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BASF A.G. - 1st Quarter Results

BASF A.G BASF: Successful Start to 2006 -- Further increase in volumes, sales climb 24 percent -- EBIT before special items rises 19 percent -- Positive outlook for 2006: -- Significantly higher sales -- Increase in EBIT before special items In the first quarter of 2006, BASF continued its success story with another top performance. 'Our declared goal is to create sustainable value by implementing our strategy,' said BASF chairman Dr. Juergen Hambrecht in his presentation of BASF's first-quarter results at the company's 54th Annual Meeting on May 4, 2006. At EUR 12.5 billion, first-quarter sales were 24 percent higher than in the same period of 2005. Growth was driven above all by considerably higher volumes and price increases in the chemical businesses and in the Oil & Gas segment. Disregarding currency effects, in particular due to the appreciation of the U.S. dollar, sales increased by 20 percent. Income from operations (EBIT) before special items rose by 19 percent compared with the first quarter of 2005 to EUR 1.9 billion. In the Chemicals segment, significantly higher raw materials and energy prices could not be completely passed on to the market in the form of higher sales prices. Earnings in the Plastics segment rose as a result of higher volumes and improved margins in the global polyurethanes business. The Performance Products segment posted higher earnings thanks in particular to strong volume growth and stable margins in the Coatings division. First-quarter earnings in the Agricultural Products division were negatively impacted by the difficult market environment in Brazil and higher research costs. The profitability of the products lysine and vitamin C remained unsatisfactory in the Fine Chemicals division. Higher prices and expansion of the natural gas trading business led to very good earnings in the Oil & Gas segment. First-quarter EBIT after special items rose by 23 percent to EUR 1.8 billion. Special items were related to income from the ongoing portfolio optimization measures in the Agricultural Products division and expenses for restructuring, which are recorded under 'Other' until they are implemented in the course of the year. The financial result declined by EUR 24 million to EUR 21 million. In the first quarter of 2005, the financial result still contained earnings from BASF's stake in the Basell joint venture, which was sold in the third quarter of 2005. Income before taxes and minority interests rose by 21 percent to EUR 1.9 billion. The tax rate was 46 percent compared with 40 percent in the first quarter of 2005. This increase was due to the higher contribution to earnings from the Oil & Gas segment. Taxes for oil production that are noncompensable with German corporate income tax amounted to EUR 272 million compared with EUR 198 million in the same period of 2005. Net income increased 10 percent to EUR 950 million. Earnings per share were EUR 1.87 compared with EUR 1.60 in the same period of the previous year. Positive outlook for full-year 2006 Hambrecht's outlook for full-year 2006 is confident, based on global economic growth of more than 3 percent. In 2006, BASF expects an average oil price of $60 per barrel of Brent crude and an average euro/dollar exchange rate of $1.25 per euro. Hambrecht formulated his optimistic prognosis as follows: 'Our business has developed very positively since the beginning of 2006, and the level of orders remains extremely robust. We have seen two strong years in a row, and we are confident that we will continue our successful performance in 2006. We aim to continue to grow faster than the market. Above all, though, we want to achieve profitable growth. We expect to post higher EBIT before special items compared with the previous year's strong level. This depends, of course, on a stable geopolitical environment and the development of the crude oil price.' Growth in Europe, North America and Asia In Europe, sales by location of company increased by 28 percent in the first quarter of 2006. EBIT before special items rose by EUR 286 million to EUR 1.4 billion. The higher sales and earnings were primarily due to the contribution of the Oil & Gas segment. First-quarter sales by location of company in North America rose by 7 percent in dollar terms. The sales growth was due in particular to the Chemicals and Plastics segments. EBIT before special items increased by EUR 27 million to EUR 298 million. In Asia Pacific, we increased sales in local currencies by 19 percent. EBIT before special items rose EUR 28 million to EUR 115 million. Growth in the Chemicals segment was due especially to the Verbund site in Nanjing, China, which started operations in the second quarter of 2005. Sales by location of company in South America, Africa, Middle East declined by 11 percent in local currency terms. EBIT before special items was EUR 39 million lower than in the same period of 2005 because of the difficult market environment in the agricultural products business in Brazil. The Coatings division recorded strong business, in particular with decorative paints. BASF is the world's leading chemical company: The Chemical Company. Its portfolio ranges from chemicals, plastics, performance products, agricultural products and fine chemicals to crude oil and natural gas. As a reliable partner to virtually all industries, BASF's intelligent system solutions and high-value products help its customers to be more successful. BASF develops new technologies and uses them to open up additional market opportunities. It combines economic success with environmental protection and social responsibility, thus contributing to a better future. In 2005, BASF had approximately 81,000 employees and posted sales of more than EUR 42.7 billion. BASF shares are traded on the stock exchanges in Frankfurt (BAS), London (BFA), New York (BF) and Zurich (AN). Further information on BASF is available on the Internet at www.basf.com. On May 4, 2006, you can obtain further information from the Internet at the following addresses: Interim Report (from 7:30 a.m. CEST) corporate.basf.com/interimreport (English) corporate.basf.com/zwischenbericht (German) Press release (from 7:30 a.m. CEST) corporate.basf.com/pressrelease (English) corporate.basf.com/pressemitteilungen (German) Live-Transmission - Speech Dr. Juergen Hambrecht (from 10:00 a.m. CEST) corporate.basf.com/shareholdermeeting (English) corporate.basf.com/hauptversammlung (German) Speech Dr. Juergen Hambrecht - print version (from 11:00 a.m. CEST) corporate.basf.com/pressconference (English) corporate.basf.com/pressekonferenz (German) Photos (from 7:30 a.m. CEST) corporate.basf.com/photos (English) corporate.basf.com/fotos (German) Photos from the Annual Shareholder Meeting (from 11:30 a.m. CEST) corporate.basf.com/photos (English) corporate.basf.com/fotos (German) Information about BASF shares corporate.basf.com/share (English) corporate.basf.com/aktie (German) Live-Transmission Telephone Conference for Analysts (from 8:30 a.m. CEST) corporate.basf.com/share (English) corporate.basf.com/aktie (German) This press release contains forward-looking statements. All statements contained in this press release that are not clearly historical in nature or that necessarily depend on future events are forward-looking, and the words 'anticipate,''believe,''expect,''estimate,''plan,' and similar expressions are generally intended to identify forward-looking statements. These statements are based on current expectations, estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict and are based upon assumptions as to future events that may not prove to be accurate. Many factors could cause the actual results, performance or achievements of BASF to be materially different from those that may be expressed or implied by such statements. Such factors include those discussed in BASF's Form 20-F filed with the SEC. Successful start to 2006 BASF sets course for future success First-Quarter Results 2006 January - March 2006 published on May 4, 2006 BASF Group 1st Quarter Million EUR Change 2006 2005 in % Sales 12,515 10,083 24.1 Income from operations before interest, taxes, depreciation and amortization (EBITDA) 2,401 2,019 18.9 Income from operations (EBIT) before special items 1,865 1,563 19.3 Income from operations (EBIT) 1,849 1,499 23.3 Financial result 21 45 (53.3) Income before taxes and minority interests 1,870 1,544 21.1 Net income 950 861 10.3 Earnings per share (EUR) 1.87 1.60 16.9 EBIT before special items in percent of sales 14.9 15.5 - Cash provided by operating activities 1,448 1,104 31.2 Additions to fixed assets(a) 600 362 65.7 Excluding acquisitions 473 362 30.7 Amortization and depreciation(a) 552 520 6.2 Segment assets (end of period)(b) 29,680 27,374 8.4 Personnel costs 1,392 1,277 9.0 Number of employees (end of period) 79,926 81,335 (1.7) (a) Tangible and intangible fixed assets (b) Tangible and intangible fixed assets, inventories and business-related receivables The interim financial statements have not been audited. 1 BASF Group Business BASF shares Review and Outlook 1st Quarter Full Year 4 Chemicals 2006 2005 5 Plastics Share price (end of period)(a)(EUR) 64.70 64.71 6 Performance Products High(a)(EUR) 65.95 65.33 7 Agricultural Products Low(a)(EUR) 61.65 50.11 & Nutrition 8 Oil & Gas Average daily trade (million shares)(a) 3.01 2.70 9 Regions BASF share performance(b) 0.0% 26.2% 10 Consolidated Statements of DAX 30 Income performance(b) 10.4% 27.1% 11 Consolidated Balance EURO STOXX 50 Sheets performance(b) 7.9% 24.3% 12 Consolidated Statements Market capitalization (end of period) of Cash Flows (billion EUR) 33.33 33.33 13 Consolidated Statements Number of shares (end of period) of Recognized Income and Expense (million shares)(c) 515.06 515.06 14 Consolidated Statements (a) XETRA trading of Stockholders' Equity (b)With dividends reinvested 15 Segment Reporting (c)Including bought-back shares intended for cancellation Cover photo: Antonio Germani, delegate from BASF Italy and Director Special Projects Pharma Solutions, and Verena Bertgen, laboratory assistant at BASF's Competence Center Polymer Research in Ludwigshafen News from our innovation centers Environmentally friendly processing of cellulose BASF and the University of Alabama cooperate on the use of ionic liquids BASF has set up a research partnership with the University of Alabama to study the dissolution and processing of cellulose by means of ionic liquids. The two partners will further develop practical uses for this innovative application. Cellulose is the commonest organic compound and is a constituent of virtually all plant cell walls. Of the 40 billion tons formed by nature every year, only 100 million tons is used as a feedstock for further processing. A more widespread use of cellulose as a renewable raw material has to date been prevented by its poor solubility. By means of ionic liquids, however, solutions of cellulose can now be produced for the first time at technically useful concentrations. BASF is in the process of evaluating a variety of ideas that might improve the use of cellulose. The use of ionic liquids can significantly simplify the production of cellulose fibers, for example. 'We believe ionic liquids have a promising future,' says Dr. Matthias Maase, who works in the New Business Development unit of BASF's Intermediates division. 'Their properties will open up completely new applications in addition to classical chemical uses. Examples include fluids used in engineering, optical devices, electronic components and heat transfer.' BASF has several years of experience in the fairly recent field of ionic liquids. At its Ludwigshafen site, the company operates the world's first large-scale industrial process that uses ionic liquids. The process allows fast and simple removal of the acids from the desired product, and the ionic liquids employed can be almost completely recycled. BASF sells its ionic liquids under the brand name Basionics(TM), while the corresponding processes are marketed under the name Basil(TM). Renewable raw materials: Turning cellulose into fibers. BASF markets its portfolio of ionic liquids under the brand name Basionics. The current portfolio consists of 19 different ionic liquids. News from our innovation centers Polyurethane composite protects imperiled dikes The innovative covering of small stones and the Elastocoast polyurethane system is elastic and porous. As a result, it can withstand the force of the water masses