Speech BASF Analyst Conference Call Q2 2011

BASF 2nd Quarter 2011 Analyst Conference Call July 28, 2011, 14:00 (CEST), Ludwigshafen

BASF 2nd Quarter 2011 Analyst Conference Call 1

BASF posts strong results

Second Quarter 2011 Financial highlightsJuly 28, 2011

Analyst Conference Call Script

Dr. Kurt Bock Dr. Hans-Ulrich Engel

The spoken word applies.

BASF 2nd Quarter 2011 Analyst Conference Call July 28, 2011


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


Sales €18.5 billion +14%EBITDA €3.0 billion +5%EBITDA margin 16.3% 17.7%EBIT before special items (bSI) €2.2 billion +1%EBIT bSI adjusted for non-comp. oil taxes €2.2 billion +12%EBIT €2.2 billion +7%Net income €1.5 billion +23%EPS €1.59 +23% Adjusted EPS €1.75 +17%

Business performance Q2’11 vs. Q2’10

BASF posts strong resultsSecond quarter 2011 highlights

Robust sales and earnings growth in the chemicals business with volumes up 5%Excellent performance of the acquired former Cognis businessEarnings in Agricultural Solutions increased despite adverse weather conditionsSales growth in Oil & Gas was price driven. Net income rose by 74%


Dr. Kurt Bock Ladies and Gentlemen, good afternoon and thank you for joining us.

[Chart 3: BASF posts strong results]

After a powerful start into the year we had another good and very

solid quarter. Sales grew by 14 percent to 18.5 billion Euros

compared to 2010. More importantly, we succeeded to grow

volumes in our chemical business by 5 percent. For the first time

in 2011 the weakening of the US Dollar led to a negative sales

effect of 6 percent, which however, was largely compensated by

the excellent performance of the acquired former Cognis

business.

In Oil and Gas, growth was purely price driven due to the

shutdown of our operations in Libya. The missing sales and

earnings from Libya – and we do not see our operations being

restarted in 2011 – also affected the year over year earnings

comparison. Adjusted for Libya, EBIT before special items

increased by 16 percent to 2.2 billion Euros.

Adjusted earnings per share grew by 17 percent to 1.75 Euro.

What we saw in Q2 was a continued upward trend in raw material

costs. Our sales prices rose by 13 percent in total and 12 percent

in the chemicals business. However, we were able to pass on the

cost increases to a very large degree.

We also had planned and unplanned plant outages which

affected earnings negatively, most notably, the turnaround of a

cracker as well as the disruption of our acetylene plant in

Ludwigshafen which impacted our butanediol value chain.


At the end of the second quarter, we saw some inventory

destocking at our customers, above all in Asia. We interpret this

as a sign that the exceptionally high growth rates of the last

couple of quarters are going to normalize as expected. We

therefore reiterate our guidance for full year sales and earnings.



Important milestones in Q2 2011

Styrolution

Joint venture of BASF and INEOS to form the global market leader in styrenicsJoint venture contract signedFTC and EU antitrust approval receivedClosing subject to remaining approvals from antitrust authorities in other countries Closing of joint venture expected in Q4 2011

New TDI plant in Europe

TDI is a key component for polyurethane foams with growth rates above GDPBASF to expand its leading position in TDI with a new 300kt/a plant in Europe The world‘s largest single-train TDI plantSuperior technology and unique Verbundconcept provide industry leading cost structureStart-up of production in 2014


[Chart 4: Important milestones in Q2 2011]

In the second quarter, we also achieved important milestones:

As you all know, BASF and INEOS plan to combine major parts of

their global styrene monomer, polymer and copolymer business

activities into a new joint venture called Styrolution. In the second

quarter, we took important steps towards the establishment of the

joint venture Styrolution. In May, the companies signed the joint

venture contract. Meanwhile, the new joint venture has already

been approved by the U.S. Federal Trade Commission and the

EU Commission. We are still awaiting approvals from antitrust

authorities in a few countries and expect closing in the fourth

quarter.

