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Strategic Changes to Finance of BASFSAP C.I.S CFO Roundtable

May 23rd, 2012Moscow

BASF – The Chemical CompanyWe create chemistry for a sustainable future

Our chemicals are used in almost all industries

We combine economic success, social responsibility and environmental protection.

Sales 2011: €73,497 million; YTD growth +15%thereof Russia & CIS € ~950 million1); YTD growth +32%

EBIT 2011: €8,586 million

Employees (as of December 31, 2011): 111,141thereof Russia & CIS more than 1,000

In 2011, BASF filed for around 1,050 new patents worldwide

Expenditures for R&D circa €1.61 billion world leader in chemical industry

Strongest innovation power in the chemical industry (No.1 in the Patent Asset IndexTM)

6 Verbund sites and around 370 production sitesthereof Russia & CIS 10 production sites

1) w/o Oil & Gas

Six business segments contain 15 divisions which bear the operational responsibility and manage 70 global and regional business units

These in turn develop strategies for 76 strategic business units

Regional divisions contribute to the local development of BASF’s business, help to exploit market potential and are responsible for optimizing the infrastructure for our businesses

Three central divisions, five corporate departments and ten Competence Centers provide Group-wide services such as finance, investor relations, communications, human resources, research, engineering and site management

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Our portfolio

Oil & Gas Classical Chemicals Customized Products

Functionalized Materials and

SolutionsExcellent position and growth opportunities, synergies with chemical businesses

Chemical business based on our production Verbund

Customer oriented specialties, backward integration in Verbund value chains

Integration of competencies in chemistry: R&D, technology, market knowledge and global access to customer industries

Exploration &production of oil and gas, gas trading activities

Cracker products, plasticizers, acrylic acid, MDI/TDI

PU systems, vitamins, personal care ingredients

Battery materials, water solutions, crop protection agents, engineering plastics

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BASF Global Finance Strategy

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BASF Global Finance Mission to provide

•Optimized financing

•Effective financial risk management

•Fully integrated financial compliance

•Strong governance

•Efficient processes

•Reliable financial information and services

•Comprehensive business support

Finance is mainly Quality driven (5 of 7), not Cost

Megatrends in Finance

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OverviewYear Median Word ClassDelta

1992 1,9 1,5 0,41994 1,7 1,28 0,421996 1,5 1,1 0,41998 1,4 1 0,42000 1,2 0,9 0,32002 1,1 0,72 0,382004 1,08 0,74 0,342005 1,26 0,73 0,532006 1,22 0,67 0,552007 1,24 0,61 0,632008 1,17 0,58 0,592009 1,13 0,6 0,532010 1,16 0,61 0,55

Source: Hacket Group

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0

0,2

0,4

0,6

0,8

1

1,2

1,4

1,6

1,8

2

1992 1994 1996 1998 2000 2002 2004 2005 2006 2007 2008 2009 2010

Finance Cost as a Percentage of Revenue Trending

Median

Word Class

Delta

2005 was a turning pointWorld class Finance organizations significantly increased gap to Median Organizations from previously average of 0,38% to 0,56%For BASF group this equals to € 13,3 million

QUALITY COST

Finance Roles

Business Partner•Act as business advisor and integrator of the total business view•Provide insight and robust challenge and support of commercial decisions•Take ownership for and actively manages the financial drivers of value

Score Keeper•Focused on bookkeeping•Efforts expended on transaction processing and providing month end result•Inward looking culture

Custodian•Focused on world-class governance•Works with the business to ensure compliance and effective controls•Custodian of assets and value protection•Conscience of the business

Commentator•Explain the business story in numbers and variances•Business recognizes the value of decision support available within finance and request support& comments as required

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Finance Roles

Business Partner•Act as business advisor and integrator of the total business view•Provide insight and robust challenge and support of commercial decisions•Take ownership for and actively manages the financial drivers of value

Score Keeper•Focused on bookkeeping•Efforts expended on transaction processing and providing month end result•Inward looking culture

Custodian•Focused on world-class governance•Works with the business to ensure compliance and effective controls•Custodian of assets and value protection•Conscience of the business

Commentator•Explain the business story in numbers and variances•Business recognizes the value of decision support available within finance and request support& comments as required

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BASF approach to Stay World Class

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2010 organization 2010 organization alignmentalignment2015 Global Processes

2020 Global Finance

Consolidation of all finance and logistic

processes on one SAP platform

Consolidation of all finance and logistic

processes on one SAP platform

Fine tuning of activity split

Fine tuning of activity split

Implementation of shared service center organization in each

region

Global shared service center organization

Global shared service center organization

End to End

Global Audits Global Audits

Access RightsAccess Rights

End to EndGlobal Governance - Process Overview

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Contract framework & visibility, spend visibility, KPI frameworkContract framework & visibility, spend visibility, KPI framework

Outbound

Inbound

Manage freight

cost

Manage freight

cost

Transportation Management*

Integrated Non Conformance Management for Procurement, Production, Transportation Management & SalesIntegrated Non Conformance Management for Procurement, Production, Transportation Management & Sales

