BASF in South America Report Productivity and sustainability

Transcription

1 BASF in South America Report 2017 Productivity and sustainability

2 Cover photo: Employee working in Jacareí (SP, Brasil) laboratory. On this page: Via QR Code and tablet device, industrial foremen Avni Türkseven, working in project management digitalization at the steam cracker in Ludwigshafen, gets access to digital information about instruments in the plant. Under the banner of Smart Manufacturing BASF evaluates opportunities for a more intensive use of digital technologies and applications in its plants with the goal of making production more efficient and even safer.

3 Chemicals The Chemicals segment comprises our business with basic chemicals and intermediates. Its portfolio ranges from solvents and plasticizers to high-volume monomers and glues as well as raw materials for detergents, plastics, textile fibers, paints and coatings, crop protection and medicines. In addition to supplying customers in the chemical industry and numerous other sectors, we also ensure that other BASF segments are supplied with chemicals for producing downstream products. Key data Chemicals 1 (million ) Change in % Sales 16,331 12, Thereof Petrochemicals 6,389 5, Monomers 6,963 5, Intermediates 2,979 2, EBITDA 5,374 3, Income from operations (EBIT) 4,208 1, EBIT before special items 4,233 2, Performance Products Our Performance Products lend stability, color and better application properties to many everyday products. Our product portfolio includes vitamins and other food additives in addition to ingredients for pharmaceuticals, personal care and cosmetics, as well as hygiene and household products. Other products from this segment improve processes in the paper industry, in oil, gas and ore extraction, and in water treatment. They furthermore enhance the efficiency of fuels and lubricants, the effectiveness of adhesives and coatings, and the stability of plastics. Key data Performance Products 1 (million ) Change in % Sales 16,217 15,558 4 Thereof Dispersions & Pigments 5,398 5,086 6 Care Chemicals 5,079 4,735 7 Nutrition & Health 1,844 1,932 (5) Performance Chemicals 3,896 3,805 2 EBITDA 2,427 2,577 (6) Income from operations (EBIT) 1,510 1,678 (10) EBIT before special items 1,416 1,777 (20) Functional Materials & Solutions In the Functional Materials & Solutions segment, we bundle system solutions, services and innovative products for specific sectors and customers, especially the automotive, electrical, chemical and construction industries, as well as applications for household, sports and leisure. Our portfolio comprises catalysts, battery materials, engineering plastics, polyurethane systems, automotive coatings, surface treatment solutions and concrete admixtures as well as construction systems like tile adhesives and decorative paints. Key data Functional Materials & Solutions (million ) Change in % Sales 20,745 18, Thereof Catalysts 6,658 6,263 6 Construction Chemicals 2,412 2,332 3 Coatings 3,969 3, Performance Materials 7,706 6, EBITDA 2,251 2,906 (23) Income from operations (EBIT) 1,545 2,199 (30) EBIT before special items 1,617 1,946 (17) Agricultural Solutions The Agricultural Solutions segment provides innovative solutions in the areas of chemical and biological crop protection, seed treatment and water management as well as for nutrient supply and plant stress. Key data Agricultural Solutions (million ) Change in % Sales 5,696 5,569 2 EBITDA 1,282 1,305 (2) Income from operations (EBIT) 1,015 1,037 (2) EBIT before special items 1,033 1,087 (5) Oil & Gas In the Oil & Gas segment, we focus on exploration and production in oil and gas-rich regions in Europe, North Africa, Russia, South America and the Middle East. Together with our Russian partner Gazprom, we are also active in the transportation of natural gas in Europe. Key data Oil & Gas (million ) Change in % Sales 3,244 2, EBITDA 2,069 1, Income from operations (EBIT) 1, EBIT before special items Net income On January 1, 2017, the Monomers and Dispersions & Pigments divisions activities for the electronics industry were merged into the global Electronic Materials business unit and allocated to the Dispersions & Pigments division. For better comparability, the affected figures for 2016 have been adjusted accordingly.

4 BASF in South America Report 2017 About this report 4 Index About this report 4 Employees, health and safety 32 Welcome 5 Message from the management 5 South America Executive Committee 6 BASF Group 2017 at a glance 10 BASF Group 12 Our Strategy 13 Goals 14 BASF in the regions 16 BASF on the capital market 18 Environmental performance 38 Innovation 42 Sustainability 46 Ten-year summary 57 Further information 58 Contact in South America 58 Credits 59 BASF in South America 20 Corporate Governance 26 BASF South America Strategy 28 About this report The BASF in South America" Report is published annually as a concise document about the performance of our activities across the three dimensions of sustainability economy, environment, and society in South America. The reporting period for this publication is the financial year This report also carries an overview of BASF Group along with its financial performance, prepared in accordance with the requirements of the International Financial Reporting Standards (IFRS), and, where applicable, the German Commercial Code as well as the German Accounting Standards (GAS). The emissions, waste, energy and water use of consolidated joint operations are included pro rata, based on our stake. The employee numbers refer to employees within the BASF Group as of December 31, 2017.

5 5 Welcome BASF in South America Report 2017 Welcome Message from the management Dear reader, The year 2017 was a positive one for BASF. Besides upholding our sales figures in a challenging context, we solidified a culture of excellence and moved forward with projects that made the company more digital and closer to its customers. The results were not only reflected in-house, but also by the market and press in South America, which conferred 25 recognitions upon us for our innovative and sustainable performance. These results were the fruit of work carried out with great discipline and long-term vision, by employees who, with a positive attitude, embraced the challenge to change a culture. This transformation started in 2014, when we launched the South America Excellence Program (SAEP), and was consolidated in 2017, when we defined five strategic measures: Go to market; Materialization of sustainability; Increased XBU sales; Offer of innovative products and solutions; and Effectiveness in marketing and sales. All of this is only possible with a vision of sustainability and innovation. And, for BASF, innovation only occurs through diversity. It is our conviction that as we work with more diversified teams in gender, sexual orientation, race and age, according to their different ways of thinking and acting - we will be more successful. We are prepared to grow through two major strategic acquisitions announced in 2017: part of Bayer's seed business and Solvay's global polyamide business. These planned transactions would enable us to add knowledge from highly specialized teams and complement the options of our agribusiness and engineering plastics portfolio. We are building the future through a digital platform that will bring innovation to the market and help us better serve customers in a more complete way. This is the way BASF does business: with productivity and sustainability. It is how we seek to build a better world for everyone. It is how we create chemistry for a sustainable future. Ralph Schweens BASF President for South America 1 1 Ralph Schweens was the President of BASF for South America from 2013 to By the end of April 2018, the executive ended his management period in Brazil and returned to Germany, where he assumened responsibility for the Care Chemicals division of BASF. Manfredo Rübens is the new BASF President for South America. The executive started his career at the company in Ludwigshafen, Germany, in He lived in São Paulo from 1998 to 2000, when he took over the position of director of BASF's Regional Functional Unit for Accounting, Controllership, Treasury, Credit and Collection in Brazil.

6 6 South America Executive Committee BASF in South America Report 2017 South America Executive Committee Ralph Schweens BASF President for South America 1 Cristiana Brito Director of Corporate Affairs and Sustainability 1 Ralph Schweens was the President of BASF for South America until the end of April, Manfredo Rübens took over the position of BASF President for South America on May 1, 2018.

7 BASF in South America Report 2017 South America Executive Committee 7 Ewald Maier-Erhart Vice President of Human Resources Antonio Lacerda Senior Vice President of Chemicals and Performance Products and Sustainability

8 8 South America Executive Committee BASF in South America Report 2017 Eduardo Leduc Senior Vice President of the Crop Protection Unit Gisela Pinheiro Vice President of Materials and Functional Solutions

9 BASF in South America Report 2017 South America Executive Committee 9 André Oliveira Legal Director, Insurances, Intellectual Property and Chief Compliance Officer Marcos Allemann Vice President of Decorative Paints Tobias Dratt Senior Vice President of Finance, Management and Business Centers South, North and West 1 1 Tobias Dratt was the Senior Vice President of Finance, Management and Business Centers South, North and West until April 30 th, He assumed responsibility for NT Regional Functions & Country Platforms, BASF Corporation, Florham Park, New Jersey.

10 10 BASF Group 2017 at a glance BASF in South America Report 2017 BASF Group 2017 at a glance Economic data Change in % Sales million 64,475 57, Income from operations before depreciation and amortization (EBITDA) and special items million 12,527 10, EBITDA million 12,724 10, Amortization and depreciation 1 million 4,202 4,251 (1.2) Income from operations (EBIT) million 8,522 6, Special items million 194 (34). EBIT before special items million 8,328 6, Financial result million (722) (880) 18.0 Income before taxes and minority interests million 7,800 5, Net income million 6,078 4, EBIT after cost of capital million 2,727 1, Earnings per share Adjusted earnings per share Dividend per share Research and development expenses million 1,888 1, Personnel expenses million 10,610 10, Number of employees 115, , Assets million 78,768 76, Investments 2 million 4,364 7,258 (39.9) Equity ratio % Return on assets % Return on equity after tax % Net debt million 11,485 14,401 (20.2) Cash provided by operating activities million 8,785 7, Free cash flow million 4,789 3, Amortization of intangible assets, depreciation of property, plant and equipment, impairments and reversals of impairments 2 Additions to intangible assets and property, plant and equipment (including acquisitions) Value added Creation of value added (million ) Business performance 67,176 59,852 1 Cost of raw materials and merchandise (29,224) (25,450) 2 Services purchased, energy costs and other expenses (14,520) (13,658) 3 Amortization and depreciation (4,202) (4,251) 3 Business performance 67,176 million 2016: 59,852 million 1 4 Value added 19,230 16,493 2 Use of value added Employees 55.2% 61.6% 4.2 Government 8.9% 8.6% 4.3 Creditors 2.9% 4.0% 4.4 Minority interests 1.4% 1.2% 4.5 Shareholders (dividend and retention) 31.6% 24.6% Value added results from the company s performance minus goods and services purchased, depreciation and amortization. Business performance includes sales revenues, other operating income, interest income and net income from shareholdings. Value added shows the BASF Group s contribution to both private and public income as well as its distribution among all stakeholders.

11 BASF in South America Report 2017 BASF Group 2017 at a glance 11 Innovation Change in % Research and development expenses million 1,888 1, Number of employees in research and development at year-end 10,110 9, Employees and society Change in % Employees Employees at year-end 115, , Apprentices at year-end 3,103 3,120 (0.5) Personnel expenses million 10,610 10, Society Donations and sponsorship million Environment, health, safety and security Change in % Safety, security and health Transportation incidents with significant impact on the environment Process safety incidents per one million working hours Lost-time injuries 4 per one million working hours (6.6) Health Performance Index Environment Primary energy use 5 million MWh (0.2) Energy efficiency in production processes kilograms of sales product/mwh Total water withdrawal million cubic meters 1,816 1, Withdrawal of drinking water million cubic meters (1.9) Emissions of organic substances to water 6 thousand metric tons (11.3) Emissions of nitrogen to water 6 thousand metric tons (3.4) Emissions of heavy metals to water 6 metric tons Emissions of greenhouse gases 4 million metric tons of CO 2 equivalents Emissions to air (air pollutants) 6 thousand metric tons (1.2) Waste million metric tons Operating costs for environmental protection million 1,024 1, Investments in environmental protection plants and facilities million The 2016 figure has been adjusted due to updated data. 5 Primary energy used in BASF s plants as well as in the plants of our energy suppliers to cover energy demand for production processes 6 Excluding emissions from oil and gas production Audits along the value chain Suppliers Change in % Number of on-site sustainability audits of raw material suppliers Responsible Care Management System Number of environmental and safety audits (9.9) Number of short-notice audits Number of occupational medicine and health protection audits and health performance control visits 44 30

