Income from Operations

• Considerable decline in EBIT before special items, EBIT and ROCE

Income from operations (EBIT) before special items decreased by €1,745 million to €4,536 million as a result of significantly lower contributions from the Materials and Chemicals segments. The Materials segment in particular recorded a considerable decline in earnings, mainly from lower isocyanate margins. The earnings decrease in the Chemicals segment was attributable to lower volumes and softer margins, especially in the Petrochemicals division due in particular to the scheduled turnarounds of our steam crackers in North America and Europe. The EBIT before special items of Other was also considerably below the 2018 figure. By contrast, we increased EBIT before special items in all other segments. This rose considerably in the Agricultural Solutions segment, primarily from sales growth as a result of the businesses acquired from Bayer. EBIT before special items was also considerably above the prior-year level in the Industrial Solutions segment due to lower fixed costs, positive currency effects and higher margins. The Surface Technologies segment likewise saw a considerable improvement in EBIT before special items owing to an increase in both divisions. In the Nutrition & Care segment, EBIT before special items rose slightly due to a considerable improvement in the Care Chemicals division’s contribution.

EBIT before special items^{a, b}

Million €

Special items in EBIT totaled minus €484 million in 2019, compared with minus €307 million in the previous year. The increase in special items is primarily attributable to structural measures in connection with our Excellence Program. In addition, integration costs rose from €169 million to €303 million, mainly for the businesses acquired from Bayer in the Agricultural Solutions segment. The increase in net special income from divestitures and higher other income had an offsetting effect. Divestitures led to a positive earnings contribution of €286 million in 2019, in particular from the transfer of BASF’s paper and water chemicals business to the Solenis group and the sale of businesses in the Agricultural Solutions segment in accordance with the conditions imposed by antitrust authorities in connection with the acquisition of the Bayer businesses. The special items recognized in other charges and income amounted to €160 million in 2019, compared with minus €63 million in the previous year, and mainly resulted from the sale of BASF’s share of the Klybeck site in Basel, Switzerland. This was partly offset by a special charge from the impairment of project costs for a planned methane-to-propylene plant on the U.S. Gulf Coast in the Chemicals segment.

At €4,052 million, EBIT for the BASF Group in 2019 was considerably below the previous year’s level (2018: €5,974 million). This figure includes income from companies accounted for using the equity method, which declined from €269 million to €116 million. Since February 1, 2019, this has also included BASF’s share in Solenis’ net income and since May 1, 2019, BASF’s share in Wintershall Dea’s net income. Both shareholdings contributed losses to income from companies accounted for using the equity method. The contribution from BASF-YPC, which operates the Verbund site in Nanjing, China, also declined.

EBIT^{a, b}

Million €

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 7.7%, after 12.0% in the previous year. The decline in ROCE was primarily due to the combination of lower EBIT and higher capital employed. The increase in capital employed was largely attributable to the full-year inclusion of the assets acquired from Bayer in August 2018. Higher property, plant and equipment from the initial application of IFRS 16 also contributed to the increase.¹