Innovation and portfolio optimization strengthen BASF’s Agricultural Products division

13/03/06 BASF Agricultural Products has noted that it is continuing its strategy of profitable growth with new and innovative products. In 2005, the division invested €303 million in research and development, an 11% increase compared to 2004. The investment continues to pay off: The division expects to achieve total peak sales of €1,900 million with its pipeline of innovative active ingredients, about €100 million more than the previously published figure. These figures were presented by Mike Heinz, president of BASF’s Agricultural Products division since December 1, 2005, in an investors’ conference today (March 10, 2006).

In the past five years, BASF has introduced eight new crop protection active ingredients with peak sales potential of €1.2 billion. Part of this line-up is the fungicide metrafenone, which was launched in late 2005.

Successful new products are major contributors to profitability: With 26.9%, the EBITDA margin before special items surpassed the 25% margin target of the division for a second time in a row. “With this EBITDA margin we have once again set a profitability benchmark in our industry,” said Heinz.

The division’s development pipeline also looks promising for the years ahead. BASF is currently working on a herbicide tolerance project and six active ingredients, including a new insecticide, which was elevated from discovery to development status in 2005. These inventions are expected to come to market from 2006 onward and have a peak sales potential of €700 million.

“We want to grow profitably through innovation, especially with new fungicides and insecticides and with special applications such as seed treatment,” described Heinz. “We have strengthened our team of scientists, are managing our R&D activities highly effectively, and are continuing our efforts to reduce time-to-market.“

Strict management of assets and costs is another strategic objective of the division. Heinz: “With an emphasis on high-margin innovative products, we are continuing our cost and asset optimization measures in mature or non-core areas.” In 2005, the division divested its triforine fungicide, its phorate insecticide, its non-European imazamethabenz herbicides business, all of which clearly have a better fit with more specialized companies. In addition, a manufacturing plant in Resende, Brazil, was divested in an employee buyout.

“We will continue to prune our product portfolio. We had more than 300 actives in 2000, and target about 100 actives for 2006, a further reduction of about 25% compared to the end of 2005. Ultimately we will focus on about 60 core active ingredients,” said Heinz. “This streamlining reduces complexity and allows us to direct all of our energy to bringing innovative products to the market.”

Sales of BASF Agricultural Products in 2005 were €3,298 million. Europe accounted for 43%, North America (NAFTA) for 29%, South America, Africa, Middle East for 20% and Asia Pacific for 8% by customer location. By product group, sales of fungicides were €1,310 million, herbicides €1,222 million, insecticides and other agrochemical products €766 million.