Dynamic BASF on Course for Profitable Growth; Second-Quarter Results 2006

April - June 2006 published on August 2, 2006

-- Strong sales growth of 16%

-- EBIT before special items up 15%

-- New growth opportunities from acquisitions

-- Outlook: Higher sales and EBIT before special items compared with 2005
Overview 2nd Quarter
Million EUR Change
2006 2005 in %
Sales 12,322 10,581 16.5
Income from operations before interest,
taxes, depreciation and amortization
(EBITDA) 2,374 2,149 10.5
Income from operations (EBIT) before
special items 1,910 1,657 15.3
Income from operations (EBIT) 1,797 1,587 13.2
Financial result 23 (82) .
Income before taxes and minority
interests 1,820 1,505 20.9
Net income 920 778 18.3
Earnings per share (EUR) 1.82 1.48 23.0
EBIT before special items in percent of
sales 15.5 15.7 -
Cash provided by operating activities 760 977 (22.2)
Additions to fixed assets (a) 4,957 850 483.2
Excluding acquisitions 491 482 1.9
Amortization and depreciation (a) 577 562 2.7
Segment assets (end of period) (b) 35,241 28,631 23.1
Personnel costs 1,430 1,393 2.7
Number of employees (end of period) 86,794 80,946 7.2


Overview 1st
Half
Million EUR Change
2006 2005 in %
Sales 24,837 20,664 20.2
Income from operations before interest, taxes,
depreciation and amortization (EBITDA) 4,775 4,168 14.6
Income from operations (EBIT) before special
items 3,775 3,220 17.2
Income from operations (EBIT) 3,646 3,086 18.1
Financial result 44 (37) .
Income before taxes and minority interests 3,690 3,049 21.0
Net income 1,870 1,639 14.1
Earnings per share (EUR) 3.69 3.08 19.8
EBIT before special items in percent of sales 15.2 15.6 -
Cash provided by operating activities 2,208 2,081 6.1
Additions to fixed assets (a) 5,557 1,212 358.5
Excluding acquisitions 964 844 14.2
Amortization and depreciation (a) 1,129 1,082 4.3
Segment assets (end of period) (b) - - -
Personnel costs 2,822 2,670 5.7
Number of employees (end of period) - - -

* Tangible and intangible fixed assets (including acquisitions)

** Tangible and intangible fixed assets, inventories andbusiness-related receivables

Contents
1 BASF Group Business Review 13 Consolidated Statements of Income
3 BASF Shares 14 Consolidated Balance Sheets
4 Significant Events and 15 Consolidated Statements of Cash Flows
Outlook
6 Chemicals 16 Consolidated Statements of Recognized
7 Plastics Income and Expense
8 Performance Products 17 Consolidated Statements of
Stockholders'
9 Agricultural Products & Equity
Nutrition
10 Oil & Gas 18 Segment Reporting
11 Regions 20 Explanations to the Interim Financial
12 Overview of Other Topics Statements

Cover photo:

Shah Kazi, senior research engineer from the BASF Catalysts R&DCenter in Iselin, New Jersey and Dr. Henrik Junicke, product managerfor catalysts in Ludwigshafen.

News from our innovation centers

Wax in the wall for a pleasant indoor climate

BASF's phase-change material Micronal(R) PCM absorbs daytimetemperature peaks

Summer, sun, sunshine - although much longed for throughout thewinter months, they can soon become too much of a good thing when theyarrive. Modern lightweight construction houses and steel and glassoffice complexes with transparent frontages can become more likesaunas overnight. BASF's SmartBoard(TM) offers a solution to thisproblem. The cooling properties of this innovative gypsum wallboardare provided by the raw material Micronal(R) PCM, a microencapsulatedlatent heat store based on paraffin wax that absorbs excess heat. PCMstands for phase change material. Micronal(R) is an effective thermalbuffer due to the physical phenomena that occur when wax changes fromthe solid to the liquid state. During this phase transition, a largeamount of thermal energy (known as latent heat) is consumed withoutthe temperature of the material itself changing.

The waxes contained in Micronal(R) PCM melt at 23C or 26C (73/79F)depending on the application. When they melt, they absorb largeamounts of heat from the environment, thereby preventing the roomtemperature from rising further. At night, when the outsidetemperature falls, the heat bound when the wax solidifies is releasedand the heat store is ready for a new summer's day.

Thanks to microencapsulation the wax can be safely integrated intobuilding materials like wall plaster, mortar or gypsum boards:Microscopically small droplets of wax are enclosed in a virtuallyindestructible acrylic polymer shell that withstands even drilling andsawing. Depending on the material, between 20 and 40 percentMicronal(R) PCM may be used.

The ready-to-use gypsum wallboard Micronal(R) PCM SmartBoard(TM)is very user-friendly: although only 1.5 centimeters thick, eachsquare meter contains around three kilograms of Micronal(R) PCM, andits heat insulating capacity corresponds to that of a brick wall 12centimeters thick. As a result, it acts as an important functionalcomponent of the building that actively improves the indoor climate.

The SmartBoard(TM) wallboards can be obtained directly throughBASF's subsidiary BTC Specialty Chemical Distribution GmbH in Cologne.But several other industrial partners are also offering PCMconstruction materials based on Micronal(R) PCM. The German companyH+H Celcon, for example, has incorporated BASF's phase-change materialin aerated cement blocks. The heat storage capacity of the blocks,which are sold under the brand name CelBloc Plus and recognizable bytheir characteristic green color, is thus considerably enhanced.

The perspex microcapsules - about 5 micrometers in diameter -contain a storage medium such as paraffin.

When the contents melt, heat is taken up and is given out againonly when the material solidifies.

News from our innovation centers

Biotechnologists fight dreaded potato disease

Microscope image of the fungus Phytophthora infestans (light redstructure in the center of the picture).

The fungus spreads through leaf tissue in potatoes and causespotato blight.

Two genes from wild potatoes protect crops

Phytophthora infestans is every potato farmer's nightmare. Oncethis harmful fungus shows up, the dreaded potato blight can't be farbehind. This disease can result in considerable crop losses. In themid-19th century, it caused a famine in Ireland, and even today around20 percent of potato harvest losses in the world are due to thisdisease. Researchers at BASF Plant Science GmbH have now developed agenetically improved potato that is resistant to this harmfulpathogen.

The starting point for this modern innovation is a remote valleyin the Central American Andes. Various wild types of potato grow hereand potato blight is also rampant. But not all the potato plants areinfested. Some seem to have developed a very effective strategy toprotect themselves against the pathogen that causes the disease.

Scientists discovered that the resistant potato plants had atleast one gene that the infested plants did not have. This geneensures that the plant recognizes the harmful fungus in the firstplace. To set its defense mechanisms in motion, the plant needs toknow that the fungus is there.

That is precisely the problem with the modern cultivated potato.These plants would be able to fight off the fungus if they were onlyable to recognize its presence. This encouraged scientists to attemptto transfer the benefits of the wild potato to its cultivatedcounterpart. Conventional breeding methods were attempted for yearsbut without success. Although the new types were partially resistant,they had other negative properties such as the lower yield typical ofthe wild potato. The breakthrough finally came in recent years withthe aid of biotechnology: Scientists isolated a resistance gene of thewild potato and transferred it to the cultivated potato.

Because the fungus adapts to varying environmental conditions,mutates and forms a large number of variants, scientists from BASFPlant Science identified other resistance genes in the wild potato.Together with potato breeders, a potato with two additional genestaken from the wild potato has now been developed.

