Actual Development Compared with Outlook for 2019

BASF Group sales declined slightly in 2019, contrary to our forecast of slight growth. Sales development in the Materials and Chemicals segments in particular was weaker than expected at the beginning of the year. Contrary to our forecast of higher sales volumes, we recorded a slight decline in volumes for the BASF Group as a whole. Above all, the trade conflict between the United States and China did not ease. Consequently, income from operations (EBIT) before special items declined considerably, rather than increasing slightly as we had assumed. Earnings development in the Chemicals segment in particular did not meet our expectations. The BASF Group’s return on capital employed (ROCE) declined considerably rather than slightly compared with 2018. ROCE was also considerably below the cost of capital percentage; we had expected it to be slightly above this at the beginning of 2019. We adjusted our outlook in July 2019 due to the continued difficult global economic environment, forecasting a slight decline in sales and a considerable decline in EBIT before special items and ROCE.

Sales in the Chemicals segment declined considerably. At the beginning of 2019, we expected sales to reach the prior-year level. Contrary to expectations, the lower volumes projected as a result of the scheduled turnarounds of our steam crackers in North America and Europe could not be offset by higher volumes in the other business areas. We recorded slightly lower volumes for plasticizers and oxo alcohols in the Petrochemicals division, as well as for amines and polyalcohols in the Intermediates division; sales volumes for styrenes in the Petrochemicals division remained at prior-year level. Lower capacity utilization of the condensate splitter in Port Arthur, Texas, had a negative impact on volumes development in North America. EBIT before special items did not increase slightly as assumed, but declined considerably. In both divisions, we were unable to improve overall margins. The expected margin growth in the butanediol value chain in the Intermediates division, and in acrylic monomers in the Petrochemicals division did not materialize. Earnings development was also negatively impacted by lower sales volumes in both divisions. As a result, ROCE did not just decline slightly, but considerably.

Contrary to our forecast, the Materials segment saw a considerable decline in sales, rather than a slight increase. Price levels in the Performance Materials division were slightly below the prior-year level due to lower raw materials prices for methylene diphenyl diisocyanates (MDI), and were thus unable to compensate for the expected decline in isocyanate prices in the Monomers division. Sales volumes in the Performance Materials division also fell short of our expectations as a result of weak demand from key industries, especially the automotive industry. The acquisition of Solvay’s integrated polyamide business was only completed on January 31, 2020, meaning that the acquisition did not lead to a positive contribution in 2019. EBIT before special items and ROCE declined considerably as expected.

Sales in the Industrial Solutions segment declined considerably and were thus below our forecast of a slight decline. As expected, we were able to increase sales volumes in the Performance Chemicals division’s remaining businesses following the transfer of BASF’s paper and water chemicals business to the Solenis group. However, contrary to our assumptions, we recorded lower volumes in the Dispersions & Pigments division and lower prices in both divisions, mainly as a result of lower raw materials prices. Nevertheless, we increased the segment’s EBIT before special items considerably as forecast. Driving factors here were lower fixed costs, positive currency effects and higher margins. ROCE was considerably above the prior-year level, as expected.

Our forecast for the Surface Technologies segment at the beginning of the year still included the construction chemicals business. In determining actual development, we took into account the fact that, retroactively as of January 1, 2019, the sales and earnings of the Construction Chemicals division are no longer included in the sales, EBIT before special items or ROCE of the Surface Technologies segment. We considerably improved sales in the Surface Technologies segment, outperforming our forecast of a slight increase even though sales in the Coatings division did not increase as we had anticipated, but remained at the prior-year level. This was primarily attributable to considerably higher sales in the Catalysts division on the back of higher precious metal prices. As expected, we considerably improved EBIT before special items and slightly increased ROCE.

In the Nutrition & Care segment, sales rose only slightly instead of considerably. Contrary to our forecast, sales in the Care Chemicals division declined due to a difficult market environment. The Nutrition & Health division recorded considerable volumes growth, but not as strong as expected. Consequently, EBIT before special items also only improved slightly instead of considerably. Rather than increasing slightly as expected, ROCE declined considerably, mainly as a result of an impairment in connection with the optimization of production sites within the Nutrition & Health division.

We considerably increased sales and EBIT before special items in the Agricultural Solutions segment, as forecast. ROCE rose slightly as expected.

Sales in Other were only slightly – instead of considerably – above the prior-year level. This was attributable to lower prices in raw materials trading. EBIT before special items declined considerably as expected.

In 2019, we invested a total of €3.3 billion in capital expenditures (capex), excluding additions from acquisitions, IT investments, restoration obligations and right-of-use assets arising from leases. The figure forecast at the beginning of 2019 was approximately €3.8 billion. Capex in the Surface Technologies segment and Other in particular was below the planned values.