BASF Presents First-Quarter Results at 55th Annual Meeting.Powerful start to 2007 * Further increase in sales (plus 17 percent) and EBIT EBIT See: Earnings Before Interest and Taxes EBIT See earnings before interest and taxes (EBIT). before special items (plus 13 percent) * Earnings jump (plus 98 percent) in Chemicals segment * Positive outlook for 2007 confirmed: Significant increase in sales and EBIT before special items to at least match the previous year's strong level LUDWIGSHAFEN, Germany -- BASF BASF Bar Association of San Francisco (since 1872; San Francisco, California) BASF Badische Anilin und Soda Fabrik (German chemical products company) BASF Builders Association of South Florida (NYSE NYSE See: New York Stock Exchange :BF)(FWB (Fixed Wireless Broadband) See fixed wireless. :BAS BAS abbr. 1. Bachelor of Agricultural Science 2. Bachelor of Applied Science )(LSE LSE - Language Sensitive Editor :BFA BFA abbr. Bachelor of Fine Arts BFA abbr BFA, B.F.A Bachelor of Fine Arts; first degree in Fine Arts. ) remained on its successful course in the first quarter of 2007 and looked confidently to the coming months following a powerful start to the year. "BASF's team is working constantly to bring the company even closer to its customers and make BASF even more innovative and cyclically resilient See resiliency. ," said BASF's Chairman Dr. Jurgen Hambrecht during the presentation of the company's results for 2006 and the first quarter of 2007 at the 55th Annual Meeting in Mannheim on April 26, 2007. Compared with the same period of 2006, sales in the first quarter rose 17 percent to EU14.6 billion. This was due primarily to the acquisitions in 2006, as well as higher volumes and sales prices in the chemical businesses. Disregarding dis·re·gard tr.v. dis·re·gard·ed, dis·re·gard·ing, dis·re·gards 1. To pay no attention or heed to; ignore. 2. To treat without proper respect or attentiveness. n. currency effects, in particular from the depreciation of the U.S. dollar, sales increased by 21 percent. Compared with the very strong first quarter of 2006, BASF increased income from operations (EBIT) before special items by 13 percent to EU2.1 billion. Earnings in the Chemicals segment almost doubled, and were significantly higher in all divisions. Margins improved, in particular for petrochemicals. The Catalysts division also made a major contribution to the earnings growth. In the Plastics segment, earnings declined slightly because the Polyurethanes polyurethanes (pŏl'ēy  r`əthānz), group of plastics that may be either thermosetting or thermoplastic. Polyurethane can be made into both flexible and rigid foams. division did not quite match
the strong performance of the previous year's first quarter.
Earnings improved in the Styrenics business due to the expansion of the
business and improved efficiency. Earnings in the Performance Products
segment were lower than in the first quarter of 2006 as a result of
persistent pressure on margins for functional polymers Functional polymers are polymers with advanced optic and/or electronic properties. Advantages of functional polymers are low cost, ease of processing and a range of attractive mechanical characteristics for functional organic molecules. . Both divisions
in the Agricultural Products & Nutrition segment posted higher
earnings. The earnings situation in Brazil improved in the Agricultural
Products division. In the Fine Chemicals division, earnings increased as
a result of the restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). measures initiated in 2006 and the
contribution from the acquired personal care business. In the Oil &
Gas segment, a rise in the contribution from the natural gas trading
business kept earnings at the previous year's strong level despite
the decline in oil prices.
Compared with the same period of 2006, first-quarter EBIT after special items rose by 9 percent to approximately EU2 billion. Special items in income from operations were related to integration costs for the acquisitions made in 2006 and expenses for restructuring. The financial result declined by EU115 million to minus EU94 million. Interest expenses rose in connection with financing for the acquisitions made in mid-2006. The previous year's first quarter contained proceeds from the sale of securities. Income before taxes and minority interests rose by 2 percent to EU1.9 billion. The tax rate declined from 46 percent to 40 percent as a result of the acquisitions and the lower contribution to the BASF Group's earnings from the Oil & Gas segment. In the first quarter, foreign taxes for oil production that are noncompensable with German corporate income tax amounted to EU258 million compared with EU272 million in the same period of 2006. Net income rose by 9 percent to more than EU1 billion. Earnings per share were EU2.08 compared with EU1.87 in the first quarter of 2006. Positive outlook confirmed for full-year 2007 Hambrecht remained confident with regard to the ongoing year, expecting global economic growth of 3.2 percent. In 2007, the company anticipates an average oil price (Brent) of about $55/barrel and an average euro/dollar exchange rate of $1.30 per euro. Major risk factors are seen as being associated with an escalation es·ca·late v. es·ca·lat·ed, es·ca·lat·ing, es·ca·lates v.tr. To increase, enlarge, or intensify: escalated the hostilities in the Persian Gulf. v.intr. in geopolitical ge·o·pol·i·tics n. (used with a sing. verb) 1. The study of the relationship among politics and geography, demography, and economics, especially with respect to the foreign policy of a nation. 