BASF Report 2011

Economic, environmental and

social performance
BASF Group 2011

Economic data
2011 2010 Change in %
Sales million € 73,497 63,873 15.1
Income from operations before depreciation and amortization (EBITDA) million € 11,993 11,131 7.7
Income from operations (EBIT) before special items million € 8,447 8,138 3.8
Income from operations (EBIT) million € 8,586 7,761 10.6
Income before taxes and minority interests million € 8,970 7,373 21.7
Net income million € 6,188 4,557 35.8

Earnings per share € 6.74 4.96 35.9

Adjusted earnings per share 1 € 6.26 5.73 9.2
Dividend per share € 2.50 2.20 13.6

Cash provided by operating activities million € 7,105 6,460 10.0

Additions to long-term assets 2 million € 3,646 5,304 (31.3)
Depreciation and amortization million € 3,407 3,370 1.1

Return on assets % 16.1 14.7 –

Return on equity after tax % 27.5 24.6 –

Research and development expenses million € 1,605 1,492 7.6

Environment and safety

2011 2010 Change in %
Emissions of greenhouse gases (CO2 equivalents) million metric tons/year 25.8 25.74 0.4
Emissions to air (air pollutants)3 thousand metric tons/year 33.8 33.9 (0.3)
Emissions of organic substances to water3 thousand metric tons/year 24.3 26.1 (6.9)
Energy efficiency in production processes metric tons of sales product/MWh 0.63 0.61 2.1
Transportation accidents per 10,000 shipments 0.18 0.28 (35.7)
Number of environmental and safety audits 97 97 0
Operating costs for environmental protection facilities million € 850 729 16.6
Investments in environmental protection million € 190 122 55.7

Employees and society

2011 2010 Change in %
Employees as of December 31 111,141 109,140 1.8
Apprentices/trainees as of December 31 2,565 2,442 5.0
Personnel expenses million € 8,576 8,228 4.2
Donations and sponsorship million € 48.7 49.8 (2.2)
Annual bonus % of Group companies 93.7 92.9 0.8
Lost time injury rate per million working hours 1.9 2.0 (5.0)
Health Performance Index5 0.86 – –

1
For further information, see page 36
2
Including acquisitions
3
Excluding emissions from oil and gas production
4
Variation from Report 2010 (25.2) due to updated basis of calculation
5
For more information, see page 88

The cover photo shows a Berlin subway during the morning rush hour. The branding motifs shown in this report, taken from BASF’s current business
campaign, show how BASF contributes to solving global challenges – for example, in the area of sustainable mobility.
BASF’s segments

Chemicals Page 44

rt
In the Chemicals segment, we supply Key data Chemicals (million €)

ie
products to customers in the chemical,

lis
electronics, construction, textile, auto- 2011 2010 Change in %

a
tu
motive, pharmaceutical and agricultural Sales 12,958 11,377 13.9

ak
industries as well as many others. We
also ensure that other BASF segments EBITDA 3,188 3,000 6.3

ird
are supplied with chemicals for produ- Income from operations
2,441 2,302 6.0

w
cing downstream products. Our portfolio before special items
ranges from basic chemicals, glues and Income from operations
electronic chemicals for the semicon- 2,442 2,310 5.7
(EBIT)
ductor and solar cell industries, to
solvents and plasticizers, as well as
starting materials for detergents, 1
3
plastics, textile fibers, paints and Sales (%)
coatings, and pharmaceuticals.
1 Inorganics 11
2 Petrochemicals 68
€12,958
million
3 Intermediates 21

Plastics Page 50

The Plastics segment includes a broad Key data Plastics (million €)

range of products, system solutions and
services. We offer a number of enginee- 2011 2010 Change in %
ring plastics for the automotive and elec- Sales 10,990 9,830 11.8
trical industries as well as for use in
household appliances and sports and EBITDA 1,678 1,721 (2.5)
leisure products. Our styrenic foams are Income from operations
1,203 1,284 (6.3)
used as insulating materials in the before special items
construction industry and in packaging. Income from operations
Our polyurethanes are extremely versa- 1,259 1,273 (1.1)
(EBIT)
tile: As soft foams, for example, they
improve car seats and mattresses, and
as rigid foams they increase the energy
efficiency of refrigerators.
Sales (%)
1 Performance Polymers 47
2
€10,990 1
million
2 Polyurethanes 53

Performance Products Page 55

Performance Products lend stability and Key data Performance Products (million €)
color to countless everyday items and
help to improve their application profile. 2011 2010 Change in %
Our product portfolio includes vitamins Sales 15,697 12,288 27.7
and food additives as well as ingredients
for pharmaceuticals and for hygiene, EBITDA 2,312 2,162 6.9
home and personal care items. Other Income from operations
1,727 1,554 11.1
Performance Products improve before special items
processes in the paper industry, oil and Income from operations
gas production, mining and water treat- 1,361 1,345 1.2
(EBIT)
ment. They can also enhance the
efficiency of fuels and lubricants, the
effectiveness of adhesives and coatings,
and the stability of plastics. Sales (%)
5 1
1 Dispersions & Pigments 22
2 Care Chemicals 33
€15,697
3 Nutrition & Health 12 million
4
4 Paper Chemicals 10
5 Performance Chemicals 23 3 2
Functional Solutions Page 63

In the Functional Solutions segment, we Key data Functional Solutions (million €)

bundle system solutions and innovative
products for specific sectors and custo- 2011 2010 Change in %
mers, in particular for the automotive, Sales 11,361 9,703 17.1
chemical and construction industries.
Our portfolio comprises automotive and EBITDA 921 861 7.0
industrial catalysts, automotive and Income from operations
559 467 19.7
industrial coatings and concrete admix- before special items
tures as well as construction systems Income from operations
such as tile adhesives and architectural 427 457 (6.6)
(EBIT)
coatings.

3
Sales (%)
1 Catalysts 56
€11,361
2 Construction Chemicals 19 million 1

3 Coatings 25 2

Agricultural Solutions Page 68

Our crop protection products guard Key data Agricultural Solutions (million €)
against fungal diseases, insects and
weeds and they increase quality and 2011 2010 Change in %
secure crop yields. Our research in plant Sales 4,165 4,033 3.3
biotechnology concentrates on plants
for greater efficiency in agriculture, EBITDA 981 938 4.6
healthier nutrition and for use as renew- Income from operations
810 749 8.1
able raw materials. before special items
Research and development expenses, Income from operations
sales, earnings and all other data 808 749 7.9
(EBIT)
pertaining to BASF Plant Science are not
included in the Agricultural Solutions
segment; they are reported in Other.
1

Sales (%)
€4,165
1 Crop Protection 100 million

Oil & Gas Page 73

As the largest German producer of oil Key data Oil & Gas (million €)
and gas, we focus our exploration and
production on oil- and gas-rich regions 2011 2010 Change in %
in Europe, North Africa, South America, Sales 12,051 10,791 11.7
Russia and the Caspian Sea region.
Together with our Russian partner EBITDA 2,616 2,977 (12.1)
Gazprom, we are active in the transport, Income from operations
2,111 2,430 (13.1)
storage and trading of natural gas in before special items
Europe. Income from operations
2,111 2,334 (9.6)
(EBIT)
Overview of BASF’s segments

Net income 1,064 923 15.3

1
Sales (%)
1 Exploration & Production 26 €12,051
million
2 Natural Gas Trading 74
2
Selected prizes and awards

World’s Most Admired Companies 2011

BASF honored as the most admired company in the chemical industry
The U.S. business magazine Fortune again ranked BASF as the most admired chemical
company in the world. BASF took first place in numerous categories, including product and
service quality, global competitiveness and quality of management.

Dow Jones Sustainability World Index

BASF shares listed in the most important sustainability index for past eleven years
BASF shares were again included in the Dow Jones Sustainability Index (DJSI World) in 2011.
The company received particular recognition for its product stewardship, environmental man­
agement systems and climate strategy, as well as its risk and crisis management.

Carbon Disclosure Project

Carbon Disclosure Leadership Index and Carbon Performance Leadership Index
In 2011, BASF again achieved the top ranking in the Materials & Energy sector in the Carbon Dis­
closure Leadership Index. BASF was also once again included in the Carbon Performance Lead­
ership Index, which assesses companies’ performance in managing climate change.

China Green Companies Top 100

BASF honored for its efforts
For the fourth time in succession, BASF was listed among the China Green Companies Top
100. This award recognizes companies that strengthen their competitiveness through long­
term commitment to environmental protection, society, innovation and corporate culture.

German Diversity Prize & DiversityInc 25 Noteworthy Companies

BASF honored for commitment to diversity
BASF was honored in 2011 with the German Diversity Award as “Germany’s Most Diverse
Employer” in the category large­scale enterprise. The prize is awarded by Henkel, the busi­
ness consultancy McKinsey and the German business magazine Wirtschaftswoche. It hon­
ors employers, individuals and innovative projects that are committed to establishing a diverse
working culture. We have also gained international recognition for our diversity activities: BASF
was included in DiversityInc’s 2011 ranking of “25 Noteworthy Companies for Diversity.”

This report is printed on FSC® Publisher:

certified real art paper, which BASF SE
contains products from BASF Communications & Government Relations
Paper Chemicals. 67056 Ludwigshafen, Germany

Design:
More information on the
Addison, London, United Kingdom
production process, selec-
tion of paper and printing of
Photography:
this report can be found at
Timothy Foster
basf.com/report_production
Hans-Jürgen Dölger, Tim Schober (segments)
Andreas Pohlmann (Board of Executive Directors)

Forward-looking statements

This report contains forward-looking statements. These statements are based on current 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 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 the Opportunities and Risks Report from page 104 to 112. We do not assume any obligation to update
the forward-looking statements contained in this report.
Annual Shareholders’ Meeting 2012 / Interim Report 1st Quarter 2012

April 27, 2012

Interim Report 1st Half 2012

July 26, 2012

Interim Report 3rd Quarter 2012

Oct. 25, 2012

Full Year Results 2012

Feb. 26, 2013

Annual Shareholders’ Meeting 2013 / Interim Report 1st Quarter 2013

April 26, 2013

Report 2011

BASF supports the chemical industry’s global initiative

Responsible Care.

Further information Contact

You can find this and other publications from BASF on the General inquiries
ISSN 1866-9387

internet at www.basf.com Phone: +49 621 60-0

You can also order the reports: Corporate Media Relations
Jennifer Moore-Braun, Phone: +49 621 60-99123
– by telephone: +49 621 60-99001
– on the internet: basf.com/mediaorders Sustainability Center
Dr. Eckhard Koch, Phone: +49 621 60-78638
ZOAC 1202 E

Investor Relations
Magdalena Moll, Phone: +49 621 60-48002
Internet
www.basf.com
BASF Report 2011

BASF is the world’s leading chemical company:

The Chemical Company. Its portfolio ranges from
chemicals, plastics, performance products and crop
protection products to oil and gas.

We combine economic success, social responsibility

and environmental protection. Through science
and innovation we enable our customers in almost
all industries to meet the current and future needs
of society. Our products and system solutions
contribute to conserving resources, ensuring healthy
food and nutrition and helping to improve quality
of life.

We have summed up this contribution

in our corporate purpose:
We create chemistry for a sustainable future.

Report 2011
Economy
This integrated report documents BASF’s economic,
environmental and social performance in 2011. Using
specific examples, we illustrate how sustainability
contributes to BASF’s success and how we as a
Society Environment company create value for employees, business partners,
shareholders, neighbors and the public.
sticky loves wet
We encounter innovations in chemistry every day – even where we don’t expect
to. They improve our quality of life. ACRESIN® is a smart chemical that stays
sticky in wet conditions – it doesn’t matter if you are at the beach, in the
swimming pool or in the shower. We are always improving our existing product
portfolio. In 2011, around 1,050 newly registered patents attested to this power
of innovation.
For more on innovation, see page 16 onward and page 28 onward
kids love chemistry
In our society, education is a key resource around the world for economic and
social progress. BASF is committed to introducing the next generation to the
world of chemistry. In 2011, the International Year of Chemistry, 54,813 young
people in 33 countries conducted experiments in BASF’s Kids’ Labs and Teens’
Labs, exploring the scientific phenomena of everyday life.
 or more on vocational training and career development, see page 84 onward; for more on education
F
projects, see page 89
warm houses love energy bills
We at BASF have made it our business to develop sustainable solutions for the construction
industry. We offer our customers solutions that help them to build energy-saving, long-lasting
structures. BASF’s materials and construction solutions are more effective than conventional
insulation systems, which saves money in the long term. With products like Neopor ® and
Elastopor ®, houses stay warmer in the winter and waste less energy.
For more on climate protection, see page 95 onward
ecology loves economy
With resources becoming scarcer and greenhouse gas emissions increasing, we
need a fundamental change in how we approach mobility. Whether subway,
automobile or airplane – sustainable transportation solutions are in demand.
BASF has recognized this potential and offers, for example, numerous
innovations as a development partner for the automotive industry. Whether in
the form of advanced plastics for lightweight design, modern emissions control
catalysts, materials for safe high-performance batteries in electric cars or
innovative concepts for temperature management, BASF makes an essential
contribution to the energy efficiency of tomorrow.
For more on mobility, see page 28 onward and page 50 onward
2 BASF Report 2011

BASF Report 2011

Contents

Management’s Analysis

About this report 4 The BASF Group

Strategy and values 16
Our goals 20
Markets, structures and organization 22
To our shareholders
Value-based management 24
Letter from the Chairman of the Board Sustainability management 25
of Executive Directors 6
Value added statement 27
Board of Executive Directors 8
Innovation 28
BASF on the capital market 10
The business year at BASF
Trends in the global economy 30
Trends in key customer industries 31
Trends in the chemical industry 32
Business review BASF Group 33
Consolidated balance sheets 37
Liquidity and capital resources 39
Business review by segment 42
Chemicals 44
Plastics 50
Performance Products 55
Functional Solutions 63
Agricultural Solutions 68
Oil & Gas 73
Regional results 79
Employees and society
Employees 83
Occupational safety and health protection 88
Social commitment 89
Environment and safety
Environmental, safety and security management 90
www.basf.com/report Climate protection 95
BASF Report 2011 online Energy and raw materials 98
This report is also available in HTML Water 100
format and as a PDF download on
our website. Interactive tools ena- Product stewardship 102
ble individual compilation of texts,
tables and diagrams, and quick Forecast
selection according to subject. The
direct link to the previous year’s Opportunities and risks report 104
report makes it easier to compare
statements. Examples from this Economic environment in 2012 113
report demonstrate how we create
value – for BASF and for society.
BASF Group outlook 116
 Contents

BASF Report 2011

3

Corporate Governance Topics at a glance

Overview
Corporate Governance of the BASF Group 120
About this report  4
Management and Supervisory Boards 126
Index  218–219
Compensation report 129
Strategy
Report of the Supervisory Board 135
Goals  16–19, 20–21, 24, 39–41, 84–86, 88, 92–93, 95, 98, 100, 102
Declaration of Conformity 138 Opportunities  25–26, 28–29, 79–82, 84, 97, 101, 104–112, 116
Minimizing risks  19, 25–26, 39–41, 84, 90–94, 102–112, 116, 118
Portfolio  18, 22, 56
Efficiency  79–82, 98–99
Segment strategies  44, 50, 55, 63, 68, 73
Consolidated Financial Statements
Solutions for global challenges
Statement by the Board of Executive Directors 140
Resources  16, 26, 28–29, 92, 98–99
Auditor’s report 141 Environmental and climate protection  16, 25–26, 28, 90–94, 95–97
Consolidated statements of income 142 Food and nutrition  16, 28–29, 55, 61, 68–70, 114
Quality of life  16–18, 28–29
Consolidated statements of income and expense
Demographic change  84, 112
recognized in equity 143
Mobility  28–29, 50–51, 63, 80, 99, 111
Consolidated balance sheets 144 Construction and housing  29, 31, 50, 114

Consolidated statements of cash flows 145 

Financial position and performance
Consolidated statements of equity 146
Shares  10–14, 33, 36
Notes 147 Balance sheet structure  37-38
Financial position  39–41
Financial performance  33–36
Business development by segment  42–43, 47–49, 53–54, 59–62
 65–67, 71–72, 76–78
Supplementary information on
oil and gas producing activities Forecast
Economic environment  113–115
Supplementary information on oil and gas
BASF Group outlook  116–118
producing activities 204
Innovations
Growth fields  18, 29, 111
Innovations for a sustainable future  18, 44, 50, 56, 63, 68, 74
Overviews
Partnerships

Glossary 214 Strategic partnerships  17, 55, 68, 89, 100, 103
Cooperations  28–29, 70, 89, 101, 103, 104, 111, 204
Index 218
Supply chain  92, 104, 108
Registered trademarks 220 Business opportunities with sustainability  26, 97

Ten-year summary 221

Dialog
Requirements, topics and data 224 Customers  16–19, 25, 31, 45, 51, 57, 64, 69
GRI and Global Compact Index 225 Other stakeholders  12, 25–26, 86-87, 89, 103

Statement GRI Application Level Check 226

Prizes and awards  back cover
GRI and Global Compact Index  225
Global Compact relevance 
4 About this report BASF Report 2011

About this report

Content and structure External audit and evaluation

The BASF Report combines our financial and sustainability Our reporting is audited by a third party. KPMG AG Wirtschafts­
r­ eporting and is addressed to readers interested in both prüfungsgesellschaft has audited the BASF Group Consolidated
­areas. Financial Statements and the Management’s Analysis and has
In addition to our integrated corporate report, we publish approved them free of qualification. The audit of the Consoli­
further information about sustainability issues on the internet. dated Financial Statements including the Notes is based on the
Links to this supplementary information are provided in each audited financial statements of the BASF Group companies.
chapter. The audit covers financial information as well as statements
The information in the BASF Report 2011 also serves as a and figures pertaining to sustainability, and was conducted in
progress report on BASF’s implementation of the ten principles accordance with the relevant International Standard of Assur­
of the U.N. Global Compact and takes into consideration the ance Engagements 3000, a standard for sustainability report­
Blueprint for Corporate Sustainability Leadership – an action ing. The additional content provided on the BASF internet sites
plan initiated as part of the Global Compact LEAD platform. The ­indicated in this report is not part of the information audited by
symbol indicates information that is relevant to the ten prin­ KPMG.
ciples and the Blueprint for Corporate Sustainability Leadership. Our sustainability reporting has been oriented toward the
If the symbol appears at the end of a chapter, the entire content Global Reporting Initiative (GRI) framework since 2003. For the
of the chapter is relevant. The Global Compact Index on page BASF Report 2011, the GRI confirmed that the BASF Group’s
225 provides an overview of the topics. In addition to the tradi­ sustainability reporting fulfills the expanded GRI guideline 3.1
tional table of contents, “Topics at a glance” provides an over­ with the highest application level, A+.
view of key topics such as business development, global chal­ The Auditor’s report can be found on page 141
lenges, innovations and other topics of central ­importance for The Assurance Report on sustainability information in the BASF
Report 2011 can be found at basf.com/sustainability_information
our business.
 he GRI Application Level Check Statement can be found
T
The 2011 online report can be found at basf.com/report on page 226
For more on sustainability, see basf.com/sustainability
 or more on the implementation of the Global Compact principles
F
and the Blueprint for Corporate Sustainability Leadership, see
basf.com/globalcompact_e
 or more on the Global Compact, Global Compact LEAD and
F
Blueprint for Corporate Sustainability Leadership, see
www.globalcompact.org and basf.com/gclead_e
For information on topic selection and data collection, see page 224

Overview

−−BASF Report 2011 integrates our financial −−Financial information as well as figures and statements
and sustainability reporting pertaining to sustainability in the Consolidated Financial
−−HTML version of the report online contains additional Statements and Management’s Analysis audited by
information and service features KPMG AG Wirtschaftsprüfungs­gesellschaft
−−Further information on sustainability issues on the internet −−Audit also in accordance with assurance
−−Report serves as a progress report for the standards for sustainability reporting
U.N. Global Compact −−Level A+ in sustainability reporting confirmed
by Global Reporting Initiative
 1
BASF Report 2011

To our shareholders
To our shareholders

Letter from the Chairman of

the Board of Executive Directors 6
Board of Executive Directors 8
BASF on the capital market 10
 Letter from the Chairman of

6 To our shareholders the Board of Executive Directors BASF Report 2011

Letter from the Chairman of the Board of Executive Directors

Dear Shareholder,

One year ago, we predicted moderate global economic growth

and considerably higher volatility for 2011. This was the case:
“We will integrate sustainability
Global gross domestic product grew by 2.7% in 2011, compared
with 3.9% in 2010, and growth in worldwide chemical produc­
more closely than ever into
tion (excluding pharmaceuticals) slowed from 9.3% to 4.8%. Our
business was particularly affected by events that were not fore­
our business. And innovation
seeable one year ago: The natural disaster in Japan left the world is the key.”
shaken, and Germany saw a shift in its energy policy. In Libya,
we had to suspend our crude oil production from February to
October 2011. After the economic growth spurt of the first half Ambitious goals achieved
of the year, the national debt crisis in Europe contributed to a Despite significantly higher raw material prices, we were able to
considerable slowdown in the second half. increase earnings because we continuously strive to lower costs
and improve our productivity and internal processes. Our suc­
Nevertheless, we significantly surpassed the record levels of cessfully concluded excellence program, NEXT, shows our com­
2010 in sales and earnings, and again earned a high premium mitment to operational excellence. We have now started the
on our cost of capital. The BASF team once again showed what STEP program, which is also expected to contribute around
it is made of. For that, I would like to express my heartfelt €1 billion to earnings each year by the end of 2015. Together
gratitude to all employees. with important customers, we have begun further joint develop­
ment projects. These demonstrate BASF’s power of innovation.
We successfully implemented a whole range of important proj­ One example is the smart forvision concept car developed by
ects in 2011. We started up the first leg of the Nord Stream pipe­ Daimler and BASF to make electric cars affordable, environmen­
line and began operations following the second expansion tally friendly and safe.
phase of our Verbund site in Nanjing. Cognis was successfully
integrated into BASF. We continue to optimize our portfolio – In 2011, we paid a new record dividend of €2.20 to you, our
with the inclusion of our styrenics business in the Styrolution shareholders. At the Annual Shareholders’ Meeting at the end
joint venture, as well as with a contract for the sale of our fertil­ of April 2012, we will propose a dividend increase of 13.6% to
izer business. Most importantly, we continued to lay the foun­ €2.50, representing a dividend yield of 4.64%. This increase also
dation for future profitable growth by increasing expenditures attests to BASF’s financial strength, which has improved once
for research and development by 7.6% to €1.6 billion. again.

We expect overall global economic growth in 2012 to match the

level of the previous year. High raw material costs and uncer­
tainty in the financial markets hamper the outlook and make
forecasts difficult. Positive impetus for the chemical industry will
come from the emerging markets in particular. We aim to
­increase sales volumes and exceed the record levels of sales
and income from operations that we posted in 2011. Crude oil
production in Libya, which we have already resumed, as well as
growing volumes in the chemicals businesses, will contribute to
the rise in earnings.
 Letter from the Chairman of
BASF Report 2011 the Board of Executive Directors To our shareholders
7

Dividend

€2.50
(+13.6%)
We stand by our ambitious dividend policy and
propose a dividend of €2.50 per share – an increase
of 13.6% compared with the previous year.

Successful strategy updated of new growth opportunities – because no other chemical com­
Margret Suckale and Michael Heinz joined the Board of Execu­ pany has such a broad technology base and such comprehen­
tive Directors in May 2011. The new Board team introduced the sive access to customer industries.
updated “We create chemistry” strategy at the end of
November. It shows how we intend to take advantage of the Our success depends on how we interact with each other, with
long-term opportunities presented by our markets to continue our partners and with society. In this, we rely on the compe­
to grow faster than chemical production and, above all, to tence and dedication of each and every one of our employees.
increase our profitability even further. We have also set ourselves We have defined values to guide our actions: We are creative,
even more ambitious goals for environmental and climate pro­ open, responsible and entrepreneurial. Our values are integral
tection. We are convinced that this course will take us in the in enabling us to fulfill our corporate purpose: We create chem­
right direction, even in a volatile environment. Our focus on long- istry for a sustainable future.
term trends and our strengths will work to our advantage.
I look forward to pursuing this path with you and thank you for
Rapid worldwide population growth demands new sustainable putting your trust in BASF.
solutions. This opens up opportunities for the chemical indus­
try, in particular – for example, in the areas of resources, envi­ Sincerely yours,
ronment and climate; food and nutrition; and quality of life. That
is why we will integrate sustainability more closely than ever into
our business. And innovation is the key. In the future, our inno­
vative strength, our market knowledge and our customer rela­
tionships will need to be even more tightly interconnected. This Dr. Kurt Bock
is how we will add value as one company and take advantage Chairman of the Board of Executive Directors of BASF SE
8 To our shareholders Board of Executive Directors BASF Report 2011

The Board of Dr. Harald Schwager

51, with BASF for 24 years
Margret Suckale Dr. Hans-Ulrich Engel
Industrial Relations Director Chief Financial Officer
Executive Directors 55, with BASF for 3 years 52, with BASF for 23 years

of BASF SE
– Oil & Gas – Human Resources – Finance
– Construction Chemicals – Engineering & – Catalysts
– Procurement ­Maintenance – Corporate Controlling
– Region Europe – Environment, – Corporate Audit
Health & Safety – Information Services &
– Verbund Site Supply Chain Management
Management Europe – Market & Business ­Development
North America
– Regional Functions North America
 BASF Report 2011 Board of Executive Directors To our shareholders
9

Michael Heinz Dr. Kurt Bock Dr. Martin Brudermüller Dr. Andreas Kreimeyer Dr. Stefan Marcinowski
47, with BASF for 26 years Chairman of the Board of Vice Chairman of the Board Research Executive Director 58, with BASF for 33 years
Executive Directors of Executive Directors 56, with BASF for 26 years
53, with BASF for 21 years 50, with BASF for 24 years

–D
 ispersion & Pigments – Legal, Taxes & Insurance – Performance Polymers – Inorganics – Crop Protection
–C
 are Chemicals – Strategic Planning & – Polyurethanes – Petrochemicals – Coatings
–N
 utrition & Health Controlling – Market & Business – Intermediates – BASF Plant Science
–P
 aper Chemicals – Communications & ­Development Asia Pacific – Process Research & – Biological &
–P
 erformance Chemicals ­Government Relations – Regional Functions & ­Chemical Engineering Effect ­Systems Research
–A
 dvanced Materials & – Global Executive Human Country Management – BASF Future Business – Region South America
Systems Research Resources Asia Pacific
– Investor Relations
– Compliance
10 To our shareholders BASF on the capital market BASF Report 2011

BASF on the capital market

Dividend increase, good credit ratings

After developing positively in the first half of 2011, stock expectations for the world economy in 2012. The BASF share
markets were increasingly characterized by uncertainty was not able to escape this negative trend, and traded at €53.89
in the second half of the year. The BASF share traded at at the end of 2011, 9.7% below its closing price one year earlier.
€53.89 at the end of 2011, 9.7% below its closing price Assuming that dividends were reinvested, BASF shares lost
one year earlier. 6.7% of their value in 2011. The BASF stock thus outperformed
We stand by our ambitious dividend policy and will the German and European stock markets: Over the same
propose a dividend of €2.50 per share at the Annual period, the DAX 30 index fell by 14.7% while the DJ EURO
Shareholders’ Meeting – an increase of 13.6% compared STOXX 50 index lost 14.5%. In 2011, BASF shares also per­
with the previous year. BASF has solid financing and good formed better than the global industry indices DJ Chemicals and
credit ratings, especially compared with its competitors MSCI World Chemicals, which shed 10.6% and 7.8% of their
in the chemical industry. value, respectively.
The assets of an investor who invested the equivalent of
BASF share performance €1,000 in BASF shares at the end of 2001 and reinvested the
Stock markets made significant gains in the first half of 2011 – dividends in additional BASF shares would have increased to
the BASF share reached a new all-time high of €69.40 – but €3,734 by the end of 2011. This average annual return of 14.1%
uncertainty increasingly began to dominate the markets in the places BASF shares substantially above the returns for the
second half of the year. From the beginning of August, share DAX 30 (1.4%), EURO STOXX 50 (–2.2%) and MSCI World
prices worldwide declined sharply. This was a result of the Chemicals (7.2%).
further intensification of the national debt crises in Europe and
the United States as well as the financial markets’ lower growth

Change in value of an investment in BASF shares 2011

(with dividends reinvested, indexed)

130 130

120 120

110 110

100 100

90 90

80 80

70 70
iert

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
lis

BASF share – 6.7% DAX 30 – 14.7% MSCI World Chemicals – 7.8%

aktua
wird

BASF on the capital market Dividend per share1 (€ per share)

2.50
−−Stock markets develop positively in first half of 2011, 2.20
second half increasingly marked by uncertainty 1.95 1.95
1.70
−−BASF share outperforms the most important benchmark 1.50
and industry indices 1.00
0.85
−−Proposed dividend of €2.50 per share; increase of 13.6% 0.70 0.70
compared with previous year

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

1
Adjusted for two-for-one stock split conducted in the second quarter of 2008
BASF Report 2011 BASF on the capital market To our shareholders
11

Long-term performance of BASF shares compared with indices Broad base of international shareholders
(average annual performance with dividends reinvested)
With over 400,000 shareholders, BASF is one of the largest
publicly owned companies with a high free float. An analysis of
2006 – 2011 12.5%
the shareholder structure carried out in December 2011 showed
(2.2%)
that, at nearly 15% of share capital, the United States and
(7.9%)
Canada made up the largest regional group of institutional
2.4%
investors. Institutional investors from Germany accounted for
2001– 2011 14.1%
11%. Shareholders from the United Kingdom and Ireland hold
1.4%
around 12% of BASF shares, while institutional investors from
(2.2%)
the rest of Europe hold a further 18% of capital. Approximately
7.2%
27% of the company’s share capital is held by private investors,
BASF share DAX 30 EURO STOXX MSCI World Chemicals most of whom are resident in Germany. BASF is therefore one
of the DAX 30 companies with the largest percentage of private
Dividend of €2.50 per share shareholders in Germany.
At the Annual Shareholders’ Meeting, the Board of Executive
Directors and the Supervisory Board will propose a dividend Employees becoming shareholders
payment of €2.50 per share. We stand by our ambitious divi­ In many countries, we offer share purchase programs to
dend policy and plan to pay out around €2.3 billion to our share­ encourage our employees to become BASF shareholders. In
holders (based on the qualifying shares as of December 31, 2011, more than 19,600 employees (2010: 18,900) purchased
2011). Based on the year-end share price for 2011, BASF shares employee shares worth around €45 million (2010: €28 million).
offer a high dividend yield of 4.64%. BASF is part of the DivDAX For more on employee share purchase programs, see page 86
share index, which contains the 15 companies with the highest
dividend yield in the DAX 30. We continue to aim to increase our
dividend each year, or at least maintain it at the previous year’s
level.

Shareholder structure (by region) Percentage of BASF shares in important indices

as of December 31, 2011
6
1 Germany 38%
5
2 United States/Canada 15% 1 DAX 30 9.6%
3 United Kingdom/Ireland 12% DJ Chemicals 7.2%
4 Rest of Europe 18% 4 MSCI World Index 0.3%
5 Rest of the world 4%
6 Unidentified 13% 3
2
12 To our shareholders BASF on the capital market BASF Report 2011

BASF in key sustainability indices Good credit ratings and solid financing
For the eleventh year in succession, BASF has been included With “A+/A-1/outlook stable” from rating agency Standard &
in the world’s most important sustainability index, the Dow Poor’s and “A1/P-1/outlook stable” from Moody’s, BASF has
Jones Sustainability World Index (DJSI World). We received par­ good credit ratings, especially in comparison with competitors
ticular recognition for our product stewardship, environmental in the chemical industry.
management and climate strategy as well as our risk and crisis At the end of 2011, the financial indebtedness of the BASF
management. The DJSI World represents the top 10% of the Group was around €13 billion with liquid funds of approximately
largest 2,500 companies in the Dow Jones Global Index based €2 billion. The average maturity of our financial indebtedness
on economic, environmental and social criteria. was 3.1 years. The company’s medium- to long-term debt
Furthermore, the international investor group Carbon Dis­ ­financing is based on corporate bonds with a balanced matu­
closure Project has again selected BASF for inclusion in the rity profile. For short-term debt financing, BASF has a commer­
prestigious Carbon Disclosure Leadership Index (CDLI) and in cial paper program with an issuing volume of up to $12.5 billion.
the Carbon Performance Leadership Index (CPLI). The CDLI As back-up for the commercial paper program, there are com­
contains 52 companies that provide especially transparent and mitted, broadly syndicated credit lines of €3 billion and $2.25 bil­
extensive information about their carbon footprint. The CPLI lion available; these are not being used at this time.
includes 29 companies based on their exemplary performance For more on financial indebtedness and maturities, see the Notes
from page 186 onward
in terms of climate change – for example, with regard to their
climate strategy, stakeholder communication and management
system as well as their reduction of greenhouse gas emissions. Analysts’ recommendations
The inclusion in both indices demonstrates that BASF is one of Around thirty financial analysts regularly publish reports on
the world’s leading companies when it comes to climate BASF. At the end of 2011, 50% of these analysts had a buy
protection. The Carbon Disclosure Project represents 551 insti­ rating for our shares (end of 2010: 73%) while 44% of analysts
tutional investors, with around $71 trillion in assets under recommended holding our shares (end of 2010: 21%), and 6%
management. had a sell rating (end of 2010: 6%). On December 31, 2011, the
 or more on the key sustainability indices, see
F average target share price according to analyst consensus
basf.com/sustainabilityindices
estimates was €60.43.
Continuously updated consensus estimates on BASF are available
online at basf.com/share

BASF in sustainability indices Solid financing

−−Once again included in most important −−Financial indebtedness of the BASF Group around
sustainability indices €13 billion at year-end 2011; average maturity of 3.1 years
−−DJSI World: particular recognition for our product −−Commercial paper program with an issuing volume
stewardship, environmental management and climate of up to $12.5 billion
strategy as well as risk and crisis management −−Committed, unused back-up lines of €3 billion
−−CDLI and CPLI: inclusion in the important sustainability and $2.25 billion
indices shows that BASF is one of the leading companies
worldwide when it comes to climate protection
BASF Report 2011 BASF on the capital market To our shareholders
13

Close dialog with the capital markets We also held roadshows targeted specifically at investors who
Our corporate strategy aims to create long-term value. We sup­ base their investment decisions on sustainability criteria, where
port this strategy through regular and open communication with we particularly explained our measures related to climate pro­
all capital market participants. To keep institutional investors and tection and energy efficiency. In addition, we conducted special
rating agencies informed, we host numerous one-on-one meet­ creditor relations roadshows in 2011 for the first time, present­
ings and roadshows worldwide. We also hold information events ing our business and our financing strategy to credit analysts
to give private investors insight into BASF. and creditors.
At an investor day in London at the end of November, we Our website provides investors with comprehensive infor­
introduced our updated “We create chemistry” strategy and mation about BASF and BASF shares. In recognition of the
showed the opportunities that will open up for the chemical growing importance of social media, we have expanded our
­industry as a result of the challenges of the future, such as the communication activities through social media channels, such
growing world population. We want to take advantage of these as Twitter and Facebook. Interested users can always find
opportunities in order to reach our ambitious growth targets. up-to-date information about BASF in Web 2.0.
For more on our growth targets, see page 18 Analysts and investors have confirmed the quality of our
communication work – and have ranked BASF Investor Rela­
To delve more deeply into certain topics, we also held round­ tions number one on many occasions. In the Thomson Extel
table talks in 2011. These talks were aimed at giving our inves­ Pan-European Survey 2011, BASF’s Investor Relations team was
tors in the world’s important financial centers information about once again honored as “Best IR Team in Europe” and “Best IR
certain key areas of our business. At the Agricultural Solutions Team in the Chemicals Sector.” At the IR Magazine Europe
roundtable talk in New York in August, BASF management pre­ Awards 2011, BASF also won six top awards: Our Investor
sented the strategic direction and growth opportunities of our Relations team again picked up the Grand Prix for large pub­
crop protection business. Furthermore, we illustrated the prog­ licly-listed companies in addition to first place in the chemicals
ress and prospects of our plant biotechnology activities. In mid- sector and for investor relations in Germany. Furthermore, BASF
November, our Oil & Gas roundtable in London gave investors was honored with the Investor Relations Award from the busi­
and analysts a chance to gain in-depth insight into our oil and ness magazine Capital for the fifth time in a row.
gas business; for example, we presented the growth strategy
and 2015 goals for the Exploration & Production and Natural
Gas Trading business sectors. It is very important to us that
analysts and investors have direct contact with BASF manage­
ment, as we feel that investors should get to know the people
who lead our businesses.

Dialog with the capital markets Investor Relations

−−Global roadshows and one-on-one meetings provide can be contacted at

­information to institutional investors and ratings agencies −−Phone: +49 621 60 -48230
−−Information events for private investors −−Email: ir@basf.com
−−Roundtable talks and investor days provide in-depth −−Internet: basf.com/share
information on certain topics The Investor Relations team’s newsletter keeps you
−−Special creditor relations roadshows provide informed about current BASF topics and acts as a useful
information to credit analysts and creditors reminder for important BASF dates.
−−Numerous awards for BASF Investor Relations Subscribe at: basf.com/share/newsletter
14 To our shareholders BASF on the capital market BASF Report 2011

Key BASF share data1

2007 2008 2009 2010 2011

Year-end price € 50.71 27.73 43.46 59.70 53.89
Year high € 50.81 52.41 43.95 61.73 69.40
Year low € 35.98 19.95 20.71 39.43 43.66
Year average € 44.50 38.88 31.62 46.97 57.02

Daily trade in shares2

 million € 298.3 282.1 157.4 197.5 265.7
 million shares 6.7 7.3 5.0 4.2 4.7

Number of shares December 313  million shares 956.4 918.5 918.5 918.5 918.5
Market capitalization December 31  billion € 48.5 25.5 39.9 54.8 49.5

Earnings per share € 4.16 3.13 1.54 4.96 6.74

Adjusted earnings per share4 € – 3.85 3.01 5.73 6.26
Dividend per share € 1.95 1.95 1.70 2.20 2.50
Dividend yield5 % 3.85 7.03 3.91 3.69 4.64
Payout ratio  % 45 62 111 44 37
Price-earnings ratio (P/E ratio)5 12.2 8.9 28.2 12.0 8.0

1
All values adjusted for two-for-one stock split conducted in the second quarter of 2008
2
Average, Xetra trading
3
After deduction of shares earmarked for cancellation
4
Calculated since 2008
5
Based on year-end share price

Further information

Securities code numbers International ticker symbol

Germany BASF11 Deutsche Börse BAS
Great Britain 0083142 London Stock Exchange BFA
Switzerland 323600 Swiss Exchange AN
United States (CUSIP Number) 055262505
ISIN International Stock Identification Number DE000BASF111
BASF Report 2011

Management’s Analysis

2
The BASF Group
Strategy and values 16

Management’s Analysis
Our goals 20
Markets, structures and organization 22
Value-based management 24
Sustainability management 25
Value added statement 27
Innovation 28
The business year at BASF
Trends in the global economy 30
Trends in key customer industries 31
Trends in the chemical industry 32
Business review of the BASF Group 33
Consolidated balance sheets 37
Liquidity and capital resources 39
Business review by segment 42
Chemicals 44
Plastics 50
Performance Products 55
Functional Solutions 63
Agricultural Solutions 68
Oil & Gas 73
Regional results 79
Employees and society
Employees 83
Occupational safety and health protection 88
Social commitment 89
Environment and safety
Environmental, safety and security management 90
Climate protection 95
Energy and raw materials 98
Water 100
Product stewardship 102
Forecast
Opportunities and risks report 104
Economic environment in 2012 113
BASF Group outlook 116
16 Management’s Analysis The BASF Group
Strategy and values
BASF Report 2011

Strategy and values

BASF aims to strengthen its position as the world’s lead- We combine economic success, social responsibility and envi­
ing chemical company. We describe how we intend to ronmental protection. Through science and innovation, we
achieve this in our “We create chemistry” strategy, which ­enable our customers in almost all industries to meet the ­current
we presented in November 2011. This strategy builds on and future needs of society.
our success in recent years and defines ambitious goals Sustainability is becoming increasingly important as a key
for the future. factor for growth and value creation. Customers want sustain­
able products and system solutions, and the company’s
In 2050, around nine billion people will live on this planet. On the ­employees expect BASF to integrate sustainability firmly into its
one hand, this population growth is associated with enormous day-to-day activities. That is why we will integrate sustainability
global challenges but we also see many opportunities, espe­ much more closely into our business.
cially for the chemical industry. We expect the chemical indus­ Our position as the leading chemical company opens up
try to grow particularly strongly in the emerging economies, and unique opportunities for us to contribute to a sustainable future.
that these markets will account for around 60% of global chem­ We act in accordance with four strategic principles.
ical production by 2020. Innovations based on chemistry will
play a key role in three areas in particular: Our strategic principles

−−Resources, environment and climate We add value as

−−Food and nutrition one company
−−Quality of life

BASF’s products and solutions will contribute to conserving We innovate to make our
r­ esources, ensuring healthy food and nutrition, and improving customers more successful
quality of life. Sustainability and innovation will be significant
driving forces.
We drive sustainable
Our purpose solutions

We create chemistry We form the

for a sustainable future best team

Updated strategy Our purpose

−−Our “We create chemistry” strategy builds on our −−We create chemistry for a sustainable future
success in recent years and defines ambitious goals
for the future
−−Innovations based on chemistry will play a key role in
three areas in particular: resources, environment and
climate; food and nutrition; and quality of life
BASF Report 2011 The BASF Group
Strategy and values
Management’s Analysis
17

We add value as one company. Our Verbund system is unique Our values
in the industry. We plan to strengthen this sophisticated and In developing the “We create chemistry” strategy, we have also
profitable system even further. It extends from the Production defined our values more precisely. These were discussed
Verbund and Technology Verbund to the Know-How Verbund, beforehand in workshops around the world with employees from
and provides access to all relevant customer industries world­ different functions and levels within the organization. It is impor­
wide. In this way, we combine our strengths and add value as tant that each and every member of the BASF team understands
one company. our corporate values and acts accordingly. This is because our
We innovate to make our customers more successful. values are an integral part of bringing our purpose as a com­
We want to focus our business even more strongly on our cus­ pany to life: “We create chemistry for a sustainable future.” They
tomers’ needs and contribute to their success with innovative guide how we interact with society, with our partners and with
and sustainable solutions. In doing so, the focus of innovation each other.
is shifting from individual chemicals to customized products,
functionalized materials and system solutions. Through close Creative
partnerships with customers and research institutes, we link In order to find innovative and sustainable solutions, we have
­expertise in chemistry, biology, physics, materials sciences and the courage to pursue bold ideas. We bring together our know-
engineering to create new solutions. how in many different fields and build partnerships to develop
We drive sustainable solutions. In the future, sustainabil­ creative, value-adding solutions. We also constantly work to
ity will increasingly become a starting point for new business ­improve our products, services and solutions.
opportunities. We therefore value sustainability and innovation
as important drivers for profitable growth. Open
We form the best team. Committed and qualified employ­ We value diversity – in people, opinions and experience. That is
ees around the world are the key to making our contribution to why we foster dialog based on honesty, respect and mutual
a sustainable future. That is why we will continue to pursue our trust. We continually explore our talents and capabilities.
goal of building the best team. We offer excellent working con­
ditions and an open leadership culture that fosters mutual trust Responsible
and respect and encourages high motivation. We act responsibly as an integral part of society, strictly adher­
ing to our compliance standards. And we never compromise on
safety.

Entrepreneurial
We all contribute to BASF’s success, as individuals and as a
team. BASF turns market needs into customer solutions. We
succeed in this because we take ownership and embrace
­accountability for our work.

Our strategic principles Our values

−−We add value as one company −−Creative

−−We innovate to make our customers more successful −−Open
−−We drive sustainable solutions −−Responsible
−−We form the best team −−Entrepreneurial
18 Management’s Analysis The BASF Group
Strategy and values
BASF Report 2011

Ambitious growth and profitability targets Innovations for a sustainable future

As part of developing our strategy, we have defined goals that Innovations will play an important part in enabling us to achieve
we aim to meet by 2020. We forecast that worldwide chemical our growth targets. In 2020, we aim to generate €30 billion of
production will grow faster than global gross domestic product our sales and €7 billion of our EBITDA with innovative products
(GDP) through 2020. Based on 2010, we expect GDP to grow that will have been on the market for less than 10 years. Inno­
by an average of 3% per year, which would be slightly faster than vations in the chemical industry are nowadays not just based
in the past 10 years. on the development of new chemicals, but increasingly on new
From baseline 2010, chemical production is estimated to materials and system solutions. These are the result of the com­
grow on average by 4% per year. We continue to aim to grow bination of expertise from a variety of disciplines. For us, inno­
two percentage points faster than global chemical production vations of this kind require a broad portfolio and interdisciplin­
and thus increase sales by an average of 6% per year until 2020. ary cooperation as well as a deep understanding of technology
We have set ourselves the ambitious goal of earning a premium and our customers’ value chains.
on our cost of capital of at least €2.5 billion on average each Based on the three key areas – resources, environment and
year. climate; food and nutrition; quality of life – we have focused on
Based on the conditions listed above, we aim to increase seven primary customer industries in which we use our chem­
sales to approximately €85 billion by 2015 and to approximately istry to contribute to solutions, and thus continue to grow prof­
€115 billion by 2020. We expect all regions to contribute to this itably: transportation, construction, consumer goods, health and
sales growth: Europe with €53 billion in sales in 2020, Asia nutrition, electronics, agriculture, energy and resources. These
­Pacific with €29 billion, North America with €22 billion and South industries result in new growth fields in which we can make a
America, Africa, Middle East with €11 billion. We also want to decisive contribution to innovative and sustainable solutions for
increase profitability, as well, aiming for an EBITDA of about global challenges. Examples of these growth fields include bat­
€15 billion in 2015 and around €23 billion in 2020. Our updated tery materials, plant biotechnology and water treatment.
strategy also includes, for the first time, a goal for earnings per For more on innovation, see page 28
share: Our target is to increase earnings to approximately €7.50
per share by 2015. Business expansion in emerging markets
A new strategic excellence program, STEP, serves to BASF’s sales to customers in emerging markets have almost
strengthen our competitiveness and profitability. By the end of t­ripled in the past 10 years and accounted for approximately
2015, STEP is expected to contribute around €1 billion to earn­ one-third of total sales (excluding Oil & Gas) in 2011. By 2020,
ings each year. This program, which follows on from our suc­ we aim to significantly increase sales to customers in emerging
cessfully completed excellence program NEXT, includes mea­ markets to around 45% of total sales (excluding Oil & Gas).
sures in the areas of production, engineering, maintenance, ­Investments will also make an important contribution to our
logistics, procurement and administration. STEP comprises growth. Between 2011 and 2020, we plan capital expenditures
more than 100 projects that are expected to lower fixed costs of €30 billion to €35 billion. More than one-third of this amount
and raise profit margins. will be invested in emerging markets in order to strengthen our
leading position.
For more on growth in emerging markets, see page 31 and page 82

Growth targets Profitability targets

−−At least two percentage points faster than chemical −−Average premium on cost of capital of at least
production €2.5 billion on average each year
−−Sales of approximately €85 billion in 2015 −−EBITDA of approximately €15 billion in 2015
−−Sales of approximately €115 billion in 2020 −−Doubling EBITDA compared with 2010 to approximately
−−All regions contribute to growth €23 billion in 2020
BASF Report 2011 The BASF Group
Strategy and values
Management’s Analysis
19

Global standards Code of Conduct and compliance

With our “We create chemistry” strategy, we have more pre­ For us, compliance means the duty to comply with laws and
cisely defined the values which guide our actions. Based on our ­internal corporate directives. This takes place within the frame­
value of acting responsibly as an integral part of society, our work of our corporate governance system, which encompasses
standards are aligned with internationally recognized principles the management and monitoring of the company. The system
and fulfill or exceed existing laws and regulations. We respect includes organization, corporate principles and guidelines as
and promote well as internal and external control and monitoring mecha­
nisms. Our value “We strictly adhere to our compliance stan­
−−the 10 principles of the U.N. Global Compact, dards” ensures that this standard is a mandatory part of every­
−−the Universal Declaration of Human Rights and both United day operations for all employees. Observance of this value is a
Nations covenants on human rights, component in our senior executives’ target agreements.
−−the ILO’s core labor standards and Tripartite Declaration of Based on our worldwide standards, our Group companies
Principles concerning Multinational Enterprises and Social have created Codes of Conduct for the regions, taking into
Policy (MNE Declaration), ­account local laws and rules. These Codes are binding for all
−−the OECD Guidelines for Multinational Enterprises, employees in the respective countries; they are explained and
−−the Responsible Care Global Charter, and incorporated into daily business operations. Mandatory compli­
−−the German Corporate Governance Code. ance training for all employees is an important prerequisite for
successful implementation of the Codes of Conduct. Moreover,
Numerous international principles outlining responsible corporate employees have a number of potential contacts in addition to
actions were revised and adopted in 2011. We took an active part their supervisors if they want to discuss questions or seek ­advice
in various initiatives, such as the U.N. Guiding Principles, OECD and help: our legal and human resources departments, compli­
Guidelines and ISO 26000 on social responsibility. BASF wel­ ance ­officers and our external compliance hotlines.
comes such efforts to create generally recognized principles. We For more on compliance, see page 123
will continue our constructive contribution to the international dis­
cussion and align our internal guidelines and processes accord­
ingly.
We stipulate rules for our employees with standards that
­apply Group-wide. We set ourselves ambitious goals for observ­
ing voluntary commitments and review our environmental, health
and safety performance using our Responsible Care Manage­
ment System. A three-pronged monitoring system ensures our
compliance with labor and social standards. Our business part­
ners are expected to align their actions with internationally rec­
ognized principles, and we have established management
­systems to monitor this.
 or more on environmental, health and safety management as well
F
as audits, see page 90 onward
 or more on our monitoring system for labor and social standards,
F
see page 25 and page 90 onward

Global standards Code of Conduct and compliance

−−We act according to clearly defined values and standards −−Binding standards of conduct ensure that our values are
of conduct that fulfill or go beyond laws and regulations firmly established in day-to-day business activities
−−We review our performance with monitoring systems and −−Mandatory compliance training for all employees
regular audits −−External compliance hotlines offer advice and assistance
−−We support the chemical industry’s global Responsible to employees around the world
Care initiative
20 Management’s Analysis The BASF Group
Our goals
BASF Report 2011

Our goals

Economic goals1

Annual Goals 2015 Goals 2020 Goals Status at year-end 2011

Growth Sales of approx. €85 billion Sales of approx. €115 billion Sales of €73.5 billion

Profitability We earn a premium on our cost of

We earned a premium of
capital of at least €2.5 billion on
€2.6 billion on our cost of capital
average per year

EBITDA of approx. €15 billion Doubling EBITDA compared with EBITDA of €12 billion
2010 to approx. €23 billion

Earnings per share of around €7.50 Earnings per share of €6.74

1
Our goals are based on the assumptions that we will continue to grow two percentage points faster than global chemical production annually and that global gross
domestic product will grow by an average of 3% every year until 2020 and worldwide chemical production by 4% every year.

Environment, safety and product stewardship

Status at
2020 Goals year-end 2011 More on
Energy and climate protection
Emissions of greenhouse gases per metric ton of sales product2 (baseline 2002) –40% –34.6% page 95
Improvement of energy efficiency in production processes2 (baseline 2002) ­­+35% +26.2% page 98

Stop the flaring of associated gas that is released during crude

100% >95% page 95
oil production by Wintershall (2012 Goal)

Reduction in emissions from BASF operations (excluding Oil & Gas)

Emissions of air pollutants2 (baseline 2002) –70% –60.5% page 93
Emissions to water3 of organic substances (baseline 2002) –80% –73.5% page 100
Abstraction of drinking water for production (baseline 2010) –50% –20.9% page 100

Introduction of sustainable water management at production sites

100% 2.0% page 100
in water stress areas

Transportation safety
Transportation accidents (baseline 2003) –70% –67.9% page 93
Product stewardship

Risk assessment for all products sold worldwide by BASF in quantities of more than
>99% 29.5% page 102
one metric ton per year

2
Excluding oil and gas production
3
Assuming comparable product portfolio

EBITDA 2011 Energy efficiency

(2020 Goal: approximately €23 billion) Improvement in energy efficiency in

production processes, baseline 2002 (2020 Goal: +35%)

€12 billion +26%

BASF Report 2011 The BASF Group
Our goals
Management’s Analysis
21

Employees and society

Status at
2020 Goals year-end 2011 More on
Occupational safety
Lost time injury rate per million working hours (baseline 2002) –80% –42.0% page 88
Health protection
Health Performance Index (annual goal) >0.9 0.86 page 88

Status at
Executives Long-term Goals year-end 2011 More on

Increase in the proportion of non-German senior

International proportion of senior executives 33.0% page 84
executives (baseline 2003: 30%)

Proportion of senior executives with international

Senior executives with international experience 79.7% page 84
experience over 70%

Women in executive positions Increase in the proportion of female executives worldwide 16.2% page 84
Employees Long-term Goal

Establish a common understanding that personnel Implementation

Personnel development development is a responsibility shared by employees and has started in all page 85
managers and develop related processes and tools regions

Occupational safety Executives

Lost time injury rate per million working hours, International proportion of non-German senior executives,
baseline 2002 (2020 Goal: – 80%) baseline 2003 (Goal: >30%)

–42% 33%
22 Management’s Analysis The BASF Group
Markets, structures and organization
BASF Report 2011

Markets, structures and organization

The world’s leading chemical company – The Chemical Company

We are the world’s leading chemical company: The both primary resources and costs. Another important part of
­Chemical Company. Around 111,000 employees work the Verbund concept is the Know-How Verbund. Expert know­
in the BASF Group, helping our customers from nearly ledge is pooled in our technology platforms.
all ­sectors and almost every country in the world to For more on the Verbund concept, see basf.com/verbund_e
be more successful. Our broad portfolio is arranged into
six ­segments: Chemicals, Plastics, Performance Prod- Organization of the BASF Group
ucts, Functional Solutions, Agricultural Solutions and BASF’s six business segments contain 15 divisions which bear
Oil & Gas. the operational responsibility and manage our 70 global and
regional business units. The divisions develop strategies for our
Markets and sites 76 strategic business units and are organized according to
BASF has subsidiaries in more than eighty countries and sup­ sectors or products.
plies products to a large number of business partners in nearly The regional divisions contribute to the local development
every part of the world. In 2011, we achieved 53% of our sales of our business and help to exploit market potential. They are
with customers in Europe, of which 30 percentage points were also responsible for optimizing the infrastructure for our busi­
in the Oil & Gas segment. In addition, 19% of sales were gener­ ness. For financial reporting purposes, our divisions are grouped
ated in North America; 20% in Asia Pacific; and 8% in South into the following four regions: Europe; North America; Asia
America, Africa, Middle East. ­Pacific; and South America, Africa, Middle East.
We operate six Verbund sites as well as approximately 370 Three central divisions, five corporate departments and ten
additional production sites worldwide. Our Verbund site in competence centers provide Group-wide services such as
Ludwigshafen is the largest integrated chemical complex in the finance, investor relations, communications, human resources,
world. This was where the Verbund concept was developed and research, engineering and site management.
continuously optimized before it was applied to other sites
around the world.
The Production Verbund, for example, intelligently links pro­
duction units and energy demands so that heat from produc­
tion processes can be used as energy in other plants, saving

Structure of BASF
Segments

Chemicals Plastics Performance Functional Agricultural Oil & Gas

Products Solutions Solutions

Divisions

– Inorganics – Performance – Dispersions & – Catalysts – Crop Protection – Oil & Gas
– Petrochemicals Polymers Pigments – Construction (Exploration &
– Intermediates – Polyurethanes – Care Chemicals Chemicals Production, Natural
– Nutrition & Health – Coatings Gas Trading)
– Paper Chemicals
– Performance
Chemicals

The BASF Group Organization of the BASF Group

−−Six Verbund sites and around 370 other production sites −−Six segments contain 15 divisions that manage
worldwide; approximately 111,000 employees our global and regional business units
−−Ludwigshafen is the largest BASF Verbund site and where −−Regional divisions optimize the infrastructure
the Verbund concept was created and support operations
−−Verbund: intelligent plant networking in the Production −−Corporate divisions and departments as well as
Verbund; Know-How and Research Verbund competence centers provide Group-wide services
BASF Report 2011 The BASF Group
Markets, structures and organization
Management’s Analysis
23

Corporate legal structure controlled entities with one or more partners on a proportional
As the publicly-traded parent company of the BASF Group, basis. We also include 13 companies using the equity method.­
BASF SE takes a central position: Directly or indirectly, it holds  or more, see the Notes to the Consolidated Financial Statements from
F
page 156 onward
the shares in the companies belonging to the BASF Group, and
is also its largest operating company. The majority of Group com­
panies cover a broad spectrum of our business. Some concen­ Compensation report and disclosures
trate on specific business areas: the Wintershall Group compa­ in accordance with section 315 (4) German
nies, for example, focus on oil and gas activities. In the BASF Commercial Code
Group Consolidated Financial Statements, 292 companies inclu­  he compensation report can be found from page 129 onward, and
T
the disclosures required by takeover law in accordance with section
ding BASF SE are fully consolidated. We consolidate 24 jointly 315 (4) German Commercial Code from page 124 onward. They form
part of the Management’s Analysis audited by the external auditor.
BASF sites

Ludwigshafen

R
Antwerp
R
R
R
R Florham Park
Nanjing
R

Freeport R
Geismar

Hong Kong
R

Kuantan
R
Singapore

São Paulo

Regional centers Selected production sites Verbund sites R Most important research sites

Corporate legal structure Most important research sites

−−BASF SE is the publicly-traded parent company of −−Europe: Ludwigshafen, Basel, Düsseldorf

the BASF Group −−North America: Raleigh, Iselin, Wyandotte
−−292 companies fully consolidated in the Consolidated −−Asia Pacific: Shanghai, Singapore, Mumbai
Financial Statements −−South America: Guaratinguetá
−−24 joint ventures included on a proportional basis
−−13 additional companies included using the equity
method
24 Management’s Analysis The BASF Group
Value-based management
BASF Report 2011

Value-based management
We add value as one company

“We add value as one company” is one of the four prin- An EBIT threshold is determined based on the cost of capital
ciples of our “We create chemistry” strategy. To create and income taxes. Together, the BASF Group’s operating units
value in the long term, a company’s earnings must need to reach this threshold in order to earn the cost of capital.
exceed the costs of equity and debt capital. This is why The cost of capital percentage is the relationship between this
we strive to earn a premium on our cost of capital of at minimum EBIT level and the assets of the BASF Group’s oper­
least €2.5 billion on average per year. To secure BASF ’s ating units. In 2011, the cost of capital percentage was 11%; in
long-term success, we encourage all employees to think 2012, it will be at the same level.
and act entrepreneurially within the framework of our
value-based management concept. Our goal: to create Value-based management throughout the company
awareness about how every employee can find value-­ Value-based management is only successful if it is firmly rooted
oriented solutions and implement these in an efficient in the company. For us, value-based management is the daily
and effective manner in day-to-day business. value-oriented performance of all our employees. We have iden­
tified value drivers that show how each individual business unit
EBIT after cost of capital can create value. We develop key figures for the individual value
Earnings before interest and taxes (EBIT) after cost of capital is drivers that help us to plan and pursue changes.
the key performance and management indicator for our oper­ An important factor in ensuring the successful implemen­
ating divisions and business units. This figure takes into account tation of value-based management is linking the goals of BASF
that BASF’s shareholders and creditors expect a return on the to the individual target agreements of employees. In the oper­
capital they provide. The BASF Group creates added value only ating units, achievement of positive EBIT after cost of capital is
when EBIT covers at least the cost of capital. the most important performance indicator. In contrast, the value
contribution of the functional units is evaluated on the basis of
Calculation of the cost of capital percentage effectiveness and efficiency.
The cost of capital percentage depends primarily on three According to our value-based management concept, all
factors: employees can make a contribution in their business to help
­ensure that we earn the targeted premium on our cost of capi­
– the capital structure of the BASF Group, tal. Around the world, we raise awareness of this topic among
– the level of interest rates on debt, and our team through numerous training programs, thereby promot­
– the return expected by shareholders. ing more entrepreneurial thinking at all levels within BASF.

Borrowing costs comprise interest payments for bank loans and

liabilities to the capital markets. The cost of equity corresponds
to the returns expected by providers of equity. This is deter­
mined by the market value of BASF shares and with the help of
the Capital Asset Pricing Model (CAPM).

t
s ier
tu ali
ak
w ird
EBIT after cost of capital (million €) Calculation of EBIT after cost of capital (million €)
Five-year summary1
2011 2010
2011 2,551 EBIT BASF Group 8,586 7,761
2010 3,500 less EBIT for activities not assigned to the segments1 178 (707)
2009 (226) less non-compensable foreign income taxes for oil
2008 1,621 production 439 983

2007 2,895 less cost of capital2 5,418 3,985

EBIT after cost of capital 2,551 3,500

1
Since January 1, 2008, Group corporate costs are no longer allocated to the 1
The projected net expense is already provided for by an increase in the cost
segments, but rather reported under Other. The previous years’ figures were of capital percentage.
not adjusted. 2
In 2010, the cost of capital percentage was 9%; in 2011, it was 11%.
BASF Report 2011 The BASF Group
Sustainability management
Management’s Analysis
25

Sustainability management

Sustainability is firmly embedded in our strategy and Stakeholder engagement

­organization and is integrated into our core processes. We foster an ongoing exchange with our stakeholders. These
Sustainability management supports our strategic include employees, customers, suppliers and shareholders, as
principle “We drive sustainable solutions,” helping us to well as experts in science, industry, politics, society and media.
put our company’s purpose – “We create chemistry for a We have a particular responsibility toward our production sites’
sustainable future” – into practice. neighbors, and discuss current issues with them in 85 Commu­
nity Advisory Panels (CAPs). In 2011, for example, we provided
Strategy extensive information to the residents of Chongqing, China,
We define sustainability as the balance between economic about our plans to construct a production facility for diphenyl­
success, social responsibility and environmental protection. Our methane diisocyanate (MDI) and offered them a platform for
sustainability management has three strategic responsibilities: questions and discussion.
Minimizing risks, taking advantage of business opportunities We provide transparent communication about our activi­
and establishing strong relationships with our internal and ties and take on critical questions. Social media is one way in
­external stakeholders. We minimize risks by identifying relevant which we are expanding our direct dialog with our stakehold­
issues early on and through operational excellence in our busi­ ers. An open exchange with consumers, non-governmental
ness processes. We take advantage of business opportunities ­organizations, policy makers and the public is very important
by helping our customers offer innovative and sustainable for the successful introduction of products based on new tech­
solutions. We engage in ongoing open dialog with our stake­ nologies. For example, we have been involved in international
holders from, for example, business, society and politics. dialogs on nanotechnology since 2004. In 2011, we expanded
the number of participants in our Dialog Forum Nano, founded
Minimizing risks in 2008. In addition to representatives of environmental, con­
We set ourselves globally consistent standards. We use various sumer and ­religious groups, we also invited representatives of
systems to monitor whether and how our sites adhere to these consumer-oriented businesses.
standards for environment, safety and product stewardship. BASF is actively involved in local Global Compact networks.
Furthermore, we check to make sure they fulfill commitments We have had a representative in the Global Reporting Initiative
to ­labor and social standards as well as compliance. We Stakeholder Council since the beginning of 2012.
conduct internal audits on process safety, occupational health For more on the stakeholder dialog, see basf.com/dialog_e
and safety, and environmental protection. We review labor and
social standards based on a three-part monitoring system. This Business opportunities with sustainability
includes an ­external compliance hotline, a survey in our Group Our innovative strength and expertise support our customers in
companies and dialog with employee representatives and global developing sustainable products and processes. We measure
organizations. In addition to economic criteria, our suppliers are their satisfaction with our Non Conformance Management
selected on the basis of environmental protection, labor and system, which centrally records any difficulties customers
social standards. experience with processes or products. This analysis allows us
For more on standards, on the implementation of requirements to learn from mistakes, decrease costs and continually ­improve
related to environment, health, safety and security, and on internal
audits, see page 88 and page 90 onward
our performance.
For more on compliance, see page 123; for more on our monitoring
system for labor and social standards, see basf.com/audits_e
For more on supply chain management, see page 92

Strategy Stakeholder engagement

−−Sustainability management supports our corporate −−BASF fosters ongoing exchange with its stakeholders
purpose: “We create chemistry for a sustainable future” −−Participants in Dialog Forum Nano expanded to
−−Strategic responsibilities: minimizing risks, taking include consumer-oriented businesses
advantage of business opportunities and establishing −−Engagement in local Global Compact networks
strong r­ elationships with stakeholders
26 Management’s Analysis The BASF Group
Sustainability management
BASF Report 2011

Our business units investigate how they can support custom­ water, product stewardship, renewable resources, biodiversity
ers and suppliers in terms of sustainability. For example, in our and ­human capital development as well as human and labor
S.E.T. (Sustainability, Eco-efficiency, Traceability) initiative, we rights.
help food and feed producers to improve the sustainability of We have already reached our goals for climate protection
their products and processes along the value-adding chain. In and energy efficiency ahead of schedule, along with two of our
2011, we supported our customers in optimizing the compound goals for water management, and in 2011 we defined new global
feed for farmed salmon. We also help our customers in emerg­ targets for these issues. We are advancing our ambitious goals
ing markets to reduce their greenhouse gas emissions in accor­ in product stewardship. Based on the materiality analysis and
dance with the U.N.’s Clean Development Mechanism projects. ­issues identified, our sustainability management is continuously
For this, we offer catalysts that decompose nitrous oxide as well evolving.
as advice on project implementation. For more on materiality analysis, see basf.com/materiality
Since 1996, we have used our Eco-Efficiency Analysis to For more on renewable resources, see
basf.com/resource_conservation
identify critical parameters for improving the environmental and
For more on climate protection, see page 95 onward; for
economic aspects of products and processes – from raw more on water, see page 100 onward; for more on
­material extraction to disposal. We are also contributing our product stewardship, see page 102 onward

­expertise to the drafting of the international norm ISO 14045, For more on biodiversity, see basf.com/biodiversity and page 103

which outlines systems for eco-efficiency analysis. In addition,

we use our Socio-Eco-Efficiency Analysis, SEEBALANCE®, to Organization
consider social impacts. We used the experience gained from Our globally responsible Sustainability Council is the decision-
these activities to develop AgBalance®. AgBalance makes it making body for the sustainability issues most important to us.
possible to measure and analyze the sustainability of agricul­ It ensures that our actions are guided by sustainable develop­
tural production along the entire value-adding chain. BASF ment. The Chairwoman of the Council is Board member Margret
worked closely with stakeholders in the farming sector, such as Suckale. The Council comprises ten heads of functional, oper­
interest groups and non-government organizations, in the ating and regional divisions, including the Climate Protection
­development of AgBalance. ­Officer. Regional steering committees identify focus areas in the
For more on Eco-Efficiency Analysis and SEEBALANCE, regions, propose relevant projects and implement global deci­
see basf.com/eco-efficiency
sions. Operating division units are responsible for the establish­
For more on AgBalance, see basf.com/agbalance_e and page 103
ment and maintenance of worldwide networks and advance
concepts for improved sustainability and product stewardship.
Identifying and assessing important issues The Sustainability Center coordinates the implementation of the
In order to identify areas that could represent opportunities or sustainability strategy in all core processes, liaising between
risks for our business now or in the future, we regularly analyze the Sustainability Council, regional steering committees and
issues in terms of their significance for society and BASF. In ­specialist units.
2010, we surveyed several hundred stakeholders for our For more on the Sustainability Council, see basf.com/sustainability
­materiality analysis. Subsequently, BASF’s experts from several
functions assessed the strategic importance of these topics
and, in 2011, prioritized the sustainability issues that are of par­
ticular significance for BASF. These include energy and climate,

Business opportunities with sustainability Identifying and assessing important issues

−−Eco-Efficiency Analysis and SEEBALANCE as −−Sustainability issues identified based on stakeholder

strategic tools for evaluating the sustainability ­survey within the scope of materiality analysis
of products and processes −−Energy and climate, water, product stewardship,
−−Development of AgBalance, instrument for measuring and renewable resources, biodiversity, human capital
evaluating the sustainability of agricultural production development and human and labor rights prioritized as
material issues
BASF Report 2011 The BASF Group
Value added statement
Management’s Analysis
27

Value added statement

Our value added statement shows the BASF Group’s fits. In addition, a significant share of value added was distrib­
contribution to both private and public income, and how uted to the state as taxes. This amounted to €2,711 million
our economic activities provide value to society. compared with €2,583 million in the previous year.
In 2011, BASF spent a total of €48.7 million on donations,
Value added results from the company’s business performance sponsorship and funding for our own projects (2010: €49.8 mil­
minus goods and services purchased as well as depreciation lion). This amount is reported in “other expenses.”
and amortization. In contrast to the income statement, which The remaining value added of €6,188 million was available
is based on the perspective of the owners, the distribution to be paid out as a dividend to BASF SE shareholders or
statement takes into account all the stakeholders in this value- retained.
adding process: employees, the state, other companies, lend­ For more on wages and salaries, see page 83 and page 171 onward;
for more on taxes, see page 169 onward; and for more on donations
ers and shareholders. and sponsorship, see page 89
BASF Group’s value added amounted to €18,652 million in
2011. This was an increase of 12% compared with the previous
year (2010: €16,658 million). The rise was primarily attributable
to the increase in the business performance. The greatest share
of value added was distributed to our employees, who received
€8,576 million in the form of wages, salaries and social bene­

Value added statement BASF Group 2011

Use of value added

Creation of value added (previous year’s figures in parentheses)
(million €, previous year’s figures in parentheses)

1 Value added 18,652 (16,658)

46.0% Employees
(49.4%)

2 Amortization
and depreciation
3,407 (3,370) 1
14.5% Taxes
(15.5%)
3 Services purchased, 12,656 (11,459) Business
energy costs and
4
performance
2
2.2% Minority interests
(3.1%)
other expenses 76,701 (65,496)
4 Cost of raw
materials and
41,986 (34,009)
3
4.1% Creditors
(4.6%)
merchandise
33.2% Remaining for shareholders
(dividend and retention)
(27.4%)

Value added statement Use of value added

−−BASF Group’s financial contribution to private −−€8,576 million for employees

and public income −−€2,711 million for taxes
−−Increase of 12% compared with 2010 to €18,652 million −−€6,188 million in remaining value added, to be paid as a
dividend to BASF SE shareholders or retained
28 Management’s Analysis The BASF Group
Innovation
BASF Report 2011

Innovation
Meeting challenges, developing new business areas

Innovation based on research and development is the components for the mobility of the future. Together with auto­
foundation of BASF ’s strategy for profitable growth and mobile manufacturer Daimler, we have developed the smart
long-term business success. Highly-qualified employees ­forvision concept car, which combines our ideas for compre­
are working in international and interdisciplinary teams hensive electric mobility. In the smart forvision, special empha­
to find answers to the challenges of the future. With our sis was placed on energy efficiency, temperature management
innovative products and processes, we provide solutions and lightweight ­design. In such projects, BASF’s innovations set
for nearly all industrial sectors. new standards.
For more on the smart forvision, see smartforvision.basf.com
The rapidly growing world population presents society with
special challenges. The demand for food, clean water and Our research pipeline included approximately 2,800 projects in
energy is growing and society’s needs are increasing, but 2011. Expenditures on research and development increased by
resources are finite. Sustainable solutions are therefore required €113 million to €1,605 million (2010: €1,492 million). The operat­
– and chemistry can make an important contribution. ing divisions accounted for 77% of research expenditures, while
Our innovative strength rests on our global team of highly the remaining 23% was allocated to cross-divisional, strategic
qualified employees with various specializations. In 2011, the corporate research. Around one third of our research and
number of employees involved in research and development development expenditure was once again invested in projects
rose to around 10,100 (2010: 9,600). for increased energy efficiency and climate protection. We aim
We were able to further expand our Know-How Verbund to achieve sales of around €30 billion in 2020 with innovations
through the newly added research and development activities – new and improved products or applications that have been
of Cognis. We maintain our own research site in Düsseldorf, on the market for 10 years or less.
where we concentrate on topics pertaining to surfactants, One way in which a company measures its innovative power
renewable raw materials and lipid biotechnology. The establish­ is by the number and quality of its patents. In 2011, BASF filed
ment of the first Innovation Campus Asia Pacific is a step for around 1,050 new patents worldwide. Furthermore, we
forward in our goal to make our research activities more global. ranked first in the Patent Asset IndexTM for the third time in
This research and development center will accommodate succession. This method, which compares patent portfolios
around 450 employees at the site in Shanghai, China, and is industry-wide, found BASF to be the most innovative company
scheduled to open in the second half of 2012. It will strengthen in the chemical industry worldwide.
our activities in innovation for the Asian market, helping us to  or a multi-year overview of research and development
F
expenditures, see the Ten-Year Summary on page 221
serve the needs of this rapidly growing market even better.
Another integral component of our Know-How Verbund is
a network of around 1,950 cooperative partnerships around the BASF’s research focus areas
world with universities, research institutions, partners in indus­ Our forward-looking research projects, in which we search for
try and start-up companies. For example, we opened the jointly answers to pressing societal issues, are derived from global
operated laboratory BELLA (Battery and Electrochemistry Lab­ megatrends; until the end of 2011, these were grouped into five
oratory) with the Karlsruhe Institute of Technology in 2011. There, growth clusters.
we explore innovative materials and functional components for Our goal in the Plant Biotechnology growth cluster is to
the battery generations of today and tomorrow – because high- make targeted improvements to the properties and character­
performance, affordable batteries for everyday use are the key istics of plants. For example, we worked together with Monsanto

Innovation Expenditure on research and development by segment

1
1 Chemicals 8%
−−Around 10,100 research and development 7
2
2 Plastics 9%
employees worldwide
3 Performance Products 21%
−−Research pipeline with around 2,800 projects
4 Functional Solutions 12%
6 €1,605
−−€1,605 million in research and development million 3
5 Agricultural Solutions 26%
expenditures in 2011
6 Oil & Gas 1% 5

7 Corporate research, Other 23% 4

BASF Report 2011 The BASF Group
Innovation
Management’s Analysis
29

to develop the world’s first genetically modified drought-toler­ example, allows the body to absorb medications better or gives
ant variety of corn (maize). This corn was approved for cultiva­ our customers more control over the hardening process of
tion in the United States in December 2011. It will be grown on concrete.
selected farms in the United States starting in 2012 in order to We concluded the growth cluster initiative in 2011 and
familiarize farmers with the product. ­enhanced our research and development activities within the
In the White Biotechnology growth cluster, we use micro­ scope of the “We create chemistry” strategy. In the future, we
organisms and enzymes to synthesize chemical products. will focus more intently on the market and our customers’ needs.
We want to conduct extensive research on the suitability of We are broadening our long-term research activities to encom­
algae, for example, as a production organism for synthesizing pass the development of new business areas. We have identi­
specialty chemicals, such as those for the cosmetics and food fied more than ten growth fields – such as batteries, ­water treat­
industries. To this end, we started up a pilot plant for algae ment and organic electronics – that represent attractive business
cultivation in 2011. opportunities in our target industries. In addition, we are focus­
In the Raw Material Change growth cluster, we are research­ ing on three pioneering technology areas that provide the tech­
ing alternatives and supplements to crude oil as a raw material nological basis for the development of future-oriented solutions:
for the chemical industry. In the future, we want to synthesize ­Materials, Systems & Nanotechnology; Raw Material Change;
important basic chemicals from natural gas or carbon dioxide, and White Biotechnology.
as well. One process, in which methane (the main component We have also redesigned our research processes and
of natural gas) is turned into benzene at high temperatures, has structures. Our knowledge and competence centers are the
proven especially promising. In addition, we are looking for ways central technology platforms Advanced Materials & Systems
to produce syngas from the feedstocks methane and carbon Research, Biological & Effect Systems Research, Process
dioxide. Syngas is a universal raw material for many chemi­ ­Research & Chemical Engineering as well as BASF Plant
cals. ­Science. These are supported by BASF Future Business and
The Energy Management growth cluster focuses on BASF Venture Capital, which primarily focus on identifying and
solving the energy questions of the future. Cooling systems promoting new business areas. Together with the development
which use the magnetocaloric effect use only half as much units in our operating divisions, as well as the research facilities
energy as conventional systems. We are working with the Dutch in key ­regions, these platforms form the core of our global Know-
Foundation for Fundamental Research on Matter to find new How Verbund. Through more efficient innovation management,
magnetocaloric materials with improved properties. Together we have laid the foundation for even more profitable growth.
with partners in industry, we are making the first appliances  or more on research and development, see basf.com/innovations;
F
for more on innovation in the segments, see page 44 onward
based on this technology ready for series production.
Our focus areas in the Nanotechnology growth cluster
­include formulating active ingredients for the pharmaceutical
­industry and additives for the construction sector. With the help
of nanoformulations and microfluidics, which we are working on
as part of the BASF Advanced Research Initiative at Harvard
University, we can introduce specific molecules into substrates
in order to create new or improve existing properties. This, for

Enhancing research activities Spotlight on electric mobility

−−Growth cluster initiative concluded in 2011 −−BASF’s innovations reduce energy consumption in
−−Research and development activities developed further electric cars, thereby increasing their range
in alignment with the “We create chemistry” strategy −−Comprehensive approach based on electricity
−−Stronger research orientation on the market and future generation, storage and use
growth fields −−Focus on new battery materials, lightweight design
and temperature management
−−smart forvision concept car developed in
collaboration with Daimler
30 Management’s Analysis The business year at BASF
Trends in the global economy
BASF Report 2011

Trends in the global economy

The strong growth momentum from the previous year In 2011, the U.S. economy grew only half as much as in the pre­
continued in the first half of 2011. However, this economic vious year and was weak overall (2010: +3.0%; 2011: +1.6%).
upturn was followed by significantly weaker growth in all Ongoing high unemployment rates particularly led to lower
regions in the second half of the year. This development spending among U.S. consumers. Furthermore, economic
was influenced by uncertainty in the financial markets as growth was negatively impacted by prolonged political debate
a result of the intensification of the national debt crises over raising the debt ceiling and necessary fiscal consolidation
in the eurozone and the United States. Compared with measures. The continued low level of construction investment
the previous year, global gross domestic product there- additionally slowed overall economic growth.
fore did not rise as sharply (+2.7%) as we had originally Although gross domestic product growth in Asia (exclud-
forecast for 2011 (+3.3%). ing Japan) was lower in 2011 than in the previous year, the
region nevertheless saw comparatively strong growth (2010:
Global gross domestic product growth (+2.7%) at the beginning +9.2%; 2011: +7.1%). The most important regional growth driver
of 2011 was driven by both the previous year’s economic ­upturn was China (+9.2%), where government investment programs
as well as by strong economic growth in the emerging markets. strengthened the domestic economy. However, higher interest
By contrast, negative growth impetus over the course of the year rates as well as the creation of overcapacities weakened both
came mainly from the industrialized countries: The intensifica­ consumer demand and investment activities in China. India also
tion of the national debt crises in the eurozone and the United posted strong growth (+7.6%).
States led to lower growth expectations, despite an overall good Economic output fell sharply in Japan following the earth­
level of incoming orders. Consumer confidence decreased. The quake and tsunami disaster in March 2011; gross domestic
decline in worldwide demand for goods dampened growth in product shrank (– 0.5%). The appreciation of the yen also neg­
international trade. atively impacted the export sector.
Growth slowed in South America in 2011 (2010: +6.4%;
Development by region 2011: +4.0%). While rising raw materials exports initially strength­
While gross domestic product in the European Union grew ened economic development, many countries in South Amer­
substantially in the first half of 2011, growth weakened in the ica experienced increasing inflation rates. In Brazil in particular,
second half. Private consumption in particular lost momentum. the Central Bank’s more restrictive monetary policy at the
Given the high national debt levels of some European countries, beginning of the year and higher interest rates dampened
there was considerable variation in growth rates. Overall, gross private consumption and investment activities.
domestic product grew almost as fast as in the previous year  or the forecast for the economic environment in 2012,
F
see page 113 onward
(2010: +1.8%; 2011: +1.6%). Germany in particular benefited from
good foreign demand for capital goods and posted a compar­
atively high level of economic growth (2010: +3.6%; 2011:
+3.0%).

