales, excluding Oil & Gas, in Asia Pacific. Over the years, we have significantly increased profit contribution out of Asia. In 2010 we reached an EBITDA margin of 14 percent in this region, based on about 60 percent local manufacturing content.In our Strategy 2020, we aim to grow sales on average two percentage pointsper year faster than the chemical market in Asia Pacific by Developing and marketing innovations in Asia for Asia, Investing 2.3 billion euros over the next five years in Asia to generate 70 percent of sales through local production: The major upcoming investment projects are the ongoing 1.4 billion dollar expansion of our Verbund site in Nanjing, the upcoming MDI facility in Chongqing, the announced second expansion of Nanjing and the new investment into specialties together with Petronas in Malaysia. Strengthening market focus through industry and customer target groups.By 2020, we project sales of more than 20 billion euros and substantially higherearnings contributions from this region.
Page 16BASF Full Year 2010 Analyst Conference February 24, 2011 Ongoing portfolio optimization BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 12 Cognis – integrating a global leader in value-added products Pro forma business perform ance FY’2010 Sales: ~ €3 billion EBITDA: ~ €550 million EBITDA margin: ~18% Closing on December 9, 2010 Integration objectives Growing >2% points faster than the relevant market Achieve 20% EBITDA margin in the Performance Products segment by 2012 Acquisition accretive as of 2012 Integration costs of €200-250 million until end of 2012 Annual cost synergies of at least 5% of 2009 net sales (i.e. ~€130 million) fully achieved by 2013 and substantial top line synergies BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 13
Page 17BASF Full Year 2010 Analyst Conference February 24, 2011[Chart 12: Ongoing portfolio optimization]The second pillar of our growth strategy is our proactive portfoliooptimization. Here are two examples:[Chart 13: Cognis – integrating a global leader in value addedproducts] After Ciba, Cognis is now a further step in moving our portfolio closer to end customers. At December 9, 2010, we successfully closed the acquisition of Cognis. Cognis performed very well in 2010: On a pro forma basis, Cognis would have contributed sales of about 3 billion euros, an EBITDA of 550 million euros and an EBITDA margin of approximately 18 percent. Given the attractive enterprise value of 3.1 billion euros at closing, we are confident that this acquisition will generate substantial value. Currently we are fully on track with the integration process. At the end of March we will be able to give you a more detailed overview of the planned integration process, the costs and the substantial top line synergies related to it.
Page 18BASF Full Year 2010 Analyst Conference February 24, 2011 BASF + Cognis Improved market positions Current Future BASF position BASF position Personal care ingredients 3 1 Home care ingredients 1 1 Mining chemicals 3 2 Functional nutrition ingredients 6 3 Coating additives 7 3 Heavy-duty driveline lubricants > 10 3 BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 14
Page 19BASF Full Year 2010 Analyst Conference February 24, 2011[Chart 14: BASF + Cognis: improved market positions] With Cognis, we have significantly improved our market position in many attractive business areas. As a leading supplier in these markets, we will be able to define market standards in close cooperation with our customers. We will operate more efficiently and effectively and finally reach more customers all over the world, generating top line growth and synergies.
Page 20BASF Full Year 2010 Analyst Conference February 24, 2011 Styrolution Planning a 50/50 joint venture with INEOS Scope Global No.1 in styrenics Sales of about €5 billion*, thereof – 48% Europe, 32% Americas, 20% Asia Pacific – 34% SM, 34% PS, 21% ABS, 11% Copolymer Specialties Customers in more than 110 countries 29 production facilities across 11 countries More than 3,000 employees Milestones Nov 29, 2010: LoI signed by BASF and INEOS Jan 1, 2011: Carve-out of BASF‘s Styrenics activities into separate legal entities Second half of 2011: Start of planned JV Styrolution Value creating divestiture process Styrolux T/S shrink film BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 * Pro-f or ma figures, based on BASF ‘s and INEOS‘ sales in 2009 15
Page 21BASF Full Year 2010 Analyst Conference February 24, 2011[Chart 15: Styrolution]Second example: Styrolution At the end of November 2010, we announced the plan to form this 50-50 joint venture with INEOS. The new company will be the global No.1 in styrenics. Styrolution will have sales of about 5 billion euros and more than 3,000 employees. The joint venture will offer the broadest product portfolio and it will have a strong footprint in all major regions. The carve-out of BASF’s styrenics activities into separate legal entities was already completed as of January 1, 2011. Establishment of the planned joint venture, which is subject to approval by the appropriate antitrust authorities, is expected in the second half of 2011. Styrolution represents the first step in our value creating divestiture process.
