4 – Reporting by segment and region

BASF’s business is conducted by thirteen operating divisions aggregated into five segments for reporting purposes. The divisions are allocated to the segments based on their business models.

The Chemicals segment entails the classical chemicals business with basic chemicals and intermediates. It forms the core of BASF’s Production Verbund and is the starting point for a majority of the value chains. In addition to supplying the chemical industry and numerous other sectors, Chemicals ensures that other BASF segments are supplied with chemicals for producing downstream products. The Chemicals segment comprises the Petrochemicals, Monomers and Intermediates divisions.

The Performance Products segment consists of the Dispersions & Pigments, Care Chemicals, Nutrition & Health and Performance Chemicals divisions. Customized products and solutions allow customers to make their production processes more efficient or to give their products improved application properties. As of January 1, 2017, the activities of the Monomers and Dispersions & Pigments divisions for the Electronic Industry will be merged in the global business unit Electronic Materials in the Dispersions & Pigments division within the Performance Products segment. BASF thereby strengthens its position as a strategic partner for the large electronic producers.

The Functional Materials & Solutions segment bundles system solutions, services and innovative products for specific sectors and customers, especially the automotive, electrical, chemical and construction industries, as well as applications for household, sports and leisure. It is made up of the Catalysts, Construction Chemicals, Coatings, and Performance Materials divisions.

The Agricultural Solutions segment includes the Crop Protection division. It provides innovative solutions in the areas of chemical and biological crop protection, seed treatment and water management as well as for nutrient supply and plant stress. Plant biotechnology research is not assigned to this segment; it is reported in Other.

The Oil & Gas segment comprises the division of the same name. As part of an asset swap at the end of the third quarter of 2015, BASF transferred to Gazprom the natural gas trading and storage business previously operated together with Gazprom. Since October 1, 2015, the segment has concentrated on the exploration and production of oil and gas-rich regions in Europe, North Africa, Russia, South America and the Middle East as well as on the transport of natural gas together with partner Gazprom.

Activities not assigned to a particular division are reported under Other. These include the sale of raw materials, engineering and other services, rental income and leases, the production of precursors not assigned to a particular segment, the steering of the BASF Group by corporate headquarters, and cross-divisional corporate research. Cross-divisional corporate research, which has been restructured in the context of the newly developed innovation approach, works on long-term topics of strategic importance to the BASF Group. Furthermore, it focuses on the development of specific key technologies, which are of central importance for the divisions. Plant biotechnology research is also part of cross-divisional corporate research.

Earnings from currency conversion that are not allocated to the segments are also reported under Other, as are earnings from the hedging of raw material prices and foreign currency exchange risks. Furthermore, income and expenses from the long-term incentive (LTI) program are shown here.

Transfers between the segments are generally executed at adjusted market-based prices which take into account the higher cost efficiency and lower risk of Group-internal transactions. Assets, as well as their depreciation and amortization, are allocated to the segments based on economic control. Assets used by more than one segment are allocated based on the percentage of usage.

Income from operations (EBIT) of Other (million €)

 

 

2016

2015

Costs for cross-divisional corporate research

 

(395)

(402)

Costs of corporate headquarters

 

(222)

(233)

Other businesses

 

39

170

Foreign currency results, hedging and other measurement effects

 

(331)

(220)

Miscellaneous income and expenses

 

(182)

(300)

Income from operations of Other

 

(1,091)

(985)

Income from operations of Other decreased by €106 million year-on-year to minus €1,091 million. Income from other businesses fell by €131 million to €39 million. The line item foreign currency results, hedging and other measurement effects decreased by €111 million to minus €331 million. Higher additions to provisions in comparison with the previous year for the long-term incentive (LTI) program were partially compensated by lower currency losses. The costs for cross-divisional corporate research as well as costs of corporate headquarters decreased by €7 million and €11 million, respectively. The line item miscellaneous income and expenses amounted to minus €182 million compared with minus €300 million in the previous year, which included expenses for BASF’s 150th anniversary celebrations among other things.

