Catalysts Moving on the fast track Wayne T. Smith 1
Estimated growth rates 2007-2012: Global chemical market growth: 3% Catalysts market growth: 5% BASF Catalysts growth target: 7% Maintain high margins! 2
BASF: The #1 global catalyst supplier Chemicals Inorganics Catalysts Petrochemicals Intermediates 8% 24% 10% Agricultural Products & Nutrition Customer-focused, technology-driven businesses Global R&D, manufacturing presence Approx. 5,000 employees 23% 20% Oil & Gas Plastics 19% Performance Products 3 Q1 2007 Group sales: 14.6 billion Euro* *including other activities: 624 million Euro (4%)
What does a catalyst do? Ludwigshafen Alps Venice energy reactants Reaction pathway products 4
What does a catalyst do? Ludwigshafen Tunnel Venice energy reactants Reaction pathway products 5
1 BASF Catalysts moving on the fast track 2 Leading position in fast growing markets 3 Toward new levels of performance 6
Combining the strengths of two catalyst pioneers BASF a pioneer in industrial catalysis History BASF ammonia synthesis is key milestone for chemical industry Today 85% of all chemical processes use catalysts Leader in chemical process efficiency Engelhard a pioneer in emission-control catalysis History introduction of first three-way catalyst for automobiles Long-standing expertise in precious metal markets World s leading catalyst supplier for automotive, refinery, polyolefin and chemical industry BASF today: #1 position in global catalyst market 7
expanding the world s leading catalyst business Technology position Leading catalyst position by combining complementary technology portfolios, paired with global marketing capability Merging powerful R&D capabilities to exploit technological synergies Market attractiveness High growth, high profitability Innovation-driven High barriers to entry Lower volatility in earnings contributing to lower cyclicality for BASF Strategic fit for BASF enhancing profitable growth 8
Driving a successful integration Key Engelhard integration achievements Organizational realignment and headquarters consolidation completed Successful retention of key personnel 800 headcount reduction on track Ahead of targeted 160 million Euro annual synergies* Over 50% of cost synergies to be realized through 2007 and over 80% through 2008 Maintaining catalyst market focus Approved investments of 110 million Euro to serve highly attractive, growing markets Operational performance exceeding expectations to date 9 * Full synergies expected to be realized by 2010 (includes 40 million Euro annual top-line growth)
1 BASF Catalysts moving on the fast track 2 Leading position in fast growing markets 3 Toward new levels of performance 10
Catalysts portfolio focused on customer solutions Emission-control catalysts Emission-control catalysts for cars, trucks and motorcycles Refinery catalysts Catalysts and additives for fluidized bed catalytic cracking in oil refining Chemical catalysts Chemical and polyolefin catalysts Adsorbents Materials Services supports precious metal-based catalyst businesses 11
#1 position in global catalyst market BASF market share in strategically relevant markets (excl. precious metals) #1 in emission-control catalysts #1 in chemical catalysts #3 in refinery catalysts xx% BASF + 22% BASF JVs Others (combined) 12
Extensive knowledge of precious metal markets Supplier information (mining companies) Other precious metal consumers (e.g. industrial, jewelry) Trading counterparts External Information BASF Materials Services 40-50% of total Catalyst division sales ~ 2% EBITDA margin Internal Information Platinum, palladium, rhodium, etc. Precious metal pricing trend, hedging and trading expertise Engelhard Price for Platinum quoted daily on London Metal Exchange Market-driven R&D through constant feedback of precious metal trends Demand in automotive and chemical industry Future demand due to novel technologies (R&D) 13
Catalyst demand driven by global trends Increasing energy costs More efficient usage of crude oil, gas, coal and chemical feedstocks Raw material change Tightening clean air regulations Transportation Industry Emerging technologies Nanotechnology 14
