August 2005

Strategy For Profitable Growth

Dr. Jürgen HambrechtChairman of the Board

1 | We grow faster than the Market

2 | We increase our Profitability

3 | We are committed to Shareholder Value

3

Volume growth in %

BASF Grows Faster than the Market

-3

-1

1

3

5

7

9

2000 2001 2002 2003 2004 Q1 2005 Q2 2005

BASF European Chemicals*(excl. BASF)

US Chemicals**

* European Peers: Akzo Nobel, Bayer, Ciba, Clariant, Degussa, DSM, Rhodia** US Peers: Dow, PPG, DuPont, Ecolab, Rohm and Haas

Source: Citigroup and company reports

4

Constant PortfolioOptimization

• Acquisitions in core, profitable business areas

• Divestments of non-core businesses

• Selective strategic partnerships

Good Position in Growth Markets

• Strong presence in Asia

• Enhance position in high growth businesses

ExcellentInnovation Platform

• Market-driven innovation

• Innovative businessofferings

Superior Growth OpportunitiesStrategic Focus Ensures Profitable Growth

Excellent platform to enable faster-than-market growth

5

2.7 %

4.6 %

3.8 %

6.2 %

Organic Growth

p.a.

35.6

20.2

22.8

23.6

Net Sales1995

- 0.8 %3.0 %29.8Bayer (in EUR)

- 5.6 %- 2.9 %27.3DuPont (in USD)

3.4 %8.0 %40.2Dow (in USD)

- 0.9 % 5.3 %37.5BASF (in EUR)

Chemical Market

Growth* p.a.

∆Portfolio

Mmgtp.a.

Total Growth

p.a.

Net Sales2004

Organic Growth versus M&ABASF and Peers, 1995 – 2004

In billion EUR (USD)

* without Pharma

3.3 %

6

Acquisitionsin profitablebusinesses

• Crop protectionAHP, Fipronil, seed treatment

• Fine chemicals

• Polyurethanes

• Superabsorbents

• Oil and gasDutch gas activities

• Engineering plastics

Divestment ofnon-core

businessesBASFcore

businesses

Constant Portfolio OptimizationSelected Transactions 1995 – 2004

• Pharmaceuticals• Fertilizers• Kali + Salz• Refineries• Polyolefins• Magnetic tapes• Fibers• Dystar• Printing systems

Partnerships

• AtoFina: NROC• Shell: Ellba• Gazprom: WINGAS• Dow: HPPO• Solvin

7 bn EUR(sales from acquired

businesses)

10 bn EUR(sales from divested

businesses)

7

Acquisitions in profitable

businesses

• Electronic ChemicalsMerck

• Coatings JV NOF

• Fine ChemicalsOrgamol

• PolyurethanesHuntsman TDI

Divestments of non-core

businesses

BASFCore

Businesses

Constant Portfolio OptimizationAcquisitions/Divestments in 2005

• Polystyrene USIneos Americas

• TriforineFungicidesSumitomo

• BasellAccess Industries

Focus on acquisitions supporting profitable growth

8

Hold Market Position

Reposition

Divest

Expand Moderately

Expand

Strategic Positioning of Business Units

• Divestitures almost completed

• Half of the businesses are in areas with high growth rates and are subject for expansion / moderate expansion

• Acquisitions will contribute to top line growth

• Acquisition criteria:- Strategic fit- Min. return:

9% discount rate (aftertax) + risk adjustment

- Accretive by third yearlatest

32 BUs

1 BU

34 BUs

9

Chemical Market Growth (excl. Pharma) 2004 – 2015

Western Europe Asia/Pacific Rest of WorldNAFTA • Asia/Pacific to become largest regional chemical market by 2015

• BASF strongly positioned to participate in Asian growth

• Future capex in chemical activities will meet this growth pattern

2004 2015

27%

22%

24%

13%

35%

25%

13%

41%

2,2203.1%p.a.

4.7%p.a.

1.9%p.a.

1.8%p.a.

1,578

3.8% p.a.

In billion USD

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• Early positioning in high growth markets of Asia

• Major investment projects:- Integrated Petrochemical Site, Nanjing, China

- Polyurethanes Complex, Caojing, China- THF/PolyTHF, Caojing, China

- Integrated Site Kuantan, Malaysia- MDI/TDI, Yeosu, Korea

• Total capital spending in Asia of 5.6 billion EUR by 2005

• Ongoing investments in Asia

Investments in Asia

Nanjing

THF/PolyTHF® complexin Aug. 2004

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BASF Innovation StrategyBASF R&D

• R&D Expenditure2004 1.2 billion EUR (+ 6%)

• 6,800 employees

• Global #1 in chemical patents

• R&D Verbund extends to 1,200 co-operations(universities, research institutes, start-up companies etc.)