The potato from BASF Plant Science has already demonstrated itsresistance in the greenhouse. Field trials are now being carried outat a number of locations to investigate whether various climaticconditions adversely affect the resistance of the genetically improvedpotato. The potato can be launched on the market as soon as thesetrials have been completed and following E.U. approval.

BASF Group Business Review

-- Sales volumes up 7%

-- Sales growth of 16%

-- EBIT before special items up 15%

Sales

Compared with the same period of the previous year, sales in thesecond quarter of 2006 increased by 16% to EUR 12.3 billion. The salesgrowth was due to the following factors:

Factors influencing sales in comparison with previous year
% of sales 2nd Quarter 1st Half
Volumes 7 7
Prices 7 9
Acquisitions/divestitures 2 2
Currencies 0 2
16 20

The new Catalysts division has been assigned to the Chemicalssegment. This division includes the catalysts business and preciousmetals trading acquired on June 6, 2006 as part of EngelhardCorporation as well as our own existing catalysts business, which wasformerly part of the Inorganics division. In addition to the effect ofthe activities of Engelhard, which contributed sales of EUR 240million, sales in the Chemicals segment were boosted by the Verbundsite in Nanjing, China, which started operations in June 2005.Furthermore, sales increased due to sales price increases to pass onsignificantly higher raw material costs.

In the Plastics segment, sales rose considerably due to highersales volumes in the Styrenics and Polyurethanes division.

Second-quarter sales by segment
Million EUR
Chemicals 2006 2,443 22%
2005 2,007
Plastics 2006 3,168 8%
2005 2,924
Performance 2006 2,197 5%
Products 2005 2,098
Agricultural Products 2006 1,389 (5)%
& Nutrition 2005 1,465
Oil & Gas 2006 2,481 50%
2005 1,650

In the Performance Products segment, all operating divisionsposted higher sales due to higher volumes and a slight increase insales prices.

Volumes and sales prices declined in the Agricultural Products &Nutrition segment. Together with the divestiture of major parts of thegenerics business in North America, this resulted in significantlylower sales in the Agricultural Products division. The Fine Chemicalsdivision posted significantly higher sales thanks to thepharmaceutical contract manufacturing business of the Orgamol Groupthat was acquired in the fourth quarter of 2005 and the personal carebusiness acquired from Engelhard Corporation.

Sales in the Oil & Gas segment rose strongly due to higher volumesand 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) (65) (109)
- Financial
result - - - - 222 -
(16) (64) (113) (70) 157 (109)

Earnings

Compared with the same period of 2005, we increased income fromoperations (EBIT) before special items by 15% to EUR 1,910 million.

Margins in the Chemicals segment declined due to significantlyhigher prices for energy and raw materials. In addition, earnings werenegatively affected by maintenance turnarounds at several plants aswell as plant outages.

In the Plastics segment, increased raw material costs reduced ourmargins. Nevertheless, higher volumes led to a rise in earnings.

Earnings in the Performance Products segment declined due tosevere pressure on margins, in particular in the Functional Polymersdivision.

Second-quarter earnings in the Agricultural Products division wereimpacted by lower volumes due to the late start to the season inEurope as well as subdued demand from customers in North America.

In the Fine Chemicals division, earnings increased as a result ofthe contribution from the acquired businesses as well as a reductionin fixed costs compared with the same period of the previous year.

The Oil & Gas segment posted the strongest earnings growth, duepartly to higher crude oil prices and increased volumes in the naturalgas trading business.

Compared with the same period of 2005, second-quarter EBIT rose by13% to EUR 1,797 million. Special items in income from operations wererelated to the integration of Engelhard Corporation, as well asexpenses for restructuring, which are primarily recorded under "Other"in the course of the year. The reduction of a fine imposed by the E.U.in 2001 for anti-trust violations related to vitamin sales resulted inspecial income of EUR 66 million.

Second-quarter EBIT before special items
Million EUR
Chemicals 2006 351 (15)%
2005 415
Plastics 2006 315 15%
2005 274
Performance 2006 209 (23)%
Products 2005 272
Agricultural Products 2006 183 (39)%
& Nutrition 2005 302
Oil & Gas 2006 868 50%
2005 579

The financial result increased by EUR 105 million to EUR 23million. This was due in particular to lower net financing costs forpension obligations recorded under "Other financial result" followingthe transfer of approximately EUR 3.7 billion to a contractual trustarrangement at the end of 2005.

Income before taxes and minority interests rose by 21% to EUR1,820 million.

The tax rate was 47.6% compared with 46.3% in the second quarterof 2005. Taxes for oil production that are noncompensable with Germancorporate income tax amounted to EUR 383 million compared with EUR 267million in the same period of the previous year.

Net income increased 18% to EUR 920 million. Earnings per sharewere EUR 1.82 compared with EUR 1.48 in the second quarter of 2005.

BASF Shares

-- BASF shares better than Dax 30 and Euro Stoxx 50 indices in the second quarter

-- Shares buybacks for EUR 285 million in the second quarter of 2006
BASF shares 2nd Quarter 1st Half
2006 2006
Performance (with dividends reinvested)
BASF (%) (0.14) (0.16)
DAX 30 (%) (4.80) + 5.09
EURO STOXX 50 (%) (3.66) + 3.97

Share prices and trade (XETRA trading)
Average (EUR) 64.07 63.78
High (EUR) 69.49 69.49
Low (EUR) 58.97 58.97
Close (EUR) 62.78 62.78
Average daily trade in shares (million shares) 3.37 3.20

BASF share performance

After a relatively flat period in the first quarter of 2006, theprice of BASF's stock increased significantly in April and reached arecord high of EUR 69.49 on April 21. In May, the stock pared gains ina market characterized by high crude oil prices and anticipatedinterest rate increases and closed the quarter with a performance of -0.14% (assuming reinvestment of the EUR 2.00 per share dividend paidon May 5). As a result, BASF shares performed better than the DAX 30and EURO STOXX 50 indices, which declined by 4.80% and 3.66%,respectively, in the second quarter.

Share buybacks

In the second quarter of 2006, BASF Aktiengesellschaft bought back4.54 million shares for a total of EUR 285 million and an averageprice of EUR 62.83 per share.

Up to the end of the second quarter, BASF had bought back sharesfor a total of EUR 342 million under the EUR 500 million share buybackprogram that was announced in February 2006. This program is scheduledto run until the Annual Meeting in 2007.

We also plan to buy back shares in the future.

Up-to-date information on BASF shares is available on the Internetat www.basf.de/share.

You can reach BASF's investor relations team by calling +49 62160-48230 or by sending an e-mail to investorrelations@basf.com.

Significant Events and Outlook

Acquisition of Engelhard Corporation

Following the acceptance of BASF's cash offer by the majority ofshareholders, BASF gained control of Engelhard Corporation on June 6,2006. BASF owns 100% of the company since June 9, 2006.

As a result of this acquisition, we will become a leading supplierin the fast growing market for catalysts. The combination of the twocompanies' R&D activities will create a unique Know-how Verbund andthus open up further potential for innovation and growth in the areaof catalysis.

The acquisition involves 50 production sites and 22 R&D centers inmore than 20 countries. Approximately 7,300 Engelhard employees havetransferred to BASF as a result of the acquisition. The purchase pricefor Engelhard shares amounted to $ 4.8 billion or appoximately EUR 3.8billion.

