Segment Profile Divisions Petrochemicals Broad range of basic products for sectors such as the chemical and plastics industries Monomers Isocyanates and polyamides as well as inorganic basic products and specialties for various sectors, such as the plastics, automotive and construction industries Intermediates Most comprehensive intermediates portfolio in the world, including precursors for coatings, plastics, textile fibers and crop protection products Sales Factors influencing sales Income from operations before special items Million € How we create value – an example Biomass balance approach for methanol Fossil resource-saving process expanded Value for BASF Annual volume of relevant market in Europe 20.5 million metric tons Value for the environment ≥50% lower greenhouse gas emissions Since 2013, BASF has used the biomass balance approach to promote the use of sustainably produced renewable raw materials in the integrated Production Verbund by replacing fossil feedstock with biogas or bio-naphtha at the very beginning of the value chain. BASF has produced methanol according to the biomass balance approach since 2018. This methanol is certified according to the EU-RedCert standard. Methanol is an important raw material for many products in different value chains. Potential applications are biofuels and fuel additives. The European market for methyl-tert-butylether (MTBE), a fuel additive manufactured from methanol, has an annual volume of 20.5 million metric tons. Biomass balance products actively contribute to saving fossil raw materials and in this way, help reduce greenhouse gas emissions. For instance, using renewable feedstock in the methanol production process reduces climate-damaging greenhouse gas emissions by at least 50% compared with conventionally produced methanol. For the methanol certified according to the EU-RedCert standard, BASF completely replaces fossil methane with biomethane made from waste and residual materials. Strategy Integrated production facilities form core of Verbund Technology and cost leadership provide most important competitive edge With its production facilities, the Chemicals segment is at the heart of the Verbund and supplies BASF’s segments with basic chemicals for the production of downstream products. We add value with innovations in processes and production and invest in future markets. As a reliable supplier, we provide chemicals of consistent quality and market them to customers in downstream industries. We continuously improve our value chains and are expanding our market position – particularly outside Europe – with new processes and technologies, as well as through investments and collaborations in future markets. We invest in research and development to develop new technologies and to make our existing technologies even more efficient. Cost leadership and a clear orientation along individual value chains are among our most important competitive advantages. We concentrate on the critical success factors of the classic chemicals business: leveraging economies of scale and the advantages of our Verbund, high capacity utilization, continuous optimization of access to raw materials, lean and energy efficient processes – including reducing greenhouse gas emissions – and reliable, cost-effective logistics. Furthermore, we are constantly improving our global production structures and aligning these with regional market requirements. We plan to build an integrated Verbund chemical production site in Zhanjiang in the southern Chinese province of Guangdong. A non-binding Memorandum of Understanding was signed in July 2018. At the new site, we intend to implement a comprehensive smart manufacturing concept based on implementing cutting-edge digital technologies within the plants. BASF and Sinopec, Beijing, signed a Memorandum of Understanding in October to further strengthen their partnership in chemical production in China. The partners intend to build an additional steam cracker and to further expand their existing 50:50 joint venture, BASF-YPC Company Limited, at our Verbund site in Nanjing. To support the growing demand for acrylic monomers in Asia Pacific, BASF PETRONAS Chemicals is looking into expanding the production capacity of its acrylic acid plant and butyl acrylate plants at our Verbund site in Kuantan, Malaysia. At our Verbund site in Antwerp, Belgium, we are planning a significant capacity expansion of the integrated ethylene oxide complex. The project also includes several downstream derivatives, such as surfactants. In Ludwigshafen, Germany, we will strengthen our Verbund by replacing our acetylene plant with a modern highly efficient plant by the end of 2019. The new MDI synthesis unit in Geismar, Louisiana, is a major milestone toward increasing MDI production capacity in North America. This investment supports the growth of our MDI customers in the North American market. On September 18, 2017, we signed an agreement with Solvay on the acquisition of Solvay’s integrated polyamide business. More information on the current status of the agreement with Solvay back next