2. a. trouble spots. "The good start in the first quarter confirms our positive outlook for 2007. We expect significantly higher sales based on the acquisitions made in 2006 and organic growth. We expect to at least match the previous year's strong EBIT before special items despite our assumption of a lower average oil price in 2007," said Hambrecht. Double-digit sales growth in all regions Sales by location of company in Europe increased by 14 percent in the first quarter of 2007. EBIT before special items rose by EU171 million to EU1.6 billion. This was due both to the acquired businesses and organic growth in the chemical businesses. Earnings in the Oil & Gas segment matched the previous year's level despite the decline in oil prices. As a result of the acquisitions, companies in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. increased sales by 23 percent in dollar terms and by 15 percent in euro terms. EBIT before special items declined by EU33 million to EU265 million. Earnings were reduced by the shutdown shut·down n. A cessation of operations or activity, as at a factory. shutdown Noun the closing of a factory, shop, or other business Verb shut down of the TDI TDI - Transport Driver Interface plant in Geismar, Louisiana, as well as by weaker demand from the automotive industry The automotive industry is the industry involved in the design, development, manufacture, marketing, and sale of motor vehicles. In 2006, more than 69 million motor vehicles, including cars and commercial vehicles were produced worldwide. . This could not be fully offset by the acquired businesses. In Asia Pacific, BASF increased sales by 37 percent in local currency terms and by 28 percent in euro terms. EBIT before special items climbed EU92 million to EU207 million. The sales and earnings growth was due to the acquisitions as well as strong demand for products from the Chemicals and Plastics segments. The measures to increase efficiency that were initiated in 2006 also contributed to the rise in earnings. In South America South America, fourth largest continent (1991 est. pop. 299,150,000), c.6,880,000 sq mi (17,819,000 sq km), the southern of the two continents of the Western Hemisphere. , Africa, Middle East, first-quarter sales by location of company rose by 49 percent in local currency terms and by 41 percent in euro terms. EBIT before special items increased by EU21 million to EU53 million. The activities of the Catalysts division in South Africa South Africa, Afrikaans Suid-Afrika, officially Republic of South Africa, republic (2005 est. pop. 44,344,000), 471,442 sq mi (1,221,037 sq km), S Africa. and the Agricultural Products division in South America contributed to the expansion of the business. Higher prices for agricultural produce improved the economic situation for farmers in Brazil, thus increasing demand for crop protection products. 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 high-value products and intelligent system solutions help its customers to be more successful. BASF develops new technologies and uses them to meet the challenges of the future and open up additional market opportunities. It combines economic success with environmental protection and social responsibility, thus contributing to a better future. BASF has approximately 95,000 employees and posted sales of EU52.6 billion in 2006. BASF shares are traded on the stock exchanges in Frankfurt (BAS), London (BFA), New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of (BF) and Zurich (AN). Further information on BASF is available on the Internet at www.basf.com. On April 26, 2007, 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-Telephone Conference for Analysts (from 8:30 a.m. CEST) corporate.basf.com/share (English) corporate.basf.com/aktie (German) Live Transmission - Speech Dr. Jurgen Hambrecht (from 10:00 a.m. CEST) corporate.basf.com/shareholdermeeting (English) corporate.basf.com/hauptversammlung (German) Speech Dr. Jurgen Hambrecht - print version (from 11:30 a.m. CEST) corporate.basf.com/pcon (English) corporate.basf.com/pk (German) Photos (from 7:30 a.m. CEST) corporate.basf.com/photos (English) corporate.basf.com/fotos (German) Photos from the Annual Meeting (from 1:00 p.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) Forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This release contains forward-looking statements under the U.S. Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These statements are based on current expectations, estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict and are based upon assumptions as to future events that may not prove to be accurate. Many factors could cause the actual results, performance or achievements of BASF to be materially different from those that may be expressed or implied by such statements. Such factors include those discussed in BASF's Form 20-F filed with the Securities and Exchange Commission. We do not assume any obligation to update the forward-looking statements contained in this release. Powerful Start to 2007 First-Quarter Results 2007 January - March 2007 Published on April 26, 2007 BASF Group First-Quarter Results 2007 [TABLE OMITTED] 1 Tangible and intangible fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → 2 Tangible and intangible fixed assets, inventories and business-related receivables [TABLE OMITTED] News from Our Innovation Centers Environmental technology for diesel motors: Exhaust specialists from BASF Catalysts are developing diesel oxidation oxidation /ox·i·da·tion/ (ok?si-da´shun) the act of oxidizing or state of being oxidized.ox·idative ox·i·da·tion n. 1. The combination of a substance with oxygen. 2. catalysts and catalyzed soot soot, black or dull brown deposit of fine powder resulting from incomplete combustion of fuel of high carbon content, e.g., coal, wood, and oil. It consists chiefly of amorphous carbon and tarry substances that cause it to adhere to surfaces. filters. Innovative solutions are also able to neutralize neutralize to render neutral. nitrogen oxides Noun 1. nitrogen oxide - any of several oxides of nitrogen formed by the action of nitric acid on oxidizable materials; present in car exhausts pollutant - waste matter that contaminates the water or air or soil in exhaust fumes exhaust fumes fumes given off by vehicles; contain some carbon monoxide, the amount varying with the efficiency of combustion in the particular engine. In most engines the use of exhaust fumes for euthanasia is not recommended because it operates partly on the carbon dioxide . The number of diesel vehicles in Europe is continuing to rise, and their lower fuel consumption is easier on their drivers' wallets. Diesel exhaust fumes, however, are a real challenge for the specialists at BASF Catalysts: Diesel engines run at lower temperatures. Their main problem is that this results in uncombusted fuel and soot particles in the exhaust, which would rapidly clog up normal catalysts. To solve this problem BASF's experts have developed special diesel