1 Plastics Toward new levels of performance John Feldmann
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Agriculture & Nutrition
Performance Products
19%Plastics• Styrenics• Performance Polymers• Polyurethanes
24%
Chemicals
Oil & Gas20%
10%22%
*including other activities: 2.5 billion Euro (5%)
2006 Group sales*: 52.6 billion Euro
BASF’s Plastics segment
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Styrenics
• Styrene
• Polystyrene and copolymers
• Foams
• Specialties
Performance Polymers
• Polyamide intermediates
• Polyamides
• Engineering Plastics
Polyurethanes
• Basic products
• Systems
• Special elastomers
BASF PlasticsA good mix of commodities and specialties
AutomotiveElectric & Electronic PackagingConstruction Footwear
Electric & Electronic
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Plastics The material of choice for the 21st century
Easy and efficient to convert
Shaping functionality and design
Driving energy and resource efficiency
5
Global consumption of plastics
24 41 53
Western Europe
1990 2006 2015
NAFTA
1990 2006 2015
Global Growth1990-2006: +5.5 % p.a. 2006-2015: +5.0 % p.a.
25 47 66
Asia
1990 2006 2015
75 136
Japan
Asia excl. Japan
1410
11
14
+2.9 % +6.3 % +4.2 %
Global Consumption1990: 86 million to2006: 208 million to 2015: 328 million to
in million to; annual growth rates
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50 90 108
40 104 136
Western Europe
1980 2006 2015
Japan
1980 2006 2015
2 3421
Asia excl. Japan
1980 2006 2015
46 107 140
NAFTA
1980 2006 2015
+2.0 %
+5.5 %
+3.0 %+3.0 %
Per capita consumption of plastics
in kg; annual growth rates
1 | Plastics – our track record of profitable growth
2 | A strong portfolio based on performance
3 | Toward new levels of performance
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8
Plastics On track to profitable growth
0
2000
4000
6000
8000
10000
12000
2001 2002 2003 2004 2005 20060
200
400
600
800
1000
1200
• Third consecutive year of increased profitability
Main drivers• Portfolio optimization
with focus on products and solutions that offer differentiation potential in their markets
• Reduction of complexity in commodity businesses
• Implementation of dedicated customer interaction models
Sales in million Euro
EBIT before special items in million Euro
PolyurethanesStyrenics Performance Polymers
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Strong profitability growth
0
100
200
300
400
500
600
700
2001 2002 2003 2004 2005 2006
Index
Fixed costs indexed (including depreciation and amortization)
• EBIT grew significantly stronger than sales
• Cost reduction through operational excellence and relentless restructuring
• Drivers for improvement:– Significant higher
sales prices and margins
– High capacity utilization
– Portfolio optimization toward higher margin products
EBIT before special items indexed
Sales indexed
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Selected milestones in Plastics since 2001
Major investments
• Global network of Engineering Plastics compounding plants
• PU basic products (TDI, MDI, PO)
• Global network of PU system houses
• Acquisitions in Engineering Plastics (Honeywell, LATI NAFTA, Leuna-Miramid, Ticona PA 6.6)
Major divestitures / closures
BASF Plastics
Optimized portfolio toward specialty business
• Polyolefins (Basell)• Fibers (Honeywell)• Polystyrene NAFTA
(INEOS)• Closure of selected
styrenics plants (PS, Spain; EPS, NAFTA; ABS, Netherlands)
Powerful partnerships
• Dow (PU)• Shell (SM/PO)• Regional partners
(e.g. Huntsman, Toray, Alfa)
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1 | Plastic – our track record of profitable growth
2 | A strong portfolio based on performance
3 | Toward new levels of performance
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Balanced portfolio of chemical building blocs and higher value-added products
75%
Chemicals & basic materials Customized solutions
64%
36%
Formulated materials
Estimate 2007 (in % of sales)
19%
50%
31%
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Major plastic segments
PS
EPSABS
PA*
PCPBT
POM
PPO
PMMA
PET(bulk)
PUR
PA**
2
3
4
5
6
7
8
0 5 10 15 20 25
Share of global plastic consumption 2006 in %
Growth p.a. in %2006 – 2015
PPPVC
HDPE
LDPE &LLDPE
Global markets 2006
• Total plastics market: 208 million to
• BASF relevant market: 45 million to
Market growth 2006-2015
• Annual consumption and production growth rate worldwide: 5%
• Growth by major regions– Asia (excl. Japan): 6%– NAFTA: 3%– Europe: 3.5%
BASF products, circle size = consumption 2006
* Engineering Plastics & Extrusion** Spin polyamides, accessible market
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PS
EPS ABS
PA*
PC
PBT
POM
PPO
PMMA
PET(bulk)
PUR basic product
ASA
PUR specialties
PA**
0
5
10
0 5 10
PEPVC
PP
Main pricing elements or pricing criteria
Perf
orm
ance
diff
eren
tiatio
n
high
low
Raw material costs
Performance
Segmentation of global plastics market
BASF products, circle size = consumption 2006
* Engineering Plastics & Extrusion** Spin polyamides, accessible market
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Basic and formulated materials
Main businesses• Spin polyamides, polyamide intermediates• Styrene, polystyrene, ABS, styrenic foams• Polyurethane basic products
BASF relevant markets*• Market size in 2006: 31 million to• Market growth 2006-2015: ~4% p.a.