12 12 BASF Group BASF in South America Report 2017 BASF Group At BASF, we create chemistry for a sustainable future. We combine economic success with environmental protection and social responsibility. The approximately 115,000 employees in the BASF Group work on contributing to the success of our customers in nearly all sectors and almost every country in the world. Our portfolio is arranged into five segments: Chemicals, Performance Products, Functional Materials & Solutions, Agricultural Solutions and Oil & Gas. Organization of the BASF Group Thirteen divisions grouped into five segments Regional divisions, functional units and corporate and research units support our business Our 13 divisions are aggregated into five segments based on their business models. The divisions bear operational responsibility and are organized according to sectors or products. They manage our 55 global and regional business units and develop strategies for the 86 strategic business units. Our regional units are responsible for optimizing local infrastructure, and contribute to tapping our market potential. For financial reporting purposes, we organize the regional divisions into four regions: Europe; North America; Asia Pacific; South America, Africa, Middle East. Eight functional units and seven corporate units support the BASF Group s business activities. The functional and corporate units provide services in areas such as finance, investor relations, communications, human resources, engineering and site management, as well as environmental protection, health and safety. Our research and development organization has around 10,000 employees in global research units and safeguards our innovative capacity and competitiveness. Business processes are the shared responsibility of the divisions and the functional units. They closely coordinate the procurement of raw materials and services, production and transport to customers. Sites and Verbund Six Verbund sites with intelligent plant networking 347 additional production sites worldwide Global Technology and Know-How Verbund BASF has companies in more than 80 countries. We operate six Verbund sites and 347 additional production sites worldwide. Our Verbund site in Ludwigshafen, Germany, is the world s largest integrated chemical complex owned by a single company. This was where the Verbund principle was originally developed and continuously optimized before being implemented at additional sites. The Verbund system is one of BASF s great strengths. Here, we add value as one company by using our resources efficiently. The Production Verbund intelligently links production units and their energy supply so that, for example, the waste heat of one plant provides energy to others. Furthermore, one facility s by-products can serve as feedstock elsewhere. This not only saves us raw materials and energy, it also avoids emissions, lowers logistics costs and leverages synergies. We also make use of the Verbund principle for more than production, applying it for technologies, know-how, employees, customers and partners, as well. Expert knowledge is pooled in our global research platforms. Procurement and sales markets Around 130,000 customers; broad customer portfolio More than 70,000 suppliers BASF supplies products and services to around 130,000 customers from various sectors in almost every country in the world. Our customer portfolio ranges from major global customers and medium-sized businesses to end consumers. We work with over 70,000 suppliers from different sectors worldwide. They supply us with important raw materials, chemicals, investment goods and consumables, and perform a range of services. Some of our most important raw materials are naphtha, natural gas, methanol, ammonia and benzene. Business and competitive environment BASF s global presence means that it operates in the context of local, regional and global developments and is bound by various conditions. These include: Global economic environment Legal and political requirements (such as European Union regulations) Trade agreements like the North American Free Trade Agreement (NAFTA) Environmental agreements (such as the E.U. Emissions Trading System) Social aspects (such as the U.N. Universal Declaration of Human Rights) BASF holds one of the top three market positions in around 75% of the business areas in which it is active. Our most important global competitors include AkzoNobel, Clariant, Covestro, DowDuPont, DSM, Evonik, Formosa Plastics, Huntsman, SABIC, Sinopec, Solvay and many hundreds of local and regional competitors. We expect competitors from Asia and the Middle East in particular to gain increasing significance in the years ahead. Corporate legal structure As the publicly traded parent company, BASF SE takes a central position: Directly or indirectly, it holds the shares in the companies belonging to the BASF Group, and is also the largest operating company. The majority of Group companies cover a broad spectrum of our business. In the BASF Group Consolidated Financial Statements, 286 companies including BASF SE are fully consolidated. We consolidate eight joint operations on a proportional basis, and account for 35 companies using the equity method.

13 BASF in South America Report 2017 BASF Group 13 Our Strategy With the We create chemistry strategy, BASF has set itself ambitious goals. We want to contribute to a sustainable future and have embedded this into our corporate purpose: We create chemistry for a sustainable future. In 2050, nearly 10 billion people will live on Earth. While the world s population and its demands will keep growing, the planet s resources are finite. On the one hand, population growth is associated with huge global challenges; and yet we also see many opportunities, especially for the chemical industry. Our corporate purpose We create chemistry for a sustainable future We want to contribute to a world that provides a viable future with enhanced quality of life for everyone. We do so by creating chemistry for our customers and society and by making the best use of available resources. We live our corporate purpose by: Sourcing and producing responsibly Acting as a fair and reliable partner Connecting creative minds to find the best solution for market needs For us, this is what successful business is all about. As an integrated global chemical com pany, we make important contributions in the following three areas: Resources, environment and climate Food and nutrition Quality of life In doing so, we act in accordance with four strategic principles. Our strategic principles We add value as one company. Our Verbund concept is unique in the industry. Encompassing the Production Verbund, Technology Verbund and Know-How Verbund as well as all relevant customer industries worldwide, this sophisticated and profitable system will continue to be expanded. This is how we combine our strengths and add value as one company. We innovate to make our customers more successful. We want to align our business optimally with our customers needs and contribute to their success with innovative and sustainable solutions. Through close partnerships with customers and research institutes, we link expertise in chemistry, biology, physics, materials science and engineering to jointly develop customized products, functional materials, and system solutions as well as processes and technologies. We drive sustainable solutions. In the future, sustainability will more than ever serve as a starting point for new business opportunities. That is why sustainability and innovation are becoming significant drivers for our profitable growth. We form the best team. Committed and qualified employees around the world are the key to making our contribution to a sustainable future. Because we want to form the best team, we offer excellent working conditions and inclusive leadership based on mutual trust, respect and dedication to top performance. Our values Our conduct is critical for the successful implementation of our strategy: This is what our values represent. They guide how we interact with society, our partners and with each other. Creative: In order to find innovative and sustainable solutions, we have the courage to pursue bold ideas. We link our areas of expertise from many different fields and build partnerships to develop creative, value-adding solutions. We constantly improve our products, services and solutions. Open: We value diversity in people, opinions and experiences. That is why we foster dialog based on honesty, respect and mutual trust. Responsible: We act responsibly as an integral part of society. In doing so, we strictly adhere to our compliance standards. And in everything we do, we never compromise on safety. Entrepreneurial: All employees contribute to BASF s suc cess as individuals and as a team. We turn market needs into customer solutions. We succeed in this because we take ownership and embrace accountability for our work. Our focus areas We set ourselves goals along the value chain for our focus areas Sustainability is key to the company s long-term success and as such, is embedded into our corporate strategy. We have systematically formulated expectations for our conduct and defined focus areas to meet the growing challenges along the value chain: We source responsibly We produce safely for people and the environment We produce efficiently We value people and treat them with respect We drive sustainable products and solutions

14 14 BASF Group BASF in South America Report 2017 Goals We carry out our corporate purpose, We create chemistry for a sustainable future, by pursuing ambitious goals along our entire value chain. In this way, we aim to achieve profitable growth and take on social and environmental responsibility. We are focusing on issues where we as a company can make a significant contribution. Goal areas along the value chain Suppliers BASF Customers Procurement Growth and profitability; Employees; Production; Product stewardship; Energy and climate protection; Water Products and solutions Procurement 2020 Goal Status at end of 2017 Assessment of sustainability performance of relevant suppliers; 1 development of action plans where improvement is necessary 70% 56% 1 Our suppliers are evaluated based on risk due to the size and scale of our supplier portfolio. We define relevant suppliers as those showing an elevated sustainability risk potential as identified by our risk matrices and our purchasers assessments. We also use further sources of information to identify relevant suppliers such as evaluations from Together for Sustainability (TfS), a joint initiative of chemical companies for sustainable supply chains. Growth and profitability As determined in 2015, our aim for the years ahead is, on average, to grow sales slightly faster and EBITDA considerably faster than global chemical production (excluding pharmaceuticals; 2017: 3.5%; average change since 2015: 3.5%), and to earn a significant premium on our cost of capital. Moreover, we strive for a high level of free cash flow each year, either raising or at least maintaining the dividend at the prior-year level. Average 2017 Change since 2016 change since 2015 Sales 64.5 billion 12.0% 3.7% 2 EBITDA 12.7 billion 20.9% 13.1% 2 Dividends per share paid out Premium on cost of capital Free cash flow 2.7 billion 4.8 billion 2 Baseline 2015: excluding the gas trading and storage business transferred to Gazprom Employees 2021 Goal Status at end of 2017 Proportion of women in leadership positions with disciplinary responsibility 22 24% 20.5% International representation among senior executives 3 Senior executives with international experience Employee development Long-term goals Increase in proportion of non-german senior executives (baseline 2003: 30%) 38.9% Proportion of senior executives with international experience over 80% 84.6% Systematic, global employee development as shared responsibility of employees and leaders based on relevant processes and tools Project implemented worldwide 3 The term senior executives refers to leadership levels 1 to 4, whereby level 1 denotes the Board of Executive Directors. In addition, individual employees can attain senior executive status by virtue of special expertise.

15 BASF in South America Report 2017 BASF Group 15 Production 2025 Goals Status at end of 2017 Reduction of worldwide lost-time injury rate per one million working hours Reduction of worldwide process safety incidents per one million working hours Annual goal Health Performance Index > Product stewardship 2020 Goal Status at end of 2017 Risk assessment of products that we sell in quantities of more than one metric ton per year worldwide >99% 76.2% Energy and climate protection 2020 Goal Status at end of 2017 Coverage of our primary energy demand by introducing certified energy management systems (ISO 50001) at all relevant sites 4 90% 54.3% Reduction of greenhouse gas emissions per metric ton of sales product (excluding Oil & Gas, baseline 2002) (40%) (35.5%) 4 The selection of relevant sites is determined by the amount of primary energy used and local energy prices. Water 2025 Goals Status at end of 2017 Introduction of sustainable water management at all production sites in water stress areas and at all Verbund sites (excluding Oil & Gas) 100% 45.2% Products and solutions 2020 Goal Status at end of 2017 Increase the proportion of sales generated by products that make a particular contribution to sustainable development (Accelerator products) 28% 27.3%

16 16 BASF Group BASF in South America Report 2017 BASF in the regions BASF Group sales 2017: 64,475 million; EBIT 2017: 8,522 million North america 15,937 Sales 1 (in million ) 1,236 EBIT 1 (in million ) 18,295 Employees 2 Florham Park South America, Africa, Middle East Geismar Freeport 4,102 Sales 1 (in million ) 335 EBIT 1 (in million ) São Paulo 7,286 Employees 2 Regional centers Selected sites Verbund sites Selected research and development sites

17 BASF in South America Report 2017 BASF Group 17 Europe 30,778 Sales 1 (in million ) 4,742 EBIT 1 (in million ) 71,653 Employees 2 Antwerp Ludwigshafen Asia Pacific 13,658 Sales 1 (in million ) 2,209 EBIT 1 (in million ) 18,256 Employees 2 Nanjing Hong Kong Kuantan 1 In 2017, by location of company 2 At year-end 2017

18 18 BASF Group BASF in South America Report 2017 BASF on the capital market The BASF share price rose by 3.9% in 2017, trading at at the year-end. We stand by our ambitious dividend policy and paid a dividend of 3.10 per share an increase of 3.3% compared with the previous year. BASF enjoys solid financing and good credit ratings. BASF share performance BASF share gains 3.9% in 2017 Long-term performance continues to clearly exceed benchmark indexes The BASF share closed the 2017 stock market year with a closing price of This equates to a 3.9% rise in the value of BASF shares compared with the previous year s closing price, which also marked the high for Assuming that dividends were reinvested, BASF shares gained 7.4% in value in The benchmark indexes of the German and European stock markets the DAX 30 and the EURO STOXX 50 rose by 12.5% and 9.2% over the same period, respectively. The global industry index MSCI World Chemicals gained 23.6%. The BASF share reached a new high of over the course of Viewed over a 10-year period, the long-term performance of BASF shares still clearly surpasses the German, European and global benchmark indexes. The assets of an investor who invested 1,000 in BASF shares at the end of 2007 and reinvested the dividends in additional BASF shares would have increased to 2,676 by the end of This represents an annual yield of 10.3%, placing BASF shares above the returns for the DAX 30 (4.8%), EURO STOXX 50 (0.8%) and MSCI World Chemicals (6.8%) indexes. Long-term performance of BASF shares compared with indexes (Average annual increase with dividends reinvested) % 11.1% 8.8% 12.2% % 4.8% 0.8% 6.8% BASF-Aktie DAX 30 EURO STOXX 50 MSCI World Chemicals Weighting of BASF shares in important indexes as of December 31, 2017 DAX % EURO STOXX % MSCI World Chemicals 8.6% Change in value of an investment in BASF shares in 2017 (With dividends reinvested; indexed) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 90 BASF share 7.4% DAX % EURO STOXX % MSCI World Chemicals 23.6 %

