2
Chemicals – the heart of the Verbund
*including other activities: 2.5 billion Euro (5%)
2006 Group sales*: 52.6 billion Euro
Agricultural Products & Nutrition
Performance Products
19%Plastics
24%
Chemicals• Inorganics• Catalysts• Petrochemicals• Intermediates
Oil & Gas20%
10%22%
3
Strong positions across chemical spectrum
Inorganics PetrochemicalsIntermediatesCatalysts
• Inorganic chemicals
• Inorganic specialties
• Electronic chemicals
• Glues and resins
• Cracker products• Industrial gases• Alkylene oxides
and glycols• Plasticizers• Solvents
• Amines • Butanediol
and derivates• Polyalcohols and
specialties• Acids and special
intermediates
• Emission-control catalysts
• Process catalysts
• Precious metal services
1 | Building a stronger Chemicals segment (2001 – today)
2 | A strong portfolio focused on performance
3 | Toward new levels of performance
4
5
Sales more than doubled, EBIT quadrupled within last 6 years
CAGR 2001-2006:
• Global chemical production**: 3.6%
• Oil price: 13.6% (Euro/bbl)
• BASF Chemicals
Sales: 20.8%
EBIT***: 32.0%
** without pharma
*** before special items
0
2000
4000
6000
8000
10000
12000
14000
2001 2002 2003 2004 2005 2006*0200400600800100012001400160018002000
Sales* in million Euro
EBIT before special items* in million Euro
InorganicsPetrochemicals IntermediatesCatalysts
Sales: +21% p.a.
* Engelhard-Catalysts accounted from June 2006 onwards
6
Relentless focus on operational excellence drives profitability
Index
Drivers for improvement:
• High capacity utilization
• Higher margins
• Rationalization in older plants
• Investments into state- of-the-art technologies
• Business models and enterprise-resource- planning models
EBIT before special items indexed
Sales indexed
0
50
100
150
200
250
300
350
400
450
2001 2002 2003 2004 2005 20060
50
100
150
200
250
300
350
400
450
Fixed costs indexed (including depreciation and amortization)
7
BASF Chemicals
Powerful partnerships
• Total• Sinopec• Petronas• Shell
Major investments
Major capex• Verbund sites
(Nanjing, Port Arthur, Kuantan)
• PolyTHF (Caojing)
Acquisitions• Catalysts • Electronic chemicals• Plasticizers • Inorganic specialties
Major divestitures / closures
• Ethane cracker North America
• Butanediol restructuring
• Plasticizer restructuring
Today’s portfolio better than ever
1 | Building a stronger Chemicals segment (2001 – today)
2 | A strong portfolio focused on performance
3 | Toward new levels of performance
8
9
7%
20%
73%
Estimate 2007 (in % of sales)*
Growing share of formulated materials and customized solutions
*excluding Materials Services
20%
73% Chemicals & basic materials
Formulated materials
Customized solutions
10
Chemicals & basic materials
How we succeed:
• Cost leadership through Verbund - Product portfolio - Energy efficiency - Logistics
• Technology leadership• Innovation• Partnership /
cooperation
Chemicals & basic materials
7%
20%
73%
Estimate 2007 (in % of sales)*
*excluding Materials Services
7%
20%
73%
Chemicals & basic materials
Formulated materials
Customized solutions
11
Strong forward integration in a large portfolio of value added products (I)
Naphtha,LPG
EO Ethylene glycol
Ethanolamines
Styrene Polystyrene
Oxo-C4
Butadiene
Isobutene
PolyamideCaprolactam
Dispersions
Plasticizers
SolventsButanols
2-Ethylhexanol
Superabsorbents
Engine coolants
Process chemicals
Fuel additives, sealantsPolyisobutene
Cyclohexane
Polyurethanes
Benzene
Acrylic Acid
PO
Ethylbenzene
Raw materials Selected products
Ethylene
C4
Propylene
Chemicals segment
Surfactants Detergents
12
Food conservations
Pharma, Agro
Textile fibers, polyurethanes
Coating resins, adhesive raw materials
Glues,
Glass industry, fertilizers
Chemicals, electronics, fertilizers
PVC
Alcoholates
Natural Gas
Sulfur
Salt
Acetylene
Ammonia
THF/pTHF®
Urea
Vinyl ether
Methanol Formaldehyde
Me-Formiate Formic acid
Melamine
NOx
SO2 , SO3
Nitrite, Nitrate
Sulfuric acid
Cl2 , NaOH EDC
Butanediol
Syngas
impregnating resins
Strong forward integration in a large portfolio of value added products (II)
Chemicals segment
Raw materials Selected products
13
Diverse product portfolio with a strong propylene value chain
• Naphtha cracker matches BASF’s broad demand for cracker products better
• BASF operates metathesis plants to convert ethylene to propylene (Port Arthur)
• BASF is a net buyer of benzene and propylene
