Strategy Agricultural Products Hans W. Reiners President Agricultural Products Division August 2005
1 Agricultural Products Strategy Delivers Results 2 Half-Year 2005 Performance 3 Setting the Benchmark in Customer Satisfaction, Innovation and Profitability
BASF Top Player in Agricultural Products BASF The Chemical Company Strategy: Focus on high-value Markets Products Innovation Profitability Success in today s and tomorrow s agro markets Pipeline Customer Satisfaction 3
Our Strategy of Profitable Growth at Work Targets and Strategic Measures We set clear targets We defined clear measures EBITDA* Margin Profitable growth with new and innovative products Active cost optimization Strict asset management Assets 4 * before special items
We Reduced Working Capital by One-Third Strict Asset Management In % of sales (year-end) 75 50 Joint efforts with our channel partners Sell closer to the planting season Reduce payment terms Reduce channel inventories 25 0 2001 2002 2003 2004 By further improving internal processes Reducing manufacturing lead times Increasing manufacturing efficiency 5 Inventories Accounts receivable
We Cleaned Up Channel Inventories US Channel inventories at season-end September 30 Brazil Channel inventories at season-end March 31 250 200 150 100 50 0 100 50 Million USD 230 160 2000/01 2001/02 2002/03 2003/04 Million USD 130 ~90 40% 20% 0% 50% 25% Ongoing management of channel inventories together with customers Down to just 25% of seasonal sales in the US Low channel inventories in Brazil: <10% of seasonal sales Current situation in Brazil: In Q2+3 we reduced drought-related field inventories by about 60 million USD, paving the way for the season 2005/6 ~30 6 Bar: million USD Line: in % of BASF seasonal net sales 0 0% 2001/02 2002/03 2003/04 2004/05
We Have Exited 12 Sites Since 2001 Asset and Cost Optimization 2003 2002 2002 2005 2002 2001 2002 2002 2005 2002 2005 2003 7 Research sites and experimental stations A.I. manufacturing and formulation sites EXIT
We Actively Reduced Costs in All Areas Strict Cost Management Cost reduction in million EUR Corporate R&D Sales and Marketing Operations 0 50 100 150 2001 2002 2003 2004 Following the acquisition of American Cyanamid, we achieved cost improvements of more than 400 million EUR since 2001 Corporate: Realized synergies R&D: Reduced unproductive infrastructure costs Refocused R&D activities M&S: Realized synergies Increased focus Operations: Site exits and site consolidation Process and sourcing improvements We continue to reduce costs, especially in operations 8
We Increased Sales in Strategic Markets Focus on High-Value Markets We increased share of sales in strategic markets to more than 85% of overall sales Presence in key markets is prerequisite for successful launch of pipeline products Rapid penetration of new, high-value segments Strategic Markets Opportunity Markets 9
We Increased Sales with New Products Focus on High-Value Products Million EUR 2,808 552 2001* Product portfolio rational./ reduction 98 Divestitures 1,196 Acquisition, product pipeline, product lifecycle innovation 3,354 2004 New and innovative products drive sales growth - Product pipeline and product lifecycle innovation - Acquisition of fipronil package Product portfolio rationalization and divestitures reduce complexity and share of less profitable, particularly third-party products 10 * Currency adjusted to 2004
We Successfully Launched Our Pipeline Focus on High-Value Innovations Sales of pipeline products in million EUR 1,000 Youngest portfolio in the industry Introduced seven new active ingredients since 2000 Fungicides: Boscalid, Dimoxystrobin, F 500 500 Herbicides: Dimethenamid-P, Picolinafen, Tritosulfuron Insecticide: Chlorfenapyr 2001 2002 2003 2004 2005 + 11
Our Strategy of Profitable Growth Works Targets and Achievements 2005 goal of 25% set in 2002 28.0 EBITDA* Margin (in % of net sales) 18.9 16.2 21.3 * before special items 2001 2002 2003** 2004** *** Assets (in billion EUR) ** including acquired fipronil package ***IFRS adjusted 6.4 5.1 5.5 5.0 12
1 Agricultural Products Strategy Delivers Results 2 Half-Year 2005 Performance 3 Setting the Benchmark in Customer Satisfaction, Innovation and Profitability
Agricultural Products Division Performs Overview of Half-Year 2005 Performance In million EUR 1 HY 2005 1 HY 2004 in?% in $?% Sales 2,002 2,054-3 +2 EBITDA* 679 632 +7 +12 EBITDA*-margin 33.9% 30.8% EBIT* 571 493 +16 +21 EBIT*-margin 28.5% 24.0% Assets 5,540 5,693-3 +8 * before special items Exchange Rate: 1 HY 2004: US$/ = 1.227 1 HY 2005: US$/ = 1.286 14
Agricultural Products Division Performs Sales Development by Region In million EUR 1 HY 2005 1 HY 2004 in?% in $?% Europe 960 999-4 +1 NAFTA 736 654 +13 +18 South America 163 259-37 -34 Asia-Pacific 143 142 +1 +5 TOTAL 2,002 2,054-3 +2 Exchange Rate: 1 HY 2004: US$/ = 1.227 1 HY 2005: US$/ = 1.286 15
Agricultural Products Division Performs Sales Development by Product Group In million EUR 1 HY 2005 1 HY 2004 in?% in $?% Herbicides 825 861-4 +0 Fungicides 805 775 +4 +9 Insecticides/ Other 372 418-11 -7 TOTAL 2,002 2,054-3 +2 Exchange Rate: 1 HY 2004: US$/ = 1.227 1 HY 2005: US$/ = 1.286 16
Agricultural Products Division Performs 2005 Outlook Agrochemical market: After 4.7% market growth in 2004, we expect the market to be slightly below last year s level in 2005. Subject to the following assumptions: No major commodity price changes Improved liquidity situation in Latin America No extreme exchange rate volatility Normal weather conditions BASF Agricultural Products: For the full year 2005 we expect slightly lower sales, but higher EBIT before special items and a higher EBITDA margin compared to the previous year. 17
1 Agricultural Products Strategy Delivers Results 2 Half-Year 2005 Performance 3 Setting the Benchmark in Customer Satisfaction, Innovation and Profitability
We Set New Benchmarks Benchmark in Customer Satisfaction Innovation Profitability 19
We Set Benchmark in Customer Satisfaction BASF in the eye of our customers: Country Year 2001 Year 2004/5 USA #3 #1 Brazil n.a. France #5 #1 Germany #1 #1 UK #2 #1 Italy #2 #1 Japan #9 #1 #7 Source: Various independent customer satisfaction studies Stratus (USA), A Granja (Brazil), Eider (France), DLG (Germany), B2C (UK), CIF (Italy), Crecon (Japan) 20 We build on strong relationships with our customers
We have the Best Patent Protected Portfolio Successful Portfolio Management Sales of patented actives in % of total company sales: 100% 50% Customers enjoy steady flow of innovative products to safeguard quality and quantity of harvest Leading intellectual property position for BASF through successful commercialization of pipeline products Platform for generic defense and lifecycle extension 0% BASF A B C Competitors Patent Off-Patent Source: PhilipsMcDougall and own estimates. Based on 2004 sales of crop protection products. 21
We Launch Agro Innovations Successfully Successful Product Innovation F 500 fungicide Becoming the leading fungicide in the world Expect 2005 sales of F 500 -based products to surpass 400 million EUR target, set in September 2004 Upgrade sales target for F 500 products again by 100 million EUR to over 500 million EUR by 2007 Boscalid fungicide Successful launch driven by excellent customer acceptance in Europe and North America Registrations in 36 countries and for over 100 crops Expect sales to increase to more than 150 million EUR 22
We Set the Benchmark in Innovation Profitable Growth Through Powerful Late Stage R&D Pipeline Stage Projects Major Crops/ Markets Peak Sales Potential In Launch 3 Fungicides 3 Herbicides Cereals, Soybeans, Specialty Crops Cereals, Corn 1,100 Million EUR* 1 Insecticide Non-crop In Development 3 Fungicides 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops Corn, Non-crop Soybeans 700 Million EUR 1 Insecticide Specialty Crops *Almost 60% thereof reached in 2004. Products in launch have developed better than initial forecasts 23
We Develop New Insecticide Mode of Action Emerging Technology: Metaflumizone* Insecticide New insecticide Metaflumizone Untreated Potato Innovative insecticide for specialty crops Strong on target pests Low risk to applicators, consumers and the environment New technology to be launched by 2006/7 Treated Potato 24 * Provisionally approved common name
We Develop New Fungicide Mode of Action Emerging Technology New Fungicide expected to become a blockbuster Fourth generation of fungicides Broad range of solutions for effective and long-lasting control of fungal diseases Strongly complementary to the currently available chemistry Without treatment New technology to be launched by 2009/10 BASF new technology 25
We Invest in New Technologies Strong Commitment to Agrochemical R&D Development Broad market introduction of pipeline projects Extending portfolio of new innovative actives to new applications such as seed treatment and other new business opportunities (F 500, Boscalid, Fipronil) Research Further strengthening discovery of novel fungicides and insecticides Exploring new opportunities, such as in Plant Health 7.5% of sales Development Research 9 10% of sales 26 Innovation is the critical success factor in the agrochemical market 2003 2007
Financial Targets until 2010 Average organic sales growth of 2-3% p.a. above market growth EBITDA margin above 25% Maintain profitability benchmark position in the industry 27
Disclaimer This presentation contains forward-looking statements under the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict and are based upon assumptions as to future events that may not prove to be accurate. Many factors could cause the actual results, performance or achievements of BASF to be materially different from those that may be expressed or implied by such statements. Such factors include those discussed in BASF s Form 20-F filed with the Securities and Exchange Commission. We do not assume any obligation to update the forward-looking statements contained in this presentation. 28
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