5. Reporting by Segment and Region

Accounting policies

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. Activities that are not allocated to any of the divisions are recorded under Other.

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 according to the percentage of usage.

Income from operations (EBIT) before special items was used for the internal steering of the segments and to complement the key performance indicator, return on capital employed (ROCE), up to and including 2023. 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 as well as EBITDA and EBITDA before special items are alternative performance measures that are not defined under IFRS and are to be considered complementary to the indicators defined by IFRS.

• More information on changes in the steering concept, see the Combined Management’s Report

Explanation of segments

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 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 in this segment.

The Industrial Solutions segment consists of the Dispersions & Resins and the Performance Chemicals divisions. This 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, this 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 its 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. An example of the latter is the expansion of 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 based on digital technologies combined with practical advice.

Other is comprised of the remaining businesses. These include 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, which bundles cross-company projects to achieve climate protection targets.
• Foreign currency results not allocated to the segments and measurement effects from the hedging of raw materials price and foreign currency exchange risks; as well as gains and losses from the long-term incentive programs (LTI programs).
• Remanent fixed costs resulting from organizational changes or restructuring that are not allocated to a division; idle capacity costs from internal human resource platforms; and consolidation effects that cannot be allocated to a division.

Income from operations of Other decreased by €256 million year on year to -€778 million. This resulted mainly from miscellaneous income and expenses, which in the previous year had included special income from the disposal of shares in the Hollandse Kust Zuid offshore wind farm. A special charge in the amount of €110 million arose in the current reporting year primarily for severance payments in connection with restructuring. Foreign currency results, hedging and other measurement effects were down by €62 million year on year, due mainly to lower gains on the valuation of commodity derivatives as well as expenses from the long-term incentive programs, following gains in the previous year. Improved income from other businesses as well as lower costs for corporate research had an offsetting effect.

In the United States, sales to third parties in 2023 amounted to €16,128 million (2022: €21,319 million) according to location of companies and €15,764 million (2022: €20,585 million) according to location of customers. On December 31, 2023, the carrying amounts of intangible assets, property, plant and equipment, and investments accounted for using the equity method amounted to €10,362 million (2022: €10,937 million) in the United States.

In China, sales to third parties in 2023 amounted to €8,950 million (2022: €11,216 million) according to location of companies and €8,893 million (2022: €11,022 million) according to location of customers. On December 31, 2023, the carrying amounts of intangible assets, property, plant and equipment, and investments accounted for using the equity method amounted to €7,802 million (2022: €6,457 million) in China.