Financial Position

Equity declined from €42,350 million as of December 31, 2019, to €34,632 million. As well as the dividend payments made in the second quarter of 2020, this was mainly due to lower net income. The equity ratio decreased from 48.7% to 39.8%.

Noncurrent liabilities rose by €3,215 million to €31,211 million. This was primarily attributable to provisions for pensions and similar obligations, which increased by €1,320 million as a result of lower discount rates in all relevant currency zones. In addition, noncurrent financial indebtedness rose by €1,493 million, mainly due to the issue of two eurobonds in the amount of €1 billion each, as well as new bank loans taken out for a total of approximately €800 million in the second quarter of 2020.

Current liabilities rose by €4,526 million compared with December 31, 2019, to €21,130 million as of the end of the third quarter of 2020. The main contributing factor here was the €2,468 million increase in other liabilities. This primarily reflected the purchase price payments already received from the sale of the construction chemicals business, since the divestiture of the business and the resulting derecognition of the disposal group will only be accounted for in the fourth quarter. In addition, current financial indebtedness rose by €1,692 million, largely due to the increase in commercial paper compared with the 2019 year-end. The increase in provisions is mainly attributable to higher provisions for discounts and additions to provisions in connection with the planned realignment of the Global Business Services unit. Lower trade accounts payable had an offsetting effect.

Net debt¹ rose by €196 million compared with December 31, 2019, to €15,702 million. The €3,185 million rise in financial indebtedness was almost completely offset by the €3,078 million increase in cash and cash equivalents.

Cash flows from operating activities amounted to €2,100 million in the third quarter of 2020, €102 million above the figure for the prior-year quarter despite the €3,033 million decline in net income. The decrease in net income was largely attributable to the non-cash-effective impairments recognized under depreciation and amortization of property, plant and equipment and intangible assets. Overall, depreciation and amortization of property, plant and equipment and intangible assets was €2,719 million higher than in the prior-year quarter.

The change in net working capital amounted to €767 million and thus led to a slightly higher cash inflow than in the prior-year quarter (€727 million). Miscellaneous items also contributed to the increase in operating cash flows. In the third quarter of 2019, these mainly related to the reclassification of the disposal gain on BASF’s share of the Klybeck site in Basel, Switzerland, to cash flows from investing activities.

Cash flows from investing activities amounted to €1,851 million, €2,256 million above the figure for the prior-year quarter. This is primarily attributable to the cash inflow of €2,692 million for the sale of the construction chemicals business. In addition, payments made for property, plant and equipment and intangible assets amounted to €736 million, €190 million below the figure for the prior-year period. The main offsetting effects were the above-mentioned reclassification of the disposal gain on the Klybeck site in the previous year and stronger growth in other financing-related receivables.

At minus €3,889 million, cash flows from financing activities showed a much stronger cash outflow than in the prior-year quarter (minus €1,518 million). This was mainly due to the decrease in financial and similar liabilities.

Free cash flow² rose from €1,072 million in the prior-year quarter to €1,364 million as a result of higher cash flows from operating activities in conjunction with lower payments made for property, plant and equipment and intangible assets.

BASF enjoys good credit ratings, especially compared with competitors in the chemical industry. On September 18, 2020, Standard & Poor’s confirmed its long and short-term ratings for BASF (“A/A-1”) and revised its outlook to “negative.” The outlook was adjusted due in particular to the deteriorated market conditions caused by the pandemic. Moody’s has rated BASF “A3/P-2/outlook stable” since June 25, 2020. The ratings agency Fitch was also asked to provide a rating as of September 1, 2020. Fitch rated BASF “A/F1/outlook stable.”