6-K UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
November 2, 2006
BASF AKTIENGESELLSCHAFT
(Exact name of Registrant as Specified in its Charter)
BASF CORPORATION
(Translation of Registrant's name into English)
Carl-Bosch-Strasse 38, LUDWIGSHAFEN, GERMANY 67056
(Address of Principal Executive Offices)
Indicate by check mark whether the Registrant files or will file annual
reports under cover Form 20-F or Form 40-F
Form 20-F X Form 40-F
Indicate by check mark whether the Registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
If "Yes" is marked, indicate below the file number assigned to the
Registrant in connection with Rule 12g3-2(b): 82- .
BASF: Acquisitions Strengthen Profitable Growth
-- Increase in sales (up 28 percent) and EBIT before special
items (up 22 percent)
-- Acquired businesses meet expectations: Synergies of EUR
290 million per year
-- Additional global program to increase efficiency:
Cost savings of EUR 300 million per year by 2008
-- Outlook for 2006 confirmed: Sales to increase significantly to
more than EUR 50 billion and higher EBIT before special items
compared with the previous year's strong level
Business Editors/Chemicals Writers
LUDWIGSHAFEN, Germany--(BUSINESS WIRE)--Nov. 2, 2006--BASF - The
Chemical Company (NYSE:BF) (FWB:BAS) (LSE:BFA) is continuing on its
profitable growth path: The third quarter of 2006 is the thirteenth
quarter in succession in which the company has posted an increase in
sales. "We have achieved a new earnings level, and in doing so, three
things are important: First, our chemicals businesses were again very
successful in the third quarter. Second, the newly acquired businesses
have met our expectations. And third, we are continuously improving
our sites and business processes," said Dr. Jurgen Hambrecht, Chairman
of the Board of Executive Directors of BASF Aktien-gesellschaft:
The third quarter of 2006 followed on seamlessly from BASF's
strong performance in the first half of the year. Demand for its
high-value products and system solutions continued unabated. In its
chemicals businesses, BASF again recorded higher sales volumes
compared with last year's already high level. Despite high and very
volatile raw material prices, the company was largely successful in
passing on necessary price increases to the market.
Sales climbed 28 percent to EUR 13.3 billion. The newly acquired
businesses - Engelhard, Degussa Construction Chemicals and Johnson
Polymer - contributed EUR 1.8 billion to this dynamic growth.
Income from operations (EBIT) before special items rose by
22 percent to EUR 1.6 billion in the third quarter.
Cumulative sales in the first nine months of 2006 increased by
23 percent to more than EUR 38 billion. EBIT before special items
increased by 19 percent to EUR 5.4 billion in the same period.
BASF confirms optimistic outlook for full-year 2006
In the fourth quarter, BASF expects demand for its products to
remain strong. Despite an easing in the oil price, raw material costs
remain high and margins are therefore still under pressure.
Geopolitical tensions and regional conflicts are continuing to result
in highly volatile raw material prices, which are now also impacting
agricultural products.
For full-year 2006, Hambrecht continues to expect sales to
increase to more than EUR 50 billion and higher EBIT before special
items compared with the previous year's strong level.
Strong sales growth in Chemicals segment
In the Chemicals segment, BASF posted significantly higher sales
(plus 67 percent) and EBIT before special items (plus 66 percent).
This was primarily due to the acquired catalysts business, as well as
to higher sales volumes and price increases.
BASF also recorded double-digit growth in sales (plus 10 percent)
and EBIT before special items (plus 18 percent) in its Plastics
segment, in particular due to the improvement in earnings in the
Performance Polymers division.
Sales (plus 41 percent) and EBIT before special items (plus 11
percent) also rose by double-digit amounts in the Performance Products
segment. Above all, a decline in margins for acrylic monomers
negatively impacted earnings. Due to the contribution of the acquired
businesses, EBIT before special items was nevertheless higher than in
the third quarter of 2005.
Sales (minus 3 percent) and EBIT before special items (minus
100 percent) declined in the Agricultural Products & Nutrition
segment. Lower sales prices and currency effects, in particular in
Brazil, had a negative impact on the Agricultural Products business.
Due to persistently high crude oil prices, sales (plus 30 percent)
and EBIT before special items (plus 26 percent) in the Oil & Gas
segment were again significantly higher than in the same period of
2005.
EUR 290 million in synergies through integration of new businesses
The number one topic at BASF in 2006 has been acquisitions, and
the integration of the new businesses is proceeding as planned. BASF
expects the combination of the acquired businesses with its existing
ones to result in synergies amounting to EUR 290 million per year by
2010. Of this amount, the largest share of EUR 160 million is
anticipated to come from Engelhard; Degussa's construction chemicals
and Johnson Polymer are likely to contribute EUR 100 million and EUR
30 million, respectively. These synergies will primarily result from
the elimination of overlapping functions and processes, for example in
administration, marketing and sales, and logistics. There will be an
associated reduction of approximately 1,000 positions worldwide:
Approximately 800 are related to former Engelhard activities and
approximately 200 to Degussa's construction chemicals business. BASF
estimates that one-time integration costs of about EUR 200 million are
needed to achieve the annual synergy effects of EUR 290 million.
Greater efficiency to reduce costs by EUR 300 million per year
BASF has established a new global program to further increase
efficiency and streamline business processes. The program includes a
number of site and plant restructuring measures. The company expects
it to result in total savings of EUR 300 million per year by 2008.
Implementation of the program will result in total one-time
expenditures of EUR 160 million as well as write-downs of EUR
270 million, with the larger part being recorded in 2006. The measures
are associated with a reduction of 1,000 positions, primarily in Asia
and North America. The large majority of these reductions have already
been communicated in the regions.
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
intelligent system solutions and high-value products help its
customers to be more successful. BASF develops new technologies and
uses them to open up additional market opportunities. It combines
economic success with environmental protection and social
responsibility, thus contributing to a better future. BASF has over
95,000 employees and posted sales of more than EUR 42.7 billion in
2005. BASF shares are traded on the stock exchanges in Frankfurt
(BAS), London (BFA), New York (BF) and Zurich (AN). Further
information on BASF is available on the Internet at www.basf.com.
Note to editors:
With immediate effect, BASF offers you the opportunity to obtain
all of its press releases free of charge via an RSS feed. This allows
you to receive up-to-date news about BASF directly on your computer,
quickly and simply. Further information can be found at
www.basf.de/rss/e. Here, you can also subscribe to the RSS feed and
select your topics of interest.
On November 2, 2006, you can also obtain further information from
the Internet at the following addresses:
Interim report (from 7:30 a.m. CET)
corporate.basf.com/interimreport (English)
corporate.basf.com/zwischenbericht (German)
Press release (from 7:30 a.m. CET)
www.corporate.basf.com/pressrelease (English)
corporate.basf.com/pressemitteilungen (German)
Live transmission of telephone conference
(from 10:30 a.m. CET)
corporate.basf.com/pcon (English)
corporate.basf.com/pk (German)
Speech Dr. Jurgen Hambrecht/Dr. Kurt Bock - print version
(from 10:30 a.m. CET)
corporate.basf.com/pressconference (English)
corporate.basf.com/pressekonferenz (German)
Photos (from 7:30 a.m. CET)
corporate.basf.com/photos (English)
corporate.basf.com/fotos (German)
Information about BASF shares
www.basf.com/share (English)
www.basf.com/aktie (German)
Live transmission Analyst Conference (from 3:00 p.m. CEST)
www.basf.com/share (English)
www.basf.com/aktie (German)
This release 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 Annual Report 2005 on Form 20-F will be available on
the Internet at corporate.basf.com as of March 14, 2006. We do not
assume any obligation to update the forward-looking statements
contained in this release.
Third-Quarter Results 2006
July - September 2006
-- Sales up 28%
-- EBIT before special items up 22%
-- Integration of acquisitions proceeding as planned
-- Outlook confirmed: Sales to increase to more than EUR 50
billion and higher EBIT before special items compared with the
previous year's strong level
Overview 3rd Quarter
Million EUR Change
2006 2005 in %
Sales 13,299 10,361 28.4
Income from operations before interest, taxes,
depreciation and amortization (EBITDA) 2,368 1,843 28.5
Income from operations (EBIT) before special
items 1,615 1,327 21.7
Income from operations (EBIT) 1,438 1,262 13.9
Financial result (133) 176 .
