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BASF Capital Market Story Q3-2010

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The BASF Capital Market Story gives you an overview on BASF's historic performance and our portfolio, highlighting our strength in operational excellence.

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BASF Capital Market Story Q3-2010

  1. 1. Profitable growth loves ups and downs BASF Capital Market Story November 2010 1
  2. 2. Business dynamics remained strong in Q3 Sales (billion €) EBIT before special items (billion €) 20 2.5 2.2 2.2 15.5 16.2 15.8 2.0 16 2.0 12.8 13.2 1.5 12 1.5 1.2 8 1.0 4 0.5 0 0.0 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3 2009 2010 2009 2010 Sales development Period Volumes Prices Portfolio Currencies Q3’10 vs. Q2’10 (3)%* 0% 0% 0% Q3’10 vs. Q3’09 5% 10% 0% 8% 1-9 ’10 vs. 1-9 ’09 14% 6% 2% 4% * +2% volume growth w/o Agricultural solutions and Oil & Gas BASF Capital Market Story November 2010 2
  3. 3. Important operational developments STYROLUTION Construction Chemicals Oil and Gas Carve-out of Styrenics BASF admixtures used in the Five North Sea oil discoveries in activities into STYROLUTION construction of Gotthard Base 2010: Effective: January 1, 2011 Tunnel – World’s longest – Norway: Beta and Maria; railway tunnel Sales 2009: €2.5 billion – UK: Catcher, Blakeney, Special admixtures for long Cladhan Employees 2009: 1,460 distance and high temperature New discoveries with growth potential Appraisal phase starts asap BASF Capital Market Story November 2010 3
  4. 4. Continuous strong cash flow Cash Flow (billion €) 7 6 5.3 5 4 3.8 3 2 1 0 2001* 2002* 2003* 2004 2005** 2006 2007 2008 2009*** 2010 -1 Q1-Q3 Cash provided by operating activities * According to German GAAP ** Cash provided by operating activities less capex (in 2005 before CTA) Free cash flow** *** 2009 adjusted for re-classification of settlement payments for currency derivatives BASF Capital Market Story November 2010 4
  5. 5. Attractive shareholder returns Dividend per share (€) Key facts Average annual dividend increase of 12.8% 1.95 1.95 2.0 2.0 (2001-2009) 1.70 1.50 Dividend yield above 3% in any 1.5 1.5 given year since 2001 1.00 Attractive dividend yield of 1.0 1.0 0.85 3.9% in 2009* 0.65 0.70 0.70 0.5 0.5 Consistent, long-term value Jan 2001 – September 2010: Average annual performance 0.0 of BASF share** of 11% 2001 2002 2003 2004 2005 2006 2007 2008 2009 For 2010, we expect to Yield* 3.1% 3.9% 3.1% 3.2% 3.1% 4.1% 3.8% 7.0% 3.9% increase the dividend. * Dividend yield based on share price at year-end ** With dividends reinvested BASF Capital Market Story November 2010 5
  6. 6. 1 | Focus on operational excellence Costs 2 | Well positioned for profitable growth Earnings 3 | Outlook Earnings 6
  7. 7. Unique ‘Verbund’ concept Cost savings of >€500 million p.a. in Ludwigshafen alone BASF site Ludwigshafen, Germany Verbund Concept Vertical and horizontal integration of production plants, energy and waste flows, logistics and site infrastructure Know-how Verbund Energy Verbund and combined heat and power plants lead to - Savings of ∼2.6 million tons oil equivalent p.a. - Reduction of CO2-emissions of ~6 million tons p.a. 7BASF Capital Market Story November 2010 7
  8. 8. Tenacious fixed cost management BASF Group development 2001-2009 Key facts Since 2001 sales and earnings Index Trend increased significantly 250 Fixed costs represent around 30% of total costs 200 Ciba synergies and NEXT will drive fixed costs down 150 Synergies from Ciba integration 100 2010E: €350 million run-rate 50 2001 2003 2005 2007 2009 Fixed costs indexed Sales indexed EBITDA indexed BASF Capital Market Story November 2010 8
  9. 9. Sustainable improvement of cost base Annual earnings contribution (million €) New EXcellence Targets (NEXT) > 500 individual projects to simplify processes, structures 2,500 and production sites in all regions 2,000 Project timeline: 1,500 2008-2011 1,000 Annual earnings contribution of €600 million in 2010 expected 500 Targeted earnings contribution 0 by 2012: 2003 2005 2007 2009 2010E 2012 ≥€1 billion Completed restructuring programs New efficiency program NEXT BASF Capital Market Story November 2010 9
  10. 10. 1 | Focus on operational excellence Costs 2 | Well positioned for profitable growth Earnings 3 | Outlook Earnings 10