• Ethylene surplus is mostly covered through long-term contracts with strategic partners (e.g. Solvin)
to/to Ethylene Typical cracker output
BASF demand
Feedstock Ethane (1.3)
Naphtha (3.0)
2006
Ethylene 1.0 1.0 1.0
Propylene 0.02 0.55 1.09
Butadiene 0.03 0.17 0.16
Benzene 0.01 0.25 1.62
Toluene 0.0 0.04 0.17
Source: Ullmann, BASF
14
Global ethylene market segments
Source: CMAI, BASF
Ethylene surplus sold to 3rd parties account for 2% of total Chemicals sales
• 84% of produced ethylene consumed captive in value added products
• BASF participates over proportional in– EO derivatives – Styrene
• BASF will manage and balance the limited direct impact of Middle East ethylene derivatives imports inside the Verbund
59%
12%
7%
10 %
12%
Global ethylene market 2006:110 million tons
BASF net ethylene balance
BASF production* 2006:2.3 million tons
16%
8%
2%
25%13%
29%
7%
* BASF JV as per ownership share, 2006
EOPVCPolyethylene
Others Ethylene surplus sold to merchant market
Styrene
EO for MEG merchant market (68 % in China)
15 Source: BASF
Propylene captive demand in different spread of applications
65%
7%
4%
9 %
8%
Global propylene market 2006:66 million tons
BASF production* 2006:1.4 million tons
7 %
* BASF JV as per ownership share, 2006, from steamcracker and metathesis
Global propylene market segments
AcrylonitrilePOPolypropylene Acrylic acid
OthersOxo
• BASF participates over proportional in– Propylene oxide – Acrylic acid – Oxo products
• Can manage and balance the limited direct impact of Middle East propylene derivatives imports inside the Verbund
24%
12%
29%
35%
BASF net propylene balance
16
Unique energy efficient Verbund concept
(average tons/hour)
-1000 -500 0 500 1000
Heat producing processes
Heat consuming processes
Own energy power station
Steam consumption Steam production
16
Example Antwerp
17
0
25
50
75
100
Total manufacturingcosts
Net energy usage
• Cost leadership through consequent process innovation
• New feature: Increased selectivity by optimized feed gas
• Record in specific EO yield and energy efficiency
• Significant ethylene savings
Technology leadership through continuous improvement
Results of benchmarking study in %
BASF Antwerp
Best quartile world
Average world
Example EO technology
18
Ethylene
Butadiene
Propylene
Benzene
Toluene
BenzeneExpanding the feedstock basisto take advantage of market fluctuations e.g. benzene from steam-dealkylation
Propylene EthyleneTargeted closure of the captive supply/demand gape.g. Propane DeHydrogenation (PDH)
ButadieneCapturing market opportunities via dedicated productione.g. butadiene from butaneBASF own production
Global position
lowlow high
high
BA
SF c
aptiv
ede
man
dExpanding our technology leadership through process research
Over 80 R&D projects for new & improved processes
19
Capturing new markets through product research
• BASF uses proprietary reaction know-how for production
• Rapid introduction of new plasticizer to cope with changed regulations: from 0 to 30 kto in five years
• Sales potential: 80 million Euro in 2010
• Market share to grow from 11% (2006) to 30% (2010) (plasticizers in sensitive applications)
Hexamoll DINCH® is a new plasticizer for sensitive applications: medical devices, toys, food contact uses
20
Leverage partnerships A new butadiene value-chain with CDon
• New highly efficient process, using butadiene and laughing gas from the Verbund
• Oxidation with laughing gas in worldwide first large- scale production
• Long-term contract signed with EMS-Chemie
• New plant under construction, launch 2010
• Sales potential: 50 million Euro
65 R&D projects for new productsin category of chemicals and basic materials
CDon (Cyclododecanone) is used as intermediate for engineering plastics and flavor/fragrances
21
How we succeed:
• Product performance• Innovation• Joint development with
customers• Broad application
know-how within BASF • Proprietary technology
Extend into customized solutions and formulated materials for chemicals
Customized solutions and formulated materials
7%
20%
73%
*excluding Materials Services
7%
20%
73%
Estimate 2007 (in % of sales)*
Chemicals & basic materials
Formulated materials
Customized solutions
22
Customized solution provider BASF – active in high growth markets
• Electronic chemicals 3%
• Inorganic specialties >4%
NAFTA
2007 – 2016, p.a.
• Electronic chemicals 3%
• Inorganic specialties >6%
Europe
• Electronic chemicals 9%
• Inorganic specialties >6%
Asia
• Environmental catalysts 7%
• Process catalysts 4%
Global
23
Electronics industry – value chain
Joint development with customers in electronic chemicals
*2005
Chemicals Formulations / materials Components End-consumer
products
USD 48 bn USD 400 bn USD 1100 bnInnovation circle
BASF today:Integrated system house
Market size*: USD 4 bn
24
CMP – Chemical and mechanical polishing: Polishing method, combining chemical and mechanical forces to level each layer on a chip
• Global CMP slurry market (2006): 450 million Euro, 10% growth p.a.
• BASF participates in the development of next generation CMP slurries with customers and partners
• From 2009, BASF will enter the market with new CMP products
Success through innovation and product performance
With CMP
Without CMP
80 R&D projects for new products in category formulated materials and customized solutions
1 | Building a stronger Chemicals segment (2001 – today)
2 | A strong portfolio focused on performance
3 | Toward new levels of performance
25
26
Active portfoliooptimization
• Strongly grow solution provider business
• Acquisitions in leading technologies and growth markets
Excellentinnovation platform
• Innovation pipeline filled with > 200 promising projects
• R&D spending average 2007-2011: 200 million Euro p.a.
Good position ingrowth markets
• Maintain profitability with strong value chains and technology leadership
• Extend into new products and growth markets
• Optimal supply to Verbund of raw materials and intermediates
• Capex budget 2007– 2011: 2.4 billion Euro
Our strategy for profitable growth
27
Targets Chemicals 2010
*oil price assumption 2010: $45 bbl
2006 2010Sales to 3rd parties of 11.6 billion Euro
Best in class in operational excellence Sales* to 3rd parties >13 billionEuro
EBIT after cost of capital of 479 million Euro
Earning a premium on cost of capital
28
BASF Chemicals – our unique strengths
• A more diverse, less cyclical portfolio of chemicals than other manufacturers – we are not an ethylene company
• Lean supplier of chemicals to internal and external customers
• High leverage through Verbund and technology leadership
• Economy-of-scale investments with strong partners in growth markets
• Growing through product and process innovation together with customers in high growth markets
• Profitable growth exploiting Verbund synergies
29
Disclaimer
This presentation contains forward-looking statements under the US 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 to be 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 include those 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.
31
Glossary
• C4 Raw materials with four carbon atoms • CMAI Chemical Market Associates, Inc.• EDC Ethylenedichloride• EO Ethylene oxide• JV Joint venture• LPG Liquefied petroleum gas• Me-Formiate Methylformiate• MEG Monoethyleneglycol• Oxo-C4 Oxo alcohols with four carbon atoms• PO Propylene oxide• PolyTHF, pTHF Polytetrahydrofurane• PVC Polyvinylchloride• THF Tetrahydrofurane