BASF capital market story 10/2012

BASF Capital Market Story__October 2012

We add value as one company

October 2012


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.

Forward-looking statements

2


The leading chemical company worldwide

- Sales 2011: €73.5 billion

- EBIT before special items 2011: €8.4 billion

- ~111,000 employees

Customers in >200 countries and in virtually all industries

# 1-3 market position in over 75% of businesses

Unique Verbund concept for integrated production

- Six Verbund sites in all major regions

- Production sites in 41 countries

International, interdisciplinary R&D network - More than 10,000 employees in R&D

Highly experienced management team

- Senior executives from 36 countries

BASF today – The Chemical Company Facts & figures

3


Dispersions & Pigments Performance Chemicals Care Chemicals Nutrition & Health Paper Chemicals

Crop Protection

Inorganics Petrochemicals Intermediates

Catalysts Construction Chemicals Coatings

Chemicals

Functional Solutions Performance Products

Agricultural Solutions Oil & Gas Exploration & Production and

Natural Gas Trading

Percentage of sales 2011*

BASF today – a well-balanced portfolio Total sales 2011: €73.5 billion

Performance Polymers Polyurethanes

Plastics

* not depicted here: 9% of Group sales reported as ‘Other‘ 4


Business review BASF Today Trends Purpose and strategic principles Targets Strategic levers BASF Tomorrow – Board priorities

BASF Strategy: We create chemistry__November 2011

Business review

BASF strategy & growth targets

Strategic levers

Fit for 2020


Sales €19.0 billion +8% EBITDA €2.8 billion +4% EBIT before special items €2.1 billion +5% EBIT €2.0 billion +6%

Net income €0.9 billion (21%) EPS €1.03 (21%) Adjusted EPS €1.19 (22%)

Business performance Q3’12 vs. Q3’11

BASF maintains good business performance in Q3 2012

Favorable business development in Agricultural Solutions and Oil & Gas Earnings in chemical activities did not match the previous year’s level

Sales development Period Volumes Prices Portfolio Currencies

Q3’12 vs. Q3’11 7% (4%) (1)% 6%

6


Strong free cash flow generation

* Cash provided by operating activities less capex (in 2005 before CTA) ** 2009 adjusted for re-classification of settlement payments for currency derivatives

2.8 2.6

3.3 3.5 3.2

2.53.2

2.4

2002 2003 2004 2005 2006 2007 2008 2009** 2010 2011 Q1-Q32012

Free cash flow* in billion €

3.9 3.7

-0.1

7


Delivering attractive shareholder returns

€2.50 dividend per share for 2011, dividend yield 4.6%*

15% average annual dividend increase for 2002-2011 period

Dividend yield above 3% in any given year since 2002, total payout €14.5 billion

Dividend per share in €

* Dividend yield based on share price at year-end

Dividend payments

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

Dividend yield* 4.6% 3.9% 3.1%

2.50

Between 1999 & 2008, BASF bought back 28.65% of shares outstanding, spent €9.9 billion

AGM 2012 approved new share buy-back program; up to 10% of shares, 5 years

Share buy-backs 0.70 0.70

0.851.00

1.50

1.95 1.951.70

2.20

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

8


Delivering consistent, long-term value

Average annual performance with dividends reinvested

0 5 10 15 20

Euro Stoxx 50

DAX 30

MSCI World Chemicals

+10.0%

Last 5 years October 2007 – September 2012

+ 11.0%

-7.8%

-1.7%

+1.4%

Last 10 years October 2002 – September 2012

BASF

+10.6%

+4.1%

+18.3%

9


Outlook 2012 confirmed

For the FY 2012, BASF aims to exceed the record levels of sales and EBIT before special items achieved in 2011

BASF will strive again to earn a high premium on cost of capital

Chemical activities - We do not expect demand to pick up in the fourth quarter 2012 - Therefore, 2012 EBIT before special items of chemical activities will come in below the level of the

previous year.