oxidation catalysts and catalyzed soot filters. These initially trap the soot and then burn it using a combination of catalysts and engine controls to govern the oxygen content and temperature. The terms "soot filter" or "particle filter This article is about the statistical method. For the pollution control device, see diesel particulate filter. Particle filters, also known as Sequential Monte Carlo methods (SMC), are sophisticated model estimation techniques based on simulation. " therefore fall a long way short of describing the innovative technology involved. Diesel engines also require a "lean" air-fuel mixture that results in a high content of residual oxygen in the exhaust gas Exhaust gas is flue gas which occurs as a result of the combustion of fuels such as natural gas, gasoline/petrol, diesel, fuel oil or coal. It is discharged into the atmosphere through an exhaust pipe or flue gas stack. . This considerably impedes the conversion of nitrogen oxides to nitrogen. But here too, the experts at BASF Catalysts are busy developing technical solutions: The nitrogen oxides are initially stored chemically while the engine is operated in the "lean" mode. When the storage capacity is exhausted, the engine automatically switches to a "rich" air-fuel mixture for a short time, allowing the catalyst to convert the stored nitrogen oxides into nitrogen and oxygen. When the storage catalyst is regenerated, the engine can switch back to the lean mixture, which both enhances engine performance and the combustion of soot particles. Vehicle catalysts are tested under long-term conditions at BASF's catalyst testing facility in Union, New Jersey. Complex electronic sensors are used to record all exhaust gas values during testing. The experts at BASF Catalysts are among the leading innovators innovators people who will try new things. early innovators important figures in the farming or client community because they are the leaders in the introduction of new techniques and management systems. in the development and optimization optimization Field of applied mathematics whose principles and methods are used to solve quantitative problems in disciplines including physics, biology, engineering, and economics. of catalysts for gasoline gasoline or petrol, light, volatile mixture of hydrocarbons for use in the internal-combustion engine and as an organic solvent, obtained primarily by fractional distillation and "cracking" of petroleum, but also obtained from natural gas, by and diesel engines. [TABLE OMITTED] An umbrella for fungi Fungi (fŭn`jī), kingdom of heterotrophic single-celled, multinucleated, or multicellular organisms, including yeasts, molds, and mushrooms. The organisms live as parasites, symbionts, or saprobes (see saprophyte). : Hydrophobin, a protein obtained from fungi that causes water droplets to roll off, is stimulating the imagination of biotechnologists and developers at BASF. If produced on a large scale, it could be used in the future to make car windscreens and other surfaces water repellent re·pel·lent adj. Capable of driving off or repelling. n. A substance used to drive off or keep away insects. repellent able to repel or drive off; also, an agent that repels. Refers usually to insect repellent. . Hydrophobin has a broad range of physical and chemical properties that result in numerous possible applications: It could be used, for example, as a bonding agent between a variety of materials, or as an emulsifier emulsifier /emul·si·fi·er/ (e-mul´si-fi?er) an agent used to produce an emulsion. e·mul·si·fi·er n. An agent used to make an emulsion of a fixed oil. for oil-water mixtures. Once it has fulfilled ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. its function, the protein is naturally biodegraded. Methods from the area of biotechnology are currently being used in BASF's research labs to produce what are known as performance proteins. Nature offers countless examples of proteins with interesting and promising properties. Technical advances in fermentation fermentation, process by which the living cell is able to obtain energy through the breakdown of glucose and other simple sugar molecules without requiring oxygen. Fermentation is achieved by somewhat different chemical sequences in different species of organisms. - an area within BASF's white (industrial) biotechnology cluster - are enabling BASF to synthesize To create a whole or complete unit from parts or components. See synthesis. some of these proteins on an industrial scale for the first time. This will allow consumers to benefit from the special properties of these natural substances in their everyday life. One example of a new product from BASF's research labs is hydrophobin. This water-repellent protein is found in nature on the skin of fungi, where it causes raindrops to simply roll off. BASF's biotechnologists have isolated the gene responsible for producing hydrophobin and transferred it to the bacterium bacterium /bac·te·ri·um/ (bak-ter´e-um) pl. bacte´ria [L.] in general, any of the unicellular prokaryotic microorganisms that commonly multiply by cell division, lack a nucleus or membrane-bound organelles, and possess a cell E. coli E. coli: see Escherichia coli. E. coli in full Escherichia coli Species of bacterium that inhabits the stomach and intestines. E. coli can be transmitted by water, milk, food, or flies and other insects. . BASF is the first company able to produce hydrophobin in industrial quantities. Potential applications, for example in detergents, are currently being tested. BASF has almost three decades of experience in the field of white biotechnology. These activities use microorganisms or isolated enzymes to manufacture products such as proteins and chiral chi·ral adj. Of or relating to the structural characteristic of a molecule that makes it impossible to superimpose it on its mirror image. chi·ral intermediates as starting materials for crop protection and pharmaceutical active ingredients An active ingredient, also active pharmaceutical ingredient (or API), is the substance in a drug that is pharmaceutically active. Some medications may contain more than one active ingredient. . [TABLE OMITTED] BASF First-Quarter Results 2007 Contents 2 BASF Group Business Review 4 BASF Shares 5 Significant Events and Outlook 6 Chemicals 7 Plastics 8 Performance Products 9 Agricultural Products & Nutrition 10 Oil & Gas 11 Regions 12 Overview of Other Topics 13 Consolidated Statements of Income 14 Consolidated Balance Sheets consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. 