Income before taxes and minority interests 1,305 1,438 (9.2)
Net income 613 808 (24.1)
Earnings per share (EUR) 1.22 1.55 (21.3)
EBIT before special items in percent of sales 12.1 12.8 -
Cash provided by operating activities 1,355 1,929 (29.8)
Additions to fixed assets(a) 3,922 408 .
Excluding acquisitions 601 408 47.3
Amortization and depreciation(a) 930 581 60.1
Segment assets (end of period)(b) 38,994 28,106 38.7
Personnel costs 1,614 1,419 13.7
Number of employees (end of period) 95,518 80,695 18.4
Overview January - September
Million EUR Change
2006 2005 in %
Sales 38,136 31,025 22.9
Income from operations before interest, taxes,
depreciation and amortization (EBITDA) 7,143 6,011 18.8
Income from operations (EBIT) before special
items 5,390 4,547 18.5
Income from operations (EBIT) 5,084 4,348 16.9
Financial result (89) 139 .
Income before taxes and minority interests 4,995 4,487 11.3
Net income 2,483 2,447 1.5
Earnings per share (EUR) 4.91 4.63 6.0
EBIT before special items in percent of sales 14.1 14.7 -
Cash provided by operating activities 3,563 4,010 (11.1)
Additions to fixed assets(a) 9,479 1,620 485.1
Excluding acquisitions 1,565 1,252 25.0
Amortization and depreciation(a) 2,059 1,663 23.8
Segment assets (end of period)(b) - - -
Personnel costs 4,436 4,089 8.5
Number of employees (end of period) - - -
(a) Tangible and intangible fixed assets (including acquisitions)
(b) Tangible and intangible fixed assets, inventories and
business-related receivables
Contents
1 BASF Group Business Review
3 BASF Shares
4 Significant Events and Outlook
5 Chemicals
6 Plastics
7 Performance Products
8 Agricultural Products & Nutrition
9 Oil & Gas
10 Regions
11 Overview of Other Topics
12 Consolidated Statements of Income
13 Consolidated Balance Sheets
14 Consolidated Statements of Cash Flows
15 Consolidated Statements of Recognized
Income and Expense
16 Consolidated Statements of Stockholders'
Equity
17 Segment Reporting
19 Explanations to the Interim Financial
Statements
News from our innovation centers
Probiotic bacteria fight caries and body odor
BASF develops innovative oral hygiene and personal care products
The concept of using probiotic bacteria to provide natural defense
against harmful organisms allows BASF Future Business GmbH to develop
innovative products for oral hygiene and personal care. Suitable
lactic acid bacteria (lactobacilli) are selected from the extensive
collection of cultures from the project partner Organo-Balance GmbH,
Berlin, and jointly developed to market. Promising applications for
probiotic bacteria include fighting cariogenic microorganisms,
preventing body odor and regenerating the skin's protective microbial
flora.
Oral hygiene
The bacterium responsible for caries, Streptococcus mutans,
persistently colonizes the surface of the teeth, where it converts
sugar into aggressive acids that break down the enamel. To
substantially diminish the risk of caries, it is important to
significantly reduce the concentration of harmful bacteria in the oral
cavity. With Lactobacillus anti-caries, scientists have found an agent
that effectively binds to the caries-causing bacteria and prevents
them from adhering to the surface of the teeth. The effectiveness has
been demonstrated. BASF Future Business expects the first oral hygiene
products containing probiotic lactobacilli to appear in 2007.
Personal care
Our skin is naturally populated with different types of
microorganisms. Ideally, those with beneficial health effects - known
as commensal microorganisms - dominate over likewise occurring harmful
bacteria. If this system gets out of balance, the appearance, health
and well-being of the skin are adversely affected. This may occur, for
example, after washing or showering. In such cases Lactobacillus
stimulans can promote the rapid regeneration of the skin's protective
microbial flora. By secreting growth-promoting substances, it
stimulates colonization by its healthful relatives. Because of their
major cosmetic relevance, these microorganisms are interesting
candidates for use in lotions and creams and in medicinal ointments
and plasters.
A third application for beneficial lactobacilli is the prevention
of body odor. Bacteria are responsible for creating odor, for example
in the armpits or on the feet. Lactobacillus pes-odoris, which
specifically inhibits the odor-producing bacteria of the feet, and
Lactobacillus ala-odoris, which prevents the formation of odor in the
armpits, provide a remedy for these situations. Both lactobacillus
cultures can improve the effectiveness of deodorants, foot sprays and
lotions.
Depending on the application, desired effect and formulation
required for a cosmetic product, probiotic lactic acid bacteria can be
used in either a live encapsulated or in a live or inactivated
freeze-dried form. In the exclusive cooperative enterprise between the
two project partners, OrganoBalance conducts screening for suitable
microorganism cultures in its own collection of microbial strains as
well as the fundamental scientific research, while BASF Future
Business is responsible for fermentation of the strains and their
further processing, customer-specific formulation and marketing.
The first oral hygiene products containing probiotic bacteria are
expected to reach the market in 2007.
News from our innovation centers
Chemistry keeps the black gold gushing
Drilling and production island in the Mittelplate oil field in the
North Sea. A consortium consisting of RWE Dea and Wintershall has been
producing crude oil from the largest German deposit since 1987.
Oilfield chemicals from BASF help increase production efficiency
With its full range of oilfield chemicals BASF plays a major role
in the extraction of crude oil. From the first test drill onward, BASF
products accompany the entire production process and allow deposits to
be accessed much more intensively. Only thanks to these products is it
possible to achieve oil extraction levels of 50% and more.
The drill head has to be cooled and lubricated, the cuttings
dispersed and flushed upwards: The technical process is optimized by
drilling fluid additives circulating in the closed system. Other
chemicals prevent the surrounding rock formations from swelling, which
could otherwise trap the drill or even damage it. But drilling alone
is not the whole story. The boreholes, which are up to 11 kilometers
in length, have to be stabilized with a circular jacket of cement dow
to the oil-bearing stratum. BASF additives are used to control the
flowability and setting time of the cement, allowing it to be ideally
adjusted to the prevailing conditions. And even when the borehole has
finally advanced as far as the deposit, the engineers are often called
upon to provide ingenious solutions. Oil doesn't just lie around in
underground lakes waiting to be pumped to the surface. Rather, it is
enclosed in porous rock formations that only grudgingly yield up their
riches. To promote the flow of oil, the tiny pores in the stone are
widened with the aid of chemicals.
To keep the pores permeable despite the rock formations bearing
down on them, special support materials called proppants are required.
These include special sands produced by the U.S. manufacturer
Engelhard, which was recently acquired by BASF. This specially coated
sand consists of perfectly spherical particles, allowing it to be
pumped underground like a liquid, while creating a maximum of hollow
spaces as permeable pathways through which the oil can flow.
The inherent pressure within the crude oil containing formation
rapidly decreases, but is usually maintained by forcing water into the
deposit through injection boreholes sunk at the edge of the oilfield.
The water then mixes with the crude oil - a water content of 95% is
completely normal. These resulting water and oil mixtures are very
difficult to separate and this is where customized demulsifiers from
BASF come in to play. These substances are special surfactants which
greatly accelerate the natural separation of oil and water. And this
is the case even though as little as 10 to 15 grams are sufficient to
separate 1 metric ton of an oil-water mixture.
BASF acts as a raw materials supplier for internationally
operating service companies whose experts formulate the required
finished product for the major oil companies directly at the borehole.
The market for oilfield chemicals has now reached a volume of around
$4 billion with an estimated annual growth of 5%. By acquiring the
U.S. company Engelhard Corporation and the construction chemicals
business of Degussa in 2006, BASF has greatly increased its expertise
in the areas of special sands, cement additives and polymers for
drilling fluids and can offer its customers an even broader product
portfolio.
BASF Group Business Review
-- Sales up 28%
-- EBIT before special items up 22%
-- Net income declines due to special items
Sales
Compared with the same period of 2005, third-quarter sales
increased by 28% to EUR 13.3 billion. Sales growth was driven in
particular by the acquisition of Engelhard, Degussa's construction
chemicals business and Johnson Polymer, as well as by higher sales
prices in the chemicals businesses and in the Oil & Gas segment.
