29 – Statement 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 €

2013

2012

Income tax payments

1,125

1,332

Interest payments

446

549

Dividends received

238

385

Interest payments comprise interest received of €160 million (2012: €171 million) and interest paid of €606 million (2012: €720 million).

Cash provided by operating activities also includes €250 million in benefits paid (2012: €233 million) which are covered by a contractual trust arrangement.

Capital structure management

The aim of capital structure management is to maintain the financial flexibility needed to further develop BASF’s business portfolio and take advantage of strategic opportunities. The objectives of the Company’s financing policy are to secure solvency, limit financial risks and optimize the cost of capital.

Capital structure management focuses on meeting the requirements needed to ensure unrestricted access to capital markets and a solid A rating. BASF’s capital structure is managed using selected financial ratios, such as dynamic debt and the equity ratio, as part of the company’s financial planning. The equity of the BASF Group as reported on the balance sheet amounted to €27,789 million as of December 31, 2013 (December 31, 2012: €25,621 million). The equity ratio was 43.2% on December 31, 2013 (December 31, 2012: 40.8%).

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.

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

Within the framework of risk management, acitivities in countries with transfer restrictions are continually monitored. This includes regular analysis of the macroeconomic and legal environment, shareholders’ equity and the business model of the operating unit. The chief aim is the reduction of counterparty, transfer and currency risks for the BASF Group.

Currently, BASF has the following ratings:

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December 31, 2013

 

December 31, 2012

 

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

Moody’s confirmed our short-term and long-term rating on October 14, 2013 and Standard and Poor’s on November 22, 2013 with a stable outlook.

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