Page 22BASF Full Year 2010 Analyst Conference February 24, 2011 Active portfolio management pays off EBITDA b y activity (in billion €, excluding Other) Our diversified portfolio is a key strength 12 R ecent acquisitions reshaped 10 portfolio 8 – Closer to end customers – Innovation-driven 6 – Profitable growth above 4 industry average 2 BASF’s EBITDA in 2010 0 (excluding Other) amounted to €11.7 billion 2001* 2004 2007** 2010 Chemical activities * Based on German GAAP Agricultural Solutions ** As of 2007 according to new segm ent structure (excl. Styrenics and corporate costs) Oil & Gas, including non-deductible oil taxes BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 16
Page 23BASF Full Year 2010 Analyst Conference February 24, 2011[Chart 16: Active portfolio management pays off] Our active portfolio management is clearly paying off as demonstrated by the EBITDA development over the last 10 years. EBITDA, excluding Other, reached 11.7 billion euros in 2010, up 49 percent compared to the full year figure 2009, clearly above last pre-crisis levels and well above the crisis level of 2001. We achieved this excellent result due to – the continuous optimization of our portfolio as well as – our sustained and relentless efforts to increase operational excellence and to reduce costs. Today, we are clearly on a new level of performance with substantially reduced earnings volatility!
Page 24BASF Full Year 2010 Analyst Conference February 24, 2011 Excellent innovation platform BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 17 Natugrain® TS X-SEED® PCI Geofug® Ecovio® CypoSol® NaphthaMax® III Kaurit® Light BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 Elastopave® Xemium® 18
Page 25BASF Full Year 2010 Analyst Conference February 24, 2011[Chart 17 + 18: Excellent innovation platform]Innovation is the third important cornerstone for the continuedprofitable growth of the BASF Group. And here I’m not talking aboutabstract ideas in our labs – it’s all about marketable solutions whichmeet the needs of our customers today and tomorrow! Let medemonstrate this by introducing to you an important innovationexample from our Agricultural Solutions segment: Xemium®.
Page 26BASF Full Year 2010 Analyst Conference February 24, 2011 Xemium® BASF’s next-generation fungicide for broad use Key facts Xemium® complements BASF‘s outstanding fungicide portfolio Our 1st carboxamide fungicide for all market segments BASF is carboxamide pioneer, Xemium® strengthens lead Launch planned in >50 countries and >100 crops World-wide data submission process underway U ntreated Market launch from 2012 onwards Xemium ® global peak sales potential: >€200 million * Source: Phili ps McDougall, own estimation BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 19
Page 27BASF Full Year 2010 Analyst Conference February 24, 2011[Chart 19: Xemium®] A year ago, I talked about Kixor®, a new herbicide which was successfully launched in 2010 and continues to thrive with unprecedented success. Today, I would like to introduce to you a new product that nicely complements our strong fungicide portfolio: Xemium, a next- generation carboxamide with blockbuster potential. As a pioneer in this product class, we are proud to launch a new carboxamide which can be used for all fungicide segments: We will help our customers with Xemium-based products for field crops, and we also will offer products for specialty crops such as vegetables and fruits. Xemium products can be marketed to a wide customer basis due to its broad range of application and efficient and long-lasting disease control. The data submission process is underway, and we expect regulatory approval in time for a market launch from 2012 onwards. Xemium will be a global active ingredient which we plan to gradually introduce in more than 50 countries and for more than 100 crops. Thus, we are optimistic that Xemium will play out its blockbuster potential and generate peak sales in excess of 200 million euros.
Page 28BASF Full Year 2010 Analyst Conference February 24, 2011 Innovation pipeline worth €21 billion Net present value b y segments (billion €) R&D contributes significantly to earnings growth €21 bn The pipeline NPV of €21 billion 20 €19 bn 3% Chemicals is a bottom-up aggregation of 7% Plastics all R&D projects 14% Performance Products H igh success rate due to 15 8% Functional Solutions stringent R&D controlling via Phasegate process 10 46% Agricultural Solutions Expected Commercial Value: ~50% of NPV (probability- weighted) 5 2% Oil & Gas In 2010, sales of new products 20% Corporate Research (5 years or younger) exceeded 0 0,0 3.5 4.5 0,0 the target of €6 billion 2009 2010 Target 2015: up to €8 billion sales with new products * New or i mproved products or new applic atio ns, max. 5 years on market, includi ng Growth C lusters BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 20
Page 29BASF Full Year 2010 Analyst Conference February 24, 2011[Chart 20: Innovation pipeline worth 21 billion euros]Through innovation we see significant growth and value creationpotential. Today, we value our innovation pipeline with a net presentvalue of 21 billion euros. The Net Present Value of a project represents the discounted earnings after deduction of discounted expenditures. This is the return after a certain period of time if the project is successful. The total NPV of all projects at a given time is the net present value of our R&D pipeline. The biggest value contribution stems from R&D projects in Agricultural Solutions, Performance Products and Corporate Research. Thanks to rigorous R&D controlling we generate a high success rate. The expected commercial value of our pipeline is about 50 percent of NPV. In 2010, sales with new products (on the market for five years or less) exceeded our target of 6 billion euros. By 2015, we target annual sales of up to 8 billion euros from product innovations.And now to Kurt Bock who will provide more details from Q4 2010.