The following factors led to the increase in sales:
Factors influencing sales in comparison with previous year
% of sales 3rd Quarter Jan.-Sept.
Volumes 3 6
Prices 9 9
Acquisitions/divestitures 18 7
Currencies (2) 1
28 23
The Chemicals segment achieved the highest sales growth as a
result of the Catalysts division arising from the acquisition of
Engelhard Corporation. The other divisions in this segment also
increased volumes and prices.
Higher sales prices in the Styrenics division and a rise in sales
volumes in the Polyurethanes division were the main reasons for the
rise in sales in the Plastics segment.
In the Performance Products segment, sales were driven by the
acquisitions that closed on July 1, 2006. The sales growth was due
primarily to the activities acquired from Degussa in the new
Construction Chemicals division and the Johnson Polymer business that
has been assigned to the Performance Chemicals division.
Third-quarter sales by segment
Million EUR
Chemicals 2006 3,442 67%
2005 2,063
Plastics 2006 3,256 10%
2005 2,957
Performance 2006 2,959 41%
Products 2005 2,106
Agricultural 2006 973 (3)%
Products
& Nutrition 2005 1,008
Oil & Gas 2006 2,116 30%
2005 1,630
Sales declined in the Agricultural Products & Nutrition segment as
a result of lower sales prices and currency effects. In the
Agricultural Products division, divestitures to optimize the portfolio
also led to a decline in sales. The Fine Chemicals division posted
higher sales as a result of the pharma custom synthesis business of
the Orgamol Group that was acquired in the fourth quarter of 2005, as
well as the personal care products acquired from Engelhard
Corporation.
In the Oil & Gas segment, sales increased significantly due to
higher prices.
Special items
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Million EUR 2006 2005 2006 2005 2006 2005 2006 2005
Special items in:
- Income from
operations (16) (64) (113) (70) (177) (65) (109)
- Financial result - - - - - 222 -
(16) (64) (113) (70) (177) 157 (109)
Earnings
Compared with the same period of 2005, income from operations
(EBIT) before special items rose by 22% to EUR 1,615 million.
In the Chemicals segment, we significantly increased EBIT before
special items due to higher sales volumes and better margins in the
Petrochemicals and Intermediates divisions.
Earnings in the Plastics segment improved above all due to higher
margins in the Performance Polymers division.
In the Performance Products segment, the earnings growth was due
primarily to the new Construction Chemicals division. In the
Functional Polymers division, margins remained under pressure from
higher raw material costs.
The Agricultural Products division was severely affected by the
extremely difficult situation of customers in Brazil. The loss posted
due to the seasonal nature of the business increased.
In the Fine Chemicals division, earnings rose due to a reduction
in fixed costs and the contribution of Engelhard's personal care
products.
As a result of higher sales prices, the Oil & Gas segment recorded
significantly higher earnings in both the exploration and production
and the natural gas trading business sectors.
Compared with the same period of 2005, third-quarter EBIT rose by
14% to EUR 1,438 million. Special items in income from operations were
related to the mothballing of the THF plant in Caojing, China; the use
of step-up on inventory associated with the acquisition of Degussa's
construction chemicals business; and restructuring measures in the
Fine Chemicals division. Use was made of a provision established in
the first half of 2006 for restructuring measures.
Third-quarter EBIT before special items
Million EUR
Chemicals 2006 444 66%
2005 268
Plastics 2006 316 18%
2005 267
Performance 2006 239 11%
Products 2005 216
Agricultural 2006 (46)(100)%
Products
& Nutrition 2005 (23)
Oil & Gas 2006 749 26%
2005 594
The financial result declined by EUR 309 million to EUR (133)
million. Interest expenses rose in connection with financing for the
acquisitions. The third quarter of 2005 also included a special gain
from the sale of our stake in Basell.
Income before taxes and minority interests declined by 9% to EUR
1,305 million as a result of the significantly lower financial result.
The tax rate was 49% compared with 43% in the third quarter of
2005, which contained the tax-free gain from the Basell sale. The
greater share of EBIT from the Oil & Gas segment also contributed to
the rise in the tax rate. In the third quarter of 2006, foreign taxes
for oil production that are noncompensable with German corporate
income tax amounted to EUR 349 million compared with EUR 317 million
in the same period of the previous year.
Net income declined by 24% to EUR 613 million. Earnings per share
were EUR 1.22 compared with EUR 1.55 in the third quarter of 2005.
BASF Shares
-- BASF shares flat in third quarter
-- Share buybacks for over EUR 800 million in the first nine
months
BASF shares 3rd Quarter Jan.- Sept.
2006 2006
Performance (with dividends reinvested)
BASF (%) 0.6 0.4
DAX 30 (%) 5.7 11.0
EURO STOXX 50 (%) 7.2 11.4
Share prices and trade (XETRA trading)
Average (EUR ) 62.73 63.42
High (EUR ) 64.93 69.49
Low (EUR ) 60.69 58.97
Close (EUR ) 63.15 63.15
Average daily trade in shares (million shares) 2.65 3.01
BASF share performance
At the end of the third quarter, BASF shares were trading at EUR
63.15 or at almost the same price as at the end of the second quarter.
As a result, BASF shares did not perform as well as the DAX 30 and
EURO STOXX 50 indices, which gained 5.7% and 7.2%, respectively, in
the third quarter.
In the first nine months of 2006, BASF shares rose in value by
0.4% (assuming reinvestment of the dividend). The performance of the
DAX 30 and EURO STOXX 50 indices in the same period was 11.0% and
11.4%, respectively.
At the beginning of September, BASF shares were included in the
Dow Jones Sustainability World Index (DJSI World) for the sixth year
in succession. The DJSI World is the most important sustainability
index and represents the top 10% of the largest 2,500 companies in the
Dow Jones Global Index in terms of sustainability in their respective
industries.
Share buybacks
In the third quarter of 2006, BASF Aktiengesellschaft bought back
2.03 million shares on the stock exchange for a total of EUR 127.4
million or an average price of EUR 62.76 per share.
Up to the end of the third quarter, BASF had bought back 7.46
million shares for a total of EUR 469.5 million under the EUR 500
million share buyback program that was announced in February 2006. As
a result, BASF bought back shares for more than EUR 800 million in the
first nine months of 2006.
We also plan to buy back shares in the future.
Up-to-date information on BASF shares is available on the Internet
at www.basf.de/share.
You can reach BASF's investor relations team by calling +49 621
60-48230 or by sending an e-mail to investorrelations@basf.com.
Significant Events and Outlook
Significant events
On August 18, BASF, Huntsman and their Chinese partners - Shanghai
Hua Yi (Group Company), Sinopec Shanghai Gao Qiao Petrochemical
Corporation and Shanghai Chloro-Alkali Chemical Co. Ltd. - held an
opening ceremony at the Shanghai Chemical Industry Park to celebrate
the startup of their integrated isocyanates complex. The project
involved a total capital expenditure of $1 billion. The complex has a
capacity of 240,000 metric tons per year of crude MDI (diphenylmethane
diisocyanate) and 160,000 metric tons of TDI (toluene diisocyanate)
per year and will serve the rapidly growing market for polyurethanes
in China.
On September 14, BASF and SINOPEC signed an agreement on the
preparation of a technical and commercial feasibility study for the
planned expansion of their joint Verbund site in Nanjing, China. The
agreement advances BASF's and SINOPEC's earlier commitment, announced
on July 10, 2006, to invest well above $500 million expanding their
production facilities at their 50-50 joint venture in Nanjing -
BASF-YPC Co. Ltd. The companies plan to expand the capacity of the
steam cracker and invest in additional downstream plants to further
strengthen synergies at the site. The new activities are expected to
come on stream in 2009.
At BASF's site in Antwerp, Belgium, BASF, Dow and Solvay held a
groundbreaking ceremony on September 27 for the first world-scale
plant for the production of propylene oxide (PO) on the basis of
hydrogen peroxide (HP). The HPPO plant will employ a new technology
that has been developed jointly by BASF and Dow. The key advantages of
the technology are lower costs and significantly better environmental
performance.
Outlook
We continue to expect the following conditions in 2006:
-- An average oil price (Brent) of about $65/barrel
-- An average euro/dollar exchange rate of $1.25 per euro
-- Global economic growth and chemical production growth
(excluding pharmaceuticals) of more than 3%
Major risk factors are the political situation in unstable areas
and resulting volatility in prices for raw materials.
In the fourth quarter, we expect demand for our products to remain
strong. Despite a relaxation in the oil price, raw material costs
remain high and continue to put pressure on margins.
For the full year, we continue to expect sales to increase to more
than EUR 50 billion and higher EBIT before special items compared with
the previous year's strong level.
According to our current estimates, we expect the acquisitions of
Engelhard, Degussa's construction chemicals business and Johnson
Polymer to result in synergies of EUR 290 million per year by 2010.
The integration costs, excluding the use of step-up on inventories,
are anticipated to amount to approximately EUR 200 million. Of this
amount, EUR 50 million has already been recorded in EBIT as of
September 30, 2006.
We want to apply the experience gained from the -Ludwigshafen Site
Project and our North American restructuring programs in a new global
program to increase efficiency. Measures under this new program
include the closure of production of high-impact polystyrene in
Tarragona, Spain, as well as the restructuring of the butanediol value
chain and the Fine Chemicals division. We expect total savings of EUR
300 million per year by 2008. The program will be associated with
total one-time expenditures of EUR 160 million as well as write-downs
of EUR 270 million. Of the total amount, approximately 60% has already
been recorded in EBIT as of -September 30, 2006.
Chemicals
-- Strong increase in sales and EBIT before special items
-- Integration of Engelhard proceeds as planned
-- EBIT negatively impacted by THF plant in Caojing, China
Overview Chemicals 3rd Quarter
Million EUR Change
2006 2005 in %
Sales 3,442 2,063 67
Thereof Inorganics 271 251 8
Catalysts 999 19 .
Petrochemicals 1,607 1,309 23
Intermediates 565 484 17
EBITDA 599 408 47
EBIT before special items 444 268 66
EBIT before special items in percent of sales 12.9 13.0 -
EBIT 229 259 (12)
Assets 10,703 5,993 79
Overview Chemicals January - September
Million EUR Change
2006 2005 in %
Sales 8,124 5,892 38
Thereof Inorganics 841 690 22
Catalysts 1,279 55 .
Petrochemicals 4,305 3,672 17
Intermediates 1,699 1,475 15
EBITDA 1,460 1,429 2
EBIT before special items 1,112 1,109 0
EBIT before special items in percent of sales 13.7 18.8 -
EBIT 809 1,030 (21)
Assets - - -
Third-quarter sales in the Chemicals segment rose significantly
(volumes 11%, prices 11%, portfolio 48%, currencies -3%). The sales
growth was primarily due to the acquired catalysts business in
addition to higher sales volumes and price increases. Although
earnings before special items were significantly higher, EBIT was
negatively impacted by high special charges in the Intermediates
division and was lower than in the same period of the previous year.
Inorganics
We increased both sales volumes and our average sales prices.
Sales of inorganic basic chemicals and specialties grew particularly
strongly. The division's earnings declined because margins for
methane-based derivatives such as ammonia and methanol were
particularly negatively affected by significantly higher natural gas
prices.
Catalysts
Sales in the new Catalysts division rose in particular due to the
business with catalysts for diesel engines in Europe and the global
business with process catalysts. The earnings trend is meeting the
expectations we placed on the acquisition of Engelhard. The
integration is proceeding as planned.
Petrochemicals
Sales increased significantly thanks to strong global demand for
cracker products. The Asian and European plasticizers and solvents
businesses also contributed to the sales growth. In the third quarter,
we largely succeeded in passing on high raw material costs to our
customers. Earnings increased significantly compared with the third
quarter of 2005, which was negatively impacted by the effects of the
hurricanes in the United States.
Intermediates
Demand for intermediates continued to develop well in all regions.
In view of strong global demand, we were able to increase prices to
counteract high raw material costs. Earnings before special items
increased compared with the same period of the previous year, in which
capacity utilization rates were lower. The restructuring of the
butanediol value chain and the associated mothballing of the THF plant
in Caojing, China, is part of our program to increase efficiency; the
measure reduced EBIT by EUR 200 million.
Plastics
-- Further increase in sales and earnings
-- Higher earnings contribution from Performance Polymers
-- Groundbreaking for first world-scale HPPO plant
Overview Plastics 3rd Quarter
Million EUR Change
2006 2005 in %
Sales 3,256 2,957 10
Thereof Styrenics 1,297 1,135 14
Performance Polymers 720 743 (3)
Polyurethanes 1,239 1,079 15
EBITDA 438 382 15
EBIT before special items 316 267 18
EBIT before special items in percent of sales 9.7 9.0 -
EBIT 306 260 18
Assets 6,992 6,440 9
Overview Plastics January - September
Million EUR Change
2006 2005 in %
Sales 9,515 8,681 10
Thereof Styrenics 3,680 3,399 8
Performance Polymers 2,208 2,164 2
Polyurethanes 3,627 3,118 16
EBITDA 1,336 1,162 15
EBIT before special items 963 810 19
EBIT before special items in percent of sales 10.1 9.3 -
EBIT 951 808 18
Assets - - -
In the Plastics segment, sales increased as a result of higher
volumes and prices (volumes 6%, prices 5%, portfolio 1%, currencies
-2%). Earnings were significantly higher than in the third quarter of
2005. This was due above all to considerably improved earnings in the
Performance Polymers division.
Styrenics
Higher volumes and, in particular, higher sales prices led to an
increase in sales. Business was especially strong in Europe, where we
benefited from robust demand in the construction sector. Earnings were
higher than in the same period of 2005. Margins, however, remain
unsatisfactory.
To increase capacity utilization rates, we are ceasing production
of high-impact polystyrene in Tarragona, Spain. In the future,
European customers will be supplied from plants in Antwerp, Belgium,
and Ludwigshafen, Germany. This closure is part of our program to
increase efficiency.
Performance Polymers
We succeeded in increasing prices further. Sales were slightly
lower than in the same period of the previous year because volumes for
some products declined. Earnings, however, were significantly higher.
We have strengthened higher value engineering plastics in our
portfolio as a result of smaller acquisitions in 2005 and the startup
of the PBT plant in Kuantan, Malaysia, which is now operating at a
high capacity utilization rate.
Polyurethanes
We greatly increased volumes and sales due to strong worldwide
demand. Increases in raw material costs could only be passed on to the
market to a limited extent. Third-quarter earnings were at the
previous year's high level.
In September, we started work on a new plant to produce propylene
oxide (PO) on the basis of hydrogen peroxide (HP) at our site in
Antwerp, Belgium. Dow and Solvay are our partners in the construction
and subsequent operation of this first world-scale HPPO plant.
Performance Products
-- Sales and earnings increase significantly due to acquisitions
-- Margin pressure for acrylic monomers
-- Integration of Degussa Construction Chemicals and Johnson
Polymer proceeds as planned
Overview Performance Products 3rd Quarter
Million EUR Change
2006 2005 in %
Sales 2,959 2,106 41
Thereof Construction Chemicals 582 - -
Coatings 578 561 3
Functional Polymers 899 823 9
Performance Chemicals 900 722 25
EBITDA 341 299 14
EBIT before special items 239 216 11
EBIT before special items in percent of sales 8.1 10.3 -
EBIT 180 209 (14)
Assets 10,175 4,864 109
Overview Performance Products January - September
Million EUR Change
2006 2005 in %
Sales 7,303 6,112 19
Thereof Construction Chemicals 582 - -
Coatings 1,745 1,588 10
Functional Polymers 2,539 2,374 7
Performance Chemicals 2,437 2,150 13
EBITDA 968 969 0
EBIT before special items 9.5 713 (2)
EBIT before special items in percent of sales 10.5 11.7 -
EBIT 636 715 (11)
Assets - - -
Sales in the Performance Products segment increased in particular
due to our acquisitions (volumes 3%, prices 2%, portfolio 38%,
currencies -2%). We continued to implement our value-over-volume
strategy. Even so, the decline in margins for acrylic monomers
adversely affected earnings before special items. Due to the
contribution of the acquired businesses, earnings before special items
were nevertheless higher than in the third quarter of 2005. EBIT was
impacted by the use of stepup on inventories from the acquired
businesses. Compared with the same period of the previous year, the
segment's assets rose by EUR 5.3 billion, primarily as a result of the
acquisitions.
