5. Reporting by Segment and Region

The BASF Group’s business is operated by 11 divisions, grouped into six segments:

• Chemicals: Petrochemicals, Intermediates
• Materials: Performance Materials, Monomers
• Industrial Solutions: Dispersions & Resins, Performance Chemicals
• Surface Technologies: Catalysts, Coatings
• Nutrition & Care: Care Chemicals, Nutrition & Health
• Agricultural Solutions: Agricultural Solutions

The divisions are allocated to the segments based on their business models and according to their focal points, customer groups, the focus of their innovations, their investment relevance and sustainability aspects.

The Chemicals segment comprises the Petrochemicals and Intermediates divisions and is the cornerstone of BASF’s Verbund structure. It supplies the other segments with basic chemicals and intermediates, contributing to the organic growth of the key value chains. In addition to internal transfers, the segment mainly serves customers in downstream industries, especially in the chemical and plastics industries. The segment’s competitiveness is strengthened by technological leadership and operational excellence, process and product innovations as well as the development of sustainable technologies.

The Materials segment is composed of the Performance Materials and the Monomers divisions. The segment offers advanced materials and their precursors for new applications and systems. Its product portfolio includes isocyanates and polyamides as well as inorganic basic products and specialties for plastics and plastics processing. In addition to specific technological knowledge, industry expertise and customer proximity, particularly products that contribute to the circular economy as well as sustainable production methods help differentiate BASF from its competitors.

The Industrial Solutions segment consists of the Dispersions & Resins and the Performance Chemicals divisions. The segment develops and markets ingredients and additives for industrial applications, such as polymer dispersions, resins, electronic materials, antioxidants and additives. Its customers come from key industries such as automotive, plastics and electronics as well as energy and resources. The pigments business was part of the Dispersions & Pigments division until June 30, 2021. The division was renamed Dispersions & Resins as of July 1, 2021, following the divestiture of the global pigments business.

The Surface Technologies segment bundles chemical solutions for surfaces in the Catalysts and Coatings divisions. Its portfolio range serves the automotive and chemical industries and includes catalysts, battery materials, automotive OEM and refinish coatings, surface treatment, and precious and base metal services. Innovations and solutions customized in collaboration with our customers in the field of sustainable mobility are a key growth driver for this segment.

The Nutrition & Care segment comprises the Care Chemicals division and the Nutrition & Health division. This segment produces ingredients and solutions for consumer applications in the areas of nutrition, home and personal care. Its customers include food and feed producers as well as the pharmaceutical, cosmetics, and the detergent and cleaner industries. The segment’s competitiveness is strengthened, among other things, by focusing on new business models and sustainability trends in the consumer goods markets, for instance expanding the portfolio with bio-based and biodegradable products.

The Agricultural Solutions segment consists of the division of the same name. As an integrated provider, its portfolio comprises fungicides, herbicides, insecticides and biological crop protection products, as well as seeds and seed treatment products. Furthermore, Agricultural Solutions offers farmers innovative and sustainable solutions, including those based on digital technologies, combined with practical advice.

Activities that are not allocated to any of the divisions are recorded under Other. These include other businesses which comprise commodity trading, engineering and other services, as well as rental income and leases. Discontinued operations and certain activities remaining after divestitures are also reported here.

The following activities are also presented under Other:

• The steering of the BASF Group by corporate headquarters.
• Cross-divisional corporate research, which includes plant biotechnology research, works on long-term topics of strategic importance to the BASF Group. Furthermore, it focuses on the development of specific key technologies, which are of central importance for the divisions.
• Results from currency translation that are not allocated to the segments; earnings from the hedging of raw materials prices and foreign currency exchange risks; and gains and losses from the long-term incentive programs (LTI programs).
• Remanent fixed costs resulting from organizational changes or restructuring; function and region-related restructuring costs not allocated to a division; idle capacity costs from internal human resource platforms; and consolidation effects that cannot be allocated to the divisions.

Income from operations of Other improved by €562 million year on year, from –€1,203 million to –€641 million. This resulted mainly from miscellaneous income and expenses, which included special income from the partial release of provisions for the restructuring of the Global Business Services unit. In the previous year, special charges had been recognized. The costs of corporate headquarters rose by €41 million year on year to €255 million. Income from other businesses increased by €11 million to €180 million. The costs for cross-divisional corporate research decreased by €9 million to €355 million.

The same accounting rules are used for segment reporting as those used for the Group, which are presented in these Notes. Transfers between the segments are generally executed at adjusted market-based prices, taking into account the higher cost efficiency and lower risk of intragroup transactions. Assets, as well as their depreciation and amortization, are allocated to the segments based on economic control. Assets used by more than one segment are allocated based on the percentage of usage.

Income from operations (EBIT) before special items is used for the internal steering of the segments and complements the key management indicator, return on capital employed (ROCE). It is determined based on EBIT, which is calculated from gross profit on sales, selling expenses, general administrative expenses, research and development expenses, other operating income and expenses, and income from integral companies accounted for using the equity method. To calculate EBIT before special items, this figure is then adjusted for special items. Special items arise from the integration of acquired businesses, restructuring costs, impairments and reversals of impairments, gains or losses on divestitures and sales of integral investments accounted for using the equity method, as well as other expenses and income that arise outside of ordinary business activities. EBIT and EBIT before special items are alternative performance measures that are not defined under IFRS and are to be considered as being complementary to the indicators defined by IFRS.

In the United States, sales to third parties in 2021 amounted to €19,583 million (2020: €14,352 million) according to location of companies and €18,277 million (2020: €13,414 million) according to location of customers. On December 31, 2021, intangible assets, property, plant and equipment, and investments accounted for using the equity method amounted to €10,466 million (2020: €9,967 million) in the United States.

In China, sales to third parties in 2021 amounted to €11,380 million (2020: €7,839 million) according to location of companies and €11,408 million (2020: €7,877 million) according to location of customers. On December 31, 2021, intangible assets, property, plant and equipment, and investments accounted for using the equity method amounted to €5,613 million (2020: €3,799 million) in China.