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Strategy Agricultural Products Hans W. Reiners President Agricultural Products Division August 2005

Strategy Agricultural Products - BASF...Corn, Non-crop Soybeans 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops 3 Fungicides 1 Insecticide Non-crop 3 Herbicides Cereals,

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Page 1: Strategy Agricultural Products - BASF...Corn, Non-crop Soybeans 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops 3 Fungicides 1 Insecticide Non-crop 3 Herbicides Cereals,

Strategy Agricultural Products

Hans W. Reiners PresidentAgricultural Products Division

August 2005

Page 2: Strategy Agricultural Products - BASF...Corn, Non-crop Soybeans 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops 3 Fungicides 1 Insecticide Non-crop 3 Herbicides Cereals,

1 | Agricultural Products Strategy Delivers Results

2 | Half-Year 2005 Performance

3 | Setting the Benchmark in Customer Satisfaction, Innovation and Profitability

Page 3: Strategy Agricultural Products - BASF...Corn, Non-crop Soybeans 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops 3 Fungicides 1 Insecticide Non-crop 3 Herbicides Cereals,

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Pipeline

BASFTheChemicalCompany

Strategy:Focus on high-value• Markets• Products• Innovation

ProfitabilityProfitability

CustomerSatisfaction

PipelineProfitability

CustomerSatisfaction

Pipeline

Success intoday‘s and tomorrow‘s

agro markets

BASF – Top Player in Agricultural Products

Page 4: Strategy Agricultural Products - BASF...Corn, Non-crop Soybeans 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops 3 Fungicides 1 Insecticide Non-crop 3 Herbicides Cereals,

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Our Strategy of Profitable Growth at Work Targets and Strategic Measures

• Profitable growth with new and innovative products

• Active cost optimization

• Strict asset management

We defined clear measures

* before special items

EBITDA*Margin

Assets

We set clear targets

Page 5: Strategy Agricultural Products - BASF...Corn, Non-crop Soybeans 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops 3 Fungicides 1 Insecticide Non-crop 3 Herbicides Cereals,

5

0

25

50

75

2001 2002 2003 2004

Inventories

Accounts receivable

Joint efforts with our channel partners

• Sell closer to the planting season

• Reduce payment terms

• Reduce channel inventories

By further improving internal processes

• Reducing manufacturing lead times

• Increasing manufacturing efficiency

We Reduced Working Capital by One-ThirdStrict Asset Management

In % of sales (year-end)

Page 6: Strategy Agricultural Products - BASF...Corn, Non-crop Soybeans 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops 3 Fungicides 1 Insecticide Non-crop 3 Herbicides Cereals,

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US Channel inventoriesat season-end September 30

Brazil Channel inventoriesat season-endMarch 31

Bar: million USDLine: in % of BASFseasonal net sales

• 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

We Cleaned Up Channel Inventories

Million USD250

2000/01 2001/02 2002/03 2003/040

20%

40%

0%

200

150

100

50

160

230

~90

~30

2001/02 2002/03 2003/04 2004/050 0%

25%

50%

100

50

130

Million USD

Page 7: Strategy Agricultural Products - BASF...Corn, Non-crop Soybeans 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops 3 Fungicides 1 Insecticide Non-crop 3 Herbicides Cereals,

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We Have Exited 12 Sites Since 2001 Asset and Cost Optimization

EXITResearch sites and experimental stations

A.I. manufacturing and formulation sites

2002

2002

2001

2005

2005

2005

2002 2002

2003

2003

2002

2002

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Following the acquisition of American Cyanamid, we achieved cost improvements of more than 400 million EUR since 2001Corporate:• Realized synergiesR&D:• Reduced unproductive

infrastructure costs• Refocused R&D activitiesM&S:• Realized synergies• Increased focusOperations:• Site exits and site

consolidation• Process and sourcing

improvementsWe continue to reduce costs, especially in operations2001 2002 2003 2004

We Actively Reduced Costs in All Areas Strict Cost Management

0 50 100 150

Operations

Sales andMarketing

R&D

Corporate

Cost reduction in million EUR

Page 9: Strategy Agricultural Products - BASF...Corn, Non-crop Soybeans 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops 3 Fungicides 1 Insecticide Non-crop 3 Herbicides Cereals,