Construction Chemicals
The new operating division contains Degussa's construction
chemicals business, which was acquired effective July 1, 2006. Sales
developed well, in particular in Admixture Systems in Europe and the
Middle East and in Construction Systems in Europe and North America.
The earnings trend satisfies our expectations. The integration is
proceeding according to plan.
Coatings
Sales increased slightly compared with the third quarter of 2005.
Although sales of automotive (OEM) coatings were lower as a result of
a decline in automotive production in Europe and North America,
worldwide sales of refinish coatings and sales of industrial coatings
in Europe and South America developed well. Third-quarter earnings
were at the previous year's level.
Functional Polymers
Sales increased compared with the third quarter of 2005 due to
higher volumes and the paper coatings business acquired from
Engelhard. Higher raw material costs combined with unchanged sales
prices and a high level of available capacities - in particular for
acrylic monomers - led to a decline in margins. It was not possible to
increase prices for paper dispersions due to our customers'
restructuring activities. Earnings were therefore significantly lower
than in the strong third quarter of 2005.
Performance Chemicals
Sales and earnings increased in the Performance Chemicals division
as a result of both price increases and higher volumes. Both the
acquisition of the Johnson Polymer business with water-based resins
for the coatings and printing inks industries and Engelhard's pigment
business contributed to the increase in sales and earnings.
Agricultural Products & Nutrition
-- Persistently difficult market environment for agricultural
products
-- Fine Chemicals division steps up measures to increase
efficiency
Overview Agricultural Products 3rd Quarter
Million EUR Change
2006 2005 in %
Sales 509 576 (12)
EBITDA (3) 43 .
EBIT before special items (54) (24) .
EBIT before special items in percent of sales (10.6) (4.2) -
EBIT (55) (12) .
Assets 4,559 5,164 (12)
Overview Agricultural Products January - September
Million EUR Change
2006 2005 in %
Sales 2,361 2,578 (8)
EBITDA 547 726 (25)
EBIT before special items 324 547 (41)
EBIT before special items in percent of sales 13.7 21.2 -
EBIT 389 563 (31)
Assets - - -
Third-quarter sales in the Agricultural Products division were
significantly lower than in the same period of 2006 (volumes -1%,
prices/currencies -6%, portfolio -5%). Sales fell due to the
divestiture of large parts of the generics business in North America
and as a result of a decline in prices.
The start to the season in South America did not result in a
turnaround compared with the first half of the year. The appreciation
of the real lowered the export opportunities and hence the liquidity
of many farmers in Brazil. There was therefore weaker demand for our
highvalue fungicides, in particular for soybeans.
Disregarding the effects of divestitures, the fall business in
Europe and North America was stronger than in 2005.
The loss posted due to the seasonal nature of the business
increased. On the basis of business to date, we expect a decline in
sales and earnings for full-year 2006 compared with 2005.
Overview Fine Chemicals 3rd Quarter
Million EUR Change
2006 2005 in %
Sales 464 432 7
EBITDA 12 34 (65)
EBIT before special items 8 1 .7
EBIT before special items in percent of sales 1.7 0.2 -
EBIT (26) 1 .
Assets 1,705 1,289 32
Overview Fine Chemicals January - September
Million EUR Change
2006 2005 in %
Sales 1,377 1,249 10
EBITDA 148 96 54
EBIT before special items 37 28 32
EBIT before special items in percent of sales 2.7 2.2 -
EBIT 47 2 .
Assets - - -
Sales in the Fine Chemicals division increased as a result of both
the pharma custom synthesis business acquired in October 2005 and
Engelhard's personal care business (volumes 2%, prices/currencies -6%,
portfolio 11%). We again increased volumes of aroma chemicals. Lysine
prices remained under pressure and we significantly reduced sales
volumes.
EBIT before special items was higher than in the same period of
2005. This was due to the reduction in fixed costs as well as the
contribution of the acquired personal care activities.
With effect from November 1, 2006, we have combined our human
nutrition and animal nutrition businesses in a single Nutrition unit
to optimally utilize synergies and serve the market more efficiently.
In the third quarter, we initiated further measures to reduce costs
and increase efficiency and flexibility at our site in Minden,
Germany. These measures negatively impacted EBIT.
Oil & Gas
-- Further increase in sales and earnings
-- Baltic Sea pipeline: Priority project to secure European gas
sup
Overview Oil & Gas 3rd Quarter
Million EUR Change
2006 2005 in %
Sales 2,116 1,630 30
Thereof Exploration and production 1,120 904 24
Natural gas trading 996 726 37
EBITDA 894 697 28
Thereof Exploration and production 785 644 22
Natural gas trading 109 53 106
EBIT before special items 749 594 26
Thereof Exploration and production 672 572 17
Natural gas trading 77 22 250
EBIT before special items in percent of sales 35.4 36.4 -
Thereof Exploration and production 60.0 63.3 -
Natural gas trading 7.7 3.0 -
EBIT 754 594 27
Thereof Exploration and production 677 572 18
Natural gas trading 77 22 250
Assets 4,860 4,356 12
Thereof Exploration and production 2,253 2,005 12
Natural gas trading 2,607 2,351 11
Overview Oil & Gas January - September
Million EUR Change
2006 2005 in %
Sales 7,582 5,120 48
Thereof Exploration and production 3,420 2,459 39
Natural gas trading 4,162 2,661 56
EBITDA 2,820 1,973 43
Thereof Exploration and production 2,327 1,712 36
Natural gas trading 493 261 89
EBIT before special items 2,465 1,657 49
Thereof Exploration and production 2,076 1,491 39
Natural gas trading 389 166 134
EBIT before special items in percent of sales 32.5 32.4 -
Thereof Exploration and production 60.7 60.6 -
Natural gas trading 9.3 6.2 -
EBIT 2,470 1,657 49
Thereof Exploration and production 2,081 1,491 40
Natural gas trading 389 166 134
Assets - - -
Thereof Exploration and production - - -
Natural gas trading - - -
Sales and earnings were again significantly higher than in the
same period of 2005 as a result of persistently high crude oil prices
(prices/currencies 30%).
Volumes in the exploration and production business sector declined
slightly. Sales and earnings nevertheless increased compared with the
third quarter of the previous year due to persistently high crude oil
prices. Compared with the third quarter of 2005, the average price of
Brent crude rose by approximately $8/barrel to just under $70/barrel.
In euro terms, this corresponds to an increase of EUR 4/barrel to
approximately EUR 55/barrel.
Sales volumes in the natural gas trading business sector were
slightly higher than in the third quarter of 2005. Sales prices
improved, resulting in a significant increase in sales and earnings.
WINGAS continued to expand its pipeline system and put a new
compressor station into operation. This capital expenditure has
increased the transport capacity of the WEDAL gas pipeline by around
30%.
At the end of August 2006, the final shareholder agreement for the
planned gas pipeline through the Baltic Sea was signed by Gazprom,
Wintershall and E.ON Ruhrgas. The EU Commission recently classified
the planned pipeline as a priority project for securing Europe's
future energy supplies.
Regions
-- Europe: Significant increase in sales and earnings
-- North America: Sales boosted by acquisitions, significantly
stronger earnings
-- Asia: High earnings contribution from petrochemicals
Regions Sales Sales
(location of company) (location of customer)
Change Change
Million EUR 2006 2005 in % 2006 2005 in %
3rd Quarter
Europe 7,426 5,802 28 6,922 5,436 27
Thereof Germany 5,297 3,927 35 2,374 2,097 13
North America (NAFTA) 3,206 2,291 40 3,263 2,266 44
Asia Pacific 1,987 1,645 21 2,145 1,820 18
South America, Africa,
Middle East 680 623 9 969 839 15
13,299 10,361 28 13,299 10,361 28
January - September
Europe 22,711 18,082 26 21,388 17,116 25
Thereof Germany 16,598 12,378 34 7,785 6,351 23
North America (NAFTA) 8,563 7,141 20 8,618 7,097 21
Asia Pacific 5,342 4,395 22 5,793 4,746 22
South America, Africa,
Middle East 1,520 1,407 8 2,337 2,066 13
38,136 31,025 23 38,136 31,025 23
Regions EBIT before
special items
Change
Million EUR 2006 2005 in %
3rd Quarter
Europe 1,242 1,015 22
Thereof Germany 985 703 40
North America (NAFTA) 175 110 59
Asia Pacific 125 113 11
South America, Africa,
Middle East 73 89 (18)
1,615 1,327 22
January - September
Europe 4,175 3,348 25
Thereof Germany 3,125 2,217 41
North America (NAFTA) 736 732 1
Asia Pacific 365 295 24
South America, Africa,
Middle East 114 172 (34)
5,390 4,547 19
Sales by location of company in Europe climbed 28% in the third
quarter of 2006. EBIT before special items rose by 22% to EUR 1,242
million. The sales and earnings growth was due in particular to the
Oil & Gas segment and the new Catalysts and Construction Chemicals
divisions.