  11. 11. Well positioned for profitable growth Leading positions Ongoing Excellent in growth industries portfolio innovation and emerging optimization platform markets Translate megatrends Continue with active Product and system into business growth portfolio management innovation as growth Continue expansion in Drive portfolio closer drivers Asia to customers Strong pipeline of innovations We strive to outperform global chemical production Growth target: growth by at least 2 percentage points p.a. BASF Capital Market Story November 2010 11
  12. 12. Leading positions in growth industries and emerging markets BASF Capital Market Story November 2010 12
  13. 13. Ambitious targets for 2020 Regional sales targets 2020 Profitable growth to more than €90 billion in sales by 2020 Europe, including Outgrow global chemical North America Africa, Middle East production growth by p.a . 2 percentage points p.a. 5-6% 4-5 % €17 Earn premium on cost of €9 bn bn* €49 bn** capital in all regions €30 2009 2020 bn Asia Pacific . p.a % 2009 2020 7-8 €20 South America bn €9bn . a. ~8% p 2009 2020 €6 bn €3 bn 2009 2020 * corresponds to sales of €17 billion in 2020, assuming $/€ of 1.40 ** oil price assumption of $75/bbl until 2013, thereafter increase to ~$100/bbl up to 2020 BASF Capital Market Story September 2010 13
  14. 14. Growth in emerging markets Outgrowing Asian Pacific chemical market by 2 percentage points p.a. China BASF expects to double sales to €20 billion in Asia S. Korea Japan Pacific by 2020: Pakistan Strengthen market focus Bangladesh Taiwan through industry and customer target groups Thailand Hong Kong India Vietnam Develop and market innovations in Asia for Asia Malaysia Singapore Invest in Asia to generate 70% of sales through local Indonesia production – €2 billion investments Regional headquarters planned for 2009-2013 Verbund site Australia • Expansion of Verbund Chemical production site * site Nanjing, China Asia Pacific service center • New MDI plant in R&D center * * Some sites not shown due to scale New Zealand Chongqing, China BASF Capital Market Story September 2010 14
  15. 15. Ongoing portfolio optimization BASF Capital Market Story November 2010 15
  16. 16. Pro-active portfolio management Selected transactions Major acquisitions 1999 to date Major divestitures Crop protection Pharmaceuticals Superabsorbents BASF Fertilizers Oil & Gas (Revus) core Refineries Engineering Plastics businesses Fibers Electronic Chemicals Printing systems Custom synthesis Polyolefins (Basell) Catalysts (Engelhard) Construction Chem. Polystyrene Powerful North America Water-based resins partnerships Agchem generics Pigments (Ciba) Gazprom Premix Plastic additives (Ciba) Monsanto Cognis Petronas Styrenics (STYROLUTION) (acquisition announced) (to be divested) Shell 16 billion Euro* Sinopec 10 billion Euro** (Sales) Total (Sales) * not including Cognis ** not including Styrenics business BASF Capital Market Story November 2010 16
  17. 17. Active portfolio management pays off EBITDA by activity (in billion €, without Other) Our diversified portfolio is a key strength 10 Recent acquisitions reshaped portfolio 8 - Closer to customers 6 - Innovation-driven - Profitable growth above 4 industry average 2 BASF’s EBITDA (excluding 0 Other) was €9 billion in 1-9/2010 2001* 2003* 2005 2007** 2009 2010 Q1-Q3 EBITDA margin 1-9/2010: 17.8% Chemical activities * Based on German GAAP Agricultural Solutions ** As of 2007 according to new segment structure (excl. Styrenics and corporate costs) Oil & Gas, including non-deductible oil taxes BASF Capital Market Story November 2010 17
  18. 18. Cognis A global leader in value-added products Care Chemicals Nutrition & Health Functional Products Products and formulations for Products, formulations and Specific solutions based on the personal and home care concepts for functional food, renewable resources for markets beverage, dietary supplements mining, synthetic lubricants, and pharma coatings and crop protection industries Sales 2009: €1,457 million Sales 2009: €325 million Sales 2009: €786 million EBITDA margin 2009: 13.2% EBITDA margin 2009: 13.2% EBITDA margin 2009: 11.2% BASF Capital Market Story November 2010 18
