4 – Segment reporting

BASF’s worldwide business is conducted by operating divisions that are aggregated into six segments for reporting purposes.

Chemicals consists of the Inorganics, Petrochemicals and Intermediates divisions. Its portfolio ranges from basic chemicals, glues and electronic chemicals to solvents and plasticizers, as well as starting materials for products such as detergents, plastics, textile fibers, paints and coatings and pharmaceuticals.

Plastics is composed of the Performance Polymers and Polyurethanes divisions.

Performance Products, which is made up of the Dispersions & Pigments, Care Chemicals, Nutrition & Health, Paper Chemicals and Performance Chemicals divisions, primarily offers customer-specific specialties alongside standard products.

Functional Solutions comprises the Catalysts, Construction Chemicals and Coatings divisions.

Agricultural Solutions is made up of the Crop Protection division.

The Oil & Gas segment is composed of the Oil & Gas division with the Exploration & Production and Natural Gas Trading business sectors.

Activities not assigned to a particular division are reported in Other. In particular, these included our styrenics business, which was contributed to the Styrolution joint venture as of October 1, 2011, and our fertilizer business, which we divested in the first quarter of 2012. The remaining activities reported in Other particularly comprise the sale of raw materials, engineering and other services, rental income and leases.

With our cross-divisional corporate research, which is also reported under Other, we develop growth fields and ensure the long-term competence of BASF with regard to technology and methods.

Group corporate costs are not allocated to the segments, but rather reported under Other. These consist of the expenses for steering the BASF Group. Earnings from currency conversion that are not allocated to the segments are also reported under Other as are earnings from the hedging of raw materials prices and foreign currency exchange risks. Furthermore, expenses and revenues from the long-term incentive (LTI) program are reported here.

In the first quarter of 2012, sales in Other declined significantly compared with the previous first quarter as a result of the styrenics divestiture, as expected. Income from operations improved, however, in particular due to the positive special item arising from income of €645 million from the divestiture of our fertilizer business. Expenses from the LTI program were around €95 million higher than in the first quarter of the previous year.

Transfers between the segments are almost always executed at market-based prices. The allocation of assets and depreciation to the segments is based on economic control. Assets used by more than one segment are allocated based on the percentage of usage.

Assets of businesses included under Other significantly declined due to the divestiture of our styrenics and fertilizer activities.

In the reconciliation reporting for Oil & Gas, the income from operations of the Oil & Gas segment is reconciled to the contribution of the companies in this segment to the net income of the BASF Group.

Other income includes all expenses and income not included in income from operations of the segment, the interest result and the miscellaneous financial result.

The higher earnings level in the first quarter of 2012 is attributable to both higher production and sales volumes as well as higher crude oil and gas prices.