In May, we announced our plans to build the world’s largest-

single train TDI plant in Europe. TDI is a key component for the

polyurethanes industry. It is widely used in the automotive

industry, for example in seating cushions and interior applications,

as well as in the furniture segment, for example in flexible foams

for mattresses and cushions. We expect the global TDI market to

grow faster than GDP in the coming years, with strong

contributions from Central and Eastern Europe, Middle East and

Africa. Our excellent technology and unique Verbund concept will

ensure an industry-leading cost structure. We aim to start up this

fully integrated plant in 2014. This investment supports our growth

strategy and underlines our leading position as the largest TDI

producer.



Focus on future marketsBASF intensifying R&D around electromobility

Market trendsSustainable electromobility is key to climate friendly mobility High-performance batteries and innovative solutions for weight reduction and heat management are essential for efficient electromobility

BASF activitiesInvestment of three-digit million euro sum over the next five years for R&D and production of battery materials• Current investment in innovative cathode materials plant in

Elyria, Ohio to start up in mid-2012Portfolio expansion by entering electrolytes and positioning BASF as future system supplier for high performance batteriesLightweight construction solutions and heat management systems further help to reduce energy consumption

Electromobility – leveraging BASF’s R&D and business platforms


[Chart 5: Focus on future markets] We are further intensifying our efforts in the field of electro-

mobility and will bring BASF’s innovation strength to function

here.

Energy efficient electric cars are becoming key to the climate

friendly transformation of individual mobility. Improved batteries

as well as innovative solutions for weight reduction and heat

management are major challenges electromobility faces today.

We see new chemical solutions as a major contributor to

overcoming these challenges. BASF is therefore committed to

leveraging its research and business platforms on this future

market.

In battery materials, for example, BASF will be investing a three-

digit million euro sum in research, development and production

over the next five years. Part of the investment is being

channeled into the construction of a production plant for

advanced cathode materials in Elyria, Ohio. This new facility is

scheduled to supply the market with innovative cathode materials

for the production of high-performance lithium-ion batteries from

mid-2012 onwards. In addition, we are expanding our activities in

the field of high-quality tailored electrolytes to position ourselves

as a future systems supplier in this market.

Furthermore, in order to reduce the energy consumption of

electric vehicles we are working on resin-based solutions for fiber

reinforced composites to reduce vehicle weight as well as heat

management solutions.



We aim to grow sales on average by two percentage points per year faster than chemical production growthWe strive to grow our earnings further year by year, and to achieve an EBITDA margin of 18% by 2012

We forecast Brent oil price of $110/bbl (from $100/bbl) and US$/€ of $1.40 (from $1.35)We assume that oil production in Libya will not restart during 2011 →EBIT before special items from our Libyan oil production for the full year 2011

will be about €1 billion lower compared with 2010(thereof about €700 million of non-compensable oil taxes)

Assumptions

Medium-term targets

Outlook 2011

We expect to generate significantly higher salesWe aim to significantly exceed the 2010 EBIT before special itemsadjusted for non-compensable oil taxes (2010: €7.2 billion)We expect to achieve a high premium on our cost of capital

Targets 2011


[Chart 6: Outlook 2011]

Now let’s come to the outlook for 2011. To put it in a nutshell, we

confirm our strong outlook for 2011. We will continue to focus our

attention on protecting our margins and optimizing our fixed costs

as well as keeping working capital at a minimum level.

With the further weakening of the US Dollar and the high oil price

volatility we see the need to adjust the assumptions for our full year

outlook:

We are increasing our Brent oil price forecast from 100 Dollars

per barrel to 110 Dollars per barrel and we are expecting a

Dollar/Euro exchange rate of 1.40, up from 1.35.

Our assumptions for the growth of GDP, industrial and chemical

production remain unchanged.

We are still assuming that the oil production in Libya will not

resume during 2011.