Trends in the global economy in 2011 Gross domestic product 2011

Real change compared with the previous year

−−Increase in global gross domestic product (+2.7%) World 2.7%

weaker than in previous year and lower than European Union 1.6%
our original forecast (+3.3%) United States 1.6%
−−Significant growth slowdown in the second Asia (excl. Japan) 7.1%
half of the year Japan (0.5%)
−−Uncertainty in the financial markets due to South America 4.0%
intensification of the national debt crises
in the eurozone and the United States
BASF Report 2011 The business year at BASF
Trends in key customer industries
Management’s Analysis
31

Trends in key customer industries

Following the previous year’s strong upturn (+7.2%), Within the electronics industry (+6.6%), information and com­
growth in global industrial production reached a high munication technology posted the strongest growth. In Japan,
level in 2011 (+4.7%), but was lower than our forecast growth declined due to production outages, especially in semi­
(+5.0%). Of all regions, Asia’s emerging markets posted conductor manufacturing.
the strongest growth in industrial production (+10.4%). The health and nutrition sector grew sharply worldwide
Growth was considerably weaker in the industrialized (+3.6%). The food industry in particular posted significant growth
countries of the OECD (+2.2%), mostly as a result of pro- (+3.6%). Production grew considerably faster in emerging mar­
duction outages in Japan following the earthquake and kets (+7.7%) than in the industrialized countries (+1.1%).
tsunami disaster in March 2011. Agriculture posted average growth worldwide in 2011
(+2.2%). Production declined slightly in the industrialized coun­
The transportation sector posted solid growth (+5.2%). The tries (–1.3%) as a result of both weather conditions as well as
number of automobiles produced worldwide rose substantially the earthquake and tsunami disaster in Japan. By contrast,
(+5.7%), despite major production outages in Japan (–19.0%). ­favorable weather conditions and higher prices for agricultural
Automotive production in the United States continued to show products led to a production increase in emerging markets
strong growth in 2011 (+9.5%). In the European Union, automo­ (+3.9%).
tive production on a per-unit basis again grew significantly  or the forecast for the economic environment in 2012,
F
see page 113 onward
­compared with the previous year (+10.0%).
The energy and resources sector also benefited from the
general economic development and posted robust growth Growth in key customer industries in 2011
Real change compared with the previous year
(+3.1%).
The construction sector overall recovered noticeably
OECD 2.2%
(+3.9%). But this development varied widely from region to Industries total
World 4.7%
r­ egion: In the United States (+1.0%), Japan (+1.2%) and the
OECD 2.9%
­European Union (+1.1%), the construction industry grew only Transportation
World 5.2%
slowly due to existing overcapacities. By contrast, Asia’s emerg­
OECD 0.3%
ing markets posted a considerable increase over the previous Energy and raw
materials World 3.1%
year (+7.9%).
OECD 1.5%
The consumer goods industry (+5.9%) benefited in 2011 Construction
industry World 3.9%
from high demand worldwide in its important subindustries.
OECD 3.3%
­Production increased sharply in the electrical industry in partic­ Consumer
goods World 5.9%
ular (+9.3%), although growth in Japan slowed down following
OECD 5.2%
production outages (+4.2%). Growth in this sector was driven Electronics
World 6.6%
by the electrical industry in Asia’s emerging markets (+14.4%).
OECD 1.0%
The textile industry also grew considerably worldwide (+5.5%). Health and
nutrition World 3.6%
Asia (excluding Japan) posted the most substantial rise in tex­
OECD (1.3%)
tile production (+7.4%). The paper industry grew worldwide Agriculture
World 2.2%
(+3.1%), ­although growth halved compared with the previous
year. While growth in Asia’s emerging markets was above aver­
age (+10.4%), paper production increased only slightly in the
­industrialized countries (+0.7%).

Development of industrial production in 2011 BASF sales by industry

Direct customers

−−Global industrial production growth at a high level (+4.7%) > 15% Chemicals and plastics | Energy and resources
−−Strongest growth in Asia’s emerging markets 10 –15% Consumer goods | Transportation
−−Significant growth in the electronics industry (+6.6%) and 5 –10% Agriculture | Construction industry
consumer goods industry (+5.9%) < 5% Health and nutrition | Electronics
32 Management’s Analysis The business year at BASF
Trends in the chemical industry
BASF Report 2011

Trends in the chemical industry

2011 was a successful year overall for the chemical The crude oil price of Brent blend increased significantly com­
industry. Global chemical production (excluding pharma- pared with the previous year. This was due on the one hand to
ceuticals) grew by 4.8% – slightly slower than we had increased global demand following the economic recovery, and
originally forecast for 2011 (+5.2%). Following strong on the other, to the tense political situation in North Africa and
development in the first half of the year, economic growth the Middle East which led to cutbacks in oil production. Never­
slowed down in the second half. Overall, growth in chemi­ theless, fluctuations in the crude oil price over the course of the
cal production (excluding pharmaceuticals) stabilized at year were relatively low. The average monthly prices ranged from
a high level. $96 per barrel to $124 per barrel. The average annual oil price
was around $110 per barrel, an increase of approximately 40%
After returning to pre-crisis levels in 2010, global chemical over the previous year’s level and the highest average annual oil
­production (excluding pharmaceuticals) continued to develop price to date.
positively in 2011 as a result of high demand from key customer Average monthly prices for the chemical raw material
­industries. Chemical production grew in the European Union ­naphtha ranged over the course of the year from a low of $850
(+1.6%). Thanks to the close links between the chemical indus­ per metric ton in January to a high of more than $1,050 per
try and fast-growing, export-oriented customer industries, ­metric ton in April. The average annual price of naphtha was
chemical production increased more sharply in Germany (+2.0%) $930 per metric ton, an increase of more than 30% over the
than in the European Union. Chemical production in Japan, how­ ­previous year’s level.
ever, posted a significant decline (–3.1%) as a result of the earth­ The average annual price of natural gas in the United States
quake and tsunami disaster. In the United States, the overall was around $4/mbtu, unchanged from the previous year. In
economic situation also led to slower growth in the chemical the European Union, the average price of natural gas rose to
­industry (+2.1%). Chemical production grew strongly once again more than $10/mbtu, an increase of about 25% compared
in South America (+4.7%) and Asia (excluding Japan) (+11.1%). with 2010.
 or the forecast for the economic environment in 2012,
F
see page 113 onward
Chemical production (excluding pharmaceuticals) in 2011
Real change compared with the previous year

World 4.8%
E.U. 1.6%
United States 2.1%
Asia (excl. Japan) 11.1%
Japan (3.1%)
South America 4.7%

Trends in the chemical industry in 2011 Price trends for crude oil (Brent blend) and naphtha
($/barrel, $/metric ton)

−−Global chemical production (excluding $/metric ton

1,200
$/barrel
135
pharmaceuticals) grows by 4.8% 1,050 120

−−Chemical production increases in the 900

105

European Union (+1.6%) 750

90

75
−−Price of Brent blend crude oil increases 600
60
significantly year-on-year 450
45
300 30

150 15
2006 2007 2008 2009 2010 2011

Oil spot price (Brent blend) in $/barrel

Naphtha spot price in $/metric ton
BASF Report 2011 The business year at BASF
Business review BASF Group
Management’s Analysis
33

Business review BASF Group

Sales and earnings (million €)

2011 2010 Change in %

Sales 73,497 63,873 15.1
Income from operations before depreciation and amortization (EBITDA) 11,993 11,131 7.7
EBITDA margin  % 16.3 17.4 –
Income from operations (EBIT) before special items 8,447 8,138 3.8
Income from operations (EBIT) 8,586 7,761 10.6
Financial result 384 (388) .
Income before taxes and minority interests 8,970 7,373 21.7
Income before minority interests 6,603 5,074 30.1
Net income 6,188 4,557 35.8
Earnings per share  € 6.74 4.96 35.9
Adjusted earnings per share  € 6.26 5.73 9.2

Sales and earnings by quarter 2011 (million €)­1

1st quarter 2nd quarter 3rd quarter 4th quarter 2011

Sales 19,361 18,461 17,607 18,068 73,497
Income from operations before depreciation and amortization (EBITDA) 3,365 3,015 2,709 2,904 11,993
Income from operations (EBIT) before special items 2,732 2,237 1,964 1,514 8,447
Income from operations (EBIT) 2,550 2,217 1,882 1,937 8,586
Financial result 830 (121) (161) (164) 384
Income before taxes and minority interests 3,380 2,096 1,721 1,773 8,970
Net income 2,411 1,454 1,192 1,131 6,188
Earnings per share  € 2.62 1.59 1.30 1.23 6.74
Adjusted earnings per share  € 1.94 1.75 1.52 1.05 6.26

Sales and earnings by quarter 2010 (million €)1

1st quarter 2nd quarter 3rd quarter 4th quarter 2010

Sales 15,454 16,214 15,781 16,424 63,873
Income from operations before depreciation and amortization (EBITDA) 2,627 2,867 2,934 2,703 11,131
Income from operations (EBIT) before special items 1,954 2,206 2,213 1,765 8,138
Income from operations (EBIT) 1,840 2,079 2,155 1,687 7,761
Financial result (80) (93) (105) (110) (388)
Income before taxes and minority interests 1,760 1,986 2,050 1,577 7,373
Net income 1,029 1,183 1,245 1,100 4,557
Earnings per share  € 1.12 1.29 1.35 1.20 4.96
Adjusted earnings per share  € 1.32 1.50 1.52 1.39 5.73

1
Quarterly results not audited

t
tua lisier
Sales Sales (million €) wird ak

Sales increase significantly, sales volumes rise in most

2011 73,497
divisions; months-long suspension of oil production in
2010 63,873
Libya negatively impacts sales and earnings growth
2009 50,693
2008 62,304

+15%
2007 57,951
34 Management’s Analysis The business year at BASF
Business review BASF Group
BASF Report 2011

BASF significantly increased sales and earnings in Factors influencing sales BASF Group
2011. The economic upturn of 2010 continued into 2011,
­ lthough growth momentum slowed in the second half
a Change in Change
of the year due to uncertainty in the financial markets. million € in %
Volumes 311 .
Growing demand was accompanied by increasing raw
Prices 7,800 12
material costs, which we were largely able to pass on
Currencies (1,372) (2)
to the market. Sales and earnings were negatively
impacted by the months-long suspension of our oil Acquisitions and changes in
the scope of consolidation 3,246 5
production in Libya.
Divestitures (361) .
Compared with 2010, sales increased by 15.1% to
Total change in sales 9,624 15
€73,497 million. Income from operations improved by
10.6% and amounted to €8,586 million.
For more on the economic environment in 2012, see pages 113 – 115 Sales in the Plastics segment were considerably above the pre­
vious year’s level. Especially in the first half of the year, demand
Sales and income from operations from numerous customer industries grew, particularly from the
Positive economic development led to an approximately 2.5% automotive industry. We raised prices in response to increasing
increase in ­demand in the chemicals business1, and most divi­ raw material costs; they declined only in the TDI business. This
sions ­improved their sales volumes. Prices rose as a result of prevented income from operations in the Polyurethanes division
higher raw material costs, especially in the Petrochemicals and from matching the level of the previous year. However, signifi­
Catalysts divisions. However, we were unable to fully pass on cantly increased earnings in the Performance Polymers division
the ­increased raw material costs to our customers in all prod­ were able to mostly compensate for this development.
uct lines, which negatively affected our margins. The integrated Sales in the Performance Products segment improved,
Cognis businesses were included for the full year for the first mainly driven by the full-year inclusion of the Cognis businesses
time, which had a positive influence on sales and earnings as well as by increased prices due to higher raw material costs.
growth. Our sales and earnings only included the styrenics busi­ Furthermore, our products were in high demand from most cus­
ness until it was transferred to the Styrolution joint venture on tomer industries, especially during the first half of 2011. Special
October 1, 2011. Other company acquisitions and divestitures items related to the Cognis integration had a negative influence
had only a small influence on the development of our sales and on earnings in some divisions. Overall, however, the integrated
earnings. Cognis businesses made a positive contribution and played a
Sales in the Chemicals segment rose significantly com­ decisive role in the year-on-year increase in the segment’s
pared with the previous year mostly as a result of higher prices. ­income from operations.
We were largely able to pass on increased raw material costs In the Functional Solutions segment, higher sales volumes
to our customers, especially because market supplies of some and a significant sales increase were predominantly attributable
products continued to be scarce. The Petrochemicals division to high demand from the automotive industry. In the Catalysts
in particular benefited from this development. High capacity uti­ division, sales growth was also boosted by a sharp increase in
lization rates, our cost-cutting programs and good margins all precious metal prices. Sales also rose in the Construction
led to an increase in income from operations. Chemicals and Coatings divisions. The segment’s decline in
­income from operations was mainly a result of special charges

siert
tu ali
d ak
r €)
Income from operations wi
Income from operations (million

−−Considerable earnings increase year-on-year

2011 8,586
−−High demand from many customer industries
2010 7,761
−−Higher raw material costs largely passed on to customers
2009 3,677
2008 6,463

+11%
2007 7,316

1
Our chemicals business includes the Chemicals, Plastics, Performance Products and Functional Solutions segments.
BASF Report 2011 The business year at BASF
Business review BASF Group
Management’s Analysis
35

in the Coatings and Construction Chemicals divisions; even the Special items in income from operations
significantly increased earnings contribution from the Catalysts Special items had a positive influence on income from opera­
division could not compensate for this. tions in 2011, amounting to €139 million compared with
Sales in the Agricultural Solutions segment grew primar­ minus €377 million in 2010. Gains resulting from the transfer of
ily as a result of high demand. We were able to increase sales our styrenics business to the Styrolution joint venture were
volumes in the growth markets of Asia and Eastern Europe in primarily responsible for this significant improvement. The
particular. Prices remained stable overall, but the depreciation divestiture of various other businesses led to special charges
of the U.S. dollar negatively affected sales growth. Income from totaling €86 million; in 2010, we posted special income of
operations exceeded the previous year’s level despite increases €31 million.
in expenditures for research and development as well as for the Special charges for restructuring measures amounted to
expansion of our sales activities in growth markets. €181 million in 2011, compared with €100 million in the previous
Sales increased significantly in the Oil & Gas segment as year.
a result of higher prices. In the Exploration & Production busi­ Integration costs of €240 million were almost exclusively
ness sector, however, the months-long suspension of oil pro­ ­related to the Cognis integration. In 2010, costs were incurred
duction in Libya led to a decline in volumes. In contrast, sales for the integration of both Ciba and Cognis.
volumes in Natural Gas Trading were slightly higher than in the Other items resulted in special income of €53 million, com­
previous year. Income from operations for the segment declined pared with special charges of €146 million in the previous year.
as a result of the lower contribution from Libya. This improvement was in part due to the repeal of the fine
Sales in Other increased to €6,275 million from €5,851 mil­ ­imposed by the European Union on the former Ciba in 2009 as
lion in the previous year. As of October 1, 2011, our styrenics well as to ­income from the settlement of legal disputes in the
business was transferred to the Styrolution joint venture; this United States.
unit therefore only contributed to the sales and earnings of Other
for the first nine months of 2011. During this period, sales in Financial result and net income
Styrenics significantly exceeded the level of the previous year. The financial result was €384 million, significantly above the pre­
Sales also developed positively in the fertilizer business and raw vious year’s value of minus €388 million. This was primarily due
materials trading. Income from operations in Other rose from to the special item of €887 million in income from participations
minus €707 million to €178 million. This increase is predomi­ that resulted from the sale of our stake in K+S Aktiengesell­
nantly attributable to gains on the disposal of our styrenics busi­ schaft. The overall financial result included special items of
ness in the amount of €593 million. In addition, special charges €829 million. Special items in income before taxes and minor­
as well as expenses for the long-term incentive program were ity interests amounted to €968 million.
both lower.
EBIT after cost of capital amounted to €2,551 million. This
means we once again earned a high premium on our cost of
capital.

Income from operations Special items (million €)

−−Earnings rise compared with the previous year despite 2011 2010
Integration costs (240) (162)
months-long suspension of oil production in Libya
Restructuring measures (181) (100)
−−Special income results from transfer of styrenics business
Divestitures 507 31
to the Styrolution joint venture
Other charges and income 53 (146)
−−High premium earned on cost of capital
Total reported in EBIT 139 (377)
Special items reported in financial result 829 –
Total reported in income before taxes 968 (377)
36 Management’s Analysis The business year at BASF
Business review BASF Group
BASF Report 2011

At minus €574 million, the interest result improved compared Adjusted earnings per share
with the previous year. Other financial expenses and ­income Earnings per share adjusted for special items and the amortiza­
­improved to minus €26 million. tion of intangible assets is a key ratio that offers long-term com­
Income before taxes and minority interests increased parability and is more suitable for predicting the company’s
­significantly from €7,373 million to €8,970 million. Return on ­future profitability.
­assets amounted to 16.1%, compared with 14.7% in the In 2011, adjusted earnings per share amounted to €6.26
pre­vious year. compared with €5.73 in the previous year.
Despite the strong improvement in income before taxes
and minority interests, income taxes increased only slightly, by Adjusted earnings per share (million €)
€68 million to €2,367 million. The tax rate therefore decreased
2011 2010
significantly, from 31.2% to 26.4%. This was mostly due to the
Income before taxes and minority interests 8,970 7,373
months-long suspension of oil production in Libya, which is
Special items (968) 377
heavily taxed. At €439 million, non-compensable income taxes
Amortization of intangible assets 789 703
for oil production in 2011 were €544 million below the level of
the previous year. Furthermore, gains from the sale of our shares Amortization of intangible assets contained in the
special items (97) (73)
in K+S Aktiengesellschaft were predominantly tax-free.
Adjusted income before taxes and minority interests 8,694 8,380
Income before minority interests improved by €1,529 mil­
Adjusted income taxes (2,513) (2,596)
lion to €6,603 million. Minority interests decreased from €517 mil­
Adjusted income before minority interests 6,181 5,784
lion to €415 million. Declines were posted especially at Winters­
Adjusted minority interests (432) (523)
hall AG following the months-long suspension of production in
Adjusted net income 5,749 5,261
Libya as well as at BASF PETRONAS Chemicals Sdn. Bhd. in
Malaysia. Net income grew by €1,631 million to €6,188 million.
Earnings per share thus rose from €4.96 to €6.74. Weighted average number of
outstanding shares (in thousands) 918,479 918,479
For more on the tax rate, see the Notes on page 169
For more on the accounting methods, see the Notes on page 148 Adjusted earnings per share (€) 6.26 5.73

Cash flow Adjusted income before taxes and minority interests, adjusted
At €7,105 million, cash flow from operating activities in 2011 net income and adjusted earnings per share are key ratios that
­exceeded the level of the previous year by €645 million. Net are not defined under International Financial Reporting Stan­
­income contributed significantly to this. In addition to higher dards (IFRS). They should therefore be viewed as supplemen­
price levels, the expansion of our business also led to a rise in tary information.
receivables and inventories, thus increasing the funds tied down For more information on the earnings per share under IFRS, see the
Notes on page 166
in net working capital.
Payments related to property, plant and equipment and
­intangible assets were €862 million above the previous year’s
level. Free cash flow was therefore €217 million lower than in the
previous year and amounted to €3,695 million.

Financial result and net income Earnings per share and cash flow

−−Financial result improves significantly, special income −−Earnings per share rise to €6.74
from sale of shares in K+S Aktiengesellschaft −−Adjusted earnings per share increase by €0.53
−−Income taxes increase only slightly, despite −−At €7,105 million, cash provided by operating activities
strong improvement in earnings before taxes once again higher compared with previous year
and minority interests −−Free cash flow below previous year’s level due to higher
−−Months-long suspension of oil production in Libya expenditures for property, plant and equipment and
and predominantly tax-free gains from sale of shares in intangible assets
K+S Aktiengesellschaft lead to decline in tax rate
BASF Report 2011 The business year at BASF
Consolidated balance sheets
Management’s Analysis
37

Consolidated balance sheets

Assets

December 31, 2011 December 31, 2010

Million € % Million € %
Intangible assets 11,919 19.5 12,245 20.6
Property, plant and equipment 17,966 29.4 17,241 29.0
Investments accounted for using the equity method 1,852 3.0 1,328 2.2
Other financial assets 848 1.4 1,953 3.3
Deferred taxes 941 1.5 1,112 1.9
Other receivables and miscellaneous long-term assets 561 0.9 653 1.1
Long-term assets 34,087 55.7 34,532 58.1

Inventories 10,059 16.5 8,688 14.7

Accounts receivable, trade 10,886 17.8 10,167 17.1
Other receivables and miscellaneous short-term assets 3,781 6.2 3,883 6.6
Marketable securities 19 . 16 .
Cash and cash equivalents 2,048 3.3 1,493 2.5
Assets of disposal groups 295 0.5 614 1.0
Short-term assets 27,088 44.3 24,861 41.9
Total assets 61,175 100.0 59,393 100.0

Equity and liabilities

December 31, 2011 December 31, 2010

Million € % Million € %
Subscribed capital 4,379 7.2 4,392 7.4
Retained earnings 19,446 31.8 15,817 26.6
Other comprehensive income 314 0.5 1,195 2.0
Minority interests 1,246 2.0 1,253 2.1
Equity 25,385 41.5 22,657 38.1

Provisions for pensions and similar obligations 3,189 5.2 2,778 4.7
Other provisions 3,335 5.5 3,352 5.6
Deferred taxes 2,628 4.3 2,467 4.2
Financial indebtedness 9,019 14.7 11,670 19.6
Other liabilities 1,142 1.9 901 1.6
Long-term liabilities 19,313 31.6 21,168 35.7

Accounts payable, trade 5,121 8.4 4,738 8.0

Provisions 3,210 5.2 3,324 5.6
Tax liabilities 1,038 1.7 1,140 1.9
Financial indebtedness 3,985 6.5 3,369 5.7
Other liabilities 3,036 5.0 2,802 4.7
Liabilities of disposal groups 87 0.1 195 0.3
Short-term liabilities 16,477 26.9 15,568 26.2
Total equity and liabilities 61,175 100.0 59,393 100.0
38 Management’s Analysis The business year at BASF
Consolidated balance sheets
BASF Report 2011

Compared with the previous year, total assets rose by had been accumulated directly in equity, were derecognized.
€1,782 million to €61,175 million. Actuarial losses from pension obligations reduced equity by
€582 million. The equity ratio improved to 41.5% (2010:
Assets 38.1%).
Long-term assets were reduced by €445 million to €34,087 mil­ Long-term liabilities decreased by €1,855 million. While
lion, particularly due to the sale of our shares in K+S Aktien­ long-term financial indebtedness was reduced by €2,651 mil­
gesellschaft. This development was only partly offset by the lion, provisions for pension obligations increased mainly as a
inclusion of our share in the Styrolution joint venture. result of lower discount rates.
Intangible assets decreased as a result of impairments and
scheduled amortization; as of December 31, 2011, intangible Net debt (million €)
assets accounted for 19.5% of total assets (2010: 20.6%).
­Additions to property, plant and equipment exceeded depreci­ Dec. 31, 2011 Dec. 31, 2010
Cash and cash equivalents 2,048 1,493
ation and amortization. Thus as a percentage of total assets,
Financial indebtedness 13,004 15,039
property, plant and equipment increased slightly compared with
Net debt 10,956 13,546
the previous year, comprising 29.4% of total assets (2010:
29.0%).
The value of investments accounted for using the equity Short-term liabilities increased compared with the previous year,
method increased in 2011. This development was mainly a r­ esult primarily on account of short-term financial indebtedness, which
of the addition of our share in the Styrolution joint venture. rose by €616 million. This was mostly because bonds due
Other financial assets decreased significantly year-on-year in 2012 with a value of around €2.9 billion were reclassified from
following the sale of our shares in K+S Aktiengesellschaft. long-term financial indebtedness. In 2011, bonds amounting to
The rise in short-term assets, in particular inventories and around €1.2 billion were repaid and the use of the com-
trade accounts receivable, is attributable to the expansion of mercial paper program was scaled back. Overall, financial
our business volume as well as higher prices. Cash and cash indebtedness decreased by €2,035 million; net debt declined
equivalents grew by €555 million compared with the previous by €2,590 million.
year. The disposal group created for the styrenics business in Overall, trade accounts payable, short-term provisions and
2010 was dissolved in October 2011 upon the transfer of these other liabilities were at the level of the previous year.
activities to the Styrolution joint venture. The disposal group  or more on the composition and development of individual balance
F
sheet items, see the Notes from page 172 onward
established for our fertilizer business in 2011 contained assets
For more on the development of the balance sheet, see the
of €295 million. Ten-Year Summary from page 221 onward
For more on the fertilizer business disposal group, see the Notes
on page 161
Equity and liabilities
Equity once again rose sharply compared with the previous year,
predominantly thanks to net income, which, at €6,188 million,
was significantly higher than the dividend payments. This devel­
opment was partially countered by effects recognized directly
in equity: Upon the sale of the shares in K+S Aktiengesellschaft,
the changes in fair value amounting to around €1 billion, which

Assets Equity and liabilities

−−Total assets slightly increase −−Equity increases sharply due to high net income
−−Decline in long-term assets, due in particular to the −−Long-term liabilities decline
sale of shares in K+S Aktiengesellschaft −−Net debt significantly reduced
−−Rise in inventories and trade accounts receivable due to
expansion of business volume and higher price levels
 BASF Report 2011 The business year at BASF
Liquidity and capital resources
Management’s Analysis
39

Liquidity and capital resources

Value-based financial management, high cash flow

Our value-based financing principles are aimed at secur- None of the credit lines were, or are currently being tapped.
ing liquidity at all times, limiting the risks associated with BASF’s external financing is therefore largely independent of
financing and optimizing our cost of capital. We prefer- short-term fluctuations in the credit markets.
ably meet our financing needs on international capital Off-balance-sheet financing tools, such as leasing, are of
markets. minimal importance for BASF. BASF Group’s most important
­financial contracts contain no side agreements with regard to
Financing policy and credit ratings specific financial ratios (financial covenants). We are also not
We continue to aim for at least a solid A rating, which allows us ­obligated to maintain a particular rating.
unrestricted access to money and capital markets. Our financ­  or more on the financing tools used, see the Notes from page 191
F
onward
ing measures are aligned with our operative business planning
as well as the company’s strategic direction and also ensure the
financial flexibility to take advantage of strategic options. On May 10, 2011, Standard & Poor’s raised its long-term rating
Corporate bonds form the basis of our medium- to long- for BASF by one notch from “A” to “A+,” maintaining a stable out­
term debt financing. These are issued in euros and other curren­ look. Moody’s last confirmed BASF’s A1 long-term rating on

rt
cies with different maturities to ensure a balanced maturity pro­ ­December 6, 2011, and rated the outlook as stable. BASF’s

ie
file and diverse range of investors, and to optimize our debt short-term ratings were confirmed by both agencies. With

is
al
capital ­financing conditions. ­“A+/A-1 outlook stable” from rating agency Standard & Poor’s

tu
ak
For short-term financing we use our well-established and “A1/P-1 outlook stable” from Moody’s, BASF has good

ird
commercial paper program, which has an issuing volume of up credit ratings, also compared with its competitors in the chem­

w
to $12.5 billion. As back-up for the commercial paper program, ical industry.
we have access to committed, broadly syndicated credit lines:
By signing a credit line of €3 billion expiring in 2016 to replace a Financing instruments (million €)
3
rt

credit line of $3.75 billion expiring in 2012, we were able to 1

ie

017
­improve both our maturity profile and creditor structure. An
is
al

016
1 Bank loans1 2,704
­additional credit line of $2.25 billion expiring in 2014 remains
tu

€13,004

015
ak

2 Eurobonds 8,810
­unchanged. million

014
ird

3 Other bonds 1,490

w

013
Maturities of financial indebtedness (million €)
1
Including promissory notes

012
2

2017 and beyond 1,767

2016 1,541
2015 2,234
2014 1,964
2013 1,513
2012 3,985

Financing principles Consolidated statements of cash flows

−−Value-based financing principles to secure liquidity at all −−High cash flow from operating activities
times, limit financial risks and optimize cost of capital −−Net working capital increases by €906 million, mostly
−−Balanced maturity profile and diverse range of investors as a result of high prices
−−BASF’s external financing is largely independent of −−Free cash flow of €3,695 million
short-term fluctuations in the credit markets thanks to −−Payments related to property, plant and equipment
good credit ratings and intangible assets of €3,410 million
−−Net debt reduced by €2,590 million compared
with the previous year
40 Management’s Analysis The business year at BASF
Liquidity and capital resources
BASF Report 2011

Financial management in the BASF Group is centralized and Cash provided by operating activities
supported by regional finance units. To minimize risks and At €7,105 million, cash flow from operating activities in 2011 once
­exploit internal optimization potential within the Group, again exceeded the high level of the previous year, due largely
we ­bundle the financing, financial investments and foreign to higher net income. In addition to higher price levels, the
currency hedging of BASF SE’s subsidiaries. When possible, expansion of our business volume led to increased receivables
this occurs within the BASF Group. Foreign currency risks and inventories, tying down additional funds in net working cap­
are primarily hedged centrally by means of derivative financial ital. The negative value for miscellaneous items resulted primar­
instruments in the market. ily because the gain of €887 million from the disposal of around
19.7 million shares in K+S Aktiengesellschaft was reclassified
into cash flow from investing activities, as was the €593 million
gain on the disposal of our styrenics business.

Consolidated statements of cash flows (million €)

2011 2010
Net income 6,188 4,557
Depreciation and amortization of intangible assets, property, plant and equipment and financial assets 3,419 3,393
Changes in working capital (906) (1,680)
Miscellaneous items (1,596) 190
Cash provided by operating activities 7,105 6,460

Payments related to property, plant and equipment and intangible assets (3,410) (2,548)
Acquisitions/divestitures 517 (562)
Financial investments and other items 1,155 394
Cash used in investing activities (1,738) (2,716)

Capital increases/repayments, share repurchases 32 (18)

Changes in financial liabilities (2,372) (2,295)
Dividends (2,478) (1,931)
Cash used in financing activities (4,818) (4,244)

Net changes in cash and cash equivalents 549 (500)

rt
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Cash and cash equivalents as of beginning of year and other changes 1,499 1,993
is
al

Cash and cash equivalents as of end of year 2,048 1,493

tu
ak
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Cash flow (billion €)

6 Cash provided by operating activities

5  P
 ayments related to property, plant and equipment
4 and intangible assets
3  Free cash flow1
2

1
0
2007 2008 2009 2010 2011

1
Cash provided by operating activities less payments related to property, plant and equipment and intangible assets
BASF Report 2011 The business year at BASF
Liquidity and capital resources
Management’s Analysis
41

Cash used in investing activities Financing 2012

At €1,738 million, cash used in investing activities was signifi­ We will continue to adhere to our financing principles in 2012.
cantly lower in 2011 than in the previous year. Payments for prop­ Our goals continue to be securing liquidity at all times, limiting
erty, plant and equipment and intangible assets amounted to the risks associated with financing and optimizing our cost of
€3,410 million, exceeding the previous year’s level by €862 mil­ capital, possibly even with share buybacks. We aim to maintain
lion. Acquisitions and divestitures, however, resulted in an inflow at least a solid A rating.
of €517 million in 2011 – compared with an outflow of €562 mil­ Cash outflows are expected to result from the scheduled
lion in the previous year – mostly from the cash consideration repayment of bonds with a total volume equivalent to €2,942 mil­
of €600 million ­received in connection with the founding of the lion. In light of our strong cash flow from operating activities as
­Styrolution joint venture. The divestiture of various smaller well as our level of cash and cash equivalents, we currently see
­activities led to a further cash inflow of €65 million. Expenditures no concrete need for additional medium- and long-term financ­
for ­acquisitions ­totaled €148 million in 2011, around half of which ing. However, our unrestricted access to the capital markets
was spent on the ­acquisition of inge watertechnologies AG and ­allows us flexible use of attractive financing for the BASF Group
inge GmbH, a specialist in ultrafiltration technology. Acquisition at any time.
expenditures in 2010 were primarily related to the acquisition of
Cognis. Compared with the previous year, the cash inflow from
financial investments and other items was higher; this is largely
attributable to cash received of €972 million from the sale of our
shares in K+S Aktien­gesellschaft.
 or more information on additions to property, plant and equipment,
F
see the Notes from page 175 onward

Cash used in financing activities

Financing activities led to a cash outflow of €4,818 million,
compared with €4,244 million in the previous year. Dividends
of €2,021 million were paid to shareholders of BASF SE
and €457 million were paid to minority shareholders in Group
companies. The 4% euro-denominated bond from 2006 and
the 3.25% CHF-denominated bond from 2008 were repaid. In
addition, we scaled back the use of BASF SE’s commercial
paper program. No new long-term capital market liabilities were
taken up in 2011. Net debt decreased by €2,590 million com­
pared with the previous year and amounted to €10,956 million
as of December 31, 2011.
Overall, cash and cash equivalents rose by €555 million
compared with the previous year and amounted to €2,048 mil­
lion as of December 31, 2011.

Capital expenditures by region (%) Financing 2012

2011 2010 −−We aim to maintain a minimum rating of a solid A

Europe 68 63
−−Currently no need for medium- to long-term financing
North America 14 19
thanks to strong cash flow from operating activities
Asia Pacific 15 15
−−Unrestricted access to capital markets allows flexible use
South America, Africa, Middle East 3 3
of attractive financing conditions at any time
100 100
42 Management’s Analysis The business year at BASF
Business review by segment
BASF Report 2011

Business review by segment

Segment overview (million €)

Income from operations before

depreciation and amortization Income from operations (EBIT)
Sales (EBITDA) before special items
2011 2010 2011 2010 2011 2010
Chemicals 12,958 11,377 3,188 3,000 2,441 2,302
Plastics 10,990 9,830 1,678 1,721 1,203 1,284
Performance Products 15,697 12,288 2,312 2,162 1,727 1,554
Functional Solutions 11,361 9,703 921 861 559 467
Agricultural Solutions 4,165 4,033 981 938 810 749
Oil & Gas 12,051 10,791 2,616 2,977 2,111 2,430
Other1 6,275 5,851 297 (528) (404) (648)
73,497 63,873 11,993 11,131 8,447 8,138

Segment overview (million €)

Income from operations

(EBIT) Assets Capital expenditures2
2011 2010 2011 2010 2011 2010
Chemicals 2,442 2,310 6,920 6,526 622 535
Plastics 1,259 1,273 5,297 5,114 423 250
Performance Products 1,361 1,345 13,680 13,409 648 3,000
Functional Solutions 427 457 9,725 9,364 359 208
Agricultural Solutions 808 749 5,350 5,063 150 145
Oil & Gas 2,111 2,334 10,232 9,150 1,274 996
Other1 178 (707) 9,971 10,767 170 170
8,586 7,761 61,175 59,393 3,646 5,304

1
Information on the composition of “Other” can be found in the Notes to the Consolidated Financial Statements from page 162 onward.
2
Additions to property, plant and equipment (thereof from acquisitions: €66 million in 2011 and €833 million in 2010) and intangible assets
(thereof from acquisitions: €141 million in 2011 and €1,906 million in 2010)
rt

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al

al
tu

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ak

ak
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Sales by segment Contributions to EBITDA by segment

Chemicals 18% Chemicals 27%

Plastics 15% Plastics 14%
Performance Products 21% Performance Products 19%
Functional Solutions 15% Functional Solutions 8%
Agricultural Solutions 6% Agricultural Solutions 8%
Oil & Gas 16% Oil & Gas 22%
Other 9% Other 2%
BASF Report 2011 The business year at BASF
Business review by segment
Management’s Analysis
43

Sales (million €)1

1st quarter 2nd quarter 3rd quarter 4th quarter

2011 2010 2011 2010 2011 2010 2011 2010
Chemicals 3,276 2,588 3,392 2,970 3,168 2,874 3,122 2,945
Plastics 2,788 2,197 2,828 2,584 2,801 2,598 2,573 2,451
Performance Products 3,982 2,871 4,095 3,151 3,991 3,206 3,629 3,060
Functional Solutions 2,818 2,090 2,766 2,453 2,907 2,591 2,870 2,569
Agricultural Solutions 1,230 1,145 1,205 1,211 908 832 822 845
Oil & Gas 3,455 3,225 2,461 2,374 2,195 2,228 3,940 2,964
Other2 1,812 1,338 1,714 1,471 1,637 1,452 1,112 1,590
19,361 15,454 18,461 16,214 17,607 15,781 18,068 16,424

Income from operations (EBIT) before special items (million €)1

1st quarter 2nd quarter 3rd quarter 4th quarter

2011 2010 2011 2010 2011 2010 2011 2010
Chemicals 765 461 674 687 621 617 381 537
Plastics 393 279 383 349 317 371 110 285
Performance Products 554 419 513 471 440 370 220 294
Functional Solutions 142 111 167 165 162 158 88 33
Agricultural Solutions 343 321 331 320 95 66 41 42
Oil & Gas 744 629 332 515 350 573 685 713
Other2 (209) (266) (163) (301) (21) 58 (11) (139)
2,732 1,954 2,237 2,206 1,964 2,213 1,514 1,765

Income from operations (EBIT) (million €)1

1st quarter 2nd quarter 3rd quarter 4th quarter

2011 2010 2011 2010 2011 2010 2011 2010
Chemicals 765 461 686 687 612 619 379 543
Plastics 393 277 383 350 315 371 168 275
Performance Products 407 341 456 450 403 377 95 177
Functional Solutions 142 111 165 164 161 159 (41) 23
Agricultural Solutions 343 321 331 320 95 66 39 42
Oil & Gas 744 629 332 515 350 573 685 617
Other2 (244) (300) (136) (407) (54) (10) 612 10
rt

2,550 1,840 2,217 2,079 1,882 2,155 1,937 1,687

ie
is

1
Quarterly results not audited
al

2
Information on the composition of Other can be found in the Notes to the Consolidated Financial Statements from page 162 onward.
tu
ak
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Contributions to EBIT by segment (million €) EBIT BASF Group by quarter (million €)

Chemicals 2,442 1st quarter 2011 2,550

1st quarter 2010 1,840
Plastics 1,259
2nd quarter 2011 2,217
Performance Products 1,361
2nd quarter 2010 2,079
Functional Solutions 427
3rd quarter 2011 1,882
Agricultural Solutions 808 3rd quarter 2010 2,155
Oil & Gas 2,111 4th quarter 2011 1,937
4th quarter 2010 1,687
Other 178
44 Management’s Analysis The business year at BASF
Chemicals
BASF Report 2011

Chemicals
Excellence in the Verbund, technology and cost leadership

The Chemicals segment consists of the Inorganics, ing market-oriented business models, and efficiently using the
­Petrochemicals and Intermediates divisions. In our inte- synergy potential of our Verbund. We constantly optimize our
grated production facilities – our Verbund – we produce portfolio and production structures and align them with regional
a broad range of basic chemicals and downstream prod- market requirements.
ucts in Europe, Asia and North America for our internal
and external customers. Innovation
Our research activities are focused on the development of
Segment strategy ­innovative production processes that will make us even more
We create value by driving growth with an attractive portfolio, competitive. We are also continuously improving existing prod­
investments in future markets and process and product inno­ ucts and applications. In developing new products, we look at
vations as well as by the competitive and flexible integration of the needs of our external and internal customers and take
our production into the BASF Verbund structures. We supply ­advantage of the opportunities offered by value-adding chains
the BASF segments with basic chemicals for the production of in the Verbund and in the markets.
high-value products. As a reliable supplier, we market our prod­ For example, we developed an innovative product line of
ucts to customers in downstream industries, primarily in the iron salts based on our proven ultrapure iron technology which
chemical, electronics, construction, textile, lumber, automotive, can be used to produce active ingredients for the treatment of
pharmaceutical and agrochemical industries. We continually iron deficiency anemia. Because our new iron salts satisfy the
­improve our value-adding chains with innovations, capital highest purity requirements, they conform to common interna­
­expenditures and acquisitions in future markets. Technology tional guidelines for use in medicines.
and cost leadership are among our most important success
factors. We achieve them by improving processes, implement­

Products, customers and applications

Segment Chemicals
Division Inorganics Petrochemicals Intermediates
Products Basic products: ammonia, methanol, Basic products: ethylene, propylene, Basic products: butanediol and
caustic soda, chlorine and standard butadiene, benzene, alcohols, solvents, derivatives, alkylamines and
alcoholates as well as sulfuric and nitric plasticizers, alkylene oxides, glycols alkanolamines, neopentylglycol, formic
acid and acrylic monomers acid and propionic acid

Specialties: chemicals for the Specialties: special plasticizers such as Specialties: specialty amines such
semiconductor industry, salts, metal Hexamoll DINCH, special acrylates as tert-Butylamine, gas scrubbing
systems and organometallic chemicals, hardeners for epoxy resin
compounds systems, vinyl monomers, acid chloride,
chloroformate, chiral intermediates
Customer industries Use within BASF Verbund Use within BASF Verbund Use within BASF Verbund
and applications
Specialties for the electronics, Chemical and plastics industries; Starting materials for coatings, plastics,
pharmaceutical, automotive and other detergent, automotive, packaging and pharmaceuticals, textile fibers, crop
industries textile industries; production of paints, protection products as well as
coatings and cosmetics as well as oil- detergents and cleaners
field, construction and paper chemicals

Strategy Products

−−Supplying the value-adding chains in the BASF Verbund −−Inorganics: basic products for our Verbund and
and marketing our products to external customers specialties for the electronics and other industries
−−Most important success factors are technology −−Petrochemicals: broad range of basic products
and cost leadership as well as specialties, for example, for the chemical
−−Product portfolio and regional production structures are and plastics industries
continuously optimized −−Intermediates: most comprehensive intermediates
portfolio in the world, such as starting materials for
coatings, plastics or pharmaceuticals
BASF Report 2011 The business year at BASF
Chemicals
Management’s Analysis
45

production in less than a year. The new catalyst system has

Baxxodur systems
been produced at various plants in the Verbund in Ludwigs­hafen
Shortened manufacturing process for wind turbine
rotor blades and in the United States since 2010 and is marketed by the
Catalysts division.
For more on catalyst systems, see page 63
Value for BASF Value for our
We aim for ­customers
Marketing and customer relations

€300 30%
For standard products, our priority is supplying customers
reliably and cost-efficiently. Internally, we supply nearly all BASF
million ­divisions with our products. We offer organic and inorganic
in annual sales in wind energy shorter ­process for specialties together with the corresponding technical applica­
growth market by 2020 manufacturing wind tions know-how. In these areas, our development laboratories
turbine rotor blades work particularly closely with our customers and partners.
In order to further improve our market position in South
Value for BASF With our performance portfolio for America and to serve our customers there even better and
wind energy, we are shaping one of the most dynamic faster, we started up a sodium methylate production plant in
growth markets in the world; we aim to increase our Guaratinguetá, Brazil. Sodium methylate is a reliable and effi­
­annual sales in this market to around €300 million by cient catalyst for the production of biodiesel. The new plant has
2020. In addition to Baxxodur systems, we offer our an annual capacity of 60,000 metric tons.
customers coating systems, foams, grouts and concrete With more than 300 reference plants, BASF is today one of
admixtures for wind turbine foundations and towers, as the world’s leading suppliers in the gas treatment business.
BASF began the industrial, amine-based separation of carbon
well as hydraulic fluids and lubricants for the gearbox.
dioxide from syngas, which is required for ammonia production,
Value for our customers Our Baxxodur systems as early as 1971. Our portfolio was extended step by step,
help to improve efficiency in the production of wind ­incorporating technologies such as the purification of natural
turbines: Our broad range of hardeners, accelerators and gas, refinery off-gas, flue gas and biogas. Today, under the
additives for the professional processing of epoxy resin brand name Oase®, we have a comprehensive offering ranging
can reduce the manufacturing process of rotor blades by from technology, gas treatment chemicals and technical
up to 30%. support services to on-site training of personnel at our custo­
mers’ plants.

With the Thomas Alva Edison Patent Award, we received ­special

recognition in 2011 for our new catalyst systems for the purifi­
cation of exhaust gases in diesel-powered vehicles. This sys­
tem stands apart from conventional solutions because it works
efficiently and reliably even in very low temperatures, thanks in
particular to a special adamantylammonium salt that was
­developed by our Intermediates division and made ready for

Innovation Marketing and customer relations

−−Focus on innovative production processes to −−Reliable and cost-efficient marketing of

strengthen our competitiveness standard products
−−New product line of ultrapure iron salts for the −−Marketing of organic and inorganic specialties with the
treatment of iron deficiency anemia corresponding technical applications know-how
−−Thomas Alva Edison Patent Award for innovative −−Our development laboratories collaborate closely with
catalyst system customers and partners
46 Management’s Analysis The business year at BASF
Chemicals
BASF Report 2011

Capital expenditures

Additional annual Total annual

capacity through expansion capacity
Location Project (metric tons) ­(metric tons) Startup
Antwerp, Belgium Construction: oleum plant n/a 420,000 2011
Camaçari, Brazil Construction: acrylic acid complex 160,000 2014
Geismar, Louisiana Construction: methylamines plant n/a 2011
Guaratinguetá, Brazil Construction: sodium methylate plant 60,000 2011
Ludwigshafen, Germany Construction: ethylene pipeline1 n/a 2012
Construction: Hexamoll DINCH plant 100,000 200,000 2013
Nanjing, China Construction: tert-Butylamine plant n/a 2013
Expansion: steam cracker2 140,000 740,000 2011
Construction: 2-propylheptanol plant2 80,000 2011
Expansion: ethylene oxide plant2 80,000 330,000 2011
Construction: butadiene plant2 130,000 2011
Construction: isobutene plant2 60,000 2011
Construction: amine complex2 130,000 2011/2012

1
Participation through investment in Ethylen-Pipeline-Süd GmbH & Co. KG
2
Operated by a joint venture company in which BASF has a 50% stake and which is proportionally consolidated in the Group Consolidated Financial Statements

Production capacities of significant products 3

Sites

Asia South America, Annual capacity

Product Europe North America Pacific Africa, Middle East (metric tons)
Acrylic acid X X X 1,190,000
Alkyl amines X X X 250,000

Formic and 255,000

X X
propionic acid 150,000

Ammonia X 1,525,000
Benzene X X X 820,000
Butadiene X X X 645,000
Butanediol equivalents X X X 535,000
Chlorine X 385,000
Ethanolamines and derivatives X X 400,000
Ethylene X X X 3,375,000
Ethylene oxide X X X 1,395,000
Formaldehyde condensate X 750,000
Neopentyl glycol X X X 165,000
Oxo-C4 alcohols (calculated as butyraldehyde) X X X 1,495,000
PolyTHF X X X 185,000
Propylene X X X 2,550,000
Plasticizers X X X 660,000

3
All capacities included at 100%, including plants belonging to joint ventures

Sales – Chemicals Sales by division

(million €)
1
3

2011 12,958 1 Inorganics 11%

2010 11,377 2 Petrochemicals 68% €12,958
million
2009 7,515 3 Intermediates 21%

2
BASF Report 2011 The business year at BASF
Chemicals
Management’s Analysis
47

Segment data Chemicals (million €)

2011 2010 Change in %

Sales to third parties 12,958 11,377 13.9
Thereof Inorganics 1,415 1,255 12.7
Petrochemicals 8,839 7,593 16.4
Intermediates 2,704 2,529 6.9
Intersegmental transfers 6,295 5,476 15.0
Sales including intersegmental transfers 19,253 16,853 14.2
Income from operations before depreciation and amortization (EBITDA) 3,188 3,000 6.3
EBITDA margin  % 24.6 26.4 –
Income from operations (EBIT) before special items 2,441 2,302 6.0
Income from operations (EBIT) 2,442 2,310 5.7
Income from operations (EBIT) after cost of capital 1,686 1,722 (2.1)
Assets 6,920 6,526 6.0
Research and development expenses 132 130 1.5
Additions to property, plant and equipment and intangible assets 622 535 16.3

In the Chemicals segment, we increased sales to third Inorganics

parties in 2011 by €1,581 million to reach €12,958 million. Our sales to third parties were €1,415 million in 2011, exceeding
This significant growth was primarily attributable to the previous year’s level by €160 million (volumes 5%, prices
higher raw material prices, which we were able to pass 9%, currencies –1%). In addition to increased demand, in par­
on in almost all business areas (volumes –1%, prices 16%, ticular from the electronics and pharmaceutical industries,
portfolio 2%, currencies – 3%). Income from operations higher sales prices for basic products were a major factor driv­
grew by €132 million to reach €2,442 million. Our pro- ing this significant sales growth.
grams to reduce costs and increase efficiency contri­ Our income from operations improved considerably com­
buted to this earnings growth. pared with the previous year. Higher margins, especially for
We expect sales in 2012 to be higher than in the pre- ­ammonia and urea, as well as our strict cost discipline had a
vious year. Additional capacities will increase pressure positive influence on earnings growth.
on margins, especially for cracker products. Earnings In the fourth quarter of 2011, we increased our annual
are not expected to match the level of 2011. ­capacity for sodium methylate production by 60,000 metric tons
with the startup of a new plant in Guaratinguetá, Brazil. Further­
more, we started operations at a new oleum and sulfur plant in
Antwerp, Belgium, raising annual capacity at this site to 420,000
metric tons.

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Factors influencing sales – Chemicals
aktu
Income from operations – Chemicals
(million €)
wird
Volumes (1%)
Prices 16% 2011 2,442
Portfolio 2% 2010 2,310
Currencies (3%) 2009 735
Sales 14%
48 Management’s Analysis The business year at BASF
Chemicals
BASF Report 2011

We foresee a moderately positive business environment in 2012 During the third quarter, increasing uncertainty about global
and therefore expect many business areas to post higher sales economic development began to have a negative impact on our

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volumes. We aim to significantly increase our sales. As part of market environment. In the fourth quarter, we were unable to

lis
the divestiture of our fertilizer business, we plan to sell three ­nitric maintain the high levels of the previous quarters due to declin­

a
tu
acid plants in 2012; this, together with lower margins for some ing demand.
ak
basic products, will likely result in a decrease in earnings. During the year, we started up several new production
ird
plants at our Verbund site in Nanjing, China, including a buta­
w

Inorganics – Sales by region diene extraction plant, an isobutene extraction plant and a
(Location of customer)
2-propyl­heptanol production plant. Furthermore, we success­
4
fully completed the expansion of the steam cracker. With the
1 Europe 62%
3
develop­ment of our Nanjing site, we are further strengthening
2 North America 7%
our market position in China.
3 Asia Pacific 25% €1,415
million We expect our business development to remain good in
South America, Africa,
1
2012. Sales are expected to match the high level of the previ­
4 Middle East 6% 2
ous year, despite declining prices. According to our forecast,
earnings are unlikely to reach the very good 2011 level due to
lower margins.
Petrochemicals
Mainly as a result of higher prices, sales to third parties in 2011 Petrochemicals – Sales by region
(Location of customer)
rose by €1,246 million to reach €8,839 million, thus significantly 4
exceeding the level of the previous year (volumes –3%, prices 3
1 Europe 43%
20%, portfolio 2%, currencies –3%). Until the third quarter, we
2 North America 38% 1
benefited in all business areas from strong global demand for
3 Asia Pacific 17% €8,839
our products. As supplies on the market were limited in some million
cases, we were able to raise prices to pass on higher raw South America, Africa,
4 Middle East 2%
­material costs to customers. 2

Overall, capacity utilization rates at our plants were good.

As a result of strong demand, there were temporary supply
bottle­necks for some products, in particular acrylates and
­solvents. Our margins therefore developed positively, especially
in the first half of the year. Income from operations was above
the level of the previous year.

Inorganics Petrochemicals

−−Sales grow considerably due to increased demand −−Sales improve significantly; strong global demand,
and higher sales prices particularly in the first half of 2011
−−Earnings improve significantly −−Increase in earnings thanks to positive margin
−−Startup of sodium methylate plant in Guaratinguetá, Brazil development, especially in the first half of the year
−−Outlook 2012: significant sales increase; decline in −−Expansion of the Verbund site in Nanjing, China
earnings due to divestiture of fertilizer business as well as −−Outlook 2012: sales at previous year’s level; earnings
lower margins for some basic products below very good level of previous year as a result of
lower margins
BASF Report 2011 The business year at BASF
Chemicals
Management’s Analysis
49

Intermediates In 2012, we expect demand from most customer sectors to

Thanks to higher prices, sales to third parties rose by €175 mil­ slightly exceed the high level of 2011. We therefore assume that
lion in 2011 to €2,704 million (volumes –1%, prices 10%, curren­ our sales will increase. In the product lines amines, acids and

rt
ie
cies –2%). In general, demand from our key customer industries, polyalcohols, we expect increasing availability on the market to

lis
such as the plastics, agricultural and pharmaceutical ­industries, lead to more intense competition. The resulting increased pres­

a
tu
remained constant in all regions. During the course of the year, sure on margins and growing fixed costs will likely lead to earn­

ak
however, growing uncertainty regarding global economic devel­ ings below the very good level of 2011.

ird
opment led to inventory destocking, particularly among our

w
Asian customers in the value-adding chains for coatings and Intermediates – Sales by region
(Location of customer)
textile fibers. 4
Demand from our customers in 2011 once again exceeded
1 Europe 45%
global product supply in some cases, for example, for amines
2 North America 16%
and polyalcohols, and especially for butanediol and derivatives. 3
3 Asia Pacific 35% €2,704 1
The scarcity within these product lines was additionally intensi­ million
fied at the end of May as a result of a temporary shutdown for South America, Africa,
4 Middle East 4%
acetylene and its derivatives due to a disruption at the Ludwigs­
hafen site. This limited our ability to deliver these products ­until 2

the end of September.

Rising costs for our key raw materials could mostly be
passed on to the market through higher sales prices. Thanks to
strong sales volumes of our products and high capacity utiliza­
tion, particularly in the first half of the year, we were once again
able to ­improve income from operations from the very good level
of the prior year.
In addition to a methylamines plant in Geismar, Louisiana,
we also started up a plant to produce ethanolamines and down­
stream products in Nanjing, China, in 2011. By contrast, we
closed smaller plants producing methylamines and dimethylfor­
mamide in Camaçari, Brazil.

Intermediates

−−Sales rise in 2011, mainly thanks to higher prices −−Outlook 2012: sales increase; earnings below the
−−Available supply unable to fully meet customer demand, previous year’s level due to higher pressure on margins
particularly for butanediol and derivatives and rising fixed costs
−−Increase in earnings due to higher prices as well as strong
sales volumes and good capacity utilization rates,
in particular in the first half of the year
50 Management’s Analysis The business year at BASF
Plastics
BASF Report 2011

Plastics
Energy-efficient products and system solutions for our customers

BASF is one of the world’s leading producers of high- Innovation

quality plastics. In the Performance Polymers and Poly- In 2011, we developed numerous innovative products and
urethanes divisions, we offer energy-efficient products ­applications for our customers in the automotive, electrical, elec­
and customer-oriented system solutions. tronics and packaging industries.
Together with Daimler, we were able to apply many ideas
Segment strategy for comprehensive electric mobility in the smart forvision con­
We concentrate on activities which allow us to stand out from cept car. We focused especially on lightweight design, temper­
our market competitors and offer us profitable growth opportu­ ature management and energy efficiency. The smart forvision’s
nities. Our customers are primarily in the construction, automo­ wheel rims, for example, are made of the long-fiber reinforced
tive, electrical and electronics, textile, packaging and furniture specialty polyamide Ultramid® Structure and are the first rims
industries. The versatility of our products enables us to offer made entirely from plastic to be ready for series production.
­innovative solutions that substitute conventional materials in a These rims weigh up to 30% less than comparable metal ones,
wide variety of applications, thus broadening our portfolio to while providing the same degree of stability. As a result, the elec­
­numerous customer industries. Furthermore, we are position­ tric car becomes lighter and requires less electricity to run. Our
ing ourselves to grow faster than the market and become less innovative high-performance foams are fitted into the body pan­
dependent on the cyclicality of individual industries. We work els to help ensure a comfortable climate inside the car. They
closely with our customers – with the aim of offering the best keep the vehicle pleasantly cool in summer and insulate it against
solution in terms of cost and functionality. the cold in winter. Thanks to their high efficiency even in thin lay­
ers, these foams can be fitted everywhere in the vehicle.

Products, customers and applications

Segment Plastics
Division Performance Polymers Polyurethanes
Products Basic products: caprolactam, adipic acid, Basic products: MDI, TDI, polyols, propylene
polyamides, foams (Styropor/Styrodur), oxide
compounded polyamides (Ultramid) and
polybutylene terephthalates (Ultradur), Ultraform Specialties: polyurethane systems, specialty
elastomers (Cellasto, Elastollan)
Specialties: Basotect, Ecoflex, Ecovio, Ultrason,
Neopor, E-por, Neopolen, Palusol
Customer industries and applications Automotive (engineering plastics for multiple Furnishings (foams), construction (insulation
components), electrical (engineering plastics foams), automotive (basic products and specialty
for switches, plugs and casings), construction elastomers), household appliances (basic
(insulation foams), packaging (extruded polymers, products, e.g., for refrigerator insulation), shoe
polystyrene), textile (polyamides, monofilaments) soles and upper materials (basic products and
specialty elastomers)

Strategy Products

−−Tapping into new market segments with a diverse −−Performance Polymers: engineering plastics, polyamide
and innovative portfolio and polyamide intermediates as well as foams and
−−Close cooperation with customers in the development specialty plastics for diverse applications
of new products and system solutions −−Polyurethanes: basic products, tailor-made systems and
−−Our goal: to offer the best solution in terms of cost specialties for the construction and automotive industries,
and functionality and for household appliances
BASF Report 2011 The business year at BASF
Plastics
Management’s Analysis
51

Ecovio: business model for compost bin liners We have developed Ultradur® PRO especially for medical tech­
Biodegradable plastic for collecting and composting nology applications, such as components for insulin pens or
organic matter ­inhalers. It is characterized by particularly high dimensional sta­
bility as well as chemical resistance and low water absorption.
Value for BASF Value for the environment The new products Styrodur® Neo and Styrodur® HT have

20% 30%
been added to our portfolio of pressure-resistant insulation
­panels. While Styrodur Neo ensures even better thermal insu­
lation, Styrodur HT withstands high temperatures especially
well.
annual market growth for reduction in greenhouse
Ecovio in applications for gases thanks to the Furthermore, we showed in a pilot project that organic
biodegradable bin liners separate composting of waste bags made from Ecovio® biodegradable plastic are ­easily
from 2011 to 2020 biodegradable waste in degraded in municipal composting facilities. They are also very
Europe stable, making the collection of biodegradable waste easier and
more hygienic.

Value for BASF In the future, the European Union

Marketing and customer relations
will require its member states to collect and dispose of
In the Plastics segment, we develop, produce and market stan­
biodegradable waste separately. We therefore expect the
dard products and specialties as well as system solutions and
demand for biodegradable bin liners made from plastics
compounded polymers. For standard products, which we sell
like Ecovio to grow by approximately 20% every year
in large quantities, quality and efficiency take top priority. For
between 2011 and 2020.
specialties and customer-specific products, we focus on tailor-
made technical marketing that allows us to implement value-
Value for the environment In Europe today, only
based pricing.
30% of compostable waste is separated from the rest
Regional development laboratories help us to quickly adapt
– many countries still deposit it in the same landfill with
our products to local needs. In the highly service-oriented poly­
non-compostable waste. This produces methane, which
urethane systems and specialties business, experience, exper­
has around twenty times the greenhouse gas potential
tise and close collaboration with customers are essential.
of CO2. Sturdy, biodegradable bags make waste coll-
Through our network of 38 system houses worldwide, we
ection and separation easier and more hygienic. They
­provide fast local support in the development of customized
help reduce damage to the environment, as composting
­solutions, as well as technical service, sales and marketing.
produces CO2 rather than methane. If all of Europe collec-
We work closely with our customers from an early stage of
ted and composted its biodegradable waste separately,
development onward in order to find optimal solutions and con­
greenhouse gas emissions from waste disposal could be
tribute to their success in the long term.
reduced by 30%.

Innovation Marketing and customer relations

−−smart forvision concept car: Daimler and BASF −−Quality and efficiency in the marketing of
implement their ideas for the electric mobility of the future standard products
−−Ultradur PRO: new plastic for medical technology −−Tailor-made technical marketing for specialties
applications and customer-specific products
−−Styrodur Neo and Styrodur HT: improved pressure- −−Close cooperation with customers for optimal
resistant insulation panels solutions and lasting success
−−Ecovio: biodegradable plastic bags for easier composting
of organic waste
52 Management’s Analysis The business year at BASF
Plastics
BASF Report 2011

Capital expenditures

Additional annual capacity Total annual

through expansion capacity
Location Project (metric tons) ­(metric tons) Startup
Ansan, South Korea Expansion: compounding plant for engineering plastics 13,000 30,000 2011
Chongqing, China Construction: MDI complex 400,000 2014
Ludwigshafen, Germany Expansion: Neopor 45,000 805,0001 2013
Expansion: Styrodur 7,000 50,000 2012
Expansion: polyamide 20,000 global: 720,000 2012
Construction: TDI plant 300,000 2014
Shanghai, China Expansion: compounding plant for engineering plastics 39,000 global: 560,000 2013
Yeosu, South Korea Expansion: MDI plant 60,000 250,000 2012

1
Includes all types of EPS (expandable polystyrene)

Production capacities of significant products

Sites

Asia South America, Annual capacity

Product Europe North America Pacific Africa, Middle East (metric tons)
Isocyanate X X X 1,840,000
Polyamide X X 700,000
Polyamide precursors X X 1,070,000
Propylene oxide X X 925,0002

2
Of which 800,000 metric tons are for polyurethane applications. Contains the full capacity of three joint venture companies for the production of propylene oxide in
Belgium, the Netherlands and Singapore, in which BASF has a 50% stake and which are proportionally consolidated in the Group Consolidated Financial
Statements.

Sales – Plastics Sales by division

(million €)

2011 10,990 1

2010 9,830
1 Performance Polymers 47% €10,990
2 Polyurethanes 53% 2 million
2009 7,128
BASF Report 2011 The business year at BASF
Plastics
Management’s Analysis
53

Segment data Plastics (million €)

2011 2010 Change in %

Sales to third parties 10,990 9,830 11.8
Thereof Performance Polymers 5,138 4,389 17.1
Polyurethanes 5,852 5,441 7.6
Intersegmental transfers 694 546 27.1
Sales including intersegmental transfers 11,684 10,376 12.6
Income from operations before depreciation and amortization (EBITDA) 1,678 1,721 (2.5)
EBITDA margin  % 15.3 17.5 –
Income from operations (EBIT) before special items 1,203 1,284 (6.3)
Income from operations (EBIT) 1,259 1,273 (1.1)
Income from operations (EBIT) after cost of capital 674 816 (17.4)
Assets 5,297 5,114 3.6
Research and development expenses 149 141 5.7
Additions to property, plant and equipment and intangible assets 423 250 69.2

In the Plastics segment, our sales to third parties posted considerable growth in sales volumes as demand grew
­improved from €9,830 million to €10,990 million (volumes sharply, particularly from the automotive industry in North
4%, prices 10%, currencies –2%). This significant rise Ameri­ca and Europe. As a result of the ongoing weakness in
was primarily due to price increases resulting from higher the private construction sector in the industrialized countries,
raw material costs. In the first half of the year in partic- however, sales volumes of foams stagnated. In the specialties
ular, we also experienced very high demand from nearly business, we further strengthened our position in the fast-grow­
all customer sectors, especially from the automotive ing market for biodegradable plastics with the expansion of our
­industry. However, the pace of growth slowed in the production capacity for E ­ coflex®.
second half of the year. Income from operations amounted In addition to an overall improvement in sales volumes,
to €1,259 million, matching the level of the previous higher prices in all business areas and regions made a signifi­
year. cant contribution to sales growth. Particularly for standard prod­
In 2012 we aim to increase sales and earnings in an ucts in the polyamide value-adding chain, we raised our prices
unchanged market environment. in response to higher raw material costs. However, the price
­increases implemented for engineering plastics in North Ameri­ca
Performance Polymers and Asia were partially offset by negative currency effects.
Sales to third parties in 2011 rose by €749 million to reach Income from operations rose considerably as a result of
€5,138 million, thus significantly exceeding the level of the ­favorable demand development – especially in the automotive
previous year (volumes 4%, prices 16%, currencies –3%). The and textiles industries – and higher prices.
global economic upturn led to growing demand in nearly all
customer sectors. In the engineering plastics business area, we

t
tualisier
rd ak
Factors influencing sales – Plastics Income from operations – Plastics
(million €)
wi
Volumes 4%
Prices 10% 2011 1,259
Portfolio 0% 2010 1,273
Currencies (2)% 2009 554
Sales 12%
54 Management’s Analysis The business year at BASF
Plastics
BASF Report 2011

As part of our efforts to increase efficiency in the long term, we We successfully expanded our business with specialties, but its
successfully expanded our Ecoflex production in Ludwigshafen earnings were negatively impacted by increased raw material
and closed the less profitable plant in Schwarzheide. costs. Primarily as a result of lower margins for TDI, income from
In 2012, we plan to continue the expansion of our business operations in the Polyurethanes division was below the very
with engineering plastics and specialties. We want these busi­ good level of the previous year.
nesses to grow faster than the most important markets and thus In 2011, we began construction of a new, integrated MDI
significantly improve the division’s sales year-on-year. In order complex with an annual capacity of 400,000 metric tons in
to continue implementing our strategy for profitable, lasting Chongqing, China. This investment will allow us to further
growth, we are strengthening our sales and marketing units and strengthen our position in the MDI market in one of the growth
rt
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investing in research and development as well as in new regions of Western China. The plant is scheduled to start up in
is
al

production facilities. As a result of the costs associated with 2014.

tu

this, we expect that earnings will not match the level of the As the leading supplier of polyurethane solutions, we are
ak

previous year. continually expanding our global network of system houses. We

ird
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have 38 system houses that offer complete solutions which

Performance Polymers – Sales by region range from swift local support in the development of individual
(Location of customer)
4
solutions to technical service for our customers. Our system
house in Dubai began operations in April 2011. Furthermore, we
1 Europe 48%
3 are planning to construct two polyurethane system houses in
2 North America 21%
Chongqing in Western China and Tianjin in Northern China.
€5,138

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1
3 Asia Pacific 26%

ie
million In 2012, we anticipate an unchanged market environment.

is
South America, Africa, We expect our sales and earnings to exceed the previous year’s

al
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4 Middle East 5%
level.

ak
2

ird
Polyurethanes Polyurethanes – Sales by region
(Location of customer)
w
Due to higher prices and volumes, our sales to third parties were
4
€5,852 million, exceeding the previous year’s level by €411 mil­
1 Europe 38%
lion (volumes 5%, prices 5%, currencies –2%). We were able to 1
2 North America 20%
increase sales in all regions and nearly all product lines.
Demand from key customer sectors, such as the automo­ 3 Asia Pacific 35% 3 €5,852
million
tive and industrial construction industries, grew sharply in the South America, Africa,
4 Middle East 7%
first half of the year, particularly in Asia and Europe. However,
growth began to slow from the middle of the year, especially in 2

the construction industry.

We were able to raise our sales prices for most product
lines and thereby largely compensate for higher raw material
costs. Nevertheless, due to better availability on the market,
prices for TDI decreased.

Performance Polymers Polyurethanes

−−Significant sales growth due to higher volumes and prices −−Sales rise as a result of higher prices and sales volumes
−−Earnings considerably above previous year’s level thanks −−Earnings below previous year’s level, due mainly to lower
to favorable demand development and higher prices margins for TDI
−−Successful expansion of Ecoflex production in −−Continuous expansion of our system house network
Ludwigshafen −−Outlook 2012: increased sales and earnings
−−Outlook 2012: significant sales increase; earnings below
previous year’s level
BASF Report 2011 The business year at BASF
Performance Products
Management’s Analysis
55

Performance Products
Innovative, fast-growing and cyclically resilient

The Performance Products segment consists of the Segment strategy

­Dispersions & Pigments, Care Chemicals, Nutrition & Specialties make up a major part of our product range. Key suc­
Health, Paper Chemicals and Performance Chemicals cess factors are innovations, close relationships with leading
­divisions. Our customers use our products and services companies in our customer industries as well as special exper­
to make their production processes more efficient as well tise in applications and development. Our products create
as to give their products an improved application profile ­additional value for our customers, which allows them to set
and special characteristics to design, protect and main- themselves apart from their competitors. We develop new
tain surfaces. We also offer high-performance products ­solutions together with our customers and strive for long-term
for detergents and cleaners, for cosmetics and for ­better partnerships which create profitable growth opportunities for
nutrition. both sides.

Products, customers and applications

Segment Performance Products

Division Dispersions & Care Chemicals Nutrition & Health Paper Chemicals Performance
Pigments Chemicals

Products Polymer dispersions, Superabsorbents, Additives for the food and Dispersions for paper Antioxidants, light
fiber bonding, surfactants, emulsifiers, feed industries, such as coating, functional stabilizers, pigments
pigments (including polymers, emollients, vitamins, carotenoids, chemicals, process and flame retardants for
effect pigments), dyes, active ingredients, sterols, enzymes and chemicals, kaolin minerals plastic applications
preparations, resins, pigments, UV filters, organic acids
light stabilizers and chelating agents, Fuel and lubricant
photoinitiators, micronutrients, biocides, Aroma chemicals such as additives, engine
formulation additives optical effect products, geraniol, citronellol and coolants, brake fluids
waxes, esters, amides, linalool
silicates and metal Process chemicals for
surface treatment Active ingredients and the extraction of oil, gas,
products excipients for the metals and minerals
pharmaceutical industry,
like caffeine, ibuprofen and Chemicals and package
pseudoephedrine as well solutions for water
as binders and coatings treatment
for tablets, synthesizing
pharmaceutical substances Auxiliary agents for the
and intermediates for our production and treatment
customers of leather and textiles

Customer industries Raw materials for the Ingredients for hygiene, Food and feed industries, Paper industry Plastics processing
and applications formulation of varnishes, personal care, home care flavor and fragrance industry, fuel and
coatings, printing and and industrial & instituti- industry and lubricant industry, oil and
packaging inks, onal cleaning businesses pharmaceutical industry mining industry, municipal
adhesives and as well as for technical and industrial water
construction materials applications treatment, leather and
textile industry

Strategy Cognis integration

−−Specialties: innovation, close relationships with leading −−Cognis businesses successfully integrated into the
customer companies, expertise in applications Performance Products segment
and development −−Aiming for additional EBIT of €290 million starting in 2015
−−Standard products: efficient production structures in through synergies from the Cognis integration
the Verbund, technology and cost leadership −−One-time integration costs of around €300 million
−−Significantly strengthened market position with Cognis expected by the end of 2013; €21 million already incurred
acquisition; now also market leader in personal care in 2010 and €238 million in 2011
ingredients
56 Management’s Analysis The business year at BASF
Performance Products
BASF Report 2011

We have a different business model for standard products, such around €120 million by the first quarter of 2011. The acquired
as vitamins or dispersions for paper coatings. Here, efficient business will already be accretive to earnings per share as of
production structures within the BASF Verbund and capacity 2012, less than two years after the acquisition. We completed
management as well as technology and cost leadership are cru­ the major parts of the structural integration by the end of 2011.
cial. We support our customers by being a reliable supplier with
lean processes, consistent product quality and a good price/ Innovation
performance ratio. The success of the Performance Products segment is driven by
A central element of our value-adding strategy is the active product innovations. We focus on the needs of our customers
management of our business and product portfolio. We expand and on market trends. For example, we recognized the need for
the share of innovative, cyclically resilient and fast-growing busi­ effective sun protection products early on. Today’s UV filters
nesses through acquisitions and divestitures. We completed the should not only protect against sunburn, but also offer protec­
structural integration of Ciba in April 2010. By the end of 2012, tion against UVA radiation that can lead to chronic damage. With
synergies from the combined businesses will rise to more than the launch of our innovative products Tinosorb® M, Tinosorb® S
€450 million annually. With the acquisition of Cognis on Decem­ and Uvinul® A Plus, efficient UVA filters are now available for sun­
ber 9, 2010, we have further strengthened the Performance screens and daily skin care products.
Products segment and added products to the portfolio that are UV absorbers are also important in plastics: Our Tinu­
based on renewable raw materials. This deal has significantly vin® 1600 is a highly effective UV absorber for engineering
improved our position in some markets, particularly for personal plastics which significantly increases the lifetime of end user
care ingredients. We are now the market leader in this busi­ applications such as modern plastic window glazings or solar
ness. panels.
In the Performance Products segment, we aim for long- Biologically degradable adhesives will play a decisive role
term profitable growth. While we are actively expanding some in the development of compostable packaging materials. With
business activities, in other areas we are focusing on restruc­ Epotal® Eco, we offer the first compostable water-based adhe­
turing and repositioning. To this end, we are defining and imple­ sive certified by the German Technical Inspection Agency TÜV.
menting new strategies and appropriate business models. Epotal Eco is particularly suitable for the production of multi-
layer films for flexible packaging materials made of biode­
Cognis integration gradable plastics. These applications can include, for example,
The Cognis businesses have been successfully integrated into granola bar packaging.
the Performance Products segment. Our goal is to generate Our new synthetic dry-strength agent for use in the paper
­additional income from operations (EBIT) of €290 million yearly industry shows how innovations can further improve our cus­
as a result of the integration. This includes growth synergies to tomers’ production processes. It makes freshly produced wet
generate an additional EBIT of €145 million annually from 2015 paper sheets more tear-resistant, enabling a higher throughput
and cost synergies of around €145 million each year, which we speed as well as the use of lower-grade paper fibers. Compared
expect to achieve starting from the end of 2013. with the starch-based products usually used, our new cationic,
By the end of 2013, we anticipate one-time integration costs vinyl formamide-based polymer offers major cost reduction
of around €300 million, of which €21 million were already ­incurred ­potential for our customers. Trials with a leading ­European ­paper
in 2010 and €238 million in 2011. In addition, the full use of producer have shown that the production costs of wood-free
­inventories stepped up to fair value had resulted in expenses of base paper can be reduced by 5%.

Products

−−Dispersions & Pigments: raw materials for the formulation −−Nutrition & Health: products for the food and feed
of varnishes, coatings, printing and packaging inks, industries, the flavor and fragrance industry and the
adhesives and construction materials pharmaceutical industry
−−Care Chemicals: ingredients for hygiene, personal care, −−Paper Chemicals: products for the paper industry
home care and industrial and institutional cleaning −−Performance Chemicals: wide range of system solutions
businesses as well as for technical applications for industrial applications
BASF Report 2011 The business year at BASF
Performance Products
Management’s Analysis
57

Starting in summer 2012, we will expand our offering in the

Tinuvin 1600
aroma chemicals business with L-menthol, a product from our
UV absorber for transparent engineering plastics
citral value chain. We developed and patented the L-menthol
production method. This process allows us to offer a very high Value for BASF Value for our customers
level of purity. L-menthol is an ingredient in numerous oral care,

50% 75%
flavor and pharmaceutical industry products.

Marketing and customer relations

Our customer portfolio is made up of large and medium-sized growth in annual sales increase in product life-
enterprises, global and regional customers in almost all areas volumes from 2006 to time of plastic applications
of the consumer and capital goods industries. We offer our cus­ 2011
tomers direct and individual service and usually maintain long-
term business relationships with them. In addition to innovative
Value for BASF The plastics industry grows by 3–5%
products, we often offer application services as well. Regional
every year, and the growth rate for special applications in
development laboratories allow us to quickly adapt our prod­
the construction, electronics and automotive industries is
ucts to local needs. We follow a value-based pricing strategy
even higher. Additives considerably improve the perfor-
that focuses on the overall added benefit that customers gain
mance of plastics and are therefore an important value-
from our solutions.
adding factor for these industries. We have the world’s
We work with specialized distribution partners for certain
most comprehensive plastic additives portfolio, and offer
products and applications and to serve smaller customers. We
products ranging from pigments and antioxidants to high-
also supply internal customers, for example BASF’s Coatings
quality UV absorbers. One example is our UV absorber
and Construction Chemicals divisions, which receive important
Tinuvin 1600, with which we increased our sales by 50%
raw materials from the divisions in the Performance Products
per year from 2006 to 2011.
segment.
Value for our customers Our UV absorber
­ inuvin 1600 increases the lifetime of end applications –
T
such as modern plastic window glazings and solar panels
– by up to 75%. At the same time, Tinuvin 1600 allows
more efficient processing as well as significantly lower
waste in the production process, increasing productivity
by up to 15%.

Innovation Marketing and customer relations

−−Product innovations: focused on customers’ needs −−Broad customer portfolio: large and medium-sized global
and on market trends and regional customers from almost all areas of the
−−New UVA absorbers offer efficient protection against consumer and capital goods industries
harmful UVA radiation −−Development laboratories close to our customers in all
−−Epotal Eco: the first compostable water-based adhesive regions to enable quick problem solving
certified by the German Technical Inspection Agency TÜV −−Specialized distribution partners to serve smaller
−−L-menthol: new plant to start up in 2012; production customers as well as for certain products and
method developed and patented by BASF applications
58 Management’s Analysis The business year at BASF
Performance Products
BASF Report 2011

Capital expenditures

Additional annual
capacity through Total annual
expansion capacity
Location Project (metric tons) ­(metric tons) Startup
Antwerp, Belgium Expansion: superabsorbents 25,000 n/a 2012
Bahrain Construction: plastic additives 16,000 2012
Camaçari, Brazil Construction: superabsorbents 60,000 2014
Durban, South Africa Construction: dispersions n/a n/a 2012
Freeport, Texas Expansion: superabsorbents 35,000 n/a 2011
Huizhou, China Construction: dispersions (XSB and acrylate) 100,000 2012
Ludwigshafen, Germany Expansion: methane sulfonic acid 20,000 30,000 2012
Construction: L-menthol n/a n/a 2012
Nanjing, China Construction: cationic polyacrylamides 20,000 2012
Construction: quaternized cationic monomers (DMA3/DMA3Q) 40,000 2012
Construction: polyisobutene 50,000 2011
Construction: nonionic surfactants 60,000 2011
Construction: superabsorbents 60,000 2014

Production capacities of significant products

Sites

Asia South America, Annual capacity

Product Europe North America Pacific Africa, Middle East (metric tons)
Anionic surfactants X X X X 550,000
Citral X 40,000
Chelating agent X X X 120,000
Methane sulfonic acid X 10,000
Nonionic surfactants X X X 630,000
Organic pigments X X X X n/a
Polyisobutene X X 215,000
Superabsorbents X X X 445,000

t
tua lisier
Sales – Performance Products
(million €) wi rd ak Sales by division

5 1
1 Dispersions & Pigments 22%
2011 15,697 2 Care Chemicals 33%
2010 12,288 3 Nutrition & Health 12% €15,697
4 million
2009 9,356 4 Paper Chemicals 10%
5 Performance Chemicals 23%
3 2
BASF Report 2011 The business year at BASF
Performance Products
Management’s Analysis
59

Segment data Performance Products (million € )

2011 2010 Change in %

Sales to third parties 15,697 12,288 27.7
Thereof Dispersions & Pigments 3,509 3,197 9.8
Care Chemicals 5,174 2,755 87.8
Nutrition & Health 1,862 1,482 25.6
Paper Chemicals 1,623 1,713 (5.3)
Performance Chemicals 3,529 3,141 12.4
Intersegmental transfers 490 438 11.9
Sales including intersegmental transfers 16,187 12,726 27.2
Income from operations before depreciation and amortization (EBITDA) 2,312 2,162 6.9
EBITDA margin  % 14.7 17.6 –
Income from operations (EBIT) before special items 1,727 1,554 11.1
Income from operations (EBIT) 1,361 1,345 1.2
Income from operations (EBIT) after cost of capital (119) 441 .
Assets 13,680 13,409 2.0
Research and development expenses 330 289 14.2
Additions to property, plant and equipment and intangible assets 648 3,000 (78.4)

Sales to third parties grew by €3,409 million to €15,697 mil- Dispersions & Pigments
lion (volumes –1%, prices 6%, portfolio 25%, currencies In 2011, our sales to third parties were €3,509 million, an ­increase
–2%). This growth was especially supported by the full- of €312 million over the previous year (volumes 2%, prices 8%,
year inclusion of the Cognis businesses. While volumes portfolio 2%, currencies –2%). This sales increase resulted from
remained generally stable, sales growth was also boosted the generally good economic environment in the first half of the
by higher sales prices resulting from increased raw year as well as from the restocking of inventories along the ­entire
­material costs. Income from operations amounted to value-adding chain. However, at the beginning of the second
€1,361 million, matching the level of the previous year. half, economic growth weakened considerably and our custom­
In 2012 we expect higher demand and a rise in sales. ers began to focus heavily on restrictive inventory management.
We aim to increase earnings through growth impetus, We were nevertheless able to increase our sales in this period
mainly from the combined businesses of Cognis and thanks to the inclusion of the Cognis businesses.
BASF, as well as from lower integration expenses. Sales in our pigments business area matched the very good
level of the previous year and increased significantly in disper­
sions, resins and additives. We were mostly able to pass on
­increased raw material costs to the market via higher sales
prices, especially in our business with dispersions and resins.

t
a lisier rt
aktu alisie
w i rd aktu
wird
Factors influencing sales – Performance Products Income from operations – Performance Products
(million €)

Volumes (1%)
Prices 6% 2011 1,361
Portfolio 25% 2010 1,345
Currencies (2%) 2009 (150)
Sales 28%
60 Management’s Analysis The business year at BASF
Performance Products
BASF Report 2011

In the resins business, we also benefited from better availability Care Chemicals
of raw materials as well as the inclusion of the Cognis business. Compared with the previous year, we almost doubled our sales
In our additives business, our sales grew thanks in part to the in the Care Chemicals division, which rose by €2,419 million to
success of our business with specialties for the manufacture of €5,174 million. This considerable growth was mainly attributable
liquid crystal displays, which were in high demand in Asia in the to the inclusion of the Cognis businesses (volumes 1%, prices
first half of the year. The acquired Cognis activities were also an 5%, portfolio 84%, currencies –2%).
additional driver of sales growth in this business. In the first half of the year, our business developed success­
Despite the inclusion of the Cognis business, we have fully thanks to strong demand. In certain product lines we were
­reduced our fixed costs thanks to our continued cost discipline unable to fully meet demand on account of delivery bottlenecks
and the realization of further synergies from the Ciba integra­ for precursors. During this time period, we were able to pass on
tion. Thanks to strong business performance during the first half the significant rise in raw material prices to the market through
of the year, income from operations rose. our sales prices. Over the course of the second half of the year,
We expect demand for our products to continue to grow in demand from our customer industries weakened, as custom­
2012. We also expect growth in our key customer industries – ers began reducing their inventories in response to growing
automotive, construction and packaging – in the coming year; economic uncertainty. Sales volumes overall matched the high
rt
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our sales will likely rise significantly compared with 2011 levels. prior-year level. The weaker U.S. dollar had a negative impact
is
al

However, increasing product availability on the market will lead on sales.

tu

to growing pressure on our margins. Overall, we expect earn­ Despite high special charges, we achieved a significant
ak

ings in 2012 to match the previous year’s level. ­improvement in income from operations compared with the pre­
ird
w

vious year. The special charges resulted in particular from the

Dispersions & Pigments – Sales by region integration of Cognis. As expected, they were considerably
(Location of customer)
higher than in the previous year.
4
The integration of Cognis activities was successful; we
1 Europe 43%
reached all important milestones by the end of the year, as
2 North America 25% 3 1 planned.
3 Asia Pacific 24% €3,509
million In Nanjing, China, our first nonionic surfactant plant in Asia
South America, Africa, started up ahead of schedule. Furthermore, we expanded the
4 Middle East 8%
capacity of our hygiene business in North America.
2 In 2012, we aim to grow faster than the market and to
­increase our sales. We expect earnings to grow significantly as
expenses for the integration of Cognis decrease and margins
remain stable.

Dispersions & Pigments Care Chemicals

−−Sales rise due to good economic environment in first −−Sales improve significantly, mainly thanks to
half as well as inclusion of Cognis businesses inclusion of Cognis
−−Positive business development, especially in −−Considerable rise in earnings
dispersions, resins and additives −−Special charges increase due to Cognis integration
−−Earnings increase compared with previous year −−Outlook 2012: sales growth; significant increase in
−−Outlook 2012: significant sales growth; earnings at earnings with a considerable decline in integration
previous year’s level expenses
BASF Report 2011 The business year at BASF
Performance Products
Management’s Analysis
61

Care Chemicals – Sales by region Nutrition & Health – Sales by region

(Location of customer) (Location of customer)
4 4

1 Europe 50% 1 Europe 50%

3
2 North America 23% 2 North America 19% 3

3 Asia Pacific 16% €5,174 1 3 Asia Pacific 22% €1,862 1

million million
South America, Africa, South America, Africa,
4 Middle East 11% 4 Middle East 9%
2
2

Nutrition & Health Paper Chemicals

In the Nutrition & Health division, our sales to third parties In 2011, we posted sales to third parties of €1,623 million, a
­increased by €380 million to €1,862 million (volumes 5%, prices ­decrease of €90 million compared with the previous year (vol­
–1%, portfolio 23%, currencies –1%). This considerable rise is umes – 9%, prices 8%, portfolio –2%, currencies –2%). In addi­
primarily attributable to the full-year inclusion of the Cognis tion to restructuring measures, this decline was attributable to
­activities. Demand for our products was high, particularly in the the considerably lower demand in almost all regions; particu­
first half of the year. We were able to increase sales volumes in larly in Europe and North and South America, we faced a diffi­
nearly all business areas and regions in 2011. We posted the cult market and competitive environment. Increased prices
strongest volume growth in the business areas pharmaceuti­ could not fully offset the decline. In Asia, our sales volumes
cals and animal feed. In some product lines, we were ­unable to matched the previous year’s level. Here, we focused on the
keep up with demand because our capacities were already fully growth markets of China, India and Indonesia.
utilized, or because of a shortage of key raw materials. The price We were able to achieve a substantial reduction in our fixed
level for vitamins declined slightly as a result of intense compe­ costs through restructuring measures, such as the realignment
tition. In addition, sales growth was slowed by the weakness of of global production structures for paper dyes, and exiting the
the U.S. dollar. optical brightener business in Europe. Our strict cost manage­
Despite increasing sales volumes, income from operations ment also contributed here. Nevertheless, income from
did not match the high level of the previous year. This was mainly ­operations declined, mainly on account of the high special
due to special charges associated with the integration of the charges resulting from restructuring measures.
­acquired Cognis businesses as well as pressure on margins In 2012, we continue to anticipate a difficult economic
from higher raw material prices and more intense competition. ­environment in the paper industry, especially in the regions
In 2012, we aim to again post an increase in sales volumes ­Europe and North America. Electronic media will continue to
and sales. Growth impetus is likely to come from our human displace printed media and paper, making further consolidation
­nutrition business, which combines the activities of BASF and and plant closures necessary in our customer industry. On the
the former Cognis, as well as our business with customized other hand, the market for paper packaging material will con­
pharmaceutical specialties and the scheduled startup of the tinue to experience stable growth. Especially in this business
world’s largest production facility for the aroma chemical L-men­ environment, we plan to grow faster than the market with envi­
thol. With generally stable margins and lower integration ronmentally friendly, biodegradable barrier coatings. There are
­expenses, we expect significantly higher earnings than in the good growth opportunities in the Asian market. Therefore, we
previous year.

Nutrition & Health Paper Chemicals

−−Significant sales growth due mainly to inclusion of −−Sales decrease as a result of restructuring measures
Cognis activities as well as lower demand
−−Substantial volume growth, especially in the −−Substantial reduction in fixed costs thanks to
pharmaceuticals and animal nutrition business areas restructuring measures and strict cost management
−−Earnings below strong prior-year level due in part to −−Earnings decline compared with previous year, mainly
special charges due to high special charges
−−Outlook 2012: sales increase due to higher sales −−Outlook 2012: sales in continuing operations higher than
volumes; significant improvement in earnings previous year’s level; significant increase in earnings
62 Management’s Analysis The business year at BASF
Performance Products
BASF Report 2011

plan to start up plants for cationic polymers and coating bind­ Income from operations was considerably above the level of the
ers in China in 2012. We will also focus on introducing new, previous year. This development was supported by our strict
­inexpensive paper dispersions on the market and accelerating price management and by the acquired Cognis businesses. In

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the launch of biopolymers. We aim for sales growth in our con­ contrast, the weak U.S. dollar, the strong Swiss franc, the

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tinuing operations in 2012 and want to significantly increase ­demand-related volume decline and the consequences of the

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In our plastic additives business, we want to get even closer

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Paper Chemicals – Sales by region to our customers in fast-growing regions; to this end, we began
(Location of customer)
construction of a new plant for customized antioxidant blends
4
in the Middle East.
1 Europe 43%
With the acquisition of inge watertechnologies AG, we now
2 North America 21%
3 offer solutions for ultrafiltration technology, a membrane pro­
3 Asia Pacific 29% €1,623 1

million cess used in the treatment of drinking water, process water,

South America, Africa, wastewater and seawater. This acquisition also strengthens our
4 Middle East 7%
water treatment chemicals business.
2 In 2012, we expect sales to rise on account of the startup
of new production facilities – for example, plants for polyacryl­
Performance Chemicals amide and polyisobutene in Nanjing, China – as well as a slight
In 2011, our sales to third parties rose by €388 million to recovery in demand. Furthermore, despite targeted additional
€3,529 million (volumes – 5%, prices 7%, portfolio 12%, curren­ ­expenditures for research and development, we expect earn­

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cies –2%). In the first quarter, there was strong demand for our ings to improve significantly due to price measures already

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products, but it then weakened over the course of the year. Due ­implemented, further price differentiation, measures to increase

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to increasing economic uncertainty, our customers reduced efficiency and systematic customer management.

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their inventory levels. In order to pass on the high raw material
costs to the market, we successfully adapted prices in all busi­ ird
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ness areas in line with our “value over volume” strategy. The Performance Chemicals – Sales by region
(Location of customer)
overall significant sales growth was driven mainly by our strong
4
business in fuel and ­lubricant solutions as well as the full-year
1 Europe 42%
inclusion of the integrated Cognis businesses, in addition to
2 North America 23% 1
higher prices.
3 Asia Pacific 25%
3
€3,529
million
South America, Africa,
4 Middle East 10%

Performance Chemicals

−−Considerable improvement in sales in 2011 thanks in −−Outlook 2012: considerable sales growth due in part to
part to higher prices; successful business with fuel the startup of new production facilities; earnings to
and lubricant additives improve significantly despite increase in targeted
−−Earnings significantly above previous year’s level thanks additional expenditures for research and development
to strict price management and the contribution from the
acquired Cognis businesses
BASF Report 2011 The business year at BASF
Functional Solutions
Management’s Analysis
63

Functional Solutions
Customer-specific products and system solutions

The Functional Solutions segment comprises the Cata- Innovation

lysts, Construction Chemicals and Coatings divisions. In the Catalysts division, we have a research and development
These divisions develop innovative, customer-specific platform that is unique in the industry. We continuously expand
products and system solutions, in particular for the our technological leadership through process and product
­automotive, chemical and construction industries. ­innovations. Our focus is on improving the performance of our
catalysts to conserve resources and meet tightening emission
Segment strategy standards. Our SCR (Selective Catalytic Reduction) technology,
Our portfolio is made up of innovative products and technolo­ for example, can remove over 90% of nitrogen oxide emissions
gies that allow our customers to set themselves apart from their from the exhaust flow of diesel engines. This innovation earned
competitors. The success of the segment is based primarily on us the Thomas Alva Edison Patent Award in 2011.
specialties and system solutions developed in collaboration with Construction Chemicals aligns its research and develop­
our customers. One focus of our strategy is the ongoing ment activities with local customers’ needs and construction
optimization of our product portfolio and structures in accor­ ­industry trends. Sustainability – in other words, cost and
dance with different regional market requirements as well as ­resource efficiency – is the focus of the division’s research. One
trends in our customer industries. For example, our new example is our newly launched Masterflow® special grouts for
Battery Materials business unit drives solutions for the electric anchoring wind turbines. These help to make turbine installa­
mobility of ­tomorrow. We aim to strengthen our leading market tion more efficient and secure and to ensure long-lasting dura­
position in Europe, to profitably expand our position in the North bility in harsh weather conditions. Other key research topics are
American market and to selectively extend our activities in the ­organic binders for applications in flooring and waterproofing as
growth ­regions of Asia, South America, Eastern Europe and the well as inorganic binders as an alternative to cement.
Middle East.

Products, customers and applications

Segment Functional Solutions

Division Catalysts Construction Chemicals Coatings
Products Automotive and process catalysts Concrete admixtures, cement Coatings solutions for automotive and
additives, underground construction industrial applications
Precious and base metal services solutions, exterior insulation and
finishing systems, sealants, repair Decorative paints
products, high-performance mortars
and grouts, tile-laying systems
Customer industries and applications Automotive and chemical industries Cement and concrete producers, Automotive industry, body shops,
construction companies, craftsmen, steel industry, painting businesses
Refineries builders’ merchants and private consumers

Solutions for building envelopes and

structure, interior construction in
residential and commercial buildings,
and for infrastructure

Strategy Innovation

−−Focus on innovative products and technologies that allow −−Especially efficient exhaust gas purification with
customers to set themselves apart from the competition SCR technology for diesel engines
−−Development of specialties and system solutions in close −−Specially designed Masterflow grouts to securely
collaboration with our customers anchor wind turbines
−−Continuous optimization of our product portfolio −−More efficient coating process for the automotive industry
according to regional market requirements and trends in
the customer industries
64 Management’s Analysis The business year at BASF
Functional Solutions
BASF Report 2011

Capital expenditures

Location Project Startup

Clermont de l’Oise, France Construction: coating resins 2012
Elyria, Ohio Construction: battery materials 2012
Mangalore, India Expansion: construction chemicals 2011
Swinton, United Kingdom Expansion: construction chemicals 2011
Tultitlán, Mexico Construction: regional laboratory activities 2012
Westonaria, South Africa Expansion: construction chemicals 2011

In the Coatings division, we continually work on developing

SCR (Selective Catalytic Reduction) filter
­innovative coating systems and intelligent solutions to contrib­
A single component removes nitrogen oxides and soot
ute to our customers’ success. We make sure that the coatings
Value for BASF Value for our customers of the future will be more scratch-resistant and less sensitive to
annual up to environmental influences, offering improved corrosion protec­
tion and innovative color and design effects. Moreover, we

30% 25%
­develop coating processes that are more efficient and environ­
mentally friendly. In the automotive sector, for example, we man­
aged to successfully integrate the functionality of two paint ­layers
worldwide increase in less space needed into one layer. Car body painting thus requires fewer steps and
sales volumes of catalysts compared with exhaust less energy, shortening the overall painting process.
for diesel-powered com- gas purification systems
mercial vehicles expected with two components
Marketing and customer relations
through 2015
Our customer portfolio includes everything from major custom­
ers to ­medium-sized regional businesses, to small local busi­
Value for BASF Standards for exhaust gases are
nesses and body shops. Our business models and sales chan­
becoming increasingly strict; demand is growing for our
nels are aligned with the needs of the specific customer groups
catalysts for diesel-powered commercial vehicles. We aim
and market segments. We provide our major customers with
for an annual 30% increase in sales volumes for our SCR
­individual service, offering customized research and develop­
filters through 2015.
ment and technical services. Regional development laborato­
ries allow us to quickly adapt our products to local needs.
Value for our customers Thanks to our SCR filter,
Good cooperation and the regular exchange of ideas and
nitrogen oxides and soot can be removed using just
experience have, for example, resulted in Daimler becoming the
one component. This not only saves weight, but also
first customer to use our new, innovative iGloss® clearcoat in
space – up to 25% compared with two-part exhaust gas
­serial production. This finish is characterized by especially high
purification systems, thus allowing more flexibility in the
scratch resistance, ensuring that cars look like new for longer.
construction of drive train components.

Sales – Functional Solutions Sales by division

(million €)

2011 11,361 1 Catalysts 56%

2010 9,703 2 Construction Chemicals 19% €11,361 1
million
2009 7,115 3 Coatings 25%
2
BASF Report 2011 The business year at BASF
Functional Solutions
Management’s Analysis
65

Segment data Functional Solutions (million €)

2011 2010 Change in %

Sales to third parties 11,361 9,703 17.1
Thereof Catalysts 6,380 5,005 27.5
Construction Chemicals 2,181 2,121 2.8
Coatings 2,800 2,577 8.7
Intersegmental transfers 195 159 22.6
Sales including intersegmental transfers 11,556 9,862 17.2
Income from operations before depreciation and amortization (EBITDA) 921 861 7.0
EBITDA margin  % 8.1 8.9 –
Income from operations (EBIT) before special items 559 467 19.7
Income from operations (EBIT) 427 457 (6.6)
Income from operations (EBIT) after cost of capital (599) (356) (68.3)
Assets 9,725 9,364 3.9
Research and development expenses 192 179 7.3
Additions to property, plant and equipment and intangible assets 359 208 72.6

In the Functional Solutions segment, our sales to third Catalysts

parties increased year-on-year by €1,658 million to Our business benefited in 2011 from the continued upturn in the
€11,361 million (volumes 9%, prices 10%, portfolio 1%, global automotive industry as well as the considerable recovery
currencies – 3%). Demand from the automotive industry in the market for chemical catalysts. Sales to third parties
for both our mobile emissions catalysts and automotive ­increased by €1,375 million to €6,380 million (volumes 13%,
coatings was strong. At €427 million, income from oper- prices 17%, portfolio 1%, currencies – 4%). This significant sales
ations was €30 million below the level of the previous growth was supported by rising precious metal prices. For the
year, mainly as a result of higher special charges, partic- most part, we were able to pass on higher costs for rare earths
ularly in the Coatings division. to the market.
In 2012, we expect growing demand from our key Our sales volumes of mobile emissions catalysts improved
customer sectors, the construction and automotive significantly in all regions. While demand for the light duty gas
­industries. We expect sales and earnings to exceed the segment in North America and Asia remained consistently
level of the previous year. strong, the ­demand for the light and heavy duty diesel segment
grew substantially in Europe.
The upswing in the automotive industry positively impacted
the performance of our unit Precious and Base Metal Services,
whose activities focus mainly on trading. On account of higher
precious metal prices, sales rose by €378 million to €2,860 mil­
lion.

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Factors influencing sales – Functional Solutions Income from operations – Functional Solutions
(million €)

Volumes 9% 2011 427

Prices 10% 2010 457
Portfolio 1% 2009 107
Currencies (3%)
Sales 17%
66 Management’s Analysis The business year at BASF
Functional Solutions
BASF Report 2011

In this favorable market environment, we posted a considerable Income from operations was below the level of the previous year
increase in our income from operations. due primarily to the negative development in the construction
We expect our sales to grow significantly once more in 2012. industry in Spain and North Africa. Furthermore, the market
This growth will be driven by the ongoing positive ­developments ­recovery we had forecast in North America failed to ­materialize.
in the automotive and chemical industries as well as rising prices We were therefore only partially able to pass on higher raw

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for base and precious metals. Our programs to improve opera­ ­material costs to our customers. In Spain, we adapted our sales

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tional excellence will continue to contribute to cost reduction structures to the weak market environment; the resulting
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and greater efficiency in 2012. We expect earnings to signifi­ ­expenses also had a negative impact on earnings.
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cantly exceed the previous year’s level. We expect the following developments in our important
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markets in 2012: In Northern and Western Europe as well as

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Catalysts – Sales by region ­Japan, growth will continue in the construction sector, while
(Location of customer)

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building activity in China will continue to increase at a strong

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4

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pace. Furthermore, we expect substantial growth in South

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1 Europe 36%
America, Turkey and Saudi Arabia. Thanks to this economic

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2 North America 29%
­recovery and based on measures for improving our efficiency,
3 €6,380

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3 Asia Pacific 23%
million we aim to significantly ­improve sales and earnings in 2012.

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South America, Africa,
4 Middle East 12%
Construction Chemicals – Sales by region
(Location of customer)
2
4

1 Europe 45%
Construction Chemicals
2 North America 22%
Compared with the previous year, we increased our sales to
3 Asia Pacific 22%
3
€2,181 1
third parties in 2011 to €2,181 million (2010: €2,121 million). Neg­ million
ative currency effects were more than offset by higher volumes South America, Africa,
4 Middle East 11%
(volumes 4%, prices 1%, currencies –2%).
2
Our business performance varied considerably by region:
In China, India, Russia and Saudi Arabia, our sales rose signif­
icantly once again thanks to strong demand. Although the mar­
ket environment in North America remained challenging, we also
improved our sales in that market in local-currency terms. Fur­
thermore, our sales grew in the important European markets of
France and Germany, as well as in Northern Europe, as a result
of the recovery in the construction sector. In contrast, we expe­
rienced a sharp drop in sales in Southern Europe; in Spain in
particular, the economic conditions in the construction industry
worsened again. The tense political situation in North Africa neg­
atively impacted our business in this region.

Catalysts Construction Chemicals

−−Sales considerably exceed prior-year level thanks to −−Sales increase due to greater volumes
strong business with automotive and chemical catalysts −−Earnings below previous year’s level primarily as a
and higher precious metal prices result of negative development of construction sector
−−Significant improvement in earnings in a favorable market in Spain and North Africa
environment −−Outlook 2012: significant sales and earnings increase
−−Outlook 2012: significant sales and earnings growth from thanks to economic recovery in key markets as well as
ongoing positive development in automotive and chemical to measures for improving our efficiency
industries and higher prices for base and precious metals
BASF Report 2011 The business year at BASF
Functional Solutions
Management’s Analysis
67

Coatings Although we expanded our operations, we managed to limit the

In 2011, we increased our sales to third parties year-on-year by increase in fixed costs thanks to restructuring projects. The
€223 million to €2,800 million (volumes 6%, prices 4%, curren­ sharp increase in raw material costs could not be fully passed
cies –1%). Demand for our products grew in all business areas. on to the market.
The favorable market environment in the global automotive In 2012, we expect demand for decorative paints in South
­industry, higher demand in South America and our strong busi­ America to stabilize at a high level and demand from the global
ness with coatings solutions in Russia made a significant con­ automotive industry to grow. The emerging markets in particu­
tribution to sales growth. lar will be a driving force in this regard. We therefore ­expect sales
Our business with automotive coatings was very success­ to increase in comparison with the 2011 level. After the high spe­
ful thanks to growing demand from our customers in Europe cial charges in the previous year, earnings are expected to

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and Asia, especially in China. Sales in the automotive refinish significantly increase in 2012. We will strengthen our presence

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coatings business also grew thanks to new customers and price in the growth markets of Asia and Eastern Europe – particularly

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increases, but the business environment remained competitive. in China, India and Russia – and together with our customers,

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of coatings for transportation and agricultural machinery.
In ­Europe, we benefited from strong demand for coil coatings Coatings – Sales by region
(Location of customer)
from the Russian steel industry. Thanks to new customers,
especially in emerging markets, sales volumes of coatings for
4
1 Europe 42%
wind turbines also grew. In the decorative paints business area,
2 North America 13%
sales were higher than in the previous year, particularly in South
3 Asia Pacific 17% €2,800 1

Ameri­ca. In this region, we not only experienced greater million

consumer demand, we were also able to gain additional South America, Africa,
4 Middle East 28%
market share with product innovations and targeted advertising 3

measures. 2

Income from operations was below the level of 2010 owing

to special charges which resulted from impairments in connec­
tion with the planned sale of our business with Relius® brand
decorative paints. Production sites in Memmingen, ­Germany,
and Deurne, Netherlands, are primarily affected by this divesti­
ture. Adjusted for these special charges, earnings exceeded the
very good level of the previous year.

Coatings

−−Sales improve in 2011 thanks in part to favorable market −−Outlook 2012: sales to grow thanks in part to growing
conditions for the global automotive industry as well as demand from the global automotive industry; significant
increased demand in South America earnings improvement after high special charges in 2011
−−Special charges arise from write-downs related to the
planned sale of our business with Relius brand decorative
paints; earnings therefore below previous year’s level
68 Management’s Analysis The business year at BASF
Agricultural Solutions
BASF Report 2011

Agricultural Solutions
Innovations for the health of crops

The Agricultural Solutions segment consists of the Crop we address important issues in agriculture, such as water man­
Protection division. We develop and produce innovative agement or sustainable yield optimization.
active ingredients and formulations for the improvement
of crop health and yields, and market them worldwide. Innovation
BASF Plant Science conducts research in the field of In 2011, we increased our research and development expendi­
plant biotechnology. tures to €412 million. This represents around 10% of sales. We
make targeted investments to identify novel active ingredients
Crop Protection – Strategy at an early stage and to quickly bring to market the results of
Our strategy has been developed based on long-term market our research and development projects. Our pipeline currently
trends. To feed the growing world population, we need a sus­ has a peak sales potential of €2,800 million, which is €400 mil­
tainable increase in crop yields. This is only possible with the lion more than in the previous year. Of this, €1,200 million ­relates
help of innovations. In order to secure our future growth, we rely to products that will have been launched between 2010 and
on a clear and long-term innovation strategy. We offer our cus­ 2020, ­including Kixor®, Initium® and Xemium®. Thanks to the
tomers a broad portfolio of integrated solutions, continuously con­tinuous and successful expansion of our umbrella brand
invest in our active ingredients pipeline and develop improved AgCelence®, we expect our active ingredient F 500® to reach a
formulations. In addition, we make targeted investments in core ­total peak sales potential of €1 billion.
markets and intensify our investments in growth markets. Xemium is a particularly powerful and widely applicable fun­
Moreover, we want to further strengthen our strategic part­ gicide for field and specialty crops. Sales already began in
nerships with seed companies, benefiting from the technologi­ France at the end of 2011. In the course of the global market
cal competence of BASF Plant Science. We develop solutions launch, starting in 2012, we plan to offer Xemium in more than
­together with other BASF divisions that go beyond conventional 50 countries for use with over 100 different crops. We are also
crop protection measures. With the help of the BASF Verbund, working on the development of two herbicide tolerance projects

Products, customers and applications

Segment Agricultural Solutions

Indications and sectors Fungicides Herbicides Insecticides Seed treatment Pest control
Application Protecting crops from Reduction of nutrient Combating insect pests Protecting seeds and Non-agricultural appli-
harmful fungal attacks; and water deprivation in agriculture young plants from fungal cations: public health,
improving plant health caused by weeds diseases and harmful professional pest control,
insects landscape maintenance
Product examples Products for fungicidal Kixor, imidazoline, Fipronil, Standak Top Termidor to protect
applications: boscalid, imidazolinone, alpha-cypermethrin, against termite
F 500, Xemium pendimethalin teflubenzuron infestation

Products for plant health:

AgCelence (umbrella
brand)

Sales – Agricultural Solutions Strategy and products

(million €)

−−Clear and long-term innovation strategy secures

future growth
2011 4,165
−−Targeted investments in core markets and growth
2010 4,033
markets
2009 3,646
−−Our products: fungicides, herbicides, insecticides, seed
treatment, crop health products and applications in the
non-crop sector
BASF Report 2011 The business year at BASF
Agricultural Solutions
Management’s Analysis
69

We see major growth potential in Asia, particularly in China and

Blockbuster fungicide Xemium
India. We want to strengthen our support for farmers in these
An important component of BASF’s fungicide portfolio
countries with our wide-ranging expertise in agronomic prac­
tices and technological solutions.
Value for BASF Value for our customers Acting responsibly is an integral part of BASF’s business

200million 3x
philosophy. We have invested in the development of a new

>€ method to implement sustainable solutions and agricultural

practices with our customers. AgBalance® is a way of measur­
total peak sales potential better performance
ing sustainability in agriculture that reveals where there is room
compared with
conventional fungicides for improvement.
For more, see basf.com/agbalance_e and page 214

Value for BASF Xemium is an important addition to Investments

our fungicide portfolio and further strengthens our leading In 2011, we invested €150 million. A large portion of this amount
position in the market for carboxamide fungicides. We aim was directly related to the creation of new production capaci­
for a peak sales potential of more than €200 million with ties for our fungicide Xemium. Furthermore, we increased
Xemium. ­capacity for the formulation of our fungicide F 500 in North
America. At the Ludwigshafen site, we invested in infrastructure
Value for our customers Xemium outperforms to improve our filling processes.
conventional fungicides in three ways: It remains effective To be able to meet the high demand for our innovative crop
longer, can be used more flexibly and disperses extraor- protection products in the future, we will continue to invest in
dinarily well within the plant. For the farmer, this means our production capacities. To do this, we plan an average
higher crop yields and improved quality. ­investment volume of approximately €200 million annually over
the next few years.

and three additional active ingredients, as well as on the estab­ BASF Plant Science
lishment of our new Functional Crop Care business area. Here, Plant biotechnology at BASF
we will develop solutions in resource and stress management BASF Plant Science is one of the world’s leading suppliers of
in order to help protect the environment and improve crop plant biotechnology solutions for agriculture. More than 750
yield. ­ mployees at eight sites help farmers meet the growing demand
e
for increased agricultural productivity as well as better nutrition
Marketing and customer relations for people and animals. BASF invests more than €150 million
Innovative, high-value products and services as well as strong per year to accomplish this. Research and development
local expertise are key to making our collaboration with custom­ ­expenses, sales, earnings and all other data of BASF Plant
ers successful. ­Science are not included in the Agricultural Solutions segment;
they are reported in Other.

Income from operations – Agricultural Solutions Innovation

(million €)

−−2011: research and development expenditures

of €412 million; 10% of sales
2011 808
−−Pipeline with peak sales potential of €2,800 million
2010 749
−−Widely applicable fungicide Xemium to be launched
2009 769
globally in 2012
−−Creation of new business area, Functional Crop Care
70 Management’s Analysis The business year at BASF
Agricultural Solutions
BASF Report 2011

Crop protection pipeline

Product Market launch 2002-2009 Market launch 2010-2020 Total peak sales potential
F: F 500, orysastrobin, dimoxystrobin, F 500 seed treatment,
boscalid, metrafenone
€1,600 million
H: tritosulfuron, topramezone
I: chlorfenapyr, Metaflumizone
F: Initium, Xemium, a new fungicide
H: Kixor, a new herbicide
I: a new insecticide €1,200 million
HT systems, for example, Dicamba or Cultivance¹
Functional Crop Care

Abbreviations: F = fungicide, H = herbicide, I = insecticide, HT = herbicide tolerance

¹ Herbicide tolerance project Cultivance is also reported in the BASF biotech pipeline.

Strategy Innovation
With a pioneering platform for gene discovery, BASF Plant BASF Plant Science cooperates with a number of biotechnol­
­Science has specialized in the development of plant character­ ogy companies, research institutes and universities worldwide.
istics such as higher yield, drought tolerance or disease resis­ Together with Monsanto, we develop higher-yielding and stress-
tance. Our goal is to develop crops like corn (maize), soybeans tolerant corn, soybean, canola (oil-seed rape), wheat and
and rice that provide farmers with higher and secure yields. We cotton plants. The world’s first genetically engineered drought-
also make an important contribution to sustainable agriculture tolerant corn was approved for cultivation in the United States
­because the cultivation of these plants significantly reduces the in December 2011. It will be grown on selected farms in the
amount of land, water and energy required to produce each United States starting in 2012 in order to familiarize farmers with
metric ton of harvested crops. In addition, we develop plants the product.
that can ­improve nutrition or be even better used as renewable Cargill and BASF Plant Science have been working together
raw materials. We market our products together with leading to develop healthy canola oil since November 2011. This oil is
partners in the seed industry. rich in valuable polyunsaturated omega-3 fatty acids that have
Starting in 2012, BASF Plant Science will concentrate even been proven to offer health benefits.
more on the main markets of North and South America. The All projects aimed solely at the European market will be
company’s headquarters will be moved to the Research Trian­ stopped in 2012. This applies to the amylopectin potatoes
gle Park site in Raleigh, North Carolina, in order to gain proxim­ ­Amflora, Amadea and Modena, as well as the late-blight-resis­
ity to these markets. tant potato, Fortuna. Approval processes that have already
­begun will be continued.

BASF Plant Science Innovation

−−BASF’s plant biotechnology company with more than −−Cooperation with Monsanto: first genetically modified
750 employees worldwide corn approved for cultivation in the United States
−−Pioneering gene discovery platform −−Cooperation with Cargill: development of healthy canola
−−Development of crops with clear advantages for farmers, oil with polyunsaturated omega-3 fatty acids
consumers and the environment −−Projects aimed solely at the European market to be
−−Company headquarters to move to the Research Triangle stopped, including amylopectin potatoes Amflora,
Park site in North Carolina starting in 2012 Amadea, Modena and Fortuna
BASF Report 2011 The business year at BASF
Agricultural Solutions
Management’s Analysis
71

Segment data Agricultural Solutions1 (million €)

2011 2010 Change in %

Sales to third parties 4,165 4,033 3.3
Intersegmental transfers 27 25 8.0
Sales including intersegmental transfers 4,192 4,058 3.3
Income from operations before depreciation and amortization (EBITDA) 981 938 4.6
EBITDA margin  % 23.6 23.3 –
Income from operations (EBIT) before special items 810 749 8.1
Income from operations (EBIT) 808 749 7.9
Income from operations (EBIT) after cost of capital 242 289 (16.3)
Assets 5,350 5,063 5.7
Research and development expenses 412 393 4.8
Additions to property, plant and equipment and intangible assets 150 145 3.4

1
Research and development expenses, sales, earnings and all other data of BASF Plant Science are not included in the Agricultural Solutions segment; they are
reported in Other.

Compared with the previous year, our sales to third par- At €1,659 million, sales in Europe were €93 million higher than
ties grew by €132 million to €4,165 million, thanks to in 2010. This increase was driven in particular by strong demand
higher volumes. Despite increased investments in from the growth markets of Eastern Europe as well as by our
­research and development as well as in growth markets, successful fall business. In addition, our business with herbi­
income from operations reached €808 million, exceed- cides for sunflowers and corn (maize) made a significant contri­
ing the 2010 level by €59 million. bution to sales growth. However, the extreme drought in our key
We will continue our successful innovation strategy markets in Western Europe during the first half of the year
in 2012 and we aim once again for sales and earnings ­reduced demand for fungicides.
growth. In North America, our sales declined by €34 million to
€965 million, in particular due to the depreciation of the U.S.
Crop Protection dollar. Furthermore, the cultivated area declined due to flooding
In the Crop Protection division, sales to third parties increased during the first half of the year; herbicide demand decreased.
by €132 million to €4,165 million (volumes 6%, prices 0%, cur­ These ­developments could be partially offset by increased sales
rencies –3%). This sales growth was primarily attributable to the volumes of our fungicides for plant health, as farmers were more
positive market environment: Thanks to increased agricultural willing to invest in products that offer benefits beyond disease
commodity prices and the resulting high liquidity in the agricul­ control.
ture sector, demand grew for our innovative crop protection
products. On the other hand, the depreciation of the U.S. dollar
had a negative impact on sales.

Factors influencing sales – Agricultural Solutions Factors influencing sales

−−Europe: sales growth mainly driven by strong demand

Volumes 6%
from the growth markets of Eastern Europe
Prices 0%
−−North America: sales decline, especially as a result of
Portfolio 0%
the depreciation of the U.S. dollar
Currencies (3%)
−−Asia: sales improve considerably as a result of higher
Sales 3%
sales volumes
−−South America: sales increase thanks to higher prices
and volume growth
72 Management’s Analysis The business year at BASF
Agricultural Solutions
BASF Report 2011

In Asia, our sales improved considerably thanks to higher sales We expect slight growth in the market for agricultural chemicals
volumes, rising by €49 million to €487 million. This growth was in 2012. We anticipate that prices for agricultural commodities
particularly attributable to our successful herbicide business in will continue to be highly volatile and remain above the histori­
India as well as to strong demand for products based on F 500® cal average. In addition to agricultural commodity prices and
in the growth markets of India and China. In India, we also ben­ weather conditions, the exchange rates of important currencies
efited from our Samruddhi business model, which focuses on will play an important role in our business development. In light

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training farmers in the proper use of crop protection products of our recently launched products and the expansion of our busi­

is
al
and fertilizers in order to increase yields. ness in growth markets, we want to grow faster than the mar­

tu
As a result of higher prices and growing volumes, sales in ket in 2012. We aim to improve sales and earnings.

ak
South America grew by €24 million to €1,054 million, despite

ird
w
negative currency effects. In particular, our business with the
AgCelence® production system – a combined product offering Crop Protection – Sales by region
(Location of customer)
that ranges from seed treatment to foliar applications – grew
considerably. Insecticides for sugarcane and seed treatment 4
1 Europe 40%
were in high demand, especially in Brazil. For example, our

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2 North America 23%
­innovative seed treatment Standak® Top sold very well on the
€4,165 1

is
3 Asia Pacific 12%

al
Brazilian market. million

tu
In this positive business environment, we achieved income South America, Africa, 3

ak
4 Middle East 25%
from operations of €808 million, exceeding the high level of the

ird
previous year by €59 million. The rise in earnings was limited by

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2

negative currency effects as well as our planned increase in in­

vestments in research and development and the expansion of Crop Protection – Sales by indication
our sales team in growth regions. 3

1 Fungicides 46%
2 Herbicides 33% €4,165 1

million
3 Insecticides and other 21%

Crop Protection

−−Sales increase in 2011 as a result of high demand, −−Outlook 2012: slight growth in the agricultural chemical
particularly in growth markets market with crop commodity prices remaining volatile;
−−Earnings exceed high level of previous year despite sales and earnings to improve
negative currency effects and increased investments in
research and development as well as in sales activities
BASF Report 2011 The business year at BASF
Oil & Gas
Management’s Analysis
73

Oil & Gas

Exploration and production of oil and natural gas;
Trading, transport and storage of natural gas

BASF ’s oil and gas activities are bundled in the Winters­ Exploration & Production
hall Group. Wintershall and its subsidiaries operate in the Europe: The Mittelplate oil field in the North Sea tidal flats is the
business sectors Exploration & Production and ­Natural cornerstone of our oil production in Germany. Wintershall and
Gas Trading. RWE-DEA each own a 50% stake in this field, the largest known
oil deposit in the country. In 2011, we also drilled the first wells
Segment strategy as part of our biopolymer project to increase recovery rates from
In the exploration and production of crude oil and natural gas, the Bockstedt oil field in Lower Saxony.
we concentrate on selected oil- and gas-rich regions in Europe, Wintershall is one of the largest producers of natural gas in
Russia and the Caspian Sea region as well as in North Africa/ the southern North Sea, producing approximately 1.0 billion
Middle East and South America. To ensure our lasting success, ­cubic meters annually. In October 2011, we began production
we continuously develop our technological expertise. Our focus at the Wingate platform, the first gas production site operated
here is on measures for increasing the yield from oil-­producing by Wintershall in the British North Sea. Similarly to 19 other plat­
deposits as well as the development of technologies for reser­ forms, this is centrally controlled by one of the most modern
voirs with difficult production conditions. By utilizing the syner­ ­radio control systems in the world.
gies resulting from the research expertise available within the Our oil activities in Norway and the United Kingdom also
BASF Group, we are increasingly able to enhance our position play an important role in our portfolio. For example, in the
as a partner with exceptional technological expertise. Catcher field off the east coast of Scotland, three exploration
The long-term increase in demand for natural gas in West­ and appraisal wells were successfully drilled in 2011 (Winters­
ern Europe, coupled with the decline in regional production, hall’s stake: 20%). We were also able to expand our resources
means that ever-increasing volumes of natural gas will have to in Norway in 2011 thanks to exploration projects. The Norwe­
be imported. This creates opportunities for our business sec­ gian Parliament approved our plan for operating the Knarr field
tors, which we exploit within the scope of our Gas for Europe in the northern North Sea. This field, in which Winters­hall has a
strategy. We explore for and produce natural gas in and around 20% stake, has commercially recoverable ­reserves of more than
Europe and help to establish the necessary infrastructure to 70 million barrels of oil equivalent. Furthermore, we were granted
­deliver the gas to our customers. With our pipeline network and two exploration licenses with operatorship for the first time in
strategically positioned natural gas storage facilities, we make the Barents Sea.
an important ­contribution to securing gas supplies in Germany Russia and the Caspian Sea region: The Yuzhno Russ­
and Europe. koye natural gas field in Western Siberia has been operating at
We operate in ecologically sensitive areas. Therefore, ­before plateau production since 2009. We participate with a 35%
our activities start, we carefully examine potential consequences interest in the economic rewards of this field. In addition, we
for the environment, such as for water and biodiversity. Together have a 50% share in the development of a section of the ­Achimov
with experts, our contractors and relevant stakeholders, we formation (Block IA, Achimgaz) in the Urengoy field, which is
­develop and implement measures to minimize the impact on also located in Western Siberia. After the successful comple­
people and the environment. In so doing, we act in accordance tion of the pilot phase in November 2011, we began develop­
with international agreements, local regulations and our own ment of the entire field. Twenty new production wells are planned
high standards. as part of a first subproject.

Oil & Gas segment Exploration & Production

−−Two business sectors: Exploration & Production and −−Norway and Russia play a central role in enhancing
Natural Gas Trading, bundled in the Wintershall Group our portfolio
−−Success in exploration and production is driven by −−First Wintershall-operated natural gas production in
investments as well as expansion of technological the United Kingdom
expertise −−Expansion of upstream activities with Gazprom in
−−We make an important contribution to Europe’s supply Achimov projects in Russia and in the North Sea
security with our “Gas for Europe” strategy
74 Management’s Analysis The business year at BASF
Oil & Gas
BASF Report 2011

We have signed a Memorandum of Understanding for an asset

Nord Stream pipeline
swap with Gazprom: According to this agreement, Wintershall Important role in supplying the European Union
will hold a 25% stake in the development of Blocks 4 and 5 of with energy
the Achimov Formation in the Urengoy field – with the option to
raise this stake to 50% in a second step. In return, Gazprom will Value for BASF Value for the environment
receive a stake in fields in the British and Dutch North Sea. Up to
In the Caspian Sea region, we are pursuing exploration
pro­jects in Turkmenistan.
North Africa/Middle East: In Libya, we operate eight oil
fields in the southeastern Sirte Basin in the onshore conces­
sions 96 and 97. Following political tension in Libya, we took the
9 billion m 30%
of natural gas per year
3
reduction in carbon
secured for the next 25 ­emissions per year
precaution of stopping production in both concessions in Feb­
years
ruary 2011. These facilities have been in operation again since
mid-October. Production was stopped from March to Septem­
ber 2011 in the Libyan Al Jurf offshore oil field, in which Winters­ Value for BASF Natural gas imports in Europe will
hall has a minority stake. increase sharply in the future as a result of growing
In Mauritania, we conduct exploration activities in two demand and decreasing domestic production. We help to
­onshore concessions. We drilled the first exploration well in strengthen and secure energy supplies in the long term
Block 4N in Qatar; we also hold a stake in Block 3. In Abu Dhabi, with our direct and reliable link to Russia’s gas reserves,
we signed a Memorandum of Understanding with the Abu Dhabi the largest in the world. The WINGAS Group will procure
National Oil Company for the development of a natural gas a total of over 200 billion cubic meters of natural gas
­deposit. through the Nord Stream pipeline over the next 25 years.
South America: We hold shares in 15 fields in Argentina.
In the Neuquén Basin, we began three technology projects to Value for the environment Our detailed Eco-Effici-
­explore the potential for shale gas in the Aguada Pichana, ency Analysis has shown that the Nord Stream pipeline
Bandurria and San Roque blocks. We hold stakes in two blocks is clearly superior to two alternate onshore routes: The
in Chile and have drilled the first exploration well. shorter distance, higher average transportation pressure
For more on current reserves, see pages 77 and 204 and lower number of compressor stations allow an annual
saving of up to 1.4 billion cubic meters of fuel gas and
Natural Gas Trading 4 million metric tons of carbon emissions.
The WINGAS Group, operated jointly with Gazprom, com-
bines our main activities in natural gas trading, transport and
storage. We meet our gas needs primarily through long-term supply con­
Natural gas trading: We market natural gas from various tracts. In addition, we are increasingly active in international spot
sources to Germany and other European countries. Our main trading markets due to their growing importance.
customers are municipal utilities, larger industrial firms and Gas transport: WINGAS transferred ownership of its gas
­regional gas suppliers. pipeline network, including the personnel required for its main­
tenance, operation and development, to WINGAS TRANSPORT

Natural Gas Trading Important developments in 2011

−−The WINGAS Group combines our main activities in −−The first Nord Stream pipeline and the OPAL pipeline
natural gas trading, transport and storage (Baltic Sea Pipeline Link) begin operations as planned
−−Expansion of natural gas infrastructure in Germany and −−Construction begun on the North European Gas
Europe together with Gazprom Pipeline (NEL)
−−Stake acquired in the offshore section of the South −−Construction on the Jemgum natural gas storage facility
Stream pipeline, from Russia through the Black Sea to progressing; second expansion phase completed at
southeastern Europe Haidach natural gas storage facility
BASF Report 2011 The business year at BASF
Oil & Gas
Management’s Analysis
75

Capital expenditures

Location Project Total capacity Completion

Haidach, Austria Startup and expansion of the natural gas storage facility >2 billion m3 20072/2011
Haiming, Germany Startup and expansion of the compressor station 32 MW 20072/2011

Construction of the onshore pipeline links OPAL and NEL

to the Nord Stream natural gas pipeline 55 billion m3 2011/2012

Jemgum, Germany Startup and expansion of the natural gas storage facility approximately 1 billion m3 20132/2016
North Sea, Norway Development of Knarr field 20 million BOE1 20142
Development of Luno field 30 million BOE1 20152

Achimgaz, development of the Achimov formation in the

Siberia, Russia
Urengoy gas and condensate field 70 million BOE1 20082/2018

1
BOE = Barrel oil equivalent
2
Year of startup

in 2010, thus fulfilling many of the requirements of the amend­ of the NEL. Various solutions are currently being explored. Con­
ment to the German Energy Act (EnWG). In 2012, we will under­ struction on the other sections of the pipeline is proceeding as
take additional legal and organizational unbundling of network planned. The 440 kilometer-long NEL should partly begin oper­
and storage operations as required by the EnWG amendment. ations, together with the second line of the Nord Stream pipe­
The construction of the Nord Stream pipeline from Russia line, at the end of 2012.
through the Baltic Sea to the German coast and its associated Wintershall signed shareholders’ agreements in September
onshore projects for onward transport to the European trans­ 2011 to join South Stream Transport AG, which will develop, con­
portation network will significantly strengthen Europe’s natural struct and operate the offshore portion of the South Stream
gas infrastructure. Nord Stream AG, builder and operator of the pipeline through the Black Sea. Apart from Gazprom (50%) and
offshore pipeline, is consolidated in the BASF Group Consoli­ Wintershall (15%), other shareholders in South Stream Trans­
dated Financial Statements according to the equity method. The port AG are the Italian oil and energy company Eni (20%) and the
shareholders in Nord Stream are: Gazprom (51%), Wintershall French electric power company EdF (15%).
(15.5%) and E.ON Ruhrgas (15.5%), as well as N.V. Nederlandse Gas storage: Important components of our storage port­
Gasunie and GDF Suez (9% each). folio include the largest natural gas storage facility in Western
Construction on the Baltic Sea Pipeline Link (OPAL), which Europe, in Rehden, Germany, and the natural gas storage facil­
starts near Greifswald, Germany, was completed in the middle ity in Haidach, Austria. In accordance with our growth strategy,
of 2011. The 470 kilometer natural gas transit pipeline has a we continue to expand our storage capacity. Construction is
transport capacity of more than 35 billion cubic ­meters and progressing on the Jemgum natural gas storage facility in North­
started operations together with the first Nord Stream pipeline ern Germany, which is expected to begin operations in 2013.
in fall 2011. Furthermore, we have completed the second expansion phase
Construction on the second pipeline link, the North Euro­ of the storage facility in Haidach, Austria.
pean Gas Pipeline (NEL), was begun in March 2011. Due to
safety concerns, however, the Higher Administrative Court in
the city of Lüneburg has temporarily halted construction on parts

Sales – Oil & Gas Sales by business sector

(million €)

2011 12,051
2010 10,791
1 Exploration & Production 26% €12,051
2 Natural Gas Trading 74% million
2009 11,356
2
76 Management’s Analysis The business year at BASF
Oil & Gas
BASF Report 2011

Segment data Oil & Gas1 (million €)

2011 2010 Change in %

Sales to third parties 12,051 10,791 11.7
Thereof Exploration & Production 3,182 3,819 (16.7)
Natural Gas Trading 8,869 6,972 27.2
Intersegmental transfers 1,015 852 19.1
Sales including intersegmental transfers 13,066 11,643 12.2
Income from operations before depreciation and amortization (EBITDA) 2,616 2,977 (12.1)
Thereof Exploration & Production 2,042 2,428 (15.9)
Natural Gas Trading 574 549 4.6
EBITDA margin  % 21.7 27.6 –
Income from operations (EBIT) before special items 2,111 2,430 (13.1)
Thereof Exploration & Production 1,686 2,014 (16.3)
Natural Gas Trading 425 416 2.2
Income from operations (EBIT) 2,111 2,334 (9.6)
Thereof Exploration & Production 1,686 1,918 (12.1)
Natural Gas Trading 425 416 2.2
Income from operations (EBIT) after cost of capital2 667 588 13.4
Assets 10,232 9,150 11.8
Thereof Exploration & Production 5,315 5,158 3.0
Natural Gas Trading 4,917 3,992 23.2
Exploration expenses 184 190 (3.2)
Additions to property, plant and equipment and intangible assets 1,274 996 27.9

Income taxes on oil-producing operations non-compensable with German corporate

income tax 439 983 (55.3)

Net income 3
1,064 923 15.3

1
Supplementary information on oil and gas producing activities from page 204 onward
2
In the Oil & Gas segment, non-compensable foreign income taxes for oil production are deducted.
3
Information on the net income of the Oil & Gas segment can be found in the reconciliation reporting Oil & Gas in the Notes to the Consolidated Financial Statements
on page 163.

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Factors influencing sales – Oil & Gas
wird wir&dGas
Income from operations – Oil
(million €)

Volumes (11%) 2011 2,111

Prices/currencies 23% 2010 2,334
Portfolio 0% 2009 2,289
Sales 12%
BASF Report 2011 The business year at BASF
Oil & Gas
Management’s Analysis
77

Sales to third parties in the Oil & Gas segment in 2011 Mainly owing to the production shutdown in Libya for several
­increased by €1,260 million to €12,051 million as a result months, our oil and gas production in 2011 declined by 15% to
of higher prices (volumes –11%, prices/currencies 23%). 113 million barrels of oil equivalent (BOE). This figure includes
However, income from operations declined by €223 mil- Gazprom’s interests in a German Wintershall subsidiary that
lion to €2,111 million, due to the lower contribution from holds the Libyan onshore concessions 96 and 97.
activities in Libya. Net income improved by €141 million Due to the lower contribution from activities in Libya, ­income
to €1,064 million. from operations declined by €232 million to €1,686 million. This
We expect the oil price in 2012 to remain at the pre- included income taxes on oil production in Libya that are non-
vious year’s level. Our planning is based on an average compensable with German corporate income tax and which fell
oil price of $110 per barrel and a U.S. dollar exchange rate by €544 million to €439 million.
of $1.30 per euro. Owing to the resumption of oil produc- In 2011, we completed the drilling of 21 exploration and
tion in Libya at the end of 2011, we expect to post a rise ­appraisal wells in the search for new oil and natural gas depos­
in sales and earnings. its, of which 10 were successful. Compared with 2010, explo­
ration expenses decreased by €6 million to €184 million.
Exploration & Production Proven crude oil and natural gas reserves increased by 3%
Business development in the Exploration & Production business compared with the end of 2010 to 1,156 million BOE. This
sector was considerably impaired by the events in Libya. In ­increase is primarily a result of the first-time inclusion of volumes
­response to unrest in the country, onshore production was sus­ from the Achimgaz project, for which we began development
pended in February and offshore production in March. Offshore of the entire field after successfully completing the pilot phase.
production did not resume until September, and onshore pro­ The reserve-to-production ratio is 11 years (2010: 10 years). This
duction was partially restarted in October and gradually is based on Wintershall’s share of production in 2011 and refers
­increased. At the end of 2011, the daily onshore production rate to the reserves at year-end. We replenished 131% of the vol­
was at about 50% of the level of volumes produced before the umes produced in 2011.
unrest began. Sales in this business sector therefore declined In 2012, we expect our production volumes to rise as a
by €637 million to €3,182 million. ­result of the increasingly stable situation in Libya. We therefore
The significant increase in the oil price is partially attribut­ expect a significant improvement in sales and earnings.
able to decreased production in Libya. Compared with the pre­
vious year, the average price of Brent crude rose by $31 per bar­
rel to around $110 per barrel. Due to the weakening of the U.S.
dollar compared with the euro, the price of crude oil in euro
­increased by €20 per barrel to €80 per barrel.

Oil & Gas segment

−−Sales grow in 2011 due to higher prices; earnings decline −−The oil price in 2012 is expected to remain at the level of
owing to lower contribution from Libyan activities the previous year; our planning is based on the following
−−Net income rises significantly despite suspension of annual average assumptions:
production in Libya Oil price of $110 per barrel, euro/dollar exchange rate of
$1.30 per euro
−−Outlook 2012: increase in sales and earnings
78 Management’s Analysis The business year at BASF
Oil & Gas
BASF Report 2011

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Natural Gas Trading Oil & Gas – Sales by region
2
(Location of customer)
Sales to third parties increased by €1,897 million to €8,869 mil­
lion, due largely to higher prices. At 417 billion kilowatt hours,
1 Europe 96%
sales volumes overall were slightly above the level of the previ­
€12,051
ous year; in the international business, we increased our sales South America, Africa,
million
2 Middle East 4%
volumes by 11% to 184 billion kilowatt hours. WINGAS sold 11%
of its volumes to BASF Group companies.
Compared with 2010, income from operations increased 1

by €9 million to €425 million. Sales prices for oil-indexed natu­

ral gas generally follow those of oil with a time lag of several
months. Increasing oil prices over the course of the year there­
fore had a negative effect on earnings. On the spot markets, the
price level remained relatively low. This led to ongoing pressure
on trading margins, which we were partially able to counteract
with optimization measures in our purchasing.
We expect sales volumes in the Natural Gas Trading busi­
ness sector to increase in 2012 despite the continued ­intense
competition. As a result of the ongoing pressure on margins, we
anticipate that, while sales will be considerably higher, earnings
will nevertheless decline.

Exploration & Production Natural Gas Trading

−−Crude oil and natural gas production decline as a result of −−Sales increase considerably as a result of higher
suspension of activities in Libya for several months gas prices
−−Decline in sales and earnings moderated by positive price −−Sales volumes rise slightly compared with previous year
trend −−Earnings above previous year’s level
−−Outlook 2012: significant sales and earnings growth −−Outlook 2012: significant sales increase, earnings decline
thanks to rising production volumes as a result of ongoing pressure on margins
BASF Report 2011 The business year at BASF
Regional results
Management’s Analysis
79

Regional results

Regions (million €)

Sales Sales Income from operations

by location of company by location of customer (EBIT)

Change Change Change

2011 2010 in % 2011 2010 in % 2011 2010 in %
Europe 41,036 35,156 16.7 39,124 33,201 17.8 5,668 5,206 8.9
Thereof Germany 28,816 25,426 13.3 14,705 12,225 20.3 3,249 3,769 (13.8)
North America 14,727 13,246 11.2 13,995 12,886 8.6 1,314 1,107 18.7
Asia Pacific 13,316 11,642 14.4 14,410 12,510 15.2 1,133 1,271 (10.9)
South America, Africa, Middle East 4,418 3,829 15.4 5,968 5,276 13.1 471 177 166.1
73,497 63,873 15.1 73,497 63,873 15.1 8,586 7,761 10.6

Europe We strengthen our position in Europe through investments. At

In 2011, companies headquartered in Europe recorded a signif­ the Ludwigshafen site, for example, we will start up the world’s
icant increase in sales compared with the previous year: Sales largest production plant for the aroma chemical L-menthol on
rose by 17% to reach €41,036 million. Sales in the chemicals schedule in the middle of 2012. L-menthol is an ingredient in
business exceeded the very good level of the previous year and ­numerous oral care, flavoring and pharmaceutical industry prod­
grew by 21% to €23,446 million. ucts. In addition, construction on the Baltic Sea Pipeline Link,
We increased prices and volumes in almost all divisions of which starts near Greifswald, Germany, was completed in the
the Chemicals, Plastics and Functional Solutions segments; middle of 2011. The 470 kilometer natural gas transit pipeline
sales in these three segments grew significantly. We also posted has a transport capacity of more than 35 billion cubic meters
a considerable sales increase in the Performance Products seg­ and started operations together with the first Nord Stream pipe­
ment, resulting from both the inclusion of the acquired Cognis line in fall 2011.
businesses as well as higher prices. The Agricultural Solutions Furthermore, as part of our Strategy 2020 in Europe, we
segment developed positively, as well. Sales in this segment started our new industry-based initiatives Agro/Food/Feed/Fuel,
surpassed the level of 2010, mainly due to higher sales volumes. Clean Tech Energy and Furniture/Wood in 2011. This strategy
Despite the suspension of our oil production in Libya1 from late involves looking at value-adding chains, such as wind energy,
February to October 2011, sales in the Oil & Gas segment rose from a cross-divisional standpoint and position BASF as a sec­
significantly thanks to higher prices. tor-specific solution provider. We continued to develop existing
Income from operations amounted to €5,668 million, an ­industry-based initiatives, such as construction and packaging,
­improvement of 9% compared with the previous year. This was and intensified customer and country-based approaches. These
mainly due to good earnings in the chemicals business – which, cross-segment initiatives will help us to reach our growth tar­
at €3,359 million, exceeded the previous year’s level by €147 mil­ gets in the Europe region in 2020.
lion – as well as to gains on the disposal of our styrenics activ­
ities in the amount of around €382 million.
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Sales by region (location of company) Income from operations by region

5 5

1 Germany 39% 1 Germany 38% 4

4
2 Europe (excl. Germany) 17% 2 Europe (excl. Germany) 28% 1
1
3 North America 20%
€73,497 3 North America 15%
€8,586
million 3 million
4 Asia Pacific 18% 4 Asia Pacific 13%

South America, Africa, 3 South America, Africa,

5 Middle East 6% 5 Middle East 6%
2 2

1
Crude oil production in Libya is operated by branches belonging to European BASF companies; sales and earnings from these activities are therefore reported in the
region Europe.
80 Management’s Analysis The business year at BASF
Regional results
BASF Report 2011

North America In 2011, we made significant progress in implementing our

Companies headquartered in North America increased sales by ­regional strategy for North America. This strategy focuses on
11% to €14,727 million compared with the previous year. In ­local even stronger market and customer orientation. We concentrate
currency terms, sales rose by 17%. Sales exceeded the on innovation, cross-sector initiatives and attractive ­customer
previous year’s levels in nearly all segments. In the Performance and market segments. At the same time, we are ­increasing our
Products segment, this was mainly driven by the full-year operational excellence through ongoing improvements, which
inclusion of the acquired Cognis businesses. Higher prices in include harmonizing our business processes worldwide and
particular led to sales growth in the Chemicals, Plastics and improving their efficiency.
Functional Solutions segments. By contrast, sales declined in
the Agricultural Solutions segment, primarily as a result of Asia Pacific
negative currency effects. In Asia Pacific, we were able to exceed the sales level of the
We posted record income from operations, which rose by ­record year 2010. Thanks to the full-year inclusion of the ­acquired
€207 million to €1,314 million thanks mainly to higher prices. In­ Cognis businesses, the startup of new plants, and higher price
creased raw material costs could largely be passed on through levels, sales of companies based in this region rose by 14% to
our sales prices. The Chemicals, Plastics and Functional Solu­ €13,316 million. In local currency terms, sales rose by 16%. All
tions segments especially contributed to this increase in earn­ divisions contributed to this positive development. Negative
ings. In the Performance Products segment, earnings declined ­currency effects were mainly offset by very strong demand in
due to high special items from restructuring our paper business the first half of the year.
as well as to expenses related to the Cognis integration. Earn­ However, income from operations declined by €138 million
ings in the Agricultural Solutions segment were above the pre­ to €1,133 million due to increased raw material costs and weak­
vious year’s level. ening demand in the second half of the year. In addition, as in
In 2011, we started up a methylamines plant at our Verbund the previous year, plant shutdowns resulted in high charges.
site in Geismar, Louisiana. The construction of our cathode We continue to rigorously optimize our cost structures and
­materials plant in Elyria, Ohio, is proceeding on schedule and standardize our systems landscapes, for example through the
we aim to begin production in the fourth quarter of 2012. These migration of all of our IT systems onto one platform. In 2011, we
cathode materials will be used in lithium-ion batteries in hybrid moved forward with the implementation of our Strategy 2020 in
and electric cars. The new plant and our research at the site in Asia Pacific. Our main goal is to grow on average two percent­
Beachwood, Ohio, are steps in the implementation of our North age points faster than the Asia Pacific chemical market each
America strategy to enter the future market in electric mobility. year. We aim to generate 70% of our sales from local produc­
tion; in 2011, this figure already stood at around 60%.

Regional development

−−Europe: cross-segment initiatives intensified; world’s largest production plant for aroma chemical L-menthol
to begin operations in Ludwigshafen on schedule in mid-2012
−−North America: concentration on innovation, cross-sector initiatives and attractive customer and market segments;
production of methylamines begins in Geismar, Louisiana
−−Asia Pacific: second expansion of our Verbund site in Nanjing complete; construction of first Innovation Campus
Asia Pacific in Shanghai, China
−−South America, Africa, Middle East: construction begins of first production complex for acrylic acid and
superabsorbents in South America; Africa strategy exploits long-term business opportunities
BASF Report 2011 The business year at BASF
Regional results
Management’s Analysis
81

We stepped up our investing activities in the region. In China, Sales by companies in Africa and the Middle East considerably
we completed the second expansion of our Verbund site in Nan­ exceeded the previous year’s level despite the difficult political
jing: Along with the successful expansion of the steam cracker, conditions in some countries. In the Catalysts division in partic­
we started up several new plants in 2011 including a butadiene ular, sales increased significantly in Africa, thanks to strong
extraction plant and a nonionic surfactants plant. In addition, ­demand from the automotive industry.
construction is scheduled to begin on a production complex for Income from operations increased by €294 million to
superabsorbents in the middle of 2012. With our joint venture €471 million due to our strong business in South America.
partner, Sinopec, we are also planning new investment projects In November 2011, we began construction of the first pro­
of around $1 billion, including new plants for the production of duction complex in South America for acrylic acid and super­
HPPO, acrylic acid and butyl acrylate. In order to take full absorbents, which will be located in the Brazilian state of Bahia.
­advantage of our opportunities in China, we are also ­investing With an investment volume of more than €500 million, the con­
in the growing markets of the inland provinces. In April 2011, for struction of several world-scale plants for acrylic acid, butyl acry­
example, we began construction in Chongqing of a production late and superabsorbent polymers is the largest investment in
plant for MDI, a precursor for polyurethanes. BASF’s century-long history in South America. The goal of this
Together with our partner, PETRONAS, we want to expand investment is to secure the supply of important products in
our specialties business in Malaysia. South America. These include superabsorbents for diapers and
We are making targeted investments in successful busi­ hygiene products, acrylic resins for coatings, textiles and adhe­
ness areas, such as the expansion of our catalyst plants in sives and products for the construction industry. We also plan
Shanghai, China, and in Ibaraki, Japan, and the strengthening to start up the first plant for the production of 2-ethyl-hexyl
of our business with the semiconductor industry in Taiwan. In acrylate in 2015 at the chemical complex in Guaratinguetá,
order to attune our research even better to regional customer Brazil, BASF’s largest site in South America. 2-ethyl-hexyl
needs, we are also building the first Innovation Campus Asia acrylate is an important raw material for the adhesives and coat­
­Pacific in Shanghai, where around 450 researchers and devel­ ings industries.
opers will work starting at the end of 2012. With our Africa strategy, we tap new long-term business
potential. Along with our current activities in Northern and South­
South America, Africa, Middle East ern Africa, we are now focusing on Eastern and Western Africa,
In a favorable market environment, sales by companies in the as well: For example, we have expanded our business with crop
region significantly exceeded the level of the previous year, protection products and enlarged our team. We aim to further
­increasing by 15% to €4,418 million. In local currency terms, expand our local presence in 2012. Our businesses with yield-
sales were 19% higher than 2010. increasing crop protection products, construction chemicals
In South America, sales rose in all segments. In the Agri­ and ingredients for end consumer products all help to signifi­
cultural Solutions segment, demand continued to increase for cantly boost sales in Africa.
our innovative crop protection products. Our decorative paints
business also developed successfully.

Assets by region (share in %)

Property, plant and equipment Inventories Accounts receivable, trade

2011 2010 2011 2010 2011 2010
Europe 60 59 53 53 50 54
North America 19 21 27 26 17 16
Asia Pacific 17 16 15 15 22 20
South America, Africa, Middle East 4 4 5 6 11 10
100 100 100 100 100 100
82 Management’s Analysis The business year at BASF
Regional results
BASF Report 2011

Emerging markets Compared with the previous year, companies headquartered in

As part of our “We create chemistry” strategy, we aim to further emerging markets increased sales by 18% to €17,286 million.
strengthen growth in emerging economies in the years ahead Nearly all segments made a strong contribution to this growth
and expand our position in future markets. We define emerging thanks to high demand and prices. Based on customer loca­
markets as the Asia Pacific region (except Japan, Australia and tion, we increased sales (excluding Oil & Gas) in emerging
New Zealand), South and Central America, Eastern Europe, the ­markets year-on-year by 17% to €21,196 million.
Middle East and Africa. We anticipate that around 60% of the Between 2011 and 2020, we plan capital expenditures of
world’s chemical production in 2020 will come from today’s €30 billion to €35 billion; more than a third of this sum will be
emerging markets, particularly China. Our strong local presence ­invested in emerging markets. Important projects already
already allows us to benefit from the significant growth in these ­underway include: the expansion of our Verbund site in Nanjing,
­regions. China; our MDI plant in Chongqing, China; and the acrylic acid
For more on our “We create chemistry” strategy, see page 16 and superabsorbents production complex in Brazil. We also aim
to enhance our research and development activities in emerg­
Emerging markets recorded substantial economic growth in ing markets, particularly in Asia. That is why we are building the
2011. Supported by global economic momentum during the first first Innovation Campus Asia Pacific in Shanghai, in addition to
half of the year, China’s economy in particular experienced our existing research facilities elsewhere in China as well as in
­noticeable growth. The economies of India and Brazil also grew, Singapore and India.
thanks to robust domestic trade. Russia benefited from com­
paratively high raw material prices over the course of the year.
By contrast, economies in the Middle East and Northern Africa
grew more slowly than expected as a result of the difficult
­political conditions.

Growth in emerging markets Sales in emerging markets (% of sales1)

−−2020: emerging markets are expected to account for

around 60% of world chemical production
2020 55% 45%
−−BASF participates in growth through strong
2011 66% 34%
local presence
2001 78% 22%
−−Sales increase in emerging markets compared
with previous year Industrialized countries
Industrieländer
2
Emerging markets
2
Schwellenländer
−−Investments of €30 billion to €35 billion between 2011 and
2020, of which more than a third in emerging markets

1
BASF Group sales excluding Oil & Gas
2
Comprises EU15, Norway, Switzerland, North America, Japan, Australia,
New Zealand
BASF Report 2011 Employees and society
Employees
Management’s Analysis
83

Employees

The best team needs committed, performance-driven Personnel expenses and social benefits
employees. We want to recruit and retain the best talent, In 2011, the BASF Group spent €8,576 million on wages and
and in doing so, we value diversity in our teams. We ­invest salaries, social security contributions and expenses for pensions
in our attractiveness as an employer, offer our employ- and assistance (2010: €8,228 million). Personnel expenses rose
ees career development opportunities and support them by 4.2%, particularly as a result of the Cognis acquisition. This
in achieving work-life balance. ­increase was partially offset by lower provisions for the long-
term incentive (LTI) program, our stock price-based compensa­
Employees worldwide tion program. Compensation for our employees comprises
At the end of 2011, BASF had 111,141 employees, 2,001 more ­remuneration with fixed and variable components as well as
than at the end of 2010. Of these, 2,565 were apprentices and ­social benefits that often exceed the legal requirements. These
trainees (2010: 2,442). The acquisitions of Germany’s inge benefits include a company pension plan, supplementary health
watertechnologies AG and China’s Ji’Ning Hock Mining & Engi­ insurance and share programs.
neering Equipment Company Limited added to our employee
headcount. Reductions in headcount resulted from, for exam­ BASF Group personnel expenses (million €)
ple, the transfer of the styrenics business to a joint venture. As
a ­result of the Cognis integration, 680 positions are being elim­ Change
inated in the BASF Group due to restructuring. Around 28,500 2011 2010 in %
Wages and salaries 6,856 6,731 1.9
employees from ­external companies were contracted to provide
services at BASF sites. Worldwide, the percentage of employ­ Social security contributions and
expenses for ­pensions and assistance 1,720 1,497 14.9
ees who left the company voluntarily during their first three years
Thereof for pension benefits 465 408 14.0
of employment was on average 1.1%. The rate of employee turn­
Personnel expenses 8,576 8,228 4.2
over was 0.4% in ­Europe, 1.5% in North America, 3.4% in Asia
Pacific and 2.1% in South America, Africa, Middle East.
Competition for talent
Number of employees by region (as of December 31) BASF faces competition worldwide for the best qualified
­ mployees and managers. The use of social media is one way
e
Thereof we are intensifying our recruitment activities. Our new global
2011 % women % ­employer branding motifs illustrate the wide variety of careers
Europe 70,664 63.6 22.9
available within BASF.
Thereof Germany 52,049 46.8 23.0
We have improved our programs for career beginners in all
Thereof BASF SE 33,761 30.4 20.5
regions: In Italy and Spain, we started a program for new­comers
North America 16,167 14.5 22.2
to the company and in Germany, we combined the existing
Asia Pacific 17,342 15.6 26.6
trainee programs. In South America, BASF started an initiative
South America, Africa, Middle East 6,968 6.3 24.4
in 2011 to support young engineers. BASF has been certified
111,141 100 23.5
as one of “China’s Top Employers® 2011” by the Corporate
­Research Foundation in recognition of our ­accomplishments in
human resources, leadership and strategy. The consulting firm
Hay Group included BASF in its top 20 “Best Companies for
Leadership” for the first time.

Overview 2011 New hires 2011

−−111,141 employees worldwide Thereof

−−€8,576 million in personnel expenses Total women %
Europe 4,612 33.7
−−9,529 new employees hired
North America 1,456 26.4
Asia Pacific 2,615 32.9
South America, Africa, Middle East 846 34.6
9,529 32.4
84 Management’s Analysis Employees and society
Employees
BASF Report 2011

BASF Group employee age structure (as of December 31) Competitive advantages through diversity
With the Diversity + Inclusion (D+I) initiative, our goal is to fur­
Thereof ther strengthen the culture of cooperation and appreciation
Total women % within the company. This helps us to gain the best-possible
Employees 111,141 23.5
­position in the different markets where we are active and to make
thereof up to and including 25 years 8,087 32.4
ourselves even more competitive around the world. Since this
thereof between 26 and 39 years 36,809 30.5
initiative began in 2008, around 7,400 employees have taken
thereof between 40 and 54 years 52,742 19.3
part in more than 90 implementation projects, 30 of which took
thereof 55 years and older 13,503 15.4
place in 2011. So far, around 3,200 employees have attended
Diversity + Inclusion training sessions.
The challenge of demographic change “Inclusion of diversity” is part of the global competence pro­
We have a number of measures to address the effects of file used for the assessment and development of employees
­demographic change. Our focus is on Europe and the United and managers. In 2011, we developed two special management
States and we place importance on sharing experience inter­ training seminars on this topic. As an employer, we provide equal
nationally. We have analyzed the age structure of our workforce opportunities for all employees and are committed to the equal
as well as demographic developments in our host communities treatment of both men and women. At the end of 2011, the per­
to determine site-specific risks. centage of executive positions in the BASF Group held by
In Europe, we conducted workshops on the challenges of women was 16.2% worldwide (2010: 15.5%). Together with all
demographic change together with Econsense and other part­ of the other 29 DAX-listed companies, BASF signed a voluntary
ners from the areas of politics, industry and science. In North commitment in 2011. In Germany, we aim to raise the percent­
America, a new retirement planning model was introduced in age of women in executive positions from 9.8% (baseline 2010)
order to ensure that the benefits of employees’ knowledge and to 15% by the end of 2020. At the end of 2011, the percentage
experience are not lost. Within BASF SE, we have offered health of executive positions held by women in Germany was 10.9%.
check-ups on a voluntary basis for all employees since 2011. The percentage of non-Germans in senior executive posi­
We support our managers with new training seminars on the tions worldwide was 33.0% in 2011 (2010: 33.4%), while 79.7%
topic of “leadership in times of demographic change.” We used of senior executives had international experience (2010: 77.7%).
the ­experience gained from the Generations@Work program in The percentage of non-German candidates for senior executive
production units to adapt it for non-production units. BASF SE positions was 38% (2010: 36%). For more, see basf.com/diversity
and all German Group companies participating in collective
bargaining agreements have contributed €300 annually per non- Vocational training
­exempt employee into a company “demography fund” since BASF is currently training 2,565 young people in more than 60
2010. The ­demography fund is being used in nearly all occupations in 15 countries. In 2011, 1,168 young people started
Group companies to finance long-term savings accounts for apprenticeships and traineeships at German Group companies
non-­exempt employees, allowing them flexible options for the and in the BASF Training Verbund. Since 2004, BASF and its
transition into retirement. approximately 500 partner companies in the BASF Training
For more, see basf.com/demographic_change Verbund have been creating additional apprenticeship positions
in Germany; together, we are currently training 3,395 young
people. After passing their final examination, 99% of the appren­

BASF Group employee structure 2011 (as of December 31) Employee diversity

Thereof −−More than 90 implementation projects with around 7,400

Total women % employees since 2008
Employees 111,141 23.5
−−Since 2008, around 3,200 employees have attended
thereof professionals1 30,529 27.6
Diversity + Inclusion training
thereof managers2 6,653 16.2
−−Percentage of executive positions held by
women worldwide: 16.2%
−−Percentage of non-German senior executives: 33.0%

1
Specialists and experts without disciplinary managerial responsibilities
2
Employees with disciplinary managerial responsibilities
BASF Report 2011 Employees and society
Employees
Management’s Analysis
85

tices and trainees at BASF SE received a job offer in 2011. In The goal of our new global project “Employee Development
the BASF Training Verbund, this figure was 78%. Worldwide, we BASF Group” is to establish employee development as a top
invested around €77 million in vocational training in 2011 as well priority within the company. Professional development should
as approximately €24 million in the Training Verbund as part of be a shared responsibility between employees and managers,
our social commitment. who engage in special in-depth development dialogs. Around
For more on vocational training, see basf.com/apprenticeship 20,000 employees and managers received information or train­
ing by the end of 2011.
Further training and personnel development
The continuous development of our employees’ skills is an Work-life balance
­investment in BASF’s future. In annual performance reviews, we Around the world, we are expanding and enhancing our wide
determine every employee’s need for professional development range of programs to improve work-life balance. To compete for
and further training. In addition to seminars and workshops, we the best employees, we are responding to the differing needs
also offer a wide range of opportunities worldwide for indepen­ and life stages of our employees. We offer options such as flexi­
dent learning via electronic media. ble working-time models and childcare, as well as support for
In 2011, we invested around €170 million (2010: €155 mil­ employees who are caring for relatives.
lion) in vocational training and career development. More than Our regional initiatives meet the individual needs of our
92,000 employees worldwide participated in training programs, ­employees at a local level. In Hong Kong and Malaysia, we have
spending on average 3.4 days at professional development started a pilot project for making working times and locations
seminars (2010: 4.1 days). Our measures for further training are more flexible. In Columbia and Italy, we have initiated projects
based on the specific learning needs of our employees. to promote work-life balance. At our sites in Ludwigshafen and
Employee development in North America focused on mar­ Münster, Germany, we are building centers for improved work-
ket orientation, innovation and creating value for our customers. life management. These centers will offer childcare, social coun­
The BASF SE Learning Center was used around 58,000 times seling, counseling and services in terms of eldercare, and health
in 2011, and a total of more than 107,000 seminar days took and fitness programs. At the end of 2011, 527 BASF SE employ­
place. Our offerings are complemented by international ees were on parental leave, of whom 10.4% were fathers. Dur­
seminars that allow employees to network with each other on a ing 2011, 545 employees returned to work following parental
global level. The internal ­social media network connect.BASF, leave. The percentage of employees working part-time for
which was given the International German PR Award in 2011, BASF SE is 10.8%, of whom 70.2% are women.
also provides a forum for exchange between employees all over BASF Sozialberatung (BASF social counseling) supports
the world. In 2011, we ­introduced a mandatory training program employees, particularly at the Ludwigshafen site, who find them­
for all new managers at BASF SE. selves in difficult personal situations and helps them to remain
In Asia, we conducted a pilot project to establish an expert able to work. In 2011, we launched social counseling hotlines
career track for sales employees in 2011. Our career develop­ for employees in Asia and South Africa.
ment programs in North America included ­expanded talent For more, see basf.com/worklife_balance
­reviews and strengthened efforts in development and succes­
sion planning.

Vocational training and career development Work-life balance

−−Worldwide 2,565 apprentices and trainees −−Regional initiatives to meet the needs of our
in over 60 occupations employees at a local level
−−Around €170 million invested in vocational and −−Flexible working models
further training −−Expansion of services related to work-life management
−−More than 92,000 employees participate in training −−Services for employees who are caring for relatives
programs worldwide
−−Knowledge transfer through internal social media
network connect.BASF
86 Management’s Analysis Employees and society
Employees
BASF Report 2011

Employee participation in the company’s success Dialog with employee representatives

With variable compensation systems, we allow employees to We involve employee representatives in decision-making
share in the company’s success and be rewarded for their indi­ processes and procedures in our Group companies. If restruc­
vidual performance. The same basic principles apply to all turing leads to staff downsizing, as it did in the course of the
­employees. The variable component is determined by the eco­ Cognis integration, we work with employee representatives to
nomic success of the BASF Group – measured by the return on develop socially responsible implementation measures. This is
assets – and the employee’s individual performance. done in accordance with the respective legal regulations and
The bonus payment for 2011 will once again exceed the agreements reached.
high level of the previous year. In numerous Group companies, For cross-border matters, the BASF Europa Betriebsrat
employees are able to acquire shares in BASF SE. The “plus” (European Works Council) has been responsible for employees
share program promotes the long-term participation of our in Europe since 2008. Network meetings at which company and
­employees in the company through incentive shares, allowing employee representatives meet regularly for discussions at a
them to invest part of their compensation in BASF shares. In ­regional level take place in South America and Asia. A network
2011, 19,654 employees around the world purchased 677,480 meeting was held in Brazil in 2011.
shares under the “plus” program. For more, see basf.com/employeerepresentation
Since 1999, BASF has offered its senior executives the
­opportunity to participate in a stock price-based compensation Responsibility for employees – global standards
program. This long-term incentive (LTI) program ties a propor­ Compliance with national law and the core labor standards of the
tion of their compensation to the long-term performance of International Labor Organization (ILO) is the foundation of our
BASF shares. In 2011, 94% of the approximately 1,100 senior ­social responsibility. Moreover, we aim to harmonize our working
executives eligible participated in the LTI program worldwide, conditions worldwide with our voluntary commitments and the
investing up to 30% of their variable compensation. relevant ILO conventions and OECD Guidelines for Multinational
For more, see the Notes from page 198 onward Enterprises, as well as with local requirements such as industry
standards. We evaluate our adherence to our voluntary commit­
Feedback from our employees ments using a monitoring system implemented Group-wide. It
We have established the global employee survey, including the contains three central instruments:
follow-up process, throughout the entire BASF Group. The
­results of the global employee survey in 2008, in which a need −−external compliance hotlines,
was identified for improvement in human capital development, −−the annual survey in our Group companies to inspect the
have been incorporated into the concept of the ­“Employee prevailing working conditions, and
­Development BASF Group” Senior Project. The next global −−close dialog with our stakeholders, such as employee repre­
­employee survey will take place in 2012. sentatives and international organizations.
One way in which we further strengthened our culture of
­dialog was by introducing a “feedback week” in South America In 2011, our external compliance hotlines received 53 calls (five
in 2011. Our goal is to foster dialog based on honesty, respect inquiries and 48 complaints) ­relating to labor and social stan­
and mutual trust. dards, of which 13 related to verifiable grievances. The results
of the annual survey covered 100% of our employees in 2011.
If the survey evaluation indicates that our voluntary commitments
are being insufficiently implemented, we investigate this infor­

Participation in the company’s success Feedback from our employees

−−“plus” share program encourages employees to make −−Global employee survey established for
long-term investments through incentive shares: in 2011, the entire BASF Group
19,654 employees purchased 677,480 shares −−Next global employee survey to take place in 2012
−−Compensation program ties a proportion of senior
executives’ compensation to the long-term performance
of BASF shares: in 2011, 94% of eligible senior executives
worldwide participated in the LTI program
BASF Report 2011 Employees and society
Employees
Management’s Analysis
87

mation and introduce ­remedial measures. A complaint filed with stage. In 2011, the 34 members of this team invested 10% of
the OECD in Brazil in 2010 was withdrawn in 2011. Following their working time in the implementation of our sustainability
­internal investigations, no infringement of the right to freedom strategy.
of assembly and collective bargaining could be identified. In In 2011, we again met with our German employee repre­
­order to improve our worldwide adherence to international ­labor sentatives in the “Wittenberg Dialogs” to discuss the Code of
and social standards, we carried out a regional risk analysis for Responsible Conduct for Business, which focuses on strength­
our businesses in 2011. ening the social market economy and encouraging responsible
The compensation of our employees worldwide is based action. We are committed to both success-oriented and value-
on objective criteria. An analysis of all management-represented oriented leadership in accordance with the social market
employees at our site in Ludwigshafen has shown that there is economy.
no systematic difference in compensation of women and men For more on compliance, see page 19 and page 123
with comparable jobs and qualifications. The difference in For more on labor and social standards, see page 19
­income was found to be less than 1%. We have a “virtual sus­
tainability team” in South America in order to raise awareness
of sustainability issues among young managers at an early

Survey of ILO core labor standards / human rights 2011

Process implemented Effectiveness of the process

Prevention of child labor 100% Verification of age of employee when hired 100% Employees are over 15 years of age when hired
Prevention of forced labor 100% Employment contract based on 100% Employees have a right to unilateral termination
employee’s voluntary agreement of the employment contract
Prevention of discrimination 100% Personnel policies based on objective In 2011, we received 40 calls. Misconduct was
criteria identified in 10 cases and countermeasures were
taken
Employees’ right to freedom of association 100%1 No company measures to fundamentally 92% Employees are working at a company in which
restrict freedom of association employee representation exists
Employees’ right to collective bargaining 100%1 No company measures to fundamentally 88% Employees are working at a company in which
restrict freedom of collective bargaining working conditions are based on a collective
contract and employee representation exists
Human rights 100% Reports investigated In 2011, we received 48 calls (40 of which
related to discrimination). Misconduct was
identified in 13 cases and countermeasures
were taken

Fewer than 1% of our employees are working in countries that have national legal restrictions with respect to freedom of association and collective bargaining.
1 

Labor and social standards

−−National law and International Labor Organization’s core labor standards as minimum standard
−−Evaluation of adherence to voluntary commitments through a global monitoring system
−−We strive to ensure that our working conditions comply with ILO standards, OECD Guidelines for Multinational Enterprises
and local requirements such as industry standards
88 Management’s Analysis Employees and society
Occupational safety and health protection
BASF Report 2011

Occupational safety and health protection

We never compromise on safety. Our management sys- Unfortunately, there were three fatal accidents in 2011. At the
tems for occupational safety and health protection are Ludwigshafen site in January, an apprentice in our Training
based on extensive preventive measures and the partici­ Verbund had a fatal accident on the way to work. An employee
pation of all employees working at our sites. working on a BASF contract in Egypt died in a traffic accident
in June. An employee of a jointly-controlled entity at our Ludwigs­
Global goals hafen site succumbed to the effects of electric shock received
We have set ourselves demanding goals in order to continuously while conducting repair work on a crane in November.
increase our performance in terms of occupational safety and For more, see page 90 onward and basf.com/occupational_safety
health protection. For example, by 2020, we want to reduce our
lost-time injury rate per million working hours by 80% compared Health protection focus areas
with the baseline 2002. In order to portray BASF’s comprehen­ Our global health management serves to promote and protect
sive health management even more accurately, we ­developed the health and productivity of our employees. Worldwide stan­
a new indicator in 2010: the Health Performance ­Index (HPI). dards for occupational medicine and health protection within
This comprises five components, each of which contributes a BASF are specified in a Group Directive, which is implemented
maximum of 0.2 to the total score. The highest possible score by a global network of experts. We regularly conduct occupa­
for the HPI is 1.0. Our goal is to reach a value of more than 0.9 tional medical audits to monitor our performance. We measured
every year. the HPI – our new, extended indicator for global health manage­
ment – for the first time in 2011. With an HPI of 0.86 in 2011, we
2020 Goal have not yet been able to reach the ambitious goal of exceed­
Occupational safety ing 0.9 each year.
BASF’s fourth worldwide health campaign, carried out in

–80%
Reduce work-related 2011, focused on skin protection. More than 45,000 employees
accidents¹ took advantage of the opportunity to be screened for skin can­
(baseline 2002)
cer or to receive individual consultation. We plan to launch the
global “Soundcheck” campaign in 2012 to educate employees
1
per million working hours
about dealing with noise sources both at work and at home. We
­received the Health Award from the German foundation
Occupational safety focus areas “Ruf­zeichen ­Gesundheit” for our activities promoting occupa­
We promote and monitor safety at work through risk assess­ tional health and the prevention of heart disease.
ments, safety rules, seminars and audits. As part of our global For more on occupational medical audits, see page 90 onward
safety initiative, we have improved our contractor management For more on occupational medicine, health promotion campaigns
and the HPI, see basf.com/health_protection
with measures for work organization and supervision.
In 2011, 1.9 work-related accidents per million working
hours occurred at BASF sites, representing a slight decrease
from the previous year (2010: 2.0). Compared with the baseline
2002, the lost-time injury rate declined by 42%. The number of
work-related accidents for contractors decreased slightly in 2011
to 2.4 (2010: 2.6).