15 Consolidated Statements of Cash Flows 16 Consolidated Statements of Recognized Income and Expense 17 Consolidated Statements of Stockholders' Equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. 18 Segment Reporting segment reporting A type of financial reporting in which the firm discloses information by identifiable industry segments. For example, Union Pacific Corporation reports revenues, income, assets, depreciation, and capital expenditures for each of four 19 Explanations to the Interim Financial Statements Front cover: Overview 1st Quarter 2007 News from Our Innovation Centers Back cover: Important Dates Contacts Cover photo: Sandra Cosmo and Edson Oliveira Santos Santos (sän`t  s), city (1996 pop. 412,288), São Paulo state, SE Brazil, on the island of São Vicente in the Atlantic just off the mainland. , production
workers at BASF S.A.'s coatings plant in Sao Bernardo do Campo São Ber·nar·do do Cam·po A city of southeast Brazil, an industrial suburb of São Paulo. Population: 740,000. Noun 1. Sao Bernardo do Campo - a city in southeastern Brazil; an industrial suburb of Sao Paulo , Brazil. [TABLE OMITTED] BASF Group Business Review Sales Compared with the same period of 2006, sales in the first quarter rose 17% to EU14.6 billion. This was due primarily to the acquisitions in mid-2006, as well as higher volumes and sales prices in the chemical businesses. Disregarding currency effects, in particular from the depreciation of the U.S. dollar, sales increased by 21%. Factors influencing sales [TABLE OMITTED] The sales growth was highest in the Chemicals segment thanks to the contribution of the new Catalysts division, as well as higher volumes and increased sales prices in the Inorganics, Petrochemicals and Intermediates divisions. Sales rose in all divisions in the Plastics segment. The Styrenics division in particular increased sales prices significantly and posted higher volumes. In the Performance Products segment, all divisions recorded higher sales as a result of the acquisitions. The Construction Chemicals division developed very positively thanks to strong growth in the construction industry in Europe and Asia. Both divisions in the Agricultural Products & Nutrition segment posted higher volumes. In the Agricultural Products division, sales declined compared with the same period of 2006 due to divestitures and currency translation effects. In the Fine Chemicals division, however, the acquired personal care products led to a significant increase in sales. Volumes declined in the Oil & Gas segment. Sales were at approximately the same level as in the first quarter of 2006. The lower oil price led to a decline in sales in the exploration and production business. This was largely offset by higher sales prices in the natural gas trading business. First-quarter sales by segment [TABLE OMITTED] [TABLE OMITTED] Earnings Compared with the first quarter of 2006, we increased income from operations (EBIT) before special items by 13% to EU2,116 million. Earnings in the Chemicals segment almost doubled, and were significantly higher in all divisions. Margins improved, in particular for petrochemicals. The Catalysts division also made a major contribution to the earnings growth. In the Plastics segment, earnings declined slightly because the Polyurethanes division did not quite match the strong performance of the previous year's first quarter. Earnings improved in the Styrenics business due to the expansion of the business and improved efficiency. Earnings in the Performance Products segment were lower than in the first quarter of 2006 as a result of persistent pressure on margins for functional polymers. This could not be offset by the earnings contributions from the acquired businesses. Both divisions in the Agricultural Products & Nutrition segment posted higher earnings. The earnings situation in Brazil improved in the Agricultural Products division. In the Fine Chemicals division, earnings increased as a result of the restructuring measures initiated in 2006 and the contribution from the acquired personal care business. In the Oil & Gas segment, a rise in the contribution from the natural gas trading business kept earnings at the previous year's strong level despite the decline in oil prices. Compared with the same period of 2006, first-quarter EBIT after special items rose by 9% to EU2,010 million. Special items in income from operations were related to integration costs for the acquisitions made in 2006 and expenses for restructuring that are recorded under "Other" until they are implemented in the course of the year. The financial result declined by EU115 million to EU(94) million. Interest expenses rose in connection with financing for the acquisitions made in mid-2006. The previous year's first quarter contained proceeds from the sale of securities. Income before taxes and minority interests rose by 2% to EU1,916 million. The tax rate declined from 46% to 40% as a result of the acquisitions and the lower contribution to the BASF Group's earnings from the Oil & Gas segment. In the first quarter, foreign taxes for oil production that are noncompensable with German corporate income tax amounted to EU258 million compared with EU272 million in the same period of 2006. Net income rose by 9% to EU1,035 million. Earnings per share were EU2.08 compared with EU1.87 in the first quarter of 2006. First-quarter EBIT before special items [TABLE OMITTED] [TABLE OMITTED] BASF Shares [TABLE OMITTED] Strong performance of BASF shares BASF shares increased in value by 14% in the first three months of 2007. As a result, our shares outperformed the German and European stock markets, whose key indices DAX 30 and DJ EURO STOXX 50 rose by approximately 5% and 2%, respectively, in the same period. In the first quarter, BASF shares also outperformed the global industry indices DJ Chemicals and MSCI World The MSCI World is a stock market index of 'world' stocks. It is maintained by Morgan Stanley Capital International. The index includes a selection of stocks of all the developed markets in