Targeting over two times chemical market growth Strategically relevant markets in billion Euro 10.0 CAGR* = 5% 7.5% 12.9 5.3 Market Estimated growth rates 2007-2012: Global chemical market: 3% Catalysts market**: 5% 3.7 2.5 3.8 4.0% 4.0% 3.0 4.6 BASF Catalysts Growth target (2007-2012): 7% Maintain high margins! 2007 2012 Chemical catalysts Refinery catalysts Emission-control catalysts * Compound annual growth rate ** Market figures excluding precious metals 15
1 BASF Catalysts moving on the fast track 2 Leading position in fast growing markets 3 Toward new levels of performance 16
Key growth elements in place Unmatched technology position Powerful partnerships Outstanding market dynamics 17
Achieve long-term technology leadership through R&D Former Engelhard s R&D fully integrated into BASF s established global technology platform Centers of excellence for core technologies strengthened Expanded cooperation with innovative customers Chemical catalysis expertise harnessed for all BASF customers and operating divisions using catalysts Ludwigshafen Our more than 2,000 researchers in Chemicals Research and Engineering, including 600 catalyst experts worldwide, form the best R&D team in the industry Iselin 18
Exploit catalysts leverage potential for process technologies Catalyst performance drives manufacturing costs Catalyst performance determines overall production plant investment Strong customer partnerships High entry barrier for new players 19
Introduce next generation products in refinery catalysts Crude oil FCC process in refinery Gasoline & diesel New NaphthaMax II TM & Flex-Tec for Fluid Catalytic Cracking (FCC) Refinery yield increase by 1.2 volume % vs. industry benchmark 60,000 gallons additional fuel per day for average size refinery ~ 15 million USD additional annual refinery profit 20
Key growth elements in place Unmatched technology position Powerful partnerships Outstanding market dynamics 21
Enabling technologies for converting alternative raw materials to liquid fuels Gas-To-Liquids alliance with Sasol Oil Coal Refinery Syngas Gasoline & Diesel Long-term catalyst supply partnership and cooperative development since 1996 Sasol is technology leader in G-T-L Two G-T-L projects (Qatar, Nigeria) Natural gas DeMeern catalyst plant at full capacity 22
Partnering across emission-control value chain Suppliers Catalyst manufacturers Canners Integrators OEM Precious metal Substrate BASF Engineered catalyst coating provides function to meet regulation Catalyst coating technology leverages up to 90% of total catalytic converter costs 23
Key growth elements in place Unmatched technology position Powerful partnerships Outstanding market dynamics 24
Emission-control technology turnover prevents commoditization Improving engine performance Reducing fuel consumption / using alternative fuels Emission-control system Tightening emission regulations Each OEM has specific powertrain designs that require customized emission-control solutions 25
Vehicle emission regulations tighten globally Off Road Global 2011 Global 2014 US Tier 2, CA LEV II Phase in USA US 2010 USA US 2007 USA Euro 6 Europe Europe Euro 5 Europe Europe China (?) Euro 4 Euro 3 Euro 2 Europe India China Europe Russia Europe China Russia China Brazil Brazil India Russia China China India, Russia Euro 1 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 26 Light Duty Heavy Duty Motorcycle Different phase-in of regulations in major cities versus nationwide in China and India
Increasing complexity brings increasing value 2004 2007 2010 DOC CSF SCR HC, CO Particulate matter AdBlue NO x 1 7x 10x Baseline price* Baseline price* Baseline price* (DOC) (DOC + CSF) (DOC + CSF + SCR) DOC: Diesel Oxidation Catalyst; HC: Hydrocarbon; CO: Carbon monoxide; CSF: Catalyzed Soot Filter;` SCR: Selective Catalytic Reduction; NOx: Nitrogen Oxide 27 * Industry estimates for typical Class 8 diesel truck emission-control catalyst substrate and coating, excl. precious metal