Companies in North America increased sales in dollar and euro
terms by 45% and 40%, respectively. Sales were boosted in particular
by the newly acquired businesses. The Petrochemicals and Polyurethanes
divisions posted significantly higher sales and earnings thanks to
higher volumes. At EUR 175 million, EBIT before special items was 59%
higher than in the same period of 2005.
Sales by location of company in Asia Pacific increased by 24% in
local currency terms and by 21% in euro terms. EBIT before special
items rose 11% to EUR 125 million. In particular, the Petrochemicals
division significantly increased margins and earnings at the Verbund
sites in Nanjing, China, and Kuantan, Malaysia, due to higher sales
prices for cracker products and oxo alcohols.
In South America, Africa, Middle East, third-quarter sales by
location of company increased by 11% in local currencies and by 9% in
euros. EBIT before special items was negatively impacted by the
difficult market environment for the Agricultural Products division in
Brazil.
Overview of Other Topics
Research and development
Innovative products, processes and business models play a major
part in ensuring the sustainability of BASF's economic success.
Hexamoll(R) DINCH, an innovative plasticizer, was recently honored
with the ICIS Publications Innovation Award 2006 as best product
innovation. BASF's developers specially designed Hexamoll DINCH for
use in sensitive applications such as toys and medical devices.
The product has been approved by the European Food Safety
Authority, and production capacity is now being expanded.
In September, we opened a Joint Innovation Lab for organic
electronics at our Ludwigshafen site. At this facility, BASF employees
will work together with industrial and academic partners. At present,
the researchers are concentrating on organic light-emitting diodes
(OLEDs) and organic photovoltaics. OLEDs are flat, thin light-emitting
devices made from organic semiconductive materials. As lighting
panels, they open up completely new possibilities in lighting
technology.
Employees
Compared with the end of 2005, the number of BASF Group employees
rose by 14,573 to 95,518 as of September 30, 2006. The increase was
due entirely to acquisitions, in particular of Engelhard and Degussa's
construction chemicals business.
As a result of the acquisitions, the number of employees increased
in all regions. At 58.3%, the largest increase was in North America.
Employee numbers rose by 30.6% in Asia Pacific; by 16.4% in South
America, Africa, Middle East; and by 9% in Europe.
Employees by region
June 30, 2006 Dec. 31, 2005
Europe 61,705 56,614
North America (NAFTA) 15,559 9,826
Asia Pacific 12,626 9,669
South America, Africa,
Middle East 5,628 4,836
95,518 80,945
As a result of the acquisitions, personnel costs rose by 8.5% to
EUR 4,436 million in the first nine months of 2006.
Consolidated Statements of Income
3rd Quarter
Million EUR Change
2006 2005 in %
Sales 13,299 10,361 28.4
Cost of sales 9,613 7,277 32.1
Gross profit on sales 3,686 3,084 19.5
Selling expenses 1,325 1,083 22.3
General and administrative expenses 238 194 22.7
Research and development expenses 327 268 22.0
Other operating income 169 96 76.0
Other operating expenses 527 373 41.3
Income from operations 1,438 1,262 13.9
(Expenses)/income from financial assets 19 219 (91.3)
Interest result (141) (40) .
Other financial result (11) (3) .
Financial result (133) 176 .
Income before taxes and minority interests 1,305 1,438 (9.2)
Income taxes 645 622 3.7
Net income before minority interests 660 816 (19.1)
Minority interests 47 8 487.5
Net income 613 808 (24.1)
Earnings per share (EUR )
Number of shares, in million (weighted) 504 521 (3.3)
Dilutive effect - - -
Earnings per share (EUR )
Undiluted 1.22 1.55 (21.3)
Diluted 1.22 1.55 (21.3)
January - September
Million EUR Change
2006 2005 in %
Sales 38,136 31,025 22.9
Cost of sales 37,159 21,205 28.1
Gross profit on sales 10,977 9,820 11.8
Selling expenses 3,571 3,172 12.6
General and administrative expenses 631 551 14.5
Research and development expenses 910 774 17.6
Other operating income 587 278 111.2
Other operating expenses 1,368 1,253 9.2
Income from operations 5,084 4,348 16.9
(Expenses)/income from financial assets 64 332 (80.7)
Interest result (244) (131) (86.3)
Other financial result 91 (62) .
Financial result (89) 139 .
Income before taxes and minority interests 4,995 4,487 11.3
Income taxes 2,364 1,941 21.8
Net income before minority interests 2,631 2,546 3.3
Minority interests 148 99 49.5
Net income 2,483 2,447 1.5
Earnings per share (EUR )
Number of shares, in million (weighted) 506 528 (4.2)
Dilutive effect - - -
Earnings per share (EUR )
Undiluted 4,91 4,63 6.0
Diluted 4,91 4,63 6.0
Consolidated Balance Sheets
Million EUR Sept. Sept. Change Dec. Change
30, 30, in % 31, in %
2006 2005 2005
Long-term assets
Intangible assets 9,626 3,710 159.5 3,720 158.8
Property, plant and equipment 15,133 13,659 10.8 13,987 8.2
Investments accounted for using
the equity method 269 241 11.6 244 10.2
Other financial assets 1,247 936 33.2 813 53.4
Deferred taxes 1,087 1,312 (17.1) 1,255 (13.4)
Other long-term assets 616 334 84.4 524 17.6
27,978 20,192 38.6 20,543 36.2
Short-term assets
Inventories 6,594 5,354 23.2 5,430 21.4
Accounts receivable, trade 7,833 6,306 24.2 7,020 11.6
Other receivables and
miscellaneous short-term
assets 2,463 1,804 36.5 1,586 55.3
Liquid funds 872 4,311 (79.8) 1,091 (20.1)
17,762 17,775 (0.1) 15,127 17.4
Total assets 45,740 37,967 25.5 35,670 28.2
Million EUR Sept. Sept. Change Dec. Change
30, 30, in % 31, in %
2006 2005 2005
Stockholders' equity
Subscribed capital 1,284 1,330 (3.5) 1,317 (2.5)
Capital surplus 3,135 3,084 1.7 3,100 1.1
Retained earnings 12,669 11,922 6.3 11,928 6.2
Other comprehensive income 354 572 (38.1) 696 (49.1)
Minority interests 520 444 17.1 482 7.9
17,962 17,352 3.5 17,523 2.5
Long-term liabilities
Provisions for pensions and
similar obligations 1,514 4,685 (67.7) 1,547 (2.1)
Other provisions 2,892 2,455 17.8 2,791 3.6
Deferred taxes 1,960 829 136.4 699 180.4
Financial indebtedness 5,906 3,561 65.9 3,682 60.4
Other long-term liabilities 967 954 1.4 1,043 (7.3)
13,239 12,484 5.3 9,762 34.7
Short-term liabilities
Accounts payable, trade 3,591 2,332 54.0 2,777 29.3
Provisions 2,710 2,896 (6.4) 2,763 (1.9)
Tax liabilities 832 969 (14.1) 887 (6.2)
Financial indebtedness 5,058 318 . 259 .
