Plastics Toward New Levels Of Performance - BASF

PlasticsToward new levels of performanceJohn Feldmann1

BASF’s Plastics segmentAgriculture &NutritionChemicals22%10%20%Oil & Gas24%19%Plastics Styrenics Performance Polymers PolyurethanesPerformanceProducts2006 Group sales*: 52.6 billion Euro*including other activities: 2.5 billion Euro (5%)2

BASF PlasticsA good mix of commodities and specialtiesStyrenics Styrene Polystyreneand copolymersPerformancePolymersPolyurethanes Polyamideintermediates Basic products Polyamides Special elastomers Systems Engineering Plastics Foams SpecialtiesElectric &Electronic3ConstructionPackagingElectric &ElectronicFootwearAutomotive

PlasticsThe material of choice for the 21st centuryShaping functionality and designEasy and efficient to convertDriving energy and resource efficiency4

Global consumption of plasticsin million to;annual growth rates14 2.9 % 6.3 % 4.2 estern EuropeGlobal Consumption1990:86 million to2006: 208 million to2015: 328 million to5Japan2547661990200620151362015AsiaGlobal Growth1990-2006: 5.5 % p.a.2006-2015: 5.0 % p.a.NAFTA

Per capita consumption of plasticsin kg;annual growth rates 5.5 %2 3.0 %198021342006 3.0 %2015Asia excl. Japan4010413619802006201546107140198020062015 2.0 %Western EuropeNAFTA509019802006Japan61082015

1 Plastics – our track record ofprofitable growth2 A strong portfolio based onperformance3 Toward new levels of performance7

PlasticsOn track to profitable growthSales inmillion EuroEBIT before specialitems in million 002001Styrenics8200220032004Performance Polymers20052006Polyurethanes Third consecutive yearof increased profitabilityMain drivers Portfolio optimizationwith focus on productsand solutions that offerdifferentiation potentialin their markets Reduction of complexityin commoditybusinesses Implementation ofdedicated customerinteraction models

Strong profitability growth EBIT grew significantlystronger than salesIndex Cost reduction throughoperational excellenceand 2002Fixed costs indexed(including depreciationand amortization)20032004Sales indexed20052006EBIT before specialitems indexed Drivers for improvement:– Significant highersales prices andmargins– High capacityutilization– Portfolio optimizationtoward highermargin products

Optimized portfoliotoward specialty businessSelected milestones in Plastics since 2001Major divestitures /closuresMajor investments Global network ofEngineering Plasticscompounding plants PU basic products(TDI, MDI, PO) Global network ofPU system houses Acquisitions inEngineering Plastics(Honeywell,LATI NAFTA,Leuna-Miramid,Ticona PA 6.6)10BASFPlastics Polyolefins (Basell) Fibers (Honeywell) Polystyrene NAFTA(INEOS)Powerfulpartnerships Dow (PU) Shell (SM/PO) Regional partners(e.g. Huntsman,Toray, Alfa) Closure of selectedstyrenics plants(PS, Spain;EPS, NAFTA;ABS, Netherlands)

1 Plastic – our track record ofprofitable growth2 A strong portfolio based onperformance3 Toward new levels of performance11

Balanced portfolio of chemical buildingblocs and higher value-added productsEstimate 2007 (in % of ls &basic materials12Customized solutions

Major plastic segmentsGrowth p.a. in %2006 – 2015BASF products, circle size consumption 2006Global markets 2006 Total plastics market:208 million to8PET(bulk) BASF relevant market:45 million to7PCMarket growth 2006-20156PBT5POMPA*EPSPPOHDPEPVC Annual consumption andproduction growth rateworldwide: 5%PURABSLDPE &LLDPE43PPPM M APA** Growth by major regions– Asia (excl. Japan): 6%– NAFTA: 3%– Europe: 3.5%PS205101520Share of global plastic consumption 2006 in %13* Engineering Plastics & Extrusion** Spin polyamides, accessible market25

Segmentation of global plastics market10highPURspecialtiesPerformance differentiationBASF products,circle size consumption 2006ASAPA*PCPPO5PUR basic productPMMAPOMPPPElow0Raw0materialcosts14PBTABSPS PET(bulk)EPSPA**PVC5 or pricing criteriaMain pricing elementsPerformance10* Engineering Plastics & Extrusion** Spin polyamides, accessible market

Basic and formulated materialsMain businesses Spin polyamides, polyamide intermediates Styrene, polystyrene, ABS, styrenic foams Polyurethane basic productsBASF relevant markets* Market size in 2006: 31 million to Market growth 2006-2015: 4% p.a.Research and Development 20 R&D projectsHow we succeed: Standard products atappropriate qualityand supply reliability Lowest cost providerwith minimumcomplexity Investments in best-inclass world-scaleplants Transactional pricing Supply/demandbalance* w/o Polyamide intermediates, Styrene15

Profitable growth in PU basic productsSupply / demand balance remains favorableGlobal capacityutilization in %Global capacityin kto1008000TDI utilization906000 Market growth2001-2005: 7% p.a.2006-2015: 5% p.a.855000 BASF volume growthMDI 00MDI BASF16 Rates above 90%indicate favorablemarket conditionsMDI othersTDI BASFFC 2010TDI others2001-2005: 13% p.a.2006-2015: above market Additional BASFcapacities 400 kto MDI in China2010 onwards(JV with partners) 300 kto TDI in Europe2011 onwards(JV with DOW)