Research and Development• > 20 R&D projects
* w/o Polyamide intermediates, Styrene
How we succeed:• Standard products at
appropriate quality and supply reliability
• Lowest cost provider with minimum complexity
• Investments in best-in- class world-scale plants
• Transactional pricing• Supply/demand
balance
16
60
65
70
75
80
85
90
95
100
0
1000
2000
3000
4000
5000
6000
7000
8000
Profitable growth in PU basic products Supply / demand balance remains favorable
Global capacity in kto
Global capacity utilization in %
MDI BASF MDI others TDI BASF TDI others
MDI utilizationTDI utilization
• Rates above 90% indicate favorable market conditions
• Market growth 2001-2005: ~7% p.a. 2006-2015: ~5% p.a.
• BASF volume growth 2001-2005: ~13% p.a. 2006-2015: above market
• Additional BASF capacities
+ 400 kto MDI in China 2010 onwards (JV with partners)
+ 300 kto TDI in Europe 2011 onwards (JV with DOW)
2000 2006 FC 2010
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Formulated materials and customized solutions
Main businesses• Polyurethane systems and specialties• Styrenic specialties• Engineering Plastics
BASF relevant markets• Market size in 2006: 14 million to• Market growth 2006-2015: ~5% p.a.
Research and Development• >50 R&D projects
How we succeed:• Constant flow of
innovations for customers’ products and processes
• Customized offerings with superior performance
• Very active sales force with high technical expertise
• Value pricing• Opening up new horizons
for plastics applications• Close and fruitful
cooperation with customers
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Nanotechnology enables product innovation in Engineering Plastics
Ultradur® High Speed – Increased flowability ofpolymer melt by 100% through nanoparticles• High level of material properties is retained• Reduction of cycle time in production (by 30%)
and defect rate (to 0%)• Potential reduction of global CO2 emissions by
220,000 to p.a. (assuming re-placement of all PBT plastics worldwide by Ultradur® High Speed)
• Lower production costs for customers
Expected sales in 2010: 25 million Euro
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Ultradur® High Speed: completely filled mold
Standard polymer: only partially filled mold
1919
Elastocool® – Best insulation solutions for growingmarket of appliances
• Global product platform with regional production• Dedicated marketing team focuses on customers
with global requirements and high volumes• High performance products at very competitive
costs• Global availability and logistical reliability
• Global partnership with local service contact
Expected sales in 2010: 400 million Euro
Profitable growth through innovative marketing approach in polyurethanes
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Styrenics specialty providing breakthrough solution for body panels
Permaskin® from Luran® S – UV-resistant polymerbased on acrylic rubber, formed and adhesivelybonded to exterior body panels
• Cost effective use for weather resistant applications without the need for painting and/or coating
• Excellent surface quality, maintenance free• Enhanced surface protection for materials
like wood, PUR, metal, etc.• Joint customer development with Permacoat
Expected sales for body panels in 2010: 50 million Euro
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0
20
40
60
80
100
120
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
upper bandwidth
average value = 89standard deviation = 18
lower bandwidth
0
20
40
60
80
100
120
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
upper bandwidth
average value = 103standard deviation = 8
lower bandwidth
Indexed margin comparison in polyamide value chain
Basic material:Caprolactam
Higher value-added product:Engineering Plastics
Mar
gin,
inde
xed
Mar
gin,
inde
xed
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Shift to higher value-added products as key to success
020406080
100120140
2000 2005 FC 2010
Share of global sales volumes indexed (year 2000 = 100)
Intermediates (e.g. Caprolactam), spin polymers, fibers (only 2000)
Engineering Plastics
• Shift from basic materials to higher value-added products
• Acquisition of selected Engineering Plastics businesses since 2003
• Establishment of global network of specific compounding facilities
• Intensifying partnerships with customers at early stages of product / application development
• Strengthening application development capabilities
• Focusing on innovative concepts and customer solutions
41%
59%
70%
30%
60%
40%
CAGR of Engineering
Plastics 9%
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High share of PU specialties and systems ensure robustness and profitability
Share of annual sales
• BASF with highest share of PU specialties and systems among top 3 players
• Forward integration into additional margin business
• Global network of >30 system houses
• More resilient to raw materials and basic products volatility