particularly well. Flexible covering with BASF's Elastocoast withstands even harsh storms During the coming century, scientists predict that global warming will cause a rise in the sea level and increased flooding from rivers. More than ever before, innovative solutions are needed to provide effective and stable coastal protection and river dikes. One of them is a specially developed elastomer polyurethane system from BASF's subsidiary Elastogran: Under the name Elastocoast(R), the company is offering a novel plastic for reinforcing stone ballast revetments for dikes. These coverings represent the first line of defense, for example, against the sea. They protect the dike by absorbing the force of the breaking waves and slowing down the water masses. Elastic and porous - these two properties are the secret of Elastocoast: The ability to yield slightly protects the revetment against the brute force of the water masses crashing down upon them; the interconnecting cavities between the stones absorb their energy. Rigid and solid revetments made from the conventional 'adhesives' concrete or asphalt, on the other hand, are often broken down by the pounding force of the waves: starting from an initial, tiny defect, the breakers gradually make deeper and deeper inroads into the revetment. It could hardly be easier to use: The liquid two-component special plastic polyurethane is stirred on site and then mixed - for example in a concrete mixer - with the crushed stone which it envelops like a thin, transparent film. With relatively little effort, the finished mix of materials can be applied in covering layers about 15 to 30 centimeters thick. The mixture even hardens underwater. Elastocoast also provides benefits for nature: Flora and fauna can find new habitats in the porous structure of the cover layers. Following its successful use in the redevelopment of a jetty on the bank of the River Elbe in Hamburg, Elastocoast is now facing its biggest challenge on the island of Sylt. Especially in winter, the North Sea gnaws away at the island. In September 2005, a revetment made of Elastocoast has been protecting part of the particularly exposed northern part of the island. Dr. Marcus Leberfinger, project manager for maritime applications at Elastogran, is very satisfied with the results achieved in the first winter: 'Even in the breaker zone of the open coast of Sylt, the revetment reliably withstood the high dynamic stresses caused by wave impact, salt water and the effects of frost.' A similar pilot project has also been completed on Hamburger Hallig to the north of the German town of Husum. BASF Group Business Review and Outlook -- Further increase in volumes, sales climb 24% -- EBIT before special items rises 19% -- Agreement reached on acquisition of Degussa's construction chemicals business -- Positive outlook for 2006: -- Significantly higher sales -- Increase in EBIT before special items Sales At EUR12.5 billion, first-quarter sales were 24% higher than in the same period of 2005. Growth was driven above all by considerably higher volumes and price increases in our chemical businesses and in the Oil & Gas segment. Disregarding currency effects, in particular due to the appreciation of the U.S. dollar, sales increased by 20%. Factors influencing sales in comparison with previous year % of sales 1st Quarter Volumes 7 Prices 12 Currencies 4 Acquisitions/divestitures 1 Total 24 Sales increased in all segments. Volumes in the Chemicals segment rose in particular due to the startup of the Verbund site in Nanjing, China, in 2005. The electronic chemicals business, which was acquired in April last year, also contributed to the significant increase in sales. In the Plastics and Performance Products segments we also posted higher volumes while adjusting sales prices to reflect increased raw material costs. Sales by segment, 1st Quarter 2006 Chemicals 2006 2,239 23% 2005 1,822 Plastics 2006 3,091 10% 2005 2,800 Performance 2006 2,147 13% Products 2005 1,908 Agricultural Products 2006 1,376 2% & Nutrition 2005 1,354 Oil & Gas 2006 2,985 62% 2005 1,840 In the Agricultural Products & Nutrition segment, the Fine Chemicals division recorded higher sales thanks to an increase in volumes and the acquisition of Orgamol Group's pharmaceutical contract manufacturing business in the fourth quarter of 2005. Sales in the Agricultural Products division declined slightly compared with the first quarter of 2005 due to lower sales volumes in South America. With a sales increase of more than EUR1.1 billion, the Oil & Gas segment accounted for 11 percentage points of the BASF Group's sales growth. This was a consequence of the high oil price and increased sales volumes in the natural gas trading business. Special items 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Million EUR 2006 2005 2006 2005 2006 2005 2006 2005 Special items in: Income from operations (16) (64) (70) (65) (109) Financial result - - - 222 - Income before taxes and minority interests (16) (64) (70) 157 (109) Earnings Compared with the first quarter of 2005, we increased income from operations (EBIT) before special items by 19% to EUR1,865 million. In the Chemicals segment, significantly higher raw material and energy prices could not be completely passed on to the market in the form of higher sales prices. It was therefore not possible to match the previous year's very strong first-quarter earnings, in particular in the Petrochemicals division. Earnings in the Plastics segment rose as a result of higher volumes and improved margins in the global polyurethanes business. The Performance Products segment posted higher earnings thanks in particular to strong volume growth and stable margins in the Coatings division. First-quarter earnings in the Agricultural Products division were negatively impacted by the difficult market environment in Brazil and higher research costs. The profitability of the products lysine and vitamin C remained unsatisfactory in the Fine Chemicals division. Higher prices and expansion of the natural gas trading business led to very good earnings in the Oil & Gas segment. First-quarter EBIT after special items rose by 23% to EUR1,849 million. Special items in income from operations were related to income from the ongoing portfolio