26. Capital Structure Management and Statement of Cash Flows

26.1. Capital structure management

The aim of capital structure management is to maintain the financial flexibility needed to further develop BASF’s business portfolio and take advantage of strategic opportunities. The objectives of the company’s financing policy are to ensure solvency, limit financial risks and optimize the cost of capital.

Capital structure management focuses on meeting the requirements needed to ensure unrestricted access to the capital market and a single A credit rating. Capital structure is managed using selected financial ratios, such as dynamic debt ratios, as part of the company’s financial planning.

Equity of the BASF Group as reported in the balance sheet amounted to €34,338 million as of December 31, 2025 (previous year: €36,884 million); the equity ratio was 45.1% on December 31, 2025 (previous year: 45.9%).

BASF prefers to access external financing on the capital markets and, when advantageous, via bank loans. A commercial paper program is used for short-term financing, while corporate bonds are used for financing in the medium and long term. These are issued in euros and other currencies with different maturities. The goal is to create a balanced maturity profile, achieve a diverse range of investors and optimize BASF’s debt capital financing conditions. Since 2020, BASF has employed green corporate bonds to finance the development of sustainable products and projects with a clear environmental benefit.

BASF currently has the following credit ratings, which were last confirmed by Fitch on February 13, 2026, by Moody’s on January 28, 2026, and by Standard & Poor’s on December 12, 2025.

BASF strives for a single A credit rating, which ensures unrestricted access to financial and capital markets (for more information on BASF’s financing policy, see Financing Policy and Credit Ratings in the Combined Management’s Report).

26.2. Statement of cash flows

Accounting policies

Cash flows from operating activities are determined using the indirect method whereby changes in balance sheet items are adjusted for currency translation effects and changes in the scope of consolidation and thus cannot be derived directly from the consolidated balance sheet.

BASF reports interest paid and dividends received in cash flows from operating activities. Income tax payments from ongoing business are also allocated to cash flows from operating activities. In the case of material transactions, however, these are reported in the corresponding section of the statement of cash flows.

Cash flows from financing activities include payments for leases in which BASF is lessee as well as dividend payments.

Payments are netted in cash flows from investing activities and cash flows from financing activities if they are items with a high turnover rate, represent large amounts and have short-term maturities.

Explanation of the statement of cash flows

For a better presentation of significant effects, the item Gains (-) / losses (+) from disposals of noncurrent assets was supplemented to include the gains and losses from divestments. These were previously included in other noncash items. The prior-year figures were adjusted accordingly. The reclassified amounts were €796 million for 2025 and €6 million for the previous year.

Cash flows from operating activities contained the following payments:

Furthermore, tax payments in the amount of €264 million are included in cash flows from investing activities in 2025. Total tax payments thus amounted to €1,424 million.

In order to optimize precious metal inventories, the Group sells precious metals and concurrently enters into agreements to repurchase them at a set price. Cash flows resulting from the sale and repurchase in the amount of €340 million (previous year: -€55 million) were reported in cash flows from operating activities.

Factoring agreements in the amount of €353 million had a positive impact on cash flows from operating activities in 2025 (previous year: negative impact of €359 million).

The carrying amount of financial liabilities that are the subject of supplier financing agreements and are reported as trade accounts payable amounted to €117 million in 2025 (previous year: €80 million). Of this, an amount of €88 million was already paid by the financial services provider (previous year: €73 million). The payment terms for these liabilities ranged between 0 and 120 days, while the terms for comparable trade accounts payable that were not the subject of the agreements ranged between 0 and 60 days.

In 2025, payments for acquisitions were immaterial. By contrast, the previous year’s cash flows from investing activities contained €202 million in payments for acquisitions. This included the purchase price payment of €192 million for the acquisition of one of the two MDI plants and the production facilities for the precursors aniline and nitrobenzene from the joint venture with Huntsman, Shanghai Lianheng Isocyanate Co. Ltd., Shanghai, China.

In the 2025 business year, proceeds from divestments amounted to €871 million and primarily included the sale of the Brazilian decorative paints business and the sale of the food and health performance ingredients business unit. In the prior year, proceeds from divestments amounted to €75 million and involved exclusively non-material transactions. In connection with divestitures, cash and cash equivalents in the amount of €57 million were transferred during the reporting year. No such transfers occurred in the previous year.

Payments made for property, plant and equipment and intangible assets amounted to €4,267 million, €1,930 million lower than in the previous year. This included capitalized interest in the amount of €152 million (previous year: €147 million).

In the 2025 business year, payments for investments in equity instruments were exclusively attributable to transactions of minor significance. The previous year included €598 million for the acquisition and several subsequent capital increases of the equity-accounted investment in the Nordlicht 1 and 2 wind farm projects.

The cash inflows from the disposal of equity instruments in 2025 included €80 million from the sale of BASF’s 49% stake in the Nordlicht 1 and 2 wind farm projects to Vattenfall. In the previous year, this item had included the cash inflow of €1,169 million from the sale of the exploration and production business of Wintershall Dea GmbH (Wintershall Dea AG until September 23, 2024), Kassel, Germany, to Harbour Energy plc, London, United Kingdom, as well as a capital repayment of €556 million from Wintershall Dea.

The payments for financial assets and securities, as well as the payments received from the disposal of noncurrent assets and securities, resulted primarily from portfolio adjustments and reallocations between individual portfolios.

Cash and cash equivalents in the amount of €2,818 million (previous year: €2,921 million) consist primarily of cash on hand and bank balances with maturities of less than three months. As in the previous year, these were not subject to any utilization restrictions in 2025. However, the repatriation of funds from Russia is currently only possible to a limited extent. These amounted to €20 million as of December 31, 2025 (previous year: €20 million).

Cash and cash equivalents in the statement of cash flows may differ from the values in the balance sheet if the relevant amounts have been reclassified to the assets of disposal groups. As of December 31, 2025, the statement of cash flows reported cash and cash equivalents in the amount of €2,818 million, which included both the amount reported in the balance sheet of €2,670 million as well as the amount of €148 million reclassified to the disposal group. In the previous year, cash and cash equivalents of €2,921 million were reported in the statement of cash flows and included the amount reported in the balance sheet of €2,914 million as well as €7 million reclassified to the disposal group.

Lease payments totaled €679 million in 2025 (previous year: €679 million). The principal component of €432 million (previous year: €413 million) is presented in cash flows from financing activities. BASF reports interest payments, which amounted to €62 million (previous year: €65 million), in cash flows from operating activities. Payments in connection with short-term leases, lease payments relating to low-value assets, and variable lease payments that were not taken into account in the measurement of the lease liability amounted to €185 million in 2025 (previous year: €201 million).

Reconciliation according to IAS 7 breaks down the changes in financial and similar liabilities and their hedging transactions into cash-effective and non-cash-effective changes. The cash-effective changes presented below correspond to the figures in cash flows from financing activities.

Other financing-related liabilities primarily comprise liabilities from accounts used for cash pooling with BASF companies not included in the Consolidated Financial Statements. They are reported in miscellaneous liabilities under the balance sheet item other liabilities, in which financial instruments are presented.

Assets/liabilities from hedging transactions included in cash flows from financing activities form part of the balance sheet items derivatives with positive and negative fair values respectively and include only those transactions which hedge risks arising from financial indebtedness and financing-related liabilities secured by micro hedges.