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• 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

We Increased Sales in Strategic MarketsFocus on High-Value Markets

Page 10: Strategy Agricultural Products - BASF...Corn, Non-crop Soybeans 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops 3 Fungicides 1 Insecticide Non-crop 3 Herbicides Cereals,

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* Currency adjusted to 2004

552

98

1,196

2,8083,354

2001* Productportfolio rational./reduction

Divestitures Acquisition,product pipeline, product lifecycle innovation

2004

We Increased Sales with New Products Focus on High-Value Products

• 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

Million EUR

Page 11: Strategy Agricultural Products - BASF...Corn, Non-crop Soybeans 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops 3 Fungicides 1 Insecticide Non-crop 3 Herbicides Cereals,

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We Successfully Launched Our PipelineFocus on High-Value Innovations

• Youngest portfolio in the industry

• Introduced seven new active ingredients since 2000

Fungicides:Boscalid, Dimoxystrobin, F 500

Herbicides:Dimethenamid-P, Picolinafen, Tritosulfuron

Insecticide:Chlorfenapyr

Sales of pipeline products in million EUR

500

1,000

2001 2002 2003 2004 2005 +

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Our Strategy of Profitable Growth Works Targets and Achievements

* before special items

EBITDA*Margin(in % of

net sales)

Assets(in billion EUR)

2002 2003** 2004** ***** including acquired

fipronil package***IFRS adjusted

16.2

28.0

21.3

2005 goal of 25% set in 2002

18.9

5.15.5

5.0

6.4

2001

Page 13: Strategy Agricultural Products - BASF...Corn, Non-crop Soybeans 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops 3 Fungicides 1 Insecticide Non-crop 3 Herbicides Cereals,

1 | Agricultural Products Strategy Delivers Results

2 | Half-Year 2005 Performance

3 | Setting the Benchmark in Customer Satisfaction, Innovation and Profitability

Page 14: Strategy Agricultural Products - BASF...Corn, Non-crop Soybeans 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops 3 Fungicides 1 Insecticide Non-crop 3 Herbicides Cereals,

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-3

+16

+7

-3

in €?%

24.0%28.5%EBIT*-margin

+12632679EBITDA*

30.8%33.9%EBITDA*-margin

+85,6935,540Assets

+21493571EBIT*

+22,0542,002Sales

in $?%

1 HY2004

1 HY2005

Agricultural Products Division PerformsOverview of Half-Year 2005 Performance

* before special items

In million EUR

Exchange Rate: 1 HY 2004: US$/€ = 1.227 1 HY 2005: US$/€ = 1.286

Page 15: Strategy Agricultural Products - BASF...Corn, Non-crop Soybeans 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops 3 Fungicides 1 Insecticide Non-crop 3 Herbicides Cereals,

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Agricultural Products Division Performs Sales Development by Region

-34-37259163South America

+1-4999960Europe

-3

+1

+13

in €?%

+2

+5

+18

in $?%

2,0542,002TOTAL

142143Asia-Pacific

654736NAFTA

1 HY2004

1 HY2005

Exchange Rate: 1 HY 2004: US$/€ = 1.227 1 HY 2005: US$/€ = 1.286

In million EUR

Page 16: Strategy Agricultural Products - BASF...Corn, Non-crop Soybeans 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops 3 Fungicides 1 Insecticide Non-crop 3 Herbicides Cereals,

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2,054

418

775

861

1 HY2004

-3

-11

+4

-4

in € ?%

+2

-7

+9

+0

in $?%

372Insecticides/Other

2,002TOTAL

805Fungicides

825Herbicides

1 HY2005

Agricultural Products Division Performs Sales Development by Product Group

Exchange Rate: 1 HY 2004: US$/€ = 1.227 1 HY 2005: US$/€ = 1.286

In million EUR

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Agricultural Products Division Performs2005 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.