For the full year 2011, we expect to generate significantly higher

sales than in 2010. As already explained during our first quarter

conference call, EBIT before special items excluding non-

compensable oil taxes provides a much more meaningful

guidance for 2011. We therefore confirm, that we aim to

significantly exceed the 2010 EBIT before special items excluding

non-compensable oil taxes which amounted to 7.2 billion Euros.

Finally, we remain committed to our target of achieving a high

premium on our cost of capital in 2011.

With this I’ll hand over to Hans.



ChemicalsRobust sales and earnings supported by price increases

Intermediates693+7%

Inorganics351

+8%

Petrochemicals2,348+18%

€3,392+14%

687617

537

765674

0

200

400

600

800

Q2 Q3 Q4 Q1 Q2

Sales developmentPeriod Volumes Prices Portfolio Currencies

Q2’11 vs. Q2’10 2% 20% 0% (8)%

Q2’11 segment sales (million €) vs. Q2’10 EBIT before special items (million €)

20112010


Dr. Hans-Ulrich Engel

Good afternoon ladies and gentlemen.

I will highlight the financial performance of each segment in more

detail and focus on the respective business developments in

comparison to the second quarter of 2010.

[Chart 7: Chemicals – Robust sales and earnings supported by

price increases]

Ongoing solid demand in the Chemicals segment drove up sales

significantly. We successfully increased prices in many product lines

in order to offset higher raw material costs. Planned and unplanned

plant shutdowns negatively impacted our EBIT. Nevertheless,

earnings remained almost on the strong level of the previous year’s

quarter.

In Petrochemicals, the strong demand for our products led to

significant sales growth in all regions, but we witnessed a

declining momentum in Asia, specifically in China, towards the

end of the quarter. The performance in the acrylics business was

excellent as a result of ongoing tight markets. Plasticizers, on the

other hand, were weaker as demand from the construction and

housing industries remained subdued, especially in North

America. Earnings came in at a very high level, albeit below the

extremely high previous year’s quarter. This was due to the

turnaround at our larger cracker in Ludwigshafen.

In Inorganics, continued strong demand, particularly for inorganic

chemicals, glues and impregnating resins, led to an


increase in sales. Lower margins in ammonia and methanol as

well as higher costs triggered by major planned turnarounds of

our ammonia and sulphuric acid plants resulted in lower earnings.

Higher sales in Intermediates were driven particularly by

customers from the plastics, coatings and textile fiber industries.

The strong demand for our products could not be fully met in all

product lines. The unplanned shutdown of the acetylene plant in

Ludwigshafen due to a fire significantly impacted our butanediol

value chain. As a consequence we had to declare force majeure

for butanediol and several downstream products in Europe.

Nevertheless, earnings were up overall given higher volumes and

improved margins.



PlasticsStrong demand in all product lines resulted in increased earnings

Polyurethanes1,498+7%

PerformancePolymers

1,330+12%

€2,828+9%

349 371

285

393 383

0

200

400

Q2 Q3 Q4 Q1 Q2

Sales development Period Volumes Prices Portfolio Currencies

Q2’11 vs. Q2’10 4% 12% 0% (7)%


20112010


[Chart 8: Plastics – Strong demand in all product lines resulted

in increased earnings]

In Plastics, we experienced strong demand in all product lines and

we increased sales and earnings compared to the previous year’s

quarter in both divisions.

In Performance Polymers, positive pricing momentum drove

sales growth. Demand for polyamides and intermediates

remained at a high level. The Engineering Plastics business

benefitted from strong demand from the automotive industry,

especially in Europe and North America. Fierce competition from

Asia adversely affected demand for expandable polystyrene from

the construction industry in Asia and Europe. Sales of our

biodegradable plastics were temporarily impacted by limited raw

material availability, but still increased substantially. EBIT before

special items rose significantly as a result of higher volumes and

improved margins, especially in the polyamide and intermediates

businesses.

In Polyurethanes, sales were driven by higher volumes and

prices in all regions, most pronounced in Europe. Demand from

the automotive and construction industries increased compared

with the previous year’s quarter. We were able to increase prices

for MDI, polyurethane systems and polyols, while TDI prices were

slightly lower. Despite several turnarounds, earnings were up

mainly because of higher volumes.