19 BASF in South America Report 2017 BASF Group 19 Dividend of 3.10 per share We paid a dividend of 3.10 per share. We stand by our ambitious dividend policy and paid out nearly 2.8 billion to our shareholders. Based on the year-end share price for 2017, BASF shares offer a high dividend yield of 3.4%. BASF is part of the DivDAX share index, which contains the 15 companies with the highest dividend yield in the DAX 30. We aim to increase our dividend each year, or at least maintain it at the previous year s level. Dividend per share ( per share) 1, , , , ,60 2, ,80 2,90 3, , Broad base of international shareholders With over 500,000 shareholders, BASF is one of the largest publicly owned companies with a high free float. An analysis of the shareholder structure carried out at the end of 2017 showed that, at around 20% of share capital, the United States and Canada made up the largest regional group of institutional investors. Institutional investors from Germany accounted for around 11%. Shareholders from the United Kingdom and Ireland hold 12% of BASF shares, while investors from the rest of Europe hold a further 17% of capital. Approximately 29% of the company s share capital is held by private investors, nearly all of whom reside in Germany. BASF is therefore one of the DAX 30 companies with the largest percentage of private shareholders. Shareholder structure (by region, rounded) 1 Germany 40% 2 United States and Canada 20% 3 United Kingdom and Ireland 12% 4 Rest of Europe 17% 5 Rest of world 5% 6 Not identified 6% Employees becoming shareholders In many countries, we offer share purchase programs that turn our employees into BASF shareholders. In 2017, for example, 23,700 employees (2016: approximately 24,000) purchased employee shares worth 63 million (2016: 59 million).

20 20 BASF in South America BASF in South America Report 2017 BASF in South America At BASF, we create chemistry for a sustainable future. We combine economic success, social responsibility and environmental protection. Our products and solutions contribute to the preservation of natural resources, ensuring healthy food and nutrition and helping to improve the quality of life. Sustainability and innovation are forces that go together in our strategy for innovating opportunities and reducing risk to generate a positive impact for society. The headquarters of BASF in South America is located in the Morumbi neighborhood, in the city of São Paulo, Brazil. With 17 production units in the region the company has a portfolio for different sectors as well as for final consumers, divided into five segments: Chemicals, Performance Products, Materials & Functional Solutions, Solutions for Agriculture and Oil & Gas. The operational structure in the region is divided into four Business Centers - BC: Brazil, South (Argentina, Bolivia, Paraguay and Uruguay), West (Chile and Peru) and North (Colombia, Venezuela and Ecuador). In 2017, BASF's sales volumes to customers in South America amounted to 3,680 million. Production Units La Calera Callao Lima Jaboatão dos Guararapes Camaçari Santo Antônio de Posse Indaiatuba Jundiaí Chemetall Vila Prudente Guaratinguetá Jacareí Demarchi São Paulo Santiago Concon Tortuguitas Santo Tomé General Lagos Buzarco Regional centers Selected sites Selected research and development sites BASF in South America Sales by location of customer 1 3,680 million Employees, as of December 31, ,567 1 These numbers differ from the regional overview in the world map (page 12), because the latter considers both South America, Africa and Middle East

21 BASF in South America Report 2017 BASF in South America 21 Sales in South America by Business Center 1 Brazil 2,208 million (60%) South (Argentina, Bolivia, Paraguay and Uruguay) 983 million (27%) dation Eco ), established by BASF. This project measures and optimizes the processes carried out in the plant, focusing on continuous improvement and on the implementation of an increasingly eco-efficient management system. Among the initiatives connected to the project is the Zero Aterro (Zero Landfills), which aims to find more sustainable alternatives for the disposal of solid waste, as well as Triple E, a corporate program that seeks excellence in energy efficiency. For more details about Zero Aterro, see page 40 1 By location of customer 3,680 million West (Chile and Peru) 262 million (7%) North (Colombia, Venezuela, Ecuador and Guyanas) 227 million (6%) Camaçari (BA): Inaugurated in 2015, the Camaçari Acrylic Complex is the largest South American investment in BASF's history. The factory registered operational improvements, with the increased production of superabsorbents (SAP), acrylic acid and butyl acrylate, raw materials for products such as diapers, paints, fabrics and adhesives and construction materials. The production of the Camaçari complex supplied imports in the amount of US$300 million and generated around 400 direct jobs. Business Center Brazil 3,833 employees São Bernardo do Campo - Demarchi (SP): BASF's Industrial Complex for producing Paints and Varnishes has an annual production capacity of up to 330 million liters of paints, enamels, varnishes and resins. It is responsible for the production of decorative paints (Suvinil and Glasurit ) and automotive paints (OEM). Since 2010, the unit has been running the "Demarchi + Ecoeficiente project, developed in partnership with a consultancy for sustainability, Fundação Espaço ECO (Space Foun- Guaratinguetá (SP): BASF's Chemical Complex in Guaratinguetá is the company`s largest site in South America, with 58 hectares built and urbanized and 152 hectares of preservation area. It is responsable for the production of solutions such as defensive pesticides, sodium methylate, raw materials for adhesives, resins, paints, detergents, cosmetics and solutions for the automotive market. We recorded an increase in the production capacity of sodium methylate by 10%, mainly to meet the demands of our customers producing biodiesel in the country. In 2017, three units of the Guaratinguetá Chemical Complex received the international certification ISO 50001, which helps companies to establish more efficient and modern prac- Acrylic Complex in Camaçari (BA, Brazil).

22 22 BASF in South America BASF in South America Report 2017 Chemical Complex in Guaratinguetá (SP, Brazil). tices in relation to energy management. BASF is the first company in the Brazilian chemical segment to receive this certification, one of the most important in the energy segment. This certification is in line with the company's overall goal, which states that its largest units, which are also the ones that consume the most energy, seek the best practices and consequently, the same recognition. Indaiatuba (SP): It produces catalysts for motorcycles, cars and trucks, serving the main car manufacturers in Brazil and Mercosur. BASF was one of the first to lead studies on pollutant emissions in 1974 and is responsible for the development of the three-way catalyst, an important innovation in the automotive sector, responsible for reducing more than 90% of the pollutants produced by combustion engine vehicles. Jacareí (SP): There are three production plants of raw materials for the hygiene and personal care, cleaning, agriculture, mining and paints sectors. It has one Research and Development Center in the area of cosmetics and home care, as well as a Applications of Nutrition and Health Center with the latest technology to serve the food and pharmaceutical industries of South America. The Jacareí unit also provides logistics services to various divisions of the company with a Sample Preparation Center and a Packing Center. Jundiaí (SP): With a monthly production of about 800 tons of surface treatment, cleaners and metal forming products, the BASF surface treatment plant, operating under the Chemetall brand, in Jundiaí provides enhanced capabilities to various manufacturing sectors, including automotive, automotive components, aerospace, cold forming (tube and wire mills), general industry (appliances), aluminum finishing, as well as steel and aluminum mills. Chemetall has been operating in Brazil for more than 20 years and introduced the thin-film technology to the Brazilian market. This high performing technology replaces traditional heavy metal pretreatment processes with environmentally sustainable alternatives, which also support customers in significantly reducing their process cost, energy and water consumption. Santo Antônio de Posse (SP): BASF's Experimental Agricultural Station is the company's only station in the Southern Hemisphere and the largest in territorial extension. It develops research and studies focused on the development of new products for the control of pests, diseases and weeds that attack the main crops in Brazil and in Latin American countries. Jaboatão dos Guararapes (PE): It produces paints and textures from the decorative brands Suvinil and Glasurit, focused on the North and Northeast markets. In 2017, through the Zero Aterro initiative, it developed more sustainable alternatives for the disposal of solid waste and now they no longer send their waste to landfills. Factory in Jacareí (SP, Brazil) Vila Prudente (SP): It manufactures more than 130 types of products, among them concrete additives and chemical construction products.

23 BASF in South America Report 2017 BASF in South America 23 Business Center South 1,126 employees Argentina: General Lagos: It produces the dispersions of polymers and additives and operates the product distribution center for crop protection. Tortuguitas: It produces automotive (OEM) and overcoating paints. It has laboratories for the development of colors and application of automotive paints, in addition to a distribution center. In Argentina, BASF also has units in Burzaco (polyurethanes) and São Tomé (specialties for agriculture). Uruguay: Shared Financial Services Center: In Montevideo the unit centralizes BASF's financial services for the American continent. It serves the demand of approximately 80 company affiliates in more than 20 countries in North America, Central America and South America. Factory in Tortuguitas, Argentina.

24 24 BASF in South America BASF in South America Report 2017 Business Center West 453 employees Chile: Santiago: Produces concrete additives and products for construction systems. Through the Green Sense Concrete program, it carries out tests to obtain additives that contribute to reduce CO 2 consumption. It also has a Development Center to customize solutions for local market conditions, such as Master Polyheed and Master Glenium, additives that significantly reduce the customers' water consumption in the concrete mixture. Through the Operational Excellence and Sustainability programs, water consumption (not used as raw material in production) was reduced from 10,563 m 3 (2012) to 3,823 m 3 (2016). As an example, since 2012, 100% of the water used for washing the mixers in our production processes is reused, reaching a reduction of 100 m 3 per year. Concón: Responsible for most of the company's productive activities in the country, producing dispersers, resins and solutions for agriculture. Since 2013, the plant has developed a 100% natural biological product, based on Quillay extract (QL AgriR35 MR) - obtained from a native tree in the country and it is recommended for the control of nematodes, a type of pest that appears in fruit crops, vegetables and flowers. In addition to it being a natural organic solution, the waste generated during production is used as fertilizer. The wood chips generated in production are used for composting and growing tomatoes and also as a source of energy for the production of mushrooms. It also produces Pholus, a biostimulant fertilizer that provides nutrition and contributes to the development of the root system during the vegetative and reproductive stages in the treated plants. Peru: Lima: It mainly produces liquid additives for construction and mining. Since 2011, the water used for washing has been reused in the production process. In the same way, pallets are being reused, therefore achieving a reduction in solid waste, as a contribution to the reduction of natural resource consumption (wood). Callao: Responsible for manufacturing dispersions and polymers for the detergent and formulator industries and for mining. The factory has two polymerization lines that serve the local market and the export market. Business Center North 155 employees Colombia: La Calera, Bogotá: Responsible for the production of additives and chemicals for construction. Located in the municipality of La Calera, northeast of Bogotá, it produces powders, additives and polymers for the for the Construction Chemicals division. It has three production units, a bulk storage tank, storage areas and a quality control laboratory. Among its quality processes, several programs have been integrated to guarantee the saving of resources, such as energy and water. Part of the factory in Callao, Peru.

