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BASF A.G. - 3rd Quarter Results

BASF Michael Grabicki, +49 621 60-99938 Fax: +49 621 60-92693 [email protected] Acquisitions Strengthen Profitable Growth -- Increase in sales (up 28 percent) and EBIT before special items (up 22 percent) -- Acquired businesses meet expectations: Synergies of EUR 290 million per year -- Additional global program to increase efficiency: Cost savings of EUR 300 million per year by 2008 -- Outlook for 2006 confirmed: Sales to increase significantly to more than EUR 50 billion and higher EBIT before special items compared with the previous year's strong level BASF - The Chemical Company (NYSE:BF) (FWB:BAS) (LSE:BFA) is continuing on its profitable growth path: The third quarter of 2006 is the thirteenth quarter in succession in which the company has posted an increase in sales. "We have achieved a new earnings level, and in doing so, three things are important: First, our chemicals businesses were again very successful in the third quarter. Second, the newly acquired businesses have met our expectations. And third, we are continuously improving our sites and business processes," said Dr. Jurgen Hambrecht, Chairman of the Board of Executive Directors of BASF Aktien-gesellschaft: The third quarter of 2006 followed on seamlessly from BASF's strong performance in the first half of the year. Demand for its high-value products and system solutions continued unabated. In its chemicals businesses, BASF again recorded higher sales volumes compared with last year's already high level. Despite high and very volatile raw material prices, the company was largely successful in passing on necessary price increases to the market. Sales climbed 28 percent to EUR 13.3 billion. The newly acquired businesses - Engelhard, Degussa Construction Chemicals and Johnson Polymer - contributed EUR 1.8 billion to this dynamic growth. Income from operations (EBIT) before special items rose by 22 percent to EUR 1.6 billion in the third quarter. Cumulative sales in the first nine months of 2006 increased by 23 percent to more than EUR 38 billion. EBIT before special items increased by 19 percent to EUR 5.4 billion in the same period. BASF confirms optimistic outlook for full-year 2006 In the fourth quarter, BASF expects demand for its products to remain strong. Despite an easing in the oil price, raw material costs remain high and margins are therefore still under pressure. Geopolitical tensions and regional conflicts are continuing to result in highly volatile raw material prices, which are now also impacting agricultural products. For full-year 2006, Hambrecht continues to expect sales to increase to more than EUR 50 billion and higher EBIT before special items compared with the previous year's strong level. Strong sales growth in Chemicals segment In the Chemicals segment, BASF posted significantly higher sales (plus 67 percent) and EBIT before special items (plus 66 percent). This was primarily due to the acquired catalysts business, as well as to higher sales volumes and price increases. BASF also recorded double-digit growth in sales (plus 10 percent) and EBIT before special items (plus 18 percent) in its Plastics segment, in particular due to the improvement in earnings in the Performance Polymers division. Sales (plus 41 percent) and EBIT before special items (plus 11 percent) also rose by double-digit amounts in the Performance Products segment. Above all, a decline in margins for acrylic monomers negatively impacted earnings. Due to the contribution of the acquired businesses, EBIT before special items was nevertheless higher than in the third quarter of 2005. Sales (minus 3 percent) and EBIT before special items (minus 100 percent) declined in the Agricultural Products & Nutrition segment. Lower sales prices and currency effects, in particular in Brazil, had a negative impact on the Agricultural Products business. Due to persistently high crude oil prices, sales (plus 30 percent) and EBIT before special items (plus 26 percent) in the Oil & Gas segment were again significantly higher than in the same period of 2005. EUR 290 million in synergies through integration of new businesses The number one topic at BASF in 2006 has been acquisitions, and the integration of the new businesses is proceeding as planned. BASF expects the combination of the acquired businesses with its existing ones to result in synergies amounting to EUR 290 million per year by 2010. Of this amount, the largest share of EUR 160 million is anticipated to come from Engelhard; Degussa's construction chemicals and Johnson Polymer are likely to contribute EUR 100 million and EUR 30 million, respectively. These synergies will primarily result from the elimination of overlapping functions and processes, for example in administration, marketing and sales, and logistics. There will be an associated reduction of approximately 1,000 positions worldwide: Approximately 800 are related to former Engelhard activities and approximately 200 to Degussa's construction chemicals business. BASF estimates that one-time integration costs of about EUR 200 million are needed to achieve the annual synergy effects of EUR 290 million. Greater efficiency to reduce costs by EUR 300 million per year BASF has established a new global program to further increase efficiency and streamline business processes. The program includes a number of site and plant restructuring measures. The company expects it to result in total savings of EUR 300 million per year by 2008. Implementation of the program will result in total one-time expenditures of EUR 160 million as well as write-downs of EUR 270 million, with the larger part being recorded in 2006. The measures are associated with a reduction of 1,000 positions, primarily in Asia and North America. The large majority of these reductions have already been communicated in the regions. 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. BASF has over 95,000 employees and posted sales of more than EUR 42.7 billion in 2005. 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. Note to editors: With immediate effect, BASF offers you the opportunity to obtain all of its press releases free of charge via an RSS feed. This allows you to receive up-to-date news about BASF directly on your computer, quickly and simply. Further information can be found at www.basf.de/rss/e. Here, you can also subscribe to the RSS feed and select your topics of interest. On November 2, 2006, you can also obtain further information from the Internet at the following addresses: Interim report (from 7:30 a.m. CET) corporate.basf.com/interimreport (English) corporate.basf.com/zwischenbericht (German) Press release (from 7:30 a.m. CET) www.corporate.basf.com/pressrelease (English) corporate.basf.com/pressemitteilungen (German) Live transmission of telephone conference (from 10:30 a.m. CET) corporate.basf.com/pcon (English) corporate.basf.com/pk (German) Speech Dr. Jurgen Hambrecht/Dr. Kurt Bock - print version (from 10:30 a.m. CET) corporate.basf.com/pressconference (English) corporate.basf.com/pressekonferenz (German) Photos (from 7:30 a.m. CET) corporate.basf.com/photos (English) corporate.basf.com/fotos (German) Information about BASF shares www.basf.com/share (English) www.basf.com/aktie (German) Live transmission Analyst Conference (from 3:00 p.m. CEST) www.basf.com/share (English) www.basf.com/aktie (German) This release 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 2005 on Form 20-F will be available on the Internet at corporate.basf.com as of March 14, 2006. We do not assume any obligation to update the forward-looking statements contained in this release. Third-Quarter Results 2006 July - September 2006 -- Sales up 28% -- EBIT before special items up 22% -- Integration of acquisitions proceeding as planned -- Outlook confirmed: Sales to increase to more than EUR 50 billion and higher EBIT before special items compared with the previous year's strong level Overview 3rd Quarter Million EUR Change 2006 2005 in % Sales 13,299 10,361 28.4 Income from operations before interest, taxes, depreciation and amortization (EBITDA) 2,368 1,843 28.5 Income from operations (EBIT) before special items 1,615 1,327 21.7 Income from operations (EBIT) 1,438 1,262 13.9 Financial result (133) 176 . Income before taxes and minority interests 1,305 1,438 (9.2) Net income 613 808 (24.1) Earnings per share (EUR) 1.22 1.55 (21.3) EBIT before special items in percent of sales 12.1 12.8 - Cash provided by operating activities 1,355 1,929 (29.8) Additions to fixed assets(a) 3,922 408 . Excluding acquisitions 601 408 47.3 Amortization and depreciation(a) 930 581 60.1 Segment assets (end of period)(b) 38,994 28,106 38.7 Personnel costs 1,614 1,419 13.7 Number of employees (end of period) 95,518 80,695 18.4 Overview January - September Million EUR Change 2006 2005 in % Sales 38,136 31,025 22.9 Income from operations before interest, taxes, depreciation and amortization (EBITDA) 7,143 6,011 18.8 Income from operations (EBIT) before special items 5,390 4,547 18.5 Income from operations (EBIT) 5,084 4,348 16.9 Financial result (89) 139 . Income before taxes and minority interests 4,995 4,487 11.3 Net income 2,483 2,447 1.5 Earnings per share (EUR) 4.91 4.63 6.0 EBIT before special items in percent of sales 14.1 14.7 - Cash provided by operating activities 3,563 4,010 (11.1) Additions to fixed assets(a) 9,479 1,620 485.1 Excluding acquisitions 1,565 1,252 25.0 Amortization and depreciation(a) 2,059 1,663 23.8 Segment assets (end of period)(b) - - - Personnel costs 4,436 4,089 8.5 Number of employees (end of period) - - - (a) Tangible and intangible fixed assets (including acquisitions) (b) Tangible and intangible fixed assets, inventories and business-related receivables Contents 1 BASF Group Business Review 3 BASF Shares 4 Significant Events and Outlook 5 Chemicals 6 Plastics 7 Performance Products 8 Agricultural Products & Nutrition 9 Oil & Gas 10 Regions 11 Overview of Other Topics 12 Consolidated Statements of Income 13 Consolidated Balance Sheets 14 Consolidated Statements of Cash Flows 15 Consolidated Statements of Recognized Income and Expense 16 Consolidated Statements of Stockholders' Equity 17 Segment Reporting 19 Explanations to the Interim Financial Statements News from our innovation centers Probiotic bacteria fight caries and body odor BASF develops innovative oral hygiene and personal care products The concept of using probiotic bacteria to provide natural defense against harmful organisms allows BASF Future Business GmbH to develop innovative products for oral hygiene and personal care. Suitable lactic acid bacteria (lactobacilli) are selected from the extensive collection of cultures from the project partner Organo-Balance GmbH, Berlin, and jointly developed to market. Promising applications for probiotic bacteria include fighting cariogenic microorganisms, preventing body odor and regenerating the skin's protective microbial flora. Oral hygiene The bacterium responsible for caries, Streptococcus mutans, persistently colonizes the surface of the teeth, where it converts sugar into aggressive acids that break down the enamel. To substantially diminish the risk of caries, it is important to significantly reduce the concentration of harmful bacteria in the oral cavity. With Lactobacillus anti-caries, scientists have found an agent that effectively binds to the caries-causing bacteria and prevents them from adhering to the surface of the teeth. The effectiveness has been demonstrated. BASF Future Business expects the first oral hygiene products containing probiotic lactobacilli to appear in 2007. Personal care Our skin is naturally populated with different types of microorganisms. Ideally, those with beneficial health effects - known as commensal microorganisms - dominate over likewise occurring harmful bacteria. If this system gets out of balance, the appearance, health and well-being of the skin are adversely affected. This may occur, for example, after washing or showering. In such cases Lactobacillus stimulans can promote the rapid regeneration of the skin's protective microbial flora. By secreting growth-promoting substances, it stimulates colonization by its healthful relatives. Because of their major cosmetic relevance, these microorganisms are interesting candidates for use in lotions and creams and in medicinal ointments and plasters. A third application for beneficial lactobacilli is the prevention of body odor. Bacteria are responsible for creating odor, for example in the armpits or on the feet. Lactobacillus pes-odoris, which specifically inhibits the odor-producing bacteria of the feet, and Lactobacillus ala-odoris, which prevents the formation of odor in the armpits, provide a remedy for these situations. Both lactobacillus cultures can improve the effectiveness of deodorants, foot sprays and lotions. Depending on the application, desired effect and formulation required for a cosmetic product, probiotic lactic acid bacteria can be used in either a live encapsulated or in a live or inactivated freeze-dried form. In the exclusive cooperative enterprise between the two project partners, OrganoBalance conducts screening for suitable microorganism cultures in its own collection of microbial strains as well as the fundamental scientific research, while BASF Future Business is responsible for fermentation of the strains and their further processing, customer-specific formulation and marketing. The first oral hygiene products containing probiotic bacteria are expected to reach the market in 2007. News from our innovation centers Chemistry keeps the black gold gushing Drilling and production island in the Mittelplate oil field in the North Sea. A consortium consisting of RWE Dea and Wintershall has been producing crude oil from the largest German deposit since 1987. Oilfield chemicals from BASF help increase production efficiency With its full range of oilfield chemicals BASF plays a major role in the extraction of crude oil. From the first test drill onward, BASF products accompany the entire production process and allow deposits to be accessed much more intensively. Only thanks to these products is it possible to achieve oil extraction levels of 50% and more. The drill head has to be cooled and lubricated, the cuttings dispersed and flushed upwards: The technical process is optimized by drilling fluid additives circulating in the closed system. Other chemicals prevent the surrounding rock formations from swelling, which could otherwise trap the drill or even damage it. But drilling alone is not the whole story. The boreholes, which are up to 11 kilometers in length, have to be stabilized with a circular jacket of cement dow to the oil-bearing stratum. BASF additives are used to control the flowability and setting time of the cement, allowing it to be ideally adjusted to the prevailing conditions. And even when the borehole has finally advanced as far as the deposit, the engineers are often called upon to provide ingenious solutions. Oil doesn't just lie around in underground lakes waiting to be pumped to the surface. Rather, it is enclosed in porous rock formations that only grudgingly yield up their riches. To promote the flow of oil, the tiny pores in the stone are widened with the aid of chemicals. To keep the pores permeable despite the rock formations bearing down on them, special support materials called proppants are required. These include special sands produced by the U.S. manufacturer Engelhard, which was recently acquired by BASF. This specially coated sand consists of perfectly spherical particles, allowing it to be pumped underground like a liquid, while creating a maximum of hollow spaces as permeable pathways through which the oil can flow. The inherent pressure within the crude oil containing formation rapidly decreases, but is usually maintained by forcing water into the deposit through injection boreholes sunk at the edge of the oilfield. The water then mixes with the crude oil - a water content of 95% is completely normal. These resulting water and oil mixtures are very difficult to separate and this is where customized demulsifiers from BASF come in to play. These substances are special surfactants which greatly accelerate