  19. 19. BASF + Cognis Clear targets Integration into Performance Products segment with the following 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 Cost synergies of at least 5% of 2009 net sales fully achieved by 2013 BASF Capital Market Story November 2010 19
  20. 20. Excellent innovation platform BASF Capital Market Story November 2010 20
  21. 21. Innovation will spur further growth Total R&D expenditures 2009 (billion €) Strong commitment to R&D R&D investments: 3.5% of sales* Chemicals Corporate Research 9% 23% More than 9,300 employees involved in R&D Plastics 9% Around 1,900 partnerships with 24% Other €1.4 universities, startup companies Performance 2% and industry partners Products billion 1% Five Growth Clusters: 20% - Nanotechnology Functional Agricultural - Energy Management Solutions Solutions - Plant Biotechnology 12% 25% - Industrial Biotechnology - Raw Material Change Budget for Growth Clusters (2009-2011): up to €1 billion R&D spending in 2010 planned on similar level * Excluding Oil & Gas BASF Capital Market Story November 2010 21
  22. 22. Introducing the next leading technologies CO2 scrubbing Standak® Top NaphthaMax® III High-efficiency capture of SeedSolutions® innovation for Catalyst for Fluid Catalytic carbon dioxide (CO2) from soybean growers in Brazil Cracking (FCC) units combustion gases in coal-fired Ready-to-use insecticidal and Increased zeolite activity and power plants fungicidal seed protection with coke selectivity as well as Development of new Plant Health characteristics improved hydrothermal stability processes and solvents Attractive and fast growing Increased gasoline yield from the market driven by high value FCC unit seed Translating to higher refinery margins BASF Capital Market Story November 2010 22
  23. 23. Innovation pipeline worth €19 billion Net present value by segments (billion €) R&D contributes significantly to earnings growth 20 €19 billion Net Present Value (NPV) 4% Chemicals represents discounted earnings 7% Plastics after tax from R&D projects 15 17% Performance Products after deduction of R&D 9% Functional Solutions expenditures 10 Major contribution from Agricultural Solutions and 45% Agricultural Solutions Performance Products 5 History of high success rate 3% Oil & Gas due to consequent R&D 15% Corporate Research controlling and Phasegate 0 3.5 4.5 process, including life cycle management * New or improved products or new applications, max. 5 years on market, including Growth Clusters BASF Capital Market Story November 2010 23
  24. 24. 1 | Focus on operational excellence Costs 2 | Well positioned for profitable growth Earnings 3 | Outlook Earnings 24
  25. 25. Assumptions 2010 GDP 3% - 4% Chemicals (excl. Pharma) 7% - 8% Industrial production 7% - 8% US$ / EURO 1.30 Oil price (US$ / bbl) 75 BASF Capital Market Story November 2010 25
  26. 26. Outlook: record year 2010 Targets 2010 We expect: - the good business development to continue in the fourth quarter of 2010 - sales of ~€ 63 billion and EBIT before special items of more than € 8 billion in 2010 - to earn a high premium on our cost of capital - to increase the dividend Medium-term targets We aim to grow sales on average by two percentage points per year above chemical market growth. We strive to grow our earnings further year by year and to achieve an EBITDA margin of 18% until 2012. Dividend policy We aim to continuously increase the annual dividend, or at least maintain it at the level of the previous year. BASF Capital Market Story November 2010 26
  27. 27. 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. BASF Capital Market Story November 2010 27
  28. 28. BASF Capital Market Story November 2010 28
  29. 29. BASF today – a well-balanced portfolio Total sales 2009: €50.7 billion Percentage of sales 2009 Chemicals Plastics* Performance Functional Agricultural Oil & Gas Products Solutions Solutions 15% 14% 18% 14% 7% 22% Inorganics Performance Dispersions & Catalysts Crop Exploration & Polymers Pigments Protection Production and Petrochemicals Polyurethanes Care Construction Natural Gas Chemicals Chemicals Trading Intermediates Paper Coatings Chemicals Performance Chemicals * Styrenics reported under ‘Other’ BASF Capital Market Story November 2010 29