Page 30BASF Full Year 2010 Analyst Conference February 24, 2011 Financial highlights Q4 2010 BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 21 BASF Group Q4 2010 Record sales and strong earnings increase vs. PYQ Sales (billion €) EBIT before special items (billion €) 20 2.5 2.2 2.2 15.5 16.2 15.8 16.4 2.0 16 2.0 1.8 13.2 1.5 12 1.5 8 1.0 4 0.5 0 0.0 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 2009 2010 2009 2010 Sales development Period Volumes Prices Portfolio Currencies Q4’10 vs. Q4’09 4%* 13% 2% 6% FY’10 vs. FY’09 11% 8% 2% 5% * Volumes +8% (without Oil & G as) BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 22
Page 31BASF Full Year 2010 Analyst Conference February 24, 2011Dr. Kurt BockLadies and Gentlemen,Good afternoon and thank you for joining us.[Chart 22: BASF Group Q4 2010] As Juergen already mentioned, 2010 was a record year for the BASF Group. And also in the fourth quarter, we posted new record numbers. At 16.4 billion euros, sales reached a record level for a fourth quarter, and were up 25 percent versus the fourth quarter of 2009. Volumes were up 4 percent. Volumes excluding Oil & Gas grew by 8 percent. We continued to raise prices, also compared with the third quarter of 2010, in order to protect our margins in view of rising feedstock costs. EBIT before special items was the second highest ever in a fourth quarter. It was burdened by several one-off costs at year-end due to intensified maintenance, accelerated restructuring and other non recurring items. Significantly higher fixed costs have been caused by our long-term incentive plan and a special employee bonus. On top, harsh weather conditions towards year-end impacted all construction related businesses. Net income at 1.1 billion euros is a new record for a fourth quarter. This was partly due to a tax rate well below the annual average given tax credits in Asia, tax refunds and deferred tax income. Adjusted EPS were 1.39 euros, up 31 percent compared to Q4 2009.
Page 32BASF Full Year 2010 Analyst Conference February 24, 2011 On the next slides, I will highlight the financial development in the fourth quarter in more detail. After many unusual quarters due to the crisis, seasonality is now dominating the development in most businesses again. Therefore, I will mainly focus on the comparison of the fourth quarter 2010 with the same period of last year. Chemicals Strong earnings improvement vs. PYQ due to higher demand Q4’10 segment sales (million €) vs. Q4’09 EBIT before special items (million €) Intermediates Inorganics 687 326 617 655 600 537 +32% +24% 461 €2,945 400 315 +37% 200 Petrochemicals 1,964 0 +41% Q4 Q1 Q2 Q3 Q4 2009 2010 Sales development Period Volumes Prices Portfolio Currencies Q4’10 vs. Q4’09 9% 20% 0% 8% FY’10 vs. FY’09 18% 28% 0% 5% BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 23[Chart 23: Chemicals] In our Chemicals segment, increases in volumes and prices as well as positive currency effects led to strong sales growth in all divisions. EBIT before special items rose significantly compared with the fourth quarter of 2009. This was due to higher capacity utilization as well as increased margins for basic products. Demand also remained strong toward the end of the year, but we incurred one-off items especially from accelerated maintenance.
Page 33BASF Full Year 2010 Analyst Conference February 24, 2011 In Inorganics, sales grew compared with the previous fourth quarter mainly as a result of higher volumes and prices. The business environment was favorable, particularly in the electronic chemicals and inorganic salts businesses. Earnings reached the level of the fourth quarter of 2009. In Petrochemicals, demand rose for all products. Prices rose considerably as higher raw material costs were passed on; this contributed to the strong sales growth. There continued to be some supply bottlenecks, particularly for acrylic acid, solvents and plasticizers. Following an improved availability of cracker products in the third quarter in Asia and North America, supplies also increased in Europe. Thanks to high demand, our plants were operating at high capacity utilization rates. Earnings significantly surpassed the level of the previous fourth quarter. Sales in Intermediates improved considerably year-on-year thanks to higher demand and prices. Our capacities were fully utilized for products in the butanediol value-adding chain, polyalcohols and numerous amines. The increase in volumes was a major factor in our strong earnings growth.