the natural separation of oil and water. And this is the case even though as little as 10 to 15 grams are sufficient to separate 1 metric ton of an oil-water mixture. BASF acts as a raw materials supplier for internationally operating service companies whose experts formulate the required finished product for the major oil companies directly at the borehole. The market for oilfield chemicals has now reached a volume of around $4 billion with an estimated annual growth of 5%. By acquiring the U.S. company Engelhard Corporation and the construction chemicals business of Degussa in 2006, BASF has greatly increased its expertise in the areas of special sands, cement additives and polymers for drilling fluids and can offer its customers an even broader product portfolio. BASF Group Business Review -- Sales up 28% -- EBIT before special items up 22% -- Net income declines due to special items Sales Compared with the same period of 2005, third-quarter sales increased by 28% to EUR 13.3 billion. Sales growth was driven in particular by the acquisition of Engelhard, Degussa's construction chemicals business and Johnson Polymer, as well as by higher sales prices in the chemicals businesses and in the Oil & Gas segment. The following factors led to the increase in sales: Factors influencing sales in comparison with previous year % of sales 3rd Quarter Jan.-Sept. Volumes 3 6 Prices 9 9 Acquisitions/divestitures 18 7 Currencies (2) 1 28 23 The Chemicals segment achieved the highest sales growth as a result of the Catalysts division arising from the acquisition of Engelhard Corporation. The other divisions in this segment also increased volumes and prices. Higher sales prices in the Styrenics division and a rise in sales volumes in the Polyurethanes division were the main reasons for the rise in sales in the Plastics segment. In the Performance Products segment, sales were driven by the acquisitions that closed on July 1, 2006. The sales growth was due primarily to the activities acquired from Degussa in the new Construction Chemicals division and the Johnson Polymer business that has been assigned to the Performance Chemicals division. Third-quarter sales by segment Million EUR Chemicals 2006 3,442 67% 2005 2,063 Plastics 2006 3,256 10% 2005 2,957 Performance 2006 2,959 41% Products 2005 2,106 Agricultural 2006 973 (3)% Products & Nutrition 2005 1,008 Oil & Gas 2006 2,116 30% 2005 1,630 Sales declined in the Agricultural Products & Nutrition segment as a result of lower sales prices and currency effects. In the Agricultural Products division, divestitures to optimize the portfolio also led to a decline in sales. The Fine Chemicals division posted higher sales as a result of the pharma custom synthesis business of the Orgamol Group that was acquired in the fourth quarter of 2005, as well as the personal care products acquired from Engelhard Corporation. In the Oil & Gas segment, sales increased significantly due to higher prices. 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) (113) (70) (177) (65) (109) - Financial result - - - - - 222 - (16) (64) (113) (70) (177) 157 (109) Earnings Compared with the same period of 2005, income from operations (EBIT) before special items rose by 22% to EUR 1,615 million. In the Chemicals segment, we significantly increased EBIT before special items due to higher sales volumes and better margins in the Petrochemicals and Intermediates divisions. Earnings in the Plastics segment improved above all due to higher margins in the Performance Polymers division. In the Performance Products segment, the earnings growth was due primarily to the new Construction Chemicals division. In the Functional Polymers division, margins remained under pressure from higher raw material costs. The Agricultural Products division was severely affected by the extremely difficult situation of customers in Brazil. The loss posted due to the seasonal nature of the business increased. In the Fine Chemicals division, earnings rose due to a reduction in fixed costs and the contribution of Engelhard's personal care products. As a result of higher sales prices, the Oil & Gas segment recorded significantly higher earnings in both the exploration and production and the natural gas trading business sectors. Compared with the same period of 2005, third-quarter EBIT rose by 14% to EUR 1,438 million. Special items in income from operations were related to the mothballing of the THF plant in Caojing, China; the use of step-up on inventory associated with the acquisition of Degussa's construction chemicals business; and restructuring measures in the Fine Chemicals division. Use was made of a provision established in the first half of 2006 for restructuring measures. Third-quarter EBIT before special items Million EUR Chemicals 2006 444 66% 2005 268 Plastics 2006 316 18% 2005 267 Performance 2006 239 11% Products 2005 216 Agricultural 2006 (46)(100)% Products & Nutrition 2005 (23) Oil & Gas 2006 749 26% 2005 594 The financial result declined by EUR 309 million to EUR (133) million. Interest expenses rose in connection with financing for the acquisitions. The third quarter of 2005 also included a special gain from the sale of our stake in Basell. Income before taxes and minority interests declined by 9% to EUR 1,305 million as a result of the significantly lower financial result. The tax rate was 49% compared with 43% in the third quarter of 2005, which contained the tax-free gain from the Basell sale. The greater share of EBIT from the Oil & Gas segment also contributed to the rise in the tax rate. In the third quarter of 2006, foreign taxes for oil production that are noncompensable with German corporate income tax amounted to EUR 349 million compared with EUR 317 million in the same period of the previous year. Net income declined by 24% to EUR 613 million. Earnings per share were EUR 1.22 compared with EUR 1.55 in the third quarter of 2005. BASF Shares -- BASF shares flat in third quarter -- Share buybacks for over EUR 800 million in the first nine months BASF shares 3rd Quarter Jan.- Sept. 2006 2006 Performance (with dividends reinvested) BASF (%) 0.6 0.4 DAX 30 (%) 5.7 11.0 EURO STOXX 50 (%) 7.2 11.4 Share prices and trade (XETRA trading) Average (EUR ) 62.73 63.42 High (EUR ) 64.93 69.49 Low (EUR ) 60.69 58.97 Close (EUR ) 63.15 63.15 Average daily trade in shares (million shares) 2.65 3.01 BASF share performance At the end of the third quarter, BASF shares were trading at EUR 63.15 or at almost the same price as at the end of the second quarter. As a result, BASF shares did not perform as well as the DAX 30 and EURO STOXX 50 indices, which gained 5.7% and 7.2%, respectively, in the third quarter. In the first nine months of 2006, BASF shares rose in value by 0.4% (assuming reinvestment of the dividend). The performance of the DAX 30 and EURO STOXX 50 indices in the same period was 11.0% and 11.4%, respectively. At the beginning of September, BASF shares were included in the Dow Jones Sustainability World Index (DJSI World) for the sixth year in succession. The DJSI World is the most important sustainability index and represents the top 10% of the largest 2,500 companies in the Dow Jones Global Index in terms of sustainability in their respective industries. Share buybacks In the third quarter of 2006, BASF Aktiengesellschaft bought back 2.03 million shares on the stock exchange for a total of EUR 127.4 million or an average price of EUR 62.76 per share. Up to the end of the third quarter, BASF had bought back 7.46 million shares for a total of EUR 469.5 million under the EUR 500 million share buyback program that was announced in February 2006. As a result, BASF bought back shares for more than EUR 800 million in the first nine months of 2006. We also plan to buy back shares in the future. Up-to-date information on BASF shares is available on the Internet at www.basf.de/share. You can reach BASF's investor relations team by calling +49 621 60-48230 or by sending an e-mail to [email protected] Significant Events and Outlook Significant events On August 18, BASF, Huntsman and their Chinese partners - Shanghai Hua Yi (Group Company), Sinopec