optimization measures in the Agricultural Products division and expenses for restructuring, which are recorded under 'Other' until they are implemented in the course of the year. The financial result declined by EUR24 million to EUR21 million. In the first-quarter of 2005, the financial result still contained earnings from our stake in the Basell joint venture, which was sold in the third quarter of 2005. Chemicals 2006 317 (26)% 2005 426 Plastics 2006 332 23% 2005 269 Performance 2006 248 10% Products 2005 225 Agricultural Products 2006 224 (24)% & Nutrition 2005 296 Oil & Gas 2006 848 75% 2005 484 Income before taxes and minority interests rose by 21% to EUR1,870 million. The tax rate was 46% compared with 40% in the first quarter of 2005. This increase was due to the higher contribution to earnings from the Oil & Gas segment. Taxes for oil production that are noncompensable with German corporate income tax amounted to EUR272 million compared with EUR198 million in the same period of 2005. Net income increased 10% to EUR950 million. Earnings per share were EUR1.87 compared with EUR1.60 in the same period of the previous year. Outlook We expect the following conditions in 2006: -- Average oil prices (Brent) of about $60/barrel -- An average euro/dollar exchange rate of $1.25 per euro and moderately higher interest rates -- Global economic growth of more than 3% On this basis, we expect that our business will continue to develop positively in the further course of the year. We plan to increase our sales prices to counter the pressure on margins caused by rising raw material prices. Risk factors continue to be the political situation in regional hotspots and the development of the crude oil price. The good start in the first quarter confirms our positive outlook for the full year. We expect to post significantly higher sales and higher EBIT before special items compared with the previous year's strong level. Significant events On February 28, 2006, BASF reached an agreement with Degussa AG, Duesseldorf, to acquire Degussa's construction chemicals business. The purchase price for equity is just under EUR2.2 billion. As a result, the transaction value for BASF is EUR2.7 billion including debt. Subject to approval by the relevant authorities, the transaction is expected to close by the middle of 2006. We will place Degussa's construction chemicals business in a new operating division - Construction Chemicals - in our Performance Products segment. On April 27, 2006, BASF and Gazprom agreed on a swap of assets of equivalent value. In accordance with this agreement, BASF's subsidiary Wintershall will receive a total interest of 35% less one share in the Yuzhno Russkoye gas field. In return, Gazprom is to increase its interest in WINGAS GmbH to 50% less one share. In addition, Gazprom will receive a share in a Wintershall subsidiary with interests in exploration and production activities in Libya as well as a 50% share in a company that will be responsible for expanding gas marketing activities in Europe (excluding Germany). On May 1, 2006, BASF announced that it extended the expiration date of its cash offer to acquire all outstanding shares in Engelhard Corporation until Monday, June 5, 2006. At the same time, the tender offer was increased to $38 per share. BASF is confident that Engelhard's shareholders will accept this offer. Further information is available on the Internet at corporate.basf.com/tender-offer and on the SEC's website at www.sec.gov Chemicals -- Strong sales growth in all operating divisions -- Pressure on margins due to high raw material and energy prices -- First-quarter earnings below previous year's very high level Overview Chemicals 1st Quarter Million EUR Change 2006 2005 in % Sales 2,239 1,822 23 Thereof Inorganics 306 207 48 Petrochemicals 1,374 1,136 21 Intermediates 559 479 17 EBITDA 452 544 (17) EBIT before special items 317 426 (26) EBIT before special items in percent of sales 14.2 23.4 - EBIT 317 426 (26) Sales in the Chemicals segment increased significantly in the first quarter (volumes 11%, portfolio 3%, prices 4%, currencies 5%). This was due in particular to the volumes from our Verbund site in Nanjing, China, as well as from the electronic chemicals business acquired in April 2005. Higher raw material and energy prices could not be passed on fully to the market in the form of higher prices. Earnings were below the previous year's very strong level. Inorganics Sales of electronic chemicals developed very positively, in particular in Asia. We also posted higher sales of inorganic specialties, catalysts and glues and impregnating resins. The division's earnings declined slightly. Margins in the basic products business in particular were adversely affected by high raw material and energy costs. Petrochemicals Sales rose thanks to strong demand worldwide. High crude oil prices resulted in significantly higher purchase prices for our main feedstock, naphtha, and impaired margins for cracker products in particular in Europe, but also in Asia. In addition, earnings were negatively impacted by scheduled plant turnarounds as well as by production losses at the cracker in Port Arthur, Texas. Earnings were therefore significantly lower than in the first quarter of 2005. Raw material prices are expected to continue to rise in the second quarter. Sales and earnings in the second quarter will also be impaired by the scheduled turnaround of the crackers in Port Arthur and Ludwigshafen, and by the temporary shutdown of the cracker at the site in Antwerp, Belgium, as the result of a power outage. Intermediates Sales increased in all regions and product lines, in particular due to higher volumes. Considerably higher raw material costs put margins under pressure, especially at our new THF plant in Caojing, China. Earnings declined as a result. The THF and PolyTHF(R) plants in Yokkaichi, Japan, were closed in the first quarter of 2006 as announced last year. Plastics -- Segment earnings increase significantly -- Polyurethanes business continues to perform well -- Integrated isocyanate site in Caojing, China, to start operations in mid-2006 Overview Plastics 1st Quarter Million EUR Change 2006 2005 in % Sales 3,091 2,800 10 ThereofStyrenics 1,151 1,136 1 Performance Polymers 