Engelhard Corporation reported the following results for fiscal2005:
Key data Engelhard Corporation
Million $ 2005
Sales 4,597
Income from operations 299
Assets 3,879

The catalysts business will be managed in BASF's new Catalystsoperating division and reported as part of the Chemicals segment.Engelhard's remaining businesses will be integrated primarily inBASF's Performance Products segment and in the Fine Chemicalsoperating division.

The companies acquired as a result of the acquisition are includedin BASF Group's consolidated financial statements as of June 6, 2006.

Acquisition of Degussa's construction chemicals business

The acquisition of the construction chemicals business of DegussaAG by BASF Aktiengesellschaft was completed on July 1.

With BASF's chemical expertise and Degussa's know-how inconstruction chemicals applications, we offer our customers a greaterrange of innovative products and help them to be more successful inthe competitive construction sector. BASF's strong presence in Asiawill additionally generate growth opportunities in this region'sbooming construction sector.

The acquisition includes production sites and sales centers inover 50 countries as well as an R&D center in Trostberg, Germany.Approximately 7,400 employees have transferred from Degussa to BASF.The purchase price for equity was just under EUR 2.2 billion. Inaddition, the transaction was associated with debt of EUR 0.5 billion.

Degussa reported the following results for its constructionchemicals business in fiscal 2005:
Key data Degussa Construction Chemicals
Million $ 2005
Sales 1,968
Income from operations 223
Assets 1,472

The activities will be reported in the new Construction Chemicalsdivision, which is part of the Performance Products segment. Thecompanies acquired as a result of the acquisition will be included inBASF Group's consolidated financial statements as of July 1, 2006. Theacquisition price of EUR 2.7 billion for Degussa's constructionchemicals business is reported under "Other receivables" as of June30, 2006.

Further significant events

The acquisition of Johnson Polymer was completed on July 1, 2006.It provides BASF with a range of water-based resins that complementsour portfolio of high solids and UV resins for the coatings and paintsindustry and will strengthen our market presence, in particular inNorth America.

The acquisition of Johnson Polymer involves one production siteeach in the United States and in the Netherlands, as well as technicalcenters and offices in Asia Pacific. The purchase price was $470million on a cash and debt-free basis.

In 2005, Johnson Polymer posted sales of approximately $360million and had 430 employees worldwide. The business will beintegrated into the Performance Chemicals division and included inBASF Group's consolidated financial statements as of July 1, 2006. Theacquisition price of EUR 376 million for Johnson Polymer is reportedunder "Other receivables" as of June 30, 2006.

BASF acquired CropDesign on June 27, 2006. This Belgianbiotechnology company will be integrated in BASF Plant Science GmbH,in which all of our plant biotechnology activities are combined.CropDesign will strengthen our research network thanks to theworkforce of over 70 employees at its research facilities in Ghent,Belgium.

On July 10, BASF and the China Petroleum & Chemical Corporation(SINOPEC Corp.) signed a $500 million agreement to expand their jointVerbund site in Nanjing, China. BASF-YPC Co. Ltd. - the 50-50 jointventure between BASF and SINOPEC - plans to invest in additionaldownstream plants and expand the capacity of its steam cracker. Thenew activities are expected to come on stream in 2009.

On July 7, 2006, the Supervisory Board of BASF Aktiengesellschaftextended the appointment of BASF Chairman Dr. Juergen Hambrecht untilthe end of the Annual Meeting in 2011.

At the same time, the Supervisory Board extended the appointmentsof Klaus Peter Loebbe and Dr. Stefan Marcinowski to the Board ofExecutive Directors. Loebbe's appointment will now run until the endof the Annual Meeting in 2008, Marcinowski's until May 2012.

Outlook

We expect the following conditions in 2006:

-- Average oil prices (Brent) of about $ 65/barrel

-- An average euro/dollar exchange rate of $ 1.25 per euro and a further increase in interest rates

-- Global economic growth and chemical production growth (excluding pharmaceuticals) of more than 3%

On this basis, we expect that our business will continue todevelop positively in the further course of the year. Persistentlyhigh oil prices are likely to lead to an increase in raw materialcosts and margin pressure. Additional sales price increases aretherefore necessary.

Major risk factors continue to be the political situation inunstable areas, especially in the Middle East, and the development ofthe crude oil price.

In view of the strong business performance in the first half, weremain optimistic for the full year: We expect to post significantlyhigher sales and higher EBIT before special items compared with theprevious year's strong level.

Furthermore, our acquisitions will contribute to sales in thesecond half, bringing total sales to more than EUR 50 billion.

We anticipate an additional contribution to EBIT before specialitems.

Chemicals

-- Higher sales and volumes in all divisions

-- Margins and earnings decline due to high raw material and energy pricesas well as plant shutdowns

-- New Catalysts operating division
Overview Chemicals 2nd Quarter
Million EUR Change
2006 2005 in %
Sales 2,443 2,007 22
Thereof Inorganics 285 250 14
Catalysts 259 18 .
Petrochemicals 1,324 1,227 8
Intermediates 575 512 12
EBITDA 409 477 (14)
EBIT before special items 351 415 (15)
EBIT before special items in percent of
sales 14.4 20.7 -
EBIT 263 345 (24)
Assets 10,903 6,026 81


Overview Chemicals 1st Half
Million EUR 2006 2005 Change in %
Sales 4,682 3,829 22
Thereof Inorganics 570 439 30
Catalysts 280 36 .
Petrochemicals 2,698 2,363 14
Intermediates 1,134 991 14
EBITDA 861 1,021 (16)
EBIT before special items 668 841 (21)
EBIT before special items in
percent of sales 14.3 22.0 -
EBIT 580 771 (25)
Assets - - -

We increased sales significantly in the second quarter. Inaddition to higher volumes and sales prices, sales were boosted byEngelhard's catalyst business, which was acquired at the beginning ofJune (volumes 6%, prices 4%, portfolio 12%). EBIT before special itemswas negatively impacted by significantly higher prices for rawmaterials and energy as well as by plant turnarounds and outages. EBITcontains special charges related to the integration of EngelhardCorporation.

Inorganics

Sales rose especially due to strong demand for inorganic basicchemicals and specialties. Significantly higher prices for natural gasput pressure on margins, especially for methane-based derivatives, andled to a decline in earnings.

The catalysts business unit, which was previously part of theInorganics division, was assigned to the new Catalysts division witheffect from January 1, 2006. The previous year's figures were restatedaccordingly.

Catalysts

BASF acquired Engelhard Corporation at the beginning of June andhas started the integration process. Effective June 6, Engelhard'scatalysts business and precious metals trading are reported in thisnew operating division together with BASF's existing catalystbusiness.

Petrochemicals

Higher prices and additional volumes from production at the sitein Nanjing, China, led to an increase in sales compared with the sameperiod of 2005. Business with plasticizers and solvents was strong.Earnings were significantly lower, however, due to high and rising rawmaterial costs, as well as plant turnarounds and outages. Followingshutdowns lasting several weeks, plants in Ludwigshafen, Antwerp,Belgium, and Port Arthur, Texas, are again operating at high capacityutilization rates.

Intermediates

As in previous quarters, demand continued to rise in the secondquarter of 2006. Sales were higher than in the same period of 2005.Very high prices for raw materials worldwide could only be passed onto a limited extent in the form of higher sales prices. Earnings wereat the same level as in the previous year.