Shanghai Gao Qiao Petrochemical Corporation and Shanghai Chloro-Alkali Chemical Co. Ltd. - held an opening ceremony at the Shanghai Chemical Industry Park to celebrate the startup of their integrated isocyanates complex. The project involved a total capital expenditure of $1 billion. The complex has a capacity of 240,000 metric tons per year of crude MDI (diphenylmethane diisocyanate) and 160,000 metric tons of TDI (toluene diisocyanate) per year and will serve the rapidly growing market for polyurethanes in China. On September 14, BASF and SINOPEC signed an agreement on the preparation of a technical and commercial feasibility study for the planned expansion of their joint Verbund site in Nanjing, China. The agreement advances BASF's and SINOPEC's earlier commitment, announced on July 10, 2006, to invest well above $500 million expanding their production facilities at their 50-50 joint venture in Nanjing - BASF-YPC Co. Ltd. The companies plan to expand the capacity of the steam cracker and invest in additional downstream plants to further strengthen synergies at the site. The new activities are expected to come on stream in 2009. At BASF's site in Antwerp, Belgium, BASF, Dow and Solvay held a groundbreaking ceremony on September 27 for the first world-scale plant for the production of propylene oxide (PO) on the basis of hydrogen peroxide (HP). The HPPO plant will employ a new technology that has been developed jointly by BASF and Dow. The key advantages of the technology are lower costs and significantly better environmental performance. Outlook We continue to expect the following conditions in 2006: -- An average oil price (Brent) of about $65/barrel -- An average euro/dollar exchange rate of $1.25 per euro -- Global economic growth and chemical production growth (excluding pharmaceuticals) of more than 3% Major risk factors are the political situation in unstable areas and resulting volatility in prices for raw materials. In the fourth quarter, we expect demand for our products to remain strong. Despite a relaxation in the oil price, raw material costs remain high and continue to put pressure on margins. For the full year, we continue to expect sales to increase to more than EUR 50 billion and higher EBIT before special items compared with the previous year's strong level. According to our current estimates, we expect the acquisitions of Engelhard, Degussa's construction chemicals business and Johnson Polymer to result in synergies of EUR 290 million per year by 2010. The integration costs, excluding the use of step-up on inventories, are anticipated to amount to approximately EUR 200 million. Of this amount, EUR 50 million has already been recorded in EBIT as of September 30, 2006. We want to apply the experience gained from the -Ludwigshafen Site Project and our North American restructuring programs in a new global program to increase efficiency. Measures under this new program include the closure of production of high-impact polystyrene in Tarragona, Spain, as well as the restructuring of the butanediol value chain and the Fine Chemicals division. We expect total savings of EUR 300 million per year by 2008. The program will be associated with total one-time expenditures of EUR 160 million as well as write-downs of EUR 270 million. Of the total amount, approximately 60% has already been recorded in EBIT as of -September 30, 2006. Chemicals -- Strong increase in sales and EBIT before special items -- Integration of Engelhard proceeds as planned -- EBIT negatively impacted by THF plant in Caojing, China Overview Chemicals 3rd Quarter Million EUR Change 2006 2005 in % Sales 3,442 2,063 67 Thereof Inorganics 271 251 8 Catalysts 999 19 . Petrochemicals 1,607 1,309 23 Intermediates 565 484 17 EBITDA 599 408 47 EBIT before special items 444 268 66 EBIT before special items in percent of sales 12.9 13.0 - EBIT 229 259 (12) Assets 10,703 5,993 79 Overview Chemicals January - September Million EUR Change 2006 2005 in % Sales 8,124 5,892 38 Thereof Inorganics 841 690 22 Catalysts 1,279 55 . Petrochemicals 4,305 3,672 17 Intermediates 1,699 1,475 15 EBITDA 1,460 1,429 2 EBIT before special items 1,112 1,109 0 EBIT before special items in percent of sales 13.7 18.8 - EBIT 809 1,030 (21) Assets - - - Third-quarter sales in the Chemicals segment rose significantly (volumes 11%, prices 11%, portfolio 48%, currencies -3%). The sales growth was primarily due to the acquired catalysts business in addition to higher sales volumes and price increases. Although earnings before special items were significantly higher, EBIT was negatively impacted by high special charges in the Intermediates division and was lower than in the same period of the previous year. Inorganics We increased both sales volumes and our average sales prices. Sales of inorganic basic chemicals and specialties grew particularly strongly. The division's earnings declined because margins for methane-based derivatives such as ammonia and methanol were particularly negatively affected by significantly higher natural gas prices. Catalysts Sales in the new Catalysts division rose in particular due to the business with catalysts for diesel engines in Europe and the global business with process catalysts. The earnings trend is meeting the expectations we placed on the acquisition of Engelhard. The integration is proceeding as planned. Petrochemicals Sales increased significantly thanks to strong global demand for cracker products. The Asian and European plasticizers and solvents businesses also contributed to the sales growth. In the third quarter, we largely succeeded in passing on high raw material costs to our customers. Earnings increased significantly compared with the third quarter of 2005, which was negatively impacted by the effects of the hurricanes in the United States. Intermediates Demand for intermediates continued to develop well in all regions. In view of strong global demand, we were able to increase prices to counteract high raw material costs. Earnings before special items increased compared with the same period of the previous year, in which capacity utilization rates were lower. The restructuring of the butanediol value chain and the associated mothballing of the THF plant in Caojing, China, is part of our program to increase efficiency; the measure reduced EBIT by EUR 200 million. Plastics -- Further increase in sales and earnings -- Higher earnings contribution from Performance Polymers -- Groundbreaking for first world-scale HPPO plant Overview Plastics 3rd Quarter Million EUR Change 2006 2005 in % Sales 3,256 2,957 10 Thereof Styrenics 1,297 1,135 14 Performance Polymers 720 743 (3) Polyurethanes 1,239 1,079 15 EBITDA 438 382 15 EBIT before special items 316 267 18 EBIT before special items in percent of sales 9.7 9.0 - EBIT 306 260 18 Assets 6,992 6,440 9 Overview Plastics January - September Million EUR Change 2006 2005 in % Sales 9,515 8,681 10 Thereof Styrenics 3,680 3,399 8 Performance Polymers 2,208 2,164 2 Polyurethanes 3,627 3,118 16 EBITDA 1,336 1,162 15 EBIT before special items 963 810 19 EBIT before special items in percent of sales 10.1 9.3 - EBIT 951 808 18 Assets - - - In the Plastics segment, sales increased as a result of higher volumes and prices (volumes 6%, prices 5%, portfolio 1%, currencies -2%). Earnings were significantly higher than in the third quarter of 2005. This was due above all to considerably improved earnings in the Performance Polymers division. Styrenics Higher volumes and, in particular, higher sales prices led to an increase in sales. Business was especially strong in Europe, where we benefited from robust demand in the construction sector. Earnings were higher than in the same period of 2005. Margins, however, remain unsatisfactory. To increase capacity utilization rates, we are ceasing production of high-impact polystyrene in Tarragona, Spain. In the future, European customers will be supplied from plants in Antwerp, Belgium, and Ludwigshafen, Germany. This closure is part of our program to increase efficiency. Performance Polymers We succeeded in increasing prices further. Sales were slightly lower than in the same