Lost time injury rate per million working hours Components of the Health Performance Index
(reduction compared with baseline 2002: –42%)

Baseline
−−The HPI comprises five components: reported cases of
2002 2006 2007 2008 2009 2010 2011 occupational disease, medical emergency planning, first
2020 Goal aid, p
­ reventive medicine and health promotion
– 80 %
−−All areas contribute a maximum of 0.2 toward the total
1.7 1.8 1.8 1
score; the highest possible score is an HPI of 1.0
2.0 1.9
2.2 −−Goal: HPI greater than 0.9

3.3

1
Figure differs from Report 2009 (1.7) as a result of intra-year correction due,
for example, to changes in categorization.
BASF Report 2011 Employees and society
Social commitment
Management’s Analysis
89

Social commitment

We assume social responsibility: We are involved in In Germany, the “Education Initiative Plus” program was even
­diverse projects worldwide, especially in the communi- more firmly established in the 230 participating kindergartens

rt
ties in which our sites are located. Our main focus is on and day-care centers. Furthermore, we collaborate with the Pop

ie
lis
access to education. In this way, we promote innovation Academy Baden-Württemberg to promote music education for

a
tu
capacity and future viability. children. Nearly 7,000 students from over 300 classes are

ak
­already benefiting from this opportunity.

ird
Strategy

w
In 2011, the BASF Group spent a total of €48.7 million on sup­ BASF Group donations, sponsorship and own projects in 2011
(million €)
porting projects (2010: €49.8 million). Of this amount, we ­donated
24% (2010: 29.4%). We support initiatives that reach out to many 6 1
1 Science 3.9 (8.0%)
people and have long-lasting impact. We foster education, 2

2 Social projects 4.7 (9.6%)

science, social projects, sports and cultural events in the com­
munities around our sites. We cooperate with universities, 3 Culture 6.2 (12.8%)
€48.7 3

4 Sports 2.8 (5.8%) million

schools and non-profit organizations on a regional level. Inter­
5 Education 28.9 (59.3%) 5
nationally, we work together with the United Nations through the 4

6 Other 2.2 (4.5%)

BASF ­Sozialstiftung (“BASF Social Foundation”). Since 2005,
this has included our strategic partnership with the U.N. Human
Settlements Program, UN-HABITAT, presented to U.N. Secre­ International donation projects
tary-General Ban Ki-Moon as a part of Global Compact LEAD We continued to help victims of natural disasters in 2011 and
at the U.N. Private Sector Forum 2011. BASF joined UN-HABI­ donated more than €2 million for people affected by the earth­
TAT’s Urban Private Sector Advisory Board in 2011. quake and flooding in Japan. Employees around the world con­
BASF does not support political parties. In the United tributed by donating €780,000. These funds are being used to
States, our employees have established the BASF Corporation support projects such as trauma counseling and emergency
Employees Political Action Committee. It is an independent, preparedness at schools in Japan. To this end, the BASF
federally registered association of employees which pools Sozialstiftung and BASF Japan are working together with
donations to political candidates from BASF employees and UNESCO for the first time.
independently decides how these are used. In Kenya, BASF gave €200,000 in emergency aid to the
U.N. Refugee Agency (UNHCR) to combat malnutrition in the
Focus on education refugee camps of Dadaab. The 2011 Christmas donation cam­
In 2011, 54,813 children and young people in 33 countries vis­ paign is supporting a project to fight famine and the effects of
ited our Kids’ Labs and Teens’ Labs. We opened new hands- drought in East Africa. BASF SE made a donation of €100,000
on, interactive laboratories in 16 countries around the world in to the project as starting capital; employees donated €195,000.
2011, including in South Africa, Hungary and Vietnam. For the first time, BASF Sozialstiftung is helping the International
As a founding member of the Knowledge Factory, BASF is Labor Organization to combat unemployment among young
one of more than 90 companies that support education proj­ people in East Africa.
ects, startup companies and young entrepreneurs. Since it was For more, see basf.com/international_donations
founded in 2005, the Knowledge Factory has entered into more
than 2,300 educational partnerships with schools, reaching
around 10,000 teachers and more than 550,000 children.

Principles and criteria for support Highlights 2011

−−Support for projects that bring long-term benefits −−New hands-on, interactive laboratories opened
−−Fostering education, science, social projects, sports and in 16 countries
cultural events in the communities around BASF sites −−“Education Initiative Plus” even more firmly established in
−−Cooperation with expert partners such as kindergartens and day-care centers
the United Nations −−€2 million donated worldwide for disaster victims in Japan
−−Activities to combat famine and the effects of drought
in East Africa
90 Management’s Analysis Environment and safety
Environmental, safety and security management
BASF Report 2011

Environmental, safety and security management

We act responsibly as an integral part of society. Our top stakeholders. BASF received several awards in 2011 for our
priorities are the safety of our employees and neighbors activities in environmental protection, safety, security and health.
and the security of our plants. Our Responsible Care At the Geo Responsibility Awards in Sri Lanka, we were distin­
Management System sets out the framework for our vol- guished for our safe and environmentally friendly handling of
untary commitments. industrial waste.
For more on Responsible Care, see basf.com/responsible-care_e
Strategy and management systems  or more on occupational safety and health protection, see page 88
F
and basf.com/occupational_safety
BASF’s Responsible Care Management System comprises the
global rules, standards and procedures for environmental
protection, safety and security. Concrete specifications for Audits
implementing these measures are laid out in binding directives. Regular audits help ensure uniformly high standards within the
These describe the pertinent responsibilities, requirements and BASF Group for environmental protection, safety, security and
assessment methods. We periodically conduct audits to moni­ health protection. We carry out audits at BASF sites and at
tor our performance and progress in Responsible Care, and use companies in which BASF is a majority shareholder. In our Group
the findings to continually improve our performance. directive for Responsible Care audits, we ­define, for example, a
We set ourselves ambitious goals for environmental protec­ regular procedure to be followed if standards are not being
tion, safety and security and regularly report on our progress. ­adhered to. During our audits, we create an environmental,
Our guidelines and requirements are constantly updated. In 2011, safety and security profile which shows if our performance with
we adopted a new global Group directive on environmental pro­ regard to environment, safety and security is sufficient to
tection with a focus on air, noise, water and waste, and defined address the ­existing risk potential. If this is not the case, we stip­
several worldwide requirements for occupational safety and site ulate measures and conduct follow-up audits on their imple­
security. These set, for example, mandatory limits on noise in the mentation soon afterward.
workplace and regulate the handling of nanomaterials. Our internal audit system complies with the standards for
We assess risks in areas ranging from research and external auditing procedures ISO 19011 and OHSAS 18001.
production to logistics, and how these could affect the safety Worldwide, 179 BASF production sites are certified in accor­
and security of our employees, the environment or the surround­ dance with ISO 14001 (2010: 153); this increase results mainly
ing community. Collecting and evaluating incident data on a from the integration of the former Cognis sites.
global basis helps us to systematically learn from mistakes and In 2011, 97 environmental, safety and security audits were
accumulate knowledge gained through experience. In our data­ carried out in the BASF Group at 66 sites. We carried out 35
bases, we document accidents, near-misses and safety-related audits relating to occupational medicine and health protection
incidents at our sites as well as on transportation routes. We also at 35 sites. For more on certification, see basf.com/certified
gather data on incidents involving external contractors working
for BASF.
With our global safety initiative, we foster and encourage
awareness of safety and security in the workplace and safe prac­
tices for every individual. To further improve our environmental
protection and safety and security systems, we also take into
account the information derived from our ongoing dialog with

Directives and requirements Audits

−−New Group directive on environmental protection −−Regular audits help ensure uniformly high standards for
with a focus on air, noise, water and waste environmental protection, safety, security and health
−−New global requirements for occupational safety −−BASF’s internal audit system complies with the
and site security standards for external auditing procedures ISO 19011
and OHSAS 18001
−−97 audits on safety, security and environment, 35 audits
on occupational medicine and health protection
BASF Report 2011 Environment and safety
Environmental, safety and security management
Management’s Analysis
91

Global safety and security concepts We also trained the experts for the Japanese sites in radioac­
Our global safety and security concepts serve to protect our tivity measurement and provided them with the appropriate
employees and neighbors as well as to prevent property measuring equipment.
damage and protect information. They also aim to prevent pro­ In 2011, we continued to implement the requirements set
duction stoppages and damage to the environment. When down in 2010 for preventive measures to protect our sites around
designing a new facility, we apply a five-step system from the world from third-party interference. These measures aim to
conception to start-up that takes into account the most impor­ ensure extensive protection for employees and the company
tant aspects of environmental protection, safety, security and against, for example, criminal behavior, the loss of knowledge
health protection, and incorporates them early on. We use a risk or international terrorism. We have incorporated human rights
matrix to assess risks according to estimated probability as well aspects relevant for site security into the training of our security
as potential impact, and determine appropriate protective mea­ personnel. We made these qualification requirements globally
sures. In 2011, around 12,000 employees received training in mandatory in 2011 and began implementing and monitoring
occupational and process safety. them in all regions. The respect of human rights is now an oblig­
We closely investigate incidents at all sites which led to fires, atory element of new contracts with contractors for whom these
explosions or the release of substances. In order to further aspects apply.
improve process safety at our plants, we analyze and compare For more on emergency response,
see basf.com/emergency_response
the causes on a global level and continually optimize processes.
For more on process safety, see basf.com/process_safety
A new process safety requirement has been in effect since 2011
to increase employees’ risk awareness, for example, in situa­
tions involving changes made at production plants. Furthermore,
we also define the regular intervals at which safety concepts for
BASF production plants are reviewed. We can thus address
­potential risks with appropriate measures.
With our emergency response concepts, we are prepared
for potential incidents. This includes specific emergency
response plans for our production facilities. Depending on the
situation, we involve joint venture companies, partners and
suppliers as well as cities, communities and neighboring
companies in this process. BASF’s central emergency response
supports local emergency response units around the clock. Our
emergency systems are checked regularly, for example, in drills
with our employees and local authorities.
In 2011, we began linking our emergency dispatch centers
across Europe. This allows us to work more closely across
different sites, and to assess and deal with alarm information
within the network more quickly and reliably. After the earth­
quake in Japan, our experts in research, health and safety spent
several weeks supporting local measures at our Japanese sites.

Safety and security concepts

−−Around 12,000 employees trained in occupational and process safety

−−New requirements defined for process safety
−−We have incorporated human rights aspects relevant for site security into the training
of our security personnel and stipulated globally binding qualification requirements
92 Management’s Analysis Environment and safety
Environmental, safety and security management
BASF Report 2011

Supply chain management In 2011, we provided compliance training to our employees in

Both new and existing suppliers are selected and evaluated procurement on topics including sustainability. In order to further
not only on the basis of economic criteria, but also on standards minimize supply chain risks and offer information on the oppor­
for environmental protection, occupational safety and social tunities available through sustainable business practices, we held
responsibility. Our Code of Conduct for suppliers is based on a Supplier Day in 2011 with around 70 suppliers in China. There,
internationally recognized guidelines: It includes environmental we recruited more participants for the “1+3” project begun
protection and compliance with human rights and labor laws, as in 2006, in which suppliers pledge to pass on our sustainability
well as antidiscrimination and anticorruption policies. In 2012, we standards to at least three of their cooperation partners in the
aim to include compliance with the Code of Conduct in our supply chain.
supplier contracts. BASF purchased approximately 500,000 different raw
We conduct risk-based assessments of our suppliers through materials and technical goods as well as services for plant
on-site visits. Risk matrices help us to identify high-risk suppliers construction, maintenance and logistics in 2011. We procured
based on country and product risks. In response to this country raw materials from over 6,000 suppliers.
and product risk analysis, we paid on-site visits to a total of 206 For more on supply chain management, see basf.com/supplychain
raw materials suppliers in 2011 to assess environmental, health
and safety aspects. If our audits find need for improvement, we 2020 Goal
take corrective measures. We perform a follow-up audit a few Reduce transportation accidents
months later. If we do not see any improvement, we terminate the
business relationship. This occurred in eight cases in 2011. We aim to reduce the rate

–70%
To check their compliance with international labor and of transportation accidents
social standards, new suppliers from countries outside the OECD worldwide per 10,000 ship-
are required to fill out a questionnaire. A total of 665 suppliers ments by 70% compared
received our questionnaire on labor and social standards in 2011. with 2003.
In order to do business with us, a company must have completed
and signed the survey, with no key issues – such as the elimina­
tion of child labor – remaining unresolved. Should we suspect Transportation and warehouse safety
that our labor and social standards are not being met, we retain Our regulations and measures for transportation and warehouse
the right to conduct an external audit and, if necessary, decline safety comprise the delivery, storage and distribution of chemi­
a business relationship with that supplier. We did not terminate cals among BASF sites, suppliers and customers. Our global
any business relationships on these grounds in 2011. ­direc­tives also set out consistent standards for the transportation
BASF is currently participating in an international initiative of and storage of chemical products in rented warehouse faci­lities.
the chemical industry to standardize suppliers’ self-assessment We expanded our network for transportation, distribution
and self-auditing processes worldwide. This initiative aims to use and warehouse safety in 2011. For example, in North Africa, we
a globally uniform list of questions modeled after international conducted employee training, reviewed processes, and defined
guidelines like Responsible Care, the International Labor Organi­ consistent requirements for our logistics companies. In 2011, we
zation (ILO) standards and the principles of the United Nations’ introduced a new global directive for the uniform assessment of
Global Compact, and to develop uniform criteria for auditing transportation safety in deep sea tankers. At sites which have
suppliers. joined the BASF Group as a result of acquisitions, we reevaluated

Supply chain management Transportation accidents per 10,000 shipments

(reduction compared with baseline 2003: –68%)

−−Code of Conduct for suppliers includes environmental Baseline

protection and compliance with human and labor rights, 2003 2006 2007 2008 2009 2010 2011
as well as antidiscrimination and anticorruption policies
2020 Goal
−−Around 70 suppliers participate in Supplier Day in China 0.18 –70%
0.24
−−Around 500,000 different raw materials, technical 0.28 0.28
0.36
goods and services procured; raw materials 0.45
purchased from more than 6,000 suppliers 0.56
BASF Report 2011 Environment and safety
Environmental, safety and security management
Management’s Analysis
93

the transportation risks for selected critical products and Asia, with which we define requirements for emergency response
improved their transport processes, making these safer. measures and accident information. In 2011, in order to further
If an incident occurs despite all of our preventive measures increase the quality of transportation accident assistance through­
worldwide, we provide swift and specially coordinated assistance. out Germany, we provided public fire departments with a train­
Our transportation safety advisors are involved in these processes ing concept on handling dangerous goods. We plan to expand
and procedures, and they subsequently evaluate all of the infor­ this training concept and introduce it in other countries.
mation. More than 150 employees are active around the world as  or more, see basf.com/distribution_safety and
F
basf.com/emergency_response
trained transportation safety advisors. They collaborate within a
global network, helping us to establish proper measures and to
avoid incidents in the future. 2020 Goal
Compared with baseline 2003, we have reduced the num­ Reduce emissions of air pollutants
ber of transportation accidents from 0.56 per 10,000 shipments
to 0.18. This number ­is significantly reduced compared with the

–70%
We aim to reduce air pol-
previous year (2010: 0.28). We have recorded and evaluated lutants from our chemical
product spillages during transportation on a global level since plants by 70% compared
2011, continually optimizing our transport processes. In 2011, the with 2002.
number of product spillages amounted to 0.30 per 10,000
shipments.
We also assess our logistics suppliers with regard to safety
and quality, and evaluated more than 500 companies worldwide Emissions to air
in 2011. For these inspections, our experts use both our own Regular monitoring of our emissions to air is a part of environ­
methods as well as internationally approved analysis instruments, mental management at BASF. In addition to greenhouse gases,
such as the European Safety Quality Assessment System. Based we also measure emissions of other air pollutants. These include
on the questionnaire revised by the European Chemical Industry inorganic compounds such as carbon monoxide (CO), sulfur
Association (CEFIC) in 2011, we raised our requirements for safety dioxide (SO2), nitrogen oxide, ammonia and other inorganic
and quality in our logistics partners even higher. If we determine compounds, dust, heavy metals and non-methane volatile
that our standards are not being met, we discuss this with ­organic compounds (NMVOCs).
logistics companies in quality and safety briefings and ensure Our reporting does not take into consideration air pollutant
that the necessary measures for improvement are immediately emissions from oil and gas operations due to their substantial
introduced. fluctuation during exploration phases. Emissions of ozone-
We are actively involved in external networks that quickly depleting substances as defined by the Montreal Protocol
provide information and assistance in emergencies. These totaled 62 metric tons in 2011 (2010: 93 metric tons), while emis­
include the International Chemical Environmental (ICE) initiative sions of heavy metals totaled 3 metric tons (2010: 4 metric tons).
and the German Transport Accident Information and Emergency
Response System (TUIS), in which BASF plays a coordinating
role. BASF provided assistance with TUIS in around 250 cases
in 2011, including assistance to third parties. As a part of TUIS,
BASF has started the implementation of a regional risk matrix in

Transportation and warehouse safety Emissions to air

Air pollutants1 (reduction compared with baseline 2002)

−−Regulations and measures for transportation and 2002 2005 2006 2007 2008 2009 2010 2011
Baseline
warehouse safety comprise delivery, storage
and distribution of chemicals
−−New global directive for transportation safety
in deep sea tankers –40.5 –42.6 –40.9

−−More than 150 transportation safety advisors worldwide –57.3

2020 Goal –63.5 –60.4 –60.5
–70%

1
See table on page 94 for the composition of the air pollutants
94 Management’s Analysis Environment and safety
Environmental, safety and security management
BASF Report 2011

As our portfolio expands and production volumes increase, we Waste management

remain committed to our goal of reducing the emission of air BASF prevents and reduces waste wherever possible. If no
pollutants from our chemical plants. By 2020, we want to recovery options are available, we dispose of waste in a correct
reduce absolute emissions by 70% in comparison with baseline and environmentally responsible manner. We regularly carry out
2002. In 2011, the decline was 60.5%; we reduced emissions to audits to inspect external waste management plants. When
33,807 metric tons (2010: 60.4%; 33,940 metric tons). making acquisitions, we apply the same standards for the
responsible handling of landfills and contaminated sites. After
Emissions to air extensive planning, the remediation of two former multi-disposal
Air pollutants (metric tons per year) from BASF operations
(excluding Oil & Gas)
landfills was largely completed in 2011. These were contami­
nated areas of former Ciba sites.
Baseline Worldwide, around 1.97 million metric tons of waste
2002 2008 2009 2010 2011 resulted from production in 2011 (2010: 1.86 million metric tons).
CO* 46,208 5,171 3,549 3,964 4,419
Of this, oil and gas exploration accounted for 0.08 million
NOx** 15,045 14,207 11,767 12,764 13,003
metric tons (2010: 0.06 million metric tons). We were able to
NMVOC *** 15,005 5,136 5,050 5,550 5,570
recycle or thermally recover 48.9% of our waste (2010: 48.5%).
SOx**** 6,633 5,918 4,884 4,934 4,483
The rest was disposed of by underground storage (9.1%),
Dust 1,734 3,273 3,126 3,537 3,069
through incineration (56.8%) or by landfilling (34.1%). According
NH3/other ***** 994 2,812 2,914 3,191 3,263
to internationally established categories, around 0.58 million
Total 85,619 36,518 31,290 33,940 33,807
metric tons of the waste we disposed of was classified as
* Carbon monoxide hazardous and approximately 0.43 million metric tons as non-
** Total NO2 (nitrogen dioxide) + NO (nitrogen monoxide), calculated as NO2 hazardous. Our sites sent 0.30 million metric tons of hazardous
*** Non-methane volatile organic compounds
waste away for professional disposal.
**** Total various sulfur oxides
***** NH3 (ammonia) and other inorganic substances
Costs and provisions for environmental protection
The overall costs of operating environmental protection facilities
amounted to €850 million in 2011 (2010: €729 million). BASF
­invested an additional €190 million in new and improved envi­
ronmental protection plants and facilities (2010: €122 million).
These capital expenditures involved both end-of-pipe measures
as well as integrated environmental protection measures.
Provisions established for environmental protection
measures and remediation amounted to €659 million as of
December 31, 2011 (December 31, 2010: €665 million).

Waste management Costs and provisions for environmental protection

−−Audits at external waste management plants −−€850 million in overall costs for operating
−−Remediation of contaminated areas at two former environmental protection facilities
Ciba sites largely complete −−€190 million invested in new and improved
−−1.97 million metric tons of waste from production in 2011 environmental protection plants and facilities
−−€659 million in provisions for environmental
protection plants and remediation costs
BASF Report 2011 Environment and safety
Climate protection
Management’s Analysis
95

Climate protection

We are committed to global climate protection. We make Global climate protection goals
an important contribution with our climate protection In 2011, BASF emitted 25.8 million metric tons of greenhouse
products and our efforts to further reduce emissions gases worldwide, measured as CO2 equivalents (2010: 25.7 mil­
along our value-adding chain. In 2011, we set ourselves lion metric tons); of this amount, 23.2 million metric tons were from
a new goal for climate protection. One focus of our BASF operations (excluding Oil & Gas) (2010: 23.8 million metric
research and development is on continually improving tons). As in the previous year, in 2011 we once again reached our
the cost effectiveness of climate protection solutions. goal of reducing greenhouse gas emissions per metric ton of sales
We measure our performance with a transparent corpo- product by 25% compared with 2002. The integration of the Cog­
rate carbon footprint. nis portfolio, the further reduction of nitrous oxide (N2O) emissions
and the further improvement of energy efficiency all contributed
Strategy to this development. Overall, we have been able to lower our
We want to further reduce greenhouse gas emissions in our own greenhouse gas emissions from BASF operations (excluding
production and along the entire value-adding chain. To this end, Oil & Gas) by 42% and reduce specific emissions by 74% since
we implemented numerous measures in our production in 2011. 1990. In 2011, we set ourselves a new goal: by 2020, we want to
Furthermore, we signed the Manifesto for Energy Efficiency in lower emissions per metric ton of sales product by 40%
Buildings laid out by the World Business Council for Sustain­ compared with 2002.
able Development (WBCSD), and developed a sustainability
guideline for the management of our own office buildings. We 2020 Goals
offer our customers solutions that help reduce greenhouse gas Reduce greenhouse gas emissions
emissions and improve resource efficiency. About a third of our
annual research spending is invested in the development of Chemical production¹ Natural gas transport²
these products. (baseline 2002) (baseline 2010)
Our climate protection activities are based on comprehen­
sive emissions controlling. In 2011, we received an award from
the Environmental Investment Organization for our transparent
reporting and comprehensive data collection. For the second
time in a row, BASF has been selected for inclusion in the
–40% –10%
¹ per metric ton of sales product
Carbon Disclosure Leadership Index (CDLI) and the Carbon ² per amount and distance of transported gas
Performance Leadership Index (CPLI) – the only chemical
company to receive this honor. In the oil and gas business, BASF’s subsidiary Wintershall will
Information on emission certificates can be found on page 108; likely achieve its goal of stopping the continuous flaring of gases
for more on innovation, see page 28 onward
­associated with crude oil production in routine operations at all
For more on climate protection, see basf.com/climate_protection
its oil production sites by the end of 2012. Wintershall has also
set itself the goal of increasing energy efficiency in natural gas
transport: By 2020, it aims to reduce carbon emissions related
to the amount and distance of transported natural gas by 10%
compared with 2010. This will be accomplished through, for
example, a more energy-efficient gas pipe layout and the more
intensive reuse of waste heat in the WINGAS Group’s transpor­
tation network.

Strategy and goals Reduction of greenhouse gas emissions in BASF operations

(excluding
Reduction ofOil & Gas)
specific
1
per metricgas
greenhouse ton emissions
of sales product
1 (in %)
per metric ton of sales (baseline 2002)
−−We invest around one-third of our annual research
spending in the development of products for climate 2002 2005 2006 2007 2008 2009 2010 2011
Baseline +0.1
protection and resource efficiency
−−Goal of reducing greenhouse gas emissions in BASF –10.9 –12.4
–14.2
–16.6
operations (excluding Oil & Gas) per metric ton of sales
product (–25%) exceeded, as in the previous year; new –28.9

goal (–40%) defined for 2020 2020 Goal –34.6

– 40%

1
compared with baseline 2002
96 Management’s Analysis Environment and safety
Climate protection
BASF Report 2011

Greenhouse gas emissions ­ ccordingly. We report separately on direct emissions and on

a
We report on greenhouse gases along our entire value-adding ­indirect emissions from the purchase of energy. Scope 1 emis­
chain in accordance with the Greenhouse Gas Protocol Stan­ sions encompass both direct emissions from production and
dard. We contribute our expertise to a WBCSD project, in which energy generation, as well as direct emissions from the genera­
we work together with other companies to establish a uniform tion of ­energy for sale. Scope 2 emissions comprise indirect
interpretation of this standard for the chemical industry. Our own emissions from the purchase of energy for BASF use.
­reporting on emissions from production has been improved

BASF Group’s greenhouse gas emissions according to the Greenhouse Gas Protocol (1,000 metric tons of CO2equivalent per year)

BASF operations including Oil & Gas GWP factor * 2002 2009 2010 2011
Scope 1
CO2 (carbon dioxide) 1 14,634 17,181 18,787 18,488
N20 (nitrous oxide) 310 6,407 9,553 1,862 1,124
CH4 (methane) 21 244 137 94 105
HFC (hydrofluorocarbons)** 140–11,700 61 74 82 85
SF6 (sulfur hexafluoride) 23,900 0 1 3 2
Scope 2
CO2 1 5,243 4,119 4,402 4,879
Total 26,589 31,065 25,230 24,683

Sale of energy to third parties (Scope 1)***

CO2 1 347 577 484 1,116
Total 26,936 31,642 25,714 25,799

Certificates sold**** 0 0 0 175

Total including offsets 26,936 31,642 25,714 25,974

* GWP-Factor: global warming potential of the individual gases expressed as a factor of CO2
** Calculated using the GWP factors of the individual components (Intergovernmental Panel on Climate Change 1995)
*** Also includes sales to BASF Group companies and joint ventures; as a result, emissions reported under Scope 2 can be reported again in some cases
**** Voluntary Carbon Units (VCU) certificates from measures to reduce emissions, which were sold to third parties

Emissions reporting

−−Reporting on emissions from production improved

−−Emissions divided into separate groups: direct emissions from production and from energy generation for BASF use
(Scope 1 emissions); direct emissions from the generation of energy for sale (Scope 1 emissions); indirect emissions from
the purchase of energy for BASF use (Scope 2 emissions)
BASF Report 2011 Environment and safety
Climate protection
Management’s Analysis
97

Our corporate carbon footprint Avoidance of greenhouse gas emissions through the use of BASF
products by sector (in million metric tons of CO2 equivalents)
BASF is the only industrial company worldwide to have pub­
3 45
lished a comprehensive corporate carbon footprint since 2008, 2
1 Housing and construction 282
based on continuously updated calculation methods. We report
2 Industry 29
on all emissions along the value-adding chain and show the vol­ 330
3 Transport 8 million
ume of emissions avoided through the use of our climate pro­
metric tons
4 Agriculture 3
tection products. In order to reduce emissions along the value-
5 Other 8
adding chain, we analyzed the 65 million metric tons of emissions 1
from our raw material procurement in more detail in 2011. Our
goal is to work together with selected raw material suppliers on
solutions that help reduce greenhouse gas emissions. Opportunities with climate protection products
In 2011, we generated sales of around €6.7 billion (9% of BASF
Group sales, excluding the styrenics business) with our climate
Significant greenhouse gas emissions along the BASF
value-adding chain in 20111 (in million metric tons of CO2 equivalents) protection products (2010: €7.7 billion), which include building
insulation materials and plastic components for the automotive
26 BASF 30 Disposal
Production (including Incineration with energy industry. This year-on-year decrease in sales of climate protec­
energy generation) recovery, landfilling (C 12) tion products is primarily attributable to the inclusion of the
­styrenics business in the Styrolution joint venture. The products
from this business were not taken into account in calculating
65 Suppliers 50 Customers 4 Transport our corporate carbon footprint for 2011. In 2010, comparable
Purchased products, Emissions from Transport of products
services and capital the use of employees’ commuting sales of climate protection products amounted to €6.4 billion.
goods (C 1, 2, 3a) end products (C 11) and business travel Our current research activities in ­areas such as renewable
(C 4, 6, 7, 9)
energy and battery materials are expected to further increase
1
According to Greenhouse Gas Protocol, Scope 1, 2 and 3 (categories within
Scope 3 shown in parentheses) our sales of climate protection products.
In addition, we offer a number of products which enable
users to address the effects of climate change. Elastocoast®,
Since 2011, we have defined climate protection products as for example, is a composite of BASF specialty plastics and stone
those product groups which compared to the alternatives avoid ballast which protects dikes against the force of waves.
greenhouse gas emissions over their entire life cycle – from
production and use to disposal – andCorporate carbon footprint
whose eco-efficiency is 2011
at least as good as that of comparable products. The use of
climate protection products we sold in 2011 reduces our cus­
tomers’ emissions by 330 million metric tons of CO2 (2010:
322 million metric tons). Our goal is to continuously increase our
contribution to climate protection with these products.
 or more on our emissions reporting, see
F
basf.com/corporate_carbon_footprint

Corporate carbon footprint Climate protection products

−−Comprehensive reporting on greenhouse gas −−Around €6.7 billion in sales from

emissions along the value-adding chain climate protection ­products in 2011
−−Use of climate protection products sold in 2011 −−Product portfolio enables users to address
reduces our customers’ emissions by the ­effects of climate change
330 million metric tons of CO2
98 Management’s Analysis Environment and safety
Energy and raw materials
BASF Report 2011

Energy and raw materials

The conservation of resources is one of our fundamen- 2020: We want to improve the energy efficiency of our produc­
tal principles. We use efficient energy-generation tech- tion processes by 35% compared with 2002. We plan to
nologies, energy-efficient production processes and accomplish this by continuing to optimize our facilities and by
comprehensive energy management. We also make investing in new plants. To support this goal, we have integrated
products that help conserve resources. In order to energy management issues into our global Responsible Care
continue to increase our energy efficiency, we have set auditing system.
ourselves a new goal.
2020 Goal
Strategy Increase energy efficiency
We offer our customers products and technologies that help

35%
them conserve resources, save energy and make renewable We want to improve the
energies more economical in the long run. Our own production energy efficiency of our
processes focus on energy efficiency and the responsible use production processes by
of raw materials. As a company in an energy-intensive industry, 35% compared with 2002.
our success also depends on the long-term security of our
­energy and raw material supplies. We have therefore created a
program to increase our energy efficiency – measured as the Energy and resource efficiency
volume of sales products produced in relation to the primary We use highly efficient combined heat and power (CHP) plants
­energy required for their production – with a global goal for our to generate our own energy. With this CHP technology, we can
production processes. We pursue this goal through efficiency meet more than 70% of our electricity needs. In 2011, it allowed
in energy generation, savings through our Energy Verbund, and us to save more than 12 million MWh of fossil fuels compared to
our energy management, which analyzes and further improves conventional methods of generating steam and electricity.
energy efficiency at our plants. The Verbund system is an important component of our
For more on energy-efficient products, see page 50 onward ­energy efficiency concept. Waste heat from one plant’s produc­
tion processes is used as energy in other plants. In this way,
Global goals BASF saves more than 18 million MWh each year, which corre­
In 2011, we increased the energy efficiency of our production sponds to savings of 3.7 million metric tons worth of carbon
processes by 26.2% in comparison with the baseline 2002 emissions annually. Furthermore, the by-products of one plant
(2010: 23.7%). Thus, ahead of schedule, we have already can be used as feedstock elsewhere, thus helping us to use raw
achieved our goal of improving the energy efficiency of our materials more efficiently. Our most important raw materials are
production processes by 25% compared with 2002. This was naphtha, natural gas, methanol, ammonia and benzene.
accomplished through the use of cogeneration technology and We are examining the use of renewable energy sources.
­individual projects. At the Ludwigshafen site, for example, we These can only become a permanent part of our energy mix if
expanded our network for condensate return in 2011. The they are competitive in terms of supply security and cost. We
­increased use of condensate saves water and heat. support the use and generation of renewable energies, and
In order to further increase energy efficiency in BASF ­research and develop technologies that can be used in fields
operations (excluding Oil & Gas), we have set a new goal for such as wind and solar thermal energy. To advance electric

Strategy Goals

−−Develop products that help customers conserve −−2020 Goal to increase the energy efficiency of our
resources, save energy and make renewable energies production processes by 25% compared with 2002
more economic in the long run achieved ahead of schedule
−−Three-pronged approach: efficient energy production, −−New quantitative goal to increase energy efficiency in our
savings through the Energy Verbund and successful production processes: 35% compared with baseline 2002
energy management
BASF Report 2011 Environment and safety
Energy and raw materials
Management’s Analysis
99

i er t
al i s
kt u
da
wi r
Energy supply of the BASF Group 2011

2 Fossil and residual fuels used for power generation in

Electricity supply
BASF’s own power plants
1 Internally generated 70% Electricity
16.3 million
2 Purchased 30% MWh 85% Natural gas
34.5 million MWh

1%
1
Heating oil
0.3 million MWh
3
Steam supply
2% Coal
0.9 million MWh
1 Internally generated 49%
2 Waste heat 42% Steam
56.0 million
1 12% Residual fuels
4.9 million MWh
3 Purchased 9%
metric tons
2
Total: 40.6 million MWh

­ obility, BASF began construction in 2011 on the first facility for

m mental agency for international cooperation, we started a proj­
the large-scale production of battery materials for electric ect in 2011 for the economical, environmentally friendly and
vehicles in Elyria, Ohio. ­socially responsible production of coconut oil in the Philippines.
 or more on products that support the use of renewable energies,
F Furthermore, BASF will continue to be a member of the Round­
see page 45
table on Sustainable Palm Oil, which Cognis joined in 2004. Our
For more on our Verbund concept, see basf.com/verbund_e
goal is to use palm and palm kernel oil from certified, sustainable
For more on energy efficiency, see basf.com/resource_conservation
sources by 2015.
 or more on the raw material change growth field, see
F
basf.com/raw_material_change
Renewable raw materials
In 2011, more than 3% of the raw materials we purchased world­
wide were from renewable sources. BASF is intensifying ­research Mineral raw materials
and development activities for products and production We performed an analysis in 2011 to discover if we use ­“conflict
­processes based on renewable raw materials. minerals.” To our current knowledge, this is not the case. To be
In one research project, for example, we have isolated a certain, we plan in 2012 to trace the source of minerals we pur­
­bacterium with which succinic acid can be produced from chase all the way back to the original mine. Should some cases
­renewable resources. Our Eco-Efficiency Analysis shows that arise in which the possibility cannot be excluded that ­materials
this bio-based process is more ecologically efficient than the are taken from critical regions, we reserve the right to conduct
­production of succinic acid using petrochemicals. an external audit and, if necessary, end our business relation­
BASF is involved in various projects along the value-adding ship with that supplier.
chain to promote the sustainable cultivation of renewable raw For more on our dealings with suppliers, see page 92 onward
materials. Together with Cargill and GIZ, the German govern­

Energy and resource efficiency Renewable raw materials

−−12 million MWh savings with combined heat and power −−More than 3% of raw materials purchased worldwide in
(CHP) technology 2011 were from renewable sources
−−Savings of more than 18 million MWh per year with the −−Succinic acid produced from renewable raw materials
Energy Verbund −−Member in Roundtable on Sustainable Palm Oil
−−Most important raw materials: naphtha, natural gas,
methanol, ammonia, benzene
−−Construction begun on the first facility for large-scale
production of battery materials for electric vehicles
100 Management’s Analysis Environment and safety
Water
BASF Report 2011

Water

We use water as a coolant, solvent and cleaning agent, 2020 Goals

and to produce our products. We aim to use water spar- Water
ingly and set ourselves global goals to this end. We offer
our customers solutions that help them to purify water, Reduce use of drinking Sustainable water
use it more efficiently and reduce pollution. ­water in production pro- ­management in water
cesses (baseline 2010) stress areas

Strategy
We want to use water as sparingly as possible at our sites, thus
contributing to responsible usage. Water quality and availability
vary substantially from region to region; therefore, we have
developed a custom-designed water usage plan for each site.
–50% 100%
We also show our commitment to sustainable water use in Fewer emissions
international partnerships and initiatives. As a member of the We want to reduce emissions to water of organic
­European Water Partnership (EWP), we played a decisive role in substances and nitrogen by 80% and of heavy metals
the development of the European Water Stewardship (EWS) stan­ by 60% compared with baseline 2002.
dard, a voluntary industry standard. We investigated the applica­
bility of this standard in practice and offered important advice on
its improvement. We will apply the EWS standard in water stress Reducing emissions further
areas worldwide starting in 2012. In 2011, we once again partic­ Around 192 million cubic meters of wastewater were discharged
ipated in the Carbon Disclosure Project survey on the risks and from BASF production sites (2010: 197 million cubic meters). At
opportunities of water management for companies. 2,900 metric tons, emissions to water of nitrogen (N total) in 2011
For more, see basf.com/water were less than in the previous year (2010: 3,950 metric tons),
representing a reduction of 87.2% since 2002. BASF’s waste­
New global goals water contained 24 metric tons of heavy metals (2010: 25 met­
In 2011, we set ourselves two new goals for 2020: We want to ric tons). Using an optimized procedure for separating heavy
reduce the use of drinking water in production processes by half metals from wastewater at the Ludwigshafen site, we were able
compared with 2010 and establish sustainable water manage­ to reduce heavy metal emissions worldwide by 5.6% compared
ment at all sites in areas of water stress. In 2011, around 21% of with the previous year and by 60.8% compared with 2002. As
our production sites were located in water stress areas, and a result, we already reached our 2020 goals for ­reducing emis­
around 6.5% of water used by BASF was abstracted from these sions of nitrogen and heavy metals to water in 2011. Around
­areas. 24,300 metric tons of organic substances were emitted in 2011
In 2011, we already made progress toward our 2020 goal (2010: 26,100 metric tons). This represents a ­decline of 73.5%
of reducing the use of drinking water in production by half com­ compared with 2002. Phosphorus emissions amounted to 391
pared with 2010; we achieved a reduction of 20.9%. At our site metric tons (2010: 458 metric tons).
in Antwerp, Belgium, we have switched to using river water To avoid errors which lead to unanticipated emissions, we
instead of drinking water for cooling purposes. will review our water protection concepts at all production sites
by 2015. For example, we will invest more than €2 million in
improving the analytical instrumentation of the wastewater treat­

Emissions to water
(2020 Goal: reduction compared with baseline 2002 in %)

Organic substances Nitrogen Heavy metals

2002 2007 2008 2009 2010 2011 2002 2007 2008 2009 2010 2011 2002 2007 2008 2009 2010 2011
Baseline Baseline Baseline

–44.3
2020 Goal
– 60% –55.9 –61.4 –58.4 –60.8
–65.9
2020 Goal –71.5 –73.5 2020 Goal
– 80% –77.5 –79.7 – 80% –76.3 –80.3
–83.9 –82.3 –87.2
BASF Report 2011 Environment and safety
Water
Management’s Analysis
101

Water footprint of the BASF Group in 2011

(Million cubic meters per year)

Supply Use Discharge

2 3 2 3

87% Cooling
– closed-circuit cooling 1 Cooling water 1,849
3,577 (uncontaminated) (90.6%)
1 Surface water 2,012
– flow cooling
(94.5%) 2 Wastewater from 174
1,849
2 Groundwater 94 (4.4%) production (8.5%)

3 Drinking water 24 (1.1%) 13% Production1

269 3 Graywater 19
(0.9%)
1 1

Total: 2,130 Total: 5,695 Total: 2,0422

1
Total from production processes, graywater, rinsing and purification in production
2
The difference between the volume of water supplied and discharged is mainly attributable to evaporation losses during closed-circuit cooling.

ment facility at our site in Geismar, Louisiana, in order to iden­ in flow and closed-circuit cooling. However, we do not want
tify any unanticipated emissions at an early stage. ­ ater recirculation to result in increased energy use, for instance,
w
BASF not only reduces its own emissions to water – we for recooling the water. We have recooling plants at our larger
also want to minimize the risk of water contamination from our sites to reduce the temperature of the cooling water before it is
products. We have participated in the roundtable Zusammen­ discharged back into a body of water.
arbeit von Wasserversorgung und Agrarchemie (Water Supply
and Agricultural Chemistry Cooperation) since 2009, which aims Business opportunities
to prevent the contamination of drinking water with crop protec­ We supply our customers with products that help them use
tion products. In 2011, a monitoring database was set up for ­water efficiently and reduce emissions to water. We are build­
Germany within the framework of this cooperation. ing a new water treatment chemicals plant at our site in ­Nanjing,
China, which will begin production in 2012. With the acquisition
Water use of inge watertechnologies AG in 2011, we aim to expand our
In 2011, BASF abstracted 2,130 million cubic meters of water market position in the water treatment industry and offer our
worldwide (2010: 2,125 million cubic meters). Of this amount, customers solutions based on both chemicals and membrane
94.5% was drawn from rivers and lakes. Groundwater ­accounted technologies. For more, see basf.com/water
for 4.4% and drinking water for 1.1%.
BASF uses most of this water as cooling water. Only around
13% of the water comes into contact with products, for exam­
ple, when used for washing or as a solvent or reaction medium.
We recirculate water as much as possible in order to reduce our
water usage. We report separately on recirculated water used

Use of water Highlights 2011

−−Commitment to sustainable water usage −−Participation in the development of the industry’s

−−2020 Goals achieved for reducing emissions voluntary European Water Stewardship standard
of nitrogen and heavy metals to water −−Antwerp site switches to using river water
−−Two new 2020 Goals for water rather than drinking water for cooling
−−BASF abstracted 2,130 million cubic meters of −−Construction begins on a water treatment
water worldwide in 2011 chemicals plant at Nanjing site
102 Management’s Analysis Environment and safety
Product stewardship
BASF Report 2011

Product stewardship

For us, product stewardship does not end at the factory

2020 Goal
gates. We review the safety of our products along the
Risk assessment of all products
entire value-adding chain – from raw material suppliers
to our own production and finally to our customers’ use

>99%
Risk assessment of all
of the products. We work continually to ensure that our
products that we sell in
products pose no risk to people or the environment when
quantities of more than one
they are used responsibly and in the manner intended.
metric ton per year
Strategy
We ensure uniform high standards for product stewardship
worldwide and our voluntary initiatives go beyond legal require­ Global goals
ments. We fulfill the requirements of the European Union’s By 2020, we will review our risk assessments for all substances
chemicals legislation, including the REACH regulation. Our BASF produces or sells worldwide in quantities of more than
directives and global goals apply to all of BASF’s operative one metric ton per year. We already reached 29.5% of this goal
decision makers, who are responsible for implementing them. in 2011. The risk associated with using a substance is the
This implementation is monitored with regular audits. combination of its hazardous properties and the degree of
We provide extensive information to our customers and the exposure to people and the environment. We review our sales
public on our chemical products with safety data sheets in more products, including mixtures, in the same way.
than 30 languages. This is achieved with the help of a global
database containing continuously updated environmental, REACH and other legal requirements
health and safety data on our substances and products. Our We began implementing the second registration phase of
global emergency hotline network provides information around REACH in 2011. We have notified the European Chemicals
the clock. We offer our customers needs-based training in the Agency (ECHA) of 4,000 substances for inclusion in the Classi­
safe use of our products, such as chemical intermediates or fication and Labeling Inventory. By 2013, BASF will have regis­
crop protection products. tered nearly 700 substances with ECHA which are produced or
With our global goals for risk assessment, we are support­ imported in quantities between 100 and 1,000 metric tons per
ing the implementation of initiatives such as the Global Product year. Nearly a quarter of these substances were added to our
Strategy (GPS) of the International Council of Chemical Associ­ portfolio as a result of the integration of the former Cognis busi­
ations (ICCA). GPS is establishing global standards and best nesses. We expect that the cost of implementing REACH will
practices to improve the safe management of chemical continue to average around €50 million per year.
substances. Internationally, we are also involved in workshops
and training seminars in developing countries and emerging
markets. In 2011, we contributed to GPS training workshops in
Africa, Asia and Eastern Europe mainly for smaller and medium-
sized enterprises as well as for government and university
representatives. We conducted 14 learning events around the
world in 2011, bringing the total to 42 since 2008.
 or more on auditing of suppliers, see page 92 onward; for more on
F
GPS, see basf.com/gps_e

Product stewardship REACH implementation

−−We review product safety throughout the entire −−Second registration phase begins; around
value-adding chain 700 substances to be registered by 2013
−−Global directives with uniform high standards −−Expertise in evaluating substances and our
−−Workshops conducted on Global Product Strategy cost-effective processes offer significant competitive
for smaller and medium-sized enterprises as well advantages in the implementation of REACH
as for government and university representatives
in Africa, Asia and Eastern Europe
BASF Report 2011 Environment and safety
Product stewardship
Management’s Analysis
103

We consider it an important competitive advantage that we have Biodiversity

expertise in evaluating substances as well as cost-effective In order to preserve and foster biodiversity in agriculture, we
processes, which we can use to implement these regulations. participate in initiatives for the protection and conservation of
When it comes to REACH, we are in close contact with our ecosystems. For example, we test various possibilities on a farm
customers and suppliers to ensure we have secure supplies of in the United Kingdom in order to even better harmonize
the raw materials we need and to strengthen customer relation­ economic success with the protection of biodiversity. In France,
ships. Another way in which BASF contributes to international we work with partners in a network promoting bee health
chemical safety is through our support of the United and biodiversity. Using our AgBalance® method, we evaluate
Nations’ initiative to implement a Globally Harmonized System biodiversity as one of the 16 assessment categories in agricul­
(GHS) of Classification and Labeling of Chemicals. tural production.

Ecological and toxicological testing Management of new technologies

Before launching products on the market, we subject them to a Innovative technologies such as plant biotechnology or nano­
variety of ecological and toxicological testing. We apply the most technology offer solutions for the key challenges our society
current scientific knowledge in the research and development faces – for instance, in the areas of climate protection or health
of our products. As a rule, we only conduct animal studies when and nutrition. Products made using new technologies are often
we are legally required to do so. In some cases, animal studies subject to higher standards than all other products.
are stipulated by REACH and other national legislation outside Our Code of Conduct Nanotechnology sets out principles
the European Union in order to obtain more information on the for using nanomaterials. In the past five years, we have taken
properties and effects of chemical products. Our treatment of part in approximately 25 projects, collaborations and partner­
animals meets the highest standards. We adhere to the speci­ ships related to safety research. The NanoGEM project, for
fications laid down by the German Animal Welfare Act as well example, investigates the lifecycle of functionalized nanoparti­
as the requirements of the Association for Assessment and cles and nanocomposite material. In Europe, we participate in
Accreditation of Laboratory Animal Care – the highest standard endeavors like the MARINA joint project to establish reference
for laboratory animals in the world. methods and a test strategy for nanomaterials safety.
We are continuously developing alternative and comple­ Since 2010, we have been involved in a project coordinated
mentary methods that we put into practice whenever it is pos­ by the Öko-Institut e.V. (Institute for Applied Ecology) to develop
sible and accepted by the authorities. BASF invested approxi­ an instrument for assessing the sustainability of nanoproducts.
mately €3 million for this in 2011. For tests where it is not We analyzed the concrete admixture X-SEED® in a pilot trial.
permissible or possible to use alternative methods, we are work­ This test, completed in 2011, demonstrated that X-SEED helps
ing to further optimize our procedures. to significantly reduce carbon emissions as well as energy and
We use alternative and complementary methods in more ­resource consumption in construction.
than a third of our tests. Since 2009, BASF has had a labora­ For more on nanotechnology and the Nanotechnology Code
of Conduct, see basf.com/dialog-nanotechnology
tory in which routine toxicological tests are carried out exclu­
sively using alternative methods. Currently, 25 alternative
methods are being used in our labs and another 10 are in the
development stage.

Use of animal studies New technologies

−−Products undergo ecological and toxicological testing −−Innovative technologies offer solutions for society’s
before they are launched on the market challenges, such as climate protection, health and
−−BASF uses alternative and complementary methods nutrition
whenever possible and accepted by the authorities −−Instrument for assessing sustainability in nanoproducts
−−Approximately €3 million invested in 2011 in the developed in a joint project with the Öko-Institut e.V.
development of alternative methods
104 Management’s Analysis Forecast
Opportunities and risks report
BASF Report 2011

Opportunities and risks report

Identifying, assessing and managing opportunities and risks

The goal of BASF’s risk management is to identify and Overall assessment

evaluate opportunities and risks as early as possible and We expect the global economy to continue to grow in the next
to take appropriate measures in order to seize opportu- two years. However, the national debt crises in Europe and the
nities and limit business losses. The aim here is to avoid United States as well as inflationary trends in Asia all pose con­
risks that pose a threat to BASF’s continued existence siderable risks. A new economic crisis could result if market
and to make improved managerial decisions to create uncertainty continues or demand is negatively impacted by
lasting value. extensive fiscal austerity measures. Important opportunities and
We understand risk to be any event that can nega- risks for our earnings are also associated with uncertainty
tively impact the achievement of our short-term oper­ regarding the development of key customer industries and raw
ational or long-term strategic goals. We define opportu- material prices, as well as volatility in foreign currency exchange
nities as possible successes that exceed our defined rates and margins.
goals. According to our assessment, there are still no significant
individual risks that pose a threat to the continued existence of
Short- and long-term effects on earnings of key opportunity the BASF Group. The same applies to the sum of individual risks,
and risk factors
even in the case of another economic crisis.

Possible variations Operative planning Strategic goals Risk management process

related to: – 2012 + – 2020 +
The BASF Group’s risk management process is based on the
Business environment international risk management standard COSO II Enterprise Risk
and sector
Management – Integrated Framework, and has the following key
Demand
features:
Raw material prices
Product prices
Organization and responsibilities
Regulation/policy
−−Risk management is the responsibility of the Board of Exec­
utive Directors, which also determines the processes for
Company-specific opportunities and risks
approving investments, acquisitions and divestitures.
Purchasing/supply chain
−−The Board of Executive Directors is supported by the corpo­
Investments/production
rate divisions Finance, Strategic Planning & Controlling and
Innovation
Legal, Taxes & Insurance, as well as the Corporate Control­
Personnel
ling unit and the Chief Compliance Officer. They coordinate
Acquisitions/cooperation
the risk management process at a Group level and provide
Information technology
the structure and appropriate methodology. Opportunity and
Legal issues
risk management is thus integrated in the strategy, planning
and budgeting processes.
Finances

Exchange rate volatility

Other financial opportunities

and risks

Strategy and goals Overall assessment

−−Detect opportunities and risks as early as possible −−The most significant causes of opportunities and risks are
−−Take measures to limit business losses the development of the economy and important customer
−−Avoid risks that threaten the company’s industries as well as the development of raw material
continued existence prices, and volatility in exchange rates and margins
−−Support managerial decisions −−Considerable risks arise from the national debt crises
in Europe and the United States
−−No threat to the continued existence of the BASF Group
BASF Report 2011 Forecast
Opportunities and risks report
Management’s Analysis
105

Organization of BASF Group’s risk management

Corporate Audit Supervisory Board External Auditors

Board of Executive Directors

Corporate Controlling: Corporate Units

Monthly Management
Strategic Planning Legal, Taxes Chief Compliance Officer
Information Meetings Finance
(levels 1 and 2) & Controlling & Insurance

Divisions Regions Verbund Sites Competence Centers

−−A network of risk managers in the business and central units Instruments
advances the implementation of appropriate risk management −−The Risk Management Process Manual, applicable through­
practices in daily operations. out the Group, forms the framework for risk management and
−−The management of specific opportunities and risks is largely is adapted by the business units to suit their particular busi­
delegated to the business units and is steered at a local level. ness conditions.
Risks relating to exchange rates and raw material prices are −−A catalog of opportunity and risk categories helps to identify
an exception. In this case, there is an initial consolidation at all relevant opportunities and risks as comprehensively as pos­
the Group-wide level before derivative hedging instruments, sible.
for example, are used. −−Standardized evaluation and reporting tools are available for
−−The internal auditing unit is responsible for regularly auditing the identification and evaluation of risks. The aggregation of
the risk management system to be established by the Board opportunities, risks and sensitivities at the division and Group
of Executive Directors in accordance with Section 91 (2) of the level using a Monte Carlo simulation helps us to identify
German Stock Corporation Act. Furthermore, as part of its effects and trends across the organization.
monitoring of the Board of Executive Directors, the Supervi­ −−Company management is informed about operational oppor­
sory Board considers the effectiveness of the risk manage­ tunities and risks (observation period of up to one year) in the
ment system. An external auditor evaluates the establishment monthly management report produced by the Corporate
and suitability of an early detection system for risks. Controlling unit. In addition, the corporate divisions Strategic

Internal control and risk management system with regard to the Group financial reporting process

−−Uniform, Group-wide guideline that sets accounting policies, processes and deadlines
−−Strict adherence to the principles of segregation of duties and dual control and enforcement of access rights rules
−−Annual evaluation of the control environment at significant companies and service units using a central risk catalog
106 Management’s Analysis Forecast
Opportunities and risks report
BASF Report 2011

Planning & Controlling and Finance provide information twice Our internal control system for financial reporting continuously
a year about the aggregated opportunity/risk exposure of the monitors these principles. To this end, methods are provided
BASF Group. Furthermore, if a new individual risk is identified for the structured and Group-wide uniform evaluation of the
which has an impact on earnings of more than €10 million, it internal control system in financial reporting.
must be immediately reported. A central risk catalog covers the significant risks for the
−−As part of our strategy development, the Strategic Planning & BASF Group regarding a reliable control environment and proper
Controlling unit conducts strategic opportunity/risk analyses financial reporting. The risk catalog is revised and updated
with a ten-year assessment period. These analyses are annu­ annually.
ally reviewed during the course of the strategic controlling and In a centralized selection process, companies and units are
are adapted if necessary. identified that are exposed to particular risks, that have a mate­
rial impact on the Consolidated Financial Statements of the
When BASF was included in the Dow Jones Sustainability BASF Group or that provide service processes. The selection
Index in September 2011, the company once again received process is conducted annually. In the relevant companies and
special recognition for its risk management system. units, one person is given responsibility to coordinate and mon­
itor the execution of the steps.
Significant features of the internal control and
risk management system with regard to the The annual evaluation process consists of the following steps:
Group financial reporting process
The Consolidated Financial Statements are prepared by a unit – Evaluation of the control environment
in the corporate division Finance. BASF Group’s accounting pro­ The adherence to internal and external guidelines that are rele­
cess is based on a uniform accounting guideline that sets out vant for the maintenance of a reliable control environment is
accounting policies and the significant processes and deadlines checked by means of a standardized questionnaire. The
on a Group-wide basis. There are binding directives for the assessment is performed by checking the rules awareness of
internal reconciliations and other accounting operations. Stan­ employees involved, and is supported by sample taking.
dard software is used to carry out the accounting processes for – Identification of the control activities
the preparation of the individual financial statements as well as In order to mitigate the risks to the financial reporting process
for the Consolidated Financial Statements. There are clear rules listed in our central risk catalog, corresponding control activi­
for the access rights of each participant in these processes. ties are conducted.
Employees involved in the accounting and reporting pro­ – Assessment of the control activities
cess meet the qualitative requirements and participate in train­ After documentation, a test is performed to verify whether the
ing on a regular basis. There is a clear assignment of responsi­ described controls are capable of adequately mitigating the
bilities between the specialist units, companies and regional risks. In the subsequent test phase, samples are taken to test
service units involved. We strictly adhere to the principles of seg­ whether the controls were effective in practice.
regation of duties and dual control. Complex actuarial reports
and evaluations are produced by specialized service providers
or specially qualified employees.

Risk management process Annual evaluation process

−−Integrated process with standardized tools for identifying, −−Evaluation of the control environment
assessing and reporting opportunities and risks −−Identification of the control activities
−−Decentralized management of specific opportunities −−Assessment of the control activities
and risks −−Monitoring of control weaknesses
−−Aggregation at a Group level −−Internal confirmation of the internal control system
−−Regular reporting on operational and strategic
opportunity/risk exposure
BASF Report 2011 Forecast
Opportunities and risks report
Management’s Analysis
107

– Monitoring of control weaknesses Our average capacity utilization rate is already at a very high
The managers responsible receive reports on any control weak­ level. However, in some cases, there is still the possibility to take
nesses identified and their resolution, and an interdisciplinary advantage of increased demand as far as our idle production
committee investigates their relevance for the BASF Group. The capacities allow.
Board of Executive Directors is informed if control weaknesses Gas consumption can fluctuate due to colder or warmer
have been identified that have a considerable impact on the winter weather, which has positive or negative effects on the
financial reporting. performance of our gas trading business. Similarly, growing sea­
– Internal confirmation of the internal control system sons that are wet and warm, or dry and cold, can have positive
The managing director and chief financial officer responsible for or negative effects on our crop protection business.
each consolidated Group company confirm to the Board of
Executive Directors of BASF SE at the end of the annual cycle Margin volatility due to fluctuating raw material prices
the effectiveness of the internal control system with regard to and/or product oversupply/shortage: We anticipate stable
accounting as well as the reliability of financial reporting. margins in 2012. For some products and value-adding chains,
however, there is likely to be pressure on margins, which would
have a negative effect on our earnings.
Short-term opportunities and risks The average oil price (Brent crude) in 2011 was around $110
Demand fluctuation due to volatility in market growth: The per barrel, which was attributable primarily to high demand from
development of demand in our sales markets is one of the stron­ emerging markets, in particular from China. For 2012, we also
gest drivers of opportunities and risks. More details on our anticipate an average oil price of $110 per barrel. We therefore
assumptions regarding short-term growth rates for the global expect the price level of the raw materials and petrochemical
economy, regions and key customer industries, such as the basic products that are important to our business to remain
chemicals, automotive and construction sectors, can be found high. Due to the good demand situation until now, we have
from pages 113 to 115. In accordance with this baseline scenario, largely been able to pass raw material costs on to our custom­
we are planning to achieve volume growth in nearly all segments. ers. If there were a considerable decline in demand, this could
In addition to the baseline scenario, we also consider risk lead to significant narrowing of our margins and the need to write
scenarios. These include, for example, an intensification of the down inventories.
national debt crises in Europe and the United States, which Our dependence on the oil price is reduced through the
would dampen private demand and limit the ability of businesses contribution of our Oil & Gas business. Earnings in this business
to get refinancing. There could also be strong negative effects rise by around €30 million for every $1 increase in the average
on consumer and industrial demand from extensive fiscal aus­ annual barrel price of Brent crude.
terity measures in the form of tax increases and cuts to govern­
ment spending. In these risk scenarios, a demand-driven
decline in oil prices can be expected; the dollar/euro exchange
rate would remain at a similar level to that in the baseline sce­
nario as both the United States and Europe are similarly
­indebted.

Development of demand Margin volatility

−−Possible negative effects on demand due to −−Oversupply expected to lead to lower margins
intensification of the national debt crises and in some value-adding chains
extensive fiscal austerity measures −−Raw material costs remain high
−−Taking advantage of opportunities arising from −−If demand declines, increasing risk that raw material
higher demand as far as our production capacities allow costs cannot be passed on to the market
108 Management’s Analysis Forecast
Opportunities and risks report
BASF Report 2011

Regulation and political risks: Due to the European chemi­ measures to increase energy efficiency, we expect higher
cals regulation REACH, which came into force in 2007, BASF ­demand for our products. Construction of low-emission gas
and our European customers face the risk of being placed at a power plants could raise demand for natural gas, which would
disadvantage to our non-European competitors due to the cost- present an opportunity for our gas trading activities. Our build­
intensive test and registration procedures. ing ­insulation materials are used in the energy-efficient renova­
Under the E.U. emissions trading scheme, it is likely that tion of housing and office buildings. Furthermore, we offer a
the CO2 certificates allotted to BASF Group will exceed our ­diverse range of solutions for the construction and operation of
demand during the current (second) trading period (2008-2012). wind turbines, such as intermediates, coatings and foams for
One major reason for this is that we invested early on in highly rotor manufacturing as well as construction chemicals for the
efficient gas power plants (combined heat and power, or CHP, base and supports. Our catalysts business benefits from the
plants) for our energy supply infrastructure. tightening of vehicle emissions regulations.
In the third trading period, which begins in 2013, all certifi­
cates for industrial electricity supplies will have to be purchased. Delivery bottlenecks resulting from interruptions in produc-
For chemical production, on the other hand, the number of CO2 tion or the supply chain and raw material shortages: We try
certificates allocated free-of-charge is based on very ambitious to prevent unplanned plant shutdowns by adhering to high tech­
benchmarks. As a result of the above-average efficiency, we nical standards and continuously improving our plants. We limit
expect allocation for our chemical plants to be nearly sufficient. the effects of unplanned shutdowns through diversification
However, due to the auctioning of all certificates for electricity within our global production Verbund.
generation, we expect that, overall, the BASF Group will face an China continues to limit the export of rare earths, which are
annual undersupply; the number of certificates we need each used in the production of our catalysts, for example. We mini­
year ranges in the middle of the single-digit millions. The extent mize procurement risks through our broad portfolio, our global
to which this can negatively affect the global competitiveness purchasing activities and the purchase of additional quantities
of our European sites depends on the trading price of these CO2 of raw materials on spot markets. If possible, we avoid procur­
certificates. ing raw materials from a single supplier. When this cannot be
Other risks for us include further regulation, for example, of avoided, we try to foster competition or we knowingly enter into
the use of chemicals or in the gas business as well as the inten­ this relationship and assess the consequences of potential non-
sification of geopolitical tensions, the destabilization of political delivery. We continuously monitor the credit risk of important
systems and the erection of trade barriers (for example, Chinese business partners, both customers as well as suppliers.
restrictions on exports of rare earths or OPEC quotas for oil pro­
duction). Information technology risks: BASF relies on a number of IT
On the other hand, regulatory decisions also offer oppor­ systems in order to carry out its day-to-day operations. The non-
tunities that we want to exploit: As a result of Germany’s deci­ availability of critical IT systems and applications can have a
sion to phase out the use of nuclear power, as well as global ­direct impact on production and logistic processes. If data are
programs to support the expansion of renewable energy and lost or manipulated, this can negatively affect process safety

Regulation Delivery bottlenecks

−−Emissions trading: risk of undersupply and additional −−Avoidance of unplanned shutdowns through high
costs due to need to purchase certificates technical standards and diversification within our
−−Opportunities arising from regulatory decisions: higher global production Verbund
demand for products to increase energy efficiency −−Procurement risks minimized by a broad portfolio, global
purchasing activities and careful selection of suppliers
BASF Report 2011 Forecast
Opportunities and risks report
Management’s Analysis
109

and the accuracy of our financial reporting. Unauthorized ­access Financial opportunities and risks
to sensitive data, such as personnel records, competition-­ The management of liquidity, currency and interest rate risks is
related information or research results, can result in legal con­ conducted in the Treasury unit. The management of commod­
sequences or jeopardize our competitive advantage. ity price risks takes place in the Global Procurement & Logistics
To minimize such risks, BASF has implemented applica­ Competence Center or in the appropriately authorized Group
tion-specific measures such as stable and redundantly designed companies. Detailed guidelines and procedures exist for deal­
IT systems, back-up processes, virus and access protection ing with financial risks. Among other things, they provide for the
and encryption systems as well as integrated, Group-wide stan­ segregation of trading and back office functions.
dardized IT infrastructure and applications. The systems used
for information security are continuously tested and updated. In Exchange rate volatility: Our competitiveness on global mar­
addition, our employees receive regular training on information kets is influenced by fluctuations in exchange rates. For BASF,
and data protection. IT-related risk management is conducted opportunities and risks arise in particular on the sales side when
using Group-wide regulations for organization and application, the U.S. dollar exchange rate fluctuates. A full-year rise in the
as well as an internal control system based on these regula­ value of the U.S. dollar/euro exchange rate by $0.01 would ­result
tions. in an increase of around €50 million in BASF’s earnings, assum­
ing other conditions remain the same.
Litigation and claims: In order to assess the risks from current On the production side, we mitigate foreign currency risks
legal disputes and proceedings and any potential need to rec­ by having local production sites in the respective currency
ognize provisions, we prepare our own analysis and assess­ zones.
ment of the circumstances and claims considered. In addition, Financial foreign currency risks result from the translation
in individual cases, we consider the results of comparable pro­ of receivables, liabilities and other monetary items in accordance
ceedings and independent legal opinions. Furthermore, we with IAS 21 at the closing rate into the functional currency of the
make assumptions regarding the probability of claims being respective Group company. In addition, we incorporate planned
successful and their potential financial impact. The actual costs purchase and sales transactions in foreign currencies in our
can deviate from these estimates. financial foreign currency risk management. These risks are
We use an internal control system to limit risks from poten­ hedged using derivative instruments, if required.
tial wrongdoing or legal infringements. For example, we try to
avoid patent and licensing disputes whenever possible with the Interest rate risks: Interest rate risks result from potential
help of extensive clearance research. As part of our Group-wide changes in prevailing market interest rates. These can cause a
Compliance Program, our employees receive regular training. change in the present value of fixed-rate instruments and fluc­
For more on our Group-wide Compliance Program, see page 19 tuations in the interest payments for variable-rate instruments,
and page 123 onward
which would positively or negatively affect earnings. To hedge
these risks, interest rate swaps and combined interest rate and
currency derivatives are used in individual cases.
In addition to market interest rates, BASF’s financing costs
are determined by the payable credit risk premiums. These are

Litigation and claims Financial opportunities and risks

−−Limitation of legal risks with the help of an internal −−Exchange rate volatility
control system −−Interest rate risks
−−Estimate of monetary effects from legal disputes −−Risks from metal and raw materials trading
and proceedings as realistic as possible −−Liquidity risks
−−Regular employee training as part of Group-wide −−Risk of asset losses
Compliance Program −−Impairment risks
−−Risks from pension obligations
110 Management’s Analysis Forecast
Opportunities and risks report
BASF Report 2011

mainly influenced by our credit rating and the market conditions credit limits. Thanks to the worldwide activities and diversified
at the time of issue. In the short to medium term, BASF is largely customer structure of the BASF Group, there is no large con­
protected from the possible effects on its interest result thanks centration of credit default risk. Risks are also limited through
to the well-balanced maturity profile of its financial debt. the use of credit insurance and bank guarantees.

Risks from metal and raw materials trading: In the catalysts Impairment risks: The risk of an asset impairment occurs if the
business, BASF employs commodity derivatives for precious assumed interest rate in an impairment test increases or the
metals and trades precious metals on behalf of third parties and forecast cash flows decline. In the current business environ­
on its own account. In addition, we use our knowledge of the ment, we consider the risk of impairment of individual assets
markets for crude oil and oil products to generate earnings from such as customer relationships, technologies and brands, as
the trade of raw materials. To address specific risks associated well as goodwill, to be low.
with these trades, which are not part of our operating business,
we set and continuously monitor limits with regard to the type Long-term incentive program for executives: Our executives
and size of the deals concluded. have the opportunity to participate in a stock-price-based
compensation program. The need for provisions for this
Liquidity risks: Risks from fluctuating cash flows are recog­ program varies according to the development of the BASF share
nized in a timely manner as part of our liquidity planning. We price; this leads to a corresponding increase or decrease in
have access to extensive liquidity at any time thanks to our good personnel costs.
ratings, the commercial paper program and committed bank
credit lines. In the short to medium term, BASF is largely pro­ Risks from pension obligations: We predominantly finance
tected against potential refinancing risks thanks to the balanced company pension obligations externally through separate plan
maturity profile of our financial indebtedness as well as diversi­ assets. In addition to the large pension plans of our Group com­
fication in various financial markets. panies in North America, the United Kingdom and Switzerland,
For more on financial risks, see the Notes to the Consolidated this applies particularly to BASF Pensionskasse VVaG and BASF
Financial Statements from page 191 onward
Pensionstreuhand e.V. in Germany. To address the risk of under­
For more on the maturity profile, see Notes to the Consolidated
Financial Statements from page 186 onward funding due to market-related fluctuations in plan assets, we
have investment strategies that align return and risk optimiza­
Risk of asset losses: We limit country-specific risks by inter­ tion to the structure of the pension obligations. Stress scenar­
nally determining country ratings, which are continuously ios are also simulated regularly by means of portfolio analyses.
updated to reflect changing environment conditions. We selec­ Furthermore, new employees are almost always offered defined
tively use export credit insurance and investment guarantees to contribution plans.
limit specific country-related risks. We lower credit risks for our
financial investments by engaging in transactions only with
banks with good credit ratings and by adhering to fixed limits.
The credit ratings are continuously monitored and the limits are
adjusted accordingly. We reduce the risk of default on receiv­
ables by continuously monitoring the creditworthiness and pay­
ment behavior of our customers and by setting appropriate

Exchange rate volatility Risk of asset losses

−−Exchange rate volatility a significant risk factor; −−Export credit insurance and investment guarantees
sales-side opportunities and risks in particular to hedge country-related risks
from U.S. dollar exchange rate fluctuations −−Reduction of credit risks through credit checks
−−Production-related foreign currency risks limited and transaction limits
by having local sites −−No concentration of risk of default on receivables
−−Net position in foreign-currency-denominated at any individual business partner
receivables and liabilities as well as planned foreign- −−Use of credit insurance and bank guarantees
currency transactions hedged with derivatives
BASF Report 2011 Forecast
Opportunities and risks report
Management’s Analysis
111

Long-term opportunities and risks In order to achieve long-term profitable growth, our research
Long-term demand development: In our “We create chemis­ and business focus is on highly innovative business areas, which
try” strategy, we expect chemical production (excluding phar­ we sometimes enter into through strategic cooperative partner­
maceuticals) to grow worldwide by 4.0% annually until 2020, ships.
faster than global gross domestic product and also more rap­
idly than in the previous 10 years. We want our sales to ­increase Portfolio development through investments: We expect the
significantly faster, by an average of 6% annually. We plan to increase in chemical production in emerging markets in the com­
­accomplish this with our market-oriented and innovative port­ ing years to be significantly above the global average. This will
folio, which we will further strengthen in coming years through create opportunities that we want to exploit by expanding our
investments in new production capacity, R&D activities and presence in these economies; therefore, at least one-third of our
­acquisitions. Our ambitious goal for 2020 is thus to reach sales investment volume between 2012 and 2020 will be spent in
of €115 billion and we expect to increase income from ­operations emerging markets.
before depreciation and amortization (EBITDA) to €23 billion. Our decisions on the type, size and locations of our invest­
If the current national debt crises result in a long-lasting ment projects are based on assumptions related to the long-
stagnation in the markets of the West, these goals could prove term development of markets, margins and costs, as well as
to be too ambitious. As a result of our high degree of diversifi­ raw material availability and country, currency and technology
cation across various customer industries and regions, we risks. Opportunities and risks arise when real developments
would still expect our growth to be above the market average, deviate from our assumptions.
even under these conditions. In the implementation phase, we make use of our experi­
For more on the “We create chemistry” strategy, see page 16 ence in project management and controlling, in order to mini­
mize the risk of cost overruns or missed deadlines.
Development of the competitive and customer landscape: For more on our investment plans, see page 117
We expect competitors from emerging markets to become
­increasingly important in the coming years. Furthermore, we Innovation: We are observing a trend toward more sustainabil­
anticipate that many raw material suppliers will broaden their ity in our customer industries. We want to take advantage of the
value-adding chains. resulting opportunities with innovations – particularly in
We are addressing this risk through active portfolio man­ the growth fields we have identified. These include battery
agement. In order to remain competitive, we continuously materials for electric mobility, Functional Crop Care to improve
improve our operational excellence. We exit markets where risks agricultural efficiency, solutions for water treatment and
outweigh opportunities, and in which we do not see satisfac­ technologies for the use of renewable energy (wind, solar ther­
tory opportunities to stand out from our competitors in the long mal and photovoltaic power).
term. Examples of divestitures and carve-outs in 2011 and 2012 New products launched on the market during 2011 or later
include the styrenics business, which was transferred to a joint should contribute €30 billion to sales in 2020. To achieve this
venture with INEOS, as well as our fertilizer business. goal, we continue to invest around 3% of our sales in research
and development. We also address the risk of the technical or
economic failure of research and development projects by main­
taining a balanced and diversified project portfolio.

Long-term development Investments

−−Annual growth of 4% in global chemical production −−Investment decisions on the basis of assumptions
expected; growth risks if long-lasting stagnation regarding development of markets, margins and costs,
results from national debt crises as well as raw material availability and country,
−−BASF aims for above-average growth currency and technology risks
−−Active portfolio management: taking advantage −−Opportunities and risks from deviations
of opportunities with targeted investments in from expectations
production capacity, R&D activities and acquisitions; −−Risks minimized in project implementation by making use
minimizing risks with divestitures of experience in project management and controlling
112 Management’s Analysis Forecast
Opportunities and risks report
BASF Report 2011

We optimize the effectiveness and efficiency of our research Business could be negatively affected in the medium and long
­ ctivities through our global Know-How Verbund as well as
a term by the loss of expertise in North America and Europe due
through collaboration with partners and customers. Further­ to disproportionately high retirement numbers, as well as by the
more, in a program and project management process, we challenge arising from additional recruitment ­demand in Asia as
continuously review the chances of success and the underlying a result of our targeted growth.
assumptions of research projects; this review includes all phases We address these risks by making BASF an attractive
from idea generation to product launch. The trust of customers ­employer and retaining our employees in the long term through
and consumers is essential for the successful introduction of our global programs Generations@Work and Diversity + Inclu­
new technologies. That is why we enter into dialog with stake­ sion, the Employee Development BASF Group project, employer
holders at an early stage of development. branding and a greater emphasis on human capital develop­
For more on innovation, see page 28 and BASF’s segments from ment as well as additional regional initiatives.
page 44 onward
For more on the individual initiatives and our goals,
see page 83 onward

Acquisitions: In the future, we will continue to refine our port­

folio through acquisitions that promise above-average profitable Sustainability: BASF is committed to integrating environmen­
growth, are innovation-driven and offer added value for our cus­ tal protection and socially responsible conduct into its business
tomers while reducing the cyclicality of our earnings. activities. Infringements of our voluntary commitments and
The evaluation of opportunities and risks already plays a legal violations represent a reputational risk and could lead to
significant role during the assessment of potential acquisition operational or strategic risks. We use the results of our global
targets. A detailed analysis and quantification are conducted as issue management for sustainability to initiate change processes
part of due diligence. Examples of risks include increased staff in the company in order to be prepared for any potential risks
turnover, delayed realization of synergies, and the assumption and to exploit opportunities. We have established global moni­
of obligations that were not precisely quantifiable in advance. If toring systems which also include our supply chain – these
our expectations in this regard are not fulfilled, risks could arise, enable us to ensure adherence to laws and our voluntary com­
such as the need to impair intangible assets; yet there could mitments in the areas of environment, safety, security and health
also be opportunities, for example, from additional synergies. as well as to labor and social standards. In order to assure
society’s acceptance of our business activities, we engage in
Recruitment and long-term retention of qualified employ- ongoing dialog with relevant stakeholders. Before acquiring a
ees: The continued improvement in the economic environment company, we take into account its focus on sustainability and
in the past two years has also led to an increase in global com­ we consider this in the acquisition process.
petition for highly-qualified specialists and managers. This will For more on monitoring tools, see page 124 onward
likely be intensified in the medium to long term due to demo­
graphic developments. As a result, there is an increased risk
that job ­vacancies cannot be filled with suitable applicants, or
only after a delay.

Innovation Personnel

−−Major component of our growth strategy −−Intensified global competition for highly-qualified
−−Reduction of risks through Know-How Verbund as well as specialists and managers
continuous review of the efficiency, chances of success −−Danger of loss of expertise from numerous retirements
and operating environment of research projects −−More effective personnel recruitment and
−−Ongoing dialog with partners and customers to retention with the help of various measures
improve chances of success
BASF Report 2011 Forecast
Economic environment in 2012
Management’s Analysis
113

Economic environment in 2012

We expect the global economy to continue to grow in Outlook for gross domestic product 2012
(Real change compared with previous year)
2012. However, uncertainty in the financial markets
­regarding the development of the national debt crises in World 2.7%
the eurozone and the United States dampens growth E.U. 0.5%
prospects. Nevertheless, we expect average annual United States 2.0%
global economic growth to match the previous year’s Asia (excl. Japan) 6.6%
level (+2.7%). Economic growth in the industrialized Japan 2.4%
countries is likely to be significantly weaker (+1.5%). For South America 3.9%
2012, we anticipate an average oil price of $110 per
barrel, and an ­average exchange rate of $1.30 per euro.
As in previous years, we anticipate highly volatile Trends in gross domestic product 2012–2014
(Average annual real change)
exchange rates over the course of the year.
World 3.1%
Uncertainty regarding the development of the national debt E.U. 1.2%
­crises in the eurozone dampens the growth outlook for the United States 2.5%
­European Union in 2012. Growth in domestic consumption and Asia (excl. Japan) 6.9%
demand for capital goods will likely weaken compared with the Japan 1.9%
previous year. We anticipate slow growth in gross domestic South America 4.1%
product (+0.5%). In Germany, we expect economic growth to
slacken considerably (+1.0%); as an export-oriented economy,
Germany will be affected by the weak growth of its important For the United States, we forecast stronger economic growth
trading partners. In the medium term, we expect average (+2.0%) in 2012 than in the previous year. We expect the labor
economic growth for the European Union of 1.2%. market situation to improve and private consumption, which rep­
resents more than 70% of gross domestic product, to pick up
again. As a result of the high national debt and the very low
interest rate level, we do not anticipate any further economic
stimulus in the form of expansive fiscal or monetary policy.
Strong earnings at U.S. companies and favorable exchange
rates will likely help to increase exports and investing activity.
In the medium term, we expect the U.S. economy to grow by
2.5% annually.

For the year 2012, we expect the following economic conditions:

−−Global economic growth at prior year’s level (+2.7%) −−Stronger growth in the United States (+2.0%) compared
−−Significantly weaker growth in industrialized with prior year; continued high growth in Asia (excluding
countries (+1.5%) Japan) (+6.6%); stronger growth in Japan (+2.4%) thanks
−−Slow growth in gross domestic product in the to substantial economic recovery; growth in South
European Union (+0.5%) America at previous year’s level (+3.9%)
−−An average exchange rate of $1.30 per euro
−−An average annual oil price of $110 per barrel
114 Management’s Analysis Forecast
Economic environment in 2012
BASF Report 2011

We assume that economic growth in Asia (excluding Japan) In the transportation segment, we expect automotive produc­
will lose momentum in 2012, but will still remain high (+6.6%). tion to grow more quickly than in 2011. Especially in the emerg­
Particularly in China, growth will likely be dampened by lower ing markets of Asia, we anticipate increasing demand, which
demand for exports; we also expect a slight appreciation of the will strengthen local production. In Japan, the unexpected pro­
Chinese currency. In Asia (excluding Japan) in the ­medium duction outage of the previous year is likely to be compensated
term, we anticipate annual growth in regional gross domestic for. According to our forecasts, automotive production in the
product of 6.9%, driven by the strong growth in industrial United States will continue to grow.
production. We anticipate that growth in the global energy and
In Japan, we forecast a substantial economic recovery in ­resources sector will remain robust in 2012.
2012 due to the clearance of a large part of the damage caused For the construction industry worldwide in 2012, we fore­
by the earthquake and tsunami disaster. We anticipate that the cast somewhat stronger growth than in the previous year, driven
country will experience substantial economic growth (+2.4%). mainly by the emerging markets of Asia and South America. In
However, due to slowing global economic growth and the strong Europe and the United States, the construction industry overall
Japanese yen, growth in exports is likely to be weaker. In the is likely to grow only marginally faster than in 2011. We expect
­medium term, we expect annual growth of 1.9% due to the eco­ reconstruction following the earthquake and tsunami disaster
nomic recovery. in Japan to provide a boost to the country’s building sector.
In South America, we anticipate that gross domestic prod­ For 2012, we forecast weaker growth overall for the
uct growth in 2012 will match the level of the previous year ­consumer goods industry than in the previous year – despite
(+3.9%). Interest rate hikes are likely to have a negative impact positive impetus from the electrical industry, which is develop­
on ­domestic demand. We expect monetary policy to be shaped ing strongly, especially in Asia. We expect ongoing high growth
by efforts to combat rising inflation. In the medium term, we fore­ rates for the textiles industry in emerging markets, while growth
cast annual economic growth of 4.1% thanks to positive growth should continue to weaken in most industrialized countries.
impetus from Brazil. Global production in the paper industry is likely to stabilize
thanks to rising demand from the emerging markets of Asia.
Outlook for key customer industries In the electronics industry, we assume that semiconduc­
Growth in global industrial production will likely be slightly slower tor production and information and communication technology
in 2012 (+4.1%) than it was in 2011. In the industrialized coun­ (ICT) will continue to post solid growth. In Europe and the United
tries, we expect the pace of growth in production to match the States, however, we expect weaker growth than in the previous
previous year’s level. In the Asian emerging markets, by con­ year.
trast, we assume that growth will slow down somewhat. In the segment health and nutrition we anticipate that
global production growth will be somewhat stronger than in
2011.
The agriculture sector is likely to experience robust
production growth worldwide in 2012.

We expect the following developments in key customer industries in 2012:

−−Growth in global industrial production (+4.1%) slightly −−Consumer goods sector: year-on-year growth
below previous year’s level weaker overall despite positive impetus from the
−−Transportation: production volumes in the automotive electrical industry
industry to grow worldwide compared with previous year −−Electronics industry: solid growth in semiconductor
−−Construction industry: somewhat stronger global and ICT sectors
growth, thanks largely to positive developments in −−Health and nutrition, as well as agriculture: robust
emerging markets growth worldwide
BASF Report 2011 Forecast
Economic environment in 2012
Management’s Analysis
115

Outlook for the chemical industry We anticipate that the chemical industry in Japan in 2012 will
We forecast for 2012 that global chemical production (exclud­ experience a substantial temporary upturn from the growth in
ing pharmaceuticals) will continue to experience solid growth domestic industry as well as from the building sector due to
(+4.1%). However, following the high growth rates in the past two ­reconstruction efforts. Therefore, we expect a considerable rise
years, growth in most regions in 2012 will likely slow down. In in growth (+3.4%). In the medium term, we foresee an annual
the medium term, we anticipate average economic growth of growth rate of 2.2%.
4.4% per year. In South America, growth in chemical production in 2012
In the European Union, we expect slight growth in the (+3.9%) is likely to be weaker than in the previous year, thereby
chemical industry in 2012 (+0.8%). We believe, for example, that following the general growth trend in industrial production. As a
the high growth rates seen in the last two years in the consumer supplier industry, the chemical industry in this region will bene­
goods sector will weaken in 2012. In the medium term, we fore­ fit in particular from infrastructure investments in Brazil as well
cast that European chemical production will grow by 1.6% per as from the increasing demand for agricultural chemicals. In the
year. medium term, we anticipate average growth of 4.3%.
The growth rate of chemical production in the United
States in 2012 will likely be higher (+2.2%) than in other indus­ Outlook chemical production 2012 (excl. pharmaceuticals)
(Real change compared with previous year)
trialized countries: As a result of the availability of large volumes
of unconventionally extracted natural gas, we anticipate posi­ World 4.1%
tive impetus for the U.S. chemical sector. In the medium term E.U. 0.8%
as well, we expect annual growth of 2.2%. United States 2.2%
In Asia (excluding Japan), chemical production grew con­ Asia (excl. Japan) 8.0%
siderably in 2011, driven mainly by the strong contribution from Japan 3.4%
the Chinese chemical industry. As a result of the generally weak­ South America 3.9%
ening economic trend, year-on-year we expect a lower growth
rate in 2012 (+8.0%) in the region. In the medium term, we
forecast annual growth of 8.1%. Trends in chemical production 2012–2014 (excl. pharmaceuticals)
(Average annual real change)

World 4.4%
E.U. 1.6%
United States 2.2%
Asia (excl. Japan) 8.1%
Japan 2.2%
South America 4.3%

We expect the following developments in the chemical industry in 2012:

−−Continued solid growth in global chemical −−Asia (excluding Japan): growth to slow compared with
production (+4.1%) 2011, but remain strong (+8.0%)
−−European Union: weak growth in the chemical −−Japan: significant growth (+3.4%) thanks to temporary
industry (+0.8%) economic upturn in domestic industry
−−United States: stronger growth (+2.2%) than in other −−South America: weaker growth (+3.9%) compared with
industrialized countries previous year
116 Management’s Analysis Forecast
BASF Group outlook
BASF Report 2011

BASF Group outlook

Profitable growth with the “We create chemistry” strategy

We expect global economic growth to continue in 2012. In 2012, we expect sales in the Plastics segment to increase.
However, uncertainty on the financial markets will In the Performance Polymers division, we plan to continue the
dampen growth prospects. Positive impetus for the expansion of our business with engineering plastics and spe­
chemical industry will mainly come from the emerging cialties. We expect this business to grow faster than the most
markets. ­important markets and thus significantly increase sales for the
Excluding the effects of acquisitions and divesti- division. Due to investments in research and development, in
tures, we aim to increase our sales volumes. We strive to sales activities and in new production facilities, earnings in the
exceed the 2011 record levels in sales and income from Performance Polymers division are likely to be below the level
operations. Earnings development will be supported by of the previous year. In the Polyurethanes division, we aim for
the resumption of our crude oil production in Libya as an ­increase in sales and earnings. Overall, we want to improve
well as by growing volumes in the chemicals business. earnings for the segment compared with 2011.
We aim to earn a high premium on our cost of capital We anticipate higher demand for our products and higher
once again in 2012. sales in the Performance Products segment in 2012. All divi­
sions will contribute to this sales growth. The economic envi­
As presented in detail on pages 113 to 115, we expect the global ronment in the paper industry, however, is likely to remain diffi­
economy in 2012 to grow at the previous year’s level (+2.7%) cult, especially in the Europe and North America regions.
and anticipate solid growth in chemical production (+4.1%). Our Nevertheless, thanks in part to growing demand from the Asian
forecast assumes an average exchange rate of $1.30 per euro market, we also want to achieve sales growth in our continuing
and an oil price of $110 per barrel. In view of the opportunities operations in the Paper Chemicals division. We strive to increase
and risks described on pages 104 to 112, we want to once again the segment’s earnings through both lower integration expenses
­increase earnings. We do not expect to match the extraordi­ and growth impetus, mainly from the combined businesses of
narily good results of the first two quarters of 2011 in the first Cognis and BASF. In the Care Chemicals division in particular
half of 2012. For the second half, we expect to surpass the ­levels we expect a significant improvement in earnings.
of the same period of the previous year. The Functional Solutions segment will likely benefit in 2012
from growing demand from our key customer industries – the
Sales and earnings forecast for the segments construction and automotive industries. We want to ­increase
In the Chemicals segment, we expect sales in 2012 to be above sales in all divisions. This sales growth will be particularly driven
the level of the previous year. This growth will mainly be driven by our activities in emerging markets. We also ­expect earnings
by the Inorganics and Intermediates divisions. As a result of the in all divisions to exceed the previous year’s level.
sale of several plants in association with the divestiture of our
fertilizer business, earnings in the Inorganics division will likely
decrease. Furthermore, we expect growing pressure on ­margins,
especially in the Petrochemicals and Intermediates divisions.
The segment’s earnings are therefore unlikely to match the high
level of 2011.

Outlook 2012

We expect global economic growth to continue in 2012. Excluding the effects of acquisitions and divestitures, we aim to
increase our sales volumes. We strive to exceed the 2011 record levels in sales and income from operations. Earnings
development will be supported by the resumption of our crude oil production in Libya as well as by growing volumes in the
chemicals business. We aim to earn a high premium on our cost of capital once again in 2012.
BASF Report 2011 Forecast
BASF Group outlook
Management’s Analysis
117

Forecast by segment (million €)

Sales Income from operations (EBIT)

2011 Expected 2012 2011 Expected 2012
Chemicals 12,958 Increase 2,442 Decline
Plastics 10,990 Increase 1,259 Increase
Performance Products 15,697 Increase 1,361 Increase
Functional Solutions 11,361 Increase 427 Increase
Agricultural Solutions 4,165 Increase 808 Increase
Oil & Gas 12,051 Increase 2,111 Increase
Other 6,275 Decline 178 Decline
BASF Group 73,497 Increase 8,586 Increase

In the Agricultural Solutions segment, we will continue to pur­ Investment planning

sue our successful innovation strategy in 2012. We expect slight To enhance our chemical activities, we plan capital expenditures
growth in the market for agricultural chemicals. We also antici­ of €30 billion to €35 billion between 2011 and 2020; more than
pate that prices for agricultural commodities will continue to be a third of this sum will be invested in emerging markets in order
higher than historical averages, in a market characterized by to further strengthen our presence in these fast-growing
continuing high volatility. In light of our recently launched prod­ ­regions.
ucts and the ­expansion of our business in growth markets, we We are already planning or carrying out the following
aim to improve sales and earnings. ­projects:
We assume that the oil price in 2012 will remain at the level
of the previous year. Our planning is based on an average oil −−Expansion of our Verbund site in Nanjing, China
price of $110 per barrel and an average exchange rate of $1.30 (joint venture with Sinopec)
per euro. Owing to the resumption of oil production in Libya at −−Expansion of our site in Malaysia
the end of 2011, we expect the Oil & Gas segment to post a rise (joint venture with PETRONAS)
in sales and earnings. −−Construction of an MDI plant in Chongqing, China
On October 1, 2011, we transferred our styrenics business −−Construction of a TDI plant in Ludwigshafen, Germany
to the Styrolution joint venture. Furthermore, we plan to divest −−Construction of an acrylic acid and superabsorbents
our fertilizer business in the first half of 2012. Sales and earn­ production complex in Camaçari, Brazil
ings in Other in 2012 will therefore be below the level of the −−Construction of a sodium methylate plant in
­previous year. General Lagos (Rosario), Argentina
More information on our expectations for business development in −−Construction of a production site for antioxidant
the segments and divisions can be found on pages 44 to 78
blends in Bahrain
−−Construction of a production site for cathode materials
in Elyria, Ohio

Planned capital expenditures by segment 2012–2016 Planned capital expenditures by region 2012–2016

7 4 5
1 Chemicals 22% 1 Europe 65%
1
2 Plastics 13% 2 North America 14% 3

3 Performance Products 14% 3 Asia Pacific 14%

4 Functional Solutions 6% €16.5 South America, Africa,
€16.5
6 billion billion
2 2
5 Agricultural Solutions 4% 4 Middle East 4%

6 Oil & Gas 31% Alternative sites 1

7 Other (infrastructure, R&D) 10% 5 3 5 under review 3%

4
118 Management’s Analysis Forecast
BASF Group outlook
BASF Report 2011

In the Oil & Gas segment, our investments of around €5 billion Financing
by 2016 will focus mainly on the development of proven gas and We will continue to adhere to our financing principles in 2012.
oil deposits in Siberia, Argentina and Norway, as well as the Our goals continue to be securing liquidity at all times, limiting
­exploration of new oil and gas reserves. Furthermore, we will the risks associated with financing and optimizing our cost of
continue to invest in the expansion of our gas transport and stor­ capital, also possibly through the use of share buybacks. We
age infrastructure, which includes the construction of the NEL aim to maintain at least a solid A rating.
transit pipeline and the Jemgum natural gas storage facility. Cash outflows are expected to result from the scheduled
We plan investments totaling €3.5 billion to €3.8 billion in repayment of bonds with a total volume equivalent to €2,942 mil­
2012. This figure already includes most of the projects named lion. In light of our strong cash flow from operating activities as
above. Our plans for 2012 include starting up an L-menthol plant well as our level of cash and cash equivalents, we currently see
in Ludwigs­hafen, Germany, and a production plant for battery no concrete need for additional medium- and long-term financ­
materials in Elyria, Ohio. ing. However, our unrestricted access to the capital markets
­allows us flexible use of attractive financing for the BASF Group
Dividend at any time.
We stand by our ambitious dividend policy and offer our share­ Information on our financing principles can be found on page 39
holders an attractive dividend yield. We aim to increase our div­
idend each year, or at least maintain it at the previous year’s Expectations for 2013
level. We anticipate that sales and earnings will also increase in 2013.
I nformation on the proposed dividend can be found This projection assumes that the national debt crises in the
from page 10 onward
­eurozone do not intensify and that the upswing continues in
North America. We still aim to grow two percentage points
above global chemical production.

Significant events subsequent to the balance

sheet date
Since the beginning of the financial year 2012, there have not
been any significant changes affecting BASF’s situation and
­industry environment.

Key investments in 2012 Dividends and financing

−−Construction of an MDI plant in Chongqing, China −−We aim to increase the dividend each year
−−Construction of a production complex for acrylic acid −−We aim to maintain a minimum rating of a solid A
and superabsorbents in Camaçari, Brazil −−Currently no need for medium- to long-term financing
−−New production wells in the Achimov deposits
(Block IA, Achimgaz in Siberia, Russia)
−−Construction of the NEL transit pipeline in Germany
BASF Report 2011

Corporate Governance

Corporate Governance of the BASF Group 120

Management and Supervisory Boards 126
Compensation report 129
Report of the Supervisory Board 135
Declaration of Conformity 138

3
Corporate Governance
120 Corporate Governance Corporate Governance of the BASF Group BASF Report 2011

Corporate Governance
of the BASF Group

Corporate governance refers to the entire system for Direction and management by the
managing and supervising a company, including its Board of Executive Directors
organization, its values, business policies and guide- Under the two-tier management system of BASF SE, the Board
lines, as well as all internal and external regulatory and of Executive Directors is responsible for the management of the
monitoring mechanisms. Effective and transparent company, and represents BASF SE in business undertakings
corporate governance guarantees that BASF is managed with third parties. BASF’s Board of Executive Directors is strictly
and monitored in a responsible manner focused on value separated from the Supervisory Board: A member of the Board
creation. This fosters the confidence of our domestic and of Executive Directors cannot simultaneously be a member of
international investors, the financial markets, our cus- the Supervisory Board. The Board of Executive Directors agrees
tomers and other business partners, ­employees and the on the BASF Group’s corporate goals and strategic alignment.
public in the company. It also manages and monitors the business units of the BASF
Group through the planning and setting of the corporate bud­
Management and supervision get, the allocation of resources and management capacities,
BASF has the legal form of a European Company (Societas the monitoring and decision-making regarding significant indi­
Europaea). The legal foundations of its corporate constitution vidual measures and the control of the operational management.
are primarily the SE Council Regulation of the European Union, The Board’s actions and decisions are aligned with the compa­
the German SE Implementation Act and the German Stock Cor­ ny’s best interests. It is committed to the goal of sustainably
poration Act. The fundamental elements of BASF SE’s corpo­ increasing the company’s value. Decisions that are reserved for
rate governance system correspond to the proven principal the Board as a whole by law, through the Board of Executive
components of the German Aktiengesellschaft’s corporate con­ Directors’ Rules of Procedure or through resolutions adopted
stitution: these are the two-tier system consisting of BASF’s by the Board, are made based on a simple majority. In the case
Board of Executive Directors and the Supervisory Board, the of a tied vote, the casting vote is given by the Chairman of the
equal representation of shareholders and employees in the Board. However, the Chairman of the Board does not have the
Supervisory Board and the shareholders’ rights of co-adminis­ right to veto the decisions of the Board of Executive Directors.
tration and supervision at the Shareholders’ Meeting. Members of the Board of Executive Directors are authorized to
make decisions individually in their assigned business areas.
The Board of Executive Directors informs the Supervisory
Board regularly, without delay and comprehensively, of all issues
important to the company with regard to planning, business
development, risk situation, risk management and compliance.
Furthermore, the Board of Executive Directors coordinates the
company’s strategic approach with the Supervisory Board. The
Statutes of BASF SE define certain transactions that require the
Board of Executive Directors to obtain the Supervisory Board’s
approval prior to their conclusion. Such cases include the
acquisition and disposal of enterprises and parts of enterprises,
the issue of bonds or comparable financial instruments, pro­
vided the acquisition or disposal price or the amount of the
issue in an individual case exceeds 3% of the equity reported
in the last approved Consolidated Financial Statements of the
BASF Group.
 he members of the Board of Executive Directors, including
T
their memberships on the supervisory bodies of other companies,
are listed on page 126. Compensation of the Board of Executive
Directors is described in detail in the Compensation Report
on pages 129 to 133.
BASF Report 2011 Corporate Governance of the BASF Group Corporate Governance
121

Supervision of company management by the −−in the management of an internationally operating company,
Supervisory Board −−in cross-industry value creation along different value-adding
The Supervisory Board appoints the members of the Board of chains,
Executive Directors and supervises and advises the Board on −−in the application of accounting principles and internal con­
management issues. Members of the Supervisory Board trol procedures, and
cannot simultaneously be members of the Board of Executive −−in the field of technical and scientific innovations in the
Directors. Structurally, this ensures a high level of autonomy with chemical sector and associated industries as well as in the
regard to the supervision of the Board of Executive Directors. sectors using chemical products.
Together with the SE Council Regulation, the relevant statu­
tory foundations for the size and composition of the Supervi­ With regard to diversity, the Supervisory Board shall consider a
sory Board are the Statutes of BASF SE and the Agreement variety of professional and international experience as well as
Concerning the Involvement of Employees in BASF SE the participation of women. Individuals who may have a conflict
(Employee Participation Agreement). The latter was signed on of interest shall not be nominated for election to the Supervisory
November 15, 2007 by the company management and the Board. The same applies to candidates who will have reached
representatives of the BASF Group’s European employees upon the age of 70 by the day of the election.
the conversion of BASF Aktiengesellschaft into BASF SE. The
Codetermination Act, which is the relevant statutory foundation In accordance with these objectives, the Shareholders’ Meet­
regarding the size and composition of the Supervisory Board of ing voted on May 6, 2011, to approve the Supervisory Board’s
a German Aktiengesellschaft, does not apply to the SE. nomination of Anke Schäferkordt as a member of the Supervi­
 or more on the Statutes of BASF SE and the Employee Participation
F sory Board. As a result, there are two women among the twelve
Agreement, see basf.com/investor/cg_e
members of the Supervisory Board. We are committed to main­
taining or, if possible, raising the proportion of women at the
The Supervisory Board of BASF SE comprises twelve mem­ next scheduled election to the Supervisory Board in 2014. The
bers. Six members are elected by the shareholders at the Share­ Nomination Committee will include both appropriately qualified
holders’ Meeting. The remaining six members are elected by women and candidates with international experience in its
the BASF Europa Betriebsrat (European Works Council), the ­selection process. We firmly believe the current formation of the
­European employee representation body of the BASF Group, Supervisory Board already largely fulfills the objectives agreed
as agreed to in the Employee Participation Agreement. on by the Supervisory Board regarding its composition on
 he members of the Supervisory Board of BASF SE, including their
T ­October 21, 2010.
memberships on the supervisory bodies of other companies, are
listed on pages 127 and 128. Compensation of the Supervisory Board
is described in detail in the Compensation Report on pages 133 and Resolutions of the Supervisory Board are passed by a simple
134.
majority vote of the participating members. In the event of a tie,
the vote of the Chairman of the Supervisory Board, who must
It is very important for good corporate governance that the com­ always be a shareholder representative, shall be the casting
pany ensures that seats on the responsible corporate bodies, vote. This resolution process is also applicable for the appoint­
the Board of Executive Directors and the Supervisory Board, ment and dismissal of members of the Board of Executive
are appropriately filled. Criteria in this case include professional ­Directors by the Supervisory Board.
and personal qualifications, the diversity of the board members BASF SE’s Supervisory Board has established a total of
and the independence of the Supervisory Board. Seats on the three Supervisory Board Committees: the Personnel Commit­
Board of Executive Directors and Supervisory Board should be tee, the Audit Committee and the Nomination Committee.
filled with members who as a group ensure a well-balanced con­
sideration of all the necessary knowledge, skills and personal The Personnel Committee’s duties include, preparing the
qualifications necessary to manage and supervise BASF as a appointment of members to the Board of Executive Directors
large, globally operating, capital market-oriented company in by the Supervisory Board and the employment contracts to be
the chemical industry. entered into with members of the Board of Executive Directors.
When making recommendations on appoint­ments to the Board
The Supervisory Board has agreed upon objectives for the com­ of Executive Directors, the Personnel Committee takes into
position of the Supervisory Board in accordance with Section account their professional qualifications, international experi­
5.4.1 of the German Corporate Governance Code. According ence and leadership skills as well as long-term succession
to these objectives, the Supervisory Board shall be composed planning, diversity and, in particular, the appropriate consider­
in such a way that the members as a group possess knowledge, ation of women. It also prepares the resolutions made by the
ability and expert experience Supervisory Board with regard to the system and determination
of the amount of compensation paid to members of the Board
122 Corporate Governance Corporate Governance of the BASF Group BASF Report 2011

of Executive Directors. The committee comprises Supervisory Shareholders’ rights

Board Chairman Dr. h.c. Eggert Voscherau (chairman), Super­ Shareholders exercise their rights of co-administration and
visory Board Deputy Chairmen Michael Diekmann and Robert supervision at the Shareholders’ Meeting. The Shareholders’
Oswald, as well as Michael Vassiliadis. Meeting elects half of the members of the Supervisory Board
and, in particular, decides on the formal discharge of the Board
The Audit Committee prepares the negotiations and resolutions of Executive Directors and the Supervisory Board, the distri­
of the Supervisory Board for the approval of the Financial State­ bution of profits, capital measures, the authorization of share
ments and Consolidated Financial Statements, and discusses buybacks, changes to the Statutes and the selection of the
the quarterly and first-half financial reports with the Board of auditor.
Executive Directors prior to their publication. It also deals with Each BASF SE share represents one vote. Following the
monitoring the financial reporting process, the annual audit, the conversion of BASF shares to registered shares in August 2010,
effectiveness of the internal control system, the risk manage­ those BASF shareholders who are listed in the share register
ment system, and the internal auditing system as well as com­ are entitled to vote. Shareholders are obliged to provide the
pliance issues. The Audit Committee is also responsible for busi­ information necessary for registration in the share register, in
ness relations with the company’s external auditor: It prepares accordance with the German Stock Corporation Act. There are
the Supervisory Board’s proposal to the Shareholders’ Meeting no registration restrictions and there is no limit to the number of
regarding the selection of an auditor, monitors the auditor’s shares that can be registered to one shareholder. Shareholders
independence, defines the focus areas of the audit together with may exercise their voting rights at the Shareholders’ Meeting
the auditor, negotiates auditing fees and establishes the condi­ either personally, through a representative of their choice or
tions for the provision of the auditor’s non-audit services. The through a company-appointed proxy authorized by the share­
Audit Committee is authorized to request any information that holders to vote according to their instructions. There are neither
it deems necessary from the auditor or Board of Executive voting caps to limit the number of votes a shareholder may cast
Directors. It can also view all of BASF’s business documents nor special voting rights. BASF has fully implemented the prin­
and examine these and all other assets belonging to BASF. The ciple of “one share, one vote.”
Audit Committee can also engage experts such as auditors or All shareholders entered in the share register are entitled
lawyers to carry out these inspections. The members of this to participate in the Shareholders’ Meetings, to have their say
committee are Max Dietrich Kley (chairman), Ralf-Gerd Bastian, concerning any item on the agenda and to request information
Franz Fehrenbach and Michael Vassiliadis. Max Dietrich Kley about company issues insofar as it serves to help make an
has particular knowledge and experience in the application of informed judgment about the item on the agenda under discus­
accounting principles and internal audit procedures, as he was sion. Registered shareholders are also entitled to file motions
Chief Financial Officer of BASF Aktiengesellschaft until April pertaining to proposals for resolutions made by the Board of
2003. Executive Directors and Supervisory Board at the Sharehold­
ers’ Meeting and to contest resolutions of the Shareholders’
According to the recommendation of the German Corporate Meeting. Shareholders who hold at least €100,000 of the com­
Governance Code, BASF SE’s Supervisory Board established pany’s share capital are entitled to request that an item be added
a Nomination Committee that prepares the nominations for the to the agenda of the Shareholders’ Meeting.
Supervisory Board members to be elected at the Shareholders’
Meeting. The members of the Nomination Committee are the
members of the Supervisory Board elected at the ­Shareholders’
Meeting: Dr. h.c. Eggert Voscherau, Prof. Dr. François
Diederich, Michael Diekmann, Franz Fehrenbach, Max Dietrich
Kley and Anke Schäferkordt.
BASF Report 2011 Corporate Governance of the BASF Group Corporate Governance
123

German Corporate Governance Code Compliance

BASF accords great importance to good corporate governance. Our Group-wide Compliance Program aims to ensure adher­
Therefore, BASF supports the German Corporate Governance ence to legal regulations and the company’s internal guidelines.
Code, which is regarded as an important tool in the capital The foundations of this program are our value “We strictly
market-focused continuing development of corporate gover­ adhere to our compliance standards” and the globally estab­
nance and control, and advocates responsible corporate lished Codes of Conduct, which provide the content framework
governance that focuses on sustainably increasing the value of and show employees possible courses of action in doubtful
the company. cases.
BASF SE follows all recommendations of the German Cor­ Our efforts are principally aimed at preventing violations
porate Governance Code in its most recently revised version of from the outset. To this end, all employees are required within
May 2010. This also applies to the Code’s new recommenda­ a prescribed timeframe to take part in basic compliance train­
tions regarding the composition of the Board of Executive ing, refresher courses and special courses dealing with, for
Directors and the Supervisory Board as well as in the staffing example, antitrust law or trade control regulations. In 2011, more
of executive positions. The joint Declaration of Conformity 2011 than 73,000 employees worldwide took part in around 78,500
of the Board of Executive Directors and Supervisory Board of hours of compliance training.
BASF SE is rendered at the end of this section on page 138. BASF’s Chief Compliance Officer (CCO) manages the
In the same manner, BASF fulfills nearly all of the non-oblig­ implementation of the program, supported by around 100
atory suggestions of the German Corporate Governance Code. Compliance Managers worldwide. The CCO regularly reports
We have not implemented the suggestion to enable sharehold­ to the Board of Executive Directors on progress in the program’s
ers to follow the proceedings of the entire Shareholders’ Meet­ implementation as well as on any significant findings; further­
ing online. The Shareholders’ Meeting is openly accessible to more, the CCO reports to the Supervisory Board’s Audit Com­
all via online broadcast until the end of the speech by the Chair­ mittee in at least one of its meetings each year on the status of
man of the Board of Executive Directors. The subsequent the Compliance Program as well as any major developments.
discussion of items on the agenda is not accessible online in In the event of significant incidents, the Audit Committee is
order to preserve the character of the Shareholders’ Meeting as immediately informed by the Board of Executive Directors.
a meeting attended by our shareholders on-site. The ­Supervisory BASF’s Corporate Audit department monitors adherence
Board’s annual variable compensation component based on to compliance principles. In 2011, 75 Group-wide audits of this
earnings per share is aligned with long-term profit increases kind were performed (2010: 48).
insofar as the earnings per share required to attain the same If violations occur despite preventive measures, we aim to
variable compensation increase annually. This creates an incen­ investigate and rectify these as quickly as possible. In 2011, 264
tive to devote particular attention to the company’s long-term calls and emails were received by our 47 external hotlines world­
development and sustainably increase its enterprise value in the wide. These related to topics ranging from questions about per­
shareholders’ interests. sonnel management to the handling of company property and
 or more on the Declaration of Conformity 2011, an overview of
F information on the behavior of business partners. We launch an
the implementation of the Code’s suggestions and the German
Corporate Governance Code, see basf.com/governance_e
investigation into all cases of suspected misconduct that we
­become aware of. Confirmed violations are penalized and can
lead to dismissal.
In 2011, we continued the evaluation of our suppliers. We
also expanded the checklist-based evaluation of other business
partners, in particular agents, distributors and contractors.
Outside of our company as well, we support the fight
against corruption and the respect of human rights. We are a
member of the U.N. Global Compact as well as Transparency
International Deutschland, and are active in the Partnering
Against Corruption Initiative (PACI) of the World Economic
Forum in Davos, Switzerland. We actively support the imple­
mentation of these organizations’ objectives.
124 Corporate Governance Corporate Governance of the BASF Group BASF Report 2011

As a result of the positive experience with the compliance Until April 30, 2014, the Board of Executive Directors of BASF
survey carried out in BASF SE in 2010, we have decided to add SE is empowered by a resolution passed at the Annual Share­
this topic to our global employee survey in 2012 in order to gain holders’ Meeting of April 30, 2009 to increase the subscribed
more information that will help to improve our compliance stan­ capital by a total amount of €500 million through the issue of
dards and adherence to them. new shares (authorized capital). This must have the approval of
the Supervisory Board. A right to subscribe to the new shares
Disclosure according to Section 315 (4) of the shall be granted to shareholders. This can also be done by a
German Commercial Code and the explanatory credit institution acquiring the new shares with the obligation
report of the Board of Executive Directors accord- to offer these to shareholders (indirect subscription right). The
ing to Section 176 (1) Sentence 1 of the German Board of Executive Directors is authorized to exclude the
Stock Corporation Act statutory subscription right of shareholders in certain excep­
As of December 31, 2011, the subscribed capital of BASF SE tional cases that are narrowly defined in Section 5 No. 8 of the
was €1,175,652,728.32, divided into 918,478,694 registered BASF SE ­Statutes. This applies in particular if, for capital
shares with no par value. Each share shall, at a Shareholders’ increases in return for cash contributions, the issue price of the
Meeting, entitle the holder to one vote. Restrictions on the right new shares is not substantially lower than the stock market price
to vote or transfer shares do not exist. The same rights and of BASF shares and the total number of shares issued under
duties apply to all shares. According to the Statutes, share­ this authorization is not more than 10% of the subscribed cap­
holders are not entitled to receive share certificates. There are ital on the date of issue.
neither different classes of shares nor shares with preferential In the event of a change of control, members of the Board
voting rights (golden shares). of Executive Directors shall, under certain additional conditions,
The appointment and dismissal of members of the Board receive compensation (details of which are listed in the Com­
of Executive Directors is legally governed by the regulations in pensation Report on page 132). A change of control is assumed
Article 39 of the SE Council Regulation, Section 16 of the SE when a shareholder informs BASF of a shareholding of at least
Implementation Act and Sections 84, 85 of the German Stock 25% or the increase of such a holding. In addition, employees
Corporation Act, as well as Article 7 of the BASF SE Statutes. of BASF SE and its subsidiaries who are classed as ‘senior
According to these regulations, members of the Board of Exec­ executives’ (Obere Führungskräfte) will receive a severance pay­
utive Directors are appointed and dismissed by the Supervisory ment if their contract of employment is terminated by BASF
Board. The members of the Board of Executive Directors are within 18 months of the occurrence of a change of control, pro­
appointed for a maximum of five years, and re-appointments vided the employee has not given cause for the termination. The
are permissible. The Supervisory Board can dismiss a member employee whose service contract has been terminated in such
of the Board of Executive Directors if there is serious cause to a case will receive a maximum severance payment of 1.5 times
do so. Serious cause includes, in particular, a gross breach of the annual salary (fixed component) depending on the number
the duties pertaining to the Board of Executive Directors and a of months that have passed since the change-of-control
vote of no confidence at the Shareholders’ Meeting. The Super­ event.
visory Board decides on appointments and dismissals accord­ The remaining specifications stipulated in Section 315 (4)
ing to its own dutiful discretion. of the German Commercial Code refer to situations that are not
According to Article 59 (1) SE Council Regulation, amend­ applicable to BASF SE.
ments to the Statutes of BASF SE require a resolution of the
Shareholders’ Meeting adopted with at least a two-thirds
majority of the votes cast, provided that the legal provisions
applicable to German stock corporations under the German
Stock Corporation Act do not stipulate or allow for larger
majority requirements. In the case of amendments to the
­Statutes, Section 179 (2) of the German Stock Corporation
Act requires a majority of at least three quarters of the sub­
scribed capital represented. Pursuant to Article 12 No. 6 of the
Statutes of BASF SE, the Supervisory Board is authorized to
resolve upon amendments to the Statutes that merely concern
their wording. This applies in particular to the alignment of share
capital and the number of shares after a BASF share buyback
and after a new issue of shares from the authorized capital.
BASF Report 2011 Corporate Governance of the BASF Group Corporate Governance
125

Directors’ and Officers’ liability insurance Share dealings of the Board of Executive Directors
BASF has taken out liability insurance that covers the activities and Supervisory Board (Directors’ Dealings under
of members of the Board of Executive Directors and the Super­ Section 15a of German Securities Trading Act)
visory Board (D&O insurance). This policy provides for the level In accordance with Section 15a of the German Securities Trad­
of deductibles for the Board of Executive Directors as prescribed ing Act (Wertpapierhandelsgesetz), all members of the Board of
by Section 93 (2) 3 of the German Stock Corporation Act and Executive Directors and the Supervisory Board as well as cer­
for the level of deductibles for the Supervisory Board as recom­ tain members of their families are required to disclose the pur­
mended in Section 3.8, Paragraph 3 of the German Corporate chase or sale of BASF shares and other related rights to the
Governance Code. Federal Financial Supervisory Authority (Bundesanstalt für
Finanzdienstleistungsaufsicht) and to the company if transac­
Share ownership by Members of the Board of tions within the calendar year exceed the threshold of €5,000.
Executive Directors and the Supervisory Board In 2011, a total of 18 purchases subject to disclosure as
No member of the Board of Executive Directors or the Supervi­ Directors’ Dealings by members of the Board of Executive
sory Board owns shares in BASF SE and related options or other Directors and the Supervisory Board and members of their fam­
derivatives that account for 1% or more of the share capital. ilies subject to disclosure were reported, involving between 130
Furthermore, the total volume of BASF SE shares and related and 5,000 BASF shares. The price per share was between
financial instruments held by members of the Board of Execu­ €44.00 and €65.98. The volume of the individual trades was
tive Directors and the Supervisory Board accounts for less than between €8,577.40 and €220,000.00. The disclosed share
1% of the shares issued by the company. transactions are published on the website of BASF SE.
For more on directors’ dealings in 2011, see
basf.com/governance/sharedealings_e
126 Corporate Governance Management and Supervisory Boards BASF Report 2011

Management and Supervisory Boards

Board of Executive Directors Dr. Andreas Kreimeyer

As of December 31, 2011, there were eight members on the Responsibilities: Inorganics; Petrochemicals; Intermediates;
Board of Executive Directors of BASF SE. Process Research & Chemical Engineering; BASF Future Business

First appointed: 2003

Dr. Kurt Bock
Chairman of the Board of Executive Directors (since May 6, 2011) Term expires: 2015

Responsibilities: Legal, Taxes & Insurance; Strategic Planning & Internal memberships as defined in Section 100 (2) of the German
­Controlling; Communications & Government Relations; Global Executive Stock Corporation Act:
Human Resources; Investor Relations; Compliance Wintershall Holding GmbH (Supervisory Board member)

First appointed: 2003

Term expires: 2016 Dr. Stefan Marcinowski

Responsibilities: Crop Protection; Coatings; BASF Plant Science;

Biological & Effect Systems Research; Region South America
Dr. Martin Brudermüller
Vice Chairman of the Board of Executive Directors (since May 6, 2011) First appointed: 1997

Responsibilities: Performance Polymers; Polyurethanes; Term expires: 2012

Market & Business Development Asia Pacific; Supervisory Board memberships (excluding internal member-
Regional Functions & Country Management Asia Pacific ships):
First appointed: 2006 DWS Investment GmbH (Supervisory Board member)

Term expires: 2016 Internal memberships as defined in Section 100 (2) of the German
Stock Corporation Act:
Comparable German and non-German controlling bodies:
Wintershall Holding GmbH (Supervisory Board member)
Styrolution Holding GmbH (Deputy Chairman of Advisory Board since
BASF Coatings GmbH (Supervisory Board chairman)
October 1, 2011)

Dr. Harald Schwager

Dr. Hans-Ulrich Engel
Responsibilities: Oil & Gas; Construction Chemicals; Procurement;
Responsibilities: Finance; Catalysts; Corporate Controlling; Corporate
Region Europe
Audit; Information Services & Supply Chain Management; Market & Busi­
ness Development North America; Regional Functions North America First appointed: 2008

First appointed: 2008 Term expires: 2016

Term expires: 2016 Internal memberships as defined in Section 100 (2) of the German
Stock Corporation Act:
Internal memberships as defined in Section 100 (2) of the German
Wintershall Holding GmbH (Supervisory Board Chairman since
Stock Corporation Act:
May 7, 2011)
Wintershall Holding GmbH (Supervisory Board Chairman until May 6, 2011)
Wintershall AG (Supervisory Board Chairman since May 7, 2011)
Wintershall AG (Supervisory Board Chairman until May 6, 2011)
Comparable German and non-German controlling bodies:
BASF Personal Care and Nutrition GmbH (formerly Cognis GmbH)
BASF Antwerpen N.V. (Chairman of the Administrative Council until
(Supervisory Board member)
May 6, 2011)
Comparable German and non-German controlling bodies: Nord Stream AG, Zug, Switzerland (member of the Shareholders’ Commit­
Nord Stream AG, Zug, Switzerland (member of the Shareholders’ Commit­ tee since September 16, 2011)
tee until September 15, 2011)

Margret Suckale (since May 6, 2011)

Michael Heinz (since May 6, 2011)
Responsibilities: Human Resources; Engineering & Maintenance;
Responsibilities: Dispersions & Pigments; Care Chemicals; Environment, Health & Safety; Verbund Site Management Europe
Nutrition & Health; Paper Chemicals; Performance Chemicals;
First appointed: 2011
Advanced Materials & Systems Research
Term expires: 2014
First appointed: 2011
Comparable German and non-German controlling bodies:
Term expires: 2014
BASF Antwerpen N.V. (Chairwoman of the Administrative Council since
Internal memberships as defined in Section 100 (2) of the German May 7, 2011)
Stock Corporation Act:
BASF Coatings GmbH (Supervisory Board member since May 7, 2011)
BASF Personal Care and Nutrition GmbH (formerly Cognis GmbH)
(Supervisory Board member since May 7, 2011, Supervisory Board Chair­
man since May 11, 2011)
BASF Report 2011 Management and Supervisory Boards Corporate Governance
127

The following members left the Board of Executive Directors upon Supervisory Board
conclusion of the Annual Shareholders’ Meeting on May 6, 2011: In accordance with the Statutes, the Supervisory Board of BASF SE
comprises twelve members. Pursuant to Section 35 Paragraph 1 of the
Act on the Participation of Employees in a European Company (SE-Beteili­
Dr. Jürgen Hambrecht gungsgesetz – “SEBG”) and the Agreement Concerning the Involvement of
Chairman of the Board of Executive Directors Employees in BASF SE (Employee Participation Agreement) signed on
Responsibilities: Legal, Taxes & Insurance; Strategic Planning & November 15, 2007 by company management and the representatives of
Controlling; Communications & Government Relations; BASF Group’s European employees, seats on the board are accorded
Global HR – Executive Management & Development; Investor Relations; following the principle of parity. The six shareholder representatives on the
Compliance Supervisory Board of BASF SE are elected by the Shareholders’ Meeting.
By way of derogation from Section 40 (2) of the Council Regulation (EC)
First appointed: 1997 (Chairman 2003 until 2011)
No. 2157/2001, the six employee representatives are not elected by the
Term expired: 2011 Shareholders’ Meeting, but appointed by the representative body of the
Supervisory Board memberships (excluding internal member- ­employees, the BASF Europa Betriebsrat, in accordance with the Employee
ships): ­Participation Agreement. The term of office of the Supervisory Board
Daimler AG (Supervisory Board member) ­commenced following the Annual Shareholders’ Meeting on April 30, 2009,
Lufthansa AG (Supervisory Board member) in which the shareholder representatives on the Supervisory Board were
­elected. It terminates upon conclusion of the Annual Shareholders’ Meeting
which resolves on the discharge of members of the Supervisory Board for
Dr. John Feldmann the fourth complete financial year after the term of office commenced; this
Responsibilities: Construction Chemicals; Dispersions & Pigments; is the Annual Shareholders’ Meeting in 2014. Stephen K. Green, Supervisory
Care Chemicals; Nutrition & Health; Paper Chemicals; Board member elected at the Annual Shareholders’ Meeting on April 30,
Performance Chemicals; Polymer Research 2009, resigned from the Supervisory Board at the close of December 16,
2010, to take on the role as the United Kingdom’s Minister of State for Trade
First appointed: 2000
and Investment at the beginning of 2011. On May 6, 2011, the Annual Share­
Term expired: 2011 holders’ Meeting elected Anke Schäferkordt to succeed Stephen K. Green
Supervisory Board memberships (excluding internal member- as a member of the ­Supervisory Board. Anke Schäferkordt had already been
ships): appointed to the ­Supervisory Board, effective December 17, 2010, upon
Bilfinger Berger SE (Supervisory Board member) ­request of the ­Chairman of the Supervisory Board, by decision of the
Internal memberships as defined in Section 100 (2) of the German Ludwigs­hafen district court on November 18, 2010. The Supervisory Board
Stock Corporation Act: comprises the following members:
BASF Coatings GmbH (Supervisory Board member until May 6, 2011)
BASF Personal Care and Nutrition GmbH (formerly Cognis GmbH) (Super­ Dr. h.c. Eggert Voscherau, Wachenheim, Germany
visory Board Chairman until May 6, 2011)
Chairman of the Supervisory Board of BASF SE

Former Deputy Chairman of the Board of Executive Directors of

BASF SE

Supervisory Board memberships (excluding internal member-

ships):
Hochtief AG (Supervisory Board member since May 12, 2011)

Comparable German and non-German controlling bodies:

Zentrum für Europäische Wirtschaftsforschung GmbH (ZEW) (Supervisory
Board Deputy Chairman)
128 Corporate Governance Management and Supervisory Boards BASF Report 2011

Michael Diekmann, Munich, Germany Max Dietrich Kley, Heidelberg, Germany

Deputy Chairman of the Supervisory Board of BASF SE Lawyer

Chairman of the Board of Management of Allianz SE Supervisory Board memberships (excluding internal member-

Supervisory Board memberships (excluding internal member- ships):

ships): SGL Carbon SE (Supervisory Board Chairman)

Linde AG (Supervisory Board Deputy Chairman) HeidelbergCement AG (Supervisory Board member)

Siemens AG (Supervisory Board member)

Internal memberships as defined in Section 100 (2) of the German

Stock Corporation Act: Anke Schäferkordt, Cologne, Germany
Allianz Deutschland AG (Supervisory Board member) Chief Executive Officer, Mediengruppe RTL Deutschland and RTL
Allianz Global Investors AG (Supervisory Board Chairman) Television
Comparable German and non-German controlling bodies: Supervisory Board memberships (excluding internal member-
Allianz France S.A. (Deputy Chairman of the Administrative Council) ships):
Allianz S.p.A. (member of the Administrative Council) Software AG (Supervisory Board member)

Robert Oswald, Altrip, Germany Denise Schellemans, Kalmthout, Belgium

Deputy Chairman of the Supervisory Board of BASF SE Full-time trade union delegate
Chairman of the Works Council of the Ludwigshafen site of
BASF SE and Chairman of the Joint Works Council of the BASF
Group Ralf Sikorski, Wiesbaden, Germany

Regional manager of the Rhineland-Palatinate/Saarland branch of

the Mining, Chemical and Energy Industries Union
Ralf-Gerd Bastian, Neuhofen, Germany
Supervisory Board memberships (excluding internal member-
Member of the Works Council of the Ludwigshafen site of BASF SE ships):
Villeroy & Boch AG (Supervisory Board member)
Villeroy & Boch Fliesen GmbH (Supervisory Board member)

Wolfgang Daniel, Heidelberg, Germany Evonik Power Saar GmbH (Supervisory Board Deputy Chairman)
Evonik New Energies GmbH (Supervisory Board Deputy Chairman)
Deputy Chairman of the Works Council of the Ludwigshafen site of
KSBG Kommunale Verwaltungsgesellschaft mbH (Supervisory Board
BASF SE
Deputy Chairman)

Prof. Dr. François Diederich, Zurich, Switzerland

Michael Vassiliadis, Hanover, Germany
Professor at the Swiss Federal Institute of Technology Zurich
Chairman of the Central Board of Executive Directors of the
Mining, Chemical and Energy Industries Union

Supervisory Board memberships (excluding internal member-

Franz Fehrenbach, Stuttgart, Germany
ships):
Chairman of the Board of Management of Robert Bosch GmbH K+S AG (Supervisory Board Deputy Chairman)
Comparable German and non-German controlling bodies: Henkel AG & Co. KGaA (Supervisory Board member)
Robert Bosch Corporation (member of the Board of Directors) Steag GmbH (Supervisory Board Deputy Chairman)
BASF Report 2011 Compensation report Corporate Governance
129

Compensation report

This report outlines the main principles of the compen- In order to assess the sustainable performance of the Board
sation for the Board of Executive Directors and discloses of Executive Directors, each year the Supervisory Board sets
the amount and structure of the compensation of each a target agreement with the entire Board of Executive Direc­
Board member. Furthermore, it provides information tors that primarily contains medium- and long-term goals.
on end-of-service undertakings with respect to Board The Supervisory Board assesses the achievement of goals
members, as well as information on the compensation in relation to the last three years. A performance factor with
of Supervisory Board members. a value between 0 and 1.5 is determined on the basis of the
goal achievement ascertained by the Supervisory Board. The
Compensation of Board members variable bonus for the prior fiscal year is payable after the
This report meets the disclosure requirements of the German Annual Shareholders’ Meeting.
Commercial Code, supplemented by the additional require­ Board members, as other employee groups, may contri­
ments based on the German Act on Disclosure of Management bute a portion of their annual variable gross bonus into a
Board Remuneration (Vorstandsvergütungs-Offenlegungsge­ deferred compensation program. For members of the Board
setz) as well as the German Act on the Appropriateness of of Executive Directors, as well as for all other senior execu­
Management Board Remuneration (Gesetz zur Angemessen­ tives of the German BASF Group, the maximum amount that
heit der Vorstandsvergütung), and is aligned with the recom­ can be contributed to this program is €30,000. Board
mendations of the German Corporate Governance Code. ­members have taken advantage of this offer to varying
Based on a proposal by the Personnel Committee (see ­degrees.
page 121), the Supervisory Board (see page 127) determines
the amount and structure of compensation of members of the 3. A share price-based remuneration program (a long-term
Board. The amount of compensation is determined by the com­ incentive, or LTI program) exists for members of the Board of
pany’s size and financial position, as well as the performance of Executive Directors. It is also offered to all other senior execu­
the Board of Executive Directors. Globally operating companies tives of BASF Group. Members of the Board of Executive
based in Germany and Europe serve as a reference. A review Directors are subject to a stricter set of rules than are con­
of the structure and amount of compensation of Board mem­ tained in the general program conditions: They are required
bers takes place at regular intervals. to participate in the LTI program with at least 10% of their
gross bonus. This mandatory investment consisting of BASF
The compensation of Board members comprises: shares is subject to a holding period of four years. For any
1. a fixed annual salary, additional voluntary investment of up to 20% of the gross
2. an annual variable bonus, bonus, the general holding period of two years applies.
3. a stock price-based long-term incentive (LTI) program, Under the LTI program, members of the Board of Executive
4. non-monetary compensation and other additional compen­ Directors may only exercise their options at least four years
sation in varying amounts, and after they have been granted (vesting period). For further
5. company pension benefits. details on the LTI program, see page 198.

The compensation of the Board of Executive Directors is 4. Non-monetary compensation and other additional compen­
­designed to promote sustainable corporate development. It is sation include: delegation allowances, accident insurance
marked by a pronounced variability in relation to the perfor­ premiums and other similar benefits, as well as the personal
mance of the Board of Executive Directors and BASF Group’s use of, or benefit from, communication equipment, company
return on assets. cars and security measures made available by the company.
The members of the Board did not receive loans or advances
The compensation components are shown in detail below: from the company in 2011.

1. The annual fixed compensation is paid in equal monthly pay­ 5. For details on the company pension benefits, see page 131.
ments.

2. The annual variable compensation (variable bonus) of the

Board of Executive Directors is based on the performance of
the entire Board and the return on assets. The return on
­assets is also used to determine the variable compensation
of all other employee groups.
130 Corporate Governance Compensation report BASF Report 2011

Based on the principles listed above, individual Board members received the following compensation:

Total compensation of the Board of Executive Directors (thousand €)

Performance
Non-performance related related com-
compensation pensation Options granted
Non-mone-
tary com-
pensation Total compen-
and other Market sation (cash
additional Total cash value at compensation
compensa- Variable compen- option grant plus options
Year Fixed salary tion bonus1 sation Number date granted)

Dr. Kurt Bock 2011 1,0442 5043 2,948 4,496 29,460 757 5,253
Chairman (since May 6, 2011) 2010 6952 1,1743 1,620 3,489 20,620 384 3,873

Dr. Jürgen Hambrecht 2011 423 53 1,179 1,655 50,044 1,286 2,941
Chairman (until May 6, 2011) 2010 1,100 129 3,240 4,469 41,244 768 5,237

Dr. Martin Brudermüller 2011 7672 6913 2,158 3,616 29,460 757 4,373
Vice Chairman (since May 6, 2011) 2010 5782 7533 1,620 2,951 20,620 384 3,335

Dr. Hans-Ulrich Engel 2011 635 2

5253 1,769 2,929 29,460 757 3,686
2010 550 109 1,620 2,279 20,620 384 2,663

Dr. John Feldmann 2011 211 37 590 838 25,020 643 1,481
(until May 6, 2011) 2010 550 82 1,620 2,252 20,620 384 2,636

Michael Heinz 2011 391 148 1,179 1,718 9,912 255 1,973
(since May 6, 2011) 2010 – – – – – – –

Dr. Andreas Kreimeyer 2011 600 144 1,769 2,513 29,460 757 3,270
2010 550 105 1,620 2,275 20,620 384 2,659

Dr. Stefan Marcinowski 2011 600 111 1,769 2,480 29,460 757 3,237
2010 550 89 1,620 2,259 20,620 384 2,643

Dr. Harald Schwager 2011 600 119 1,769 2,488 29,460 757 3,245
2010 550 108 1,620 2,278 20,620 384 2,662

Margret Suckale 2011 391 52 1,179 1,622 7,148 184 1,806

(since May 6, 2011) 2010 – – – – – – –
Total 2011 5,662 2,384 16,309 24,355 268,884 6,910 31,265
Total 2010 5,123 2,549 14,580 22,252 185,584 3,456 25,708

1
The basis for the variable bonus is the return on assets adjusted for special items and the performance factor. These include all contributions made to the deferred
compensation program.
2
Payment is made in local currency based on a theoretical net salary in Germany (on a pro rata basis, where applicable).
3
Includes payments to cover additional costs of delegates, such as assumption of prevailing local rental fees
.
BASF Report 2011 Compensation report Corporate Governance
131

The options granted led to expenses (personnel expense) in Pension benefits

2011. This personnel expense refers to the sum of all options Annual pension units are accrued for the members of the Board
from the LTI programs 2003 to 2011. It is calculated as the (“Board Performance Pension”). The method of determination
difference in the value of the options on December 31, 2011, of the amount of the pension benefits generally corresponds to
compared with the value on December 31, 2010, considering that used for other employee groups. The method is designed
the options exercised and granted in 2011. The value of the such that both the performance of the company and the pro­
options is based primarily on the development of the BASF share gression of the individual Board member’s career significantly
price and its outperformance compared with the benchmark affect the pension entitlement.
indices specified for the LTI programs 2003 to 2011. The annual pension benefits accruing to Board members
The personnel expenses reported below are purely in a given reporting year (pension unit) are composed of a fixed
accounting figures which do not equate with the actual cash and a variable component. The fixed component is calculated
gains should options be exercised. The members of the Board by multiplying the annual fixed compensation above the Social
may each decide on the timing and scope of the exercise of Security Contribution Ceiling by 32% (contribution factor). The
options of the individual years, while taking into account the gen­ resulting amount is converted into a lifelong pension using
eral terms and conditions and ceilings of the LTI program. The actuarial factors based on an actuarial interest rate (5%), the
personnel expenses for the year 2011 relating to all options probability of death, invalidity and bereavement (Heubeck-­
issued were as follows: Dr. Kurt Bock €182 thousand (2010: Richttafeln, 2005G) and an assumed pension increase (1.5%
€4,919 thousand); Dr. Martin Brudermüller €182 thousand (2010: per annum). This is the amount that is payable upon retirement.
€4,087 thousand); Dr. Hans-Ulrich Engel €517 thousand (2010: The variable component of the pension unit depends on the
€3,198 thousand); Michael Heinz €748 thousand; Dr. Andreas ­return on assets in the reporting year and the performance fac­
Kreimeyer €346 thousand (2010: €3,449 thousand); Dr. Stefan tor, which is also decisive for the bonus. The variable compo­
Marcinowski €1,897 thousand (2010: €4,034 thousand); Dr. Harald nent of the pension unit is based on a return on assets of 12%
Schwager €385 thousand (2010: €3,105 thousand); and ­Margret and on a performance factor of 1.0 at which point the variable
Suckale €107 thousand. component is equal in value to the fixed component. With
For more on the LTI program, see page 198 onward regard to the return on assets, there is a linear relationship
between the variable component and the return on assets
The members of the Board are covered by loss liability insur­ figures between 10% and 14%. Should the return on assets
ance concluded by the company (D&O insurance) which exceed 14%, the variable component levels off; should the
includes a deductible. return on assets fall below 10%, the decline accelerates. With
regard to the performance factor, there is a linear relationship
between the variable component of the pension unit and a goal
achievement of more than 50% and less than 125%. The per­
formance factor ranges between 0 for a goal achievement of
50% or less and 1.5 for a goal achievement of 125% and more.
The fixed and the variable components together result in the
acquired pension unit for the reporting year. The sum of the pen­
sion units accumulated over the reporting years determines the
respective Board member’s pension benefit in the event of a
claim. The pension benefit takes effect at the end of service
upon reaching retirement age of 60 years, or disability or death.
Pension payments are adjusted on an annual basis, by at least
1% annually, in accordance with changes in the German con­
sumer price index.
132 Corporate Governance Compensation report BASF Report 2011

The pension units also include survivor benefits. Upon the death End of service benefits
of an active or former member of the Board, the surviving spouse In the event that a member of the Board of Executive Directors
receives a survivor pension amounting to 60% of the Board retires from employment before the age of 60, either because
member’s pension entitlement. The orphan pension amounts his appointment was not extended or was revoked for an
to 10% for each half-orphan, 33% for an orphan, 25% each for important reason, he is entitled to pension benefits if he has
two orphans and 20% each for three or more orphans of the served on the Board for at least ten years or if the time needed
pension entitlement of the deceased (former) Board member. to reach legal retirement age is less than ten years. The com­
The survivor benefits may not exceed 75% of the Board mem­ pany is entitled to offset compensation received for any other
ber’s total pension entitlement. If the survivor pensions exceed work done against pension benefits until the legal retirement
the upper limit, they will be proportionately reduced. age is reached.
Board members are members of the BASF Pensionskasse The following applies to end-of-service due to a change-
VVaG, as are generally all employees of BASF SE. Contributions of-control event: A change-of-control event, in terms of this
and benefits are determined by the Statutes of the BASF Pen­ provision, occurs when a shareholder informs BASF of a share­
sionskasse VVaG and the General Conditions of Insurance. holding of at least 25%, or the increase of such a holding.
The service costs attributable to 2011 include costs for If a Board member’s position is revoked within one year
BASF Pensionskasse VVaG as well as for the Performance Pen­ following a change-of-control event, the Board member will
sion and are as follows: Dr. Kurt Bock €760 thousand (2010: receive the contractually agreed payments for the remaining
€430 thousand); Dr. Jürgen Hambrecht (until May 6, 2011) contractual term of office as a one-off payment (fixed compen­
€3 thousand (2010: €9 thousand); Dr. Martin Brudermüller sation and variable bonus based on a return of assets of 12%
€566 thousand (2010: €414 thousand); Dr. Hans-Ulrich Engel as well as target achievement of 100%). Furthermore, the Board
€485 thousand (2010: €439 thousand); Dr. John Feldmann member may receive the fair value of the option rights acquired
(until May 6, 2011) €60 thousand (2010: €236 thousand); Michael in connection with the LTI program within a period of three
Heinz (since May 6, 2011) €226 thousand; Dr. Andreas Kreimeyer months or may continue to hold the existing rights under the
€497 thousand (2010: €456 thousand); Dr. Stefan Marcinowski terms of the program. For the determination of the accrued pen­
€500 thousand (2010: €460 thousand); Dr. Harald Schwager sion benefits from the “Board Performance Pension,” the time
€465 thousand (2010: €420 thousand); and Margret Suckale up to the regular expiry of office is taken into consideration.
(since May 6, 2011) €256 thousand. There is a general limit on severance pay (severance pay­
The present value of pension benefits (defined benefit ment cap) for all Board members. Accordingly, payments made
obligation) is an accounting figure for the entitlements that the to a Board member upon premature termination of their
Board members have accumulated in their years of service at contract, without serious cause, may not exceed the value of
BASF. The defined benefit obligation up to and including 2011 two years’ compensation nor compensate more than the remain­
are as follows: Dr. Kurt Bock €8,647 thousand (2010: €7,416 thou­ ing term of the contract. The severance payment cap is to be
sand); Dr. Martin Brudermüller €5,768 thousand (2010: calculated on the basis of the total compensation for the past
€4,884 thousand); Dr. Hans-Ulrich Engel €4,620 thousand full financial year and, if appropriate, also the expected total
(2010: €3,862 thousand); Michael Heinz €3,136 thousand; compensation for the current financial year. If membership of
Dr. Andreas Kreimeyer €7,943 thousand (2010: €6,899 thou­ the Board of Executive Directors is terminated prematurely as
sand); Dr. Stefan Marcinowski €9,068 thousand (2010: the result of a “Change of Control,” the payments may not
€7,914 thousand); Dr. Harald Schwager €4,277 thousand (2010: exceed 150% of the severance compensation cap.
€3,566 thousand); and Margret Suckale €975 thousand.
BASF Report 2011 Compensation report Corporate Governance
133

Former Board members Compensation of Supervisory Board members

Total compensation for previous Board members and their sur­ The disclosure of compensation of the Supervisory Board
viving dependents amounted to €12.8 million in 2011 (2010: is based on the German Commercial Code and is aligned
€13.2 million). This figure also contains payments that previous with the recommendations of the German Corporate Gover­
Board members have themselves financed through the deferred nance Code. The compensation of the Supervisory Board is
compensation program and personnel expense for the year regulated by the Articles of Association of BASF SE passed
2011 relating to options that previous members of the Board still by the Shareholders’ Meeting.
hold from the time of their active service period. The continua­ Each member of the Supervisory Board receives an annual
tion of the options that have not yet been exercised at the time fixed compensation of €60,000 and a performance-oriented
of retirement, along with the continuation of the associated hold­ variable compensation for each full €0.01 by which the earnings
ing period for individual investment in BASF shares under the per share of the BASF Group, as declared in the BASF Group
conditions of the program, is intended in order to particularly Consolidated Financial Statements for the year for which the
emphasize how sustainability is incorporated into the compen­ remuneration is paid, exceeds the minimum earnings per share.
sation for the Board members. Pension provisions for previous The minimum earnings per share figure for the year 2011 is
Board members and their surviving dependents amounted to €1.50. The performance-oriented variable remuneration is €800
€116.1 million (2010: €95.4 million). for each full €0.01 of earnings per share up to an earnings per
share of €2.25, €600 for each further €0.01 of earnings per share
up to an earnings per share of €2.75, and €400 for each €0.01
beyond this. The performance-oriented variable remuneration
is limited to a maximum amount of €120,000. The minimum
earnings per share and the corresponding thresholds shall
increase by €0.05 for each subsequent financial year. Based on
the earnings per share of €6.74 published in the BASF Group
Consolidated Statements 2011, the performance-oriented com­
pensation reached the maximum amount of €120,000. The
chairman of the Supervisory Board receives two-and-a-half
times and a deputy chairman one-and-a-half times the compen­
sation of an ordinary member.
Members of the Supervisory Board who are members of a
committee, except for the Nomination Committee, shall receive
a further fixed compensation for this purpose in the amount of
€12,500. For the Audit Committee, the further fixed compensa­
tion shall be €50,000 (2010: €25,000). The chairman of a
committee shall receive twice and a deputy chairman one-and-
a-half times the further fixed compensation.
The company reimburses members of the Supervisory
Board for out-of-pocket expenses and value-added tax to be
paid with regard to their activities as members of the Supervi­
sory Board or of a committee. The company further grants the
members of the Supervisory Board a fee of €500 for attending
a meeting of the Supervisory Board or one of its committees to
which they belong and includes the performance of the duties
of the members of the Supervisory Board in the cover of a loss
liability insurance concluded by it (D&O insurance), which
includes a deductible.
134 Corporate Governance Compensation report BASF Report 2011

Total compensation of the Supervisory Board of the company for the activity in 2011, including the attendance fees, was €3.0 million
(2010: €2.9 million). The compensation of the individual Supervisory Board members is as follows:

Compensation of the Supervisory Board of BASF SE (thousand €)

Performance-oriented Payment for commit-

Fixed compensation variable compensation tee membership(s) Total compensation
2011 2010 2011 2010 2011 2010 2011 2010

Dr. h.c. Eggert Voscherau,

Chairman of the Supervisory Board1 150.0 150.0 300.0 300.0 25.0 25.0 475.0 475.0

Michael Diekmann,
Vice Chairman of the Supervisory Board2 90.0 90.0 180.0 180.0 12.5 12.5 282.5 282.5

Robert Oswald, Vice Chairman of the Supervisory Board 2

90.0 90.0 180.0 180.0 12.5 12.5 282.5 282.5
Ralf-Gerd Bastian4 60.0 60.0 120.0 120.0 50.0 25.0 230.0 205.0
Wolfgang Daniel 60.0 60.0 120.0 120.0 – – 180.0 180.0
Prof. Dr. François Diederich 60.0 60.0 120.0 120.0 – – 180.0 180.0
Franz Fehrenbach4 60.0 60.0 120.0 120.0 50.0 25.0 230.0 205.0
Stephen K. Green (from April 30, 2009 until Dec. 16, 2010) – 60.0 – 120.0 – – – 180.0
Max Dietrich Kley3 60.0 60.0 120.0 120.0 100.0 50.0 280.0 230.0
Anke Schäferkordt (since December 17, 2010) 60.0 5.0 120.0 10.0 – – 180.0 15.0
Denise Schellemans 60.0 60.0 120.0 120.0 – – 180.0 180.0
Ralf Sikorski 60.0 60.0 120.0 120.0 – – 180.0 180.0
Michael Vassiliadis2, 4 60.0 60.0 120.0 120.0 62.5 37.5 242.5 217.5
Total 870.0 875.0 1,740.0 1,750.0 312.5 187.5 2,922.5 2,812.5

1
Chairman of the Personnel Committee
2
Member of the Personnel Committee
3
Chairman of the Audit Committee
4
Member of the Audit Committee

Compensation for Supervisory Board membership and mem­ Beyond this, no other Supervisory Board members received any
bership of Supervisory Board committees is payable after the compensation in 2011 for services rendered personally, in par­
Annual Shareholders’ Meeting, which approves the Consolidated ticular, the rendering of advisory and agency services.
Financial Statements upon which the variable compensation For more on share ownership by members of the Board of Executive
Directors and the Supervisory Board, see page 125
is based. Accordingly, compensation relating to the year 2011
will be paid following the Annual Shareholders’ Meeting on
April 27, 2012.
In 2011, as in 2010, the company paid the Supervisory Board
member Prof. Dr. François Diederich a total of CHF38,400 (2011:
around €31,200; 2010: approximately €27,800) plus value-added
taxes and out-of-pocket expenses for consulting work in the area
of chemical research based on a consulting contract approved
by the Supervisory Board.
BASF Report 2011 Report of the Supervisory Board Corporate Governance
135

Report of the Supervisory Board

Dear Shareholder, The members of the Supervisory Board elected by sharehold­

ers and those elected by the employees prepared for the meet­
Despite the ongoing national debt crisis in the eurozone and the ings in separate preliminary discussions. All twelve members
related uncertainty in the global financial markets, 2011 was took part in all Supervisory Board meetings in 2011.
once again a successful year for BASF, with very good results In all of its meetings, the Supervisory Board discussed the
in sales and earnings. With the transfer of the styrenics busi­ further development of the BASF Group’s business activities
ness to the Styrolution joint venture and the divestiture of the through acquisitions, divestitures and investment projects and
fertilizer business, BASF has continued to successfully focus on advised the Board of Executive Directors on these significant
fast-growing and innovative business areas. The BASF strategy questions impacting the future of the company. A highlight for
“We create chemistry” sets out clear guidelines for BASF’s suc­ the work of the Supervisory Board was the close consultation
cessful future development. with the Board of Executive Directors on July 21, 2011, regard­
The Board of Executive Directors demonstrated impressive ing the update of the BASF Group’s strategy. The Supervisory
company leadership. BASF continues to occupy an excellent Board is convinced that the “We create chemistry” strategy
position under its new management and in 2011, took full contains the right answers to the question of which path BASF
­advantage of the business opportunities which presented them­ should take to master the challenges of a changing world and
selves. The high-quality, interconnected work of the entire team to continue on its successful track.
of the Board of Executive Directors and employees was once Furthermore, in 2011 we also addressed the strategies,
again crucial to BASF’s success. Again and again, maintaining status and prospects of individual business areas. These
continuity while embracing change has proven to be one of included the Agricultural Solutions segment, with the crop
BASF’s strengths. protection business and plant biotechnology activities, during
the meeting on July 21, 2011. The Polyurethanes division, where
Monitoring and consultation in an ongoing dialog BASF wants to continue to grow with major investments in new
with the Board of Executive Directors production facilities such as the MDI plant in Chongqing, China,
In 2011, the Supervisory Board of BASF SE exercised its duties and the planned TDI plant in Ludwigshafen, Germany, were
required by law and the Statutes with the utmost care. We topics during the meeting on October 20, 2011. We devoted our
regularly monitored the management of the Board of Executive attention to the Oil & Gas segment, particularly given
­Directors and provided advice on the company’s strategic the changes in ­Germany’s energy policy, during the meetings
­development and important individual measures. To this end, on March 3 and October 20, 2011. At four meetings of the
the Supervisory Board requested detailed information from the Supervisory Board, we received information, including exam­
Board of Executive Directors at five meetings, in the form of writ­ ples of innovation, about research and development topics and
ten and verbal reports. The topics included: business policies the development of ­future markets, such as electric mobility,
and the business situation, as well as the company’s perfor­ and we discussed these with the Board of Executive Directors.
mance, profitability, global HR policy and planning with regard At the meeting on December 15, 2011, we discussed and
to finances, capital expenditures and human resources at BASF approved the Board of Executive Directors’ operative and finan­
SE and its major subsidiaries. Information was also provided cial planning for 2012. Furthermore, we once again empowered
about any deviations of business performance from planning. the Board of Executive Directors to procure necessary financ­
The Supervisory Board discussed in detail the reports from the ing in 2012.
Board of Executive Directors and also discussed prospects for The Supervisory Board thoroughly considered the person­
the company as a whole and its individual business areas with nel issues concerning the Board of Executive Directors during
the Board of Executive Directors. Outside of Supervisory Board the meetings on October 20 and December 15, 2011. At the
meetings, the Chairman of the Supervisory Board also regularly meeting on October 20, 2011, the Supervisory Board discussed
requested information from the Chairman of the Board of Execu­ and approved the suitability, composition and level of the com­
tive Directors regarding current developments and company- pensation for the Board of Executive Directors. At the meeting
relevant items. The Supervisory Board was always ­involved on December 15, 2011, the Supervisory Board discussed the
at an early stage in decisions of major importance. The Super­ composition of the Board of Executive Directors and nominated
visory Board discussed and voted on all of those individual Wayne T. Smith, an American and currently head of the Polyure­
measures taken by the Board of Executive Directors, which by thanes division, for a three-year appointment as a member of
law or the Statutes required the approval of the Supervisory the Board of Executive Directors, effective as of the end of the
Board. In 2011, these related to the expansion of the coopera­ Annual Shareholders’ Meeting on April 27, 2012. Dr. Stefan
tion with Gazprom through the planned asset swap in the oil Marcinowski will retire from the Board of Executive Directors at
and gas business, as well as the divestiture of BASF’s fertilizer this time. The appointment of Dr. Andreas Kreimeyer to the
business. Board of Executive Directors, which was set to expire upon con­
clusion of the Annual Shareholders’ Meeting 2012, was extended
136 Corporate Governance Report of the Supervisory Board BASF Report 2011

until the conclusion of the Annual Shareholders’ Meeting in 2015. Directors on ­accounting issues, the internal control system and
Furthermore, at this meeting the Supervisory Board and the discussing and defining the focus of the annual audit with the
Board of Executive Directors discussed and agreed upon the auditor. The topics internal auditing system and compliance in
goals for the Board of Executive Directors for 2012 to 2014. In the BASF Group were each a focus at one meeting of the Audit
addition, the performance assessment for the Board of Execu­ Committee. In these meetings, the head of the Corporate Audit
tive Directors for 2011 was decided; this, along with the return department and the Chief Compliance Officer reported to the
on assets of the BASF Group, determines the performance-­ Audit Committee and answered its questions. The business
related component of the compensation of the Board of Execu­ relations with the auditor, apart from the annual audit, were
tive Directors. regulated with the adoption of a resolution allowing the grant­
ing of contracts for the provision of non-audit services by the
Committees auditor. These kind of services are generally not permitted. The
BASF SE’s Supervisory Board has a total of three committees: Audit Committee will be informed of any approved individual
1) the committee for personnel affairs of the Board of Executive contracts. The committee also reached an agreement with the
Directors as well as the granting of loans in accordance with auditor on the ­auditing fees and discussed questions related to
Section 89 (4) of the German Stock Corporation Act (Personnel the auditor’s independence. Furthermore, the Audit Committee
Committee), 2) the Audit Committee and 3) the Nomination recommended to the Supervisory Board that KPMG once again
Committee. Following each Committee meeting, the Chairmen be nominated as the auditor at the Annual Shareholders’ Meet­
of the Committees reported in detail about the meetings and ing 2012.
the activities of the Committees at the next meeting of the The members of the Nomination Committee are the mem­
­Supervisory Board. bers of the Supervisory Board elected at the Annual Share­
The Personnel Committee comprises Supervisory Board holders’ Meeting: Dr. h.c. Eggert Voscherau, Prof. Dr. François
Chairman Dr. h.c. Eggert Voscherau (chairman), Supervisory ­Diederich, Michael Diekmann, Franz Fehrenbach, Max Dietrich
Board Deputy Chairmen Michael Diekmann and Robert Oswald, Kley and Anke Schäferkordt. The Nomination Committee is
as well as Supervisory Board member Michael Vassiliadis. The responsible for ­preparing candidate proposals for the election
Personnel Committee met on December 14, 2011. At this meet­ of those Supervisory Board members who are elected by the
ing, the Committee dealt primarily with new appointments Shareholders’ Meeting. Following Stephen K. Green’s resigna­
and the extension of mandates on the Board of Executive tion from the Supervisory Board as of December 16, 2010, the
Directors as well as the target agreement process between the members of the Nomination Committee discussed his succes­
Supervisory Board and Board of Executive Directors, the sion and recommended that the Supervisory Board nominate
corresponding target agreements for 2012 to 2014, and the Anke Schäferkordt for election to the Supervisory Board at the
achievement of targets in 2011. The Committee made recom­ Annual Shareholders’ Meeting 2011. The Nomination Commit­
mendations to the Supervisory Board regarding all issues dis­ tee based its recommendation on the objectives for the com­
cussed at this meeting. The Supervisory Board adopted the rec­ position of the Supervisory Board decided by the Supervisory
ommended proposals at its meeting on December 15, 2011. Board at its meeting on October 21, 2010.
The Audit Committee consists of Supervisory Board mem­
bers Max Dietrich Kley, Ralf Gerd Bastian, Franz Fehrenbach Corporate Governance and Declaration of
and Michael Vassiliadis. The Chairman of the Audit Committee Conformity
is Max Dietrich Kley, who has also been appointed “Audit In 2011, the Supervisory Board again addressed in detail the
Committee Financial Expert.” The Audit Committee is respon­ corporate governance standards applied by BASF and their
sible for all the tasks of an audit committee listed in Section 107 ­implementation in the company. The Corporate Governance
Paragraph (3) Sentence 2 of the German Stock Corporation Act ­Report of the BASF Group provides extensive information on
and in subsection 5.3.2 of the German Corporate Governance BASF’s corporate governance. It also includes the compensa­
Code from May 26, 2010. The Audit Committee met five times tion report, containing full details on the structure and amount
in 2011. All committee members attended all committee meet­ of the compensation for the Board of Executive Directors and
ings. Following each Committee meeting, the Chairman of the the Supervisory Board, including the pension benefits of the
Audit Committee reported on the agenda items and audit work members of the Board of Executive Directors, which can be
of the Committee at the subsequent Supervisory Board meet­ found on pages 129 to 134.
ing. The core duties were to review BASF SE’s Financial State­
ments and Consolidated Financial Statements, as well as to
discuss the quarterly and first-half financial reports with the
Board of Executive Directors prior to their publication. Other
important activities included advising the Board of Executive
BASF Report 2011 Report of the Supervisory Board Corporate Governance
137

At its meeting on December 15, 2011, the Supervisory Board those of the audit. The Supervisory Board sees no grounds for
approved the joint Declaration of Conformity by the Supervisory objection to the management and submitted reports.
Board and the Board of Executive Directors in accordance with At the Supervisory Board’s accounts meeting on February
Section 161 of the German Stock Corporation Act. BASF com­ 23, 2012, we approved the Financial Statements of BASF SE
plies with the recommendations of the German Corporate Gov­ and the Consolidated Financial Statements of the BASF Group
ernance Code in its version of May 26, 2010, without exception. prepared by the Board of Executive Directors, making the
The complete wording of the Declaration of Conformity is pro­ ­Financial Statements final. We concur with the proposal of the
vided on page 138 and is also available to shareholders on Board of Executive Directors regarding the appropriation of profit
BASF’s website. and the payment of a dividend of €2.50 per share.
The Supervisory Board has affirmed the independence of
its members and determined that there are no conflicts of inter­ Composition of the Supervisory Board
est. The Annual Shareholders’ Meeting on May 6, 2011, elected
Anke Schäferkordt as a member of the Supervisory Board.
Annual Financial Statements of BASF SE and Ms. Schäferkordt had previously been legally appointed to the
Consolidated Financial Statements Supervisory Board by the Ludwigshafen am Rhein district court
KPMG AG Wirtschaftsprüfungsgesellschaft, the auditor elected with effect from D
­ ecember 17, 2010.
by the Annual Shareholders’ Meeting for the fiscal year 2011,
has audited the Financial Statements of BASF SE and the BASF Thanks
Group Consolidated Financial Statements, including the Man­ The Supervisory Board thanks the management and all employ­
agement’s Analysis and the accounting records from which they ees of the BASF Group worldwide for the work they performed
were prepared, and have approved them free of qualification. in 2011.
Furthermore, the auditor certified that the Board of Executive
Directors had taken the measures incumbent on it under Sec­ Ludwigshafen, February 23, 2012
tion 91 (2) of the ­German Stock Corporation Act in an appropri­
ate way. In particular, it had instituted an appropriate informa­ The Supervisory Board
tion and monitoring system that met the needs of the company
and appeared suitable, both in design and application in prac­
tice, to provide early warning of developments that pose a threat
to the continued existence of the company.
The documents to be examined and the auditor’s reports
were sent in a timely manner to every member of the Supervi­
sory Board. The auditor attended the accounts review meeting
of the Audit Committee on February 22, 2012, as well as the Dr. h.c. Eggert Voscherau
­accounts meeting of the Supervisory Board on February 23, Chairman of the Supervisory Board
2012, and reported on the main findings of his audit. The audi­
tor also provided detailed explanations of his reports on the day
before the accounts meeting of the Supervisory Board.
The Audit Committee reviewed the audits and Manage­
ment’s Analysis at its meeting on February 22, 2012, and dis­
cussed them in detail with the auditor. The Chairman of the ­Audit
Committee gave a detailed account of the preliminary review at
the Supervisory Board meeting on February 23, 2012.
On the basis of this preliminary review by the Audit Com­
mittee, the Supervisory Board has examined the Financial State­
ments and Management’s Analysis of BASF SE for 2011, the
proposal by the Board of Executive Directors for the appropri­
ation of profit as well as the Consolidated Financial Statements
and Management’s Analysis for the BASF Group for 2011. We
have reviewed, acknowledged and approved the auditor’s
­reports. The results of the preliminary review by the Audit Com­
mittee and the results of our own examination fully concur with
138 Corporate Governance Declaration of Conformity BASF Report 2011

Declaration of Conformity 2011

of the Board of Executive Directors and the Supervisory Board of BASF SE

The Board of Executive Directors and the Super­

visory Board of BASF SE hereby declare pursuant
to § 161 AktG (Stock Corporation Act)

The recommendations of the Government Commission on

the German Corporate Governance Code from May 26, 2010,
as published by the Federal Ministry of Justice on July 2, 2010,
in the ­official section of the electronic Federal Gazette, are being
complied with; furthermore, they have been complied with since
the submission of the last Declaration of Conformity on Decem­
ber 16, 2010.

Ludwigshafen, December 15, 2011

The Supervisory Board The Board of Executive Directors

of BASF SE of BASF SE
BASF Report 2011

Consolidated Financial Statements

Statement by the Board of Executive Directors 140 Other notes

Auditor’s report 141 27 – Consolidated statements of cash flows
and capital structure management 198
Consolidated statements of income 142
28 – Stock price-based compensation program
Consolidated statements of recognized
and BASF incentive share program 198
income and expense 143
29 – Compensation for the Board of Executive
Consolidated balance sheets 144
Directors and Supervisory Board of BASF SE 200
Consolidated statements of cash flows 145
30 – Related party transactions 201
Consolidated statements of equity 146
31 – Services provided by the external auditor 202
32 – Declaration of Conformity with the German
Notes Corporate Governance Code 202
Policies and scope of consolidation
1 – Summary of accounting policies 147
2 – Scope of consolidation 156
3 – List of shares held 162
Segments and regions
4 – Reporting by segment and regions  162

4
Notes on consolidated statements of income
5 – Earnings per share 166
6 – Other operating income 166

Consolidated Financial Statements

7 – Other operating expenses 167
8 – Financial result 168
9 – Income taxes 169
10 – Minority interests 171
11 – Personnel expenses and employees  171
Notes on consolidated balance sheets
12 – Intangible assets 172
13 – Property, plant and equipment 175
14 – Investments accounted for using the equity
method and other financial assets 177
15 – Inventories 177
16 – Receivables and miscellaneous assets 178
17 – Capital and reserves 180
18 – Retained earnings and other comprehensive
income 180
19 – Minority interests 181
20 – Provisions for pensions and similar obligations 181
21 – Other provisions 185
22 – Liabilities 186
23 – Contingent liabilities and other financial
obligations 188
24 – Risks from litigation and claims 190
25 – Supplementary information on financial
instruments 191
26 – Leasing 197
140 Consolidated Financial Statements Statement by the Board of Executive Directors BASF Report 2011

Statement by the Board of Executive Directors

and ­assurance pursuant to Sections 297(2), 315(1) of the
German Commercial Code (HGB)

The Board of Executive Directors of BASF SE is responsible for To the best of our knowledge, and in accordance with the
preparing the Consolidated Financial Statements and Manage­ ­applicable reporting principles, the Consolidated Financial
ment’s Analysis of the BASF Group. Statements of the BASF Group give a true and fair view of the
The Consolidated Financial Statements for 2011 were assets, liabilities, financial position and profit situation of the
­prepared according to the International Financial Reporting Group, and the Management’s Analysis includes a fair review of
­Standards (IFRS), which are published by the International the development and performance of the business and the
­Accounting Standards Board (IASB), London, and have been ­position of the Group, together with a description of the­
endorsed by the European Union. principal opportunities and risks associated with the expected
In order to ensure the adherence of the Consolidated ­development of the Group.
­Financial Statements of the BASF Group and Management’s
Analysis to the applicable accounting rules, and the accuracy
of reporting, we have established effective internal control
­systems.
The adherence to uniform, Group-wide accounting and
­reporting standards, and the reliability and effectiveness of our
control systems are continually audited throughout the Group
by our internal audit department. The risk management system
we have set up is designed to identify material risks in a timely
manner, thus enabling the Board of Executive Directors to take
appropriate defensive measures as required.

Ludwigshafen, February 22, 2012

Dr. Kurt Bock Dr. Martin Brudermüller

Chairman of the Board of Executive Directors Vice Chairman of the Board of Executive Directors

Dr. Hans-Ulrich Engel Michael Heinz

Chief Financial Officer

Dr. Andreas Kreimeyer Dr. Stefan Marcinowski

Dr. Harald Schwager Margret Suckale

 Notes

141 Consolidated
BASF Report Financial
2011 Statements Auditor’s
xxx report Consolidated Financial
BASF Report
Statements
2011
141

Auditor’s report

We have audited the Consolidated Financial Statements pre­ ment’s Analysis are detected with reasonable assurance. Know­
pared by BASF SE, Ludwigshafen am Rhein, Germany, com­ ledge of the business activities and the economic and legal
prising the statement of income, statement of income and ­environment of the Group and expectations as to possible mis­
­expense recognized in equity, balance sheet, statement of cash statements are taken into account in the determination of audit
flows, statement of equity and the notes to the Consolidated procedures. The effectiveness of the accounting-related inter­
­Financial Statements, together with the Management’s Analy­ nal control system and the evidence supporting the disclosures
sis for the business year from January 1 to December 31, 2011. in the Consolidated Financial Statements and the Management’s
The preparation of the Consolidated Financial Statements and Analysis are examined primarily on a test basis within the frame­
the Management’s Analysis in accordance with ­IFRSs as work of the audit. The audit includes assessing the annual
­adopted by the European Union, and the additional ­requirements ­financial statements of those entities included in consolidation,
of German commercial law pursuant to § 315a Abs. [paragraph] the determination of entities to be included in consolidation, the
1 HGB ­[Handelsgesetzbuch “German Commercial Code”] are accounting and consolidation principles used and significant
the responsibility of the parent company’s management. Our estimates made by management, as well as evaluating the over­
responsibility is to express an opinion on the Consolidated all presentation of the Consolidated Financial Statements and
­Financial Statements and on the Management’s Analysis based the Management’s Analysis. We believe that our audit provides
on our audit. In addition, we have been instructed to express an a reasonable basis for our opinion. Our audit has not led to any
­opinion as to whether the Consolidated Financial Statements reservations.
comply with full IFRS. In our opinion, based on the findings of our audit, the Con­
We conducted our audit of the Consolidated Financial solidated Financial Statements comply with IFRSs as adopted
Statements in accordance with § 317 HGB and German gener­ by the E.U., the additional requirements of German commercial
ally accepted standards for the audit of financial statements pro­ law pursuant to § 315a Abs. 1 HGB and full IFRS and give a true
mulgated by the Institut der Wirtschaftsprüfer (IDW). and fair view of the net assets, financial position and results of
Those standards require that we plan and perform the ­audit operations of the Group in accordance with these requirements.
such that misstatements materially affecting the presentation of The Management’s Analysis is consistent with the Consolidated
the net assets, financial position and results of operations in the Financial Statements and as a whole provides a suitable view
Consolidated Financial Statements in accordance with the of the Group’s position and suitably presents the opportunities
­applicable financial reporting framework and in the Manage­ and risks of future development.

Frankfurt am Main, February 22, 2012

KPMG AG
Wirtschaftsprüfungsgesellschaft

Prof. Dr. Joachim Schindler Hans-Dieter Krauß

Wirtschaftsprüfer Wirtschaftsprüfer
142 Consolidated Financial Statements Consolidated statements of income BASF Report 2011

Consolidated statements of income

BASF Group

Consolidated statements of income (million €)

Explanations in note 2011 2010

Sales [4] 73,497 63,873
Cost of sales (53,986) (45,310)
Gross profit on sales 19,511 18,563

Selling expenses (7,323) (6,700)

General and administrative expenses (1,315) (1,138)
Research and development expenses (1,605) (1,492)
Other operating income [6] 2,008 1,140
Other operating expenses [7] (2,690) (2,612)
Income from operations  [4] 8,586 7,761

Income from companies accounted for using the equity method 48 201
Other income from participations 966 137
Other expenses from participations (30) (39)
Interest income 189 150
Interest expense (763) (773)
Other financial income 909 866
Other financial expenses (935) (930)
Financial result [8] 384 (388)

Income before taxes and minority interests 8,970 7,373

Income taxes [9] (2,367) (2,299)
Income before minority interests 6,603 5,074

Minority interests [10] (415) (517)

Net income 6,188 4,557
Earnings per share (€)  [5] 6.74 4.96
Dilution effect [5] (0.01) .
Diluted earnings per share (€)  [5] 6.73 4.96
 Notes

143 Consolidated
BASF Report Financial
2011 Statements Income
xxx and expense Consolidated Financial
BASF Report
Statements
2011
143

Consolidated statements of income and expense recognized in equity

BASF Group

Statement of income and expense recognized in equity (million €)

2011 2010
Income before minority interests 6,603 5,074

Actuarial gains/losses and asset ceiling for defined benefit assets (763) (171)
Change in foreign currency translation adjustments 186 756
Fair value changes in available-for-sale securities (1,014) 315
Cash flow hedges (71) (9)
Hedges of net investments in foreign operations 5 (7)
Revaluation due to acquisition of majority of shares (2) (2)
Deferred taxes 196 56
Minority interests (2) 42
Total income and expense recognized directly in equity (1,465) 980

Total income and expense for the period 5,138 6,054

Thereof BASF SE 4,725 5,495
minority interests 413 559

Development of income and expense recognized directly in equity of shareholders of BASF SE (million €)

Total income
and expense
Retained recognized
earnings Other comprehensive income directly in equity

Fair value Hedges of Revalua-

Actuarial Foreign changes in net invest- tion due to
gains/ currency available-for- ments in acquisition of Total of other
losses; asset translation sale securi- Cash flow foreign majority comprehen-
ceiling adjustment ties hedges operations of shares sive income
As of January 1, 2011 (1,526) 190 1,009 (3) (7) 6 1,195 (331)
Additions (763) 186 – (71) – – 115 (648)
Releases – – (1,014) – 5 (2) (1,011) (1,011)
Deferred taxes 181 (3) 15 3 – – 15 196

As of
December 31, 2011 (2,108) 373 10 (71) (2) 4 314 (1,794)

As of January 1, 2010 (1,425) (555) 698 5 – 8 156 (1,269)

Additions (171) 756 315 – (7) – 1,064 893
Releases – – – (9) – (2) (11) (11)
Deferred taxes 70 (11) (4) 1 – – (14) 56

As of
December 31, 2010 (1,526) 190 1,009 (3) (7) 6 1,195 (331)
144 Consolidated Financial Statements Consolidated balance sheets BASF Report 2011

Consolidated balance sheets

BASF Group

Assets (million €)

Explanations in note December 31, 2011 December 31, 2010

Intangible assets [12] 11,919 12,245
Property, plant and equipment [13] 17,966 17,241
Investments accounted for using the equity method [14] 1,852 1,328
Other financial assets [14] 848 1,953
Deferred tax assets [9] 941 1,112
Other receivables and miscellaneous long-term assets [16] 561 653
Long-term assets 34,087 34,532

Inventories [15] 10,059 8,688

Accounts receivable, trade [16] 10,886 10,167
Other receivables and miscellaneous short-term assets [16] 3,781 3,883
Marketable securities 19 16
Cash and cash equivalents  2,048 1,493
Assets of disposal groups [2] 295 614
Short-term assets 27,088 24,861
Total assets 61,175 59,393

Equity and liabilities (million €)

Explanations in note December 31, 2011 December 31, 2010

Subscribed capital [17] 1,176 1,176
Capital surplus [17] 3,203 3,216
Retained earnings [18] 19,446 15,817
Other comprehensive income [18] 314 1,195
Equity of shareholders of BASF SE 24,139 21,404
Minority interests [19] 1,246 1,253
Equity 25,385 22,657

Provisions for pensions and similar obligations [20] 3,189 2,778

Other provisions [21] 3,335 3,352
Deferred tax liabilities [9] 2,628 2,467
Financial indebtedness [22] 9,019 11,670
Other liabilities [22] 1,142 901
Long-term liabilities 19,313 21,168

Accounts payable, trade 5,121 4,738

Provisions [21] 3,210 3,324
Tax liabilities [9] 1,038 1,140
Financial indebtedness [22] 3,985 3,369
Other liabilities [22] 3,036 2,802
Liabilities of disposal groups [2] 87 195
Short-term liabilities 16,477 15,568
Total equity and liabilities 61,175 59,393
 Notes

145 Consolidated
BASF Report Financial
2011 Statements Consolidated
xxx statements of cash flows Consolidated Financial
BASF Report
Statements
2011
145

Consolidated statements of cash flows

BASF Group

Consolidated statements of cash flows1 (million €)

2011 2010
Net income 6,188 4,557
Depreciation and amortization of intangible assets, property, plant and equipment and financial assets 3,419 3,393
Changes in inventories (1,239) (1,341)
Changes in receivables (45) (1,839)
Changes in operating liabilities and other provisions 378 1,500
Changes in pension provisions, defined benefit assets and other non-cash items (68) 273
Net gains from disposal of long-term assets and securities (1,528) (83)
Cash provided by operating activities 7,105 6,460

Payments related to intangible assets and property, plant and equipment (3,410) (2,548)
Payments related to financial assets and securities (346) (480)
Payments related to acquisitions (148) (605)
Proceeds from divestitures 665 43
Proceeds from the disposal of long-term assets and securities 1,501 874
Cash used in investing activities (1,738) (2,716)

Capital increases/repayments and other equity transactions 32 (18)

Proceeds from the addition of financial liabilities 2,306 3,679
Repayment of financial liabilities (4,678) (5,974)
Dividends paid
To shareholders of BASF SE (2,021) (1,561)
To minority shareholders (457) (370)
Cash used in financing activities (4,818) (4,244)
Net changes in cash and cash equivalents 549 (500)

Effects on cash and cash equivalents

From foreign exchange rates 9 86
From changes in scope of consolidation (3) 72
Cash and cash equivalents at the beginning of the year 1,493 1,835
Cash and cash equivalents at the end of the year 2,048 1,493

1
More information on the Consolidated statement of cash flows can be found in the Management’s Analysis (Liquidity and capital resources) from page 39 onward.
Other information on cash flow can be found in Note 27 on page 198.
146 Consolidated Financial Statements Consolidated statements of equity BASF Report 2011

Consolidated statements of equity

BASF Group

Consolidated statements of equity (million €)

Number of Equity of
subscribed Other com­ share­
shares out- Subscribed Capital Retained prehensive holders of Minority Total
standing capital surplus earnings income1 BASF SE interests equity
January 1, 2011 918,478,694 1,176 3,216 15,817 1,195 21,404 1,253 22,657

Effects of acquisitions achieved

in stages – – – 34 – 34 (2) 32

Effects of change of control – – – – – – 2 2

Dividend paid – – – (2,021) – (2,021) (457)2 (2,478)
Net income – – – 6,188 – 6,188 415 6,603

Income and expense recognized

directly in equity – – – (582) (881) (1,463) (2) (1,465)

Changes in scope of consoli-

dation and other changes – – (13)3 10 – (3) 37 34

December 31, 2011 918,478,694 1,176 3,203 19,446 314 24,139 1,246 25,385

January 1, 2010 918,478,694 1,176 3,229 12,916 156 17,477 1,132 18,609
Effects of change of control – – – – – – (53) (53)
Capital withdrawal/contribution – – – – – – (18) (18)
Dividend paid – – – (1,561) – (1,561) (370)2 (1,931)
Net income – – – 4,557 – 4,557 517 5,074

Income and expense recognized

directly in equity – – – (101) 1,039 938 42 980

Changes in scope of consoli-

dation and other changes – – (13)3 6 – (7) 3 (4)

December 31, 2010 918,478,694 1,176 3,216 15,817 1,195 21,404 1,253 22,657

1
Details are provided in “the development of income and expense recognized directly in equity of shareholders of BASF SE” on page 143.
2
Including profit and loss transfers
3
Granting of BASF shares under the employee share program “plus”
 Notes

147 Consolidated
BASF Report Financial
2011 Statements Notes
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1 – Summary of accounting policies

1.1 – Group accounting principles Transactions between consolidated companies as well as inter-
company profits resulting from sales and services rendered
Accounting standards applied: The Consolidated Financial ­between consolidated companies are eliminated in full; for jointly
Statements of BASF SE as of December 31, 2011, have been controlled entities, they are proportionally eliminated. Material
prepared in accordance with International Financial Reporting inter-company profits related to companies accounted for ­using
Standards (IFRS) and Section 315a (1) of the German Commer­ the e­ quity method are eliminated.
cial Code (HGB). BASF SE is a publicly-listed corporation based Capital consolidation at the acquisition date is based on
in Ludwigshafen am Rhein. Its official address is Carl-Bosch- the purchase method. Initially, all assets, liabilities and additional
Str. 38, 67056 Ludwigshafen am Rhein, Germany. intangible assets that are to be capitalized are valued at fair
The individual financial statements of the companies value. Finally, the acquisition cost is compared with the propor­
­included in the Consolidated Financial Statements of the BASF tionate share of the net assets acquired at fair value. The result­
Group (hereinafter referred to as “consolidated companies”) are ing positive differences are capitalized as goodwill.
generally prepared as of the balance sheet date of the Con­ The incidental acquisition costs of a business combination
solidated Financial Statements. All binding International ­Financial are recognized in the income statement.
Reporting Standards (IFRS) and pronouncements of the Inter­ Translation of foreign currency financial statements:
national Financial Reporting Interpretations Committee (IFRIC) The translation of foreign currency financial statements depends
for the 2011 fiscal year were applied. The IFRS are applied as on the functional currency of the consolidated companies. For
soon as they have been endorsed by the European Union. companies whose functional currency is not the euro, transla­
The accounting policies applied are the same as those in tion into the reporting currency is based on the closing rate
2010. Exceptions to this are changes required by the applica­ method: Balance sheet items are translated into euros at clos­
tion of new or revised reporting standards. In 2011 there were ing rates on the balance sheet date; expenses and income are
no significant changes in this regard. translated into euros at monthly average rates and accumulated
The Consolidated Financial Statements are prepared in for the year. The translation adjustments due to the use of the
­euros, and all amounts, including the figures for previous years, closing rate method are shown under currency translation
are given in million euros unless otherwise indicated. ­adjustments as a component of other comprehensive income
On February 20, 2012, the Consolidated Financial in equity and are recognized in income only upon the disposal
Statements were prepared and authorized for release by the of a company.
Board of Executive ­Directors and submitted for approval by the For certain companies outside the euro or U.S. dollar zone,
Audit Committee to the Supervisory Board of BASF SE at its the euro or U.S. dollar is the functional currency.
meeting on February 23, 2012.
Scope of consolidation: The Consolidated Financial State­ Selected exchange rates
ments include BASF SE as well as all material subsidiaries. BASF
controls these companies or exercises a majority of the voting Closing rates Average rates

rights, either directly or indirectly. Dec. 31, Dec. 31,

Material, jointly controlled entities are included on a propor­ 1 EUR equals 2011 2010 2011 2010
Brazil (BRL) 2.42 2.22 2.33 2.33
tional consolidation basis.
China (CNY) 8.16 8.82 9.00 8.97
Associated companies are accounted for using the equity
Great Britain (GBP) 0.84 0.86 0.87 0.86
method. These are companies in which the Company has a par­
Japan (JPY) 100.20 108.65 110.96 116.24
ticipation of at least 20% and can exercise a significant influence
Malaysia (MYR) 4.11 4.10 4.26 4.27
over the operating and financial policies.
Mexico (MXN) 18.05 16.55 17.29 16.74
Subsidiaries whose business is dormant or of low volume
The Russian Federation (RUB) 41.77 40.82 40.88 40.26
and that is insignificant for the presentation of a true and fair
Switzerland (CHF) 1.22 1.25 1.23 1.38
view of the net assets, financial position and results of opera­
South Korea (KRW) 1,498.69 1,499.06 1,541.23 1,531.82
tions as well as the cash flows are not con­solidated. These com­
United States (USD) 1.29 1.34 1.39 1.33
panies are carried at amortized cost and are written down in the
case of an impairment. The sum of these subsidiaries’ assets
and equity amounts to less than 1% of the corresponding value
at the Group level.
Consolidation method: Assets and liabilities of con­
solidated companies are accounted for and valued uniformly in
­accordance with the principles described herein. For compa­
nies accounted for using the equity method, material deviations
from our accounting policies are adjusted for.
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Policies and scope of consolidation
BASF Report 2011

1.2 – Accounting policies Internally generated intangible assets primarily comprise

­internally developed software. Such software, as well as other
Assets internally generated assets for internal use, are valued at cost
Goodwill is only written down if there is an impairment. Impair­ and amortized over their useful lives. Impairments are recorded
ment testing takes place annually or if there is an indication of if the carrying amount of an asset exceeds the ­recoverable
an impairment. The goodwill impairment test is based on cash- amount.
generating units and compares the recoverable amount of the In addition to those costs directly attributable to the asset,
unit with the respective carrying amount. At BASF, cash-­ costs of internally generated intangible assets also include an
generating units are predominantly the business units, in indi­ appropriate allocation of overhead cost. Borrowing costs are
vidual cases, the divisions. The recoverable amount is the higher capitalized to the extent that they are material and relate to the
of fair value less costs to sell and the value-in-use. Value-in-use period over which the asset is generated.
is generally determined using the discounted cash flow method. The weighted-average useful lives of intangible assets
Impairment testing relies upon the cash-generating unit’s long- amounted to:
term earnings forecasts, which are based on economic
trends. Average amortization in years
The weighted average cost of capital (WACC) based on the
Capital Asset Pricing Model plays an important role in impair­ 2011 2010
Distribution, supply and similar rights 13 13
ment testing. The WACC is made up of the risk-free ­interest rate,
Product rights, licenses and trademarks 17 18
the country-specific tax rates, the beta of the BASF share as
well as assumptions as to the spread for credit risk and the mar­ Know-how, patents and production
technologies 13 11
ket risk premium for the cost of equity. Additional ­important
Internally generated intangible assets 5 5
­assumptions are the forecasts for the detailed ­planning ­period
Other rights and values 6 5
and the terminal growth rates used.
For more information, see Note 12 from page 172 onward
If the impairment loss is equal to or exceeds the carrying The estimated useful life and amortization method chosen are
amount of goodwill, the goodwill is written off completely. Any based on historical values, plans and estimates. These ­estimates
impairment loss left over is allocated to the remaining assets of also consider the period and distribution of future cash inflows.
the cash-generating unit. Goodwill impairment losses are The amortization methods, useful lives and ­residual values are
­reported under other operating expenses. reviewed at each balance sheet date.
Acquired intangible assets are valued at cost less Emission rights: Emission right certificates granted
­scheduled straight-line amortization, except for goodwill and ­free-of-charge by the German Emissions Trading Authority
­intangible assets with indefinite useful lives. The useful life is (Deutsche Emissionshandelsstelle) or a similar authority in other
­determined using the period of the underlying contract and the European countries, are recognized at fair value at the time they
period of time over which the intangible asset is expected to be are credited to the electronic register run by the relevant
used. Impairment losses are recognized if the recoverable ­governmental authority. Purchased emission rights are recorded
amount of the asset is permanently lower than the carrying at cost. Subsequently, they are measured at fair value, up to a
amount. The recoverable amount is the higher of net realizable maximum of acquisition cost. If the fair value is lower than the
value and value-in-use. Impairment losses are reversed if the carrying amount on the balance sheet date, the emission rights
reasons for the impairment no longer exist. are written down.
Depending on the type of intangible asset, the amortiza­ Property, plant and equipment are carried at acquisition
tion expense is recorded as production cost, cost of sales, or production cost less scheduled depreciation over their
­research and development expenses or other operating ­estimated useful lives. The revaluation method is not used. Low-
­expenses. value assets are fully written off in the year of acquisition and
Intangible assets with indefinite useful lives are trade names are shown as disposals.
and trademarks that have been acquired as part of acquisitions. The cost of self-constructed plants includes direct costs,
They are tested for impairment annually. appropriate allocations of material and manufacturing costs, and
a share of the general administrative costs of the divisions
associated with the construction of the plants. Borrowing costs
that are incurred during the period of construction are capital­
ized. For companies in Germany, borrowing costs were capital­
ized at 4.5% whereas country-specific rates were used for Group
companies outside Germany.
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Expenses related to scheduled maintenance turnarounds of BASF acts as a lessor for finance leases in a minor capacity only.
large-scale plants are capitalized as part of the asset and Leases can be embedded within other contracts. If IFRS ­requires
­depreciated using the straight-line method over the period ­until separation of an embedded lease, then it is recorded separately
the next planned turnaround. The costs for the exchange of from its host contract and each component of the contract is
components are recognized as assets when an ­additional ­future carried and measured in accordance with the applicable
benefit is expected. The book value of the ­exchanged com­ ­regulations.
ponents is derecognized. The costs for maintenance and repair Borrowing costs: If the production phase of intangible
as part of normal business operations are recognized as an ­assets or the construction phase of property, plant and equip­
­expense. ment extends beyond a period of one year, the interest incurred
Both movable and immovable fixed assets are usually on borrowed capital directly attributable to that asset is
­depreciated using the straight-line method. The weighted-aver­ ­capitalized as part of the cost of that asset. Borrowing costs are
age depreciation periods used were as follows: capitalized up to the date the asset is ready for its intended use.
All other borrowing costs are recognized as an expense in the
Average depreciation in years period in which they are incurred.
Investment subsidies: Government grants related to the
2011 2010 acquisition or construction of property, plant and equipment
Buildings and structural installations 22 18
­reduce the acquisition or construction cost of the respective
Machinery and technical equipment 10 10
­assets. Other government grants or government assistance are
Long-distance natural gas pipelines 25 25
treated as deferred income and recognized as income over the
Factory, office equipment and other underlying period.
facilities 7 6
Investments in companies accounted for using the
­equity method: The carrying amounts of these companies are
The estimated useful life and depreciation method chosen are adjusted annually based on the pro rata share of income, divi­
based on historical values, plans and estimates. These ­estimates dends and other changes in equity. Should there be indications
also consider the period and distribution of future cash inflows. of a permanent reduction in the value of an ­investment, an im­
The depreciation methods, useful lives and ­residual values are pairment expense is recognized in the income statement.
reviewed at each balance sheet date. The increase in the Inventories are carried at cost. If the listed, market or fair
weighted-average depreciation period of buildings and struc­ value of the sales product which forms the basis for the net
tural installations in 2011 is due to acquisitions that took place ­realizable value is lower, then this is applied and an impairment
in 2009 and 2010. charge is recorded. The net realizable value is based on the
Impairment losses are recognized if the recoverable amount ­estimated selling price in the ordinary course of business less
of the asset is lower than the carrying amount. The evaluation the estimated costs of completion and costs necessary to make
is based on the present value of the expected future cash flows. the sale.
An impairment loss is recorded for the difference between the Production costs include, in addition to direct costs, an
carrying amount and the value of discounted future cash flows. ­appropriate allocation of production overhead costs based on
Impairment losses are reversed if the reasons for the impairment normal utilization rates of the production plants, to the extent
no longer exist. they are related to the production process. In addition, pensions,
Investment properties held to realize capital gains or rental social services and voluntary social benefits are included as well
income are immaterial. They are valued at the lower of acquisi­ as allocations for administrative costs, provided they relate to
tion cost less scheduled depreciation or fair value. the production. Borrowing costs are not included in production
Leases: In accordance with IAS 17, leasing contracts are costs.
classified as either finance or operating leases. Assets which Value adjustments on inventories result from price declines
are subject to operating leases are not capitalized. Lease pay­ in sales products, lack of saleability and the age of inventory.
ments are charged to income in the year they are incurred.
A lease is classified as a finance lease if it substantially
transfers all of the risks and rewards related to the leased asset.
Assets subject to a finance lease are recorded at the present
value of the minimum lease payments. A leasing liability is
­recorded in the same amount. The periodic lease payments are
divided into principal and interest components. The principal
component reduces the outstanding liability, while the interest
component represents an interest expense. Depreciation takes
place over the shorter of the useful life of the asset or the period
of the lease.
150 Consolidated Financial Statements Notes
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IAS 2 “Inventories” does not apply to commodity brokertraders. Financial instruments

Accordingly, inventories held exclusively for trading purposes Financial assets and financial liabilities are recorded on the
are to be measured at fair value. Changes in fair value are ­balance sheet when the BASF Group becomes a party to a
­recognized in income. ­financial instrument. Financial assets are derecognized when
Deferred taxes: Deferred taxes are recorded for tempo­ the contractual rights to the cash flows from the financial asset
rary differences between the carrying amount of assets and li­ expire or when the financial asset, with all risks and rewards of
abilities in the financial statements and the carrying amounts for ownership, is transferred. Financial liabilities are derecognized
tax purposes as well as for tax loss carryforwards and ­unused when the contractual obligation expires, is discharged or
tax credits. This also comprises temporary differences arising ­cancelled. Standard purchases and sales of financial instru­
from business combinations, with the exception of goodwill. De­ ments are accounted for using the settlement date, and in
ferred tax assets and liabilities are calculated a ­ ccording to coun­ ­precious metals trading using the day of trading.
try-specific tax rates. Any changes to the tax rate ­enacted or The fair value of a financial instrument is the amount for
substantively enacted on or before the balance sheet date are which an instrument could be exchanged in an arm’s length
taken into consideration. The tax rate for ­corporations based in transaction between ­knowledgeable, willing parties. When
Germany is 29%. Deferred tax assets are offset against d ­ eferred ­pricing on an active ­market is available, for example on a stock
tax liabilities in so far as they are related to the same taxation exchange, this price is used. In other cases, a valuation is based
authority. Surpluses of deferred tax assets are only ­recognized on internal valuation ­models using current market parameters
to the extent that the tax benefits are likely to be ­realized. The or external valuations, for ­example, from banks. These internal
valuation of deferred tax assets depends on the estimated prob­ valuations predominantly use the net present value method and
ability of a reversal of the temporary differences and the ability option pricing models.
to utilize tax loss carryforwards and unused tax credits. This de­ If there is objective evidence of a permanent impairment of
pends on whether future taxable profits will ­exist during the pe­ a financial instrument that is not measured at fair value and
riod in which temporary ­differences are ­reversed and in which ­recognized through profit or loss, an impairment charge is
tax loss carryforwards and unused tax credits can be claimed. taken.
Based on experience and the expected development of taxable If the reason for the impairment of loans and receivables as
income, it is assumed that the benefit of deferred tax assets rec­ well as held-to-maturity financial instruments no longer exists,
ognized will be ­realized. The valuation of deferred tax assets is the impairment is reversed up to the amortized cost and recog­
based on internal projections of the ­future earnings of the Group nized as income. Impairment losses on financial instruments are
company. booked separately.
Changes made to deferred tax assets or liabilities are Financial assets and liabilities are divided into the following
­recorded as deferred tax expense or income as long as the valuation categories:
transaction or event on which they are based is not recognized
directly in equity. Deferred tax assets and liabilities for those –– Financial assets and liabilities that are measured at fair
­effects which have been recognized in equity are also recorded value and recognized through profit or loss consist of
outside profit and loss. ­derivatives and other trading instruments. At BASF, this
No deferred tax liabilities are recognized for differences ­valuation category only includes derivatives. Derivatives are
­between the proportional IFRS equity and the ­taxable book reported in miscellaneous assets or other liabilities. BASF
value of participations when a reversal of these differences is does not make use of the fair value option under IAS 39. The
not expected in the foreseeable future. Deferred tax liabilities calculation of fair values is based on market parameters or
are created for dividend distributions which are planned for the valuation methods based on such parameters. In some
following year insofar as they lead to a reversal of the temporary ­exceptional cases, the fair value is calculated using parame­
differences. ters which are not o
­ bservable on the market.
For more information, see Note 9 from page 169 onward
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–– Loans and receivables comprise financial assets with fixed –– Available-for-sale financial assets comprise financial ­assets
or determinable payments, which are not quoted on an active which are not derivatives and do not fall under any of the
market and are not derivatives or classified as available-for- ­previously stated valuation categories. This valuation category
sale. Included in this category are trade accounts receivable, comprises participations not accounted for using the equity
loans classified under other financial assets as well as other method and long-term securities reported under the item
receivables and loans classified under other receivables and “other financial assets.” Securities contained in the item
miscellaneous long-term assets. Initial valuation is done at fair ­‘marketable ­securities’ also fall under this valuation category.
value, which generally matches the nominal value of the re­ Initial valuation is carried out at fair value. Changes in fair value
ceivable or loan. Interest-free and low-interest long-term loans are booked to equity under the item other comprehensive
and ­receivables are recorded at present value. Subsequent ­income and are only recorded in the income statement when
­valuations are generally made at amortized cost, under the assets are disposed of or have been impaired. Subsequent
­consideration of the effective interest method. If there is reversals are not recognized in the income statement, but
­objective evidence for an impairment of a receivable or loan, rather directly in equity (other comprehensive income). Rever­
an individual valuation adjustment is made. When assessing sals to the amount of the original value adjustment are recog­
the need for a valuation adjustment, regional and sector-­ nized in income in the case of debt instruments; reversals
specific conditions are considered. In addition, use is made above this amount are recognized in equity. If the fair value of
of ­internal and external ratings as well as the assessments of available-for-sale financial assets drops below acquisition
debt collection agencies and credit insurers, when available. costs, objective evidence is needed to determine whether the
A substantial proportion of receivables is covered by credit asset should be impaired. Objective evidence is said to exist
­insurance. Bank guarantees and letters of credit are used to when the decrease is ­ongoing or significant. The fair values
a limited extent. Only those receivables which are not covered are determined using market prices. Participations whose fair
by insurance or other collateral are written down. The value value cannot be ­reliably determined are carried at amortized
adjustments for receivables whose insurance includes a cost and are ­written down in the case of an impairment. When
­deductible cannot exceed the amount of the deductible. determining the value of these participations, the acquisition
­Valuation adjustments are based on historical values on cus­ costs constitute the best estimate of their fair value. This
tomer solvency and the age, period overdue, insurance ­category of participations ­includes investments in affiliated
­policies and customer-specific risks. In addition, an impair­ companies, investments in associated companies and shares
ment loss occurs when the contractual ­conditions which form in other participations, ­insofar as these shares are not ­publicly
the basis for the receivable or loan need to be changed through traded. There are no plans for a large-scale sale of these par­
renegotiation in such a way that the present value of the ­future ticipations.
cash flows decreases. If, in a ­subsequent period, the amount –– Financial liabilities which are not derivatives are initially
of the valuation adjustment decreases and the decrease can measured at fair value. This normally corresponds to the
be related objectively to an event occurring after the valuation amount payable. Subsequent measurement is carried out at
adjustment was recognized, the previously recognized valu­ amortized cost, using the effective ­interest method.
ation adjustment loss is to be reversed through profit or loss. –– Cash and cash equivalents consist primarily of cash on hand
Reversals of value adjustments may not exceed amortized and bank balances.
cost. Receivables and loans are written off when their uncol­
lectibility is finally determined. Receivables for which no There were no reclassifications between the valuation catego­
­objective indication for an impairment exists may be impaired, ries in 2011 and 2010.
if necessary, based on historical default rates. In addition, Revenue from interest-bearing assets is recognized on the
­valuation adjustments on receivables for transfer risks in outstanding receivables at the balance sheet date using ­interest
­certain countries are established. rates calculated by means of the effective interest method.
–– Held-to-maturity financial assets consist of non-derivative ­Dividends from participations not accounted for under the ­equity
financial assets with fixed or determinable payments and a method are recognized when the shareholders’ right to receive
fixed term, for which there is the ability and intent to hold ­until payment is established.
maturity, and which do not fall under other valuation catego­ Derivative financial instruments can be embedded within
ries. Initial valuation is made at fair value, which, in most cases, other contracts. If IFRS requires separation, then the embed­
matches the nominal value. Subsequently, measurement is ded derivative is recorded separately from its host contract and
carried out at amortized cost, under consideration of the shown at fair value.
­effective interest method. Financial guarantees of the BASF Group are contracts that
For BASF, there are no material financial assets that fall require compensation payments to be made to the guarantee
­under this category. holder if a debtor fails to make payment when due under terms
of the financial guarantee. Financial guarantees are measured
at fair value upon initial recognition. In subsequent periods,
­financial ­guarantees are carried at the higher of amortized cost
or the best estimate of the present obligation on the financial
­reporting date.
152 Consolidated Financial Statements Notes
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Cash flow hedge accounting is applied for selected deals to They result from the variance between the actual ­development
hedge future transactions. The effective portion of the change in pension obligations and pension assets and the assumptions
in fair value of the derivative is thereby recognized directly in made at the beginning of the year as well as the updating of
­equity under other comprehensive income, taking deferred ­actuarial assumptions.
taxes into account. The ineffective portion is recognized imme­ Similar obligations, especially those arising from commit­
diately in profit or loss. In the case of future transactions that will ments in North America to pay the healthcare costs and life
lead to a non-financial asset or a non-financial debt, the cumu­ ­insurance premiums of retired staff and their dependents, are
lative fair value changes in ­equity are either charged against the included in pension provisions.
­acquisition costs on initial recognition or recognized in profit or The calculation of pension provisions is based on actuarial
loss in the reporting period in which the hedged item is recorded reports.
in the income statement. For hedges based on financial assets  or more information on provisions for pensions and similar obliga-
F
tions, see Note 20 from page 181 onward
or debts, the cumulative fair value changes of the hedges are
transferred from equity to the income statement in the report­
ing period in which the hedged item is recognized in the income Other provisions: Other provisions are recognized when there
statement. The maturity of the hedging instrument is based upon is a present obligation as a result of a past event and when there
the ­effective date of the future transaction. is a probable outflow of resources whose amount can be ­reliably
To hedge the translation risk from the net investment in a estimated. Provisions are recognized at the probable settlement
foreign subsidiary, BASF uses hedge accounting in individual value.
cases (hedge of a net investment in a foreign operation). The Provisions for German trade income tax, German corpo­
effective portion of the hedge is recognized in ­equity. If the for­ rate income tax and similar income taxes are determined and
eign operation is disposed of, these amounts are reclassified to recognized in the amount necessary to meet the expected pay­
profit and loss. The ineffective portion of the hedge is immedi­ ment obligations, less any prepayments that have been made.
ately recognized in profit and loss. Other taxes assessed are appropriately considered.
When fair value hedges are used, the asset or liability is Provisions are established for certain environmental
hedged against the risk of a change in fair value. Here changes ­protection measures and risks if the measures are considered
in the market value of the derivative financial instruments are likely as a result of present legal or constructive obligations
recognized in the income statement. Furthermore, the book ­arising from a past event. Provisions for restoration obligations
value of the underlying transaction is adjusted by the profit or ­primarily concern the filling of wells and the removal of produc­
loss resulting from the hedged risk and recognized in the ­income tion facilities upon the termination of production in the Oil & Gas
statement. ­segment. The present value of the obligation increases the cost
The derivatives employed by BASF for hedging purposes of the ­respective asset when it is initially recognized.
are effective hedges from an economic point of view. Changes Other provisions also include expected charges for the
in the fair value of the derivatives almost completely offset the ­rehabilitation of contaminated sites, the recultivation of landfills,
changes in the value of the underlying contracts. the removal of environmental contamination at existing produc­
tion or storage facilities and other similar measures. If BASF is
Debt the only responsible party that can be identified, the provision
Provisions for pensions and similar obligations: Provisions covers the entire expected claim. At sites operated together with
for pensions are based on actuarial computations made accord­ one or more partners, the provision covers only BASF’s share
ing to the projected unit credit method, which applies, among of the expected claim. The determination of the amount of the
others, the following valuation parameters: future developments provision is based on the available technical information on the
in compensation, pensions and inflation, the expected perfor­ site, the technology used, legal regulations, and official obliga­
mance of plan assets, employee turnover and the life expec­ tions.
tancy of beneficiaries. The resulting obligations are discounted The estimation of future costs is subject to uncertainties.
by reference to market yields at the balance sheet date on high This refers in particular to rehabilitation measures that involve
quality corporate fixed rate bonds with an AA rating. Actuarial several parties and longer time periods.
gains and losses are recognized directly in retained earnings.
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Provisions are recognized for expected severance payments or Payments relating to the sale or licensing of technologies or
­similar personnel expenses as well as for demolition expenses technological expertise are recognized in income according to
and other charges related to the closing down of operations that the contractually agreed transfer of the rights and obligations
have been planned and publicly announced by management. associated with those technologies.
Provisions for long-service and anniversary bonuses are Foreign currency transactions: The cost of assets
predominantly calculated based on actuarial principles. For ­acquired in foreign currencies and revenue from sales in foreign
­contracts signed under the early retirement programs, provi­ currencies are recorded at the exchange rate on the date of the
sions for the supplemental payments are recognized in their full transaction. Foreign currency receivables and liabilities are
amount and the wage and salary payments due during the ­valued at the exchange rates on the balance sheet date. ­Foreign
­passive phase of agreements are accrued in installments. exchange gains or losses resulting from the conversion of ­assets
 or more information on provisions for the long-term incentive pro-
F and liabilities are reported as other operating expenses or other
gram, see Note 28 from page 198 onward
operating income under other financial income or expenses; for
Other provisions also cover risks resulting from legal available-for-sale financial assets, they are reported in other
­ isputes and proceedings. In order to determine the amount of
d comprehensive ­income.
the provisions, the facts related to each case, the size of the Oil and gas exploration and production: Exploration and
claim, claims awarded in similar cases and independent expert development expenditures are accounted for using the success­
advice are considered along with assumptions regarding the ful efforts method. Under this method, costs of successful
probability of a successful claim and the range of possible ­exploratory drilling as well as successful and dry development
claims. The actual costs can deviate from these estimates. wells are capitalized as property, plant and e ­ quipment.
For more information, see Note 24 on page 190 An exploration well is a well located outside of an area with
The probable amount required to settle long-term provisions proven oil and gas reserves. A development well is a well which
is discounted if the effect of discounting is material. In this case, is drilled to the depth of a reservoir of oil or gas within an area
the provision is recognized at present value. Assumptions have with proven reserves.
to be made in determining the discount rate to be used in cal­ Production costs include all costs incurred to operate,
culating long-term provisions. Financing costs related to the ­repair and maintain the wells as well as the associated plant and
compounding of provisions in subsequent periods are shown in ancillary production equipment, including the associated
other financial results. ­depreciation.
Exploration expenses relate exclusively to the Oil & Gas
Other accounting policies segment and include all costs related to areas with unproven oil
Revenue recognition: Revenues from the sale of goods or the or gas deposits. Included here are costs for the exploration of
rendering of services are recognized upon the transfer of areas with possible oil or gas deposits, among others. Costs for
­ownership and risk to the buyer. They are valued at the fair value geological and geophysical investigations are always reported
of the consideration received. Sales are reported without sales under exploration expenses. In addition, this item includes the
tax. Expected rebates and other trade discounts are either impairment charges of exploration wells which did not encoun­
­accrued or deducted. Provisions are made to cover probable ter proven reserves. Scheduled depreciation of successful
risks related to the return of products, estimated future warranty ­exploratory drilling is reported under cost of sales.
obligations and other claims. Exploratory drilling is generally reported under construc­
Revenues from the sale of precious metals to industrial tion in progress until its success can be determined. When the
­customers as well as some revenues from natural gas trading ­presence of hydrocarbons is proven such that the economic
are recognized at the time of shipment and the corresponding development of the field is probable, the costs remain ­capitalized
purchase price is recorded at cost of sales. In the trading of as suspended well costs. At least once a year, all suspended
­precious metals and their derivatives with broker-­traders, where wells are assessed from an economic, technical and strategic
as a rule there is no physical delivery, revenues are ­recorded on viewpoint to see if development is still intended. If this is not the
a net basis. Revenues from the natural gas trading activities of case, the well in question is written off. When reserves are
a project company consolidated by BASF are also recorded on proven and the development of the field begins, the exploration
a net basis. wells are ­reclassified as machinery and technical equipment.
In certain cases, customer acceptance is required on
­delivery. In these cases, revenue is recognized after customer
acceptance occurs.
154 Consolidated Financial Statements Notes
Policies and scope of consolidation
BASF Report 2011

An Exploration and Production Sharing Agreement (EPSA) is a Use of estimates in the preparation of the Consoli-
type of contract in crude oil and gas concessions whereby the dated Financial Statements
expenses and profits from the exploration, development and The carrying amount of assets, liabilities and provisions, contin­
production phases are divided between the state and one or gent liabilities and other financial obligations in the Consolidated
more exploration and production companies using defined keys. Financial Statements depends on the use of estimates and
The revenue BASF is entitled to under such contracts is reported ­assumptions. Specific estimates or assumptions used in­
as sales. Negotiations to convert the Libya concession agree­ individual accounting or valuation methods are disclosed in their
ments into EPSA-IV agreements are suspended due to the respective sections. They are based on the circumstances and
­political situation. estimates on the balance sheet date and affect the reported
Provisions for required restoration obligations associated amounts of income and expenses during the reporting periods.
with oil and gas operations concern the filling of wells and the These assumptions affect the determination of useful lives of
removal of production facilities upon the termination of produc­ property, plant and equipment and intangible assets, the
tion. When the obligation arises, initial measurement is con­ ­measurement of provisions, the carrying amount of investments,
ducted at the present value of the future restoration costs. An and other similar valuations of assets and obligations. Although
asset of the same value is capitalized as part of the carrying ­uncertainty is appropriately incorporated in the valuation factors,
amount of the plant concerned and together they are depreci­ actual results can differ from these estimates.
ated. ­Interest on the provision is accrued annually until the time In business combinations, the acquired assets and liabili­
of the planned restoration. ties are recognized at fair value on the date the acquirer effec­
The unit of production method is used to depreciate assets tively obtains control. The determination of fair value of the
from oil and gas exploration at the field or reservoir level. In prin­ ­acquired ­intangible assets, property, plant and equipment and
ciple, depreciation is calculated on the basis of proven, devel­ ­liabilities ­assumed at the date of exchange as well as the useful
oped reserves in relation to the production of the period. lives of the acquired intangible assets and property, plant and
In the natural gas trading business, long-distance natural equipment is based on assumptions. The measurement is largely
gas pipelines are depreciated using the straight-line method. based on projected cash flows. The actual cash flows can differ
The weighted-average depreciation period amounted to 25 significantly from the cash flows used to determine the fair ­values.
years in 2011 (2010: 25 years). The intangible asset from the The ­purchase price allocation of material acquisitions is based on
marketing contract for natural gas from the Yuzhno Russkoye ­external appraisals. When businesses are ­acquired, measure­
natural gas field is amortized based on BASF’s share of the ments are based on the information available on the acquisition
­produced and distributed volumes. date.
Intangible assets in the Oil & Gas segment relate primarily Impairment tests on assets are required whenever certain
to exploration and drilling rights. During the exploration phase, triggering events indicate that an impairment may be necessary.
these are not subject to scheduled amortization but are tested External triggering events include, for example, changes in
for impairment annually. When economic success is determined, ­customer industries, technologies used and economic down­
the rights are amortized in accordance with the unit of produc­ turns. ­Internal triggering events for an impairment include lower­
tion method. product profitability, planned restructuring measures or
physical damage to assets. Intangible assets with indefinite
Assets and liabilities of disposal groups: These comprise useful lives are subject to an annual impairment test.
those assets and directly associated liabilities shown on the Impairment tests are based on a comparison of the carrying
­balance sheet whose sale in the context of a single transaction amount and the recoverable amount. The recoverable amount is
is highly probable. The assets and liabilities of disposal groups the higher of net realizable value and value-in-use. The determi­
are recognized at the lower of the sum of their carrying amounts nation of value-in-use requires the estimation and discounting of
or fair value less costs to sell. Scheduled depreciation of long- cash flows. The estimation of cash flows and the assumptions
term assets is suspended. used consider all information available on the respective balance
 urther information on the assets and liabilities of disposal groups
F sheet date on the future development of the operating business.
can be found in Note 2 on page 161
Actual future developments may vary.
 Notes

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2011 Statements Notes
xxx
Policies and scope of consolidation
Consolidated Financial
BASF Report
Statements
2011
155

IFRSs and IFRICs not yet to be considered in the preparation of the consolidated financial statements
The effects on the BASF Group of the IFRSs and IFRICs not yet in force or not yet endorsed by the European Union in the fiscal year
2011 were reviewed:

Implementa-
tion date Endorsed by
Standard/ Published by stipulated by the European
Interpretation IASB IASB Union Anticipated impact on BASF

IFRS 9 Nov. 12, 2009 Jan. 1, 2015 Postponed As the first phase of the project to replace IAS 39, Financial Instruments - Recognition and
Financial Measurement, this standard introduces new classes, classification criteria and assessment
Instruments criteria for financial instruments. The potential impact on BASF is currently being analyzed.
In addition, on October 28, 2010, new requirements from IFRS 9 were published on the
accounting for financial liabilities and the derecognition of financial instruments. In particular
these changes will affect those financial liabilities that were optionally measured at fair
value. The potential impact on BASF is currently being analyzed.

IFRS 10 May 12, 2011 Jan. 1, 2013 Expected in Q3 This new standard comprehensively regulates the mandatory full consolidation of subsidiar-
Consolidated 2012 ies and clarifies which conditions lead to a full consolidation. In contrast to IAS 27, this
Financial State- standard is geared more strongly towards the economic situation as opposed to the legal
ments conditions. The impact on BASF is being analyzed.

IFRS 11 May 12, 2011 Jan. 1, 2013 Expected in Q3 The regulations contained within IFRS 11 will bring about considerable changes.
Joint 2012 BASF currently consolidates jointly controlled entities proportionally. In the future jointly
Arrangements controlled ­entities will have to be accounted for using the equity method. The option to use
proportional consolidation will be abolished.
After the standard is endorsed by the E.U., BASF plans to classify the equity result as part
of EBIT in its external reporting. The value of investments accounted for using the equity
method will be shown as operating assets.
Applying this regulation to the year 2011, for example, would result in a decrease in sales of
€5,749 million.
For financial information on proportionally consolidated companies, see Note 2
from page 156 onward

IFRS 12 May 12, 2011 Jan. 1, 2013 Expected in Q3 This new standard requires more extensive disclosures with respect to fully consolidated
Disclosure of 2012 companies and companies which are not included in the Consolidated Financial State-
Interests in ments, i.e. the reasons why they were fully consolidated or excluded. This change will
Other Entities impact the Notes to the Consolidated Financial Statements of the BASF Group.

IFRS 13 May 12, 2011 Jan. 1, 2013 Expected in Q3 IFRS 13 will replace the individual regulations governing the determination of fair value. This
Fair Value 2012 standard does not introduce any significant new valuation requirements but does require
Measurement additional notes. The potential impact on BASF is currently being analyzed.

Amendments to May 12, 2011 Jan. 1, 2013 Expected in Q3 The provision of IAS 28 governing the use of the equity method will be considerably
IAS 28 2012 expanded by the adoption of IFRS 11. In the future it will have to be used on shares in jointly
Investments in controlled entities (see IFRS 11). The use of proportional consolidation for jointly controlled
Associates entities will consequently be omitted. The impact on BASF is explained above (IFRS 11).
Additionally, remaining shares in associated companies that later become shares of a jointly
controlled entity (or vice versa) do not have to be revalued.

Amendments to June 16, 2011 July 1, 2012 Expected in Q1 Components of other comprehensive income (OCI) that are to be, under certain circum-
IAS 1 2012 stances, reclassified in the profit and loss statement will have to be shown separately from
Presentation of those components which can never be reclassified. The impact on BASF is being analyzed.
Financial State-
ments

IAS 19 June 16, 2011 Jan. 1, 2013 Expected in Q1 The most significant change of IAS 19 requires that experience-based adjustments and
Employee 2012 effects from changes of actuarial assumptions, reported as actuarial gains and losses, will
Benefits have to be recognized immediately in other comprehensive income. The previous choice
between immediate reporting in profit and loss, reporting in other comprehensive income or
delayed reporting according to the corridor method will be abolished. The amendment will
not have an effect on BASF.
Additionally, interest rates on plan assets will no longer be calculated according to expecta-
tions but will instead be equal to the discount rate of pension obligations.
For more information, see Note 20 from page 181 onward
The revised IAS 19 also requires more detailed notes.

Other new standards or amendments of the standards will have no material impact on BASF. Implementing the standards before
endorsement by the European Union is not planned.
156 Consolidated Financial Statements Notes
Policies and scope of consolidation
BASF Report 2011

2 – Scope of consolidation

2.1 – Changes in scope of consolidation –– an additional eleven companies which had previously not been
consolidated, registered in Germany, China, South ­Korea,
In 2011, the scope of consolidation for the Consolidated ­Financial ­Belgium, Canada and Panama.
Statements encompassed 316 companies (2010: 339). Of this
number, 26 companies were first-time consolidations (2010: 46). First-time consolidations in 2010 comprised:
Since the beginning of 2011, 49 companies were deconsolidated
due to merger, sale or immateriality (2010: 52). –– a total of 40 companies in conjunction with the acquisition of
Cognis Holding GmbH
First-time consolidations in 2011 comprised: –– an additional six companies due to their increased impor­
tance, which had previously not been consolidated, registered
–– a total of four companies in conjunction with the acquisition in Germany, China, Japan and Algeria.
of inge watertechnologies AG and inge GmbH
–– eleven companies as a result of carving out the ­styrenics A list of companies included in the Consolidated Financial State­
­activities as of January 1, 2011. These companies were ments and a list of all companies in which BASF SE has a
­removed from the scope of consolidation as of October 1, ­participation as required by Section 313 (2) of the German
2011 along with two other companies due to their transfer into ­Commercial Code is provided in the List of Shares Held.
Styrolution Holding GmbH, which is ­accounted for using the For more information, see Note 3 on page 162
equity method

Scope of consolidation

South
America,
Thereof North Asia Africa,
Europe Germany America Pacific Middle East 2011 2010
Consolidated companies as of January 1 203 68 39 71 26 339 345
Thereof proportionally consolidated 11 1 3 7 – 21 19
First-time consolidations 12 9 5 8 1 26 46
Thereof proportionally consolidated 1 – – 2 – 3 2
Deconsolidations 23 7 6 12 8 49 52
Thereof proportionally consolidated – – – – – – –
Consolidated as of December 31 192 70 38 67 19 316 339
Thereof proportionally consolidated 12 1 3 9 – 24 21

Overview of impact of changes to the scope of consolidation (excluding acquisitions and divestitures)

2011 2010
Million € % Million € %
Sales 108 0.1 149 0.2

Long-term assets (67) (0.2) (146) (0.4)

Thereof property, plant and equipment 44 0.2 46 0.3
Short-term assets 140 0.5 111 0.4
Thereof cash and cash equivalents (3) (0.1) 72 4.8
Total assets 73 0.1 (35) (0.1)

Equity (28) (0.1) (126) (0.6)

Long-term liabilities 6 . 25 0.1
Thereof financial indebtedness 2 . . .
Short-term liabilities 95 0.6 66 0.4
Thereof financial indebtedness 47 1.2 1 .
Total equity and liabilities 73 0.1 (35) (0.1)
Contingent liabilities and other financial obligations 12 0.2 28 0.4
 Notes

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BASF Report Financial
2011 Statements Notes
xxx
Policies and scope of consolidation
Consolidated Financial
BASF Report
Statements
2011
157

2.2 – Proportionally and at equity consolidated As of August 1, 2011, Shell withdrew from the joint venture
companies ­Sabina ­Petrochemicals LLC, Port Arthur, Texas. Since then, the
company has been operated together under joint control with
Proportionally consolidated joint ventures of major significance TOTAL as the sole remaining partner. BASF’s stake in the com­
are as follows: pany was raised from 23% to 60%.
In 2011, 13 companies were accounted for using the equity
–– Wintershall Erdgas Handelshaus GmbH & Co. KG, Berlin, method (2010: 14). The following associated companies of ­major
­Germany, Wintershall Erdgas Handelshaus Zug AG, Zug, significance have been accounted for using the equity
­Switzerland, as well as ZAO Achimgaz, Novy Urengoy, the method:
Russian Federation, joint ventures with Gazprom through
which gas trading activities and the production of natural gas –– Solvin Group (BASF stake: 25%)
and condensate in Siberia are operated –– CIMO Compagnie industrielle de Monthey S.A., Monthey,
–– ELLBA C.V., Rotterdam, the Netherlands and ELLBA Eastern Switzerland (BASF stake: 50%)
Private Ltd., Singapore, which are operated jointly with Shell –– Nord Stream AG, Zug, Switzerland (BASF stake: 15.5%)
and produce propylene oxide and styrene monomers –– OAO Severneftegazprom, Krasnoselkup, the Russian Feder­
–– BASF DOW HPPO Production B.V.B.A., Antwerp, Belgium, ation (BASF stake: 25%; share of economic rewards: 35%)
which is operated jointly with The Dow Chemical Company to –– Shanghai Lianheng Isocyanate Co. Ltd., Shanghai, China
produce propylene oxide (BASF stake: 35%)
–– BASF-YPC Company Ltd., a joint venture between BASF and –– Styrolution Holding GmbH, Frankfurt am Main, Germany
Sinopec, which operates the Verbund site in Nanjing, China (BASF stake: 50%). Effective ­October 1, 2011, the carved-out
–– N.E. Chemcat Corporation, Tokyo, Japan, which is operated parts of the ­styrenics business were transferred to Styrolu­
jointly with Sumitomo Metal Mining. tion, which is jointly operated with INEOS.
For more information, see Note 2.3 from page 159 onward
On May 31, 2011, BASF increased its stake in Heesung Catalysts
Corporation, Seoul, South Korea, to 50%. Therefore, the com­ A complete listing of all proportionally consolidated companies
pany is now proportionally consolidated and is no longer con­ and companies consolidated using the equity method is ­available
solidated using the equity method. In accordance with IFRS 3, in the List of Shares Held.
a purchase price allocation has to be carried out following the For more information, see Note 3 on page 162
acquisition of additional shares. The purchase price allocation
took place in the second quarter and should be considered
provisional. It can be adjusted within a period of one year. The
first proportional consolidation of Heesung Catalysts Corpora­
tion resulted in goodwill of €1 million. Furthermore, €58 million
was charged as a special item to the financial result. Of this
amount, €23 million resulted from the recycling into profit and
loss of negative currency translation effects on the participation
value of Heesung, which had been ­previously recognized in ­other
comprehensive income in accordance with IAS 21. On the date
when the stake increase took place, the previously held stake
of 49% had to be revalued, which led to an additional charge of
€35 million.
158 Consolidated Financial Statements Notes
Policies and scope of consolidation
BASF Report 2011

Financial information on proportionally consolidated companies (BASF stake)

Million € 2011 2010

Income statement information
Sales 5,749 4,602
Income from operations 345 383
Income before taxes and minority interests 371 408
Net income 284 363

Balance sheet information

Long-term assets 1,674 1,533
Thereof property, plant and equipment 1,498 1,382
Short-term assets 1,642 1,262
Thereof marketable securities, cash and cash equivalents 133 148
Total assets 3,316 2,795
Equity 1,617 1,385
Long-term liabilities 556 426
Thereof financial indebtedness 349 237
Short-term liabilities 1,143 984
Thereof financial indebtedness 154 105
Total equity and liabilities 3,316 2,795
Contingent liabilities and other financial obligations 285 158

Consolidated statements of cash flows

Cash provided by operating activities 395 486
Cash used in investing activities (194) (213)
Cash used in financing activities (234) (300)
Net changes in cash and cash equivalents (33) (27)

Financial information on associated companies of major significance consolidated using the equity method
(complete financial statements; 100%)

Million € 2011 2010

Income statement information
Sales 4,100 3,332
Income from operations 330 712
Income before taxes and minority interests 254 702
Net income 206 554
BASF’s share of net income 69 202

Balance sheet information

Long-term assets 11,739 7,431
Thereof property, plant and equipment 9,949 2,556
Short-term assets 3,483 1,535
Thereof marketable securities, cash and cash equivalents 448 559
Total assets 15,222 8,966
Equity 5,574 3,871
Long-term liabilities 7,196 2,598
Thereof financial indebtedness 5,996 224
Short-term liabilities 2,452 2,497
Thereof financial indebtedness 937 1,577
Total equity and liabilities 15,222 8,966
BASF’s share of equity 1,786 958
 Notes

159 Consolidated
BASF Report Financial
2011 Statements Notes
xxx
Policies and scope of consolidation
Consolidated Financial
BASF Report
Statements
2011
159

2.3 – Acquisitions and divestitures BASF acquired the following businesses in 2010:

Acquisitions –– On December 9, 2010, BASF acquired Cognis Holding GmbH

In 2011, BASF acquired the following activities: (Cognis), Monheim, Germany, a specialty chemicals company
that produces products based on renewable raw materials for
–– The acquisition of inge watertechnologies AG and inge GmbH, the health and nutrition market as well as the cosmetics, deter­
Greifenberg, Germany, a specialist for ultrafiltration technology, gents and cleaner industries. The equity purchase price of the
which had been announced in April 2011, was successfully shares in Cognis held on the acquisition date amounted to
completed on August 16, 2011. This ­acquisition gives BASF €700 million, plus €4 million in interest. The ­approval for the
­access to the technology and market for ultrafiltration, a method ­acquisition of Cognis from the antitrust authorities contained
of treating drinking water, process water, wastewater and conditions pertaining to the divestiture of ­certain businesses
­seawater using special Multibore® ­membranes. and plants ­located at Cognis’ site in Hythe, ­England (the Cog­
–– In October BASF founded BASF Hock Mining Chemical (China) nis ­hydroxy methacrylates business, the Cognis multifunctional
Company Limited (BASF Hock) together with Ji’Ning Hock methacrylates [MFM] and adducts business, and plants for the
­Mining & Engineering Equipment Company Limited (Hock). production of polyalkylene glycols [PAG] and PAG-based
BASF holds a majority share of 75% in BASF Hock. In Decem­ ­lubricants.) The remaining business activities of Cognis were
ber 2011, the company acquired Hock’s business activities in completely integrated into the BASF Group, p ­ rimarily in the
the area of chemical injection and cavity filling products for coal ­Performance Products segment. The preliminary purchase
mining and other underground applications. price allocation from 2010 was slightly adjusted in the ­current
–– Additionally, on November 25, 2011, BASF completed its reporting year. As a result, goodwill increased by €10 million to
­acquisition of 50% of Zandvliet Power N.V., which had been €599 million.
­announced in June. Zandvliet Power N.V. is a jointly controlled –– In addition, on December 30, 2010, BASF acquired the styrene
entity with the Belgian company Electrabel and runs the gas catalysts business of CRI/Criterion, a company based in Iselin,
and steam turbine power plant at the BASF site in Antwerp, New Jersey.
­Belgium.
The following shows an overview of ­the preliminary purchase price
allocations of the acquisitions conducted in 2011 and 2010.

Effects of acquisitions in the year of acquisition

2011 2010
Million € % Million € %
Long-term assets 213 0.6 2,830 8.2
Goodwill 50 0.8 589 10.0
Other intangible assets 91 1.5 1,317 20.7
Property, plant and equipment 66 0.4 833 4.8
Financial assets – – 19 0.6
Other assets 6 0.4 72 4.1
Short-term assets 23 0.1 1,189 4.8
Thereof cash and cash equivalents 1 0.1 116 7.8
Total assets 236 0.4 4,019 6.8

Equity 10 . 3 .
Long-term liabilities 56 0.3 843 4.0
Thereof financial indebtedness – – 1 .
Short-term liabilities 21 0.1 2,452 15.7
Thereof financial indebtedness – – 1,920 57.0
Total equity and liabilities 87 0.1 3,298 5.6
Payments for acquisitions 149 721
160 Consolidated Financial Statements Notes
Policies and scope of consolidation
BASF Report 2011

Divestitures In 2010, BASF divested the following activities:

In 2011, BASF divested the following activities:
–– The iron oxides business, marketed under the name Sicovits,
–– On April 1, 2011, N.E. Chemcat Corporation, Tokyo, Japan, was sold to Rockwood Italia S.p.A. on December 1, 2010.
an entity jointly controlled with Sumitomo Metal Mining, sold –– On November 22, 2010, BASF completed the disposal of the
the business with chemicals for surface treatment and dyes and markers business to John Hogg Technical Solutions
­electroplating to Metalor, an international group based in Ltd. This business included the Sudan®, Pigmoil, Somalia,
­Switzerland. The divested business activities include solutions ­Covertrace® and KeroDye® brands.
for precious metals as well as apparatus engineering for –– In 2010, the business with synthetic dry strength agents used
­electroplating applications, which are primarily sold to in the paper industry was divested in accordance with the
­customers in the electrical ­industry. ­European Commission’s conditions for the acquisition of Ciba.
–– On April 8, 2011, BASF divested its surface technologies In addition, the business with starch production and modifi­
­business for thermal spray coatings, which had been acquired cation plants was sold to Chemigate Oy. Furthermore, BASF
as part of the Engelhard acquisition in 2006. The business was able to sell major parts of the Ciba Expert Services
was sold to North American firm Metal Improvement ­Company ­business to Intertek Group plc, and the businesses with the
LLC, a subsidiary of Curtiss Wright Corporation, based in New pigments bismuthvanadate and indanthrone blue to Domin­
Jersey. ion Colour Corporation, in order to comply with conditions
–– The bisomer-monomer business and the conventional ­contact ­imposed by antitrust authorities.
lens business of Cognis were sold to GEO Specialty Chemi­ –– On September 28, 2010, the sale of the PIRA business to the
cals Inc. on August 31, 2011, thereby fulfilling the conditions Smithers Group was completed.
of the acquisition as set out by the European Commission. –– On June 7, 2010, BASF concluded the divestiture of its
The transaction included production facilities in Hythe, ­business with hydrophilic melt additives for plastics, marketed
­England. under the brand name Irgasurf HL, to Techmer PM, based in
–– On October 1, 2011, BASF transferred its ­styrenics disposal Tennessee.
group activities to the joint venture Styrolution.
 or more information on the divestiture of the styrenics business,
F The following overview shows the effects of the divestitures in
see page 161
2011 and 2010 on the consolidated balance sheet (including the
divestiture of the styrenics business). Sales represents the
­decline in sales due to the divestitures compared with the pre­
vious year. The impact on equity relates mainly to gains and
losses from divestitures. Any expenditures for restructuring mea­
sures connected with divestitures are not included.

Effects of divestitures in the year of divestiture

2011 2010
Million € % Million € %
Sales (361) (0.5) (58) .

Long-term assets 728 2.1 (10) .

Thereof property, plant and equipment (13) (0.1) (9) (0.1)
Short-term assets (735) (2.7) (19) (0.1)
Thereof cash and cash equivalents (2) (0.1) – –
Total assets (7) . (29) .

Equity 586 2.3 19 .

Long-term liabilities 148 0.8 – –
Thereof financial indebtedness – . – –
Short-term liabilities (74) (0.4) (5) .
Thereof financial indebtedness – . – –
Total equity and liabilities 660 1.1 14 .
Proceeds from divestitures 667 43
 Notes

161 Consolidated
BASF Report Financial
2011 Statements Notes
xxx
Policies and scope of consolidation
Consolidated Financial
BASF Report
Statements
2011
161

Divestiture of styrenics activities Profit realization from the deconsolidation of styrenics activities
(million €)
On October 1, 2011, BASF and INEOS transferred their world­
Fair value of the 50% share in Styrolution 1,285
wide business activities in the styrene monomer (SM), poly­
Disposed net assets of the disposal group (741)
styrene (PS), acrylonitrile butadiene styrene (ABS), styrene-
Cash consideration 600
butadiene block copolymer (SBC), copolymer blends and other
Net payment from mutual compensation claims (7)
styrene-based copolymer (SAN, AMSAN, ASA, MABS) busi­
Miscellaneous income and expenses 7
ness activities into the newly-founded joint venture Styrolution.
Adjustment according to SIC-13 (551)
The 50% share held by BASF is consolidated using the equity
Disposal gains 593
method. BASF does not intend to hold this share permanently.
To determine the disposal gain, Styrolution was measured at fair
value on the basis of discounted cash flows as of October 1, Assets and liabilities of disposal groups
2011. At this time, the styrenics disposal group was deconsoli­ BASF intends to sell large parts of its fertilizer activities. To this
dated as a disposed net asset. The following table shows the end, BASF signed a contract on September 27, 2011, with
disposed assets and liabilities for the styrenics disposal group ­EuroChem, Moscow, the ­Russian Federation, to sell its fertilizer
as of September 30, 2011: activities in Antwerp, ­Belgium. The sale comprises production
facilities for calcium ammonium nitrate and ammonium nitrate
Styrenics disposal group on the date of disposal (million €) fertilizers, Nitro­phoska® products, nitrophosphoric acid and the
three related nitric acid plants. The sale will result in the trans­
Sept. 30, 2011 fer of around 330 employees.
Intangible assets 42
The transaction with EuroChem still requires the approval
Property, plant and equipment 216
of the antitrust authorities and is expected to be finalized ­during
Inventories 297
the first quarter of 2012.
Accounts receivable, trade 380
Furthermore, as of the balance sheet date, BASF planned
Other receivables and other assets 52
to sell its 50% share in the jointly controlled entity PEC-Rhin,
Cash and cash equivalents 49
­Ottmarsheim, France to its partner GPN. PEC-Rhin owns and
Assets of the disposal group 1,036
operates production facilities for calcium ammonium nitrate and
Provisions for pensions and similar obligations 4
ammonium nitrate ­fertilizers, as well as production facilities for
Other provisions 62
the intermediates ­ammonia and nitric acid. This transaction was
Accounts payable, trade 123
concluded on January 31, 2012.
Other liabilities 106
The fertilizer activities in Antwerp and Ottmarsheim have a
Liabilities of the disposal group 295
total annual capacity of approximately 2.5 million metric tons of
Net assets 741
fertilizer and account for less than 1% of BASF Group’s total
sales. Fertilizer production plants at the Ludwigshafen site are
With the founding of Styrolution, BASF received a cash consid­ not part of the transaction and will be retained by BASF.
eration in the amount of €600 million as compensation for the The assets and liabilities have been reclassified into a
value difference between the businesses contributed by both ­disposal group. The values of the disposal group are shown in
joint venture partners. Other expenses and income from the the following table:
­divestiture include options (measured at fair value) in connec­
tion with the planned ­medium-term withdrawal of BASF from Fertilizer disposal group (million €)
the joint venture and deconsolidation effects; previously
­eliminated receivables and payables between BASF Group Dec. 31, 2011
Intangible assets –
companies and Styrolution have been ­reinstated. The reported
Property, plant and equipment 45
­disposal gains of €593 million were ­determined in accordance
Inventories 76
with the regulations set out by the Standing Interpretations Com­
Accounts receivable, trade 172
mittee Interpretation (SIC-13). This amount equals the cash con­
Other receivables and other assets 1
sideration less the mutual compensation claims. The initial
Cash and cash equivalents 1
­at-­equity book value of the participation in ­Styrolution, adjusted
Assets of the disposal group 295
according to SIC-13, was €734 million.
Provisions for pensions and similar obligations –
The following overview shows the individual components
Other provisions 17
of the profit BASF realized as a result of the disposal of its
Accounts payable, trade 46
­styrenics business:
Other liabilities 24
Liabilities of the disposal group 87
Net assets 208
162 Consolidated Financial Statements Notes
Segments and regions
BASF Report 2011

3 – List of Shares Held of the BASF Group in accordance with Section 313 (2) of the German
Commercial Code

List of Shares Held component of the audited Consolidated Financial Statements

The list of consolidated companies and the complete list of all submitted to the electronic Federal Gazette. It is also published
companies in which BASF SE has a participation as required by on the internet. basf.com/en/investor/cg
Section 313 (2) of the German Commercial Code is an integral

4 – Reporting by segment and region

BASF’s worldwide business is conducted by 15 operating On January 1, 2011, we carved out our styrenics business and
­ ivisions that are divided into six segments for reporting
d from then onward the carved-out activities were included in
­purposes on the basis of similar products, production processes ­Styrenics as reported under Other. The activities that were not
and customer industries. affected by the carve-out are still reported under Other, but not
Chemicals consists of the Inorganics, Petrochemicals and as part of Styrenics. On October 1, 2011, BASF transferred its
Intermediates divisions. We produce a wide variety of basic carved-out styrenics business into the joint venture Styrolution.
chemicals and downstream products for both internal and BASF’s share in this joint venture is reported at equity in the
­external customers in our integrated production facilities. Consolidated Financial Statements. Styrenics therefore contrib­
Plastics, consisting of the Performance Polymers and uted to sales and income from operations only for the first nine
­Polyurethanes divisions, offers a variety of engineering plastics months of 2011.
and the associated system solutions and services. For more information, see Note 2 from page 156 onward
The Performance Products segment offers innovative and
specific system solutions for numerous processing industries. Group corporate costs consist of the expenses for steering the
These include, for example, the plastics processing industry, BASF Group and are not allocated to the segments, but rather
the paper industry, the food and animal feed industry, pro­ducers reported under Other.
of hygiene products, users of oil field and mining chemicals as With our corporate research, which is also reported under
well as leather and textiles processors. The segment Perfor­ Other, we develop cross-division and cross-segment growth
mance Products consists of the Dispersions & Pigments, Care fields and ensure the long-term competence of BASF with
Chemicals, Nutrition & Health, Paper Chemicals and ­Performance ­regard to technology and methods, including plant biotech­
Chemicals divisions. nology.
Functional Solutions comprises the Catalysts, Construc­ Earnings from currency conversion reported under Other
tion Chemicals and Coatings divisions. In this segment, we include earnings not allocated to the segments from the ­hedging
­bundle tailor-made system solutions and innovative products for of forecasted sales, from currency positions that are macro­
specific industries, in particular for the automotive, chemical and hedged as well as from the conversion of financial liabilities. In
construction sectors. addition, Other also includes income and expenses from the
The Agricultural Solutions segment corresponds to the BASF long-term incentive (LTI) program as well as the results of
Crop Protection division, which primarily offers crop protection the hedging of raw material price risks that were not allocated
products that guard against fungal diseases, insects and to the segments.
weeds. Transfers between the segments are almost always
The Oil & Gas segment is composed of the Oil & Gas ­executed at market-based prices. The allocation of assets and
­division with the Exploration & Production and Natural Gas depreciation to the segments is based on economic control.
­Trading business sectors. ­Assets used by more than one segment are allocated based on
Activities not assigned to a particular division are reported the percentage of usage.
in Other. These include fertilizers, the sale of raw materials,
­engineering and other services, rental income and leases.
 Notes

163 Consolidated
BASF Report Financial
2011 Statements Notes
xxx
Segments and regions
Consolidated Financial
BASF Report
Statements
2011
163

Income from operations (EBIT) of Other (million €)

2011 2010
Corporate research costs (348) (323)
Costs of the corporate headquarters (246) (226)
Styrenics, fertilizers, other businesses 997 400
Foreign currency results, hedging and other measurement effects (199) (460)
Miscellaneous income and expenses (26) (98)
178 (707)

The significant increase in income from operations in Other is in declined by €293 million to €125 million due to the development
particular due to the gain on the disposal of the styrenics busi­ in the stock price.
ness, which amounted to €593 million. The operating ­earnings Miscellaneous income and expenses in 2011 includes
contribution from Styrenics declined compared with the ­previous ­income of €68 million arising from the repeal of the E.U. fine
year. In contrast, earnings in the fertilizer business and other against the former Ciba in 2009. In 2010, miscellaneous income
businesses climbed. and e
­ xpenses included charges related to closed sites.
The foreign currency result under Other decreased com­  or more information about the disposal of styrenics activities, see
F
Note 2.3 on page 161
pared with the previous year. Compared with the prior year,
­expenses arising from the long-term incentive program in 2011

Assets of Other (million €)

2011 2010
Assets of businesses included under Other 2,272 2,690
Financial assets 2,700 3,281
Deferred tax assets 941 1,112
Cash and cash equivalents/marketable securities 2,067 1,509
Defined benefit assets 128 260
Miscellaneous receivables/prepaid expenses 1,863 1,915
9,971 10,767

The reconciliation reporting Oil & Gas reconciles the income The decrease in income from operations and the lower income
from operations in the Oil & Gas segment with the contribution taxes are attributable to the months-long suspension of oil pro­
of the segment to the net income of the BASF Group. duction in Libya.
The Oil & Gas segment’s miscellaneous earnings relate to The decrease in income from participations resulted pri­
income and expenses not included in the income from opera­ marily from lower profits at OAO Severneftegazprom (SNG),
tions of the segment, the interest result as well as the other Krasnoselkup, the Russian Federation, which is accounted for
­financial result. using the equity method. SNG holds the production license to
the Yuzhno Russkoye natural gas field in Western Siberia. BASF
has a 35% share in the commercial success of the field.

Reconciliation reporting Oil & Gas (million €)

2011 2010
Income from operations 2,111 2,334
Income from financial assets 100 226
Miscellaneous earnings (92) (69)
Income before taxes and minority interests 2,119 2,491
Income taxes 896 1,340

Thereof income taxes on oil-producing operations non-compensable

with German corporate income tax 439 983

Income before minority interests 1,223 1,151

Minority interests 159 228
Net income 1,064 923
164 Consolidated Financial Statements Notes
Segments and regions
BASF Report 2011

Segments 2011 (million €)

Thereof
Perfor- Agri­ Explora-
mance Functional cultural tion & BASF
Chemicals Plastics Products Solutions Solutions Oil & Gas Production Other Group
Sales 12,958 10,990 15,697 11,361 4,165 12,051 3,182 6,275 73,497
Change (%) 13.9 11.8 27.7 17.1 3.3 11.7 (16.7) 7.2 15.1
Intersegmental transfers 6,295 694 490 195 27 1,015 2 411 9,127
Sales including intersegmental transfers 19,253 11,684 16,187 11,556 4,192 13,066 3,184 6,686 82,624
Income from operations 2,442 1,259 1,361 427 808 2,111 1,686 178 8,586
Change (%) 5.7 (1.1) 1.2 (6.6) 7.9 (9.6) (12.1) . 10.6
Assets 6,920 5,297 13,680 9,725 5,350 10,232 5,315 9,971 61,175
Thereof goodwill 25 122 1,946 2,023 1,410 389 389 47 5,962
intangible assets 89 104 2,079 1,645 165 1,806 1,760 69 5,957

property, plant and

equipment 3,500 2,353 3,844 1,718 669 5,062 2,246 820 17,966

Debt 1,849 1,349 3,321 2,309 1,123 3,267 1,335 22,572 35,790
Research and development expenses 132 149 330 192 412 23 23 367 1,605

Additions to property, plant and

equipment and intangible assets 622 423 648 359 150 1,274 692 170 3,646

Amortization of intangible assets and

depreciation of property, plant and
equipment 746 419 951 494 173 505 356 119 3,407

Thereof impairments 87 4 131 109 – – – 14 345

Segments 2010 (million €)

Thereof
Perfor- Agri­ Explora-
mance Functional cultural tion & BASF
Chemicals Plastics Products Solutions Solutions Oil & Gas Production Other Group
Sales 11,377 9,830 12,288 9,703 4,033 10,791 3,819 5,851 63,873
Change (%) 51.4 37.9 31.3 36.4 10.6 (5.0) (0.7) 27.8 26.0
Intersegmental transfers 5,476 546 438 159 25 852 41 275 7,771
Sales including intersegmental transfers 16,853 10,376 12,726 9,862 4,058 11,643 3,860 6,126 71,644
Income from operations 2,310 1,273 1,345 457 749 2,334 1,918 (707) 7,761
Change (%) 214.3 129.8 . 327.1 (2.6) 2.0 7.7 (12.8) 111.1
Assets 6,526 5,114 13,409 9,364 5,063 9,150 5,158 10,767 59,393
Thereof goodwill 22 118 1,859 2,041 1,394 389 389 50 5,873
intangible assets 120 116 2,286 1,735 243 1,756 1,706 116 6,372

property, plant and

equipment 3,484 2,287 3,983 1,676 619 4,414 2,005 778 17,241

Debt 1,900 1,289 3,723 2,154 1,123 2,825 1,279 23,722 36,736
Research and development expenses 130 141 289 179 393 15 15 345 1,492

Additions to property, plant and

equipment and intangible assets 535 250 3,000 208 145 996 478 170 5,304

Amortization of intangible assets and

depreciation of property, plant and
equipment 690 448 817 404 189 643 510 179 3,370

Thereof impairments 2 3 89 11 – 96 96 1 202

 Notes

165 Consolidated
BASF Report Financial
2011 Statements Notes
xxx
Segments and regions
Consolidated Financial
BASF Report
Statements
2011
165

Regions 2011 (million €)

South
America,
Africa,
Thereof North Asia Middle BASF
Europe Germany America Pacific East Group
Location of customers
Sales 39,124 14,705 13,995 14,410 5,968 73,497
Change (%) 17.8 20.3 8.6 15.2 13.1 15.1
Share (%) 53.3 20.0 19.0 19.6 8.1 100.0
Location of companies
Sales 41,036 28,816 14,727 13,316 4,418 73,497
Sales including interregional transfers 47,347 33,974 17,057 13,796 4,652 82,852
Income from operations 5,668 3,249 1,314 1,133 471 8,586
Assets 36,058 21,337 12,209 9,492 3,416 61,175
Thereof property, plant and equipment 10,700 6,853 3,483 3,098 685 17,966
Additions to property, plant and equipment and intangible assets 2,467 1,462 504 551 124 3,646

Amortization of intangible assets and depreciation of property,

plant and equipment 2,036 1,204 795 463 113 3,407

Employees as of December 31 70,664 52,049 16,167 17,342 6,968 111,141

Regions 2010 (million €)

South
America,
Africa,
Thereof North Asia Middle BASF
Europe Germany America Pacific East Group
Location of customers
Sales 33,201 12,225 12,886 12,510 5,276 63,873
Change (%) 16.4 14.6 35.9 43.7 32.7 26.0
Share (%) 51.9 19.1 20.2 19.6 8.3 100.0
Location of companies
Sales 35,156 25,426 13,246 11,642 3,829 63,873
Sales including interregional transfers 41,312 30,197 15,205 12,098 4,037 72,652
Income from operations 5,206 3,769 1,107 1,271 177 7,761
Assets 35,494 21,494 11,885 8,411 3,603 59,393
Thereof property, plant and equipment 10,134 6,424 3,569 2,853 685 17,241
Additions to property, plant and equipment and intangible assets 3,364 2,273 981 788 171 5,304

Amortization of intangible assets and depreciation of property,

plant and equipment 2,137 1,140 697 432 104 3,370

Employees as of December 31 69,809 50,801 16,487 15,965 6,879 109,140

166 Consolidated Financial Statements Notes
Notes on consolidated statements of income
BASF Report 2011

5 – Earnings per share

Earnings per share In accordance with IAS 33, a potential dilutive effect must be
considered in the diluted earnings per share for those BASF
2011 2010 shares which will be granted in the future as a part of the BASF
Net income million € 6,188 4,557 ­employee participation program “plus.” This applies regardless
Weighted-average number of of the fact that the necessary shares are acquired by third ­parties
outstanding shares 1,000 918,479 918,479
on the market on behalf of BASF, and the fact that there are no
Earnings per share € 6.74 4.96 plans for the issuance of new shares. In 2010, the dilutive effect
Diluted earnings per share € 6.73 4.96 was less than €0.01.