Plastics

-- Further increase in sales and earnings

-- Higher volumes of polyurethanes and styrenics

-- Startup of new plants in Kuantan, Malaysia, and Caojing, China
Overview Plastics 2nd Quarter
Million EUR Change
2006 2005 in %
Sales 3,168 2,924 8
Thereof Styrenics 1,232 1,128 9
Performance Polymers 738 732 1
Polyurethanes 1,198 1,064 13
EBITDA 442 400 11
EBIT before special items 315 274 15
EBIT before special items in percent of
sales 9.9 9.4 -
EBIT 314 280 12
Assets 6,867 6,591 4


Overview Plastics 1st Half
Million EUR 2006 2005 Change in %
Sales 6,259 5,724 9
Thereof Styrenics 2,383 2,264 5
Performance Polymers 1,488 1,421 5
Polyurethanes 2,388 2,039 17
EBITDA 898 780 15
EBIT before special items 647 543 19
EBIT before special items in percent of
sales 10.3 9.5 -
EBIT 645 548 18
Assets - - -

The Plastics segment posted an increase in sales compared with thesecond quarter of 2005 due to higher volumes and virtually stableprices (volumes 9%, prices -1%, portfolio -1%, currencies 1%).Earnings rose to an even greater extent. This was due in particular toimproved earnings in the Styrenics division and continued strongearnings in the Polyurethanes division.

Styrenics

Sales were higher than in the same period of the previous year, inparticular thanks to strong demand in Europe and Asia. Earningsincreased significantly compared with the weak second quarter of 2005.Margins, however, remain unsatisfactory. Earnings were additionallyimpacted by the shutdown of the styrene plant in Ludwigshafen formaintenance.

In order to expand our specialties business, we have opened aservice center called designfabrik(R) in Ludwigshafen through which wesupport our customers in the early stages of product development.

Performance Polymers

Second-quarter sales and earnings were at the same level as in2005. Sales volumes of engineering plastics developed positively inAsia and Europe. The business acquired from Leuna-Miramid in November2005 contributed to this effect.

Together with our partner Toray, we started operations at aworld-scale production plant for polybutylene terephthalate (PBT) atour Verbund site in Kuantan, Malaysia, as scheduled in April 2006. Thecapacity utilization of the plant is already high as a result of thecustomer base that has been systematically established.

Polyurethanes

We increased sales significantly thanks to strong demand, inparticular in North America. Earnings were increased slightly comparedwith the previous year's high level.

In Caojing, China, we are currently starting operations as plannedat the integrated isocyanate complex for MDI and TDI that we havebuilt with Huntsman and Chinese partners.

Together with DOW and Solvay we will start construction work onplants for hydrogen peroxide and propylene oxide (HPPO) in Antwerp,Belgium, in September 2006.

Performance Products

-- Higher sales due to increased volumes in all divisions

-- Decline in earnings due to rise in raw material costs

-- Acquisition of Degussa's construction chemicals business and resins producer Johnson Polymer
Overview Performance Products 2nd Quarter
Million EUR Change
2006 2005 in %
Sales 2,197 2,098 5
Thereof Coatings 576 555 4
Functional Polymers 848 809 5
Performance Chemicals 773 734 5
EBITDA 298 366 (19)
EBIT before special items 209 272 (23)
EBIT before special items in percent of
sales 9.5 13.0 -
EBIT 209 282 (26)
Assets 5,884 4,938 19


Overview Performance Products 1st Half
Million EUR Change
2006 2005 in %
Sales 4,344 4,006 8
Thereof Coatings 1,167 1,027 14
Functional Polymers 1,640 1,551 6
Performance Chemicals 1,537 1,428 8
EBITDA 627 670 (6)
EBIT before special items 457 497 (8)
EBIT before special items in percent of
sales 10.5 12.4 -
EBIT 456 506 (10)
Assets - - -

In the Performance Products segment, all divisions posted highersecond-quarter sales compared with the same period of 2005 (volumes2%, prices 1%, portfolio 2%). Rising raw material costs negativelyaffected margins, and earnings were lower than in the previous year'ssecond quarter.

The construction chemicals business acquired from Degussa will bereported in the new operating division Construction Chemicals witheffect from July 1, 2006. Johnson Polymer, a producer of water-basedresins for the coatings and printing inks industry that was acquiredby BASF, will become part of the Performance Chemicals division as ofJuly 1, 2006.

The pigments business of Engelhard Corporation is reported in theFunctional Polymers and Performance Chemicals divisions effective June6, 2006.

Coatings

We increased sales of automotive coatings in Asia and NorthAmerica. This growth occurred despite a slight decline in automotiveproduction in North America. In Europe, sales of industrial coatingsgrew in particular. Earnings increased compared with the same periodof 2005.

Functional Polymers

We improved sales of functional polymers thanks in particular tohigher volumes of polymers for construction chemicals, adhesive rawmaterials and superabsorbents. Prices for acrylic monomers cameincreasingly under pressure due to additional capacities in Asia. Thebusiness environment in the paper industry is negatively affected byongoing restructuring activities among our customers. Overall,earnings were lower than in the strong second quarter of 2005.

The high level of prices in almost all product lines is making itincreasingly difficult to pass on increased raw material costspromptly to our customers.

Performance Chemicals

We increased volumes and sales, in particular for performancechemicals for the automotive and oil industry. Further increases inraw material costs could be passed on to the market only to a limitedextent. Thanks to strict cost management, earnings were at almost thesame level as in the second quarter of 2005.

Agricultural Products & Nutrition

-- Difficult market environment for agricultural products

-- Fine Chemicals division improves sales and earnings
Overview Agricultural 2nd Quarter 1st Half
Products
Million EUR Change Change
2006 2005 in % 2006 2005 in %
Sales 924 1,043 (11) 1,852 2,002 (7)
EBITDA 217 351 (38) 550 683 (19)
EBIT before special items 165 295 (44) 378 571 (34)
EBIT before special items
in percent of sales 17.9 28.3 - 20.4 28.5 -
EBIT 164 291 (44) 444 575 (23)
Assets 5,025 5,540 (9) - - -

Sales were significantly lower than in the second quarter of 2005.This was due primarily to a decline in sales volumes and thedivestiture of major parts of the North American generics business(volumes -6%, prices/currency -1%, portfolio -4%).

In Europe, business was negatively affected by the late start tothe season, which resulted in the application of smaller amounts ofcrop protection products.

The agricultural economy in North America was impacted by higheroperating costs and lower sales prices for agricultural produce. Inaddition, retailers reduced high inventory levels of fungicides thatwere established in 2005 in expectation of the rapid spread of Asiansoybean rust.

Earnings declined due to the drop in volumes. The furtherappreciation of the Brazilian real also contributed to the decline.

On the basis of business to date, we do not expect to be able tomatch the previous year's level of sales and earnings.
Overview Fine Chemicals 2nd Quarter 1st Half
Million EUR Change Change
2006 2005 in % 2006 2005 in %
Sales 465 422 10 913 817 12
EBITDA 96 12 . 136 62 119
EBIT before special items 18 7 157 29 27 7
EBIT before special items
in percent of sales 3.9 1.7 - 3.2 3.3 -
EBIT 63 (19) . 73 1 .
Assets 1,760 1,326 33 - - -

Sales increased thanks to the pharmaceutical contractmanufacturing business that we acquired in October 2005 and thepersonal care business of Engelhard Corporation (volumes -1%,prices/currencies -2%, portfolio 13%).

