Last Update:
March 1, 2012

Letter from the Chairman
of the Board of Executive Directors

Dear Shareholder,

One year ago, we predicted moderate global economic growth and considerably higher volatility for 2011. This was the case: Global gross domestic product grew by 2.7% in 2011, compared with 3.9% in 2010, and growth in worldwide chemical production (excluding pharmaceuticals) slowed from 9.3% to 4.8%. Our business was particularly affected by events that were not foreseeable one year ago: The natural disaster in Japan left the world shaken, and Germany saw a shift in its energy policy. In Libya, we had to suspend our crude oil production from February to October 2011. After the economic growth spurt of the first half of the year, the national debt crisis in Europe contributed to a considerable slowdown in the second half.

Dr. Kurt Bock, Chairman of the Board of Executive Directors of BASF SE (Foto)



We stand by our ambitious dividend policy and propose a dividend of €2.50 per share – an increase of 13.6% compared with the previous year.

Nevertheless, we significantly surpassed the record levels of 2010 in sales and earnings, and again earned a high premium on our cost of capital. The BASF team once again showed what it is made of. For that, I would like to express my heartfelt gratitude to all employees.

We successfully implemented a whole range of important projects in 2011. We started up the first leg of the Nord Stream pipeline and began operations following the second expansion phase of our Verbund site in Nanjing. Cognis was successfully integrated into BASF. We continue to optimize our portfolio – with the inclusion of our styrenics business in the Styrolution joint venture, as well as with a contract for the sale of our fertilizer business. Most importantly, we continued to lay the foundation for future profitable growth by increasing expenditures for research and development by 7.6% to €1.6 billion.

Ambitious goals achieved

“We will integrate sustainability more closely than ever into our business. And innovation is the key.”

Despite significantly higher raw material prices, we were able to increase earnings because we continuously strive to lower costs and improve our productivity and internal processes. Our successfully concluded excellence program, NEXT, shows our commitment to operational excellence. We have now started the STEP program, which is also expected to contribute around €1 billion to earnings each year by the end of 2015. Together with important customers, we have begun further joint development projects. These demonstrate BASF’s power of innovation. One example is the smart forvision concept car developed by Daimler and BASF to make electric cars affordable, environmentally friendly and safe.

In 2011, we paid a new record dividend of €2.20 to you, our shareholders. At the Annual Shareholders’ Meeting at the end of April 2012, we will propose a dividend increase of 13.6% to €2.50, representing a dividend yield of 4.64%. This increase also attests to BASF’s financial strength, which has improved once again.

We expect overall global economic growth in 2012 to match the level of the previous year. High raw material costs and uncertainty in the financial markets hamper the outlook and make forecasts difficult. Positive impetus for the chemical industry will come from the emerging markets in particular. We aim to increase sales volumes and exceed the record levels of sales and income from operations that we posted in 2011. Crude oil production in Libya, which we have already resumed, as well as growing volumes in the chemicals businesses, will contribute to the rise in earnings.

Successful strategy updated

Margret Suckale and Michael Heinz joined the Board of Executive Directors in May 2011. The new Board team introduced the updated “We create chemistry” strategy at the end of November. It shows how we intend to take advantage of the long-term opportunities presented by our markets to continue to grow faster than chemical production and, above all, to increase our profitability even further. We have also set ourselves even more ambitious goals for environmental and climate protection. We are convinced that this course will take us in the right direction, even in a volatile environment. Our focus on long-term trends and our strengths will work to our advantage.

Rapid worldwide population growth demands new sustainable solutions. This opens up opportunities for the chemical industry, in particular – for example, in the areas of resources, environment and climate; food and nutrition; and quality of life. That is why we will integrate sustainability more closely than ever into our business. And innovation is the key. In the future, our innovative strength, our market knowledge and our customer relationships will need to be even more tightly interconnected. This is how we will add value as one company and take advantage of new growth opportunities – because no other chemical company has such a broad technology base and such comprehensive access to customer industries.

Our success depends on how we interact with each other, with our partners and with society. In this, we rely on the competence and dedication of each and every one of our employees. We have defined values to guide our actions: We are creative, open, responsible and entrepreneurial. Our values are integral in enabling us to fulfill our corporate purpose: We create chemistry for a sustainable future.

I look forward to pursuing this path with you and thank you for putting your trust in BASF.

Sincerely yours,

Dr. Kurt Bock
Chairman of the Board of Executive Directors of BASF SE

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