6 – Other operating income

Million € 2011 2010

Reversal and adjustment of provisions 170 244
Revenue from miscellaneous revenue-generating activities 207 142
Income from foreign currency and hedging transactions 170 136
Income from the translation of financial statements in foreign currencies 42 76
Gains on the disposal of property, plant and equipment and divestitures 666 101
Reversal of impairments of property, plant and equipment – 40
Gains on the reversal of allowances for doubtful business-related receivables 77 36
Other 676 365
2,008 1,140

The reversal and adjustment of provisions was primarily Gains on the disposal of property, plant and equipment and
­related to shutdowns and restructuring measures, employee divestitures arose in particular from the transfer of the ­styrenics
obligations, risks from lawsuits and damage claims as well as business into the joint venture Styrolution, which ­resulted in
various other items as part of the normal course of business. gains of €593 million.
Provisions were reversed or adjusted if the circumstances on In 2010, reversals of impairments of property, plant and
the balance sheet date were such that utilization was no ­longer equipment ­related to the site in Altamira, Mexico.
expected or expected to a lesser extent. Gains on the reversal of allowances for doubtful busi-
Revenue from miscellaneous revenue-generating ness-related receivables resulted mainly from doubtful receiv­
­activities primarily includes income from rentals, property sales ables that had been written off but that were settled in 2011.
and logistics services. Other income includes refunds and settlements totaling
Income from foreign currency and hedging transac- €186 million, including two payments to resolve contractual
tions concerned foreign currency transactions, the measure­ ­disputes in the United States. Income of €68 million resulting
ment at fair value of receivables and payables in foreign curren­ from the ­repeal of an E.U. fine imposed on the former Ciba is
cies as well as currency derivatives and other hedging also ­included in this item. Further income resulted from insur­
transactions. ance settlements, the sale of emissions certificates, gains from
Income from the translation of financial statements in ­precious metal trading as well as from a number of other
foreign currencies includes gains arising from the translation items.
of subsidiaries outside of the eurozone that use the euro as their
functional currency.
 Notes

167 Consolidated
BASF Report Financial
2011 Statements Notes
xxx
Notes on consolidated statements of income
Consolidated Financial
BASF Report
Statements
2011
167

7 – Other operating expenses

Million € 2011 2010

Restructuring measures 233 276

Environmental protection and safety measures, costs of demolition and removal, and planning expenses
related to capital expenditures that are not subject to mandatory capitalization 203 98

Valuation adjustments on tangible and intangible assets 366 247

Costs from miscellaneous revenue-generating activities 220 180
Expenses from foreign currency and hedging transactions as well as market valuation 399 601
Losses from the translation of the financial statements in foreign currencies 56 63
Losses from the disposal of property, plant and equipment and divestitures 40 24
Oil and gas exploration expenses 184 190
Expenses from additions to allowances for business-related receivables 124 107
Expenses from the use of inventories measured at market value and the derecognition of obsolete inventory 233 188
Other 632 638
2,690 2,612

In 2011, expenses for restructuring measures arose primarily Expenses from foreign currency and hedging transactions
as a result of the Cognis integration in the amount of €157 mil­ as well as market valuation concerned foreign currency trans­
lion and the restructuring of several sites in the Construction lations of receivables and payables as well as changes in the
Chemicals division in the amount of €13 million. In 2010, these fair value of currency derivatives and other hedging transactions.
expenses primarily concerned the Ciba integration in the amount Furthermore, expenses of €125 million resulted from the long-
of €113 million and the Grenzach site in the amount of €24 mil­ term ­incentive program (LTI program). In 2010, expenses of
lion as well as the Cognis integration to a minor d ­ egree. €418 million resulted from the LTI program.
Further expenses were related to environmental protec- Losses from the disposal of property, plant and equip-
tion and safety measures, costs of demolition and removal­, ment and divestitures in 2011 included losses of €12 million
and planning expenses related to capital expenditures that from the sale of individual businesses and plants at the Hythe,
are not subject to mandatory capitalization according to England site.
IFRS. In 2011, expenses of €50 million were incurred for setting Compared with 2010, there was an increase in expenses
up provisions for the removal of several landfill sites. ­Additionally, from additions to allowances for business-related receiv-
expenses of €60 million resulted from demolition and removal ables which related to an insolvent customer in the Oil & Gas
measures at the Ludwigshafen site. segment.
Valuation adjustments on tangible and intan­gible Expenses from the use of inventory measured at ­market
­assets included an amount of €79 million in connection with the value and the derecognition of obsolete inventory were
planned disposal of Relius’ decorative paints business and an ­primarily due to the latter and amounted to €168 million in 2011
amount of €83 million for property, plant and equipment in the and €126 million in 2010. In addition, the use of inventories
Petrochemicals division at the Port Arthur, Texas site. Impair­ ­measured at market values from the Cognis acquisition resulted
ments in 2011 also included €46 million for ­assets taken over as in charges of €58 million in 2011 as well as in 2010.
part of the Cognis acquisition and €54 million for property, plant Other expenses were the result of a legal settlement in the
and equipment in the ­Paper Chemicals division at a site in the United States, the implementation of various projects and the
United States. Further impairments were also made on ­property, recognition of provisions for outstanding invoices and onerous
plant and equipment at the restructured Grenzach site, contracts. ­Further expenses related to the introduction of
­amounting to €14 million in 2011 and €40 million in 2010. In 2010, REACH as well as to a number of other items. Other expenses
an impairment loss of €96 million was recognized on property, in 2010 were attributable to the recognition of a provision for
plant and equipment as well as on concessions for oil and gas risks arising from legal disputes in relation to the closed site in
production in the British and Norwegian North Sea. ­Paulinia, Brazil; for the recognition of a provision for anticipated
Costs from miscellaneous revenue-generating activi- losses for a supply contract of BASF SE; and to long-term ­supply
ties were related to the respective items ­presented in other ­contracts in South America.
­operating income.
For more information, see Note 6 on page 166
168 Consolidated Financial Statements Notes
Notes on consolidated statements of income
BASF Report 2011

8 – Financial result

Million € 2011 2010

Income from companies accounted for using the equity method 48 201
Income from participations in affiliated and associated companies 56 59
Income from the disposal of participations 890 48
Income from profit transfer agreements 15 24
Income from tax allocation to participating interests 5 6
Other income from participations 966 137
Losses from loss transfer agreements (7) (5)
Write-down of/losses from the sales of participations (23) (34)
Other expenses from participations (30) (39)
Interest income from cash and cash equivalents 177 131
Interest and dividend income from securities and loans 12 19
Interest income 189 150
Interest expenses (763) (773)
Write-ups/profits from the sale of securities and loans 1 1
Expected income from plan assets to cover pensions and similar obligations 819 765
Income from plan assets to cover other long-term employee obligations 14 18
Income from the capitalization of construction interest 73 65
Miscellaneous financial income 2 17
Other financial income 909 866
Write-downs/losses from the disposal of securities and loans (3) (5)
Interest cost on pension obligations and other similar obligations (833) (819)
Expenses from/interest cost on other long-term employee obligations (32) (47)
Interest cost on other long-term debts (67) (59)
Miscellaneous financial expenses – –
Other financial expenses (935) (930)
Financial result 384 (388)

The decline in income from companies accounted for using Miscellaneous financial income and miscellaneous finan-
the equity method resulted primarily from the lower income cial expenses relate to gains and losses from the translation of
contribution from OAO Severneftegazprom as well as from the individually hedged financing-related receivables and payables
earnings effects from the final application of the equity method and the associated hedging instruments. Furthermore, these
for the South Korean company Heesung Catalysts Corporation. items include expense and income from the compounding and
For more information, see Note 2 from page 156 onward discounting of long-term liabilities and receivables as required
by IFRS.
Income from the disposal of participations was primarily
­attributable to the sale of 19.7 million shares in K+S Aktien­
gesellschaft, which resulted in a gain of €887 million.
The interest result improved compared with the previous
year due to higher interest income and declining interest
­expenses. The increase in interest income is primarily attribut­
able to income from interest and currency swaps as well as
higher interest rates compared with the previous year. The
­repayment of two bonds led to lower interest expenses.
 Notes

169 Consolidated
BASF Report Financial
2011 Statements Notes
xxx
Notes on consolidated statements of income
Consolidated Financial
BASF Report
Statements
2011
169

9 – Income taxes

Million € 2011 2010

German corporate income tax, solidarity surcharge, trade taxes (Germany) 340 616
Foreign income tax 1,420 1,603
Taxes for prior years 28 (147)
Current taxes 1,788 2,072
Deferred tax expense (+)/income (–) 579 227
Income taxes 2,367 2,299
Thereof income taxes on oil-producing operations 520 1,175
Other taxes as well as sales and consumption taxes 344 284
Tax expense 2,711 2,583

Income before taxes and minority interests is broken down into domestic and foreign as follows:

Million € 2011 2010

Germany 3,343 2,415
Foreign oil production branches of German companies 564 1,277
Foreign 5,063 3,681
8,970 7,373

In Germany, a uniform corporate tax rate of 15.0% as well as a Income taxes on foreign oil-producing operations in certain
solidarity surcharge of 5.5% thereon is levied on all paid out and ­regions are compensable up to the level of the German corpo­
­retained earnings. In addition to corporate income tax, income rate income tax on this foreign taxable income. The non-­
generated in Germany is subject to a trade tax that varies compensable amount is shown separately in the following ­table.
­depending on the municipalities in which the company is Non-compensable foreign income taxes for oil production
­represented. In 2011, the weighted average tax rate amounted amounted to €439 million. This calculation is based on a corpo­
to 12.9% (2010: 12.8%). The profits of foreign Group companies rate income tax rate of 15.0%.
are assessed using the tax rates applicable in their respective Other taxes include real estate taxes and other compara­
countries. ble taxes in the amount of €95 million in 2011, and €99 million
Deferred tax assets and liabilities in the Consolidated in 2010; they are allocated to the appropriate functional costs.
­Financial Statements must be valued using the tax rates Changes in valuation adjustments to deferred tax assets
­applicable for the period in which the asset or liability is realized for tax loss carryforwards resulted in an expense of €10 million
or settled. in 2011 and in income of €4 million in 2010.
For German Group companies, deferred taxes were calcu­
lated using a uniform 29.0% rate.
For foreign Group companies, deferred taxes were calcu­
lated using the tax rates applicable in the individual foreign coun­
tries. These rates averaged 28.5% in 2011 and 23.1% in 2010.
170 Consolidated Financial Statements Notes
Notes on consolidated statements of income
BASF Report 2011

Reconciliation from the statutory tax rate in Germany to the effective tax rate

2011 2010
Million € % Million € %
Income before taxes and minority interests 8,970 – 7,373 –
Expected tax based on German corporate income tax (15%) 1,346 15.0 1,106 15.0
Solidarity surcharge 8 0.1 15 0.2
German trade income tax 334 3.7 347 4.7
Foreign tax-rate differential 684 7.6 299 4.1
Tax exempt income (366) (4.1) (137) (1.9)
Non-deductible expenses 60 0.7 71 1.0
Income after taxes of companies accounted for using the equity method (7) (0.1) (30) (0.4)
Taxes for prior years 28 0.3 (147) (2.0)

Income taxes on oil-producing operations non-compensable with German corporate

income tax 439 4.9 983 13.3

Deferred tax liabilities for the future reversal of temporary differences associated with
shares in participations (23) (0.2) 77 1.1

Other (136) (1.5) (285) (3.9)

Income taxes/effective tax rates 2,367 26.4 2,299 31.2

For planned dividend distributions of Group companies and The decrease in non-compensable foreign income taxes for oil-
planned disposals, the resulting future income taxes and with­ producing operations is attributable to the suspension of oil pro­
holding taxes are recognized as deferred tax liabilities as long duction in Libya, which lasted for several months.
as they are expected to lead to a reversal of temporary differ­ Tax-exempt income primarily includes effects from the dis­
ences. In the past, a planning horizon of three years was used posal of shares in K+S Aktiengesellschaft and the transfer of
for planned distributions of dividends. This time frame was business activities to the joint venture Styrolution.
­reduced to one year in 2011, leading to deferred tax income of The increased influence of the foreign tax rate differential
€81 million. An increase in planned dividend distributions led to for income from foreign group companies resulted from higher
a deferred tax expense of €23 million in 2011 (2010: €77 mil­ earnings of Group companies in Europe.
lion).

Deferred tax assets and liabilities (million €)

Deferred tax assets Deferred tax liabilities

2011 2010 2011 2010
Intangible assets 184 209 1,840 1,710
Property, plant and equipment 304 250 2,127 2,163
Financial assets 18 13 99 116
Inventories and accounts receivable 343 301 732 504
Provisions for pensions 1,246 1,278 459 529
Other provisions and liabilities 1,056 939 59 38
Tax loss carryforwards 620 794 – –
Other 163 293 181 246
Netting (2,869) (2,839) (2,869) (2,839)
Valuation allowances for deferred tax assets (124) (126) – –
Thereof for tax loss carryforwards (107) (86) – –
Total 941 1,112 2,628 2,467
Thereof short-term 392 507 404 370

Deferred taxes result primarily from temporary differences ­between Deferred tax assets were offset against deferred tax liabilities of
tax balances and the valuation of assets and liabilities according the same maturity if they were related to the same taxation
to IFRS as well as from tax loss carryforwards and unused tax ­authority.
credits. The revaluation of all the assets and liabilities associated
with acquisitions according to IFRS 3 has resulted in significant
deviations between fair values and the values in the tax accounts.
This leads primarily to deferred tax liabilities.
 Notes

171 Consolidated
BASF Report Financial
2011 Statements Notes
xxx
Notes on consolidated statements of income
Consolidated Financial
BASF Report
Statements
2011
171

Deferred tax liabilities for undistributed earnings of sub­sidiaries in were reduced in 2011 as a result of high earnings. Valuation
the amount of €5,281 million in 2011 and €3,576 million in 2010 ­ llowances on deferred tax assets were recognized for tax loss
a
were not recognized, as they are either not subject to taxation on carryforwards of €48 million. In 2010, valuation allowances on
payout or they are expected to be reinvested for ­indefinite periods ­deferred tax ­assets were reversed for tax loss carryforwards of
of time. €78 million.
The regional distribution of tax loss carryforwards is as Tax obligations comprise both tax liabilities and short-term
­follows: tax provisions. Tax liabilities primarily concern the assessed
­income taxes and other taxes. Tax provisions include estimated
Tax loss carryforwards (million €) income taxes not yet assessed for the current and previous
years.
Tax loss carryforwards Deferred tax assets
2011 2010 2011 2010 Tax liabilities (million €)
Germany 17 19 2 3
Foreign 2,808 3,004 511 705 2011 2010
2,825 3,023 513 708 Tax provisions 434 499
Tax liabilities 604 641
1,038 1,140
German tax losses may be carried forward indefinitely. Foreign
tax loss carryforwards exist primarily in North America, where
they will first expire starting in 2021, and in Europe, where they
will first expire in 2016. Tax loss carryforwards in North ­America

10 – Minority interests

Million € 2011 2010 Lower minority interests in profits resulted primarily from natu­
Minority interests in profits 420 517 ral gas trading companies as well as Gazprom’s stake in a
Minority interests in losses (5) – Winters­hall subsidiary that holds production and exploration
415 517 rights in Libya. In contrast, higher minority interests in profits
­resulted from BASF FINA Petrochemicals L.P., Port Arthur,
Texas.
 or more information on minority interests in consolidated
F
companies, see Note 19 on page 181

11 – Personnel expenses and employees

Personnel expenses Number of employees

Personnel expenses increased by 4.2%, from €8,228 million in The number of employees was 111,141 as of December 31, 2011
2010 to €8,576 million in 2011. This resulted in particular from (December 31, 2010: 109,140).
the acquisition of Cognis. The increase was partially offset by
lower additions to provisions for the stock price-based compen­ Number of employees by contract type (as of December 31)
sation program (long-term ­incentive program) due to decreased
fair values as well as to the lower number of outstanding op­ Thereof
tions. Total women
(in %)
Permanent staff 105,756 22.7
Personnel expenses (million €)
Temporary staff 2,820 44.3

2011 2010 Apprentices and trainees 2,565 31.7

Wages and salaries 6,856 6,731 111,141 23.5

Social security contributions and

­expenses for pensions and assistance 1,720 1,497

Thereof for pension benefits 465 408

8,576 8,228
172 Consolidated Financial Statements Notes
Notes on consolidated balance sheets
BASF Report 2011

The number of employees in proportionally consolidated ­ ro-rata, the average number of employees in the BASF Group
p
­companies is included in full in the table below. Considered was 110,403 in 2011 and 104,043 in 2010.

Average number of employees

Proportionally consolidated
Consolidated companies companies BASF Group
2011 2010 2011 2010 2011 2010
Europe 70,180 66,772 450 431 70,630 67,203
Thereof Germany 51,395 48,620 15 16 51,410 48,636
North America 16,104 15,517 497 476 16,601 15,993
Asia Pacific 15,143 13,776 3,139 2,137 18,282 15,913
South America, Africa, Middle East 6,933 6,456 – – 6,933 6,456
BASF Group 108,360 102,521 4,086 3,044 112,446 105,565
Thereof apprentices and trainees 2,236 2,113 2 3 2,238 2,116
temporary staff 2,766 2,214 134 105 2,900 2,319

12 – Intangible assets

The goodwill of BASF is allocated to 32 cash-generating units In determining the value-in-use of a cash-generating unit, BASF
which are defined either on the basis of business units or on a anticipates that a reasonably possible change in key assump­
higher level. tions will not lead to the carrying amount exceeding its respec­
The annual impairment testing took place in the fourth tive recoverable amount.
­quarter of the year on the basis of the cash-generating units. The impairment tests in the financial year 2011 resulted in
The recoverable amount was determined based on the value- an overall impairment loss on goodwill of €11 million. These
in-use; this was done using five-year plans and their respective ­impairments occurred in relation to the planned sale of the
cash flows that had been approved by corporate management. ­European decorative paints business and were allocated to the
For the time period after the fifth year, a terminal value is calcu­ Coatings division in the Functional Solutions segment.
lated using a forward projection from the last detailed planning In 2010, the impairment tests resulted in no impairment
year. In accordance with IAS 36, the applied growth rates do losses on goodwill.
not factor in capacity-increasing investments for which no cash
outflows have taken place. The planning is based on ­experience,
current performance and best possible corporate management
estimates on the future development of ­individual parameters
such as raw material prices and profit ­margins. Market assump­
tions regarding, for example, economic development and mar­
ket growth are included based on external macroeconomic
sources as well as sources specific to the industry.
The weighted average cost of capital rate after tax required
for the impairment tests is determined using the ­Capital Asset
Pricing Model. It comprises a risk-free rate, the market risk pre­
mium and the spread for the credit risk. The calculation also
takes into account the capital structure and the volatility of the
BASF share in comparison to the capital market (beta) as well
as the average tax rate of each cash-generating unit. The
­impairment tests were conducted assuming a weighted
average cost of capital rate between 7.03% and 7.27% (2010:
6.96% to 7.28%). For the cash generating unit Exploration & Pro­
duction in the Oil & Gas division, a cost of capital rate of 8.49%
was applied, which takes country-specific risks into ­account.
 Notes

173 Consolidated
BASF Report Financial
2011 Statements Notes
xxx
Notes on consolidated balance sheets
Consolidated Financial
BASF Report
Statements
2011
173

Goodwill of cash-generating units (million €)

2011 2010

Cash-generating unit Goodwill Growth rates1 Goodwill Growth rates1

Crop Protection division 1,410 2.0% 1,394 1.0%
Catalysts division 1,322 2.0% 1,342 2.0%
Construction Chemicals division 698 1.5% 685 1.5%
Personal Care Ingredients in the Care Chemicals division 461 2.0% 465 2.0%
Exploration & Production in the Oil & Gas division 389 0.0% 389 0.0%
Pigments in the Dispersions & Pigments division 371 2.0% 360 2.0%
Other 26 cash-generating units 1,311 0.0–2.0% 1,238 0.0–2.0%
Goodwill as of December 31 5,962 5,873

1
Growth rates of impairment tests to determine terminal values according to IAS 36.

Development of intangible assets 2011 (million €)

Know-how, Internally
Distribution, Product rights, patents and generated
supply and licenses and production intangible Other rights
similar rights trademarks technology assets and values2 Goodwill Total
Cost
Balance as of January 1, 2011 4,791 1,699 1,967 83 819 5,873 15,232
Changes in scope of consolidation 8 (2) – – – – 6
Additions 77 155 72 17 74 52 447
Disposals (113) (195) (55) (22) (238) (15) (638)
Transfers 36 (28) 5 4 (46) 10 (19)
Exchange differences 30 (1) 13 (1) 2 42 85
Balance as of December 31, 2011 4,829 1,628 2,002 81 611 5,962 15,113

Accumulated valuation
­adjustments

Balance as of January 1, 2011 1,140 693 635 47 472 – 2,987

Changes in scope of consolidation – (2) – – – – (2)
Additions 369 132 175 16 86 11 789
Disposals (113) (191) (44) (17) (237) (11) (613)
Transfers 29 (24) – 3 (1) – 7
Exchange differences 21 (4) 7 – 2 – 26
Balance as of December 31, 2011 1,446 604 773 49 322 – 3,194

Net carrying amount as of

December 31, 2011 3,383 1,024 1,229 32 289 5,962 11,919

2
Including licenses on such rights and values

In connection with the acquisition of inge watertechnologies AG Concessions for oil and gas production under the category
and inge GmbH, in 2011 there were additions to intangible product rights, licenses and trademarks with a net carrying
­assets of €21 million and to goodwill of €50 million. Additions to amount of €498 million in 2011 (2010: €350 million) authorize the
intangible assets in the amount of €70 million resulted from the exploration and production of oil and gas in certain areas. To a
­acquisition of business ­activities in the area of chemical ­injection ­limited extent, these rights entail obligations to deliver a portion
and cavity filling p
­ roducts from Hock. of the produced amount to local companies. At the end of the
term of a concession, the rights are returned. The additions in
2011 primarily concerned the acquisition of concessions for oil
and gas production in the Norwegian North Sea.
174 Consolidated Financial Statements Notes
Notes on consolidated balance sheets
BASF Report 2011

Reclassifications under goodwill resulted from the adjustment other operating expenses. A significant portion of the impair­
of the preliminary purchase price allocation related to the acqui­ ment ­occurred in relation to the planned sale of the European
sition of ­Cognis. decorative paints business.
The market value adjustments of emission rights as of the There were no material reversals of impairments in 2011.
balance sheet day which are recognized in equity are reported
in the column “other rights and values” under “transfers.”
Disposals primarily concerned the derecognition of fully
­amortized intangible assets.
In 2011, impairments of €114 million were recognized, which
included €11 million in goodwill. Impairments are reported u
­ nder

Development of intangible assets 2010 (million €)

Know-how, Internally
Distribution, Product rights, patents and generated
supply and licenses and production intangible Other rights
similar rights trademarks technology assets and values1 Goodwill Total
Cost
Balance as of January 1, 2010 3,822 1,666 1,761 128 857 5,069 13,303

Changes in scope of
consolidation 34 – (39) – 2 – (3)

Additions 809 93 434 15 70 589 2,010

Disposals (71) (90) (184) (55) (190) – (590)
Transfers (50) 12 (58) (7) 45 (22) (80)
Exchange differences 247 18 53 2 35 237 592

Balance as of
December 31, 2010 4,791 1,699 1,967 83 819 5,873 15,232

Accumulated valuation
adjustments

Balance as of January 1, 2010 881 603 723 87 560 – 2,854

Changes in scope of
consolidation (6) (2) (63) – (1) – (72)

Additions 313 136 167 17 70 – 703

Disposals (69) (86) (183) (55) (185) – (578)
Transfers (32) 30 (28) (3) 2 – (31)
Exchange differences 53 12 19 1 26 – 111

Balance as of
December 31, 2010 1,140 693 635 47 472 – 2,987

Net carrying amount as of

December 31, 2010 3,651 1,006 1,332 36 347 5,873 12,245

1
Including licenses on such rights and values

In connection with the Cognis acquisition and its preliminary The amounts recorded under transfers resulted primarily from
purchase price allocation, in 2010 there were additions of the reclassification of intangible assets to assets of disposal
€1,301 million for production technologies, brands, customer groups.
relationships and other intangible assets; goodwill amounted to The market value adjustments of emission rights as of the
€589 million. balance sheet date are included in the line item transfers in the
In 2010, impairments of €74 million were recognized. A sig­ column “other rights and values.”
nificant portion of the impairment losses related to concessions Changes in the scope of consolidation related primarily to
for oil and gas production in the British and Norwegian North N.E. Chemcat Corporation, Tokyo, Japan, which was
Sea as well as to intangible assets from the Ciba acquisition in ­proportionally consolidated for the first time, and to the decon­
2009. solidation of BASF Fuel Cell, Frankfurt am Main, Germany.
There were no material reversals of impairments in 2010.
 Notes

175 Consolidated
BASF Report Financial
2011 Statements Notes
xxx
Notes on consolidated balance sheets
Consolidated Financial
BASF Report
Statements
2011
175

13 – Property, plant and equipment

Development of property, plant and equipment 2011 (million €)

Machinery Miscellaneous
Land, land rights and technical equipment and Construction in
and buildings equipment fixtures progress Total
Cost
Balance as of January 1, 2011 8,793 39,849 3,045 3,045 54,732
Changes in scope of consolidation 24 57 8 18 107
Additions 112 1,000 145 1,942 3,199
Disposals (108) (591) (127) (51) (877)
Transfers 6 1,669 79 (2,132) (378)
Exchange differences 107 459 27 27 620
Balance as of December 31, 2011 8,934 42,443 3,177 2,849 57,403
Accumulated valuation adjustments
Balance as of January 1, 2011 4,918 30,086 2,482 5 37,491
Changes in scope of consolidation 5 11 5 8 29
Additions 299 2,114 195 10 2,618
Disposals (73) (547) (119) – (739)
Transfers (125) (238) 8 – (355)
Exchange differences 44 327 20 2 393
Balance as of December 31, 2011 5,068 31,753 2,591 25 39,437

Net carrying amount as of

December 31, 2011 3,866 10,690 586 2,824 17,966

Additions to fixed assets in 2011 amounted to €3,199 million. In 2011, impairments of €231 million were recognized in valua­
A total of €66 million of property, plant and equipment resulted tion adjustments. A significant portion of the impairments ­related
from acquisitions, primarily from BASF’s stake in the to production facilities in the Petrochemicals division at the Port
cogeneration power plant of Zandvliet Power N.V., Antwerp, Arthur, Texas site as well as to property, plant and equipment
Belgium. Further continuing investments related particularly to: in the Paper Chemicals division at a site in the United States.
the construction of the intermodal transportation terminal Changes in the scope of consolidation related primarily to
in Ludwigs­hafen, Germany; the construction of a new oleum/ Heesung Catalyst Corporation, which was proportionally
sulfuric acid plant in Antwerp, Belgium; the construction of consoli­dated for the first time.
­natural gas pipelines in Europe (particularly OPAL and NEL); and There were no reversals of impairment recorded in 2011.
the construction of a production plant for methylamines in
­Geismar, ­Louisiana.
The amounts recorded under transfers were primarily
­related to fertilizer activities. Property, plant and equipment
­belonging to fertilizer activities were reclassified to assets of
­disposal groups.
For more on disposal groups, see Note 2 on page 161
176 Consolidated Financial Statements Notes
Notes on consolidated balance sheets
BASF Report 2011

Development of property, plant and equipment 2010 (million €)

Machinery Miscellaneous
Land, land rights and technical equipment and Construction in
and buildings equipment fixtures progress Total
Cost
Balance as of January 1, 2010 8,071 38,833 2,936 2,103 51,943
Changes in scope of consolidation 34 (2) 21 (7) 46
Additions 368 983 142 1,801 3,294
Disposals (57) (464) (107) (36) (664)
Transfers 96 (507) (28) (857) (1,296)
Exchange differences 281 1,006 81 41 1,409
Balance as of December 31, 2010 8,793 39,849 3,045 3,045 54,732
Accumulated valuation adjustments
Balance as of January 1, 2010 4,561 28,725 2,359 13 35,658
Changes in scope of consolidation 14 (20) 17 (7) 4
Additions 276 2,192 199 – 2,667
Disposals (26) (399) (98) – (523)
Transfers (12) (1,057) (56) – (1,125)
Exchange differences 105 645 61 (1) 810
Balance as of December 31, 2010 4,918 30,086 2,482 5 37,491

Net carrying amount as of

December 31, 2010 3,875 9,763 563 3,040 17,241

Additions to property, plant and equipment in 2010 arose pri­ In 2010, impairments of €128 million were recognized. Impair­
marily from the Cognis acquisition and the associated prelimi­ ment charges of €68 million were recognized in connection with
nary purchase price allocation. Additions to fixed assets from the restructuring of Ciba, which had been acquired in 2009, in
the acquisition amounted to €833 million. Further investments particular at the site in Grenzach, Germany.
in 2010 primarily related to: the expansion of the Ecoflex/Ecovio Changes in the scope of consolidation related primarily to
plant in Ludwigshafen, Germany; the construction of natural gas the N.E. Chemcat Corporation, Tokyo, Japan, which was pro­
pipelines in Europe (in particular OPAL and NEL); expansion portionally consolidated for the first time.
measures at the site in Nanjing, China; construction of an oleum/ An impairment loss taken in 2008 for our site in Altamira,
sulfuric acid plant in Antwerp, Belgium; and the construction of Mexico, was reversed in 2010 following significantly improved
a production plant for methylamines in Geismar, Louisiana. business development. The €40 million reversal was recorded
The amounts recorded under transfers resulted in particu­ under transfers.
lar from the reclassification of selected items of property, plant
and equipment from the styrenics plastics business to assets
of disposal groups.
177 BASF
Consolidated
Report 2011
Financial Statements Notes
Notes on consolidated balance sheets
Consolidated Financial
BASF Report
Statements
2011
177

14 – Investments accounted for using the equity method and other financial assets

Investments accounted for using the equity method (million €)

2011 2010
Balance as of January 1 1,328 1,340
Changes in scope of consolidation (138) (280)
Additions 774 93
Disposals – (84)
Transfers/changes in market value (86) 219
Exchange differences (26) 40
Balance as of December 31 1,852 1,328
Accumulated valuation adjustments – –
Net carrying amount as of December 31 1,852 1,328

Other financial assets (million €)

2011 2010
Investments in other affiliated companies 308 309
Investments in other associated companies 82 86
Shares in other participations 164 1,277
Participations 554 1,672
Loans to affiliated companies 80 20
Loans to associated companies 72 105
Other loans 102 119
Loans 254 244
Long-term securities 40 37
848 1,953

The founding of ­Styrolution resulted in additions to investments In 2010, the decline under changes in the scope of consolida­
accounted for using the ­equity method in the amount of tion included the shares in N.E. Chemcat Corporation, which
€734 million in 2011. The acquisition of additional shares in the has been proportionally consolidated since then.
­Heesung Catalysts Corporation led to a proportional con­ Shares in other participations declined in 2011 due to the
solidation of said company and to the changes in the scope of disposal of the shares in K+S Aktiengesellschaft. These shares
­consolidation in 2011. were included in other participations in the amount of €1,111 mil­
BASF has a stake of 15.5% and continues to exercise lion as of December 31, 2010.
­significant influence over Nord Stream AG, as BASF’s approval At the end of 2011, impairment losses of €11 million were
is required for relevant board resolutions. recognized in participations.

15 – Inventories

Million € 2011 2010

Raw materials and factory supplies 2,922 2,427
Work-in-process, finished goods and merchandise 7,034 6,171
Advance payments and services-in-process 103 90
10,059 8,688
178 Consolidated Financial Statements Notes
Notes on consolidated balance sheets
BASF Report 2011

Work-in-process and finished goods and merchandise are Write-downs on inventories amounted to €8 million in 2011 and
­combined into one item due to production conditions in the €29 million in 2010. The valuation adjustment rates for the use
chemical industry. Services-in-process relate primarily to of technical materials were reduced based on the experience of
­services not invoiced on the balance sheet date. recent years. This resulted in the reversal of write-downs
Inventories are valued using the weighted average cost amounting to €36 million in 2011.
method. Impairments are reversed if the reasons for the impair­ Of the total inventory, €2,154 million was valued at net
ments no longer apply. ­realizable value in 2011 (2010: €1,520 million).

16 – Receivables and miscellaneous assets

Other receivables and miscellaneous assets (million €)

2011 2010

Thereof Thereof
short-term short-term
Receivables from affiliated companies 279 279 273 273
Receivables from associated companies and other participating interests 449 443 289 285
Loans and interest receivables 19 19 61 61
Derivatives with positive fair values 561 545 424 421
Receivables from finance leases 22 2 18 1
Insurance claims 72 59 65 54
Receivables from partners in jointly controlled entities – – 8 8
Other 614 437 522 368
Other receivables, financial instruments 2,016 1,784 1,660 1,471
Prepaid expenses 222 198 181 162
Defined benefit assets 128 – 260 –
Tax refund claims 825 792 780 766
Employee receivables 54 37 42 27
Precious metal trading positions 723 723 1,082 1,082
Other 374 247 531 375
Other receivables, non-financial instruments 2,326 1,997 2,876 2,412
Total 4,342 3,781 4,536 3,883

In 2011 receivables from associated companies and other Tax refund claims were primarily related to corporate income
participating interests resulted primarily from the sale of goods tax and sales tax.
and services as well as compensation payments from Styrolu­ Precious metal trading positions primarily comprise
tion companies, which are ­accounted for using the equity physical positions and precious metal accounts as well as long
method in the con­solidated ­financial statements. positions in precious metals, which are largely hedged through
The increase in derivatives with positive fair values is sales or derivatives. Drops in precious metal prices and lower
­primarily due to commodity derivatives. inventories in 2011 led to a decrease compared with the ­previous
Prepaid expenses include prepayments for operating year. Derivatives included in the previous year’s precious metal
­expenses of €67 million in 2011, compared with €23 million in trading positions amounting to €16 million were reclassified into
2010, as well as prepayments for insurance premiums of derivatives with positive fair values. The previous year’s figures
€22 million in 2011, compared with €25 million in 2010. have been adjusted accordingly.
Defined benefit assets decreased, as the increase of Included under Other are primarily financial receivables as
­pension obligations exceeded the increase of pension assets. well as rents and deposits. In the previous year, rents and
­deposits, including finance leases, were listed separately.
179 BASF
Consolidated
Report 2011
Financial Statements Notes
Notes on consolidated balance sheets
Consolidated Financial
BASF Report
Statements
2011
179

Valuation allowances for doubtful receivables 2011 (million €)

Balance as of Additions Reversals Additions Reversals Balance as of

January 1, affecting affecting not affecting not affecting December 31,
2011 income income income income 2011
Accounts receivable, trade 398 121 74 25 45 425
Other receivables 111 8 3 1 71 46
509 129 77 26 116 471

Valuation allowances for doubtful receivables 2010 (million €)

Balance as of Additions Reversals Additions Reversals Balance as of

January 1, affecting affecting not affecting not affecting December 31,
2010 income income income income 2010
Accounts receivable, trade 348 108 42 79 95 398
Other receivables 33 2 1 84 7 111
381 110 43 163 102 509

In 2011, the addition to allowances for doubtful receivables of €106 million were recognized for trade accounts receivable
­recognized in profit or loss was mainly related to ­receivables ­(reversals: €36 million) and €2 million for miscellaneous
from a customer in the Oil & Gas segment. ­receivables (reversals: €1 million). Contractual conditions of
A significant portion of receivables is covered by credit ­receivables were not ­renegotiated to any major extent in 2011
­insurance. and 2010.
The changes not affecting income were primarily related to Overdue trade accounts receivables which have not been
changes in the scope of consolidation, translation adjustments individually assessed for impairment were included in credit
and derecognition of uncollectible receivables. ­insurance policies in the amount of €281 million on D
­ ecember 31,
Even in the current economic environment, BASF does not 2011 (December 31, 2010: €216 million).
note any material changes in the credit quality of its receivables.
In 2011, after being individually assessed for impairment, valu­
ation allowances of €91 million were recognized for trade
­accounts receivable (reversals: €40 million) and €8 million for
miscellaneous receivables (reversals: €3 million). In 2010, after
being ­individually assessed for impairment, valuation allowances

Aging analysis of trade accounts receivable (million €)

2011 2010
Gross value Valuation allowances Gross value Valuation allowances
Not yet due 10,050 84 9,411 60
Past due less than 30 days 627 23 572 14
Past due between 30 and 89 days 179 11 151 13
Past due more than 90 days 455 307 431 311
11,311 425 10,565 398

As of December 31, 2011, there were no material other receivables classified as financial instruments that were overdue and for
which no valuation allowance was made.
180 Consolidated Financial Statements Notes
Notes on consolidated balance sheets
BASF Report 2011

17 – Capital and reserves

Conditional capital visory Board through April 30, 2014. The Board of Executive
A residual amount of less than €10,000 is reserved to meet com­ Directors is ­empowered, following the approval of the Super­
pensation claims of former shareholders of Wintershall. These visory Board, to decide on the exclusion of shareholders’
compensation claims expired in 2004. BASF SE will therefore ­subscription rights for these new shares in certain predefined
issue no more shares from conditional capital nor fulfill compen­ cases covered by the enabling resolution. Until now, this option
sation claims. has not been e ­ xercised and no new shares have been issued.

Authorized capital Capital surplus

At the Annual Shareholders’ Meeting of April 30, 2009, share­ Capital surplus includes share premiums from the issuance of
holders authorized the Board of Executive Directors to increase shares, the consideration for warrants and negative goodwill
the subscribed capital by issuing new shares in an amount of from the capital consolidation resulting from acquisitions of
up to €500 million against cash with the approval of the Super­ ­subsidiaries in exchange for the issue of BASF SE shares at par
value.

18 – Retained earnings and other comprehensive income

Million € 2011 2010 Other comprehensive income

Legal reserves 383 436
In accordance with IFRS, certain expenses and income have
Other retained earnings 19,063 15,381
been recorded in ‘other comprehensive income.’ This includes
19,446 15,817
translation adjustments, the valuation of securities at fair value,
changes in the fair value of derivatives held to hedge future cash
In 2011, changes in the scope of consolidation led to a decrease flows and net investments in a foreign operation and effects from
of €6 million in the legal reserves (2010: €11 million). Transfers the revaluation of assets and liabilities due to acquisition of a
from other retained earnings reduced legal reserves by €30 mil­ majority interest.
lion in 2011 and raised them by €18 million in 2010.
The acquisition of shares in companies which BASF already Translation adjustments
controls or includes as a jointly controlled entity in the Consoli­ The translation adjustments due to the use of the closing rate
dated ­Financial Statements is treated as a transaction between method are shown under currency translation adjustments as
shareholders, as long as this does not lead to a change in the a component of other comprehensive income in equity (trans­
consolidation method. Additional interests in BASF Pakistan lation adjustments) and are recognized in the income statement
­(Private) Ltd., Karachi, Pakistan, and in the jointly controlled ­entity only upon the disposal of a company.
­Sabina Petrochemicals LLC, Houston, Texas, were acquired in
2011. The amount of €34 million resulting from the difference Valuation of securities at fair value
between the acquisition price and the proportionate value of the For fully and proportionally consolidated companies, as well as
net assets received was netted against retained earnings. In those companies which are accounted for using the equity
2010, there were no acquisitions of shares in companies which method, changes in value of available-for-sale securities in
BASF controlled or included as a jointly controlled entity in the ­excess of their acquisition costs are accounted for in other
Consolidated Financial Statements. ­comprehensive income, without impacting the income state­
The offsetting of actuarial gains and losses resulted in a ment, until the securities are disposed of. Upon disposal, the
­decrease in retained earnings of €582 million in 2011 and a changes accumulated in other comprehensive income are
­decrease of €101 million in 2010. ­recognized in the income statement.
The decrease of €1,014 million in 2011 is primarily due to
Payment of dividends the sale of shares in K+S Aktiengesellschaft.
In accordance with the resolution of the Annual Shareholders’
Meeting on May 6, 2011, BASF SE paid a dividend of €2.20 per Cash flow hedge
share from the retained profit of the 2010 fiscal year. With Derivatives are used to hedge future cash flows. The effective
918,478,694 shares entitled to dividends, this amounts to a portion of the change in value of these derivatives is recognized
total dividend payout of €2,020,653,126.80. in equity. This also comprises equity effects from the hedging
of future cash flows at companies accounted for using the ­equity
method.
Hedging future cash flows at Nord Stream AG, Zug,
­Switzerland, a company accounted for using the equity method,
resulted in a change of minus €44 million.
181 BASF
Consolidated
Report 2011
Financial Statements Notes
Notes on consolidated balance sheets
Consolidated Financial
BASF Report
Statements
2011
181

Net investments in foreign operations Revaluation due to acquisition of majority of

Hedge accounting can be used to hedge the translation risk shares
from the net investment in a foreign operation. Effects recorded Until 2008, effects from the revaluation of net assets were
in equity are recognized in the income statement upon sale of ­recorded in equity when they arose due to the acquisition of a
the operation or return of the investment. majority of shares in a previously proportionally consolidated
company. Additional depreciation of these ­revalued assets leads
to a reversal of the corresponding item in equity; this does not
affect income.

19 – Minority interests

2011 2010

Equity stake Equity stake

Group company Partner (%) Million € (%) Million €

WINGAS GmbH & Co. KG, Gazprom Group,

Kassel, Germany Moscow, Russia 49.98 241 49.98 310

WINGAS TRANSPORT GmbH, Gazprom Group,

Kassel, Germany Moscow, Russia 49.98 139 49.98 103

Wintershall AG, Gazprom Group,

Kassel, Germany Moscow, Russia 49.00 148 49.00 136

BASF India Ltd., Shares are publicly traded

Mumbai, India 26.67 39 28.31 46

BASF PETRONAS Chemicals Sdn. Bhd., PETRONAS (Petroliam

Shah Alam, Malaysia Nasional Bhd.),
Kuala Lumpur, Malaysia 40.00 117 40.00 135

BASF Sonatrach PropanChem S.A., SONATRACH, Algiers, Algeria

Tarragona, Spain 49.00 48 49.00 49

BASF FINA Petrochemicals L.P., Total Petrochemicals Inc.,

Port Arthur, Texas Houston, Texas 40.00 262 40.00 263

Shanghai BASF Polyurethane Company Ltd., Shanghai Hua Yi (Group) Company,

Shanghai, China Shanghai, China, and Sinopec
Shanghai GaoQiao Petrochemical
Corporation, Shanghai, China 30.00 84 30.00 92

Other 168 119

1,246 1,253

20 – Provisions for pensions and similar obligations

In addition to state pension plans, most employees are entitled For BASF SE and German Group companies, a basic level of
to Company pension benefits from either defined contribution benefits is provided by BASF Pensionskasse VVaG, a legally
or defined benefit plans. Benefits generally depend on years of ­independent funded plan which is financed by contributions of­
service, contributions or compensation, and take into con­ employees and the employer and the return on its assets.
sideration the legal framework of labor, tax and social security BASF SE will ensure the necessary contributions to adequately
laws of the countries where the companies are located. To limit finance the benefits promised by BASF Pensionskasse VVaG.
the risks of changing market conditions as well as demographic Some of the benefits financed via the BASF Pensionskasse
developments, employees have been almost exclusively offered VVaG are subject to adjustments that must be borne by the
defined contribution plans in recent years. companies to the extent that these cannot be borne by
182 Consolidated Financial Statements Notes
Notes on consolidated balance sheets
BASF Report 2011

BASF Pensionskasse VVaG due to the regulations imposed by The measurement date for the pension plans is set as
the German supervisory authority. Additional occupational December 31. The most recent actuarial mortality tables are
­pension commitments at German Group companies are ­financed used, which in Germany are derived from the BASF Group
almost exclusively via pension provisions. ­population.
In the case of non-German subsidiaries, defined pension
benefits are covered in some cases by pension provisions, but
mainly by external insurance companies or pension funds.

The valuations using the projected unit credit method per IAS 19 were carried out under the following assumptions:

Assumptions used to determine the defined benefit obligation as of December 31 (weighted average in %)

Germany Foreign
2011 2010 2011 2010
Discount rate 5.00 5.00 4.34 4.74
Projected increase of wages and salaries 2.75 2.75 3.71 3.79
Projected pension increase 2.00 1.75 0.70 1.00

Assumptions used to determine expenses for pension plans (weighted average in %)

Germany Foreign
2011 2010 2011 2010
Discount rate 5.00 5.50 4.74 5.17
Projected increase of wages and salaries 2.75 2.75 3.79 3.91
Projected pension increase 1.75 2.00 1.00 0.92
Expected return on plan assets 5.28 5.13 5.49 6.28

The assumptions used to ascertain the defined benefit­ The assumptions regarding the overall expected long-term
obligation as of December 31 are used in the following year to rate of return are based on forecasts of expected individual
determine the expenses for pension plans. asset class returns and the desired portfolio structure. The
Similar obligations for North American Group companies forecasts are based on long-term historical average returns and
from assuming health care and life insurance costs for retired take into consideration the current yield level and the inflation
employees and their dependents were measured using trend. In 2011, the discount rate used in this calculation was
­actuarial principles and are included in the overall value. ­adjusted to account for developments in the capital markets.
The assumed rate of increase in health care costs is 8% The target asset allocation has been defined by using asset
per year (2010: 8%) until 2012, followed by a straight-line liability studies and is reviewed regularly. Accordingly, plan
­reduction until a rate of ­increase of 5% per year is reached by assets are aligned with long-term pension liabilities, taking into
2018 (2010: 5%). A change in the underlying rate of increase in consideration investment risks and adherence to government
health care costs by one percentage point would have the ­regulations. The existing portfolio structure is oriented towards
­following effects: the target asset allocation. In addition, current market assess­
ments are taken into consideration. In order to mitigate risks and
Sensitivity of health care costs (million €) maximize returns, a widely spread global portfolio of individual
asset classes is held.
Increase by one Decrease by one
percentage point percentage point Portfolio structure of plan assets (%)
Accumulated
post-employment
Target
benefit obligation 17 (31)
allocation Share of plan assets
Effect on pension cost 1 (2) 2012 2011 2010
Shares 27 28 31
Bonds 61 63 60
Property 5 4 4
Other 7 5 5
Total 100 100 100
183 BASF
Consolidated
Report 2011
Financial Statements Notes
Notes on consolidated balance sheets
Consolidated Financial
BASF Report
Statements
2011
183

Development of defined benefit obligation (million €)

2011 2010
Defined benefit obligation as of January 1 17,695 15,264
Service cost 250 220
Interest cost 832 819
Benefits paid (914) (890)
Participants’ contributions 55 53
Actuarial losses 464 941
Acquisition-related effects – 800
Settlements and other plan changes 5 (96)
Exchange differences 226 584
Defined benefit obligation as of December 31 18,613 17,695

Development of plan assets (million €)

2011 2010
Plan assets as of January 1 15,226 13,810
Expected return on plan assets 818 765
Actuarial losses/gains (328) 569
Employer contributions 180 181
Participants’ contributions 55 53
Benefits paid (560) (801)
Acquisition-related effects – 249
Other changes 2 (62)
Exchange differences 179 462
Plan assets as of December 31 15,572 15,226

The actual return on plan assets amounted to €490 million in In 2010, BASF Pensionskasse was granted profit participation
2011 and €1,334 million in 2010. On December 31, 2011, plan capital of €80 million to strengthen its financing. This does not
assets contained securities issued by BASF Group companies represent a plan asset. No material transactions took place
with a market value of €27 million (December 31, 2010: €14 mil­ ­between the legally independent pension funds and BASF
lion). The market value of the properties of legally independent Group companies in 2011.
pension funds rented to BASF Group companies amounted to
€48 million on December 31, 2011, and €49 million on Decem­
ber 31, 2010.

Reconciliation of funded status to provisions for pensions and similar obligations (million €)

2011 2010
Plan assets as of December 31 15,572 15,226
Less defined benefit obligation as of December 31 18,613 17,695
Funded status (3,041) (2,469)
Unrecognized past service cost (19) (19)
Asset ceiling in accordance with IAS 19.58 (1) (30)
Net obligation recognized on the balance sheet (3,061) (2,518)
Thereof defined benefit assets 128 260
pension provisions (3,189) (2,778)
184 Consolidated Financial Statements Notes
Notes on consolidated balance sheets
BASF Report 2011

Actuarial gains and losses are recognized directly in retained r­ ecognized directly in retained earnings. Since the introduction
earnings in the reporting period in which they occur. Past ­service of this accounting policy in 2004, total actuarial losses of
costs are amortized over the average service period of the €2,972 million have been recognized directly in retained earn­
­entitled employees until the benefits become vested. Actuarial ings, not taking deferred taxes into account.
losses of €792 million in 2011 and €372 million in 2010 were

Current funding situation of the plans (million €)

2011 2010

Defined benefit Defined benefit

obligation Plan assets obligation Plan assets
Unfunded pension plans 2,157 – 2,003 –
Partially funded pension plans 10,633 9,363 5,130 4,374
Total of pension plans that are not fully funded 12,790 9,363 7,133 4,374
Fully funded pension plans 5,823 6,209 10,562 10,852
18,613 15,572 17,695 15,226

The shift between plans with partial and full funding is caused by updated actuarial assumptions used to determine the defined
­benefit obligation and by the lower than expected plan assets.

Deviation between actuarial assumptions and the actual development (million €)

2011 2010 2009 2008 2007

Defined benefit obligation 18,613 17,695 15,264 11,814 12,348
Thereof impact of experience adjustments 33 21 (2) 36 (172)
Plan assets 15,572 15,226 13,810 10,325 12,038
Thereof impact of experience adjustments (328) 569 1,120 (2,163) (121)
Funded status (3,041) (2,469) (1,454) (1,489) (310)

Expected payments resulting from pension obligations existing as of December 31, 2011 (million €)

2012 963
2013 992
2014 997
2015 1,026
2016 1,098
2017 until 2021 5,932

Composition of expenses for pension plans (million €)

2011 2010
Service cost 250 220
Amortization of past service cost (6) (2)
Settlement losses/gains 5 (4)
Expenses for defined benefit plans charged to income from operations 249 214
Expenses for defined contribution plans charged to income from operations 216 194
Expenses for pension benefits charged to income from operations 465 408

Interest cost 832 819

Expected return on plan assets (818) (765)
Expenses for pension benefits in the financial result 14 54

In 2011, contributions to public pension plans were €550 million (2010: €473 million). The estimated contribution payments for
defined benefit plans for 2012 are €174 million.
185 BASF
Consolidated
Report 2011
Financial Statements Notes
Notes on consolidated balance sheets
Consolidated Financial
BASF Report
Statements
2011
185

21 – Other provisions

2011 2010
Million € Thereof short-term Thereof short-term
Restoration obligations 983 18 869 5
Environmental protection and remediation costs 659 150 665 192
Employee obligations 1,876 1,395 2,043 1,380
Sales and purchase risks 665 651 730 692
Restructuring measures 198 180 234 214
Legal, damage claims, guarantees and related commitments 190 90 249 125
Other 1,974 726 1,886 716
6,545 3,210 6,676 3,324

Restoration obligations primarily relate to the estimated costs The sales and purchase risks provisions include warranties,
for the filling of wells, the removal of production equipment ­after product liability, customer rebates, payment discounts and other
the end of production and the removal of natural gas pipelines. price reductions, sales commissions and provisions for ­expected
The increase in long-term provisions for restoration obligations losses on committed purchases as well as provisions for ­onerous
is primarily a result of provisions added in connection with the contracts.
construction of natural gas pipelines and the expansion of The restructuring measures provisions include severance
­natural gas storage facilities in Germany. payments to employees as well as expected costs for site
Provisions for environmental protection and remedia- ­closures, including the costs for demolition and similar
tion costs cover expected costs for rehabilitating contaminated ­measures.
sites, recultivating landfills, removal of environmental contami­ Provisions for legal, damage claims, guarantees and
nation at existing production or storage sites and ­similar ­related commitments include the expected costs of litigation,
­measures. In addition, provisions are recognized in connection obligations under damage claims, and other guarantees.
with the allocation of emissions certificates from the German Other includes long-term tax provisions as well as further
Emissions Trading Authority or other similar bodies in the present obligations and accruals.
­European Union. The following table shows the development of other
Provisions for employee obligations include obligations ­provisions by category. Other changes relate to changes in the
for the granting of long-service bonuses and anniversary scope of consolidation, currency effects and the transfer of
­payments, variable compensation including the associated ­obligations to liabilities, where these obligations have become
­social ­security contributions, and other accruals as well as more concrete as to their amount and timing.
­provisions for early retirement programs for employees nearing
­retirement.
The decrease in the long-term employee obligation provi­
sions resulted primarily from the utilization of provisions for the
BASF stock price-based compensation program (long-term
incentive program).
 or more information on provisions for the long-term incentive
F
­p rogram, see Note 28 from page 198 onward
186 Consolidated Financial Statements Notes
Notes on consolidated balance sheets
BASF Report 2011

Development of other provisions in 2011 (million €)

Interest December 31,

January 1, 2011 Additions compounding Utilization Reversals Other changes 2011
Restoration obligations 869 100 41 (16) (16) 5 983

Environmental protection and

remediation costs 665 142 1 (165) (19) 35 659

Employee obligations 2,043 1,302 17 (1,322) (115) (49) 1,876

Sales and purchase risks 730 409 1 (318) (91) (66) 665
Restructuring measures 234 98 – (115) (18) (1) 198

Legal, damage claims,

guarantees and related
commitments 249 72 11 (32) (106) (4) 190

Other 1,886 804 1 (534) (177) (6) 1,974

6,676 2,927 72 (2,502) (542) (86) 6,545

22 – Liabilities

Financial indebtedness (million €)

Carrying amounts based on effective

interest method
Nominal volume
(million, Effective
currency of interest
issue) rate 2011 2010
4% Euro Bond 2006/2011 of BASF SE 1,000 4.05 % – 1,000
3.375% Euro Bond 2005/2012 of BASF SE 1,400 3.42 % 1,400 1,399
3.75% Euro Bond 2009/2012 of BASF SE 1,350 3.97 % 1,3561 1,345
4.5% Euro Bond 2006/2016 of BASF SE 500 4.62 % 498 497
4.25% Euro Bond 2009/2016 of BASF SE 200 4.40 % 199 199
5.875% GBP Bond 2009/2017 of BASF SE 400 6.04 % 475 461
4.625% Euro Bond 2009/2017 of BASF SE 300 4.69 % 299 299
3.25% CHF Bond 2008/2011 of BASF Finance Europe N.V. 300 3.39 % – 240
6% Euro Bond 2008/2013 of BASF Finance Europe N.V. 1,250 6.15 % 1,247 1,245
5% Euro Bond 2007/2014 of BASF Finance Europe N.V. 1,000 5.09 % 998 997
5% Euro Bond 2007/2014 of BASF Finance Europe N.V. 250 4.83 % 251 251
3.625% CHF Bond 2008/2015 of BASF Finance Europe N.V. 200 3.77 % 164 159
5.125% Euro Bond 2009/2015 of BASF Finance Europe N.V. 1,500 5.30 % 1,492 1,489
5.125% Euro Bond 2009/2015 of BASF Finance Europe N.V. 500 4.38 % 511 515
4.5% Euro Medium Term Note 2009/2016 of BASF Finance Europe N.V. 150 4.56 % 150 150
3.25% CHF Bond 2006/2012 of Ciba Spezialitätenchemie Finanz AG 225 3.32 % 184 177
4.875% Euro Bond 2003/2018 of Ciba Spec. Chem. Finance Luxemb. S.A. 477 4.88 % 409 401
USD commercial paper – 1,384
Other bonds 667 696
Bonds and other liabilities to the capital markets 10,300 12,904
Liabilities to credit institutions 2,704 2,135
13,004 15,039

1
Interest rate swaps were concluded in July 2011 to hedge against interest rate risks for the 3.75% Euro Bond of BASF SE. Fair value hedge accounting is applied in
this context, resulting in an adjustment of the carrying amount of the bond by €8 million.
187 BASF
Consolidated
Report 2011
Financial Statements Notes
Notes on consolidated balance sheets
Consolidated Financial
BASF Report
Statements
2011
187

Breakdown of financial indebtedness by currency (million €)

2011 2010
Euro 10,411 10,980
U.S. dollar 752 2,177
British pound 560 543
Chinese renminbi 557 391
Swiss franc 347 576
Brazilian real 144 205
South Korean won 51 –
Turkish lira 40 18
South African rand 39 28
Argentinean peso 26 30
Other 77 91
13,004 15,039

Maturities of financial indebtedness (million €)

2011 2010
Following year 1 3,985 3,369
Following year 2 1,513 3,112
Following year 3 1,964 2,100
Following year 4 2,234 1,321
Following year 5 1,541 2,539
Following year 6 and thereafter 1,767 2,598
13,004 15,039

Bonds and other liabilities to the capital markets Other liabilities

Other bonds consist primarily of industrial revenue and ­pollution The increase in other liabilities in 2011 related, among other
control bonds of the BASF Corporation group that are used to things, to negative fair values of derivatives concluded to hedge
finance investments in the United States. The weighted-average against currency fluctuations and rising raw material prices.
interest rate of these bonds was 2.2% in 2011 (2010: 2.2%). Other liabilities included the non-consolidated propor­
The weighted-average effective interest rate amounted to 2.2% tionate amount of ­liabilities to companies accounted for using
in 2011 and 2010 and their average residual term amounted to the ­proportional consolidation method of €259 million in 2011,
211 months as of December 31, 2011, and 222 months as of and €195 million in 2010, thereof miscellaneous liabilities of
December 31, 2010. €96 million in 2011, and €57 million in 2010. Further miscella­
neous ­liabilities relating to participations accounted for using the
Liabilities to credit institutions ­equity or cost method amounted to €258 million in 2011, and
In order to finance investments in natural gas infrastructure, €261 million in 2010. Precious metal derivatives that were
€643 million was borrowed at an interest rate of 3.5% by ­contained in miscellaneous ­liabilities amounting to €74 million
WINGAS GmbH & Co. KG. The weighted-average interest rate in 2010 were reclassified into derivatives with negative­
on loans was 4.4% in 2011 (2010: 3.6%). market ­values. The previous year’s figures have been adjusted
BASF SE had committed and unused credit lines with ­accordingly.
­variable interest rates of €4,739 million as of December 31, 2011,  or more information on financial risks and derivative financial
F
­instruments, see Note 25 from page 191 onward
and €4,490 million as of December 31, 2010.
 or more information on finance lease payables, see Note 26 on
F
page 197
188 Consolidated Financial Statements Notes
Notes on consolidated balance sheets
BASF Report 2011

Other liabilities (million €)

2011 2010
Short-term Long-term Short-term Long-term
Liabilities on bills 46 4 73 2
Non-trade liabilities to partners in jointly controlled entities 221 431 314 433
Derivatives with negative fair values 582 176 443 7
Liabilities arising from finance leases 10 50 10 49
Accrued interest on bonds and other loans 202 1 247 –
Miscellaneous liabilities 786 90 450 70
Other liabilities which qualify as financial instruments 1,847 752 1,537 561
Advances received on orders 272 – 283 –
Liabilities related to social security 152 23 166 26
Employee liabilities 299 159 328 94
Deferred income 128 173 154 203
Miscellaneous liabilities 338 35 334 17
Other liabilities which qualify as non-financial instruments 1,189 390 1,265 340
Total 3,036 1,142 2,802 901

Secured liabilities (million €)

2011 2010
Liabilities to credit institutions 3 14
Miscellaneous liabilities 20 26
23 40

Liabilities to credit institutions were secured primarily with registered land charges. Secured contingent liabilities do not exist.

23 – Contingent liabilities and other financial obligations

The contingencies listed below are stated at nominal value:

Contingent liabilities (million €)

2011 2010
Bills of exchange 8 7
Thereof to affiliated companies – –
Guarantees 153 510
Thereof to affiliated companies 19 8
Warranties 103 96
Collateral granted on behalf of third-party liabilities 4 14
268 627
189 BASF
Consolidated
Report 2011
Financial Statements Notes
Notes on consolidated balance sheets
Consolidated Financial
BASF Report
Statements
2011
189

The decline in guarantees compared with the ­previous year was After the completion of the approval process and the laying of the
primarily the result of the expiry of the financial ­guarantee for the first pipeline, operations started in 2011. By 2012, a second line
financing of OAO Severneftegazprom on March 31, 2011. will be built parallel to the first line. Upon completion of the ­second
BASF has a stake of 15.5% in the project company Nord line in 2012, the full capacity of 55 billion cubic meters of natural
Stream AG, Zug, Switzerland, whose purpose is to construct a gas per year will be reached.
natural gas pipeline through the Baltic Sea from Vyborg, the Rus­ In accordance with the provisions of Section 17 of the
sian ­Federation, to Greifswald, Germany. To finance the two lines ­Republic of Ireland Companies (Amendments) Act 1986,
of the pipeline, ­project financing was arranged in 2011 and 2010. BASF SE gives irrevocable guarantees with respect to the
As is normal in such financing, the stockholders issued guaran­ ­liabilities, as referred to in Section 5 (c) (ii) of that Act, of the
tees in favor of the banks giving the loans. The risk from the guar­ ­subsidiary company BASF Ireland Ltd., Dublin, Republic of Ire­
antees issued by BASF is limited to a proportionate share of the land. As of Decem­ber 31, 2011, the liabilities of BASF Ireland Ltd.
project volume. As of December 31, 2011, it is assumed that no totaled €20 million.
claims will be made against these guarantees issued by BASF.
The shares in Nord Stream AG and the subordinated loan receiv­
ables of €19 million granted to Nord Stream AG were given as
collateral to the banks extending the loans.

Other financial obligations (million €)

2011 2010
Construction in progress 5,280 4,642
Thereof purchase commitments 969 752
for the purchase of intangible assets 14 8
Obligation arising from long-term leases (excluding finance leases) 1,801 1,679
Payment and loan commitments and other financial obligations 7 3
7,088 6,324

Assets used under long-term leases Purchase obligations from long-term natural gas
Assets used under long-term leases primarily concern buildings and raw material supply contracts
and IT infrastructure. The Company has entered into long-term purchase contracts
For more information on leasing liabilities, see Note 26 on page 197 for natural gas in the Natural Gas Trading business sector, which
are subject to continual price adjustments. These purchase
Obligations arising from long-term leases ­obligations mainly relate to long-term supply contracts with cus­
(Excluding finance leases) (million €)
tomers with terms between one and nineteen years.
The Company purchases raw materials via long-term con­
2012 620
tracts and on spot markets. The fixed purchase obligations of
2013 225
long-term purchase contracts with a remaining term of more
2014 198
than one year as of December 31, 2011, are as f­ollows:
2015 176
2016 132
Purchase obligations from natural gas and
2017 and thereafter 450 raw material supply contracts (million €)
1,801
2012 12,313
2013 9,528
2014 7,908
2015 7,257
2016 7,275
2017 and thereafter 92,808
137,089
190 Consolidated Financial Statements Notes
Notes on consolidated balance sheets
BASF Report 2011

24 – Risks from litigation and claims

Since 2005, a total of 38 class action lawsuits have been filed In addition, BASF SE and its affiliated companies are defendants
in U.S. courts against urethane and polyurethane producers, in or parties to further judicial and arbitrational proceedings.
­including BASF SE and BASF Corporation. It was alleged that Based on the current state of knowledge, these proceedings
sales of TDI, MDI and polyether polyols had violated antitrust will have no material influence on the economic situation of
laws on price fixing. In addition, two plaintiffs have opted out of BASF.
the class action process and are pursuing their claims in ­parallel
suits. At the end of 2007, the U.S. Department of Justice ceased
its inquiry into alleged price fixing. BASF settled the class action
lawsuits on September 17, 2011 and agreed to pay $51 million.
The settlement was conclusively approved by the courts in
­December 2011. It does not include the two parallel claims
­currently being ­pursued. BASF is defending itself against these
lawsuits.
BASF S.A., Brazil, and Shell are defendants in several
­individual lawsuits and one class action lawsuit regarding
existing and potential health damage to former employees
­(including employees of external companies), their families and
descendants due to their employment at a site in Paulinia, ­Brazil,
which was significantly contaminated by the production of crop
protection products. BASF acquired the site from American
­Cyanamid in 2000, who had in turn acquired it from Shell in
1995. The contamination stems from the period before 2000.
In August 2010, BASF S.A. and Shell were jointly ordered to pay
damages for medical treatment and personal suffering equiva­
lent to approximately €490 million, not including interest. The
appeal against this ­first-instance judgment was rejected on
April 4, 2011. BASF S.A. has applied for the right to appeal to a
higher court. On March 30, 2011, BASF S.A. brought a suit for
a ­declaratory judgment against Shell to determine that Shell is
­responsible for the full amount of damages ­resulting from the
contamination at the Paulinia site, which had been caused by
Shell. Currently BASF S.A. and Shell are in settlement talks with
one another and with the plaintiffs.
191 BASF
Consolidated
Report 2011
Financial Statements Notes
Notes on consolidated balance sheets
Consolidated Financial
BASF Report
Statements
2011
191

25 – Supplementary information on financial instruments

25.1 – Financial risks Exposure and sensitivity by currency (million €)

Market risks Exposure Sensitivity Exposure Sensitivity

Foreign currency risks: Changes in exchange rates could lead 2011 2011 2010 2010
U.S. dollar 1,706 (237) 1,141 (132)
to negative changes in the value of financial instruments and
Other (132) (11) (83) (14)
­adverse changes in future cash flows from planned trans­actions.
Total 1,574 (248) 1,058 (146)
Foreign currency risks from financial instruments result from the
translation at the closing rate of financial receivables, loans,
­securities, cash, and financial liabilities into the functional Due to the use of options to hedge currency risks, the sen­sitivity
­currency of the respective Group company. Foreign currency analysis is not a linear function of the assumed changes in
contracts in a variety of currencies are used to hedge foreign ­exchange rates.
exchange risks from primary financial instruments and planned Interest rate risks: Interest rate risks result from changes
transactions. in prevailing market interest rates, which can cause a change in
The foreign currency risk exposure corresponds to the net the fair value of fixed-rate instruments, and changes in the
amount of the nominal volume of the primary and the derivative ­interest payments of variable-rate instruments. To hedge these
financial instruments which are exposed to currency risks. In risks, interest rate swaps and combined interest rate and
­addition, planned purchase and sales transactions of the ­currency derivatives are used. While these risks are relevant to
­respective following year are included, if they fall under the the financing activities of BASF, they are not of material signi­
­currency risk management system. Opposite positions in the ficance for BASF’s operating activities.
same currency are offset against each other. The variable interest exposure, which also includes fixed-
The sensitivity analysis is conducted by simulating a 10% rate bonds set to mature in the following year, amounted to
depreciation in all currencies against the respective functional ­minus €4,070 million at the end of 2011, compared with minus
currency. The effect on BASF’s income before taxes and ­minority €3,658 million at the end of 2010. An increase in all relevant
interests would have been minus €243 million as of Decem­ ­interest rates by one percentage point would have lowered
ber 31, 2011, and minus €157 million as of December 31, 2010. ­income before taxes and minority interests by €10 million as of
The effect from the items designated under hedge accounting December 31, 2011 and €23 million as of December 31, 2010.
would have decreased the equity of the shareholders of The sensitivity of the equity of the shareholders of BASF SE to
BASF SE before income taxes by €5 million on December 31, changes in interest rates is not material.
2011 (December 31, 2010: an ­increase of €11 million). This ­refers
to transactions in U.S. dollars and British pounds. The currency
­exposure amounted to €1,574 million on December 31, 2011
(December 31, 2010: €1,058 million).

Carrying amount of non-derivative interest-bearing financial instruments (million €)

2011 2010

Fixed interest Variable interest Fixed interest Variable interest

rate rate rate rate
Loans 218 36 169 75
Securities 35 5 28 5
Financial indebtedness 11,012 1,992 13,309 1,730

Nominal and fair value of interest rate and combined interest and cross currency swaps (million €)

2011 2010
Nominal value Fair value Nominal value Fair value
Interest rate swaps 2,711 48 1,061 52
Thereof payer swaps 1,361 39 1,061 52
receiver swaps 1,350 9 – –
Combined interest and cross currency swaps 722 34 928 60
Thereof fixed rate 722 34 920 61
variable rate – – 8 (1)
192 Consolidated Financial Statements Notes
Notes on consolidated balance sheets
BASF Report 2011

Equity price risks: BASF holds shares in listed companies and In connection with CO2 emissions trading, various types of CO2
mutual stock funds as a vehicle for investing liquid funds and, certificates are purchased and sold forward. The goal of these
to a limited extent, with a view to taking strategic stakes in com­ transactions is to benefit from market price differences. These
panies. They are included under participations, long-term and deals are settled by physical delivery.
short-term securities, and are classified as available-for-sale in By holding ­commodity derivatives and precious metal trad­
the BASF Group. A decline in all relevant share prices by 10% ing positions, BASF is exposed to price risks. The valuation of
would have lowered equity by €6 million on ­December 31, 2011 commodity derivatives and precious metal ­trading positions at
(December 31, 2010: €117 million), before taking income taxes fair value means that adverse changes in market prices could
into consideration. The significant decline in sensitivity is due to negatively affect the earnings and equity of BASF.
the sale of the shares in K+S Aktien­gesellschaft. BASF performs value-at-risk analyses for all commodity
Options for disposal of participations: BASF and INEOS ­derivatives and precious metals trading positions. Using the
have agreed upon options for BASF’s withdrawal from the joint value-at-risk analysis, we continually quantify market risk and
venture Styrolution. These options are classified as derivatives forecast the maximum possible loss within a given confidence
according to IAS 39. A significant risk variable which is decisive interval over a defined period. The value-at-risk calculation is
for the valuation of both options is the value of the company. An based on a confidence interval of 95% and a holding period of
additional negative impact on earnings of €26 million would have one day. A confidence interval of 95% means that there is a 95%
resulted had the value of Styrolution been 10% higher as of probability that the maximum loss does not exceed the value at
­December 31, 2011. Had the company value been 10% lower risk within a one-day period. The value-at-risk calculation for
as of ­December 31, 2011, increased earnings of €33 million precious metals is based on a confidence interval of 99%. BASF
would have r­ esulted. uses the variance-covariance approach.
Commodity price risks: Some of BASF’s divisions are BASF uses value-at-risk as a supplement to other risk
­exposed to strong fluctuations in raw material prices. These ­management tools and also sets volume-based, exposure and
­result primarily from the following raw materials: naphtha, stop loss limits.
­propylene, benzene, lauric oils, titanium dioxide, cyclohexane,
methanol, natural gas, butadiene, LPG condensate, ammonia Exposure to commodity derivatives (million €)
and precious metals. BASF takes the following measures to
­reduce price risks associated with the purchase of raw 2011 2010

­materials: Expo- Value at Expo- Value at

sure Risk sure Risk

–– BASF uses commodity derivatives to hedge the risks from the Crude oil, oil products and
natural gas (259) 13 (230) 6
volatility of raw material prices. These are primarily options
Precious metals 31 2 4 1
and swaps on crude oil, oil products and natural gas.
CO2 emissions certificates 4 1 3 .
–– In order to secure margins, the Oil & Gas segment uses
Agricultural commodities (209) 1 (95) .
­commodity derivatives, primarily swaps on oil products, in the
(433) 17 (318) 7
Natural Gas Trading business sector. Risks to margins arise
in volatile markets when purchase and sales contracts are
priced differently. The exposure corresponds to the net amount of all long and
–– The Catalysts division enters into both short-term and long- short positions of the respective commodity category.
term purchase contracts with precious metal producers. It  or more information regarding financial risks and BASF’s risk
F
­management, see BASF Management’s Analysis, Opportunities and
also buys precious metals on spot markets from a variety of risks report, from page 104 onward
business partners. The price risk from precious metals
­purchased to be sold on to third parties, or for use in the
­production of catalysts, is hedged using derivative instru­ Default and credit risk
ments. Forward contracts are primarily used and they are Default and credit risks arise when counterparties do not fulfill
­settled by either entering into offsetting contracts or by their contractual obligations. BASF regularly analyzes the
­delivering the precious metals. ­creditworthiness of each significant debtor and grants credit
–– In the Crop Protection division, the sales prices of products limits on the basis of this analysis. Due to the global activities
are partially coupled to the price of certain agricultural and diversified customer structure of the BASF Group, there is
­commodities. To hedge the resulting risks, derivatives on no significant concentration of default risk. The carrying amount
­agricultural commodities are concluded. of all receivables, loans and interest-bearing securities plus the
nominal value of contingent liabilities excluding potential ­warranty
In addition, BASF holds limited unhedged precious metal and obligations represents the maximum default risk for BASF.
oil product positions, which could also include derivatives, for  or more information on credit risks, see Note 16 from page 178
F
­onward
trading on its own account. The value of these positions is
­exposed to market price volatility and is subject to constant
monitoring.
193 BASF
Consolidated
Report 2011
Financial Statements Notes
Notes on consolidated balance sheets
Consolidated Financial
BASF Report
Statements
2011
193

Liquidity risks tation of the maturities of the contractual cash flows from finan­
BASF promptly recognizes any risks from cash flow fluctuations cial liabilities. Future cash flows are not discounted here.
as part of the liquidity planning. BASF has ready access to Derivatives are included using their net cash flows, provided
­sufficient liquid funds from our ongoing commercial paper they have a negative fair value and therefore represent a liabil­
­program and confirmed lines of credit from banks. ity. Derivatives with positive fair values are assets and are there­
fore not considered.
25.2 – Maturity analysis Trade accounts payable are generally interest free and are
due within one year. Therefore the carrying amount of trade
The interest and principal payments as well as other payments ­accounts payable equals the sum of future cash flows.
for derivative financial instruments are relevant for the presen­

Maturities of contractual cash flows from financial liabilities 2011 (million €)

Liabilities
Bonds and other resulting from
liabilities to the Liabilities to derivative finan- Miscellaneous
capital markets credit institutions cial instruments liabilities Total
2012 3,410 1,117 532 973 6,032
2013 1,805 750 18 83 2,656
2014 1,516 119 6 21 1,662
2015 2,324 745 22 22 3,113
2016 956 59 – 22 1,037
2017 and thereafter 1,840 125 – 425 2,390
11,851 2,915 578 1,546 16,890

Maturities of contractual cash flows from financial liabilities 2010 (million €)

Liabilities
Bonds and other resulting from
liabilities to the Liabilities to derivative finan- Miscellaneous
capital markets credit institutions cial instruments liabilities Total
2011 3,616 795 437 942 5,790
2012 3,396 235 62 80 3,773
2013 1,799 686 1 14 2,500
2014 1,518 53 – 11 1,582
2015 2,320 382 – 12 2,714
2016 and thereafter 2,819 102 7 388 3,316
15,468 2,253 507 1,447 19,675

25.3 – Classes and categories of financial The carrying amount of financial indebtedness amounted to
instruments €13,004 million on December 31, 2011 (December 31, 2010:
€15,039 million). The fair value of financial indebtedness
For trade accounts receivable, other receivables and miscella­ amounted to €13,819 million at the end of 2011 (end of 2010:
neous assets, loans, cash and cash equivalents, as well as trade €15,995 million). The fair value of financial indebtedness is
accounts payable and other liabilities, the carrying amount ­determined on the basis of interbank interest rates. The differ­
­approximates the fair value. Participations which are not traded ence between carrying amounts and fair values results primar­
on an active market and whose fair value could not be reliably ily from changes in market interest rates.
determined are recognized at amortized cost and are reported
in “other financial assets”.
The carrying amount of participations which are traded on
an active market and therefore recognized at fair value amounted
to €1 million as of December 31, 2011 (December 31, 2010:
€1,116 million). They are included in the item “shares in other
­participations.” The decline is due to the sale of the shares in
K+S Aktiengesellschaft.
For more information, see Note 14 on page 177
194 Consolidated Financial Statements Notes
Notes on consolidated balance sheets
BASF Report 2011

Carrying amounts and fair values of financial instruments as of December 31, 2011 (million €)

Total carrying
amount with- Valuation
in scope of category in Thereof Thereof Thereof
Carrying application accordance fair value fair value fair value
amount of IFRS 7 with IAS 392 Fair value level 13 level 24 level 35
Participations1 554 554 Afs 1 1 – –
Receivables from finance leases 22 22 n/a 22 – – –
Loans 254 254 LaR 254 – – –
Accounts receivable, trade 10,886 10,886 LaR 10,886 – – –
Derivatives without hedging relationships 526 526 aFVtPL 526 91 421 14
Derivatives with hedging relationships 35 35 n/a 35 – 35 –
Other receivables and miscellaneous assets6 3,759 1,433 LaR 1,433 – – –
Securities 59 59 Afs 59 59 – –
Cash and cash equivalents 2,048 2,048 Afs 2,048 2,048 – –
Total assets 18,143 15,817 15,264 2,199 456 14
Bonds 10,300 10,300 AmC 11,115 – – –
Commercial paper – – AmC – – – –
Liabilities to credit institutions 2,704 2,704 AmC 2,704 – – –
Liabilities from finance leases 60 60 n/a 60 – – –
Accounts payable, trade 5,121 5,121 AmC 5,121 – – –
Derivatives without hedging relationships 713 713 aFVtPL 713 49 503 161
Derivatives with hedging relationships 45 45 n/a 45 – 45 –
Other liabilities6 3,360 1,781 AmC 1,781 – – –
Total liabilities 22,303 20,724 21,539 49 548 161

Carrying amounts and fair values of financial instruments as of December 31, 2010 (million €)

Total carrying
amount with- Valuation
in scope of category in Thereof Thereof Thereof
Carrying application accordance fair value fair value fair value
amount of IFRS 7 with IAS 392 Fair value level 13 level 24 level 35
Participations1 1,672 1,672 Afs 1,116 1,116 – –
Receivables from finance leases 18 18 n/a 18 – – –
Loans 244 244 LaR 244 – – –
Accounts receivable, trade 10,167 10,167 LaR 10,167 – – –
Derivatives without hedging relationships 396 396 aFVtPL 396 34 362 –
Derivatives with hedging relationships 28 28 n/a 28 – 28 –
Other receivables and miscellaneous assets6 4,094 1,218 LaR 1,218 – – –
Securities 53 53 Afs 53 53 – –
Cash and cash equivalents 1,493 1,493 Afs 1,493 1,493 – –
Total assets 18,165 15,289 14,733 2,696 390 –
Bonds 11,520 11,520 AmC 12,476 – – –
Commercial paper 1,384 1,384 AmC 1,384 – – –
Liabilities to credit institutions 2,135 2,135 AmC 2,135 – – –
Liabilities from finance leases 59 59 n/a 59 – – –
Accounts payable, trade 4,738 4,738 AmC 4,738 – – –
Derivatives without hedging relationships 424 424 aFVtPL 424 58 366 –
Derivatives with hedging relationships 26 26 n/a 26 – 26 –
Other liabilities6 3,194 1,589 AmC 1,589 – – –
Total liabilities 23,480 21,875 22,831 58 392 –

1
The difference between carrying amount and fair value results from participations measured at acquisition cost, for which the fair value could not be reliably deter-
mined (2011: €553 million, 2010: €556 million).
2
Afs: Available-for-sale; LaR: Loans and receivables; aFVtPL: at-fair-value-through-profit-or-loss; AmC: Amortized Cost; a more detailed description of the categories
can be found in Note 1 from page 147 onward.
3
Determination of the fair value based on quoted, unadjusted prices on active markets.
4
Determination of the fair value based on parameters for which directly or indirectly quoted prices on active markets are available.
5
Determination of the fair value based on parameters for which there is no observable market data.
6
Not including separately shown derivatives as well as receivables and liabilities from finance leases; the categorization for the 2010 fiscal year has been adjusted for
purposes of comparison.
195 BASF
Consolidated
Report 2011
Financial Statements Notes
Notes on consolidated balance sheets
Consolidated Financial
BASF Report
Statements
2011
195

Derivatives whose fair value is calculated using parameters not i­nstruments. The item “financial instruments at fair value through
observable on the market (level 3) only include the options profit or loss” contains only those gains and losses from instru­
agreed upon with INEOS regarding the sale of BASF’s share in ments which are not designated as hedging instruments as
Styrolution Holding GmbH. The sale and purchase options are ­defined by IAS 39. Net gains or net losses from available-for-
shown on the balance sheet under other long-term receivables sale financial assets contain income from write-downs/write-
or other long-term liabilities. As of October 1, 2011, the ­market ups, ­interest, dividends and the reclassification of valuation
value of these options amounted to minus €139 million and to ­effects from equity on the sale of the securities and participa­
minus €147 million as of December 31, 2011. The resulting tions.
­difference of €8 million was recorded in the financial result. The net loss from loans and receivables, and net gains from
Net gains and losses of financial instruments comprise the financial liabilities measured at amortized cost relate primarily
results of valuations, the amortization of discounts, the recog­ to results from the translation of foreign currencies.
nition and derecognition of impairment losses, results from the  he gains and losses from the valuation of securities and participa-
T
tions recognized in the equity of the shareholders of BASF SE are
translation of foreign currencies as well as interest, dividends shown in the Consolidated statements of income and ­expense rec-
and all other effects on the earnings resulting from financial ognized in equity on page 143