Q2’11 vs. Q2’10 2% 6% 27% (5)%

Performance ProductsStrong earnings contributions from acquired Cognis business

471

370294

554513

0

100

200

300

400

500

600

Q2 Q3 Q4 Q1 Q2

PerformanceChemicals

908+13%

Care Chemicals1,353+100%

€4,095+30%

Paper Chemicals417(5)%


Nutrition & Health480+29%

Dispersions& Pigments

937+9% 20112010


[Chart 9: Performance Products – Strong earnings

contributions from acquired Cognis business]

Sales and EBIT before special items in the Performance Products

segment increased due to the acquired Cognis business, higher

volumes as well as the successful repositioning of the combined

businesses following the Ciba integration.

In Dispersions & Pigments, we could increase sales in all

product lines and regions, except for North America where we

faced negative currency effects. Margin levels could be largely

maintained since successful price increases helped to offset

higher raw material costs. Thanks to higher volumes and the

successful repositioning of the combined businesses following the

Ciba integration we were able to improve earnings.

In Care Chemicals, sales doubled and earnings were up

significantly due to Cognis. Volumes went up despite the limited

availability of precursors for hygiene and cosmetics. We

experienced strong demand, especially for detergents and

formulators. We successfully maintained our margins despite

significantly higher input costs. As a result, earnings were up

substantially.

In Nutrition & Health, net sales grew strongly mainly due to the

inclusion of Cognis. Demand was very good in all regions and in

all businesses. In vitamins, we continued to face some price

pressure but we see prices stabilizing at present. Earnings could

not be maintained at the previous year’s level as a result of higher

raw material costs, lower vitamin margins and a weaker US-

Dollar.


In an ongoing challenging business environment, sales in Paper

Chemicals decreased slightly. Sales were impacted by

divestments and portfolio optimizations as well as our “value over

volume” strategy. Earnings were below the previous year’s

quarter as we were not able to fully pass on higher raw material

costs.

In Performance Chemicals, sales increased substantially thanks

to price increases and the inclusion of the Cognis businesses.

Weaker order volumes from Japan could not be compensated by

the overall strong demand from the automotive and refinery

industries. EBIT before special items decreased slightly, mainly

due to lower volumes and higher raw material costs, which could

only partially be compensated by price increases.




Q2’11 vs. Q2’10 12% 8% 0% (7)%

Functional SolutionsStrong demand from automotive drove earnings growth

Catalysts1,500+22%

Construction Chemicals

5770%

Coatings689

+6%

€2,766+13%

165 158

33

142167

0

50

100

150

Q2 Q3 Q4 Q1 Q2


20112010


[Chart 10: Functional Solutions – Strong demand from

automotive drove earnings growth]

Volumes in the Functional Solutions segment were significantly

higher, reflecting the strong global demand for mobile emissions

catalysts and OEM coatings from the automotive industry. Demand

from the construction industry rose slightly in Northern, Central and

Eastern Europe. EBIT before special items improved slightly thanks

to strong volume growth in Catalysts.

Catalysts’ sales rose sharply. Mobile emission catalysts showed

strong growth in Europe, Asia and North America. Moreover, we

realized higher volumes in refinery and chemical catalysts. As a

result, EBIT before special items came in far above the level of

the prior year.

Sales in Construction Chemicals were at the previous year’s

level reflecting a volume improvement at stable prices as well as

negative currency effects. Volumes increased in all major regions

except for Southern Europe. Volumes in North America improved

despite the ongoing challenging market environment. EBIT before

special items did not match the previous year’s level due to higher

raw material costs, which we could not pass on to our customers.

In Coatings, the positive trend in demand continued for all

product lines, especially in automotive OEM coatings and

decorative paints. However, raw material prices could not be fully

passed on. As a result, EBIT before special items was below the

very good level of the previous year.



