Information on Q2 2020: BASF Group

Sales declined by €1,798 million compared with the second quarter of 2019 to €12,680 million. The development of sales was mainly attributable to lower sales volumes in the Surface Technologies, Materials and Industrial Solutions segments and in Other. Volumes growth in the Chemicals, Nutrition & Care and Agricultural Solutions segments was unable to compensate for this. Negative currency effects, particularly in the Agricultural Solutions segment, also contributed to the sales decrease. In addition, sales were negatively impacted by a slightly lower price level. Higher prices in the Surface Technologies segment could not completely compensate for the lower price level in Chemicals, Materials, Industrial Solutions, Other and Nutrition & Care. Portfolio effects had an offsetting impact, especially in the Materials segment from the acquisition of Solvay’s integrated polyamide business.

Factors influencing BASF Group sales in Q2 2020

At €226 million, income from operations (EBIT) before special items¹ was down €769 million from the second quarter of 2019. This was primarily the result of significantly lower contributions from the Materials, Surface Technologies and Chemicals segments. EBIT before special items also declined considerably in the Industrial Solutions segment, while the Agricultural Solutions segment posted a decrease of €1 million. By contrast, we considerably increased EBIT before special items in Other and in the Nutrition & Care segment.

Special items in EBIT totaled minus €167 million in the second quarter of 2020, compared with minus €488 million in the prior-year quarter. These largely related to expenses for restructuring measures and measures as part of the “Helping Hands” aid campaign. Further expenses arose in connection with the carve-out of the global pigments business. The higher expenses in the prior-year period were mainly attributable to restructuring measures in connection with our excellence program, the impairment of a natural gas-based investment on the U.S. Gulf Coast, and the integration of the businesses acquired from Bayer.

EBIT² declined by €448 million to €59 million. This figure includes income from integral companies accounted for using the equity method, which declined to €28 million (Q2 2019: €56 million).

Q2 sales

Million €, relative change

Q2 EBIT before special items

Million €, absolute change

Income from operations before depreciation, amortization and special items (EBITDA before special items)³ decreased by €656 million to €1,229 million and EBITDA³ declined by €476 million to €1,070 million in the same period.

Net income from shareholdings declined by €784 million to minus €788 million. This was primarily due to the €819 million impairment of the shareholding in Wintershall Dea as a result of lower oil and gas price forecasts and changed reserve estimates. Excluding the impairment of Wintershall Dea, the earnings contributed by the shareholding, which has been accounted for using the equity method since May 1, 2019, rose by €27 million year on year to €53 million. Solenis’ earnings contribution improved by €29 million to minus €11 million.

The financial result improved by €16 million to minus €194 million. This mainly reflected the improved interest result. The other financial result was only slightly above the prior-year figure.

Income before income taxes decreased by €1,216 million to minus €923 million.

Income after taxes from continuing operations declined to minus €888 million, compared with €243 million in the prior-year quarter.

Income after taxes from discontinued operations, which in 2020 comprises the construction chemicals business, amounted to €14 million after €5,686 million in the second quarter of 2019. This is primarily attributable to the book gain of €5,684 million on the deconsolidation of Wintershall following the merger of Wintershall and DEA as of May 1, 2019, which was included in the figure for the prior-year quarter.

Noncontrolling interests amounted to minus €4 million after €25 million in the prior-year period. In the prior-year period, income arose in connection with the turnaround of the steam cracker in Port Arthur, Texas.

Net income decreased to minus €878 million, compared with €5,954 million in the second quarter of 2019.

As a result, earnings per share declined to minus €0.95 in the second quarter of 2020, after €6.48 in the prior-year period. Earnings per share adjusted⁴ for special items and amortization of intangible assets amounted to €0.25 (Q2 2019: €0.83).

In the second quarter of 2020, we improved cash flows from operating activities by €296 million year on year to €2,242 million. The increase was primarily due to cash released from net working capital, which rose by €336 million. The main contributing factors here were the reduction in trade accounts receivable and inventories, and higher tax liabilities. This was partially offset by a stronger decline in trade accounts payable compared with the prior-year quarter. Cash flows from operating activities were also reduced by the considerable decline in net income. This included a non-cash-effective gain of €5,684 million on the deconsolidation of Wintershall in the second quarter of 2019 and an impairment of €819 million on the shareholding in Wintershall Dea in the second quarter of 2020.

Cash flows from investing activities amounted to minus €705 million, well below the figure for the prior-year quarter (€1,289 million). The decline is primarily attributable to the net payments received from acquisitions and divestitures in the prior-year quarter, which had included payments received from the merger of Wintershall and DEA on May 1, 2019. At €726 million, payments made for property, plant and equipment and intangible assets were significantly below the figure for the second quarter of 2019 (€981 million).

Cash flows from financing activities amounted to €373 million in the second quarter of 2020, compared with minus €3,847 million in the prior-year quarter. Net additions of €3,470 million to financial and similar liabilities exceeded the dividend payments of €3,100 million. In the prior-year quarter, dividend payments amounted to around €3.0 billion, and repayments exceeded additions to financial and similar liabilities by €834 million.

Free cash flow⁵ amounted to €1,516 million in the second quarter of 2020, an improvement of €551 million compared with the prior-year quarter.