  30. 30. Delivering consistent, long-term value Long-term performance January 2001 – September 2010 Committed to (average annual performance with dividends reinvested) shareholder value BASF total return well above benchmark levels 11.3% BASF Average annual dividend increase of 12.8% (2001-2009) -3.0% Euro Stoxx 50 Attractive dividend yield of 3.9% in 2009, based on share price at year-end -0.3% DAX 30 Aim to increase dividend each year, or at least maintain it at 5.7% MSCI World Chemicals the previous year‘s level -5 0 5 10 15 BASF Capital Market Story November 2010 30
  31. 31. Chemicals Continued strong demand Q3’10 segment sales (million €) vs. Q2’10 EBIT before special items (million €) Intermediates Inorganics 687 322 617 643 600 (1)% (1)% 461 €2,874 400 364 315 (3)% 200 Petrochemicals 1,909 0 (4)% Q3 Q4 Q1 Q2 Q3 2009 2010 Sales development Period Volumes Prices Portfolio Currencies Q3’10 vs. Q2’10 0% (2)% 0% (1)% Q3’10 vs. Q3’09 10% 25% 0% 9% 1-9 ’10 vs. 1-9 ’09 22% 31% 0% 4% BASF Capital Market Story November 2010 31
  32. 32. Plastics Earnings up thanks to high capacity utilization Q3’10 segment sales (million €) vs. Q2’10 EBIT before special items (million €) Polyurethanes 400 371 349 1,458 +4% 279 251 216 €2,598 200 +1% Performance Polymers 1,140 0 (4)% Q3 Q4 Q1 Q2 Q3 2009 2010 Sales development Period Volumes Prices Portfolio Currencies Q3’10 vs. Q2’10 1% 0% 0% 0% Q3’10 vs. Q3’09 14% 7% 0% 11% 1-9 ’10 vs. 1-9 ’09 27% 10% 0% 5% BASF Capital Market Story November 2010 32
  33. 33. Performance Products Solid earnings despite one-off costs Q3’10 segment sales (million €) vs. Q2’10 EBIT before special items (million €) Care Chemicals 500 471 682 Performance 419 +1% Chemicals 400 370* 832 286 Nutrition €3,206 +3% 300 & Health 209 357 +2% 200 (4)% 100 Paper Chemicals Dispersions & Pigments 0 448 887 Q3 Q4 Q1 Q2 Q3 +2% +4% 2009 2010 Sales development Period Volumes Prices Portfolio Currencies Q3’10 vs. Q2’10 1% 1% 0% 0% Q3’10 vs. Q3’09 7% 7% 0% 7% 1-9 ’10 vs. 1-9 ’09 15% 3% 13% 4% BASF Capital Market Story November 2010 * Reduction in EBIT before special items due to one-time charges 33
  34. 34. Functional Solutions Increased volumes drive topline growth Q3’10 segment sales (million €) vs. Q2’10 EBIT before special items (million €) Catalysts Construction Chemicals 165 158 1,347 599 150 +10% +4% 111 106 101 €2,591 100 +6% 50 Coatings 645 0 (1)% Q3 Q4 Q1 Q2 Q3 2009 2010 Sales development Period Volumes Prices Portfolio Currencies Q3’10 vs. Q2’10 7% (1)% 0% 0% Q3’10 vs. Q3’09 15% 9% 1% 12% 1-9 ’10 vs. 1-9 ’09 18% 11% 1% 7% BASF Capital Market Story November 2010 34
  35. 35. Agricultural Solutions Successful start to new season in South America Q3’10 segment sales (million €) vs. Q3’09 EBIT before special items (million €) 1,000 832 80 % 66 +34 800 623 600 4% + 21 40 400 21 200 0 0 Q3 Q3 Q3 Q3 2009 2010 2009 2010 Sales development Period Volumes Prices Portfolio Currencies Q3’10 vs. Q2’10 (31)% (1)% 0% 1% Q3 ’10 vs. Q3 ’09 29% (6)% 0% 11% 1-9 ’10 vs. 1-9 ’09 7% (3)% 0% 4% BASF Capital Market Story November 2010 35
  36. 36. Oil & Gas Improved earnings despite lower volumes Q3’10 segment sales (million €) vs. Q3’09 EBIT before special items / Net income (million €) Exploration & 800 Production 573 881 600 550 (1)% 70 83 €2,228 400 (7)% 503 Natural Gas 200 467 272 Trading 186 1,347 0 (10)% Q3 Q3 2009 2010 EBIT bSI Natural Gas Trading Net income Sales development EBIT bSI Exploration & Production Period Volumes Prices/Currencies Portfolio Q3’10 vs. Q2’10 (12)% 6% 0% Q3’10 vs. Q3’09 (23)% 16% 0% 1-9 ’10 vs. 1-9 ’09 3% (13)% 0% BASF Capital Market Story November 2010 36
  37. 37. Ciba integration: synergies exceed targets Structural integration of Ciba completed Expected synergy run rate (million €) Impact of Ciba acquisition Integration costs 500 >450 2009: €785 million 450 Synergy 2010: ~€170 million 400 Target 2011/2012: ~€100 million 350 Net reduction of positions 300 - Target: 3,800 - Status Q3 2010: >2,400 200 130 100 Ciba non-production sites - To be consolidated: 58 0 - Status Q3 2010: 47 exited 2009 2010 2011/2012 Steady 23 Ciba production sites State under strategic review Synergy run rate - Planned exit: 15* Effective in 2009 (thereof 11 implemented) * On two sites exit of production activities only BASF Capital Market Story November 2010 37

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