27 – Statement of Cash Flows and Capital Structure Management

Statement of Cash Flows

Cash flows from operating activities contained the following payments:

In 2020, BASF SE transferred securities in the amount of €401 million (2019: €300 million) to BASF Pensionstreuhand e.V., Ludwigshafen am Rhein, Germany. This transfer was not cash effective and therefore had no effect on the statement of cash flows.

Cash flows from investing activities included €1,240 million in payments made for acquisitions for the polyamide business acquired from Solvay (2019: €239 million for various transactions).

In 2020, payments received for divestitures arose in the amount of €2,520 million due to the sale of the construction chemicals business. These included tax payments in the amount of €150 million that were directly associated with the transaction. In 2019, payments received for divestitures recognized in the amount of €2,600 million were mainly due to the merger of the oil and gas businesses of Wintershall and DEA. The effects of the deconsolidation of the Wintershall companies and the simultaneous recognition of the equity-accounted interest in Wintershall Dea GmbH offset each other. The only effect on cash was the outflow of cash and cash equivalents in the amount of €800 million, as well as the repayment of BASF SE’s open finance-related receivables against the Wintershall Dea group and capital decreases at Wintershall Dea GmbH, Kassel/Hamburg, Germany, in the total amount of €3.2 billion. In connection with the transfer of the paper and water chemicals business to the Solenis group in the first quarter of 2019, the majority of the purchase price was settled with the contribution of the interest in Solenis UK International Limited, London, United Kingdom (€590 million). The rest of the purchase price (€178 million) was recognized in cash.

Payments made for property, plant and equipment and intangible assets amounted to €3,129 million, €695 million lower than in the previous year.

Cash and cash equivalents consist primarily of cash on hand and bank balances with maturities of less than three months.

Cash and cash equivalents in the amount of €4,335 million reported in the statement of cash flows as of December 31, 2020, consisted of the balance sheet value (€4,330 million) and the value reclassified to the pigments business disposal group (€5 million). Cash and cash equivalents in the amount of €2,455 million reported in the statement of cash flows as of December 31, 2019, consisted of the balance sheet value (€2,427 million) and the values reclassified to the disposal groups for the construction chemicals business (€21 million) and the pigments business (€7 million). At the beginning of the 2019 reporting period, the cash and cash equivalents of the oil and gas business (€219 million) were reclassified to the disposal group.

As in the previous year, cash and cash equivalents were not subject to any utilization restrictions.

The reconciliation according to IAS 7 breaks down the changes in financial and similar liabilities and their hedging transactions into cash-effective and non-cash-effective changes. The cash-effective changes presented above correspond to the figures in cash flows from financing activities.

Loan liabilities do not contain any interest components.

Other financing-related liabilities primarily comprise liabilities from accounts used for cash pooling with BASF companies not included in the Consolidated Financial Statements. They are reported in miscellaneous liabilities within the balance sheet item other liabilities that qualify as financial instruments.

Assets/liabilities from hedging transactions form part of the balance sheet items derivatives with positive and negative fair values respectively and include only those transactions which hedge risks arising from financial indebtedness and financing-related liabilities secured by micro hedges.

Capital structure management

The aim of capital structure management is to maintain the financial flexibility needed to further develop BASF’s business portfolio and take advantage of strategic opportunities. The objectives of the company’s financing policy are to ensure solvency, limit financial risks and optimize the cost of capital.

Capital structure management focuses on meeting the requirements needed to ensure unrestricted access to the capital market and a solid A rating. The capital structure is managed using selected financial ratios, such as dynamic debt ratios, as part of the company’s financial planning.

The equity of the BASF Group as reported in the balance sheet amounted to €34,398 million as of December 31, 2020 (December 31, 2019: €42,350 million); the equity ratio was 42.8% on December 31, 2020 (December 31, 2019: 48.7%).

BASF prefers to access external financing on the capital markets. A commercial paper program is used for short-term financing, while corporate bonds are used for financing in the medium and long term. These are issued in euros and other currencies with different maturities. The goal is to create a balanced maturity profile, achieve a diverse range of investors and optimize our debt capital financing conditions.

BASF currently has the following ratings, which were most recently confirmed by Fitch on February 12, 2021, Moody’s on February 12, 2021 and by Standard & Poor’s on December 8, 2020.

BASF strives to maintain a solid A rating, which ensures unrestricted access to financial and capital markets.