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EXHIBIT 99.2
49TH ANNUAL MEETING
APRIL 26, 2001
ADDING VALUE THROUGH GROWTH AND INNOVATION
SPEECH BY
DR. JUERGEN F. STRUBE, CHAIRMAN OF THE BOARD
OF EXECUTIVE DIRECTORS OF BASF AKTIENGESELLSCHAFT
Shareholders, guests, ladies and gentlemen,
Welcome to BASF's Annual Meeting and to our new venue here in Mannheim. I am
pleased to see such a high attendance, since it reflects your continued interest
in BASF.
In the last few months, many investors have been forced to watch some virtual
business ideas turn into real losses. The lesson from this is that it remains a
good idea to invest in companies with substance that create value, that reliably
post high profits and that also have ambitious goals for the future. You, our
shareholders, have made exactly the right choice with BASF.
At today's Annual Meeting, we want to report to you, the owners of the world's
largest chemical company, on the past fiscal year and above all on your
company's perspectives. By the end of the day, you will have heard many good
reasons as to why it is worth investing in BASF's ideas, plans and future
opportunities.
I am sure that many of you have already read about our financial results for
2000. I don't want to repeat all the details here, especially since you have all
received our Annual Report. However, I would like to emphasize one point: The
year 2000 was not an easy year for the chemical industry worldwide. And it was a
year of important decisions that will shape the future of the entire industry.
However, difficult times always offer a good opportunity to show one's own
strengths, and so the really successful companies stood out from the crowd in
2000. This is particularly true of the BASF Group: 2000 was one of the most
successful years in the company's history. We reached a new earnings level, and
we left most of our competitors behind us despite the difficult environment.
Let me take stock of what we accomplished in 2000.
o We achieved double-digit growth for sales as well as for income from
operations before special items.
o To ensure long-term success, we actively focused our portfolio through a
program of acquisitions, divestitures and new partnerships.
o We made excellent progress and expanded our position in all regions, but in
particular in the rapidly growing Asian markets.
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o We strengthened the foundation for sustained profitable growth with numerous
innovations in products and processes.
o Our goal for 2000 through 2002 is to increase income from operations before
special items on a comparable basis by an average of at least 10 percent per
year. With 15.3 percent, we more than exceeded this goal last year. Even though
the economic situation might make our task more difficult, we are sticking to
this goal for 2001 and 2002, and we are confident that we will meet our
objectives.
o To offer you, our shareholders, a share in our success, we propose to increase
our dividend for the seventh time in succession. In addition, we propose to pay
out stockholders' equity charged with a high level of tax that would otherwise
be affected by the reform of German corporation tax. Together with the tax
credit, our total dividend of E2.00 corresponds to a dividend yield of almost
six percent for shareholders subject to German income or corporation tax, thus
underlining the attractiveness of BASF shares.
o However, the best news is that our combined efforts have tripled our corporate
value in the past five years - an achievement of which we are proud.
Numerous investors, customers and business partners have recognized BASF's
excellent performance. Last October, the respected U.S. publication Fortune
Magazine ranked BASF number one among world chemical companies and among German
businesses in its annual listing of "Global Most Admired Companies."
This ranking is due to the joint efforts of many individuals, and is the reward
for a lot of hard work. The period of change and increasing demand for
productivity I spoke of earlier has also demanded a lot from our employees, and
I would like to take this opportunity to thank all of them for their commitment.
I am convinced that all our employees have a vested interest in BASF being a
company that individually shapes a successful future. Every effort to achieve
this is worthwhile.
BASF 2000 - STRONG GROWTH AND SUCCESSFUL PORTFOLIO MANAGEMENT
In 2000, BASF was characterized by strong growth. With the active management of
our portfolio to concentrate on innovative chemistry we have lastingly shaped
the make-up of our company.
GROWTH
As the world's largest chemical company, we reached a new earnings level in
2000. Our sales climbed by 22 percent to E36 billion and our income from
operations before special items increased by more than 15 percent to E3.4
billion. We posted double-digit sales growth in all regions and all business
segments.
In the Plastics & Fibers segment, income from operations before special items
climbed by 23 percent. In our Oil & Gas segment, we more than doubled income
from operations before special items to almost E1.3 billion. Because of a
drastic rise in the cost of raw materials in the course of the year, we were
unable to maintain sufficient
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margins in all areas of business by passing on costs to our customers. We
therefore saw a decline in earnings in activities close to the start of the
value-adding chain in the Chemicals and Colorants & Finishing Products segments.
These changes in our earnings underscore the great importance of Oil & Gas for
BASF. This segment compensated for disadvantages that arose in our chemicals
businesses due to the increasing price of oil-based raw materials. The
profitability of the oil and gas business gives us an advantage over most of our
competitors.