Agricultural SolutionsHigh global demand for agricultural products drove volume growth

320 331

0

100

200

300

400

Q2 Q2


20112010

0200400600800

1,0001,2001,400

Q2 Q220112010

0%


Q2’11 vs. Q2’10 6% 0% 0% (6)%

1,211 1,205


[Chart 11: Agricultural Solutions – High global demand for

agricultural products drove volume growth ]

In Agricultural Solutions, high global demand for agricultural

products drove volume growth, especially in fungicides. This

development, however, was offset by negative currency effects from

the devaluation of the US-Dollar, resulting in sales at the previous

year’s level.

EBIT before special items was slightly above the prior year level

despite significantly negative currency effects.

In Europe, we increased sales thanks to higher demand for our

products in Eastern Europe which could more than offset the impact

of dry weather conditions in Western Europe.

In North America, sales declined as a result of a weaker US-Dollar

as well as weather related acreage reductions and a compressed

season, which led to a reduced number of herbicide applications.

Our Plant Health business performed strongly.

We improved sales in South America, mainly based on higher

demand for Clearfield®, our herbicide tolerance technology. Further

sales growth came from insecticides for sugarcane and seed

treatment products.

In Asia, sales were significantly above the previous year’s quarter

driven by our herbicide business.



148257

0

200

400

600

Q2 Q2

Oil & GasHigher oil and gas prices compensated for lower volumes

Exploration &Production563(34)%

Natural GasTrading

1,898+25%

€2,461+4%

Sales developmentPeriod Volumes Prices/Currencies Portfolio

Q2’11 vs. Q2’10 (19)% 23% 0%

63

EBIT bSI Natural Gas TradingEBIT bSI Exploration & Production Net income

Q2’11 segment sales (million €) vs. Q2’10 EBIT before special items/ Net income (million €)

20112010

420269

515

332

95

Non-compensableoil taxes 209


[Chart 12: Oil & Gas – Higher oil and gas prices compensated

for lower volumes]

Despite the production stoppage in Libya, sales in Oil & Gas

increased slightly, as a result of higher oil and gas prices.

Consequently, EBIT before special items adjusted for non-

compensable income taxes on oil increased.

In Exploration & Production sales decreased considerably due

to the discontinuation of our oil production in Libya. Nevertheless,

earnings adjusted for non-compensable oil taxes increased

substantially due to the higher oil and gas prices.

Sales in Natural Gas Trading were up significantly, reflecting

higher gas prices. Earnings, on the other hand, decreased as a

result of slightly lower volumes and negative time-lag effects.

A look at the income statement shows that net income rose by an

impressive 74 percent to 257 million Euros. This was related to

significantly higher oil and gas prices as well as a substantially lower

tax rate because of the production stoppage in Libya.



Review of “Other”

Million € Q2 2011 Q2 2010Sales 1,714 1,471thereof Styrenics 811 785*

EBIT before special items (163) (301)thereof Corporate research

Group corporate costs Currency results, hedges and other valuation effectsStyrenics, fertilizers, other businesses

(87)(59)

(118)

76

(78)(55)

(198)

67

Special items 27** (106)

EBIT (136) (407)

* Since January 1, 2011, Styrenics only includes the carved-out styrenics businesses; the previous year’s values were adjusted accordingly

** Incl. €68 million from repeal of fine imposed by the EU on Ciba in 2009


[Chart 13: Review of “Other”]

In “Other”, sales grew in styrenics, fertilizers and other businesses.

EBIT before special items improved by 138 million Euros to minus

163 million Euros mainly due to better operating results as well as

favorable currency and valuation effects.

Special items in “Other” amounted to plus 27 million Euros. They

contained 68 million Euros of income resulting from the repeal of

the fine imposed by the EU on Ciba in 2009 in relation to heat

stabilizers.



