Income from Operations

• Considerable decline in EBIT before special items, EBIT and EBIT after cost of capital
• Significant premium on cost of capital again earned

Income from operations (EBIT) before special items decreased by €1,292 million to €6,353 million as a result of lower contributions from all segments. The Chemicals segment in particular recorded considerably lower earnings, mainly due to lower margins for isocyanates and steam cracker products. The BASF Group’s earnings were also negatively impacted by the low water levels on the Rhine River in the second half of 2018. BASF’s business with the automotive industry also slowed in the second half of the year. In the Functional Materials & Solutions segment, EBIT before special items was considerably below the prior-year figure, primarily due to softer margins as a result of the increase in raw materials prices and higher fixed costs. The considerable decline in earnings in the Agricultural Solutions segment was attributable to negative currency effects in all regions as well as the strongly negative contribution from the businesses acquired from Bayer as a result of the late, intrayear timing of the transaction, the seasonality of the businesses and costs for integrating the businesses into the BASF Group. EBIT before special items declined slightly in the Performance Products segment, primarily due to lower sales volumes and negative currency effects.

EBIT before special items¹

Million €

Special items in EBIT totaled minus €320 million in 2018, compared with minus €58 million in the previous year. Various restructuring measures led to special items of minus €102 million, after minus €131 million in 2017. At €174 million, integration costs in connection with business acquisitions were higher than the prior-year level (2017: €52 million), largely from the integration of the businesses acquired from Bayer in the Agricultural Solutions segment. Divestitures in 2018 accounted for an earnings contribution of minus €2 million. The prior-year figure included special income totaling €137 million, mainly in the Performance Products segment from the transfer of BASF’s leather chemicals business to the Stahl group. The special items recognized in other charges and income amounted to minus €42 million in 2018, compared with minus €12 million in the previous year.

At €6,033 million, EBIT for the BASF Group in 2018 was considerably below the previous year’s level (2017: €7,587 million). Included in this figure is income from companies accounted for using the equity method, which declined from €323 million to €269 million.

EBIT²

Million €

We once again earned a significant premium on our cost of capital in 2018. EBIT after cost of capital amounted to €825 million, compared with €2,902 million in the previous year. The cost of capital rose by €323 million year on year. This increase was mainly attributable to the assets acquired from Bayer in August 2018. By contrast, the classification of the oil and gas activities as discontinued operations meant that the related assets were retroactively no longer included in the cost of capital basis.

EBIT after cost of capital³

Million €