Page 34BASF Full Year 2010 Analyst Conference February 24, 2011 Plastics High demand and price increases lifted sales significantly Q4’10 segm ent sales (million €) vs. Q4’09 EBIT before special items (million €) Polyurethanes 400 371 349 1,363 +20% 279 285 251 €2,451 200 +26% Performance Polymers 0 1,088 +34% Q4 Q1 Q2 Q3 Q4 2009 2010 Sales development Period Volumes Prices Portfolio Currencies Q4’10 vs. Q4’09 10% 9% 0% 7% FY’10 vs. FY’09 22% 10% 0% 6% BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 24[Chart 24: Plastics] In Plastics, demand for our products continued to be high. Sales grew substantially compared with the previous fourth quarter. We were able to pass on higher raw material costs to customers, particularly in Performance Polymers. Positive currency effects contributed to sales growth. However, our business with customers from the construction sector weakened due to harsh weather conditions. Thanks to higher volumes and despite higher feedstock costs, income from operations before special items improved compared with the prior-year period. In Performance Polymers, the positive trend continued into the fourth quarter. However, we saw a significant decline in demand for foams for the construction industry. Sales growth was driven by strong volumes, price increases resulting from higher raw material costs and positive currency effects. Despite higher
Page 35BASF Full Year 2010 Analyst Conference February 24, 2011 expenses resulting from plant shutdowns, earnings increased substantially. While prices remained stable, sales in Polyurethanes rose mainly due to increasing volumes and positive currency effects. Sales volumes increased in all business areas. In particular, demand for specialties such as TPU and Cellasto was good. Higher raw material costs, particularly for benzene, negatively impacted our margins and earnings were below the level of the fourth quarter of 2009.
Page 36BASF Full Year 2010 Analyst Conference February 24, 2011 Performance Products Earnings significantly up vs. previous year despite one-off costs Q4’10 segm ent sales (million €) vs. Q4’09 EBIT before special items (million €) Care Chemicals 500 471 763 Performance 419 Chemicals 400 370 +42% 778 294 Nutrition €3,060 300 +15% 209 & Health 384 +18% 200 +10% 100 Paper Chemicals Dispersions 0 405 & Pigments Q4 Q1 Q2 Q3 Q4 +2% 730 2009 2010 +17% Sales development Period Volumes Prices Portfolio Currencies Q4’10 vs. Q4’09 3% 4% 6% 5% FY’10 vs. FY’09 12% 4% 11% 4% BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 25
Page 37BASF Full Year 2010 Analyst Conference February 24, 2011[Chart 25: Performance Products] All divisions in the Performance Products segment posted a rise in sales thanks to higher volumes, positive currency effects or increased prices. Additional sales growth of 6 percent resulted from the inclusion of the Cognis businesses as of December 9, 2010. We saw a bit of a seasonal slowdown, but the business environment remained favorable overall with strong momentum in all product lines. In Q4 2010, earnings were up more than forty percent compared with the previous year but lower than in the third quarter of 2010. Toward the end of 2010, we intensified our restructuring measures, accelerated maintenance projects and incurred higher costs for employee bonuses. To cope with higher raw material costs, we continued to raise prices. Finally, synergies from the Ciba integration were realized as planned and contributed positively to earnings. Special charges of 117 million euros resulted primarily from the Cognis acquisition and accelerated site restructuring in the paper chemicals business. In January and February 2011, we have seen strong sales and earnings momentum. Looking ahead to the first quarter 2011, we are confident to top the level of earnings of the strong first quarter of 2010.
Page 38BASF Full Year 2010 Analyst Conference February 24, 2011 In Dispersions & Pigments, we posted significant sales growth thanks to the ongoing high demand for our products. Higher raw material costs could not yet be fully offset by price increases. Furthermore, earnings were negatively impacted by integration and restructuring measures. Moreover, earnings decreased compared to the third quarter 2010 due to seasonal effects in a fourth quarter. Sales in Care Chemicals increased substantially thanks to a continued favorable business environment as well as the acquisition of Cognis. Demand for hygiene products as well as detergents and cleaners was at levels not seen before. Earnings were well above the level of the fourth quarter of 2009 but below the previous quarter due to seasonal effects. Special charges were primarily related to an inventory step up following the Cognis acquisition. In Nutrition & Health, sales were higher than in the fourth quarter of 2009. Strong demand and the inclusion of the acquired Cognis businesses contributed to the increase in sales. Earnings did not match the excellent level of 2009 due to higher raw material costs and higher fixed costs mostly due to bonus packages. Special charges were related to the Cognis inventory step-up.
