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Last Update:
Mar. 10, 2011
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BASF Group outlook and opportunities

Profitable growth thanks to the right strategy

Outlook 2011

In 2011, economic growth is expected to slow down. Excluding the effects of acquisitions and divestitures, we aim for a slight increase in sales volumes and sales. Sales will be additionally boosted by the inclusion of the Cognis businesses. Overall, we aim to significantly exceed the 2010 record levels in sales and income from operations. We expect to earn a high premium on our cost of capital once again in 2011.

BASF took advantage of the favorable economic environment in 2010 and achieved record sales and earnings. There was strong demand for chemical products and growth impetus came from all regions. The successful integration of the Ciba businesses and our initiatives to increase operative excellence made a significant contribution to this performance.

We expect economic growth to slow down in 2011. Excluding the effects of acquisitions and divestitures, we aim for a slight increase in sales volumes and sales. Sales will additionally be boosted by the inclusion of the Cognis businesses. Overall, we aim to significantly exceed the 2010 record levels in sales and income from operations.

Forecast

Based on our forecast for the economic environment and excluding the effects of acquisitions and divestitures, we expect a slight increase in sales volumes and sales in 2011. In addition, sales should rise by around €3 billion as a result of the inclusion of Cognis. Overall, we expect significant sales growth. Due to the strong regional differences in growth rates, the share of our total sales generated in Asia and South America will increase.

We expect increasing pressure on margins in 2011 in some divisions, particularly in the Chemicals and Plastics segments owing to additional capacities and continued high raw materials prices. In light of these conditions, we will continue to rigorously implement our efficiency and restructuring programs. For example, we are strengthening our operational excellence through a number of individual projects under the NEXT program we initiated in 2008. With this program, we expect to improve earnings by more than €1 billion annually from 2012. At the same time, we expect synergies from the Ciba integration to contribute more than €350 million to earnings in 2011. This will be somewhat offset by the costs of the Cognis integration arising from 2011.

We aim to significantly exceed the record 2010 level in income from operations. We expect to earn a high premium on our cost of capital once again in 2011. Provided the economic growth continues, we anticipate a further increase in sales and earnings in 2012.
More on Our expectations for business development in the segments and divisions
For more Information on our financing principles see Liquidity and capital resources

Planned capital expenditures by segment 2011–2015

Planned capital expenditures by segment 2011–2015 (pie chart)

To further develop our chemical activities, we plan to make investments of around €8.2 billion in the next five years. In China, this will include the step-by-step expansion of the Verbund site in Nanjing and the construction of an MDI plant in Chongqing. In addition, we will strengthen our specialty chemicals business, for example, with the construction of a new production plant for the aroma chemical L-menthol in Ludwigshafen. In the Oil & Gas segment, we are planning investments totaling €4.4 billion by 2015. One main focus is the extension of our gas transport and storage infrastructure, which includes the construction of transit pipelines OPAL and NEL as well as the Jemgum natural gas storage facility and the expansion of the Haidach natural gas storage facility. We are also increasing our investments in the exploration and production of gas and oil deposits in Siberia and Norway.

Planned capital expenditures by region 2011–2015

Planned capital expenditures by region 2011–2015 (pie chart)

Dividend

We stand by our ambitious dividend policy and continue to offer our shareholders an attractive dividend yield. Therefore, at the Annual Meeting, the Board of Executive Directors and the Supervisory Board will propose a dividend payment of €2.20 per share. We aim to increase our dividend annually or at least maintain the level of the previous year.