BASF Competitor 1 Competitor 2 Industry Average
Comparison of top 3 players by sales volumes
Special elastomers PU Systems Basic materials
100%
40%
60%
80%
20%
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1 | Plastics – our track record of profitable growth
2 | A strong portfolio based on performance
3 | Toward new levels of performance
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Active portfoliooptimization
• Rigorous improvement of product portfolio to better serve future market needs
• Focus on activities which offer differentiation in the market and profitable growth opportunities for BASF
• Divestiture of businesses with low differentiation potential
Excellentinnovation platform
• Process innovation with leapfrog technologies
• Products and applications developed with customers
• R&D spending average 2007-2011: 150 million Euro p.a.
Good position ingrowth markets
• Intensified exploitation of growth opportunities in markets and applications that have no or only limited plastics experience
• Investments in new capacities closely tied to market needs
• Close cooperation with customers
• Capex budget 2007- 2011: 2.4 billion Euro
Our strategy for profitable growth
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Targets Plastics 2010
2006 201019% of sales as customized solutions > 30% of sales as customized
solutions
EBIT after cost of capital of 514 million Euro
Earning a premium on cost ofcapital
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BASF Plastics Our unique strengths
• Well balanced customer portfolio in all regions
• Innovative product portfolio with tendency to higher value-added products
• Well positioned in commodity type businesses through lean business models, partial backward integration and operational excellence
• Market leadership in specialties and systems through a customer oriented and innovation driven growth strategy
• Global network of state of the art production facilities, modern compounding plants and superior system houses in all major markets close to our customers
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Disclaimer
This presentation contains forward-looking statements under the US Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict and are based upon assumptions as to future events that may not prove to be accurate.
Many factors could cause the actual results, performance or achievements of BASF to be materially different from those that may be expressed or implied by such statements. Such factors include those discussed in BASF’s Form 20-F filed with the Securities and Exchange Commission. We do not assume any obligation to update the forward-looking statements contained in this presentation.
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Glossary
• ABS acrylonitrile-butadiene-styrene copolymer (BASF brand Terluran®) offers superior surface quality, mechanical properties and chemical resistance; applications include electrical and electronic equipment and automotive components.
• ASA acrylonitrile-styrene-acylate copolymer (Luran® S); resistant to weathering, aging and chemicals; primary applications include exterior automotive components, electrical and electronic equipment.
• EPS expandable polystyrene (Styropor® and Neopor®); advantages include heat insulation, low weight and moisture resistance; primary applications include building insulation and packaging.
• MDI diphenylmethane diisocyanate is a versatile isocyanate that can be used to make flexible foams as well as semi-rigid and rigid polyurethane plastics; applications include furniture interiors, automotive components and shoe soles.
• PA polyamide (nylon) 6 and 6.6 (Ultramid®) offers toughness and strength as well as heat and chemical resistance; applications include automotive engine intake manifolds and flame retardant plastics for electrical components such as switches.
• PBT polybutylene terephthalate (Ultradur®); engineering plastic with high stiffness, strength, dimensional stability and heat and aging resistance; applications include electrical connectors and automotive components.
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Glossary (continued)
• PO propylene oxide, raw material for polyols which are combined with isocyanates to make polyurethanes.
• POM polyoxymethylene (Ultraform®); engineering plastic with high stiffness, strength, resilience and low wear; applications include clips and fasteners as well as mechanical and precision engineering devices such as shafts and gears.
• PS polystyrene; mainly used in packaging and household appliances.
• PU, PUR polyurethanes offer a wide variety of applications, e.g. seats, steering wheels, fenders, and dashboards in automotive.
• SM styrene monomer
• TDI toluene diisocyanate is an isocyanate used primarily in the manufacture of flexible foams; applications include foam cushions for furniture and automotive components.
• to metric ton