750 689 9 Polyurethanes 1,190 975 22 EBITDA 456 380 20 EBIT before special items 332 269 23 EBIT before special items in percent of sales 10.7 9.6 - EBIT 331 268 24 In the Plastics segment, sales rose thanks to higher volumes, increased sales prices and positive currency effects (volumes 3%, prices 2%, currencies 5%). The significant increase in earnings was primarily due to the Polyurethanes division. Styrenics Volumes remained unchanged and sales and earnings increased slightly compared with the first quarter of 2005. The temporary loss of production at the styrene plant in Ludwigshafen and persistently high raw material prices prevented a significant increase in earnings. To strengthen this division, we plan to acquire Lanxess' business with styrene-acrylonitrile (SAN) copolymers in Europe and South America. The transaction is subject to approval by the relevant antitrust authorities. Performance Polymers Although sales increased due to higher volumes, earnings were below the high level posted in the first quarter of 2005. This was due to higher raw material costs, which we were unable to pass on to our customers to a sufficient extent. In addition, earnings were impacted by the startup of the PBT plant in Kuantan, Malaysia, which was constructed in a joint venture with Toray Industries, Inc. Leuna Miramid GmbH, which was acquired in November 2005, made a positive contribution to earnings. Polyurethanes The strong business performance recorded in the previous year continued in all regions in the first quarter of 2006. We significantly increased sales and earnings thanks to higher volumes worldwide and higher sales prices. In Geismar, Louisiana, we acquired a production plant for DNT - precursor for polyurethanes - from Air Products and Chemicals Inc., Pennsylvania. The integrated isocyanate site in Caojing, China, is scheduled to start operations in mid-2006 as planned. Performance Products -- Strong sales growth in all operating divisions -- Earnings rise due to strong business with coatings -- Agreement with Degussa on the acquisition of the construction chemicals business Overview Performance Products 1st Quarter Million EUR Change 2006 2005 in % Sales 2,147 1,908 13 ThereofPerformance Chemicals 764 694 10 Coatings 591 472 25 Functional Polymers 792 742 7 EBITDA 329 304 8 EBIT before special items 248 225 10 EBIT before special items in percent of sales 11.6 11.8 - EBIT 247 224 10 In the Performance Products segment, we recorded significantly higher sales in all divisions as a result of an increase in volumes, higher prices and positive currency effects (volumes 4%, portfolio 1%, prices 3%, currencies 5%). We also posted a further increase in earnings compared with the same period of the previous year. This was due in particular to strong business in the Coatings division. We reached an agreement with Degussa AG to acquire Degussa's construction chemicals business. Thanks to this forward integration, we will further improve BASF's strong position as a partner to the construction industry. Our goal is to expand the highly profitable construction chemicals business, which is both very innovative and cyclically resilient. We expect the transaction to close by the middle of 2006. Performance Chemicals Sales rose in particular due to strong business with performance chemicals for the automotive and oil industry and for detergents and formulators. All regions contributed to this sales growth. Earnings improved further despite higher raw material costs. Coatings We increased sales and earnings considerably thanks to strong business with automotive (OEM) and automotive refinish coatings, in particular in Asia and North America, and with industrial coatings in Europe and decorative paints in South America. We benefited from the upturn in the automotive industry. We also gained new customers in the automotive refinish coatings business. Functional Polymers The increase in sales was due primarily to higher sales volumes of superabsorbents and products for the adhesives and construction industry. Earnings were slightly lower than in the strong first quarter of 2005. With raw material prices remaining high, acrylic monomers were subject to increased price pressure. The business was also negatively impacted by restructuring among customers in the paper industry. Agricultural Products & Nutrition -- Earnings down on previous year's quarter despite a slight increase in sales -- Portfolio optimization continues in the Agricultural Products division -- Fine Chemicals demonstrates growth in aroma chemicals and fat-soluble vitamins Overview Agricultural Products 1st Quarter Million EUR Change 2006 2005 in % Sales 928 959 (3) EBITDA 333 332 - EBIT before special items 213 276 (23) EBIT before special items in percent of sales 23.0 28.8 - EBIT 280 284 (1) Sales in the Agricultural Products division declined compared with the first quarter of 2005 (volumes -4%, portfolio -1%, prices/currencies 2%). This was due mainly to subdued demand for fungicides to combat soybean rust in Brazil and North America. The appreciation of the real and low prices for agricultural products are putting pressure on our customers in Brazil. Our herbicides business developed positively, especially in North America and Europe. In Asia and Eastern Europe, we posted higher sales in all indications. Income from operations before special items declined as a result of lower sales volumes of fungicides, higher research costs, and higher expenses associated with the development of new market segments. Our ongoing portfolio optimization measures resulted in special income. In March 2006, we sold the generics business of Micro Flo Company LLC, Memphis, Tennessee, to Arysta LifeScience North America Corporation. Overview Fine Chemicals 1st Quarter Million EUR Change 2006 2005 in % Sales 448 395 13 EBITDA 40 50 (20) EBIT before special items 11 20 (45) EBIT before special items in percent of sales 2.5 5.1 - EBIT 10 20 (50) Sales volumes increased, in particular for aroma chemicals and vitamins A and E for animal nutrition. Orgamol Group's contract manufacturing business, which was acquired in October 2005 also contributed to the rise in sales (volumes 7%, portfolio 6%, prices -5%, currencies 5%). Declining prices for lysine and vitamin C and significantly higher raw material costs, for example for crude sugar, increased pressure on margins. Fixed costs in the vitamin C business declined due to the closure of the plant in Grenaa, Denmark, as well as a number of restructuring measures carried out in 2005. Overall, earnings were below the previous year's level but were nevertheless significantly higher than in the fourth quarter of 2005. Oil & Gas -- Sales and earnings rise significantly -- Exploration and production benefits from higher oil prices -- Volumes and margins improve considerably in natural gas trading Overview Oil & Gas 1st Quarter Million EUR Change 2006 2005 in % Sales 2,985 1,840 62 ThereofExploration and production 1,081 693 56 Natural gas trading 1,904 1,147 66 EBITDA 953 590 62 ThereofExploration and production 707 459 54 Natural gas trading 246 131 88 EBIT before special items 848 484 75 ThereofExploration and production 638 386 65 Natural gas trading 210 98 114 EBIT before special items in percent of sales 28.4 26.3 - ThereofExploration and production 59.0 55.7 - Natural gas trading 11.0 8.5 - EBIT 848 484 75 ThereofExploration and production 638 386 65 Natural gas trading 210 98 114 Sales increased significantly due to a considerable rise in the price of oil, a slight increase in natural gas production and the expansion of the natural gas trading business (volumes 11%, prices/currencies 51%). These factors resulted in a strong increase in earnings. Natural gas production was increased in the exploration and production business sector. Crude oil production declined slightly as a result of scheduled maintenance work at production facilities. Compared with the same quarter of 2005, the average price of Brent crude rose by $14/barrel to $62/barrel. In euro terms, this corresponds to an increase of EUR15/barrel to EUR51/barrel. The natural gas trading business sector recorded high volumes, in particular because of the long, cold winter in Europe. Compared with the same period of the previous year, sales prices were significantly higher and margins improved. Earnings more than doubled. Debottlenecking of the STEGAL long-distance gas pipeline through the German regions of Saxony and Thuringia was completed at the end of March 2006, further increasing our east-west transport capacities. Regions -- Europe: Strong increase in earnings thanks to the Oil & Gas segment -- North America (NAFTA): Positive earnings trend continues -- Asia: Growth due to Nanjing Verbund site -- South America: Difficult market environment in the agricultural products business Overview Regions Sales Sales (location of company) (location of customer) ---------------- ---------------------- -------------------------- Change Change Million EUR 2006 2005 in % 2006 2005 in % 1st Quarter Europe 7,786 6,102 28 7,415 5,851 27 Thereof Germany 5,757 4,310 34 2,972 2,201 35 North America (NAFTA) 2,637 2,265 16 2,617 2,243 17 Asia Pacific 1,648 1,299 27 1,777 1,366 30 South America, Africa, Middle East 444 417 6 706 623 13 12,515 10,083 24 12,515 10,083 24 Overview Regions EBIT before special items ---------------- ---------------------- Change Million EUR 2006 2005 in % 1st Quarter Europe 1,420 1,134 25 Thereof Germany 1,015 742 37 North America (NAFTA) 298 271 10 Asia Pacific 115 87 32 South America, Africa, Middle East 32 71 (55) 1,865 1,563 19 In Europe, sales by location of company increased by 28% in the first quarter of 2006. EBIT before special items rose by EUR286 million to EUR1,420 million. The higher sales and earnings were primarily due to the contribution of the Oil & Gas segment. First-quarter sales by location of company in North America rose by 7% in dollar terms. The sales growth was due in particular to the Chemicals and Plastics segments. EBIT before special items increased by EUR27 million to EUR298 million. In the Chemicals segment, earnings were negatively impacted by the temporary shutdown of the cracker in Port Arthur, Texas. The Plastics segment benefited from strong demand for polyurethanes. We further optimized our portfolio in the Agricultural Products & Nutrition segment by selling the generics business of Micro Flo Company LLC, Memphis, Tennessee. In Asia Pacific, we increased sales in local currencies by 19%. EBIT before special items rose EUR28 million to EUR115 million. Growth in the Chemicals segment was due especially to the Verbund site in Nanjing, China, which started operations in the second quarter of 2005. The Performance Products segment additionally benefited from the strengthened Coatings business following the acquisition of remaining shares in a joint venture in Japan in 2005. Sales by location of company in South America, Africa, Middle East declined by 11% in local currency terms. EBIT before special items was EUR39 million lower than in the same period of 2005 because of the difficult market environment in the agricultural products business in Brazil. The Coatings division recorded strong business, in particular for decorative paints. Consolidated Statements of Income 1st Quarter Full Year Million EUR Change 2006 2005 in % 2005 Sales 12,515 10,083 24.1 42,745 Cost of sales 8,888 6,845 29.8 29,567 Gross profit on sales 3,627 3,238 12.0 13,178 Selling expenses 1,103 1,004 9.9 4,330 General and administrative expenses 186 164 13.4 780 Research and development expenses 305 250 22.0 1,064 Other operating income 250 126 98.4 601 Other operating expenses 434 447 (2.9) 1,775 Income from operations 1,849 1,499 23.3 5,830 (Expenses)/income from financial assets 15 71 (78.9) 348 Interest result (48) (40) (20.0) (170) Other financial result 54 14 285.7 (82) Financial result 21 45 (53.3) 96 Income before taxes and minority interests 1,870 1,544 21.1 5,926 Income taxes 853 622 37.1 2,758 Net income before minority interests 1,017 922 10.3 3,168 Minority interests 67 61 9.8 161 Net income 950 861 10.3 3,007 Earnings per shares (EUR ) 1.87 1.60 16.9 5.73 Number of shares, in million (weighted) 509 537 (5.2) 525 The interim financial statements have not been audited. The previous year's figures have been adjusted as follows: Expenses in the Oil & Gas segment related to exploration for oil and gas deposits and to dry holes are now recorded as other operating expenses rather than as research and development expenses. In association with the change to standard IAS 19, actuarial gains and losses from the valuation of pension obligations are recognized against retained earnings in the reporting period in which they occur. Consolidated Balance Sheets Assets March March Dec. 31, 31, Change 31, Change Million EUR 2006 2005 in % 2005 in % Long-term assets Intangible assets 3,662 3,543 3.4 3,720 (1.6) Property, plant and equipment 13,976 13,202 5.9 13,987 (0.1) Investments accounted for using the equity method 267 1,165 (77.1) 244 9.4 Other financial assets 866 930 (6.9) 813 6.5 Deferred taxes 1,046 1,211 (13.6) 1,255 (16.7) Other long-term assets 521 585 (10.9) 524 (0.6) 20,338 20,636 (1.4) 20,543 (1.0) Short-term assets Inventories 5,364 4,964 8.1 5,430 (1.2) Accounts receivable, trade 7,529 6,589 14.3 7,020 7.3 Other receivables and miscellaneous short-term assets 1,694 2,224 (23.8) 1,586 6.8 Liquid funds 3,115 3,007 3.6 1,091 185.5 17,702 16,784 5.5 15,127 17.0 Total assets 38,040 37,420 1.7 35,670 6.6 Stockholders' equity March March Dec. 31, 31, Change 31, Change Million EUR 2006 2005 in % 2005 in % Stockholders' equity Subscribed capital 1,301 1,371 (5.1) 1,317 (1.2) Capital surplus 3,118 3,043 2.5 3,100 0.6 Retained earnings 12,525 12,533 (0.1) 11,928 5.0 Other comprehensive income 680 11 696 (2.3) Minority interests 478 413 15.7 482 (0.8) 18,102 17,371 4.2 17,523 3.3 Long-term liabilities Provisions for pensions and similar obligations 1,419 4,133 (65.7) 1,547 (8.3) Other provisions 2,788 2,315 20.4 2,791 (0.1) Deferred taxes 640 831 (23.0) 699 (8.4) Financial indebtedness 3,629 1,966 84.6 3,682 (1.4) Other long-term liabilities 1,033 1,064 (2.9) 1,043 (1.0) 9,509 10,309 (7.8) 9,762 (2.6) Short-term liabilities Accounts payable, trade 2,770 2,879 (3.8) 2,777 (0.3) Provisions 3,046 2,547 19.6 2,763 10.2 Tax liabilities 1,252 1,110 12.8 887 41.1 Financial indebtedness 1,719 1,455 18.1 259 . Other short-term liabilities 1,642 1,749 (6.1) 1,699 (3.4) 10,429 9,740 7.1 8,385 24.4 Total stockholders' equity and liabilities 38,040 37,420 1.7 35,670 6.6 Consolidated Statements of Cash Flows January - March Million EUR 2006 2005 Net income 950 861 Depreciation and amortization of long-term assets 552 521 Changes in net working capital 61 (175) Miscellaneous items (115) (103) Cash provided by operating activities 1,448 1,104 Payments related to tangible and intangible assets (493) (393) Acquisitions/divestitures (7) 139 Financial investments and other items 195 38 Cash using in investing activities (305) (216) Proceeds from capital increases/repayments (377) (264) Changes in financial liabilities 1,407 143 Dividends (85) (19) Cash used in financing activities 945 (140) Net changes in cash and cash equivalents 2,088 748 Cash and cash equivalents as of beginning of year and other changes 911 2,094 Cash and cash equivalents 2,999 2,842 Marketable securities 116 165 Liquid funds 3,115 3,007 At EUR1,448 million, cash provided by operating activities was EUR344 million higher than in the first quarter of 2005. This was due to higher earnings as well as a reduction in net working capital. Cash used in investing activities amounted to EUR305 million compared with EUR216 million in the same period of 2005. Payments related to tangible and intangible fixed assets were below the level of depreciation and amortization on fixed assets. We spent EUR396 million on share buybacks. Of this amount, EUR339 million was associated with the EUR1.5 billion share buyback program that was completed in mid-February 2006. EUR57 million was associated with the new EUR500 million program that is scheduled to run until the Annual Meeting in 2007. In the first quarter, a total of 6.3 million shares were bought back for an average price of EUR63.20 per share. Liquid funds rose by EUR2,024 million to EUR3,115 million. At EUR5,348 million, financial indebtedness was EUR1,407 million higher than on December 31, 2005. Net debt declined by EUR617 million to EUR2,233 million. The equity ratio at the end of the first quarter was 47.6%. Consolidated Statements of Recognized Income and Expense Income and expense items January - March Million EUR 2006 2005 Net income before minority interests 1,017 922 Fair value changes in available-for-sale securities 56 (15) Cash-flow hedges 16 16 Change in foreign currency translation adjustments (83) 77 Actuarial gains/losses from pensions and other obligations 55 39 Deferred taxes (14) (22) Minority interests (5) 11 Total income and expenses recognized in equity 25 106 Total income and expense for the period 1,042 1,028 Thereof BASF 979 956 Thereof minority interests 63 72 Development of income Retained earnings Other comprehensive income and expense recognized directly in equity Actuarial Foreign Fair value gains/losses currency changes in translation available- adjustment for- sale securities Million EUR As of January 1, 2006 (894) 475 258 Additions 55 - 56 Releases - (83) - Deferred taxes (9) 2 (1) As of March 31, 2006 (848) 394 313 As of January 1, 2005 (234) (226) 193 Additions 39 77 - Releases - - (15) Deferred taxes (15) (1) - As of March 31, 2005 (210) (150) 178 Development of income Other Total and expense compre- income and recognized hensive expense directly in equity income recognized directly in equity Cash- Total of flow other hedges comprehen- sive income Million EUR As of January 1, 2006 (37) 696 (198) Additions 16 72 127 Releases - (83) (83) Deferred taxes (6) (5) (14) As of March 31, 2006 (27) 680 (168) As of January 1, 2005 (27) (60) (294) Additions 16 93 132 Releases - (15) (15) Deferred taxes (6) (7) (22) As of March 31, 2005 (17) 11 (199) Consolidated Statements of Stockholders' Equity January - March 2006 Number of Subscribed Capital subscribed capital surplus shares outstanding Million EUR As of January 1, 2006 514,379,000 1,317 3,100 Share buy-back and cancellation of own shares including own shares intended to be cancelled (6,259,000) (16) 18 Capital injection by minority interests - - - Dividends paid - - - Net income - - - Income and expense recognized directly in equity - - - Change in scope of consolidation and other changes - - - As of March 31, 2006 508,120,000 1,301 3,118 January - March 2006 Retained Other com- Minority Stock- earnings prehensive interests holders' income equity Million