Some years ago, we entered the new field of business in oil and gas. We are now
reaping the rewards of this courage and vision.
PORTFOLIO MANAGEMENT
We work constantly to develop our portfolio and we review the profitability and
strategic position of all our areas of business on a regular basis. Only areas
that can consistently offer high profits have a long-term future as part of
BASF.
On the one hand, we are focusing on organic growth through innovations and
capital expenditures as a means of strengthening our existing business. In 2000,
we spent a record E5.2 billion in this area. On the other hand, we are also
growing through strategic acquisitions and partnerships. In this way we can
achieve more quickly the critical mass needed to establish a leading position in
our markets.
In the past year especially, we have significantly strengthened BASF's
portfolio.
o In the growth market of superabsorbents, which are used in diapers in
particular, we have become the clear number one through the acquisition of
Chemdal.
o Following the purchase of the crop protection business of American Home
Products, we are among the world's top three companies in this field.
o We have significantly strengthened our position as number two in the world
vitamin market by acquiring the vitamins business of Takeda.
o We combined our polyolefins business with that of Shell in the Basell joint
venture and merged our textile dye business in DyStar. In doing so, we have
increased the chances of success of these business areas.
o Through the sale of our pharmaceuticals activities to Abbott, we have a gain
of E6 billion in 2001, which significantly expands BASF's financial
potential. At the same time, this business now has optimal chances for a
successful future in a new environment.
What do these measures have in common? We are concentrating on what we do best:
Innovative chemistry. And this is how we will ensure profitable growth in the
future.
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THE FRUITS OF OUR GLOBAL STRATEGY - GROWTH IN ALL REGIONS
BASF's business did well in all regions. In 2000, our sales climbed by more than
18 percent in Europe, by 24 percent in North America, by 28 percent in the Asia,
Pacific Area, Africa region and by 36 percent in South America. This development
is in line with our strategic goals because we want to grow most strongly in the
fastest growing regions. We have therefore concentrated on these regions for a
number of years in terms of both capital expenditures and acquisitions. This
foresight is now paying off.
In Kuantan, Malaysia, we are building a new Verbund site with our partner
PETRONAS and the first plants started operation last year. The acrylic acid
value-adding chain was just the start: Last week the second large-scale project
- - the oxo alcohol and syngas complex - went on stream as planned, and other
plants will follow. This site exemplifies the dynamism and confidence in this
region. We will supply our customers in Asia from modern world-scale plants in
Malaysia.
Another of BASF's major projects in Asia was given the green light back in June
last year. The planned Verbund site in Nanjing, China, in which we plan to
invest E2.5 billion together with our Chinese partner, was approved by the
government in Beijing. BASF is the first foreign chemical company to realize
such a large-scale project in China.
We also want to grow significantly in North America. This year will see the
start-up of the world's largest liquids steam cracker in Port Arthur, Texas. We
are building this facility together with our partner TotalFinaElf to take
advantage of favorable backward integration with its neighboring refinery. Our
Verbund sites in Geismar and Freeport will now be supplied with ethylene and
propylene directly from Port Arthur via pipeline instead of purchasing the
majority of these raw materials from third parties. Despite being far apart,
Geismar, Freeport and Port Arthur are growing together - into"Geisport" as our
American colleagues call it.
EFFORTS TO INCREASE PRODUCTIVITY STILL NECESSARY
In our home market, Europe, sales also grew by 18 percent, thanks in particular
to the contribution of Wintershall. Our large chemical sites in Ludwigshafen,
Antwerp, Schwarzheide and Tarragona considerably increased sales volumes in
2000.
Despite the expansion of our business, earnings lagged behind the growth in
sales. For example, BASF Aktiengesellschaft in Ludwigshafen and BASF
Schwarzheide were limited in their ability to pass on increases in the cost of
raw materials in the form of corresponding increases in the prices of their
products. Here, we will work harder to improve our efficiency and thus our
profitability. After all, we have every interest in ensuring that our largest
site in Ludwigshafen remains competitive in global terms and that it yields
correspondingly high profits. This will attract capital expenditures. In this
matter we are in agreement with the employee representatives. But the basic
conditions need to be right!
DEVELOPMENT OF BASF'S ORGANIZATION - CLOSER TO OUR CUSTOMERS AND GREATER
ENTREPRENEURSHIP
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With effect from July 1, our business will be organized in new regional and
global business units. Responsibility will be delegated to units that work close
to the customer. The new organization will also encourage a greater spirit of
entrepreneurship among staff. The aim is to enable our employees to make
decisions more quickly and act more flexibly in the market. In Europe, we will
be in a better position to realize the advantages of political and economic
integration. With its single currency, the European market is becoming
increasingly tight-knit. In order to remain successful, we therefore need
streamlined, cross-border processes. This will involve standardizing procedures
in the areas of IT, accounting, human resources and logistics.