Assets of Other (million €)

 

 

December 31,
2016

December 31,
2015

Assets of businesses included in Other

 

1,959

2,097

Financial assets

 

605

526

Deferred tax assets

 

2,513

1,791

Cash and cash equivalents/marketable securities

 

1,911

2,262

Defined benefit assets

 

66

133

Other receivables/prepaid expenses

 

2,320

2,823

Assets of Other

 

9,374

9,632

Reconciliation reporting Oil & Gas (million €)

 

 

2016

2015

Income from operations

 

499

1,072

Net income from shareholdings

 

6

(6)

Other income

 

(74)

267

Income before taxes and minority interests

 

431

1,333

Income taxes

 

7

(168)

Income before minority interests

 

438

1,165

Minority interests

 

(76)

(115)

Net income

 

362

1,050

The reconciliation reporting Oil & Gas reconciles the income from operations in the Oil & Gas segment with the contribution of the segment to the net income of the BASF Group.

Income from operations in 2016 declined significantly in comparison with the previous year. This was essentially a result of lower oil and gas prices in the first three quarters of 2016 compared with the same period of the previous year as well as the asset swap with Gazprom on September 30, 2015. This resulted in a lack of earnings contributions from the divested gas trading and storage business and the 50% share in Wintershall Noordzee B.V., Rijswijk, Netherlands, beginning in the fourth quarter of 2015. Furthermore, the transaction led to earnings of €314 million in the previous year. The share in the Yuzhno Russkoye natural gas field contributed lower income from operations, as the excess amounts received over the last ten years were compensated in 2016, as contractually agreed with our partner, Gazprom.

Impairments for exploration and production licenses in the Oil & Gas segment dampened income from operations by €609 million in 2015.

The Oil & Gas segment’s other income relates to income and expenses not included in the segment’s income from operations, interest result and other financial result. As in the previous year, other income largely consisted of currency effects from Group loans.

Positive income taxes in 2016 were primarily a result of the calculation of taxable income in Norway.

Segments 2016 (million €)

 

 

Chemicals

Perfor­mance Products

Functional Materials & Solutions

Agri­cultural Solutions

Oil & Gas

Other

BASF Group

Sales

 

13,461

15,002

18,732

5,569

2,768

2,018

57,550

Intersegmental transfers

 

4,836

465

736

33

331

1

6,402

Sales including intersegmental transfers

 

18,297

15,467

19,468

5,602

3,099

2,019

63,952

Income from operations

 

1,983

1,648

2,199

1,037

499

(1,091)

6,275

Assets

 

13,486

14,549

17,359

8,899

12,829

9,374

76,496

Thereof goodwill

 

62

2,227

3,909

2,093

1,712

70

10,073

other intangible assets

 

144

1,219

2,305

263

1,121

37

5,089

property, plant and equipment

 

8,111

5,183

4,065

1,543

6,678

833

26,413

investments accounted for using the equity method

 

1,027

193

423

2,581

423

4,647

Debt

 

4,720

5,652

4,328

1,853

2,190

25,185

43,928

Research and development expenses

 

182

362

393

489

39

398

1,863

Additions to property, plant and equipment and intangible assets

 

1,213

864

3,679

266

1,115

121

7,258

Amortization of intangible assets and depreciation of property, plant and equipment

 

1,186

874

707

268

1,097

119

4,251

Thereof impairments

 

86

26

152

31

4

16

315

Segments 2015 (million €)

 

 

Chemicals

Perfor­mance Products

Functional Materials & Solutions

Agri­cultural Solutions

Oil & Gas

Other

BASF Group

Sales

 

14,670

15,648

18,523

5,820

12,998

2,790

70,449

Intersegmental transfers

 

5,300

463

873

28

766

(3)

7,427

Sales including intersegmental transfers

 

19,970

16,111

19,396

5,848

13,764

2,787

77,876

Income from operations

 

2,131

1,340

1,607

1,083

1,072

(985)

6,248

Assets

 

12,823

14,232

13,341

8,435

12,373

9,632

70,836

Thereof goodwill

 