period of the previous year because volumes for some products declined. Earnings, however, were significantly higher. We have strengthened higher value engineering plastics in our portfolio as a result of smaller acquisitions in 2005 and the startup of the PBT plant in Kuantan, Malaysia, which is now operating at a high capacity utilization rate. Polyurethanes We greatly increased volumes and sales due to strong worldwide demand. Increases in raw material costs could only be passed on to the market to a limited extent. Third-quarter earnings were at the previous year's high level. In September, we started work on a new plant to produce propylene oxide (PO) on the basis of hydrogen peroxide (HP) at our site in Antwerp, Belgium. Dow and Solvay are our partners in the construction and subsequent operation of this first world-scale HPPO plant. Performance Products -- Sales and earnings increase significantly due to acquisitions -- Margin pressure for acrylic monomers -- Integration of Degussa Construction Chemicals and Johnson Polymer proceeds as planned Overview Performance Products 3rd Quarter Million EUR Change 2006 2005 in % Sales 2,959 2,106 41 Thereof Construction Chemicals 582 - - Coatings 578 561 3 Functional Polymers 899 823 9 Performance Chemicals 900 722 25 EBITDA 341 299 14 EBIT before special items 239 216 11 EBIT before special items in percent of sales 8.1 10.3 - EBIT 180 209 (14) Assets 10,175 4,864 109 Overview Performance Products January - September Million EUR Change 2006 2005 in % Sales 7,303 6,112 19 Thereof Construction Chemicals 582 - - Coatings 1,745 1,588 10 Functional Polymers 2,539 2,374 7 Performance Chemicals 2,437 2,150 13 EBITDA 968 969 0 EBIT before special items 9.5 713 (2) EBIT before special items in percent of sales 10.5 11.7 - EBIT 636 715 (11) Assets - - - Sales in the Performance Products segment increased in particular due to our acquisitions (volumes 3%, prices 2%, portfolio 38%, currencies -2%). We continued to implement our value-over-volume strategy. Even so, the decline in margins for acrylic monomers adversely affected earnings before special items. Due to the contribution of the acquired businesses, earnings before special items were nevertheless higher than in the third quarter of 2005. EBIT was impacted by the use of stepup on inventories from the acquired businesses. Compared with the same period of the previous year, the segment's assets rose by EUR 5.3 billion, primarily as a result of the acquisitions. Construction Chemicals The new operating division contains Degussa's construction chemicals business, which was acquired effective July 1, 2006. Sales developed well, in particular in Admixture Systems in Europe and the Middle East and in Construction Systems in Europe and North America. The earnings trend satisfies our expectations. The integration is proceeding according to plan. Coatings Sales increased slightly compared with the third quarter of 2005. Although sales of automotive (OEM) coatings were lower as a result of a decline in automotive production in Europe and North America, worldwide sales of refinish coatings and sales of industrial coatings in Europe and South America developed well. Third-quarter earnings were at the previous year's level. Functional Polymers Sales increased compared with the third quarter of 2005 due to higher volumes and the paper coatings business acquired from Engelhard. Higher raw material costs combined with unchanged sales prices and a high level of available capacities - in particular for acrylic monomers - led to a decline in margins. It was not possible to increase prices for paper dispersions due to our customers' restructuring activities. Earnings were therefore significantly lower than in the strong third quarter of 2005. Performance Chemicals Sales and earnings increased in the Performance Chemicals division as a result of both price increases and higher volumes. Both the acquisition of the Johnson Polymer business with water-based resins for the coatings and printing inks industries and Engelhard's pigment business contributed to the increase in sales and earnings. Agricultural Products & Nutrition -- Persistently difficult market environment for agricultural products -- Fine Chemicals division steps up measures to increase efficiency Overview Agricultural Products 3rd Quarter Million EUR Change 2006 2005 in % Sales 509 576 (12) EBITDA (3) 43 . EBIT before special items (54) (24) . EBIT before special items in percent of sales (10.6) (4.2) - EBIT (55) (12) . Assets 4,559 5,164 (12) Overview Agricultural Products January - September Million EUR Change 2006 2005 in % Sales 2,361 2,578 (8) EBITDA 547 726 (25) EBIT before special items 324 547 (41) EBIT before special items in percent of sales 13.7 21.2 - EBIT 389 563 (31) Assets - - - Third-quarter sales in the Agricultural Products division were significantly lower than in the same period of 2006 (volumes -1%, prices/currencies -6%, portfolio -5%). Sales fell due to the divestiture of large parts of the generics business in North America and as a result of a decline in prices. The start to the season in South America did not result in a turnaround compared with the first half of the year. The appreciation of the real lowered the export opportunities and hence the liquidity of many farmers in Brazil. There was therefore weaker demand for our highvalue fungicides, in particular for soybeans. Disregarding the effects of divestitures, the fall business in Europe and North America was stronger than in 2005. The loss posted due to the seasonal nature of the business increased. On the basis of business to date, we expect a decline in sales and earnings for full-year 2006 compared with 2005. Overview Fine Chemicals 3rd Quarter Million EUR Change 2006 2005 in % Sales 464 432 7 EBITDA 12 34 (65) EBIT before special items 8 1 .7 EBIT before special items in percent of sales 1.7 0.2 - EBIT (26) 1 . Assets 1,705 1,289 32 Overview Fine Chemicals January - September Million EUR Change 2006 2005 in % Sales 1,377 1,249 10 EBITDA 148 96 54 EBIT before special items 37 28 32 EBIT before special items in percent of sales 2.7 2.2 - EBIT 47 2 . Assets - - - Sales in the Fine Chemicals division increased as a result of both the pharma custom synthesis business acquired in October 2005 and Engelhard's personal care business (volumes 2%, prices/currencies -6%, portfolio 11%). We again increased volumes of aroma chemicals. Lysine prices remained under pressure and we significantly reduced sales volumes. EBIT before special items was higher than in the same period of 2005. This was due to the reduction in fixed costs as well as the contribution of the acquired personal care activities. With effect from November 1, 2006, we have combined our human nutrition and animal nutrition businesses in a single Nutrition unit to optimally utilize synergies and serve the market more efficiently. In the third quarter, we initiated further measures to reduce costs and increase efficiency and flexibility at our site in Minden, Germany. These measures negatively impacted EBIT. Oil & Gas -- Further increase in sales and earnings -- Baltic Sea pipeline: Priority project to secure European gas sup Overview Oil & Gas 3rd Quarter Million EUR Change 2006 2005 in % Sales 2,116 1,630 30 Thereof Exploration and production 1,120 904 24 Natural gas trading 996 726 37 EBITDA 894 697 28 Thereof Exploration and production 785 644 22 Natural gas trading 109 53 106 EBIT before special items 749 594 26 Thereof Exploration and production 672 572 17 Natural gas trading 77 22 250 EBIT before special items in percent of sales 35.4 36.4 - Thereof Exploration and production 60.0 63.3 - Natural gas trading 7.7 3.0 - EBIT 754 594 27 Thereof Exploration and production 677 572 18 Natural gas trading 77 22 250 Assets 4,860 4,356 12 Thereof Exploration and production 2,253 2,005 12 Natural gas trading 2,607 2,351 11 Overview Oil & Gas January - September Million EUR Change 2006 2005 in % Sales 7,582 5,120 48 Thereof Exploration and production 3,420 2,459 39 Natural gas trading 4,162 2,661 56 EBITDA 2,820 1,973 43 Thereof Exploration and production 2,327 