Additional Indicators For Results of Operations

• Adjusted earnings per share decline from €5.87 to €4.00
• 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, EBITDA before special items, EBITDA, the EBITDA margin and adjusted earnings per share. Other APMs are net debt,¹ free cash flow¹ and capital expenditure (capex).²

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 any impairment or reversal of impairment. 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 €1,054 million year on year to €8,217 million in 2019. At €8,036 million, EBITDA was down €934 million from the prior-year figure. The EBITDA margin was 13.5% in 2019, compared with 14.9% in the previous year.

The introduction of IFRS 16 increased capital employed by around €1 billion. At the same time, depreciation and amortization rose by around €350 million, which had a positive impact on EBITDA. Interest effects of around €39 million in the year under review led to a corresponding improvement in EBIT and EBIT before special items. The increase in capital employed and the interest effects had an offsetting impact on ROCE and slightly reduced the indicator overall.

Compared with earnings per share, adjusted earnings per share is firstly adjusted for special items. Amortization, impairment and reversal of impairment on intangible assets are then 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 2019, adjusted earnings per share amounted to €4.00, compared with €5.87 in the previous year.