Results of Operations

At €31,335 million, sales were on a level with the first half of 2018. Portfolio effects in the Agricultural Solutions segment from the acquisition of significant businesses and assets from Bayer in August 2018 and slightly positive currency effects in all segments had a positive impact on sales. Sales were reduced by lower volumes, especially in the Chemicals and Materials segments as well as in the Agricultural Solutions segment’s legacy business, and by lower prices, particularly in the Materials and Chemicals segments. By contrast, the Surface Technologies, Agricultural Solutions and Industrial Solutions segments were able to increase prices.

Factors influencing BASF Group sales in H1 2019

Income from operations (EBIT) before special items¹ declined by €1,476 million compared with the first half of 2018 to €2,777 million. This was primarily due to significantly lower contributions from the Materials and Chemicals segments and Other. EBIT before special items was slightly lower in the Nutrition & Care segment. By contrast, the Agricultural Solutions and Industrial Solutions segments achieved considerable growth in EBIT before special items, while the Surface Technologies segment posted a slight increase.

Special items in EBIT totaled minus €471 million in the first half of 2019, compared with minus €84 million in the prior-year period. These mainly related to expenses for restructuring measures in connection with our excellence program and integration costs, primarily from the acquisition of significant businesses from Bayer in the third quarter of 2018. This was partially offset by special income from divestitures, especially in the Agricultural Solutions and Industrial Solutions segments.

EBIT² declined by €1,863 million compared with the first half of 2018 to €2,306 million. Of this figure, €94 million related to income from companies accounted for using the equity method, down from €109 million in the prior-year period. Since February 1, 2019, income from companies accounted for using the equity method has included BASF’s share in Solenis’ net income and since May 1, 2019, the corresponding figure for Wintershall Dea.

Compared with the prior-year period, income from operations before depreciation, amortization and special items (EBITDA before special items)³ decreased by €1,084 million to €4,638 million and EBITDA³ by €1,225 million to €4,415 million.

The financial result deteriorated by €27 million to minus €400 million. This was primarily attributable to the €82 million decrease in the interest result, mainly owing to higher interest expenses for financial indebtedness. Another contributing factor was the €21 million decline in net income from shareholdings. The other financial result improved by €76 million as a result of lower expenses for hedging our bonds and U.S. dollar commercial paper against interest and currency risk.

Income before income taxes decreased by €1,890 million to €1,906 million. The tax rate increased from 22.5% to 24.0%, mainly due to the release of tax provisions in the prior-year period.

Income after taxes from continuing operations decreased by €1,494 million to €1,448 million.

Income after taxes from discontinued operations, which comprised our oil and gas activities until the end of April 2019, rose by €6,088 million to €6,427 million. This was largely attributable to the book gain from the deconsolidation of the Wintershall companies as a result of the merger of the oil and gas activities of Wintershall and DEA on May 1, 2019.

Noncontrolling interests declined by €113 million to €9 million, due among other factors to the turnaround of the steam cracker in Port Arthur, Texas.

Net income increased by €4,707 million to €7,866 million, primarily as a result of the above book gain.

As a result, earnings per share rose to €8.56 in the first half of 2019, after €3.44 in the prior-year period. Earnings per share adjusted⁴ for special items and amortization of intangible assets amounted to €2.47 (first half of 2018: €3.70).

Segment sales and EBIT before special items

In the Chemicals segment, sales were considerably lower than in the first half of 2018. This was attributable to lower volumes and prices in both divisions. The Petrochemicals division in particular saw a significant year-on-year decrease in sales volumes as a result of the scheduled turnarounds of our steam crackers in Antwerp, Belgium, and Port Arthur, Texas. Prices were also significantly lower due to higher product availability on the market. Currency effects had a positive impact on sales development. EBIT before special items declined considerably in both divisions, but especially in the Petrochemicals division due to lower volumes and margins as well as higher fixed costs.

Sales in the Materials segment declined considerably compared with the prior-year period. This was mainly the result of lower prices, especially for isocyanates in the Monomers division. Sales volumes were also lower in both divisions. Positive currency effects had an offsetting impact. EBIT before special items declined considerably compared with the first half of 2018, especially in the Monomers division. This was primarily due to lower isocyanate margins.

In the Industrial Solutions segment, sales were considerably below the first half of 2018, primarily due to the transfer of BASF’s paper and water chemicals business, which was previously reported under Performance Chemicals, to the Solenis group. In addition, volumes declined in the Dispersions & Pigments division. Sales development was positively impacted by currency effects and slightly higher prices in both divisions. Overall, we considerably improved EBIT before special items, mainly due to higher margins in both divisions.

We considerably increased sales in the Surface Technologies segment, mainly as a result of higher precious metal prices in the Catalysts division. Currency effects also had a positive impact on sales. Volumes development in the Coatings division was weighed down by lower demand from the automotive industry. We slightly increased EBIT before special items. This was attributable to considerable growth in the Construction Chemicals division, mainly due to higher margins, as well as a slight increase in the Coatings divisions, primarily as a result of lower fixed costs. The considerable decline in EBIT before special items in the Catalysts division, largely due to lower volumes, had an offsetting effect.

We recorded slight sales growth in the Nutrition & Care segment. This was the result of significantly higher volumes in the Nutrition & Health division due to improved product availability in the animal nutrition and aroma ingredients businesses at our plants in Kuantan, Malaysia, and Ludwigshafen, Germany, as well as positive currency effects. In both divisions, prices were lower than in the prior-year period. EBIT before special items declined slightly due to a significantly lower contribution from the Nutrition & Health division. This was mainly attributable to higher fixed costs as a result of insurance refunds received in the first half of 2018 for production outages in 2017 and 2018. The Care Chemicals division considerably increased EBIT before special items with improved margins and lower fixed costs.

In the Agricultural Solutions segment, we were able to considerably increase sales compared with the prior-year period. This was mainly driven by portfolio effects from the acquisition of significant businesses and assets from Bayer in August 2018.⁵ We also recorded a slightly higher price level and slightly positive currency effects in the legacy business. Sales volumes were significantly lower year on year, especially in North America. We considerably increased EBIT before special items, mainly thanks to the contribution of the acquired businesses.

Sales in Other rose considerably compared with the prior-year period. This was primarily attributable to the remaining activities of the paper and water chemicals business, which have been reported under Other since February 2019 following the divestiture. Lower sales in the raw materials trading business had an offsetting effect. EBIT before special items was considerably below the figure for the first half of 2018. In the previous year, we recorded positive foreign currency results and valuation effects from the long-term incentive program.

H1 sales

Million €, relative change

H1 EBIT before special items

Million €, absolute change