1,712 36 Natural gas trading 493 261 89 EBIT before special items 2,465 1,657 49 Thereof Exploration and production 2,076 1,491 39 Natural gas trading 389 166 134 EBIT before special items in percent of sales 32.5 32.4 - Thereof Exploration and production 60.7 60.6 - Natural gas trading 9.3 6.2 - EBIT 2,470 1,657 49 Thereof Exploration and production 2,081 1,491 40 Natural gas trading 389 166 134 Assets - - - Thereof Exploration and production - - - Natural gas trading - - - Sales and earnings were again significantly higher than in the same period of 2005 as a result of persistently high crude oil prices (prices/currencies 30%). Volumes in the exploration and production business sector declined slightly. Sales and earnings nevertheless increased compared with the third quarter of the previous year due to persistently high crude oil prices. Compared with the third quarter of 2005, the average price of Brent crude rose by approximately $8/barrel to just under $70/barrel. In euro terms, this corresponds to an increase of EUR 4/barrel to approximately EUR 55/barrel. Sales volumes in the natural gas trading business sector were slightly higher than in the third quarter of 2005. Sales prices improved, resulting in a significant increase in sales and earnings. WINGAS continued to expand its pipeline system and put a new compressor station into operation. This capital expenditure has increased the transport capacity of the WEDAL gas pipeline by around 30%. At the end of August 2006, the final shareholder agreement for the planned gas pipeline through the Baltic Sea was signed by Gazprom, Wintershall and E.ON Ruhrgas. The EU Commission recently classified the planned pipeline as a priority project for securing Europe's future energy supplies. Regions -- Europe: Significant increase in sales and earnings -- North America: Sales boosted by acquisitions, significantly stronger earnings -- Asia: High earnings contribution from petrochemicals Regions Sales Sales (location of company) (location of customer) Change Change Million EUR 2006 2005 in % 2006 2005 in % 3rd Quarter Europe 7,426 5,802 28 6,922 5,436 27 Thereof Germany 5,297 3,927 35 2,374 2,097 13 North America (NAFTA) 3,206 2,291 40 3,263 2,266 44 Asia Pacific 1,987 1,645 21 2,145 1,820 18 South America, Africa, Middle East 680 623 9 969 839 15 13,299 10,361 28 13,299 10,361 28 January - September Europe 22,711 18,082 26 21,388 17,116 25 Thereof Germany 16,598 12,378 34 7,785 6,351 23 North America (NAFTA) 8,563 7,141 20 8,618 7,097 21 Asia Pacific 5,342 4,395 22 5,793 4,746 22 South America, Africa, Middle East 1,520 1,407 8 2,337 2,066 13 38,136 31,025 23 38,136 31,025 23 Regions EBIT before special items Change Million EUR 2006 2005 in % 3rd Quarter Europe 1,242 1,015 22 Thereof Germany 985 703 40 North America (NAFTA) 175 110 59 Asia Pacific 125 113 11 South America, Africa, Middle East 73 89 (18) 1,615 1,327 22 January - September Europe 4,175 3,348 25 Thereof Germany 3,125 2,217 41 North America (NAFTA) 736 732 1 Asia Pacific 365 295 24 South America, Africa, Middle East 114 172 (34) 5,390 4,547 19 Sales by location of company in Europe climbed 28% in the third quarter of 2006. EBIT before special items rose by 22% to EUR 1,242 million. The sales and earnings growth was due in particular to the Oil & Gas segment and the new Catalysts and Construction Chemicals divisions. Companies in North America increased sales in dollar and euro terms by 45% and 40%, respectively. Sales were boosted in particular by the newly acquired businesses. The Petrochemicals and Polyurethanes divisions posted significantly higher sales and earnings thanks to higher volumes. At EUR 175 million, EBIT before special items was 59% higher than in the same period of 2005. Sales by location of company in Asia Pacific increased by 24% in local currency terms and by 21% in euro terms. EBIT before special items rose 11% to EUR 125 million. In particular, the Petrochemicals division significantly increased margins and earnings at the Verbund sites in Nanjing, China, and Kuantan, Malaysia, due to higher sales prices for cracker products and oxo alcohols. In South America, Africa, Middle East, third-quarter sales by location of company increased by 11% in local currencies and by 9% in euros. EBIT before special items was negatively impacted by the difficult market environment for the Agricultural Products division in Brazil. Overview of Other Topics Research and development Innovative products, processes and business models play a major part in ensuring the sustainability of BASF's economic success. Hexamoll(R) DINCH, an innovative plasticizer, was recently honored with the ICIS Publications Innovation Award 2006 as best product innovation. BASF's developers specially designed Hexamoll DINCH for use in sensitive applications such as toys and medical devices. The product has been approved by the European Food Safety Authority, and production capacity is now being expanded. In September, we opened a Joint Innovation Lab for organic electronics at our Ludwigshafen site. At this facility, BASF employees will work together with industrial and academic partners. At present, the researchers are concentrating on organic light-emitting diodes (OLEDs) and organic photovoltaics. OLEDs are flat, thin light-emitting devices made from organic semiconductive materials. As lighting panels, they open up completely new possibilities in lighting technology. Employees Compared with the end of 2005, the number of BASF Group employees rose by 14,573 to 95,518 as of September 30, 2006. The increase was due entirely to acquisitions, in particular of Engelhard and Degussa's construction chemicals business. As a result of the acquisitions, the number of employees increased in all regions. At 58.3%, the largest increase was in North America. Employee numbers rose by 30.6% in Asia Pacific; by 16.4% in South America, Africa, Middle East; and by 9% in Europe. Employees by region June 30, 2006 Dec. 31, 2005 Europe 61,705 56,614 North America (NAFTA) 15,559 9,826 Asia Pacific 12,626 9,669 South America, Africa, Middle East 5,628 4,836 95,518 80,945 As a result of the acquisitions, personnel costs rose by 8.5% to EUR 4,436 million in the first nine months of 2006. Consolidated Statements of Income 3rd Quarter Million EUR Change 2006 2005 in % Sales 13,299 10,361 28.4 Cost of sales 9,613 7,277 32.1 Gross profit on sales 3,686 3,084 19.5 Selling expenses 1,325 1,083 22.3 General and administrative expenses 238 194 22.7 Research and development expenses 327 268 22.0 Other operating income 169 96 76.0 Other operating expenses 527 373 41.3 Income from operations 1,438 1,262 13.9 (Expenses)/income from financial assets 19 219 (91.3) Interest result (141) (40) . Other financial result (11) (3) . Financial result (133) 176 . Income before taxes and minority interests 1,305 1,438 (9.2) Income taxes 645 622 3.7 Net income before minority interests 660 816 (19.1) Minority interests 47 8 487.5 Net income 613 808 (24.1) Earnings per share (EUR ) Number of shares, in million (weighted) 504 521 (3.3) Dilutive effect - - - Earnings per share (EUR ) Undiluted 1.22 1.55 (21.3) Diluted 1.22 1.55 (21.3) January - September Million EUR Change 2006 2005 in % Sales 38,136 31,025 22.9 Cost of sales 37,159 21,205 28.1 Gross profit on sales 10,977 9,820 11.8 Selling expenses 3,571 3,172 12.6 General and administrative expenses 631 551 14.5 Research and development expenses 910 774 17.6 Other operating income 587 278 111.2 Other operating expenses 1,368 1,253 9.2 Income from operations 5,084 4,348 16.9 (Expenses)/income from financial assets 64 332 (80.7) Interest result (244) (131) (86.3) Other financial result 91 (62) . Financial result (89) 139 . Income before taxes and minority interests 4,995 4,487 11.3 Income taxes 2,364 1,941 21.8 Net income before minority interests 2,631 2,546 3.3 Minority interests 148 99 49.5 Net income 2,483 2,447 1.5 Earnings per share (EUR ) Number of shares, in million (weighted) 506 528 (4.2) Dilutive effect - - - Earnings per share (EUR ) Undiluted 4,91 4,63 6.0 Diluted 4,91 4,63 6.0 Consolidated Balance Sheets Million EUR Sept. Sept. Change