25 BASF in South America Report 2017 BASF in South America 25 Employee at Suvinil decorative paint laboratory.

26 26 BASF in South America BASF in South America Report 2017 Corporate Governance BASF's principle is responsible management, with a focus on generating long-term value. Therefore, corporate governance follows strict standards of transparency. The company seeks to consolidate an environment of trust among customers, partners, employees and all other stakeholders in the value chain. Corporate Governance in South America follows the standards and guidelines of BASF Group. Governance structure The two-tier system of the ultimate parent company BASF SE guides BASF's corporate governance structure, where management and supervision are divided between the Board of Directors and the Supervisory Board. The Board of Directors is responsible for the management of the company. It manages and monitors the business of the BASF Group through the planning and definition of the corporate budget; resource allocation and management capacity; monitoring and decision making in relation to significant individual measures; and operational management control. The Supervisory Board is made up of 12 members, six representing the shareholders elected in the Annual General Meeting of Shareholders and six employee representatives, appointed by the respective representative body, BASF Europa Betriebsrat (BASF Works Council Europe). Executive Committee for South America: The Executive Committee for South America is composed of the president, senior vice presidents and vice presidents, as well as managers from Human Resources, Corporate Affairs, Legal Services, and Infrastructure & Technical Services. It is responsible for carrying out all the operations and carrying out the administrative acts necessary to achieve the objectives of its position, in accordance with the overall orientation of the business, established by the Board of Directors. Ethics and integrity BASF has a structured Global Compliance program. In 2017, an internal audit conducted in South America tested and challenged the actions of the program, reaching positive results in terms of compliance. In addition, Risk Assessment was carried out in the region as part of a global effort to predict possible future risks. Focusing on the business areas, we mapped out and developed a risk map for all business areas in the region. The objective was to identify risks and opportunities for improvement, in addition to outlining a plan of action for Issues related to conflict of interest, antitrust, as well as specific actions on moral and sexual harassment, continue to be reinforced internally through training and communication campaigns. We understand that the leader is the benchmark and should be responsible for guiding the conduct of their teams. Business 20 (B20): A group formed by representatives of the private sector of the countries that make up the G20 a group of the 20 largest economies in the world responsible for interacting with governments on public policies such as the environment, human rights and economy. BASF was one of five companies that made up the B20 leadership team for an agenda of creating recommendations for the private sector society. Two tier management system of BASF SE Board of Executive Directors Supervisory Board appoints the Board of Executive Directors monitors the Board of Executive Directors advises the Board of Executive Directors reports to Supervisory Board 8 members 1 appointed by the Supervisory Board Chairman appointed by the Supervisory Board 12 members 6 shareholder representatives elected at the Annual Shareholders Meeting and 6 employee representatives Chairman elected by the Supervisory Board 1 In May 2018, this was reduced from eight to seven members in the course of changes to the composition of the Board of Executive Directors.

27 BASF in South America Report 2017 BASF in South America 27 Being recognized as the most innovative company in Brazil is a goal we have reached thanks to our people.

28 28 BASF in South America BASF in South America Report 2017 BASF South America Strategy Based on our corporate purpose "We create chemistry for a sustainable future", we incorporated practices that contribute to building a better future. All our activity in chemistry is aimed at the profitability of the businesses, for the well-being of the people and for the productivity of our clients, always preserving the environment. This is our "And way", which combines productivity and sustainability. More than just a broad portfolio of products, we bring innovative solutions to our customers, working as one company. In 2017, the Industry and Customer Orientation Teams in the business units in Argentina, Brazil, Colombia, Chile and Peru increased sales of the company's integrated portfolio, with solutions in different segments. cool pigments for heat control with efficiency attested by touch, box that presents acoustic dampening performance, application of cleaning products in order to compare various active ingredients, among several other possibilities in which the chemical industry is inserted in order to assure better and more sustainable results. Today, with the use of state of the art cell phones, supplied in partnership with Samsung, and artificial intelligence software developed by IBM, BASF's live catalog features augmented reality elements that provide the visitor with a unique sensory experience. Closer to customers BASF 4.0 Customer relationship Product technology BASF is increasingly getting closer to customers, including medium and small businesses. Through digital tools, the company presents a new way of operating in the markets. In the personal care division, for example, an online platform among other resources makes a portfolio with more than 100 products available to the market. We are pioneers in the chemical industry in developing a new relationship format with our customers. Antonio Lacerda, Senior Vice President of Chemicals, Performance Products and Sustainability BASF 4.0: A partnership with Isoeste, a company in the civil construction sector has been able, through the 4.0 industry concept, to implement a digital monitoring model called the Vendor Managed Inventory (VMI) to monitor the inventories of its three factories in real time, located in different states. The customized initiative, together with other actions focused on the customer, have improved supply logistics, avoiding risks of delays in the delivery of goods. CasaE: BASF's eco-efficient house was renovated in 2017 focused on a digital and sensory experience. The building, which brings together solutions from BASF and partners in civil construction, aims to present trends and foster innovations in the industry focused on efficiency, productivity and sustainability. The following are showcased for testing: sun protection filters with various textures, various fragrances, CasaE is an even more inspiring and comprehensive space by presenting BASF solutions to different markets. Through technology, we offer people a different visit, in which they can walk through the spaces in an autonomous and interactive way. The house is fully digital and has a cognitive system capable of receiving questions, identifying intentions, processing information and responding to users' doubts in a natural language. Gisela Pinheiro, Vice President of Materials and Functional Solutions for South America Suvinil Shop: After research showing that more than 60% of Internet users browsing the Suvinil website were expecting to buy online, the leading brand in the premium real estate paint segment developed, implemented and launched of a complete digital platform. Through experiments in three different applications suggested by the brand - Suvinil Colors, Suvinil Simulator and Suvinil Guide - before making the purchase, the consumer can analyze the colors, simulate the different options on the surface that will be transformed and choose

29 BASF in South America Report 2017 BASF in South America 29 the correct product for each need. The consumer can receive the product at home or pick it up at the nearest home center. See suvinil.com.br Product Technology: Thanks to BASF's ecovio properties, a compostable and biodegradable plastic, the company has developed a solution in Chile that combines sustainability and the strengthening of the partnership with one of its customers. EcoGel is a substitute for ice used in transporting and preserving food and perishable products. Once discarded, the product is transformed into natural fertilizer that is used to improve soil, returning to the cycle of life. Developed in partnership with DLC Soluciones, a company specializing in the production of gel packs for the aquaculture industry, it is the first 100% biodegradable and compostable refrigerator gel. Investments and acquisitions Suvinil offers a full digital journey for the consumer. Customer relationship: To commemorate the 10 years of the Glasurit Linha 90 in Argentina, a product used in the automotive refinishing segment, BASF held the fifth edition of the Glasurit Competition "Rewarding the Best Painter" - Water Based Edition. The contest, which included the participation of 650 painters from all over South America (except Brazil), had the objective of encouraging professionalism and recognition for automotive repainting. On this occasion, we emphasized that care for the environment, quality and innovation go together in BASF solutions. An agreement for the acquisition of parts of the seed and nonselective herbicides business of Bayer. The agreement covers Bayer s global glufosinate-ammonium non-selective herbicide business, commercialized under the Liberty, Basta and Finale brands, as well as its seed businesses for key row crops in selected markets. The acquisition also covers Bayer s trait research and breeding capabilities for these crops along with the LibertyLink trait and trademark. Entering the market of biotechnology and seeds soybean and cotton will strengthen our market relevance with our agribusiness customers. Eduardo Leduc, Senior Vice President of BASF's Crop Protection Unit for Latin America Painters appreciated at the "Awarding the Best Painter" Contest. On April 26, 2018, BASF and Bayer announced that they have signed an agreement on the acquisition of additional businesses and assets by BASF, which Bayer offered to divest in the context of its planned acquisition of Monsanto. The expanded scope includes Bayer s entire vegetable seeds business, operating under the global trademark Nunhems, as well as seed treatment products sold under the Poncho, VOTiVO, Vitrine Suvinil (Suvinil Showcase) BASF has launched a digital platform so consumers can find the ideal professional to paint their home. Through the website it is possible to contract a service through three simple steps: to locate the ideal professional, to contract the service and to evaluate the professional after the accomplishment of the painting. The initiative seeks to reinforce the importance of the painter's work, in addition to highlighting and valuing the work of the best professionals in Brazil. See vitrinesuvinil.com.br

30 30 BASF in South America BASF in South America Report 2017 COPeO and ILeVO brands. The transaction also includes the R&D platform for hybrid wheat, the digital farming platform xarvio and further businesses and research projects. BASF and Solvay 1 signed an agreement on the acquisition of Solvay s global polyamide business by BASF. The acquisition would complement BASF s engineering plastics portfolio and expand the company s position as a solutions provider for the transportation, construction and consumer goods industries as well as for other industrial applications. 1 Solvay and BASF aim to close the transaction in the third quarter of 2018 after regulatory approvals have been obtained and the consent of a joint venture partner has been received. Program of excellence for South America The program of excellence for South America has contributed, since 2014, to a consistent cultural change in the company. It consists of four pillars: Excellence in Operations; Excellency in Functions; Excellence in Marketing & Sales; and Excellence in Structure. In order to disseminate a culture focused on excellence, the program promotes five key behaviors that synthesize the expected behavior of all the collaborators: owner attitude; team spirit; excellence in execution; customer focus; and people. In 2017, one of BASF's main challenges in South America was to not lose its productivity pace in a challenging context and - in certain markets - with greater competitiveness. In Excellence in Operations, since its implementation, the program registered a reduction of 43 million in the consumption of raw materials, energy, waste and other variable costs. The year 2017 represented a record for the company, with a savings of 22 million. The improvement of our production processes, aimed at reducing the consumption of raw materials and energy will be our focus for the coming years. Our goal in the region was to pursue new business opportunities and establish a positive course with sustainable corporate policies and excellence in operations. For this, the challenge was the growth in sales, with all areas focused on providing total customer support, which is in the center of the company's attention. All actions were di- rected to provide a positive impact on the client, acting proactively and with a sense of urgency and identifying what needs to be done to offer the best solution in a differentiated way, that effectively contributes to its results. With this objective in mind, in 2017, five strategic measures were defined: go to market; materialization of sustainability; increased sales of the integrated portfolio; offering innovative products and solutions; and effectiveness in marketing and sales. The focus in 2017 was growth. That's why we've been looking to identify opportunities to help our customers become more sustainable through BASF products and solutions. Ralph Schweens, President of BASF for South America from 2013 to April Program of excellence in numbers The digital tool for employees to indicate Sales opportunities, received 235 recommendations, of which 30 resulted in business. Through employee meetings with members of the executive committee, more than 1,600 employees discussed the cultural transformation of BASF and the company we want to build. More than 500 recognition cards were sent to employees, which highlight the use of key behaviors Employees are the protagonists of our cultural change.

31 BASF in South America Report 2017 BASF in South America 31 The work environment inspires and connects our employees.

32 32 Employees, health and safety BASF in South America Report 2017 Employees, health and safety Our employees are key to implementing our "We create chemistry" strategy. We want to attract and retain talented people for our company and support them in their development. For this, we cultivate a work environment that inspires and connects people. It is based on inclusive leadership and mutual trust, respect and dedication. After all, diversity and inclusion can protect us against the dangers of homogeneity, as these elements generate an environment filled with engagement, creativity, motivation and innovation. We form the best team. To achieve this, we focus on three strategic directions: excellent people, excellent workplace and excellent leaders. Everything the company has to offer at various stages of the career, strengthening attraction and involvement, is grouped together on a platform. It's called Compeling Total Offer (CTO) you@basf, and it provides a different way of thinking and communicating, four important topics for employees' lives: Development and Training, Benefits, Work Environment and Compensation. In 2017, BASF was recognized throughout South America due to its excellence in people management. We have achieved a good votes in the main rankings of important awards, this recognition reflects the focus of BASF in promoting an environment that values the employee: Guia 150 Best Companies to Work for 2017, Você S.A magazine (Brazil) - 2nd place in the category "Chemistry and Petrochemical" One of the 10 Best Psychologically Healthy Companies (EPS) - Research from the company Gestão RH! (Brazil) Ranking Love Mondays - one of the companies most loved by its employees (Brazil) Demographic Data South America Total number of employees by Business Center 2017 Brazil 3, % Total North % 5,567 West % South 1, % 2016 Brazil 3, % Total North % 5,597 West % South 1, % Employees by age 1 Up to 25 years 7.1% 2 From 26 to 39 years of age 53.3% 3 From 40 to 54 years of age 34.1% 4 55 years and older 5.5% Women by age 1 Up to 25 years 11.9% 2 From 26 to 39 years of age 61.8% 3 From 40 to 54 years of age 22.9% 4 55 years and older 3.4% Diversity For BASF, diversity is essential for business, as the sum of different genders, sexual orientation, races, ages and makes us become more competitive in the markets in which we operate, drives creativity and innovation. Creating the best team possible is part of the company's business strategy. Diversity drives creativity and innovation within our teams and through this way we better understand the needs of the market. We must reflect the diversity level of our society within the organization so we can service our clients even better. Ewald Maier-Erhart, Vice President of Human Resources In 2017, BASF has restructured its way of dealing with the matters of diversity and inclusion, suggesting courses of action and changes in how we recruit and prepare the organization in order to create a more inclusive environment. The strategies the organization adopted include similarity/ affinity groups for our employees: WIB Women in Business, which addresses gender issues, BIG Black Inclusion Group, which addresses race issues, o BY@B - Be Yourself at BASF, which addresses sexual diversity, and the groups for PCD (people with disability), which discusses matters such as accessibility and the increase of this population within BASF. The similarity/affinity groups initiative is supported by members of BASF's Executive Committee in South America, who also act as sponsors of those groups. Women employed in South America 29.5% Women in leadership roles in South America 27.1%