ProductInnovations

Examples:

- Boscalid- ChiPros®

- Phase ChangeMaterials

- „Magic Eraser“

ProcessInnovations

Examples:

- THF- Propylene Oxide

- Ionic Liquids

New Fields ofTechnology

- Materials Science- Nanotechnology- EnergyManagement

- Biotechnology

Tailor-made business models

Focus on Market Driven Innovations

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1 | We grow faster than the Market

2 | We increase our Profitability

3 | We are committed to Shareholder Value

13

BASF has outperformed all traditional competitors.

BASF has achieved profitable growth from 1995-2004.

CAGR Sales: + 5.3%CAGR EBIT: +10.0%

14

Maintaining highly competitive cost structure

• LudwigshafenJune 2005: 480 mn EUR

• NAFTA I + IIJune 2005: 250 mn USD

- Program will beextended throughprocess/structureimprovements

- Cost saving amount tobe worked out in Q3 ‘05

• Europe90 mn EUR expectedend of 2006

Cost savings in million EUR

NAFTALudwigshafen Europe

0

250

500

750

1000

2004 2005 2006

Constantly Improving our Cost Base Restructuring and reorganization

What’s a good Proxyfor our Profitability?

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The Major Value Chains in Our Verbund are not Ethylene Based

• Major value chains are benzene and propylene based

• Plastics are mainly benzene based

• Oxo-C4, acrylic acidand polyurethane components are propylene based

50% 100%

Ethylene*

Benzene

Propylene

Total sales from value chains per raw material(indexed: benzene based sales = 100%)

Net sales (+) / net purchase (-)balance

(+)

(--)

(-)

75%25%

* Incl. net sales of ethylene to third parties

17

Ethylene Market Segments

Source: CMAI, BASF

BASF in the Ethylene Market

BASF:

• Very low representation in the ethylene merchant market (<15% of ethylene production)

• Participates only in about 30% of the ethylene derivatives markets*- Glycols- Styrene- Others,

e.g. EO derivatives

• Will not be affected directly by polyethylene exports to Europe from future Middle East capacities

GlycolsPVCPolyethylene Styrene Others

57%

16%

7%

7%

13%

* BASF PE sales only in Asia (Sinopec); BASF PVC sales via Solvin (Solvay)

Global Ethylene Market 2004:103 million tons

18

0

50

100

150

200

250

300

350

1995 1996 1997 1998 1999 2000 2001 2002 2003 20040

2

4

6

8

10

12

14

• Correlation between ethylene margin and

- Verbund margin: 13%

- Group margin: 25%

BASF Verbund Margin in % (rhs) **Europe C2 Cash Margin in EUR/t (lhs) *

Is Ethylene Margin a Good Proxy for BASF’s Profitability?

* Based on CMAI figures: NWE ethylene contract price./. naphtha-based cash cost

** Verbund margin = EBIT / sales (in Chemicals, Plastics,Performance Products – figuresadjusted to today’s portfolio)

*** Group margin = EBIT / sales (all segments; figures adjusted to today’s portfolio)

Ethylene margin not suitable as proxy for BASF Group – and Verbund margin

BASF Group Margin in % (rhs) ***

19

0

20

40

60

80

100

120

140

160

180

1995 1996 1997 1998 1999 2000 2001 2002 2003 20040

2

4

6

8

10

12

14

• Only 10% correlation between propylene margin and BASF Verbund margin

BASF Verbund Margin in % (rhs) **Europe C3 Cash Margin in EUR/t (lhs) *

Is Propylene Margin a Good Proxy for BASF’s Verbund Profitability?

* Based on CMAI figures: Propylene cash margin =NWE propylene contract price ./. propane based cash cost(dehydrogenation )

Reservation remark:- Propane dehydrogenation only

3% of global propyleneproduction

- Propane cost not directly interrelated with naphtha

** Verbund margin = EBIT / sales(in Chemicals, Plastics, Performance Products – figuresadjusted to today’s portfolio)

Propylene margin not suitable as proxy for BASF Verbund margin

20

0

100

200

300

400

500

600

700

1995 1996 1997 1998 1999 2000 2001 2002 2003 20040

2

4

6

8

10

12

14

Is Benzene Margin/Price a Good Proxy for BASF’s Verbund Profitability?