Dec. Change 30, 30, in % 31, in % 2006 2005 2005 Long-term assets Intangible assets 9,626 3,710 159.5 3,720 158.8 Property, plant and equipment 15,133 13,659 10.8 13,987 8.2 Investments accounted for using the equity method 269 241 11.6 244 10.2 Other financial assets 1,247 936 33.2 813 53.4 Deferred taxes 1,087 1,312 (17.1) 1,255 (13.4) Other long-term assets 616 334 84.4 524 17.6 27,978 20,192 38.6 20,543 36.2 Short-term assets Inventories 6,594 5,354 23.2 5,430 21.4 Accounts receivable, trade 7,833 6,306 24.2 7,020 11.6 Other receivables and miscellaneous short-term assets 2,463 1,804 36.5 1,586 55.3 Liquid funds 872 4,311 (79.8) 1,091 (20.1) 17,762 17,775 (0.1) 15,127 17.4 Total assets 45,740 37,967 25.5 35,670 28.2 Million EUR Sept. Sept. Change Dec. Change 30, 30, in % 31, in % 2006 2005 2005 Stockholders' equity Subscribed capital 1,284 1,330 (3.5) 1,317 (2.5) Capital surplus 3,135 3,084 1.7 3,100 1.1 Retained earnings 12,669 11,922 6.3 11,928 6.2 Other comprehensive income 354 572 (38.1) 696 (49.1) Minority interests 520 444 17.1 482 7.9 17,962 17,352 3.5 17,523 2.5 Long-term liabilities Provisions for pensions and similar obligations 1,514 4,685 (67.7) 1,547 (2.1) Other provisions 2,892 2,455 17.8 2,791 3.6 Deferred taxes 1,960 829 136.4 699 180.4 Financial indebtedness 5,906 3,561 65.9 3,682 60.4 Other long-term liabilities 967 954 1.4 1,043 (7.3) 13,239 12,484 5.3 9,762 34.7 Short-term liabilities Accounts payable, trade 3,591 2,332 54.0 2,777 29.3 Provisions 2,710 2,896 (6.4) 2,763 (1.9) Tax liabilities 832 969 (14.1) 887 (6.2) Financial indebtedness 5,058 318 . 259 . Other short-term liabilities 2,348 1,616 45.3 1,699 38.2 14,539 8,131 79.9 8,385 74.5 Total stockholders' equity and liabilities 45,740 37,967 20.5 35,670 28.2 Consolidated Statements of Cash Flows January - September Million EUR 2006 2005 Net income 2,483 2,447 Depreciation and amortization of long-term assets 2,059 1,663 Changes in net working capital (755) 199 Miscellaneous items (224) (299) Cash provided by operating activities 3,563 4,010 Payments related to tangible and intangible assets (1,580) (1,285) Acquisitions/divestitures (6,978) 1,017 Financial investments and other items 84 109 Cash using in investing activities (8,474) (159) Proceeds from capital increases/repayments (790) (1,115) Changes in financial liabilities 6,699 230 Dividends (1,141) (945) Cash provided by/used in financing activities 4,768 (1,830) Net changes in cash and cash equivalents (143) 2,021 Cash and cash equivalents as of beginning of year and other changes 902 2,125 Cash and cash equivalents 759 4,146 Marketable securities 113 165 Liquid funds 872 4,311 At EUR 3,563 million, cash provided by operating activities was EUR 447 million lower than in the third quarter of 2005. This change was primarily due to the payment of liabilities of the acquired companies. Cash used in investing activities amounted to EUR 8,474 million. At EUR 1,580 million, payments related to tangible and intangible assets were higher than in the same period of the previous year but were significantly below amortization and depreciation. Acquisitions, in particular of Engelhard, Degussa's construction chemicals business and Johnson Polymer, resulted in a cash outflow of EUR 7 billion, whereas the third quarter of 2005 contained the proceeds from the sale of our stake in Basell. In cash provided by financing activities, share buybacks and dividend payments led to a cash outflow of EUR 1,949 million. In the first three quarters of 2006, we bought back 12.8 million shares for EUR 808 million or an average of EUR 63.00 per share. At EUR 10,964 million, financial indebtedness was EUR 7,023 million higher than on December 31, 2005. To finance the acquisitions, we issued bonds with a total volume of EUR 2 billion in the second quarter as well as commercial paper equivalent to EUR 4.5 billion. As of September 30, 2006, net debt was EUR 10,092 million and the equity ratio was 39.3%. Consolidated Statements of Recognized Income and Expense Income and expense items January - September Million EUR 2006 2005 Net income before minority interests 2,631 2,546 Fair value changes in available-for-sale securities (4) 32 Cash-flow hedges (20) 17 Change in foreign currency translation adjustments (332) 595 Actuarial gains/losses from pensions and other obligations 109 (673) Deferred taxes (24) 244 Minority interests (13) 27 Total income and expenses recognized in equity (284) 242 Total income and expense for the period 2,347 2,788 Thereof BASF 2,212 2,662 Thereof minority interests 135 126 Development of income Retained and expense recognized earnings directly in equity Actuarial gains/losses Million EUR As of January 1, 2006 (894) Additions 109 Releases - Deferred taxes (38) As of June 30, 2006 (823) As of January 1, 2005 (234) Additions - Releases (673) Deferred taxes 256 As of June 30, 2005 (651) Development of Other comprehensive income Total income income and and expense expense recognized recognized directly in equity directly in equity Foreign Fair value Cash- Total of currency changes in flow other translation available- hedges compre- adjustments for hensive sale income securities Million EUR As of January 1, 2006 475 258 (37) 696 (198) Additions - 30 (26) 4 113 Releases (332) (34) 6 (360) (360) Deferred taxes 6 1 7 (14) (24) As of June 30, 2006 149 255 (50) 354 (469) As of January 1, 2005 (226) 193 (27) (60) (294) Additions 595 43 14 652 (21) Releases - (11) 3 (8) (8) Deferred taxes (11) 5 (6) (12) 244 As of June 30, 2005 358 230 (16) 572 (79) Consolidated Statements of Stockholders' Equity January - September 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 (12,829,000) (33) 35 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 September 30, 2006 501,550,000 1,284 3,135 January - September 2005 Number of Subscribed Capital subscribed capital surplus shares outstanding Million EUR As of January 1, 2005 540,440,410 1,384 3,028 Share buy-back and cancellation of own shares including own shares intended to be cancelled (20,902,229) (54) 56 Capital distribution to minority interests - - - Dividends paid - - - Net income - - - Income and expense recognized directly in equity - - - Conditional capital: Exercise of conversion rights by former Wintershall sharejolders 819 - - Change in scope of consolidation and other changes - - - As of September 30, 2005 519,539,000 1,330 3,084 January - September 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 (810) - - (808) Capital injection by minority interests - - 18 18 Dividends paid (1,014) - (127) (1,141) Net income 2,483 - 148 2,631 Income and expense recognized directly in equity 71 (342) (13) 284 Change in scope of consolidation and other changes 11 - 12 23 As of September 30, 2006 12,669 354 520 17,962 January - September 2005 Retained Other com- Minority Stock- earnings prehensive interests holders' income equity Million EUR As of January 1, 2005 11,923 (60) 328 16,603 Share buy-back and cancellation of own shares including own shares intended to be cancelled (1,126) - - (1,124) Capital distribution to minority interests - - 10 10 Dividends paid (904) - (41) (945) Net income 2,447 - 99 2,546 Income and expense recognized directly in equity (417) 632 27 242 Conditional capital: Exercise of conversion rights by former Wintershall sharejolders - - - - Change in scope of consolidation and other changes (1) - 21 20 As of September 30, 2005 11,922 572 444 17,352 Segment Reporting 3rd Quarter Sales EBITDA Million EUR 2006 2005 in % 2006 2005 in % Chemicals 3,442 2,063 66.8 599 408 46.8 Plastics 3,256 2,957 10.1 438 382 14.7 Performance Products 2,959 2,106 40.5 341 299 14.0 Agricultural Products & Nutrition 973 1,008 (3.5) 9 77 (88.3) Thereof Agricultural Products 509 576 (11.6) (3) 43 . Fine Chemicals 464 432 7.4 12 34 (64.7) Oil & Gas 2,116 1,630 29.8 894 697 28.3 Other(a) 553 597 (7.4) 87 (20) . 13,299 10,361 28.4 2,368 1,843 28.5 3rd Quarter Income from operations Income from (EBIT) before special operations (EBIT) items Million EUR 2006 2005 in % 2006 2005 in % Chemicals 444 268 65.7 229 259 (11.6) Plastics 316 267 18.4 306 260 17.7 Performance Products 239 216 10.6 180 209 (13.9) Agricultural Products & Nutrition (46) (23) (100.0) (81) (11) . Thereof Agricultural Products (54) (24) . (55) (12) . Fine Chemicals 8 1 . (26) 1 . Oil & Gas 749 594 26.1 754 594 26.9 Other(a) (87) 5 . 