Net gains and losses from financial instruments (million €)

2011 2010
Loans and receivables 399 (320)
Thereof interest result 121 65
Available-for-sale financial assets 871 7
Thereof interest result 4 2
Liabilities measured at amortized cost (822) (910)
Thereof interest result (556) (603)
Financial instruments at fair value through profit or loss (193) 302

25.4 – Derivative instruments and in the event of nonperformance of their counterparts. This credit
hedge accounting risk is minimized by trading contracts exclusively with creditwor­
thy banks and partners within predefined credit limits.
The use of derivative instruments To ensure effective risk management, risk positions are
The Company is exposed to foreign currency, interest rate and ­centralized at BASF SE and certain Group companies. Con­
commodity price risks during the normal course of business. In tracting and execution of derivative financial instruments for
addition, publicly listed financial assets are also exposed to hedging purposes is conducted according to internal guidelines,
­equity price risks. These risks are hedged through a centrally and is subject to strict control mechanisms.
determined strategy employing derivative instruments. In addi­ The fair values of derivative financial instruments are calcu­
tion, derivative instruments are used to replace primary finan­ lated using valuation models which use input parameters
cial ­instruments, such as fixed-interest securities. Hedging is ­observable on the market. Exceptions to this are some
only employed for underlying positions from the operating busi­ ­commodity derivatives, whose valuation is based directly on
ness, cash investments, financing and the net investment in a market prices and the options agreed upon with INEOS, whose
foreign operation as well as for planned sales and raw material fair values are determined based on parameters not observable
­purchases. The risks from the underlying transactions and the on the market.
derivatives are constantly monitored. Where derivatives have a
positive market value, the Company is exposed to credit risks
196 Consolidated Financial Statements Notes
Notes on consolidated balance sheets
BASF Report 2011

Fair value of derivative instruments (million €)

2011 2010
Foreign currency forward contracts (264) (151)
Foreign currency options 64 109
Foreign currency derivatives (200) (42)
Thereof designated hedging instrument as defined by IAS 39 (Hedge accounting) 6 3
Interest rate swaps 48 52
Thereof designated hedging instrument as defined by IAS 39 (Hedge accounting) 9 –
Combined interest and cross currency swaps 34 60
Interest derivatives 82 112
Options for disposal of participations (147) –
Commodity derivatives 68 (96)
Thereof designated hedging instrument as defined by IAS 39 (Hedge accounting) (25) (1)
Derivative financial instruments (197) (26)

Cash flow hedge accounting Cash flow hedge accounting is applied for the effects of foreign
Some of the planned purchases of naphtha are hedged using currency derivatives contained in supply contracts. The impact
swaps and options on oil and oil products. Some of these on earnings from the underlying transactions occurs primarily
hedges were shown in the Consolidated Financial Statements in 2012, with a smaller impact in the period between 2013 and
of the BASF Group by means of cash flow hedge accounting, 2015. In 2011, the effective change in values of the hedges was
where gains and losses from hedges were initially recognized €10 million (2010: minus €12 million), which was recognized in
directly in equity. Gains and losses from hedges are included in the equity of the shareholders of BASF SE. In 2011, the amounts
cost of sales at the point in time at which the hedged item is derecognized from the equity of the shareholders of BASF SE
recognized in the consolidated statements of income. reduced costs of sales by €16 million. In 2010 there was an
Cash flow hedge accounting is applied in the Natural Gas ­increase of €16 million in this regard. There were no ineffective
Trading business sector for swaps on crude oil concluded in parts.
­order to hedge price risks from purchase contracts for natural
gas. The purchase contracts have variable prices and the price Fair value hedge accounting
formula is coupled with the oil price. In 2011, in order to hedge interest rate risks, BASF converted
Furthermore, cash flow hedge accounting was used to a the 3.75% fixed-interest rate euro bond of BASF SE (nominal
minor extent for natural gas purchases in 2011. ­volume €1,350 million, maturity 2012) into a variable rate bond
The majority of the planned transactions and their effect on using ­interest rate swaps. The bond and the derivatives were
earnings occur in the year following the balance sheet date. A ­designated as a fair value hedge.
small part relates to the period between 2013 and 2014. In 2011, In 2011, a gain of €8 million resulted from the hedging
effective changes in the fair value of ­hedging instruments of ­instrument. The book value of the bond was adjusted for €8 mil­
­minus €26 million were recognized in the equity of the share­ lion of interest rate-related losses.
holders of BASF SE. In 2010, the effective changes in ­values
across all subsidiaries balanced each other out in the equity of Hedge of a net investment in a foreign operation
the shareholders of BASF SE. In 2011, €5 million was derecog­ The currency translation risk from an investment in a foreign
nized from the equity of the shareholders of BASF SE and ­operation is hedged using foreign currency forward contracts.
­recorded as a gain in cost of sales. In 2010, there was a gain of The hedge was completely effective and increased the equity
€11 million in this regard. The ­ineffective part in the change in of the shareholders of BASF SE by €5 million (2010: a ­reduction
value of the hedge was minus €4 million in 2011 (2010: €12 mil­ of €7 million).
lion). This amount was reported in the ­income statement in costs
of sales, in other operating ­income and in other operating
­expenses.
In 2004 and 2005, fair value changes from forward interest
swaps entered into to hedge interest-rate risks from the refinanc­
ing of an expiring bond were recognized directly in equity using
cash flow hedge accounting. The hedge was closed in 2005 as
a new bond was issued to refinance the expiring bond. The new
bond is due in 2012. Over the maturity of the bond, the changes
in fair value of interest rate swaps recognized in the equity are
­reclassified proportionally from equity of the shareholders of
BASF SE to the consolidated statements of income. In both 2011
and 2010, €8 million was ­derecognized from other comprehen­
sive income and recorded as interest expense.
197 BASF
Consolidated
Report 2011
Financial Statements Notes
Notes on consolidated balance sheets
Consolidated Financial
BASF Report
Statements
2011
197

26 – Leasing

Leased assets
Property, plant and equipment include those assets which are considered to be economically owned through a finance lease. They
primarily concern the following items:

Leased assets (million €)

2011 2010

Acquisition cost Net book value Acquisition cost Net book value
Land, land rights and buildings 47 27 46 29
Machinery and technical equipment 218 60 275 79
Miscellaneous equipment and fixtures 64 13 69 13
329 100 390 121

Liabilities from finance leases (million €)

2011 2010

Minimum lease Minimum lease

payments Interest portion Leasing liability payments Interest portion Leasing liability
Following year 1 28 7 21 35 8 27
Following year 2 21 6 15 25 6 19
Following year 3 18 5 13 15 3 12
Following year 4 13 4 9 12 4 8
Following year 5 13 3 10 10 2 8
Over 5 years 52 19 33 27 5 22
145 44 101 124 28 96

In the current business year and in 2010, no additional lease In 2011, minimum lease payments of €313 million were included
payments arising from contractual obligations for finance leases in income from operations (2010: €311 million). In 2011, this also
were recognized in income above the minimum lease payments ­included conditional lease payments of €2 million (2010: €1 mil­
for finance leases. lion). Furthermore, €3 million in lease payments from sub-leases
In 2011, leasing liabilities were not offset by any significant was included in income from operations in 2011 (2010: €4 mil­
minimum lease payments from sub-leases. lion).
In addition, BASF is a lessee under operating lease con­
tracts. The resulting lease obligations totaling €1,801 million in BASF as lessor
2011 (2010: €1,679 million) are due in the following years: BASF acts as a lessor for finance leases in a minor capacity
only. Receivables on finance leases were €22 million in 2011
Commitments due to operating lease contracts (million €) (2010: €18 million).
In 2011, nominal minimum payments arising from
Nominal value of the future operating leases amounted to €345 million within one year
minimum payments (2010: €222 million) and €42 million for more than one year­
December 31, December 31, (2010: €72 million).
2011 2010 In 2011, precious metal accounts of €813 million (2010:
Less than 1 year 620 521
€706 million) were held for customers where the metals are
1–5 years 731 807
stored physically at BASF.
Over 5 years 450 351
1,801 1,679

In 2011, commitments due to operating lease contracts of less

than one year included leases of precious metals of €334 mil­
lion (2010: €203 million). These metals were immediately leased
to third parties. Offsetting the other leasing commitments were
expected minimum lease payments from subleases of €9 mil­
lion in 2011 (2010: €16 million).
198 Consolidated Financial Statements Notes
Other notes
BASF Report 2011

27 – Consolidated statements of cash flows and capital structure management

Consolidated statements of cash flows BASF prefers to access external financing via the capital ­markets.
Cash provided by operating activities includes the following cash A commercial paper program is used for short-term ­financing,
flows: while corporate bonds are used for financing in the medium and
long-term. These are issued in euros and other currencies with
Million € 2011 2010 different maturities. This ensures a balanced maturity profile, a
Income tax payments 1,710 2,051
diverse range of investors and advantageous ­financing condi­
Interest payments 588 639
tions for BASF.
Dividends received 188 75
As part of its interest rate risk management, BASF pursues
a strategy of reducing the Group’s interest expense by turning
Interest payments comprise interest received of €179 million ­selected capital market liabilities with fixed interest into variable
(2010: €106 million) and interest paid of €767 million (2010: rate receiver swaps.
€745 million).
Currently, BASF has the following ratings:
Capital structure management
The aim of capital structure management is to maintain the December 31, 2011 December 31, 2010

­financial flexibility needed to continually develop our business Standard Standard

portfolio and take advantage of strategic opportunities. The Moody’s & Poor’s Moody’s & Poor’s

­objectives of our financing policy are to secure liquidity, limit Long-term

financial indebtedness A1 A+ A1 A
­financial risks and optimize the cost of capital by means of an
appropriate capital structure. The capital structure is orientated Short-term
financial indebtedness P-1 A-1 P-1 A-1
to the needs of the operational business and the company’s
Outlook stable stable negative stable
strategic direction.
It focuses on meeting the requirements needed to ­ensure
a solid A rating and unrestricted access to capital markets; these Moody’s last confirmed BASF’s A1 long-term rating on Decem­
include dynamic debt and equity ratio requirements. The ­capital ber 6, 2011, and rated the outlook as stable. On May 10, 2011,
structure of BASF is managed using selected financial ratios, ­Standard & Poor’s upgraded BASF’s long-term rating by one
within the framework of our financial management. Equity as notch from A to A+, also with a stable outlook. BASF’s short-
­reported on the balance sheet amounted to €25,385 million as term ratings were confirmed by both agencies.
of December 31, 2011 (December 31, 2010: €22,657 million). BASF continues to aim for at least a solid A rating, which
The equity ratio amounted to 41.5% on December 31, 2011 ensures unrestricted access to financial and capital markets.
­(December 31, 2010: 38.1%).  or more information on financing policy and consolidated state-
F
ments of cash flows, see Management’s Analysis from page 39
­onward

28 – S
 tock price-based compensation program and BASF incentive share program

Stock price-based compensation program Participation in the LTI program is voluntary. The condition for
In 2011, BASF continued its stock price-based compensation taking part in the program is the participant’s own investment:
program (the long-term incentive, or LTI program) for senior A participant must hold BASF shares in the amount of 10% to
­executives of the BASF Group. This program has been in place 30% of his or her individual variable compensation for a two-
since 1999. Approximately 1,100 senior executives, ­including year period from the granting of the option (holding period). The
the Board of Executive Directors, are currently entitled to number of shares to be held is determined by the amount of
­participate in the LTI program. This program provides for the variable compensation and the weighted-average market price
granting of virtual options, which are settled in cash when for BASF shares on the first business day after the Annual Share­
­exercised. holders’ Meeting, which was €65.98 on May 9, 2011.
199 BASF
Consolidated
Report 2011
Financial Statements Notes
Other notes
Consolidated Financial
BASF Report
Statements
2011
199

The participant receives four option rights per invested share. Fair value of options and parameters used as of
December 31, 20111
Each option consists of two parts, right A and right B, which may
be exercised if defined thresholds have been met: The threshold LTI program of the year

of right A is met if the price of the BASF share has increased by 2011 2010
Fair value € 12.72 27.48
more than 30% in comparison to the base price (absolute thresh­
Dividend yield % 4.08 4.08
old). The value of right A will be the difference between the mar­
Risk-free interest rate % 1.49 1.26
ket price of BASF shares on the exercise date and the base price;
Volatility BASF share % 27.86 29.26
it is limited to 100% of the base price. Right B may be exercised
Volatility MSCI Chemicals % 19.45 20.40
if the cumulative percentage performance of BASF shares
­exceeds (relative threshold) the percentage performance of the Correlation BASF share
price: MSCI Chemicals % 80.20 80.01
MSCI World Chemicals IndexSM (MSCI Chemicals). The value of
right B will be the base price of the option multiplied by twice the 1
It is assumed that the options will be exercised based upon the potential
percentage outperformance of BASF shares compared to the gains.
MSCI Chemicals Index on the exercise date. It is limited to the
closing price on the date of exercise minus the computed nomi­ As of December 31, 2011, the fair values and the valuation para­
nal value of BASF shares. The options were granted on July 1, meters relate to the LTI programs 2011 and 2010. For the pro­
2011, and may be exercised following a two-year vesting period, grams from preceding years, corresponding fair values were
­between July 1, 2013, and June 30, 2019. During the exercise computed and valuation parameters were used.
­period, it is not possible to exercise options during certain ­periods The number of options granted amounted to 2,357,424 in
(closed periods). Each option right can only be exercised in full, 2011 (2010: 1,833,760).
meaning that it may only be exercised if one of the performance Volatility was determined on the basis of the monthly ­closing
targets is achieved and may only be exercised once, i.e., if only prices over a historical period corresponding to the remaining
one performance target is met and that option is exercised, the term of the options.
other option right lapses. The maximum gain for a participant is As a result of a resolution by the Board of Executive ­Directors
limited to 10 times the original individual investment. Option rights in 2002 to settle options in cash, options outstanding from the
are non-transferable and are forfeited if the option holders no programs 2004 to 2011 were valued with the fair value as of the
­longer work for BASF or have sold part of their individual invest­ balance sheet date December 31, 2011. This amount is recog­
ment before the expiry of the two-year vesting period. They ­remain nized proportionally as a provision over the respective vesting
valid in the case of retirement. period. This provision decreased from €411 million as of Decem­
For the members of the Board of Executive Directors, the ber 31, 2010, to €269 million as of December 31, 2011, due to
long-term direction of the program is significantly strengthened lower fair values of the options as well as to the lower number
compared to the conditions applying to the other participants. of outstanding options. The utilization of provisions amounted
The members of the Board of Executive Directors are required to to €267 million in 2011 (2010: €263 million). Personnel expenses
participate in the LTI program with at least 10% of their gross amounted to €125 million in 2011 and €418 million in 2010.
­bonus. In view of this binding own investment (in the form of BASF The total intrinsic value of exercisable options amounted to
shares), an extended holding period of four years applies. Under €167 million as of December 31, 2011, and €266 million as of
the LTI program, members of the Board of Executive Directors December 31, 2010.
may only exercise their options at least four years after they have
been granted (vesting period).
The 2004 to 2010 programs were structured in a similar way
to the LTI program 2011.
The benchmark index used to determine the value of right B
for the 2004 program is the Dow Jones Chemicals Total Return
Index (DJ Chemicals). This index was replaced by the MSCI
Chemicals starting with the 2005 program. The MSCI Chemicals
is a global industry index for the chemical industry that measures
the performance of the companies contained within it in their
­respective local currencies, which significantly reduces currency
effects.
The models used in the valuation of the option plans are
based on the arbitrage-free valuation model according to Black-
Scholes.
Due to the complexity of the programs, a numerical solution
method was used (Monte Carlo simulation).
200 Consolidated Financial Statements Notes
Other notes
BASF Report 2011

BASF incentive share program The free shares to be provided by the Company are valued at
All employees are entitled to participate in the “plus” incentive the fair value on the grant date. Fair value is determined on the
share program, with the exception of those senior executives basis of the stock price of BASF shares, taking into account the
entitled to participate in the LTI program. The “plus” program present value of dividends, which are not paid during the term
was introduced in 1999 and is currently offered in Germany, of the program. The weighted-average fair value on the grant
other European countries and Mexico. Each ­participant must date amounted to €53.29 for the 2011 program, and €32.93 for
make an individual investment in BASF shares from his or her the 2010 program.
variable compensation. For every ten BASF shares purchased The fair value of the free shares to be granted is booked
in the program, a participant receives one BASF share at no through the income statement against capital surplus over the
cost after one, three, five, seven and ten years of holding the period until the shares are issued.
BASF shares. As a rule, the first and second block of ten shares Provisions for the costs of the 2002 program continue to
entitles the participant to receive one BASF share at no extra be accrued proportionally on the basis of the BASF closing stock
cost in each of the next ten years. price.
The right to receive free BASF shares lapses one year ­after Personnel expenses of €17 million were recorded in 2011
retirement if a participant sells the individual investment in BASF for the BASF incentive share program (2010: €16 million).
shares, or if the participant stops working for the Company. The
number of free shares to be granted has developed as
­follows:

Number of free shares to be granted

2011 2010
As of January 1 3,085,075 3,296,361
Newly acquired entitlements 512,745 485,080
Bonus shares issued (511,338) (557,001)
Lapsed entitlements (101,329) (139,365)
As of December 31 2,985,154 3,085,075

29 – Compensation for the Board of Executive Directors and Supervisory Board of BASF SE

Million € 2011 2010

Performance-related and fixed payments to the Board of Executive Directors 24.4 22.2
Market value of options granted to the Board of Executive Directors in the fiscal year on date of grant 6.9 3.5
Total compensation for the Board of Executive Directors 31.3 25.7
Service costs of the Board of Executive Directors 3.8 2.9

Compensation for the Supervisory Board 3.0 2.9

Total compensation for former members of the Board of Executive Directors

and their surviving dependents 12.8 13.2

Pension provisions for former members of the Board of Executive Directors and their surviving dependents 116.1 95.4
Guarantees to members of the Board of Executive Directors and the Supervisory Board – –
201 BASF
Consolidated
Report 2011
Financial Statements Notes
Other notes
Consolidated Financial
BASF Report
Statements
2011
201

Performance-related compensation for the Board of Executive A member of the Board of Executive Directors had a remaining
Directors is based on the return on assets, as well as the per­ debt of €97,000 in building loans from the BASF Pensionskasse
formance of the entire Board. Return on assets corresponds to VVaG as of December 31, 2011 (January 1, 2011: €194,000). The
earnings before taxes plus borrowing costs as a percentage of conditions of the loan are no different than those offered to other
average assets. employees.
Moreover, in 2011, the members of the Board of Executive  or more information on the compensation of members of the Board
F
of Executive Directors, see the Compensation report from page 129
Directors were granted 268,884 options under the long-term onward
­incentive (LTI) program.  or more information on the members of the Supervisory Board and
F
The options of active and former members of the Board Board of Executive Directors, including their memberships on other
boards, see page 126 onward
­resulted in personnel expenses of €7.6 million in 2011 (2010:
€46.4 million).

30 – R
 elated party transactions

IAS 24 requires the disclosure of transactions with related The following table shows the volume of business with ­related
­parties. parties that are included in the financial statements at amortized
A related party is a person or entity where the BASF Group cost or using the equity method or proportional consolidation.
can exercise influence or significant influence, or which is
­controlled by the BASF Group. In particular, this relates to
­non-consolidated sub­sidiaries, jointly controlled entities, asso­
ciated c ­ ompanies and other ­participations.

Million € 2011 2010

Accounts Accounts Accounts Accounts

Sales receivable, trade payable, trade Sales receivable, trade payable, trade

Non-consolidated
subsidiaries 878 205 47 1,056 266 48

Jointly controlled entities 673 84 170 536 82 145

Associated companies and other

participations 1,994 467 64 1,391 189 17

Sales from jointly controlled entities related primarily to sales There were no reportable related party transactions with
with Ellba C.V., Rotterdam, the Netherlands; Ellba Eastern ­Private ­members of the Board of Executive Directors or the Super­visory
Ltd., Singapore; Heesung Catalysts Corporation, Seoul, South Board and their related parties in 2011.
Korea; and Wintershall Erdgas Handelshaus GmbH & Co. KG,  or more information on subsidiaries, jointly controlled entities,
F
­associated and affiliated companies, see the List of shares held of
Berlin, ­Germany. The unconsolidated portion of the sales with the BASF Group 2011 on page 162
these companies amounted to €422 million in 2011, and  or more information on the Board of Executive Directors and the
F
€304 million in 2010. Supervisory Board, see Management and Supervisory Boards and
Compensation report from page 126 onward
Sales with associated companies and other participations
resulted primarily from business with Erdgas Münster GmbH,
Münster, Germany; VNG – Verbundnetz Gas Aktiengesellschaft,
Leipzig, Germany; Styrolution GmbH, Ludwigshafen, Germany;
Styrolution Belgium N.V., Antwerp, Belgium; and ­Styrolution
South East Asia Pte. Ltd., Singapore. The non-con­solidated por­
tion of the sales with these companies amounted to €1,774 mil­
lion in 2011, and €1,291 million in 2010.
202 Consolidated Financial Statements Notes
Other notes
BASF Report 2011

31 – Services provided by the external auditor

BASF Group companies have used the following services from KPMG:

Million € 2011 2010

Annual audit 24.6 24.5
Thereof domestic 7.4 7.6
Audit-related services 0.6 0.4
Thereof domestic 0.2 0.1
Tax consultation services . .
Thereof domestic – –
Other services 0.2 0.3
Thereof domestic 0.1 0.3
25.4 25.2

The annual audit related to the audit of the consolidated annual r­ equired financial statements of BASF SE and its consolidated
financial statements of the BASF Group as well as the legally ­subsidiary companies and jointly controlled entities.

32 – Declaration of Conformity with the German Corporate Governance Code

Statement of compliance according to § 161 AktG Stock Corporation Act was signed by the Board of Executive
(Stock Corporation Act) Directors and the Supervisory Board of BASF SE on Decem­
The annual Declaration of Conformity with the German ­Corporate ber 15, 2011, and is published online at: basf.com/governance_e
Governance Code according to Section 161 of the German
BASF Report 2011

Supplementary information on oil and gas producing activities

Supplementary information on oil

and gas producing activities 204

5
Oil and Gas producing activities
204 Supplementary information on oil and gas producing activities BASF Report 2011

Supplementary information on oil and gas producing activities

(unaudited)

The following tables provide supplementary information on the The regions include the following countries with operational
Exploration & Production business sector of the Oil & Gas seg­ ­activities:
ment. In the absence of detailed disclosure rules in this area
­under IFRS, the Group has elected to voluntarily disclose the Exploration &
following information, which would have been required under Region Production Exploration
Russia/Caspian Sea region Russia Turkmenistan
SFAS No. 69 (Disclosure of Oil and Gas Producing Activities)
and by the Securities and Exchange Commission. In order to Rest of Europe United Kingdom, Denmark
the Netherlands,
present an economically meaningful report of the cooperation
Norway
with Gazprom in the projects Yuzhno Russkoye and Achimgaz,
SFAS 69 is applied with several modifications. BASF has an North Africa/Middle East Libya Abu Dhabi, Qatar,
Mauritania
­interest of 35% in the economic rewards of the Yuzhno Russkoye
South America Argentina Chile
field through Severneftegazprom (SNG), the company which
holds the production license. SNG is accounted for using the
equity method. A project company, which is fully consolidated, Statistical information on the concession areas or the number
was established for these operations. The Achimgaz project is of wells has limited informative value and is therefore not
being included in the supplementary information on oil and gas ­reported.
producing activities for the first time because, following the con­
clusion of the pilot phase in 2011, a decision was made to Oil and gas reserves
­develop the field jointly. BASF has a 50% stake in Achimgaz, Proven oil and gas reserves are the estimated volumes of crude
which is proportionally consolidated. oil, natural gas and natural gas liquids that are shown by geo­
In the following overviews, BASF’s stake in both projects is logical and engineering data with reasonable certainty to be
included under ‘Russia.’ In addition, the values for SNG, which recoverable in future years from known reserves under existing
is accounted for using the equity method, are presented sepa­ economic and operating conditions. Accordingly, reserve esti­
rately. mates could be materially different from the quantities of oil and
All fully consolidated subsidiaries are included with 100%. natural gas that are ultimately recovered. To reduce uncertain­
To the extent that other investors have a stake in these compa­ ties, Wintershall uses independent, internationally recognized
nies, their share is presented separately. This relates to a stake reserve auditors to perform recurring reserves audits of its ­major
in a German Wintershall subsidiary which was part of the asset oil and gas fields.
swap with Gazprom in 2007. This company holds the produc­ The tables below show the estimated net quantities as of
tion and exploration rights to the Libyan onshore concessions December 31, 2010 and 2011, of the company’s proven oil and
96 and 97. gas reserves and proven developed oil and gas reserves as well
The following table provides an overview of the most as changes in estimated proven reserves as a result of produc­
­important differences between the information given for the tion and other factors.
­E xploration & Production business sector in the Consolidated
Financial Statement of the BASF Group and the supplementary
information on the oil and gas producing activities.

Supplementary
information
on oil and gas
BASF reporting activities

Other activities in Exploration & included not included

Production (e.g., trading business
and joint venture services)

Activities accounted for using the earnings from the included

equity method (Severneftegazprom equity method
and Volgodeminoil) included in
financial result

Corporate overhead costs and included not included

financing costs
BASF Report 2011 Supplementary information on oil and gas producing activities
205

Oil 2011

Russia,
Rest of Caspian Sea North Africa, South
Germany Europe region Middle East America Total

Proven developed and undeveloped oil reserves as of

January 1, millions of barrels (MMbbl) 54 4 9 268 27 362

Revisions and other changes 14 3 – – – 17

Extensions and discoveries – 5 – – – 5
Purchase/sale of reserves – – 32 – – 32
Production 7 2 1 10 3 23
Proven reserves as of December 31 61 10 40 258 24 393
Minority interests – – – 118 – 118
Proven reserves after minority interests 61 10 40 140 24 275
Thereof at-equity companies – – 8 – – 8
Proven reserves after minority interests and at-equity companies 61 10 32 140 24 267
Minority interests in production – – – 5 – 5
Proven developed reserves as of December 31 43 3 21 237 19 323

Gas 2011

Russia,
Rest of Caspian Sea North Africa, South
Germany Europe region Middle East America Total

Proven developed and undeveloped gas reserves as of

January 1, Billion Standard Cubic Feet (BSCF)1 249 101 3,645 195 1,210 5,400

Revisions and other changes 7 26 2 – 30 65

Extensions and discoveries – 20 – – – 20
Purchase/sale of reserves – – 428 – – 428
Production 31 37 314 5 143 530
Proven reserves as of December 31 225 110 3,761 190 1,097 5,383
Minority interests – – – 93 – 93
Proven reserves after minority interests 225 110 3,761 97 1,097 5,290
Thereof at-equity companies – – 3,335 – – 3,335
Proven reserves after minority interests and at-equity companies 225 110 426 97 1,097 1,955
Minority interests in production – – – 3 – 3
Proven developed reserves as of December 31 199 100 3,501 153 895 4,848

1
The natural gas volumes can be converted with the factor 6 BSCF per MMBOE (Million Barrel Oil Equivalent).
206 Supplementary information on oil and gas producing activities BASF Report 2011

Oil 2010

Russia,
Rest of Caspian Sea North Africa, South
Germany Europe region Middle East America Total

Proven developed and undeveloped oil reserves as of

January 1, millions of barrels (MMbbl) 54 3 11 274 30 372

Revisions and other changes 6 3 23 1 33

Extensions and discoveries – – – – – –
Purchase/sale of reserves – – – – – –
Production 6 2 2 29 4 43
Proven reserves as of December 31 54 4 9 268 27 362
Minority interests – – – 123 – 123
Proven reserves after minority interests 54 4 9 145 27 239
Thereof at-equity companies – – 9 – – 9
Proven reserves after minority interests and at-equity companies 54 4 – 145 27 230
Minority interests in production – – – 14 – 14
Proven developed reserves as of December 31 42 3 9 246 22 322

Gas 2010

Russia,
Rest of Caspian Sea North Africa, South
Germany Europe region Middle East America Total

Proven developed and undeveloped gas reserves as of

January 1, Billion Standard Cubic Feet (BSCF)1 278 101 3,562 202 1,317 5,460

Revisions and other changes 5 38 391 13 29 476

Extensions and discoveries – 5 – – – 5
Purchase/sale of reserves – – – – – –
Production 34 43 308 20 136 541
Proven reserves as of December 31 249 101 3,645 195 1,210 5,400
Minority interests – – – 96 – 96
Proven reserves after minority interests 249 101 3,645 99 1,210 5,304
Thereof at-equity companies – – 3,645 – – 3,645
Proven reserves after minority interests and at-equity companies 249 101 – 99 1,210 1,659
Minority interests in production – – – 9 – 9
Proven developed reserves as of December 31 223 80 3,517 158 1,007 4,985

1
The natural gas volumes can be converted with the factor 6 BSCF per MMBOE (Million Barrel Oil Equivalent).
BASF Report 2011 Supplementary information on oil and gas producing activities
207

Operating results of operations from oil and gas the contributions to the Oil & Gas segment. The differences in
producing activities sales compared to the segment reporting results from sales for
This represents only those revenues and expenses directly merchandise and services. Estimated income taxes were cal­
­associated with Wintershall’s oil and gas production. These culated by applying the statutory income tax rates to the pretax
amounts do not include financing costs (such as interest income from producing activities.
­expenses) or corporate overheads and do not correspond to

2011 (million €)

Russia,
Rest of Caspian Sea North Africa, South
Germany Europe region Middle East America Total
Sales crude oil (incl. condensate and LPG) 489 118 115 839 168 1,729
Sales natural gas 170 244 760 1 228 1,403
Local duties (royalties, export, etc.) 118 2 91 32 99 342
Total sales (net of duties) 541 360 784 808 297 2,790
Production costs 110 116 68 104 82 480
Exploration expenses 16 144 7 36 9 212
Depreciation, amortization and impairment 57 70 33 80 46 286
Other 7 6 17 24 (8) 46
Operating income before taxes 351 24 659 564 168 1,766
Income taxes 102 (23) 130 571 27 807
Operating income after taxes 249 47 529 (7) 141 959
Minority interests – – – 21 – 21
Operating income after taxes and minority interests 249 47 529 (28) 141 938
Thereof at-equity companies – – 100 – – 100

Operating income after taxes, minority interests and

249 47 429 (28) 141 838
at-equity companies

2010 (million €)

Russia,
Rest of Caspian Sea North Africa, South
Germany Europe region Middle East America Total
Sales crude oil (incl. condensate and LPG) 339 105 57 1,734 171 2,406
Sales natural gas 182 222 680 6 171 1,261
Local duties (royalties, export, etc.) 88 2 58 94 82 324
Total sales (net of duties) 433 325 679 1,646 260 3,343
Production costs 109 124 43 202 79 557
Exploration expenses 8 120 21 49 8 206
Depreciation, amortization and impairment 56 213 87 55 40 451
Other 2 (10) 14 19 13 38
Operating income before taxes 258 (122) 514 1,321 120 2,091
Income taxes 74 (113) 101 1,211 20 1,293
Operating income after taxes 184 (9) 413 110 100 798
Minority interests – – – 51 – 51
Operating income after taxes and minority interests 184 (9) 413 59 100 747
Thereof at-equity companies – – 193 – – 193

Operating income after taxes, minority interests and at-equity

companies 184 (9) 220 59 100 554
208 Supplementary information on oil and gas producing activities BASF Report 2011

Costs incurred in oil and gas property acquisition, exploration and development activities
Costs incurred represent amounts capitalized or charged against income as incurred in connection with oil and gas property acqui­
sition, exploration and development activities.

2011 (million €)

Russia,
Rest of Caspian Sea North Africa, South
Germany Europe region Middle East America Total
Acquisitions – – – – – –
Exploration 19 212 12 54 15 312
Development 83 202 37 8 30 360
Total net costs 102 414 49 62 45 672

2010 (million €)

Russia,
Rest of Caspian Sea North Africa, South
Germany Europe region Middle East America Total
Acquisitions – – – – – –
Exploration 8 160 8 82 12 270
Development 54 132 34 75 23 318
Total net costs 62 292 42 157 35 588
BASF Report 2011 Supplementary information on oil and gas producing activities
209

Capitalized costs relating to oil and gas producing activities

Capitalized costs represent total expenditures on proven and unproven oil and gas properties with related accumulated deprecia­
tion, depletion and amortization.

2011 (million €)

Russia,
Rest of Caspian Sea North Africa, South
Germany Europe region Middle East America Total
Proven properties 678 928 2,272 1,414 970 6,262
Unproven properties 37 915 10 103 33 1,098
Other equipment 660 728 4 40 – 1,432
Total gross costs 1,375 2,571 2,286 1,557 1,003 8,792
Accumulated depreciation 985 1,368 392 922 691 4,358
Total net costs 390 1,203 1,894 635 312 4,434

2010 (million €)

Russia,
Rest of Caspian Sea North Africa, South
Germany Europe region Middle East America Total
Proven properties 637 867 2,168 1,414 952 6,038
Unproven properties 19 848 6 93 – 966
Other equipment 638 636 4 42 – 1,320
Total gross costs 1,294 2,351 2,178 1,549 952 8,324
Accumulated depreciation 952 1,477 280 916 634 4,259
Total net costs 342 874 1,898 633 318 4,065
210 Supplementary information on oil and gas producing activities BASF Report 2011

Capitalized exploration well-drilling costs: Standardized measure of discounted future net

Suspended well costs cash flows relating to proven oil and gas reserves
Exploratory drilling costs are capitalized until the drilling of the (SMOG)
well is complete. If hydrocarbons are found, and, subject to fur­ The following information has been prepared in accordance with
ther appraisal activity which may include the drilling of further SFAS 69 and the regulations of the Securities and Exchange
wells, are likely to be capable of commercial development, the Commission, which require the standardized measure of
costs continue to be carried under construction in progress. All discounted future cash flows based on sales prices, costs and
such carried costs are subject to technical, commercial and statutory interest rates. The proven reserves are valued at the
management review at least once a year to confirm the contin­ average price calculated from the prices on the first day of the
ued intent to develop or otherwise extract value from the month. The values calculated in this way are subject to a 10%
­discovery. When this is no longer the case, the costs are writ­ annual discount rate.
ten off. If proven reserves of oil or natural gas are determined The projection should not be viewed as realistic estimates
and development is sanctioned, the relevant expenditure is of future cash flows nor should the “standardized measure” be
transferred to machinery and technical equipment. Unsuccess­ interpreted as representing current value to the company.
ful exploration wells are impaired in exploration expenses. Material revisions of estimates of proven reserves may
The following table indicates the changes to the company’s occur in the future, development and production of the reserves
capitalized exploration well-drilling costs. may not occur in the period assumed, actual prices realized are
expected to vary significantly from those used and actual costs
Capitalized exploration well-drilling costs (million €)1 may also vary.
The company’s investment and operating decisions are not
2011 2010 based on the information presented below, but rather on a wide
As of January 1 254 175
range of reserve estimates, and on different price and cost
Additions pending determination of proven reserves 120 112
­assumptions from those reflected in this information.
Capitalized exploratory well costs charged to expense (26) (29)
Beyond the above considerations, the “standardized mea­
Reclassifications to wells, facilities and equipment (34) (4)
sure” is also not directly comparable with asset balances
As of December 31 314 254
appearing elsewhere in the Consolidated Financial Statements
because any such comparison would require a reconciling
1
Only fully consolidated companies
adjustment.

The following table provides an aging of capitalized well costs,

the amounts capitalized and, on the last line, the number of
­suspended exploration wells.

Capitalized exploration well-drilling costs (million €)1

2011 2010
Wells for which drilling is not complete 33 54
Wells capitalized less than one year 63 30
Wells capitalized more than one year 218 170
Total 314 254

Number of suspended wells 32 29

1
Only fully consolidated companies
BASF Report 2011 Supplementary information on oil and gas producing activities
211

Standardized measure of discounted future cash flows 2011 (million €)

Russia,
Rest of Caspian Sea North Africa, South
Germany Europe region Middle East America Total
Future revenues 4,671 1,519 7,989 19,765 1,985 35,929
Future production/development costs 1,914 1,127 1,260 3,320 989 8,610
Future income taxes 666 255 1,062 13,780 109 15,872
Future net cash flows 2,091 137 5,667 2,665 887 11,447
Discounted to present value at a 10% annual rate 764 (18) 2,223 892 339 4,200
Standardized measures of discounted future cash flows 1,327 155 3,444 1,773 548 7,247
Minority interests – – – 738 – 738

Standardized measures of discounted future cash flows after

minority interests 1,327 155 3,444 1,035 548 6,509

Thereof at-equity companies – – 832 – – 832

Standardized measures of discounted future cash flows after

minority interests and at-equity companies 1,327 155 2,612 1,035 548 5,677

Standardized measure of discounted future cash flows 2010 (million €)

Russia,
Rest of Caspian Sea North Africa, South
Germany Europe region Middle East America Total
Future revenues 3,470 862 6,647 16,250 2,306 29,535
Future production/development costs 1,980 687 1,364 3,372 1,377 8,780
Future income taxes 326 84 723 10,153 120 11,406
Future net cash flows 1,164 91 4,560 2,725 809 9,349
Discounted to present value at a 10% annual rate 378 30 1,739 925 274 3,346
Standardized measures of discounted future cash flows 786 61 2,821 1,800 535 6,003
Minority interests – – – 770 – 770

Standardized measures of discounted future cash flows after

minority interests 786 61 2,821 1,030 535 5,233

Thereof at-equity companies – – 1,340 – – 1,340

Standardized measures of discounted future cash flows after

minority interests and at-equity companies 786 61 1,481 1,030 535 3,893
212 Supplementary information on oil and gas producing activities BASF Report 2011

Summary of changes in standardized measure of discounted future net cash flows 2011 (million €)

Russia,
Rest of Caspian Sea North Africa, South
Germany Europe region Middle East America Total
Balance as of January 1 786 61 2,821 1,800 535 6,003
Sales and transfers of oil and gas produced, net of production costs (432) (249) (784) (710) (214) (2,389)
Net changes in price and in development and production costs 600 195 956 2,667 163 4,581
Extension, discoveries and improved recovery, less related costs – 6 – – – 6
Revisions of previous quantity estimates 413 250 31 25 61 780
Development costs incurred during the period 83 153 36 8 28 308
Changes in estimated future development costs (19) (132) (31) 7 (80) (255)
Purchase/sale reserves – – 395 – – 395
Net change in income taxes (196) (135) (206) (2,504) 1 (3,040)
Accretion of discounts 93 6 226 480 54 859
Other (1) – – – – (1)
Balance as of December 31 1,327 155 3,444 1,773 548 7,247
Minority interests – – – 738 – 738

Standardized measures of discounted future cash flows (SMOG)

after minority interests 1,327 155 3,444 1,035 548 6,509

Thereof at-equity companies – – 832 – – 832

Standardized measure of discounted future cash flows after

minority interests and at-equity companies 1,327 155 2,612 1,035 548 5,677

Summary of changes in standardized measure of discounted future net cash flows 2010 (million €)

Russia,
Rest of Caspian Sea North Africa, South
Germany Europe region Middle East America Total
Balance as of January 1 692 88 3,235 953 513 5,481
Sales and transfers of oil and gas produced, net of production costs (324) (201) (636) (1,444) (181) (2,786)
Net changes in price and in development and production costs 277 (13) (403) 3,575 83 3,519
Extension, discoveries and improved recovery, less related costs – – – – – –
Revisions of previous quantity estimates 109 169 160 1,054 77 1,569
Development costs incurred during the period 53 109 34 76 23 295
Changes in estimated future development costs (56) (136) (54) 3 (51) (294)
Purchase/sale reserves – – – – – –
Net change in income taxes (42) 41 131 (2,851) 14 (2,707)
Accretion of discounts 79 9 354 434 57 933
Other (2) (5) (7)
Balance as of December 31 786 61 2,821 1,800 535 6,003
Minority interests – – – 770 – 770

Standardized measures of discounted future cash flows (SMOG)

after minority interests 786 61 2,821 1,030 535 5,233

Thereof at-equity companies – – 1,340 – – 1,340

Standardized measure of discounted future cash flows after

minority interests and at-equity companies 786 61 1,481 1,030 535 3,893
BASF Report 2011

Overviews

Glossary 214
Index 218
Registered trademarks 220
Ten-year summary 221
Requirements, topics and data 224
GRI and Global Compact Index 225
Statement GRI Application Level Check 226

6
Overviews
214 Overviews Glossary BASF Report 2011

Glossary

A Conflict minerals
AgBalance Conflict minerals describe minerals listed in the U.S. Conflict ­Minerals
AgBalance® is an assessment methodology developed by BASF for Trade Act. These include tantalite (coltan), cassiterite (tin ore), wolf­
the holistic measurement and analysis of sustainability in agricul­ ramite, gold, or their derivatives, by which conflicts in the Demo­
ture and food production. Ecological, economic and social ­indicators cratic ­Republic of Congo or neighboring states are financed.
are employed to create specific recommendations for sustainable
production methods. AgBalance received independent validation Consumer goods sector
from global auditors in 2011. The consumer goods sector includes, for example, the textiles and
leather industry, the electric industry and domestic appliance manu­
Audits facturing, as well as the paper industry and the personal care and
Audits are a strategic tool for managing safety and environmental cleaners sector.
protection standards. During a site or plant audit, a profile is cre­
ated using clearly defined environmental, safety or health criteria. D
Dow Jones Sustainability World Index (DJSI World)
B The Dow Jones Sustainability World Index (DJSI World) is the world’s
Back-up line most important sustainability index. It lists the top 10% of the lar­
A back-up line is a confirmed line of credit that can be drawn upon gest 2,500 companies which appear in the Dow Jones Global ­Index
in connection with the issue of commercial paper if market liquidity in terms of economic, ecological and social criteria.
is not sufficient, or for the purpose of general corporate financing.
It is one of the instruments BASF uses to ensure it is able to make Drilling
payments at all times. Drilling describes the creation of boreholes to explore for and
­develop deposits.
Barrel of Oil Equivalent (BOE)
A Barrel of Oil Equivalent is an international standard for comparing E
the thermal energy of different fuels. A BOE is the equivalent of one EBIT
barrel of crude oil or 6,000 cubic feet or 169 cubic meters of natu­ Earnings before Interest and Taxes (EBIT) – at BASF, EBIT corres­
ral gas. ponds to the income from operations.

Biotechnology EBIT after cost of capital

This term covers all processes and products that use living organ­ EBIT after cost of capital is calculated by deducting the cost of capi­
isms, for example bacteria and yeasts, or their cellular constitu­ tal from the EBIT. The cost of capital thereby reflects the share­
ents. holders’ expectations regarding return (in the form of dividends or
share price increases) and interest payable to creditors. If the EBIT
C after cost of capital has a positive value, BASF has earned a pre­
CO2 equivalent mium on the return expected by its creditors and investors.
CO2 equivalent is a parameter describing the effect of greenhouse
gas emissions. A factor known as the global warming potential EBITDA
(GWP) shows the effect of the individual gases compared with CO2 Earnings before Interest, Taxes, Depreciation and Amortization
as the reference value. (EBITDA) – at BASF, EBITDA corresponds to the income from
operations before depreciation and amortization.
Coil coatings
Coil coatings are specialty coatings that can be applied to steel and EBITDA margin
aluminum bands creating a composite material that incorporates The EBITDA margin is the margin that we earn on sales from our
the traits of the metal and the coating material. The composite operating activities before depreciation and amortization. It is cal­
­material is especially resistant to corrosion and can be easily formed, culated as income from operations before depreciation and amor­
for instance. Coil coating sheets are mainly used in the construc­ tization as a percentage of sales.
tion industry.
Eco-Efficiency Analysis
Commercial paper program The Eco-Efficiency Analysis is a method for the evaluation of prod­
The commercial paper program is a framework agreement between ucts and processes considering economic and environmental
BASF and banks regarding the issuing of debt obligations on the ­aspects. The aim is to compare products with regard to profitabil­
­financial market (commercial paper). The commercial paper is ity and environmental performance.
­issued under a rolling program for which the terms can be deter­
mined individually. This requires a good rating. Econsense
Econsense, Forum for Sustainable Development of German Busi­
Compliance ness e.V., is an association of leading, globally active companies
Compliance is an important element of corporate governance. It and organizations in German business specializing in sustainable
­refers to the company’s behavior in accordance with laws, guide­ development and corporate social responsibility (CSR). BASF is one
lines and voluntary codices. of the forum’s founding members. Econsense’s top concern is to
encourage a political framework that fosters sustainable innovation
related to business, environment and society.
BASF Report 2011 Glossary Overviews
215

Emerging markets Greenhouse Gas Protocol (GHG Protocol)

According to our definition, emerging markets comprise the region The Greenhouse Gas Protocol, used by companies from different
Asia Pacific (excluding Japan, Australia and New Zealand), South sectors, NGOs and governments, is a globally recognized standard
and Central America, Eastern Europe, the Middle East and Africa. to quantify and manage greenhouse gas emissions. The reporting
standards and recommendations for the implementation of projects
Emollient to reduce emissions are jointly developed by companies, govern­
Emollients are nurturing oil components that give skin a velvety feel. ments and NGOs under the guidance of the World Resources
They are a common ingredient in skin and hair care products, such ­Institute and the World Business Council for Sustainable
as creams and hair masks. Development.

EPSA H
An Exploration and Production Sharing Agreement (EPSA) is one Health Performance Index (HPI)
of the prevalent types of contract between a national oil company The Health Performance Index (HPI) is an indicator developed by
and an international oil company in the exploration and production BASF to provide a more detailed insight into the application of health
of hydrocarbons. management. It comprises five components: reported cases of
­occupational disease, medical emergency planning, first aid,
Equity method preventive medicine and health promotion
The equity method is an accounting technique used to include
BASF’s investments in companies in which it has significant influ­ HPPO
ence in the Consolidated Financial Statements. The book value of HPPO is the acronym describing technology to produce propylene
the investment changes depending on the equity of the company oxide (PO) from hydrogen peroxide (HP). HPPO technology is more
in question. environmentally friendly and economically viable than conventional
PO methods of production, because no by-products are produced
European Water Stewardship (EWS) Standard besides water. PO is an intermediate, for example, in the produc­
The European Water Stewardship Standard enables businesses tion of polyurethane.
and agriculture to assess the sustainability of their water manage­
ment practices. The criteria are: water abstraction volumes, water I
quality, conservation of biodiversity and water governance. The IAS
EWS Standard was developed together with NGOs, governments IAS stands for International Accounting Standards (see also IFRS).
and businesses.
IFRS
Exploration International Financial Reporting Standards (IFRS) (until 2001: Inter­
Exploration refers to the exploration and investigation of an area in national Accounting Standards, IAS) are developed and published
the search for mineral resources such as crude oil or natural gas. by the International Accounting Standards Board (IASB) headquar­
The exploration process involves using suitable geophysical pro­ tered in London, United Kingdom. In accordance with the IAS Regu­
cesses to find structures that may contain oil and gas then proving lations, IFRS are mandatory for listed companies headquartered in
a possible find by means of exploratory drilling. the European Union since 2005.

F ILO Core Labor Standards

Field development The ILO Core Labor Standards are laid out in a declaration of the
Field development is the term for the installation of production International Labor Organization (ILO). It comprises eight conven­
­facilities and the drilling of production wells for the commercial tions which set minimum requirements for decent working condi­
­exploitation of oil and natural gas deposits. tions. BASF has a Group-wide system to monitor employees’ and
suppliers’ adherence to these labor standards.
Free cash flow
Free cash flow is cash provided by operating activities less pay­ ISAE 3000
ments related to property, plant and equipment and intangible The International Standard on Assurance Engagements 3000 (ISAE
­assets. 3000) is published by the International Audit and Assurance Stan­
dards Board (IAASB). It provides guidelines for comprehensive
G ­audits, which contain non-financial data, for example for the audits
Global Product Strategy (GPS) of sustainability reports.
The Global Product Strategy aims to establish global product stew­
ardship standards and practices for companies. The program, ISO 14001
­initiated by the International Council of Chemical Associations ISO 14001 is an international standard developed by the Interna­
(ICCA), strives to ensure the safe handling of chemicals by reduc­ tional Organization for Standardization (ISO) that determines the
ing existing differences in risk assessment. general requirements for an environmental management system for
voluntary certification.
216 Overviews Glossary BASF Report 2011

ISO 14045 NMVOCs (non-methane volatile organic compounds)

ISO 14045 is an international standard developed by the Interna­ VOCs (volatile organic compounds) are organic substances that, at
tional Organization for Standardization (ISO) that determines the low temperatures, are present in the air as gas. These include some
general requirements for the eco-efficiency analysis. hydrocarbons, alcohols, aldehydes and organic acids. NMVOCs
are VOCs from which methane is excluded.
ISO 19011
ISO 19011 is an international standard developed by the Interna­ O
tional Organization for Standardization (ISO) that determines OHSAS 18001
­requirements for audits of quality management and environmental The Occupational Health and Safety Assessment Series (OHSAS)
management systems. comprises, among other things, the standard OHSAS 18001 which
includes a management system for occupational safety. This sys­
ISO 26000 SR tem can be integrated into an existing quality and environmental
ISO 26000 SR is a guideline that provides organizations with protection management system and certified accordingly.
recommendations and guidance on social responsibility (SR).
P
J Patent Asset Index
Joint Venture The Patent Asset Index measures the strength of a company’s pat­
We define joint ventures as all activities in which other partners ent portfolio. It is made up of two factors: (1) portfolio size (the num­
­besides BASF hold a stake. The accounting method applied for ber of worldwide active patent families) and (2) competitive impact,
those activities depends on the circumstances of the respective which is the combination of technology relevance and market cov­
­investment. erage (weighted by market size).

M PolyTHF
Materiality analysis THF stands for tetrahydrofuran and is a starting compound for Poly­
BASF uses materiality analysis to analyze and evaluate societal tetrahydrofuran (PolyTHF®), an important component for the pro­
­interest in sustainability topics as well as their potential significance duction of elastomer fibers for textiles. Elastomer fibers are used in
for the company. The aim is to develop strategies at an early stage sports clothing, for example.
to address potential new risks and opportunities.
R
MDI REACH
MDI stands for diphenylmethane diisocyanate and is one of the most REACH is an E.U. regulatory framework for the registration, evalu­
important raw materials for the production of the plastic polyure­ ation and authorization of chemicals.
thane. This plastic is used for applications ranging from the soles
of high-tech jogging shoes, to car shock-absorbers, refrigerator Responsible Care
­insulation and even insulation for buildings. Responsible Care refers to a worldwide initiative by the chemical
­industry to continuously improve its performance in the fields of
Monitoring system ­environmental protection, health and safety.
Monitoring systems and tools serve to measure and ensure the
­adherence to standards. One area that is monitored is our volun­ Retention
tary commitments, such as the adherence to human rights and There are two applications for generated profits: distribution to
­internationally recognized labor standards. shareholders or retention in the company.

MSCI World Chemicals Index Return on assets

The MSCI World Chemicals Index is a stock index that includes the Return on assets describes the return we make on the average
world’s biggest chemical companies. It measures the performance ­assets employed during the year. It is calculated as income before
of the companies in the index in their respective national currencies, taxes and minority interests plus interest expenses as a percent­
thus considerably reducing currency effects. age of average assets.

N S
Nanomaterials SCR technology
Definitions vary worldwide for nanomaterials. For regulatory pur­ Selective Catalytic Reduction (SCR) technology is used to convert
poses, BASF supports the definition given by the International Coun­ harmful nitrogen oxide, which is found in the exhaust flow of heavy
cil of Chemical Associations (ICCA). This states that nanomaterials duty diesel engines, into water vapor and nitrogen, a natural con­
are solid, particulate substances which are intentionally manufac­ stituent of the air.
tured and have a weight-based cutoff of either 10 weight% or more
of nano-objects or 50 weight% or more of aggregates or agglom­ SEEBALANCE
erates consisting of nano-objects. SEEBALANCE refers to the Socio-Eco-Efficiency Analysis devel­
oped by BASF. This analysis considers the three dimensions of sus­
Naphtha tainability: economy, environment and society. This tool allows the
Naphtha is petroleum that is produced during oil refining. Heavy assessment of environmental impact and costs as well as the
naphtha is the starting point for gasoline production. Light naphtha societal impacts of products and processes.
is the most ­important feedstock for steam crackers.
BASF Report 2011 Glossary Overviews
217

Seed treatment products T

Seed treatment products include crop protection agents and are TDI
applied with specific technologies directly onto the seed. This pro­ Toluene diisocyanate is a starting material for the production of poly­
tects crops in the emerging stages against fungal diseases and urethane. It is used primarily in the automotive industry (for exam­
harmful insects. ple, in seat cushions and interiors) and the furniture industry (for
­example, for flexible foams for mattresses or cushioning, or in wood
S.E.T. Initiative coating).
BASF’s S.E.T. initiative helps customers to quantify and improve the
sustainability, eco-efficiency and traceability of products in their TUIS
value-adding chain. This comprehensive offer includes strategic TUIS is a German transport accident information and emergency
sustainability consulting, an eco-efficiency analysis and the imple­ ­response system jointly operated by around 130 chemical compa­
mentation of a traceability system along the entire value-adding nies. The member companies can be reached by the public author­
chain. ities at any time and provide assistance over the telephone, expert
on-site advice or special technical equipment.
Special items
Special items describe one-time charges or one-time income that V
significantly affect the earnings of a segment or the BASF Group. Value-adding chain
Special items include, for example, charges arising from restructur­ A value-adding chain describes the successive steps in a produc­
ing measures or earnings from divestitures. tion process, from the raw materials through various intermediate
steps to the finished product.
Spot market
A spot market is a market where an agreed deal including delivery, Verbund
acceptance and payment occurs immediately. In contrast to for­ In the BASF Verbund, production facilities, energy flow, logistics and
ward contracts where the delivery, acceptance and payment ­occurs infrastructure are intelligently networked with each other, in order to
at a point in time after the conclusion of the deal. increase production yields, save resources and energy and reduce
logistic costs. A significant factor in the Verbund concept is the
Stakeholder Know-How Verbund. In the latter, know-how is shared among BASF
Stakeholder is the term referring to persons or groups whose inter­ employees worldwide and expert knowledge is pooled in technol­
ests are interlinked with those of a company in a variety of ways. ogy platforms.
BASF’s stakeholders include shareholders, business partners,
­employees, neighbors and society. W
Water stress areas
Steam cracker Water stress areas are areas in which water represents a scarce
A steam cracker is a plant in which steam is used to “crack” naph­ ­resource, and where people abstract more than 60 percent of the
tha (petroleum) or natural gas. The resulting petrochemicals are the water available. The most important factors leading to water scar­
starting materials used to produce most of BASF’s products. city are: low precipitation, high temperatures, low air humidity,
­unfavorable soil properties and high water abstraction rates.
Styrenics
Styrenics is a term describing the styrenic plastics business. The White biotechnology
precursor styrene is primarily for captive use (backward integration). White technology is an area of biotechnology, also called industrial
Styrenic plastics are used in many areas, for example, in the con­ biotechnology, that uses microorganisms and/or enzymes to pro­
struction, packaging, automotive, electrical and leisure industries. duce chemical products, utilized in many levels of the value-adding
chain in the chemical industry. This involves, for example, the bio­
Sustainability technological production of chiral intermediates.
The objective of sustainable development is to meet the economic,
environmental and social needs of society without harming the
­development opportunities of future generations.

Swap
A swap is an agreement between two parties to exchange goods
or payment flows in the future. In an interest swap, a fixed (variable)
interest rate is exchanged for a floating (fixed) rate for an agreed
nominal amount.
218 Overviews Index BASF Report 2011

Index

A G
Acquisitions 41, 56, 83, 111 f., 116, 148 f., 159, 170 Global Compact 4, 19, 25, 89, 92, 123, 224 f.
Added value 24, 112 Global Reporting Initiative 4, 25, 224 f.
AgBalance 26, 69, 103, 214 Goodwill 110, 148
Agricultural Solutions cover, 22, 35, 42, 68 ff., 117 Growth fields 18, 29, 111, 162
Auditor’s report 141
Audits 19, 25, 88, 90, 92, 94, 102 H
Automotive coatings 65, 67 Health protection 88, 90 f.

B I
Back-up line 12, 214 Income, statement of 27, 142, 152, 196
Biodiversity 26, 103 inge watertechnologies 41, 62, 83, 101, 156, 159, 173
Biotechnology 28 f., 68 ff., cover Innovation 4, 16 ff., 28 f., 44 f., 50 f., 55 ff.,
Board of Executive Directors 8 f., 104 ff., 120 ff. 63, 68 ff., 89, 117, 121
Inorganics 22, 44, 47 f., 116
C Intermediates 22, 44 f., 49, 116
Care Chemicals 22, 55 f., 60 Investments 18, 39 f., 44, 46 ff., 52, 58, 64, 68 f.,
Cash flow 36, 39 ff., 145 ff. 71 f., 82, 104, 111, 113 ff., 116 ff., 221
Catalysts 22, 34 f., 45, 63 ff. Investor Relations 13
Chemicals 22, 34, 42 ff., 44 ff., 116 f., 164, cover
Climate protection 12 f., 26, 28, 95 ff., 103 L
Coatings 22, 63 ff., 67 Labor and social standards 19, 25, 86 f., 92
Cognis integration 34 f., 55 f., 59 ff., 79 f., 83, 86,
90, 95, 99, 102, 159 f. M
Compliance 17, 19, 25, 86 f., 92, 109, 123 f. Mobility 28 f., 50 f., 63, 80, 99, 111
Consolidated balance sheets 37 f., 144 ff. Monitoring 19, 25, 86 f., 101, 106 f., 112
Construction Chemicals 22, 63, 66
Collaborations 28, 103, 111 N
Corporate Governance 119 f. Nanotechnology 25, 29, 103
Cost of capital 18, 24, 35, 39, 41, 116 Nutrition 16, 18, 31, 55, 61, 69 f., 103, 114, cover
Crop Protection 22, 68, 71 ff. Nutrition & Health 22, 55 f., 61, 162
Customers 16 ff., 22, 25 f., 29, 34, 44 f., 48 f., 50 f., 54,
55 ff., 68 ff., 80 f., 95 ff., 97 f., 100 f., 102 ff., 107 ff. O
Oil & Gas 22, 35 ,42 f., 73 ff., 117 f., 135,
D 152 ff., 204, cover
Decorative paints 67
Demographic change 84 P
Derivative financial instruments 151, 178, 192 f., 195 f. Paper Chemicals 22, 55 f., 61 f., 116
Dispersions 56, 59 f. Patents 28, 173 f.
Dispersions & Pigments 22, 55 f., 59 f. Performance Chemicals 22, 55 f., 62
Diversity 84, 112, cover Performance Polymers 22, 34, 50, 53 ff., 116, 162
Divestitures 41, 56, 104, 111, 116, 135, 145, 159 ff. Performance Products 22, 34, 42 f., 55 ff., 116, 162, cover
Dividend 6 f., 10 f., 27, 118, 137 Personnel expenses 83, 131, 133, 171, 199 ff., cover
Donations and sponsorship 27, 83, 98, cover Petrochemicals 22, 34, 44, 48, 116
Plastics 22, 34, 42 ff., 50 ff., 162, cover
E Polyurethanes 22, 50 ff., 54
Eco-Efficiency Analysis 26, 74, 99 Product stewardship 12, 25 f., 102 f., cover
Emerging markets 16 ff., 26, 30, 31, 67, 82,
102, 107, 111, 114, 116 f. R
Employee representatives 25, 86 f. Rating 10 ff., 39, 41, 110, 118, 151 f., 198
Employees 11, 16 ff., 22, 24, 25, 27, 28, 69 f., Raw materials 16 ff., 26, 28, 56, 61, 70, 92, 98 f.
83 ff., 88 ff., 90 ff., 106 ff., 223, cover 103, 107 ff., 192, cover
Energy efficiency 20, 28, 50, 95, 98, 108, cover REACH 102 f., 108
Environmental protection 25, 90 ff., 94, 224, cover Regions 18 f., 30, 31, 49, 51, 63 ff., 73,
79 ff., 99, 105, 115 ff., cover
F Registered trademarks 220
Field development 73, 77, 153, 204 Renewable resources 26, 28, 70, 99
Functional Solutions 22, 34, 42 f., 63 ff., 79 f., 116, 162, cover Responsible Care 19, 90, 92, 98
Further training 85
BASF Report 2011 Index Overviews
219

S T
Safety 17 ff., 25, 88, 90 ff., 102 f., 112, 224, cover Ten-year summary 221
Sales 18, 22, 33 ff., 42 ff., 53 ff., 59 ff., 65 ff., 68 ff.
76 ff., 79 ff., 97, 111, 116 ff., 221, cover V
SEEBALANCE 26 Value-based management 24
Segment data 47, 53, 59, 65, 71, 76 Values 7, 16 ff., 120
Shareholders 6, 17, 27, 120 ff., 135 ff. Verbund 17, 22, 28 f., 44 f., 48, 55 f., 68,
Shares 10 ff., 33, 36, 122 ff., 166, 168 80 ff., 88, 98 f., 105
Significant events subsequent to the balance sheet date 118 Vocational training 84 f.
Social benefits 27, 83
Special items 33 ff., cover W
Stakeholders 25 f., 86, 90, 112, 224 Water 26, 28 f., 62, 68, 70, 98, 100 f., 159
Standards 19, 25, 86 f., 90 ff., 96, 102 f., 123 f., 224 Wintershall 36, 73 ff., 95, 180 f., 182, 204
Statement by the Board of Executive Directors 140 Work-life balance 85
Steam cracker 46, 48, 81
Shareholders’ equity 24, 38, 120, 146
Strategy 13, 16 ff., 24, 25, 29, 82, 111, 116, 135
Supervisory Board 105, 120 ff., 129, 133 f., 135 ff.
Suppliers 25 f., 91 f., 97, 102 f., 108
Supply chain management 92
Sustainability 4, 12 f., 16 ff., 25 ff., 69, 87, 92, 95, 103,
111 f., 224, cover
220 Overviews Registered trademarks BASF Report 2011

Registered trademarks1

ACRESIN reg. trademark of BASF NEOPOLEN reg. trademark of BASF

AgBalance reg. trademark of BASF NEOPOR reg. trademark of BASF
AgCelence reg. trademark of BASF OASE reg. trademark of BASF
AMFLORA reg. trademark of BASF PALUSOL reg. trademark of BASF
BASOTECT reg. trademark of BASF Patent Asset Index trademark of PatentSight GmbH
BAXXODUR reg. trademark of BASF POLYTHF reg. trademark of BASF
CELLASTO reg. trademark of BASF RELIUS reg. trademark of BASF
COVERTRACE reg. trademark of BASF RESPONSIBLE CARE reg. trademark of the Conseil
CULTIVANCE reg. trademark of BASF Européen de l’Industrie Chimique
ECOFLEX reg. trademark of BASF SEEBALANCE reg. trademark of BASF
ECOVIO reg. trademark of BASF STANDAK reg. trademark of BASF
ELASTOCOAST reg. trademark of BASF STYRODUR reg. trademark of BASF
ELASTOLLAN reg. trademark of BASF STYROPOR reg. trademark of BASF
ELASTOPOR reg. trademark of BASF SUDAN reg. trademark of BASF
E-por reg. trademark of BASF TERMIDOR reg. trademark of BASF
EPOTAL reg. trademark of BASF TINOSORB reg. trademark of BASF
F 500 reg. trademark of BASF TINUVIN reg. trademark of BASF
HEXAMOLL reg. trademark of BASF ULTRADUR reg. trademark of BASF
iGloss reg. trademark of BASF ULTRAFORM reg. trademark of BASF
INITIUM reg. trademark of BASF ULTRAMID reg. trademark of BASF
KeroDye reg. trademark of BASF ULTRASON reg. trademark of BASF
KIXOR reg. trademark of BASF UVINUL reg. trademark of BASF
MASTERFLOW reg. trademark of BASF XEMIUM reg. trademark of BASF
MULTIBORE reg. trademark of inge watertechnologies AG X-SEED reg. trademark of BASF
1
Trademarks are not necessarily registered in all countries
BASF Report 2011 Ten-year summary Overviews
221

Ten-year summary

Million € 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Sales and earnings1
Sales 32,216 33,361 37,537 42,745 52,610 57,951 62,304 50,693 63,873 73,497

Income from operations before depreciation

and amortization (EBITDA) 5,105 5,110 7,685 8,233 9,723 10,225 9,562 7,388 11,131 11,993

Income from operations (EBIT) 2,641 2,658 5,193 5,830 6,750 7,316 6,463 3,677 7,761 8,586
Income before taxes 2,641 2,168 4,347 5,926 6,527 6,935 5,976 3,079 7,373 8,970
Income before minority interests 1,599 976 2,133 3,168 3,466 4,325 3,305 1,655 5,074 6,603

Net income
1,504 910 2,004 3,007 3,215 4,065 2,912 1,410 4,557 6,188

Capital expenditures and depreciation1

Additions to property, plant and equipment and

intangible assets 3,055 3,415 2,163 2,523 10,039 4,425 3,634 5,972 5,304 3,646

Thereof property, plant and equipment 2,677 2,293 2,022 2,188 4,068 2,564 2,809 4,126 3,294 3,199

Depreciation and amortization of property, plant

and equipment and intangible assets 2,464 2,452 2,492 2,403 2,973 2,909 3,099 3,711 3,370 3,407

Thereof property, plant and equipment 2,012 1,951 2,053 2,035 2,482 2,294 2,481 2,614 2,667 2,618

Number of employees
At year-end 89,389 87,159 81,955 80,945 95,247 95,175 96,924 104,779 109,140 111,141
Annual average 90,899 88,167 85,022 80,992 88,160 94,893 95,885 103,612 104,043 110,403

Personnel expenses1 5,975 5,891 5,615 5,574 6,210 6,648 6,364 7,107 8,228 8,576

Research and development expenses1 1,135 1,105 1,173 1,064 1,277 1,380 1,355 1,398 1,492 1,605

Key data1
Earnings per share6,7 € 1.30 0.81 1.83 2.87 3.19 4.16 3.13 1.54 4.96 6.74
Cash provided by operating activities2 2,313 4,878 4,634 5,2503 5,940 5,807 5,023 5,693 6,460 7,105
EBITDA margin  % 15.8 15.3 20.5 19.3 18.5 17.6 15.3 14.6 17.4 16.3
Return on assets  % 8.4 7.4 13.2 17.7 17.5 16.4 13.5 7.5 14.7 16.1
Return on equity after tax  % 9.3 6.0 12.9 18.6 19.2 22.4 17.0 8.9 24.6 27.5

Appropriation of profits
Net income of BASF SE4 1,045 1,103 1,363 1,273 1,951 2,267 2,982 2,176 3,737 3,506
Transfer to retained earnings4 247 334 449 – – – – – – –
Dividend 789 774 904 1,015 1,484 1,831 1,791 1,561 2,021 2,296
Dividend per share6 € 0.70 0.70 0.85 1.00 1.50 1.95 1.95 1.70 2.20 2.50

Number of shares as of December 315,6 million 1,140.6 1,113.3 1,080.9 1,028.8 999.4 956.4 918.5 918.5 918.5 918.5

1
Starting in 2005, the accounting and reporting of the BASF Group have been 5
After deduction of repurchased shares earmarked for cancellation
prepared in accordance with International Financial Reporting Standards 6
In the second quarter of 2008, we conducted a two-for-one stock split.
(IFRS). The previous year’s figures have been restated in accordance with The previous years’ figures for earnings per share, dividend per share
IFRS. The figures for the years up to and including 2003 were prepared accor- and number of shares have been adjusted accordingly.
ding to German GAAP. 7
Adjusted for special items and impairment of intangible assets,
2
Includes the change in reporting from 2009 onward of the effects of regular earnings per share were €6.26 in 2011 and €5.73 in 2010.
extensions of U.S. dollar hedging transactions.
3
Before external financing of pension obligations
4
Calculated in accordance with German GAAP
222 Overviews Ten-year summary BASF Report 2011

Consolidated balance sheets (German GAAP)

Million € 2002 2003

Intangible assets 3,464 3,793
Property, plant and equipment 13,745 13,070
Financial assets 3,249 2,600
Fixed assets 20,458 19,463

Inventories 4,798 4,151

Accounts receivable, trade 5,316 4,954
Other receivables 2,947 3,159
Deferred taxes 1,204 1,247
Marketable securities 132 147
Cash and cash equivalents 231 481
Current assets 14,628 14,139

Total assets 35,086 33,602

Subscribed capital 1,460 1,425

Capital surplus 2,948 2,983
Paid-in capital 4,408 4,408
Retained earnings 12,468 12,055
Currency translation adjustment (330) (972)
Minority interests 396 388
Equity 16,942 15,879

Pensions and other long-term provisions 6,233 6,205

Tax and other short-term provisions 2,764 2,982
Provisions 8,997 9,187

Financial indebtedness 3,610 3,507

Accounts payable, trade 2,344 2,056
Other liabilities 3,193 2,973
Liabilities 9,147 8,536

Provisions and liabilities 18,144 17,723

Thereof long-term liabilities 9,211 10,285

Total equity and liabilities 35,086 33,602

BASF Report 2011 Ten-year summary Overviews
223

Consolidated balance sheets (IFRS)

Million € 2004 2005 2006 2007 2008 2009 2010 2011

Intangible assets 3,607 3,720 8,922 9,559 9,889 10,449 12,245 11,919
Property, plant and equipment 13,063 13,987 14,902 14,215 15,032 16,285 17,241 17,966
Investments accounted for using the equity method 1,100 244 651 834 1,146 1,340 1,328 1,852
Other financial assets 938 813 1,190 1,952 1,947 1,619 1,953 848
Deferred taxes 1,337 1,255 622 679 930 1,042 1,112 941
Other receivables and miscellaneous long-term assets 473 524 612 655 642 946 653 561
Long-term assets 20,518 20,543 26,899 27,894 29,586 31,681 34,532 34,087

Inventories 4,645 5,430 6,672 6,578 6,763 6,776 8,688 10,059

Accounts receivable, trade 5,861 7,020 8,223 8,561 7,752 7,738 10,167 10,886
Other receivables and miscellaneous short-term assets 2,133 1,586 2,607 2,337 3,948 3,223 3,883 3,781
Marketable securities 205 183 56 51 35 15 16 19
Cash and cash equivalents 2,086 908 834 767 2,776 1,835 1,493 2,048
Assets of disposal groups – – – 614 – – 614 295
Short-term assets 14,930 15,127 18,392 18,908 21,274 19,587 24,861 27,088

Total assets 35,448 35,670 45,291 46,802 50,860 51,268 59,393 61,175

Subscribed capital 1,383 1,317 1,279 1,224 1,176 1,176 1,176 1,176
Capital surplus 3,028 3,100 3,141 3,173 3,241 3,229 3,216 3,203
Retained earnings 11,923 11,928 13,302 14,556 13,250 12,916 15,817 19,446
Other comprehensive income (60) 696 325 174 (96) 156 1,195 314
Minority interests 328 482 531 971 1,151 1,132 1,253 1,246
Equity 16,602 17,523 18,578 20,098 18,722 18,609 22,657 25,385

Provisions for pensions and similar obligations 4,124 1,547 1,452 1,292 1,712 2,255 2,778 3,189
Other provisions 2,376 2,791 3,080 3,015 2,757 3,289 3,352 3,335
Deferred taxes 948 699 1,441 2,060 2,167 2,093 2,467 2,628
Financial indebtedness 1,845 3,682 5,788 6,954 8,290 12,444 11,670 9,019
Other liabilities 1,079 1,043 972 901 917 898 901 1,142
Long-term liabilities 10,372 9,762 12,733 14,222 15,843 20,979 21,168 19,313

Accounts payable, trade 2,372 2,777 4,755 3,763 2,734 2,786 4,738 5,121
Provisions 2,364 2,763 2,848 2,697 3,043 3,276 3,324 3,210
Tax liabilities 644 887 858 881 860 1,003 1,140 1,038
Financial indebtedness 1,453 259 3,695 3,148 6,224 2,375 3,369 3,985
Other liabilities 1,641 1,699 1,824 1,976 3,434 2,240 2,802 3,036
Liabilities of disposal groups – – – 17 – – 195 87
Short-term liabilities 8,474 8,385 13,980 12,482 16,295 11,680 15,568 16,477

Total equity and liabilities 35,448 35,670 45,291 46,802 50,860 51,268 59,393 61,175
224 Overviews Requirements, topics and data BASF Report 2011

Requirements and topics Data

The information on the financial position and performance of the All information and bases for calculation in this report are based
BASF Group is based on the requirements of International on national and international standards for financial and sustai­
­Financial Reporting Standards (IFRS), and, where applicable, nability reporting. All of the data and information for the repor­
the German Commercial Code as well as the German Account­ ting period were sourced from the responsible units using
ing Standards (GAS). After delisting from the NYSE, we have ­representative methods. The reporting period was the financial
­retained a modified form of the control system for financial year 2011. BASF Group’s reporting includes BASF SE, the parent
­reporting based on the guidelines of the Sarbanes-Oxley Act. company, with its headquarters in Ludwigshafen, Germany, as
Internal control mechanisms ensure the reliability of the infor­ well as all of its material subsidiaries. All employees of the BASF
mation presented in this report. BASF’s management confirmed Group as of December 31, 2011, are represented in the infor­
the effectiveness of the internal control measures and compli­ mation contained in the chapter Employees.
ance with the regulations for financial reporting. Our data collection methods for environmental protection
Our sustainability reporting is aligned with the international and occupational safety are based on the recommendations of
guidelines (G3.1) of the Global Reporting Initiative (GRI) as well the European Chemical Industry Council (CEFIC). In the area of
as with the principles of the UN Global Compact and the Blue­ emissions (air, water, waste) and energy, we report on approxi­
print for Corporate Sustainability Leadership. We want to iden­ mately 98% of all emissions from our production sites world­
tify and evaluate sustainability issues relevant for BASF at an wide. Data for our styrenics business was only collected until
early stage. To this end, we engage in constant dialog with our September 30, 2011. The emissions of joint venture companies
stakeholders. We evaluate and analyze sustainability issues are included pro rata, based on our stake. We compile informa­
­together with experts in our materiality analysis in order to tion on work-related accidents at all Group company sites world­
­develop strategies well in advance for dealing with potential wide. Accidents at joint venture sites are compiled and reported,
­opportunities and risks. In 2011, we updated the analysis again as well. Further data on social responsibility and transportation
and portrayed the results in a materiality matrix, which consid­ safety apply to all consolidated Group companies, unless other­
ers the degree of societal interest as well as the significance of wise indicated.
these issues for BASF. We used this analysis as the basis for To make this report as current as possible, we have inclu­
­indentifying key topics for the report. ded relevant information available up to the editorial deadline of
 or more on the Global Reporting Initiative, see
F February 22, 2012. The report is published each year in English
www.globalreporting.org
and in German.
For more on the selection of sustainability topics, see
page 25 onward and basf.com/materiality More information on emissions can be found in the chapters
Our Goals, Climate Protection, Energy and Raw Materials, Water
A short GRI and Global Compact index can be found on page 225; and Environmental and Safety Management
for a more comprehensive version, see basf.com/gri_gc_e
The Consolidated Financial Statements begin on page 140

Topics Data

−−Financial reporting is based on requirements of −−Information and bases for calculation based on
International Financial Reporting Standards, German international standards for financial reporting and
Commercial Code and German Accounting Standards sustainability reporting
−−Sustainability reporting follows guidelines of the Global −−Data collection methods for environmental protection and
Reporting Initiative safety based on recommendations of the European
−−Dialog with sustainability experts and stakeholders Chemical Industry Council
regarding relevant topics −−Relevant information included up to the editorial deadline
of February 22, 2012
BASF Report 2011 GRI and Global Compact Index Overviews
225

GRI and Global Compact Index

The complete GRI Index with core and additional indicators as well as the ten principles of the Global Compact can be found at
basf.com/gri_gc_e

Global
Compact
Principles GRI Indicator Subject Page
Strategy and profile
1–10 1.1 Chief executive statement 6–7
1.2 Description of key impacts, risks and opportunities 16–19, 20, 25–26, 28–29, 30, 31, 32, 73–75, 82, 84, 98,
102–103, 104–112, 116–118
2.1–2.10 Organizational profile, structure, markets Cover, 11–13, 20, 22–23, 28, 33–36, 37–38, 42–43, 54, 56,
62, 73–75, 79–82, 83–87, 88, 90, 220
3.1–3.4 Report profile Cover, 224
3.5–3.13 Report scope and boundary, assurance Cover, 4, 23, 26, 41, 141, 224, 225
1–10 4.1–4.7 Corporate governance 8–9, 17, 19, 25–26, 86, 120–125, 126–128, 129–134
1–10 4.8–4.13 Guidelines and policies, codes of conduct, commitments to 4, 16–19, 20–21, 24, 25–26, 69, 73, 79–80, 83–87, 88, 89,
external initiatives 90–93, 95, 99, 100–101, 102–103, 112, 123–124
4.14–4.17 Stakeholder engagement 13, 25–26, 28, 81, 86, 88, 89, 102–103, 123–124, 224
Economic performance
1, 4, 6, 7 Management approach 16–17, 20–21, 22–23, 24, 27, 33–36, 37–38, 104–112
EC1 Direct economic value generated and distributed 10, 27, 28, 45, 69, 79, 83–86
7, 8, 9 EC2 Financial implications due to climate change 28, 64, 95–97, 107
EC3 Coverage of benefit plan obligations 27, 83, 84, 181–185
EC4 Significant financial assistance received from government 103
EC6 Local supplier 92
6 EC7 Local hiring 21, 84
EC8 Development and impact of investments for public benefit 27, 85, 89
Environmental performance
7, 8, 9 Management approach 17, 19, 20, 25–26, 73, 90–94, 95, 98, 100–101, 102–103, 123
8, 9 EN1–EN2 Materials used 92, 94, 98–99, 101
8, 9 EN3–EN7 Energy 20, 29, 50-51, 64, 74, 80, 95, 97, 98–99, 101
8, 9 EN8–EN10 Water 100–101
7, 8, 9 EN11–EN15 Biodiversity 26, 73–74, 103
7, 8, 9 EN16–EN20 Emissions 29, 63, 64, 74, 93–94, 95–97, 98
7, 8, 9 EN21 Wastewater 100–101
7, 8, 9 EN22 Waste 94
8, 9 EN23 Spills 93, 100–101
7, 8, 9 EN26–EN27 Products and services 26, 45, 51, 54, 63–64, 68, 80, 90, 91, 93, 95, 101, 103
EN28 Compliance 190
Social performance
Labor practice and labor quality
1, 3, 6 Management approach 16–19, 21, 83–87, 88
1, 3, 6 LA1–LA5 Employment 28, 83–86, 112, 171–172
1 LA7–LA8 Occupational health and safety 84, 88
LA10–LA11 Training and education 84–85, 92, 102, 123
1, 6 LA13 Composition of governance bodies 84
1, 6 LA14 Equal employment 19, 84, 87
6 LA15 Maternity leave 85
Human rights
1, 2, 3, 4, 5, 6 Management approach 16–19, 25, 83–87, 91, 93–94
1, 2, 3, 4, 5, 6 HR1 Significant investment agreements 19, 91
1, 2, 3, 4, 5, 6 HR2 Screening of suppliers 87, 92, 123
1, 2, 3, 4, 5, 6 HR3 Training 91, 123
1, 2, 6 HR4 Non-discrimination 87
1, 2, 3 HR5 Freedom of association, collective bargaining 87, 92, 123
1, 2, 4, 5 HR6–HR7 Child labor, forced labor, compulsory labor 87, 92, 123
1, 2, 3, 4, 5, 6 HR10 Assessment 19, 86–87, 123–124
1, 2, 3, 4, 5, 6 HR11 Remediation 87
Society
10 Management approach 16–19, 25, 89, 120–125, 190
SO1, SO9, SO10 Community 25, 89, 91, 99
10 SO2–SO4 Corruption 19, 123
1–10 SO5–SO8 Public policy 25, 89
Product responsibility
1, 8 Management approach 16–19, 20, 25-26, 90, 102–103
1, 7 PR1 Customer health and safety 29, 56, 90–94, 97, 102–103
8 PR3 Product and service 102–103
PR6 Marketing communication 89, 123

Since 2003, BASF has been participating in the feedback meetings of the This short index shows where to find information on the GRI core and
Global Reporting Initiative (GRI) and has been working to further develop the additional indicators as well as topics relevant to the principles of the Global
guidelines together with experts from industry, non-governmental organiza- Compact in this report. An extended overview is available online at
tions, analysts and financial auditors. GRI aims to improve the comparability basf.com/gri_gc_e. The online index contains all GRI reporting elements as well
of sustainability reporting. We reported on the basis of the GRI for the first as all GRI core and additional indicators and shows where details are to be
time in our Corporate Report 2003. Since 2005, we have been supporting the found in our printed and online reporting. We also give a brief explanation if no
Global Reporting Initiative as an Organizational Stakeholder. This report has data is available for a given indicator.
been aligned with the indicators of the current GRI guideline G3.1. More information on GRI can be found at www.globalreporting.org
226 Overviews Statement GRI Application Level Check BASF Report 2011

Statement GRI Application Level Check