Outlook 2012

GDP: +2.2% (before: 2.3%)

Industrial production: +2.8% (before: 3.4%)

Chemical production: +2.9% (before: 3.5%)

US$/Euro: 1.30 (unchanged)

Oil price (US$/bbl): 110 (unchanged)

Assumptions 2012

10




Business review


Strategic levers

Fit for 2020


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

12


Key trends for the chemical industry

Integrated chemical companies remain cornerstone

Emerging markets players grow quickly

Raw material players invest further downstream

Competitive landscape will change

Use opportunities from sustainability

Increase resource efficiency

Renewables as raw materials

Stakeholder dialog

Sustainability as strategic driver

Chemistry as enabler

Chemical products replace traditional materials

Create innovative sustainable solutions

Innovation gains in importance

Growth will accelerate

Industrial production > GDP

Chemical production > GDP

Emerging markets will outgrow developed markets

Chemical industry remains an attractive growth industry

13


Striving for strong profitable growth Medium- and long-term sales target*

Sales** in billion €

64

2010 Target 2020

Target 2015

Investments

Acquisitions Innovations

Investments

Acquisitions Innovations

~85

~115

We aim to grow 6 percent p.a.; 2 percentage points above chemical production outperform chemical production by * Published on November 29, 2011

** Potential impact of IFRS changes not included 14


Striving for strong profitable growth All regions will deliver profitable growth

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

North America

2010 2020

13

~5.5% p.a. ~22

South America, Africa, Middle East

~8% p.a.

5 ~11

Europe

~4.5% p.a.

33

~53

Asia Pacific

~8% p.a.

13 ~29

2010 2020

2010 2020 2010 2020

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

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

* Published on November 29, 2011 ** Percentage of total sales 15


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

Developed markets*

Emerging markets

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

Target 2020: ~45% sales share of Emerging Markets

28 22%

34%

61

45%

Striving for strong profitable growth Sales share of emerging markets to keep growing

16


Striving for strong profitable growth Doubling EBITDA by 2020*

EBITDA** in billion €

2010 Target 2020

Target 2015

11.1

~23

~15 Op. Excellence

Growth

Acquisitions

Op. Excellence

Growth

Acquisitions

* Published on November 29, 2011 ** Assumptions 2010-2020: Exchange rate $/€ Ø 1.40, Oil price Ø $110/bbl 17




Business review


Strategic levers – Portfolio development

– Market approach – Innovations for a sustainable future – Investments – Acquisitions – Operational excellence

Fit for 2020


Chemistry as key enabler for functionalized materials & solutions

Deep understanding of customer value chains required

New molecules

Improved applications

Functionalized materials & solutions

1960 1970 1980 1990 2000 2010 2020

Batteries, membranes ...

Portfolio development We expand from chemicals to chemistry

19


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

BASF core business

Strong partnerships

Gazprom Monsanto Petronas Shell Sinopec Total

Selected transactions 2001 − today

Acquisitions

~ €15bn sales ~ €10bn sales*

Divestitures

Pharma Fibers Printing systems Polyolefins Polystyrene Americas Agro generics Vitamins premix Fertilizers Styrenics (transferred into

Styrolution JV on Oct. 1, 2011)

* without Styrenics

Portfolio development Towards more market driven and innovative businesses

20


Portfolio development Moving downstream towards customer industries

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

Functionalized Materials & Solutions Customized Products Classical Chemicals

2020 in % of sales**

Chemical Industry First customer industries*


~ 40%

~ 30% ~ 70%


~ 50%

~ 60%

~ 50%

21


BASF sales by first customer industry*

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

> 15 %

< 10 %

< 10 %

> 15 %

Inorganics Petro- chemicals

Construction Chemicals

Dispersions & Pigments

Catalysts Intermediates Coatings Care Chemicals

Performance Polymers

Poly- urethanes

Performance Chemicals

Paper Chemicals

Consumer goods

Transportation

Construction

Energy & Resources

Market approach Cross-divisional customer industry approach

22

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


E-textiles

Solar roof with transparent organic solar panels and OLED modules

Multifunctional seat

Infrared-reflective coating

Infrared-reflective film

High performance foams

Lightweight tridion cell

All-plastic wheel

Cross-divisional approach: ‘Smartforvision’ Technology competencies combined with customer know-how

Daimler & BASF concept car ‘Smartforvison’

23


Potential Increased incremental oil recovery of up to 10% on

waterflooding. Sales potential to be defined after completion of trials

Approach Leverage BASF’s Verbund knowhow in white

biotechnology for Oil & Gas production Proprietary biopolymer from Schizophyllum fungus allows

for enhanced oil recovery due to its high viscosifying efficiency

Biopolymer is stable in high temperature and high salinity reservoirs

Current activities Schizophyllan biopolymer to be produced at BASF

Ludwigshafen via fermentation. First trial in mature Wintershall oil field starting in 2012 (Bockstedt, Germany)

