5. Reporting by Segment and Region

The BASF Group’s business is run by 11 divisions, structured in 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, thereby contributing to the organic growth of the BASF Group. 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. As part of the sustainability strategy, the segment’s focus is on the creation of more efficient production structures and processes that better conserve resources. Its customers come from key industries such as automotive, plastics and electronics.

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 growth drivers for this segment.

The Nutrition & Care segment comprises the Care Chemicals division and the Nutrition & Health division. This segment produces ingredients 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 trends in digitalized business models and sustainability in the consumer goods markets, the latter through expansion of the portfolio with bio-based and biodegradable products, for example.

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 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 overriding importance for the divisions.
• Trade with renewable energies as well as the activities of the Net Zero Accelerator unit established on January 1, 2022, which bundles cross-company projects to achieve climate protection targets.
• 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 €236 million year on year to –€523 million. This resulted mainly from miscellaneous income and expenses, which included special income in the amount of €256 million from the disposal of shares in the Hollandse Kust Zuid offshore wind farm. Foreign currency results, hedging and other measurement effects improved by a total of €94 million, primarily due to income from the long-term incentive programs following expenses in the previous year as well as higher income from hedging transactions. Furthermore, costs for cross-divisional corporate research was €29 million lower than the prior-year figure. Income from other businesses was €108 million lower, which had an offsetting effect.

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 2022 amounted to €21,319 million (2021: €19,583 million) according to location of companies and €20,585 million (2021: €18,277 million) according to location of customers. On December 31, 2022, the carrying amounts of intangible assets, property, plant and equipment, and investments accounted for using the equity method amounted to €10,937 million (2021: €10,466 million) in the United States.

In China, sales to third parties in 2022 amounted to €11,216 million (2021: €11,380 million) according to location of companies and €11,022 million (2021: €11,408 million) according to location of customers. On December 31, 2022, the carrying amounts of intangible assets, property, plant and equipment, and investments accounted for using the equity method amounted to €6,457 million (2021: €5,613 million) in China.

As a result of Russia’s war of aggression against Ukraine, BASF has largely suspended its business activities in Russia and Belarus with the exception of business to support food production. In this context, expenses were incurred in the amount of €72 million, including impairments on property, plant and equipment of €14 million. As of December 31, 2022, the carrying amounts of property, plant and equipment in Russia amounted to €3 million.