• 11% negative correlation between benzene margin and BASF Verbund margin

• 37% negative correlation between benzene price and BASF Verbund margin

* Benzene margin = NWE benzene contract price ./. NWE Naphtha contract price

** Verbund margin = EBIT / sales(in Chemicals, Plastics,Performance Products – figuresadjusted to today’s portfolio)

BASF Verbund Margin in % (rhs) **Europe Benzene Margin in EUR/t (lhs) *

Benzene margin/price not suitable as proxy for BASF Verbund margin

Europe Benzene Price in EUR/t (lhs)

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0

5

10

15

20

25

30

35

40

1995 1996 1997 1998 1999 2000 2001 2002 2003 20040

2

4

6

8

10

12

14

Oil price in USD/bbl p.a. (lhs) BASF Group Margin in % (rhs) *

Is Oil Price a Good Proxy for BASF’s Profitability?

• Correlation between oil price (in USD/bbl) and

- Group margin: -13%

- Group margin (excl. oil taxes): -31%

- Verbund margin: -50%

* Group margin = EBIT / sales (all segments; figures adjustedto today’s portfolio)

** Verbund margin = EBIT / sales (in Chemicals, Plastics,Performance Products – figures adjusted to today’s portfolio)

BASF Verbund Margin in % (rhs) **

BASF Group Margin (excl. oil taxes) in % (rhs)

Oil price not suitable as proxy for BASF Group – and Verbund margin

22

-2

-1

0

1

2

3

4

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

0

2

4

6

8

10

12

Global Industrial ProductionGrowth p.a. in % (lhs) *

BASF Group Margin in % (rhs) **

Is Industrial Production Growth a Good Proxy for BASF’s Profitability?

• 85% correlation between global industrial production growth and BASF Group margin

* Source: BASF; Industrial Production = Goods Producing Sector (Agro + Industry)

** Group margin = EBIT / sales (all segments; figures adjusted to today’s portfolio)

Global industrial production growth best suitable as proxy for BASF Group margin

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85%

25%

13%

10%

-11%

-13%

-31%

-50%

-60% -40% -20% 0% 20% 40% 60% 80% 100%

Potential Proxies for BASF’s Profitability

Correlation

Industrial Production and BASF Margin

Ethylene Margin and BASF Margin

Propylene Margin and Verbund Margin

Benzene Margin and Verbund Margin

Oil Price and BASF Margin

Oil Price and BASF Margin (excl. oil taxes)

Oil Price and Verbund Margin

Ethylene Margin and Verbund Margin

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1 | We grow faster than the Market

2 | We increase our Profitability

3 | We are committed to Shareholder Value

25

Capex Dividends Share buybackAcquisitions

Use of Cash

Use of cash in billion EUR

0

5

10

15

20

25

30

35

1995-1999 2000-2004

30 %

57 %

12 %

12 %

35 %

39 %

14 %*22.4

30.9

Dividend Policy

• Most consequently increased dividends amongst major chemical peers

Share buyback

• Most aggressive share buyback program within chemical industry

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1. Investments in Organic Growth

2. Acquisitions „Strengthen the Strengths“

3. Dividends

4. Share Buyback

27

0,00

0,40

0,80

1,20

1,60

2,00

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004*

Dividend in EUR per share

Dividend Special Dividend

+10% p.a.

• Increased dividend in 8 of the last 10 years

• 21% increase to 1.70 EUR per share in 2004

• Dividend yield of 3.21%in 2004

• Objective: To further increase dividend

Modified Dividend Policy

28

256

700

1,300

500 500

726

1,774

0

500

1000

1500

2000

1999 2000 2001 2002 2003 2004 2005 *

Continuous Share Buyback Program

In million EUR

* incl. planned share buyback program

• 16% of shares outstanding(4.3 bn EUR) bought back from 1999–2004

• Further repurchase for 1.5 bn EURannounced for 2005

• 0.87 bn EUR alreadyspent in HY1 2005(thereof: 0.6 bn EUR of new program)

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Conclusions

• We continue to outgrow the market

• We will be the benchmark in the industry on profitability; earning a premium on the cost of capital over the cycle

• Global industrial production growth is a good indicator for our profitability

• We continue to increase the return of cash to our shareholders via dividends and share repurchases

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Disclaimer

This presentation contains forward-looking statements under the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict and are based upon assumptions as to future events that may not prove tobe accurate.

Many factors could cause the actual results, performance or achievements of BASF to be materially different from those that may be expressed or implied by such statements. Such factors includethose discussed in BASF’s Form 20-F filed with the Securities and Exchange Commission. We do not assume any obligation to update the forward-looking statements contained in this presentation.

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