Agricultural Solutions Sustainable growth through market-driven innovations Dr. Stefan Marcinowski Member of the Board of Executive Directors BASF Roundtable Agricultural Solutions New York & Monmouth August 8, 2011
2 Disclaimer This presentation includes forward-looking statements that are subject to risks and uncertainties, including those pertaining to the anticipated benefits to be realized from the proposals described herein. This presentation contains a number of forward-looking statements including, in particular, statements about future events, future financial performance, plans, strategies, expectations, prospects, competitive environment, regulation and supply and demand. BASF has based these forward-looking statements on its views with respect to future events and financial performance. Actual financial performance of the entities described herein could differ materially from that projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and financial performance may be better or worse than anticipated. Given these uncertainties, readers should not put undue reliance on any forward-looking statements. Forward-looking statements represent estimates and assumptions only as of the date that they were made. The information contained in this presentation is subject to change without notice and BASF does not undertake any duty to update the forward-looking statements, and the estimates and assumptions associated with them, except to the extent required by applicable laws and regulations.
3 1 Introduction 2 BASF Crop Protection 3 BASF Plant Biotechnology 4 Update Monsanto BASF Collaboration
4 BASF Group results H1 2011 Business performance H1 2011 vs. H1 2010 Sales 37.8 billion +19% EBITDA 6.4 billion +16% EBITDA margin 16.9% 17.3% EBIT before special items (bsi) 5.0 billion +19% EBIT bsi adjusted for non-comp. oil taxes 4.7 billion +26% EBIT 4.8 billion +22% Net income 3.9 billion +75% EPS 4.21 +75% Adjusted EPS 3.69 +31% Significant sales and earnings growth in the chemicals business Excellent performance of the acquired former Cognis business Earnings in Agricultural Solutions increased despite adverse weather conditions Sales growth in Oil & Gas was price driven. Net income rose by 34% 4
5 Outlook 2011 Assumptions We forecast Brent oil price of $110/bbl (from $100/bbl) and US$/ of $1.40 (from $1.35) We are assuming that oil production in Libya will not restart during 2011 EBIT before special items from our Libyan oil production for the full year 2011 will be about 1 billion lower compared with 2010 (thereof about 700 million of non-compensable oil taxes) Targets 2011 We expect to generate significantly higher sales We aim to significantly exceed the 2010 EBIT before special items adjusted for non-compensable oil taxes (2010: 7.2 billion) We expect to achieve a high premium on our cost of capital Medium-term targets We aim to grow sales on average by two percentage points per year faster than chemical production growth We strive to grow our earnings further year by year, and to achieve an EBITDA margin of 18% by 2012 5
6 BASF s segment structure Chemicals Plastics Performance Products Functional Solutions Agricultural Solutions Oil & Gas Inorganics Performance Polymers Dispersions & Pigments Catalysts Crop Protection Oil & Gas Petrochemicals Polyurethanes Care Chemicals Construction Chemicals Plant Biotechnology Intermediates Performance Chemicals Coatings Paper Chemicals Nutrition & Health
7 Sales 2010 by segments Chemicals Business Chemicals 18% Agricultural Solutions 6% Oil & Gas 17% Plastics Total sales 16% 64 billion Other 9% Performance Products 19% Functional Solutions 15%
8 Agricultural Solutions R&D expenditures 2010 Capex 2011 2015 Chemicals Business Chemicals 9% Agricultural Solutions 26% Chemicals Business Chemicals 15% Agricultural Solutions 4% Plastics 10% Performance Products 19% Functional Solutions 12% Other 1% 1.5 billion Plant Biotech 10% other Corp. R&D 12% Oil & Gas 1% Plastics 14% Performance Products 14% Functional Solutions 6% 35% 12.6 billion * Excluding investments in Nord Stream Oil & Gas* 35% Other 12% Agricultural Solutions: Innovation-driven business
9 Agricultural Solutions EBIT before special items in billion Agricultural Solutions, reliable EBIT generator for BASF 10 8 6 4.9 8.1 Not coupled to chemical cycle, stable earnings Substantial contribution to Group earnings in 2009 trough 4 2 0 2009 2010 Agricultural Solutions Oil & Gas Chemical activities including Others Reliable earnings contribution to BASF Group
10 Agriculture is resilient to crises Growth* in % 25 World GDP Growth Agriculture Automotive 20 15 10 5 0-5 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010-10 -15-20 1973: 1 st oil crisis 1979/80: 2 nd oil crisis 1981 US-loan crisis 1991: Japan crisis 1990/91: Gulf war I 1997/98: Asia crisis 2000: Dotcom crisis 2001: 9/11 2008/09: Financial crisis *GDP: Annual percentage change of a country's GDP in constant prices of base year 2005 Sectors: Annual percentage change of world's Production Index, 2005=100 Source: BASF analysis of FAO, IHS Global Insight and national statistics (e.g. Eurostat)
11 Agriculture is a growth industry Growing / aging global population Urbanization, metropolization Globalization and emerging markets Energy demand, climate impact Rising demand for agricultural products Limited ressources (land, water) Yield increase via agricultural solutions needed