50 (49) . 1.615 1.327 21.7 1,438 1,262 13.9 3rd Quarter Research and Assets(b) development expenses Chemicals 46 34 35.3 10,703 5,993 78.6 Plastics 38 33 15.2 6,992 6,440 8.6 Performance Products 84 55 52.7 10,175 4,864 109.2 Agricultural Products & Nutrition 103 98 5.1 6,264 6,453 (2.9) Thereof Agricultural Products 82 80 2.5 4,559 5,164 (11.7) Fine Chemicals 21 18 16.7 1,705 1,289 32.3 Oil & Gas - - - 4,860 4,356 11.6 Other(a) 56 48 16.7 6,746 9,861 (31.6) 327 268 22.0 45,740 37,967 20.5 3rd Quarter Additions to Amortization and fixed assets(c) depreciation(c) Chemicals 155 77 101.3 370 149 148.3 Plastics 103 113 (8.8) 132 122 8.2 Performance Products 3,422 61 . 161 90 78.9 Agricultural Products & Nutrition 20 33 (39.4) 90 88 2.3 Thereof Agricultural Products 1 22 (95.5) 52 55 (5.5) Fine Chemicals 19 11 72.7 38 33 15.2 Oil & Gas 178 106 67.9 140 103 35.9 Other(a) 44 18 144.4 37 29 27.6 3,922 408 . 930 581 60.1 Segment Reporting January - September Sales EBITDA Million EUR 2006 2005 in % 2006 2005 in % Chemicals 8,124 5,892 37.9 1,460 1,429 2.2 Plastics 9,515 8,681 9.6 1,336 1,162 15.0 Performance Products 7,303 6,112 19.5 968 969 (0.1) Agricultural Products & Nutrition 3,738 3,827 (2.3) 695 822 (15.5) Thereof Agricultural Products 2,361 2,578 (8.4) 547 726 (24.7) Fine Chemicals 1,377 1,249 10.2 148 96 54.2 Oil & Gas 7,582 5,120 48.1 2,820 1,973 42.9 Other(a) 1,874 1,393 34.5 (136) (344) 60.5 38,136 31,025 22.9 7,143 6,011 18.8 January - September Income from Income from operations (EBIT) operations (EBIT) before special items Million EUR 2006 2005 in % 2006 2005 in % Chemicals 1,112 1,109 0.3 809 1,030 (21.5) Plastics 963 810 18.9 951 808 17.7 Performance Products 696 713 (2.4) 636 715 (11.0) Agricultural Products & Nutrition 361 575 (37.2) 436 565 (22.8) Thereof Agricultural Products 324 547 (40.8) 389 563 (30.9) Fine Chemicals 37 28 32.1 47 2 . Oil & Gas 2,465 1,657 48.8 2,470 1,657 49.1 Other(a) (207) (317) 34.7 (218) (427) 48.9 5,390 4,547 18.5 5,084 4,348 16.9 January - September Research and Assets(b) development expenses Chemicals 112 89 25.8 10,703 5,993 78.6 Plastics 111 102 8.8 6,992 6,440 8.6 Performance Products 203 152 33.6 10,175 4,864 109.2 Agricultural Products & Nutrition 299 276 8.3 6,264 6,453 (2.9) Thereof Agricultural Products 245 223 9.9 4,559 5,164 (11.7) Fine Chemicals 54 53 1.9 1,705 1,289 32.3 Oil & Gas - 1 - 4,860 4,356 11.6 Other(a) 185 154 20.1 6,746 9,861 (31.6) 910 774 17.6 45,740 37,967 20.5 January - September Additions to Amortization and fixed assets(c) depreciation(c) Chemicals 3,550 534 . 651 399 63.2 Plastics 437 315 38.7 385 354 8.8 Performance Products 4,424 249 . 332 254 30.7 Agricultural Products & Nutrition 339 97 249.5 259 257 0.8 Thereof Agricultural Products 53 48 10.4 158 163 (3.1) Fine Chemicals 286 49 483.7 101 94 7.4 Oil & Gas 368 356 3.4 350 316 10.8 Other(a) 361 69 423.2 82 83 (1.2) 9,479 1,620 485.1 2,059 1,663 23.8 (a) "Other" contains the fertilizers business and other businesses as well as expenses, income and assets not allocated to the segments. This item also contains foreign currency results from financial indebtedness that are not allocated to the segments, from hedging of forecasted sales as well as from currency positions that are macrohedged (EUR (30) million in the third quarter (2005: EUR 19 million) and EUR 63 million in the first nine months (2005: EUR (120) 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; September 30, 2006: EUR 4,827 million, September 30, 2005: EUR 8,194 million). (c) Intangible and tangible fixed assets Explanations to the Interim Financial Statements 1. Basis of presentation The Consolidated Financial Statements of BASF Group for the year ended December 31, 2005 were prepared according to the International Financial Reporting Standards (IFRS) valid as of the balance sheet date. The current interim financial statements were prepared using the same accounting policies. BASF's Financial Report for fiscal 2005 is available on the Internet at corporate.basf.com/financial-report. The previous year's figures have been adjusted as follows in accordance with the changes made effective December 31, 2005: 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 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. Compared with the end of 2005, the assumptions used to determine expenses for pension benefit were changed as follows with effect from September 30, 2006: The interest rate was increased from 4.25% to 4.50% and the expected pension increase from 1.50% to 1.75%. The interim financial statements have not been audited. 2. Scope of consolidation The Consolidated Financial Statements include BASF Aktiengesellschaft, the parent company, as well as all material subsidiaries on a fully consolidated basis. Material jointly operated companies are proportionally consolidated. The number of fully and proportionally consolidated companies has developed as follo 2006 2005 As of January 1 180 160 Thereof proportionally consolidated 15 12 First-time consolidations 167 28 Thereof proportionally consolidated - 4 Thereof changes in the consolidation method 1 (1) Deconsolidations 4 8 Thereof proportionally consolidated - - As of September 30/December 31 343 180 Thereof proportionally consolidated 15 15 First-time consolidations since January 1, 2006 comprised: -- A total of 79 companies associated with the acquisition of Engelhard Corporation; -- A total of 70 companies from the acquisition of Degussa's construction chemicals business; -- A total of three companies from the acquisition of Johnson Polymer; -- The biotechnology company CropDesign N.V., Belgium, acquired in May; -- BASF Services Europe GmbH, Berlin, and BASF Asia Pacific Service Centre Sdn. Bhd., Malaysia, which, respectively, perform finance and human resources services for BASF companies in Europe and Asia; and -- Twelve previously unconsolidated companies with headquarters in Germany, Spain, Australia, China, Malta and Switzerland due to their increased importance. Four companies have been deconsolidated since the beginning of 2006 due to their decreased significance or merger with other BASF companies. Companies accounted for using the equity method were as follows: Sept. 30, Dec. 31, 2005 2006 Affiliated companies 10 11 Joint ventures 2 2 Other associated companies 3 3 15 16 3. Acquisitions/divestitures Effect of acquisitions and divestitures on BASF Group assets September 30, 2006 Million EUR % Long-term assets 8,344 70.4 Thereof goodwill 2,879 24.3 Intangible assets 3,249 27.4 Property, plant and equipment 1,759 14.8 Short-term assets 3,504 29.6 Thereof Inventories 962 8.1 Accounts receivable, trade 1,043 8.8 Other receivables and miscellaneous short-term assets 1,357 11.5 Assets 11,848 100.0 The provisional purchase price allocations for Engelhard Corporation, Degussa's construction chemicals business and Johnson Polymer are included in the above table under the respective balance sheet items. -- Important Dates -- Contacts -- February 22, 2007 -- Corporate Media Relations: Annual Results 2006 Michael Grabicki -- April 26, 2007 Phone: +49 621 60-99938 Interim Report First Quarter Fax: +49 621 60-92693 2007 and Annual Meeting -- Investor Relations: -- August 1, 2007 Magdalena Moll Interim Report Second Phone: +49 621 60-48230 Quarter 2007 Fax: +49 621 60-22500 -- October 30, 2007 -- General inquiries -- Interim Report Third Quarter Phone: +49 621 60-0 2007 Fax: +49 621 60-42525 -- Internet: corporate.basf.com -- BASF Aktiengesellschaft 67056 Ludwigshafen Germany 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. You can find this and other publications from BASF on the Internet at www.corporate.basf.com. You can also order the reports -- by telephone: +49 621 60-91827 -- by fax: +49 621 60-20162 -- on the Internet: www.corporate.basf.com/mediaorders

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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