Operating cash flow in H1 2011

Million € H1 2011 H1 2010Cash provided by operating activities 3,038 2,721thereof Changes in net working capital (1,178) (1,355)

Cash provided by investing activities 81 (599)thereof Payments related to tangible / intangible assets (1,265) (889)

Cash used in financing activities (2,764) (2,054)thereof Changes in financial liabilities

Dividends (486)

(2,278)(292)

(1,762)

Operating cash flow at €3.0 billion despite reclassification of €887 million gain from the sale of K+S stakeFree cash flow at €1.8 billion Net debt amounted to €12.3 billion, a reduction of €1.3 billion since end of 2010

First half 2011


[Chart 14: Operating cash flow in H1 2011]

Let me now briefly conclude with our cash flow.

Cash provided by operating activities at around 3.0 billion Euros in

the first half of 2011 was 317 million Euros higher than in the same

period of the previous year. This can primarily be attributed to

increased earnings. Working capital rose between January and

June 2011 reflecting the growth in our business, higher raw material

costs as well as higher natural gas injection in our storage facilities.

Cash provided by investing activities amounted to 81 million Euros.

In March, the sale of shares in K+S resulted in a cash inflow of 972

million Euros with a net gain of 887 million Euros. CAPEX amounted

to 1.3 billion Euros including the investments in the OPAL-pipeline,

the capacity expansion of Ecoflex/Ecovio and the ongoing extension

of our Verbund site in Nanjing.

Financing activities led to a cash outflow of 2.8 billion Euros, mainly

due to a 486 million Euros reduction in financial liabilities and 2.3

billion Euros of dividend payments to shareholders of BASF SE and

minority shareholders in Group companies.

Since the end of 2010, we reduced net debt by 1.3 billion Euros to

12.3 billion Euros.

Thank you for your attention. We are now happy to take your

questions.

40BASF 4Q/FY’2010 Conference | February 24th, 2011



Back-Up


Financial highlights

Million € Q2 2011 Q2 2010 Δ% Q1 2011 Δ%Sales

changes due to- volumes- prices- portfolio- currencies

18,461 16,214 +14%

+2%+13%+5%(6)%

19,361 (5)%

EBITDA 3,015 2,867 +5% 3,365 (10)%

EBIT before special items 2,237 2,206 +1% 2,732 (18)%

EBIT before special itemsadjusted for non-compensable oil taxes 2,237 1,997 +12% 2,452 (9)%

Special items (20) (127) (84)% (182) (89)%

EBIT 2,217 2,079 +7% 2,550 (13)%

Net income 1,454 1,183 +23% 2,411 (40)%

EPS (€) 1,59 1,29 +23% 2,62 (39)%

Adjusted EPS (€) 1,75 1,50 +17% 1,94 (10)%



Balance sheet review

Balance sheet June 30, 2011 vs. end of 2010 (billion €)

Liquid funds

Accountsreceivable

Long-termassets

22.7

15.0

21.7

34.5

10.2

1.5

Otherliabilities

Financialdebt

Stock-holders’Equity

Jun 312011

Jun 312011

Dec 312010

Dec 312010

59.3

32.5

10.9

1.8

59.3

23.0

14.1

22.2

Inventories

Other assets

9.5

4.6

8.7

4.5

59.459.4

Long-term assets decreased by €2.0 billion amongst others due to the sale of shares in K+S

Inventories increased by €0.8 billion reflecting the expansion of our business and raw material inflation

Net debt decreased by €1.3 billion to €12.3 billion

Accounts receivable were up by €0.7 billion as a result of the expansion of our business

Equity ratio at 39% (up 1 percentage point)


Cognis – integration objectives

TargetsAchieve 20% EBITDA margin in the Performance Products segment by 2012Acquisition accretive as of 2012

CostsOne-time integration costs of €290 million until end of 2013 Inventory step-up of €120 millionCosts already incurred:− 2010: €80 million (thereof €60 million inventory step-up) − H1/2011: €210 million (thereof €60 million inventory step-up)

SynergiesGenerate €275 million of additional EBIT− €135 million growth synergies by the end of 2015− €140 million cost synergies by the end of 2013

Speech BASF Analyst Conference Call Q2 2011

Investor Relations

Transcript of Speech BASF Analyst Conference Call Q2 2011