While growth rates remained high in the aroma chemicals business,sales of lysine and vitamin C continued to decline.

EBIT before special items improved considerably compared with thesame period of 2005. This was due in particular to the pharmaceuticalcontract manufacturing business. We are continuing with our costreduction measures to combat the persisting pressure on margins forlysine, vitamin C and pharmaceutical active ingredients.

EBIT contains special income of EUR 66 million resulting from thereduction of a fine imposed by the E.U. for anti-trust violationsrelated to vitamin sales as well as special charges for restructuringmeasures.

Oil & Gas

-- Sales and earnings 50% up on previous year

-- Considerably higher volumes in natural gas trading

-- Achimgaz joint venture starts production wells
Overview Oil & Gas 2nd Quarter
Million EUR Change
2006 2005 in %
Sales 2,481 1,650 50
Thereof Exploration and production 1,219 862 41
Natural gas trading 1,262 788 60
EBITDA 973 686 42
Thereof Exploration and production 835 609 37
Natural gas trading 138 77 79
EBIT before special items 868 579 50
Thereof Exploration and production 766 533 44
Natural gas trading 102 46 122
EBIT before special items in percent of
sales 35.0 35.1 -
Thereof Exploration and production 62.8 61.8 -
Natural gas trading 8.1 5.8 -
EBIT 868 579 50
Thereof Exploration and production 766 533 44
Natural gas trading 102 46 122
Assets 4,802 4,210 14
Thereof Exploration and production 2,232 2,063 8
Natural gas trading 2,570 2,147 20


Overview Oil & Gas 1st Half
Million EUR Change
2006 2005 in %
Sales 5,466 3,490 57
Thereof Exploration and production 2,300 1,555 48
Natural gas trading 3,166 1,935 64
EBITDA 1,926 1,276 51
Thereof Exploration and production 1,542 1,068 44
Natural gas trading 384 208 85
EBIT before special items 1,716 1,063 61
Thereof Exploration and production 1,404 919 53
Natural gas trading 312 144 117
EBIT before special items in percent of
sales 31.4 30.5 -
Thereof Exploration and production 61.0 59.1 -
Natural gas trading 9.9 7.4 -
EBIT 1,716 1,063 61
Thereof Exploration and production 1,404 919 53
Natural gas trading 312 144 117
Assets - - -
Thereof Exploration and production - - -
Natural gas trading - - -

Persistently high crude oil prices and considerably higher salesvolumes in the natural gas trading business sector (volumes 7%,prices/currencies 43%) led to a significant increase in sales andearnings compared with the strong second quarter of 2005.

In the exploration and production business sector, sales andearnings increased significantly compared with the same period of theprevious year as a result of persistently high crude oil prices.Compared with the second quarter of 2005, the average price of Brentcrude rose by approximately $ 18/barrel to just under $ 70/barrel. Ineuro terms, this corresponds to an increase of EUR 14/barrel to EUR55/barrel.

The natural gas trading business sector again increased salesvolumes considerably in both Germany and Western Europe. Sales priceswere also raised compared with the previous year's second quarter.Significantly higher sales and earnings were posted as a result.

Our Achimgaz joint venture with Gazprom started its first twoproduction wells in the second quarter. The construction work on theremaining facilities is proceeding according to schedule. We thereforeaim to start production around the end of the year.

In April 2006, BASF and Gazprom signed an agreement on BASF'sparticipation in the Yuzhno Russkoye gas field. The contracts areexpected to be completed by the end of the year.

Regions

-- Europe: Strong increase in sales and earnings due to Oil & Gas segment

-- North America: Sales growth due to acquisition of Engelhard Corporation; earnings impaired by plant turnarounds and weaker agricultural products business

-- Asia: Additional growth from Verbund site in Nanjing, China
Regions Sales Sales
(location of company) (location of customer)
Change Change
Million EUR 2006 2005 in % 2006 2005 in %
2nd Quarter
Europe 7,499 6,178 21 7,051 5,829 21
Thereof Germany 5,544 4,141 34 2,439 2,053 19
North America (NAFTA) 2,720 2,585 5 2,738 2,588 6
Asia Pacific 1,707 1,451 18 1,871 1,560 20
South America, Africa,
Middle East 396 367 8 662 604 10
12,322 10,581 16 12,322 10,581 16


Regions EBIT before
special items
Change
Million EUR 2006 2005 in %
2nd Quarter
Europe 1,513 1,199 26
Thereof Germany 1,125 772 46
North America (NAFTA) 263 351 (25)
Asia Pacific 125 95 32
South America, Africa, Middle
East 9 12 (25)
1,910 1,657 15
1st Half
Europe 15,285 12,280 24 14,466 11,680 24
Thereof Germany 11,301 8,451 34 5,411 4,254 27
North America (NAFTA) 5,357 4,850 10 5,355 4,831 11
Asia Pacific 3,355 2,750 22 3,648 2,926 25
South America, Africa,
Middle East 840 784 7 1,368 1,227 11
24,837 20,664 20 24,837 20,664 20


1st Half
Europe 2,933 2,333 26
Thereof Germany 2,140 1,514 41
North America (NAFTA) 561 622 (10)
Asia Pacific 240 182 32
South America, Africa, Middle East 41 83 (51)
3,775 3,220 17

Sales by location of company in Europe rose by 21% in the secondquarter of 2006. EBIT before special items climbed 26% to EUR 1,513million. This strong improvement was due above all to the Oil & Gassegment.

Companies in North America increased sales in Dollar and euroterms by 5%. This sales growth was due to the acquisition of EngelhardCorporation and higher sales volumes in the Polyurethanes division.EBIT before special items declined by 25% to EUR 263 million. Theplanned plant turnarounds and a decline in sales of fungicidesnegatively impacted earnings in the Petrochemicals and AgriculturalProducts divisions, respectively.

Sales by location of company in Asia Pacific increased by 17% inlocal currency terms and by 18% in euro terms. EBIT before specialitems rose by 32% to EUR 125 million. All segments contributed to thesales growth, in particular the Chemicals segment as a result of theVerbund site in Nanjing, China, which started operations in June 2005.

In South America, Africa, Middle East sales by location of companyrose 4% in local currencies and 8% in euro terms. EBIT before specialitems was negatively impacted by higher costs due to the furthersignificant appreciation of the Brazilian real. Higher earnings fromgas production in Argentina were unable to offset this effect.

Overview of Other Topics

Research and development

In the first half of 2006, we increased spending on research anddevelopment by 15% as planned to EUR 583 million. Of the amount spentin the first six months of this year, approximately 80% fell under theoperational responsibility of the operating divisions. Corporateresearch costs accounted for the remaining 20%.

We have expanded our global network of centers of excellence inthe key areas of catalysis and nanotechnology. Through the acquisitionof Engelhard Corporation we have significantly expanded our researchcapacity in process and environmental catalysis and are now a worldleader in this area. Together with the University of Heidelberg, weplan to establish a joint laboratory for homogeneous catalysis by fall2006. To strengthen our research network in Asia, we opened a researchlaboratory for nanostructured surfaces in Singapore at the end ofApril.

Employees

The number of BASF Group employees rose by 5,849 compared with theend of 2005 to 86,794 as of June 30, 2006.

This increase was due in particular to the acquisition ofEngelhard Corporation. Simultaneously, employees left BASF as a resultof continued measures to increase efficiency.

