Results of Operations, Net Assets, Financial Position

Sales declined by €211 million compared with the first quarter of 2017 to €16,646 million. This was attributable to significantly negative currency effects in all segments. Higher sales prices, especially in the Functional Materials & Solutions and Chemicals segments, and increased volumes had a positive impact on sales. All segments except Performance Products recorded volumes growth.

Factors influencing BASF Group sales, 1st quarter 2018

Income from operations (EBIT) before special items¹ rose by €55 million to €2,512 million, mainly due to the significant improvement in contributions from the Chemicals and Oil & Gas segments. EBIT before special items declined slightly in the Performance Products segment, and decreased considerably in the Functional Materials & Solutions and Agricultural Solutions segments.

Special items in EBIT totaled €9 million in the first quarter of 2018, compared with minus €6 million in the prior-year quarter. Special income from divestitures, particularly in the Oil & Gas segment, exceeded special charges, which included restructuring measures and integration costs.

EBIT² rose by €70 million as against the first quarter of 2017 to €2,521 million.

Compared with the prior-year quarter, income from operations before depreciation, amortization and special items (EBITDA before special items)³ decreased by €68 million to €3,439 million and EBITDA³ by €54 million to €3,448 million.

The financial result declined by €34 million year on year to minus €186 million. This was primarily attributable to the lower other financial result from higher hedging expenses. The improvement in the interest result and net income from shareholdings had an offsetting effect.

Income before taxes and minority interests rose by €36 million to €2,335 million. The tax rate increased from 22.9% to 24.7%, mainly as a result of higher earnings contributions from companies in countries with a high tax rate such as Norway.

Net income declined by €30 million to €1,679 million.

Earnings per share were €1.83 in the first quarter of 2018, compared with €1.86 in the prior-year period. Earnings per share adjusted⁴ for special items and amortization of intangible assets amounted to €1.93 (first quarter of 2017: €1.97).

Net Assets

Total assets rose by €1,685 million as against the end of 2017, from €78,768 million to €80,453 million. At €46,728 million, noncurrent assets were down €895 million on the figure as of December 31, 2017, largely due to currency effects, while current assets rose by €2,580 million.

This was mainly attributable to higher receivables and cash and cash equivalents, which were primarily increased with a view to payment of the purchase prices for the planned acquisitions.

Financial Position

Compared with December 31, 2017, equity increased from €34,756 million to €36,387 million. The equity ratio rose from 44.1% to 45.2%.

Noncurrent liabilities declined from €29,132 million to €27,765 million. This was largely attributable to the €765 million decrease in noncurrent financial indebtedness following the reclassification of a eurobond with a carrying amount of €750 million from noncurrent to current financial indebtedness. In addition, provisions for pensions and similar obligations decreased by €458 million, mainly as a result of actuarial gains from higher discount rates.

Current liabilities rose from €14,880 million to €16,301 million due, among other factors, to higher current financial indebtedness, other liabilities and tax liabilities. The €524 million increase in current financial indebtedness primarily reflected the above reclassification, which was partially offset by the scheduled repayment of a eurobond with a carrying amount of €300 million.

Overall, financial indebtedness decreased by €241 million to €17,791 million. Net debt⁵ declined by €1,003 million as against December 31, 2017, to €10,482 million.

In the first quarter of 2018, cash flows from operating activities amounted to €1,231 million, €398 million above the figure for the prior-year quarter. This was primarily attributable to the lower level of cash tied up in net working capital, largely in receivables. The main offsetting factors were lower amortization and depreciation of intangible assets and property, plant and equipment.

Cash flows from investing activities amounted to minus €634 million in the first quarter of 2018, compared with minus €1,215 million in the prior-year quarter. This was mainly due to the year-on-year decline in additions to other financing-related receivables. Furthermore, at €627 million, payments made for property, plant and equipment and intangible assets were down €140 million on the figure for the first quarter of 2017.

Cash flows from financing activities amounted to €201 million in the first quarter of 2018, compared with €831 million in the prior-year quarter. The year-on-year decrease was largely the result of lower net additions to financial and similar liabilities, with additions and repayments both down on the prior-year level. Payments of around €0.8 billion were received in the first quarter of 2018, mainly from hedging transactions and the increase in liabilities to credit institutions. In the prior-year quarter, we issued bonds with an aggregate nominal value of €1.9 billion. The above repayment of the eurobond with a carrying amount of €300 million in the current year contrasted with the repayment of bonds with a carrying amount of €767 million and the scaling back of BASF SE’s commercial paper program by €420 million in the prior-year quarter.

Free cash flow rose from €66 million in the prior-year quarter to €604 million. Both the higher cash flows from operating activities and the lower payments made for property, plant and equipment and intangible assets contributed to the increase.

Our ratings have remained unchanged since the publication of the BASF Report 2017. Rated “A1/P-1/outlook stable” by Moody’s, “A/A-1/outlook stable” by Standard & Poor’s and “A/S-1/outlook stable” by Scope, BASF enjoys good credit ratings, especially compared with competitors in the chemical industry. These ratings were most recently confirmed by Moody’s on December 19, 2017, by Standard & Poor’s on October 18, 2017, and by Scope on March 6, 2018.