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Letter to the Editor

BASF Strengthens Its Outlook on Significant Earnings Increase in 2002

"On the basis of a roughly similar level of sales, we aim to increase EBIT before special items significantly over 2001," said Dr. Jurgen F. Strube, Chairman of the Board of Executive Directors at BASF Aktiengesellschaft, when presenting the company's results for the third-quarter of 2002.

From July through September, BASF posted total sales of almost EUR 7.6 billion, or 5.3% more than in the same quarter of 2001. In July and August, sales were only at the weak level of the previous year, and did not pick up until September. Cumulative sales for the first nine months were more than EUR 24 billion, which corresponds to a slight decline of 2.5% compared with the same period in 2001.

In contrast, third-quarter EBIT before special items of EUR 591 million exceeded the previous year's level by EUR 263 million. This corresponds to an increase of 80%.

From January through September, BASF achieved EBIT before special items of more than EUR 2.2 billion, which was EUR 190 million more than in the same period in 2001.

With the exception of the seasonally weak business with agricultural products, all of BASF's operating divisions were in the black before special items in the third quarter. However, the company is concerned that sales prices are increasingly coming under pressure. Higher volumes are compensating for the decline in prices only to a certain extent.

Earnings per share climb significantly to EUR 0.43

In the third quarter of 2002, BASF's earnings per share climbed significantly from EUR 0.02 in 2001 to EUR 0.43. The company has continued to buy back shares and this year has so far repurchased shares for a total of more than EUR 445 million.

For 2002 overall, Strube forecast an increase in EBIT before special items of at least 15% compared to 2001 based on a similar level of sales. Strube said: "Our confidence is based on the major efforts that BASF and its employees have taken since the first signs of an economic downturn were seen in early summer 2001. We are not passively waiting for an upturn in the economy, but are taking active measures to further develop BASF: From a position of financial strength, we are pursuing a strategy of active portfolio management and carrying our the necessary structural measures."

Earnings in the NAFTA region were considerably higher than in the previous years, although margins remain under pressure from high costs for raw materials.

Strube noted that consumer confidence is the crucial factor that will determine how growth in the NAFTA region will develop. Consumers are apprehensive about falling share prices, increasing unemployment and the threat of military action against Iraq, he said, and this has led to cautious buying and slower growth in North America.

From July through September, sales in the NAFTA region were EUR 1.8 billion, or EUR 117 million more than in the same period in 2001.

At minus EUR 13 million, EBIT before special items in the third quarter was up EUR 170 million on the previous year.

With regard to the coming year, BASF's chairman sees 2003 as a year in which the company will again be faced with demanding tasks. "Optimistic estimates predict that the gross domestic product will grow by more than 2% in Western Europe and by almost 3% worldwide, although growth in the chemical industry is likely to be stronger. However, this growth associated with a number of uncertainties such as the possibility of military action against Iraq. Should this occur, we can expect another significant increase in oil prices, even heavier pressure on margins and much lower economic growth," said Strube.

"However, it is in such difficult and uncertain times that BASF derives its success from its drive and decisiveness," Strube continued. "With our financial strength, the right global position and a portfolio focused on key markets, we will face the tasks of the coming months and the year 2003 with determination and confidence."

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