✓ audited

28 – Statements of cash flows and capital structure management

Statement of cash flows

Cash provided by operating activities includes the following cash flows:

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Million €

2012

2011

Income tax payments

3,549

1,710

Interest payments

574

588

Dividends received

82

188

Interest payments comprise interest received of €173 million (2011: €179 million) and interest paid of €747 million (2011: €767 million). The cash flows also include €233 million in benefits paid (2011: €233 million) which are covered by contractual trust arrangements.

Capital structure management

The aim of capital structure management is to maintain the financial flexibility needed to continually develop BASF’s business portfolio and take advantage of strategic opportunities. The objectives of the Company’s financing policy are to secure liquidity, limit financial risks and optimize the cost of capital by means of an appropriate capital structure. The capital structure is oriented to the needs of the operational business and BASF’s “We create chemistry” strategy.

Capital structure management focuses on meeting the requirements needed to ensure a solid A rating and unrestricted access to capital markets; these include dynamic debt and equity ratio requirements. The capital structure of BASF is managed using selected financial ratios, within the framework of our financial management. Equity as reported on the balance sheet amounted to €25,804 million as of December 31, 2012 (December 31, 2011: €25,385 million). The equity ratio was 40.1% on December 31, 2012 (December 31, 2011: 41.5%).

BASF prefers to access external financing via the capital markets. A commercial paper program is used for short-term financing, while corporate bonds are used for financing in the medium and long-term. These are issued in euros and other currencies with different maturities. This ensures a balanced maturity profile, a diverse range of investors and more advantageous financing conditions for BASF. In 2012, BASF issued a six-year €750 million bond and a ten-year €1 billion bond.

As part of its interest rate risk management, BASF pursues a strategy of reducing the Group’s interest expense by turning selected capital market liabilities with fixed interest into variable-rate receiver swaps.

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December 31, 2012

 

December 31, 2011

 

Moody’s

Standard & Poor’s

 

Moody’s

Standard & Poor’s

Long-term financial indebtedness

A1

A+

 

A1

A+

Short-term financial indebtedness

P-1

A-1

 

P-1

A-1

Outlook

stable

stable

 

stable

stable

Standard & Poor’s most recently confirmed BASF’s long-term rating on July 24, 2012. Moody’s confirmed BASF’s long-term rating on October 12, 2012, and rated the outlook as stable. BASF’s short-term ratings were confirmed by both agencies.

BASF continues to aim for at least a solid A rating, which ensures unrestricted access to financial and capital markets.