Page 18: Strategy Agricultural Products - BASF...Corn, Non-crop Soybeans 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops 3 Fungicides 1 Insecticide Non-crop 3 Herbicides Cereals,

1 | Agricultural Products Strategy Delivers Results

2 | Half-Year 2005 Performance

3 | Setting the Benchmark in Customer Satisfaction, Innovation and Profitability

Page 19: Strategy Agricultural Products - BASF...Corn, Non-crop Soybeans 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops 3 Fungicides 1 Insecticide Non-crop 3 Herbicides Cereals,

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We Set New Benchmarks

Benchmark in• Customer Satisfaction• Innovation• Profitability

Page 20: Strategy Agricultural Products - BASF...Corn, Non-crop Soybeans 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops 3 Fungicides 1 Insecticide Non-crop 3 Herbicides Cereals,

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We Set Benchmark inCustomer Satisfaction

Country

BASF in the eye of our customers:

Year 2004/5Year 2001USA #3 #1

Brazil n.a.France #5Germany #1 #1UK #2 #1Italy #2 #1Japan #9

#1#1

#7Source: Various independent customer satisfaction studiesStratus (USA), A Granja (Brazil), Eider (France), DLG (Germany), B2C (UK), CIF (Italy), Crecon (Japan)

We build on strong relationships withour customers

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Source: PhilipsMcDougall and own estimates. Based on 2004 sales of crop protection products.

Competitors

Sales of patented actives in % of total company sales:

A B C

• 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

We have the Best Patent Protected PortfolioSuccessful Portfolio Management

0%

50%

100%

BASF

Patent Off-Patent

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F 500® fungicide

• Becoming the leading fungicide in the world

• Expect 2005 sales of F 500®-based productsto surpass 400 million EUR target, set inSeptember 2004

• Upgrade sales target for F 500® products againby 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 than150 million EUR

We Launch Agro Innovations Successfully Successful Product Innovation

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We Set the Benchmark in Innovation Profitable Growth Through Powerful Late Stage R&D Pipeline

Specialty Crops1 Insecticide

Corn, Non-crop

Soybeans

2 Herbicides

1 Herbicide tolerance

Cereals, Rice, Specialty Crops

3 Fungicides

Non-crop1 Insecticide

Cereals, Corn3 Herbicides

Cereals, Soybeans, Specialty Crops

3 Fungicides

Peak Sales Potential

Major Crops/MarketsProjectsStage

*Almost 60% thereof reached in 2004. Products in launch have developed better than initial forecasts

InLaunch

InDevelop-

ment

1,100 MillionEUR*

700 MillionEUR

Page 24: Strategy Agricultural Products - BASF...Corn, Non-crop Soybeans 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops 3 Fungicides 1 Insecticide Non-crop 3 Herbicides Cereals,

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New insecticide – Metaflumizone

• 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

We Develop New Insecticide Mode of Action Emerging Technology: Metaflumizone* Insecticide

* Provisionally approved common name

Untreated Potato

Treated Potato

Page 25: Strategy Agricultural Products - BASF...Corn, Non-crop Soybeans 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops 3 Fungicides 1 Insecticide Non-crop 3 Herbicides Cereals,

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New Fungicide – expected to become a blockbuster

• Fourth generation of fungicides

• Broad range of solutions for effective andlong-lasting control of fungal diseases

• Strongly complementary to the currently available chemistry

• New technology to be launched by 2009/10

We Develop New Fungicide Mode of Action Emerging Technology

Without treatment

BASF new technology

Page 26: Strategy Agricultural Products - BASF...Corn, Non-crop Soybeans 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops 3 Fungicides 1 Insecticide Non-crop 3 Herbicides Cereals,

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Innovation is the critical success factor inthe agrochemical market

We Invest in New TechnologiesStrong Commitment to Agrochemical R&D

Development ì• 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 ì• Further strengthening discovery of novel

fungicides and insecticides• Exploring new opportunities, such as in Plant

Health

2003 2007

Research

Develop-ment

7.5%of sales

9–10%of sales

Page 27: Strategy Agricultural Products - BASF...Corn, Non-crop Soybeans 2 Herbicides 1 Herbicide tolerance Cereals, Rice, Specialty Crops 3 Fungicides 1 Insecticide Non-crop 3 Herbicides Cereals,

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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

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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 tobe 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 includethose 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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