the world, as defined by MSCI. Chemicals, which increased by 7% and 6%, respectively. Attractive dividend policy The proposed dividend of EU3.00 per share for 2006 is 50% higher than in the previous year. We aim to increase our dividend further in the future, or at least maintain it at the previous year's level. Further share buybacks In the first quarter of 2007, we purchased 4.98 million of our own shares for a total of EU381 million or EU76.50 per share under our EU3 billion buyback program. The goal of this program, which is to run until the end of 2008, is to increase our earnings per share and further optimize our balance sheet structure. Inclusion in Global 100 sustainability ranking In January, BASF was included in the Global 100 list by the New York research house Innovest for the second year in succession. The Global 100 list comprises the world's most successful companies in the areas of environmental protection, social affairs and corporate governance Corporate Governance The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. . Investor relations Investor relations The process by which the corporation communicates with its investors. award BASF was awarded first place in a ranking of 145 investor relations websites of companies in 33 countries performed by the financial communications consulting firm Noun 1. consulting firm - a firm of experts providing professional advice to an organization for a fee consulting company business firm, firm, house - the members of a business organization that owns or operates one or more establishments; "he worked for a MZ Consult. > Up-to-date information on BASF shares is available on the Internet at corporate.basf.com/share. [TABLE OMITTED] Significant Events and Outlook Significant events The Board of Executive Directors and Supervisory Board Supervisory board The board of directors that represents stakeholders in the governance of the corporation. of BASF Aktiengesellschaft have resolved to propose to the Annual Meeting on April 26, 2007 the transformation of BASF Aktiengesellschaft into a European Company (Societas Europaea, SE) with the name BASF SE. We consider the European Company to be a modern legal form for a global company whose home market is in Europe. The company's headquarters and chief administrative offices will remain in Ludwigshafen, Germany. Subject to antitrust Antitrust The antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade. approval, BASF plans to sell the majority of its premix premix a finite mixture of nutritional supplements such as minerals and vitamins, usually combined with a carrier and ready for mixing with a total ration. business to the Dutch animal feed group Nutreco as part of its global program to increase efficiency in the Fine Chemicals division. In addition, the closure of the production plant for lysine lysine (lī`sēn), organic compound, one of the 20 amino acids commonly found in animal proteins. Only the l-stereoisomer appears in mammalian protein. in Gunsan, South Korea, by mid-2007 was announced at the end of March. On March 21, 2007, BASF and Monsanto announced a long-term research and development and commercialization collaboration in plant biotechnology. The collaboration is effective immediately. Over the life of the collaboration, the two companies will dedicate ded·i·cate tr.v. ded·i·cat·ed, ded·i·cat·ing, ded·i·cates 1. To set apart for a deity or for religious purposes; consecrate. 2. a joint budget of potentially $1.5 billion to the joint development of high yielding crops and crops that are more tolerant to adverse environmental conditions. The first products developed as part of this collaboration are expected to be commercialized in the first half of the next decade. Outlook We continue to expect the following conditions in 2007: * Global economic growth of 3.2% * Average oil prices (Brent) of about $55/barrel * An average euro/dollar exchange rate of $1.30 per euro and moderately higher interest rates, primarily in Europe Major risk factors are associated with an escalation in geopolitical trouble spots. The good start in the first quarter confirms our positive outlook for 2007. We expect significantly higher sales based on the acquisitions made in 2006 and organic growth. We expect to at least match the previous year's strong EBIT before special items despite our assumption of a lower average oil price in 2007. [TABLE OMITTED] Chemicals [TABLE OMITTED] Compared with the same period of 2006, first-quarter sales in the Chemicals segment rose significantly (volumes 5%, prices 3%, portfolio 53%, currencies -5%). In addition to higher sales volumes and prices, the sales growth was due in particular to the acquisition of the catalysts business. Earnings almost doubled compared with the first quarter of 2006. Inorganics Demand remained strong, and we increased the prices of our products. Sales of inorganic inorganic /in·or·gan·ic/ (in?or-gan´ik) 1. having no organs. 2. not of organic origin. in·or·gan·ic n. 1. specialties, glues and impregnating resins and inorganic basic chemicals grew particularly strongly. Earnings rose as a result of the improvement in margins. Catalysts Sales developed particularly positively in the European business with catalysts for diesel engines, the global business with refinery catalysts, and the materials services business. The division contributed significantly to the segment's EBIT even after taking account of special charges for the integration. Petrochemicals Thanks to continued strong demand, sales were at the same level as in the first quarter of 2006. Earnings increased significantly due to strong margins for cracker (1) A person who breaks into a computer system without authorization, whose purpose is to do damage (destroy files, steal credit card numbers, plant viruses, etc.). Because a cracker uses low-level hacker skills to do cracking, the terms "cracker" and "hacker" have become products in Europe and Asia and the positive development of the global solvents and plasticizers plasticizers mostly triaryl phosphates, such as tricresyl, triphenyl phosphates, which are poisonous. See also triorthocresyl phosphate. businesses. Intermediates We posted sales growth worldwide in almost all areas of the portfolio. Strong demand enabled us to increase sales prices. Earnings increased