Other short-term liabilities 2,348 1,616 45.3 1,699 38.2
14,539 8,131 79.9 8,385 74.5
Total stockholders' equity and
liabilities 45,740 37,967 20.5 35,670 28.2
Consolidated Statements of Cash Flows
January -
September
Million EUR 2006 2005
Net income 2,483 2,447
Depreciation and amortization of long-term assets 2,059 1,663
Changes in net working capital (755) 199
Miscellaneous items (224) (299)
Cash provided by operating activities 3,563 4,010
Payments related to tangible and intangible assets (1,580) (1,285)
Acquisitions/divestitures (6,978) 1,017
Financial investments and other items 84 109
Cash using in investing activities (8,474) (159)
Proceeds from capital increases/repayments (790) (1,115)
Changes in financial liabilities 6,699 230
Dividends (1,141) (945)
Cash provided by/used in financing activities 4,768 (1,830)
Net changes in cash and cash equivalents (143) 2,021
Cash and cash equivalents as of beginning of year and
other changes 902 2,125
Cash and cash equivalents 759 4,146
Marketable securities 113 165
Liquid funds 872 4,311
At EUR 3,563 million, cash provided by operating activities was
EUR 447 million lower than in the third quarter of 2005. This change
was primarily due to the payment of liabilities of the acquired
companies.
Cash used in investing activities amounted to EUR 8,474 million.
At EUR 1,580 million, payments related to tangible and intangible
assets were higher than in the same period of the previous year but
were significantly below amortization and depreciation. Acquisitions,
in particular of Engelhard, Degussa's construction chemicals business
and Johnson Polymer, resulted in a cash outflow of EUR 7 billion,
whereas the third quarter of 2005 contained the proceeds from the sale
of our stake in Basell.
In cash provided by financing activities, share buybacks and
dividend payments led to a cash outflow of EUR 1,949 million.
In the first three quarters of 2006, we bought back 12.8 million
shares for EUR 808 million or an average of EUR 63.00 per share.
At EUR 10,964 million, financial indebtedness was EUR 7,023
million higher than on December 31, 2005. To finance the acquisitions,
we issued bonds with a total volume of EUR 2 billion in the second
quarter as well as commercial paper equivalent to EUR 4.5 billion.
As of September 30, 2006, net debt was EUR 10,092 million and the
equity ratio was 39.3%.
Consolidated Statements of Recognized Income and Expense
Income and expense items
January -
September
Million EUR 2006 2005
Net income before minority interests 2,631 2,546
Fair value changes in available-for-sale securities (4) 32
Cash-flow hedges (20) 17
Change in foreign currency translation adjustments (332) 595
Actuarial gains/losses from pensions and other obligations 109 (673)
Deferred taxes (24) 244
Minority interests (13) 27
Total income and expenses recognized in equity (284) 242
Total income and expense for the period 2,347 2,788
Thereof BASF 2,212 2,662
Thereof minority interests 135 126
Development of income Retained
and expense recognized earnings
directly in equity
Actuarial
gains/losses
Million EUR
As of January 1, 2006 (894)
Additions 109
Releases -
Deferred taxes (38)
As of June 30, 2006 (823)
As of January 1, 2005 (234)
Additions -
Releases (673)
Deferred taxes 256
As of June 30, 2005 (651)
Development of Other comprehensive income Total
income income and
and expense expense
recognized recognized
directly in equity directly
in equity
Foreign Fair value Cash- Total of
currency changes in flow other
translation available- hedges compre-
adjustments for hensive
sale income
securities
Million EUR
As of January 1,
2006 475 258 (37) 696 (198)
Additions - 30 (26) 4 113
Releases (332) (34) 6 (360) (360)
Deferred taxes 6 1 7 (14) (24)
As of June 30, 2006 149 255 (50) 354 (469)
As of January 1,
2005 (226) 193 (27) (60) (294)
Additions 595 43 14 652 (21)
Releases - (11) 3 (8) (8)
Deferred taxes (11) 5 (6) (12) 244
As of June 30, 2005 358 230 (16) 572 (79)
Consolidated Statements of Stockholders' Equity
January - September 2006 Number of Subscribed Capital
subscribed capital surplus
shares
outstanding
Million EUR
As of January 1, 2006 514,379,000 1,317 3,100
Share buy-back and
cancellation of own shares
including own shares intended
to
be cancelled (12,829,000) (33) 35
Capital injection by minority
interests - - -
Dividends paid - - -
Net income - - -
Income and expense recognized
directly
in equity - - -
Change in scope of
consolidation and
other changes - - -
As of September 30, 2006 501,550,000 1,284 3,135
January - September 2005 Number of Subscribed Capital
subscribed capital surplus
shares
outstanding
Million EUR
As of January 1, 2005 540,440,410 1,384 3,028
Share buy-back and
cancellation of own shares
including own shares intended
to
be cancelled (20,902,229) (54) 56
Capital distribution to
minority interests - - -
Dividends paid - - -
Net income - - -
Income and expense recognized
directly
in equity - - -
Conditional capital: Exercise
of
conversion rights by former
Wintershall
sharejolders 819 - -
Change in scope of
consolidation and
other changes - - -
As of September 30, 2005 519,539,000 1,330 3,084
January - September 2006 Retained Other com- Minority Stock-
earnings prehensive interests holders'
income equity
Million EUR
As of January 1, 2006 11,928 696 482 17,523
Share buy-back and
cancellation of own shares
including own shares intended
to
be cancelled (810) - - (808)
Capital injection by minority
interests - - 18 18
Dividends paid (1,014) - (127) (1,141)
Net income 2,483 - 148 2,631
Income and expense recognized
directly
in equity 71 (342) (13) 284
Change in scope of
consolidation and
other changes 11 - 12 23
As of September 30, 2006 12,669 354 520 17,962
January - September 2005 Retained Other com- Minority Stock-
earnings prehensive interests holders'
income equity
Million EUR
As of January 1, 2005 11,923 (60) 328 16,603
Share buy-back and
cancellation of own shares
including own shares intended
to
be cancelled (1,126) - - (1,124)
Capital distribution to
minority interests - - 10 10
Dividends paid (904) - (41) (945)
Net income 2,447 - 99 2,546
Income and expense recognized
directly
in equity (417) 632 27 242
Conditional capital: Exercise
of
conversion rights by former
Wintershall
sharejolders - - - -
Change in scope of
consolidation and
other changes (1) - 21 20
As of September 30, 2005 11,922 572 444 17,352
Segment Reporting
3rd Quarter Sales EBITDA
Million EUR 2006 2005 in % 2006 2005 in %
Chemicals 3,442 2,063 66.8 599 408 46.8
Plastics 3,256 2,957 10.1 438 382 14.7
Performance Products 2,959 2,106 40.5 341 299 14.0
Agricultural Products &
Nutrition 973 1,008 (3.5) 9 77 (88.3)
Thereof Agricultural
Products 509 576 (11.6) (3) 43 .
Fine Chemicals 464 432 7.4 12 34 (64.7)
Oil & Gas 2,116 1,630 29.8 894 697 28.3
Other(a) 553 597 (7.4) 87 (20) .
13,299 10,361 28.4 2,368 1,843 28.5
3rd Quarter Income from operations Income from
(EBIT) before special operations (EBIT)
items
Million EUR 2006 2005 in % 2006 2005 in %
Chemicals 444 268 65.7 229 259 (11.6)
Plastics 316 267 18.4 306 260 17.7
Performance Products 239 216 10.6 180 209 (13.9)
Agricultural Products &
Nutrition (46) (23) (100.0) (81) (11) .
Thereof Agricultural
Products (54) (24) . (55) (12) .
Fine Chemicals 8 1 . (26) 1 .
Oil & Gas 749 594 26.1 754 594 26.9
Other(a) (87) 5 . 50 (49) .
