2.5 – Discontinued Operations/Disposal Groups

Discontinued operations

As of the binding agreement between BASF and LetterOne to merge their respective activities on September 27, 2018, the oil and gas business is presented as a discontinued operation.

The joint venture that will result from the merger will operate under the name Wintershall DEA. Although BASF will receive a majority stake in Wintershall DEA, the agreement stipulates joint control. With this transaction, the formation of a leading independent European oil and gas company is being pursued. BASF expects to close the transaction in the first half of 2019. Until closing, Wintershall and DEA will continue to operate as independent companies.

BASF’s oil and gas activities are bundled in the Wintershall Group. Wintershall, headquartered in Kassel, Germany, focuses on exploration and production in oil and gas-rich regions in Europe, North Africa, Russia, South America and the Middle East. Wintershall is also active in the transport of natural gas in Europe with BASF’s Russian partner Gazprom.

Impairments were not recorded for the discontinued oil and gas business on the date of reclassification to “held for sale” or at the end of the reporting period.

The amounts in the following tables illustrate the consolidated contribution of discontinued operations.

Earnings from discontinued operations are as follows:

Statement of Income from discontinued operations (Million €)

 


 

2018

2017

Sales revenue

 

 

4,094

3,252

Cost of sales

 

 

(2,024)

(2,338)

Gross profit on sales

 

 

2,070

914

Selling expenses

 

 

(94)

(80)

General administrative expenses

 

 

(68)

(82)

Research and development expenses

 

 

(26)

(45)

Other operating income and expenses

 

 

(248)

(20)

Income from companies accounted for using the equity method

 

 

99

248

EBIT

 

 

1,733

935

Financial result

 

 

(19)

(17)

Income before income taxes

 

 

1,714

918

Income taxes

 

 

(885)

(158)

Income after income taxes

 

 

829

760

of which attributable to noncontrolling interests

 

 

(61)

(41)

Net income

 

 

768

719

Earnings per share from discontinued operations

 

0.83

0.78

Amortization of intangible assets and depreciation of property, plant and equipment (until September 30, 2018)

 

 

617

1,024

of which impairments and reversals of impairments (until September 9, 2018)

 

 

(79)

Of other comprehensive income after taxes attributable to BASF SE shareholders totaling minus €608 million (2017: minus €1,268 million), minus €102 million (2017: minus €327 million) related to discontinued operations and minus €506 million (2017: minus €941 million) to continuing operations.

Discontinued operations accounted for the following amounts in BASF’s Statement of Cash Flows:

Cash flows from discontinued operations (Million €)

 


2018

2017

Cash flows from operating activities

 

1,554

1,835

Cash flows from investing activities

 

(1,011)

(920)

Cash flows from financing activities

 

(346)

(387)

Total

 

197

528

The carrrying amounts of the balance sheet items of the discontinued operations are presented in the following table “Disposal groups as of December 31, 2018.”

Groups of assets and liabilities held for sale (disposal groups)

On May 3, 2018, BASF and Solenis announced that they had signed an agreement on the combination of BASF’s paper and water chemicals business with Solenis. The relevant assets and liabilities were reclassified to a disposal group. No impairments were recognized for the disposal group for the paper and water chemicals business on the date of reclassification to “hold to sell” or at the end of the reporting period. The business was allocated to the Performance Chemicals division until the transaction closed on January 31, 2019.

The values for the disposal groups are presented in the following table.

Other comprehensive income included minus €1,174 million for the oil and gas disposal group as of December 31, 2018. The paper and water chemicals business disposal group did not contribute to other comprehensive income.

Disposal groups as of December 31, 2018 (Million €)

 

 

 

Paper and water chemicals business

Oil and gas business

Total

Balance sheet

 

 

 

 

Goodwill

 

39

1,572

1,611

Other intangible assets

 

10

724

734

Property, plant and equipment

 

312

6,959

7,271

Investments accounted for using the equity method

 

2,565

2,565

Other financial assets

 

2

2

Deferred tax assets

 

128

128

Other receivables and miscellaneous assets

 

896

896

Noncurrent assets

 

361

12,846

13,207

Inventories

 

158

136

294

Accounts receivable, trade

 

614

614

Other receivables and miscellaneous assets

 

273

273

Marketable securities

 

Cash and cash equivalents

 

219

219

Current assets

 

158

1,242

1,400

Assets of the disposal group

 

519

14,088

14,607

Provisions for pensions and similar obligations

 

3

307

310

Other provisions

 

1,605

1,605

Deferred tax liabilities

 

1,637

1,637

Financial indebtedness

 

499

499

Other liabilities

 

217

217

Noncurrent liabilities

 

3

4,265

4,268

Accounts payable, trade

 

342

342

Provisions

 

72

72

Tax liabilities

 

228

228

Financial indebtedness

 

10

10

Other liabilities

 

833

833

Current liabilities

 

1,485

1,485

Liabilities of the disposal group

 

3

5,750

5,753

Net assets

 

516

8,338

8,854