significantly compared with the first quarter of 2006. This was due in particular to high capacity utilization rates Capacity utilization rate The percentage of the economy's total plant and equipment that is currently in production. Usually, a decrease in this percentage signals an economic slowdown, while an increase signals economic expansion. , as well as lower fixed costs fixed costs, n.pl the costs that do not change to meet fluctuations in enrollment or in use of services (e.g., salaries, rent, business license fees, and depreciation). as a result of the restructuring measures that we have initiated. [TABLE OMITTED] Plastics [TABLE OMITTED] Sales in the Plastics segment rose as a result of higher volumes and prices (volumes 4%, prices 9%, currencies -5%). Earnings were slightly lower than in the first quarter of 2006 due to a decline in the Polyurethanes division. Styrenics Higher sales volumes and significantly higher prices led to strong sales growth. Business developed particularly positively in Europe and Asia, where we benefited from strong demand in the construction sector. Due to rapidly rising demand for products for thermal insulation The term thermal insulation can refer to materials used to reduce the rate of heat transfer, or the methods and processes used to reduce heat transfer. Heat is transferred from one material to another by conduction, convection and/or radiation. , we will increase production capacity for our innovative insulating foam Neopor([R]) in Ludwigshafen from 60,000 to 190,000 metric tons per year by the end of 2008 and are starting production of Neopor in Asia. Earnings more than doubled compared with the weak first quarter of 2006. This was also due to the ongoing measures to increase the profitability of the division. Performance Polymers Sales were higher than in the first quarter of the previous year due to higher sales prices. In Asia, we increased sales volumes, among other things due to the new capacity for Ultradur([R]) in Kuantan, Malaysia. We passed on increases in raw material prices in the form of higher prices. Earnings rose compared with the first quarter of 2006. Polyurethanes Sales rose only slightly compared with the same period of the previous year as a result of the shutdown of the TDI plant in Geismar, Louisiana; prices remained stable. Demand and volumes continued to develop positively, especially in Europe and Asia. As a result of the difficulties with the TDI plant and higher raw material costs, it was not possible to match the very strong earnings posted in the first quarter of 2006. We have strengthened our position in the attractive Benelux market by acquiring a Dutch polyurethanes systems house. [TABLE OMITTED] Performance Products [TABLE OMITTED] The strong sales growth was due to the businesses acquired in June and July 2006 (volumes 2%, prices 1%, portfolio 33%, currencies -4%). Earnings before special items were lower than in the first quarter of 2006. Earnings were negatively impacted by ongoing margin pressure for acrylic acrylic, artificial fiber made from a special group of vinyl compounds, primarily acrylonitrile. Acrylic fibers are thermoplastic (i.e., soften when heated, reharden upon cooling), have low moisture regain, are low in density, and can be made into bulky fabrics. monomers and paper chemicals. Construction Chemicals In Europe, the business grew strongly thanks to the mild weather and the robust construction industry. In Asia, negative currency effects in Japan were offset by growth in China, Australia and Indonesia. In North America, the business was negatively impacted as a result of the harsh winter and a decline in construction activity. The overall positive earnings trend in 2006 continued in the first quarter. Coatings First-quarter sales were higher than in 2006. Sales of automotive (OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and ) coatings increased despite a decline in production at some North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. automobile manufacturers. Sales of refinish re·fin·ish tr.v. re·fin·ished, re·fin·ish·ing, re·fin·ish·es To put a new finish on (furniture). re·fin coatings were weaker, while sales of architectural coatings and industrial coatings An industrial coating is a paint or coating defined by its protective, rather than its aesthetic properties, although it can provide both. The most common use of industrial coatings is for corrosion control of steel or concrete. rose, in particular thanks to the activities acquired from Degussa in 2006. Earnings declined compared with the previous year, primarily due to the weaker business in North America. Functional Polymers Sales increased compared with the previous year's first quarter as a result of the acquisitions. Persistently high raw material costs and competitive pressure due to high capacities, in Asia especially, had a negative impact on margins for acrylic monomers and paper chemicals. Earnings were therefore significantly lower than in the strong first quarter of 2006. Performance Chemicals Sales rose significantly, in particular due to the activities acquired in 2006. Sales of performance chemicals for detergents and formulators also increased, whereas sales of performance chemicals for textile and leather declined. First-quarter earnings were higher than in 2006, primarily due to the contribution of the acquired businesses. [TABLE OMITTED] Agricultural Products & Nutrition [TABLE OMITTED] Sales in the Agricultural Products division declined slightly compared with the first quarter of 2006 due to the divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of large parts of the generics business of Micro Flo Company as well as the global business with the active ingredient terbufos (volumes 6%, prices -1%, portfolio -4%, currencies -4%). Currency effects also had a negative impact on sales. In Brazil, we increased sales volumes, in particular of products for sugarcane. In addition, we benefited from a gradual recovery in the market for soybeans. Although earnings before special items improved, EBIT declined compared with the same period of the previous year. In 2006, the special gain from the sale of the generics business of Micro Flo Company increased earnings. [TABLE OMITTED] Sales increased in the Fine Chemicals division, in particular