In Europe, the number of employees increased by 0.5% in the firstsix months of 2006. The greatest increase of 44.5% was in NorthAmerica (NAFTA) as a result of the acquistion of EngelhardCorporation. Employee numbers increased by 11% in Asia Pacific and by2.5% in South America, Africa, Middle East.
Employees by region
June 30, 2006 Dec. 31, 2005
Europe 56,904 56,614
North America (NAFTA) 14,202 9,826
Asia Pacific 10,733 9,669
South America, Africa,
Middle East 4,955 4,836
86,794 80,945

Compared with the first half of 2005, personnel costs rose by 5.7%to EUR 2.8 billion in the same period of 2006.

Consolidated Statements of Income
2nd Quarter
Million EUR Change
2006 2005 in %
Sales 12,322 10,581 16.5
Cost of sales 8,658 7,083 22.2
Gross profit on sales 3,664 3,498 4.7
Selling expenses 1,143 1,085 5.3
General and administrative expenses 207 193 7.3
Research and development expenses 278 256 8.6
Other operating income 168 56 200.0
Other operating expenses 407 433 (6.0)
Income from operations 1,797 1,587 13.2
(Expenses)/income from financial assets 30 42 (28.6)
Interest result (55) (51) (7.8)
Other financial result 48 (73) .
Financial result 23 (82) .
Income before taxes and minority interests 1,820 1,505 20.9
Income taxes 866 697 24.2
Net income before minority interests 954 808 18.1
Minority interests 34 30 13.3
Net income 920 778 18.3

Earnings per share (EUR)
Number of shares, in million (weighted) 506 527 (4.0)
Dilutive effect - - -
Earnings per share (EUR)
Undiluted 1.82 1.48 23.0
Diluted 1.82 1.48 23.0


2nd Quarter 1st
Half
Million EUR Change
2006 2005 in %
Sales 24,837 20,664 20.2
Cost of sales 17,546 13,928 26.0
Gross profit on sales 7,291 6,736 8.2
Selling expenses 2,246 2,089 7.5
General and administrative expenses 393 357 10.1
Research and development expenses 583 506 15.2
Other operating income 418 182 129.7
Other operating expenses 841 880 (4.4)
Income from operations 3,646 3,086 18.1
(Expenses)/income from financial assets 45 113 (60.2)
Interest result (103) (91) (13.2)
Other financial result 102 (59) .
Financial result 44 (37) .
Income before taxes and minority interests 3,690 3,049 21.0
Income taxes 1,719 1,319 30.3
Net income before minority interests 1,971 1,730 13.9
Minority interests 101 91 11.0
Net income 1,870 1,639 14.1

Earnings per share (EUR)
Number of shares, in million (weighted) 507 532 (4.7)
Dilutive effect - - -
Earnings per share (EUR)
Undiluted 3.69 3.08 19.8
Diluted 3.69 3.08 19.8

Consolidated Balance Sheets
Million EUR June 30, June 30, Change Dec. Change
2006 2005 in % 31, in %
2005
Long-term assets
Intangible assets 6,938 3,773 83.9 3,720 86.5
Property, plant and
equipment 14,782 13,709 7.8 13,987 5.7
Investments accounted for
using the equity method 261 1,168 (77.7) 244 7.0
Other financial assets 1,099 974 12.8 813 35.2
Deferred taxes 899 1,425 (36.9) 1,255 (28.4)
Other long-term assets 557 362 53.9 524 6.3
24,536 21,411 14.6 20,543 19.4
Short-term assets
Inventories 6,122 5,331 14.8 5,430 12.7
Accounts receivable, trade 7,825 6,815 14.8 7,020 11.5
Other receivables and
miscellaneous short-term
assets 5,492 1,869 193.8 1,586 246.3
Liquid funds 496 3,156 (84.3) 1,091 (54.5)
19,935 17,171 16.1 15,127 31.8
Total assets 44,471 38,582 15.3 35,670 24.7
Million EUR June 30, June Change Dec. Change
2006 30, in % 31, in %
2005 2005
Stockholders' equity
Subscribed capital 1,289 1,342 (3.9) 1,317 (2.1)
Capital surplus 3,130 3,072 1.9 3,100 1.0
Retained earnings 12,337 11,244 9.7 11,928 3.4
Other comprehensive income 356 416 (14.4) 696 (48.9)
Minority interests 476 435 9.4 482 (1.2)
17,588 16,509 6.5 17,523 0.4
Long-term liabilities
Provisions for pensions and
similar obligations 1,193 4,837 (75.3) 1,547 (22.9)
Other provisions 2,749 2,463 11.6 2,791 (1.5)
Deferred taxes 1,203 788 52.7 699 72.1
Financial indebtedness 5,920 3,496 69.3 3,682 60.8
Other long-term liabilities 1,323 1,014 30.5 1,043 26.8
12,388 12,598 (1.7) 9,762 26.9
Short-term liabilities
Accounts payable, trade 3,215 2,369 35.7 2,777 15.8
Provisions 2,856 2,759 3.5 2,763 3.4
Tax liabilities 1,178 1,078 9.3 887 32.8
Financial indebtedness 5,037 1,510 233.6 259 .
Other short-term liabilities 2,209 1,759 25.6 1,699 30.0
14,495 9,475 53.0 8,385 72.9
Total stockholders' equity
and liabilities 44,471 38,582 15.3 35,670 24.7

Consolidated Statements of Cash Flows
1st Half
Million EUR 2006 2005
Net income 1,870 1,639
Depreciation and amortization of long-term assets 1,129 1,082
Changes in net working capital (611) (573)
Miscellaneous items (180) (67)
Cash provided by operating activities 2,208 2,081

Payments related to tangible and intangible
assets (983) (875)
Acquisitions/divestitures (6,987) (51)
Financial investments and other items 268 13
Cash using in investing activities (7,702) (913)

Proceeds from capital increases/repayments (663) (858)
Changes in financial liabilities 6,772 1,494
Dividends (1,124) (942)
Cash provided by/used in financing activities 4,985 (306)

Net changes in cash and cash equivalents (509) 862
Cash and cash equivalents as of beginning of year
and other changes 901 2,126
Cash and cash equivalents 392 2,988
Marketable securities 104 168
Liquid funds 496 3,156

Cash provided by operating activities was EUR 2,208 million in thefirst half of 2006 compared with EUR 2,081 million in the same periodof 2005. The increase was primarily due to the rise in earnings.

Cash used in investing activities was EUR 7,702 million comparedwith EUR 913 million in the same period of the previous year.Approximately EUR 7 billion was spent in the second quarter on theacquisitions described under "Significant Events and Outlook."

In cash provided by financing activities, share buybacks anddividend payments led to a cash outflow of EUR 1,805 million. In thefirst six months of 2006, we bought back 10.8 million shares for EUR681 million or an average of EUR 63.04 per share.

At EUR 10.957 million, financial indebtedness was EUR 7,016million higher than on December 31, 2005.

On April 11, BASF Aktiengesellschaft issued a euro benchmark bondwith a volume of EUR 1 billion and a maturity of five years. Thecoupon is 4.0% per year. In addition, on June 22, BASFAktiengesellschaft issued a three-year floating rate note and a10-year euro fixed-rate benchmark bond, each with a nominal volume ofEUR 500 million. The coupon of the 10-year bond is 4.5 percent peryear. In addition, commercial paper equivalent to approximately EUR4.4 billion was outstanding as of June 30, 2006.

