Strategy

At the center of the strategic lever Focus is our portfolio management. BASF distinguishes between core businesses and standalone businesses. The core businesses comprise the Chemicals, Materials, Industrial Solutions and Nutrition & Care segments. These are closely integrated into BASF’s value chains and Production Verbund at major sites. They generate value through efficient use of resources, operational excellence and cost efficiency. The portfolio of our core businesses ranges from basic chemicals to specialties. The standalone businesses, which have greater flexibility and operational independence, comprise the Surface Technologies segment with the Environmental Catalyst and Metal Solutions (ECMS) and Battery Materials divisions as well as the Agricultural Solutions segment. Until October 1, 2025, the Surface Technologies segment also included the Coatings division.

In the coming years, we will focus on strengthening our core businesses and growing profitably in these areas, organically or through value-increasing acquisitions: We see the current consolidation in the chemical industry as an opportunity for BASF. We want to operate our core businesses in an even more cost-efficient and leaner manner in order to secure their profitability and competitive advantage over emerging competitors, in particular from China and the Middle East.

Our standalone businesses compete with pure-play peers that are subject to their own market trends. We want these businesses to be able to respond quickly to the specific requirements of their customers and to strengthen their competitive position. We therefore rely on various measures, such as the introduction of standalone ERP (Enterprise Resource Planning) systems or differentiated steering with industry-specific financial steering indicators in order to make the performance of the businesses more transparent compared to competitors. We have further promoted the entrepreneurial independence of our standalone businesses and have identified individual paths through which each business can generate the greatest value:

• Our ECMS business has been carved out since 2023. It operates in a low-growth industry but continues to deliver a strong cash contribution. At present, we see ourselves as the best owner to operate this business.
• Our Battery Materials business operates in a rapid-growth environment characterized by high market and technology risks. We have significantly reduced fixed costs and capital expenditures and signed contracts with key customers to utilize existing capacities. We are also investigating opportunities for cooperation along the value chain.
• In the Coatings division, we completed the sale of the Brazilian decorative paints business to Sherwin-Williams, Cleveland, Ohio, effective October 1, 2025. In October 2025, we signed a binding agreement with Carlyle, Washington D.C., for the sale of the automotive OEM coatings, automotive refinish coatings and surface treatment business units. The transaction is expected to close in the second quarter of 2026, subject to regulatory approvals. We will then continue to hold a 40% equity stake in this coatings business.
• For the Agricultural Solutions segment, we are targeting IPO readiness by 2027, in order to float a minority stake. The Frankfurt Stock Exchange is envisaged as the listing location. The legal carve-out and the implementation of an industry-specific ERP system are progressing well.

Under the strategic lever Focus, we have changed our internal steering processes for capital and resource allocation in order to focus even more strongly on cash generation and to strengthen our capital discipline. We are now following a strategic allocation approach for our operating divisions instead of the largely project-based approach previously used at BASF Group level. We have developed medium-term value creation plans for the divisions based on their respective roles in the BASF portfolio. These plans are the basis for capital allocation. Within this framework, the operating divisions are empowered with increased autonomy to make business decisions – and thus their accountability for business success.

The strategic focus on profitable growth also means prioritizing high-growth markets. One example of this is our new Verbund site in Zhanjiang, China. We manufactured the first products from the Verbund there in November 2025. Commissioning of the steam cracker and production in the first value chains of the Verbund commenced at the turn of 2025/2026. This project milestone was achieved on schedule with strict cost discipline, and we expect to remain below the original project budget, with total investments of around €8.7 billion in the period 2019 to 2028.

In addition to China, we want to expand our presence primarily in India and five ASEAN countries (Indonesia, Malaysia, Singapore, Thailand and Vietnam) by strengthening local organizational structures, our production sites and our research and development (R&D) activities. These seven countries will account for around 80% of global chemical growth by 2035.

With the strategic lever Accelerate, we want to generate value faster by adjusting the way in which we collaborate and complete tasks at BASF. Our priority is to empower our business units through lean steering, simplify our organizational structure and increase the use of artificial intelligence (AI).

The Board of Executive Directors focuses on topics that are important to BASF as a whole: strategy, portfolio management, capital allocation and talent development. By contrast, the individual operating divisions have greater ownership of specific business decisions and accountability for business success. In line with this, we introduced an enhanced performance management system in 2025 that provides a closer link between incentives and unit-specific performance.

We are making our organization simpler and leaner by sharpening role clarity, flattening hierarchies and by reducing bureaucracy and internal alignment processes. Spans of control are being broadened to increase individual ownership. An important step in this direction was dissolving the regional dimension of our organizational structure, which was mostly completed at the end of 2025. With few exceptions, the responsibilities of the previous country organizations have been transferred to the largest operating division in each country. In smaller markets, we are either forgoing our local presence or developing new sales approaches to reduce the complexity of our sales channels. With this simplified organizational setup, we are aiming to accelerate decisions in all areas of our company.

BASF is harnessing the potential of digitalization and AI to advance productivity and accelerate innovations. We aim to gradually enable our employees to utilize AI in their respective areas of work. For this purpose, we provide them with a variety of digital tools in their dayto- day work and offer accompanying training courses. At the same time, our focus is on applications whose added value has been confirmed by fast and effective pilot projects. In particular, we target key functions such as sales, marketing, R&D, production, procurement and services.

Sustainability is an integral part of our strategy as well as our targets, steering processes and business models. We are fully committed to our climate protection targets (for more information on our sustainability strategy, see page 18 onward and for more on our targets, see page 16 onward) as well as to the green transformation of our production and our product portfolio.

With the strategic lever Transform, we aim to drive the green transformation in a more differentiated and focused way as well as in line with market development, in order to grow profitably. Our transformation approach goes beyond the green transformation of our own production. Our key customer industries are facing tremendous challenges in achieving their transformation targets. We want to be the preferred chemical company to enable our customers’ green transformation with our broad portfolio as well as our product and process innovations.

Our approach here is to intensify our focus on specific opportunities for our business and to increase volumes of products with sustainability attributes according to customer needs. With this approach, we are mitigating the investment and business risks resulting from capital-intensive new technologies and the varying transformation speed of our customer industries. In addition, we are prioritizing projects that have a positive impact on our license to operate.

Over time, we are staggering our transformation projects based on these priorities. In recent years, we have already increasingly invested in renewable energies to operate our plants. Furthermore, we are already piloting new technologies in selected value chains, are using alternative raw materials and have launched products with sustainability attributes such as a reduced or netzero product carbon footprint (Low/Zero Product Carbon Footprint; LowPCF/ZeroPCF). We are now focusing on ramping up the use of renewable, recycled and low-emission feedstocks in our existing plants and thus offering more products with a reduced carbon footprint and other sustainability attributes in line with market demand and at low capital expenditure. At the same time, we consistently continue to evaluate new business models and technologies. As markets for more sustainable products grow, we want to be in a position in the medium to long term to apply and scale up the new technologies we are currently developing and, in some cases, already piloting.

In line with our market-oriented approach and the reduced speed of industrial feedstock transformation, we have adjusted our investments to an expected €1.2 billion from 2026 to 2029. We continue to assume that most of the major capital expenditure for our green transformation will be incurred after 2030.

BASF’s integrated Verbund system has fundamental advantages for our transformation approach, in particular the energy and resource efficiency provided by the Verbund and the numerous entry points that offer feedstock flexibility. We can be flexible and scalable in how we employ renewable and recycled feedstocks in existing plants. We therefore expect that BASF will benefit from the change and growth momentum in connection with the green transformation. This also applies to our largest site, Ludwigshafen, and its integrated Verbund.

In the medium to long term, our aim is to successfully develop Ludwigshafen into a leading, sustainable chemical site for Europe with an improved competitive position. To this end, we have initiated, among other things, a cost savings program with a focus on the Ludwigshafen site. From the end of 2026, we aim to save more than €2.3 billion worldwide compared to the base year 2022 with all ongoing programs and measures. This is €200 million more than originally targeted.

In Ludwigshafen, we have conducted a thorough analysis of our production asset structure based on current and future market and customer demand: Selected plants and production lines no longer deliver sufficient earnings or are at risk of losing their competitiveness. Against this background, we decided to close individual plants and discontinue business operations in 2025. However, the majority of the assets in the Ludwigshafen Verbund remain competitive. In addition, we are investing in new plants in Ludwigshafen, for example for the production of high-purity chemicals for semiconductor manufacturing, in order to meet the growing demand for advanced semiconductor chips in Europe.

The strategic lever Win is how we want to drive change in corporate culture throughout the entire company. This change is a decisive factor for us in successfully implementing our “Winning Ways” strategy. Our Winning Culture is based on three topics to make BASF an even more performance-oriented company: Accountability (Own it!), Speed (Drive it!) and Improvement Mindset (Excel in it!).

Within these three topics, the Board of Executive Directors has developed nine actionable Winning Behaviors: They define the behavior that BASF expects from all employees, including the Board of Executive Directors, and show in a concrete way how each and every individual can contribute to successful change.

Accountability:

• We give and take ownership over narrow supervision.
• We strive for results, not staying in the comfort zone.
• We take action on low performance, not dragging it along.

Speed:

• We prioritize speed over perfection.
• We spread motivation and inspiration, not skepticism.
• We focus, not do a bit of everything.

Improvement Mindset:

• We fight for the best solution over compromises.
• We give candid and constructive feedback, not empty phrases.
• We learn from external perspectives, not just from internal views.

Our CORE corporate values (creative, open, responsible, entrepreneurial) will remain the guide for our behavior.

We want to deepen our employees’ understanding of the Winning Behaviors and inspire them to actively live them out. Employees regularly have the opportunity to provide feedback on the progress of change in corporate culture in global surveys.

Further developing our corporate culture goes hand in hand with our enhanced performance management system with a closer link between incentives and unit-specific achievements. As planned, we introduced this differentiated bonus system for the majority of employees worldwide over the course of 2025.