33 BASF in South America Report 2017 Employees, health and safety 33 Diversity & Inclusion contributes to excellence and adds competitiveness to the business. The Women in Business (WIB), for instance, was launched on International Women's Day - March 8. This network is a global initiative, and its mission in South America is to attract, develop, promote and retain women who support the corporate values of the company. The aim is to make BASF a company in which women are proportionally represented and have the same development opportunities. For this, three fronts were created: Career Development, Leadership, and Promotion and Retention. Groups gather to discuss female leadership. Work-Life-Management Equilibre Program (Balance program) Virada da Mobilidade (Mobility Turnaround) For BASF, flexibility at work means an opportunity to create an excellent place to work, contributing to the sustainable balance between the needs of a highly-competitive professional environment and the responsibilities of everyone's personal lives. Especially in large cities, where displacement is a critical factor for the quality of life, the possibility of flexible schedule and work location contributes to the efficiency of our employees: this is the proposal of the Equilibre Program. Part of the Regional Human Resources Strategy, the program provides for flexible working conditions in terms of working hours and workplaces. Among the possibilities offered by the program are: flexible working hours, telework and mobile spaces the options allow employees to balance their professional and personal live. The pilot program Share Desk, which is part of Programa Equilibre, was deployed in one of the corporate areas of BASF and showed that it is possible to innovate the way we make our employees' work more flexible. In this mode, participants no longer have a fixed physical work space in the company, and

34 34 Employees, health and safety BASF in South America Report 2017 will now share tables with other colleagues that are also participating in the program. BASF promotes intelligent and shared use of cars among its employees and offers a series of tools that help in offering and obtaining rides, in order to offer greater comfort and quality of life to employees. Programs include carpooling; car sharing; and one app that provides integrated mobility solutions, for private as well as for corporate transport. In 2017, we organized the first Urban Mobility Fair in order to raise employees' awareness with regard to the adequate use of modal transport and present this initiative to BASF partners. Moreover, BASF participated in Virada da Mobilidade, an event that took place in São Paulo (Brazil) aimed at educate the population with regard to mobility in major urban centers. We also participate in the Carbon Compensation Program, in partnership with the corporate vehicle fleet supplier, which promotes the planting of trees to neutralize carbon emissions emitted by all the cars of the company's leased fleet. In 2017, BASF planted 3,200 trees, equivalent to 593 tons of neutralized carbon. Training and development Eu + líder tool Global platform MentForMe At BASF, we contribute to professional development by providing the necessary elements to help employees exploit their talents. Therefore, development goes beyond formal training, and is also based on the relationships and experiences that are generated on a day to day basis. In order to strengthen the culture of feedback, since 2016, the Eu + líder tool allows employees to have an even more open dialog with leaders while contributing to their development as a people manager. One of the most important values organizations ought to have is their employees, and the exchange of knowledge can be a major asset for innovation. BASF has launched MentForMe, a global platform that facilitates the mentoring process through onlines matches made between mentor and mentee profiles that have similar interests and common goals. The program invites more experienced employees to become mentors and thus help to steep the growth of other employees and broaden their networking. The development of collaborators is based on relationships.

35 BASF in South America Report 2017 Employees, health and safety 35 Trained employees are prepared to act in case of emergencies. Safety Projects to strengthen the safety culture BASF Safety Award BASF has a strong commitment and responsibility to safety, this applies to our own employees, contractors and the communities in which we operate. We believe that no task is so urgent that it can not be done safely. Safety at BASF is 360 : all the time and everywhere, inside or outside the company. Throughout the year, we maintain several actions focused on the health and safety of our employees. Projects to strengthen the safety culture: We develop a safety culture through daily safety dialogs in the production plants and also through the safety moment process throughout the company and at all levels. Focusing on preventive actions, near-accident situations began to be recorded in the security reports for the joint search for solutions. The next step will be the creation of a global performance indicator specifically related to the recording of the numbers of near-accidents with high potential of danger and also the evaluation of the corresponding action plans. 10 Rules that save lives Counts on the involvement of employees and contractors to strengthen the safety culture through training with security dialogs, sector meetings, Internal Week of Prevention of Work Accidents, electronic media and distribution of information materials. All incidents are thoroughly evaluated to increase efforts to comply with critical rules that, when violated, can result in fatality.

36 36 Employees, health and safety BASF in South America Report 2017 BASF Safety Award: The 6th BASF Safety Award, which had 30 entries, encourages the areas to present their projects with wide internal dissemination, as well as awards to encourage best practices. These and other initiatives have contributed to a significant evolution in performance indicators: lost-time injuries (LTI) had a reduction of 36% from 2016 to 2017 (five lost-time injuries in 2017 vs. eight in 2016). There was also a fall in the severity rate of lost-time injuries, with a reduction of 14% from 2016 to For contracted employees, there was a significant improvement regarding the severity of events, despite an increase in absolute numbers. The rate of accidents with sick leave had an increase of 29% in 2017 compared to 2016, the severity rate of accidents with sick leave per hour worked had a decrease of 54% in the same period, as well as not representing any impacts on the environment and production interruption. Specific training actions - both for BASF employees and contractors - were effective measures to reduce product leaks. As a result of the process risk analysis of the plants, several projects to update safety measures were executed throughout South America, with optimization of processes and production methods and reduction of risk exposure from the operation through the adoption of effective technical measures. In 2017, the global health campaign focused on lung and respiratory disease prevention. Employees participated in lectures held throughout the year that addressed issues such as smoking and physical activity. In addition, our information on the subject has reached all employees in our units in the region. BASF health checks formed the basis of our global health promotion program and are offered to employees worldwide at regular intervals. For more information on occupational medicine, health promotion campaigns and the HPI, see basf.com/health Operational excellence BASF Excellence Awards added value Eureka Program promoting innovation BASF Excellence Award: In its 20 th edition, in 2017, the award received 33 entries. The projects added value to BASF with expressive gains, such as increasing market share with product innovation, reducing variable costs in process improvement, consolidating our company's image in South America, social engagement projects and focus on the client. Safety indicators (Brazil, per million working hours) Lost time injury rate (BASF and leased employees) Lost time injury rate (contractors) Fatalities (total) Health Campanha Seus Pulmões, sua Vida! (Global Health Campaign 2017 "Your Lungs Your Life") Initiative promoting innovation among employees. Campanha Seus Pulmões, sua Vida! (Global Health Campaign "Your Lungs Your Life"): BASF's global health management aims to promote and maintain the health of our employees. Our worldwide standards of occupational medicine and health protection are specified in a policy implemented by a global network of specialists. We measure our performance in health protection using the Health Performance Index (HPI). HPI has five components: - Recognized occupational diseases - Medial emergeny preparedness - First aid - Medical surveillance examination - Health promotion. Each component contributes a maximum of 0.2 points to the total value. The maximum total value is 1.0. With an global HPI of 0.97 in 2017, we reached the goal of exceeding 0.9 per year (2016: 0.96). Eureka Program A regional incentive catalizing innovation for all of BASF in South America. This is a contest that encourages employees to promote ideas that, among other benefits, result in reduced cost, time, or raw material in the production or optimization of administrative, production, or commercial processes. The authors of the best implemented ideas are rewarded financially. In addition, the company involves them in the decisionmaking process, emphasizing their relevance in the constant search for excellence. The employee ideas that were awarded in 2017 rendered 1.6 million for BASF, and the program, since its regionalization in 2009, has already accumulated 9.5 million in total.

37 BASF in South America Report 2017 Employees, health and safety 37 Women represent 29.5% of employees in South America.

38 38 Environmental performance BASF in South America Report 2017 Environmental performance At BASF, we act responsibly as an integral part of society. We have established a comprehensive Responsible Care Management System which is constantly being further developed. We are committed to energy efficiency and climate protection. About 60% of our research and development investments are aimed at developing more sustainable products and optimizing our production processes. We are aware that our success depends on the supply of natural resources and energy. We are committed to continuously analyze and further improve the energy efficiency of our production units. In general, in 2017 we had an increase in production volume in South America of 9.7% compared to 2016, which directly impacted the environmental indicators. Even with the increase in production volume, energy efficiency increased by 2.6% compared to 2016, a result supported by the Triple E (Excellence in Energy Efficiency) initiatives, which seeks to increase the organizations competitiveness through greater energy efficiency, promoting sustainable improvement of energy costs and reducing environmental impacts. The project is aligned with BASF's global concept of excellence in energy management, in addition to contributing to the company's environmental goals: global reduction of our greenhouse gas emissions per metric ton of sales product by 40% by 2020 increased energy efficiency of South American units by 7% by 2025 introduction of an energy management system (ISO standard) in the production units which together represent 90% of BASF's global primary energy demand Throughout the year 2017, BASF worked hard to adapt to the new version (2015) of ISO The main focus was the life cycle perspective as well as the context, and expectations and needs of the stakeholders. For this reason, several environmental initiatives were mapped throughout the life cycle, including raw material acquisition, production, transportation and use of the products. Water We are focused on practices that contribute positively to the environment. Water is of fundamental importance to the chemical industry. We have reduced the volume of water used in recent years by recirculating water as much as possible in the cooling process. We have bold targets for the reduction of the specific consumption of water in the factories linked to action plans for the attainment of this. Between 2002 and 2017, we have already reduced the volume of water consumed per ton produced in South America by 55%. In the Chemical Complex of Guaratinguetá, this reduction was even greater, at 80% during the same period. Between 2016 and 2025, we have planned an additional reduction of 20% in South American. This is a commitment to continuous optimization of the consumption of natural resources in our activities. We are looking for ways to address water scarcity and the need to ensure the availability and sustainable management of water, in line with the Sustainable Development Goals (SDGs). We applied the European Water Stewardship (EWS) tool as an assessment of the sustainable use of water in our sites in Chile and Peru, where a large part of the available water is present in the mountain ranges, thus ensuring that the volume of water we use in our plants do not have an impact on the water supply to the population. In partnership with Guaratinguetá City Hall and the Espaço ECO Foundation, BASF has been supporting the Water Producer Program since 2012, which aims to increase water availability in the Guaratinguetá River Basin responsible for 90% of the public supply of water from the municipality. The initiative provides for practices and management of soil conservation, recovery of riparian forests and the protection of remnants of native vegetation and springs. Excellence in Energy Efficiency The Triple E (Excellence in Energy Efficiency) project is primarily responsible for improving BASF's energy efficiency indicators. It began at the Guaratinguetá Chemical Complex in December 2015, in partnership with Unesp, the project sought to improve energy and sustainability rates and increase the company's competitiveness in South America. Some examples of initiatives implemented by the Triple E project are the adaptations in condensation return to the steam boiler, optimization of the exhaust systems, valve automation, and optimization of the pumping systems. In addition, measures have been implemented such as the optimization of cooling water systems and the installation of new heat exchangers in water heating systems, which reduce energy losses, such as natural gas for steam generation and improvements in the cogeneration of electricity from the site. The expected results from applying these and other Triple E initiativess at the Guaratinguetá site, 60 in total, are a reduction in gas emissions (CO 2 eq) by 3,500 tons/year, reduction in the internal primary energy consumption by 21.6 thousand MWh/year and a cost reduction of BRL 9.4 million. The Triple E project is also underway in the Demarchi, Jacareí, and Indaiatuba sites in Brazil, and in General Lagos, Argentina. The scope also includes the implementation at the Camaçari units in Bahia and Concón in Chile.

