BASF Group Business Review 2nd Quarter 2015

Sales and income from operations before special items

• Sales grow by 3% to €19.1 billion as a result of higher volumes in Oil & Gas and positive currency effects
• Earnings rise by 2% to around €2 billion, driven by contributions from Functional Materials & Solutions segment and Other

Compared with the second quarter of 2014, our sales grew by 3% to €19.1 billion despite overall lower sales prices. This development was supported by higher volumes in gas trading as well as by positive currency effects in all divisions. The drop in prices resulting from the lower price of oil negatively impacted sales, especially in the Chemicals and Oil & Gas segments.

We raised income from operations before special items by €31 million to around €2 billion, largely through the significantly increased contribution from the Functional Materials & Solutions segment as well as the reversal of provisions for the long-term incentive program in Other. While earnings were only slightly down in the Chemicals segment, the other segments posted considerable declines.

Factors influencing sales

Sales volumes grew slightly compared with the same quarter of the previous year. This was predominantly through a sharp increase in volumes in the Oil & Gas segment’s Natural Gas Trading business sector. Sales volumes remained stable in the chemicals business¹ but decreased in the Agricultural Solutions segment. As a consequence of the significant drop in the price of oil, prices declined overall, especially in the Chemicals and Oil & Gas segments. We observed positive currency effects in all segments. Portfolio measures had no material impact on sales development.

Sales and income from operations before special items in the segments

Sales in the Chemicals segment were considerably down compared with the second quarter of 2014. Lower raw material costs led to a sharp drop in prices, especially in the Petrochemicals division. Further dampening sales was the disposal of our share in the Ellba Eastern Private Ltd. joint operation in Singapore at the end of 2014. Positive currency effects in all divisions and higher sales volumes in the Intermediates division worked in our favor. Earnings declined slightly, primarily as a result of higher fixed costs arising from the gradual startup of new production facilities and a greater number of scheduled plant shutdowns.

Second-quarter sales (million €, relative change)

Positive currency effects led to a slight sales increase in the Performance Products segment. Sales volumes took a slight dip; this was mainly due to the unscheduled shutdown of a polyisobutene plant as well as weaker demand in the oilfield chemicals business in connection with the price of oil. The market environment for paper chemicals remained difficult. Furthermore, our prices were negatively impacted by intense competition in the vitamin E business. The startup of new plants, reduction of inventory, and negative currency effects were largely responsible for an increase in our fixed costs. Earnings for the segment therefore declined considerably.

In the Functional Materials & Solutions segment, sales considerably exceeded the level of the second quarter of 2014. Positive currency effects in all divisions were the decisive factor here. Sales volumes matched the level of the previous second quarter, with prices slightly down. While sales volumes to the automotive and construction industry grew, they declined in precious metal trading. We considerably raised our earnings, particularly through a strong contribution from the Performance Materials division.

Sales in the Agricultural Solutions segment rose slightly in a challenging market environment. Positive currency effects and higher sales prices more than offset lower sales volumes. Earnings nevertheless fell considerably. Aside from the decrease in volumes, this was also a result of increased fixed costs from the startup of new plants.

Second-quarter EBIT before special items (million €, absolute change)

Sales in the Oil & Gas segment grew considerably compared with the second quarter of 2014, primarily attributable to sharply increased volumes in natural gas trading. The price of oil fell 44% in U.S. dollar terms, dampening sales growth. Also weighed down by oil price trends, earnings decreased considerably. Earnings for the previous second quarter had included a contribution from offshore lifting in Libya.

Sales in Other were considerably down quarter-on-quarter. This was largely an effect of the lower plant availability resulting from the plant outage at the Ellba C.V. joint operation in Moerdijk, Netherlands, in addition to the disposal of our share in the Ellba Eastern Private Ltd. joint operation in Singapore. Income from operations before special items improved considerably, especially through the reversal of provisions for the long-term incentive program. The previous second quarter had included expenses for the recognition of corresponding provisions.

Income from operations and special items

Special items in EBIT amounted to minus €4 million in the second quarter of 2015, compared with minus €79 million in the second quarter of 2014. This was largely the result of lower special charges for restructuring measures as well as gains on the divestiture of our textile chemicals business.

EBIT grew by €106 million to €2,039 million compared with the second quarter of the previous year. EBITDA improved by €289 million to €2,994 million, particularly owing to higher amortization and depreciation.

Financial result and net income

At minus €152 million, the financial result was below the level of the second quarter of 2014 (minus €136 million). This was primarily due to a decrease in other financial result while the interest result improved considerably.

Income before taxes and minority interests rose by €90 million to €1,887 million compared with the same quarter of the previous year. The tax rate was at 26.8% (second quarter of 2014: 26.0%).

At €1,265 million, net income matched the level of the second quarter of 2014 (€1,259 million).

Earnings per share were €1.38 in the second quarter of 2015, compared with €1.37 in the same period of the previous year. Adjusted for special items and amortization of intangible assets, earnings per share amounted to €1.49 (second quarter of 2014: €1.53).