Cross-divisional approach Biopolymer for enhanced oil recovery

Schizophyllan biopolymer

Schizophyllum commune

24


Cross-divisional approach ecovio biodegradable plastic in paper applications

Business potential 2020 Market size: opportunity to substitute > 200 kt of

various products Sales potential for BASF: ~€40 million

(ecovio FS Paper for extrusion coating) Additional business opportunities in wet-end

applications under evaluation

Concept Leverage BASF know-how on biodegradable plastics

and paper chemicals to offer sustainable solutions for packaging and foodservice ware

Current activities ecovio FS Paper launched in various markets since 2010 Business Model for sustainable „Closed System“

throughout whole value chain (incl. waste management) R&D-projects for additional applications and solutions

25


Innovations for a sustainable future Commitment to R&D

€1.6 billion R&D expenditures in 2011 (2010: €1.5 billion)

~10,100 employees in R&D

~2,800 projects

Research Verbund: About 1,950 partnerships with universities, start-ups and industry partners

Increase of R&D spending to €1.7 billion planned for 2012

24%

1%

Corporate Research 23%

Agricultural Solutions

26%

Functional Solutions 12%

Performance Products 21%

Chemicals 8%

Plastics 9%

€1.6 billion

Oil & Gas 1%

Target: €30 billion in sales from innovations younger than 10 years

Total R&D expenditures 2011 in billion €

Strong commitment to R&D

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Sustainability in customer industries will drive our innovative growth fields

Health & Nutrition

Consumer Goods Construction Transportation Electronics Energy &

Resources Agriculture

Customer industries

Energy management

Water solutions

Wind energy

Rare earth metals

recycling

Heat management

Enzymes Plant biotechnology

Batteries for mobility

Lightweight composites

Heat management

Functional crop care

Medical Organic electronics

Growth Fields*

* Including growth fields still under evaluation

Ongoing inflow of new growth fields

Innovations for a sustainable future Chemistry as an enabler for many customer industries

27


Growth Field examples

Business potential 2020*

Market size: >€20 billion

BASF sales potential: >€500 million

Market size: ~€20 billion

BASF sales potential: >€800 million

Market size: ~€11 billion gross trait value

BASF sales potential: €1.8 billion gross trait sales before partner share

Existing Activities

New global business unit for battery chemicals & materials

Electrode material plant being built in Ohio. Acquired Novolyte, Merck’s electrolytes, Ovonik, equity position in Sion Power

R&D network with academia Sites in US, China, Europe

BASF expertise and portfolio (high-performance flocculants, desalination and antifouling chemicals….)

Acquired inge water-technologies; membrane module systems

Invested into NanoH2O

BASF as Trait Technology Partner of leading trait and seed companies

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

Targets Become the leading supplier of battery materials

Target customers: Battery producers

Leading supplier of innovative water solutions

Forward integration into membrane technologies

Contribute to more efficient agriculture, healthier nutrition

Make Plant Biotechnology an operating division within the Agricultural Solutions segment

Batteries for mobility Plant biotechnology Water solutions

Innovations for a sustainable future BASF growth field examples

* Published on November 29, 2011 28


Future investments in € billlion

Thereof investments in emerging markets

Total investments

35-45%

15-20

30-40%

~15

2006 – 2010 2011 – 2015 2016 – 2020

10.9

~20%

Investments … will boost future organic growth

29


Expansion joint venture activities in Malaysia

Expansion Verbund site Nanjing, China*

MDI plant Chongqing, China

Acrylic acid complex, Brazil

Expansion oil & gas activities

* Memorandum of Understanding signed

TDI plant Ludwigshafen, Germany

Investments Major projects

30


Acquisitions … will contribute to profitable growth in the future

Provide a minimum return on investment of 8% after tax

Are EPS accretive by year three at the latest

Financial acquisition criteria

Generate profitable growth above the industry average

Are innovation-driven

Offer a special value proposition to customers

Reduce earnings cyclicality

Strategic acquisition criteria

We want to acquire businesses which …

31


BASF Group 2002–2011 Index

50

100

150

200

250

300

2002 2005 2008 2011

CAGR 2002 – 2011

10 %

10 %

4 %

EBITDA

Sales

Fixed costs

Operational excellence Strong track record

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

Annual earnings contribution in € million

0

1,000

2,000

3,000

2012 2015

Former cost saving programs NEXT STEP

Project timeline: 2012–2015 Measures to optimize processes and

structures in all regions, e.g. − manufacturing, maintenance − supply chain − engineering, best-cost country sourcing

Fixed cost savings and margin improvements

One-time costs & investments: ~€1 billion Targeted annual earnings contribution:

~€1 billion by end of 2015, thereof €100 million in 2012 (run-rate)