Page 39BASF Full Year 2010 Analyst Conference February 24, 2011 In Paper Chemicals, volumes were below the level of the fourth quarter of 2009. Higher raw material costs could be largely offset by price increases. Earnings improved compared with the fourth quarter of the previous year. In addition, we continued with our restructuring efforts: Following the divestiture of the European starch business, we announced the closure of our production of optical brighteners in Grenzach, Germany, planned for 2011. Volumes and sales rose in Performance Chemicals. Demand was particularly dynamic from the automotive and the plastics processing industries, especially for plastic additives. Earnings were far above the level of the previous fourth quarter.
Page 40BASF Full Year 2010 Analyst Conference February 24, 2011 Functional Solutions Earnings declined considerably due to one-time operating costs Q4’10 segm ent sales (million €) vs. Q4’09 EBIT before special items (million €) Catalysts Construction Chemicals 165 15 8 1,369 514 150 +62% +11% 111 101 €2,569 100 +35% 50 33 Coatings 686 0 +15% Q4 Q1 Q2 Q3 Q4 2009 2010 Sales development Period Volumes Prices Portfolio Currencies Q4’10 vs. Q4’09 15% 10% 1% 9% FY’10 vs. FY’09 17% 10% 1% 8% BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 26[Chart 26: Functional Solutions] Volumes in the Functional Solutions segment were significantly higher than in the same quarter of 2009 reflecting the global recovery of our automotive customers. Demand from the construction industry increased slightly, primarily owing to the robust building activity in Asia. Nevertheless, harsh weather conditions towards year-end had a strong negative impact on our Construction Chemicals business. The price increase of 10 percent also reflects higher precious metal prices. EBIT before special items was lower than in the fourth quarter of 2009 and much lower compared to Q3 2010. As mentioned before, higher bonuses, accelerated maintenance as well as higher raw material costs contributed to this. In addition, precious metals trading generated lower earnings.
Page 41BASF Full Year 2010 Analyst Conference February 24, 2011 After the holiday slowdown, we started into 2011 with very good momentum and for Q1 2011 we expect to exceed the earnings level of the first quarter 2010. Catalysts’ sales increased substantially, mainly due to higher sales volumes of mobile emissions and chemical catalysts. In addition, sales from precious metals trading almost doubled to 654 million euros. Earnings, however, decreased due to the above mentioned factors. Our Construction Chemicals business in Europe and North America experienced a seasonal slowdown with unusually harsh weather conditions towards year-end. Nevertheless, we were able to increase sales year-on-year, especially in Asia and other emerging markets. Earnings did not match the level of the previous fourth quarter, mainly as a result of personnel-related provisions, intensified maintenance and restructuring. Volumes and sales in Coatings increased year-on-year in all business areas. The positive trend seen in previous quarters continued for automotive OEM coatings, automotive refinish coatings and architectural coatings. We have not yet been able to fully pass on substantially increased raw material costs. Earnings therefore declined despite higher volumes.
Page 42BASF Full Year 2010 Analyst Conference February 24, 2011 Agricultural Solutions South America drove strong sales growth Q4’10 segm ent sales (million €) vs. Q4’09 EBIT before special items (million €) (5 )% 1,000 +2 0 % 50 44 845 42 800 703 40 600 30 400 20 200 10 0 0 Q4 Q4 Q4 Q4 2009 2010 2009 2010 Sales development Period Volumes Prices Portfolio Currencies Q4’10 vs. Q4’09 18% (4)% 0% 6% FY’10 vs. FY’09 9% (3)% 0% 5% BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 27[Chart 27: Agricultural Solutions] In Agricultural Solutions, sales in the fourth quarter significantly exceeded the level of the same period of 2009. Lower prices for certain products, particularly fungicides, were offset by significantly higher demand for our products across all indications. Sales in Europe were slightly below the level of Q4 2009. In the traditionally strong year-end business in France, demand for crop protection products declined. Sales in North America rose, mainly due to higher volumes in herbicides. In South America, we had a good start into the growing season. Increasing prices for soft commodities led to higher demand for soybean fungicides in Brazil and Argentina. In Asia, our sales increased thanks to higher demand from growth markets such as India and China. In particular, business with products based on our fungicide F500® was very successful.