Worldwide, we expect the ongoing development in our organization to produce cost
advantages of around E400 million per year. This amount will be achieved
gradually over two years and then on a yearly basis.
INCREASING AND SUSTAINING OUR CORPORATE VALUE - GROWTH AND INNOVATION
Our formula for success is to increase our corporate value through growth and
innovation. We pursue our business activities according to this motto and it
also forms the basis for decisions regarding research and development projects
as well as capital expenditures. I would now like to explain in more detail what
"Adding value through growth and innovation" means to us.
We want to achieve growth by
o achieving above-average profits from a strong market position;
o focusing on expanding our business in growth regions; and
o extending our Verbund.
Over the last five years, BASF has grown by more than 50 percent and has
established leading positions in the world's most dynamic markets. We now
achieve more than two-thirds of our sales and earnings in product groups in
which we are one of the top three suppliers, if not the market leader. A strong
market position means that we can post above-average earnings even in difficult
times.
INNOVATIONS - KEYS TO THE FUTURE
Innovations are important tools for shaping our future. Here, our employees are
a crucial factor for success. In our Know-how Verbund, or BASF's "Verbund of
minds" if you like, our researchers produce ideas that develop into concrete
projects and then into new products and processes. Of course, our employees in
production, marketing and sales and in service units for logistics, IT or human
resources are also continually developing innovative ideas that broaden BASF's
range of services and tailor them to customers' needs.
Our innovations are based on
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o continually renewing products and processes;
o offering our customers creative system solutions; and
o capitalizing on the broad potential of the chemistry we use.
We improve our products and develop new ones. Agricultural products such as our
latest fungicide F 500(R) are extremely effective, environmentally friendly and
offer promising returns. Another example is Neopor(R). With this material we are
setting new standards in thermal insulation in the refurbishment of older
buildings that can turn the low-fuel-consumption apartment building into a
reality. Using BASF's products optimally can help reduce energy consumption in
refurbished buildings by 85% and carbon dioxide emissions by 90%. The annual
consumption of heating oil will be only three liters per square meter of living
space compared with a previous figure of well over 20 liters.
SILENT INNOVATIONS PAY OFF IN HARD CASH
In addition to new products, new production processes are crucial to our
success. We call them "silent innovations" because you cannot see any difference
in our products. Our innovative production processes help us achieve technology
and cost leadership which we turn into dollars and euros in the market. In the
last ten years, we have invested an average of E100 million per year in such
"silent innovations" for our most important processes. Through this, we can
reduce our annual manufacturing costs by about E1 billion compared with 1990
- - no meager achievement, as I'm sure you'll agree. Such technical advances help
us to remain competitive by increasing productivity and efficiency.
CHEMICALS: AN INDUSTRY WITH ENORMOUS POTENTIAL
The chemistry we use also has enormous potential. Just look around: We stand on
chemistry in the form of carpets and sealed hardwood floors. We walk around on
chemistry with shoe soles made from tanned leather or foamed plastic. Kickboards
whiz along on wheels made of PolyTHF(R), and winter sports with snowboards and
carving skis would be impossible without chemistry. Traditional materials are
being replaced by specially developed plastics. Our automobiles are safer and
require less fuel thanks to plastic components. Today, everyone can see the
importance of materials and solutions based on chemicals. And this importance
will continue to grow.
Unlocking the doors to tomorrow's successes: That is the motto of our recently
established unit BASF Future Business GmbH, a company through which we aim to
access new business areas in innovative chemistry. The company investigates the
potential of future technologies such as nanotechnology or water purification
and, if appropriate, turns them into profitable new projects for BASF.
We founded BASF Future Business GmbH because we know that chemistry is
indispensable when it comes to finding solutions to the world's fundamental
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problems. For example, an ever-growing population needs sufficient food and
clean water. In addition, fuel for heating and transport as well as textiles and
leather for clothes and shoes are also in demand. We are already working to
provide tailor-made innovations for the needs of future generations. This is our
contribution toward Sustainable Development.
FIRST QUARTER 2001: CONTINUING ON OUR COURSE FOR GROWTH
We have continued on our course for growth in the first quarter of 2001. Sales
have increased by almost 10 percent to approximately E9.3 billion and our
income from operations before special items rose by more than 4 percent to
E962 million. These results once again put us ahead of most of our
competitors.