EUR As of January 1, 2006 11,928 696 482 17,523 Share buy-back and cancellation of own shares including own shares intended to be cancelled (398) - - (396) Capital injection by minority interests - - 18 18 Dividends paid - - (85) (85) Net income 950 - 67 1,017 Income and expense recognized directly in equity 46 (16) (5) 25 Change in scope of consolidation and other changes (1) - 1 - As of March 31, 2006 12,525 680 478 18,102 January - March 2005 Number of Subscribed Capital Retained subscribed capital surplus earnings shares outstanding Million EUR As of January 1, 2005 540,440,410 1,384 3,028 11,923 Share buy-back and cancellation of own shares including own shares intended to be cancelled (5,091,410) (13) 15 (276) Capital injection by minority interests - - - - Dividends paid - - - - Net income - - - 861 Income and expense recognized directly in equity - - - 24 Change in scope of consolidation and other changes - - - 1 As of March 31, 2005 535,349,000 1,371 3,043 12,533 January - March 2005 Other com- Minority Stock- prehensive interests holders' income equity Million EUR As of January 1, 2005 (60) 328 16,603 Share buy-back and cancellation of own shares including own shares intended to be cancelled - - (274) Capital injection by minority interests - 10 10 Dividends paid - (19) (19) Net income - 61 922 Income and expense recognized directly in equity 71 11 106 Change in scope of consolidation and other changes - 22 23 As of March 31, 2005 11 413 17,371 Segment Reporting Segments Sales EBITDA Million EUR 1st Quarter 2006 2005 in % 2006 2005 in % Chemicals 2,239 1,822 22.9 452 544 (16.9) Plastics 3,091 2,800 10.4 456 380 20.0 Performance Products 2,147 1,908 12.5 329 304 8.2 Agricultural Products & Nutrition 1,376 1,354 1.6 373 382 (2.4) Agricultural Products 928 959 (3.2) 333 332 0.3 Fine Chemicals 448 395 13.4 40 50 (20.0) Oil & Gas 2,985 1,840 62.2 953 590 61.5 Other(1) 677 359 88.6 (162) (181) 10.5 12,515 10,083 24.1 2,401 2,019 18.9 Segments Income from operations Income from before special items operations (EBIT) Million EUR 1st Quarter 2006 2005 in % 2006 2005 in % Chemicals 317 426 (25.6) 317 426 (25.6) Plastics 332 269 23.4 331 268 23.5 Performance Products 248 225 10.2 247 224 10.3 Agricultural Products & Nutrition 224 296 (24.3) 290 304 (4.6) Agricultural Products 213 276 (22.8) 280 284 (1.4) Fine Chemicals 11 20 (45.0) 10 20 (50.0) Oil & Gas 848 484 75.2 848 484 75.2 Other(1) (104) (137) 24.1 (184) (207) 11.1 1,865 1,563 19.3 1,849 1,499 23.3 Segments Research and Assets(b) development expenses 1st Quarter -------------------- ------------------------------------------------ Chemicals 31 27 14.8 6,198 5,416 14.4 Plastics 41 34 20.6 6,894 6,530 5.6 Performance Products 60 50 20.0 4,936 4,711 4.8 Agricultural Products & Nutrition 97 86 12.8 6,854 6,700 2.3 Agricultural Products 80 68 17.6 5,365 5,402 (0.7) Fine Chemicals 17 18 (5.6) 1,489 1,298 14.7 Oil & Gas - 1 - 4,798 4,017 19.4 Other(1) 76 52 46.2 8,360 10,046 (16.8) 305 250 22.0 38,040 37,420 1.7 Segments Additions to Amortization and fixed assets(c) depreciation(c) 1st Quarter ------------------------------------------------------------------ Chemicals 162 88 84.1 135 118 14.4 Plastics 218 82 165.9 125 112 11.6 Performance Products 81 54 50.0 82 80 2.5 Agricultural Products & Nutrition 37 31 19.4 83 78 6.4 Agricultural Products 15 12 25.0 53 48 10.4 Fine Chemicals 22 19 15.8 30 30 0.0 Oil & Gas 75 94 (20.2) 105 106 (0.9) Other(1) 27 13 107.7 22 26 (15.4) 600 362 65.7 552 520 6.2 (a) 'Other' includes the fertilizers business and other businesses as well as expenses, income and assets not allocated to the segments. This item also includes foreign currency results from financial indebtedness that are not allocated to the segments, hedging of forecasted sales as well as from currency positions that are macro-hedged {EUR55 million in the first quarter (first quarter 2005 EUR(45) million)}. (b) The assets of 'Other' includes the assets of the fertilizers business and other businesses as well as assets that are not allocated to the segments (financial assets, liquid funds, financial receivables, deferred taxes; first quarter 2006: EUR6,685 million, first quarter 2005: EUR8,388 million). (c) Tangible and intangible fixed assets Forward-looking statements This report contains forward-looking statements under the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict and are based upon assumptions as to future events that may not prove to be accurate. Many factors could cause the actual results, performance or achievements of BASF to be materially different from those that may be expressed or implied by such statements. Such factors include those discussed in BASF's Form 20-F filed with the Securities and Exchange Commission. {The Annual Report on Form 20-F is available on the Internet at corporate.basf.com/20-f-report.} We do not assume any obligation to update the forward-looking statements contained in this report. - Important Dates -- Contacts - August 2, 2006 -- Corporate Media Relations: Interim Report Second Quarter Michael Grabicki 2006 Phone: +49 621 60-99938 Fax: +49 621 60-92693 - November 2, 2006 Interim Report Third Quarter -- Investor Relations: 2006 Magdalena Moll Phone: +49 621 60-48230 Fax: +49 621 60-22500 -- General inquires: Phone: +49 621 60-0 - Annual Meetings Fax: +49 621 60-42525 - May 4, 2006, Mannheim -- Internet: corporate.basf.com - April 26, 2007, Mannheim -- BASF Aktiengesellschaft 67056 Ludwigshafen Germany You can find this and other publications from BASF on the Internet at corporate.basf.com. You can also order the reports -- by telephone: +49 621 60-91827 -- by fax: +49 621 60-20162 -- on the Internet: corporate.basf.com/mediaorders CONTACT: BASF Michael Grabicki, +49 621 60-99938 Fax: +49 621 60-92693 [email protected]

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Bass Oil set to drill 'a low-risk and very high-impact well' with Bunian 5

Bass Oil Ltd (ASX:BAS) managing director Tino Guglielmo updates Proactive Investors on increased reserves, increasing production, and expanded criteria in the search for additional Indonesian oil assets. Guglielmo says, "The Buyian 5 well is going to be at least as good as the Bunyan 3...

on 11/3/19

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