Page 43BASF Full Year 2010 Analyst Conference February 24, 2011 Due to higher expenses for research and development as well as the expansion of our business activities in growth markets, EBIT before special items was only slightly below the previous fourth quarter.
Page 44BASF Full Year 2010 Analyst Conference February 24, 2011 Oil & Gas Earnings grew substantially y-o-y as a result of higher oil prices Q4’10 segm ent sales (million €) vs. Q4’09 EBIT b efore special items / Net income (million €) Exploration & 800 713 Production 106 1,059 600 508 +9% €2,964 400 134 +13% 607 Natural Gas 200 374 Trading 230 132 1,905 0 +16% Q4 Q4 2009 2010 EBIT bSI Natural G as T rading Net income EBIT bSI Explorat ion & Production Sales development Period Volumes Prices/Currencies Portfolio Q4’10 vs. Q4’09 (15)% 28% 0% FY’10 vs. FY’09 (2)% (3)% 0% BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 28
Page 45BASF Full Year 2010 Analyst Conference February 24, 2011[Chart 28: Oil & Gas] In Oil & Gas, sales increased in comparison with the previous fourth quarter. Lower sales volumes in Natural Gas Trading were more than offset by higher selling prices for natural gas and higher crude oil prices. EBIT before special items and net income after minority interests were significantly higher as a result of higher oil prices. Valuation adjustments on oil and gas licenses in the North Sea resulted in special items. In Exploration & Production, production volumes of oil and gas matched the level of the fourth quarter of 2009. Sales rose due to higher crude oil prices. The average price for Brent crude oil was 86 dollars per barrel, compared with 75 dollars per barrel in the fourth quarter of 2009. In euro terms, crude oil prices climbed to 64 euros per barrel (+26 percent). As a result of higher prices, earnings exceeded the level of the previous fourth quarter. Sales volumes in Natural Gas Trading did not match the level of the strong fourth quarter of 2009. Overall, sales grew thanks to higher prices for natural gas. Margins were negatively impacted by the time lag in the adjustment of sales prices to purchase prices, which led to lower earnings year-on-year. Let me give you a brief update on the situation in Libya: Over the past days, the events have been developing rapidly. Our foremost concern is the wellbeing and safety of our 453 employees. We have advised all employees to remain at home. In the meantime, most of our expats and their families have left the country. A few delegates voluntarily stay in the country. As a precautionary measure, we stopped our production of oil and gas at the beginning of the week. At this moment it is uncertain, when we can restart production. We will continue to monitor the situation closely.
Page 46BASF Full Year 2010 Analyst Conference February 24, 2011 Review of “Other” Million € Q4 2010 Q4 2009 2010 2009 Sales 1,590 1,263 5,851 4,577 thereof Styrenics 857 685 3,401 2,502 EBIT before special item s (139) 51 (648) (717) thereof Corporate research (96) (79) (323) (319) Group corporate costs (66) (45) (226) (209) Currency results, hedges and other (229) 9 (460) (512) valuation effects Styrenics, fertilizers, other businesses 142 80 387 339 Special items 149 293 (59) 90 EBIT 10 344 (707) (627) BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 29
Page 47BASF Full Year 2010 Analyst Conference February 24, 2011[Chart 29: Review of “Other”] In “Other”, income from operations before special items decreased by 190 million euros compared with the fourth quarter of 2009 despite the improved earnings of our Styrenics business. Main reason for the decline was a significant increase in provisions for the long-term incentive program as a result of the 30 percent rise in the BASF share price over the course of Q4 – something we had hoped would happen but could not predict when we last met at the end of October. Positive special items resulting from the allocation of restructuring expenses to the operating divisions in the fourth quarter were significantly lower in 2010 than in the previous year.