NEXT Program

STrategic Excellence Program ‘STEP’

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

Achieved by end 2011: >€ 800 million

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Business review


Strategic levers

Fit for 2020


Key financial targets 2015 / 2020

Grow at least 2 percentage points above chemical production

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

Profitability targets Growth targets

2015

2020

Sales ~€85 billion

Sales ~€115 billion

EBITDA ~€15 billion EPS ~€7.50

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

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Appendix Business development Q3 2012

BASF Capital Market Story__October 2012 37

Chemicals Declining margins and plant shutdowns

Intermediates 767 +14%

Inorganics 485 +36%

Petrochemicals 2,304 +8%

€3,556 +12%

621

381467 436 459

0

200

400

600

800

Q3 Q4 Q1 Q2 Q3

EBIT before special items (million €)

2012 2011

Q3’12 segment sales (million €) vs. Q3’11


Q3’12 vs. Q3’11 4% (9%) 10% 7%


Plastics Significantly weaker margins for polyamide precursors

Polyurethanes 1,655 +12%

Performance Polymers

1,314 (1%)

€2,969+6%


Q3’12 vs. Q3’11 0% (1%) 1% 6%


317

110

219256

218

0

200

400

Q3 Q4 Q1 Q2 Q3


2012 2011


Performance Products Competitive market environment and higher fixed costs

Performance Chemicals

933 +3%

Care Chemicals 1,233 (3%)

€4,015 +1%

Paper Chemicals 410 (3%)


Nutrition & Health 492 +4% Dispersions

& Pigments 947

+2%

440

220

452 446

347

0

200

400

600

Q3 Q4 Q1 Q2 Q3



Q3’12 vs. Q3’11 (2%) (2%) 0% 5%

2012 2011


Functional Solutions Lower volumes and prices in precious metal trading

Catalysts 1,446 (10%)

Construction Chemicals

634 +6%

Coatings 767

+10%

€2,847 -2%


162

88

148134 138

0

50

100

150

200

Q3 Q4 Q1 Q2 Q3



Q3’12 vs. Q3’11 (5%) (5%) 2% 6%

2012 2011


Agricultural Solutions Successful start of season in South America

Q3’12 segment sales (million €) vs. Q3’11 EBIT before special items (million €)

2012 2011

0

50

100

150

200

Q3 Q3

2012 2011

0

500

1.000

Q3 Q3

1,008


Q3’12 vs. Q3’11 3% 0% 0% 8%

171

95

908


Exploration & Production 1,360 +155%

Natural Gas Trading

2,012 +21%

€3,372 +54%

Q3’12 segment sales (million €) vs. Q3’11 EBIT bSI/Net income (million €)

123 225 97322

0

200

400

600

800

1,000

Q3/2011 Q3/2012

1,068

Natural Gas Trading

Exploration & Production

Net income

Non compensable oil taxes (Q3 2011: €0 million; Q3 2012: €492 million)

350 971

Sales development Period Volumes Prices/Currencies Portfolio

Q3’12 vs. Q3’11 60% (5%) (1%)

227

Oil & Gas Increased oil production in Libya


Review of “Other”

Million € Q3 2012 Q3 2011 Sales 1,243 1,637 thereof Styrenics - 739

EBIT before special items (331) (21) thereof Corporate research Group corporate costs Currency results, hedges and other valuation effects Styrenics, fertilizers, other businesses

(92) (63)

(247)

31

(86) (58) 104

82

Special items (45) (33)

EBIT (376) (54)


Strong operating cash flow of €5.2 billion

Million € Jan - Sep 2012

Jan - Sep 2011

Cash provided by operating activities 5,156 5,028 thereof Changes in net working capital (667) (1,337)

Cash used in investing activities (2,081) (957) thereof Payments related to tangible / intangible assets (2,780) (2,101)

thereof Acquisitions / divestitures 411 (22)

Cash used in financing activities (3,395) (4,105) thereof Changes in financial liabilities Dividends

(797) (2,593)

(1,727) (2,378)

Free cash flow 2,376 2,927

Operating cash flow: €1.7 billion Free cash flow: €0.6 billion Capex: €1.1 billion Net debt decreased by €0.6 billion to €11.0 billion in comparison to YTD 2011

Third quarter 2012


Appendix


Our purpose

We create chemistry for a sustainable future.

46


Our strategic principles

We add value as one company.

We innovate to make our customers more successful.

We drive sustainable solutions.

We form the best team.

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BASF capital market story 10/2012

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Transcript of BASF capital market story 10/2012