due to the acquired personal care business (volumes 5%, prices -1%, portfolio 7%, currencies -4%). We increased volumes in other parts of the portfolio, especially for UV absorbers and Pharma Solutions. Earnings improved significantly compared with the previous year's first quarter, also as a result of a reduction in fixed costs. In February, we signed an agreement to sell the premix business in eight countries to the Dutch animal feed group Nutreco. In mid-2007, we will close the production plant for lysine in Gunsan, South Korea, and will thus exit this business. Both of these measures are part of our global program to increase efficiency. [TABLE OMITTED] Oil & Gas [TABLE OMITTED] Segment sales were at the level of the first quarter of 2006 (volumes -6%, prices/currencies 5%). Earnings were also at the same level as in the first quarter of the previous year due to a higher contribution from natural gas trading. Volumes in the exploration and production business declined slightly, in particular due to scheduled maintenance shutdowns in natural gas production in Argentina. Compared with the first quarter of 2006, the average price of Brent crude Brent Crude is one of the major classifications of oil consisting of Brent Crude, Brent Sweet Light Crude, Oseberg and Forties. Brent Crude is sourced from the North Sea. The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum. declined by 7% to approximately $58/barrel. In euro terms, this corresponds to an decrease of 14% to approximately EU44/barrel. This resulted in a decline in earnings compared with the first quarter of 2006. Sales volumes in the natural gas trading business were lower than in the first quarter of 2006 due to the milder weather in Europe; sales prices and margins improved, however. Sales and earnings were therefore considerably higher. The Norwegian energy ministry has assigned Wintershall a new offshore license. With a stake of 40%, Wintershall will participate with Norsk Hydro Norsk Hydro ASA (OSE: NHY, NYSE: NHY) is a Norwegian aluminium and renewable energy company, headquartered in Oslo. Hydro is the fourth largest integrated aluminium company worldwide. It has operations in some 40 countries around the world and is active on all continents. in the exploration block 6407/9. Norway is the world's fourth largest producer of natural gas and one of the most important suppliers to the European Union European Union (EU), name given since the ratification (Nov., 1993) of the Treaty of European Union, or Maastricht Treaty, to the European Community . [TABLE OMITTED] Regions [TABLE OMITTED] Sales by location of company in Europe increased by 14% in the first quarter of 2007. EBIT before special items rose by EU171 million to EU1,591 million. This was due both to the acquired businesses and organic growth in the chemical businesses. Earnings in the Oil & Gas segment matched the previous year's level despite the decline in oil prices. As a result of the acquisitions, companies in North America increased sales by 23% in dollar terms and by 15% in euro terms. EBIT before special items declined by EU33 million to EU265 million. Earnings were reduced by the shutdown of the TDI plant in Geismar, Louisiana, as well as by weaker demand from the automotive industry. This could not be fully offset by the acquired businesses. In Asia Pacific, we increased sales by 37% in local currency terms and by 28% in euro terms. EBIT before special items climbed EU92 million to EU207 million. The sales and earnings growth was due to the acquisitions as well as strong demand for products from the Chemicals and Plastics segments. The measures to increase efficiency that were initiated in 2006 also contributed to the rise in earnings. In South America, Africa, Middle East first-quarter sales by location of company rose by 49% in local currency terms and by 41% in euro terms. EBIT before special items increased by EU21 million to EU53 million. The activities of the Catalysts division in South Africa and the Agricultural Products division in South America contributed to the expansion of the business. Higher prices for agricultural produce have improved the economic situation for farmers in Brazil, thus increasing demand for crop protection products. [TABLE OMITTED] Overview of Other Topics Research and development In 2007, BASF is planning to launch two new active ingredients: the rice fungicide fungicide (fŭn`jəsīd', fŭng`gə–), any substance used to destroy fungi. Some fungi are extremely damaging to crops (see diseases of plants), and others cause diseases in humans and other animals (see fungal infection). orysastrobin and the insecticide insecticide Any of a large group of substances used to kill insects. Such substances are mainly used to control pests that infest cultivated plants and crops or to eliminate disease-carrying insects in specific areas. metaflumizone. The peak sales potential of BASF's development pipeline of innovative crop protection active ingredients is EU800 million. The Agricultural Products division is currently working on developing seven new active ingredients and on one new herbicide herbicide (hr`bəsīd'), chemical compound that kills plants or inhibits their normal growth. A herbicide in a particular formulation and application can be described as selective or nonselective. tolerance project. Seven additional crop protection active ingredients with a peak sales potential of EU1,000 million are currently being introduced to the market. The collaboration agreement with Monsanto that was signed in March shows that BASF's innovativeness makes it an attractive partner in the area of plant biotechnology. The collaboration focuses on developing and marketing high yielding crops and crops that are more tolerant to adverse environmental conditions such as heat and drought. The joint pipeline will include the companies' existing and planned yield and stress tolerance programs for the globally important crops corn (maize maize: see corn. ), soybeans, cotton and canola canola see brassicanapus. (oilseed oilseed the seeds of the linseed plant, rapeseed or canola, peanut, safflower (Carthamus tinctorius); biproduct oils from seeds include corn, grapeseed, olive, sesame, sunflower. rape). The companies also announced that they had entered into a separate development and commercialization collaboration to research methods to control the soybean cyst nematode The soybean cyst nematode (SCN), Heterodera glycines, is a plant-parasitic nematode and a devastating pest of the soybean (Glycine max) worldwide. The nematode infects the roots of soybean, and the female nematode eventually becomes a cyst. , a parasitic par·a·sit·ic or par·a·sit·i·cal adj. 1. Of, relating to, or characteristic of a parasite. 