12 Agriculture needs innovation World Population in billion people 9 8 7 6 2011 Technology Waves Plant Biotechnology Crop Protection 5 4 3 2 1 1850 1890 1930 1970 2010 2050 Breeding Fertilizers Mechanisation Land & Irrigation Technological innovations needed to fill the gap between demand and supply
13 BASF s offering: Agricultural Solutions Crop Protection BASF Plant Science BASF s Agricultural Solutions offering helps to fill the gap
14 Sustainable agriculture SUSTAINABILITY BASF s definition of sustainable agriculture Achieving more yield with less land, water, and energy, while ensuring the profitability of farming, caring for the environment, and meeting the needs of society. Sustainability: Value for BASF Integral part of R&D strategy Differentiation on product level Increased customer retention via new business models Transparency in our sustainability concepts supports positive perception of BASF by public and investors Sustainability: Translating values into value
15 Sustainable agriculture Product example Plant Health effect Improved stress tolerance and growth Improved crop quality Yield increases of >10% Higher return on farmer s investment Improved land-use efficiency Resource conservation Integrated offer from planting to harvest in launch: Standard Plant Health: Economic & ecological benefit
16 Sustainable agriculture Mite Away TM Quick Strips: Efficient control of mites Mites are one of the major causes for bee colony collapse disorder Biodegradable product: gel containing formic acid, sugar, starch wrapped in paper and Ecoflex film Combination of BASF and beekeeper know-how Mites are efficiently killed Product launched in US in 2011 Mite Away TM contributes to improving bee health
17 Sustainable agriculture innovate explain care Product stewardship throughout the entire product life-cycle
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19 Verbund synergies along the value chain Know-how Verbund Production & Sourcing Verbund Know-how Verbund a.i. discovery & process design raw materials active ingredient formulated active ingredient formulated active ingredient BASF s R&D experts back-integration BASF production network BASF adjuvants, formulation expertise BASF products & know-how R&D partners External suppliers Partners and customers
20 Verbund synergy example Know-how Verbund People: A + B Technical knowledge pool of 9,600 experts in R&D Processes and Products: multi-step alternatives Suzuki: 1 step Cross-divisional innovations Example: Suzuki-based Boscalid production route A B Suzuki coupling offers great shortcut in reaction route, but was perceived as academic (not upscalable) BASF realized 1 st industry-scale Suzuki process New plant started up in 2005 (Guarantinguetá, Brazil) Boscalid global peak sales potential: 300 million Know-how Verbund leads to lower manufacturing costs for Boscalid
21 Verbund synergy example Top-100 raw materials* by value in 2010 in million from 3 rd parties 58% 340 million A.i. s sales share** from own production in % Generics 0% 25% 50% 75% * without tolling, formulants, packaging ** own estimates BASF peers from Verbund 42% BASF 100% Highest level of value capture in the industry Make/buy along Ag value chain Upstream: Back-integration security & flexibility of supply market-based transfer pricing Sourcing synergies economy of scale via joint BASF procurement Downstream: Highest level of in-house a.i. production vs. peer group Outsourcing: tollers are involved when economically attractive
22 Verbund synergy example Polymers in seed treatment products Improved effectiveness, seed flow and sowing Reduction of seed dusting Targeted use of modern low-dose chemistry First product launch in 2012 Know-how synergies Broad polymer portfolio and experience within BASF (properties, formulations, applications) Technology platform for development of differentiated seed treatment solutions untreated soybeans Seed treatment solutions with advantages for farmers through BASF polymer know-how treated soybeans
23 Profitability Crop Protection division Sales to 3 rd parties in billion 4.5 4.500 4.0 4.000 3.500 3.0 3.000 2.500 2.0 2.000 1.500 1.0 1.000 500 0 3-y- EBITDA 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 EBITDA margin* 2002 2004 2006 2008 2010 EBITDA 30% % 25% % target 20% % 15% % 10% % 5% 5 % 0% Crop Protection has delivered 3 year-average EBITDA margin has reached ~25% level Fluctuations due to weather, crop prices, foreign exchange rates Ongoing investments for further business expansion R&D and sales, especially in growth markets Capex * before Special Items. 2004 onwards according to IFRS. 2006 onwards excl. corporate cost ** under optimal conditions Crop Protection EBITDA margin target: 25%**
24 Summary and outlook Resilient industry, multiple sustained growth drivers Opportunities both in Crop Protection and Plant Biotechnology BASF s innovation strength allows for differentiating offer Integral part of the Verbund Determined to grow Agro: High R&D investments In-licensing (Meiji Seika Kaisha) Selective acquisitions (American Cyanamid, Sorex) Cooperations with strong partners (Monsanto, ) BASF is fully committed to Agricultural Solutions
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