Additional Indicators For Results of Operations

  • ROCE declines from 15.4% to 11.4%, adjusted earnings per share from €6.44 to €5.87
  • EBITDA before special items and EBITDA considerably below previous year

We also use alternative performance measures (APMs) to steer the BASF Group. Investors, analysts and rating agencies use them to assess our performance. These are not defined by IFRS. As such, the methods of calculation can differ from those used by other companies. Alternative performance measures for the results of operations are EBIT before special items, EBIT after cost of capital, EBITDA before special items, EBITDA, the EBITDA margin, ROCE1 and adjusted earnings per share. Other APMs are net debt,2 free cash flow2 and capital expenditure (capex).3

We have used the indicator return on capital employed (ROCE) since the 2018 business year. It measures the profitability of the capital employed by the segments. ROCE was 11.4%, after 15.4% in the previous year.

1 The financial return on assets reported in the previous year was the starting point for determining the return on assets, adjusted for special items from acquisitions and divestitures, which was used as a compensation parameter. The return on assets is no longer reported on, as this was replaced by ROCE as the compensation-relevant indicator from 2018 onward.

2 For more information on these indicators, see the Financial Position

3 For more information on capex, see Value-Based Management and Material Investments and Portfolio Measure

ROCE (Million €)

 


 

2018

2017

EBIT of BASF Group

 

 

6,033

7,587

– EBIT of Other

 

 

(491)

(691)

EBIT of segments

 

 

6,524

8,278

Cost of capital basis of segments, average of month-end figures

 

 

56,990

53,750

ROCE

 

%

11.4

15.4

Capital employed (Million €)

 


2018

2017

4

Including customer/supplier financing and other adjustments

Intangible assets

 

13,375

11,666

+ Property, plant and equipment

 

18,519

18,128

+ Investments accounted for using the equity method

 

1,800

1,685

+ Inventories

 

10,951

9,896

+ Accounts receivable, trade

 

10,320

10,660

+ Current and noncurrent other receivables and other assets4

 

1,749

1,715

+ Assets of disposal groups

 

276

Cost of capital basis of segments, average of month-end figures

 

56,990

53,750

+ Deviation from cost of capital basis at closing rates as of December 31

 

5,823

(625)

+ Assets not included in cost of capital

 

23,743

25,643

of which disposal group for the oil and gas business

 

14,088

Assets of the BASF Group as of December 31

 

86,556

78,768

Income from operations before depreciation, amortization and special items (EBITDA before special items) and income from operations before depreciation and amortization (EBITDA) are indicators that describe operational performance independent of age-related depreciation and amortization of assets and extraordinary valuation allowances (impairments or reversals of impairments). Both figures are therefore particularly useful in cross-company comparisons. EBITDA before special items is also highly useful in making comparisons over time. The EBITDA margin is a relative indicator and is calculated as the ratio of EBITDA to sales revenue, enabling operational performance to be compared independent of the size of the underlying business.

EBITDA before special items declined by €1,257 million year on year to €9,481 million in 2018. At €9,166 million, EBITDA was down €1,599 million from the prior-year figure. The EBITDA margin was 14.6% in 2018, compared with 17.6% in the previous year.

EBITDA before special items (Million €)

 


2018

2017

5

Excluding depreciation, amortization and valuation allowances attributable to the discontinued oil and gas business

EBIT

 

6,033

7,587

– Special items

 

(320)

(58)

EBIT before special items

 

6,353

7.645

+ Depreciation and amortization5

 

3,080

2,959

+ Valuation allowances on intangible assets and property, plant and equipment5

 

48

134

Depreciation, amortization and valuation allowances on intangible assets and property, plant and equipment

 

3,128

3,093

EBITDA before special items

 

9,481

10,738

EBITDA (Million €)

 


 

2018

2017

1

Excluding depreciation, amortization and valuation allowances attributable to the discontinued oil and gas business

EBIT

 

 

6,033

7,587

+ Depreciation and amortization1

 

 

3,080

2,959

+ Valuation allowances on intangible assets and property, plant and equipment1

 

 

53

219

Depreciation, amortization and valuation allowances on intangible assets and property, plant and equipment

 

 

3,133

3,178

EBITDA

 

 

9,166

10,765

Sales revenue

 

 

62,675

61,223

EBITDA margin

 

%

14.6

17.6

Compared with earnings per share, adjusted earnings per share has firstly been adjusted for special items. Secondly, amortization and valuation allowances (impairments and reversals of impairments) on intangible assets were eliminated. Amortization of intangible assets primarily results from the purchase price allocation following acquisitions and is therefore of a temporary nature. The effects of these adjustments on income taxes and on noncontrolling interests are also considered. This makes adjusted earnings per share a suitable measure for making comparisons over time and predicting future profitability.

In 2018, adjusted earnings per share amounted to €5.87 compared with €6.44 in the previous year.

Adjusted earnings per share (Million €)

 

 

 

2018

2017

Income after taxes

 

 

4,979

6,352

– Special items

 

 

(320)

(58)

+ Amortization and valuation allowances on intangible assets

 

 

563

539

– Amortization and valuation allowances on intangible assets contained in special items

 

 

1

32

– Adjustments to income taxes

 

 

231

537

– Adjustments to income after taxes from discontinued operations

 

 

(34)

188

Adjusted income after taxes

 

 

5,664

6,192

– Adjusted noncontrolling interests

 

 

273

277

Adjusted net income

 

 

5,391

5,915

Weighted average number of outstanding shares (in thousands)

 

 

918,479

918,479

Adjusted earnings per share

 

5.87

6.44