2. Caused by a parasite. Parasitic Of, or relating to a parasite. worm that can limit and destroy yields for soybean soybean, soya bean, or soy pea, leguminous plant (Glycine max, G. soja, or Soja max) of the family Leguminosae (pulse family), native to tropical and warm temperate regions of Asia, where it has been farmers. Over the life of the collaboration, BASF and Monsanto will dedicate a combined budget of potentially $1.5 billion to the joint development pipeline. This results in an increase in BASF's research costs for plant biotechnology, which are recorded under "Other." The innovative insulating foam Neopor([R]) needs less material to achieve the same insulation quality as Styropor([R]), thus making a key contribution to energy efficiency and climate protection. Silver-gray Neopor is primarily used to insulate in·su·late tr.v. in·su·lat·ed, in·su·lat·ing, in·su·lates 1. To cause to be in a detached or isolated position. See Synonyms at isolate. 2. buildings and contains special graphite graphite (grăf`īt), an allotropic form of carbon, known also as plumbago and black lead. It is dark gray or black, crystalline (often in the form of slippery scales), greasy, and soft, with a metallic luster. particles that reflect heat waves like a mirror. Thanks to strong demand, BASF will triple production capacity for Neopor in Ludwigshafen by the end of 2008 and will also start producing this insulating material in South Korea. Employees Compared with the end of 2006, the number of BASF Group employees declined by 291 to 94,956. As a result, the number of employees declined by 0.7% in Europe and by 0.6% in North America. In the South America, Africa, Middle East region and in Asia Pacific, the number of employees rose by 0.9% and 1.5%, respectively. As a result of the acquisitions, personnel costs increased by 15% compared with the same period of 2006 and amounted to EU1,595 million in the first quarter of 2007. [TABLE OMITTED] Consolidated Statements of Income [TABLE OMITTED] Consolidated Balance Sheets [TABLE OMITTED] [TABLE OMITTED] Consolidated Statements of Cash Flows [TABLE OMITTED] Cash provided by operating activities In the first quarter of 2007, cash provided by operating activities amounted to EU701 million compared with EU1,448 million in the same period of 2006. This significant decline was due to a higher level of net working capital. As a result of the expansion of the business and seasonal effects in the Agricultural Products division, receivables rose, while trade accounts payable declined significantly. Cash used in investing activities Cash used in investing activities amounted to EU486 million compared with EU305 million in the first quarter of 2006. The first quarter of 2006 contained a cash inflow in·flow n. 1. The act or process of flowing in or into: an inflow of water; an inflow of information. 2. from the sale of securities. Cash used in financing activities We used EU381 million to buy back shares. In the first quarter of 2007, we bought back 4.98 million shares for an average price of EU76.50 per share under the EU3 billion buyback program that is scheduled to run until the end of 2008. Cash and cash equivalents amounted to EU658 million as of March 31, 2007 compared with EU834 million as of the end of 2006. In the same period, financial indebtedness rose by EU103 million to EU9,586 million. Compared with year-end 2006, net debt increased by EU279 million to EU8,928 million. Consolidated Statements of Recognized Income and Expense [TABLE OMITTED] Development of income and expense recognized directly in equity [TABLE OMITTED] Consolidated Statements of Stockholders' Equity [TABLE OMITTED] [TABLE OMITTED] Segment Reporting [TABLE OMITTED] [TABLE OMITTED] * "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 [EU3 million in the first quarter of 2007 (first quarter 2006: EU55 million)]. ** 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 Financial assets Claims on real assets. , cash and cash equivalents, financial receivables, deferred taxes; first quarter 2007: EU4,826 million, first quarter 2006: EU6,685 million). *** Tangible and intangible fixed assets Explanations to the Interim Financial Statements 1. Basis of presentation The Consolidated Financial Statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge of BASF Group for the year ended December 31, 2006 were prepared according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the International Financial Reporting Standards International Financial Reporting Standards (IFRS) are standards and interpretations adopted by the International Accounting Standards Board (IASB). Many of the standards forming part of IFRS are known by the older name of International Accounting Standards (IAS). (IFRS IFRS International Financial Reporting Standard(s) IFRS Inter Frame Relay Service IFRS Indiana Facilities Registry System ) 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 2006 is available on the Internet at corporate.basf.com/financial-report. Compared with the end of 2006, the assumptions used to determine expenses for pension benefit did not have to be changed as of March 31, 2007: The interest rate and expected pension increase were unchanged at 4.50% and 1.75%, respectively. 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 follows: [TABLE OMITTED] Eleven companies, thereof nine holding companies and two companies due to their increased importance, have been included in the scope of consolidation for the first time since January 1, 2007. Four companies have been deconsolidated since the beginning of 2007 because they were merged with other BASF companies or sold. Companies accounted for using the equity method were as follows: [TABLE OMITTED] 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 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. |
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion