Re-focussing Your Business to Meet the New World Order

Wayne T. Smith Member of the Board of Executive Directors

BASF SE

Re-focusing your business to meet the new world order Agenda

3

The new world order

Importance of strategy

“We create chemistry”

Consequences for BASF organization

Conclusion

Re-focusing your business to meet the new world order Agenda

4

The new world order

Importance of strategy

“We create chemistry”

Consequences for BASF organization

Conclusion

Increasing speed and uncertainty Innovation rates and competitiveness are unprecedented

Will Windows 8 change the game?

“Facebook tops 1 billion users” (USA today, Oct. 4, 2012)

Will Facebook succeed in a mobile world? 5

32,6

16,9 6,6

43,8 Samsung Apple Nokia others

Smartphone market shares (in %) Q2, 2012

-200

300

800

2008 2009 2010 2011 2012 (Q3)

Profit (mio USD)

“Analysts predict Nokia will command 40% of the market by 2nd half of 2007” (Dealbreaker, Aug. 2, 2007)  

1992 1997 2002 2007 2012 0

100 200 300 400 500

Wheat (USD/metric ton)

Volatility is the new normal

Oil (USD/barrell)

Raw sugar (USD cent/lb) Cotton (USD cent/lb)

1992 1997 2002 2007 2012 0

40 80

120 160

1992 1997 2002 2007 2012 0

50 100 150 200 250

6

1992 1997 2002 2007 2012 0

10 20 30 40

Production of passenger cars and Light Commercial Vehicles (in million units)

United States

Western Europe Japan

Source: LMCA

“New World” producers*

* Brazil, Russia, India, China, S. Korea, Thailand

Production 2005

11.5 16.0

14.8

10.5

Production 2011

14.0

31.8

8.0

Production in 2020 (estim.)

15.9

63.0

9.5

8.4 12.1

Emerging markets are leading the way example: Automotive OEM production

7

Food & Nutrition Quality of life Resources, Environment & Climate

Nine billion people in 2050 but only one earth

8

Sustainable development is a necessity

1992 1997 2002 2007 2012 0

300 600 900

1200 1500

1992 1997 2002 2007 2012 0

200 400 600

Natural gas (USD/1000 m³)

1992 1997 2002 2007 2012 0

250 500 750

1000 1250 Naphtha (USD/t)

Volatility in chemical markets

Palm oil (USD/t)

9

Oil and Gas

Commodity Chemicals

Specialty Chemicals

Pharma- ceuticals

Agrochemicals/ Biotechnology

Petro- chemicals

In the 80s

Dow

BASF

ICI

Bayer DuPont

Hoechst

Changing competitive landscape

10

New player

New player

Today

Dow

BASF

Clariant

Sanofi Aventis

Ticona, Celanese

Conoco

Invista

DuPont Syn- genta

Astra, Zeneca

Akzo

Lanxess

Bayer

Reliance

LBI Sabic

Ineos New

player

For- mosa

New player

New player

Re-focusing your business to meet the new world order Agenda

Importance of strategy

“We create chemistry”

Consequences for BASF organization

Conclusion

The new world order

11

Three years is a lifetime!

12

BASF “We Create Chemistry”

Regional strategies

Strategic Business Units & Industry strategies

Strategy development and consequent implementation monitoring

BASF Strategy Pyramid Importance of strategy becomes even more critical

13

Three years is a lifetime!

14

0

40

80

120

1980 1985 1990 1995 2000 2005 2010 2015 2020

Do we believe in the fundamentals of an industry? Example Automotive

Source: LMCA

Global annual car production (in million)

15

CAGR 3%

0

40

80

120

1980 1985 1990 1995 2000 2005 2010 2015 2020

Do we believe in the fundamentals of an industry? Example Automotive

Source: LMCA

Global annual car production (in million)

16

CAGR 3%

0

40

80

120

1980 1985 1990 1995 2000 2005 2010 2015 2020

Do we believe in the fundamentals of an industry? Example Automotive

Source: LMCA

Global annual car production (in million)

17

CAGR 3%

0

40

80

120

1980 1985 1990 1995 2000 2005 2010 2015 2020

Do we believe in the fundamentals of an industry? Example Automotive

Source: LMCA

Global annual car production (in million)

18

CAGR 3%

CAGR ~5%

forecast

Re-focusing your business to meet the new world order Agenda

“We create chemistry”

Consequences for BASF organization

Conclusion

The new world order

19

Importance of strategy

“We create chemistry” strategy

Nine billion people in 2050 but only one earth

Chemistry as enabler

Growth of chemical production above GDP

60% of chemical production in emerging countries

Sustainability and innovation as main driver

Innovation focus on materials & solutions

“We create chemistry” strategy

Nine billion people in 2050 but only one earth

21

Chemistry as enabler

Growth of chemical production above GDP

60% of chemical production in emerging countries

Sustainability and innovation as main driver

Innovation focus on materials & solutions

“We create chemistry” strategy

Nine billion people in 2050 but only one earth

22

Innovation Campus Shanghai

Target to

n  double sales from 2009 to 2020 to 29 billion EUR

n  match sales with 70% of regional manufacturing

n  Asia Pacific as strong hub in our global R&D network

n  25% of R&D headcount in Asia Pacific (2020)

Nanjing

Emerging markets – BASF Asia Pacific region

23

Kuantan

24

n  Chemistry as key enabler for functionalized materials & solutions

n  Deep understanding of customer value chains required

New molecules

Improved applications

Functionalized materials &

solutions

1960 1970 1980 1990 2000 2010 2020

Batteries, membranes ...

Moving downstream toward customer industries

Increased innovation focus on materials and solutions

Sustainability and innovation as key growth drivers

25

Wind  

Solar panels

Crop Science

Advanced battery materials Insulation  

Emission control

Re-focusing your business to meet the new world order Agenda

Consequences for BASF organization

Conclusion

The new world order

26

Importance of strategy

“We create chemistry”

New structure supports our “We create chemistry” strategy

27

Janu

ary

2013

Intermediates

e.g. Amines

e.g. TDI

e.g. Monomers

e.g. Epoxy Systems

e.g. PU Systems

e.g. Ultramid

Clear separation of business models

Monomers Petrochemicals

Performance Materials

Industry focus Product focus

toda

y

Petrochemicals

Inorganics

Intermediates

Polyurethanes

Performance Polymers

Classical Chemicals Functionalized Materials & Solutions

Re-focusing your business to meet the new world order Agenda

Conclusion

The new world order

28

Importance of strategy

“We create chemistry”

Consequences for BASF organization

Conclusion

The new world order

29

The role of the chemical industry: “Chemistry will be the enabler for sustainable growth“

Increasing  speed  

High  vola2lity  

Growth  in  emerging    markets  

Sustainability  as  growth  driver  

The importance of strategy: “Stay the course, but ensure short-term flexibility”