Financial Position

Equity rose from €36,109 million as of December 31, 2018, to €41,376 million. The equity ratio increased from 41.7% to 46.2%, mainly due to the book gain on the deconsolidation of the Wintershall companies.

Noncurrent liabilities grew by €4,263 million to €31,381 million. This was primarily attributable to provisions for pensions and similar obligations, which rose by €2,697 million as a result of lower discount rates in all relevant currency zones. In addition, other liabilities increased by €1,095 million, largely due to the recognition of lease liabilities in connection with the initial application of IFRS 16. Noncurrent financial indebtedness rose by €783 million, mainly from the €657 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 €6,495 million compared with December 31, 2018, to €16,834 million as of the end of the third quarter of 2019. This was mainly driven by the derecognition of the liabilities of the disposal group for the oil and gas business in the amount of €5,753 million in the second quarter of 2019. The reclassification of current and noncurrent liabilities to the disposal group for the pigments business in the third quarter of 2019 had an offsetting effect. In addition, current financial indebtedness and trade accounts payable declined. The €1,592 million decrease in current financial indebtedness was primarily due to the €1.3 billion decline in commercial paper, as well as the scheduled repayment of a eurobond with a carrying amount of €750 million. The main offsetting effect came from the previously mentioned reclassification of a eurobond. Current provisions, tax liabilities and other liabilities rose compared with December 31, 2018. The increase in other liabilities was largely attributable to the first-time recognition of lease liabilities.

Net debt¹ decreased by €393 million compared with December 31, 2018, to €17,804 million. This was mainly the result of the €809 million decline in financial indebtedness. Lower holdings of marketable securities and cash and cash equivalents had an offsetting effect.

Cash flows from operating activities amounted to €1,998 million in the third quarter of 2019, €932 million below the figure for the prior-year quarter. Alongside the €289 million decline in net income, the decrease was primarily attributable to the €603 million decline in miscellaneous items in the third quarter of 2019. This mainly related to the reclassification of the gain on the sale of our share of the Klybeck site in Basel, Switzerland, to cash flows from investing activities. Cash inflow from the change in net working capital rose by €159 million compared with the third quarter of 2018. Contributing factors included the €831 million year-on-year decrease in cash tied up due to lower inventory build-up, as well as the €562 million higher cash inflow from the change in accounts receivable. The change in operating liabilities and provisions had an offsetting effect. These rose in the previous year, leading to a cash inflow of around €1.2 billion, and decreased in the third quarter of 2019, leading to a cash outflow of €27 million.

Cash flows from investing activities amounted to minus €405 million in the third quarter of 2019, compared with minus €8,301 million in the prior-year period. This was mainly due to lower net payments made in connection with acquisitions and divestitures: Net payments made amounted to €38 million in the third quarter of 2019, compared with net payments made of around €7.2 billion in the prior-year quarter following the acquisition of a range of businesses from Bayer, especially for seeds. Payments made for intangible assets and property, plant and equipment amounted to €926 million, €53 million below the figure for the prior-year period. The change in financial assets and miscellaneous items led to a net cash inflow of €559 million in the third quarter of 2019, primarily as a result of the reclassification of the gain on the sale of BASF’s share of the Klybeck site as described above. In the prior-year quarter, there was a net cash outflow of €138 million.

Cash flows from financing activities amounted to minus €1,518 million in the third quarter of 2019, compared with €391 million in the prior-year period. In the third quarter of 2019, repayments exceeded additions to financial and similar liabilities by €1,515 million, after net additions of €400 million in the prior-year quarter.

Free cash flow² declined from €1,951 million in the prior-year quarter to €1,072 million as a result of lower cash flows from operating activities.

BASF enjoys good credit ratings, especially compared with competitors in the chemical industry. 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, and August 14, 2019, respectively. The contract with Scope Ratings expired at the beginning of September 2019 and was not extended by BASF. On October 9, 2019, Moody’s downgraded the rating for BASF from “A1 under review for possible downgrade/P-1/outlook under review” to “A2/P-1/outlook stable.”