Formulated materials andcustomized solutionsMain businesses Polyurethane systems and specialties Styrenic specialties Engineering PlasticsBASF relevant markets Market size in 2006: 14 million to Market growth 2006-2015: 5% p.a.Research and Development 50 R&D projectsHow we succeed: Constant flow ofinnovations forcustomers’ productsand processes Customized offerings withsuperior performance Very active sales forcewith high technicalexpertise Value pricing Opening up new horizonsfor plastics applications Close and fruitfulcooperation withcustomers17

Nanotechnology enables productinnovation in Engineering PlasticsUltradur High Speed – Increased flowability ofpolymer melt by 100% through nanoparticlesUltradur High Speed:completely filled mold 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 by220,000 to p.a. (assuming re-placement of allPBT plastics worldwide by Ultradur High Speed) Lower production costs for customersExpected sales in 2010: 25 million Euro18Standard polymer:only partially filled mold

Profitable growth through innovativemarketing approach in polyurethanesElastocool – Best insulation solutions for growingmarket of appliances Global product platform with regional production Dedicated marketing team focuses on customerswith global requirements and high volumes High performance products at very competitivecosts Global availability and logistical reliability Global partnership with local service contactExpected sales in 2010: 400 million Euro19

Styrenics specialty providingbreakthrough solution for body panelsPermaskin from Luran S – UV-resistant polymerbased on acrylic rubber, formed and adhesivelybonded to exterior body panels Cost effective use for weather resistant applicationswithout the need for painting and/or coating Excellent surface quality, maintenance free Enhanced surface protection for materialslike wood, PUR, metal, etc. Joint customer development with PermacoatExpected sales for body panels in 2010:50 million Euro20

Indexed margin comparisonin polyamide value chainBasic material:CaprolactamHigher value-added product:Engineering Plastics120upper bandwidth10080604021lower bandwidthaverage value 89standard deviation 18upper bandwidthMargin, indexedMargin, indexed120100lower bandwidth806040average value 103standard deviation 82020001996 1997 1998 1999 2000 2001 2002 2003 2004 2005 20061996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Shift to higher value-added productsas key to successShare of global salesvolumes indexed(year 2000 100)gineeringnEfoCA G Rs 05FC 20100Engineering Plastics22Intermediates (e.g. Caprolactam),spin polymers, fibers (only 2000) Shift from basic materialsto higher value-addedproducts Acquisition of selectedEngineering Plasticsbusinesses since 2003 Establishment of globalnetwork of specificcompounding facilities Intensifying partnershipswith customers at earlystages of product /application development Strengthening applicationdevelopment capabilities Focusing on innovativeconcepts and customersolutions

High share of PU specialties and systemsensure robustness and profitabilityComparison of top 3 players by sales volumesShare of annual sales100% Forward integration intoadditional marginbusiness80%60% Global network of 30 system houses40% More resilient to rawmaterials and basicproducts volatility20%BASFCompetitor 1Special elastomers23 BASF with highestshare of PU specialtiesand systems amongtop 3 playersCompetitor 2PU SystemsIndustryAverageBasic materials

1 Plastics – our track record ofprofitable growth2 A strong portfolio based onperformance3 Toward new levels of performance24

Ecovio FoamBio-degradable packaging foam25

Elastocoast Flexible Polyurethane protection for dikes along seashores26

Our strategy for profitable growth27Good position ingrowth marketsActive portfoliooptimizationExcellentinnovation platform Intensified exploitationof growth opportunitiesin markets andapplications that haveno or only limitedplastics experience Investments in newcapacities closely tied tomarket needs Close cooperation withcustomers Capex budget 20072011: 2.4 billion Euro Rigorous improvementof product portfolio tobetter serve futuremarket needs Focus on activitieswhich offerdifferentiation in themarket and profitablegrowth opportunities forBASF Divestiture ofbusinesses with lowdifferentiation potential Process innovation withleapfrog technologies Products andapplications developedwith customers R&D spendingaverage 2007-2011:150 million Euro p.a.

Targets Plastics 2010200628201019% of sales as customized solutionsÎ 30% of sales as customizedsolutionsEBIT after cost of capitalof 514 million EuroÎ Earning a premium on cost ofcapital

BASF PlasticsOur unique strengths Well balanced customer portfolio in all regions Innovative product portfolio with tendency to higher value-addedproducts Well positioned in commodity type businesses through lean businessmodels, partial backward integration and operational excellence Market leadership in specialties and systems through a customeroriented and innovation driven growth strategy Global network of state of the art production facilities, moderncompounding plants and superior system houses in all major marketsclose to our customers29

DisclaimerThis presentation contains forward-looking statements under the USPrivate Securities Litigation Reform Act of 1995. These statementsare based on current expectations, estimates and projections ofBASF management and currently available information. They arenot guarantees of future performance, involve certain risks anduncertainties that are difficult to predict and are based uponassumptions as to future events that may not prove to be accurate.Many factors could cause the actual results, performance orachievements of BASF to be materially different from those that maybe expressed or implied by such statements. Such factors includethose discussed in BASF’s Form 20-F filed with the Securities andExchange Commission. We do not assume any obligation to updatethe forward-looking statements contained in this presentation.30

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