However, there are other figures that more accurately reflect our business and
our performance, and these are even more positive. Because of the significant
changes we made to our portfolio since the beginning of 2000, a one-to-one
comparison with the previous year is no longer meaningful. Instead, it makes
more sense to make a comparison based on ongoing business. This means we also
adjust the previous year's results so that they no longer contain contributions
from areas of business that are no longer part of our portfolio, that is
pharmaceuticals, polyolefins and textile dyes. On this basis it is then possible
to make a better forecast for our future growth.
On the basis of ongoing business, sales climbed by almost 25 percent, thus
exceeding the growth we saw in the year 2000. We have made significant progress
in all regions, and our companies in Asia were again our most successful.
We improved in all segments and recorded double-digit sales growth in most of
them. The Oil & Gas segment posted the highest growth. Here we sold nearly 70
percent more than in the first quarter of 2000. In Agricultural Products &
Nutrition, sales were up by more than one-third over the previous year following
the integration of American Home Products' crop protection business.
Overall, sales volumes increased slightly and higher product prices contributed
seven percentage points to the improvement in sales.
These price increases were not always sufficient to achieve acceptable margins.
Nevertheless, we increased income from operations before special items on the
basis of ongoing business grew by seven percent.
Our Oil & Gas segment again made the greatest contribution to earnings with
E376 million. Agricultural Products & Nutrition came second, achieving
E300 million. All operating divisions posted positive first quarter earnings
with the exception of Fiber Products.
In our segments Plastics & Fibers and Colorants & Finishing Products, income
from operations was considerably lower than in the first quarter of 2000. The
main reason for this was a decline in demand in North America which led to
difficulties in passing on the necessary price increases for consumer-related
products in particular. However, we are confident that this situation will
improve during the course of the year.
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The sale of our pharmaceuticals business to Abbott, which was completed at the
beginning of March, generated extraordinary income of more than E6 billion.
As a result, our first quarter income before taxes exceeded E6.6 billion and
net income was almost E6.2 billion.
2001 - ANOTHER GOOD YEAR FOR BASF
We want to make 2001 another good year for BASF. Despite some critical
developments, we have set ourselves the goal of achieving a further significant
increase in our sales and earnings on the basis of ongoing business.
As in the first quarter, we too expect that the general economic climate will be
somewhat subdued until the summer, particularly since the weakness of the
domestic economies in North America and in Japan is now more perceptible than at
the beginning of the year. Our American competitors in particular have a
pessimistic outlook and we can understand this, since our business in the United
States is also experiencing a strong headwind at the moment.
However, unlike American companies, the BASF Group is affected to a lesser
extent because of its regional business focus. Although our home market in
Europe is growing more slowly than was predicted a few months ago, it is
nevertheless showing steady growth. And we are also well-positioned in Asia.
In particular, our product portfolio gives us real cause for optimism. In our
agricultural products business the integration process has run smoothly. In the
course of 2001, we anticipate the integration to generate synergies of E125
million - already half of the total annual cost savings expected. Following the
high level of special charges related to the acquisition in 2000, we expect that
earnings in our agricultural products business will improve significantly in
2001.
Our gas business is growing steadily and its increasing earnings will mean that
even if profits from the oil business are reduced, 2001 will still be another
excellent year for our Oil & Gas segment.
On the basis of ongoing business, we anticipate a significant increase in income
from operations before special items in the second quarter. We are therefore
sticking to our goal of increasing our income from operations before special
items by an average of at least 10 percent per year in 2000 through 2002.
Ladies and gentlemen,
In 2000, BASF has come a great deal further in achieving our Vision 2010 in
which we say: "We are a transnational chemical company recognized as successful
and innovative."
There are still a few years to go until 2010, but even so, we shouldn't rest on
our laurels. We want to make faster progress in "Adding value through growth and
innovation," but without losing sight of the right balance of interests.
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In a time of change, vision and a fine sense of balance are particularly
important. We manage the process by:
- -- weighing the advantages of diversification and concentration;
- -- achieving the right mix of innovative products and established products with
solid sales records;
- -- growing steadily in Asia and the Americas, but also in our home market,
Europe;
- -- ensuring future profits by striking a balance between cost reductions and
investments for the future;
- -- optimally combining our own achievements and acquisitions; and
- -- combining short-term successes with long-term goals.
Thanks to the hard work and commitment of BASF's team around the world, we are
steadily increasing and sustaining our value. All of those involved in the
company -- employees and shareholders -- profit from this. Every day, we prove
that long-term strategies can also pay off. And we will continue to prove that
our unique ability to innovate and achieve growth in the market are the powerful
engines driving BASF's business.
These, ladies and gentlemen, are the reasons I mentioned at the outset as to why
investing in BASF's ideas, plans and future opportunities continues to pay off.
We have marked out a path for the future and are determined to push forward. We
invite you to join us on our journey.