Net Assets and Financial Position

Net assets

Total assets rose from €86,556 million as of the end of 2018 to €88,759 million.

This was due to the €15,965 million increase in noncurrent assets to €59,300 million. All items except intangible assets contributed here. The main driver was investments accounted for using the equity method, which rose by €14,066 million to €16,269 million. This was primarily attributable to the addition of the interest in Wintershall Dea in the second quarter of 2019. The addition of our interest in Solenis was already included in the first-quarter figure following the transfer of our paper and water chemicals business to Solenis. Property, plant and equipment in particular also increased, mainly due to the capitalization of right-of-use assets arising from leases in the amount of €1.3 billion as a result of the initial application of IFRS 16.

Current assets declined by €13,762 million to €29,459 million. This was largely attributable to the derecognition of assets of disposal groups in the total amount of €14.6 billion for the paper and water chemicals business in the first quarter, and for the oil and gas business in the second quarter of 2019. Marketable securities and cash and cash equivalents also decreased. The main offsetting effects were higher trade accounts receivable and higher other receivables and miscellaneous assets. Inventories rose slightly.

Financial position

Equity rose from €36,109 million as of December 31, 2018, to €40,847 million. The equity ratio increased from 41.7% to 46.0%, mainly due to the book gain on the deconsolidation of the Wintershall companies.

Noncurrent liabilities grew by €3,309 million to €30,427 million. This was mainly due to provisions for pensions and similar obligations, which rose by €1,629 million as a result of lower discount rates in all relevant currency zones. In addition, other liabilities increased by €1,146 million, largely from the recognition of lease liabilities in connection with the initial application of IFRS 16. Noncurrent financial indebtedness rose by €628 million, primarily from the €653 million increase in liabilities to credit institutions and the issue of a 10-year eurobond with a carrying amount of €247 million. The reclassification of a eurobond with a carrying amount of €300 million from noncurrent to current financial indebtedness had an offsetting effect.

Current liabilities decreased by €5,844 million compared with December 31, 2018, to €17,485 million as of the end of the first half of 2019. This was primarily attributable to the derecognition of the liabilities of the disposal group for the oil and gas business in the amount of €5,753 million. Current financial indebtedness and trade accounts payable also contributed here. The €432 million decline in current financial indebtedness was mainly due to the scheduled repayment of a eurobond with a carrying amount of €750 million. The previously mentioned reclassification of a eurobond had an offsetting effect. Current provisions, tax liabilities and other liabilities rose compared with December 31, 2018. The increase in other liabilities was primarily due to the first-time recognition of lease liabilities.

Overall, financial indebtedness rose by €196 million to €21,037 million. Net debt¹ increased by €675 million compared with December 31, 2018, to €18,872 million. Both the increase in financial indebtedness and the decline in marketable securities and cash and cash equivalents contributed here.

Cash flows from operating activities amounted to €2,319 million in the first half of 2019. €1,136 million below the figure for the prior-year period. The decrease was mainly due to lower net income after accounting for the reclassification of the disposal gain on the deconsolidation of the Wintershall companies (€6,190 million) to cash flows from investing activities. The lower level of cash tied up in net working capital compared with the previous year, especially in inventories, had an offsetting impact.

Cash flows from investing activities amounted to €452 million in the first half of 2019, compared with minus €1,735 million in the prior-year period. The increase was driven by net payments received from acquisitions and divestitures in the amount of €2,292 million, compared with €64 million in the first half of 2018. This was primarily attributable to the merger of the oil and gas businesses of Wintershall and DEA. The related outflow of cash and cash equivalents in the amount of €800 million from Wintershall was recognized in the statement of cash flows. This was offset by a cash inflow of €3.1 billion, as immediately following closing of the transaction, BASF SE’s remaining open finance-related receivables to the Wintershall Dea group were settled and capital decreases were performed at Wintershall Dea GmbH. Payments made for intangible assets and property, plant and equipment amounted to €1,722 million, €273 million above the figure for the prior-year period. Changes in financial assets and miscellaneous items resulted in a €232 million decline in net cash outflow compared with the first half of 2018.

In the first half of 2019, cash flows from financing activities amounted to minus €3,227 million, compared with minus €518 million in the prior-year period. The decrease was primarily driven by changes in financial and similar liabilities. Repayments exceeded additions to financial and similar liabilities by €215 million in the first half of 2019, after net additions of €2,526 million in the prior-year period. Dividends of €2,939 million were paid to shareholders of BASF SE in the first half of 2019, €92 million more than in the prior-year period. Noncontrolling interests in Group companies received €74 million in dividends, compared with €197 million in the first half of 2018.

Free cash flow² declined from €2,006 million in the prior-year period to €597 million, mainly as a result of lower cash flows from operating activities. The decrease in free cash flow was more than offset by the settlement of BASF SE’s open finance-related receivables to Wintershall Dea as described above.

BASF enjoys good credit ratings, especially compared with competitors in the chemical industry. Our ratings have remained virtually unchanged since the publication of the BASF Report 2018. The ratings awarded by Standard & Poor’s (“A/A-1/outlook stable”) and Scope Ratings (“A/S-1/outlook stable”) were most recently confirmed on July 11, 2019. Moody’s revised its rating for BASF on July 12, 2019 (previously “A1/P-1/outlook stable”). The short-term rating of “P-1” was confirmed, the long-term rating of “A1” was placed on a watchlist for possible downgrade and the outlook was changed to “rating under review.”