Heavy duty diesel catalysts grow significantly above market Increasingly stringent regulation drives heavy duty diesel catalyst market growth Particulate Matter (PM), g/kw/hr 0.20 0.18 0.16 0.14 0.12 0.10 0.08 0.06 0.04 0.02 0.00 US 2010 / Euro 6 Off-road 2014 US 2007 Off-road 2006 Euro 5 / Off-road 2011 Euro 4 0 2 4 2007-2012 Market CAGR 30% 25% 20% 15% 10% 5% 0% ~GDP Growth Vehicles 25%+ Catalysts Oxides of Nitrogen (NOx), g/kw/hr Heavy Duty Diesel 28
Developing new technology for high growth HDD market through R&D synergies Novel-Metal- Zeolite former Engelhard Synergy Combination of former Engelhard s materials know-how with BASF s chemical synthesis expertise New Material Chemical synthesis BASF Robust, stable operation under varying conditions Reducing emission control system complexity 29
BASF is the undisputed automotive catalysts market leader in Asia Mobile emissions market share in Asia 43% BASF + BASF JVs ~ 43 % market share in Asia including our joint ventures in Korea and Japan Currently serving 50+% of global transplant business from Japan and Korea Leveraging BASF s regional strength especially in rapidly growing Chinese market 30
Leveraging position in Asia to capture high growth motorcycle catalyst business 2007-2012 market CAGR 30% 25% 20% 15% 10% 5% 5% 25%+ 90% of two-wheel vehicles are manufactured in Asia Acquisition of REEcat the global leader in motorcycle/small engine catalyst business Expanded customer base for advanced emission- control technologies 0% Two-wheel vehicles Catalysts 31
Investing in growth opportunities to expand market leadership Total approved investments in 2007: 110 million Euro Seven capacity expansions underway worldwide - G-T-L - FCC - Diesel - Gasoline - R&D facilities Regional expansion in fast-growing markets (China, Russia, India, Europe) 32
Growing more than two times global chemical market growth Maintaining attractive, stable margins Expanding technology leadership position Leveraging BASF s global reach 33
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. 34
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Glossary I DOC: diesel oxidation catalyst systems originally developed to reduce hydrocarbons and carbon monoxide to meet US 1994 emission regulations CSR: catalyzed soot filter traps and destroys the carbon particulates or soot produced by diesel engines, using a proprietary coating that can enable the filter to burn soot during normal driving conditions SCR: selective catalytic reduction catalysts, originally designed for stationary applications, now meet tightening NOx emission standards for mobile applications as well Three-way catalysts: are designed to reduce nitrogen oxides (NOx), carbon monoxide (CO) and hydrocarbon (HC) emissions from gasoline engines FCC: fluid catalytic cracking catalysts are used by petroleum refiners to convert feedstocks into a variety of fuel products, including gasoline, diesel fuel, heating oil and lubricants Syngas: produced from natural gas or coal, is a key intermediate in several emerging technologies for gas-to-liquids (GTL), methanol-to-olefins, coal-to-liquids and fuel cells 36
Glossary II Gas-to-liquids: or GTL is a refinery process to convert natural gas or other gaseous hydrocarbons into longer-chain hydrocarbons. Methane-rich gases are converted into liquid fuels either via direct conversion or via syngas as an intermediate, for example using the Fischer-Tropsch process NaphthaMax II catalysts: allow petroleum refiners to produce significantly higher gasoline yields by using a unique technology (Distributed Matrix Structure DMS platform) that provides enhanced stability, activity and yield without the typically associated coke and gas penalties Flex-Tec : catalysts enables petroleum refiners to significantly boost the amount of gasoline they can produce from "bottom-of-the-barrel" crude oil, also using the high-performance DMS technology platform AdBlue : is BASF s high-purity, synthetically produced 32.5% solution of urea; in the SCR emission-control system, AdBlue reduces nitrogen oxides in the exhaust gases of diesel-engined commercial vehicles to water and elementary nitrogen (a natural constituent of the atmosphere) Zeolite: a natural or synthetic inorganic molecular structure used in adsorbent, catalyst and separation technologies 37