Page 48BASF Full Year 2010 Analyst Conference February 24, 2011 Excellent operating cash flow in 2010 Full Year 2010 (billion €) Capex* on 9 last year´s level 8 Net cash-out for purchase 7 (2.5) of Cognis: €0.6 bn 6 6.5 (0.6) thereof €1.6 bn dividends to 5 BASF SE shareholders 4 (1.9) 3 (1.8) 2 Excellent operating cash flow (2.3) despite €1.7 bn increase in 0.5 1 1.8 net working capital 1.5 0 Cash Operating Capex* Acqu isitio ns Divid end s D eb t Oth er cash Cash 12/31/09 CF repaym ent i nflow s 12/31/10 * Paym ents related to intangible assets and property, plant and equipment BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 30
Page 49BASF Full Year 2010 Analyst Conference February 24, 2011[Chart 30: Excellent operating cash flow in 2010] Let me now briefly discuss our cash flow in 2010. At 6.5 billion euros, operating cash flow was again very strong, of which 1.2 billion euros were generated in Q4. The very high after-tax earnings more than offset the increase of 1.7 billion euros in net working capital requirements due to the expansion of business volume in 2010. Free cash flow amounted to 3.9 billion euros. In 2010, we stuck to our priorities with regard to the use of cash: – We spent 2.5 billion euros for capital expenditures. – Net cash-out for the purchase of Cognis amounted to 0.6 billion euros. – We paid 1.6 billion euros in dividends to our shareholders. – And we used 2.3 billion euros for the repayment of debt, which includes the refinancing of 1.9 billion of debt taken over from Cognis. Despite the Cognis acquisition, dividend payments and capital expenditures, net debt increased by only 562 million euros compared to the end of 2009.
Page 50BASF Full Year 2010 Analyst Conference February 24, 2011 Balance sheet remains strong Balance sheet 2010 vs. 2009 (billion €) Impact of Cognis acquisition As of December 31, 2010: 59.4 59.4 Increase in long-term assets by €2.9 billion, thereof 51.3 51.3 Stock- – Goodwill: €0.6 billion 22.7 holders’ Long-term Equity – Other intangible assets: assets 34.5 18.6 €1.3 billion 31.7 Financial – Property, plant and 15.0 equipment: €0.8 billion 14.8 debt Inventories 8.7 Addition of Accounts 6.8 receivable 21.7 Other – €0.5 billion of inventories 10.2 7.7 17.9 liabilities Other assets 4.5 3.3 – €0.4 billion of receivables Liquid funds 1.5 1.8 Financial debt: €2.6 billion Dec 31 Dec 31 Dec 31 Dec 31 (incl. purchase price of €0.7 billion) 2010 2009 2009 2010 BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 31
Page 51BASF Full Year 2010 Analyst Conference February 24, 2011[Chart 31: Balance sheet remains strong] Let me finally briefly turn to our balance sheet. Compared with the previous year, total assets rose by 8.1 billion euros to 59.4 billion euros. Thereof, 4.1 billion were related to the acquisition of Cognis. This includes accounts receivables and inventories of 0.9 billion euros. The first-time consolidation of Cognis led to goodwill of 0.6 billion euros as well as an increase of provisions for pensions by around 0.5 billion euros. Furthermore, currency effects, for example due to the appreciation of the US dollar and the Japanese yen versus the euro, inflated our asset base by roughly 2.2 billion euros in 2010. Our equity ratio improved from 36 percent to 38 percent and is rock-solid. Furthermore, with our A-rating and a well-balanced maturity profile of financial debt, BASF has a very strong financial position.
Page 52BASF Full Year 2010 Analyst Conference February 24, 2011 Outlook 2011 BASF 4Q/FY’2010 Conference | February 24th, 2011 32 Outlook BASF Group 2011 Expectations for global economy 2010 Forecast 2011 GDP 3.9% 3.3% Chemicals (excl. Pharma) 9.3% 5.2% Industrial production 8.9% 5.0% US$ / Euro 1.33 1.35 Oil price (US$ / bbl) 79.50 90 BASF 4Q/FY’2010 Conference | February 24th, 2011 33
Page 53BASF Full Year 2010 Analyst Conference February 24, 2011Dr. Jürgen Hambrecht[Chart 32 + 33: Outlook BASF Group 2011]Let me conclude with the general outlook for 2011: After the strong global economic rebound in 2010 supported by major economic stimulus programs and strong growth in Asia, the global economy will continue to recover in 2011. However, in industrialized countries, the austerity programs necessary to trim public spending will start to dampen the growth dynamic. Increasing raw material costs and the uncertainty in North Africa and the Middle East are risks we closely follow up. In 2011, we expect GDP growth of 3.3 percent. Growth will be weaker in industrialized countries (2.2 percent), but production in most of these countries will reach and partly surpass pre-crisis levels. We expect global chemical production (without pharmaceuticals) to grow by 5.2 percent. For 2011, we expect an average oil price of 90 dollars per barrel, and an average exchange rate of 1.35 dollars per euro.
Page 54BASF Full Year 2010 Analyst Conference February 24, 2011 Outlook 2011 by region Industrial production Chemicals (excl. Pharma) 2010 2011 2010 2011 World 8.9% 5.0% 9.3% 5.2% EU-27 6.0% 3.0% 10.1% 2.9% USA 5.7% 3.9% 5.0% 3.3% Asia (excl. Japan) 14.5% 10.0% 13.0% 9.6% Japan 15.8% 2.3% 8.8% 1.9% South America 6.2% 4.6% 6.4% 4.3% BASF 4Q/FY’2010 Conference | February 24th, 2011 34
Page 55BASF Full Year 2010 Analyst Conference February 24, 2011[Chart 34: Outlook 2011 by region] In 2011, global chemical production (excluding pharmaceuticals) will continue to grow in all regions. In Asia (excluding Japan), growth will remain strong at approximately 10 percent. Our growth forecast for China is particularly favorable at 12 percent for 2011.
Page 56BASF Full Year 2010 Analyst Conference February 24, 2011 Outlook 2011 for our key customer industries* Growth Key customer industries 2009 2010 forecast 2011 of BASF (World) (World) (World) Industries total (8.1) 8.9 5.0 Construction (5.8) (1.3) 3.6 Automotive (per-unit-base) (11.3) 21.5 6.1 Electronics (11.1) 12.0 5.9 Information & Communications (11.9) 16.6 9.2 Textiles (8.7) 8.8 5.6 Paper (3.3) 7.9 5.7 Nutrition (0.7) 3.9 3.4 Agriculture 0.9 4.2 2.3 * Growth Production Index in % p.a.; change compared with previous year BASF 4Q/FY’2010 Conference | February 24th, 2011 35
Page 57BASF Full Year 2010 Analyst Conference February 24, 2011[Chart 35: Outlook for our key customer industries] All customer industries show normalized solid growth. Growth is expected to be especially strong in the automotive and information & communication industries.
Page 58BASF Full Year 2010 Analyst Conference February 24, 2011 Outlook 2011 by segments Segments EBIT before special items 2011 Chemicals Plastics Performance Products Functional Solutions Agricultural Solutions Oil & Gas BASF Group (incl. Other) BASF 4Q/FY’2010 Conference | February 24th, 2011 36
Page 59BASF Full Year 2010 Analyst Conference February 24, 2011[Chart 36: Outlook by segment]If we translate all this into the outlook for our businesses in the respectivesegments, this means: In Chemicals, we expect sales in 2011 to be slightly above the level of 2010. Additional capacities will increase pressure on margins, especially for cracker products. Earnings are expected to be slightly below the level of 2010. In Plastics, we expect sales and earnings in 2011 to slightly exceed the level of the previous year. We anticipate that demand for our products will remain volatile and that increasing product availability will have a negative impact on margins. In Performance Products in 2011, we expect stable demand and – driven by the Cognis acquisition – substantial sales growth. We aim for a strong increase in earnings. In Functional Solutions, we expect rising demand from our key customer industries – the construction and automotive industries. We aim for a significant increase in sales and a substantial rise in earnings. In Agricultural Solutions, we will continue our successful innovation strategy in 2011. We aim for slight growth in sales and earnings. Based on our assumptions regarding oil price and euro, we aim in Oil & Gas for a significant increase in sales and a substantial improvement in earnings. We base this also on the assumption that we can restart our operations in Libya in a short period of time.Now let’s turn to the overall “consolidated” outlook for 2011.
Page 60BASF Full Year 2010 Analyst Conference February 24, 2011 Outlook 2011 Targets 2011 We expect to achieve in 2011: - Significant increase in sales and EBIT before special items. - A high premium on our cost of capital. - Significantly higher sales and earnings in the 1 st quarter 2011 vs. previous year’s quarter. Medium-term targets We aim to grow sales on average by two percentage points per year faster than chemical market growth. We strive to grow our earnings further year by year, and to achieve an EBITDA margin of 18% by 2012. Dividend policy We aim to continuously increase the annual dividend, or at least maintain it at the level of the previous year. BASF 4Q/ FY’ 2010 Con ference | February 24 th, 2011 37
Page 61BASF Full Year 2010 Analyst Conference February 24, 2011[Chart 37: Outlook 2010]We expect to achieve in 2011: Significant increase in sales and EBIT before special items. A high premium on our cost of capital. Significantly higher sales and earnings in the 1st quarter 2011 vs. previous year’s quarter.We are also abiding by our medium-term targets and our dividendpolicy: We aim to grow sales on average by two percentage points per year faster than chemical market growth. We strive for an EBITDA margin of 18 percent by 2012. And we aim to continuously increase the annual dividend, or at least maintain it at the level of the previous year.Thank you for your attention. We are now happy to take yourquestions. BASF 4Q/FY’2010 Conference | February 24th, 2011 40