39 BASF in South America Report 2017 Environmental performance 39 Also at BASF's herbicide factory in Guaratinguetá, SP, water consumption was reduced by 90% (equivalent to 85 thousand m³) between 2016 and For this, an annual production plan was created, allowing to reduce the need to clean the plant (from six times per year to four times per year), in addition the unit started to perform dry cleaning before starting to use water. This process corresponds to about 70% of the factory's water consumption. Water consumption (total) (Brazil, millions of cubic meters/year) Considers the operations of the Camaçari Acrylic Complex in 2016 Energy BASF is the first major company in the Brazilian chemical industry to be recognized with the international ISO certification, which helps companies to establish more efficient and modern practices in relation to energy management. This achievement was made possible by the implementation of the Triple E (Excellence in Energy Efficiency) project, initiated in three plants of the Guaratinguetá Chemical Complex (SP) in December The project will also implement ISO in all other manufacturing plants at the Guaratinguetá Chemical Complex and sites of Camaçari and Demarchi, Brazil, and in Concón, Chile, in For more details about Triple E, see page 38 Water used for cooling (total) (Brazil, millions of cubic meters/year) Considers the operations of the Camaçari Acrylic Complex in 2016 Electricity consumption (Brazil, MWh) , , ,855 1 Considers the operations of the Camaçari Acrylic Complex in 2016 There was a correction to the amount of electric energy imported in Gta Water used for production (total) (Brazil, millions of cubic meters/year) Considers the operations of the Camaçari Acrylic Complex in 2016 Steam Consumption (Brazil, metric tons) , , ,975 1 Considers the operations of the Camaçari Acrylic Complex in 2016 Effluents: Since 2014, 15 million were invested in the effluent treatment system at the Guaratinguetá unit, using modern technologies that combine the efficiency and reliability of the treatment with energy efficiency and minimization in the use of supplies. Emissions of organic substances in the water (Brazil tons COD 1 per year) Fuel consumption (Brazil, MWh) , , ,263 1 Considers the operations of the Camaçari Acrylic Complex in COD = Chemical Oxygen Demand Emissions of Metals 1 in the water (Brazil, tons of metals per year) Metals = As, Cd, Cr, Cu, Hg, Ni, Pb, Zn Nitrogen emissions in the water (Brazil, tons of Total Nitrogen per year) Emissions to air In addition to the legal limits for atmospheric emissions, BASF voluntarily adopts its own global reference values as indicators to compare operations against these values and to identify opportunities to reduce emissions with a focus on obtaining cleaner production processes. From the evaluation of these indices, projects are developed to reduce the overall emission levels of the existing BASF operations. At the same time, benchmark values serve as guiding principles for the overall environmental standard of operations expected in the enterprise. Between 2016 and 2017, this indicator continued to decline (from 240 to 232 tons per year), a fact that demonstrates the continued search for the reduction of environmental impacts.

40 40 Environmental performance BASF in South America Report 2017 Zero Landfill, in São Bernardo do Campo (SP) and Jaboatão do Guararapes (PE), eliminates the amount of solid waste sent to landfills. Emissions of pollutants 1 in the atmosphere/year (Brazil, tons of pollutants per year) Pollutants: CO, NOx such as NO2, SOx such as SO2, COVs except methane, Particulate Material, NH3/other non-organics Emissions of Greenhouse Gases (Brazil, tons of CO 2 equivalent per year) Zero Landfills: Begun in 2015 at the Industrial Complex of Paints and Varnishes in São Bernardo do Campo, the project has already prevented 440 tons of waste from being sent to landfills. In 2017, the program was expanded, so the sludge from the effluent treatment station and the pruning of gardening also stopped being sent to industrial landfills. In Jaboatão dos Guararapes, the second BASF site in South America to implement the initiative, the alternatives that were developed have allowed to zero the amount of solid waste destined for landfills , , ,633 1 There was a correction in value, considering imported electric energy. Waste Governance for waste management and disposal is very relevant for minimizing environmental impacts and optimizing raw material consumption and waste reduction at BASF. BASF has recycled 70% of the waste generated in South America since the beginning of its operations in the region. Among the projects that contribute to this practice is Zero Landfill. inpev: BASF is actively involved in the National Institute for the Processing of Empty Packaging, a non-profit organization created with the objective of promoting the correct disposal of agricultural pesticides empty packaging. InpEV counts on the participation of the different links of the agricultural productive chain - farmers, distribution channels and cooperatives, industry and public power. Thanks to the organization's performance, Brazil is a worldwide reference in the environmentally correct disposal of the material, sending 94% of primary plastic packaging (which comes into direct contact with the product) for recycling or incineration and 80% of the total packaging of products marketed annually receive the correct post-use disposal. Waste recycling rate (Brazil, %)

41 BASF in South America Report 2017 Environmental performance 41 We are all focused on practices that positively contribute to the environment.

42 42 Innovation BASF in South America Report 2017 Innovation For BASF, innovation is the key to successfully standing out in the market. In 2017, we were awarded first place in Brazil for being the most innovative company in one of the country's most important awards, the ATKearney Best Innovator. Agrobusiness and food Launching of Verismo : The product was developed as an important innovation for the resistance management of coffee borer, considered one of the most aggressive pests in coffee plantations, which could lead to an average loss of 20% in the coffee weight. With unique technology in the market, the insecticide presents high efficiency in the control and fast action on the insect. In 2017, BASF positioned itself in the market with one of the best supply of fungicides on the market with the launch of Versatilis. The product, combined with other BASF solutions, prevents the germination of Asian rust fungus, a severe disease that affects soybean cultivation and can cause losses of up to 80% of crops. The analysis carried out on more than 25 thousand hectares proved that the use of the fungicide generated an increase of productivity of 2 bags in the 2016/2017 harvest. 10 years of the Global Environment and Food Safety Laboratory (GENCS): Located in the Chemical Complex of Guaratinguetá (SP), the laboratory carries out studies to evaluate the residue of pesticides in food and the behavior of these agrochemicals in the environment. These studies are required by Brazilian and international regulatory authorities for the registration of new products and the extension of use for existing ones. In 10 years, more than 5,000 research studies and tests have been carried out on about 50 crops, guaranteeing farmers the security of marketing their crops in the country and also exporting them to various markets. More productivity for coffee crops thanks to Verismo. Launching of Sistiva, Argentina: The new Sistiva fungicide, for the treatment of wheat and barley ensures a better grain quality and, therefore, higher yields. The product presents revolutionary technology and provides prolonged protection, up to 45 days, for disease control. AgroStart Program BASF's AgroStart program, in partnership with the ACE Accelerator, launched in 2016, and with more than 150 registered start-ups, offers the necessary solutions so that start-ups can leverage and consolidate their business in the agrocultural market within a time period of 10 months. Among the benefits of AgroStart are: investment of up to 150,000 reals; coaching and mentoring from recognized entrepreneurs and mentors in agrobusiness and the startup market; and working in conjunction with ACE, a company with proven experience in accelerating start-ups. So far, seven start-ups are participating in the BASF acceleration program, including Brazil and Chile. In 2017, AgroStart and AgFunder, an online American agrobusiness investment platform, created a partnership and launched a web series on the benefits of taking on the Brazilian agricultural market and also the importance of technology for the development of agriculture in the country. The web series is available on BASF's YouTube channel. To see more about AgroStart, visit the BASF YouTube Channel Innovation and technology increase productivity in the country.

43 BASF in South America Report 2017 Innovation 43 Drones: precision agriculture. Launching of Atectra BV, Argentina: In order to provide new tools to the farmer, BASF has launched Atectra BV in Argentina, a new hormonal herbicide for the control of more than 42 different types of resistant weeds, among them the red Yuyo (Amaranthus Hybridus and Palmieri) and the Black Branch (Conyza spp). 11 th edition of Top Science: Held every two years, the event promoted by BASF awarded 14 studies, out of a total of 262 projects registered in Latin America. Top Science 2017 had as its main theme, techniques in the integrated management of the productive system to achieve good results in agricultural crops. About 400 participants, including researchers, scientists, farmers and consultants from various countries in Latin America, as well as representatives from associations, the Ministry of Agriculture and BASF employees, highlighted themes relevant to present and future agriculture. Since the first edition of the Top Science, approximately 2,950 studies have been analyzed in several crops and 213 projects were awarded. In 2016, we announced the acquisition of Chemetall, a global leader in technology and innovation in the surface treatment market, making us the most complete provider of coating solutions. In South America, there is a Chemetall site in Jundiaí (SP, Brazil) and a sales office in Buenos Aires, Argentina. The announcement of the acquisition of Solvay's integrated polyamide business was also a major achievement for BASF in The acquisition complements BASF's portfolio of engineering plastics, expanding the company's position as a provider of transportation, construction, industrial applications and consumer industries solutions. Improvement in the manufacturing process of Lupranol (polyether polyol): Improvements in the manufacturing process of Lupranol, the raw material used in the manufacture of automotive components, have allowed the reduction of Volatile Organic Compound (VOC) emissions in vehicle interiors. As a result, automotive suppliers are able to meet the growing demands of automakers. Cooperate Program: As a way of always remaining close to agricultural cooperatives, BASF promotes, through the Cooperate Program, training focused on the sustainable development of its business. In addition, training courses are carried out in partnership with educational institutes and associations, which offer personalized content ranging from agricultural policy and financial economics to people management and loyalty of cooperatives. Automotive In 2017, the automotive segment experienced resumption of growth and for BASF, this meant a resumption of the interactions between business areas under the responsibility of a single vice president, aiming at providing solutions in a joint way for this segment. In 2017, we observed a growth in the Brazilian automotive industry of about 20% in sales, largely through the sale and production of Brazil, with a focus on exports; and in Argentina with increased sales in the car market. In general, all businesses in the region showed growth. Lupranol decreases emissions of VOCs.

44 44 Innovation BASF in South America Report 2017 Construction Anticipating customer needs is one of BASF's motivations for increasingly innovative and sustainable options and solutions. Concrete Additives: In 2017, new solutions were launched focusing on efficiency and sustainability in construction, as well as promoting results in the cost-benefit ratio of buildings. The products MasterSure, a new generation of polymers that eliminates the addition of water in the work, in addition to minimizing multiple dosing of super plasticizers; MasterX-Seed, an additive that accelerates early-stage concrete hardening and reduces water consumption, CO 2 emissions and electricity consumption in precast facilities; and MasterEase, a new super plastic polymer for high viscosity concrete that saves time and costs in construction projects, the solutions currently sold in the USA, Mexico and some European countries became available in the South American Portfolio. Personal care BASF's Care Chemicals division offers a range of ingredients for hygiene, personal care, household cleaning, industrial cleaning and technical applications. Suvinil Total Cleaning Suvinil, BASF's premium paint brand - and leader in Brazil - has launched the first washable paint with a soft matte finish in the market. Along with the product, the "Half Clean Half Dirty" campaign was launched to highlight the main attribute of the new paint: removing dirt from the wall with only a damp cloth and mild detergent. Tinosorb S Lite Aqua The new water-resistant UV filter contributes to the prevention of skin diseases such as cancer. With state-of-the-art technology, the product is more efficient at lower concentrations, which brings benefits not only to the skin, but also to the environment. Other sustainability benefits are related to the fact that the product is processed cold, which allows a reduction in time and energy consumption when proparing the formulation, and it doesn't contain conservatives and help prevent long-term skin damage. Pharmaceutics Launching Omecap 90 (Argentina): Developed in partnership with the Argentine laboratory Gador, Omecap 90 is an Omega 3 concentrate manufactured with 90% Omega from BASF. When used in the treatment of hypertriglyceridemia (high levels of triglycerides in the blood) and hyperlipidemia (elevated blood cholesterol levels), the medication reduces the risk of side effects such as liver and joint pain.