1.615 1.327 21.7 1,438 1,262 13.9
3rd Quarter Research and Assets(b)
development
expenses
Chemicals 46 34 35.3 10,703 5,993 78.6
Plastics 38 33 15.2 6,992 6,440 8.6
Performance Products 84 55 52.7 10,175 4,864 109.2
Agricultural Products &
Nutrition 103 98 5.1 6,264 6,453 (2.9)
Thereof
Agricultural Products 82 80 2.5 4,559 5,164 (11.7)
Fine Chemicals 21 18 16.7 1,705 1,289 32.3
Oil & Gas - - - 4,860 4,356 11.6
Other(a) 56 48 16.7 6,746 9,861 (31.6)
327 268 22.0 45,740 37,967 20.5
3rd Quarter Additions to Amortization and
fixed assets(c) depreciation(c)
Chemicals 155 77 101.3 370 149 148.3
Plastics 103 113 (8.8) 132 122 8.2
Performance Products 3,422 61 . 161 90 78.9
Agricultural Products &
Nutrition 20 33 (39.4) 90 88 2.3
Thereof
Agricultural Products 1 22 (95.5) 52 55 (5.5)
Fine Chemicals 19 11 72.7 38 33 15.2
Oil & Gas 178 106 67.9 140 103 35.9
Other(a) 44 18 144.4 37 29 27.6
3,922 408 . 930 581 60.1
Segment Reporting
January - September Sales EBITDA
Million EUR 2006 2005 in % 2006 2005 in %
Chemicals 8,124 5,892 37.9 1,460 1,429 2.2
Plastics 9,515 8,681 9.6 1,336 1,162 15.0
Performance Products 7,303 6,112 19.5 968 969 (0.1)
Agricultural Products &
Nutrition 3,738 3,827 (2.3) 695 822 (15.5)
Thereof Agricultural
Products 2,361 2,578 (8.4) 547 726 (24.7)
Fine Chemicals 1,377 1,249 10.2 148 96 54.2
Oil & Gas 7,582 5,120 48.1 2,820 1,973 42.9
Other(a) 1,874 1,393 34.5 (136) (344) 60.5
38,136 31,025 22.9 7,143 6,011 18.8
January - September Income from Income from
operations (EBIT) operations (EBIT)
before special
items
Million EUR 2006 2005 in % 2006 2005 in %
Chemicals 1,112 1,109 0.3 809 1,030 (21.5)
Plastics 963 810 18.9 951 808 17.7
Performance Products 696 713 (2.4) 636 715 (11.0)
Agricultural Products &
Nutrition 361 575 (37.2) 436 565 (22.8)
Thereof Agricultural
Products 324 547 (40.8) 389 563 (30.9)
Fine Chemicals 37 28 32.1 47 2 .
Oil & Gas 2,465 1,657 48.8 2,470 1,657 49.1
Other(a) (207) (317) 34.7 (218) (427) 48.9
5,390 4,547 18.5 5,084 4,348 16.9
January - September Research and Assets(b)
development
expenses
Chemicals 112 89 25.8 10,703 5,993 78.6
Plastics 111 102 8.8 6,992 6,440 8.6
Performance Products 203 152 33.6 10,175 4,864 109.2
Agricultural Products &
Nutrition 299 276 8.3 6,264 6,453 (2.9)
Thereof
Agricultural Products 245 223 9.9 4,559 5,164 (11.7)
Fine Chemicals 54 53 1.9 1,705 1,289 32.3
Oil & Gas - 1 - 4,860 4,356 11.6
Other(a) 185 154 20.1 6,746 9,861 (31.6)
910 774 17.6 45,740 37,967 20.5
January - September Additions to Amortization and
fixed assets(c) depreciation(c)
Chemicals 3,550 534 . 651 399 63.2
Plastics 437 315 38.7 385 354 8.8
Performance Products 4,424 249 . 332 254 30.7
Agricultural Products &
Nutrition 339 97 249.5 259 257 0.8
Thereof
Agricultural Products 53 48 10.4 158 163 (3.1)
Fine Chemicals 286 49 483.7 101 94 7.4
Oil & Gas 368 356 3.4 350 316 10.8
Other(a) 361 69 423.2 82 83 (1.2)
9,479 1,620 485.1 2,059 1,663 23.8
(a) "Other" contains the fertilizers business and other businesses
as well as expenses, income and assets not allocated to the
segments. This item also contains foreign currency results
from financial indebtedness that are not allocated to the
segments, from hedging of forecasted sales as well as from
currency positions that are macrohedged (EUR (30) million in
the third quarter (2005: EUR 19 million) and EUR 63 million in
the first nine months (2005: EUR (120) million)).
(b) 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, liquid funds,
financial receivables, deferred taxes; September 30, 2006: EUR
4,827 million, September 30, 2005: EUR 8,194 million).
(c) Intangible and tangible fixed assets
Explanations to the Interim Financial Statements
1. Basis of presentation
The Consolidated Financial Statements of BASF Group for the year
ended December 31, 2005 were prepared according to the International
Financial Reporting Standards (IFRS) 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 2005 is
available on the Internet at corporate.basf.com/financial-report.
The previous year's figures have been adjusted as follows in
accordance with the changes made effective December 31, 2005: Expenses
in the Oil & Gas segment related to exploration for oil and gas
deposits and to dry holes are now recorded as other operating expenses
rather than as research and development expenses. In association with
the change to IAS 19, actuarial gains and losses from the valuation of
pension obligations are recognized against retained earnings in the
reporting period in which they occur.
Compared with the end of 2005, the assumptions used to determine
expenses for pension benefit were changed as follows with effect from
September 30, 2006: The interest rate was increased from 4.25% to
4.50% and the expected pension increase from 1.50% to 1.75%.
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 follo
2006 2005
As of January 1 180 160
Thereof proportionally
consolidated 15 12
First-time consolidations 167 28
Thereof proportionally
consolidated - 4
Thereof changes in the
consolidation
method 1 (1)
Deconsolidations 4 8
Thereof proportionally
consolidated - -
As of September 30/December 31 343 180
Thereof proportionally
consolidated 15 15
First-time consolidations since January 1, 2006 comprised:
-- A total of 79 companies associated with the acquisition of
Engelhard Corporation;
-- A total of 70 companies from the acquisition of Degussa's
construction chemicals business;
-- A total of three companies from the acquisition of Johnson
Polymer;
-- The biotechnology company CropDesign N.V., Belgium, acquired
in May;
-- BASF Services Europe GmbH, Berlin, and BASF Asia Pacific
Service Centre Sdn. Bhd., Malaysia, which, respectively,
perform finance and human resources services for BASF
companies in Europe and Asia; and
-- Twelve previously unconsolidated companies with headquarters
in Germany, Spain, Australia, China, Malta and Switzerland due
to their increased importance.
Four companies have been deconsolidated since the beginning of
2006 due to their decreased significance or merger with other BASF
companies.
Companies accounted for using the equity method were as follows:
Sept. 30, Dec. 31, 2005
2006
Affiliated companies 10 11
Joint ventures 2 2
Other associated companies 3 3
15 16
3. Acquisitions/divestitures
Effect of acquisitions and divestitures
on BASF Group assets
September 30, 2006
Million
EUR %
Long-term assets 8,344 70.4
Thereof goodwill 2,879 24.3
Intangible assets 3,249 27.4
Property, plant and equipment 1,759 14.8
Short-term assets 3,504 29.6
Thereof Inventories 962 8.1
Accounts receivable, trade 1,043 8.8
Other receivables and miscellaneous short-term
assets 1,357 11.5
Assets 11,848 100.0
The provisional purchase price allocations for Engelhard
Corporation, Degussa's construction chemicals business and Johnson
Polymer are included in the above table under the respective balance
sheet items.
-- Important Dates -- Contacts
-- February 22, 2007 -- Corporate Media Relations:
Annual Results 2006 Michael Grabicki
-- April 26, 2007 Phone: +49 621 60-99938
Interim Report First Quarter Fax: +49 621 60-92693
2007 and Annual Meeting -- Investor Relations:
-- August 1, 2007 Magdalena Moll
Interim Report Second Phone: +49 621 60-48230
Quarter 2007 Fax: +49 621 60-22500
-- October 30, 2007 -- General inquiries
-- Interim Report Third Quarter Phone: +49 621 60-0
2007 Fax: +49 621 60-42525
-- Internet: corporate.basf.com
-- BASF Aktiengesellschaft
67056 Ludwigshafen
Germany
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 Annual
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.
You can find this and other publications from
BASF on the Internet at www.corporate.basf.com.
You can also order the reports
-- by telephone: +49 621 60-91827
-- by fax: +49 621 60-20162
-- on the Internet: www.corporate.basf.com/mediaorders
CONTACT: BASF
Michael Grabicki, +49 621 60-99938
Fax: +49 621 60-92693
michael.grabicki@basf.com
or
Investor Relations
Magdalena Moll, +49 621-48230
Fax:+49 621 22500
presse.kontakt@basf.com
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BASF Aktiengesellschaft
November 2, 2006 By: /s/ Elisabeth Schick
------------------------------------------------
Name: Elisabeth Schick
Title: Director Site Communications Ludwigshafen
and Europe
By: /s/ Christian Schubert
------------------------------------------------
Name: Christian Schubert
Title: Director Corporate Communications
BASF Group