Integrated Non Conformance Management

Order to Cash

Invoice verificationInvoice

verification

Invoice customers

Invoice customers

Manage payments Manage payments

Manage customer

return

Manage customer

return

Monitor transport Monitor

transportPlan

transportPlan

transportExecute

transportExecute

transport

Purchase to Pay

Preparesales order

Preparesales order

Manage Purchase

to Pay channels

Manage Purchase

to Pay channels

Create & update sales order

Create & update sales order

Create & update

outbound delivery

Create & update

outbound delivery

Process outbound

goods movement

Process outbound

goods movement

Create shipment

request

Create shipment

request

Create & approve

purchase order

Create & approve

purchase order

Create &approve purchase

requisition

Create &approve purchase

requisition

* Scope of global harmonization: liner shipment, truck inbound

Book to Report

Closing &ReportingClosing &Reporting

IncomeStatement

IncomeStatement

Product Costing& Inventory

Valuation

Product Costing& Inventory

Valuation

CostAccounting

CostAccounting

Fixed AssetsFixed

AssetsGeneral LedgerGeneral Ledger

Only Global Finance Transformation ScopeOnly Global Finance Transformation Scope Parallel ProcessParallel ProcessCommon Process (GFT + Logistics)Common Process (GFT + Logistics)

• In the past years, BASF‘s business processes were globally harmonized, designed and verified based on business requirements

• Harmonized processes have proven to support business effectively and efficiently across businesses, regions and functions

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Local Service ConceptLocal Service ConceptLocal Service ConceptLocal Service Concept

• Decentralized, heterogeneous Finance and HR processes• Full Finance and HR Teams and competences in group

companies• Uneven distribution of know how in the group companies• Tailor-made infrastructure

• Decentralized, heterogeneous Finance and HR processes• Full Finance and HR Teams and competences in group

companies• Uneven distribution of know how in the group companies• Tailor-made infrastructure

Many heterogeneous Service Teams

A Change of ParadigmA Change of ParadigmA Change of ParadigmA Change of Paradigm

European Shared Service CenterEuropean Shared Service CenterEuropean Shared Service CenterEuropean Shared Service Center

• Standardized European processes• Efficient split of activities, use of synergies• Process specialists in the Shared Service Center• Best practices shared among the BASF Group

• Standardized European processes• Efficient split of activities, use of synergies• Process specialists in the Shared Service Center• Best practices shared among the BASF Group

One Team – Several Places

Cost and profitability accounting, asset accounting, product costing

Cost and profitability accounting, asset accounting, product costing

Acc. Receivable incl. requests for payment, clearance of incoming orders

Acc. Receivable incl. requests for payment, clearance of incoming orders

General ledger, monthly and annual closing

General ledger, monthly and annual closing

Management of payments, netting, liquidity forecast

Management of payments, netting, liquidity forecast

Processing of accounts payable (incl. Scanning), Managing of travel costs

Processing of accounts payable (incl. Scanning), Managing of travel costs

Administration and maintenance of customer

Administration and maintenance of customer

• Consistency: Transparent Data Administration• Efficiency: Bundling of Know How concerning data and information

dependencies• Quality: Improvement through specialization and guarantee of FRC

compliance

• Consistency: Transparent Data Administration• Efficiency: Bundling of Know How concerning data and information

dependencies• Quality: Improvement through specialization and guarantee of FRC

compliance

Shared Service Center Organization

Main Finance services/ functions Brief Description

115 companies in Europe receive services from the SSC112,000 invoices are processed per month by the ESSC

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Status: 53 companies migrated in 2011; 164 will in 2012

Consolidation of Finance and Logistic Processes on One SAP platform

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• Simplification of the BASF system landscape and reduction in process deviations

• Enablement of transparent and comparable data across BASF Group

• Efficient implementation of differentiated service levels per business model

• Streamlined global supply chain operations, functional services and reporting

• Enablement of a globally integrated and consistent IS Support and Organization

• One time IS cost savings of €16,8 m

• Streamlined approach to organizational structure changes caused by mergers and acquisitions, divestitures, product portfolio reassignments and strategic projects

• Development of a repository of re-usable templates and tools for future integration and migration projects

• Reduction of future development efforts due tot the creation of a single globally harmonized system

• Annual IS cost savings of €14,6 m

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Fine tuning of activity split

Implementation of Process Simplification and Standardization at BASF

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1515

Chemicals

Inorganics

Petrochemicals

Intermediates

Plastics

PerformancePolymers

Polyurethanes

Performance Products

Dispersions & Pigments

Care Chemicals

Nutrition & Health

Paper Chemicals

PerformanceChemicals

Functional Solutions

Catalysts

ConstructionChemicals

Coatings

AgriculturalSolutions

Crop Protection

Oil & Gas

Exploration & Production

Natural Gas Trading

Structure of BASF’s segments

Sales: € 12,051 mEBIT: € 2,111 m

Sales: € 4,165 mEBIT: € 808 m

Sales: € 11,361 mEBIT: € 427 m

Sales: € 15,697 mEBIT: € 1,361 m

Sales: € 10,990 mEBIT: € 1,259 m

Sales: € 12,958 mEBIT: € 2,442 m

Contributions YTD 2011: