Information on Q2 2019: BASF Group

Compared with the second quarter of 2018, sales declined by €625 million to €15,158 million. This was mainly due to lower volumes, particularly in the Chemicals segment as a result of the scheduled turnarounds of our steam crackers in Antwerp, Belgium, and Port Arthur, Texas. Sales volumes decreased in the Agricultural Solutions, Materials and Surface Technologies segments as well. Lower prices also contributed to the sales decrease, especially in the Materials and Chemicals segments. We achieved significant price increases in the Surface Technologies segment. Portfolio effects in the Agricultural Solutions segment and slightly positive currency effects in all segments had an offsetting impact.

Factors influencing BASF Group sales in Q2 2019

Income from operations (EBIT) before special items¹ declined by €927 million compared with the second quarter of 2018 to €1,045 million. This was primarily the result of significantly lower contributions from the Materials, Chemicals and Agricultural Solutions segments. By contrast, the Industrial Solutions segment considerably increased EBIT before special items. EBIT before special items rose slightly in the Surface Technologies and Nutrition & Care segments.

Special items in EBIT totaled minus €497 million in the second quarter of 2019, compared with minus €66 million in the prior-year quarter. This was mainly due to expenses for restructuring measures in connection with our excellence program. Other special charges primarily arose from the impairment of a natural gas-based investment on the U.S. Gulf Coast, which BASF is no longer pursuing, and from the integration of the significant businesses acquired from Bayer in the third quarter of 2018.

EBIT² declined by €1,358 million compared with the second quarter of 2018 to €548 million. This figure includes income from companies accounted for using the equity method, including BASF’s share in Solenis’ net income (since February 1, 2019) and the corresponding figure for Wintershall Dea (since May 1, 2019). Income from companies accounted for using the equity method declined from €59 million in the prior-year quarter to €45 million.

Q2 sales

Million €, relative change

Q2 EBIT before special items

Million €, absolute change

Compared with the second quarter of 2018, income from operations before depreciation, amortization and special items (EBITDA before special items)³ decreased by €734 million to €1,975 million and EBITDA³ by €1,019 million to €1,626 million.

The financial result deteriorated by €12 million to minus €204 million. This was primarily attributable to the €31 million decrease in the interest result, mainly as a result of higher interest expenses for financial indebtedness. Another contributing factor was the €2 million decline in net income from shareholdings, while the other financial result improved by €21 million as a result of lower expenses for hedging our bonds and U.S. dollar commercial paper against interest and currency risk.

Income before income taxes decreased by €1,370 million to €344 million. The tax rate declined from 20.6% to 18.0%, mainly as a result of lower earnings, especially in countries with higher tax rates.

Income after taxes from continuing operations decreased by €1,079 million to €282 million.

Income after taxes from discontinued operations, which comprised our oil and gas activities until the end of April 2019, rose by €5,991 million to €6,153 million. This was largely due to the book gain recorded in this item from the deconsolidation of the Wintershall companies as a result of the merger of the oil and gas activities of Wintershall and DEA on May 1, 2019.

Noncontrolling interests declined by €68 million to minus €25 million, mainly due to the turnaround of the steam cracker in Port Arthur, Texas.

Net income increased by €4,980 million to €6,460 million, primarily as a result of the above book gain.

As a result, earnings per share rose to €7.03 in the second quarter of 2019, after €1.61 in the prior-year period. Earnings per share adjusted³ for special items and amortization of intangible assets amounted to €0.82 (second quarter of 2018: €1.77).

Cash flows from operating activities amounted to €1,946 million in the second quarter of 2019, €278 million below the figure for the prior-year quarter. The decrease was mainly due to lower net income after accounting for the reclassification of the disposal gain on the deconsolidation of the Wintershall companies (€6,190 million) to cash flows from investing activities. The main offsetting effect was higher cash inflows from trade accounts receivable compared with the second quarter of 2018, as well as cash released from inventories.

Cash flows from investing activities amounted to €1,289 million in the second quarter of 2019, compared with minus €1,101 million in the prior-year period. The increase was driven by net payments received from acquisitions and divestitures in the amount of €2,174 million, compared with €30 million in the second quarter of 2018. BASF recorded net cash inflows in the total amount of €2.3 billion in the second quarter in connection with the merger of Wintershall and DEA. Payments made for intangible assets and property, plant and equipment amounted to €981 million, €159 million above the figure for the prior-year period. Changes in financial assets and miscellaneous items led to a net cash inflow of €96 million in the second quarter of 2019, after a net cash outflow of €309 million in the prior-year quarter.

Cash flows from financing activities amounted to minus €3,847 million in the second quarter of 2019, compared with minus €719 million in the prior-year period. The decrease was primarily driven by changes in financial and similar liabilities. Repayments exceeded additions to financial and similar liabilities by €835 million in the second quarter of 2019, after net additions of €2,306 million in the prior-year period. Dividends of €2,939 million were paid to shareholders of BASF SE in the second quarter of 2019, €92 million more than in the prior-year quarter. Noncontrolling interests in Group companies received €74 million in dividends, compared with €178 million in the second quarter of 2018.

Free cash flow⁴ declined from €1,402 million in the prior-year quarter to €965 million. This was due to both lower cash flows from operating activities and higher payments made for intangible assets and property, plant and equipment.