45 BASF in South America Report 2017 Innovation 45 We have received 25 awards that recognize our innovative and sustainable efforts.

46 46 Sustainability BASF in South America Report 2017 Sustainability Sustainability is an integral part of our strategy. We use various sustainability management tools to materialize our purpose: We create chemistry for a sustainable future." Sustainability is in our business. This is how we take advantage of business opportunities and minimize risks along the value chain. Sustainability is at the heart of what we do, a driver of growth, as well as an element of our risk management. That is why we incorporate aspects of sustainability into our decision-making process and define clear responsibilities in our organization. This is how we position our company for long-term economic success. We want to contribute to a world that provides a viable future with an enhanced quality of life for everyone. We do so by creating chemistry for our customers and society and by making the best use of available resources. We live our corporate goal: - Sourcing and producing responsibly - Acting as a fair and reliable partner - Connecting creative minds to find the best solution for market needs For us, this is what successful business is all about. In 2017, we received 25 awards throughout South America for our innovation and sustainability work from clients, the press, and other institutions They include the Guia Exame de Sustentabilidade, Época Empresa Verde and Valor Inovação. Sustainability in practice In 2050, nearly ten billion people will live on Earth. While the world's population and its demands will keep growing, the planet's resources are finite. On the one hand, population growth is associated with huge global challenges, and yet we see many opportunities, especially for the chemical industry. Portfolio focused on sustainability: More innovative solutions, which contribute significantly to sustainability throughout the value chain, accounted for 27.3% of globally marketed products. This considers the life cycle analysis of more than 60,000 applications, including the procurement of raw materials, production, use and disposal, through the Sustainable Solution Steering methodology. From this analysis, the solutions are classified into four categories: Accelerator; Performers; Transitioners; and Challenged. In addition to the analysis of the products developed by BASF, the methodology is also available to the market, thus contributing to the whole value chain. Sustainable Solution Steering : How BASF's products contribute to sustainability 27.3% (2016:27.2%) 68.3% (2016:68.3%) Sustainable Solution Steering 4.3% (2016:4.2%) 0.1% (2016:0.3%) Accelerator: Substantial sustainability contribution in the value chain Performer: Meets basic sustainability standards on the market Transitioner: Specific sustainability issues which are being actively addressed Challenged: Significant sustainability concern identified and action plan in development Access the series of Sustainability in Practice videos and learn more about how BASF solutions contribute to a more sustainable future. Food: We are transforming the way we produce food, to obtain it in a healthier and more sustainable way. Solutions such as Natuphos, for example, helps poultry and swine to more efficiently absorb nutrients and thereby reducing the environmental impact of their manure on water sources such as rivers and seas. With this enzyme, animals can excrete up to 40% less phosphorus and zinc in nature. We treat our crops with high technology herbicides. For rice production, we have developed, along with our partners, the Clearfield production system, which uses genetically advanced seeds for the control of weeds, therefore increasing productivity in the field. In Rio Grande do Sul (Brazil), farmers have doubled the average productivity of their crops in 10 years (4 to 8 thousand kilos of rice per hectare). Jobs: Through a program that enables people in social risk situations to work in the automotive refinishing sector, we made a contribution the labor market for young people from Chile, Uruguay and Argentina. For more details about Espacio Inclusivo, see page 50 Accelerator Performer Transitioner Challenged

47 BASF in South America Report 2017 Sustainability 47 Construction: We are transforming the way we build, making the process more sustainable. The MasterGlenium line allows for the reduction of water and cement consumption and more resistance and quality of the concrete with the use of an additive to maintain its characteristics in the fresh state and a lower consumption of cement. This is one of BASF's solutions presented at Casa Econômica, which brings solutions from the company and its partners aimed at reducing the total cost of works, assuring time and resource savings. Another highlight is the isothermal building system - polyurethane sandwich panel (polyisocyanurate), Elastopor - an innovative solution for faster building and efficiency, labor reduction, less waste, and durability. It is an innovation for residential use, which prioritizes the comfort and convenience of residents: it decreases heat transfer between environments by up to 90%.That is 20 times more insulating than bricks and 80 times more than concrete. Cleaning: We are transforming the way we clean, developing innovative and sustainable formulas with biodegradable raw materials like Trilon M, which reduces the impact on water sources, protecting ecosystems. Fuels: We are transforming the way we produce fuel with sodium methylate, reducing the pollution caused by diesel engines and making the biodiesel chain even more efficient. We installed a sodium methylate plant in Brazil, which puts us closer to the main customers, reducing transport and greenhouse gas emissions. For more details about sodium methylate, see page 21 Air: We are transforming the quality of the air by means of catalysts for engines cars, motorcycles and trucks. Since they were invented (1974), BASF's catalysts division contributed to the fact that more than a billion tonnes of pollutants such as carbon monoxide (CO), hydrocarbons (HC) and nitrogen oxides (NO x ) have not been released in to the air. Through BASF Connect to Transform, which in 2017 had its second edition, we selected and supported initiatives of social and environmental impact in four countries of South America. The projects focus on: scientific and environmental education, employability and protection of natural resources and biodiversity. They are active in the communities where we are present. In 2017, 12 projects were carried out in Argentina, Brazil and Chile. Location Project Training of the Firefighting Brigade in Water Resources Areas, of the Resident Owners Brazil São Bernardo do Campo Community Council of Vila Ecológica Chácaras Porangaba Collective Paths: Socio-environmental Training and Experience in the Territory for Brazil São Bernardo do Campo Recyclable Material Collectors, of the Public Interest Ecology Civil Society Organization Traveling Museum, of the Research Brazil São Bernardo do Campo Development Foundation Friends of Waste, from the Brazil Guaratinguetá Cooperative Friends of Waste Educador Firemen of the Firemen's Brazil Guaratinguetá Foundation of São Paulo Fun Walk, of the Fraternity Brazil Guaratinguetá Group Brother Altino Brazil Guaratinguetá Siemens Foundation Experiment Argentina Tortuguitas, Training and Work Program, Malvinas Argentinas, Province of the Forge Foundation of Buenos Aires Argentina Tortuguitas, Training Center in Labor Competencies, of Malvinas Argentinas, Province the Fundación Reciduca of Buenos Aires Chile Quinta Normal (Santiago) Kyklos, Entertaining Recycling Micro-business Development and Chile Quinta Normal (Santiago) Innovation Program, of the Integrare Foundation Chile Quinta Normal (Santiago) TuPrimeraPega, da TuPrimeraPega SPA Social engagement strategy BASF Connect to Transform Shared value Dialog with the community Volunteering Training and Work Program of the Forge Foundation in Argentina. BASF's social engagement strategy foresees a broader positive impact by connecting the resolution of social challenges to the business strategy. Our proposal is to bring innovation to, and generate positive impact in society. For 2018, the BASF notice received a 116 project registrations, an increase of 84% compared to the previous year, and selected 11 projects with social and environmental impacts that will be supported in Brazil, Chile and Argentina.

48 48 Sustainability BASF in South America Report 2017 Shared value: The concept of shared value proposes that companies should seek to create value for both their shareholders and society. According to the concept, the mission of the company must integrate the pursuit of profit and social responsibility as inseparable goals. We analyze social needs as an opportunity for economic, social and environmental growth, and thus develop solutions for a more sustainable world. Cristiana Brito, Director of Institutional Relations and Sustainability At BASF, we believe that shared value projects reflect how we live our purpose: We create chemistry for a sustainable future. By helping to solve society's gaps, we approach this purpose, and contribute to improving people's quality of life and building a good future. BASF has five shared-value projects underway in Argentina, Brazil, Chile, Peru and Uruguay, which involve professional training, income generation, waste reduction and rural productivity increase. Compostable Future: The initiative in Chile seeks to reduce the amount of domestic waste destined for landfills in the city of Santiago, through the allocation of organic materials to be sent to composting units. It covers from the delivery of ecovio based compostable trash bags for residents to place their organic waste (fruits, raw vegetables, eggshells, tea bags and coffee); to the removal and weighing of the bags by a specialized recycling company; and finally, the transfer to an industrial composting plant, where the waste is transformed into natural fertilizer, rich in minerals, resulting from its controlled decomposition. Compostable Future, an initiative done in Chile, reduces the quantity of household waste.

49 BASF in South America Report 2017 Sustainability 49 Allin Kawsay project, held in Peru, supports potato farmers. "Allin Kawsay": Held in Peru, through partnerships with different organizations in the potato production chain, the project seeks to promote increased productivity by transferring technology to protect crops and encourage more sustainable agricultural practices. In 2017, the program entered its second stage, benefiting 600 farmers. According to program data, a farmer can increase and improve his production by around 50%, and can even double it. Through this project, we establish a dialog, provide training and connect the producers with companies that can facilitate their business. In this way, we seek to improve the quality of life of the potato producers in Peru. Origin: The Brazilian program seeks to generate a more sustainable production of potatoes, monitoring their quality and encouraging the adoption of better agricultural practices. Vitrine Suvinil: The online painter recommendation platform allows the consumer to search for qualified and trained professionals, who work in the vicinity of the address where the painting service will be performed. This way, in addition to valuing the best professionals in Brazil, the company also contributes to their professional development. For more details about Vitrine Suvinil, see page 29

50 50 Sustainability BASF in South America Report 2017 Together with the Cristo Vive Foundation, courses were implemented in 2017 focusing on automotive refinishing, lubrication and composite materials. Dialog with the community: We search for dialog with the communities surrounding our sites to build up an open and trustful relationship. Espacio Inclusivo in Argentina, Uruguay and Chile. Espacio Inclusivo (Inclusive Space): In 2017, Argentina and Uruguay started to count on the project's performance, previously performed only in Chile. With a focus on training young people in situations of social risk, to work in the automotive refinishing sector, the initiative is carried out in partnership with BASF clients. Community Advisory Panel (CAP): Founded in 2000 in Guaratinguetá, SP, and São Bernardo do Campo, SP, the CAPs aim to discuss issues of common interest related to safety, health and the environment. They are formed by BASF professionals from the areas of Communication, Safety and Environment, and representatives of different segments of society, such as public bodies, neighborhood associations, non-governmental organizations (NGOs), class entities, schools and health clinics. The initiative is part of the Responsible Care Program, coordinated by the Brazilian Chemical Industry Association (Abiquim) and acts as a channel for dialog between the company and the communities located around the sites. Community Advisory Panel discusses issues of common interest related to safety, health and the environment.