58

2,201

2,326

2,048

1,660

70

8,363

other intangible assets

 

155

1,428

1,181

342

1,030

38

4,174

property, plant and equipment

 

7,933

4,958

3,645

1,488

6,421

815

25,260

investments accounted for using the equity method

 

840

195

387

2,589

425

4,436

Debt

 

3,550

4,639

3,511

1,628

2,214

23,749

39,291

Research and development expenses

 

207

383

392

514

50

407

1,953

Additions to property, plant and equipment and intangible assets

 

1,859

964

854

402

1,823

111

6,013

Amortization of intangible assets and depreciation of property, plant and equipment

 

959

949

621

238

1,515

119

4,401

Thereof impairments

 

24

86

67

10

500

3

690

Regions 2016 (million €)

 

 

 

Europe

Thereof Germany

North America

Asia Pacific

South America, Africa, Middle East

BASF Group

1

The sum of sales including interregional transfers for all the regions can differ from the sum of sales including intersegmental transfers for all the segments, as the segments are viewed globally, and therefore shipments and services between regions within the same segment are not classified as transfers.

Location of customers

 

 

 

 

 

 

 

 

Sales

 

 

26,039

7,412

14,042

12,165

5,304

57,550

Share

 

%

45.3

12.9

24.4

21.1

9.2

100.0

Location of companies

 

 

 

 

 

 

 

 

Sales

 

 

27,221

17,540

14,682

11,512

4,135

57,550

Sales including interregional transfers1

 

 

34,234

23,241

17,060

12,269

4,361

67,924

Income from operations

 

 

3,632

1,582

1,113

1,098

432

6,275

Assets

 

 

40,086

21,120

17,714

12,869

5,827

76,496

Thereof intangible assets

 

 

7,925

3,249

5,048

1,661

528

15,162

property, plant and equipment

 

 

13,990

6,915

6,055

4,421

1,947

26,413

investments accounted for using the equity method

 

 

3,052

1,120

119

1,476

4,647

Additions to property, plant and equipment and intangible assets

 

 

4,114

2,912

1,424

1,437

283

7,258

Amortization of intangible assets and depreciation of property, plant and equipment

 

 

2,526

1,224

1,018

463

244

4,251

Regions 2015 (million €)

 

 

 

Europe

Thereof Germany

North America

Asia Pacific

South America, Africa, Middle East

BASF Group

1

The sum of sales including interregional transfers for all the regions can differ from the sum of sales including intersegmental transfers for all the segments, as the segments are viewed globally, and therefore shipments and services between regions within the same segment are not classified as transfers.

Location of customers

 

 

 

 

 

 

 

 

Sales

 

 

36,897

13,483

15,390

12,334

5,828

70,449

Share

 

%

52.4

19.1

21.8

17.5

8.3

100.0

Location of companies

 

 

 

 

 

 

 

 

Sales

 

 

38,675

28,229

15,665

11,712

4,397

70,449

Sales including interregional transfers1

 

 

46,056

34,297

18,311

12,384

4,623

81,374

Income from operations

 

 

4,174

2,303

1,295

445

334

6,248

Assets

 

 

38,993

20,307

15,968

11,002

4,873

70,836

Thereof intangible assets

 

 

6,845

2,467

4,406

839

447

12,537

property, plant and equipment

 

 

13,877

6,942

5,613

4,053

1,717

25,260

investments accounted for using the equity method

 

 

3,009

1,182

113

1,314

4,436

Additions to property, plant and equipment and intangible assets

 

 

3,162

1,446

1,263

986

602

6,013

Amortization of intangible assets and depreciation of property, plant and equipment

 

 

2,889

1,081

911

422

179

4,401

In the United States, sales to third parties in 2016 amounted to €12,831 million (2015: €13,831 million) according to location of companies and €11,985 million (2015: €13,302 million) according to location of customers. In the United States, intangible assets, property, plant and equipment, and investments accounted for using the equity method amounted to €10,342 million compared with €9,262 million in the previous year.