As of June 30, 2006, nebt debt was EUR 10,461 million and theequity ratio was 39.5%.

Consolidated Statements of Recognized Income and Expense
Income and expense items
1st Half
Million EUR 2006 2005
Net income before minority interests 1,971 1,730

Fair value changes in available-for-sale securities (2) (22)
Cash-flow hedges 23 (3)
Change in foreign currency translation adjustments (360) 501
Actuarial gains/losses from pensions and other
obligations 368 (874)
Deferred taxes (132) 340
Minority interests (15) 23
Total income and expenses recognized in equity (118) (35)

Total income and expense for the period 1,853 1,695
Thereof BASF 1,767 1,581
Thereof minority interests 86 114
Development Retained Other comprehensive income
of income earnings
and expense
recognized
directly in
equity
Actuarial Foreign Fair value Cash- Total of
gains/losses currency changes in flow other compr-
translation available- hedges ehensive
adjustments for income
sale
securities
Million EUR
As of
January 1,
2006 (894) 475 258 (37) 696
Additions 368 - - 23 23
Releases - (360) (2) - (362)
Deferred
taxes (131) 7 1 (9) (1)
As of June
30, 2006 (657) 122 257 (23) 356

As of
January 1,
2005 (234) (226) 193 (27) (60)
Additions - 501 - - 501
Releases (874) - (22) (3) (25)
Deferred
taxes 340 (10) 8 2 -
As of June
30, 2005 (768) 265 179 (28) 416


Development of income Total
and expense recognized income and
directly in equity expense
recognized
directly in
equity

Million EUR
As of January 1, 2006 (198)
Additions 391
Releases (362)
Deferred taxes (132)
As of June 30, 2006 (301)

As of January 1, 2005 (294)
Additions 501
Releases (899)
Deferred taxes 340
As of June 30, 2005 (352)

Consolidated Statements of Stockholders' Equity
January - June 2006 Number of Subscribed Capital Retained
subscribed capital surplus earnings
shares
outstanding
Million EUR
As of January 1, 2006 514,379,000 1,317 3,100 11,928
Share buy-back and
cancellation of own shares
including own shares intended
to
be cancelled (10,799,000) (28) 30 (683)
Capital injection by minority
interests - - - -
Dividends paid - - - (1,014)
Net income - - - 1,870
Income and expense recognized
directly
in equity - - - 237
Change in scope of
consolidation and
other changes - - - (1)
As of June 30, 2006 503,580,000 1,289 3,130 12,337


January - June 2006 Other com- Minority Stock-
prehensive interests holders'
income equity
Million EUR
As of January 1, 2006 696 482 17,523
Share buy-back and cancellation
of own shares including own
shares intended to
be cancelled - - (681)
Capital injection by minority
interests - 18 18
Dividends paid - (110) (1,124)
Net income - 101 1,971
Income and expense recognized
directly
in equity (340) (15) 118
Change in scope of consolidation
and
other changes - - 1
As of June 30, 2006 356 476 17,588
January - June 2005 Number of Subscribed Capital Retained
subscribed capital surplus earnings
shares
outstanding
Million EUR
As of January 1, 2005 540,440,410 1,384 3,028 11,923
Share buy-back and
cancellation of own shares
including own shares intended
to
be cancelled (16,402,229) (42) 44 (869)
Capital distribution to
minority interests - - - -
Dividends paid - - - (904)
Net income - - - 1,639
Income and expense recognized
directly
in equity - - - (534)
Change in scope of
consolidation and
other changes - - - (11)
As of June 30, 2005 524,038,181 1,342 3,072 11,244


January - June 2005 Other com- Minority Stock-
prehensive interests holders'
income equity
Million EUR
As of January 1, 2005 (60) 328 16,603
Share buy-back and cancellation
of own shares including own
shares intended to
be cancelled - - (867)
Capital distribution to minority
interests - 10 10
Dividends paid - (38) (942)
Net income - 91 1,730
Income and expense recognized
directly
in equity 476 23 (35)
Change in scope of consolidation
and
other changes - 21 10
As of June 30, 2005 416 435 16,509

Segment Reporting
2nd Quarter Sales EBITDA

Million EUR 2006 2005 in % 2006 2005 in %

Chemicals 2,443 2,007 21.7 409 477 (14.3)
Plastics 3,168 2,924 8.3 442 400 10.5
Performance Products 2,197 2,098 4.7 298 366 (18.6)
Agricultural Products &
Nutrition 1,389 1,465 (5.2) 313 363 (13.8)
Thereof Agricultural
Products 924 1,043 (11.4) 217 351 (38.2)
Fine Chemicals 465 422 10.2 96 12 .
Oil & Gas 2,481 1,650 50.4 973 686 41.8
Other (a) 644 437 47.4 (61) (143) 57.3
12,322 10,581 16.5 2,374 2,149 10.5


2nd Quarter Income from Income from
operations (EBIT) operations (EBIT)
before special
items

Million EUR 2006 2005 in % 2006 2005 in %

Chemicals 351 415 (15.4) 263 345 (23.8)
Plastics 315 274 15.0 314 280 12.1
Performance Products 209 272 (23.2) 209 282 (25.9)
Agricultural Products &
Nutrition 183 302 (39.4) 227 272 (16.5)
Thereof Agricultural Products 165 295 (44.1) 164 291 (43.6)
Fine Chemicals 18 7 157.1 63 (19) .
Oil & Gas 868 579 49.9 868 579 49.9
Other (a) (16) (185) 91.4 (84) (171) 50.9
1.910 1.657 15.3 1,797 1,587 13.2
2nd Quarter Research and Assets (b)
development
expenses

Chemicals 35 28 25.0 10,903 6,026 80.9
Plastics 32 35 (8.6) 6,867 6,591 4.2
Performance Products 59 47 25.5 5,884 4,938 19.2
Agricultural Products &
Nutrition 99 92 7.6 6,785 6,866 (1.2)
Thereof
Agricultural Products 83 75 10.7 5,025 5,540 (9.3)
Fine Chemicals 16 17 (5.9) 1,760 1,326 32.7
Oil & Gas - - - 4,802 4,210 14.1
Other (a) 53 54 (1.9) 9,230 9,951 (7.2)
278 256 8.6 44,471 38,582 15.3


2nd Quarter Additions to Amortization and
fixed assets (c) depreciation (c)

Chemicals 3,233 369 . 146 132 10.6
Plastics 116 120 (3.3) 128 120 6.7
Performance Products 921 134 . 89 84 6.0
Agricultural Products &
Nutrition 282 33 . 86 91 (5.5)
Thereof
Agricultural Products 37 14 164.3 53 60 (11.7)
Fine Chemicals 245 19 . 33 31 6.5
Oil & Gas 115 156 (26.3) 105 107 (1.9)
Other (a) 290 38 . 23 28 (17.9)
4,957 850 483.2 577 562 2.7

Segment Reporting
1st Half Sales EBITDA

Million EUR 2006 2005 in % 2006 2005 in %

Chemicals 4,682 3,829 22.3 861 1,021 (15.7)
Plastics 6,259 5,724 9.3 898 780 15.1
Performance Products 4,344 4,006 8.4 627 670 (6.4)
Agricultural Products &
Nutrition 2,765 2,819 (1.9) 686 745 (7.9)
Thereof Agricultural
Products 1,852 2,002 (7.5) 550 683 (19.5)
Fine Chemicals 913 817 11.8 136 62 119.4
Oil & Gas 5,466 3,490 56.6 1,926 1,276 50.9
Other (a) 1,321 796 66.0 (223) (324) 31.2
24,837 20,664 20.2 4,775 4,168 14.6


