29 – Statement of cash flows and capital structure management

Statement of cash flows

Cash provided by operating activities contained the following payments:

Interest payments comprised interest payments received of €194 million (2014: €187 million) and interest paid of €652 million (2014: €677 million).

Cash provided by operating activities also included €248 million in benefits paid (2014: €47 million), which are covered by a contractual trust arrangement.

Cash used in investing activities included €215 million in payments made for acquisitions (2014: €963 million), especially for the acquisition of a 66% share in a company into which TODA KOGYO CORP., Hiroshima, Japan, contributed its business with cathode materials for lithium-ion batteries, patents and production capacities in Japan. In the previous year, payments had been made for such purchases as shares in producing oil and gas fields as well as exploration licenses from Statoil Petroleum AS, Stavanger, Norway, and Tullow Oil Norge AS, Oslo, Norway.

Payments of €651 million were received for divestitures (2014: €1,336 million) in relation to transactions such as the sale of portions of the pharmaceutical ingredients and services business to Siegfried Holding AG, Zofingen, Switzerland. In the previous year, payments had been received particularly from the sale of the 50% share in Styrolution Holding GmbH, Frankfurt am Main, Germany, to the INEOS Group; this also gave rise to payments received in 2015.

The payments for property, plant and equipment, and intangible assets in the amount of €5,812 million included investments for 2015, to the extent that they already had an effect on cash.

Cash and cash equivalents were not subject to any utilization restrictions, as in the previous year.

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 ratios, as part of the company’s financial planning. The equity of the BASF Group as reported in the balance sheet amounted to €31,545 million as of December 31, 2015 (December 31, 2014: €28,195 million); the equity ratio was 44.5% on December 31, 2015 (December 31, 2014: 39.5%).

BASF prefers to access external financing on 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. The goal is to create a balanced maturity profile and diverse range of investors, and to optimize our debt capital financing conditions.

As a part of risk management, activities in countries with transfer restrictions are continuously monitored. This includes, for example, regular analysis of the macroeconomic and legal environment, shareholders’ equity and the business models of the operating units. The chief aim is the reduction of counterparty, transfer and currency risks for the BASF Group.

Currently, BASF has the following ratings:

Rating agency Moody’s last confirmed their rating of “A1/P-1 outlook stable” on November 4, 2015. Standard & Poor’s adjusted the outlook of their “A+/A-1” rating to “negative” on April 10, 2015. This was mainly due to an increase in pension provisions as a result of declining capital market interest rates.

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