51 BASF in South America Report 2017 Sustainability 51 "More Green More Life" Project in Guaratinguetá (SP). The Community Projects Sponsorship Program: Exclusively supports entities that are part of the Community Advisory Panels of BASF. Four projects were supported by the company in 2017 to receive financial assistance to develop projects focused on health, safety or the environment. In 2017, the completion of a new cycle selected four more projects to be completed in Projeto Mais Verde Mais Vida (More Green More Life Project): Asaben's (Association of Residents of the Engenheiro Neiva Neighborhood) in Guaratinguetá, SP, promotes workshops on vertical, horizontal and PET bottle horticulture gardening techniques. The project stimulates food production, decreasing household expenditures and, in many cases, increasing income with vegetable sales. Cerca Viva (Live Fence): Developed by the Community Council of the Chácaras Porcaraba neighborhood, (São Bernardo do Campo, SP) the initiative aims to contribute to the safety and preservation of the environment of the region by planting seedlings that will form a natural barrier, between the community and the southern section of Mário Covas Rodoanel, near the Ribeirão do Soldado Road. Jardim do Vale Colaborando e o Mundo Reciclando (Valley Garden Collaborating and the World Recycling): Project of the Association of Residents of the Jardim do Vale Neighborhood (Guaratinguetá, SP), which aligns environmental awareness to the generation of income. The sponsorship makes the purchase of equipment and carts for the collection of recyclable materials. Recicla Centro (Recycling Center): In the city center, the Commercial and Business Association of Guaratinguetá (ACEG) promotes educational campaigns for residents and shopkeepers, encouraging the separation of recyclable garbage. It has the support of BASF and the partnership of the selective collection cooperative Amigos do Lixo. Emergency phones: BASF maintains a community communication channel available 24 hours a day. Through it, it is possible to report the occurrence of incidents or to question the operation of the company. BASF's Communication Center (CECOM) verifies the origin of the occurrences and performs the necessary routing for the analysis and solution of the issue Call Ecology. Volunteering: In line with BASF's social engagement strategy, in 2017 there was an increase in employee participation in corporate volunteering. The volunteers meet in an organized and autonomous way to define the causes in which they will volunteer and how to invest the money made available by the company. We invest in the empowerment of our employees to be promoters of social transformation and that this multiplies sustainable values inside and outside of BASF. Emiliano Graziano, Manager of Corporate Sustainability The volunteer commissions encourage and support the implementation of social projects for employees in the communities. Altogether, in South America, there are 14 commissions in the following places: Brazil - Camaçari, Demarchi, Guaratinguetá, Jaboatão dos Guararapes, Jacareí and Morumbi; Argentina - General Lagos, República and Tortuguitas; Peru - Lima and Callao; Chile - Carrascal and Pundahuel; Colombia - La Calera.

52 52 Sustainability BASF in South America Report 2017 The involvement of 800 employees reached 1,700 people and impacted 30 non-governmental organizations (NGOs). Partnerships and sponsorships Global Compact Sustainable Development Goals (SDGs) Suvinil is the official supplier of the Museum of Tomorrow We value partnerships. Through them, we can contribute to a positive agenda in South America. We can also connect customers, government and society to more sustainable practices, inspiring other organizations and business associations, and contributing to business improvement. Volunteer fairs, important event to dissemination of voluntary work. Among the actions carried out by the volunteers were: renovation and painting of the municipal school Raul Pompéia (SP), the initiative, promoted by the Cyrela Institute with the sponsorship from Suvinil, transformed the environment of a thousand students in the area; collection of clothes for the Campanha do Agasalho do Fundo Social de Solidariedade (Social Solidarity Fund Clothing Collection Campaign), and the donation of toys to four child care centers in the city of São Bernardo do Campo (SP); volunteer fairs played an important role in disseminating more information to all company employees about the charities that need donations and voluntary help the last edition, held in October, was attended by nine institutions; planting of 551 tree seedlings in the municipality of Guaratinguetá, SP, in partnership with the City Council and other stakeholders; delivery of supplies to the victims of the heavy rains that hit Peru; donation of caps to the Instiutição Damas de Café (Coffee Ladies Institute), who do recycling to raise funds for the treatment of children with cancer at the Mackenna Hospital in Carrascal, Chile. Global Compact: Since the design of the Global Compact (2000), BASF supports the network. The company held the chairmanship of the board of the Brazilian Global Compact Committee from 2015 until 2017, the year in which it became Vice-President. In addition, it also actively participates in the Thematic Groups (TGs) created to implement the 10 principles and implement the Global Compact values. Sustainable Development Goals (SDGs): Through this global commitment, created by the United Nations Summit, 17 objectives and 169 goals were established that should be met by BASF contributes to all SDGs, minimizing impacts along the value chain and promoting positive contributions through products and solutions. For each SDG, there are examples of BASF's contribution. In addition, the company globally defined 6 SDGs as the main focus for its contribution in order to be more effective: clean water and sanitation; decent employment and economic growth; responsible consumption and production; accessible and clean energy; industry, innovation and infrastructure and combating climate change. 17 Goals for Sustainable Development (SDGs) guide the policies and attitudes.

53 BASF in South America Report 2017 Sustainability 53 Suvinil Além da Cor (Suvinil Beyond Color) at the Museum of Tomorrow (RJ, Brazil): changing people's lives through color. Suvinil is the official supplier of the Museum of Tomorrow: Suvinil will make available, for the next two years, 7,200 liters of the product Suvinil Sempre Nova, in the color white for the Museum of Tomorrow, in Rio de Janeiro, Brazil. The objective is the maintenance of the painting of the internal and external areas of the space, a necessary action due to the large number of visitors. The painting of the museum is part of the project Suvinil Além da Cor (Suvinil Beyond Color), which aims to support initiatives that bring benefits to society, transforming the lives of people, who have a relationship with the space or the good of the public, through colors. In 2016, through the project, BASF presented the MASP painting, an important milestone in the history of the brand in São Paulo (SP). Governance in sustainability We set well-defined goals and objectives for the 2025 Strategy South America: To be recognized as the most reliable and sustainable chemical company in the value chain. Sustainability governance at BASF is carried out through committees that permeate the whole structure of the company at different levels. Sustainability Committee: With quarterly meetings, it is responsible for defining the sustainability goals in South America, aligned with BASF's global guidelines, monitoring and ensuring the implementation of the proposed actions, reporting to the South America Executive Team. Themed Committees: Representatives from all regions of South America make up the six committees, who are responsible for disseminating the vision of the strategy in different areas of the company, in both the functional and business units, being involved from the social engagement to the development of products from renewable sources. Which are: Communication for Sustainability, Social Engagement, Value Chain, Sustainability applied to Business, Employees and Health, Safety and Environment. All of them report to the Sustainability Committee. Local Committees: They have been implementing the strategy in the cities where the factories are located, reporting to the Social Engagement Committee.

54 54 Sustainability BASF in South America Report 2017 Fundação Espaço ECO (FEE ) FEE is a business foundation established and maintained by BASF since 2005 with the qualification of OSCIP Civil Society Organization of Public Interest and the mission "to promote sustainable development in the business environment and in society". FEE acts as a sustainability consultancy, developing customized projects for its clients and partners. It performs studies and analyzes the eco-efficiency of products and processes, evaluating the economic and social environmental impacts generated by them, using scientific methodologies based on life-cycle thinking. FEE also advises companies seeking certification and sustainability protocols for their products and processes, develops and implements environmental conservation projects, measures social impacts of shared value projects, and also develops and helps implement programs that foster diversity and inclusion in organizations. "Fundação Espaço ECO is a great facilitator of the strategy of our customers and partners, offering sustainability and business knowledge to co-create customized solutions to solve the challenges of society and contribute to the sustainability of the planet", say Antonio Lacerda, Senior Vice President of Chemicals, Performance Products and Sustainability. With studies that have impacted different market segments such as agriculture, food and beverage, construction, packaging, pulp and paper, petrochemical, chemical and paints, in 2017, the Espaço ECO Foundation reinforced the link between sustainability and business, developing large scale projects for organizations. Established partnerships with leading institutions such as Embrapa, the IBICT (Brazilian Institute of Science and Technology) and Ecoinvent in Switzerland; and implemented collaborative projects, thereby strengthening skills in areas such as diversity and inclusion, shared value projects, certifications, and valuation of ecosystem services. These are the results achieved past 12 years. These are initiatives and projects that contribute to decision making, mitigation and management of environmental, social and economic risks; as well as in stakeholder engagement and value generation, which protect the reputation of brands. One of the main challenges of FEE is to connect science to business and translate it into society, proving how innovation and sustainability generate positive results. To do this, it identifies the impacts generated by organizations to develop customized solutions that will respond to these challenges. For this, it applies scientific methodologies based on the concept of Life Cycle Assessment (LCA) analysis of the path traveled by a product manufactured in the industry, from the extraction of raw materials to its disposal. Fundação Espaço ECO (FEE ). Also fulfilling its mission to promote discussion and share knowledge on sustainability, the Espaço ECO Foundation actively participated in 2017 in the most relevant congresses, meetings and discussion forums on sustainability issues. The highlight was FEE at the 8 th International Conference on Life Cycle Management (LCM 2017) in Luxembourg. The case of the Sustainable Management Program (PGS), from FEE, was awarded as the best poster presented at the event. In this project, FEE enables Small and Medium Enterprises (SMEs) to adopt a management model oriented towards sustainability. The organization also held talks with supply chains, supported manufacturers associations and participated in working groups in the agricultural market. The Brazil-Germany Chamber of São Paulo (AHK São Paulo) and the Fundação Espaço ECO (FEE ), an organization established by BASF, launched the initiative 'Diversity + Inclusion: The practices that worked', with the support of the Cultural Institute Partner Brazil-Germany (ISCBA). Through the initiative, two workshops were held in São Paulo, in which eight companies debated cases of success, experiences, challenges and difficulties related to gender equality, LGBT inclusion, racial diversity and the inclusion of people with disabilities. FEE believes it has fulfilled its mission of promoting sustainable development in the business environment and in civil society, collaborating with the studies and projects that it has developed, in order to generate improvements and changes in society, creating positive impacts for this and for future generations. Rodolfo Viana, Director and President of FEE For more details, see FEE Report 2017

55 BASF in South America Report 2017 Sustainability 55 Awards In 2017, BASF received 25 awards for its innovation and sustainability activities in South America. The awards reinforce the importance of our strategic pillars, in addition to valuing our employees and recognizing the importance of BASF in generating value for our customers, partners and society. See below the awards won in 2017 in the areas of innovation and sustainability: Sustainable Company of the Year and in supplier management. Country Awards Categories Brazil Guia Exame de Sustentabilildade (Exame Sustainability Guide) Most sustainable company in the chemical sector and in supplier management Brazil ÉPOCA - Empresa Verde (Green Company) Featured company Brazil Valor Innovation Chemical and Petrochemical Industry Brazil Fiat Chrysler Automóveis Brasil (FCA) Sustainability - Annual Supplier Awards Brazil Grupo Boticário Suppliers - Sustainability Brazil MRV General. Social and Economic Brazil QLIC.AR Natura Raw material Brazil Você S/A Melhores Empresas (Best Companies) Chemical and Petrochemical Brazil Psychologically Healthy Companies Award (EPS) General Brazil Best Innovator Innovation Brazil Sustaining Sustainable Services Brazil PARAR Award Mobility management Brazil EY Entrepreneur of the Year Sustainable Category Brazil Telhanorte Sustainability Global American Chemistry Council - ACC Company of the Year in the Responsible Actions Program Argentina Company committed to SDG Innovation - Sustainability Argentina Certification of 'Healthy Work Place' at the São Tomé plant Company free from tobacco smoke Colombia Award for Child Nutrition - KIPOWER Product Development Colombia Sura Excellence Improvements in the work environment Chile Executive of the year - Capital Magazine Business Woman Chile Creative corporative cultures Large Companies Chile Company committed to responsible communication Anuário Corresponsables Chile Partner of the year - CAMCHAL General Peru Good Labor Practices Awards 2017 Professional Development and Access to Training Peru CLB Tecnológica Environmental Performance Value chain BASF develops and implements global initiatives to encourage suppliers and promote sustainable supply practices in the chemical industry. It is based on recognized best practices and protocols, such as the United Nations Global Compact and the Atuação Responsável Program. Integrare: BASF is associated with Integrare in Brazil, an institution specializing in the approximation of large corporations and micro and small enterprises (MSEs) owned by people of color, indigenous people or people with disabilities. Together for Sustainability (TfS): The Together for Sustainability (TfS) concept analyzes a supplier's sustainability performance against a set of assessment and audit criteria, tailored to the requirements of a large group of chemical industries. As a result, a single database of suppliers qualified to the TfS standards is created, these standards are based on the principles of the UN Global Compact, as well as the standards of the Atuação Responsável program, International Labor Organization (ILO) and national laws. The TfS program contributes to reducing supply chain risks and promotes continuous improvement through process reviews and a suggested action plan. 10 th BASF Suppliers Excellence Award: In its 10 th edition, the awards highlighted innovative projects and actions that contributed to the development of the chain. Through performance evaluations, the company recognizes partners who contribute to the joint evolution of processes, reaching a high level of excellence. In 2017, 61 companies were evaluated in seven categories: storage, equipment and materials, raw materials, packaging, services, shipping companies and transport.