1st Half Income from Income from
operations (EBIT) operations (EBIT)
before special
items

Million EUR 2006 2005 in % 2006 2005 in %

Chemicals 668 841 (20.6) 580 771 (24.8)
Plastics 647 543 19.2 645 548 17.7
Performance Products 457 497 (8.0) 456 506 (9.9)
Agricultural Products &
Nutrition 407 598 (31.9) 517 576 (10.2)
Thereof Agricultural
Products 378 571 (33.8) 444 575 (22.8)
Fine Chemicals 29 27 7.4 73 1 .
Oil & Gas 1,716 1,063 61.4 1,716 1,063 61.4
Other (a) (120) (322) 62.7 (268) (378) 29.1
3,775 3,220 17.2 3,646 3,086 18.1
1st Half Research and Assets (b)
development
expenses

Chemicals 66 55 20.0 10,903 6,026 80.9
Plastics 73 69 5.8 6,867 6,591 4.2
Performance Products 119 97 22.7 5,884 4,938 19.2
Agricultural Products &
Nutrition 196 178 10.1 6,785 6,866 (1.2)
Thereof
Agricultural Products 163 143 14.0 5,025 5,540 (9.3)
Fine Chemicals 33 35 (5.7) 1,760 1,326 32.7
Oil & Gas - 1 - 4,802 4,210 14.1
Other (a) 129 106 21.7 9,230 9,951 (7.2)
583 506 15.2 44,471 38,582 15.3


1st Half Additions to Amortization and
fixed assets (c) depreciation (c)

Chemicals 3,395 457 . 281 250 12.4
Plastics 334 202 65.3 253 232 9.1
Performance Products 1,002 188 433.0 171 164 4.3
Agricultural Products &
Nutrition 319 64 398.4 169 169 0.0
Thereof
Agricultural Products 52 26 100.0 106 108 (1.9)
Fine Chemicals 267 38 . 63 61 3.3
Oil & Gas 190 250 (24.0) 210 213 (1.4)
Other (a) 317 51 . 45 54 (16.7)
5,557 1,212 358.5 1,129 1,082 4.3

(a) "Other" includes the fertilizers business and other businessesas well as expenses, income and assets not allocated to the segments.This item also includes foreign currency results from financialindebtedness that are not allocated to the segments, from hedging offorecasted sales as well as from currency positions that aremacro-hedged (EUR 38 million in the second quarter (2005: EUR (94)million) and EUR 93 million in the first half (2005: EUR (139)million)).

(b) The assets of "Other" includes the assets of the fertilizersbusiness and other businesses as well as assets that are not allocatedto the segments (financial assets, liquid funds, financialreceivables, deferred taxes; first half 2006: EUR 7,189 million, firsthalf 2005: EUR 8,180 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 yearended December 31, 2005 were prepared according to the InternationalFinancial Reporting Standards (IFRS) valid as of the balance sheetdate. The current interim financial statements were prepared using thesame accounting policies. BASF's Financial Report for fiscal 2005 isavailable on the Internet at corporate.basf.com/financial-report.

The previous year's figures have been adjusted as follows inaccordance with the changes made effective December 31, 2005: Expensesin the Oil & Gas segment related to exploration for oil and gasdeposits and to dry holes are now recorded as other operating expensesrather than as research and development expenses. In association withthe change to IAS 19, actuarial gains and losses from the valuation ofpension obligations are recognized against retained earnings in thereporting period in which they occur.

Compared with the end of 2005, the assumptions used to determineexpenses for pension benefit were changed as follows with effect fromJune 30, 2006: The interest rate was increased from 4.25% to 4.75% andthe 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 BASFAktiengesellschaft, the parent company, as well as all materialsubsidaries on a fully consolidated basis. Material jointly operatedcompanies are proportionally consolidated. The number of fully andproportionally consolidated companies has developed as follows:
2006 2005
As of January 1 180 160
Thereof proportionally
consolidated 15 12
First-time consolidations 91 28
Thereof proportionally
consolidated - 4
Thereof changes in the
consolidation
method - (1)
Deconsolidations 4 8
Thereof proportionally
consolidated - -
As of June 30/December 31 267 180
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, United States;

-- The biotechnology company CropDesign N.V., Belgium, acquired in May;

-- BASF Services Europe GmbH, Berlin, which performs finance and human resources services for BASF companies in Europe; and

-- Ten previously unconsolidated companies with headquarters in Germany, Australia, China, Malta and Switzerland due to their increased importance.

Four companies have been deconsolidated since the beginning of2006 due to their decreased significance or merger with other BASFcompanies.

Companies accounted for using the equity method were as follows:
June 30, Dec. 31,
2006 2005
Affiliated companies 11 11
Joint ventures 2 2
Other associated companies 3 3
16 16

Companies acquired in association with the purchase of Degussa'sconstruction chemicals business will be included in BASF'sConsolidated Financial Statements as of July 1, 2006. Companiesacquired in association with the purchase of Johnson Polymer will alsobe consolidated as of July 1, 2006.

3. Acquisitions/divestitures
Effect of acquisitions and divestitures
on BASF Group assets
June 30, 2006
Million
EUR %
Long-term assets 4,818 46.4
Thereof goodwill 2,089 20.1
Intangible assets 1,214 11.7
Property, plant and equipment 1,260 12.1
Short-term assets 5,559 53.6
Thereof Inventories 655 6.3
Accounts receivable, trade 484 4.7
Other receivables and miscellaneous short-term
assets 4,366 42.1
Assets 10,377 100.0

The total purchase price for Degussa's construction chemicalsbusiness and for Johnson Polymer of EUR 3,048 million is reportedunder "Other receivables" as of June 30, 2006.

The provisional purchase price allocation for EngelhardCorporation is included in the above table under the respectivebalance sheet items. The activities acquired from EngelhardCorporation increased sales by EUR 288 million in the second quarterof 2006.
-- Important Dates

-- November 2, 2006
Interim Report Third
Quarter 2006

-- February 22, 2007
Annual Results 2006

-- April 26, 2007
Interim Report First Quarter
2007 and Annual Meeting

-- August 1, 2007
Interim Report Second
Quarter 2007

-- October 30, 2007
-- Interim Report Third Quarter 2007 Forward-looking statements

This report contains forward- looking statements under the U.S.Private Securities Litigation Reform Act of 1995. These statements arebased on current expectations, estimates and projections of BASFmanagement and currently available information. They are notguarantees of future performance, involve certain risks anduncertainties that are difficult to predict and are based uponassumptions as to future events that may not prove to be accurate.Many factors could cause the actual results, performance orachievements of BASF to be materially different from those that may beexpressed or implied by such statements. Such factors include thosediscussed in BASF's Form 20-F filed with the Securities and ExchangeCommission. The Annual Report on Form 20-F is available on theInternet at corporate.basf.com/20-f-report. We do not assume anyobligation to update the forward-looking statements contained in thisreport.

You can find this and other publications from BASF on the Internetat corporate.basf.com. You can also order the reports -- by telephone: +49 621 60-91827 -- by fax: +49 621 60-20162 -- on the Internet: corporate.basf.com/mediaorders